107t h Congress 1 f COMMITTEE 

1st Session " COMMITTE E PRINT | PRINT 107-C 

COMPILATION OF BASIC BANKING LAWS 

WITHIN THE JURISDICTION OF THE 

COMMITTEE ON FINANCIAL SERVICES 

PREPARE D FOR TH E US E O F TH E 

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

MAY 2001 
COMPILATION OF BASIC BANKING LAWS 
1 

107th Congress 1 f COMMITTEE 

1st Session " COMMITTE E PRIN T | PRINT H.07—C 

COMPILATION OF BASIC BANKING LAWS 

WITHIN THE JURISDICTION OF THE 

COMMITTEE ON FINANCIAL SERVICES 

PREPARED FOR THE USE OF THE 

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

MAY 2001 

U.S. GOVERNMENT PRINTING OFFICE 

71-726 WASHINGTON : 2001 

For sale by the Superintendent of Documents, U.S. Government Printing Office 

Internet: bookstore.gpo.gov Phone: (202) 512-1800 Fax: (202) 512-2250 

Mail: Stop SSOP, Washington, DC 20402-0001 
HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman 

JAMES A. LEACH, Iowa 

MARGE ROUKEMA, New Jersey, Vice Chair 

DOUG BEREUTER, Nebraska 

RICHARD H. BAKER, Louisiana 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

BOB BARR, Georgia 

SUE W. KELLY, New York 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

CHRISTOPHER COX, California 

DAVE WELDON, Florida 

JIM RYUN, Kansas 

BOB RILEY, Alabama 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

DOUG OSE, California 

JUDY BIGGERT, Illinois 

MARK GREEN, Wisconsin 

PATRICK J. TOOMEY, Pennsylvania 

CHRISTOPHER SHAYS, Connecticut 

JOHN B. SHADEGG, Arizona 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

ERIC CANTOR, Virginia 

FELIX J. GRUCCI, JR., New York 

MELISSA A. HART, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

PATRICK J. TIBERI, Ohio 

JOHN J. LAFALCE, New York 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELAZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

KEN BENTSEN, Texas 

JAMES H. MALONEY, Connecticut 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

MAX SANDLIN, Texas 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

FRANK MASCARA, Pennsylvania 

JAY INSLEE, Washington 

JANICE D. SCHAKOWSKY, Illinois 

DENNIS MOORE, Kansas 

CHARLES A. GONZALEZ, Texas 

STEPHANIE TUBBS JONES, Ohio 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD JR., Tennessee 

RUBE N HINOJOSA, Texas 

KEN LUCAS, Kentucky 

RONNIE SHOWS, Mississippi 

JOSEPH CROWLEY, New York 

WILLIAM LACY CLAY, Missouri 

STEVE ISRAEL, New York 

MIKE ROSS, Arizona 

BERNARD SANDERS, Vermont 

TERRY HAINES, Chief Counsel and Staff Director 

(II) 
Notes to the Reader 

1. Any material contained within brackets [ ] is not part of the 

text of the law but is inserted as an aid to the reader. 

2. Citations have been included to enable the reader to locate the 

same material in the United States Code (U.S.C.). These citations 

are not a part of the text of the law in which they appear. For 

changes after the closing date of this publication (December 31, 

2000) to provisions of law in this publication that have citations to 

the U.S. Code, see the United States Code Classification Tables 

published by the Office of the Law Revision Counsel of the House 

of Representatives at http://uscode.house.gov/uscct.htm. 

REVISED THROUGH DECEMBER 31, 2000 

(III) 
C O N T E N T S 

Page 

Act of May 1, 1886 1 

Act of September 28, 1962 5 

Act of October 26, 1970 11 

Act of October 28, 1974 17 

Alternative Mortgage Transaction Parity Act of 1982 21 

Bank Conservation Act 27 

Bank Enterprise Act of 1991 35 

Bank Holding Company Act of 1956 49 

Bank Holding Company Act Amendments of 1970 109 

Bank Protection Act of 1968 119 

Bank Service Company Act 123 

Banking Act of 1933 129 

Community Development Credit Union Revolving Loan Fund Transfer Act 135 

Community Reinvestment Act of 1977 139 

Competitive Equality Banking Act of 1987 149 

Consumer Credit Protection Act 153 

including the following Acts: 

Truth In Lending Act 155 

Restriction on Garnishment (title III) 222 

Credit Repair Organizations Act 225 

Fair Credit Reporting Act 233 

Equal Credit Opportunity Act 272 

Fair Debt Collection Practices Act 282 

Electronic Fund Transfer Act 293 

Depository Institution Management Interlocks Act 311 

Economic Growth and Regulatory Paperwork Reduction Act of 1996 319 

Expedited Funds Availability Act 335 

Federal Credit Union Act 355 

Federal Deposit Insurance Act 471 

Federal Deposit Insurance Corporation Improvement Act of 1991 749 

Federal Financial Institutions Examination Council Act of 1978 763 

Federal Home Loan Bank Act 769 

Federal Reserve Act 905 

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 1009 

Gramm-Leach-Bliley Act 1043 

Home Mortgage Disclosure Act of 1975 1085 

Home Owners' Loan Act 1099 

International Banking Act of 1978 1181 

International Lending Supervision Act of 1983 1209 

Legal Certainty for Bank Products Act of 2000 1219 

National Bank Consolidation and Merger Act 1227 

National Bank Receivership Act 1237 

Real Estate Settlement Procedures Act of 1974 1243 

Resolution Trust Corporation Funding Act of 1991 1263 

Resolution Trust Corporation Refinancing, Restructuring, and Improvement 

Act of 1991 1267 

Revised Statutes of the United States, Title LXII 1273 

Riegle Community Development and Regulatory Improvement Act of 1994 1327 

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 1391 

Right To Financial Privacy Act of 1978 1401 

Title 31, United States Code, Subtitle IV 1423 

Truth In Savings Act 1485 

Reporting Requirements 1499 

(IV) 
ACT OF MAY 1, 1886 

1 

ACT OF MAY 1, 1886 

CHAP. 73.—An Act to enable national banking associations to increase their capital 

stock and to change their names or locations. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

[Section 1 was repealed by section 6 of Public Law 86-230, 

73 Stat. 457.] 

SEC. 2. [12 U.S.C. 30] (a) Any national banking association, 

upon written notice to the Comptroller of the Currency, may 

change its name, except that such new name shall include the word 

"National". 

(b) Any national banking association, upon written notice to 

the Comptroller of the Currency, may change the location of its 

main office to any authorized branch location within the limits of 

the city, town, or village in which it is situated, or, with a vote of 

shareholders owning two-thirds of the stock of such association for 

a relocation outside such limits and upon receipt of a certificate of 

approval from the Comptroller of the Currency, to any other location within or outside the limits of the city, town, or village in 

which it is located, but not more than thirty miles beyond such limits. 

(c) COORDINATION WIT H REVISED STATUTES.—In the case of a 

national bank which relocates the main office of such bank from 1 

State to another State after May 31, 1997, the bank may retain 

and operate branches within the State from which the bank relocated such office only to the extent authorized in section 5155(e)(2) 

of the Revised Statutes. 

(d) RETENTION OF "FEDERAL" I N NAM E OF CONVERTED FEDERAL 

SAVINGS ASSOCIATION.— 

(1) IN GENERAL.—Notwithstanding subsection (a) or any 

other provision of law, any depository institution, the charter 

of which is converted from that of a Federal savings association to a national bank or a State bank after the date of the 

enactment of the Gramm-Leach-Bliley Act may retain the term 

"Federal" in the name of such institution if such institution remains an insured depository institution. 

(2) DEFINITIONS.—Fo r purposes of this subsection, the 

terms ''depository institution'', ''insured depository institution", 

''national bank'', and ''State bank'' have the meanings given 

those terms in section 3 of the Federal Deposit Insurance Act. 

SEC. 3. [12 U.S.C. 31] That all debts, liabilities, rights, provisions, and powers of the association under its old name shall devolve upon and inure to the association under its new name. 

3 
4 

SEC. 4. [12 U.S.C. 32] That nothing in this act contained shall 

be so construed as in any manner to release any national banking 

association under its old name or at its old location from any liability, or affect any action or proceeding in law in which said association may be or become a party or interested. 
ACT OF SEPTEMBER 28, 1962 

5 

ACT OF SEPTEMBER 28, 1962 

AN ACT To place authority over the trust powers of national banks in the 

Comptroller of the Currency. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That [12 U.S.C. 

92a] (a) the Comptroller of the Currency shall be authorized and 

empowered to grant by special permit to national banks applying 

therefor, when not in contravention of State or local law, the right 

to act as trustee, executor, administrator, registrar of stocks and 

bonds, guardian of estates, assignee, receiver, committee of estates 

of lunatics, or in any other fiduciary capacity in which State banks, 

trust companies, or other corporations which come into competition 

with national banks are permitted to act under the laws of the 

State in which the national bank is located. 

(b) Whenever the laws of such State authorize or permit the 

exercise of any or all of the foregoing powers by State banks, trust 

companies, or other corporations which compete with national 

banks, the granting to and the exercise of such powers by national 

banks shall not be deemed to be in contravention of State or local 

law within the meaning of this Act. 

(c) National banks exercising any or all of the powers enumerating in this section shall segregate all assets held in any fiduciary 

capacity from the general assets of the bank and shall keep a separate set of books and records showing in proper detail all transactions engaged in under authority of this section. The State banking authorities may have access to reports of examination made by 

the Comptroller of the Currency insofar as such reports relate to 

the trust department of such bank, but nothing in this Act shall 

be construed as authorizing the State banking authorities to examine the books, records, and assets of such bank. 

(d) No national bank shall receive in its trust department deposits of current funds subject to check or the deposit of checks, 

drafts, bills of exchange, or other items for collection or exchange 

purposes. Funds deposited or held in trust by the bank awaiting 

investment shall be carried in a separate account and shall not be 

used by the bank in the conduct of its business unless it shall first 

set aside in the trust department United States bonds or other 

securities approved by the Comptroller of the Currency. 

(e) In the event of the failure of such bank the owners of the 

funds held in trust for investment shall have a lien on the bonds 

or other securities so set apart in addition to their claim against 

the estate of the bank. 

(f) Whenever the laws of a State require corporations acting in 

a fiduciary capacity to deposit securities with the State authorities 

for the protection of private or court trusts, national banks so acting shall be required to make similar deposits and securities so 

7 
Sec. 2 ACT OF SEPTEMBER 28, 1962 8 

deposited shall be held for the protection of private or court trusts, 

as provided by the State law. National banks in such cases shall 

not be required to execute the bond usually required of individuals 

if State corporations under similar circumstances are exempt from 

this requirement. National banks shall have power to execute such 

bond when so required by the laws of the State. 

(g) In any case in which the laws of a State require that a corporation acting as trustee, executor, administrator, or in any capacity specified in this section, shall take an oath or make an affidavit, 

the president, vice president, cashier, or trust officer of such national bank may take the necessary oath or execute the necessary 

affidavit. 

(h) It shall be unlawful for any national banking association to 

lend any officer, director, or employee any funds held in trust 

under the powers conferred by this section. Any officer, director, or 

employee making such loan, or to whom such loan is made, may 

be fined not more than $5,000, or imprisoned not more than five 

years, or may be both fined and imprisoned, in the discretion of the 

court. 

(i) In passing upon applications for permission to exercise the 

powers enumerated in this section, the Comptroller of the Currency 

may take into consideration the amount of capital and surplus of 

the applying bank, whether or not such capital and surplus is sufficient under the circumstances of the case, the needs of the community to be served, and any other facts and circumstances that seem 

to him proper, and may grant or refuse the application accordingly: 

Provided, That no permit shall be issued to any national banking 

association having a capital and surplus less than the capital and 

surplus required by State law of State banks, trust companies, and 

corporations exercising such powers. 

(j) Any national banking association desiring to surrender its 

right to exercise the powers granted under this section, in order to 

relieve itself of the necessity of complying with the requirements of 

this section, or to have returned to it any securities which it may 

have deposited with the State authorities for the protection of private or court trusts, or for any other purpose, may file with the 

Comptroller of the Currency a certified copy of a resolution of its 

board of directors signifying such desire. Upon receipt of such resolution, the Comptroller of the Currency, after satisfying himself 

that such bank has been relieved in accordance with State law of 

all duties as trustee, executory, administrator, registrar of stocks 

and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics or other fiduciary, under court, private, or other 

appointments previously accepted under authority of this section, 

may, in his discretion, issue to such bank a certificate certifying 

that such bank is no longer authorized to exercise the powers 

granted by this section. Upon the issuance of such a certificate by 

the Comptroller of the Currency, such bank (1) shall no longer be 

subject to the provisions of this section or the regulations of the 

Comptroller of the Currency made pursuant thereto, (2) shall be 

entitled to have returned to it any securities which it may have 

deposited with the State authorities for the protection of private or 

court trusts, and (3) shall not exercise thereafter any of the powers 

granted by this section without first applying for and obtaining a 
Sec. 2 

ACT OF SEPTEMBER 28, 1962 

9 

new permit to exercise such powers pursuant to the provisions of 

this section. The Comptroller of the Currency is authorized and 

empowered to promulgate such regulations as he may deem necessary to enforce compliance with the provisions of this section and 

the proper exercise of the powers granted therein. 

(k)(1) In addition to the authority conferred by other law, if, in 

the opinion of the Comptroller of the Currency, a national banking 

association is unlawfully or unsoundly exercising, or has unlawfully 

or unsoundly exercised, or has failed for a period of five consecutive 

years to exercise, the powers granted by this section or otherwise 

fails or has failed to comply with the requirements of this section, 

the Comptroller may issue and serve upon the association a notice 

of intent to revoke the authority of the association to exercise the 

powers granted by this section. The notice shall contain a statement of the facts constituting the alleged unlawful or unsound 

exercise of powers, or failure to exercise powers, or failure to comply, and shall fix a time and place at which a hearing will be held 

to determine whether an order revoking authority to exercise such 

powers should issue against the association. 

(2) Such hearing shall be conducted in accordance with the provisions of subsection (h) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818(h)), and subject to judicial review as provided in such section, and shall be fixed for a date not earlier than 

thirty days nor later than sixty days after service of such notice unless an earlier or later date is set by the Comptroller at the request 

of any association so served. 

(3) Unless the association so served shall appear at the hearing 

by a duly authorized representative, it shall be deemed to have 

consented to the issuance of the revocation order. In the event of 

such consent, or if upon the record made at any such hearing, the 

Comptroller shall find that any allegation specified in the notice of 

charges has been established, the Comptroller may issue and serve 

upon the association an order prohibiting it from accepting any 

new or additional trust accounts and revoking authority to exercise 

any and all powers granted by this section, except that such order 

shall permit the association to continue to service all previously 

accepted trust accounts pending their expeditious divestiture or 

termination. 

(4) A revocation order shall become effective not earlier than 

the expiration of thirty days after service of such order upon the 

association so served (except in the case of a revocation order 

issued upon consent, which shall become effective at the time specified therein), and shall remain effective and enforceable, except to 

such extent as it is stayed, modified, terminated, or set aside by 

action of the Comptroller or a reviewing court. 

SEC. 2. [12 U.S.C. 92a note] Nothing contained in this Act 

shall be deemed to affect or curtail the right of any national bank 

to act in fiduciary capacities under a permit granted before the 

date of enactment of this Act by the Board of Governors of the Federal Reserve System, nor to affect the validity of any transactions 

entered into at any time by any national bank pursuant to such 

permit. On and after the date of enactment of this Act the exercise 

of fiduciary powers by national banks shall be subject to the provisions of this Act and the requirements of regulations issued by the 
Sec. 2 ACT OF SEPTEMBER 28, 1962 10 

Comptroller of the Currency pursuant to the authority granted by 

this Act. 
ACT OF OCTOBER 26, 1970 

11 

ACT OF OCTOBER 26, 1970 

(Public Law 91-508) 

AN ACT To amend the Federal Deposit Insurance Act to require insured banks to 

maintain certain records, to require that certain transactions in United States 

currency be reported to the Department of the Treasury, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

TITLE I—FINANCIAL RECORDKEEPING 

Chapter 

1. INSURED BANKS AND INSURED INSTITUTIONS 

2. OTHER FINANCIAL INSTITUTIONS 

Chapter 1.—INSURED BANKS AND INSURED 

INSTITUTIONS

 1 

Chapter 2.—OTHER FINANCIAL INSTITUTIONS 

Sec. 

121. Congressional findings and purpose. 

122. Authority of Secretary with respect to reports on ownership and control. 

123. Authority of Secretary with respect to recordkeeping and procedures. 

124. Injunctions. 

125. Civil penalties. 

126. Criminal penalty. 

127. Additional criminal penalty in certain cases. 

128. Compliance. 

129. Administrative procedure. 

§ 121. [12 U.S.C. 1951] Congressional findings and purposes 

(a) The Congress finds that certain records maintained by businesses engaged in the functions described in section 123(b) of this 

Act have a high degree of usefulness in criminal, tax, and regulatory investigations and proceedings. The Congress further finds 

that the power to require reports of changes in the ownership, control, and managements of types of financial institutions referred to 

in section 122 of this Act may be necessary for the same purpose. 

(b) It is the purpose of this chapter to require the maintenance 

of appropriate types of records and the making of appropriate reports by such businesses in the United States where such records 

or reports have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings. 

1

 Chapter 1 amended other laws. 

13 

Sec. 

101 

121 
14 

ACT OF OCTOBER 26, 1970 

§ 128 

§ 122. [12 U.S.C. 1952] Authority of Secretary with respect to 

reports on ownership and control 

Where the Secretary determines that the making of appropriate reports by uninsured banks or uninsured institutions of any 

type with respect to their ownership, control, and managements 

and any changes therein has a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, he may by regulation require such banks or institutions to make such reports as 

he determines in respect of such ownership, control, and managements and changes therein. 

§ 123. [12 U.S.C. 1953] Authority of Secretary with respect to 

recordkeeping and procedures 

(a) Where the Secretary determines that the maintenance of 

appropriate records and procedures by any uninsured bank or uninsured institution, or any person engaging in the business of carrying on in the United States any of the functions referred to in 

subsection (b) of this section, has a high degree of usefulness in 

criminal, tax, or regulatory investigations or proceedings, he may 

by regulation require such bank, institution, or person— 

(1) to require, retain, or maintain, with respect to its functions as an uninsured bank or uninsured institution or its 

functions referred to in subsection (b), any records or evidence 

of any type which the Secretary is authorized under section 21 

of the Federal Deposit Insurance Act to require insured banks 

to require, retain, or maintain; and 

(2) to maintain procedures to assure compliance with 

requirements imposed under this chapter. For the purposes of 

any civil or criminal penalty, a separate violation of any 

requirement under this paragraph occurs with respect to each 

day and each separate office, branch, or place of business in 

which the violation occurs or continues. 

(b) INSTITUTIONS SUBJECT TO RECORDKEEPING REQUIREMENTS.—The authority of the Secretary of the Treasury under subsection (a) extends to any financial institution (as defined in section 

5312(a)(2) of title 31, United States Code), other than any insured 

bank (as defined in section 3(h) of the Federal Deposit insurance 

Act) and any insured institution (as defined in section 401(a) of the 

National Housing Act), and any partner, officer, director, or employee of any such financial institution. 

(c) ACCEPTANCE OF AUTOMATE D RECORDS.—Th e Secretary shall 

permit an uninsured bank or financial institution to retain or 

maintain records referred to in subsection (a) in electronic or automated form, subject to terms and conditions established by the Secretary. 

§ 124. [12 U.S.C. 1954] Injunctions 

Whenever it appears to the Secretary that any person has engaged, is engaged, or is about to engage in any acts or practices 

constituting a violation of any regulation under this chapter, he 

may in his discretion bring an action, in the proper district court 

of the United States or the proper United States court of any territory or other place subject to the jurisdiction of the United States, 
15 ACT OF OCTOBER 26, 1970 § 128 

to enjoin such acts or practices, and upon a proper showing a permanent or temporary injunction or restraining order shall be 

granted without bond. upon application of the Secretary, any such 

court may also issue mandatory injunctions commanding any person to comply with any regulation of the Secretary under this chapter. 

§ 125. [12 U.S.C. 1955] Civil penalties 

(a) For each willful or grossly negligent violation of any regulation under this chapter, the Secretary may assess upon any person 

to which the regulation applies, or any person willfully causing a 

violation of the regulation, and, if such person is a partnership, corporation, or other entity, upon any partner, director, officer, or employee thereof who willfully or through gross negligence participates in the violation, a civil penalty not exceeding $10,000. 

(b) In the event of the failure of any person to pay any penalty 

assessed under this section, a civil action for the recovery thereof 

may, in the discretion of the Secretary, be brought in the name of 

the united States. 

§ 126. [12 U.S.C. 1956] Criminal penalty 

Whoever willfully violates any regulation under this chapter 

shall be fined not more than $1,000 or imprisoned not more than 

one year, or both. 

§ 127. [12 U.S.C. 1957] Additional criminal penalty in certain 

cases 

Whoever willfully violates, or willfully causes a violation of any 

regulation under this chapter, section 21 of the Federal Deposit 

Insurance Act, or section 411 of the National Housing Act, where 

the violation is committed in furtherance of the commission of any 

violation of Federal law punishable by imprisonment for more than 

one year, shall be fined not more than $10,000 or imprisoned not 

more than five years, or both. 

§ 128. [12 U.S.C. 1958] Compliance 

The Secretary shall have the responsibility to assure compliance with the requirements of this title and may delegate such 

responsibility to the appropriate bank supervisory agency, or other 

supervisory agency. 
16 

ACT OF OCTOBER 26, 1970 

§ 128 

§ 129. [12 U.S.C. 1959] Administrative procedure 

The administrative procedure and judicial review provisions of 

subchapter II of chapter 5 and chapter 7 of title 5, united States 

Code, shall apply to all proceedings under this chapter, section 21 

of the Federal Deposit Insurance Act, and section 411 of the National Housing Act. 

TITLE II—REPORTS OF CURRENCY AND FOREIGN 

TRANSACTIONS1 

1

Title I I of this Act was repealed by section 5(b) of Public Law 97-258 but the substance of 

such title was incorporated into subchapter I I of chapter 53 of title 31, United States Code. 
ACT OF OCTOBER 28, 1974 

17 

ACT OF OCTOBER 28, 1974 

AN ACT To increase deposit insurance from $20,000 to $40,000, to provide full insurance for public unit deposits of $100,000 per account, to establish a National 

Commission on Electronic Fund Transfers, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

TITLE I—AMENDMENTS TO AND EXTENSIONS OF PROVISIONS OF LAW RELATING TO FEDERAL REGULATION OF 

DEPOSITORY INSTITUTIONS 

INDEPENDENCE OF FINANCIAL REGULATORY AGENCIES 

SEC. 111.1 [12 U.S.C. 250] No officer or agency of the United 

States shall have any authority to require the Securities and Exchange Commission, the Board of Governors of the Federal Reserve 

System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Federal Housing Finance Board, or the National Credit 

Union Administration to submit legislative recommendations, or 

testimony, or comments on legislation, to any officer or agency of 

the United States for approval, comments, or review, prior to the 

submission of such recommendations, testimony, or comments to 

the Congress if such recommendations, testimony, or comments to 

the Congress include a statement indicating that the views expressed therein are those of the agency submitting them and do not 

necessarily represent the views of the President. 

1

 Section 744(j) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 

(P.L. 101-73) amended section 3 of title I of Public Law 93-495 by striking ''Federal Home Loan 

Bank Board'' and inserting ''Director of the Office of Thrift Supervision". There is no section 3 

in such Public Law. The amendment probably should have been made to section 111 of such 

law. 

19 

ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT 

OF 1982 

21 

ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT 

OF 1982 

TITLE VIII—ALTERNATIVE MORTGAGE TRANSACTIONS1 

SHOR T TITL E 

SEC. 801. [12 U.S.C. 3801 note] This title may be cited as the 

"Alternative Mortgage Transaction Parity Act of 1982''. 

FINDING S AN D PURPOSE. 

SEC. 802. [12 U.S.C. 3801] (a) The Congress hereby finds 

that— 

(1) increasingly volatile and dynamic changes in interest 

rates have seriously impaired the ability of housing creditors 

to provide consumers with fixed-term, fixed-rate credit secured 

by interests in real property, cooperative housing, manufactured homes, and other dwellings; 

(2) alternative mortgage transactions are essential to the 

provision of an adequate supply of credit secured by residential 

property necessary to meet the demand expected during the 

1980's; and 

(3) the Comptroller of the Currency, the National Credit 

Union Administration, and the Director of the Office of Thrift 

Supervision have recognized the importance of alternative 

mortgage transactions and have adopted regulations authorizing federally chartered depository institutions to engage in 

alternative mortgage financing. 

(b) It is the purpose of this title to eliminate the discriminatory 

impact that those regulations have upon nonfederally chartered 

housing creditors and provide them with parity with federally chartered institutions by authorizing all housing creditors to make, purchase, and enforce alternative mortgage transactions so long as the 

transactions are in conformity with the regulations issued by the 

Federal agencies. 

DEFINITION S 

SEC. 803. [12 U.S.C. 3802] As used in this title— 

(1) the term "alternative mortgage transaction'' means a 

loan or credit sale secured by an interest in residential real 

property, a dwelling, all stock allocated to a dwelling unit in 

a residential cooperative housing corporation, or a residential 

manufactured home (as that term is defined in section 603(6) 

of the National Manufactured Home Construction and Safety 

Standards Act of 1974)— 

1

 The Alternative Mortgage Transaction Parity Act of 1982 was enacted as title VIII of the 

Garn-St Germain Depository Institutions Act of 1982. 

2 3 
Sec. 804 ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT 24 

(A) in which the interest rate or finance charge may 

be adjusted or renegotiated; 

(B) involving a fixed-rate, but which implicitly permits 

rate adjustments by having the debt mature at the end of 

an interval shorter than the term of the amortization 

schedule; or 

(C) involving any similar type of rate, method of determining return, term, repayment, or other variation not 

common to traditional fixed-rate, fixed-term transactions, 

including without limitation, transactions that involve the 

sharing of equity or appreciation; 

described and defined by applicable regulation; and 

(2) the term ''housing creditor'' means— 

(A) a depository institution, as defined in section 

501(a)(2) of the Depository Institutions Deregulation and 

Monetary Control Act of 1980; 

(B) a lender approved by the Secretary of Housing and 

Urban Development for participation in any mortgage 

insurance program under the National Housing Act; 

(C) any person who regularly makes loans, credit 

sales, or advances secured by interests in properties referred to in paragraph (1); or 

(D) any transferee of any of them. 

A person is not a ''housing creditor'' with respect to a specific 

alternative mortgage transaction if, except for this title, in 

order to enter into that transaction, the person would be required to comply with licensing requirements imposed under 

State law, unless such person is licensed under applicable 

State law and such person remains, or becomes, subject to the 

applicable regulatory requirements and enforcement mechanisms provided by State law. 

ALTERNATIVE MORTGAGE AUTHORITY. 

SEC. 804. [12 U.S.C. 3803] (a) In order to prevent discrimination against State-chartered depository institutions, and other nonfederally chartered housing creditors, with respect to making, purchasing, and enforcing alternative mortgage transactions, housing 

creditors may make, purchase, and enforce alternative mortgage 

transactions, except that this section shall apply— 

(1) with respect to banks, only to transactions made in 

accordance with regulations governing alternative mortgage 

transactions as issued by the Comptroller of the Currency for 

national banks, to the extent that such regulations are authorized by rulemaking authority granted to the Comptroller of the 

Currency with regard to national banks under laws other than 

this section; 

(2) with respect to credit unions, only to transactions made 

in accordance with regulations governing alternative mortgage 

transactions as issued by the National Credit Union Administration Board for Federal credit unions, to the extent that such 

regulations are authorized by rulemaking authority granted to 

the National Credit Union Administration with regard to Federal credit unions under laws other than this section; and 
Sec. 804 

ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT 

25 

(3) with respect to all other housing creditors, including 

without limitation, savings and loan associations, mutual savings banks, and savings banks, only to transactions made in 

accordance with regulations governing alternative mortgage 

transactions as issued by the Director of the Office of Thrift 

Supervision for federally charter savings and loan associations, 

to the extent that such regulations are authorized by rulemaking authority granted to the Director of the Office of Thrift 

Supervision with regard to federally chartered savings and 

loan associations under laws other than this section. 

(b) For the purpose of determining the applicability of this section, an alternative mortgage transaction shall be deemed to be 

made in accordance with the applicable regulation notwithstanding 

the housing creditor's failure to comply with the regulations, if— 

(1) the transaction is in substantial compliance with the 

regulation; and 

(2) within 60 days of discovering any error, the housing 

credit correct such error, including making appropriate adjustments, if any, to the account. 

(c) An alternative mortgage transaction, may be made by a 

housing creditor in accordance with this section, notwithstanding 

any State constitution, law, or regulation. 

APPLICABILITY 

SEC. 805. [12 U.S.C. 3804] (a) The provisions of section 804 

shall not apply to any alternative mortgage transaction in any 

State made on or after the effective date (if such effective date occurs on or after the effective date of this title and prior to a date 

3 years after the effective date of this title) of a State law or a certification that the voters of such State have voted in favor of any 

provision, constitutional or otherwise, which states explicitly and 

by its terms that such State does not want the preemption provided 

in section 804 to apply with respect to alternative mortgage transactions subject to the laws of such State, except that section 804 

shall continue to apply to— 

(1) any alternative mortgage transaction undertaken on or 

after such date pursuant to an agreement to undertake such 

alternative mortgage transaction which was entered into on or 

after the effective date of this title and prior to such later date 

(the "preemption period''); and 

(2) any renewal, extension, refinancing, or other modification of an alternative mortgage transaction that was entered 

into during the preemption period. 

(b) An alternative mortgage transaction shall be deemed to 

have been undertaken during the preemption period to which this 

section applied if it— 

(1) is funded or extended in whole or in part during the 

preemption period, regardless of whether pursuant to a commitment or other agreement therefor made prior to that period; 

or 

(2) is a renewal, extension, refinancing, or other modification of an alternative mortgage transaction entered into before 

the preemption period and such renewal, extension, or other 
Sec. 804 ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT 26 

modification is made during such period with the written consent of any person obligated to repay such credit. 

RELATION TO OTHER LAW 

SEC. 806. [12 U.S.C. 3805] Section 501(c)(1) of the Depository 

Institutions Deregulation and Monetary Control Act of 1980 shall 

not apply to transactions which are subject to this title. 

EFFECTIVE DATE 

SEC. 807. [12 U.S.C. 3801 note] (a) This title shall be effective 

upon enactment. 

(b) Within 60 days of the enactment of this title, the Comptroller of the Currency, the National Credit Union Administration, 

and the Federal Home Loan Bank Board shall identify, describe, 

publish those portions or provisions of their respective regulations 

that are inappropriate for (and thus inapplicable to), or that need 

to be conformed for the use of, the nonfederally chartered housing 

creditors to which their respective regulations apply, including 

without limitation, making necessary changes in terminology to 

conform the regulatory and disclosure provisions to those more 

typically associated with various types of transactions including 

credit sales. 
BANK CONSERVATION ACT 

27 

BANK CONSERVATION ACT 

SEC. 201. [12 U.S.C. 201] This title may be cited as the ''Bank 

Conservation Act.'' 

SEC. 202. [12 U.S.C. 202] As used in this title, the term 

''bank'' means (1) any national banking association or any other 

financial institution chartered or licensed under Federal law and 

subject to the supervision of the Comptroller of the Currency, and 

(2) any bank or trust company located in the District of Columbia 

and operating under the supervision of the Comptroller of the Currency; the term ''voluntary dissolution and liquidation'' means a 

transaction pursuant to section 5220 of the Revised Statutes that 

involves the assumption of the bank's insured deposit liabilities 

and the sale of the bank, or of control of the bank, as a going concern; and the term ''State'' means any State, Territory, or possession of the United States, and the Canal Zone. 

SEC. 203. [12 U.S.C. 203] APPOINTMENT OF CONSERVATOR. 

(a) APPOINTMENT.—The Comptroller of the Currency may, 

without prior notice or hearings, appoint a conservator (which may 

be the Federal Deposit Insurance Corporation) to the

 1 possession 

and control of a bank whenever the Comptroller of the Currency 

determines that 1 or more of the grounds specified in section 

11(c)(5) of the Federal Deposit Insurance Act exist. 

(b) JUDICIAL REVIEW.— 

(1) IN GENERAL.—Not later than 20 days after the initial 

appointment of a conservator pursuant to this section, the 

bank may bring an action in the United States district court 

for the judicial district in which the home office of such bank 

is located, or in the United States District Court for the District of Columbia, for an order requiring the Comptroller to terminate the appointment of the conservator, and the court, 

upon the merits, shall dismiss such action or shall direct the 

Comptroller to terminate the appointment of such conservator. 

The Comptroller's decision to appoint a conservator pursuant 

to this section shall be set aside only if the court finds that 

such decision was arbitrary, capricious, an abuse of discretion, 

or otherwise not in accordance with law. 

(2) STAY.—The conservator may request that any judicial 

action or proceeding to which the conservator or the bank is or 

may become a party be stayed for a period of up to 45 days 

after the appointment of the conservator. Upon petition, the 

court shall grant such stay as to all parties. 

(3) ACTIONS AND ORDERS.—Except as otherwise provided in 

this subsection, no court may take any action regarding the removal of a conservator, or restrain, or affect the exercise of 

powers or functions of a conservator. A court, upon application 

1

 So in law. Probably should be ''take''. 

29 
Sec. 204 BANK CONSERVATION ACT 30 

by the Comptroller, shall have jurisdiction to enforce an order 

of the Comptroller relating to— 

(A) the conservatorship and the bank in conservatorship, or 

(B) restraining or affecting the exercise of powers or 

functions of a conservator. 

(c) ADDITIONAL GROUNDS FOR APPOINTMENT.—In addition to 

the foregoing provisions, the Comptroller may appoint a conservator for a bank if— 

(1) the bank, by an affirmative vote of a majority of its 

board of directors or by an affirmative vote of a majority of its 

shareholders, consents to such appointment, or 

(2) the Federal Deposit Insurance Corporation terminates 

the bank's status as an insured bank. 

The appointment of a conservator pursuant to this subsection shall 

not be subject to review. 

(d) EXCLUSIVE AUTHORITY.—The Comptroller shall have exclusive power and jurisdiction to appoint a conservator for a bank. 

Whenever the Comptroller appoints a conservator for any bank, the 

Comptroller may appoint the Federal Deposit Insurance Corporation conservator for such bank. The Federal Deposit Insurance Corporation, as such conservator, shall have all the powers granted 

under the Federal Deposit Insurance Act, and (when not inconsistent therewith) any other rights, powers, and privileges possessed by conservators of banks under this Act and any other provision of law. The Comptroller may also appoint another person as 

conservator, who shall be subject to the provisions of this Act. 

(e) REPLACEMENT OF CONSERVATOR.—The Comptroller may, 

without notice or hearing, replace a conservator with another conservator. Such replacement shall not affect the bank's right under 

subsection (b) to obtain judicial review of the Comptroller's original 

decision to appoint a conservator. 

SEC. 204. [12 U.S.C. 204] EXAMINATIONS. 

The Comptroller of the Currency (in consultation with the 

Board of Directors of the Federal Deposit Insurance Corporation 

when the Corporation is appointed conservator) is authorized to examine and supervise the bank in conservatorship as long as the 

bank continues to operate as a going concern. The Comptroller may 

use reports and other information provided by the Federal Deposit 

Insurance Corporation for this purpose. 

SEC. 205. [12 U.S.C. 205] TERMINATION OF CONSERVATORSHIP. 

(a) GENERAL RULE.—A t any time the Comptroller becomes satisfied that it may safely be done and that it would be in the public 

interest, the Comptroller (with the agreement of the Board of 

Directors of the Federal Deposit Insurance Corporation when the 

Corporation has been appointed conservator) may— 

(1) terminate the conservatorship and permit the involved 

bank to resume the transaction of its business subject to such 

terms, conditions, and limitations as the Comptroller may prescribe; or 

(2) terminate the conservatorship upon a sale, merger, consolidation, purchase and assumption, change in control, or voluntary dissolution and liquidation of the involved bank. 
31 BANK CONSERVATION ACT Sec. 206 

(b) OTHER GROUNDS FOR TERMINATION.—The Comptroller also 

may terminate the conservatorship upon the appointment of a receiver pursuant to the first section of the Act of June 30, 1876 (12 

U.S.C. 191). 

(c) ENFORCEMENT UNDER FEDERAL DEPOSIT INSURANCE ACT.— 

Such terms, conditions, and limitations as may be prescribed under 

subsection (a)(1) shall be enforceable under the provisions of section 8(i) of the Federal Deposit Insurance Act, to the same extent 

as an order issued pursuant to section 8(b) of the Federal Deposit 

Insurance Act which has become final. The bank may bring an action in the United States district court for the judicial district in 

which the home office of such bank is located or in the United 

States District Court for the District of Columbia for an order requiring the Comptroller to terminate the order. An action for judicial review of the terms, conditions, and limitations may not be 

commenced later than 20 days from the date of the termination of 

the conservatorship or the imposition of the order, whichever is 

later. 

(d) ACTION UPON TERMINATION.— 

(1) IN GENERAL.—Upon termination of the conservatorship 

under subsection (a)(2), the Federal Deposit Insurance Corporation, as conservator, or when another person is appointed 

conservator, such other person, shall conclude the affairs of the 

conservatorship in accordance with paragraph (2). 

(2)1 DEPOSIT AND DISTRIBUTION OF PROCEEDS.—(A) Within 180 

days of the sale, merger, consolidation, purchase and assumption, 

change in control, or voluntary dissolution and liquidation, the conservator shall deposit all net proceeds received from the transaction, less any outstanding expenses of the conservatorship, with 

the United States district court for the judicial district in which the 

home office of such bank is located and shall cause notice to be 

published for three consecutive months and notify by mail all 

known and remaining creditors and shareholders. Within 60 days 

thereafter, any depositor, creditor, or other claimant of the bank, 

or any shareholder of the bank may bring an action in interpleader 

in that court for distribution of the proceeds. The district court 

shall distribute such funds equitably. If no such action is instituted 

within one year after the date the funds are deposited with the district court, title to such net proceeds shall revert to the United 

States and the district court shall remit the funds to the Treasury 

of the United States. 

(B) The conservator shall be deemed to have discharged all 

responsibility of the conservatorship upon the deposit of the proceeds with the district court and giving the required notifications. 

SEC. 206. [12 U.S.C. 206] CONSERVATOR; POWERS AND DUTIES. 

(a) GENERAL POWERS.—A conservator shall have all the powers 

of the shareholders, directors, and officers of the bank and may operate the bank in its own name unless the Comptroller in the order 

of appointment limits the conservator's authority. 

(b) SUBJECT TO RULES OF COMPTROLLER.—The conservator 

shall be subject to such rules, regulations, and orders as the Comptroller from time to time deems appropriate; and, except as other1

 Indentation so in law 
Sec. 204 BANK CONSERVATION ACT 32 

wise specifically provided in such rules, regulations, or orders or in 

section 209 of this Act, shall have the same rights and privileges 

and be subject to the same duties, restrictions, penalties, conditions, and limitations as apply to directors, officers, or employees 

of a national bank. 

(c) PAYMENT OF DEPOSITORS AND CREDITORS.—The Comptroller 

may require the conservator to set aside and make available for 

withdrawal by depositors and payment to other creditors such 

amounts as in the opinion of the Comptroller may safely be used 

for that purpose. All depositors and creditors who are similarly situated shall be treated in the same manner. 

(d) COMPENSATION OF CONSERVATOR AND EMPLOYEES.—The 

conservator and professional employees appointed to represent or 

assist the conservator shall not be paid amounts greater than are 

payable to employees of the Federal Government for similar services, except that the Comptroller of the Currency may authorize 

payment at higher rates (but not in excess of rates prevailing in 

the private sector), if the Comptroller determines that paying such 

higher rates is necessary in order to recruit and retain competent 

personnel. 

(e) EXPENSES.—All expenses of any such conservatorship shall 

be paid by the bank and shall be a lien upon the bank which shall 

be prior to any other lien. 

[§ 207 and § 208 repealed by section 808 of P.L. 101-73 (103 

Stat. 446).] 

SEC. 209. [12 U.S.C. 209] LIABILITY PROTECTION. 

(a) FEDERAL AGENCY AND EMPLOYEES.—In any case in which 

the conservator is a Federal agency or an employee of the Government, the provisions of chapters 161 and 171 of title 28, United 

States Code, shall apply with respect to such conservator's liability 

for acts or omissions performed pursuant to and in the course of 

the duties and responsibilities of the conservatorship. 

(b) OTHER CONSERVATORS.—In any case where the conservator 

is not a conservator described in subsection (a), the conservator 

shall not be liable for damages in tort or otherwise for acts or omissions performed pursuant to and in the course of the duties and 

responsibilities of the conservatorship, unless such acts or omissions constitute gross negligence, including any similar conduct or 

any form of intentional tortious conduct, as determined by a court. 

(c) INDEMNIFICATION.—The Comptroller shall have authority to 

indemnify the conservator on such terms as the Comptroller deems 

proper. 

SEC. 210. [12 U.S.C. 210] Nothing in this title shall be construed to impair in any manner any powers of the President, the 

Secretary of the Treasury, the Comptroller of the Currency, or the 

Federal Reserve Board1. 

1

 Since the date of the enactment of the Banking Act of 1935, the Federal Reserve Board has 

been known as the Board of Governors of the Federal Reserve System (see section 203(a) of such 

Act, 49 Stat. 704). 
33 BANK CONSERVATION ACT Sec. 206 

SEC. 211. [12 U.S.C. 211] RULES AN D REGULATIONS. 

(a) IN GENERAL.—The Comptroller of the Currency may prescribe such rules and regulations as the Comptroller may deem 

necessary to carry out the provisions of this Act. 

(b) F.D.I.C. AS CONSERVATOR.—In any case in which the Federal Deposit Insurance Corporation is the conservator, any rules or 

regulations prescribed by the Comptroller shall be consistent with 

any rules and regulations prescribed by the Federal Deposit Insurance Corporation pursuant to the Federal Deposit Insurance Act. 

BANK ENTERPRISE ACT OF 1991 

35 

Subtitle C—Bank Enterprise Act 1 

SEC. 231. [12 U.S.C. 1811 nt.] SHOR T TITLE. 

This subtitle may be cited as the ''Bank Enterprise Act of 

1991''. 

SEC. 232. [12 U.S.C. 1834] REDUCE D ASSESSMENT RATE FOR DEPOSITS ATTRIBUTABLE T O LIFELIN E ACCOUNTS. 

(a) QUALIFICATION OF LIFELIN E ACCOUNTS BY FEDERAL RESERVE BOARD.— 

(1) IN GENERAL.—The Board 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)(H) 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, the Board and the Corporation shall consider the following factors: 

(A) Whether the account is available to provide basic 

transaction services for individuals who maintain a balance of less than $1,000 or such other amount which the 

Board may determine to be appropriate. 

(B) Whether any service charges or fees to which the 

account is subject, if any, for routine transactions do not 

exceed a minimal amount. 

(C) Whether any minimum balance or minimum opening requirement to which the account is subject, if any, is 

not more than a minimal amount. 

(D) Whether checks, negotiable orders of withdrawal, 

or similar instruments for making payments or other 

transfers to third parties may be drawn on the account. 

(E) Whether the depositor is permitted to make more 

than a minimal number of withdrawals from the account 

each month by any means described in subparagraph (D) 

or any other means. 

(F) Whether a monthly statement itemizing all transactions for the monthly reporting period is made available 

to the depositor with respect to such account or a passbook 

is provided in which all transactions with respect to such 

account are recorded. 

1

 This Act was enacted as subtitle C of title II of the Federal Deposit Insurance Corporation 

Improvement Act of 1991. 

37 
Sec. 233 BANK ENTERPRISE ACT OF 1991 38 

(G) Whether depositors are permitted access to tellers 

at the institution for conducting transactions with respect 

to such account. 

(H) Whether other account relationships with the 

institution are required in order to open any such account. 

(I) Whether individuals are required to meet any prerequisite which discriminates against low-income individuals in order to open such account. 

(J) Such other factors as the Board may determine to 

be appropriate. 

(3) DEFINITIONS.—Fo r purposes of this subsection— 

(A) BOARD.—The term ''Board'' means the Board of 

Governors of the Federal Reserve System. 

(B) INSURED DEPOSITORY INSTITUTION.—The term ''insured depository institution'' has the meaning given to 

such term in section 3(c)(2) of the Federal Deposit Insurance Act. 

(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 Board under 

this subsection. 

[Subsection (b) amended other provisions of law.] 

(c) AVAILABILITY OF FUNDS.—Th e 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. 

SEC. 233. [12 U.S.C. 1834a] ASSESSMENT CREDITS FOR QUALIFYIN G 

ACTIVITIES RELATIN G TO DISTRESSED COMMUNITIES. 

(a) DETERMINATION OF CREDITS FOR INCREASES I N COMMUNITY 

ENTERPRISE ACTIVITIES.— 

(1) IN GENERAL.—The Community Enterprise Assessment 

Credit Board established under subsection (d) shall issue 

guidelines for insured depository institutions eligible under 

this subsection for any community enterprise assessment 

credit with respect to any semiannual period. Such guidelines 

shall— 

(A) designate the eligibility requirements for any institution meeting applicable capital standards to receive an 

assessment credit under section 7(b)(7) of the Federal Deposit Insurance Act; and 

(B) determine the community enterprise assessment 

credit available to any eligible institution under paragraph 

(3). 

(2) QUALIFYING ACTIVITIES.—An insured depository institution may apply for1

 for any community enterprise assessment 

credit for any semiannual period for— 

(A) the amount, during such period, of new originations of qualified loans and other assistance provided for 

low- and moderate-income persons in distressed communities, or enterprises integrally involved with such neigh1

 Probably should strike ''for''. See section 114(c)(1)(A) of P.L. 103-325. 
39 BANK ENTERPRISE ACT OF 1991 Sec. 233 

borhoods, which the Board determines are qualified to be 

taken into account for purposes of this subsection; 

(B) the amount, during such period, of deposits 

accepted from persons domiciled in the distressed community, at any office of the institution (including any branch) 

located in any qualified distressed community, and new 

originations of any loans and other financial assistance 

made within that community, except that in no case shall 

the credit for deposits at any institution or branch exceed 

the credit for loans and other financial assistance by the 

bank or branch in the distressed community; and 

(C) any increase during the period in the amount of 

new equity investments in community development financial institutions. 

(3) AMOUN T OF ASSESSMENT CREDIT.—The amount of any 

community enterprise assessment credit available under section 7(b)(7) of the Federal Deposit Insurance Act for any insured depository institution, or a qualified portion thereof, 

shall be the amount which is equal to 5 percent, in the case 

of an institution which does not meet the community development organization requirements under section 234, and 15 percent, in the case of an institution, or a qualified portion 

thereof, which meets such requirements (or any percentage 

designated under paragraph (5)) of— 

(A) for the first full semiannual period in which community enterprise assessment credits are available, the 

sum of— 

(i) the amounts of assets described in paragraph 

(2)(A); and 

(ii) the amounts of deposits, loans, and other 

financial assistance described in paragraph (2)(B); and 

(B) for any subsequent semiannual period, the sum 

of— 

(i) any increase during such period in the amount 

of assets described in paragraph (2)(A) that has been 

deemed eligible for credit by the Board; and 

(ii) any increase during such period in the 

amounts of deposits, loans, and other financial assistance described in paragraph (2)(B) that has been 

deemed eligible for credit by the Board. 

(4) DETERMINATIO N OF QUALIFIED LOANS AND OTHER FINANCIAL ASSISTANCE.—Except as provided in paragraph (6), the 

types of loans and other assistance which the Board may determine to be qualified to be taken into account under paragraph 

(2)(A) for purposes of the community enterprise assessment 

credit, may include the following: 

(A) Loans insured or guaranteed by the Secretary of 

Housing and Urban Development, the Secretary of the 

Department of Veterans Affairs, the Administrator of the 

Small Business Administration, and the Secretary of Agriculture. 

(B) Loans or financing provided in connection with 

activities assisted by the Administrator of the Small Business Administration or any small business investment 
Sec. 233 BANK ENTERPRISE ACT OF 1991 40 

company and investments in small business investment 

companies. 

(C) Loans or financing provided in connection with any 

neighborhood housing service program assisted under the 

Neighborhood Reinvestment Corporation Act. 

(D) Loans or financing provided in connection with 

any activities assisted under the community development 

block grant program under title I of the Housing and Community Development Act of 1974. 

(E) Loans or financing provided in connection with 

activities assisted under title II of the Cranston-Gonzalez 

National Affordable Housing Act. 

(F) Loans or financing provided in connection with a 

homeownership program assisted under title III of the 

United States Housing Act of 1937 or subtitle B or C of 

title IV of the Cranston-Gonzalez National Affordable 

Housing Act. 

(G) Financial assistance provided through community 

development corporations. 

(H) Federal and State programs providing interest 

rate assistance for homeowners. 

(I) Extensions of credit to nonprofit developers or purchasers of low-income housing and small business developments. 

(J) In the case of members of any Federal home loan 

bank, participation in the community investment fund program established by the Federal home loan banks. 

(K) Conventional mortgages targeted to low- or moderate-income persons. 

(L) Loans made for the purpose of developing or 

supporting— 

(i) commercial facilities that enhance revitalization, community stability, or job creation and retention 

efforts; 

(ii) business creation and expansion efforts that— 

(I) create or retain jobs for low-income people; 

(II) enhance the availability of products and 

services to low-income people; or 

(III) create or retain businesses owned by lowincome people or residents of a targeted area; 

(iii) community facilities that provide benefits to 

low-income people or enhance community stability; 

(iv) home ownership opportunities that are affordable to low-income households; 

(v) rental housing that is principally affordable to 

low-income households; and 

(vi) other activities deemed appropriate by the 

Board. 

(M) The provision of technical assistance to residents 

of qualified distressed communities in managing their personal finances through consumer education programs 

either sponsored or offered by insured depository institutions. 
41 BANK ENTERPRISE ACT OF 1991 Sec. 233 

(N) The provision of technical assistance and consulting services to newly formed small businesses located 

in qualified distressed communities. 

(O) The provision of technical assistance to, or servicing the loans of low- or moderate-income homeowners 

and homeowners located in qualified distressed communities. 

(5) ADJUSTMENT OF PERCENTAGE.—The Board may increase or decrease the percentage referred to in paragraph 

(3)(A) for determining the amount of any community enterprise 

assessment credit pursuant to such paragraph, except that the 

percentage established for insured depository institutions 

which meet the community development organization requirements under section 234 shall not be less than 3 times the 

amount of the percentage applicable for insured depository 

institutions which do not meet such requirements. 

(6) CERTAIN INVESTMENTS NOT ELIGIBLE TO BE TAKEN INTO 

ACCOUNT.—Loans, financial assistance, and equity investments 

made by any insured depository institution that are not the result of originations by the institution shall not be taken into 

account for purposes of determining the amount of any credit 

pursuant to this subsection. 

(7) QUANTITATIVE ANALYSIS OF TECHNICAL ASSISTANCE.— 

The Board may establish guidelines for analyzing the technical 

assistance described in subparagraphs (M), (N), and (o) of 

paragraph (4) for the purpose of quantifying the results of such 

assistance in determining the amount of any community 

assessment credit under this subsection. 

(b) QUALIFIED DISTRESSED COMMUNITY DEFINED. — 

(1) IN GENERAL.—For purposes of this section, the term 

''qualified distressed community'' means any neighborhood or 

community which— 

(A) meets the minimum area requirements under 

paragraph (3) and the eligibility requirements of paragraph (4); and 

(B) is designated as a distressed community by any insured depository institution in accordance with paragraph 

(2) and such designation is not disapproved under such 

paragraph. 

(2) DESIGNATION REQUIREMENTS.— 

(A) NOTICE OF DESIGNATION.— 

(i) NOTICE TO AGENCY.—Upo n designating an area 

as a qualified distressed community, an insured 

depository institution shall notify the appropriate Federal banking agency of the designation. 

(ii) PUBLIC NOTICE.—Upo n the effective date of 

any designation of an area as a qualified distressed 

community, an insured depository institution shall 

publish a notice of such designation in major newspapers and other community publications which serve 

such area. 

(B) AGENCY DUTIES RELATING TO DESIGNATIONS.— 

(i) PROVIDING INFORMATION.—A t the request of 

any insured depository institution, the appropriate 
Sec. 233 BANK ENTERPRISE ACT OF 1991 42 

Federal banking agency shall provide to the institution appropriate information to assist the institution 

to identify and designate a qualified distressed community. 

(ii) PERIOD FOR DISAPPROVAL.—Any notice received 

by the appropriate Federal banking agency from any 

insured depository institution under subparagraph 

(A)(i) shall take effect at the end of the 90-day period 

beginning on the date such notice is received unless 

written notice of the approval or disapproval of the application by the agency is provided to the institution 

before the end of such period. 

(3) MINIMU M AREA REQUIREMENTS.—For purposes of this 

subsection, an area meets the requirements of this paragraph 

if— 

(A) the area is within the jurisdiction of 1 unit of general local government; 

(B) the boundary of the area is contiguous; and 

(C) the area— 

(i) has a population, as determined by the most recent census data available, of not less than— 

(I) 4,000, if any portion of such area is located 

within a metropolitan statistical area (as designated by the Director of the Office of Management and Budget) with a population of 50,000 or 

more; or 

(II) 1,000, in any other case; or 

(ii) is entirely within an Indian reservation (as 

determined by the Secretary of the Interior). 

(4) ELIGIBILITY REQUIREMENTS.—For purposes of this subsection, an area meets the requirements of this paragraph if 

the following criteria are met: 

(A) At least 30 percent of the residents residing in the 

area have incomes which are less than the national poverty level. 

(B) The unemployment rate for the area is 1V2 times 

greater than the national average (as determined by the 

Bureau of Labor Statistics' most recent figures). 

(C) Such additional eligibility requirements as the 

Board may, in its discretion, deem necessary to carry out 

the provisions of this subtitle. 

[Subsection (c) amended other provisions of law.] 

(d) COMMUNITY ENTERPRISE ASSESSMENT CREDIT BOARD.— 

(1) ESTABLISHMENT.—There is hereby established the 

"Community Enterprise Assessment Credit Board''. 

(2) NUMBER AND APPOINTMENT.—The Board shall be composed of 5 members as follows: 

(A) The Secretary of the Treasury or a designee of the 

Secretary. 

(B) The Secretary of Housing and Urban Development 

or a designee of the Secretary. 

(C) The Chairperson of the Federal Deposit Insurance 

Corporation or a designee of the Chairperson. 
43 BANK ENTERPRISE ACT OF 1991 Sec. 233 

(D) 2 individuals appointed by the President from 

among individuals who represent community organizations. 

(3) TERMS.— 

(A) APPOINTED MEMBERS.—Each appointed member 

shall be appointed for a term of 5 years. 

(B) INTERI M APPOINTMENT.—Any member appointed to 

fill a vacancy occurring before the expiration of the term 

to which such member's predecessor was appointed shall 

be appointed only for the remainder of such term. 

(C) CONTINUATION OF SERVICE.—Each appointed member may continue to serve after the expiration of the period 

to which such member was appointed until a successor has 

been appointed. 

(4) CHAIRPERSON.—The Secretary of the Treasury shall 

serve as the Chairperson of the Board. 

(5) No PAY.—No members of the Commission may receive 

any pay for service on the Board. 

(6) TRAVEL EXPENSES.—Each member shall receive travel 

expenses, including per diem in lieu of subsistence, in accordance with sections 5702 and 5703 of title 5, United States 

Code. 

(7) MEETINGS.—The Board shall meet at the call of the 

Chairperson or a majority of the Board's members. 

(e) DUTIES OF THE BOARD.— 

(1) PROCEDURE FOR DETERMINING COMMUNITY ENTERPRISE 

ASSESSMENT CREDITS.—The Board shall establish procedures 

for accepting and considering applications by insured depository institutions under subsection (a)(1) for community enterprise assessment credits and making determinations with respect to such applications. 

(2) NOTICE TO FDIC.—Th e Board shall notify the applicant 

and the Federal Deposit Insurance Corporation of any determination of the Board with respect to any application referred 

to in paragraph (1) in sufficient time for the Corporation to include the amount of such credit in the computation of the semiannual assessment to which such credit is applicable. 

(f) AVAILABILITY OF FUNDS.—Th e 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. 

(g) PROHIBITION ON DOUBLE FUNDIN G FOR SAME ACTIVITIES.— 

No community development financial institution may receive a 

community enterprise assessment credit if such institution, either 

directly or through a community partnership— 

(1) has received assistance within the preceding 12-month 

period, or has an application for assistance pending, under section 105 of the Community Development Banking and Financial Institutions Act of 1994; or 

(2) has ever received assistance, under section 108 of the 

Community Development Banking and Financial Institutions 

Act of 1994, for the same activity during the same semiannual 
Sec. 233 BANK ENTERPRISE ACT OF 1991 44 

period for which the institution seeks a community enterprise 

assessment credit under this section. 

(h) PRIORITY OF AWARDS.— 

(1) QUALIFYING LOANS AND SERVICES.— 

(A) I N GENERAL.—If the amount of funds appropriated 

for purposes of carrying out this section for any fiscal year 

are insufficient to award the amount of assessment credits 

for which insured depository institutions have applied and 

are eligible under this section, the Board shall, in awarding community enterprise assessment credits for qualifying 

activities under subparagraphs (A) and (B) of subsection 

(a)(2) for any semiannual period for which such appropriation is available, determine which institutions shall receive 

an award. 

(B) PRIORITY FOR SUPPORT OF EFFORTS OF CDFI.—The 

Board shall give priority to institutions that have supported the efforts of community development financial 

institutions in the qualified distressed community. 

(C) OTHER FACTORS.—The Board may also consider the 

following factors: 

(i) DEGREE OF DIFFICULTY.—The degree of difficulty in carrying out the activities that form the 

basis for the institution's application. 

(ii) COMMUNITY IMPACT.—The extent to which the 

activities that form the basis for the institution's application have benefited the qualified distressed community. 

(iii) INNOVATION.—The degree to which the activities that form the basis for the institution's application 

have incorporated innovative methods for meeting 

community needs. 

(iv) LEVERAGE.—The leverage ratio between the 

dollar amount of the activities that form the basis for 

the institution's application and the amount of the 

assessment credit calculated in accordance with this 

section for such activities. 

(v) SIZE.—The amount of total assets of the institution. 

(vi) NEW ENTRY.—Whether the institution had 

provided financial services in the designated distressed community before such semiannual period. 

(vii) NEED FOR SUBSIDY.—The degree to which the 

qualified activity which forms the basis for the application needs enhancement through an assessment 

credit. 

(viii) EXTENT OF DISTRESS I N COMMUNITY.—The 

degree of poverty and unemployment in the designated 

distressed community, the proportion of the total 

population of the community which are low-income 

families and unrelated individuals, and the extent of 

other adverse economic conditions in such community. 

(2) QUALIFYING INVESTMENTS.—If the amount of funds 

appropriated for purposes of carrying out this section for any 

fiscal year are insufficient to award the amount of assessment 
45 BANK ENTERPRISE ACT OF 1991 Sec. 233 

credits for which insured depository institutions have applied 

and are eligible under this section, the Board shall, in awarding community enterprise assessment credits for qualifying 

activities under subsection (a)(2)(C) for any semiannual period 

for which such appropriation is available, determine which 

institutions shall receive an award based on the leverage ratio 

between the dollar amount of the activities that form the basis 

for the institution's application and the amount of the assessment credit calculated in accordance with this section for such 

activities. 

(i) DETERMINATION OF AMOUN T OF ASSESSMENT CREDIT.—Notwithstanding any other provision of this section, the determination 

of the amount of any community enterprise assessment credit 

under subsection (a)(3) for any insured depository institution for 

any semiannual period shall be made solely at the discretion of the 

Board. No insured depository institution shall be awarded community enterprise assessment credits for any semiannual period in excess of an amount determined by the Board. 

(j) DEFINITIONS.—Fo r purposes of this section— 

(1) APPROPRIATE FEDERAL BANKING AGENCY.—The term 

"appropriate Federal banking agency'' has the meaning given 

to such term in section 3(q) of the Federal Deposit Insurance 

Act. 

(2) BOARD.—The term "Board" means the Community 

Enterprise Assessment Credit Board established under the 

amendment made by subsection (d). 

(3) INSURED DEPOSITORY INSTITUTION.—The term "insured 

depository institution'' has the meaning given to such term in 

section 3(c)(2) of the Federal Deposit Insurance Act. 

(4) COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION.— 

The term "community development financial institution'' has 

the same meaning as in section 103(5) of the Community 

Development Banking and Financial Institutions Act of 1994. 

(5) AFFILIATE.—Th e term "affiliate'' has the same meaning 

as in section 2 of the Bank Holding Company Act of 1956. 

SEC. 234. [12 U.S.C. 1834b] COMMUNIT Y DEVELOPMEN T ORGANIZATIONS. 

(a) COMMUNITY DEVELOPMENT ORGANIZATIONS DESCRIBED.— 

For purposes of this subtitle, any insured depository institution, or 

a qualified portion thereof, shall be treated as meeting the community development organization requirements of this section if— 

(1) the institution— 

(A) is a community development bank, or controls any 

community development bank, which meets the requirements of subsection (b); 

(B) controls any community development corporation, 

or maintains any community development unit within the 

institution, which meets the requirements of subsection (c); 

(C) invests in accounts in any community development 

credit union designated as a low-income credit union, subject to restrictions established for such credit unions by the 

National Credit union Administration Board; or 

(D) invests in a community development organization 

jointly controlled by two or more institutions; 
Sec. 233 BANK ENTERPRISE ACT OF 1991 46 

(2) except in the case of an institution which is a community development bank, the amount of the capital invested, in 

the form of debt or equity, by the institution in the community 

development organization referred to in paragraph (1) (or, in 

the case of any community development unit, the amount 

which the institution irrevocably makes available to such unit 

for the purposes described in paragraph (3)) is not less than 

the greater of— 

(A) V2 of 1 percent of the capital, as defined by generally accepted accounting principles, of the institution; or 

(B) the sum of the amounts invested in such community development organization; and 

(3) the community development organization provides 

loans for residential mortgages, home improvement, and community development and other financial services, other than financing for the purchase of automobiles or extension of credit 

under any open-end credit plan (as defined in section 103(i) of 

the Truth in Lending Act), to low- and moderate-income persons, nonprofit organizations, and small businesses located in 

qualified distressed communities in a manner consistent with 

the intent of this subtitle. 

(b) COMMUNITY DEVELOPMENT BANK REQUIREMENTS.—A community development bank meets the requirements of this subsection if— 

(1) the community development bank has a 15-member advisory board designated as the ''Community Investment Board'' 

and consisting entirely of community leaders who— 

(A) shall be appointed initially by the board of directors of the community development bank and thereafter by 

the Community investment Board from nominations received from the community; and 

(B) are appointed for a single term of 2 years, except 

that, of the initial members appointed to the Community 

Investment Board, V3 shall be appointed for a term of 8 

months, V3 shall be appointed for a term of 16 months, and 

V3 shall be appointed for a term of 24 months, as designated by the board of directors of the community development bank at the time of the appointment; 

(2) V3 of the members of the community development 

bank's board of directors are appointed from among individuals 

nominated by the Community investment Board; and 

(3) the bylaws of the community development bank require 

that the board of directors of the bank meet with the Community investment Board at least once every 3 months. 

(c) COMMUNITY DEVELOPMENT CORPORATION REQUIREMENTS.— 

Any community development corporation, or community development unit within any insured depository institution meets the 

requirements of this subsection if the corporation or unit provides 

the same or greater, as determined by the appropriate Federal 

banking agency, community participation in the activities of such 

corporation or unit as would be provided by a Community Investment Board under subsection (b) if such corporation or unit were 

a community development bank. 
47 BANK ENTERPRISE ACT OF 1991 Sec. 233 

(d) ADEQUATE DISPERSAL REQUIREMENT.—Th e appropriate 

Federal banking agency may approve the establishment of a community development organization under this subtitle only upon 

finding that the distressed community is not adequately served by 

an existing community development organization. 

(e) DEFINITIONS.—Fo r purposes of this section— 

(1) COMMUNITY DEVELOPMENT BANK.—Th e term "community development bank'' means any depository institution (as 

defined in section 3(c)(1) of the Federal Deposit Insurance Act). 

(2) COMMUNITY DEVELOPMENT ORGANIZATION.—The term 

"community development organization'' means any community 

development bank, community development corporation, community development unit within any insured depository institution, or community development credit union. 

(3) LOW- AND MODERATE-INCOME PERSONS.—The term "lowand moderate-income persons'' has the meaning given such 

term in section 102(a)(20) of the Housing and Community 

Development Act of 1974. 

(4) NONPROFIT ORGANIZATION; SMALL BUSINESS.—The 

terms ''nonprofit organization'' and ''small business'' have the 

meanings given to such terms by regulations which the appropriate Federal banking agency shall prescribe for purposes of 

this section. 

(5) QUALIFIED DISTRESSED COMMUNITY.—Th e term ''qualified distressed community'' has the meaning given to such 

term in section 233(b). 

BANK HOLDING COMPANY ACT OF 1956 

49 

BANK HOLDING COMPANY ACT OF 1956 

(70 stat. 133; 12 u.s.C. 1841 et seq.) 

A N ACT To define bank holding companies, control their future expansion, and 

require divestment of their nonbanking interests. 

Be is enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That this Act may 

be cited as the ''Bank Holding Company Act of 1956''. 

DEFINITIONS 

SEC. 2. [12 U.S.C. 1841] (a)(1) Except as provided in paragraph (5) of this subsection, ''bank holding company'' means any 

company which has control over any bank or over any company 

that is or becomes a bank holding company by virtue of this Act. 

(2) Any company has control over a bank or over any company 

if— 

(A) the company directly or indirectly or acting through 

one or more other persons owns, controls, or has power to vote 

25 per centum or more of any class of voting securities of the 

bank or company; 

(B) the company controls in any manner the election of a 

majority of the directors or trustees of the bank or company; 

or 

(C) the Board determines, after notice and opportunity for 

hearing, that the company directly or indirectly exercises a 

controlling influence over the management or policies of the 

bank or company. 

(3) For the purposes of any proceeding under paragraph (2)(C) 

of this subsection, there is a presumption that any company which 

directly or indirectly owns, controls, or has power to vote less than 

5 per centum of any class of voting securities of a given bank or 

company does not have control over that bank or company. 

(4) in any administrative or judicial proceeding under this Act, 

other than a proceeding under paragraph (2)(C) of this subsection, 

a company may not be held to have had control over any given 

bank or company at any given time unless that company, at the 

time in question, directly or indirectly owned, controlled, or had 

power to vote 5 per centum or more of any class of voting securities 

of the bank or company, or had already been found to have control 

in a proceeding under paragraph (2)(C). 

(5) Notwithstanding any other provision of this subsection— 

(A) No bank and no company owning or controlling voting 

shares of a bank is a bank holding company by virtue of its 

ownership or control of shares in a fiduciary capacity, except 

as provided in paragraphs (2) and (3) of subsection (g) of this 

section. For the purpose of the preceding sentence, bank shares 

51 
Sec. 2 BANK HOLDING COMPANY ACT OF 1956 52 

shall not be deemed to have been acquired in a fiduciary capacity if the acquiring bank or company has sole discretionary authority to exercise voting rights with respect thereto; except 

that this limitation is applicable in the case of a bank or company acquiring such shares prior to the date of enactment of 

the Bank Holding Company Act Amendments of 1970 only if 

the bank or company has the right consistent with its obligations under the instrument, agreement, or other arrangement 

establishing the fidiciary relationship to divest itself of such 

voting rights and fails to exercise that right to divest within 

a reasonable period not to exceed one year after the date of 

enactment of the Bank Holding Company Act Amendments of 

1970. 

(B) No company is a bank holding company by virtue of its 

ownership or control of shares acquired by it in connection 

with its underwriting of securities if such shares are held only 

for such period of time as will permit the sale thereof on a reasonable basis. 

(C) No company formed for the sole purpose of participating in a proxy solicitation is a bank holding company by virtue of its control of voting rights of shares acquired in the 

course of such solicitation. 

(D) No company is a bank holding company by virtue of its 

ownership or control of shares acquired in securing or collecting a debt previously contracted in good faith, until two 

years after the date of acquisition. The Board is authorized 

upon application by a company to extend, from time to time for 

not more than one year at a time, the two-year period referred 

to herein for disposing of any shares acquired by a company in 

the regular course of securing or collecting a debt previously 

contracted in good faith, if, in the Board's judgment, such an 

extension would not be detrimental to the public interest, but 

no such extension shall in the aggregate exceed three years. 

(E) No company is a bank holding company by virtue of its 

ownership or control of any state-chartered bank or trust company which— 

(i) is wholly owned by 1 or more thrift institutions or savings banks; and 

(ii) is restricted to accepting— 

(i) deposits from thrift institutions or savings banks; 

(ii) deposits arising out of the corporate business of 

the thrift institutions or savings banks that own the bank 

or trust company; or 

(iii) deposits of public moneys. 

(F) No trust company or mutual savings bank which is an 

insured bank under the Federal Deposit Insurance Act is a 

bank holding company by virtue of its direct or indirect ownership or control of one bank located in the same state, if (i) such 

ownership or control existed on the date of enactment of the 

Bank Holding Company Act Amendments of 1970 and is specifically authorized by applicable state law, and (ii) the trust 

company or mutual savings bank does not after that date acquire an interest in any company that, together with any other 

interest it holds in that company, will exceed 5 per centum of 
Sec. 2 

BANK HOLDING COMPANY ACT OF 1956 

53 

any class of the voting shares of that company, except that this 

limitation shall not be applicable to investments of the trust 

company or mutual savings bank, direct and indirect, which 

are otherwise in accordance with the limitations applicable to 

national banks under section 5136 of the Revised Statutes. (12 

u.s.C. 24) 

(6) For the purposes of this Act, any successor to a bank holding company shall be deemed to be a bank holding company from 

the date on which the predecessor company became a bank holding 

company. 

(b) ''Company'' means any corporation, partnership, business 

trust, association, or similar organization, or any other trust unless 

by its terms it must terminate within twenty-five years or not later 

than twenty-one years and ten months after the death of individuals living on the effective date of the trust, but shall not include 

any corporation the majority of the shares of which are owned by 

the united states or by any state, and shall not include a qualified 

family partnership. ''Company covered in 1970'' means a company 

which becomes a bank holding company as a result of the enactment of the Bank Holding Company Act Amendments of 1970 and 

which would have been a bank holding company on June 30, 1968, 

if those amendments had been enacted on that date. 

(c) BANK DEFINED.—For purposes of this Act— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

term ''bank'' means any of the following: 

(A) An insured bank as defined in section 3(h) of the 

Federal Deposit Insurance Act. 

(B) An institution organized under the laws of the 

United States, any State of the United States, the District 

of Columbia, any territory of the united states, puerto 

Rico, Guam, American samoa, or the virgin islands which 

both— 

(i) accepts demand deposits or deposits that the 

depositor may withdraw by check or similar means for 

payment to third parties or others; and 

(ii) is engaged in the business of making commercial loans. 

(2) EXCEPTIONS.—The term ''bank'' does not include any of 

the following: 

(A) A foreign bank which would be a bank within the 

meaning of paragraph (1) solely because such bank has an 

insured or uninsured branch in the United States. 

(B) An insured institution (as defined in subsection 

(j)). 

(C) An organization that does not do business in the 

united states except as an incident to its activities outside 

the United States. 

(D) An institution that functions solely in a trust or 

fiduciary capacity, if— 

(i) all or substantially all of the deposits of such 

institution are in trust funds and are received in a 

bona fide fiduciary capacity; 

(ii) no deposits of such institution which are insured by the Federal Deposit Insurance Corporation 
Sec. 2 BANK HOLDING COMPANY ACT OF 1956 54 

are offered or marketed by or through an affiliate of 

such institution; 

(iii) such institution does not accept demand deposits or deposits that the depositor may withdraw by 

check or similar means for payment to third parties or 

others or make commercial loans; and 

(iv) such institution does not— 

(I) obtain payment or payment related services from any Federal Reserve bank, including any 

service referred to in section 11A of the Federal 

Reserve Act; or 

(ii) exercise discount or borrowing privileges 

pursuant to section 19(b)(7) of the Federal Reserve 

Act. 

(E) A credit union (as described in section 

19(b)(1)(A)(iv) of the Federal Reserve Act). 

(F) An institution, including an institution that accepts collateral for extensions of credit by holding deposits 

under $100,000, and by other means which— 

(i) engages only in credit card operations; 

(ii) does not accept demand deposits or deposits 

that the depositor may withdraw by check or similar 

means for payment to third parties or others; 

(iii) does not accept any savings or time deposit of 

less than $100,000; 

(iv) maintains only one office that accepts deposits; and 

(v) does not engage in the business of making 

commercial loans. 

(G) An organization operating under section 25 or section 25(a) of the Federal Reserve Act. 

(H) An industrial loan company, industrial bank, or 

other similar institution which is— 

(i) an institution organized under the laws of a 

State which, on March 5, 1987, had in effect or had 

under consideration in such state's legislature a statute which required or would require such institution 

to obtain insurance under the Federal Deposit insurance Act— 

(i) which does not accept demand deposits 

that the depositor may withdraw by check or similar means for payment to third parties; 

(ii) which has total assets of less than 

$100,000,000; or 

(iii) the control of which is not acquired by 

any company after the date of the enactment of 

the Competitive Equality Amendments of 1987; or 

(ii) an institution which does not, directly, indirectly, or through an affiliate, engage in any activity 

in which it was not lawfully engaged as of March 5, 

1987, 

except that this subparagraph shall cease to apply to any 

institution which permits any overdraft (including any 

intraday overdraft), or which incurs any such overdraft in 
Sec. 2 

BANK HOLDING COMPANY ACT OF 1956 

55 

such institution's account at a Federal Reserve bank, on 

behalf of an affiliate if such overdraft is not the result of 

an inadvertent computer or accounting error that is beyond the control of both the institution and the affiliate, or 

that is otherwise permissible for a bank controlled by a 

company described in section 4(f)(1) . 

(i) The investors Fiduciary Trust Company, located in 

Kansas City, Missouri, so long as such institution— 

(i) engages only in trust, fiduciary, and agency 

activities in which it was lawfully engaged on March 

5, 1987; 

(ii) engages in such activities only at the same 

number of locations at which such activities were conducted on such date; 

(iii) does not accept demand deposits other than 

demand deposits which are maintained by such institution in— 

(i) a trust or fiduciary capacity; 

(ii) the institution's capacity as a custodian or 

as a paying, transfer, shareholder servicing, securities clearing, escrow, or dividend disbursing 

agent; or 

(iii) any capacity which is incidental to the 

trust or fiduciary activities of the institution; 

(iv) does not engage in the business of making 

commercial loans; 

(v) does not exercise discount or borrowing privileges pursuant to section 19(b)(7) of the Federal Reserve Act; and 

(vi) is not directly or indirectly controlled by any 

company other than a company which directly or indirectly controlled such institution on March 5, 1987. 

(J) A savings bank (as defined in section 3(g) of the 

Federal Deposit insurance Act) which— 

(i) is an insured bank (as defined in section 3(h) 

of such Act); 

(ii) is a subsidiary of the Great Western Financial 

Corporation as a result of an approval in writing by 

the state bank supervisor of the state of New York before June 30, 1987; 

(iii) meets or exceeds the investment requirements 

which an insured institution must meet in order to be 

a qualified thrift lender under section 408(o) of the 

National Housing Act; and 

(iv) does not, directly, or through insurance products such savings bank receives from or provides to 

the Great Western Financial Corporation, engage in 

the sale or underwriting of insurance, 

except that this subparagraph shall cease to apply with respect to such savings bank or any successor institution if 

any deposits of any other subsidiary or affiliate of the 

Great Western Financial Corporation which are subject to 

an assessment of an insurance premium under subsection 

(b) or (c) of section 404 of the National Housing Act are, 
Sec. 2 BANK HOLDING COMPANY ACT OF 1956 56 

directly or indirectly by any device whatsoever, transferred 

to or acquired by such savings bank or any successor institution which would have the effect of materially reducing 

such premium assessments. The exemption provided by 

this subparagraph shall cease to apply if Great Western 

Financial Corporation uses such savings bank or any successor institution as a vehicle to move such Corporation 

from Federal Savings and Loan Insurance Corporation 

insurance to Federal Deposit insurance Corporation insurance. 

(3) DISTRICT BANK.—The term ''District bank'' means any 

bank operating under the Code of Law for the District of Columbia. 

(d) ''subsidiary'', with respect to a specified bank holding company, means (1) any company 25 per centum or more of whose voting shares (excluding shares owned by the united states or by any 

company wholly owned by the united states) is directly or indirectly owned or controlled by such bank holding company, or is 

held by it with power to vote; (2) any company the election of a majority of whose directors is controlled in any manner by such bank 

holding company; or (3) any company with respect to the management or policies of which such bank holding company has the 

power, directly or indirectly, to exercise a controlling influence, as 

determined by the Board, after notice and opportunity for hearing. 

(e) The term ''successor'' shall include any company which acquires directly or indirectly from a bank holding company shares 

of any bank, when and if the relationship between such company 

and the bank holding company is such that the transaction effects 

no substantial change in the control of the bank or beneficial ownership of such shares of such bank. The Board may, by regulation, 

further define the term ''successor'' to the extent necessary to prevent evasion of the purposes of this Act. 

(f) ''Board'' means the Board of Governors of the Federal Reserve system. 

(g) For the purposes of this Act— 

(1) shares owned or controlled by any subsidiary of a bank 

holding company shall be deemed to be indirectly owned or 

controlled by such bank holding company; and 

(2) shares held or controlled directly or indirectly by trustees for the benefit of (A) a company, (B) the shareholders or 

members of a company, or (C) the employees (whether exclusively or not) of a company, shall be deemed to be controlled 

by such company. 

(h)(1) Except as provided by paragraph (2), the application of 

this Act and of section 23A of the Federal Reserve Act (12 U.S.C. 

371), as amended, shall not be affected by the fact that a transaction takes place wholly or partly outside the united states or 

that a company is organized or operates outside the United States. 

(2) Except as provided in paragraph (3), the prohibitions of section 4 of this Act shall not apply to shares of any company organized under the laws of a foreign country (or to shares held by such 

company in any company engaged in the same general line of business as the investor company or in a business related to the business of the investor company) that is principally engaged in busi-
Sec. 2 

63 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

57 

ness outside the united states if such shares are held or acquired 

by a bank holding company organized under the laws of a foreign 

country that is principally engaged in the banking business outside 

the United States. For the purpose of this subsection, the term 

''section 2(h)(2) company'' means any company whose shares are 

held pursuant to this paragraph. 

(3) Nothing in paragraph (2) authorizes a section 2(h)(2) company to engage in (or acquire or hold more than 5 percent of the 

outstanding shares of any class of voting securities of a company 

engaged in) any banking, securities, insurance, or other financial 

activities, as defined by the Board, in the United States. This paragraph does not prohibit a section 2(h)(2) company from holding 

shares that were lawfully acquired before the date of enactment of 

the Competitive Equality Banking Act of 1987. 

(4) No domestic office or subsidiary of a bank holding company 

or subsidiary thereof holding shares of a section 2(h)(2) company 

may extend credit to a domestic office or subsidiary of such section 

2(h)(2) company on terms more favorable than those afforded similar borrowers in the United States. 

(5) No domestic banking office or bank subsidiary of a bank 

holding company that controls a section 2(h)(2) company may offer 

or market products or services of such section 2(h)(2) company, or 

permit its products or services to be offered or marketed by or 

through such section 2(h)(2) company, unless such products or services were being so offered or marketed as of March 5, 1987, and 

then only in the same manner in which they were being offered or 

marketed as of that date. 

(i) THRIFT INSTITUTION.—For purposes of this Act, the term 

''thrift institution'' means— 

(1) any domestic building and loan or savings and loan 

association; 

(2) any cooperative bank without capital stock organized 

and operated for mutual purposes and without profit; 

(3) any Federal savings bank; and 

(4) any state-chartered savings bank the holding company 

of which is registered pursuant to section 408 of the National 

Housing Act. 

(j) DEFINITIO N 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 savings 

Association insurance Fund; and 

(3) any savings bank or cooperative bank which is deemed 

by the Director of the Office of Thrift Supervision to be a savings association under section 10(l) of the Home Owners' Loan 

Act. 

(k) AFFILIATE.—For purposes of this Act, the term ''affiliate'' 

means any company that controls, is controlled by, or is under common control with another company. 
58 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

(l) SAVINGS BANK HOLDIN G COMPANY.—For purposes of this 

Act, the term ''savings bank holding company'' means any company 

which controls one or more qualified savings banks if the aggregate 

total assets of such savings banks constitute, upon formation of the 

holding company and at all times thereafter, at least 70 percent of 

the total assets of such company. 

(m) QUALIFIED SAVINGS BANK.—Fo r purposes of this Act, the 

term ''qualified savings bank''— 

(1) means any savings bank (as defined in section 3(g) of 

the Federal Deposit Insurance Act) which was organized on or 

before March 5, 1987; and 

(2) includes any cooperative bank that is an insured bank 

(as defined in section 3(h) of the Federal Deposit Insurance 

Act) and any interim savings bank that is established to facilitate a corporate reorganization, or the formation of a holding 

company, involving a savings bank described in paragraph (1). 

(n) INCORPORATED DEFINITIONS.—Fo r purposes of this Act, the 

terms ''depository institution'', ''insured depository institution'', 

''appropriate Federal banking agency'', ''default'', ''in danger of default'', and ''state bank supervisor'' have the same meanings as in 

section 3 of the Federal Deposit insurance Act. 

(o) OTHER DEFINITIONS.—Fo r purposes of this Act, the following definitions shall apply: 

(1) CAPITAL TERMS.— 

(A) INSURED DEPOSITORY INSTITUTIONS.—With respect 

to insured depository institutions, the terms ''well capitalized'', ''adequately capitalized'', and ''undercapitalized'' 

have the same meanings as in section 38 of the Federal 

Deposit Insurance Act. 

( B) BANK HOLDING COMPANY.— 

(i) ADEQUATELY CAPITALIZED.—With respect to a 

bank holding company, the term ''adequately capitalized'' means a level of capitalization which meets or 

exceeds all applicable Federal regulatory capital 

standards. 

(ii) WEL L CAPITALIZED.—A bank holding company 

is ''well capitalized'' if it meets the required capital 

levels for well capitalized bank holding companies 

established by the Board. 

(C) OTHER CAPITAL TERMS.—The terms ''Tier 1'' and 

''risk-weighted assets'' have the meanings given those 

terms in the capital guidelines or regulations established 

by the Board for bank holding companies. 

(2) ANTITRUST LAWS.—Except as provided in section 11, 

the term ''antitrust laws''— 

(A) has the same meaning as in subsection (a) of the 

first section of the Clayton Act; and 

(B) includes section 5 of the Federal Trade Commission Act to the extent that such section 5 relates to unfair 

methods of competition. 

(3) BRANCH.—The term ''branch'' means a domestic branch 

(as defined in section 3 of the Federal Deposit Insurance Act). 

(4) HOM E STATE.—The term ''home State'' means— 
59 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(A) with respect to a national bank, the State in which 

the main office of the bank is located; 

(B) with respect to a state bank, the state by which 

the bank is chartered; and 

(C) with respect to a bank holding company, the state 

in which the total deposits of all banking subsidiaries of 

such company are the largest on the later of— 

(i) July 1, 1966; or 

(ii) the date on which the company becomes a 

bank holding company under this Act. 

(5) HOST STATE.—The term ''host State'' means— 

(A) with respect to a bank, a State, other than the 

home state of the bank, in which the bank maintains, or 

seeks to establish and maintain, a branch; and 

(B) with respect to a bank holding company, a state, 

other than the home state of the company, in which the 

company controls, or seeks to control, a bank subsidiary. 

(6) OUT-OF-STATE BANK.—Th e term ''out-of-State bank'' 

means, with respect to any state, a bank whose home state is 

another State. 

(7) OUT-OF-STATE BANK HOLDING COMPANY.—The term 

''out-of-state bank holding company'' means, with respect to 

any state, a bank holding company whose home state is another State. 

(8) LEAD INSURED DEPOSITORY INSTITUTIONS.— 

(A) IN GENERAL.—The term ''lead insured depository 

institution'' means the largest insured depository institution controlled by the subject bank holding company at any 

time, based on a comparison of the average total riskweighted assets controlled by each insured depository 

institution during the previous 12-month period. 

(B) BRANCH OR AGENCY.—For purposes of this paragraph and section 4(j)(4), the term ''insured depository 

institution'' includes any branch or agency operated in the 

united states by a foreign bank. 

(9) WEL L MANAGED.—The term ''well managed'' means— 

(A) in the case of any company or depository institution which receives examinations, the achievement of— 

(i) a CAMEL composite rating of 1 or 2 (or an 

equivalent rating under an equivalent rating system) 

in connection with the most recent examination or 

subsequent review of such company or institution; and 

(ii) at least a satisfactory rating for management, 

if such rating is given; or 

(B) in the case of a company or depository institution 

that has not received an examination rating, the existence 

and use of managerial resources which the Board determines are satisfactory. 

(10) QUALIFIED FAMILY PARTNERSHIP.—The term ''qualified 

family partnership'' means a general or limited partnership 

that the Board determines— 

(A) does not directly control any bank, except through 

a registered bank holding company; 
60 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

(B) does not control more than 1 registered bank holding company; 

(C) does not engage in any business activity, except indirectly through ownership of other business entities; 

(D) has no investments other than those permitted for 

a bank holding company pursuant to section 4(c); 

(E) is not obligated on any debt, either directly or as 

a guarantor; 

(F) has partners, all of whom are either— 

(i) individuals related to each other by blood, marriage (including former marriage), or adoption; or 

(ii) trusts for the primary benefit of individuals related as described in clause (i); and 

(G) has filed with the Board a statement that 

includes— 

(i) the basis for the eligibility of the partnership 

under subparagraph (F); 

(ii) a list of the existing activities and investments 

of the partnership; 

(iii) a commitment to comply with this paragraph; 

(iv) a commitment to comply with section 7 of the 

Federal Deposit Insurance Act with respect to any acquisition of control of an insured depository institution 

occurring after date of enactment of this paragraph; 

and 

(v) a commitment to be subject, to the same extent 

as if the qualified family partnership were a bank 

holding company— 

(i) to examination by the Board to assure 

compliance with this paragraph; and 

(II) to section 8 of the Federal Deposit Insurance Act. 

(p) FINANCIA L HOLDIN G COMPANY.—Fo r purposes of this Act, 

the term ''financial holding company'' means a bank holding company that meets the requirements of section 4(l)(1). 

(q) INSURANCE COMPANY.—Fo r purposes of sections 4 and 5, 

the term ''insurance company'' includes any person engaged in the 

business of insurance to the extent of such activities. 

ACQUISITION OF BANK SHARES OR ASSETS 

SEC. 3. [12 U.S.C. 1842] (a) It shall be unlawful, except with 

the prior approval of the Board, (1) for any action to be taken that 

causes any company to become a bank holding company; (2) for any 

action to be taken that causes a bank to become a subsidiary of a 

bank holding company; (3) for any bank holding company to acquire direct or indirect ownership or control of any voting shares 

of any bank if, after such acquisition, such company will directly 

or indirectly own or control more than 5 per centum of the voting 

shares of such bank; (4) for any bank holding company or subsidiary thereof, other than a bank, to acquire all or substantially 

all of the assets of a bank; or (5) for any bank holding company to 

merge or consolidate with any other bank holding company. Notwithstanding the foregoing this prohibition shall not apply to (A) 
61 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

shares acquired by a bank, (i) in good faith in a fiduciary capacity, 

except where such shares are held under a trust that constitutes 

a company as defined in section 2(b) and except as provided in 

paragraphs (2) and (3) of section 2(g), or (ii) in the regular course 

of securing or collecting a debt previously contracted in good faith, 

but any shares acquired after the date of enactment of this Act in 

securing or collecting any such previously contracted debt shall be 

disposed of within a period of two years from the date on which 

they were acquired; (B) additional shares acquired by a bank holding company in a bank in which such bank holding company owned 

or controlled a majority of the voting shares prior to such acquisition; or (C) the acquisition, by a company, of control of a bank in 

a reorganization in which a person or group of persons exchanges 

their shares of the bank for shares of a newly formed bank holding 

company and receives after the reorganization substantially the 

same proportional share interest in the holding company as they 

held in the bank except for changes in shareholders' interests resulting from the exercise of dissenting shareholders' rights under 

state or Federal law if— 

(i) immediately following the acquisition— 

(I) the bank holding company meets the capital and other financial standards prescribed by 

the Board by regulation for such a bank holding 

company; and 

(ii) the bank is adequately capitalized (as defined in section 38 of the Federal Deposit insurance Act); 

(ii) the holding company does not engage in any 

activities other than those of managing and controlling 

banks as a result of the reorganization; 

(iii) the company provides 30 days prior notice to 

the Board and the Board does not object to such transaction during such 30-day period; and 

(iv) the holding company will not acquire control 

of any additional bank as a result of the reorganization..

 1 

The Board is authorized upon application by a bank to extend, 

from time to time for not more than one year at a time, the twoyear period referred to above for disposing of any shares acquired 

by a bank in the regular course of securing or collecting a debt previously contracted in good faith, if, in the Board's judgment, such 

an extension would not be detrimental to the public interest, but 

no such extension shall in the aggregate exceed three years. For 

the purpose of the preceding sentence, bank shares acquired after 

the date of enactment of the Bank Holding Company Act Amendments of 1970 shall not be deemed to have been acquired in good 

faith in a fiduciary capacity if the acquiring bank or company has 

sole discretionary authority to exercise voting rights with respect 

thereto, but in such instances acquisitions may be made without 

prior approval of the Board if the Board, upon application filed 

within ninety days after the shares are acquired, approves retention or, if retention is disapproved, the acquiring bank disposes of 

1

 So in law. The second period should probably be striken. 
62 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

the shares or its sole discretionary voting rights within two years 

after issuance of the order of disapproval. 

(b)(1) NOTICE AND HEARING REQUIREMENTS.—Upon receiving 

from a company any application for approval under this section, 

the Board shall give notice to the Comptroller of the Currency, if 

the applicant company or any bank the voting shares or assets of 

which are sought to be required

 1 is a national banking association 

or a District bank, or to the appropriate supervisory authority of 

the interested state, if the applicant company or any bank the voting shares or assets of which are sought to be acquired is a state 

bank, in order to provide for the submission of the views and recommendations of the Comptroller of the Currency or the state 

supervisory authority, as the case may be. The views and recommendations shall be submitted within thirty calendar days of 

the date on which notice is given, or within ten calendar days of 

such date if the Board advises the Comptroller of the Currency or 

the state supervisory authority that an emergency exists requiring 

expeditious action. If the thirty-day notice period applies and if the 

Comptroller of the Currency or the State supervisory authority so 

notified by the Board disapproves the application in writing within 

this period, the Board shall forthwith give written notice of that 

fact to the applicant. Within three days after giving such notice to 

the applicant, the Board shall notify in writing the applicant and 

the disapproving authority of the date for commencement of a hearing by it on such application. Any such hearing shall be commenced 

not less than ten or more than thirty days after the Board has 

given written notice to the applicant of the action of the disapproving authority. The length of any such hearing shall be determined by the Board, but it shall afford all interested parties a reasonable opportunity to testify at such hearing. At the conclusion 

thereof, the Board shall, by order, grant or deny the application on 

the basis of the record made at such hearing. in the event of the 

failure of the Board to act on any application for approval under 

this section within the ninety-one-day period which begins on the 

date of submission to the Board of the complete record on that application, the application shall be deemed to have been granted. 

Notwithstanding any other provision of this subsection, if the 

Board finds that it must act immediately on any application for approval under this section in order to prevent the probable failure 

of a bank or bank holding company involved in a proposed acquisition, merger, or consolidation transaction, the Board may dispense 

with the notice requirements of this subsection, and if notice is 

given, the Board may request that the views and recommendations 

of the Comptroller of the Currency or the State supervisory authority, as the case may be, be submitted immediately in any form or 

by any means acceptable to the Board. if the Board has found pursuant to this subsection either that an emergency exists requiring 

expeditious action or that it must act immediately to prevent probable failure, the Board may grant or deny any such application 

without a hearing not withstanding any recommended disapproval 

by the appropriate supervisory authority. 

1

 So in original. Probably should be "acquired". 
63 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

( 2 ) WAIVE R I N CASE OF BAN K I N DANGE R OF CLOSING.—I f th e 

Board receives a certification described in section 13(f)(8)(D) of the 

Federal Deposit Insurance Act from the appropriate Federal or 

state chartering authority that a bank is in danger of closing, the 

Board may dispense with the notice and hearing requirements of 

paragraph (1) with respect to any application received by the Board 

relating to the acquisition of such bank, the bank holding company 

which controls such bank, or any other affiliated bank. 

(c) FACTORS FOR CONSIDERATIO N BY BOARD. — 

(1) COMPETITIVE FACTORS.—Th e Board shall not approve— 

(A)1 any acquisition or merger or consolidation under this 

section which would result in a monopoly, or which would be 

in furtherance of any combination or conspiracy to monopolize 

or to attempt to monopolize the business of banking in any 

part of the united states, or 

(B) 1 any other proposed acquisition or merger or consolidation under this section whose effect in any section of the country may be substantially to lessen competition, or to tend to 

create a monopoly, or which in any other manner would be in 

restraint or2 trade, unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the 

public interest by the probable effect of the transaction in 

meeting the convenience and needs of the community to be 

served. 

(2) BANKIN G AN D COMMUNIT Y FACTORS.—I n every case, the 

Board shall take into consideration the financial and managerial resources and future prospects of the company or companies and the banks concerned, and the convenience and needs 

of the community to be served. 

(3) SUPERVISORY FACTORS.—Th e Board shall disapprove 

any application under this section by any company if— 

(A) the company fails to provide the Board with adequate assurances that the company will make available to 

the Board such information on the operations or activities 

of the company, and any affiliate of the company, as the 

Board determines to be appropriate to determine and enforce compliance with this Act; or 

(B) in the case of an application involving a foreign 

bank, the foreign bank is not subject to comprehensive 

supervision or regulation on a consolidated basis by the 

appropriate authorities in the bank's home country. 

( 4 ) TREATMEN T OF CERTAI N BANK STOCK LOANS.—Notwith -

standing any other provision of law, the Board shall not follow 

any practice or policy in the consideration of any application 

for the formation of a one-bank holding company if following 

such practice or policy would result in the rejection of such application solely because the transaction to form such one-bank 

holding company involves a bank stock loan which is for a period of not more than twenty-five years. The previous sentence 

shall not be construed to prohibit the Board from rejecting any 

application solely because the other financial arrangements are 

1

 indentation so in law. 

2So in original. Probably should be "of'. 
64 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

considered unsatisfactory. The Board shall consider transactions involving bank stock loans for the formation of a onebank holding company having a maturity of twelve years or 

more on a case by case basis and no such transaction shall be 

approved if the Board believes the safety or soundness of the 

bank may be jeopardized. 

(5) MANAGERIA L RESOURCES.—Consideration of the managerial resources of a company or bank under paragraph (2) 

shall include consideration of the competence, experience, and 

integrity of the officers, directors, and principal shareholders of 

the company or bank. 

(d) INTERSTATE BANKING. — 

(1) APPROVALS AUTHORIZED.— 

(A) ACQUISITION OF BANKS.—The Board may approve 

an application under this section by a bank holding company that is adequately capitalized and adequately managed to acquire control of, or acquire all or substantially 

all of the assets of, a bank located in a state other than 

the home state of such bank holding company, without regard to whether such transaction is prohibited under the 

law of any state. 

( B ) PRESERVATION OF STATE AGE LAWS.— 

(i) IN GENERAL.—Notwithstanding subparagraph 

(A), the Board may not approve an application pursuant to such subparagraph that would have the effect 

of permitting an out-of-state bank holding company to 

acquire a bank in a host state that has not been in 

existence for the minimum period of time, if any, 

specified in the statutory law of the host State. 

(ii) SPECIAL RULE FOR STATE AGE LAWS SPECIFYING 

A PERIOD OF MORE THA N 5 YEARS.—Notwithstanding 

clause (i), the Board may approve, pursuant to subparagraph (A), the acquisition of a bank that has been 

in existence for at least 5 years without regard to any 

longer minimum period of time specified in a statutory 

law of the host state. 

(C) SHELL BANKS.—For purposes of this subsection, a 

bank that has been chartered solely for the purpose of, and 

does not open for business prior to, acquiring control of, or 

acquiring all or substantially all of the assets of, an existing bank shall be deemed to have been in existence for the 

same period of time as the bank to be acquired. 

(D) EFFEC T 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) the state law does not have the effect of discriminating against out-of-state banks, out-of-state 

bank holding companies, or subsidiaries of such banks 

or bank holding companies; 
65 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(ii) that state law was in effect as of the date of 

enactment of the Riegle-Neal interstate Banking and 

Branching Efficiency Act of 1994; 

(iii) the Federal Deposit Insurance Corporation 

has not determined that compliance with such state 

law would result in an unacceptable risk to the appropriate deposit insurance fund; and 

(iv) the appropriate Federal banking agency for 

such bank has not found that compliance with such 

State law would place the bank in an unsafe or unsound condition. 

(2) CONCENTRATION LIMITS.— 

(A) NATIONWID E CONCENTRATION LIMITS.—Th e Board 

may not approve an application pursuant to paragraph 

(1)(A) if the applicant (including all insured depository 

institutions which are affiliates of the applicant) controls, 

or upon consummation of the acquisition for which such 

application is filed would control, more than 10 percent of 

the total amount of deposits of insured depository institutions in the United States. 

( B ) STATEWIDE CONCENTRATION LIMITS OTHER THA N 

WIT H RESPECT TO INITIAL ENTRIES.—Th e Board may not 

approve an application pursuant to paragraph (1)(A) if— 

(i) immediately before the consummation of the 

acquisition for which such application is filed, the applicant (including any insured depository institution 

affiliate of the applicant) controls any insured depository institution or any branch of an insured depository 

institution in the home state of any bank to be acquired or in any host state in which any such bank 

maintains a branch; and 

(ii) the applicant (including all insured depository 

institutions which are affiliates of the applicant), upon 

consummation of the acquisition, would control 30 percent or more of the total amount of deposits of insured 

depository institutions in any such state. 

(C) EFFECTIVENESS OF STATE DEPOSIT CAPS.—No provision of this subsection shall be construed as affecting the 

authority of any state to limit, by statute, regulation, or 

order, the percentage of the total amount of deposits of insured depository institutions in the State which may be 

held or controlled by any bank or bank holding company 

(including all insured depository institutions which are 

affiliates of the bank or bank holding company) to the extent the application of such limitation does not discriminate against out-of-state banks, out-of-state bank holding 

companies, or subsidiaries of such banks or holding 

companies. 

(D) EXCEPTIONS TO SUBPARAGRAPH (B).—The Board 

may approve an application pursuant to paragraph (1)(A) 

without regard to the applicability of subparagraph (B) 

with respect to any state if— 

(i) there is a limitation described in subparagraph 

(C) in a state statute, regulation, or order which has 
66 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

the effect of permitting a bank or bank holding company (including all insured depository institutions 

which are affiliates of the bank or bank holding company) to control a greater percentage of total deposits 

of all insured depository institutions in the state than 

the percentage permitted under subparagraph (B); or 

(ii) the acquisition is approved by the appropriate 

state bank supervisor of such state and the standard 

on which such approval is based does not have the effect of discriminating against out-of-State banks, outof-state bank holding companies, or subsidiaries of 

such banks or holding companies. 

(E) DEPOSI T DEFINED.—Fo r purposes of this paragraph, the term ''deposit'' has the same meaning as in section 3(l) of the Federal Deposit Insurance Act. 

(3) COMMUNIT Y REINVESTMEN T COMPLIANCE.—I n determining whether to approve an application under paragraph 

(1)(A), the Board shall— 

(A) comply with the responsibilities of the Board regarding such application under section 804 of the Community Reinvestment Act of 1977; and 

(B) take into account the applicant's record of compliance with applicable state community reinvestment laws. 

(4) APPLICABILIT Y OF ANTITRUS T LAWS.—N o provision of 

this subsection shall be construed as affecting— 

(A) the applicability of the antitrust laws; or 

(B) the applicability, if any, of any state law which is 

similar to the antitrust laws. 

( 5 ) EXCEPTIO N FOR BANK S I N DEFAUL T OR I N DANGE R OF 

DEFAULT.—The Board may approve an application pursuant to 

paragraph (1)(A) which involves— 

(A) an acquisition of 1 or more banks in default or in 

danger of default; or 

(B) an acquisition with respect to which assistance is 

provided under section 13(c) of the Federal Deposit Insurance Act; 

without regard to subparagraph (B) or (D) of paragraph (1) or 

paragraph (2) or (3). 

(e) Every bank that is a holding company and every bank that 

is a subsidiary of such company shall become and remain an insured depository institution as such term is defined in section 3 1 

of the Federal Deposit Insurance Act. 

(f) [Repealed]. 

( g) MUTUA L BAN K HOLDIN G COMPANY. — 

(1) ESTABLISHMENT.—Notwithstanding any provision of 

Federal law other than this Act, a savings bank or cooperative 

bank operating in mutual form may reorganize so as to form 

a holding company. 

(2) REGULATIONS.— A bank holding company organized as 

a mutual holding company shall be regulated on terms, and 

1

 Section 602(b) of P.L. 101-73, 103 Stat. 409, amended section 3(e) by striking ''an insured 

bank as defined in section 3(h)'' and inserting "an insured depository institution as defined in 

section 3''. The amendment probably should have striken ''an insured bank as such term is defined in section 3(h)''. 
67 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

shall be subject to limitations, comparable to those applicable 

to any other bank holding company. 

INTERESTS I N NONBANKING ORGANIZATIONS 

SEC. 4. [12 U.S.C. 1843] (a) Except as otherwise provided in 

this Act, no bank holding company shall— 

(1) after the date of enactment of this Act acquire direct 

or indirect ownership or control of any voting shares of any 

company which is not a bank, or 

(2) after two years from the date as of which it becomes 

a bank holding company, or in the case of a company which 

has been continuously affiliated since May 15, 1955, with a 

company which was registered under the investment Company 

Act of 1940, prior to May 15, 1955, in such a manner as to constitute an affiliated company within the meaning of that Act, 

after December 31, 1978, or, in the case of any company which 

becomes, as a result of the enactment of the Bank Holding 

Company Act Amendments of 1970, a bank holding company 

on the date of such enactment, after December 31, 1980, retain 

direct or indirect ownership or control of any voting shares of 

any company which is not a bank or bank holding company or 

engage in any activities other than (A) those of banking or of 

managing or controlling banks and other subsidiaries authorized under this Act or of furnishing services to or performing 

services for its subsidiaries, and (B) those permitted under 

paragraph (8) of subsection (c) of this section subject to all the 

conditions specified in such paragraph or in any order or regulation issued by the Board under such paragraph: Provided, 

That a company covered in 1970 may also engage in those 

activities in which directly or through a subsidiary (i) it was 

lawfully engaged on June 30, 1968 (or on a date subsequent to 

June 30, 1968 in the case of activities carried on as the result 

of the acquisition by such company or subsidiary, pursuant to 

a binding written contract entered into on or before June 30, 

1968, of another company engaged in such activities at the 

time of the acquisition), and (ii) it has been continuously engaged since June 30, 1968 (or such subsequent date). The 

Board by order, after opportunity for hearing, may terminate 

the authority conferred by the preceding proviso on any company to engage directly or through a subsidiary in any activity 

otherwise permitted by that proviso if it determines, having 

due regard to the purposes of this Act, that such action is necessary to prevent undue concentration of resources, decreased 

or unfair competition, conflicts of interest, or unsound banking 

practices; and in the case of any such company controlling a 

bank having bank assets in excess of $60,000,000 on or after 

the date of enactment of the Bank Holding Company Act 

Amendments of 1970 the Board shall determine, within two 

years after such date (or, if later, within two years after the 

date on which the bank assets first exceed $60,000,000), 

whether the authority conferred by the preceding proviso with 

respect to such company should be terminated as provided in 

this sentence. Nothing in this paragraph shall be construed to 
68 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

authorize any bank holding company referred to in the preceding proviso, or any subsidiary thereof, to engage in activities authorized by that proviso through the acquisition, pursuant to a contract entered into after June 30, 1968, of any interest in or the assets of a going concern engaged in such activities. Any company which is authorized to engage in any activity pursuant to the preceding proviso or subsection (d) of this 

section but, as a result of action of the Board, is required to 

terminate such activity may (notwithstanding any otherwise 

applicable time limit prescribed in this paragraph) retain the 

ownership or control of shares in any company carrying on 

such activity for a period of ten years from the date on which 

its authority was so terminated by the Board. Notwithstanding 

any other provision of this paragraph, if any company that became a bank holding company as a result of the enactment of 

the Competitive Equality Amendments of 1987 acquired, between March 5, 1987, and the date of the enactment of such 

Amendments, an institution that became a bank as a result of 

the enactment of such Amendments, that company shall, upon 

the enactment of such Amendments, immediately come into 

compliance with the requirements of this Act. 

The Board is authorized, upon application by a bank holding company, to extend the two-year period referred to in paragraph (2) 

above from time to time as to such bank holding company for not 

more than one year at a time, if, in its judgment, such an extension 

would not be detrimental to the public interest, but no such extensions shall in the aggregate exceed three years. Notwithstanding 

any other provision of this Act, the period ending December 31, 

1980, referred to in paragraph (2) above, may be extended by the 

Board of Governors to December 31, 1984, but only for the divestiture by a bank holding company of real estate or interests in real 

estate lawfully acquired for investment or development. in making 

its decision whether to grant such extension, the Board shall consider whether the company has made a good faith effort to divest 

such interests and whether such extension is necessary to avert 

substantial loss to the company. 

(b) After two years from the date of enactment of this Act, no 

certificate evidencing shares of any bank holding company shall 

bear any statement purporting to represent shares of any other 

company except a bank or a bank holding company, nor shall the 

ownership, sale, or transfer of shares of any bank holding company 

be conditioned in any manner whatsoever upon the ownership, 

sale, or transfer of shares of any other company except a bank or 

a bank holding company. 

(c) The prohibitions in this section shall not apply to (i) any 

company that was on January 4, 1977, both a bank holding company and a labor, agricultural, or horticultural organization exempt 

from taxation under section 501 of the internal Revenue Code of 

1954, or to any labor, agricultural, or horticultural organization to 

which all or substantially all of the assets of such company are 

hereafter transferred, or (ii) a company covered in 1970 more than 

85 per centum of the voting stock of which was collectively owned 

on June 30, 1968, and continuously thereafter, directly or indirectly, by or for members of the same family, or their spouses, who 
69 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

are lineal descendants of common ancestors; and such prohibitions 

shall not, with respect to any other bank holding company, apply 

to— 

(1) shares of any company engaged or to be engaged solely 

in one or more of the following activities: (A) holding or operating properties used wholly or substantially by any banking 

subsidiary of such bank holding company in the operations of 

such banking subsidiary or acquired for such future use; or (B) 

conducting a safe deposit business; or (C) furnishing services 

to or performing services for such bank holding company or its 

banking subsidiaries; or (D) liquidating assets acquired from 

such bank holding company or its banking subsidiaries or acquired from any other source prior to May 9, 1956, or the date 

on which such company became a bank holding company, 

whichever is later; 

(2) shares acquired by a bank holding company or any of 

its subsidiaries in satisfaction of a debt previously contracted 

in good faith, but such shares shall be disposed of within a period of two years from the date on which they were acquired, 

except that the Board is authorized upon application by such 

bank holding company to extend such period of two years from 

time to time as to such holding company if, in its judgment, 

such an extension would not be detrimental to the public interest, and, in the case of a bank holding company which has not 

disposed of such shares within 5 years after the date on which 

such shares were acquired, the Board may, upon the application of such company, grant additional exemptions if, in the 

judgment of the Board, such extension would not be detrimental to the public interest and, either the bank holding company has made a good faith attempt to dispose of such shares 

during such 5-year period, or the disposal of such shares during such 5-year period would have been detrimental to the 

company, except that the aggregate duration of such extensions shall not extend beyond 10 years after the date on which 

such shares were acquired; 

(3) shares acquired by such bank holding company from 

any of its subsidiaries which subsidiary has been requested to 

dispose of such shares by any Federal or State authority having statutory power to examine such subsidiary, but such bank 

holding company shall dispose of such shares within a period 

of two years from the date on which they were acquired; 

(4) shares held or acquired by a bank in good faith in a 

fiduciary capacity, except where such shares are held under a 

trust that constitutes a company as defined in section 2(b) and 

except as provided in paragraphs (2) and (3) of section 2(g); 

(5) shares which are of the kinds and amounts eligible for 

investment by national banking associations under the provisions of section 5136 of the Revised Statutes; 

(6) shares of any company which do not include more than 

5 per centum of the outstanding voting shares of such company; 

(7) shares of an investment company which is not a bank 

holding company and which is not engaged in any business 

other than investing in securities, which securities do not in-
70 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

clude more than 5 per centum of the outstanding voting shares 

of any company; 

(8) shares of any company the activities of which had been 

determined by the Board by regulation or order under this 

paragraph as of the day before the date of the enactment of the 

Gramm-Leach-Bliley Act, to be so closely related to banking as 

to be a proper incident thereto (subject to such terms and conditions contained in such regulation or order, unless modified 

by the Board); 

(9) shares held or activities conducted by any company 

organized under the laws of a foreign country the greater part 

of whose business is conducted outside the united states, if the 

Board by regulation or order determines that, under the circumstances and subject to the conditions set forth in the regulation or order, the exemption would not be substantially at 

variance with the purposes of this Act and would be in the 

public interest; 

(10) shares lawfully acquired and owned prior to May 9, 

1956, by a bank which is a bank holding company, or by any 

of its wholly owned subsidiaries; 

(11) shares owned directly or indirectly by a company covered in 1970 in a company which does not engage in any activities other than those in which the bank holding company, or 

its subsidiaries, may engage by virtue of this section, but nothing in this paragraph authorizes any bank holding company, or 

subsidiary thereof, to acquire any interest in or the assets of 

any going concern (except pursuant to a binding written contract entered into before June 30, 1968, or pursuant to another 

provision of this Act) other than one which was a subsidiary 

on June 30, 1968; 

(12) shares retained or acquired, or activities engaged in, 

by any company which becomes, as a result of the enactment 

of the Bank Holding Company Act Amendments of 1970, a 

bank holding company on the date of such enactment, or by 

any subsidiary thereof, if such company— 

(A) within the applicable time limits prescribed in subsection (a)(2) of this section (i) ceases to be a bank holding 

company, or (ii) ceases to retain direct or indirect owership 

or control of those shares and to engage in those activities 

not authorized under this section; and 

(B) complies with such other conditions as the Board 

may by regulation or order prescribe; 

(13) shares of, or activities conducted by, any company 

which does no business in the united states except as an incident to its international or foreign business, if the Board by 

regulation or order determines that, under the circumstances 

and subject to the conditions set forth in the regulation or 

order, the exemption would not be substantially at variance 

with the purposes of this Act and would be in the public interest; or 

(14) shares of any company which is an export trading 

company whose acquisition (including each acquisition of 

shares) or formation by a bank holding company has not been 

disapproved by the Board pursuant to this paragraph, except 
71 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

that such investments, whether direct or indirect, in such 

shares shall not exceed 5 per centum of the bank holding company's consolidated capital and surplus. 

(A)(i) No bank holding company shall invest in an export trading company under this paragraph unless the 

Board has been given sixty days' prior written notice of 

such proposed investment and within such period has not 

issued a notice disapproving the proposed investment or 

extending for up to another thirty days the period during 

which such disapproval may be issued. 

(ii) The period for disapproval may be extended for 

such additional thirty-day period only if the Board determines that a bank holding company proposing to invest in 

an export trading company has not furnished all the information required to be submitted or that in the Board's 

judgment any material information submitted is substantially inaccurate. 

(iii) The notice required to be filed by a bank holding 

company shall contain such relevant information as the 

Board shall require by regulation or by specific request in 

connection with any particular notice. 

(iv) The Board may disapprove any proposed investment only if— 

(i) such disapproval is necessary to prevent unsafe 

or unsound banking practices, undue concentration of 

resources, decreased or unfair competition, or conflicts 

of interest; 

(ii) the Board finds that such investment would 

affect the financial or managerial resources of a bank 

holding company to an extent which is likely to have 

a materially adverse effect on the safety and soundness of any subsidiary bank of such bank holding company, or 

(iii) the bank holding company fails to furnish the 

information required under clause (iii). 

(v) LEVERAGE.—The Board may not disapprove any 

proposed investment solely on the basis of the anticipated 

or proposed asset-to-equity ratio of the export trading company with respect to which such investment is proposed, 

unless the anticipated or proposed annual average assetto-equity ratio is greater than 20-to-1. 

(vi) Within three days after a decision to disapprove 

an investment, the Board shall notify the bank holding 

company in writing of the disapproval and shall provide a 

written statement of the basis for the disapproval. 

(vii) A proposed investment may be made prior to the 

expiration of the disapproval period if the Board issues 

written notice of its intent not to disapprove the investment. 

(B)(i) The total amount of extensions of credit by a 

bank holding company which invests in an export trading 

company, when combined with all such extensions of credit 

by all the subsidiaries of such bank holding company, to 

an export trading company shall not exceed at any one 
72 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

time 10 per centum of the bank holding company's consolidated capital and surplus. For purposes of the preceding 

sentence, an extension of credit shall not be deemed to include any amount invested by a bank holding company in 

the shares of an export trading company. 

(ii) No provision of any other Federal law in effect on 

October 1, 1982, relating specifically to collateral requirements shall apply with respect to any such extension of 

credit. 

(iii) No bank holding company or subsidiary of such 

company which invests in an export trading company may 

extend credit to such export trading company or to customers of such export trading company on terms more 

favorable than those afforded similar borrowers in similar 

circumstances, and such extension of credit shall not involve more than the normal risk of repayment or present 

other unfavorable features. 

(C) For purposes of this paragraph, an export trading 

company— 

(i) may engage in or hold shares of a company engaged in the business of underwriting, selling, or distributing securities in the united states only to the 

extent that any bank holding company which invests 

in such export trading company may do so under applicable Federal and state banking laws and regulations; and 

(ii) may not engage in agricultural production 

activities or in manufacturing, except for such incidental product modification including repackaging, reassembling or extracting byproducts, as is necessary to 

enable united states goods or services to conform with 

requirements of a foreign country and to facilitate 

their sale in foreign countries. 

(D) A bank holding company which invests in an export trading company may be required, by the Board, to 

terminate its investment or may be made subject to such 

limitations or conditions as may be imposed by the Board, 

if the Board determines that the export trading company 

has taken positions in commodities or commodity contracts, in securities, or in foreign exchange, other than as 

may be necessary in the course of the export trading company's business operations. 

(E) Notwithstanding any other provision of law, an 

Edge Act corporation, organized under section 25(a) of the 

Federal Reserve Act (12 U.S.C. 611-631), which is a subsidiary of a bank holding company, or an agreement corporation, operating subject to section 25 of the Federal Reserve Act (12 U.S.C. 601-604(a)), which is a subsidiary of 

a bank holding company, may invest directly and indirectly in the aggregate up to 5 per centum of its consolidated capital and surplus (25 per centum in the case of a 

corporation not engaged in banking) in the voting stock of1 

1

 So in law. Probably should be "or". 
73 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

other evidences of ownership in one or more export trading 

companies. 

(F) For purposes of this paragraph— 

(i) the term ''export trading company'' means a 

company which does business under the laws of the 

united states or any state, which is exclusively engaged in activities related to international trade, and 

which is organized and operated principally for purposes of exporting goods or services produced in the 

united states or for purposes of facilitating the exportation of goods or services produced in the united 

states by unaffiliated persons by providing one or 

more export trade services.1 

(ii) the term ''export trade services'' includes, but 

is not limited to, consulting, international market research, advertising, marketing, insurance (other than 

acting as principal, agent or broker in the sale of 

insurance on risks resident or located, or activities 

performed, in the united states, except for insurance 

covering the transportation of cargo from any point of 

origin in the united states to a point of final destination outside the united states), product research and 

design, legal assistance, transportation, including 

trade documentation and freight forwarding, communication and processing of foreign orders to and for exporters and foreign purchasers, warehousing, foreign 

exchange, financing, and taking title to goods, when 

provided in order to facilitate the export of goods or 

services produced in the united states; 

(iii) the term ''bank holding company'' shall include a bank which (i) is organized solely to do business with other banks and their officers, directors, or 

employees; (ii) is owned primarily by the banks with 

which it does business; and (iii) does not do business 

with the general public. No such other bank, owning 

stock in a bank described in this clause that invests 

in an export trading company, shall extend credit to 

an export trading company in an amount exceeding at 

any one time 10 per centum of such other bank's capital and surplus; and 

(iv) the term ''extension of credit'' shall have the 

same meaning given such term in the fourth paragraph of section 23A of the Federal Reserve Act. 

( G ) DETERMINATIO N OF STATUS AS EXPORT TRADIN G 

COMPANY.— 

(i) TIM E PERIOD REQUIREMENTS.—Fo r purposes of 

determining whether an export trading company is 

operated principally for the purposes described in subparagraph (F)(i)— 

(i) the operations of such company during the 

2-year period beginning on the date such company 

1

 so in original. The period probably should be a semicolon. 
74 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

commences operations shall not be taken into account in making any such determination; and 

(II) not less than 4 consecutive years of operations of such company (not including any portion 

of the period referred to in subclause (I)) shall be 

taken into account in making any such determination. 

(ii) EXPORT REVENUE REQUIREMENTS.—A company 

shall not be treated as operated principally for the 

purposes described in subparagraph (F)(i) unless— 

(I) the revenues of such company from the export, or facilitating the export, of goods or services 

produced in the united states exceed the revenues of such company from the import, or facilitating the import, into the united states of goods 

or services produced outside the united states; 

and 

(II) at least V3 of such company's total revenues are revenues from the export, or facilitating 

the export, of goods or services produced in the 

united states by persons not affiliated with such 

company. 

( H ) INVENTORY.— 

(i) N O GENERAL LIMITATION.—The Board may not 

prescribe by regulation any maximum dollar amount 

limitation on the value of goods which an export trading company may maintain in inventory at any time. 

(ii) SPECIFIC LIMITATION BY ORDER.—Notwith -

standing clause (i), the Board may issue an order 

establishing a maximum dollar amount limitation on 

the value of goods which a particular export trading 

company may maintain in inventory at any time (after 

such company has been operating for a reasonable period of time) if the Board finds that, under the facts 

and circumstances, such limitation is necessary to prevent risks that would affect the financial or managerial resources of an investor bank holding company to 

an extent which would be likely to have a materially 

adverse effect on the safety and soundness of any subsidiary bank of such bank holding company. 

The Board shall include in its annual report to the Congress a 

description and a statement of the reasons for approval of each activity approved by it by order or regulation under such paragraph 

during the period covered by the report. 

(d) To the extent that such action would not be substantially 

at variance with the purposes of this Act and subject to such conditions as it considers necessary to protect the public interest, the 

Board by order, after opportunity for hearing, may grant exemptions from the provisions of this section to any bank holding company which controlled one bank prior to July 1, 1968, and has not 

thereafter acquired the control of any other bank in order (1) to 

avoid disrupting business relationships that have existed over a 

long period of years without adversely affecting the banks or communities involved, or (2) to avoid forced sales of small locally 
75 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

owned banks to purchasers not similarly representative of community interests, or (3) to allow retention of banks that are so small 

in relation to the holding company's total interests and so small in 

relation to the banking market to be served as to minimize the 

likelihood that the bank's powers to grant or deny credit may be 

influenced by a desire to further the holding company's other interests. 

(e) With respect to shares which were not subject to the prohibitions of this section as originally enacted by reason of any exemption with respect thereto but which were made subject to such prohibitions by the subsequent repeal of such exemption, no bank 

holding company shall retain direct or indirect ownership or control 

of such shares after five years from the date of the repeal of such 

exemption, except as provided in paragraph (2) of subsection (a). 

Any bank holding company subject to such five-year limitation on 

the retention of nonbanking assets shall endeavor to divest itself 

of such shares promptly and such bank holding company shall report its progress in such divestiture to the Board two years after 

repeal of the exemption applicable to it and annually thereafter. 

(f) CERTAI N COMPANIES NO T TREATED AS BAN K HOLDIN G COM -

PANIES.— 

(1) IN GENERAL.—Except as provided in paragraph (9), any 

company which— 

(A) on March 5, 1987, controlled an institution which 

became a bank as a result of the enactment of the Competitive Equality Amendments of 1987; and 

(B) was not a bank holding company on the day before 

the date of the enactment of the Competitive Equality 

Amendments of 1987, 

shall not be treated as a bank holding company for purposes 

of this Act solely by virtue of such company's control of such 

institution. 

(2) LOSS OF EXEMPTION.—Subject to paragraph (3), a company described in paragraph (1) shall no longer qualify for the 

exemption provided under that paragraph if— 

(A) such company directly or indirectly— 

(i) acquires control of an additional bank or an insured institution (other than an insured institution described in paragraph (10) or (12) of this subsection) 

after March 5, 1987; or 

(ii) acquires control of more than 5 percent of the 

shares or assets of an additional bank or a savings 

association other than— 

(I) shares held as a bona fida fiduciary 

(whether with or without the sole discretion to 

vote such shares); 

(II) shares held by any person as a bona fide 

fiduciary solely for the benefit of employees of 

either the company described in paragraph (1) or 

any subsidiary of that company and the beneficiaries of those employees; 

(III) shares held temporarily pursuant to an 

underwriting commitment in the normal course of 

an underwriting business; 
76 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

(iv) shares held in an account solely for trading purposes; 

(v) shares over which no control is held other 

than control of voting rights acquired in the normal course of a proxy solicitation; 

(vi) loans or other accounts receivable acquired in the normal course of business; 

(vii) shares or assets acquired in securing or 

collecting a debt previously contracted in good 

faith, during the 2-year period beginning on the 

date of such acquisition or for such additional 

time (not exceeding 3 years) as the Board may 

permit if the Board determines that such an 

extension will not be detrimental to the public interest; 

(viii) shares or assets of a savings association 

described in paragraph (10) or (12) of this subsection; 

(IX) shares of a savings association held by 

any insurance company, as defined in section 

2(a)(17) of the Investment Company Act of 1940, 

except as provided in paragraph (11); 

(X) shares issued in a qualified stock insuance 

under section 10(q) of the Home Owners' Loan 

Act; and 

(Xi) assets that are derived from, or incidental to, activities in which institutions described 

in subparagraph (F) or (H) of section 2(c)(2) are 

permitted to engage; 

except that the aggregate amount of shares held under this clause 

(other than under subclauses (i), (ii), (iii), (iv), (v), and (viii)) 

may not exceed 15 percent of all outstanding shares or of the voting power of a savings association; 

(B) any bank subsidiary of such company— 

(i) accepts demand deposits or deposits that the 

depositor may withdraw by check or similar means for 

payment to third parties; and 

(ii) engages in the business of making commercial 

loans (except that, for purposes of this clause, loans 

made in the ordinary course of a credit card operation 

shall not be treated as commercial loans); or 

(C) after the date of the enactment of the Competitive 

Equality Amendments of 1987, any bank subsidiary of 

such company permits any overdraft (including any 

intraday overdraft), or incurs any such overdraft in the account of the bank at a Federal reserve bank, on behalf of 

an affiliate, other than an overdraft described in paragraph (3). 

(3) PERMISSIBLE OVERDRAFTS DESCRIBED.—For purposes of 

paragraph (2)(C), an overdraft is described in this paragraph 

if— 

(A) such overdraft results from an inadvertent computer or accounting error that is beyond the control of both 

the bank and the affiliate; 
77 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(B) such overdraft— 

(i) is permitted or incurred on behalf of an affiliate 

that is monitored by, reports to, and is recognized as 

a primary dealer by the Federal Reserve Bank of New 

York; and 

(ii) is fully secured, as required by the Board, by 

bonds, notes, or other obligations that are direct obligations of the united states or on which the principal 

and interest are fully guaranteed by the united states 

or by securities and obligations eligible for settlement 

on the Federal Reserve book entry system; or 

(C) such overdraft— 

(i) is permitted or incurred by, or on behalf of, an 

affiliate in connection with an activity that is financial 

in nature or incidental to a financial activity; and 

(ii) does not cause the bank to violate any provision of section 23A or 23B of the Federal Reserve Act, 

either directly, in the case of a bank that is a member 

of the Federal Reserve system, or by virtue of section 

18(j) of the Federal Deposit Insurance Act, in the case 

of a bank that is not a member of the Federal Reserve 

system. 

(4) DIVESTITURE I N CASE OF LOSS OF EXEMPTION.—If an y 

company described in paragraph (1) fails to qualify for the 

exemption provided under paragraph (1) by operation of paragraph (2), such exemption shall cease to apply to such company 

and such company shall divest control of each bank it controls 

before the end of the 180-day period beginning on the date on 

which the company receives notice from the Board that the 

company has failed to continue to qualify for such exemption, 

unless, before the end of such 180-day period, the company 

has— 

(A) either— 

(i) corrected the condition or ceased the activity 

that caused the company to fail to continue to qualify 

for the exemption; or 

(ii) submitted a plan to the Board for approval to 

cease the activity or correct the condition in a timely 

manner (which shall not exceed 1 year); and 

(B) implemented procedures that are reasonably 

adapted to avoid the reoccurrence of such condition or activity. 

(5) SUBSECTION CEASES TO APPLY UNDER CERTAIN CIRCUMSTANCES.—This subsection shall cease to apply to any company described in paragraph (1) if such company— 

(A) registers as a bank holding company under section 

5(a) of this Act; 

(B) immediately upon such registration, complies with 

all of the requirements of this Act, and regulations prescribed by the Board pursuant to this Act, including the 

nonbanking restrictions of this section; and 

(C) does not, at the time of such registration, control 

banks in more than one state, the acquisition of which 

would be prohibited by section 3(d) of this Act if an appli-
78 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

cation for such acquisition by such company were filed 

under section 3(a) of this Act. 

(6) INFORMATION REQUIREMENT.—Each company described 

in paragraph (1) shall, within 60 days after the date of enactment of the Competitive Equality Amendments of 1987, provide the Board with the name and address of such company, 

the name and address of each bank such company controls, 

and a description of each such bank's activities. 

(7) EXAMINATION.—Th e Board may, from time to time, examine a company described in paragraph (1), or a bank controlled by such company, or require reports under oath from 

appropriate officers or directors of such company or bank solely 

for purposes of assuring compliance with the provisions of this 

subsection and enforcing such compliance. 

(8) ENFORCEMENT.— 

(A) I N GENERAL.—In addition to any other power of 

the Board, the Board may enforce compliance with the provisions of this Act which are applicable to any company described in paragraph (1), and any bank controlled by such 

company, under section 8 of the Federal Deposit insurance 

Act and such company or bank shall be subject to such section (for such purposes) in the same manner and to the 

same extent as if such company or bank were a state 

member insured bank. 

(B) APPLICATION OF OTHER ACT.—An y violation of this 

Act by any company described in paragraph (1), and any 

bank controlled by such company, may also be treated as 

a violation of the Federal Deposit Insurance Act for purposes of subparagraph (A). 

(C) N O EFFECT ON OTHER AUTHORITY.—No provision of 

this paragraph shall be construed as limiting any authority of the Comptroller of the Currency or the Federal Deposit insurance Corporation. 

(9) TYIN G PROVISIONS.—A company described in paragraph 

(1) shall be— 

(A) treated as a bank holding company for purposes of 

section 106 of the Bank Holding Company Act Amendments of 1970 and section 22(h) of the Federal Reserve Act 

and any regulation prescribed under any such section; and 

(B) subject to the restrictions of section 106 of the 

Bank Holding Company Act Amendments of 1970, in connection with any transaction involving the products or 

services of such company or affiliate and those of a bank 

affiliate, as if such company or affiliate were a bank and 

such bank were a subsidiary of a bank holding company. 

(10) EXEMPTION UNAFFECTED BY CERTAIN EMERGENCY ACQUISITIONS.—For purposes of clauses (i) and (ii)(VIII) of paragraph (2)(A), an insured institution is described in this paragraph if— 

(A) the insured institution was acquired (or any shares 

or assets of such institution were acquired) by a company 

described in paragraph (1) in an acquisition under section 

408(m) of the National Housing Act or section 13(k) of the 

Federal Deposit Insurance Act; and 
79 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(B) either— 

(i) the insured institution is located in a state in 

which such company controlled a bank on March 5, 

1987; or 

(ii) the insured institution has total assets of 

$500,000,000 or more at the time of such acquisition. 

(11) SHARES HELD BY INSURANCE AFFILIATES.—Shares described in clause (ii)(IX) of paragraph (2)(A) shall not be excluded for purposes of clause (ii) of such paragraph if— 

(A) all shares held under such clause (ii)(IX) by all 

insurance company affiliates of such savings association in 

the aggregate exceed 5 percent of all outstanding shares or 

of the voting power of the savings association; or 

(B) such shares are acquired or retained with a view 

to acquiring, exercising, or transferring control of the savings association. 

(12) EXEMPTION UNAFFECTED BY CERTAIN OTHER ACQUISITIONS.—For purposes of clauses (i) and (ii)(VIII) of paragraph 

(2)(A), an insured institution is described in this paragraph if 

the insured institution was acquired (or any shares or assets 

of such institution were acquired) by a company described in 

paragraph (1)— 

(A) from the Resolution Trust Corporation, the Federal 

Deposit Insurance Corporation, or the Director of the Office of Thrift Supervision, in any capacity; or 

(B) in an acquisition in which the insured institution 

has been found to be in danger of default (as defined in 

section 3 of the Federal Deposit Insurance Act) by the 

appropriate Federal or state authority. 

(13) SPECIAL RULE RELATING TO SHARES ACQUIRED I N A 

QUALIFIED STOCK ISSUANCE.—A company described in paragraph (1) that holds shares issued in a qualified stock issuance 

pursuant to section 10(q) of the Home Owners' Loan Act by 

any savings association or savings and loan holding company 

(neither of which is a subsidiary) shall not be deemed to control such savings association or savings and loan holding company solely because such company holds such shares unless— 

(A) the company fails to comply with any requirement 

or condition imposed by paragraph (2)(A)(ii)(x) or section 

10(q) of the Home Owners' Loan Act with respect to such 

shares; or 

(B) the shares are acquired or retained with a view to 

acquiring, exercising, or transferring control of the savings 

association or savings and loan holding company. 

(14) FOREIGN BANK SUBSIDIARIES OF LIMITED PURPOSE 

CREDIT CARD BANKS.— 

(A) I N GENERAL.—An institution described in section 

2(c)(2)(F) may control a foreign bank if— 

(i) the investment of the institution in the foreign 

bank meets the requirements of section 25 or 25A of 

the Federal Reserve Act and the foreign bank qualifies 

under such sections; 

(ii) the foreign bank does not offer any products or 

services in the united states; and 
80 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

(iii) the activities of the foreign bank are permissible under otherwise applicable law. 

(B) OTHER LIMITATIONS INAPPLICABLE.—The limitations contained in any clause of section 2(c)(2)(F) shall not 

apply to a foreign bank described in subparagraph (A) that 

is controlled by an institution described in such section. 

(g) LIMITATIONS ON CERTAIN BANKS.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

this section (other than the last sentence of subsection (a)(2)), 

a bank holding company which controls an institution that became a bank as a result of the enactment of the Competitive 

Equality Amendments of 1987 may retain control of such institution if such institution does not— 

(A) engage in any activity after the date of the enactment of such Amendments which would have caused such 

institution to be a bank (as defined in section 2(c), as in 

effect before such date) if such activities had been engaged 

in before such date; or 

(B) increase the number of locations from which such 

institution conducts business after March 5, 1987. 

(2) LIMITATIONS CEASE TO APPLY UNDER CERTAIN CIRCUMSTANCES.—The limitations contained in paragraph (1) shall 

cease to apply to a bank described in such paragraph at such 

time as the acquisition of such bank, by the bank holding company referred to in such paragraph, would not be prohibited 

under section 3(d) of this Act if— 

(A) an application for such acquisition were filed 

under section 3(a) of this Act; and 

(B) such bank were treated as an additional bank 

(under section 3(d)). 

(h) TYIN G PROVISIONS.— 

(1) APPLICABLE TO CERTAIN EXEMPT INSTITUTIONS AND PARENT COMPANIES.—An institution described in subparagraph 

(D), (F), (G), (H), (I), or (J) of section 2(c)(2) shall be treated 

as a bank, and a company that controls such an institution 

shall be treated as a bank holding company, for purposes of 

section 106 of the Bank Holding Company Act Amendments of 

1970 and section 22(h) of the Federal Reserve Act and any regulation prescribed under any such section. 

(2) APPLICABLE WIT H RESPECT TO CERTAIN TRANSACTIONS.— 

A company that controls an institution described in subparagraph (D), (F), (G), (H), (I), or (J) of section 2(c)(2) and any of 

such company''s other affiliates, shall be subject to the tying 

restrictions of section 106 of the Bank Holding Company Act 

Amendments of 1970 in connection with any transaction involving the products or services of such company or affiliate 

and those of such institution, as if such company or affiliate 

were a bank and such institution were a subsidiary of a bank 

holding company. 

(i) ACQUISITION OF SAVINGS ASSOCIATIONS.— 

(1) IN GENERAL.—The Board may approve an application 

by any bank holding company under subsection (c)(8) to acquire any savings association in accordance with the requirements and limitations of this section. 
81 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(2) PROHIBITION ON TANDEM RESTRICTIONS.—In approving 

an application by a bank holding company to acquire a savings 

association, the Board shall not impose any restriction on 

transactions between the savings association and its holding 

company affiliates, except as required under sections 23A and 

23B of the Federal Reserve Act or any other applicable law. 

(3) ACQUISITION OF INSOLVENT SAVINGS ASSOCIATIONS.— 

(A) IN GENERAL.—Notwithstanding any other provision 

of this Act, any qualified savings association which became 

a federally chartered stock company in December of 1986 

and which is acquired by any bank holding company without Federal financial assistance after June 1, 1991, and 

before March 1, 1992, and any subsidiary of any such association, may after such acquisition continue to engage 

within the home state of the qualified savings association 

in insurance agency activities in which any Federal savings association (or any subsidiary thereof) may engage in 

accordance with the Home Owners' Loan Act and regulations pursuant to such Act if the qualified savings association or subsidiary thereof was continuously engaged in 

such activity from June 1, 1991, to the date of the acquisition. 

(B) DEFINITIO N OF QUALIFIED SAVINGS ASSOCIATION.— 

For purposes of this paragraph, the term "qualified savings association'' means any savings association that— 

(i) was chartered or organized as a savings association before June 1, 1991; 

(ii) had, immediately before the acquisition of such 

association by the bank holding company referred to in 

subparagraph (A), negative tangible capital and total 

insured deposits in excess of $3,000,000,000; and 

(iii) will meet all applicable regulatory capital 

requirements as a result of such acquisition. 

(4) SOLICITATION OF VIEWS.— 

(A) NOTICE TO DIRECTOR.—Upon receiving any application or notice by a bank holding company to acquire, directly or indirectly, a savings association under subsection 

(c)(8), the Board shall solicit comments and recommendations from the Director with respect to such acquisition. 

(B) COMMEN T PERIOD.—The comments and recommendations of the Director under subparagraph (A) 

with respect to any acquisition subject to such subparagraph shall be transmitted to the Board not later than 30 

days after the receipt by the Director of the notice relating 

to such acquisition (or such shorter period as the Board 

may specify if the Board advises the Director that an 

emergency exists that requires expeditious action). 

(5) EXAMINATION.— 

(A) SCOPE.—The Board shall consult with the Director, 

as appropriate, in establishing the scope of an examination 

by the Board of a bank holding company that directly or 

indirectly controls a savings association. 

( B) ACCESS TO INSPECTION REPORTS.—Upon the request of the Director, the Board shall furnish the Director 
82 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

with a copy of any inspection report, additional examination materials, or supervisory information relating to any 

bank holding company that directly or indirectly controls 

a savings association. 

(6) COORDINATION OF ENFORCEMENT EFFORTS.—The Board 

and the Director shall cooperate in any enforcement action 

against any bank holding company that controls a savings 

association, if the relevant conduct involves such association. 

(7) DIRECTOR DEFINED.—Fo r purposes of this section, the 

term ''Director'' means the Director of the Office of Thrift 

supervision. 

(j) NOTICE PROCEDURES FOR NONBANKING ACTIVITIES.— 

(1) GENERAL NOTICE PROCEDURE.— 

(A) NOTICE REQUIREMENT.—Except as provided in 

paragraph (3), no bank holding company may engage in 

any nonbanking activity or acquire or retain ownership or 

control of the shares of a company engaged in activities 

based on subsection (c)(8) or (a)(2) or in any complementary activity under subsection (k)(1)(B) without providing 

the Board with written notice of the proposed transaction 

or activity at least 60 days before the transaction or activity is proposed to occur or commence. 

(B) CONTENTS OF NOTICE.—Th e notice submitted to 

the Board shall contain such information as the Board 

shall prescribe by regulation or by specific request in connection with a particular notice. 

( C) PROCEDURE FOR AGENCY ACTION.— 

(i) NOTICE OF DISAPPROVAL.—Any notice filed 

under this subsection shall be deemed to be approved 

by the Board unless, before the end of the 60-day period beginning on the date the Board receives a complete notice under subparagraph (A), the Board issues 

an order disapproving the transaction or activity and 

setting forth the reasons for disapproval. 

(ii) EXTENSION OF PERIOD.—The Board may extend 

the 60-day period referred to in clause (i) for an additional 30 days. The Board may further extend the period with the agreement of the bank holding company 

submitting the notice pursuant to this 

subsection. 

(iii) DETERMINATION OF PERIOD I N CASE OF PUBLIC 

HEARING.—I n the event a hearing is requested or the 

Board determines that a hearing is warranted, the 

Board may extend the notice period provided in this 

subsection for such time as is reasonably necessary to 

conduct a hearing and to evaluate the hearing record. 

such extension shall not exceed the 91-day period 

beginning on the date that the hearing record is complete. 

( D ) APPROVAL BEFORE END OF PERIOD.— 

(i) IN GENERAL.—Any transaction or activity may 

commence before the expiration of any period for disapproval established under this paragraph if the 

Board issues a written notice of approval. 
83 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(ii) SHORTER PERIODS BY REGULATION.—The Board 

may prescribe regulations which provide for a shorter 

notice period with respect to particular activities or 

transactions. 

(E) EXTENSION OF PERIOD.—In the case of any notice 

to engage in, or to acquire or retain ownership or control 

of shares of any company engaged in, any activity pursuant to subsection (c)(8) or (a)(2) or in any complementary 

activity under subsection (k)(1)(B) that has not been previously approved by regulation, the Board may extend the 

notice period under this subsection for an additional 90 

days. The Board may further extend the period with the 

agreement of the bank holding company submitting the 

notice pursuant to this subsection. 

(2) GENERAL STANDARDS FOR REVIEW.— 

(A) CRITERIA.—I n connection with a notice under this 

subsection, the Board shall consider whether performance 

of the activity by a bank holding company or a subsidiary 

of such company can reasonably be expected to produce 

benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh 

possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. 

(B) GROUNDS FOR DISAPPROVAL.—The Board may deny 

any proposed transaction or activity for which notice has 

been submitted pursuant to this subsection if the bank 

holding company submitting such notice neglects, fails, or 

refuses to furnish the Board all the information required 

by the Board. 

(C) CONDITIONAL ACTION.—Nothin g in this subsection 

limits the authority of the Board to impose conditions in 

connection with an action under this section. 

(3) N O NOTICE REQUIRED FOR CERTAIN TRANSACTIONS.—No 

notice under paragraph (1) of this subsection or under subsection (c)(8) or (a)(2)(B) is required for a proposal by a bank 

holding company to engage in any activity, other than any 

complementary activity under subsection (k)(1)(B), or acquire 

the shares or assets of any company, other than an insured 

depository institution or a company engaged in any complementary activity under subsection (k)(1)(B), if the proposal 

qualifies under paragraph (4). 

(4) CRITERIA FOR STATUTORY APPROVAL.—A proposal qualifies under this paragraph if all of the following criteria are 

met: 

(A) FINANCIAL CRITERIA.—Both before and immediately after the proposed transaction— 

(i) the acquiring bank holding company is well 

capitalized; 

(ii) the lead insured depository institution of such 

holding company is well capitalized; 

(iii) well capitalized insured depository institutions control at least 80 percent of the aggregate total 
84 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

risk-weighted assets of insured depository institutions 

controlled by such holding company; and 

(iv) no insured depository institution controlled by 

such holding company is undercapitalized. 

(B) MANAGERIAL CRITERIA.— 

(i) WEL L MANAGED.—At the time of the transaction, the acquiring bank holding company, its lead 

insured depository institution, and insured depository 

institutions that control at least 90 percent of the 

aggregate total risk-weighted assets of insured depository institutions controlled by such holding company 

are well managed. 

(ii) LIMITATION ON POORLY MANAGED INSTITUTIONS.—Except as provided in paragraph (6), no insured depository institution controlled by the acquiring bank holding company has received 1 of the 2 lowest composite ratings at the later of the institution's 

most recent examination or subsequent review. 

(C) ACTIVITIES PERMISSIBLE.—Following consummation 

of the proposal, the bank holding company engages directly 

or through a subsidiary solely in— 

(i) activities that are permissible under subsection 

(c)(8), as determined by the Board by regulation or 

order thereunder, subject to all of the restrictions, 

terms, and conditions of such subsection and such regulation or order; and 

(ii) such other activities as are otherwise permissible under this section, subject to the restrictions, 

terms and conditions, including any prior notice or approval requirements, provided in this section. 

( D ) SIZE OF ACQUISITION.— 

(i) ASSET SIZE.—The book value of the total assets 

to be acquired does not exceed 10 percent of the consolidated total risk-weighted assets of the acquiring 

bank holding company. 

(ii) CONSIDERATION.—The gross consideration to 

be paid for the securities or assets does not exceed 15 

percent of the consolidated Tier 1 capital of the acquiring bank holding company. 

( E) NOTICE NOT OTHERWISE WARRANTED.—For proposals described in paragraph (5)(B), the Board has not, 

before the conclusion of the period provided in paragraph 

(5)(B), advised the bank holding company that a notice 

under paragraph (1) is required. 

(F) COMPLIANCE CRITERION.—During the 12-month period ending on the date on which the bank holding company proposes to commence an activity or acquisition, no 

administrative enforcement action has been commenced, 

and no cease and desist order has been issued pursuant to 

section 8 of the Federal Deposit Insurance Act, against the 

bank holding company or any depository institution subsidiary of the holding company, and no such enforcement 

action, order, or other administrative enforcement proceeding is pending as of such date. 
85 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(5) NOTIFICATION.— 

(A) COMMENCEMENT OF ACTIVITIES APPROVED BY 

RULE.— A bank holding company that qualifies under paragraph (4) and that proposes to engage de novo, directly or 

through a subsidiary, in any activity that is permissible 

under subsection (c)(8), as determined by the Board by regulation, may commence that activity without prior notice 

to the Board and must provide written notification to the 

Board not later than 10 business days after commencing 

the activity. 

( B) ACTIVITIES PERMITTED BY ORDER AND ACQUISITIONS.— 

(i) I N GENERAL.—At least 12 business days before 

commencing any activity pursuant to paragraph (3) 

(other than an activity described in subparagraph (A) 

of this paragraph) or acquiring shares or assets of any 

company pursuant to paragraph (3), the bank holding 

company shall provide written notice of the proposal to 

the Board, unless the Board determines that no notice 

or a shorter notice period is appropriate. 

(ii) DESCRIPTION OF ACTIVITIES AND TERMS.—A notification under this subparagraph shall include a description of the proposed activities and the terms of 

any proposed acquisition. 

(6) RECENTLY ACQUIRED INSTITUTIONS.—Any insured depository institution which has been acquired by a bank holding 

company during the 12-month period preceding the date on 

which the company proposes to commence an activity or acquisition pursuant to paragraph (3) may be excluded for purposes 

of paragraph (4)(B)(ii) if— 

(A) the bank holding company has developed a plan 

for the institution to restore the capital and management 

of the institution which is acceptable to the appropriate 

Federal banking agency; and 

(B) all such insured depository institutions represent, 

in the aggregate, less than 10 percent of the aggregate 

total risk-weighted assets of all insured depository institutions controlled by the bank holding company. 

(7) ADJUSTMENT OF PERCENTAGES.—The Board may, by 

regulation, adjust the percentages and the manner in which 

the percentages of insured depository institutions are calculated under paragraph (4)(B)(i), (4)(D), or (6)(B) if the Board 

determines that any such adjustment is consistent with safety 

and soundness and the purposes of this Act. 

(k) ENGAGING I N ACTIVITIES THA T ARE FINANCIAL I N NA -

TURE.— 

(1) IN GENERAL.—Notwithstanding subsection (a), a financial holding company may engage in any activity, and may acquire and retain the shares of any company engaged in any activity, that the Board, in accordance with paragraph (2), determines (by regulation or order)— 

(A) to be financial in nature or incidental to such financial activity; or 
86 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

(B) is complementary to a financial activity and does 

not pose a substantial risk to the safety or soundness of 

depository institutions or the financial system generally. 

(2) COORDINATION BETWEEN THE BOARD AND THE SECRETARY OF THE TREASURY.— 

(A) PROPOSALS RAISED BEFORE THE BOARD.— 

(i) CONSULTATION.—The Board shall notify the 

secretary of the Treasury of, and consult with the secretary of the Treasury concerning, any request, proposal, or application under this subsection for a determination of whether an activity is financial in nature 

or incidental to a financial activity. 

(ii) TREASURY VIEW.—Th e Board shall not determine that any activity is financial in nature or incidental to a financial activity under this subsection if 

the secretary of the Treasury notifies the Board in 

writing, not later than 30 days after the date of receipt of the notice described in clause (i) (or such 

longer period as the Board determines to be appropriate under the circumstances) that the Secretary of 

the Treasury believes that the activity is not financial 

in nature or incidental to a financial activity or is not 

otherwise permissible under this section. 

( B) PROPOSALS RAISED BY THE TREASURY.— 

(i) TREASURY RECOMMENDATION.—The Secretary of 

the Treasury may, at any time, recommend in writing 

that the Board find an activity to be financial in nature or incidental to a financial activity. 

(ii) TIM E PERIOD FOR BOARD ACTION.—No t later 

than 30 days after the date of receipt of a written recommendation from the secretary of the Treasury 

under clause (i) (or such longer period as the secretary 

of the Treasury and the Board determine to be appropriate under the circumstances), the Board shall determine whether to initiate a public rulemaking proposing that the recommended activity be found to be 

financial in nature or incidental to a financial activity 

under this subsection, and shall notify the secretary of 

the Treasury in writing of the determination of the 

Board and, if the Board determines not to seek public 

comment on the proposal, the reasons for that determination. 

(3) FACTORS TO BE CONSIDERED.—In determining whether 

an activity is financial in nature or incidental to a financial activity, the Board shall take into account— 

(A) the purposes of this Act and the Gramm-Leach-Bliley Act; 

(B) changes or reasonably expected changes in the 

marketplace in which financial holding companies compete; 

(C) changes or reasonably expected changes in the 

technology for delivering financial services; and 
87 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(D) whether such activity is necessary or appropriate 

to allow a financial holding company and the affiliates of 

a financial holding company to— 

(i) compete effectively with any company seeking 

to provide financial services in the united states; 

(ii) efficiently deliver information and services 

that are financial in nature through the use of technological means, including any application necessary to 

protect the security or efficacy of systems for the 

transmission of data or financial transactions; and 

(iii) offer customers any available or emerging 

technological means for using financial services or for 

the document imaging of data. 

(4) ACTIVITIES THAT ARE FINANCIAL I N NATURE.—Fo r purposes of this subsection, the following activities shall be considered to be financial in nature: 

(A) Lending, exchanging, transferring, investing for 

others, or safeguarding money or securities. 

(B) insuring, guaranteeing, or indemnifying against 

loss, harm, damage, illness, disability, or death, or providing and issuing annuities, and acting as principal, 

agent, or broker for purposes of the foregoing, in any 

state. 

(C) Providing financial, investment, or economic advisory services, including advising an investment company 

(as defined in section 3 of the Investment Company Act of 

1940). 

(D) issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly. 

(E) Underwriting, dealing in, or making a market in 

securities. 

(F) Engaging in any activity that the Board has determined, by order or regulation that is in effect on the date 

of the enactment of the Gramm-Leach-Bliley Act, to be so 

closely related to banking or managing or controlling 

banks as to be a proper incident thereto (subject to the 

same terms and conditions contained in such order or regulation, unless modified by the Board). 

(G) Engaging, in the United States, in any activity 

that— 

(i) a bank holding company may engage in outside 

of the united states; and 

(ii) the Board has determined, under regulations 

prescribed or interpretations issued pursuant to subsection (c)(13) (as in effect on the day before the date 

of the enactment of the Gramm-Leach-Bliley Act) to be 

usual in connection with the transaction of banking or 

other financial operations abroad. 

(H) Directly or indirectly acquiring or controlling, 

whether as principal, on behalf of 1 or more entities (including entities, other than a depository institution or subsidiary of a depository institution, that the bank holding 

company controls), or otherwise, shares, assets, or owner-
88 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

ship interests (including debt or equity securities, partnership interests, trust certificates, or other instruments representing ownership) of a company or other entity, whether or not constituting control of such company or entity, 

engaged in any activity not authorized pursuant to this 

section if— 

(i) the shares, assets, or ownership interests are 

not acquired or held by a depository institution or subsidiary of a depository institution; 

(ii) such shares, assets, or ownership interests are 

acquired and held by— 

(i) a securities affiliate or an affiliate thereof; 

or 

(ii) an affiliate of an insurance company described in subparagraph (i)(ii) that provides investment advice to an insurance company and is 

registered pursuant to the investment Advisers 

Act of 1940, or an affiliate of such investment adviser; 

as part of a bona fide underwriting or merchant or investment banking activity, including investment activities engaged in for the purpose of appreciation and 

ultimate resale or disposition of the investment; 

(iii) such shares, assets, or ownership interests are 

held for a period of time to enable the sale or disposition thereof on a reasonable basis consistent with the 

financial viability of the activities described in clause 

(ii); and 

(iv) during the period such shares, assets, or ownership interests are held, the bank holding company 

does not routinely manage or operate such company or 

entity except as may be necessary or required to obtain a reasonable return on investment upon resale or 

disposition. 

(I) Directly or indirectly acquiring or controlling, 

whether as principal, on behalf of 1 or more entities (including entities, other than a depository institution or subsidiary of a depository institution, that the bank holding 

company controls) or otherwise, shares, assets, or ownership interests (including debt or equity securities, partnership interests, trust certificates or other instruments representing ownership) of a company or other entity, whether or not constituting control of such company or entity, 

engaged in any activity not authorized pursuant to this 

section if— 

(i) the shares, assets, or ownership interests are 

not acquired or held by a depository institution or a 

subsidiary of a depository institution; 

(ii) such shares, assets, or ownership interests are 

acquired and held by an insurance company that is 

predominantly engaged in underwriting life, accident 

and health, or property and casualty insurance (other 

than credit-related insurance) or providing and issuing 

annuities; 
89 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(iii) such shares, assets, or ownership interests 

represent an investment made in the ordinary course 

of business of such insurance company in accordance 

with relevant state law governing such investments; 

and 

(iv) during the period such shares, assets, or ownership interests are held, the bank holding company 

does not routinely manage or operate such company 

except as may be necessary or required to obtain a 

reasonable return on investment. 

(5) ACTIONS REQUIRED.— 

(A) IN GENERAL.—The Board shall, by regulation or 

order, define, consistent with the purposes of this Act, the 

activities described in subparagraph (B) as financial in nature, and the extent to which such activities are financial 

in nature or incidental to a financial activity. 

(B) ACTIVITIES.—Th e activities described in this subparagraph are as follows: 

(i) Lending, exchanging, transferring, investing for 

others, or safeguarding financial assets other than 

money or securities. 

(ii) providing any device or other instrumentality 

for transferring money or other financial assets. 

(iii) Arranging, effecting, or facilitating financial 

transactions for the account of third parties. 

(6) REQUIRED NOTIFICATION.— 

(A) I N GENERAL.—A financial holding company that acquires any company or commences any activity pursuant 

to this subsection shall provide written notice to the Board 

describing the activity commenced or conducted by the 

company acquired not later than 30 calendar days after 

commencing the activity or consummating the acquisition, 

as the case may be. 

(B) APPROVAL NOT REQUIRED FOR CERTAIN FINANCIAL 

ACTIVITIES.—Except as provided in subsection (j) with regard to the acquisition of a savings association, a financial 

holding company may commence any activity, or acquire 

any company, pursuant to paragraph (4) or any regulation 

prescribed or order issued under paragraph (5), without 

prior approval of the Board. 

(7) MERCHANT BANKING ACTIVITIES.— 

(A) JOINT REGULATIONS.—The Board and the Secretary 

of the Treasury may issue such regulations implementing 

paragraph (4)(H), including limitations on transactions between depository institutions and companies 

controlled pursuant to such paragraph, as the Board and 

the secretary jointly deem appropriate to assure compliance with the purposes and prevent evasions of this Act 

and the Gramm-Leach-Bliley Act and to protect depository 

institutions. 

( B) SUNSET OF RESTRICTIONS ON MERCHANT BANKING 

ACTIVITIES OF FINANCIAL SUBSIDIARIES.—The restrictions 

contained in paragraph (4)(H) on the ownership and control of shares, assets, or ownership interests by or on be-
90 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

half of a subsidiary of a depository institution shall not 

apply to a financial subsidiary (as defined in section 5136A 

of the Revised statutes of the united states) of a bank, if 

the Board and the Secretary of the Treasury jointly authorize financial subsidiaries of banks to engage in merchant banking activities pursuant to section 122 of the 

Gramm-Leach-Bliley Act. 

(l) CONDITIONS FOR ENGAGING I N EXPANDED FINANCIA L ACTIVITIES.— 

(1) IN GENERAL.—Notwithstanding subsection (k), (n), or 

(o), a bank holding company may not engage in any activity, 

or directly or indirectly acquire or retain shares of any company engaged in any activity, under subsection (k), (n), or (o), 

other than activities permissible for any bank holding company 

under subsection (c)(8), unless— 

(A) all of the depository institution subsidiaries of the 

bank holding company are well capitalized; 

(B) all of the depository institution subsidiaries of the 

bank holding company are well managed; and 

(C) the bank holding company has filed with the 

Board— 

(i) a declaration that the company elects to be a 

financial holding company to engage in activities or 

acquire and retain shares of a company that were not 

permissible for a bank holding company to engage in 

or acquire before the enactment of the Gramm-LeachBliley Act; and 

(ii) a certification that the company meets the requirements of subparagraphs (A) and (B). 

(2) CRA REQUIREMENT.—Notwithstanding subsection (k) or 

(n) of this section, section 5136A(a) of the Revised Statutes of 

the united states, or section 46(a) of the Federal Deposit insurance Act, the appropriate Federal banking agency shall prohibit a financial holding company or any insured depository institution from— 

(A) commencing any new activity under subsection (k) 

or (n) of this section, section 5136A(a) of the Revised Statutes of the United States, or section 46(a) of the Federal 

Deposit Insurance Act; or 

(B) directly or indirectly acquiring control of a company engaged in any activity under subsection (k) or (n) of 

this section, section 5136A(a) of the Revised Statutes of 

the united states, or section 46(a) of the Federal Deposit 

Insurance Act (other than an investment made pursuant 

to subparagraph (H) or (i) of subsection (k)(4), or section 

122 of the Gramm-Leach-Bliley Act, or under section 46(a) 

of the Federal Deposit Insurance Act by reason of such section 122, by an affiliate already engaged in activities under 

any such provision); 

if any insured depository institution subsidiary of such financial holding company, or the insured depository institution or 

any of its insured depository institution affiliates, has received 

in its most recent examination under the Community Reinvest-
91 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

ment Act of 1977, a rating of less than "satisfactory record of 

meeting community credit needs''. 

(3) FOREIGN BANKS.—For purposes of paragraph (1), the 

Board shall apply comparable capital and management standards to a foreign bank that operates a branch or agency or 

owns or controls a commercial lending company in the united 

states, giving due regard to the principle of national treatment 

and equality of competitive opportunity. 

( m ) PROVISIONS APPLICABLE TO FINANCIAL HOLDIN G COMPANIES THA T FAIL T O MEE T CERTAIN REQUIREMENTS.— 

(1) I N GENERAL.—If the Board finds that— 

(A) a financial holding company is engaged, directly or 

indirectly, in any activity under subsection (k), (n), or (o), 

other than activities that are permissible for a bank holding company under subsection (c)(8); and 

(B) such financial holding company is not in compliance with the requirements of subsection (l)(1); 

the Board shall give notice to the financial holding company to 

that effect, describing the conditions giving rise to the notice. 

(2) AGREEMENT TO CORRECT CONDITIONS REQUIRED.—Not 

later than 45 days after the date of receipt by a financial holding company of a notice given under paragraph (1) (or such additional period as the Board may permit), the financial holding 

company shall execute an agreement with the Board to comply 

with the requirements applicable to a financial holding company under subsection (l)(1). 

(3) BOARD MAY IMPOSE LIMITATIONS.—Unti l the conditions 

described in a notice to a financial holding company under 

paragraph (1) are corrected, the Board may impose such limitations on the conduct or activities of that financial holding 

company or any affiliate of that company as the Board determines to be appropriate under the circumstances and consistent with the purposes of this Act. 

(4) FAILURE TO CORRECT.—If the conditions described in a 

notice to a financial holding company under paragraph (1) are 

not corrected within 180 days after the date of receipt by the 

financial holding company of a notice under paragraph (1), the 

Board may require such financial holding company, under such 

terms and conditions as may be imposed by the Board and subject to such extension of time as may be granted in the discretion of the Board, either— 

(A) to divest control of any subsidiary depository institution; or 

(B) at the election of the financial holding company instead to cease to engage in any activity conducted by such 

financial holding company or its subsidiaries (other than a 

depository institution or a subsidiary of a depository institution) that is not an activity that is permissible for a 

bank holding company under subsection (c)(8). 

(5) CONSULTATION.—In taking any action under this subsection, the Board shall consult with all relevant Federal and 

state regulatory agencies and authorities. 

(n) AUTHORITY T O RETAI N LIMITE D NONFINANCIAL ACTIVITIES 

AND AFFILIATIONS.— 
92 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

(1) IN GENERAL.—Notwithstanding subsection (a), a company that is not a bank holding company or a foreign bank (as 

defined in section 1(b)(7) of the International Banking Act of 

1978) and becomes a financial holding company after the date 

of the enactment of the Gramm-Leach-Bliley Act may continue 

to engage in any activity and retain direct or indirect ownership or control of shares of a company engaged in any activity 

if— 

(A) the holding company lawfully was engaged in the 

activity or held the shares of such company on september 

30, 1999; 

(B) the holding company is predominantly engaged in 

financial activities as defined in paragraph (2); and 

(C) the company engaged in such activity continues to 

engage only in the same activities that such company conducted on September 30, 1999, and other activities permissible under this Act. 

(2) PREDOMINANTLY FINANCIAL.—For purposes of this subsection, a company is predominantly engaged in financial activities if the annual gross revenues derived by the holding 

company and all subsidiaries of the holding company (excluding revenues derived from subsidiary depository institutions), 

on a consolidated basis, from engaging in activities that are financial in nature or are incidental to a financial activity under 

subsection (k) represent at least 85 percent of the consolidated 

annual gross revenues of the company. 

(3) N O EXPANSION OF GRANDFATHERED COMMERCIAL ACTIVITIES THROUGH MERGER OR CONSOLIDATION.—A financial holding company that engages in activities or holds shares pursuant to this subsection, or a subsidiary of such financial holding 

company, may not acquire, in any merger, consolidation, or 

other type of business combination, assets of any other company that is engaged in any activity that the Board has not determined to be financial in nature or incidental to a financial 

activity under subsection (k), except this paragraph shall not 

apply with respect to a company that owns a broadcasting station licensed under title III of the Communications Act of 1934 

and the shares of which are under common control with an insurance company since January 1, 1998, unless such company 

is acquired by, or otherwise becomes an affiliate of, a bank 

holding company that, at the time such acquisition or affiliation is consummated, is 1 of the 5 largest domestic bank holding companies (as determined on the basis of the consolidated 

total assets of such companies). 

(4) CONTINUING REVENUE LIMITATION ON GRANDFATHERED 

COMMERCIAL ACTIVITIES.—Notwithstanding any other provision 

of this subsection, a financial holding company may continue 

to engage in activities or hold shares in companies pursuant to 

this subsection only to the extent that the aggregate annual 

gross revenues derived from all such activities and all such 

companies does not exceed 15 percent of the consolidated annual gross revenues of the financial holding company (excluding revenues derived from subsidiary depository institutions). 
93 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(5) CROSS MARKETING RESTRICTIONS APPLICABLE TO COMMERCIAL ACTIVITIES.— 

(A) I N GENERAL.—A depository institution controlled 

by a financial holding company shall not— 

(i) offer or market, directly or through any arrangement, any product or service of a company whose 

activities are conducted or whose shares are owned or 

controlled by the financial holding company pursuant 

to this subsection or subparagraph (H) or (I) of subsection (k)(4); or 

(ii) permit any of its products or services to be offered or marketed, directly or through any arrangement, by or through any company described in clause 

(i). 

(B) RULE OF CONSTRUCTION.—Subparagraph (A) shall 

not be construed as prohibiting an arrangement between a 

depository institution and a company owned or controlled 

pursuant to subsection (k)(4)(i) for the marketing of products or services through statement inserts or internet 

websites if— 

(i) such arrangement does not violate section 106 

of the Bank Holding Company Act Amendments of 

1970; and 

(ii) the Board determines that the arrangement is 

in the public interest, does not undermine the separation of banking and commerce, and is consistent with 

the safety and soundness of depository institutions. 

(6) TRANSACTIONS WIT H NONFINANCIAL AFFILIATES.—A depository institution controlled by a financial holding company 

may not engage in a covered transaction (as defined in section 

23A(b)(7) of the Federal Reserve Act) with any affiliate controlled by the company pursuant to this subsection. 

(7) SUNSET OF GRANDFATHER.—A financial holding company engaged in any activity, or retaining direct or indirect 

ownership or control of shares of a company, pursuant to this 

subsection, shall terminate such activity and divest ownership 

or control of the shares of such company before the end of the 

10-year period beginning on the date of the enactment of the 

Gramm-Leach-Bliley Act. The Board may, upon application by 

a financial holding company, extend such 10-year period by a 

period not to exceed an additional 5 years if such extension 

would not be detrimental to the public interest. 

(o) REGULATION OF CERTAIN FINANCIAL HOLDING COMPANIES.— 

Notwithstanding subsection (a), a company that is not a bank holding company or a foreign bank (as defined in section 1(b)(7) of the 

International Banking Act of 1978) and becomes a financial holding 

company after the date of enactment of the Gramm-Leach-Bliley 

Act, may continue to engage in, or directly or indirectly own or control shares of a company engaged in, activities related to the trading, sale, or investment in commodities and underlying physical 

properties that were not permissible for bank holding companies to 

conduct in the United States as of September 30, 1997, if— 

(1) the holding company, or any subsidiary of the holding 

company, lawfully was engaged, directly or indirectly, in any 
94 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

of such activities as of September 30, 1997, in the United 

states; 

(2) the attributed aggregate consolidated assets of the company held by the holding company pursuant to this subsection, 

and not otherwise permitted to be held by a financial holding 

company, are equal to not more than 5 percent of the total consolidated assets of the bank holding company, except that the 

Board may increase that percentage by such amounts and 

under such circumstances as the Board considers appropriate, 

consistent with the purposes of this Act; and 

(3) the holding company does not permit— 

(A) any company, the shares of which it owns or controls pursuant to this subsection, to offer or market any 

product or service of an affiliated depository institution; or 

(B) any affiliated depository institution to offer or market any product or service of any company, the shares of 

which are owned or controlled by such holding company 

pursuant to this subsection. 

ADMINISTRATION 

SEC. 5. [12 U.S.C. 1844] (a) Within one hundred and eighty 

days after the date of enactment of this Act, or within one hundred 

and eighty days after becoming a bank holding company, whichever 

is later, each bank holding company shall register with the Board 

on forms prescribed by the Board, which shall include such information with respect to the financial condition and operations, management, and intercompany relationships of the bank holding company and its subsidiaries, and related matters, as the Board may 

deem necessary or appropriate to carry about the purposes of this 

Act. The Board may, in its discretion, extend the time within which 

a bank holding company shall register and file the requisite information. A declaration filed in accordance with section 4(l)(1)(C) 

shall satisfy the requirements of this subsection with regard to the 

registration of a bank holding company but not any requirement to 

file an application to acquire a bank pursuant to section 3. 

(b) The Board is authorized to issue such regulations and orders as may be necessary to enable it to administer and carry out 

the purposes of this Act and prevent evasions thereof. 

(c) REPORTS AND EXAMINATIONS.— 

(1) REPORTS.— 

(A) IN GENERAL.—The Board, from time to time, may 

require a bank holding company and any subsidiary of 

such company to submit reports under oath to keep the 

Board informed as to— 

(i) its financial condition, systems for monitoring 

and controlling financial and operating risks, and 

transactions with depository institution subsidiaries of 

the bank holding company; and 

(ii) compliance by the company or subsidiary with 

applicable provisions of this Act or any other Federal 

law that the Board has specific jurisdiction to enforce 

against such company or subsidiary. 

( B) US E OF EXISTING REPORTS.— 
95 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(i) IN GENERAL.—For purposes of compliance with 

this paragraph, the Board shall, to the fullest extent 

possible, accept— 

(i) reports that a bank holding company or 

any subsidiary of such company has provided or 

been required to provide to other Federal or State 

supervisors or to appropriate self-regulatory organizations; 

(ii) information that is otherwise required to 

be reported publicly; and 

(iii) externally audited financial statements. 

(ii) AVAILABILITY.—A bank holding company or a 

subsidiary of such company shall provide to the Board, 

at the request of the Board, a report referred to in 

clause (i). 

(iii) REPORTS FILED WIT H OTHER AGENCIES.— 

(I) I N GENERAL.—In the event that the Board 

requires a report under this subsection from a 

functionally regulated subsidiary of a bank holding company of a kind that is not required by another Federal or State regulatory authority or an 

appropriate self-regulatory organization, the 

Board shall first request that the appropriate regulatory authority or self-regulatory organization 

obtain such report. 

(II ) AVAILABILITY FROM OTHER SUBSIDIARY.—If 

the report is not made available to the Board, and 

the report is necessary to assess a material risk to 

the bank holding company or any of its depository 

institution subsidiaries or compliance with this 

Act or any other Federal law that the Board has 

specific jurisdiction to enforce against such company or subsidiary or the systems described in 

paragraph (2)(A)(ii)(ii), the Board may require 

such functionally regulated subsidiary to provide 

such a report to the Board. 

(2) EXAMINATIONS.— 

( A) EXAMINATION AUTHORITY FOR BANK HOLDING COMPANIES AND SUBSIDIARIES.—Subject to subparagraph (B), 

the Board may make examinations of each bank holding 

company and each subsidiary of such holding company in 

order— 

(i) to inform the Board of the nature of the operations and financial condition of the holding company 

and such subsidiaries; 

(ii) to inform the Board of— 

(i) the financial and operational risks within 

the holding company system that may pose a 

threat to the safety and soundness of any depository institution subsidiary of such holding company; and 

(ii) the systems for monitoring and controlling 

such risks; and 
96 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

(iii) to monitor compliance with the provisions of 

this Act or any other Federal law that the Board has 

specific jurisdiction to enforce against such company 

or subsidiary and those governing transactions and relationships between any depository institution subsidiary and its affiliates. 

(B) FUNCTIONALLY REGULATED SUBSIDIARIES.—Notwithstanding subparagraph (A), the Board may make examinations of a functionally regulated subsidiary of a bank 

holding company only if— 

(i) the Board has reasonable cause to believe that 

such subsidiary is engaged in activities that pose a 

material risk to an affiliated depository institution; 

(ii) the Board reasonably determines, after reviewing relevant reports, that examination of the subsidiary is necessary to adequately inform the Board of 

the systems described in subparagraph (A)(ii)(II); or 

(iii) based on reports and other available information, the Board has reasonable cause to believe that a 

subsidiary is not in compliance with this Act or any 

other Federal law that the Board has specific jurisdiction to enforce against such subsidiary, including provisions relating to transactions with an affiliated depository institution, and the Board cannot make such 

determination through examination of the affiliated 

depository institution or the bank holding company. 

(C) RESTRICTED FOCUS OF EXAMINATIONS.—The Board 

shall, to the fullest extent possible, limit the focus and 

scope of any examination of a bank holding company to— 

(i) the bank holding company; and 

(ii) any subsidiary of the bank holding company 

that could have a materially adverse effect on the safety and soundness of any depository institution subsidiary of the holding company due to— 

(I) the size, condition, or activities of the subsidiary; or 

(ii) the nature or size of transactions between 

the subsidiary and any depository institution that 

is also a subsidiary of the bank holding company. 

(D) DEFERENCE TO BANK EXAMINATIONS.—The Board 

shall, to the fullest extent possible, for the purposes of this 

paragraph, use the reports of examinations of depository 

institutions made by the appropriate Federal and state depository institution supervisory authority. 

(E) DEFERENCE TO OTHER EXAMINATIONS.—The Board 

shall, to the fullest extent possible, forego an examination 

by the Board under this paragraph and instead review the 

reports of examination made of— 

(i) any registered broker or dealer by or on behalf 

of the Securities and Exchange Commission; 

(ii) any registered investment adviser properly 

registered by or on behalf of either the securities and 

Exchange Commission or any State; 
97 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(iii) any licensed insurance company by or on behalf of any state regulatory authority responsible for 

the supervision of insurance companies; and 

(iv) any other subsidiary that the Board finds to 

be comprehensively supervised by a Federal or State 

authority. 

(3) CAPITAL.— 

(A) I N GENERAL.—The Board may not, by regulation, 

guideline, order, or otherwise, prescribe or impose any capital or capital adequacy rules, guidelines, standards, or requirements on any functionally regulated subsidiary of a 

bank holding company that— 

(i) is not a depository institution; and 

(ii) is— 

(i) in compliance with the applicable capital 

requirements of its Federal regulatory authority 

(including the Securities and Exchange Commission) or state insurance authority; 

(ii) properly registered as an investment adviser under the Investment Advisers Act of 1940, 

or with any state; or 

(iii) is licensed as an insurance agent with 

the appropriate State insurance authority. 

(B) RULE OF CONSTRUCTION.—Subparagraph (A) shall 

not be construed as preventing the Board from imposing 

capital or capital adequacy rules, guidelines, standards, or 

requirements with respect to— 

(i) activities of a registered investment adviser 

other than with respect to investment advisory activities or activities incidental to investment advisory activities; or 

(ii) activities of a licensed insurance agent other 

than insurance agency activities or activities incidental to insurance agency activities. 

(C) LIMITATIONS ON INDIRECT ACTION.—In developing, 

establishing, or assessing bank holding company capital or 

capital adequacy rules, guidelines, standards, or requirements for purposes of this paragraph, the Board may not 

take into account the activities, operations, or investments 

of an affiliated investment company registered under the 

Investment Company Act of 1940, unless the investment 

company is— 

(i) a bank holding company; or 

(ii) controlled by a bank holding company by reason of ownership by the bank holding company (including through all of its affiliates) of 25 percent or 

more of the shares of the investment company, and 

the shares owned by the bank holding company have 

a market value equal to more than $1,000,000. 

(4) FUNCTIONAL REGULATION OF SECURITIES AND INSURANCE ACTIVITIES.— 

(A) SECURITIES ACTIVITIES.—Securities activities conducted in a functionally regulated subsidiary of a depository institution shall be subject to regulation by the secu-
98 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

rities and Exchange Commission, and by relevant State securities authorities, as appropriate, subject to section 104 

of the Gramm-Leach-Bliley Act, to the same extent as if 

they were conducted in a nondepository institution subsidiary of a bank holding company. 

(B) INSURANCE ACTIVITIES.—Subject to section 104 of 

the Gramm-Leach-Bliley Act, insurance agency and brokerage activities and activities as principal conducted in a 

functionally regulated subsidiary of a depository institution shall be subject to regulation by a state insurance authority to the same extent as if they were conducted in a 

nondepository institution subsidiary of a bank holding 

company. 

(5) DEFINITION.—For purposes of this subsection, the term 

"functionally regulated subsidiary" means any company— 

(A) that is not a bank holding company or a depository 

institution; and 

(B) that is— 

(i) a broker or dealer that is registered under the 

Securities Exchange Act of 1934; 

(ii) a registered investment adviser, properly registered by or on behalf of either the Securities and Exchange Commission or any State, with respect to the 

investment advisory activities of such investment adviser and activities incidental to such investment advisory activities; 

(iii) an investment company that is registered 

under the Investment Company Act of 1940; 

(iv) an insurance company, with respect to insurance activities of the insurance company and activities 

incidental to such insurance activities, that is subject 

to supervision by a state insurance regulator; or 

(v) an entity that is subject to regulation by the 

Commodity Futures Trading Commission, with respect 

to the commodities activities of such entity and activities incidental to such commodities activities. 

(d) Before the expiration of two years following the date of enactment of this Act, and each year thereafter in the Board's annual 

report to the Congress, the Board shall report to the Congress the 

results of the administration of this Act, stating what, if any, substantial difficulties have been encountered in carrying out the purposes of this Act, and any recommendations as to changes in the 

law which in the opinion of the Board would be desirable. 

(e)(1) Notwithstanding any other provision of this Act, the 

Board may, whenever it has reasonable cause to believe that the 

continuation by a bank holding company of any activity or of ownership or control of any of its nonbank subsidiaries, other than a 

nonbank subsidiary of a bank, constitutes a serious risk to the financial safety, soundness, or stability of a bank holding company 

subsidiary bank and is inconsistent with sound banking principles 

or with the purposes of this Act or with the Financial Institutions 

Supervisory Act of 1966, at the election of the bank holding 

company— 
99 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

(A) order the bank holding company or any such nonbank 

subsidiaries, after due notice and opportunity for hearing, and 

after considering the views of the bank's primary supervisor, 

which shall be the Comptroller of the Currency in the case of 

a national bank or the Federal Deposit Insurance Corporation 

and the appropriate state supervisory authority in the case of 

an insured nonmember bank, to terminate such activities or to 

terminate (within one hundred and twenty days or such longer 

period as the Board may direct in unusual circumstances) its 

ownership or control of any such subsidiary either by sale or 

by distribution of the shares of the subsidiary to the shareholders of the bank holding company; or 

(B) order the bank holding company, after due notice and 

opportunity for hearing, and after consultation with the primary supervisor for the bank, which shall be the Comptroller 

of the Currency in the case of a national bank, and the Federal 

Deposit Insurance Corporation and the appropriate State supervisor in the case of an insured nonmember bank, to terminate (within 120 days or such longer period as the Board may 

direct) the ownership or control of any such bank by such company. 

The distribution referred to in subparagraph (A) shall be pro rata 

with respect to all of the shareholders of the distributing bank 

holding company, and the holding company shall not make any 

charge to its shareholders arising out of such a distribution. 

(2) The Board may in its discretion apply to the united states 

district court within the jurisdiction of which the principal office of 

the holding company is located, for the enforcement of any effective 

and outstanding order issued under this section, and such court 

shall have jurisdiction and power to order and require compliance 

therewith, but except as provided in section 9 of this Act, no court 

shall have jurisdiction to affect by injunction or otherwise the 

issuance or enforcement of any notice or order under this section, 

or to review, modify, suspend, terminate, or set aside any such notice or order. 

(f) in the course of or in connection with an application, examination, investigation or other proceeding under this Act, the 

Board, or any member or designated representative thereof, including any person designated to conduct any hearing under this Act, 

shall have the power to administer oaths and affirmations, to take 

or cause to be taken depositions, and to issue, revoke, quash, or 

modify subpenas and subpenas duces tecum; and the Board is empowered to make rules and regulations to effectuate the purposes 

of this subsection. The attendance of witnesses and the production 

of documents provided for in this subsection may be required from 

any place in any state or in any territory or other place subject to 

the jurisdiction of the united states at any designated place where 

such proceeding is being conducted. Any party to proceedings under 

this Act 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 the enforcement of any subpena or subpena 

duces tecum issued pursuant to this subsection, and such courts 
100 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

shall have jurisdiction and power to order and require compliance 

therewith. Witnesses subpenaed under this subsection shall be paid 

the same fees and mileage that are paid witnesses in the district 

courts of the United States. Any service required under this subsection may be made by registered mail, or in such other manner 

reasonably calculated to give actual notice as the Board may by 

regulation or otherwise provide. Any court having jurisdiction of 

any proceeding instituted under this subsection may allow to any 

such party such reasonable expenses and attorneys' fees as it 

deems just and proper. Any person who willfully shall fail or refuse 

to attend and testify or to answer any lawful inquiry or to produce 

books, papers, correspondence, memoranda, contracts, agreements, 

or other records, if in such person's power so to do, in obedience 

to the subpena of the Board, shall be guilty of a misdemeanor and, 

upon conviction, shall be subject to a fine of not more than $1,000 

or to imprisonment for a term of not more than one year or both. 

(g) AUTHORITY OF STATE INSURANCE REGULATOR AND THE SECURITIES AND EXCHANGE COMMISSION.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

law, any regulation, order, or other action of the Board that requires a bank holding company to provide funds or other assets 

to a subsidiary depository institution shall not be effective nor 

enforceable with respect to an entity described in subparagraph (A) if— 

(A) such funds or assets are to be provided by— 

(i) a bank holding company that is an insurance 

company, a broker or dealer registered under the securities Exchange Act of 1934, an investment company 

registered under the Investment Company Act of 1940, 

or an investment adviser registered by or on behalf of 

either the Securities and Exchange Commission or any 

state; or 

(ii) an affiliate of the depository institution that is 

an insurance company or a broker or dealer registered 

under the Securities Exchange Act of 1934, an investment company registered under the Investment Company Act of 1940, or an investment adviser registered 

by or on behalf of either the Securities and Exchange 

Commission or any State; and 

(B) the state insurance authority for the insurance 

company or the Securities and Exchange Commission for 

the registered broker, dealer, investment adviser (solely 

with respect to investment advisory activities or activities 

incidental thereto), or investment company, as the case 

may be, determines in writing sent to the holding company 

and the Board that the holding company shall not provide 

such funds or assets because such action would have a material adverse effect on the financial condition of the insurance company or the broker, dealer, investment company, 

or investment adviser, as the case may be. 

(2) NOTICE TO STATE INSURANCE AUTHORITY OR SEC REQUIRED.—If the Board requires a bank holding company, or an 

affiliate of a bank holding company, that is an insurance company or a broker, dealer, investment company, or investment 
101 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

adviser described in paragraph (1)(A) to provide funds or assets to a depository institution subsidiary of the holding company pursuant to any regulation, order, or other action of the 

Board referred to in paragraph (1), the Board shall promptly 

notify the state insurance authority for the insurance company, the Securities and Exchange Commission, or State securities regulator, as the case may be, of such requirement. 

(3) DIVESTITURE I N LIEU OF OTHER ACTION.—If the Board 

receives a notice described in paragraph (1)(B) from a State insurance authority or the Securities and Exchange Commission 

with regard to a bank holding company or affiliate referred to 

in that paragraph, the Board may order the bank holding company to divest the depository institution not later than 180 

days after receiving the notice, or such longer period as the 

Board determines consistent with the safe and sound operation 

of the depository institution. 

(4) CONDITIONS BEFORE DIVESTITURE.—Durin g the period 

beginning on the date an order to divest is issued by the Board 

under paragraph (3) to a bank holding company and ending on 

the date the divestiture is completed, the Board may impose 

any conditions or restrictions on the holding company's ownership or operation of the depository institution, including restricting or prohibiting transactions between the depository institution and any affiliate of the institution, as are appropriate 

under the circumstances. 

(5) RULE OF CONSTRUCTION.—No provision of this subsection may be construed as limiting or otherwise affecting, except to the extent specifically provided in this subsection, the 

regulatory authority, including the scope of the authority, of 

any Federal agency or department with regard to any entity 

that is within the jurisdiction of such agency or department. 

BORROWING BY BANK HOLDING COMPANY OR ITS SUBSIDIARIES 

SEC. 6. [Repealed by Public Law 89-485; 80 Stat. 240.] 

RESERVATION OF RIGHTS TO STATES 

SEC. 7. [12 U.S.C. 1846] (a) I N GENERAL.—N o provision of this 

Act shall be construed as preventing any state from exercising 

such powers and jurisdiction which it now has or may hereafter 

have with respect to companies, banks, bank holding companies, 

and subsidiaries thereof. 

(b) STATE TAXATION AUTHORITY NO T AFFECTED.—N o provision 

of this Act shall be construed as affecting the authority of any 

state or political subdivision of any state to adopt, apply, or 

administer any tax or method of taxation to any bank, bank holding company, or foreign bank, or any affiliate of any bank, bank 

holding company, or foreign bank, to the extent that such tax or 

tax method is otherwise permissible by or under the Constitution 

of the United States or other Federal law. 

PENALTIES 

SEC. 8. [12 U.S.C. 1847] (a) CRIMINAL PENALTY.— 
102 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

(1) Whoever knowingly violates any provision of this Act 

or, being a company, violates any regulation or order issued by 

the Board under this Act, shall be imprisoned not more than 

1 year, fined not more than $100,000 per day for each day during which the violation continues, or both. 

(2) Whoever, with the intent to deceive, defraud, or profit 

significantly, knowingly violates any provision of this Act shall 

be imprisoned not more than 5 years, fined not more than 

$1,000,000 per day for each day during which the violation 

continues, or both. Every officer, director, agent, and employee 

of a bank holding company shall be subject to the same penalties for false entries in any book, report, or statement of such 

bank holding company as are applicable to officers, directors, 

agents, and employees of member banks for false entries in 

any books, reports, or statements of member banks under section 1005 of title 18, United States Code. 

(b) CIVIL MONEY PENALTY.— 

(1) PENALTY.—Any company which violates, and any individual who participates in a violation of, any provision of this 

Act, or any regulation or order issued pursuant thereto, shall 

forfeit and pay a civil penalty of not more than $25,000 for 

each day during which such violation continues. 

(2) ASSESSMENT; ETC.—Any penalty imposed under paragraph (1) may be assessed and collected by the Board in the 

manner provided in subparagraphs (E), (F), (G), and (I) of section 8(i)(2) of the Federal Deposit Insurance Act for penalties 

imposed (under such section) and any such assessment shall be 

subject to the provisions of such section. 

(3) HEARING.—The company or other person against whom 

any penalty is assessed under this subsection shall be afforded 

an agency hearing if such association or person submits a request for such hearing within 20 days after the issuance of the 

notice of assessment. section 8(h) of the Federal Deposit insurance Act shall apply to any proceeding under this subsection. 

(4) DISBURSEMENT.—All penalties collected under authority of this subsection shall be deposited into the Treasury. 

(5) VIOLATE DEFINED.—For purposes of this section, the 

term "violate" includes any action (alone or with another or 

others) for or toward causing, bringing about, participating in, 

counseling, or aiding or abetting a violation. 

(6) REGULATIONS.—The Board shall prescribe regulations 

establishing such procedures as may be necessary to carry out 

this subsection. 

(c) 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 bank holding company (including a separation caused 

by the deregistration of such a company) shall not affect the jurisdiction and authority of the Board 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 com-
103 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

pany (whether such date occurs before, on, or after the date of the 

enactment of this subsection). 

(d) PENALTY FOR FAILUR E T O MAK E REPORTS.— 

(1) FIRST TIER.—Any company which— 

(A) maintains procedures reasonably adapted to avoid 

any inadvertent error and, unintentionally and as a result 

of such an error— 

(i) fails to make, submit, or publish such reports 

or information as may be required under this Act or 

under regulations prescribed by the Board pursuant to 

this Act, within the period of time specified by the 

Board; or 

(ii) submits or publishes any false or misleading 

report or information; or 

(B) inadvertently transmits or publishes any report 

which is minimally late, 

shall be subject to a penalty of not more than $2,000 for each 

day during which such failure continues or such false or misleading information is not corrected. The company shall have 

the burden of proving that an error was inadvertent and that 

a report was inadvertently transmitted or published late. 

(2) SECOND TIER.—Any company which— 

(A) fails to make, submit, or publish such reports or 

information as may be required under this Act or under 

regulations prescribed by the Board pursuant to this Act, 

within the period of time specified by the Board; or 

(B) submits or publishes any false or misleading report or information, 

in a manner not described in paragraph (1) shall be subject to 

a penalty of not more than $20,000 for each day during which 

such failure continues or such false or misleading information 

is not corrected. 

(3) THIR D TIER.—Notwithstanding paragraph (2), if any 

company knowingly or with reckless disregard for the accuracy 

of any information or report described in paragraph (2) submits or publishes any false or misleading report or information, 

the Board may, in its discretion, assess a penalty of not more 

than $1,000,000 or 1 percent of total assets of such company, 

whichever is less, per day for each day during which such failure continues or such false or misleading information is not 

corrected. 

(4) ASSESSMENT; ETC.—Any penalty imposed under paragraph (1), (2), or (3) shall be assessed and collected by the 

Board in the manner provided in subsection (b) (for penalties 

imposed under such subsection) and any such assessment (including the determination of the amount of the penalty) shall 

be subject to the provisions of such subsection. 

(5) HEARING.—Any company against which any penalty is 

assessed under this subsection shall be afforded an agency 

hearing if such company submits a request for such hearing 

within 20 days after the issuance of the notice of assessment. 

Section 8(h) of the Federal Deposit Insurance Act shall apply 

to any proceeding under this subsection. 
104 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

JUDICIAL REVIEW 

SEC. 9. [12 U.S.C. 1848] Any party aggrieved by an order of 

the Board under this Act may obtain a review of such order in the 

United States Court of Appeals within any circuit wherein such 

party has its principal place of business, or in the Court of Appeals 

in the District of Columbia, by filing in the court, within thirty 

days after the entry of the Board's order, a petition praying that 

the order of the Board be set aside. A copy of such petition shall 

be forthwith transmitted to the Board by the clerk of the court, and 

thereupon the Board shall file in the court the record made before 

the Board, as provided in section 2112 of title 28, United States 

Code. Upon the filing of such petition the court shall have jurisdiction to affirm, set aside, or modify the order of the Board and to 

require the Board to take such action with regard to the matter 

under review as the court deems proper. The findings of the Board 

as to the facts, if supported by substantial evidence, shall be conclusive. 

AMENDMENTS TO INTERNAL REVENUE CODE OF 195 4 

SEC. 10. [Section 10 contains an amendment to the Internal 

Revenue Code of 1954 regarding distributions pursuant to the 

Bank Holding Company Act of 1956. Refer to subchapter 0 of chapter 1 of such Code for such amendment.] 

SEC. 10A. [12 U.S.C. 1848a] LIMITATIO N O N RULEMAKING , PRUDEN -

TIAL, SUPERVISORY, AN D ENFORCEMEN T AUTHORIT Y O F 

T H E BOARD. 

(a) LIMITATIO N ON DIREC T ACTION.—Th e Board may not prescribe regulations, issue or seek entry of orders, impose restraints, 

restrictions, guidelines, requirements, safeguards, or standards, or 

otherwise take any action under or pursuant to any provision of 

this Act or section 8 of the Federal Deposit Insurance Act against 

or with respect to a functionally regulated subsidiary of a bank 

holding company unless— 

(1) the action is necessary to prevent or redress an unsafe 

or unsound practice or breach of fiduciary duty by such subsidiary that poses a material risk to— 

(A) the financial safety, soundness, or stability of an 

affiliated depository institution; or 

(B) the domestic or international payment system; and 

(2) the Board finds that it is not reasonably possible to 

protect effectively against the material risk at issue through 

action directed at or against the affiliated depository institution or against depository institutions generally. 

(b) LIMITATIO N ON INDIRECT ACTION.—Th e Board may not prescribe regulations, issue or seek entry of orders, impose restraints, 

restrictions, guidelines, requirements, safeguards, or standards, or 

otherwise take any action under or pursuant to any provision of 

this Act or section 8 of the Federal Deposit Insurance Act against 

or with respect to a bank holding company that requires the bank 

holding company to require a functionally regulated subsidiary of 

the holding company to engage, or to refrain from engaging, in any 

conduct or activities unless the Board could take such action di-
105 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

rectly against or with respect to the functionally regulated subsidiary in accordance with subsection (a). 

(c) ACTIONS SPECIFICALLY AUTHORIZED.—Notwithstandin g subsection (a) or (b), the Board may take action under this Act or section 8 of the Federal Deposit Insurance Act to enforce compliance 

by a functionally regulated subsidiary of a bank holding company 

with any Federal law that the Board has specific jurisdiction to enforce against such subsidiary. 

(d) FUNCTIONALLY REGULATED SUBSIDIARY DEFINED.—Fo r purposes of this section, the term "functionally regulated subsidiary" 

has the meaning given the term in section 5(c)(5). 

SAVING PROVISION 

SEC. 11. [12 U.S.C. 1849] (a) Nothing herein contained shall 

be interpreted or construed as approving any act, action, or conduct 

which is or has been or may be in violation of existing law, nor 

shall anything herein contained constitute a defense to any action, 

suit, or proceeding pending or hereafter instituted on account of 

any prohibited antitrust or monopolistic act, action, or conduct, except as specifically provided in this section. 

(b) ANTITRUST REVIEW. — 

(1) IN GENERAL.—The Board shall immediately notify the 

Attorney General of any approval by it pursuant to section 3 

of a proposed acquisition, merger, or consolidation transaction 

and, if the transaction also involves an acquisition under section 4, the Board shall also notify the Federal Trade Commission of such approval. if the Board has found that it must act 

immediately in order to prevent the probable failure of a bank 

or bank holding company involved in any such transaction, the 

transaction may be consummated immediately upon approval 

by the Board. If the Board has advised the Comptroller of the 

Currency or the State supervisory authority, as the case may 

be, of the existence of an emergency requiring expeditious action and has required the submission of views and recommendations within ten days, the transaction may not be 

consummated before the fifth calendar day after the date of approval by the Board. in all other cases, the transaction may 

not be consummated before the thirtieth calendar day after the 

date of approval by the Board or, if the Board has not received 

any adverse comment from the Attorney General of the United 

states relating to competitive factors, such shorter period of 

time as may be prescribed by the Board with the concurrence 

of the Attorney General, but in no event less than 15 calendar 

days after the date of approval. Any action brought under the 

antitrust laws arising out of an acquisition, merger, or consolidation transaction approved under section 3 shall be commenced prior to the earliest time under this subsection at 

which the transaction approval under section 3 might be consummated. The commencement of such an action shall stay the 

effectiveness of the Board's approval unless the court shall otherwise specifically order. in any such action, the court shall review de novo the issues presented. in any judicial proceeding 

attacking any acquisition, merger, or consolidation transaction 
106 

BANK HOLDING COMPANY ACT OF 1956 

Sec. 11 

approved pursuant to section 3 on the ground that such transaction alone and of itself constituted a violation of any antitrust laws other than section 2 of the Act of July 2, 1890 (section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), the standards applied by the court shall be identical with those that the 

Board is directed to apply under section 3 of this Act. upon the 

consummation of an acquisition, merger, or consolidation 

transaction approved under section 3 in compliance with this 

Act and after the termination of any antitrust litigation commenced within the period prescribed in this section, or upon 

the termination of such period if no such litigation is commenced therein, the transaction may not thereafter be attacked 

in any judicial proceeding on the ground that it alone and of 

itself constituted a violation of any antitrust laws other than 

section 2 of the Act of July 2, 1890 (section 2 of the sherman 

Antitrust Act, 15 U.S.C. 2), but nothing in this Act shall 

exempt any bank holding company involved in such a transaction from complying with the antitrust laws after the consummation of such transaction. 

(2) SECTION 13(f) CASES.—(A) If— 

(i) the Federal Deposit Insurance Corporation learns 

that a bank insured by such Corporation is in danger of 

closing; and 

(ii) the Corporation is considering assisting the acquisition of such bank and its affiliated banks by another 

bank or holding company under section 13(f) of the Federal 

Deposit Insurance Act and such acquisition is subject to 

the approval of the Board under section 3 of this Act, 

the Corporation shall immediately notify the Board of such 

facts. 

(B) Upon receipt of notice from the Federal Deposit Insurance Corporation under subparagraph (A) or at such earlier 

time as deemed appropriate by the Board, the Board shall 

immediately notify the Attorney General of the united states 

of the facts concerning the possible acquisition. 

(C) Within 5 days of receiving notice under subparagraph 

(B), the Attorney General shall notify the Board in writing of 

the Attorney General's preliminary finding as to the consistency of the possible acquisition with the antitrust laws. 

(D) The Board may reduce or eliminate the post-approval 

waiting period established under paragraph (1) for an acquisition to which this paragraph applies, except that such period 

may not be eliminated or reduced to less than 5 days without 

the concurrence of the Attorney General. 

(c) in any action brought under the antitrust laws arising out 

of any acquisition, merger, or consolidation transaction approved by 

the Board under section 3 of this Act, the Board and any state 

banking supervisory agency having jurisdiction within the state involved, may appear as a party of its own motion and as of right, 

and be represented by its counsel. 

(d) Any acquisition, merger, or consolidation of the kind described in section 3(a) of this Act which was consummated at any 

time prior or subsequent to May 9, 1956, and as to which no litigation was initiated by the Attorney General prior to the date of 
107 BANK HOLDING COMPANY ACT OF 1956 Sec. 11 

enactment of this amendment,

 1 shall be conclusively presumed not 

to have been in violation of any antitrust laws other than section 

2 of the Act of July 2, 1890 (section 2 of the Sherman Antitrust 

Act, 15 U.S.C. 2). 

(e) Any court having pending before it on or after the date of 

enactment of this amendment1 any litigation initiated under the 

antitrust laws by the Attorney General with respect to any acquisition, merger, or consolidation of the kind described in section 3(a) 

of this Act shall apply the substantive rule of law set forth in section 3 of this Act. 

(f) For the purposes of this section, the term ''antitrust laws'' 

means the Act of July 2, 1890 (the Sherman Antitrust Act, 15 

U.S.C. 1-7), the Act of October 15, 1914 (the Clayton Act, 15 U.S.C. 

12-27), and any other Acts in pari materia. 

SEPARABILITY OF PROVISIONS 

SEC. 12. If any provision of this Act, or the application of such 

provision to any person or circumstance, shall be held invalid, the 

remainder of the Act, and the application of such provision to persons or circumstances other than those to which it is held invalid, 

shall not be affected thereby. 

1

 such date of enactment was July 1, 1966. 

BANK HOLDING COMPANY ACT AMENDMENTS OF 1970 

109 

BANK HOLDING COMPANY ACT AMENDMENTS OF 19701 

A N AC T To amend the Bank Holding Company Act of 1956, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That this Act may 

be cited as the "Bank Holding Company Act Amendments of 1970''. 

TITLE I—BANK HOLDING COMPANIES 

SEC. 105. [12 U.S.C. 1850] With respect to any proceeding before the Federal Reserve Board wherein an applicant seeks authority to acquire a subsidiary which is a bank under section 3 of the 

Bank Holding Company Act of 1956 or to engage in an activity otherwise prohibited under section 106 of this Act, a party who would 

become a competitor of the applicant or subsidiary thereof by virtue 

of the applicant's or its subsidiary's acquisition, entry into the business involved, or activity, shall have the right to be a party in interest in the proceeding and, in the event of an adverse order of 

the Board, shall have the right as an aggrieved party to obtain judicial review thereof as provided in section 9 of such Act of 1956 

or as otherwise provided by law. 

(c) ANTITYING.—Section 106(a) of the Bank Holding Company 

Act Amendments of 1970 (12 U.S.C. 1971) is amended by adding 

at the end the following: ''For purposes of this section, a financial 

subsidiary of a national bank engaging in activities pursuant to 

section 5136A(a) of the Revised Statutes of the United States shall 

be deemed to be a subsidiary of a bank holding company, and not 

a subsidiary of a bank.''. 

SEC. 106. (a) [12 U.S.C. 1971] As used in this section, the 

terms ''bank'', ''bank holding company'', ''subsidiary'', and ''Board'' 

have the meaning ascribed to such terms in section 2 of the Bank 

Holding Company Act of 1956. For purposes of this section only, 

the term ''company'', as used in section 2 of the Bank Holding Company Act of 1956, means any person, estate, trust, partnership, corporation, association, or similar organization, but does not include 

any corporation the majority of the shares of which are owned by 

the United States or by any State. The term "trust service'' means 

any service customarily performed by a bank trust department. For 

purposes of this section, a financial subsidiary of a national bank 

engaging in activities pursuant to section 5136A(a) of the Revised 

Statutes of the United States shall be deemed to be a subsidiary 

of a bank holding company, and not a subsidiary of a bank. 

(b) [12 U.S.C. 1972] (1) A bank shall not in any manner extend credit, lease or sell property of any kind, or furnish any serv1

 Sections 101, 102, 103, and 104 of such Act amended the Bank Holding Company Act of 

1956. Title I I of such Act contained provisions relating to coinage. 

1 1 1 
Sec. 106 BANK HOLDING COMPANY ACT AMENDMENTS OF 1970 112 

ice, or fix or vary the consideration for any of the foregoing, on the 

condition or requirement— 

(A) that the customer shall obtain some additional credit, 

property, or service from such bank other than a loan, discount, deposit, or trust service; 

(B) that the customer shall obtain some additional credit, 

property, or service from a bank holding company of such 

bank, or from any other subsidiary of such bank holding company; 

(C) that the customer provide some additional credit, property, or service to such bank, other than those related to and 

usually provided in connection with a loan, discount, deposit, 

or trust service; 

(D) that the customer provide some additional credit, property, or service to a bank holding company of such bank, or to 

any other subsidiary of such bank holding company; or 

(E) that the customer shall not obtain some other credit, 

property, or service from a competitor of such bank, a bank 

holding company of such bank, or any subsidiary of such bank 

holding company, other than a condition or requirement that 

such bank shall reasonably impose in a credit transaction to 

assure the soundness of the credit. 

The Board may by regulation or order permit such exceptions to 

the foregoing prohibition and the prohibitions of section 4(f)(9) and 

4(h)(2) of the Bank Holding Company Act of 1956 as it considers 

will not be contrary to the purposes of this section. 

(2)(A) No bank which maintains a correspondent account in the 

name of another bank shall make an extension of credit to an executive officer or director of, or to any person who directly or indirectly or acting through or in concert with one or more persons 

owns, controls, or has the power to vote more than 10 per centum 

of any class of voting securities of, such other bank or to any related interest of such person unless such extension of credit is 

made on substantially the same terms, including interest rates and 

collateral as those prevailing at the time for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features. 

(B) No bank shall open a correspondent account at another 

bank while such bank has outstanding an extension of credit to an 

executive officer or director of, or other person who directly or indirectly or acting through or in concert with one or more persons 

owns, controls, or has the power to vote more than 10 per centum 

of any class of voting securities of, the bank desiring to open the 

account or to any related interest of such person, unless such 

extension of credit was made on substantially the same terms, including interest rates and collateral as those prevailing at the time 

for comparable transactions with other persons and does not involve more than the normal risk of repayment or present other unfavorable features. 

(C) No bank which maintains a correspondent account at another bank shall make an extension of credit to an executive officer 

or director of, or to any person who directly or indirectly acting 

through or in concert with one or more persons owns, controls, or 

has the power to vote more than 10 per centum of any class of vot-
113 Sec. 106 BANK HOLDING COMPANY ACT AMENDMENTS OF 1970 113 

ing securities of, such other bank or to any related interest of such 

person, unless such extension of credit is made on substantially the 

same terms, including interest rates and collateral as those prevailing at the time for comparable transactions with other persons 

and does not involve more than the normal risk of repayment or 

present other unfavorable features. 

(D) No bank which has outstanding an extension of credit to 

an executive officer or director of, or to any person who directly or 

indirectly or acting through or in concert with one or more persons 

owns, controls, or has the power to vote more than 10 per centum 

of any class of voting securities of, another bank or to any related 

interest of such person shall open a correspondent account at such 

other bank, unless such extension of credit was made on substantially the same terms, including interest rates and collateral as 

those prevailing at the time for comparable transactions with other 

persons and does not involve more than the normal risk of repayment or present other unfavorable features. 

(E) For purposes of this paragraph, the term "extension of 

credit'' shall have the meaning prescribed by the Board pursuant 

to section 22(h) of the Federal Reserve Act (12 U.S.C. 375b), and 

the term "executive officer'' shall have the same meaning given it 

under section 22(g) of the Federal Reserve Act. 

( F ) CIVI L MONEY PENALTY.— 

(i) FIRST TIER.—Any bank which, and any institution-affiliated party (within the meaning of section 3(u) of the Federal 

Deposit Insurance Act) with respect to such bank who, violates 

any provision of this paragraph shall forfeit and pay a civil 

penalty of not more than $5,000 for each day during which 

such violation continues. 

(ii) SECOND TIER.—Notwithstanding clause (i), any bank 

which, and any institution-affiliated party (within the meaning 

of section 3(u) of the Federal Deposit Insurance Act) with respect to such bank who— 

(i)(aa) commits any violation described in clause (i); 

(bb) recklessly engages in an unsafe or unsound practice in conducting the affairs of such bank; or 

(cc) breaches any fiduciary duty; 

(II) which violation, practice, or breach— 

(aa) is part of a pattern of misconduct; 

(bb) causes or is likely to cause more than a minimal loss to such bank; or 

(cc) results in pecuniary gain or other benefit to 

such party, 

shall forfeit and pay a civil penalty of not more than $25,000 

for each day during which such violation, practice, or breach 

continues. 

(iii) THIR D TIER.—Notwithstanding clauses (i) and (ii), any 

bank which, and any institution-affiliated party (within the 

meaning of section 3(u) of the Federal Deposit Insurance Act) 

with respect to such bank who— 

(i) knowingly— 

(aa) commits any violation described in clause (i); 

(bb) engages in any unsafe or unsound practice in 

conducting the affairs of such bank; or 
Sec. 106 BANK HOLDING COMPANY ACT AMENDMENTS OF 1970 114 

(cc) breaches any fiduciary duty; and 

(II) knowingly or recklessly causes a substantial loss 

to such bank or a substantial pecuniary gain or other benefit to such party by reason of such violation, practice, or 

breach, 

shall forfeit and pay a civil penalty in an amount not to exceed 

the applicable maximum amount determined under clause (iv) 

for each day during which such violation, practice, or breach 

continues. 

(iv) MAXIMU M AMOUNTS OF PENALTIES FOR ANY VIOLATION 

DESCRIBED I N CLAUSE (iii).—The maximum daily amount of any 

civil penalty which may be assessed pursuant to clause (iii) for 

any violation, practice, or breach described in such clause is— 

(I) in the case of any person other than a bank, an 

amount to not exceed $1,000,000; and 

(II) in the case of a bank, an amount not to exceed the 

lesser of— 

(aa) $1,000,000; or 

(bb) 1 percent of the total assets of such bank. 

(v) ASSESSMENT; ETC.—Any penalty imposed under clause 

(i), (ii), or (iii) may be assessed and collected— 

(I) in the case of a national bank, by the Comptroller 

of the Currency; 

(II) in the case of a State member bank, by the Board; 

and 

(III) in the case of an insured nonmember State bank, 

by the Federal Deposit Insurance Corporation, 

in the manner provided in subparagraphs (E), (F), (G), and (I) of 

section 8(i)(2) of the Federal Deposit Insurance Act for penalties 

imposed (under such section) and any such assessment shall be 

subject to the provisions of such section. 

(vi) HEARING.—The bank or other person against whom 

any penalty is assessed under this subparagraph shall be afforded an agency hearing if such bank or person submits a request for such hearing within 20 days after the issuance of the 

notice of assessment. Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under this subparagraph. 

(vii) DISBURSEMENT.—All penalties collected under authority of this subsection shall be deposited into the Treasury. 

(viii) VIOLATE DEFINED.—For purposes of this paragraph, 

the term ''violate'' includes any action (alone or with another 

or others) for or toward causing, bringing about, participating 

in, counseling, or aiding or abetting a violation. 

(ix) REGULATIONS.—The Comptroller of the Currency, the 

Board, and the Federal Deposit Insurance Corporation shall 

prescribe regulations establishing such procedures as may be 

necessary to carry out this subparagraph. 

(G)(i) Each executive officer and each stockholder of record who 

directly or indirectly owns, controls, or has the power to vote more 

than 10 per centum of any class of voting securities of an insured 

bank shall make a written report to the board of directors of such 

bank for any year during which such executive officer or shareholder has outstanding an extension of credit from a bank which 
115 Sec. 106 BANK HOLDING COMPANY ACT AMENDMENTS OF 1970 115 

maintains a corresponding account in the name of such bank. Such 

report shall include the following information: 

(1) the maximum amount of indebtedness to the bank 

maintaining the correspondent account during such year of (a) 

such executive officer or stockholder of record, (b) each company controlled by such executive officer or stockholder, or (c) 

each political or campaign committee the funds or services of 

which will benefit such executive officer or stockholder, or 

which is controlled by such executive officer or stockholder; 

(2) the amount of indebtedness to the bank maintaining 

the correspondent account outstanding as of a date not more 

than ten days prior to the date of filing of such report of (a) 

such executive officer or stockholder of record, (b) each company controlled by such executive officer or stockholder, or (c) 

each political or campaign committee the funds or services of 

which will benefit such executive officer or stockholder; 

(3) the range of interest rates charged on such indebtedness of such executive officer or stockholder of record; and 

(4) the terms and conditions of such indebtedness of such 

executive officer or stockholder of record. 

(ii) The appropriate Federal banking agencies are authorized to 

issue rules and regulations, including definitions of terms, to require the reporting and public disclosure of information by any 

bank or executive officer or principal shareholder thereof concerning any extension of credit by a correspondent bank to the reporting bank's executive officers or principal shareholders, or the 

related interests of such persons. 

(H) For the purpose of this paragraph— 

(i) the term ''bank'' includes a mutual savings bank, a savings bank, and a savings association (as those terms are defined in section 3 of the Federal Deposit Insurance Act); 

(ii) the term ''related interests of such persons'' includes 

any company controlled by such executive officer, director, or 

person, or any political or campaign committee the funds or 

services of which will benefit such executive officer, director, or 

person or which is controlled by such executive officer, director, 

or person; and 

(iii) the terms ''control of a company'' and ''company'' have 

the same meaning as under section 22(h) of the Federal Reserve Act (12 U.S.C. 375b). 

( I) NOTIC E UNDE R THI S SECTION AFTER SEPARATION FRO M 

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 such a bank (including a separation caused by the closing of such a bank) shall not affect the jurisdiction and authority 

of the appropriate Federal banking agency 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 bank 

(whether such date occurs before, on, or after the date of the enactment of this subparagraph). 

(c) [12 U.S.C. 1973] The district courts of the United States 

have jurisdiction to prevent and restrain violations of subsection (b) 
Sec. 106 BANK HOLDING COMPANY ACT AMENDMENTS OF 1970 116 

of this section and it is the duty of the united states attorneys, 

under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. The proceedings may be by way of a petition setting forth the case and 

praying that the violation be enjoined or otherwise prohibited. 

when the parties complained of have been duly notified of the petition, the court shall proceed, as soon as possible, to the hearing and 

determination of the case. while the petition is pending, and before 

final decree, the court may at any time make such temporary restraining order or prohibition as it deems just. Whenever it appears to the court that the ends of justice require that other parties 

be brought before it, the court may cause them to be summoned 

whether or not they reside in the district in which the court is held, 

and subpenas to that end may be served in any district by the marshal thereof. 

(d) [12 U.S.C. 1974] In any action brought by or on behalf of 

the united states under subsection (b), subpenas for witnesses may 

run into any district, but no writ of subpena may issue for witnesses living out of the district in which the court is held at a 

greater distance than one hundred miles from the place of holding 

the same without the prior permission of the trial court upon 

proper application and cause shown. 

(e) [12 U.S.C. 1975] Any person who is injured in his business 

or property by reason of anything forbidden in subsection (b) may 

sue therefor in any district court of the united states in which the 

defendant resides or is found or has an agent, without regard to 

the amount in controversy, and shall be entitled to recover three 

times the amount of the damages sustained by him, and the cost 

of suit, including a reasonable attorney's fee. 

(f) [12 U.S.C. 1976] Any person may sue for and have injunctive relief, in any court of the united states having jurisdiction 

over the parties, against threatened loss or damage by reason of a 

violation of subsection (b), under the same conditions and principles as injunctive relief against threatened conduct that will 

cause loss or damage is granted by courts of equity and under the 

rules governing such proceedings. upon the execution of proper 

bond against damages for an injunction improvidently granted and 

a showing that the danger of irreparable loss or damage is immediate, a preliminary injunction may issue. 

(g)(1) [12 U.S.C. 1977] Subject to paragraph (2), any action to 

enforce any cause of action under this section shall be forever 

barred unless commenced within four years after the cause of action accrued. 

(2) Whenever any enforcement action is instituted by or on behalf of the united states with respect to any matter which is or 

could be the subject of a private right of action under this section, 

the running of the statute of limitations in respect of every private 

right of action arising under this section and based in whole or in 

part on such matter shall be suspended during the pendency of the 

enforcement action so instituted and for one year thereafter: Provided, That whenever the running of the statute of limitations in 

respect of a cause of action arising under this section is suspended 

under this paragraph, any action to enforce such cause of action 

shall be forever barred unless commenced either within the period 
117 Sec. 106 BANK HOLDING COMPANY ACT AMENDMENTS OF 1970 117 

of suspension or within the four-year period referred to in paragraph (1). 

(h) [12 U.S.C. 1978] Nothing contained in this section shall be 

construed as affecting in any manner the right of the United States 

or any other party to bring an action under any other law of the 

United States or of any State, including any right which may exist 

in addition to specific statutory authority, challenging the legality 

of any act or practice which may be proscribed by this section. No 

regulation or order issued by the Board under this section shall in 

any manner constitute a defense to such action. 

BANK PROTECTION ACT OF 1968 

119 

BANK PROTECTION ACT OF 1968 

A N AC T To provide security measures for banks and other financial institutions, 

and to provide for the appointment of the Federal savings and Loan insurance 

Corporation as receiver 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That this Act may 

be cited as the ''Bank Protection Act of 1968''. 

SEC. 2. [12 U.S.C. 1881] As used in this Act the term ''Federal 

supervisory agency'' means— 

(1) The Comptroller of the Currency with respect to national banks and district banks, 

(2) The Board of Governors of the Federal Reserve system 

with respect to Federal Reserve banks and state banks which 

are members of the Federal Reserve system, 

(3) The Federal Deposit Insurance Corporation with respect to state banks which are not members of the Federal Reserve system but the deposits of which are insured by the Federal Deposit Insurance Corporation and State savings associations, and 

(4) The Director of the Office of Thrift Supervision with respect to Federal savings

 1

. 

SEC. 3. [12 U.S.C. 1882] (a) Within six months from the date 

of this Act, each Federal supervisory agency shall promulgate rules 

establishing minimum standards with which each bank or savings 

and loan association must comply with respect to the installation, 

maintenance, and operation of security devices and procedures, reasonable in cost, to discourage robberies, burglaries, and larcenies 

and to assist in the identification and apprehension of persons who 

commit such acts. 

(b) The rules shall establish the time limits within which 

banks and savings and loan associations shall comply with the 

standards. 

SEC. 4. [12 U.S.C. 1883] The Federal supervisory agencies 

shall consult with2 

(1) insurers furnishing insurance protection against losses 

resulting from robberies, burglaries, and larcenies committed 

against financial institutions referred to in section 2, and 

(2) state agencies having supervisory or regulatory responsibilities with respect to such insurers

 2 

to determine the feasibility and desirability of premium rate differentials based on the installation, maintenance, and operation of 

security devices and procedures. The Federal supervisory agencies 

shall report to the Congress the results of their consultations pur1

 So in original. The phrase ''and State savings associations", which was added at the end of 

paragraph (3) by section 744(h)(2) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, should probably have been added at the end of paragraph (4). 

2

 So in original. No punctuation marks. 

1 2 1 
Sec. 5 BANK PROTECTION ACT OF 1968 122 

suant to this section not later than two years after the date of 

enactment of this Act. 

SEC. 5. [12 U.S.C. 1884] A bank or savings and loan association which violates a rule promulgated pursuant to this Act shall 

be subject to a civil penalty which shall not exceed $100 for each 

day of the violation. 
BANK SERVICE COMPANY ACT 

123 

BANK SERVICE COMPANY ACT 

A N AC T To authorize certain banks to invest in corporations whose purpose is to 

provide clerical services for them, and for other purposes. 

SHOR T TITL E AN D DEFINITION S 

SECTIO N 1. [12 U.S.C. 1861] 

(a) SHOR T TITLE.—This Act may be cited as the ''Bank Service 

Company Act''. 

(b) For the purpose of this Act— 

(1) the term "appropriate Federal banking agency'' shall 

have the meaning provided in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)); 

(2) the term ''bank service company'' means— 

(A) any corporation— 

(i) which is organized to perform services authorized by this Act; and 

(ii) all of the capital stock of which is owned by 1 

or more insured banks; and 

(B) any limited liability company— 

(i) which is organized to perform services authorized by this Act; and 

(ii) all of the members of which are 1 or more insured banks. 

(3) the term ''Board'' means the Board of Governors of the 

Federal Reserve System; 

(4) the term ''depository institution'' means an insured 

bank, a financial institution subject to examination by the Federal Home Loan Bank Board or the National Credit Union 

Administration Board, or a financial institution the accounts or 

deposits of which are insured or guaranteed under State law 

and are eligible to be insured by the Federal Deposit Insurance 

Corporation, the Federal Savings and Loan Insurance Corporation, or the National Credit Union Administration Board;1 

(5) the term ''insured bank'' shall have the meaning provided in section 3(h) of the Federal Deposit Insurance Act (12 

U.S.C. 1813(h)); 

(6) the term ''invest'' includes any advance of funds to a 

bank service company, whether by the purchase of stock, the 

making of a loan, or otherwise, except a payment for rent 

earned, goods sold and delivered, or services rendered prior to 

the making of such payment; 

(7) the term ''limited liability company'' means any company, partnership, trust, or similar business entity organized 

under the law of a State (as defined in section 3 of the Federal 

*The Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation abolished by P.L. 101-73. The term ''Director of the Office of Thrift Supervision'' probably 

should be substituted for ''Federal Home Loan Bank Board''. 

1 2 5 
Sec. 2 BANK SERVICE COMPANY ACT 126 

Deposit Insurance Act) which provides that a member or manager of such company is not personally liable for a debt, obligation, or liability of the company solely by reason of being, or 

acting as, a member or manager of such company; and 

(8) the term ''principal investor'' means the insured bank 

that has the largest dollar amount invested in the equity of a 

bank service company. In any case where two or more insured 

banks have equal dollar amounts invested in a bank service 

company, the company shall, prior to commencing operations, 

select one of the insured banks as its principal investor and 

shall notify the bank's appropriate Federal banking agency of 

that choice within 5 business days of its selection. 

AMOUNT OF INVESTMENT I N BANK SERVICE COMPANY 

SEC. 2. [12 U.S.C. 1862] Notwithstanding any limitation or 

prohibition otherwise imposed by any provision of law exclusively 

relating to banks, an insured bank may invest not more than 10 

per centum of paid-in and unimpaired capital and unimpaired surplus in a bank service company. No insured bank shall invest more 

than 5 per centum of its total assets in bank service companies. 

PERMISSIBLE BANK SERVICE COMPANY ACTIVITIES FOR DEPOSITORY 

INSTITUTIONS 

SEC. 3. [12 U.S.C. 1863] Without regard to the provisions of 

sections 4 and 5 of this Act, an insured bank may invest in a bank 

service company that performs, and a bank service company may 

perform, the following services only for depository institutions: 

check and deposit sorting and posting, computation and posting of 

interest and other credits and charges, preparation and mailing of 

checks, statements, notices, and similar items, or any other clerical, 

bookkeeping, accounting, statistical, or similar functions performed 

for a depository institution. 

PERMISSIBLE BANK SERVICE COMPANY ACTIVITIES FOR OTHER 

PERSONS 

SEC. 4. [12 U.S.C. 1864] (a) A bank service company may provide to any person any service authorized by this section, except 

that a bank service company shall not take deposits. 

(b) Except with the prior approval of the Board under section 

5(b) of this Act in accordance with subsection (f) of this section— 

(1) a bank service company shall not perform the services 

authorized by this section in any State other than that State 

in which its shareholders or members are located; and 

(2) all insured bank shareholders or members of a bank 

service company shall be located in the same State. 

(c) A bank service company in which a State bank is a shareholder or member shall perform only those services that such State 

bank shareholder or member is authorized to perform under the 

law of the State in which such State bank operates and shall perform such services only at locations in the State in which such 

State bank shareholder or member could be authorized to perform 

such services. 
127 BANK SERVICE COMPANY ACT Sec. 5 

(d) A bank service company in which a national bank is a 

shareholder or member shall perform only those services that such 

national bank shareholder or member is authorized to perform 

under the law of the United States and shall perform such services 

only at locations in the State at which such national bank shareholder or member could be authorized to perform such services. 

(e) A bank service company that has both national bank and 

State bank shareholders or members shall perform only those services that may lawfully be performed by both any shareholder or 

member of the company which is a national bank under the law 

of the United States and any shareholder or member of the company which is a State bank under the law of the State in which 

any such State bank operate1 and shall perform such services only 

at locations in the State at which both its State bank and national 

bank shareholders or members could be authorized to perform such 

services. 

(f) Notwithstanding the other provisions of this section or any 

other provision of law, other than the provisions of Federal and 

State branching law regulating the geographic location of banks to 

the extent that those laws are applicable to an activity authorized 

by this subsection, a bank service company may perform at any 

geographic location any service, other than deposit taking, that the 

Board has determined, by regulation, to be permissible for a bank 

holding company under section 4(c)(8) of the Bank Holding Company Act. 

PRIOR APPROVAL FOR INVESTMENTS I N BANK SERVICE COMPANIES 

SEC. 5. [12 U.S.C. 1865] (a) No insured bank shall invest in 

the capital stock of a bank service company that performs any service under authority of subsection (c), (d), or (e) of section 4 of this 

Act without prior notice, as determined by the bank's appropriate 

Federal banking agency. 

(b) No insured bank shall invest in the capital stock of a bank 

service company that performs any service under authority of section 4(f) of this Act and no bank service company shall perform any 

activity under section 4(f) of this Act without the prior approval of 

the Board. 

(c) in determining whether to approve or deny any application 

for prior approval or whether to approve or disapprove any notice 

under this section, the Board or the appropriate Federal banking 

agency, as the case may be, is authorized to consider the financial 

and managerial resources and future prospects of the bank or 

banks and bank service company involved, including the financial 

capability of the bank to make a proposed investment under this 

Act, and possible adverse effects such as undue concentration of resources, unfair or decreased competition, conflicts of interest, or unsafe or unsound banking practices. 

(d) in the event the Board or the appropriate Federal banking 

agency, as the case may be, fails to act on any application under 

this section within ninety days of the submission of a complete application to the agency, the application shall be deemed approved. 

1

 So in law. Probably should be ''operates''. 
Sec. 2 BANK SERVICE COMPANY ACT 128 

SERVICES TO NONSTOCKHOLDERS OR NONMEMBERS 

SEC. 6. [12 U.S.C. 1866] No bank service company shall unreasonably discriminate in the provision of any services authorized 

under this Act to any depository institution that does not own stock 

in or is not a member of the service company on the basis of the 

fact that such depository institution is in competition with an institution that owns stock in or is a member of the bank service company, except that— 

(1) it shall not be considered unreasonable discrimination 

for a bank service company to provide services to a nonstockholding or nonmember institution only at a price that fully reflects all of the costs of offering those services, including the 

cost of capital and a reasonable return thereon; and 

(2) a bank service company may refuse to provide services 

to a nonstockholding or nonmember institution if comparable 

services are available from another source at competitive overall costs, or if the providing of services would be beyond the 

practical capacity of the service company. 

REGULATION AND EXAMINATION OF BANK SERVICE COMPANIES 

SEC. 7. [12 U.S.C. 1867] (a) A bank service company shall be 

subject to examination and regulation by the appropriate Federal 

banking agency of its principal investor to the same extent as its 

principal investor. The appropriate Federal banking agency of the 

principal shareholder or principal member of such a bank service 

company may authorize any other Federal banking agency that 

supervises any other shareholder or member of the bank service 

company to make such an examination. 

(b) A bank service company shall be subject to the provisions 

of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) 

as if the bank service company were an insured bank. For this purpose, the appropriate Federal banking agency shall be the appropriate Federal banking agency of the principal investor of the bank 

service company. 

(c) Notwithstanding subsection (a) of this section, whenever a 

bank that is regularly examined by an appropriate Federal banking 

agency, or any subsidiary or affiliate of such a bank that is subject 

to examination by that agency, causes to be performed for itself, by 

contract or otherwise, any services authorized under this Act, 

whether on or off its premises— 

(1) such performance shall be subject to regulation and 

examination by such agency to the same extent as if such services were being performed by the bank itself on its own premises, and 

(2) the bank shall notify such agency of the existence of 

the service relationship within thirty days after the making of 

such service contract or the performance of the service, whichever occurs first. 

(d) The Board and the appropriate Federal banking agencies 

are authorized to issue such regulations and orders as may be necessary to enable them to administer and to carry out the purposes 

of this Act and to prevent evasions thereof. 
BANKING ACT OF 1933 

129 

BANKING ACT OF 1933 

(Enacted June 16, 1933; 48 Stat. 162) 

AN ACT To provide for the safer and more effective use of the assets of banks, to 

regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That the short 

title of this Act shall be the "Banking Act of 1933.'' 

SEC. 2. [12 U.S.C. 221a] As used in this Act and in any provision of law amended by this Act— 

(a) The terms "banks" "national bank'', "national banking association'', ''member bank'', ''board'', ''district'', and ''reserve bank'' 

shall have the meanings assigned to them in section 1 of the Federal Reserve Act, as amended. 

(b) Except where otherwise specifically provided, the term 

''affiliate'' shall include any corporation, business trust, association, 

or other similar organization— 

(1)1 Of which a member bank, directly or indirectly, owns or 

controls either a majority of the voting shares or more than 50 per 

centum of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the 

preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar 

functions; or

 2 

(2)1 Of which control is held, directly or indirectly, through 

stock ownership or in any other manner, by the shareholders of a 

member bank who own or control either a majority of the shares 

of such bank or more than 50 per centum of the number of shares 

voted for the election of directors of such bank at the preceding 

election, or by trustees for the benefit of the shareholders of any 

such bank; or

 2 

(3)1 Of which a majority of its directors, trustees, or other persons exercising similar functions are directors of any one member 

bank; or 

(4)1 Which owns or controls, directly or indirectly, either a majority of the shares of capital stock of a member bank or more than 

50 per centum of the number of shares voted for the election of 

directors of a member bank at the preceding election, or controls 

in any manner the election of a majority of the directors of a member bank, or for the benefit of whose shareholders or members all 

or substantially all the capital stock of a member bank is held by 

trustees. 

1

 indentation so in original. The first letter of the first word in paragraphs (1) through (4) 

probably should be lower case. 

2

 So in original. The word ''or'' probably should not appear. 

131 
Sec. 21 BANKING ACT OF 1933 132 

[Subsection (c) repealed. Section 13(b) of P.L. 89-485, 80 Stat. 

236.] 

[Secs. 3-19 amend other Acts.] 

[Sec. 20 repealed by section 101(a) of P.L. 106-102, 113 Stat. 

1341.] 

SEC. 21. [12 U.S.C. 378] (a) After the expiration of one year 

after the date of enactment of this Act it shall be unlawful— 

(1) For any person, firm, corporation, association, business 

trust, or other similar organization, engaged in the business of 

issuing, underwriting, selling, or distributing, at wholesale or retail, or through syndicate participation, stocks, bonds, debentures, 

notes, or other securities, to engage at the same time to any extent 

whatever in the business of receiving deposits subject to check or 

to repayment upon presentation of a passbook, certificate of deposit, or other evidence of debt, or upon request of the depositor: 

Provided, That the provisions of this paragraph shall not prohibit 

national banks or State banks or trust companies (whether or not 

members of the Federal Reserve System) or other financial institutions or private bankers from dealing in, underwriting, purchasing, 

and selling investment securities, or issuing securities, to the extent permitted to national banking associations by the provisions 

of section 5136 of the Revised Statutes, as amended (U.S.C. title 

12, sec. 24; Supp. VII, title 12, sec. 24): Provided further, That 

nothing in this paragraph shall be construed as affecting in any 

way such right as any bank, banking association, savings bank, 

trust company, or other banking institution, may otherwise possess 

to sell, without recourse or agreement to repurchase, obligations 

evidencing loans on real estate; or 

(2) For any person, firm, corporation, association, business 

trust, or other similar organization to engage, to any extent whatever with others than his or its officers, agents or employees, in the 

business of receiving deposits subject to check or to repayment 

upon presentation of a pass book, certificate of deposit, or other evidence of debt, or upon request of the depositor, unless such person, 

firm, corporation, association, business trust, or other similar organization (A) shall be incorporated under, and authorized to engage 

in such business by, the laws of the United States or of any State, 

Territory, or District, and subjected, by the laws of the United 

States, or of the State, Territory, or District wherein located, to 

examination and regulation, or (B) shall be permitted by the 

United States, any State, territory, or district to engage in such 

business and shall be subjected by the laws of the United States, 

or such State, territory, or district to examination and regulations 

or, (C) shall submit to periodic examination by the banking authority of the State Territory, or District where such business is carried 

on and shall make and publish periodic reports of its condition, exhibiting in detail its resources and liabilities, such examination and 

reports to be made and published at the same times and in the 

same manner and under the same conditions as required by the 

law of such State, Territory, District in the case of incorporated 

banking institutions engaged in such business in the same locality. 

(b) Whoever shall willfully violate any of the provisions of this 

section shall upon conviction be fined not more than $5,000 or 

imprisoned not more than five years, or both, and any officer, direc-
133 BANKING ACT OF 1933 Sec. 31 

tor, employee, or agent of any person, firm, corporation, association, business trust, or other similar organization who knowingly 

participates in any such violation shall be punished by a like fine 

or imprisonment or both. 

SEC. 22. [12 U.S.C. 64a] The additional liability imposed upon 

shareholders in national banking associations by the provisions of 

section 5151 of the Revised Statutes, as amended, and section 23 

of the Federal Reserve Act, as amended (U.S.C., title 12, secs. 63 

and 64),1 shall not apply with respect to shares in any such association issued after the date of enactment of this Act. Such additional liability shall cease on July 1, 1937, with respect to all 

shares issued by any association which shall be transacting the 

business of banking on July 1, 1937. Provided, That not less than 

six months prior to such date, such association shall have caused 

notice of such prospective termination of liability to be published 

in a newspaper published in the city, town, or county in which such 

association is located, and if no newspaper is published in such 

city, town, or county, then in a newspaper of general circulation 

therein. if the association fail2 to give such notice as and when 

above provided, a termination of such additional liability may 

thereafter be accomplished as of the date six month3 subsequent 

to publication, in the manner above provided. In the case of each 

association which has not caused notice of such prospective termination of liability to be published prior to the effective date of this 

amendment, the Comptroller of the Currency shall cause such notice to be published in the manner provided in this section, and on 

the date six months subsequent to such publication by the Comptroller of the Currency such additional liability shall cease. 

[Secs. 23-28 amend other Acts.] 

SEC. 29. [12 U.S.C. 197a] in any case in which, in the opinion 

of the Comptroller of the Currency, it would be to the advantage 

of the depositors and unsecured creditors of any national banking 

association whose business has been closed, for such association to 

resume business upon the retention by the association, for a reasonable period to be prescribed by the Comptroller, of all or any 

part of its deposits, the Comptroller is authorized, in his discretion, 

to permit the association to resume business if depositors and unsecured creditors of the association representing at least 75 per 

centum of its total deposit and unsecured credit liabilities consent 

in writing to such retention of deposits. Nothing in this section 

shall be construed to affect in any manner any powers of the 

Comptroller under the provisions of law in force on the date of 

enactment of this Act with respect to the reorganization of national 

banking associations. 

[Sec. 30 was repealed.] 

SEC. 31. [12 U.S.C. 71a] After one year from the date of enactment of this Act, notwithstanding any other provision of law, the 

board of directors, board of trustees, or other similar governing 

body of every national banking association and of every State bank 

or trust company which is a member of the Federal Reserve Sys1

 Section 5151 of the Revised Statutes and section 23 of the Federal Reserve Act were repealed 

by section 7 of P.L. 86-230, 73 Stat. 457. 

2

 So in original. Probably should be "fails". 

3

 So in original. Probably should be "months". 
Sec. 21 BANKING ACT OF 1933 134 

tem shall consist of not less than five nor more than twenty-five 

members, except that the Comptroller of the Currency may, by regulation or order, exempt a national bank from the 25-member limit 

established by this section. if any national banking association violates the provisions of this section and continues such violation 

after thirty days' notice from the Comptroller of the Currency, the 

said Comptroller may appoint a receiver or conservator therefor, in 

accordance with the provisions of existing law. If any State bank 

or trust company which is a member of the Federal Reserve System violates the provisions of this section and continues such violation after thirty days' notice from the Board of Governors of the 

Federal Reserve System, it shall be subject to the forfeiture of its 

membership in the Federal Reserve System in accordance with the 

provisions of section 9 of the Federal Reserve Act, as amended. 

[Sec. 32 repealed by section 101(b) of P.L. 106-102, 113 Stat. 

1341] 

[Sec. 33 amend another Act.] 

SEC. 34. The right to alter, amend, or repeal this Act is hereby 

expressly reserved. if any provision of this Act, or the application 

thereof to any person or circumstances, is held invalid, the remainder of the Act, and the application of such provision to other persons or circumstances, shall not be affected thereby. 
COMMUNITY DEVELOPMENT CREDIT UNION REVOLVING 

LOAN FUND TRANSFER ACT 

135 

COMMUNITY DEVELOPMENT CREDIT UNION 

REVOLVING LOAN FUND TRANSFER ACT 

A N ACT To transfer the Community Development Credit Union Revolving Loan 

Fund to the National Credit Union Administration and to authorize the National 

Credit Union Administration Board to administer the Fund. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTION 1. [42 U.S.C. 9822 nt.] SHORT TITLE. 

This Act may be cited as the "Community Development Credit 

Union Revolving Loan Fund Transfer Act''. 

SEC. 2. [42 U.S.C. 9822 nt.] TRANSFER OF COMMUNIT Y DEVELOPMEN T 

CREDI T UNIO N REVOLVIN G LOA N FUND. 

(a) ADMINSTRATION OF FUN D BY NCUA.— 

(1) IN GENERAL.—Beginning on the date of the enactment 

of this Act, the National Credit Union Administration Board 

shall administer the Community Development Credit Union 

Revolving Loan Fund. 

(2) TRANSFER OF AUTHORITY.—Al l authority to carry out 

the purposes of the Fund and to prescribe regulations in connection with the administration of the Fund which, on the day 

before the date of the enactment of this Act, was vested in the 

Secretary of Health and Human Services shall vest on such 

date in the Board. Except as provided in subsection (c), the 

Secretary shall have no further responsibility with respect to 

the Fund. 

(b) CONTINUED AVAILABILITY OF APPROPRIATED FUNDS.—Al l 

funds appropriated to the Fund and interest accumulated in the 

Fund which continue to be available under section 633 of the 

Omnibus Budget Reconciliation Act of 1981 shall continue to be 

available to the Board to carry out the purposes of the Fund. 

(c) TRANSFER OF ASSETS; ETC.—Th e Secretary shall transfer to 

the National Credit Union Administration all assets, liabilities, 

grants, contracts, property, records, and funds held, used, arising 

from, or available to the Secretary in connection with the administration of the Fund before the end of the 60-day period beginning 

on the date of the enactment of this Act. 

(d) SAVINGS PROVISIONS.— 

(1) REGULATIONS.—Any regulations prescribed by the Secretary in connection with the administration of the Fund shall 

continue in effect until superseded by regulations prescribed by 

the Board. 

(2) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—Subsection (a) shall not be construed as affecting the 

validity of any right, duty, or obligation of the United States 

or any other person arising under or pursuant to any contract, 

137 
Sec. 2 COMMUNITY DEVELOPMENT CREDIT UNION 138 

loan, or other instrument or agreement which was in effect on 

the day before the date of the enactment of this Act. 

(3) CONTINUATION OF SUITS.—No action or other proceeding commenced by or against the Secretary in connection 

with the administration of the Fund shall abate by reason of 

the enactment of this Act, except that the Board shall be substituted for the Secretary as a party to any such action or proceeding. 

(e) DEFINITIONS.—For purposes of this section— 

(1) BOARD.—The term "Board" means the National Credit 

Union Administration Board. 

(2) FUND.—The term "Fund" means the Community Development Credit Union Revolving Loan Fund established under 

title Vii of the Economic Opportunity Act of 1964 (as in effect 

before the date of the enactment of the Omnibus Budget Reconciliation Act of 1981).1 

(3) SECRETARY.—The term "Secretary" means the Secretary of Health and Human Services. 

1

 Such date was August 13, 1981. 
COMMUNITY REINVESTMENT ACT OF 1977 

139 

COMMUNITY REINVESTMENT ACT OF 1977 

[Title VII I of Public La w 95-128; 91 Stat. 1147; 12 U.S.C. 2901 et seq.] 

TITLE Viii—COMMUNITY REINVESTMENT 

[SHORT TITLE] 

SEC. 801.1 [12 U.S.C. 2901 note] This title may be cited as the 

''Community Reinvestment Act of 1977''. 

[FINDINGS AN D PURPOSES] 

SEC. 802.1 [12 U.S.C. 2901] (a) The Congress finds that— 

(1) regulated financial institutions are required by law to 

demonstrate that their deposit facilities serve the convenience 

and needs of the communities in which they are chartered to 

do business; 

(2) the convenience and needs of communities include the 

need for credit services as well as deposit services; and 

(3) regulated financial institutions have continuing and 

affirmative obligation to help meet the credit needs of the local 

communities in which they are chartered. 

(b) It is the purpose of this title to require each appropriate 

Federal financial supervisory agency to use its authority when 

examining financial institutions, to encourage such institutions to 

help meet the credit needs of the local communities in which they 

are chartered consistent with the safe and sound operation of such 

institutions. 

[DEFINITIONS] 

SEC. 803.1 [12 U.S.C. 2902] For the purposes of this title— 

(1) the term "appropriate Federal financial supervisory 

agency'' means— 

(A) the Comptroller of the Currency with respect to 

national banks; 

(B) the Board of Governors of the Federal Reserve System with respect to State chartered banks which are members of the Federal Reserve System and bank holding companies; 

(C) the Federal Deposit Insurance Corporation with 

respect to State chartered banks and savings banks which 

are not members of the Federal Reserve System and the 

deposits of which are insured by the Corporation; and 

(2)

 2 section 8 of the Federal Deposit Insurance Act, by the 

Director of the Office of Thrift Supervision, in the case of a 

1

 No section headings in law. 

2

 So in law. Probably should be redesignated as subparagraph (D) and be indented 2 ems to 

the right. 

1 41 
Sec. 804 COMMUNITY REINVESTMENT ACT OF 1977 142 

savings association (the deposits of which are insured by the 

Federal Deposit Insurance Corporation) and a savings and loan 

holding company; 

(2) the term ''regulated financial institution'' means an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act); and 

(3) the term ''application for a deposit facility'' means an 

application to the appropriate Federal financial supervisory 

agency otherwise required under Federal law or regulations 

thereunder for— 

(A) a charter for a national bank or Federal savings 

and loan association; 

(B) deposit insurance in connection with a newly chartered State bank, savings bank, savings and loan association or similar institution; 

(C) the establishment of a domestic branch or other facility with the ability to accept deposits of a regulated 

financial institution; 

(D) the relocation of the home office or a branch office 

of a regulated financial institution; 

(E) the merger or consolidation with, or the acquisition 

of the assets, or the assumption of the liabilities of a regulated financial institution requiring approval under section 

18(c) of the Federal Deposit Insurance Act or under regulations issued under the authority of title i v of the National 

Housing Act; or 

(F) the acquisition of shares in, or the assets of, a regulated financial institution requiring approval under section 3 of the Bank Holding Company Act of 1956 or section 

408 (e) of the National Housing Act. 

(4) A1 financial institution whose business predominately 

consists of serving the needs of military personnel who are not 

located within a defined geographic area may define its ''entire 

community'' to include its entire deposit customer base without 

regard to geographic proximity. 

[ASSESSMENT OF RECORD OF MEET COMMUNITY CREDIT NEEDS] 

SEC. 804.2 [12 U.S.C. 2903] (a) I N GENERAL.—I n connection 

with its examination of a financial institution, the appropriate Federal financial supervisory agency shall— 

(1) assess the institution's record of meeting the credit 

needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution; and 

(2) take such record into account in its evaluation of an application for a deposit facility by such institution. 

(b) MAJORITY-OWNED INSTITUTIONS.—In assessing and taking 

into account, under subsection (a), the record of a nonminorityowned and nonwomen-owned financial institution, the appropriate 

Federal financial supervisory agency may consider as a factor capital investment, loan participation, and other ventures undertaken 

1

 So in law. 

2

 No section headings in law. 
143 COMMUNITY REINVESTMENT ACT OF 1977 Sec. 805 

by the institution in cooperation with minority- and women-owned 

financial institutions and low-income credit unions provided that 

these activities help meet the credit needs of local communities in 

which such institutions and credit unions are chartered. 

(c) FINANCIAL HOLDIN G COMPANY REQUIREMENT.— 

(1) I N GENERAL.—An election by a bank holding company 

to become a financial holding company under section 4 of the 

Bank Holding Company Act of 1956 shall not be effective if— 

(A) the Board finds that, as of the date the declaration 

of such election and the certification is filed by such holding company under section 4(l)(1)(C) of the Bank Holding 

Company Act of 1956, not all of the subsidiary insured 

depository institutions of the bank holding company had 

achieved a rating of ''satisfactory record of meeting community credit needs'', or better, at the most recent examination of each such institution; and 

(B) the Board notifies the company of such finding before the end of the 30-day period beginning on such date. 

(2) LIMITE D EXCLUSIONS FOR NEWLY ACQUIRED INSURED 

DEPOSITORY INSTITUTIONS.—Any insured depository institution 

acquired by a bank holding company during the 12-month period preceding the date of the submission to the Board of the 

declaration and certification under section 4(l)(1)(C) of the 

Bank Holding Company Act of 1956 may be excluded for purposes of paragraph (1) during the 12-month period beginning 

on the date of such acquisition if— 

(A) the bank holding company has submitted an 

affirmative plan to the appropriate Federal financial 

supervisory agency to take such action as may be necessary in order for such institution to achieve a rating of 

''satisfactory record of meeting community credit needs'', or 

better, at the next examination of the institution; and 

(B) the plan has been accepted by such agency. 

(3) DEFINITIONS.—Fo r purposes of this subsection, the following definitions shall apply: 

(A) BANK HOLDING COMPANY; FINANCIAL HOLDING COMPANY.—The terms ''bank holding company'' and ''financial 

holding company'' have the meanings given those terms in 

section 2 of the Bank Holding Company Act of 1956. 

(B) BOARD.—The term ''Board'' means the Board of 

Governors of the Federal Reserve System. 

(C) INSURED DEPOSITORY INSTITUTION.—The term ''insured depository institution'' has the meaning given the 

term in section 3(c) of the Federal Deposit Insurance Act. 

[REPORT TO CONGRESS] 

SEC. 805.1 [12 U.S.C. 2904] Each appropriate Federal financial supervisory agency shall include in its annual report to the 

Congress a section outlining the actions it has taken to carry out 

its responsibilities under this title. 

1

 No section headings in law. 
Sec. 804 COMMUNITY REINVESTMENT ACT OF 1977 144 

[REGULATIONS] 

SEC. 806.1 [12 U.S.C. 2905] Regulations to carry out the purposes of this title shall be published by each appropriate Federal 

financial supervisory agency, and shall take effect no later than 

390 days after the date of enactment of this title.2 

SEC. 807. [12 U.S.C. 2906] WRITTE N EVALUATIONS. 

(a) REQUIRED.— 

(1) IN GENERAL.—Upon the conclusion of each examination 

of an insured depository institution under section 804, the 

appropriate Federal financial supervisory agency shall prepare 

a written evaluation of the institution's record of meeting the 

credit needs of its entire community, including low- and moderate-income neighborhoods. 

(2) PUBLIC AND CONFIDENTIAL SECTIONS.—Each written 

evaluation required under paragraph (1) shall have a public 

section and a confidential section. 

(b) PUBLIC SECTION OF REPORT.— 

(1) FINDINGS AND CONCLUSIONS.—(A) CONTENTS OF WRITT E N EVALUATION.—The public section of the written evaluation 

shall— 

(i) state the appropriate Federal financial supervisory 

agency's conclusions for each assessment factor identified 

in the regulations prescribed by the Federal financial 

supervisory agencies to implement this Act; 

(ii) discuss the facts and data supporting such conclusions; and 

(iii) contain the institution's rating and a statement 

describing the basis for the rating. 

(B) METROPOLITAN AREA DISTINCTIONS.—The information required by clauses (i) and (ii) of subparagraph (A) 

shall be presented separately for each metropolitan area in 

which a regulated depository institution maintains one or 

more domestic branch offices. 

(2) ASSIGNED RATING.—The institution's rating referred to 

in paragraph (1)(C) shall be one of the following: 

(A) ''Outstanding record of meeting community credit 

needs''. 

(B) ''Satisfactory record of meeting community credit 

needs''. 

(C) ''Needs to improve record of meeting community 

credit needs''. 

(D) ''Substantial noncompliance in meeting community 

credit needs''. 

Such ratings shall be disclosed to the public on and after July 

1, 1990. 

(c) CONFIDENTIAL SECTION OF REPORT.— 

(1) PRIVACY OF NAMED INDIVIDUALS.—The confidential section of the written evaluation shall contain all references that 

identify any customer of the institution, any employee or officer of the institution, or any person or organization that has 

1

 No section headings in law. 

2

 The date of enactment was October 12, 1977. 
145 COMMUNITY REINVESTMENT ACT OF 1977 Sec. 805 

provided information in confidence to a Federal or State financial supervisory agency. 

(2) TOPICS NOT SUITABLE FOR DISCLOSURE.—The confidential section shall also contain any statements obtained or made 

by the appropriate Federal financial supervisory agency in the 

course of an examination which, in the judgment of the agency, 

are too sensitive or speculative in nature to disclose to the 

institution or the public. 

(3) DISCLOSURE TO DEPOSITORY INSTITUTION.—The confidential section may be disclosed, in whole or part, to the 

institution, if the appropriate Federal financial supervisory 

agency determines that such disclosure will promote the objectives of this Act. However, disclosure under this paragraph 

shall not identify a person or organization that has provided 

information in confidence to a Federal or State financial supervisory agency. 

(d) INSTITUTIONS WIT H INTERSTATE BRANCHES.— 

(1) STATE-BY-STATE EVALUATION.—In the case of a regulated financial institution that maintains domestic branches in 

2 or more States, the appropriate Federal financial supervisory 

agency shall prepare— 

(A) a written evaluation of the entire institution's 

record of performance under this title, as required by subsections (a), (b), and (c); and 

(B) for each State in which the institution maintains 

1 or more domestic branches, a separate written evaluation of the institution's record of performance within such 

State under this title, as required by subsections (a), (b), 

and (c). 

(2) MULTISTATE METROPOLITAN AREAS.—In the case of a 

regulated financial institution that maintains domestic 

branches in 2 or more States within a multistate metropolitan 

area, the appropriate Federal financial supervisory agency 

shall prepare a separate written evaluation of the institution's 

record of performance within such metropolitan area under 

this title, as required by subsections (a), (b), and (c). if the 

agency prepares a written evaluation pursuant to this paragraph, the scope of the written evaluation required under paragraph (1)(B) shall be adjusted accordingly. 

(3) CONTENT OF STATE LEVEL EVALUATION.—A written 

evaluation prepared pursuant to paragraph (1)(B) shall— 

(A) present the information required by subparagraphs 

(A) and (B) of subsection (b)(1) separately for each metropolitan area in which the institution maintains 1 or more 

domestic branch offices and separately for the remainder 

of the nonmetropolitan area of the State if the institution 

maintains 1 or more domestic branch offices in such nonmetropolitan area; and 

(B) describe how the Federal financial supervisory 

agency has performed the examination of the institution, 

including a list of the individual branches examined. 

(e) DEFINITIONS.—Fo r purposes of this section the following 

definitions shall apply: 
Sec. 804 COMMUNITY REINVESTMENT ACT OF 1977 146 

(1) DOMESTIC BRANCH.—The term ''domestic branch'' 

means any branch office or other facility of a regulated financial institution that accepts deposits, located in any State. 

(2) METROPOLITAN AREA.—The term ''metropolitan area'' 

means any primary metropolitan statistical area, metropolitan 

statistical area, or consolidated metropolitan statistical area, 

as defined by the Director of the Office of Management and 

Budget, with a population of 250,000 or more, and any other 

area designated as such by the appropriate Federal financial 

supervisory agency. 

(3) STATE.—The term ''State'' has the same meaning as in 

section 3 of the Federal Deposit Insurance Act. 

SEC. 808. [12 U.S.C. 2907] OPERATION OF BRANCH FACILITIES BY 

MINORITIES AND WOMEN. 

(a) I N GENERAL.—in the case of any depository institution 

which donates, sells on favorable terms (as determined by the 

appropriate Federal financial supervisory agency), or makes available on a rent-free basis any branch of such institution which is located in any predominantly minority neighborhood to any minority 

depository institution or women's depository institution, the 

amount of the contribution or the amount of the loss incurred in 

connection with such activity may be a factor in determining 

whether the depository institution is meeting the credit needs of 

the institution's community for purposes of this title. 

(b) DEFINITIONS.—For purposes of this section— 

(1) MINORITY DEPOSITORY INSTITUTION.—The term ''minority institution'' means a depository institution (as defined in 

section 3(c) of the Federal Deposit insurance Act)— 

(A) more than 50 percent of the ownership or control 

of which is held by 1 or more minority individuals; and 

(B) more than 50 percent of the net profit or loss of 

which accrues to 1 or more minority individuals. 

(2) WOMEN'S DEPOSITORY INSTITUTION.—The term ''women's depository institution'' means a depository institution (as 

defined in section 3(c) of the Federal Deposit insurance Act)— 

(A) more than 50 percent of the ownership or control 

of which is held by 1 or more women; 

(B) more than 50 percent of the net profit or loss of 

which accrues to 1 or more women; and 

(C) a significant percentage of senior management 

positions of which are held by women. 

(3) MINORITY.—The term ''minority'' has the meaning 

given to such term by section 1204(c)(3) of the Financial institutions Reform, Recovery and Enforcement Act of 1989. 

SEC. 809. [12 U.S.C. 2908] SMALL BANK REGULATORY RELIEF. 

(a) IN GENERAL.—Except as provided in subsections (b) and (c), 

any regulated financial institution with aggregate assets of not 

more than $250,000,000 shall be subject to routine examination 

under this title— 

(1) not more than once every 60 months for an institution 

that has achieved a rating of ''outstanding record of meeting 

community credit needs'' at its most recent examination under 

section 804; 
147 COMMUNITY REINVESTMENT ACT OF 1977 Sec. 805 

(2) not more than once every 48 months for an institution 

that has received a rating of ''satisfactory record of meeting 

community credit needs'' at its most recent examination under 

section 804; and 

(3) as deemed necessary by the appropriate Federal financial supervisory agency, for an institution that has received a 

rating of less than ''satisfactory record of meeting community 

credit needs'' at its most recent examination under section 804. 

(b) N O EXCEPTION FRO M CR A EXAMINATIONS I N CONNECTION 

WIT H APPLICATIONS FOR DEPOSIT FACILITIES.—A regulated financial institution described in subsection (a) shall remain subject to 

examination under this title in connection with an application for 

a deposit facility. 

(c) DISCRETION.—A regulated financial institution described in 

subsection (a) may be subject to more frequent or less frequent 

examinations for reasonable cause under such circumstances as 

may be determined by the appropriate Federal financial supervisory agency. 

COMPETITIVE EQUALITY BANKING ACT OF 1987 

149 

COMPETITIVE EQUALITY BANKING ACT OF 19871 

SEC. 1204. [1 2 U.S.C. 3806 ] ADJUSTABL E RAT E MORTGAG E CAPS. 

(a) IN GENERAL.—Any adjustable rate mortgage loan originated 

by a creditor shall include a limitation on the maximum interest 

rate that may apply during the term of the mortgage loan. 

(b) REGULATIONS.—Th e Board of Governors of the Federal Reserve System shall prescribe regulations to carry out the purposes 

of this section. 

(c) ENFORCEMENT.—An y violation of this section shall be 

treated as a violation of the Truth in Lending Act and shall be subject to administrative enforcement under section 108 or civil damages under section 130 of such Act, or both. 

(d) DEFINITIONS.—Fo r the purpose of this section— 

(1) the term "creditor" means a person who regularly extends credit for personal, family, or household purposes; and 

(2) the term "adjustable rate mortgage loan" means any 

consumer loan secured by a lien on a one- to four-family dwelling unit, including a condominium unit, cooperative housing 

unit, or mobile home, where the loan is made pursuant to an 

agreement under which the creditor may, from time to time, 

adjust the rate of interest. 

(e) EFFECTIV E DATE.—This section shall take effect upon the 

expiration of 120 days after the date of enactment of this Act. 

1

 Note: The Competitive Equality Banking Act of 1987 was largely amendatory. Most of the 

free-standing provisions of such Act, while still in effect, did not have a permanent or long-term 

application and therefore are not shown in this compilation. Title VI, the Expedited Funds 

Availabilty Act, appears under its own heading in this compilation. 

1 5 1 

CONSUMER CREDIT PROTECTION ACT 

153 

CONSUMER CREDIT PROTECTION ACT 

(82 Stat. 146; 15 U.S.C. 1601 et seq.) 

AN ACT To safeguard the consumer in connection with the utilization of credit by 

requiring full disclosure of the terms and conditions of finance charges in credit 

transactions or in offers to extend credit; by restricting the garnishment of wages; 

and by creating the National Commission on Consumer Finance to study and 

make recommendations on the need for further regulation of the consumer finance 

industry; and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

§ 1. Short title of entire Act 

This Act may be cited as the Consumer Credit Protection Act.

 1 

TITLE I—CONSUMER CREDIT COST 

DISCLOSURE 

Chapter Section 

1. GENERAL PROVISIONS 10 1 

2. CREDIT TRANSACTIONS 12 1 

3. CREDIT ADVERTISING 14 1 

4. CREDIT BILLING 16 1 

5. CONSUMER LEASES 18 1 

CHAPTER 1—GENERAL PROVISIONS 

Sec. 

101. short title. 

102. Findings and declaration of purpose. 

103. Definitions and rules of construction. 

104. Exempted transactions. 

105. Regulations. 

106. Determination of finance charge. 

107. Determination of annual percentage rate. 

108. Administrative enforcement. 

109. Views of other agencies. 

110. [Repealed] 

111. Effect on other laws. 

112. Criminal liability for willful and knowing violation. 

113. Effect on governmental agencies. 

114. Reports by-Board and Attorney General. 

115. [Repealed]. 

§ 101. [15 U.S.C. 1601 note] Short title 

This title may be cited as the Truth in Lending Act.1 

1

 So in law. The short titles of the Act and title I probably should be enclosed in quotation 

marks. 

155 
Sec. 102 TRUTH IN LENDING ACT 156 

§ 102. [15 U.S.C. 1601] Findings and declaration of purpose 

(a) The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit 

would be strengthened by the informed use of credit. The informed 

use of credit results from an awareness of the cost thereof by consumers. it is the purpose of this title to assure a meaningful disclosure of credit terms so that the consumer will be able to compare 

more readily the various credit terms available to him and avoid 

the uninformed use of credit; and to protect the consumer against 

inaccurate and unfair credit billing and credit card practices. 

(b) The Congress also finds that there has been a recent trend 

toward leasing automobiles and other durable goods for consumer 

use as an alternative to installment credit sales and that these 

leases have been offered without adequate cost disclosures. it is the 

purpose of this title to assure a meaningful disclosure of the terms 

of leases of personal property for personal, family, or household 

purposes so as to enable the lessee to compare more readily the 

various lease terms available to him, limit balloon payments in 

consumer leasing, enable comparison of lease terms with credit 

terms where appropriate, and to assure meaningful and accurate 

disclosures of lease terms in advertisements.) 

§ 103. [15 U.S.C. 1602] Definitions and rules of construction 

(a) The definitions and rules of construction set forth in this 

section are applicable for the purposes of this title. 

(b) The term ''Board'' refers to the Board of Governors of the 

Federal Reserve System. 

(c) The term ''organization'' means a corporation, government 

or governmental subdivision or agency, trust, estate, partnership, 

cooperative, or association. 

(d) The term ''person'' means a natural person or an organization. 

(e) The term ''credit'' means the right granted by a creditor to 

a debtor to defer payment of debt or to incur debt and defer its 

payment. 

(f) The term ''creditor'' refers only to a person who both (1) regularly extends, whether in connection with loans, sales of property 

or services, or otherwise, consumer credit which is payable by 

agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction 

is initially payable on the face of the evidence of indebtedness or, 

if there is no such evidence of indebtedness, by agreement. Notwithstanding the preceding sentence, in the case of an open-end 

credit plan involving a credit card, the card issuer and any person 

who honors the credit card and offers a discount which is a finance 

charge are creditors. For the purpose of the requirements imposed 

under chapter 4 and sections 127(a)(5), 127(a)(6), 127(a)(7), 

127(b)(1), 127(b)(2), 127(b)(3), 127(b)(8), and 127(b)(10) of chapter 2 

of this title, the term ''creditor'' shall also include card issuers 

whether or not the amount due is payable by agreement in more 

than four installments or the payment of a finance charge is or 
157 TRUTH IN LENDING ACT Sec. 103 

may be required, and the Board shall, by regulation, apply these 

requirements to such card issuers, to the extent appropriate, even 

though the requirements are by their terms applicable only to 

creditors offering open-end credit plans. Any person who originates 

2 or more mortgages referred to in subsection (aa) in any 12-month 

period or any person who originates 1 or more such mortgages 

through a mortgage broker shall be considered to be a creditor for 

purposes of this title. 

(g) The term "credit sale'' refers to any sale in which the seller 

is a creditor. The term includes any contract in the form of a bailment or lease if the bailee or lessee contracts to pay as compensation for use a sum substantially equivalent to or in excess of the 

aggregate value of the property and services involved and it is 

agreed that the bailee or lessee will become, or for no other or a 

nominal consideration has the option to become, the owner of the 

property upon full compliance with his obligations under the contract. 

(h) The adjective "consumer", used with reference to a credit 

transaction, characterizes the transaction as one in which the party 

to whom credit is offered or extended is a natural person, and the 

money, property, or services which are the subject of the transaction are primarily for personal, family, or household purposes. 

(i) The term "open end credit plan'' means a plan under which 

the creditor reasonably contemplates repeated transactions, which 

prescribes the terms of such transactions, and which provides for 

a finance charge which may be computed from time to time on the 

outstanding unpaid balance. A credit plan which is an open end 

credit plan within the meaning of the preceding sentence is an 

open end credit plan even if credit information is verified from time 

to time. 

(j) The term "adequate notice'', as used in section 133, means 

a printed notice to a cardholder which sets forth the pertinent facts 

clearly and conspicuously so that a person against whom it is to 

operate could reasonably be expected to have noticed it and understood its meaning. Such notice may be given to a cardholder by 

printing the notice on any credit card, or on each periodic statement of account, issued to the cardholder, or by any other means 

reasonably assuring the receipt thereof by the cardholder. 

(k) The term "credit card'' means any card, plate, coupon book 

or other credit device existing for the purpose of obtaining money, 

property, labor, or services on credit. 

(l) The term "accepted credit card'' means any credit card 

which the cardholder has requested and received or has signed or 

has used, or authorized another to use, for the purpose of obtaining 

money, property, labor, or services on credit. 

(m) The term "cardholder" means any person to whom a credit 

card is issued or any person who has agreed with the card issuer 

to pay obligations arising from the issuance of a credit card to another person. 

(n) The term "card issuer'' means any person who issues a 

credit card, or the agent of such person with respect to such card. 

(o) The term "unauthorized use'', as used in section 133, means 

a use of a credit card by a person other than the cardholder who 
Sec. 102 TRUTH IN LENDING ACT 158 

does not have actual, implied, or apparent authority for such use 

and from which the cardholder receives no benefit. 

(p) The term ''discount'' as used in section 167 means a reduction made from the regular price. The term ''discount'' as used in 

section 167 shall not mean a surcharge. 

(q) The term ''surcharge'' as used in section 103 and section 

167 means any means of increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check, 

or similar means. 

(r) The term ''State'' refers to any State, the Commonwealth of 

Puerto Rico, the District of Columbia, and any territory or possession of the United States. 

(s) The term ''agricultural purposes'' includes the production, 

harvest, exhibition, marketing, transportation, processing, or manufacture of agricultural products by a natural person who cultivates, plants, propagates, or nurtures those agricultural products, 

including but not limited to the acquisition of farmland, real property with a farm residence, and personal property and services 

used primarily in farming. 

(t) The term ''agricultural products'' includes agricultural, horticultural, viticultural, and dairy products, livestock, wildlife, poultry, bees, forest products, fish and shellfish, and any products 

thereof, including processed and manufactured products, and any 

and all products raised or produced on farms and any processed or 

manufactured products thereof. 

(u) The term ''material disclosures'' means the disclosure, as 

required by this title, of the annual percentage rate, the method of 

determining the finance charge and the balance upon which a finance charge will be imposed, the amount of the finance charge, 

the amount to be financed, the total of payments, the number and 

amount of payments, the due dates or periods of payments scheduled to repay the indebtedness, and the disclosures required by section 129(a). 

(v) The term "dwelling" means a residential structure or mobile 

home which contains one to four family housing units, or individual 

units of condominiums or cooperatives. 

(w) The term ''residential mortgage transaction'' means a 

transaction in which a mortgage, deed of trust, purchase money 

security interest arising under an installment sales contract, or 

equivalent consensual security interest is created or retained 

against the consumer's dwelling to finance the acquisition or initial 

construction of such dwelling. 

(x) As used in this section and section 167, the term ''regular 

price'' means the tag or posted price charged for the property or 

service if a single price is tagged or posted, or the price charged 

for the property or service when payment is made by use of an 

open-end credit plan or a credit card if either (1) no price is tagged 

or posted, or (2) two prices are tagged or posted, one of which is 

charged when payment is made by use of an open-end credit plan 

or a credit card and the other when payment is made by use of 

cash, check, or similar means. For purposes of this definition, payment by check, draft, or other negotiable instrument which may result in the debiting of an open-end credit plan or a credit card-
159 TRUTH IN LENDING ACT Sec. 103 

holder's open-end account shall not be considered payment made by 

use of the plan or the account. 

(y) Any reference to any requirement imposed under this title 

or any provision thereof includes reference to the regulations of the 

Board under this title or the provision thereof in question. 

(z) The disclosure of an amount or percentage which is greater 

than the amount or percentage required to be disclosed under this 

title does not in itself constitute a violation of this title. 

(aa)(1) A mortgage referred to in this subsection means a consumer credit transaction that is secured by the consumer's principal dwelling, other than a residential mortgage transaction, a reverse mortgage transaction, or a transaction under an open end 

credit plan, if— 

(A) the annual percentage rate at consummation of the 

transaction will exceed by more than 10 percentage points the 

yield on Treasury securities having comparable periods of 

maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of 

credit is received by the creditor; or 

(B) the total points and fees payable by the consumer at 

or before closing will exceed the greater of— 

(i) 8 percent of the total loan amount; or 

(ii) $400. 

(2)(A) After the 2-year period beginning on the effective date 

of the regulations promulgated under section 155 of the Riegle 

Community Development and Regulatory Improvement Act of 

1994, and no more frequently than biennially after the first increase or decrease under this subparagraph, the Board may by regulation increase or decrease the number of percentage points specified in paragraph (1)(A), if the Board determines that the increase 

or decrease is— 

(i) consistent with the consumer protections against abusive lending provided by the amendments made by subtitle B 

of title I of the Riegle Community Development and Regulatory 

Improvement Act of 1994; and 

(ii) warranted by the need for credit. 

(B) An increase or decrease under subparagraph (A) may not 

result in the number of percentage points referred to in subparagraph (A) being— 

(i) less that 8 percentage points; or 

(ii) greater than 12 percentage points. 

(C) in determining whether to increase or decrease the number 

of percentage points referred to in subparagraph (A), the Board 

shall consult with representatives of consumers, including low-income consumers, and lenders. 

(3) The amount specified in paragraph (1)(B)(ii) shall be adjusted annually on January 1 by the annual percentage change in 

the Consumer Price Index, as reported on June 1 of the year preceding such adjustment. 

(4) For purposes of paragraph (1)(B), points and fees shall 

include— 

(A) all items included in the finance charge, except interest 

or the time-price differential; 

(B) all compensation paid to mortgage brokers; 
Sec. 102 TRUTH IN LENDING ACT 160 

(C) each of the charges listed in section 106(e) (except an 

escrow for future payment of taxes), unless— 

(i) the charge is reasonable; 

(ii) the creditor receives no direct or indirect compensation; and 

(iii) the charge is paid to a third party unaffiliated 

with the creditor; and 

(D) such other charges as the Board determines to be 

appropriate. 

(5) This subsection shall not be construed to limit the rate of 

interest or the finance charge that a person may charge a consumer for any extension of credit. 

(bb) The term "reverse mortgage transaction'' means a nonrecourse transaction in which a mortgage, deed of trust, or equivalent consensual security interest is created against the consumer's 

principal dwelling— 

(1) securing one or more advances; and 

(2) with respect to which the payment of any principal, interest, and shared appreciation or equity is due and payable 

(other than in the case of default) only after— 

(A) the transfer of the dwelling; 

(B) the consumer ceases to occupy the dwelling as a 

principal dwelling; or 

(C) the death of the consumer. 

§ 104. [15 U.S.C. 1603] Exempted transactions 

This title does not apply to the following: 

(1) Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to 

government or governmental agencies or instrumentalities, or 

to organizations. 

(2) Transactions in securities or commodities accounts by 

a broker-dealer registered with the Securities and Exchange 

Commission. 

(3) Credit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property used or expected to be used as the principal 

dwelling of the consumer, in which the total amount financed 

exceeds $25,000. 

(4) Transactions under public utility tariffs, if the Board 

determines that a State regulatory body regulates the charges 

for the public utility services involved, the charges for delayed 

payment, and any discount allowed for early payment. 

(5) Transactions for which the Board, by rule, determines 

that coverage under this title is not necessary to carry out the 

purposes of this title. 

(7)

 1 Loans made, insured, or guaranteed pursuant to a 

program authorized by title IV of the Higher Education Act of 

1965 (20 U.S.C. 1070 et seq.). 

1So in law. Probably should be redesignated as paragraph (6). Section 603(c)(3) of P.L. 96-

221 (94 Stat. 169) repealed then-existing paragraph (5) and section 701(a) of P.L. 97-320 (96 

Stat. 1538) added this paragraph as a new paragraph (6). Section 2102(a) of P.L. 104-208 (110 

Stat. 3009-398) redesignated paragraphs (5) and (6) as paragraphs (6) and (7) and added a new 
161 TRUTH IN LENDING ACT Sec. 103 

§ 105. [15 U.S.C. 1604] Regulations 

(a) The Board shall prescribe regulations to carry out the purposes of this title. Except in the case of a mortgage referred to in 

section 103(aa), these regulations may contain such classifications, 

differentiations, or other provisions, and may provide for such 

adjustments and exceptions for any class of transactions, as in the 

judgment of the Board are necessary or proper to effectuate the 

purposes of this title, to prevent circumvention or evasion thereof, 

or to facilitate compliance therewith. 

(b) The Board shall publish model disclosure forms and clauses 

for common transactions to facilitate compliance with the disclosure requirements of this title and to aid the borrower or lessee in 

understanding the transaction by utilizing readily understandable 

language to simplify the technical nature of the disclosures. in devising such forms, the Board shall consider the use by creditors or 

lessors of data processing or similar automated equipment. Nothing 

in this title may be construed to require a creditor or lessor to use 

any such model form or clause prescribed by the Board under this 

section. A creditor or lessor shall be deemed to be in compliance 

with the disclosure provisions of this title with respect to other 

than numerical disclosures if the creditor or lessor (1) uses any 

appropriate model form or clause as published by the Board, or (2) 

uses any such model form or clause and changes it by (A) deleting 

any information which is not required by this title, or (B) rearranging the format, if in making such deletion or rearranging the 

format, the creditor or lessor does not affect the substance, clarity, 

or meaningful sequence of the disclosure. 

(c) Model disclosure forms and clauses shall be adopted by the 

Board after notice duly given in the Federal Register and an opportunity for public comment in accordance with section 553 of title 

5, United States Code. 

(d) Any regulation of the Board, or any amendment or 

interpretation thereof, requiring any disclosure which differs from 

the disclosures previously required by this chapter, chapter 4, or 

chapter 5, or by any regulation of the Board promulgated thereunder shall have an effective date of that October 1 which follows 

by at least six months the date of promulgation, except that the 

Board may at its discretion take interim action by regulation, 

amendment, or interpretation to lengthen the period of time permitted for creditors or lessors to adjust their forms to accommodate 

new requirements or shorten the length of time for creditors or lessors to make such adjustments when it makes a specific finding 

that such action is necessary to comply with the findings of a court 

or to prevent unfair or deceptive disclosure practices. Notwithstanding the previous sentence, any creditor or lessor may comply 

with any such newly promulgated disclosure requirements prior to 

the effective date of the requirements. 

(f) 1 EXEMPTIO N AUTHORITY. — 

paragraph (5). Since the prior paragraph (5) had already been repealed, the attempted redesignation was probably unnecessary. 

1

 Subsections (f) and (g) as added by sections 2102(b) and 2104 of P.L. 104-208 (110 Stat. 

3009-399, 401) probably should be redesignated as subsections (e) and (f), respectively. 
Sec. 102 TRUTH IN LENDING ACT 162 

(1) IN GENERAL.—The Board may exempt, by regulation, 

from all or part of this title any class of transactions, other 

than transactions involving any mortgage described in section 

103(aa), for which, in the determination of the Board, coverage 

under all or part of this title does not provide a meaningful 

benefit to consumers in the form of useful information or protection. 

(2) FACTORS FOR CONSIDERATION.—In determining which 

classes of transactions to exempt in whole or in part under 

paragraph (1), the Board shall consider the following factors 

and publish its rationale at the time a proposed exemption is 

published for comment: 

(A) The amount of the loan and whether the disclosures, right of rescission, and other provisions provide a 

benefit to the consumers who are parties to such transactions, as determined by the Board. 

(B) The extent to which the requirements of this title 

complicate, hinder, or make more expensive the credit 

process for the class of transactions. 

(C) The status of the borrower, including— 

(i) any related financial arrangements of the borrower, as determined by the Board; 

(ii) the financial sophistication of the borrower relative to the type of transaction; and 

(iii) the importance to the borrower of the credit, 

related supporting property, and coverage under this 

title, as determined by the Board; 

(D) whether the loan is secured by the principal residence of the consumer; and 

(E) whether the goal of consumer protection would be 

undermined by such an exemption. 

(g) WAIVER FOR CERTAIN BORROWERS.— 

(1) IN GENERAL.—The Board, by regulation, may exempt 

from the requirements of this title certain credit transactions 

if— 

(A) the transaction involves a consumer— 

(i) with an annual earned income of more than 

$200,000; or 

(ii) having net assets in excess of $1,000,000 at 

the time of the transaction; and 

(B) a waiver that is handwritten, signed, and dated by 

the consumer is first obtained from the consumer. 

(2) ADJUSTMENTS BY THE BOARD.—The Board, at its discretion, may adjust the annual earned income and net asset 

requirements of paragraph (1) for inflation. 

§ 106. [15 U.S.C. 1605] Determination of finance charge 

(a) Except as otherwise provided in this section, the amount of 

the finance charge in connection with any consumer credit transaction shall be determined as the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, 

and imposed directly or indirectly by the creditor as an incident to 

the extension of credit. The finance charge does not include charges 

of a type payable in a comparable cash transaction. The finance 
163 TRUTH IN LENDING ACT Sec. 103 

charge shall not include fees and amounts imposed by third party 

closing agents (including settlement agents, attorneys, and escrow 

and title companies) if the creditor does not require the imposition 

of the charges or the services provided and does not retain the 

charges. Examples of charges which are included in the finance 

charge include any of the following types of charges which are applicable. 

(1) Interest, time price differential, and any amount payable under a point, discount, or other system of additional 

charges. 

(2) Service or carrying charge. 

(3) Loan fee, finder's fee, or similar charge. 

(4) Fee for an investigation or credit report. 

(5) Premium or other charge for any guarantee or insurance protecting the creditor against the obligor's default or 

other credit loss. 

(6) Borrower-paid mortgage broker fees, including fees 

paid directly to the broker or the lender (for delivery to the 

broker) whether such fees are paid in cash or financed. 

(b) Charges or premiums for credit life, accident, or health 

insurance written in connection with any consumer credit transaction shall be included in the finance charge unless: 

(1) the coverage of the debtor by the insurance is not a factor in the approval by the creditor of the extension of credit, 

and this fact is clearly disclosed in writing to the person applying for or obtaining the extension of credit; and 

(2) in order to obtain the insurance in connection with the 

extension of credit, the person to whom the credit is extended 

must give specific affirmative written indication of his desire 

to do so after written disclosure to him of the cost thereof. 

(c) Charges or premiums for insurance, written in connection 

with any consumer credit transaction, against loss of or damage to 

property or against liability arising out of the ownership or use of 

property, shall be included in the finance charge unless a clear and 

specific statement in writing is furnished by the creditor to the person to whom the credit is extended, setting forth the cost of the 

insurance if obtained from or through the creditor, and stating that 

the person to whom the credit is extended may choose the person 

through which the insurance is to be obtained. 

(d) if any of the following items is itemized and disclosed in 

accordance with the regulations of the Board in connection with 

any transaction, then the creditor need not include that item in the 

computation of the finance charge with respect to that transaction: 

(1) Fees and charges prescribed by law which actually are 

or will be paid to public officials for determining the existence 

of or for perfecting or releasing or satisfying any security related to the credit transaction. 

(2) The premium payable for any insurance in lieu of perfecting any security interest otherwise required by the creditor 

in connection with the transaction, if the premium does not exceed the fees and charges described in paragraph (1) which 

would otherwise be payable. 

(3) Any tax levied on security instruments or on documents evidencing indebtedness if the payment of such taxes is 
Sec. 102 TRUTH IN LENDING ACT 164 

a precondition for recording the instrument securing the evidence of indebtedness. 

(e) The following items, when charged in connection with any 

extension of credit secured by an interest in real property, shall not 

be included in the computation of the finance charge with respect 

to that transaction: 

(1) Fees or premiums for title examination, title insurance, 

or similar purposes. 

(2) Fees for preparation of loan-related documents. 

(3) Escrows for future payments of taxes and insurance. 

(4) Fees for notarizing deeds and other documents. 

(5) Appraisal fees, including fees related to any pest infestation or flood hazard inspections conducted prior to closing. 

(6) Credit reports. 

(f) TOLERANCE S FOR ACCURACY.—I n connection with credit 

transactions not under an open end credit plan that are secured by 

real property or a dwelling, the disclosure of the finance charge and 

other disclosures affected by any finance charge— 

(1) shall be treated as being accurate for purposes of this 

title if the amount disclosed as the finance charge— 

(A) does not vary from the actual finance charge by 

more than $100; or 

(B) is greater than the amount required to be disclosed 

under this title; and 

(2) shall be treated as being accurate for purposes of section 125 if— 

(A) except as provided in subparagraph (B), the 

amount disclosed as the finance charge does not vary from 

the actual finance charge by more than an amount equal 

to one-half of one percent of the total amount of credit extended; or 

(B) in the case of a transaction, other than a mortgage 

referred to in section 103(aa), which— 

(i) is a refinancing of the principal balance then 

due and any accrued and unpaid finance charges of a 

residential mortgage transaction as defined in section 

103(w), or is any subsequent refinancing of such a 

transaction; and 

(ii) does not provide any new consolidation or new 

advance; 

if the amount disclosed as the finance charge does not vary 

from the actual finance charge by more than an amount 

equal to one percent of the total amount of credit extended. 

§ 107. [15 U.S.C. 1606] Determination of annual percentage 

rate 

(a) The annual percentage rate applicable to any extension of 

consumer credit shall be determined, in accordance with the regulations of the Board,1 

(1) in the case of any extension of credit other than under 

an open end credit plan, as 

1

 So in original. Probably should be a dash. 
165 TRUTH IN LENDING ACT Sec. 103 

(A) that nominal annual percentage rate which will 

yield a sum equal to the amount of the finance charge 

when it is applied to the unpaid balances of the amount 

financed, calculated according to the actuarial method of 

allocating payments made on a debt between the amount 

financed and the amount of the finance charge, pursuant 

to which a payment is applied first to the accumulated finance charge and the balance is applied to the unpaid 

amount financed; or 

(B) the rate determined by any method prescribed by 

the Board as a method which materially simplifies computation while retaining reasonable accuracy as compared 

with the rate determined under subparagraph (A).1 

(2) in the case of any extension of credit under an open 

end credit plan, as the quotient (expressed as a percentage) of 

the total finance charge for the period to which it relates divided by the amount upon which the finance charge for that 

period is based, multiplied by the number of such periods in 

a year. 

(b) Where a creditor imposes the same finance charge for balances within a specified range, the annual percentage rate shall be 

computed on the median balance within the range, except that if 

the Board determines that a rate so computed would not be meaningful, or would be materially misleading, the annual percentage 

rate shall be computed on such other basis as the Board may by 

regulation require. 

(c) The disclosure of an annual percentage rate is accurate for 

the purpose of this title if the rate disclosed is within a tolerance 

not greater than one-eighth of 1 per centum more or less than the 

actual rate or rounded to the nearest one-fourth of 1 per centum. 

The Board may allow a greater tolerance to simplify compliance 

where irregular payments are involved. 

(d) The Board may authorize the use of rate tables or charts 

which may provide for the disclosure of annual percentage rates 

which vary from the rate determined in accordance with subsection 

(a)(1)(A) by not more than such tolerances as the Board may allow. 

The Board may not allow a tolerance greater than 8 per centum 

of that rate except to simplify compliance where irregular payments are involved. 

(e) in the case of creditors determining the annual percentage 

rate in a manner other than as described in subsection (d), the 

Board may authorize other reasonable tolerances. 

§ 108. [15 U.S.C. 1607] Administrative enforcement 

(a) Compliance with the requirements imposed under this title 

shall be enforced under

 2 

(1) section 8 of the Federal Deposit Insurance Act, in the 

case of— 

(A) national banks, and Federal branches and Federal 

agencies of foreign banks, by the Office of the Comptroller 

of the Currency; 

1

 So in original. Probably should be "; and''. 

2

 No punctuation in law. Probably should be a dash. 
Sec. 102 TRUTH IN LENDING ACT 166 

(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25(a)

 1 of 

the Federal Reserve Act, by the Board; and 

(C) banks insured by the Federal Deposit Insurance 

Corporation (other than members of the Federal Reserve 

System) and insured State branches of foreign banks, by 

the Board of Directors of the Federal Deposit Insurance 

Corporation; 

(2) section 8 of the Federal Deposit Insurance Act, by the 

Director of the office of Thrift Supervision, in the case of a 

savings association the deposits of which are insured by the 

Federal Deposit Insurance Corporation.

 2 

(3) the Federal Credit Union Act, by the Administrator of 

the National Credit Union Administration with respect to any 

Federal credit union.2 

(4) the Federal Aviation Act of 1958, by the Secretary of 

Transportation with respect to any air carrier or foreign air 

carrier subject to that Act.

 2 

(5) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the Secretary of Agriculture with respect to any activities subject to that Act.

 3 

(6) the Farm Credit Act of 1971, by the Farm Credit 

Administration with respect to any Federal land bank, Federal 

land bank association, Federal intermediate credit bank, or 

production credit association. 

The terms used in paragraph (1) that are not defined in this title 

or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them 

in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 

3101). 

(b) For the purpose of the exercise by any agency referred to 

in subsection (a) of its powers under any Act referred to in that 

subsection, a violation of any requirement imposed under this title 

shall be deemed to be a violation of a requirement imposed under 

that Act. In addition to its powers under any provision of law specifically referred to in subsection (a), each of the agencies referred 

to in that subsection may exercise, for the purpose of enforcing 

compliance with any requirement imposed under this title, any 

other authority conferred on it by law. 

(c) Except to the extent that enforcement of the requirements 

imposed under this title is specifically committed to some other 

Government agency under subsection (a), the Federal Trade Commission shall enforce such requirements. For the purpose of the 

exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any 

requirement imposed under this title shall be deemed a violation 

1

 Section 25(a) of the Federal Reserve Act was redesignated as section 25A by section 142(e)(2) 

of the Federal Deposit Insurance Corporation Improvement Act of 1991. 

2

 So in law. The period probably should be a semicolon. 

3

 So in law. Probably should be ''; and''. 
167 TRUTH IN LENDING ACT Sec. 103 

of a requirement imposed under that Act. All of the functions and 

powers of the Federal Trade Commission under the Federal Trade 

Commission Act are available to the Commission to enforce compliance by any person with the requirements imposed under this title, 

irrespective of whether that person is engaged in commerce or 

meets any other jurisdictional tests in the Federal Trade Commission Act. 

(d) The authority of the Board to issue regulations under this 

title does not impair the authority of any other agency designated 

in this section to make rules respecting its own procedures in enforcing compliance with requirements imposed under this title. 

(e)(1) In carrying out its enforcement activities under this section, each agency referred to in subsection (a) or (c), in cases where 

an annual percentage rate or finance charge was inaccurately disclosed, shall notify the creditor of such disclosure error and is 

authorized in accordance with the provisions of this subsection to 

require the creditor to make an adjustment to the account of the 

person to whom credit was extended, to assure that such person 

will not be required to pay a finance charge in excess of the finance 

charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower. For the purposes of this subsection, except where such disclosure error resulted from a willful violation which was intended to mislead the 

person to whom credit was extended, in determining whether a disclosure error has occurred and in calculating any adjustment, (A) 

each agency shall apply (i) with respect to the annual percentage 

rate, a tolerance of one-quarter of 1 percent more or less than the 

actual rate, determined without regard to section 107(c) of this 

title, and (ii) with respect to the finance charge, a corresponding 

numerical tolerance as generated by the tolerance provided under 

this subsection for the annual percentage rate; except that (B) with 

respect to transactions consummated after two years following the 

effective date of section 608 of the Truth in Lending Simplification 

and Reform Act, each agency shall apply (i) for transactions that 

have a scheduled amortization of ten years or less, with respect to 

the annual percentage rate, a tolerance not to exceed one-quarter 

of 1 percent more or less than the actual rate, determined without 

regard to section 107(c) of this title, but in no event a tolerance of 

less than the tolerances allowed under section 107(c), (ii) for transactions that have a scheduled amortization of more than ten years, 

with respect to the annual percentage rate, only such tolerances as 

are allowed under section 107(c) of this title, and (iii) for all transactions, with respect to the finance charge, a corresponding numerical tolerance as generated by the tolerances provided under this 

subsection for the annual percentage rate. 

(2) Each agency shall require such an adjustment when it 

determines that such disclosure error resulted from (A) a clear and 

consistent pattern or practice of violations, (B) gross negligence, or 

(C) a willful violation which was intended to mislead the person to 

whom the credit was extended. Notwithstanding the preceding sentence, except where such disclosure error resulted from a willful 

violation which was intended to mislead the person to whom credit 

was extended, an agency need not require such an adjustment if 

it determines that such disclosure error— 
Sec. 102 TRUTH IN LENDING ACT 168 

(A) resulted from an error involving the disclosure of a fee 

or charge that would otherwise be excludable in computing the 

finance charge, including but not limited to violations involving 

the disclosures described in sections 106(b), (c) and (d) of this 

title, in which event the agency may require such remedial action as it determines to be equitable, except that for transactions consummated after two years after the effective date of 

section 608 of the Truth in Lending Simplification and Reform 

Act, such an adjustment shall be ordered for violations of section 106(b); 

(B) involved a disclosed amount which was 10 per centum 

or less of the amount that should have been disclosed and (i) 

in cases where the error involved a disclosed finance charge, 

the annual percentage rate was disclosed correctly, and (ii) in 

cases where the error involved a disclosed annual percentage 

rate, the finance charge was disclosed correctly; in which event 

the agency may require such adjustment as it determines to be 

equitable; 

(C) involved a total failure to disclose either the annual 

percentage rate or the finance charge, in which event the 

agency may require such adjustment as it determines to be 

equitable; or 

(D) resulted from any other unique circumstance involving 

clearly technical and nonsubstantive disclosure violations that 

do not adversely affect information provided to the consumer 

and that have not misled or otherwise deceived the consumer. 

In the case of other such disclosure errors, each agency may require such an adjustment. 

(3) Notwithstanding paragraph (2), no adjustment shall be 

ordered— 

(A) if it would have a significantly adverse impact upon 

the safety or soundness of the creditor, but in any such case, 

the agency may— 

(i) require a partial adjustment in an amount which 

does not have such an impact; or 

(ii) require the full adjustment, but permit the creditor 

to make the required adjustment in partial payments over 

an extended period of time which the agency considers to 

be reasonable, if (in the case of an agency referred to in 

paragraph (1), (2), or (3) of subsection (a)), the agency 

determines that a partial adjustment or making partial 

payments over an extended period is necessary to avoid 

causing the creditor to become undercapitalized pursuant 

to section 38 of the Federal Deposit Insurance Act; 

(B) the1 amount of the adjustment would be less that $1, 

except that if more than one year has elapsed since the date 

1

 Section 2106(4) of P.L. 104-208 (110 Stat. 3009-416) amended subsection (e)(3) by striking 

"reasonable, (B) the'' and inserting the following: "reasonable, if (in the case of an agency referred to in paragraph (1), (2), or (3) of subsection (a)), the agency determines that a partial 

adjustment or making partial payments over an extended period is necessary to avoid causing 

the creditor to become undercapitalized pursuant to section 38 of the Federal Deposit Insurance 

Act; 

''(B) the''. 

The amendment probably should have been to strike "reasonable, (B) if the'' and the amendment probably should have inserted "if' after "(B)''. 
169 TRUTH IN LENDING ACT Sec. 103 

of the violation, the agency may require that such amount be 

paid into the Treasury of the United States, or 

(C) except where such disclosure error resulted from a willful violation which was intended to mislead the person to 

whom credit was extended, in the case of an open-end credit 

plan, more than two years after the violation, or in the case 

of any other extension of credit, as follows: 

(i) with respect to creditors that are subject to examination 

by the agencies referred to in paragraphs (1) through (3) of section 108(a) of this title, except in connection with violations 

arising from practices identified in the current examination 

and only in connection with transactions that are consummated after the date of the immediately preceding examination, except that where practices giving rise to violations 

identified in earlier examinations have not been corrected, 

adjustments for those violations shall be required in connection 

with transactions consummated after the date of the examination in which such practices were first identified; 

(ii) with respect to creditors that are not subject to examination by such agencies, except in connection with transactions that are consummated after May 10, 1978; and 

(iii) in no event after the later of (i) the expiration of the 

life of the credit extension, or (II) two years after the agreement to extend credit was consummated. 

(4)(A) Notwithstanding any other provision of this section, an 

adjustment under this subsection may be required by an agency referred to in subsection (a) or (c) only by an order issued in accordance with cease and desist procedures provided by the provision of 

law referred to in such subsections. 

(B) in the case of an agency which is not authorized to conduct 

cease and desist proceedings, such an order may be issued after an 

agency hearing on the record conducted at least thirty but not more 

than sixty days after notice of the alleged violation is served on the 

creditor. Such a hearing shall be deemed to be a hearing which is 

subject to the provisions of section 8(h) of the Federal Deposit 

Insurance Act and shall be subject to judicial review as provided 

therein. 

(5) Except as otherwise specifically provided in this subsection 

and notwithstanding any provision of law referred to in subsection 

(a) or (c), no agency referred to in subsection (a) or (c) may require 

a creditor to make dollar adjustments for errors in any requirements under this title, except with regard to the requirements of 

section 165. 

(6) A creditor shall not be subject to an order to make an 

adjustment, if within sixty days after discovering a disclosure 

error, whether pursuant to a final written examination report or 

through the creditor's own procedures, the creditor notifies the person concerned of the error and adjusts the account so as to assure 

that such person will not be required to pay a finance charge in 

excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is 

lower. 

(7) Notwithstanding the second sentence of subsection (e)(1), 

subsection (e)(3)(C)(i), and subsection (e)(3)(C)(ii), each agency re-
Sec. 102 TRUTH IN LENDING ACT 170 

ferred to in subsection (a) or (c) shall require an adjustment for an 

annual percentage rate disclosure error that exceeds a tolerance of 

one quarter of one percent less than the actual rate, determined 

without regard to section 107(c) of this title, with respect to any 

transaction consummated between January 1, 1977, and the effective date of section 608 of the Truth in Lending Simplification and 

Reform Act. 

§ 109. [15 U.S.C. 1608] Views of other agencies 

In the exercise of its functions under this title, the Board may 

obtain upon request the views of any other Federal agency which, 

in the judgment of the Board, exercises regulatory or supervisory 

functions with respect to any class of creditors subject to this title. 

§ 110. [Repealed by Public Law 94-239 (90 Stat. 253).] 

§ 111. [15 U.S.C. 1610] Effect on other laws 

(a)(1) Except as provided in subsection (e), chapters 1, 2, and 

3 do not1 annul, alter, or affect the laws of any State relating to 

the disclosure of information in connection with credit transactions, 

except to the extent that those laws are inconsistent with the provisions of this title, and then only to the extent of the inconsistency. Upon its own motion or upon the request of any creditor, 

State, or other interested party which is submitted in accordance 

with procedures prescribed in regulations of the Board, the Board 

shall determine whether any such inconsistency exists. If the Board 

determines that a State-required disclosure is inconsistent, creditors located in that State may not make disclosures using the 

inconsistent term or form, and shall incur no liability under the 

law of that State for failure to use such term or form, notwithstanding that such determination is subsequently amended, rescinded, or determined by judicial or other authority to be invalid 

for any reason. 

(2) Upon its own motion or upon the request of any creditor, 

State, or other interested party which is submitted in accordance 

with procedures prescribed in regulations of the Board, the Board 

shall determine whether any disclosure required under the law of 

any State is substantially the same in meaning as a disclosure required under this title. If the Board determines that a State-required disclosure is substantially the same in meaning as a disclosure required by this title, then creditors located in that State may 

make such disclosure in compliance with such State law in lieu of 

the disclosure required by this title, except that the annual percentage rate and finance charge shall be disclosed as required by 

section 122, and such State-required disclosure may not be made 

in lieu of the disclosures applicable to certain mortgages under section 129.

 2 

(b) Except as provided in section 129, this title does not1 otherwise annul, alter or affect in any manner the meaning, scope or ap1

 So in original. The term ''shall not be construed to'' probably should be substituted for ''does 

not'' and ''do not'', respectively. 

2

 The amendment made by section 152(e)(2)(B) of the Reigle Community Development and 

Regulatory Improvement Act of 1994 (103-325; 108 Stat. 2194) did not specify which sentence 

of this paragraph was being amended. Such amendment was executed to the second sentence 

of paragraph (2). 
171 TRUTH IN LENDING ACT Sec. 103 

plicability of the laws of any State, including, but not limited to, 

laws relating to the types, amounts or rates of charges, or any element or elements of charges, permissible under such laws in connection with the extension or use of credit, nor does this title extend the applicability of those laws to any class of persons or transactions to which they would not otherwise apply. The provisions of 

section 129 do not1 annul, alter, or affect the applicability of the 

laws of any State or exempt any person subject to the provisions 

of section 129 from complying with the laws of any State, with respect to the requirements for mortgages referred to in section 

103(aa), except to the extent that those State laws are inconsistent 

with any provisions of section 129, and then only to the extent of 

the inconsistency. 

(c) in any action or proceeding in any court involving a consumer credit sale, the disclosure of the annual percentage rate as 

required under this title in connection with that sale may not be 

received as evidence that the sale was a loan or any type of transaction other than a credit sale. 

(d) Except as specified in sections 125, 130, and 166, this title 

and the regulations issued thereunder do not affect the validity or 

enforceability of any contract or obligation under State or Federal 

law. 

(e) CERTAI N CREDI T AN D CHARGE CAR D APPLICATIO N AN D 

SOLICITATIO N DISCLOSUR E PROVISIONS.—Th e provisions of subsection (c) of section 122 and subsections (c), (d), (e), and (f) of section 127 shall supersede any provision of the law of any State relating to the disclosure of information in any credit or charge card 

application or solicitation which is subject to the requirements of 

section 127(c) or any renewal notice which is subject to the requirements of section 127(d), except that any State may employ or 

establish State laws for the purpose of enforcing the requirements 

of such sections. 

§ 112. [15 U.S.C. 1611] Criminal liability for willful and 

knowing violation 

Whoever willfully and knowingly2 

(1) gives false or inaccurate information or fails to provide 

information which he is required to disclose under the provisions of this title or any regulation issued thereunder, 

(2) uses any chart or table authorized by the Board under 

section 107 in such a manner as to consistently understate the 

annual percentage rate determined under section 107(a)(1)(A), 

or 

(3) otherwise fails to comply with any requirement imposed under this title, 

shall be fined not more than $5,000 or imprisoned not more than 

one year, or both. 

§ 113. [15 U.S.C. 1612] Effect on governmental agencies 

(a) Any department or agency of the United States which 

administers a credit program in which it extends, insures, or guar1

 See footnote 1 on previous page. 

2

 No punctuation in law. Probably should be a dash. 
Sec. 102 TRUTH IN LENDING ACT 172 

antees consumer credit and in which it provides instruments to a 

creditor which contain any disclosures required by this title shall, 

prior to the issuance or continued use of such instruments, consult 

with the Board to assure that such instruments comply with this 

title. 

(b) No civil or criminal penalty provided under this title for 

any violation thereof may be imposed upon the United States or 

any department or agency thereof, or upon any State or political 

subdivision thereof, or any agency of any State or political subdivision. 

(c) A creditor participating in a credit program administered, 

insured, or guaranteed by any department or agency of the United 

States shall not be held liable for a civil or criminal penalty under 

this title in any case in which the violation results from the use 

of an instrument required by any such department or agency. 

(d) A creditor participating in a credit program administered, 

insured, or guaranteed by any department or agency of the United 

States shall not be held liable for a civil or criminal penalty under 

the laws of any State (other than laws determined under section 

111 to be inconsistent with this title) for any technical procedural 

failure, such as a failure to use a specific form, to make information available at a specific place on an instrument, or to use a specific typeface, as is required by State law, which is caused by the 

use of an instrument required to be used by such department or 

agency. 

§ 114. [15 U.S.C. 1614] Reports by Board and Attorney General 

Each year the Board shall make a report to the Congress concerning the administration of its functions under this title, including such recommendations as the Board deems necessary or appropriate. In addition, each report of the Board shall include its 

assessment of the extent to which compliance with the requirements imposed under this title is being achieved. 

§ 115. [This section repealed by section 616(b) of the Depository Institutions Deregulation and Monetary Control Act of 1980 

(94 Stat. 182).] 

CHAPTER 2—CREDIT TRANSACTIONS 

Sec. 

121. General requirement of disclosure. 

122. Form of disclosure; additional information. 

123. Exemption for State-regulated transactions. 

124. Effect of subsequent occurrence. 

125. Right of rescission as to certain transactions. 

126. [Repealed.] 

127. open end consumer credit plans. 

127A. Disclosure requirements for open end consumer credit plans secured by the 

consumer's principal dwelling. 

128. Consumer credit not under open end credit plans. 

129. Requirements for certain mortgages. 

130. Civil liability. 

131. Liability of assignees. 

132. Issuance of credit cards. 

133. Liability of holder of credit card. 

134. Fraudulent use of credit card. 

135. Business credit cards. 
173 TRUTH IN LENDING ACT Sec. 103 

136. Dissemination of annual percentage rates. 

137. Home equity plans. 

138. Reverse mortgages. 

139. Certain limitations on liability. 

§ 121. [15 U.S.C. 1631] General requirement of disclosure 

(a) Subject to subsection (b), a creditor or lessor shall disclose 

to the person who is obligated on a consumer lease or a consumer 

credit transaction the information required under this title. in a 

transaction involving more than one obligor, a creditor or lessor, 

except in a transaction under section 125, need not disclose to more 

than one of such obligors if the obligor given disclosure is a primary obligor. 

(b) if a transaction involves one creditor as defined in section 

103(f), or one lessor as defined in section 181(3), such creditor or 

lessor shall make the disclosures. if a transaction involves more 

than one creditor or lessor, only one creditor or lessor shall be required to make the disclosures. The Board shall by regulation 

specify which creditor or lessor shall make the disclosures. 

(c) The Board may provide by regulation that any portion of 

the information required to be disclosed by this title may be given 

in the form of estimates where the provider of such information is 

not in a position to know exact information. in the case of any consumer credit transaction a portion of the interest on which is determined on a per diem basis and is to be collected upon the consummation of such transaction, any disclosure with respect to such 

portion of interest shall be deemed to be accurate for purposes of 

this title if the disclosure is based on information actually known 

to the creditor at the time that the disclosure documents are being 

prepared for the consummation of the transaction. 

(d) The Board shall determine whether tolerances for numerical disclosures other than the annual percentage rate are necessary to facilitate compliance with this title, and if it determines 

that such tolerances are necessary to facilitate compliance, it shall 

by regulation permit disclosures within such tolerances. The Board 

shall exercise its authority to permit tolerances for numerical disclosures other than the annual percentage rate so that such tolerances are narrow enough to prevent such tolerances from resulting 

in misleading disclosures or disclosures that circumvent the purposes of this title. 

§ 122. [15 U.S.C. 1632] Form of disclosures; additional information 

(a) information required by this title shall be disclosed clearly 

and conspicuously, in accordance with regulations of the Board. 

The terms ''annual percentage rate'' and ''finance charge'' shall be 

disclosed more conspicuously than other terms, data, or information provided in connection with a transaction, except information 

relating to the identity of the creditor. Except as provided in subsection (c), regulations of the Board need not require that disclosures pursuant to this title be made in the order set forth in this 

title and, except as otherwise provided, may permit the use of terminology different from that employed in this title if it conveys 

substantially the same meaning. 
Sec. 102 TRUTH IN LENDING ACT 174 

(b) Any creditor or lessor may supply additional information or 

explanation with any disclosures required under chapters 4 and 5 

and, except as provided in sections 127A(b)(3) and 128(b)(1), under 

this chapter. 

(c) TABULAR FORMAT REQUIRED FOR CERTAIN DISCLOSURES 

UNDE R SECTION 127(c).— 

(1) IN GENERAL.—The information described in paragraphs 

(1)(A), (3)(B)(i)(I), (4)(A), and (4)(C)(i)(I) of section 127(c) shall 

be— 

(A) disclosed in the form and manner which the Board 

shall prescribe by regulations; and 

(B) placed in a conspicuous and prominent location on 

or with any written application, solicitation, or other document or paper with respect to which such disclosure is required. 

(2) TABULAR FORMAT.— 

(A) FOR M OF TABLE TO BE PRESCRIBED.—In the regulations prescribed under paragraph (1)(A) of this subsection, 

the Board shall require that the disclosure of such information shall, to the extent the Board determines to be 

practicable and appropriate, be in the form of a table 

which— 

(i) contains clear and concise headings for each 

item of such information; and 

(ii) provides a clear and concise form for stating 

each item of information required to be disclosed 

under each such heading. 

( B ) BOARD DISCRETION I N PRESCRIBING ORDER AND 

WORDING OF TABLE.—I n prescribing the form of the table 

under subparagraph (A), the Board may— 

(i) list the items required to be included in the 

table in a different order than the order in which such 

items are set forth in paragraph (1)(A) or (4)(A) of section 127(c); and 

(ii) subject to subparagraph (C), employ terminology which is different than the terminology which 

is employed in section 127(c) if such terminology conveys substantially the same meaning. 

(C) GRACE PERIOD.—Eithe r the heading or the statement under the heading which relates to the time period 

referred to in section 127(c)(1)(A)(iii) shall contain the 

term grace period. 

§ 123. [15 U.S.C. 1633] Exemption for State-regulated transactions 

The Board shall by regulation exempt from the requirements 

of this chapter any class of credit transactions within any State if 

it determines that under the law of that State that class of transactions is subject to requirements substantially similar to those imposed under this chapter, and that there is adequate provision for 

enforcement. 
175 TRUTH IN LENDING ACT Sec. 103 

§ 124. [15 U.S.C. 1634] Effect of subsequent occurrence 

If information disclosed in accordance with this chapter is subsequently rendered inaccurate as the result of any act, occurrence, 

or agreement subsequent to the delivery of the required disclosures, the inaccuracy resulting therefrom does not constitute a violation of this chapter. 

§ 125. [15 U.S.C. 1635] Right of rescission as to certain transactions 

(a) Except as otherwise provided in this section, in the case of 

any consumer credit transaction (including opening or increasing 

the credit limit for an open end credit plan) in which a security interest, including any such interest arising by operation of law, is 

or will be retained or acquired in any property which is used as the 

principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight 

of the third business day following the consummation of the transaction or the delivery of the information and recission forms required under this section together with a statement containing the 

material disclosures required under this title, whichever is later, by 

notifying the creditor, in accordance with regulations of the Board, 

of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any 

obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this 

section. 

(b) When an obligor exercises his right to rescind under subsection (a), he is not liable for any finance or other charge, and any 

security interest given by the obligor, including any such interest 

arising by operation of law, becomes void upon such a rescission. 

Within 20 days after receipt of a notice of rescission, the creditor 

shall return to the obligor any money or property given as earnest 

money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered 

any property to the obligor, the obligor may retain possession of it. 

Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except 

that if return of the property in kind would be impracticable or 

inequitable, the obligor shall tender its reasonable value. Tender 

shall be made at the location of the property or at the residence 

of the obligor, at the option of the obligor. If the creditor does not 

take possession of the property within 20 days after tender by the 

obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this 

subsection shall apply except when otherwise ordered by a court. 

(c) Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this title by a 

person to whom information, forms, and a statement is required to 

be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof. 
Sec. 102 TRUTH IN LENDING ACT 176 

(d) The Board may, if it finds that such action is necessary in 

order to permit homeowners to meet bona fide personal financial 

emergencies, prescribe regulations authorizing the modification or 

waiver of any rights created under this section to the extent and 

under the circumstances set forth in those regulations. 

(e) This section does not apply to— 

(1) a residential mortgage transaction as defined in section 

103(w); 

(2) a transaction which constitutes a refinancing or consolidation (with no new advances) of the principal balance then 

due and any accrued and unpaid finance charges of an existing 

extension of credit by the same creditor secured by an interest 

in the same property; 

(3) a transaction in which an agency of a State is the creditor; or 

(4) advances under a preexisting open end credit plan if a 

security interest has already been retained or acquired and 

such advances are in accordance with a previously established 

credit limit for such plan. 

(f) An obligor's right of rescission shall expire three years after 

the date of consummation of the transaction or upon the sale of the 

property, whichever occurs first, notwithstanding the fact that the 

information and forms required under this section or any other disclosures required under this chapter have not been delivered to the 

obligor, except that if (1) any agency empowered to enforce the provisions of this title institutes a proceeding to enforce the provisions 

of this section within three years after the date of consummation 

of the transaction, (2) such agency finds a violation of section 125, 

and (3) the obligor's right to rescind is based in whole or in part 

on any matter involved in such proceeding, then the obligor's right 

of rescission shall expire three years after the date of consummation of the transaction or upon the earlier sale of the property, or 

upon the expiration of one year following the conclusion of the proceeding, or any judicial review or period for judicial review thereof, 

whichever is later. 

(g) In any action in which it is determined that a creditor has 

violated this section, in addition to rescission the court may award 

relief under section 130 for violations of this title not relating to 

the right to rescind. 

(h) LIMITATIO N ON RESCISSION.—A n obligor shall have no 

rescission rights arising solely from the form of written notice used 

by the creditor to inform the obligor of the rights of the obligor 

under this section, if the creditor provided the obligor the appropriate form of written notice published and adopted by the Board, 

or a comparable written notice of the rights of the obligor, that was 

properly completed by the creditor, and otherwise complied with all 

other requirements of this section regarding notice. 

(i) RESCISSION RIGHTS I N FORECLOSURE.— 

(1) IN GENERAL.—Notwithstanding section 139, and subject 

to the time period provided in subsection (f), in addition to any 

other right of rescission available under this section for a 

transaction, after the initiation of any judicial or nonjudicial 

foreclosure process on the primary dwelling of an obligor securing an extension of credit, the obligor shall have a right to re-
177 TRUTH IN LENDING ACT Sec. 103 

scind the transaction equivalent to other rescission rights provided by this section, if— 

(A) a mortgage broker fee is not included in the finance charge in accordance with the laws and regulations 

in effect at the time the consumer credit transaction was 

consummated; or 

(B) the form of notice of rescission for the transaction 

is not the appropriate form of written notice published and 

adopted by the Board or a comparable written notice, and 

otherwise complied with all the requirements of this section regarding notice. 

(2) TOLERANCE FOR DISCLOSURES.—Notwithstanding section 106(f), and subject to the time period provided in subsection (f), for the purposes of exercising any rescission rights 

after the initiation of any judicial or nonjudicial foreclosure 

process on the principal dwelling of the obligor securing an 

extension of credit, the disclosure of the finance charge and 

other disclosures affected by any finance charge shall be 

treated as being accurate for purposes of this section if the 

amount disclosed as the finance charge does not vary from the 

actual finance charge by more than $35 or is greater than the 

amount required to be disclosed under this title. 

(3) RIGH T OF RECOUPMENT UNDER STATE LAW.—Nothin g i n 

this subsection affects a consumer's right of rescission in 

recoupment under State law. 

(4) APPLICABILITY.—This subsection shall apply to all consumer credit transactions in existence or consummated on or 

after the date of the enactment of the Truth in Lending Act 

Amendments of 1995. 

§ 126. [This section repealed by section 614(e)(1) of the Depository Institutions Deregulation and Monetary Control Act of 1980 

(94 Stat. 180).] 

§ 127. [15 U.S.C. 1637] Open end consumer credit plans 

(a) Before opening any account under an open end consumer 

credit plan, the creditor shall disclose to the person to whom credit 

is to be extended each of the following items, to the extent applicable; 

(1) The conditions under which a finance charge may be 

imposed, including the time period (if any) within which any 

credit extended may be repaid without incurring a finance 

charge, except that the creditor may, at his election and without disclosure, impose no such finance charge if payment is received after the termination of such time period. if no such 

time period is provided, the creditor shall disclose such fact. 

(2) The method of determining the balance upon which a 

finance charge will be imposed. 

(3) The method of determining the amount of the finance 

charge, including any minimum or fixed amount imposed as a 

finance charge. 

(4) Where one or more periodic rates may be used to compute the finance charge, each such rate, the range of balances 

to which it is applicable, and the corresponding nominal an-
Sec. 102 TRUTH IN LENDING ACT 178 

nual percentage rate determined by mutliplying the periodic 

rate by the number of periods in a year. 

(5) Identification of other charges which may be imposed 

as part of the plan, and their method of computation, in 

accordance with regulations of the Board. 

(6) In cases where the credit is or will be secured, a statement that a security interest has been or will be taken in (A) 

the property purchased as part of the credit transaction, or (B) 

property not purchased as part of the credit transaction identified by item or type. 

(7) A statement, in a form prescribed by regulations of the 

Board of the protection provided by sections 161 and 170 to an 

obligor and the creditor's responsibilities under sections 162 

and 170. With respect to one billing cycle per calendar year, at 

intervals of not less than six months or more than eighteen 

months, the creditor shall transmit such statement to each obligor to whom the creditor is required to transmit a statement 

pursuant to section 127(b) for such billing cycle. 

(8) In the case of any account under an open end consumer 

credit plan which provides for any extension of credit which is 

secured by the consumer's principal dwelling, any information 

which— 

(A) is required to be disclosed under section 127A(a); 

and 

(B) the Board determines is not described in any other 

paragraph of this subsection. 

(b) The creditor of any account under an open end consumer 

credit plan shall transmit to the obligor, for each billing cycle at 

the end of which there is an outstanding balance in that account 

or with respect to which a finance charge is imposed, a statement 

setting forth each of the following items to the extent applicable: 

(1) The outstanding balance in the account at the beginning of the statement period. 

(2) The amount and date of each extension of credit during 

the period, and a brief identification, on or accompanying the 

statement of each extension of credit in a form prescribed by 

the Board sufficient to enable the obligor either to identify the 

transaction or to relate it to copies of sales vouchers or similar 

instruments previously furnished, except that a creditor's failure to disclose such information in accordance with this paragraph shall not be deemed a failure to comply with this chapter or this title if (A) the creditor maintains procedures reasonably adapted to procure and provide such information, and (B) 

the creditor responds to and treats any inquiry for clarification 

or documentation as a billing error and an erroneously billed 

amount under section 161. In lieu of complying with the 

requirements of the previous sentence, in the case of any 

transaction in which the creditor and seller are the same person, as defined by the Board, and such person's open end credit 

plan has fewer than 15,000 accounts, the creditor may elect to 

provide only the amount and date of each extension of credit 

during the period and the seller's name and location where the 

transaction took place if (A) a brief identification of the transaction has been previously furnished, and (B) the creditor re-
179 TRUTH IN LENDING ACT Sec. 103 

sponds to and treats any inquiry for clarification or documentation as a billing error and an erroneously billed amount under 

section 161. 

(3) The total amount credited to the account during the period. 

(4) The amount of any finance charge added to the account 

during the period, itemized to show the amounts, if any, due 

to the application of percentage rates and the amount, if any, 

imposed as a minimum or fixed charge. 

(5) Where one or more periodic rates may be used to compute the finance charge, each such rate, the range of balances 

to which it is applicable, and, unless the annual percentage 

rate (determined under section 107(a)(2)) is required to be disclosed pursuant to paragraph (6), the corresponding nominal 

annual percentage rate determined by mutliplying the periodic 

rate by the number of periods in a year. 

(6) Where the total finance charge exceeds 50 cents for a 

monthly or longer billing cycle, or the pro rata part of 50 cents 

for a billing cycle shorter than monthly, the total finance 

charge expressed as an annual percentage rate (determined 

under section 107(a)(2)), except that if the finance charge is the 

sum of two or more products of a rate times a portion of the 

balance, the creditor may, in lieu of disclosing a single rate for 

the total charge, disclose each such rate expressed as an annual percentage rate, and the part of the balance to which it 

is applicable. 

(7) The balance on which the finance charge was computed 

and a statement of how the balance was determined. if the balance is determined without first deducting all credits during 

the period, that fact and the amount of such payments shall 

also be disclosed. 

(8) The outstanding balance in the account at the end of 

the period. 

(9) The date by which or the period (if any) within which, 

payment must be made to avoid additional finance charges, except that the creditor may, at his election and without disclosure, impose no such additional finance charge if payment is 

received after such date or the termination of such period. 

(10) The address to be used by the creditor for the purpose 

of receiving billing inquiries from the obligor. 

(c) DISCLOSURE I N CREDIT AND CHARGE CARD APPLICATIONS 

AND SOLICITATIONS.— 

(1) DIREC T MAI L APPLICATIONS AND SOLICITATIONS.— 

(A) INFORMATION I N TABULAR FORMAT.—Any application to open a credit card account for any person under an 

open end consumer credit plan, or a solicitation to open 

such an account without requiring an application, that is 

mailed to consumers shall disclose the following information, subject to subsection (e) and section 122(c): 

(i) ANNUA L PERCENTAGE RATES.— 

(I) Each annual percentage rate applicable to 

extensions of credit under such credit plan. 

(ii) Where an extension of credit is subject to 

a variable rate, the fact that the rate is variable, 
Sec. 102 TRUTH IN LENDING ACT 180 

the annual percentage rate in effect at the time of 

the mailing, and how the rate is determined. 

(Ill) Where more than one rate applies, the 

range of balances to which each rate applies. 

(ii) ANNUA L AND OTHER FEES.— 

(I) Any annual fee, other periodic fee, or membership fee imposed for the issuance or availability of a credit card, including any account 

maintenance fee or other charge imposed based on 

activity or inactivity for the account during the 

billing cycle. 

(II) Any minimum finance charge imposed for 

each period during which any extension of credit 

which is subject to a finance charge is outstanding. 

(III) Any transaction charge imposed in connection with use of the card to purchase goods or 

services. 

(iii) GRACE PERIOD.— 

(I) The date by which or the period within 

which any credit extended under such credit plan 

for purchases of goods or services must be repaid 

to avoid incurring a finance charge, and, if no 

such period is offered, such fact shall be clearly 

stated. 

(II) If the length of such "grace period'' varies, 

the card issuer may disclose the range of days in 

the grace period, the minimum number of days in 

the grace period, or the average number of days in 

the grace period, if the disclosure is identified as 

such. 

(iv) BALANCE CALCULATION METHOD.— 

(I) The name of the balance calculation 

method used in determining the balance on which 

the finance charge is computed if the method used 

has been defined by the Board, or a detailed 

explanation of the balance calculation method 

used if the method has not been so defined. 

(II) In prescribing regulations to carry out 

this clause, the Board shall define and name not 

more than the 5 balance calculation methods 

determined by the Board to be the most commonly 

used methods. 

(B) OTHER INFORMATION.—I n addition to the information required to be disclosed under subparagraph (A), each 

application or solicitation to which such subparagraph applies shall disclose clearly and conspicuously the following 

information, subject to subsections (e) and (f): 

(i) CASH ADVANCE FEE.—Any fee imposed for an 

extension of credit in the form of cash. 

(ii) LATE FEE.—Any fee imposed for a late payment. 

(iii) OVER-THE-LIMIT FEE.—Any fee imposed in 

connection with an extension of credit in excess of the 
181 TRUTH IN LENDING ACT Sec. 127A 

amount of credit authorized to be extended with respect to such account. 

(2) TELEPHONE SOLICITATIONS.— 

(A) I N GENERAL.—In any telephone solicitation to open 

a credit card account for any person under an open end 

consumer credit plan, the person making the solicitation 

shall orally disclose the information described in paragraph (1)(A). 

(B) EXCEPTION.—Subparagraph (A) shall not apply to 

any telephone solicitation if— 

(i) the credit card issuer— 

(i) does not impose any fee described in paragraph (1)(A)(ii)(I); or 

(ii) does not impose any fee in connection 

with telephone solicitations unless the consumer 

signifies acceptance by using the card; 

(ii) the card issuer discloses clearly and conspicuously in writing the information described in paragraph (1) within 30 days after the consumer requests 

the card, but in no event later than the date of delivery of the card; and 

(iii) the card issuer discloses clearly and conspicuously that the consumer is not obligated to accept the 

card or account and the consumer will not be obligated 

to pay any of the fees or charges disclosed unless the 

consumer elects to accept the card or account by using 

the card. 

(3) APPLICATIONS AND SOLICITATIONS BY OTHER MEANS.— 

(A) IN GENERAL.—Any application to open a credit 

card account for any person under an open end consumer 

credit plan, and any solicitation to open such an account 

without requiring an application, that is made available to 

the public or contained in catalogs, magazines, or other 

publications shall meet the disclosure requirements of subparagraph (B), (C), or (D). 

(B) SPECIFIC INFORMATION.—A n application or solicitation described in subparagraph (A) meets the requirement 

of this subparagraph if such application or solicitation 

contains— 

(i) the information— 

(I) described in paragraph (1)(A) in the form 

required under section 122(c) of this chapter, subject to subsection (e), and 

(ii) described in paragraph (1)(B) in a clear 

and conspicuous form, subject to subsections (e) 

and (f); 

(ii) a statement, in a conspicuous and prominent 

location on the application or solicitation, that— 

(i) the information is accurate as of the date 

the application or solicitation was printed; 

(ii) the information contained in the application or solicitation is subject to change after such 

date; and 
Sec. 127A TRUTH IN LENDING ACT 182 

(Ill) the applicant should contact the creditor 

for information on any change in the information 

contained in the application or solicitation since it 

was printed; 

(iii) a clear and conspicuous disclosure of the date 

the application or solicitation was printed; and 

(iv) a disclosure, in a conspicuous and prominent 

location on the application or solicitation, of a toll free 

telephone number or a mailing address at which the 

applicant may contact the creditor to obtain any 

change in the information provided in the application 

or solicitation since it was printed. 

(C) GENERAL INFORMATION WITHOUT ANY SPECIFIC 

TERM.—An application or solicitation described in subparagraph (A) meets the requirement of this subparagraph if 

such application or solicitation— 

(i) contains a statement, in a conspicuous and 

prominent location on the application or solicitation, 

that— 

(I) there are costs associated with the use of 

credit cards; and 

(II) the applicant may contact the creditor to 

request disclosure of specific information of such 

costs by calling a toll free telephone number or by 

writing to an address, specified in the application; 

(ii) contains a disclosure, in a conspicuous and 

prominent location on the application or solicitation, of 

a toll free telephone number and a mailing address at 

which the applicant may contact the creditor to obtain 

such information; and 

(iii) does not contain any of the items described in 

paragraph (1). 

( D ) APPLICATIONS OR SOLICITATIONS CONTAINING SUBSECTION (a) DISCLOSURES.—An application or solicitation 

meets the requirement of this subparagraph if it contains, 

or is accompanied by— 

(i) the disclosures required by paragraphs (1) 

through (6) of subsection (a); 

(ii) the disclosures required by subparagraphs (A) 

and (B) of paragraph (1) of this subsection included 

clearly and conspiciously (except that the provisions of 

section 122(c) shall not apply); and 

(iii) a toll free telephone number or a mailing address at which the applicant may contact the creditor 

to obtain any change in the information provided. 

( E) PROMPT RESPONSE TO INFORMATION REQUESTS.— 

Upon receipt of a request for any of the information referred to in subparagraph (B), (C), or (D), the card issuer 

or the agent of such issuer shall promptly disclose all of 

the information described in paragraph (1). 

(4) CHARGE CARD APPLICATIONS AND SOLICITATIONS.— 

(A) IN GENERAL.—Any application or solicitation to 

open a charge card account shall disclose clearly and con-
183 TRUTH IN LENDING ACT Sec. 127A 

spicuously the following information in the form required 

by section 122(c) of this chapter, subject to subsection (e): 

(i) Any annual fee, other periodic fee, or membership fee imposed for the issuance or availability of the 

charge card, including any account maintenance fee or 

other charge imposed based on activity or inactivity 

for the account during the billing cycle. 

(ii) Any transaction charge imposed in connection 

with use of the card to purchase goods or services. 

(iii) A statement that charges incurred by use of 

the charge card are due and payable upon receipt of 

a periodic statement rendered for such charge card account. 

(B) OTHER INFORMATION.—In addition to the information required to be disclosed under subparagraph (A), each 

written application or solicitation to which such subparagraph applies shall disclose clearly and conspicuously the 

following information, subject to subsections (e) and (f): 

(i) CASH ADVANCE FEE.—An y fee imposed for an 

extension of credit in the form of cash. 

(ii) LATE FEE.—An y fee imposed for a late payment. 

(iii) OVER-THE-LIMIT FEE.—An y fee imposed in 

connection with an extension of credit in excess of the 

amount of credit authorized to be extended with respect to such account. 

(C) APPLICATIONS AND SOLICITATIONS BY OTHER 

MEANS.—Any application to open a charge card account, 

and any solicitation to open such an account without requiring an application, that is made available to the public 

or contained in catalogs, magazines, or other publications 

shall contain— 

(i) the information— 

(I) described in subparagraph (A) in the form 

required under section 122(c) of this chapter, subject to subsection (e), and 

(ii) described in subparagraph (B) in a clear 

and conspicuous form, subject to subsections (e) 

and (f); 

(ii) a statement, in a conspicuous and prominent 

location on the application or solicitation, that— 

(i) the information is accurate as of the date 

the application or solicitation was printed; 

(ii) the information contained in the application or solicitation is subject to change after such 

date; and 

(iii) the applicant should contact the creditor 

for information on any change in the information 

contained in the application or solicitation since it 

was printed; 

(iii) a clear and conspicuous disclosure of the date 

the application or solicitation was printed; and 

(iv) a disclosure, in a conspicuous and prominent 

location on the application or solicitation, of a toll free 
Sec. 127A TRUTH IN LENDING ACT 184 

telephone number or a mailing address at which the 

applicant may contact the creditor to obtain any 

change in the information provided in the application 

or solicitation since it was printed. 

( D ) ISSUERS OF CHARGE CARDS WHIC H PROVIDE ACCESS 

TO OPEN EN D CONSUMER CREDIT PLANS.—If a charge card 

permits the card holder to receive an extension of credit 

under an open end consumer credit plan, which is not 

maintained by the charge card issuer, the charge card 

issuer may provide the information described in subparagraphs (A) and (B) in the form required by such subparagraphs in lieu of the information required to be provided 

under paragraph (1), (2), or (3) with respect to any credit 

extended under such plan, if the charge card issuer discloses clearly and conspicuously to the consumer in the application or solicitation that— 

(i) the charge card issuer will make an independent decision as to whether to issue the card; 

(ii) the charge card may arrive before the decision 

is made with respect to an extension of credit under 

an open end consumer credit plan; and 

(iii) approval by the charge card issuer does not 

constitute approval by the issuer of the extension of 

credit. 

The information required to be disclosed under paragraph 

(1) shall be provided to the charge card holder by the creditor which maintains such open end consumer credit plan 

before the first extension of credit under such plan. 

(E) CHARGE CARD DEFINED.—For the purposes of this 

subsection, the term "charge card'' means a card, plate, or 

other single credit device that may be used from time to 

time to obtain credit which is not subject to a finance 

charge. 

(5) REGULATORY AUTHORITY OF TH E BOARD.—The Board 

may, by regulation, require the disclosure of information in 

addition to that otherwise required by this subsection or subsection (d), and modify any disclosure of information required 

by this subsection or subsection (d), in any application to open 

a credit card account for any person under an open end consumer credit plan or any application to open a charge card account for any person, or a solicitation to open any such account 

without requiring an application, if the Board determines that 

such action is necessary to carry out the purposes of, or prevent evasions of, any paragraph of this subsection. 

(d) DISCLOSURE PRIOR TO RENEWAL. — 

(1) IN GENERAL.—Except as provided in paragraph (2), a 

card issuer that imposes any fee described in subsection 

(c)(1)(A)(ii)(I) or (c)(4)(A)(i) shall transmit to a consumer at 

least 30 days prior to the scheduled renewal date of the consumer's credit or charge card account a clear and conspicuous 

disclosure of— 

(A) the date by which, the month by which, or the billing period at the close of which, the account will expire if 

not renewed; 
185 TRUTH IN LENDING ACT Sec. 127A 

(B) the information described in subsection (c)(1)(A) or 

(c)(4)(A) that would apply if the account were renewed, 

subject to subsection (e); and 

(C) the method by which the consumer may terminate 

continued credit availability under the account. 

(2) SPECIAL RULE FOR CERTAIN DISCLOSURES.— 

(A) IN GENERAL.—The disclosures required by this subsection may be provided— 

(i) prior to posting a fee described in subsection 

(c)(1)(A)(ii)(I) or (c)(4)(A)(i) to the account, or 

(ii) with the periodic billing statement first disclosing that the fee has been posted to the account. 

(B) LIMITATION ON USE OF SPECIAL RULE.—Disclosure s 

may be provided under subparagraph (A) only if— 

(i) the consumer is given a 30-day period to avoid 

payment of the fee or to have the fee recredited to the 

account in any case where the consumer does not wish 

to continue the availability of the credit; and 

(ii) the consumer is permitted to use the card during such period without incurring an obligation to pay 

such fee. 

(3) SHORT-TERM RENEWALS.—The Board may by regulation 

provide for fewer disclosures than are required by paragraph 

(1) in the case of an account which is renewable for a period 

of less than 6 months. 

(e) OTHER RULES FOR DISCLOSURES UNDE R SUBSECTIONS (c) 

AND (d).— 

(1) FEES DETERMINED ON THE BASIS OF A PERCENTAGE.—If 

the amount of any fee required to be disclosed under subsection (c) or (d) is determined on the basis of a percentage of 

another amount, the percentage used in making such determination and the identification of the amount against which 

such percentage is applied shall be disclosed in lieu of the 

amount of such fee. 

(2) DISCLOSURE ONLY OF FEES ACTUALLY IMPOSED.—If a 

credit or charge card issuer does not impose any fee required 

to be disclosed under any provision of subsection (c) or (d), 

such provision shall not apply with respect to such issuer. 

(f) DISCLOSURE OF RANGE OF CERTAIN FEES WHIC H VARY BY 

STATE ALLOWED.—I f the amount of any fee required to be disclosed 

by a credit or charge card issuer under paragraph (1)(B), 

(3)(B)(i)(II), (4)(B), or (4)(C)(i)(II) of subsection (c) varies from State 

to State, the card issuer may disclose the range of such fees for 

purposes of subsection (c) in lieu of the amount for each applicable 

State, if such disclosure includes a statement that the amount of 

such fee varies from State to State. 

(g) INSURANCE I N CONNECTION WIT H CERTAIN OPE N EN D 

CREDIT CARD PLANS.— 

(1) CHANGE I N INSURANCE CARRIER.—Wheneve r a card 

issuer that offers any guarantee or insurance for repayment of 

all or part of the outstanding balance of an open end credit 

card plan proposes to change the person providing that guarantee or insurance, the card issuer shall send each insured 

consumer written notice of the proposed change not less than 
Sec. 127A TRUTH IN LENDING ACT 186 

30 days prior to the change, including notice of any increase 

in the rate or substantial decrease in coverage or service which 

will result from such change. such notice may be included on 

or with the monthly statement provided to the consumer prior 

to the month in which the proposed change would take effect. 

(2) NOTICE OF NEW INSURANCE COVERAGE.—In any case in 

which a proposed change described in paragraph (1) occurs, the 

insured consumer shall be given the name and address of the 

new guarantor or insurer and a copy of the policy or group certificate containing the basic terms and conditions, including 

the premium rate to be charged. 

(3) RIGH T TO DISCONTINUE GUARANTEE OR INSURANCE.— 

The notices required under paragraphs (1) and (2) shall each 

include a statement that the consumer has the option to discontinue the insurance or guarantee. 

(4) N O PREEMPTION OF STATE LAW.—N o provision of this 

subsection shall be construed as superseding any provision of 

State law which is applicable to the regulation of insurance. 

(5) BOARD DEFINITION OF SUBSTANTIAL DECREASE I N COVERAGE OR SERVICE.—The Board shall define, in regulations, 

what constitutes a ''substantial decrease in coverage or service'' 

for purposes of paragraph (1). 

SEC. 127A. [15 U.S.C. 1637a] DISCLOSURE REQUIREMENTS FOR OPE N 

E N D CONSUMER CREDI T PLANS SECURED BY TH E CONSUMER'S PRINCIPA L DWELLING. 

(a) APPLICATION DISCLOSURES.—In the case of any open end 

consumer credit plan which provides for any extension of credit 

which is secured by the consumer's principal dwelling, the creditor 

shall make the following disclosures in accordance with subsection 

(b): 

(1) FIXED ANNUAL PERCENTAGE RATE.—Eac h annual percentage rate imposed in connection with extensions of credit 

under the plan and a statement that such rate does not include 

costs other than interest. 

(2) VARIABLE PERCENTAGE RATE.—I n the case of a plan 

which provides for variable rates of interest on credit extended 

under the plan— 

(A) a description of the manner in which such rate will 

be computed and a statement that such rate does not include costs other than interest; 

(B) a description of the manner in which any changes 

in the annual percentage rate will be made, including— 

(i) any negative amortization and interest rate 

carryover; 

(ii) the timing of any such changes; 

(iii) any index or margin to which such changes in 

the rate are related; and 

(iv) a source of information about any such index; 

(C) if an initial annual percentage rate is offered 

which is not based on an index— 

(i) a statement of such rate and the period of time 

such initial rate will be in effect; and 

(ii) a statement that such rate does not include 

costs other than interest; 
187 TRUTH IN LENDING ACT Sec. 127A 

(D) a statement that the consumer should ask about 

the current index value and interest rate; 

(E) a statement of the maximum amount by which the 

annual percentage rate may change in any 1-year period 

or a statement that no such limit exists; 

(F) a statement of the maximum annual percentage 

rate that may be imposed at any time under the plan; 

(G) subject to subsection (b)(3), a table, based on a 

$10,000 extension of credit, showing how the annual percentage rate and the minimum periodic payment amount 

under each repayment option of the plan would have been 

affected during the preceding 15-year period by changes in 

any index used to compute such rate; 

(H) a statement of— 

(i) the maximum annual percentage rate which 

may be imposed under each repayment option of the 

plan; 

(ii) the minimum amount of any periodic payment 

which may be required, based on a $10,000 outstanding balance, under each such option when such 

maximum annual percentage rate is in effect; and 

(iii) the earliest date by which such maximum annual interest rate may be imposed; and 

(i) a statement that interest rate information will be 

provided on or with each periodic statement. 

(3) OTHER FEES IMPOSED BY THE CREDITOR.—An 

itemization of any fees imposed by the creditor in connection 

with the availability or use of credit under such plan, including 

annual fees, application fees, transaction fees, and closing costs 

(including costs commonly described as ''points''), and the time 

when such fees are payable. 

(4) ESTIMATES OF FEES WHIC H MAY BE IMPOSED BY THIRD 

PARTIES.— 

(A) AGGREGATE AMOUNT.—A n estimate, based on the 

creditor's experience with such plans and stated as a single amount or as a reasonable range, of the aggregate 

amount of additional fees that may be imposed by third 

parties (such as governmental authorities, appraisers, and 

attorneys) in connection with opening an account under 

the plan. 

(B) STATEMENT OF AVAILABILITY.—A statement that 

the consumer may ask the creditor for a good faith estimate by the creditor of the fees that may be imposed by 

third parties. 

(5) STATEMENT OF RISK OF LOSS OF DWELLING.—A statement that— 

(A) any extension of credit under the plan is secured 

by the consumer's dwelling; and 

(B) in the event of any default, the consumer risks the 

loss of the dwelling. 

(6) CONDITIONS TO WHIC H DISCLOSED TERMS ARE SUBJECT.— 

( A) PERIOD DURING WHIC H SUCH TERMS ARE AVAILABLE.—A clear and conspicuous statement— 
Sec. 127A TRUTH IN LENDING ACT 188 

(i) of the time by which an application must be 

submitted to obtain the terms disclosed; or 

(ii) if applicable, that the terms are subject to 

change. 

(B) RIGH T OF REFUSAL IF CERTAIN TERMS CHANGE.—A 

statement that— 

(i) the consumer may elect not to enter into an 

agreement to open an account under the plan if any 

term changes (other than a change contemplated by a 

variable feature of the plan) before any such agreement is final; and 

(ii) if the consumer makes an election described in 

clause (i), the consumer is entitled to a refund of all 

fees paid in connection with the application. 

(C) RETENTION OF INFORMATION.—A statement that 

the consumer should make or otherwise retain a copy of 

information disclosed under this subparagraph. 

(7) RIGHTS OF CREDITOR WIT H RESPECT TO EXTENSIONS OF 

CREDIT.—A statement that— 

(A) under certain conditions, the creditor may terminate any account under the plan and require immediate 

repayment of any outstanding balance, prohibit any additional extension of credit to the account, or reduce the 

credit limit applicable to the account; and 

(B) the consumer may receive, upon request, more specific information about the conditions under which the 

creditor may take any action described in subparagraph 

(A). 

(8) REPAYMENT OPTIONS AND MINIMU M PERIODIC PAYMENTS.—The repayment options under the plan, including— 

(A) if applicable, any differences in repayment options 

with regard to— 

(i) any period during which additional extensions 

of credit may be obtained; and 

(ii) any period during which repayment is required 

to be made and no additional extensions of credit may 

be obtained; 

(B) the length of any repayment period, including any 

differences in the length of any repayment period with regard to the periods described in clauses (i) and (ii) of subparagraph (A); and 

(C) an explanation of how the amount of any minimum monthly or periodic payment will be determined 

under each such option, including any differences in the 

determination of any such amount with regard to the periods described in clauses (i) and (ii) of subparagraph (A). 

(9) EXAMPLE OF MINIMU M PAYMENTS AND MAXIMU M REPAYMEN T PERIOD.—A n example, based on a $10,000 outstanding 

balance and the interest rate (other than a rate not based on 

the index under the plan) which is, or was recently, in effect 

under such plan, showing the minimum monthly or periodic 

payment, and the time it would take to repay the entire 

$10,000 if the consumer paid only the minimum periodic payments and obtained no additional extensions of credit. 
189 TRUTH IN LENDING ACT Sec. 127A 

(10) STATEMENT CONCERNING BALLOON PAYMENTS.—If, 

under any repayment option of the plan, the payment of not 

more than the minimum periodic payments required under 

such option over the length of the repayment period— 

(A) would not repay any of the principal balance; or 

(B) would repay less than the outstanding balance by 

the end of such period, 

as the case may be, a statement of such fact, including an explicit statement that at the end of such repayment period a 

balloon payment (as defined in section 147(f)) would result 

which would be required to be paid in full at that time. 

(11) NEGATIVE AMORTIZATION.—If applicable, a statement 

that— 

(A) any limitation in the plan on the amount of any 

increase in the minimum payments may result in negative 

amortization; 

(B) negative amortization increases the outstanding 

principal balance of the account; and 

(C) negative amortization reduces the consumer's equity in the consumer's dwelling. 

(12) LIMITATIONS AND MINIMU M AMOUNT REQUIREMENTS ON 

EXTENSIONS OF CREDIT.— 

( A) NUMBE R AND DOLLAR AMOUNT LIMITATIONS.—Any 

limitation contained in the plan on the number of extensions of credit and the amount of credit which may be obtained during any month or other defined time period. 

(B) MINIMU M BALANCE AND OTHER TRANSACTION 

AMOUNT REQUIREMENTS.—Any requirement which establishes a minimum amount for— 

(i) the initial extension of credit to an account 

under the plan; 

(ii) any subsequent extension of credit to an account under the plan; or 

(iii) any outstanding balance of an account under 

the plan. 

(13) STATEMENT REGARDING CONSULTATION OF TAX ADVISOR.—A statement that the consumer should consult a tax advisor regarding the deductibility of interest and charges under 

the plan. 

(14) DISCLOSURE REQUIREMENTS ESTABLISHED BY BOARD.— 

Any other term which the Board requires, in regulations, to be 

disclosed. 

(b) TIM E AND FOR M OF DISCLOSURES.— 

(1) TIM E OF DISCLOSURE.— 

(A) IN GENERAL.—The disclosures required under subsection (a) with respect to any open end consumer credit 

plan which provides for any extension of credit which is secured by the consumer's principal dwelling and the pamphlet required under subsection (e) shall be provided to 

any consumer at the time the creditor distributes an application to establish an account under such plan to such consumer. 

(B) TELEPHONE, PUBLICATIONS, AND 3d PARTY APPLICATIONS.—In the case of telephone applications, applications 
Sec. 127A TRUTH IN LENDING ACT 190 

contained in magazines or other publications, or applications provided by a third party, the disclosures required 

under subsection (a) and the pamphlet required under subsection (e) shall be provided by the creditor before the end 

of the 3-day period beginning on the date the creditor receives a completed application from a consumer. 

(2) FORM.— 

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

(1)(B), the disclosures required under subsection (a) shall 

be provided on or with any application to establish an account under an open end consumer credit plan which provides for any extension of credit which is secured by the 

consumer's principal dwelling. 

(B) SEGREGATION OF REQUIRED DISCLOSURES FROM 

OTHER INFORMATION.—The disclosures required under subsection (a) shall be conspicuously segregated from all other 

terms, data, or additional information provided in connection with the application, either by grouping the disclosures separately on the application form or by providing 

the disclosures on a separate form, in accordance with regulations of the Board. 

( C) PRECEDENCE OF CERTAIN INFORMATION.—The disclosures required by paragraphs (5), (6), and (7) of subsection (a) shall precede all of the other required disclosures. 

( D ) SPECIAL PROVISION RELATING TO VARIABLE INTEREST RATE INFORMATION.—Whethe r or not the disclosures 

required under subsection (a) are provided on the application form, the variable rate information described in subsection (a)(2) may be provided separately from the other 

information required to be disclosed. 

(3) REQUIREMENT FOR HISTORICAL TABLE.—I n preparing 

the table required under subsection (a)(2)(G), the creditor shall 

consistently select one rate of interest for each year and the 

manner of selecting the rate from year to year shall be consistent with the plan. 

(c) 3d PARTY APPLICATIONS.—In the case of an application to 

open an account under any open end consumer credit plan described in subsection (a) which is provided to a consumer by any 

person other than the creditor— 

(1) such person shall provide such consumer with— 

(A) the disclosures required under subsection (a) with 

respect to such plan, in accordance with subsection (b); 

and 

(B) the pamphlet required under subsection (e); or 

(2) if such person cannot provide specific terms about the 

plan because specific information about the plan terms is not 

available, no nonrefundable fee may be imposed in connection 

with such application before the end of the 3-day period beginning on the date the consumer receives the disclosures required under subsection (a) with respect to the application. 

(d) PRINCIPAL DWELLING DEFINED.—Fo r purposes of this section and sections 137 and 147, the term ''principal dwelling" includes any second or vacation home of the consumer. 
191 TRUTH IN LENDING ACT Sec. 127A 

(e) PAMPHLET.—In addition to the disclosures required under 

subsection (a) with respect to an application to open an account 

under any open end consumer credit plan described in such subsection, the creditor or other person providing such disclosures to 

the consumer shall provide— 

(1) a pamphlet published by the Board pursuant to section 

4 of the Home Equity Consumer Protection Act of 1988; or 

(2) any pamphlet which provides substantially similar 

information to the information described in such section, as 

determined by the Board. 

§ 128. [15 U.S.C. 1638] Consumer credit not under open end 

credit plans 

(a) For each consumer credit transaction other than under an 

open end credit plan, the creditor shall disclose each of the following items, to the extent applicable: 

(1) The identity of the creditor required to make disclosure. 

(2)(A) The ''amount financed'', using that term, which shall 

be the amount of credit of which the consumer has actual use. 

This amount shall be computed as follows, but the computations need not be disclosed and shall not be disclosed with the 

disclosures conspicuously segregated in accordance with subsection (b)(1): 

(i) take the principal amount of the loan or the cash 

price less downpayment and trade-in; 

(ii) add any charges which are not part of the finance 

charge or of the principal amount of the loan and which 

are financed by the consumer, including the cost of any 

items excluded from the finance charge pursuant to section 

106; and 

(iii) subtract any charges which are part of the finance 

charge but which will be paid by the consumer before or 

at the time of the consummation of the transaction, or 

have been withheld from the proceeds of the credit. 

(B) In conjunction with the disclosure of the amount financed, a creditor shall provide a statement of the consumer's 

right to obtain, upon a written request, a written itemization 

of the amount financed. The statement shall include spaces for 

a ''yes'' and ''no'' indication to be initialed by the consumer to 

indicate whether the consumer wants a written itemization of 

the amount financed. upon receiving an affirmative indication, 

the creditor shall provide, at the time other disclosures are required to be furnished, a written itemization of the amount financed. For the purposes of this subparagraph, ''itemization of 

the amount financed'' means a disclosure of the following 

items, to the extent applicable: 

(i) the amount that is or will be paid directly to the 

consumer; 

(ii) the amount that is or will be credited to the consumer's account to discharge obligations owed to the creditor; 

(iii) each amount that is or will be paid to third persons by the creditor on the consumer's behalf, together 
Sec. 127A TRUTH IN LENDING ACT 192 

with an identification of or reference to the third person; 

and 

(iv) the total amount of any charges described in the 

preceding subparagraph (A)(iii). 

(3) The ''finance charge'', not itemized, using that term. 

(4) The finance charge expressed as a ''annual percentage 

rate'', using that term. This shall not be required if the amount 

financed does not exceed $75 and the finance charge does not 

exceed $5, or if the amount financed exceeds $75 and the finance charge does not exceed $7.50. 

(5) The sum of the amount financed and the finance 

charge, which shall be termed the ''total of payments''. 

(6) The number, amount, and due dates or period of payments scheduled to repay the total of payments. 

(7) In a sale of property or services in which the seller is 

the creditor required to disclose pursuant to section 121(b), the 

''total sale price,'' using that term, which shall be the total of 

the cash price of the property or services, additional charges, 

and the finance charge. 

(8) Descriptive explanations of the terms ''amount financed'', ''finance charge'', ''annual percentage rate'', ''total of 

payments'', and ''total sale price'' as specified by the Board. The 

descriptive explanation of ''total sale price'' shall include reference to the amount of the downpayment. 

(9) where the credit is secured, a statement that a security 

interest has been taken in (A) the property which is purchased 

as part of the credit transaction, or (B) property not purchased 

as part of the credit transaction identified by item or type. 

(10) Any dollar charge or percentage amount which may be 

imposed by a creditor solely on account of a late payment, 

other than a deferral or extension charge. 

(11) A statement indicating whether or not the consumer 

is entitled to a rebate of any finance charge upon refinancing 

or prepayment in full pursuant to acceleration or otherwise, if 

the obligation involves a precomputed finance charge. A statement indicating whether or not a penalty will be imposed in 

those same circumstances if the obligation involves a finance 

charge computed from time to time by application of a rate to 

the unpaid principal balance. 

(12) A statement that the consumer should refer to the 

appropriate contract document for any information such document provides about nonpayment, default, the right to accelerate the maturity of the debt, and prepayment rebates and 

penalties. 

(13) In any residential mortgage transaction, a statement 

indicating whether a subsequent purchaser or assignee of the 

consumer may assume the debt obligation on its original terms 

and conditions. 

(14) In the case of any variable interest rate residential 

mortgage transaction, in disclosures provided at application as 

prescribed by the Board for a variable rate transaction secured 

by the consumer's principal dwelling, at the option of the creditor, a statement that the periodic payments may increase or 

decrease substantially, and the maximum interest rate and 
193 TRUTH IN LENDING ACT Sec. 127A 

payment for a $10,000 loan originated at a recent interest rate, 

as determined by the Board, assuming the maximum periodic 

increases in rates and payments under the program, or a historical example illustrating the effects of interest rate changes 

implemented according to the loan program. 

(b)(1) Except as otherwise provided in this chapter, the disclosures required under subsection (a) shall be made before the credit 

is extended. Except for the disclosures required by subsection (a)(1) 

of this section, all disclosures required under subsection (a) and 

any disclosure provided for in subsection (b), (c), or (d) of section 

106 shall be conspicuously segregated from all other terms, data, 

or information provided in connection with a transaction, including 

any computations or itemization. 

(2) in the case of a residential mortgage transaction, as defined 

in section 103(w), which is also subject to the Real Estate Settlement Procedures Act, good faith estimates of the disclosures required under subsection (a) shall be made in accordance with regulations of the Board under section 121(c) before the credit is extended, or shall be delivered or placed in the mail not later than 

three business days after the creditor receives the consumer's written application, whichever is earlier. if the disclosure statement 

furnished within three days of the written application contains an 

annual percentage rate which is subsequently rendered inaccurate 

within the meaning of section 107(c), the creditor shall furnish another statement at the time of settlement or consummation. 

(c)(1) If a credit receives a purchase order by mail or telephone 

without personal solicitation, and the cash price and the total sale 

price and the terms of financing, including the annual percentage 

rate, are set forth in the creditor's catalog or other printed material 

distributed to the public, then the disclosures required under subsection (a) may be made at any time not later than the date the 

first payment is due. 

(2) if a creditor receives a request for a loan by mail or telephone without personal solicitation and the terms of financing, including the annual percentage rate for representative amounts of 

credit, are set forth in the creditor's printed material distributed to 

the public, or in the contract of loan or other printed material 

delivered to the obligor, then the disclosures required under subsection (a) may be made at any time not later than the date the 

first payment is due. 

(d) if a consumer credit sale is one of a series of consumer 

credit sales transactions made pursuant to an agreement providing 

for the addition of the deferred payment price of that sale to an existing outstanding balance, and the person to whom the credit is 

extended has approved in writing both the annual percentage rate 

or rates and the method of computing the finance charge or 

charges, and the creditor retains no security interest in any property as to which he has received payments aggregating the amount 

of the sales price including any finance charges attributable 

thereto, then the disclosure required under subsection (a) for the 

particular sale may be made at any time not later than the date 

the first payment for that sale is due. For the purposes of this subsection, in the case of items purchased on different dates, the first 

purchased shall be deemed first paid for, and in the case of items 
Sec. 127A TRUTH IN LENDING ACT 194 

purchased on the same date, the lowest priced shall be deemed 

first paid for. 

SEC. 129. [15 U.S.C. 1639] REQUIREMENTS FOR CERTAI N MORTGAGES. 

(a) DISCLOSURES.— 

(1) SPECIFIC DISCLOSURES.—In addition to other disclosures required under this title, for each mortgage referred to 

in section 103(aa), the creditor shall provide the following disclosures in conspicuous type size: 

(A) ''You are not required to complete this agreement 

merely because you have received these disclosures or 

have signed a loan application.''. 

(B) ''if you obtain this loan, the lender will have a 

mortgage on your home. You could lose your home, and 

any money you have put into it, if you do not meet your 

obligations under the loan.''. 

(2) ANNUA L PERCENTAGE RATE.—I n addition to the disclosures required under paragraph (1), the creditor shall 

disclose— 

(A) in the case of a credit transaction with a fixed rate 

of interest, the annual percentage rate and the amount of 

the regular monthly payment; or 

(B) in the case of any other credit transaction, the annual percentage rate of the loan, the amount of the regular 

monthly payment, a statement that the interest rate and 

monthly payment may increase, and the amount of the 

maximum monthly payment, based on the maximum interest rate allowed pursuant to section 1204 of the Competitive Equality Banking Act of 1987. 

(b) TIM E OF DISCLOSURES.— 

(1) IN GENERAL.—The disclosures required by this section 

shall be given not less than 3 business days prior to consummation of the transaction. 

(2) NE W DISCLOSURES REQUIRED.— 

(A) IN GENERAL.—After providing the disclosures required by this section, a creditor may not change the terms 

of the extension of credit if such changes make the disclosures inaccurate, unless new disclosures are provided that 

meet the requirements of this section. 

(B) TELEPHONE DISCLOSURE.—A creditor may provide 

new disclosures pursuant to subparagraph (A) by telephone, if— 

(i) the change is initiated by the consumer; and 

(ii) at the consummation of the transaction under 

which the credit is extended— 

(i) the creditor provides to the consumer the 

new disclosures, in writing; and 

(II) the creditor and consumer certify in writing that the new disclosures were provided by 

telephone, by not later than 3 days prior to the 

date of consummation of the transaction. 

(3) MODIFICATIONS.—The Board may, if it finds that such 

action is necessary to permit homeowners to meet bona fide 

personal financial emergencies, prescribe regulations author-
195 TRUTH IN LENDING ACT Sec. 127A 

izing the modification or waiver of rights created under this 

subsection, to the extent and under the circumstances set forth 

in those regulations. 

(c) N O PREPAYMENT PENALTY.— 

(1) I N GENERAL.— 

(A) LIMITATION ON TERMS.—A mortgage referred to in 

section 103(aa) may not contain terms under which a consumer must pay a prepayment penalty for paying all or 

part of the principal before the date on which the principal 

is due. 

(B) CONSTRUCTION.—For purposes of this subsection, 

any method of computing a refund of unearned scheduled 

interest is a prepayment penalty if it is less favorable to 

the consumer than the actuarial method (as that term is 

defined in section 933(d) of the Housing and Community 

Development Act of 1992). 

(2) EXCEPTION.—Notwithstanding paragraph (1), a mortgage referred to in section 103(aa) may contain a prepayment 

penalty (including terms calculating a refund by a method that 

is not prohibited under section 933(b) of the Housing and Community Development Act of 1992 for the transaction in question) if— 

(A) at the time the mortgage is consummated— 

(i) the consumer is not liable for an amount of 

monthly indebtedness payments (including the amount 

of credit extended or to be extended under the transaction) that is greater than 50 percent of the monthly 

gross income of the consumer; and 

(ii) the income and expenses of the consumer are 

verified by a financial statement signed by the consumer, by a credit report, and in the case of employment income, by payment records or by verification 

from the employer of the consumer (which verification 

may be in the form of a copy of a pay stub or other 

payment record supplied by the consumer); 

(B) the penalty applies only to a prepayment made 

with amounts obtained by the consumer by means other 

than a refinancing by the creditor under the mortgage, or 

an affiliate of that creditor; 

(C) the penalty does not apply after the end of the 5-

year period beginning on the date on which the mortgage 

is consummated; and 

(D) the penalty is not prohibited under other applicable law. 

(d) LIMITATIONS AFTER DEFAULT.— A mortgage referred to in 

section 103(aa) may not provide for an interest rate applicable after 

default that is higher than the interest rate that applies before default. If the date of maturity of a mortgage referred to in subsection

 1 103(aa) is accelerated due to default and the consumer is 

entitled to a rebate of interest, that rebate shall be computed by 

any method that is not less favorable than the actuarial method (as 

1

 So in law. Probably should be ''section''. 
Sec. 127A TRUTH IN LENDING ACT 196 

that term is defined in section 933(d) of the Housing and Community Development Act of 1992). 

(e) N O BALLOON PAYMENTS.—A mortgage referred to in section 

103(aa) having a term of less than 5 years may not include terms 

under which the aggregate amount of the regular periodic payments would not fully amortize the outstanding principal balance. 

(f) N O NEGATIVE AMORTIZATION.—A mortgage referred to in 

section 103(aa) may not include terms under which the outstanding 

principal balance will increase at any time over the course of the 

loan because the regular periodic payments do not cover the full 

amount of interest due. 

(g) N O PREPAID PAYMENTS.—A mortgage referred to in section 

103(aa) may not include terms under which more than 2 periodic 

payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the consumer. 

(h) PROHIBITION ON EXTENDING CREDIT WITHOU T REGARD TO 

PAYMENT ABILITY OF CONSUMER.—A creditor shall not engage in a 

pattern or practice of extending credit to consumers under mortgages referred to in section 103(aa) based on the consumers' collateral without regard to the consumers' repayment ability, including 

the consumers' current and expected income, current obligations, 

and employment. 

(i) REQUIREMENTS FOR PAYMENTS UNDE R HOM E IMPROVEMENT 

CONTRACTS.—A creditor shall not make a payment to a contractor 

under a home improvement contract from amounts extended as 

credit under a mortgage referred to in section 103(aa), other than— 

(1) in the form of an instrument that is payable to the consumer or jointly to the consumer and the contractor; or 

(2) at the election of the consumer, by a third party escrow 

agent in accordance with terms established in a written agreement signed by the consumer, the creditor, and the contractor 

before the date of payment. 

(j) CONSEQUENCE OF FAILURE T O COMPLY.—An y mortgage that 

contains a provision prohibited by this section shall be deemed a 

failure to deliver the material disclosures required under this title, 

for the purpose of section 125. 

(k) DEFINITION.—Fo r purposes of this section, the term ''affiliate'' has the same meaning as in section 2(k) of the Bank Holding 

Company Act of 1956. 

(l) DISCRETIONARY REGULATORY AUTHORITY OF BOARD.— 

(1) EXEMPTIONS.—The Board may, by regulation or order, 

exempt specific mortgage products or categories of mortgages 

from any or all of the prohibitions specified in subsections (c) 

through (i), if the Board finds that the exemption— 

(A) is in the interest of the borrowing public; and 

(B) will apply only to products that maintain and 

strengthen home ownership and equity protection. 

(2) PROHIBITIONS.—The Board, by regulation or order, 

shall prohibit acts or practices in connection with— 

(A) mortgage loans that the Board finds to be unfair, 

deceptive, or designed to evade the provisions of this section; and 
197 TRUTH IN LENDING ACT Sec. 127A 

(B) refinancing of mortgage loans that the Board finds 

to be associated with abusive lending practices, or that are 

otherwise not in the interest of the borrower. 

§ 130. [15 U.S.C. 1640] Civil liability 

(a) Except as otherwise provided in this section, any creditor 

who fails to comply with any requirement imposed under this chapter, including any requirement under section 125, or chapter 4 or 

5 of this title with respect to any person is liable to such person 

in an amount equal to the sum of— 

(1) any actual damage sustained by such person as a result 

of the failure; 

(2)(A)(i) in the case of an individual action twice the 

amount of any finance charge in connection with the transaction, (ii) in the case of an individual action relating to a consumer lease under chapter 5 of this title, 25 per centum of the 

total amount of monthly payments under the lease, except that 

the liability under this subparagraph shall not be less than 

$100 nor greater than $1,000, or (iii) in the case of an individual action relating to a credit transaction not under an open 

end credit plan that is secured by real property or a dwelling, 

not less than $200 or greater than $2,000; or 

(B) in the case of a class action, such amount as the court 

may allow, except that as to each member of the class no minimum recovery shall be applicable, and the total recovery 

under this subparagraph in any class action or series of class 

actions arising out of the same failure to comply by the same 

creditor shall not be more than the lesser of $500,000 or 1 per 

centum of the net worth of the creditor; 

(3) in the case of any successful action to enforce the foregoing liability or in any action in which a person is determined 

to have a right of rescission under section 125, the costs of the 

action, together with a reasonable attorney's fee as determined 

by the court; and 

(4) in the case of a failure to comply with any requirement 

under section 129, an amount equal to the sum of all finance 

charges and fees paid by the consumer, unless the creditor 

demonstrates that the failure to comply is not material. 

In determining the amount of award in any class action, the court 

shall consider, among other relevant factors, the amount of any actual damages awarded, the frequency and persistence of failures of 

compliance by the creditor, the resources of the creditor, the number of persons adversely affected, and the extent to which the creditor's failure of compliance was intentional. In connection with the 

disclosures referred to in subsection (a) and (b) of section 127, a 

creditor shall have a liability determined under paragraph (2) only 

for failing to comply with the requirements of section 125, section 

127(a), or of paragraph (4), (5), (6), (7), (8), (9), or (10) of section 

127(b) or for failing to comply with disclosure requirements under 

State law for any term or item which the Board has determined to 

be substantially the same in meaning under section 111(a)(2) as 

any of the terms or items referred to in section 127(a) or any of 

those paragraphs of section 127(b). In connection with the disclosures referred to in subsection (c) or (d) of section 127, a card 
Sec. 127A TRUTH IN LENDING ACT 198 

issuer shall have a liability under this section only to a cardholder 

who pays a fee described in section 127(c)(1)(A)(ii)(I) or section 

127(c)(4)(A)(i) or who uses the credit card or charge card. In connection with the disclosures referred to in section 128, a creditor 

shall have a liability determined under paragraph (2) only for failing to comply with the requirements of section 125 or of paragraph 

(2) (insofar as it requires a disclosure of the ''amount financed''), 

(3), (4), (5), (6), or (9) of section 128(a), or for failing to comply with 

disclosure requirements under State law for any term which the 

Board has determined to be substantially the same in meaning 

under section 111(a)(2) as any of the terms referred to in any of 

those paragraphs of section 128(a). With respect to any failure to 

make disclosures required under this chapter or chapter 4 or 5 of 

this title, liability shall be imposed only upon the creditor required 

to make disclosure, except as provided in section 131. 

(b) A creditor or assignee has no liability under this section or 

section 108 or section 112 for any failure to comply with any 

requirement imposed under this chapter or chapter 5, if within 

sixty days after discovering an error, whether pursuant to a final 

written examination report or notice issued under section 108(e)(1) 

or through the creditor's or assignee's own procedures, and prior to 

the institution of an action under this section or the receipt of written notice of the error from the obligor, the creditor or assignee 

notifies the person concerned of the error and makes whatever 

adjustments in the appropriate account are necessary to assure 

that the person will not be required to pay an amount in excess of 

the charge actually disclosed, or the dollar equivalent of the annual 

percentage rate actually disclosed, whichever is lower. 

(c) A creditor or assignee may not be held liable in any action 

brought under this section or section 125 for a violation of this title 

if the creditor or assignee shows by a preponderance of evidence 

that the violation was not intentional and resulted from a bona fide 

error notwithstanding the maintenance of procedures reasonably 

adapted to avoid any such error. Examples of a bona fide error include, but are not limited to, clerical, calculation, computer malfunction and programing, and printing errors, except that an error 

of legal judgment with respect to a person's obligations under this 

title is not a bona fide error. 

(d) When there are multiple obligors in a consumer credit 

transaction or consumer lease, there shall be no more than one recovery of damages under subsection (a)(2) for a violation of this 

title. 

(e) Any action under this section may be brought in any United 

States district court, or in any other court of competent 

juridisdiction, within one year from the date of the occurrence of 

the violation. This subsection does not bar a person from asserting 

a violation of this title in an action to collect the debt which was 

brought more than one year from the date of the occurrence of the 

violation as a matter of defense by recoupment or set-off in such 

action, except as otherwise provided by State law. An action to enforce a violation of section 129 may also be brought by the appropriate State attorney general in any appropriate United States district court, or any other court of competent jurisdiction, not later 

than 3 years after the date on which the violation occurs. The State 
199 TRUTH IN LENDING ACT Sec. 127A 

attorney general shall provide prior written notice of any such civil 

action to the Federal agency responsible for enforcement under section 108 and shall provide the agency with a copy of the complaint. 

If prior notice is not feasible, the State attorney general shall provide notice to such agency immediately upon instituting the action. 

The Federal agency may— 

(1) intervene in the action; 

(2) upon intervening— 

(A) remove the action to the appropriate united states 

district court, if it was not originally brought there; and 

(B) be heard on all matters arising in the action; and 

(3) file a petition for appeal. 

(f) No provision of this section, section 108(b), section 108(c), 

section 108(e), or section 112 imposing any liability shall apply to 

any act done or omitted in good faith in conformity with any rule, 

regulation, or interpretation thereof by the Board or in conformity 

with any interpretation or approval by an official or employee of 

the Federal Reserve System duly authorized by the Board to issue 

such interpretations or approvals under such procedures as the 

Board may prescribe therefor, notwithstanding that after such act 

or omission has occurred, such rule, regulation, interpretation, or 

approval is amended, rescinded, or determined by judicial or other 

authority to be invalid for any reason. 

(g) The multiple failure to disclose to any person any information required under this chapter or chapter 4 or 5 of this title to 

be disclosed in connection with a single account under an open end 

consumer credit plan, other single consumer credit sale, consumer 

loan, consumer lease, or other extension of consumer credit, shall 

entitle the person to a single recovery under this section but continued failure to disclose after a recovery has been granted shall 

give rise to rights to additional recoveries. This subsecton does not 

bar any remedy permitted by section 125. 

(h) A person may not take any action to offset any amount for 

which a creditor or asignee is potentially liable to such person 

under subsection (a)(2) against any amount owed by such person, 

unless the amount of the creditor's or assignee's liability under this 

title has been determined by judgment of a court of competent 

jurisdiction in an action of which such person was a party. This 

subsection does not bar a consumer then in default on the obligation from asserting a violation of this title as an original action, or 

as a defense or counterclaim to an action to collect amounts owed 

by the consumer brought by a person liable under this title. 

(i) CLASS ACTIO N MORATORIUM. — 

(1) IN GENERAL.—During the period beginning on the date 

of the enactment of the Truth in Lending Class Action Relief 

Act of 1995 and ending on October 1, 1995, no court may enter 

any order certifying any class in any action under this title— 

(A) which is brought in connection with any credit 

transaction not under an open end credit plan which is secured by a first lien on real property or a dwelling and 

constitutes a refinancing or consolidation of an existing 

extension of credit; and 

(B) which is based on the alleged failure of a 

creditor— 
Sec. 127A TRUTH IN LENDING ACT 2 00 

(i) to include a charge actually incurred (in connection with the transaction) in the finance charge disclosed pursuant to section 128; 

(ii) to properly make any other disclosure required 

under section 128 as a result of the failure described 

in clause (i); or 

(iii) to provide proper notice of rescission rights 

under section 125(a) due to the selection by the creditor of the incorrect form from among the model forms 

prescribed by the Board or from among forms based on 

such model forms. 

(2) EXCEPTIONS FOR CERTAIN ALLEGED VIOLATIONS.—Para -

graph (1) shall not apply with respect to any action— 

(A) described in clause (i) or (ii) of paragraph (1)(B), 

if the amount disclosed as the finance charge results in an 

annual percentage rate that exceeds the tolerance provided 

in section 107(c); or 

(B) described in paragraph (1)(B)(iii), if— 

(i) no notice relating to rescission rights under section 125(a) was provided in any form; or 

(ii) proper notice was not provided for any reason 

other than the reason described in such paragraph. 

§ 131. [15 U.S.C. 1641] Liability of assignees 

(a) Except as otherwise specifically provided in this title, any 

civil action for a violation of this title or proceeding under section 

108 which may be brought against a creditor may be maintained 

against any assignee of such creditor only if the violation for which 

such action or proceeding is brought is apparent on the face of the 

disclosure statement, except where the assignment was involuntary. For the purpose of this section, a violation apparent on the 

face of the disclosure statement includes, but is not limited to (1) 

a disclosure which can be determined to be incomplete or inaccurate from the face of the disclosure statement or other documents 

assigned, or (2) a disclosure which does not use the terms required 

to be used by this title. 

(b) Except as provided in section 125(c), in any action or proceeding by or against any subsequent assignee of the original creditor without knowledge to the contrary by the assignee when he acquires the obligation, written acknowledgement of receipt by a person to whom a statement is required to be given pursuant to this 

title shall be conclusive proof of the delivery thereof and, except as 

provided in subsection (a), of compliance with this chapter. This 

section does not affect the rights of the obligor in any action 

against the original creditor. 

(c) Any consumer who has the right to rescind a transaction 

under section 125 may rescind the transaction as against any assignee of the obligation. 

(d) RIGHTS UPO N ASSIGNMEN T OF CERTAI N MORTGAGES.— 

(1) IN GENERAL.—Any person who purchases or is otherwise assigned a mortgage referred to in section 103(aa) shall 

be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor of the 

mortgage, unless the purchaser or assignee demonstrates, by a 
201 TRUTH IN LENDING ACT Sec. 127A 

preponderance of the evidence, that a reasonable person exercising ordinary due diligence, could not determine, based on 

the documentation required by this title, the itemization of the 

amount financed, and other disclosure of disbursements that 

the mortgage was a mortgage referred to in section 103(aa). 

The preceding sentence does not affect rights of a consumer 

under subsection (a), (b), or (c) of this section or any other provision of this title. 

(2) LIMITATION ON DAMAGES.—Notwithstanding any other 

provision of law, relief provided as a result of any action made 

permissible by paragraph (1) may not exceed— 

(A) with respect to actions based upon a violation of 

this title, the amount specified in section 130; and 

(B) with respect to all other causes of action, the sum 

of— 

(i) the amount of all remaining indebtedness; and 

(ii) the total amount paid by the consumer in connection with the transaction. 

(3) OFFSET.—The amount of damages that may be 

awarded under paragraph (2)(B) shall be reduced by the 

amount of any damages awarded under paragraph (2)(A). 

(4) NOTICE.—Any person who sells or otherwise assigns a 

mortgage referred to in section 103(aa) shall include a prominent notice of the potential liability under this subsection as 

determined by the Board. 

(e) LIABILITY OF ASSIGNEE FOR CONSUMER CREDIT TRANSACTIONS SECURED BY REAL PROPERTY.— 

(1) IN GENERAL.—Except as otherwise specifically provided 

in this title, any civil action against a creditor for a violation 

of this title, and any proceeding under section 108 against a 

creditor, with respect to a consumer credit transaction secured 

by real property may be maintained against any assignee of 

such creditor only if— 

(A) the violation for which such action or proceeding is 

brought is apparent on the face of the disclosure statement 

provided in connection with such transaction pursuant to 

this title; and 

(B) the assignment to the assignee was voluntary. 

(2) VIOLATION APPARENT ON THE FACE OF THE DISCLOSURE 

DESCRIBED.—For the purpose of this section, a violation is apparent on the face of the disclosure statement if— 

(A) the disclosure can be determined to be incomplete 

or inaccurate by a comparison among the disclosure statement, any itemization of the amount financed, the note, or 

any other disclosure of disbursement; or 

(B) the disclosure statement does not use the terms or 

format required to be used by this title. 

(f) TREATMENT OF SERVICER.— 

(1) I N GENERAL.—A servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as 

an assignee of such obligation for purposes of this section unless the servicer is or was the owner of the obligation. 

(2) SERVICER NOT TREATED AS OWNER ON BASIS OF ASSIGNMEN T FOR ADMINISTRATIVE CONVENIENCE.—A servicer of a con-
Sec. 127A TRUTH IN LENDING ACT 2 02 

sumer obligation arising from a consumer credit transaction 

shall not be treated as the owner of the obligation for purposes 

of this section on the basis of an assignment of the obligation 

from the creditor or another assignee to the servicer solely for 

the administrative convenience of the servicer in servicing the 

obligation. Upon written request by the obligor, the servicer 

shall provide the obligor, to the best knowledge of the servicer, 

with the name, address, and telephone number of the owner of 

the obligation or the master servicer of the obligation. 

(3) SERVICER DEFINED.—For purposes of this subsection, 

the term ''servicer'' has the same meaning as in section 6(i)(2) 

of the Real Estate Settlement Procedures Act of 1974. 

(4) APPLICABILITY.—This subsection shall apply to all consumer credit transactions in existence or consummated on or 

after the date of the enactment of the Truth in Lending Act 

Amendments of 1995. 

§ 132. [15 U.S.C. 1642] Issuance of credit cards 

No credit card shall be issued except in response to a request 

or application therefor. This prohibition does not apply to the 

issuance of a credit card in renewal of, or in substitution for, an 

accepted credit card. 

§ 133. [15 U.S.C. 1643] Liability of holder of credit card 

(a)(1) A cardholder shall be liable for the unauthorized use of 

a credit card only if— 

(A) the card is an accepted credit card; 

(B) the liability is not in excess of $50; 

(C) the card issuer give adequate notice to the cardholder 

of the potential liability; 

(D) the card issuer has provided the cardholder with a 

description of a means by which the card issuer may be notified of loss or theft of the card, which description may be provided on the face or reverse side of the statement required by 

section 127(b) or on a separate notice accompanying such statement; 

(E) the unauthorized use occurs before the card issuer has 

been notified that an unauthorized use of the credit card has 

occurred or may occur as the result of loss, theft, or otherwise; 

and 

(F) the card issuer has provided a method whereby the 

user of such card can be identified as the person authorized to 

use it. 

(2) For purposes of this section, a card issuer has been notified 

when such steps as may be reasonably required in the ordinary 

course of business to provide the card issuer with the pertinent 

information have been taken, whether or not any particular officer, 

employee, or agent of the card issuer does in fact receive such 

information. 

(b) in any action by a card issuer to enforce liability for the use 

of a credit card, the burden of proof is upon the card issuer to show 

that the use was authorized or, if the use was unauthorized, then 

the burden of proof is upon the card issuer to show that the condi-
203 TRUTH IN LENDING ACT Sec. 127A 

tions of liability for the unauthorized use of a credit card, as set 

forth in subsection (a), have been met. 

(c) Nothing in this section imposes liability upon a cardholder 

for the unauthorized use of a credit card in excess of his liability 

for such use under other applicable law or under any agreement 

with the card issuer. 

(d) Except as provided in this section, a cardholder incurs no 

liability from the unauthorized use of a credit card. 

§ 134. [15 U.S.C. 1644] Fraudulent use of credit card 

(a) Whoever knowingly in a transaction affecting interstate or 

foreign commerce, uses or attempts or conspires to use any counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained credit card to obtain money, goods, services, or anything else 

of value which within any one-year period has a value aggregating 

$1,000 or more; or 

(b) whoever, with unlawful or fraudulent intent, transports or 

attempts or conspires to transport in interstate or foreign commerce a counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained credit card knowing the same to be counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained; or 

(c) whoever, with unlawful or fraudulent intent, uses any 

instrumentality of interstate or foreign commerce to sell or transport a counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained credit card knowing the same to be counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained; or 

(d) whoever knowingly receives, conceals, uses, or transports 

money, goods, services, or anything else of value (except tickets for 

interstate or foreign transportation) which (1) within any one-year 

period has a value aggregating $1,000 or more, (2) has moved in 

or is part of, or which constitutes interstate or foreign commerce, 

and (3) has been obtained with a counterfeit, fictitious, altered, 

forged, lost, stolen, or fraudulently obtained credit card; or 

(e) Whoever knowingly receives, conceals, uses, sells, or transports in interstate or foreign commerce one or more tickets for 

interstate or foreign transportation, which (1) within any one-year 

period have a value aggregating $500 or more, and (2) have been 

purchased or obtained with one or more counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained credit cards; or 

(f) whoever in a transaction affecting interstate or foreign commerce furnishes money, property, services, or anything else of 

value, which within any one-year period has a value aggregating 

$1,000 or more, through the use of any counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained credit card 

knowing the same to be counterfeit, fictitious, altered, forged, lost, 

stolen, or fraudulently obtained— 

shall be fined not more than $10,000 or imprisoned not more than 

ten years, or both. 

§ 135. [15 U.S.C. 1645] Business credit cards 

The exemption provided by section 104(1) does not apply to the 

provisions of sections 132, 133, and 134, except that a card issuer 

and a business or other organization which provides credit cards 

issued by the same card issuer to ten or more of its employees may 
Sec. 127A TRUTH IN LENDING ACT 2 04 

by contract agree as to liability of the business or other organization with respect to unauthorized use of such credit cards without 

regard to the provisions of section 133, but in no case may such 

business or other organization or card issuer impose liability upon 

any employee with respect to unauthorized use of such a credit 

card except in accordance with and subject to the limitations of section 133. 

§ 136. [15 U.S.C. 1646] Dissemination of annual percentage 

rates 

(a) The Board shall collect, publish, and disseminate to the 

public, on a demonstration basis in a number of standard metropolitan statistical areas to be determined by the Board, the annual 

percentage rates charged for representative types of nonsale credit 

by creditors in such areas. For the purpose of this section, the 

Board is authorized to require creditors in such areas to furnish 

information necessary for the Board to collect, publish, and disseminate such information. 

(b) CREDIT CARD PRICE AND AVAILABILITY INFORMATION.— 

(1) COLLECTION REQUIRED.—The Board shall collect, on a 

semiannual basis, credit card price and availability information, including the information required to be disclosed under 

section 127(c) of this chapter, from a broad sample of financial 

institutions which offer credit card services. 

(2) SAMPLE REQUIREMENTS.—The broad sample of financial 

institutions required under paragraph (1) shall include— 

(A) the 25 largest issuers of credit cards; and 

(B) not less than 125 additional financial institutions 

selected by the Board in a manner that ensures— 

(i) an equitable geographical distribution within 

the sample; and 

(ii) the representation of a wide spectrum of institutions within the sample. 

(3) REPORT OF INFORMATION FROM SAMPLE.—Each financial 

institution in the broad sample established pursuant to paragraph (2) shall report the information to the Board in accordance with such regulations or orders as the Board may prescribe. 

(4) PUBLIC AVAILABILITY OF COLLECTED INFORMATION, REPORT TO CONGRESS.—The Board shall— 

(A) make the information collected pursuant to this 

subsection available to the public upon request; and 

(B) report such information semiannually to Congress. 

(c) The Board is authorized to enter into contracts or other 

arrangements with appropriate persons, organizations, or State 

agencies to carry out its functions under subsections (a) and (b) and 

to furnish financial assistance in support thereof. 

SEC. 137. [15 U.S.C. 1648] HOM E EQUITY PLANS. 

(a) INDEX REQUIREMENT.—I n the case of extensions of credit 

under an open end consumer credit plan which are subject to a 

variable rate and are secured by a consumer's principal dwelling, 

the index or other rate of interest to which changes in the annual 

percentage rate are related shall be based on an index or rate of 
205 TRUTH IN LENDING ACT Sec. 127A 

interest which is publicly available and is not under the control of 

the creditor. 

(b) GROUND S FOR ACCELERATIO N OF OUTSTANDIN G BALANCE. — 

A creditor may not unilaterally terminate any account under an 

open end consumer credit plan under which extensions of credit are 

secured by a consumer's principal dwelling and require the immediate repayment of any outstanding balance at such time, except in 

the case of— 

(1) fraud or material misrepresentation on the part of the 

consumer in connection with the account; 

(2) failure by the consumer to meet the repayment terms 

of the agreement for any outstanding balance; or 

(3) any other action or failure to act by the consumer 

which adversely affects the creditor's security for the account 

or any right of the creditor in such security. 

This subsection does not apply to reverse mortgage transactions. 

(c) CHANG E I N TERMS. — 

(1) I N GENERAL.—No open end consumer credit plan under 

which extensions of credit are secured by a consumer's principal dwelling may contain a provision which permits a creditor to change unilaterally any term required to be disclosed 

under section 127A(a) or any other term, except a change in 

insignificant terms such as the address of the creditor for billing purposes. 

(2) CERTAIN CHANGES NOT PRECLUDED.—Notwithstanding 

the provisions of subsection (1)1, a creditor may make any of 

the following changes: 

(A) Change the index and margin applicable to extensions of credit under such plan if the index used by the 

creditor is no longer available and the substitute index and 

margin would result in a substantially similar interest 

rate. 

(B) Prohibit additional extensions of credit or reduce 

the credit limit applicable to an account under the plan 

during any period in which the value of the consumer's 

principal dwelling which secures any outstanding balance 

is significantly less than the original appraisal value of the 

dwelling. 

(C) Prohibit additional extensions of credit or reduce 

the credit limit applicable to the account during any period 

in which the creditor has reason to believe that the consumer will be unable to comply with the repayment 

requirements of the account due to a material change in 

the consumer's financial circumstances. 

(D) prohibit additional extensions of credit or reduce 

the credit limit applicable to the account during any period 

in which the consumer is in default with respect to any 

material obligation of the consumer under the agreement. 

(E) Prohibit additional extensions of credit or reduce 

the credit limit applicable to the account during any period 

in which— 

1

 So in original. Probably should be "paragraph (1)''. 
Sec. 127A TRUTH IN LENDING ACT 206 

(i) the creditor is precluded by government action 

from imposing the annual percentage rate provided for 

in the account agreement; or 

(ii) any government action is in effect which adversely affects the priority of the creditor's security interest in the account to the extent that the value of 

the creditor's secured interest in the property is less 

than 120 percent of the amount of the credit limit applicable to the account. 

(F) Any change that will benefit the consumer. 

(3) MATERIAL OBLIGATIONS.—Upon the request of the consumer and at the time an agreement is entered into by a consumer to open an account under an open end consumer credit 

plan under which extensions of credit are secured by the consumer's principal dwelling, the consumer shall be given a list 

of the categories of contract obligations which are deemed by 

the creditor to be material obligations of the consumer under 

the agreement for purposes of paragraph (2)(D). 

(4) CONSUMER BENEFIT.— 

(A) IN GENERAL.—For purposes of paragraph (2)(F), a 

change shall be deemed to benefit the consumer if the 

change is unequivocally beneficial to the borrower and the 

change is beneficial through the entire term of the 

agreement. 

(B) BOARD CATEGORIZATION.—The Board may, by regulation, determine categories of changes that benefit the 

consumer. 

(d) TERMS CHANGED AFTER APPLICATION.—If any term or condition described in section 127A(a) which is disclosed to a consumer 

in connection with an application to open an account under an open 

end consumer credit plan described in such section (other than a 

variable feature of the plan) changes before the account is opened, 

and if, as a result of such change, the consumer elects not to enter 

into the plan agreement, the creditor shall refund all fees paid by 

the consumer in connection with such application. 

(e) ADDITIONAL REQUIREMENTS RELATING TO REFUNDS AND IM -

POSITION OF NONREFUNDABLE FEES.— 

(1) I N GENERAL.—No nonrefundable fee may be imposed by 

a creditor or any other person in connection with any application by a consumer to establish an account under any open end 

consumer credit plan which provides for extensions of credit 

which are secured by a consumer's principal dwelling before 

the end of the 3-day period beginning on the date such consumer receives the disclosure required under section 127A(a) 

and the pamphlet required under section 127A(e) with respect 

to such application. 

(2) CONSTRUCTIVE RECEIPT.—For purposes of determining 

when a nonrefundable fee may be imposed in accordance with 

this subsection if the disclosures and pamphlet referred to in 

paragraph (1) are mailed to the consumer, the date of the receipt of the disclosures by such consumer shall be deemed to 

be 3 business days after the date of mailing by the creditor. 
207 TRUTH IN LENDING ACT Sec. 127A 

SEC. 138. [15 U.S.C. 1648] REVERSE MORTGAGES. 

(a) I N GENERAL.—In addition to the disclosures required under 

this title, for each reverse mortgage, the creditor shall, not less 

than 3 days prior to consummation of the transaction, disclose to 

the consumer in conspicuous type a good faith estimate of the projected total cost of the mortgage to the consumer expressed as a 

table of annual interest rates. Each annual interest rate shall be 

based on a projected total future credit extension balance under a 

projected appreciation rate for the dwelling and a term for the 

mortgage. The disclosure shall include— 

(1) statements of the annual interest rates for not less 

than 3 projected appreciation rates and not less than 3 credit 

transaction periods, as determined by the Board, including— 

(A) a short-term reverse mortgage; 

(B) a term equaling the actuarial life expectancy of the 

consumer; and 

(C) such longer term as the Board deems appropriate; 

and 

(2) a statement that the consumer is not obligated to complete the reverse mortgage transaction merely because the consumer has received the disclosure required under this section 

or has signed an application for the reverse mortgage. 

(b) PROJECTED TOTAL COST.—In determining the projected 

total cost of the mortgage to be disclosed to the consumer under 

subsection (a), the creditor shall take into account— 

(1) any shared appreciation or equity that the lender will, 

by contract, be entitled to receive; 

(2) all costs and charges to the consumer, including the 

costs of any associated annuity that the consumer elects or is 

required to purchase as part of the reverse mortgage transaction; 

(3) all payments to and for the benefit of the consumer, including, in the case in which an associated annuity is purchased (whether or not required by the lender as a condition 

of making the reverse mortgage), the annuity payments received by the consumer and financed from the proceeds of the 

loan, instead of the proceeds used to finance the annuity; and 

(4) any limitation on the liability of the consumer under 

reverse mortgage transactions (such as nonrecourse limits and 

equity conservation agreements). 

SEC. 139. [15 U.S.C. 1649] CERTAIN LIMITATIONS ON LIABILITY. 

(a) LIMITATIONS ON LIABILITY.—For any closed end consumer 

credit transaction that is secured by real property or a dwelling, 

that is subject to this title, and that is consummated before the 

date of the enactment of the Truth in Lending Act Amendments of 

1995, a creditor or any assignee of a creditor shall have no civil, 

administrative, or criminal liability under this title for, and a consumer shall have no extended rescission rights under section 125(f) 

with respect to— 

(1) the creditor's treatment, for disclosure purposes, of— 

(A) taxes described in section 106(d)(3); 

(B) fees described in section 106(e)(2) and (5); 

(C) fees and amounts referred to in the 3rd sentence 

of section 106(a); or 
Sec. 127A TRUTH IN LENDING ACT 208 

(D) borrower-paid mortgage broker fees referred to in 

section 106(a)(6); 

(2) the form of written notice used by the creditor to inform the obligor of the rights of the obligor under section 125 

if the creditor provided the obligor with a properly dated form 

of written notice published and adopted by the Board or a comparable written notice, and otherwise complied with all the 

requirements of this section regarding notice; or 

(3) any disclosure relating to the finance charge imposed 

with respect to the transaction if the amount or percentage 

actually disclosed— 

(A) may be treated as accurate for purposes of this 

title if the amount disclosed as the finance charge does not 

vary from the actual finance charge by more than $200; 

(B) may, under section 106(f)(2), be treated as accurate 

for purposes of section 125; or 

(C) is greater than the amount or percentage required 

to be disclosed under this title. 

(b) EXCEPTIONS.—Subsection (a) shall not apply to— 

(1) any individual action or counterclaim brought under 

this title which was filed before June 1, 1995; 

(2) any class action brought under this title for which a 

final order certifying a class was entered before January 1, 

1995; 

(3) the named individual plaintiffs in any class action 

brought under this title which was filed before June 1, 1995; 

or 

(4) any consumer credit transaction with respect to which 

a timely notice of rescission was sent to the creditor before 

June 1, 1995. 

CHAPTER 3—CREDIT ADVERTISING 

Sec. 

141. Catalogs and multiple-page advertisements. 

142. Advertising of downpayments and installments. 

143. Advertising of open end credit plans. 

144. Advertising of credit other than open end plans. 

145. Nonliability of media. 

146. use of annual percentage rate in oral disclosures. 

147. Advertising of open end consumer credit plans secured by the consumer's principal dwelling. 

§ 141. [15 U.S.C. 1661] Catalogs and multiple-page advertisements 

For the purposes of this chapter, a catalog or other multiplepage advertisement shall be considered a single advertisement if it 

clearly and conspicuously displays a credit terms table on which 

the information required to be stated under this chapter is clearly 

set forth. 

§ 142. [15 U.S.C. 1662] Advertising of downpayments and 

installments 

No advertisement to aid, promote, or assist directly or indirectly any extension of consumer credit may state 
209 TRUTH IN LENDING ACT Sec. 127A 

(1) that a specific periodic consumer credit amount or 

installment amount can be arranged, unless the creditor usually and customarily arranges credit payments or installments 

for that period and in that amount. 

(2) that a specified downpayment is required in connection 

with any extension of consumer credit, unless the creditor usually and customarily arranges downpayments in that amount. 

§ 143. [15 U.S.C. 1663] Advertising of open end credit plans 

No advertisement to aid, promote, or assist directly or indirectly the extension of consumer credit under an open end credit 

plan may set forth any of the specific terms of that plan unless it 

also clearly and conspicuouly sets forth all of the following items: 

(1) Any minimum or fixed amount which could be imposed. 

(2) In any case in which periodic rates may be used to 

compute the finance charge, the periodic rates expressed as annual percentage rates. 

(3) Any other term that the Board may by regulation require to be disclosed. 

§ 144. [15 U.S.C. 1664] Advertising of credit other than open 

end plans 

(a) Except as provided in subsection (b), this section applies to 

any advertisement to aid, promote, or assist directly or indirectly 

any consumer credit sale, loan, or other extension of credit subject 

to the provisions of this title, other than an open end credit plan. 

(b) The provisions of this section do not apply to advertisements of residential real estate except to the extent that the Board 

may by regulation require. 

(c) If any advertisement to which this section applies states the 

rate of a finance charge, the advertisement shall state the rate of 

that charge expressed as an annual percentage rate. 

(d) If any advertisement to which this section applies states 

the amount of the downpayment, if any, the amount of any installment payment, the dollar amount of any finance charge, or the 

number of installments or the period of repayment, then the advertisement shall state all of the following items: 

(1) The downpayment, if any. 

(2) The terms of repayment. 

(3) The rate of the finance charge expressed as an annual 

percentage rate. 

§ 145. [15 U.S.C. 1665] Nonliability of media 

There is no liability under this chapter on the part of any 

owner or personnel, as such, of any medium in which an advertisement appears or through which it is disseminated. 

§ 146. [15 U.S.C. 1665a] Use of annual percentage rate in 

oral disclosures 

In responding orally to any inquiry about the cost of credit, a 

creditor, regardless of the method used to compute finance charges, 

shall state rates only in terms of the annual percentage rate, except that in the case of an open end credit plan, the periodic rate 

also may be stated and, in the case of an other than open end 
Sec. 127A TRUTH IN LENDING ACT 2 10 

credit plan where a major component of the finance charge consists 

of interest computed at a simple annual rate, the simple annual 

rate also may be stated. The Board may, by regulation, modify the 

requirements of this section or provide an exception from this section for a transaction or class of transactions for which the creditor 

cannot determine in advance the applicable annual percentage 

rate. 

SEC. 147. [15 U.S.C. 1665b] ADVERTISIN G OF OPE N EN D CONSUMER 

CREDI T PLANS SECURED BY TH E CONSUMER'S PRINCIPAL DWELLING. 

(a) I N GENERAL.—If any advertisement to aid, promote, or assist, directly or indirectly, the extension of consumer credit through 

an open end consumer credit plan under which extensions of credit 

are secured by the consumer's principal dwelling states, affirmatively or negatively, any of the specific terms of the plan, including 

any periodic payment amount required under such plan, such 

advertisement shall also clearly and conspicuously set forth the following information, in such form and manner as the Board may require: 

(1) LOA N FEES AND OPENING COST ESTIMATES.—Any loan 

fee the amount of which is determined as a percentage of the 

credit limit applicable to an account under the plan and an 

estimate of the aggregate amount of other fees for opening the 

account, based on the creditor's experience with the plan and 

stated as a single amount or as a reasonable range. 

(2) PERIODIC RATES.—In any case in which periodic rates 

may be used to compute the finance charge, the periodic rates 

expressed as an annual percentage rate. 

(3) HIGHEST ANNUAL PERCENTAGE RATE.—Th e highest annual percentage rate which may be imposed under the plan. 

(4) OTHER INFORMATION.—Any other information the 

Board may by regulation require. 

(b) TAX DEDUCTIBILITY.—if any advertisement described in 

subsection (a) contains a statement that any interest expense 

incurred with respect to the plan is or may be tax deductible, the 

advertisement shall not be misleading with respect to such 

deductibility. 

(c) CERTAIN TERM S PROHIBITED.—N o advertisement described 

in subsection (a) with respect to any home equity account may refer 

to such loan as ''free money'' or use other terms determined by the 

Board by regulation to be misleading. 

(d) DISCOUNTED INITIAL RATE.— 

(1) I N GENERAL.—If any advertisement described in subsection (a) includes an initial annual percentage rate that is 

not determined by the index or formula used to make later interest rate adjustments, the advertisement shall also state 

with equal prominence the current annual percentage rate that 

would have been applied using the index or formula if such initial rate had not been offered. 

(2) QUOTED RATE MUST BE REASONABLY CURRENT.—The annual percentage rate required to be disclosed under the paragraph (1) rate must be current as of a reasonable time given 

the media involved. 
211 TRUTH IN LENDING ACT Sec. 127A 

(3) PERIOD DURING WHIC H INITIAL RATE IS I N EFFECT.—An y 

advertisement to which paragraph (1) applies shall also state 

the period of time during which the initial annual percentage 

rate referred to in such paragraph will be in effect. 

(e) BALLOON PAYMENT.—If any advertisement described in subsection (a) contains a statement regarding the minimum monthly 

payment under the plan, the advertisement shall also disclose, if 

applicable, the fact that the plan includes a balloon payment. 

(f) BALLOON PAYMENT DEFINED.—Fo r purposes of this section 

and section 127A, the term "balloon payment'' means, with respect 

to any open end consumer credit plan under which extensions of 

credit are secured by the consumer's principal dwelling, any repayment option under which— 

(1) the account holder is required to repay the entire 

amount of any outstanding balance as of a specified date or at 

the end of a specified period of time, as determined in accordance with the terms of the agreement pursuant to which such 

credit is extended; and 

(2) the aggregate amount of the minimum periodic payments required would not fully amortize such outstanding balance by such date or at the end of such period. 

CHAPTER 4—CREDIT BILLING 

sec. 

161. Correction of billing errors. 

162. Regulation of credit reports. 

163. Length of billing period. 

164. Prompt crediting of payments. 

165. Treatment of credit balances. 

166. Prompt notification of returns. 

167. Use of cash discounts. 

168. Prohibition of tie-in services. 

169. Prohibition of offsets. 

170. Rights of credit card customers. 

171. Relation to state laws. 

§ 161. [15 U.S.C. 1666] Correction of billing errors 

(a) If a creditor, within sixty days after having transmitted to 

an obligor a statement of the obligor's account in connection with 

an extension of consumer credit, receives at the address disclosed 

under section 127(b)(10) a written notice (other than notice on a 

payment stub or other payment medium supplied by the creditor 

if the creditor so stipulates with the disclosure required under section 127(a)(7)) from the obligor in which the obligor— 

(1) sets forth or otherwise enables the creditor to identify 

the name and account number (if any) of the obligor, 

(2) indicates the obligor's belief that the statement contains a billing error and the amount of such billing error, and 

(3) sets forth the reasons for the obligor's belief (to the extent applicable) that the statement contains a billing error, 

the creditor shall, unless the obligor has, after giving such written 

notice and before the expiration of the time limits herein specified, 

agreed that the statement was correct— 

(A) not later than thirty days after the receipt of the notice, send a written acknowledgement thereof to the obligor, 
Sec. 127A TRUTH IN LENDING ACT 2 12 

unless the action required in subparagraph (B) is taken within 

such thirty-day period, and 

(B) not later than two complete billing cycles of the creditor (in no event later than ninety days) after the receipt of the 

notice and prior to taking any action to collect the amount, or 

any part thereof, indicated by the obligor under paragraph (2) 

either— 

(i) make appropriate corrections in the account of the 

obligor, including the crediting of any finance charges on 

amounts erroneously billed, and transmit to the obligor a 

notification of such corrections and the creditor's explanation of any change in the amount indicated by the obligor under paragraph (2) and, if any such change is made 

and the obligor so requests, copies of documentary evidence of the obligor's indebtedness; or 

(ii) send a written explanation or clarification to the 

obligor, after having conducted an investigation, setting 

forth to the extent applicable the reasons why the creditor 

believes the account of the obligor was correctly shown in 

the statement and, upon request of the obligor, provide 

copies of documentary evidence of the obligor's indebtedness. in the case of a billing error where the obligor alleges 

that the creditor's billing statement reflects goods not 

delivered to the obligor or his designee in accordance with 

the agreement made at the time of the transaction, a creditor may not construe such amount to be correctly shown 

unless he determines that such goods were actually delivered, mailed, or otherwise sent to the obligor and provides 

the obligor with a statement of such determination. 

After complying with the provisions of this subsection with respect 

to an alleged billing error, a creditor has no further responsibility 

under this section if the obligor continues to make substantially the 

same allegation with respect to such error. 

(b) For the purpose of this section, a ''billing error'' consists of 

any of the following: 

(1) A reflection on a statement of an extension of credit 

which was not made to the obligor or, if made, was not in the 

amount reflected on such statement. 

(2) A reflection on a statement of an extension of credit for 

which the obligor requests additional clarification including 

documentary evidence thereof. 

(3) A reflection on a statement of goods or services not 

accepted by the obligor or his designee or not delivered to the 

obligor or his designee in accordance with the agreement made 

at the time of a transaction. 

(4) The creditor's failure to reflect properly on a statement 

a payment made by the obligor or a credit issued to the obligor. 

(5) A computation error or similar error of an accounting 

nature of the creditor on a statement. 

(6) Failure to transmit the statement required under section 127(b) of this Act to the last address of the obligor which 

has been disclosed to the creditor, unless that address was furnished less than twenty days before the end of the billing cycle 

for which the statement is required. 
213 TRUTH IN LENDING ACT Sec. 127A 

(7) Any other error described in regulations of the Board. 

(c) For the purposes of this section, ''action to collect the 

amount, or any part thereof, indicated by an obligor under paragraph (2)'' does not include the sending of statements of account, 

which may include finance charges on amounts in dispute, to the 

obligor following written notice from the obligor as specified under 

subsection (a), if— 

(1) the obligor's account is not restricted or closed because 

of the failure of the obligor to pay the amount indicated under 

paragraph (2) of subsection (a), and 

(2) the creditor indicates the payment of such amount is 

not required pending the creditor's compliance with this section. 

Nothing in this section shall be construed to prohibit any action by 

a creditor to collect any amount which has not been indicated by 

the obligor to contain a billing error. 

(d) pursuant to regulations of the Board, a creditor operating 

an open end consumer credit plan may not, prior to the sending of 

the written explanation or clarification required under paragraph 

(B)(ii), restrict or close an account with respect to which the obligor 

has indicated pursuant to subsection (a) that he believes such account to contain a billing error solely because of the obligor's failure to pay the amount indicated to be in error. Nothing in this subsection shall be deemed to prohibit a creditor from applying against 

the credit limit on the obligor's account the amount indicated to be 

in error. 

(e) Any creditor who fails to comply with the requirements of 

this section or section 162 forfeits any right to collect from the obligor the amount indicated by the obligor under paragraph (2) of 

subsection (a) of this section, and any finance charges thereon, except that the amount required to be forfeited under this subsection 

may not exceed $50. 

§ 162. [15 U.S.C. 1666a] Regulation of credit reports 

(a) After receiving a notice from an obligor as provided in section 161(a), a creditor or his agent may not directly or indirectly 

threaten to report to any person adversely on the obligor's credit 

rating or credit standing because of the obligor's failure to pay the 

amount indicated by the obligor under section 161(a)(2), and such 

amount may not be reported as delinquent to any third party until 

the creditor has met the requirements of section 161 and has allowed the obligor the same number of days (not less than ten) 

thereafter to make payment as is provided under the credit agreement with the obligor for the payment of undisputed amounts. 

(b) if a creditor receives a further written notice from an obligor that an amount is still in dispute within the time allowed for 

payment under subsection (a) of this section, a creditor may not report to any third party that the amount of the obligor is delinquent 

because the obligor has failed to pay an amount which he has indicated under section 161(a)(2), unless the creditor also reports that 

the amount is in dispute and, at the same time, notifies the obligor 

of the name and address of each party to whom the creditor is reporting information concerning the delinquency. 
Sec. 127A TRUTH IN LENDING ACT 2 14 

(c) A creditor shall report any subsequent resolution of any 

delinquencies reported pursuant to subsection (b) to the parties to 

whom such delinquencies were initially reported. 

§ 163. [15 U.S.C. 1666b] Length of billing period 

(a) If an open end consumer credit plan provides a time period 

within which an obligor may repay any portion of the credit extended without incurring an additional finance charge, such additional finance charge may not be imposed with respect to such portion of the credit extended for the billing cycle of which such period 

is a part unless a statement which includes the amount upon 

which the finance charge for that period is based was mailed at 

least fourteen days prior to the date specified in the statement by 

which payment must be made in order to avoid imposition of that 

finance charge. 

(b) subsection (a) does not apply in any case where a creditor 

has been prevented, delayed, or hindered in making timely mailing 

or delivery of such periodic statement within the time period specified in such subsection because of an act of God, war, natural disaster, strike, or other excusable or justifiable cause, as determined 

under regulations of the Board. 

§ 164. [15 U.S.C. 1666c] Prompt crediting of payments 

Payments received from an obligor under an open end consumer credit plan by the creditor shall be posted promptly to the 

obligor's account as specified in regulations of the Board. Such regulations shall prevent a finance charge from being imposed on any 

obligor if the creditor has received the obligor's payment in readily 

identifiable form in the amount, manner, location, and time indicated by the creditor to avoid the imposition thereof. 

§ 165. [15 U.S.C. 1666d] Treatment of credit balances 

Whenever a credit balance in excess of $1 is created in connection with a consumer credit transaction through (1) transmittal of 

funds to a creditor in excess of the total balance due on an account, 

(2) rebates of unearned finance charges or insurance premiums, or 

(3) amounts otherwise owed to or held for the benefit of an obligor, 

the creditor shall— 

(A) credit the amount of the credit balance to the consumer's account; 

(B) refund any part of the amount of the remaining credit 

balance, upon request of the consumer; and 

(C) make a good faith effort to refund to the consumer by 

cash, check, or money order any part of the amount of the 

credit balance remaining in the account for more than six 

months, except that no further action is required in any case 

in which the consumer's current location is not known by the 

creditor and cannot be traced through the consumer's last 

known address or telephone number. 

§ 166. [15 U.S.C. 1666e] Prompt notification of returns 

with respect to any sales transaction where a credit card has 

been used to obtain credit, where the seller is a person other than 

the card issuer, and where the seller accepts or allows a return of 
215 TRUTH IN LENDING ACT Sec. 127A 

the goods or forgiveness of a debit for services which were the subject of such sale, the seller shall promptly transmit to the credit 

card issuer, a credit statement with respect thereto and the credit 

card issuer shall credit the account of the obligor for the amount 

of the transaction. 

§ 167. [15 U.S.C. 1666f] Use of cash discounts 

(a)(1) With respect to a credit card which may be used for 

extensions of credit in sales transaction in which the seller is a person other than the card issuer, the card issuer may not, by contract 

or otherwise, prohibit any such seller from offering a discount to 

a cardholder to induce the cardholder to pay by cash, check, or 

similar means rather than use a credit card. 

(2)1 No seller in any sales transaction may impose a surcharge 

on a cardholder who elects to use a credit card in lieu of payment 

by cash, check, or similar means. 

(b) With respect to any sales transaction, any discount not in 

excess of 5 per centum offered by the seller for the purpose of inducing payment by cash, check, or other means not involving the 

use of a credit card shall not constitute a finance charge as determined under section 106, if such discount is offered to all prospective buyers and its availability is disclosed to all prospective buyers 

clearly and conspicuously in accordance with regulations of the 

Board. 

§ 168. [15 U.S.C. 1666g] Prohibition of tie-in services 

Notwithstanding any agreement to the contrary, a card issuer 

may not require a seller, as a condition to participating in a credit 

card plan, to open an account with or procure any other service 

from the card issuer or its subsidiary or agent. 

§ 169. [15 U.S.C. 1666h] Prohibition of offsets 

(a) A card issuer may not take any action to offset a cardholder's indebtedness arising in connection with a consumer credit 

transaction under the relevant credit card plan against funds of the 

cardholder held on deposit with the card issuer unless— 

(1) such action was previously authorized in writing by the 

cardholder in accordance with a credit plan whereby the cardholder agrees periodically to pay debts incurred in his open end 

credit account by permitting the card issuer periodically to deduct all or a portion of such debt from the cardholder's deposit 

account, and 

(2) such action with respect to any outstanding disputed 

amount not be taken by the card issuer upon request of the 

cardholder. 

in the case of any credit card account in existence on the effective 

date of this section, the previous written authorization referred to 

in clause (1) shall not be required until the date (after such effective date) when such account is renewed, but in no case later than 

one year after such effective date. Such written authorization shall 

be deemed to exist if the card issuer has previously notified the 

cardholder that the use of his credit card account will subject any 

1

This paragraph ceased to be effective on February 27, 1984. 
Sec. 127A TRUTH IN LENDING ACT 216 

funds which the card issuer holds in deposit accounts of such cardholder to offset against any amounts due and payable on his credit 

card account which have not been paid in accordance with the 

terms of the agreement between the card issuer and the cardholder. 

(b) This section does not alter or affect the right under state 

law of a card issuer to attach or otherwise levy upon funds of a 

cardholder held on deposit with the card issuer if that remedy is 

constitutionally available to creditors generally. 

§ 170. [15 U.S.C. 1666i] Rights of credit card customers 

(a) subject to the limitation contained in subsection (b), a card 

issuer who has issued a credit card to a cardholder pursuant to an 

open end consumer credit plan shall be subject to all claims (other 

than tort claims) and defenses arising out of any transaction in 

which the credit card is used as a method of payment or extension 

of credit if (1) the obligor has made a good faith attempt to obtain 

satisfactory resolution of a disagreement or problem relative to the 

transaction from the person honoring the credit card; (2) the 

amount of the initial transaction exceeds $50; and (3) the place 

where the initial transaction occurred was in the same state as the 

mailing address previously provided by the cardholder or was 

within 100 miles from such address, except that the limitations set 

forth in clauses (2) and (3) with respect to an obligor's right to assert claims and defenses against a card issuer shall not be applicable to any transaction in which the person honoring the credit card 

(A) is the same person as the card issuer, (B) is controlled by the 

card issuer, (C) is under direct or indirect common control with the 

card issuer, (D) is a franchised dealer in the card issuer's products 

or services, or (E) has obtained the order for such transaction 

through a mail solicitation made by or participated in by the card 

issuer in which the cardholder is solicited to enter into such transaction by using the credit card issued by the card issuer. 

(b) The amount of claims or defenses asserted by the cardholder may not exceed the amount of credit outstanding with respect to such transaction at the time the cardholder first notifies 

the card issuer or the person honoring the credit card of such claim 

or defense. For the purpose of determining the amount of credit 

outstanding in the preceding sentence, payments and credits to the 

cardholder's account are deemed to have been applied, in the order 

indicated, to the payment of: (1) late charges in the order of their 

entry to the account; (2) finance charges in order of their entry to 

the account; and (3) debits to the account other than those set forth 

above, in the order in which each debit entry to the account was 

made. 

§ 171. [15 U.S.C. 1666j] Relation to State laws 

(a) This chapter does not annul, alter, or affect, or exempt any 

person subject to the provisions of this chapter from complying 

with, the laws of any state with respect to credit billing practices, 

except to the extent that those laws are inconsistent with any provision of this chapter, and then only to the extent of the inconsistency. The Board is authorized to determine whether such inconsistencies exist. The Board may not determine that any State law is 
217 TRUTH IN LENDING ACT Sec. 127A 

inconsistent with any provision of this chapter if the Board determines that such law gives greater protection to the consumer. 

(b) The Board shall by regulation exempt from the requirements of this chapter any class of credit transactions within any 

state if it determines that under the law of that state that class 

of transactions is subject to requirements substantially similar to 

those imposed under this chapter or that such law gives greater 

protection to the consumer, and that there is adequate provision for 

enforcement. 

(c) Notwithstanding any other provisions of this title, any discount offered under section 167(b) of this title shall not be considered a finance charge or other charge for credit under the usury 

laws of any state or under the laws of any state relating to disclosure of information in connection with credit transactions, or relating to the types, amounts or rates of charges, or to any element or 

elements of charges permissible under such laws in connection with 

the extension or use of credit. 

CHAPTER 5—CONSUMER LEASES 

sec. 

181. Definitions. 

182. Consumer lease disclosures. 

183. Lessee's liability on expiration or termination of lease. 

184. Consumer lease advertising. 

185. Civil liability. 

186. Relation to state laws. 

187. Regulations. 

§ 181. [15 U.S.C. 1667] Definitions 

For purposes of this chapter— 

(1) The term "consumer lease'' means a contract in the 

form of a lease or bailment for the use of personal property by 

a natural person for a period of time exceeding four months, 

and for a total contractual obligation not exceeding $25,000, 

primarily for personal, family, or household purposes, whether 

or not the lessee has the option to purchase or otherwise become the owner of the property at the expiration of the lease, 

except that such term shall not include any credit sale as defined in section 103(g). such term does not include a lease for 

agricultural, business, or commerical purposes, or to a government or governmental agency or instrumentality, or to an organization. 

(2) The term "lessee" means a natural person who leases 

or is offered a consumer lease. 

(3) The term "lessor" means a person who is regularly engaged in leasing, offering to lease, or arranging to lease under 

a consumer lease. 

(4) The term "personal property'' means any property 

which is not real property under the laws of the state where 

situated at the time offered or otherwise made available for 

lease. 

(5) The terms "security" and "security interest'' mean any 

interest in property which secures payment or performance of 

an obligation. 
Sec. 127A TRUTH IN LENDING ACT 218 

§ 182. [15 U.S.C. 1667a] Consumer lease disclosures 

Each lessor shall give a lessee prior to the consummation of 

the lease a dated written statement on which the lessor and lessee 

are identified setting out accurately and in a clear and conspicuous 

manner the following information with respect to that lease, as applicable: 

(1) A brief description or identification of the leased property; 

(2) The amount of any payment by the lessee required at 

the inception of the lease; 

(3) The amount paid or payable by the lessee for official 

fees, registration, certificate of title, or license fees or taxes; 

(4) The amount of other charges payable by the lessee not 

included in the periodic payments, a description of the charges 

and that the lessee shall be liable for the differential, if any, 

between the anticipated fair market value of the leased property and its appraised actual value at the termination of the 

lease, if the lessee has such liability; 

(5) A statement of the amount or method of determining 

the amount of any liabilities the lease imposes upon the lessee 

at the end of the term and whether or not the lessee has the 

option to purchase the leased property and at what price and 

time; 

(6) A statement identifying all express warranties and 

guarantees made by the manufacturer or lessor with respect to 

the leased property, and identifying the party responsible for 

maintaining or servicing the leased property together with a 

description of the responsibility; 

(7) A brief description of insurance provided or paid for by 

the lessor or required of the lessee, including the types and 

amounts of the coverages and costs; 

(8) A description of any security interest held or to be retained by the lessor in connection with the lease and a clear 

identification of the property to which the security interest relates; 

(9) The number, amount, and due dates or periods of payments under the lease and the total amount of such periodic 

payments; 

(10) Where the lease provides that the lessee shall be liable for the anticipated fair market value of the property on 

expiration of the lease, the fair market value of the property 

at the inception of the lease, the aggregate cost of the lease on 

expiration, and the differential between them; and 

(11) A statement of the conditions under which the lessee 

or lessor may terminate the lease prior to the end of the term 

and the amount or method of determining any penalty or other 

charge for delinquency, default, late payments, or early termination. 

The disclosures required under this section may be made in the 

lease contract to be signed by the lessee. The Board may provide 

by regulation that any portion of the information required to be 

disclosed under this section may be given in the form of estimates 

where the lessor is not in a position to know exact information. 
219 TRUTH IN LENDING ACT Sec. 127A 

§ 183. [15 U.S.C. 1667b] Lessee's liability on expiration or 

termination of lease 

(a) where the lessee's liability on expiration of a consumer 

lease is based on the estimated residual value of the property such 

estimated residual value shall be a reasonable approximation of 

the anticipated actual fair market value of the property on lease 

expiration. There shall be a rebuttable presumption that the estimated residual value is unreasonable to the extent that the estimated residual value exceeds the actual residual value by more 

than three times the average payment allocable to a monthly period under the lease. In addition, where the lessee has such liability on expiration of a consumer lease there shall be a rebuttable 

presumption that the lessor's estimated residual value is not in 

good faith to the extent that the estimated residual value exceeds 

the actual residual value by more than three times the average 

payment allocable to a monthly period under the lease and such 

lessor shall not collect from the lessee the amount of such excess 

liability on expiration of a consumer lease unless the lessor brings 

a successful action with respect to such excess liability. In all actions, the lessor shall pay the lessee's reasonable attorney's fees. 

The presumptions stated in this section shall not apply to the extent the excess of estimated over actual residual value is due to 

physical damage to the property beyond reasonable wear and use, 

or to excessive use, and the lease may set standards for such wear 

and use if such standards are not unreasonable. Nothing in this 

subsection shall preclude the right of a willing lessee to make any 

mutually agreeable final adjustment with respect to such excess residual liability, provided such an agreement is reached after termination of the lease. 

(b) Penalties or other charges for delinquency, default, or early 

termination may be specified in the lease but only at an amount 

which is reasonable in the light of the anticipated or actual harm 

caused by the delinquency, default, or early termination, the difficulties of proof of loss, and the inconvenience or nonfeasibility of 

otherwise obtaining an adequate remedy. 

(c) If a lease has a residual value provision at the termination 

of the lease, the lessee may obtain at his expense, a professional 

appraisal of the leased property by an independent third party 

agreed to by both parties. Such appraisal shall be final and binding 

on the parties. 

§ 184. [15 U.S.C. 1667c] Consumer lease advertising 

(a) I N GENERAL.—If an advertisement for a consumer lease includes a statement of the amount of any payment or a statement 

that any or no initial payment is required, the advertisement shall 

clearly and conspicuously state, as applicable— 

(1) the transaction advertised is a lease; 

(2) the total amount of any initial payments required on or 

before consummation of the lease or delivery of the property, 

whichever is later; 

(3) that a security deposit is required; 

(4) the number, amount, and timing of scheduled payments; and 
Sec. 127A TRUTH IN LENDING ACT 2 20 

(5) with respect to a lease in which the liability of the consumer at the end of the lease term is based on the anticipated 

residual value of the property, that an extra charge may be imposed at the end of the lease term. 

(b) ADVERTISING MEDIU M NO T LIABLE.—N o owner or employee 

of any entity that serves as a medium in which an advertisement 

appears or through which an advertisement is disseminated, shall 

be liable under this section. 

(c) RADIO ADVERTISEMENTS.— 

(1) I N GENERAL.—An advertisement by radio broadcast to 

aid, promote, or assist, directly or indirectly, any consumer 

lease shall be deemed to be in compliance with the requirements of subsection (a) if such advertisement clearly and 

conspicuously— 

(A) states the information required by paragraphs (1) 

and (2) of subsection (a); 

(B) states the number, amounts, due dates or periods 

of scheduled payments, and the total of such payments 

under the lease; 

(C) includes— 

(i) a referral to— 

(i) a toll-free telephone number established in 

accordance with paragraph (2) that may be used 

by consumers to obtain the information required 

under subsection (a); or 

(ii) a written advertisement that— 

(aa) appears in a publication in general 

circulation in the community served by the 

radio station on which such advertisement is 

broadcast during the period beginning 3 days 

before any such broadcast and ending 10 days 

after such broadcast; and 

(bb) includes the information required to 

be disclosed under subsection (a); and 

(ii) the name and dates of any publication referred 

to in clause (i)(ii); and 

(D) includes any other information which the Board 

determines necessary to carry out this chapter. 

(2) ESTABLISHMENT OF TOLL-FREE NUMBER.— 

(A) I N GENERAL.—In the case of a radio broadcast 

advertisement described in paragraph (1) that includes a 

referral to a toll-free telephone number, the lessor who offers the consumer lease shall— 

(i) establish such a toll-free telephone number not 

later than the date on which the advertisement including the referral is broadcast; 

(ii) maintain such telephone number for a period 

of not less than 10 days, beginning on the date of any 

such broadcast; and 

(iii) provide the information required under subsection (a) with respect to the lease to any person who 

calls such number. 

(B) FOR M OF INFORMATION.—The information required 

to be provided under subparagraph (A)(iii) shall be pro-
221 TRUTH IN LENDING ACT Sec. 127A 

vided verbally or, if requested by the consumer, in written 

form. 

(3) N O EFFECT ON OTHER LAW.—Nothing in this subsection 

shall affect the requirements of Federal law as such requirements apply to advertisement by any medium other than radio 

broadcast. 

§ 185. [15 U.S.C. 1667d] Civil liability 

(a) Any lessor who fails to comply with any requirement imposed under section 182 or 183 of this chapter with respect to any 

person is liable to such person as provided in section 130. 

(b) Any lessor who fails to comply with any requirement imposed under section 184 of this chapter with respect to any person 

who suffers actual damage from the violation is liable to such person as provided in section 130. For the purposes of this section, the 

term ''creditor'' as used in sections 130 and 131 shall include a lessor as defined in this chapter. 

(c) Notwithstanding section 130(e), any action under this section may be brought in any United States district court or in any 

other court of competent jurisdiction. Such actions alleging a failure to disclose or otherwise comply with the requirements of this 

chapter shall be brought within one year of the termination of the 

lease agreement. 

§ 186. [15 U.S.C. 1667e] Relation to State laws 

(a) This chapter does not annul, alter, or affect, or exempt any 

person subject to the provisions of this chapter from complying 

with, the laws of any State with respect to consumer leases, except 

to the extent that those laws are inconsistent with any provision 

of this chapter, and then only to the extent of the inconsistency. 

The Board is authorized to determine whether such inconsistencies 

exist. The Board may not determine that any State law is inconsistent with any provision of this chapter if the Board determines 

that such law gives greater protection and benefit to the consumer. 

(b) The Board shall by regulation exempt from the requirements of this chapter any class of lease transactions within any 

State if it determines that under the law of that State that class 

of transactions is subject to requirements substantially similar to 

those imposed under this chapter or that such law gives greater 

protection and benefit to the consumer, and that there is adequate 

provision for enforcement. 

SEC. 187. [15 U.S.C. 1667f] REGULATIONS. 

(a) REGULATIONS AUTHORIZED.— 

(1) IN GENERAL.—The Board shall prescribe regulations to 

update and clarify the requirements and definitions applicable 

to lease disclosures and contracts, and any other issues specifically related to consumer leasing, to the extent that the Board 

determines such action to be necessary— 

(A) to carry out this chapter; 

(B) to prevent any circumvention of this chapter; or 

(C) to facilitate compliance with the requirements of 

the chapter. 
Sec. 301 RESTRICTION ON GARNISHMENT 2 22 

(2) CLASSIFICATIONS, ADJUSTMENTS.—Any regulations prescribed under paragraph (1) may contain classifications and 

differentiations, and may provide for adjustments and exceptions for any class of transactions, as the Board considers 

appropriate. 

(b) MODE L DISCLOSURE.— 

(1) PUBLICATION.—The Board shall establish and publish 

model disclosure forms to facilitate compliance with the disclosure requirements of this chapter and to aid the consumer in 

understanding the transaction to which the subject disclosure 

form relates. 

(2) USE OF AUTOMATED EQUIPMENT.—I n establishing model 

forms under this subsection, the Board shall consider the use 

by lessors of data processing or similar automated equipment. 

(3) USE OPTIONAL.—A lessor may utilize a model disclosure 

form established by the Board under this subsection for purposes of compliance with this chapter, at the discretion of the 

lessor. 

(4) EFFECT OF USE.—Any lessor who properly uses the 

material aspects of any model disclosure form established by 

the Board under this subsection shall be deemed to be in compliance with the disclosure requirements to which the form relates. 

TITLE II—EXTORTIONATE CREDIT 

TRANSACTIONS 

[See 82 Stat. 159, 82 Stat. 162, and Chapter 42 of title 18, 

United States Code.] 

TITLE III—RESTRICTION ON GARNISHMENT 

sec. 

301. Findings and purpose. 

302. Definitions. 

303. Restriction on garnishment. 

304. Restriction on discharge from employment by reason of garnishment. 

305. Exemption for State-regulated garnishments. 

306. Enforcement by secretary of Labor. 

307. Effect on State laws. 

§ 301. [15 U.S.C. 1671] Findings and purpose 

(a) The Congress finds: 

(1) The unrestricted garnishment of compensation due for 

personal services encourages the making of predatory extensions of credit. such extensions of credit divert money into 

excessive credit payments and thereby hinder the production 

and flow of goods in interstate commerce. 

(2) The application of garnishment as a creditors' remedy 

frequently results in loss of employment by the debtor, and the 

resulting disruption of employment, production, and consumption constitutes a substantial burden on interstate commerce. 

(3) The great disparities among the laws of the several 

states relating to garnishment have, in effect, destroyed the 
223 RESTRICTION ON GARNISHMENT Sec. 303 

uniformity of the bankruptcy laws and frustrated the purposes 

thereof in many areas of the country. 

(b) On the basis of the findings stated in subsection (a) of this 

section, the Congress determines that the provisions of this title 

are necessary and proper for the purpose of carrying into execution 

the powers of the Congress to regulate commerce and to establish 

uniform bankruptcy laws. 

§ 302. [15 U.S.C. 1672] Definitions 

For the purposes of this title: 

(a) The term ''earnings'' means compensation paid or payable 

for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement program. 

(b) The term ''disposable earnings'' means that part of the 

earnings of any individual remaining after the deduction from 

those earnings of any amounts required by law to be withheld. 

(c) The term ''garnishment'' means any legal or equitable procedure through which the earnings of any individual are required 

to be withheld for payment of any debt. 

§ 303. [15 U.S.C. 1673] Restriction on garnishment 

(a) Except as provided in subsection (b) and in section 305, the 

maximum part of the aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may 

not exceed

 1 

(1) 25 per centum of his disposable earnings for that week, 

or 

(2) the amount by which his disposable earnings for that 

week exceed thirty times the Federal minimum hourly wage 

prescribed by section 6(a)(1) of the Fair Labor Standards Act 

of 1938 in effect at the time the earnings are payable, 

whichever is less. in the case of earnings for any pay period other 

than a week, the Secretary of Labor shall by regulation prescribe 

a multiple of the Federal minimum hourly wage equivalent in effect to that set forth in paragraph (2). 

(b)(1) The restrictions of subsection (a) do not apply in the case 

of— 

(A) any order for the support of any person issued by a 

court of competent jurisdiction or in accordance with an administrative procedure, which is established by State law, which 

affords substantial due process, and which is subject to judicial 

review.

 2 

(B) any order of any court of bankruptcy under chapter 

XIII of the Bankruptcy Act.

 3 

(C) any debt due for any State or Federal tax. 

(2) The maximum part of the aggregate disposable earnings of 

an individual for any workweek which is subject to garnishment to 

enforce any order for the support of any person shall not exceed— 

1

 So in original. Probably should be "exceed—''. 

2

 So in original. The period probably should be a semicolon. 

3

 So in original. The period probably should be ''; and'' and the reference probably should be 

to chapter 13 of title 11, United States Code. 
Sec. 301 RESTRICTION ON GARNISHMENT 2 24 

(A) where such individual is supporting his spouse or dependent child (other than a spouse or child with respect to 

whose support such order is used), 50 per centum of such individual's disposable earnings for that week; and 

(B) where such individual is not supporting such a spouse 

or dependent child described in clause (A), 60 per centum of 

such individual's disposable earnings for that week; 

except that, with respect to the disposable earnings of any individual for any workweek, the 50 per centum specified in clause (A) 

shall be deemed to be 55 per centum and the 60 per centum specified in clause (B) shall be deemed to be 65 per centum, if and to 

the extent that such earnings are subject to garnishment to enforce 

a support order with respect to a period which is prior to the 

twelve-week period which ends with the beginning of such workweek. 

(c) No court of the united states or any state, and no state 

(or officer or agency thereof), may make, execute, or enforce any 

order or process in violation of this section. 

§ 304. [15 U.S.C. 1674] Restriction on discharge from employment by reason of garnishment 

(a) No employer may discharge any employee by reason of the 

fact that his earnings have been subjected to garnishment for any 

one indebtedness. 

(b) whoever willfully violates subsection (a) of this section 

shall be fined not more than $1,000, or imprisoned not more than 

one year, or both. 

§ 305. [15 U.S.C. 1675] Exemption for State-regulated garnishments 

The secretary of Labor may by regulation exempt from the 

provisions of section 303(a) and (b)(2) garnishments issued under 

the laws of any state if he determines that the laws of that state 

provide restrictions on garnishment which are substantially similar 

to those provided in section 303(a) and (b)(2). 

§ 306. [15 U.S.C. 1676] Enforcement by Secretary of Labor 

The Secretary of Labor, acting through the Wage and Hour 

Division of the Department of Labor, shall enforce the provisions 

of this title. 

§ 307. [15 U.S.C. 1677] Effect on State laws 

This title does not annul, alter, or affect, or exempt any person 

from complying with, the laws of any state

 1 

(1) prohibiting garnishments or providing for more limited 

garnishments than are allowed under this title, or 

(2) prohibiting the discharge of any employee by reason of 

the fact that his earnings have been subjected to garnishment 

for more than one indebtedness. 

1

 So in original. Probably should be "State—' 
225 CREDIT REPAIR ORGANIZATIONS ACT Sec. 403 

TITLE IV—CREDIT REPAI R 

ORGANIZATIONS1 

Sec. 

401. Short title. 

402. Findings and purposes. 

403. Definitions. 

404. Prohibited practices. 

405. Disclosures. 

406. Credit repair organizations contracts. 

407. Right to cancel contract. 

408. Noncompliance with this title. 

409. Civil liability. 

410. Administrative enforcement. 

411. Statute of limitations. 

412. Relation to State law. 

413. Effective date. 

SEC. 401. [15 U.S.C. 1601 nt] SHORT TITLE. 

This title may be cited as the ''Credit Repair Organizations 

Act''. 

SEC. 402. [15 U.S.C. 1679] FINDINGS AND PURPOSES. 

(a) FINDINGS.—The Congress makes the following findings: 

(1) Consumers have a vital interest in establishing and 

maintaining their credit worthiness and credit standing in 

order to obtain and use credit. As a result, consumers who 

have experienced credit problems may seek assistance from 

credit repair organizations which offer to improve the credit 

standing of such consumers. 

(2) Certain advertising and business practices of some 

companies engaged in the business of credit repair services 

have worked a financial hardship upon consumers, particularly 

those of limited economic means and who are inexperienced in 

credit matters. 

(b) PURPOSES.—The purposes of this title are— 

(1) to ensure that prospective buyers of the services of 

credit repair organizations are provided with the information 

necessary to make an informed decision regarding the purchase of such services; and 

(2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations. 

SEC. 403. [15 U.S.C. 1679a] DEFINITIONS. 

For purposes of this title, the following definitions apply: 

(1) CONSUMER.—The term ''consumer'' means an individual. 

(2) CONSUMER CREDIT TRANSACTION.—The term ''consumer 

credit transaction'' means any transaction in which credit is offered or extended to an individual for personal, family, or 

household purposes. 

(3) CREDIT REPAIR ORGANIZATION.—The term ''credit repair 

organization''— 

(A) means any person who uses any instrumentality of 

interstate commerce or the mails to sell, provide, or per1

 The typeface for the items in the table of sections for this title were lightfaced roman in the 

conference report and boldface roman in the printed public law. 
Sec. 404 CREDIT REPAIR ORGANIZATIONS ACT 226 

form (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of 

money or other valuable consideration, for the express or 

implied purpose of— 

(i) improving any consumer's credit record, credit 

history, or credit rating; or 

(ii) providing advice or assistance to any consumer 

with regard to any activity or service described in 

clause (i); and 

(B) does not include— 

(i) any nonprofit organization which is exempt 

from taxation under section 501(c)(3) of the Internal 

Revenue Code of 1986; 

(ii) any creditor (as defined in section 103 of the 

Truth in Lending Act), with respect to any consumer, 

to the extent the creditor is assisting the consumer to 

restructure any debt owed by the consumer to the 

creditor; or 

(iii) any depository institution (as that term is defined in section 3 of the Federal Deposit Insurance 

Act) or any Federal or state credit union (as those 

terms are defined in section 101 of the Federal Credit 

union Act), or any affiliate or subsidiary of such a depository institution or credit union. 

(4) CREDIT.—The term ''credit'' has the meaning given to 

such term in section 103(e) of this Act. 

SEC. 404. [15 U.S.C. 1679b] PROHIBITED PRACTICES. 

(a) I N GENERAL.—No person may— 

(1) make any statement, or counsel or advise any consumer to make any statement, which is untrue or misleading 

(or which, upon the exercise of reasonable care, should be 

known by the credit repair organization, officer, employee, 

agent, or other person to be untrue or misleading) with respect 

to any consumer's credit worthiness, credit standing, or credit 

capacity to— 

(A) any consumer reporting agency (as defined in section 603(f) of this Act); or 

(B) any person— 

(i) who has extended credit to the consumer; or 

(ii) to whom the consumer has applied or is applying for an extension of credit; 

(2) make any statement, or counsel or advise any consumer to make any statement, the intended effect of which is 

to alter the consumer's identification to prevent the display of 

the consumer's credit record, history, or rating for the purpose 

of concealing adverse information that is accurate and not obsolete to— 

(A) any consumer reporting agency; 

(B) any person— 

(i) who has extended credit to the consumer; or 

(ii) to whom the consumer has applied or is applying for an extension of credit; 
227 CREDIT REPAIR ORGANIZATIONS ACT Sec. 403 

(3) make or use any untrue or misleading representation 

of the services of the credit repair organization; or 

(4) engage, directly or indirectly, in any act, practice, or 

course of business that constitutes or results in the commission 

of, or an attempt to commit, a fraud or deception on any person 

in connection with the offer or sale of the services of the credit 

repair organization. 

(b) PAYMENT I N ADVANCE.—No credit repair organization may 

charge or receive any money or other valuable consideration for the 

performance of any service which the credit repair organization has 

agreed to perform for any consumer before such service is fully performed. 

SEC. 405. [15 U.S.C. 1679c] DISCLOSURES. 

(a) DISCLOSURE REQUIRED.—Any credit repair organization 

shall provide any consumer with the following written statement 

before any contract or agreement between the consumer and the 

credit repair organization is executed: 

"Consumer Credit File Rights Under State 

and Federal Law 

''You have a right to dispute inaccurate information in your 

credit report by contacting the credit bureau directly. However, neither you nor any ''credit repair'' company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is 

over 7 years old. Bankruptcy information can be reported for 10 

years. 

''You have a right to obtain a copy of your credit report from 

a credit bureau. You may be charged a reasonable fee. There is no 

fee, however, if you have been turned down for credit, employment, 

insurance, or a rental dwelling because of information in your credit report within the preceding 60 days. The credit bureau must provide someone to help you interpret the information in your credit 

file. You are entitled to receive a free copy of your credit report if 

you are unemployed and intend to apply for employment in the 

next 60 days, if you are a recipient of public welfare assistance, or 

if you have reason to believe that there is inaccurate information 

in your credit report due to fraud. 

''You have a right to sue a credit repair organization that violates the Credit Repair Organization Act. This law prohibits deceptive practices by credit repair organizations. 

''You have the right to cancel your contract with any credit repair organization for any reason within 3 business days from the 

date you signed it. 

''Credit bureaus are required to follow reasonable procedures 

to ensure that the information they report is accurate. However, 

mistakes may occur. 

''You may, on your own, notify a credit bureau in writing that 

you dispute the accuracy of information in your credit file. The 

credit bureau must then reinvestigate and modify or remove inac-
Sec. 404 CREDIT REPAIR ORGANIZATIONS ACT 228 

curate or incomplete information. The credit bureau may not 

charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given 

to the credit bureau. 

''if the credit bureau's reinvestigation does not resolve the dispute to your satisfaction, you may send a brief statement to the 

credit bureau, to be kept in your file, explaining why you think the 

record is inaccurate. The credit bureau must include a summary of 

your statement about disputed information with any report it 

issues about you. 

''The Federal Trade Commission regulates credit bureaus and 

credit repair organizations. For more information contact: 

''The Public Reference Branch 

''Federal Trade Commission 

''Washington, D.C. 20580''. 

(b) SEPARATE STATEMENT REQUIREMENT.—Th e written statement required under this section shall be provided as a document 

which is separate from any written contract or other agreement between the credit repair organization and the consumer or any other 

written material provided to the consumer. 

(c) RETENTION OF COMPLIANCE RECORDS.— 

(1) IN GENERAL.—The credit repair organization shall 

maintain a copy of the statement signed by the consumer acknowledging receipt of the statement. 

(2) MAINTENANCE FOR 2 YEARS.—The copy of any consumer's statement shall be maintained in the organization's 

files for 2 years after the date on which the statement is signed 

by the consumer. 

SEC. 406. [15 U.S.C. 1679d] CREDI T REPAI R ORGANIZATIONS CONTRACTS. 

(a) WRITTE N CONTRACTS REQUIRED.—N o services may be provided by any credit repair organization for any consumer— 

(1) unless a written and dated contract (for the purchase 

of such services) which meets the requirements of subsection 

(b) has been signed by the consumer; or 

(2) before the end of the 3-business-day period beginning 

on the date the contract is signed. 

(b) TERM S AND CONDITIONS OF CONTRACT.—No contract referred to in subsection (a) meets the requirements of this subsection unless such contract includes (in writing)— 

(1) the terms and conditions of payment, including the 

total amount of all payments to be made by the consumer to 

the credit repair organization or to any other person; 

(2) a full and detailed description of the services to be performed by the credit repair organization for the consumer, 

including— 

(A) all guarantees of performance; and 

(B) an estimate of— 

(i) the date by which the performance of the services (to be performed by the credit repair organization 

or any other person) will be complete; or 
2 29 CREDIT REPAIR ORGANIZATIONS ACT Sec. 403 

(ii) the length of the period necessary to perform 

such services; 

(3) the credit repair organization's name and principal 

business address; and 

(4) a conspicuous statement in bold face type, in immediate proximity to the space reserved for the consumer's signature on the contract, which reads as follows: ''You may cancel 

this contract without penalty or obligation at any time before 

midnight of the 3rd business day after the date on which you 

signed the contract. see the attached notice of cancellation 

form for an explanation of this right.''. 

SEC. 407. [15 U.S.C. 1679e] RIGH T TO CANCEL CONTRACT. 

(a) IN GENERAL.—Any consumer may cancel any contract with 

any credit repair organization without penalty or obligation by notifying the credit repair organization of the consumer's intention to 

do so at any time before midnight of the 3rd business day which 

begins after the date on which the contract or agreement between 

the consumer and the credit repair organization is executed or 

would, but for this subsection, become enforceable against the parties. 

(b) CANCELLATION FOR M AND OTHER INFORMATION.—Each contract shall be accompanied by a form, in duplicate, which has the 

heading ''Notice of Cancellation'' and contains in bold face type the 

following statement: 

''You may cancel this contract, without any penalty or obligation, at any time before midnight of the 3rd day which begins after the date the contract is signed by you. 

''To cancel this contract, mail or deliver a signed, dated 

copy of this cancellation notice, or any other written notice to 

[ name of credit repair organization ] at [ address of credit repair organization ] before midnight on [ date ] 

''I hereby cancel this transaction, 

[ date ] 

[ purchaser's signature ].''. 

(c) CONSUMER COPY OF CONTRACT REQUIRED.—An y consumer 

who enters into any contract with any credit repair organization 

shall be given, by the organization— 

(1) a copy of the completed contract and the disclosure 

statement required under section 405; and 

(2) a copy of any other document the credit repair organization requires the consumer to sign, 

at the time the contract or the other document is signed. 

SEC. 408. [15 U.S.C. 1679f] NONCOMPLIANC E WIT H THIS TITLE. 

(a) CONSUMER WAIVERS INVALID.—An y waiver by any consumer of any protection provided by or any right of the consumer 

under this title— 

(1) shall be treated as void; and 

(2) may not be enforced by any Federal or state court or 

any other person. 

(b) ATTEMPT T O OBTAIN WAIVER.—An y attempt by any person 

to obtain a waiver from any consumer of any protection provided 

by or any right of the consumer under this title shall be treated 

as a violation of this title. 
Sec. 404 CREDIT REPAIR ORGANIZATIONS ACT 2 30 

(c) CONTRACTS NO T I N COMPLIANCE.—Any contract for services 

which does not comply with the applicable provisions of this title— 

(1) shall be treated as void; and 

(2) may not be enforced by any Federal or State court or 

any other person. 

SEC. 409. [15 U.S.C. 1679g] CIVI L LIABILITY. 

(a) LIABILITY ESTABLISHED.—Any person who fails to comply 

with any provision of this title with respect to any other person 

shall be liable to such person in an amount equal to the sum of the 

amounts determined under each of the following paragraphs: 

(1) ACTUAL DAMAGES.—The greater of— 

(A) the amount of any actual damage sustained by 

such person as a result of such failure; or 

(B) any amount paid by the person to the credit repair 

organization. 

(2) PUNITIVE DAMAGES.— 

(A) INDIVIDUAL ACTIONS.—In the case of any action by 

an individual, such additional amount as the court may 

allow. 

(B) CLASS ACTIONS.—In the case of a class action, the 

sum of— 

(i) the aggregate of the amount which the court 

may allow for each named plaintiff; and 

(ii) the aggregate of the amount which the court 

may allow for each other class member, without regard to any minimum individual recovery. 

(3) ATTORNEYS' FEES.—I n the case of any successful action 

to enforce any liability under paragraph (1) or (2), the costs of 

the action, together with reasonable attorneys' fees. 

(b) FACTORS T O BE CONSIDERED I N AWARDING PUNITIVE DAM -

AGES.—In determining the amount of any liability of any credit repair organization under subsection (a)(2), the court shall consider, 

among other relevant factors— 

(1) the frequency and persistence of noncompliance by the 

credit repair organization; 

(2) the nature of the noncompliance; 

(3) the extent to which such noncompliance was intentional; and 

(4) in the case of any class action, the number of consumers adversely affected. 

SEC. 410. [15 U.S.C. 1679h] ADMINISTRATIVE ENFORCEMENT. 

(a) IN GENERAL.—Compliance with the requirements imposed 

under this title with respect to credit repair organizations shall be 

enforced under the Federal Trade Commission Act by the Federal 

Trade Commission. 

(b) VIOLATIONS OF THIS TITLE TREATED AS VIOLATIONS OF FEDERAL TRADE COMMISSION ACT. — 

(1) IN GENERAL.—For the purpose of the exercise by the 

Federal Trade Commission of the Commission's functions and 

powers under the Federal Trade Commission Act, any violation 

of any requirement or prohibition imposed under this title with 

respect to credit repair organizations shall constitute an unfair 
231 CREDIT REPAIR ORGANIZATIONS ACT Sec. 403 

or deceptive act or practice in commerce in violation of section 

5(a) of the Federal Trade Commission Act. 

(2) ENFORCEMENT AUTHORITY UNDER OTHER LAW.—Al l 

functions and powers of the Federal Trade Commission under 

the Federal Trade Commission Act shall be available to the 

Commission to enforce compliance with this title by any person 

subject to enforcement by the Federal Trade Commission pursuant to this subsection, including the power to enforce the 

provisions of this title in the same manner as if the violation 

had been a violation of any Federal Trade Commission trade 

regulation rule, without regard to whether the credit repair 

organization— 

(A) is engaged in commerce; or 

(B) meets any other jurisdictional tests in the Federal 

Trade Commission Act. 

(c) STATE ACTION FOR VIOLATIONS.— 

(1) AUTHORITY OF STATES.—In addition to such other remedies as are provided under state law, whenever the chief law 

enforcement officer of a state, or an official or agency designated by a state, has reason to believe that any person has 

violated or is violating this title, the state— 

(A) may bring an action to enjoin such violation; 

(B) may bring an action on behalf of its residents to 

recover damages for which the person is liable to such residents under section 409 as a result of the violation; and 

(C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action 

and reasonable attorney fees as determined by the court. 

(2) RIGHTS OF COMMISSION.— 

(A) NOTICE TO COMMISSION.—The State shall serve 

prior written notice of any civil action under paragraph (1) 

upon the Federal Trade Commission and provide the Commission with a copy of its complaint, except in any case 

where such prior notice is not feasible, in which case the 

state shall serve such notice immediately upon instituting 

such action. 

(B) INTERVENTION.—The Commission shall have the 

right— 

(i) to intervene in any action referred to in subparagraph (A); 

(ii) upon so intervening, to be heard on all matters 

arising in the action; and 

(iii) to file petitions for appeal. 

(3) INVESTIGATORY POWERS.—For purposes of bringing any 

action under this subsection, nothing in this subsection shall 

prevent the chief law enforcement officer, or an official or agency designated by a state, from exercising the powers conferred 

on the chief law enforcement officer or such official by the laws 

of such state to conduct investigations or to administer oaths 

or affirmations or to compel the attendance of witnesses or the 

production of documentary and other evidence. 

(4) LIMITATION.—Whenever the Federal Trade Commission 

has instituted a civil action for violation of this title, no state 

may, during the pendency of such action, bring an action under 
Sec. 404 CREDIT REPAIR ORGANIZATIONS ACT 2 32 

this section against any defendant named in the complaint of 

the Commission for any violation of this title that is alleged in 

that complaint. 

SEC. 411. [15 U.S.C. 1679i] STATUTE OF LIMITATIONS. 

Any action to enforce any liability under this title may be 

brought before the later of— 

(1) the end of the 5-year period beginning on the date of 

the occurrence of the violation involved; or 

(2) in any case in which any credit repair organization has 

materially and willfully misrepresented any information 

which— 

(A) the credit repair organization is required, by any 

provision of this title, to disclose to any consumer; and 

(B) is material to the establishment of the credit repair organization's liability to the consumer under this 

title, 

the end of the 5-year period beginning on the date of the discovery by the consumer of the misrepresentation. 

SEC. 412. [15 U.S.C. 1679j] RELATION TO STATE LAW. 

This title shall not annul, alter, affect, or exempt any person 

subject to the provisions of this title from complying with any law 

of any State except to the extent that such law is inconsistent with 

any provision of this title, and then only to the extent of the inconsistency. 

SEC. 413. [15 U.S.C. 1679 nt] EFFECTIVE DATE. 

This title shall apply after the end of the 6-month period beginning on the date of the enactment of the Credit Repair Organizations Act, except with respect to contracts entered into by a credit 

repair organization before the end of such period. 

TITLE V—GENERAL PROVISIONS 

Sec. 

501. Severability. 

502. Captions and catchlines for reference only. 

503. Grammatical usages. 

504. Effective dates. 

§ 501. [15 U.S.C. 1602 note] Severability 

If a provision enacted by this Act is held invalid, all valid provisions that are severable from the invalid provision remain in effect. If a provision enacted by this Act is held invalid in one or 

more of its applications, the provision remains in effect in all valid 

applications that are severable from the invalid application or applications. 

§ 502. [15 U.S.C. 1602 note] Captions and catchlines for reference only 

Captions and catchlines are intended solely as aids to convenient reference, and no inference as to the legislative intent with respect to any provision enacted by this Act may be drawn from 

them. 
233 FAIR CREDIT REPORTING ACT Sec. 602 

§ 503. [15 U.S.C. 1602 note] Grammatical usages 

In this Act: 

(1) The word ''may'' is used to indicate that an action 

either is authorized or is permitted. 

(2) The word ''shall'' is used to indicate that an action is 

both authorized and required. 

(3) The phrase ''may not'' is used to indicate that an action 

is both unauthorized and forbidden. 

(4) Rules of law are stated in the indicative mood. 

§ 504. [15 U.S.C. 1602 note1] Effective dates 

(a) Except as otherwise specified, the provisions of this Act 

take effect upon enactment. 

(b) Chapters 2 and 3 of title I take effect on July 1, 1969. 

(c) Title III takes effect on July 1, 1970. 

(d) Title VI takes effect upon the expiration of one hundred 

and eighty days following the date of its enactment. 

TITLE VI—CONSUMER CREDIT REPORTING 

Sec. 

601. Short title. 

602. Findings and purpose. 

603. Definitions and rules of construction. 

604. Permissible purposes of reports. 

605. Requirements relating to information contained in consumer reports. 

606. Disclosure of investigative consumer reports. 

607. Compliance procedures. 

608. Disclosures to governmental agencies. 

609. Disclosure to consumers. 

610. Conditions and form of disclosure to consumers. 

611. Procedure in case of disputed accuracy. 

612. Charges for certain disclosures. 

613. Public record information for employment purposes. 

614. Restrictions on investigative consumer reports. 

615. Requirements on users of consumer reports. 

616. Civil liability for willful noncompliance. 

617. Civil liability for negligent noncompliance. 

618. Jurisdiction of courts; limitation of actions. 

619. obtaining information under false pretenses. 

620. unauthorized disclosures by officers or employees. 

621. Administrative enforcement. 

622. information on overdue child support obligations. 

623. Responsibilities of furnishers of information to consumer reporting agencies. 

624. Relation to State laws.1 

624. Disclosures to FBI for counterintelligence purposes. 

§ 601. [15 U.S.C. 1601 note] Short title 

This title may be cited as the Fair Credit Reporting Act.

 2 

§ 602. [15 U.S.C. 1681] Findings and purpose 

(a) The Congress makes the following findings: 

(1) The banking system is dependent upon fair and accurate 

credit reporting. Inaccurate credit reports directly impair the effi1

 So in law. The second item designated as section 624 should probably be redesignated as 

section 625. Section 2413(b) of P.L. 104-208 (110 Stat. 3009-449) redesignated the item relating 

to section 623 as section 624 and inserted an item relating to a new section 623. Section 601(b) 

of P.L. 104-93 (109 Stat. 977) had already added an item relating to section 624. 

2

 So in law. The short title probably should be within quotation marks. 
Sec. 603 FAIR CREDIT REPORTING ACT 2 34 

ciency of the banking system, and unfair credit reporting methods 

undermine the public confidence which is essential to the continued 

functioning of the banking system. 

(2) An elaborate mechanism has been developed for investigating and evaluating the credit worthiness, credit standing, credit capacity, character, and general reputation of consumers. 

(3) Consumer reporting agencies have assumed a vital role in 

assembling and evaluating consumer credit and other information 

on consumers. 

(4) There is a need to insure that consumer reporting agencies 

exercise their grave responsibilities with fairness, impartiality, and 

a respect for the consumer's right to privacy. 

(b) It is the purpose of this title to require that consumer reporting agencies adopt reasonable procedures for meeting the needs 

of commerce for consumer credit, personnel, insurance, and other 

information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and 

proper utilization of such information in accordance with the requirements of this title. 

§ 603. [15 U.S.C. 1681a] Definitions and rules of construction 

(a) Definitions and rules of construction set forth in this section are applicable for the purposes of this title. 

(b) The term ''person'' means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity. 

(c) The term ''consumer'' means an individual. 

(d) CONSUMER REPORT.— 

(1) IN GENERAL.—The term ''consumer report'' means any 

written, oral, or other communication of any information by a 

consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is 

used or expected to be used or collected in whole or in part for 

the purpose of serving as a factor in establishing the consumer's eligibility for— 

(A) credit or insurance to be used primarily for personal, family, or household purposes; 

(B) employment purposes; or 

(C) any other purpose authorized under section 604. 

(2) EXCLUSIONS.—The term ''consumer report'' does not 

include— 

(A) any— 

(i) report containing information solely as to 

transactions or experiences between the consumer and 

the person making the report; 

(ii) communication of that information among persons related by common ownership or affiliated by corporate control; or 

(iii) communication of other information among 

persons related by common ownership or affiliated by 

corporate control, if it is clearly and conspicuously disclosed to the consumer that the information may be 
235 FAIR CREDIT REPORTING ACT Sec. 602 

communicated among such persons and the consumer 

is given the opportunity, before the time that the information is initially communicated, to direct that 

such information not be communicated among such 

persons; 

(B) any authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit 

card or similar device; 

(C) any report in which a person who has been requested by a third party to make a specific extension of 

credit directly or indirectly to a consumer conveys his or 

her decision with respect to such request, if the third party 

advises the consumer of the name and address of the person to whom the request was made, and such person 

makes the disclosures to the consumer required under section 615; or 

(D) a communication described in subsection (o). 

(e) The term ''investigative consumer report'' means a consumer report or portion thereof in which information on a consumer's character, general reputation, personal characteristics, or 

mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information. However, such information 

shall not include specific factual information on a consumer's credit 

record obtained directly from a creditor of the consumer or from a 

consumer reporting agency when such information was obtained directly from a creditor of the consumer or from the consumer. 

(f) The term ''consumer reporting agency'' means any person 

which, for monetary fees, dues, or on a cooperative nonprofit basis, 

regularly engages in whole or in part in the practice of assembling 

or evaluating consumer credit information or other information on 

consumers for the purpose of furnishing consumer reports to third 

parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports. 

(g) The term ''file'', when used in connection with information 

on any consumer, means all of the information on that consumer 

recorded and retained by a consumer reporting agency regardless 

of how the information is stored. 

(h) The term ''employment purposes'' when used in connection 

with a consumer report means a report used for the purpose of 

evaluating a consumer for employment, promotion, reassignment or 

retention as an employee. 

(i) The term ''medical information'' means information or 

records obtained, with the consent of the individual to whom it relates, from licensed physicians or medical practitioners, hospitals, 

clinics, or other medical or medically related facilities. 

(j) DEFINITION S RELATIN G TO CHIL D SUPPORT OBLIGATIONS.— 

(1) OVERDU E SUPPORT.—The term ''overdue support'' has 

the meaning given to such term in section 466(e) of the social 

security Act. 

(2) STATE OR LOCAL CHILD SUPPORT ENFORCEMENT AGENCY.—The term ''State or local child support enforcement agency'' means a state or local agency which administers a state 
Sec. 603 FAIR CREDIT REPORTING ACT 236 

or local program for establishing and enforcing child support 

obligations. 

(k) ADVERSE ACTION.— 

(1) ACTIONS INCLUDED.—Th e term ''adverse action''— 

(A) has the same meaning as in section 701(d)(6) of 

the Equal Credit Opportunity Act; and 

(B) means— 

(i) a denial or cancellation of, an increase in any 

charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any 

insurance, existing or applied for, in connection with 

the underwriting of insurance; 

(ii) a denial of employment or any other decision 

for employment purposes that adversely affects any 

current or prospective employee; 

(iii) a denial or cancellation of, an increase in any 

charge for, or any other adverse or unfavorable change 

in the terms of, any license or benefit described in section 604(a)(3)(D); and 

(iv) an action taken or determination that is— 

(i) made in connection with an application 

that was made by, or a transaction that was initiated by, any consumer, or in connection with a review of an account under section 604(a)(3)(F)(ii); 

and 

(ii) adverse to the interests of the consumer. 

(2) APPLICABLE FINDINGS, DECISIONS, COMMENTARY, AND 

ORDERS.—For purposes of any determination of whether an action is an adverse action under paragraph (1)(A), all appropriate final findings, decisions, commentary, and orders issued 

under section 701(d)(6) of the Equal Credit Opportunity Act by 

the Board of Governors of the Federal Reserve System or any 

court shall apply. 

(L) FIR M OFFER OF CREDIT OR INSURANCE.—The term ''firm 

offer of credit or insurance'' means any offer of credit or insurance 

to a consumer that will be honored if the consumer is determined, 

based on information in a consumer report on the consumer, to 

meet the specific criteria used to select the consumer for the offer, 

except that the offer may be further conditioned on one or more of 

the following: 

(1) The consumer being determined, based on information 

in the consumer's application for the credit or insurance, to 

meet specific criteria bearing on credit worthiness or insurability, as applicable, that are established— 

(A) before selection of the consumer for the offer; and 

(B) for the purpose of determining whether to extend 

credit or insurance pursuant to the offer. 

(2) verification— 

(A) that the consumer continues to meet the specific 

criteria used to select the consumer for the offer, by using 

information in a consumer report on the consumer, information in the consumer's application for the credit or insurance, or other information bearing on the credit worthiness or insurability of the consumer; or 
237 FAIR CREDIT REPORTING ACT Sec. 602 

(B) of the information in the consumer's application for 

the credit or insurance, to determine that the consumer 

meets the specific criteria bearing on credit worthiness or 

insurability. 

(3) The consumer furnishing any collateral that is a requirement for the extension of the credit or insurance that 

was— 

(A) established before selection of the consumer for the 

offer of credit or insurance; and 

(B) disclosed to the consumer in the offer of credit or 

insurance. 

( m ) CREDIT OR INSURANCE TRANSACTION THA T IS NO T INITIATED BY THE CONSUMER.—Th e term ''credit or insurance transaction that is not initiated by the consumer'' does not include the 

use of a consumer report by a person with which the consumer has 

an account or insurance policy, for purposes of— 

(1) reviewing the account or insurance policy; or 

(2) collecting the account. 

(n) STATE.—The term ''State'' means any State, the Commonwealth of Puerto Rico, the District of Columbia, and any territory 

or possession of the United States. 

(o) EXCLUDED COMMUNICATIONS.—A communication is described in this subsection if it is a communication— 

(1) that, but for subsection (d)(2)(D), would be an investigative consumer report; 

(2) that is made to a prospective employer for the purpose 

of— 

(A) procuring an employee for the employer; or 

(B) procuring an opportunity for a natural person to 

work for the employer; 

(3) that is made by a person who regularly performs such 

procurement; 

(4) that is not used by any person for any purpose other 

than a purpose described in subparagraph (A) or (B) of paragraph (2); and 

(5) with respect to which— 

(A) the consumer who is the subject of the 

communication— 

(i) consents orally or in writing to the nature and 

scope of the communication, before the collection of 

any information for the purpose of making the communication; 

(ii) consents orally or in writing to the making of 

the communication to a prospective employer, before 

the making of the communication; and 

(iii) in the case of consent under clause (i) or (ii) 

given orally, is provided written confirmation of that 

consent by the person making the communication, not 

later than 3 business days after the receipt of the consent by that person; 

(B) the person who makes the communication does 

not, for the purpose of making the communication, make 

any inquiry that if made by a prospective employer of the 

consumer who is the subject of the communication would 
Sec. 603 FAIR CREDIT REPORTING ACT 238 

violate any applicable Federal or State equal employment 

opportunity law or regulation; and 

(C) the person who makes the communication— 

(i) discloses in writing to the consumer who is the 

subject of the communication, not later than 5 business days after receiving any request from the consumer for such disclosure, the nature and substance of 

all information in the consumer's file at the time of 

the request, except that the sources of any information 

that is acquired solely for use in making the communication and is actually used for no other purpose, 

need not be disclosed other than under appropriate 

discovery procedures in any court of competent jurisdiction in which an action is brought; and 

(ii) notifies the consumer who is the subject of the 

communication, in writing, of the consumer's right to 

request the information described in clause (i). 

(p) CONSUMER REPORTING AGENC Y THA T COMPILES AND MAIN -

TAINS FILES ON CONSUMERS ON A NATIONWID E BASIS.—The term 

''consumer reporting agency that compiles and maintains files on 

consumers on a nationwide basis'' means a consumer reporting 

agency that regularly engages in the practice of assembling or evaluating, and maintaining, for the purpose of furnishing consumer 

reports to third parties bearing on a consumer's credit worthiness, 

credit standing, or credit capacity, each of the following regarding 

consumers residing nationwide: 

(1) Public record information. 

(2) Credit account information from persons who furnish 

that information regularly and in the ordinary course of business. 

§ 604. [15 U.S.C. 1681b] Permissible purposes of reports 

(a) IN GENERAL.—Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following 

circumstances and no other: 

(1) In response to the order of a court having jurisdiction to 

issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury. 

(2) in accordance with the written instructions of the consumer 

to whom it relates. 

(3) To a person which it has reason to believe— 

(A) intends to use the information in connection with a 

credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit 

to, or review or collection of an account of, the consumer; or 

(B) intends to use the information for employment purposes; or 

(C) intends to use the information in connection with the 

underwriting of insurance involving the consumer; or 

(D) intends to use the information in connection with a 

determination of the consumer's eligibility for a license or other 

benefit granted by a governmental instrumentality required by 

law to consider an applicant's financial responsibility or status; 

or 
239 FAIR CREDIT REPORTING ACT Sec. 602 

(E)1 intends to use the information, as a potential investor or servicer, or current insurer, in connection with a 

valuation of, or an assessment of the credit or prepayment 

risks associated with, an existing credit obligation; or 

(F)

 1 otherwise has a legitimate business need for the 

information— 

(i) in connection with a business transaction that 

is initiated by the consumer; or 

(ii) to review an account to determine whether the 

consumer continues to meet the terms of the account. 

(4) In response to a request by the head of a State or local 

child support enforcement agency (or a state or local government 

official authorized by the head of such an agency), if the person 

making the request certifies to the consumer reporting agency 

that— 

(A) the consumer report is needed for the purpose of establishing an individual's capacity to make child support payments or determining the appropriate level of such payments; 

(B) the paternity of the consumer for the child to which 

the obligation relates has been established or acknowledged by 

the consumer in accordance with state laws under which the 

obligation arises (if required by those laws); 

(C) the person has provided at least 10 days' prior notice 

to the consumer whose report is requested, by certified or registered mail to the last known address of the consumer, that 

the report will be requested; and 

(D) the consumer report will be kept confidential, will be 

used solely for a purpose described in subparagraph (A), and 

will not be used in connection with any other civil, administrative, or criminal proceeding, or for any other purpose. 

(5) To an agency administering a state plan under section 454 

of the Social Security Act (42 U.S.C. 654) for use to set an initial 

or modified child support award. 

(b) CONDITIONS FOR FURNISHING AND USIN G CONSUMER REPORTS FOR EMPLOYMENT PURPOSES.— 

(1) CERTIFICATION FROM USER.—A consumer reporting 

agency may furnish a consumer report for employment purposes only if— 

(A) the person who obtains such report from the 

agency certifies to the agency that— 

(i) the person has complied with paragraph (2) 

with respect to the consumer report, and the person 

will comply with paragraph (3) with respect to the consumer report if paragraph (3) becomes applicable; and 

(ii) information from the consumer report will not 

be used in violation of any applicable Federal or state 

equal employment opportunity law or regulation; and 

(B) the consumer reporting agency provides with the 

report, or has previously provided, a summary of the consumer's rights under this title, as prescribed by the Federal Trade Commission under section 609(c)(3). 

(2) DISCLOSURE TO CONSUMER.— 

1

 Margin so in law. 
Sec. 603 FAIR CREDIT REPORTING ACT 2 40 

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

(B), a person may not procure a consumer report, or cause 

a consumer report to be procured, for employment purposes with respect to any consumer, unless— 

(i) a clear and conspicuous disclosure has been 

made in writing to the consumer at any time before 

the report is procured or caused to be procured, in a 

document that consists solely of the disclosure, that a 

consumer report may be obtained for employment purposes; and 

(ii) the consumer has authorized in writing (which 

authorization may be made on the document referred 

to in clause (i)) the procurement of the report by that 

person. 

( B) APPLICATION BY MAIL, TELEPHONE, COMPUTER, OR 

OTHER SIMILAR MEANS.—If a consumer described in subparagraph (C) applies for employment by mail, telephone, 

computer, or other similar means, at any time before a 

consumer report is procured or caused to be procured in 

connection with that application— 

(i) the person who procures the consumer report 

on the consumer for employment purposes shall provide to the consumer, by oral, written, or electronic 

means, notice that a consumer report may be obtained 

for employment purposes, and a summary of the consumer's rights under section 615(a)(3); and 

(ii) the consumer shall have consented, orally, in 

writing, or electronically to the procurement of the report by that person. 

(C) SCOPE.—Subparagraph (B) shall apply to a person 

procuring a consumer report on a consumer in connection 

with the consumer's application for employment only if— 

(i) the consumer is applying for a position over 

which the Secretary of Transportation has the power 

to establish qualifications and maximum hours of 

service pursuant to the provisions of section 31502 of 

title 49, or a position subject to safety regulation by a 

State transportation agency; and 

(ii) as of the time at which the person procures 

the report or causes the report to be procured the only 

interaction between the consumer and the person in 

connection with that employment application has been 

by mail, telephone, computer, or other similar means. 

(3) CONDITIONS ON USE FOR ADVERSE ACTIONS.— 

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

(B), in using a consumer report for employment purposes, 

before taking any adverse action based in whole or in part 

on the report, the person intending to take such adverse 

action shall provide to the consumer to whom the report 

relates— 

(i) a copy of the report; and 

(ii) a description in writing of the rights of the 

consumer under this title, as prescribed by the Federal 

Trade Commission under section 609(c)(3). 
241 FAIR CREDIT REPORTING ACT Sec. 602 

( B) APPLICATION BY MAIL, TELEPHONE, COMPUTER, OR 

OTHER SIMILAR MEANS.— 

(i) If a consumer described in subparagraph (C) 

applies for employment by mail, telephone, computer, 

or other similar means, and if a person who has procured a consumer report on the consumer for employment purposes takes adverse action on the employment application based in whole or in part on the report, then the person must provide to the consumer to 

whom the report relates, in lieu of the notices required 

under subparagraph (A) of this section and under section 615(a), within 3 business days of taking such action, an oral, written or electronic notification— 

(i) that adverse action has been taken based 

in whole or in part on a consumer report received 

from a consumer reporting agency; 

(ii) of the name, address and telephone number of the consumer reporting agency that furnished the consumer report (including a toll-free 

telephone number established by the agency if the 

agency compiles and maintains files on consumers 

on a nationwide basis); 

(iii) that the consumer reporting agency did 

not make the decision to take the adverse action 

and is unable to provide to the consumer the specific reasons why the adverse action was taken; 

and 

(iv) that the consumer may, upon providing 

proper identification, request a free copy of a report and may dispute with the consumer reporting 

agency the accuracy or completeness of any information in a report. 

(ii) if, under clause (B)(i)(iv), the consumer requests a copy of a consumer report from the person 

who procured the report, then, within 3 business days 

of receiving the consumer's request, together with 

proper identification, the person must send or provide 

to the consumer a copy of a report and a copy of the 

consumer's rights as prescribed by the Federal Trade 

Commission under section 609(c)(3). 

(C) SCOPE.—Subparagraph (B) shall apply to a person 

procuring a consumer report on a consumer in connection 

with the consumer's application for employment only if— 

(i) the consumer is applying for a position over 

which the Secretary of Transportation has the power 

to establish qualifications and maximum hours of 

service pursuant to the provisions of section 31502 of 

title 49, or a position subject to safety regulation by a 

State transportation agency; and 

(ii) as of the time at which the person procures 

the report or causes the report to be procured the only 

interaction between the consumer and the person in 

connection with that employment application has been 

by mail, telephone, computer, or other similar means. 
Sec. 603 FAIR CREDIT REPORTING ACT 2 42 

(4) EXCEPTION FOR NATIONAL SECURITY INVESTIGATIONS.— 

(A) I N GENERAL.—In the case of an agency or department of the United States Government which seeks to obtain and use a consumer report for employment purposes, 

paragraph (3) shall not apply to any adverse action by 

such agency or department which is based in part on such 

consumer report, if the head of such agency or department 

makes a written finding that— 

(i) the consumer report is relevant to a national 

security investigation of such agency or department; 

(ii) the investigation is within the jurisdiction of 

such agency or department; 

(iii) there is reason to believe that compliance 

with paragraph (3) will— 

(I) endanger the life or physical safety of any 

person; 

(II) result in flight from prosecution; 

(III) result in the destruction of, or tampering 

with, evidence relevant to the investigation; 

(IV) result in the intimidation of a potential 

witness relevant to the investigation; 

(v) result in the compromise of classified 

information; or 

(VI) otherwise seriously jeopardize or unduly 

delay the investigation or another official proceeding. 

(B) NOTIFICATION OF CONSUMER UPON CONCLUSION OF 

INVESTIGATION.—Upon the conclusion of a national security investigation described in subparagraph (A), or upon 

the determination that the exception under subparagraph 

(A) is no longer required for the reasons set forth in such 

subparagraph, the official exercising the authority in such 

subparagraph shall provide to the consumer who is the 

subject of the consumer report with regard to which such 

finding was made— 

(i) a copy of such consumer report with any classified information redacted as necessary; 

(ii) notice of any adverse action which is based, in 

part, on the consumer report; and 

(iii) the identification with reasonable specificity 

of the nature of the investigation for which the consumer report was sought. 

(C) DELEGATION BY HEAD OF AGENCY OR DEPARTMENT.—For purposes of subparagraphs (A) and (B), the 

head of any agency or department of the united states 

Government may delegate his or her authorities under this 

paragraph to an official of such agency or department who 

has personnel security responsibilities and is a member of 

the Senior Executive Service or equivalent civilian or military rank. 

(D) REPORT TO THE CONGRESS.—Not later than January 31 of each year, the head of each agency and department of the United States Government that exercised authority under this paragraph during the preceding year 
243 FAIR CREDIT REPORTING ACT Sec. 602 

shall submit a report to the Congress on the number of 

times the department or agency exercised such authority 

during the year. 

(E) DEFINITIONS.—Fo r purposes of this paragraph, the 

following definitions shall apply: 

(i) CLASSIFIED INFORMATION.—The term ''classified 

information'' means information that is protected from 

unauthorized disclosure under Executive Order No. 

12958 or successor orders. 

(ii) NATIONAL SECURITY INVESTIGATION.—The term 

''national security investigation'' means any official inquiry by an agency or department of the United States 

Government to determine the eligibility of a consumer 

to receive access or continued access to classified information or to determine whether classified information 

has been lost or compromised. 

(c) FURNISHING REPORTS I N CONNECTION WIT H CREDIT OR 

INSURANCE TRANSACTIONS THA T ARE NO T INITIATED BY THE CONSUMER.— 

(1) I N GENERAL.—A consumer reporting agency may furnish a consumer report relating to any consumer pursuant to 

subparagraph (A) or (C) of subsection (a)(3) in connection with 

any credit or insurance transaction that is not initiated by the 

consumer only if— 

(A) the consumer authorizes the agency to provide 

such report to such person; or 

(B)(i) the transaction consists of a firm offer of credit 

or insurance; 

(ii) the consumer reporting agency has complied with 

subsection (e); and 

(iii) there is not in effect an election by the consumer, 

made in accordance with subsection (e), to have the consumer's name and address excluded from lists of names 

provided by the agency pursuant to this paragraph. 

(2) LIMITS ON INFORMATION RECEIVED UNDER PARAGRAPH 

(1)(B).—A person may receive pursuant to paragraph (1)(B) 

only— 

(A) the name and address of a consumer; 

(B) an identifier that is not unique to the consumer 

and that is used by the person solely for the purpose of 

verifying the identity of the consumer; and 

(C) other information pertaining to a consumer that 

does not identify the relationship or experience of the consumer with respect to a particular creditor or other entity. 

(3) INFORMATION REGARDING INQUIRIES.—Except as provided in section 609(a)(5), a consumer reporting agency shall 

not furnish to any person a record of inquiries in connection 

with a credit or insurance transaction that is not initiated by 

a consumer. 

(d) RESERVED. 

(e) ELECTION OF CONSUMER T O BE EXCLUDED FRO M LISTS.— 

(1) I N GENERAL.—A consumer may elect to have the consumer's name and address excluded from any list provided by 

a consumer reporting agency under subsection (c)(1)(B) in con-
Sec. 603 FAIR CREDIT REPORTING ACT 2 44 

nection with a credit or insurance transaction that is not initiated by the consumer by notifying the agency in accordance 

with paragraph (2) that the consumer does not consent to any 

use of a consumer report relating to the consumer in connection with any credit or insurance transaction that is not initiated by the consumer. 

(2) MANNE R OF NOTIFICATION.—A consumer shall notify a 

consumer reporting agency under paragraph (1)— 

(A) through the notification system maintained by the 

agency under paragraph (5); or 

(B) by submitting to the agency a signed notice of election form issued by the agency for purposes of this subparagraph. 

(3) RESPONSE OF AGENCY AFTER NOTIFICATION THROUGH 

SYSTEM.—Upon receipt of notification of the election of a consumer under paragraph (1) through the notification system 

maintained by the agency under paragraph (5), a consumer reporting agency shall— 

(A) inform the consumer that the election is effective 

only for the 2-year period following the election if the consumer does not submit to the agency a signed notice of 

election form issued by the agency for purposes of paragraph (2)(B); and 

(B) provide to the consumer a notice of election form, 

if requested by the consumer, not later than 5 business 

days after receipt of the notification of the election through 

the system established under paragraph (5), in the case of 

a request made at the time the consumer provides notification through the system. 

(4) EFFECTIVENESS OF ELECTION.—A n election of a consumer under paragraph (1)— 

(A) shall be effective with respect to a consumer reporting agency beginning 5 business days after the date on 

which the consumer notifies the agency in accordance with 

paragraph (2); 

(B) shall be effective with respect to a consumer reporting agency— 

(i) subject to subparagraph (C), during the 2-year 

period beginning 5 business days after the date on 

which the consumer notifies the agency of the election, 

in the case of an election for which a consumer notifies 

the agency only in accordance with paragraph (2)(A); 

or 

(ii) until the consumer notifies the agency under 

subparagraph (C), in the case of an election for which 

a consumer notifies the agency in accordance with 

paragraph (2)(B); 

(C) shall not be effective after the date on which the 

consumer notifies the agency, through the notification system established by the agency under paragraph (5), that 

the election is no longer effective; and 

(D) shall be effective with respect to each affiliate of 

the agency. 

(5) NOTIFICATION SYSTEM.— 
245 FAIR CREDIT REPORTING ACT Sec. 602 

(A) IN GENERAL.—Each consumer reporting agency 

that, under subsection (c)(1)(B), furnishes a consumer report in connection with a credit or insurance transaction 

that is not initiated by a consumer shall— 

(i) establish and maintain a notification system, 

including a toll-free telephone number, which permits 

any consumer whose consumer report is maintained 

by the agency to notify the agency, with appropriate 

identification, of the consumer's election to have the 

consumer's name and address excluded from any such 

list of names and addresses provided by the agency for 

such a transaction; and 

(ii) publish by not later than 365 days after the 

date of enactment of the Consumer Credit Reporting 

Reform Act of 1996, and not less than annually thereafter, in a publication of general circulation in the 

area served by the agency— 

(i) a notification that information in consumer 

files maintained by the agency may be used in 

connection with such transactions; and 

(ii) the address and toll-free telephone number for consumers to use to notify the agency of 

the consumer's election under clause (i). 

(B) ESTABLISHMENT AND MAINTENANCE AS COMPLIANCE.—Establishment and maintenance of a notification 

system (including a toll-free telephone number) and publication by a consumer reporting agency on the agency's own 

behalf and on behalf of any of its affiliates in accordance 

with this paragraph is deemed to be compliance with this 

paragraph by each of those affiliates. 

(6) NOTIFICATION SYSTEM BY AGENCIES THAT OPERATE 

NATIONWIDE.—Each consumer reporting agency that compiles 

and maintains files on consumers on a nationwide basis shall 

establish and maintain a notification system for purposes of 

paragraph (5) jointly with other such consumer reporting agencies. 

(f) CERTAIN USE OR OBTAINING OF INFORMATION PROHIBITED.— 

A person shall not use or obtain a consumer report for any purpose 

unless— 

(1) the consumer report is obtained for a purpose for which 

the consumer report is authorized to be furnished under this 

section; and 

(2) the purpose is certified in accordance with section 607 

by a prospective user of the report through a general or specific 

certification. 

(g) FURNISHING REPORTS CONTAINING MEDICA L INFORMATION.— A consumer reporting agency shall not furnish for employment purposes, or in connection with a credit or insurance transaction, a consumer report that contains medical information about 

a consumer, unless the consumer consents to the furnishing of the 

report. 
Sec. 603 FAIR CREDIT REPORTING ACT 246 

§ 605. [15 U.S.C. 1681c] Requirements relating to information contained in consumer reports 

( a ) INFORMATIO N EXCLUDE D FRO M CONSUME R REPORTS.—Ex -

cept as authorized under subsection (b), no consumer reporting 

agency may make any consumer report containing any of the following items of information: 

(1) cases1 under title 11 of the United States Code or under 

the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the 

report by more than 10 years. 

(2) Civil suits, judgments, and records of arrest that,2 from 

date of entry, antedate the report by more than seven years or 

until the governing statute of limitations has expired, whichever is 

the longer period. 

(3) Paid tax liens which, from date of payment, antedate the 

report by more than seven years. 

(4) Accounts placed for collection or charged to profit and loss 

which antedate the report by more than seven years. 

(5) Any other adverse item of information, other than records 

of convictions of crimes which antedates the report by more than 

seven years. 

(b) The provisions of subsection (a) are not applicable in the 

case of any consumer credit report to be used in connection with— 

(1) a credit transaction involving, or which may reasonably 

be expected to involve, a principal amount of $150,000 or more; 

(2) the underwriting of life insurance involving, or which 

may reasonably be expected to involve, a face amount of 

$150,000 or more; or 

(3) the employment of any individual at an annual salary 

which equals, or which may reasonably be expected to equal 

$75,000, or more. 

(c) RUNNIN G OF REPORTIN G PERIOD. — 

(1) IN GENERAL.—The 7-year period referred to in paragraphs (4) and (6) of subsection (a) shall begin, with respect to 

any delinquent account that is placed for collection (internally 

or by referral to a third party, whichever is earlier), charged 

to profit and loss, or subjected to any similar action, upon the 

expiration of the 180-day period beginning on the date of the 

commencement of the delinquency which immediately preceded 

the collection activity, charge to profit and loss, or similar action. 

(2) EFFECTIV E DATE.—Paragraph (1) shall apply only to 

items of information added to the file of a consumer on or after 

the date that is 455 days after the date of enactment of the 

Consumer Credit Reporting Reform Act of 1996. 

(d) INFORMATIO N REQUIRE D T O B E DISCLOSED.—An y consumer 

reporting agency that furnishes a consumer report that contains 

information regarding any case involving the consumer that arises 

under title 11, United States Code, shall include in the report an 

1

 So in original. Probably should be "Cases". 

2

 The amendment made by section 5(1) of Public Law 105-347 (112 Stat. 3211) struck ''Suits 

and Judgments which''. The word ''judgments'' should have be lowercase. The amendment was 

executed in accordance with the probable intent of Congress. 
247 FAIR CREDIT REPORTING ACT Sec. 602 

identification of the chapter of such title 11 under which such case 

arises if provided by the source of the information. If any case arising or filed under title 11, United States Code, is withdrawn by the 

consumer before a final judgment, the consumer reporting agency 

shall include in the report that such case or filing was withdrawn 

upon receipt of documentation certifying such withdrawal. 

(e) INDICATION OF CLOSURE OF ACCOUNT BY CONSUMER.—If a 

consumer reporting agency is notified pursuant to section 623(a)(4) 

that a credit account of a consumer was voluntarily closed by the 

consumer, the agency shall indicate that fact in any consumer report that includes information related to the account. 

(f) INDICATION OF DISPUTE BY CONSUMER.—If a consumer reporting agency is notified pursuant to section 623(a)(3) that information regarding a consumer who was furnished to the agency is 

disputed by the consumer, the agency shall indicate that fact in 

each consumer report that includes the disputed information. 

§ 606. [15 U.S.C. 1681d] Disclosure of investigative consumer 

reports 

(a) A person may not procure or cause to be prepared an investigative consumer report on any consumer unless— 

(1) it is clearly and accurately disclosed to the consumer 

that an investigative consumer report including information as 

to his character, general reputation, personal characteristics, 

and mode of living, whichever are applicable, may be made, 

and such disclosure (A) is made in a writing mailed, or otherwise delivered, to the consumer, not later than three days after 

the date on which the report was first requested, and (B) includes a statement informing the consumer of his right to request the additional disclosures provided for under subsection 

(b) of this section and the written summary of the rights of the 

consumer prepared pursuant to section 609(c); and 

(2) the person certifies or has certified to the consumer reporting agency that— 

(A) the person has made the disclosures to the consumer required by paragraph (1); and 

(B) the person will comply with subsection (b). 

(b) Any person who procures or causes to be prepared an investigative consumer report on any consumer shall, upon written request made by the consumer within a reasonable period of time 

after the receipt by him of the disclosure required by subsection 

(a)(1), make a complete and accurate disclosure of the nature and 

scope of the investigation requested. This disclosure shall be made 

in a writing mailed, or otherwise delivered, to the consumer not 

later than five days after the date on which the request for such 

disclosure was received from the consumer or such report was first 

requested, whichever is the later. 

(c) No person may be held liable for any violation of subsection 

(a) or (b) of this section if he shows by a preponderance of the evidence that at the time of the violation he maintained reasonable 

procedures to assure compliance with subsection (a) or (b). 

(d) PROHIBITIONS.— 

(1) CERTIFICATION.—A consumer reporting agency shall 

not prepare or furnish an investigative consumer report unless 
Sec. 603 FAIR CREDIT REPORTING ACT 248 

the agency has received a certification under subsection (a)(2) 

from the person who requested the report. 

(2) INQUIRIES.—A consumer reporting agency shall not 

make an inquiry for the purpose of preparing an investigative 

consumer report on a consumer for employment purposes if the 

making of the inquiry by an employer or prospective employer 

of the consumer would violate any applicable Federal or state 

equal employment opportunity law or regulation. 

(3) CERTAIN PUBLIC RECORD INFORMATION.—Except as otherwise provided in section 613, a consumer reporting agency 

shall not furnish an investigative consumer report that includes information that is a matter of public record and that 

relates to an arrest, indictment, conviction, civil judicial action, 

tax lien, or outstanding judgment, unless the agency has verified the accuracy of the information during the 30-day period 

ending on the date on which the report is furnished. 

(4) CERTAIN ADVERSE INFORMATION.—A consumer reporting agency shall not prepare or furnish an investigative consumer report on a consumer that contains information that is 

adverse to the interest of the consumer and that is obtained 

through a personal interview with a neighbor, friend, or associate of the consumer or with another person with whom the 

consumer is acquainted or who has knowledge of such item of 

information, unless— 

(A) the agency has followed reasonable procedures to 

obtain confirmation of the information, from an additional 

source that has independent and direct knowledge of the 

information; or 

(B) the person interviewed is the best possible source 

of the information. 

§ 607. [15 U.S.C. 1681e] Compliance procedures 

(a) Every consumer reporting agency shall maintain reasonable 

procedures designed to avoid violations of section 605 and to limit 

the furnishing of consumer reports to the purposes listed under 

section 604. These procedures shall require that prospective users 

of the information identify themselves, certify the purposes for 

which the information is sought, and certify that the information 

will be used for no other purpose. Every consumer reporting agency 

shall make a reasonable effort to verify the identity of a new prospective user and the uses certified by such prospective user prior 

to furnishing such user a consumer report. No consumer reporting 

agency may furnish a consumer report to any person if it has reasonable grounds for believing that the consumer report will not be 

used for a purpose listed in section 604. 

(b) Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates. 

(c) DISCLOSURE OF CONSUMER REPORTS BY USERS ALLOWED.— 

A consumer reporting agency may not prohibit a user of a consumer report furnished by the agency on a consumer from disclosing the contents of the report to the consumer, if adverse action 
249 FAIR CREDIT REPORTING ACT Sec. 602 

against the consumer has been taken by the user based in whole 

or in part on the report. 

(d) NOTICE TO USERS AND FURNISHERS OF INFORMATION.— 

(1) NOTICE REQUIREMENT.—A consumer reporting agency 

shall provide to any person— 

(A) who regularly and in the ordinary course of business furnishes information to the agency with respect to 

any consumer; or 

(B) to whom a consumer report is provided by the 

agency; 

a notice of such person's responsibilities under this title. 

(2) CONTENT OF NOTICE.—The Federal Trade Commission 

shall prescribe the content of notices under paragraph (1), and 

a consumer reporting agency shall be in compliance with this 

subsection if it provides a notice under paragraph (1) that is 

substantially similar to the Federal Trade Commission prescription under this paragraph. 

(e) PROCUREMENT OF CONSUMER REPORT FOR RESALE.— 

(1) DISCLOSURE.—A person may not procure a consumer 

report for purposes of reselling the report (or any information 

in the report) unless the person discloses to the consumer reporting agency that originally furnishes the report— 

(A) the identity of the end-user of the report (or information); and 

(B) each permissible purpose under section 604 for 

which the report is furnished to the end-user of the report 

(or information). 

(2) RESPONSIBILITIES OF PROCURERS FOR RESALE.—A person who procures a consumer report for purposes of reselling 

the report (or any information in the report) shall— 

(A) establish and comply with reasonable procedures 

designed to ensure that the report (or information) is resold by the person only for a purpose for which the report 

may be furnished under section 604, including by requiring that each person to which the report (or information) 

is resold and that resells or provides the report (or information) to any other person— 

(i) identifies each end user of the resold report (or 

information); 

(ii) certifies each purpose for which the report (or 

information) will be used; and 

(iii) certifies that the report (or information) will 

be used for no other purpose; and 

(B) before reselling the report, make reasonable efforts 

to verify the identifications and certifications made under 

subparagraph (A). 

(3) RESALE OF CONSUMER REPORT TO A FEDERAL AGENCY OR 

DEPARTMENT.—Notwithstanding paragraph (1) or (2), a person 

who procures a consumer report for purposes of reselling the 

report (or any information in the report) shall not disclose the 

identity of the end-user of the report under paragraph (1) or 

(2) if— 

(A) the end user is an agency or department of the 

United States Government which procures the report from 
Sec. 603 FAIR CREDIT REPORTING ACT 2 50 

the person for purposes of determining the eligibility of the 

consumer concerned to receive access or continued access 

to classified information (as defined in section 

604(b)(4)(E)(i)); and 

(B) the agency or department certifies in writing to 

the person reselling the report that nondisclosure is necessary to protect classified information or the safety of persons employed by or contracting with, or undergoing investigation for work or contracting with the agency or department. 

§ 608. [15 U.S.C. 1681f] Disclosures to governmental agencies 

Notwithstanding the provisions of section 604, a consumer reporting agency may furnish identifying information respecting any 

consumer, limited to his name, address, former addresses, places of 

employment, or former places of employment, to a governmental 

agency. 

§ 609. [15 U.S.C. 1681g] Disclosures to consumers 

(a) Every consumer reporting agency shall, upon request, and 

subject to section 610(a)(1), clearly and accurately disclose to the 

consumer: 

(1) All information in the consumer's file at the time of the 

request, except that nothing in this paragraph shall be construed to require a consumer reporting agency to disclose to a 

consumer any information concerning credit scores or any 

other risk scores or predictors relating to the consumer. 

(2)

 1 The sources of the information; except that the sources of 

information acquired solely for use in preparing an investigative 

consumer report and actually used for no other purpose need not 

be disclosed: Provided, That in the event an action is brought 

under this title, such sources shall be available to the plaintiff 

under appropriate discovery procedures in the court in which the 

action is brought. 

(3)(A) Identification of each person (including each enduser identified under section 607(e)(1)) that procured a consumer report— 

(i) for employment purposes, during the 2-year period 

preceding the date on which the request is made; or 

(ii) for any other purpose, during the 1-year period 

preceding the date on which the request is made. 

(B) An identification of a person under subparagraph (A) 

shall include— 

(i) the name of the person or, if applicable, the trade 

name (written in full) under which such person conducts 

business; and 

(ii) upon request of the consumer, the address and 

telephone number of the person. 

(C)1 Subparagraph (A) does not apply if— 

(i) the end user is an agency or department of the 

United States Government that procures the report 

from the person for purposes of determining the eligi1

 Indentation so in law. 
251 FAIR CREDIT REPORTING ACT Sec. 602 

bility of the consumer to whom the report relates to 

receive access or continued access to classified information (as defined in section 604(b)(4)(E)(i)); and 

(ii) the head of the agency or department makes 

a written finding as prescribed under section 

604(b)(4)(A). 

(4) The dates, original payees, and amounts of any checks 

upon which is based any adverse characterization of the consumer, included in the file at the time of the disclosure. 

(5) A record of all inquiries received by the agency during 

the 1-year period preceding the request that identified the consumer in connection with a credit or insurance transaction that 

was not initiated by the consumer. 

(b) The requirements of subsection (a) respecting the disclosure 

of sources of information and the recipients of consumer reports do 

not apply to information received or consumer reports furnished 

prior to the effective date of this title except to the extent that the 

matter involved is contained in the files of the consumer reporting 

agency on that date. 

(c) SUMMARY OF RIGHTS REQUIRED T O B E INCLUDED WIT H DISCLOSURE.— 

(1) SUMMARY OF RIGHTS.—A consumer reporting agency 

shall provide to a consumer, with each written disclosure by 

the agency to the consumer under this section— 

(A) a written summary of all of the rights that the 

consumer has under this title; and 

(B) in the case of a consumer reporting agency that 

compiles and maintains files on consumers on a nationwide basis, a toll-free telephone number established by the 

agency, at which personnel are accessible to consumers 

during normal business hours. 

(2) SPECIFIC ITEMS REQUIRED TO BE INCLUDED.—Th e summary of rights required under paragraph (1) shall include— 

(A) a brief description of this title and all rights of consumers under this title; 

(B) an explanation of how the consumer may exercise 

the rights of the consumer under this title; 

(C) a list of all Federal agencies responsible for enforcing any provision of this title and the address and any 

appropriate phone number of each such agency, in a form 

that will assist the consumer in selecting the appropriate 

agency; 

(D) a statement that the consumer may have additional rights under State law and that the consumer may 

wish to contact a State or local consumer protection agency 

or a State attorney general to learn of those rights; and 

(E) a statement that a consumer reporting agency is 

not required to remove accurate derogatory information 

from a consumer's file, unless the information is outdated 

under section 605 or cannot be verified. 

(3) FOR M OF SUMMARY OF RIGHTS.—For purposes of this 

subsection and any disclosure by a consumer reporting agency 

required under this title with respect to consumers' rights, the 

Federal Trade Commission (after consultation with each Fed-
Sec. 603 FAIR CREDIT REPORTING ACT 2 52 

eral agency referred to in section 621(b)) shall prescribe the 

form and content of any such disclosure of the rights of consumers required under this title. A consumer reporting agency 

shall be in compliance with this subsection if it provides disclosures under paragraph (1) that are substantially similar to the 

Federal Trade Commission prescription under this paragraph. 

(4) EFFECTIVENESS.—No disclosures shall be required 

under this subsection until the date on which the Federal 

Trade Commission prescribes the form and content of such disclosures under paragraph (3). 

§ 610. [15 U.S.C. 1681h] Conditions and form of disclosure to 

consumers 

(a) I N GENERAL.— 

(1) PROPER IDENTIFICATION.—A consumer reporting agency 

shall require, as a condition of making the disclosures required 

under section 609, that the consumer furnish proper identification. 

(2) DISCLOSURE I N WRITING.—Excep t as provided in subsection (b), the disclosures required to be made under section 

609 shall be provided under that section in writing. 

(b) OTHER FORMS OF DISCLOSURE.— 

(1) I N GENERAL.—If authorized by a consumer, a consumer 

reporting agency may make the disclosures required under 

609— 

(A) other than in writing; and 

(B) in such form as may be— 

(i) specified by the consumer in accordance with 

paragraph (2); and 

(ii) available from the agency. 

(2) FORM.— A consumer may specify pursuant to paragraph 

(1) that disclosures under section 609 shall be made— 

(A) in person, upon the appearance of the consumer at 

the place of business of the consumer reporting agency 

where disclosures are regularly provided, during normal 

business hours, and on reasonable notice; 

(B) by telephone, if the consumer has made a written 

request for disclosure by telephone; 

(C) by electronic means, if available from the agency; 

or 

(D) by any other reasonable means that is available 

from the agency. 

(c) Any consumer reporting agency shall provide trained personnel to explain to the consumer any information furnished to him 

pursuant to section 609. 

(d) The consumer shall be permitted to be accompanied by one 

other person of his choosing, who shall furnish reasonable identification. A consumer reporting agency may require the consumer to 

furnish a written statement granting permission to the consumer 

reporting agency to discuss the consumer's file in such person's 

presence. 

(e) Except as provided in sections 616 and 617, no consumer 

may bring any action or proceeding in the nature of defamation, 

invasion of privacy, or negligence with respect to the reporting of 
253 FAIR CREDIT REPORTING ACT Sec. 602 

information against any consumer reporting agency, any user of 

information, or any person who furnishes information to a consumer reporting agency, based on information disclosed pursuant 

to section 609, 610, or 615, or based on information disclosed by a 

user of a consumer report to or for a consumer against whom the 

user has taken adverse action, based in whole or in part on the report except as to false information furnished with malice or willful 

intent to injure such consumer. 

§ 611. [15 U.S.C. 1681i] Procedure in case of disputed 

accuracy 

(a) REINVESTIGATIONS OF DISPUTED INFORMATION.— 

(1) REINVESTIGATION REQUIRED.— 

(A) I N GENERAL.—If the completeness or accuracy of 

any item of information contained in a consumer's file at 

a consumer reporting agency is disputed by the consumer 

and the consumer notifies the agency directly of such dispute, the agency shall reinvestigate free of charge and 

record the current status of the disputed information, or 

delete the item from the file in accordance with paragraph 

(5), before the end of the 30-day period beginning on the 

date on which the agency receives the notice of the dispute 

from the consumer. 

(B) EXTENSION OF PERIOD TO REINVESTIGATE.—Except 

as provided in subparagraph (C), the 30-day period described in subparagraph (A) may be extended for not more 

than 15 additional days if the consumer reporting agency 

receives information from the consumer during that 30-day 

period that is relevant to the reinvestigation. 

( C) LIMITATIONS ON EXTENSION OF PERIOD TO REINVESTIGATE.—Subparagraph (B) shall not apply to any reinvestigation in which, during the 30-day period described in 

subparagraph (A), the information that is the subject of 

the reinvestigation is found to be inaccurate or incomplete 

or the consumer reporting agency determines that the 

information cannot be verified. 

(2) PROMPT NOTICE OF DISPUTE TO FURNISHER OF INFORMATION.— 

(A) IN GENERAL.—Before the expiration of the 5-business-day period beginning on the date on which a consumer reporting agency receives notice of a dispute from 

any consumer in accordance with paragraph (1), the 

agency shall provide notification of the dispute to any person who provided any item of information in dispute, at 

the address and in the manner established with the person. The notice shall include all relevant information regarding the dispute that the agency has received from the 

consumer. 

(B) PROVISION OF OTHER INFORMATION FROM CONSUMER.—The consumer reporting agency shall promptly 

provide to the person who provided the information in dispute all relevant information regarding the dispute that is 

received by the agency from the consumer after the period 
Sec. 603 FAIR CREDIT REPORTING ACT 2 54 

referred to in subparagraph (A) and before the end of the 

period referred to in paragraph (1)(A). 

(3) DETERMINATION THAT DISPUTE IS FRIVOLOUS OR IRRELEVANT.— 

(A) IN GENERAL.—Notwithstanding paragraph (1), a 

consumer reporting agency may terminate a reinvestigation of information disputed by a consumer under that 

paragraph if the agency reasonably determines that the 

dispute by the consumer is frivolous or irrelevant, including by reason of a failure by a consumer to provide sufficient information to investigate the disputed information. 

(B) NOTICE OF DETERMINATION.—Upon making any 

determination in accordance with subparagraph (A) that a 

dispute is frivolous or irrelevant, a consumer reporting 

agency shall notify the consumer of such determination not 

later than 5 business days after making such determination, by mail or, if authorized by the consumer for that 

purpose, by any other means available to the agency. 

(C) CONTENTS OF NOTICE.—A notice under subparagraph (B) shall include— 

(i) the reasons for the determination under subparagraph (A); and 

(ii) identification of any information required to 

investigate the disputed information, which may consist of a standardized form describing the general nature of such information. 

(4) CONSIDERATION OF CONSUMER INFORMATION.—In conducting any reinvestigation under paragraph (1) with respect 

to disputed information in the file of any consumer, the consumer reporting agency shall review and consider all relevant 

information submitted by the consumer in the period described 

in paragraph (1)(A) with respect to such disputed information. 

(5) TREATMENT OF INACCURATE OR UNVERIFIABLE INFORMATION.— 

(A) IN GENERAL.—If, after any reinvestigation under 

paragraph (1) of any information disputed by a consumer, 

an item of the information is found to be inaccurate or 

incomplete or cannot be verified, the consumer reporting 

agency shall promptly delete that item of information from 

the consumer's file or modify that item of information, as 

appropriate, based on the results of the reinvestigation. 

(B) REQUIREMENTS RELATING TO REINSERTION OF PREVIOUSLY DELETED MATERIAL.— 

(i) CERTIFICATION OF ACCURACY OF INFORMATION.—If any information is deleted from a consumer's 

file pursuant to subparagraph (A), the information 

may not be reinserted in the file by the consumer reporting agency unless the person who furnishes the 

information certifies that the information is complete 

and accurate. 

(ii) NOTICE TO CONSUMER.—If any information 

that has been deleted from a consumer's file pursuant 

to subparagraph (A) is reinserted in the file, the consumer reporting agency shall notify the consumer of 
255 FAIR CREDIT REPORTING ACT Sec. 602 

the reinsertion in writing not later than 5 business 

days after the reinsertion or, if authorized by the consumer for that purpose, by any other means available 

to the agency. 

(iii) ADDITIONAL INFORMATION.—As part of, or in 

addition to, the notice under clause (ii), a consumer reporting agency shall provide to a consumer in writing 

not later than 5 business days after the date of the 

reinsertion— 

(i) a statement that the disputed information 

has been reinserted; 

business name and address of any furnisher 

of information contacted and the telephone number of such furnisher, if reasonably available, or of 

any furnisher of information that contacted the 

consumer reporting agency, in connection with the 

reinsertion of such information; and 

(iii) a notice that the consumer has the right 

to add a statement to the consumer's file disputing the accuracy or completeness of the disputed information. 

(C) PROCEDURES TO PREVENT REAPPEARANCE.—A consumer reporting agency shall maintain reasonable procedures designed to prevent the reappearance in a consumer's file, and in consumer reports on the consumer, of 

information that is deleted pursuant to this paragraph 

(other than information that is reinserted in accordance 

with subparagraph (B)(i)). 

( D ) AUTOMATED REINVESTIGATION SYSTEM.—Any consumer reporting agency that compiles and maintains files 

on consumers on a nationwide basis shall implement an 

automated system through which furnishers of information 

to that consumer reporting agency may report the results 

of a reinvestigation that finds incomplete or inaccurate 

information in a consumer's file to other such consumer reporting agencies. 

(6) NOTICE OF RESULTS OF REINVESTIGATION.— 

(A) I N GENERAL.—A consumer reporting agency shall 

provide written notice to a consumer of the results of a reinvestigation under this subsection not later than 5 business days after the completion of the reinvestigation, by 

mail or, if authorized by the consumer for that purpose, by 

other means available to the agency. 

(B) CONTENTS.—As part of, or in addition to, the notice under subparagraph (A), a consumer reporting agency 

shall provide to a consumer in writing before the expiration of the 5-day period referred to in subparagraph (A)— 

(i) a statement that the reinvestigation is completed; 

(ii) a consumer report that is based upon the consumer's file as that file is revised as a result of the reinvestigation; 

(iii) a notice that, if requested by the consumer, a 

description of the procedure used to determine the ac-
Sec. 603 FAIR CREDIT REPORTING ACT 256 

curacy and completeness of the information shall be 

provided to the consumer by the agency, including the 

business name and address of any furnisher of information contacted in connection with such information 

and the telephone number of such furnisher, if reasonably available; 

(iv) a notice that the consumer has the right to 

add a statement to the consumer's file disputing the 

accuracy or completeness of the information; and 

(v) a notice that the consumer has the right to request under subsection (d) that the consumer reporting agency furnish notifications under that subsection. 

(7) DESCRIPTION OF REINVESTIGATION PROCEDURE.—A consumer reporting agency shall provide to a consumer a description referred to in paragraph (6)(B)(iii) by not later than 15 

days after receiving a request from the consumer for that 

description. 

(8) EXPEDITED DISPUTE RESOLUTION.—If a dispute regarding an item of information in a consumer's file at a consumer 

reporting agency is resolved in accordance with paragraph 

(5)(A) by the deletion of the disputed information by not later 

than 3 business days after the date on which the agency receives notice of the dispute from the consumer in accordance 

with paragraph (1)(A), then the agency shall not be required 

to comply with paragraphs (2), (6), and (7) with respect to that 

dispute if the agency— 

(A) provides prompt notice of the deletion to the consumer by telephone; 

(B) includes in that notice, or in a written notice that 

accompanies a confirmation and consumer report provided 

in accordance with subparagraph (C), a statement of the 

consumer's right to request under subsection (d) that the 

agency furnish notifications under that subsection; and 

(C) provides written confirmation of the deletion and 

a copy of a consumer report on the consumer that is based 

on the consumer's file after the deletion, not later than 5 

business days after making the deletion. 

(b) If the reinvestigation does not resolve the dispute, the consumer may file a brief statement setting forth the nature of the 

dispute. The consumer reporting agency may limit such statements 

to not more than one hundred words if it provides the consumer 

with assistance in writing a clear summary of the dispute. 

(c) Whenever a statement of a dispute is filed, unless there is 

reasonable grounds to believe that it is frivolous or irrevelant, the 

consumer reporting agency shall, in any subsequent consumer report containing the information in question, clearly note that it is 

disputed by the consumer and provide either the consumer's statement or a clear and accurate codification or summary thereof. 

(d) Following any deletion of information which is found to be 

inaccurate or whose accuracy can no longer be verified or any notation as to disputed information, the consumer reporting agency 

shall, at the request of the consumer, furnish notification that the 

item has been deleted or the statement, codification or summary 

pursuant to subsection (b) or (c) to any person specifically des-
257 FAIR CREDIT REPORTING ACT Sec. 602 

ignated by the consumer who has within two years prior thereto received a consumer report for employment purposes, or within six 

months prior thereto received a consumer report for any other purpose, which contained the deleted or disputed information. 

SEC. 612. [15 U.S.C. 1681j] CHARGES FOR CERTAI N DISCLOSURES. 

(a) REASONABLE CHARGES ALLOWED FOR CERTAIN DISCLOSURES.— 

(1) IN GENERAL.—Except as provided in subsections (b), (c), 

and (d), a consumer reporting agency may impose a reasonable 

charge on a consumer— 

(A) for making a disclosure to the consumer pursuant 

to section 609, which charge— 

(i) shall not exceed $8; and 

(ii) shall be indicated to the consumer before making the disclosure; and 

(B) for furnishing, pursuant to section 611(d), following a reinvestigation under section 611(a), a statement, 

codification, or summary to a person designated by the 

consumer under that section after the 30-day period beginning on the date of notification of the consumer under 

paragraph (6) or (8) of section 611(a) with respect to the 

reinvestigation, which charge— 

(i) shall not exceed the charge that the agency 

would impose on each designated recipient for a consumer report; and 

(ii) shall be indicated to the consumer before furnishing such information. 

(2) MODIFICATION OF AMOUNT.—Th e Federal Trade Commission shall increase the amount referred to in paragraph 

(1)(A)(i) on January 1 of each year, based proportionally on 

changes in the Consumer Price Index, with fractional changes 

rounded to the nearest fifty cents. 

(b) FREE DISCLOSURE AFTER ADVERSE NOTIC E TO CONSUMER.— 

Each consumer reporting agency that maintains a file on a consumer shall make all disclosures pursuant to section 609 without 

charge to the consumer if, not later than 60 days after receipt by 

such consumer of a notification pursuant to section 615, or of a 

notification from a debt collection agency affiliated with that consumer reporting agency stating that the consumer's credit rating 

may be or has been adversely affected, the consumer makes a request under section 609. 

(c) FREE DISCLOSURE UNDE R CERTAIN OTHER CIRCUMSTANCES.—Upon the request of the consumer, a consumer reporting agency shall make all disclosures pursuant to section 609 

once during any 12-month period without charge to that consumer 

if the consumer certifies in writing that the consumer— 

(1) is unemployed and intends to apply for employment in 

the 60-day period beginning on the date on which the certification is made; 

(2) is a recipient of public welfare assistance; or 

(3) has reason to believe that the file on the consumer at 

the agency contains inaccurate information due to fraud. 
Sec. 603 FAIR CREDIT REPORTING ACT 258 

(d) OTHER CHARGES PROHIBITED.—A consumer reporting 

agency shall not impose any charge on a consumer for providing 

any notification required by this title or making any disclosure required by this title, except as authorized by subsection (a). 

§ 613. [15 U.S.C. 1681k] Public record information for 

employment purposes 

(a) I N GENERAL.—A consumer reporting agency which furnishes a consumer report for employment purposes and which for 

that purpose compiles and reports items of information on consumers which are matters of public record and are likely to have 

an adverse effect upon a consumer's ability to obtain employment 

shall— 

(1) at the time such public record information is reported 

to the user of such consumer report, notify the consumer of the 

fact that public record information is being reported by the 

consumer reporting agency, together with the name and address of the person to whom such information is being reported; or 

(2) maintain strict procedures designed to insure that 

whenever public record information which is likely to have an 

adverse effect on a consumer's ability to obtain employment is 

reported it is complete and up to date. For purposes of this 

paragraph, items of public record relating to arrests, indictments, convictions, suits, tax liens, and outstanding judgments 

shall be considered up to date if the current public record status of the item at the time of the report is reported. 

(b) EXEMPTION FOR NATIONAL SECURITY INVESTIGATIONS.—Subsection (a) does not apply in the case of an agency or department 

of the United States Government that seeks to obtain and use a 

consumer report for employment purposes, if the head of the 

agency or department makes a written finding as prescribed under 

section 604(b)(4)(A). 

§ 614. [15 U.S.C. 1681Z] Restrictions on investigative consumer reports 

Whenever a consumer reporting agency prepares an investigative consumer report, no adverse information in the consumer report (other than information which is a matter of public record) 

may be included in a subsequent consumer report unless such adverse information has been verified in the process of making such 

subsequent consumer report, or the adverse information was received within the three-month period preceding the date the subsequent report is furnished. 

§ 615. [15 U.S.C. 1681m] Requirements on users of consumer 

reports 

(a) DUTIES OF USERS TAKING ADVERSE ACTIONS ON THE BASIS 

OF INFORMATION CONTAINED I N CONSUMER REPORTS.—If an y person takes any adverse action with respect to any consumer that is 

based in whole or in part on any information contained in a consumer report, the person shall— 

(1) provide oral, written, or electronic notice of the adverse 

action to the consumer; 
259 FAIR CREDIT REPORTING ACT Sec. 602 

(2) provide to the consumer orally, in writing, or 

electronically— 

(A) the name, address, and telephone number of the 

consumer reporting agency (including a toll-free telephone 

number established by the agency if the agency compiles 

and maintains files on consumers on a nationwide basis) 

that furnished the report to the person; and 

(B) a statement that the consumer reporting agency 

did not make the decision to take the adverse action and 

is unable to provide the consumer the specific reasons why 

the adverse action was taken; and 

(3) provide to the consumer an oral, written, or electronic 

notice of the consumer's right— 

(A) to obtain, under section 612, a free copy of a consumer report on the consumer from the consumer reporting agency referred to in paragraph (2), which notice shall 

include an indication of the 60-day period under that section for obtaining such a copy; and 

(B) to dispute, under section 611, with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency. 

(b) ADVERSE ACTIO N BASED ON INFORMATION OBTAINED FRO M 

THIR D PARTIES OTHER THA N CONSUMER REPORTING AGENCIES.— 

(1) IN GENERAL.—Whenever credit for personal, family, or 

household purposes involving a consumer is denied or the 

charge for such credit is increased either wholly or partly because of information obtained from a person other than a consumer reporting agency bearing upon the consumer's credit 

worthiness, credit standing, credit capacity, character, general 

reputation, personal characteristics, or mode of living, the user 

of such information shall, within a reasonable period of time, 

upon the consumer's written request for the reasons for such 

adverse action received within sixty days after learning of such 

adverse action, disclose the nature of the information to the 

consumer. The user of such information shall clearly and accurately disclose to the consumer his right to make such written 

request at the time such adverse action is communicated to the 

consumer. 

(2) DUTIES OF PERSON TAKING CERTAIN ACTIONS BASED ON 

INFORMATION PROVIDED BY AFFILIATE.— 

(A) DUTIES, GENERALLY.—If a person takes an action 

described in subparagraph (B) with respect to a consumer, 

based in whole or in part on information described in subparagraph (C), the person shall— 

(i) notify the consumer of the action, including a 

statement that the consumer may obtain the information in accordance with clause (ii); and 

(ii) upon a written request from the consumer received within 60 days after transmittal of the notice 

required by clause (i), disclose to the consumer the nature of the information upon which the action is based 

by not later than 30 days after receipt of the request. 

(B) ACTION DESCRIBED.—An action referred to in subparagraph (A) is an adverse action described in section 
Sec. 603 FAIR CREDIT REPORTING ACT 2 60 

603(k)(1)(A), taken in connection with a transaction initiated by the consumer, or any adverse action described in 

clause (i) or (ii) of section 603(k)(1)(B). 

(C) INFORMATION DESCRIBED.—Information referred to 

in subparagraph (A)— 

(i) except as provided in clause (ii), is information 

that— 

(I) is furnished to the person taking the action 

by a person related by common ownership or 

affiliated by common corporate control to the person taking the action; and 

(II) bears on the credit worthiness, credit 

standing, credit capacity, character, general reputation, personal characteristics, or mode of living 

of the consumer; and 

(ii) does not include— 

(I) information solely as to transactions or 

experiences between the consumer and the person 

furnishing the information; or 

(II) information in a consumer report. 

(c) No person shall be held liable for any violation of this section if he shows by a preponderance of the evidence that at the 

time of the alleged violation he maintained reasonable procedures 

to assure compliance with the provisions of this section. 

(d) DUTIE S OF USERS MAKIN G WRITTE N CREDIT OR INSURANCE 

SOLICITATIONS ON TH E BASIS OF INFORMATION CONTAINE D I N CONSUMER FILES. — 

(1) IN GENERAL.—Any person who uses a consumer report 

on any consumer in connection with any credit or insurance 

transaction that is not initiated by the consumer, that is provided to that person under section 604(c)(1)(B), shall provide 

with each written solicitation made to the consumer regarding 

the transaction a clear and conspicuous statement that— 

(A) information contained in the consumer's consumer 

report was used in connection with the transaction; 

(B) the consumer received the offer of credit or insurance because the consumer satisfied the criteria for credit 

worthiness or insurability under which the consumer was 

selected for the offer; 

(C) if applicable, the credit or insurance may not be 

extended if, after the consumer responds to the offer, the 

consumer does not meet the criteria used to select the consumer for the offer or any applicable criteria bearing on 

credit worthiness or insurability or does not furnish any 

required collateral; 

(D) the consumer has a right to prohibit information 

contained in the consumer's file with any consumer reporting agency from being used in connection with any credit 

or insurance transaction that is not initiated by the consumer; and 

(E) the consumer may exercise the right referred to in 

subparagraph (D) by notifying a notification system established under section 604(e). 
261 FAIR CREDIT REPORTING ACT Sec. 602 

( 2 ) DISCLOSUR E OF ADDRESS AN D TELEPHON E NUMBER.— A 

statement under paragraph (1) shall include the address and 

toll-free telephone number of the appropriate notification system established under section 604(e). 

(3) MAINTAININ G CRITERIA O N FILE.— A person who makes 

an offer of credit or insurance to a consumer under a credit or 

insurance transaction described in paragraph (1) shall maintain on file the criteria used to select the consumer to receive 

the offer, all criteria bearing on credit worthiness or insurability, as applicable, that are the basis for determining 

whether or not to extend credit or insurance pursuant to the 

offer, and any requirement for the furnishing of collateral as 

a condition of the extension of credit or insurance, until the 

expiration of the 3-year period beginning on the date on which 

the offer is made to the consumer. 

( 4 ) AUTHORIT Y OF FEDERAL AGENCIES REGARDING UNFAI R 

OR DECEPTIVE ACTS OR PRACTICES NO T AFFECTED.—Thi s section 

is not intended to affect the authority of any Federal or State 

agency to enforce a prohibition against unfair or deceptive acts 

or practices, including the making of false or misleading statements in connection with a credit or insurance transaction that 

is not initiated by the consumer.

 1 

§ 616. [15 U.S.C. 1681n] Civil liability for willful noncompliance 

(a) IN GENERAL.—Any person who willfully fails to comply with 

any requirement imposed under this title with respect to any consumer is liable to that consumer in an amount equal to the sum 

of— 

(1)(A) any actual damages sustained by the consumer as a 

result of the failure or damages of not less than $100 and not 

more than $1,000; or 

(B) in the case of liability of a natural person for obtaining 

a consumer report under false pretenses or knowingly without 

a permissible purpose, actual damages sustained by the consumer as a result of the failure or $1,000, whichever is greater; 

(2) such amount of punitive damages as the court may 

allow; and 

(3) in the case of any successful action to enforce any liability under this section, the costs of the action together with 

reasonable attorney's fees as determined by the court. 

(b) CIVI L LIABILITY FOR KNOWIN G NONCOMPLIANCE.—An y person who obtains a consumer report from a consumer reporting 

agency under false pretenses or knowingly without a permissible 

purpose shall be liable to the consumer reporting agency for actual 

damages sustained by the consumer reporting agency or $1,000, 

whichever is greater. 

(c) ATTORNEY'S FEES.—Upo n a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with 

an action under this section was filed in bad faith or for purposes 

of harassment, the court shall award to the prevailing party attor1

 Section 2411(c) of P.L. 104-208 (110 Stat. 3009-445) purported to amend section 615 by adding at the end a new subsection (e). The amendment consisted only of the subsection "(e)'' designation and is not shown. 
Sec. 603 FAIR CREDIT REPORTING ACT 2 62 

ney's fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper. 

§ 617. [15 U.S.C. 1681o] Civil liability for negligent noncompliance 

(a) IN GENERAL.—Any person who is negligent in failing to 

comply with any requirement imposed under this title with respect 

to any consumer is liable to that consumer in an amount equal to 

the sum of— 

(1) any actual damages sustained by the consumer as a result of the failure;

 1 

(2) in the case of any successful action to enforce any liability under this section, the costs of the action together with 

reasonable attorney's fees as determined by the court. 

(b) ATTORNEY' S FEES.—O n a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with 

an action under this section was filed in bad faith or for purposes 

of harassment, the court shall award to the prevailing party attorney's fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper. 

§ 618. [15 U.S.C. 1681p] Jurisdiction of courts; limitation of 

actions 

An action to enforce any liability created under this title may 

be brought in any appropriate united states district court without 

regard to the amount in controversy, or in any other court of competent jurisdiction, within two years from the date on which the liability arises, except that where a defendant has materially and 

willfully misrepresented any information required under this title 

to be disclosed to an individual and the information so misrepresented is material to the establishment of the defendant's liability 

to that individual under this title, the action may be brought at 

any time within two years after discovery by the individual of the 

misrepresentation. 

§ 619. [15 U.S.C. 1681q] Obtaining information under false 

pretenses 

Any person who knowingly and willfully obtains information 

on a consumer from a consumer reporting agency under false pretenses shall be fined under title 18, United States Code, imprisoned 

for not more than 2 years, or both. 

§ 620. [15 U.S.C. 1681r] Unauthorized disclosures by officers 

or employees 

Any officer or employee of a consumer reporting agency who 

knowingly and willfully provides information concerning an individual from the agency's files to a person not authorized to receive 

that information shall be fined under title 18, United States Code, 

imprisoned for not more than 2 years, or both. 

1

 So in original. Probably should be "; and''. 
263 FAIR CREDIT REPORTING ACT Sec. 602 

§ 621. [15 U.S.C. 1681s] Administrative enforcement 

(a)(1) ENFORCEMEN T BY FEDERAL TRAD E COMMISSION.—Compliance with the requirements imposed under this title shall be enforced under the Federal Trade Commission Act by the Federal 

Trade Commission with respect to consumer reporting agencies and 

all other persons subject thereto, except to the extent that enforcement of the requirements imposed under this title is specifically 

committed to some other government agency under subsection (b) 

hereof. For the purpose of the exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any requirement or prohibition imposed 

under this title shall constitute an unfair or deceptive act or practice in commerce in violation of section 5(a) of the Federal Trade 

Commission Act and shall be subject to enforcement by the Federal 

Trade Commission under section 5(b) thereof with respect to any 

consumer reporting agency or person subject to enforcement by the 

Federal Trade Commission pursuant to this subsection, irrespective 

of whether that person is engaged in commerce or meets any other 

jurisdictional tests in the Federal Trade Commission Act. The Federal Trade Commission shall have such procedural, investigative, 

and enforcement powers, including the power to issue procedural 

rules in enforcing compliance with the requirements imposed under 

this title and to require the filing of reports, the production of documents, and the appearance of witnesses as though the applicable 

terms and conditions of the Federal Trade Commission Act were 

part of this title. Any person violating any of the provisions of this 

title shall be subject to the penalties and entitled to the privileges 

and immunities provided in the Federal Trade Commission Act as 

though the applicable terms and provisions thereof were part of 

this title. 

(2)(A) In the event of a knowing violation, which constitutes a 

pattern or practice of violations of this title, the Commission may 

commence a civil action to recover a civil penalty in a district court 

of the United States against any person that violates this title. In 

such action, such person shall be liable for a civil penalty of not 

more than $2,500 per violation. 

(B) In determining the amount of a civil penalty under subparagraph (A), the court shall take into account the degree of culpability, any history of prior such conduct, ability to pay, effect on 

ability to continue to do business, and such other matters as justice 

may require. 

(3) Notwithstanding paragraph (2), a court may not impose any 

civil penalty on a person for a violation of section 623(a)(1) unless 

the person has been enjoined from committing the violation, or ordered not to commit the violation, in an action or proceeding 

brought by or on behalf of the Federal Trade Commission, and has 

violated the injunction or order, and the court may not impose any 

civil penalty for any violation occurring before the date of the violation of the injunction or order. 

(b) ENFORCEMEN T BY OTHE R AGENCIES.—Compliance with the 

requirements imposed under this title with respect to consumer reporting agencies, persons who use consumer reports from such 

agencies, persons who furnish information to such agencies, and 
Sec. 603 FAIR CREDIT REPORTING ACT 2 64 

users of information that are subject to subsection (d) of section 

615 shall be enforced under— 

(1) section 8 of the Federal Deposit Insurance Act, in the 

case of— 

(A) national banks, and Federal branches and Federal 

agencies of foreign banks, by the Office of the Comptroller 

of the Currency; 

(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25(a)1 of 

the Federal Reserve Act, by the Board of Governors of the 

Federal Reserve System; and 

(C) banks insured by the Federal Deposit Insurance 

Corporation (other than members of the Federal Reserve 

System) and insured State branches of foreign banks, by 

the Board of Directors of the Federal Deposit Insurance 

Corporation; 

(2) section 8 of the Federal Deposit Insurance Act, by the 

Director of the Office of Thrift Supervision, in the case of a 

savings association the deposits of which are insured by the 

Federal Deposit Insurance Corporation; 

(3) the Federal Credit Union Act, by the Administrator of 

the National Credit Union Administration with respect to any 

Federal credit union; 

(4) the Acts to regulate commerce, by the Secretary of 

Transportation, with respect to all carriers subject to the jurisdiction of the Surface Transportation Board; 

(5) the Federal Aviation Act of 1958, by the Secretary of 

Transportation with respect to any air carrier or foreign air 

carrier subject to that Act; and 

(6) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the Secretary of Agriculture with respect to any activities subject to that Act. 

The terms used in paragraph (1) that are not defined in this title 

or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them 

in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 

3101). 

(c) STAT E ACTIO N FOR VIOLATIONS. — 

(1) AUTHORIT Y OF STATES.—In addition to such other remedies as are provided under State law, if the chief law enforcement officer of a State, or an official or agency designated by 

a State, has reason to believe that any person has violated or 

is violating this title, the State— 

(A) may bring an action to enjoin such violation in any 

appropriate United States district court or in any other 

court of competent jurisdiction; 

1

 Section 25(a) of the Federal Reserve Act was redesignated as section 25A by section 142(e)(2) 

of the Federal Deposit Insurance Corporation Improvement Act of 1991. 
265 FAIR CREDIT REPORTING ACT Sec. 602 

(B) subject to paragraph (5), may bring an action on 

behalf of the residents of the state to recover— 

(i) damages for which the person is liable to such 

residents under sections 616 and 617 as a result of the 

violation; 

(ii) in the case of a violation of section 623(a), 

damages for which the person would, but for section 

623(c), be liable to such residents as a result of the 

violation; or 

(iii) damages of not more than $1,000 for each 

willful or negligent violation; and 

(C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action 

and reasonable attorney fees as determined by the court. 

(2) RIGHTS OF FEDERAL REGULATORS.—The State shall 

serve prior written notice of any action under paragraph (1) 

upon the Federal Trade Commission or the appropriate Federal regulator determined under subsection (b) and provide the 

Commission or appropriate Federal regulator with a copy of its 

complaint, except in any case in which such prior notice is not 

feasible, in which case the state shall serve such notice immediately upon instituting such action. The Federal Trade Commission or appropriate Federal regulator shall have the right— 

(A) to intervene in the action; 

(B) upon so intervening, to be heard on all matters 

arising therein; 

(C) to remove the action to the appropriate United 

states district court; and 

(D) to file petitions for appeal. 

(3) INVESTIGATORY POWERS.—For purposes of bringing any 

action under this subsection, nothing in this subsection shall 

prevent the chief law enforcement officer, or an official or 

agency designated by a state, from exercising the powers conferred on the chief law enforcement officer or such official by 

the laws of such state to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence. 

(4) LIMITATION ON STATE ACTION WHILE FEDERAL ACTION 

PENDING.—If the Federal Trade Commission or the appropriate 

Federal regulator has instituted a civil action or an administrative action under section 8 of the Federal Deposit Insurance 

Act for a violation of this title, no state may, during the pendency of such action, bring an action under this section against 

any defendant named in the complaint of the Commission or 

the appropriate Federal regulator for any violation of this title 

that is alleged in that complaint. 

(5) LIMITATIONS ON STATE ACTIONS FOR VIOLATION OF SECTION 623(a)(1).— 

(A) VIOLATION OF INJUNCTION REQUIRED.—A State 

may not bring an action against a person under paragraph 

(1)(B) for a violation of section 623(a)(1), unless— 

(i) the person has been enjoined from committing 

the violation, in an action brought by the state under 

paragraph (1)(A); and 
Sec. 603 FAIR CREDIT REPORTING ACT 266 

(ii) the person has violated the injunction. 

(B) LIMITATIO N ON DAMAGES RECOVERABLE.—In a n action against a person under paragraph (1)(B) for a violation of section 623(a)(1), a State may not recover any damages incurred before the date of the violation of an injunction on which the action is based. 

(d) For the purpose of the exercise by any agency referred to 

in subsection (b) of its powers under any Act referred to in that 

subsection, a violation of any requirement imposed under this title 

shall be deemed to be a violation of a requirement imposed under 

that Act. In addition to its powers under any provision of law specifically referred to in subsection (b), each of the agencies referred 

to in that subsection may exercise, for the purpose of enforcing 

compliance with any requirement imposed under this title any 

other authority conferred on it by law. 

(e) REGULATORY AUTHORITY.— 

(1) The Federal banking agencies referred to in paragraphs 

(1) and (2) of subsection (b) shall jointly prescribe such regulations as necessary to carry out the purposes of this Act with 

respect to any persons identified under paragraphs (1) and (2) 

of subsection (b), and the Board of Governors of the Federal 

Reserve System shall have authority to prescribe regulations 

consistent with such joint regulations with respect to bank 

holding companies and affiliates (other than depository institutions and consumer reporting agencies) of such holding companies. 

(2) The Board of the National Credit Union Administration 

shall prescribe such regulations as necessary to carry out the 

purposes of this Act with respect to any persons identified 

under paragraph (3) of subsection (b). 

§ 622. [15 U.S.C. 1681s-1] Information on overdue child support obligations 

Notwithstanding any other provision of this title, a consumer 

reporting agency shall include in any consumer report furnished by 

the agency in accordance with section 604, any information on the 

failure of the consumer to pay overdue support which— 

(1) is provided— 

(A) to the consumer reporting agency by a State or 

local child support enforcement agency; or 

(B) to the consumer reporting agency and verified by 

any local, State, or Federal Government agency; and 

(2) antedates the report by 7 years or less. 

SEC. 623. [15 U.S.C. 1681s-2] RESPONSIBILITIES OF FURNISHER S OF 

INFORMATIO N TO CONSUME R REPORTIN G AGENCIES. 

(a) DUT Y OF FURNISHERS OF INFORMATION T O PROVIDE ACCURATE INFORMATION.— 

(1) PROHIBITION.— 

(A) REPORTING INFORMATION WIT H ACTUAL KNOWLEDGE 

OF ERRORS.—A person shall not furnish any information 

relating to a consumer to any consumer reporting agency 

if the person knows or consciously avoids knowing that the 

information is inaccurate. 
267 FAIR CREDIT REPORTING ACT Sec. 602 

(B) REPORTING INFORMATION AFTER NOTICE AND CONFIRMATION OF ERRORS.—A person shall not furnish information relating to a consumer to any consumer reporting 

agency if— 

(i) the person has been notified by the consumer, 

at the address specified by the person for such notices, 

that specific information is inaccurate; and 

(ii) the information is, in fact, inaccurate. 

(C) N O ADDRESS REQUIREMENT.—A person who clearly 

and conspicuously specifies to the consumer an address for 

notices referred to in subparagraph (B) shall not be subject 

to subparagraph (A); however, nothing in subparagraph 

(B) shall require a person to specify such an address. 

(2) DUT Y TO CORRECT AND UPDATE INFORMATION.—A person who— 

(A) regularly and in the ordinary course of business 

furnishes information to one or more consumer reporting 

agencies about the person's transactions or experiences 

with any consumer; and 

(B) has furnished to a consumer reporting agency 

information that the person determines is not complete or 

accurate, 

shall promptly notify the consumer reporting agency of that 

determination and provide to the agency any corrections to 

that information, or any additional information, that is necessary to make the information provided by the person to the 

agency complete and accurate, and shall not thereafter furnish 

to the agency any of the information that remains not complete 

or accurate. 

(3) DUT Y TO PROVIDE NOTICE OF DISPUTE.—If the completeness or accuracy of any information furnished by any person 

to any consumer reporting agency is disputed to such person 

by a consumer, the person may not furnish the information to 

any consumer reporting agency without notice that such information is disputed by the consumer. 

(4) DUTY TO PROVIDE NOTICE OF CLOSED ACCOUNTS.—A 

person who regularly and in the ordinary course of business 

furnishes information to a consumer reporting agency regarding a consumer who has a credit account with that person shall 

notify the agency of the voluntary closure of the account by the 

consumer, in information regularly furnished for the period in 

which the account is closed. 

(5) DUT Y TO PROVIDE NOTICE OF DELINQUENCY OF ACCOUNTS.—A person who furnishes information to a consumer 

reporting agency regarding a delinquent account being placed 

for collection, charged to profit or loss, or subjected to any similar action shall, not later than 90 days after furnishing the 

information, notify the agency of the month and year of the 

commencement of the delinquency that immediately preceded 

the action. 

(b) DUTIES OF FURNISHERS OF INFORMATION UPO N NOTICE OF 

DISPUTE.— 

(1) IN GENERAL.—After receiving notice pursuant to section 

611(a)(2) of a dispute with regard to the completeness or accu-
Sec. 603 FAIR CREDIT REPORTING ACT 268 

racy of any information provided by a person to a consumer reporting agency, the person shall— 

(A) conduct an investigation with respect to the disputed information; 

(B) review all relevant information provided by the 

consumer reporting agency pursuant to section 611(a)(2); 

(C) report the results of the investigation to the consumer reporting agency; and 

(D) if the investigation finds that the information is 

incomplete or inaccurate, report those results to all other 

consumer reporting agencies to which the person furnished 

the information and that compile and maintain files on 

consumers on a nationwide basis. 

(2) DEADLINE.— A person shall complete all investigations, 

reviews, and reports required under paragraph (1) regarding 

information provided by the person to a consumer reporting 

agency, before the expiration of the period under section 

611(a)(1) within which the consumer reporting agency is required to complete actions required by that section regarding 

that information. 

(c) LIMITATIO N O N LIABILITY.—Section s 61 6 an d 61 7 do no t 

apply to any failure to comply with subsection (a), except as provided in section 621(c)(1)(B). 

(d) LIMITATIO N O N ENFORCEMENT.—Subsectio n (a) shall be enforced exclusively under section 621 by the Federal agencies and 

officials and the state officials identified in that section. 

§ 624. [15 U.S.C. 1681t] Relation to State laws1 

(a) IN GENERAL.—Except as provided in subsections (b) and (c), 

this title does not annul, alter, affect, or exempt any person subject 

to the provisions of this title from complying with the laws of any 

state with respect to the collection, distribution, or use of any 

information on consumers, except to the extent that those laws are 

inconsistent with any provision of this title, and then only to the 

extent of the inconsistency. 

(b) GENERA L EXCEPTIONS.—N o requirement or prohibition may 

be imposed under the laws of any state— 

(1) with respect to any subject matter regulated under— 

(A) subsection (c) or (e) of section 604, relating to the 

prescreening of consumer reports; 

(B) section 611, relating to the time by which a consumer reporting agency must take any action, including 

the provision of notification to a consumer or other person, 

in any procedure related to the disputed accuracy of information in a consumer's file, except that this subparagraph 

shall not apply to any state law in effect on the date of 

enactment of the Consumer Credit Reporting Reform Act 

of 1996; 

(C) subsections (a) and (b) of section 615, relating to 

the duties of a person who takes any adverse action with 

respect to a consumer; 

!So in law. Section 2413(a) of P.L. 104-208 (110 Stat. 3009-447) redesignated what had been 

section 623 as section 624 and inserted a new section 623. Section 601(b) of P.L. 104-93 (109 

stat. 977) had already added a section 624. 
269 FAIR CREDIT REPORTING ACT Sec. 602 

(D) section 615(d), relating to the duties of persons 

who use a consumer report of a consumer in connection 

with any credit or insurance transaction that is not initiated by the consumer and that consists of a firm offer of 

credit or insurance; 

(E) section 605, relating to information contained in 

consumer reports, except that this subparagraph shall not 

apply to any State law in effect on the date of enactment 

of the Consumer Credit Reporting Reform Act of 1996; or 

(F) section 623, relating to the responsibilities of persons who furnish information to consumer reporting agencies, except that this paragraph shall not apply— 

(i) with respect to section 54A(a) of chapter 93 of 

the Massachusetts Annotated Laws (as in effect on the 

date of enactment of the Consumer Credit Reporting 

Reform Act of 1996); or 

(ii) with respect to section 1785.25(a) of the California Civil Code (as in effect on the date of enactment 

of the Consumer Credit Reporting Reform Act of 

1996); 

(2) with respect to the exchange of information among persons affiliated by common ownership or common corporate control, except that this paragraph shall not apply with respect to 

subsection (a) or (c)(1) of section 2480e of title 9, Vermont Statutes Annotated (as in effect on the date of enactment of the 

Consumer Credit Reporting Reform Act of 1996); or 

(3) with respect to the form and content of any disclosure 

required to be made under section 609(c). 

(c) DEFINITIO N OF FIR M OFFER OF CREDIT OR INSURANCE.—Notwithstanding any definition of the term "firm offer of credit or 

insurance'' (or any equivalent term) under the laws of any State, 

the definition of that term contained in section 603(l) shall be construed to apply in the enforcement and interpretation of the laws 

of any State governing consumer reports. 

(d) LIMITATIONS.—Subsections (b) and (c)— 

(1) do not affect any settlement, agreement, or consent 

judgment between any State Attorney General and any consumer reporting agency in effect on the date of enactment of 

the Consumer Credit Reporting Reform Act of 1996; and 

(2) do not apply to any provision of State law (including 

any provision of a State constitution) that— 

(A) is enacted after January 1, 2004; 

(B) states explicitly that the provision is intended to 

supplement this title; and 

(C) gives greater protection to consumers than is provided under this title. 

§ 624. [15 U.S.C. 1681u] Disclosures to FBI for counterintelligence purposes

 1 

(a) IDENTITY OF FINANCIAL INSTITUTIONS.—Notwithstanding 

section 604 or any other provision of this title, a consumer report1

 So in law. This section as added by section 601(a) of the Intelligence Authorization Act for 

Fiscal Year 1996 (P.L. 104-93; 110 Stat. 974) probably should be redesignated as section 625. 
Sec. 603 FAIR CREDIT REPORTING ACT 2 70 

ing agency shall furnish to the Federal Bureau of Investigation the 

names and addresses of all financial institutions (as that term is 

defined in section 1101 of the Right to Financial Privacy Act of 

1978) at which a consumer maintains or has maintained an account, to the extent that information is in the files of the agency, 

when presented with a written request for that information, signed 

by the Director of the Federal Bureau of Investigation, or the 

Director's designee, which certifies compliance with this section. 

The Director or the Director's designee may make such a certification only if the Director or the Director's designee has determined in writing that— 

(1) such information is necessary for the conduct of an 

authorized foreign counterintelligence investigation; and 

(2) there are specific and articulable facts giving reason to 

believe that the consumer— 

(A) is a foreign power (as defined in section 101 of the 

Foreign Intelligence Surveillance Act of 1978) or a person 

who is not a united states person (as defined in such section 101) and is an official of a foreign power; or 

(B) is an agent of a foreign power and is engaging or 

has engaged in an act of international terrorism (as that 

term is defined in section 101(c) of the Foreign Intelligence 

Surveillance Act of 1978) or clandestine intelligence activities that involve or may involve a violation of criminal 

statutes of the United States. 

(b) IDENTIFYIN G INFORMATION.—Notwithstanding the provisions of section 604 or any other provision of this title, a consumer 

reporting agency shall furnish identifying information respecting a 

consumer, limited to name, address, former addresses, places of 

employment, or former places of employment, to the Federal Bureau of Investigation when presented with a written request, 

signed by the Director or the Director's designee, which certifies 

compliance with this subsection. The Director or the Director's designee may make such a certification only if the Director or the 

Director's designee has determined in writing that— 

(1) such information is necessary to the conduct of an 

authorized counterintelligence investigation; and 

(2) there is information giving reason to believe that the 

consumer has been, or is about to be, in contact with a foreign 

power or an agent of a foreign power (as defined in section 101 

of the Foreign Intelligence Surveillance Act of 1978). 

(c) COURT ORDER FOR DISCLOSURE OF CONSUMER REPORTS.— 

Notwithstanding section 604 or any other provision of this title, if 

requested in writing by the Director of the Federal Bureau of 

Investigation, or a designee of the Director, a court may issue an 

order ex parte directing a consumer reporting agency to furnish a 

consumer report to the Federal Bureau of Investigation, upon a 

showing in camera that— 

(1) the consumer report is necessary for the conduct of an 

authorized foreign counterintelligence investigation; and 

(2) there are specific and articulable facts giving reason to 

believe that the consumer whose consumer report is sought— 

(A) is an agent of a foreign power, and 
271 FAIR CREDIT REPORTING ACT Sec. 602 

(B) is engaging or has engaged in an act of international terrorism (as that term is defined in section 

101(c) of the Foreign Intelligence Surveillance Act of 1978) 

or clandestine intelligence activities that involve or may 

involve a violation of criminal statutes of the united 

States. 

The terms of an order issued under this subsection shall not disclose that the order is issued for purposes of a counterintelligence 

investigation. 

(d) CONFIDENTIALITY.—No consumer reporting agency or officer, employee, or agent of a consumer reporting agency shall disclose to any person, other than those officers, employees, or agents 

of a consumer reporting agency necessary to fulfill the requirement 

to disclose information to the Federal Bureau of Investigation 

under this section, that the Federal Bureau of Investigation has 

sought or obtained the identity of financial institutions or a consumer report respecting any consumer under subsection (a), (b), or 

(c), and no consumer reporting agency or officer, employee, or agent 

of a consumer reporting agency shall include in any consumer report any information that would indicate that the Federal Bureau 

of investigation has sought or obtained such information or a consumer report. 

(e) PAYMENT OF FEES.—The Federal Bureau of Investigation 

shall, subject to the availability of appropriations, pay to the consumer reporting agency assembling or providing report or information in accordance with procedures established under this section 

a fee for reimbursement for such costs as are reasonably necessary 

and which have been directly incurred in searching, reproducing, or 

transporting books, papers, records, or other data required or requested to be produced under this section. 

(f) LIMIT ON DISSEMINATION.—The Federal Bureau of Investigation may not disseminate information obtained pursuant to this 

section outside of the Federal Bureau of Investigation, except to 

other Federal agencies as may be necessary for the approval or conduct of a foreign counterintelligence investigation, or, where the 

information concerns a person subject to the Uniform Code of Military Justice, to appropriate investigative authorities within the 

military department concerned as may be necessary for the conduct 

of a joint foreign counterintelligence investigation. 

(g) RULES OF CONSTRUCTION.—Nothing in this section shall be 

construed to prohibit information from being furnished by the Federal Bureau of Investigation pursuant to a subpoena or court order, 

in connection with a judicial or administrative proceeding to enforce the provisions of this Act. Nothing in this section shall be construed to authorize or permit the withholding of information from 

the Congress. 

(h) REPORTS TO CONGRESS.—On a semiannual basis, the Attorney General shall fully inform the Permanent Select Committee on 

Intelligence and the Committee on Banking, Finance and Urban 

Affairs of the House of Representatives, and the Select Committee 

on Intelligence and the Committee on Banking, Housing, and 

Urban Affairs of the Senate concerning all requests made pursuant 

to subsections (a), (b), and (c). 
Sec. 704A EQUAL CREDIT OPPORTUNITY ACT 2 72 

(i) DAMAGES.—Any agency or department of the United States 

obtaining or disclosing any consumer reports, records, or information contained therein in violation of this section is liable to the 

consumer to whom such consumer reports, records, or information 

relate in an amount equal to the sum of— 

(1) $100, without regard to the volume of consumer reports, records, or information involved; 

(2) any actual damages sustained by the consumer as a result of the disclosure; 

(3) if the violation is found to have been willful or intentional, such punitive damages as a court may allow; and 

(4) in the case of any successful action to enforce liability 

under this subsection, the costs of the action, together with 

reasonable attorney fees, as determined by the court. 

(j) DISCIPLINARY ACTIONS FOR VIOLATIONS.—If a court determines that any agency or department of the united states has violated any provision of this section and the court finds that the circumstances surrounding the violation raise questions of whether or 

not an officer or employee of the agency or department acted willfully or intentionally with respect to the violation, the agency or 

department shall promptly initiate a proceeding to determine 

whether or not disciplinary action is warranted against the officer 

or employee who was responsible for the violation. 

(k) GOOD-FAITH EXCEPTION.—Notwithstanding any other provision of this title, any consumer reporting agency or agent or employee thereof making disclosure of consumer reports or identifying 

information pursuant to this subsection in good-faith reliance upon 

a certification of the Federal Bureau of Investigation pursuant to 

provisions of this section shall not be liable to any person for such 

disclosure under this title, the constitution of any state, or any law 

or regulation of any State or any political subdivision of any State. 

(l) LIMITATION OF REMEDIES.—Notwithstanding any other provision of this title, the remedies and sanctions set forth in this section shall be the only judicial remedies and sanctions for violation 

of this section. 

(m) INJUNCTIVE RELIEF.—I n addition to any other remedy contained in this section, injunctive relief shall be available to require 

compliance with the procedures of this section. In the event of any 

successful action under this subsection, costs together with reasonable attorney fees, as determined by the court, may be recovered. 

TITLE VII—EQUAL CREDIT OPPORTUNITY 

sec. 

701. Prohibited discrimination. 

702. Definitions. 

703. Regulations. 

704. Administrative enforcement. 

704A. Incentives for self-testing and self-correction. 

705. Relation to state laws. 

706. Civil liability. 

707. Annual reports to Congress. 

708. Effective date. 

709. short title. 
273 EQUAL CREDIT OPPORTUNITY ACT Sec. 704A 

§ 701. [15 U.S.C. 1691] Prohibited discrimination; reasons for 

adverse action 

(a) it shall be unlawful for any creditor to discriminate against 

any applicant, with respect to any aspect of a credit transaction— 

(1) on the basis of race, color, religion, national origin, sex 

or marital status, or age (provided the applicant has the capacity to contract); 

(2) because all or part of the applicant's income derives 

from any public assistance program; or 

(3) because the applicant has in good faith exercised any 

right under the Consumer Credit Protection Act. 

(b) it shall not constitute discrimination for purposes of this 

title for a creditor— 

(1) to make an inquiry of marital status if such inquiry is 

for the purpose of ascertaining the creditor's rights and remedies applicable to the particular extension of credit and not to 

discriminate in a determination of credit-worthiness; 

(2) to make an inquiry of the applicant's age or of whether 

the applicant's income derives from any public assistance program if such inquiry is for the purpose of determining the 

amount and probable continuance of income levels, credit history, or other pertinent element of credit-worthiness as provided in regulations of the Board; 

(3) to use any empirically derived credit system which considers age if such system is demonstrably and statistically 

sound in accordance with regulations of the Board, except that 

in the operation of such system the age of an elderly applicant 

may not be assigned a negative factor or value; or 

(4) to make an inquiry or to consider the age of an elderly 

applicant when the age of such applicant is to be used by the 

creditor in the extension of credit in favor of such applicant. 

(c) it is not a violation of this section for a creditor to refuse 

to extend credit offered pursuant to— 

(1) any credit assistance program expressly authorized by 

law for an economically disadvantaged class of persons; 

(2) any credit assistance program administered by a nonprofit organization for its members or an economically disadvantaged class of persons; or 

(3) any special purpose credit program offered by a profitmaking organization to meet special social needs which meets 

standards prescribed in regulations by the Board; 

if such refusal is required by or made pursuant to such program. 

(d)(1) Within thirty days (or such longer reasonable time as 

specified in regulations of the Board for any class of credit transaction) after receipt of a completed application for credit, a creditor 

shall notify the applicant of its action on the application. 

(2) Each applicant against whom adverse action is taken shall 

be entitled to a statement of reasons for such action from the creditor. A creditor satisfies this obligation by— 

(A) providing statements of reasons in writing as a matter 

of course to applicants against whom adverse action is taken; 

or 
Sec. 704A EQUAL CREDIT OPPORTUNITY ACT 2 74 

(B) giving written notification of adverse action which discloses (i) the applicant's right to a statement of reasons within 

thirty days after receipt by the creditor of a request made 

within sixty days after such notification, and (ii) the identity 

of the person or office from which such statement may be obtained. Such statement may be given orally, if the written notification advises the applicant of his right to have the statement 

of reasons confirmed in writing on written request. 

(3) A statement of reasons meets the requirements of this section only if it contains the specific reasons for the adverse action 

taken. 

(4) Where a creditor has been requested by a third party to 

make a specific extension of credit directly or indirectly to an applicant, the notification and statement of reasons required by this 

subsection may be made directly by such creditor, or indirectly 

through the third party, provided in either case that the identity 

of the creditor is disclosed. 

(5) The requirements of paragraphs (2), (3), or (4) may be satisfied by verbal statements or notifications in the case of any creditor 

who did not act on more than one hundred and fifty applications 

during the calendar year preceding the calendar year in which the 

adverse action is taken, as determined under regulations of the 

Board. 

(6) For purposes of this subsection, the term "adverse action'' 

means a denial or revocation of credit, a change in the terms of an 

existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested. such 

term does not include a refusal to extend additional credit under 

an existing credit arrangement where the applicant is delinquent 

or otherwise in default, or where such additional credit would exceed a previously established credit limit. 

(e) Each creditor shall promptly furnish an applicant, upon 

written request by the applicant made within a reasonable period 

of time of the application, a copy of the appraisal report used in 

connection with the applicant's application for a loan that is or 

would have been secured by a lien on residential real property. The 

creditor may require the applicant to reimburse the creditor for the 

cost of the appraisal. 

§ 702. [15 U.S.C. 1691a] Definitions 

(a) The definitions and rules of construction set forth in this 

section are applicable for the purposes of this title. 

(b) The term "applicant'' means any person who applies to a 

creditor directly for an extension, renewal, or continuation of credit, 

or applies to a creditor indirectly by use of an existing credit plan 

for an amount exceeding a previously established credit limit. 

(c) The term "Board'' refers to the Board of Governors of the 

Federal Reserve system. 

(d) The term ''credit'' means the right granted by a creditor to 

a debtor to defer payment of debt or to incur debts and defer its 

payment or to purchase property or services and defer payment 

therefor. 

(e) The term ''creditor'' means any person who regularly extends, renews, or continues credit; any person who regularly ar-
275 EQUAL CREDIT OPPORTUNITY ACT Sec. 704A 

ranges for the extension, renewal, or continuation of credit; or any 

assignee of an original creditor who participates in the decision to 

extend, renew, or continue credit. 

(f) The term "person'' means a natural person, a corporation, 

government or governmental subdivision or agency, trust, estate, 

partnership, cooperative, or association. 

(g) Any reference to any requirement imposed under this title 

or any provision thereof includes reference to the regulations of the 

Board under this title or the provision thereof in question. 

§ 703. [15 U.S.C. 1691b] Regulations 

(a)(1) The Board shall prescribe regulations to carry out the 

purposes of this title. These regulations may contain but are not 

limited to such classifications, differentiation, or other provision, 

and may provide for such adjustments and exceptions for any class 

of transactions, as in the judgment of the Board are necessary or 

proper to effectuate the purposes of this title, to prevent circumvention or evasion thereof, or to facilitate or substantiate compliance 

therewith. 

(2) Such regulations may exempt from the provisions of this 

title any class of transactions that are not primarily for personal, 

family, or household purposes, or business or commercial loans 

made available by a financial institution, except that a particular 

type within a class of such transactions may be exempted if the 

Board determines, after making an express finding that the application of this title or of any provision of this title of such transaction would not contribute substantially to effecting the purposes 

of this title. 

(3) An exemption granted pursuant to paragraph (2) shall be 

for no longer than five years and shall be extended only if the 

Board makes a subsequent determination, in the manner described 

by such paragraph, that such exemption remains appropriate. 

(4) pursuant to Board regulations, entities making business or 

commercial loans shall maintain such records or other data relating to such loans as may be necessary to evidence compliance with 

this subsection or enforce any action pursuant to the authority of 

this Act. In no event shall such records or data be maintained for 

a period of less than one year. The Board shall promulgate regulations to implement this paragraph in the manner prescribed by 

chapter 5 of title 5, United States Code. 

(5) The Board shall provide in regulations that an applicant for 

a business or commercial loan shall be provided a written notice of 

such applicant's right to receive a written statement of the reasons 

for the denial of such loan. 

(b) The Board shall establish a Consumer Advisory Council to 

advise and consult with it in the exercise of its functions under the 

Consumer Credit Protection Act and to advise and consult with it 

concerning other consumer related matters it may place before the 

Council. In appointing the members of the Council, the Board shall 

seek to achieve a fair representation of the interests of creditors 

and consumers. The Council shall meet from time to time at the 

call of the Board. Members of the Council who are not regular fulltime employees of the United States shall, while attending meetings of such Council, be entitled to receive compensation at a rate 
Sec. 704A EQUAL CREDIT OPPORTUNITY ACT 276 

fixed by the Board, but not exceeding $100 per day, including 

travel time. such members may be allowed travel expenses, including transportation and subsistence, while away from their homes 

or regular place of business. 

§ 704. [15 U.S.C. 1691c] Administrative enforcement 

(a) Compliance with the requirements imposed under this title 

shall be enforced under:1 

(1)2 section 8 of the Federal Deposit Insurance Act, in the 

case of— 

(A) national banks, and Federal branches and Federal 

agencies of foreign banks, by the Office of the Comptroller 

of the Currency; 

(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured state branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25(a)

 3 of 

the Federal Reserve Act, by the Board; and 

(C) banks insured by the Federal Deposit Insurance 

Corporation (other than members of the Federal Reserve 

system) and insured state branches of foreign banks, by 

the Board of Directors of the Federal Deposit Insurance 

Corporation;

 4 

(2) Section 8 of the Federal Deposit Insurance Act, by the 

Director of the office of Thrift supervision, in the case of a 

savings association the deposits of which are insured by the 

Federal Deposit Insurance Corporation. 

(3) The Federal Credit union Act, by the Administrator of 

the National Credit union Administration with respect to any 

Federal Credit union. 

(4) The Acts to regulate commerce, by the secretary of 

Transportation, with respect to all carriers subject to the jurisdiction of the Surface Transportation Board. 

(5) The Federal Aviation Act of 1958, by the Secretary of 

Transportation with respect to any air carrier or foreign air 

carrier subject to that Act. 

(6) The Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the secretary of Agriculture with respect to any activities subject to that Act. 

(7) The Farm Credit Act of 1971, by the Farm Credit 

Administration with respect to any Federal land bank, Federal 

land bank association, Federal intermediate credit bank, and 

production credit association;

 4 

(8) The Securities Exchange Act of 1934, by the Securities 

and Exchange Commission with respect to brokers and dealers; 

and4 

1

 so in law. The term ''the following provisions of law'' should probably be inserted before the 

colon. 

2

 so in law. The 1st letter probably should be uppercase. 

3

 section 25(a) of the Federal Reserve Act was redesignated as section 25A by section 142(e)(2) 

of the Federal Deposit Insurance Corporation Improvement Act of 1991. 

4

 So in law. Probably should be a period. 
277 EQUAL CREDIT OPPORTUNITY ACT Sec. 704A 

(9) The Small Business Investment Act of 1958, by the 

Small Business Administration, with respect to small business 

investment companies. 

The terms used in paragraph (1) that are not defined in this title 

or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them 

in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 

3101). 

(b) For the purpose of the exercise by any agency referred to 

in subsection (a) of its powers under any Act referred to in that 

subsection, a violation of any requirement imposed under this title 

shall be deemed to be a violation of a requirement imposed under 

that Act. In addition to its powers under any provision of law specifically referred to in subsection (a), each of the agencies referred 

to in that subsection may exercise for the purpose of enforcing compliance with any requirement imposed under this title, any other 

authority conferred on it by law. The exercise of the authorities of 

any of the agencies referred to in subsection (a) for the purpose of 

enforcing compliance with any requirement imposed under this 

title shall in no way preclude the exercise of such authorities for 

the purpose of enforcing compliance with any other provision of law 

not relating to the prohibition of discrimination on the basis of sex 

or marital status with respect to any aspect of a credit transaction. 

(c) Except to the extent that enforcement of the requirements 

imposed under this title is specifically committed to some other 

Government agency under subsection (a), the Federal Trade Commission shall enforce such requirements. For the purpose of the 

exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any 

requirement imposed under this title shall be deemed a violation 

of a requirement imposed under that Act. All of the functions and 

powers of the Federal Trade Commission under the Federal Trade 

Commission Act are available to the Commission to enforce compliance by any person with the requirements imposed under this title, 

irrespective of whether that person is engaged in commerce or 

meets any other jurisdictional tests in the Federal Trade Commission Act, including the power to enforce any Federal Reserve Board 

regulation promulgated under this title in the same manner as if 

the violation had been a violation of a Federal Trade Commission 

trade regulation rule. 

(d) The authority of the Board to issue regulations under this 

title does not impair the authority of any other agency designated 

in this section to make rules respecting its own procedures in enforcing compliance with requirements imposed under this title. 

SEC. 704A. [15 U.S.C. 1691c-1 ] INCENTIVE S FO R SELF-TESTIN G AN D 

SELF-CORRECTION .

 1 

( a ) PRIVILEGE D INFORMATION. — 

1

 Section 2302(a)(1) of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 

(P.L. 104-208) adds this new section. 

Regarding regulations and applications of section 704A, subsections (a)(2) and (c) of section 

2302 provide as follow: 

( 2 ) REGULATIONS. — 

Continued 
Sec. 704A EQUAL CREDIT OPPORTUNITY ACT 278 

(1) CONDITIONS FOR PRIVILEGE.—A report or result of a 

self-test (as that term is defined by regulations of the Board) 

shall be considered to be privileged under paragraph (2) if a 

creditor— 

(A) conducts, or authorizes an independent third party 

to conduct, a self-test of any aspect of a credit transaction 

by a creditor, in order to determine the level or effectiveness of compliance with this title by the creditor; and 

(B) has identified any possible violation of this title by 

the creditor and has taken, or is taking, appropriate corrective action to address any such possible violation. 

(2) PRIVILEGED SELF-TEST.—If a creditor meets the conditions specified in subparagraphs (A) and (B) of paragraph (1) 

with respect to a self-test described in that paragraph, any report or results of that self-test— 

(A) shall be privileged; and 

(B) may not be obtained or used by any applicant, 

department, or agency in any— 

(i) proceeding or civil action in which one or more 

violations of this title are alleged; or 

(ii) examination or investigation relating to compliance with this title. 

( b ) RESULT S OF SELF-TESTING. — 

(1) I N GENERAL.—No provision of this section may be construed to prevent an applicant, department, or agency from obtaining or using a report or results of any self-test in any pro-

(A) IN GENERAL.—Not later than 6 months after the date of enactment of this Act, 

in consultation with the secretary of Housing and urban Development and the agencies 

referred to in section 704 of the Equal Credit Opportunity Act, and after providing notice and an opportunity for public comment, the Board shall prescribe final regulations 

to implement section 704A of the Equal Credit Opportunity Act, as added by this section. 

( B ) SELF-TEST.— 

(i) DEFINITION.—The regulations prescribed under subparagraph (A) shall include a definition of the term ''self-test'' for purposes of section 704A of the Equal 

Credit opportunity Act, as added by this section. 

(ii) REQUIREMENT FOR SELF-TEST.—The regulations prescribed under subparagraph (A) shall specify that a self-test shall be sufficiently extensive to constitute 

a determination of the level and effectiveness of compliance by a creditor with the 

Equal Credit Opportunity Act. 

(iii) SUBSTANTIAL SIMILARITY TO CERTAIN FAIR HOUSING ACT REGULATIONS.—Th e 

regulations prescribed under subparagraph (A) shall be substantially similar to 

the regulations prescribed by the secretary of Housing and urban Development 

to carry out section 814A(d) of the Fair Housing Act, as added by this section. 

(c) APPLICABILITY.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the privilege provided for in section 

704A of the Equal Credit Opportunity Act or section 814A of the Fair Housing Act (as those 

sections are added by this section) shall apply to a self-test (as that term is defined pursuant to the regulations prescribed under subsection (a)(2) or (b)(2) of this section, as appropriate) conducted before, on, or after the effective date of the regulations prescribed under 

subsection (a)(2) or (b)(2), as appropriate. 

(2) EXCEPTION.—The privilege referred to in paragraph (1) does not apply to such a selftest conducted before the effective date of the regulations prescribed under subsection (a) 

or (b), as appropriate, if— 

(A) before that effective date, a complaint against the creditor or person engaged in 

residential real estate related lending activities (as the case may be) was— 

(i) formally filed in any court of competent jurisdiction; or 

(ii) the subject of an ongoing administrative law proceeding; 

(B) in the case of section 704A of the Equal Credit Opportunity Act, the creditor has 

waived the privilege pursuant to subsection (b)(1)(A)(i) of that section; or 

(C) in the case of section 814A of the Fair Housing Act, the person engaged in residential real estate related lending activities has waived the privilege pursuant to subsection (b)(1)(A)(i) of that section. 
279 EQUAL CREDIT OPPORTUNITY ACT Sec. 704A 

ceeding or civil action in which a violation of this title is 

alleged, or in any examination or investigation of compliance 

with this title if— 

(A) the creditor or any person with lawful access to the 

report or results— 

(i) voluntarily releases or discloses all, or any part 

of, the report or results to the applicant, department, 

or agency, or to the general public; or 

(ii) refers to or describes the report or results as 

a defense to charges of violations of this title against 

the creditor to whom the self-test relates; or 

(B) the report or results are sought in conjunction with 

an adjudication or admission of a violation of this title for 

the sole purpose of determining an appropriate penalty or 

remedy. 

(2) DISCLOSURE FOR DETERMINATION OF PENALTY OR REMEDY.—Any report or results of a self-test that are disclosed for 

the purpose specified in paragraph (1)(B)— 

(A) shall be used only for the particular proceeding in 

which the adjudication or admission referred to in paragraph (1)(B) is made; and 

(B) may not be used in any other action or proceeding. 

(c) ADJUDICATION.—A n applicant, department, or agency that 

challenges a privilege asserted under this section may seek a determination of the existence and application of that privilege in— 

(1) a court of competent jurisdiction; or 

(2) an administrative law proceeding with appropriate 

jurisdiction. 

§ 705. [15 U.S.C. 1691d] Relation to State laws 

(a) A request for the signature of both parties to a marriage 

for the purpose of creating a valid lien, passing clear title, waiving 

inchoate rights to property, or assigning earnings, shall not constitute discrimination under this title: Provided, however, That this 

provision shall not be construed to permit a creditor to take sex or 

marital status into account in connection with the evaluation of 

creditworthiness of any applicant. 

(b) Consideration or application of State property laws directly 

or indirectly affecting creditworthiness shall not constitute discrimination for purposes of this title. 

(c) Any provision of State law which prohibits the separate 

extension of consumer credit to each party to a marriage shall not 

apply in any case where each party to a marriage voluntarily applies for separate credit from the same creditor: Provided, That in 

any case where such a State law is so preempted, each party to the 

marriage shall be solely responsible for the debt so contracted. 

(d) When each party to a marriage separately and voluntarily 

applies for and obtains separate credit accounts with the same 

creditor, those accounts shall not be aggregated or otherwise combined for purposes of determining permissible finance charges or 

permissible loan ceilings under the laws of any State or of the 

United States. 

(e) Where the same act or omission constitutes a violation of 

this title and of applicable State law, a person aggrieved by such 
Sec. 704A EQUAL CREDIT OPPORTUNITY ACT 2 80 

conduct may bring a legal action to recover monetary damages 

either under this title or under such State law, but not both. This 

election of remedies shall not apply to court actions in which the 

relief sought does not include monetary damages or to administrative actions. 

(f) This title does not annul, alter, or affect, or exempt any person subject to the provisions of this title from complying with, the 

laws of any state with respect to credit discrimination, except to 

the extent that those laws are inconsistent with any provision of 

this title, and then only to the extent of the inconsistency. The 

Board is authorized to determine whether such inconsistencies 

exist. The Board may not determine that any State law is inconsistent with any provision of this title if the Board determines that 

such law gives greater protection to the applicant. 

(g) The Board shall by regulation exempt from the requirements of sections 701 and 702 of this title any class of credit transactions within any state if it determines that under the law of that 

State that class of transactions is subject to requirements substantially similar to those imposed under this title or that such law 

gives greater protection to the applicant, and that there is adequate provision for enforcement. Failure to comply with any 

requirement of such state law in any transaction so exempted shall 

constitute a violation of this title for the purposes of section 706. 

§ 706. [15 U.S.C. 1691e] Civil liability 

(a) Any creditor who fails to comply with any requirement imposed under this title shall be liable to the aggrieved applicant for 

any actual damages sustained by such applicant acting either in an 

individual capacity or as a member of a class. 

(b) Any creditor, other than a government or governmental 

subdivision or agency, who fails to comply with any requirement 

imposed under this title shall be liable to the aggrieved applicant 

for punitive damages in an amount not greater than $10,000, in 

addition to any actual damages provided in subsection (a), except 

that in the case of a class action the total recovery under this subsection shall not exceed the lesser of $500,000 or 1 per centum of 

the net worth of the creditor. In determining the amount of such 

damages in any action, the court shall consider, among other relevant factors, the amount of any actual damages awarded, the frequency and persistence of failures of compliance by the creditor, 

the resources of the creditor, the number of persons adversely affected, and the extent to which the creditor's failure of compliance 

was intentional. 

(c) upon application by an aggrieved applicant, the appropriate 

United States district court or any other court of competent jurisdiction may grant such equitable and declaratory relief as is necessary to enforce the requirements imposed under this title. 

(d) In the case of any successful action under subsection (a), 

(b), or (c), the costs of the action, together with a reasonable attorney's fee as determined by the court, shall be added to any damages awarded by the court under such subsection. 

(e) No provision of this title imposing liability shall apply to 

any act done or omitted in good faith in conformity with any official 

rule, regulation, or interpretation thereof by the Board or in con-
281 EQUAL CREDIT OPPORTUNITY ACT Sec. 704A 

formity with any interpretation or approval by an official or employee of the Federal Reserve System duly authorized by the Board 

to issue such interpretations or approvals under such procedures as 

the Board may prescribe therefor, notwithstanding that after such 

act or omission has occurred, such rule, regulation, interpretation, 

or approval is amended, rescinded, or determined by judicial or 

other authority to be invalid for any reason. 

(f) Any action under this section may be brought in the appropriate United States district court without regard to the amount in 

controversy, or in any other court of competent jurisdiction. No 

such action shall be brought later than two years from the date of 

the occurrence of the violation, except that— 

(1) whenever any agency having responsibility for administrative enforcement under section 704 commences an enforcement proceeding within two years from the date of the occurrence of the violation, 

(2) whenever the Attorney General commences a civil action under this section within two years from the date of the 

occurrence of the violation, 

then any applicant who has been a victim of the discrimination 

which is the subject of such proceeding or civil action may bring 

an action under this section not later than one year after the commencement of that proceeding or action. 

(g) The agencies having responsibility for administrative 

enforcement under section 704, if unable to obtain compliance with 

section 701, are authorized to refer the matter to the Attorney General with a recommendation that an appropriate civil action be instituted. Each agency referred to in paragraphs (1), (2), and (3) of 

section 704(a) shall refer the matter to the Attorney General whenever the agency has reason to believe that 1 or more creditors has 

engaged in a pattern or practice of discouraging or denying applications for credit in violation of section 701(a). Each such agency may 

refer the matter to the Attorney General whenever the agency has 

reason to believe that 1 or more creditors has violated section 

701(a). 

(h) When a matter is referred to the Attorney General pursuant to subsection (g), or whenever he has reason to believe that one 

or more creditors are engaged in a pattern or practice in violation 

of this title, the Attorney General may bring a civil action in any 

appropriate United States district court for such relief as may be 

appropriate, including actual and punitive damages and injunctive 

relief. 

(i) No person aggrieved by a violation of this title and by a violation of section 805 of the Civil Rights Act of 1968 shall recover 

under this title and section 812 of the Civil Rights Act of 1968, if 

such violation is based on the same transaction. 

(j) Nothing in this title shall be construed to prohibit the discovery of a creditor's credit granting standards under appropriate 

discovery procedures in the court or agency in which an action or 

proceeding is brought. 

(k) NOTIC E TO HUD OF VIOLATIONS.—Whenever an agency referred to in paragraph (1), (2), or (3) of section 704(a)— 
Sec. 707 FAIR DEBT COLLECTION PRACTICES ACT 2 82 

(1) has reason to believe, as a result of receiving a consumer complaint, conducting a consumer compliance examination, or otherwise, that a violation of this title has occurred; 

(2) has reason to believe that the alleged violation would 

be a violation of the Fair Housing Act; and 

(3) does not refer the matter to the Attorney General pursuant to subsection (g), 

the agency shall notify the secretary of Housing and urban Development of the violation, and shall notify the applicant that the secretary of Housing and urban Development has been notified of the 

alleged violation and that remedies for the violation may be available under the Fair Housing Act. 

§ 707. [15 U.S.C. 1691f] Annual reports to Congress 

Each year, the Board and the Attorney General shall, respectively, make reports to the Congress concerning the administration 

of their functions under this title, including such recommendations 

as the Board and the Attorney General, respectively, deem necessary or appropriate. In addition, each report of the Board shall 

include its assessment of the extent to which compliance with the 

requirements of this title is being achieved, and a summary of the 

enforcement actions taken by each of the agencies assigned administrative enforcement responsibilities under section 704. 

§ 708. [15 U.S.C. 1691 note] Effective date 

This title takes effect upon the expiration of one year after the 

date of its enactment. The amendments made by the Equal Credit 

Opportunity Act Amendments of 1976 shall take effect on the date 

of enactment thereof and shall apply to any violation occurring on 

or after such date, except that the amendments made to section 

701 of the Equal Credit Opportunity Act shall take effect 12 

months after the date of enactment. 

§ 709. [15 U.S.C. 1691 note] Short title 

This title may be cited as the ''Equal Credit Opportunity Act''. 

TITLE VIII—DEBT COLLECTION PRACTICES 

sec. 

801. short title. 

802. Findings and purpose. 

803. Definitions. 

804. Acquisition of location information. 

805. Communication in connection with debt collection. 

806. Harassment or abuse. 

807. False or misleading representations. 

808. unfair practices. 

809. validation of debts. 

810. Multiple debts. 

811. Legal actions by debt collectors. 

812. Furnishing certain deceptive forms. 

813. Civil liability. 

814. Administrative enforcement. 

815. Reports to Congress by the Commission. 

816. Relation to state laws. 

817. Exemption for State regulation. 

818. Effective date. 
283 FAIR DEBT COLLECTION PRACTICES ACT Sec. 803 

§ 801. [15 U.S.C. 1601 note] Short title 

This title may be cited as the ''Fair Debt Collection Practices 

Act''. 

§ 802. [15 U.S.C. 1692] Findings and purpose 

(a) There is abundant evidence of the use of abusive, deceptive, 

and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal 

bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy. 

(b) Existing laws and procedures for redressing these injuries 

are inadequate to protect consumers. 

(c) Means other than misrepresentation or other abusive debt 

collection practices are available for the effective collection of debts. 

(d) Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and 

instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce. 

(e) it is the purpose of this title to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are 

not competitively disadvantaged, and to promote consistent State 

action to protect consumers against debt collection abuses. 

§ 803. [15 U.S.C. 1692a] Definitions 

As used in this title— 

(1) The term ''Commission'' means the Federal Trade Commission. 

(2) The term ''communication'' means the conveying of 

information regarding a debt directly or indirectly to any person through any medium. 

(3) The term ''consumer'' means any natural person obligated or allegedly obligated to pay any debt. 

(4) The term ''creditor'' means any person who offers or extends credit creating a debt or to whom a debt is owed, but 

such term does not include any person to the extent that he 

receives an assignment or transfer of a debt in default solely 

for the purpose of facilitating collection of such debt for another. 

(5) The term ''debt'' means any obligation or alleged obligation of a consumer to pay money arising out of a transaction 

in which the money, property, insurance, or services which are 

the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has 

been reduced to judgment. 

(6) The term ''debt collector'' means any person who uses 

any instrumentality of interstate commerce or the mails in any 

business the principal purpose of which is the collection of any 

debts, or who regularly collects or attempts to collect, directly 

or indirectly, debts owed or due or asserted to be owed or due 

another. Notwithstanding the exclusion provided by clause (F) 

of the last sentence of this paragraph, the term includes any 
Sec. 707 FAIR DEBT COLLECTION PRACTICES ACT 2 84 

creditor who, in the process of collecting his own debts, uses 

any name other than his own which would indicate that a 

third person is collecting or attempting to collect such debts. 

For the purpose of section 808(6), such term also includes any 

person who uses any instrumentality of interstate commerce or 

the mails in any business the principal purpose of which is the 

enforcement of security interests. The term does not include— 

(A) any officer or employee of a creditor while, in the 

name of the creditor, collecting debts for such creditor; 

(B) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting 

as a debt collector does so only for persons to whom it is 

so related or affilated and if the principal business of such 

person is not the collection of debts; 

(C) any officer or employee of the united states or any 

state to the extent that collecting or attempting to collect 

any debt is in the performance of his official duties; 

(D) any person while serving or attempting to serve 

legal process on any other person in connection with the 

judicial enforcement of any debt; 

(E) any nonprofit organization which, at the request of 

consumers, performs bona fide consumer credit counseling 

and assists consumers in the liquidation of their debts by 

receiving payments from such consumers and distributing 

such amounts to creditors; 

(F) any person collecting or attempting to collect any 

debt owed or due or asserted to be owed or due another to 

the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) 

concerns a debt which was originated by such person; (iii) 

concerns a debt which was not in default at the time it 

was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial 

credit transaction involving the creditor. 

(7) The term ''location information'' means a consumer's 

place of abode and his telephone number at such place, or his 

place of employment. 

(8) The term ''state'' means any state, territory, or possession of the united states, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any 

of the foregoing. 

§ 804. [15 U.S.C. 1692b] Acquisition of location information 

Any debt collector communicating with any person other than 

the consumer for the purpose of acquiring location information 

about the consumer shall— 

(1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, 

only if expressly requested, identify his employer; 

(2) not state that such consumer owes any debt; 

(3) not communicate with any such person more than once 

unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such per-
285 FAIR DEBT COLLECTION PRACTICES ACT Sec. 803 

son is erroneous or incomplete and that such person now has 

correct or complete location information; 

(4) not communicate by post card; 

(5) not use any language or symbol on any envelope or in 

the contents of any communication effected by the mails or 

telegram that indicates that the debt collector is in the debt 

collection business or that the communication relates to the 

collection of a debt; and 

(6) after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and 

has knowledge of, or can readily ascertain, such attorney's 

name and address, not communicate with any person other 

than that attorney, unless the attorney fails to respond within 

a reasonable period of time to communication from the debt 

collector. 

§ 805. [15 U.S.C. 1692c] Communication in connection with 

debt collection 

(a) COMMUNICATION WIT H THE CONSUMER GENERALLY.—With -

out the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt— 

(1) at any unusual time or place or a time or place known 

or which should be known to be inconvenient to the consumer. 

in the absence of knowledge of circumstances to the contrary, 

a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o'clock antimeridian and 

before 9 o'clock postmeridian, local time at the consumer's location; 

(2) if the debt collector knows the consumer is represented 

by an attorney with respect to such debt and has knowledge 

of, or can readily ascertain, such attorney's name and address, 

unless the attorney fails to respond within a reasonable period 

of time to a communication from the debt collector or unless 

the attorney consents to direct communication with the consumer; or 

(3) at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication. 

(b) COMMUNICATION WIT H THIR D PARTIES.—Except as provided 

in section 804, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of 

competent jurisdiction, or as reasonably necessary to effectuate a 

post judgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting 

agency if otherwise permitted by law, the creditor, the attorney of 

the creditor, or the attorney of the debt collector. 

(c) CEASING COMMUNICATION.—If a consumer notifies a debt 

collector in writing that the consumer refuses to pay a debt or that 

the consumer wishes the debt collector to cease further communica-
Sec. 707 FAIR DEBT COLLECTION PRACTICES ACT 286 

tion with the consumer, the debt collector shall not communicate 

further with the consumer with respect to such debt, except— 

(1) to advise the consumer that the debt collector's further 

efforts are being terminated: 

(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or 

(3) where applicable, to notify the consumer that the debt 

collector or creditor intends to invoke a specified remedy. 

If such notice from the consumer is made by mail, notification shall 

be complete upon receipt. 

(d) For the purpose of this section, the term ''consumer'' includes the consumer's spouse, parent (if the consumer is a minor), 

guardian, executor, or administrator. 

§ 806. [15 U.S.C. 1692d] Harassment or abuse 

A debt collector may not engage in any conduct the natural 

consequence of which is to harass, oppress, or abuse any person in 

connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation 

of this section: 

(1) The use or threat of use of violence or other criminal 

means to harm the physical person, reputation, or property of 

any person. 

(2) The use of obscene or profane language or language the 

natural consequence of which is to abuse the hearer or reader. 

(3) The publication of a list of consumers who allegedly 

refuse to pay debts, except to a consumer reporting agency or 

to persons meeting the requirements of section 603(f) or 604(3) 

of this Act. 

(4) The advertisement for sale of any debt to coerce payment of the debt. 

(5) Causing a telephone to ring or engaging any person in 

telephone conversation repeatedly or continuously with intent 

to annoy, abuse, or harass any person at the called number. 

(6) Except as provided in section 804, the placement of 

telephone calls without meaningful disclosure of the caller's 

identity. 

§ 807. [15 U.S.C. 1692e] False or misleading representations 

A debt collector may not use any false, deceptive, or misleading 

representation or means in connection with the collection of any 

debt. Without limiting the general application of the foregoing, the 

following conduct is a violation of this section: 

(1) The false representation or implication that the debt 

collector is vouched for, bonded by, or affiliated with the 

united states or any state, including the use of any badge, 

uniform, or facsimile thereof. 

(2) The false representation of— 

(A) the character, amount, or legal status of any debt; 

or 

(B) any services rendered or compensation which may 

be lawfully received by any debt collector for the collection 

of a debt. 
287 FAIR DEBT COLLECTION PRACTICES ACT Sec. 803 

(3) The false representation or implication that any individual is an attorney or that any communication is from an attorney. 

(4) The representation or implication that nonpayment of 

any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any 

property or wages of any person unless such action is lawful 

and the debt collector or creditor intends to take such action. 

(5) The threat to take any action that cannot legally be 

taken or that is not intended to be taken. 

(6) The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause 

the consumer to— 

(A) lose any claim or defense to payment of the debt; 

or 

(B) become subject to any practice prohibited by this 

title. 

(7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer. 

(8) Communicating or threatening to communicate to any 

person credit information which is known or which should be 

known to be false, including the failure to communicate that 

a disputed debt is disputed. 

(9) The use or distribution of any written communication 

which simulates or is falsely represented to be a document 

authorized, issued, or approved by any court, official, or agency 

of the United States or any State, or which creates a false 

impression as to its source, authorization, or approval. 

(10) The use of any false representation or deceptive 

means to collect or attempt to collect any debt or to obtain 

information concerning a consumer. 

(11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a 

debt and that any information obtained will be used for that 

purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except 

that this paragraph shall not apply to a formal pleading made 

in connection with a legal action. 

(12) The false representation or implication that accounts 

have been turned over to innocent purchasers for value. 

(13) The false representation or implication that documents are legal process. 

(14) The use of any business, company, or organization 

name other than the true name of the debt collector's business, 

company, or organization. 

(15) The false representation or implication that documents are not legal process forms or do not require action by 

the consumer. 

(16) The false representation or implication that a debt collector operates or is employed by a consumer reporting agency 

as defined by section 603(f) of this Act. 
Sec. 707 FAIR DEBT COLLECTION PRACTICES ACT 2 88 

§ 808. [15 U.S.C. 1692f] Unfair practices 

A debt collector may not use unfair or unconscionable means 

to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation 

of this section: 

(1) The collection of any amount (including any interest, 

fee, charge, or expense incidental to the principal obligation) 

unless such amount is expressly authorized by the agreement 

creating the debt or permitted by law. 

(2) The acceptance by a debt collector from any person of 

a check or other payment instrument postdated by more than 

five days unless such person is notified in writing of the debt 

collector's intent to deposit such check or instrument not more 

than ten nor less than three business days prior to such deposit. 

(3) The solicitation by a debt collector of any postdated 

check or other postdated payment instrument for the purpose 

of threatening or instituting criminal prosecution. 

(4) Depositing or threatening to deposit any postdated 

check or other postdated payment instrument prior to the date 

on such check or instrument. 

(5) Causing charges to be made to any person for communications by concealment of the true purpose of the communication. such charges include, but are not limited to, collect 

telephone calls and telegram fees. 

(6) Taking or threatening to take any nonjudicial action to 

effect dispossession or disablement of property if— 

(A) there is no present right to possession of the property claimed as collateral through an enforceable security 

interest; 

(B) there is no present intention to take possession of 

the property; or 

(C) the property is exempt by law from such dispossession or disablement. 

(7) Communicating with a consumer regarding a debt by 

post card. 

(8) using any language or symbol, other than the debt collector's address, on any envelope when communicating with a 

consumer by use of the mails or by telegram, except that a 

debt collector may use his business name if such name does 

not indicate that he is in the debt collection business. 

§ 809. [15 U.S.C. 1692g] Validation of debts 

(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector 

shall, unless the following information is contained in the initial 

communication or the consumer has paid the debt, send the consumer a written notice containing— 

(1) the amount of the debt; 

(2) the name of the creditor to whom the debt is owed; 

(3) a statement that unless the consumer, within thirty 

days after receipt of the notice, disputes the validity of the 
289 FAIR DEBT COLLECTION PRACTICES ACT Sec. 803 

debt, or any portion thereof, the debt will be assumed to be 

valid by the debt collector; 

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or 

any portion thereof, is disputed, the debt collector will obtain 

verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be 

mailed to the consumer by the debt collector; and 

(5) a statement that, upon the consumer's written request 

within the thirty-day period, the debt collector will provide the 

consumer with the name and address of the original creditor, 

if different from the current creditor. 

(b) if the consumer notifies the debt collector in writing within 

the thirty-day period described in subsection (a) that the debt, or 

any portion thereof, is disputed, or that the consumer requests the 

name and address of the original creditor, the debt collector shall 

cease collection of the debt, or any disputed portion thereof, until 

the debt collector obtains verification of the debt or a copy of a 

judgment, or the name and address of the original creditor, and a 

copy of such verification or judgment, or name and address of the 

original creditor, is mailed to the consumer by the debt collector. 

(c) The failure of a consumer to dispute the validity of a debt 

under this section may not be construed by any court as an admission of liability by the consumer. 

§ 810. [15 U.S.C. 1692h] Multiple debts 

if any consumer owes multiple debts and makes any single 

payment to any debt collector with respect to such debts, such debt 

collector may not apply such payment to any debt which is disputed by the consumer and where applicable, shall apply such payment in accordance with the consumer's directions. 

§ 811. [15 U.S.C. 1692i] Legal actions by debt collectors 

(a) Any debt collector who brings any legal action on a debt 

against any consumer shall— 

(1) in the case of an action to enforce an interest in real 

property securing the consumer's obligation, bring such action 

only in a judicial district or similar legal entity in which such 

real property is located; or 

(2) in the case of an action not described in paragraph (1), 

bring such action only in the judicial district or similar legal 

entity— 

(A) in which such consumer signed the contract sued 

upon; or 

(B) in which such consumer resides at the commencement of the action. 

(b) Nothing in this title shall be construed to authorize the 

bringing of legal actions by debt collectors. 

§ 812. [15 U.S.C. 1692j] Furnishing certain deceptive forms 

(a) it is unlawful to design, compile, and furnish any form 

knowing that such form would be used to create the false belief in 

a consumer that a person other than the creditor of such consumer 

is participating in the collection of or in an attempt to collect a debt 
Sec. 707 FAIR DEBT COLLECTION PRACTICES ACT 2 90 

such consumer allegedly owes such creditor, when in fact such person is not so participating. 

(b) Any person who violates this section shall be liable to the 

same extent and in the same manner as a debt collector is liable 

under section 813 for failure to comply with a provision of this title. 

§ 813. [15 U.S.C. 1692k] Civil liability 

(a) Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title with respect to any person is liable to such person in an amount equal to 

the sum of— 

(1) any actual damage sustained by such person as a result 

of such failure; 

(2)(A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding 

$1,000; or 

(B) in the case of a class action, (i) such amount for each 

named plaintiff as could be recovered under subparagraph (A), 

and (ii) such amount as the court may allow for all other class 

members, without regard to a minimum individual recovery, 

not to exceed the lesser of $500,000 or 1 per centum of the net 

worth of the debt collector; and 

(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court. on a finding by 

the court that an action under this section was brought in bad 

faith and for the purpose of harassment, the court may award 

to the defendant attorney's fees reasonable in relation to the 

work expended and costs. 

(b) In determining the amount of liability in any action under 

subsection (a), the court shall consider, among other relevant 

factors— 

(1) in any individual action under subsection (a)(2)(A), the 

frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to 

which such noncompliance was intentional; or 

(2) in any class action under subsection (a)(2)(B), the frequency and persistence of noncompliance by the debt collector, 

the nature of such noncompliance, the resources of the debt 

collector, the number of persons adversely affected, and the extent to which the debt collector's noncompliance was intentional. 

(c) A debt collector may not be held liable in any action 

brought under this title if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted 

from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. 

(d) An action to enforce any liability created by this title may 

be brought in any appropriate united states district court without 

regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs. 

(e) No provision of this section imposing any liability shall 

apply to any act done or omitted in good faith in conformity with 
291 FAIR DEBT COLLECTION PRACTICES ACT Sec. 803 

any advisory opinion of the Commission, notwithstanding that after 

such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid 

for any reason. 

§ 814. [15 U.S.C. 1692Z] Administrative enforcement 

(a) Compliance with this title shall be enforced by the Commission, except to the extent that enforcement of the requirements imposed under this title is specifically committed to another agency 

under subsection (b). For purpose of the exercise by the Commission of its functions and powers under the Federal Trade Commission Act, a violation of this title shall be deemed an unfair or 

deceptive act or practice in violation of that Act. All of the functions and powers of the Commission under the Federal Trade Commission Act are available to the Commission to enforce compliance 

by any person with this title, irrespective of whether that person 

is engaged in commerce or meets any other jurisdictional tests in 

the Federal Trade Commission Act, including the power to enforce 

the provisions of this title in the same manner as if the violation 

had been a violation of a Federal Trade Commission trade regulation rule. 

(b) Compliance with any requirements imposed under this title 

shall be enforced under— 

(1) section 8 of the Federal Deposit Insurance Act, in the 

case of— 

(A) national banks, and Federal branches and Federal 

agencies of foreign banks, by the Office of the Comptroller 

of the Currency; 

(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25(a)

 1 of 

the Federal Reserve Act, by the Board of Governors of the 

Federal Reserve System; and 

(C) banks insured by the Federal Deposit Insurance 

Corporation (other than members of the Federal Reserve 

System) and insured State branches of foreign banks, by 

the Board of Directors of the Federal Deposit Insurance 

Corporation; 

(2) section 8 of the Federal Deposit Insurance Act, by the 

Director of the Office of Thrift Supervision, in the case of a 

savings association the deposits of which are insured by the 

Federal Deposit Insurance Corporation; 

(3) the Federal Credit Union Act, by the Administrator of 

the National Credit Union Administration with respect to any 

Federal credit union; 

(4) the Acts to regulate commerce, by the Secretary of 

Transportation, with respect to all carriers subject to the jurisdiction of the Surface Transportation Board; 

1

 Section 25(a) of the Federal Reserve Act was redesignated as section 25A by section 142(e)(2) 

of the Federal Deposit Insurance Corporation Improvement Act of 1991. 
Sec. 707 FAIR DEBT COLLECTION PRACTICES ACT 2 92 

(5) the Federal Aviation Act of 1958, by the Secretary of 

Transportation with respect to any air carrier or any foreign 

air carrier subject to that Act; and 

(6) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the secretary of Agriculture with respect to any activities subject to that Act. 

The terms used in paragraph (1) that are not defined in this title 

or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them 

in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 

3101). 

(c) For the purpose of the exercise by any agency referred to 

in subsection (b) of its powers under any Act referred to in that 

subsection, a violation of any requirement imposed under this title 

shall be deemed to be a violation of a requirement imposed under 

that Act. In addition to its powers under any provision of law specifically referred to in subsection (b), each of the agencies referred 

to in that subsection may exercise, for the purpose of enforcing 

compliance with any requirement imposed under this title any 

other authority conferred on it by law, except as provided in subsection (d). 

(d) Neither the Commission nor any other agency referred to 

in subsection (b) may promulgate trade regulation rules or other 

regulations with respect to the collection of debts by debt collectors 

as defined in this title. 

§ 815. [15 U.S.C. 1692m] Reports to Congress by the Commission 

(a) Not later than one year after the effective date of this title 

and at one-year intervals thereafter, the Commission shall make 

reports to the Congress concerning the administration of its functions under this title, including such recommendations as the Commission deems necessary or appropriate. In addition, each report of 

the Commission shall include its assessment of the extent to which 

compliance with this title is being achieved and a summary of the 

enforcement actions taken by the Commission under section 814 of 

this title. 

(b) In the exercise of its functions under this title, the Commission may obtain upon request the views of any other Federal 

agency which exercises enforcement functions under section 814 of 

this title. 

§ 816. [15 U.S.C. 1692n] Relation to State laws 

This title does not annul, alter, or affect, or exempt any person 

subject to the provisions of this title from complying with the laws 

of any state with respect to debt collection practices, except to the 

extent that those laws are inconsistent with any provision of this 

title, and then only to the extent of the inconsistency. For purposes 

of this section, a state law is not inconsistent with this title if the 

protection such law affords any consumer is greater than the protection provided by this title. 
293 ELECTRONIC FUND TRANSFER ACT Sec. 903 

§ 817. [15 U.S.C. 1692o] Exemption for State regulation 

The Commission shall by regulation exempt from the requirements of this title any class of debt collection practices within any 

State if the Commission determines that under the law of that 

State that class of debt collection practices is subject to requirements substantially similar to those imposed by this title, and that 

there is adequate provision for enforcement. 

§ 818. [15 U.S.C. 1692 note] Effective date 

This title takes effect upon the expiration of six months after 

the date of its enactment, but section 809 shall apply only with respect to debts for which the initial attempt to collect occurs after 

such effective date. 

TITLE IX—ELECTRONIC FUN D TRANSFERS 

§ 901. [15 U.S.C. 1601 note] Short title 

This title may be cited as the ''Electronic Fund Transfer Act''. 

§ 902. [15 U.S.C. 1693] Findings and purpose 

(a) The Congress finds that the use of electronic systems to 

transfer funds provides the potential for substantial benefits to consumers. However, due to the unique characteristics of such systems, the application of existing consumer protection legislation is 

unclear, leaving the rights and liabilities of consumers, financial 

institutions, and intermediaries in electronic fund transfers undefined. 

(b) it is the purpose of this title to provide a basic framework 

establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer systems. The primary objective of 

this title, however, is the provision of individual consumer rights. 

§ 903. [15 U.S.C. 1693a] Definitions 

As used in this title— 

(1) the term ''accepted card or other means of access'' 

means a card, code, or other means of access to a consumer's 

account for the purpose of initiating electronic fund transfers 

when the person to whom such card or other means of access 

was issued has requested and received or has signed or has 

used, or authorized another to use, such card or other means 

of access for the purpose of transferring money between accounts or obtaining money, property, labor, or services; 

(2) the term ''account'' means a demand deposit, savings 

deposit, or other asset account (other than an occasional or incidental credit balance in an open end credit plan as defined 

in section 103(i) of this Act), as described in regulations of the 

Board, established primarily for personal, family, or household 

purposes, but such term does not include an account held by 

a financial institution pursuant to a bona fide trust agreement; 

(3) the term ''Board'' means the Board of Governors of the 

Federal Reserve System; 

(4) the term ''business day'' means any day on which the 

offices of the consumer's financial institution involved in an 
Sec. 903 ELECTRONIC FUND TRANSFER ACT 2 94 

electronic fund transfer are open to the public for carrying on 

substantially all of its business functions; 

(5) the term ''consumer'' means a natural person; 

(6) the term ''electronic fund transfer'' means any transfer 

of funds, other than a transaction originated by check, draft, 

or similar paper instrument, which is initiated through an 

electronic terminal, telephonic instrument, or computer or 

magnetic tape so as to order, instruct, or authorize a financial 

institution to debit or credit an account. such term includes, 

but is not limited to, point-of-sale transfers, automated teller 

machine transactions, direct deposits or withdrawals of funds, 

and transfers initiated by telephone. such term does not 

include— 

(A) any check guarantee or authorization service 

which does not directly result in a debit or credit to a consumer's account:1 

(B) any transfer of funds, other than those processed 

by automated clearinghouse, made by a financial institution on behalf of a consumer by means of a service that 

transfers funds held at either Federal Reserve banks or 

other depository institutions and which is not designed primarily to transfer funds on behalf of a consumer; 

(C) any transaction the primary purpose of which is 

the purchase or sale of securities or commodities through 

a broker-dealer registered with or regulated by the securities and Exchange Commission; 

(D) any automatic transfer from a savings account to 

a demand deposit account pursuant to an agreement between a consumer and a financial institution for the purpose of covering an overdraft or maintaining an agreed 

upon minimum balance in the consumer's demand deposit 

account; or 

(E) any transfer of funds which is initiated by a telephone conversation between a consumer and an officer or 

employee of a financial institution which is not pursuant 

to a prearranged plan and under which periodic or recurring transfers are not contemplated; 

as determined under regulations of the Board; 

(7) the term ''electronic terminal'' means an electronic device, other than a telephone operated by a consumer, through 

which a consumer may initiate an electronic fund transfer. 

such term includes, but is not limited to, point-of-sale terminals, automated teller machines, and cash dispensing machines; 

(8) the term ''financial institution'' means a state or National bank, a state or Federal savings and loan association, 

a mutual savings bank, a state or Federal credit union, or any 

other person who, directly or indirectly, holds an account belonging to a consumer; 

(9) the term ''preauthorized electronic fund transfer'' 

means an electronic fund transfer authorized in advance to 

recur at substantially regular intervals; 

1

 so in original. The colon probably should be a semicolon. 
295 ELECTRONIC FUND TRANSFER ACT Sec. 903 

(10) the term ''State'' means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any 

of the foregoing; and 

(11) the term ''unauthorized electronic fund transfer'' 

means an electronic fund transfer from a consumer's account 

initiated by a person other than the consumer without actual 

authority to initiate such transfer and from which the consumer receives no benefit, but the term does not include any 

electronic fund transfer (A) initiated by a person other than 

the consumer who was furnished with the card, code, or other 

means of access to such consumer's account by such consumer, 

unless the consumer has notified the financial institution involved that transfers by such other person are no longer 

authorized, (B) initiated with fraudulent intent by the consumer or any person acting in concert with the consumer, or 

(C) which constitutes an error committed by a financial institution. 

§ 904. [15 U.S.C. 1693b] Regulations 

(a) The Board shall prescribe regulations to carry out the purposes of this title. In prescribing such regulations, the Board shall: 

(1) consult with the other agencies referred to in section 

917 and take into account, and allow for, the continuing evolution of electronic banking services and the technology utilized in such services, 

(2) prepare an analysis of economic impact which considers 

the costs and benefits to financial institutions, consumers, and 

other users of electronic fund transfers, including the extent to 

which additional documentation, reports, records, or other 

paper work would be required, and the effects upon competition in the provision of electronic banking services among large 

and small financial institutions and the availability of such 

services to different classes of consumers, particularly low income consumers, 

(3) to the extent practicable, the Board shall demonstrate 

that the consumer protections of the proposed regulations outweigh the compliance costs imposed upon consumers and 

financial institutions, and 

(4) any proposed regulations and accompanying analyses 

shall be sent promptly to Congress by the Board. 

(b) The Board shall issue model clauses for optional use by 

financial institutions to facilitate compliance with the disclosure 

requirements of section 905 and to aid consumers in understanding 

the rights and responsibilities of participants in electronic fund 

transfers by utilizing readily understandable language. Such model 

clauses shall be adopted after notice duly given in the Federal Register and opportunity for public comment in accordance with section 553 of title 5, United States Code. With respect to the disclosures required by section 905(a) (3) and (4), the Board shall take 

account of variations in the services and charges under different 

electronic fund transfer systems and, as appropriate, shall issue 

alternative model clauses for disclosure of these differing account 

terms. 
Sec. 903 ELECTRONIC FUND TRANSFER ACT 296 

(c) Regulations prescribed hereunder may contain such classifications, differentiations, or other provisions, and may provide for 

such adjustments and exceptions for any class of electronic fund 

transfers, as in the judgment of the Board are necessary or proper 

to effectuate the purposes of this title, to prevent circumvention or 

evasion thereof, or to facilitate compliance therewith. The Board 

shall by regulation modify the requirements imposed by this title 

on small financial institutions if the Board determines that such 

modifications are necessary to alleviate any undue compliance burden on small financial institutions and such modifications are consistent with the purpose and objective of this title. 

(d) 1 APPLICABILIT Y TO SERVIC E PROVIDER S OTHE R THA N CER -

TAI N FINANCIA L INSTITUTIONS. — 

(1) I N GENERAL.—I f electronic fund transfer services are 

made available to consumers by a person other than a financial 

institution holding a consumer's account, the Board shall by 

regulation assure that the disclosures, protections, responsibilities, and remedies created by this title are made applicable to 

such persons and services. 

( 2 ) STAT E AN D LOCA L GOVERNMEN T ELECTRONI C BENEFI T 

TRANSFE R SYSTEMS. — 

( A ) DEFINITIO N OF ELECTRONI C BENEFI T TRANSFE R 

SYSTEM.—In this paragraph, the term ''electronic benefit 

transfer system''— 

(i) means a system under which a government 

agency distributes needs-tested benefits by establishing accounts that may be accessed by recipients 

electronically, such as through automated teller machines or point-of-sale terminals; and 

(ii) does not include employment-related payments, including salaries and pension, retirement, or 

unemployment benefits established by a Federal, 

State, or local government agency. 

(B) EXEMPTIO N GENERALLY.—Th e disclosures, protections, responsibilities, and remedies established under this 

title, and any regulation prescribed or order issued by the 

Board in accordance with this title, shall not apply to any 

electronic benefit transfer system established under State 

or local law or administered by a State or local government. 

( C ) EXCEPTIO N FOR DIREC T DEPOSI T INT O RECIPIENT'S 

ACCOUNT.—Subparagraph (B) shall not apply with respect 

to any electronic funds transfer under an electronic benefit 

transfer system for a deposit directly into a consumer account held by the recipient of the benefit. 

(D) RUL E OF CONSTRUCTION.—N o provision of this 

paragraph— 

1

 Section 891 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 

(P.L. 104-193; 110 Stat. 2346) amended this subsection by adding a new paragraph (1) designation and added a new paragraph (2). Section 907 (110 Stat. 2350) of such Act also amended 

section 904(d) by adding a new paragraph (1) designation and adding the same new paragraph 

(2) (not executed in this compilation). 
297 ELECTRONIC FUND TRANSFER ACT Sec. 903 

(i) affects or alters the protections otherwise applicable with respect to benefits established by any other 

provision Federal, state, or local law; or 

(ii) otherwise supersedes the application of any 

state or local law. 

(3) FEE DISCLOSURES AT AUTOMATED TELLER MACHINES.— 

(A) IN GENERAL.—The regulations prescribed under 

paragraph (1) shall require any automated teller machine 

operator who imposes a fee on any consumer for providing 

host transfer services to such consumer to provide notice 

in accordance with subparagraph (B) to the consumer (at 

the time the service is provided) of— 

(i) the fact that a fee is imposed by such operator 

for providing the service; and 

(ii) the amount of any such fee. 

(B) NOTICE REQUIREMENTS.— 

(i) ON THE MACHINE.—The notice required under 

clause (i) of subparagraph (A) with respect to any fee 

described in such subparagraph shall be posted in a 

prominent and conspicuous location on or at the automated teller machine at which the electronic fund 

transfer is initiated by the consumer. 

(ii) ON THE SCREEN.—The notice required under 

clauses (i) and (ii) of subparagraph (A) with respect to 

any fee described in such subparagraph shall appear 

on the screen of the automated teller machine, or on 

a paper notice issued from such machine, after the 

transaction is initiated and before the consumer is 

irrevocably committed to completing the transaction, 

except that during the period beginning on the date of 

the enactment of the Gramm-Leach-Bliley Act and 

ending on December 31, 2004, this clause shall not 

apply to any automated teller machine that lacks the 

technical capability to disclose the notice on the screen 

or to issue a paper notice after the transaction is initiated and before the consumer is irrevocably committed 

to completing the transaction. 

(C) PROHIBITION ON FEES NOT PROPERLY DISCLOSED 

AND EXPLICITLY ASSUMED BY CONSUMER.—No fee ma y be 

imposed by any automated teller machine operator in connection with any electronic fund transfer initiated by a 

consumer for which a notice is required under subparagraph (A), unless— 

(i) the consumer receives such notice in accordance with subparagraph (B); and 

(ii) the consumer elects to continue in the manner 

necessary to effect the transaction after receiving such 

notice. 

(D) DEFINITIONS.—Fo r purposes of this paragraph, the 

following definitions shall apply: 

(i) AUTOMATED TELLER MACHINE OPERATOR.—The 

term ''automated teller machine operator'' means any 

person who— 
Sec. 903 ELECTRONIC FUND TRANSFER ACT 2 98 

(I) operates an automated teller machine at 

which consumers initiate electronic fund transfers; 

and 

(II) is not the financial institution that holds 

the account of such consumer from which the 

transfer is made. 

(ii) ELECTRONI C FUN D TRANSFER.—Th e term ''electronic fund transfer'' includes a transaction that involves a balance inquiry initiated by a consumer in 

the same manner as an electronic fund transfer, 

whether or not the consumer initiates a transfer of 

funds in the course of the transaction. 

(iii) HOS T TRANSFE R SERVICES.—Th e term ''host 

transfer services'' means any electronic fund transfer 

made by an automated teller machine operator in connection with a transaction initiated by a consumer at 

an automated teller machine operated by such operator. 

§ 905. [15 U.S.C. 1693c] Terms and conditions of transfers 

(a) The terms and conditions of electronic fund transfers involving a consumer's account shall be disclosed at the time the consumer contracts for an electronic fund transfer service, in accordance with regulations of the Board. Such disclosures shall be in 

readily understandable language and shall include, to the extent 

applicable— 

(1) the consumer's liability for unauthorized electronic 

fund transfers and, at the financial institution's option, notice 

of the advisability of prompt reporting of any loss, theft, or unauthorized use of a card, code, or other means of access; 

(2) the telephone number and address of the person or office to be notified in the event the consumer believes than1

 an 

unauthorized electronic fund transfer has been or may be effected; 

(3) the type and nature of electronic fund transfers which 

the consumer may initiate, including any limitations on the 

frequency or dollar amount of such transfers, except that the 

details of such limitations need not be disclosed if their confidentiality is necessary to maintain the security of an electronic fund transfer system, as determined by the Board; 

(4) any charges for electronic fund transfers or for the 

right to make such transfers; 

(5) the consumer's right to stop payment of a 

preauthorized electronic fund transfer and the procedure to initiate such a stop payment order; 

(6) the consumer's right to receive documentation of electronic fund transfers under section 906; 

(7) a summary, in a form prescribed by regulations of the 

Board, of the error resolution provisions of section 908 and the 

consumer's rights thereunder. The financial institution shall 

thereafter transmit such summary at least once per calendar 

year; 

1

 So in original. Probably should be "that". 
299 ELECTRONIC FUND TRANSFER ACT Sec. 903 

(8) the financial institution's liability to the consumer 

under section 910; 

(9) under what circumstances the financial institution will 

in the ordinary course of business disclose information concerning the consumer's account to third persons; and 

(10) a notice to the consumer that a fee may be imposed 

by— 

(A) an automated teller machine operator (as defined 

in section 904(d)(3)(D)(i)) if the consumer initiates a transfer from an automated teller machine that is not operated 

by the person issuing the card or other means of access; 

and 

(B) any national, regional, or local network utilized to 

effect the transaction. 

(b) A financial institution shall notify a consumer in writing at 

least twenty-one days prior to the effective date of any change in 

any term or condition of the consumer's account required to be disclosed under subsection (a) if such change would result in greater 

cost or liability for such consumer or decreased access to the consumer's account. A financial institution may, however, implement 

a change in the terms or conditions of an account without prior notice when such change is immediately necessary to maintain or restore the security of an electronic fund transfer system or a consumer's account. Subject to subsection (a)(3), the Board shall require subsequent notification if such a change is made permanent. 

(c) For any account of a consumer made accessible to electronic 

fund transfer prior to the effective date of this title, the information 

required to be disclosed to the consumer under subsection (a) shall 

be disclosed not later than the earlier of— 

(1) the first periodic statement required by section 906(c) 

after the effective date of this title; or 

(2) thirty days after the effective date of this title. 

§ 906. [15 U.S.C. 1693d] Documentation of tranfers; periodic 

statements 

(a) For each electronic fund transfer initiated by a consumer 

from an electronic terminal, the financial institution holding such 

consumer's account shall, directly or indirectly, at the time the 

transfer is initiated, make available to the consumer written documentation of such transfer. The documentation shall clearly set 

forth to the extent applicable— 

(1) the amount involved and date the transfer is initiated; 

(2) the type of transfer; 

(3) the identity of the consumer's account with the financial institution from which or to which funds are transferred; 

(4) the identity of any third party to whom or from whom 

funds are transferred; and 

(5) the location or identification of the electronic terminal 

involved. 

(b) For a consumer's account which is scheduled to be credited 

by a preauthorized electronic fund transfer from the same payor at 

least once in each successive sixty-day period, except where the 

payor provides positive notice of the transfer to the consumer, the 

financial institution shall elect to provide promptly either positive 
Sec. 903 ELECTRONIC FUND TRANSFER ACT 3 00 

notice to the consumer when the credit is made as scheduled, or 

negative notice to the consumer when the credit is not made as 

scheduled, in accordance with regulations of the Board. The means 

of notice elected shall be disclosed to the consumer in accordance 

with section 905. 

(c) A financial institution shall provide each consumer with a 

periodic statement for each account of such consumer that may be 

accessed by means of an electronic fund transfer. Except as provided in subsections (d) and (e), such statement shall be provided 

at least monthly for each monthly or shorter cycle in which an electronic fund transfer affecting the account has occurred, or every 

three months, whichever is more frequent. The statement, which 

may include information regarding transactions other than electronic fund transfers, shall clearly set forth— 

(1) with regard to each electronic fund transfer during the 

period, the information described in subsection (a), which may 

be provided on an accompanying document; 

(2) the amount of any fee or charge assessed by the financial institution during the period for electronic fund transfers 

or for account maintenance; 

(3) the balances in the consumer's account at the beginning of the period and at the close of the period; and 

(4) the address and telephone number to be used by the 

financial institution for the purpose of receiving any statement 

inquiry or notice of account error from the consumer. Such address and telephone number shall be preceded by the caption 

''Direct Inquires To:'' or other similar language indicating that 

the address and number are to be used for such inquiries or 

notices. 

(d) in the case of a consumer's passbook account which may 

not be accessed by electronic fund transfers other than 

preauthorized electronic fund transfers crediting the account, a 

financial institution may, in lieu of complying with the requirements of subsection (c), upon presentation of the passbook provide 

the consumer in writing with the amount and date of each such 

transfer involving the account since the passbook was last presented. 

(e) in the case of a consumer's account, other than a passbook 

account, which may not be accessed by electronic fund transfers 

other than preauthorized electronic fund transfers crediting the account, the financial institution may provide a periodic statement on 

a quarterly basis which otherwise complies with the requirements 

of subsection (c). 

(f) in any action involving a consumer, any documentation required by this section to be given to the consumer which indicates 

that an electronic fund transfer was made to another person shall 

be admissible as evidence of such transfer and shall constitute 

prima facie proof that such transfer was made. 

§ 907. [15 U.S.C. 1693e] Preauthorized transfers 

(a) A preauthorized electronic fund transfer from a consumer's 

account may be authorized by the consumer only in writing, and 

a copy of such authorization shall be provided to the consumer 

when made. A consumer may stop payment of a preauthorized elec-
301 ELECTRONIC FUND TRANSFER ACT Sec. 903 

tronic fund transfer by notifying the financial institution orally or 

in writing at any time up to three business days preceding the 

scheduled date of such transfer. The financial institution may require written confirmation to be provided to it within fourteen days 

of an oral notification if, when the oral notification is made, the 

consumer is advised of such requirement and the address to which 

such confirmation should be sent. 

(b) In the case of preauthorized transfers from a consumer's account to the same person which may vary in amount, the financial 

institution or designated payee shall, prior to each transfer, provide 

reasonable advance notice to the consumer, in accordance with regulations of the Board, of the amount to be transferred and the 

scheduled date of the transfer. 

§ 908. [15 U.S.C. 1693f] Error resolution 

(a) If a financial institution, within sixty days after having 

transmitted to a consumer documentation pursuant to section 906 

(a), (c), or (d) or notification pursuant to section 906(b), receives 

oral or written notice in which the consumer— 

(1) sets forth or otherwise enables the financial institution 

to identify the name and account number of the consumer; 

(2) indicates the consumer's belief that the documentation, 

or, in the case of notification pursuant to section 906(b), the 

consumer's account, contains an error and the amount of such 

error; and 

(3) sets forth the reasons for the consumer's belief (where 

applicable) that an error has occurred, 

the financial institution shall investigate the alleged error, determine whether an error has occurred, and report or mail the results 

of such investigation and determination to the consumer within ten 

business days. The financial institution may require written confirmation to be provided to it within ten business days of an oral 

notification of error if, when the oral notification is made, the consumer is advised of such requirement and the address to which 

such confirmation should be sent. A financial institution which requires written confirmation in accordance with the previous sentence need not provisionally recredit a consumer's account in 

accordance with subsection (c), nor shall the financial institution be 

liable under subsection (e) if the written confirmation is not received within the ten-day period referred to in the previous sentence. 

(b) If the financial institution determines that an error did 

occur, it shall promptly, but in no event more than one business 

day after such determination, correct the error, subject to section 

909, including the crediting of interest where applicable. 

(c) If a financial institution receives notice of an error in the 

manner and within the time period specified in subsection (a), it 

may, in lieu of the requirements of subsections (a) and (b), within 

ten business days after receiving such notice provisionally recredit 

the consumer's account for the amount alleged to be in error, subject to section 909, including interest where applicable, pending the 

conclusion of its investigation and its determination of whether an 

error has occurred. such investigation shall be concluded not later 

than forty-five days after receipt of notice of the error. During the 
Sec. 903 ELECTRONIC FUND TRANSFER ACT 3 02 

pendency of the investigation, the consumer shall have full use of 

the funds provisionally recredited. 

(d) if the financial institution determines after its investigation 

pursuant to subsection (a) or (c) that an error did not occur, it shall 

deliver or mail to the consumer an explanation of its findings 

within 3 business days after the conclusion of its investigation, and 

upon request of the consumer promptly deliver or mail to the consumer reproductions of all documents which the financial institution relied on to conclude that such error did not occur. The financial institution shall include notice of the right to request reproductions with the explanation of its findings. 

(e) If in any action under section 915, the court finds that— 

(1) the financial institution did not provisionally recredit a 

consumer's account within the ten-day period specified in subsection (c), and the financial institution (A) did not make a 

good faith investigation of the alleged error, or (B) did not have 

a reasonable basis for believing that the consumer's account 

was not in error; or 

(2) the financial institution knowingly and willfully concluded that the consumer's account was not in error when such 

conclusion could not reasonably have been drawn from the evidence available to the financial institution at the time of its 

investigation, 

then the consumer shall be entitled to treble damages determined 

under section 915(a)(1). 

(f) For the purpose of this section, an error consists of— 

(1) an unauthorized electronic fund transfer; 

(2) an incorrect electronic fund transfer from or to the consumer's account; 

(3) the omission from a periodic statement of an electronic 

fund transfer affecting the consumer's account which should 

have been included; 

(4) a computational error by the financial institution; 

(5) the consumer's receipt of an incorrect amount of money 

from an electronic terminal; 

(6) a consumer's request for additional information or clarification concerning an electronic fund transfer or any documentation required by this title; or 

(7) any other error described in regulations of the Board. 

§ 909. [15 U.S.C. 1693g] Consumer liability for unauthorized 

transfers 

(a) A consumer shall be liable for any unauthorized electronic 

fund transfer involving the account of such consumer only if the 

card or other means of access utilized for such transfer was an 

accepted card or other means of access and if the issuer of such 

card, code, or other means of access has provided a means whereby 

the user of such card, code, or other meana

 1 of access can be identified as the person authorized to use it, such as by signature, photograph, or fingerprint or by electronic or mechanical confirmation. 

1

 So in original. Probably should be "means". 
303 ELECTRONIC FUND TRANSFER ACT Sec. 903 

In no event, however, shall a consumer's liability for an unauthorized transfer exceed the lesser of— 

(1) $50; or 

(2) the amount of money or value of property or services 

obtained in such unauthorized electronic fund transfer prior to 

the time the financial institution is notified of, or otherwise becomes aware of, circumstances which lead to the reasonable belief that an unauthorized electronic fund transfer involving the 

consumer's account has been or may be effected. Notice under 

this paragraph is sufficient when such steps have been taken 

as may be reasonably required in the ordinary course of business to provide the financial institution with the pertinent 

information, whether or not any particular officer, employee, or 

agent of the financial institution does in fact receive such information. 

Notwithstanding the foregoing, reimbursement need not be made 

to the consumer for losses the financial institution establishes 

would not have occurred but for the failure of the consumer to report within sixty days of transmittal of the statement (or in extenuating circumstances such as extended travel or hospitalization, 

within a reasonable time under the circumstances) any unauthorized electronic fund transfer or account error which appears on the 

periodic statement provided to the consumer under section 906. In 

addition, reimbursement need not be made to the consumer for 

losses which the financial institution establishes would not have occurred but for the failure of the consumer to report any loss or 

theft of a card or other means of access within two business days 

after the consumer learns of the loss or theft (or in extenuating circumstances such as extended travel or hospitalization, within a 

longer period which is reasonable under the circumstances), but the 

consumer's liability under this subsection in any such case may not 

exceed a total of $500, or the amount of unauthorized electronic 

fund transfers which occur following the close of two business days 

(or such longer period) after the consumer learns of the loss or 

theft but prior to notice to the financial institution under this subsection, whichever is less. 

(b) In any action which involves a consumer's liability for an 

unauthorized electronic fund transfer, the burden of proof is upon 

the financial institution to show that the electronic fund transfer 

was authorized or, if the electronic fund transfer was unauthorized, 

then the burden of proof is upon the financial institution to establish that the conditions of liability set forth in subsection (a) have 

been met, and, if the transfer was initiated after the effective date 

of section 905, that the disclosures required to be made to the consumer under section 905(a) (1) and (2) were in fact made in accordance with such section. 

(c) In the event of a transaction which involves both an unauthorized electronic fund transfer and an extension of credit as defined in section 103(e) of this Act pursuant to an agreement between the consumer and the financial institution to extend such 

credit to the consumer in the event the consumer's account is overdrawn, the limitation on the consumer's liability for such transaction shall be determined solely in accordance with this section. 
Sec. 903 ELECTRONIC FUND TRANSFER ACT 3 04 

(d) Nothing in this section imposes liability upon a consumer 

for an unauthorized electronic fund transfer in excess of his liability for such a transfer under other applicable law or under any 

agreement with the consumer's financial institution. 

(e) Except as provided in this section, a consumer incurs no liability from an unauthorized electronic fund transfer. 

§ 910. [15 U.S.C. 1693h] Liability of financial institutions 

(a) Subject to subsections (b) and (c), a financial institution 

shall be liable to a consumer for all damages proximately caused 

b y -

(1) the financial institution's failure to make an electronic 

fund transfer, in accordance with the terms and conditions of 

an account, in the correct amount or in a timely manner when 

properly instructed to do so by the consumer, except where-

(A) the consumer's account has insufficient funds; 

(B) the funds are subject to legal process or other 

encumbrance restricting such transfer; 

(C) such transfer would exceed an established credit 

limit; 

(D) an electronic terminal has insufficient cash to complete the transaction; or 

(E) as otherwise provided in regulations of the Board; 

(2) the financial institution's failure to make an electronic 

fund transfer due to insufficient funds when the financal1 

institution failed to credit, in accordance with the terms and 

conditions of an account, a deposit of funds to the consumer's 

account which would have provided sufficient funds to make 

the transfer, and 

(3) the financial institution's failure to stop payment of a 

preauthorized transfer from a consumer's account when instructed to do so in accordance with the terms and conditions 

of the account. 

(b) A financial institution shall not be liable under subsection 

(a)(1) or (2) if the financial institution shows by a preponderance 

of the evidence that its action or failure to act resulted from— 

(1) an act of God or other circumstance beyond its control, 

that it exercised reasonable care to prevent such an occurrence, 

and that it exercised such diligence as the circumstances required; or 

(2) a technical malfunction which was known to the consumer at the time he attempted to initiate an electronic fund 

transfer or, in the case of a preauthorized transfer, at the time 

such transfer should have occurred. 

(c) In the case of a failure described in subsection (a) which 

was not intentional and which resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adapted to 

avoid any such error, the financial institution shall be liable for actual damages proved. 

(d) EXCEPTIO N FOR DAMAGE D NOTICES.—I f the notice required 

to be posted pursuant to section 904(d)(3)(B)(i) by an automated 

teller machine operator has been posted by such operator in com1

 So in original. Probably should be "financial". 
305 ELECTRONIC FUND TRANSFER ACT Sec. 903 

pliance with such section and the notice is subsequently removed, 

damaged, or altered by any person other than the operator of the 

automated teller machine, the operator shall have no liability 

under this section for failure to comply with section 904(d)(3)(B)(i). 

§ 911. [15 U.S.C. 1693i] Issuance of cards or other means of 

access 

(a) No person may issue to a consumer any card, code, or other 

means of access to such consumer's account for the purpose of initiating an electronic fund transfer other than— 

(1) in response to a request or application therefor; or 

(2) as a renewal of, or in substitution for, an accepted card, 

code, or other means of access, whether issued by the initial 

issuer or a successor. 

(b) Notwithstanding the provisions of subsection (a), a person 

may distribute to a consumer on an unsolicited basis a card, code, 

or other means of access for use in initiating an electronic fund 

transfer from such consumer's account, if— 

(1) such card, code, or other means of access is not validated; 

(2) such distribution is accompanied by a complete disclosure, in accordance with section 905, of the consumer's rights 

and liabilities which will apply if such card, code, or other 

means of access is validated; 

(3) such distribution is accompanied by a clear explanation, in accordance with regulations of the Board, that such 

card, code, or other means of access is not validated and how 

the consumer may dispose of such code, card, or other means 

of access if validation is not desired; and 

(4) such card, code, or other means of access is validated 

only in response to a request or application from the consumer, 

upon verification of the consumer's identity. 

(c) For the purpose of subsection (b), a card, code, or other 

means of access is validated when it may be used to initiate an 

electronic fund transfer. 

§ 912. [15 U.S.C. 1693j] Suspension of obligations 

If a system malfunction prevents the effectuation of an electronic fund transfer initiated by a consumer to another person, and 

such other person has agreed to accept payment by such means, 

the consumer's obligation to the other person shall be suspended 

until the malfunction is corrected and the electronic fund transfer 

may be completed, unless such other person has subsequently, by 

written request, demanded payment by means other than an electronic fund transfer. 

§ 913. [15 U.S.C. 1693k] Compulsory use of electronic fund 

transfers 

No person may— 

(1) condition the extension of credit to a consumer on such 

consumer's repayment by means of preauthorized electronic 

fund transfers; or 

(2) require a consumer to establish an account for receipt 

of electronic fund transfers with a particular financial institu-
306 

ELECTRONIC FUND TRANSFER ACT 

Sec. 903 

tion as a condition of employment or receipt of a government 

benefit. 

§ 914. [15 U.S.C. 1693Z] Waiver of rights 

No writing or other agreement between a consumer and any 

other person may contain any provision which constitutes a waiver 

of any right conferred or cause of action created by this title. Nothing in this section prohibits, however, any writing or other agreement which grants to a consumer a more extensive right or remedy 

or greater protection than contained in this title or a waiver given 

in settlement of a dispute or action. 

§ 915. [15 U.S.C. 1693m] Civil liability 

(a) Except as otherwise provided by this section and section 

910, any person who fails to comply with any provision of this title 

with respect to any consumer, except for an error resolved in 

accordance with section 908, is liable to such consumer in an 

amount equal to the sum of— 

(1) any actual damage sustained by such consumer as a result of such failure; 

(2)(A) in the case of an individual action, an amount not 

less than $100 nor greater than $1,000; or 

(B) in the case of a class action, such amount as the court 

may allow, except that (i) as to each member of the class no 

minimum recovery shall be applicable, and (ii) the total recovery under this subparagraph in any class action or series of 

class actions arising out of the same failure to comply by the 

same person shall not be more than the lesser of $500,000 or 

1 per centum of the net worth of the defendant; and 

(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court. 

(b) in determining the amount of liability in any action under 

subsection (a), the court shall consider, among other relevant 

factors— 

(1) in any individual action under subsection (a)(2)(A), the 

frequency and persistence of noncompliance, the nature of such 

noncompliance, and the extent to which the noncompliance was 

intentional; or 

(2) in any class action under subsection (a)(2)(B), the frequency and persistence of noncompliance, the nature of such 

noncompliance, the resources of the defendant, the number of 

persons adversely affected, and the extent to which the noncompliance was intentional. 

(c) Except as provided in section 910, a person may not be held 

liable in any action brought under this section for a violation of 

this title if the person shows by a preponderance of evidence that 

the violation was not intentional and resulted from a bona fide 

error notwithstanding the maintenance of procedures reasonably 

adapted to avoid any such error. 

(d) No provision of this section or section 916 imposing any liability shall apply to— 

(1) any act done or omitted in good faith in conformity 

with any rule, regulation, or interpretation thereof by the 
307 ELECTRONIC FUND TRANSFER ACT Sec. 903 

Board or in conformity with any interpretation or approval by 

an official or employee of the Federal Reserve system duly 

authorized by the Board to issue such interpretations or approvals under such procedures as the Board may prescribe 

therefor; or 

(2) any failure to make disclosure in proper form if a financial institution utilized an appropriate model clause issued by 

the Board, 

notwithstanding that after such act, omission, or failure has occurred, such rule, regulation, approval, or model clause is amended, 

rescinded, or determined by judicial or other authority to be invalid 

for any reason. 

(e) A person has no liability under this section for any failure 

to comply with any requirement under this title if, prior to the 

institution of an action under this section, the person notifies the 

consumer concerned of the failure, complies with the requirements 

of this title, and makes an appropriate adjustment to the consumer's account and pays actual damages or, where applicable, 

damages in accordance with section 910. 

(f) on a finding by the court that an unsuccessful action under 

this section was brought in bad faith or for purposes of harassment, the court shall award to the defendant attorney's fees reasonable in relation to the work expended and costs. 

(g) Without regard to the amount in controversy, any action 

under this section may be brought in any united states district 

court, or in any other court of competent jurisdiction, within one 

year from the date of the occurrence of the violation. 

§ 916. [15 U.S.C. 1693n] Criminal liability 

(a) Whoever knowingly and willfully— 

(1) gives false or inaccurate information or fails to provide 

information which he is required to disclose by this title or any 

regulation issued thereunder; or 

(2) otherwise fails to comply with any provision of this 

title; 

shall be fined not more than $5,000 or imprisoned not more than 

one year, or both. 

(b) Whoever— 

(1) knowingly, in a transaction affecting interstate or foreign commerce, uses or attempts or conspires to use any counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently 

obtained debit instrument to obtain money, goods, services, or 

anything else of value which within any one-year period has a 

value aggregating $1,000 or more; or 

(2) with unlawful or fraudulent intent, transports or attempts or conspires to transport in interstate or foreign commerce a counterfeit, fictitious, altered, forged, lost, stolen, or 

fraudulently obtained debit instrument knowing the same to be 

counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained; or 

(3) with unlawful or fraudulent intent, uses any instrumentality of interstate or foreign commerce to sell or transport 

a counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained debit instrument knowing the same to be coun-
308 

ELECTRONIC FUND TRANSFER ACT 

Sec. 903 

terfeit, fictitious, altered, forged, lost, stolen, or fraudulently 

obtained; or 

(4) knowingly receives, conceals, uses, or transports, 

money, goods, services, or anything else of value (except tickets 

for interstate or foreign transportation) which (A) within any 

one-year period has a value aggregating $1,000 or more, (B) 

has moved in or is part of, or which constitutes interstate or 

foreign commerce, and (C) has been obtained with a counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained debit instrument; or 

(5) knowingly receives, conceals, uses, sells, or transports 

in interstate or foreign commerce one or more tickets for interstate or foreign transportation, which (A) within any one-year 

period have a value aggregating $500 or more, and (B) have 

been purchased or obtained with one or more counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained 

debit instrument; or 

(6) in a transaction affecting interstate or foreign commerce, furnishes money, property, services, or anything else of 

value, which within any one-year period has a value aggregating $1,000 or more, through the use of any counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained 

debit instrument knowingly the same to be counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained— 

shall be fined not more than $10,000 or imprisoned not more than 

ten years, or both. 

(c) As used in this section, the term ''debit instrument" means 

a card, code, or other device, other than a check, draft, or similar 

paper instrument, by the use of which a person may initiate an 

electronic fund transfer. 

§ 917. [15 U.S.C. 1693o] Administrative enforcement 

(a) Compliance with the requirements imposed under this title 

shall be enforced under— 

(1) section 8 of the Federal Deposit Insurance Act, in the 

case of— 

(A) national banks, and Federal branches and Federal 

agencies of foreign banks, by the Office of the Comptroller 

of the Currency; 

(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25(a)

 1 of 

the Federal Reserve Act, by the Board; and 

(C) banks insured by the Federal Deposit Insurance 

Corporation (other than members of the Federal Reserve 

System) and insured State branches of foreign banks, by 

the Board of Directors of the Federal Deposit Insurance 

Corporation; 

1

 Section 25(a) of the Federal Reserve Act was redesignated as section 25A by section 142(e)(2) 

of the Federal Deposit Insurance Corporation Improvement Act of 1991. 
309 ELECTRONIC FUND TRANSFER ACT Sec. 903 

(2) section 8 of the Federal Deposit Insurance Act, by the 

Director of the Office of Thrift Supervision, in the case of a 

savings association the deposits of which are insured by the 

Federal Deposit Insurance Corporation; 

(3) the Federal Credit Union Act, by the Administrator of 

the National Credit Union Administration with respect to any 

Federal credit union.

 1 

(4) the Federal Aviation Act of 1958, by the Secretary of 

Transportation, with respect to any air carrier or foreign air 

carrier subject to that Act; and 

(5) the Securities Exchange Act of 1934, by the Securities 

and Exchange Commission, with respect to any broker or 

dealer subject to that Act. 

The terms used in paragraph (1) that are not defined in this title 

or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them 

in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 

3101). 

(b) For the purpose of the exercise by any agency referred to 

in subsection (a) of its powers under any Act referred to in that 

subsection, a violation of any requirement imposed under this title 

shall be deemed to be a violation of a requirement imposed under 

that Act. In addition to its powers under any provision of law specifically referred to in subsection (a), each of the agencies referred 

to in that subsection may exercise, for the purpose of enforcing 

compliance with any requirement imposed under this title, any 

other authority conferred on it by law. 

(c) Except to the extent that enforcement of the requirements 

imposed under this title is specifically committed to some other 

Government agency under subsection (a), the Federal Trade Commission shall enforce such requirements. For the purpose of the 

exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any 

requirement imposed under this title shall be deemed a violation 

of a requirement imposed under that Act. All of the functions and 

powers of the Federal Trade Commission under the Federal Trade 

Commission Act are available to the Commission to enforce compliance by any person subject to the jurisdiction of the Commission 

with the requirements imposed under this title, irrespective of 

whether that person is engaged in commerce or meets any other 

jurisdictional tests in the Federal Trade Commission Act. 

§ 918. [15 U.S.C. 1693p] Reports to Congress 

(a) Not later than twelve months after the effective date of this 

title and at one-year intervals thereafter, the Board shall make reports to the Congress concerning the administration of its functions 

under this title, including such recommendations as the Board 

deems necessary and appropriate. In addition, each report of the 

Board shall include its assessment of the extent to which compliance with this title is being achieved, and a summary of the 

enforcement actions taken under section 917 of this title. In such 

report, the Board shall particularly address the effects of this title 

1

 So in original. The period probably should be a semicolon. 
310 

ELECTRONIC FUND TRANSFER ACT 

Sec. 903 

on the costs and benefits to financial institutions and consumers, 

on competition, on the introduction of new technology, on the operations of financial institutions, and on the adequacy of consumer 

protection. 

(b) In the exercise of its functions under this title, the Board 

may obtain upon request the views of any other Federal agency 

which, in the judgment of the Board, exercises regulatory or supervisory functions with respect to any class of persons subject to this 

title. 

§ 919. [15 U.S.C. 1693q] Relation to State laws 

This title does not annul, alter, or affect the laws of any state 

relating to electronic fund transfers, except to the extent that those 

laws are inconsistent with the provisions of this title, and then only 

to the extent of the inconsistency. A state law is not inconsistent 

with this title if the protection such law affords any consumer is 

greater than the protection afforded by this title. The Board shall, 

upon its own motion or upon the request of any financial institution, state, or other interested party, submitted in accordance with 

procedures prescribed in regulations of the Board, determine 

whether a state requirement is inconsistent or affords greater protection. If the Board determines that a State requirement is inconsistent, financial institutions shall incur no liability under the law 

of the state for a good faith failure to comply with that law, notwithstanding that such determination is subsequently amended, rescinded, or determined by judicial or other authority to be invalid 

for any reason. This title does not extend the applicability of any 

such law to any class of persons or transactions to which it would 

not otherwise apply. 

§ 920. [15 U.S.C. 1693r] Exemption for State regulation 

The Board shall by regulation exempt from the requirements 

of this title any class of electronic fund transfers within any state 

if the Board determines that under the law of that State that class 

of electronic fund transfers is subject to requirements substantially 

similar to those imposed by this title, and that there is adequate 

provision for enforcement. 

§ 921. [15 U.S.C. 1693 note] Effective date 

This title takes effect upon the expiration of eighteen months 

from the date of its enactment, except that sections 909 and 911 

take effect upon the expiration of ninety days after the date of 

enactment. 
DEPOSITORY INSTITUTION MANAGEMENT 

INTERLOCKS ACT 

3 11 

DEPOSITORY INSTITUTION MANAGEMENT 

INTERLOCKS ACT 

SEC. 201. [12 U.S.C. 3201 note] This title may be cited as the 

''Depository Institution Management Interlocks Act''. 

SEC. 202. [12 U.S.C. 3201] As used in this title— 

(1) the term ''depository institution'' means a commercial 

bank, a savings bank, a trust company, a savings and loan 

association, a building and loan association, a homestead association, a cooperative bank, an industrial bank, or a credit 

union; 

(2) the term ''depository holding company'' means a bank 

holding company as defined in section 2(a) of the Bank Holding 

Company Act of 1956, a company which would be a bank holding company as defined in section 2(a) of the Bank Holding 

Company Act of 1956 but for the exemption contained in section 2(a)(5)(F) thereof, or a savings and loan holding company 

as defined in section 408(a)(1)(I)1 of the National Housing Act; 

(3) the characterization of any corporation (including 

depository institutions and depository holding companies), as 

an ''affiliate of,'' or as ''affiliated'' with any other corporation 

means that— 

(A) one of the corporations is a depository holding company and the other is a subsidiary thereof, or both corporations are subsidiary of the same depository holding company, as the term ''subsidiary'' is defined in either section 

2(d) of the Bank Holding Company Act of 1956 in the case 

of a bank holding company or section 408(a)(1)(H)1 of the 

National Housing Act in the case of a savings and loan 

holding company; or

 2 

(B) more than 25 percent of the voting stock of one 

corporation is beneficially owned in the aggregate by one 

or more persons who also beneficially own in the aggregate 

more than 25 percent of the voting stock of the other corporation; or

 2 

(C) one of the corporations is a trust company all of 

the stock of which, except for directors qualifying shares, 

was owned by one or more mutual savings banks on the 

date of enactment of this Act, and the other corporation is 

a mutual savings bank; or2 

(D) one of the corporations is a bank, insured by the 

Federal Deposit Insurance Corporation and chartered 

under State law, and is a bankers' bank, described in 

1

 Repealed by Public Law 101-73, §407, 103 Stat. 363. The term ''section 10(a)(1)(D) of the 

Home Owners' Loan Act'' should probably be substituted for such reference. 

2

 So in original. The word ''or'' probably should not appear. 

3 13 
Sec. 203 DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT 314 

Paragraph Seventh of section 5136 of the Revised Statutes; 

or 

(E) one of the corporations is a bank, chartered under 

State law and insured by the Federal Deposit Insurance 

Corporation, the voting securities of which are held only by 

persons who are officers of other banks, as permitted by 

state law, and which bank is primarily engaged in providing banking services for other banks and not the public: 

Provided, however, That in no case shall the voting securities of such corporation be held by such officers of other 

banks in excess of 6 per centum of the paid-in capital and 

6 per centum of the surplus of such a bank.1 

(4) the term ''management official'' means an employee or 

officer with management functions, a director (including an advisory or honorary director, except in the case of a depository 

institution with total assets of less than $100,000,000), a 

trustee of a business organization under the control of trustee, 

or any person who has a representative or nominee serving in 

any such capacity: Provided, That if a corporator, trustee, director, or other officer of a state-chartered savings bank or cooperative bank in specifically authorized under the laws of the 

state in which said institution is located to serve as a trustee, 

director, or other officer of a state-chartered trust company 

which does not make real estate mortgage loans and does not 

accept savings from natural persons, then, for the purposes of 

this title, such corporator, trustee, director, or other officer 

shall not be deemed to be a management official of such trust 

company; And provided further, That if a management official 

of a state-chartered trust company which does not make real 

estate mortgage loans and does not accept savings deposits 

from natural persons is specifically authorized under the laws 

of the state in which said institution is located to serve as a 

corporator, trustee, director, or other officer of a State-chartered savings bank or cooperative bank, then, for the purposes 

of this title, such management official shall not be deemed to 

be a management official of any such savings bank or cooperative bank; 

(5) the term ''office'' used with reference to a depository 

institution means either a principal office or a branch; and 

(6) the term ''appropriate Federal depository institutions 

regulatory agency'' means, with respect to any depository institution or depository holding company, the agency referred to in 

section 209 in connection with such institution or company. 

SEC. 203. [12 U.S.C. 3202] A management official of a depository institution or a depository holding company may not serve as 

a management official of any other depository institution or depository holding company not affiliated therewith if an office of one of 

the institutions or any depository institution that is an affiliate of 

such institutions is located within either— 

(1) the same primary metropolitan statistical area, the 

same metropolitan statistical area, or the same consolidated 

metropolitan statistical area that is not comprised of des1

 so in original. The period probably should be a semicolon. 
Sec. 203 DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT 315 

ignated primary metropolitan statistical areas as defined by 

the Office of Management and Budget, except in the case of 

depository institutions with less than $20,000,000 in assets in 

which case the provision of paragraph (2) shall apply, as that 

in which an office of the other institution or any depository 

institution that is an affiliate of such institution is located, or 

(2) the same city, town, or village as that in which an office of the other institution or any depository institution that 

is an affiliate of such other institution is located, or in any city, 

town, or village contiguous or adjacent thereto. 

SEC. 204. [12 U.S.C. 3203] If a depository institution or a 

depository holding company has total assets exceeding 

$2,500,000,000, a management official of such institution or any 

affiliate thereof may not serve as a management official of any 

other nonaffiliated depository institution or depository holding company having total assets exceeding $1,500,000,000 or as a management official of any affiliate of such other institution. In order to 

allow for inflation or market changes, the appropriate Federal 

depository institutions regulatory agencies may, by regulation, adjust, as necessary, the amount of total assets required for depository institutions or depository holding companies under this section. 

SEC. 205. [12 U.S.C. 3204] The prohibitions contained in sections 203 and 204 shall not apply in the case of any one or more 

of the following or subsidiary thereof: 

(1) A depository institution or depository holding company 

which has been placed formally in liquidation, or which is in 

the hands of a receiver, conservator, or other official exercising 

a similar function. 

(2) A corporation operating under section 25 or 25(a)

 1 of 

the Federal Reserve Act. 

(3) a credit union being served by a management official 

of another credit union. 

(4) A depository institution or depository holding company 

which does not do business within any State of the United 

States, the District of Columbia, any territory of the United 

States, Puerto Rico, Guam, American Samoa, or the Virgin Islands except as in incident to its activities outside the United 

States. 

(5) A State-chartered savings and loan guaranty corporation. 

(6) A Federal Home Loan Bank or any other bank organized specifically to serve depository institutions. 

(7) A depository institution or a depository holding company which— 

(A) is closed or is in danger of closing, as determined 

by the appropriate Federal depository institutions regulatory agency in accordance with regulations prescribed by 

such agency; and 

(B) is acquired by another depository institution or 

depository holding company, 

1

 Section 25(a) of the Federal Reserve Act was redesignated as section 25A by section 142(e)(2) 

of the Federal Deposit Insurance Corporation Improvement Act of 1991. 
Sec. 203 DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT 316 

during the 5-year period beginning on the date of the acquisition of the depository institution or depository holding company described in subparagraph (A). 

(8)(A) A diversified savings and loan holding company (as 

defined in section 408(a)(1)(F)1 of the National Housing Act) 

with respect to the service of a director of such company who 

is also a director of any nonaffiliated depository institution or 

depository holding company (including a savings and loan holding company) if— 

(i) notice of the proposed dual service is given by such 

diversified savings and loan holding company to— 

(I) the appropriate Federal depository institutions 

regulatory agency for such company; and 

(II) the appropriate Federal depository institutions 

regulatory agency for the nonaffiliated depository 

institution or depository holding company of which 

such person is also a director, 

not less than 60 days before such dual service is proposed 

to begin; and 

(ii) the proposed dual service is not disapproved by 

any such appropriate Federal depository institutions regulatory agency before the end of such 60-day period. 

(B) Any appropriate Federal depository institutions regulatory agency may disapprove, under subparagraph (A)(ii), a 

notice of proposed dual service by any individual if such agency 

finds that— 

(i) the dual service cannot be structured or limited so 

as to preclude the dual service's resulting in a monopoly 

or substantial lessening of competition in financial services 

in any part of the United States; 

(ii) the dual service would lead to substantial conflicts 

of interest or unsafe or unsound practices; or 

(iii) the diversified savings and loan holding company 

has neglected, failed, or refused to furnish all the information required by such agency. 

(C) Any appropriate Federal depository institutions regulatory agency may, at any time after the end of the 60-day period referred to in subparagraph (A), require that any dual 

service by any individual which was not disapproved by such 

agency during such period be terminated if a change in circumstances occurs with respect to any depository institution or 

depository holding company of which such individual is a director that would have provided a basis for disapproval of the 

dual service during such period. 

(9) Any savings association (as defined in section 

10(a)(1)(A) of the Home Owners' Loan Act or any savings and 

loan holding company (as defined in section 10(a)(1)(D) of such 

Act) which has issued stock in connection with a qualified 

stock issuance pursuant to section 10(q) of such Act, except 

that this paragraph shall apply only with respect to service as 

a single management official of such savings association or 

1

 Repealed by Public Law 101-73, § 407, 103 Stat. 363. The term ''section 10(a)(1)(F) of the 

Home Owners' Loan Act'' should probably be substituted for such reference. 
Sec. 203 DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT 317 

holding company, or any subsidiary of such savings association 

or holding company, by a single management official of the 

savings and loan holding company which purchased the stock 

issued in connection with such qualified stock issuance, and 

shall apply only when the Director of the Office of Thrift 

Supervision has determined that such service is consistent 

with the purposes of this Act and the Home Owners' Loan Act. 

SEC. 206. [12 U.S.C. 3205] (a) A person whose service in a 

position as a management official began prior to the date of enactment of this title and who was not immediately prior to the date 

of enactment of this title in violation of section 8 of the Clayton Act 

is not prohibited by section 203 or section 204 of this title from continuing to serve in that position. The appropriate Federal depository institutions regulatory agency may provide a reasonable period 

of time for compliance with this title, not exceeding fifteen months, 

after any change in circumstances which makes service described 

in the preceding sentence prohibited by this title, except that a 

merger, acquisition, increase in total assets, establishment of one 

or more offices, or change in management responsibilities shall not 

constitute changes in circumstances which would make such service prohibited by section 203 or section 204 of this title. 

(b) Effective on the date of enactment of this title, a person 

who serves as a management official of a company which is not a 

depository institution or a depository holding company and as a 

management official of that depository institution or depository 

holding company as a result of that company which is not a depository institution or depository holding company becoming a diversified savings and loan holding company as that term is defined in 

section 408(a)1 of the National Housing Act. 

SEC. 207. [12 U.S.C. 3206] This title shall be administered 

and enforced by— 

(1) the Comptroller of the Currency with respect to national banks and banks located in the District of Columbia, 

(2) the Board of Governors of the Federal Reserve System 

with respect to State banks which are members of the Federal 

Reserve System, and bank holding companies,2 

(3) the Board of Directors of the Federal Deposit Insurance 

Corporation with respect to State banks which are not members of the Federal Reserve System but the deposits of which 

are insured by the Federal Deposit Insurance Corporation, 

(4) the Director of the Office of Thrift Supervision with respect to a savings association (the deposits of which are insured by the Federal Deposit Insurance Corporation) and savings and loan holding companies, 

(5) the National Credit Union Administration with respect 

to credit unions the accounts of which are insured by the National Credit Union Administration, and 

(6) upon

 3 referral by the agencies named in the foregoing 

paragraphs (1) through (5), the Attorney General shall have 

1

 Repealed by Public Law 101-73, § 407, 103 Stat. 363. The term ''section 10(a)(1)(F) of the 

Home Owners' Loan Act'' should probably be substituted for such reference. 

2

 So in law. The term ''and'' probably should be inserted after the comma. 

3

 So in law. Probably should not be designated as a paragraph because the authority is in 

addition to the authority contained in paragraphs (1) through (5). 
Sec. 203 DEPOSITORY INSTITUTION MANAGEMENT INTERLOCKS ACT 318 

the authority to enforce compliance by any person with this 

title. 

[Section 208 amended other Acts] 

SEC. 209. [12 U.S.C. 3207] Regulations to carry out this title, 

including regulations that permit service by a management official 

that would otherwise be prohibited by section 203 or section 204, 

if such service would not result in a monopoly or substantial lessening of competition, may be prescribed by— 

(1) the Comptroller of the Currency with respect to national banks and banks located in the District of Columbia, 

(2) the Board of Governors of the Federal Reserve System 

with respect to state banks which are members of the Federal 

Reserve system, and bank holding companies, 

(3) the Board of Directors of the Federal Deposit Insurance 

Corporation with respect to state banks which are not members of the Federal Reserve system but the deposits of which 

are insured by the Federal Deposit Insurance Corporation, 

(4) the Director of the office of Thrift supervision with respect to in-titutions the accounts of which are insured by the 

Federal Deposit Insurance Corporation, and savings and loan 

holding companies, and 

(5) the National Credit union Administration with respect 

to credit unions the accounts of which are insured by the National Credit union Administration. 

SEC. 210. [12 U.S.C. 3208] (a) For the purpose of the exercise 

by the Attorney General of his enforcement functions under section 

207(6) of this title, all of the functions and powers of the Attorney 

General under the Clayton Act are available to the Attorney General, irrespective of any jurisdictional tests in the Clayton Act, including the power to take enforcement actions in the same manner 

as if the violation had been a violation of the Clayton Act. 

(b) All of the functions and powers of the Attorney General or 

the Assistant Attorney General in charge of the Antitrust Division 

of the Department of Justice are available to the Attorney General 

or to such Assistant Attorney General to investigate possible violations under section 207(6) of the title in the same manner as if 

such possible violations were possible violations of the Clayton Act. 
ECONOMIC GROWTH AND REGULATORY PAPERWORK 

REDUCTION ACT OF 1996 

3 19 

ECONOMIC GROWTH AND REGULATORY PAPERWORK 

REDUCTION ACT OF 19961 

TITLE II—ECONOMI C GROWT H AN D 

REGULATORY PAPERWORK REDUCTIO N 

SEC. 2001. [12 U.S.C. 226 nt] SHORT TITLE; TABLE OF CONTENTS; DEFINITIONS. 

(a) SHORT TITLE.—Thi s title may be cited as the ''Economic 

Growth and Regulatory Paperwork Reduction Act of 1996''. 

(c) [12 U.S.C. 252 nt] DEFINITIONS.—Except as otherwise 

specified in this title, the following definitions shall apply for purposes of this title: 

(1) APPRAISAL SUBCOMMITTEE.—The term ''Appraisal Subcommittee'' means the Appraisal Subcommittee established 

under section 1011 of the Federal Financial Institutions Examination Council Act of 1978 (as in existence on the day before 

the date of enactment of this Act). 

(2) APPROPRIATE FEDERAL BANKING AGENCY.—The term 

''appropriate Federal banking agency'' has the same meaning 

as in section 3 of the Federal Deposit Insurance Act. 

(3) BOARD.—The term ''Board'' means the Board of Governors of the Federal Reserve System. 

(4) CORPORATION.—The term ''Corporation'' means the 

Federal Deposit Insurance Corporation. 

(5) COUNCIL.—The term ''Council'' means the Financial 

institutions Examination Council established under section 

1004 of the Federal Financial Institutions Examination Council 

Act of 1978. 

(6) INSURED CREDIT UNION.—The term ''insured credit 

union'' has the same meaning as in section 101 of the Federal 

Credit Union Act. 

(7) INSURED DEPOSITORY INSTITUTION.—The term ''insured 

depository institution'' has the same meaning as in section 3 

of the Federal Deposit Insurance Act. 

*This Act consists of title II of the Omnibus Consolidated Appropriations for Fiscal Year 1997 

(P.L. 104-208; 110 Stat. 3009-394), which largely amended other Acts. 

321 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 322 

Subtitle A—Streamlining the Home 

Mortgage Lending Process 

SEC. 2101. [12 U.S.C. 2601 nt] SIMPLIFICATION AND UNIFICATION OF 

DISCLOSURES REQUIRED UNDER RESPA AN D TILA FOR 

MORTGAGE TRANSACTIONS. 

(a) IN GENERAL.—With respect to credit transactions which are 

subject to the Real Estate Settlement Procedures Act of 1974 and 

the Truth in Lending Act, the Board of Governors of the Federal 

Reserve System (hereafter in this section referred to as the 

"Board") and the Secretary of Housing and Urban Development 

(hereafter in this section referred to as the "Secretary") shall take 

such action as may be necessary before the end of the 6-month period beginning on the date of enactment of this Act— 

(1) to simplify and improve the disclosures applicable to 

such transactions under such Acts, including the timing of the 

disclosures; and 

(2) to provide a single format for such disclosures which 

will satisfy the requirements of each such Act with respect to 

such transactions. 

(b) REGULATIONS.—To the extent that it is necessary to prescribe any regulation in order to effect any changes required to be 

made under subsection (a), the proposed regulation shall be published in the Federal Register before the end of the 6-month period 

referred to in subsection (a). 

(c) RECOMMENDATIONS FOR LEGISLATION.—If the Board and the 

Secretary find that legislative action may be necessary or appropriate in order to simplify and unify the disclosure requirements 

under the Real Estate Settlement Procedures Act of 1974 and the 

Truth in Lending Act, the Board and the Secretary shall submit a 

report containing recommendations to the Congress concerning 

such action. 

Subtitle B—Streamlining Government 

Regulation 

CHAPTER 2—ELIMINATING UNNECESSARY 

REGULATORY BURDENS 

SEC. 2222. [12 U.S.C. 3311] REQUIRED REVIEW OF REGULATIONS. 

(a) IN GENERAL.—Not less frequently than once every 10 years, 

the Council and each appropriate Federal banking agency represented on the Council shall conduct a review of all regulations 

prescribed by the Council or by any such appropriate Federal banking agency, respectively, in order to identify outdated or otherwise 

unnecessary regulatory requirements imposed on insured depository institutions. 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 323 

(b) PROCESS.—In conducting the review under subsection (a), 

the Council or the appropriate Federal banking agency shall— 

(1) categorize the regulations described in subsection (a) by 

type (such as consumer regulations, safety and soundness regulations, or such other designations as determined by the 

Council, or the appropriate Federal banking agency); and 

(2) at regular intervals, provide notice and solicit public 

comment on a particular category or categories of regulations, 

requesting commentators to identify areas of the regulations 

that are outdated, unnecessary, or unduly burdensome. 

(c) COMPLETE REVIEW.—The Council or the appropriate Federal banking agency shall ensure that the notice and comment period described in subsection (b)(2) is conducted with respect to all 

regulations described in subsection (a) not less frequently than 

once every 10 years. 

(d) REGULATORY RESPONSE.—The Council or the appropriate 

Federal banking agency shall— 

(1) publish in the Federal Register a summary of the comments received under this section, identifying significant issues 

raised and providing comment on such issues; and 

(2) eliminate unnecessary regulations to the extent that 

such action is appropriate. 

(e) REPORT TO CONGRESS.—Not later than 30 days after carrying out subsection (d)(1), the Council shall submit to the Congress a report, which shall include— 

(1) a summary of any significant issues raised by public 

comments received by the Council and the appropriate Federal 

banking agencies under this section and the relative merits of 

such issues; and 

(2) an analysis of whether the appropriate Federal banking 

agency involved is able to address the regulatory burdens associated with such issues by regulation, or whether such burdens 

must be addressed by legislative action. 

SEC. 2227. [12 U.S.C. 252] CREDIT AVAILABILITY ASSESSMENT. 

(a) STUDY.— 

(1) IN GENERAL.—Not later than 12 months after the date 

of enactment of this Act, and once every 60 months thereafter, 

the Board, in consultation with the Director of the office of 

Thrift Supervision, the Comptroller of the Currency, the Board 

of Directors of the Corporation, the Administrator of the National Credit Union Administration, the Administrator of the 

small Business Administration, and the secretary of Commerce, shall conduct a study and submit a report to the Congress detailing the extent of small business lending by all 

creditors. 

(2) CONTENTS OF STUDY.—The study required under paragraph (1) shall identify, to the extent practicable, those factors 

which provide policymakers with insights into the small business credit market, including— 

(A) the demand for small business credit, including 

consideration of the impact of economic cycles on the levels 

of such demand; 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 324 

(B) the availability of credit to small businesses; 

(C) the range of credit options available to small businesses, such as those available from insured depository institutions and other providers of credit; 

(D) the types of credit products used to finance small 

business operations, including the use of traditional loans, 

leases, lines of credit, home equity loans, credit cards, and 

other sources of financing; 

(E) the credit needs of small businesses, including, if 

appropriate, the extent to which such needs differ, based 

upon product type, size of business, cash flow requirements, characteristics of ownership or investors, or other 

aspects of such business; 

(F) the types of risks to creditors in providing credit 

to small businesses; and 

(G) such other factors as the Board deems appropriate. 

(b) USE OF EXISTING DATA.—Th e studies required by this section shall not increase the regulatory or paperwork burden on regu 

lated financial institutions, other sources of small business credit, 

or small businesses. 

Subtitle D—Consumer Credit 

CHAPTER 1—CREDIT REPORTING REFORM 

SEC. 2422. FEDERA L RESERVE BOAR D STUDY. 

(a) STUDY REQUIRED.—Th e Board of Governors of the Federal 

Reserve System, in consultation with the other Federal banking 

agencies (as defined in section 3 of the Federal Deposit Insurance 

Act) and the Federal Trade Commission, shall conduct a study of 

whether organizations which, as of the date of the enactment of 

this Act, are not subject to the Fair Credit Reporting Act as consumer reporting agencies (as defined in section 603 of such Act) are 

engaged in the business of making sensitive consumer identification information, including social security numbers, mothers' maiden names, prior addresses, and dates of birth, available to the general public. 

(b) DETERMINATION OF POTENTIAL FOR FRAUD.—I f the Board of 

Governors of the Federal Reserve System determines that organizations referred to in subsection (a) are engaged in the business of 

making sensitive consumer identification information available to 

the general public, the Board shall determine— 

(1) whether such activities create undue potential for fraud 

and risk of loss to insured depository institutions (as defined 

in section 3 of the Federal Deposit Insurance Act); and 

(2) if so, whether changes in Federal law are necessary to 

address such risks of fraud and loss. 

(c) REPORT TO CONGRESS.—Before the end of the 6-month period beginning on the date of the enactment of this Act, the Board 

of Governors of the Federal Reserve System shall submit a report 

to the Congress containing— 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 325 

(1) the findings and conclusion of the Board in connection 

with the study required under subsections (a) and (b); and 

(2) recommendations for such legislative or administrative 

action as the Board determines to be appropriate. 

Subtitle F—Miscellaneous 

SEC. 2601. FEDERAL RESERVE BOARD STUDY. 

(a) STUDY OF ELECTRONIC STORED VALUE PRODUCTS.— 

(1) STUDY.—The Board shall conduct a study of electronic 

stored value products which evaluates whether provisions of 

the Electronic Fund Transfer Act could be applied to such 

products without adversely impacting the cost, development, 

and operation of such products. 

(2) CONSIDERATIONS.—In conducting its study under paragraph (1), the Board shall consider whether alternatives to regulation under the Electronic Fund Transfer Act, such as allowing competitive market forces to shape the development and 

operation of electronic stored value products, could more efficiently achieve the objectives embodied in that Act. 

(b) REPORT.—The Board shall submit a report of its study 

under subsection (a) to the Congress not later than 6 months after 

the date of enactment of this Act. 

(c) ACTION TO FINALIZE.—The Board shall take no action to finalize any amendments to regulations under the Electronic Fund 

Transfer Act that would regulate electronic stored value products 

until the later of— 

(1) 3 months after the date on which the report is submitted to the Congress under subsection (b); or 

(2) 9 months after the date of enactment of this Act. 

SEC. 2606. [12 U.S.C. 1752a nt] STUDY OF CORPORATE CREDIT UNIONS. 

(a) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) ADMINISTRATION.—The term "Administration" means 

the National Credit Union Administration. 

(2) BOARD.—The term "Board" means the National Credit 

Union Administration Board. 

(3) CORPORATE CREDIT UNION.—The term "corporate credit 

union'' has the meaning given such term by rule or regulation 

of the Board. 

(4) FUND.—The term "Fund" means the National Credit 

Union Share Insurance Fund established under section 203 of 

the Federal Credit Union Act. 

(5) SECRETARY.—The term "Secretary" means the Secretary of the Treasury. 

(b) STUDY.— 

(1) IN GENERAL.—The Secretary, in consultation with the 

Board, the Corporation, the Comptroller of the Currency, and 

the Administration, shall conduct a study and evaluation of— 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 326 

(A) the oversight and supervisory practices of the Administration concerning the Fund, including the treatment 

of amounts deposited in the Fund pursuant to section 

202(c) of the Federal Credit Union Act, including analysis 

of— 

(i) whether those amounts should be— 

(I) refundable; or 

(II) treated as expenses; and 

(ii) the use of those amounts in determining equity capital ratios; 

(B) the potential for, and potential effects of, administration of the Fund by an entity other than the Administration; 

(C) the 10 largest corporate credit unions in the 

United States, conducted in cooperation with appropriate 

employees of other Federal agencies with expertise in the 

examination of federally insured financial institutions, 

including— 

(i) the investment practices of those credit unions; 

and 

(ii) the financial stability, financial operations, 

and financial controls of those credit unions; 

(D) the regulations of the Administration; and 

(E) the supervision of corporate credit unions by the 

Administration. 

(c) REPORT.—Not later than 12 months after the date of enactment of this Act, the Secretary shall submit to the appropriate 

committees of the Congress, a report that includes the results of 

the study and evaluation conducted under subsection (b), together 

with any recommendations that the Secretary considers to be appropriate. 

SEC. 2607. REPORT ON THE RECONCILIATION OF DIFFERENCES BETWEEN REGULATORY ACCOUNTING PRINCIPLES AND 

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 

Not later than 180 days after the date of enactment of this Act, 

each appropriate Federal banking agency shall submit to the Committee on Banking and Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban 

Affairs of the Senate, a report describing both the actions that have 

been taken by the agency and the actions that will be taken by the 

agency to eliminate or conform inconsistent or duplicative accounting and reporting requirements applicable to reports or statements 

filed with any such agency by insured depository institutions, as required by section 121 of the Federal Deposit Insurance Corporation 

Improvement Act of 1991. 

Subtitle G—Deposit Insurance Funds 

SEC. 2701. [12 U.S.C. 1811 nt] SHORT TITLE. 

This subtitle may be cited as the ''Deposit Insurance Funds Act 

of 1996''. 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 327 

SEC. 2702. [12 U.S.C. 1817 nt] SPECIAL ASSESSMENT TO CAPITALIZE 

SAIF. 

(a) IN GENERAL.—Except as provided in subsection (f), the 

Board of Directors of the Federal Deposit Insurance Corporation 

shall impose a special assessment on the SAIF-assessable deposits 

of each insured depository institution in accordance with assessment regulations of the Corporation at a rate applicable to all such 

institutions that the Board of Directors, in its sole discretion, determines (after taking into account the adjustments described in subsections (g), (h), and (j)) will cause the Savings Association Insurance Fund to achieve the designated reserve ratio on the first business day of the 1st month beginning after the date of the enactment of this Act. 

(b) FACTORS TO BE CONSIDERED.—In carrying out subsection 

(a), the Board of Directors shall base its determination on— 

(1) the monthly Savings Association Insurance Fund balance most recently calculated; 

(2) data on insured deposits reported in the most recent reports of condition filed not later than 70 days before the date 

of enactment of this Act by insured depository institutions; and 

(3) any other factors that the Board of Directors deems appropriate. 

(c) DATE OF DETERMINATION.—For purposes of subsection (a), 

the amount of the SAIF-assessable deposits of an insured depository institution shall be determined as of March 31, 1995. 

(d) DATE PAYMENT DUE.—Except as provided in subsection (g), 

the special assessment imposed under this section shall be— 

(1) due on the first business day of the 1st month beginning after the date of the enactment of this Act; and 

(2) paid to the Corporation on the later of— 

(A) the first business day of the 1st month beginning 

after such date of enactment; or 

(B) such other date as the Corporation shall prescribe, 

but not later than 60 days after the date of enactment of 

this Act. 

(e) ASSESSMENT DEPOSITED I N SAIF.—Notwithstanding any 

other provision of law, the proceeds of the special assessment imposed under this section shall be deposited in the Savings Association Insurance Fund. 

(f) EXEMPTIONS FOR CERTAIN INSTITUTIONS.— 

(1) EXEMPTION FOR WEAK INSTITUTIONS.—The Board of Directors may, by order, in its sole discretion, exempt any insured depository institution that the Board of Directors determines to be weak, from paying the special assessment imposed 

under this section if the Board of Directors determines that the 

exemption would reduce risk to the Savings Association Insurance Fund. 

(2) GUIDELINES REQUIRED.—Not later than 30 days after 

the date of enactment of this Act, the Board of Directors shall 

prescribe guidelines setting forth the criteria that the Board of 

Directors will use in exempting institutions under paragraph 

(1). Such guidelines shall be published in the Federal Register. 

(3) EXEMPTION FOR CERTAIN NEWLY CHARTERED AND OTHER 

DEFINED INSTITUTIONS.— 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 328 

(A) I N GENERAL.—In addition to the institutions exempted from paying the special assessment under paragraph (1), the Board of Directors shall exempt any insured 

depository institution from payment of the special assessment if the institution— 

(i) was in existence on October 1, 1995, and held 

no sAIF-assessable deposits before January 1, 1993; 

(ii) is a Federal savings bank which— 

(I) was established de novo in April 1994 in 

order to acquire the deposits of a savings association which was in default or in danger of default; 

and 

(II) received minority interim capital assistance from the Resolution Trust Corporation under 

section 21A(w) of the Federal Home Loan Bank 

Act in connection with the acquisition of any such 

savings association; or 

(iii) is a savings association, the deposits of which 

are insured by the savings Association Insurance 

Fund, which— 

(I) before January 1, 1987, was chartered as 

a Federal savings bank insured by the Federal 

Savings and Loan Insurance Corporation for the 

purpose of acquiring all or substantially all of the 

assets and assuming all or substantially all of the 

deposit liabilities of a national bank in a transaction consummated after July 1, 1986; and 

(II) as of the date of that transaction, had assets of less than $150,000,000. 

(B) DEFINITION.—Fo r purposes of this paragraph, an 

institution shall be deemed to have held sAIF-assessable 

deposits before January 1, 1993, if— 

(i) it directly held sAIF-assessable deposits before 

that date; or 

(ii) it succeeded to, acquired, purchased, or otherwise holds any SAIF-assessable deposits as of the date 

of enactment of this Act that were sAIF-assessable deposits before January 1, 1993. 

(4) EXEMPT INSTITUTIONS REQUIRED TO PAY ASSESSMENTS 

AT FORMER RATES.— 

(A) PAYMENTS TO SAIF AND DIF.—Any insured depository institution that the Board of Directors exempts under 

this subsection from paying the special assessment imposed under this section shall pay semiannual 

assessments— 

(i) during calendar years 1996, 1997, and 1998, 

into the Savings Association Insurance Fund, based on 

SAIF-assessable deposits of that institution, at assessment rates calculated under the schedule in effect for 

savings Association Insurance Fund members on June 

30, 1995; and 

(ii) during calendar year 1999— 

(I) into the Deposit Insurance Fund, based on 

sAIF-assessable deposits of that institution as of 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 329 

December 31, 1998, at assessment rates calculated 

under the schedule in effect for Savings Association Insurance Fund members on June 30, 1995; 

or 

(ii) in accordance with clause (i), if the Bank 

Insurance Fund and the Savings Association Insurance Fund are not merged into the Deposit Insurance Fund. 

(B) OPTIONAL PRO RATA PAYMENT OF SPECIAL ASSESSMENT.—This paragraph shall not apply with respect to any 

insured depository institution (or successor insured depository institution) that has paid, during any calendar year 

from 1997 through 1999, upon such terms as the Corporation may announce, an amount equal to the product of— 

(i) 16.7 percent of the special assessment that the 

institution would have been required to pay under 

subsection (a), if the Board of Directors had not exempted the institution; and 

(ii) the number of full semiannual periods remaining between the date of the payment and December 

31, 1999. 

(g) SPECIAL ELECTION FOR CERTAIN INSTITUTIONS FACING 

HARDSHIP AS A RESULT OF THE SPECIAL ASSESSMENT.— 

(1) ELECTION AUTHORIZED.—If— 

(A) an insured depository institution, or any depository institution holding company which, directly or indirectly, controls such institution, is subject to terms or covenants in any debt obligation or preferred stock outstanding on September 13, 1995; and 

(B) the payment of the special assessment under subsection (a) would pose a significant risk of causing such depository institution or holding company to default or violate any such term or covenant, 

the depository institution may elect, with the approval of the 

Corporation, to pay such special assessment in accordance with 

paragraphs (2) and (3) in lieu of paying such assessment in the 

manner required under subsection (a). 

(2) 1ST ASSESSMENT.—An insured depository institution 

which makes an election under paragraph (1) shall pay an assessment in an amount equal to 50 percent of the amount of 

the special assessment that would otherwise apply under subsection (a), by the date on which such special assessment is 

payable under subsection (d). 

(3) 2 D ASSESSMENT.—An insured depository institution 

which makes an election under paragraph (1) shall pay a 2d 

assessment, by the date established by the Board of Directors 

in accordance with paragraph (4), in an amount equal to the 

product of 51 percent of the rate determined by the Board of 

Directors under subsection (a) for determining the amount of 

the special assessment and the SAIF-assessable deposits of the 

institution on March 31, 1996, or such other date in calendar 

year 1996 as the Board of Directors determines to be appropriate. 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 330 

(4) DU E DATE OF 2D ASSESSMENT.—Th e date established by 

the Board of Directors for the payment of the assessment 

under paragraph (3) by a depository institution shall be the 

earliest practicable date which the Board of Directors determines to be appropriate, which is at least 15 days after the 

date used by the Board of Directors under paragraph (3). 

(5) SUPPLEMENTA L SPECIAL ASSESSMENT.—A n insured depository institution which makes an election under paragraph 

(1) shall pay a supplemental special assessment, at the same 

time the payment under paragraph (3) is made, in an amount 

equal to the product of— 

(A) 50 percent of the rate determined by the Board of 

Directors under subsection (a) for determining the amount 

of the special assessment; and 

(B) 95 percent of the amount by which the sAIF-assessable deposits used by the Board of Directors for determining the amount of the 1st assessment under paragraph 

(2) exceeds, if any, the sAIF-assessable deposits used by 

the Board for determining the amount of the 2d assessment under paragraph (3). 

( h) ADJUSTMEN T OF SPECIA L ASSESSMEN T FOR CERTAI N BAN K 

INSURANC E FUN D MEMBE R BANKS. — 

(1) IN GENERAL.—For purposes of computing the special assessment imposed under this section with respect to a Bank 

Insurance Fund member bank, the amount of any deposits of 

any insured depository institution which section 5(d)(3) of the 

Federal Deposit Insurance Act treats as insured by the Savings 

Association Insurance Fund shall be reduced by 20 percent— 

(A) if the adjusted attributable deposit amount of the 

Bank Insurance Fund member bank is less than 50 percent of the total domestic deposits of that member bank as 

of June 30, 1995; or 

(B) if, as of June 30, 1995, the Bank Insurance Fund 

member— 

(i) had an adjusted attributable deposit amount 

equal to less than 75 percent of the total assessable 

deposits of that member bank; 

(ii) had total assessable deposits greater than 

$5,000,000,000; and 

(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. 

( 2 ) ADJUSTE D ATTRIBUTABLE DEPOSIT AMOUNT.—Fo r purposes of this subsection, the ''adjusted attributable deposit 

amount'' shall be determined in accordance with section 

5(d)(3)(C) of the Federal Deposit Insurance Act. 

(j) 1 ADJUSTMEN T OF SPECIAL ASSESSMEN T FOR CERTAI N SAVINGS ASSOCIATIONS.— 

1

 Subsection (i) made amendments to the Federal Deposit Insurance Act. 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 331 

(1) SPECIA L ASSESSMEN T REDUCTION.—Fo r purposes of 

computing the special assessment imposed under this section, 

in the case of any converted association, the amount of any deposits of such association which were insured by the savings 

Association Insurance Fund as of March 31, 1995, shall be reduced by 20 percent. 

(2) CONVERTE D ASSOCIATION.—Fo r purposes of this subsection, the term ''converted association'' means— 

(A) any Federal savings association— 

(i) that is a member of the Savings Association Insurance Fund and that has deposits subject to assessment by that fund which did not exceed 

$4,000,000,000, as of March 31, 1995; and 

(ii) that had been, or is a successor by merger, acquisition, or otherwise to an institution that had been, 

a state savings bank, the deposits of which were insured by the Federal Deposit Insurance Corporation 

before August 9, 1989, that converted to a Federal savings association pursuant to section 5(i) of the Home 

Owners' Loan Act before January 1, 1985; 

(B) a state depository institution that is a member of 

the savings Association Insurance Fund that had been a 

State savings bank before October 15, 1982, and was a 

Federal savings association on August 9, 1989; 

(C) an insured bank that— 

(i) was established de novo in order to acquire the 

deposits of a savings association in default or in danger of default; 

(ii) did not open for business before acquiring the 

deposits of such savings association; and 

(iii) was a savings Association Insurance Fund 

member before the date of enactment of this Act; and 

(D) an insured bank that— 

(i) resulted from a savings association before December 19, 1991, in accordance with section 5(d)(2)(G) 

of the Federal Deposit Insurance Act; and 

(ii) had an increase in its capital in conjunction 

with the conversion in an amount equal to more than 

75 percent of the capital of the institution on the day 

before the date of the conversion. 

SEC. 2703. FINANCIN G CORPORATIO N FUNDING . 

(a) * * * 

(d) [12 U.S.C. 1441 nt] PROHIBITIO N O N DEPOSI T SHIFTING. — 

(1) IN GENERAL.—Effective as of the date of the enactment 

of this Act and ending on the date provided in subsection 

(c)(2)

 1 of this section, the Comptroller of the Currency, the 

Board of Directors of the Federal Deposit Insurance Corpora1

 Paragraph (2) of subsection (c) provides "[subparagraph (A) of section 21(f)(2) of the Federal 

Home Loan Bank Act (as amended by subsection (a)) shall not apply after the earlier of December 31, 1999 or, the date as of which the last savings association ceases to exist''. 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 332 

tion, the Board of Governors of the Federal Reserve System, 

and the Director of the Office of Thrift Supervision shall take 

appropriate actions, including enforcement actions, denial of 

applications, or imposition of entrance and exit fees as if such 

transactions qualified as conversion transactions pursuant to 

section 5(d) of the Federal Deposit Insurance Act, to prevent 

insured depository institutions and depository institution holding companies from facilitating or encouraging the shifting of 

deposits from SAIF-assessable deposits to BIF-assessable deposits (as defined in section 21(k) of the Federal Home Loan 

Bank Act) for the purpose of evading the assessments imposed 

on insured depository institutions with respect to SAIF-assessable deposits under section 7(b) of the Federal Deposit Insurance Act and section 21(f)(2) of the Federal Home Loan Bank 

Act. 

(2) REGULATIONS.—Th e Board of Directors of the Federal 

Deposit Insurance Corporation may issue regulations, including regulations defining terms used in paragraph (1), to prevent the shifting of deposits described in such paragraph. 

(3) RUL E OF CONSTRUCTION.—N o provision of this subsection shall be construed as prohibiting conduct or activity of 

any insured depository institution which— 

(A) is undertaken in the ordinary course of business of 

such depository institution; and 

(B) is not directed towards the depositors of an insured depository institution affiliate (as defined in section 

2(k) of the Bank Holding Company Act of 1956) of such depository institution. 

SEC. 2704. [1 2 U.S.C. 1821 nt ] MERGE R O F BI F AN D SAIF . 

( a ) I N GENERAL. — 

(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. 

(2) DISPOSITIO N OF ASSETS AN D LIABILITIES.—Al l 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.—Th e separate existence of 

the Bank Insurance Fund and the Savings Association Insurance Fund shall cease. 

(b) [Repealed by Pub. L. 106-102, 113 Stat. 1479.] 

(c)1 EFFECTIV E DATE.—Thi s 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. 

1

 Subsection (d) of this section makes conforming and technical amendments primarily to the 

Federal Deposit Insurance Act. Since this section and the amendments made by this section 

never became effective, such subsection is not shown. 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 333 

SEC. 2709. TREASURY STUDY OF COMMO N DEPOSITOR Y INSTITUTIO N 

CHARTER. 

(a) STUDY REQUIRED.—Th e Secretary of the Treasury shall conduct a study of all issues which the secretary considers to be relevant with respect to the development of a common charter for all 

insured depository institutions (as defined in section 3 of the Federal Deposit Insurance Act) and the abolition of separate and distinct charters between banks and savings associations. 

(b) REPORT TO THE CONGRESS.— 

(1) IN GENERAL.—The Secretary of the Treasury shall submit a report to the Congress on or before March 31, 1997, containing the findings and conclusions of the secretary in connection with the study conducted pursuant to subsection (a). 

(2) DETAILED ANALYSIS AND RECOMMENDATIONS.—The report under paragraph (1) shall include— 

(A) a detailed analysis of each issue the Secretary considered relevant to the subject of the study; 

(B) recommendations of the secretary with regard to 

the establishment of a common charter for insured depository institutions (as defined in section 3 of the Federal Deposit Insurance Act); and 

(C) such recommendations for legislative and administrative action as the secretary determines to be appropriate to implement the recommendations of the secretary 

under subparagraph (B). 

SEC. 2710. [12 U.S.C. 1821 nt] DEFINITIONS. 

For purposes of this subtitle, the following definitions shall 

apply: 

(1) BAN K INSURANCE FUND.—Th e term "Bank Insurance 

Fund'' means the fund established pursuant to section 

(11)(a)(5)(A) of the Federal Deposit Insurance Act, as that section existed on the day before the date of enactment of this 

Act. 

(2) BIF MEMBER, SAIF MEMBER.—Th e terms "Bank Insurance Fund member'' and "Savings Association Insurance Fund 

member'' have the same meanings as in section 7(l) of the Federal Deposit Insurance Act. 

(3) VARIOUS BANKING TERMS.—Th e terms "bank", "Board of 

Directors'', "Corporation", "deposit", "insured depository institution'', "Federal savings association", "savings association", 

"State savings bank'', and "State depository institution" have 

the same meanings as in section 3 of the Federal Deposit Insurance Act. 

(4) DEPOSIT INSURANCE FUND.—Th e term "Deposit Insurance Fund'' means the fund established under section 11(a)(4) 

of the Federal Deposit Insurance Act (as amended by section 

2704(d) of this subtitle). 

(5) DEPOSITORY INSTITUTION HOLDING COMPANY.—The term 

"depository institution holding company'' has the same meaning as in section 3 of the Federal Deposit Insurance Act. 

(6) DESIGNATED RESERVE RATIO.—Th e term "designated reserve ratio'' has the same meaning as in section 7(b)(2)(A)(iv) 

of the Federal Deposit Insurance Act. 
Sec. 2101 ECONOMIC GROWTH & REGULATORY PAPERWORK REDUCTION ACT 334 

(7) sAIF.—The term ''savings Association Insurance Fund'' 

means the fund established pursuant to section 11(a)(6)(A) of 

the Federal Deposit Insurance Act, as that section existed on 

the day before the date of enactment of this Act. 

(8) SAIF-ASSESSABLE DEPOSIT.—The term ''SAIF-assessable 

deposit''— 

(A) means a deposit that is subject to assessment for 

purposes of the savings Association Insurance Fund under 

the Federal Deposit Insurance Act (including a deposit 

that is treated as insured by the savings Association Insurance Fund under section 5(d)(3) of the Federal Deposit 

Insurance Act); and 

(B) includes any deposit described in subparagraph (A) 

which is assumed after March 31, 1995, if the insured depository institution, the deposits of which are assumed, is 

not an insured depository institution when the special assessment is imposed under section 2702(a). 

SEC. 2711. [26 U.S.C. 162 nt] DEDUCTIO N FOR SPECIAL ASSESSMENTS. 

For purposes of subtitle A of the Internal Revenue Code of 

1986— 

(1) the amount allowed as a deduction under section 162 

of such Code for a taxable year shall include any amount paid 

during such year by reason of an assessment under section 

2702 of this subtitle, and 

(2) section 172(f) of such Code shall not apply to any deduction described in paragraph (1). 
EXPEDITED FUNDS AVAILABILITY ACT 

3 35 

EXPEDITED FUNDS AVAILABILITY ACT1 

TITLE VI—EXPEDITE D FUND S 

AVAILABILITY 

SEC. 601. [12 U.S.C. 4001 nt.] SHORT TITLE. 

This title may be cited as the ''Expedited Funds Availability 

Act''. 

SEC. 602. [12 U.S.C. 4001] DEFINITIONS. 

For purposes of this title— 

(1) ACCOUNT.—The term ''account'' means a demand deposit account or other similar transaction account at a depository institution. 

(2) BOARD.—The term ''Board'' means the Board of Governors of the Federal Reserve System. 

(3) BUSINESS DAY.—The term ''business day'' means any 

day other than a Saturday, Sunday, or legal holiday. 

(4) CASH.—The term ''cash'' means United States coins and 

currency, including Federal Reserve notes. 

(5) CASHIER'S CHECK.—The term ''cashier's check'' means 

any check which— 

(A) is drawn on a depository institution; 

(B) is signed by an officer or employee of such depository institution; and 

(C) is a direct obligation of such depository institution. 

(6) CERTIFIED CHECK.—The term ''certified check'' means 

any check with respect to which a depository institution certifies that— 

(A) the signature on the check is genuine; and 

(B) such depository institution has set aside funds 

which— 

(i) are equal to the amount of the check; and 

(ii) will be used only to pay such check. 

(7) CHECK.—The term ''check'' means any negotiable demand draft drawn on or payable through an office of a depository institution located in the United States. Such term does 

not include noncash items. 

(8) CHECK CLEARINGHOUSE ASSOCIATION.—The term ''check 

clearinghouse association'' means any arrangement by which 

participant depository institutions exchange deposited checks 

on a local basis, including an entire metropolitan area, without 

*The Expedited Funds Availability Act was enacted as title VI of the Competitive Equality 

Banking Act of 1987. 

337 
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 338 

using the check processing facilities of the Federal Reserve 

system. 

(9) CHECK PROCESSING REGION.—The term ''check processing region'' means the geographical area served by a Federal Reserve bank check processing center or such larger area 

as the Board may prescribe by regulations. 

(10) CONSUMER ACCOUNT.—The term ''consumer account'' 

means any account used primarily for personal, family, or 

household purposes. 

(11) DEPOSITORY CHECK.—The term ''depository check'' 

means any cashier's check, certified check, teller's check, and 

any other functionally equivalent instrument as determined by 

the Board. 

(12) DEPOSITORY INSTITUTION.—The term ''depository institution'' has the meaning given such term in clauses (i) through 

(vi) of section 19(b)(1)(A) of the Federal Reserve Act. Such term 

also includes an office, branch, or agency of a foreign bank located in the United States. 

(13) LOCAL ORIGINATING DEPOSITORY INSTITUTION.—The 

term ''local originating depository institution'' means any originating depository institution which is located in the same 

check processing region as the receiving depository institution. 

(14) NONCASH ITEM.—The term ''noncash item'' means— 

(A) a check or other demand item to which a passbook, 

certificate, or other document is attached; 

(B) a check or other demand item which is accompanied by special instructions, such as a request for special 

advise of payment or dishonor; or 

(C) any similar item which is otherwise classified as a 

noncash item in regulations of the Board. 

(15) NONLOCAL ORIGINATING DEPOSITORY INSTITUTION.— 

The term ''nonlocal originating depository institution'' means 

any originating depository institution which is not a local 

depository institution. 

(16) PROPRIETARY ATM.—The term ''proprietary ATM'' 

means an automated teller machine which is— 

(A)located— 

(i) at or adjacent to a branch of the receiving 

depository institution; or 

(ii) in close proximity, as defined by the Board, to 

a branch of the receiving depository institution; or 

(B) owned by, operated exclusively for, or operated by 

the receiving depository institution. 

(17) ORIGINATING DEPOSITORY INSTITUTION.—The term 

''originating depository institution'' means the branch of a 

depository institution on which a check is drawn. 

(18) NONPROPRIETARY ATM.—The term ''nonproprietary 

ATM'' means an automated teller machine which is not a proprietary ATM. 

(19) PARTICIPANT.—The term ''participant'' means a depository institution which— 

(A) is located in the same geographic area as that 

served by a check clearinghouse association; and 
339 EXPEDITED FUNDS AVAILABILITY ACT Sec. 603 

(B) exchanges checks through the check clearinghouse 

association, either directly or through an intermediary. 

(20) RECEIVING DEPOSITORY INSTITUTION.—The term "receiving depository institution" means the branch of a depository institution or the proprietary ATM in which a check is 

first deposited. 

(21) STATE.—The term "State" means any State, the District of Columbia, the Commonwealth of Puerto Rico, or the 

Virgin Islands. 

(22) TELLER'S CHECK.—The term "teller's check" means 

any check issued by a depository institution and drawn on another depository institution. 

(23) UNITE D STATES.—The term "United States'' means the 

several States, the District of Columbia, the Commonwealth of 

Puerto Rico, and the Virgin islands. 

(24) UNI T OF GENERAL LOCAL GOVERNMENT.—The term 

"unit of general local government'' means any city, county, 

town, township, parish, village, or other general purpose political subdivision of a State. 

(25) WIR E TRANSFER.—The term ''wire transfer'' has such 

meaning as the Board shall prescribe by regulations. 

SEC. 603. [12 U.S.C. 4002] EXPEDITE D FUND S AVAILABILITY SCHEDULES. 

(a) NEXT BUSINESS DA Y AVAILABILITY FOR CERTAIN DEPOSITS.— 

(1) CASH DEPOSITS; WIRE TRANSFERS.—Except as provided 

in subsection (e) and in section 604, in any case in which— 

(A) any cash is deposited in an account at a receiving 

depository institution staffed by individuals employed by 

such institution, or 

(B) funds are received by a depository institution by 

wire transfer for deposit in an account at such institution, 

such cash or funds shall be available for withdrawal not later 

than the business day after the business day on which such 

cash is deposited or such funds are received for deposit. 

(2) GOVERNMENT CHECKS; CERTAIN OTHER CHECKS.—Funds 

deposited in an account at a depository institution by check 

shall be available for withdrawal not later than the business 

day after the business day on which such funds are deposited 

in the case of— 

(A) a check which— 

(i) is drawn on the Treasury of the United States; 

and 

(ii) is endorsed only by the person to whom it was 

issued. 

(B) a check which— 

(i) is drawn by a State; 

(ii) is deposited in a receiving depository institution which is located in such State and is staffed by 

individuals employed by such institution; 

(iii) is deposited with a special deposit slip which 

indicates it is a check drawn by a State; and 

(iv) is endorsed only by the person to whom it was 

issued; 
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 3 40 

(C) a check which— 

(i) is drawn by a unit of general local government; 

(ii) is deposited in a receiving depository institution which is located in the same state as such unit 

of general local government and is staffed by individuals employed by such institution; 

(iii) is deposited with a special deposit slip which 

indicates it is a check drawn by a unit of general local 

government; and 

(iv) is endorsed only by the person to whom it was 

issued; 

(D) the first $100 deposited by check or checks on any 

one business day; 

(E) a check deposited in a branch of a depository institution and drawn on the same or another branch of the 

same depository institution if both such branches are located in the same State or the same check processing region; 

(F) a cashier's check, certified check, teller's check, or 

depository check which— 

(i) is deposited in a receiving depository institution which is staffed by individuals employed by such 

institution; 

(ii) is deposited with a special deposit slip which 

indicates it is a cashier's check, certified check, teller's 

check, or depository check, as the case may be; and 

(iii) is endorsed only by the person to whom it was 

issued. 

(b) PERMANEN T SCHEDULE.— 

(1) AVAILABILITY OF FUNDS DEPOSITED BY LOCAL CHECKS.— 

subject to paragraph (3) of this subsection, subsections (a)(2), 

(d), and (e) of this section, and section 604, not more than 1 

business day shall intervene between the business day on 

which funds are deposited in an account at a depository institution by a check drawn on a local originating depository institution and the business day on which the funds involved are 

available for withdrawal. 

(2) AVAILABILITY OF FUNDS DEPOSITED BY NONLOCAL 

CHECKS.—Subject to paragraph (3) of this subsection, subsections (a)(2), (d), and (e) of this section, and section 604, not 

more than 4 business days shall intervene between the business day on which funds are deposited in an account at a 

depository institution by a check drawn on a nonlocal originating depository institution and the business day on which 

such funds are available for withdrawal. 

(3) TIM E PERIOD ADJUSTMENTS FOR CASH WITHDRAWAL OF 

CERTAIN CHECKS.— 

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

(B), funds deposited in an account in a depository institution by check (other than a check described in subsection 

(a)(2)) shall be available for cash withdrawal not later 

than the business day after the business day on which 

such funds otherwise are available under paragraph (1) or 

(2). 
341 EXPEDITED FUNDS AVAILABILITY ACT Sec. 603 

(B) 5 P.M. CASH AVAILABILITY.—Not more than $400 (or 

the maximum amount allowable in the case of a withdrawal from an automated teller machine but not more 

than $400) of funds deposited by one or more checks to 

which this paragraph applies shall be available for cash 

withdrawal not later than 5 o'clock post meridian of the 

business day on which such funds are available under 

paragraph (1) or (2). If funds deposited by checks described 

in both paragraph (1) and paragraph (2) become available 

for cash withdrawal under this paragraph on the same 

business day, the limitation contained in this subparagraph shall apply to the aggregate amount of such funds. 

(C) $100 AVAILABILITY.—Any amount available for 

withdrawal under this paragraph shall be in addition to 

the amount available under subsection (a)(2)(D). 

(4) APPLICABILITY.—This subsection shall apply with respect to funds deposited by check in an account at a depository 

institution on or after September 1, 1990, except that the 

Board may, by regulation, make this subsection or any part of 

this subsection applicable earlier than September 1, 1990. 

(c) TEMPORARY SCHEDULE.— 

(1) AVAILABILITY OF LOCAL CHECKS.— 

(A) IN GENERAL.—Subject to subparagraph (B) of this 

paragraph, subsections (a)(2), (d), and (e) of this section, 

and section 604, not more than 2 business days shall intervene between the business day on which funds are deposited in an account at a depository institution by a check 

drawn on a local originating depository institution and the 

business day on which such funds are available for withdrawal. 

(B) TIM E PERIOD ADJUSTMENT FOR CASH WITHDRAWAL 

OF CERTAIN CHECKS.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

funds deposited in an account in a depository institution by check drawn on a local depository institution 

that is not a participant in the same check clearinghouse association as the receiving depository institution (other than a check described in subsection (a)(2)) 

shall be available for cash withdrawal not later than 

the business day after the business day on which such 

funds otherwise are available under subparagraph (A). 

(ii) 5 P.M. CASH AVAILABILITY.—Not more than 

$400 (or the maximum amount allowable in the case 

of a withdrawal from an automated teller machine but 

not more than $400) of funds deposited by one or more 

checks to which this subparagraph applies shall be 

available for cash withdrawal not later than 5 o'clock 

post meridian of the business day on which such funds 

are available under subparagraph (A). 

(iii) $100 AVAILABILITY.—Any amount available for 

withdrawal under this subparagraph shall be in addition 

to the amount available under subsection (a)(2)(D). 

(2) AVAILABILITY OF NONLOCAL CHECKS.—Subject to subsections (a)(2), (d), and (e) of this section and section 604, not 
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 3 42 

more than 6 business days shall intervene between the business day on which funds are deposited in an account at a 

depository institution by a check drawn on a nonlocal originating depository institution and the business day on which 

such funds are available for withdrawal. 

(3) APPLICABILITY.—This subsection shall apply with respect to funds deposited by check in an account at a depository 

institution after August 31, 1988, and before September 1, 

1990, except as may be otherwise provided under subsection 

(b)(4). 

(d) TIM E PERIOD ADJUSTMENTS.— 

(1) REDUCTION GENERALLY.—Notwithstanding any other 

provision of law, the Board shall, by regulation, reduce the 

time periods established under subsections (b), (c), and (e) to 

as short a time as possible and equal to the period of time 

achievable under the improved check clearing system for a receiving depository institution to reasonably expect to learn of 

the nonpayment of most items for each category of checks. 

(2) EXTENSION FOR CERTAIN DEPOSITS I N NONCONTIGUOUS 

STATES OR TERRITORIES.—Notwithstanding any other provision 

of law, any time period established under subsection (b), (c), or 

(e) shall be extended by 1 business day in the case of any deposit which is both— 

(A) deposited in an account at a depository institution 

which is located in Alaska, Hawaii, Puerto Rico, or the Virgin islands; and 

(B) deposited by a check drawn on an originating 

depository institution which is not located in the same 

state, commonwealth, or territory as the receiving depository institution. 

(e) DEPOSITS AT A N ATM.— 

(1) NONPROPRIETARY ATM.— 

(A) IN GENERAL.—Not more than 4 business days shall 

intervene between the business day a deposit described in 

subparagraph (B) is made at a nonproprietary automated 

teller machine (for deposit in an account at a depository 

institution) and the business day on which funds from 

such deposit are available for withdrawal. 

(B) DEPOSITS DESCRIBED I N THIS PARAGRAPH1. —A deposit is described in this subparagraph if it is— 

(i) a cash deposit; 

(ii) a deposit made by a check described in subsection (a)(2); 

(iii) a deposit made by a check drawn on a local 

originating depository institution (other than a check 

described in subsection (a)(2)); or 

(iv) a deposit made by a check drawn on a 

nonlocal originating depository institution (other than 

a check described in subsection (a)(2)). 

(2) PROPRIETARY ATM—TEMPORARY AND PERMANENT SCHEDULES.—The provisions of subsections (a), (b), and (c) shall 

apply with respect to any funds deposited at a proprietary 

1

 So in original. Probably should be "SUBPARAGRAPH". 
343 EXPEDITED FUNDS AVAILABILITY ACT Sec. 603 

auto- mated teller machine for deposit in an account at a 

depository institution. 

(3) STUD Y AND REPORT ON ATM'S.—The Board shall, either 

directly or through the Consumer Advisory Council, establish 

and maintain a dialogue with depository institutions and their 

suppliers on the computer software and hardware available for 

use by automated teller machines, and shall, not later than 

September 1 of each of the first 3 calendar years beginning 

after the date of the enactment of this title, report to the Congress regarding such software and hardware and regarding the 

potential for improving the processing of automated teller machine deposits. 

(f) CHEC K RETURN ; NOTIC E OF NONPAYMENT.—No provision of 

this section shall be construed as requiring that, with respect to all 

checks deposited in a receiving depository institution— 

(1) such checks be physically returned to such depository 

institution; or 

(2) any notice of nonpayment of any such check be given 

to such depository institution within the times set forth in subsection (a), (b), (c), or (e) or in the regulations issued under any 

such subsection. 

SEC. 604. [12 U.S.C. 4003] SAFEGUARD EXCEPTIONS. 

(a) NEW ACCOUNTS.—Notwithstanding section 603, in the case 

of any account established at a depository institution by a new depositor, the following provisions shall apply with respect to any deposit in such account during the 30-day period (or such shorter period as the Board may establish) beginning on the date such account is established— 

( 1 ) NEX T BUSINESS DA Y AVAILABILIT Y OF CAS H AN D CERTAI N 

ITEMS.—Except as provided in paragraph (3), in the case of— 

(A) any cash deposited in such account; 

(B) any funds received by such depository institution 

by wire transfer for deposit in such account; 

(C) any funds deposited in such account by cashier's 

check, certified check, teller's check, depository check, or 

traveler's check; and 

(D) any funds deposited by a government check which 

is described in subparagraph (A), (B), or (C) of section 

603(a)(2), 

such cash or funds shall be available for withdrawal on the 

business day after the business day on which such cash or 

funds are deposited or, in the case of a wire transfer, on the 

business day after the business day on which such funds are 

received for deposit. 

(2) AVAILABILITY OF OTHER ITEMS.—In the case of any 

funds deposited in such account by a check (other than a check 

described in subparagraph (C) or (D) of paragraph (1)), the 

availability for withdrawal of such funds shall not be subject 

to the provisions of section 603(b), 603(c), or paragraphs1 (1) 

of section 603(e). 

1

 Section 227(b)(2) of the Federal Deposit Insurance Corporation Improvement Act of 1991 

amended subsection (a)(2) by striking ''and (2)''. An amendment probably should have been made 

striking out ''paragraphs'' and inserting ''paragraph''. 
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 3 44 

(3) LIMITATION RELATING TO CERTAIN CHECKS I N EXCESS OF 

$5,000.—In the case of funds deposited in such account during 

such period by checks described in subparagraph (C) or (D) of 

paragraph (1) the aggregate amount of which exceeds $5,000— 

(A) paragraph (1) shall apply only with respect to the 

first $5,000 of such aggregate amount; and 

(B) not more than 8 business days shall intervene between the business day on which any such funds are 

deposited and the business day on which such excess 

amount shall be available for withdrawal. 

(b) LARGE OR REDEPOSITED CHECKS; REPEATED OVERDRAFTS.— 

The Board may, by regulation, establish reasonable exceptions to 

any time limitation established under subsection (a)(2), (b), (c), or 

(e) of section 603 for— 

(1) the amount of deposits by one or more checks that exceeds the amount of $5,000 in any one day; 

(2) checks that have been returned unpaid and redeposited; and 

(3) deposit accounts which have been overdrawn repeatedly. 

(c) REASONABLE CAUSE EXCEPTION.— 

(1) I N GENERAL.—In accordance with regulations which the 

Board shall prescribe, subsections (a)(2), (b), (c), and (e) of section 603 shall not apply with respect to any check deposited in 

an account at a depository institution if the receiving depository institution has reasonable cause to believe that the check 

is uncollectible from the originating depository institution. For 

purposes of the preceding sentence, reasonable cause to believe 

requires the existence of facts which would cause a wellgrounded belief in the mind of a reasonable person. such 

reasons shall be included in the notice required under subsection (f). 

(2) BASIS FOR DETERMINATION.—No determination under 

this subsection may be based on any class of checks or persons. 

(3) OVERDRAFT FEES.—If the receiving depository institution determines that a check deposited in an account is a check 

described in paragraph (1), the receiving depository institution 

shall not assess any fee for any subsequent overdraft with respect to such account, if— 

(A) the depositor was not provided with the written 

notice required under subsection (f) (with respect to such 

determination) at the time the deposit was made; 

(B) the overdraft would not have occurred but for the 

fact that the funds so deposited are not available; and 

(C) the amount of the check is collected from the originating depository institution. 

(4) COMPLIANCE.—Each agency referred to in section 

610(a) shall monitor compliance with the requirements of this 

subsection in each regular examination of a depository institution and shall describe in each report to the Congress the extent to which this subsection is being complied with. For the 

purpose of this paragraph, each depository institution shall retain a record of each notice provided under subsection (f) as a 

result of the application of this subsection. 
345 EXPEDITED FUNDS AVAILABILITY ACT Sec. 603 

(d) EMERGENCY CONDITIONS.—Subjec t to such regulations as 

the Board may prescribe, subsections (a)(2), (b), (c), and (e) of section 603 shall not apply to funds deposited by check in any receiving depository institution in the case of— 

(1) any interruption of communication facilities; 

(2) suspension of payments by another depository institution; 

(3) any war; or 

(4) any emergency condition beyond the control of the receiving depository institution, 

if the receiving depository institution exercises such diligence as 

the circumstances require. 

(e) PREVENTION OF FRAUD LOSSES.— 

(1) IN GENERAL.—The Board may, by regulation or order, 

suspend the applicability of this title, or any portion thereof, 

to any classification of checks if the Board determines that— 

(A) depository institutions are experiencing an unacceptable level of losses due to check-related fraud, and 

(B) suspension of this title, or such portion of this title, 

with regard to the classification of checks involved in such 

fraud is necessary to diminish the volume of such fraud. 

(2) SUNSET PROVISION.—No regulation prescribed or order 

issued under paragraph (1) shall remain in effect for more 

than 45 days (excluding Saturdays, Sundays, legal holidays, or 

any day either House of Congress is not in session). 

(3) REPORT TO CONGRESS.— 

(A) NOTICE OF EACH SUSPENSION.—Within 10 days of 

prescribing any regulation or issuing any order under 

paragraph (1), the Board shall transmit a report of such 

action to the Committee on Banking, Finance and Urban 

Affairs of the House of Representatives and the Committee 

on Banking, Housing, and Urban Affairs of the Senate. 

(B) CONTENTS OF REPORT.—Each report under subparagraph (A) shall contain— 

(i) the specific reason for prescribing the regulation or issuing the order; 

(ii) evidence considered by the Board in making 

the determination under paragraph (1) with respect to 

such regulation or order; and 

(iii) specific examples of the check-related fraud 

giving rise to such regulation or order. 

(f) NOTICE OF EXCEPTION; AVAILABILITY WITHI N REASONABLE 

TIME. — 

(1) I N GENERAL.—If any exception contained in this section 

(other than subsection (a)) applies with respect to funds deposited in an account at a depository institution— 

(A) the depository institution shall provide notice in 

the manner provided in paragraph (2) of— 

(i) the time period within which the funds shall be 

made available for withdrawal; and 

(ii) the reason the exception was invoked; and 

(B) except where other time periods are specifically 

provided in this title, the availability of the funds deposited shall be governed by the policy of the receiving deposi-
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 346 

tory institution, but shall not exceed a reasonable period 

of time as determined by the Board. 

(2) TIM E FOR NOTICE.—The notice required under paragraph (1)(A) with respect to a deposit to which an exception 

contained in this section applies shall be made by the time provided in the following subparagraphs: 

(A) In the case of a deposit made in person by the depositor at the receiving depository institution, the depository institution shall immediately provide such notice in 

writing to the depositor. 

(B) In the case of any other deposit (other than a deposit described in subparagraph (C)), the receiving depository institution shall mail the notice to the depositor not 

later than the close of the next business day following the 

business day on which the deposit is received. 

(C) In the case of a deposit to which subsection (d) or 

(e) applies, notice shall be provided by the depository institution in accordance with regulations of the Board. 

(D) In the case of a deposit to which subsection (b)(1) 

or (b)(2) applies, the depository institution may, for nonconsumer accounts and other classes of accounts, as defined by the Board, that generally have a large number of 

such deposits, provide notice at or before the time it first 

determines that the subsection applies. 

(E) In the case of a deposit to which subsection (b)(3) 

applies, the depository institution may, subject to regulations of the Board, provide notice at the beginning of each 

time period it determines that the subsection applies. in 

addition to the requirements contained in paragraph 

(1)(A), the notice shall specify the time period for which 

the exception will apply. 

(3) SUBSEQUENT DETERMINATIONS.—If the facts upon which 

the determination of the applicability of an exception contained 

in subsection (b) or (c) to any deposit only become known to the 

receiving depository institution after the time notice is required under paragraph (2) with respect to such deposit, the 

depository institution shall mail such notice to the depositor as 

soon as practicable, but not later than the first business day 

following the day such facts become known to the depository 

institution. 

SEC. 605. [12 U.S.C. 4004] DISCLOSURE OF FUND S AVAILABILITY 

POLICIES. 

(a) NOTICE FOR NE W ACCOUNTS.—Before an account is opened 

at a depository institution, the depository institution shall provide 

written notice to the potential customer of the specific policy of 

such depository institution with respect to when a customer may 

withdraw funds deposited into the customer's account. 

(b) PREPRINTED DEPOSIT SLIPS.—All preprinted deposit slips 

that a depository institution furnishes to its customers shall contain a summary notice, as prescribed by the Board in regulations, 

that deposited items may not be available for immediate withdrawal. 

(c) MAILIN G OF NOTICE.— 
347 EXPEDITED FUNDS AVAILABILITY ACT Sec. 603 

(1) FIRST MAILING AFTER ENACTMENT.—I n the first regularly scheduled mailing to customers occurring after the effective date of this section, but not more than 60 days after such 

effective date, each depository institution shall send a written 

notice containing the specific policy of such depository institution with respect to when a customer may withdraw funds 

deposited into such customer's account, unless the depository 

institution has provided a disclosure which meets the requirements of this section before such effective date. 

(2) SUBSEQUENT CHANGES.—A depository institution shall 

send a written notice to customers at least 30 days before implementing any change to the depository institution's policy 

with respect to when customers may withdraw funds deposited 

into consumer accounts, except that any change which expedites the availability of such funds shall be disclosed not later 

than 30 days after implementation. 

(3) UPO N REQUEST.—Upon the request of any person, a 

depository institution shall provide or send such person a written notice containing the specific policy of such depository 

institution with respect to when a customer may withdraw 

funds deposited into a customer's account. 

(d) POSTING OF NOTICE.— 

(1) SPECIFIC NOTICE AT MANNED TELLER STATIONS.—Each 

depository institution shall post, in a conspicuous place in each 

location where deposits are accepted by individuals employed 

by such depository institution, a specific notice which describes 

the time periods applicable to the availability of funds deposited in a consumer account. 

(2) GENERAL NOTICE AT AUTOMATED TELLER MACHINES.—I n 

the case of any automated teller machine at which any funds 

are received for deposit in an account at any depository institution, the Board shall prescribe, by regulations, that the owner 

or operator of such automated teller machine shall post or provide a general notice that funds deposited in such machine 

may not be immediately available for withdrawal. 

(e) NOTICE OF INTEREST PAYMENT POLICY.—If a depository 

institution described in section 606(b) begins the accrual of interest 

or dividends at a later date than the date described in section 

606(a) with respect to all funds, including cash, deposited in an interest-bearing account at such depository institution, any notice required to be provided under subsections (a) and (c) shall contain a 

written description of the time at which such depository institution 

begins to accrue interest or dividends on such funds. 

(f) MODEL DISCLOSURE FORMS.— 

(1) PREPARED BY BOARD.—The Board shall publish model 

disclosure forms and clauses for common transactions to facilitate compliance with the disclosure requirements of this section and to aid customers by utilizing readily understandable language. 

(2) USE OF FORMS TO ACHIEVE COMPLIANCE.—A depository 

institution shall be deemed to be in compliance with the 

requirements of this section if such institution— 

(A) uses any appropriate model form or clause as published by the Board, or 
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 348 

(B) uses any such model form or clause and changes 

such form or clause by— 

(i) deleting any information which is not required 

by this title; or 

(ii) rearranging the format. 

(3) VOLUNTARY USE.—Nothing in this title requires the use 

of any such model form or clause prescribed by the Board 

under this subsection. 

(4) NOTICE AND COMMENT.—Model disclosure forms and 

clauses shall be adopted by the Board only after notice duly 

given in the Federal Register and an opportunity for public 

comment in accordance with section 553 of title 5, united 

States Code. 

SEC. 606. [12 U.S.C. 4005] PAYMEN T OF INTEREST. 

(a) IN GENERAL.—Except as provided in subsection (b) or (c) 

and notwithstanding any other provision of law, interest shall accrue on funds deposited in an interest-bearing account at a depository institution beginning not later than the business day on which 

the depository institution receives provisional credit for such funds. 

(b) SPECIAL RULE FOR CREDIT UNIONS.—Subsection (a) shall 

not apply to an account at a depository institution described in 

section 19(b)(1)(A)(iv) of the Federal Reserve Act if the depository 

institution— 

(1) begins the accrual of interest or dividends at a later 

date than the date described in subsection (a) with respect to 

all funds, including cash, deposited in such account; and 

(2) provides notice of the interest payment policy in the 

manner required under section 605(e). 

(c) EXCEPTION FOR CHECKS RETURNED UNPAID.—No provision 

of this title shall be construed as requiring the payment of interest 

or dividends on funds deposited by a check which is returned unpaid. 

SEC. 607. [12 U.S.C. 4006] MISCELLANEOU S PROVISIONS. 

(a) AFTER-HOURS DEPOSITS.—For purposes of this title, any deposit which is made on a Saturday, Sunday, legal holiday, or after 

the close of business on any business day shall be deemed to have 

been made on the next business day. 

(b) AVAILABILITY AT START OF BUSINESS DAY.—Excep t as provided in subsections (b)(3) and (c)(1)(B) of section 603, if any provision of this title requires that funds be available for withdrawal on 

any business day, such funds shall be available for withdrawal at 

the start of such business day. 

(c) EFFECT ON POLICIES OF DEPOSITORY INSTITUTIONS.—No provision of this title shall be construed as— 

(1) prohibiting a depository institution from making funds 

available for withdrawal in a shorter period of time than the 

period of time required by this title; or 

(2) affecting a depository institution's right— 

(A) to accept or reject a check for deposit; 

(B) to revoke any provisional settlement made by the 

depository institution with respect to a check accepted by 

such institution for deposit; 
349 EXPEDITED FUNDS AVAILABILITY ACT Sec. 603 

(C) to charge back the depositor's account for the 

amount of such check; or 

(D) to claim a refund of such provisional credit. 

(d) PROHIBITION ON FREEZING CERTAIN FUNDS I N A N ACCOUNT.—In any case in which a check is deposited in an account 

at a depository institution and the funds represented by such check 

are not yet available for withdrawal pursuant to this title, the 

depository institution may not freeze any other funds in such account (which are otherwise available for withdrawal pursuant to 

this title) solely because the funds so deposited are not yet available for withdrawal. 

(e) EMPLOYEE TRAINING ON AND COMPLIANCE WIT H THE 

REQUIREMENTS OF THIS TITLE.—Eac h depository institution shall— 

(1) take such actions as may be necessary fully to inform 

each employee (who performs duties subject to the requirements of this title) of the requirements of this title; and 

(2) establish and maintain procedures reasonably designed to assure and monitor employee compliance with 

such requirements. 

SEC. 608. [12 U.S.C. 4007] EFFEC T O N STATE LAW. 

(a) IN GENERAL.—Any law or regulation of any State in effect 

on September 1, 1989, which requires that funds deposited or received for deposit in an account at a depository institution chartered by such state be made available for withdrawal in a shorter 

period of time than the period of time provided in this title or in 

regulations prescribed by the Board under this title (as in effect on 

september 1, 1989) shall— 

(1) supersede the provisions of this title and any regulations by the Board to the extent such provisions relate to the 

time by which funds deposited or received for deposit in an account shall be available for withdrawal; and 

(2) apply to all federally insured depository institutions 

located within such state. 

(b) OVERRIDE OF CERTAIN STATE LAWS.—Excep t as provided in 

subsection (a), this title and regulations prescribed under this title 

shall supersede any provision of the law of any state, including the 

Uniform Commercial Code as in effect in such State, which is 

inconsistent with this title or such regulations. 

SEC. 609. [12 U.S.C. 4008] REGULATION S AN D REPORTS BY BOARD. 

(a) IN GENERAL.—After notice and opportunity to submit comment in accordance with section 553(c) of title 5, united states 

Code, the Board shall prescribe regulations— 

(1) to carry out the provisions of this title; 

(2) to prevent the circumvention or evasion of such provisions; and 

(3) to facilitate compliance with such provisions. 

(b) REGULATIONS RELATING TO IMPROVEMENT OF CHECK PROCESSING SYSTEM.—I n order to improve the check processing system, 

the Board shall consider (among other proposals) requiring, by regulation, that— 

(1) depository institutions be charged based upon notification that a check or similar instrument will be presented for 

payment; 
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 3 50 

(2) the Federal Reserve banks and depository institutions 

provide for check truncation; 

(3) depository institutions be provided incentives to return 

items promptly to the depository institution of first deposit; 

(4) the Federal Reserve banks and depository institutions 

take such actions as are necessary to automate the process of 

returning unpaid checks, 

(5) each depository institution and Federal Reserve bank— 

(A) place its endorsement, and other notations specified in regulations of the Board, on checks in the positions 

specified in such regulations; and 

(B) take such actions as are necessary to— 

(i) automate the process of reading endorsements; 

and 

(ii) eliminate unnecessary endorsements; 

(6) within one business day after an originating depository 

institution is presented a check (for more than such minimum 

amount as the Board may prescribe)— 

(A) such originating depository institution determine 

whether it will pay such check; and 

(B) if such originating depository institution determines that it will not pay such check, such originating 

depository institution directly notify the receiving depository institution of such determination; 

(7) regardless of where a check is cleared initially, all returned checks be eligible to be returned through the Federal 

Reserve system; 

(8) Federal Reserve banks and depository institutions participate in the development and implementation of an electronic clearinghouse process to the extent the Board determines, pursuant to the study under subsection (f), that such a 

process is feasible; and 

(9) originating depository institutions be permitted to return unpaid checks directly to, and obtain reimbursement for 

such checks directly from, the receiving depository institution. 

(c) REGULATORY RESPONSIBILITY OF BOARD FOR PAYMENT SYSTEM. — 

(1) RESPONSIBILITY FOR PAYMENT SYSTEM.—In order to 

carry out the provisions of this title, the Board of Governors of 

the Federal Reserve system shall have the responsibility to 

regulate— 

(A) any aspect of the payment system, including the 

receipt, payment, collection, or clearing of checks; and 

(B) any related function of the payment system with 

respect to checks. 

(2) REGULATIONS.—The Board shall prescribe such regulations as it may determine to be appropriate to carry out its 

responsibility under paragraph (1). 

(d) REPORTS.— 

(1) IMPLEMENTATION PROGRESS REPORTS.— 

(A) REQUIRED REPORTS.—The Board shall transmit a 

report to both Houses of the Congress not later than 18, 

30, and 48 months after the date of the enactment of this 

title. 
351 EXPEDITED FUNDS AVAILABILITY ACT Sec. 603 

(B) CONTENTS OF REPORT.—Each such report shall 

describe— 

(i) the actions taken and progress made by the 

Board to implement the schedules established in section 603, and 

(ii) the impact of this title on consumers and 

depository institutions. 

(2) EVALUATION OF TEMPORARY SCHEDULE REPORT.— 

(A) REPORT REQUIRED.—The Board shall transmit a report to both Houses of the Congress not later than 2 years 

after the date of the enactment of this title regarding the 

effects the temporary schedule established under section 

603(c) have had on depository institutions and the public. 

(B) CONTENTS OF REPORT.—Such report shall also assess the potential impact the implementation of the schedule established in section 603(b) will have on depository 

institutions and the public, including an estimate of the 

risks to and losses of depository institutions and the benefits to consumers. such report shall also contain such recommendations for legislative or administrative action as 

the Board may determine to be necessary. 

(3) COMPTROLLER GENERAL EVALUATION REPORT.—Not 

later than 6 months after section 603(b) takes effect, the 

Comptroller General of the United States shall transmit a report to the Congress evaluating the implementation and 

administration of this title. 

(e) CONSULTATION.—In prescribing regulations under subsections (a) and (b), the Board shall consult with the Comptroller 

of the Currency, the Board of Directors of the Federal Deposit 

Insurance Corporation, the Federal Home Loan Bank Board, and 

the National Credit Union Administration Board. 

(f) ELECTRONIC CLEARINGHOUSE STUDY.— 

(1) STUDY REQUIRED.—The Board shall study the feasibility of modernizing and accelerating the check payment system through the development of an electronic clearinghouse 

process utilizing existing telecommunications technology to 

avoid the necessity of actual presentment of the paper instrument to a payor institution before such institution is charged 

for the item. 

(2) CONSULTATION; FACTORS TO BE STUDIED.—I n connection 

with the study required under paragraph (1), the Board shall— 

(A) consult with appropriate experts in telecommunications technology; and 

(B) consider all practical and legal impediments to the 

development of an electronic clearinghouse process. 

(3) REPORT REQUIRED.—The Board shall report its conclusions to the Congress within 9 months of the date of the enactment of this title. 

SEC. 610. [12 U.S.C. 4009] ADMINISTRATIVE ENFORCEMENT. 

(a) ADMINISTRATIVE ENFORCEMENT.—Complianc e with the 

requirements imposed under this title, including regulations prescribed by and orders issued by the Board of Governors of the Federal Reserve System under this title, shall be enforced under— 
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 3 52 

(1) section 8 of the Federal Deposit Insurance Act in the 

case of— 

(A) national banks, and Federal branches and Federal 

agencies of foreign banks, by the Office of the Comptroller 

of the Currency; 

(B) member banks of the Federal Reserve System 

(other than national banks), and offices, branches, and 

agencies of foreign banks located in the united states 

(other than Federal branches, Federal agencies, and insured state branches of foreign banks), by the Board of 

Governors of the Federal Reserve System; and 

(C) banks insured by the Federal Deposit Insurance 

Corporation (other than members of the Federal Reserve 

system) and insured state branches of foreign banks, by 

the Board of Directors of the Federal Deposit Insurance 

Corporation; 

(2) section 8 of the Federal Deposit Insurance Act, by the 

Director of the Office of Thrift Supervision in the case of savings associations the deposits of which are insured by the Federal Deposit Insurance Corporation; and 

(3) the Federal Credit Union Act, by the National Credit 

Union Administration Board with respect to any Federal credit 

union or insured credit union. 

The terms used in paragraph (1) that are not defined in this title 

or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them 

in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 

3101). 

(b) ADDITIONAL POWERS.— 

(1) VIOLATION OF THIS TITLE TREATED AS VIOLATION OF 

OTHER ACTS.—For purposes of the exercise by any agency referred to in subsection (a) of this section of its powers under 

any Act referred to in that subsection, a violation of any 

requirement imposed under this title shall be deemed to be a 

violation of a requirement imposed under that Act. 

(2) ENFORCEMENT AUTHORITY UNDER OTHER ACTS.—In 

addition to its powers under any provision of law specifically 

referred to in subsection (a) of this section, each of the agencies 

referred to in such subsection may exercise, for purposes of enforcing compliance with any requirement imposed under this 

title, any other authority conferred on it by law. 

(c) ENFORCEMENT BY THE BOARD.— 

(1) IN GENERAL.—Except to the extent that enforcement of 

the requirements imposed under this title is specifically committed to some other Government agency under subsection (a) 

of this section, the Board of Governors of the Federal Reserve 

system shall enforce such requirements. 

(2) ADDITIONAL REMEDY.—If the Board determines that— 

(A) any depository institution which is not a depository institution described in subsection (a), or 

(B) any other person subject to the authority of the 

Board under this title, including any person subject to the 

authority of the Board under section 605(d)(2) or 609(c), 
353 EXPEDITED FUNDS AVAILABILITY ACT Sec. 603 

has failed to comply with any requirement imposed by this 

title or by the Board under this title, the Board may issue an 

order prohibiting any depository institution, any Federal Reserve bank, or any other person subject to the authority of the 

Board from engaging in any activity or transaction which directly or indirectly involves such noncomplying depository 

institution or person (including any activity or transaction involving the receipt, payment, collection, and clearing of checks 

and any related function of the payment system with respect 

to checks). 

(d) PROCEDURAL RULES.—The authority of the Board to prescribe regulations under this title does not impair the authority of 

any other agency designated in this section to make rules regarding its own procedures in enforcing compliance with requirements 

imposed under this title. 

SEC. 611. [12 U.S.C. 4010] CIVI L LIABILITY. 

(a) CIVIL LIABILITY.—Except as otherwise provided in this section, any depository institution which fails to comply with any 

requirement imposed under this title or any regulation prescribed 

under this title with respect to any person other than another 

depository institution is liable to such person in an amount equal 

to the sum of— 

(1) any actual damage sustained by such person as a result 

of the failure; 

(2)(A) in the case of an individual action, such additional 

amount as the court may allow, except that the liability under 

this subparagraph shall not be less than $100 nor greater than 

$1,000; or 

(B) in the case of a class action, such amount as the court 

may allow, except that— 

(i) as to each member of the class, no minimum recovery shall be applicable; and 

(ii) the total recovery under this subparagraph in any 

class action or series of class actions arising out of the 

same failure to comply by the same depository institution 

shall not be more than the lesser of $500,000 or 1 percent 

of the net worth of the depository institution involved; and 

(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court. 

(b) CLASS ACTION AWARDS.—In determining the amount of any 

award in any class action, the court shall consider, among other 

relevant factors— 

(1) the amount of any actual damages awarded; 

(2) the frequency and persistence of failures of compliance; 

(3) the resources of the depository institution; 

(4) the number of persons adversely affected; and 

(5) the extent to which the failure of compliance was 

intentional. 

(c) BONA FID E ERRORS.— 

(1) GENERAL RULE.—A depository institution may not be 

held liable in any action brought under this section for a violation of this title if the depository institution demonstrates by 
Sec. 602 EXPEDITED FUNDS AVAILABILITY ACT 3 54 

a preponderance of the evidence that the violation was not 

intentional and resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adapted to 

avoid any such error. 

(2) EXAMPLES.—Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and 

printing errors, except that an error of legal judgment with respect to a depository institution's obligation under this title is 

not a bona fide error. 

(d) JURISDICTION.—Any action under this section may be 

brought in any united states district court, or in any other court 

of competent jurisdiction, within one year after the date of the 

occurrence of the violation involved. 

(e) RELIANCE ON BOARD RULINGS.—No provision of this section 

imposing any liability shall apply to any act done or omitted in 

good faith in conformity with any rule, regulation, or interpretation 

thereof by the Board of Governors of the Federal Reserve system, 

notwithstanding the fact that after such act or omission has occurred, such rule, regulation, or interpretation is amended, rescinded, or determined by judicial or other authority to be invalid 

for any reason. 

(f) AUTHORITY T O ESTABLISH RULES REGARDING LOSSES AND 

LIABILITY AMON G DEPOSITORY INSTITUTIONS.—The Board is authorized to impose on or allocate among depository institutions the 

risks of loss and liability in connection with any aspect of the payment system, including the receipt, payment, collection, or clearing 

of checks, and any related function of the payment system with respect to checks. Liability under this subsection shall not exceed the 

amount of the check giving rise to the loss or liability, and, where 

there is bad faith, other damages, if any, suffered as a proximate 

consequence of any act or omission giving rise to the loss or liability. 

[Section 612 of P.L. 100-86 amended another Act] 

SEC. 613. [12 U.S.C. 4001 nt.] EFFECTIVE DATES. 

(a) DATE OF ENACTMENT.—Except as provided in subsection 

(b), this title shall take effect on the date of the enactment of this 

title. 

(b) 1 YEAR AFTER DATE OF ENACTMENT.—Sections 603 , 604 , 

605, 606, 610, and 611 shall take effect on September 1, 1988. 
FEDERAL CREDIT UNION ACT 

3 55 

FEDERAL CREDIT UNION ACT 

(48 Stat. 1216; 12 U.S.C. 1751 et seq.) 

A N ACT To establish a Federal Credit Union System, to establish a further market 

for securities of the United States and to make more available to people of small 

means credit for provident purposes through a national system of cooperative 

credit, thereby helping to stabilize the credit structure of the United States. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SHORT TITLE 

SECTION 1. [12 U.S.C. 1751] This Act may be cited as the 

''Federal Credit Union Act''. 

TITLE I—FEDERAL CREDIT UNIONS 

DEFINITIONS 

SEC. 101. [12 U.S.C. 1752] As used in this Act— 

(1) the term ''Federal credit union'' means a cooperative 

association organized in accordance with the provisions of this 

Act for the purpose of promoting thrift among its members and 

creating a source of credit for provident or productive purposes; 

(2) the term ''Chairman'' means the Chairman of the National Credit Union Administration; 

(3) the term ''Administration'' means the National Credit 

Union Administration; and1 

(4) the term ''Board'' means the National Credit Union 

Administration Board; 

(5) The terms ''member account'' and ''account'' mean a 

share, share certificate, or share draft account account2 of a 

member of a credit union of a type approved by the Board 

which evidences money or its equivalent received or held by a 

credit union in the usual course of business and for which it 

has given or is obligated to give credit to the account of the 

member, and, in the case of a credit union serving predominantly low-income members (as defined by the Board), such 

terms (when referring to the account of a nonmember served 

by such credit union) mean a share, share certificate, or share 

draft account account2 of such nonmember which is of a type 

approved by the Board and evidences money or its equivalent 

received or held by such credit union in the usual course of 

business and for which it has given or is obligated to give 

credit to the account of such nonmember, and such terms mean 

1

 So in original. 

2

 So in original. Probably should be "or share draft account''. 

3 5 7 
Sec. 102 FEDERAL CREDIT UNION ACT 358 

share, share certificate, or share draft account accounts

 1 of 

nonmember credit unions and nonmember units of Federal, 

state, or local governments and political subdivisions thereof 

enumerated in section 207 of this Act, and such terms mean 

custodial accounts established for loans sold in whole or in part 

pursuant to section 107(13): Provided, That for purposes of insured state credit unions, reference in this paragraph to 

"share'', "share certificate'', or "share draft'' accounts includes, 

as determined by the Board, the equivalent of such accounts 

under state law; 

(6) The terms "State credit union'' and "State-chartered 

credit union'' mean a credit union organized and operated according to the laws of any State, the District of Columbia, the 

several territories and possessions of the united states, the 

Panama Canal Zone, or the Commonwealth of Puerto Rico, 

which laws provide for the organization of credit unions similar 

in principle and objectives to Federal credit unions; 

(7) The term "insured credit union'' means any credit 

union the member accounts of which are insured in accordance 

with the provisions of title II of this Act, and the term "noninsured credit union'' means any credit union the member accounts of which are not so insured; 

(8) The term "Fund'' means the National Credit Union 

share insurance Fund; and 

(9) The term "branch" includes any branch credit union, 

branch office, branch agency, additional office, or any branch 

place of business located in any state of the united states, the 

District of Columbia, the several territories, including the trust 

territories, and possessions of the united states, the panama 

Canal Zone, or the Commonwealth of Puerto Rico, at which 

member accounts are established or money lent. The term 

"branch'' also includes a suboffice, operated by a Federal credit 

union or by a credit union authorized by the Department of 

Defense, located on an American military installation in a foreign country or in the trust territories of the united states. 

CREATION OF ADMINISTRATIO N 

SEC. 102. [12 U.S.C. 1752a] (a) There is hereby established in 

the executive branch of the Government an independent agency to 

be known as the National Credit Union Administration. The 

Administration shall be under the management of a National 

Credit Union Administration Board. 

(b) MEMBERSHI P AN D APPOINTMEN T OF BOARD. — 

(1) IN GENERAL.—The Board shall consist of three members, who are broadly representative of the public interest, appointed by the president, by and with the advice and consent 

of the senate. in appointing the members of the Board, the 

president shall designate the Chairman. Not more than two 

members of the Board shall be members of the same political 

party. 

( 2 ) APPOINTMEN T CRITERIA.— 

1

 So in original. Probably should be "or share draft account''. 
359 FEDERAL CREDIT UNION ACT Sec. 107A 

(A) EXPERIENCE I N FINANCIAL SERVICES.—In considering appointments to the Board under paragraph (1), the 

President shall give consideration to individuals who, by 

virtue of their education, training, or experience relating to 

a broad range of financial services, financial services regulation, or financial policy, are especially qualified to serve 

on the Board. 

( B) LIMI T ON APPOINTMENT OF CREDIT UNIO N 

OFFICERS.—Not more than one member of the Board may 

be appointed to the Board from among individuals who, at 

the time of the appointment, are, or have recently been, involved with any insured credit union as a committee member, director, officer, employee, or other institution-affiliated party. 

(c) The term of office of each member of the Board shall be six 

years, except that the terms of the two members, other than the 

Chairman, initially appointed shall expire one upon the expiration 

of two years after the date of appointment, and the other upon the 

expiration of four years after the date of appointment. Board members shall not be appointed to succeed themselves except the initial 

members appointed for less than a six-year term may be reappointed for a full six-year term and future members appointed 

to fill unexpired terms may be reappointed for a full six-year term. 

Any Board member may continue to serve as such after the expiration of said member's term until a successor has qualified. 

(d) The management of the Administration shall be vested in 

the Board. The Board shall adopt such rules as it sees fit for the 

transaction of its business and shall keep permanent and complete 

records and minutes of its acts and proceedings. A majority of the 

Board shall constitute a quorum. Not later than April 1 of each calendar year, and at such other times as the Congress shall determine, the Board shall make a report to the President and to the 

Congress. Such a report shall summarize the operations of the 

Administration and set forth such information as is necessary for 

the Congress to review the financial program approved by the 

Board. 

(e) The Chairman of the Board shall be the spokesman for the 

Board and shall represent the Board and the National Credit 

Union Administration in its official relations with other branches 

of the Government. The Chairman shall determine each Board 

member's area of responsibility and shall review such assignments 

biennially. It shall be the Chairman's responsibility to direct the 

implementation of the adopted policies and regulations of the 

Board. 

(f) The financial transactions of the Administration shall be 

subject to audit by the General Accounting Office in accordance 

with the principles and procedures applicable to commercial corporate transactions and under such rules and regulations as may 

be prescribed by the Comptroller General of the United States. The 

audit shall be conducted at the place or places where the accounts 

of the Administration are kept. 
Sec. 102 FEDERAL CREDIT UNION ACT 3 60 

FEDERAL CREDIT UNIO N ORGANIZATION 

SEC. 103. [12 U.S.C. 1753] Any seven or more natural persons 

who desire to form a Federal credit union shall each subscribe 

either individually or collectively before some officer competent to 

administer oaths an organization certificate in duplicate which 

shall specifically state— 

(1) the name of the association; 

(2) the location of the proposed Federal credit union and 

the territory in which it will operate; 

(3) the names and addresses of the subscribers to the certificate and the number of shares subscribed by each; 

(4) the initial par value of the shares; 

(5) the proposed field of membership, specified in detail; 

(6) the term of the existence of the corporation, which may 

be perpetual; and 

(7) the fact that the certificate is made to enable such persons to avail themselves of the advantages of this Act. 

Such organization certificate may also contain any provisions approved by the Board for the management of the business of the 

association and for the conduct of its affairs and relative to the 

powers of its directors, officers, or stockholders. 

APPROVAL OF ORGANIZATION CERTIFICATE 

SEC. 104. [12 U.S.C. 1754] The organization certificate shall 

be presented to the Board for approval. Before any organization 

certificate is approved, an appropriate investigation shall be made 

for the purpose of determining (1) whether the organization certificate conforms to the provisions of this Act; (2) the general character and fitness of the subscribers thereto; and (3) the economic 

advisability of establishing the proposed Federal credit union. 

upon approval of such organization certificate by the Board it shall 

be the charter of the corporation, and one of the originals thereof 

shall be delivered to the corporation after the payment of the fee 

required therefor. upon such approval the Federal credit union 

shall be a body corporate and as such, subject to the limitations 

herein contained, shall be vested with all of the powers and 

charged with all of the liabilities conferred and imposed by this Act 

upon corporations organized hereunder. 

FEES 

SEC. 105. [12 U.S.C. 1755] (a) In accordance with rules prescribed by the Board, each Federal credit union shall pay to the 

Administration an annual operating fee which may be composed of 

one or more charges identified as to the function or functions for 

which assessed. 

(b) The fee assessed under this section shall be determined according to a schedule, or schedules, or other method determined by 

the Board to be appropriate, which gives due consideration to the 

expenses of the Administration in carrying out its responsibilities 

under this Act and to the ability of Federal credit unions to pay 

the fee. The Board shall, among other things, determine the peri-
361 FEDERAL CREDIT UNION ACT Sec. 107A 

ods for which the fee shall be assessed and the date or dates for 

the payment of the fee or increments thereof. 

(c) If the annual operating fee is composed of separate charges, 

no supervision charge shall be payable by a Federal credit union, 

and the Board may waive payment of any or all other charges comprising the fee, with respect to the year in which its charter is 

issued, or in which final distribution is made in its liquidation or 

the charter is canceled. 

(d) All operating fees shall be deposited with the Treasurer of 

the United States for the account of the Administration and may 

be expended by the Board to defray the expenses incurred in carrying out the provisions of this Act including the examination and 

supervision of Federal credit unions. 

(e)(1) Upon request of the Board, the Secretary of the Treasury 

shall invest and reinvest such portions of the annual operating fees 

deposited under subsection (d) as the Board determines are not 

needed for current operations. 

(2) Such investments may be made only in interest bearing 

securities of the United States with maturities requested by the 

Board bearing interest at rates determined by the Secretary of the 

Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States of comparable 

maturities. 

(3) All income derived from such investments and reinvestments shall be deposited to the account of the Administration described in subsection (d). 

REPORTS AND EXAMINATIONS 

SEC. 106. [12 U.S.C. 1756] Federal credit unions shall be 

under the supervision of the Board, and shall make financial reports to it as and when it may require, but at least annually. Each 

Federal credit union shall be subject to examination by, and for 

this purpose shall make its books and records accessible to, any 

person designated by the Board. 

POWERS 

SEC. 107. [12 U.S.C. 1757] A Federal credit union shall have 

succession in its corporate name during its existence and shall 

have power— 

(1) to make contracts; 

(2) to sue and be sued; 

(3) to adopt and use a common seal and alter the same at 

pleasure; 

(4) to purchase, hold, and dispose of property necessary or 

incidental to its operations; 

(5) to make loans, the maturities of which shall not exceed 

twelve years except as otherwise provided herein, and extend 

lines of credit to its members, to other credit unions, and to 

credit union organizations and to participate with other credit 

unions, credit union organizations, or financial organizations in 

making loans to credit union members in accordance with the 

following: 
Sec. 102 FEDERAL CREDIT UNION ACT 3 62 

(A) Loans to members shall be made in conformity 

with criteria established by the board of directors: Provided, That— 

(i) a residential real estate loan on a one-to-fourfamily dwelling, including an individual cooperative 

unit, that is or will be the principal residence of a 

credit union member, and which is secured by a first 

lien upon such dwelling, may have a maturity not exceeding thirty years or such other limits as shall be 

set by the National Credit Union Administration 

Board (except that a loan on an individual cooperative 

unit shall be adequately secured as defined by the 

Board), subject to the rules and regulations of the 

Board; 

(ii) a loan to finance the purchase of a mobile 

home, which shall be secured by a first lien on such 

mobile home, to be used by the credit union member 

as his residence, or a second mortgage loan secured by 

a residential dwelling which is the residence of a 

credit union member shall have a maturity not to exceed 15 years or any longer term which the Board may 

allow; 

(iii) a loan secured by the insurance or guarantee 

of, or with advance commitment to purchase the loan 

by, the Federal Government, a State government, or 

any agency of either may be made for the maturity 

and under the terms and conditions specified in the 

law under which such insurance, guarantee, or commitment is provided; 

(iv) a loan or aggregate of loans to a director or 

member of the supervisory or credit committee of the 

credit union making the loan which exceeds $20,000 

plus pledged shares, be approved by the board of directors; 

(v) loans to other members for which directors or 

members of the supervisory or credit committee act as 

guarantor or endorser be approved by the board of 

directors when such loans standing alone or when 

added to any outstanding loan or loans of the guarantor or endorser exceeds $20,000; 

(vi) the rate of interest may not exceed 15 per centum per annum on the unpaid balance inclusive of all 

finance charges, except that the Board may 

establish— 

(i) after consultation with the appropriate 

committees of the Congress, the Department of 

Treasury, and the Federal financial institution 

regulatory agencies, an interest rate ceiling exceeding such 15 per centum per annum rate, for 

periods not to exceed 18 months, if it determines 

that money market interest rates have risen over 

the preceding six-month period and that prevailing interest rate levels threaten the safety and 

soundness of individual credit unions as evidenced 
363 FEDERAL CREDIT UNION ACT Sec. 107A 

by adverse trends in liquidity, capital, earnings, 

and growth; and 

(II) a higher interest rate ceiling for Agent 

members of the central Liquidity Facility in carrying out the provisions of title ii i for such periods as the Board may authorize; 

(vii) the taking, receiving, reserving, or charging 

of a rate of interest greater than is allowed by this 

paragraph, when knowingly done, shall be deemed a 

forfeiture of the entire interest which the note, bill, or 

other evidence of debt carries with it, or which has 

been agreed to be paid thereon. if such greater rate of 

interest has been paid, the person by whom it has 

been paid, or his legal representatives, may recover 

back from the credit union taking or receiving the 

same, in an action in the nature of an action of debt, 

the entire amount of interest paid; but such action 

must be commenced within two years from the time 

the usurious collection was made; 

(viii) a borrower may repay his loan, prior to 

maturity in whole or in part on any business day without penalty, except that on a first or second mortgage 

loan a Federal credit union may require that any partial prepayments (i) be made on the date monthly 

installments are due, and (ii) be in the amount of that 

part of one or more monthly installments which would 

be applicable to principal; 

(ix) loans shall be paid or amortized in accordance 

with rules and regulations prescribed by the Board 

after taking into account the needs or conditions of the 

borrowers, the amounts and duration of the loans, the 

interests of the members and the credit unions, and 

such other factors as the Board deems relevant;

 1 

(x) loans must be approved by the credit committee or a loan officer, but no loan may be made to 

any member if, upon the making of that loan, the 

member would be indebted to the Federal credit union 

upon loans made to him in an aggregate amount 

which would exceed 10 per centum of the credit 

union's unimpaired capital and surplus. 

(B) A self-replenishing line of credit to a borrower may 

be established to a stated maximum amount on certain 

terms and conditions which may be different from the 

terms and conditions established for another borrower. 

(c) Loans to other credit unions shall be approved by 

the board of directors. 

(D) Loans to credit union organizations shall be approved by the board of directors and shall not exceed 1 per 

centum of the paid-in and unimpaired capital and surplus 

of the credit union. A credit union organization means any 

organization as determined by the Board, which is established primarily to serve the needs of its member credit 

1

 So in original. Probably should be "and" after the semicolon. 
Sec. 102 FEDERAL CREDIT UNION ACT 3 64 

unions, and whose business relates to the daily operations 

of the credit unions they serve. 

(E) participation loans with other credit unions, credit 

union organizations, or financial organizations shall be in 

accordance with written policies of the board of directors: 

Provided, That a credit union which originates a loan for 

which participation arrangements are made in accordance 

with this subsection shall retain an interest of at least 10 

per centum of the face amount of the loan.

 1 

(6) to receive from its members, from other credit unions, 

from an officer, employee, or agent of those nonmember units 

of Federal, indian tribal, state, or local governments and political subdivisions thereof enumerated in section 207 of this Act 

and in the manner so prescribed, from the central liquidity facility, and from nonmembers in the case of credit unions serving predominately low-income members (as defined by the 

Board) payments, representing equity, on— 

(A) shares which may be issued at varying dividend 

rates; 

(B) share certificates which may be issued at varying 

dividend rates and maturities; and 

(C) share draft accounts authorized under section 

205(f); 

subject to such terms, rates, and conditions as may be established by the board of directors, within limitations prescribed 

by the Board.

 1 

(7) to invest its funds (A) in loans exclusively to members; 

(B) in obligations of the United States of America, or securities 

fully guaranteed as to principal and interest thereby; (C) in 

accordance with rules and regulations prescribed by the Board, 

in loans to other credit unions in the total amount not exceeding 25 per centum of its paid-in and unimpaired capital and 

surplus; (D) in shares or accounts of savings and loan associations or mutual savings banks, the accounts of which are insured by the Federal savings and Loan insurance Corporation2

 or the Federal Deposit Insurance Corporation; (E) in obligations issued by banks for cooperatives, Federal land banks, 

Federal intermediate credit banks, Federal home loan banks, 

the Federal Home Loan Bank Board,

 3 or any corporation designated in section 101 of the Government Corporation Control 

Act as a wholly owned Government corporation; or in obligations, participations, or other instruments of or issued by, or 

fully guaranteed as to principal and interest by, the Federal 

National Mortgage Association or the Government National 

Mortgage Association; or in mortgages, obligations, or other 

securities which are or ever have been sold by the Federal 

Home Loan Mortgage Corporation pursuant to section 305 or 

section 306 of the Federal Home Loan Mortgage Corporation 

1

 so in original. The period probably should be a semicolon. 

2

 The Federal savings and Loan insurance Corporation was abolished by section 401 of the 

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (P.L. 101-73; 103 Stat. 

354). 

3

 The Federal Home Loan Bank Board was abolished by section 401 of the Financial institutions Reform, Recovery, and Enforcement Act of 1989 (P.L. 101-73; 103 Stat. 354). The Board's 

successor with respect to Federal home loan banks is the Federal Housing Finance Board. 
365 FEDERAL CREDIT UNION ACT Sec. 107A 

Act; or in obligations, participations, securities, or other instruments of, or issued by, or fully guaranteed as to principal and 

interest by any other agency of the United States and a Federal credit union may issue and sell securities which are guaranteed pursuant to section 306(g) of the National Housing Act; 

(F) in participation certificates evidencing beneficial interests 

in obligations, or in the right to receive interest and principal 

collections therefrom, which obligations have been subjected by 

one or more Government agencies to a trust or trusts for which 

any executive department, agency, or instrumentality of the 

United States (or the head thereof) has been named to act as 

trustee; (G) in shares or deposits of any central credit union in 

which such investments are specifically authorized by the 

board of directors of the Federal credit union making the 

investment; (H) in shares, share certificates, or share deposits 

of federally insured credit unions; (I) in the shares, stocks, or 

obligations of any other organization, providing services which 

are associated with the routine operations of credit unions, up 

to 1 per centum of the total paid in and unimpaired capital 

and surplus of the credit union with the approval of the Board: 

Provided, however, That such authority does not include the 

power to acquire control directly or indirectly, of another financial institution, nor invest in shares, stocks or obligations of an 

insurance company, trade association, liquidity facility or any 

other similar organization, corporation, or association, except 

as otherwise expressly provided by this Act; (J) in the capital 

stock of the National Credit Union Central Liquidity Facility 

(K) investments in obligations of, or issued by, any State or 

political subdivision thereof (including any agency, corporation, 

or instrumentality of a State or political subdivision), except 

that no credit union may invest more than 10 per centum of 

its unimpaired capital and surplus in the obligations of any 

one issuer (exclusive of general obligations of the issuer).

 1 

(8) to make deposits in national banks and in State banks, 

trust companies, and mutual savings banks operating in 

accordance with the laws of the State in which the Federal 

credit union does business, or in banks or institutions the accounts of which are insured by the Federal Deposit Insurance 

Corporation or the Federal Savings and Loan Insurance Corporation, and for Federal credit unions or credit unions authorized by the Department of Defense operating suboffices on 

American military installations in foreign countries or trust 

territories of the United States to maintain demand deposit accounts in banks located in those countries or trust territories, 

subject to such regulations as may be issued by the Board and 

provided such banks are correspondents of banks described in 

this paragraph; 

(9) to borrow, in accordance with such rules and regulations as may be prescribed by the Board, from any source, in 

an aggregate amount not exceeding, except as authorized by 

the Board in carrying out the provisions of subchapter III, 2 50 

1

 So in original. The period should probably be a semicolon. 

2

 So in original. Probably should be "title III''. 
Sec. 102 FEDERAL CREDIT UNION ACT 366 

per centum of its paid-in and unimpaired capital and surplus: 

Provided, That any Federal credit union may discount with or 

sell to any Federal intermediate credit bank any eligible obligations up to the amount of its paid-in and unimpaired capital; 

(10) to levy late charges, in accordance with the bylaws, for 

failure of members to meet promptly their obligations to the 

Federal credit union; 

(11) to impress and enforce a lien upon the shares and 

dividends of any member, to the extent of any loan made to 

him and any dues or charges payable by him; 

(12) in accordance with rules and regulations prescribed by 

the Board, to sell to members negotiable checks (including 

travelers checks), money orders, and other similar money 

transfer instruments, and to cash checks and money orders for 

members, for a fee; 

(13) in accordance with rules and regulations prescribed by 

the Board, to purchase, sell, pledge, or discount or otherwise 

receive or dispose of, in whole or in part, any eligible obligations (as defined by the Board) of its members and to purchase 

from any liquidating credit union notes made by individual 

members of the liquidating credit union at such prices as may 

be agreed upon by the board of directors of the liquidating 

credit union and the board of directors of the purchasing credit 

union, but no purchase may be made under authority of this 

paragraph if, upon the making of that purchase, the aggregate 

of the unpaid balances of notes purchased under authority of 

this paragraph would exceed 5 per centum of the unimpaired 

capital and surplus of the credit union; and1 

(14) to sell all or a part of its assets to another credit 

union, to purchase all or part of the assets of another credit 

union and to assume the liabilities of the selling credit union 

and those of its members subject to regulations of the Board; 

(15) to invest in securities that— 

(A) are offered and sold pursuant to section 4(5) of the 

Securities Act of 1933 (15 U.S.C. 77d(5)); 

(B) are mortgage related securities (as that term is defined in section 3(a)(41) of the Securities Exchange Act of 

1934 (15 U.S.C. 78c(a)(41))), subject to such regulations as 

the Board may prescribe, including regulations prescribing 

minimum size of the issue (at the time of initial distribution) or minimum aggregate sales prices, or both; or 

(C) are small business related securities (as defined in 

section 3(a)(53) of the Securities Exchange Act of 1934), 

subject to such regulations as the Board may prescribe, including regulations prescribing the minimum size of the 

issue (at the time of the initial distribution), the minimum 

aggregate sales price, or both; 

(16) subject to such regulations as the Board may prescribe, to provide technical assistance to credit unions in Poland and Hungary; and 

1

 So in law. The "and" should probably be omitted. 
367 FEDERAL CREDIT UNION ACT Sec. 107A 

(17) to exercise such incidental powers as shall be necessary or requisite to enable it to carry on effectively the business for which it is incorporated. 

SEC. 107A. [12 U.S.C. 1757a] LIMITATION ON MEMBER BUSINESS 

LOANS. 

(a) I N GENERAL.—On and after the date of enactment of this 

section, no insured credit union may make any member business 

loan that would result in a total amount of such loans outstanding 

at that credit union at any one time equal to more than the lesser 

of— 

(1) 1.75 times the actual net worth of the credit union; or 

(2) 1.75 times the minimum net worth required under section 216(c)(1)(A) for a credit union to be well capitalized. 

(b) EXCEPTIONS.—Subsection (a) does not apply in the 

case of— 

(1) an insured credit union chartered for the purpose of 

making, or that has a history of primarily making, member 

business loans to its members, as determined by the Board; or 

(2) an insured credit union that— 

(A) serves predominantly low-income members, as defined by the Board; or 

(B) is a community development financial institution, 

as defined in section 103 of the Community Development 

Banking and Financial Institutions Act of 1994. 

(c) DEFINITIONS.—As used in this section— 

(1) the term ''member business loan''— 

(A) means any loan, line of credit, or letter of credit, 

the proceeds of which will be used for a commercial, corporate or other business investment property or venture, 

or agricultural purpose; and 

(B) does not include an extension of credit— 

(i) that is fully secured by a lien on a 1- to 4-family dwelling that is the primary residence of a member; 

(ii) that is fully secured by shares in the credit 

union making the extension of credit or deposits in 

other financial institutions; 

(iii) that is described in subparagraph (A), if it 

was made to a borrower or an associated member that 

has a total of all such extensions of credit in an 

amount equal to less than $50,000; 

(iv) the repayment of which is fully insured or 

fully guaranteed by, or where there is an advance 

commitment to purchase in full by, any agency of the 

Federal Government or of a state, or any political subdivision thereof; or 

(v) that is granted by a corporate credit union (as 

that term is defined by the Board) to another credit 

union. 

(2) the term ''net worth''— 

(A) with respect to any insured credit union, means 

the credit union's retained earnings balance, as determined under generally accepted accounting principles; and 
Sec. 374A FEDERAL CREDIT UNION ACT 428 

(B) with respect to a credit union that serves predominantly low-income members, as defined by the Board, includes secondary capital accounts that are— 

(i) uninsured; and 

(ii) subordinate to all other claims against the 

credit union, including the claims of creditors, shareholders, and the Fund; and 

(3) the term ''associated member'' means any member 

having a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower. 

(d) EFFECT ON EXISTING LOANS.—An insured credit union that 

has, on the date of enactment of this section, a total amount of outstanding member business loans that exceeds the amount permitted under subsection (a) shall, not later than 3 years after that 

date of enactment, reduce the total amount of outstanding member 

business loans to an amount that is not greater than the amount 

permitted under subsection (a). 

(e) CONSULTATION AND COOPERATION WIT H STATE CREDIT 

UNIO N SUPERVISORS.—In implementing this section, the Board 

shall consult and seek to work cooperatively with state officials 

having jurisdiction over State-chartered insured credit unions. 

BYLAWS 

SEC. 108. [12 U.S.C. 1758] In order to simplify the organization of Federal credit unions the Board shall from time to time 

cause to be prepared a form of organization certificate and a form 

of bylaws, consistent with this Act, which shall be used by Federal 

credit union incorporators, and shall be supplied to them on request. At the time of presenting the organization certificate the 

incorporators shall also submit proposed bylaws to the Board for its 

approval. 

MEMBERSHIP 

SEC. 109. [12 U.S.C. 1759] (a) IN GENERAL.—Subject to subsection (b), Federal credit union membership shall consist of the 

incorporators and such other persons and incorporated and unincorporated organizations, to the extent permitted by rules and regulations prescribed by the Board, as may be elected to membership 

and as such shall each, subscribe to at least one share of its stock 

and pay the initial installment thereon and a uniform entrance fee 

if required by the board of directors. shares may be issued in joint 

tenancy with right of survivorship with any persons designated by 

the credit union member, but no joint tenant shall be permitted to 

vote, obtain loans, or hold office, unless he is within the field of 

membership and is a qualified member. 

(b) MEMBERSHIP FIELD.—Subject to the other provisions of this 

section, the membership of any Federal credit union shall be limited to the membership described in one of the following 

categories: 

(1) SINGLE COMMON-BOND CREDIT UNION.—One group that 

has a common bond of occupation or association. 

(2) MULTIPLE COMMON-BOND CREDIT UNION.—More than 

one group— 
367 FEDERAL CREDIT UNION ACT Sec. 109A 

(A) each of which has (within the group) a common 

bond of occupation or association; and 

(B) the number of members, each of which (at the time 

the group is first included within the field of membership 

of a credit union described in this paragraph) does not exceed any numerical limitation applicable under subsection 

(d). 

(3) COMMUNITY CREDIT UNION.—Persons or organizations 

within a well-defined local community, neighborhood, or rural 

district. 

(c) EXCEPTIONS.— 

(1) GRANDFATHERED MEMBERS AND GROUPS.— 

(A) IN GENERAL.—Notwithstanding subsection (b)— 

(i) any person or organization that is a member of 

any Federal credit union as of the date of enactment 

of the Credit Union Membership Access Act may remain a member of the credit union after that date of 

enactment; and 

(ii) a member of any group whose members constituted a portion of the membership of any Federal 

credit union as of that date of enactment shall continue to be eligible to become a member of that credit 

union, by virtue of membership in that group, after 

that date of enactment. 

(B) SUCCESSORS.—If the common bond of any group 

referred to in subparagraph (A) is defined by any particular organization or business entity, subparagraph (A) 

shall continue to apply with respect to any successor to the 

organization or entity. 

(2) EXCEPTION FOR UNDERSERVED AREAS.—Notwithstanding subsection (b), in the case of a Federal credit union, 

the field of membership category of which is described in subsection (b)(2), the Board may allow the membership of the 

credit union to include any person or organization within a 

local community, neighborhood, or rural district if— 

(A) the Board determines that the local community, 

neighborhood, or rural district— 

(i) is an ''investment area'', as defined in section 

103(16) of the Community Development Banking and 

Financial Institutions Act of 1994 (12 U.S.C. 

4703(16)), and meets such additional requirements as 

the Board may impose; and 

(ii) is underserved, based on data of the Board and 

the Federal banking agencies (as defined in section 3 

of the Federal Deposit Insurance Act), by other depository institutions (as defined in section 19(b)(1)(A) of 

the Federal Reserve Act); and 

(B) the credit union establishes and maintains an office or facility in the local community, neighborhood, or 

rural district at which credit union services are available. 

(d) MULTIPLE COMMON-BON D CREDIT UNIO N GROUP 

REQUIREMENTS.— 

(1) NUMERICA L LIMITATION.—Except as provided in paragraph (2), only a group with fewer than 3,000 members shall 
Sec. 376A FEDERAL CREDIT UNION ACT 

428 

be eligible to be included in the field of membership category 

of a credit union described in subsection (b)(2). 

(2) EXCEPTIONS.—In the case of any Federal credit union, 

the field of membership category of which is described in subsection (b)(2), the numerical limitation in paragraph (1) of this 

subsection shall not apply with respect to— 

(A) any group that the Board determines, in writing 

and in accordance with the guidelines and regulations 

issued under paragraph (3), could not feasibly or reasonably establish a new single common-bond credit union, the 

field of membership category of which is described in subsection (b)(1) because— 

(i) the group lacks sufficient volunteer and other 

resources to support the efficient and effective operation of a credit union; 

(ii) the group does not meet the criteria that the 

Board has determined to be important for the likelihood of success in establishing and managing a new 

credit union, including demographic characteristics 

such as geographical location of members, diversity of 

ages and income levels, and other factors that may affect the financial viability and stability of a credit 

union; or 

(iii) the group would be unlikely to operate a safe 

and sound credit union; 

(B) any group transferred from another credit union— 

(i) in connection with a merger or consolidation 

recommended by the Board or any appropriate state 

credit union supervisor based on safety and soundness 

concerns with respect to that other credit union; or 

(ii) by the Board in the Board's capacity as 

conservator or liquidating agent with respect to that 

other credit union; or 

(c) any group transferred in connection with a 

voluntary merger, having received conditional approval by 

the Administration of the merger application prior to October 25, 1996, but not having consummated the merger 

prior to October 25, 1996, if the merger is consummated 

not later than 180 days after the date of enactment of the 

Credit Union Membership Access Act. 

(3) REGULATIONS AND GUIDELINES.—The Board shall issue 

guidelines or regulations, after notice and opportunity for comment, setting forth the criteria that the Board will apply in 

determining under this subsection whether or not an additional group may be included within the field of membership 

category of an existing credit union described in subsection 

(b)(2). 

(e) ADDITIONAL MEMBERSHIP ELIGIBILITY PROVISIONS.— 

(1) MEMBERSHIP ELIGIBILITY LIMITED TO IMMEDIATE FAMILY 

OR HOUSEHOLD MEMBERS.—N o individual shall be eligible for 

membership in a credit union on the basis of the relationship 

of the individual to another person who is eligible for membership in the credit union, unless the individual is a member of 
367 FEDERAL CREDIT UNION ACT Sec. 377A 

the immediate family or household (as those terms are defined 

by the Board, by regulation) of the other person. 

(2) RETENTIO N OF MEMBERSHIP.—Excep t as provided in 

section 118, once a person becomes a member of a credit union 

in accordance with this title, that person or organization may 

remain a member of that credit union until the person or organization chooses to withdraw from the membership of the 

credit union. 

(f) CRITERIA FOR APPROVAL OF EXPANSION OF MULTIPL E 

COMMON-BON D CREDIT UNIONS. — 

(1) IN GENERAL.—The Board shall— 

(A) encourage the formation of separately chartered 

credit unions instead of approving an application to include an additional group within the field of membership 

of an existing credit union whenever practicable and consistent with reasonable standards for the safe and sound 

operation of the credit union; and 

(B) if the formation of a separate credit union by the 

group is not practicable or consistent with the standards 

referred to in subparagraph (A), require the inclusion of 

the group in the field of membership of a credit union that 

is within reasonable proximity to the location of the group 

whenever practicable and consistent with reasonable 

standards for the safe and sound operation of the credit 

union. 

(2) APPROVAL CRITERIA.—Th e Board may not approve any 

application by a Federal credit union, the field of membership 

category of which is described in subsection (b)(2) to include 

any additional group within the field of membership of the 

credit union (or an application by a Federal credit union described in subsection (b)(1) to include an additional group and 

become a credit union described in subsection (b)(2)), unless 

the Board determines, in writing, that— 

(A) the credit union has not engaged in any unsafe or 

unsound practice (as defined in section 206(b)) that is 

material during the 1-year period preceding the date of filing of the application; 

(B) the credit union is adequately capitalized; 

(C) the credit union has the administrative capability 

to serve the proposed membership group and the financial 

resources to meet the need for additional staff and assets 

to serve the new membership group; 

(D) any potential harm that the expansion of the field 

of membership of the credit union may have on any other 

insured credit union and its members is clearly outweighed in the public interest by the probable beneficial 

effect of the expansion in meeting the convenience and 

needs of the members of the group proposed to be included 

in the field of membership; and 

(E) the credit union has met such additional requirements as the Board may prescribe, by regulation. 

(g) REGULATIONS REQUIRE D FOR COMMUNIT Y CREDIT UNIONS. — 

(1) DEFINITIO N OF WELL-DEFINED LOCAL COMMUNITY, 

NEIGHBORHOOD, OR RURAL DISTRICT.—Th e Board shall pre-
Sec. 378A FEDERAL CREDIT UNION ACT 428 

scribe, by regulation, a definition for the term ''well-defined 

local community, neighborhood, or rural district'' for purposes 

of— 

(A) making any determination with regard to the field 

of membership of a credit union described in subsection 

(b)(3); and 

(B) establishing the criteria applicable with respect to 

any such determination. 

(2) SCOPE OF APPLICATION.—The definition prescribed by 

the Board under paragraph (1) shall apply with respect to any 

application to form a new credit union, or to alter or expand 

the field of membership of an existing credit union, that is filed 

with the Board after the date of enactment of the Credit Union 

Membership Access Act. 

MEMBERS' MEETINGS 

SEC. 110. [12 U.S.C. 1760] The fiscal year of all Federal credit 

unions shall end December 31. The annual meeting of each Federal 

credit union shall be held at such place as its bylaws shall prescribe. special meetings may be held in the manner indicated in 

the bylaws. No member shall be entitled to vote by proxy, but a 

member other than a natural person may vote through an agent 

designated for the purpose. irrespective of the number of shares 

held, no member shall have more than one vote. 

MANAGEMENT 

SEC. 111. [12 U.S.C. 1761] (a) The management of a Federal 

credit union shall be by a board of directors, a supervisory committee, and where the bylaws so provide, a credit committee. The 

board shall consist of an odd number of directors, at least five in 

number, to be elected annually by and from the members as the 

bylaws provide. Any vacancy occurring on the board shall be filled 

until the next annual election by appointment by the remainder of 

the directors. 

(b) The supervisory committee shall be appointed by the board 

of directors and shall consist of not less than three members nor 

more than five members, one of whom may be a director other than 

the compensated officer of the board. A record of the names and 

addresses of the executive officers, members of the supervisory 

committee, credit committee, and loan officers, shall be filed with 

the administration within ten days after their election or appointment. 

(c) No member of the board or of any other committee shall, 

as such, be compensated, except that reasonable health, accident, 

similar insurance protection, and the reimbursement of reasonable 

expenses incurred in the execution of the duties of the position 

shall not be considered compensation. 

OFFICERS OF THE BOARD 

SEC. 112. [12 U.S.C. 1761a] At their first meeting after the 

annual meeting of the members, the directors shall elect from their 

number the board officers specified in the bylaws. Only one board 

officer may be compensated as an officer of the board and the by-
367 FEDERAL CREDIT UNION ACT Sec. 113A 

laws shall specify such position as well as the specific duties of 

each of the board officers. The board shall elect from their number 

a financial officer who shall give adequate fidelity coverage in 

accordance with section 113(2) of this Act. 

BOARD OF DIRECTORS; MEETINGS; POWERS AND DUTIES EXECUTIVE 

COMMITTEE; MEMBERSHIP OFFICERS; MEMBERSHIP APPLICATIONS 

SEC. 113. [12 U.S.C. 1761b] The board of directors shall meet 

at least once a month and shall have the general direction and control of the affairs of the Federal credit union. Minutes of all meetings shall be kept. Among other things, the board of directors 

shall— 

(1) act upon applications for membership or appoint membership officers from among the members of the credit union, 

other than the board member paid as an officer, the financial 

board officer, any assistant to the paid officer of the board or 

to the financial officer, or any loan officer; 

(2) provide adequate fidelity coverage for officers and employees having custody of or handling funds according to regulations issued by the Board; 

(3) fill vacancies on the board of directors until successors 

elected at the next annual meeting have qualified; 

(4) if the bylaws provide for an elected credit committee, 

fill vacancies on the credit committee until successors elected 

at the next annual meeting have qualified; 

(5) appoint the members of the supervisory committee and, 

if the bylaws so provide, appoint the members of the credit 

committee; 

(6) have charge of investments including the right to designate an investment committee of not less than two to act on 

its behalf; 

(7) determine the maximum number of shares, share certificates, and share draft accounts, and the classes of shares, 

share certificates, and share draft accounts; 

(8) subject to any limitations of this subchapter, determine 

the interest rates on loans, the security, and the maximum 

amount which may be loaned and provided in lines of credit; 

(9) authorize interest refunds to members of record at the 

close of business on the last day of any dividend period from 

income earned and received in proportion to the interest paid 

by them during that dividend period; 

(10) if the bylaws so provide, appoint one or more loan officers and delegate to these officers the power to approve or disapprove loans, lines of credit, or advances from lines of credit; 

(11) establish the par value of the share; 

(12) subject to the limitations of this title and the bylaws 

of the credit union, provide for the hiring and compensation of 

officers and employees; 

(13) if the bylaws so provide, appoint an executive committee of not less than three directors to act on its behalf and 

any other committees to which it can delegate specific functions; 
Sec. 114A FEDERAL CREDIT UNION ACT 428 

(14) prescribe conditions and limitations for any committee 

which it appoints; 

(15) review at each monthly meeting a list of approved or 

pending applications for membership received since the previous monthly meeting together with such other related information as it or the bylaws require; 

(16) provide for the furnishing of the written reasons for 

any denial of a membership application to the applicant upon 

the written request of the applicant; 

(17) in the absence of a credit committee, and upon the 

written request of a member, review a loan application denied 

by a loan officer; 

(18) declare the dividend rate to be paid on shares, share 

certificates, and share draft accounts pursuant to the terms 

and conditions of section 117; 

(19) establish and maintain a system of internal controls 

consistent with the regulations of the Board; 

(20) establish lending policies; and 

(21) do all other things that are necessary and proper to 

carry out all the purposes and powers of the Federal credit 

union, subject to regulations issued by the Board. 

CREDIT COMMITTEE 

SEC. 114. [12 U.S.C. 1761c] (a) If the bylaws provide for a 

credit committee, then pursuant to the provisions of the bylaws, 

the board of directors may appoint or the members may elect a 

credit committee which shall consist of an odd number of members 

of the credit union, but which shall not include more than one loan 

officer. The method used shall be set forth in the bylaws. The credit 

committee shall hold such meetings as the business of the Federal 

credit union may require, not less frequently than once a month, 

to consider applications for loans or lines of credit. Reasonable notice of such meetings shall be given to all members of the committee. Except for those loans or lines of credit required to be approved by the board of directors in section 107(5) of this Act, approval of an application shall be by majority of the committee who 

are present at the meeting at which it is considered provided that 

a majority of the full committee is present. The credit committee 

may appoint and delegate to loan officers the authority to approve 

applications. 

(b) if the bylaws provide for a credit committee, all applications 

not approved by the loan officer shall be reviewed by the credit 

committee, and the approval of a majority of the members who are 

present at the meeting when such review is undertaken shall be required to reverse the loan officer's decision provided a majority of 

the full committee is present. if there is not a credit committee, a 

member shall have the right upon written request of review by the 

board of directors of a loan application which has been denied. No 

individual shall have authority to disburse funds of the Federal 

credit union with respect to any loan or line of credit for which the 

application has been approved by him in his capacity as a loan officer. 
367 FEDERAL CREDIT UNION ACT Sec. 118A 

SUPERVISORY COMMITTEE 

SEC. 115. [12 U.S.C. 1761d] The supervisory committee shall 

make or cause to be made a semi-annual audit and shall submit 

a report of that audit to the board of directors and a summary of 

the report to the members at the next annual meeting of the credit 

union; shall make or cause to be made such supplementary audits 

as it deems necessary or as may be ordered by the Board, and submit reports of the supplementary audits to the board of directors; 

may by a unanimous vote suspend any officer of the credit union 

or any member of the credit committee or of the board of directors, 

until the next members' meeting, which shall be held not less than 

seven nor more than fourteen days after any such suspension, at 

which meeting any such suspension shall be acted upon by the 

members; and may call by a majority vote a special meeting of the 

members to consider any violation of this Act, the charter, or the 

bylaws, or any practice of the credit union deemed by the supervisory committee to be unsafe or unauthorized. Any member of the 

supervisory committee may be suspended by a majority vote of the 

board of directors. The members shall decide, at a meeting held not 

less than seven nor more than fourteen days after any such suspension, whether the suspended committee member shall be removed from or restored to the supervisory committee. The supervisory committee shall cause the passbooks and accounts of the 

members to be verified with the records of the treasurer from time 

to time, and not less frequently than once every two years. As used 

in this section, the term ''passbook'' shall include any book, statement of account, or other record approved by the Board for use by 

Federal credit unions. 

[Sec. 116 repealed by P.L. 105-219, 112 Stat. 931.] 

DIVIDENDS 

SEC. 117. [12 U.S.C. 1763] At such intervals as the board of 

directors may authorize, and after provision for required reserves, 

the board of directors may declare, pursuant to such regulations as 

may be issued by the Board, a dividend to be paid at different rates 

on different types of shares, at different rates and maturity dates 

in the case of share certificates, and at different rates on different 

types of share draft accounts. Dividends credited may be accrued 

on various types of shares, share certificates, and share draft accounts as authorized by the board of directors. If the par value of 

a share exceeds $5, dividends shall be paid on all funds in the regular share account once a full share has been purchased. 

EXPULSION AND WITHDRAWAL 

SEC. 118. [12 U.S.C. 1764] (a) Except as provided in subsection (b) of this section, a member may be expelled by a twothirds vote of the members of a Federal credit union present at a 

special meeting called for the purpose, but only after opportunity 

has been given him to be heard. 

(b) The board of directors of a Federal credit union may, by 

majority vote of a quorum of directors, adopt and enforce a policy 

with respect to expulsion from membership based on nonparticipa-
Sec. 119A FEDERAL CREDIT UNION ACT 

428 

tion by a member in the affairs of the credit union. In establishing 

its policy, the board should consider a member's failure to vote in 

annual credit union elections or failure to purchase shares from, 

obtain a loan from, or lend to the Federal credit union. if such a 

policy is adopted, written notice of the policy as adopted and the 

effective date of such policy shall be mailed to each member of the 

credit union at the member's current address appearing on the 

records of the credit union not less than thirty days prior to the 

effective date of such policy. in addition, each new member shall 

be provided written notice of any such policy prior to or upon applying for membership. 

(c) withdrawal or expulsion of a member pursuant to either 

subsection (a) or (b) of this section shall not operate to relieve him 

from liability to the Federal credit union. The amount to be paid 

a withdrawing or expelled member by a Federal credit union shall 

be determined and paid in a manner specified in the bylaws. 

MINORS 

SEC. 119. [12 U.S.C. 1765] Shares may be issued in the name 

of a minor or in trust, subject to such conditions as may be prescribed by the bylaws. When shares are issued in trust, the name 

of the beneficiary shall be disclosed to the Federal credit union. 

CERTAIN POWERS OF BOARD 

SEC. 120. [12 U.S.C. 1766] (a) The Board may prescribe rules 

and regulations for the administration of this Act (including, but 

not by way of limitation, the merger, consolidation, and dissolution 

of corporations organized under this Act). Any central credit union 

chartered by the Board shall be subject to such rules, regulations, 

and orders as the Board deems appropriate and, except as otherwise specifically provided in such rules, regulations, or orders, shall 

be vested with or subject to the same rights, privileges, duties, 

restrictions, penalties, liabilities, conditions, and limitations that 

would apply to all Federal credit unions under this Act. 

(b)(1) The Board may suspend or revoke the charter of any 

Federal credit union, or place the same in involuntary liquidation 

and appoint a liquidating agent therefor, upon its finding that the 

organization is bankrupt or insolvent, or has violated any of the 

provisions of its charter, its bylaws, this Act, or any regulations 

issued thereunder. 

(2) The Board, through such persons as it shall designate, may 

examine any Federal credit union in voluntary liquidation and, 

upon its finding that such voluntary liquidation is not being conducted in an orderly or efficient manner or in the best interests of 

its members, may terminate such voluntary liquidation and place 

such organization in involuntary liquidation and appoint a liquidating agent therefor. 

(3) such liquidating agent shall have power and authority, subject to the control and supervision of the Board and under such 

rules and regulations as the Board may prescribe, (A) to receive 

and take possession of the books, records, assets, and property of 

every description of the Federal credit union in liquidation, to sell, 

enforce collection of, and liquidate all such assets and property, to 
367 FEDERAL CREDIT UNION ACT Sec. 120A 

compound all bad or doubtful debts, and to sue in his own name 

or in the name of the Federal credit union in liquidation, and defend such actions as may be brought against him as liquidating 

agent or against the Federal credit union; (B) to receive, examine, 

and pass upon all claims against the Federal credit union in liquidation, including claims of members on member accounts; (C) to 

make distribution and payment to creditors and members as their 

interests may appear; and (D) to execute such documents and papers and to do such other acts and things which he may deem necessary or desirable to discharge his duties hereunder. 

(4) Subject to the control and supervision of the Board and 

under such rules and regulations as the Board may prescribe, the 

liquidating agent of a Federal credit union in involuntary liquidation shall (A) cause notice to be given to creditors and members to 

present their claims and make legal proof thereof, which notice 

shall be published once a week in each of three successive weeks 

in a newspaper of general circulation in each county in which the 

Federal credit union in liquidation maintained an office or branch 

for the transaction of business on the date it ceased unrestricted 

operations; except that whenever the aggregate book value of the 

assets and property of a Federal credit union in involuntary liquidation is less than $1,000, unless the Board shall find that its 

books and records do not contain a true and accurate record of its 

liabilities, he shall declare such Federal credit union in liquidation 

to be a ''no publication'' liquidation, and publication of notice to 

creditors and members shall not be required in such case; (B) from 

time to time make a ratable dividend on all such claims as may 

have been proved to his satisfaction or adjudicated in a court of 

competent jurisdiction and, after the assets of such organization 

have been liquidated, make further dividends on all claims previously proved or adjudicated, and he may accept in lieu of a formal proof of claim on behalf of any creditor or member the statement of any amount due to such creditor or member as shown on 

the books and records of the credit union; but all claims not filed 

before payment of the final dividend shall be barred and claims rejected or disallowed by the liquidating agent shall be likewise 

barred unless suit be instituted thereon within three months after 

notice of rejection or disallowance; and (C) in a ''no publication'' liquidation, determine from all sources available to him, and within 

the limits of available funds of the Federal credit union, the 

amounts due to creditors and members, and after sixty days shall 

have elapsed from the date of his appointment distribute the funds 

of the Federal credit union to creditors and members ratably and 

as their interests may appear. 

(5) Upon certification by the liquidating agent in the case of an 

involuntary liquidation, and upon such proof as shall be satisfactory to the Board in the case of a voluntary liquidation, that distribution has been made and that liquidation has been completed, 

as provided herein, the Board shall cancel the charter of such Federal credit union; but the corporate existence of the Federal credit 

union shall continue for a period of three years from the date of 

such cancellation of its charter, during which period the liquidating 

agent, or his duly appointed successor, or such persons as the 

Board shall designate, may act on behalf of the Federal credit 
Sec. 384A FEDERAL CREDIT UNION ACT 428 

union for the purpose of paying, satisfying, and discharging any existing liabilities or obligations, collecting and distributing its assets, and doing all other acts required to adjust and wind up its 

business and affairs, and it may sue and be sued in its corporate 

name. 

(c) After the expiration of five years from the date of cancellation of the charter of a Federal credit union the Board may, in its 

discretion, destroy any or all books and records of such Federal 

credit union in its possession or under its control. 

(d) The Board is authorized and empowered to execute any and 

all functions and perform any and all duties vested in them hereby, 

through such persons as it shall designate or employ; and it may 

delegate to any person or persons, including any institution operating under the general supervision of the Administration, the performance and discharge of any authority, power, or function vested 

in them by this Act. 

(e) All books and records of Federal credit unions shall be kept 

and reports shall be made in accordance with forms approved by 

the Board. 

(f)(1) The Board is authorized to make investigations and to 

conduct researches and studies of the problems of persons of small 

means in obtaining credit at reasonable rates of interest, and of the 

methods and benefits of cooperative saving and lending among 

such persons. it is further authorized to make reports of such 

investigations and to publish and disseminate the same. 

(2)(A) The Board is authorized to conduct directly, or to make 

grants to or contracts with colleges or universities, state or local 

educational agencies, or other appropriate public or private nonprofit organizations to conduct, programs for the training of persons engaged, or preparing to engage, in the operation of credit 

unions, and in related consumer counseling programs, serving the 

poor. it is authorized to establish a program of experimental, developmental, demonstration, and pilot projects, either directly or by 

grants to public or private nonprofit organizations, including credit 

unions, or by contracts with such organizations or other private 

organizations, designed to promote more effective operation of 

credit unions, and related consumer counseling programs, serving 

the poor. 

(B) in carrying out its authority under this paragraph, the 

Board shall consult with officials of the Office of Economic Opportunity and other appropriate Federal agencies responsible for the 

administration of projects or programs concerned with problems of 

the poor. The development and operation of programs and projects 

under this paragraph shall involve maximum feasible participation 

of residents of the areas and members of the groups served by such 

programs and projects, with community action agencies established 

under the provisions of the Economic Opportunity Act of 1964 serving, to the extent feasible, as the means through which such participation is achieved. 

(c) in order to carry out the purposes of this paragraph, there 

is authorized to be appropriated, as a supplement to any funds that 

may be expended by the Board pursuant to sections 105 and 106 

for such purposes, not to exceed $300,000 for the fiscal year ending 
367 FEDERAL CREDIT UNION ACT Sec. 385A 

June 30, 1970, and not to exceed $1,000,000 for the fiscal year ending June 30, 1971. 

(g) Any officer or employee of the Administration is authorized, 

when designated for the purpose by the Board, to administer oaths 

and affirmations and to take affidavits and depositions touching 

upon any matter within the jurisdiction of the Administration. 

(h) The Board is authorized, empowered, and directed to require that every person appointed or elected by any Federal credit 

union to any position requiring the receipt, payment, or custody of 

money or other personal property owned by a Federal credit union, 

or in its custody or control as collateral or otherwise, give bond in 

a corporate surety company holding a certificate of authority from 

the Secretary of the Treasury under the Act approved July 30, 

1947 (6 U.S.C., secs. 6-13),1 as an acceptable surety on Federal 

bonds. Any such bond or bonds shall be in a form approved by the 

Board with a view to providing surety coverage to the Federal 

credit union with reference to loss by reason of acts of fraud or dishonesty including forgery, theft, embezzlement, wrongful abstraction, or misapplication on the part of the person, directly or 

through connivance with others, and such other surety coverages 

as the Board may determine to be reasonably appropriate or as 

elsewhere required by this Act. Any such bond or bonds shall be 

in such an amount in relation to the money or other personal property involved or in relation to the assets of the Federal credit union 

as the Board may from time to time prescribe by regulation for the 

purpose of requiring reasonable coverage. In lieu of individual 

bonds the Board may approve the use of a form of schedule or blanket bond which covers all of the officers and employees of a Federal 

credit union whose duties include the receipt, payment, or custody 

of money or other personal property for or on behalf of the Federal 

credit union. The Board may also approve the use of a form of excess coverage bond whereby a Federal credit union may obtain an 

amount of coverage in excess of the basic surety coverage. 

(i) in addition to the authority conferred upon them by other 

sections of this Act, the Board is authorized in carrying out its 

functions under this Act— 

(1) to appoint such personnel as may be necessary to enable the Administration to carry out its functions; 

(2) to expend such funds, enter into such contracts with 

public and private organizations and persons, make such payments in advance or by way of reimbursement, acquire and 

dispose of, by lease or purchase, real or personal property, 

without regard to the provisions of any other law applicable to 

executive or independent agencies of the United States, and 

perform such other functions or acts as it may deem necessary 

or appropriate to carry out the provisions of this Act, in accordance with the rules and regulations or policies established by 

the Board not inconsistent with this Act; and 

(3) to pay stipends, including allowances for travel to and 

from the place of residence, to any individual to study in a program assisted under this Act upon a determination by the 

1

 Sections 6-13 of the Act of July 30, 1947 (Chap. 390, 61 Stat. 646) were repealed by P.L. 

97-258 (96 Stat. 1068, 1085) but the substance of such sections appears in chapter 93 of title 

31, United States Code. 
Sec. 386A FEDERAL CREDIT UNION ACT 428 

Board that assistance to such individual in such studies will be 

in furtherance of the purposes of this Act. 

(j) STAFF. — 

(1) APPOINTMEN T AN D COMPENSATION.—Th e Board shall fix 

the compensation and number of, and appoint and direct, employees of the Board. Rates of basic pay for employees of the 

Board may be set and adjusted by the Board without regard 

to the provisions of chapter 51 or subchapter ii i of chapter 53 

of title 5, United States Code. 

(2) ADDITIONA L COMPENSATIO N AN D BENEFITS.—Th e Board 

may provide additional compensation and benefits to employees of the Board if the same type of compensation or benefits 

are then being provided by any other Federal bank regulatory 

agency or, if not then being provided, could be provided by 

such an agency under applicable provisions of law, rule, or regulation. in setting and adjusting the total amount of compensation and benefits for employees of the Board, the Board shall 

seek to maintain comparability with other Federal bank regulatory agencies. 

(3) FUNDING.—The salaries and expenses of the Board and 

employees of the Board shall be paid from fees and assessments (including income earned on insurance deposits) levied 

on insured credit unions under this Act. 

FISCA L AGENT S AN D DEPOSITORIES 

SEC. 121.1 (a) [12 U.S.C. 1767] Each Federal credit union 

organized under this Act, when requested by the Secretary of the 

Treasury, shall act as fiscal agent of the United States and shall 

perform such services as the secretary of the Treasury may require 

in connection with the collection of taxes and other obligations due 

the United States and the lending, borrowing, and repayment of 

money by the United States, including the issue, sale, redemption, 

or repurchase of bonds, notes, Treasury certificates of indebtedness, 

or other obligations of the United States; and to facilitate such purposes the Board shall furnish to the secretary of the Treasury from 

time to time the names and addresses of all Federal credit unions 

with such other available information concerning them as may be 

requested by the Secretary of the Treasury. Any Federal credit 

union organized under this Act, when designated for that purpose 

by the secretary of the Treasury, shall be a depository of public 

money, except receipts from customs, under such regulations as 

may be prescribed by the secretary of the Treasury. 

(b) Any Federal credit union, upon the deposit with it of any 

funds by the Federal Government, an indian tribe, or any state or 

local government or political subdivision thereof as otherwise 

authorized by this Act, is authorized to pledge any of its assets securing the payment of the funds so deposited. 

1

 item 1 of the section designated as section 2 following section 664 of the Treasury, postal 

Service, and General Government Appropriations Act, 1997 (as enacted by section 101(f) of P.L. 

104-208) provided for the selection of national banks as financial agents. item 2 of such section 

reads as follows: ''2. Make conforming changes to 12 U.S.C. 265, 266, 391, 1452(d), 1767, 1789a, 

2013, 2122 and to 31 U.S.C. 3122 and 3303.''. Due to the inexact nature of the direction, no 

change is shown here. 
367 FEDERAL CREDIT UNION ACT Sec. 124A 

TAXATIO N 

SEC. 122. [12 U.S.C. 1768] The Federal credit unions organized hereunder, their property, their franchises, capital, reserves, 

surpluses, and other funds, and their income shall be exempt from 

all taxation now or hereafter imposed by the United States or by 

any State, Territorial, or local taxing authority; except that any 

real property and any tangible personal property of such Federal 

credit unions shall be subject to Federal, State, Territorial, and 

local taxation to the same extent as other similar property is taxed. 

Nothing herein contained shall prevent holdings in any Federal 

credit union organized hereunder from being included in the valuation of the personal property of the owners or holders thereof in 

assessing taxes imposed by authority of the State or political subdivision thereof in which the Federal credit union is located; but 

the duty or burden of collecting or enforcing the payment of such 

a tax shall not be imposed upon any such Federal credit union and 

the tax shall not exceed the rate of taxes imposed upon holdings 

in domestic credit unions. 

PARTIA L INVALIDITY ; RIGH T TO AMEN D 

SEC. 123. [12 U.S.C. 1769] (a) If any provision of this Act, or 

the application thereof to any person or circumstance, is held invalid, the remainder of the Act, and the application of such provision to other persons or circumstances, shall not be affected 

thereby. 

(b) The right to alter, amend, or repeal this Act or any part 

thereof, or any charter issued pursuant to the provisions of this 

Act, is expressly reserved. 

SPACE I N FEDERA L BUILDING S 

SEC. 124. [12 U.S.C. 1770] Upon application by any credit 

union organized under State law or by any Federal credit union 

organized in accordance with the terms of this Act,1 which application shall be addressed to the officer or agency of the United States 

charged with the allotment of space in the Federal buildings in the 

community or district in which such credit union does business, 

such officer or agency may in his or its discretion allot space to 

such credit union without charge for rent or services if at least 95 

percent of the membership of the credit union to be served by the 

allotment of space is composed of persons who either are presently 

Federal employees or were Federal employees at the time of admission into the credit union, and members of their families, and if 

space is available. For the purpose of this section, the term ''services'' includes, but is not limited to, the providing of lighting, heating, cooling, electricity, office furniture, office machines and equipment, telephone service (including installation lines and equipment 

and other expenses associated with telephone service), and security 

systems (including installation of and other expenses associated 

with security systems). Where there is an agreement for the pay1

 Error in amendment made by section 2854(1) of Public Law 103-160 (107 Stat. 1908). The 

amendment attempted to strike ''at least 95 per centum'' and all that follows through ''and the 

members of their families,''. The word ''the'' between ''and'' and ''members'' does not appear. 
Sec. 125A FEDERAL CREDIT UNION ACT 428 

ment of costs associated with the provision of space or services, 

nothing in title 31, United States Code, or any other provision of 

law, shall be construed to prohibit or restrict payment by reimbursement to the miscellaneous receipts or other appropriate account of the Treasury. 

CONVERSION FRO M FEDERAL TO STATE CREDIT UNIO N AND FRO M 

STATE TO FEDERAL CREDIT UNIO N 

SEC. 125. [12 U.S.C. 1771] (a) A Federal credit union may be 

converted into a state credit union under the laws of any state, the 

District of columbia, the several Territories and possessions of the 

United States, the Panama Canal Zone, or the Commonwealth of 

puerto Rico, by complying with the following requirements: 

(1) The proposition for such conversion shall first be approved, 

and a date set for a vote thereon by the members (either at a meeting to be held on such date or by written ballot to be filed on or 

before such date), by a majority of the directors of the Federal 

credit union. Written notice of the proposition and of the date set 

for the vote shall then be delivered in person to each member, or 

mailed to each member at the address for such member appearing 

on the records of the credit union, not more than thirty nor less 

than seven days prior to such date. Approval of the proposition for 

conversion shall be by the affirmative vote of a majority of the 

members of the credit union who vote on the proposal. The written 

notice of the proposition shall in boldface type state that the issue 

will be decided by a majority of the members who vote. 

(2) A statement of the results of the vote, verified by the affidavits of the president or vice president and the secretary, shall be 

filed with the Administration within ten days after the vote is 

taken. 

(3) promptly after the vote is taken and in no event later than 

ninety days thereafter, if the proposition for conversion was approved by such vote, the credit union shall take such action as may 

be necessary under the applicable state law to make it a state 

credit union, and within ten days after receipt of the state credit 

union charter there shall be filed with the Administration a copy 

of the charter thus issued. upon such filing the credit union shall 

cease to be a Federal credit union. 

(4) upon ceasing to be a Federal credit union, such credit 

union shall no longer be subject to any of the provisions of this Act. 

The successor state credit union shall be vested with all of the assets and shall continue responsible for all of the obligations of the 

Federal credit union to the same extent as though the conversion 

had not taken place. 

(b)(1) A State credit union, organized under the laws of any 

State, the District of Columbia, the several Territories and possessions of the United States, the Panama Canal Zone, or the Commonwealth of puerto Rico, may be converted into a Federal credit 

union by (A) complying with all State requirements requisite to 

enabling it to convert to a Federal credit union or to cease being 

a State credit union, (B) filing with the Administration proof of 

such compliance, satisfactory to the Board, and (C) filing with the 

Administration an organization certificate as required by this Act. 
367 FEDERAL CREDIT UNION ACT Sec. 130A 

(2) When the Board has been satisfied that all of such requirements, and all other requirements of this Act, have been complied 

with, the Board shall approve the organization certificate. Upon 

such approval, the State credit union shall become a Federal credit 

union as of the date it ceases to be a State credit union. The Federal credit union shall be vested with all of the assets and shall 

continue responsible for all of the obligations of the State credit 

union to the same extent as though the conversion had not taken 

place. (12 U.S.C. 1771) 

TERRITORIAL APPLICABILITY OF ACT 

SEC. 126. [12 U.S.C. 1772] The provisions of this Act shall 

apply to the several States, the District of Columbia, the several 

Territories, including the trust territories, and possessions of the 

United States, the Panama Canal Zone, and the Commonwealth of 

Puerto Rico. 

GIFTS 

SEC. 127. [12 U.S.C. 1772a] The Board is authorized to accept 

gifts of money made unconditionally by will or otherwise for the 

carrying out of any of the functions under this Act. A conditional 

gift of money made by will or otherwise for such purposes may be 

accepted and used in accordance with its conditions, but no such 

gift shall be accepted which is conditioned upon any expenditure 

not to be met therefrom or from income thereof unless the Board 

determines that supplementation of such gift from the fees it may 

expend pursuant to sections 105 and 106 or from any funds appropriated pursuant to section 120(f)(2)(C) for the purpose of making 

such expenditure will not adversely affect the sound administration 

of this Act. Any such gift shall be deposited in the Treasury of the 

United States for the account of the Administration and may be expended in accordance with section 6 or as provided in the preceding 

sentence. 

SEC. 128. [12 U.S.C. 1772b] APPORTIONMENT . 

Notwithstanding any other provision of law, funds received by 

the Board pursuant to any method provided by this Act, and interest, dividend, or other income thereon, shall not be subject to 

apportionment for the purpose of chapter 15 of title 31, United 

States Code, or under any other authority. 

SEC. 129. [12 U.S.C. 1772c] TRUST FUND . 

Notwithstanding any other provision of law, all moneys of the 

Board shall be treated as trust funds for the purpose of section 

256(a)(2) of the Balanced Budget and Emergency Deficit Control 

Act of 1985. This section is effective for fiscal year 1986 and every 

fiscal year thereafter. 

SEC. 130. [12 U.S.C. 1772c-1] COMMUNIT Y DEVELOPMEN T REVOLVIN G 

LOA N FUN D FOR CREDI T UNIONS. 

(a) IN GENERAL.—The Board may exercise the authority 

granted to it by the Community Development Credit Union Revolving Loan Fund Transfer Act, including any additional appropriation made or earnings accrued, subject only to this section and to 

regulations prescribed by the Board. 
Sec. 131A FEDERAL CREDIT UNION ACT 428 

(b) INVESTMENT.—Th e Board may invest any idle Fund moneys 

in United States Treasury securities. Any interest accrued on such 

securities shall become a part of the Fund. 

(c) LOANS.—The Board may require that any loans made from 

the Fund be matched by increased shares in the borrower credit 

union. 

(d) INTEREST.—Interest earned by the Fund may be allocated 

by the Board for technical assistance to community development 

credit unions, subject to an appropriations Act. 

(e) DEFINITION.—A s used in this section, the term ''Fund'' 

means the Community Development Credit Union Revolving Loan 

Fund. 

SEC. 131. [12 U.S.C. 1772d] FORFEITUR E OF ORGANIZATION CERTIFICATE FOR MONEY LAUNDERIN G OR CASH TRANSACTION 

REPORTIN G OFFENSES. 

(a) FORFEITURE OF FRANCHISE FOR MONE Y LAUNDERING OR 

CASH TRANSACTION REPORTING OFFENSES.— 

(1) CONVICTION OF TITLE 18 OFFENSES.— 

(A) DUT Y TO NOTIFY.—If a credit union has been convicted of any criminal offense under section 1956 or 1957 

of title 18, United States Code, the Attorney General shall 

provide to the Board a written notification of the conviction and shall include a certified copy of the order of conviction from the court rendering the decision. 

(B) NOTICE OF TERMINATION; PRETERMINATION HEARING.—After receiving written notification from the Attorney General of such a conviction, the Board shall issue to 

such credit union a notice of its intention to terminate all 

rights, privileges, and franchises of the credit union and 

schedule a pretermination hearing. 

(2) CONVICTION OF TITLE 31 OFFENSES.—If a credit union is 

convicted of any criminal offense under section 5322 or 5324 of 

title 31, United States Code, after receiving written notification 

from the Attorney General, the Board may issue to such credit 

union a notice of its intention to terminate all rights, privileges, and franchises of the credit union and schedule a 

pretermination hearing. 

(3) JUDICIAL REVIEW.—Section 206(j) shall apply to any 

proceeding under this section. 

(b) FACTORS TO BE CONSIDERED.—In determining whether a 

franchise shall be forfeited under subsection (a), the Board shall 

take into account the following factors: 

(1) The extent to which directors, committee members, or 

senior executive officers (as defined by the Board in regulations 

which the Board shall prescribe) of the credit union knew of, 

or were involved in, the commission of the money laundering 

offense of which the credit union was found guilty. 

(2) The extent to which the offense occurred despite the 

existence of policies and procedures within the credit union 

which were designed to prevent the occurrence of any such offense. 

(3) The extent to which the credit union has fully cooperated with law enforcement authorities with respect to the 
367 FEDERAL CREDIT UNION ACT Sec. 201A 

investigation of the money laundering offense of which the 

credit union was found guilty. 

(4) The extent to which the credit union has implemented 

additional internal controls (since the commission of the offense of which the credit union was found guilty) to prevent 

the occurrence of any other money laundering offense. 

(5) The extent to which the interest of the local community 

in having adequate deposit and credit services available would 

be threatened by the forfeiture of the franchise. 

(c) SUCCESSOR LIABILITY.—Thi s section shall not apply to a 

successor to the interests of, or a person who acquires, a credit 

union that violated a provision of law described in subsection (a), 

if the successor succeeds to the interests of the violator, or the acquisition is made, in good faith and not for purposes of evading this 

section or regulations prescribed under this section. 

TITLE II—SHARE INSURANCE 

INSURANCE OF MEMBER ACCOUNTS AND ELIGIBILITY PROVISIONS 

SEC. 201. [12 U.S.C. 1781] (a) The Board, as hereinafter provided, shall insure the member accounts of all Federal credit 

unions and it may insure the member accounts of (1) credit unions 

organized and operated according to the laws of any State, the District of Columbia, the several territories, including trust territories, 

and possessions of the United States, the Panama Canal Zone, or 

the Commonwealth of Puerto Rico, and (2) credit unions organized 

and operating under the jurisdiction of the Department of Defense 

if such credit unions are operating in compliance with the requirements of title I of this Act and regulations issued thereunder. 

(b) Application for insurance of member accounts shall be made 

immediately by each Federal credit union and may be made at any 

time by a State credit union or a credit union operating under the 

jurisdiction of the Department of Defense. Applications for such 

insurance shall be in such form as the Board shall provide and 

shall contain an agreement by the applicant— 

(1) to pay the reasonable cost of such examinations as the 

Board may deem necessary in connection with determining the 

eligibility of the applicant for insurance: Provided, That examinations required under title I of this Act shall be so conducted 

that the information derived therefrom may be utilized for 

share insurance purposes, and examinations conducted by 

State regulatory agencies shall be utilized by the Board for 

such purposes to the maximum extent feasible; 

(2) to permit and pay the reasonable cost of such examinations as in the judgment of the Board may from time to time 

be necessary for the protection of the fund and of other insured 

credit unions; 

(3) to permit the Board to have access to any information 

or report with respect to any examination made by or for any 

public regulatory authority, including any commission, board, 

or authority having supervision of a State-chartered credit 

union, and furnish such additional information with respect 

thereto as the Board may require; 
Sec. 201A FEDERAL CREDIT UNION ACT 428 

(4) to provide protection and indemnity against burglary, 

defalcation, and other similar insurable losses, of the type, in 

the form, and in an amount at least equal to that required by 

the laws under which the credit union is organized and operates; 

(5) to maintain such regular reserves as may be required 

by the laws of the State, district, territory, or other jurisdiction 

pursuant to which it is organized and operated, in the case of 

a State-chartered credit union, or as may be required by section 116 of this Act, in the case of a Federal credit union; 

(6) to maintain such special reserves as the Board, by regulation or in special cases, may require for protecting the interest of members or to assure that all insured credit unions 

maintain regular reserves which are not less than those required under title I of this Act; 

(7) not to issue or have outstanding any account or security the form of which, by regulation or in special cases, has 

not been approved by the Board except for accounts authorized 

by State law for State credit unions; 

(8) to pay and maintain its deposit and to pay the premium charges for insurance imposed by this title; and 

(9) to comply with the requirements of this title and of regulations prescribed by the Board pursuant thereto. 

(c)(1) Before approving the application of any credit union for 

insurance of its member accounts, the Board shall consider— 

(A) the history, financial condition, and management policies of the applicant; 

(B) the economic advisability of insuring the applicant 

without undue risk of the fund; 

(C) the general character and fitness of the applicant's 

management; 

(D) the convenience and needs of the members to be served 

by the applicant; and 

(E) whether the applicant is a cooperative association organized for the purpose of promoting thrift among its members 

and creating a source of credit for provident or productive purposes. 

(2) The Board shall disapprove the application of any credit 

union for insurance of its member accounts if it finds that its reserves are inadequate, that its financial condition and policies are 

unsafe or unsound, that its management is unfit, that insurance of 

its member accounts would otherwise involve undue risk to the 

fund, or that its powers and purposes are inconsistent with the promotion of thrift among its members and the creation of a source of 

credit for provident or productive purposes. 

(d) Upon the approval of any application for insurance, the 

Board shall notify the applicant and shall issue to it a certificate 

evidencing the fact that it is, as of the date of issuance of the certificate, an insured credit union under the provisions of this title. 

(e) PROHIBITION ON CERTAIN ASSOCIATIONS.— 

(1) I N GENERAL.—No insured credit union may be sponsored by or accept financial support, directly or indirectly, from 

any Government-sponsored enterprise, if the credit union in-
367 FEDERAL CREDIT UNION ACT Sec. 202A 

cludes the customers of the Government-sponsored enterprise 

in the field of membership of the credit union. 

(2) ROUTIN E BUSINESS FINANCING.—Paragraph (1) shall not 

apply with respect to advances or other forms of financial 

assistance generally provided by a Government-sponsored 

enterprise in the ordinary course of business of the enterprise. 

(3) GOVERNMENT-SPONSORED ENTERPRISE DEFINED.—Fo r 

purposes of this subsection, the term ''Government-sponsored 

enterprise'' has the meaning given to such term in section 

1404(e)(1)(A) of the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989. 

(4) EMPLOYEE CREDIT UNION.—No provision of this subsection shall be construed as prohibiting any employee of a 

Government-sponsored enterprise from becoming a member of 

a credit union whose field of membership is the employees of 

such enterprise. 

REPORTS OF CONDITION; CERTIFIED STATEMENTS; PREMIUM S FOR 

INSURANCE 

SEC. 202. [12 U.S.C. 1782] (a)(1) Each insured credit union 

shall make reports of condition to the Board upon dates which 

shall be selected by them. Such reports of condition shall be in such 

form and shall contain such information as the Board may require. 

The reporting dates selected for reports of condition shall be the 

same for all insured credit unions except that when any of said reporting dates is a nonbusiness day for any credit union the preceding business day shall be its reporting date. The total amount 

of the member accounts of each insured credit union as of each reporting date shall be reported in such reports of condition in 

accordance with regulations prescribed by the Board. Each report 

of condition shall contain a declaration by the president, by a vice 

president, by the treasurer, or by any other officer designated by 

the board of directors of the reporting credit union to make such 

declaration, that the report is true and correct to the best of such 

officer's knowledge and belief. Unless such requirement is waived 

by the Board, the correctness of each report of condition shall be 

attested by the signatures of three of the officers of the reporting 

credit union with the declaration that the report has been examined by them and to the best of their knowledge and belief is true 

and correct. 

(2) The Board may call for such other reports as it may from 

time to time require. 

(3) The Board may require reports of condition to be published 

in such manner, not inconsistent with any applicable law, as it 

may direct. Any insured credit union which maintains procedures 

reasonably adapted to avoid any inadvertent error and, unintentionally and as a result of such an error, fails to submit or publish 

any report required under this subsection or section 106, within the 

period of time specified by the Board, or submits or publishes any 

false or misleading report or information, or inadvertently transmits or publishes any report which is minimally late, shall be subject to a penalty of not more than $2,000 for each day during which 

such failure continues or such false or misleading information is 
Sec. 202 FEDERAL CREDIT UNION ACT 388 

not corrected. The insured credit union shall have the burden of 

proving that an error was inadvertent and that a report was inadvertently transmitted or published late. Any insured credit union 

which fails to submit or publish any report required under this 

subsection or section 106, within the period of time specified by the 

Board, or submits or publishes any false or misleading report or 

information, in a manner not described in the 2nd preceding sentence shall be subject to a penalty of not more than $20,000 for 

each day during which such failure continues or such false or misleading information is not corrected. Notwithstanding the preceding sentence, if any insured credit union knowingly or with 

reckless disregard for the accuracy of any information or report described in such sentence submits or publishes any false or misleading report or information, the Board may assess a penalty of 

not more than $1,000,000 or 1 percent of total assets of such credit 

union, whichever is less, per day for each day during which such 

failure continues or such false or misleading information is not corrected. Any penalty imposed under any of the 4 preceding sentences shall be assessed and collected by the Board in the manner 

provided in section 206(k)(2) (for penalties imposed under such section) and any such assessment (including the determination of the 

amount of the penalty) shall be subject to the provisions of such 

section. Any insured credit union against which any penalty is assessed under this subsection shall be afforded an agency hearing 

if such insured credit union submits a request for such hearing 

within 20 days after the issuance of the notice of assessment. Section 206(j) shall apply to any proceeding under this subsection. 

(4) The Board may accept any report of condition made to any 

commission, board, or authority having supervision of a State-chartered credit union and may furnish to any such commission, board, 

or authority reports of condition made to the Board. 

(5) Reports required under title I of this Act shall be so prepared that they can be used for share insurance purposes. To the 

maximum extent feasible, the Board shall use for insurance purposes reports submitted to State regulatory agencies by State-chartered credit unions. 

(6) 1 AUDI T REQUIREMENT.— 

(A) IN GENERAL.—Before the end of the 120-day period 

beginning on the date of the enactment of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 

1989 and notwithstanding any other provision of Federal 

or State law, the Board shall prescribe, by regulation, 

audit standards which require an outside, independent 

audit of any insured credit union by a certified public 

accountant for any fiscal year (of such credit union)— 

(i) for which such credit union has not conducted 

an annual supervisory committee audit; 

(ii) for which such credit union has not received a 

complete and satisfactory supervisory committee 

audit; or 

1

 Indentation so in law. 
417 

FEDERAL CREDIT UNION ACT Sec. 202 

(iii) during which such credit union has experienced persistent and serious recordkeeping deficiencies, as determined by the Board. 

(B) UNSAFE OR UNSOUND PRACTICE.—The Board may 

treat the failure of any insured credit union to obtain an 

outside, independent audit for any fiscal year for which 

such audit is required under subparagraph (A) or (D) as an 

unsafe or unsound practice within the meaning of section 

206(b). 

(C) ACCOUNTING PRINCIPLES.— 

(i) IN GENERAL.—Accounting principles applicable 

to reports or statements required to be filed with the 

Board by each insured credit union shall be uniform 

and consistent with generally accepted accounting 

principles. 

(ii) BOARD DETERMINATION.—If the Board determines that the application of any generally accepted 

accounting principle to any insured credit union is not 

appropriate, the Board may prescribe an accounting 

principle for application to the credit union that is no 

less stringent than generally accepted accounting principles. 

(iii) D E MINIMU S EXCEPTION.—This subparagraph 

shall not apply to any insured credit union, the total 

assets of which are less than $10,000,000, unless prescribed by the Board or an appropriate State credit 

union supervisor. 

( D ) LARGE CREDIT UNIO N AUDIT REQUIREMENT.— 

(i) IN GENERAL.—Each insured credit union having 

total assets of $500,000,000 or more shall have an annual independent audit of the financial statements of 

the credit union, performed in accordance with generally accepted auditing standards by an independent 

certified public accountant or public accountant licensed by the appropriate State or jurisdiction to perform those services. 

(ii) VOLUNTARY AUDITS.—If a Federal credit union 

that is not required to conduct an audit under clause 

(i), and that has total assets of more than $10,000,000 

conducts such an audit for any purpose, using an independent auditor who is compensated for his or her 

audit services with respect to that audit, the audit 

shall be performed consistent with the accountancy 

laws of the appropriate State or jurisdiction, including 

licensing requirements. 

(7) 1 REPORT TO INDEPENDENT AUDITOR.— 

(A) IN GENERAL.—Each insured credit union which has 

engaged the services of an independent auditor to audit 

such depository institution within the past 2 years shall 

transmit to such auditor a copy of the most recent report 

of condition made by such credit union (pursuant to this 

1

 indentation so in law. 
Sec. 202A FEDERAL CREDIT UNION ACT 

428 

Act or any other provision of law) and a copy of the most 

recent report of examination received by such credit union. 

(B) ADDITIONAL INFORMATION.—I n addition to the copies of the reports required to be provided to an auditor 

under subparagraph (A), each insured credit union shall 

provide such auditor with— 

(i) a copy of any supervisory memorandum of 

understanding with such credit union and any written 

agreement between the Board or a State regulatory 

agency and the credit union which is in effect during 

the period covered by the audit; and 

(ii) a report of any action initiated or taken by the 

Board during such period under subsection (e), (f), (g), 

(i), (l), or (q) of section 206, or any similar action taken 

by a State regulatory dagency under State law, or any 

other civil money penalty assessed by the Board under 

this Act, with respect to— 

(I) the credit union; or 

(II) any institution-affiliated party. 

(b) CERTIFIED STATEMENT.— 

(1) STATEMENT REQUIRED.— 

(A) IN GENERAL.—For each calendar year, in the case 

of an insured credit union with total assets of not more 

than $50,000,000, and for each semi-annual period in the 

case of an insured credit union with total assets of 

$50,000,000 or more, an insured credit union shall file 

with the Board, at such time as the Board prescribes, a 

certified statement showing the total amount of insured 

shares in the credit union at the close of the relevant period and both the amount of its deposit or adjustment of 

deposit and the amount of the insurance charge due to the 

Fund for that period, both as computed under subsection 

(c). 

(B) EXCEPTION FOR NEWLY INSURED CREDIT UNION. — 

Subparagraph (A) shall not apply with respect to a credit 

union that became insured during the reporting period. 

(2) FORM.—The certified statements required to be filed 

with the Board pursuant to this subsection shall be in such 

form and shall set forth such supporting information as the 

Board shall require. 

(3) CERTIFICATION.—The president of the credit union or 

any officer designated by the board of directors shall certify, 

with respect to each statement required to be filed with the 

Board pursuant to this subsection, that to the best of his or her 

knowledge and belief the statement is true, correct, complete, 

and in accordance with this title and the regulations issued 

under this title. 

(c)(1)(A)(i) Each insured credit union shall pay to and maintain 

with the National Credit Union Share Insurance Fund a deposit in 

an amount equaling 1 per centum of the credit union's insured 

shares. 

(ii) The Board may, in its discretion, authorize insured credit 

unions to initially fund such deposit over a period of time in excess 
417 FEDERAL CREDIT UNION ACT Sec. 202 

of one year if necessary to avoid adverse effects on the condition 

of insured credit unions. 

(iii)1 PERIODIC ADJUSTMENT.—The amount of each 

insured credit union's deposit shall be adjusted as follows, in accordance with procedures determined by the 

Board, to reflect changes in the credit union's insured 

shares: 

(i) annually, in the case of an insured credit 

union with total assets of not more than 

$50,000,000; and 

(ii) semi-annually, in the case of an insured 

credit union with total assets of $50,000,000 or 

more. 

(B)(i) The deposit shall be returned to an insured credit union 

in the event that its insurance coverage is terminated, it converts 

to insurance coverage from another source, or in the event the 

operations of the fund are transferred from the National Credit 

Union Administration Board. 

(ii) The deposit shall be returned in accordance with procedures and valuation methods determined by the Board, but in no 

event shall the deposit be returned any later than one year after 

the final date on which no shares of the credit union are insured 

by the Board. 

(iii) The deposit shall not be returned in the event of liquidation on account of bankruptcy or insolvency. 

(iv) The deposit funds may be used by the fund if necessary to 

meet its expenses, in which case the amount so used shall be expensed and shall be replenished by insured credit unions in accordance with procedures established by the Board. 

(2) 1 INSURANCE PREMIU M CHARGES.— 

(A) IN GENERAL.—Each insured credit union shall, at 

such times as the Board prescribes (but not more than 

twice in any calendar year), pay to the Fund a premium 

charge for insurance in an amount stated as a percentage 

of insured shares (which shall be the same for all insured 

credit unions). 

(B) RELATION OF PREMIU M CHARGE TO EQUITY RATIO OF 

FUND.—The Board may assess a premium charge only if— 

(i) the Fund's equity ratio is less than 1.3 percent; 

and 

(ii) the premium charge does not exceed the 

amount necessary to restore the equity ratio to 1.3 

percent. 

( C ) PREMIU M CHARGE REQUIRED IF EQUITY RATIO FALLS 

BELOW 1.2 PERCENT.—If the Fund's equity ratio is less than 

1.2 percent, the Board shall, subject to subparagraph (B), 

assess a premium charge in such an amount as the Board 

determines to be necessary to restore the equity ratio to, 

and maintain that ratio at, 1.2 percent. 

(3) DISTRIBUTIONS FROM FUND REQUIRED.— 

1

 indentation so in law. 
Sec. 202 FEDERAL CREDIT UNION ACT 388 

(A) IN GENERAL.—The Board shall effect a pro rata 

distribution to insured credit unions after each calendar 

year if, as of the end of that calendar year— 

(i) any loans to the Fund from the Federal Government, and any interest on those loans, have been 

repaid; 

(ii) the Fund's equity ratio exceeds the normal 

operating level; and 

(iii) the Fund's available assets ratio exceeds 1.0 

percent. 

(B) AMOUN T OF DISTRIBUTION.—The Board shall distribute under subparagraph (A) the maximum possible 

amount that— 

(i) does not reduce the Fund's equity ratio below 

the normal operating level; and 

(ii) does not reduce the Fund's available assets 

ratio below 1.0 percent. 

( C) CALCULATION BASED ON CERTIFIED STATEMENTS.— 

in calculating the Fund's equity ratio and available assets 

ratio for purposes of this paragraph, the Board shall determine the aggregate amount of the insured shares in all insured credit unions from insured credit unions certified 

statements under subsection (b) for the final reporting period of the calendar year referred to in subparagraph (A). 

(4) TIMELINESS AND ACCURACY OF DATA.—I n calculating 

the available assets ratio and equity ratio of the Fund, the 

Board shall use the most current and accurate data reasonably 

available. 

(d)(1) Any insured credit union which fails to make any report 

of condition under subsection (a) of this section or to file any certified statement required to be filed by it in connection with determining the amount of its deposit or any premium charge for insurance may be compelled to make such report or to file such statement by mandatory injunction or other appropriate remedy in a 

suit brought for such purpose by the Board against the credit union 

and any officer or officers thereof. Any such suit may be brought 

in any court of the United States of competent jurisdiction in the 

district or territory in which the principal office of the credit union 

is located. 

(2) 1 PENALTY FOR FAILURE TO MAKE ACCURATE CERTIFIED 

STATEMENT OR TO PAY DEPOSIT OR PREMIUM.— 

(A) FIRST TIER.—An y insured credit union which— 

(i) maintains procedures reasonably adapted to 

avoid any inadvertent error and, unintentionally and 

as a result of such an error, fails to submit any certified statement under subsection (b)(1) within the period of time required or submits a false or misleading 

certified statement under such subsection; or 

(ii) submits the statement at a time which is minimally after the time required, 

shall be subject to a penalty of not more than $2,000 for 

each day during which such failure continues or such false 

1

 Indentation so in law. 
367 FEDERAL CREDIT UNION ACT Sec. 202A 

and misleading information is not corrected. The insured 

credit union shall have the burden of proving that an error 

was inadvertent or that a statement was inadvertently 

submitted late. 

(B) SECOND TIER.—An y insured credit union which— 

(i) fails to submit any certified statement under 

subsection (b)(1) within the period of time required or 

submits a false or misleading certified statement in a 

manner not described in subparagraph (A); or 

(ii) fails or refuses to pay any deposit or premium 

for insurance required under this title, 

shall be subject to a penalty of not more than $20,000 for 

each day during which such failure continues, such false 

and misleading information is not corrected, or such deposit or premium is not paid. 

(C) THIR D TIER.—Notwithstanding subparagraphs (A) 

and (B), if any insured credit union knowingly or with 

reckless disregard for the accuracy of any certified statement under subsection (b)(1) submits a false or misleading 

certified statement under such subsection, the Board may 

assess a penalty of not more than $1,000,000 or not more 

than 1 percent of the total assets of the credit union, 

whichever is less, per day for each day during which the 

failure continues or the false or misleading information in 

such statement is not corrected. 

(D) ASSESSMENT PROCEDURE.—Any penalty imposed 

under this paragraph shall be assessed and collected by 

the Board in the manner provided in section 206(k)(2) (for 

penalties imposed under such section) and any such 

assessment (including the determination of the amount of 

the penalty) shall be subject to the provisions of such section. 

(E) HEARING.—Any insured credit union against which 

any penalty is assessed under this paragraph shall be afforded an agency hearing if the credit union submits a request for such hearing within 20 days after the issuance 

of the notice of the assessment. Section 206(j) shall apply 

to any proceeding under this subparagraph. 

( F ) SPECIAL RULE FOR DISPUTED PAYMENTS.—No penalty may be assessed for the failure of any insured credit 

union to pay any deposit or premium for insurance if— 

(i) the failure is due to a dispute between the 

credit union and the Board over the amount of the deposit or premium which is due from the credit union; 

and 

(ii) the credit union deposits security satisfactory 

to the Board for payment of the deposit or insurance 

premium upon final determination of the dispute. 

(3) No insured credit union shall pay any dividends on its insured shares or distribute any of its assets while it remains in default in the payment of its deposit or any premium charge for 

insurance due to the fund. Any director or officer of any insured 

credit union who knowingly participates in the declaration or payment of any such dividend or in any such distribution shall, upon 
Sec. 202A FEDERAL CREDIT UNION ACT 428 

conviction, be fined not more than $1,000 or imprisoned not more 

than one year, or both. The provisions of this paragraph shall not 

be applicable in any case in which the default is due to a dispute 

between the credit union and the Board over the amount of its deposit or the premium charge due to the fund if the credit union deposits security satisfactory to the Board for payment of its deposit 

or the premium charge upon final determination of the issue. 

(e) The Board, in a suit brought at law or in equity in any 

court of competent jurisdiction, shall be entitled to recover from 

any insured credit union the amount of any unpaid deposit or premium charge for insurance lawfully payable by the credit union to 

the fund, whether or not such credit union shall have made any report of condition under subsection (a) of this section or filed any 

certified statement required under subsection (b) of this section and 

whether or not suit shall have been brought to compel the credit 

union to make any such report or to file any such statement. No 

action or proceeding shall be brought for the recovery of any deposit or premium charge due to the fund, or for the recovery of any 

amount paid to the fund in excess of the amount due it, unless 

such action or proceeding shall have been brought within five years 

after the right accrued for which the claim is made. where the insured credit union has made or filed with the Board a false or 

fraudulent certified statement with the intent to evade, in whole or 

in part, the payment of its deposit or any premium charge, the 

claim shall not be deemed to have accrued until the discovery by 

the Board of the fact that the certified statement is false or fraudulent. 

(f) should any Federal credit union fail to make any report of 

condition under subsection (a) of this section or to file any certified 

statement required to be filed under subsection (b) of this section 

or to pay its deposit or any premium charge for insurance required 

to be paid under any provision of this title, and should the credit 

union fail to correct such failure within thirty days after written 

notice has been given by the Board to an officer of the credit union, 

citing this subsection and stating that the credit union has failed 

to make any such report or file any such statement or pay any such 

deposit or premium charge as required by law, all the rights, privileges, and franchises of the credit union granted to it under title 

I of this Act shall be thereby forfeited. Whether or not the penalty 

provided in this subsection has been incurred shall be determined 

and adjudged by any court of the United States of competent jurisdiction in a suit brought for that purpose in the district or territory 

in which the principal office of such credit union is located, under 

direction of and by the Board in its own name, before the credit 

union shall be declared dissolved. The remedies provided in this 

subsection and in subsections (d) and (e) of this section shall not 

be construed as limiting any other remedies against any insured 

credit union but shall be in addition thereto. 

(g) Each insured credit union shall maintain such records as 

will readily permit verification of the correctness of its reports of 

condition, certified statements, and deposit and premium charges 

for insurance. However, no insured credit union shall be required 

to retain such records for such purpose for a period in excess of five 

years from the date of the making of any such report, the filing of 
367 FEDERAL CREDIT UNION ACT Sec. 203A 

any such statement, or the payment of any deposit or adjustment 

thereof or any premium charge, except that when there is a dispute 

between the insured credit union and the Board over the amount 

of any deposit or adjustment thereof or any premium charge for 

insurance the credit union shall retain such records until final 

determination of the issue. 

(h) DEFINITIONS.—Fo r purposes of this section, the following 

definitions shall apply: 

(1) AVAILABL E ASSETS RATIO.—Th e term "available assets 

ratio'', when applied to the Fund, means the ratio of— 

(A) the amount determined by subtracting— 

(i) direct liabilities of the Fund and contingent liabilities for which no provision for losses has been 

made, from 

(ii) the sum of cash and the market value of 

unencumbered investments authorized under section 

203(c), to 

(B) the aggregate amount of the insured shares in all 

insured credit unions. 

(2) EQUIT Y RATIO.—Th e term "equity ratio'', when applied 

to the Fund, means the ratio of— 

(A) the amount of Fund capitalization, including insured credit unions' 1 percent capitalization deposits and 

the retained earnings balance of the Fund (net of direct liabilities of the Fund and contingent liabilities for which no 

provision for losses has been made); to 

(B) the aggregate amount of the insured shares in all 

insured credit unions. 

(3) INSURE D SHARES.—Th e term "insured shares'', when 

applied to this section, includes share, share draft, share certificate, and other similar accounts as determined by the 

Board, but does not include amounts exceeding the insured account limit set forth in section 207(c)(1)1

. 

(4) NORMA L OPERATIN G LEVEL.—Th e term "normal operating level'', when applied to the Fund, means an equity ratio 

specified by the Board, which shall be not less than 1.2 percent 

and not more than 1.5 percent. 

NATIONA L CREDI T UNIO N SHARE INSURANC E FUN D 

SEC. 203. [12 U.S.C. 1783] (a) There is hereby created in the 

Treasury of the United States a National Credit Union Share 

insurance Fund which shall be used by the Board as a revolving 

fund for carrying out the purposes of this title. Money in the fund 

shall be available upon requisition by the Board, without fiscal 

year limitation, for making payments of insurance under section 

207 of this title, for providing assistance and making expenditures 

under section 208 of this title in connection with the liquidation or 

threatened liquidation of insured credit unions, and for such 

administrative and other expenses incurred in carrying out the 

purposes of this title as it may determine to be proper. 

1So in original. The reference to "section 207(c)(1)'' probably should be a reference to "section 

207(k)(1)''. 
Sec. 203A FEDERAL CREDIT UNION ACT 

428 

(b) All deposit and premium charges for insurance paid pursuant to the provisions of section 202 of this title and all fees for 

examinations and all penalties collected by the Board under any 

provision of this title shall be deposited in the National Credit 

Union Share Insurance Fund. The Board shall report annually to 

the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Banking, Finance and Urban Affairs of 

the House of Representatives with respect to the operating level of 

the fund. Such report shall also include the results of an independent audit of the fund. 

(c) The Board may authorize the Secretary of the Treasury to 

invest and reinvest such portions of the fund as the Board may 

determine are not needed for current operations in any interestbearing securities of the United States or in any securities guaranteed as to both principal and interest by the United States or in 

bonds or other obligations which are lawful investments for fiduciary, trust, and public funds of the United States, and the income 

therefrom shall constitute a part of the fund. 

(d)(1) If, in the judgment of the Board, a loan to the fund is 

required at any time for carrying out the purposes of this title, the 

Secretary of the Treasury shall make the loan, but loans under this 

paragraph shall not exceed in the aggregate $100,000,000 outstanding at any one time. Except as otherwise provided in this subsection and in subsection (e) of this section, each loan under this 

paragraph shall be made on such terms as may be fixed by agreement between the Board and the Secretary of the Treasury. 

(2) Interest shall accrue to the Treasury on the amount of any 

outstanding loans made to the fund pursuant to paragraph (1) of 

this subsection on the basis of the average daily amount of such 

outstanding loans determined at the close of each fiscal year with 

respect to such year, and the Board shall pay the interest so accruing into the Treasury as miscellaneous receipts annually from the 

fund. The Secretary of the Treasury shall determine the applicable 

interest rate in advance by calculating the average yield to maturity (on the basis of daily closing market bid quotations during the 

month of June of the preceding fiscal year) on outstanding marketable public debt obligations of the United States having a maturity 

date of five or less years from the first day of such month of June 

and by adjusting such yield to the nearest one-eighth of 1 per centum. 

(3) For the purpose of making loans under paragraph (1) of 

this subsection, the Secretary of the Treasury is authorized to use 

as a public debt transaction the proceeds of the sale of any securities 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 hereby extended to include such 

loans. All loans and repayments under this section shall be treated 

as public debt transactions of the United States.1 

(e) So long as any loans to the fund are outstanding, the Board 

shall from time to time, not less often than annually, determine 

whether the balance in the fund is in excess of the amount which, 

1

 The Second Liberty Bond Act was repealed by section 5 of p.L. 97-258. The substance of 

such Act was reenacted as subchapter 1 of chapter 31 of title 31, United States Code. 
367 FEDERAL CREDIT UNION ACT Sec. 204A 

in its judgment, is needed to meet the requirements of the fund 

and shall pay such excess to the Secretary of the Treasury, to be 

credited against the loans to the fund. 

(f) In addition to the authority to borrow from the Secretary of 

the Treasury provided in subsection (d), if in the judgment of the 

Board, a loan to the fund is required at any time for carrying out 

the purposes of this title, the fund is authorized to borrow from the 

National Credit Union Administration Central Liquidity Facility. 

EXAMINATION OF INSURED CREDIT UNIONS 

SEC. 204. [12 U.S.C. 1784] (a) The Board shall appoint examiners who shall have power, on its behalf, to examine any insured 

credit union, any credit union making application for insurance of 

its member accounts, or any closed insured credit union whenever 

in the judgment of the Board an examination is necessary to determine the condition of any such credit union for insurance purposes. 

Each examiner shall have power to make a thorough examination 

of all of the affairs of the credit union and shall make a full and 

detailed report of the condition of the credit union to the Board. 

The Board in like manner shall appoint claim agents who shall 

have power to investigate and examine all claims for insured member accounts. Each claim agent shall have power to administer 

oaths and affirmations, to examine and to take and preserve testimony under oath as to any matter in respect to claims for insured 

accounts, and to issue subpenas and subpenas duces tecum and, for 

the enforcement thereof, to apply to the United States district court 

for the judicial district or the United States court in any territory 

in which the principal office of the credit union is located or in 

which the witness resides or carries on business. Such courts shall 

have jurisdiction and power to order and require compliance with 

any such subpena. 

(b) in connection with examinations of insured credit unions, 

or with other types of investigations to determine compliance with 

applicable law and regulations, the Board, or its designated representatives, shall have power to administer oaths and affirmations, to examine and to take and preserve testimony under oath 

as to any matter in respect of the affairs of any such credit union, 

and to issue subpenas and subpenas duces tecum and to exercise 

such others

 1 powers as are set forth in section 206(p) and, for the 

enforcement thereof, to apply to the United States district court for 

the judicial district or the United States court in any territory in 

which the principal office of the credit union is located or in which 

the witness resides or carries on business. Such courts shall have 

jurisdiction and power to order and require compliance with any 

such subpena. 

(c) in cases of refusal to obey a subpena issued to, or contumacy by, any person, the Board may invoke the aid of any court 

of the United States within the jurisdiction of which such hearing, 

examination, or investigation is carried on, or where such person 

resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, records, or other 

papers. Such court may issue an order requiring such person to ap1

 So in original. Probably should be "other". 
Sec. 204A FEDERAL CREDIT UNION ACT 428 

pear before the Board, or before a person designated by them, there 

to produce records, if so ordered, or to give testimony touching the 

matter in question. Any failure to obey such order of the court may 

be punished by such court as a contempt thereof. All process in any 

such case may be served in the judicial district whereof such person is an inhabitant or carries on business or wherever he may be 

found. No person shall be excused from attending and testifying or 

from producing books, records, or other papers in obedience to a 

subpena issued under the authority of this title on the ground that 

the testimony or evidence, documentary or otherwise, required of 

him may tend to incriminate him or subject him to penalty or forfeiture, but no individual shall be prosecuted or subject to any penalty or forfeiture for or on account of any transaction, matter, or 

thing concerning which he is compelled to testify or produce evidence, documentary or otherwise, after having claimed his privilege 

against self-incrimination, except that such individual so testifying 

shall not be exempt from prosecution and punishment for perjury 

committed in so testifying. 

(d) The Administration may accept any report of examination 

made by or to any commission, board, or authority having supervision of a state-chartered credit union and may furnish to any 

such commission, board, or authority reports of examination made 

on behalf of the Board. 

(e) FLOOD INSURANCE COMPLIANCE BY INSURED CREDIT 

UNIONS. — 

(1) EXAMINATION.—Th e Board shall, during each examination conducted under this section, determine whether the insured credit union is complying with the requirements of the 

national flood insurance program. 

(2) REPORT.— 

(A) REQUIREMENT.—No t later than 1 year after the 

date of enactment of the Riegle Community Development 

and Regulatory Improvement Act of 1994 and biennially 

thereafter for the next 4 years, the Board shall submit a 

report to the Congress on compliance by insured credit 

unions with the requirements of the national flood insurance program. 

(B) CONTENTS.—The report shall include a description 

of the methods used to determine compliance, the number 

of insured credit unions examined during the reporting 

year, a listing and total number of insured credit unions 

found not to be in compliance, actions taken to correct incidents of noncompliance, and an analysis of compliance, including a discussion of any trends, patterns, and problems, 

and recommendations regarding reasonable actions to improve the efficiency of the examinations processes. 

(f) ACCESS TO LIQUIDITY.—Th e Board shall— 

(1) periodically assess the potential liquidity needs of each 

insured credit union, and the options that the credit union has 

available for meeting those needs; and 

(2) periodically assess the potential liquidity needs of insured credit unions as a group, and the options that insured 

credit unions have available for meeting those needs. 
417 

FEDERAL CREDIT UNION ACT Sec. 205 

(g) SHARING INFORMATION WIT H FEDERAL RESERVE BANKS.— 

The Board shall, for the purpose of facilitating insured credit 

unions' access to liquidity, make available to the Federal reserve 

banks (subject to appropriate assurances of confidentiality) information relevant to making advances to such credit unions, including the Board's reports of examination. 

REQUIREMENTS GOVERNING INSURED CREDIT UNIONS 

SEC. 205. [12 U.S.C. 1785] (a) Every insured credit union shall 

display at each place of business maintained by it a sign or signs 

indicating that its member accounts are insured by the Board and 

shall include in all of its advertisements a statement to the effect 

that its member accounts are insured by the Board. The Board may 

exempt from this requirement advertisements which do not relate 

to member accounts or advertisements in which it is impractical to 

include such a statement. The Board shall prescribe by regulation 

the forms of such signs, the manner of display, the substance of 

any such statement, and the manner of use. 

(b)(1) Except as provided in paragraph (2), no insured credit 

union shall, without the prior approval of the Board— 

(A) merge or consolidate with any noninsured credit union 

or institution; 

(B) assume liability to pay any member accounts in, or 

similar liabilities of, any noninsured credit union or institution; 

(C) transfer assets to any noninsured credit union or institution in consideration of the assumption of liabilities for any 

portion of the member accounts in such insured credit union; 

or 

(D) convert into a noninsured credit union or institution. 

(2) 1 CONVERSION OF INSURED CREDIT UNIONS TO MUTUAL 

SAVINGS BANKS.— 

(A) IN GENERAL.—Notwithstanding paragraph (1), an 

insured credit union may convert to a mutual savings 

bank or savings association (if the savings association is in 

mutual form), as those terms are defined in section 3 of 

the Federal Deposit Insurance Act, without the prior approval of the Board, subject to the requirements and procedures set forth in the laws and regulations governing mutual savings banks and savings associations. 

(B) CONVERSION PROPOSAL.—A proposal for a conversion described in subparagraph (A) shall first be approved, 

and a date set for a vote thereon by the members (either 

at a meeting to be held on that date or by written ballot 

to be filed on or before that date), by a majority of the 

directors of the insured credit union. Approval of the proposal for conversion shall be by the affirmative vote of a 

majority of the members of the insured credit union who 

vote on the proposal. 

(C) NOTICE OF PROPOSAL TO MEMBERS.—A n insured 

credit union that proposes to convert to a mutual savings 

bank or savings association under subparagraph (A) shall 

1

 indentation so in law. 
Sec. 205A FEDERAL CREDIT UNION ACT 428 

submit notice to each of its members who is eligible to vote 

on the matter of its intent to convert— 

(i) 90 days before the date of the member vote on 

the conversion; 

(ii) 60 days before the date of the member vote on 

the conversion; and 

(iii) 30 days before the date of the member vote on 

the conversion. 

(D) NOTICE OF PROPOSAL TO BOARD.—The Board may 

require an insured credit union that proposes to convert to 

a mutual savings bank or savings association under subparagraph (A) to submit a notice to the Board of its intent 

to convert during the 90-day period preceding the date of 

the completion of the conversion. 

( E) INAPPLICABILITY OF ACT UPON CONVERSION.—Upon 

completion of a conversion described in subparagraph (A), 

the credit union shall no longer be subject to any of the 

provisions of this Act. 

( F) LIMI T ON COMPENSATION OF OFFICIALS.— 

(i) I N GENERAL.—No director or senior management official of an insured credit union may receive 

any economic benefit in connection with a conversion 

of the credit union as described in subparagraph (A), 

other than— 

(i) director fees; and 

(ii) compensation and other benefits paid to 

directors or senior management officials of the 

converted institution in the ordinary course of 

business. 

(ii) SENIOR MANAGEMENT OFFICIAL.—For purposes 

of this subparagraph, the term ''senior management 

official'' means a chief executive officer, an assistant 

chief executive officer, a chief financial officer, and any 

other senior executive officer (as defined by the appropriate Federal banking agency pursuant to section 32 

(f) of the Federal Deposit Insurance Act). 

( G) CONSISTENT RULES.— 

(i) IN GENERAL.—Not later than 6 months after 

the date of enactment of the Credit Union Membership Access Act, the Administration shall promulgate 

final rules applicable to charter conversions described 

in this paragraph that are consistent with rules promulgated by other financial regulators, including the 

Office of Thrift Supervision and the Office of the 

Comptroller of the Currency. The rules required by 

this clause shall provide that charter conversion by an 

insured credit union shall be subject to regulation that 

is no more or less restrictive than that applicable to 

charter conversions by other financial institutions. 

(ii) OVERSIGHT OF MEMBER VOTE.—Th e member 

vote concerning charter conversion under this paragraph shall be administered by the Administration, 

and shall be verified by the Federal or state regulatory agency that would have jurisdiction over the 
367 

FEDERAL CREDIT UNION ACT Sec. 205A 

institution after the conversion. If either the Administration or that regulatory agency disapproves of the 

methods by which the member vote was taken or procedures applicable to the member vote, the member 

vote shall be taken again, as directed by the Administration or the agency. 

(3) Except with the prior written approval of the Board, no insured credit union shall merge or consolidate with any other insured credit union or, either directly or indirectly, acquire the assets of, or assume liability to pay any member accounts in, any 

other insured credit union. 

(c) In granting or withholding approval or consent under subsection (b) of this section, the Board shall consider— 

(1) the history, financial condition, and management policies of the credit union; 

(2) the adequacy of the credit union's reserves; 

(3) the economic advisability of the transaction; 

(4) the general character and fitness of the credit union's 

management; 

(5) the convenience and needs of the members to be served 

by the credit union; and 

(6) whether the credit union is a cooperative association 

organized for the purpose of promoting thrift among its members and creating a source of credit for provident or productive 

purposes. 

(d) PROHIBITION.— 

(1) IN GENERAL.—Except with prior written consent of the 

Board— 

(A) any person who has been convicted of any criminal 

offense involving dishonesty or a breach of trust, or has 

agreed to enter into a pretrial diversion or similar program 

in connection with a prosecution for such offense, may 

not— 

(i) become, or continue as, an institution-affiliated 

party with respect to any insured credit union; or 

(ii) otherwise participate, directly or indirectly, in 

the conduct of the affairs of any insured credit union; 

and 

(B) any insured credit union may not permit any person referred to in subparagraph (A) to engage in any conduct or continue any relationship prohibited under such 

subparagraph. 

(2) MINIMU M 10-YEAR PROHIBITION PERIOD FOR CERTAIN OFFENSES.— 

(A) I N GENERAL.—If the offense referred to in paragraph (1)(A) in connection with any person referred to in 

such paragraph is— 

(i) an offense under— 

(I) section 215, 656, 657, 1005, 1006, 1007, 

1008, 1014, 1032, 1344, 1517, 1956, or 1957 of 

title 18, United States Code; or 

(II) section 1341 or 1343 of such title which 

affects any financial institution (as defined in section 20 of such title); or 
Sec. 205A FEDERAL CREDIT UNION ACT 428 

(ii) the offense of conspiring to commit any such 

offense, 

the Board may not consent to any exception to the application of paragraph (1) to such person during the 10-year period beginning on the date the conviction or the agreement 

of the person becomes final. 

(B) EXCEPTION BY ORDER OF SENTENCING COURT.— 

(i) I N GENERAL.—On motion of the Board, the 

court in which the conviction or the agreement of a 

person referred to in subparagraph (A) has been entered may grant an exception to the application of 

paragraph (1) to such person if granting the exception 

is in the interest of justice. 

(ii) PERIOD FOR FILING.— A motion may be filed 

under clause (i) at any time during the 10-year period 

described in subparagraph (A) with regard to the person on whose behalf such motion is made. 

(3) PENALTY.—Whoever knowingly violates paragraph (1) 

or (2) shall be fined not more than $1,000,000 for each day 

such prohibition is violated or imprisoned for not more than 5 

years, or both. 

(e)(1) The Board shall promulgate rules establishing minimum 

standards with which each insured credit union must comply with 

respect to the installation, maintenance, and operation of security 

devices and procedures, reasonable in cost, to discourage robberies, 

burglaries, and larcenies and to assist in the identification and apprehension of persons who commit such acts. 

(2) The rules shall establish the time limits within which insured credit unions shall comply with the standards and shall require the submission of periodic reports with respect to the installation, maintenance, and operation of security devices and procedures. 

(3) An insured credit union which violates a rule promulgated 

pursuant to this subsection shall be subject to a civil penalty which 

shall not exceed $100 for each day of the violation. 

(f)(1) Every insured credit union is authorized to maintain, and 

make loans with respect to, share draft accounts in accordance 

with rules and regulations prescribed by the Board. Except as provided in paragraph (2), an insured credit union may pay dividends 

on share draft accounts and may permit the owners of such share 

draft accounts to make withdrawals by negotiable or transferable 

instruments or other orders for the purpose of making transfers to 

third parties. 

(2) Paragraph (1) shall apply only with respect to share draft 

accounts in which the entire beneficial interest is held by one or 

more individuals or members or by an organization which is operated primarily for religious, philanthropic, charitable, educational, 

or other similar purposes and which is not operated for profit, and 

with respect to deposits of public funds by an officer, employee, or 

agent of the United States, any State, county, municipality, or 

political subdivision thereof, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, Guam, any territory or 

possession of the United States, or any political subdivision thereof. 
367 FEDERAL CREDIT UNION ACT Sec. 206A 

(g)(1) If the applicable rate prescribed in this subsection exceeds the rate an insured credit union would be permitted to 

charge in the absence of this subsection, such credit union may, 

notwithstanding any State constitution or statute which is hereby 

preempted for the purposes of this subsection, take, receive, reserve, and charge on any loan, interest at a rate of not more than 

1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where such insured credit union is located or at the 

rate allowed by the laws of the State, territory, or district where 

such credit union is located, whichever may be greater. 

(2) If the rate prescribed in paragraph (1) exceeds the rate 

such credit union would be permitted to charge in the absence of 

this subsection, and such State fixed rate is thereby preempted by 

the rate described in paragraph (1), the taking, receiving, reserving, or charging a greater rate than is allowed by paragraph (1), 

when knowingly done, shall be deemed a forfeiture of the entire interest which the loan carries with it, or which has been agreed to 

be paid thereon. if such greater rate of interest has been paid, the 

person who paid it may recover, in a civil action commenced in a 

court of appropriate jurisdiction not later than two years after the 

date of such payment, an amount equal to twice the amount of interest paid from the credit union taking or receiving such interest. 

TERMINATION OF INSURANCE; CEASE-AND-DESIST PROCEEDINGS; SUSPENSION AND/OR REMOVAL OF DIRECTORS, OFFICERS, AND COMMITTEE MEMBERS; TAKING POSSESSION OF COMMITTEE MEMBERS 

SEC. 206. [12 U.S.C. 1786] (a)(1) Any insured credit union 

other than a Federal credit union may, upon not less than ninety 

days' written notice to the Board and upon the affirmative vote of 

a majority of its members within one year prior to the giving of 

such notice, terminate its status as an insured credit union. 

(2) Any insured credit union, other than a Federal credit 

union, which has obtained a new certificate of insurance from a 

corporation authorized and duly licensed to insure member accounts may upon not less than ninety days' written notice to the 

Board convert from status as an insured credit union under this 

Act: Provided, That at the time of giving notice to the Board the 

provisions of paragraph (b)(1) of this section are not being invoked 

against the credit union. 

(b)(1) Whenever, in the opinion of the Board, any insured 

credit union is engaging or has engaged in unsafe or unsound practices in conducting the business of such credit union, or is in an 

unsafe or unsound condition to continue operations as an insured 

credit union, or is violating or has violated an applicable law, rule, 

regulation, order, or any condition imposed in writing by the Board 

in connection with the granting of any application or other request 

by the credit union, or is violating or has violated any written 

agreement entered into with the Board, the Board shall serve upon 

the credit union a statement with respect to such practices or conditions or violations for the purpose of securing the correction 

thereof. In the case of an insured State-chartered credit union, the 

Board shall send a copy of such statement to the commission, 
Sec. 206A FEDERAL CREDIT UNION ACT 428 

board, or authority, if any, having supervision of such credit union. 

Unless such correction shall be made within one hundred and 

twenty days after service of such statement, or within such shorter 

period of not less than twenty days after such service as the Board 

shall require in any case where it determines that the insurance 

risk with respect to such credit union could be unduly jeopardized 

by further delay in the correction of such practices or conditions or 

violations, or as the commission, board, or authority having supervision of such credit union, if any, shall require in the case of an 

insured state-chartered credit union, the Board, if it shall determine to proceed further, shall give to the credit union not less than 

thirty days' written notice of its intention to terminate the status 

of the credit union as an insured credit union. such notice shall 

contain a statement of the facts constituting the alleged unsafe and 

unsound practices or conditions or violations and shall fix a time 

and place for a hearing thereon. such hearing shall be fixed for a 

date not earlier than thirty days nor later than sixty days after 

service of such notice unless an earlier or a later date is set by the 

Board at the request of the credit union. Unless the credit union 

shall appear at the hearing by a duly authorized representative, it 

shall be deemed to have consented to the termination of its status 

as an insured credit union. In the event of such consent, or if upon 

the record made at any such hearing the Board shall find that any 

unsafe or unsound practice or condition or violation specified in the 

notice has been established and has not been corrected within the 

time above-prescribed in which to make such correction, the Board 

may issue and serve upon the credit union an order terminating its 

status as an insured credit union on a date subsequent to the date 

of such finding and subsequent to the expiration of the time specified in the notice. 

(2) Any credit union whose insured status has been terminated 

by order of the Board under this subsection shall have the right of 

judicial review of such order only to the same extent as provided 

for the review of orders under subsection (j) of this section. 

(c) in the event of the termination of a credit union's status as 

an insured credit union as provided under subsection (a)(2) or (b) 

of this section, the credit union shall give prompt and reasonable 

notice to all of its members whose accounts are insured that it has 

ceased to be an insured credit union. it may include in such notice 

a statement of the fact that member accounts insured on the effective date of such termination, to the extent not withdrawn, remain 

insured for one year from the date of such termination, but it shall 

not further represent itself in any manner as an insured credit 

union. In the event of failure to give the notice as herein provided 

to members whose accounts are insured, the Board is authorized to 

give reasonable notice. 

(d)(1) After the termination of the insured status of any credit 

union as provided under subsection (a)(1) or (b) of this section, 

insurance of its member accounts to the extent that they were insured on the effective date of such termination, less any amounts 

thereafter withdrawn which reduce the accounts below the amount 

covered by insurance on the effective date of such termination, 

shall continue for a period of one year, but no shares issued by the 

credit union or deposits made after the date of such termination 
367 

FEDERAL CREDIT UNION ACT Sec. 206A 

shall be insured by the Board. The credit union shall continue to 

pay premiums to the Board during such period as in the case of 

an insured credit union and the Board shall have the right to examine such credit union from time to time during the period during 

which such insurance continues. Such credit union shall, in all 

other respects, be subject to the duties and obligations of an insured credit union for the period of one year from the date of such 

termination. In the event that such credit union shall be closed for 

liquidation within such period of one year, the Board shall have the 

same powers and rights with respect to such credit union as in the 

case of an insured credit union. 

(2) No credit union shall convert from status as an insured 

credit union under this Act as provided under subsection (a)(2) of 

this section until the proposition for such conversion has been approved by a majority of all the directors of the credit union, and 

by affirmative vote of a majority of the members of the credit union 

who vote on the proposition in a vote in which at least 20 per centum of the total membership of the credit union participates. Following approval by the directors, written notice of the proposition 

and of the date set for the membership vote shall be delivered in 

person to each member, or mailed to each member at the address 

for such member appearing on the records of the credit union, not 

more than thirty nor less than seven days prior to such date. The 

membership shall be given the opportunity to vote by mail ballot. 

If the proposition is approved by the membership, prompt and reasonable notice of insurance conversion shall be given to all members. 

(3) In the event of a conversion of a credit union from status 

as an insured credit union under this Act as provided under 

subection (a)(2) of this section, premium charges payable under section 202(c) of this Act shall be reduced by an amount proportionate 

to the number of calendar months for which the converting credit 

union will no longer be insured under this Act. As long as a converting credit union remains insured under this Act, it shall remain subject to all of the provisions of chapter II of this Act. 

(e)(1) If, in the opinion of the Board, any insured credit union, 

credit union which has insured accounts, or any institution-affiliated party is engaging or has engaged, or the Board has reasonable 

cause to believe that the credit union or any institution-affiliated 

party is about to engage, in an unsafe or unsound practice in conducting the business of such credit union, or is violating or has violated, or the Board has reasonable cause to believe that the credit 

union or any institution-affiliated party is about to violate, a law, 

rule, or regulation, or any condition imposed in writing by the 

Board in connection with the granting of any application or other 

request by the credit union or any written agreement entered into 

with the Board, the Board may issue and serve upon the credit 

union or such party a notice of charges in respect thereof. The notice shall contain a statement of the facts constituting the alleged 

violation or violations or the unsafe or unsound practice or practices, and shall fix a time and place at which a hearing will be held 

to determine whether an order to cease and desist therefrom 

should issue against the credit union or the institution-affiliated 

party. Such hearing shall be fixed for a date not earlier than thirty 
Sec. 206A FEDERAL CREDIT UNION ACT 428 

days nor later than sixty days after service of such notice unless 

an earlier or a later date is set by the Board at the request of any 

party so served. Unless the party or parties so served shall appear 

at the hearing by a duly authorized representative, they shall be 

deemed to have consented to the issuance of the cease-and-desist 

order. In the event of such consent, or if upon the record made at 

any such hearing, the Board shall find that any violation or unsafe 

or unsound practice specified in the notice of charges has been 

established, the Board may issue and serve upon the credit union 

or the institution-affiliated party an order to cease and desist from 

any such violation or practice. Such order may, by provisions which 

may be mandatory or otherwise, require the credit union or its 

institution-affiliated parties

 1 to cease and desist from the same, 

and, further, to take affirmative action to correct the conditions resulting from any such violation or practice. 

(2) A cease-and-desist order shall become effective at the expiration of thirty days after the service of such order upon the credit 

union or other person concerned (except in the case of a cease-anddesist order issued upon consent, which shall become effective at 

the time specified therein), and shall remain effective and enforceable as provided therein, except to such extent as it is stayed, 

modified, terminated, or set aside by action of the Board or a reviewing court. 

(3) 2 AFFIRMATIV E ACTIO N TO CORREC T CONDITION S RESULT -

I N G FRO M VIOLATION S OR PRACTICES.—The authority to issue 

an order under this subsection and subsection (f) which requires an insured credit union or any institution-affiliated 

party to take affirmative action to correct any conditions resulting from any violation or practice with respect to which 

such order is issued includes the authority to require such insured credit union or such party to— 

(A) make restitution or provide reimbursement, 

indemnification, or guarantee against loss if— 

(i) such credit union or such party was unjustly 

enriched in connection with such violation or practice; 

or 

(ii) the violation or practice involved a reckless 

disregard for the law or any applicable regulations or 

prior order of the Board; 

(B) restrict the growth of the institution; 

(C) rescind agreements or contracts; 

(D) dispose of any loan or asset involved; and3 

(E) employ qualified officers or employees (who may be 

subject to approval by the Board at the direction of such 

Board); and 

(F) take such other action as the Board determines to 

be appropriate. 

1

 Section 901(b)(2)(A)(ii) of P.L. 101-73, 103 Stat. 448, amended section 206(e)(1) by striking 

out "directors, officers, committee members, employees, agents, or other persons participating 

in the conduct of the affairs of such credit union'' and inserting in lieu thereof "institution-affiliated parties''. The amendment probably should have used the word "and" rather than "or" following "employees, agents,''. 

2

 Indentation so in law. 

3

 So in original. The word "and" probably should not appear. 
367 FEDERAL CREDIT UNION ACT Sec. 206A 

(4)1 AUTHORIT Y TO LIMI T ACTIVITIES.—Th e authority to 

issue an order under this subsection or subsection (f) includes 

the authority to place limitations on the activities or functions 

of an insured credit union or any institution-affiliated party. 

(f)(1) Whenever the Board shall determine that the violation or 

threatened violation or the unsafe or unsound practice or practices, 

specified in the notice of charges served upon the credit union or 

any institution-affiliated party pursuant to paragraph (1) of subsection (e) of this section, or the continuation thereof, is likely to 

cause insolvency or significant dissipation of assets or earnings of 

the credit union, or is likely to weaken the condition of the credit 

union or otherwise prejudice the interests of its insured members 

prior to the completion of the proceedings conducted pursuant to 

paragraph (1) of subsection (e) of this section, the Board may issue 

a temporary order requiring the credit union or such party to cease 

and desist from any such violation or practice and to take affirmative action to prevent such insolvency, dissipation, condition, or 

prejudice pending completion of such proceedings. Such order may 

include any requirement authorized under subsection (e)(3)(B)

 2

. 

Such order shall become effective upon service upon the credit 

union or institution-affiliated party and, unless set aside, limited, 

or suspended by a court in proceedings authorized by paragraph (2) 

of this subsection, shall remain effective and enforceable pending 

the completion of the administrative proceedings pursuant to such 

notice and until such time as the Administration shall dismiss the 

charges specified in such notice, or if a cease-and-desist order is 

issued against the credit union or such party, until the effective 

date of such order. 

(2) Within ten days after the credit union concerned or any 

institution-affiliated party has been served with a temporary ceaseand-desist order, the credit union or such party may apply to the 

United States district court for the judicial district in which the 

home office of the credit union is located, or the United States District Court for the District of Columbia, for an injunction setting 

aside, limiting, or suspending the enforcement, operation, or effectiveness of such order pending the completion of the administrative 

proceedings pursuant to the notice of charges served upon the 

credit union or such party under paragraph (1) of subsection (e) of 

this section, and such court shall have jurisdiction to issue such 

injunction. 

(3) 1 INCOMPLET E OR INACCURAT E RECORDS. — 

(A) TEMPORAR Y ORDER.—I f a notice of charges served 

under subsection (e)(1) specifies, on the basis of particular 

facts and circumstances, that an insured credit union's 

books and records are so incomplete or inaccurate that the 

Board is unable, through the normal supervisory process, 

to determine the financial condition of that insured credit 

union or the details or purpose of any transaction or transactions that may have a material effect on the financial 

condition of that insured credit union, the Board may issue 

a temporary order requiring— 

1

 indentation so in law. 

2

 So in original. The reference to "subsection (e)(3)(B)'' probably should be a reference to "subsection (e)(3)''. 
Sec. 206A FEDERAL CREDIT UNION ACT 4 28 

(i) the cessation of any activity or practice which 

gave rise, whether in whole or in part, to the incomplete or inaccurate state of the books or records; or 

(ii) affirmative action to restore such books or 

records to a complete and accurate state, until the 

completion of the proceedings under subsection (e)(1). 

(B) EFFECTIVE PERIOD.—Any temporary order issued 

under subparagraph (A)— 

(i) shall become effective upon service; and 

(ii) unless set aside, limited, or suspended by a 

court in proceedings under paragraph (2), shall remain 

in effect and enforceable until the earlier of— 

(i) the completion of the proceeding initiated 

under subsection (e)(1) in connection with the notice of charges; or 

(ii) the date the Board determines, by examination or otherwise, that the insured credit 

union's books and records are accurate and reflect 

the financial condition of the credit union. 

(4) in the case of violation or threatened violation of, or failure 

to obey, a temporary cease-and-desist order, the Board may apply 

to the United States district court, or the United States court of 

any territory, within the jurisdiction of which the principal office 

of the credit union is located for an injunction to enforce such 

order, and, if the court shall determine that there has been such 

violation or threatened violation or failure to obey, it shall be the 

duty of the court to issue such injunction. 

(g) REMOVA L AND PROHIBITION AUTHORITY. — 

(1) AUTHORITY TO ISSUE ORDER.—Whenever the Board 

determines that— 

(A) any any institution-affiliated party has, directly or 

indirectly— 

(i) violated— 

(i) any law or regulation; 

(ii) any cease-and-desist order which has become final; 

(iii) any condition imposed in writing by the 

Board in connection with the grant of any application or other request by such credit union; or 

(iv) any written agreement between such 

credit union and the Board; 

(ii) engaged or participated in any unsafe or unsound practice in connection with any insured credit 

union or business institution; or 

(iii) committed or engaged in any act, omission, or 

practice which constitutes a breach of such party's 

fiduciary duty; 

(B) by reason of the violation, practice, or breach described in any clause of subparagraph (A)— 

(i) such insured credit union or business institution has suffered or will probably suffer financial loss 

or other damage; 

(ii) the interests of the insured credit union's 

members have been or could be prejudiced; or 
367 

FEDERAL CREDIT UNION ACT Sec. 206A 

(iii) such party has received financial gain or other 

benefit by reason of such violation, practice or breach; 

and 

(C) such violation, practice, or breach— 

(i) involves personal dishonesty on the part of 

such party; or 

(ii) demonstrates such party's unfitness to serve 

as a director or officer of, or to otherwise participate 

in the conduct of the affairs of, an insured credit 

union, 

the Board may serve upon such party a written notice of the 

Board's intention to remove such party from office or to prohibit any further participation, by such party, in any manner 

in the conduct of the affairs of any insured credit union. 

(2) SPECIFIC VIOLATIONS.— 

(A) IN GENERAL.—Whenever the Board determines 

that— 

(i) an institution-affiliated party has committed a 

violation of any provision of subchapter II of chapter 

53 of title 31, United States Code, unless such violation was inadvertent or unintentional; 

(ii) an officer or director of an insured credit union 

has knowledge that an institution-affiliated party of 

the insured credit union has violated any such provision or any provision of law referred to in subsection 

(i)(1)(A)(ii); or 

(iii) an officer or director of an insured credit 

union has committed any violation of the Depository 

Institution Management Interlocks Act, 

the Board may serve upon such party, officer, or director 

a written notice of the Board's intention to remove such officer or director from office. 

(B) FACTORS TO BE CONSIDERED.—In determining 

whether an officer or director should be removed as a result of the application of subparagraph (A)(ii), the Board 

shall consider whether the officer or director took appropriate action to stop, or to prevent the recurrence of, a violation described in such subparagraph. 

(3) SUSPENSION ORDER.— 

( A ) SUSPENSION OR PROHIBITION AUTHORIZED.—If th e 

Board serves written notice under paragraph (1) or (2) to 

any institution-affiliated party of the Board's intention to 

issue an order under such paragraph, the Board may suspend such party from office or prohibit such party from 

further participation in any manner in the conduct of the 

affairs of the institution, if the Board— 

(i) determines that such action is necessary for the 

protection of the credit union or the interests of the 

credit union's members; and 

(ii) serves such person with written notice of the 

suspension order. 

(B) EFFECTIVE PERIOD.—Any suspension order issued 

under subparagraph (A)— 

(i) shall become effective upon service; and 
Sec. 206 FEDERAL CREDIT UNION ACT 

388 

(ii) unless a court issues a stay of such order 

under paragraph (6), shall remain in effect and 

enforceable until— 

(i) the date the Board dismisses the charges 

contained in the notice served under paragraph 

(1) or (2) with respect to such party; or 

(ii) the effective date of an order issued by the 

Board to such person under paragraph (1) or (2). 

(C) COPY OF ORDER.—If the Board issues a suspension 

order under subparagraph (A) to any institution-affiliated 

party, the Board shall serve a copy of such order on any 

insured credit union with which such party is associated 

at the time such order is issued. 

(4)1 A notice of intention to remove a director, committee member, officer, or other person from office or to prohibit his participation in the conduct of the affairs of an insured credit union, shall 

contain a statement of the facts constituting grounds therefor, and 

shall fix a time and place at which a hearing will be held thereon. 

such hearing shall be fixed for a date not earlier than thirty days 

nor later than sixty days after the date of service of such notice, 

unless an earlier or a later date is set by the Board at the request 

of (A) such director, committee member, or officer or other person, 

and for good cause shown, or (B) the Attorney General of the 

United States. Unless such director, committee member, officer, or 

other person shall appear at the hearing in person or by a duly 

authorized representative, he shall be deemed to have consented to 

the issuance of an order of such removal or prohibition. in the 

event of such consent, or if upon the record made at any such hearing the Board shall find that any of the grounds specified in such 

notice have been established, the Board may issue such orders of 

suspension or removal from office, or prohibition from participation 

in the conduct of the affairs of the credit union, as it may deem 

appropriate. Any such order shall become effective at the expiration of thirty days after service upon such credit union and the director, committee member, officer, or other person concerned (except in the case of an order issued upon consent, which shall become effective at the time specified therein). such order shall remain effective and enforceable except to such extent as it is stayed, 

modified, terminated, or set aside by action of the Board or a reviewing court. 

(5)1 PROHIBITION OF CERTAIN SPECIFIC ACTIVITIES.—Any person 

subject to an order issued under this subsection shall not— 

(A) participate in any manner in the conduct of the affairs of any institution or agency specified in paragraph 

(7)(A); 

(B) solicit, procure, transfer, attempt to transfer, vote, 

or attempt to vote any proxy, consent, or authorization 

with respect to any voting rights in any institution described in subparagraph (A); 

(C) violate any voting agreement previously approved 

by the appropriate Federal banking agency; or 

1

 Indentation so in law. 
417 FEDERAL CREDIT UNION ACT Sec. 206 

(D) vote for a director, or serve or act as an institution-affiliated party. 

(6)

 1 Within ten days after any director, officer, committee 

member, or other person has been suspended from office and/or 

prohibited from participation in the conduct of the affairs of an insured credit union under paragraph (3) of this subsection, such director, officer, committee member, or other person may apply to the 

United States district court for the judicial district in which the 

principal office of the credit union is located, or the United States 

District Court for the District of Columbia, for a stay of such suspension and/or prohibition pending the completion of the administrative proceedings pursuant to the notice served upon such director, officer, committee member, or other person under paragraph 

(1) or (2) of this subsection, and such court shall have jurisdiction 

to stay such suspension and/or prohibition. 

(7) INDUSTRYWIDE PROHIBITION.— 

(A) IN GENERAL.—Except as provided in subparagraph (B), 

any person who, pursuant to an order issued under this subsection or subsection (i), has been removed or suspended from 

office in an insured credit union or prohibited from participating in the conduct of the affairs of an insured credit union 

may not, while such order is in effect, continue or commence 

to hold any office in, or participate in any manner in the conduct of the affairs of— 

(i) any insured depository institution; 

(ii) any institution treated as an insured bank under 

paragraph (3) or (4) of section 8(b) of the Federal Deposit 

Insurance Act, or as a savings association under section 

8(b)(8) . of such Act; 

(iii) any insured credit union; 

(iv) any institution chartered under the Farm Credit 

Act of 1971; 

(v) any appropriate Federal depository institution regulatory agency; 

(vi) the Federal Housing Finance Board and any Federal home loan bank; and 

(vii) the Resolution Trust Corporation. 

( B) EXCEPTION IF AGENCY PROVIDES WRITTE N CONSENT.—If, on or after the date an order is issued under 

this subsection which removes or suspends from office any 

institution-affiliated party or prohibits such party from 

participating in the conduct of the affairs of an insured 

credit union, such party receives the written consent of— 

(i) the Board; and 

(ii) the appropriate Federal financial institutions 

regulatory agency of the institution described in any 

clause of subparagraph (A) with respect to which such 

party proposes to become an institution-affiliated 

party, 

subparagraph (A) shall, to the extent of such consent, 

cease to apply to such party with respect to the institution 

described in each written consent. if any person receives 

1

 indentation so in law. 
Sec. 206A FEDERAL CREDIT UNION ACT 428 

such a written consent from the Board, the Board shall 

publicly disclose such consent. If the agency referred to in 

clause (ii) grants such a written consent, such agency shall 

report such action to the Board and publicly disclose such 

consent. 

( C ) VIOLATIO N OF PARAGRAPH TREATED AS VIOLATIO N 

OF ORDER.—Any violation of subparagraph (A) by any person who is subject to an order described in such subparagraph shall be treated as a violation of the order. 

( D ) APPROPRIATE FEDERA L FINANCIA L INSTITUTION S 

REGULATORY AGENCY DEFINED.—Fo r purposes of this paragraph and subsection (1),1

 the term ''appropriate Federal 

financial institutions regulatory agency'' means— 

(i) the appropriate Federal banking agency, as 

provided in section 3(q) of the Federal Deposit Insurance Act; 

(ii) the Farm Credit Administration, in the case of 

an institution chartered under the Farm Credit Act of 

1971; 

(iii) the National Credit Union Administration 

Board, in the case of an insured credit union (as defined in section 101(7) of the Federal Credit Union 

Act); 

(iv) the Secretary of the Treasury, in the case of 

the Federal Housing Finance Board and any Federal 

home loan bank; and 

(v) the Oversight Board, in the case of the Resolution Trust Corporation. 

(E) CONSULTATIO N BETWEE N AGENCIES.—Th e agencies 

referred to in clauses (i) and (ii) of subparagraph (B) shall 

consult with each other before providing any written consent described in subparagraph (B). 

(F) APPLICABILITY.—Thi s paragraph shall only apply 

to a person who is an individual, unless the Board specifically finds that it should apply to a corporation, firm, or 

other business enterprise. 

(h)(1) The Board may, ex parte without notice, appoint itself or 

another (including, in the case of a State-chartered insured credit 

union, the State official having jurisdiction over the credit union) 

as conservator and immediately take possession and control of the 

business and assets of any insured credit union in any case in 

which— 

(A) the Board determines that such action is necessary to 

conserve the assets of any insured credit union or to protect 

the Fund or the interests of the members of such insured 

credit union; 

(B) an insured credit union, by a resolution of its board of 

directors, consents to such an action by the Board; 

(C)2 the Attorney General notifies the Board in writing that an insured credit union has been found guilty of 

a criminal offense under section 1956 or 1957 of title 18, 

*So in original. There is no subsection (1) and the term does not appear to be used anywhere 

in this Act outside this paragraph. 

2

 Indentation so in law. 
417 FEDERAL CREDIT UNION ACT Sec. 206 

United States Code, or section 5322 or 5324 of title 31, 

United States Code; 

(D) there is a willful violation of a cease-and-desist order 

which has become final; 

(E) there is concealment of books, papers, records, or assets of the credit union or refusal to submit books, papers, 

records, or affairs of the credit union for inspection to any 

examiner or to any lawful agent of the Board; 

(F) the credit union is significantly undercapitalized, as defined in section 216, and has no reasonable prospect of becoming adequately capitalized, as defined in section 216; or 

(G) the credit union is critically undercapitalized, as defined in section 216. 

(2)(A) Except as provided in subparagraph (C), in the case of 

a State-chartered insured credit union, the authority conferred by 

paragraph (1) shall not be exercised without the written approval 

of the State official having jurisdiction over the State-chartered 

credit union that the grounds specified for such exercise exist. 

(B) if such approval has not been received by the Board within 

30 days of receipt of notice by the State that the Board has determined such grounds exist, and the Board has responded in writing 

to the State's written reasons, if any, for withholding approval, 

then the Board may proceed without State approval only by a 

unanimous vote of the Board. 

(C)1 In the case of a State-chartered insured credit union, 

the authority conferred by subparagraphs (F) and (G) of paragraph (1) may not be exercised unless the Board has complied 

with section 216(l). 

(3) Not later than ten days after the date on which the Board 

takes possession and control of the business and assets of an insured credit union pursuant to paragraph (1), such insured credit 

union may apply to the United States district court for the judicial 

district in which the principal office of such insured credit union 

is located or the United States District Court for the District of Columbia, for an order requiring the Board to show cause why it 

should not be enjoined from continuing such possession and control. Except as provided in this paragraph, no court may take any 

action, except at the request of the Board by regulation or order, 

to restrain or affect the exercise of powers or functions of the Board 

as conservator. 

(4) Except as provided in paragraph (3), in the case of a Federal credit union, the Board may maintain possession and control 

of the business and assets of such credit union and may operate 

such credit union until such time— 

(A) as the Board shall permit such credit union to continue 

business subject to such terms and conditions as may be imposed by the Board; or 

(B) as such credit union is liquidated in accordance with 

the provisions of section 207. 

(5) Except as provided in paragraph (3), in the case of an insured State-chartered credit union, the Board may maintain pos1

 indentation so in law. 
Sec. 206A FEDERAL CREDIT UNION ACT 428 

session and control of the business and assets of such credit union 

and may operate such credit union until such time— 

(A) as the Board shall permit such credit union to continue 

business, subject to such terms and conditions as may be imposed by the Board; 

(B) as the Board shall permit the transfer of possession 

and control of such credit union to any commission, board, or 

authority which has supervisory authority over such credit 

union and which is authorized by State law to operate such 

credit union; or 

(C) as such credit union is liquidated in accordance with 

the provisions of section 207. 

(6) The Board may appoint such agents as it considers necessary in order to assist the Board in carrying out its duties as a 

conservator under this subsection. 

(7) All expenses incurred by the Board in exercising its authority under this subsection with respect to any credit union shall be 

paid out of the assets of such credit union. 

(8) The conservator shall have all the powers of the members, 

the directors, the officers, and the committees of the credit union 

and shall be authorized to operate the credit union in its own name 

or to conserve its assets in the manner and to the extent authorized by the Board. 

(9) The authority granted by this subsection is in addition to 

all other authority granted to the Board under this Act. 

(i)1 

( 1 ) SUSPENSIO N OR PROHIBITIO N AUTHORIZED. — 

(A) IN GENERAL.—Whenever any institution-affiliated 

party is charged in any information, indictment, or complaint, with the commission of or participation in— 

(i) a crime involving dishonesty or breach of trust 

which is punishable by imprisonment for a term exceeding one year under State or Federal law, or 

(ii) a criminal violation of section 1956, 1957, or 

1960 of title 18, United States Code, or section 5322 

or 5324 of title 31, United States Code, 

the Board may, if continued service or participation by 

such party may pose a threat to the interests of the credit 

union's members or may threaten to impair public confidence in the credit union, by written notice served upon 

such party, suspend such party from office or prohibit such 

party from further participation in any manner in the conduct of the affairs of the credit union. 

( B ) PROVISION S APPLICABLE TO NOTICE. — 

(i) COPY.—A copy of any notice under subparagraph (A) shall also be served upon the credit union. 

(ii) EFFECTIV E PERIOD.— A suspension or prohibition under subparagraph (A) shall remain in effect 

until the information, indictment, or complaint referred to in such subparagraph is finally disposed of or 

until terminated by the Board. 

1

 Subsection (i) does not have a heading. Section 1504(b)(2) of the Housing and Community 

Development Act of 1992 (P.L. 102-550; 106 Stat. 4054) amended paragraph (1) to read as follows. The old paragraph (1) ran into the subsection designation. 
417 FEDERAL CREDIT UNION ACT Sec. 206 

(C) REMOVAL OR PROHIBITION.— 

(i) I N GENERAL.—If a judgment of conviction or an 

agreement to enter a pretrial diversion or other similar program is entered against an institution-affiliated 

party in connection with a crime described in subparagraph (A)(i), at such time as such judgment is not subject to further appellate review, the Board may, if continued service or participation by such party may pose 

a threat to the interests of the credit union's members 

or may threaten to impair public confidence in the 

credit union, issue and serve upon such party an order 

removing such party from office or prohibiting such 

party from further participation in any manner in the 

conduct of the affairs of the credit union without the 

prior written consent of the Board. 

(ii) REQUIRED FOR CERTAIN OFFENSES—In the case 

of a judgment of conviction or agreement against an 

institution-affiliated party in connection with a violation described in subparagraph (A)(ii), the Board shall 

issue and serve upon such party an order removing 

such party from office or prohibiting such party from 

further participation in any manner in the conduct of 

the affairs of the credit union without the prior written consent of the Board. 

( D ) PROVISIONS APPLICABLE TO ORDER.— 

(i) COPY.—A copy of any order under subparagraph (C) shall also be served upon such credit union, 

whereupon such party (if a director or an officer) shall 

cease to be a director or officer of such credit union. 

(ii) EFFECT OF ACQUITTAL.—A finding of not guilty 

or other disposition of the charge shall not preclude 

the Board from instituting proceedings after such finding or disposition to remove such party from office or 

to prohibit further participation in credit union affairs, 

pursuant to paragraph (1), (2), or (3) of subsection (g) 

of this section. 

(iii) EFFECTIVE PERIOD.—Any notice of suspension 

or order of removal issued under this paragraph shall 

remain effective and outstanding until the completion 

of any hearing or appeal authorized under paragraph 

(3) unless terminated by the Board. 

(2)

 1 if at any time, because of the suspension of one or more 

directors pursuant to this section, there shall be on the board of 

directors of a Federal credit union less than a quorum of directors 

not so suspended, all powers and functions vested in or exercisable 

by such board shall vest in and be exercisable by the director or 

directors on the board not so suspended, until such time as there 

shall be a quorum of the board of directors. in the event all of the 

directors of a Federal credit union are suspended pursuant to this 

section, the Board shall appoint persons to serve temporarily as 

directors in their place and stead pending the termination of such 

suspensions, or until such time as those who have been suspended 

1

 indentation so in law. 
Sec. 206A FEDERAL CREDIT UNION ACT 428 

cease to be directors of the credit union and their respective successors have been elected by the members at an annual or special 

meeting and have taken office. Directors appointed temporarily by 

the Board shall, within thirty days following their appointment, 

call a special meeting for the election of new directors, unless during the thirty-day period (A) the regular annual meeting is scheduled, or (B) the suspensions giving rise to the appointment of temporary directors are terminated. 

(c) in connection with the liquidation of any insured credit 

union, the Board shall have the power to carry on the business of 

and collect all obligations to the credit union, to settle, compromise, 

or release claims in favor of or against the credit union, and to do 

all other things that may be necessary in connection therewith, 

subject to the regulation of the court or other public body having 

jurisdiction over the matter. 

(3) Within thirty days from service of any notice of suspension 

or order of removal issued pursuant to paragraph (1) of this subsection, the institution-affiliated party concerned may request in 

writing an opportunity to appear before the Board to show that the 

continued service to or participation in the conduct of the affairs 

of the credit union by such party does not, or is not likely to, pose 

a threat to the interests of the credit union's members or threaten 

to impair public confidence in the credit union. Upon receipt of any 

such request, the Board shall fix a time (not more than thirty days 

after receipt of such request, unless extended at the request of such 

party) and place at which such party may appear, personally or 

through counsel, before the Board or its designee to submit written 

materials (or, at the discretion of the Board, oral testimony) and 

oral argument. Within sixty days of such hearing, the Board shall 

notify such party whether the suspension or prohibition from participation in any manner in the conduct of the affairs of the credit 

union will be continued, terminated or otherwise modified, or 

whether the order removing such party from office or prohibiting 

such party from further participation in any manner in the conduct 

of the affairs of the credit union will be rescinded or otherwise 

modified. Such notification shall contain a statement of the basis 

for the Board's decision, if adverse to such party. The Board is 

authorized to prescribe such rules as may be necessary to effectuate the purposes of this subsection. 

(j)(1) Any hearing provided for in this section (other than the 

hearing provided for in subsection (i)(3) of this section) shall be 

held in the Federal judicial district or in the territory in which the 

principal office of the credit union is located, unless the party afforded the hearing consents to another place, and shall be conducted in accordance with the provisions of chapter 5 of title 5 of 

the United States Code.1 After such hearing, and within ninety 

days after the Board has notified the parties that the case has been 

submitted to them for final decision, it shall render its decision 

(which shall include findings of fact upon which its decision is 

predicated) and shall issue and serve upon each party to the proceeding an order or orders consistent with the provisions of this 

1

 Section 2547(b)(2) of P.L. 101-647 (104 Stat. 4888) struck the second sentence of 206(j)(1) 

by quoting such sentence. The quotation of such sentence probably should not have included a 

comma after the word ''private''. 
417 FEDERAL CREDIT UNION ACT Sec. 206 

section. Judicial review of any such order shall be exclusively as 

provided in this subsection (j). Unless a petition for review is 

timely filed in a court of appeals of the United States, as provided 

in paragraph (2) of this subsection, and thereafter until the record 

in the proceeding has been filed as so provided, the Board may at 

any time, upon such notice and in such manner as it may deem 

proper, modify, terminate, or set aside any such order. Upon such 

filing of the record, the Board may modify, terminate, or set aside 

any such order with permission of the court. 

(2) Any party to any proceeding under paragraph (1) may obtain a review of any order served pursuant to paragraph (1) of this 

subsection (other than an order issued with the consent of the 

credit union or the institution-affiliated party concerned or an 

order issued under subsection (i)(1) of this section) by filing in the 

court of appeals of the United States for the circuit in which the 

principal office of the credit union is located, or in the United 

States Court of Appeals for the District of Columbia Circuit, within 

thirty days after the date of service of such order, a written petition praying that the order of the Board be modified, terminated, 

or set aside. A copy of such petition shall be forthwith transmitted 

by the clerk of the court to the Board, and thereupon the Board 

shall file in the court the record in the proceeding, as provided in 

section 2112 of title 28, United States Code. Upon the filing of such 

petition, such court shall have jurisdiction, which upon the filing 

of the record shall, except as provided in the last sentence of said 

paragraph (1), be exclusive, to affirm, modify, terminate, or set 

aside, in whole or in part, the order of the Board. Review of such 

proceedings shall be had as provided in chapter 7 of title 5, United 

States Code. The judgment and decree of the court shall be final, 

except that the same shall be subject to review by the Supreme 

Court upon certiorari, as provided in section 1254 of title 28, 

United States Code. 

(3) The commencement of proceedings for judicial review under 

paragraph (2) of this subsection shall not, unless specifically ordered by the court, operate as a stay of any order issued by the 

Board. 

(k)(1) The Board may in its discretion apply to the United 

States district court, or the United States court of any territory 

within the jurisdiction of which the principal office of the credit 

union is located, for the enforcement of any effective and outstanding notice or order issued under this section or section 216, 

and such courts shall have jurisdiction and power to order and require compliance therewith. However, except as otherwise provided 

in this section or section 216, no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any 

notice or order under this section or section 216 or to review, modify, suspend, terminate, or set aside any such notice or order. 

(2) 1 CIVI L MONEY PENALTY.— 

(A) FIRST TIER.—Any insured credit union which, and 

any institution-affiliated party who— 

(i) violates any law or regulation; 

1

 indentation so in law. 
Sec. 206A FEDERAL CREDIT UNION ACT 4 28 

(ii) violates any final order or temporary order 

issued pursuant to subsection (e), (f), (g), (i), or (q), or 

any final order under section 216; 

(iii) violates any condition imposed in writing by 

the Board in connection with the grant of any application or other request by such credit union; or 

(iv) violates any written agreement between such 

credit union and such agency, 

shall forfeit and pay a civil penalty of not more than 

$5,000 for each day during which such violation continues. 

(B) SECOND TIER.—Notwithstanding subparagraph (A), 

any insured credit union which, and any institution-affiliated party who— 

(i)(i) commits any violation described in any 

clause of subparagraph (A); 

(ii) recklessly engages in an unsafe or unsound 

practice in conducting the affairs of such credit union; 

or 

(iii) breaches any fiduciary duty; 

(ii) which violation, practice, or breach— 

(I) is part of a pattern of misconduct; 

(ii) causes or is likely to cause more than a 

minimal loss to such credit union; or 

(iii) results in pecuniary gain or other benefit 

to such party, 

shall forfeit and pay a civil penalty of not more than 

$25,000 for each day during which such violation, practice, 

or breach continues. 

(C) THIR D TIER.—Notwithstanding subparagraphs (A) 

and (B), any insured credit union which, and any institution-affiliated party who— 

(i) knowingly— 

(i) commits any violation described in any 

clause of subparagraph (A); 

(ii) engages in any unsafe or unsound practice 

in conducting the affairs of such credit union; or 

(iii) breaches any fiduciary duty; and 

(ii) knowingly or recklessly causes a substantial 

loss to such credit union or a substantial pecuniary 

gain or other benefit to such party by reason of such 

violation, practice, or breach, 

shall forfeit and pay a civil penalty in an amount not to 

exceed the applicable maximum amount determined under 

subparagraph (D) for each day during which such violation, practice, or breach continues. 

( D ) MAXIMU M AMOUNTS OF PENALTIES FOR ANY VIOLATIO N DESCRIBED I N SUBPARAGRAPH (C).—The maximum 

daily amount of any civil penalty which may be assessed 

pursuant to subparagraph (C) for any violation, practice, 

or breach described in such subparagraph is— 

(i) in the case of any person other than an insured 

credit union, an amount to not exceed $1,000,000; and 

(ii) in the case of any insured credit union, an 

amount not to exceed the lesser of— 
367 

FEDERAL CREDIT UNION ACT Sec. 206A 

(I) $1,000,000; or 

(II) 1 percent of the total assets of such credit 

union. 

( E) ASSESSMENT.— 

(i) WRITTE N NOTICE.—An y penalty imposed under 

subparagraph (A), (B), or (C) may be assessed and collected by the Board by written notice. 

(ii) FINALITY OF ASSESSMENT.—If, with respect to 

any assessment under clause (i), a hearing is not requested pursuant to subparagraph (H) within the period of time allowed under such subparagraph, the 

assessment shall constitute a final and unappealable 

order. 

( F ) AUTHORITY TO MODIFY OR REMIT PENALTY.—The 

Board may compromise, modify, or remit any penalty 

which such agency may assess or had already assessed 

under subparagraph (A), (B), or (C). 

(G) MITIGATING FACTORS.—In determining the amount 

of any penalty imposed under subparagraph (A), (B), or 

(C), the Board shall take into account the appropriateness 

of the penalty with respect to— 

(i) the size of financial resources and good faith of 

the insured credit union or the person charged; 

(ii) the gravity of the violation; 

(iii) the history of previous violations; and 

(iv) such other matters as justice may require. 

(H) HEARING.—The insured credit union or other person against whom any penalty is assessed under this paragraph shall be afforded an agency hearing if such institution or person submits a request for such hearing within 

20 days after the issuance of the notice of assessment. 

( I) COLLECTION.— 

(i) REFERRAL.—If any insured credit union or 

other person fails to pay an assessment after any penalty assessed under this paragraph has become final, 

the Board shall recover the amount assessed by action 

in the appropriate United States district court. 

(ii) APPROPRIATENESS OF PENALTY NOT REVIEWABLE.—In any civil action under clause (i), the validity 

and appropriateness of the penalty shall not be subject 

to review. 

(J) DISBURSEMENT.—Al l penalties collected under authority of this paragraph shall be deposited into the Treasury. 

(K) VIOLATE DEFINED.—Fo r purposes of this section, 

the term "violate" includes any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation. 

(L) REGULATIONS.—The Board shall prescribe regulations establishing such procedures as may be necessary to 

carry out this paragraph. 

(3) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM 

SERVICE.—The resignation, termination of employment or participation, or separation of a institution-affiliated party (includ-
Sec. 206A FEDERAL CREDIT UNION ACT 428 

ing a separation caused by the closing of an insured credit 

union) shall not affect the jurisdiction and authority of the 

Board 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 credit union (whether 

such date occurs before, on, or after the date of the enactment 

of this paragraph). 

(l) CRIMINA L PENALTY FOR VIOLATIO N OF CERTAI N ORDERS.— 

Whoever— 

(1) under this Act, is suspended or removed from, or prohibited from participating in the affairs of any credit union described in section 206(g)(5); and 

(2) knowingly participates, directly or indirectly, in any 

manner (including by engaging in an activity specifically prohibited in such an order or in subsection (g)(5)) in the conduct 

of the affairs of such a credit union; 

shall be fined not more than $1,000,000, imprisoned for not more 

than 5 years, or both. 

(m) As used in this section (1) the terms "cease-and-desist 

order which has become final'' and ''order which has become final'' 

means a cease-and-desist order, or an order issued by the Board 

with the consent of the credit union or the director, officer, committee member, or other person concerned, or with respect to which 

no petition for review of the action of the Board has been filed and 

perfected in a court of appeals as specified in paragraph (2) of subsection (j) of this section, or with respect to which the action of the 

court in which said petition is so filed is not subject to further review by the Supreme Court of the United States in proceedings 

provided for in said paragraph, or an order issued under subsection 

(i) of this section, and (2) the term ''violation'' includes without limitation any action (alone or with another or others) for or toward 

causing, bringing about, participating in, counseling, or aiding or 

abetting a violation. 

(n) Any service required or authorized to be made by the Board 

under this section may be made by registered mail or in such other 

manner reasonably calculated to give actual notice as the Board 

may by regulation or otherwise provide. Copies of any notice or 

order served by the Board upon any State-chartered credit union 

or any director, officer, or committee member thereof or other person participating in the conduct of its affairs, pursuant to the provisions of this section, shall also be sent to the commission, board, 

or authority, if any, having supervision of such credit union. 

(o) in connection with any proceeding under subsection (e), 

(f)(1), or (g) of this section involving an insured State-chartered 

credit union or any institution-affiliated party, the Board shall provide the commission, board, or authority, if any, having supervision 

of such credit union, with notice of its intent to institute such a 

proceeding and the grounds thereof. Unless within such time as the 

Board deems appropriate in the light of the circumstances of the 

case (which time must be specified in the notice prescribed in the 

preceding sentence) satisfactory corrective action is effectuated by 

action of such commission, board, or authority, the Board may proceed as provided in this section. No credit union or other party who 
421 FEDERAL CREDIT UNION ACT Sec. 206 

is the subject of any notice or order issued by the Board under this 

section shall have standing to raise the requirements of this subsection as ground for attacking the validity of any such notice or 

order. 

(p) in the course of or in connection with any proceeding under 

this section or in connection with any claim for insured deposits or 

any examination or investigation under section 204(b), the Board, 

in conducting the proceeding, examination, or investigation or considering the claim for insured deposits,,

 1 or any designated representative thereof, including any person designated to conduct any 

hearing under this section, shall have the power to administer 

oaths and affirmations, to take or cause to be taken depositions, 

and to issue, revoke, quash, or modify subpenas and subpenas 

duces tecum, and the Board is empowered to make rules and regulations with respect to any such proceedings, claims, examinations, 

or investigations. The attendance of witnesses and the production 

of documents provided for in this subsection may be required from 

any place in any state or in any territory or other place subject to 

the jurisdiction of the United States at any designated place where 

such proceeding is being conducted. Any party to proceedings under 

this section 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 enforcement of any subpena or subpena 

duces tecum issued pursuant to this subsection, 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. Any court having jurisdiction of any 

proceeding instituted under this section by an insured credit union 

or a director, officer, or committee member thereof may allow to 

any such party such reasonable expenses and attorneys' fees as it 

deems just and proper, and such expenses and fees shall be paid 

by the credit union or from its assets. 

(q) COMPLIANCE WIT H MONETARY TRANSACTION RECORDKEEPING AND REPORT REQUIREMENTS.— 

(1) COMPLIANCE PROCEDURES REQUIRED.—The Board shall 

prescribe regulations requiring insured credit unions to establish and maintain procedures reasonably designed to assure 

and monitor the compliance of such credit unions with the 

requirements of subchapter II of chapter 53 of title 31, United 

States Code. 

(2) EXAMINATIONS OF CREDIT UNIONS TO INCLUDE REVIEW 

OF COMPLIANCE PROCEDURES.— 

(A) IN GENERAL.—Each examination of an insured 

credit union by the Board shall include a review of the procedures required to be established and maintained under 

paragraph (1). 

(B) EXA M REPORT REQUIREMENT.—The report of examination shall describe any problem with the procedures 

maintained by the credit union. 

1

 so in original. 
Sec. 206A FEDERAL CREDIT UNION ACT 428 

(3) ORDER TO COMPLY WIT H REQUIREMENTS.—If the Board 

determines that an insured credit union— 

(A) has failed to establish and maintain the procedures described in paragraph (1); or 

(B) has failed to correct any problem with the procedures maintained by such credit union which was previously reported to the credit union by the Board, 

the Board shall issue an order in the manner prescribed in 

subsection (e) or (f) requiring such credit union to cease and 

desist from its violation of this subsection or regulations prescribed under this subsection. 

(r) INSTITUTION-AFFILIATED PARTY DEFINED.—Fo r purposes of 

this Act, the term ''institution-affiliated party'' means— 

(1) any committee member, director, officer, or employee 

of, or agent for, an insured credit union; 

(2) any consultant, joint venture partner, and any other 

person as determined by the Board (by regulation or on a caseby-case basis) who participates in the conduct of the affairs of 

an insured credit union; and 

(3) any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in— 

(A) any violation of any law or regulation; 

(B) any breach of fiduciary duty; or 

(C) any unsafe or unsound practice, 

which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured credit 

union. 

(s) PUBLIC DISCLOSURE OF AGENCY ACTION.— 

(1) IN GENERAL.—The Board shall publish and make available to the public on a monthly basis— 

(A) any written agreement or other written statement 

for which a violation may be enforced by the Board, unless 

the Board, in its discretion, determines that publication 

would be contrary to the public interest; 

(B) any final order issued with respect to any administrative enforcement proceeding initiated by the Board 

under this section or any other law; and 

(C) any modification to or termination of any order or 

agreement made public pursuant to this paragraph. 

(2) HEARINGS.—All hearings on the record with respect to 

any notice of charges issued by the Board shall be open to the 

public, unless the agency, in its discretion, determines that 

holding an open hearing would be contrary to the public interest. 

(3) REPORTS TO CONGRESS.—A written report shall be 

made part of a determination not to hold a public hearing pursuant to paragraph (2) or not to publish a document pursuant 

to paragraph (1)(A). At the end of each calendar quarter, all 

such reports shall be transmitted to the Congress. 

(4) TRANSCRIPT OF HEARING.—A transcript that includes 

all testimony and other documentary evidence shall be prepared for all hearings commenced pursuant to subsection (k). 
367 FEDERAL CREDIT UNION ACT Sec. 206A 

A transcript of public hearings shall be made available to the 

public pursuant to section 552 of title 5, United States Code. 

( 5 ) DELA Y OF PUBLICATION UNDE R EXCEPTIONA L CIRCUMSTANCES.—I f the Board makes a determination in writing 

that the publication of a final order pursuant to paragraph 

(1)(B) would seriously threaten the safety and soundness of an 

insured depository institution, the agency may delay the publication of the document for a reasonable time. 

( 6 ) DOCUMENT S FILE D UNDE R SEAL I N PUBLIC ENFORCEMEN T HEARINGS.—Th e Board may file any document or part of 

a document under seal in any administrative enforcement 

hearing commenced by the agency if disclosure of the document 

would be contrary to the public interest. A written report shall 

be made part of any determination to withhold any part of a 

document from the transcript of the hearing required by paragraph (2). 

(7) RETENTIO N OF DOCUMENTS.—Th e Board shall keep and 

maintain a record, for a period of at least 6 years, of all documents described in paragraph (1) and all informal enforcement 

agreements and other supervisory actions and supporting documents issued with respect to or in connection with any administrative enforcement proceeding initiated by such agency 

under this section or any other laws. 

(8) DISCLOSURES TO CONGRESS.—N o provision of this subsection may be construed to authorize the withholding, or to 

prohibit the disclosure, of any information to the Congress or 

any committee or subcommittee of the Congress. 

( t) REGULATIO N OF CERTAI N FORM S OF BENEFITS TO INSTITU -

TION-AFFILIATE D PARTIES. — 

( 1 ) GOLDE N PARACHUTES AN D INDEMNIFICATIO N PAYMENTS.—The Board may prohibit or limit, by regulation or 

order, any golden parachute payment or indemnification payment. 

(2) FACTORS TO BE TAKE N INTO ACCOUNT.—Th e Board shall 

prescribe, by regulation, the factors to be considered by the 

Board in taking any action pursuant to paragraph (1) which 

may include such factors as the following: 

(A) Whether there is a reasonable basis to believe that 

the institution-affiliated party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or 

insider abuse with regard to the credit union that has had 

a material affect on the financial condition of the credit 

union. 

(B) Whether there is a reasonable basis to believe that 

the institution-affiliated party is substantially responsible 

for the insolvency of the credit union, the appointment of 

a conservator or liquidating agent for the credit union, or 

the credit union's troubled condition (as defined in

 1 prescribed by the Board pursuant to paragraph (4)(A)(ii)(III)). 

(C) Whether there is a reasonable basis to believe that 

the institution-affiliated party has materially violated any 

applicable Federal or State banking law or regulation that 

1

 So in original. The term "regulations" probably should be inserted after "defined in". 
Sec. 206A FEDERAL CREDIT UNION ACT 428 

has had a material affect1 on the financial condition of the 

credit union. 

(D) Whether there is a reasonable basis to believe that 

the institution-affiliated party has violated or conspired to 

violate— 

(i) section 215, 656, 657, 1005, 1006, 1007, 1014, 

1032, or 1344 of title 18, United States Code; or 

(ii) section 1341 or 1343 of such title affecting a 

financial institution. 

(E) Whether the institution-affiliated party was in a 

position of managerial or fiduciary responsibility. 

(F) The length of time the party was affiliated with 

the credit union and the degree to which— 

(i) the payment reasonably reflects compensation 

earned over the period of employment; and 

(ii) the compensation involved represents a reasonable payment for services rendered. 

(3) CERTAI N PAYMENTS PROHIBITED.—N o credit union may 

prepay the salary or any liability or legal expense of any institution-affiliated party if such payment is made— 

(A) in contemplation of the insolvency of such credit 

union or after the commission of an act of insolvency; and 

(B) with a view to, or has the result of— 

(i) preventing the proper application of the assets 

of the credit union; or 

(ii) preferring one creditor over another. 

(4) GOLDE N PARACHUTE PAYMEN T DEFINED.—Fo r purposes 

of this subsection— 

(A) IN GENERAL.—The term ''golden parachute payment'' means any payment (or any agreement to make any 

payment) in the nature of compensation by any credit 

union for the benefit of any institution-affiliated party pursuant to an obligation of such credit union that— 

(i) is contingent on the termination of such party's 

affiliation with the credit union; and 

(ii) is received on or after the date on which— 

(i) the credit union is insolvent; 

(ii) any conservator or liquidating agent is appointed for such credit union; or 

(iii) the Board determines that the credit 

union is in a troubled condition (as defined in regulations which the Board shall prescribe); 

(iv) the credit union has been assigned a composite rating by the Board of 4 or 5 under the 

Uniform Financial Institutions Rating System (as 

applicable with respect to credit unions); or 

(v) the credit union is subject to a proceeding 

initiated by the Board to terminate or suspend deposit insurance for such credit union. 

( B ) CERTAI N PAYMENTS I N CONTEMPLATION OF A N 

EVENT.—Any payment which would be a golden parachute 

payment but for the fact that such payment was made be1

 So in original. The term "affect'' probably should be "effect". 
367 

FEDERAL CREDIT UNION ACT Sec. 206A 

fore the date referred to in subparagraph (A)(ii) shall be 

treated as a golden parachute payment if the payment was 

made in contemplation of the occurrence of an event described in any subclause of such subparagraph. 

(C) CERTAIN PAYMENTS NOT INCLUDED.—The term 

''golden parachute payment'' shall not include— 

(i) any payment made pursuant to a retirement 

plan which is qualified (or is intended to be qualified) 

under section 401 of the Internal Revenue Code of 

1986 or other nondiscriminatory retirement or severance benefit plan; 

(ii) any payment made pursuant to a bona fide deferred compensation plan or arrangement which the 

Board determines, by regulation or order, to be permissible; or 

(iii) any payment made by reason of the death or 

disability of an institution-affiliated party. 

(5) OTHER DEFINITIONS.—For purposes of this subsection— 

(A) INDEMNIFICATION PAYMENT.—Subject to paragraph 

(6), the term ''indemnification payment'' means any payment (or any agreement to make any payment) by any 

credit union for the benefit of any person who is or was an 

institution-affiliated party, to pay or reimburse such person for any liability or legal expense with regard to any 

administrative proceeding or civil action instituted by the 

Board which results in a final order under which such 

person— 

(i) is assessed a civil money penalty; 

(ii) is removed or prohibited from participating in 

conduct of the affairs of the credit union; or 

(iii) is required to take any affirmative action described in section 206(e)(3) with respect to such credit 

union. 

(B) LIABILITY OR LEGAL EXPENSE.—The term ''liability 

or legal expense'' means— 

(i) any legal or other professional expense incurred in connection with any claim, proceeding, or action; 

(ii) the amount of, and any cost incurred in connection with, any settlement of any claim, proceeding, 

or action; and 

(iii) the amount of, and any cost incurred in connection with, any judgment or penalty imposed with 

respect to any claim, proceeding, or action. 

(C) PAYMENT.—The term ''payment'' includes— 

(i) any direct or indirect transfer of any funds or 

any asset; and 

(ii) any segregation of any funds or assets for the 

purpose of making, or pursuant to an agreement to 

make, any payment after the date on which such 

funds or assets are segregated, without regard to 

whether the obligation to make such payment is contingent on— 
Sec. 206A FEDERAL CREDIT UNION ACT 428 

(i) the determination, after such date, of the 

liability for the payment of such amount; or 

(ii) the liquidation, after such date, of the 

amount of such payment. 

(6) CERTAIN COMMERCIAL INSURANCE COVERAGE NOT 

TREATED AS COVERED BENEFIT PAYMENT.—N o provision of this 

subsection shall be construed as prohibiting any credit union 

from purchasing any commercial insurance policy or fidelity 

bond, except that, subject to any requirement described in 

paragraph (5)(A)(iii), such insurance policy or bond shall not 

cover any legal or liability expense of the credit union which 

is described in paragraph (5)(A). 

(u) FOREIGN INVESTIGATIONS.— 

(1) REQUESTING ASSISTANCE FROM FOREIGN BANKING 

AUTHORITIES.—In conducting any investigation, examination, 

or enforcement action under this Act, the Board may— 

(A) request the assistance of any foreign banking authority; and 

(B) maintain an office outside the United States. 

(2) PROVIDING ASSISTANCE TO FOREIGN BANKING AUTHORITIES.— 

(A) IN GENERAL.—The Board may, at the request of 

any foreign banking authority, assist such authority if 

such authority states that the requesting authority is conducting an investigation to determine whether any person 

has violated, is violating, or is about to violate any law or 

regulation relating to banking matters or currency transactions administered or enforced by the requesting authority. 

(B) INVESTIGATION BY FEDERAL BANKING AGENCY.—The 

Board may, in the Board's discretion, investigate and collect information and evidence pertinent to a request for 

assistance under subparagraph (A). Any such investigation 

shall comply with the laws of the United States and the 

policies and procedures of the Board. 

(C) FACTORS TO CONSIDER.—In deciding whether to 

provide assistance under this paragraph, the Board shall 

consider— 

(i) whether the requesting authority has agreed to 

provide reciprocal assistance with respect to banking 

matters within the jurisdiction of the Board or any 

appropriate Federal banking agency; and 

(ii) whether compliance with the request would 

prejudice the public interest of the United States. 

( D ) TREATMENT OF FOREIGN BANKING AUTHORITY.—For 

purposes of any Federal law or Board regulation relating 

to the collection or transfer of information by the Board or 

any appropriate Federal banking agency, the foreign banking authority shall be treated as another appropriate Federal banking agency. 

(3) RULE OF CONSTRUCTION.—Paragraphs (1) and (2) shall 

not be construed to limit the authority of the Board or any 

other Federal agency to provide or receive assistance or infor-
367 FEDERAL CREDIT UNION ACT Sec. 206A 

mation to or from any foreign authority with respect to any 

matter. 

(v) TERMINATION OF INSURANCE FOR MONE Y LAUNDERING OR 

CASH TRANSACTION REPORTING OFFENSES.— 

(1) I N GENERAL.— 

(A) CONVICTION OF TITLE 18 OFFENSES.— 

(i) DUT Y TO NOTIFY.—If an insured State credit 

union has been convicted of any criminal offense 

under section 1956 or 1957 of title 18, United States 

Code, the Attorney General shall provide to the Board 

a written notification of the conviction and shall include a certified copy of the order of conviction from 

the court rendering the decision. 

(ii) NOTICE OF TERMINATION.—Afte r written notification from the Attorney General to the Board of such 

a conviction, the Board shall issue to such insured 

credit union a notice of its intention to terminate the 

insured status of the insured credit union and schedule a hearing on the matter, which shall be conducted 

as a termination hearing pursuant to subsection (b) of 

this section, except that no period for correction shall 

apply to a notice issued under this subparagraph. 

(B) CONVICTION OF TITLE 31 OFFENSES.—If a credit 

union is convicted of any criminal offense under section 

5322 or 5324 of title 31, United States Code, after prior 

written notification from the Attorney General, the Board 

may initiate proceedings to terminate the insured status of 

such credit union in the manner described in subparagraph (A). 

(C) NOTICE TO STATE SUPERVISOR.—The Board shall simultaneously transmit a copy of any notice under this 

paragraph to the appropriate State financial institutions 

supervisor. 

(2) FACTORS TO BE CONSIDERED.—In determining whether 

to terminate insurance under paragraph (1), the Board shall 

take into account the following factors: 

(A) The extent to which directors, committee members, 

or senior executive officers (as defined by the Board in regulations which the Board shall prescribe) of the credit 

union knew of, or were involved in, the commission of the 

money laundering offense of which the credit union was 

found guilty. 

(B) The extent to which the offense occurred despite 

the existence of policies and procedures within the credit 

union which were designed to prevent the occurrence of 

any such offense. 

(C) The extent to which the credit union has fully cooperated with law enforcement authorities with respect to 

the investigation of the money laundering offense of which 

the credit union was found guilty. 

(D) The extent to which the credit union has implemented additional internal controls (since the commission 

of the offense of which the credit union was found guilty) 
Sec. 206A FEDERAL CREDIT UNION ACT 4 28 

to prevent the occurrence of any other money laundering 

offense. 

(E) The extent to which the interest of the local community in having adequate deposit and credit services 

available would be threatened by the termination of insurance. 

(3) NOTIC E TO STATE CREDIT UNIO N SUPERVISOR AND PUBLIC.—When the order to terminate insured status initiated 

pursuant to this subsection is final, the Board shall— 

(A) notify the commission, board, or authority (if any) 

having supervision of the credit union described in paragraph (1) at least 10 days prior to the effective date of the 

order of the termination of the insured status of such 

credit union; and 

(B) publish notice of the termination of the insured 

status of the credit union. 

(4) TEMPORARY INSURANCE OF PREVIOUSLY INSURED DEPOSITS.—Upon termination of the insured status of any State 

credit union pursuant to paragraph (1), the deposits of such 

credit union shall be treated in accordance with section 

206(d)(2). 

(5) SUCCESSOR LIABILITY.—This subsection shall not apply 

to a successor to the interests of, or a person who acquires, an 

insured credit union that violated a provision of law described 

in paragraph (1), if the successor succeeds to the interests of 

the violator, or the acquisition is made, in good faith and not 

for purposes of evading this subsection or regulations prescribed under this subsection. 

SEC. 206A. [12 U.S.C. 1786a] REGULATIO N AN D EXAMINATIO N OF 

CREDI T UNIO N ORGANIZATION S AN D SERVIC E 

PROVIDERS. 

(a) REGULATION AND EXAMINATION OF CREDIT UNIO N ORGANIZATIONS.— 

(1) GENERAL EXAMINATION AND REGULATORY AUTHORITY.— 

A credit union organization shall be subject to examination and 

regulation by the Board to the same extent as that insured 

credit union. 

(2) EXAMINATION BY OTHER BANKING AGENCIES.—The 

Board may authorize to make an examination of a credit union 

organization in accordance with paragraph (1)— 

(A) any Federal regulator1 agency that supervises any 

activity of a credit union organization; or 

(B) any Federal banking agency that supervises any 

other person who maintains an ownership interest in a 

credit union organization. 

(b) APPLICABILITY OF SECTION 206.—A credit union organization shall be subject to the provisions of section 206 as if the credit 

union organization were an insured credit union. 

(c) SERVICE PERFORMED BY CONTRACT OR OTHERWISE.— 

Notwithstanding subsection (a), if an insured credit union or a 

credit union organization that is regularly examined or subject to 

examination by the Board, causes to be performed for itself, by con1

 So in original. Probably should be "regulatory". 
367 

431 FEDERAL CREDIT UNION ACT Sec. 207 

tract or otherwise, any service authorized under this Act, or in the 

case of a State credit union, any applicable State law, whether on 

or off its premises— 

(1) such performance shall be subject to regulation and 

examination by the Board to the same extent as if such services were being performed by the insured credit union or credit 

union organization itself on its own premises; and 

(2) the insured credit union or credit union organization 

shall notify the Board of the existence of the service relationship not later than 30 days after the earlier of— 

(A) the date on which the contract is entered into; or 

(B) the date on which the performance of the service 

is initiated. 

(d) ADMINISTRATION BY THE BOARD.—The Board may issue 

such regulations and orders as may be necessary to enable the 

Board to administer and carry out this section and to prevent evasion of this section. 

(e) DEFINITIONS.—For purposes of this section— 

(1) the term ''credit union organization'' means any entity 

that— 

(A) is not a credit union; 

(B) is an entity in which an insured credit union may 

lawfully hold an ownership interest or investment; and 

(C) is owned in whole or in part by an insured credit 

union; and 

(2) the term ''Federal banking agency'' has the same 

meaning as in section 3 of the Federal Deposit Insurance Act. 

(f) EXPIRATION OF AUTHORITY.—This section and all powers 

and authority of the Board under this section shall cease to be 

effective as of December 31, 2001. 

PAYMENT OF INSURANCE 

SEC. 207. [12 U.S.C. 1787] (a)(1)(A) Upon its finding that a 

Federal credit union insured under this title is bankrupt or insolvent, the Board shall close such credit union for liquidation and appoint itself liquidating agent therefor. 

(B) Not later than 10 days after the date on which the Board 

closes a credit union for liquidation pursuant to paragraph (1), or 

accepts appointment as liquidating agent pursuant to subsection 

(b), such insured credit union may apply to the United States district court for the judicial district in which the principal office of 

such insured credit union is located or the United States District 

Court for the District of Columbia, for an order requiring the Board 

to show cause why it should not be prohibited from continuing such 

liquidation. Except as otherwise provided in this subparagraph, no 

court may take any action for or toward the removal of any liquidating agent or, except at the instance of the Board, restrain or affect the exercise of powers or functions of a liquidating agent. 

(2) Notwithstanding any other provision of law, the Board as 

liquidating agent of a closed Federal credit union insured under 

this title shall not be required to furnish bond and shall have the 

right to appoint an agent or agents to assist them in its duties as 

such liquidating agent. All fees, compensation, and expenses of liq-
Sec. 207 FEDERAL CREDIT UNION ACT 388 

uidation and administration thereof shall be fixed by the Board 

and may be paid by them out of funds coming into its possession 

as such liquidating agent. 

(3) 1 LIQUIDATION TO FACILITATE PROMPT CORRECTIVE ACTION.—The Board may close any credit union for liquidation, 

and appoint itself or another (including, in the case of a Statechartered insured credit union, the State official having jurisdiction over the credit union) as liquidating agent of that credit 

union, if— 

(A) the Board determines that— 

(i) the credit union is significantly undercapitalized, as defined in section 216, and has no reasonable 

prospect of becoming adequately capitalized, as defined in section 216; or 

(ii) the credit union is critically undercapitalized, 

as defined in section 216; and 

(B) in the case of a State-chartered insured credit 

union, the Board has complied with section 216(l). 

(b) POWERS AND DUTIES OF BOARD AS CONSERVATOR OR LIQUIDATING AGENT.— 

(1) RULEMAKING AUTHORITY OF BOARD.—The Board may 

prescribe such regulations as the Board determines to be 

appropriate regarding the conduct of the Board as conservator 

or liquidating agent. 

(2) GENERAL POWERS.— 

(A) SUCCESSOR TO CREDIT UNION.—Th e Board shall, as 

conservator or liquidating agent, and by operation of law, 

succeed to— 

(i) all rights, titles, powers, and privileges of the 

credit union, and of any member, accountholder, officer, or director of such credit union with respect to the 

credit union and the assets of the credit union; and 

(ii) title to the books, records, and assets of any 

previous conservator or other legal custodian of such 

credit union. 

(B) OPERATE THE CREDIT UNION.—Th e Board may, as 

conservator or liquidating agent— 

(i) take over the assets of and operate the credit 

union with all the powers of the members or shareholders, the directors, and the officers of the credit 

union and shall be authorized to conduct all business 

of the credit union; 

(ii) collect all obligations and money due the credit 

union; 

(iii) perform all functions of the credit union in the 

name of the credit union which is consistent with the 

appointment as conservator or liquidating agent; and 

(iv) preserve and conserve the assets and property 

of such credit union. 

(C) FUNCTIONS OF CREDIT UNION'S OFFICERS, DIRECTORS, AND SHAREHOLDERS.—The Board may, by regulation 

or order, provide for the exercise of any function by any 

1

 Indentation so in law. 
431 FEDERAL CREDIT UNION ACT Sec. 207 

member or stockholder, director, or officer of any credit 

union for which the Board has been appointed conservator 

or liquidating agent. 

(D) POWERS AS CONSERVATOR.—The Board may, as 

conservator, take such action as may be— 

(i) necessary to put the credit union in a sound 

and solvent condition; and 

(ii) appropriate to carry on the business of the 

credit union and preserve and conserve the assets and 

property of the credit union. 

( E ) ADDITIONAL POWERS AS LIQUIDATING AGENT.—Th e 

Board may, as liquidating agent, place the credit union in 

liquidation and proceed to realize upon the assets of the 

credit union, having due regard to the conditions of credit 

in the locality. 

(F) PAYMENT OF VALID OBLIGATIONS.—The Board, as 

conservator or liquidating agent, shall pay all valid obligations of the credit union in accordance with the prescriptions and limitations of this Act. 

( G) ATTACHMENT OF ASSETS AND INJUNCTIVE RELIEF.— 

subject to subparagraph (H), any court of competent jurisdiction may, at the request of the Board (in the Board's capacity as conservator or liquidating agent for any insured 

credit union or in the Board's corporate capacity in the 

exercise of any authority under section 207), issue an order 

in accordance with Rule 65 of the Federal Rules of Civil 

procedure, including an order placing the assets of any 

person designated by the Board under the control of the 

court and appointing a trustee to hold such assets. 

( H ) STANDARDS.— 

(i) SHOWING.—Rule 65 of the Federal Rules of 

Civil Procedure shall apply with respect to any proceeding under subparagraph (G) without regard to the 

requirement of such rule that the applicant show that 

the injury, loss, or damage is irreparable and immediate. 

(ii) STATE PROCEEDING.—If, in the case of any proceeding in a State court, the court determines that 

rules of civil procedure available under the laws of 

such state provide substantially similar protections to 

such party's right to due process as Rule 65 (as modified with respect to such proceeding by clause (i)), the 

relief sought by the Board pursuant to subparagraph 

(G) may be requested under the laws of such state. 

( I) SUBPOENA AUTHORITY.— 

(i) IN GENERAL.—The Board may, as conservator 

or liquidating agent and for purposes of carrying out 

any power, authority, or duty with respect to an insured credit union (including determining any claim 

against the credit union and determining and realizing 

upon any asset of any person in the course of collecting money due the credit union), exercise any 

power established under section 206(p), and the provisions of such section shall apply with respect to the 
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

exercise of any such power under this subparagraph in 

the same manner as such provisions apply under such 

section. 

(ii) AUTHORITY OF BOARD.—A subpoena or subpoena duces tecum may be issued under clause (i) only 

by, or with the written approval of, the Board or their 

designees. 

(iii) RULE OF CONSTRUCTION.—This subsection 

shall not be construed as limiting any rights that the 

Board, in any capacity, might otherwise have under 

section 206(p). 

(J) INCIDENTAL POWERS.—The Board may, as conservator or liquidating agent— 

(i) exercise all powers and authorities specifically 

granted to conservators or liquidating agents, respectively, under this Act and such incidental powers as 

shall be necessary to carry out such powers; and 

(ii) take any action authorized by this Act, 

which the Board determines is in the best interests of the 

credit union, its account holders, or the Board. 

(3) AUTHORITY OF LIQUIDATING AGENT TO DETERMINE 

CLAIMS.— 

(A) IN GENERAL.—The Board may, as liquidating 

agent, determine claims in accordance with the requirements of this subsection and regulations prescribed under 

para- graph (4). 

(B) NOTICE REQUIREMENTS.—The liquidating agent, in 

any case involving the liquidation or winding up of the affairs of a closed credit union, shall— 

(i) promptly publish a notice to the credit union's 

creditors to present their claims, together with proof, 

to the liquidating agent by a date specified in the notice which shall be not less than 90 days after the publication of such notice; and 

(ii) republish such notice approximately 1 month 

and 2 months, respectively, after the publication under 

clause (i). 

(C) MAILIN G REQUIRED.—The liquidating agent shall 

mail a notice similar to the notice published under subparagraph (B)(i) at the time of such publication to any 

creditor shown on the credit union's books— 

(i) at the creditor's last address appearing in such 

books; or 

(ii) upon discovery of the name and address of a 

claimant not appearing on the credit union's books 

within 30 days after the discovery of such name and 

address. 

(4) RULEMAKING AUTHORITY RELATING TO DETERMINATION 

OF CLAIMS.—The Board may prescribe regulations regarding 

the allowance or disallowance of claims by the liquidating 

agent and providing for administrative determination of claims 

and review of such determination. 

(5) PROCEDURES FOR DETERMINATION OF CLAIMS.— 

(A) DETERMINATION PERIOD.— 
431 FEDERAL CREDIT UNION ACT Sec. 207 

(i) IN GENERAL.—Before the end of the 180-day period beginning on the date any claim against a credit 

union is filed with the Board as liquidating agent, the 

Board shall determine whether to allow or disallow 

the claim and shall notify the claimant of any determination with respect to such claim. 

(ii) EXTENSION OF TIME.—Th e period described in 

clause (i) may be extended by a written agreement between the claimant and the Board. 

(iii) MAILIN G OF NOTICE SUFFICIENT.—The requirements of clause (i) shall be deemed to be satisfied if 

the notice of any determination with respect to any 

claim is mailed to the last address of the claimant 

which appears— 

(i) on the credit union's books; 

(ii) in the claim filed by the claimant; or 

(iii) in documents submitted in proof of the 

claim. 

(iv) CONTENTS OF NOTICE OF DISALLOWANCE.—If 

any claim filed under clause (i) is disallowed, the notice to the claimant shall contain— 

(i) a statement of each reason for the disallowance; and 

(ii) the procedures available for obtaining 

agency review of the determination to disallow the 

claim or judicial determination of the claim. 

(B) ALLOWANCE OF PROVEN CLAIMS.—The liquidating 

agent shall allow any claim received on or before the date 

specified in the notice published under paragraph (3)(B)(i) 

by the liquidating agent from any claimant which is 

proved to the satisfaction of the liquidating agent. 

(C) DISALLOWANCE OF CLAIMS FILED AFTER END OF FILI NG PERIOD.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

claims filed after the date specified in the notice published under paragraph (3)(B)(i) shall be disallowed 

and such disallowance shall be final. 

(ii) CERTAIN EXCEPTIONS.—Clause (i) shall not 

apply with respect to any claim filed by any claimant 

after the date specified in the notice published under 

paragraph (3)(B)(i) and such claim may be considered 

by the liquidating agent if— 

(i) the claimant did not receive notice of the 

appointment of the liquidating agent in time to 

file such claim before such date; and 

(ii) such claim is filed in time to permit payment of such claim. 

(D) AUTHORITY TO DISALLOW CLAIMS.—The liquidating 

agent may disallow any portion of any claim by a creditor 

or claim of security, preference, or priority which is not 

proved to the satisfaction of the liquidating agent. 

( E) N O JUDICIAL REVIEW OF DETERMINATION PURSUANT 

TO SUBPARAGRAPH (D).—No court may review the Board's 
Sec. 207dir FEDERAL CREDIT UNION ACT 4 64 

determination pursuant to subparagraph (D) to disallow a 

claim. 

( F) LEGAL EFFECT OF FILING.— 

(i) STATUTE OF LIMITATION TOLLED.—For purposes 

of any applicable statute of limitations, the filing of a 

claim with the liquidating agent shall constitute a 

commencement of an action. 

(ii) N o PREJUDICE TO OTHER ACTIONS.—Subject to 

paragraph (12), the filing of a claim with the liquidating agent shall not prejudice any right of the claimant to continue any action which was filed before the 

appointment of the liquidating agent. 

(6) PROVISION FOR AGENCY REVIEW OR JUDICIAL DETERMINATION OF CLAIMS.— 

(A) IN GENERAL.—Before the end of the 60-day period 

beginning on the earlier of— 

(i) the end of the period described in paragraph 

(5)(A)(i) with respect to any claim against a credit 

union for which the Board is liquidating agent; or 

(ii) the date of any notice of disallowance of such 

claim pursuant to paragraph (5)(A)(i), 

the claimant may request administrative review of the 

claim in accordance with subparagraph (A) or (B) of paragraph (7) or file suit on such claim (or continue an action 

commenced before the appointment of the liquidating 

agent) in the district or territorial court of the United 

states for the district within which the credit union's principal place of business is located or the United States District Court for the District of Columbia (and such court 

shall have jurisdiction to hear such claim). 

(B) STATUTE OF LIMITATIONS.—If any claimant fails 

to— 

(i) request administrative review of any claim in 

accordance with subparagraph (A) or (B) of paragraph 

(7); or 

(ii) file suit on such claim (or continue an action 

commenced before the appointment of the liquidating 

agent), 

before the end of the 60-day period described in subparagraph (A), the claim shall be deemed to be disallowed 

(other than any portion of such claim which was allowed 

by the liquidating agent) as of the end of such period, such 

disallowance shall be final, and the claimant shall have no 

further rights or remedies with respect to such claim. 

(7) REVIEW OF CLAIMS.— 

(A) ADMINISTRATIVE HEARING.—If any claimant requests review under this subparagraph in lieu of filing or 

continuing any action under paragraph (6) and the Board 

agrees to such request, the Board shall consider the claim 

after opportunity for a hearing on the record. The final 

determination of the Board with respect to such claim 

shall be subject to judicial review under chapter 7 of title 

5, United States Code. 

(B) OTHER REVIEW PROCEDURES.— 
431 FEDERAL CREDIT UNION ACT Sec. 207 

(i) IN GENERAL.—The Board shall also establish 

such alternative dispute resolution processes as may 

be appropriate for the resolution of claims filed under 

paragraph (5)(A)(i). 

(ii) CRITERIA.—I n establishing alternative dispute 

resolution processes, the Board shall strive for procedures which are expeditious, fair, independent, and 

low cost. 

(iii) VOLUNTARY BINDING OR NONBINDING PROCEDURES.—The Board may establish both binding and 

nonbinding processes, which may be conducted by any 

government or private party, but all parties, including 

the claimant and the Board, must agree to the use of 

the process in a particular case. 

(iv) CONSIDERATION OF INCENTIVES.—The Board 

shall seek to develop incentives for claimants to participate in the alternative dispute resolution process. 

(8) EXPEDITED DETERMINATION OF CLAIMS.— 

(A) ESTABLISHMENT REQUIRED.—The Board shall 

establish a procedure for expedited relief outside of the 

routine claims process established under paragraph (5) for 

claimants who— 

(i) allege the existence of legally valid and enforceable or perfected security interests in assets of any 

credit union for which the Board has been appointed 

liquidating agent; and 

(ii) allege that irreparable injury will occur if the 

routine claims procedure is followed. 

(B) DETERMINATION PERIOD.—Before the end of th e 90-

day period beginning on the date any claim is filed in 

accordance with the procedures established pursuant to 

subparagraph (A), the Board shall— 

(i) determine— 

(I) whether to allow or disallow such claim; or 

(II) whether such claim should be determined 

pursuant to the procedures established pursuant 

to paragraph (5); or 

(ii) notify the claimant of the determination, and 

if the claim is disallowed, a statement of each reason 

for the disallowance and the procedure for obtaining 

agency review or judicial determination. 

( C) PERIOD FOR FILING OR RENEWING SUIT.—An y 

claimant who files a request for expedited relief shall be 

permitted to file a suit, or to continue a suit filed before 

the appointment of the liquidating agent, seeking a determination of the claimant's rights with respect to such security interest after the earlier of— 

(i) the end of the 90-day period beginning on the 

date of the filing of a request for expedited relief; or 

(ii) the date the Board denies the claim. 

(D) STATUTE OF LIMITATIONS.—If an action described 

in subparagraph (C) is not filed, or the motion to renew a 

previously filed suit is not made, before the end of the 30-

day period beginning on the date on which such action or 
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

motion may be filed in accordance with subparagraph (B), 

the claim shall be deemed to be disallowed as of the end 

of such period (other than any portion of such claim which 

was allowed by the liquidating agent), such disallowance 

shall be final, and the claimant shall have no further 

rights or remedies with respect to such claim. 

( E) LEGAL EFFECT OF FILING.— 

(i) STATUTE OF LIMITATION TOLLED.—For purposes 

of any applicable statute of limitations, the filing of a 

claim with the liquidating agent shall constitute a 

commencement of an action. 

(ii) NO PREJUDICE TO OTHER ACTIONS.—Subject to 

paragraph (12), the filing of a claim with the liquidating agent shall not prejudice any right of the claimant to continue any action which was filed before the 

appointment of the liquidating agent. 

(9) AGREEMENT AS BASIS OF CLAIM.— 

(A) REQUIREMENTS.—Except as provided in subparagraph (B), any agreement which does not meet the requirements set forth in section 208(a)(3) shall not form the 

basis of, or substantially comprise, a claim against the liquidating agent or the Board. 

( B) EXCEPTION TO CONTEMPORANEOUS EXECUTION 

REQUIREMENT.—Notwithstanding section 208(a)(3), any 

agreement between a Federal home loan bank or Federal 

Reserve bank and any insured credit union which was executed before the extension of credit by such bank to such 

credit union shall be treated as having been executed contemporaneously with such extension of credit for purposes 

of subparagraph (A). 

(10) PAYMENT OF CLAIMS.— 

(A) IN GENERAL.—The liquidating agent may, in the 

liquidating agent's discretion and to the extent funds are 

available, pay creditor claims which are allowed by the liquidating agent, approved by the Board pursuant to a final 

determination pursuant to paragraph (7) or (8), or determined by the final judgment of any court of competent 

jurisdiction in such manner and amounts as are authorized under this Act. 

(B) PAYMENT OF DIVIDENDS ON CLAIMS.—The liquidating agent may, in the liquidating agent's sole discretion, pay dividends on proved claims at any time, and no 

liability shall attach to the Board (in such Board's corporate capacity or as liquidating agent), by reason of any 

such payment, for failure to pay dividends to a claimant 

whose claim is not proved at the time of any such payment. 

(11) DISTRIBUTION OF ASSETS.— 

(A) SUBROGATED CLAIMS; CLAIMS OF UNINSURED 

ACCOUNTHOLDERS AND OTHER CREDITORS.—The liquidating 

agent shall— 

(i) retain for the account of the Board such portion 

of the amounts realized from any liquidation as the 
431 FEDERAL CREDIT UNION ACT Sec. 207 

Board may be entitled to receive in connection with 

the subrogation of the claims of accountholders; and 

(ii) pay to accountholders and other creditors the 

net amounts available for distribution to them. 

(B) DISTRIBUTION TO SHAREHOLDERS OF AMOUNTS REMAINING AFTER PAYMENT OF ALL OTHER CLAIMS AND EXPENSES.—In any case in which funds remain after all 

accountholders, creditors, other claimants, and administrative expenses are paid, the liquidating agent shall distribute such funds to the credit union's shareholders or 

members together with the accounting report required 

under paragraph (14)(C). 

(12) SUSPENSION OF LEGAL ACTIONS.— 

(A) IN GENERAL.—After the appointment of a conservator or liquidating agent for an insured credit union, the 

conservator or liquidating agent may request a stay for a 

period not to exceed— 

(i) 45 days, in the case of any conservator; and 

(ii) 90 days, in the case of any liquidating agent, 

in any judicial action or proceeding to which such credit 

union is or becomes a party. 

(B) GRANT OF STAY BY ALL COURTS REQUIRED.—Upo n 

receipt of a request by any conservator or liquidating agent 

pursuant to subparagraph (A) for a stay of any judicial action or proceeding in any court with jurisdiction of such action or proceeding, the court shall grant such stay as to all 

parties. 

(13) ADDITIONAL RIGHTS AND DUTIES.— 

(A) PRIOR FINAL ADJUDICATION.—The Board shall 

abide by any final unappealable judgment of any court of 

competent jurisdiction which was rendered before the 

appointment of the Board as conservator or liquidating 

agent. 

(B) RIGHTS AND REMEDIES OF CONSERVATOR OR LIQUIDATING AGENT.—I n the event of any appealable judgment, 

the Board as conservator or liquidating agent shall— 

(i) have all the rights and remedies available to 

the credit union (before the appointment of such conservator or liquidating agent) and the Board in its corporate capacity, including removal to Federal court 

and all appellate rights; and 

(ii) not be required to post any bond in order to 

pursue such remedies. 

(C) N o ATTACHMENT OR EXECUTION.—N o attachment 

or execution may issue by any court upon assets in the 

possession of the liquidating agent. 

(D) LIMITATION ON JUDICIAL REVIEW.—Excep t as otherwise provided in this subsection, no court shall have jurisdiction over— 

(i) any claim or action for payment from, or any 

action seeking a determination of rights with respect 

to, the assets of any credit union for which the Board 

has been appointed liquidating agent, including assets 
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

which the Board may acquire from itself as such liquidating agent; or 

(ii) any claim relating to any act or omission of 

such credit union or the Board as liquidating agent. 

(14 ) STATUTE OF LIMITATIONS FOR ACTIONS BROUGHT BY 

CONSERVATOR OR LIQUIDATING AGENT.— 

(A) IN GENERAL.—Notwithstanding any provision of 

any contract, the applicable statute of limitations with regard to any action brought by the Board as conservator or 

liquidating agent shall be— 

(i) in the case of any contract claim, the longer 

of— 

(i) the 6-year period beginning on the date the 

claim accrues; or 

(ii) the period applicable under state law; and 

(ii) in the case of any tort claim, the longer of— 

(i) the 3-year period beginning on the date the 

claim accrues; or 

(ii) the period applicable under state law. 

( B) DETERMINATIO N OF TH E DATE ON WHIC H A CLAIM 

ACCRUES.—For purposes of subparagraph (A), the date on 

which the statute of limitation begins to run on any claim 

described in such subparagraph shall be the later of— 

(i) the date of the appointment of the Board as 

conservator or liquidating agent; or 

(ii) the date on which the cause of action accrues. 

(15 ) ACCOUNTING AND RECORDKEEPING REQUIREMENTS.— 

(A) IN GENERAL.—The Board as conservator or liquidating agent shall, consistent with the accounting and reporting practices and procedures established by the Board, 

maintain a full accounting of each conservatorship and liquidation or other disposition of credit unions in default. 

(B) ANNUA L ACCOUNTING OR REPORT.—Wit h respect to 

each conservatorship or liquidation to which the Board 

was appointed, the Board shall make an annual accounting or report, as appropriate, available to the Comptroller 

General of the United States or, in the case of a Statechartered credit union, the authority which appointed the 

Board as conservator or liquidating agent. 

(C) AVAILABILITY OF REPORTS.—An y report prepared 

pursuant to subparagraph (B) shall be made available by 

the Board upon request to any shareholder of the credit 

union for which the Board was appointed conservator or 

liquidating agent or any other member of the public. 

( D ) RECORDKEEPING REQUIREMENT.—Afte r th e en d of 

the 6-year period beginning on the date the Board is appointed as liquidating agent of an insured credit union, the 

Board may destroy any records of such credit union which 

the Board, in the Board's discretion, determines to be unnecessary unless directed not to do so by a court of competent jurisdiction or governmental agency, or prohibited 

by law. 

(16 ) FRAUDULEN T TRANSFERS.— 
431 FEDERAL CREDIT UNION ACT Sec. 207 

(A) IN GENERAL.—The Board, as conservator or liquidating agent for any insured credit union, may avoid a 

transfer of any interest of an institution-affiliated party, or 

any person who the Board determines is a debtor of the 

institution, in property, or any obligation incurred by such 

party or person, that was made within 5 years of the date 

on which the Board becomes conservator or liquidating 

agent if such party or person voluntarily or involuntarily 

made such transfer or incurred such liability with the intent to hinder, delay, or defraud the insured credit union 

or the Board. 

(B) RIGH T OF RECOVERY.—To the extent a transfer is 

avoided under subparagraph (A), the Board may recover, 

for the benefit of the insured credit union, the property 

transferred, or, if a court so orders, the value of such property (at the time of such transfer) from— 

(i) the initial transferee of such transfer or the 

institution-affiliated party or person for whose benefit 

such transfer was made; or 

(ii) any immediate or mediate transferee of any 

such initial transferee. 

(C) RIGHTS OF TRANSFEREE OR OBLIGEE.—The Board 

may not recover under subparagraph (B) from— 

(i) any transferee that takes for value, including 

satisfaction or securing of a present or antecedent 

debt, in good faith; or 

(ii) any immediate or mediate good faith transferee of such transferee. 

(D) RIGHTS UNDER THIS PARAGRAPH.—The rights of the 

Board under this paragraph shall be superior to any rights 

of a trustee or any other party (other than any party 

which is a Federal agency) under title 11, United States 

Code. 

(c) PROVISIONS RELATING TO CONTRACTS ENTERED INTO BEFORE APPOINTMENT OF CONSERVATOR OR LIQUIDATING AGENT. — 

(1) AUTHORITY TO REPUDIATE CONTRACTS.—In addition to 

any other rights a conservator or liquidating agent may have, 

the conservator or liquidating agent for any insured credit 

union may disaffirm or repudiate any contract or lease— 

(A) to which such credit union is a party; 

(B) the performance of which the conservator or liquidating agent, in the conservator's or liquidating agent's 

discretion, determines to be burdensome; and 

(C) the disaffirmance or repudiation of which the conservator or liquidating agent determines, in the conservator's or liquidating agent's discretion, will promote the orderly administration of the credit union's affairs. 

(2) TIMIN G OF REPUDIATION.—The conservator or liquidating agent appointed for any insured credit union shall 

determine whether or not to exercise the rights of repudiation 

under this subsection within a reasonable period following 

such appointment. 

(3) CLAIMS FOR DAMAGES FOR REPUDIATION.— 
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

(A) IN GENERAL.—Except as otherwise provided in subparagraph (C) and paragraphs (4), (5), and (6), the liability 

of the conservator or liquidating agent for the 

disaffirmance or repudiation of any contract pursuant to 

paragraph (1) shall be— 

(i) limited to actual direct compensatory damages; 

and 

(ii) determined as of— 

(i) the date of the appointment of the conservator or liquidating agent; or 

(ii) in the case of any contract or agreement 

referred to in paragraph (8), the date of the 

disaffirmance or repudiation of such contract or 

agreement. 

(B) N O LIABILITY FOR OTHER DAMAGES.—For purposes 

of subparagraph (A), the term ''actual direct compensatory 

damages'' does not include— 

(i) punitive or exemplary damages; 

(ii) damages for lost profits or opportunity; or 

(iii) damages for pain and suffering. 

( C) MEASURE OF DAMAGES FOR REPUDIATION OF FINANCIAL CONTRACTS.—In the case of any qualified financial 

contract or agreement to which paragraph (8) applies, compensatory damages shall be— 

(i) deemed to include normal and reasonable costs 

of cover or other reasonable measures of damages utilized in the industries for such contract and agreement 

claims; and 

(ii) paid in accordance with this subsection and 

subsection (f) except as otherwise specifically provided 

in this section. 

(4) LEASES UNDER WHIC H THE CREDIT UNIO N IS THE LESSEE.— 

(A) I N GENERAL.—If the conservator or liquidating 

agent disaffirms or repudiates a lease under which the 

credit union was the lessee, the conservator or liquidating 

agent shall not be liable for any damages (other than damages determined pursuant to subparagraph (B)) for the 

disaffirmance or repudiation of such lease. 

(B) PAYMENTS OF RENT.—Notwithstanding subparagraph (A), the lessor under a lease to which such subparagraph applies shall— 

(i) be entitled to the contractual rent accruing before the later of the date— 

(I) the notice of disaffirmance or repudiation 

is mailed; or 

(ii) the disaffirmance or repudiation becomes 

effective, 

unless the lessor is in default or breach of the terms 

of the lease; 

(ii) have no claim for damages under any acceleration clause or other penalty provision in the lease; and 

(iii) have a claim for any unpaid rent, subject to 

all appropriate offsets and defenses, due as of the date 
431 FEDERAL CREDIT UNION ACT Sec. 207 

of the appointment which shall be paid in accordance 

with this subsection and subsection (b). 

(5) LEASES UNDER WHIC H THE CREDIT UNIO N IS THE LESSOR.— 

(A) I N GENERAL.—If the conservator or liquidating 

agent repudiates an unexpired written lease of real property of the credit union under which the credit union is the 

lessor and the lessee is not, as of the date of such repudiation, in default, the lessee under such lease may either— 

(i) treat the lease as terminated by such repudiation; or 

(ii) remain in possession of the leasehold interest 

for the balance of the term of the lease unless the lessee defaults under the terms of the lease after the 

date of such repudiation. 

(B) PROVISIONS APPLICABLE TO LESSEE REMAINING I N 

POSSESSION.—If any lessee under a lease described in subparagraph (A) remains in possession of a leasehold interest 

pursuant to clause (ii) of such subparagraph— 

(i) the lessee— 

(i) shall continue to pay the contractual rent 

pursuant to the terms of the lease after the date 

of the repudiation of such lease;1 

(ii) may offset against any rent payment 

which accrues after the date of the repudiation of 

the lease, any damages which accrue after such 

date due to the nonperformance of any obligation 

of the credit union under the lease after such 

date; and 

(ii) the conservator or liquidating agent shall not 

be liable to the lessee for any damages arising after 

such date as a result of the repudiation other than the 

amount of any offset allowed under clause (i)(II). 

(6) CONTRACTS FOR THE SALE OF REAL PROPERTY.— 

(A) I N GENERAL.—If the conservator or liquidating 

agent repudiates any contract (which meets the requirements of each paragraph of section 208(a)(3)) for the sale 

of real property and the purchaser of such real property 

under such contract is in possession and is not, as of the 

date of such repudiation, in default, such purchaser may 

either— 

(i) treat the contract as terminated by such repudiation; or 

(ii) remain in possession of such real property. 

(B) PROVISIONS APPLICABLE TO PURCHASER REMAINING 

I N POSSESSION.—If any purchaser of real property under 

any contract described in subparagraph (A) remains in 

possession of such property pursuant to clause (ii) of such 

subparagraph— 

(i) the purchaser— 

1

 So in original. Probably should end with "and". 
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

(i) shall continue to make all payments due 

under the contract after the date of the repudiation of the contract; and 

(ii) may offset against any such payments any 

damages which accrue after such date due to the 

nonperformance (after such date) of any obligation 

of the credit union under the contract; and 

(ii) the conservator or liquidating agent shall— 

(i) not be liable to the purchaser for any damages arising after such date as a result of the 

repudiation other than the amount of any offset 

allowed under clause (i)(ii); 

(ii) deliver title to the purchaser in accordance with the provisions of the contract; and 

(iii) have no obligation under the contract 

other than the performance required under subclause (ii). 

(C) ASSIGNMENT AND SALE ALLOWED.— 

(i) I N GENERAL.—No provision of this paragraph 

shall be construed as limiting the right of the conservator or liquidating agent to assign the contract described in subparagraph (A) and sell the property subject to the contract and the provisions of this paragraph. 

(ii) N o LIABILITY AFTER ASSIGNMENT AND SALE.— 

if an assignment and sale described in clause (i) is 

consummated, the conservator or liquidating agent 

shall have no further liability under the contract described in subparagraph (A) or with respect to the real 

property which was the subject of such contract. 

(7) PROVISIONS APPLICABLE TO SERVICE CONTRACTS.— 

( A) SERVICES PERFORMED BEFORE APPOINTMENT.—In 

the case of any contract for services between any person 

and any insured credit union for which the Board has been 

appointed conservator or liquidating agent, any claim of 

such person for services performed before the appointment 

of the conservator or the liquidating agent shall be— 

(i) a claim to be paid in accordance with subsection (b); and 

(ii) deemed to have arisen as of the date the conservator or liquidating agent was appointed. 

(B) SERVICES PERFORMED AFTER APPOINTMENT AND 

PRIOR TO REPUDIATION.—If, in the case of any contract for 

services described in subparagraph (A), the conservator or 

liquidating agent accepts performance by the other person 

before the conservator or liquidating agent makes any 

determination to exercise the right of repudiation of such 

contract under this section— 

(i) the other party shall be paid under the terms 

of the contract for the services performed; and 

(ii) the amount of such payment shall be treated 

as an administrative expense of the conservatorship or 

liquidation. 
431 FEDERAL CREDIT UNION ACT Sec. 207 

(C) ACCEPTANCE OF PERFORMANCE NO BAR TO SUBSEQUENT REPUDIATION.—The acceptance by any conservator 

or liquidating agent of services referred to in subparagraph (B) in connection with a contract described in such 

subparagraph shall not affect the right of the conservator 

or liquidating agent to repudiate such contract under this 

section at any time after such performance. 

(8) CERTAIN QUALIFIED FINANCIAL CONTRACTS.— 

(A) RIGHTS OF PARTIES TO CONTRACTS.—Subject to 

paragraph (12) of this subsection and notwithstanding any 

other provision of this Act (other than subsection (b)(9) of 

this section and section 208(a)(3)), any other Federal law, 

or the law of any State, no person shall be stayed or prohibited from exercising— 

(i) any right to cause the termination or liquidation of any qualified financial contract with an insured 

credit union which arises upon the appointment of the 

Board as liquidating agent for such credit union at 

any time after such appointment; 

(ii) any right under any security arrangement relating to any contract or agreement described in clause 

(i); or 

(iii) any right to offset or net out any termination 

value, payment amount, or other transfer obligation 

arising under or in connection with 1 or more contracts and agreements described in clause (i), including any master agreement for such contracts or agreements. 

(B) APPLICABILITY OF OTHER PROVISIONS.—Subsection 

(b)(12) shall apply in the case of any judicial action or proceeding brought against any liquidating agent referred to 

in subparagraph (A), or the credit union for which such 

liquidating agent was appointed, by any party to a contract or agreement described in subparagraph (A)(i) with 

such credit union. 

( C) CERTAIN TRANSFERS NOT AVOIDABLE.— 

(i) IN GENERAL.—Notwithstanding paragraph (11), 

the Board, whether acting as such or as conservator or 

liquidating agent of an insured credit union, may not 

avoid any transfer of money or other property in connection with any qualified financial contract with an 

insured credit union. 

(ii) EXCEPTION FOR CERTAIN TRANSFERS.—Clause 

(i) shall not apply to any transfer of money or other 

property in connection with any qualified financial 

contract with an insured credit union if the Board 

determines that the transferee had actual intent to 

hinder, delay, or defraud such credit union, the creditors of such credit union, or any conservator or liquidating agent appointed for such credit union. 

( D ) CERTAIN CONTRACTS AND AGREEMENTS DEFINED.— 

For purposes of this subsection— 

(i) QUALIFIED FINANCIAL CONTRACT.—The term 

''qualified financial contract'' means any securities con-
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

tract, forward contract, repurchase agreement, and 

any similar agreement that the Board determines by 

regulation to be a qualified financial contract for purposes of this paragraph. 

(ii) SECURITIES CONTRACT.—Th e term ''securities 

contract''— 

(i) has the meaning given to such term in section 741 of title 11, United States Code, except 

that the term ''security'' (as used in such section) 

shall be deemed to include any mortgage loan, any 

mortgage-related security (as defined in section 

3(a)(41) of the Securities Exchange Act of 19341, 

and any interest in any mortgage loan or mortgage-related security; and 

(ii) does not include any participation in a 

commercial mortgage loan unless the Board determines by regulation, resolution, or order to include any such participation within the meaning 

of such term. 

(iii) FORWARD CONTRACT.—Th e term ''forward contract'' has the meaning given to such term in section 

101 of title 11, United States Code. 

(iv) REPURCHASE AGREEMENT.—Th e term ''repurchase agreement''— 

(i) has the meaning given to such term in section 101 of title 11, the United States Code, except 

that the items (as described in such section) which 

may be subject to any such agreement shall be 

deemed to include mortgage-related securities (as 

such term is defined in section 3(a)(41) of the 

Securities Exchange Act of 1934, any mortgage 

loan, and any interest in any mortgage loan; and 

(ii) does not include any participation in a 

commercial mortgage loan unless the Board determines by regulation, resolution, or order to include any such participation within the meaning 

of such term. 

(v) TRANSFER.—The term ''transfer'' has the meaning given to such term in section 101 of title 11, 

United States Code. 

( E ) CERTAI N PROTECTIONS I N EVEN T OF APPOINTMEN T 

OF CONSERVATOR.—Notwithstanding any other provision of 

this Act (other than paragraph (12) of this subsection, subsection (b)(9) of this section, and section 208(a)(3) of this 

Act), any other Federal law, or the law of any State, no 

person shall be stayed or prohibited from exercising— 

(i) any right such person has to cause the termination, liquidation, or acceleration of any qualified 

financial contract with a credit union in a conservatorship based upon a default under such financial contract which is enforceable under applicable noninsolvency law; 

1

 So in original. A closing parenthesis probably should precede the comma. 
431 FEDERAL CREDIT UNION ACT Sec. 207 

(ii) any right under any security arrangement relating to such qualified financial contracts; or 

(iii) any right to offset or net out any termination 

values, payment amounts, or other transfer obligations 

arising under or in connection with such qualified 

financial contracts. 

(9) TRANSFER OF QUALIFIED FINANCIAL CONTRACTS.—In 

making any transfer of assets or liabilities of a credit union in 

default which includes any qualified financial contract, the conservator or liquidating agent for such credit union shall 

either— 

(A) transfer to 1 credit union (other than a credit 

union in default)— 

(i) all qualified financial contracts between— 

(i) any person or any affiliate of such person; 

and 

(ii) the credit union in default; 

(ii) all claims of such person or any affiliate of 

such person against such credit union under any such 

contract (other than any claim which, under the terms 

of any such contract, is subordinated to the claims of 

general unsecured creditors of such credit union); 

(iii) all claims of such credit union against such 

person or any affiliate of such person under any such 

contract; and 

(iv) all property securing any claim described in 

clause (ii) or (iii) under any such contract; or 

(B) transfer none of the financial contracts, claims, or 

property referred to in subparagraph (A) (with respect to 

such person and any affiliate of such person). 

(10 ) NOTIFICATION OF TRANSFER.— 

(A) I N GENERAL.—If— 

(i) the conservator or liquidating agent for an insured credit union in default makes any transfer of 

the assets and liabilities of such credit union; and 

(ii) the transfer includes any qualified financial 

contract, 

the conservator or liquidating agent shall use such conservator's or liquidating agent's best efforts to notify any 

person who is a party to any such contract of such transfer 

by 12:00, noon (local time), on the business day following 

such transfer. 

(B) BUSINESS DAY DEFINED.—Fo r purposes of this 

paragraph, the term ''business day'' means any day other 

than any saturday, sunday, or any day on which either 

the New York Stock Exchange or the Federal Reserve 

Bank of New York is closed. 

(11 ) CERTAIN SECURITY INTERESTS NOT AVOIDABLE.—No 

provision of this subsection shall be construed as permitting 

the avoidance of any legally enforceable or perfected security 

interest in any of the assets of any credit union except where 

such an interest is taken in contemplation of the credit union's 

insolvency or with the intent to hinder, delay, or defraud the 

credit union or the creditors of such credit union. 
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

(12) AUTHORITY TO ENFORCE CONTRACTS.— 

(A) IN GENERAL.—The conservator or liquidating agent 

may enforce any contract, other than a director's or officer's liability insurance contract or a credit union bond, entered into by the credit union notwithstanding any provision of the contract providing for termination, default, 

acceleration, or exercise of rights upon, or solely by reason 

of, insolvency or the appointment of a conservator or liquidating agent. 

(B) CERTAIN RIGHTS NOT AFFECTED.—No provision of 

this paragraph may be construed as impairing or affecting 

any right of the conservator or liquidating agent to enforce 

or recover under a directors or officers liability insurance 

contract or credit union bond under other applicable law. 

(13) EXCEPTION FOR FEDERAL RESERVE AND FEDERAL HOME 

LOAN BANKS.—No provision of this subsection shall apply with 

respect to— 

(A) any extension of credit from any Federal home 

loan bank or Federal Reserve bank to any insured depository institution; or 

(B) any security interest in the assets of the institution securing any such extension of credit. 

(d) PAYMENT OF INSURED DEPOSITS.— 

(1) I N GENERAL.—In case of the liquidation of any insured 

credit union, payment of the insured deposits in such credit 

union shall be made by the Board as soon as possible, subject 

to the provisions of subsection (e) of this section, either by cash 

or by making available to each accountholder a transferred deposit in a new credit union in the same community or in another insured credit union in an amount equal to the insured 

deposit of such accountholder. 

(2) PROOF OF CLAIMS.—The Board, in its discretion, may 

require proof of claims to be filed and may approve or reject 

such claims for insured deposits. 

(3) RESOLUTION OF DISPUTES.— 

(A) RESOLUTIONS I N ACCORDANCE TO 1 BOARD REGULATIONS.—In the case of any disputed claim relating to any 

insured deposit or any determination of insurance coverage 

with respect to any deposit, the Board may resolve such 

disputed claim in accordance with regulations prescribed 

by the Board establishing procedures for resolving such 

claims. 

(B) ADJUDICATION OF CLAIMS.—If the Board has not 

prescribed regulations establishing procedures for resolving disputed claims, the Board may require the final determination of a court of competent jurisdiction before paying 

any such claim. 

(4) REVIEW OF BOARD'S DETERMINATION.—Fina l determination made by the Board shall be reviewable in accordance with 

chapter 7 of title 5, United States Code, by the United States 

Court of Appeals for the District of Columbia or the court of 

1

 So in original. Probably should be "WITH". 
431 FEDERAL CREDIT UNION ACT Sec. 207 

appeals for the Federal judicial circuit where the principal 

place of business of the credit union is located. 

(5) STATUTE OF LIMITATIONS.—Any request for review of a 

final determination by the Board shall be filed with the appropriate circuit court of appeals not later than 60 days after such 

determination is ordered. 

(e) SUBROGATION OF BOARD.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

Federal law, the law of any State, or the constitution of any 

State, the Board, upon the payment to any accountholder as 

provided in subsection (d) in connection with any insured 

credit union described in such subsection or the assumption of 

any deposit in such credit union by another insured credit 

union pursuant to this section, shall be subrogated to all rights 

of the accountholder against such credit union to the extent of 

such payment or assumption. 

(2) DIVIDENDS ON SUBROGATED AMOUNTS.—The subrogation of the Board under paragraph (1) with respect to any insured credit union shall include the right on the part of the 

Board to receive the same dividends from the proceeds of the 

assets of such credit union as would have been payable to the 

accountholder on a claim for the insured deposit, but such 

accountholder shall retain such claim for any uninsured or 

unassumed portion of the deposit. 

(f) VALUATION OF CLAIMS I N DEFAULT.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

Federal law or the law of any State, this subsection shall govern the rights of the creditors (other than insured 

accountholders) of such credit union. 

(2) MAXIMU M LIABILITY.—The maximum liability of the 

Board, acting as liquidating agent or in any other capacity, to 

any person having a claim against the liquidating agent or the 

insured credit union for which such liquidating agent is appointed shall equal the amount such claimant would have received if the Board had liquidated the assets and liabilities of 

such credit union without exercising the Board's authority 

under subsection (n) of this section. 

(3) ADDITIONAL PAYMENTS AUTHORIZED.— 

(A) IN GENERAL.—The Board may, in its discretion and 

in the interests of minimizing its losses, use its own resources to make additional payments or credit additional 

amounts to or with respect to or for the account of any 

claimant or category of claimants. The Board shall not be 

obligated, as a result of having made any such payment or 

credited any such amount to or with respect to or for the 

account of any claimant or category of claimants, to make 

payments to any other claimant or category or

 1 claimants. 

(B) MANNE R OF PAYMENT.—The Board may make the 

payments or credit the amounts specified in subparagraph 

(A) directly to the claimants or may make such payments 

or credit such amounts to an open insured credit union to 

1

 So in original. Probably should be "of'. 
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

induce the open insured credit union to accept liability for 

such claims. 

(g) LIMITATION ON COURT ACTION.—Except as provided in this 

section, no court may take any action, except at the request of the 

Board of Directors by regulation or order, to restrain or affect the 

exercise of powers or functions of the Board as a conservator or a 

liquidating agent. 

(h) LIABILITY OF DIRECTORS AND OFFICERS.—A director or officer of an insured credit union may be held personally liable for 

monetary damages in any civil action by, on behalf of, or at the request or direction of the Board, which action is prosecuted wholly 

or partially for the benefit of the Board— 

(1) acting as conservator or liquidating agent of such insured credit union, 

(2) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed by such liquidating agent or conservator, or 

(3) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed in whole or in 

part by an insured credit union or its affiliate in connection 

with assistance provided under section 208, 

for gross negligence, including any similar conduct or conduct that 

demonstrates a greater disregard of a duty of care (than gross negligence) including intentional tortious conduct, as such terms are 

defined and determined under applicable state law. Nothing in this 

paragraph shall impair or affect any right, if any, of the Board 

under other applicable law. 

(i) DAMAGES.—In any proceeding related to any claim against 

an insured credit union's director, officer, employee, agent, attorney, accountant, appraiser, or any other party employed by or providing services to an insured credit union, recoverable damages 

determined to result from the improvident or otherwise improper 

use or investment of any insured credit union's assets shall include 

principal losses and appropriate interest. 

(j) Whenever any insured State-chartered credit union shall 

have been closed by action of its board of directors or by the commission, board, or authority having supervision of such credit 

union, as the case may be, or by a court of competent jurisdiction, 

on account of bankruptcy or insolvency, the Board shall accept 

appointment as liquidating agent therefor, if such appointment is 

tendered by the commission, board, or authority having supervision 

of such credit union, or by a court of competent jurisdiction, and 

is authorized or permitted by state law. with respect to any such 

state-chartered credit union, the Board as such liquidating agent 

shall possess all the rights, powers, and privileges granted by state 

law to a liquidating agent of a State-chartered credit union. For the 

purposes of this subsection, the term ''liquidating agent'' includes 

a liquidating agent, receiver, conservator, commission, person, or 

other agency charged by law with the duty of winding up the affairs of a credit union. 

(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 
431 FEDERAL CREDIT UNION ACT Sec. 207 

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. 

(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— 

(i) an officer, employee, or agent of the United States having official custody of public funds and lawfully investing the 

same in a credit union insured in accordance with this title; 

(ii) an officer, employee, or agent of any State of the 

United States, or of any county, municipality, or political subdivision thereof having official custody of public funds and lawfully investing the same in a credit union insured in accordance with this title in such State; 

(iii) an officer, employee, or agent of the District of Columbia having official custody of public funds and lawfully investing the same in a credit union insured in accordance with this 

title in the District of Columbia; 

(iv) an officer, employee, or agent of the Commonwealth of 

Puerto Rico, of the Panama Canal Zone, or of any territory or 

possession of the United States, or of any county, municipality, 

or political subdivision thereof having official custody of public 

funds and lawfully investing the same in a credit union insured in accordance with this title in the Commonwealth of 

Puerto Rico, the Panama Canal Zone, or any such territory or 

possession, respectively; or 

(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 title; 

his account shall be insured in an amount not to exceed $100,000 

per account. 

(B) 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 depositor or member referred to in subparagraph (A) 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 

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 

$100,000 per account. As to any plan qualifying under section 
Sec. 207dir FEDERAL CREDIT UNION ACT 464 

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. 

(1) Payment of an insured account to any person by the Board 

shall discharge the Board to the same extent that payment to such 

person by the closed insured credit union would have discharged it 

from liability for the insured account. 

(m) Except as otherwise prescribed by the Board, the Board 

shall not be required to recognize as the owner of any portion of 

an account appearing on the records of the closed credit union 

under a name other than that of the claimant any person whose 

name or interest as such owner is not disclosed on the records of 

such closed credit union as part owner of such account, if such recognition would increase the aggregate amount of the insured accounts in such closed credit union. 

(n) The Board may withhold payment of such portion of the insured account of any member of a closed credit union as may be 

required to provide for the payment of any direct or indirect liability of such member to the closed credit union or its liquidating 

agent, which is not offset against a claim due from such credit 

union, pending the determination and payment of such liability by 

such member or any other person liable therefor. 

(o) if, after the Board shall have given at least four months' 

notice to the member by mailing a copy thereof to his last-known 

address appearing on the records of the closed credit union, any 

member of the closed credit union shall fail to claim his insured account from the Board within 18 months after the appointment of 

the liquidating agent for the closed credit union, all rights of the 

member against the Board with respect to the insured account 

shall be barred, and all rights of the member against the closed 

credit union, or the estate to which the Board may have become 

subrogated, shall thereupon revert to the member. 

(p)(1) Liquidating agents of insured credit unions closed for liquidation on account of bankruptcy or insolvency may offer the assets of such credit unions for sale to the Board or as security for 

loans from the Board, upon receiving permission from the commission, board, or authority having supervision of such credit union, 

in the case of an insured State-chartered credit union, in accordance with express provisions of State law. The proceeds of every 

such sale or loan shall be utilized for the same purposes and in the 

same manner as other funds realized from the liquidation of the assets of such credit unions. The Board, in its discretion, may make 

loans on the security of or may purchase and liquidate or sell any 

part of the assets of an insured credit union closed for liquidation 

on acount of bankruptcy or insolvency, but in any case in which the 

Board is acting as liquidating agent of a closed insured credit 

union, no such loan or purchase shall be made without the approval of a court of competent jurisdiction. 

(2) No agreement which tends to diminish or defeat the right, 

title, or interest of the Board in any asset acquired by them under 

this subsection, either as security for a loan or by purchase, shall 

be valid against the Board unless such agreement— 

(A) shall be in writing; 
431 FEDERAL CREDIT UNION ACT Sec. 208 

(B) shall have been executed by the credit union and the 

person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of 

the asset by the credit union; 

(C) shall have been approved by the board of directors of 

the credit union, which approval shall be reflected in the minutes of such board; and 

(D) shall have been, continuously, from the time of its execution, an official record of the credit union. 

(q) PROHIBITION ON CERTAIN ACQUISITIONS OF ASSETS.— 

(1) CONVICTED DEBTORS.—Except as provided in paragraph 

(2), any individual who— 

(A) has been convicted of an offense under section 215, 

657, 1006, 1014, 1032, 1341, 1343, or 1344 of title 18, 

United States Code, or of conspiring to commit any such 

offense, affecting any insured credit union for which the 

Board is appointed conservator or liquidating agent; and 

(B) is in default on any loan or other extension of 

credit from such insured credit union which, if not paid, 

will cause substantial loss to the credit union, the National 

Credit Union Share Insurance Fund, or the Board, 

may not purchase any asset of such credit union from the conservator or liquidating agent. 

(2) SETTLEMENT OF CLAIMS.—Paragraph (1) shall not apply 

to the sale or transfer by the Board of any asset of any insured 

credit union to any individual if the sale or transfer of the 

asset resolves or settles, or is part of the resolution or settlement, of— 

(A) 1 or more claims that have been, or could have 

been, asserted by the Board against the individual; or 

(B) obligations owed by the individual to the insured 

credit union or the Board. 

(r) FOREIGN INVESTIGATIONS.—The Board, as conservator or 

liquidating agent of any insured credit union and for purposes of 

carrying out any power, authority, or duty with respect to an insured credit union— 

(1) may request the assistance of any foreign banking authority and provide assistance to any foreign banking authority 

in accordance with section 206(u); and 

(2) may maintain an office to coordinate foreign investigations or investigations on behalf of foreign banking authorities. 

SPECIAL ASSISTANCE FOR FEDERALLY INSURED CREDIT UNIONS 

SEC. 208. [12 U.S.C. 1788] (a)(1) In order to reopen a closed 

insured credit union or in order to prevent the closing of an insured 

credit union which the Board has determined is in danger of closing or in order to assist in the voluntary liquidation of a solvent 

credit union, the Board, in its discretion, is authorized to make 

loans to, or purchase the assets of, or establish accounts in such 

insured credit union upon such terms and conditions as it may prescribe. Except with respect to the voluntary liquidation of a solvent 

credit union, such loans shall be made and such accounts shall be 

established only when, in the opinion of the Board, such action is 
Sec. 209dir FEDERAL CREDIT UNION ACT 464 

necessary to protect the fund or the interests of the members of the 

credit union. 

(2) whenever in the judgment of the Board such action will reduce the risk or avert a threatened loss to the fund and will facilitate a merger or consolidation of an insured credit union with another insured credit union, or will facilitate the sale of the assets 

of an open or closed insured credit union to and assumption of its 

liability by another person the Board may, upon such terms and 

conditions as it may determine, make loans secured in whole or in 

part by assets of an open or closed insured credit union, which 

loans may be in subordination to the rights of members and creditors of such credit union, or the Board may purchase any of such 

assets or may guarantee any person against loss by reason of its 

assuming the liabilities and purchasing the assets of an open or 

closed insured credit union. For purposes of this paragraph, the 

term ''person'' means any credit union, individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity. 

(3) No agreement which tends to diminish or defeat the right, 

title, or interest of the Board, in any asset acquired by them under 

this subsection, either as security for a loan or by purchase, shall 

be valid against the Board unless such agreement— 

(A) shall be in writing; 

(B) shall have been executed by the credit union and the 

person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of 

the asset by the credit union; 

(C) shall have been approved by the board of directors of 

the credit union, which approval shall be reflected in the minutes of such board; and 

(D) shall have been continuously, from the time of its execution, an official record of the credit union. 

(b) For the protection of the Fund, the Board, without regard 

to the Federal Property and Administrative Services Act of 1949, 

may— 

(1) deal with, complete, reconstruct, rent, renovate, modernize, insure, make contracts for the management of, sell for 

cash or credit, or lease, in its discretion, any real property acquired or held by them under this section; and 

(2) assign or sell at public or private sale, or otherwise dispose of, any evidence of debt, contract, claim, personal property, or security assigned to or held by them under this section. 

Section 3709 of the Revised Statutes of the United States shall not 

apply to any purchase or contract for services or supplies made or 

entered into by the Board under this section if the amount thereof 

does not exceed $1,000, or to any contract for hazard insurance on 

any real property acquired or held by them under this section. 

(c) Money received by the Board in carrying out this section 

shall be paid into the Fund. 

ADMINISTRATIVE PROVISIONS 

SEC. 209. [12 U.S.C. 1789] (a) In carrying out the purposes of 

this title, the Board may— 
431 FEDERAL CREDIT UNION ACT Sec. 459 

(1) make contracts; 

(2) sue and be sued, complain and defend, in any court of 

law or equity, State or Federal. All suits of a civil nature at 

common law or in equity to which the Board shall be a party 

shall be deemed to arise under the laws of the United States, 

and the United States district courts shall have original jurisdiction thereof, without regard to the amount in controversy. 

The Board may, without bond or security, remove any such action, suit, or proceeding from a State court to the United 

States district court for the district or division embracing the 

place where the same is pending by following any procedure for 

removal now or hereafter in effect, except that any such suit 

to which the Board is a party in its capacity as liquidating 

agent of a State-chartered credit union and which involves only 

the rights or obligations of members, creditors, and such State 

credit union under State law shall not be deemed to arise 

under the laws of the United States. No attachment or execution shall be issued against the Board or its property before 

final judgment in any suit, action, or proceeding in any State, 

county, municipal, or United States court. The Board shall designate an agent upon whom service of process may be made in 

any State, territory, or jurisdiction in which any insured credit 

union is located; 

(3) pursue to final disposition by way of compromise or 

otherwise claims both for and against the United States (other 

than tort claims, claims involving administrative expenses, and 

claims in excess of $5,000 arising out of contracts for construction, repairs, and the purchase of supplies and materials) 

which are not in litigation and have not been referred to the 

Department of Justice; 

(4) to appoint such officers and employees as are not otherwise provided for in this Act, to define their duties, fix their 

compensation, require bonds of them and fix the penalty 

thereof, and to dismiss at pleasure such officers or employees. 

Nothing in this or any other Act shall be construed to prevent 

the appointment and compensation as an officer or employee of 

the Administration of any officer or employee of the United 

States in any board, commission, independent establishment, 

or executive department thereof; 

(5) employ experts and consultants or organizations 

thereof, as authorized by section 15 of the Administrative Expenses Act of 1946 (5 U.S.C. 55a); 

(6) prescribe the manner in which its general business 

may be conducted and the privileges granted to them by law 

may be exercised and enjoyed; 

(7) exercise all powers specifically granted by the provisions of this title and such incidental powers as shall be necessary to carry out the powers so granted; 

(8) make examinations of and require information and reports from insured credit unions, as provided in this title.

 1 

(9) act as liquidating agent; 

1

 so in original. The period probably should be a semicolon. 
Sec. 460dir FEDERAL CREDIT UNION ACT 4 64 

(10) delegate to any officer or employee of the Administration such of its functions as it deems appropriate; and 

(11) prescribe such rules and regulations as it may deem 

necessary or appropriate to carry out the provisions of this 

title. 

(b) With respect to the financial operations arising by reason 

of this title, the Board shall— 

(1) prepare annually and submit a business-type budget as 

provided for wholly owned Government corporations by the 

Government Corporation Control Act; and 

(2) maintain an integral set of accounts, which shall be audited annually by the General Accounting Office in accordance 

with principles and procedures applicable to commercial corporate transactions, as provided by section 105 of the Government Corporation Control Act. 

[DEPOSITAR Y OF PUBLI C MONEY ]

 1 

SEC. 210.2 [12 U.S.C. 1789a] Any credit union the accounts of 

which are insured under this title shall be a depositary of public 

money and may be employed as fiscal agent of the United States. 

The Secretary of the Treasury is authorized to deposit public 

money in any such insured credit union, and shall prescribe such 

regulations as may be necessary to enable such credit unions to become depositaries of public money and fiscal agents of the United 

States. Each credit union shall perform all such reasonable duties 

as depositaries of public money and fiscal agent of the United 

States as may be required of it including services in connection 

with the collection of taxes and other obligations owed the United 

States. 

NONDISCRIMINATOR Y PROVISIO N 

SEC. 211. [12 U.S.C. 1790] It is not the purpose of this title 

to discriminate in any manner against State-chartered credit 

unions and in favor of Federal credit unions, but it is the purpose 

of this title to provide all credit unions with the same opportunity 

to obtain and enjoy the benefits of this title. 

SEC. 212. [1 2 U.S.C. 1790a] BOAR D DISAPPROVA L O F DIRECTORS , COM -

MITTE E MEMBERS , AN D SENIO R EXECUTIV E OFFICER S O F 

INSURE D CREDI T UNIONS . 

(a) PRIO R NOTIC E REQUIRED.—A n insured credit union shall 

notify the Board of the proposed addition of any individual to the 

board of directors or committee or the employment of any individual as a senior executive officer of such credit union at least 30 

days before such addition or employment becomes effective, if the 

insured credit union— 

(1) has been chartered less than 2 years; or 

1

 Section heading does not appear in the original. 

2

 Item 1 of the section designated as section 2 following section 664 of the Treasury, Postal 

Service, and General Government Appropriations Act, 1997 (as enacted by section 101(f) of P.L. 

104-208) provided for the selection of national banks as financial agents. Item 2 of such section 

reads as follows: ''2. Make conforming changes to 12 U.S.C. 265, 266, 391, 1452(d), 1767, 1789a, 

2013, 2122 and to 31 U.S.C. 3122 and 3303.''. Due to the inexact nature of the direction, no 

change is shown here. 
431 FEDERAL CREDIT UNION ACT Sec. 461 

(2) is in troubled condition, as determined on the basis of 

such credit union's most recent report of condition or report of 

examination. 

(b) DISAPPROVAL BY THE BOARD.—A n insured credit union may 

not add any individual to the board of directors or employ any individual as a senior executive officer if the Board issues a notice of 

disapproval of such addition or employment before the end of the 

30-day period beginning on the date the agency receives notice of 

the proposed action pursuant to subsection (a). 

(c) EXCEPTION I N EXTRAORDINARY CIRCUMSTANCES.— 

(1) IN GENERAL.—The Board may prescribe by regulation 

conditions under which the prior notice requirement of subsection (a) may be waived in the event of extraordinary circumstances. 

(2) N o EFFECT ON DISAPPROVAL AUTHORITY OF BOARD.— 

Such waivers shall not affect the authority of the Board to 

issue notices of disapproval of such additions or employment of 

such individuals within 30 days after each such waiver. 

(d) ADDITIONAL INFORMATION.—Any notice submitted to the 

Board by any insured credit union pursuant to subsection (a) shall 

include— 

(1) the information described in section 7(j)(6)(A) of the 

Federal Deposit Insurance Act about the individual; and 

(2) such other information as the Board may prescribe by 

regulation. 

(e) STANDARD FOR DISAPPROVAL.—The Board shall issue a notice of disapproval with respect to a notice submitted pursuant to 

subsection (a) if the competence, experience, character, or integrity 

of the individual with respect to whom such notice is submitted indicates that it would not be in the best interests of the depositors 

of the insured credit union or in the best interests of the public to 

permit the individual to be employed by, or associated with, such 

insured credit union. 

(f) DEFINITIO N REGULATIONS.—The Board shall prescribe by 

regulation a definition for the terms ''troubled condition'' and ''senior executive officer'' for purposes of subsection (a). 

SEC. 213. [12 U.S.C. 1790b] CREDI T UNIO N EMPLOYEE PROTECTIO N 

REMEDY. 

(a) I N GENERAL.— 

(1) EMPLOYEES OF CREDIT UNIONS.—N o insured credit 

union may discharge or otherwise discriminate against any 

employee with respect to compensation, terms, conditions, or 

privileges of employment because the employee (or any person 

acting pursuant to the request of the employee) provided information to the Board or the Attorney General regarding any 

possible violation of any law or regulation by the credit union 

or any director, officer, or employee of the credit union. 

(2) EMPLOYEES OF THE ADMINISTRATION.—The Administration may not discharge or otherwise discriminate against any 

employee (including any employee of the National Credit 

Union Central Liquidity Facility) with respect to compensation, 

terms, conditions, or privileges of employment because the employee (or any person acting pursuant to the request of the employee) provided information to the Administration or the At-
Sec. 462dir FEDERAL CREDIT UNION ACT 464 

torney General regarding any possible violation of any law or 

regulation by— 

(A) any credit union or the Administration; 

(B) any director, officer, committee member, or employee of any credit union; or 

(C) any officer or employee of the Administration. 

(b) ENFORCEMENT.—An y employee or former employee who believes he has been discharged or discriminated against in violation 

of subsection (a) may file a civil action in the appropriate United 

states district court before the close of the 2-year period beginning 

on the date of such discharge or discrimination. The complainant 

shall also file a copy of the complaint initiating such action with 

the Board. 

(c) REMEDIES.—If the district court determines that a violation 

of subsection (a) has occurred, it may order the credit union or the 

Administration which committed the violation— 

(1) to reinstate the employee to his former position, 

(2) to pay compensatory damages, or 

(3) take other appropriate actions to remedy any past discrimination. 

(d) LIMITATIONS.—Th e protections of this section shall not 

apply to any employee who— 

(1) deliberately causes or participates in the alleged violation of law or regulation, or 

(2) knowingly or recklessly provides substantially false 

information to such an agency or the Attorney General. 

SEC. 214. [12 U.S.C. 1790c] REWARD FOR INFORMATIO N LEADIN G TO 

RECOVERIES OR CIVI L PENALTIES. 

The Board may pay rewards in connection with an offense affecting an insured credit union, under the same circumstances and 

subject to the same limitations that a Federal banking agency may 

pay rewards under section 33 of the Federal Deposit Insurance Act 

in connection with an offense affecting a depository institution insured by the Federal Deposit Insurance Corporation. 

SEC. 216. [12 U.S.C. 1790d] PROMPT CORRECTIVE ACTION. 

(a) RESOLVING PROBLEMS TO PROTECT FUND. — 

(1) PURPOSE.—The purpose of this section is to resolve the 

problems of insured credit unions at the least possible longterm loss to the Fund. 

(2) PROMPT CORRECTIVE ACTION REQUIRED.—The Board 

shall carry out the purpose of this section by taking prompt 

corrective action to resolve the problems of insured credit 

unions. 

(b) REGULATIONS REQUIRED.— 

(1) INSURED CREDIT UNIONS.— 

(A) IN GENERAL.—The Board shall, by regulation, prescribe a system of prompt corrective action for insured 

credit unions that 

(iii) have boards of directors that consist primarily 

of volunteers. 

(2) NE W CREDIT UNIONS.— 

(A) I N GENERAL.—In addition to regulations under 

paragraph (1), the Board shall, by regulation, prescribe a 
431 FEDERAL CREDIT UNION ACT Sec. 463 

system of prompt corrective action that shall apply to new 

credit unions in lieu of this section and the regulations 

prescribed under paragraph (1). 

(B) CRITERIA FOR ALTERNATIVE SYSTEM.—The Board 

shall design the system prescribed under subparagraph 

(A)— 

(i) to carry out the purpose of this section; 

(ii) to recognize that credit unions (as cooperatives 

that do not issue capital stock) initially have no net 

worth, and give new credit unions reasonable time to 

accumulate net worth; 

(iii) to create adequate incentives for new credit 

unions to become adequately capitalized by the time 

that they either— 

(i) have been in operation for more than 10 

years; or 

(ii) have more than $10,000,000 in total assets; 

(iv) to impose appropriate restrictions and requirements on new credit unions that do not make sufficient progress toward becoming adequately capitalized; and 

(v) to prevent evasion of the purpose of this section. 

(c) NE T WORT H CATEGORIES.— 

(1) IN GENERAL.—For purposes of this section the following 

definitions shall apply: 

(A) WEL L CAPITALIZED.—An insured credit union is 

''well capitalized'' if— 

(i) it has a net worth ratio of not less than 7 percent; and 

(ii) it meets any applicable risk-based net worth 

requirement under subsection (d). 

(B) ADEQUATELY CAPITALIZED.—An insured credit 

union is ''adequately capitalized'' if— 

(i) it has a net worth ratio of not less than 6 percent; and 

(ii) it meets any applicable risk-based net worth 

requirement under subsection (d). 

(C) UNDERCAPITALIZED.—An insured credit union is 

''undercapitalized'' if— 

(i) it has a net worth ratio of less than 6 percent; 

or 

(ii) it fails to meet any applicable risk-based net 

worth requirement under subsection (d). 

(D) SIGNIFICANTLY UNDERCAPITALIZED.—An insured 

credit union is ''significantly undercapitalized''— 

(i) if it has a net worth ratio of less than 4 percent; or 

(ii) if— 

(i) it has a net worth ratio of less than 5 percent; and 

(ii) it— 
Sec. 464dir FEDERAL CREDIT UNION ACT 464 

(aa) fails to submit an acceptable net 

worth restoration plan within the time allowed under subsection (f); or 

(bb) materially fails to implement a net 

worth restoration plan accepted by the Board. 

(E) CRITICALLY UNDERCAPITALIZED.—An insured credit 

union is "critically undercapitalized" if it has a net worth 

ratio of less than 2 percent (or such higher net worth ratio, 

not to exceed 3 percent, as the Board may specify by regulation). 

(2) ADJUSTING NET WORTH LEVELS.— 

(A) IN GENERAL.—If, for purposes of section 38(c) of 

the Federal Deposit Insurance Act, the Federal banking 

agencies increase or decrease the required minimum level 

for the leverage limit (as those terms are used in section 

38), the Board may, by regulation, and subject to subparagraph (B) of this paragraph, correspondingly increase or 

decrease 1 or more of the net worth ratios specified in subparagraphs (A) through (D) of paragraph (1) of this subsection in an amount that is equal to not more than the 

difference between the required minimum level most recently established by the Federal banking agencies and 4 

percent of total assets (with respect to institutions regulated by those agencies). 

(B) DETERMINATIONS REQUIRED.—The Board may increase or decrease net worth ratios under subparagraph 

(A) only if the Board— 

(i) determines, in consultation with the Federal 

banking agencies, that the reason for the increase or 

decrease in the required minimum level for the leverage limit also justifies the adjustment in net worth ratios; and 

(ii) determines that the resulting net worth ratios 

are sufficient to carry out the purpose of this section. 

(C) TRANSITION PERIOD REQUIRED.—If the Board increases any net worth ratio under this paragraph, the 

Board shall give insured credit unions a reasonable period 

of time to meet the increased ratio. 

(d) RISK-BASED NE T WORT H REQUIREMENT FOR COMPLEX 

CREDIT UNIONS. — 

(1) IN GENERAL.—The regulations required under subsection (b)(1) shall include a risk-based net worth requirement 

for insured credit unions that are complex, as defined by the 

Board based on the portfolios of assets and liabilities of credit 

unions. 

(2) STANDARD.—The Board shall design the risk-based net 

worth requirement to take account of any material risks 

against which the net worth ratio required for an insured 

credit union to be adequately capitalized may not provide adequate protection. 

(e) EARNINGS-RETENTION REQUIREMENT APPLICABLE TO CREDIT 

UNION S THA T ARE NO T WEL L CAPITALIZED.— 
431 FEDERAL CREDIT UNION ACT Sec. 216 

(1) I N GENERAL.—An insured credit union that is not well 

capitalized shall annually set aside as net worth an amount 

equal to not less than 0.4 percent of its total assets. 

(2) BOARD'S AUTHORITY TO DECREASE EARNINGS-RETENTION 

REQUIREMENT.— 

(A) IN GENERAL.—The Board may, by order, decrease 

the 0.4 percent requirement in paragraph (1) with respect 

to a credit union to the extent that the Board determines 

that the decrease— 

(i) is necessary to avoid a significant redemption 

of shares; and 

(ii) would further the purpose of this section. 

(B) PERIODIC REVIEW REQUIRED.—The Board shall 

periodically review any order issued under subparagraph 

(A). 

(f) NE T WORT H RESTORATION PLAN REQUIRED.— 

(1) IN GENERAL.—Each insured credit union that is undercapitalized shall submit an acceptable net worth restoration 

plan to the Board within the time allowed under this subsection. 

(2) ASSISTANCE TO SMALL CREDIT UNIONS.—Th e Board (or 

the staff of the Board) shall, upon timely request by an insured 

credit union with total assets of less than $10,000,000, and 

subject to such regulations or guidelines as the Board may prescribe, assist that credit union in preparing a net worth restoration plan. 

(3) DEADLINES FOR SUBMISSION AND REVIEW OF PLANS.— 

The Board shall, by regulation, establish deadlines for submission of net worth restoration plans under this subsection 

that— 

(A) provide insured credit unions with reasonable time 

to submit net worth restoration plans; and 

(B) require the Board to act on net worth restoration 

plans expeditiously. 

(4) FAILURE TO SUBMIT ACCEPTABLE PLAN WITHI N TIME ALLOWED.— 

(A) FAILURE TO SUBMIT ANY PLAN.—If an insured 

credit union fails to submit a net worth restoration plan 

within the time allowed under paragraph (3), the Board 

shall— 

(i) promptly notify the credit union of that failure; 

and 

(ii) give the credit union a reasonable opportunity 

to submit a net worth restoration plan. 

(B) SUBMISSION OF UNACCEPTABLE PLAN.—If a n insured credit union submits a net worth restoration plan 

within the time allowed under paragraph (3), and the 

Board determines that the plan is not acceptable, the 

Board shall— 

(i) promptly notify the credit union of why the 

plan is not acceptable; and 

(ii) give the credit union a reasonable opportunity 

to submit a revised plan. 
Sec. 216dir FEDERAL CREDIT UNION ACT 464 

(5) ACCEPTING PLAN.—Th e Board may accept a net worth 

restoration plan only if the Board determines that the plan is 

based on realistic assumptions and is likely to succeed in restoring the net worth of the credit union. 

(g) RESTRICTIONS ON UNDERCAPITALIZED CREDIT UNIONS. — 

(1) RESTRICTION ON ASSET GROWTH.—A n insured credit 

union that is undercapitalized shall not generally permit its 

average total assets to increase, unless—is— 

(A) the Board has accepted the net worth restoration 

plan of the credit union for that action; 

(B) any increase in total assets is consistent with the 

net worth restoration plan; and 

(C) the net worth ratio of the credit union increases at 

a rate that is consistent with the net worth restoration 

plan. 

(2) RESTRICTION ON MEMBER BUSINESS LOANS.—Notwith -

standing section 107A(a), an insured credit union that is 

undercapitalized may not make any increase in the total 

amount of member business loans (as defined in section 

107A(c)) outstanding at that credit union at any one time, until 

such time as the credit union becomes adequately capitalized. 

(h) MOR E STRINGENT TREATMENT BASED ON OTHER SUPERVISORY CRITERIA.—Wit h respect to the exercise of authority by the 

Board under regulations comparable to section 38(g) of the Federal 

Deposit Insurance Act— 

(1) the Board may not reclassify an insured credit union 

into a lower net worth category, or treat an insured credit 

union as if it were in a lower net worth category, for reasons 

not pertaining to the safety and soundness of that credit union; 

and 

(2) the Board may not delegate its authority to reclassify 

an insured credit union into a lower net worth category or to 

treat an insured credit union as if it were in a lower net worth 

category. 

(i) ACTION REQUIRED REGARDING CRITICALLY UNDERCAPITALIZED CREDIT UNIONS. — 

(1) IN GENERAL.—The Board shall, not later than 90 days 

after the date on which an insured credit union becomes critically undercapitalized— 

(A) appoint a conservator or liquidating agent for the 

credit union; or 

(B) take such other action as the Board determines 

would better achieve the purpose of this section, after documenting why the action would better achieve that purpose. 

(2) PERIODIC REDETERMINATIONS REQUIRED.—Any determination by the Board under paragraph (1)(B) to take any action with respect to an insured credit union in lieu of appointing a conservator or liquidating agent shall cease to be effective not later than the end of the 180-day period beginning on 

the date on which the determination is made, and a conservator or liquidating agent shall be appointed for that credit 

union under paragraph (1)(A), unless the Board makes a new 
431 FEDERAL CREDIT UNION ACT Sec. 216 

determination under paragraph (1)(B) before the end of the 

effective period of the prior determination. 

(3) APPOINTMENT OF LIQUIDATING AGENT REQUIRED IF 

OTHER ACTION FAILS TO RESTORE NET WORTH.— 

(A) IN GENERAL.—Notwithstanding paragraphs (1) and 

(2), the Board shall appoint a liquidating agent for an insured credit union if the credit union is critically undercapitalized on average during the calendar quarter beginning 18 months after the date on which the credit union 

became critically undercapitalized. 

(B) EXCEPTION.—Notwithstanding subparagraph (A), 

the Board may continue to take such other action as the 

Board determines to be appropriate in lieu of appointment 

of a liquidating agent if— 

(i) the Board determines that— 

(i) the insured credit union has been in substantial compliance with an approved net worth 

restoration plan that requires consistent improvement in the net worth of the credit union since 

the date of the approval of the plan; and 

(ii) the insured credit union has positive net 

income or has an upward trend in earnings that 

the Board projects as sustainable; and 

(ii) the Board certifies that the credit union is viable and not expected to fail. 

(4) NONDELEGATION.— 

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

(B), the Board may not delegate the authority of the Board 

under this subsection. 

(B) EXCEPTION.—The Board may delegate the authority of the Board under this subsection with respect to an 

insured credit union that has less than $5,000,000 in total 

assets, if the Board permits the credit union to appeal any 

adverse action to the Board. 

(j) REVIEW REQUIRED WHE N FUN D INCURS MATERIAL LOSS.— 

For purposes of determining whether the Fund has incurred a 

material loss with respect to an insured credit union (such that the 

inspector general of the Board must make a report), a loss is material if it exceeds the sum of— 

(1) $10,000,000; and 

(2) an amount equal to 10 percent of the total assets of the 

credit union at the time at which the Board initiated assistance under section 208 or was appointed liquidating agent. 

(k) APPEALS PROCESS.—Material supervisory determinations, 

including decisions to require prompt corrective action, made pursuant to this section by Administration officials other than the 

Board may be appealed to the Board pursuant to the independent 

appellate process required by section 309 of the Riegle Community 

Development and Regulatory Improvement Act of 1994 (or, if the 

Board so specifies, pursuant to separate procedures prescribed by 

regulation). 

(l) CONSULTATION AND COOPERATION WIT H STATE CREDIT 

UNIO N SUPERVISORS.— 
Sec. 216dir FEDERAL CREDIT UNION ACT 464 

(1) I N GENERAL.—I n implementing this section, the Board 

shall consult and seek to work cooperatively with State officials 

having jurisdiction over State-chartered insured credit unions. 

(2) EVALUATIN G NE T WORT H RESTORATION PLAN.—I n evaluating any net worth restoration plan submitted by a Statechartered insured credit union, the Board shall seek the views 

of the State official having jurisdiction over the credit union. 

( 3 ) DECIDIN G WHETHE R TO APPOINT CONSERVATOR OR LIQUIDATIN G AGENT.—Wit h respect to any decision by the Board on 

whether to appoint a conservator or liquidating agent for a 

State-chartered insured credit union— 

(A) the Board shall— 

(i) seek the views of the State official having jurisdiction over the credit union; and 

(ii) give that official an opportunity to take the 

proposed action; 

(B) the Board shall, upon timely request of an official 

referred to in subparagraph (A), promptly provide the official with— 

(i) a written statement of the reasons for the proposed action; and 

(ii) reasonable time to respond to that statement; 

(C) if the official referred to in subparagraph (A) 

makes a timely written response that disagrees with the 

proposed action and gives reasons for that disagreement, 

the Board shall not appoint a conservator or liquidating 

agent for the credit union, unless the Board, after considering the views of the official, has determined that— 

(i) the Fund faces a significant risk of loss with respect to the credit union if a conservator or liquidating 

agent is not appointed; and 

(ii) the appointment is necessary to reduce— 

(I) the risk that the Fund would incur a loss 

with respect to the credit union; or 

(II) any loss that the Fund is expected to 

incur with respect to the credit union; and 

(D) the Board may not delegate any determination 

under subparagraph (C). 

(m) CORPORATE CREDI T UNION S EXEMPTED.—Thi s section does 

not apply to any insured credit union that— 

(1) operates primarily for the purpose of serving credit 

unions; and 

(2) permits individuals to be members of the credit union 

only to the extent that applicable law requires that such persons own shares. 

(n) OTHE R AUTHORIT Y NO T AFFECTED.—Thi s section does not 

limit any authority of the Board or a State to take action in addition to (but not in derogation of)

 1 that is required under this section. 

(o) DEFINITIONS.—Fo r purposes of this section the following 

definitions shall apply: 

1

 So in original. The term ''any action'' probably should be inserted before ''that is required''. 
431 FEDERAL CREDIT UNION ACT Sec. 302 

(1) FEDERAL BANKING AGENCY.—The term ''Federal banking agency'' has the same meaning as in section 3 of the Federal Deposit Insurance Act. 

(2) NET WORTH.—The term ''net worth''— 

(A) with respect to any insured credit union, means retained earnings balance of the credit union, as determined 

under generally accepted accounting principles; and 

(B) with respect to a low-income credit union, includes 

secondary capital accounts that are— 

(i) uninsured; and 

(ii) subordinate to all other claims against the 

credit union, including the claims of creditors, shareholders, and the Fund. 

(3) NE T WORTH RATIO.—The term ''net worth ratio'' means, 

with respect to a credit union, the ratio of the net worth of the 

credit union to the total assets of the credit union. 

(4) NE W CREDIT UNION.—The term ''new credit union'' 

means an insured credit union that— 

(A) has been in operation for less than 10 years; and 

(B) has not more than $10,000,000 in total assets. 

TITLE III—CENTRAL LIQUIDITY FACILITY 

SEC. 301. [12 U.S.C. 1795] The Congress finds that the establishment of a National Credit Union Central Liquidity Facility is 

needed to improve general financial stability by meeting the liquidity needs of credit unions and thereby encourage savings, support 

consumer and mortgage lending, and provide basic financial resources to all segments of the economy. 

DEFINITIONS 

SEC. 302. [12 U.S.C. 1795a] As used in this title, the term— 

(1) ''liquidity needs'' means the needs of credit unions primarily serving natural persons for— 

(A) short-term adjustment credit available to assist in 

meeting temporary requirements for funds or to cushion 

more persistent outflows of funds pending an orderly 

adjustment of credit union assets and liabilities; 

(B) seasonal credit available for longer periods to assist in meeting seasonal needs for funds arising from a 

combination of expected patterns of movement in share 

and deposit accounts and loans; and 

(C) protracted adjustment credit available in the event 

of unusual or emergency circumstances of a longer term 

nature resulting from national, regional or local difficulties; 

(2) ''Central Liquidity Facility'' or ''Facility'' means the National Credit Union Central Liquidity Facility; 

(3) ''paid-in and unimpaired capital and surplus'' means 

the balance of the paid-in share accounts and deposits as of a 

given date, less any loss that may have been incurred for 

which there is no reserve or which has not been charged 

against undivided earnings, plus the credit balance (or less the 

debit balance) of the undivided earnings account as of a given 
Sec. 303dir FEDERAL CREDIT UNION ACT 4 64 

date, after all losses have been provided for and net earnings 

or net losses have been added thereto or deducted therefrom. 

Reserves shall not be considered as part of surplus; and 

(4) ''member'' means a Regular or an Agent member of the 

Facility. 

ESTABLISHMEN T OF TH E NATIONA L CREDIT UNIO N ADMINISTRATIO N 

CENTRAL LIQUIDITY FACILITY 

SEC. 303. [12 U.S.C. 1795b] There is hereby created the National Credit Union Administration Central Liquidity Facility. The 

Central Liquidity Facility, an intrumentality of the United States, 

shall exist within the National Credit Union Administration and be 

managed by the Board. The United States district court shall have 

original jurisdiction over any case to which the Board on behalf of 

the Facility is a party, without regard to the amount in controversy. 

MEMBERSHIP 

SEC. 304. [12 U.S.C. 1795c] (a) A credit union primarily serving natural persons may be a Regular member of the Facility by 

subscribing to the capital stock of the Facility in an amount not 

less than one-half of 1 per centum of the credit union's paid-in and 

unimpaired capital and surplus. 

(b) A credit union or group of credit unions, primarily serving 

other credit unions, may be an Agent member of the Facility by— 

(1) obtaining the approval of the Board; 

(2) subscribing to the capital stock of the Facility in an 

amount not less than one-half of 1 per centum of the paid-in 

and unimpaired capital and surplus of all those credit unions 

which primarily serve natural persons, which are members of 

such credit union or of any credit union comprising such credit 

union group, and which are not regular members; 

(3) agreeing to comply with rules and regulations the 

Board shall prescribe with respect to, but not limited to, management quality, asset and liability safety and soundness, internal operating and control practices and procedures, and participation of natural persons in the affairs or1

 such credit 

union or credit union group; and 

(4) agreeing to submit to the supervision of the Board 

which shall include, but not be limited to, reporting requirements and periodic unrestricted examinations. 

(c) Stock subscriptions provided for in subsections (a) and (b)(2) 

of this section shall be— 

(1) based on an arithmetic average of paid-in capital and 

surplus over the six months preceding application and membership; and 

(2) adjusted at the close of each calendar year in accordance with an arithmetic average of paid-in capital and surplus 

over a period determined by the Board. 

1

 So in original. Probably should be "of'. 
431 FEDERAL CREDIT UNION ACT Sec. 306 

(d) An Agent member of the Facility shall perform for its member credit unions those functions required by the Board to carry out 

this title. 

(e)(1) A member of the Facility whose capital stock subscription 

constitutes less than 5 per centum of such stock outstanding, may 

withdraw from membership in the Facility six months after notifying the Board of its intention to do so. 

(2) A member of the Facility whose capital stock subscription 

constitutes 5 per centum or more of such stock outstanding, may 

withdraw from membership in the Facility twenty-four months 

after notifying the Board of its intention to do so. 

(3) The Board may terminate membership in the Facility if, 

after opportunity for a hearing, the Board determines a member 

has failed to comply with any provision of this title or regulation 

issued pursuant thereto. 

CAPITAL STOCK 

SEC. 305. [12 U.S.C. 1795d] (a) As soon as practicable, the 

Board shall open books for subscriptions to the capital stock of the 

Facility. The mininum subscription shall be $50. 

(b) The capital stock of the Facility— 

(1) shall be divided into shares having a par value of $50 

each; 

(2) shall be paid for with cash or with securities of the 

United States or any Agency thereof in accordance with 

requirements the Board may impose; 

(3) shall share in dividend distributions at rates determined by the Board. However, rates on the required capital 

stock shall be without preference; and 

(4) shall not be transferred or hypothecated except as provided for herein. 

(c) When circumstances require that all or a portion of a member's stock be redeemed by the Facility, the Board shall pay an 

amount equal to what the member originally paid for the stock less 

any amount owed by the member to the Facility. 

(d) At least one-half of the payment for the subscription 

amount required for membership under section 304 of this title 

shall be transferred to the Facility. The remainder may be held by 

the member on call of the Board and shall be invested in assets 

designated by the Board. 

(e) A credit union or credit union group that becomes a member of the Facility later than six months after the date the Board 

opens books for capital stock subscriptions, may not borrow or receive advances from the Facility without approval by the Board for 

a period of six months after becoming a member. 

EXTENSIONS OF CREDIT 

SEC. 306. [12 U.S.C. 1795e] (a)(1) A member may apply for an 

extension of credit from the Facility to meet its liquidity needs. The 

Board shall approve or deny any such application within five working days after receiving it. The Board shall not approve an application for credit the intent of which is to expand credit union portfolios. 
Sec. 307dir FEDERAL CREDIT UNION ACT 464 

(2) The Board may advance funds to a member on terms and 

conditions prescribed by the Board after giving due consideration 

to creditworthiness. 

(3) The Board shall not advance funds for the benefit of a 

credit union whose share or deposit accounts are insured by a State 

share or deposit guaranty credit union, insurance corporation, or 

guaranty association, without consultation with the appropriate 

State share or deposit guaranty credit union, insurance corporation, or guaranty association. 

(b) The Secretary of the Treasury is authorized to lend to the 

Facility up to $500,000,000, in the event the Board certifies to the 

Secretary that the Facility does not have sufficient funds to meet 

liquidity needs of credit unions. Any such loan shall bear an interest rate not greater than one-eighth of 1 per centum above the current average market yield on outstanding obligations of the United 

States with remaining time to maturity comparable to the maturity 

of such loan. The authority of the Secretary to lend under this subsection shall be limited to such extent or in such amounts as are 

provided in advance in appropriation Acts. 

POWERS OF TH E ADMINISTRATOR 

SEC. 307. [12 U.S.C. 1795f] (a) The Board on behalf of the Facility shall have the ability to— 

(1) prescribe the manner in which the general business of 

the Facility shall be conducted; 

(2) prescribe rules and regulations to carry out this title; 

(3) determine the expenditures incurred by the Administration to carry out this title, and the expenditures incurred by 

the Facility to carry out titles I and II of this Act, and annually 

assess the Facility and the Administration accordingly; 

(4) borrow from— 

(A) any source, provided that the total face value of 

these obligations shall not exceed twelve times the subscribed capital stock and surplus of the Facility; and 

(B) the National Credit Union Share Insurance Fund 

up to $500,000 to defray initial organizational and operating expenses of the Facility at such rates and terms consistent with prevailing market conditions; 

(5) guarantee performance of the terms of any financial 

obligation of a member but only when such obligation bears a 

clear and conspicuous notice on its face that only the resources 

of the Facility underlie such guarantee; 

(6) purchase any asset from a member with the member's 

endorsement; 

(7) invest in obligations of the United States or any agency 

thereof; 

(8) make deposits in federally insured financial institutions 

and make investments in shares or deposits of credit unions; 

(9) sue and be sued, complain, and defend, in any State or 

Federal court; 

(10 adopt a seal; 

(11) pursue to final disposition by way of compromise or 

otherwise claims both for and against the United States (other 
431 FEDERAL CREDIT UNION ACT Sec. 307 

than tort claims, claims involving administrative expenses, and 

claims in excess of $5,000 arising out of contracts for construction, repairs, and the purchase of supplies and materials) 

which are not in litigation and have not been referred to the 

Department of Justice; 

(12) appoint officers and employees to assist in carrying 

out this title, who shall be appointed subject to the provisions 

of title 5, United States Code; 

(13) conduct business, carry on operations, have offices, 

and exercise the powers granted by this title in any State or 

territory; 

(14) lease, purchase, or otherwise acquire and own, hold, 

improve, use, or otherwise deal in and with property, real, personal, or mixed, or any interest therein, wherever situated; 

(15) enter into contracts with any public or private organization, partnership, corporation, or individual; 

(16) advance funds on a fully secured basis to a State 

credit union share or deposit insurance corporation, guaranty 

credit union, or guaranty association. Such advance shall not 

exceed twelve months in maturity, shall be relent at an interest rate not exceeding that imposed by the Facility, and shall 

not be renewable; 

(17) exercise such incidental powers as shall be necessary 

or requisite to enable it to carry out effectively the purposes for 

which the facility is incorporated; and 

(18) advance funds to the National Credit Union Share 

Insurance Fund under such terms and conditions as may be 

established by the Board. 

(b)(1) The Board may authorize the Central Liquidity Facility 

or its Agent members, subject to such rules and regulations, including definitions of terms used in this subsection, as the Board shall 

from time to time prescribe, to be drawees of, and to engage in, or 

be agents or intermediaries for, or otherwise participate or assist 

in, the collection and settlement of (including presentment, clearing, and payment of, and remitting for), checks, share drafts, or 

any other negotiable or nonnegotiable items or instruments of payment drawn on or issued by members of the Central Liquidity Facility, any of its Agent members, or any other credit union eligible 

to become a member of the Central Liquidity Facility, and to have 

such incidental powers as the Board shall find necessary for the 

exercise of any such authorization. 

(2) The Central Liquidity Facility or its Agent members shall 

make charges, to be determined and regulated by the Board consistent with the principles set forth in section 11A(c) of the Federal 

Reserve Act, or utilize the services of, or act as agent for, or be a 

member of, a Federal Reserve bank, clearinghouse, or any other 

public or private financial institution or other agency, in the exercise of any powers or functions pursuant to this subsection. 

(3) The Board is authorized, with respect to participation in 

the collection and settlement of any items by the Central Liquidity 

Facililty or by its Agent members, and with respect to the collection and settlement (including payment by the payor institution) of 

items payable by members of the Central Liquidity Facility or of 

any of its Agent members, to prescribe rules and regulations re-
Sec. 308dir FEDERAL CREDIT UNION ACT 464 

garding the rights, powers, responsibilities, duties, and liabilities, 

including standards relating thereto, of such entities and other parties to any such items or their collection and settlement. in prescribing such rules and regulations, the Board may adopt or apply, 

in whole or in part, general banking usage and practices, and, in 

instances or respects in which they would otherwise not be applicable, Federal Reserve regulations and operating letters, the Uniform 

Commercial Code, and clearinghouse rules. 

DEPOSITORIES, CUSTODIANS, AN D FISCAL AGENTS 

SEC. 308. [12 U.S.C. 1795g] The Federal Reserve Banks are 

authorized to act as depositories, custodians and/or fiscal agents for 

the Central Liquidity Facility in the general performance of its 

powers conferred by this title. Each Federal Reserve Bank when 

designated by the Board as fiscal agent for the Central Liquidity 

Facility, shall be entitled to be reimbursed for all expenses incurred as such fiscal agent. 

AUDI T OF FINANCIA L TRANSACTIONS 

SEC. 309. [12 U.S.C. 1795h] The Comptroller General of the 

United States shall audit the Central Liquidity Facility under such 

rules and regulations as the Comptroller may prescribe. 

ANNUA L REPORT 

SEC. 310. [12 U.S.C. 1795i] The annual report required by section 102(e)1

 shall include a full report of the activities of the Facility. 

AGEN T OF TH E FEDERAL RESERVE SYSTEM 

SEC. 311. [12 U.S.C. 1795j] The facility is authorized to act 

upon the request of the Board of Governors of the Federal Reserve 

System as an agent of the Federal Reserve System in matters pertaining to credit unions under such terms and conditions as may 

be established by the Board of Governors of the Federal Reserve 

System. 

STATE AN D LOCAL TAX EXEMPTIO N 

SEC. 312. (a) [12 U.S.C. 1795k] The Cental Liquidity Facility, 

and its franchise, activities, capital reserves, surplus, and income, 

shall be exempt from all State and local taxation now or hereafter 

imposed, other than taxes on real property held by the Facility (to 

the same extent, according to its value, as other similar property 

held by other persons is taxed). 

(b)(1) Except as provided in paragraph (2), the notes, bonds, 

debentures, and other obligations issued on behalf of the Central 

Liquidity Facility and the income therefrom shall be exempt from 

all State and local taxation now or hereafter imposed. 

(2) Any obligation described in paragraph (1) shall not be 

exempt from State or local gift, estate, inheritance, legacy, succession, or other wealth transfer taxes. 

1

 So in original. Probably should be "section 102(d)''. 
431 

FEDERAL CREDIT UNION ACT Sec. 469 

(c) For purposes of this section— 

(1) the term ''State'' includes the District of Columbia; and 

(2) taxes imposed by counties or muncipalities, or any territory, dependency, or possession of the United States shall be 

treated as local taxes. 

FEDERAL DEPOSIT INSURANCE ACT 

4 71 

FEDERAL DEPOSIT INSURANCE ACT 

(64 Stat. 873; 12 U.S.C. 1811 et seq.) 

SECTION 1. [12 U.S.C. 1811] FEDERA L DEPOSIT INSURANC E 

CORPORATION. 

(a) ESTABLISHMENT OF CORPORATION.—There is hereby established a Federal Deposit Insurance Corporation (hereinafter referred to as the ''Corporation'') which shall insure, as hereinafter 

provided, the deposits of all banks and savings associations which 

are entitled to the benefits of insurance under this Act, and which 

shall have the powers hereinafter granted. 

(b) ASSET DISPOSITION DIVISION.— 

(1) ESTABLISHMENT.—The Corporation shall have a separate division of asset disposition. 

(2) MANAGEMENT.—Th e division of asset disposition shall 

have an administrator who shall be appointed by the Board of 

Directors. 

(3) RESPONSIBILITIES OF DIVISION.—The division of asset 

disposition shall carry out all of the responsibilities of the Corporation under this Act relating to the liquidation of insured 

depository institutions and the disposition of assets of such 

institutions. 

SEC. 2. [12 U.S.C. 1812] MANAGEMENT. 

(a) BOARD OF DIRECTORS.— 

(1) IN GENERAL.—The management of the Corporation 

shall be vested in a Board of Directors consisting of 5 

members— 

(A) 1 of whom shall be the Comptroller of the Currency; 

(B) 1 of whom shall be the Director of the Office of 

Thrift Supervision; and 

(C) 3 of whom shall be appointed by the President, by 

and with the advice and consent of the Senate, from 

among individuals who are citizens of the United States, 

1 of whom shall have State bank supervisory experience. 

(2) POLITICAL AFFILIATION.—Afte r February 28, 1993, not 

more than 3 of the members of the Board of Directors may be 

members of the same political party. 

(b) CHAIRPERSON AND VIC E CHAIRPERSON.— 

(1) CHAIRPERSON.—1 of the appointed members shall be 

designated by the President, by and with the advice and consent of the Senate, to serve as Chairperson of the Board of 

Directors for a term of 5 years. 

(2) VIC E CHAIRPERSON.—1 of the appointed members shall 

be designated by the President, by and with the advice and 

4 73 
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 74 

consent of the Senate, to serve as Vice Chairperson of the 

Board of Directors. 

(3) ACTING CHAIRPERSON.—In the event of a vacancy in the 

position of Chairperson of the Board of Directors or during the 

absence or disability of the Chairperson, the Vice Chairperson 

shall act as Chairperson. 

(c) TERMS.— 

(1) APPOINTED MEMBERS.—Each appointed member shall 

be appointed for a term of 6 years. 

(2) INTERI M APPOINTMENTS.—Any member appointed to fill 

a vacancy occurring before the expiration of the term for which 

such member's predecessor was appointed shall be appointed 

only for the remainder of such term. 

(3) CONTINUATION OF SERVICE.—The Chairperson, Vice 

Chairperson, and each appointed member may continue to 

serve after the expiration of the term of office to which such 

member was appointed until a successor has been appointed 

and qualified. 

(d) VACANCY.— 

(1) IN GENERAL.—Any vacancy on the Board of Directors 

shall be filled in the manner in which the original appointment 

was made. 

(2) ACTING OFFICIALS MAY SERVE.—In the event of a vacancy in the office of the Comptroller of the Currency or the 

office of Director of the Office of Thrift Supervision and pending the appointment of a successor, or during the absence or 

disability of the Comptroller or such Director, the acting Comptroller of the Currency or the acting Director of the Office of 

Thrift Supervision, as the case may be, shall be a member of 

the Board of Directors in the place of the Comptroller or Director. 

(e) INELIGIBILITY FOR OTHER OFFICES.— 

(1) POSTSERVICE RESTRICTION.— 

(A) I N GENERAL.—No member of the Board of Directors may hold any office, position, or employment in any 

insured depository institution or any depository institution 

holding company during— 

(i) the time such member is in office; and 

(ii) the 2-year period beginning on the date such 

member ceases to serve on the Board of Directors. 

(B) EXCEPTION FOR MEMBERS WHO SERVE FULL TERM.— 

The limitation contained in subparagraph (A)(ii) shall not 

apply to any member who has ceased to serve on the 

Board of Directors after serving the full term for which 

such member was appointed. 

(2) RESTRICTION DURING SERVICE.—No member of the 

Board of Directors may— 

(A) be an officer or director of any insured depository 

institution, depository institution holding company, Federal Reserve bank, or Federal home loan bank; or 

(B) hold stock in any insured depository institution or 

depository institution holding company. 

(3) CERTIFICATION.—Upon taking office, each member of 

the Board of Directors shall certify under oath that such mem-
Sec. 2 

FEDERAL DEPOSIT INSURANCE ACT 

475 

ber has complied with this subsection and such certification 

shall be filed with the secretary of the Board of Directors. 

(f) STATUS OF EMPLOYEES.— 

(1) I N GENERAL.—A director, member, officer, or employee 

of the Corporation has no liability under the Securities Act of 

1933 with respect to any claim arising out of or resulting from 

any act or omission by such person within the scope of such 

person's employment in connection with any transaction involving the disposition of assets (or any interests in any assets 

or any obligations backed by any assets) by the Corporation. 

This subsection shall not be construed to limit personal liability for criminal acts or omissions, willful or malicious misconduct, acts or omissions for private gain, or any other acts 

or omissions outside the scope of such person's employment. 

(2) DEFINITION.—Fo r purposes of this subsection, the term 

"employee of the Corporation'' includes any employee of the Office of the Comptroller of the Currency or of the Office of Thrift 

Supervision who serves as a deputy or assistant to a member 

of the Board of Directors of the Corporation in connection with 

activities of the Corporation. 

(3) EFFECT ON OTHER LAW.—This subsection does not 

affect— 

(A) any other immunities and protections that may be 

available to such person under applicable law with respect 

to such transactions, or 

(B) any other right or remedy against the Corporation, 

against the United States under applicable law, or against 

any person other than a person described in paragraph (1) 

participating in such transactions. 

This subsection shall not be construed to limit or alter in any 

way the immunities that are available under applicable law for 

Federal officials and employees not described in this subsection. 

SEC. 3. [12 U.S.C. 1813] As used in this Act— 

(a) DEFINITIONS OF BANK AND RELATED TERMS.— 

(1) BANK.—The term "bank''— 

(A) means any national bank, State bank, and District 

bank, and any Federal branch and insured branch; 

(B) includes any former savings association that— 

(i) has converted from a savings association 

charter; and 

(ii) is a Savings Association Insurance Fund 

member. 

(2) STATE BANK.—The term "State bank'' means any bank, 

banking association, trust company, savings bank, industrial 

bank (or similar depository institution which the Board of 

Directors finds to be operating substantially in the same manner as an industrial bank), or other banking institution 

which— 

(A) is engaged in the business of receiving deposits, 

other than trust funds (as defined in this section); and 

(B) is incorporated under the laws of any State or 

which is operating under the Code of Law for the District 

of Columbia (except a national bank), 
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 76 

including any cooperative bank or other unincorporated bank 

the deposits of which were insured by the Corporation on the 

day before the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

(3) STATE.—The term ''State'' means any State of the 

United States, the District of Columbia, any territory of the 

United States, Puerto Rico, Guam, American Samoa, the Trust 

Territory of the pacific islands, the virgin islands, and the 

Northern Mariana Islands. 

(4) DISTRICT BANK.—Th e term ''District bank'' means any 

State bank operating under the Code of Law of the District of 

Columbia. 

(b) DEFINITIO N OF SAVINGS ASSOCIATIONS AND RELATED 

TERMS.— 

(1) SAVINGS ASSOCIATION.—The term ''savings association'' 

means— 

(A) any Federal savings association; 

(B) any State savings association; and 

(C) any corporation (other than a bank) that the Board 

of Directors and the Director of the Office of Thrift Supervision jointly determine to be operating in substantially 

the same manner as a savings association. 

(2) FEDERAL SAVINGS ASSOCIATION.—The term ''Federal 

savings association'' means any Federal savings association or 

Federal savings bank which is chartered under section 5 of the 

Home Owners' Loan Act. 

(3) STATE SAVINGS ASSOCIATION.—The term ''State savings 

association'' means— 

(A) any building and loan association, savings and 

loan association, or homestead association; or 

(B) any cooperative bank (other than a cooperative 

bank which is a State bank as defined in subsection (a)(2)), 

which is organized and operating according to the laws of the 

State (as defined in subsection (a)(3)) in which it is chartered 

or organized. 

(c) DEFINITIONS RELATING TO DEPOSITORY INSTITUTIONS.— 

(1) DEPOSITORY INSTITUTION.—The term ''depository institution'' means any bank or savings association. 

(2) INSURED DEPOSITORY INSTITUTION.—The term ''insured 

depository institution'' means any bank or savings association 

the deposits of which are insured by the Corporation pursuant 

to this Act. 

(3) INSTITUTIONS INCLUDED FOR CERTAIN PURPOSES.—The 

term ''insured depository institution'' includes any uninsured 

branch or agency of a foreign bank or a commercial lending 

company owned or controlled by a foreign bank for purposes of 

section 8 of this Act. 

(4) FEDERAL DEPOSITORY INSTITUTION.—The term ''Federal 

depository institution'' means any national bank, any Federal 

savings association, and any Federal branch. 

(5) STATE DEPOSITORY INSTITUTION.—The term ''State 

depository institution'' means any State bank, any State savings association, and any insured branch which is not a Federal branch. 
Sec. 2 

FEDERAL DEPOSIT INSURANCE ACT 

477 

(d) DEFINITION S RELATING TO MEMBE R BANKS.— 

(1) NATIONA L MEMBER BANK.—The term ''national member 

bank'' means any national bank which is a member of the Federal Reserve System. 

(2) STATE MEMBER BANK.—The term ''State member bank'' 

means any State bank which is a member of the Federal Reserve System. 

(e) DEFINITION S RELATING TO NONMEMBE R BANKS.— 

(1) NATIONA L NONMEMBE R BANK.—The term ''national nonmember bank'' means any national bank which— 

(A) is located in any territory of the United States, 

Puerto Rico, Guam, American Samoa, the Virgin Islands, 

or the Northern Mariana islands; and 

(B) is not a member of the Federal Reserve System. 

(2) STATE NONMEMBE R BANK.—The term ''State nonmember bank'' means any State bank which is not a member 

of the Federal Reserve System. 

(f) The term ''mutual savings bank'' means a bank without capital stock transacting a savings bank business, the net earnings of 

which inure wholly to the benefit of its depositors after payment 

of obligations for any advances by its organizers. 

(g) SAVINGS BANK.—The term ''savings bank'' means a bank 

(including a mutual savings bank) which transacts its ordinary 

banking business strictly as a savings bank under State laws imposing special requirements on such banks governing the manner 

of investing their funds and of conducting their business. 

(h) The term ''insured bank'' means any bank (including a foreign bank having an insured branch) the deposits of which are insured in accordance with the provisions of this Act; and the term 

''noninsured bank'' means any bank the deposits of which are not 

so insured. 

(i) NE W BAN K AND BRIDGE BAN K DEFINED. — 

(1) NEW BANK.—The term ''new bank'' means a new national bank, other than a bridge bank, organized by the Corporation in accordance with section (11)(m). 

(2) BRIDGE BANK.—The term ''bridge bank'' means a new 

national bank organized by the Corporation in accordance with 

section 11(n). 

(j) The term ''receiver'' includes a receiver, liquidating agent, 

conservator, commission, person, or other agency charged by law 

with the duty of winding up the affairs of a bank or savings association or of a branch of a foreign bank. 

(k) The term ''Board of Directors'' means the Board of Directors 

of the Corporation. 

(l) The term ''deposit'' means— 

(1) the unpaid balance of money or its equivalent received 

or held by a bank or savings association in the usual course 

of business and for which it has given or is obligated to give 

credit, either conditionally or unconditionally, to a commercial, 

checking, savings, time, or thrift account, or which is evidenced 

by its certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar name, or a 

check or draft drawn against a deposit account and certified by 

the bank or savings association, or a letter of credit or a trav-
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 78 

eler's check on which the bank or savings association is primarily liable: Provided, That, without limiting the generality of 

the term ''money or its equivalent'', any such account or instrument must be regarded as evidencing the receipt of the equivalent of money when credited or issued in exchange for checks 

or drafts or for a promissory note upon which the person obtaining any such credit or instrument is primarily or secondarily liable, or for a charge against a deposit account, or in settlement of checks, drafts, or other instruments forwarded to 

such bank or savings association for collection, 

(2) trust funds as defined in this Act received or held by 

such bank or savings association, whether held in the trust 

department or held or deposited in any other department of 

such bank or savings association, 

(3) money received or held by a bank or savings association, or the credit given for money or its equivalent received or 

held by a bank or savings association, in the usual course of 

business for a special or specific purpose, regardless of the 

legal relationship thereby established, including without being 

limited to, escrow funds, funds held as security for an obligation due to the bank or savings association or others (including 

funds held as dealers reserves) or for securities loaned by the 

bank or savings association, funds deposited by a debtor to 

meet maturing obligations, funds deposited as advance payment on subscriptions to United States Government securities, 

funds held for distribution or purchase of securities, funds held 

to meet its acceptances or letters of credit, and withheld taxes: 

Provided, That there shall not be included funds which are received by the bank or savings association for immediate application to the reduction of an indebtedness to the receiving 

bank or savings association, or under condition that the receipt 

thereof immediately reduces or extinguishes such an indebtedness, 

(4) outstanding draft (including advice or authorization to 

charge a bank's or a savings association's balance in another 

bank or savings association), cashier's check, money order, or 

other officer's check issued in the usual course of business for 

any purpose, including without being limited to those issued in 

payment for services, dividends, or purchases, and 

(5) such other obligations of a bank or savings association 

as the Board of Directors, after consultation with the Comptroller of the Currency, Director of the Office of Thrift Supervision, and the Board of Governors of the Federal Reserve System, shall find and prescribe by regulation to be deposit liabilities by general usage, except that the following shall not be 

a deposit for any of the purposes of this Act or be included as 

part of the total deposits or of an insured deposit: 

(A) any obligation of a depository institution which is 

carried on the books and records of an office of such bank 

or savings association located outside of any State, 

unless— 

(i) such obligation would be a deposit if it were 

carried on the books and records of the depository 
4 79 FEDERAL DEPOSIT INSURANCE ACT Sec. 3 

institution, and would be payable at, an office located 

in any State; and 

(ii) the contract evidencing the obligation provides 

by express terms, and not by implication, for payment 

at an office of the depository institution located in any 

State; 

(B) any international banking facility deposit, including an international banking facility time deposit, as such 

term is from time to time defined by the Board of Governors of the Federal Reserve System in regulation D or 

any successor regulation issued by the Board of Governors 

of the Federal Reserve System; and 

(C) any liability of an insured depository institution 

that arises under an annuity contract, the income of which 

is tax deferred under section 72 of the Internal Revenue 

Code of 1986. 

(m) INSURED DEPOSIT.— 

(1) IN GENERAL.—Subject to paragraph (2), the term "insured deposit'' means the net amount due to any depositor for 

deposits in an insured depository institution as determined 

under sections 7(i) and 11(a). 

(2)

 1 in the case of any deposit in a branch of a foreign bank, 

the term ''insured deposit'' means an insured deposit as defined in 

paragraph (1) of this subsection which— 

(A) is payable in the United States to— 

(i) an individual who is a citizen or resident of the 

United States, 

(ii) a partnership, corporation, trust, or other legally 

cognizable entity created under the laws of the United 

States or any State and having its principal place of business within the United States or any State, or 

(iii) an individual, partnership, corporation, trust, or 

other legally cognizable entity which is determined by the 

Board of Directors in accordance with its regulations to 

have such business or financial relationships in the United 

States as to make the insurance of such deposit consistent 

with the purposes of this Act; and 

(B) meets any other criteria prescribed by the Board of 

Directors by regulation as necessary or appropriate in its judgment to carry out the purposes of this Act or to facilitate the 

administration thereof. 

(3) UNINSURED DEPOSITS.—The term ''uninsured deposit'' 

means the amount of any deposit of any depositor at any 

insured depository institution in excess of the amount of the 

insured deposits of such depositor (if any) at such depository 

institution. 

(4) PREFERRED DEPOSITS.—The term ''preferred deposits'' 

means deposits of any public unit (as defined in paragraph (1)) 

at any insured depository institution which are secured or 

collateralized as required under State law. 

(n) The term ''transferred deposit'' means a deposit in a new 

bank or other insured depository institution made available to a de1

 Indentation so in law. 
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 80 

positor by the Corporation as payment of the insured deposit of 

such depositor in a closed bank, and assumed by such new bank 

or other insured depository institution. 

(o) The term ''domestic branch'' includes any branch bank, 

branch office, branch agency, additional office, or any branch place 

of business located in any State of the United States or in any Territory of the United States, Puerto Rico, Guam, American Samoa, 

the Trust Territory of the pacific islands, or the virgin islands at 

which deposits are received or checks paid or money lent. The term 

''domestic branch'' does not include an automated teller machine or 

a remote service unit. The term ''foreign branch'' means any office 

or place of business located outside the United States, its territories, Puerto Rico, Guam, American Samoa, the Trust Territory of 

the pacific islands, or the virgin islands, at which banking operations are conducted. 

(p) The term ''trust funds'' means funds held by an insured 

depository institution in a fiduciary capacity and includes, without 

being limited to, funds held as trustee, executor, administrator, 

guardian, or agent. 

(q) APPROPRIATE FEDERAL BANKIN G AGENCY.—Th e term 

''appropriate Federal banking agency'' means— 

(1) the Comptroller of the Currency, in the case of any national banking association, any District bank, or any Federal 

branch or agency of a foreign bank; 

(2) the Board of Governors of the Federal Reserve System, 

in the case of— 

(A) any State member insured bank (except a District 

bank), 

(B) any branch or agency of a foreign bank with respect to any provision of the Federal Reserve Act which is 

made applicable under the International Banking Act of 

1978, 

(C) any foreign bank which does not operate an insured branch, 

(D) any agency or commercial lending company other 

than a Federal agency, 

(E) supervisory or regulatory proceedings arising from 

the authority given to the Board of Governors under section 7(c)(1) of the International Banking Act of 1978, including such proceedings under the Financial institutions 

Supervisory Act of 1966, and 

(F) any bank holding company and any subsidiary of 

a bank holding company (other than a bank); 

(3) the Federal Deposit Insurance Corporation in the case 

of a State nonmember insured bank (except a District bank), 

or a foreign bank having an insured branch; and 

(4) the Director of the Office of Thrift Supervision in the 

case of any savings association or any savings and loan holding 

company. 

Under the rule set forth in this subsection, more than one agency 

may be an appropriate Federal banking agency with respect to any 

given institution. 
Sec. 2 

FEDERAL DEPOSIT INSURANCE ACT 

481 

(r) 1 STAT E BAN K SUPERVISOR. — 

(1) IN GENERAL.—The term ''State bank supervisor'' means 

any officer, agency, or other entity of any State which has primary regulatory authority over State banks or State savings 

associations in such State. 

(2) INTERSTAT E APPLICATION.—Th e State bank supervisors 

of more than 1 State may be the appropriate State bank supervisor for any insured depository institution. 

(s) DEFINITION S RELATIN G TO FOREIG N BANK S AN D 

BRANCHES. — 

(1) FOREIG N BANK.—Th e term ''foreign bank'' has the 

meaning given to such term by section 1(b)(7) of the International Banking Act of 1978. 

(2) FEDERA L BRANCH.—Th e term ''Federal branch'' has the 

meaning given to such term by section 1(b)(6) of the International Banking Act of 1978. 

(3) INSURE D BRANCH.—Th e term ''insured branch'' means 

any branch (as defined in section 1(b)(3) of the International 

Banking Act of 1978) of a foreign bank any deposits in which 

are insured pursuant to this Act. 

( t) INCLUDES , INCLUDING. — 

(1) IN GENERAL.—The terms ''includes'' and "including" 

shall not be construed more restrictively than the ordinary 

usage of such terms so as to exclude any other thing not referred to or described. 

(2) RUL E OF CONSTRUCTION.—Paragrap h (1) shall not be 

construed as creating any inference that the term ''includes'' or 

"including" in any other provision of Federal law may be 

deemed to exclude any other thing not referred to or described. 

(u) INSTITUTION-AFFILIATE D PARTY.—Th e term ''institutionaffiliated party'' means— 

(1) any director, officer, employee, or controlling stockholder (other than a bank holding company) of, or agent for, 

an insured depository institution; 

(2) any other person who has filed or is required to file a 

change-in-control notice with the appropriate Federal banking 

agency under section 7(j); 

(3) any shareholder (other than a bank holding company), 

consultant, joint venture partner, and any other person as 

determined by the appropriate Federal banking agency (by regulation or case-by-case) who participates in the conduct of the 

affairs of an insured depository institution; and 

(4) any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in— 

(A) any violation of any law or regulation; 

(B) any breach of fiduciary duty; or 

(C) any unsafe or unsound practice, 

1

 Section 1603(b)(2) of P.L. 102-550 (106 Stat. 4079) amended section 112 of the Federal Deposit Insurance Corporation Improvement Act of 1992 by redesignating existing (b) as (c) and 

by inserting a new subsection (b). The new subsection (b) amends section 3(r) of the Federal 

Deposit Insurance Act to read as set forth above. The instructions made by section 1603(b)(2) 

of P.L. 102-550 probably should have been to the Federal Deposit Insurance Corporation 

Improvement Act of 1991. 
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 82 

which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured 

depository institution. 

(v) VIOLATION.—Th e term ''violation'' includes any action (alone 

or with another or others) for or toward causing, bringing about, 

participating in, counseling, or aiding or abetting a violation. 

( w) DEFINITIONS RELATING TO AFFILIATES OF DEPOSITORY 

INSTITUTIONS.— 

(1) DEPOSITORY INSTITUTION HOLDING COMPANY.—The term 

''depository institution holding company'' means a bank holding 

company or a savings and loan holding company. 

(2) BANK HOLDING COMPANY.—The term ''bank holding 

company'' has the meaning given to such term in section 2 of 

the Bank Holding Company Act of 1956. 

(3) SAVINGS AND LOAN HOLDING COMPANY.—The term ''savings and loan holding company'' has the meaning given to such 

term in section 10 of the Home Owners' Loan Act. 

(4) SUBSIDIARY.—The term ''subsidiary''— 

(A) means any company which is owned or controlled 

directly or indirectly by another company; and 

(B) includes any service corporation owned in whole or 

in part by an insured depository institution or any subsidiary of such a service corporation. 

(5) CONTROL.—The term ''control'' has the meaning given 

to such term in section 2 of the Bank Holding Company Act 

of 1956. 

(6) AFFILIATE.—Th e term ''affiliate'' has the meaning given 

to such term in section 2(k) of the Bank Holding Company Act 

of 1956. 

(7) COMPANY.—The term ''company'' has the same meaning 

as in section 2(b) of the Bank Holding Company Act of 1956. 

(x) DEFINITIONS RELATING TO DEFAULT.— 

(1) DEFAULT.—The term ''default'' means, with respect to 

an insured depository institution, any adjudication or other 

official determination by any court of competent jurisdiction, 

the appropriate Federal banking agency, or other public authority pursuant to which a conservator, receiver, or other 

legal custodian is appointed for an insured depository institution or, in the case of a foreign bank having an insured branch, 

for such branch. 

(2) I N DANGER OF DEFAULT.—The term ''in danger of default'' means an insured depository institution with respect to 

which (or in the case of a foreign bank having an insured 

branch, with respect to such insured branch) the appropriate 

Federal banking agency or State chartering authority has advised the Corporation (or, if the appropriate Federal banking 

agency is the Corporation, the Corporation has determined) 

that— 

(A) in the opinion of such agency or authority— 

(i) the depository institution or insured branch is 

not likely to be able to meet the demands of the institution's or branch's depositors or pay the institution's 

or branch's obligations in the normal course of business; and 
Sec. 2 

FEDERAL DEPOSIT INSURANCE ACT 

483 

(ii) there is no reasonable prospect that the 

depository institution or insured branch will be able to 

meet such demands or pay such obligations without 

Federal assistance; or 

(B) in the opinion of such agency or authority— 

(i) the depository institution or insured branch 

has incurred or is likely to incur losses that will deplete all or substantially all of its capital; and 

(ii) there is no reasonable prospect that the capital 

of the depository institution or insured branch will be 

replenished without Federal assistance. 

(y) The term ''deposit insurance fund'' means the Bank insurance Fund or the Savings Association Insurance Fund, as appropriate. 

(z) FEDERAL BANKING AGENCY.—Th e term "Federal banking 

agency'' means the Comptroller of the Currency, the Director of the 

Office of Thrift Supervision, the Board of Governors of the Federal 

Reserve System, or the Federal Deposit Insurance Corporation. 

SEC. 4. [12 U.S.C. 1814] (a) CONTINUATION OF INSURANCE.— 

(1) BANKS.—Each bank, which is an insured depository 

institution on the effective date of this amendment,1 shall be 

and continue to be, without application or approval, an insured 

depository institution and shall be subject to the provisions of 

this Act. 

(2) SAVINGS ASSOCIATIONS.—Each savings association the 

accounts of which were insured by 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, without application or approval, an insured depository institution. 

(b) CONTINUATION OF INSURANCE UPO N BECOMING A MEMBE R 

BANK.—In the case of an insured bank which is admitted to membership in the Federal Reserve System or an insured State bank 

which is converted into a national member bank, the bank shall 

continue as an insured bank. 

(c) CONTINUATION OF INSURANCE AFTER CONVERSION.—Subject 

to section 5(d)— 

(1) any State depository institution which results from the 

conversion of any insured Federal depository institution; and 

(2) any Federal depository institution which results from 

the conversion of any insured State depository institution, 

shall continue as an insured depository institution. 

(d) CONTINUATION OF INSURANCE AFTER MERGER OR CONSOLIDATION.—Any State depository institution or any Federal depository institution which results from the merger or consolidation of 

insured depository institutions, or from the merger or consolidation 

of a noninsured depository institution with an insured depository 

institution, shall continue as an insured depository institution. 

SEC. 5. [12 U.S.C. 1815] DEPOSIT INSURANCE. 

(a) APPLICATION TO CORPORATION REQUIRED.— 

(1) IN GENERAL.—Except as provided in paragraphs (2) and 

(3), any depository institution which is engaged in the business 

1

 Such effective date was August 9, 1989. 
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 84 

of receiving deposits other than trust funds (as defined in section 3(p)), upon application to and examination by the Corporation and approval by the Board of Directors, may become an 

insured depository institution. 

(2) INTERI M DEPOSITORY INSTITUTIONS.—In the case of any 

interim Federal depository institution that is chartered by the 

appropriate Federal banking agency and will not open for business, the depository institution shall be an insured depository 

institution upon the issuance of the institution's charter by the 

agency. 

(3) APPLICATION AND APPROVAL NOT REQUIRED I N CASES OF 

CONTINUED INSURANCE.—Paragrap h (1) shall not apply in the 

case of any depository institution whose insured status is continued pursuant to section 4. 

(4) REVIEW REQUIREMENTS.—In reviewing any application 

under this subsection, the Board of Directors shall consider the 

factors described in section 6 in determining whether to approve the application for insurance. 

(5) NOTICE OF DENIAL OF APPLICATION FOR INSURANCE.—If 

the Board of Directors votes to deny any application for insurance by any depository institution, the Board of Directors shall 

promptly notify the appropriate Federal banking agency and, 

in the case of any State depository institution, the appropriate 

State banking supervisor of the denial of such application, giving specific reasons in writing for the Board of Directors' determination with reference to the factors described in section 6. 

(6) NONDELEGATION REQUIREMENT.—The authority of the 

Board of Directors to make any determination to deny any application under this subsection may not be delegated by the 

Board of Directors. 

(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) the financial history and condition of the bank, 

(2) the adequacy of its capital structure, 

(3) its future earnings prospects, 

(4) the general character and fitness of its management, 

including but not limited to the management of the branch 

proposed to be insured, 

(5) the risk presented to the Bank insurance Fund or the 

Savings Association Insurance Fund, 

(6) the convenience and needs of the community to be 

served by the branch, 

(7) whether or not its corporate powers, insofar as they 

will be exercised through the proposed insured branch, are consistent with the purposes of this Act, and 

(8) the probable adequacy and reliability of information 

supplied and to be supplied by the bank to the Corporation to 

enable it to carry out its functions under this Act. 
Sec. 2 

FEDERAL DEPOSIT INSURANCE ACT 

485 

(c)(1) Before any branch of a foreign bank becomes an insured 

branch, the bank shall deliver to the Corporation or as the Corporation may direct a surety bond, a pledge of assets, or both, in 

such amounts and of such types as the Corporation may require or 

approve, for the purpose set forth in paragraph (4) of this subsection. 

(2) After any branch of a foreign bank becomes an insured 

branch, the bank shall maintain on deposit with the Corporation, 

or as the Corporation may direct, surety bonds or assets or both, 

in such amounts and of such types as shall be determined from 

time to time in accordance with such regulations as the Board of 

Directors may prescribe. Such regulations may impose differing 

requirements on the basis of any factors which in the judgment of 

the Board of Directors are reasonably related to the purpose set 

forth in paragraph (4). 

(3) The Corporation may require of any given bank larger deposits of bonds and assets than required under paragraph (2) of 

this subsection if, in the judgment of the Corporation, the situation 

of that bank or any branch thereof is or becomes such that the deposits of bonds and assets otherwise required under this section 

would not adequately fulfill the purpose set forth in paragraph (4). 

The imposition of any such additional requirements may be without notice or opportunity for hearing, but the Corporation shall afford an opportunity to any such bank to apply for a reduction or 

removal of any such additional requirements so imposed. 

(4) The purpose of the surety bonds and pledges of assets required under this subsection is to provide protection to the 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. 

(5) in the case of any failure or threatened failure of a foreign 

bank to comply with any requirement imposed under this subsection (c), the Corporation, in addition to all other administrative 

and judicial remedies, may apply to any United States district 

court, or United States court of any territory, within the jurisdiction of which any branch of the bank is located, for an injunction 

to compel such bank and any officer, employee, or agent thereof, or 

any other person having custody or control of any of its assets, to 

deliver to the Corporation such assets as may be necessary to meet 

such requirement, and to take any other action necessary to vest 

the Corporation with control of assets so delivered. If the court 

shall determine that there has been any such failure or threatened 

failure to comply with any such requirement, it shall be the duty 

of the court to issue such injunction. The propriety of the requirement may be litigated only as provided in chapter 7 of title 5 of 

the United States Code, and may not be made an issue in an action 

for an injuction under this paragraph. 

(d) INSURANCE FEES. — 

(1) UNINSURE D INSTITUTIONS.— 
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 86 

(A) 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 reserve ratios in the Bank Insurance Fund and the Savings Association Insurance Fund as 

required by section 7. 

(B) FEE CREDITED TO APPROPRIATE FUND.—Th e 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. 

( C) 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. 

(2) CONVERSIONS.— 

(A) I N GENERAL.— 

(i) PRIOR APPROVAL REQUIRED.—No insured 

depository institution may participate in a conversion 

transaction without the prior approval of the Corporation. 

(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. 

(B) CONVERSION DEFINED.—Fo r purposes of this paragraph, the term ''conversion transaction'' means— 

(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; 

(ii) the merger or consolidation of a Bank Insurance Fund member with a Savings Association Insurance Fund member; 

(iii) the assumption of any liability by— 

(I) any Bank Insurance Fund member to pay 

any deposits of a Savings Association Insurance 

Fund member; or 

(II) any Savings Association Insurance Fund 

member to pay any deposits of a Bank Insurance 

Fund member; 

(iv) the transfer of assets of— 

(I) any Bank Insurance Fund member to any 

Savings Association Insurance Fund member in 

consideration of the assumption of liabilities for 
Sec. 2 

FEDERAL DEPOSIT INSURANCE ACT 

487 

any portion of the deposits of such Bank insurance Fund member; or 

(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 

(v) the transfer of deposits— 

(i) from a Bank insurance Fund member to a 

Savings Association Insurance Fund member; or 

(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. 

(C) APPROVAL DURING MORATORIUM.—The Corporation 

may approve a conversion transaction at any time if— 

(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; 

(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 

(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). 

( 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 institutions Reform, Recovery, and Enforcement Act of 1989 

does not exceed 35 percent of the lesser of— 
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 88 

(i) the amount which is equal to the sum of— 

(i) the total deposits of such insured depository institution on May 1, 1989; and 

(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 

(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. 

(E) EXI T AND ENTRANCE FEES.—Each insured depository institution participating in a conversion transaction 

shall pay— 

(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— 

(I) shall be deposited in the Savings Association Insurance Fund; or 

(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; 

(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 

(iii) an entrance fee in an amount to be determined by the Corporation (and assessed in accordance 

with subparagraph (F)(ii)), except that— 

(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 

(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. 
Sec. 2 

FEDERAL DEPOSIT INSURANCE ACT 

489 

( F) ASSESSMENT OF EXIT AND ENTRANCE FEES.— 

(i) DETERMINATION OF AMOUNT OF EXIT FEES.— 

( 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. 

(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. 

(ii) PROCEDURES.—The Corporation shall prescribe, by regulation, procedures for assessing any exit 

or entrance fee under subparagraph (E). 

( G) CHARTER CONVERSION OF SAIF MEMBERS.—Thi s 

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. 

(3) OPTIONAL CONVERSIONS SUBJECT TO SPECIAL RULES ON 

DEPOSIT INSURANCE PAYMENTS.— 

(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). 

( B) ASSESSMENTS ON DEPOSITS ATTRIBUTABLE TO 

FORMER DEPOSITORY INSTITUTION.— 

(i) ASSESSMENTS BY SAIF.—I n 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. 

(ii) ASSESSMENTS BY BIF.—I n 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. 
Sec. 2 FEDERAL DEPOSIT INSURANCE ACT 4 90 

(C) 1 DETERMINATIO N OF ADJUSTE D ATTRIBUTABL E DEPOSI T AMOUNT.—Excep t as provided in subparagraph (K), 

the adjusted attributable deposit amount which shall be 

taken into account for purposes of determining the amount 

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— 

(i) the amount of any deposits acquired by the 

institution in connection with the transaction (as 

determined at the time of such transaction); 

(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 

(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. 

(D) DEPOSI T OF ASSESSMENT.—Tha t portion of any 

assessment under section 7 which— 

(i) is determined in accordance with subparagraph 

(B)(i) shall be deposited in the Savings Association 

Insurance Fund; and 

(ii) is determined in accordance with subparagraph (B)(ii) shall be deposited in the Bank Insurance 

Fund. 

( E ) CONDITION S FO R APPROVAL, GENERALLY. — 

(i) INFORMATIO N REQUIRED.—A n 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. 

(ii) N o TRANSFE R OF DEPOSI T INSURANC E PERMITTED.—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. 

(iii) CAPITA L 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 

1

 Section 501(b) of the Federal Deposit Insurance Corporation Improvement Act of 1991, provides that section 5(d)(3)(C) shall apply with respect to semiannual periods beginning after 

December 19, 1991. 
Sec. 2 

Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 497 

491 

capital requirements upon consummation of the transaction. 

(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 

Savings Association Insurance Fund member involved in 

such transaction was a State bank that the bank holding 

company was applying to acquire. 

( G) ALLOCATION OF COSTS I N 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). 

( H ) SUBSEQUENT APPROVAL OF CONVERSION TRANSACTION.—This paragraph shall cease to apply if— 

(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 

(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. 

( I) ACQUIRING, ASSUMING, OR RESULTING DEPOSITORY 

INSTITUTION DEFINED.—Fo r purposes of this paragraph, 

the term ''acquiring, assuming, or resulting depository 

institution'' means any insured depository institution 

which— 

(i) results from any transaction described in paragraph (2)(B)(ii) and approved under this paragraph; 

(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 

(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. 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 4 92 

(K) 1 ADJUSTMEN T 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— 

(i) had an adjusted attributable deposit amount 

that was less than 50 percent of the total deposits of 

that member bank; or 

(ii)(i) had an adjusted attributable deposit amount 

equal to less than 75 percent of the total assessable 

deposits of that member bank; 

(ii) had total assessable deposits greater than 

$5,000,000,000; and 

(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. 

(e) LIABILITY OF COMMONL Y CONTROLLE D DEPOSITOR Y INSTITU -

TIONS. — 

( 1 ) I N GENERAL.— 

(A) LIABILIT Y ESTABLISHED.—An y insured depository 

institution shall be liable for any loss incurred by the Corporation, or any loss which the Corporation reasonably 

anticipates incurring, after the date of the enactment of 

the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 in connection with— 

(i) the default of a commonly controlled insured 

depository institution; or 

(ii) any assistance provided by the Corporation to 

any commonly controlled insured depository institution in danger of default. 

(B) PAYMEN T UPO N NOTICE.—A n insured depository 

institution shall pay the amount of any liability to the Corporation under subparagraph (A) upon receipt of written 

notice by the Corporation in accordance with this subsection. 

( C ) NOTIC E REQUIRE D TO BE PROVIDED WITHI N 2 YEARS 

OF LOSS.—No insured depository institution shall be liable 

to the Corporation under subparagraph (A) if written notice with respect to such liability is not received by such 

institution before the end of the 2-year period beginning on 

the date the Corporation incurred the loss. 

( 2 ) AMOUN T OF COMPENSATION; PROCEDURES.— 

:No subparagraph (J) exists in law. See paragraphs (3) and (4) of section 2201(a) and section 

2702(i)(2) of P.L. 104-208. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

493 

(A) USE OF ESTIMATES.—When an insured depository 

institution is in default or requires assistance to prevent 

default, the Corporation shall— 

(i) in good faith, estimate the amount of the loss 

the Corporation will incur from such default or assistance; 

(ii) if, with respect to such insured depository 

institution, there is more than 1 commonly controlled 

insured depository institution, estimate the amount of 

each such commonly controlled depository institution's 

share of such liability; and 

(iii) advise each commonly controlled depository 

institution of the Corporation's estimate of the amount 

of such institution's liability for such losses. 

(B) PROCEDURES; IMMEDIATE PAYMENT.—The Corporation, after consultation with the appropriate Federal banking agency and the appropriate State chartering agency, 

shall— 

(i) on a case-by-case basis, establish the procedures and schedule under which any insured depository institution shall reimburse the Corporation for 

such institution's liability under paragraph (1) in connection with any commonly controlled insured depository institution; or 

(ii) require any insured depository institution to 

make immediate payment of the amount of such institution's liability under paragraph (1) in connection 

with any commonly controlled insured depository institution. 

(C) PRIORITY.—The liability of any insured depository 

institution under this subsection shall have priority with 

respect to other obligations and liabilities as follows: 

(i) SUPERIORITY.—The liability shall be superior to 

the following obligations and liabilities of the depository institution: 

(I) Any obligation to shareholders arising as a 

result of their status as shareholders (including 

any depository institution holding company or any 

shareholder or creditor of such company). 

(II) Any obligation or liability owed to any 

affiliate of the depository institution (including 

any other insured depository institution), other 

than any secured obligation which was secured as 

of May 1, 1989. 

(ii) SUBORDINATION.—The liability shall be subordinate in right and payment to the following obligations and liabilities of the depository institution: 

(I) Any deposit liability (which is not a liability described in clause (i)(ii)). 

(II) Any secured obligation, other than any 

obligation owed to any affiliate of the depository 

institution (including any other insured depository 

institution) which was secured after May 1, 1989. 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 4 94 

(III) Any other general or senior liability 

(which is not a liability described in clause (i)). 

(IV) Any obligation subordinated to depositors 

or other general creditors (which is not an obligation described in clause (i)). 

( D ) ADJUSTMENT OF ESTIMATED PAYMENT.— 

(i) OVERPAYMENT.—If the amount of compensation 

estimated by and paid to the Corporation by 1 or more 

such commonly controlled depository institutions is 

greater than the actual loss incurred by the Corporation, the Corporation shall reimburse each such commonly controlled depository institution its pro rata 

share of any overpayment. 

(ii) UNDERPAYMENT.—If the amount of compensation estimated by and paid to the Corporation by 1 or 

more such commonly controlled depository institutions 

is less than the actual loss incurred by the Corporation, the Corporation shall redetermine in its discretion the liability of each such commonly controlled 

depository institution to the Corporation and shall require each such commonly controlled depository institution to make payment of any additional liability to 

the Corporation. 

(3) REVIEW.— 

(A) JUDICIAL.—Actions of the Corporation shall be 

reviewable pursuant to chapter 7 of title 5, United States 

Code. 

(B) ADMINISTRATIVE.—The Corporation shall prescribe 

regulations and establish administrative procedures which 

provide for a hearing on the record for the review of— 

(i) the amount of any loss incurred by the Corporation in connection with any insured depository 

institution; 

(ii) the liability of individual commonly controlled 

depository institutions for the amount of such loss; 

and 

(iii) the schedule of payments to be made by such 

commonly controlled depository institutions. 

(4) LIMITATION ON RIGHTS OF PRIVATE PARTIES.—To th e extent the exercise of any right or power of any person would impair the ability of any insured depository institution to perform 

such institution's obligations under this subsection— 

(A) the obligations of such insured depository institution shall supersede such right or power; and 

(B) no court may give effect to such right or power 

with respect to such insured depository institution. 

(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 Bank 

Insurance Fund or the Savings Association Insurance 

Fund. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

495 

(B) CONDITION.—During the period any exemption 

granted to any insured depository institution under subparagraph (A) or (C) is in effect, such insured depository 

institution and all other insured depository institution 

affiliates of such depository institution shall comply fully 

with the restrictions of sections 23A and 23B of the Federal Reserve Act without regard to section 23A(d)(1). 

( C) LIMITE D PARTNERSHIPS.— 

(i) IN GENERAL.—The Corporation may, in its discretion, exempt any limited partnership and any affiliate of any limited partnership (other than any insured depository institution which is a majority owned 

subsidiary of such partnership) from the provisions of 

this subsection if such limited partnership or affiliate 

has filed a registration statement with the Securities 

and Exchange Commission on or before April 10, 1989, 

indicating that as of the date of such filing such partnership intended to acquire 1 or more insured depository institutions. 

(ii) REVIE W AND NOTICE.—Within 10 business days 

after the date of submission of any request for an 

exemption under this subparagraph together with 

such information as shall be reasonably requested by 

the Corporation, the Corporation shall make a determination on the request and shall so advise the applicant. 

(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— 

(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 

(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 

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. 

(7) EXCLUSION FOR INSTITUTIONS ACQUIRED I N 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) 1 depository institution controls another by virtue 

of ownership of voting shares acquired in securing or collecting a debt previously contracted in good faith; and 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 4 96 

(B) during the period beginning on the date of the 

enactment of the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989 and ending upon the expiration of the exclusion, the controlling bank and all other insured depository institution affiliates of such controlling 

bank comply fully with the restrictions of sections 23A and 

23B of the Federal Reserve Act, without regard to section 

23A(d)(1) of such Act, in transactions with the acquired insured depository institution. 

(8) 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) such affiliate was receiving cash payments from 

the Federal Savings and Loan Insurance Corporation 

under an assistance agreement or note entered into before 

the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989; 

(B) the Federal Savings and Loan Insurance Corporation, or such other entity which has succeeded to the payment obligations of such Corporation with respect to such 

assistance agreement or note, is unable to continue such 

payments; and 

(C) such affiliate— 

(i) is in default or in need of assistance solely as 

a result of the failure to meet the payment obligations 

referred to in subparagraph (B); and 

(ii) is not otherwise in breach of the terms of any 

assistance agreement or note which would authorize 

the Federal Savings and Loan Insurance Corporation 

or such other successor entity, pursuant to the terms 

of such assistance agreement or note, to refuse to 

make such payments. 

(9) COMMONLY CONTROLLED DEFINED.—Fo r purposes of 

this subsection, depository institutions are commonly controlled if— 

(A) such institutions are controlled by the same 

depository institution holding company (including any company required to file reports pursuant to section 4(f)(6) of 

the Bank Holding Company Act of 1956); or 

(B) 1 depository institution is controlled by another 

depository institution. 

SEC. 6. [12 U.S.C. 1816] 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) The financial history and condition of the depository 

institution. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

497 

(2) The adequacy of the depository institution's capital 

structure. 

(3) The future earnings prospects of the depository institution. 

(4) The general character and fitness of the management 

of the depository institution. 

(5) The risk presented by such depository institution to the 

Bank Insurance Fund or the Savings Association Insurance 

Fund. 

(6) The convenience and needs of the community to be 

served by such depository institution. 

(7) whether the depository institution's corporate powers 

are consistent with the purposes of this Act. 

SEC. 7. [12 U.S.C. 1817] (a)(1) Each insured State nonmember 

bank (except a District bank) and each foreign bank having an insured branch which is not a Federal branch shall make to the Corporation reports of condition which shall be in such form and shall 

contain such information as the Board of Directors may require. 

Such reports shall be made to the Corporation on the dates selected 

as provided in paragraph (3) of this subsection and the deposit liabilities shall be reported therein in accordance with and pursuant 

to paragraphs (4) and (5) of this subsection. The Board of Directors 

may call for additional reports of condition on dates to be fixed by 

it and may call for such other reports as the Board may from time 

to time require. Any such bank which (A) maintains procedures 

reasonably adapted to avoid any inadvertent error and, unintentionally and as a result of such an error, fails to make or publish 

any report required under this paragraph, within the period of time 

specified by the Corporation, or submits or publishes any false or 

misleading report or information, or (B) inadvertently transmits or 

publishes any report which is minimally late, shall be subject to a 

penalty of not more than $2,000 for each day during which such 

failure continues or such false or misleading information is not corrected. Such bank shall have the burden of proving that an error 

was inadvertent and that a report was inadvertently transmitted 

or published late. Any such bank which fails to make or publish 

any report required under this paragraph, within the period of time 

specified by the Corporation, or submits or publishes any false or 

misleading report or information, in a manner not described in the 

2nd preceding sentence shall be subject to a penalty of not more 

than $20,000 for each day during which such failure continues or 

such false or misleading information is not corrected. Notwithstanding the preceding sentence, if any such bank knowingly or 

with reckless disregard for the accuracy of any information or report described in such sentence submits or publishes any false or 

misleading report or information, the Corporation may assess a 

penalty of not more than $1,000,000 or 1 percent of total assets of 

such bank, whichever is less, per day for each day during which 

such failure continues or such false or misleading information is 

not corrected. Any penalty imposed under any of the 4 preceding 

sentences shall be assessed and collected by the Corporation in the 

manner provided in subparagraphs (E), (F), (G), and (I) of section 

8(i)(2) (for penalties imposed under such section) and any such 

assessment (including the determination of the amount of the 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 4 98 

penalty) shall be subject to the provisions of such section. Any such 

bank against which any penalty is assessed under this subsection 

shall be afforded an agency hearing if such bank submits a request 

for such hearing within 20 days after the issuance of the notice of 

assessment. Section 8(h) shall apply to any proceeding under this 

paragraph. 

(2)(A) The Corporation and, with respect to any State depository institution, any appropriate State bank supervisor for such 

institution, shall have access to reports of examination made by, 

and reports of condition made to, the Comptroller of the Currency, 

the Director of the Office of Thrift Supervision, the Federal Housing Finance Board, any Federal home loan bank, or any Federal 

Reserve bank and to all revisions of reports of condition made to 

any of them, and they shall promptly advise the Corporation of any 

revisons or changes in respect to deposit liabilities made or required to be made in any report of condition. The Corporation may 

accept any report made by or to any commission, board, or authority having supervision of a depository institution, and may furnish 

to the Comptroller of the Currency, the Director of the Office of 

Thrift Supervision, the Federal Housing Finance Board, any Federal home loan bank, to any Federal Reserve bank, and to any such 

commission, board, or authority, reports of examinations made on 

behalf of, and reports of condition made to, the Corporation.1 

(B)2 ADDITIONA L REPORTS.—The Board of Directors may 

from time to time require any insured depository institution to 

file such additional reports as the Corporation, after agreement 

with the Comptroller of the Currency, the Board of Governors 

of the Federal Reserve System, and the Director of the Office 

of Thrift Supervision, as appropriate, may deem advisable for 

insurance purposes. 

(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. 

Two dates shall be selected within the semiannual period of January to june inclusive, and the reports on such dates shall be the 

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. 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 

1

 Section 208(1)(D) of the Financial Institutions Improvement, Reform, and Enforcement Act 

of 1989 amended the last sentence of 7(a)(2)(A) by inserting ''or savings associations'' after 

"banks". This amendment could not be executed. 

2

 indentation so in law. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

499 

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. 

(4) in the reports of condition required to be made by paragraph (3) of this subsection, each insured depository institution 

shall report the total amount of the liability of the depository institution for deposits in the main office and in any branch located in 

any State of the United States, the District of Columbia, any Territory of the United States, Puerto Rico, Guam, American Samoa, the 

Trust Territory of the pacific islands, or the virgin islands, according to the definition of the term ''deposit'' in and pursuant to subsection (1) of section 3 of this Act, without any deduction for 

indebtedness of depositors or creditors or any deduction for cash 

items in the process of collection drawn on others than the reporting depository institution: Provided, That the depository institution 

in reporting such deposits may (i) subtract from the deposit balance 

due to any depository institution the deposit balance due from the 

same depository institution (other than trust funds deposited by 

either depository institution) and any cash items in the process of 

collection due from or due to such depository institutions shall be 

included in determining such net balance, except that balances of 

time deposits of any depository institution and any balances standing to the credit of private depository institutions, of depository 

institutions in foreign countries, of foreign branches of other American depository institutions, and of American branches of foreign 

banks shall be reported gross without any such subtraction, and (ii) 

exclude any deposits received in any office of the depository institution for deposit in any other office of the depository institution: And 

provided further, That outstanding drafts (including advices and 

authorizations to charge depository institution's balance in another 

depository institution) drawn in the regular course of business by 

the reporting depository institution on depository institutions need 

not be reported as deposit liabilities. The amount of trust funds 

held in the depository institution's own trust department, which 

the reporting depository institution keeps segregated and apart 

from its general assets and does not use in the conduct of its business, shall not be included in the total deposits in such reports, but 

shall be separately stated in such reports. Deposits which are accumulated for the payment of personal loans and are assigned or 

pledged to assure payment of loans at maturity shall not be included in the total deposits in such reports, but shall be deducted 
Sec. 7 FEDERAL DEPOSIT INSURANCE ACT 5 00 

from the loans for which such deposits are assigned or pledged to 

assure repayment. 

(5) The deposits to be reported on such reports of condition 

shall be segregated between (i) time and savings deposits and (ii) 

demand deposits. For this purpose, the time and savings deposits 

shall consist of time certificates of deposit, time deposits-open account and savings deposits; and demand deposits shall consist of 

all deposits other than time and savings deposits. 

(6)1 LIFELINE ACCOUNT DEPOSITS.—In the reports of condition required to be reported under this subsection, the deposits 

in lifeline accounts (as defined in section 232(a)(3)(C) of the 

Bank Enterprise Act of 1991) shall be reported separately. 

(7) The Board of Directors, after consultation with the Comptroller of the Currency, the Director of the Office of Thrift Supervision, and the Board of Governors of the Federal Reserve System, 

may by regulation define the terms ''cash items'' and ''process of 

collection'', and shall classify deposits as ''time,'' ''savings,'' and ''demand'' deposits, for the purposes of this section. 

(8) in respect of any report required or authorized to be supplied or published pursuant to this subsection or any other provision of law, the Board of Directors or the Comptroller of the Currency, as the case may be, may differentiate between domestic 

banks and foreign banks to such extent as, in their judgment, may 

be reasonably required to avoid hardship and can be done without 

substantial compromise of insurance risk or supervisory and regulatory effectiveness. 

(9)1 DATA COLLECTIONS.—In addition to or in connection 

with any other report required under this subsection, the Corporation shall take such action as may be necessary to ensure 

that— 

(A) each insured depository institution maintains; and 

(B) the Corporation receives on a regular basis from 

such institution, 

information on the total amount of all insured deposits, preferred deposits, and uninsured deposits at the institution. In 

prescribing reporting and other requirements for the collection 

of actual and accurate information pursuant to this paragraph, 

the Corporation shall minimize the regulatory burden imposed 

upon insured depository institutions that are well capitalized 

(as defined in section 38) while taking into account the benefit 

of the information to the Corporation, including the use of the 

information to enable the Corporation to more accurately 

determine the total amount of insured deposits in each insured 

depository institution for purposes of compliance with this Act. 

(10) A Federal banking agency may not, by regulation or 

otherwise, designate, or require an insured institution or an 

affiliate to designate, a corporation as highly leveraged or a 

transaction with a corporation as a highly leveraged transaction solely because such corporation is or has been a debtor 

or bankrupt under title 11, United States Code, if, after confirmation of a plan of reorganization, such corporation would 

not otherwise be highly leveraged. 

1

 Indentation so in law. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

501 

(b) ASSESSMENTS.— 

(1) RISK-BASED ASSESSMENT SYSTEM.— 

( A ) RISK-BASED ASSESSMENT SYSTEM REQUIRED.—Th e 

Board of Directors shall, by regulation, establish a riskbased assessment system for insured depository 

institutions. 

(B) PRIVATE REINSURANCE AUTHORIZED.—I n carrying 

out this paragraph, the Corporation may— 

(i) obtain private reinsurance covering not more 

than 10 percent of any loss the Corporation incurs 

with respect to an insured depository institution; and 

(ii) base that institution's semiannual assessment 

(in whole or in part) on the cost of the reinsurance. 

( C ) RISK-BASED ASSESSMENT SYSTEM DEFINED.—Fo r 

purposes of this paragraph, the term ''risk-based assessment system'' means a system for calculating a depository 

institution's semiannual assessment based on— 

(i) the probability that the deposit insurance fund 

will incur a loss with respect to the institution, taking 

into consideration the risks attributable to— 

(i) different categories and concentrations of 

assets; 

(ii) different categories and concentrations of 

liabilities, both insured and uninsured, contingent 

and noncontingent; and 

(III) any other factors the Corporation determines are relevant to assessing such probability; 

(ii) the likely amount of any such loss; and 

(iii) the revenue needs of the deposit insurance 

fund. 

(D) SEPARATE ASSESSMENT SYSTEMS.—The Board of 

Directors may establish separate risk-based assessment 

systems for large and small members of each deposit 

insurance fund. 

(2) SETTING ASSESSMENTS.— 

(A) ACHIEVIN G AND MAINTAINING DESIGNATED RESERVE 

RATIO.— 

(i) IN GENERAL.—The Board of Directors shall set 

semiannual assessments for insured depository institutions when necessary, and only to the extent 

necessary— 

(i) to maintain the reserve ratio of each deposit insurance fund at the designated reserve 

ratio; or 

(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). 

(ii) FACTORS TO BE CONSIDERED.—In carrying out 

clause (i), the Board of Directors shall consider the deposit insurance fund's— 

(i) expected operating expenses, 

(ii) case resolution expenditures and income, 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 02 

(iii) the effect of assessments on members' 

earnings and capital, and 

(IV) any other factors that the Board of Directors may deem appropriate. 

(iii) LIMITATIO N O N ASSESSMENT.—Excep t as pro -

vided 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— 

(i) to maintain the reserve ratio of the fund at 

the designated reserve ratio; or 

(ii) if the reserve ratio is less than the designated reserve ratio, to increase the reserve ratio 

to the designated reserve ratio. 

(iv ) DESIGNATE D RESERVE RATIO DEFINED.—Th e 

designated reserve ratio of each deposit insurance 

fund for each year shall be— 

(I) 1.25 percent of estimated insured deposits; 

or 

(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. 

(v) EXCEPTIO N TO LIMITATIO N O N 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. 

(B) INDEPENDEN T TREATMEN T OF FUNDS.—Th e Board 

of Directors shall— 

(i) set semiannual assessments for members of 

each deposit insurance fund independently from semiannual assessments for members of any other deposit 

insurance fund; and 

(ii) set the designated reserve ratio of each deposit 

insurance fund independently from the designated 

reserve ratio of any other deposit insurance fund. 

(C) NOTIC E OF ASSESSMENTS.—Th e Corporation shall 

notify each insured depository institution of that institution's semiannual assessment. 

(E)1 MINIMU M ASSESSMENTS.—Th e 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— 

1

 Subparagraph (D) was repealed by section 2703(b) of P.L. 104-208. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

503 

(i) section 7(b) as in effect on July 15, 1991 remained in effect; 

(ii) the assessment rate in effect on July 15, 1991 

remained in effect; and 

(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. 

( F ) TRANSITION RULE FOR SAVINGS ASSOCIATION INSURANCE FUND.—With respect to the Savings Association 

Insurance Fund, during the period beginning on the effective 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— 

(i) subparagraph (A)(i)(II) shall apply as if such 

subparagraph did not include ''as provided in paragraph (3)''; and 

(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). 

( 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. 

( H ) 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 at a 

rate determined in accordance with such Act. 

(3) SPECIAL RULE FOR RECAPITALIZING UNDERCAPITALIZED 

FUNDS.— 

(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— 

(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 

(ii) in accordance with a schedule promulgated by 

the Corporation under subparagraph (B). 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 04 

(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. 

(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. 

(D) APPLICATION TO SAIF MEMBERS.—This paragraph 

shall become applicable to Savings Association Insurance 

Fund members on January 1, 1998. 

(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. 

(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. 

(6) 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 any 

such assessment— 

(A) is necessary— 

(i) 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; 

(ii) to provide sufficient assessment income to 

repay obligations issued to and other amounts borrowed from Bank Insurance Fund members under section 14(d); or 

(iii) for any other purpose the Corporation may 

deem necessary; and 

(B) is allocated between Bank Insurance Fund members and Savings Association Insurance Fund members in 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

505 

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. 

(7) 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 semiannual assessment. 

(B) FOR M OF CERTIFICATION.—The certified statement 

required under subparagraph (A) shall— 

(i) be in such form and set forth such supporting 

information as the Board of Directors shall prescribe; 

and 

(ii) be certified by the president of the depository 

institution or any other officer designated by its board 

of directors or trustees that to the best of his or her 

knowledge and belief, the statement is true, correct 

and complete, and in accordance with this Act and 

regulations issued hereunder. 

(2) PAYMENTS REQUIRED.— 

(A) IN GENERAL.—Each insured depository institution 

shall pay to the Corporation the semiannual assessment 

imposed under subsection (b). 

(B) FOR M OF PAYMENT.—The payments required under 

subparagraph (A) shall be made in such manner and at 

such time or times as the Board of Directors shall prescribe by regulation. 

(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 semiannual period in which a depository institution becomes insured. 

(4) PENALTY FOR FAILURE TO MAKE ACCURATE CERTIFIED 

STATEMENT.— 

(A) FIRST TIER.—An y insured depository institution 

which— 

(i) maintains procedures reasonably adapted to 

avoid any inadvertent error and, unintentionally and 

as a result of such an error, fails to submit the certified statement under paragraph (1) within the period 

of time required under paragraph (1) or submits a 

false or misleading certified statement; or 

(ii) submits the statement at a time which is minimally after the time required in such paragraph, 

shall be subject to a penalty of not more than $2,000 for 

each day during which such failure continues or such false 

and misleading information is not corrected. The institu-
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 506 

tion shall have the burden of proving that an error was 

inadvertent or that a statement was inadvertently submitted late. 

(B) SECOND TIER.—Any insured depository institution 

which fails to submit the certified statement under paragraph (1) within the period of time required under paragraph (1) or submits a false or misleading certified statement in a manner not described in subparagraph (A) shall 

be subject to a penalty of not more than $20,000 for each 

day during which such failure continues or such false and 

misleading information is not corrected. 

(C) THIR D TIER.—Notwithstanding subparagraphs (A) 

and (B), if any insured depository institution knowingly or 

with reckless disregard for the accuracy of any certified 

statement described in paragraph (1) submits a false or 

misleading certified statement under paragraph (1), the 

Corporation may assess a penalty of not more than 

$1,000,000 or not more than 1 percent of the total assets 

of the institution, whichever is less, per day for each day 

during which the failure continues or the false or misleading information in such statement is not corrected. 

(D) ASSESSMENT PROCEDURE.—Any penalty imposed 

under this paragraph shall be assessed and collected by 

the Corporation in the manner provided in subparagraphs 

(E), (F), (G), and (I) of section 8(i)(2) (for penalties imposed 

under such section) and any such assessment (including 

the determination of the amount of the penalty) shall be 

subject to the provisions of such section. 

(E) HEARING.—Any insured depository institution 

against which any penalty is assessed under this paragraph shall be afforded an agency hearing if the institution submits a request for such hearing within 20 days 

after the issuance of the notice of the assessment. Section 

8(h) shall apply to any proceeding under this subparagraph. 

(d) CORPORATION EXEMPT FRO M APPORTIONMENT.—Notwithstanding any other provision of law, amounts received pursuant to 

any assessment under this section and any other amounts received 

by the Corporation shall not be subject to apportionment for the 

purposes of chapter 15 of title 31, United States Code, or under any 

other authority. 

(e) REFUNDS.— 

(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— 

(A) refund the amount of the excess payment to the insured depository institution; or 

(B) credit such excess amount toward the payment of 

subsequent semiannual assessments until such credit is 

exhausted. 

(2) BALANCE I N INSURANCE FUND I N EXCESS OF DESIGNATED 

RESERVE.— 

(A) IN GENERAL.—Subject to subparagraphs (B) and 

(C), if, as of the end of any semiannual assessment period 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

507 

beginning after the date of the enactment of the Deposit 

Insurance Funds Act of 1996, the amount of the actual reserves in— 

(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 

(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. 

(B) REFUN D 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. 

( C) REFUN D 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). 

(f) Any insured depository institution which fails to make any 

report of condition under subsection (a) of this section or to file any 

certified statement required to be filed by it in connection with 

determining the amount of any assessment payable by the depository institution to the Corporation may be compelled to make such 

report or file such statement by mandatory injunction or other 

appropriate remedy in a suit brought for such purpose by the Corporation against the depository institution and any officer or officers thereof in any court of the United States of competent jurisdiction in the District or Territory in which such depository institution 

is located. 

(g) The Corporation, in a suit brought at law or in equity in 

any court of competent jurisdiction, shall be 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. No 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, 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 508 

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,1 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. 

(h) Should any national member bank or any insured national 

nonmember bank fail to make any report of condition under subsection (a) of this section or to file

 2 any certified statement required to be filed by such bank under any provision of this section, 

or fail to pay any assessment required to be paid by such bank 

under any provision of this Act, and should the bank not correct 

such failure within thirty days after written notice has been given 

by the Corporation to an officer of the bank, citing this subsection, 

and stating that the bank has failed to make any report of condition under subsection (a) of this section or to file

 2 or pay as required by law, all the rights, privileges, and franchises of the bank 

granted to it under the National Bank Act, as amended, the Federal Reserve Act, as amended, or this Act, shall be thereby forfeited. Whether or not the penalty provided in this subsection has 

been incurred shall be determined and adjudged in the manner 

provided in the sixth paragraph of section 2 of the Federal Reserve 

Act, as amended. The remedies provided in this subsection and in 

the two preceding subsections shall not be construed as limiting 

any other remedies against any insured depository institution, but 

shall be in addition thereto. 

( i) INSURANC E OF TRUS T 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 $100,000 for each trust estate. 

(2) INTERBAN K DEPOSITS.—Trust funds described in paragraph (1) which are deposited by the fiduciary depository institution in another insured depository institution shall be similarly insured to the fiduciary depository institution according 

to the trust estates represented. 

( 3 ) BAN K DEPOSI T FINANCIA L ASSISTANC E PROGRAM.—Not -

withstanding paragraph (1), funds deposited by an insured 

1Such effective date was Sept. 21, 1950. 

2

 Section 3 of the Act of July 14, 1960 (Public Law 86-671) amended this subsection by "substituting for the words 'to file' in the first sentence of subsection (h) the words 'to make any 

report of condition under subsection (a) of this section or to file'''. The term "to file'' in the first 

sentence appeared twice. The amendment was executed to the second occurence of such term, 

according to the probable intent of Congress. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

509 

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 $100,000 for each 

insured depository institution depositing such funds. 

(4) REGULATIONS.—Th e Board of Directors may prescribe 

such regulations as may be necessary to clarify the insurance 

coverage under this subsection and to prescribe the manner of 

reporting and depositing such trust funds. 

(j)(1) No person, acting directly or indirectly or through or in 

concert with one or more other persons, shall acquire control of any 

insured depository institution through a purchase, assignment, 

transfer, pledge, or other disposition of voting stock of such insured 

depository institution unless the appropriate Federal banking 

agency has been given sixty days' prior written notice of such proposed acquisition and within that time period the agency has not 

issued a notice disapproving the proposed acquisition or, in the discretion of the agency, extending for an additional 30 days

 1 the period during which such a disapproval may issue.The period for disapproval under the preceding sentence may be extended not to exceed 2 additional times for not more than 45 days each time if— 

(A) the agency determines that any acquiring party has 

not furnished all the information required under paragraph (6); 

(B) in the agency's judgment, any material information 

submitted is substantially inaccurate; 

(C) the agency has been unable to complete the investigation of an acquiring party under paragraph (2)(B) because of 

any delay caused by, or the inadequate cooperation of, such acquiring party; or 

(D) the agency determines that additional time is needed 

to investigate and determine that no acquiring party has a 

record of failing to comply with the requirements of subchapter 

II of chapter 53 of title 31, United States Code. 

An acquisition may be made prior to expiration of the disapproval 

period if the agency issues written notice of its intent not to disapprove the action. 

(2)(A) NOTIC E TO STAT E AGENCY.—Upo n receiving any notice 

under this subsection, the appropriate Federal banking agency 

shall forward a copy thereof to the appropriate State depository 

institution supervisory agency if the depository institution the voting shares of which are sought to be acquired is a State depository 

institution, and shall allow thirty days within which the views and 

recommendations of such State depository institution supervisory 

agency may be submitted. The appropriate Federal banking agency 

shall give due consideration to the views and recommendations of 

such State agency in determining whether to disapprove any proposed acquisition. Notwithstanding the provisions of this paragraph, if the appropriate Federal banking agency determines that 

it must act immediately upon any notice of a proposed acquisition 

in order to prevent the probable default of the depository institution involved in the proposed acquisition, such Federal banking 

agency may dispense with the requirements of this paragraph or, 

if a copy of the notice is forwarded to the State depository institu1P.L. 99-570, section 1360(a)(1), 100 Stat. 3207-29, left out "for" in the phrase it deleted. 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 10 

tion supervisory agency, such Federal banking agency may request 

that the views and recommendations of such State depository institution supervisory agency be submitted immediately in any form or 

by any means acceptable to such Federal banking agency. 

(B) INVESTIGATION OF PRINCIPALS REQUIRED.—Upon receiving 

any notice under this subsection, the appropriate Federal banking 

agency shall— 

(i) conduct an investigation of the competence, experience, 

integrity, and financial ability of each person named in a notice 

of a proposed acquisition as a person by whom or for whom 

such acquisition is to be made; and 

(ii) make an independent determination of the accuracy 

and completeness of any information described in paragraph 

(6) with respect to such person. 

(C) REPORT.—The appropriate Federal banking agency shall 

prepare a written report of any investigation under subparagraph 

(B) which shall contain, at a minimum, a summary of the results 

of such investigation. The agency shall retain such written report 

as a record of the agency. 

(D) PUBLIC COMMENT.—Upon receiving notice of a proposed acquisition, the appropriate Federal banking agency shall, unless 

such agency determines that an emergency exists, within a reasonable period of time— 

(i) publish the name of the insured depository institution 

proposed to be acquired and the name of each person identified 

in such notice as a person by whom or for whom such acquisition is to be made; and 

(ii) solicit public comment on such proposed acquisition, 

particularly from persons in the geographic area where the 

bank proposed to be acquired is located, before final consideration of such notice by the agency, 

unless the agency determines in writing that such disclosure or 

solicitation would seriously threaten the safety or soundness of 

such bank. 

(3) Within three days after its decision to disapprove any proposed acquisition, the appropriate Federal banking agency shall notify the acquiring party in writing of the disapproval. Such notice 

shall provide a statement of the basis for the disapproval. 

(4) Within ten days of receipt of such notice of disapproval, the 

acquiring party may request an agency hearing on the proposed acquisition. In such hearing all issues shall be determined on the 

record pursuant to section 554 of title 5, United States Code. The 

length of the hearing shall be determined by the appropriate Federal banking agency. At the conclusion thereof, the appropriate 

Federal banking agency shall by order approve or disapprove the 

proposed acquisition on the basis of the record made at such hearing. 

(5) Any person whose proposed acquisition is disapproved after 

agency hearings under this subsection may obtain review by the 

United States court of appeals for the circuit in which the home office of the bank to be acquired is located, or the United States 

Court of Appeals for the District of Columbia Circuit, by filing a 

notice of appeal in such court within ten days from the date of such 

order, and simultaneously sending a copy of such notice by reg-
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

511 

istered or certified mail to the appropriate Federal banking agency. 

The appropriate Federal banking agency shall promptly certify and 

file in such court the record upon which the disapproval was based. 

The findings of the appropriate Federal banking agency shall be set 

aside if found to be arbitrary or capricious or if found to violate 

procedures established by this subsection. 

(6) Except as otherwise provided by regulation of the appropriate Federal banking agency, a notice filed pursuant to this subsection shall contain the following information: 

(A) The identity, personal history, business background 

and experience of each person by whom or on whose behalf the 

acquisition is to be made, including his material business 

activities and affiliations during the past five years, and a 

description of any material pending legal or administrative 

proceedings in which he is a party and any criminal indictment 

or conviction of such person by a State or Federal court. 

(B) A statement of the assets and liabilities of each person 

by whom or on whose behalf the acquisition is to be made, as 

of the end of the fiscal year for each of five fiscal years immediately preceding the date of the notice, together with related 

statements of income and source and application of funds for 

each of the fiscal years then concluded, all prepared in accordance with generally accepted accounting principles consistently 

applied, and an interim statement of the assets and liabilities 

for each such person, together with related statements of income and source and application of funds, as of a date not 

more than ninety days prior to the date of the filing of the notice. 

(C) The terms and conditions of the proposed acquisition 

and the manner in which the acquisition is to be made. 

(D) The identity, source and amount of the funds or other 

consideration used or to be used in making the acquisition, and 

if any part of these funds or other consideration has been or 

is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the transaction, the names 

of the parties, and any arrangements, agreements, or understandings with such persons. 

(E) Any plans or proposals which any acquiring party making the acquisition may have to liquidate the bank, to sell its 

assets or merge it with any company or to make any other 

major change in its business or corporate structure or management. 

(F) The identification of any person employed, retained, or 

to be compensated by the acquiring party, or by any person on 

his behalf, to make solicitations or recommendations to stockholders for the purpose of assisting in the acquisition, and a 

brief description of the terms of such employment, retainer, or 

arrangement for compensation. 

(G) Copies of all invitations or tenders or advertisements 

making a tender offer to stockholders for purchase of their 

stock to be used in connection with the proposed acquisition. 

(H) Any additional relevant information in such form as 

the appropriate Federal banking agency may require by regu-
Sec. 7 FEDERAL DEPOSIT INSURANCE ACT 5 12 

lation or by specific request in connection with any particular 

notice. 

(7) The appropriate Federal banking agency may disapprove 

any proposed acquisition if— 

(A) the proposed acquisition of control would result in a 

monopoly or would be in furtherance of any combination or 

conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States; 

(B) the effect of the proposed acquisition of control in any 

section of the country may be substantially to lessen competition or to tend to create a monopoly or the proposed acquisition 

of control would in any other manner be in restraint of trade, 

and the anticompetitive effects of the proposed acquisition of 

control are not clearly outweighed in the public interest by the 

probable effect of the transaction in meeting the convenience 

and needs of the community to be served; 

(C) the financial condition of any acquiring person is such 

as might jeopardize the financial stability of the bank or prejudice the interests of the depositors of the bank; 

(D) the competence, experience, or integrity of any acquiring person or of any of the proposed management personnel indicates that it would not be in the interest of the depositors of 

the bank, or in the interest of the public to permit such person 

to control the bank; 

(E) any acquiring person neglects, fails, or refuses to furnish the appropriate Federal banking agency all the information required by the appropriate Federal banking agency; or 

(F) the appropriate Federal banking agency determines 

that the proposed transaction would result in an adverse effect 

on the Bank Insurance Fund or the Savings Association Insurance Fund. 

(8) For the purposes of this subsection, the term— 

(A) ''person'' means an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of 

entity not specifically listed herein; and 

(B) ''control'' means the power, directly or indirectly, to direct the management or policies of an insured depository institution or to vote 25 per centum or more of any class of voting 

securities of an insured depository institution. 

(9) 1 REPORTING OF STOCK LOANS.— 

(A) REPORT REQUIRED.—An y foreign bank, or any affiliate thereof, that has credit outstanding to any person or 

group of persons which is secured, directly or indirectly, by 

shares of an insured depository institution shall file a consolidated report with the appropriate Federal banking 

agency for such insured depository institution if the extensions of credit by the foreign bank or any affiliate thereof, 

in the aggregate, are secured, directly or indirectly, by 25 

percent or more of any class of shares of the same insured 

depository institution. 

1

 Indentation so in law. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

513 

(B) DEFINITIONS.—Fo r purposes of this paragraph, the 

following definitions shall apply: 

(i) FOREIGN BANK.—Th e terms "foreign bank'' and 

''affiliate'' have the same meanings as in section 1 of 

the International Banking Act of 1978. 

(ii) CREDIT OUTSTANDING.—The term "credit outstanding'' includes— 

(I) any loan or extension of credit, 

(ii) the issuance of a guarantee, acceptance, 

or letter of credit, including an endorsement or 

standby letter of credit, and 

(iii) any other type of transaction that extends credit or financing to the person or group of 

persons. 

(iii) GROUP OF PERSONS.—The term ''group of persons'' includes any number of persons that the foreign 

bank or any affiliate thereof reasonably believes— 

(i) are acting together, in concert, or with one 

another to acquire or control shares of the same 

insured depository institution, including an acquisition of shares of the same insured depository 

institution at approximately the same time under 

substantially the same terms; or 

(ii) have made, or propose to make, a joint filing under section 13 of the Securities Exchange 

Act of 1934 regarding ownership of the shares of 

the same insured depository institution. 

( C) INCLUSION OF SHARES HELD BY THE FINANCIAL 

INSTITUTION.—Any shares of the insured depository institution held by the foreign bank or any affiliate thereof as 

principal shall be included in the calculation of the number of shares in which the foreign bank or any affiliate 

thereof has a security interest for purposes of subparagraph (A). 

( D ) REPORT REQUIREMENTS.— 

(i) TIMIN G OF REPORT.—The report required under 

this paragraph shall be a consolidated report on behalf 

of the foreign bank and all affiliates thereof, and shall 

be filed in writing within 30 days of the date on which 

the foreign bank or affiliate thereof first believes that 

the security for any outstanding credit consists of 25 

percent or more of any class of shares of an insured 

depository institution. 

(ii) CONTENT OF REPORT.—The report under this 

paragraph shall indicate the number and percentage 

of shares securing each applicable extension of credit, 

the identity of the borrower, and the number of shares 

held as principal by the foreign bank and any affiliate 

thereof. 

(iii) COPY TO OTHER AGENCIES.—A copy of any report under this paragraph shall be filed with the 

appropriate Federal banking agency for the foreign 

bank or any affiliate thereof (if other than the agency 

receiving the report under this paragraph). 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 14 

(iv) OTHER INFORMATION.—Each appropriate Federal banking agency may require any additional information necessary to carry out the agency's supervisory 

responsibilities. 

( E) EXCEPTIONS.— 

(i) EXCEPTION WHERE INFORMATION PROVIDED BY 

BORROWER.—Notwithstanding subparagraph (A), a foreign bank or any affiliate thereof shall not be required 

to report a transaction under this paragraph if the 

person or group of persons referred to in such subparagraph has disclosed the amount borrowed from 

such foreign bank or any affiliate thereof and the security interest of the foreign bank or any affiliate thereof 

to the appropriate Federal banking agency for the insured depository institution in connection with a notice filed under this subsection, an application filed 

under the Bank Holding Company Act of 1956, section 

10 of the Home Owners' Loan Act, or any other application filed with the appropriate Federal banking 

agency for the insured depository institution as a substitute for a notice under this subsection, such as an 

application for deposit insurance, membership in the 

Federal Reserve System, or a national bank charter. 

(ii) EXCEPTION FOR SHARES OWNED FOR MORE 

THA N 1 YEAR.—Notwithstanding subparagraph (A), a 

foreign bank and any affiliate thereof shall not be required to report a transaction involving— 

(I) a person or group of persons that has been 

the owner or owners of record of the stock for a 

period of 1 year or more; or 

(II) stock issued by a newly chartered bank 

before the bank's opening. 

(10) The reports required by paragraph (9) of this subsection 

shall contain such of the information referred to in paragraph (6) 

of this subsection, and such other relevant information, as the 

appropriate Federal banking agency may require by regulation or 

by specific request in connection with any particular report. 

(11) The Federal banking agency receiving a notice or report 

filed pursuant to paragraph (1) or (9) shall immediately furnish to 

the other Federal banking agencies a copy of such notice or report. 

(12) Whenever such a change in control occurs, each insured 

depository institution shall report promptly to the appropriate Federal banking agency any changes or replacement of its chief executive officer or of any director occurring in the next twelve-month 

period, including in its report a statement of the past and current 

business and professional affiliations of the new chief executive officer or directors. 

(13) The appropriate Federal banking agencies are authorized 

to issue rules and regulations to carry out this subsection. 

(14) Within two years after the effective date of the Change in 

Bank Control Act of 1978, and each year thereafter in each appropriate Federal banking agency's annual report to the Congress, the 

appropriate Federal banking agency shall report to the Congress 
Sec. 7 

FEDERAL DEPOSIT INSURANCE ACT 

515 

the results of the administration of this subsection, and make any 

recommendations as to changes in the law which in the opinion of 

the appropriate Federal banking agency would be desirable. 

(15 ) INVESTIGATIVE AND ENFORCEMENT AUTHORITY.— 

(A) INVESTIGATIONS.—The appropriate Federal banking 

agency may exercise any authority vested in such agency 

under section 8(n) in the course of conducting any investigation 

under paragraph (2)(B) or any other investigation which the 

agency, in its discretion, determines is necessary to determine 

whether any person has filed inaccurate, incomplete, or misleading information under this subsection or otherwise is violating, has violated, or is about to violate any provision of this 

subsection or any regulation prescribed under this subsection. 

(B) ENFORCEMENT.—Whenever it appears to the appropriate Federal banking agency that any person is violating, has 

violated, or is about to violate any provision of this subsection 

or any regulation prescribed under this subsection, the agency 

may, in its discretion, apply to the appropriate district court of 

the United States or the United States court of any territory 

for— 

(i) a temporary or permanent injunction or restraining 

order enjoining such person from violating this subsection 

or any regulation prescribed under this subsection; or 

(ii) such other equitable relief as may be necessary to 

prevent any such violation (including divestiture). 

( C ) JURISDICTION.— 

(i) The district courts of the United States and the 

United States courts in any territory shall have the same 

jurisdiction and power in connection with any exercise of 

any authority by the appropriate Federal banking agency 

under subparagraph (A) as such courts have under section 

8(n). 

(ii) The district courts of the United States and the 

United States courts of any territory shall have jurisdiction and power to issue any injunction or restraining order 

or grant any equitable relief described in subparagraph 

(B). When appropriate, any injunction, order, or other 

equitable relief granted under this paragraph shall be 

granted without requiring the posting of any bond. The 

resignation, termination of employment or participation, 

divestiture of control, or separation of or by an institutionaffiliated party (including a separation caused by the closing of a depository institution) shall not affect the jurisdiction and authority of the appropriate Federal banking 

agency to issue any notice and proceed under this subsection 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 

depository institution (whether such date occurs before, on, 

or after the date of the enactment of this sentence). 

(16) 1 CIVI L MONEY PENALTY.— 

1

 Indentation so in law. 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 516 

(A) FIRST TIER.—Any person who violates any provision of this subsection, or any regulation or order issued 

by the appropriate Federal banking agency under this subsection, shall forfeit and pay a civil penalty of not more 

than $5,000 for each day during which such violation continues. 

(B) SECOND TIER.—Notwithstanding subparagraph (A), 

any person who— 

(i)(i) commits any violation described in any 

clause of subparagraph (A); 

(ii) recklessly engages in an unsafe or unsound 

practice in conducting the affairs of a depository institution; or 

(iii) breaches any fiduciary duty; 

(ii) which violation, practice, or breach— 

(I) is part of a pattern of misconduct; 

(ii) causes or is likely to cause more than a 

minimal loss to such institution; or 

ii) results in pecuniary gain or other benefit to 

such person, 

shall forfeit and pay a civil penalty of not more than 

$25,000 for each day during which such violation, practice, 

or breach continues. 

(C) THIR D TIER.—Notwithstanding subparagraphs (A) 

and (B), any person who— 

(i) knowingly— 

(i) commits any violation described in any 

clause of subparagraph (A); 

(ii) engages in any unsafe or unsound practice 

in conducting the affairs of a depository institution; or 

(iii) breaches any fiduciary duty; and 

(ii) knowingly or recklessly causes a substantial 

loss to such institution or a substantial pecuniary gain 

or other benefit to such person by reason of such violation, practice, or breach, 

shall forfeit and pay a civil penalty in an amount not to 

exceed the applicable maximum amount determined under 

subparagraph (D) for each day during which such violation, practice, or breach continues. 

( D ) MAXIMU M AMOUNTS OF PENALTIES FOR ANY VIOLATIO N DESCRIBED I N SUBPARAGRAPH (C).—The maximum 

daily amount of any civil penalty which may be assessed 

pursuant to subparagraph (C) for any violation, practice, 

or breach described in such subparagraph is— 

(i) in the case of any person other than a depository institution, an amount to not exceed $1,000,000; 

and 

(ii) in the case of a depository institution, an 

amount not to exceed the lesser of— 

(i) $1,000,000; or 

(ii) 1 percent of the total assets of such institution. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

517 

(E) ASSESSMENT; ETC.—An y penalty imposed under 

subparagraph (A), (B), or (C) shall be assessed and collected by the appropriate Federal banking agency in the 

manner provided in subparagraphs (E), (F), (G), and (I) of 

section 8(i)(2) for penalties imposed (under such section) 

and any such assessment shall be subject to the provisions 

of such section. 

(F) HEARING.—The depository institution or other person against whom any penalty is assessed under this paragraph shall be afforded an agency hearing if such institution or other person submits a request for such hearing 

within 20 days after the issuance of the notice of assessment. Section 8(h) shall apply to any proceeding under this 

paragraph. 

(G) DISBURSEMENT.—Al l penalties collected under authority of this paragraph shall be deposited into the Treasury. 

(17) EXCEPTIONS.—This subsection shall not apply with respect to a transaction which is subject to— 

(A) section 3 of the Bank Holding Company Act of 

1956; 

(B) section 18(c) of this Act; or 

(C) section 10 of the Home Owners' Loan Act. 

(18) APPLICABILITY OF CHANGE I N CONTROL PROVISIONS TO 

OTHER INSTITUTIONS.—For purposes of this subsection, the 

term ''insured depository institution'' includes— 

(A) any depository institution holding company; and 

(B) any other company which controls an insured 

depository institution and is not a depository institution 

holding company. 

(k) The appropriate Federal banking agencies are authorized to 

issue rules and regulations, including definitions of terms, to require the reporting and public disclosure of information by a bank 

or any executive officer or prinicipal shareholder thereof concerning 

extensions of credit by the bank to any of its executive officers or 

principal shareholders, or the related interests of such persons. 

(l) DESIGNATION OF FUN D MEMBERSHIP FOR NEWLY INSURED 

DEPOSITORY INSTITUTIONS; DEFINITIONS.—Fo r purposes of this section: 

(1) BANK INSURANCE FUND.—An y institution which— 

(A) becomes an insured depository institution; and 

(B) does not become a Savings Association Insurance 

Fund member pursuant to paragraph (2), 

shall be a Bank Insurance Fund member. 

(2) SAVINGS ASSOCIATION INSURANCE FUND.—An y savings 

association, other than any Federal savings bank chartered 

pursuant to section 5(o) of the Home Owners' Loan Act, which 

becomes an insured depository institution shall be a Savings 

Association Insurance Fund member. 

(3) TRANSITION PROVISION.— 

(A) BANK INSURANCE FUND.—An y depository institution the deposits of which were insured by the Federal 

Deposit Insurance Corporation on the day before the date 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 518 

of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, including— 

(i) any Federal savings bank chartered pursuant 

to section 5(o) of the Home Owners' Loan Act; and 

(ii) any cooperative bank, 

shall be a Bank insurance Fund member as of such date 

of enactment. 

(B) SAVINGS ASSOCIATION INSURANCE FUND.—An y savings association which is an insured depository institution 

by operation of section 4(a)(2) shall be a Savings Association insurance Fund member as of the date of the enactment of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989. 

(4) BANK INSURANCE FUND MEMBER.—Th e term "Bank 

insurance Fund member'' means any depository institution the 

deposits of which are insured by the Bank Insurance Fund. 

(5) SAVINGS ASSOCIATION INSURANCE FUND MEMBER.—Th e 

term "Savings Association Insurance Fund member'' means 

any depository institution the deposits of which are insured by 

the Savings Association Insurance Fund. 

(6) BANK INSURANCE FUND RESERVE RATIO.—The term 

''Bank insurance Fund reserve ratio'' means the ratio of the 

net worth of the Bank insurance Fund to the value of the 

aggregate estimated insured deposits held in all Bank insurance Fund members. 

(7) SAVINGS ASSOCIATION INSURANCE FUND RESERVE 

RATIO.—The term ''Savings Association Insurance Fund reserve 

ratio'' means the ratio of the net worth of the Savings Association insurance Fund to the value of the aggregate estimated 

insured deposits held in all Savings Association Insurance 

Fund members. 

( m ) SECONDARY RESERVE OFFSETS AGAINST PREMIUMS.— 

(1) OFFSETS I N CALENDAR YEARS BEGINNING BEFORE 1993.— 

Subject to the maximum amount limitation contained in paragraph (2) and notwithstanding any other provision of law, any 

insured savings association may offset such association's pro 

rata share of the statutorily prescribed amount against any 

premium assessed against such association under subsection 

(b) of this section for any calendar year beginning before 1993. 

(2) ANNUA L MAXIMU M AMOUNT LIMITATION.—The amount of 

any offset allowed for any savings association under paragraph 

(1) for any calendar year beginning before 1993 shall not exceed an amount which is equal to 20 percent of such association's pro rata share of the statutorily prescribed amount (as 

computed for such calendar year). 

(3) OFFSETS I N CALENDAR YEARS BEGINNING AFTER 1992.— 

Notwithstanding any other provision of law, a savings association may offset such association's pro rata share of the statutorily prescribed amount against any premium assessed 

against such association under subsection (b) for any calendar 

year beginning after 1992. 

(4) TRANSFERABILITY.—No right, title, or interest of any insured depository institution in or with respect to its pro rata 

share of the secondary reserve shall be assignable or transfer-
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

519 

able whether by operation of law or otherwise, except to the extent that the Corporation may provide for transfer of such pro 

rata share in cases of merger or consolidation, transfer of bulk 

assets or assumption of liabilities, and similar transactions, as 

defined by the Corporation for purposes of this paragraph. 

(5) PRO RATA DISTRIBUTION ON TERMINATION OF INSURED 

STATUS.—If — 

(A) the status of any savings association as an insured 

depository institution is terminated pursuant to any provision of section 8 or the insurance of accounts of any such 

institution is otherwise terminated; 

(B) a receiver or other legal custodian is appointed for 

the purpose of liquidation or winding up the affairs of any 

savings association; or 

(C) the Corporation makes a determination that for 

the purposes of this subsection any savings association has 

otherwise gone into liquidation, 

the Corporation shall pay in cash to such institution its pro 

rata share of the secondary reserve, in accordance with such 

terms and conditions as the Corporation may prescribe, or, at 

the option of the Corporation, the Corporation may apply the 

whole or any part of the amount which would otherwise be 

paid in cash toward the payment of any indebtedness or obligation, whether matured or not, of such institution to the Corporation, existing or arising before such payment in cash. Such 

payment or such application need not be made to the extent 

that the provisions of the exception in paragraph (4) are applicable. 

(6) STATUTORILY PRESCRIBED AMOUN T DEFINED.—Fo r purposes of this subsection, the term ''statutorily prescribed 

amount'' means, with respect to any calendar year which ends 

after the date of the enactment of the Financial Institutions 

Reform, Recovery, and Enforcement Act of 1989— 

(A) $823,705,000, minus 

(B) the sum of— 

(i) the aggregate amount of offsets made before 

such date of enactment by all insured institutions 

under section 404(e)(2) of the National Housing Act 

(as in effect before such date of enactment); and 

(ii) the aggregate amount of offsets made by all 

savings associations under this subsection before the 

beginning of such calendar year. 

(7) SAVINGS ASSOCIATION'S PRO RATA AMOUNT.—Fo r purposes of this subsection, any savings association's pro rata 

share of the statutorily prescribed amount is the percentage 

which is equal to such association's share of the secondary reserve as determined under section 404(e) of the National Housing Act on the day before the date on which the Federal Savings and Loan Insurance Corporation ceased to recognize the 

secondary reserve (as such Act was in effect on the day before 

such date). 

(8) YEA R OF ENACTMENT RULE.—Wit h respect to the calendar year in which the Financial Institutions Reform, Recov-
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 20 

ery, and Enforcement Act of 1989 is enacted, the Corporation 

shall make such adjustments as may be necessary— 

(A) in the computation of the statutorily prescribed 

amount which shall be applicable for the remainder of 

such calendar year after taking into account the aggregate 

amount of offsets by all insured institutions under section 

404(e)(2) of the National Housing Act (as in effect before 

the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989) after the 

beginning of such calendar year and before such date of 

enactment; and 

(B) in the computation of the maximum amount of any 

savings association's offset for such calendar year under 

paragraph (1) after taking into account— 

(i) the amount of any offset by such savings association under section 404(e)(2) of the National Housing 

Act (as in effect before such date of enactment) after 

the beginning of such calendar year and before such 

date of enactment; and 

(ii) the change of such association's premium year 

from the 1-year period applicable under section 404(b) 

of the National Housing Act (as in effect before such 

date of enactment) to a calendar year basis. 

(n) COLLECTIONS ON BEHALF OF THE DIRECTOR OF THE OFFICE 

OF THRIFT SUPERVISION.—When requested by the Director of the 

Office of Thrift Supervision, the Corporation shall collect on behalf 

of the Director assessments on savings associations levied by the 

Director under section 9 of the Home Owners' Loan Act. The Corporation shall be reimbursed for its actual costs for the collection 

of such assessments. Any such assessments by the Director shall 

be in addition to any amounts assessed by the Corporation, the Financing Corporation, and the Resolution Funding Corporation. 

SEC. 8. [12 U.S.C. 1818] (a) TERMINATION OF INSURANCE.— 

(1) VOLUNTARY TERMINATION.—An y insured depository 

institution which is not— 

(A) a national member bank; 

(B) a State member bank; 

(C) a Federal branch; 

(D) a Federal savings association; or 

(E) an insured branch which is required to be insured 

under subsection (a) or (b) of section 6 of the international 

Banking Act of 1978, 

may terminate such depository institution's status as an insured depository institution if such insured institution provides 

written notice to the Corporation of the institution's intent to 

terminate such status not less than 90 days before the effective 

date of such termination. 

(2) INVOLUNTARY TERMINATION.— 

(A) NOTICE TO PRIMARY REGULATOR.—If the Board of 

Directors determines that— 

(i) an insured depository institution or the directors or trustees of an insured depository institution 

have engaged or are engaging in unsafe or unsound 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

521 

practices in conducting the business of the depository 

institution; 

(ii) an insured depository institution is in an unsafe or unsound condition to continue operations as an 

insured institution; or 

(iii) an insured depository institution or the directors or trustees of the insured institution have violated 

any applicable law, regulation, order, condition imposed in writing by the Corporation in connection with 

the approval of any application or other request by the 

insured depository institution, or written agreement 

entered into between the insured depository institution and the Corporation, 

the Board of Directors shall notify the appropriate Federal 

banking agency with respect to such institution (if other 

than the Corporation) or the State banking supervisor of 

such institution (if the Corporation is the appropriate Federal banking agency) of the Board's determination and the 

facts and circumstances on which such determination is 

based for the purpose of securing the correction of such 

practice, condition, or violation. Such notice shall be given 

to the appropriate Federal banking agency not less than 

30 days before the notice required by subparagraph (B), 

except that this period for notice to the appropriate Federal banking agency may be reduced or eliminated with 

the agreement of such agency. 

(B) NOTICE OF INTENTION TO TERMINATE INSURANCE.— 

If, after giving the notice required under subparagraph (A) 

with respect to an insured depository institution, the 

Board of Directors determines that any unsafe or unsound 

practice or condition or any violation specified in such notice requires the termination of the insured status of the 

insured depository institution, the Board shall— 

(i) serve written notice to the insured depository 

institution of the Board's intention to terminate the 

insured status of the institution; 

(ii) provide the insured depository institution with 

a statement of the charges on the basis of which the 

determination to terminate such institution's insured 

status was made (or a copy of the notice under subparagraph (A)); and 

(iii) notify the insured depository institution of the 

date (not less than 30 days after notice under this subparagraph) and place for a hearing before the Board of 

Directors (or any person designated by the Board) 

with respect to the termination of the institution's insured status. 

(3) HEARING; TERMINATION.—If, on the basis of the evidence presented at a hearing before the Board of Directors (or 

any person designated by the Board for such purpose), in 

which all issues shall be determined on the record pursuant to 

section 554 of title 5, United States Code, and the written findings of the Board of Directors (or such person) with respect to 

such evidence (which shall be conclusive), the Board of Direc-
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 522 

tors finds that any unsafe or unsound practice or condition or 

any violation specified in the notice to an insured depository 

institution under paragraph (2)(B) or subsection (w) has been 

established, the Board of Directors may issue an order terminating the insured status of such depository institution effective as of a date subsequent to such finding. 

(4) APPEARANCE; CONSENT TO TERMINATION.—Unles s the 

depository institution shall appear at the hearing by a duly 

authorized representative, it shall be deemed to have consented to the termination of its status as an insured depository 

institution and termination of such status thereupon may be 

ordered. 

(5) JUDICIAL REVIEW.—An y insured depository institution 

whose insured status has been terminated by order of the 

Board of Directors under this subsection shall have the right 

of judicial review of such order only to the same extent as provided for the review of orders under subsection (h) of this section. 

(6) PUBLICATION OF NOTICE OF TERMINATION.—The Corporation may publish notice of such termination and the 

depository institution shall give notice of such termination to 

each of its depositors at his last address of record on the books 

of the depository institution, in such manner and at such time 

as the Board of Directors may find to be necessary and may 

order for the protection of depositors. 

(7) TEMPORARY INSURANCE OF DEPOSITS INSURED AS OF 

TERMINATION.—After the termination of the insured status of 

any depository institution under the provisions of this subsection, the insured deposits of each depositor in the depository 

institution on the date of such termination, less all subsequent 

withdrawals from any deposits of such depositor, shall continue for a period of at least 6 months or up to 2 years, within 

the discretion of the Board of Directors, to be insured, and the 

depository institution shall continue to pay to the Corporation 

assessments as in the case of an insured depository institution 

during such period. No additions to any such deposits and no 

new deposits in such depository institution made after the date 

of such termination shall be insured by the Corporation, and 

the depository institution shall not advertise or hold itself out 

as having insured deposits unless in the same connection it 

shall also state with equal prominence that such additions to 

deposits and new deposits made after such date are not so insured. Such depository institution shall, in all other respects, 

be subject to the duties and obligations of an insured depository institution for the period referred to in the 1st sentence 

from the date of such termination, and in the event that such 

depository institution shall be closed on account of inability to 

meet the demands of its depositors within such period, the Corporation shall have the same powers and rights with respect 

to such depository institution as in case of an insured depository institution. 

(8) TEMPORARY SUSPENSION OF INSURANCE.— 

(A) I N GENERAL.—If the Board of Directors initiates a 

termination proceeding under paragraph (2), and the 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

523 

Board of Directors, after consultation with the appropriate 

Federal banking agency, finds that an insured depository 

institution (other than a savings association to which subparagraph (B) applies) has no tangible capital under the 

capital guidelines or regulations of the appropriate Federal 

banking agency, the Corporation may issue a temporary 

order suspending deposit insurance on all deposits received 

by the institution. 

( B) SPECIAL RULE FOR CERTAIN SAVINGS INSTITUTIONS.— 

(i) CERTAI N GOODWILL INCLUDED I N TANGIBLE CAPITAL.—In determining the tangible capital of a savings 

association for purposes of this paragraph, the Board 

of Directors shall include goodwill to the extent it is 

considered a component of capital under section 5(t) of 

the Home Owners' Loan Act. Any savings association 

which would be subject to a suspension order under 

subparagraph (A) but for the operation of this subparagraph, shall be considered by the Corporation to 

be a ''special supervisory association''. 

(ii) SUSPENSION ORDER.—Th e Corporation may 

issue a temporary order suspending deposit insurance 

on all deposits received by a special supervisory association whenever the Board of Directors determines 

that— 

(i) the capital of such association, as computed utilizing applicable accounting standards, 

has suffered a material decline; 

(ii) that such association (or its directors or 

officers) is engaging in an unsafe or unsound practice in conducting the business of the association; 

(iii) that such association is in an unsafe or 

unsound condition to continue operating as an insured association; or 

(iv) that such association (or its directors or 

officers) has violated any applicable law, rule, regulation, or order, or any condition imposed in 

writing by a Federal banking agency, or any written agreement including a capital improvement 

plan entered into with any Federal banking 

agency, or that the association has failed to enter 

into a capital improvement plan which is acceptable to the Corporation within the time period set 

forth in section 5(t) of the Home Owners' Loan 

Act. 

Nothing in this paragraph limits the right of the Corporation or the Director of the Office of Thrift Supervision to enforce a contractual provision which authorizes the Corporation or the Director of the Office of 

Thrift Supervision, as a successor to the Federal Savings and Loan Insurance Corporation or the Federal 

Home Loan Bank Board, to require a savings association to write down or amortize goodwill at a faster 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 24 

rate than otherwise required under this Act or under 

applicable accounting standards. 

(C) EFFECTIVE PERIOD OF TEMPORARY ORDER.—Any 

order issued under subparagraph (A) shall become effective not earlier than 10 days from the date of service upon 

the institution and, unless set aside, limited, or suspended 

by a court in proceedings authorized hereunder, such temporary order shall remain effective and enforceable until 

an order of the Board under paragraph (3) becomes final 

or until the Corporation dismisses the proceedings under 

paragraph (3). 

(D) JUDICIAL REVIEW.—Before the close of the 10-day 

period beginning on the date any temporary order has 

been served upon an insured depository institution under 

subparagraph (A), such institution may apply to the 

United States District Court for the District of Columbia, 

or the United States district court for the judicial district 

in which the home office of the institution is located, for 

an injunction setting aside, limiting, or suspending the 

enforcement, operation, or effectiveness of such order, and 

such court shall have jurisdiction to issue such injunction. 

( E) CONTINUATION OF INSURANCE FOR PRIOR DEPOSITS.—The insured deposits of each depositor in such 

depository institution on the effective date of the order 

issued under this paragraph, minus all subsequent withdrawals from any deposits of such depositor, shall continue 

to be insured, subject to the administrative proceedings as 

provided in this Act. 

(F) PUBLICATION OF ORDER.—The depository institution shall give notice of such order to each of its depositors 

in such manner and at such times as the Board of Directors may find to be necessary and may order for the protection of depositors. 

(G) NOTICE BY CORPORATION.—If the Corporation 

determines that the depository institution has not substantially complied with the notice to depositors required by 

the Board of Directors, the Corporation may provide such 

notice in such manner as the Board of Directors may find 

to be necessary and appropriate. 

(H) LACK OF NOTICE.—Notwithstanding subparagraph 

(A), any deposit made after the effective date of a suspension order issued under this paragraph shall remain 

insured to the extent that the depositor establishes that— 

(i) such deposit consists of additions made by 

automatic deposit the depositor was unable to prevent; 

or 

(ii) such depositor did not have actual knowledge 

of the suspension of insurance. 

(9) FINA L DECISIONS TO TERMINATE INSURANCE.—Any decision by the Board of Directors to— 

(A) issue a temporary order terminating deposit insurance; or 

(B) issue a final order terminating deposit insurance 

(other than under subsection (p) or (q)); 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

525 

shall be made by the Board of Directors and may not be 

delegated. 

(10 ) Low - TO MODERATE-INCOME HOUSING LENDER.—I n 

making any determination regarding the termination of insurance of a solvent savings association, the Corporation may consider the extent of the association's low- to moderate-income 

housing loans. 

(b)(1) If, in the opinion of the appropriate Federal banking 

agency, any insured depository institution, depository institution 

which has insured deposits, or any institution-affiliated party is engaging or has engaged, or the agency has reasonable cause to believe that the depository institution or any institution-affiliated 

party is about to engage, in an unsafe or unsound practice in conducting the business of such depository institution, or is violating 

or has violated, or the agency has reasonable cause to believe that 

the depository institution or any institution-affiliated party is 

about to violate, a law, rule, or regulation, or any condition imposed in writing by the agency in connection with the granting of 

any application or other request by the depository institution or 

any written agreement entered into with the agency, the agency 

may issue and serve upon the depository institution or such party 

a notice of charges in respect thereof. The notice shall contain a 

statement of the facts constituting the alleged violation or violations or the unsafe or unsound practice or practices, and shall fix 

a time and place at which a hearing will be held to determine 

whether an order to cease and desist therefrom should issue 

against the depository institution or the institution-affiliated party. 

Such hearing shall be fixed for a date not earlier than thirty days 

nor later than sixty days after service of such notice unless an earlier or a later date is set by the agency at the request of any party 

so served. Unless the party or parties so served shall appear at the 

hearing personally or by a duly authorized representative, they 

shall be deemed to have consented to the issuance of the cease-anddesist order. In the event of such consent, or if upon the record 

made at any such hearing, the agency shall find that any violation 

or unsafe or unsound practice specified in the notice of charges has 

been established, the agency may issue and serve upon the depository institution or the institution-affiliated party an order to cease 

and desist from any such violation or practice. Such order may, by 

provisions which may be mandatory or otherwise, require the 

depository institution or its institution-affiliated parties to cease 

and desist from the same, and, further, to take affirmative action 

to correct the conditions resulting from any such violation or practice. 

(2) A cease-and-desist order shall become effective at the expiration of thirty days after the service of such order upon the 

depository institution or other person concerned (except in the case 

of a cease-and-desist order issued upon consent, which shall become effective at the time specified therein), and shall remain effective and enforceable as provided therein, except to such extent as 

it is stayed, modified, terminated, or set aside by action of the 

agency or a reviewing court. 

(3) This subsection and subsections (c) through (s) and subsection (u) of this section shall apply to any bank holding company, 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 526 

and to any ''subsidiary'' (other than a bank) of a bank holding company, as those terms are defined in the Bank Holding Company Act 

of 1956, and to any organization organized and operated under section 25(a)1

 of the Federal Reserve Act or operating under section 

25 of the Federal Reserve Act, in the same manner as they apply 

to a State member insured bank. Nothing in this subsection or in 

subsection (c) of this section shall authorize any Federal banking 

agency, other than the Board of Governors of the Federal Reserve 

System, to issue a notice of charges or cease-and-desist order 

against a bank holding company or any subsidiary thereof (other 

than a bank or subsidiary of that bank.) 

(4) This subsection and subsections (c) through (s) and subsection (u) of this section shall apply to any foreign bank or company to which subsection (a) of section 8 of the international Banking Act of 1978 applies and to any subsidiary (other than a bank) 

of any such foreign bank or company in the same manner as they 

apply to a bank holding company and any subsidiary thereof (other 

than a bank) under paragraph (3) of this subsection. For the purposes of this paragraph, the term ''subsidiary'' shall have the meaning assigned to it in section 2 of the Bank Holding Company Act 

of 1956. 

(5) This section shall apply, in the same manner as it applies 

to any insured depository institution for which the appropriate 

Federal banking agency is the Comptroller of the Currency, to any 

national banking association chartered by the Comptroller of the 

Currency, including an uninsured association. 

(6) 2 AFFIRMATIV E ACTIO N TO CORREC T CONDITION S RESULT -

I N G FRO M VIOLATION S OR PRACTICES.—The authority to issue 

an order under this subsection and subsection (c) which requires an insured depository institution or any institutionaffiliated party to take affirmative action to correct or remedy 

any conditions resulting from any violation or practice with respect to which such order is issued includes the authority to 

require such depository institution or such party to— 

(A) make restitution or provide reimbursement, 

indemnification, or guarantee against loss if— 

(i) such depository institution or such party was 

unjustly enriched in connection with such violation or 

practice; or 

(ii) the violation or practice involved a reckless 

disregard for the law or any applicable regulations or 

prior order of the appropriate Federal banking agency; 

(B) restrict the growth of the institution; 

(C) dispose of any loan or asset involved; 

(D) rescind agreements or contracts; and 

(E) employ qualified officers or employees (who may be 

subject to approval by the appropriate Federal banking 

agency at the direction of such agency); and 

(F) take such other action as the banking agency 

determines to be appropriate. 

1

 Section 25(a) of the Federal Reserve Act was redesignated as section 25A by section 142(e)(2) 

of the Federal Deposit Insurance Corporation Improvement Act of 1991. 

2

 Indentation so in law. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

527 

(7)1 AUTHORIT Y TO LIMI T ACTIVITIES.—The authority to 

issue an order under this subsection or subsection (c) includes 

the authority to place limitations on the activities or functions 

of an insured depository institution or any institution-affiliated 

party. 

( 8 ) UNSATISFACTOR Y ASSET QUALITY, MANAGEMENT , EARNINGS, OR LIQUIDITY AS UNSAFE OR UNSOUN D PRACTICE.—I f a n 

insured depository institution receives, in its most recent report of examination, a less-than-satisfactory rating for asset 

quality, management, earnings, or liquidity, the appropriate 

Federal banking agency may (if the deficiency is not corrected) 

deem the institution to be engaging in an unsafe or unsound 

practice for purposes of this subsection. 

( 9 ) EXPANSIO N OF AUTHORITY TO SAVINGS AN D LOAN AFFILIATES AN D ENTITIES.—Subsections (a) through (s) and subsection 

(u) shall apply to any savings and loan holding company and 

to any subsidiary (other than a bank or subsidiary of that 

bank) of a savings and loan holding company,,

 2 whether 

wholly or partly owned, in the same manner as such subsections apply to a savings association. 

(10) STANDARD FOR CERTAI N ORDERS.—No authority under 

this subsection or subsection (c) to prohibit any institutionaffiliated party from withdrawing, transferring, removing, dissipating, or disposing of any funds, assets, or other property 

may be exercised unless the appropriate Federal banking 

agency meets the standards of Rule 65 of the Federal Rules of 

Civil Procedure, without regard to the requirement of such rule 

that the applicant show that the injury, loss, or damage is 

irreparable and immediate. 

(c)(1) Whenever the appropriate Federal banking agency shall 

determine that the violation or threatened violation or the unsafe 

or unsound practice or practices, specified in the notice of charges 

served upon the depository institution or any institution-affiliated 

party pursuant to paragraph (1) of subsection (b) of this section, or 

the continuation thereof, is likely to cause insolvency or significant 

dissipation of assets or earnings of the depository institution, or is 

likely to weaken the condition of the depository institution or otherwise prejudice the interests of its depositors prior to the completion of the proceedings conducted pursuant to paragraph (1) of subsection (b) of this section, the agency may issue a temporary order 

requiring the depository institution or such party to cease and desist from any such violation or practice and to take affirmative action to prevent or remedy such insolvency, dissipation, condition, or 

prejudice pending completion of such proceedings. Such order may 

include any requirement authorized under subsection (b)(6). Such 

order shall become effective upon service upon the depository institution or such party participating in the conduct of the affairs of 

such depository institution and, unless set aside, limited, or suspended by a court in proceedings authorized by paragraph (2) of 

this subsection, shall remain effective and enforceable pending the 

completion of the administrative proceedings pursuant to such no1

 indentation so in law. 

2

The amendment made by p.L. 105-164, section 2(a)(2) (105 stat. 35) did not strike out the 

extra comma. 
Sec. 7 FEDERAL DEPOSIT INSURANCE ACT 528 

tice and until such time as the agency shall dismiss the charges 

specified in such notice, or if a cease-and-desist order is issued 

against the depository institution or such party, until the effective 

date of such order. 

(2) Within ten days after the depository institution concerned 

or any institution-affiliated party has been served with a temporary cease-and-desist order, the depository institution or such 

party may apply to the United States district court for the judicial 

district in which the home office of the depository institution is located, or the United States District Court for the District of Columbia, for an injunction setting aside, limiting, or suspending the 

enforcement, operation, or effectiveness of such order pending the 

completion of the administrative proceedings pursuant to the notice 

of charges served upon the depository institution or such party 

under paragraph (1) of subsection (b) of this section, and such court 

shall have jurisdiction to issue such injunction. 

(3) 1 INCOMPLETE OR INACCURATE RECORDS.— 

(A) TEMPORARY ORDER.—If a notice of charges served 

under subsection (b)(1) specifies, on the basis of particular 

facts and circumstances, that an insured depository institution's books and records are so incomplete or inaccurate 

that the appropriate Federal banking agency is unable, 

through the normal supervisory process, to determine the 

financial condition of that depository institution or the details or purpose of any transaction or transactions that 

may have a material effect on the financial condition of 

that depository institution, the agency may issue a temporary order requiring— 

(i) the cessation of any activity or practice which 

gave rise, whether in whole or in part, to the incomplete or inaccurate state of the books or records; or 

(ii) affirmative action to restore such books or 

records to a complete and accurate state, until the 

completion of the proceedings under subsection (b)(1). 

(B) EFFECTIVE PERIOD.—An y temporary order issued 

under subparagraph (A)— 

(i) shall become effective upon service; and 

(ii) unless set aside, limited, or suspended by a 

court in proceedings under paragraph (2), shall remain 

in effect and enforceable until the earlier of— 

(i) the completion of the proceeding initiated 

under subsection (b)(1) in connection with the notice of charges; or 

(II) the date the appropriate Federal banking 

agency determines, by examination or otherwise, 

that the insured depository institution's books and 

records are accurate and reflect the financial condition of the depository institution. 

(d) in the case of violation or threatened violation of, or failure 

to obey, a temporary cease-and-desist order issued pursuant to 

paragraph (1) of subsection (c) of the section, the appropriate Federal banking agency may apply to the United States district court, 

1

 Indentation so in law. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

529 

or the United States court of any territory, within the jurisdiction 

of which the home office of the depository institution is located, for 

an injunction to enforce such order, and, if the court shall determine that there has been such violation or threatened violation or 

failure to obey, it shall be the duty of the court to issue such 

injunction. 

(e) REMOVA L AND PROHIBITION AUTHORITY. — 

(1) AUTHORITY TO ISSUE ORDER.—Whenever the appropriate Federal banking agency determines that— 

(A) any institution-affiliated party has, directly or 

indirectly— 

(i) violated— 

(I) any law or regulation; 

(II) any cease-and-desist order which has become final; 

(III) any condition imposed in writing by the 

appropriate Federal banking agency in connection 

with the grant of any application or other request 

by such depository institution; or 

(IV) any written agreement between such 

depository institution and such agency; 

(ii) engaged or participated in any unsafe or unsound practice in connection with any insured depository institution or business institution; or 

(iii) committed or engaged in any act, omission, or 

practice which constitutes a breach of such party's 

fiduciary duty; 

(B) by reason of the violation, practice, or breach described in any clause of subparagraph (A)— 

(i) such insured depository institution or business 

institution has suffered or will probably suffer financial loss or other damage; 

(ii) the interests of the insured depository institution's depositors have been or could be prejudiced; or 

(iii) such party has received financial gain or other 

benefit by reason of such violation, practice, or breach; 

and 

(C) such violation, practice, or breach— 

(i) involves personal dishonesty on the part of 

such party; or 

(ii) demonstrates willful or continuing disregard 

by such party for the safety or soundness of such insured depository institution or business institution, 

the agency may serve upon such party a written notice of the 

agency's intention to remove such party from office or to prohibit any further participation by such party, in any manner, 

in the conduct of the affairs of any insured depository institution. 

(2) SPECIFIC VIOLATIONS.— 

(A) IN GENERAL.—Whenever the appropriate Federal 

banking agency determines that— 

(i) an institution-affiliated party has committed a 

violation of any provision of subchapter II of chapter 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 30 

53 of title 31, United States Code, and such violation 

was not inadvertent or unintentional; 

(ii) an officer or director of an insured depository 

institution has knowledge that an institution-affiliated 

party of the insured depository institution has violated 

any such provision or any provision of law referred to 

in subsection (g)(1)(A)(ii); or 

(iii) an officer or director of an insured depository 

institution has committed any violation of the Depository Institution Management Interlocks Act, 

the agency may serve upon such party, officer, or director 

a written notice of the agency's intention to remove such 

party from office. 

(B) FACTORS TO BE CONSIDERED.—In determining 

whether an officer or director should be removed as a result of the application of subparagraph (A)(ii), the agency 

shall consider whether the officer or director took appropriate action to stop, or to prevent the recurrence of, a violation described in such subparagraph. 

(3) SUSPENSION ORDER.— 

( A ) SUSPENSION OR PROHIBITION AUTHORIZED.—If th e 

appropriate Federal banking agency serves written notice 

under paragraph (1) or (2) to any institution-affiliated 

party of such agency's intention to issue an order under 

such paragraph, the appropriate Federal banking agency 

may suspend such party from office or prohibit such party 

from further participation in any manner in the conduct of 

the affairs of the depository institution, if the agency— 

(i) determines that such action is necessary for the 

protection of the depository institution or the interests 

of the depository institution's depositors; and 

(ii) serves such party with written notice of the 

suspension order. 

(B) EFFECTIVE PERIOD.—An y suspension order issued 

under subparagraph (A)— 

(i) shall become effective upon service; and 

(ii) unless a court issues a stay of such order 

under subsection (f), shall remain in effect and 

enforceable until— 

(i) the date the appropriate Federal banking 

agency dismisses the charges contained in the notice served under paragraph (1) or (2) with respect 

to such party; or 

(ii) the effective date of an order issued by the 

agency to such party under paragraph (1) or (2). 

(C) COPY OF ORDER.—If an appropriate Federal banking agency issues a suspension order under subparagraph 

(A) to any institution-affiliated party, the agency shall 

serve a copy of such order on any insured depository institution with which such party is associated at the time such 

order is issued. 
Sec. 7 

FEDERAL DEPOSIT INSURANCE ACT 

531 

(4)1 A notice of intention to remove an institution-affiliated 

party from office or to prohibit such party from participating in the 

conduct of the affairs of an insured depository institution, shall 

contain a statement of the facts constituting grounds therefor, and 

shall fix a time and place at which a hearing will be held thereon. 

Such hearing shall be fixed for a date not earlier than thirty days 

nor later than sixty days after the date of service of such notice, 

unless an earlier or a later date is set by the agency at the request 

of (A) such party, and for good cause shown, or (B) the Attorney 

General of the United States. Unless such party shall appear at the 

hearing in person or by a duly authorized representative, such 

party shall be deemed to have consented to the issuance of an 

order of such removal or prohibition. in the event of such consent, 

or if upon the record made at any such hearing the agency shall 

find that any of the grounds specified in such notice have been 

established, the agency may issue such orders of suspension or removal from office, or prohibition from participation in the conduct 

of the affairs of the depository institution, as it may deem appropriate. In any action brought under this section by the Comptroller 

of the Currency in respect to any such party with respect to a national banking association or a District depository institution, the 

findings and conclusions of the Administrative Law Judge shall be 

certified to the Board of Governors of the Federal Reserve System 

for the determination of whether any order shall issue. Any such 

order shall become effective at the expiration of thirty days after 

service upon such depository institution and such party (except in 

the case of an order issued upon consent, which shall become effective at the time specified therein). Such order shall remain effective 

and enforceable except to such extent as it is stayed, modified, terminated, or set aside by action of the agency or a reviewing court. 

(5)1 For the purpose of enforcing any law, rule, regulation, or 

cease-and-desist order in connection with an interlocking relationship, the term ''officer'' within the term ''institution-affiliated party'' 

as used in this subsection means an employee or officer with management functions, and the term ''director'' within the term ''institution-affiliated party'' as used in this subsection includes an advisory or honorary director, a trustee of a depository institution 

under the control of trustees, or any person who has a representative or nominee serving in any such capacity. 

(6) PROHIBITION OF CERTAIN SPECIFIC ACTIVITIES.—Any 

person subject to an order issued under this subsection shall 

not— 

(A) participate in any manner in the conduct of the affairs of any institution or agency specified in paragraph 

(7)(A); 

(B) solicit, procure, transfer, attempt to transfer, vote, 

or attempt to vote any proxy, consent, or authorization 

with respect to any voting rights in any institution described in subparagraph (A); 

(C) violate any voting agreement previously approved 

by the appropriate Federal banking agency; or 

1

 Indentation so in law. 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 32 

(D) vote for a director, or serve or act as an institution-affiliated party. 

(7) INDUSTRYWIDE PROHIBITION.— 

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

(B), any person who, pursuant to an order issued under 

this subsection or subsection (g), has been removed or suspended from office in an insured depository institution or 

prohibited from participating in the conduct of the affairs 

of an insured depository institution may not, while such 

order is in effect, continue or commence to hold any office 

in, or participate in any manner in the conduct of the affairs of— 

(i) any insured depository institution; 

(ii) any institution treated as an insured bank 

under subsection (b)(3) or (b)(4), or as a savings association under subsection (b)(9); 

(iii) any insured credit union under the Federal 

Credit Union Act; 

(iv) any institution chartered under the Farm 

Credit Act of 1971; 

(v) any appropriate Federal depository institution 

regulatory agency; 

(vi) the Federal Housing Finance Board and any 

Federal home loan bank; and 

(vii) the Resolution Trust Corporation. 

( B) EXCEPTION IF AGENCY PROVIDES WRITTE N CONSENT.—If, on or after the date an order is issued under 

this subsection which removes or suspends from office any 

institution-affiliated party or prohibits such party from 

participating in the conduct of the affairs of an insured 

depository institution, such party receives the written consent of— 

(i) the agency that issued such order; and 

(ii) the appropriate Federal financial institutions 

regulatory agency of the institution described in any 

clause of subparagraph (A) with respect to which such 

party proposes to become an institution-affiliated 

party, 

subparagraph (A) shall, to the extent of such consent, 

cease to apply to such party with respect to the institution 

described in each written consent. Any agency that grants 

such a written consent shall report such action to the Corporation and publicly disclose such consent. 

( C ) VIOLATIO N OF PARAGRAPH TREATED AS VIOLATION 

OF ORDER.—Any violation of subparagraph (A) by any person who is subject to an order described in such subparagraph shall be treated as a violation of the order. 

( D ) APPROPRIATE FEDERAL FINANCIAL INSTITUTIONS 

REGULATORY AGENCY DEFINED.—Fo r purposes of this paragraph and subsection (j), the term "appropriate Federal 

financial institutions regulatory agency'' means— 

(i) the appropriate Federal banking agency, in the 

case of an insured depository institution; 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

533 

(ii) the Farm Credit Administration, in the case of 

an institution chartered under the Farm Credit Act of 

1971; 

(iii) the National Credit Union Administration 

Board, in the case of an insured credit union (as defined in section 101(7) of the Federal Credit Union 

Act); 

(iv) the Secretary of the Treasury, in the case of 

the Federal Housing Finance Board and any Federal 

home loan bank; and 

(v) the Oversight Board,1 in the case of the Resolution Trust Corporation. 

(E) CONSULTATION BETWEEN AGENCIES.—The agencies 

referred to in clauses (i) and (ii) of subparagraph (B) shall 

consult with each other before providing any written consent described in subparagraph (B). 

(F) APPLICABILITY.—This paragraph shall only apply 

to a person who is an individual, unless the appropriate 

Federal banking agency specifically finds that it should 

apply to a corporation, firm, or other business enterprise. 

(f) Within ten days after any institution-affiliated party has 

been suspended from office and/or prohibited from participation in 

the conduct of the affairs of an insured depository institution under 

subsection (e)(3) of this section, such party may apply to the United 

States district court for the judicial district in which the home office of the depository institution is located, or the United States 

District Court for the District of Columbia, for a stay of such suspension and/or prohibition pending the completion of the administrative proceedings pursuant to the notice served upon such party 

under subsection (e)(1) or (e)(2) of this section, and such court shall 

have jurisdiction to stay such suspension and/or prohibition. 

(g)2 

( 1 ) SUSPENSIO N OR PROHIBITION. — 

(A) IN GENERAL.—Whenever any institution-affiliated 

party is charged in any information, indictment, or complaint, with the commission of or participation in— 

(i) a crime involving dishonesty or breach of trust 

which is punishable by imprisonment for a term exceeding one year under State or Federal law, or 

(ii) a criminal violation of section 1956, 1957, or 

1960 of title 18, United States Code, or section 5322 

or 5324 of title 31, United States Code, 

the appropriate Federal banking agency may, if continued 

service or participation by such party may pose a threat to 

the interests of the depository institution's depositors or 

may threaten to impair public confidence in the depository 

institution, by written notice served upon such party, sus1

 So in law. The Oversight Board was redesignated as the Thrift Depositor Protection Oversight Board by the Resolution Trust Corporation Refinancing, Restructuring, and improvement 

Act of 1991 (see section 302(a) of such Act, 105 Stat. 1767) and subsequently abolished under 

section 14 of the Homeowners Protection Act of 1998 (12 U.S.C. 1441a note). The Board's authority and duties were transferred to the Secretary of the Treasury. The Resolution Trust Corporation has been abolished (see section 21A(m) of the Federal Home Loan Bank Act). 

2

 So in law. See section 1504(a)(2) of P.L. 102-550 which struck out paragraph (1) and inserted the above paragraph (1). 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 34 

pend such party from office or prohibit such party from 

further participation in any manner in the conduct of the 

affairs of the depository institution. 

(B) PROVISIONS APPLICABLE TO NOTICE.— 

(i) COPY.—A copy of any notice under subparagraph (A) shall also be served upon the depository 

institution. 

(ii) EFFECTIVE PERIOD.—A suspension or prohibition under subparagraph (A) shall remain in effect 

until the information, indictment, or complaint referred to in such subparagraph is finally disposed of or 

until terminated by the agency. 

( C) REMOVAL OR PROHIBITION.— 

(i) I N GENERAL.—If a judgment of conviction or an 

agreement to enter a pretrial diversion or other similar program is entered against an institution-affiliated 

party in connection with a crime described in subparagraph (A)(i), at such time as such judgment is not subject to further appellate review, the appropriate Federal banking agency may, if continued service or participation by such party may pose a threat to the interests of the depository institution's depositors or 

may threaten to impair public confidence in the 

depository institution, issue and serve upon such party 

an order removing such party from office or prohibiting such party from further participation in any 

manner in the conduct of the affairs of the depository 

institution without the prior written consent of the 

appropriate agency. 

(ii) REQUIRED FOR CERTAIN OFFENSES.—In the case 

of a judgment of conviction or agreement against an 

institution-affiliated party in connection with a violation described in subparagraph (A)(ii), the appropriate 

Federal banking agency shall issue and serve upon 

such party an order removing such party from office or 

prohibiting such party from further participation in 

any manner in the conduct of the affairs of the depository institution without the prior written consent of 

the appropriate agency. 

( D ) PROVISIONS APPLICABLE TO ORDER.— 

(i) COPY.—A copy of any order under subparagraph (C) shall also be served upon the depository 

institution, whereupon the institution-affiliated party 

who is subject to the order (if a director or an officer) 

shall cease to be a director or officer of such depository 

institution. 

(ii) EFFECT OF ACQUITTAL.—A finding of not guilty 

or other disposition of the charge shall not preclude 

the agency from instituting proceedings after such 

finding or disposition to remove such party from office 

or to prohibit further participation in depository institution affairs, pursuant to paragraph (1), (2), or (3) of 

subsection (e) of this section. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

535 

(iii) EFFECTIVE PERIOD.—Any notice of suspension 

or order of removal issued under this paragraph shall 

remain effective and outstanding until the completion 

of any hearing or appeal authorized under paragraph 

(3) unless terminated by the agency. 

(2) if at any time, because of the suspension of one or more 

directors pursuant to this section, there shall be on the board of 

directors of a national bank less than a quorum of directors not so 

suspended, all powers and functions vested in or exercisable by 

such board shall vest in and be exercisable by the director or directors on the board not so suspended, until such time as there shall 

be a quorum of the board of directors. in the event all of the directors of a national bank are suspended pursuant to this section, the 

Comptroller of the Currency shall appoint persons to serve temporarily as directors in their place and stead pending the termination 

of such suspensions, or until such time as those who have been suspended, cease to be directors of the bank and their respective successors take office. 

(3) Within thirty days from service of any notice of suspension 

or order of removal issued pursuant to paragraph (1) of this subsection, the institution-affiliated party concerned may request in 

writing an opportunity to appear before the agency to show that 

the continued service to or participation in the conduct of the affairs of the depository institution by such party does not, or is not 

likely to, pose a threat to the interests of the bank's depositors or 

threaten to impair public confidence in the depository institution. 

Upon receipt of any such request, the appropriate Federal banking 

agency shall fix a time (not more than thirty days after receipt of 

such request, unless extended at the request of such party) and 

place at which such party may appear, personally or through counsel, before one or more members of the agency or designated employees of the agency to submit written materials (or, at the discretion of the agency, oral testimony) and oral argument. Within sixty 

days of such hearing, the agency shall notify such party whether 

the suspension or prohibition from participation in any manner in 

the conduct of the affairs of the depository institution will be continued, terminated, or otherwise modified, or whether the order removing such party from office or prohibiting such party from further participation in any manner in the conduct of the affairs of the 

depository institution will be rescinded or otherwise modified. Such 

notification shall contain a statement of the basis for the agency's 

decision, if adverse to such party. The Federal banking agencies 

are authorized to prescribe such rules as may be necessary to effectuate the purposes of this subsection. 

(h)(1) Any hearing provided for in this section (other than the 

hearing provided for in subsection (g)(3) of this section) shall be 

held in the Federal judicial district or in the territory in which the 

home office of the depository institution is located unless the party 

afforded the hearing consents to another place, and shall be conducted in accordance with the provisions of chapter 5 of title 5 of 

the United States Code. After such hearing, and within ninety days 

after the appropriate Federal banking agency or Board of Governors of the Federal Reserve System has notified the parties that 

the case has been submitted to it for final decision, it shall render 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 536 

its decision (which shall include findings of fact upon which its 

decision is predicated) and shall issue and serve upon each party 

to the proceeding an order or orders consistent with the provisions 

of this section. Judicial review of any such order shall be exclusively as provided in this subsection (h). Unless a petition for review is timely filed in a court of appeals of the United States, as 

hereinafter provided in paragraph (2) of this subsection, and thereafter until the record in the proceeding has been filed as so provided, the issuing agency may at any time, upon such notice and 

in such manner as it shall deem proper, modify, terminate, or set 

aside any such order. Upon such filing of the record, the agency 

may modify, terminate, or set aside any such order with permission 

of the court. 

(2) Any party to any proceeding under paragraph (1) may obtain a review of any order served pursuant to paragraph (1) of this 

subsection (other than an order issued with the consent of the 

depository institution or the institution-affiliated party concerned, 

or an order issued under paragraph (1) of subsection (g) of this section) by the filing in the court of appeals of the United States for 

the circuit in which the home office of the depository institution is 

located, or in the United States Court of Appeals for the District 

of Columbia Circuit, within thirty days after the date of service of 

such order, a written petition praying that the order of the agency 

be modified, terminated, or set aside. A copy of such petition shall 

be forthwith transmitted by the clerk of the court to the agency, 

and thereupon the agency shall file in the court the record in the 

proceeding, as provided in section 2112 of title 28 of the United 

States Code. Upon the filing of such petition, such court shall have 

jurisdiction, which upon the filing of the record shall except as provided in the last sentence of said paragraph (1) be exclusive, to affirm, modify, terminate, or set aside, in whole or in part, the order 

of the agency. Review of such proceedings shall be had as provided 

in chapter 7 of title 5 of the United States Code. The judgment and 

decree of the court shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari, as provided 

in section 1254 of title 28 of the United States Code. 

(3) The commencement of proceedings for judicial review under 

paragraph (2) of this subsection shall not, unless specifically ordered by the court, operate as a stay of any order issued by the 

agency. 

(i)(1) The appropriate Federal banking agency may in its discretion apply to the United States district court, or the United 

States court of any territory, within the jurisdiction of which the 

home office of the depository institution is located, for the enforcement of any effective and outstanding notice or order issued under 

this section or under section 38 or 39, and such courts shall have 

jurisdiction and power to order and require compliance herewith; 

but except as otherwise provided in this section or under section 

38 or 39 no court shall have jurisdiction to affect by injunction or 

otherwise the issuance or enforcement of any notice or order under 

any such section, or to review, modify, suspend, terminate, or set 

aside any such notice or order. 
Sec. 7 

FEDERAL DEPOSIT INSURANCE ACT 

537 

(2) 1 CIVI L MONEY PENALTY.— 

(A) FIRST TIER.—Any insured depository institution 

which, and any institution-affiliated party who— 

(i) violates any law or regulation; 

(ii) violates any final order or temporary order 

issued pursuant to subsection (b), (c), (e), (g), or (s) or 

any final order under section 38 or 39; 

(iii) violates any condition imposed in writing by 

the appropriate Federal banking agency in connection 

with the grant of any application or other request by 

such depository institution; or 

(iv) violates any written agreement between such 

depository institution and such agency, 

shall forfeit and pay a civil penalty of not more than 

$5,000 for each day during which such violation continues. 

(B) SECOND TIER.—Notwithstanding subparagraph (A), 

any insured depository institution which, and any institution-affiliated party who— 

(i)(i) commits any violation described in any 

clause of subparagraph (A); 

(ii) recklessly engages in an unsafe or unsound 

practice in conducting the affairs of such insured 

depository institution; or 

(iii) breaches any fiduciary duty; 

(ii) which violation, practice, or breach— 

(I) is part of a pattern of misconduct; 

(ii) causes or is likely to cause more than a 

minimal loss to such depository institution; or 

(iii) results in pecuniary gain or other benefit 

to such party, 

shall forfeit and pay a civil penalty of not more than 

$25,000 for each day during which such violation, practice, 

or breach continues. 

(C) THIR D TIER.—Notwithstanding subparagraphs (A) 

and (B), any insured depository institution which, and any 

institution-affiliated party who— 

(i) knowingly— 

(i) commits any violation described in any 

clause of subparagraph (A); 

(ii) engages in any unsafe or unsound practice 

in conducting the affairs of such depository institution; or 

(iii) breaches any fiduciary duty; and 

(ii) knowingly or recklessly causes a substantial 

loss to such depository institution or a substantial 

pecuniary gain or other benefit to such party by reason of such violation, practice, or breach, 

shall forfeit and pay a civil penalty in an amount not to 

exceed the applicable maximum amount determined under 

subparagraph (D) for each day during which such violation, practice, or breach continues. 

1

 Indentation so in law. 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 538 

( D ) MAXIMU M AMOUNTS OF PENALTIES FOR ANY VIOLATION DESCRIBED I N SUBPARAGRAPH (C).—Th e maximum 

daily amount of any civil penalty which may be assessed 

pursuant to subparagraph (C) for any violation, practice, 

or breach described in such subparagraph is— 

(i) in the case of any person other than an insured 

depository institution, an amount to not exceed 

$1,000,000; and 

(ii) in the case of any insured depository institution, an amount not to exceed the lesser of— 

(i) $1,000,000; or 

(ii) 1 percent of the total assets of such institution. 

( E) ASSESSMENT.— 

(i) WRITTE N NOTICE.—An y penalty imposed under 

subparagraph (A), (B), or (C) may be assessed and collected by the appropriate Federal banking agency by 

written notice. 

(ii) FINALITY OF ASSESSMENT.—If, with respect to 

any assessment under clause (i), a hearing is not requested pursuant to subparagraph (H) within the period of time allowed under such subparagraph, the 

assessment shall constitute a final and unappealable 

order. 

( F ) AUTHORITY TO MODIFY OR REMIT PENALTY.—Any 

appropriate Federal banking agency may compromise, 

modify, or remit any penalty which such agency may assess or had already assessed under subparagraph (A), (B), 

or (C). 

(G) MITIGATING FACTORS.—In determining the amount 

of any penalty imposed under subparagraph (A), (B), or 

(C), the appropriate agency shall take into account the 

appropriateness of the penalty with respect to— 

(i) the size of financial resources and good faith of 

the insured depository institution or other person 

charged; 

(ii) the gravity of the violation; 

(iii) the history of previous violations; and 

(iv) such other matters as justice may require. 

(H) HEARING.—Th e insured depository institution or 

other person against whom any penalty is assessed under 

this paragraph shall be afforded an agency hearing if such 

institution or person submits a request for such hearing 

within 20 days after the issuance of the notice of assessment. 

( I) COLLECTION.— 

(i) REFERRAL.—If any insured depository institution or other person fails to pay an assessment after 

any penalty assessed under this paragraph has become final, the agency that imposed the penalty shall 

recover the amount assessed by action in the appropriate United States district court. 

(ii) APPROPRIATENESS OF PENALTY NOT REVIEWABLE.—I n any civil action under clause (i), the validity 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

539 

and appropriateness of the penalty shall not be subject 

to review. 

(J) DISBURSEMENT.—Al l penalties collected under authority of this paragraph shall be deposited into the 

Treasury. 

(K) REGULATIONS.—Each appropriate Federal banking 

agency shall prescribe regulations establishing such procedures as may be necessary to carry out this paragraph. 

(3) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM 

SERVICE.—The resignation, termination of employment or participation, or separation of an institution-affiliated party (including a separation caused by the closing of an insured 

depository institution) shall not affect the jurisdiction and authority of the appropriate Federal banking agency 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 depository institution (whether such date 

occurs before, on, or after the date of the enactment of this 

paragraph). 

(4) PREJUDGMENT ATTACHMENT.— 

(A) I N GENERAL.—In any action brought by an appropriate Federal banking agency (excluding the Corporation 

when acting in a manner described in section 11(d)(18)) 

pursuant to this section, or in actions brought in aid of, or 

to enforce an order in, any administrative or other civil action for money damages, restitution, or civil money penalties brought by such agency, the court may, upon application of the agency, issue a restraining order that— 

(i) prohibits any person subject to the proceeding 

from withdrawing, transferring, removing, dissipating, 

or disposing of any funds, assets or other property; 

and 

(ii) appoints a temporary receiver to administer 

the restraining order. 

(B) STANDARD.— 

(i) SHOWING.—Rule 65 of the Federal Rules of 

Civil Procedure shall apply with respect to any proceeding under subparagraph (A) without regard to the 

requirement of such rule that the applicant show that 

the injury, loss, or damage is irreparable and immediate. 

(ii) STATE PROCEEDING.—If, in the case of any proceeding in a State court, the court determines that 

rules of civil procedure available under the laws of 

such State provide substantially similar protections to 

a party's right to due process as Rule 65 (as modified 

with respect to such proceeding by clause (i)), the relief sought under subparagraph (A) may be requested 

under the laws of such State. 

(j) CRIMINAL PENALTY.—Whoever, being subject to an order in 

effect under subsection (e) or (g), without the prior written approval of the appropriate Federal financial institutions regulatory 

agency, knowingly participates, directly or indirectly, in any man-
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 40 

ner (including by engaging in an activity specifically prohibited in 

such an order or in subsection (e)(6)) in the conduct of the affairs 

of— 

(1) any insured depository institution; 

(2) any institution treated as an insured bank under subsection (b)(3) or (b)(4), or as a savings association under subsection (b)(9); 

(3) any insured credit union (as defined in section 101(7) 

of the Federal Credit Union Act); 

(4) any institution chartered under the Farm Credit Act of 

1971;or 

(5) the Resolution Trust Corporation, 

shall be fined not more than $1,000,000, imprisoned for not more 

than 5 years, or both. 

(k)1 

(l) Any service required or authorized to be made by the appropriate Federal banking agency under this section may be made by 

registered mail, or in such other manner reasonably calculated to 

give actual notice as the agency may by regulation or otherwise 

provide. Copies of any notice or order served by the agency upon 

any State depository institution or any institution-affiliated party, 

pursuant to the provisions of this section, shall also be sent to the 

appropriate State supervisory authority. 

(m) in connection with any proceeding under subsection (b), 

(c)(1), or (e) of this section involving an insured State bank or any 

institution-affiliated party, the appropriate Federal banking agency 

shall provide the appropriate State supervisory authority with notice of the agency's intent to institute such a proceeding and the 

grounds therefor. Unless within such time as the Federal banking 

agency deems appropriate in the light of the circumstances of the 

case (which time must be specified in the notice prescribed in the 

preceding sentence) satisfactory corrective action is effectuated by 

action of the State supervisory authority, the agency may proceed 

as provided in this section. No bank or other party who is the subject of any notice or order issued by the agency under this section 

shall have standing to raise the requirements of this subsection as 

ground for attacking the validity of any such notice or order. 

(n) in the course of or in connection with any proceeding under 

this section, or in connection with any claim for insured deposits 

or any examination or investigation under section 10(c), the agency 

conducting the proceeding, examination, or investigation or considering the claim for insured deposits, or any member or designated 

representative thereof, including any person designated to conduct 

any hearing under this section, shall have the power to administer 

oaths and affirmations, to take or cause to be taken depositions, 

and to issue, revoke, quash, or modify subpenas and subpenas 

duces tecum; and such agency is empowered to make rules and regulations with respect to any such proceedings, claims, examinations, or investigations. The attendance of witnesses and the production of documents provided for in this subsection may be required from any place in any State or in any territory or other 

1

 So in law. Section 920(c) of the Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989, 103 Stat. 488, amended section 8(k) by striking out all that follows ''(k)''. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

541 

place subject to the jurisdiction of the United States at any designated place where such proceeding is being conducted. Any such 

agency or any party to proceedings under this section 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 enforcement of any subpena or subpena duces tecum 

issued pursuant to this subsection, and such courts shall have 

jurisdiction and power to order and require compliance therewith. 

Witnesses subpenaed under this subsection shall be paid the same 

fees and mileage that are paid witnesses in the district courts of 

the United States. Any court having jurisdiction of any proceeding 

instituted under this section by an insured depository institution or 

a director or officer thereof, may allow to any such party such reasonable expenses and attorneys' fees as it deems just and proper; 

and such expenses and fees shall be paid by the depository institution or from its assets. Any person who willfully shall fail or refuse 

to attend and testify or to answer any lawful inquiry or to produce 

books, papers, correspondence, memoranda, contracts, agreements, 

or other records, if in such person's power so to do, in obedience 

to the subpoena of the appropriate Federal banking agency, shall 

be guilty of a misdemeanor and, upon conviction, shall be subject 

to a fine of not more than $1,000 or to imprisonment for a term 

of not more than one year or both. 

(o) Whenever the insured status of a State member bank shall 

be terminated by action of the Board of Directors, the Board of 

Governors of the Federal Reserve System shall terminate its membership in the Federal Reserve System in accordance with the provisions of section 9 of the Federal Reserve Act, and whenever the 

insured status of a national member bank shall be so terminated 

the Comptroller of the Currency shall appoint a receiver for the 

bank, which shall be the Corporation. Except as provided in subsection (c) or (d) of section 4, whenever a member bank shall cease 

to be a member of the Federal Reserve System, its status as an insured depository institution shall, without notice or other action by 

the Board of Directors, terminate on the date the bank shall cease 

to be a member of the Federal Reserve System, with like effect as 

if its insured status had been terminated on said date by the Board 

of Directors after proceedings under subsection (a) of this section. 

Whenever the insured status of an insured Federal savings bank 

shall be terminated by action of the Board of Directors, the Director of the Office of Thrift Supervision shall appoint a receiver for 

the bank, which shall be the Corporation. 

(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 semiannual assessment period following 

such notice. A finding by the Board of Directors that a depository 

institution is not engaged in the business of receiving deposits, 

other than such trust funds, shall be conclusive. The Board of 

Directors shall prescribe the notice to be given by the depository 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 542 

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 semiannual period in which the 

assumption takes effect. 

(r)(1) Except as otherwise specifically provided in this section, 

the provisions of this section shall be applied to foreign banks in 

accordance with this subsection. 

(2) An act or practice outside the United States on the part of 

a foreign bank or any officer, director, employee, or agent thereof 

may not constitute the basis for any action by any officer or agency 

of the United States under this section, unless— 

(A) such officer or agency alleges a belief that such act or 

practice has been, is, or is likely to be a cause of or carried on 

in connection with or in furtherance of an act or practice 

within any one or more States which, in and of itself, would 

constitute an appropriate basis for action by a Federal officer 

or agency under this section; or 

(B) the alleged act or practice is one which, if proven, 

would, in the judgment of the Board of Directors, adversely affect the insurance risk assumed by the Corporation. 

(3) in any case in which any action or proceeding is brought 

pursuant to an allegation under paragraph (2) of this subsection for 

the suspension or removal of any officer, director, or other person 

associated with a foreign bank, and such person fails to appear 

promptly as a party to such action or proceeding and to comply 

with any effective order or judgment therein, any failure by the foreign bank to secure his removal from any office he holds in such 

bank and from any further participation in its affairs shall, in and 

of itself, constitute grounds for termination of the insurance of the 

deposits in any branch of the bank. 

(4) Where the venue of any judicial or administrative proceeding under this section is to be determined by reference to the 

location of the home office of a bank, the venue of such a proceeding with respect to a foreign bank having one or more branches 

or agencies in not more than one judicial district or other relevant 

jurisdiction shall be within such jurisdiction. Where such a bank 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

543 

has branches or agencies in more than one such jurisdiction, the 

venue shall be in the jurisdiction within which the branch or 

branches or agency or agencies involved in the proceeding are located, and if there is more than one such jurisdiction, the venue 

shall be proper in any such jurisdiction in which the proceeding is 

brought or to which it may appropriately be transferred. 

(5) Any service required or authorized to be made on a foreign 

bank may be made on any branch or agency located within any 

State, but if such service is in connection with an action or proceeding involving one or more branches or one or more agencies located in any State, service shall be made on at least one branch 

or agency so involved. 

(s) COMPLIANCE WIT H MONETARY TRANSACTION RECORDKEEPING AND REPORT REQUIREMENTS.— 

(1) COMPLIANCE PROCEDURES REQUIRED.—Each appropriate Federal banking agency shall prescribe regulations requiring insured depository institutions to establish and maintain procedures reasonably designed to assure and monitor the 

compliance of such depository institutions with the requirements of subchapter II of chapter 53 of title 31, United States 

Code. 

(2) EXAMINATIONS OF DEPOSITORY INSTITUTION TO INCLUDE 

REVIEW OF COMPLIANCE PROCEDURES.— 

(A) IN GENERAL.—Each examination of an insured 

depository institution by the appropriate Federal banking 

agency shall include a review of the procedures required to 

be established and maintained under paragraph (1). 

(B) EXA M REPORT REQUIREMENT.—The report of examination shall describe any problem with the procedures 

maintained by the insured depository institution. 

(3) ORDER TO COMPLY WIT H REQUIREMENTS.—If the appropriate Federal banking agency determines that an insured 

depository institution— 

(A) has failed to establish and maintain the procedures described in paragraph (1); or 

(B) has failed to correct any problem with the procedures maintained by such depository institution which was 

previously reported to the depository institution by such 

agency, 

the agency shall issue an order in the manner prescribed in 

subsection (b) or (c) requiring such depository institution to 

cease and desist from its violation of this subsection or regulations prescribed under this subsection. 

(t) AUTHORITY OF FDIC T O TAKE ENFORCEMENT ACTION 

AGAINST INSURED DEPOSITORY INSTITUTIONS AND INSTITUTIONAFFILIATED PARTIES.— 

(1) RECOMMENDING ACTION BY APPROPRIATE FEDERAL 

BANKING AGENCY.—The Corporation, based on an examination 

of an insured depository institution by the Corporation or by 

the appropriate Federal banking agency or on other information, may recommend in writing to the appropriate Federal 

banking agency that the agency take any enforcement action 

authorized under section 7(j), this section, or section 18(j) with 

respect to any insured depository institution or any institution-
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 44 

affiliated party. The recommendation shall be accompanied by 

a written explanation of the concerns giving rise to the 

recommendation. 

(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) the insured depository institution is in an unsafe 

or unsound condition; 

(B) the institution or institution-affiliated party is engaging in unsafe or unsound practices, and the recommended enforcement action will prevent the institution 

or institution-affiliated party from continuing such practices; or 

(C) the conduct or threatened conduct (including any 

acts or omissions) poses a risk to the deposit insurance 

fund, or may prejudice the interests of the institution's 

depositors. 

(3) EFFECT OF EXIGENT CIRCUMSTANCES.— 

(A) AUTHORITY TO ACT.—The Corporation may, upon a 

vote of the Board of Directors, and after notice to the 

appropriate Federal banking agency, exercise its authority 

under paragraph (2) in exigent circumstances without regard to the time period set forth in paragraph (2). 

( B) AGREEMENT ON EXIGENT CIRCUMSTANCES.—The 

Corporation shall, by agreement with the appropriate Federal banking agency, set forth those exigent circumstances 

in which the Corporation may act under subparagraph (A). 

(4) CORPORATION'S POWERS; INSTITUTION'S DUTIES.—For 

purposes of this subsection— 

(A) the Corporation shall have the same powers with 

respect to any insured depository institution and its affiliates as the appropriate Federal banking agency has with 

respect to the institution and its affiliates; and 

(B) the institution and its affiliates shall have the 

same duties and obligations with respect to the Corporation as the institution and its affiliates have with respect 

to the appropriate Federal banking agency. 

(5) REQUESTS FOR FORMAL ACTIONS AND INVESTIGATIONS.— 

(A) SUBMISSION OF REQUESTS.—A regional office of an 

appropriate Federal banking agency (including a Federal 

Reserve bank) that requests a formal investigation of or 

civil enforcement action against an insured depository 

institution or institution-affiliated party shall submit the 

request concurrently to the chief officer of the appropriate 

Federal banking agency and to the Corporation. 

(B) AGENCIES REQUIRED TO REPORT ON REQUESTS.— 

Each appropriate Federal banking agency shall report 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

545 

semiannually to the Corporation on the status or disposition of all requests under subparagraph (A), including the 

reasons for any decision by the agency to approve or deny 

such requests. 

(u) PUBLIC DISCLOSURES OF FINAL ORDERS AND AGREEMENTS.— 

(1) IN GENERAL.—The appropriate Federal banking agency 

shall publish and make available to the public on a monthly 

basis— 

(A) any written agreement or other written statement 

for which a violation may be enforced by the appropriate 

Federal banking agency, unless the appropriate Federal 

banking agency, in its discretion, determines that publication would be contrary to the public interest; 

(B) any final order issued with respect to any administrative enforcement proceeding initiated by such agency 

under this section or any other law; and 

(C) any modification to or termination of any order or 

agreement made public pursuant to this paragraph. 

(2) HEARINGS.—All hearings on the record with respect to 

any notice of charges issued by a Federal banking agency shall 

be open to the public, unless the agency, in its discretion, 

determines that holding an open hearing would be contrary to 

the public interest. 

(3) TRANSCRIPT OF HEARING.—A transcript that includes 

all testimony and other documentary evidence shall be prepared for all hearings commenced pursuant to subsection (i). A 

transcript of public hearings shall be made available to the 

public pursuant to section 552 of title 5, United States Code. 

(4) DELAY OF PUBLICATION UNDER EXCEPTIONAL CIRCUMSTANCES.—If the appropriate Federal banking agency 

makes a determination in writing that the publication of a 

final order pursuant to paragraph (1)(B) would seriously 

threaten the safety and soundness of an insured depository 

institution, the agency may delay the publication of the document for a reasonable time. 

(5) DOCUMENTS FILED UNDER SEAL I N PUBLIC ENFORCEMEN T HEARINGS.—The appropriate Federal banking agency 

may file any document or part of a document under seal in any 

administrative enforcement hearing commenced by the agency 

if disclosure of the document would be contrary to the public 

interest. A written report shall be made part of any determination to withhold any part of a document from the transcript of 

the hearing required by paragraph (2). 

(6) RETENTION OF DOCUMENTS.—Each Federal banking 

agency shall keep and maintain a record, for a period of at 

least 6 years, of all documents described in paragraph (1) and 

all informal enforcement agreements and other supervisory actions and supporting documents issued with respect to or in 

connection with any administrative enforcement proceeding 

initiated by such agency under this section or any other laws. 

(7) DISCLOSURES TO CONGRESS.—No provision of this subsection may be construed to authorize the withholding, or to 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 546 

prohibit the disclosure, of any information to the Congress or 

any committee or subcommittee of the Congress. 

(v) FOREIGN INVESTIGATIONS.— 

(1) REQUESTING ASSISTANCE FROM FOREIGN BANKING 

AUTHORITIES.—In conducting any investigation, examination, 

or enforcement action under this Act, the appropriate Federal 

banking agency may— 

(A) request the assistance of any foreign banking authority; and 

(B) maintain an office outside the United States. 

(2) PROVIDING ASSISTANCE TO FOREIGN BANKING AUTHORITIES.— 

(A) IN GENERAL.—Any appropriate Federal banking 

agency may, at the request of any foreign banking authority, assist such authority if such authority states that the 

requesting authority is conducting an investigation to 

determine whether any person has violated, is violating, or 

is about to violate any law or regulation relating to banking matters or currency transactions administered or enforced by the requesting authority. 

(B) INVESTIGATION BY FEDERAL BANKING AGENCY.— 

Any appropriate Federal banking agency may, in such 

agency's discretion, investigate and collect information and 

evidence pertinent to a request for assistance under subparagraph (A). Any such investigation shall comply with 

the laws of the United States and the policies and procedures of the appropriate Federal banking agency. 

(C) FACTORS TO CONSIDER.—In deciding whether to 

provide assistance under this paragraph, the appropriate 

Federal banking agency shall consider— 

(i) whether the requesting authority has agreed to 

provide reciprocal assistance with respect to banking 

matters within the jurisdiction of any appropriate Federal banking agency; and 

(ii) whether compliance with the request would 

prejudice the public interest of the United States. 

( D ) TREATMENT OF FOREIGN BANKING AUTHORITY.—For 

purposes of any Federal law or appropriate Federal banking agency regulation relating to the collection or transfer 

of information by any appropriate Federal banking agency, 

the foreign banking authority shall be treated as another 

appropriate Federal banking agency. 

(3) RULE OF CONSTRUCTION.—Paragraphs (1) and (2) shall 

not be construed to limit the authority of an appropriate Federal banking agency or any other Federal agency to provide or 

receive assistance or information to or from any foreign authority with respect to any matter. 

( w) TERMINATION OF INSURANCE FOR MONE Y LAUNDERING OR 

CASH TRANSACTION REPORTING OFFENSES.— 

(1) I N GENERAL.— 

(A) CONVICTION OF TITLE 18 OFFENSES.— 

(i) DUT Y TO NOTIFY.—If an insured State depository institution has been convicted of any criminal offense under section 1956 or 1957 of title 18, United 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

547 

States Code, the Attorney General shall provide to the 

Corporation a written notification of the conviction 

and shall include a certified copy of the order of conviction from the court rendering the decision. 

(ii) NOTICE OF TERMINATION; PRETERMINATION 

HEARING.—After receipt of written notification from 

the Attorney General by the Corporation of such a 

conviction, the Board of Directors shall issue to the insured depository institution a notice of its intention to 

terminate the insured status of the insured depository 

institution and schedule a hearing on the matter, 

which shall be conducted in all respects as a termination hearing pursuant to paragraphs (3) through (5) 

of subsection (a). 

(B) CONVICTION OF TITLE 31 OFFENSES.—If an insured 

State depository institution is convicted of any criminal offense under section 5322 or 5324 of title 31, United States 

Code, after receipt of written notification from the Attorney General by the Corporation, the Board of Directors 

may initiate proceedings to terminate the insured status of 

the insured depository institution in the manner described 

in subparagraph (A). 

(C) NOTICE TO STATE SUPERVISOR.—The Corporation 

shall simultaneously transmit a copy of any notice issued 

under this paragraph to the appropriate State financial 

institutions supervisor. 

(2) FACTORS TO BE CONSIDERED.—In determining whether 

to terminate insurance under paragraph (1), the Board of 

Directors shall take into account the following factors: 

(A) The extent to which directors or senior executive 

officers of the depository institution knew of, or were involved in, the commission of the money laundering offense 

of which the institution was found guilty. 

(B) The extent to which the offense occurred despite 

the existence of policies and procedures within the depository institution which were designed to prevent the occurrence of any such offense. 

(C) The extent to which the depository institution has 

fully cooperated with law enforcement authorities with respect to the investigation of the money laundering offense 

of which the institution was found guilty. 

(D) The extent to which the depository institution has 

implemented additional internal controls (since the commission of the offense of which the depository institution 

was found guilty) to prevent the occurrence of any other 

money laundering offense. 

(E) The extent to which the interest of the local community in having adequate deposit and credit services 

available would be threatened by the termination of insurance. 

(3) NOTICE TO STATE BANKING SUPERVISOR AND PUBLIC.— 

When the order to terminate insured status initiated pursuant 

to this subsection is final, the Board of Directors shall— 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 548 

(A) notify the State banking supervisor of any State 

depository institution described in paragraph (1) and the 

Office of Thrift Supervision, where appropriate, at least 10 

days prior to the effective date of the order of termination 

of the insured status of such depository institution, including a State branch of a foreign bank; and 

(B) publish notice of the termination of the insured 

status of the depository institution in the Federal Register. 

(4) TEMPORARY INSURANCE OF PREVIOUSLY INSURED DEPOSITS.—Upon termination of the insured status of any State 

depository institution pursuant to paragraph (1), the deposits 

of such depository institution shall be treated in accordance 

with subsection (a)(7). 

(5) SUCCESSOR LIABILITY.—Thi s subsection shall not apply 

to a successor to the interests of, or a person who acquires, an 

insured depository institution that violated a provision of law 

described in paragraph (1), if the successor succeeds to the interests of the violator, or the acquisition is made, in good faith 

and not for purposes of evading this subsection or regulations 

prescribed under this subsection. 

(6) DEFINITION.—Th e term "senior executive officer'' has 

the same meaning as in regulations prescribed under section 

32(f) of this Act. 

SEC. 9. [12 U.S.C. 1819] (a) IN GENERAL.—Upon the date of 

enactment of the Banking Act of 1933, the Corporation shall become a body corporate and as such shall have power— 

First. To adopt and use a corporate seal. 

Second. To have succession until dissolved by an Act of Congress. 

Third. To make contracts. 

Fourth. To sue and be sued, and complain and defend, by and 

through its own attorneys, in any court of law or equity, State 

or Federal. 

Fifth. To appoint by its Board of Directors such officers and 

employees as are not otherwise provided for in this Act, to define 

their duties, fix their compensation, require bonds of them and fix 

the penalty thereof, and to dismiss at pleasure such officers or employees. Nothing in this or any other Act shall be construed to prevent the appointment and compensation as an officer or employee 

of the Corporation of any officer or employee of the United States 

in any board, commission, independent establishment, or executive 

department thereof. 

Sixth. To prescribe, by its Board of Directors, bylaws not inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may 

be exercised and enjoyed. 

Seventh. To exercise by its Board of Directors, or duly authorized officers or agents, all powers specifically granted by the provisions of this Act, and such incidental powers as shall be necessary 

to carry out the powers so granted. 

Eighth. To make examinations of and to require information 

and reports from depository institutions, as provided in this Act. 

Ninth. To act as receiver. 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

549 

Tenth. To prescribe by its Board of Directors such rules and 

regulations as it may deem necessary to carry out the provisions 

of this Act or of any other law which it has the responsibility of 

administering or enforcing (except to the extent that authority to 

issue such rules and regulations has been expressly and exclusively 

granted to any other regulatory agency). 

(b) AGENC Y AUTHORITY. — 

(1) STATUS.—The Corporation, in any capacity, shall be an 

agency of the United States for purposes of section 1345 of title 

28, United States Code, without regard to whether the Corporation commenced the action. 

(2) FEDERAL COURT JURISDICTION.— 

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

(D), all suits of a civil nature at common law or in equity 

to which the Corporation, in any capacity, is a party shall 

be deemed to arise under the laws of the United States. 

(B) REMOVAL.—Except as provided in subparagraph 

(D), the Corporation may, without bond or security, remove any action, suit, or proceeding from a State court to 

the appropriate United States district court before the end 

of the 90-day period beginning on the date the action, suit, 

or proceeding is filed against the Corporation or the Corporation is substituted as a party. 

(C) APPEAL OF REMAND.—The Corporation may appeal 

any order of remand entered by any United States district 

court. 

(D) STATE ACTIONS.—Except as provided in subparagraph (E), any action— 

(i) to which the Corporation, in the Corporation's 

capacity as receiver of a State insured depository institution by the exclusive appointment by State authorities, is a party other than as a plaintiff; 

(ii) which involves only the preclosing rights 

against the State insured depository institution, or 

obligations owing to, depositors, creditors, or stockholders by the State insured depository institution; 

and 

(iii) in which only the interpretation of the law of 

such State is necessary, 

shall not be deemed to arise under the laws of the United 

States. 

(E) RUL E OF CONSTRUCTION.—Subparagraph (D) shall 

not be construed as limiting the right of the Corporation 

to invoke the jurisdiction of any United States district 

court in any action described in such subparagraph if the 

institution of which the Corporation has been appointed 

receiver could have invoked the jurisdiction of such court. 

(3) SERVICE OF PROCESS.—The Board of Directors shall 

designate agents upon whom service of process may be made 

in any State, territory, or jurisdiction in which any insured 

depository institution is located. 

(4) BONDS OR FEES.—The Corporation shall not be required 

to post any bond to pursue any appeal and shall not be subject 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 550 

to payments of any filing fees in United States district courts 

or courts of appeal. 

SEC. 10. [12 U.S.C. 1820] (a) The Board of Directors shall 

administer the affairs of the Corporation fairly and impartially and 

without discrimination. The Board of Directors of the Corporation 

shall determine and prescribe the manner in which its obligations 

shall be incurred and its expenses allowed and paid. The Corporation shall be entitled to the free use of the United States mails in 

the same manner as the executive departments of the Government. 

The Corporation with the consent of any Federal Reserve bank or 

of any board, commission, independent establishment, or executive 

department of the Government, including any field service thereof, 

may avail itself of the use of information, services, and facilities 

thereof in carrying out the provisions of this Act. 

(b) EXAMINATIONS.— 

(1) APPOINTMENT OF EXAMINERS AND CLAIMS AGENTS.—The 

Board of Directors shall appoint examiners and claims agents. 

(2) REGULAR EXAMINATIONS.—Any examiner appointed 

under paragraph (1) shall have power, on behalf of the Corporation, to examine— 

(A) any insured State nonmember bank (except a District bank) or insured State branch of any foreign bank; 

(B) any depository institution which files an application with the Corporation to become an insured depository 

institution; and 

(C) any insured depository institution in default, 

whenever the Board of Directors determines an examination of 

any such depository institution is necessary. 

(3) SPECIAL EXAMINATION OF ANY INSURED DEPOSITORY 

INSTITUTION.—I n addition to the examinations authorized 

under paragraph (2), any examiner appointed under paragraph 

(1) shall have power, on behalf of the Corporation, to make any 

special examination of any insured depository institution 

whenever the Board of Directors determines a special examination of any such depository institution is necessary to determine the condition of such depository institution for insurance 

purposes. 

(4) EXAMINATION OF AFFILIATES.— 

(A) I N GENERAL.—In making any examination under 

paragraph (2) or (3), any examiner appointed under paragraph (1) shall have power, on behalf of the Corporation, 

to make such examinations of the affairs of any affiliate of 

any depository institution as may be necessary to disclose 

fully— 

(i) the relationship between such depository institution and any such affiliate; and 

(ii) the effect of such relationship on the depository institution. 

(B) COMMITMEN T BY FOREIGN BANKS TO ALLOW EXAMINATIONS OF AFFILIATES.—No branch or depository institution subsidiary of a foreign bank may become an insured 

depository institution unless such foreign bank submits a 

written binding commitment to the Board of Directors to 

permit any examination of any affiliate of such branch or 
Sec. 10 

FEDERAL DEPOSIT INSURANCE ACT 

551 

depository institution subsidiary pursuant to subparagraph (A) to the extent determined by the Board of Directors to be necessary to carry out the purposes of this Act. 

(5) EXAMINATION OF INSURED STATE BRANCHES.—The 

Board of Directors shall— 

(A) coordinate examinations of insured State branches 

of foreign banks with examinations conducted by the 

Board of Governors of the Federal Reserve System under 

section 7(c)(1) of the International Banking Act of 1978; 

and 

(B) to the extent possible, participate in any simultaneous examination of the United States operations of a foreign bank requested by the Board under such section. 

(6) POWER AND DUTY OF EXAMINERS.—Each examiner appointed under paragraph (1) shall— 

(A) have power to make a thorough examination of 

any insured depository institution or affiliate under paragraph (2), (3), (4), or (5); and 

(B) shall make a full and detailed report of condition 

of any insured depository institution or affiliate examined 

to the Corporation. 

(7) POWER OF CLAIM AGENTS.—Each claim agent appointed 

under paragraph (1) shall have power to investigate and examine all claims for insured deposits. 

(c) in connection with examinations of insured depository institutions and any State nonmember bank, savings association, or 

other institution making application to become insured depository 

institutions, and affiliates thereof, or with other types of investigations to determine compliance with applicable law and regulations, 

the appropriate Federal banking agency, or its designated representatives, are authorized to administer oaths and affirmations, 

and to examine and and to take and preserve testimony under oath 

as to any matter in respect to the affairs or ownership of any such 

bank or institution or affiliate thereof, and to exercise such other 

powers as are set forth in section 8(n) of this Act. 

(d) ANNUA L ON-SITE EXAMINATIONS OF AL L INSURED DEPOSITORY INSTITUTIONS REQUIRED.— 

(1) IN GENERAL.—The appropriate Federal banking agency 

shall, not less than once during each 12-month period, conduct 

a full-scope, on-site examination of each insured depository 

institution. 

(2) EXAMINATIONS BY CORPORATION.—Paragraph (1) shall 

not apply during any 12-month period in which the Corporation has conducted a full-scope, on-site examination of the insured depository institution. 

(3) STATE EXAMINATIONS ACCEPTABLE.—The examinations 

required by paragraph (1) may be conducted in alternate 12-

month periods, as appropriate, if the appropriate Federal banking agency determines that an examination of the insured 

depository institution conducted by the State during the intervening 12-month period carries out the purpose of this subsection. 
Sec. 10 FEDERAL DEPOSIT INSURANCE ACT 5 52 

(4) 18-MONTH RULE FOR CERTAIN SMALL INSTITUTIONS.— 

Paragraphs (1), (2), and (3) shall apply with ''18-month'' substituted for ''12-month'' if— 

(A) the insured depository institution has total assets 

of less than $250,000,000; 

(B) the institution is well capitalized, as defined in 

section 38; 

(C) when the institution was most recently examined, 

it was found to be well managed, and its composite 

condition— 

(i) was found to be outstanding; or 

(ii) was found to be outstanding or good, in the 

case of an insured depository institution that has total 

assets of not more than $100,000,000; 

(D) the insured institution is not currently subject to 

a formal enforcement proceeding or order by the Corporation or the appropriate Federal banking agency; and 

(E) no person acquired control of the institution during 

the 12-month period in which a full-scope, on-site examination would be required but for this paragraph. 

(5) CERTAIN GOVERNMENT-CONTROLLED INSTITUTIONS 

EXEMPTED.—Paragraph (1) does not apply to— 

(A) any institution for which the Corporation or the 

Resolution Trust Corporation is conservator; or 

(B) any bridge bank, none of the voting securities of 

which are owned by a person or agency other than the 

Corporation or the Resolution Trust Corportation. 

(6) COORDINATED EXAMINATIONS.—To minimize the disruptive effects of examinations on the operations of insured 

depository institutions— 

(A) each appropriate Federal banking agency shall, to 

the extent practicable and consistent with principles of 

safety and soundness and the public interest— 

(i) coordinate examinations to be conducted by 

that agency at an insured depository institution and 

its affiliates; 

(ii) coordinate with the other appropriate Federal 

banking agencies in the conduct of such examinations; 

(iii) work to coordinate with the appropriate State 

bank supervisor— 

(I) the conduct of all examinations made pursuant to this subsection; and 

(II) the number, types, and frequency of reports required to be submitted to such agencies 

and supervisors by insured depository institutions, 

and the type and amount of information required 

to be included in such reports; and 

(iv) use copies of reports of examinations of insured depository institutions made by any other Federal banking agency or appropriate State bank supervisor to eliminate duplicative requests for information; 

and 

(B) not later than 2 years after the date of enactment 

of the Riegle Community Development and Regulatory 
Sec. 10 

Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 559 

553 

Improvement Act of 1994, the Federal banking agencies 

shall jointly establish and implement a system for determining which one of the Federal banking agencies or State 

bank supervisors

 1 shall be the lead agency responsible for 

managing a unified examination of each insured depository 

institution and its affiliates, as required by this subsection. 

( 7 ) SEPARATE EXAMINATION S PERMITTED.—Notwithstandin g 

paragraph (6), each appropriate Federal banking agency may 

conduct a separate examination in an emergency or under 

other exigent circumstances, or when the agency believes that 

a violation of law may have occurred. 

(8) REPORT.—At the time the system provided for in paragraph (6) is established, the Federal banking agencies shall 

submit a joint report describing the system to the Committee 

on Banking, Housing, and Urban Affairs of the Senate and the 

Committee on Banking, Finance and Urban Affairs of the 

House of Representatives. Thereafter, the Federal banking 

agencies shall annually submit a joint report to the Committee 

on Banking, Housing, and Urban Affairs of the Senate and the 

Committee on Banking, Finance and Urban Affairs of the 

House of Representatives regarding the progress of the agencies in implementing the system and indicating areas in which 

enhancements to the system, including legislature improvements, would be appropriate. 

( 9 ) STANDARD S FOR DETERMININ G ADEQUAC Y OF STATE 

EXAMINATIONS.—Th e Federal Financial Institutions Examination Council shall issue guidelines establishing standards to be 

used at the discretion of the appropriate Federal banking 

agency for purposes of making a determination under paragraph (3). 

(10 ) AGENCIE S AUTHORIZE D TO INCREASE MAXIMU M ASSET 

AMOUN T OF INSTITUTION S FO R CERTAI N PURPOSES.—A t any time 

after the end of the 2-year period beginning on the date of 

enactment of the Riegle Community Development and Regulatory Improvement Act of 1994, the appropriate Federal banking agency, in the agency's discretion, may increase the maximum amount limitation contained in paragraph (4)(C)(ii), by 

regulation, from $100,000,000 to an amount not to exceed 

$250,000,000 for purposes of such paragraph, if the agency 

determines that the greater amount would be consistent with 

the principles of safety and soundness for insured depository 

institutions. 

( e ) EXAMINATIO N FEES. — 

( 1 ) REGULA R AN D SPECIA L EXAMINATION S OF DEPOSITOR Y 

INSTITUTIONS.—Th e cost of conducting any regular examination 

or special examination of any depository institution under subsection (b)(2), (b)(3), or (d) may be assessed by the Corporation 

against the institution to meet the Corporation's expenses in 

carrying out such examinations. 

1

 Section 2244(b) of P.L. 104-208 provides that ''[s]ection 10(d)(6)(B) of the Federal Deposit 

Insurance Act (12 U.S.C. 1820(d)(6)(B)) is amended by inserting 'or State bank supervisors' after 

'one of the Federal agencies'''. The amendment probably should have been to insert after ''one 

of the Federal banking agencies''. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 554 

(2) EXAMINATION OF AFFILIATES.—The cost of conducting 

any examination of any affiliate of any insured depository 

institution under subsection (b)(4) may be assessed by the Corporation against each affiliate which is examined to meet the 

Corporation's expenses in carrying out such examination. 

(3) ASSESSMENT AGAINST DEPOSITORY INSTITUTION I N CASE 

OF AFFILIATE'S REFUSAL TO PAY.— 

(A) IN GENERAL.—Subject to subparagraph (B), if any 

affiliate of any insured depository institution— 

(i) refuses to pay any assessment under paragraph 

(2); or 

(ii) fails to pay any such assessment before the 

end of the 60-day period beginning on the date the 

affiliate receives notice of the assessment, 

the Corporation may assess such cost against, and collect 

such cost from, the depository institution. 

(B) AFFILIATE OF MORE THA N 1 DEPOSITORY INSTITUTION.—If any affiliate referred to in subparagraph (A) is 

an affiliate of more than 1 insured depository institution, 

the assessment under subparagraph (A) may be assessed 

against the depository institutions in such proportions as 

the Corporation determines to be appropriate. 

(4) CIVIL MONEY PENALTY FOR AFFILIATE'S REFUSAL TO 

COOPERATE.— 

(A) PENALTY IMPOSED.—If any affiliate of any insured 

depository institution— 

(i) refuses to permit an examiner appointed by the 

Board of Directors under subsection (b)(1) to conduct 

an examination; or 

(ii) refuses to provide any information required to 

be disclosed in the course of any examination, 

the depository institution shall forfeit and pay a penalty of 

not more than $5,000 for each day that any such refusal 

continues. 

(B) ASSESSMENT AND COLLECTION.—Any penalty imposed under subparagraph (A) shall be assessed and collected by the Corporation in the manner provided in section 8(i)(2). 

(5) DEPOSITS OF EXAMINATION ASSESSMENT.—Amounts received by the Corporation under this subsection (other than 

paragraph (4)) may be deposited in the manner provided in 

section 13. 

(f) The Corporation may cause any and all records, papers, or 

documents kept by it or in its possession or custody to be photographed or microphotographed or otherwise reproduced upon film, 

which photographic film shall comply with the minimum standards 

of quality approved for permanent photographic records by the National Bureau of Standards. Such photographs, microphotographs, 

or photographic film or copies thereof shall be deemed to be an 

original record for all purposes, including introduction in evidence 

in all State and Federal courts or administrative agencies and shall 

be admissible to prove any act, transaction, occurrence, or event 

therein recorded. Such photographs, microphotographs, or reproduction shall be preserved in such manner as the Board of Direc-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

555 

tors of the Corporation shall prescribe and the original records, papers, or documents may be destroyed or otherwise disposed of as 

the Board shall direct. 

(g) AUTHORITY T O PRESCRIBE REGULATIONS AND DEFINITIONS.—Except to the extent that authority under this Act is conferred on any of the Federal banking agencies other than the Corporation, the Corporation may— 

(1) prescribe regulations to carry out this Act; and 

(2) by regulation define terms as necessary to carry out 

this Act. 

(h) COORDINATION OF EXAMINATION AUTHORITY.— 

(1) IN GENERAL.—The appropriate State bank supervisor of 

a host State may examine a branch operated in such State by 

an out-of-State insured State bank that resulted from an interstate merger transaction approved under section 44 or a 

branch established in such State pursuant to section 5155(g) of 

the Revised Statutes or section 18(d)(4)— 

(A) for the purpose of determining compliance with 

host State laws, including those that govern banking, community reinvestment, fair lending, consumer protection, 

and permissible activities; and 

(B) to ensure that the activities of the branch are not 

conducted in an unsafe or unsound manner. 

(2) ENFORCEMENT.—If the State bank supervisor of a host 

State determines that there is a violation of the law of the host 

State concerning the activities being conducted by a branch described in paragraph (1) or that the branch is being operated 

in an unsafe and unsound manner, the State bank supervisor 

of the host State or, to the extent authorized by the law of the 

host State, a State law enforcement officer may undertake 

such enforcement actions and proceedings as would be permitted under the law of the host State as if the branch were 

a bank chartered by that host State. 

(3) COOPERATIVE AGREEMENT.—The State bank supervisors 

from 2 or more States may enter into cooperative agreements 

to facilitate State regulatory supervision of State banks, including cooperative agreements relating to the coordination of 

examinations and joint participation in examinations. 

(4) FEDERAL REGULATORY AUTHORITY.—No provision of this 

subsection shall be construed as limiting in any way the authority of an appropriate Federal banking agency to examine 

or to take any enforcement actions or proceedings against any 

bank or branch of a bank for which the agency is the appropriate Federal banking agency. 

(i) FLOOD INSURANCE COMPLIANCE BY INSURED DEPOSITORY 

INSTITUTIONS.— 

(1) EXAMINATIONS.—The appropriate Federal banking 

agency shall, during each scheduled on-site examination required by this section, determine whether the insured depository institution is complying with the requirements of the national flood insurance program. 

(2) REPORT.— 

(A) REQUIREMENT.—No t later than 1 year after the 

date of enactment of the Riegle Community Development 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 556 

and Regulatory Improvement Act of 1994 and biennially 

thereafter for the next 4 years, each appropriate Federal 

banking agency shall submit a report to the Congress on 

compliance by insured depository institutions with the 

requirements of the national flood insurance program. 

(B) CONTENTS.—Each report submitted under this 

paragraph shall include a description of the methods used 

to determine compliance, the number of institutions examined during the reporting year, a listing and total number 

of institutions found not to be in compliance, actions taken 

to correct incidents of noncompliance, and an analysis of 

compliance, including a discussion of any trends, patterns, 

and problems, and recommendations regarding reasonable 

actions to improve the efficiency of the examinations processes. 

(j) CONSULTATION AMON G EXAMINERS.— 

(1) IN GENERAL.—Each appropriate Federal banking 

agency shall take such action as may be necessary to ensure 

that examiners employed by the agency— 

(A) consult on examination activities with respect to 

any depository institution; and 

(B) achieve an agreement and resolve any inconsistencies in the recommendations to be given to such institution as a consequence of any examinations. 

(2) EXAMINER-IN-CHARGE.—Each appropriate Federal banking agency shall consider appointing an examiner-in-charge 

with respect to a depository institution to ensure consultation 

on examination activities among all of the examiners of that 

agency involved in examinations of the institution. 

SEC. 11. [12 U.S.C. 1821] (a) DEPOSIT INSURANCE.— 

(1) INSURED AMOUNTS PAYABLE.— 

(A) IN GENERAL.—The Corporation shall insure the deposits of all insured depository institutions as provided in 

this Act. 

(B) NE T AMOUNT OF INSURED DEPOSIT.—The ne t 

amount due to any depositor at an insured depository 

institution shall not exceed $100,000 as determined in 

accordance with subparagraphs (C) and (D). 

(C) AGGREGATION OF DEPOSITS.—For the purpose of 

determining the net amount due to any depositor under 

subparagraph (B), the Corporation shall aggregate the 

amounts of all deposits in the insured depository institution which are maintained by a depositor in the same capacity and the same right for the benefit of the depositor 

either in the name of the depositor or in the name of any 

other person, other than any amount in a trust fund described in paragraph (1) or (2) of section 7(i) or any funds 

described in section 7(i)(3). 

( D ) COVERAGE ON PRO RATA OR ''PASS-THROUGH'' 

BASIS.— 

(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 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

557 

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. 

(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. 

(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— 

(I) the institution meets each applicable capital standard; and 

(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. 

(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— 

(i) an officer, employee, or agent of the United States having official custody of public funds and lawfully investing or 

depositing the same in time and savings deposits in an insured 

depository institution; 

(ii) an officer, employee, or agent of any State of the 

United States, or of any county, municipality, or political subdivision thereof having official custody of public funds and lawfully investing or depositing the same in time and savings deposits in an insured depository institution in such State; 

(iii) an officer, employee, or agent of the District of Columbia having official custody of public funds and lawfully investing or depositing the same in time and savings deposits in an 

insured depository institution in the District of Columbia; 

(iv) an officer, employee, or agent of the Commonwealth of 

Puerto Rico, of the Virgin Islands, of American Samoa, of the 

Trust Territory of the Pacific Islands, or of Guam, or of any 

county, municipality, or political subdivision thereof having 

official custody of public funds and lawfully investing or depositing the same in time and savings deposits in an insured 

depository institution in the Commonwealth of Puerto Rico, the 

Virgin Islands, American Samoa, the Trust Territory of the Pacific islands, or Guam, respectively; or 

(v) an officer, employee, or agent of any indian tribe (as 

defined in section 3(c) of the Indian Financing Act of 1974) or 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 558 

agency thereof having official custody of tribal funds and lawfully investing or depositing the same in time and savings deposits in an insured depository institution; 

such 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, 

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.1 

(B) The Corporation may limit the aggregate amount of funds 

that may be invested or deposited in deposits in any insured 

depository institution by any depositor referred to in subparagraph 

(A) of this paragraph on the basis of the size of any such bank2 

in terms of its assets: Provided, however, such limitation may be 

exceeded by the pledging of acceptable securities to the depositor 

referred to in subparagraph (A) of this paragraph when and where 

required. 

( 3 ) CERTAI N RETIREMEN T 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) any individual retirement account described in 

section 408(a) of the Internal Revenue Code of 1986; 

(ii)

 3 subject to the exception contained in paragraph (1)(D)(ii), any eligible deferred compensation 

plan described in section 457 of such Code; and 

(iii) any individual account plan defined in section 

3(34) of the Employee Retirement Income Security 

Act, and any plan described in section 401(d) of the Internal Revenue Code of 1986, to the extent that participants and beneficiaries under such plan have the 

right to direct the investment of assets held in individual accounts maintained on their behalf by the 

plan, 

shall be aggregated and insured in an amount not to exceed $100,000 per participant per insured depository institution. 

(B) AMOUNT S TAKE N INT O ACCOUNT.—For purposes of 

subparagraph (A), the amount aggregated for insurance 

coverage under this paragraph shall consist of the present 

vested and ascertainable interest of each participant under 

the plan, excluding any remainder interest created by, or 

as a result of, the plan. 

( 4 ) GENERA L PROVISION S RELATIN G TO FUNDS. — 

(A) MAINTENANC E AN D US E OF FUNDS.—The Bank Insurance Fund established under paragraph (5) and the 

1

 Section 311(b)(5)(B) of the Federal Deposit Insurance Corporation Improvement Act of 1991 

(105 stat. 2366) inserted ''in an amount not to exceed $100,000 per account'' a second time. The 

duplicate phrase should probably be stricken. 

2

 so in original. probably should be ''depository institution''. 

3

 Paragraph (3)(A) (as amended by section 311(b)(2) of the Federal Deposit Insurance Corporation Improvement Act of 1991) shall apply with respect to plans described in clause (ii) of such 

paragraph as of December 19, 1991 (see section 311(c)(3)(B) of such Act, 105 Stat. 2366). 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

559 

Savings Association Insurance Fund established under 

paragraph (6) shall each be— 

(i) maintained and administered by the Corporation; 

(ii) maintained separately and not commingled; 

and 

(iii) used by the Corporation to carry out its insurance purposes in the manner provided in this subsection. 

(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— 

(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; 

(ii) any other insured depository institution in default or in danger of default, in connection with any 

type of resolution by the Corporation or the Resolution 

Trust 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. 

(5) BANK INSURANCE FUND. — 

(A) ESTABLISHMENT.—There is established a fund to 

be known as the Bank insurance Fund. 

(B) TRANSFER TO FUND.—O n 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. 

(C) USES.—The Bank Insurance Fund shall be available to the Corporation for use with respect to Bank Insurance Fund members. 

(D) DEPOSITS.—All amounts assessed against Bank Insurance Fund members by the Corporation shall be deposited into the Bank Insurance Fund. 

(6) SAVINGS ASSOCIATION INSURANCE FUND. — 

(A) ESTABLISHMENT.—There is established a fund to 

be known as the Savings Association Insurance Fund. 

(B) USES.—The Savings Association Insurance Fund 

shall be available to the Corporation for use with respect 

to Savings Association Insurance Fund members. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 60 

(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. 

(D) TREASURY PAYMENTS TO FUND.—T o 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. 

( E) CERTIFICATION CONDITIONS ON AVAILABILITY OF 

FUNDING.—N o 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— 

(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; 

(ii) the Board of Directors has determined that— 

(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 

(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; 

(iii) the Board of Directors has determined that— 

(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 

(II) an increase in the assessment rates for 

Savings Association Insurance Fund members to 

meet any such repayment schedule could reason-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

561 

ably be expected to result in greater losses to the 

Government; 

(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; 

(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— 

(I) the Corporation has taken or is taking appropriate action to implement any recommendation made by the Comptroller General; or 

(ii) no corrective action is necessary or appropriate; 

(vi) the Corporation has provided for the appointment of a chief financial officer who— 

(i) does not have other operating responsibilities; 

(II) will report directly to the Chairperson of 

the Corporation; and 

(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; 

(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; 

(viii) the Corporation is implementing the minority outreach provisions mandated by section 1216 of 

the Financial Institutions Reform, Recovery, and Enforcement Act of 1989; 

(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 

(x) the Corporation has improved the management 

of legal services by— 

(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 

(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. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 62 

(F) AVAILABILITY OF RTC FUNDING.—A t 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— 

(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; 

(ii) the Board of Directors has determined that— 

(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 

raise and maintain capital or to maintain the 

members' assessment base; and 

(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; 

(iii) the Board of Directors has determined that— 

(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 

(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; 

(iv) the Corporation has provided for the appointment of a chief financial officer who— 

(i) does not have other operating responsibilities; 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

563 

(II) will report directly to the Chairperson of 

the Corporation; and 

(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; 

(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; 

(vi) the Corporation is implementing the minority 

outreach provisions mandated by section 1216 of the 

Financial Institutions Reform, Recovery, and Enforcement Act of 1989; 

(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 

(viii) the Corporation has improved the management of legal services by— 

(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 

(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. 

(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. 

(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). 

(I) BORROWING AUTHORITY.— 

(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. 

(ii) TERMS AND CONDITIONS.—Any loan from any 

Federal home loan bank under clause (i) to the Savings Association Insurance Fund shall— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 64 

(I) bear a rate of interest of not less than such 

bank's current marginal cost of funds, taking into 

account the maturities involved; 

(II) be adequately secured, as determined by 

the Federal Housing Finance Board; 

(III) be a direct liability of such Fund; and 

(IV) be subject to the limitations of section 

15(c). 

(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. 

(K) RETUR N 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. 

(7) PROVISIONS APPLICABLE TO MAINTENANCE OF ACCOUNTS.— 

(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 

Fund and the Savings Association Insurance Fund, is not 

intended— 

(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 

(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. 

(B) ACCOUNTING REQUIREMENTS.— 

(i) ACCOUNTING FOR USE OF FACILITIES AND RESOURCES.—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— 

(I) with respect to Bank Insurance Fund 

members to the Bank Insurance Fund; and 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

565 

(II) with respect to Savings Association Insurance Fund members to the Savings Association 

Insurance Fund. 

(ii) ACCOUNTING FOR HOLDING AND MANAGING ASSETS 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). 

(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). 

(iv) ALLOCATION OF COST, EXPENSES AND RECEIPTS.—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— 

(i) any Bank insurance Fund member to the 

Bank insurance Fund; and 

(II) any Savings Association Insurance Fund 

member to the Savings Association Insurance 

Fund. 

( C) ALLOCATION OF ADMINISTRATIVE EXPENSES.—Any 

personnel, administrative, or other overhead expense of 

the Corporation shall be allocated— 

(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; 

(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; 

(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 

(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). 

(8) CERTAIN INVESTMENT CONTRACTS NOT TREATED AS INSURED DEPOSITS.— 

(A) I N GENERAL.—A liability of an insured depository 

institution shall not be treated as an insured deposit if the 

liability arises under any insured depository institution 

investment contract between any insured depository insti-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 566 

tution and any employee benefit plan which expressly permits benefit-responsive withdrawals or transfers. 

(B) DEFINITIONS.—Fo r purposes of subparagraph (A)— 

(i) BENEFIT-RESPONSIVE WITHDRAWALS OR TRANSFERS.—The term ''benefit-responsive withdrawals or 

transfers'' means any withdrawal or transfer of funds 

(consisting of any portion of the principal and any interest credited at a rate guaranteed by the insured 

depository institution investment contract) during the 

period in which any guaranteed rate is in effect, without substantial penalty or adjustment, to pay benefits 

provided by the employee benefit plan or to permit a 

plan participant or beneficiary to redirect the investment of his or her account balance. 

(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; and 

(ii) includes any plan described in section 

401(d) of the Internal Revenue Code of 1986. 

(b) For the purposes of this Act an insured depository institution shall be deemed to have been closed on account of inability to 

meet the demands of its depositors in any case in which it has been 

closed for the purpose of liquidation without adequate provision 

being made for payment of its depositors. 

(c) APPOINTMENT OF CORPORATION AS CONSERVATOR OR 

RECEIVER.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

Federal law, the law of any State, or the constitution of any 

State, the Corporation may accept appointment and act as conservator or receiver for any insured depository institution upon 

appointment in the manner provided in paragraph (2) or (3). 

(2) FEDERAL DEPOSITORY INSTITUTIONS.— 

(A) APPOINTMENT.— 

(i) CONSERVATOR.—The Corporation may, at the 

discretion of the supervisory authority, be appointed 

conservator of any insured Federal depository institution or District bank and the Corporation may accept 

such appointment. 

(ii) RECEIVER.—The Corporation shall be appointed receiver, and shall accept such appointment, 

whenever a receiver is appointed for the purpose of 

liquidation or winding up the affairs of an insured 

Federal depository institution or District bank by the 

appropriate Federal banking agency, notwithstanding 

any other provision of Federal law (other than section 

21A of the Federal Home Loan Bank Act) or the code 

of law for the District of Columbia. 

(B) ADDITIONAL POWERS.—In addition to and not in 

derogation of the powers conferred and the duties imposed 

by this section on the Corporation as conservator or receiver, the Corporation, to the extent not inconsistent with 

such powers and duties, shall have any other power con-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

567 

ferred on or any duty (which is related to the exercise of 

such power) imposed on a conservator or receiver for any 

Federal depository institution under any other provision of 

law. 

(C) CORPORATION NOT SUBJECT TO ANY OTHER 

AGENCY.—When acting as conservator or receiver pursuant 

to an appointment described in subparagraph (A), the Corporation shall not be subject to the direction or supervision 

of any other agency or department of the United States or 

any State in the exercise of the Corporation's rights, powers, and privileges. 

( D ) DEPOSITORY INSTITUTION I N CONSERVATORSHIP 

SUBJECT TO BANKING AGENCY SUPERVISION.—Notwithstanding subparagraph (C), any Federal depository institution for which the Corporation has been appointed conservator shall remain subject to the supervision of the appropriate Federal banking agency. 

(3) INSURED STATE DEPOSITORY INSTITUTIONS— 

(A) APPOINTMENT BY APPROPRIATE STATE SUPERVISOR.—Whenever the authority having supervision of any 

insured State depository institution (other than a District 

depository institution) appoints a conservator or receiver 

for such institution and tenders appointment to the Corporation, the Corporation may accept such appointment. 

(B) ADDITIONAL POWERS.—In addition to the powers 

conferred and the duties related to the exercise of such 

powers imposed by State law on any conservator or receiver appointed under the law of such State for an insured State depository institution, the Corporation, as conservator or receiver pursuant to an appointment described 

in subparagraph (A), shall have the powers conferred and 

the duties imposed by this section on the Corporation as 

conservator or receiver. 

( C) CORPORATION NOT SUBJECT TO ANY OTHER 

AGENCY.—When acting as conservator or receiver pursuant 

to an appointment described in subparagraph (A), the Corporation shall not be subject to the direction or supervision 

of any other agency or department of the United States or 

any State in the exercise of its rights, powers, and privileges. 

( D ) DEPOSITORY INSTITUTION I N CONSERVATORSHIP 

SUBJECT TO BANKING AGENCY SUPERVISION.—Notwithstanding subparagraph (C), any insured State depository 

institution for which the Corporation has been appointed 

conservator shall remain subject to the supervision of the 

appropriate State bank or savings association supervisor. 

(4) APPOINTMENT OF CORPORATION BY THE CORPORATION.— 

Except as otherwise provided in section 21A of the Federal 

Home Loan Bank Act and notwithstanding any other provision 

of Federal law, the law of any State, or the constitution of any 

State, the Corporation may appoint itself as sole conservator or 

receiver of any insured State depository institution if— 

(A) the Corporation determines— 

(i) that— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 568 

(I) a conservator, receiver, or other legal custodian has been appointed for such institution; 

(II) such institution has been subject to the 

appointment of any such conservator, receiver, or 

custodian for a period of at least 15 consecutive 

days; and 

(III) 1 or more of the depositors in such institution is unable to withdraw any amount of any 

insured deposit; or 

(ii) that such institution has been closed by or 

under the laws of any State; and 

(B) the Corporation determines that 1 or more of the 

grounds specified in paragraph (5)— 

(i) existed with respect to such institution at the 

time— 

(I) the conservator, receiver, or other legal 

custodian was appointed; or 

(II) such institution was closed; or 

(ii) exist at any time— 

(I) during the appointment of the conservator, 

receiver, or other legal custodian; or 

(II) while such institution is closed. 

(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) ASSETS INSUFFICIENT FOR OBLIGATIONS.—The institution's assets are less than the institution's obligations to 

its creditors and others, including members of the institution. 

(B) SUBSTANTIAL DISSIPATION.—Substantia l dissipation 

of assets or earnings due to— 

(i) any violation of any statute or regulation; or 

(ii) any unsafe or unsound practice. 

(C) UNSAFE OR UNSOUND CONDITION.—A n unsafe or 

unsound condition to transact business. 

(D) CEASE AND DESIST ORDERS.—Any willful violation 

of a cease-and-desist order which has become final. 

(E) CONCEALMENT.—Any concealment of the institution's books, papers, records, or assets, or any refusal to 

submit the institution's books, papers, records, or affairs 

for inspection to any examiner or to any lawful agent of 

the appropriate Federal banking agency or State bank or 

savings association supervisor. 

(F) INABILITY TO MEET OBLIGATIONS.—The institution 

is likely to be unable to pay its obligations or meet its 

depositors' demands in the normal course of business. 

(G) LOSSES.—The institution has incurred or is likely 

to incur losses that will deplete all or substantially all of 

its capital, and there is no reasonable prospect for the 

institution to become adequately capitalized (as defined in 

section 38(b)) without Federal assistance. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

569 

(H) VIOLATIONS OF LAW.—An y violation of any law or 

regulation, or any unsafe or unsound practice or condition 

that is likely to— 

(i) cause insolvency or substantial dissipation of 

assets or earnings; 

(ii) weaken the institution's condition; or 

(iii) otherwise seriously prejudice the interests of 

the institution's depositors or the deposit insurance 

fund. 

( I) CONSENT.—Th e institution , b y resolution of its 

board of directors or its shareholders or members, consents 

to the appointment. 

(J) CESSATION OF INSURED STATUS.—The institution 

ceases to be an insured institution. 

(K) UNDERCAPITALIZATION.—The institution is undercapitalized (as defined in section 38(b)), and— 

(i) has no reasonable prospect of becoming adequately capitalized (as defined in that section); 

(ii) fails to become adequately capitalized when required to do so under section 38(f)(2)(A); 

(iii) fails to submit a capital restoration plan 

acceptable to that agency within the time prescribed 

under section 38(e)(2)(D); or 

(iv) materially fails to implement a capital restoration plan submitted and accepted under section 

38(e)(2). 

(L) The institution— 

(i) is critically undercapitalized, as defined in section 38(b); or 

(ii) otherwise has substantially insufficient capital. 

(M) MONE Y LAUNDERING OFFENSE.—The Attorney General notifies the appropriate Federal banking agency or the 

Corporation in writing that the insured depository institution has been found guilty of a criminal offense under section 1956 or 1957 of title 18, United States Code, or section 5322 or 5324 of title 31, United States Code. 

(6) APPOINTMENT BY DIRECTOR OF THE OFFICE OF THRIFT 

SUPERVISION.— 

(A) CONSERVATOR.—The Corporation or the Resolution 

Trust Corporation may, at the discretion of the Director of 

the Office of Thrift Supervision, be appointed conservator 

and the Corporation may accept any such appointment. 

(B) RECEIVER.—Whenever the Director of the Office of 

Thrift Supervision appoints a receiver under the provisions 

of subparagraph (A) or (C) of section 5(d)(2) of the Home 

Owners' Loan Act for the purpose of liquidation or winding 

up any savings association's affairs— 

(i) before such date as is determined by the Chairperson of the Thrift Depositor Protection Oversight 

Board under section 21A(b)(3)(A)(ii) of the Federal 

Home Loan Bank Act, the Resolution Trust Corporation shall be appointed; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 70 

(ii) on or after the date determined by the Chairperson of the Thrift Depositor Protection Oversight 

Board under section 21A(b)(3)(A)(ii) of the Federal 

Home Loan Bank Act, the Resolution Trust Corporation shall be appointed if the Resolution Trust Corporation had been placed in control of the depository 

institution at any time before such date; and 

(iii) on or after the date determined by the Chairperson of the Thrift Depositor Protection Oversight 

Board under section 21A(b)(3)(A)(ii) of the Federal 

Home Loan Bank Act, the Corporation shall be appointed unless the Resolution Trust Corporation is required to be appointed under clause (ii). 

(7) JUDICIAL REVIEW.—If the Corporation appoints itself as 

conservator or receiver under paragraph (4), the insured State 

depository institution may, within 30 days thereafter, bring an 

action in the United States district court for the judicial district in which the home office of such institution is located, or 

in the United States District Court for the District of Columbia, for an order requiring the Corporation to remove itself as 

such conservator or receiver, and the court shall, upon the 

merits, dismiss such action or direct the Corporation to remove 

itself as such conservator or receiver. 

(8) REPLACEMENT OF CONSERVATOR OF STATE DEPOSITORY 

INSTITUTION.— 

(A) I N GENERAL.—In the case of any insured State 

depository institution for which the Corporation appointed 

itself as conservator pursuant to paragraph (4), the Corporation may, without any requirement of notice, hearing, 

or other action, replace itself as conservator with itself as 

receiver of such institution. 

(B) REPLACEMENT TREATED AS REMOVAL OF INCUMBENT.—The replacement of a conservator with a receiver 

under subparagraph (A) shall be treated as the removal of 

the Corporation as conservator. 

( C) RIGH T OF REVIEW OF ORIGINAL APPOINTMENT NOT 

AFFECTED.—The replacement of a conservator with a receiver under subparagraph (A) shall not affect any right of 

the insured State depository institution to obtain review, 

pursuant to paragraph (7), of the original appointment of 

the conservator. 

(9) APPROPRIATE FEDERAL BANKING AGENCY MAY APPOINT 

CORPORATION AS CONSERVATOR OR RECEIVER FOR INSURED 

STATE DEPOSITORY INSTITUTION TO CARRY OUT SECTION 38.— 

(A) IN GENERAL.—The appropriate Federal banking 

agency may appoint the Corporation as sole receiver (or, 

subject to paragraph (11), sole conservator) of any insured 

State depository institution, after consultation with the 

appropriate State supervisor, if the appropriate Federal 

banking agency determines that— 

(i) 1 or more of the grounds specified in subparagraphs (K) and (L) of paragraph (5) exist with respect 

to that institution; and 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

571 

(ii) the appointment is necessary to carry out the 

purpose of section 38. 

(B) NONDELEGATION.—The appropriate Federal banking agency shall not delegate any action under subparagraph (A). 

(10) CORPORATION MAY APPOINT ITSELF AS CONSERVATOR 

OR RECEIVER FOR INSURED DEPOSITORY INSTITUTION TO PREVENT LOSS TO DEPOSIT INSURANCE FUND.—Th e 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) 1 or more of the grounds specified in any subparagraph of paragraph (5) exist with respect to the institution; 

and 

(B) the appointment is necessary to reduce— 

(i) the risk that the deposit insurance fund would 

incur a loss with respect to the insured depository 

institution, or 

(ii) any loss that the deposit insurance fund is expected to incur with respect to that institution. 

(11) APPROPRIATE FEDERAL BANKING AGENCY SHALL NOT 

APPOINT CONSERVATOR UNDER CERTAIN PROVISIONS WITHOUT 

GIVING CORPORATION OPPORTUNITY TO APPOINT RECEIVER.—The 

appropriate Federal banking agency shall not appoint a conservator for an insured depository institution under subparagraph 

(K) or (L) of paragraph (5) without the Corporation's consent 

unless the agency has given the Corporation 48 hours notice of 

the agency's intention to appoint the conservator and the 

grounds for the appointment. 

(12) DIRECTORS NOT LIABLE FOR ACQUIESCING I N APPOINTMEN T OF CONSERVATOR OR RECEIVER.—The members of the 

board of directors of an insured depository institution shall not 

be liable to the institution's shareholders or creditors for acquiescing in or consenting in good faith to— 

(A) the appointment of the Corporation or the Resolution Trust Corporation as conservator or receiver for that 

institution; or 

(B) an acquisition or combination under section 

38(f)(2)(A)(iii). 

(13) ADDITIONAL POWERS.—In any case in which the Corporation is appointed conservator or receiver under paragraph 

(4), (6), (9), or (10) for any insured State depository 

institution— 

(A) this section shall apply to the Corporation as conservator or receiver in the same manner and to the same 

extent as if that institution were a Federal depository 

institution for which the Corporation had been appointed 

conservator or receiver; and 

(B) the Corporation as receiver of the institution 

may— 

(i) liquidate the institution in an orderly manner; 

and 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 72 

(ii) make any other disposition of any matter concerning the institution, as the Corporation determines 

is in the best interests of the institution, the depositors of the institution, and the Corporation. 

(d) POWERS AND DUTIES OF CORPORATION AS CONSERVATOR OR 

RECEIVER.— 

(1) RULEMAKING AUTHORITY OF CORPORATION.—The Corporation may prescribe such regulations as the Corporation 

determines to be appropriate regarding the conduct of 

conservatorships or receiverships. 

(2) GENERAL POWERS.— 

(A) SUCCESSOR TO INSTITUTION.—The Corporation 

shall, as conservator or receiver, and by operation of law, 

succeed to— 

(i) all rights, titles, powers, and privileges of the 

insured depository institution, and of any stockholder, 

member, accountholder, depositor, officer, or director 

of such institution with respect to the institution and 

the assets of the institution; and 

(ii) title to the books, records, and assets of any 

previous conservator or other legal custodian of such 

institution. 

(B) OPERATE THE INSTITUTION.—The Corporation may 

(subject to the provisions of section 40), as conservator or 

receiver— 

(i) take over the assets of and operate the insured 

depository institution with all the powers of the members or shareholders, the directors, and the officers of 

the institution and conduct all business of the institution; 

(ii) collect all obligations and money due the institution; 

(iii) perform all functions of the institution in the 

name of the institution which are consistent with the 

appointment as conservator or receiver; and 

(iv) preserve and conserve the assets and property 

of such institution. 

( C) FUNCTIONS OF INSTITUTION'S OFFICERS, DIRECTORS, 

AND SHAREHOLDERS.—The Corporation may, by regulation 

or order, provide for the exercise of any function by any 

member or stockholder, director, or officer of any insured 

depository institution for which the Corporation has been 

appointed conservator or receiver. 

(D) POWERS AS CONSERVATOR.—The Corporation may, 

as conservator, take such action as may be— 

(i) necessary to put the insured depository institution in a sound and solvent condition; and 

(ii) appropriate to carry on the business of the 

institution and preserve and conserve the assets and 

property of the institution. 

(E) ADDITIONAL POWERS AS RECEIVER.—The Corporation may (subject to the provisions of section 40), as receiver, place the insured depository institution in liquidation and proceed to realize upon the assets of the institu-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

573 

tion, having due regard to the conditions of credit in the 

locality. 

( F) ORGANIZATION OF NEW INSTITUTIONS.—The Corporation may, as receiver— 

(i) with respect to savings associations and by application to the Director of the Office of Thrift Supervision, organize a new Federal savings association to 

take over such assets or such liabilities as the Corporation may determine to be appropriate; and 

(ii) with respect to any insured bank, organize a 

new national bank under subsection (m) or a bridge 

bank under subsection (n). 

( G) MERGER; TRANSFER OF ASSETS AND LIABILITIES.— 

(i) IN GENERAL.—The Corporation may, as conservator or receiver— 

(i) merge the insured depository institution 

with another insured depository institution; or 

(ii) subject to clause (ii), transfer any asset or 

liability of the institution in default (including assets and liabilities associated with any trust business) without any approval, assignment, or consent with respect to such transfer. 

(ii) APPROVAL BY APPROPRIATE FEDERAL BANKING 

AGENCY.—No transfer described in clause (i)(II) may 

be made to another depository institution (other than 

a new bank or a bridge bank established pursuant to 

subsection (m) or (n)) without the approval of the 

appropriate Federal banking agency for such institution. 

(H) PAYMENT OF VALID OBLIGATIONS.—The Corporation, as conservator or receiver, shall pay all valid obligations of the insured depository institution in accordance 

with the prescriptions and limitations of this Act. 

( I) SUBPOENA AUTHORITY.— 

(i) IN GENERAL.—The Corporation may, as conservator, receiver, or exclusive manager and for purposes 

of carrying out any power, authority, or duty with respect to an insured depository institution (including 

determining any claim against the institution and 

determining and realizing upon any asset of any person in the course of collecting money due the institution), exercise any power established under section 

8(n), and the provisions of such section shall apply 

with respect to the exercise of any such power under 

this subparagraph in the same manner as such provisions apply under such section. 

(ii) AUTHORITY OF BOARD OF DIRECTORS.—A subpoena or subpoena duces tecum may be issued under 

clause (i) only by, or with the written approval of, the 

Board of Directors or their designees (or, in the case 

of a subpoena or subpoena duces tecum issued by the 

Resolution Trust Corporation under this subparagraph 

and section 21A(b)(4), only by, or with the written ap-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 74 

proval of, the Board of Directors of such Corporation 

or their designees). 

(iii) RULE OF CONSTRUCTION.—This subsection 

shall not be construed as limiting any rights that the 

Corporation, in any capacity, might otherwise have 

under section 10(c) of this Act. 

(J) INCIDENTAL POWERS.—The Corporation may, as 

conservator or receiver— 

(i) exercise all powers and authorities specifically 

granted to conservators or receivers, respectively, 

under this Act and such incidental powers as shall be 

necessary to carry out such powers; and 

(ii) take any action authorized by this Act, 

which the Corporation determines is in the best interests 

of the depository institution, its depositors, or the Corporation. 

(K) UTILIZATION OF PRIVATE SECTOR.—In carrying out 

its responsibilities in the management and disposition of 

assets from insured depository institutions, as conservator, 

receiver, or in its corporate capacity, the Corporation shall 

utilize the services of private persons, including real estate 

and loan portfolio asset management, property management, auction marketing, legal, and brokerage services, 

only if such services are available in the private sector and 

the Corporation determines utilization of such services is 

the most practicable, efficient, and cost effective. 

(3) AUTHORITY OF RECEIVER TO DETERMINE CLAIMS.— 

(A) IN GENERAL.—The Corporation may, as receiver, 

determine claims in accordance with the requirements of 

this subsection and regulations prescribed under paragraph (4). 

(B) NOTICE REQUIREMENTS.—The receiver, in any case 

involving the liquidation or winding up of the affairs of a 

closed depository institution, shall— 

(i) promptly publish a notice to the depository 

institution's creditors to present their claims, together 

with proof, to the receiver by a date specified in the 

notice which shall be not less than 90 days after the 

publication of such notice; and 

(ii) republish such notice approximately 1 month 

and 2 months, respectively, after the publication under 

clause (i). 

(C) MAILIN G REQUIRED.—The receiver shall mail a notice similar to the notice published under subparagraph 

(B)(i) at the time of such publication to any creditor shown 

on the institution's books— 

(i) at the creditor's last address appearing in such 

books; or 

(ii) upon discovery of the name and address of a 

claimant not appearing on the institution's books 

within 30 days after the discovery of such name and 

address. 

(4) RULEMAKING AUTHORITY RELATING TO DETERMINATION 

OF CLAIMS.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

575 

(A) IN GENERAL.—The Corporation may prescribe regulations regarding the allowance or disallowance of claims 

by the receiver and providing for administrative determination of claims and review of such determination. 

(B) FINA L SETTLEMENT PAYMENT PROCEDURE.— 

(i) I N GENERAL.—In the handling of receiverships 

of insured depository institutions, to maintain essential liquidity and to prevent financial disruption, the 

Corporation may, after the declaration of an institution's insolvency, settle all uninsured and unsecured 

claims on the receivership with a final settlement payment which shall constitute full payment and disposition of the Corporation's obligations to such claimants. 

(ii) FINAL SETTLEMENT PAYMENT.—For purposes of 

clause (i), a final settlement payment shall be payment of an amount equal to the product of the final 

settlement payment rate and the amount of the uninsured and unsecured claim on the receivership; and 

(iii) FINA L SETTLEMENT PAYMENT RATE.—For purposes of clause (ii), the final settlement payment rate 

shall be a percentage rate reflecting an average of the 

Corporation's receivership recovery experience, determined by the Corporation in such a way that over 

such time period as the Corporation may deem appropriate, the Corporation in total will receive no more or 

less than it would have received in total as a general 

creditor standing in the place of insured depositors in 

each specific receivership. 

(iv) CORPORATION AUTHORITY.—The Corporation 

may undertake such supervisory actions and promulgate such regulations as may be necessary to assure 

that the requirements of this section can be implemented with respect to each insured depository institution in the event of its insolvency. 

(5) PROCEDURES FOR DETERMINATION OF CLAIMS.— 

(A) DETERMINATION PERIOD.— 

(i) IN GENERAL.—Before the end of the 180-day period beginning on the date any claim against a depository institution is filed with the Corporation as receiver, the Corporation shall determine whether to 

allow or disallow the claim and shall notify the claimant of any determination with respect to such claim. 

(ii) EXTENSION OF TIME.—Th e period described in 

clause (i) may be extended by a written agreement between the claimant and the Corporation. 

(iii) MAILIN G OF NOTICE SUFFICIENT.—The requirements of clause (i) shall be deemed to be satisfied if 

the notice of any determination with respect to any 

claim is mailed to the last address of the claimant 

which appears— 

(i) on the depository institution's books; 

(ii) in the claim filed by the claimant; or 

(iii) in documents submitted in proof of the 

claim. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 576 

(iv) CONTENTS OF NOTICE OF DISALLOWANCE.—If 

any claim filed under clause (i) is disallowed, the notice to the claimant shall contain— 

(I) a statement of each reason for the disallowance; and 

(ii) the procedures available for obtaining 

agency review of the determination to disallow the 

claim or judicial determination of the claim. 

(B) ALLOWANCE OF PROVEN CLAIMS.—The receiver 

shall allow any claim received on or before the date specified in the notice published under paragraph (3)(B)(i) by 

the receiver from any claimant which is proved to the satisfaction of the receiver. 

(C) DISALLOWANCE OF CLAIMS FILED AFTER END OF FILI NG PERIOD.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

claims filed after the date specified in the notice published under paragraph (3)(B)(i) shall be disallowed 

and such disallowance shall be final. 

(ii) CERTAIN EXCEPTIONS.—Clause (i) shall not 

apply with respect to any claim filed by any claimant 

after the date specified in the notice published under 

paragraph (3)(B)(i) and such claim may be considered 

by the receiver if— 

(i) the claimant did not receive notice of the 

appointment of the receiver in time to file such 

claim before such date; and 

(ii) such claim is filed in time to permit payment of such claim. 

( D ) AUTHORITY TO DISALLOW CLAIMS.— 

(i) IN GENERAL.—The receiver may disallow any 

portion of any claim by a creditor or claim of security, 

preference, or priority which is not proved to the satisfaction of the receiver. 

(ii) PAYMENTS TO LESS THA N FULLY SECURED 

CREDITORS.—In the case of a claim of a creditor 

against an insured depository institution which is secured by any property or other asset of such institution, any receiver appointed for any insured depository 

institution— 

(i) may treat the portion of such claim which 

exceeds an amount equal to the fair market value 

of such property or other asset as an unsecured 

claim against the institution; and 

(ii) may not make any payment with respect 

to such unsecured portion of the claim other than 

in connection with the disposition of all claims of 

unsecured creditors of the institution. 

(iii) EXCEPTIONS.—No provision of this paragraph 

shall apply with respect to— 

(I) any extension of credit from any Federal 

home loan bank or Federal Reserve bank to any 

insured depository institution; or 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

577 

(ii) any security interest in the assets of the 

institution securing any such extension of credit. 

( E) N O JUDICIAL REVIEW OF DETERMINATION PURSUANT 

TO SUBPARAGRAPH (D).—N o court may review the Corporation's determination pursuant to subparagraph (D) to disallow a claim. 

( F ) LEGAL EFFECT OF FILING.— 

(i) STATUTE OF LIMITATION TOLLED.—For purposes 

of any applicable statute of limitations, the filing of a 

claim with the receiver shall constitute a commencement of an action. 

(ii) N O PREJUDICE TO OTHER ACTIONS.—Subject to 

paragraph (12), the filing of a claim with the receiver 

shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver. 

(6) PROVISION FOR AGENCY REVIEW OR JUDICIAL DETERMINATION OF CLAIMS.— 

(A) IN GENERAL.—Before the end of the 60-day period 

beginning on the earlier of— 

(i) the end of the period described in paragraph 

(5)(A)(i) with respect to any claim against a depository 

institution for which the Corporation is receiver; or 

(ii) the date of any notice of disallowance of such 

claim pursuant to paragraph (5)(A)(i), 

the claimant may request administrative review of the 

claim in accordance with subparagraph (A) or (B) of paragraph (7) or file suit on such claim (or continue an action 

commenced before the appointment of the receiver) in the 

district or territorial court of the United States for the district within which the depository institution's principal 

place of business is located or the United States District 

Court for the District of Columbia (and such court shall 

have jurisdiction to hear such claim). 

(B) STATUTE OF LIMITATIONS.—If any claimant fails 

to— 

(i) request administrative review of any claim in 

accordance with subparagraph (A) or (B) of paragraph 

(7); or 

(ii) file suit on such claim (or continue an action 

commenced before the appointment of the receiver), 

before the end of the 60-day period described in subparagraph (A), the claim shall be deemed to be disallowed 

(other than any portion of such claim which was allowed 

by the receiver) as of the end of such period, such disallowance shall be final, and the claimant shall have no further 

rights or remedies with respect to such claim. 

(7) REVIEW OF CLAIMS.— 

(A) ADMINISTRATIVE HEARING.—If any claimant requests review under this subparagraph in lieu of filing or 

continuing any action under paragraph (6) and the Corporation agrees to such request, the Corporation shall consider the claim after opportunity for a hearing on the 

record. The final determination of the Corporation with re-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 578 

spect to such claim shall be subject to judicial review 

under chapter 7 of title 5, United States Code. 

( B) OTHER REVIEW PROCEDURES.— 

(i) IN GENERAL.—The Corporation shall also establish such alternative dispute resolution processes as 

may be appropriate for the resolution of claims filed 

under paragraph (5)(A)(i). 

(ii) CRITERIA.—I n establishing alternative dispute 

resolution processes, the Corporation shall strive for 

procedures which are expeditious, fair, independent, 

and low cost. 

(iii) VOLUNTARY BINDING OR NONBINDING PROCEDURES.—The Corporation may establish both binding 

and nonbinding processes, which may be conducted by 

any government or private party, but all parties, including the claimant and the Corporation, must agree 

to the use of the process in a particular case. 

(iv) CONSIDERATION OF INCENTIVES.—The Corporation shall seek to develop incentives for claimants to 

participate in the alternative dispute resolution 

process. 

(8) EXPEDITED DETERMINATION OF CLAIMS.— 

(A) ESTABLISHMENT REQUIRED.—The Corporation shall 

establish a procedure for expedited relief outside of the 

routine claims process established under paragraph (5) for 

claimants who— 

(i) allege the existence of legally valid and enforceable or perfected security interests in assets of any 

depository institution for which the Corporation has 

been appointed receiver; and 

(ii) allege that irreparable injury will occur if the 

routine claims procedure is followed. 

(B) DETERMINATION PERIOD.—Before the end of th e 90-

day period beginning on the date any claim is filed in 

accordance with the procedures established pursuant to 

subparagraph (A), the Corporation shall— 

(i) determine— 

(I) whether to allow or disallow such claim; or 

(II) whether such claim should be determined 

pursuant to the procedures established pursuant 

to paragraph (5); and 

(ii) notify the claimant of the determination, and 

if the claim is disallowed, provide a statement of each 

reason for the disallowance and the procedure for obtaining agency review or judicial determination. 

( C) PERIOD FOR FILING OR RENEWING SUIT.—An y 

claimant who files a request for expedited relief shall be 

permitted to file a suit, or to continue a suit filed before 

the appointment of the receiver, seeking a determination 

of the claimant's rights with respect to such security interest after the earlier of— 

(i) the end of the 90-day period beginning on the 

date of the filing of a request for expedited relief; or 

(ii) the date the Corporation denies the claim. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

579 

(D) STATUTE OF LIMITATIONS.—If an action described 

in subparagraph (C) is not filed, or the motion to renew a 

previously filed suit is not made, before the end of the 30-

day period beginning on the date on which such action or 

motion may be filed in accordance with subparagraph (B), 

the claim shall be deemed to be disallowed as of the end 

of such period (other than any portion of such claim which 

was allowed by the receiver), such disallowance shall be 

final, and the claimant shall have no further rights or remedies with respect to such claim. 

( E) LEGAL EFFECT OF FILING.— 

(i) STATUTE OF LIMITATION TOLLED.—For purposes 

of any applicable statute of limitations, the filing of a 

claim with the receiver shall constitute a commencement of an action. 

(ii) N o PREJUDICE TO OTHER ACTIONS.—Subject to 

paragraph (12), the filing of a claim with the receiver 

shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver. 

(9) AGREEMENT AS BASIS OF CLAIM.— 

(A) REQUIREMENTS.—Except as provided in subparagraph (B), any agreement which does not meet the requirements set forth in section 13(e) shall not form the basis of, 

or substantially comprise, a claim against the receiver or 

the Corporation. 

( B) EXCEPTION TO CONTEMPORANEOUS EXECUTION 

REQUIREMENT.—Notwithstanding section 13(e)(2), any 

agreement relating to an extension of credit between a 

Federal home loan bank or Federal Reserve bank and any 

insured depository institution which was executed before 

the extension of credit by such bank to such institution 

shall be treated as having been executed contemporaneously with such extension of credit for purposes of subparagraph (A). 

(10 ) PAYMENT OF CLAIMS.— 

(A) IN GENERAL.—The receiver may, in the receiver's 

discretion and to the extent funds are available, pay creditor claims which are allowed by the receiver, approved by 

the Corporation pursuant to a final determination pursuant to paragraph (7) or (8), or determined by the final 

judgment of any court of competent jurisdiction in such 

manner and amounts as are authorized under this Act. 

(B) PAYMENT OF DIVIDENDS ON CLAIMS.—The receiver 

may, in the receiver's sole discretion, pay dividends on 

proved claims at any time, and no liability shall attach to 

the Corporation (in such Corporation's corporate capacity 

or as receiver), by reason of any such payment, for failure 

to pay dividends to a claimant whose claim is not proved 

at the time of any such payment. 

( C) RULEMAKING AUTHORITY OF CORPORATION.—The 

Corporation may prescribe such rules, including definitions 

of terms, as it deems appropriate to establish a single uniform interest rate for or to make payments of post insol-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 80 

vency interest to creditors holding proven claims against 

the receivership estates of insured Federal or State depository institutions following satisfaction by the receiver of 

the principal amount of all creditor claims. 

(11 ) DEPOSITOR PREFERENCE.— 

(A) IN GENERAL.—Subject to section 5(e)(2)(C), 

amounts realized from the liquidation or other resolution 

of any insured depository institution by any receiver appointed for such institution shall be distributed to pay 

claims (other than secured claims to the extent of any such 

security) in the following order of priority: 

(i) Administrative expenses of the receiver. 

(ii) Any deposit liability of the institution. 

(iii) Any other general or senior liability of the 

institution (which is not a liability described in clause 

(iv) or (v)). 

(iv) Any obligation subordinated to depositors or 

general creditors (which is not an obligation described 

in clause (v)). 

(v) Any obligation to shareholders or members 

arising as a result of their status as shareholders or 

members (including any depository institution holding 

company or any shareholder or creditor of such company). 

( B) EFFEC T ON STATE LAW.— 

(i) I N GENERAL.—The provisions of subparagraph 

(A) shall not supersede the law of any State except to 

the extent such law is inconsistent with the provisions 

of such subparagraph, and then only to the extent of 

the inconsistency. 

(ii) PROCEDURE FOR DETERMINATION OF INCONSISTENCY.—Upon the Corporation's own motion or upon 

the request of any person with a claim described in 

subparagraph (A) or any State which is submitted to 

the Corporation in accordance with procedures which 

the Corporation shall prescribe, the Corporation shall 

determine whether any provision of the law of any 

State is inconsistent with any provision of subparagraph (A) and the extent of any such inconsistency. 

(iii) JUDICIA L REVIEW.—The final determination of 

the Corporation under clause (ii) shall be subject to judicial review under chapter 7 of title 5, United States 

Code. 

(C) ACCOUNTING REPORT.—Any distribution by the 

Corporation in connection with any claim described in subparagraph (A)(v) shall be accompanied by the accounting 

report required under paragraph (15)(B). 

(12 ) SUSPENSION OF LEGAL ACTIONS.— 

(A) IN GENERAL.—After the appointment of a conservator or receiver for an insured depository institution, the 

conservator or receiver may request a stay for a period not 

to exceed— 

(i) 45 days, in the case of any conservator; and 

(ii) 90 days, in the case of any receiver, 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

581 

in any judicial action or proceeding to which such institution is or becomes a party. 

(B) GRANT OF STAY BY ALL COURTS REQUIRED.—Upo n 

receipt of a request by any conservator or receiver pursuant to subparagraph (A) for a stay of any judicial action 

or proceeding in any court with jurisdiction of such action 

or proceeding, the court shall grant such stay as to all parties. 

(13) ADDITIONAL RIGHTS AND DUTIES.— 

(A) PRIOR FINAL ADJUDICATION.—The Corporation 

shall abide by any final unappealable judgment of any 

court of competent jurisdiction which was rendered before 

the appointment of the Corporation as conservator or receiver. 

(B) RIGHTS AND REMEDIES OF CONSERVATOR OR RECEIVER.—In the event of any appealable judgment, the 

Corporation as conservator or receiver shall— 

(i) have all the rights and remedies available to 

the insured depository institution (before the appointment of such conservator or receiver) and the Corporation in its corporate capacity, including removal to 

Federal court and all appellate rights; and 

(ii) not be required to post any bond in order to 

pursue such remedies. 

(C) N O ATTACHMENT OR EXECUTION.—N o attachment 

or execution may issue by any court upon assets in the 

possession of the receiver. 

(D) LIMITATION ON JUDICIAL REVIEW.—Excep t as otherwise provided in this subsection, no court shall have jurisdiction over— 

(i) any claim or action for payment from, or any 

action seeking a determination of rights with respect 

to, the assets of any depository institution for which 

the Corporation has been appointed receiver, including 

assets which the Corporation may acquire from itself 

as such receiver; or 

(ii) any claim relating to any act or omission of 

such institution or the Corporation as receiver. 

(E) DISPOSITION OF ASSETS.—In exercising any right, 

power, privilege, or authority as conservator or receiver in 

connection with any sale or disposition of assets of any insured depository institution for which the Corporation has 

been appointed conservator or receiver, including any sale 

or disposition of assets acquired by the Corporation under 

section 13(d)(1), the Corporation shall conduct its operations in a manner which— 

(i) maximizes the net present value return from 

the sale or disposition of such assets; 

(ii) minimizes the amount of any loss realized in 

the resolution of cases; 

(iii) ensures adequate competition and fair and 

consistent treatment of offerors; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 82 

(iv) prohibits discrimination on the basis of race, 

sex, or ethnic groups in the solicitation and consideration of offers; and 

(v) maximizes the preservation of the availability 

and affordability of residential real property for lowand moderate-income individuals. 

(14) STATUTE OF LIMITATIONS FOR ACTIONS BROUGHT BY 

CONSERVATOR OR RECEIVER.— 

(A) IN GENERAL.—Notwithstanding any provision of 

any contract, the applicable statute of limitations with regard to any action brought by the Corporation as conservator or receiver shall be— 

(i) in the case of any contract claim, the longer 

of— 

(I) the 6-year period beginning on the date the 

claim accrues; or 

(II) the period applicable under State law; and 

(ii) in the case of any tort claim (other than a 

claim which is subject to section 21A(b)(14) of the Federal Home Loan Bank Act), the longer of— 

(I) the 3-year period beginning on the date the 

claim accrues; or 

(II) the period applicable under State law. 

(B) DETERMINATION OF THE DATE ON WHIC H A CLAIM 

ACCRUES.—For purposes of subparagraph (A), the date on 

which the statute of limitations begins to run on any claim 

described in such subparagraph shall be the later of— 

(i) the date of the appointment of the Corporation 

as conservator or receiver; or 

(ii) the date on which the cause of action accrues. 

( C) REVIVAL OF EXPIRED STATE CAUSES OF ACTION.— 

(i) I N GENERAL.—In the case of any tort claim described in clause (ii) for which the statute of limitation 

applicable under State law with respect to such claim 

has expired not more than 5 years before the appointment of the Corporation as conservator or receiver, the 

Corporation may bring an action as conservator or receiver on such claim without regard to the expiration 

of the statute of limitation applicable under State law. 

(ii) CLAIMS DESCRIBED.—A tort claim referred to in 

clause (i) is a claim arising from fraud, intentional 

misconduct resulting in unjust enrichment, or intentional misconduct resulting in substantial loss to the 

institution. 

(15) ACCOUNTING AND RECORDKEEPING REQUIREMENTS.— 

(A) IN GENERAL.—The Corporation as conservator or 

receiver shall, consistent with the accounting and reporting practices and procedures established by the Corporation, maintain a full accounting of each conservatorship 

and receivership or other disposition of institutions in default. 

(B) ANNUA L ACCOUNTING OR REPORT.—Wit h respect to 

each conservatorship or receivership to which the Corporation was appointed, the Corporation shall make an annual 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

583 

accounting or report, as appropriate, available to the Secretary of the Treasury, the Comptroller General of the 

United States, and the authority which appointed the 

Corporation as conservator or receiver. 

(C) AVAILABILITY OF REPORTS.—Any report prepared 

pursuant to subparagraph (B) shall be made available by 

the Corporation upon request to any shareholder of the 

depository institution for which the Corporation was appointed conservator or receiver or any other member of the 

public. 

( D ) RECORDKEEPING REQUIREMENT.—Afte r th e end of 

the 6-year period beginning on the date the Corporation is 

appointed as receiver of an insured depository institution, 

the Corporation may destroy any records of such institution which the Corporation, in the Corporation's discretion, 

determines to be unnecessary unless directed not to do so 

by a court of competent jurisdiction or governmental 

agency, or prohibited by law. 

(16) CONTRACTS WIT H STATE HOUSING FINANCE AUTHORITIES.— 

(A) IN GENERAL.—The Corporation may enter into contracts with any State housing finance authority for the 

sale of mortgage-related assets (as such terms are defined 

in section 1301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989) of any depository 

institution in default (including assets and liabilities associated with any trust business), such contracts to be effective in accordance with their terms without any further 

approval, assignment, or consent with respect thereto. 

(B) FACTORS TO CONSIDER.—In evaluating the disposition of mortgage related assets to any State housing finance authority the Corporation shall consider— 

(i) the State housing finance authority's ability to 

acquire and service current, delinquent, and defaulted 

mortgage related assets; 

(ii) the State housing finance authority's ability to 

further national housing policies; 

(iii) the State housing finance authority's sensitivity to the impact of the sale of mortgage related assets upon the State and local communities; 

(iv) the costs to the Federal Government associated with alternative ownership or disposition of the 

mortgage related assets; 

(v) the minimization of future guaranties which 

may be required of the Federal Government; 

(vi) the maximization of mortgage related asset 

values; and 

(vii) the utilization of institutions currently established in mortgage related asset market activities. 

(17) FRAUDULENT TRANSFERS.— 

(A) IN GENERAL.—The Corporation, as conservator or 

receiver for any insured depository institution, and any 

conservator appointed by the Comptroller of the Currency 

or the Director of the Office of Thrift Supervision may 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 84 

avoid a transfer of any interest of an institution-affiliated 

party, or any person who the Corporation or conservator 

determines is a debtor of the institution, in property, or 

any obligation incurred by such party or person, that was 

made within 5 years of the date on which the Corporation 

or conservator was appointed conservator or receiver if 

such party or person voluntarily or involuntarily made 

such transfer or incurred such liability with the intent to 

hinder, delay, or defraud the insured depository institution, the Corporation or other conservator, or any other 

appropriate Federal banking agency. 

(B) RIGH T OF RECOVERY.—To the extent a transfer is 

avoided under subparagraph (A), the Corporation or any 

conservator described in such subparagraph may recover, 

for the benefit of the insured depository institution, the 

property transferred, or, if a court so orders, the value of 

such property (at the time of such transfer) from— 

(i) the initial transferee of such transfer or the 

institution-affiliated party or person for whose benefit 

such transfer was made; or 

(ii) any immediate or mediate transferee of any 

such initial transferee. 

(C) RIGHTS OF TRANSFEREE OR OBLIGEE.—The Corporation or any conservator described in subparagraph (A) may 

not recover under subparagraph (B) from— 

(i) any transferee that takes for value, including 

satisfaction or securing of a present or antecedent 

debt, in good faith; or 

(ii) any immediate or mediate good faith transferee of such transferee. 

(D) RIGHTS UNDER THIS PARAGRAPH.—The rights under 

this paragraph of the Corporation and any conservator described in subparagraph (A) shall be superior to any rights 

of a trustee or any other party (other than any party 

which is a Federal agency) under title 11, United States 

Code. 

(18) ATTACHMENT OF ASSETS AND OTHER INJUNCTIVE RELIEF.—Subject to paragraph (19), any court of competent jurisdiction may, at the request of— 

(A) the Corporation (in the Corporation's capacity as 

conservator or receiver for any insured depository institution or in the Corporation's corporate capacity with respect 

to any asset acquired or liability assumed by the Corporation under section 11, 12, or 13); or 

(B) any conservator appointed by the Comptroller of 

the Currency or the Director of the Office of Thrift Supervision, 

issue an order in accordance with Rule 65 of the Federal Rules 

of Civil procedure, including an order placing the assets of any 

person designated by the Corporation or such conservator 

under the control of the court and appointing a trustee to hold 

such assets. 

(19) STANDARDS.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

585 

(A) SHOWING.—Rule 65 of the Federal Rules of Civil 

Procedure shall apply with respect to any proceeding 

under paragraph (18) without regard to the requirement of 

such rule that the applicant show that the injury, loss, or 

damage is irreparable and immediate. 

(B) STATE PROCEEDING.—If, in the case of any proceeding in a State court, the court determines that rules 

of civil procedure available under the laws of such State 

provide substantially similar protections to such party's 

right to due process as Rule 65 (as modified with respect 

to such proceeding by subparagraph (A)), the relief sought 

by the Corporation or a conservator pursuant to paragraph 

(18) may be requested under the laws of such State. 

(20) TREATMENT OF CLAIMS ARISING FROM BREACH OF CONTRACTS EXECUTED BY THE RECEIVER OR CONSERVATOR.—Notwithstanding any other provision of this subsection, any final 

and unappealable judgment for monetary damages entered 

against a receiver or conservator for an insured depository 

institution for the breach of an agreement executed or approved by such receiver or conservator after the date of its 

appointment shall be paid as an administrative expense of the 

receiver or conservator. Nothing in this paragraph shall be 

construed to limit the power of a receiver or conservator to 

exercise any rights under contract or law, including to terminate, breach, cancel, or otherwise discontinue such agreement. 

(e) PROVISIONS RELATING TO CONTRACTS ENTERED INTO BEFORE APPOINTMENT OF CONSERVATOR OR RECEIVER.— 

(1) AUTHORITY TO REPUDIATE CONTRACTS.—In addition to 

any other rights a conservator or receiver may have, the conservator or receiver for any insured depository institution may 

disaffirm or repudiate any contract or lease— 

(A) to which such institution is a party; 

(B) the performance of which the conservator or receiver, in the conservator's or receiver's discretion, determines to be burdensome; and 

(C) the disaffirmance or repudiation of which the conservator or receiver determines, in the conservator's or receiver's discretion, will promote the orderly administration 

of the institution's affairs. 

(2) TIMIN G OF REPUDIATION.—The conservator or receiver 

appointed for any insured depository institution in accordance 

with subsection (c) shall determine whether or not to exercise 

the rights of repudiation under this subsection within a reasonable period following such appointment. 

(3) CLAIMS FOR DAMAGES FOR REPUDIATION.— 

(A) IN GENERAL.—Except as otherwise provided in subparagraph (C) and paragraphs (4), (5), and (6), the liability 

of the conservator or receiver for the disaffirmance or 

repudiation of any contract pursuant to paragraph (1) 

shall be— 

(i) limited to actual direct compensatory damages; 

and 

(ii) determined as of— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 86 

(i) the date of the appointment of the conservator or receiver; or 

(ii) in the case of any contract or agreement 

referred to in paragraph (8), the date of the 

disaffirmance or repudiation of such contract or 

agreement. 

(B) N O LIABILITY FOR OTHER DAMAGES.—For purposes 

of subparagraph (A), the term ''actual direct compensatory 

damages'' does not include— 

(i) punitive or exemplary damages; 

(ii) damages for lost profits or opportunity; or 

(iii) damages for pain and suffering. 

( C) MEASURE OF DAMAGES FOR REPUDIATION OF FINANCIAL CONTRACTS.—In the case of any qualified financial 

contract or agreement to which paragraph (8) applies, compensatory damages shall be— 

(i) deemed to include normal and reasonable costs 

of cover or other reasonable measures of damages utilized in the industries for such contract and agreement 

claims; and 

(ii) paid in accordance with this subsection and 

subsection (i) except as otherwise specifically provided 

in this section. 

(4) LEASES UNDER WHIC H THE INSTITUTION IS THE LESSEE.— 

(A) I N GENERAL.—If the conservator or receiver disaffirms or repudiates a lease under which the insured 

depository institution was the lessee, the conservator or receiver shall not be liable for any damages (other than damages determined pursuant to subparagraph (B)) for the 

disaffirmance or repudiation of such lease. 

(B) PAYMENTS OF RENT.—Notwithstanding subparagraph (A), the lessor under a lease to which such subparagraph applies shall— 

(i) be entitled to the contractual rent accruing before the later of the date— 

(I) the notice of disaffirmance or repudiation 

is mailed; or 

(ii) the disaffirmance or repudiation becomes 

effective, 

unless the lessor is in default or breach of the terms 

of the lease; 

(ii) have no claim for damages under any acceleration clause or other penalty provision in the lease; and 

(iii) have a claim for any unpaid rent, subject to 

all appropriate offsets and defenses, due as of the date 

of the appointment which shall be paid in accordance 

with this subsection and subsection (i). 

(5) LEASES UNDER WHIC H THE INSTITUTION IS THE LESSOR.— 

(A) I N GENERAL.—If the conservator or receiver repudiates an unexpired written lease of real property of the insured depository institution under which the institution is 

the lessor and the lessee is not, as of the date of such repu-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

587 

diation, in default, the lessee under such lease may 

either— 

(i) treat the lease as terminated by such repudiation; or 

(ii) remain in possession of the leasehold interest 

for the balance of the term of the lease unless the lessee defaults under the terms of the lease after the 

date of such repudiation. 

(B) PROVISIONS APPLICABLE TO LESSEE REMAINING I N 

POSSESSION.—If any lessee under a lease described in subparagraph (A) remains in possession of a leasehold interest 

pursuant to clause (ii) of such subparagraph— 

(i) the lessee— 

(I) shall continue to pay the contractual rent 

pursuant to the terms of the lease after the date 

of the repudiation of such lease; 

(II) may offset against any rent payment 

which accrues after the date of the repudiation of 

the lease, any damages which accrue after such 

date due to the nonperformance of any obligation 

of the insured depository institution under the 

lease after such date; and 

(ii) the conservator or receiver shall not be liable 

to the lessee for any damages arising after such date 

as a result of the repudiation other than the amount 

of any offset allowed under clause (i)(II). 

(6) CONTRACTS FOR THE SALE OF REAL PROPERTY.— 

(A) I N GENERAL.—If the conservator or receiver repudiates any contract (which meets the requirements of each 

paragraph of section 13(e)) for the sale of real property and 

the purchaser of such real property under such contract is 

in possession and is not, as of the date of such repudiation, 

in default, such purchaser may either— 

(i) treat the contract as terminated by such repudiation; or 

(ii) remain in possession of such real property. 

(B) PROVISIONS APPLICABLE TO PURCHASER REMAINING 

I N POSSESSION.—If any purchaser of real property under 

any contract described in subparagraph (A) remains in 

possession of such property pursuant to clause (ii) of such 

subparagraph— 

(i) the purchaser— 

(I) shall continue to make all payments due 

under the contract after the date of the repudiation of the contract; and 

(II) may offset against any such payments any 

damages which accrue after such date due to the 

nonperformance (after such date) of any obligation 

of the depository institution under the contract; 

and 

(ii) the conservator or receiver shall— 

(I) not be liable to the purchaser for any damages arising after such date as a result of the 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 588 

repudiation other than the amount of any offset 

allowed under clause (i)(ii); 

(ii) deliver title to the purchaser in accordance with the provisions of the contract; and 

(iii) have no obligation under the contract 

other than the performance required under subclause (ii). 

(C) ASSIGNMENT AND SALE ALLOWED.— 

(i) I N GENERAL.—No provision of this paragraph 

shall be construed as limiting the right of the conservator or receiver to assign the contract described in 

subparagraph (A) and sell the property subject to the 

contract and the provisions of this paragraph. 

(ii) N o LIABILITY AFTER ASSIGNMENT AND SALE.— 

if an assignment and sale described in clause (i) is 

consummated, the conservator or receiver shall have 

no further liability under the contract described in 

subparagraph (A) or with respect to the real property 

which was the subject of such contract. 

(7) PROVISIONS APPLICABLE TO SERVICE CONTRACTS.— 

( A) SERVICES PERFORMED BEFORE APPOINTMENT.—In 

the case of any contract for services between any person 

and any insured depository institution for which the Corporation has been appointed conservator or receiver, any 

claim of such person for services performed before the 

appointment of the conservator or the receiver shall be— 

(i) a claim to be paid in accordance with subsections (d) and (i); and 

(ii) deemed to have arisen as of the date the conservator or receiver was appointed. 

(B) SERVICES PERFORMED AFTER APPOINTMENT AND 

PRIOR TO REPUDIATION.—If, in the case of any contract for 

services described in subparagraph (A), the conservator or 

receiver accepts performance by the other person before 

the conservator or receiver makes any determination to 

exercise the right of repudiation of such contract under 

this section— 

(i) the other party shall be paid under the terms 

of the contract for the services performed; and 

(ii) the amount of such payment shall be treated 

as an administrative expense of the conservatorship or 

receivership. 

( C) ACCEPTANCE OF PERFORMANCE NO BAR TO SUBSEQUENT REPUDIATION.—The acceptance by any conservator 

or receiver of services referred to in subparagraph (B) in 

connection with a contract described in such subparagraph 

shall not affect the right of the conservator or receiver to 

repudiate such contract under this section at any time 

after such performance. 

(8) CERTAIN QUALIFIED FINANCIAL CONTRACTS.— 

(A) RIGHTS OF PARTIES TO CONTRACTS.—Subject to 

paragraph (10) of this subsection and notwithstanding any 

other provision of this Act (other than subsection (d)(9) of 

this section and section 13(e)), any other Federal law, or 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

589 

the law of any State, no person shall be stayed or prohibited from exercising— 

(i) any right to cause the termination or liquidation of any qualified financial contract with an insured 

depository institution which arises upon the appointment of the Corporation as receiver for such institution at any time after such appointment; 

(ii) any right under any security arrangement relating to any contract or agreement described in clause 

(i); or 

(iii) any right to offset or net out any termination 

value, payment amount, or other transfer obligation 

arising under or in connection with 1 or more contracts and agreements described in clause (i), including any master agreement for such contracts or agreements. 

( B) APPLICABILITY OF OTHER PROVISIONS.—Subsection 

(d)(12) shall apply in the case of any judicial action or proceeding brought against any receiver referred to in subparagraph (A), or the insured depository institution for 

which such receiver was appointed, by any party to a contract or agreement described in subparagraph (A)(i) with 

such institution. 

( C ) CERTAI N TRANSFERS NOT AVOIDABLE.— 

(i) IN GENERAL.—Notwithstanding paragraph (11), 

the Corporation, whether acting as such or as conservator or receiver of an insured depository institution, 

may not avoid any transfer of money or other property 

in connection with any qualified financial contract 

with an insured depository institution. 

(ii) EXCEPTION FOR CERTAIN TRANSFERS.—Claus e 

(i) shall not apply to any transfer of money or other 

property in connection with any qualified financial 

contract with an insured depository institution if the 

Corporation determines that the transferee had actual 

intent to hinder, delay, or defraud such institution, the 

creditors of such institution, or any conservator or receiver appointed for such institution. 

( D ) CERTAI N CONTRACTS AND AGREEMENTS DEFINED. — 

For purposes of this subsection— 

(i) QUALIFIE D FINANCIAL CONTRACT.—The term 

''qualified financial contract'' means any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar 

agreement that the Corporation determines by regulation to be a qualified financial contract for purposes of 

this paragraph. 

(ii) SECURITIES CONTRACT.—The term ''securities 

contract''— 

(i) has the meaning given to such term in section 741 of title 11, United States Code, except 

that the term ''security'' (as used in such section) 

shall be deemed to include any mortgage loan, any 

mortgage-related security (as defined in section 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 90 

3(a)(41) of the Securities Exchange Act of 1934), 

and any interest in any mortgage loan or mortgage-related security; and 

(ii) does not include any participation in a 

commercial mortgage loan unless the Corporation 

determines by regulation, resolution, or order to 

include any such participation within the meaning 

of such term. 

(iii) COMMODITY CONTRACT.—The term ''commodity contract'' has the meaning given to such term 

in section 761 of title 11, United States Code. 

(iv) FORWARD CONTRACT.—The term ''forward contract'' has the meaning given to such term in section 

101 of title 11, United States Code. 

(v) REPURCHASE AGREEMENT.—The term ''repurchase agreement''— 

(i) has the meaning given to such term in section 101 of title 11, the United States Code, except 

that the items (as described in such section) which 

may be subject to any such agreement shall be 

deemed to include mortgage-related securities (as 

such term is defined in section 3(a)(41) of the 

Securities Exchange Act of 1934), any mortgage 

loan, and any interest in any mortgage loan; and 

(ii) does not include any participation in a 

commercial mortgage loan unless the Corporation 

determines by regulation, resolution, or order to 

include any such participation within the meaning 

of such term. 

(vi) SWAP AGREEMENT.—The term ''swap 

agreement''— 

(i) means any agreement, including the terms 

and conditions incorporated by reference in any 

such agreement, which is a rate swap agreement, 

basis swap, commodity swap, forward rate agreement, interest rate future, interest rate option 

purchased, forward foreign exchange agreement, 

rate cap agreement, rate floor agreement, rate collar agreement, currency swap agreement, crosscurrency rate swap agreement, currency future, or 

currency option purchased or any other similar 

agreement, and 

(II) includes any combination of such agreements and any option to enter into any such 

agreement. 

(vii) TREATMENT OF MASTER AGREEMENT AS 1 SWAP 

AGREEMENT.—Any master agreement for any agreements described in clause (vi)(i) together with all supplements to such master agreement shall be treated as 

1 swap agreement. 

(viii) TRANSFER.—The term ''transfer'' has the 

meaning given to such term in section 101 of title 11, 

United States Code. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

591 

( E) CERTAIN PROTECTIONS I N EVENT OF APPOINTMENT 

OF CONSERVATOR.—Notwithstanding any other provision of 

this Act (other than paragraph (12) of this subsection, subsection (d)(9) of this section, and section 13(e) of this Act), 

any other Federal law, or the law of any State, no person 

shall be stayed or prohibited from exercising— 

(i) any right such person has to cause the termination, liquidation, or acceleration of any qualified 

financial contract with a depository institution in a 

conservatorship based upon a default under such 

financial contract which is enforceable under applicable noninsolvency law; 

(ii) any right under any security arrangement relating to such qualified financial contracts; or 

(iii) any right to offset or net out any termination 

values, payment amounts, or other transfer obligations 

arising under or in connection with such qualified 

financial contracts. 

(9) TRANSFER OF QUALIFIED FINANCIAL CONTRACTS.—In 

making any transfer of assets or liabilities of a depository 

institution in default which includes any qualified financial 

contract, the conservator or receiver for such depository institution shall either— 

(A) transfer to 1 depository institution (other than a 

depository institution in default)— 

(i) all qualified financial contracts between— 

(I) any person or any affiliate of such person; 

and 

(II) the depository institution in default; 

(ii) all claims of such person or any affiliate of 

such person against such depository institution under 

any such contract (other than any claim which, under 

the terms of any such contract, is subordinated to the 

claims of general unsecured creditors of such institution); 

(iii) all claims of such depository institution 

against such person or any affiliate of such person 

under any such contract; and 

(iv) all property securing any claim described in 

clause (ii) or (iii) under any such contract; or 

(B) transfer none of the financial contracts, claims, or 

property referred to in subparagraph (A) (with respect to 

such person and any affiliate of such person). 

(10 ) NOTIFICATION OF TRANSFER.— 

(A) I N GENERAL.—If— 

(i) the conservator or receiver for an insured 

depository institution in default makes any transfer of 

the assets and liabilities of such institution; and 

(ii) the transfer includes any qualified financial 

contract, 

the conservator or receiver shall use such conservator's or 

receiver's best efforts to notify any person who is a party 

to any such contract of such transfer by 12:00, noon (local 

time) on the business day following such transfer. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 92 

(B) BUSINESS DAY DEFINED.—Fo r purposes of this 

paragraph, the term ''business day'' means any day other 

than any Saturday, Sunday, or any day on which either 

the New York Stock Exchange or the Federal Reserve 

Bank of New York is closed. 

(11) CERTAIN SECURITY INTERESTS NOT AVOIDABLE.—No 

provision of this subsection shall be construed as permitting 

the avoidance of any legally enforceable or perfected security 

interest in any of the assets of any depository institution except where such an interest is taken in contemplation of the 

institution's insolvency or with the intent to hinder, delay, or 

defraud the institution or the creditors of such institution. 

(12) AUTHORITY TO ENFORCE CONTRACTS.— 

(A) IN GENERAL.—The conservator or receiver may enforce any contract, other than a director's or officer's liability insurance contract or a depository institution bond, entered into by the depository institution notwithstanding 

any provision of the contract providing for termination, default, acceleration, or exercise of rights upon, or solely by 

reason of, insolvency or the appointment of a conservator 

or receiver. 

(B) CERTAIN RIGHTS NOT AFFECTED.—No provision of 

this paragraph may be construed as impairing or affecting 

any right of the conservator or receiver to enforce or recover under a director's or officer's liability insurance contract or depository institution bond under other applicable 

law. 

(13) EXCEPTION FOR FEDERAL RESERVE AND FEDERAL HOME 

LOAN BANKS.—No provision of this subsection shall apply with 

respect to— 

(A) any extension of credit from any Federal home 

loan bank or Federal Reserve bank to any insured depository institution; or 

(B) any security interest in the assets of the institution securing any such extension of credit. 

(14) SELLING CREDIT CARD ACCOUNTS RECEIVABLE.— 

(A) NOTIFICATION REQUIRED.—A n undercapitalized insured depository institution (as defined in section 38) shall 

notify the Corporation in writing before entering into an 

agreement to sell credit card accounts receivable. 

(B) WAIVE R 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 deposit insurance fund; and 

(ii) provides a written waiver to the selling institution. 

( C) EFFECT OF WAIVER ON SUCCESSORS.— 

(i) IN GENERAL.—If, under subparagraph (B), the 

Corporation has waived its right to repudiate an 

agreement to sell credit card accounts receivable— 

(i) any provision of the agreement that restricts solicitation of a credit card customer of the 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

593 

selling institution, or the use of a credit card customer list of the institution, shall bind any receiver or conservator of the institution; and 

(II) the Corporation shall require any acquirer 

of the selling institution, or of substantially all of 

the selling institution's assets or liabilities, to 

agree to be bound by a provision described in subclause (i) as if the acquirer were the selling institution. 

(ii) EXCEPTION.—Clause (i)(II) does not— 

(i) restrict the acquirer's authority to offer 

any product or service to any person identified 

without using a list of the selling institution's customers in violation of the agreement; 

(ii) require the acquirer to restrict any preexisting relationship between the acquirer and a 

customer; or 

(iii) apply to any transaction in which the 

acquirer acquires only insured deposits. 

(D) WAIVER NOT ACTIONABLE.—The Corporation shall 

not, in any capacity, be liable to any person for damages 

resulting from the waiver of or failure to waive the Corporation's right under this section to repudiate any contract or lease, including an agreement to sell credit card 

accounts receivable. No court shall issue any order affecting any such waiver or failure to waive. 

(E) OTHER AUTHORITY NOT AFFECTED.—This paragraph 

does not limit any other authority of the Corporation to 

waive the Corporation's right to repudiate an agreement or 

lease under this section. 

(15) CERTAIN CREDIT CARD CUSTOMER LISTS PROTECTED.— 

(A) I N GENERAL.—If any insured depository institution 

sells credit card accounts receivable under an agreement 

negotiated at arm's length that provides for the sale of the 

institution's credit card customer list, the Corporation 

shall prohibit any party to a transaction with respect to 

the institution under this section or section 13 from using 

the list, except as permitted under the agreement. 

(B) FRAUDULENT TRANSACTIONS EXCLUDED.—Subparagraph (A) does not limit the Corporation's authority to 

repudiate any agreement entered into with the intent to 

hinder, delay, or defraud the institution, the institution's 

creditors, or the Corporation. 

(f) PAYMENT OF INSURED DEPOSITS.— 

(1) I N 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 depositor, except that— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 5 94 

(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 

(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. 

(2) PROOF OF CLAIMS.—The Corporation, in its discretion, 

may require proof of claims to be filed and may approve or reject such claims for insured deposits. 

(3) RESOLUTION OF DISPUTES.— 

(A) RESOLUTIONS I N ACCORDANCE WIT H CORPORATION 

REGULATIONS.—In the case of any disputed claim relating 

to any insured deposit or any determination of insurance 

coverage with respect to any deposit, the Corporation may 

resolve such disputed claim in accordance with regulations 

prescribed by the Corporation establishing procedures for 

resolving such claims. 

(B) ADJUDICATION OF CLAIMS.—If the Corporation has 

not prescribed regulations establishing procedures for resolving disputed claims, the Corporation may require the 

final determination of a court of competent jurisdiction before paying any such claim. 

(4) REVIEW OF CORPORATION'S DETERMINATION.—Fina l 

determination made by the Corporation shall be reviewable in 

accordance with chapter 7 of title 5, United States Code, by the 

United States Court of Appeals for the District of Columbia or 

the court of appeals for the Federal judicial circuit where the 

principal place of business of the depository institution is located. 

(5) STATUTE OF LIMITATIONS.—Any request for review of a 

final determination by the Corporation shall be filed with the 

appropriate circuit court of appeals not later than 60 days after 

such determination is ordered. 

(g) SUBROGATION OF CORPORATION.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

Federal law, the law of any State, or the constitution of any 

State, the Corporation, upon the payment to any depositor as 

provided in subsection (f) in connection with any insured 

depository institution or insured branch described in such subsection or the assumption of any deposit in such institution or 

branch by another insured depository institution pursuant to 

this section or section 13, shall be subrogated to all rights of 

the depositor against such institution or branch to the extent 

of such payment or assumption. 

(2) DIVIDENDS ON SUBROGATED AMOUNTS.—The subrogation of the Corporation under paragraph (1) with respect to 

any insured depository institution shall include the right on 

the part of the Corporation to receive the same dividends from 

the proceeds of the assets of such institution and recoveries on 

account of stockholders' liability as would have been payable to 

the depositor on a claim for the insured deposit, but such depositor shall retain such claim for any uninsured or 

unassumed portion of the deposit. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

595 

(3) WAIVE R OF CERTAIN CLAIMS.—With respect to any bank 

which closes after May 25, 1938, the Corporation shall waive, 

in favor only of any person against whom stockholders' individual liability may be asserted, any claim on account of such 

liability in excess of the liability, if any, to the bank or its 

creditors, for the amount unpaid upon such stock in such bank; 

but any such waiver shall be effected in such manner and on 

such terms and conditions as will not increase recoveries or 

dividends on account of claims to which the Corporation is not 

subrogated. 

(4) APPLICABILITY OF STATE LAW.—Subject to subsection 

(d)(11), if the Corporation is appointed pursuant to subsection 

(c)(3), or determines not to invoke the authority conferred in 

subsection (c)(4), the rights of depositors and other creditors of 

any State depository institution shall be determined in accordance with the applicable provisions of State law. 

(h) CONDITIONS APPLICABLE T O RESOLUTION PROCEEDINGS.— 

(1) CONSIDERATION OF LOCAL ECONOMIC IMPACT REQUIRED.—The Corporation shall fully consider the adverse economic impact on local communities, including businesses and 

farms, of actions to be taken by it during the administration 

and liquidation of loans of a depository institution in default. 

(2) ACTIONS TO ALLEVIATE ADVERSE ECONOMIC IMPACT TO 

BE CONSIDERED.—The actions which the Corporation shall consider include the release of proceeds from the sale of products 

and services for family living and business expenses and shortening the undue length of the decisionmaking process for the 

acceptance of offers of settlement contingent upon third party 

financing. 

(3) GUIDELINES REQUIRED.—The Corporation shall adopt 

and publish procedures and guidelines to minimize adverse 

economic effects caused by its actions on individual debtors in 

the community. 

(4) FINANCIAL SERVICES INDUSTRY IMPACT ANALYSIS.—After 

the appointment of the Corporation as conservator or receiver 

for any insured depository institution and before taking any action under this section or section 13 in connection with the resolution of such institution, the Corporation shall— 

(A) evaluate the likely impact of the means of resolution, and any action which the Corporation may take in 

connection with such resolution, on the viability of other 

insured depository institutions in the same community; 

and 

(B) take such evaluation into account in determining 

the means for resolving the institution and establishing 

the terms and conditions for any such action. 

(i) VALUATION OF CLAIMS I N DEFAULT.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

Federal law or the law of any State and regardless of the 

method which the Corporation determines to utilize with respect to an insured depository institution in default or in danger of default, including transactions authorized under subsection (n) and section 13(c), this subsection shall govern the 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 596 

rights of the creditors (other than insured depositors) of such 

institution. 

(2) MAXIMU M LIABILITY.—The maximum liability of the 

Corporation, acting as receiver or in any other capacity, to any 

person having a claim against the receiver or the insured 

depository institution for which such receiver is appointed 

shall equal the amount such claimant would have received if 

the Corporation had liquidated the assets and liabilities of 

such institution without exercising the Corporation's authority 

under subsection (n) of this section or section 13. 

(3) ADDITIONAL PAYMENTS AUTHORIZED.— 

(A) IN GENERAL.—The Corporation may, in its discretion and in the interests of minimizing its losses, use its 

own resources to make additional payments or credit additional amounts to or with respect to or for the account of 

any claimant or category of claimants. Notwithstanding 

any other provision of Federal or State law, or the constitution of any State, the Corporation shall not be obligated, as a result of having made any such payment or 

credited any such amount to or with respect to or for the 

account of any claimant or category of claimants, to make 

payments to any other claimant or category of claimants. 

(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. 

(C) MANNE R OF PAYMENT.—The Corporation may 

make the payments or credit the amounts specified in subparagraphs (A) and (B) 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. 

(j) LIMITATION ON COURT ACTION.—Except as provided in this 

section, no court may take any action, except at the request of the 

Board of Directors by regulation or order, to restrain or affect the 

exercise of powers or functions of the Corporation as a conservator 

or a receiver. 

(k) LIABILITY OF DIRECTORS AND OFFICERS.—A director or officer of an insured depository institution may be held personally liable for monetary damages in any civil action by, on behalf of, or 

at the request or direction of the Corporation, which action is prosecuted wholly or partially for the benefit of the Corporation— 

(1) acting as conservator or receiver of such institution, 

(2) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed by such receiver or conservator, or 

(3) acting based upon a suit, claim, or cause of action purchased from, assigned by, or otherwise conveyed in whole or in 

part by an insured depository institution or its affiliate in connection with assistance provided under section 13, 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

597 

for gross negligence, including any similar conduct or conduct that 

demonstrates a greater disregard of a duty of care (than gross negligence) including intentional tortious conduct, as such terms are 

defined and determined under applicable State law. Nothing in this 

paragraph shall impair or affect any right of the Corporation under 

other applicable law. 

(l) DAMAGES.—In any proceeding related to any claim against 

an insured depository institution's director, officer, employee, 

agent, attorney, accountant, appraiser, or any other party employed 

by or providing services to an insured depository institution, recoverable damages determined to result from the improvident or otherwise improper use or investment of any insured depository institution's assets shall include principal losses and appropriate interest. 

(m) NEW BANKS.— 

(1) ORGANIZATION AUTHORIZED.—As soon as possible after 

the default of an insured bank, the Corporation, if it finds that 

it is advisable and in the interest of the depositors of the insured bank in default or the public shall organize a new national bank in the same community as the bank in default to 

assume the insured deposits of such bank in default and otherwise to perform temporarily the functions hereinafter provided 

for. 

(2) ARTICLES OF ASSOCIATION.—The articles of association 

and the organization certificate of the new bank shall be executed by representatives designated by the Corporation. 

(3) CAPITAL STOCK.—No capital stock need be paid in by 

the Corporation. 

(4) EXECUTIVE OFFICER.—The new bank shall not have a 

board of directors, but shall be managed by an executive officer 

appointed by the Board of Directors of the Corporation who 

shall be subject to its directions. 

(5) SUBJECT TO LAWS RELATING TO NATIONAL BANKS.—In 

all other respects the new bank shall be organized in accordance with the then existing provisions of law relating to the 

organization of national banking associations. 

(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 

$100,000 from any depositor. 

(7) INSURED STATUS.—The new bank, without application 

to or approval by the Corporation, shall be an insured depository institution and shall maintain on deposit with the Federal 

Reserve bank of its district reserves in the amount required by 

law for member banks, but it shall not be required to subscribe 

for stock of the Federal Reserve bank. 

(8) INVESTMENTS.—Funds of the new bank shall be kept on 

hand in cash, invested in obligations of the United States or 

obligations guaranteed as to principal and interest by the 

United States, or deposited with the Corporation, any Federal 

Reserve bank, or, to the extent of the insurance coverage on 

any such deposit, an insured depository institution. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 598 

(9) CONDUCT OF BUSINESS.—The new bank, unless otherwise authorized by the Comptroller of the Currency, shall 

transact business only as authorized by this Act and as may 

be incidental to its organization. 

(10) EXEMPT STATUS.—Notwithstanding any other provision of Federal or State law, the new bank, its franchise, property, and income shall be exempt from all taxation now or 

hereafter imposed by the United States, by any territory, 

dependency, or possession thereof, or by any State, county, 

municipality, or local taxing authority. 

(11) TRANSFER OF DEPOSITS.—(A) Upon the organization of 

a new bank, the Corporation shall promptly make available to 

it an amount equal to the estimated insured deposits of such 

bank in default plus the estimated amount of the expenses of 

operating the new bank, and shall determine as soon as possible the amount due each depositor for the depositor's insured 

deposit in the bank in default, and the total expenses of operation of the new bank. 

(B) Upon such determination, the amounts so estimated 

and made available shall be adjusted to conform to the 

amounts so determined. 

(12) EARNINGS.—Earnings of the new bank shall be paid 

over or credited to the Corporation in such adjustment. 

(13) LOSSES.—If any new bank, during the period it continues its status as such, sustains any losses with respect to 

which it is not effectively protected except by reason of being 

an insured bank, the Corporation shall furnish to it additional 

funds in the amount of such losses. 

(14) PAYMENT OF INSURED DEPOSITS.—(A) The new bank 

shall assume as transferred deposits the payment of the insured deposits of such bank in default to each of its depositors. 

(B) Of the amounts so made available, the Corporation 

shall transfer to the new bank, in cash, such sums as may be 

necessary to enable it to meet its expenses of operation and 

immediate cash demands on such transferred deposits, and the 

remainder of such amounts shall be subject to withdrawal by 

the new bank on demand. 

(15) ISSUANCE OF STOCK.—(A) Whenever in the judgment 

of the Board of Directors it is desirable to do so, the Corporation shall cause capital stock of the new bank to be offered for 

sale on such terms and conditions as the Board of Directors 

shall deem advisable in an amount sufficient, in the opinion of 

the Board of Directors, to make possible the conduct of the 

business of the new bank on a sound basis, but in no event less 

than that required by section 5138 of the Revised Statutes for 

the organization of a national bank in the place where such 

new bank is located. 

(B) The stockholders of the insured bank in default shall 

be given the first opportunity to purchase any shares of common stock so offered. 

(16) ISSUANCE OF CERTIFICATE.—Upon proof that an adequate amount of capital stock in the new bank has been subscribed and paid for in cash, the Comptroller of the Currency 

shall require the articles of association and the organization 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

599 

certificate to be amended to conform to the requirements for 

the organization of a national bank, and thereafter, when the 

requirements of law with respect to the organization of a national bank have been complied with, the Comptroller of the 

Currency shall issue to the bank a certificate of authority to 

commence business, and thereupon the bank shall cease to 

have the status of a new bank, shall be managed by directors 

elected by its own shareholders, may exercise all the powers 

granted by law, and shall be subject to all provisions of law relating to national banks. Such bank shall thereafter be an insured national bank, without certification to or approval by the 

Corporation. 

(17) TRANSFER TO OTHER INSTITUTION.—If the capital stock 

of the new bank is not offered for sale, or if an adequate 

amount of capital for such new bank is not subscribed and paid 

for, the Board of Directors may offer to transfer its business to 

any insured depository institution in the same community 

which will take over its assets, assume its liabilities, and pay 

to the Corporation for such business such amount as the Board 

of Directors may deem adequate; or the Board of Directors in 

its discretion may change the location of the new bank to the 

office of the Corporation or to some other place or may at any 

time wind up its affairs as herein provided. 

(18) WINDIN G UP.—Unless the capital stock of the new 

bank is sold or its assets are taken over and its liabilities are 

assumed by an insured depository institution as above provided within 2 years after the date of its organization, the Corporation shall wind up the affairs of such bank, after giving 

such notice, if any, as the Comptroller of the Currency may require, and shall certify to the Comptroller of the Currency the 

termination of the new bank. Thereafter the Corporation shall 

be liable for the obligations of such bank and shall be the 

owner of its assets. 

(19) APPLICABILITY OF CERTAIN LAWS.—The provisions of 

sections 5220 and 5221 of the Revised Statutes shall not apply 

to a new bank under this subsection. 

(n) BRIDGE BANKS.— 

(1) ORGANIZATION.— 

(A) PURPOSE.—When 1 or more insured banks are in 

default, or when the Corporation anticipates that 1 or 

more insured banks may become in default, the Corporation may, in its discretion, organize, and the Office of the 

Comptroller of the Currency shall charter, 1 or more national banks with respect thereto with the powers and attributes of national banking associations, subject to the 

provisions of this subsection, to be referred to as bridge 

banks. 

(B) AUTHORITIES.—Upon the granting of a charter to 

a bridge bank, the bridge bank may— 

(i) assume such deposits of such insured bank or 

banks that is or are in default or in danger of default 

as the Corporation may, in its discretion, determine to 

be appropriate, except that if any insured deposits of 

a bank are assumed, all insured deposits of that bank 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 00 

shall be assumed by the bridge bank or another insured depository institution; 

(ii) assume such other liabilities (including liabilities associated with any trust business) of such insured bank or banks that is or are in default or in 

danger of default as the Corporation may, in its discretion, determine to be appropriate; 

(iii) purchase such assets (including assets associated with any trust business) of such insured bank or 

banks that is or are in default or in danger of default 

as the Corporation may, in its discretion, determine to 

be appropriate; and 

(iv) perform any other temporary function which 

the Corporation may, in its discretion, prescribe in 

accordance with this Act. 

(C) ARTICLES OF ASSOCIATION.—The articles of association and organization certificate of a bridge bank as approved by the Corporation shall be executed by 3 representatives designated by the Corporation. 

(D) INTERI M DIRECTORS.—A bridge bank shall have an 

interim board of directors consisting of not fewer than 5 

nor more than 10 members appointed by the Corporation. 

(E) NATIONAL BANK.—A bridge bank shall be organized as a national bank. 

(2) CHARTERING.— 

(A) CONDITIONS.—A national bank may be chartered 

by the Comptroller of the Currency as a bridge bank only 

if the Board of Directors determines that— 

(i) the amount which is reasonably necessary to 

operate such bridge bank will not exceed the amount 

which is reasonably necessary to save the cost of liquidating, including paying the insured accounts of, 1 or 

more insured banks in default or in danger of default 

with respect to which the bridge bank is chartered; 

(ii) the continued operation of such insured bank 

or banks in default or in danger of default with respect to which the bridge bank is chartered is essential to provide adequate banking services in the community where each such bank in default or in danger 

of default is located; or 

(iii) the continued operation of such insured bank 

or banks in default or in danger of default with respect to which the bridge bank is chartered is in the 

best interest of the depositors of such bank or banks 

in default or in danger of default or the public. 

(B) INSURED NATIONAL BANK.—A bridge bank shall be 

an insured bank from the time it is chartered as a national 

bank. 

(C) BRIDGE BANK TREATED AS BEING I N DEFAULT FOR 

CERTAIN PURPOSES.—A bridge bank shall be treated as an 

insured bank in default at such times and for such purposes as the Corporation may, in its discretion, determine. 

(D) MANAGEMENT.— A bridge bank, upon the granting 

of its charter, shall be under the management of a board 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

601 

of directors consisting of not fewer than 5 nor more than 

10 members appointed by the Corporation. 

(E) BYLAWS.—The board of directors of a bridge bank 

shall adopt such bylaws as may be approved by the Corporation. 

(3) TRANSFER OF ASSETS AND LIABILITIES.— 

(A) I N GENERAL.— 

(i) TRANSFER UPON GRANT OF CHARTER.—Upo n th e 

granting of a charter to a bridge bank pursuant to this 

subsection, the Corporation, as receiver, or any other 

receiver appointed with respect to any insured bank in 

default with respect to which the bridge bank is chartered may transfer any assets and liabilities of such 

bank in default to the bridge bank in accordance with 

paragraph (1). 

(ii) SUBSEQUENT TRANSFERS.—At any time after a 

charter is granted to a bridge bank, the Corporation, 

as receiver, or any other receiver appointed with respect to an insured bank in default may transfer any 

assets and liabilities of such insured bank in default 

as the Corporation may, in its discretion, determine to 

be appropriate in accordance with paragraph (1). 

(iii) TREATMEN T OF TRUST BUSINESS.—For purposes of this paragraph, the trust business, including 

fiduciary appointments, of any insured bank in default 

is included among its assets and liabilities. 

(iv) EFFECTIVE WITHOUT APPROVAL.—The transfer 

of any assets or liabilities, including those associated 

with any trust business, of an insured bank in default 

transferred to a bridge bank shall be effective without 

any further approval under Federal or State law, 

assignment, or consent with respect thereto. 

(B) INTEN T OF CONGRESS REGARDING CONTINUING 

OPERATIONS.—It is the intent of the Congress that, in 

order to prevent unnecessary hardship or losses to the customers of any insured bank in default with respect to 

which a bridge bank is chartered, especially creditworthy 

farmers, small businesses, and households, the Corporation should— 

(i) continue to honor commitments made by the 

bank in default to creditworthy customers, and 

(ii) not interrupt or terminate adequately secured 

loans which are transferred under subparagraph (A) 

and are being repaid by the debtor in accordance with 

the terms of the loan instrument. 

(4) POWERS OF BRIDGE BANKS.—Eac h bridge bank chartered under this subsection shall have all corporate powers of, 

and be subject to the same provisions of law as, a national 

bank, except that— 

(A) the Corporation may— 

(i) remove the interim directors and directors of a 

bridge bank; 

(ii) fix the compensation of members of the interim board of directors and the board of directors and 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 02 

senior management, as determined by the Corporation 

in its discretion, of a bridge bank; and 

(iii) waive any requirement established under section 5145, 5146, 5147, 5148, or 5149 of the Revised 

Statutes (relating to directors of national banks) or 

section 31 of the Banking Act of 1933 which would 

otherwise be applicable with respect to directors of a 

bridge bank by operation of paragraph (2)(B); 

(B) the Corporation may indemnify the representatives 

for purposes of paragraph (1)(B) and the interim directors, 

directors, officers, employees, and agents of a bridge bank 

on such terms as the Corporation determines to be appropriate; 

(C) no requirement under section 5138 of the Revised 

Statutes or any other provision of law relating to the capital of a national bank shall apply with respect to a bridge 

bank; 

(D) the Comptroller of the Currency may establish a 

limitation on the extent to which any person may become 

indebted to a bridge bank without regard to the amount of 

the bridge bank's capital or surplus; 

(E)(i) the board of directors of a bridge bank shall elect 

a chairperson who may also serve in the position of chief 

executive officer, except that such person shall not serve 

either as chairperson or as chief executive officer without 

the prior approval of the Corporation; and 

(ii) the board of directors of a bridge bank may appoint 

a chief executive officer who is not also the chairperson, 

except that such person shall not serve as chief executive 

officer without the prior approval of the Corporation; 

(F) a bridge bank shall not be required to purchase 

stock of any Federal Reserve bank; 

(G) the Comptroller of the Currency shall waive any 

requirement for a fidelity bond with respect to a bridge 

bank at the request of the Corporation; 

(H) any judicial action to which a bridge bank becomes 

a party by virtue of its acquisition of any assets or 

assumption of any liabilities of a bank in default shall be 

stayed from further proceedings for a period of up to 45 

days at the request of the bridge bank; 

(i) no agreement which tends to diminish or defeat the 

right, title or interest of a bridge bank in any asset of an 

insured bank in default acquired by it shall be valid 

against the bridge bank unless such agreement— 

(i) is in writing, 

(ii) was executed by such insured bank in default 

and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by such insured bank in default, 

(iii) was approved by the board of directors of such 

insured bank in default or its loan committee, which 

approval shall be reflected in the minutes of said 

board or committee, and 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

603 

(iv) has been, continuously from the time of its 

execution, an official record of such insured bank in 

default; 

(J) notwithstanding section 13(e)(2), any agreement relating to an extension of credit between a Federal home 

loan bank or Federal Reserve bank and any insured 

depository institution which was executed before the 

extension of credit by such bank to such depository institution shall be treated as having been executed contemporaneously with such extension of credit for purposes of subparagraph (I); and 

(K) except with the prior approval of the Corporation, 

a bridge bank may not, in any transaction or series of 

transactions, issue capital stock or be a party to any 

merger, consolidation, disposition of assets or liabilities, 

sale or exchange of capital stock, or similar transaction, or 

change its charter. 

(5) CAPITAL.— 

(A) No CAPITAL REQUIRED.—The Corporation shall not 

be required to— 

(i) issue any capital stock on behalf of a bridge 

bank chartered under this subsection; or 

(ii) purchase any capital stock of a bridge bank, 

except that notwithstanding any other provision of 

Federal or State law, the Corporation may purchase 

and retain capital stock of a bridge bank in such 

amounts and on such terms as the Corporation, in its 

discretion, determines to be appropriate. 

( B ) OPERATING FUNDS I N LIE U OF CAPITAL.—Upon th e 

organization of a bridge bank, and thereafter, as the Board 

of Directors may, in its discretion, determine to be necessary or advisable, the Corporation may make available 

to the bridge bank, upon such terms and conditions and in 

such form and amounts as the Corporation may in its discretion determine, funds for the operation of the bridge 

bank in lieu of capital. 

( C ) AUTHORITY TO ISSUE CAPITAL STOCK.—Wheneve r 

the Board of Directors determines it is advisable to do so, 

the Corporation shall cause capital stock of a bridge bank 

to be issued and offered for sale in such amounts and on 

such terms and conditions as the Corporation may, in its 

discretion, determine. 

(6) N o FEDERAL STATUS.— 

(A) AGENCY STATUS.—A bridge bank is not an agency, 

establishment, or instrumentality of the United States. 

(B) EMPLOYEE STATUS.—Representatives for purposes 

of paragraph (1)(B), interim directors, directors, officers, 

employees, or agents of a bridge bank are not, solely by 

virtue of service in any such capacity, officers or employees 

of the United States. Any employee of the Corporation or 

of any Federal instrumentality who serves at the request 

of the Corporation as a representative for purposes of 

paragraph (1)(B), interim director, director, officer, employee, or agent of a bridge bank shall not— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 04 

(i) solely by virtue of service in any such capacity 

lose any existing status as an officer or employee of 

the United States for purposes of title 5, United States 

Code, or any other provision of law, or 

(ii) receive any salary or benefits for service in any 

such capacity with respect to a bridge bank in addition 

to such salary or benefits as are obtained through 

employment with the Corporation or such Federal 

instrumentality. 

(7) ASSISTANCE AUTHORIZED.—The Corporation may, in its 

discretion, provide assistance under section 13(c) to facilitate 

any transaction described in clause (i), (ii), or (iii) of paragraph 

(10)(A) with respect to any bridge bank in the same manner 

and to the same extent as such assistance may be provided 

under such section with respect to an insured bank in default, 

or to facilitate a bridge bank's acquisition of any assets or the 

assumption of any liabilities of an insured bank in default. 

(8) ACQUISITION.— 

(A) IN GENERAL.—The responsible agency shall notify 

the Attorney General of any transaction involving the 

merger or sale of a bridge bank requiring approval under 

section 18(c) and if a report on competitive factors is requested within 10 days, such transaction may not be consummated before the 5th calendar day after the date of approval by the responsible agency with respect thereto. if 

the responsible agency has found that it must act immediately to prevent the probable failure of 1 of the banks involved, the preceding sentence does not apply and the 

transaction may be consummated immediately upon approval by the agency. 

(B) B Y OUT-OF-STATE HOLDING COMPANY.—Any depository institution, including an out-of-State depository institution, or any out-of-State depository institution holding 

company may acquire and retain the capital stock or assets of, or otherwise acquire and retain a bridge bank if 

the bridge bank at any time had assets aggregating 

$500,000,000 or more, as determined by the Corporation 

on the basis of the bridge bank's reports of condition or on 

the basis of the last available reports of condition of any 

insured bank in default, which institution has been acquired, or whose assets have been acquired, by the bridge 

bank. The acquiring entity may acquire the bridge bank 

only in the same manner and to the same extent as such 

entity may acquire an insured bank in default under section 13(f)(2). 

(9) DURATION OF BRIDGE BANK.—Subject to paragraphs 

(11) and (12), the status of a bridge bank as such shall terminate at the end of the 2-year period following the date it was 

granted a charter. The Board of Directors may, in its discretion, extend the status of the bridge bank as such for 3 additional 1-year periods. 

(10) TERMINATION OF BRIDGE BANK STATUS.—The status of 

any bridge bank as such shall terminate upon the earliest of— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

605 

(A) the merger or consolidation of the bridge bank 

with a depository institution that is not a bridge bank; 

(B) at the election of the Corporation, the sale of a majority of the capital stock of the bridge bank to an entity 

other than the Corporation and other than another bridge 

bank; 

(C) the sale of 80 percent, or more, of the capital stock 

of the bridge bank to an entity other than the Corporation 

and other than another bridge bank; 

(D) at the election of the Corporation, either the 

assumption of all or substantially all of the deposits and 

other liabilities of the bridge bank by a depository institution holding company or a depository institution that is not 

a bridge bank, or the acquisition of all or substantially all 

of the assets of the bridge bank by a depository institution 

holding company, a depository institution that is not a 

bridge bank, or other entity as permitted under applicable 

law; and 

(E) the expiration of the period provided in paragraph 

(9), or the earlier dissolution of the bridge bank as provided in paragraph (12). 

(11) EFFECT OF TERMINATION EVENTS.— 

(A) MERGER OR CONSOLIDATION.—A bridge bank that 

participates in a merger or consolidation as provided in 

paragraph (10)(A) shall be for all purposes a national bank 

with all the rights, powers, and privileges thereof, and 

such merger or consolidation shall be conducted in accordance with, and shall have the effect provided in, the provisions of applicable law. 

(B) CHARTER CONVERSION.—Following the sale of a 

majority of the capital stock of the bridge bank as provided 

in paragraph (10)(B), the Corporation may amend the 

charter of the bridge bank to reflect the termination of the 

status of the bridge bank as such, whereupon the bank 

shall remain a national bank, with all of the rights, powers, and privileges thereof, subject to all laws and regulations applicable thereto. 

(C) SALE OF STOCK.—Following the sale of 80 percent 

or more of the capital stock of a bridge bank as provided 

in paragraph (10)(C), the bank shall remain a national 

bank, with all of the rights, powers, and privileges thereof, 

subject to all laws and regulations applicable thereto. 

( D ) ASSUMPTION OF LIABILITIES AND SALE OF ASSETS.— 

Following the assumption of all or substantially all of the 

liabilities of the bridge bank, or the sale of all or substantially all of the assets of the bridge bank, as provided in 

paragraph (10)(D), at the election of the Corporation the 

bridge bank may retain its status as such for the period 

provided in paragraph (9). 

(E) EFFECT ON HOLDING COMPANIES.—A depository 

institution holding company acquiring a bridge bank under 

section 13(f), paragraph (8)(B) (or any predecessor provision), or both provisions, shall not be impaired or adversely affected by the termination of the status of a 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 606 

bridge bank as a result of subparagraph (A), (B), (C), or 

(D) of paragraph (10), and shall be entitled to the rights 

and privileges provided in section 13(f). 

(F) AMENDMENTS TO CHARTER.—Following the consummation of a transaction described in subparagraph (A), 

(B), (C), or (D) of paragraph (10), the charter of the resulting institution shall be amended to reflect the termination 

of bridge bank status, if appropriate. 

(12 ) DISSOLUTIO N OF BRIDG E BANK. — 

(A) IN GENERAL.—Notwithstanding any other provision 

of State or Federal law, if the bridge bank's status as such 

has not previously been terminated by the occurrence of an 

event specified in subparagraph (A), (B), (C), or (D) of 

paragraph (10)— 

(i) the Board of Directors may, in its discretion, 

dissolve a bridge bank in accordance with this paragraph at any time; and 

(ii) the Board of Directors shall promptly commence dissolution proceedings in accordance with this 

paragraph upon the expiration of the 2-year period following the date the bridge bank was chartered, or any 

extension thereof, as provided in paragraph (9). 

(B) PROCEDURES.—The Comptroller of the Currency 

shall appoint the Corporation receiver for a bridge bank 

upon certification by the Board of Directors to the Comptroller of the Currency of its determination to dissolve the 

bridge bank. The Corporation as such receiver shall wind 

up the affairs of the bridge bank in conformity with the 

provisions of law relating to the liquidation of closed national banks. with respect to any such bridge bank, the 

Corporation as such receiver shall have all the rights, powers, and privileges and shall perform the duties related to 

the exercise of such rights, powers, or privileges granted 

by law to a receiver of any insured depository institution 

and notwithstanding any other provision of law in the 

exercise of such rights, powers, and privileges the Corporation shall not be subject to the direction or supervision of 

any State agency or other Federal agency. 

(13) MULTIPL E BRIDG E BANKS.—Subject to paragraph 

(1)(B)(i), the Corporation may, in the Corporation's discretion, 

organize 2 or more bridge banks under this subsection to assume any deposits of, assume any other liabilities of, and purchase any assets of a single bank in default. 

(o) SUPERVISOR Y RECORDS.—In addition to the requirements of 

section 7(a)(2) to provide to the Corporation copies of reports of 

examination and reports of condition, whenever the Corporation 

has been appointed as receiver for an insured depository institution, the appropriate Federal banking agency shall make available 

all supervisory records to the receiver which may be used by the 

receiver in any manner the receiver determines to be appropriate. 

( p ) CERTAI N SALE S OF ASSETS PROHIBITED.— 1 

1

 Section 20(b)(4) of the Resolution Trust Corporation Completion Act (P.L. 103-204; 107 Stat. 

2405) amended this subsection by striking the heading and inserting ''(p) CERTAIN SALES OF AS-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

607 

( 1 ) PERSONS WH O ENGAGED I N IMPROPER CONDUCT WITH , OR 

CAUSED LOSSES TO, DEPOSITORY INSTITUTIONS.—The Corporation shall prescribe regulations which, at a minimum, shall 

prohibit the sale of assets of a failed institution by the Corporation to— 

(A) any person who— 

(i) has defaulted, or was a member of a partnership or an officer or director of a corporation that has 

defaulted, on 1 or more obligations the aggregate 

amount of which exceed $1,000,000, to such failed 

institution; 

(ii) has been found to have engaged in fraudulent 

activity in connection with any obligation referred to 

in clause (i); and 

(iii) proposes to purchase any such asset in whole 

or in part through the use of the proceeds of a loan or 

advance of credit from the Corporation or from any 

institution for which the Corporation has been appointed as conservator or receiver; 

(B) any person who participated, as an officer or director of such failed institution or of any affiliate of such 

institution, in a material way in transactions that resulted 

in a substantial loss to such failed institution; 

(C) any person who has been removed from, or prohibited from participating in the affairs of, such failed institution pursuant to any final enforcement action by an appropriate Federal banking agency; or 

(D) any person who has demonstrated a pattern or 

practice of defalcation regarding obligations to such failed 

institution. 

(2) CONVICTE D DEBTORS.—Except as provided in paragraph 

(3), any person who— 

(A) has been convicted of an offense under section 215, 

656, 657, 1005, 1006, 1007, 1008, 1014, 1032, 1341, 1343, 

or 1344 of title 18, United States Code, or of conspiring to 

commit such an offense, affecting any insured depository 

institution for which any conservator or receiver has been 

appointed; and 

(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 institution, any 

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. 

(3) SETTLEMEN T OF CLAIMS.—Paragraphs (1) and (2) shall 

not apply to the sale or transfer by the Corporation of any 

asset of any insured depository institution to any person if the 

sale or transfer of the asset resolves or settles, or is part of the 

resolution or settlement, of— 

SETS PROHIBITED.—''. The amendment probably should have included striking the subsection 

designation. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 08 

(A) 1 or more claims that have been, or could have 

been, asserted by the Corporation against the person; or 

(B) obligations owed by the person to any insured 

depository institution, the FSLIC Resolution Fund, the 

Resolution Trust Corporation, or the Corporation. 

(4) DEFINITION OF DEFAULT.—For purposes of this subsection, the term ''default'' means a failure to comply with the 

terms of a loan or other obligation to such an extent that the 

property securing the obligation is foreclosed upon. 

(q) EXPEDITED PROCEDURES FOR CERTAIN CLAIMS.— 

(1) TIM E FOR FILING NOTICE OF APPEAL.—The notice of appeal of any order, whether interlocutory or final, entered in 

any case brought by the Corporation against an insured depository institution's director, officer, employee, agent, attorney, 

accountant, or appraiser or any other person employed by or 

providing services to an insured depository institution shall be 

filed not later than 30 days after the date of entry of the order. 

The hearing of the appeal shall be held not later than 120 days 

after the date of the notice of appeal. The appeal shall be decided not later than 180 days after the date of the notice of appeal. 

(2) SCHEDULING.—Consistent with section 1657 of title 18, 

United States Code, a court of the United States shall expedite 

the consideration of any case brought by the Corporation 

against an insured depository institution's director, officer, employee, agent, attorney, accountant, or appraiser or any other 

person employed by or providing services to an insured depository institution. As far as practicable the court shall give such 

case priority on its docket. 

(3) JUDICIAL DISCRETION.—The court may modify the 

schedule and limitations stated in paragraphs (1) and (2) in a 

particular case, based on a specific finding that the ends of justice that would be served by making such a modification would 

outweigh the best interest of the public in having the case resolved expeditiously. 

(r) FOREIGN INVESTIGATIONS.—The Corporation and the Resolution Trust Corporation, as conservator or receiver of any insured 

depository institution and for purposes of carrying out any power, 

authority, or duty with respect to an insured depository 

institution— 

(1) may request the assistance of any foreign banking authority and provide assistance to any foreign banking authority 

in accordance with section 8(v); and 

(2) may each maintain an office to coordinate foreign 

investigations or investigations on behalf of foreign banking 

authorities. 

(s) PROHIBITION ON ENTERING SECRECY AGREEMENTS AND PROTECTIVE ORDERS.—The Corporation may not enter into any agreement or approve any protective order which prohibits the Corporation from disclosing the terms of any settlement of an administrative or other action for damages or restitution brought by the Corporation in its capacity as conservator or receiver for an insured 

depository institution. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

609 

(t) AGENCIES MA Y SHARE INFORMATION WITHOU T WAIVIN G 

PRIVILEGE.— 

(1) I N GENERAL.—A covered agency shall not be deemed to 

have waived any privilege applicable to any information by 

transferring that information to or permitting that information 

to be used by— 

(A) any other covered agency, in any capacity; or 

(B) any other agency of the Federal Government (as 

defined in section 6 of title 18, United States Code). 

(2) DEFINITIONS.—Fo r purposes of this subsection: 

(A) COVERED AGENCY.—The term ''covered agency'' 

means any of the following: 

(i) Any appropriate Federal banking agency. 

(ii) The Resolution Trust Corporation. 

(iii) The Farm Credit Administration. 

(iv) The Farm Credit System Insurance 

Corporation. 

(v) The National Credit Union Administration. 

(vi) The General Accounting Office. 

(B) PRIVILEGE.—The term ''privilege'' includes any 

work-product, attorney-client, or other privilege recognized 

under Federal or State law. 

(3) RULE OF CONSTRUCTION.—Paragraph (1) shall not be 

construed as implying that any person waives any privilege applicable to any information because paragraph (1) does not 

apply to the transfer or use of that information. 

(u) PURCHASE RIGHTS OF TENANTS.— 

(1) NOTICE.—Except as provided in paragraph (3), the Corporation may make available for sale a 1- to 4-family residence 

(including a manufactured home) to which the Corporation acquires title only after the Corporation has provided the household residing in the property notice (in writing and mailed to 

the property) of the availability of such property and the preference afforded such household under paragraph (2). 

(2) PREFERENCE.—In selling such a property, the Corporation shall give preference to any bona fide offer made by the 

household residing in the property, if— 

(A) such offer is substantially similar in amount to 

other offers made within such period (or expected by the 

Corporation to be made within such period); 

(B) such offer is made during the period beginning 

upon the Corporation making such property available and 

of a reasonable duration, as determined by the Corporation 

based on the normal period for sale of such properties; and 

(C) the household making the offer complies with any 

other requirements applicable to purchasers of such property, including any downpayment and credit requirements. 

(3) EXCEPTIONS.—Paragraphs (1) and (2) shall not apply 

to— 

(A) any residence transferred in connection with the 

transfer of substantially all of the assets of an insured 

depository institution for which the Corporation has been 

appointed conservator or receiver; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 10 

(B) any eligible single family property (as such term is 

defined in section 40(p)); or 

(C) any residence for which the household occupying 

the residence was the mortgagor under a mortgage on such 

residence and to which the Corporation acquired title pursuant to default on such mortgage. 

(v) PREFERENCE FOR SALES FOR HOMELESS FAMILIES.—Subjec t 

to subsection (u), in selling any real property (other than eligible 

residential property and eligible condominium property, as such 

terms are defined in section 40(p)) to which the Corporation acquires title, the Corporation shall give preference among offers to 

purchase the property that will result in the same net present 

value proceeds, to any offer that would provide for the property to 

be used, during the remaining useful life of the property, to provide 

housing or shelter for homeless persons (as such term is defined in 

section 103 of the Stewart B. McKinney Homeless Assistance Act) 

or homeless families. 

( w) PREFERENCES FOR SALES OF CERTAIN COMMERCIAL REAL 

PROPERTIES.— 

(1) AUTHORITY.—I n selling any eligible commercial real 

properties of the Corporation, the Corporation shall give preference, among offers to purchase the property that will result 

in the same net present value proceeds, to any offer— 

(A) that is made by a public agency or nonprofit organization; and 

(B) under which the purchaser agrees that the property shall be used, during the remaining useful life of the 

property, for offices and administrative purposes of the 

purchaser to carry out a program to acquire residential 

properties to provide (i) homeownership and rental housing opportunities for very-low-, low-, and moderate-income 

families, or (ii) housing or shelter for homeless persons (as 

such term is defined in section 103 of the Stewart B. 

McKinney Homeless Assistance Act) or homeless families. 

(2) DEFINITIONS.—Fo r purposes of this subsection, the following definitions shall apply: 

(A) ELIGIBLE COMMERCIAL REAL PROPERTY.—The term 

''eligible commercial real property'' means any property (i) 

to which the Corporation acquires title, and (ii) that the 

Corporation, in the discretion of the Corporation, determines is suitable for use for the location of offices or other 

administrative functions involved with carrying out a program referred to in paragraph (1)(B). 

( B) NONPROFIT ORGANIZATION AND PUBLIC AGENCY.— 

The terms ''nonprofit organization'' and ''public agency'' 

have the same meanings as in section 40(p). 

SEC. 11A. [12 U.S.C. 1821a] FSLIC RESOLUTIO N FUND. 

(a) ESTABLISHED.— 

(1) IN GENERAL.—There is established a separate fund to 

be designated as the FSLIC Resolution Fund which shall be 

managed by the Corporation and separately maintained and 

not commingled. 

(2) TRANSFER OF FSLIC ASSETS AND LIABILITIES.— 
611 FEDERAL DEPOSIT INSURANCE ACT Sec. 11A 

(A) IN GENERAL.—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. 

(B) ADDITIONA L 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 the Bank insurance Fund, the Savings Association Insurance Fund, or the 

Corporation for accounting, reporting, or any other purpose. 

(4) RIGHTS, POWERS, AND DUTIES.—Effective August 10, 

1989, the Corporation shall have all rights, powers, and duties 

to carry out the Corporation's duties with respect to the assets 

and liabilities of the FSLIC Resolution Fund that the Corporation otherwise has under this Act. 

(5) CORPORATION AS CONSERVATOR OR RECEIVER.— 

(A) IN GENERAL.—Effective August 10, 1989, the Corporation shall succeed the Federal Savings and Loan 

insurance Corporation as conservator or receiver with respect to any depository institution— 

(i) the accounts of which were insured before August 10, 1989 by the Federal Savings and Loan Insurance Corporation; and 

(ii) for which a conservator or receiver was appointed before January 1, 1989. 

(B) RIGHTS, POWERS, AND DUTIES.—When acting as 

conservator or receiver with respect to any depository 

institution described in subparagraph (A), the Corporation 

shall have all rights, powers, and duties that the Corporation otherwise has as conservator or receiver under this 

Act. 

(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) Income earned on assets of the FSLIC Resolution Fund. 

(2) Liquidating dividends and payments made on claims 

received by the FSLIC Resolution Fund from receiverships to 

the extent such funds are not required by the Resolution Funding Corporation pursuant to section 21B of the Federal Home 

Loan Bank Act or the Financing Corporation pursuant to section 21 of such Act. 

(3) Amounts borrowed by the Financing Corporation pursuant to section 21 of the Federal Home Loan Bank Act. 

(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, 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 12 

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. 

(c) TREASURY BACKUP.— 

(1) I N GENERAL.—If the funds described in subsections (a) 

and (b) are insufficient to satisfy the liabilities of the FSLIC 

Resolution Fund, the Secretary of the Treasury shall pay to the 

Fund such amounts as may be necessary, as determined by the 

Corporation and the Secretary, for FSLIC Resolution Fund 

purposes. 

(2) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to the Secretary of the Treasury, without fiscal year limitation, such sums as may be necessary to 

carry out this section. 

(d) LEGAL PROCEEDINGS.—Any judgment resulting from a proceeding to which the Federal Savings and Loan Insurance Corporation was a party prior to its dissolution or which is initiated 

against the Corporation with respect to the Federal Savings and 

Loan Insurance Corporation or with respect to the FSLIC Resolution Fund shall be limited to the assets of the FSLIC Resolution 

Fund. 

(e) TRANSFER OF NE T PROCEEDS FRO M SALE OF RT C ASSETS.— 

The FSLIC Resolution Fund shall transfer to the Resolution Funding Corporation any net proceeds from the sale of assets acquired 

from the Resolution Trust Corporation upon the termination of 

such Corporation pursuant to section 21A of the Federal Home 

Loan Bank Act. 

(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 Savings Association Insurance Fund. 

SEC. 12. [12 U.S.C. 1822] (a) BOND NO T REQUIRED; AGENTS; 

FEE.—The Corporation as receiver of an insured depository institution or branch of a foreign bank shall not be required to furnish 

bond and may appoint an agent or agents to assist it in its duties 

as such receiver. All fees, compensation, and expenses of liquidation and administration shall be fixed by the Corporation, and may 

be paid by it out of funds coming into its possession as such receiver. 

(b) Payment of an insured deposit to any person by the Corporation shall discharge the Corporation, and payment of a transferred deposit to any person by the new bank or by an insured 

depository institution in which a transferred deposit has been made 

available shall discharge the Corporation and such new bank or 

other insured depository institution, to the same extent that payment to such person by the depository institution in default would 

have discharged it from liability for the insured deposit. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

613 

(c) Except as otherwise prescribed by the Board of Directors, 

neither the Corporation nor such new bank or other insured depository institution shall be required to recognize as the owner of any 

portion of a deposit appearing on the records of the depository 

institution in default under a name other than that of the claimant, any person whose name or interest as such owner is not disclosed on the records of such depository institution in default as 

part owner of said deposit, if such recognition would increase the 

aggregate amount of the insured deposits in such depository institution in default. 

(d) The Corporation may withhold payment of such portion of 

the insured deposit of any depositor in a depository institution in 

default as may be required to provide for the payment of any liability of such depositor to the depository institution in default or its 

receiver, which is not offset against a claim due from such depository institution, pending the determination and payment of such liability by such depositor or any other person liable therefor. 

(e) DISPOSITION OF UNCLAIME D DEPOSITS.— 

(1) NOTICES.— 

(A) FIRST NOTICE.—Within 30 days after the initiation 

of the payment of insured deposits under section 11(f), the 

Corporation shall provide written notice to all insured 

depositors that they must claim their deposit from the Corporation, or if the deposit has been transferred to another 

institution, from the transferee institution. 

(B) SECOND NOTICE.— A second notice containing this 

information shall be mailed by the Corporation to all insured depositors who have not responded to the first notice, 15 months after the Corporation initiates such payment of insured depositors. 

(C) ADDRESS.—The notices shall be mailed to the last 

known address of the depositor appearing on the records 

of the insured depository institution in default. 

(2) TRANSFER TO APPROPRIATE STATE.—If an insured depositor fails to make a claim for his, her, or its insured or 

transferred deposit within 18 months after the Corporation initiates the payment of insured deposits under section 11(f)— 

(A) any transferee institution shall refund the deposit 

to the Corporation, and all rights of the depositor against 

the transferee institution shall be barred; and 

(B) with the exception of United States deposits, the 

Corporation shall deliver the deposit to the custody of the 

appropriate State as unclaimed property, unless the appropriate State declines to accept custody. Upon delivery to 

the appropriate State, all rights of the depositor against 

the Corporation with respect to the deposit shall be barred 

and the Corporation shall be deemed to have made payment to the depositor for purposes of section 11(g)(1). 

(3) REFUSAL OF APPROPRIATE STATE TO ACCEPT CUSTODY.— 

If the appropriate State declines to accept custody of the deposit tendered pursuant to paragraph (2)(B), the deposit shall 

not be delivered to any State, and the insured depositor shall 

claim the deposit from the Corporation before the receivership 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 14 

is terminated, or all rights of the depositor with respect to such 

deposit shall be barred. 

(4) TREATMENT OF UNITED STATES DEPOSITS.—If the deposit 

is a United States deposit it shall be delivered to the Secretary 

of the Treasury for deposit in the general fund of the Treasury. 

Upon delivery to the Secretary of the Treasury, all rights of the 

depositor against the Corporation with respect to the deposit 

shall be barred and the Corporation shall be deemed to have 

made payment to the depositor for purposes of section 11(g)(1). 

(5) REVERSION.—If a depositor does not claim the deposit 

delivered to the custody of the appropriate State pursuant to 

paragraph (2)(B) within 10 years of the date of delivery, the 

deposit shall be immediately refunded to the Corporation and 

become its property. All rights of the depositor against the 

appropriate State with respect to such deposit shall be barred 

as of the date of the refund to the Corporation. 

(6) DEFINITIONS.—Fo r purposes of this subsection— 

(A) the term "transferee institution'' means the insured depository institution in which the Corporation has 

made available a transferred deposit pursuant to section 

11(f)(1); 

(B) the term "appropriate State'' means the State to 

which notice was mailed under paragraph (1)(C), except 

that if the notice was not mailed to an address that is 

within a State it shall mean the State in which the depository institution in default has its main office; and 

(C) the term ''United States deposit'' means an insured 

or transferred deposit for which the deposit records of the 

depository institution in default disclose that title to the 

deposit is held by the United States, any department, 

agency, or instrumentality of the Federal Government, or 

any officer or employee thereof in such person's official capacity. 

(f) CONFLICT OF INTEREST.— 

(1) APPLICABILITY OF OTHER PROVISIONS.— 

(A) CLARIFICATION OF STATUS OF CORPORATION.—The 

Corporation is, and has been since its creation, an agency 

for purposes of title 18, United States Code. 

(B) TREATMENT OF CONTRACTORS.—Any individual 

who, pursuant to a contract or any other arrangement, 

performs functions or activities of the Corporation, under 

the direct supervision of an officer or employee of the Corporation, shall be deemed to be an employee of the Corporation for purposes of title 18, United States Code and 

this Act. Any individual who, pursuant to a contract or any 

other agreement, acts for or on behalf of the Corporation, 

and who is not otherwise treated as an officer or employee 

of the United States for purposes of title 18, United States 

Code, shall be deemed to be a public official for purposes 

of section 201 of title 18, United States Code. 

(2) REGULATIONS CONCERNING EMPLOYEE CONDUCT.—The 

officers and employees of the Corporation and those individuals 

under contract to the Corporation who are deemed, under 

paragraph (1)(B), to be employees of the Corporation for pur-
Sec. 11A 

Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 621 

615 

poses of title 18, United States Code, shall be subject to the 

ethics and conflict of interest rules and regulations issued by 

the Office of Government Ethics, including those concerning 

employee conduct, financial disclosure, and post-employment 

activities. The Board of Directors may prescribe regulations 

that supplement such rules and regulations only with the concurrence of that Office. 

(3) REGULATIONS CONCERNING INDEPENDENT CONTRACTORS.—The Board of Directors shall prescribe regulations applicable to those independent contractors who are not deemed, 

under paragraph (1)(B), to be employees of the Corporation for 

purposes of title 18, United States Code, governing conflicts of 

interest, ethical responsibilities, and the use of confidential 

information consistent with the goals and purposes of titles 18 

and 41, United States Code. Any such regulations shall be in 

addition to, and not in lieu of, any other statute or regulation 

which may apply to the conduct of such independent contractors. 

(4) DISAPPROVAL OF CONTRACTORS.— 

(A) IN GENERAL.—The Board of Directors shall prescribe regulations establishing procedures for ensuring 

that any individual who is performing, directly or indirectly, any function or service on behalf of the Corporation 

meets minimum standards of competence, experience, 

integrity, and fitness. 

(B) PROHIBITION FROM SERVICE ON BEHALF OF CORPORATION.—The procedures established under subparagraph (A) shall provide that the Corporation shall prohibit 

any person who does not meet the minimum standards of 

competence, experience, integrity, and fitness from— 

(i) entering into any contract with the Corporation; or 

(ii) becoming employed by the Corporation or otherwise performing any service for or on behalf of the 

Corporation. 

( C) INFORMATION REQUIRED TO BE SUBMITTED.—The 

procedures established under subparagraph (A) shall require that any offer submitted to the Corporation by any 

person under this section and any employment application 

submitted to the Corporation by any person shall include— 

(i) a list and description of any instance during 

the 5 years preceding the submission of such application in which the person or a company under such person's control defaulted on a material obligation to an 

insured depository institution; and 

(ii) such other information as the Board may prescribe by regulation. 

( D ) SUBSEQUENT SUBMISSIONS.— 

(i) I N GENERAL.—No offer submitted to the Corporation may be accepted unless the offeror agrees 

that no person will be employed, directly or indirectly, 

by the offeror under any contract with the Corporation 

unless— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 616 

(i) all applicable information described in subparagraph (C) with respect to any such person is 

submitted to the Corporation; and 

(ii) the Corporation does not disapprove of the 

direct or indirect employment of such person. 

(ii) FINALITY OF DETERMINATION.—Any determination made by the Corporation pursuant to this paragraph shall be in the Corporation's sole discretion and 

shall not be subject to review. 

( E) PROHIBITION REQUIRED I N CERTAIN CASES.—The 

standards established under subparagraph (A) shall require the Corporation to prohibit any person who has— 

(i) been convicted of any felony; 

(ii) been removed from, or prohibited from participating in the affairs of, any insured depository institution pursuant to any final enforcement action by any 

appropriate Federal banking agency; 

(iii) demonstrated a pattern or practice of defalcation regarding obligations to insured depository institutions; or 

(iv) caused a substantial loss to Federal deposit 

insurance funds; 

from performing any service on behalf of the Corporation. 

(5) ABROGATION OF CONTRACTS.—The Corporation may rescind any contract with a person who— 

(A) fails to disclose a material fact to the Corporation; 

(B) would be prohibited under paragraph (6) from providing services to, receiving fees from, or contracting with 

the Corporation; or 

(C) has been subject to a final enforcement action by 

any Federal banking agency. 

(6) PRIORITY OF FDIC RULES.—To the extent that the regulations under this subsection conflict with rules of other agencies or Government corporations, officers, directors, employees, 

and independent contractors of the Corporation who are also 

subject to the conflict of interest or ethical rules of another 

agency or Government corporation, shall be governed by the 

regulations prescribed by the Board of Directors under this 

subsection when acting for or on behalf of the Corporation. 

Notwithstanding the preceding sentence, the rules of the Corporation shall not take priority over the ethics and conflict of 

interest rules and regulations promulgated by the Office of 

Government Ethics unless specifically authorized by that Office. 

SEC. 13. [12 U.S.C. 1823] (a) INVESTMENT OF CORPORATION'S 

FUNDS.— 

(1) AUTHORITY.—Funds held in the Bank Insurance Fund, 

the Savings Association 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. 

(2) LIMITATION.—Th e Corporation shall not sell or purchase any obligations described in paragraph (1) for its own account, at any one time aggregating in excess of $100,000, with-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

617 

out the approval of the Secretary of the Treasury. The Secretary may approve a transaction or class of transactions subject to the provisions of this paragraph under such conditions 

as the Secretary may determine. 

(b) The depository accounts of the Corporation shall be kept 

with the Treasurer of the United States, or, with the approval of 

the Secretary of the Treasury, with a Federal Reserve bank, or 

with a depository institution designated as a depositary or fiscal 

agent of the United States: Provided, That the Secretary of the 

Treasury may waive the requirements of this subsection under 

such conditions as he may determine: And provided further, That 

this subsection shall not apply to the establishment and maintenance in any depository institution for temporary purposes of 

depository accounts not in excess of $50,000 in any one depository 

institution, or to the establishment and maintenance in any depository institution of any depository accounts to facilitate the payment 

of insured desposits, or the making of loans to, or the purchase of 

assets of, insured depository institutions. When designated for that 

purpose by the Secretary of the Treasury, the Corporation shall be 

a depositary of public moneys, except receipts from customs, under 

such regulations as may be prescribed by the said Secretary, and 

may also be employed as a financial agent of the Government. It 

shall perform all such reasonable duties as depositary of public 

moneys and financial agent of the Government as may be required 

of it. 

(c)(1) The Corporation is authorized, in its sole discretion and 

upon such terms and conditions as the Board of Directors may prescribe, to make loans to, to make deposits in, to purchase the assets or securities of, to assume the liabilities of, or to make contributions to, any insured depository institution— 

(A) if such action is taken to prevent the default of such 

insured depository institution; 

(B) if, with respect to an insured bank in default, such action is taken to restore such insured bank to normal operation; 

or 

(C) if, when severe financial conditions exist which 

threaten the stability of a significant number of insured depository institutions or of insured depository institutions possessing significant financial resources, such action is taken in 

order to lessen the risk to the Corporation posed by such insured depository institution under such threat of instability. 

(2)(A) In order to facilitate a merger or consolidation of another 

insured depository institution described in subparagraph (B) with 

another insured depository institution or the sale of any or all of 

the assets of such insured depository institution or the assumption 

of any or all of such insured depository institution's liabilities by 

another insured depository institution, or the acquisition of the 

stock of such insured depository institution, the Corporation is 

authorized, in its sole discretion and upon such terms and conditions as the Board of Directors may prescribe— 

(i) to purchase any such assets or assume any such liabilities; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 618 

(ii) to make loans or contributions to, or deposits in, or 

purchase the securities of, such insured institution1 or the 

company which controls or will acquire control of such insured 

institution;1 

(iii) to guarantee such insured institution1 or the company 

which controls or will acquire control of such insured institution

 1 against loss by reason of such insured institution's merging or consolidating with or assuming the liabilities and purchasing the assets of such insured depository institution or by 

reason of such company acquiring control of such insured 

depository institution; or 

(iv) to take any combination of the actions referred to in 

subparagraphs (i) through (iii). 

(B) For the purpose of subparagraph (A), the insured depository institution must be an insured depository institution— 

(i) which is in default; 

(ii) which, in the judgment of the Board of Directors, is in 

danger of default; or 

(iii) which, when severe financial conditions exist which 

threaten the stability of a significant number of insured depository institutions or of insured depository institutions possessing significant financial resources, is determined by the 

Corporation, in its sole discretion, to require assistance under 

subparagraph (A) in order to lessen the risk to the Corporation 

posed by such insured depository institution under such threat 

of instability. 

(C)2 Any action to which the Corporation is or becomes a 

party by acquiring any asset or exercising any other authority 

set forth in this section shall be stayed for a period of 60 days 

at the request of the Corporation. 

(3) The Corporation may provide any person acquiring control 

of, merging with, consolidating with or acquiring the assets of an 

insured depository institution under subsection (f) or (k) of this section with such financial assistance as it could provide an insured 

institution under this subsection. 

(4) 2 LEAST-COST RESOLUTIO N 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) the Corporation determines that the exercise of 

such authority is necessary to meet the obligation of 

the Corporation to provide insurance coverage for the 

insured deposits in such institution; and 

(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 con1

 Section 217(3)(D) of of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989, 103 Stat. 225, amended section 13(c)(2)(A) by striking ''such insured institution'' and inserting ''such other insured depository institution'' without specifying at which of the 4 places 

such term appears the amendment should be executed. 

2

 indentation so in law. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

619 

nection with the exercise of any such authority with 

respect to such institution is the least costly to the 

deposit insurance fund of all possible methods for 

meeting the Corporation's obligation under this section. 

(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 deposit insurance fund, the Corporation shall comply 

with the following provisions: 

(i) PRESENT-VALUE ANALYSIS; DOCUMENTATION 

REQUIRED.—The Corporation shall— 

(i) evaluate alternatives on a present-value 

basis, using a realistic discount rate; 

(ii) document that evaluation and the 

assumptions on which the evaluation is based, including any assumptions with regard to interest 

rates, asset recovery rates, asset holding costs, 

and payment of contingent liabilities; and 

(iii) retain the documentation for not less 

than 5 years. 

(ii) FOREGONE TAX REVENUES.—Federa l 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 deposit insurance fund. 

(C) TIM E OF DETERMINATION.— 

(i) GENERAL RULE.—Fo r purposes of this subsection, the determination of the costs of providing any 

assistance under paragraph (1) or (2) or any other provision of this section with respect to any depository 

institution shall be made as of the date on which the 

Corporation makes the determination to provide such 

assistance to the institution under this section. 

(ii) RULE FOR LIQUIDATIONS.—For purposes of this 

subsection, the determination of the costs of liquidation of any depository institution shall be made as of 

the earliest of— 

(i) the date on which a conservator is appointed for such institution; 

(ii) the date on which a receiver is appointed 

for such institution; or 

(iii) the date on which the Corporation makes 

any determination to provide any assistance 

under this section with respect to such institution. 

(D) LIQUIDATION COSTS.—In determining the cost of 

liquidating any depository institution for the purpose of 

comparing the costs under subparagraph (A) (with respect 

to such institution), the amount of such cost may not exceed the amount which is equal to the sum of the insured 

deposits of such institution as of the earliest of the dates 

described in subparagraph (C), minus the present value of 

the total net amount the Corporation reasonably expects to 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 20 

receive from the disposition of the assets of such institution in connection with such liquidation. 

( E) DEPOSIT INSURANCE FUNDS 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 any insurance fund by protecting— 

(i) depositors for more than the insured portion of deposits (determined without regard to 

whether such institution is liquidated); or 

(ii) creditors other than depositors. 

(ii) DEADLINE FOR REGULATIONS.—The Corporation 

shall prescribe regulations to implement clause (i) not 

later than January 1, 1994, and the regulations shall 

take effect not later than January 1, 1995. 

(iii) PURCHASE AND ASSUMPTION TRANSACTIONS.— 

No provision of this subparagraph shall be construed 

as prohibiting the Corporation from allowing any person who acquires any assets or assumes any liabilities 

of any insured depository institution for which the 

Corporation has been appointed conservator or receiver to acquire uninsured deposit liabilities of such 

institution so long as the insurance fund does not 

incur any loss with respect to such deposit liabilities 

in an amount greater than the loss which would have 

been incurred with respect to such liabilities if the 

institution had been liquidated. 

(F) DISCRETIONARY DETERMINATIONS.—Any determination which the Corporation may make under this 

paragraph shall be made in the sole discretion of the Corporation. 

( G) SYSTEMIC RISK.— 

(i) EMERGENCY DETERMINATION BY SECRETARY OF 

THE TREASURY.—Notwithstanding subparagraphs (A) 

and (E), if, upon the written recommendation of the 

Board of Directors (upon a vote of not less than twothirds of the members of the Board of Directors) and 

the Board of Governors of the Federal Reserve System 

(upon a vote of not less than two-thirds of the members of such Board), the Secretary of the Treasury (in 

consultation with the President) determines that— 

(i) the Corporation's compliance with subparagraphs (A) and (E) with respect to an insured 

depository institution would have serious adverse 

effects on economic conditions or financial stability; and 

(ii) any action or assistance under this subparagraph would avoid or mitigate such adverse 

effects, 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

621 

the Corporation may take other action or provide 

assistance under this section as necessary to avoid or 

mitigate such effects. 

(ii) REPAYMENT OF LOSS.—The Corporation shall 

recover the loss to the appropriate 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 the members of the insurance 

fund (of which such institution is a member) equal to 

the product of— 

(i) an assessment rate established by the Corporation; and 

(ii) the amount of each member's average 

total assets during the semiannual period, minus 

the sum of the amount of the member's average 

total tangible equity and the amount of the member's average total subordinated debt. 

(iii) DOCUMENTATION REQUIRED.—The Secretary of 

the Treasury shall— 

(i) document any determination under clause 

(i); and 

(ii) retain the documentation for review under 

clause (iv). 

(iv) GAO REVIEW.—The Comptroller General of 

the United States shall review and report to the Congress on any determination under clause (i), 

including— 

(i) the basis for the determination; 

(ii) the purpose for which any action was 

taken pursuant to such clause; and 

(iii) the likely effect of the determination and 

such action on the incentives and conduct of insured depository institutions and uninsured 

depositors. 

(v) NOTICE.— 

(I) IN GENERAL.—The Secretary of the Treasury shall provide written notice of any determination under clause (i) to the Committee on Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Banking, Finance and Urban 

Affairs of the House of Representatives. 

(II ) DESCRIPTION OF BASIS OF DETERMINATION.—The notice under subclause (I) shall include a description of the basis for any determination under clause (i). 

(H) RULE OF CONSTRUCTION.—No provision of law 

shall be construed as permitting the Corporation to 

take any action prohibited by paragraph (4) unless 

such provision expressly provides, by direct reference 

to this paragraph, that this paragraph shall not apply 

with respect to such action. 

(5) The Corporation may not use its authority under this subsection to purchase the voting or common stock of an insured 
Sec. 13 FEDERAL DEPOSIT INSURANCE ACT 6 22 

depository institution. Nothing in the preceding sentence shall be 

construed to limit the ability of the Corporation to enter into and 

enforce covenants and agreements that it determines to be necessary to protect its financial interest. 

(6)(A) During any period in which an insured depository institution has received assistance under this subsection and such 

assistance is still outstanding, such insured depository institution 

may defer the payment of any State or local tax which is determined on the basis of the deposits held by such insured depository 

institution or of the interest or dividends paid on such deposits. 

(B) When such insured depository institution no longer has any 

outstanding assistance, such insured depository institution shall 

pay all taxes which were deferred under subparagraph (A). Such 

payments shall be made in accordance with a payment plan established by the Corporation, after consultation with the applicable 

State and local taxing authorities. 

(7) The transfer of any assets or liabilities associated with any 

trust business of an insured depository institution in default under 

subparagraph (2)(A) shall be effective without any State or Federal 

approval, assignment, or consent with respect thereto. 

(8) 1 ASSISTANCE BEFORE APPOINTMENT OF CONSERVATOR 

OR RECEIVER.— 

(A) IN GENERAL.—Subject to the least-cost provisions 

of paragraph (4), the Corporation shall consider providing 

direct financial assistance under this section for depository 

institutions before the appointment of a conservator or receiver for such institution only under the following circumstances: 

(i) TROUBLED CONDITION CRITERIA.—The Corporation determines— 

(i) grounds for the appointment of a conservator or receiver exist or likely will exist in the future unless the depository institution's capital levels are increased; and 

(ii) it is unlikely that the institution can meet 

all currently applicable capital standards without 

assistance. 

(ii) OTHER CRITERIA.—The depository institution 

meets the following criteria: 

(I) The appropriate Federal banking agency 

and the Corporation have determined that, during 

such period of time preceding the date of such 

determination as the agency or the Corporation 

considers to be relevant, the institution's management has been competent and has complied with 

applicable laws, rules, and supervisory directives 

and orders. 

(ii) The institution's management did not engage in any insider dealing, speculative practice, 

or other abusive activity. 

(B) PUBLIC DISCLOSURE.—Any determination under 

this paragraph to provide assistance under this section 

1

 Indentation so in law. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

623 

shall be made in writing and published in the Federal Register. 

(9) Any assistance provided under this subsection may be in 

subordination to the rights of depositors and other creditors. 

(10) In its annual report to the Congress, the Corporation shall 

report the total amount it has saved, or estimates it has saved, by 

exercising the authority provided in this subsection. 

(11) Payments made under this subsection shall be made— 

(A) from the Bank Insurance Fund in the case of payments 

to or on behalf of a member of such Fund; or 

(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. 

(d) SALE OF ASSETS TO CORPORATION.— 

(1) IN GENERAL.-Any conservator, receiver, or liquidator 

appointed for any insured depository institution in default, including the Corporation acting in such capacity, shall be entitled to offer the assets of such depository institutions for sale 

to the Corporation or as security for loans from the Corporation. 

(2) PROCEEDS.—The proceeds of every sale or loan of assets 

to the Corporation shall be utilized for the same purposes and 

in the same manner as other funds realized from the liquidation of the assets of such depository institutions. 

(3) RIGHTS AND POWERS OF CORPORATION.— 

(A) IN GENERAL.—With respect to any asset acquired 

or liability assumed pursuant to this section, the Corporation shall have all of the rights, powers, privileges, and 

authorities of the Corporation as receiver under sections 

11 and 15(b). 

(B) RULE OF CONSTRUCTION.—Such rights, powers, 

privileges, and authorities shall be in addition to and not 

in derogation of any rights, powers, privileges, and 

authorities otherwise applicable to the Corporation. 

(C) FIDUCIARY RESPONSIBILITY.—In exercising any 

right, power, privilege, or authority described in subparagraph (A), the Corporation shall continue to be subject to 

the fiduciary duties and obligations of the Corporation as 

receiver to claimants against the insured depository institution in receivership. 

(D) DISPOSITION OF ASSETS.—In exercising any right, 

power, privilege, or authority described in subparagraph 

(A) regarding the sale or disposition of assets sold to the 

Corporation pursuant to paragraph (1), the Corporation 

shall conduct its operations in a manner which— 

(i) maximizes the net present value return from 

the sale or disposition of such assets; 

(ii) minimizes the amount of any loss realized in 

the resolution of cases; 

(iii) ensures adequate competition and fair and 

consistent treatment of offerors; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 24 

(iv) prohibits discrimination on the basis of race, 

sex, or ethnic groups in the solicitation and consideration of offers; and 

(v) maximizes the preservation of the availability 

and affordability of residential real property for lowand moderate-income individuals. 

(4) LOANS.—The Corporation, in its discretion, may make 

loans on the security of or may purchase and liquidate or sell 

any part of the assets of an insured depository institution 

which is now or may hereafter be in default. 

( e ) AGREEMENT S AGAINS T INTEREST S OF CORPORATION. — 

(1) I N GENERAL.—N o agreement which tends to diminish or 

defeat the interest of the Corporation in any asset acquired by 

it under this section or section 11, either as security for a loan 

or by purchase or as receiver of any insured depository institution, shall be valid against the Corporation unless such 

agreement— 

(A) is in writing, 

(B) was executed by the depository institution and any 

person claiming an adverse interest thereunder, including 

the obligor, contemporaneously with the acquisition of the 

asset by the depository institution, 

(C) was approved by the board of directors of the 

depository institution or its loan committee, which approval shall be reflected in the minutes of said board or 

committee, and 

(D) has been, continuously, from the time of its execution, an official record of the depository institution. 

(2) PUBLI C DEPOSITS.—A n agreement to provide for the 

lawful collateralization of deposits of a Federal, State, or local 

governmental entity or of any depositor referred to in section 

11(a)(2) shall not be deemed to be invalid pursuant to paragraph (1)(B) solely because such agreement was not executed 

contemporaneously with the acquisition of the collateral or 

with any changes in the collateral made in accordance with 

such agreement. 

(f) ASSISTE D EMERGENC Y INTERSTAT E ACQUISITIONS.—(1 ) This 

subsection shall apply only to an acquisition of an insured bank or 

a holding company by an out-of-State bank savings association1 or 

out-of-State holding company for which the Corporation provides 

assistance under subsection (c). 

(2)(A) Whenever an insured bank with total assets of 

$500,000,000 or more (as determined from its most recent report of 

condition) is in default, the Corporation, as receiver, may, in its 

discretion and upon such terms and conditions as the Corporation 

may determine, arrange the sale of assets of the closed bank2 and 

the assumption of the liabilities of the closed bank,

 2 including the 

sale of such assets to and the assumption of such liabilities by an 

1

 Section 217(5)(C) of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989, which inserted the term "savings associations'', should probably have inserted a comma 

before and after such term. 

2

 Section 217(5)(B) of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989, 103 Stat. 257, amended section 13(f) by striking "closed bank'' and inserting "bank in default'' without specifying at which of the places the term appears the amendment should be 

executed. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

625 

insured depository institution located in the State where the closed 

bank1 was chartered but established by an out-of-State bank or 

holding company. Where otherwise lawfully required, a transaction 

under this subsection must be approved by the primary Federal or 

State supervisor of all parties thereto. 

(B)(i) Before making a determination to take any action under 

subparagraph (A), the Corporation shall consult the State bank 

supervisor of the State in which the insured bank in default was 

chartered. 

(ii) The State bank supervisor shall be given a reasonable 

opportunity, and in no event less than forty-eight hours, to object 

to the use of the provisions of this paragraph. Such notice may be 

provided by the Corporation prior to its appointment as receiver, 

but in anticipation of an impending appointment. 

(iii) If the State supervisor objects during such period, the Corporation may use the authority of this paragraph only by a vote of 

75 percent of the Board of Directors. The Board of Directors shall 

provide to the State supervisor, as soon as practicable, a written 

certification of its determination. 

( 3 ) EMERGENC Y INTERSTAT E ACQUISITION S OF INSURE D BANK S 

I N DANGE R OF DEFAULT 2. — 

( A ) ACQUISITIO N OF INSURE D BANK S I N DANGE R OF DEFAULT.—One or more out-of-State banks or out-of-State holding 

companies may acquire and retain all or part of the shares or 

assets of, or otherwise acquire and retain— 

(i) an insured bank in danger of default which has 

total assets of $500,000,000 or more; or 

(ii) 2 or more affiliated insured banks in danger of default which have aggregate total assets of $500,000,000 or 

more, if the aggregate total assets of such banks is equal 

to or greater than 33 percent of the aggregate total assets 

of all affiliated insured banks. 

( B ) ACQUISITIO N OF A HOLDIN G COMPAN Y OR OTHE R BAN K 

AFFILIATE.—I f one or more out-of-State banks or out-of-State 

holding companies acquire 1 or more affiliated insured banks 

under subparagraph (A) the aggregate total assets of which is 

equal to or greater than 33 percent of the aggregate total assets of all affiliated insured banks, any such out-of-State bank 

or out-of-State holding company may also, as part of the same 

transaction, acquire and retain the shares or assets of, or otherwise acquire and retain— 

(i) the holding company which controls the affiliated 

insured banks so acquired; or 

(ii) any other affiliated insured bank. 

( C ) REQUES T FOR ASSISTANC E B Y CORPORATE BOARD OF 

DIRECTORS.—The Corporation may assist an acquisition or 

merger authorized under subparagraph (A) only if the board of 

directors or trustees of each insured bank in danger of default 

1

 see footnote 2 on previous page. 

2

 Section 217(5)(A) of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989, 103 Stat. 257, amended section 13(f) by striking ''closing'' each place it appears and inserting ''default'' but did not amend the heading of this paragraph. section 602(a)(38) of p.L. 103-

325 attempted to amend section 13(f)(3), by striking ''CLOSING'' in the heading and inserting 

''DEFAULT''. This amendment probably should have capitalized both ''CLOSING'' and "DEFAULT". 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 626 

which is being acquired has requested in writing that the Corporation assist the acquisition or merger. 

( D ) CERTAI N ACQUISITIONS AUTHORIZE D AFTER ASSISTANCE 

IS PROVIDED.—Notwithstanding paragraph (1), if— 

(i) at any time after the date of the enactment of the 

Financial Institutions Emergency Acquisitions Amendments of 1987, the Corporation provides any assistance 

under subsection (c) to an insured bank; and 

(ii) at the time such assistance is granted, the insured 

bank, the holding company which controls the insured 

bank (if any), or any affiliated insured bank is eligible to 

be acquired by an out-of-State bank or out-of-State holding 

company under this paragraph, 

the insured bank, the holding company, and such other affiliated insured bank shall remain eligible, subject to such terms 

and conditions as the Corporation (in the Corporation's discretion) may impose, to be acquired by an out-of-State bank or 

out-of-State holding company under this paragraph as long as 

any portion of such assistance remains outstanding. 

(E) STATE BANK SUPERVISOR APPROVAL.—The Corporation 

may take no final action in connection with any acquisition 

under this paragraph unless the State bank supervisor of the 

State in which the bank in danger of default is located approves the acquisition. 

(F) OTHE R REQUIREMENTS NO T AFFECTED.—This paragraph 

does not affect any other requirement under Federal or State 

law for regulatory approval of an acquisition under this paragraph. 

( G ) ACQUISITIO N MA Y BE CONDITIONE D O N RECEIPT OF CONSIDERATION FOR CORPORATION'S ASSISTANCE.—Any acquisition 

described in subparagraph (D) may be conditioned on the receipt of such consideration for the Corporation's assistance as 

the Board of Directors deems appropriate. 

(4)(A) ACQUISITION S NO T SUBJECT TO CERTAI N OTHE R LAWS. — 

Section 3(d) of the Bank Holding Company Act of 1956, any provision of State law, and section 408(e)(3) of the National Housing 

Act1 shall not apply to prohibit any acquisition under paragraph 

(2) or (3), except that an out-of-State bank may make such an acquisition only if such ownership is otherwise specifically 

authorized. 

(B) Any subsidiary created by operation of this subsection may 

retain and operate any existing branch or branches of the institution merged with or acquired under paragraph (2) or (3), but otherwise shall be subject to the conditions upon which a national bank 

may establish and operate branches in the State in which such insured institution is located. 

(C) No insured institution acquired under this subsection shall 

after it is acquired move its principal office or any branch office 

which it would be prohibited from moving if the institution were 

a national bank. 

1

 Section 408 of the National Housing Act was repealed by section 407 of P.L. 101-73 (103 

Stat. 363). The reference should probably be to section 10(e)(3) of the Home Owners' Loan Act. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

627 

( D ) SUBSEQUEN T NONEMERGENC Y INTERSTAT E ACQUISITION S 

SUBJEC T TO STAT E LAW. — 

(i) IN GENERAL.—Any out-of-State bank holding company 

which acquires control of an insured bank in any State under 

paragraph (2) or (3) may acquire any other insured bank and 

establish branches in such State to the same extent as a bank 

holding company whose insured bank subsidiaries' operations 

are principally conducted in such State may acquire any other 

insured bank or establish branches. 

(ii) DELAYE D DATE OF APPLICABILITY.—Claus e (i) shall not 

apply with respect to any out-of-State bank holding company 

referred to in such clause before the earlier of— 

(i) the end of the 2-year period beginning on the date 

the acquisition referred to in such clause with respect to 

such company is consummated; or 

(II) the end of any period established under State law 

during which such out-of-State bank holding company may 

not be treated as a bank holding company whose insured 

bank subsidiaries' operations are principally conducted in 

such State for purposes of acquiring other insured banks 

or establishing bank branches. 

(iii) DETERMINATIO N OF PRINCIPALL Y CONDUCTED.—Fo r 

purposes of this subparagraph, the State in which the operations of a holding company's insured bank subsidiaries are 

principally conducted is the State determined under section 

3(d) of the Bank Holding Company Act of 1956 with respect to 

such holding company. 

( E ) CERTAI N STAT E INTERSTAT E BANKIN G LAW S INAPPLI -

CABLE.—Any holding company which acquires control of any insured bank or holding company under paragraph (2) or (3) or subparagraph (D) of this paragraph shall not, by reason of such acquisition, be required under the law of any State to divest any other 

insured bank or be prevented from acquiring any other bank or 

holding company. 

(5) in determining whether to arrange a sale of assets and 

assumption of liabilities or an acquisition or a merger under the 

authority of paragraph (2) or (3), the Corporation may solicit such 

offers or proposals as are practicable from any prospective purchasers or merger partners it determines, in its sole discretion, are 

both qualified and capable of acquiring the assets and liabilities of 

the bank in default1 or the bank in danger of default. 

(6)(A) If, after receiving offers, the offer presenting the lowest 

expense to the Corporation, that is in a form and with conditions 

acceptable to the Corporation (hereinafter referred to as the ''lowest 

acceptable offer''), is from an offeror that is not an existing in-State 

bank of the same type as the bank that is in default or is in danger 

of default (or, where the bank is an insured bank other than a mutual savings bank, the lowest acceptable offer is not from an inState holding company), the Corporation shall permit the offeror 

which made the initial lowest acceptable offer and each offeror who 

1

 Section 217(5)(B) of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989, 103 Stat. 257, amended section 13(f) by striking ''closed bank'' and inserting "bank in default'' without specifying at which of the places such term appears the amendment should be 

executed. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 628 

made an offer the estimated cost of which to the Corporation was 

within 15 per centum or $15,000,000, whichever is less, of the initial lowest acceptable offer to submit a new offer. 

(B) in considering authorizations under this subsection, the 

Corporation shall give consideration to the need to minimize the 

cost of financial assistance and to the maintenance of specialized 

depository institutions. The Corporation shall authorize transactions under this subsection considering the following priorities: 

(i) First, between depository institutions of the same type 

within the same State. 

(ii) Second, between depository institutions of the same 

type— 

(I) in different States which by statute specifically authorize such acquisitions; or 

(II) in the absence of such statutes, in different States 

which are contiguous. 

(iii) Third, between depository institutions of the same 

type in different States other than the States described in 

clause (ii). 

(iv) Fourth, between depository institutions of different 

types in the same State. 

(v) Fifth, between depository institutions of different 

types— 

(I) in different States which by statute specifically authorize such acquisitions; or 

(II) in the absence of such statutes, in different States 

which are contiguous. 

(vi) Sixth, between depository institutions of different 

types in different States other than the States described in 

clause (v). 

(C) MINORITY BANK PRIORITY.—In the case of a minority-controlled bank, the Corporation shall seek an offer from other minority-controlled banks before proceeding with the bidding priorities 

set forth in subparagraph (B). 

(D) In determining the cost of offers and reoffers, the Corporation's calculations and estimations shall be determinative. The Corporation may set reasonable time limits on offers and reoffers. 

(7) No sale may be made under the provisions of paragraph (2) 

or (3)— 

(A) which would result in a monopoly, or which would be 

in furtherance of any combination or conspiracy to monopolize 

or to attempt to monopolize the business of banking in any 

part of the United States; 

(B) whose effect in any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of 

trade, unless the Corporation finds that the anticompetitive effects of the proposed transactions are clearly outweighed in the 

public interest by the probable effect of the transaction in 

meeting the convenience and needs of the community to be 

served; or 

(C) if in the opinion of the Corporation the acquisition 

threatens the safety and soundness of the acquirer or does not 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

629 

result in the future viability of the resulting depository institution. 

(8) As used in this subsection— 

(A) the term ''in-State depository institution or in-State 

holding company'' means an existing insured depository institution currently operating in the State in which the bank in 

default1 or the bank in danger of default is chartered or a company that is operating an insured depository institution subsidiary in the State in which the bank in default1

 or the bank 

in danger of default is chartered; 

(B) the term ''acquire'' means to acquire, directly or indirectly, ownership or control through— 

(i) an acquisition of shares; 

(ii) an acquisition of assets or assumption of liabilities; 

(iii) a merger or consolidation; or 

(iv) any similar transaction; 

(C) the term ''affiliated insured bank'' means— 

(i) when used in connection with a reference to a holding company, an insured bank which is a subsidiary of 

such holding company; and 

(ii) when used in connection with a reference to 2 or 

more insured banks, insured banks which are subsidiaries 

of the same holding company; and 

(D) the term ''subsidiary'' has the meaning given to such 

term in section 2(d) of the Bank Holding Company Act of 1956. 

( 9 ) N O ASSISTANC E AUTHORIZE D FOR CERTAI N SUBSIDIARIE S OF 

HOLDIN G COMPANIES. — 

(A) IN GENERAL.—The Corporation shall not provide any 

assistance to a subsidiary, other than a subsidiary that is an 

insured depository institution, of a holding company in connection with any acquisition under this subsection. 

( B ) INTERMEDIAT E HOLDIN G COMPAN Y PERMITTED.—Thi s 

paragraph does not prohibit an intermediate holding company 

or an affiliate of an insured depository institution from being 

a conduit for assistance ultimately intended for an insured 

bank. 

(10 ) ANNUA L REPORT. — 

(A) REQUIRED.—I n its annual report to Congress the Corporation shall include a report on the acquisitions under this 

subsection during the preceding year. 

(B) CONTENTS.—The report required under subparagraph 

(A) shall contain the following information: 

(i) The number of acquisitions under this subsection. 

(ii) A brief description of each such acquisition and the 

circumstances under which such acquisition occurred. 

(11) DETERMINATIO N OF TOTA L ASSETS.—Fo r purposes of this 

subsection, the total assets of any insured bank shall be determined on the basis of the most recent report of condition of such 

bank which is available at the time of such determination. 

1

 Section 217(5)(B) of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989, 103 Stat. 257, amended section 13(f) by striking ''closed bank'' and inserting "bank in default'' without specifiying at which of the places the term appears the amendment should be 

executed. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 30 

(12) 1 ACQUISITION OF MINORITY BANK BY MINORITY BANK 

HOLDING COMPANY WITHOUT REGARD TO ASSET SIZE.— 

(A) IN GENERAL.—For the purpose of ensuring continued minority control of a minority-controlled bank, paragraphs (2) and (3) shall apply with respect to the acquisition of a minority-controlled bank by an out-of-State minority-controlled depository institution or depository institution holding company without regard to the fact that the 

total assets of such minority-controlled bank are less than 

$500,000,000. 

(B) DEFINITIONS.—Fo r purposes of this paragraph: 

(i) MINORITY BANK.—Th e term "minority bank'' 

means any depository institution described in clause 

(i), (ii), or (iii) of section 19(b)(1)(A) of the Federal Reserve Act— 

(i) more than 50 percent of the ownership or 

control of which is held by one or more minority 

individuals; and 

(ii) more than 50 percent of the net profit or 

loss of which accrues to minority individuals. 

(ii) MINORITY.—The term "minority'' means any 

Black American, Native American, Hispanic American, 

or Asian American. 

(g) Prior to July 1, 1951, the Corporation shall pay out of its 

capital account to the Secretary of the Treasury an amount equal 

to 2 per centum simple interest per annum on amounts advanced 

to the Corporation on stock subscriptions by the Secretary of the 

Treasury and the Federal Reserve banks, from the time of such advances until the amounts thereof were repaid. The amount payable 

hereunder shall be paid in two equal installments, the first installment to be paid prior to December 31, 1950. 

(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 closing2

 of such branch 

substantially outweighs any additional risk of loss to the Bank 

Insurance Fund which the exercise of such powers would entail. 

[Subsection (i) repealed. See section 206(a) of the Garn-St Germain 

Depository Institutions Act of 1982, as amended by section 1(a) of Public 

Law 97-457 (96 Stat. 2507), and section 509(b) of the Competitive Equality 

Banking Act of 1987 (101 Stat. 635).] 

(j) LOAN LOSS AMORTIZATION FOR CERTAIN BANKS.— 

(1) ELIGIBILITY.—Th e appropriate Federal banking agency 

shall permit an agricultural bank to take the actions referred 

to in paragraph (2) if it finds that— 

(A) there is no evidence that fraud or criminal abuse 

on the part of the bank led to the losses referred to in 

paragraph (2); and 

1

 indentation so in law. 

2

 So in law. Probably should be "default". 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

631 

(B) the agricultural bank has a plan to restore its capital, not later than the close of the amortization period 

established under paragraph (2), to a level prescribed by 

the appropriate Federal banking agency. 

(2) SEVEN-YEAR LOSS AMORTIZATION.—(A) Any loss on any 

qualified agricultural loan that an agricultural bank would 

otherwise be required to show on its annual financial statement for any year between December 31, 1983, and January 1, 

1992, may be amortized on its financial statements over a period of not to exceed 7 years, as provided in regulations issued 

by the appropriate Federal banking agency. 

(B) An agricultural bank may reappraise any real estate or 

other property, real or personal, that it acquired coincident to 

the making of a qualified agricultural loan and that it owned 

on January 1, 1983, and any such additional property that it 

acquires prior to January 1, 1992. Any loss that such bank 

would otherwise be required to show on its annual financial 

statements as the result of any such reappraisal may be amortized on its financial statements over a period of not to exceed 

7 years, as provided in regulations issued by the appropriate 

Federal banking agency. 

(3) REGULATIONS.—Not later than 90 days after the date 

of enactment of this subsection, the appropriate Federal banking agency shall issue regulations implementing this subsection with respect to banks that it supervises, including regulations implementing the capital restoration requirement of 

paragraph (1)(B). 

(4) DEFINITIONS.—As used in this subsection— 

(A) the term ''agricultural bank'' means a bank— 

(i) the deposits of which are insured by the Federal Deposit Insurance Corporation; 

(ii) which is located in an area the economy of 

which is dependent on agriculture; 

(iii) which has assets of $100,000,000 or less; and 

(iv) which has— 

(I) at least 25 percent of its total loans in 

qualified agricultural loans; or 

(II) fewer than 25 percent of its total loans in 

qualified agricultural loans but which the appropriate Federal banking agency or State bank commissioner recommends to the Corporation for eligibility under this section, or which the Corporation, on its motion, deems eligible; and 

(B) the term ''qualified agricultural loan'' means a loan 

made to finance the production of agricultural products or 

livestock in the United States, a loan secured by farmland 

or farm machinery, or such other category of loans as the 

appropriate Federal banking agency may deem eligible. 

(5) MAINTENANCE OF PORTFOLIO.—As a condition of eligibility under this subsection, the agricultural bank must agree 

to maintain in its loan portfolio a percentage of agricultural 

loans which is not lower than the percentage of such loans in 

its loan portfolio on January 1, 1986. 

(k) EMERGENCY ACQUISITIONS.— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 32 

(1) I N GENERAL.— 

(A) ACQUISITIONS AUTHORIZED.— 

(i) TRANSACTIONS DESCRIBED.—Notwithstanding 

any provision of State law, upon determining that severe financial conditions threaten the stability of a significant number of savings associations, or of savings 

associations possessing significant financial resources, 

the Corporation, in its discretion and if it determines 

such authorization would lessen the risk to the Corporation, may authorize— 

(i) a savings association that is eligible for 

assistance pursuant to subsection (c) to merge or 

consolidate with, or to transfer its assets and liabilities to, any other savings association or any 

insured bank, 

(ii) any other savings association to acquire 

control of such savings association, or 

(iii) any company to acquire control of such 

savings association or to acquire the assets or assume the liabilities thereof. 

The Corporation may not authorize any transaction 

under this subsection unless the Corporation determines that the authorization will not present a substantial risk to the safety or soundness of the savings 

association to be acquired or any acquiring entity. 

(ii) TERMS OF TRANSACTIONS.—Mergers, consolidations, transfers, and acquisitions under this subsection 

shall be on such terms as the Corporation shall provide. 

(iii) APPROVAL BY APPROPRIATE AGENCY.—Wher e 

otherwise required by law, transactions under this 

subsection must be approved by the appropriate Federal banking agency of every party thereto. 

(iv) ACQUISITIONS BY SAVINGS ASSOCIATIONS.—Any 

Federal savings association that acquires another savings association pursuant to clause (i) may, with the 

concurrence of the Director of the office of Thrift 

Supervision, hold that savings association as a subsidiary notwithstanding the percentage limitations of 

section 5(c)(4)(B) of the Home Owners' Loan Act. 

(v) DUA L SERVICE.—Dual service by a management official that would otherwise be prohibited under 

the Depository Institution Management Interlocks Act 

may, with the approval of the Corporation, continue 

for up to 10 years. 

(vi) CONTINUED APPLICABILITY OF CERTAIN STATE 

RESTRICTIONS.—Nothing in this subsection overrides or 

supersedes State laws restricting or limiting the 

activities of a savings association on behalf of another 

entity. 

(B) CONSULTATION WIT H STATE OFFICIAL.— 

(i) CONSULTATION REQUIRED.—Before making a 

determination to take any action under subparagraph 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

633 

(A), the Corporation shall consult the State official 

having jurisdiction of the acquired institution. 

(ii) PERIOD FOR STATE RESPONSE.—The official 

shall be given a reasonable opportunity, and in no 

event less than 48 hours, to object to the use of the 

provisions of this paragraph. Such notice may be provided by the Corporation prior to its appointment as 

receiver, but in anticipation of an impending appointment. 

(iii) APPROVAL OVER OBJECTION OF STATE OFFICIAL.—If the official objects during such period, the 

Corporation may use the authority of this paragraph 

only by a vote of 75 percent or more of the voting 

members of the Board of Directors. The Corporation 

shall provide to the official, as soon as practicable, a 

written certification of its determination. 

(2) SOLICITATION OF OFFERS.— 

(A) I N GENERAL.—In considering authorizations under 

this subsection, the Corporation may solicit such offers or 

proposals as are practicable from any prospective purchasers or merger partners it determines, in its sole discretion, are both qualified and capable of acquiring the assets 

and liabilities of the savings association. 

(B) MINORITY-CONTROLLED INSTITUTIONS.—In the case 

of a minority-controlled depository institution, the Corporation shall seek an offer from other minority-controlled 

depository institutions before seeking an offer from other 

persons or entities. 

(3) DETERMINATION OF COSTS.—In determining the cost of 

offers under this subsection, the Corporation's calculations and 

estimations shall be determinative. The Corporation may set 

reasonable time limits on offers. 

(4) BRANCHING PROVISIONS.— 

(A) I N GENERAL.—If a merger, consolidation, transfer, 

or acquisition under this subsection involves a savings 

association eligible for assistance and a bank or bank holding company, a savings association may retain and operate 

any existing branch or branches or any other existing 

facilities. if the savings association continues to exist as a 

separate entity, it may establish and operate new branches 

to the same extent as any savings association that is not 

affiliated with a bank holding company and the home office of which is located in the same State. 

(B) RESTRICTIONS.— 

(i) IN GENERAL.—Notwithstanding subparagraph 

(A), if— 

(i) a savings association described in such 

subparagraph does not have its home office in the 

State of the bank holding company bank subsidiary, and 

(ii) such association does not qualify as a domestic building and loan association under section 

7701(a)(19) of the Internal Revenue Code of 1986, 

or does not meet the asset composition test im-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 34 

posed by subparagraph (C) of that section on institutions seeking so to qualify, 

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 Savings 

Association Insurance Fund member is located. 

(ii) TRANSITION PERIOD.—The Corporation, for 

good cause shown, may allow a savings association up 

to 2 years to comply with the requirements of clause 

(i). 

(5) ASSISTANCE BEFORE APPOINTMENT OF CONSERVATOR OR 

RECEIVER.— 

(A) ASSISTANCE PROPOSALS.—The Corporation shall 

consider proposals by Savings Association Insurance Fund 

members for assistance pursuant to subsection (c) before 

grounds exist for appointment of a conservator or receiver 

for such member under the following circumstances: 

(i) TROUBLED CONDITION CRITERIA.—The Corporation determines— 

(I) that grounds for appointment of a conservator or receiver exist or likely will exist in the future unless the member's tangible capital is increased; 

(II) that it is unlikely that the member can 

achieve positive tangible capital without assistance; and 

(III) that providing assistance pursuant to the 

member's proposal would be likely to lessen the 

risk to the Corporation. 

(ii) OTHER CRITERIA.—The member meets the following criteria: 

(I) Before enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989, the member was solvent under applicable 

regulatory accounting principles but had negative 

tangible capital. 

(II) The member's negative tangible capital 

position is substantially attributable to its participation in acquisition and merger transactions that 

were instituted by the Federal Home Loan Bank 

Board or the Federal Savings and Loan Insurance 

Corporation for supervisory reasons. 

(III) The member is a qualified thrift lender 

(as defined in section 10(m) of the Home Owners' 

Loan Act) or would be a qualified thrift lender if 

commercial real estate owned and nonperforming 

commercial loans acquired in acquisition and 

merger transactions that were instituted by the 

Federal Home Loan Bank Board or the Federal 

Savings and Loan Insurance Corporation for 

supervisory reasons were excluded from the member's total assets. 

(IV) The appropriate Federal banking agency 

has determined that the member's management is 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

635 

competent and has complied with applicable laws, 

rules, and supervisory directives and orders. 

(v) The member's management did not engage in insider dealing or speculative practices or 

other activities that jeopardized the member's 

safety and soundness or contributed to its impaired capital position. 

(vi) The member's offices are located in an 

economically depressed region. 

( B ) CORPORATION CONSIDERATION OF ASSISTANCE PROPOSAL.—If a member meets the requirements of clauses (i) 

and (ii) of subparagraph (A), the Corporation shall consider providing direct financial assistance. 

( C ) ECONOMICALLY DEPRESSED REGIO N DEFINED.—Fo r 

purposes of this paragraph, the term ''economically depressed region'' means any geographical region which the 

Corporation determines by regulation to be a region within 

which real estate values have suffered serious decline due 

to severe economic conditions, such as a decline in energy 

or agricultural values or prices. 

SEC. 14. [12 U.S.C. 1824] BORROWIN G AUTHORITY . 

(a) BORROWIN G FRO M TREASURY.—Th e 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 issued under the Second Liberty Bond Act, as amended, 

and the purposes for which securities may be issued under the Second Liberty Bond Act,1

 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 publicdebt transactions of the United States. The Corporation may employ any funds obtained under this section for purposes of the 

Bank Insurance Fund or the Savings Association Insurance Fund 

and the borrowing shall become a liability of each such 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) BORROWIN G FRO M FEDERA L FINANCIN G BANK.—Th e Corporation is authorized to issue and sell the Corporation's obliga-

*The Second Liberty Bond Act was repealed by section 5 of P.L. 97-258. The substance of 

such Act was reenacted as subchapter I of chapter 31 of title 31, United States Code. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 636 

tions, on behalf of the Bank Insurance Fund or Savings Association 

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) REPAYMEN T SCHEDULES REQUIRE D FOR AN Y BORROWING. — 

(1) I N GENERAL.—N o amount may be provided by the Secretary of the Treasury to the Corporation under subsection (a) 

unless an agreement is in effect between the Secretary and the 

Corporation which— 

(A) provides a schedule for the repayment of the outstanding amount of any borrowing under such subsection; 

and 

(B) demonstrates that income to the Corporation from 

assessments under this Act will be sufficient to amortize 

the outstanding balance within the period established in 

the repayment schedule and pay the interest accruing on 

such balance. 

( 2 ) CONSULTATIO N WIT H AN D REPORT TO CONGRESS.—Th e 

Secretary of the Treasury and the Corporation shall— 

(A) consult with the Committee on Banking, Finance 

and Urban Affairs of the House of Representatives and the 

Committee on Banking, Housing, and Urban Affairs of the 

Senate on the terms of any repayment schedule agreement 

described in paragraph (1) relating to repayment, including terms relating to any emergency special assessment 

under section 7(b)(7)

 1; and 

(B) submit a copy of each repayment schedule agreement entered into under paragraph (1) to the Committee 

on Banking, Finance and Urban Affairs of the House of 

Representatives and the Committee on Banking, Housing, 

and Urban Affairs of the Senate before the end of the 30-

day period beginning on the date any amount is provided 

by the Secretary of the Treasury to the Corporation under 

subsection (a). 

( 3 ) INDUSTR Y REPAYMENT. — 

(A) BIF MEMBE R PAYMENTS.—N o 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. 

(B) SAIF MEMBE R PAYMENTS.—N o 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. 

( d) BORROWIN G FOR BI F FRO M BI F MEMBERS. — 

1

 So in law. Probably should refer to "section 7(b)(6)''. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

637 

(1) BORROWING AUTHORITY.—The Corporation may issue 

obligations to Bank Insurance Fund members, and may borrow 

from Bank Insurance Fund members 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 Bank Insurance Fund; and 

(B) the terms of the obligation or instrument limit the 

liability of the Corporation or the Bank 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.—Fo r 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.—Fo r 

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 Bank Insurance Fund member. 

(3) LIABILITY OF BIF.—Any obligation issued or amount 

borrowed under paragraph (1) shall be a liability of the Bank 

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 BIF MEMBERS.— 

(A) AUTHORITY TO INVEST.—Subject to subparagraph 

(B) and notwithstanding any other provision of Federal 

law or the law of any State, any Bank Insurance Fund 

member may purchase and hold for investment any obligation issued by the Corporation under paragraph (1) with-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 638 

out 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 Bank Insurance Fund member 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. 

(6) ACCOUNTING TREATMENT.—I n 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. 

SEC. 15. [12 U.S.C. 1825] (a) GENERAL RULE.—Al l notes, 

debentures, bonds, or other such obligations issued by the Corporation shall be exempt, both as to principal and interest, from all taxation (except estate and inheritance taxes) now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority: Provided, That interest upon or any income from any 

such obligations and gain from the sale or other disposition of such 

obligations shall not have any exemption, as such, and loss from 

the sale or other disposition of such obligations shall not have any 

special treatment, as such, under the Internal Revenue Code, or 

laws amendatory or supplementary thereto. The Corporation, including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation now or hereafter imposed 

by the United States, by any Territory, dependency, or possession 

thereof, or by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be 

subject to State, Territorial, county, municipal, or local taxation to 

the same extent according to its value as other real property is 

taxed. 

(b) OTHER EXEMPTIONS.—Whe n acting as a receiver, the following provisions shall apply with respect to the Corporation: 

(1) The Corporation including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all 

taxation imposed by any State, county, municipality, or local 

taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or 

local taxation to the same extent according to its value as other 

real property is taxed, except that, notwithstanding the failure 

of any person to challenge an assessment under State law of 

such property's value, such value, and the tax thereon, shall be 

determined as of the period for which such tax is imposed. 

(2) No property of the Corporation shall be subject to levy, 

attachment, garnishment, foreclosure, or sale without the consent of the Corporation, nor shall any involuntary lien attach 

to the property of the Corporation. 

(3) The Corporation shall not be liable for any amounts in 

the nature of penalties or fines, including those arising from 

the failure of any person to pay any real property, personal 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

639 

property, probate, or recording tax or any recording or filing 

fees when due. 

This subsection shall not apply with respect to any tax imposed (or 

other amount arising) under the Internal Revenue Code of 1986. 

(c) LIMITATIO N ON BORROWING.— 

(1) COST ESTIMATE FOR OUTSTANDING OBLIGATIONS, GUARANTEES, AND LIABILITIES.—As soon as practicable after the date 

of enactment of the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989, the Corporation shall estimate 

the aggregate cost to the Corporation for all outstanding obligations and guarantees of the Corporation which were issued, 

and all outstanding liabilities which were incurred, by the Corporation before such date. 

(2) ESTIMATE OF NOTES AND OTHER OBLIGATIONS REQUIRED.—Before issuing an obligation or making a guarantee, 

the Corporation shall estimate the cost of such obligations or 

guarantees. 

(3) INCLUSION OF ESTIMATES I N FINANCIAL STATEMENTS.— 

The Corporation shall— 

(A) reflect in its financial statements the estimates 

made by the Corporation under paragraphs (1) and (2) of 

the aggregate amount of the costs to the Corporation for 

outstanding obligations and other liabilities, and 

(B) make such adjustments as are appropriate in the 

estimate of such aggregate amount not less frequently 

than quarterly. 

(4) ESTIMATE OF OTHER ASSETS REQUIRED.—The Corporation shall— 

(A) estimate the market value of assets held by it as 

a result of case resolution activities, with a reduction for 

expenses expected to be incurred by the Corporation in 

connection with the management and sale of such assets; 

(B) reflect the amounts so estimated in its financial 

statements; and 

(C) make such adjustments as are appropriate of such 

market value not less than quarterly. 

(5) MAXIMU M AMOUNT LIMITATION ON OUTSTANDING OBLIGATIONS.—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 the Bank Insurance Fund or Savings Association 

Insurance Fund, respectively, outstanding would exceed the 

sum of— 

(A) the amount of cash or the equivalent of cash held 

by the Bank Insurance Fund or Savings Association Insurance Fund, respectively; 

(B) the amount which is equal to 90 percent of the 

Corporation's estimate of the fair market value of assets 

held by the Bank Insurance Fund or the Savings Association Insurance Fund, respectively, 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. 11A FEDERAL DEPOSIT INSURANCE ACT 6 40 

(6) OBLIGATION DEFINED.— 

(A) IN GENERAL.—For purposes of paragraph (5), the 

term ''obligation'' includes— 

(i) any guarantee issued by the Corporation, other 

than deposit guarantees; 

(ii) any amount borrowed pursuant to section 14; 

and 

(iii) any other obligation for which the Corporation 

has a direct or contingent liability to pay any amount. 

( B) VALUATION OF CONTINGENT LIABILITIES.—The Corporation shall value any contingent liability at its expected 

cost to the Corporation. 

(d) FUL L FAIT H AND CREDIT.—Th e full faith and credit of the 

United States is pledged to the payment of any obligation issued 

after the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 by the Corporation, 

with respect to both principal and interest, if— 

(1) the principal amount of such obligation is stated in the 

obligation; and 

(2) the term to maturity or the date of maturity of such 

obligation is stated in the obligation. 

SEC. 16. [12 U.S.C. 1826] In order that the Corporation may 

be supplied with such forms of notes, debentures, bonds, or other 

such obligations as it may need for issuance under this Act, the 

Secretary of the Treasury is authorized to prepare such forms as 

shall be suitable and approved by the Corporation, to be held in the 

Treasury subject to delivery, upon order of the Corporation. The 

engraved plates, dies, bed pieces, and other material executed in 

connection therewith shall remain in the custody of the Secretary 

of the Treasury. The Corporation shall reimburse the Secretary of 

the Treasury for any expenses incurred in the preparation, custody, 

and delivery of such notes, debentures, bonds, or other such obligations. 

SEC. 17. [12 U.S.C. 1827] (a) ANNUA L REPORTS ON BIF, SAIF, 

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 the Bank Insurance Fund, the 

Savings Association Insurance Fund, and the FSLIC Resolution Fund, an analysis by the Corporation of— 

(A) the current financial condition of each such fund; 

(B) the purpose, effect, and estimated cost of each resolution action taken for an insured depository institution 

during the preceding year; 

(C) the extent to which the actual costs of assistance 

provided to, or for the benefit of, an insured depository 

institution during the preceding year exceeded the estimated costs of such assistance reported in a previous year 

under paragraph (A); 

(D) the exposure of each insurance fund to changes in 

those economic factors most likely to affect the condition of 

that fund; 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

641 

(E) a current estimate of the resources needed for the 

Bank Insurance Fund, the Savings Association 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. 

(2) MANNE R OF SUBMISSION.—Such report shall be submitted to the President of the Senate and the Speaker of the 

House of Representatives, who shall cause the same to be 

printed for the information of Congress, and the President as 

soon as practicable after the first day of January each year. 

(3) COORDINATION WIT H OTHER REPORT REQUIREMENTS.— 

The report required under this subsection shall include the report required under section 18(f)(7) of the Federal Trade Commission Act. 

(b) QUARTERLY REPORTS TO TREASURY.— 

(1) FINANCIAL OPERATING PLANS AND FORECASTS.—Before 

the beginning of each fiscal quarter, the Corporation shall provide to the Secretary of the Treasury a copy of the Corporation's financial operating plans and forecasts. 

(2) FINANCIAL CONDITION AND REPORTS OF OPERATIONS.— 

As soon as practicable after the end of each fiscal quarter, the 

Corporation shall submit to the Secretary of the Treasury a 

copy of the report of the Corporation's financial condition as of 

the end of such fiscal quarter and the results of the Corporation's operations during such fiscal quarter. 

(3) ITEMS TO BE INCLUDED.—Th e plans, forecasts, and reports required under this subsection shall reflect the estimates 

required to be made under section 15(b) of the liabilities and 

obligations of the Corporation described in such section. 

(4) RULE OF CONSTRUCTION.—The requirement to provide 

plans, forecasts, and reports to the Secretary of the Treasury 

under this subsection may not be construed as implying any 

obligation on the part of the Corporation to obtain the consent 

or approval of such Secretary with respect to such plans, forecasts, and reports. 

(c) REPORTS TO OMB.— 

(1) FINANCIAL INFORMATION.—The Corporation shall continue to provide to the Director of the Office of Management 

and Budget financial information consistent with that contained in the reports that were being provided to the Director 

immediately prior to the effective date of the Financial institutions Reform, Recovery, and Enforcement Act of 1989. 

(2) FINANCIAL OPERATING PLANS AND FORECASTS.—The 

Corporation shall also provide to the Director copies of the Corporation's financial operating plans and forecasts as prepared 

by the Corporation in the ordinary course of its operations, and 

copies of the quarterly reports of the Corporation's financial 

condition and results of operations as prepared by the Corporation in the ordinary course of its operations. 

(3) RULE OF CONSTRUCTION.—This subsection may not be 

construed as implying any obligation on the part of the Corporation to consult with or obtain the consent or approval of 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 42 

the Director with respect to any reports, plans, forecasts, or 

other information referred to in paragraph (1) or (2) or any 

jurisdiction or oversight over the affairs or operations of the 

Corporation. 

(d) AUDIT.— 

(1) AUDIT REQUIRED.—The Comptroller General shall audit 

annually the financial transactions of the Corporation, the 

Bank Insurance Fund, the Savings Association 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, the Bank Insurance Fund, the Savings Association 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. 

(e) The financial transactions of the Corporation shall be audited by the General Accounting Office in accordance with the principles and procedures applicable to commercial corporate transactions and under such rules and regulations as may be prescribed 

by the Comptroller General of the United States. The audit shall 

be conducted at the place or places where accounts of the Corporation are normally kept. The representatives of the General Accounting Office shall have access to all books, accounts, records, reports, files, and all other papers, things, or property belonging to 

or in use by the Corporation pertaining to its financial transactions 

and necessary to facilitate the audit, and they shall be afforded full 

facilities for verifying transactions with the balances or securities 

held by depositaries, fiscal agents, and custodians. All such books, 

accounts, records, reports, files, papers and property of the Corporation shall remain in possession and custody of the Corporation. 

The audit shall begin with financial transactions occurring on and 

after August 31, 1948. The Corporation shall be audited at least 

once in every three years. 

(f) A report of each audit conducted under subsection (b) of this 

section shall be made by the Comptroller General to the Congress 

not later than six and one-half months following the close of the 

last year covered by such audit. The report to the Congress shall 

set forth the scope of the audit and shall include a statement of assets and liabilities and surplus or deficit; a statement of surplus or 

deficit analysis; a statement of income and expenses; a statement 

of sources and application of funds and such comments and information as may be deemed necessary to inform Congress of the 

financial operations and condition of the Corporation, together with 

such recommendations with respect thereto as the Comptroller 

General may deem advisable. The report shall also show specifically any program, expenditure, or other financial transaction or 

undertaking observed in the course of the audit, which, in the opinion of the Comptroller General, has been carried on or made without authority of law. A copy of each report shall be furnished to the 

President, to the Secretary of the Treasury, and to the Corporation 

at the time submitted to the Congress. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

643 

(g) For the purpose of conducting such audit the Comptroller 

General is authorized in his discretion to employ by contract, without regard to section 3709 of the Revised Statutes, professional 

services of firms and organizations of certified public accountants, 

with the concurrence of the Corporation, for temporary periods or 

for special purposes. The Corporation shall reimburse the General 

Accounting Office for the cost of any such audit as billed therefor 

by the Comptroller General, and the General Accounting Office 

shall deposit the sums so reimbursed into the Treasury as miscellaneous receipts. 

SEC. 18. [12 U.S.C. 1828] (a) INSURANCE LOGO.— 

(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: 

(A) A statement that insured deposits are backed by 

the full faith and credit of the United States Government. 

(B) A statement that deposits are federally insured to 

$100,000. 

(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. 

(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: 

(A) The sign required to be displayed by insured banks 

under regulations prescribed by the Corporation in effect 

on January 1, 1989. 

(B) The sign prescribed under paragraph (1). 

(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. 

(b) No insured depository institution shall pay any dividends 

on its capital stock or interest on its capital notes or debentures (if 

such interest is required to be paid only out of net profits) or distribute any of its capital assets while it remains in default in the 

payment of any assessment due to the Corporation; and any director or officer of any insured depository institution who participates 

in the declaration or payment of any such dividend or interest or 

in any such distribution shall, upon conviction, be fined not more 

than $1,000 or imprisoned not more than one year, or both: Provided, That, if such default is due to a dispute between the insured 

depository institution and the Corporation over the amount of such 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 44 

assessment, this subsection shall not apply if the insured depository institution deposits security satisfactory to the Corporation for 

payment upon final determination of the issue. 

(c)(1) Except with the prior written approval of the responsible 

agency, which shall in every case referred to in this paragraph be 

the Corporation, no insured depository institution shall— 

(A) merge or consolidate with any noninsured bank or 

institution; 

(B) assume liability to pay any deposits (including liabilities which would be ''deposits'' except for the proviso in section 

3(l)(5) of this Act) made in, or similar liabilities of, any noninsured bank or institution; or 

(C) transfer assets to any noninsured bank or institution 

in consideration of the assumption of liabilities for any portion 

of the deposits made in such insured depository institution. 

(2) No insured depository institution shall merge or consolidate 

with any other insured depository institution or, either directly or 

indirectly, acquire the assets of, or assume liability to pay any deposits made in, any other insured depository institution except 

with the prior written approval of the responsible agency, which 

shall be— 

(A) the Comptroller of the Currency if the acquiring, assuming, or resulting bank is to be a national bank or a District 

bank; 

(B) the Board of Governors of the Federal Reserve System 

if the acquiring, assuming, or resulting bank is to be a State 

member bank (except a District bank); 

(C) the Corporation if the acquiring, assuming, or resulting 

bank is to be a State nonmember insured bank (except a District bank or a savings bank supervised by the Director of the 

Office of Thrift Supervision); and 

(D) the Director of the Office of Thrift Supervision if the 

acquiring, assuming, or resulting institution is to be a savings 

association. 

(3) Notice of any proposed transaction for which approval is required under paragraph (1) or (2) (referred to hereafter in this subsection as a ''merger transaction'') shall, unless the responsible 

agency finds that it must act immediately in order to prevent the 

probable default of one of the banks or savings associations involved, be published— 

(A) prior to the granting of approval of such transaction, 

(B) in a form approved by the responsible agency, 

(C) at appropriate intervals during a period at least as 

long as the period allowed for furnishing reports under paragraph (4) of this subsection, and 

(D) in a newspaper of general circulation in the community 

or communities where the main offices of the banks or savings 

associations involved are located, or, if there is no such newspaper in any such community, then in the newspaper of general circulation published nearest thereto. 

(4) in the interests of uniform standards, before acting on any 

application for approval of a merger transaction, the responsible 

agency, unless it finds that it must act immediately in order to prevent the probable failure of one of the banks or savings associations 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

645 

involved, shall request reports on the competitive factors involved 

from the Attorney General and the other Federal banking agencies 

referred to in this subsection. The reports shall be furnished within 

thirty calendar days of the date on which they are requested, or 

within ten calendar days of such date if the requesting agency advises the Attorney General and the other Federal banking agencies 

that an emergency exists requiring expeditious action. Notwithstanding the preceding sentence, a banking agency shall not be required to file a report requested by the responsible agency under 

this paragraph if such banking agency advises the responsible 

agency by the applicable date under the preceding sentence that 

the report is not necessary because none of the effects described in 

paragraph (5) are likely to occur as a result of the transaction. 

(5) The responsible agency shall not approve— 

(A) any proposed merger transaction which would result in 

a monopoly, or which would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize 

the business of banking in any part of the United States, or 

(B) any other proposed merger transaction whose effect in 

any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other 

manner would be in restraint of trade, unless it finds that the 

anticompetitive effects of the proposed transaction are clearly 

outweighed in the public interest by the probable effect of the 

transaction in meeting the convenience and needs of the community to be served. 

in every case, the responsible agency shall take into consideration 

the financial and managerial resources and future prospects of the 

existing and proposed institutions, and the convenience and needs 

of the community to be served. 

(6) The responsible agency shall immediately notify the Attorney General of any approval by it pursuant to this subsection of a 

proposed merger transaction. if the agency has found that it must 

act immediately to prevent the probable failure of one of the banks 

or savings associations involved and reports on the competitive factors have been dispensed with, the transaction may be consummated immediately upon approval by the agency. If the agency 

has advised the Attorney General and the other Federal banking 

agencies of the existence of an emergency requiring expeditious action and has requested reports on the competitive factors within 

ten days, the transaction may not be consummated before the fifth 

calendar day after the date of approval by the agency. in all other 

cases, the transaction may not be consummated before the thirtieth 

calendar day after the date of approval by the agency or, if the 

agency has not received any adverse comment from the Attorney 

General of the United States relating to competitive factors, such 

shorter period of time as may be prescribed by the agency with the 

concurrence of the Attorney General, but in no event less than 15 

calendar days after the date of approval. 

(7)(A) Any action brought under the antitrust laws arising out 

of a merger transaction shall be commenced prior to the earliest 

time under paragraph (6) at which a merger transaction approved 

under paragraph (5) might be consummated. The commencement of 

such an action shall stay the effectiveness of the agency's approval 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 646 

unless the court shall otherwise specifically order. In any such action, the court shall review de novo the issues presented. 

(B) In any judicial proceeding attacking a merger transaction 

approved under paragraph (5) on the ground that the merger 

transaction alone and of itself constituted a violation of any antitrust laws other than section 2 of the Act of July 2, 1890 (section 

2 of the Sherman Antitrust Act, 15 U.S.C. 2), the standards applied 

by the court shall be identical with those that the banking agencies 

are directed to apply under paragraph (5). 

(C) Upon the consummation of a merger transaction in compliance with this subsection and after the termination of any antitrust litigation commenced within the period prescribed in this 

paragraph, or upon the termination of such period if no such litigation is commenced therein, the transaction may not thereafter be 

attacked in any judicial proceeding on the ground that it alone and 

of itself constituted a violation of any antitrust laws other than section 2 of the Act of July 2, 1890 (section 2 of the Sherman Antitrust 

Act, 15 U.S.C. 2), but nothing in this subsection shall exempt any 

bank or savings association resulting from a merger transaction 

from complying with the antitrust laws after the consummation of 

such transaction. 

(D) In any action brought under the antitrust laws arising out 

of a merger transaction approved by a Federal supervisory agency 

pursuant to this subsection, such agency, and any State banking 

supervisory agency having jurisdiction within the State involved, 

may appear as a party of its own motion and as of right, and be 

represented by its counsel. 

(8) For the purposes of this subsection, the term ''antitrust 

laws'' means the Act of July 2, 1890 (the Sherman Antitrust Act, 

15 U.S.C. 1-7), the Act of October 15, 1914 (the Clayton Act, 15 

U.S.C. 12-27), and any other Acts in pari materia. 

(9) Each of the responsible agencies shall include in its annual 

report to the Congress a description of each merger transaction approved by it during the period covered by the report, along with— 

(A) the name and total resources of each bank or savings 

association involved; 

(B) whether a report was submitted by the Attorney General under paragraph (4), and, if so, a summary by the Attorney General of the substance of such report; and 

(C) a statement by the responsible agency of the basis for 

its approval. 

(10) Until June 30, 1976, the responsible agency shall not 

grant any approval required by law which has the practical effect 

of permitting a conversion from the mutual to the stock form of 

organization, including approval of any application pending on the 

date of enactment of this subsection, except that this sentence shall 

not be deemed to limit now or hereafter the authority of the 

responsible agency to grant approvals in cases where the responsible agency finds that it must act in order to maintain the safety, 

soundness, and stability of an insured depository institution. The 

responsible agency may by rule, regulation, or otherwise and under 

such civil penalties (which shall be cumulative to any other remedies) as it may prescribe take whatever action it deems necessary 

or appropriate to implement or enforce this subsection. 
Sec. 13 

FEDERAL DEPOSIT INSURANCE ACT 

647 

(11) The provisions of this subsection do not apply to any 

merger transaction involving a foreign bank if no party to the 

transaction is principally engaged in business in the United States. 

(d)(1) No State nonmember insured bank (except a District 

bank) shall establish and operate any new domestic branch unless 

it shall have the prior written consent of the Corporation, and no 

State nonmember insured bank (except a District bank) shall move 

its main office or any such branch from one location to another 

without such consent. No foreign bank may move any insured 

branch from one location to another without such consent. The factors to be considered in granting or withholding the consent of the 

Corporation under this subsection shall be those enumerated in 

section 6 of this Act. 

(2) No State nonmember insured bank shall establish or operate any foreign branch, except with the prior written consent of the 

Corporation and upon such conditions and pursuant to such regulations as the Corporation may prescribe from time to time. 

(3) 1 EXCLUSIVE AUTHORITY FOR ADDITIONAL BRANCHES.— 

(A) IN GENERAL.—Effective June 1, 1997, a State nonmember bank may not acquire, establish, or operate a 

branch in any State other than the bank's home State (as 

defined in section 44(f)(4)) or a State in which the bank already has a branch unless the acquisition, establishment, 

or operation of a branch in such State by a State nonmember bank is authorized under this subsection or section 13(f), 13(k), or 44. 

(B) RETENTION OF BRANCHES.—In the case of a State 

nonmember bank which relocates the main office of such 

bank from 1 State to another State after May 31, 1997, the 

bank may retain and operate branches within the State 

which was the bank's home State (as defined in section 

44(f)(4)) before the relocation of such office only to the extent the bank would be authorized, under this section or 

any other provision of law referred to in subparagraph (A), 

to acquire, establish, or commence to operate a branch in 

such State if— 

(i) the bank had no branches in such State; or 

(ii) the branch resulted from— 

(i) an interstate merger transaction approved 

pursuant to section 44; or 

(II) a transaction after May 31, 1997, pursuant to which the bank received assistance from 

the Corporation under section 13(c). 

(4) STATE ''OPT-IN'' ELECTION TO PERMIT INTERSTATE 

BRANCHING THROUGH DE NOVO BRANCHES.— 

(A) IN GENERAL.—Subject to subparagraph (B), the 

Corporation may approve an application by an insured 

State nonmember bank to establish and operate a de novo 

branch in a State (other than the bank's home State) in 

which the bank does not maintain a branch if— 

(i) there is in effect in the host State a law that— 

(i) applies equally to all banks; and 

1

 Indentation so in law. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 648 

(II) expressly permits all out-of-State banks to 

establish de novo branches in such State; and 

(ii) the conditions established in, or made applicable to this paragraph by, subparagraph (B) are met. 

(B) CONDITIONS ON ESTABLISHMENT AND OPERATION OF 

INTERSTATE BRANCH.— 

(i) ESTABLISHMENT.—An application by an insured 

State nonmember bank to establish and operate a de 

novo branch in a host State shall be subject to the 

same requirements and conditions to which an application for a merger transaction is subject under paragraphs (1), (3), and (4) of section 44(b). 

(ii) OPERATION.—Subsections (c) and (d)(2) of section 44 shall apply with respect to each branch of an 

insured State nonmember bank which is established 

and operated pursuant to an application approved 

under this paragraph in the same manner and to the 

same extent such provisions of such section apply to a 

branch of a State bank which resulted from a merger 

transaction under such section 44. 

(C) D E NOVO BRANCH DEFINED.—For purposes of this 

paragraph, the term ''de novo branch'' means a branch of 

a State bank which— 

(i) is originally established by the State bank as a 

branch; and 

(ii) does not become a branch of such bank as a result of— 

(i) the acquisition by the bank of an insured 

depository institution or a branch of an insured 

depository institution; or 

(ii) the conversion, merger, or consolidation of 

any such institution or branch. 

(D) HOM E STATE DEFINED.—The term ''home State'' 

means the State by which a State bank is chartered. 

(E) HOST STATE DEFINED.—The term ''host State'' 

means, with respect to a bank, a State, other than the 

home State of the bank, in which the bank maintains, or 

seeks to establish and maintain, a branch. 

(e) The Corporation may require any insured depository institution to provide protection and indemnity against burglary, defalcation, and other similar insurable losses. whenever any insured 

depository institution refuses to comply with any such requirement 

the Corporation may contract for such protection and indemnity 

and add the cost thereof to the assessment otherwise payable by 

such bank. 

(f) whenever any insured depository institution (except a national bank or a District bank), after written notice of the recommendations of the Corporation based on a report of examination 

of such insured depository institution by an examiner of the Corporation, shall fail to comply with such recommendations within 

one hundred and twenty days after such notice, the Corporation 

shall have the power, and is hereby authorized, to publish only 

such part of such report of examination as relates to any recommendation not complied with: Provided, That notice of intention 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

649 

to make such publication shall be given to the insured depository 

institution at least ninety days before such publication is made. 

(g)(1) The Board of Directors shall by regulation prohibit the 

payment of interest or dividends on demand deposits in insured 

nonmember banks and in insured branches of foreign banks and 

for such purpose it may define the term ''demand deposits''; but 

such exceptions from this prohibition shall be made as are now or 

may hereafter be prescribed with respect to deposits payable on demand in member banks by section 19 of the Federal Reserve Act, 

as amended, or by regulation of the Board of Governors of the Federal Reserve System. The Board of Directors may from time to 

time, after consulting with the Board of Governors of the Federal 

Reserve System and the Director of the Office of Thrift Supervision, prescribe rules governing the advertisement of interest or 

dividends on deposits

 1 by insured nonmember banks (including insured mutual savings banks) on time and savings deposits. The 

Board of Directors is authorized for the purposes of this subsection 

to define the terms ''time deposits'' and ''savings deposits'', to determine what shall be deemed a payment of interest, and to prescribe 

such regulations as it may deem necessary to effectuate the purposes of this subsection and to prevent evasions thereof. The provisions of this subsection and of regulations issued thereunder shall 

also apply, in the discretion of the Board of Directors, to obligations 

other than deposits that are undertaken by insured nonmember 

banks or their affiliates. As used in this subsection, the term ''affiliate'' has the same meaning as when used in section 2(b) of the 

Banking Act of 1933, as amended (12 U.S.C. 221a(b)), except that 

the term ''member bank'', as used in such section 2(b), shall be 

deemed to refer to an insured nonmember bank. During the period 

commencing on October 15, 1962, and ending on October 15, 1968, 

the provisions of this subsection shall not apply to the rate of interest which may be paid by insured nonmember banks on time deposits of foreign governments, monetary and financial authorities 

of foreign governments when acting as such, or international financial institutions of which the United States is a member. The authority conferred by this subsection shall also apply to noninsured 

banks in any State if the total amount of time and savings deposits 

held in all such banks in the State, plus the total amount of deposits, shares, and withdrawable accounts held in all building and 

loan, savings and loan, and homestead associations (including cooperative banks) in the State which are not members of a Federal 

home loan bank, is more than 20 per centum of the total amount 

of such deposits, shares, and withdrawable accounts held in all 

banks, and building and loan, savings and loan, and homestead 

associations (including cooperative banks) in the State. Such authority shall only be exercised by the Board of Directors with respect to such noninsured banks prior to July 31, 1970, to limit the 

rates of interest or dividends which such banks may pay on time 

and savings deposits to maximum rates not lower than 5V2 per cen1

 Section 207(b)(2) of Public Law 96-221 (94 Stat. 144) amended the second sentence of this 

subsection by ''striking out ', including limitations on the rates of interest and dividends that 

may be paid'''. The amendment was executed to reflect the probable intent of Congress, but it 

probably should have struck '', including limitations on the rates of interest or dividends that 

may be paid''. 
Sec. 18 FEDERAL DEPOSIT INSURANCE ACT 6 50 

tum per annum. Whenever it shall appear to the Board of Directors 

that any noninsured bank or any affiliate thereof is engaged or has 

engaged or is about to engage in any acts or practices which constitute or will constitute a violation of the provisions of this subsection or of any regulations thereunder, the Board of Directors 

may, in its discretion, bring an action in the United States district 

court for the judicial district in which the principal office of the 

noninsured bank or affiliate thereof is located to enjoin such acts 

or practices, to enforce compliance with this subsection or any regulations thereunder, or for a combination of the foregoing, and such 

courts shall have jurisdiction of such actions, and, upon a proper 

showing, an injunction, restraining order, or other appropriate 

order may be granted without bond. 

(2) Notwithstanding the provisions of paragraph (1), an insured nonmember bank may permit withdrawals to be made automatically from a savings deposit that consists only of funds in 

which the entire beneficial interest is held by one or more individuals through payment to the bank itself or through transfer of 

credit to a demand deposit or other account pursuant to written 

authorization from the depositor to make such payments or transfers in connection with checks or drafts drawn upon the bank, pursuant to terms and conditions prescribed by the Board of Directors. 

(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. 

(i)(1) No insured State nonmember bank (except a District 

bank) shall, without the prior consent of the Corporation, reduce 

the amount or retire any part of its common or preferred capital 

stock, or retire any part of its capital notes or debentures. 

(2) No insured Federal depository institution shall convert into 

an insured State depository institution if its capital stock or its surplus will be less than the capital stock or surplus, respectively, of 

the converting bank at the time of the shareholder's meeting approving such conversion, without the prior written consent of— 

(A) the Comptroller of the Currency if the resulting bank 

is to be a District bank; 

(B) the Board of Governors of the Federal Reserve System 

if the resulting bank is to be a State member bank (except a 

District bank); 

(C) the Corporation if the resulting bank is to be a State 

nonmember insured bank (except a District bank); and 

(D)1 the Director of the Office of Thrift Supervision if 

the resulting institution is to be an insured State savings 

association. 

(3) Without the prior written consent of the Corporation, no insured depository institution shall convert into a noninsured bank 

or institution. 

1

 So in original. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

651 

(4) in granting or withholding consent under this subsection, 

the responsible agency shall consider— 

(A) the financial history and condition of the bank, 

(B) the adequacy of its capital structure, 

(C) its future earnings prospects, 

(D) the general character and fitness of its management, 

(E) the convenience and needs of the community to be 

served, and 

(F) whether or not its corporate powers are consistent with 

the purposes of this Act. 

(j) RESTRICTIONS ON TRANSACTIONS WIT H AFFILIATES AND IN -

SIDERS.— 

(1) TRANSACTIONS WIT H AFFILIATES.— 

(A) IN GENERAL.—Sections 23A and 23B of the Federal 

Reserve Act shall apply with respect to every nonmember 

insured bank in the same manner and to the same extent 

as if the nonmember insured bank were a member bank. 

(B) AFFILIATE DEFINED.—Fo r the purpose of subparagraph (A), any company that would be an affiliate (as defined in sections 23A and 23B) of a nonmember insured 

bank if the nonmember insured bank were a member bank 

shall be deemed to be an affiliate of that nonmember insured bank. 

(2) EXTENSIONS OF CREDIT TO OFFICERS, DIRECTORS, AND 

PRINCIPAL SHAREHOLDERS.—Subsections (g) and (h) of section 

22 of the Federal Reserve Act shall apply with respect to every 

nonmember insured bank in the same manner and to the same 

extent as if the nonmember insured bank were a member 

bank. 

(3) AVOIDING EXTRATERRITORIAL APPLICATION TO FOREIGN 

BANKS.— 

( A ) TRANSACTIONS WIT H AFFILIATES.—Paragrap h (1) 

shall not apply with respect to a foreign bank solely because the foreign bank has an insured branch. 

( B ) EXTENSIONS OF CREDIT TO OFFICERS, DIRECTORS, 

AND PRINCIPAL SHAREHOLDERS.—Paragraph (2) shall not 

apply with respect to a foreign bank solely because the foreign bank has an insured branch, but shall apply with respect to the insured branch. 

(C) FOREIGN BANK DEFINED.—Fo r purposes of this 

paragraph, the term ''foreign bank'' has the same meaning 

as in section 1(b)(7) of the International Banking Act of 

1978. 

(k) AUTHORITY T O REGULATE OR PROHIBIT CERTAIN FORMS OF 

BENEFITS TO INSTITUTION-AFFILIATED PARTIES.— 

(1) GOLDE N PARACHUTES AND INDEMNIFICATION PAYMENTS.—The Corporation may prohibit or limit, by regulation 

or order, any golden parachute payment or indemnification 

payment. 

(2) FACTORS TO BE TAKEN INTO ACCOUNT.—Th e Corporation shall prescribe, by regulation, the factors to be considered 

by the Corporation in taking any action pursuant to paragraph 

(1) which may include such factors as the following: 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 52 

(A) Whether there is a reasonable basis to believe that 

the institution-affiliated party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or 

insider abuse with regard to the depository institution or 

depository institution holding company that has had a 

material affect on the financial condition of the institution. 

(B) Whether there is a reasonable basis to believe that 

the institution-affiliated party is substantially responsible 

for the insolvency of the depository institution or depository institution holding company, the appointment of a 

conservator or receiver for the depository institution, or 

the depository institution's troubled condition (as defined 

in the regulations prescribed pursuant to section 32(f)). 

(C) Whether there is a reasonable basis to believe that 

the institution-affiliated party has materially violated any 

applicable Federal or State banking law or regulation that 

has had a material affect on the financial condition of the 

institution. 

(D) Whether there is a reasonable basis to believe that 

the institution-affiliated party has violated or conspired to 

violate— 

(i) section 215, 656, 657, 1005, 1006, 1007, 1014, 

1032, or 1344 of title 18, United States Code; or 

(ii) section 1341 or 1343 of such title affecting a 

federally insured financial institution. 

(E) Whether the institution-affiliated party was in a 

position of managerial or fiduciary responsibility. 

(F) The length of time the party was affiliated with 

the insured depository institution or depository institution 

holding company and the degree to which— 

(i) the payment reasonably reflects compensation 

earned over the period of employment; and 

(ii) the compensation involved represents a reasonable payment for services rendered. 

(3) CERTAIN PAYMENTS PROHIBITED.—No insured depository institution or depository institution holding company may 

prepay the salary or any liability or legal expense of any institution-affiliated party if such payment is made— 

(A) in contemplation of the insolvency of such institution or holding company or after the commission of an act 

of insolvency; and 

(B) with a view to, or has the result of— 

(i) preventing the proper application of the assets 

of the institution to creditors; or 

(ii) preferring one creditor over another. 

(4) GOLDEN PARACHUTE PAYMENT DEFINED.—For purposes 

of this subsection— 

(A) IN GENERAL.—The term ''golden parachute payment'' means any payment (or any agreement to make any 

payment) in the nature of compensation by any insured 

depository institution or depository institution holding 

company for the benefit of any institution-affiliated party 

pursuant to an obligation of such institution or holding 

company that— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

653 

(i) is contingent on the termination of such party's 

affiliation with the institution or holding company; 

and 

(ii) is received on or after the date on which— 

(i) the insured depository institution or 

depository institution holding company, or any insured depository institution subsidiary of such 

holding company, is insolvent; 

(ii) any conservator or receiver is appointed 

for such institution; 

(III) the institution's appropriate Federal 

banking agency determines that the insured 

depository institution is in a troubled condition (as 

defined in the regulations prescribed pursuant to 

section 32(f)); 

(iv) the insured depository institution has 

been assigned a composite rating by the appropriate Federal banking agency or the Corporation 

of 4 or 5 under the Uniform Financial Institutions 

Rating System; or 

(V) the insured depository institution is subject to a proceeding initiated by the Corporation to 

terminate or suspend deposit insurance for such 

institution. 

(B) CERTAIN PAYMENTS I N CONTEMPLATION OF A N 

EVENT.—Any payment which would be a golden parachute 

payment but for the fact that such payment was made before the date referred to in subparagraph (A)(ii) shall be 

treated as a golden parachute payment if the payment was 

made in contemplation of the occurrence of an event described in any subclause of such subparagraph. 

(C) CERTAIN PAYMENTS NOT INCLUDED.—The term 

''golden parachute payment'' shall not include— 

(i) any payment made pursuant to a retirement 

plan which is qualified (or is intended to be qualified) 

under section 401 of the Internal Revenue Code of 

1986 or other nondiscriminatory benefit plan; 

(ii) any payment made pursuant to a bona fide deferred compensation plan or arrangement which the 

Board determines, by regulation or order, to be permissible; or 

(iii) any payment made by reason of the death or 

disability of an institution-affiliated party. 

(5) OTHER DEFINITIONS.—For purposes of this subsection— 

(A) INDEMNIFICATION PAYMENT.—Subject to paragraph 

(6), the term ''indemnification payment'' means any payment (or any agreement to make any payment) by any insured depository institution or depository institution holding company for the benefit of any person who is or was 

an institution-affiliated party, to pay or reimburse such 

person for any liability or legal expense with regard to any 

administrative proceeding or civil action instituted by the 

appropriate Federal banking agency which results in a 

final order under which such person— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 54 

(i) is assessed a civil money penalty; 

(ii) is removed or prohibited from participating in 

conduct of the affairs of the insured depository institution; or 

(iii) is required to take any affirmative action described in section 8(b)(6) with respect to such institution. 

(B) LIABILITY OR LEGAL EXPENSE.—The term ''liability 

or legal expense'' means— 

(i) any legal or other professional expense incurred in connection with any claim, proceeding, or action; 

(ii) the amount of, and any cost incurred in connection with, any settlement of any claim, proceeding, 

or action; and 

(iii) the amount of, and any cost incurred in connection with, any judgment or penalty imposed with 

respect to any claim, proceeding, or action. 

(C) PAYMENT.—The term ''payment'' includes— 

(i) any direct or indirect transfer of any funds or 

any asset; and 

(ii) any segregation of any funds or assets for the 

purpose of making, or pursuant to an agreement to 

make, any payment after the date on which such 

funds or assets are segregated, without regard to 

whether the obligation to make such payment is contingent on— 

(I) the determination, after such date, of the 

liability for the payment of such amount; or 

(II) the liquidation, after such date, of the 

amount of such payment. 

(6) CERTAIN COMMERCIAL INSURANCE COVERAGE NOT 

TREATED AS COVERED BENEFIT PAYMENT.—N o provision of this 

subsection shall be construed as prohibiting any insured 

depository institution or depository institution holding company from purchasing any commercial insurance policy or fidelity bond, except that, subject to any requirement described 

in paragraph (5)(A)(iii), such insurance policy or bond shall not 

cover any legal or liability expense of the institution or holding 

company which is described in paragraph (5)(A). 

(l) When authorized by State law, a State nonmember insured 

bank may, but only with the prior written consent of the Corporation and upon such conditions and under such regulations as the 

Corporation may prescribe from time to time, acquire and hold, directly or indirectly, stock or other evidences of ownership in one or 

more banks or other entities organized under the law of a foreign 

country or a dependency or insular possession of the United States 

and not engaged, directly or indirectly, in any activity in the 

United States except as, in the judgment of the Board of Directors, 

shall be incidental to the international or foreign business of such 

foreign bank or entity; and, notwithstanding the provisions of subsection (j) of this section, such State nonmember insured bank may, 

as to such foreign bank or entity, engage in transactions that 

would otherwise be covered thereby, but only in the manner and 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

655 

within the limit prescribed by the Corporation by general or specific regulation or ruling. 

( m ) ACTIVITIES OF SAVINGS ASSOCIATIONS AND THEI R SUBSIDIARIES.— 

(1) PROCEDURES.—When an insured savings association 

establishes or acquires a subsidiary or when an insured savings association elects to conduct any new activity through a 

subsidiary that the insured savings association controls, the insured savings association— 

(A) shall notify the Corporation and the Director of the 

Office of Thrift Supervision not less than 30 days prior to 

the establishment, or acquisition, of any such subsidiary, 

and not less than 30 days prior to the commencement of 

any such activity, and in either case shall provide at that 

time such information as each such agency may, by regulation, require; and 

(B) shall conduct the activities of the subsidiary in 

accordance with regulations and orders of the Director of 

the Office of Thrift Supervision. 

(2) ENFORCEMEN T POWERS.—Wit h respect to any subsidiary of an insured savings association: 

(A) the Corporation and the Director of the Office of 

Thrift Supervision shall each have, with respect to such 

subsidiary, the respective powers that each has with respect to the insured savings association pursuant to this 

section or section 8; and 

(B) the Director of the Office of Thrift Supervision may 

determine, after notice and opportunity for hearing, that 

the continuation by the insured savings association of its 

ownership or control of, or its relationship to, the 

subsidiary— 

(i) constitutes a serious risk to the safety, 

soundness, or stability of the insured savings association, or 

(ii) is inconsistent with sound banking principles 

or with the purposes of this Act. 

Upon making any such determination, the Corporation or 

the Director of the Office of Thrift Supervision shall have 

authority to order the insured savings association to divest 

itself of control of the subsidiary. The Director of the Office 

of Thrift Supervision may take any other corrective measures with respect to the subsidiary, including the authority 

to require the subsidiary to terminate the activities or 

operations posing such risks, as the Director may deem 

appropriate. 

(3) ACTIVITIES INCOMPATIBLE WIT H DEPOSIT INSURANCE.— 

(A) IN GENERAL.—The Corporation may determine by 

regulation or order that any specific activity poses a serious threat to the Savings Association 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 consid-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 656 

eration. 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 Savings Association Insurance Fund member may engage in the activity directly. 

(B) AUTHORITY OF DIRECTOR.—This section does not 

limit the authority of the Office of Thrift Supervision to 

issue regulations to promote safety and soundness or to 

enforce compliance with other applicable laws. 

( 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 

Savings Association Insurance Fund or the Bank Insurance Fund. 

(4) ''SUBSIDIARY'' DEFINED.—As used in this subsection, the 

term ''subsidiary'' does not include an insured depository institution. 

(5) APPLICABILITY TO CERTAIN SAVINGS BANKS.—Subpara -

graphs (A) and (B) of paragraph (1) of this subsection do not 

apply to— 

(A) any Federal savings bank that was chartered prior 

to October 15, 1982, as a savings bank under State law, 

or 

(B) a savings association that acquired its principal assets from an institution that was chartered prior to October 15, 1982, as a savings bank under State law. 

(n) CALCULATION OF CAPITAL.—No appropriate Federal banking agency shall allow any insured depository institution to include 

an unidentifiable intangible asset in its calculation of compliance 

with the appropriate capital standard, if such unidentifiable intangible asset was acquired after April 12, 1989, except to the extent 

permitted under section 5(t) of the Home Owners' Loan Act. 

(o) REAL ESTATE LENDING.— 

(1) UNIFOR M REGULATIONS.—Not more than 9 months after 

the date of enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991, each appropriate Federal 

banking agency shall adopt uniform regulations prescribing 

standards for extensions of credit that are— 

(A) secured by liens on interests in real estate; or 

(B) made for the purpose of financing the construction 

of a building or other improvements to real estate. 

(2) STANDARDS.— 

(A) CRITERIA.—In prescribing standards under paragraph (1), the agencies shall consider— 

(i) the risk posed to the deposit insurance funds 

by such extensions of credit; 

(ii) the need for safe and sound operation of insured depository institutions; and 

(iii) the availability of credit. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

657 

(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 

deposit insurance fund; or 

(iii) as may be warranted, based on the safety and 

soundness of the institutions. 

(3) LOA N EVALUATION STANDARD.—No appropriate Federal 

banking agency shall adversely evaluate an investment or a 

loan made by an insured depository institution, or consider 

such a loan to be nonperforming, solely because the loan is 

made to or the investment is in commercial, residential, or 

industrial property, unless such investment or loan may affect 

the institution's safety and soundness. 

(4) EFFECTIVE DATE.—The regulations adopted under paragraph (1) shall become effective not later than 15 months after 

the date of enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991. Such regulations shall continue in effect except as uniformly amended by the appropriate 

Federal banking agencies, acting in concert. 

(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 to prevent or minimize loss to the deposit insurance funds, 

consistent with section 38. 

(q) SOVEREIGN RISK.—Section 25C of the Federal Reserve Act 

shall apply to every nonmember insured bank in the same manner 

and to the same extent as if the nonmember insured bank were a 

member bank. 

(r) SUBSIDIARY DEPOSITORY INSTITUTIONS AS AGENTS FOR CERTAIN AFFILIATES.— 

(1) IN GENERAL.—Any bank subsidiary of a bank holding 

company may receive deposits, renew time deposits, close 

loans, service loans, and receive payments on loans and other 

obligations as an agent for a depository institution affiliate. 

(2) BANK ACTING AS AGENT IS NOT A BRANCH.—Notwith -

standing any other provision of law, a bank acting as an agent 

in accordance with paragraph (1) for a depository institution 

affiliate shall not be considered to be a branch of the affiliate. 

(3) PROHIBITIONS ON ACTIVITIES.—A depository institution 

may not— 

(A) conduct any activity as an agent under paragraph 

(1) or (6) which such institution is prohibited from conducting as a principal under any applicable Federal or 

State law; or 

(B) as a principal, have an agent conduct any activity 

under paragraph (1) or (6) which the institution is prohibited from conducting under any applicable Federal or State 

law. 

(4) EXISTING AUTHORITY NOT AFFECTED.—No provision of 

this subsection shall be construed as affecting— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 658 

(A) the authority of any depository institution to act as 

an agent on behalf of any other depository institution 

under any other provision of law; or 

(B) whether a depository institution which conducts 

any activity as an agent on behalf of any other depository 

institution under any other provision of law shall be considered to be a branch of such other institution. 

(5) AGENCY RELATIONSHIP REQUIRED TO BE CONSISTENT 

WIT H SAFE AND SOUND BANKING PRACTICES.—An agency relationship between depository institutions under paragraph (1) 

or (6) shall be on terms that are consistent with safe and 

sound banking practices and all applicable regulations of any 

appropriate Federal banking agency. 

(6) AFFILIATED INSURED SAVINGS ASSOCIATIONS.—An insured savings association which was an affiliate of a bank on 

July 1, 1994, may conduct activities as an agent on behalf of 

such bank in the same manner as an insured bank affiliate of 

such bank may act as agent for such bank under this subsection to the extent such activities are conducted only in— 

(A) any State in which— 

(i) the bank is not prohibited from operating a 

branch under any provision of Federal or State law; 

and 

(ii) the savings association maintained an office or 

branch and conducted business as of July 1, 1994; or 

(B) any State in which— 

(i) the bank is not expressly prohibited from operating a branch under a State law described in section 

44(a)(2); and 

(ii) the savings association maintained a main office and conducted business as of July 1, 1994. 

(s) PROHIBITION ON CERTAIN AFFILIATIONS.— 

(1) I N GENERAL.—No depository institution may be an affiliate of, be sponsored by, or accept financial support, directly or 

indirectly, from any Government-sponsored enterprise. 

(2) EXCEPTION FOR MEMBERS OF A FEDERAL HOME LOAN 

BANK.—Paragraph (1) shall not apply with respect to the membership of a depository institution in a Federal home loan 

bank. 

(3) ROUTINE BUSINESS FINANCING.—Paragraph (1) shall not 

apply with respect to advances or other forms of financial 

assistance provided by a Government-sponsored enterprise 

pursuant to the statutes governing such enterprise. 

(4) STUDENT LOANS.— 

(A) IN GENERAL.—This subsection shall not apply to 

any arrangement between the Holding Company (or any 

subsidiary of the Holding Company other than the Student 

Loan Marketing Association) and a depository institution, 

if the Secretary approves the affiliation and determines 

that— 

(i) the reorganization of such Association in 

accordance with section 440 of the Higher Education 

Act of 1965, as amended, will not be adversely affected 

by the arrangement; 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

659 

(ii) the dissolution of the Association pursuant to 

such reorganization will occur before the end of the 2-

year period beginning on the date on which such 

arrangement is consummated or on such earlier date 

as the Secretary deems appropriate: Provided, That 

the Secretary may extend this period for not more 

than 1 year at a time if the Secretary determines that 

such extension is in the public interest and is appropriate to achieve an orderly reorganization of the 

Association or to prevent market disruptions in connection with such reorganization, but no such extensions shall in the aggregate exceed 2 years; 

(iii) the Association will not purchase or extend 

credit to, or guarantee or provide credit enhancement 

to, any obligation of the depository institution; 

(iv) the operations of the Association will be separate from the operations of the depository institution; 

and 

(v) until the ''dissolution date'' (as that term is defined in section 440 of the Higher Education Act of 

1965, as amended) has occurred, such depository institution will not use the trade name or service mark 

''Sallie Mae'' in connection with any product or service 

it offers if the appropriate Federal banking agency for 

such depository institution determines that— 

(i) the depository institution is the only institution offering such product or service using the 

''Sallie Mae'' name; and 

(ii) such use would result in the depository 

institution having an unfair competitive advantage over other depository institutions. 

(B) TERMS AND CONDITIONS.—In approving any 

arrangement referred to in subparagraph (A) the Secretary 

may impose any terms and conditions on such an arrangement that the Secretary considers appropriate, including— 

(i) imposing additional restrictions on the issuance 

of debt obligations by the Association; or 

(ii) restricting the use of proceeds from the 

issuance of such debt. 

(C) ADDITIONAL LIMITATIONS.—In the event that the 

Holding Company (or any subsidiary of the Holding Company) enters into such an arrangement, the value of the 

Association's ''investment portfolio'' shall not at any time 

exceed the lesser of— 

(i) the value of such portfolio on the date of the 

enactment of this subsection; or 

(ii) the value of such portfolio on the date such an 

arrangement is consummated. The term ''investment 

portfolio'' shall mean all investments shown on the 

consolidated balance sheet of the Association other 

than— 

(i) any instrument or assets described in section 439(d) of the Higher Education Act of 1965, 

as amended; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 60 

(ii) any direct noncallable obligations of the 

United States or any agency thereof for which the 

full faith and credit of the United States is 

pledged; or 

(iii) cash or cash equivalents. 

(D) ENFORCEMENT.—The terms and conditions imposed under subparagraph (B) may be enforced by the Secretary in accordance with section 440 of the Higher Education Act of 1965. 

(E) DEFINITIONS.—Fo r purposes of this paragraph, the 

following definition

 1 shall apply— 

(i) ASSOCIATION; HOLDING COMPANY.—Notwithstanding any provision in section 3, the terms ''Association'' and ''Holding Company'' have the same meanings as in section 440(i) of the Higher Education Act 

of 1965. 

(ii) SECRETARY.—The term ''Secretary'' means the 

Secretary of the Treasury. 

(5) GOVERNMENT-SPONSORED ENTERPRISE DEFINED.—Fo r 

purposes of this subsection, the term ''Government-sponsored 

enterprise'' has the meaning given to such term in section 

1404(e)(1)(A) of the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989. 

(t) RECORDKEEPING REQUIREMENTS.— 

(1) REQUIREMENTS.—Each appropriate Federal banking 

agency, after consultation with and consideration of the views 

of the Commission, shall establish recordkeeping requirements 

for banks relying on exceptions contained in paragraphs (4) 

and (5) of section 3(a) of the Securities Exchange Act of 1934. 

Such recordkeeping requirements shall be sufficient to demonstrate compliance with the terms of such exceptions and be 

designed to facilitate compliance with such exceptions. 

(2) AVAILABILITY TO COMMISSION; CONFIDENTIALITY.—Each 

appropriate Federal banking agency shall make any information required under paragraph (1) available to the Commission 

upon request. Notwithstanding any other provision of law, the 

Commission shall not be compelled to disclose any such information. Nothing in this paragraph shall authorize the Commission to withhold information from Congress, or prevent the 

Commission from complying with a request for information 

from any other Federal department or agency or any self-regulatory organization requesting the information for purposes 

within the scope of its jurisdiction, or complying with an order 

of a court of the United States in an action brought by the 

United States or the Commission. For purposes of section 552 

of title 5, United States Code, this paragraph shall be considered a statute described in subsection (b)(3)(B) of such section 

552. 

(3) DEFINITION.—A s used in this subsection the term 

''Commission'' means the Securities and Exchange Commission. 

(u) LIMITATION ON CLAIMS.— 

1

 so in original. probably should be ''definitions''. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

661 

(1) I N GENERAL.—No person may bring a claim against any 

Federal banking agency (including in its capacity as conservator or receiver) for the return of assets of an affiliate or controlling shareholder of the insured depository institution transferred to, or for the benefit of, an insured depository institution 

by such affiliate or controlling shareholder of the insured 

depository institution, or a claim against such Federal banking 

agency for monetary damages or other legal or equitable relief 

in connection with such transfer, if at the time of the 

transfer— 

(A) the insured depository institution is subject to any 

direction issued in writing by a Federal banking agency to 

increase its capital; 

(B) the insured depository institution is undercapitalized (as defined in section 38 of this Act); and 

(C) for that portion of the transfer that is made by an 

entity covered by section 5(g) of the Bank Holding Company Act of 1956 or section 45 of this Act, the Federal 

banking agency has followed the procedure set forth in 

such section. 

(2) DEFINITION OF CLAIM.—For purposes of paragraph (1), 

the term ''claim''— 

(A) means a cause of action based on Federal or State 

law that— 

(i) provides for the avoidance of preferential or 

fraudulent transfers or conveyances; or 

(ii) provides similar remedies for preferential or 

fraudulent transfers or conveyances; and 

(B) does not include any claim based on actual intent 

to hinder, delay, or defraud pursuant to such a fraudulent 

transfer or conveyance law. 

(v) LOANS BY INSURED INSTITUTIONS ON THEI R OW N STOCK.— 

(1) GENERAL PROHIBITION.—No insured depository institution may make any loan or discount on the security of the 

shares of its own capital stock. 

(2) EXCLUSION.—For purposes of this subsection, an insured depository institution shall not be deemed to be making 

a loan or discount on the security of the shares of its own capital stock if it acquires the stock to prevent loss upon a debt 

previously contracted for in good faith. 

SEC. 19. [12 U.S.C. 1829] PENALTY FOR UNAUTHORIZE D PARTICIPATIO N BY CONVICTE D INDIVIDUAL . 

(a) PROHIBITION.— 

(1) IN GENERAL.—Except with the prior written consent of 

the Corporation— 

(A) any person who has been convicted of any criminal 

offense involving dishonesty or a breach of trust or money 

laundering, or has agreed to enter into a pretrial diversion 

or similar program in connection with a prosecution for 

such offense, may not— 

(i) become, or continue as, an institution-affiliated 

party with respect to any insured depository institution; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 62 

(ii) own or control, directly or indirectly, any insured depository institution; or 

(iii) otherwise participate, directly or indirectly, in 

the conduct of the affairs of any insured depository 

institution; and 

(B) any insured depository institution may not permit 

any person referred to in subparagraph (A) to engage in 

any conduct or continue any relationship prohibited under 

such subparagraph. 

(2) MINIMU M 10-YEAR PROHIBITION PERIOD FOR CERTAIN OFFENSES.— 

(A) I N GENERAL.—If the offense referred to in paragraph (1)(A) in connection with any person referred to in 

such paragraph is— 

(i) an offense under— 

(I) section 215, 656, 657, 1005, 1006, 1007, 

1008, 1014, 1032, 1344, 1517, 1956, or 1957 of 

title 18, United States Code; or 

(II) section 1341 or 1343 of such title which 

affects any financial institution (as defined in section 20 of such title); or 

(ii) the offense of conspiring to commit any such 

offense, 

the Corporation may not consent to any exception to the 

application of paragraph (1) to such person during the 10-

year period beginning on the date the conviction or the 

agreement of the person becomes final. 

(B) EXCEPTION BY ORDER OF SENTENCING COURT.— 

(i) I N GENERAL.—On motion of the Corporation, 

the court in which the conviction or the agreement of 

a person referred to in subparagraph (A) has been entered may grant an exception to the application of 

paragraph (1) to such person if granting the exception 

is in the interest of justice. 

(ii) PERIOD FOR FILING.— A motion may be filed 

under clause (i) at any time during the 10-year period 

described in subparagraph (A) with regard to the person on whose behalf such motion is made. 

(b) PENALTY.—Whoever knowingly violates subsection (a) shall 

be fined not more than $1,000,000 for each day such prohibition is 

violated or imprisoned for not more than 5 years, or both. 

SEC. 20. [12 U.S.C. 1829a] (a) A State nonmember insured 

bank may not— 

(1) deal in lottery tickets; 

(2) deal in bets used as a means or substitute for participation in a lottery; 

(3) announce, advertise, or publicize the existence of any 

lottery; or 

(4) announce, advertise, or publicize the existence or identity of any participant or winner, as such, in a lottery. 

(b) A State nonmember insured bank may not permit— 

(1) the use of any part of any of its banking offices by any 

person for any purpose forbidden to the bank under subsection 

(a), or 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

663 

(2) direct access by the public from any of its banking offices to any premises used by any person for any purpose forbidden to the bank under subsection (a). 

(c) As used in this section— 

(1) The term ''deal in'' includes making, taking, buying, 

selling, redeeming, or collecting. 

(2) The term ''lottery'' includes any arrangement whereby 

three or more persons (the ''participants'') advance money or 

credit to another in exchange for the possibility or expectation 

that one or more but not all of the participants (the ''winners'') 

will receive by reason of their advances more than the amounts 

they have advanced, the identity of the winners being determined by any means which includes— 

(A) a random selection; 

(B) a game, race, or contest; or 

(C) any record or tabulation of the result of one or 

more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner. 

(3) The term ''lottery ticket'' includes any right, privilege, 

or possibility (and any ticket, receipt, record, or other evidence 

of any such right, privilege, or possibility) of becoming a winner in a lottery. 

(d) Nothing contained in this section prohibits a State nonmember insured bank from accepting deposits or cashing or otherwise handling checks or other negotiable instruments, or performing other lawful banking services for a State operating a lottery, or for an officer or employee of that State who is charged with 

the administration of the lottery. 

(e) The Board of Directors shall prescribe such regulations as 

may be necessary to the strict enforcement of this section and the 

prevention of evasions thereof. 

SEC. 21. [12 U.S.C. 1829b] (a)(1) The Congress finds that adequate records maintained by insured depository institutions have a 

high degree of usefulness in criminal, tax, and regulatory investigations and proceedings. The Congress further finds that microfilm or 

other reproductions and other records made by banks of checks, as 

well as records kept by banks of the identity of persons maintaining or authorized to act with respect to accounts therein, have been 

of particular value in this respect. 

(2) it is the purpose of this section to require the maintenance 

of appropriate types of records by insured depository institutions in 

the United States where such records have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings. 

(b) RECORDKEEPING REGULATIONS.— 

(1) IN GENERAL.—Where the Secretary of the Treasury (referred to in this section as the ''Secretary'') determines that the 

maintenance of appropriate types of records and other evidence 

by insured depository institutions has a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, he shall prescribe regulations to carry out the purposes of this section. 

(2) DOMESTIC FUNDS TRANSFERS.—Whenever the Secretary 

and the Board of Governors of the Federal Reserve System 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 64 

(hereafter in this section referred to as the ''Board'') determine 

that the maintenance of records, by insured depository institutions, of payment orders which direct transfers of funds over 

wholesale funds transfer systems has a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, the Secretary and the Board shall jointly prescribe 

regulations to carry out the purposes of this section with respect to the maintenance of such records. 

(3) INTERNATIONAL FUNDS TRANSFERS.— 

(A) IN GENERAL.—The Secretary and the Board shall 

jointly prescribe, after consultation with State banking 

supervisors, final regulations requiring that insured 

depository institutions, businesses that provide check cashing services, money transmitting businesses, and businesses that issue or redeem money orders, travelers' 

checks or other similar instruments maintain such records 

of payment orders which— 

(i) involve international transactions; and 

(ii) direct transfers of funds over wholesale funds 

transfer systems or on the books of any insured 

depository institution, or on the books of any business 

that provides check cashing services, any money transmitting business, and any business that issues or redeems money orders, travelers' checks or similar instruments, 

that will have a high degree of usefulness in criminal, tax, 

or regulatory investigations or proceedings. 

(B) FACTORS FOR CONSIDERATION.—In prescribing the 

regulations required under subparagraph (A), the Secretary and the Board shall consider— 

(i) the usefulness in criminal, tax, or regulatory 

investigations or proceedings of any record required to 

be maintained pursuant to the proposed regulations; 

and 

(ii) the effect the recordkeeping required pursuant 

to such proposed regulations will have on the cost and 

efficiency of the payment system. 

(C) Availability of records.—Any records required to be 

maintained pursuant to the regulations prescribed under 

subparagraph (A) shall be submitted or made available to 

the Secretary or the Board upon request. 

(c) Subject to the requirements of any regulations prescribed 

jointly by the Secretary and the Board under paragraph (2) or (3) 

of subsection (b), each insured depository institution shall maintain 

such records and other evidence, in such form as the Secretary 

shall require, of the identity of each person having an account in 

the United States with the insured depository institution and of 

each individual authorized to sign checks, make withdrawals, or 

otherwise act with respect to any such account. The Secretary may 

make such exemptions from any requirement otherwise imposed 

under this subsection as are consistent with the purposes of this 

section. 

(d) Each insured depository institution shall make, to the extent that the regulations of the Secretary so require— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

665 

(1) a microfilm or other reproduction of each check, draft, 

or similar instrument drawn on it and presented to it for payment; and 

(2) a record of each check, draft, or similar instrument received by it for deposit or collection, together with an identification of the party for whose account it is to be deposited or 

collected, unless the insured depository institution has already 

made a record of the party's identity pursuant to subsection (c). 

(e) Subject to the requirements of any regulations prescribed 

jointly by the Secretary and the Board under paragraph (2) or (3) 

of subsection (b), whenever any individual engages (whether as 

principal, agent, or bailee) in any transaction with an insured 

depository institution which is required to be reported or recorded 

under the Currency and Foreign Transactions Reporting Act, the 

insured depository institution shall require and retain such evidence of the identity of that individual as the Secretary may prescribe as appropriate under the circumstances. 

(f) Subject to the requirements of any regulations prescribed 

jointly by the Secretary and the Board under paragraph (2) or (3) 

of subsection (b) and in addition to or in lieu of the records and evidence otherwise referred to in this section, each insured depository 

institution shall maintain such records and evidence as the Secretary may prescribe to carry out the purposes of this section. 

(g) Any type of record or evidence required under this section 

shall be retained for such period as the Secretary may prescribe for 

the type in question. Any period so prescribed shall not exceed six 

years unless the Secretary determines, having regard for the purposes of this section, that a longer period is necessary in the case 

of a particular type of record or evidence. 

(h) The Secretary shall include in his annual report to the Congress information on his implementation of the authority conferred 

by this section and any similar authority with respect to recordkeeping or reporting requirements conferred by other provisions of 

law. 

(i) The provisions of this section shall not apply to any foreign 

bank except with respect to the transactions and records of any insured branch of such a bank. 

(j) CIVIL PENALTIES.— 

(1) PENALTY IMPOSED.—Any insured depository institution 

and any director, officer, or employee of an insured depository 

institution who willfully or through gross negligence violates, 

or any person who willfully causes such a violation, any regulation prescribed under subsection (b) shall be liable to the 

United States for a civil penalty of not more than $10,000. 

(2) TREATMENT OF CONTINUING VIOLATION.—A separate 

violation of any regulation prescribed under subsection (b) of 

this section occurs for each day the violation continues and at 

each office, branch, or place of business at which such violation 

occurs. 

(3) ASSESSMENT.—Any penalty imposed under paragraph 

(1) shall be assessed, mitigated, and collected in the manner 

provided in subsections (b) and (c) of section 5321 of title 31, 

United States Code. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 666 

SEC. 22. [12 U.S.C. 1830] NONDISCRIMINATION . 

It is not the purpose of this Act to discriminate in any manner 

against State nonmember banks or State savings associations and 

in favor of national or member banks or Federal savings associations, respectively. It is the purpose of this Act to provide all banks 

and savings associations with the same opportunity to obtain and 

enjoy the benefits of this Act. 

SEC. 23. [12 U.S.C. 1831] The provisions of this Act limiting 

the insurance of the deposits of any depositor to a maximum less 

than the full amount shall be independent and separable from each 

and all of the provisions of this Act. 

SEC. 24. [12 U.S.C. 1831a] ACTIVITIES OF INSURE D 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 appropriate 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. 

(2) PROCESSING PERIOD.— 

(A) IN GENERAL.—The Corporation shall make a determination under paragraph (1)(A) not later than 60 days 

after receipt of a completed application that may be required under this subsection. 

(B) EXTENSION OF TIME PERIOD.—The Corporation may 

extend the 60-day period referred to in subparagraph (A) 

for not more than 30 additional days, and shall notify the 

applicant of any such extension. 

(b) INSURANCE UNDERWRITING.— 

(1) IN GENERAL.—Notwithstanding subsection (a), an insured State bank may not engage in insurance underwriting 

except to the extent that activity is permissible for national 

banks. 

(2) EXCEPTION FOR CERTAIN FEDERALLY REINSURED CROP 

INSURANCE.—Notwithstanding any other provision of law, an 

insured State bank or any of its subsidiaries that provided 

insurance on or before September 30, 1991, which was reinsured in whole or in part by the Federal Crop Insurance Corporation may continue to provide such insurance. 

(c) EQUITY INVESTMENTS BY INSURED STATE BANKS.— 

(1) I N GENERAL.—An insured State bank may not, directly 

or indirectly, acquire or retain any equity investment of a type 

that is not permissible for a national bank. 

(2) EXCEPTION FOR CERTAIN SUBSIDIARIES.—Paragraph (1) 

shall not prohibit an insured State bank from acquiring or retaining an equity investment in a subsidiary of which the insured State bank is a majority owner. 

(3) EXCEPTION FOR QUALIFIED HOUSING PROJECTS.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

667 

(A) EXCEPTION.—Notwithstanding any other provision 

of this subsection, an insured State bank may invest as a 

limited partner in a partnership, the sole purpose of which 

is direct or indirect investment in the acquisition, rehabilitation, or new construction of a qualified housing project. 

(B) LIMITATION.—The aggregate of the investments of 

any insured State bank pursuant to this paragraph shall 

not exceed 2 percent of the total assets of the bank. 

(C) QUALIFIED HOUSING PROJECT DEFINED.—As used in 

this paragraph— 

(i) QUALIFIED HOUSING PROJECT.—The term 

''qualified housing project'' means residential real estate that is intended to primarily benefit lower income 

people throughout the period of the investment. 

(ii) LOWER INCOME.—The term ''lower income'' 

means income that is less than or equal to the median 

income based on statistics from State or Federal 

sources. 

(4) TRANSITION RULE.— 

A) IN GENERAL.—The Corporation shall require any insured State bank to divest any equity investment the 

retention of which is not permissible under this subsection 

as quickly as can be prudently done, and in any event before the end of the 5-year period beginning on the date of 

the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991. 

(B) TREATMENT OF NONCOMPLIANCE DURING DIVESTMENT.—With respect to any equity investment held by any 

insured State bank on the date of enactment of the Federal Deposit Insurance Corporation Improvement Act of 

1991 which was lawfully acquired before such date, the 

bank shall be deemed not to be in violation of the prohibition in this subsection on retaining such investment so 

long as the bank complies with the applicable requirements established by the Corporation for divesting such 

investments. 

(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 appropriate deposit insurance fund; and 

(B) the bank is, and continues to be, in compliance 

with applicable capital standards prescribed by the appropriate Federal banking agency. 

(2) INSURANCE UNDERWRITING PROHIBITED.— 

(A) PROHIBITION.—Notwithstanding paragraph (1), no 

subsidiary of an insured State bank may engage in insurance underwriting except to the extent such activities are 

permissible for national banks. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 668 

(B) CONTINUATION OF EXISTING ACTIVITIES.—Notwithstanding subparagraph (A), a well-capitalized insured 

State bank or any of its subsidiaries that was lawfully providing insurance as principal in a State on November 21, 

1991, may continue to provide, as principal, insurance of 

the same type to residents of the State (including companies or partnerships incorporated in, organized under the 

laws of, licensed to do business in, or having an office in 

the State, but only on behalf of their employees resident 

in or property located in the State), individuals employed 

in the State, and any other person to whom the bank or 

subsidiary has provided insurance as principal, without 

interruption, since such person resided in or was employed 

in such State. 

(C) EXCEPTION.—Subparagraph (A) does not apply to a 

subsidiary of an insured State bank if— 

(i) the insured State bank was required, before 

June 1, 1991, to provide title insurance as a condition 

of the bank's initial chartering under State law; and 

(ii) control of the insured State bank has not 

changed since that date. 

(3) PROCESSING PERIOD.— 

(A) IN GENERAL.—The Corporation shall make a determination under paragraph (1)(A) not later than 60 days 

after receipt of a completed application that may be required under this subsection. 

(B) EXTENSION OF TIME PERIOD.—The Corporation may 

extend the 60-day period referred to in subparagraph (A) 

for not more than 30 additional days, and shall notify the 

applicant of any such extension. 

(e) SAVINGS BANK LIFE INSURANCE.— 

(1) I N GENERAL.—No provision of this Act shall be construed as prohibiting or impairing the sale or underwriting of 

savings bank life insurance, or the ownership of stock in a savings bank life insurance company, by any insured bank 

which— 

(A) is located in the Commonwealth of Massachusetts 

or the State of New York or Connecticut; and 

(B) meets applicable consumer disclosure requirements 

with respect to such insurance. 

(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 risk to the insurance fund of which such 

banks are members. 

( B) ACTIONS.— 

(i) IN GENERAL.—The Corporation shall, pursuant 

to any finding made under subparagraph (A), take 

appropriate actions to address any risk that exists or 

may subsequently develop with respect to insured 

banks described in paragraph (1)(A). 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

669 

(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 the insurance fund of which such bank is 

a member. 

(f) COMMON AND PREFERRED STOCK INVESTMENT.— 

(1) I N GENERAL.—An insured State bank shall not acquire 

or retain, directly or indirectly, any equity investment of a type 

or in an amount that is not permissible for a national bank or 

is not otherwise permitted under this section. 

(2) EXCEPTION FOR BANKS I N CERTAIN STATES.—Notwithstanding paragraph (1), an insured State bank may, to the extent permitted by the Corporation, acquire and retain ownership of securities described in paragraph (1) to the extent the 

aggregate amount of such investment does not exceed an 

amount equal to 100 percent of the bank's capital if such 

bank— 

(A) is located in a State that permitted, as of September 30, 1991, investment in common or preferred stock 

listed on a national securities exchange or shares of an 

investment company registered under the Investment 

Company Act of 1940; and 

(B) made or maintained an investment in such securities during the period beginning on September 30, 1990, 

and ending on November 26, 1991. 

(3) EXCEPTION FOR CERTAIN TYPES OF INSTITUTIONS.—Notwithstanding paragraph (1), an insured State bank may— 

(A) acquire not more than 10 percent of a corporation 

that only— 

(i) provides directors', trustees', and officers' liability insurance coverage or bankers' blanket bond group 

insurance coverage for insured depository institutions; 

or 

(ii) reinsures such policies; and 

(B) acquire or retain shares of a depository institution 

if— 

(i) the institution engages only in activities permissible for national banks; 

(ii) the institution is subject to examination and 

regulation by a State bank supervisor; 

(iii) 20 or more depository institutions own shares 

of the institution and none of those institutions owns 

more than 15 percent of the institution's shares; and 

(iv) the institution's shares (other than directors' 

qualifying shares or shares held under or initially acquired through a plan established for the benefit of 

the institution's officers and employees) are owned 

only by the institution. 

(4) TRANSITION PERIOD FOR COMMON AND PREFERRED 

STOCK INVESTMENTS.— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 70 

(A) IN GENERAL.—During each year in the 3-year period beginning on the date of the enactment of the Federal 

Deposit Insurance Corporation Improvement Act of 1991, 

each insured State bank shall reduce by not less than 1/ 

3 of its shares (as of such date of enactment) the bank's 

ownership of securities in excess of the amount equal to 

100 percent of the capital of such bank. 

(B) COMPLIANCE AT END OF PERIOD.—By th e end of the 

3-year period referred to in subparagraph (A), each insured 

State bank and each subsidiary of a State bank shall be 

in compliance with the maximum amount limitations on 

investments referred to in paragraph (1). 

(5) LOSS OF EXCEPTION UPON ACQUISITION.—Any exception 

applicable under paragraph (2) with respect to any insured 

State bank shall cease to apply with respect to such bank upon 

any change in control of such bank or any conversion of the 

charter of such bank. 

(6) NOTICE AND APPROVAL.—An insured State bank may 

only engage in any investment pursuant to paragraph (2) if— 

(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 the insurance fund of which such bank is a member. 

(7) DIVESTITURE.— 

(A) IN GENERAL.—The Corporation may require divestiture by an insured State bank of any investment permitted under this subsection if the Corporation determines 

that such investment will have an adverse effect on the 

safety and soundness of the bank. 

(B) REASONABLE STANDARD.—The Corporation shall 

not require divestiture by any bank pursuant to subparagraph (A) without reason to believe that such investment 

will have an adverse effect on the safety and soundness of 

the bank. 

(g) DETERMINATIONS.—The Corporation shall make determinations under this section by regulation or order. 

(h) ACTIVITY DEFINED.—Fo r purposes of this section, the term 

''activity'' includes acquiring or retaining any investment. 

(i) OTHER AUTHORITY NOT AFFECTED.—Thi s section shall not 

be construed as limiting the authority of any appropriate Federal 

banking agency or any State supervisory authority to impose more 

stringent restrictions. 

(j) ACTIVITIES OF BRANCHES OF OUT-OF-STATE BANKS.— 

(1) APPLICATION OF HOST STATE LAW.—Th e laws of a host 

State, including laws regarding community reinvestment, consumer protection, fair lending, and establishment of 

intrastate branches, shall apply to any branch in the host 

State of an out-of-State State bank to the same extent as such 

State laws apply to a branch in the host State of an out-ofState national bank. To the extent host State law is inapplicable to a branch of an out-of-State State bank in such host 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

671 

State pursuant to the preceding sentence, home State law shall 

apply to such branch. 

(2) ACTIVITIES OF BRANCHES.—An insured State bank that 

establishes a branch in a host State may conduct any activity 

at such branch that is permissible under the laws of the home 

State of such bank, to the extent such activity is permissible 

either for a bank chartered by the host State (subject to the 

restrictions in this section) or for a branch in the host State 

of an out-of-State national bank. 

(3) SAVINGS PROVISION.—No provision of this subsection 

shall be construed as affecting the applicability of— 

(A) any State law of any home State under subsection 

(b), (c), or (d) of section 44; or 

(B) Federal law to State banks and State bank 

branches in the home State or the host State. 

(4) DEFINITIONS.—The terms ''host State'', ''home State'', 

and ''out-of-State bank'' have the same meanings as in section 

44(f). 

SEC. 25. [12 U.S.C. 1831b] (a) No insured depository institution, insured branch of a foreign bank, or mutual savings or cooperative bank which is not an insured depository institution, shall 

make any federally related mortgage loan to any agent, trustee, 

nominee, or other person acting in a fiduciary capacity without the 

prior condition that the identity of the person receiving the beneficial interest of such loan shall at all times be revealed to the insured depository institution, insured branch, or bank. At the request of the Corporation, the insured depository institution, insured branch, or bank shall report to the Corporation on the identity of such person and the nature and amount of the loan, discount, or other extension of credit. 

(b) in addition to other available remedies, this section may be 

enforced with respect to mutual savings and cooperative banks 

which are not insured depository institutions in accordance with 

section 8 of this Act, and for such purpose such mutual savings and 

cooperative banks shall be held and considered to be State nonmember insured banks and the appropriate Federal agency with 

respect to such mutual savings and cooperative banks shall be the 

Federal Deposit Insurance Corporation. 

[Section 26—Repealed by section 602(f)(1) of the Riegle Community 

Development and Regulatory Improvement Act of 1994.] 

SEC. 27. [12 U.S.C. 1831d] (a) In order to prevent discrimination against State-chartered insured depository institutions, including insured savings banks, or insured branches of foreign banks 

with respect to interest rates, if the applicable rate prescribed in 

this subsection exceeds the rate such State bank or insured branch 

of a foreign bank would be permitted to charge in the absence of 

this subsection, such State bank or such insured branch of a foreign bank may, notwithstanding any State constitution or statute 

which is hereby preempted for the purposes of this section, take, 

receive, reserve, and charge on any loan or discount made, or upon 

any note, bill of exchange, or other evidence of debt, interest at a 

rate of not more than 1 per centum in excess of the discount rate 

on ninety-day commercial paper in effect at the Federal Reserve 

bank in the Federal Reserve district where such State bank or such 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 72 

insured branch of a foreign bank is located or at the rate allowed 

by the laws of the State, territory, or district where the bank is located, whichever may be greater. 

(b) if the rate prescribed in subsection (a) exceeds the rate 

such State bank or such insured branch of a foreign bank would 

be permitted to charge in the absence of this section, and such 

State fixed rate is thereby preempted by the rate described in subsection (a), the taking, receiving, reserving, or charging a greater 

rate of interest than is allowed by subsection (a), when knowingly 

done, shall be deemed a forfeiture of the entire interest which the 

note, bill, or other evidence of debt carries with it, or which has 

been agreed to be paid thereon. if such greater rate of interest has 

been paid, the person who paid it may recover in a civil action commenced in a court of appropriate jurisdiction not later than two 

years after the date of such payment, an amount equal to twice the 

amount of the interest paid from such State bank or such insured 

branch of a foreign bank taking, receiving, reserving, or charging 

such interest. 

SEC. 28. [12 U.S.C. 1831e] ACTIVITIE S O F SAVING S ASSOCIATIONS. 

(a) I N GENERAL.—O n 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 affected deposit insurance fund; 

and 

(2) the savings association is and continues to be in compliance with the fully phased-in capital standards prescribed 

under section 5(t) of the Home Owners' Loan Act. 

(b) DIFFERENCES OF MAGNITUD E BETWEE N STATE AN D FEDERA L 

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 affected deposit insurance fund; and 

(2) the savings association chartered under State law is 

and continues to be in compliance with the fully phased-in capital standards prescribed under section 5(t) of the Home Owners' Loan Act. 

(c) EQUIT Y INVESTMENTS BY STATE SAVINGS ASSOCIATIONS.— 

(1) IN GENERAL.—Notwithstanding subsections (a) and (b), 

a savings association chartered under State law may not directly acquire or retain any equity investment of a type or in 

an amount that is not permissible for a Federal savings association. 

( 2 ) EXCEPTIO N FOR SERVICE CORPORATIONS.—Paragrap h (1 ) 

does

 1 not prohibit a savings association from acquiring or retaining shares of one or more service corporations if— 

1

 so in original. probably should be ''shall not be construed as prohibiting''. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

673 

(A) the Corporation has determined that no significant 

risk to the affected deposit insurance fund is posed by— 

(i) the amount that the association proposes to acquire or retain; or 

(ii) the activities in which the service corporation 

engages; and 

(B) the savings association is and continues to be in 

compliance with the fully phased-in capital standards prescribed under section 5(t) of the Home Owners' Loan Act. 

(3) TRANSITION RULE.— 

(A) IN GENERAL.—The Corporation shall require any 

savings association to divest any equity investment the 

retention of which is not permissible under paragraph (1) 

or (2) as quickly as can be prudently done, and in any 

event not later than July 1, 1994. 

(B) TREATMENT OF NONCOMPLIANCE DURING DIVESTMENT.—With respect to any equity investment held by any 

savings association on May 1, 1989, the savings association shall be deemed not to be in violation of the prohibition in paragraph (1) or (2) on retaining such investment 

so long as the savings association complies with any applicable requirement established by the Corporation pursuant 

to subparagraph (A) for divesting such investments. 

(d) CORPORATE DEB T SECURITIES NO T OF INVESTMENT 

GRADE.— 

(1) I N GENERAL.—No savings association may, directly or 

through a subsidiary, acquire or retain any corporate debt 

security not of investment grade. 

(2) EXCEPTION FOR SECURITIES HELD BY QUALIFIED AFFILIATE.—Paragraph (1) shall not apply with respect to any corporate debt security not of investment grade which is acquired 

and retained by any qualified affiliate of a savings association. 

(3) TRANSITION RULE.— 

(A) IN GENERAL.—The Corporation shall require any 

savings association or any subsidiary of any savings association to divest any corporate debt security not of investment grade the retention of which is not permissible under 

paragraph (1) as quickly as can be prudently done, and in 

any event not later than July 1, 1994. 

(B) TREATMENT OF NONCOMPLIANCE DURING DIVESTMENT.—With respect to any corporate debt security not of 

investment grade held by any savings association or subsidiary on the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the 

savings association or subsidiary shall be deemed not to be 

in violation of the prohibition in paragraph (1) on retaining 

such investment so long as the association or subsidiary 

complies with any applicable requirement established by 

the Corporation pursuant to subparagraph (A) for divesting such securities. 

(4) DEFINITIONS.—Fo r purposes of this section— 

(A) INVESTMENT GRADE.—Any corporate debt security 

is not of ''investment grade'' unless that security, when acquired by the savings association or subsidiary, was rated 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 74 

in one of the 4 highest rating categories by at least one 

nationally recognized statistical rating organization. 

(B) QUALIFIED AFFILIATE.—The term ''qualified affiliate'' means— 

(i) in the case of a stock savings association, an 

affiliate other than a subsidiary or an insured depository institution; and 

(ii) in the case of a mutual savings association, a 

subsidiary other than an insured depository institution, so long as all of the savings association's investments in and extensions of credit to the subsidiary are 

deducted from the savings association's capital. 

(C) CERTAIN SECURITIES NOT INCLUDED.—The term 

''corporate debt security not of investment grade'' does not 

include any obligation issued or guaranteed by a corporation that may be held by a Federal savings association 

without limitation as to percentage of assets under subparagraph (D), (E), or (F) of section 5(c)(1) of the Home 

Owners' Loan Act. 

(e) TRANSFER OF CORPORATE DEB T SECURITY NOT OF INVESTMENT GRADE I N EXCHANGE FOR A QUALIFIED NOTE. — 

(1) ACQUISITION OF NOTE.—Notwithstanding subsections 

(a), (b), and (c) of section 5 of the Home Owners' Loan Act and 

any other provision of Federal or State law governing extensions of credit by savings associations, any insured savings 

association, and any subsidiary of any insured savings association, that, on the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, holds 

any corporate debt security not of investment grade may acquire a qualified note in exchange for the transfer of such security to— 

(A) any holding company which controls 80 percent or 

more of the shares of such insured savings association; or 

(B) any company other than an insured savings association, or any subsidiary of any insured savings association, 80 percent or more of the shares of which are controlled by such holding company, 

if the conditions of paragraph (2) are met. 

(2) CONDITIONS FOR EXCHANGE OF SECURITY FOR QUALIFIED 

NOTE.—The conditions of this paragraph are met if— 

(A) the insured savings association was in compliance 

with applicable capital requirements on December 31, 

1988, and the insured savings association after such 

date— 

(i) remains in compliance with applicable capital 

requirements; or 

(ii) adopts and complies with a capital plan 

acceptable to the Director of the Office of Thrift Supervision; 

(B) the company to which the corporate debt security 

not of investment grade is transferred is not a bank holding company, an insured savings association, or a direct or 

indirect subsidiary of such holding company or insured 

savings association; 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

675 

(C) before the end of the 90-day period beginning on 

the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the insured 

savings association notifies the Director of the office of 

Thrift Supervision of such association's intention to transfer the corporate debt security not of investment grade to 

the savings and loan holding company or the subsidiary of 

such holding company; 

(D) the transfer of the corporate debt security not of 

investment grade is completed— 

(i) before the end of the 1-year period beginning 

on the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 

in the case of an insured savings association that, as 

of such date, is controlled by a savings and loan holding company; or 

(ii) before the end of the 2-year period beginning 

on such date, in the case of a savings association that 

is not, as of such date, a subsidiary of a savings and 

loan holding company; 

(E) the insured savings association receives in exchange for the corporate debt security not of investment 

grade the fair market value of such security; 

(F) the Director of the Office of Thrift Supervision 

has— 

(i) approved the transaction; and 

(ii) determined that the transfer represents a complete and effective divestiture of the corporate debt 

security not of investment grade and is in compliance 

with the provisions of this subsection; and 

(G) any gain on the sale of the corporate debt security 

not of investment grade is recognized, and included for applicable regulatory capital requirements, by the insured 

savings association only at such time and to the extent 

that the insured savings association receives payment of 

principal on the note in cash in excess of the fair market 

value of the transferred corporate debt security not of 

investment grade as carried on the accounts of the insured 

savings association immediately prior to the transfer. 

(3) QUALIFIE D NOTE DEFINED.—Th e term ''qualified note'' 

means any note that— 

(A) is at all times fully secured by the corporate debt 

security not of investment grade transferred in exchange 

for the note, or by other collateral of at least equivalent 

value that is acceptable to the Director of the office of 

Thrift Supervision; 

(B) contains provisions acceptable to the Director of 

the Office of Thrift Supervision that would— 

(i) prevent any action to encumber or impair the 

value of the collateral referred to in subparagraph (A); 

and 

(ii) allow the sale of the corporate debt security 

not of investment grade if the proceeds of the sale are 

reinvested in assets of equivalent value; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 676 

(C) is on market terms, including interest rate, which 

must in all cases be above the insured savings association's borrowing rate for similar term funds; 

(D) is fully repayable over a period of time not to exceed 5 years from the date of transfer; 

(E) is repaid with annual principal payments at least 

as large as would be necessary to repay the note within 5 

years if it were on a level payment amortization schedule 

and the interest rate for the first year of repayment were 

fixed throughout the amortization period; 

(F) is fully guaranteed by each holding company of the 

insured savings association that acquires such note; and 

(G) is repaid in full in cash in accordance with its 

terms and this subsection. 

(4) FAILURE TO REPAY ON SCHEDULE.—The exemption provided by this subsection from subsections (a), (b), and (c) of section 11 of the Home Owners' Loan Act and any other applicable provision of Federal or State law shall terminate immediately if the insured savings association or any affiliate of 

such association fails to comply with the terms of the qualified 

note or this subsection. 

(f) DETERMINATIONS.—The Corporation shall make determinations under this section by regulation or order. 

(g) ACTIVITY DEFINED.—For purposes of subsections (a) and 

(b)— 

(1) IN GENERAL.—The term ''activity'' includes acquiring or 

retaining any investment. 

(2) DIVESTITURE OF CERTAIN ASSETS.— Notwithstanding 

paragraph (1), subsections (a) and (b) shall not be construed to 

require a savings association to divest itself of any assets acquired before the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

(h) OTHER AUTHORITY NOT AFFECTED.—This section may not 

be construed as limiting— 

(1) any other authority of the Corporation; or 

(2) any authority of the Director of the Office of Thrift 

Supervision or of a State to impose more stringent restrictions. 

SEC. 29. [12 U.S.C. 1831f] BROKERED DEPOSITS. 

(a) I N GENERAL.—An insured depository institution that is not 

well capitalized may not accept funds obtained, directly or indirectly, by or through any deposit broker for deposit into 1 or more 

deposit accounts. 

(b) RENEWALS AND ROLLOVERS TREATED AS ACCEPTANCE OF 

FUNDS.—Any renewal of an account in any troubled institution and 

any rollover of any amount on deposit in any such account shall be 

treated as an acceptance of funds by such troubled institution for 

purposes of subsection (a). 

(c) WAIVER AUTHORITY.—The Corporation may, on a case-bycase basis and upon application by an insured depository institution which is adequately capitalized (but not well capitalized), 

waive the applicability of subsection (a) upon a finding that the 

acceptance of such deposits does not constitute an unsafe or unsound practice with respect to such institution. 
Sec. 11A 

Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 683 

677 

(d) LIMITE D EXCEPTION FOR CERTAIN CONSERVATORSHIPS.—In 

the case of any insured depository institution for which the Corporation has been appointed as conservator, subsection (a) shall not 

apply to the acceptance of deposits (described in such subsection) 

by such institution if the Corporation determines that the acceptance of such deposits— 

(1) is not an unsafe or unsound practice; 

(2) is necessary to enable the institution to meet the demands of its depositors or pay its obligations in the ordinary 

course of business; and 

(3) is consistent with the conservator's fiduciary duty to 

minimize the institution's losses. 

Effective 90 days after the date on which the institution was placed 

in conservatorship, the institution may not accept such deposits. 

(e) RESTRICTION ON INTEREST RATE PAID.—An y insured depository institution which, under subsection (c) or (d), accepts funds obtained, directly or indirectly, by or through a deposit broker, may 

not pay a rate of interest on such funds which, at the time that 

such funds are accepted, significantly exceeds— 

(1) the rate paid on deposits of similar maturity in such 

institution's normal market area for deposits accepted in the 

institution's normal market area; or 

(2) the national rate paid on deposits of comparable maturity, as established by the Corporation, for deposits accepted 

outside the institution's normal market area. 

(f) ADDITIONAL RESTRICTIONS.—The Corporation may impose, 

by regulation or order, such additional restrictions on the acceptance of brokered deposits by any institution as the Corporation 

may determine to be appropriate. 

(g) DEFINITIONS RELATING TO DEPOSIT BROKER.— 

(1) DEPOSIT BROKER.—The term ''deposit broker'' means— 

A) any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions or the business of 

placing deposits with insured depository institutions for 

the purpose of selling interests in those deposits to third 

parties; and 

(B) an agent or trustee who establishes a deposit account to facilitate a business arrangement with an insured 

depository institution to use the proceeds of the account to 

fund a prearranged loan. 

(2) EXCLUSIONS.—The term ''deposit broker'' does not 

include— 

(A) an insured depository institution, with respect to 

funds placed with that depository institution; 

(B) an employee of an insured depository institution, 

with respect to funds placed with the employing depository 

institution; 

(C) a trust department of an insured depository institution, if the trust in question has not been established for 

the primary purpose of placing funds with insured depository institutions; 

(D) the trustee of a pension or other employee benefit 

plan, with respect to funds of the plan; 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 678 

(E) a person acting as a plan administrator or an 

investment adviser in connection with a pension plan or 

other employee benefit plan provided that that person is 

performing managerial functions with respect to the plan; 

(F) the trustee of a testamentary account; 

(G) the trustee of an irrevocable trust (other than one 

described in paragraph (1)(B)), as long as the trust in 

question has not been established for the primary purpose 

of placing funds with insured depository institutions; 

(H) a trustee or custodian of a pension or profitsharing 

plan qualified under section 401(d) or 403(a) of the Internal Revenue Code of 1986; or 

(i) an agent or nominee whose primary purpose is not 

the placement of funds with depository institutions. 

(3) INCLUSION OF DEPOSITORY INSTITUTIONS ENGAGING I N 

CERTAIN ACTIVITIES.—Notwithstanding paragraph (2), the term 

''deposit broker'' includes any insured depository institution 

that is not well capitalized (as defined in section 38), and any 

employee of such institution, which engages, directly or indirectly, in the solicitation of deposits by offering rates of interest which are significantly higher than the prevailing rates of 

interest on deposits offered by other insured depository institutions in such depository institution's normal market area. 

(4) EMPLOYEE.—For purposes of this subsection, the term 

''employee'' means any employee— 

(A) who is employed exclusively by the insured depository institution; 

(B) whose compensation is primarily in the form of a 

salary; 

(C) who does not share such employee's compensation 

with a deposit broker; and 

(D) whose office space or place of business is used 

exclusively for the benefit of the insured depository institution which employs such individual. 

(h) DEPOSIT SOLICITATION RESTRICTED.—An insured depository 

institution that is undercapitalized, as defined in section 38, shall 

not solicit deposits by offering rates of interest that are significantly higher than the prevailing rates of interest on insured 

deposits— 

(1) in such institution's normal market areas; or 

(2) in the market area in which such deposits would otherwise be accepted. 

[Section 29A—Repealed by section 1203 of the American Homeownership 

and Economic Opportunity Act of 2000.] 

SEC. 30. [12 U.S.C. 1831g] CONTRACTS BETWEE N DEPOSITORY INSTITUTION S AN D PERSONS PROVIDIN G GOODS, PRODUCTS, 

OR SERVICES. 

(a) I N GENERAL.—A n insured depository institution may not 

enter into a written or oral contract with any person to provide 

goods, products, or services to or for the benefit of such depository 

institution if the performance of such contract would adversely affect the safety or soundness of the institution. 

(b) RULEMAKING.—Th e Corporation shall prescribe such regulations and issue such orders, including definitions consistent with 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

679 

this section, as may be necessary to administer and carry out the 

purposes of, and prevent evasions of, this section. 

(c) ENFORCEMENT.—Any action taken by any appropriate Federal banking agency under section 8 to enforce compliance on the 

part of any insured depository institution with the requirements of 

this section may include a requirement that such institution properly reflect the transaction on its books and records. 

(d) N o PRIVATE RIGHT OF ACTION.—This section may not be 

construed as creating any private right of action. 

(e) STUDY.— 

(1) IN GENERAL.—The Attorney General and the Comptroller General of the United States shall jointly conduct a 

study on the extent to which— 

(A) insured depository institutions are entering into 

contracts with vendors under which the vendors agree to 

purchase stock or assets from insured depository institutions or to invest capital in or make deposits in such institutions; and 

(B) if such practices occur, the extent to which such 

practices are having an anticompetitive effect and should 

be prohibited. 

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

Institutions Reform, Recovery, and Enforcement Act of 1989, 

the Attorney General and the Comptroller General shall submit a report to the Congress on the results of the study conducted pursuant to paragraph (1). 

SEC. 31. [12 U.S.C. 1831h] SAVINGS ASSOCIATION INSURANCE FUND 

INDUSTRY ADVISORY COMMITTEE. 

(a) ESTABLISHMENT.—There is hereby established the Savings 

Association Insurance Fund Industry Advisory Committee (hereinafter referred to in this section as the ''Committee''). 

(b) MEMBERSHIP.—The Committee shall consist of 18 members, 

appointed as follows: 

(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. 

(2) 6 members appointed by the Corporation from among 

individuals who shall represent the public interest. 

(c) VACANCIES.—Any vacancy on the Committee shall be filled 

in the same manner in which the original appointment was made. 

(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. 

(e) TERMS.—Members shall be appointed or elected for terms 

of 1 year. 

(f) AUTHORITY OF THE COMMITTEE.—The Committee may select 

its Chairperson, Vice Chairperson, and Secretary, and adopt methods of procedure, and shall have power— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 80 

(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 

(2) to request information, and to make recommendations, 

with respect to matters within the jurisdiction of the Corporation. 

(g) MEETINGS.—The Committee shall meet 4 times each year, 

and more frequently if requested by the Corporation. 

(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. 

(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. 

(j) FEDERAL ADVISORY COMMITTEE ACT DOES NO T APPLY.—Th e 

Federal Advisory Committee Act shall not apply to the Committee. 

(k) SUNSET.—The Committee shall cease to exist 10 years after 

the enactment of this section. 

SEC. 32. [12 U.S.C. 1831i] AGENCY DISAPPROVAL OF DIRECTORS AN D 

SENIOR EXECUTIVE OFFICER S OF INSURE D DEPOSITORY 

INSTITUTION S OR DEPOSITORY INSTITUTIO N HOLDIN G 

COMPANIES. 

(a) PRIOR NOTICE REQUIRED.—A n insured depository institution or depository institution holding company shall notify the 

appropriate Federal banking agency of the proposed addition of any 

individual to the board of directors or the employment of any individual as a senior executive officer of such institution or holding 

company at least 30 days (or such other period, as determined by 

the appropriate Federal banking agency) before such addition or 

employment becomes effective, if— 

(1) the insured depository institution or depository institution holding company is not in compliance with the minimum 

capital requirement applicable to such institution or is otherwise in a troubled condition, as determined by such agency on 

the basis of such institution's or holding company's most recent 

report of condition or report of examination or inspection; or 

(2) the agency determines, in connection with the review 

by the agency of the plan required under section 38 or otherwise, that such prior notice is appropriate. 

(b) DISAPPROVAL BY AGENCY.—A n insured depository institution or depository institution holding company may not add any 

individual to the board of directors or employ any individual as a 

senior executive officer if the appropriate Federal banking agency 

issues a notice of disapproval of such addition or employment before the end of the notice period, not to exceed 90 days, beginning 

on the date the agency receives notice of the proposed action pursuant to subsection (a). 

(c) EXCEPTION I N EXTRAORDINARY CIRCUMSTANCES.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

681 

(1) IN GENERAL.—Each appropriate Federal banking 

agency may prescribe by regulation conditions under which the 

prior notice requirement of subsection (a) may be waived in the 

event of extraordinary circumstances. 

(2) N O EFFECT ON DISAPPROVAL AUTHORITY OF AGENCY.— 

Such waivers shall not affect the authority of each agency to 

issue notices of disapproval of such additions or employment of 

such individuals within 30 days after each such waiver. 

(d) ADDITIONAL INFORMATION.—Any notice submitted to an 

appropriate Federal banking agency with respect to an individual 

by any insured depository institution or depository institution holding company pursuant to subsection (a) shall include— 

(1) the information described in section 7(j)(6)(A) about the 

individual; and 

(2) such other information as the agency may prescribe by 

regulation. 

(e) STANDARD FOR DISAPPROVAL.—The appropriate Federal 

banking agency shall issue a notice of disapproval with respect to 

a notice submitted pursuant to subsection (a) if the competence, 

experience, character, or integrity of the individual with respect to 

whom such notice is submitted indicates that it would not be in the 

best interests of the depositors of the depository institution or in 

the best interests of the public to permit the individual to be employed by, or associated with, the depository institution or depository institution holding company. 

(f) DEFINITIO N REGULATIONS.—Each appropriate Federal banking agency shall prescribe by regulation a definition for the terms 

''troubled condition'' and ''senior executive officer'' for purposes of 

subsection (a). 

SEC. 33. [12 U.S.C. 1831j] DEPOSITORY INSTITUTIO N EMPLOYEE PROTECTIO N REMEDY. 

(a) I N GENERAL.— 

(1) EMPLOYEES OF DEPOSITORY INSTITUTIONS.—No insured 

depository institution may discharge or otherwise discriminate 

against any employee with respect to compensation, terms, 

conditions, or privileges of employment because the employee 

(or any person acting pursuant to the request of the employee) 

provided information to any Federal banking agency or to the 

Attorney General regarding— 

(A) a possible violation of any law or regulation; or 

(B) gross mismanagement, a gross waste of funds, an 

abuse of authority, or a substantial and specific danger to 

public health or safety; 

by the depository institution or any director, officer, or employee of the institution. 

(2) EMPLOYEES OF BANKING AGENCIES.—No Federal banking agency, Federal home loan bank, Federal reserve bank, or 

any person who is performing, directly or indirectly, any function or service on behalf of the Corporation may discharge or 

otherwise discriminate against any employee with respect to 

compensation, terms, conditions, or privileges of employment 

because the employee (or any person acting pursuant to the request of the employee) provided information to any such 

agency or bank or to the Attorney General regarding any pos-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 82 

sible violation of any law or regulation, gross mismanagement, 

a gross waste of funds, an abuse of authority, or a substantial 

and specific danger to public health or safety by— 

(A) any depository institution or any such bank or 

agency; 

(B) any director, officer, or employee of any depository 

institution or any such bank; 

(C) any officer or employee of the agency which employs such employee; or 

(D) the person, or any officer or employee of the person, who employs such employee. 

(b) ENFORCEMENT.—Any employee or former employee who believes he has been discharged or discriminated against in violation 

of subsection (a) may file a civil action in the appropriate united 

States district court before the close of the 2-year period beginning 

on the date of such discharge or discrimination. The complainant 

shall also file a copy of the complaint initiating such action with 

the appropriate Federal banking agency. 

(c) REMEDIES.—If the district court determines that a violation 

of subsection (a) has occurred, it may order the depository institution, Federal home loan bank, Federal Reserve bank, or Federal 

banking agency which committed the violation— 

(1) to reinstate the employee to his former position; 

(2) to pay compensatory damages; or 

(3) take other appropriate actions to remedy any past discrimination. 

(d) LIMITATION.—The protections of this section shall not apply 

to any employee who— 

(1) deliberately causes or participates in the alleged violation of law or regulation; or 

(2) knowingly or recklessly provides substantially false 

information to such an agency or the Attorney General. 

(e) FEDERAL BANKING AGENCY DEFINED.—For purposes of subsections (a) and (c), the term ''Federal banking agency'' means the 

Corporation, the Board of Governors of the Federal Reserve System, the Federal Housing Finance Board, the Comptroller of the 

Currency, and the Director of the Office of Thrift Supervision. 

(f) BURDENS OF PROOF.—The legal burdens of proof that prevail under subchapter III of chapter 12 of title 5, United States 

Code, shall govern adjudication of protected activities under this 

section. 

SEC. 34. [12 U.S.C. 1831k] REWARD FOR INFORMATION LEADING TO 

RECOVERIES OR CIVIL PENALTIES. 

(a) I N GENERAL.—An appropriate Federal banking agency, with 

the concurrence of the Attorney General, may pay a reward to a 

person who provides original information which leads to— 

(1) recovery of a criminal fine, restitution, or civil 

penalty— 

(A) under— 

(i) the Federal Deposit Insurance Act; 

(ii) the Federal Credit Union Act; 

(iii) section 5213, 5239(b), or 5240 of the Revised 

Statutes; 

(iv) the Federal Reserve Act; 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

683 

(v) the Bank Holding Company Act Amendments 

of 1970; 

(vi) the Bank Holding Company Act of 1956; 

(vii) the Home Owners' Loan Act; or 

(viii) section 3663 of title 18, United States Code, 

pursuant to a conviction for an offense referred to in 

subparagraph (B) of this paragraph, 

(B) pursuant to a conviction for an offense under section 215, 656, 657, 1005, 1006, 1007, 1014, 1341, 1343, or 

1344 of title 18, United States Code, affecting a depository 

institution insured by the Federal Deposit Insurance Corporation, or for a conspiracy to commit such an offense; or 

(C) under section 951 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989; or 

(2) a forfeiture under section 981 or 982 of title 18, United 

States Code, that arises in connection with a depository institution insured by the Federal Deposit Insurance Corporation. 

(b) PERCENTAGE LIMITATION.—A n appropriate Federal banking 

agency may not pay a reward under subsection (a) of more than 25 

percent of the amount of the fine, penalty, restitution, or forfeiture 

or $100,000, whichever is less. 

(c) OFFICIALS AND PERSONS INELIGIBLE.—A n appropriate Federal banking agency may not pay a reward under subsection (a) 

to— 

(1) an officer or employee of the United States or of a State 

or local government who provides information described in subsection (a), obtained in the performance of official duties; or 

(2) a person who— 

(A) deliberately causes or participates in the alleged 

violation of law or regulation, or 

(B) knowingly or recklessly provides substantially 

false information to such an agency or the Attorney General. 

(d) NONREVIEWABILITY.—Any agency decision under this section is final and not reviewable by any court. 

SEC. 35. [12 U.S.C. 1831l] COORDINATIO N OF RISK ANALYSIS BETWEE N SEC AN D FEDERA L BANKING AGENCIES. 

Any appropriate Federal banking agency shall notify the Securities and Exchange Commission of any concerns of the agency regarding significant financial or operational risks to any registered 

broker or dealer, or any registered municipal securities dealer, government securities broker, or government securities dealer for 

which the Commission is the appropriate regulatory agency (as defined in section 3 of the Securities Exchange Act of 1934), resulting 

from the activities of any insured depository institution, any 

depository institution holding company, or any affiliate of any such 

institution or company if such broker, dealer, municipal securities 

dealer, government securities broker, or government securities 

dealer is an affiliate of any such institution, company, or affiliate. 

SEC. 36. [12 U.S.C. 1831m] EARLY IDENTIFICATIO N OF NEEDE D 

IMPROVEMENTS I N FINANCIA L MANAGEMENT. 

(a) ANNUA L REPORT ON FINANCIAL CONDITION AND MANAGEMENT. — 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 84 

(1) REPORT REQUIRED.—Each insured depository institution shall submit an annual report to the Corporation, the 

appropriate Federal banking agency, and any appropriate 

State bank supervisor (including any State bank supervisor of 

a host State). 

(2) CONTENTS OF REPORT.—Any annual report required 

under paragraph (1) shall contain— 

(A) the information required to be provided by— 

(i) the institution's management under subsection 

(b); and 

(ii) an independent public accountant under subsections (c) and (d); and 

(B) such other information as the Corporation and the 

appropriate Federal banking agency may determine to be 

necessary to assess the financial condition and management of the institution. 

(3) PUBLIC AVAILABILITY.—Any annual report required 

under paragraph (1) shall be available for public inspection. 

Notwithstanding the preceding sentence, the Corporation and 

the appropriate Federal banking agencies may designate certain information as privileged and confidential and not available to the public. 

(b) MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS 

AND INTERNAL CONTROLS.—Each insured depository institution 

shall prepare— 

(1) annual financial statements in accordance with generally accepted accounting principles and such other disclosure 

requirements as the Corporation and the appropriate Federal 

banking agency may prescribe; and 

(2) a report signed by the chief executive officer and the 

chief accounting or financial officer of the institution which 

contains— 

(A) a statement of the management's responsibilities 

for— 

(i) preparing financial statements; 

(ii) establishing and maintaining an adequate internal control structure and procedures for financial 

reporting; and 

(iii) complying with the laws and regulations relating to safety and soundness which are designated 

by the Corporation and the appropriate Federal banking agency; and 

(B) an assessment, as of the end of the institution's 

most recent fiscal year, of— 

(i) the effectiveness of such internal control structure and procedures; and 

(ii) the institution's compliance with the laws and 

regulations relating to safety and soundness which are 

designated by the Corporation and the appropriate 

Federal banking agency. 

(c) INTERNAL CONTROL EVALUATION AND REPORTING REQUIREMENTS FOR INDEPENDENT PUBLIC ACCOUNTANTS.— 

(1) IN GENERAL.—With respect to any internal control report required by subsection (b)(2) of any institution, the insti-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

685 

tution's independent public accountant shall attest to, and report separately on, the assertions of the institution's management contained in such report. 

(2) ATTESTATION REQUIREMENTS.—Any attestation pursuant to paragraph (1) shall be made in accordance with generally accepted standards for attestation engagements. 

(d) ANNUA L INDEPENDENT AUDITS OF FINANCIAL STATEMENTS.— 

(1) AUDITS REQUIRED.—The Corporation, in consultation 

with the appropriate Federal banking agencies, shall prescribe 

regulations requiring that each insured depository institution 

shall have an annual independent audit made of the institution's financial statements by an independent public accountant in accordance with generally accepted auditing standards 

and section 37. 

(2) SCOPE OF AUDIT.—I n connection with any audit under 

this subsection, the independent public accountant shall determine and report whether the financial statements of the 

institution— 

(A) are presented fairly in accordance with generally 

accepted accounting principles; and 

(B) comply with such other disclosure requirements as 

the Corporation and the appropriate Federal banking 

agency may prescribe. 

(3) REQUIREMENTS FOR INSURED SUBSIDIARIES OF HOLDING 

COMPANIES.—The requirements for an independent audit under 

this subsection may be satisfied for insured depository institutions that are subsidiaries of a holding company by an independent audit of the holding company. 

(e) [Repealed] 

(f) FOR M AND CONTENT OF REPORTS AND AUDITIN G STANDARDS.— 

(1) IN GENERAL.—The scope of each report by an independent public accountant pursuant to this section, and the 

procedures followed in preparing such report, shall meet or exceed the scope and procedures required by generally accepted 

auditing standards and other applicable standards recognized 

by the Corporation. 

(2) CONSULTATION.—The Corporation shall consult with 

the other appropriate Federal banking agencies in implementing this subsection. 

(g) IMPROVED ACCOUNTABILITY.— 

(1) INDEPENDENT AUDIT COMMITTEE.— 

(A) ESTABLISHMENT.—Each insured depository institution (to which this section applies) shall have an independent audit committee entirely made up of outside directors who are independent of management of the institution, except as provided in subparagraph (D), and who satisfy any specific requirements the Corporation may establish. 

(B) DUTIES.—An independent audit committee's duties 

shall include reviewing with management and the independent public accountant the basis for the reports issued 

under subsections (b)(2), (c), and (d). 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 686 

(C) CRITERIA APPLICABLE TO COMMITTEES OF LARGE 

INSURED DEPOSITORY INSTITUTIONS.—In the case of each 

insured depository institution which the Corporation determines to be a large institution, the audit committee 

required by subparagraph (A) shall— 

(i) include members with banking or related financial management expertise; 

(ii) have access to the committee's own outside 

counsel; and 

(iii) not include any large customers of the 

institution. 

( D ) EXEMPTION AUTHORITY.— 

(i) I N GENERAL.—An appropriate Federal banking 

agency may, by order or regulation, permit the independent audit committee of an insured depository 

institution to be made up of less than all, but no fewer 

than a majority of, outside directors, if the agency 

determines that the institution has encountered hardships in retaining and recruiting a sufficient number 

of competent outside directors to serve on the internal 

audit committee of the institution. 

(ii) FACTORS TO BE CONSIDERED.—In determining 

whether an insured depository institution has encountered hardships referred to in clause (i), the appropriate Federal banking agency shall consider factors 

such as the size of the institution, and whether the 

institution has made a good faith effort to elect or 

name additional competent outside directors to the 

board of directors of the institution who may serve on 

the internal audit committee. 

(2) REVIEW OF QUARTERLY REPORTS OF LARGE INSURED 

DEPOSITORY INSTITUTIONS.— 

(A) I N GENERAL.—In the case of any insured depository institution which the Corporation has determined to 

be a large institution, the Corporation may require the 

independent public accountant retained by such institution 

to perform reviews of the institution's quarterly financial 

reports in accordance with procedures agreed upon by the 

Corporation. 

(B) REPORT TO AUDIT COMMITTEE.—The independent 

public accountant referred to in subparagraph (A) shall 

provide the audit committee of the insured depository 

institution with reports on the reviews under such subparagraph and the audit committee shall provide such reports to the Corporation, any appropriate Federal banking 

agency, and any appropriate State bank supervisor. 

(C) LIMITATION ON NOTICE.—Reports provided under 

subparagraph (B) shall be only for the information and use 

of the insured depository institution, the Corporation, any 

appropriate Federal banking agency, and any State bank 

supervisor that received the report. 

(D) NOTICE TO INSTITUTION.—The Corporation shall 

promptly notify an insured depository institution, in writing, of a determination pursuant to subparagraph (A) to 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

687 

require a review of such institution's quarterly financial 

reports. 

( 3 ) QUALIFICATIONS OF INDEPENDENT PUBLIC ACCOUNTANTS.— 

(A) IN GENERAL.—All audit services required by this 

section shall be performed only by an independent public 

accountant who— 

(i) has agreed to provide related working papers, 

policies, and procedures to the Corporation, any appropriate Federal banking agency, and any State bank 

supervisor, if requested; and 

(ii) has received a peer review that meets guidelines acceptable to the Corporation. 

(B) REPORTS ON PEER REVIEWS.—Reports on peer reviews shall be filed with the Corporation and made available for public inspection. 

(4) ENFORCEMENT ACTIONS.— 

(A) I N GENERAL.—In addition to any authority contained in section 8, the Corporation or an appropriate Federal banking agency may remove, suspend, or bar an independent public accountant, upon a showing of good cause, 

from performing audit services required by this section. 

(B) JOINT RULEMAKING.—The appropriate Federal 

banking agencies shall jointly issue rules of practice to implement this paragraph. 

(5) NOTICE BY ACCOUNTANT OF TERMINATION OF SERVICES.—Any independent public accountant performing an audit 

under this section who subsequently ceases to be the accountant for the institution shall promptly notify the Corporation 

and each appropriate Federal banking agency pursuant to such 

rules as the Corporation and each appropriate Federal banking 

agency shall prescribe. 

(h) EXCHANGE OF REPORTS AND INFORMATION.— 

(1) REPORT TO THE INDEPENDENT AUDITOR.— 

(A) IN GENERAL.—Each insured depository institution 

which has engaged the services of an independent auditor 

to audit such institution shall transmit to the auditor a 

copy of the most recent report of condition made by the 

institution (pursuant to this Act or any other provision of 

law) and a copy of the most recent report of examination 

received by the institution. 

(B) ADDITIONAL INFORMATION.—In addition to the copies of the reports required to be provided under subparagraph (A), each insured depository institution shall provide 

the auditor with— 

(i) a copy of any supervisory memorandum of 

understanding with such institution and any written 

agreement between such institution and any appropriate Federal banking agency or any appropriate 

State bank supervisor which is in effect during the period covered by the audit; and 

(ii) a report of— 

(i) any action initiated or taken by the appropriate Federal banking agency or the Corporation 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 688 

during such period under subsection (a), (b), (c), 

(e), (g), (i), (s), or (t) of section 8; 

(II) any action taken by any appropriate State 

bank supervisor under State law which is similar 

to any action referred to in subclause (i); or 

(iii) any assessment of any civil money penalty under any other provision of law with respect 

to the institution or any institution-affiliated 

party. 

(2) REPORTS TO BANKING AGENCIES.— 

(A) INDEPENDENT AUDITOR REPORTS.—Each insured 

depository institution shall provide to the Corporation, any 

appropriate Federal banking agency, and any appropriate 

State bank supervisor, a copy of each audit report and any 

qualification to such report, any management letter, and 

any other report within 15 days of receipt of any such report, qualification, or letter from the institution's independent auditors. 

(B) NOTICE OF CHANGE OF AUDITOR.—Each insured 

depository institution shall provide written notification to 

the Corporation, the appropriate Federal banking agency, 

and any appropriate State bank supervisor of the resignation or dismissal of the institution's independent auditor or 

the engagement of a new independent auditor by the institution, including a statement of the reasons for such 

change within 15 calendar days of the occurrence of the 

event. 

(i) REQUIREMENTS FOR INSURED SUBSIDIARIES OF HOLDING 

COMPANIES.— 

(1) IN GENERAL.—Except with respect to any audit requirements established under or pursuant to subsection (d), the 

requirements of this section may be satisfied for insured 

depository institutions that are subsidiaries of a holding company, if— 

(A) services and functions comparable to those required under this section are provided at the holding company level; and 

(B) the institution— 

(i) has total assets, as of the beginning of such fiscal year, of less than $5,000,000,000; or 

(ii) has— 

(I) total assets, as of the beginning of such fiscal year, of $5,000,000,000, or more; and 

(II) a CAMEL composite rating of 1 or 2 

under the Uniform Financial Institutions Rating 

System (or an equivalent rating by any such 

agency under a comparable rating system) as of 

the most recent examination of such institution by 

the Corporation or the appropriate Federal banking agency. 

(2) LARGE INSTITUTIONS.—For purposes of this subsection, 

in the case of an insured depository institution described in 

paragraph (1)(B)(ii) that the Corporation determines to be a 

large institution, the audit committee of the holding company 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

689 

of such an institution shall not include any large customers of 

the institution. 

(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 risk to the affected deposit insurance fund if applied 

to that institution. 

(j) EXEMPTION FOR SMALL DEPOSITORY INSTITUTIONS.—Thi s 

section shall not apply with respect to any fiscal year of any insured depository institution the total assets of which, as of the 

beginning of such fiscal year, are less than the greater of— 

(1) $150,000,000; or 

(2) such amount (in excess of $150,000,000) as the Corporation may prescribe by regulation. 

SEC. 37. [12 U.S.C. 1831n] ACCOUNTING OBJECTIVES, STANDARDS, 

A N D REQUIREMENTS. 

(a) I N GENERAL.— 

(1) OBJECTIVES.—Accounting principles applicable to reports or statements required to be filed with Federal banking 

agencies by insured depository institutions should— 

(A) result in financial statements and reports of condition that accurately reflect the capital of such institutions; 

(B) facilitate effective supervision of the institutions; 

and 

(C) facilitate prompt corrective action to resolve the 

institutions at the least cost to the insurance funds. 

(2) STANDARDS.— 

(A) UNIFOR M ACCOUNTING PRINCIPLES CONSISTENT 

WIT H GAAP.—Subject to the requirements of this Act and 

any other provision of Federal law, the accounting principles applicable to reports or statements required to be 

filed with Federal banking agencies by all insured depository institutions shall be uniform and consistent with generally accepted accounting principles. 

(B) STRINGENCY.—If the appropriate Federal banking 

agency or the Corporation determines that the application 

of any generally accepted accounting principle to any insured depository institution is inconsistent with the objectives described in paragraph (1), the agency or the Corporation may, with respect to reports or statements required to be filed with such agency or Corporation, prescribe an accounting principle which is applicable to such 

institutions which is no less stringent than generally 

accepted accounting principles. 

(3) REVIEW AND IMPLEMENTATION OF ACCOUNTING PRINCIPLES REQUIRED.—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, each appropriate Federal banking agency shall take the following actions: 

(A) REVIEW OF ACCOUNTING PRINCIPLES.—Review— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 90 

(i) all accounting principles used by depository 

institutions with respect to reports or statements required to be filed with a Federal banking agency; 

(ii) all requirements established by the agency 

with respect to such accounting procedures; and 

(iii) the procedures and format for reports to the 

agency, including reports of condition. 

(B) MODIFICATION OF NONCOMPLYING MEASURES.— 

Modify or eliminate any accounting principle or reporting 

requirement of such Federal agency which the agency 

determines fails to comply with the objectives and standards established under paragraphs (1) and (2). 

(C) INCLUSION OF "OFF BALANCE SHEET'' ITEMS.—De -

velop and prescribe regulations which require that all assets and liabilities, including contingent assets and liabilities, of insured depository institutions be reported in, or 

otherwise taken into account in the preparation of any balance sheet, financial statement, report of condition, or 

other report of such institution, required to be filed with 

a Federal banking agency. 

(b) UNIFOR M ACCOUNTING OF CAPITAL STANDARDS.— 

(1) IN GENERAL.—Each appropriate Federal banking 

agency shall maintain uniform accounting standards to be used 

for determining compliance with statutory or regulatory 

requirements of depository institutions. 

(2) TRANSITION PROVISION.—Any standards in effect on the 

date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991 under section 1215 of the 

Financial Institutions Reform, Recovery, and Enforcement Act 

of 1989 shall continue in effect after such date of enactment 

until amended by the appropriate Federal banking agency 

under paragraph (1). 

(c) REPORTS TO BANKING COMMITTEES.— 

(1) ANNUA L REPORTS REQUIRED.—The Federal banking 

agencies shall jointly submit an annual report to the Committee on Banking, Finance and Urban Affairs of the House of 

Representatives and the Committee on Banking, Housing, and 

Urban Affairs of the Senate containing a description of any difference between any accounting or capital standard used by 

any such agency and any accounting or capital standard used 

by any other agency. 

(2) EXPLANATION OF REASONS FOR DISCREPANCY.—Each report submitted under paragraph (1) shall contain an explanation of the reasons for any discrepancy between any accounting or capital standard used by any such agency and any accounting or capital standard used by any other agency. 

(3) PUBLICATION.—Each report under this subsection shall 

be published in the Federal Register. 

SEC. 38. [12 U.S.C. 1831o] PROMPT CORRECTIVE ACTION. 

(a) RESOLVING PROBLEMS TO PROTECT DEPOSIT INSURANCE 

FUNDS.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

691 

(1) PURPOSE.—The purpose of this section is to resolve the 

problems of insured depository institutions at the least possible 

long-term loss to the deposit insurance fund. 

(2) PROMPT CORRECTIVE ACTION REQUIRED.—Each appropriate Federal banking agency and the Corporation (acting in 

the Corporation's capacity as the insurer of depository institutions under this Act) shall carry out the purpose of this section 

by taking prompt corrective action to resolve the problems of 

insured depository institutions. 

(b) DEFINITIONS.—Fo r purposes of this section: 

(1) CAPITAL CATEGORIES.— 

(A) WEL L CAPITALIZED.—An insured depository institution is ''well capitalized'' if it significantly exceeds the required minimum level for each relevant capital measure. 

(B) ADEQUATELY CAPITALIZED.—An insured depository 

institution is ''adequately capitalized'' if it meets the required minimum level for each relevant capital measure. 

(C) UNDERCAPITALIZED.—An insured depository institution is ''undercapitalized'' if it fails to meet the required 

minimum level for any relevant capital measure. 

(D) SIGNIFICANTLY UNDERCAPITALIZED.—An insured 

depository institution is ''significantly undercapitalized'' if 

it is significantly below the required minimum level for 

any relevant capital measure. 

(E) CRITICALLY UNDERCAPITALIZED.—An insured 

depository institution is ''critically undercapitalized'' if it 

fails to meet any level specified under subsection (c)(3)(A). 

(2) OTHER DEFINITIONS.— 

( A) AVERAGE.— 

(i) IN GENERAL.—The ''average'' of an accounting 

item (such as total assets or tangible equity) during a 

given period means the sum of that item at the close 

of business on each business day during that period 

divided by the total number of business days in that 

period. 

(ii) AGENCY MAY PERMIT WEEKLY AVERAGING FOR 

CERTAIN INSTITUTIONS.—In the case of insured depository institutions that have total assets of less than 

$300,000,000 and normally file reports of condition reflecting weekly (rather than daily) averages of accounting items, the appropriate Federal banking 

agency may provide that the ''average'' of an accounting item during a given period means the sum of that 

item at the close of business on the relevant business 

day each week during that period divided by the total 

number of weeks in that period. 

(B) CAPITAL DISTRIBUTION.—The term ''capital distribution'' means— 

(i) a distribution of cash or other property by any 

insured depository institution or company to its owners made on account of that ownership, but not 

including— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 92 

(i) any dividend consisting only of shares of 

the institution or company or rights to purchase 

such shares; or 

(ii) any amount paid on the deposits of a mutual or cooperative institution that the appropriate Federal banking agency determines is not a 

distribution for purposes of this section; 

(ii) a payment by an insured depository institution 

or company to repurchase, redeem, retire, or otherwise 

acquire any of its shares or other ownership interests, 

including any extension of credit to finance an affiliated company's acquisition of those shares or interests; or 

(iii) a transaction that the appropriate Federal 

banking agency or the Corporation determines, by 

order or regulation, to be in substance a distribution 

of capital to the owners of the insured depository institution or company. 

(C) CAPITAL RESTORATION PLAN.—Th e term ''capital 

restoration plan'' means a plan submitted under subsection 

(e)(2). 

(D) COMPANY.—The term ''company'' has the same 

meaning as in section 2 of the Bank Holding Company Act 

of 1956. 

(E) COMPENSATION.—The term ''compensation'' includes any payment of money or provision of any other 

thing of value in consideration of employment. 

(F) RELEVANT CAPITAL MEASURE.—The term ''relevant 

capital measure'' means the measures described in subsection (c). 

(G) REQUIRED MINIMU M LEVEL.—Th e term ''required 

minimum level'' means, with respect to each relevant 

capital measure, the minimum acceptable capital level 

specified by the appropriate Federal banking agency by 

regulation. 

(H) SENIOR EXECUTIVE OFFICER.—The term ''senior 

executive officer'' has the same meaning as the term ''executive officer'' in section 22(h) of the Federal Reserve Act. 

(I) SUBORDINATED DEBT.—Th e term ''subordinated 

debt'' means debt subordinated to the claims of general 

creditors. 

(c) CAPITAL STANDARDS.— 

(1) RELEVANT CAPITAL MEASURES.— 

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

(B)(ii), the capital standards prescribed by each appropriate Federal banking agency shall include— 

(i) a leverage limit; and 

(ii) a risk-based capital requirement. 

(B) OTHER CAPITAL MEASURES.—An appropriate Federal banking agency may, by regulation— 

(i) establish any additional relevant capital measures to carry out the purpose of this section; or 

(ii) rescind any relevant capital measure required 

under subparagraph (A) upon determining (with the 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

693 

concurrence of the other Federal banking agencies) 

that the measure is no longer an appropriate means 

for carrying out the purpose of this section. 

(2) CAPITAL CATEGORIES GENERALLY.—Each appropriate 

Federal banking agency shall, by regulation, specify for each 

relevant capital measure the levels at which an insured depository institution is well capitalized, adequately capitalized, 

undercapitalized, and significantly undercapitalized. 

(3) CRITICAL CAPITAL.— 

( A) AGENCY TO SPECIFY LEVEL.— 

(i) LEVERAGE LIMIT.—Each appropriate Federal 

banking agency shall, by regulation, in consultation 

with the Corporation, specify the ratio of tangible equity to total assets at which an insured depository 

institution is critically undercapitalized. 

(ii) OTHER RELEVANT CAPITAL MEASURES.—The 

agency may, by regulation, specify for 1 or more other 

relevant capital measures, the level at which an insured depository institution is critically undercapitalized. 

(B) LEVERAGE LIMIT RANGE.—The level specified under 

subparagraph (A)(i) shall require tangible equity in an 

amount— 

(i) not less than 2 percent of total assets; and 

(ii) except as provided in clause (i), not more than 

65 percent of the required minimum level of capital 

under the leverage limit. 

(C) FDIC's CONCURRENCE REQUIRED.—The appropriate 

Federal banking agency shall not, without the concurrence 

of the Corporation, specify a level under subparagraph 

(A)(i) lower than that specified by the Corporation for 

State nonmember insured banks. 

(d) PROVISIONS APPLICABLE TO AL L INSTITUTIONS.— 

(1) CAPITAL DISTRIBUTIONS RESTRICTED.— 

(A) I N GENERAL.—An insured depository institution 

shall make no capital distribution if, after making the distribution, the institution would be undercapitalized. 

(B) EXCEPTION.—Notwithstanding subparagraph (A), 

the appropriate Federal banking agency may permit, after 

consultation with the Corporation, an insured depository 

institution to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, 

redemption, retirement, or other acquisition— 

(i) is made in connection with the issuance of 

additional shares or obligations of the institution in at 

least an equivalent amount; and 

(ii) will reduce the institution's financial obligations or otherwise improve the institution's financial 

condition. 

(2) MANAGEMENT FEES RESTRICTED.—An insured depository institution shall pay no management fee to any person 

having control of that institution if, after making the payment, 

the institution would be undercapitalized. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 94 

(e) PROVISIONS APPLICABLE TO UNDERCAPITALIZED INSTITUTIONS.— 

(1) MONITORIN G REQUIRED.—Eac h appropriate Federal 

banking agency shall— 

(A) closely monitor the condition of any undercapitalized insured depository institution; 

(B) closely monitor compliance with capital restoration 

plans, restrictions, and requirements imposed under this 

section; and 

(C) periodically review the plan, restrictions, and 

requirements applicable to any undercapitalized insured 

depository institution to determine whether the plan, 

restrictions, and requirements are achieving the purpose of 

this section. 

(2) CAPITAL RESTORATION PLAN REQUIRED.— 

(A) IN GENERAL.—Any undercapitalized insured 

depository institution shall submit an acceptable capital 

restoration plan to the appropriate Federal banking 

agency within the time allowed by the agency under subparagraph (D). 

(B) CONTENTS OF PLAN.—Th e capital restoration plan 

shall— 

(i) specify— 

(i) the steps the insured depository institution 

will take to become adequately capitalized; 

(ii) the levels of capital to be attained during 

each year in which the plan will be in effect; 

(iii) how the institution will comply with the 

restrictions or requirements then in effect under 

this section; and 

(iv) the types and levels of activities in which 

the institution will engage; and 

(ii) contain such other information as the appropriate Federal banking agency may require. 

(C) CRITERIA FOR ACCEPTING PLAN.—Th e appropriate 

Federal banking agency shall not accept a capital restoration plan unless the agency determines that— 

(i) the plan— 

(i) complies with subparagraph (B); 

(ii) is based on realistic assumptions, and is 

likely to succeed in restoring the institution's capital; and 

(iii) would not appreciably increase the risk 

(including credit risk, interest-rate risk, and other 

types of risk) to which the institution is exposed; 

and 

(ii) if the insured depository institution is undercapitalized, each company having control of the institution has— 

(i) guaranteed that the institution will comply 

with the plan until the institution has been adequately capitalized on average during each of 4 

consecutive calendar quarters; and 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

695 

(ii) provided appropriate assurances of performance. 

( D ) DEADLINES FOR SUBMISSION AND REVIEW OF 

PLANS.—The appropriate Federal banking agency shall by 

regulation establish deadlines that— 

(i) provide insured depository institutions with 

reasonable time to submit capital restoration plans, 

and generally require an institution to submit a plan 

not later than 45 days after the institution becomes 

undercapitalized; 

(ii) require the agency to act on capital restoration 

plans expeditiously, and generally not later than 60 

days after the plan is submitted; and 

(iii) require the agency to submit a copy of any 

plan approved by the agency to the Corporation before 

the end of the 45-day period beginning on the date 

such approval is granted. 

( E) GUARANTEE LIABILITY LIMITED.— 

(i) IN GENERAL.—The aggregate liability under 

subparagraph (C)(ii) of all companies having control of 

an insured depository institution shall be the lesser 

of— 

(I) an amount equal to 5 percent of the institution's total assets at the time the institution became undercapitalized; or 

(ii) the amount which is necessary (or would 

have been necessary) to bring the institution into 

compliance with all capital standards applicable 

with respect to such institution as of the time the 

institution fails to comply with a plan under this 

subsection. 

(ii) CERTAIN AFFILIATES NOT AFFECTED.—Thi s 

paragraph may not be construed as— 

(i) requiring any company not having control 

of an undercapitalized insured depository institution to guarantee, or otherwise be liable on, a capital restoration plan; 

(ii) requiring any person other than an insured depository institution to submit a capital 

restoration plan; or 

(iii) affecting compliance by brokers, dealers, 

government securities brokers, and government 

securities dealers with the financial responsibility 

requirements of the Securities Exchange Act of 

1934 and regulations and orders thereunder. 

(3) ASSET GROWTH RESTRICTED.—An undercapitalized insured depository institution shall not permit its average total 

assets during any calendar quarter to exceed its average total 

assets during the preceding calendar quarter unless— 

(A) the appropriate Federal banking agency has 

accepted the institution's capital restoration plan; 

(B) any increase in total assets is consistent with the 

plan; and 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 696 

(C) the institution's ratio of tangible equity to assets 

increases during the calendar quarter at a rate sufficient 

to enable the institution to become adequately capitalized 

within a reasonable time. 

(4) PRIOR APPROVAL REQUIRED FOR ACQUISITIONS, BRANCHING, AND NEW LINES OF BUSINESS.—An undercapitalized insured depository institution shall not, directly or indirectly, acquire any interest in any company or insured depository institution, establish or acquire any additional branch office, or engage in any new line of business unless— 

(A) the appropriate Federal banking agency has 

accepted the insured depository institution's capital restoration plan, the institution is implementing the plan, 

and the agency determines that the proposed action is consistent with and will further the achievement of the plan; 

or 

(B) the Board of Directors determines that the proposed action will further the purpose of this section. 

(5) DISCRETIONARY SAFEGUARDS.—The appropriate Federal 

banking agency may, with respect to any undercapitalized insured depository institution, take actions described in any subparagraph of subsection (f)(2) if the agency determines that 

those actions are necessary to carry out the purpose of this section. 

(f) PROVISIONS APPLICABLE TO SIGNIFICANTLY UNDERCAPITALIZED INSTITUTIONS AND UNDERCAPITALIZED INSTITUTIONS 

THA T FAIL TO SUBMIT AND IMPLEMENT CAPITAL RESTORATION 

PLANS.— 

(1) IN GENERAL.—This subsection shall apply with respect 

to any insured depository institution that— 

(A) is significantly undercapitalized; or 

(B) is undercapitalized and— 

(i) fails to submit an acceptable capital restoration 

plan within the time allowed by the appropriate Federal banking agency under subsection (e)(2)(D); or 

(ii) fails in any material respect to implement a 

plan accepted by the agency. 

(2) SPECIFIC ACTIONS AUTHORIZED.—The appropriate Federal banking agency shall carry out this section by taking 1 or 

more of the following actions: 

(A) REQUIRING RECAPITALIZATION.—Doing 1 or more of 

the following: 

(i) Requiring the institution to sell enough shares 

or obligations of the institution so that the institution 

will be adequately capitalized after the sale. 

(ii) Further requiring that instruments sold under 

clause (i) be voting shares. 

(iii) Requiring the institution to be acquired by a 

depository institution holding company, or to combine 

with another insured depository institution, if 1 or 

more grounds exist for appointing a conservator or receiver for the institution. 

(B) RESTRICTING TRANSACTIONS WIT H AFFILIATES.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

697 

(i) Requiring the institution to comply with section 

23A of the Federal Reserve Act as if subsection (d)(1) 

of that section (exempting transactions with certain 

affiliated institutions) did not apply. 

(ii) Further restricting the institution's transactions with affiliates. 

(C) RESTRICTING INTEREST RATES PAID.— 

(i) IN GENERAL.—Restricting the interest rates 

that the institution pays on deposits to the prevailing 

rates of interest on deposits of comparable amounts 

and maturities in the region where the institution is 

located, as determined by the agency. 

(ii) RETROACTIVE RESTRICTIONS PROHIBITED.—Thi s 

subparagraph does not authorize the agency to restrict 

interest rates paid on time deposits made before (and 

not renewed or renegotiated after) the agency acted 

under this subparagraph. 

(D) RESTRICTING ASSET GROWTH.—Restricting the 

institution's asset growth more stringently than subsection 

(e)(3), or requiring the institution to reduce its total assets. 

(E) RESTRICTING ACTIVITIES.—Requiring the institution or any of its subsidiaries to alter, reduce, or terminate 

any activity that the agency determines poses excessive 

risk to the institution. 

(F) IMPROVING MANAGEMENT.—Doing 1 or more of the 

following: 

(i) NEW ELECTION OF DIRECTORS.—Ordering a new 

election for the institution's board of directors. 

(ii) DISMISSING DIRECTORS OR SENIOR EXECUTIVE 

OFFICERS.—Requiring the institution to dismiss from 

office any director or senior executive officer who had 

held office for more than 180 days immediately before 

the institution became undercapitalized. Dismissal 

under this clause shall not be construed to be a removal under section 8. 

(iii) EMPLOYING QUALIFIED SENIOR EXECUTIVE 

OFFICERS.—Requiring the institution to employ qualified senior executive officers (who, if the agency so 

specifies, shall be subject to approval by the agency). 

( G ) PROHIBITING DEPOSITS FROM CORRESPONDENT 

BANKS.—Prohibiting the acceptance by the institution of 

deposits from correspondent depository institutions, including renewals and rollovers of prior deposits. 

( H ) REQUIRING PRIOR APPROVAL FOR CAPITAL DISTRIBUTIONS BY BANK HOLDING COMPANY.—Prohibiting any bank 

holding company having control of the insured depository 

institution from making any capital distribution without 

the prior approval of the Board of Governors of the Federal 

Reserve System. 

(I) REQUIRING DIVESTITURE.—Doing one or more of the 

following: 

(i) DIVESTITURE BY THE INSTITUTION.—Requiring 

the institution to divest itself of or liquidate any subsidiary if the agency determines that the subsidiary is 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 6 98 

in danger of becoming insolvent and poses a significant risk to the institution, or is likely to cause a significant dissipation of the institution's assets or earnings. 

(ii) DIVESTITURE BY PARENT COMPANY OF NONDEPOSITORY AFFILIATE.—Requiring any company having control of the institution to divest itself of or liquidate any affiliate other than an insured depository 

institution if the appropriate Federal banking agency 

for that company determines that the affiliate is in 

danger of becoming insolvent and poses a significant 

risk to the institution, or is likely to cause a significant dissipation of the institution's assets or earnings. 

(iii) DIVESTITURE OF INSTITUTION.—Requiring any 

company having control of the institution to divest 

itself of the institution if the appropriate Federal 

banking agency for that company determines that 

divestiture would improve the institution's financial 

condition and future prospects. 

(J) REQUIRING OTHER ACTION.—Requiring the institution to take any other action that the agency determines 

will better carry out the purpose of this section than any 

of the actions described in this paragraph. 

(3) PRESUMPTION I N FAVOR OF CERTAIN ACTIONS.—In complying with paragraph (2), the agency shall take the following 

actions, unless the agency determines that the actions would 

not further the purpose of this section: 

(A) The action described in clause (i) or (iii) of paragraph (2)(A) (relating to requiring the sale of shares or 

obligations, or requiring the institution to be acquired by 

or combine with another institution). 

(B) The action described in paragraph (2)(B)(i) (relating to restricting transactions with affiliates). 

(C) The action described in paragraph (2)(C) (relating 

to restricting interest rates). 

(4) SENIOR EXECUTIVE OFFICERS' COMPENSATION RESTRICTED.— 

(A) IN GENERAL.—The insured depository institution 

shall not do any of the following without the prior written 

approval of the appropriate Federal banking agency: 

(i) Pay any bonus to any senior executive officer. 

(ii) Provide compensation to any senior executive 

officer at a rate exceeding that officer's average rate of 

compensation (excluding bonuses, stock options, and 

profit-sharing) during the 12 calendar months preceding the calendar month in which the institution became undercapitalized. 

(B) FAILING TO SUBMIT PLAN.—The appropriate Federal banking agency shall not grant any approval under 

subparagraph (A) with respect to an institution that has 

failed to submit an acceptable capital restoration plan. 

(5) DISCRETION TO IMPOSE CERTAIN ADDITIONAL RESTRICTIONS.—The agency may impose 1 or more of the restrictions 

prescribed by regulation under subsection (i) if the agency 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

699 

determines that those restrictions are necessary to carry out 

the purpose of this section. 

(6) CONSULTATION WIT H OTHER REGULATORS.—Before th e 

agency or Corporation makes a determination under paragraph 

(2)(i) with respect to an affiliate that is a broker, dealer, government securities broker, government securities dealer, 

investment company, or investment adviser, the agency or Corporation shall consult with the Securities and Exchange Commission and, in the case of any other affiliate which is subject 

to any financial responsibility or capital requirement, any 

other appropriate regulator of such affiliate with respect to the 

proposed determination of the agency or the Corporation and 

actions pursuant to such determination. 

(g) MOR E STRINGENT TREATMENT BASED ON OTHER SUPERVISORY CRITERIA.— 

(1) I N GENERAL.—If the appropriate Federal banking 

agency determines (after notice and an opportunity for hearing) that an insured depository institution is in an unsafe or 

unsound condition or, pursuant to section 8(b)(8), deems the 

institution to be engaging in an unsafe or unsound practice, 

the agency may— 

(A) if the institution is well capitalized, reclassify the 

institution as adequately capitalized; 

(B) if the institution is adequately capitalized (but not 

well capitalized), require the institution to comply with 1 

or more provisions of subsections (d) and (e), as if the institution were undercapitalized; or 

(C) if the institution is undercapitalized, take any 1 or 

more actions authorized under subsection (f)(2) as if the 

institution were significantly undercapitalized. 

(2) CONTENTS OF PLAN.—An y plan required under paragraph (1) shall specify the steps that the insured depository 

institution will take to correct the unsafe or unsound condition 

or practice. Capital restoration plans shall not be required 

under paragraph (1)(B). 

(h) PROVISIONS APPLICABLE TO CRITICALLY UNDERCAPITALIZED 

INSTITUTIONS.— 

(1) ACTIVITIES RESTRICTED.—Any critically undercapitalized insured depository institution shall comply with restrictions prescribed by the Corporation under subsection (i). 

(2) PAYMENTS ON SUBORDINATED DEBT PROHIBITED.— 

(A) I N GENERAL.—A critically undercapitalized insured 

depository institution shall not, beginning 60 days after 

becoming critically undercapitalized, make any payment of 

principal or interest on the institution's subordinated debt. 

(B) EXCEPTIONS.—The Corporation may make exceptions to subparagraph (A) if— 

(i) the appropriate Federal banking agency has 

taken action with respect to the insured depository 

institution under paragraph (3)(A)(ii); and 

(ii) the Corporation determines that the exception 

would further the purpose of this section. 

(C) LIMITE D EXEMPTION FOR CERTAIN SUBORDINATED 

DEBT.—Until July 15, 1996, subparagraph (A) shall not 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 00 

apply with respect to any subordinated debt outstanding 

on July 15, 1991, and not extended or otherwise renegotiated after July 15, 1991. 

(D) ACCRUAL OF INTEREST.—Subparagraph (A) does 

not prevent unpaid interest from accruing on subordinated 

debt under the terms of that debt, to the extent otherwise 

permitted by law. 

(3) CONSERVATORSHIP, RECEIVERSHIP, OR OTHER ACTION REQUIRED.— 

(A) IN GENERAL.—The appropriate Federal banking 

agency shall, not later than 90 days after an insured 

depository institution becomes critically undercapitalized— 

(i) appoint a receiver (or, with the concurrence of 

the Corporation, a conservator) for the institution; or 

(ii) take such other action as the agency determines, with the concurrence of the Corporation, would 

better achieve the purpose of this section, after documenting why the action would better achieve that purpose. 

(B) PERIODIC REDETERMINATIONS REQUIRED.—An y 

determination by an appropriate Federal banking agency 

under subparagraph (A)(ii) to take any action with respect 

to an insured depository institution in lieu of appointing a 

conservator or receiver shall cease to be effective not later 

than the end of the 90-day period beginning on the date 

that the determination is made and a conservator or receiver shall be appointed for that institution under subparagraph (A)(i) unless the agency makes a new determination under subparagraph (A)(ii) at the end of the 

effective period of the prior determination. 

(C) APPOINTMENT OF RECEIVER REQUIRED IF OTHER ACTION FAILS TO RESTORE CAPITAL.— 

(i) IN GENERAL.—Notwithstanding subparagraphs 

(A) and (B), the appropriate Federal banking agency 

shall appoint a receiver for the insured depository 

institution if the institution is critically undercapitalized on average during the calendar quarter beginning 

270 days after the date on which the institution became critically undercapitalized. 

(ii) EXCEPTION.—Notwithstanding clause (i), the 

appropriate Federal banking agency may continue to 

take such other action as the agency determines to be 

appropriate in lieu of such appointment if— 

(i) the agency determines, with the concurrence of the Corporation, that (aa) the insured 

depository institution has positive net worth, (bb) 

the insured depository institution has been in substantial compliance with an approved capital restoration plan which requires consistent improvement in the institution's capital since the date of 

the approval of the plan, (cc) the insured depository institution is profitable or has an upward 

trend in earnings the agency projects as sustainable, and (dd) the insured depository institution is 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

701 

reducing the ratio of nonperforming loans to total 

loans; and 

(Ii) the head of the appropriate Federal banking agency and the Chairperson of the Board of 

Directors both certify that the institution is viable 

and not expected to fail. 

(i) RESTRICTING ACTIVITIES OF CRITICALLY UNDERCAPITALIZED 

INSTITUTIONS.—To carry out the purpose of this section, the Corporation shall, by regulation or order— 

(1) restrict the activities of any critically undercapitalized 

insured depository institution; and 

(2) at a minimum, prohibit any such institution from doing 

any of the following without the Corporation's prior written approval: 

(A) Entering into any material transaction other than 

in the usual course of business, including any investment, 

expansion, acquisition, sale of assets, or other similar action with respect to which the depository institution is required to provide notice to the appropriate Federal banking agency. 

(B) Extending credit for any highly leveraged transaction. 

(C) Amending the institution's charter or bylaws, except to the extent necessary to carry out any other requirement of any law, regulation, or order. 

(D) Making any material change in accounting methods. 

(E) Engaging in any covered transaction (as defined in 

section 23A(b) of the Federal Reserve Act). 

(F) Paying excessive compensation or bonuses. 

(G) paying interest on new or renewed liabilities at a 

rate that would increase the institution's weighted average 

cost of funds to a level significantly exceeding the prevailing rates of interest on insured deposits in the institution's normal market areas. 

(j) CERTAIN GOVERNMENT-CONTROLLED INSTITUTIONS 

EXEMPTED.—Subsections (e) through (i) (other than paragraph (3) 

of subsection (e)) shall not apply— 

(1) to an insured depository institution for which the Corporation or the Resolution Trust Corporation is conservator; or 

(2) to a bridge bank, none of the voting securities of which 

are owned by a person or agency other than the Corporation 

or the Resolution Trust Corporation. 

(k) REVIEW REQUIRED WHE N DEPOSIT INSURANCE FUN D INCURS 

MATERIAL LOSS.— 

(1) I N GENERAL.—If a 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— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 02 

(i) ascertain why the institution's problems resulted in a material loss to the deposit insurance fund; 

and 

(ii) make recommendations for preventing any 

such loss in the future; and 

(B) provide a copy of the report to— 

(i) the Comptroller General of the United States; 

(ii) the Corporation (if the agency is not the Corporation); 

(iii) in the case of a State depository institution, 

the appropriate State banking supervisor; and 

(iv) upon request by any Member of Congress, to 

that Member. 

(2) MATERIAL LOSS INCURRED.—For purposes of this subsection: 

(A) LOSS INCURRED.—A 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) it is not substantially certain that the 

assistance will be fully repaid not later than 24 

months after the date on which the Corporation 

initiated the assistance; or 

(ii) the institution ceases to repay the assistance in accordance with its terms; or 

(ii) if the Corporation is appointed receiver of the 

institution, and it is or becomes apparent that the 

present value of the deposit insurance fund's outlays 

with respect to that institution will exceed the present 

value of receivership dividends or other payments on 

the claims held by the Corporation. 

(B) MATERIAL LOSS.—A loss is material if it exceeds 

the greater of— 

(i) $25,000,000; or 

(ii) 2 percent of the institution's total assets at the 

time the Corporation initiated assistance under section 13(c) or was appointed receiver. 

(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) If the institution is described in paragraph 

(2)(A)(i), during the 6-month period beginning on the earlier of— 

(i) the date on which the institution ceases to 

repay assistance under section 13(c) in accordance 

with its terms, or 

(ii) the date on which it becomes apparent that 

the assistance will not be fully repaid during the 24-

month period described in paragraph (2)(A)(i). 

(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 the 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

703 

deposit insurance fund's outlays with respect to that institution will exceed the present value of receivership dividends or other payments on the claims held by the Corporation. 

(4) PUBLIC DISCLOSURE REQUIRED.— 

(A) IN GENERAL.—The appropriate Federal banking 

agency shall disclose the report upon request under section 

552 of title 5, United States Code, without excising— 

(i) any portion under section 552(b)(5) of that title; 

or 

(ii) any information about the insured depository 

institution under paragraph (4) (other than trade secrets) or paragraph (8) of section 552(b) of that title. 

(B) EXCEPTION.—Subparagraph (A) does not require 

the agency to disclose the name of any customer of the insured depository institution (other than an institutionaffiliated party), or information from which such a person's 

identity could reasonably be ascertained. 

(5) GAO REVIEW.—The Comptroller General of the United 

States shall, under such conditions as the Comptroller General 

determines to be appropriate, review reports made under paragraph (1) and recommend improvements in the supervision of 

insured depository institutions (including the implementation 

of this section). 

(6) TRANSITION RULE.—During the period beginning on 

July 1, 1993, and ending on June 30, 1997, a loss incurred by 

the Corporation with respect to an insured depository 

institution— 

(A) with respect to which the Corporation initiates 

assistance under section 13(c) during the period in question, or 

(B) for which the Corporation was appointed receiver 

during the period in question, 

is material for purposes of this subsection only if that loss exceeds the greater of $25,000,000 or the applicable percentage 

of the institution's total assets at that time, set forth in the following table: 

The applicable 

For the following period: percentage is: 

July 1, 1993—June 30, 1994 7 percent 

July 1, 1994—June 30, 1995 5 percent 

July 1, 1995—June 30, 1996 4 percent 

July 1, 1996—June 30, 1997 3 percent. 

(l) IMPLEMENTATION.— 

(1) REGULATIONS AND OTHER ACTIONS.—Each appropriate 

Federal banking agency shall prescribe such regulations (in 

consultation with the other Federal banking agencies), issue 

such orders, and take such other actions as are necessary to 

carry out this section. 

(2) WRITTE N DETERMINATION AND CONCURRENCE REQUIRED.—Any determination or concurrence by an appropriate 

Federal banking agency or the Corporation required under this 

section shall be written. 

(m) OTHER AUTHORITY NO T AFFECTED.—This section does not 

limit any authority of an appropriate Federal banking agency, the 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 04 

Corporation, or a State to take action in addition to (but not in 

derogation of) that required under this section. 

( n) ADMINISTRATIV E REVIE W OF DISMISSA L ORDERS. — 

(1) TIMEL Y PETITIO N REQUIRED.— A director or senior executive officer dismissed pursuant to an order under subsection 

(f)(2)(F)(ii) may obtain review of that order by filing a written 

petition for reinstatement with the appropriate Federal banking agency not later than 10 days after receiving notice of the 

dismissal. 

( 2 ) PROCEDURE. — 

(A) HEARIN G REQUIRED.—Th e agency shall give the 

petitioner an opportunity to— 

(i) submit written materials in support of the petition; and 

(ii) appear, personally or through counsel, before 1 

or more members of the agency or designated employees of the agency. 

(B) DEADLIN E FOR HEARING.—Th e agency shall— 

(i) schedule the hearing referred to in subparagraph (A)(ii) promptly after the petition is filed; and 

(ii) hold the hearing not later than 30 days after 

the petition is filed, unless the petitioner requests that 

the hearing be held at a later time. 

(C) DEADLIN E FOR DECISION.—No t later than 60 days 

after the date of the hearing, the agency shall— 

(i) by order, grant or deny the petition; 

(ii) if the order is adverse to the petitioner, set 

forth the basis for the order; and 

(iii) notify the petitioner of the order. 

( 3 ) STANDAR D FOR REVIEW OF DISMISSAL ORDERS.—Th e 

petitioner shall bear the burden of proving that the petitioner's 

continued employment would materially strengthen the insured depository institution's ability— 

(A) to become adequately capitalized, to the extent 

that the order is based on the institution's capital level or 

failure to submit or implement a capital restoration plan; 

and 

(B) to correct the unsafe or unsound condition or unsafe or unsound practice, to the extent that the order is 

based on subsection (g)(1). 

(o) TRANSITIO N RULE S FOR SAVINGS ASSOCIATIONS.— 

( 1 ) RTC' S ROLE DOES NO T DIMINIS H CARE REQUIRE D OF 

OTS.— 1 

(A) I N GENERAL.—I n 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. 

*The Resolution Trust Corporation has been abolished (see section 21A(m) of the Federal 

Home Loan Bank Act). 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

705 

(B) REPORTS.—Subparagraph (A) does not require reports under subsection (k). 

(2) ADDITIONAL FLEXIBILITY FOR CERTAIN SAVINGS ASSOCIATIONS.—Subsections (e)(2), (f), and (h) shall not apply before 

July 1, 1994, to any insured savings association if— 

(A) before the date of enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991— 

(i) the savings association had submitted a plan 

meeting the requirements of section 5(t)(6)(A)(ii) of the 

Home Owners' Loan Act; and 

(ii) the Director of the Office of Thrift Supervision 

had accepted the plan; 

(B) the plan remains in effect; and 

(C) the savings association remains in compliance with 

the plan or is operating under a written agreement with 

the appropriate Federal banking agency. 

SEC. 39. [12 U.S.C. 1831s] STANDARDS FOR SAFETY AN D SOUNDNESS. 

(a) OPERATIONAL AND MANAGERIAL STANDARDS.—Each appropriate Federal banking agency shall, for all insured depository 

institutions, prescribe— 

(1) standards relating to— 

(A) internal controls, information systems, and internal audit systems, in accordance with section 36; 

(B) loan documentation; 

(C) credit underwriting; 

(D) interest rate exposure; 

(E) asset growth; and 

(F) compensation, fees, and benefits, in accordance 

with subsection (c); and 

(2) such other operational and managerial standards as 

the agency determines to be appropriate. 

(b) ASSET QUALITY, EARNINGS, AND STOCK VALUATION STANDARDS.—Each appropriate Federal banking agency shall prescribe 

standards, by regulation or guideline, for all insured depository 

institutions relating to asset quality, earnings, and stock valuation 

that the agency determines to be appropriate. 

(c) COMPENSATION STANDARDS.—Each appropriate Federal 

banking agency shall, for all insured depository institutions, 

prescribe— 

(1) standards prohibiting as an unsafe and unsound practice any employment contract, compensation or benefit agreement, fee arrangement, perquisite, stock option plan, 

postemployment benefit, or other compensatory arrangement 

that— 

(A) would provide any executive officer, employee, director, or principal shareholder of the institution with 

excessive compensation, fees or benefits; or 

(B) could lead to material financial loss to the institution; 

(2) standards specifying when compensation, fees, or benefits referred to in paragraph (1) are excessive, which shall require the agency to determine whether the amounts are unrea-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 706 

sonable or disproportionate to the services actually performed 

by the individual by considering— 

(A) the combined value of all cash and noncash benefits provided to the individual; 

(B) the compensation history of the individual and 

other individuals with comparable expertise at the institution; 

(C) the financial condition of the institution; 

(D) comparable compensation practices at comparable 

institutions, based upon such factors as asset size, geographic location, and the complexity of the loan portfolio or 

other assets; 

(E) for postemployment benefits, the projected total 

cost and benefit to the institution; 

(F) any connection between the individual and any 

fraudulent act or omission, breach of trust or fiduciary 

duty, or insider abuse with regard to the institution; and 

(G) other factors that the agency determines to be relevant; and 

(3) such other standards relating to compensation, fees, 

and benefits as the agency determines to be appropriate. 

(d) STANDARDS TO BE PRESCRIBED.— 

(1) IN GENERAL.—Standards under subsections (a), (b), and 

(c) shall be prescribed by regulation or guideline. Such regulations or guidelines may not prescribe standards that set a specific level or range of compensation for directors, officers, or 

employees of insured depository institutions. 

(2) APPLICABILITY OF OTHER LAWS.—Paragraph (1) shall 

not affect the authority of any appropriate Federal banking 

agency to restrict the level of compensation, including golden 

parachute payments (as defined in section 18(k)(4)), paid to 

any director, officer, or employee of an insured depository institution under any other provision of law. 

(3) SENIOR EXECUTIVE OFFICERS AT UNDERCAPITALIZED 

INSTITUTIONS.—Paragraph (1) shall not affect the authority of 

any appropriate Federal banking agency to restrict compensation paid to any senior executive officer of an undercapitalized 

insured depository institution pursuant to section 38. 

(4) SAFETY AND SOUNDNESS OR ENFORCEMENT ACTIONS.— 

Paragraph (1) shall not be construed as affecting the authority 

of any appropriate Federal banking agency under any provision of this Act other than this section, or under any other provision of law, to prescribe a specific level or range of compensation for any director, officer, or employee of an insured depository institution— 

(A) to preserve the safety and soundness of the institution; or 

(B) in connection with any action under section 8 or 

any order issued by the agency, any agreement between 

the agency and the institution, or any condition imposed 

by the agency in connection with the agency's approval of 

an application or other request by the institution, which is 

enforceable under section 8. 

(e) FAILUR E T O MEE T STANDARDS.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

707 

( 1 ) PLA N REQUIRED. — 

(A) I N GENERAL.—If the appropriate Federal banking 

agency determines that an insured depository institution 

fails to meet any standard prescribed under subsection (a) 

or (b)— 

(i) if such standard is prescribed by regulation of 

the agency, the agency shall require the institution to 

submit an acceptable plan to the agency within the 

time allowed by the agency under subparagraph (C); 

and 

(ii) if such standard is prescribed by guideline, the 

agency may require the institution to submit a plan 

described in clause (i). 

(B) CONTENT S OF PLAN.—Any plan required under subparagraph (A) shall specify the steps that the institution 

will take to correct the deficiency. if the institution is 

undercapitalized, the plan may be part of a capital restoration plan. 

( C ) DEADLINE S FOR SUBMISSIO N AN D REVIE W OF 

PLANS.—The appropriate Federal banking agency shall by 

regulation establish deadlines that— 

(i) provide institutions with reasonable time to 

submit plans required under subparagraph (A), and 

generally require the institution to submit a plan not 

later than 30 days after the agency determines that 

the institution fails to meet any standard prescribed 

under subsection (a), (b), or (c); and 

(ii) require the agency to act on plans expeditiously, and generally not later than 30 days after the 

plan is submitted. 

( 2 ) ORDE R REQUIRE D I F INSTITUTIO N OR COMPAN Y

 1 FAILS T O 

SUBMI T OR IMPLEMEN T PLAN.—If an insured depository institution fails to submit an acceptable plan within the time allowed 

under paragraph (1)(C), or fails in any material respect to implement a plan accepted by the appropriate Federal banking 

agency, the agency, by order— 

(A) shall require the institution to correct the deficiency; and 

(B) may do 1 or more of the following until the deficiency has been corrected: 

(i) prohibit the institution from permitting its 

average total assets during any calendar quarter to 

exceed its average total assets during the preceding 

calendar quarter, or restrict the rate at which the 

average total assets of the institution may increase 

from one calendar quarter to another. 

(ii) Require the institution to increase its ratio of 

tangible equity to assets. 

(iii) Take the action described in section 

38(f)(2)(C). 

1Section 318(c)(2) of P.L. 103-325 amended subsection (e) by striking ''or company'' each place 

such term appears. A conforming amendment to the heading of paragraph (2) probably should 

have been made to strike ''OR COMPANY''. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 708 

(iv) Require the institution to take any other action that the agency determines will better carry out 

the purpose of section 38 than any of the actions described in this subparagraph. 

(3) RESTRICTIONS MANDATORY FOR CERTAIN INSTITUTIONS.—In complying with paragraph (2), the appropriate Federal banking agency shall take 1 or more of the actions described in clauses (i) through (iii) of paragraph (2)(B) if— 

(A) the agency determines that the insured depository 

institution fails to meet any standard prescribed under 

subsection (a)(1) or (b)(1); 

(B) the institution has not corrected the deficiency; 

and 

(C) either— 

(i) during the 24-month period before the date on 

which the institution first failed to meet the 

standard— 

(I) the institution commenced operations; or 

(II) 1 or more persons acquired control of the 

institution; or 

(ii) during the 18-month period before the date on 

which the institution first failed to meet the standard, 

the institution underwent extraordinary growth, as defined by the agency. 

(f) DEFINITIONS.—Fo r purposes of this section, the terms "average" and "capital restoration plan'' have the same meanings as in 

section 38. 

(g) OTHER AUTHORITY NO T AFFECTED.—Th e authority granted 

by this section is in addition to any other authority of the Federal 

banking agencies. 

SEC. 40. [12 U.S.C. 1831q] FDI C AFFORDABLE HOUSING PROGRAM. 

(a) PURPOSE.—The purpose of this section is to provide homeownership and rental housing opportunities for very low-income, 

low-income, and moderate-income families. 

(b) FUNDIN G AND LIMITATIONS OF PROGRAM.— 

(1) DURATION OF PROGRAM.—The provisions of this section 

shall be effective, subject to the provisions of paragraph (2), 

only during the 3-year period beginning upon the commencement of the first fiscal year for which amounts are provided 

pursuant to paragraph (2)(A). 

(2) ANNUA L FISCAL LIMITATIONS.— 

(A) I N GENERAL.—In each fiscal year during the 3-year 

period referred to in paragraph (1), the provisions of this 

section shall apply only— 

(i) to such extent or in such amounts as are provided in appropriations Acts for any losses resulting 

during the fiscal year from the sale of properties under 

this section, except that such amounts for losses may 

not exceed $30,000,000 in any fiscal year; and 

(ii) to the extent that amounts are provided in 

appropriations Acts pursuant to subparagraph (C) for 

any other costs relating to the program under this section. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

709 

(B) DEFINITIO N OF LOSSES.—For purposes of this paragraph, the amount of losses resulting from the sale of 

properties under this section during any fiscal year shall 

be the amount equal to the sum of any affordable housing 

discounts reasonably anticipated to accrue during the fiscal year. 

( C) AUTHORIZATION OF APPROPRIATIONS.—There ar e 

authorized to be appropriated, for each fiscal year during 

the 3-year period referred to in paragraph (1), such sums 

as may be necessary for any costs of the program under 

this section other than losses resulting from the sale of 

properties under this section. 

(D) OTHER DEFINITIONS.—For purposes of this paragraph: 

(i) AFFORDABLE HOUSING DISCOUNT.—The term 

''affordable housing discount'' means, with respect to 

any eligible residential or eligible condominium property transferred under this section by the Corporation, 

the difference (if any) between the realizable disposition value of the property and the actual sale price of 

the property under this section. 

(ii) REALIZABLE DISPOSITION VALUE.—Th e term 

''realizable disposition value'' means the estimated sale 

price that the Corporation reasonably would be able to 

obtain upon the sale of a property by the Corporation 

under the provisions of this Act, not including this section, and any other applicable laws. Not later than the 

expiration of the 120-day period beginning upon the 

commencement of the first fiscal year for which 

amounts are provided pursuant to paragraph (2)(A), 

the Corporation shall establish, and publish in the 

Federal Register, procedures for determining the 

realizable disposition value of a property transferred 

under this section, which shall take into consideration 

such factors as the Corporation considers appropriate, 

including the actual sale prices of properties disposed 

of by the Resolution Trust Corporation under section 

21A(c) of the Federal Home Loan Bank Act, the prices 

of other properties sold under similar programs, and 

the appraised value of the property transferred under 

this section. until such procedures are established, the 

Corporation may consider the realizable disposition 

value of any eligible residential or condominium property to be equal to the appraised value of the property. 

(3) EXISTING CONTRACTS.—The provisions of this section 

shall not apply to any eligible residential property or any eligible condominium property that is subject to an agreement entered into by the Corporation before the commencement of the 

first fiscal year for which amounts are provided pursuant to 

paragraph (2)(A) that provides for any other disposition of the 

property. 

(c) RULES GOVERNING DISPOSITION OF ELIGIBLE SINGLE FAMILY 

PROPERTIES.— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 10 

(1) NOTICE TO CLEARINGHOUSES.—Within a reasonable period of time after acquiring title to an eligible single family 

property, the Corporation shall provide written notice to clearinghouses. Such notice shall contain basic information about 

the property, including but not limited to location, condition, 

and information relating to the estimated fair market value of 

the property. Each clearinghouse shall make such information 

available, upon request, to other public agencies, other nonprofit organizations, and qualifying households. The Corporation shall allow public agencies, nonprofit organizations, and 

qualifying households reasonable access to eligible single family property for purposes of inspection. 

(2) OFFERS TO SELL TO NONPROFIT ORGANIZATIONS, PUBLIC 

AGENCIES, AND QUALIFYING HOUSEHOLDS.—During the 180-day 

period beginning on the date on which the Corporation makes 

an eligible single family property available for sale, the Corporation shall offer to sell the property to— 

(A) qualifying households (including qualifying households with members who are veterans); or 

(B) public agencies or nonprofit organizations that 

agree to (i) make the property available for occupancy by 

and maintain it as affordable for low-income families (including low-income families with members who are veterans) for the remaining useful life of such property, or (ii) 

make the property available for purchase by any such family who, except as provided in paragraph (4), agrees to occupy the property as a principal residence for at least 12 

months and certifies in writing that the family intends to 

occupy the property for at least 12 months. 

The restrictions described in clause (i) of subparagraph (B) 

shall be contained in the deed or other recorded instrument. If, 

upon the expiration of such 180-day period, no qualifying 

household, public agency, or nonprofit organization has made 

a bona fide offer to purchase the property, the Corporation may 

offer to sell the property to any purchaser. The Corporation 

shall actively market eligible single family properties for sale 

to low-income families and to low-income families with members who are veterans. 

(3) RECAPTURE OF PROFITS FROM RESALE.—Except as provided in paragraph (4), if any eligible single family property 

sold (A) to a qualifying household, or (B) to a low-income family pursuant to paragraph (2)(B)(ii), subsection (j)(3)(A), or subsection (k)(2), is resold by the qualifying household or low-income family during the 1-year period beginning upon initial acquisition by the household or low-income family, the Corporation shall recapture 75 percent of the amount of any proceeds 

from the resale that exceed the sum of (i) the original sale 

price for the acquisition of the property by the qualifying 

household or low-income family, (ii) the costs of any improvements to the property made after the date of the acquisition, 

and (iii) any closing costs in connection with the acquisition. 

(4) EXCEPTIONS TO RECAPTURE REQUIREMENT.— 

(A) RELOCATION.—The Corporation may in its discretion waive the applicability (i) to any qualifying household 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

711 

of the requirement under paragraph (3) and the requirements relating to residency of a qualifying household 

under subparagraphs (B) and (C) of subsection (p)(12), and 

(ii) to any low-income family of the requirement under 

paragraph (3) and the residency requirements under paragraph (2)(B)(ii). The Corporation may grant any such 

waiver only for good cause shown, including any necessary 

relocation of the qualifying household or low-income family. 

(B) OTHER RECAPTURE PROVISIONS.—The requirement 

under paragraph (3) shall not apply to any eligible single 

family property for which, upon resale by the qualifying 

household or low-income family during the 1-year period 

beginning upon initial acquisition by the household or family, a portion of the sale proceeds or any subsidy provided 

in connection with the acquisition of the property by the 

household or family is required to be recaptured or repaid 

under any other Federal, State, or local law (including section 143(m) of the Internal Revenue Code of 1986) or regulation or under any sale agreement. 

(5) EXCEPTION TO AVOID DISPLACEMENT OF EXISTING RESIDENTS.—Notwithstanding the first sentence of paragraph (2), 

during the 180-day period following the date on which the Corporation makes an eligible single family property available for 

sale, the Corporation may sell the property to the household 

residing in the property, but only if (A) such household was residing in the property at the time notice regarding the property 

was provided to clearinghouses under paragraph (1), (B) such 

sale is necessary to avoid the displacement of, and unnecessary 

hardship to, the resident household, (C) the resident household 

intends to occupy the property as a principal residence for at 

least 12 months, and (D) the resident household certifies in 

writing that the household intends to occupy the property for 

at least 12 months. 

(d) RULES GOVERNING DISPOSITION OF ELIGIBLE MULTIFAMILY 

HOUSING PROPERTIES.— 

(1) NOTICE TO CLEARINGHOUSES.—Within a reasonable period of time after acquiring title to an eligible multifamily 

housing property, the Corporation shall provide written notice 

to clearinghouses. Such notice shall contain basic information 

about the property, including but not limited to location, number of units (identified by number of bedrooms), and information relating to the estimated fair market value of the property. Each clearinghouse shall make such information available, upon request, to qualifying multifamily purchasers. The 

Corporation shall allow qualifying multifamily purchasers reasonable access to eligible multifamily housing properties for 

purposes of inspection. 

(2) EXPRESSION OF SERIOUS INTEREST.—Qualifying multifamily purchasers may give written notice of serious interest in 

a property during a period ending 90 days after the time the 

Corporation provides notice under paragraph (1). The notice of 

serious interest shall be in such form and include such information as the Corporation may prescribe. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 12 

(3) NOTIC E OF READINESS FOR SALE.—Upo n the expiration 

of the period referred to in paragraph (2) for a property, the 

Corporation shall provide written notice to any qualifying multifamily purchaser that has expressed serious interest in the 

property. Such notice shall specify the minimum terms and 

conditions for sale of the property. 

(4) OFFERS BY QUALIFYING MULTIFAMILY PURCHASERS.—A 

qualifying multifamily purchaser receiving notice in accordance 

with paragraph (3) shall have 45 days (from the date notice is 

received) to make a bona fide offer to purchase the property. 

The Corporation shall accept an offer that complies with the 

terms and conditions established by the Corporation. If, before 

the expiration of such 45-day period, any offer to purchase a 

property initially accepted by the Corporation is subsequently 

rejected or fails (for any reason), the Corporation shall accept 

another offer to purchase the property made during such period that complies with the terms and conditions established 

by the Corporation (if such another offer is made). The preceding sentence may not be construed to require a qualifying 

multifamily purchaser whose offer is accepted during the 45-

day period to purchase the property before the expiration of 

the period. 

(5) EXTENSION OF RESTRICTED OFFER PERIODS.—The Corporation may provide notice to clearinghouses regarding, and 

offer for sale under the provisions of paragraphs (1) through 

(4), any eligible multifamily housing property— 

(A) in which no qualifying multifamily purchaser has 

expressed serious interest during the period referred to in 

paragraph (2), or 

(B) for which no qualifying multifamily purchaser has 

made a bona fide offer before the expiration of the period 

referred to in paragraph (4), 

except that the Corporation may, in the discretion of the Corporation, alter the duration of the periods referred to in paragraphs (2) and (4) in offering any property for sale under this 

paragraph. 

(6) SALE OF MULTIFAMILY PROPERTIES TO OTHER PURCHASERS.— 

(A) TIMING.—If, upon the expiration of the period referred to in paragraph (2), no qualifying multifamily purchaser has expressed serious interest in a property, the 

Corporation may offer to sell the property, individually or 

in combination with other properties, to any purchaser. 

(B) LIMITATIO N ON COMBINATION SALES.—The Corporation may not sell in combination with other properties any 

property for which a qualifying multifamily purchaser has 

expressed serious interest in purchasing individually. 

(C) EXPIRATION OF OFFER PERIOD.—If, upon the expiration of the period referred to in paragraph (4), no qualifying multifamily purchaser has made an offer to purchase 

a property, the Corporation may offer to sell the property, 

individually or in combination with other properties, to 

any purchaser. 

(7) LOW-INCOME OCCUPANCY REQUIREMENTS.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

713 

(A) SINGLE PROPERTY PURCHASES.—With respect to 

any purchase of a single eligible multifamily housing property by a qualifying multifamily purchaser under paragraph (4) or (5)— 

(i) not less than 35 percent of all dwelling units 

purchased shall be made available for occupancy by 

and maintained as affordable for low-income and very 

low-income families during the remaining useful life of 

the property in which the units are located; provided 

that 

(ii) not less than 20 percent of all dwelling units 

purchased shall be made available for occupancy by 

and maintained as affordable for very low-income families during the remaining useful life of the property 

in which the units are located. 

(B) AGGREGATION REQUIREMENTS FOR MULTIPROPERTY 

PURCHASES.—With respect to any purchase under paragraph (4) or (5) by a qualifying multifamily purchaser involving more than one eligible multifamily housing property as a part of the same negotiation, with respect to 

which the purchaser intends to aggregate the low-income 

occupancy required under this paragraph over the total 

number of units so purchased— 

(i) not less than 40 percent of the aggregate number of all dwelling units purchased shall be made 

available for occupancy by and maintained as affordable for low-income and very low-income families during the remaining useful life of the building or structure in which the units are located; provided that 

(ii) not less than 20 percent of the aggregate number of all dwelling units purchased shall be made 

available for occupancy by and maintained as affordable for very low-income families during the remaining 

useful life of the building or structure in which the 

units are located; and further provided that 

(iii) not less than 10 percent of the dwelling units 

in each separate property purchased shall be made 

available for occupancy by and maintained as affordable for low-income families during the remaining useful life of the property in which the units are located. 

The requirements of this paragraph shall be contained in the 

deed or other recorded instrument. 

(8) EXEMPTIONS.— 

(A) CONTINUE D OCCUPANCY OF CURRENT RESIDENTS.— 

No purchaser of an eligible multifamily property may terminate the occupancy of any person residing in the property on the date of purchase for purposes of meeting the 

low-income occupancy requirement applicable to the property under paragraph (7). The purchaser shall be considered to be in compliance with this subsection if each newly 

vacant dwelling unit is reserved for low-income occupancy 

until the low-income occupancy requirement is met. 

(B) FINANCIAL INFEASIBILITY.—The Secretary or the 

State housing finance agency for the State in which an eli-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 14 

gible multifamily housing property is located may temporarily reduce the low-income occupancy requirements 

under paragraph (7) applicable to the property, if the 

Secretary or such agency determines that an owner's compliance with such requirements is no longer financially 

feasible. The owner of the property shall make a good-faith 

effort to return low-income occupancy to the level required 

under paragraph (7), and the Secretary or the State housing finance agency, as appropriate, shall review the reduction annually to determine whether financial infeasibility 

continues to exist. 

(e) REN T LIMITATIONS.— 

(1) IN GENERAL.—With respect to properties under paragraph (2), rents charged to tenants for units made available for 

occupancy by very low-income families shall not exceed 30 percent of the adjusted income of a family whose income equals 

50 percent of the median income for the area, as determined 

by the Secretary, with adjustment for family size. Rents 

charged to tenants for units made available for occupancy by 

low-income families other than very low-income families shall 

not exceed 30 percent of the adjusted income of a family whose 

income equals 65 percent of the median income for the area, 

as determined by the Secretary, with adjustment for family 

size. 

(2) APPLICABILITY.—The rent limitations under this subsection shall apply to any eligible single family property sold 

pursuant to subsection (c)(2)(B)(i) and to any eligible multifamily housing property sold pursuant to subsection (d). 

(f) PREFERENCES FOR SALES.— 

(1) I N GENERAL.—In selling any eligible multifamily housing property or combinations of eligible residential properties, 

the Corporation shall give preference, among substantially 

similar offers, to the offer that would reserve the highest percentage of dwelling units for occupancy or purchase by very 

low-income and low-income families and would retain such 

affordability for the longest term. 

(2) MULTIPROPERTY PURCHASES.—The Corporation shall 

give preference, among substantially similar offers made under 

paragraph (4) or (5) of subsection (d) to purchase more than 

one eligible multifamily housing property as a part of the same 

negotiation, to offers made by purchasers who agree to maintain low-income occupancy in each separate property purchased in compliance with the levels required for properties 

under subsection (d)(7)(A). 

(3) DEFINITION OF SUBSTANTIALLY SIMILAR OFFERS.—For 

purposes of this subsection, a given offer to purchase eligible 

multifamily housing property or combinations of such properties shall be considered to be substantially similar to another 

offer if the purchase price under such given offer is not less 

than 85 percent of the purchase price under the other offer. 

(g) FINANCING SALES.— 

(1) ASSISTANCE BY CORPORATION.— 

(A) SALE PRICE.—The Corporation shall establish a 

market value for each eligible multifamily housing prop-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

715 

erty. The Corporation shall sell eligible multifamily housing property at the net realizable market value, except 

that the Corporation may agree to sell eligible multifamily 

housing property at a price below the net realizable market value to the extent necessary to facilitate an expedited 

sale of such property and enable a public agency or nonprofit organization to comply with the low-income occupancy requirements applicable to such property under subsection (d)(7). The Corporation may sell eligible single family property or eligible condominium property to qualifying 

households, nonprofit organizations, and public agencies 

without regard to any minimum sale price. 

(B) PURCHASE LOAN.—The Corporation may provide a 

loan at market interest rates to any purchaser of eligible 

residential property for all or a portion of the purchase 

price, which loan shall be secured by a first or second 

mortgage on the property. The Corporation may provide 

the loan at below market interest rates to the extent necessary to facilitate an expedited sale of eligible residential 

property and permit (i) a low-income family to purchase an 

eligible single family property under subsection (c), or (ii) 

a public agency or nonprofit organization to comply with 

the low-income occupancy requirements applicable to the 

purchase of an eligible residential property under subsection (c) or (d). The Corporation shall provide loans 

under this subparagraph in a form permitting sale or 

transfer of the loan to a subsequent holder. in providing 

financing for combinations of eligible multifamily housing 

properties under this section, the Corporation may hold a 

participating share, including a subordinate participation. 

The Corporation shall periodically provide, to a wide range 

of minority- and women-owned businesses engaged in providing affordable housing and to nonprofit organizations, 

more than 50 percent of the control of which is held by 1 

or more minority individuals, that are engaged in providing affordable housing, information that is sufficient to 

inform such businesses and organizations of the availability and terms of financing under this subparagraph; 

such information may be provided directly, by notices published in periodicals and other publications that regularly 

provide information to such businesses or organizations, 

and through persons and organizations that regularly provide information or services to such businesses or organizations. For purposes of this subparagraph, the terms 

''women-owned business'' and ''minority-owned business'' 

have the meanings given such terms in section 21A(r) of 

the Federal Home Loan Bank Act, and the term ''minority'' 

has the meaning given such term in section 1204(c)(3) of 

the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

(2) ASSISTANCE BY HUD.—The Secretary shall take such action as may be necessary to expedite the processing of applications for assistance under section 202 of the Housing Act of 

1959, the United States Housing Act of 1937, title IV of the 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 716 

Stewart B. McKinney Homeless Assistance Act, and the National Housing Act, to enable any organization or individual to 

purchase eligible residential property. 

(3) ASSISTANCE BY FMHA.—The Secretary of Agriculture 

shall take such action as may be necessary to expedite the 

processing of applications for assistance under title v of the 

Housing Act of 1949 to enable any organization or individual 

to purchase eligible residential property. 

(4) EXCEPTION TO DISPOSITION RULES.—Notwithstanding 

the requirements under paragraphs (1), (2), (3), (4), (6), and (8) 

of subsection (d), the Corporation may provide for the disposition of eligible multifamily housing properties as necessary to 

facilitate purchase of such properties for use in connection with 

section 202 of the Housing Act of 1959. 

(5) BUL K ACQUISITIONS UNDER HOME INVESTMENT PARTNERSHIPS ACT.— 

(A) PURCHASE PRICE.—In providing for bulk acquisition of eligible single family properties by participating 

jurisdictions for inclusion in affordable housing activities 

under title II of the Cranston-Gonzalez National Affordable Housing Act, the Corporation shall agree to an 

amount to be paid for acquisition of such properties. The 

acquisition price shall include discounts for bulk purchase 

and for holding of the property such that the acquisition 

price for each property shall not exceed the fair market 

value of the property, as valued individually. 

(B) EXEMPTIONS.—To the extent necessary to facilitate 

sale of properties under this paragraph, the requirements 

of subsections (c) and (f) and of paragraph (1) of this subsection shall not apply to such transactions and properties 

involved in such transactions. 

(C) INVENTORIES.—To facilitate acquisitions by such 

participating jurisdictions, the Corporation shall provide 

the participating jurisdictions with inventories of eligible 

single family properties not less than 4 times each year. 

(h) COORDINATION WIT H OTHER PROGRAMS.— 

(1) USE OF SECONDARY MARKET AGENCIES.—In the disposition of eligible residential properties, the Corporation (in consultation with the Secretary) shall explore opportunities to 

work with secondary market entities to provide housing for 

low- and moderate-income families. 

(2) CREDIT ENHANCEMENT.— 

(A) IN GENERAL.—With respect to such properties, the 

Secretary may, consistent with statutory authorities, work 

through the Federal Housing Administration, the Government National Mortgage Association, the Federal National 

Mortgage Association, the Federal Home Loan Mortgage 

Corporation, and other secondary market entities to develop risk-sharing structures, mortgage insurance, and 

other credit enhancements to assist in the provision of 

property ownership, rental, and cooperative housing opportunities for low- and moderate-income families. 

(B) CERTAIN TAX-EXEMPT BONDS.—The Corporation 

may provide credit enhancements with respect to tax-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

717 

exempt bonds issued on behalf of nonprofit organizations 

pursuant to section 103, and subpart A of part IV of subchapter A of chapter 1, of the Internal Revenue Code of 

1986, with respect to the disposition of eligible residential 

properties for the purposes described in subparagraph (A). 

(3) NATIONAL AFFORDABLE HOUSING ACT.—The Corporation 

shall coordinate the disposition of eligible residential property 

under this section with appropriate programs and provisions 

of, and amendments made by, the Cranston-Gonzalez National 

Affordable Housing Act, including titles II and IV of such Act. 

(i) EXEMPTION FOR CERTAIN TRANSACTIONS WIT H INSURED 

DEPOSITORY INSTITUTIONS.—The provisions of this section shall not 

apply with respect to any eligible residential property after the 

date the Corporation enters into a contract to sell such property to 

an insured depository institution (as defined in section 3), including 

any sale in connection with a transfer of all or substantially all of 

the assets of a closed insured depository institution (including such 

property) to another insured depository institution. 

(j) TRANSFER OF CERTAIN ELIGIBLE RESIDENTIAL PROPERTIES 

TO STATE HOUSING AGENCIES FOR DISPOSITION.—Notwithstandin g 

subsections (c), (d), (f), and (g), the Corporation may transfer eligible residential properties to the State housing finance agency or 

any other State housing agency for the State in which the property 

is located, or to any local housing agency in whose jurisdiction the 

property is located. Transfers of eligible residential properties 

under this subsection may be conducted by direct sale, consignment 

sale, or any other method the Corporation considers appropriate 

and shall be subject to the following requirements: 

(1) INDIVIDUAL OR BULK TRANSFER.—The Corporation may 

transfer such properties individually or in bulk, as agreed to 

by the Corporation and the State housing finance agency or 

State or local housing agency. 

(2) ACQUISITION PRICE.—The acquisition price paid by the 

State housing finance agency or State or local housing agency 

to the Corporation for properties transferred under this subsection shall be an amount agreed to by the Corporation and 

the transferee agency. 

(3) LOW-INCOME USE.—Any State housing finance agency 

or State or local housing agency acquiring properties under 

this subsection shall offer to sell or transfer the properties only 

as follows: 

(A) ELIGIBLE SINGLE FAMILY PROPERTIES.—For eligible 

single family properties— 

(i) to purchasers described under subparagraphs 

(A) and (B) of subsection (c)(2); 

(ii) if the purchaser is a purchaser described 

under subsection (c)(2)(B)(i), subject to the rent limitations under subsection (e)(1); 

(iii) subject to the requirement in the second sentence of subsection (c)(2); and 

(iv) subject to recapture by the Corporation of excess proceeds from resale of the properties under paragraphs (3) and (4) of subsection (c). 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 718 

(B) ELIGIBLE MULTIFAMILY HOUSING PROPERTIES.—For 

eligible multifamily housing properties— 

(i) to qualifying multifamily purchasers; 

(ii) subject to the low-income occupancy requirements under subsection (d)(7); 

(iii) subject to the provisions of subsection (d)(8); 

(iv) subject to a preference, among financially 

acceptable offers, to the offer that would reserve the 

highest percentage of dwelling units for occupancy or 

purchase by very low- and low-income families and 

would retain such affordability for the longest term; 

and 

(v) subject to the rent limitations under subsection 

(e)(1). 

(4) AFFORDABILITY.—The State housing finance agency or 

State or local housing agency shall endeavor to make the properties transferred under this subsection more affordable to lowincome families based upon the extent to which the acquisition 

price of a property under paragraph (2) is less than the market 

value of the property. 

(k) EXCEPTION FOR SALES TO NONPROFIT ORGANIZATIONS AND 

PUBLIC AGENCIES.— 

(1) SUSPENSION OF OFFER PERIODS.—With respect to any 

eligible residential property, the Corporation may (in the discretion of the Corporation) suspend any of the requirements of 

paragraphs (1) and (2) of subsection (c) and paragraphs (1) 

through (4) of subsection (d), as applicable, but only to the extent that for the duration of the suspension the Corporation 

negotiates the sale of the property to a nonprofit organization 

or public agency. If the property is not sold pursuant to such 

negotiations, the requirements of any provisions suspended 

shall apply upon the termination of the suspension. Any time 

period referred to in such subsections shall toll for the duration 

of any suspension under this paragraph. 

(2) USE RESTRICTIONS.— 

(A) ELIGIBLE SINGLE FAMILY PROPERTY.—Any eligible 

single family property sold under this subsection shall be 

(i) made available for occupancy by and maintained as 

affordable for low-income families for the remaining useful 

life of the property, or made available for purchase by such 

families, (ii) subject to the rent limitations under subsection (e)(1), (iii) subject to the requirements relating to 

residency of a qualifying household under subsection 

(p)(12) and to residency of a low-income family under subsection (c)(2)(B), and (iv) subject to recapture by the Corporation of excess proceeds from resale of the property 

under paragraphs (3) and (4) of subsection (c). 

( B ) ELIGIBLE MULTIFAMILY HOUSING PROPERTY.—Any 

eligible multifamily housing property sold under this subsection shall comply with the low-income occupancy 

requirements under subsection (d)(7) and shall be subject 

to the rent limitations under subsection (e)(1). 

(l) RULES GOVERNING DISPOSITION OF ELIGIBLE CONDOMINIU M 

PROPERTY.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

719 

(1) NOTICE TO CLEARINGHOUSES.—Within a reasonable period of time after acquiring title to an eligible condominium 

property, the Corporation shall provide written notice to clearinghouses. Such notice shall contain basic information about 

the property. Each clearinghouse shall make such information 

available, upon request, to purchasers described in subparagraphs (A) through (D) of paragraph (2). The Corporation shall 

allow such purchasers reasonable access to an eligible condominium property for purposes of inspection. 

(2) OFFERS TO SELL.—For the 180-day period following the 

date on which the Corporation makes an eligible condominium 

property available for sale, the Corporation may offer to sell 

the property, at the discretion of the Corporation, to 1 or more 

of the following purchasers: 

(A) Qualifying households. 

(B) Nonprofit organizations. 

(C) Public agencies. 

(D) For-profit entities. 

(3) LOW-INCOME OCCUPANCY REQUIREMENTS.— 

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

(B), any nonprofit organization, public agency, or for-profit 

entity that purchases an eligible condominium property 

shall (i) make the property available for occupancy by and 

maintain it as affordable for low-income families for the remaining useful life of the property, or (ii) make the property available for purchase by any such family who, except 

as provided in paragraph (5), agrees to occupy the property 

as a principal residence for at least 12 months and certifies in writing that the family intends to occupy the property for at least 12 months. The restriction described in 

clause (i) of the preceding sentence shall be contained in 

the deed or other recorded instrument. 

(B) MULTIPLE-UNIT PURCHASES.—If any nonprofit organization, public agency, or for-profit entity purchases more 

than 1 eligible condominium property as a part of the 

same negotiation or purchase, the Corporation may (in the 

discretion of the Corporation) waive the requirement under 

subparagraph (A) and provide instead that not less than 

35 percent of all eligible condominium properties purchased shall be (i) made available for occupancy by and 

maintained as affordable for low-income families for the 

remaining useful life of the property, or (ii) made available 

for purchase by any such family who, except as provided 

in paragraph (5), agrees to occupy the property as a principal residence for at least 12 months and certifies in writing that the family intends to occupy the property for at 

least 12 months. The restriction described in clause (i) of 

the preceding sentence shall be contained in the deed or 

other recorded instrument. 

(C) SALE TO OTHER PURCHASERS.—If, upon the expiration of the 180-day period referred to in paragraph (2), no 

purchaser described in subparagraphs (A) through (D) of 

paragraph (2) has made a bona fide offer to purchase the 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 20 

property, the Corporation may offer to sell the property to 

any other purchaser. 

(4) RECAPTURE OF PROFITS FROM RESALE.—Except as provided in paragraph (5), if any eligible condominium property 

sold (A) to a qualifying household, or (B) to a low-income family pursuant to paragraph (3)(A)(ii) or (3)(B)(ii), is resold by the 

qualifying household or low-income family during the 1-year 

period beginning upon initial acquisition by the household or 

family, the Corporation shall recapture 75 percent of the 

amount of any proceeds from the resale that exceed the sum 

of (i) the original sale price for the acquisition of the property 

by the qualifying household or low-income family, (ii) the costs 

of any improvements to the property made after the date of the 

acquisition, and (iii) any closing costs in connection with the 

acquisition. 

(5) EXCEPTION TO RECAPTURE REQUIREMENT.—The Corporation (or its successor) may in its discretion waive the applicability to any qualifying household or low-income family of the 

requirement under paragraph (4) and the requirements relating to residency of a qualifying household or low-income family 

(under subsection (p)(12) and paragraph (3) of this subsection, 

respectively). The Corporation may grant any such a waiver 

only for good cause shown, including any necessary relocation 

of the qualifying household or low-income family. 

(6) LIMITATIONS ON MULTIPLE UNIT PURCHASES.—The Corporation may not sell or offer to sell as part of the same negotiation or purchase any eligible condominium properties that 

are not located in the same condominium project (as such term 

is defined in section 604 of the Housing and Community Development Act of 1980). The preceding sentence may not be construed to require all eligible condominium properties offered or 

sold as part of the same negotiation or purchase to be located 

in the same structure. 

(7) REN T LIMITATIONS.—Rent s charged to tenants of eligible condominium properties made available for occupancy by 

very low-income families shall not exceed 30 percent of the adjusted income of a family whose income equals 50 percent of 

the median income for the area, as determined by the Secretary, with adjustment for family size. Rents charged to tenants of eligible condominium properties made available for 

occupancy by low-income families other than very low-income 

families shall not exceed 30 percent of the adjusted income of 

a family whose income equals 65 percent of the median income 

for the area, as determined by the Secretary, with adjustment 

for family size. 

( m ) LIABILITY PROVISIONS.— 

(1) IN GENERAL.—The provisions of this section, or any failure by the Corporation to comply with such provisions, may 

not be used by any person to attack or defeat any title to property after it is conveyed by the Corporation. 

(2) LOW-INCOME OCCUPANCY.—The low-income occupancy 

requirements under subsections (c), (d), (j)(3), (k)(2), and (l)(3) 

shall be judicially enforceable against purchasers of property 

under this section and their successors in interest by affected 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

721 

very low- and low-income families, State housing finance agencies, and any agency, corporation, or authority of the United 

States. The parties specified in the preceding sentence shall be 

entitled to reasonable attorney fees upon prevailing in any 

such judicial action. 

(3) CLEARINGHOUSES.— A clearinghouse shall not be subject 

to suit for its failure to comply with the requirements of this 

section. 

(4) CORPORATION.—Th e Corporation shall not be liable to 

any depositor, creditor, or shareholder of any insured depository institution for which the Corporation has been appointed 

receiver or conservator, or of any subsidiary corporation of a 

depository institution under receivership or conservatorship, or 

any claimant against such institution or subsidiary, because 

the disposition of assets of the institution or the subsidiary 

under this section affects the amount of return from the assets. 

( n ) UNIFIE D AFFORDABL E HOUSIN G PROGRAMS.— 1 

(1) IN GENERAL.—Not later than 4 months after the date 

of enactment of the Resolution Trust Corporation Completion 

Act, the Corporation shall enter into an agreement, as described in paragraph (3), with the Resolution Trust Corporation that sets out a plan for the orderly unification of the Corporation's activities, authorities, and responsibilities under this 

section with the authorities, activities, and responsibilities of 

the Resolution Trust Corporation pursuant to section 21A(c) of 

the Federal Home Loan Bank Act in a manner that best 

achieves an effective and comprehensive affordable housing 

program management structure. The agreement shall be entered into after consultation with the Affordable Housing Advisory Board under section 14(b) of the Resolution Trust Corporation Completion Act. 

(2) AUTHORIT Y AN D IMPLEMENTATION.—Th e Corporation 

shall have the authority to carry out the provisions of the 

agreement entered into pursuant to paragraph (1) and shall 

implement such agreement as soon as practicable but in no 

event later than 8 months after the date of enactment of the 

Resolution Trust Corporation Completion Act. 

(3) TERM S OF AGREEMENT.—Th e agreement required under 

paragraph (1) shall provide a plan for— 

(A) a program unifying all activities and responsibilities of the Corporation and the Resolution Trust Corporation, and the design of the unified program shall take into 

consideration the substantial experience of the Resolution 

Trust Corporation regarding— 

(i) seller financing; 

(ii) technical assistance; 

(iii) marketing skills and relationships with public 

and nonprofit entities; and 

(iv) staff resources; 

(B) the elimination of duplicative and unnecessary 

administrative costs and resources; 

*The Resolution Trust Corporation has been abolished (see section 21A(m) of the Federal 

Home Loan Bank Act). 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 22 

(C) the management structure of the unified program; 

(D) a timetable for the unification; and 

(E) a methodology to determine the extent to which 

the provisions of this section shall be effective, in accordance with the limitations under subsection (b)(2). 

(4) TRANSFER TO FDIC.—Beginning not later than October 

1, 1995, the Corporation shall carry out any remaining authority and responsibilities of the Resolution Trust Corporation, as 

set forth in section 21A(c) of the Federal Home Loan Bank Act. 

(o) REPORT.—To the extent applicable, in the annual report 

submitted by the Secretary to the Congress under section 8 of the 

Department of Housing and Urban Development Act, the Secretary 

shall include a detailed description of any activities under this section, including recommendations for any additional authority the 

Secretary considers necessary to implement the provisions of this 

section. 

(p) DEFINITIONS.—For purposes of this section: 

(1) ADJUSTED INCOME AND INCOME.—The terms ''adjusted 

income'' and ''income'' shall have the meaning given such terms 

in section 3(b) of the United States Housing Act of 1937. 

(2) CLEARINGHOUSE.—The term ''clearinghouse'' means— 

(A) the State housing finance agency for the State in 

which an eligible residential property or eligible condominium property is located; 

(B) the Office of Community Investment (or other comparable division) within the Federal Housing Finance 

Board; and 

(C) any national nonprofit organizations (including 

any nonprofit entity established by the corporation established under title IX of the Housing and Community 

Development Act of 1968) that the Corporation determines 

has the capacity to act as a clearinghouse for information. 

(3) CORPORATION.—The term ''Corporation'' means the 

Federal Deposit Insurance Corporation acting in its corporate 

capacity or its capacity as receiver. 

(4) ELIGIBLE CONDOMINIUM PROPERTY.—The term ''eligible 

condominium property'' means a condominium unit, as such 

term is defined in section 604 of the Housing and Community 

Development Act of 1980— 

(A) to which such Corporation acquires title in its corporate capacity, its capacity as conservator, or its capacity 

as receiver (including in its capacity as the sole owner of 

a subsidiary corporation of a depository institution under 

conservatorship or receivership, which subsidiary has as 

its principal business the ownership of real property); and 

(B) that has an appraised value that does not exceed 

the amount provided in section 203(b)(2)(A) of the National 

Housing Act except that such amount shall not exceed 

$101,250 in the case of a 1-family residence, $114,000 in 

the case of a 2-family residence, $138,000 in the case of a 

3-family residence, and $160,000 in the case of a 4-family 

residence. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

723 

(5) ELIGIBLE MULTIFAMILY HOUSING PROPERTY.—The term 

''eligible multifamily housing property'' means a property consisting of more than 4 dwelling units— 

(A) to which the Corporation acquires title in its corporate capacity, its capacity as conservator, or its capacity 

as receiver (including in its capacity as the sole owner of 

a subsidiary corporation of a depository institution under 

conservatorship or receivership, which subsidiary has as 

its principal business the ownership of real property); and 

(B) that has an appraised value that does not exceed 

the applicable dollar amount specified in section 

221(d)(3)(ii) of the National Housing Act for elevator-type 

structures, as such dollar amount is increased under such 

section for geographical areas or on a project-by-project 

basis (except that any such increase on a project-by-project 

basis shall be made pursuant to a determination by the 

Corporation that such increase is necessary). 

(6) ELIGIBLE RESIDENTIAL PROPERTY.—The term ''eligible 

residential property'' includes eligible single family properties 

and eligible multifamily housing properties. 

(7) ELIGIBLE SINGLE FAMILY PROPERTY.—The term ''eligible 

single family property'' means a 1- to 4-family residence (including a manufactured home)— 

(A) to which the Corporation acquires title in its corporate capacity, its capacity as conservator, or its capacity 

as receiver (including in its capacity as the sole owner of 

a subsidiary corporation of a depository institution under 

conservatorship or receivership, which subsidiary has as 

its principal business the ownership of real property); and 

(B) that has an appraised value that does not exceed 

the amount provided in section 203(b)(2)(A) of the National 

Housing Act except that such amount shall not exceed 

$101,250 in the case of a 1-family residence, $114,000 in 

the case of a 2-family residence, $138,000 in the case of a 

3-family residence, and $160,000 in the case of a 4-family 

residence. 

(8) LOW-INCOME FAMILIES.—The term ''low-income families'' means families and individuals whose incomes do not exceed 80 percent of the median income of the area involved, as 

determined by the Secretary, with adjustment for family size. 

(9) NE T REALIZABLE MARKET VALUE.—Th e term ''net realizable market value'' means a price below the market value that 

takes into account (A) any reductions in holding costs resulting 

from the expedited sale of a property, including foregone real 

estate taxes, insurance, maintenance costs, security costs, and 

loss of use of funds, and (B) the avoidance, if applicable, of fees 

paid to real estate brokers, auctioneers, or other individuals or 

organizations involved in the sale of property owned by the 

Corporation. 

(10) NONPROFIT ORGANIZATION.—The term ''nonprofit organization'' means a private organization (including a limited equity cooperative)— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 24 

(A) no part of the earnings of which inures to the benefit of any member, shareholder, founder, contributor, or 

individual; and 

(B) that is approved by the Corporation as to financial 

responsibility. 

(11) PUBLIC AGENCY.—The term ''public agency'' means 

any Federal, State, local, or other governmental entity, and includes any public housing agency. 

(12) QUALIFYING HOUSEHOLD.—The term ''qualifying 

household'' means a household— 

(A) who intends to occupy eligible single family property as a principal residence; 

(B) who agrees to occupy the property as a principal 

residence for at least 12 months; 

(C) who certifies in writing that the household intends 

to occupy the property as a principal residence for at least 

12 months; and 

(D) whose income does not exceed 115 percent of the 

median income for the area, as determined by the Secretary, with adjustment for family size. 

(13) QUALIFYING MULTIFAMILY PURCHASER.—The term 

"qualifying multifamily purchaser'' means— 

(A) a public agency; 

(B) a nonprofit organization; or 

(C) a for-profit entity, which makes a commitment (for 

itself or any related entity) to comply with the low-income 

occupancy requirements under subsection (d)(7) for any eligible multifamily housing property for which an offer to 

purchase is made during or after the periods specified 

under subsection (d). 

(14) Secretary.—The term ''Secretary'' means the Secretary 

of Housing and Urban Development. 

(15) STATE HOUSING FINANCE AGENCY.—The term ''State 

housing finance agency'' means the public agency, authority, 

corporation, or other instrumentality of a State that has the 

authority to provide residential mortgage loan financing 

throughout the State. 

(16) VER Y LOW-INCOME FAMILIES.—The term ''very low-income families'' means families and individuals whose incomes 

do not exceed 50 percent of the median income of the area involved, as determined by the Secretary, with adjustment for 

family size. 

(q) NOTICE TO CLEARINGHOUSES REGARDING INELIGIBLE PROPERTIES.— 

(1) IN GENERAL.—Within a reasonable period of time after 

acquiring title to an ineligible residential property, the Corporation shall, to the extent practicable, provide written notice 

to clearinghouses. 

(2) CONTENT.—For ineligible single family properties, such 

notice shall contain the same information about such properties that the notice required under subsection (c)(1) contains 

with respect to eligible single family properties. For ineligible 

multifamily housing properties, such notice shall contain the 

same information about such properties that the notice re-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

725 

quired under subsection (d)(1) contains with respect to eligible 

multifamily housing properties. For ineligible condominium 

properties, such notice shall contain the same information 

about such properties that the notice required under subsection (l)(1) contains with respect to eligible condominium 

properties. 

(3) AVAILABILITY.—The clearinghouses shall make such 

information available, upon request, to other public agencies, 

other nonprofit organizations, qualifying households, qualifying 

multifamily purchasers, and other purchasers, as appropriate. 

(4) DEFINITIONS.—Fo r purposes of this subsection, the following definitions shall apply: 

(A) INELIGIBLE CONDOMINIUM PROPERTY.—The term 

''ineligible condominium property'' means any eligible condominium property to which the provisions of this section 

do not apply as a result of the limitations under subsection 

(b)(2)(A). 

( B) INELIGIBLE MULTIFAMILY HOUSING PROPERTY.—The 

term ''ineligible multifamily housing property'' means any 

eligible multifamily housing property to which the provisions of this section do not apply as a result of the limitations under subsection (b)(2)(A). 

(C) INELIGIBLE SINGLE FAMILY PROPERTY.—The term 

''ineligible single family property'' means any eligible single family property to which the provisions of this section 

do not apply as a result of the limitations under subsection 

(b)(2)(A). 

(D) INELIGIBLE RESIDENTIAL PROPERTY.—The term 

''ineligible residential property'' includes ineligible single 

family properties, ineligible multifamily housing properties, and ineligible condominium properties. 

SEC. 41. [12 U.S.C. 1831r] PAYMENTS O N FOREIG N DEPOSITS PROHIBITED . 

(a) IN GENERAL.—Notwithstanding any other provision of law, 

the Corporation, the Board of Governors of the Federal Reserve 

System, the Resolution Trust Corporation, any other agency, 

department, and instrumentality of the United States, and any corporation owned or controlled by the United States may not, directly 

or indirectly, make any payment or provide any assistance, guarantee, or transfer under this Act or any other provision of law in 

connection with any insured depository institution which would 

have the direct or indirect effect of satisfying, in whole or in part, 

any claim against the institution for obligations of the institution 

which would constitute deposits as defined in section 3(l) but for 

subparagraphs (A) and (B) of section 3(l)(5). 

(b) EXCEPTION.—Subsection (a) shall not apply to any payment, 

assistance, guarantee, or transfer made or provided by the Corporation if the Board of Directors determines in writing that such 

action is not inconsistent with any requirement of section 13(c). 

(c) DISCOUNT WINDO W LENDING.—N o provision of this section 

shall be construed as prohibiting any Federal Reserve bank from 

making advances or otherwise extending credit pursuant to the 

Federal Reserve Act to any insured depository institution to the ex-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 726 

tent that such advance or extension of credit is consistent with the 

conditions and limitations imposed under section 10B of such Act. 

SEC. 42. [12 U.S.C. 1831r-1] NOTIC E OF BRANC H CLOSURE. 

(a) NOTICE TO APPROPRIATE FEDERAL BANKING AGENCY.— 

(1) I N GENERAL.—An insured depository institution which 

proposes to close any branch shall submit a notice of the proposed closing to the appropriate Federal banking agency not 

later than the first day of the 90-day period ending on the date 

proposed for the closing. 

(2) CONTENTS OF NOTICE.—A notice under paragraph (1) 

shall include— 

(A) a detailed statement of the reasons for the decision 

to close the branch; and 

(B) statistical or other information in support of such 

reasons. 

(b) NOTICE TO CUSTOMERS.— 

(1) I N GENERAL.—An insured depository institution which 

proposes to close a branch shall provide notice of the proposed 

closing to its customers. 

(2) CONTENTS OF NOTICE.—Notic e under paragraph (1) 

shall consist of— 

(A) posting of a notice in a conspicuous manner on the 

premises of the branch proposed to be closed during not 

less than the 30-day period ending on the date proposed 

for that closing; and 

(B) inclusion of a notice in— 

(i) at least one of any regular account statements 

mailed to customers of the branch proposed to be 

closed, or 

(ii) in a separate mailing, 

by not later than the beginning of the 90-day period ending on the date proposed for that closing. 

(c) ADOPTION OF POLICIES.—Each insured depository institution shall adopt policies for closings of branches of the institution. 

(d) BRANCH CLOSURES I N INTERSTATE BANKING OR BRANCHING 

OPERATIONS.— 

(1) NOTICE REQUIREMENTS.—In the case of an interstate 

bank which proposes to close any branch in a low- or moderateincome area, the notice required under subsection (b)(2) shall 

contain the mailing address of the appropriate Federal banking 

agency and a statement that comments on the proposed closing 

of such branch may be mailed to such agency. 

(2) ACTION REQUIRED BY APPROPRIATE FEDERAL BANKING 

AGENCY.—If, in the case of a branch referred to in paragraph (1)— 

(A) a person from the area in which such branch is 

located— 

(i) submits a written request relating to the closing of such branch to the appropriate Federal banking 

agency; and 

(ii) includes a statement of specific reasons for the 

request, including a discussion of the adverse effect of 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

727 

such closing on the availability of banking services in 

the area affected by the closing of the branch; and 

(B) the agency concludes that the request is not frivolous, 

the agency shall consult with community leaders in the affected area and convene a meeting of representatives of the 

agency and other interested depository institution regulatory 

agencies with community leaders in the affected area and such 

other individuals, organizations, and depository institutions (as 

defined in section 19(b)(1)(A) of the Federal Reserve Act) as the 

agency may determine, in the discretion of the agency, to be 

appropriate, to explore the feasibility of obtaining adequate 

alternative facilities and services for the affected area, including the establishment of a new branch by another depository 

institution, the chartering of a new depository institution, or 

the establishment of a community development credit union, 

following the closing of the branch. 

(3) N O EFFECT ON CLOSING.—No action by the appropriate 

Federal banking agency under paragraph (2) shall affect the 

authority of an interstate bank to close a branch (including the 

timing of such closing) if the requirements of subsections (a) 

and (b) have been met by such bank with respect to the branch 

being closed. 

(4) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 

(A) INTERSTATE BANK DEFINED.—The term ''interstate 

bank'' means a bank which maintains branches in more 

than 1 State. 

(B) Low - OR MODERATE-INCOME AREA.—The term ''lowor moderate-income area'' means a census tract for which 

the median family income is— 

(i) less than 80 percent of the median family income for the metropolitan statistical area (as designated by the Director of the Office of Management 

and Budget) in which the census tract is located; or 

(ii) in the case of a census tract which is not located in a metropolitan statistical area, less than 80 

percent of the median family income for the State in 

which the census tract is located, as determined without taking into account family income in metropolitan 

statistical areas in such State. 

(e) SCOPE OF APPLICATION.—This section shall not apply with 

respect to— 

(1) an automated teller machine; 

(2) the relocation of a branch or consolidation of one or 

more branches into another branch, if the relocation or 

consolidation— 

(A) occurs within the immediate neighborhood; and 

(B) does not substantially affect the nature of the business or customers served; or 

(3) a branch that is closed in connection with— 

(A) an emergency acquisition under— 

(i) section 11(n); or 

(ii) subsection (f) or (k) of section 13; or 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 728 

(B) any assistance provided by the Corporation under 

section 13(c). 

SEC. 43. [12 U.S.C. 1831t] DEPOSITORY INSTITUTION S LACKING FEDERAL DEPOSIT INSURANCE. 

(a) ANNUA L INDEPENDENT AUDI T OF PRIVATE DEPOSIT INSURERS.— 

(1) AUDI T REQUIRED.—Any private deposit insurer shall obtain an annual audit from an independent auditor using generally accepted auditing standards. The audit shall include a 

determination of whether the private deposit insurer follows 

generally accepted accounting principles and has set aside sufficient reserves for losses. 

(2) PROVIDING COPIES OF AUDIT REPORT.— 

(A) PRIVATE DEPOSIT INSURER.—The private deposit 

insurer shall provide a copy of the audit report— 

(i) to each depository institution the deposits of 

which are insured by the private deposit insurer, not 

later than 14 days after the audit is completed; and 

(ii) to the appropriate supervisory agency of each 

State in which such an institution receives deposits, 

not later than 7 days after the audit is completed. 

(B) DEPOSITORY INSTITUTION.—Any depository institution the deposits of which are insured by the private deposit insurer shall provide a copy of the audit report, upon 

request, to any current or prospective customer of the 

institution. 

(b) DISCLOSURE REQUIRED.—An y depository institution lacking 

Federal deposit insurance shall, within the United States, do the 

following: 

(1) PERIODIC STATEMENTS; ACCOUNT RECORDS.—Include 

conspicuously in all periodic statements of account, on each 

signature card, and on each passbook, certificate of deposit, or 

similar instrument evidencing a deposit a notice that the institution is not federally insured, and that if the institution fails, 

the Federal Government does not guarantee that depositors 

will get back their money. 

(2) ADVERTISING; PREMISES.—Include conspicuously in all 

advertising and at each place where deposits are normally received a notice that the institution is not federally insured. 

(3) ACKNOWLEDGEMENT OF DISCLOSURE.— 

(A) NEW DEPOSITORS.—With respect to any depositor 

who was not a depositor at the depository institution before June 19, 1994, receive any deposit for the account of 

such depositor only if the depositor has signed a written 

acknowledgement that— 

(i) the institution is not federally insured; and 

(ii) if the institution fails, the Federal Government 

does not guarantee that the depositor will get back the 

depositor's money. 

(B) CURRENT DEPOSITORS.—Receive any deposit after 

the effective date of this paragraph for the account of any 

depositor who was a depositor before June 19, 1994, only 

if— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

729 

(i) the depositor has signed a written acknowledgement described in subparagraph (A); or 

(ii) the institution has complied with the provisions of subparagraph (C) which are applicable as of 

the date of the deposit. 

(C) ALTERNATIVE PROVISION OF NOTICE TO CURRENT 

DEPOSITORS.— 

(i) IN GENERAL.—Transmit to each depositor who 

was a depositor before June 19, 1994, and has not 

signed a written acknowledgement described in subparagraph (A)— 

(I) a card containing the information described in clauses (i) and (ii) of subparagraph (A), 

and a line for the signature of the depositor; and 

(II) accompanying materials requesting the 

depositor to sign the card, and return the signed 

card to the institution. 

(ii) MANNE R AND TIMIN G OF NOTICE.— 

(I) FIRST NOTICE.—Make the transmission described in clause (i) via first class mail not later 

than September 12, 1994. 

(II) SECOND NOTICE.—Make a second transmission described in clause (i) via first class mail 

not less than 30 days and not more than 45 days 

after a transmission to the depositor in accordance 

with subclause (I), if the institution has not, by 

the date of such mailing, received from the depositor a card referred to in clause (i) which has been 

signed by the depositor. 

(III) THIR D NOTICE.—Make a third transmission described in clause (i) via first class mail 

not less than 30 days and not more than 45 days 

after a transmission to the depositor in accordance 

with subclause (II), if the institution has not, by 

the date of such mailing, received from the depositor a card referred to in clause (i) which has been 

signed by the depositor. 

(c) MANNE R AND CONTENT OF DISCLOSURE.—To ensure that 

current and prospective customers understand the risks involved in 

foregoing Federal deposit insurance, the Federal Trade Commission, by regulation or order, shall prescribe the manner and content of disclosure required under this section. 

(d) EXCEPTIONS FOR INSTITUTIONS NO T RECEIVING RETAIL DE -

POSITS.—The Federal Trade Commission may, by regulation or 

order, make exceptions to subsection (b) for any depository institution that, within the United States, does not receive initial deposits 

of less than $100,000 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. 

(e) ELIGIBILITY FOR FEDERAL DEPOSIT INSURANCE.— 

(1) IN GENERAL.—Except as permitted by the Federal 

Trade Commission, in consultation with the Federal Deposit 

Insurance Corporation, no depository institution (other than a 

bank, including an unincorporated bank) lacking Federal de-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 30 

posit insurance may use the mails or any instrumentality of 

interstate commerce to receive or facilitate receiving deposits, 

unless the appropriate supervisor of the State in which the 

institution is chartered has determined that the institution 

meets all eligibility requirements for Federal deposit insurance, including— 

(A) in the case of an institution described in section 

19(b)(1)(A)(iv) of the Federal Reserve Act, all eligibility 

requirements set forth in the Federal Credit Union Act 

and regulations of the National Credit Union Administration; and 

(B) in the case of any other institution, all eligibility 

requirements set forth in this Act and regulations of the 

Corporation. 

(2) AUTHORITY OF FDIC AND NCUA NOT AFFECTED.—No 

determination under paragraph (1) shall bind, or otherwise affect the authority of, the National Credit Union Administration 

or the Corporation. 

(f) DEFINITIONS.—For purposes of this section: 

(1) APPROPRIATE SUPERVISOR.—The ''appropriate supervisor'' of a depository institution means the agency primarily 

responsible for supervising the institution. 

(2) DEPOSITORY INSTITUTION.—The term ''depository institution'' includes— 

(A) any entity described in section 19(b)(1)(A)(iv) of the 

Federal Reserve Act; and 

(B) any entity that, as determined by the Federal 

Trade Commission— 

(i) is engaged in the business of receiving deposits; 

and 

(ii) could reasonably be mistaken for a depository 

institution by the entity's current or prospective customers. 

(3) LACKING FEDERAL DEPOSIT INSURANCE.—A depository 

institution lacks Federal deposit insurance if the institution is 

not either— 

(A) an insured depository institution; or 

(B) an insured credit union, as defined in section 101 

of the Federal Credit Union Act. 

(4) PRIVATE DEPOSIT INSURER.—The term ''private deposit 

insurer'' means any entity insuring the deposits of any depository institution lacking Federal deposit insurance. 

(g) ENFORCEMENT.—Compliance with the requirements of this 

section, and any regulation prescribed or order issued under this 

section, shall be enforced under the Federal Trade Commission Act 

by the Federal Trade Commission. 

SEC. 44. [12 U.S.C. 1831u] INTERSTATE BANK MERGERS. 

(a) APPROVAL OF INTERSTATE MERGER TRANSACTIONS AUTHORIZED.— 

(1) IN GENERAL.—Beginning on June 1, 1997, the responsible agency may approve a merger transaction under section 

18(c) between insured banks with different home States, with-
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

731 

out regard to whether such transaction is prohibited under the 

law of any State. 

(2) STATE ELECTION TO PROHIBIT INTERSTATE MERGER 

TRANSACTIONS.— 

(A) IN GENERAL.—Notwithstanding paragraph (1), a 

merger transaction may not be approved pursuant to paragraph (1) if the transaction involves a bank the home State 

of which has enacted a law after the date of enactment of 

the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and before June 1, 1997, that— 

(i) applies equally to all out-of-State banks; and 

(ii) expressly prohibits merger transactions involving out-of-State banks. 

(B) N O EFFECT ON PRIOR APPROVALS OF MERGER TRANSACTIONS.—A law enacted by a State pursuant to subparagraph (A) shall have no effect on merger transactions that 

were approved before the effective date of such law. 

(3) STATE ELECTION TO PERMIT EARLY INTERSTATE MERGER 

TRANSACTIONS.— 

(A) I N GENERAL.—A merger transaction may be approved pursuant to paragraph (1) before June 1, 1997, if 

the home State of each bank involved in the transaction 

has in effect, as of the date of the approval of such transaction, a law that— 

(i) applies equally to all out-of-State banks; and 

(ii) expressly permits interstate merger transactions with all out-of-State banks. 

(B) CERTAIN CONDITIONS ALLOWED.—A host State may 

impose conditions on a branch within such State of a bank 

resulting from an interstate merger transaction if— 

(i) the conditions do not have the effect of discriminating against out-of-State banks, out-of-State 

bank holding companies, or any subsidiary of such 

bank or company (other than on the basis of a nationwide reciprocal treatment requirement); 

(ii) the imposition of the conditions is not preempted by Federal law; and 

(iii) the conditions do not apply or require performance after May 31, 1997. 

(4) INTERSTATE MERGER TRANSACTIONS INVOLVING ACQUISITIONS OF BRANCHES.— 

(A) I N GENERAL.—An interstate merger transaction 

may involve the acquisition of a branch of an insured bank 

without the acquisition of the bank only if the law of the 

State in which the branch is located permits out-of-State 

banks to acquire a branch of a bank in such State without 

acquiring the bank. 

(B) TREATMENT OF BRANCH FOR PURPOSES OF THIS SECTION.—In the case of an interstate merger transaction 

which involves the acquisition of a branch of an insured 

bank without the acquisition of the bank, the branch shall 

be treated, for purposes of this section, as an insured bank 

the home State of which is the State in which the branch 

is located. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 32 

(5) PRESERVATION OF STATE AGE LAWS.— 

(A) IN GENERAL.—The responsible agency may not approve an application pursuant to paragraph (1) that would 

have the effect of permitting an out-of-State bank or outof-State bank holding company to acquire a bank in a host 

State that has not been in existence for the minimum period of time, if any, specified in the statutory law of the 

host State. 

( B) SPECIAL RULE FOR STATE AGE LAWS SPECIFYING A 

PERIOD OF MORE THA N 5 YEARS.—Notwithstanding subparagraph (A), the responsible agency may approve a 

merger transaction pursuant to paragraph (1) involving 

the acquisition of a bank that has been in existence at 

least 5 years without regard to any longer minimum period of time specified in a statutory law of the host State. 

(6) SHELL BANKS.—Fo r purposes of this subsection, a bank 

that has been chartered solely for the purpose of, and does not 

open for business prior to, acquiring control of, or acquiring all 

or substantially all of the assets of, an existing bank or branch 

shall be deemed to have been in existence for the same period 

of time as the bank or branch to be acquired. 

(b) PROVISIONS RELATING TO APPLICATION AND APPROVAL 

PROCESS.— 

(1) COMPLIANCE WIT H STATE FILIN G REQUIREMENTS.— 

(A) IN GENERAL.—Any bank which files an application 

for an interstate merger transaction shall— 

(i) comply with the filing requirements of any host 

State of the bank which will result from such transaction to the extent that the requirement— 

(i) does not have the effect of discriminating 

against out-of-State banks or out-of-State bank 

holding companies or subsidiaries of such banks 

or bank holding companies; and 

(ii) is similar in effect to any requirement imposed by the host State on a nonbanking corporation incorporated in another State that engages in 

business in the host State; and 

(ii) submit a copy of the application to the State 

bank supervisor of the host State. 

(B) PENALTY FOR FAILURE TO COMPLY.—Th e responsible agency may not approve an application for an interstate merger transaction if the applicant materially fails to 

comply with subparagraph (A). 

(2) CONCENTRATION LIMITS.— 

(A) NATIONWID E CONCENTRATION LIMITS.—Th e responsible agency may not approve an application for an interstate merger transaction if the resulting bank (including 

all insured depository institutions which are affiliates of 

the resulting bank), upon consummation of the transaction, would control more than 10 percent of the total 

amount of deposits of insured depository institutions in the 

United States. 

( B ) STATEWIDE CONCENTRATION LIMITS OTHER THA N 

WIT H RESPECT TO INITIA L ENTRIES.—Th e responsible 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

733 

agency may not approve an application for an interstate 

merger transaction if— 

(i) any bank involved in the transaction (including 

all insured depository institutions which are affiliates 

of any such bank) has a branch in any State in which 

any other bank involved in the transaction has a 

branch; and 

(ii) the resulting bank (including all insured 

depository institutions which would be affiliates of the 

resulting bank), upon consummation of the transaction, would control 30 percent or more of the total 

amount of deposits of insured depository institutions 

in any such State. 

(C) EFFECTIVENESS OF STATE DEPOSIT CAPS.—No provision of this subsection shall be construed as affecting the 

authority of any State to limit, by statute, regulation, or 

order, the percentage of the total amount of deposits of insured depository institutions in the State which may be 

held or controlled by any bank or bank holding company 

(including all insured depository institutions which are 

affiliates of the bank or bank holding company) to the extent the application of such limitation does not discriminate against out-of-State banks, out-of-State bank holding 

companies, or subsidiaries of such banks or holding 

companies. 

(D) EXCEPTIONS TO SUBPARAGRAPH (B).—The responsible agency may approve an application for an interstate 

merger transaction pursuant to subsection (a) without regard to the applicability of subparagraph (B) with respect 

to any State if— 

(i) there is a limitation described in subparagraph 

(C) in a State statute, regulation, or order which has 

the effect of permitting a bank or bank holding company (including all insured depository institutions 

which are affiliates of the bank or bank holding company) to control a greater percentage of total deposits 

of all insured depository institutions in the State than 

the percentage permitted under subparagraph (B); or 

(ii) the transaction is approved by the appropriate 

State bank supervisor of such State and the standard 

on which such approval is based does not have the effect of discriminating against out-of-State banks, outof-State bank holding companies, or subsidiaries of 

such banks or holding companies. 

(E) EXCEPTION FOR CERTAIN BANKS.—This paragraph 

shall not apply with respect to any interstate merger 

transaction involving only affiliated banks. 

(3) COMMUNITY REINVESTMENT COMPLIANCE.—In determining whether to approve an application for an interstate 

merger transaction in which the resulting bank would have a 

branch or bank affiliate immediately following the transaction 

in any State in which the bank submitting the application (as 

the acquiring bank) had no branch or bank affiliate immediately before the transaction, the responsible agency shall— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 34 

(A) comply with the responsibilities of the agency regarding such application under section 804 of the Community Reinvestment Act of 1977; 

(B) take into account the most recent written evaluation under section 804 of the Community Reinvestment 

Act of 1977 of any bank which would be an affiliate of the 

resulting bank; and 

(C) take into account the record of compliance of any 

applicant bank with applicable State community reinvestment laws. 

(4) ADEQUACY OF CAPITAL AND MANAGEMENT SKILLS.—The 

responsible agency may approve an application for an interstate merger transaction pursuant to subsection (a) only if— 

(A) each bank involved in the transaction is adequately capitalized as of the date the application is filed; 

and 

(B) the responsible agency determines that the resulting bank will continue to be adequately capitalized and 

adequately managed upon the consummation of the transaction. 

(5) SURRENDER OF CHARTER AFTER MERGER TRANSACTION.— 

The charters of all banks involved in an interstate merger 

transaction, other than the charter of the resulting bank, shall 

be surrendered, upon request, to the Federal banking agency 

or State bank supervisor which issued the charter. 

(c) APPLICABILITY OF CERTAIN LAWS TO INTERSTATE BANKING 

OPERATIONS.— 

(1) STATE TAXATION AUTHORITY NOT AFFECTED.— 

(A) I N GENERAL.—No provision of this section shall be 

construed as affecting the authority of any State or political subdivision of any State to adopt, apply, or administer 

any tax or method of taxation to any bank, bank holding 

company, or foreign bank, or any affiliate of any bank, 

bank holding company, or foreign bank, to the extent such 

tax or tax method is otherwise permissible by or under the 

Constitution of the United States or other Federal law. 

(B) IMPOSITION OF SHARES TAX BY HOST STATES.—In 

the case of a branch of an out-of-State bank which results 

from an interstate merger transaction, a proportionate 

amount of the value of the shares of the out-of-State bank 

may be subject to any bank shares tax levied or imposed 

by the host State, or any political subdivision of such host 

State that imposes such tax based upon a method adopted 

by the host State, which may include allocation and apportionment. 

(2) APPLICABILITY OF ANTITRUST LAWS.—No provision of 

this section shall be construed as affecting— 

(A) the applicability of the antitrust laws; or 

(B) the applicability, if any, of any State law which is 

similar to the antitrust laws. 

(3) RESERVATION OF CERTAIN RIGHTS TO STATES.—No provision of this section shall be construed as limiting in any way 

the right of a State to— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

735 

(A) determine the authority of State banks chartered 

by that State to establish and maintain branches; or 

(B) supervise, regulate, and examine State banks chartered by that State. 

(4) STATE-IMPOSED NOTICE REQUIREMENTS.—A host State 

may impose any notification or reporting requirement on a 

branch of an out-of-State bank if the requirement— 

(A) does not discriminate against out-of-State banks or 

bank holding companies; and 

(B) is not preempted by any Federal law regarding the 

same subject. 

(d) OPERATIONS OF THE RESULTING BANK.— 

(1) CONTINUED OPERATIONS.—A resulting bank may, subject to the approval of the appropriate Federal banking agency, 

retain and operate, as a main office or a branch, any office that 

any bank involved in an interstate merger transaction was 

operating as a main office or a branch immediately before the 

merger transaction. 

(2) ADDITIONAL BRANCHES.—Following the consummation 

of any interstate merger transaction, the resulting bank may 

establish, acquire, or operate additional branches at any location where any bank involved in the transaction could have 

established, acquired, or operated a branch under applicable 

Federal or State law if such bank had not been a party to the 

merger transaction. 

(3) CERTAIN CONDITIONS AND COMMITMENTS CONTINUED.— 

if, as a condition for the acquisition of a bank by an out-ofState bank holding company before the date of the enactment 

of the Riegle-Neal Interstate Banking and Branching Efficiency 

Act of 1994— 

(A) the home State of the acquired bank imposed conditions on such acquisition by such out-of-State bank holding company; or 

(B) the bank holding company made commitments to 

such State in connection with the acquisition, 

the State may enforce such conditions and commitments with 

respect to such bank holding company or any affiliated successor company which controls a bank or branch in such State 

as a result of an interstate merger transaction to the same extent as the State could enforce such conditions or commitments 

against the bank holding company before the consummation of 

the merger transaction. 

(e) EXCEPTION FOR BANKS I N DEFAULT OR I N DANGER OF DEFAULT.—If an application under subsection (a)(1) for approval of a 

merger transaction which involves 1 or more banks in default or 

in danger of default or with respect to which the Corporation provides assistance under section 13(c), the responsible agency may 

approve such application without regard to subsection (b), or paragraph (2), (4), or (5) of subsection (a). 

(f) APPLICABLE RATE AND OTHER CHARGE LIMITATIONS.— 

(1) I N GENERAL.—In the case of any State that has a constitutional provision that sets a maximum lawful annual percentage rate of interest on any contract at not more than 5 percent above the discount rate for 90-day commercial paper in ef-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 736 

fect at the Federal reserve bank for the Federal reserve district 

in which such State is located, except as provided in paragraph 

(2), upon the establishment in such State of a branch of any 

out-of-State insured depository institution in such State under 

this section, the maximum interest rate or amount of interest, 

discount points, finance charges, or other similar charges that 

may be charged, taken, received, or reserved from time to time 

in any loan or discount made or upon any note, bill of exchange, financing transaction, or other evidence of debt by any 

insured depository institution whose home State is such State 

shall be equal to not more than the greater of— 

(A) the maximum interest rate or amount of interest, 

discount points, finance charges, or other similar charges 

that may be charged, taken, received, or reserved in a 

similar transaction under the constitution or any statute 

or other law of the home State of the out-of-State insured 

depository institution establishing any such branch, without reference to this section, as such maximum interest 

rate or amount of interest may change from time to time; 

or 

(B) the maximum rate or amount of interest, discount 

points, finance charges, or other similar charges that may 

be charged, taken, received, or reserved in a similar transaction by a State insured depository institution chartered 

under the laws of such State or a national bank or Federal 

savings association whose main office is located in such 

State without reference to this section. 

(2) RULE OF CONSTRUCTION.—No provision of this subsection shall be construed as superseding or affecting— 

(A) the authority of any insured depository institution 

to take, receive, reserve, and charge interest on any loan 

made in any State other than the State referred to in 

paragraph (1); or 

(B) the applicability of section 501 of the Depository 

Institutions Deregulation and Monetary Control Act of 

1980, section 5197 of the Revised Statutes of the United 

States, or section 27 of this Act. 

(g) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) ADEQUATELY CAPITALIZED.—The term ''adequately capitalized'' has the same meaning as in section 38. 

(2) ANTITRUST LAWS.—The term ''antitrust laws''— 

(A) has the same meaning as in subsection (a) of the 

first section of the Clayton Act; and 

(B) includes section 5 of the Federal Trade Commission Act to the extent such section 5 relates to unfair 

methods of competition. 

(3) BRANCH.—The term ''branch'' means any domestic 

branch. 

(4) HOME STATE.—The term ''home State''— 

(A) means— 

(i) with respect to a national bank, the State in 

which the main office of the bank is located; and 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

737 

(ii) with respect to a State bank, the State by 

which the bank is chartered; and 

(B) with respect to a bank holding company, has the 

same meaning as in section 2(o)(4) of the Bank Holding 

Company Act of 1956. 

(5) HOST STATE.—The term ''host State'' means, with respect to a bank, a State, other than the home State of the 

bank, in which the bank maintains, or seeks to establish and 

maintain, a branch. 

(6) INTERSTATE MERGER TRANSACTION.—The term ''interstate merger transaction'' means any merger transaction approved pursuant to subsection (a)(1). 

(7) MERGER TRANSACTION.—The term ''merger transaction'' 

has the meaning determined under section 18(c)(3). 

(8) OUT-OF-STATE BANK.—Th e term ''out-of-State bank'' 

means, with respect to any State, a bank whose home State is 

another State. 

(9) OUT-OF-STATE BANK HOLDING COMPANY.—The term 

''out-of-State bank holding company'' means, with respect to 

any State, a bank holding company whose home State is another State. 

(10) RESPONSIBLE AGENCY.—The term ''responsible agency'' 

means the agency determined in accordance with section 

18(c)(2) with respect to a merger transaction. 

(11) RESULTING BANK.—Th e term ''resulting bank'' means 

a bank that has resulted from an interstate merger transaction 

under this section. 

SEC. 45. [12 U.S.C. 1831v] AUTHORITY OF STATE INSURANCE REGULATOR AN D SECURITIES AN D EXCHANGE COMMISSION. 

(a) IN GENERAL.—Notwithstanding any other provision of law, 

the provisions of— 

(1) section 5(c) of the Bank Holding Company Act of 1956 

that limit the authority of the Board of Governors of the Federal Reserve System to require reports from, to make examinations of, or to impose capital requirements on holding companies and their functionally regulated subsidiaries or that require deference to other regulators; 

(2) section 5(g) of the Bank Holding Company Act of 1956 

that limit the authority of the Board to require a functionally 

regulated subsidiary of a holding company to provide capital or 

other funds or assets to a depository institution subsidiary of 

the holding company and to take certain actions including requiring divestiture of the depository institution; and 

(3) section 10A of the Bank Holding Company Act of 1956 

that limit whatever authority the Board might otherwise have 

to take direct or indirect action with respect to holding companies and their functionally regulated subsidiaries; 

shall also limit whatever authority that a Federal banking agency 

might otherwise have under any statute or regulation to require reports, make examinations, impose capital requirements, or take 

any other direct or indirect action with respect to any functionally 

regulated affiliate of a depository institution, subject to the same 

standards and requirements as are applicable to the Board under 

those provisions. 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 738 

(b) CERTAIN EXEMPTION AUTHORIZED.—No provision of this section shall be construed as preventing the Corporation, if the Corporation finds it necessary to determine the condition of a depository institution for insurance purposes, from examining an affiliate 

of any depository institution, pursuant to section 10(b)(4), as may 

be necessary to disclose fully the relationship between the depository institution and the affiliate, and the effect of such relationship 

on the depository institution. 

(c) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) FUNCTIONALLY REGULATED SUBSIDIARY.—The term 

''functionally regulated subsidiary'' has the meaning given the 

term in section 5(c)(5) of the Bank Holding Company Act of 

1956. 

(2) FUNCTIONALLY REGULATED AFFILIATE.—The term ''functionally regulated affiliate'' means, with respect to any depository institution, any affiliate of such depository institution that 

is— 

(A) not a depository institution holding company; and 

(B) a company described in any clause of section 

5(c)(5)(B) of the Bank Holding Company Act of 1956. 

SEC. 46. [12 U.S.C. 1831w] SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO FINANCIAL SUBSIDIARIES OF BANKS. 

(a) I N GENERAL.—An insured State bank may control or hold 

an interest in a subsidiary that engages in activities as principal 

that would only be permissible for a national bank to conduct 

through a financial subsidiary if— 

(1) the State bank and each insured depository institution 

affiliate of the State bank are well capitalized (after the capital 

deduction required by paragraph (2)); 

(2) the State bank complies with the capital deduction and 

financial statement disclosure requirements in section 5136A(c) 

of the Revised Statutes of the United States; 

(3) the State bank complies with the financial and operational safeguards required by section 5136A(d) of the Revised 

Statutes of the United States; and 

(4) the State bank complies with the amendments to sections 23A and 23B of the Federal Reserve Act made by section 

121(b) of the Gramm-Leach-Bliley Act. 

(b) PRESERVATION OF EXISTING SUBSIDIARIES.—Notwithstanding subsection (a), an insured State bank may retain control 

of a subsidiary, or retain an interest in a subsidiary, that the State 

bank lawfully controlled or acquired before the date of the enactment of the Gramm-Leach-Bliley Act, and conduct through such 

subsidiary any activities lawfully conducted in such subsidiary as 

of such date. 

(c) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) SUBSIDIARY.—The term ''subsidiary'' means any company that is a subsidiary (as defined in section 3(w)(4)) of 1 or 

more insured banks. 

(2) FINANCIAL SUBSIDIARY.—The term ''financial subsidiary'' has the meaning given the term in section 5136A(g) of 

the Revised Statutes of the United States. 
Sec. 11A 

Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 745 

739 

(d) PRESERVATION OF AUTHORITY.— 

(1) FEDERAL DEPOSIT INSURANCE ACT.—No provision of this 

section shall be construed as superseding the authority of the 

Federal Deposit Insurance Corporation to review subsidiary 

activities under section 24. 

(2) FEDERAL RESERVE ACT.—No provision of this section 

shall be construed as affecting the applicability of the 20th undesignated paragraph of section 9 of the Federal Reserve Act. 

SEC. 47. [12 U.S.C. 1831x] INSURANC E CUSTOMER PROTECTIONS. 

(a) REGULATIONS REQUIRED.— 

(1) IN GENERAL.—The Federal banking agencies shall prescribe and publish in final form, before the end of the 1-year 

period beginning on the date of the enactment of the GrammLeach-Bliley Act, customer protection regulations (which the 

agencies jointly determine to be appropriate) that— 

(A) apply to retail sales practices, solicitations, advertising, or offers of any insurance product by any depository 

institution or any person that is engaged in such activities 

at an office of the institution or on behalf of the institution; and 

(B) are consistent with the requirements of this Act 

and provide such additional protections for customers to 

whom such sales, solicitations, advertising, or offers are directed. 

(2) APPLICABILITY TO SUBSIDIARIES.—The regulations prescribed pursuant to paragraph (1) shall extend such protections 

to any subsidiary of a depository institution, as deemed appropriate by the regulators referred to in paragraph (3), where 

such extension is determined to be necessary to ensure the consumer protections provided by this section. 

(3) CONSULTATION AND JOINT REGULATIONS.—The Federal 

banking agencies shall consult with each other and prescribe 

joint regulations pursuant to paragraph (1), after consultation 

with the State insurance regulators, as appropriate. 

(b) SALES PRACTICES.—The regulations prescribed pursuant to 

subsection (a) shall include antitying and anticoercion rules applicable to the sale of insurance products that prohibit a depository 

institution from engaging in any practice that would lead a customer to believe an extension of credit, in violation of section 106(b) 

of the Bank Holding Company Act Amendments of 1970, is conditional upon— 

(1) the purchase of an insurance product from the institution or any of its affiliates; or 

(2) an agreement by the consumer not to obtain, or a prohibition on the consumer from obtaining, an insurance product 

from an unaffiliated entity. 

(c) DISCLOSURES AND ADVERTISING.—The regulations prescribed pursuant to subsection (a) shall include the following provisions relating to disclosures and advertising in connection with the 

initial purchase of an insurance product: 

(1) DISCLOSURES.— 

(A) IN GENERAL.—Requirements that the following disclosures be made orally and in writing before the comple-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 40 

tion of the initial sale and, in the case of clause (iii), at the 

time of application for an extension of credit: 

(i) UNINSURED STATUS.—As appropriate, the product is not insured by the Federal Deposit Insurance 

Corporation, the United States Government, or the 

depository institution. 

(ii) INVESTMENT RISK.—In the case of a variable 

annuity or other insurance product which involves an 

investment risk, that there is an investment risk associated with the product, including possible loss of 

value. 

(iii) COERCION.—The approval of an extension of 

credit may not be conditioned on— 

(i) the purchase of an insurance product from 

the institution in which the application for credit 

is pending or of any affiliate of the institution; or 

(II) an agreement by the consumer not to obtain, or a prohibition on the consumer from obtaining, an insurance product from an unaffiliated 

entity. 

( B) MAKIN G DISCLOSURE READILY UNDERSTANDABLE.— 

Regulations prescribed under subparagraph (A) shall 

encourage the use of disclosure that is conspicuous, simple, 

direct, and readily understandable, such as the following: 

(i) ''NOT FDIC—INSURED''. 

(ii) ''NOT GUARANTEED BY THE BANK''. 

(iii) ''MAY GO DOWN IN VALUE''. 

(iv) ''NOT INSURED BY ANY GOVERNMENT 

AGENCY". 

(C) LIMITATION.—Nothing in this paragraph requires 

the inclusion of the foregoing disclosures in advertisements 

of a general nature describing or listing the services or 

products offered by an institution. 

(D) MEANINGFU L DISCLOSURES.—Disclosures shall not 

be considered to be meaningfully provided under this paragraph if the institution or its representative states that 

disclosures required by this subsection were available to 

the customer in printed material available for distribution, 

where such printed material is not provided and such 

information is not orally disclosed to the customer. 

( E) ADJUSTMENTS FOR ALTERNATIVE METHODS OF PURCHASE.—In prescribing the requirements under subparagraphs (A) and (F), necessary adjustments shall be made 

for purchase in person, by telephone, or by electronic 

media to provide for the most appropriate and complete 

form of disclosure and acknowledgments. 

(F) CONSUMER ACKNOWLEDGMENT.—A requirement 

that a depository institution shall require any person selling an insurance product at any office of, or on behalf of, 

the institution to obtain, at the time a consumer receives 

the disclosures required under this paragraph or at the 

time of the initial purchase by the consumer of such product, an acknowledgment by such consumer of the receipt 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

741 

of the disclosure required under this subsection with respect to such product. 

(2) PROHIBITION ON MISREPRESENTATIONS.—A prohibition 

on any practice, or any advertising, at any office of, or on behalf of, the depository institution, or any subsidiary, as appropriate, that could mislead any person or otherwise cause a reasonable person to reach an erroneous belief with respect to— 

(A) the uninsured nature of any insurance product 

sold, or offered for sale, by the institution or any subsidiary of the institution; 

(B) in the case of a variable annuity or insurance product that involves an investment risk, the investment risk 

associated with any such product; or 

(C) in the case of an institution or subsidiary at which 

insurance products are sold or offered for sale, the fact 

that— 

(i) the approval of an extension of credit to a customer by the institution or subsidiary may not be conditioned on the purchase of an insurance product by 

such customer from the institution or subsidiary; and 

(ii) the customer is free to purchase the insurance 

product from another source. 

(d) SEPARATION OF BANKING AND NONBANKING ACTIVITIES.— 

(1) REGULATIONS REQUIRED.—The regulations prescribed 

pursuant to subsection (a) shall include such provisions as the 

Federal banking agencies consider appropriate to ensure that 

the routine acceptance of deposits is kept, to the extent practicable, physically segregated from insurance product activity. 

(2) REQUIREMENTS.—Regulations prescribed pursuant to 

paragraph (1) shall include the following requirements: 

(A) SEPARATE SETTING.—A clear delineation of the setting in which, and the circumstances under which, transactions involving insurance products should be conducted 

in a location physically segregated from an area where retail deposits are routinely accepted. 

(B) REFERRALS.—Standards that permit any person 

accepting deposits from the public in an area where such 

transactions are routinely conducted in a depository institution to refer a customer who seeks to purchase any 

insurance product to a qualified person who sells such 

product, only if the person making the referral receives no 

more than a one-time nominal fee of a fixed dollar amount 

for each referral that does not depend on whether the referral results in a transaction. 

(C) QUALIFICATION AND LICENSING REQUIREMENTS.— 

Standards prohibiting any depository institution from permitting any person to sell or offer for sale any insurance 

product in any part of any office of the institution, or on 

behalf of the institution, unless such person is appropriately qualified and licensed. 

(e) DOMESTIC VIOLENCE DISCRIMINATION PROHIBITION.— 

(1) I N GENERAL.—In the case of an applicant for, or an insured under, any insurance product described in paragraph (2), 

the status of the applicant or insured as a victim of domestic 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 42 

violence, or as a provider of services to victims of domestic violence, shall not be considered as a criterion in any decision 

with regard to insurance underwriting, pricing, renewal, or 

scope of coverage of insurance policies, or payment of insurance 

claims, except as required or expressly permitted under State 

law. 

(2) SCOPE OF APPLICATION.—The prohibition contained in 

paragraph (1) shall apply to any life or health insurance product which is sold or offered for sale, as principal, agent, or 

broker, by any depository institution or any person who is engaged in such activities at an office of the institution or on behalf of the institution. 

(3) DOMESTIC VIOLENCE DEFINED.—For purposes of this 

subsection, the term ''domestic violence'' means the occurrence 

of one or more of the following acts by a current or former family member, household member, intimate partner, or caretaker: 

(A) Attempting to cause or causing or threatening another person physical harm, severe emotional distress, psychological trauma, rape, or sexual assault. 

(B) Engaging in a course of conduct or repeatedly committing acts toward another person, including following 

the person without proper authority, under circumstances 

that place the person in reasonable fear of bodily injury or 

physical harm. 

(C) Subjecting another person to false imprisonment. 

(D) Attempting to cause or cause damage to property 

so as to intimidate or attempt to control the behavior of 

another person. 

(f) CONSUMER GRIEVANCE PROCESS.—The Federal banking 

agencies shall jointly establish a consumer complaint mechanism, 

for receiving and expeditiously addressing consumer complaints alleging a violation of regulations issued under the section, which 

shall— 

(1) establish a group within each regulatory agency to receive such complaints; 

(2) develop procedures for investigating such complaints; 

(3) develop procedures for informing consumers of rights 

they may have in connection with such complaints; and 

(4) develop procedures for addressing concerns raised by 

such complaints, as appropriate, including procedures for the 

recovery of losses to the extent appropriate. 

(g) EFFECT ON OTHER AUTHORITY.— 

(1) I N GENERAL.—No provision of this section shall be construed as granting, limiting, or otherwise affecting— 

(A) any authority of the Securities and Exchange Commission, any self-regulatory organization, the Municipal 

Securities Rulemaking Board, or the Secretary of the 

Treasury under any Federal securities law; or 

(B) except as provided in paragraph (2), any authority 

of any State insurance commission (or any agency or office 

performing like functions), or of any State securities commission (or any agency or office performing like functions), 

or other State authority under any State law. 

(2) COORDINATION WIT H STATE LAW.— 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

743 

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

(B), insurance customer protection regulations prescribed 

by a Federal banking agency under this section shall not 

apply to retail sales, solicitations, advertising, or offers of 

any insurance product by any depository institution or to 

any person who is engaged in such activities at an office 

of such institution or on behalf of the institution, in a 

State where the State has in effect statutes, regulations, 

orders, or interpretations, that are inconsistent with or 

contrary to the regulations prescribed by the Federal 

banking agencies. 

(B) PREEMPTION.— 

(i) IN GENERAL.—If, with respect to any provision 

of the regulations prescribed under this section, the 

Board of Governors of the Federal Reserve System, the 

Comptroller of the Currency, and the Board of Directors of the Corporation determine jointly that the protection afforded by such provision for customers is 

greater than the protection provided by a comparable 

provision of the statutes, regulations, orders, or 

interpretations referred to in subparagraph (A) of any 

State, the appropriate State regulatory authority shall 

be notified of such determination in writing. 

(ii) CONSIDERATIONS.—Before making a final 

determination under clause (i), the Federal agencies 

referred to in clause (i) shall give appropriate consideration to comments submitted by the appropriate 

State regulatory authorities relating to the level of 

protection afforded to consumers under State law. 

(iii) FEDERAL PREEMPTION AND ABILITY OF STATES 

TO OVERRIDE FEDERAL PREEMPTION.—If the Federal 

agencies referred to in clause (i) jointly determine that 

any provision of the regulations prescribed under this 

section affords greater protections than a comparable 

State law, rule, regulation, order, or interpretation, 

those agencies shall send a written preemption notice 

to the appropriate State regulatory authority to notify 

the State that the Federal provision will preempt the 

State provision and will become applicable unless, not 

later than 3 years after the date of such notice, the 

State adopts legislation to override such preemption. 

(h) NON-DISCRIMINATION AGAINST NON-AFFILIATED AGENTS.— 

The Federal banking agencies shall ensure that the regulations 

prescribed pursuant to subsection (a) shall not have the effect of 

discriminating, either intentionally or unintentionally, against any 

person engaged in insurance sales or solicitations that is not affiliated with a depository institution. 

SEC. 48. [12 U.S.C. 1831y] CRA SUNSHIN E REQUIREMENTS. 

(a) PUBLIC DISCLOSURE OF AGREEMENTS.—Any agreement (as 

defined in subsection (e)) entered into after the date of the enactment of the Gramm-Leach-Bliley Act by an insured depository 

institution or affiliate with a nongovernmental entity or person 

made pursuant to or in connection with the Community Reinvest-
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 7 44 

ment Act of 1977 involving funds or other resources of such insured 

depository institution or affiliate— 

(1) shall be in its entirety fully disclosed, and the full text 

thereof made available to the appropriate Federal banking 

agency with supervisory responsibility over the insured depository institution and to the public by each party to the agreement; and 

(2) shall obligate each party to comply with this section. 

(b) ANNUA L REPORT OF ACTIVITY BY INSURED DEPOSITORY 

INSTITUTION.—Each insured depository institution or affiliate that 

is a party to an agreement described in subsection (a) shall report 

to the appropriate Federal banking agency with supervisory 

responsibility over the insured depository institution, not less frequently than once each year, such information as the Federal banking agency may by rule require relating to the following actions 

taken by the party pursuant to the agreement during the preceding 

12-month period: 

(1) Payments, fees, or loans made to any party to the 

agreement or received from any party to the agreement and 

the terms and conditions of the same. 

(2) Aggregate data on loans, investments, and services provided by each party in its community or communities pursuant 

to the agreement. 

(3) Such other pertinent matters as determined by regulation by the appropriate Federal banking agency with supervisory responsibility over the insured depository institution. 

(c) ANNUA L REPORT OF ACTIVITY BY NONGOVERNMENTAL ENTITIES.— 

(1) IN GENERAL.—Each nongovernmental entity or person 

that is not an affiliate of an insured depository institution and 

that is a party to an agreement described in subsection (a) 

shall report to the appropriate Federal banking agency with 

supervisory responsibility over the insured depository institution that is a party to such agreement, not less frequently than 

once each year, an accounting of the use of funds received pursuant to each such agreement during the preceding 12-month 

period. 

(2) SUBMISSION TO INSURED DEPOSITORY INSTITUTION.—A 

nongovernmental entity or person referred to in paragraph (1) 

may comply with the reporting requirement in such paragraph 

by transmitting the report to the insured depository institution 

that is a party to the agreement, and such insured depository 

institution shall promptly transmit such report to the appropriate Federal banking agency with supervisory authority over 

the insured depository institution. 

(3) INFORMATION TO BE INCLUDED.—Th e accounting referred to in paragraph (1) shall include a detailed, itemized list 

of the uses to which such funds have been made, including 

compensation, administrative expenses, travel, entertainment, 

consulting and professional fees paid, and such other categories, as determined by regulation by the appropriate Federal banking agency with supervisory responsibility over the 

insured depository institution. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

745 

(d) APPLICABILITY.—Subsections (b) and (c) shall not apply with 

respect to any agreement entered into before the end of the 6-

month period beginning on the date of the enactment of the 

Gramm-Leach-Bliley Act. 

(e) DEFINITIONS.— 

(1) AGREEMENT.—For purposes of this section, the term 

''agreement''— 

(A) means— 

(i) any written contract, written arrangement, or 

other written understanding that provides for cash 

payments, grants, or other consideration with a value 

in excess of $10,000, or for loans the aggregate 

amount of principal of which exceeds $50,000, annually (or the sum of all such agreements during a 12-

month period with an aggregate value of cash payments, grants, or other consideration in excess of 

$10,000, or with an aggregate amount of loan principal in excess of $50,000); or 

(ii) a group of substantively related contracts with 

an aggregate value of cash payments, grants, or other 

consideration in excess of $10,000, or with an aggregate amount of loan principal in excess of $50,000, annually; 

made pursuant to, or in connection with, the fulfillment of 

the Community Reinvestment Act of 1977, at least 1 party 

to which is an insured depository institution or affiliate 

thereof, whether organized on a profit or not-for-profit 

basis; and 

(B) does not include— 

(i) any individual mortgage loan; 

(ii) any specific contract or commitment for a loan 

or extension of credit to individuals, businesses, farms, 

or other entities, if the funds are loaned at rates not 

substantially below market rates and if the purpose of 

the loan or extension of credit does not include any relending of the borrowed funds to other parties; or 

(iii) any agreement entered into by an insured 

depository institution or affiliate with a nongovernmental entity or person who has not commented on, 

testified about, or discussed with the institution, or 

otherwise contacted the institution, concerning the 

Community Reinvestment Act of 1977. 

(2) FULFILLMENT OF CRA.—For purposes of subparagraph 

(A), the term ''fulfillment'' means a list of factors that the 

appropriate Federal banking agency determines have a material impact on the agency's decision— 

(A) to approve or disapprove an application for a deposit facility (as defined in section 803 of the Community 

Reinvestment Act of 1977); or 

(B) to assign a rating to an insured depository institution under section 807 of the Community Reinvestment 

Act of 1977. 

(f) VIOLATIONS.— 
Sec. 11A FEDERAL DEPOSIT INSURANCE ACT 746 

(1) VIOLATIONS BY PERSONS OTHER THA N INSURED DEPOSITORY INSTITUTIONS OR THEIR AFFILIATES.— 

(A) MATERIAL FAILURE TO COMPLY.—If the party to an 

agreement described in subsection (a) that is not an insured depository institution or affiliate willfully fails to 

comply with this section in a material way, as determined 

by the appropriate Federal banking agency, the agreement 

shall be unenforceable after the offending party has been 

given notice and a reasonable period of time to perform or 

comply. 

(B) DIVERSION OF FUNDS OR RESOURCES.—If funds or 

resources received under an agreement described in subsection (a) have been diverted contrary to the purposes of 

the agreement for personal financial gain, the appropriate 

Federal banking agency with supervisory responsibility 

over the insured depository institution may impose either 

or both of the following penalties: 

(i) Disgorgement by the offending individual of 

funds received under the agreement. 

(ii) prohibition of the offending individual from 

being a party to any agreement described in subsection (a) for a period of not to exceed 10 years. 

(2) DESIGNATION OF SUCCESSOR NONGOVERNMENTAL 

PARTY.—If an agreement described in subsection (a) is found to 

be unenforceable under this subsection, the appropriate Federal banking agency may assist the insured depository institution in identifying a successor nongovernmental party to assume the responsibilities of the agreement. 

(3) INADVERTENT OR DE MINIMIS REPORTING ERRORS.—An 

error in a report filed under subsection (c) that is inadvertent 

or de minimis shall not subject the filing party to any penalty. 

(g) RULE OF CONSTRUCTION.—No provision of this section shall 

be construed as authorizing any appropriate Federal banking 

agency to enforce the provisions of any agreement described in subsection (a). 

(h) REGULATIONS.— 

(1) IN GENERAL.—Each appropriate Federal banking 

agency shall prescribe regulations, in accordance with paragraph (4), requiring procedures reasonably designed to ensure 

and monitor compliance with the requirements of this section. 

(2) PROTECTION OF PARTIES.—In carrying out paragraph 

(1), each appropriate Federal banking agency shall— 

(A) ensure that the regulations prescribed by the 

agency do not impose an undue burden on the parties and 

that proprietary and confidential information is protected; 

and 

(B) establish procedures to allow any nongovernmental 

entity or person who is a party to a large number of agreements described in subsection (a) to make a single or consolidated filing of a report under subsection (c) to an insured depository institution or an appropriate Federal 

banking agency. 
Sec. 11A 

FEDERAL DEPOSIT INSURANCE ACT 

747 

(3) PARTIES NOT SUBJECT TO REPORTING REQUIREMENTS.— 

The Board of Governors of the Federal Reserve System may 

prescribe regulations— 

(A) to prevent evasions of subsection (e)(1)(B)(iii); and 

(B) to provide further exemptions under such subsection, consistent with the purposes of this section. 

(4) COORDINATION, CONSISTENCY, AND COMPARABILITY.—In 

carrying out paragraph (1), each appropriate Federal banking 

agency shall consult and coordinate with the other such agencies for the purposes of assuring, to the extent possible, that 

the regulations prescribed by each such agency are consistent 

and comparable with the regulations prescribed by the other 

such agencies. 

FEDERAL DEPOSIT INSURANCE CORPORATION 

IMPROVEMENT ACT OF 1991 

749 

FEDERAL DEPOSIT INSURANCE CORPORATION 

IMPROVEMENT ACT OF 19911 

TITL E I—SAFETY AN D SOUNDNESS 

Subtitle A—Deposit Insurance Funds 

SEC. 102. LIMITATIO N O N OUTSTANDIN G BORROWING . 

[(b) Repealed by section 106(c) of P.L. 104-316 (110 Stat. 

3831).] 

Subtitle B—Supervisory Reforms 

SEC. 111. IMPROVE D EXAMINATIONS . 

(a) ) ) ) 

(d) [12 U.S.C. 3305 nt.] EXAMINATIO N IMPROVEMEN T PRO -

GRAM. — 

(1) IN GENERAL.—The appropriate Federal banking agencies, acting through the Federal Financial Institutions Examination Council, shall each establish a comparable examination 

improvement program that meets the requirements of paragraph (2). 

(2) REQUIREMENTS.—A n examination improvement program meets the requirements of this paragraph if, under the 

program, the agency is required— 

(A) to periodically review the organization and training of the staff of the agency who are responsible for conducting examinations of insured depository institutions 

and to make such improvements as the agency determines 

to be appropriate to ensure frequent, objective, and thorough examinations of such institutions; and 

(B) to increase the number of examiners, supervisors, 

and other individuals employed by the agency in connection with conducting or supervising examinations of insured depository institutions to the extent necessary to en1Note: The Federal Depository Insurance Corporation Act of 1991 was largely amendatory of 

other Acts. Many of the free-standing provisions of such Act, while still in effect, did not have 

a permanent or long-term application and therefore are not contained in this compilation. subtitles C and F of title II of such Act, the Bank Enterprise Act of 1991 and the Truth in Savings 

Act, respectively, each appear under their own heading. 

7 5 1 
Sec. 122 FDIC IMPROVEMENT ACT OF 1991 7 52 

sure frequent, objective, and thorough examinations of 

such institutions. 

SEC. 122. [12 U.S.C. 1817 nt.] SMALL BUSINESS AN D SMALL FAR M LOA N 

INFORMATION . 

(a) IN GENERAL.—Before the end of the 180-day period beginning on the date of the enactment of this Act, the appropriate Federal banking agency shall prescribe regulations requiring insured 

depository institutions to annually submit information on small 

businesses and small farm lending in their reports of condition. 

(b) CREDIT AVAILABILITY.—The regulations prescribed under 

subsection (a) shall require insured depository institutions to submit such information as the agency may need to assess the availability of credit to small businesses and small farms. 

(c) CONTENTS.—The information required under subsection (a) 

may include information regarding the following: 

(1) The total number and aggregate dollar amount of commercial loans and commercial mortgage loans to small businesses. 

(2) Charge-offs, interest, and interest fee income on commercial loans and commercial mortgage loans to small businesses. 

(3) Agricultural loans to small farms. 

Subtitle E—Least-Cost Resolution 

SEC. 141. [12 U.S.C. 1823 nt.] LEAST-COST RESOLUTION. 

(a) LEAST-COST RESOLUTIONS REQUIRED.— 

(1) * * * 

(2) GAO COMPLIANCE AUDIT.—Th e Comptroller General of 

the United States shall audit, under such conditions as the 

Comptroller General determines to be appropriate, the Federal 

Deposit Insurance Corporation and the Resolution Trust Corporation to determine the extent to which such corporations 

are complying with section 13(c)(4) of the Federal Deposit 

insurance Act. 

Subtitle D—FDI C Property Disposition 

SEC. 241. FDI C AFFORDABLE HOUSIN G PROGRAM. 

(a) * * * 

(b) [12 U.S.C. 1831q nt.] COORDINATION.—The Federal Deposit 

Insurance Corporation and the Resolution Trust Corporation1 shall 

consult and coordinate with each other in carrying out their respective responsibilities under the affordable housing programs under 

section 40 of the Federal Deposit Insurance Act and section 21A(c) 

*The Resolution Trust Corporation has been abolished (see section 21A(m) of the Federal 

Home Loan Bank Act). 
753 FDIC IMPROVEMENT ACT OF 1991 Sec. 306 

of the Federal Home Loan Bank Act. Such corporations shall develop any procedures, and may enter into any agreements, necessary to provide for the coordinated, efficient, and effective operation of such programs. 

TITLE III—FEDERA L DEPOSIT 

INSURANCE REFOR M 

Subtitle A—Activities 

SEC. 305. [12 U.S.C. 1828 nt.] IMPROVIN G CAPITAL STANDARDS. 

(a) * * * 

(b) REVIEW OF RISK-BASED CAPITAL STANDARDS.— 

(1) IN GENERAL.—Each appropriate Federal banking 

agency shall revise its risk-based capital standards for insured 

depository institutions to ensure that those standards— 

(A) take adequate account of— 

(i) interest-rate risk; 

(ii) concentration of credit risk; and 

(iii) the risks of nontraditional activities; 

(B) reflect the actual performance and expected risk of 

loss of multifamily mortgages; and 

(C) take into account the size and activities of the 

institutions and do not cause undue reporting burdens. 

(2) INTERNATIONAL DISCUSSIONS.—The Federal banking 

agencies shall discuss the development of comparable standards with members of the supervisory committee of the Bank 

for International Settlements. 

(3) DEADLINE FOR PRESCRIBING REVISED STANDARDS.—Each 

appropriate Federal banking agency shall— 

(A) publish final regulations in the Federal Register to 

implement paragraph (1) not later than 18 months after 

the date of enactment of this Act; and 

(B) establish reasonable transition rules to facilitate 

compliance with those regulations. 

(4) DEFINITIONS.—Fo r purposes of this subsection, the 

terms ''appropriate Federal banking agency'', ''Federal banking 

agency'' and ''insured depository institution'' have the same 

meanings as in section 3 of the Federal Deposit Insurance Act 

(12 U.S.C. 1813). 

SEC. 306. SAFEGUARDS AGAINST INSIDE R ABUSE. 

(a) * * * 

(o) [12 U.S.C. 375b nt.] REPORTING OF CREDIT BY EXECUTIVE 

OFFICERS AND DIRECTORS.—A n executive officer or director of an 

insured depository institution, a bank holding company, or a savings and loan holding company, the shares of which are not pub-
Sec. 122 FDIC IMPROVEMENT ACT OF 1991 7 54 

licly traded, shall report annually to the board of directors of the 

institution or holding company the outstanding amount of any 

credit that was extended to such executive officer or director and 

that is secured by shares of the institution or holding company. 

Subtitle B—Coverage 

SEC. 311. DEPOSIT AN D PASS-THROUGH INSURANCE. 

(a) * * * 

(d) [12 U.S.C. 1821 nt.] INFORMATIONAL STUDY.— 

(1) IN GENERAL.—The Federal Deposit Insurance Corporation, in conjunction with such consultants and technical experts as the Corporation determines to be appropriate, shall 

conduct a study of the cost and feasibility of tracking the insured and uninsured deposits of any individual and the exposure, under any Act of Congress or any regulation of any 

appropriate Federal banking agency, of the Federal Government with respect to all insured depository institutions. 

(2) ANALYSIS OF COSTS AND BENEFITS.—The study under 

paragraph (1) shall include detailed, technical analysis of the 

costs and benefits associated with the least expensive way to 

implement the system. 

(3) SPECIFIC FACTORS TO BE STUDIED.—As part of the study 

under paragraph (1), the Corporation shall investigate, review, 

and evaluate— 

(A) the data systems that would be required to track 

deposits in all insured depository institutions; 

(B) the reporting burdens of such tracking on individual depository institutions; 

(C) the systems which exist or which would be required to be developed to aggregate such data on an accurate basis; 

(D) the implications such tracking would have for individual privacy; and 

(E) the manner in which systems would be administered and enforced. 

(4) FEDERAL RESERVE BOARD SURVEY.—As part of the informational study required under paragraph (1), the Board of 

Governors of the Federal Reserve System shall conduct, in conjunction with other Federal departments and agencies as necessary, a survey of the ownership of deposits held by individuals including the dollar amount of deposits held, the type of 

deposit accounts held, and the type of financial institutions in 

which the deposit accounts are held. 

(5) ANALYSIS BY FDIC.—Th e results of the survey under 

paragraph (4) shall be provided to the Federal Deposit Insurance Corporation before the end of the 1-year period beginning 

on the date of the enactment of this Act for analysis and inclusion in the informational study. 
755 FDIC IMPROVEMENT ACT OF 1991 Sec. 306 

(6) REPORT TO CONGRESS.—Before the end of the 18-month 

period beginning on the date of the enactment of this Act, the 

Federal Deposit Insurance Corporation shall submit to the 

Congress a report containing a detailed statement of findings 

made and conclusions drawn from the study conducted under 

this section, including such recommendations for administrative and legislative action as the Corporation determines to be 

appropriate. 

TITL E IV—MISCELLANEOUS 

PROVISIONS 

Subtitle A—Payment System Risk 

Reduction 

CHAPTER 1—BILATERAL AND CLEARING 

ORGANIZATION NETTING 

SEC. 401. [12 U.S.C. 4401] FINDINGS AND PURPOSE. 

The Congress finds that— 

(1) many financial institutions engage daily in thousands 

of transactions with other financial institutions directly and 

through clearing organizations; 

(2) the efficient processing of such transactions is essential 

to a smoothly functioning economy; 

(3) such transactions can be processed most efficiently if, 

consistent with applicable contractual terms, obligations 

among financial institutions are netted; 

(4) such netting procedures would reduce the systemic risk 

within the banking system and financial markets; and 

(5) the effectiveness of such netting procedures can be assured only if they are recognized as valid and legally binding 

in the event of the closing of a financial institution participating in the netting procedures. 

SEC. 402. [12 U.S.C. 4402] DEFINITIONS. 

For purposes of this chapter— 

(1) BROKER OR DEALER.—The term ''broker or dealer'' 

means— 

(A) any company that is registered or licensed under 

Federal or State law to engage in the business of 

brokering, underwriting, or dealing in securities in the 

United States; and 

(B) to the extent consistent with this title, as determined by the Board of Governors of the Federal Reserve 

System, any company that is an affiliate of a company described in subparagraph (A) and that is engaged in the 

business of entering into netting contracts. 

(2) CLEARING ORGANIZATION.—The term ''clearing organization'' means a clearinghouse, clearing association, clearing corporation, or similar organization— 
Sec. 122 FDIC IMPROVEMENT ACT OF 1991 756 

(A) that provides clearing, netting, or settlement services for its members and— 

(i) in which all members other than the clearing 

organization itself are financial institutions or other 

clearing organizations; or 

(ii) which is registered as a clearing agency under 

the Securities Exchange Act of 1934; or 

(B) that is registered as a derivatives clearing organization under section 5b of the Commodity Exchange Act. 

(3) COVERED CLEARING OBLIGATION.—The term ''covered 

clearing obligation'' means an obligation of a member of a 

clearing organization to make payment to another member of 

a clearing organization, subject to a netting contract. 

(4) COVERED CONTRACTUAL PAYMENT ENTITLEMENT.—Th e 

term ''covered contractual payment entitlement'' means— 

(A) an entitlement of a financial institution to receive 

a payment, subject to a netting contract from another 

financial institution; and 

(B) an entitlement of a member of a clearing organization to receive payment, subject to a netting contract, from 

another member of a clearing organization of a covered 

clearing obligation. 

(5) COVERED CONTRACTUAL PAYMENT OBLIGATION.—The 

term ''covered contractual payment obligation'' means— 

(A) an obligation of a financial institution to make 

payment, subject to a netting contract to another financial 

institution; and 

(B) a covered clearing obligation. 

(6) DEPOSITORY INSTITUTION.—The term ''depository institution'' means— 

(A) a depository institution as defined in section 

19(b)(1)(A) of the Federal Reserve Act (other than clause 

(vii)); 

(B) a branch or agency as defined in section 1(b) of the 

International Banking Act of 1978; 

(C) a corporation chartered under section 25(a) of the 

Federal Reserve Act; or 

(D) a corporation having an agreement or undertaking 

with the Board of Governors of the Federal Reserve System under section 25 of the Federal Reserve Act. 

(7) FAILED FINANCIAL INSTITUTION.—The term ''failed 

financial institution'' means a financial institution that— 

(A) fails to satisfy a covered contractual payment obligation when due; 

(B) has commenced or had commenced against it insolvency, liquidation, reorganization, receivership (including 

the appointment of a receiver), conservatorship, or similar 

proceedings; or 

(C) has generally ceased to meet its obligations when 

due. 

(8) FAILED MEMBER.—Th e term ''failed member'' means 

any member that— 

(A) fails to satisfy a covered clearing obligation when 

due, 
757 FDIC IMPROVEMENT ACT OF 1991 Sec. 306 

(B) has commenced or had commenced against it insolvency, liquidation, reorganization, receivership (including 

the appointment of a receiver), conservatorship, or similar 

proceedings, or 

(C) has generally ceased to meet its obligations when 

due. 

(9) FINANCIAL INSTITUTION.—The term "financial institution'' means a broker or dealer, a depository institution, a futures commission merchant, or any other institution as determined by the Board of Governors of the Federal Reserve system. 

(10) FUTURES COMMISSION MERCHANT.—The term "futures 

commission merchant'' means a company that is registered or 

licensed under Federal law to engage in the business of selling 

futures and options in commodities. 

(11) MEMBER.—The term "member" means a member of or 

participant in a clearing organization, and includes the clearing organization. 

(12) NET ENTITLEMENT.—The term "net entitlement'' 

means the amount by which the covered contractual payment 

entitlements of a financial institution or member exceed the 

covered contractual payment obligations of the institution or 

member after netting under a netting contract. 

(13) NE T OBLIGATION.—The term "net obligation'' means 

the amount by which the covered contractual payment obligations of a financial institution or member exceed the covered 

contractual payment entitlements of the institution or member 

after netting under a netting contract. 

(14) NETTING CONTRACT.— 

(A) IN GENERAL.—The term "netting contract''— 

(i) means a contract or agreement between 2 or 

more financial institutions or members, that— 

(i) is governed by the laws of the united 

states, any state, or any political subdivision of 

any state, and 

(ii) provides for netting present or future payment obligations or payment entitlements (including liquidation or close-out values relating to the 

obligations or entitlements) among the parties to 

the agreement; and 

(ii) includes the rules of a clearing organization. 

(B) INVALID CONTRACTS NOT INCLUDED.—The term 

"netting contract'' does not include any contract or agreement that is invalid under or precluded by Federal law. 

SEC. 403. [12 U.S.C. 4403] BILATERAL NETTING. 

(a) GENERAL RULE.—Notwithstanding any other provision of 

law, the covered contractual payment obligations and the covered 

contractual payment entitlements between any 2 financial institutions shall be netted in accordance with, and subject to the conditions of, the terms of any applicable netting contract. 

(b) LIMITATION ON OBLIGATION TO MAKE PAYMENT.—The only 

obligation, if any, of a financial institution to make payment with 

respect to covered contractual payment obligations to another 
Sec. 122 FDIC IMPROVEMENT ACT OF 1991 758 

financial institution shall be equal to its net obligation to such 

other financial institution, and no such obligation shall exist if 

there is no net obligation. 

(c) LIMITATION ON RIGH T T O RECEIVE PAYMENT.—Th e only 

right, if any, of a financial institution to receive payments with respect to covered contractual payment entitlements from another 

financial institution shall be equal to its net entitlement with respect to such other financial institution, and no such right shall 

exist if there is no net entitlement. 

(d) PAYMENT OF NE T ENTITLEMENT OF FAILED FINANCIAL INSTITUTION.—The net entitlement of any failed financial institution, if 

any, shall be paid to the failed financial institution in accordance 

with, and subject to the conditions of, the applicable netting contract. 

(e) EFFECTIVENESS NOTWITHSTANDING STATUS AS FINANCIAL 

INSTITUTION.—This section shall be given effect notwithstanding 

that a financial institution is a failed financial institution. 

SEC. 404. [12 U.S.C. 4404] CLEARING ORGANIZATION NETTING. 

(a) GENERAL NETTIN G RULE.—Notwithstanding any other provision of law, the covered contractual payment obligations and covered contractual payment entitlements of a member of a clearing 

organization to and from all other members of a clearing organization shall be netted in accordance with and subject to the conditions of any applicable netting contract. 

(b) LIMITATION OF OBLIGATION TO MAK E PAYMENT.—Th e only 

obligation, if any, of a member of a clearing organization to make 

payment with respect to covered contractual payment obligations 

arising under a single netting contract to any other member of a 

clearing organization shall be equal to its net obligation arising 

under that netting contract, and no such obligation shall exist if 

there is no net obligation. 

(c) LIMITATION ON RIGH T T O RECEIVE PAYMENT.—Th e only 

right, if any, of a member of a clearing organization to receive payment with respect to a covered contractual payment entitlement 

arising under a single netting contract from other members of a 

clearing organization shall be equal to its net entitlement arising 

under that netting contract, and no such right shall exist if there 

is no net entitlement. 

(d) ENTITLEMENT OF FAILED MEMBERS.—Th e net entitlement, 

if any, of any failed member of a clearing organization shall be paid 

to the failed member in accordance with, and subject to the conditions of, the applicable netting contract. 

(e) OBLIGATIONS OF FAILED MEMBERS.—Th e net obligation, if 

any, of any failed member of a clearing organization shall be determined in accordance with, and subject to the conditions of, the applicable netting contract. 

(f) LIMITATION ON CLAIMS FOR ENTITLEMENT.—A failed member of a clearing organization shall have no recognizable claim 

against any member of a clearing organization for any amount 

based on such covered contractual payment entitlements other 

than its net entitlement. 
759 FDIC IMPROVEMENT ACT OF 1991 Sec. 306 

(g) EFFECTIVENESS NOTWITHSTANDING STATUS AS MEMBER. — 

This section shall be given effect notwithstanding that a member 

is a failed member. 

SEC. 405. [12 U.S.C. 4405] PREEMPTION . 

No stay, injunction, avoidance, moratorium, or similar proceeding or order, whether issued or granted by a court, administrative agency, or otherwise, shall limit or delay application of otherwise enforceable netting contracts in accordance with sections 403 

and 404. 

SEC. 406. [12 U.S.C. 4406] RELATIONSHIP TO OTHE R PAYMENTS SYSTEMS. 

This subtitle shall have no effect by implication or otherwise 

on the validity or legal enforceability of a netting arrangement of 

any payment system which is not subject to this subtitle. 

SEC. 407. [12 U.S.C. 4407] NATIONA L EMERGENCIES. 

The provisions of this subtitle may not be construed to limit 

the authority of the President under the Trading With the Enemy 

Act (50 U.S.C. App. 1 et seq.) or the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.). 

CHAPTER 2—MULTILATERAL CLEARING 

ORGANIZATIONS 

SEC. 408. [12 U.S.C. 4421] DEFINITIONS. 

For purposes of this chapter, the following definitions shall 

apply: 

(1) MULTILATERAL CLEARING ORGANIZATION.—The term 

''multilateral clearing organization'' means a system utilized by 

more than two participants in which the bilateral credit exposures of participants arising from the transactions cleared are 

effectively eliminated and replaced by a system of guarantees, 

insurance, or mutualized risk of loss. 

(2) OVER-THE-COUNTER DERIVATIVE INSTRUMENT.—The 

term ''over-the-counter derivative instrument'' includes— 

(A) any agreement, contract, or transaction, including 

the terms and conditions incorporated by reference in any 

such agreement, contract, or transaction, which is an interest rate swap, option, or forward agreement, including 

a rate floor, rate cap, rate collar, cross-currency rate swap, 

basis swap, and forward rate agreement; a same daytomorrow, tomorrow-next, forward, or other foreign exchange or precious metals agreement; a currency swap, option, or forward agreement; an equity index or equity 

swap, option, or forward agreement; a debt index or debt 

swap, option, or forward agreement; a credit spread or 

credit swap, option, or forward agreement; a commodity 

index or commodity swap, option, or forward agreement; 

and a weather swap, weather derivative, or weather option; 

(B) any agreement, contract or transaction similar to 

any other agreement, contract, or transaction referred to 

in this clause that is presently, or in the future becomes, 

regularly entered into by parties that participate in swap 
Sec. 122 FDIC IMPROVEMENT ACT OF 1991 7 60 

transactions (including terms and conditions incorporated 

by reference in the agreement) and that is a forward, 

swap, or option on one or more occurrences of any event, 

rates, currencies, commodities, equity securities or other 

equity instruments, debt securities or other debt instruments, economic or other indices or measures of economic 

or other risk or value; 

(C) any agreement, contract, or transaction excluded 

from the Commodity Exchange Act under section 2(c), 2(d), 

2(f), or 2(g) of such Act, or exempted under section 2(h) or 

4(c) of such Act; and 

(D) any option to enter into any, or any combination 

of, agreements, contracts or transactions referred to in this 

subparagraph. 

(3) OTHER DEFINITIONS.—The terms ''insured State nonmember bank'', ''State member bank'', and ''affiliate'' have the 

same meanings as in section 3 of the Federal Deposit Insurance Act. 

SEC. 409. [12 U.S.C. 4422] MULTILATERAL CLEARING ORGANIZATIONS. 

(a) IN GENERAL.—Except with respect to clearing organizations 

described in subsection (b), no person may operate a multilateral 

clearing organization for over-the-counter derivative instruments, 

or otherwise engage in activities that constitute such a multilateral 

clearing organization unless the person is a national bank, a State 

member bank, an insured State nonmember bank, an affiliate of a 

national bank, a State member bank, or an insured State nonmember bank, or a corporation chartered under section 25A of the 

Federal Reserve Act. 

(b) CLEARING ORGANIZATIONS.—Subsection (a) shall not apply 

to any clearing organization that— 

(1) is registered as a clearing agency under the Securities 

Exchange Act of 1934; 

(2) is registered as a derivatives clearing organization 

under the Commodity Exchange Act; or 

(3) is supervised by a foreign financial regulator that the 

Comptroller of the Currency, the Board of Governors of the 

Federal Reserve System, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, or the 

Commodity Futures Trading Commission, as applicable, has 

determined satisfies appropriate standards. 

* * * 

Subtitle I—Bank and Thrift Employee 

Provisions 

SEC. 451. [12 U.S.C. 1821 nt.] CONTINUATION OF HEALTH PLAN COVERAGE I N CASES OF FAILED FINANCIAL INSTITUTIONS. 

(a) CONTINUATION COVERAGE.—The Federal Deposit Insurance 

Corporation— 

(1) shall, in its capacity as a successor of a failed depository institution (whether acting directly or through any bridge 

bank), have the same obligation to provide a group health plan 
761 FDIC IMPROVEMENT ACT OF 1991 Sec. 306 

meeting the requirements of section 602 of the Employee 

Retirement Income Security Act of 1974 (relating to continuation coverage requirements of group health plans) with respect to former employees of such institution as such institution would have had but for its failure, and 

(2) shall require that any successor described in subsection 

(b)(1)(B)(iii) provide a group health plan with respect to former 

employees of such institution in the same manner as the failed 

depository institution would have been required to provide but 

for its failure. 

(b) DEFINITIONS.—Fo r purposes of this section— 

(1) SUCCESSOR.—An entity is a successor of a failed depository institution during any period if— 

(A) such entity holds substantially all of the assets or 

liabilities of such institution, and 

(B) such entity is— 

(i) the Federal Deposit insurance Corporation, 

(ii) any bridge bank, or 

(iii) an entity that acquires such assets or liabilities from the Federal Deposit insurance Corporation 

or a bridge bank. 

(2) FAILED DEPOSITORY INSTITUTION.—The term ''failed 

depository institution'' means any depository institution (as defined in section 3(c) of the Federal Deposit Insurance Act) for 

which a receiver has been appointed. 

(3) BRIDGE BANK.—The term ''bridge bank'' has the meaning given such term by section 3(i)(2) of the Federal Deposit 

insurance Act. 

(c) No PREMIU M COSTS IMPOSED ON FDIC.—Subsection (a) shall 

not be construed as requiring the Federal Deposit Insurance Corporation to incur, by reason of this section, any obligation for any 

premium under any group health plan referred to in such 

subsection. 

(d) EFFECTIVE DATE.—This section shall apply to plan years 

beginning on or after the date of the enactment of this Act, regardless of whether the qualifying event under section 603 of the Employee Retirement Income Security Act of 1974 occurred before, on, 

or after such date. 

SEC. 475. [12 U.S.C. 1828 nt.] PURCHASE D MORTGAGE SERVICING 

RIGHTS. 

(a) IN GENERAL.—Notwithstanding section 5(t)(4) of the Home 

owners' Loan Act, each appropriate Federal banking agency shall 

determine, with respect to insured depository institutions for which 

it is the appropriate Federal regulator, the amount of readily marketable purchased mortgage servicing rights that may be included 

in calculating such institution's tangible capital, risk-based capital, 

or leverage limit, if— 

(1) such servicing rights are valued at not more than 90 

percent (or such other percentage exceeding 90 percent but not 

exceeding 100 percent, as may be determined under subsection 

(b)) of their fair market value; and 
Sec. 122 FDIC IMPROVEMENT ACT OF 1991 7 62 

(2) the fair market value of such servicing rights is determined not less often than quarterly. 

(b) AUTHORITY TO DETERMINE PERCENTAGE BY WHIC H T O DISCOUNT VALUE OF SERVICING RIGHTS.—The appropriate Federal 

banking agencies may allow readily marketable purchased mortgage servicing rights to be valued at more than 90 percent of their 

fair market value but at not more than 100 percent of such value, 

if such agencies jointly make a finding that such valuation would 

not have an adverse effect on the deposit insurance funds or the 

safety and soundness of insured depository institutions. 

(c) DEFINITION.—For purposes of this section, the terms ''appropriate Federal banking agency'', ''deposit insurance fund'', and ''insured depository institution'' have the same meanings as in section 

3 of the Federal Deposit Insurance Act. 

(d) EFFECTIVE DATE.—This section shall apply after the end of 

the 60-day period beginning on the date of the enactment of this 

Act. 
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION 

COUNCIL ACT OF 1978 

763 

FEDERAL FINANCIAL INSTITUTIONS EXAMINATION 

COUNCIL ACT OF 19781 

TITLE X—FEDERAL FINANCIAL INSTITUTIONS 

EXAMINATION COUNCIL 

SEC. 1001. [12 U.S.C. 3301 note] This title may be cited as the 

''Federal Financial Institutions Examination Council Act of 1978''. 

PURPOSE 

SEC. 1002. [12 U.S.C. 3301] It is the purpose of this title to 

establish a Financial Institutions Examination Council which shall 

prescribe uniform principles and standards for the Federal examination of financial institutions by the Office of the Comptroller of 

the Currency, the Federal Deposit Insurance Corporation, the 

Board of Governors of the Federal Reserve System, the Federal 

Home Loan Bank Board, and the National Credit Union Administration and make recommendations to promote uniformity in the 

supervision of these financial institutions. The Council's actions 

shall be designed to promote consistency in such examination and 

to insure progressive and vigilant supervision. 

DEFINITION S 

SEC. 1003. [12 U.S.C. 3302] As used in this title— 

(1) the term ''Federal financial institutions regulatory 

agencies'' means the Office of the Comptroller of the Currency, 

the Board of Governors of the Federal Reserve System, the 

Federal Deposit Insurance Corporation, the Office of Thrift 

Supervision, and the National Credit Union Administration; 

(2) the term ''Council'' means the Financial Institutions 

Examination Council; and 

(3) the term ''financial institution'' means a commercial 

bank, a savings bank, a trust company, a savings association, 

a building and loan association, a homestead association, a cooperative bank, or a credit union;

 2 

ESTABLISHMEN T OF TH E COUNCI L 

SEC. 1004. [12 U.S.C. 3303] (a) There is established the 

Financial Institutions Examination Council which shall consist of— 

(1) the Comptroller of the Currency, 

(2) the Chairman of the Board of Directors of the Federal 

Deposit Insurance Corporation, 

1

This title was enacted by the Financial Institutions Regulatory and Interest Rate Control 

Act of 1978 (92 Stat. 3694 et seq.). 

2

 so in law. The semicolon probably should be a period. 

7 6 5 
Sec. 1005 FED. FINAN. INST. EXAMINATION COUNCIL ACT OF 1978 7 66 

(3) a Governor of the Board of Governors of the Federal 

Reserve System designated by the Chairman of the Board, 

(4) the Director, Office of Thrift Supervision1 

(5) the Chairman of the National Credit Union Administration Board. 

(b) The members of the Council shall select the first chairman 

of the Council. Thereafter the chairmanship shall rotate among the 

members of the Council. 

(c) The term of the Chairman of the Council shall be two years. 

(d) The members of the Council may, from time to time, designate other officers or employees of their respective agencies to 

carry out their duties on the Council. 

(e) Each member of the Council shall serve without additional 

compensation but shall be entitled to reasonable expenses incurred 

in carrying out his official duties a such a member. 

EXPENSES OF TH E COUNCIL 

SEC. 1005. [12 U.S.C. 3304] One-fifth of the costs and expenses of the Council, including the salaries of its employees, shall 

be paid by each of the Federal financial institutions regulatory 

agencies. Annual assessments for such share shall be levied by the 

Council based upon its projected budget for the year, and additional assessments may be made during the year if necessary. 

FUNCTION S OF TH E COUNCIL 

SEC. 1006. [12 U.S.C. 3305] (a) The Council shall establish 

uniform principles and standards and report forms for the examination of financial institutions which shall be applied by the Federal financial institutions regulatory agencies. 

(b)(1) The Council shall make recommendations for uniformity 

in other supervisory matters, such as, but not limited to, classifying 

loans subject to country risk, identifying financial institutions in 

need of special supervisory attention, and evaluating the soundness 

of large loans that are shared by two or more financial institutions. 

in addition, the Council shall make recommendations regarding the 

adequacy of supervisory tools for determining the impact of holding 

company operations on the financial institutions within the holding 

company and shall consider the ability of supervisory agencies to 

discover possible fraud or questionable and illegal payments and 

practices which might occur in the operation of financial institutions or their holding companies. 

(2) When a recommendation of the Council is found unacceptable by one or more of the applicable Federal financial institutions 

regulatory agencies, the agency or agencies shall submit to the 

Council, within a time period specified by the Council, a written 

statement of the reasons the recommendation is unacceptable. 

(c) The Council shall develop uniform reporting systems for 

federally supervised financial institutions, their holding companies, 

and nonfinancial institution subsidiaries of such institutions or 

holding companies. The authority to develop uniform reporting systems shall not restrict or amend the requirements of section 12(i) 

of the Securities Exchange Act of 1934. 

1

 So in law. Probably should be followed by ''; and''. 
Sec. 1005 FED. FINAN. INST. EXAMINATION COUNCIL ACT OF 1978 767 

(d) The Council shall conduct schools for examiners and assistant examiners employed by the Federal financial institutions regulatory agencies. Such schools shall be open to enrollment by employees of State financial institutions supervisory agencies and employees of the Federal Housing Finance Board under conditions 

specified by the Council. 

(e) Nothing in this title shall be construed to limit or discourage Federal regulatory agency research and development of new 

financial institutions supervisory methods and tools, nor to preclude the field testing of any innovation devised by any Federal 

regulatory agency. 

(f) Not later than April 1 of each year, the Council shall prepare an annual report covering its activities during the preceding 

year. 

(g) FLOOD INSURANCE.—The Council shall consult with and assist the Federal entities for lending regulation, as such term is defined in section 1370(a) of the National Flood Insurance Act of 

1968, in developing and coordinating uniform standards and 

requirements for use by regulated lending institutions under the 

national flood insurance program. 

STATE LIAISON 

SEC. 1007. [12 U.S.C. 3306] To encourage the application of 

uniform examination principles and standards by State and Federal supervisory agencies, the Council shall establish a liaison committee composed of five representatives of State agencies which 

supervise financial institutions which shall meet at least twice a 

year with the Council. Members of the liaison committee shall receive a reasonable allowance for necessary expenses incurred in attending meetings. 

ADMINISTRATION 

SEC. 1008. [12 U.S.C. 3307] (a) The Chairman of the Council 

is authorized to carry out and to delegate the authority to carry out 

the internal administration of the Council, including the appointment and supervision of employees and the distribution of business 

among members, employees, and administrative units. 

(b) in

 1 addition to any other authority conferred upon it by 

this title, in carrying out its functions under this title, the Council 

may utilize, with their consent and to the extent practical, the personnel, services, and facilities of the Federal financial institutions 

regulatory agencies, Federal Reserve banks, and Federal Home 

Loan Banks, with or without reimbursement therefor. 

(c) In addition, the Council may— 

(1) subject to the provisions of title 5, United States Code, 

relating to the competitive service, classification, and General 

Schedule pay rates, appoint and fix the compensation of such 

officers and employees as are necessary to carry out the provisions of this title, and to prescribe the authority and duties of 

such officers and employees; and 

(2) obtain the services of such experts and consultants as 

are necessary to carry out the provisions of this title. 

1

 So in law. Probably should be ''In''. 
Sec. 1005 FED. FINAN. INST. EXAMINATION COUNCIL ACT OF 1978 768 

ACCESS TO INFORMATIO N BY TH E COUNCIL 

SEC. 1009. [12 U.S.C. 3308] For the purpose of carrying out 

this title, the Council shall have access to all books, accounts, 

records, reports, files, memorandums, papers, things, and property 

belonging to or in use by Federal financial institutions regulatory 

agencies, including reports of examination of financial institutions 

or their holding companies from whatever source, together with 

workpapers and correspondence files related to such reports, 

whether or not a part of the report, and all without any deletions. 

SEC. 1009A. [12 U.S.C. 3309] RIS K MANAGEMEN T TRAINING. 1 

(a) SEMINARS.—The Council shall develop and administer 

training seminars in risk management for its employees and the 

employees of insured financial institutions. 

(b) STUD Y OF RIS K MANAGEMEN T TRAININ G PROGRAM.—No t 

later than end of the 1-year period beginning on the date of the 

enactment of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989, the Council shall— 

(1) conduct a study on the feasibility and appropriateness 

of establishing a formalized risk management training program designed to lead to the certification of Risk Management 

Analysts; and 

(2) report to the Congress the results of such study. 

SEC. 1011. [12 U.S.C. 3310] ESTABLISHMEN T O F APPRAISA L SUBCOMMITTEE . 

There shall be within the Council a subcommittee to be known 

as the ''Appraisal subcommittee'', which shall consist of the designees of the heads of the Federal financial institutions regulatory 

agencies. Each such designee shall be a person who has demonstrated knowledge and competence concerning the appraisal profession. 

1

 Section 1218 of Public Law 101-73 (103 Stat. 546) inserted this section at the end of the 

Act. The amendment probably should have been to insert after section 1009. 
FEDERAL HOME LOAN BANK ACT 

769 

FEDERAL HOME LOAN BANK ACT 

(47 Stat. 725; 12 U.S.C. 1421 et seq.) 

AN ACT To create Federal Home Loan Banks, to provide for the supervision 

thereof, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That this Act may 

be cited as the ''Federal Home Loan Bank Act.'' [12 U.S.C. 1421] 

DEFINITIONS 

SEC. 2. [12 U.S.C. 1422] As used in this Act— 

(1) BOARD.—The terms ''Finance Board'' and ''Board'' mean 

the Federal Housing Finance Board established under section 

2A. 

(2)(A) BANK.—The term ''Federal Home Loan Bank'' or 

''Bank'' means a bank established under the authority of the 

Federal Home Loan Bank Act. 

(B) BANK SYSTEM.—The term ''Federal Home Loan Bank 

System'' means the Federal Home Loan Banks under the 

supervision of the Board. 

(3) STATE.—The term ''State'', in addition to the States of 

the United States, includes the District of Columbia, Guam, 

Puerto Rico, the United States Virgin Islands, American 

Samoa, and the Commonwealth of the Northern Mariana Islands. 

(4)

 1 The term ''member'' means any institution which has subscribed for the stock of a Federal Home Loan Bank. 

(5)

 1 The term ''home mortgage loan'' means a loan made by a 

member upon the security of a home mortgage. 

(6)

 1 The term ''home mortgage'' means a mortgage upon real 

estate, in fee simple, or on a leasehold (1) under a lease for not less 

than ninety-nine years which is renewable or (2) under a lease having a period of not less than fifty years to run from the date the 

mortgage was executed, upon which is located, or which comprises 

or includes, one or more homes or other dwelling units, all of which 

may be defined by the Board, and shall include, in addition to first 

mortgages, such classes of first liens as are commonly given to secure advances on real estate by institutions authorized under this 

Act to become members, under the laws of the State in which the 

real estate is located, together with the credit instruments, if any, 

secured thereby. 

(7)1 The term ''unpaid principal,''2 when used in respect of a 

loan secured by a home mortgage means the principal thereof less 

the sum of (1) payments made on such principal, and (2) in cases 

1

 indentations so in original. 

2

 so in law. Comma probably should not be within the quotation marks. 

771 
Sec. 2A FEDERAL HOME LOAN BANK ACT 7 72 

where shares or stock are pledged as security for the loan, the payments made on such shares or stock plus earnings or dividends 

apportioned or credited thereon. 

(8)1 An ''amortized'' or ''installment'' home mortgage loan shall, 

for the purposes of this Act, be a home mortgage loan to be repaid 

or liquidated in not less than eight years by means of regular 

weekly, monthly, or quarterly payments made directly in reduction 

of the debt or upon stock or shares pledged as collateral for the 

repayment of such loan. 

(9) SAVINGS ASSOCIATION.—The term ''savings association'' 

has the meaning given to such term in section 3 of the Federal 

Deposit Insurance Act. 

(10) CHAIRPERSON.—The term ''Chairperson'' means the 

Chairperson of the Board. 

(11) SECRETARY.—The term ''Secretary'' means the Secretary of Housing and Urban Development. 

(12) INSURED DEPOSITORY INSTITUTION.—The term ''insured 

depository institution'' means— 

(A) an insured depository institution (as defined in 

section 3 of the Federal Deposit Insurance Act), and 

(B) except as used in sections 21A and 21B, an insured 

credit union (as defined in section 101 of the Federal 

Credit Union Act). 

(13) COMMUNITY FINANCIAL INSTITUTION.— 

(A) IN GENERAL.—The term ''community financial 

institution'' means a member— 

(i) the deposits of which are insured under the 

Federal Deposit Insurance Act; and 

(ii) that has, as of the date of the transaction at 

issue, less than $500,000,000 in average total assets, 

based on an average of total assets over the 3 years 

preceding that date. 

(B) ADJUSTMENTS.—The $500,000,000 limit referred to 

in subparagraph (A)(ii) shall be adjusted annually by the 

Finance Board, based on the annual percentage increase, 

if any, in the Consumer price index for all urban consumers, as published by the Department of Labor. 

SEC. 2A. [12 U.S.C. 1422a] FEDERAL HOUSING FINANCE BOARD. 

(a) ESTABLISHMENT.— 

(1) IN GENERAL.—There is established the Federal Housing 

Finance Board, which shall succeed to the authority of the Federal Home Loan Bank Board with respect to the Federal Home 

Loan Banks. 

(2) STATUS.—The Board shall be an independent agency in 

the executive branch of the Government. 

(3) 1 DUTIES.— 

(A)1 SAFETY AND SOUNDNESS.—The primary duty of the 

Board shall be to ensure that the Federal Home Loan Banks 

operate in a financially safe and sound manner. 

(B)1 OTHER DUTIES.—To the extent consistent with subparagraph (A), the duties of the Board shall also be— 

(i)

 1 to supervise the Federal Home Loan Banks; 

1

 indentations so in original. 
773 FEDERAL HOME LOAN BANK ACT Sec. 2A 

(ii)

 1 to ensure that the Federal Home Loan Banks 

carry out their housing finance mission; and 

(iii)

 1 to ensure that the Federal Home Loan Banks remain adequately capitalized and able to raise funds in the 

capital markets. 

(b) MANAGEMENT.— 

(1) IN GENERAL.—The management of the Board shall be 

vested in a Board of Directors consisting of 5 directors as follows: 

(A) The secretary who shall serve without additional 

compensation. 

(B) Four citizens of the united states, appointed by 

the President, by and with the advice and consent of the 

senate, each of whom shall hold office for a term of 7 

years. 

(2) PROVISIONS RELATING TO APPOINTED DIRECTORS.— 

(A) IN GENERAL.—The directors appointed pursuant to 

paragraph (1)(B) shall be from among persons with extensive experience or training in housing finance or with a 

commitment to providing specialized housing credit. An 

appointed director shall not hold any other appointed office 

during his or her term as director. Not more than 3 directors shall be members of the same political party. Not 

more than 1 appointed director shall be from any single 

district of the Federal Home Loan Bank system. Nominations pursuant to this subparagraph shall be referred in 

the senate to the Committee on Banking, Housing, and 

Urban Affairs. 

(B) CONSUMER REPRESENTATIVE.—At least 1 director 

shall be chosen from an organization with more than a 2-

year history of representing consumer or community interests on banking services, credit needs, housing, or financial consumer protections. 

(C) LIMITATIONS ON CONFLICTS OF INTEREST.—No director may— 

(i) serve as a director or officer of any Federal 

Home Loan Bank or any member of any Bank; or 

(ii) hold shares of, or any other financial interest 

in, any member of any such Bank. 

( D ) CLARIFICATION OF STATUS.— 

(i) IN GENERAL.—The directors appointed pursuant 

to paragraph (1)(B) shall serve on a full-time basis 

after December 31, 1993. 

(ii) RULE OF CONSTRUCTION.—Clause (i) shall not 

be construed as implying that any other position may 

be filled or held on a less than full-time basis. 

(3) INITIAL TERMS.—Notwithstanding paragraph (2), of the 

directors first appointed— 

(A) one shall be appointed for a term of 1 year; 

(B) one shall be appointed for a term of 3 years; and 

(C) one shall be appointed for a term of 5 years. 

(c) CHAIRPERSON; TRANSITIONAL PROVISIONS.— 

1

 indentations so in original. 
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 74 

(1) IN GENERAL.—The President shall designate 1 of the 

appointed directors to be the Chairperson of the Board. The 

Chairperson shall designate another director to serve as Acting 

Chairperson during the absence or disability of the Chairperson. 

(2) TRANSITIONAL PROVISION.—Beginning on the date of 

enactment of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989, until such time that at least 2 directors are appointed and confirmed pursuant to subsection (b), 

the Secretary shall act for all purposes and with the full powers of the Board of Directors. The Secretary may utilize the 

services of employees from the Department of Housing and 

urban Development to perform services for the Board of Directors during such transition period. 

(d) VACANCIES.— 

(1) IN GENERAL.—Any vacancy on the Board of Directors 

shall be filled in the manner in which the original appointment 

was made. Any director appointed to fill a vacancy occurring 

before the expiration of the term for which such director's predecessor was appointed shall be appointed only for the remainder of such term. Each director may continue to serve until a 

successor has been appointed and qualified. 

(2) TH E SECRETARY.—In the event of a vacancy in the office 

of Secretary or during the absence or disability of the Secretary, the Acting Secretary shall act as a director in place of 

the Secretary. 

SEC. 2B. [12 U.S.C. 1422b] POWERS AND DUTIES. 

(a) GENERAL POWERS.—The Board shall have the following 

powers: 

(1) To supervise the Federal Home Loan Banks and to promulgate and enforce such regulations and orders as are necessary from time to time to carry out the provisions of this Act. 

(2) To suspend or remove for cause a director, officer, employee, or agent of any Federal Home Loan Bank or joint office. 

The cause of such suspension or removal shall be communicated in writing to such director, officer, employee, or agent 

and to such Bank or joint office. Notwithstanding any other 

provision of this Act, no officer, employee, or agent of a Bank 

or joint office shall be a Federal officer or employee under any 

definition of either term in title 5, United States Code. 

(3) To determine necessary expenditures of the Board 

under this Act and the manner in which such expenditures 

shall be incurred, allowed, and paid. 

(4) To use the United States mails in the same manner 

and under the same conditions as a department or agency of 

the United States. 

(5) To issue and serve a notice of charges upon a Federal 

home loan bank or upon any executive officer or director of a 

Federal home loan bank if, in the determination of the Finance 

Board, the Bank, executive officer, or director is engaging or 

has engaged in, or the Finance Board has reasonable cause to 

believe that the Bank, executive officer, or director is about to 

engage in an unsafe or unsound practice in conducting the 
775 FEDERAL HOME LOAN BANK ACT Sec. 10b 

business of the bank, or any conduct that violates any provision of this Act or any law, order, rule, or regulation or any 

condition imposed in writing by the Finance Board in connection with the granting of any application or other request by 

the Bank, or any written agreement entered into by the Bank 

with the agency, in accordance with the procedures provided in 

subsection (c) or (f) of section 1371 of the Federal Housing 

Enterprises Financial Safety and Soundness Act of 1992. Such 

authority includes the same authority to issue an order requiring a party to take affirmative action to correct conditions resulting from violations or practices or to limit activities of a 

Bank or any executive officer or director of a Bank as appropriate Federal banking agencies have to take with respect to 

insured depository institutions under paragraphs (6) and (7) of 

section 8(b) of the Federal Deposit Insurance Act, and to have 

all other powers, rights, and duties to enforce this Act with respect to the Federal home loan banks and their executive officers and directors as the Office of Federal Housing Enterprise 

Oversight has to enforce the Federal Housing Enterprises 

Financial Safety and Soundness Act of 1992, the Federal National Mortgage Association Charter Act, or the Federal Home 

Loan Mortgage Corporation Act with respect to the Federal 

housing enterprises under subtitle C (other than section 1371) 

of the Federal Housing Enterprises Financial Safety and 

Soundness Act of 1992. 

(6) To address any insufficiencies in capital levels resulting 

from the application of section 5(f) of the Home Owners' Loan 

Act. 

(7) To act in its own name and through its own 

attorneys— 

(A) in enforcing any provision of this Act or any regulation promulgated under this Act; or 

(B) in any action, suit, or proceeding to which the Finance Board is a party that involves the Board's regulation 

or supervision of any Federal home loan bank. 

(b) STAFF.— 

(1) BOARD STAFF.—Subject to title IV of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 1989, 

the Board may employ, direct, and fix the compensation and 

number of employees, attorneys, and agents of the Federal 

Housing Finance Board, except that in no event shall the 

Board delegate any function to any employee, administrative 

unit of any Bank, or joint office of the Federal Home Loan 

Bank System. The prohibition contained in the preceding sentence shall not apply to the delegation of ministerial functions 

including issuing consolidated obligations pursuant to section 

11(b). In directing and fixing such compensation, the Board 

shall consult with and maintain comparability with the compensation at the Federal bank regulatory agencies. Such compensation shall be paid without regard to the provisions of 

other laws applicable to officers or employees of the United 

States, except the Chairperson and other Directors shall be 

compensated as prescribed in sections 5314 and 5315 of title 

5, United States Code, respectively. 
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 76 

(2) ABOLITIO N OF JOINT OFFICES.—The joint or collective offices of the Federal Home Loan Bank System, except for the 

Office of Finance, are hereby abolished. 

(c) RECEIPTS OF TH E BOARD.—Receipts of the Board derived 

from assessments levied upon the Federal Home Loan Banks and 

from other sources (other than receipts from the sale of consolidated Federal Home Loan Bank bonds and debentures issued 

under section 11 of this Act) shall be deposited in the Treasury of 

the United States. Salaries of the directors and other employees of 

the Board and all other expenses thereof may be paid from such 

assessments or other sources and shall not be construed to be Government Funds or appropriated monies, or subject to apportionment for the purposes of chapter 15 of title 31, United States Code, 

or any other authority. 

(d) ANNUA L REPORT.—The Board shall make an annual report 

to the Congress. 

FEDERAL HOM E LOAN BANKS 

SEC. 3. [12 U.S.C. 1423] As soon as practicable the Board 

shall divide the continental United States, Puerto Rico, the Virgin 

islands, Guam, and the Territories of Alaska and Hawaii into not 

less than eight nor more than twelve districts. Such districts shall 

be apportioned with due regard to the convenience and customary 

course of business of the institutions eligible to and likely to subscribe for stock of a Federal Home Loan Bank to be formed under 

this Act, but no such district shall contain a fractional part of any 

State. The districts thus created may be readjusted and new districts may from time to time be created by the Board, not to exceed 

twelve in all. Such districts shall be known as Federal Home Loan 

Bank districts and may be designated by number. As soon as practicable the Board shall establish, in each district, a Federal Home 

Loan Bank at such city as may be designated by the Board. Its title 

shall include the name of the city at which it is established. 

ELIGIBILITY OF MEMBERS AND NONMEMBER BORROWERS 

SEC. 4. [12 U.S.C. 1424] (a) CRITERIA FOR ELIGIBILITY.— 

(1) IN GENERAL.—Any building and loan association, savings and loan association, cooperative bank, homestead association, insurance company, savings bank, or any insured 

depository institution (as defined in section 2 of this Act), shall 

be eligible to become a member of a Federal Home Loan Bank 

if such institution— 

(A) is duly organized under the laws of any State or 

of the United States; 

(B) is subject to inspection and regulation under the 

banking laws, or under similar laws, of the State or of the 

United States; and 

(C) makes such home mortgage loans as, in the judgment of the Board, are long-term loans (except that in the 

case of a savings bank, this subparagraph applies only if, 

in the judgment of the Board, its time deposits, as defined 

in section 19 of the Federal Reserve Act, warrant its making such loans). 
777 FEDERAL HOME LOAN BANK ACT Sec. 10b 

(2) QUALIFIED THRIFT LENDER.—A n insured depository 

institution that is not a member on January 1, 1989, may become a member of a Federal Home Loan Bank only if— 

(A) the insured depository institution (other than a 

community financial institution) has at least 10 percent of 

its total assets in residential mortgage loans; 

(B) the insured depository institution's financial condition is such that advances may be safely made to such 

institution; and 

(C) the character of its management and its home-financing policy are consistent with sound and economical 

home financing. 

(3) CERTAIN INSTITUTIONS.—An insured depository institution commencing its initial business operations after January 

1, 1989, may become a member of a Federal Home Loan Bank 

if it complies with regulations and orders prescribed by the 

Board for the 10 percent asset requirement (described in the1 

paragraph (2)) within one year after the commencement of its 

operations. 

(4) LIMITE D EXEMPTION FOR COMMUNITY FINANCIAL INSTITUTIONS.—A community financial institution that otherwise 

meets the requirements of paragraph (2) may become a member without regard to the percentage of its total assets that is 

represented by residential mortgage loans, as described in subparagraph (A) of paragraph (2). 

(b) An institution eligible to become a member under this section may become a member only of, or secure advances from, the 

Federal Home Loan Bank of the district in which is located the 

institution's principal place of business, or of the bank of a district 

adjoining such district, if demanded by convenience and then only 

with the approval of the Board. 

(c) Notwithstanding the provisions of clause (2) of subsection 

(a) of this section requiring inspection and regulation under law as 

a condition with respect to eligibility for membership, any building 

and loan association which would be eligible to become a member 

of a Federal Home Loan Bank except for the fact that it is not subject to inspection and regulation under the banking laws or similar 

laws of the state in which such association is organized shall, upon 

subjecting itself to such inspection and regulation as the Board 

shall prescribe, be eligible to become a member. 

[Sections 5, 5A, and 5B—Repealed by the Financial Institution Reform, 

Recovery, and Enforcement Act of 1989 (see sections 705, 716, and 720 of 

such Act, 103 Stat. 416, 421, and 423).] 

SEC. 6. [12 U.S.C. 1426] CAPITAL STRUCTURE OF FEDERA L HOM E LOA N 

BANKS. 

(a) REGULATIONS.— 

(1) CAPITAL STANDARDS.—Not later than 18 months after 

the date of the enactment of the Federal Home Loan Bank System Modernization Act of 1999, the Finance Board shall issue 

regulations prescribing uniform capital standards applicable to 

1

 So in law. Section 605(2)(B) of P.L. 106-102 (113 Stat. 1452) amended this section by striking ''preceding sentence'' and inserting ''paragraph (2)''. Should probably have struck ''the'' as 

well. 
Sec. 2B FEDERAL HOME LOAN BANK ACT 778 

each Federal home loan bank, which shall require each such 

bank to meet— 

(A) the leverage requirement specified in paragraph 

(2); and 

(B) the risk-based capital requirements, in accordance 

with paragraph (3). 

(2) LEVERAGE REQUIREMENT.— 

(A) IN GENERAL.—The leverage requirement shall require each Federal home loan bank to maintain a minimum amount of total capital based on the total assets of 

the bank and shall be 5 percent. 

(B) TREATMENT OF STOCK AND RETAINED EARNINGS.— 

in determining compliance with the minimum leverage 

ratio established under subparagraph (A), the paid-in 

value of the outstanding Class B stock and the amount of 

retained earnings shall be multiplied by 1.5, and such 

higher amounts shall be deemed to be capital for purposes 

of meeting the 5 percent minimum leverage ratio, except 

that a Federal home loan bank's total capital (determined 

without taking into account any such multiplier) shall not 

be less than 4 percent of the total assets of the bank. 

(3) RISK-BASED CAPITAL STANDARDS.— 

(A) IN GENERAL.—Each Federal home loan bank shall 

maintain permanent capital in an amount that is sufficient, as determined in accordance with the regulations of 

the Finance Board, to meet— 

(i) the credit risk to which the Federal home loan 

bank is subject; and 

(ii) the market risk, including interest rate risk, to 

which the Federal home loan bank is subject, based on 

a stress test established by the Finance Board that 

rigorously tests for changes in market variables, including changes in interest rates, rate volatility, and 

changes in the shape of the yield curve. 

(B) CONSIDERATION OF OTHER RISK-BASED STANDARDS.—In establishing the risk-based standard under subparagraph (A)(ii), the Finance Board shall take due consideration of any risk-based capital test established pursuant 

to section 1361 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4611) for 

the enterprises (as defined in that Act), with such modifications as the Finance Board determines to be appropriate to reflect differences in operations between the Federal home loan banks and those enterprises. 

(4) OTHER REGULATORY REQUIREMENTS.—The regulations 

issued by the Finance Board under paragraph (1) shall— 

(A) permit each Federal home loan bank to issue, with 

such rights, terms, and preferences, not inconsistent with 

this Act and the regulations issued hereunder, as the 

board of directors of that bank may approve, any 1 or more 

of— 

(i) Class A stock, which shall be redeemable in 

cash and at par 6 months following submission by a 
779 FEDERAL HOME LOAN BANK ACT Sec. 10b 

member of a written notice of its intent to redeem 

such shares; and 

(ii) Class B stock, which shall be redeemable in 

cash and at par 5 years following submission by a 

member of a written notice of its intent to redeem 

such shares; 

(B) provide that the stock of a Federal home loan bank 

may be issued to and held by only members of the bank, 

and that a bank may not issue any stock other than as 

provided in this section; 

(C) prescribe the manner in which stock of a Federal 

home loan bank may be sold, transferred, redeemed, or repurchased; and 

(D) provide the manner of disposition of outstanding 

stock held by, and the liquidation of any claims of the Federal home loan bank against, an institution that ceases to 

be a member of the bank, through merger or otherwise, or 

that provides notice of intention to withdraw from membership in the bank. 

(5) DEFINITION S OF CAPITAL.—For purposes of determining 

compliance with the capital standards established under this 

subsection— 

(A) permanent capital of a Federal home loan bank 

shall include— 

(i) the amounts paid for the Class B stock; and 

(ii) the retained earnings of the bank (as determined in accordance with generally accepted accounting principles); and 

(B) total capital of a Federal home loan bank shall 

include— 

(i) permanent capital; 

(ii) the amounts paid for the Class A stock; 

(iii) consistent with generally accepted accounting 

principles, and subject to the regulation of the Finance 

Board, a general allowance for losses, which may not 

include any reserves or allowances made or held 

against specific assets; and 

(iv) any other amounts from sources available to 

absorb losses incurred by the bank that the Finance 

Board determines by regulation to be appropriate to 

include in determining total capital. 

(6) TRANSITION PERIOD.—Notwithstanding any other provision of this Act, the requirements relating to purchase and 

retention of capital stock of a Federal home loan bank by any 

member thereof in effect on the day before the date of the 

enactment of the Federal Home Loan Bank System Modernization Act of 1999, shall continue in effect with respect to each 

Federal home loan bank until the regulations required by this 

subsection have taken effect and the capital structure plan required by subsection (b) has been approved by the Finance 

Board and implemented by such bank. 

(b) CAPITAL STRUCTURE PLAN. — 

(1) APPROVAL OF PLANS.—Not later than 270 days after the 

date of publication by the Finance Board of final regulations in 
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 80 

accordance with subsection (a), the board of directors of each 

Federal home loan bank shall submit for Finance Board approval a plan establishing and implementing a capital structure for such bank that— 

(A) the board of directors determines is best suited for 

the condition and operation of the bank and the interests 

of the members of the bank; 

(B) meets the requirements of subsection (c); and 

(C) meets the minimum capital standards and requirements established under subsection (a) and other regulations prescribed by the Finance Board. 

(2) APPROVAL OF MODIFICATIONS.—The board of directors of 

a Federal home loan bank shall submit to the Finance Board 

for approval any modifications that the bank proposes to make 

to an approved capital structure plan. 

(c) CONTENTS OF PLAN.—Th e capital structure plan of each 

Federal home loan bank shall contain provisions addressing each 

of the following: 

(1) MINIMU M INVESTMENT.— 

(A) IN GENERAL.—Each capital structure plan of a Federal home loan bank shall require each member of the 

bank to maintain a minimum investment in the stock of 

the bank, the amount of which shall be determined in a 

manner to be prescribed by the board of directors of each 

bank and to be included as part of the plan. 

(B) INVESTMENT ALTERNATIVES.— 

(i) I N GENERAL.—In establishing the minimum 

investment required for each member under subparagraph (A), a Federal home loan bank may, in its discretion, include any 1 or more of the requirements referred to in clause (ii), or any other provisions approved by the Finance Board. 

(ii) AUTHORIZED REQUIREMENTS.—A requirement 

is referred to in this clause if it is a requirement for— 

(i) a stock purchase based on a percentage of 

the total assets of a member; or 

(ii) a stock purchase based on a percentage of 

the outstanding advances from the bank to the 

member. 

(C) MINIMU M AMOUNT.—Eac h capital structure plan of 

a Federal home loan bank shall require that the minimum 

stock investment established for members shall be set at 

a level that is sufficient for the bank to meet the minimum 

capital requirements established by the Finance Board 

under subsection (a). 

( D ) ADJUSTMENTS TO MINIMU M REQUIRED INVESTMENT.—The capital structure plan of each Federal home 

loan bank shall impose a continuing obligation on the 

board of directors of the bank to review and adjust the 

minimum investment required of each member of that 

bank, as necessary to ensure that the bank remains in 

compliance with applicable minimum capital levels established by the Finance Board, and shall require each mem-
781 FEDERAL HOME LOAN BANK ACT Sec. 10b 

ber to comply promptly with any adjustments to the required minimum investment. 

(2) TRANSITION RULE.— 

(A) IN GENERAL.—The capital structure plan of each 

Federal home loan bank shall specify the date on which it 

shall take effect, and may provide for a transition period 

of not longer than 3 years to allow the bank to come into 

compliance with the capital requirements prescribed under 

subsection (a), and to allow any institution that was a 

member of the bank on the date of the enactment of the 

Federal Home Loan Bank System Modernization Act of 

1999, to come into compliance with the minimum investment required pursuant to the plan. 

(B) INTERI M PURCHASE REQUIREMENTS.—The capital 

structure plan of a Federal home loan bank may allow any 

member referred to in subparagraph (A) that would be required by the terms of the capital structure plan to increase its investment in the stock of the bank to do so in 

periodic installments during the transition period. 

(3) DISPOSITION OF SHARES.—The capital structure plan of 

a Federal home loan bank shall provide for the manner of disposition of any stock held by a member of that bank that terminates its membership or that provides notice of its intention 

to withdraw from membership in that bank. 

(4) CLASSES OF STOCK.— 

(A) IN GENERAL.—The capital structure plan of a Federal home loan bank shall afford each member of that 

bank the option of maintaining its required investment in 

the bank through the purchase of any combination of 

classes of stock authorized by the board of directors of the 

bank and approved by the Finance Board in accordance 

with its regulations. 

(B) RIGHTS REQUIREMENT.—A Federal home loan bank 

shall include in its capital structure plan provisions establishing terms, rights, and preferences, including minimum 

investment, dividends, voting, and liquidation preferences 

of each class of stock issued by the bank, consistent with 

Finance Board regulations and market requirements. 

(C) REDUCED MINIMU M INVESTMENT.—The capital 

structure plan of a Federal home loan bank may provide 

for a reduced minimum stock investment for any member 

of that bank that elects to purchase Class B 1 in a manner 

that is consistent with meeting the minimum capital 

requirements of the bank, as established by the Finance 

Board. 

(D) LIQUIDATION OF CLAIMS.—The capital structure 

plan of a Federal home loan bank shall provide for the liquidation in an orderly manner, as determined by the bank, 

of any claim of that bank against a member, including 

claims for any applicable prepayment fees or penalties resulting from prepayment of advances prior to stated maturity. 

1

 So in law. Should probably be ''Class B stock''. 
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 82 

(5) LIMITE D TRANSFERABILITY OF STOCK.—The capital 

structure plan of a Federal home loan bank shall— 

(A) provide that any stock issued by that bank shall 

be available only to and held only by members of that 

bank and tradable only between that bank and its members; and 

(B) establish standards, criteria, and requirements for 

the issuance, purchase, transfer, retirement, and redemption of stock issued by that bank. 

(6) BANK REVIEW OF PLAN.—Before filing a capital structure plan with the Finance Board, each Federal home loan 

bank shall conduct a review of the plan by— 

(A) an independent certified public accountant, to ensure, to the extent possible, that implementation of the 

plan would not result in any write-down of the redeemable 

bank stock investment of its members; and 

(B) at least one major credit rating agency, to determine, to the extent possible, whether implementation of 

the plan would have any material effect on the credit ratings of the bank. 

(d) TERMINATION OF MEMBERSHIP.— 

(1) VOLUNTARY WITHDRAWAL.—Any member may withdraw 

from a Federal home loan bank if the member provides written 

notice to the bank of its intent to do so and if, on the date of 

withdrawal, there is in effect a certification by the Finance 

Board that the withdrawal will not cause the Federal Home 

Loan Bank System to fail to meet its obligation under section 

21B(f)(2)(C) to contribute to the debt service for the obligations 

issued by the Resolution Funding Corporation. The applicable 

stock redemption notice periods shall commence upon receipt of 

the notice by the bank. Upon the expiration of the applicable 

notice period for each class of redeemable stock, the member 

may surrender such stock to the bank, and shall be entitled to 

receive in cash the par value of the stock. During the applicable notice periods, the member shall be entitled to dividends 

and other membership rights commensurate with continuing 

stock ownership. 

(2) INVOLUNTARY WITHDRAWAL.— 

(A) IN GENERAL.—The board of directors of a Federal 

home loan bank may terminate the membership of any 

institution if, subject to Finance Board regulations, it 

determines that— 

(i) the member has failed to comply with a provision of this Act or any regulation prescribed under this 

Act; or 

(ii) the member has been determined to be insolvent, or otherwise subject to the appointment of a conservator, receiver, or other legal custodian, by a Federal or state authority with regulatory and supervisory responsibility for the member. 

(B) STOCK DISPOSITION.—An institution, the membership of which is terminated in accordance with subparagraph (A)— 
Sec. 2B 

FEDERAL HOME LOAN BANK ACT 

783 

(i) shall surrender redeemable stock to the Federal home loan bank, and shall receive in cash the par 

value of the stock, upon the expiration of the applicable notice period under subsection (a)(4)(A); 

(ii) shall receive any dividends declared on its 

redeemable stock, during the applicable notice period 

under subsection (a)(4)(A); and 

(iii) shall not be entitled to any other rights or 

privileges accorded to members after the date of the 

termination. 

(C) COMMENCEMENT OF NOTICE PERIOD.—With respect 

to an institution, the membership of which is terminated 

in accordance with subparagraph (A), the applicable notice 

period under subsection (a)(4) for each class of redeemable 

stock shall commence on the earlier of— 

(i) the date of such termination; or 

(ii) the date on which the member has provided 

notice of its intent to redeem such stock. 

(3) LIQUIDATION OF INDEBTEDNESS.—Upon the termination 

of the membership of an institution for any reason, the outstanding indebtedness of the member to the bank shall be liquidated in an orderly manner, as determined by the bank and, 

upon the extinguishment of all such indebtedness, the bank 

shall return to the member all collateral pledged to secure the 

indebtedness. 

(e) REDEMPTION OF EXCESS STOCK.— 

(1) I N GENERAL.—A Federal home loan bank, in its sole 

discretion, may redeem or repurchase, as appropriate, any 

shares of Class A or Class B stock issued by the bank and held 

by a member that are in excess of the minimum stock investment required of that member. 

(2) EXCESS STOCK.—Shares of stock held by a member 

shall not be deemed to be ''excess stock'' for purposes of this 

subsection by virtue of a member's submission of a notice of intent to withdraw from membership or termination of its membership in any other manner. 

(3) PRIORITY.—A Federal home loan bank may not redeem 

any excess Class B stock prior to the end of the 5-year notice 

period, unless the member has no Class A stock outstanding 

that could be redeemed as excess. 

(f) IMPAIRMENT OF CAPITAL.—If the Finance Board or the board 

of directors of a Federal home loan bank determines that the bank 

has incurred or is likely to incur losses that result in or are expected to result in charges against the capital of the bank, the 

bank shall not redeem or repurchase any stock of the bank without 

the prior approval of the Finance Board while such charges are 

continuing or are expected to continue. in no case may a bank redeem or repurchase any applicable capital stock if, following the 

redemption, the bank would fail to satisfy any minimum capital 

requirement. 

(g) REJOINING AFTER DIVESTITURE OF AL L SHARES.— 

(1) IN GENERAL.—Except as provided in paragraph (2), and 

notwithstanding any other provision of this Act, an institution 

that divests all shares of stock in a Federal home loan bank 
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 84 

may not, after such divestiture, acquire shares of any Federal 

home loan bank before the end of the 5-year period beginning 

on the date of the completion of such divestiture, unless the 

divestiture is a consequence of a transfer of membership on an 

uninterrupted basis between banks. 

(2) EXCEPTION FOR WITHDRAWALS FROM MEMBERSHIP BEFORE 1998.—Any institution that withdrew from membership in 

any Federal home loan bank before December 31, 1997, may 

acquire shares of a Federal home loan bank at any time after 

that date, subject to the approval of the Finance Board and the 

requirements of this Act. 

(h) TREATMENT OF RETAINED EARNINGS.— 

(1) IN GENERAL.—The holders of the Class B stock of a 

Federal home loan bank shall own the retained earnings, surplus, undivided profits, and equity reserves, if any, of the bank. 

(2) EXCEPTION.—Except as specifically provided in this section or through the declaration of a dividend or a capital distribution by a Federal home loan bank, or in the event of liquidation of the bank, a member shall have no right to withdraw or otherwise receive distribution of any portion of the retained earnings of the bank. 

(3) LIMITATION.—A Federal home loan bank may not make 

any distribution of its retained earnings unless, following such 

distribution, the bank would continue to meet all applicable 

capital requirements. 

MANAGEMENT OF BANKS 

SEC. 7. [12 U.S.C. 1427] (a) The management of each Federal 

Home Loan Bank shall be vested in a board of fourteen directors, 

eight of whom shall be elected by the members as hereinafter provided in this section and six of whom shall be appointed by the 

Board referred to in section 2A, all of whom shall be citizens of the 

United States, and each of whom shall be either a bona fide resident of the district in which such bank is located or an officer or 

director of a member of such bank located in that district: Provided, That in any district which includes five or more States the 

Board may by regulation increase the elective directors to a number not exceeding thirteen and may increase the appointive directors to a number not exceeding three-fourths the number of elective 

directors: Provided further, That, if at any time the number of elective directors in the case of any district is not at least equal to the 

number of States in such district the Board shall exercise the authority conferred by the next preceding proviso so as to increase 

such elective directors to a number at least equal to the number 

of States in such district. At least 2 of the Federal Home Loan 

Bank directors who are appointed by the Board shall be representatives chosen from organizations with more than a 2-year history 

of representing consumer or community interests on banking services, credit needs, housing, or financial consumer protections. No 

Federal Home Loan Bank director who is appointed pursuant to 

this subsection may, during such Bank director's term of office, 

serve as an officer of any Federal Home Loan Bank or a director 

or officer of any member of a Bank, or hold shares, or any other 

financial interest in, any member of a Bank. 
7 85 FEDERAL HOME LOAN BANK ACT Sec. 10b 

(b) Each elective directorship shall be designated by the Board 

as representing the members located in a particular state, and 

shall be filled by a person who is an officer or director of a member 

located in that state, each of which members shall be entitled to 

nominate an eligible person for such directorship, and such office 

shall be filled from such nominees by a plurality of the votes which 

such members may cast in an election held for the purpose of filling such office, in which election each such member may cast for 

such office a number of votes equal to the number of shares of 

stock in such bank required by this Act to be held by such member 

at the end of the calendar year next preceding the election, as 

determined pursuant to regulation of the Board, but not in excess 

of the average number of shares of stock in such bank required by 

this Act to be held at the end of such calendar year by the respective members of such bank located in such state, as so determined. 

No person who is an officer or director of a member that fails to 

meet any applicable capital requirement is eligible to hold the office of Federal Home Loan Bank director. As used in this subsection and in subsection (c) of this section, the term ''member'' 

means a member of a Federal home loan bank which was a member of such bank at the end of such calendar year. 

(c) The number of elective directorships designated as representing the members located in each separate state in a bank 

district shall be determined by the Board in the approximate ratio 

of the percentage of the required stock, as determined pursuant to 

regulation of the Board, of the members located in that state at the 

end of the calendar year next preceding the date of the election to 

the total required stock, as so detemined, of all members of such 

bank at the end of such year, except that in the case of each state 

such number shall not be less than one and shall not be more than 

six. Notwithstanding any other provision of this section, if at any 

time the number of elective directorships so designated as representing the members located in any state would not be at least 

equal to the total number of elective directorships which, on December 31, 1960, were filled by officers or directors of members 

whose principal places of business were located in such state, the 

Board shall add to the board of directors of the bank of the district 

in which such state is located such number of elective directorships, and shall so designate the directorship or directorships thus 

added, that the number of elective directorships designated as representing the members located in such state will equal said total 

number. Any elective directorship so added shall exist only until 

the expiration of its first term. The Board shall, with respect to 

each member of a Federal home loan bank, designate the state in 

the district of such bank in which such member shall, for the purposes of this subsection and subsection (b) of this section, be 

deemed to be located, and may from time to time change any such 

designation, but if the principal place of business of any such member is located in a state of such district it shall be the duty of the 

Board to designate such state as the state in which such member 

shall, for said purposes, be deemed to be located. As used in the 

second sentence of this subsection, the term ''total number of elective directorships'' means the total number of elective directorships 

on the board of directors of the bank of the district in which such 
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 86 

State was located on December 31, 1960, and the term ''members'' 

where used for the second time in such sentence means members 

of such bank. 

(d) The term of each director, whether elected or appointed, 

shall be 3 years. The board of directors of each Federal home loan 

bank and the Finance Board shall adjust the terms of members 

first elected or appointed after the date of the enactment of the 

Federal Home Loan Bank System Modernization Act of 1999 to ensure that the terms of the members of the board of directors are 

staggered with approximately V3 of the terms expiring each year. 

if any person, before or after, or partly before and partly after, the 

date of the enactment of this sentence, has been elected to each of 

three consecutive full terms as an elective director of a Federal 

home loan bank in any elective directorship or elective directorships and has served for all or part of each of said terms, such person shall not be eligible for election to an elective directorship of 

such bank for a term which begins earlier than two years after the 

expiration of the last expiring of said three terms. The Board is 

hereby authorized to prescribe such rules and regulations as it may 

deem necessary or appropriate for the nomination and election of 

directors of Federal home loan banks, including, without limitation 

on the generality of the foregoing, rules and regulations with respect to the breaking of ties and with respect to the inclusion of 

more than one directorship on a single ballot and the methods of 

voting and of determining the results of voting in such cases. 

(e) Each term, outstanding on the effective date of the amendment to this section abolishing the division of elective directors into 

classes, of an elective or appointive directorship then existing shall 

continue until its original date of expiration, and any elective or 

appointive directorship in existence on said date shall continue to 

exist to the same extent as if it had been established by or under 

this section on or after said date. The Board in its discretion may 

shorten the next succeeding term of any such elective directorship 

to one year, and may fill such term by appointment. The term 

''States'' or ''State'' as used in this section shall mean the States of 

the Union, the District of Columbia, and the Commonwealth of 

Puerto Rico. The Board, by regulation or otherwise, may add an 

additional elective directorship to the board of directors of the bank 

of any district in which the Commonwealth of Puerto Rico is included at the time such directorship is added and which does not 

then include five or more States, may fix the commencement and 

the duration, which shall not exceed two years, of the initial term 

of any directorship so added, and may fill any such initial term by 

appointment: Provided, That (1) any directorship added pursuant 

to the foregoing provisions of this sentence shall be designated by 

the Board, pursuant to subsection (b) of this section, as representing the members located in the Commonwealth of puerto 

Rico, (2) such designation of such directorship shall not be changed, 

and (3) such directorship shall automatically cease to exist if and 

when the Commonwealth of Puerto Rico ceases to be included in 

such district. 

(f) VACANCIES.— 
787 FEDERAL HOME LOAN BANK ACT Sec. 10b 

(1) I N GENERAL.—A Bank director appointed or elected to 

fill a vacancy shall be appointed or elected for the unexpired 

term of his or her predecessor in office. 

(2) APPOINTED BANK DIRECTORS.—In the event of a vacancy 

in any appointive Bank directorship, such vacancy shall be 

filled through appointment by the Board for the unexpired 

term. If any appointive Bank director shall cease to have the 

qualifications set forth in subsection (a), the office held by such 

person shall immediately become vacant, but such person may 

continue to act as a Bank director until his or her successor 

assumes the vacated office or the term of such office expires, 

whichever occurs first. 

(3) ELECTED BANK DIRECTORS.—In the event of a vacancy 

in any elective Bank directorship, such vacancy shall be filled 

by an affirmative vote of a majority of the remaining Bank 

directors, regardless of whether such remaining Bank directors 

constitute a quorum of the Bank's board of directors. A Bank 

director so elected shall satisfy the requirements for eligibility 

which were applicable to his predecessor. If any elective Bank 

director shall cease to have any qualification set forth in this 

section, the office held by such person shall immediately become vacant, and such person shall not continue to act as a 

Bank director. 

(g) CHAIRPERSON AND VICE CHAIRPERSON.— 

(1) ELECTION.—The Chairperson and Vice Chairperson of 

the board of directors of each Federal home loan bank shall be 

elected by a majority of all the directors of such bank from 

among the directors of the bank. 

(2) TERMS.—The term of office of the Chairperson and the 

vice Chairperson of the board of directors of a Federal home 

loan bank shall be 2 years. 

(3) ACTING CHAIRPERSON.—In the event of a vacancy in the 

position of Chairperson of the board of directors or during the 

absence or disability of the Chairperson, the Vice Chairperson 

shall act as Chairperson. 

(4) PROCEDURES.—The board of directors of each Federal 

home loan bank shall establish procedures, in the bylaws of 

such board, for designating an acting chairperson for any period during which the Chairperson and the vice Chairperson 

are not available to carry out the requirements of that position 

for any reason and removing any person from any such position for good cause. 

(h) if at any time when nominations are required members 

shall hold less than $1,000,000 of the capital stock of the Federal 

home loan bank, the Board shall appoint a director or directors to 

fill the place or places for which such nominations are required, 

and the Board may, prior to the filing of the certificate mentioned 

in section 12, appoint directors who shall be respectively designated by it as appointive directors and as elective directors, in 

accordance with the provisions of this section. 

(i) DIRECTORS' COMPENSATION.— 

(1) IN GENERAL.—Subject to paragraph (2), each bank may 

pay its directors reasonable compensation for the time required 

of them, and their necessary expenses, in the performance of 
Sec. 2B FEDERAL HOME LOAN BANK ACT 788 

their duties, in accordance with the resolutions adopted by the 

such directors, subject to the approval of the board. 

(2) LIMITATION.— 

(A) IN GENERAL.—The annual salary of each of the following members of the board of directors of a Federal 

home loan bank may not exceed the amount specified: 

(B) ADJUSTMENT.—Beginning January 1, 2001, each 

dollar amount referred to in the table in subparagraph (A) 

shall be adjusted annually by the Finance Board, based on 

the annual percentage increase, if any, in the Consumer 

Price Index for all urban consumers, as published by the 

Department of Labor. 

(C) EXPENSES.—Subparagraph (A) shall not be construed as prohibiting the reimbursement of expenses incurred by members of the board of directors of any Federal 

home loan bank in connection with service on the board of 

directors. 

(j) Such board of directors shall administer the affairs of the 

bank fairly and impartially and without discrimination in favor of 

or against any member, and shall, subject to the provisions hereof, 

extend to each institution authorized to secure advances such advances as may be made safely and reasonably with due regard for 

the claims and demands of other institutions, and with due regard 

to the maintanence of adequate credit standing for the Federal 

Home Loan Bank and its obligations. 

(k) INDEMNIFICATION OF DIRECTORS, OFFICERS, AND EMPLOYEES.—The board of directors of each Bank shall determine the 

terms and conditions under which such Bank may indemnify its 

directors, officers, employees or agents. 

SEC. 8. [12 U.S.C. 1428] The Board shall cause to be made 

from time to time examinations of the laws of the various States 

of the United States and the regulations and procedure thereunder 

governing conditions under which institutions of the kinds which 

may become members or nonmember borrowers under this Act are 

permitted to be formed or to do business, or relating to the conveying or recording of land titles, or to homestead and other rights, 

or to the enforcement of the rights of holders of mortgages on lands 

securing loans, or otherwise. If any such examination shall indicate, in the opinion of the Board, that under the laws of any such 

State or the regulations or procedure thereunder there would be 

inadequate protection to a Federal Home Loan Bank in making or 

collecting advances under this Act, the Board may withhold or limit 

the operation of any Federal Home Loan Bank in such State until 

satisfactory conditions of law, regulation, or procedure shall be 

established. In any State where State examination of members or 

nonmember borrowers is deemed inadequate for the purposes of 

the Federal Home Loan Banks, the Board shall establish such 

The annual compensation 

I n the case of the— 

Chairperson 

may not exceed— 

$25,000 

$20,000 

$15,000. 

Vice Chairperson . 

All other members 

EXAMINATIONS AND STUDIES BY THE BOARD 
789 FEDERAL HOME LOAN BANK ACT Sec. 10b 

examination, all or part of the cost of which may be considered as 

part of the cost of making advances in such State. The banks and/ 

or the Board may make studies of trends of home and other property values, methods of appraisals, and other subjects such as they 

may deem useful for the general guidance of their policies and 

operations and those of institutions authorized to secure advances. 

ELIGIBILITY TO SECURE ADVANCES 

SEC. 9. [12 U.S.C. 1429] Any member of a Federal Home Loan 

Bank shall be entitled to apply in writing for advances. such application shall be in such form as shall be required by the Federal 

Home Loan Bank. Such Federal Home Loan Bank may at its discretion deny any such application, or may grant it on such conditions as the Federal Home Loan Bank may prescribe. 

SEC. 10. [12 U.S.C. 1430] ADVANCES TO MEMBERS. 

(a) I N GENERAL.— 

(1) ALL ADVANCES.—Each Federal Home Loan Bank is 

authorized to make secured advances to its members upon collateral sufficient, in the judgment of the Bank, to fully secure 

advances obtained from the Bank under this section or section 

11(g) of this Act. 

(2) PURPOSES OF ADVANCES.—A long-term advance may 

only be made for the purposes of— 

(A) providing funds to any member for residential 

housing finance; and 

(B) providing funds to any community financial institution for small businesses, small farms, and small agribusinesses. 

(3) COLLATERAL.—A Bank, at the time of origination or renewal of a loan or advance, shall obtain and maintain a security interest in collateral eligible pursuant to one or more of 

the following categories: 

(A) Fully disbursed, whole first mortgages on improved residential property (not more than 90 days delinquent), or securities representing a whole interest in such 

mortgages. 

(B) securities issued, insured, or guaranteed by the 

united states Government or any agency thereof (including without limitation, mortgage-backed securities issued 

or guaranteed by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Corporation, and 

the Government National Mortgage Association). 

(C) Cash or deposits of a Federal Home Loan Bank. 

(D) Other real estate related collateral acceptable to 

the Bank if such collateral has a readily ascertainable 

value and the Bank can perfect its interest in the collateral. 

(E) Secured loans for small business, agriculture, or 

securities representing a whole interest in such secured 

loans, in the case of any community financial institution. 

(4) ADDITIONAL BANK AUTHORITY.—Subparagraph s (A) 

through (E) of paragraph (3) shall not affect the ability of any 

Federal Home Loan Bank to take such steps as it deems nec-
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 90 

essary to protect its security position with respect to outstanding advances, including requiring deposits of additional 

collateral security, whether or not such additional security 

would be eligible to originate an advance. if an advance existing on the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 matures and the 

member does not have sufficient eligible collateral to fully secure a renewal of such advance, a Bank may renew such advance secured by such collateral as the Bank determines is 

appropriate. A member that has an advance secured by such 

insufficient eligible collateral must reduce its level of outstanding advances promptly and prudently in accordance with 

a schedule determined by the Federal home loan bank. 

(5) REVIEW OF CERTAIN COLLATERAL STANDARDS.—The 

Board may review the collateral standards applicable to each 

Federal home loan bank for the classes of collateral described 

in subparagraphs (D) and (E) of paragraph (3), and may, if necessary for safety and soundness purposes, require an increase 

in the collateral standards for any or all of those classes of collateral. 

(6) DEFINITIONS.—For purposes of this subsection, the 

terms ''small business'', ''agriculture'', ''small farm'', and ''small 

agri-business'' shall have the meanings given those terms by 

regulation of the Finance Board. 

(b) For the purposes of this section, each Federal Home Loan 

Bank shall have power to make, or to cause or require to be made, 

such appraisals and other investigations as it may deem necessary. 

No home mortgage otherwise eligible to be accepted as collateral 

security for an advance by a Federal Home Loan Bank shall be 

accepted if any director, officer, employee, attorney, or agent of the 

Federal Home Loan Bank or of the borrowing institution is personally liable theron, unless the Board has specifically approved by 

formal resolution such acceptance. 

(c) Such advances shall be made upon the note or obligation of 

the member secured as provided in this section, bearing such rate 

of interest as the Federal home loan bank1 may approve or determine, and the Federal Home Loan Bank shall have a lien upon and 

shall hold the stock of such member as further collateral security 

for all indebtedness of the member to the Federal Home Loan 

Bank. 

(d) The institution applying for an advance shall enter into a 

primary and unconditional obligation to pay off all advances, together with interest and any unpaid costs and expenses in connection therewith according to the terms under which they were made, 

in such form as shall meet the requirements of the bank. The bank 

shall reserve the right to require at any time, when deemed necessary for its protection, deposits of additional collateral security or 

substitutions of security by the borrowing institution, and each borrowing institution shall assign additional or substituted security 

when and as so required. Any Federal Home Loan Bank shall have 

power to sell to any other Federal Home Loan Bank, with or without recourse, any advance made under the provisions of this Act, 

or to allow to such bank a participation therein, and any other Federal Home Loan Bank shall have power to purchase such advance 
791 FEDERAL HOME LOAN BANK ACT Sec. 10b 

or to accept a participation therein, together with an appropriate 

assignment of security therefor. 

(e) PRIORITY OF CERTAI N SECURE D INTERESTS.—Notwith -

standing any other provision of law, any security interest granted 

to a Federal Home Loan Bank by any member of any Federal 

Home Loan Bank or any affiliate of any such member shall be entitled to priority over the claims and rights of any party (including 

any receiver, conservator, trustee, or similar party having rights of 

a lien creditor) other than claims and rights that— 

(1) would be entitled to priority under otherwise applicable 

law; and 

(2) are held by actual bona fide purchasers for value or by 

actual secured parties that are secured by actual perfected 

security interests. 

(g) 1 COMMUNIT Y SUPPORT REQUIREMENTS. — 

(1) IN GENERAL.—Before the end of the 2-year period 

beginning on the date of enactment of the Financial institutions Reform, Recovery, and Enforcement Act of 1989, the 

Board shall adopt regulations establishing standards of community investment or service for members of Banks to maintain continued access to long-term advances. 

(2) FACTORS TO BE INCLUDED.—Th e regulations promulgated pursuant to paragraph (1) shall take into account factors 

such as a member's performance under the Community Reinvestment Act of 1977 and the member's record of lending to 

first-time homebuyers. 

(h) 1 SPECIAL LIQUIDIT Y ADVANCES. — 

(1) IN GENERAL.—Subject to paragraph (2), the Federal 

Home Loan Banks may, upon the request of the Director of the 

Office of Thrift Supervision, make short-term liquidity advances to a savings association that— 

(A) is solvent but presents a supervisory concern because of such association's poor financial condition; and 

(B) has reasonable and demonstrable prospects of returning to a satisfactory financial condition. 

( 2 ) INTEREST O N AN D SECURITY FOR SPECIAL LIQUIDITY ADVANCES.—Any loan by a Federal Home Loan Bank pursuant to 

paragraph (1) shall be subject to all applicable collateral 

requirements, including the requirements of section 10(a) of 

this Act, and shall be at an interest rate no less favorable than 

those made available for similar short-term liquidity advances 

to savings associations that do not present such supervisory 

concern. 

(i) 1 COMMUNIT Y INVESTMEN T PROGRAM. — 

(1) IN GENERAL.—Each Bank shall establish a program to 

provide funding for members to undertake community-oriented 

mortgage lending. Each Bank shall designate a community 

investment officer to implement community lending and affordable housing advance programs of the Banks under this subsection and subsection (j) and provide technical assistance and 

outreach to promote such programs. Advances under this program shall be priced at the cost of consolidated Federal Home 

1

 So in law. Subsections (g)-(j) probably should be redesignated as subsections (f)-(i). 
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 92 

Loan Bank obligations of comparable maturities, taking into 

account reasonable administrative costs. 

(2) COMMUNITY-ORIENTED MORTGAGE LENDING.—For purposes of this subsection, the term ''community-oriented mortgage lending'' means providing loans— 

(A) to finance home purchases by families whose income does not exceed 115 percent of the median income for 

the area, 

(B) to finance purchase or rehabilitation of housing for 

occupancy by families whose income does not exceed 115 

percent of median income for the area, 

(C) to finance commercial and economic development 

activities that benefit low- and moderate-income families 

or activities that are located in low- and moderate-income 

neighborhoods, and 

(D) to finance projects that further a combination of 

the purposes described in subparagraphs (A) through (C). 

(j) 1 AFFORDABL E HOUSIN G PROGRAM. — 

(1) IN GENERAL.—Pursuant to regulations promulgated by 

the Board, each Bank shall establish an Affordable Housing 

Program to subsidize the interest rate on advances to members 

engaged in lending for long term, low- and moderate-income, 

owner-occupied and affordable rental housing at subsidized interest rates. 

(2) STANDARDS.—The Board's regulations shall permit 

Bank members to use subsidized advances received from the 

Banks to— 

(A) finance homeownership by families with incomes 

at or below 80 percent of the median income for the area; 

or 

(B) finance the purchase, construction, or rehabilitation of rental housing, at least 20 percent of the units of 

which will be occupied by and affordable for very low-income households for the remaining useful life of such housing or the mortgage term. 

(3) PRIORITIE S FOR MAKIN G ADVANCES.—In using advances 

authorized under paragraph (1), each Bank member shall give 

priority to qualified projects such as the following: 

(A) 2 purchase of homes by families whose income is 80 

percent or less of the median income for the area, 

(B) purchase or rehabilitation of housing owned or 

held by the united states Government or any agency or 

instrumentality of the united states; and 

(C) purchase or rehabilitation of housing sponsored by 

any nonprofit organization, any state or political subdivision of any state, any local housing authority or state 

housing finance agency. 

(4) REPORT.—Each member receiving advances under this 

program shall report annually to the Bank making such advances concerning the member's use of advances received 

under this program. 

1

 see footnote on preceding page. 

2

 so in original. in subparagraphs (A) through (C) the first letter of the first word probably 

should be capitalized and subparagraphs (A) and (B) should probably end with a period. 
793 FEDERAL HOME LOAN BANK ACT Sec. 10b 

(5) CONTRIBUTION TO PROGRAM.—Each Bank shall annually contribute the percentage of its annual net earnings prescribed in the following subparagraphs to support subsidized 

advances through the Affordable Housing program: 

(A) In 1990, 1991, 1992, and 1993, 5 percent of the 

preceding year's net income, or such prorated sums as may 

be required to assure that the aggregate contribution of all 

the Banks shall not be less than $50,000,000 for each such 

year. 

(B) In 1994, 6 percent of the preceding year's net income, or such prorated sum as may be required to assure 

that the aggregate contribution of the Banks shall not be 

less than $75,000,000 for such year. 

(C) In 1995, and subsequent years, 10 percent of the 

preceding year's net income, or such prorated sums as may 

be required to assure that the aggregate contribution of 

the Banks shall not be less than $100,000,000 for each 

such year. 

(6) GROUNDS FOR SUSPENDING CONTRIBUTIONS.— 

(A) I N GENERAL.—If a Bank finds that the payments 

required under this paragraph are contributing to the 

financial instability of such Bank, it may apply to the Federal Housing Finance Board for a temporary suspension of 

such payments. 

(B) FINANCIAL INSTABILITY.—In determining the financial instability of a Bank, the Federal Housing Finance 

Board shall consider such factors as (i) whether the Bank's 

earnings are severely depressed, (ii) whether there has 

been a substantial decline in membership capital, and (iii) 

whether there has been a substantial reduction in advances outstanding. 

(C) REVIEW.—The Board shall review the application 

and any supporting financial data and issue a written 

decision approving or disapproving such application. The 

Board's decision shall be accompanied by specific findings 

and reasons for its action. 

(D) MONITORING SUSPENSION.—If the Board grants a 

suspension, it shall specify the period of time such suspension shall remain in effect and shall continue to monitor 

the Bank's financial condition during such suspension. 

( E) LIMITATIONS ON GROUNDS FOR SUSPENSION.—The 

Board shall not suspend payments to the Affordable Housing program if the Bank's reduction in earnings is a result 

of (i) a change in the terms for advances to members which 

is not justified by market conditions, (ii) inordinate operating and administrative expenses, or (iii) mismanagement. 

(F) The Federal Housing Finance Board shall notify 

the Committee on Banking, Finance and urban Affairs of 

the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate not less 

than 60 days before such suspension takes effect. Such 

suspension shall become effective unless a joint resolution 

is enacted disapproving such suspension. 
Sec. 2B FEDERAL HOME LOAN BANK ACT 7 94 

(7) FAILURE TO USE AMOUNTS FOR AFFORDABLE HOUSING.— 

if any Bank fails to utilize or commit the full amount provided 

in this subsection in any year, 90 percent of the amount that 

has not been utilized or committed in that year shall be deposited by the Bank in an Affordable Housing Reserve Fund 

administered by the Board. The 10 percent of the unutilized 

and uncommitted amount retained by a Bank should be fully 

utilized or committed by that Bank during the following year 

and any remaining portion must be deposited in the Affordable 

Housing Reserve Fund. Under regulations established by the 

Board, funds from the Affordable Housing Reserve Fund may 

be made available to any Bank to meet additional affordable 

housing needs in such Bank's district pursuant to this section. 

(8) NET EARNINGS.—The net earnings of any Federal Home 

Loan Bank shall be determined for purposes of this 

paragraph— 

(A) after reduction for any payment required under 

section 21 or 21B of this Act; and 

(B) before declaring any dividend under section 16. 

(9) REGULATIONS.—The Federal Housing Finance Board 

shall promulgate regulations to implement this subsection. 

Such regulations shall, at a minimum— 

(A) specify activities eligible to receive subsidized 

advances from the Banks under this program; 

(B) specify priorities for the use of such advances; 

(C) ensure that advances made under this program 

will be used only to assist projects for which adequate 

long-term monitoring is available to guarantee that affordability standards and other requirements of this subsection 

are satisfied; 

(D) ensure that a preponderance of assistance provided under this subsection is ultimately received by lowand moderate-income households; 

(E) ensure that subsidies provided by Banks to member institutions under this program are passed on to the 

ultimate borrower; 

(F) establish uniform standards for subsidized advances under this program and subsidized lending by 

member institutions supported by such advances, including maximum subsidy and risk limitations for different 

categories of loans made under this subsection; and 

(G) coordinate activities under this subsection with 

other Federal or federally-subsidized affordable housing 

activities to the maximum extent possible. 

(10) OTHER PROGRAMS.—No provision of this subsection or 

subsection (i) shall preclude any Bank from establishing additional community investment cash advance programs or 

contributing additional sums to the Affordable Housing Reserve Fund. 

(11) ADVISORY COUNCIL.—Each Bank shall appoint an Advisory Council of 7 to 15 persons drawn from community and 

nonprofit organizations actively involved in providing or promoting low- and moderate-income housing in its district. The 

Advisory Council shall meet with representatives of the board 
795 FEDERAL HOME LOAN BANK ACT Sec. 10b 

of directors of the Bank quarterly to advise the Bank on lowand moderate-income housing programs and needs in the district and on the utilization of the advances for these purposes. 

Each Advisory Council established under this paragraph shall 

submit to the Board at least annually its analysis of the lowincome housing activity of the Bank by which it is appointed. 

(12) REPORTS TO CONGRESS.— 

(A) The Board shall monitor and report annually to 

the Congress and the Advisory Council for each Bank the 

support of low-income housing and community development by the Banks and the utilization of advances for 

these purposes. 

(B) The analyses submitted by the Advisory Councils 

to the Board under paragraph (11) shall be included as 

part of the report required by this paragraph. 

(C) The Comptroller General of the United States 

shall audit and evaluate the Affordable Housing program 

established by this subsection after such program has been 

operating for 2 years. The Comptroller General shall report to Congress on the conclusions of the audit and recommend improvements or modifications to the program. 

(13) DEFINITIONS.—Fo r purposes of this subsection— 

( A) Low - OR MODERATE-INCOME HOUSEHOLD.—The 

term ''low- or moderate-income household'' means any 

household which has an income of 80 percent or less of the 

area median. 

(B) VER Y LOW-INCOME HOUSEHOLD.—The term ''very 

low-income household'' means any household that has an 

income of 50 percent or less of the area median. 

( C) Low - OR MODERATE-INCOME NEIGHBORHOOD.—The 

term ''low- or moderate-income neighborhood'' means any 

neighborhood in which 51 percent or more of the households are low- or moderate-income households. 

( D ) AFFORDABLE FOR VERY-LOW INCOME HOUSEHOLDS.—For purposes of paragraph (2)(B) the term ''affordable for very-low income households'' means that rents 

charged to tenants for units made available for occupancy 

by low-income families shall not exceed 30 percent of the 

adjusted income of a family whose income equals 50 percent of the income for the area (as determined by the Secretary of Housing and Urban Development) with adjustment for family size. 

SEC. 10a. [Omitted] 

SEC. 10b. [12 U.S.C. 1430b] (a) IN GENERAL.—Each Federal 

Home Loan Bank is authorized to make advances to nonmember 

mortgagees approved under title II of the National Housing Act. 

Such mortgagees must be chartered institutions having succession 

and subject to the inspection and supervision of some governmental 

agency, and whose principal activity in the mortgage field must 

consist of lending their own funds. Such advances shall not be subject to the other provisions and restrictions of this Act, but shall 

be made upon the security of insured mortgages, insured under 

title i i of the National Housing Act. Advances made under the 

terms of this section shall be at such rates of interest and upon 
Sec. 2B FEDERAL HOME LOAN BANK ACT 796 

such terms and conditions as shall be determined by the Board, but 

no advance may be for an amount in excess of 90 per centum of 

the unpaid principal of the mortgage loan given as security. 

(b) EXCEPTION.—A n advance made to a State housing finance 

agency for the purpose of facilitating mortgage lending that benefits individuals and families that meet the income requirements set 

forth in section 142(d) or 143(f) of the Internal Revenue Code of 

1986, need not be collateralized by a mortgage insured under title 

II of the National Housing Act or otherwise, if— 

(1) such advance otherwise meets the requirements of this 

subsection; and 

(2) such advance meets the requirements of section 10(a) 

of this Act, and any real estate collateral for such loan comprises single family or multifamily residential mortgages. 

GENERAL POWERS AND DUTIES OF BANKS 

SEC. 11. [12 U.S.C. 1431] (a) Each Federal Home Loan Bank 

shall have power, subject to rules and regulations prescribed by the 

Board to borrow and give security therefor and to pay interest 

thereon, to issue debentures, bonds, or other obligations upon such 

terms and conditions as the Board may approve, and to do all 

things necessary for carrying out the provisions of this Act and all 

things incident thereto. 

(b) The Board may issue consolidated Federal Home Loan 

Bank debentures which shall be the joint and several obligations 

of all Federal Home Loan Banks organized and existing under this 

Act, in order to provide funds for any such bank or banks, and such 

debentures shall be issued upon such terms and conditions as the 

Board may prescribe. No such debentures shall be issued at any 

time if any of the assets of any Federal Home Loan Bank are 

pledged to secure any debts or subject to any lien, and neither the 

Board nor any Federal Home Loan Bank shall have power to 

pledge any of the assets of any Federal Home Loan Bank, or voluntarily to permit any lien to attach to the same while any of such 

debentures so issued are outstanding. The debentures issued under 

this section and outstanding shall at no time exceed five times the 

total paid-in capital of all the Federal Home Loan Banks as of the 

time of the issue of such debentures. it shall be the duty of the 

Board not to issue debentures under this section in excess of the 

notes or obligations of member institutions held and secured under 

section 10(a) of this Act by all the Federal Home Loan Banks. 

(c) At any time that no debentures are outstanding under this 

Act, or in order to refund all outstanding consolidated debentures 

issued under this section, the Board may issue consolidated Federal Home Loan Bank bonds which shall be the joint and several 

obligations of all the Federal Home Loan Banks, and shall be 

secured and be issued upon such terms and conditions as the Board 

may prescribe. 

(d) The Board shall have full power to require any Federal 

Home Loan Bank to deposit additional collateral or to make substitutions of collateral or to adjust equities between the Federal Home 

Loan Banks. 

(e)(1) Each Federal Home Loan Bank shall have power to accept deposits made by members of such bank or by any other Fed-
797 FEDERAL HOME LOAN BANK ACT Sec. 10b 

eral Home Loan Bank or other instrumentality of the United 

states, upon such terms and conditions as the Board may prescribe, but no Federal Home Loan Bank shall transact any banking 

or other business not incidental to activities authorized by this Act. 

(2)(A) The Board may, subject to such rules and regulations, 

including definitions of terms used in this paragraph, as the Board 

shall from time to time prescribe, authorize Federal Home Loan 

Banks to be drawees of, and to engage in, or be agents or intermediaries for, or otherwise participate or assist in, the collection 

and settlement of (including presentment, clearing, and payment 

of, and remitting for), checks, drafts, or any other negotiable or 

nonnegotiable items or instruments of payment drawn on or issued 

by members of any Federal Home Loan Bank or by institutions 

which are eligible to make application to become members pursuant to section 4, and to have such incidental powers as the Board 

shall find necessary for the exercise of any such authorization. 

(B) A Federal Home Loan Bank shall make charges, to be 

determined and regulated by the Board consistent with the principles set forth in section 11A(c) of the Federal Reserve Act, or utilize the services of, or act as agent for, or be a member of, a Federal Reserve bank, clearinghouse, or any other public or private 

financial institution or other agency, in the exercise of any powers 

or functions pursuant to this paragraph. 

(C) The Board is authorized, with respect to participation in 

the collection and settlement of any items by Federal Home Loan 

Banks, and with respect to the collection and settlement (including 

payment by the payor institution) of items payable by Federal savings and loan associations and Federal mutual savings banks, to 

prescribe rules and regulations regarding the rights, powers, 

responsibilities, duties, and liabilities, including standards relating 

thereto, of such Federal Home Loan Banks, associations, or banks 

and other parties to any such items or their collection and settlement. in prescribing such rules and regulations, the Board may 

adopt or apply, in whole or in part, general banking usage and 

practices, and, in instances or respects in which they would otherwise not be applicable, Federal Reserve regulations and operating 

letters, the uniform Commercial Code, and clearinghouse rules. 

(f) The Board is authorized and empowered to permit,,

 1 to require, Federal Home Loan Banks, upon such terms and conditions 

as the Board may prescribe, to rediscount the discounted notes of 

members held by other Federal Home Loan Banks, or to make 

loans to, or make deposits with, such other Federal Home Loan 

Banks, or to purchase any bonds or debentures issued under this 

section. 

(g) Each Federal Home Loan Bank shall at all times have at 

least an amount equal to the current deposits received from its 

members invested in (1) obligations of the United States, (2) deposits in banks or trust companies, (3) advances with a maturity of not 

to exceed five years which are made to members, upon such terms 

and conditions as the Board may prescribe, and (4) advances with 

a maturity of not to exceed five years which are made to members 

*The amendment made by section 709(2) of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 did not strike the second comma (103 stat. 418). 
Sec. 2B FEDERAL HOME LOAN BANK ACT 798 

whose creditor liabilities (not including advances from the Federal 

Home Loan Bank) do not exceed 5 per centum of their net assets, 

and which may be made without the security of home mortgages 

or other security, upon such terms and conditions as the Board 

may prescribe. 

(h) Such part of the assets of each Federal Home Loan Bank 

(except reserves and amounts provided for in subsection (g)) as are 

not required for advances to members, may be invested, to such extent as the bank may deem desirable and subject to such regulations, restrictions, and limitations as may be prescribed by the 

Board, in obligations of the United States, in obligations, participations, or other instruments of or issued by the Federal National 

Mortgage Association, or the Government National Mortgage Association, in mortgages, obligations, or other securities which are or 

ever have been sold by the Federal Home Loan Mortgage Corporation pursuant to section 305 or section 306 of the Federal Home 

Loan Mortgage Corporation Act, in the stock of the Federal National Mortgage Association in stock, obligations, or other securities 

of any small business investment company formed pursuant to section 301 of the Small Business Investment Act of 1958, for the purpose of aiding members of the Federal Home Loan Bank System, 

and in such securities as fiduciary and trust funds may be invested 

in under the laws of the State in which the Federal Home Loan 

Bank is located. 

(i) The Secretary of the Treasury is authorized in his discretion 

to purchase any obligations issued pursuant to this section, as 

heretofore, now, or hereafter in force and 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 issued 

under the Second Liberty Bond Act, as now or hereafter in force, 

and the purposes for which securities may be issued under the Second Liberty Bond Act, as now or hereafter in force, are extended 

to include such purchases. The Secretary of the Treasury may, at 

any time, sell, upon such terms and conditions and at such price 

or prices as he shall determine, any of the obligations acquired by 

him under this subsection. All redemptions, purchases, and sales 

by the Secretary of the Treasury of such obligations under this subsection shall be treated as public-debt transactions of the united 

States. The Secretary of the Treasury shall not at any time purchase any obligations under this paragraph if such purchase would 

increase the aggregate principal amount of his then outstanding 

holdings of such obligations under this paragraph to an amount 

greater than $4,000,000,000. Each purchase of obligations by the 

Secretary of the Treasury under this subsection shall be upon 

terms and conditions as shall be determined by the Secretary of the 

Treasury and shall bear such rate of interest as may be determined 

by the Secretary of the Treasury taking into consideration the current average market yield for the month preceding the month of 

such purchase on outstanding marketable obligations of the united 

States. 

in addition to obligations authorized to be purchased by the 

preceding paragraph, the Secretary of the Treasury is authorized 

to purchase any obligations issued pursuant to this section in 
799 FEDERAL HOME LOAN BANK ACT Sec. 10b 

amounts not to exceed $2,000,000,000. The authority provided in 

this paragraph shall expire August 10, 1975. 

Notwithstanding the foregoing, the authority provided in this 

subsection may be exercised during any calendar quarter beginning 

after the date of enactment of the Depository Institutions Amendments of 1974 only if the Secretary of the Treasury and the Chairperson of the Board certify to the Congress that (1) alternative 

means cannot be effectively employed to permit members of the 

Federal Home Loan Bank System to continue to supply reasonable 

amounts of funds to the mortgage market, and (2) the ability to 

supply such funds is substantially impaired because of monetary 

stringency and a high level of interest rates. Any funds borrowed 

under this subsection shall be repaid by the Home Loan Banks at 

the earliest practicable date. 

(j) Notwithstanding the provisions of the first sentence of section 202 of the Government Corporation Control Act, audits by the 

General Accounting office of the financial transactions of a Federal 

Home Loan Bank shall not be limited to periods during which Government capital has been invested therein. The provisions of the 

first sentence of subsection (d) of section 303 of the Government 

Corporation Control Act shall not apply to any Federal Home Loan 

Bank.1 

(k) BAN K LOAN S T O SAIF.— 

(1) LOAN S 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 Savings Association Insurance Fund. 

(2) LIABILIT Y OF TH E FUND.—Any loan by a Federal Home 

Loan Bank pursuant to paragraph (1) shall be a direct liability 

of the Savings Association Insurance Fund. 

( 3 ) INTERES T O N AN D SECURIT Y FO R SUC H LOANS.—An y 

loan by a Federal Home Loan Bank pursuant to paragraph (1) 

shall— 

(A) bear a rate of interest not less than such Bank's 

current marginal cost of funds, taking into account the 

maturities involved; and 

(B) be adequately secured. 

INCORPORATIO N OF BANKS, AN D CORPORATE POWER S 

SEC. 12. [12 U.S.C. 1432] (a) The directors of each Federal 

Home Loan Bank shall, in accordance with such rules and regulations as the Board may prescribe, make and file with the Board at 

the earliest practicable date after the establishment of such bank, 

an organization certificate which shall contain such information as 

the Board may require. Upon the making and filing of such organization certificate with the Board, such bank shall become, as of the 

date of the execution of its organization certificate, a body corporate, and as such and in its name as designated by the Board 

1

 The provisions of the Government Corporation Control Act have been incorporated into title 

31, United States Code, as chapter 91 of such title. The reference to the 1st sentence of section 

202 of such Act should probably have been a reference to section 9105(a)(1) of such title (as in 

effect prior to the amendments made by P.L. 101-576). P.L. 101-576 rewrote such section 9105 

in a way which makes the 1st sentence of this subsection unnecessary. The reference to section 

303 of such Act should probably be a reference to section 9107(c)(2) of such title. 
Sec. 2B FEDERAL HOME LOAN BANK ACT 8 00 

it shall have power to adopt, alter, and use a corporate seal; to 

make contracts; to purchase or lease and hold or dispose of such 

real estate as may be necessary or convenient for the transaction 

of its business; to sue and be sued, to complain, and to defend, in 

any court of competent jurisdiction, State or Federal; to select, employ, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary for the transaction of its 

business; to define their duties, require bonds of them and fix the 

penalties thereof, and to dismiss at pleasure such officers, employees, attorneys, and agents; and, by the board of directors of the 

bank, to prescribe, amend, and repeal by-laws governing the manner in which its affairs may be administered, consistent with applicable laws and regulations, as administered by the Finance Board. 

No officer, employee, attorney, or agent of a Federal home loan 

bank who receives compensation, may be a member of the board 

of directors. Each such bank shall have all such incidental powers, 

not inconsistent with the provisions of this Act, as are customary 

and usual in corporations generally. 

(b) Subject to such regulations as may be prescribed by the 

Board, one or more Federal home loan banks may acquire, hold, or 

dispose of, in whole or in part, or facilitate such acquisition, holding, or disposition by members of any such bank of, housing project 

loans, or interests therein, having the benefit of any guaranty 

under section 221 of the Foreign Assistance Act of 1961, as now or 

hereafter in effect, or loans, or interests therein, having the benefit 

of any guaranty under section 224 of such Act, or any commitment 

or agreement with respect to such loans, or interests therein, made 

pursuant to either of such sections. This authority extends to the 

acquisition, holding, and disposition of loans, or interests therein, 

having the benefit of any guaranty under section 221 or 222 of the 

Foreign Assistance Act of 1961, as amended by section 105 of the 

Foreign Assistance Act of 1969 or as hereafter amended or extended, or of any commitment or agreement for any such guaranty. 

EXEMPTIO N FRO M TAXATIO N 

SEC. 13. [12 U.S.C. 1433] Any and all notes, debentures, 

bonds, and other such obligations issued by any bank, and consolidated Federal Home Loan Bank bonds and debentures, shall be 

exempt both as to principal and interest from all taxation (except 

surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. The bank, including its franchise, its capital, reserves, and surplus, its advances, and its income shall be exempt 

from all taxation now or hereafter imposed by the United States, 

by any Territory, dependency, or possession thereof, or by any 

State, county, municipality, or local taxing authority; except that 

in1 any real property of the bank shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed. The notes, 

debentures, and bonds issued by any bank, with unearned coupons 

attached, shall be accepted at par by such bank in payment of or 

1

 So in original. The word "in" probably should be omitted. 
801 FEDERAL HOME LOAN BANK ACT Sec. 16 

as a credit against the obligation of any home-owner debtor of such 

bank. 

SEC. 14. [12 U.S.C. 1434] When designated for that purpose 

by the Secretary of the Treasury, each Federal Home Loan Bank 

shall be a depositary of public money, except receipts from customs, 

under such regulations as may be prescribed by said Secretary; and 

it may also be employed as a financial agent of the Government; 

and it shall perform all such reasonable duties as depositary of 

public money and financial agent of the Government as may be required of it. 

SEC. 15. [12 U.S.C. 1435] Obligations of the Federal Home 

Loan Banks issued with the approval of the Board under this Act 

shall be lawful investments, and may be accepted as security, for 

all fiduciary, trust, and public funds the investment or deposit of 

which shall be under the authority or control of the United States 

or any officer or officers thereof. The Federal reserve banks are 

authorized to act as depositaries, custodians, and/or fiscal agents 

for Federal Home Loan Banks in the general performance of their 

powers under this Act. All obligations of Federal Home Loan Banks 

shall plainly state that such obligations are not obligations of the 

United States and are not guaranteed by the United States. 

RESERVES AND DIVIDENDS 

SEC. 16. [12 U.S.C. 1436] (a) Each Federal Home Loan Bank 

may carry to a reserve account from time-to-time

 1 such portion of 

its net earnings as may be determined by its board of directors. 

Each Federal Home Loan Bank shall establish such additional reserves and/or make such charge-offs on account of depreciation or 

impairment of its assets as the Board shall require from time to 

time. No dividends shall be paid except out of previously retained 

earnings or current net earnings remaining after reductions for all 

reserves, chargeoffs, purchases of capital certificates of the Financing Corporation, and payments relating to the Funding Corporation 

required under this Act have been provided for, other than 

chargeoffs or expenses incurred by a Bank in connection with the 

purchase of capital stock of the Financing Corporation under section 21 or payments relating to the Funding Corporation Principal 

Fund under section 21B(e). The reserves of each Federal Home 

Loan Bank shall be invested, subject to such regulations, restrictions, and limitations as may be prescribed by the Board, in direct 

obligations of the United States, in obligations, participations, or 

other instruments of or issued by the Federal National Mortgage 

Association or the Government National Mortgage Association, in 

mortgages, obligations, or other securities which are or ever have 

been sold by the Federal Home Loan Mortgage Corporation pursuant to section 305 or section 306 of the Federal Home Loan Mortgage Corporation Act, and in such securities as fiduciary and trust 

funds may be invested in under the laws of the State in which the 

Federal Home Loan Bank is located. 

(b) Notwithstanding subsection (a) or any other provision of 

this Act, if the Board determines that severe financial conditions 

exist threatening the stability of member institutions, the Board 

1

 So in original. 
802 

FEDERAL HOME LOAN BANK ACT 

Sec. 21A 

may suspend temporarily the requirements of subsection (a) that a 

portion of net earnings be set aside semiannually by each Federal 

Home Loan Bank to a reserve account and permit each Federal 

Home Loan Bank to declare and pay dividends out of undivided 

profits. 

(c) EXCEPTION I N CASE OF LOSSES I N CONNECTION WIT H FINANCING CORPORATION STOCK.— 

(1) IN GENERAL.—Notwithstanding subsection (a) of this 

section, if— 

(A) a Federal Home Loan Bank incurs a chargeoff or 

an expense in connection with such bank's investment in 

the stock of the Financing Corporation under section 21; 

(B) the Board determines there is an extraordinary 

need for the member institutions of the bank to receive 

dividends; and 

(C) the bank has reduced all reserves (other than the 

reserve account required by the first 2 sentences of subsection (a)) to zero, 

the Board may authorize such bank to declare and pay 

dividends out of undivided profits (as such term is defined in 

section 21(d)(7)) or the reserve account required by the first 2 

sentences of subsection (a). 

(2) REQUIREMENTS OF SECTION 21 NOT AFFECTED.—Notwithstanding any payment of dividends by any Federal Home 

Loan Bank pursuant to an authorization by the Board under 

paragraph (1), the applicable provisions of section 21 shall continue to apply with respect to such bank, and to such bank's 

investment in the Financing Corporation, in the same manner 

and to the same extent as if such payment had not been made. 

[Section 17—Repealed by the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989 (see section 703(a) of such Act, 103 Stat. 415).] 

ADMINISTRATIVE EXPENSES 

SEC. 18. [12 U.S.C. 1438] 

[(a)—Repealed by the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 (see section 712 of such Act, 103 Stat. 419).] 

(b) ASSESSMENTS FOR ADMINISTRATIVE EXPENSES.— 

(1) IN GENERAL.—The Board may impose a semiannual 

assessment on the Federal Home Loan Banks, the aggregate 

amount of which is sufficient to provide for the payment of the 

Board's estimated expenses for the period for which such 

assessment is made. 

(2) DEFICIENCIES.—If, at any time, amounts available from 

any assessment for any semiannual period are insufficient to 

cover the expenses of the Board incurred in carrying out the 

provisions of this Act during such period, the Board may make 

an immediate assessment against the Banks to cover the 

amount of the deficiency for such semiannual period. 

(3) SURPLUSES.—If, at the end of any semiannual period 

for which an assessment is made, any amount remains from 

such assessment, such amount will be deducted from the 
803 FEDERAL HOME LOAN BANK ACT Sec. 21A 

assessment on the Banks by the Board for the following semiannual period. 

(c)(1) The Director of the Office of Thrift Supervision, utilizing 

the services of the Administrator of General Services (hereinafter 

referred to as the ''Administrator''), and subject to any limitation 

hereon which may hereafter be imposed in appropriation Acts, is 

hereby authorized— 

(A) to acquire, in the name of the United States, real property in the District of Columbia, for the purposes set forth in 

this subsection; 

(B) to construct, develop, furnish, and equip such buildings 

thereon and such facilities as in its judgment may be appropriate to provide, to such extent as the Director of the Office 

of Thrift Supervision may deem advisable, suitable and adequate quarters and facilities for the Director of the office of 

Thrift Supervision and the agencies under its administration 

or supervision; 

(C) to enlarge, remodel, or reconstruct any of the same; 

and 

(D) to make or enter into contracts for any of the foregoing. 

(2) The Director of the Office of Thrift Supervision may require 

of the respective banks, and they shall make to the Director of the 

Office of Thrift Supervision, such advances of funds for the purposes set out in paragraph (1) as in the sole judgment of the Director of the Office of Thrift Supervision may from time to time be 

advisable. Such advances shall be in addition to the assessments 

authorized in subsection (b) and shall be apportioned by the Director of the Office of Thrift Supervision among the banks in proportion to the total assets of the respective banks, determined in such 

manner and as of such times as the Director of the office of Thrift 

Supervision may prescribe. Each such advance shall bear interest 

at the rate of 4 1/2 per centum per annum from the date of the 

advance and shall be repaid by the Director of the office of Thrift 

Supervision in such installments and over such period, not longer 

than twenty-five years from the making of the advance, as the Director of the Office of Thrift Supervision may determine. Payments 

of interest and principal upon such advances shall be made from 

receipts of the Director of the Office of Thrift Supervision or from 

other sources which may from time to time be available to the Director of the Office of Thrift Supervision. The obligation of the Director of the Office of Thrift Supervision to make any such payment 

shall not be regarded as an obligation of the United States. To such 

extent as the Director of the Office of Thrift Supervision may prescribe any such obligation shall be regarded as a legal investment 

for the purposes of subsections (g) and (h) of section 11 and for the 

purposes of section 16. 

(3) The plans and designs for such buildings and facilities and 

for any such enlargement, remodeling, or reconstruction shall, to 

such extent as the chairperson of1 the Director of the office of 

Thrift Supervision may request, be subject to his approval. 

1

 So in original. The term ''the chairperson of' probably should not appear. 
804 

FEDERAL HOME LOAN BANK ACT 

Sec. 21A 

(4) upon the making of arrangements mutually agreeable to 

the Director of the Office of Thrift Supervision and the Administrator, which arrangements may be modified from time to time by 

mutual agreement between them and may include but shall not be 

limited to the making of payments by the Director of the Office of 

Thrift supervision and such agencies to the Administrator and by 

the Administrator to the Director of the Office of Thrift Supervision, the custody, management, and control of such buildings and 

facilities and of such real property shall be vested in the Administrator in accordance therewith. until the making of such arrangements such custody, management, and control including the assignment and allotment and the reassignment and reallotment of building and other space, shall be vested in the Director of the Office 

of Thrift Supervision. 

(5) Any proceeds (including advances) received by the Director 

of the Office of Thrift Supervision in connection with this subsection, and any proceeds from the sale or other disposition of real 

or other property acquired by the Director of the Office of Thrift 

supervision under this subsection, shall be considered as receipts 

of the Director of the Office of Thrift Supervision, and obligations 

and expenditures of the Director of the Office of Thrift Supervision 

and such agencies in connection with this subsection shall not be 

considered as administrative expenses. As used in this subsection, 

the term ''property'' shall include interests in property. 

(6) With respect to its functions under this subsection the Director of the office of Thrift supervision shall (A) annually prepare 

and submit a budget program as provided in title i of the Government Corporation Control Act with regard to wholly owned Government corporations, and for purposes of this sentence, the terms 

''wholly owned Government corporations'' and ''Government corporations'', wherever used in such title, shall include the Director 

of the office of Thrift supervision, and (B) maintain an integral set 

of accounts which shall be audited by the General Accounting office in accordance with the principles and procedures applicable to 

commercial corporate transactions as provided in such title, and no 

other settlement or adjustment shall be required with respect to 

transactions under this subsection or with respect to claims, demands, or accounts by or against any person arising thereunder. 

The first budget program shall be for the first full fiscal year beginning on or after the date of the enactment of this subsection. Except as otherwise provided in this subsection or by the Director of 

the office of Thrift supervision, the provisions of this subsection 

and the functions thereby or thereunder subsisting shall be applicable and exercisable notwithstanding and without regard to the 

Act of June 20, 1938 (D.C. Code, secs. 5-413—5-428), except that 

the proviso of section 16 thereof shall apply to any building constructed under this subsection, and section 306 of the Act of July 

30, 1947 (61 Stat. 584), or any other provison of law relating to the 

construction, alteration, repair, or furnishing of public or other 

buildings or structures or the obtaining of sites therefor, but any 

person or body in whom any such function is vested may provide 

for delegation or redelegation of the exercise of such function. 

(7) No obligation shall be incurred and no expenditure, except 

in liquidation of obligation, shall be made pursuant to the first two 
805 FEDERAL HOME LOAN BANK ACT Sec. 21A 

subparagraphs of paragraph (1) of this subsection if the total 

amount of all obligations incurred pursuant thereto would thereupon exceed $13,200,000, or such greater amount as may be provided in an appropriation Act or other law. 

[Sections 19 and 19A—Repealed by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (see sections 708 and 712 of such Act, 

103 Stat. 418 and 419).] 

EXAMINATIONS AND REPORTS 

SEC. 20. [12 U.S.C. 1440] The Board shall from time to time, 

at least annually, require examinations and reports of condition of 

all Federal Home Loan Banks in such form as the Board shall prescribe and shall furnish periodically statements based upon the reports of the banks to the Board. For the purposes of this Act, examiners appointed by the Board shall be subject to the same requirements, responsibilities, and penalties as are applicable to examiners under the National Bank Act and the Federal Reserve Act, 

and shall have, in the exercise of functions under this Act, the 

same powers and privileges as are vested in such examiners by 

law. In addition to such examinations, the Comptroller General 

may audit or examine the Board and the Banks, to determine the 

extent to which the Board and the Banks are fairly and effectively 

fulfilling the purposes of this Act. 

SEC. 21. [12 U.S.C. 1441] FINANCIN G CORPORATION. 

(a) ESTABLISHMENT.—Notwithstanding any other provision of 

law, the Federal Housing Finance Board shall charter a corporation to be known as the Financing Corporation. 

(b) MANAGEMEN T OF FINANCING CORPORATION.— 

(1) DIRECTORATE.—The Financing Corporation shall be 

under the management of a directorate composed of 3 members 

as follows: 

(A) The Director of the Office of Finance of the Federal 

Home Loan Banks (or the head of any successor to such 

office). 

(B) 2 members selected by the Federal Housing Finance Board from among the presidents of the Federal 

Home Loan Banks. 

(2) TERMS.—Each member appointed under paragraph 

(1)(B) shall be appointed for a term of 1 year. 

(3) VACANCY.—If any member leaves the office in which 

such member was serving when appointed to the Directorate— 

(A) such member's service on the Directorate shall terminate on the date such member leaves such office; and 

(B) the successor to the office of such member shall 

serve the remainder of such member's term. 

(4) EQUAL REPRESENTATION OF BANKS.—No president of a 

Federal Home Loan Bank may be appointed to serve an additional term on the Directorate until such time as the presidents of each of the other Federal Home Loan Banks have 

served as many terms on the Directorate as the president of 

such bank (before the appointment of such president to such 

additional term). 
806 

FEDERAL HOME LOAN BANK ACT 

Sec. 21A 

(5) CHAIRPERSON.—The Chairperson of the Federal Housing Finance Board shall select the chairperson of the Directorate from among the 3 members of the Directorate. 

(6) STAFF.— 

(A) N O PAID EMPLOYEES.—The Financing Corporation 

shall have no paid employees. 

(B) POWERS.—The Directorate may, with the approval 

of the Federal Housing Finance Board, authorize the officers, employees, or agents of the Federal Home Loan 

Banks to act for and on behalf of the Financing Corporation in such manner as may be necessary to carry out the 

functions of the Financing Corporation. 

(7) ADMINISTRATIVE EXPENSES.— 

(A) IN GENERAL.—All administrative expenses of the 

Financing Corporation shall be paid by the Federal Home 

Loan Banks. 

(B) PRO RATA DISTRIBUTION.—The amount each Federal Home Loan Bank shall pay shall be determined by the 

Federal Housing Finance Board by multiplying the total 

administrative expenses for any period by the percentage 

arrived at by dividing— 

(i) the aggregate amount the Federal Housing Finance Board required such bank to invest in the Financing Corporation (as of the time of such determination) under paragraphs (4) and (5) of subsection (d) (as 

computed without regard to paragraph (3) or (6) of 

such subsection); by 

(ii) the aggregate amount the Federal Housing Finance Board required all Federal Home Loan Banks to 

invest (as of the time of such determination) under 

such paragraphs. 

(C) ADMINISTRATIVE EXPENSES DEFINED.—Fo r purposes 

of this paragraph, the term "administrative expenses'' does 

not include— 

(i) issuance costs (as such term is defined in subsection (g)(5)(A)); 

(ii) any interest on (and any redemption premium 

with respect to) any obligation of the Financing Corporation; or 

(iii) custodian fees (as such term is defined in subsection (g)(5)(B)). 

(8) REGULATION BY FEDERAL HOUSING FINANCE BOARD.— 

The Directorate shall be subject to such regulations, orders, 

and directions as the Federal Housing Finance Board may prescribe. 

(9) N O COMPENSATION FROM FINANCING CORPORATION.— 

Members of the Directorate shall receive no pay, allowances, or 

benefits from the Financing Corporation by reason of their 

service on the Directorate. 

(c) POWERS OF FINANCING CORPORATION.—The Financing Corporation shall have only the following powers, subject to the other 

provisions of this section and such regulations, orders, and directions as the Federal Housing Finance Board may prescribe: 
807 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(1) To issue nonvoting capital stock to the Federal Home 

Loan Banks. 

(2) To invest in any security issued by the Federal savings 

and Loan Insurance Corporation under section 402(b) of the 

National Housing Act prior to the date of the enactment of the 

Financial Institutions Reform, Recovery, and Enforcement Act 

of 1989 and thereafter to transfer the proceeds of any obligation issued by the Financing Corporation to the FSLIC Resolution Fund. 

(3) To issue debentures, bonds, or other obligations and to 

borrow, to give security for any amount borrowed, and to pay 

interest on (and any redemption premium with respect to) any 

such obligation or amount. 

(4) To impose assessments in accordance with subsection 

(f). 

(5) To adopt, alter, and use a corporate seal. 

(6) To have succession until dissolved. 

(7) To enter into contracts. 

(8) To sue and be sued in its corporate capacity, and to 

complain and defend in any action brought by or against the 

Financing Corporation in any state or Federal court of competent jurisdiction. 

(9) To exercise such incidental powers not inconsistent 

with the provisions of this section as are necessary or appropriate to carry out the provisions of this section. 

(d) CAPITALIZATION OF FINANCING CORPORATION.— 

(1) PURCHASE OF CAPITAL STOCK BY FEDERAL HOME LOAN 

BANKS.— 

(A) IN GENERAL.—Each Federal Home Loan Bank 

shall invest in nonvoting capital stock of the Financing 

Corporation at such times and in such amounts as the 

Federal Housing Finance Board may prescribe under this 

subsection. 

(B) PAR VALUE; TRANSFERABILITY.—Each share of stock 

issued by the Financing Corporation to a Federal Home 

Loan Bank shall have par value in an amount determined 

by the Federal Housing Finance Board and shall be transferable only among the Federal Home Loan Banks in the 

manner and to the extent prescribed by the Federal Housing Finance Board at not less than par value. 

(2) AGGREGATE DOLLAR AMOUNT LIMITATION ON ALL 

INVESTMENTS.—The aggregate amount of funds invested by all 

Federal Home Loan Banks in nonvoting capital stock of the Financing Corporation shall not exceed $3,000,000,000. 

(3) MAXIMU M INVESTMENT AMOUNT LIMITATION FOR EACH 

FEDERAL HOME LOAN BANK.—Th e cumulative amount of funds 

invested in nonvoting capital stock of the Financing Corporation by each Federal Home Loan Bank shall not exceed the 

aggregate amount of— 

(A) the sum of— 

(i) the reserves maintained by such bank on December 31, 1985, pursuant to the requirement contained in the first 2 sentences of section 16; and 
808 

FEDERAL HOME LOAN BANK ACT 

Sec. 21A 

(ii) the undivided profits (as defined in paragraph 

(7)) of such bank on such date; and 

(B) the sum of— 

(i) the amounts added to reserves after December 

31, 1985, pursuant to the requirement contained in 

the first 2 sentences of section 16; and 

(ii) the undivided profits of such bank accruing 

after such date. 

(4) PRO RATA DISTRIBUTION OF 1ST $1,000,000,000 INVESTED 

I N FINANCING CORPORATION BY HOM E LOAN BANKS.—Of the first 

$1,000,000,000 in the aggregate which the Thrift Depositor 

Protection Oversight Board pursuant to section 21B or the 

Federal Housing Finance Board under this section (as the case 

may be) may require the Federal Home Loan Banks collectively to invest in the stock of the Funding Corporation or invest in the capital stock of the Financing Corporation, respectively, 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 or the Federal Housing Finance Board (as the case may be) by multiplying the aggregate amount of such payment or investment by 

all Banks by the percentage appearing in the following table 

for each such Bank: 

Bank Percentage 

Federal Home Loan Bank of Boston 1.8629 

Federal Home Loan Bank of New York 9.1006 

Federal Home Loan Bank of Pittsburgh 4.2702 

Federal Home Loan Bank of Atlanta 14.4007 

Federal Home Loan Bank of Cincinnati 8.2653 

Federal Home Loan Bank of Indianapolis 5.2863 

Federal Home Loan Bank of Chicago 9.6886 

Federal Home Loan Bank of Des Moines 6.9301 

Federal Home Loan Bank of Dallas 8.8181 

Federal Home Loan Bank of Topeka 5.2706 

Federal Home Loan Bank of San Francisco 19.9644 

Federal Home Loan Bank of Seattle 6.1422 

(5) PRO RATA DISTRIBUTION OF AMOUNTS REQUIRED TO BE 

INVESTED I N EXCESS OF $1,000,000,000.—With respect to any 

amount in excess of the $1,000,000,000 amount referred to in 

paragraph (4) which the Federal Housing Finance Board may 

require the Federal Home Loan Banks to invest in capital 

stock of the Financing Corporation under this subsection, the 

amount which each Federal Home Loan Bank (or any successor 

to such bank) shall invest shall be determined by the Federal 

Housing Finance Board by multiplying such 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 insured institutions1 which are 

members of such bank; by 

(B) the sum of the total assets (as of such date) held 

by all insured institutions

 1 which are members of any 

Federal Home Loan Bank. 

1

 Section 512(1) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 

103 Stat. 406, amended section 21 by striking "insured institution'' each place it appears and 

inserting ''Savings Association Insurance Fund member''. The term "insured institutions'' should 

probably be changed to ''Savings Association Insurance Fund members''. 
809 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(6) SPECIAL PROVISIONS RELATING TO MAXIMU M AMOUNT 

LIMITATIONS.— 

(A) I N GENERAL.—If the amount any Federal Home 

Loan Bank is required to invest in capital stock of the Financing Corporation pursuant to a determination by the 

Federal Housing Finance Board under paragraph (5) (or 

under subparagraph (B) of this paragraph) exceeds the 

maximum investment amount applicable with respect to 

such bank under paragraph (3) at the time of such determination (hereinafter in this paragraph referred to as the 

''excess amount'')— 

(i) the Federal Housing Finance Board shall require each remaining Federal Home Loan Bank to invest (in addition to the amount determined under 

paragraph (5) for such remaining bank and subject to 

the maximum investment amount applicable with respect to such remaining bank under paragraph (3) at 

the time of such determination) in such capital stock 

on behalf of the bank in the amount determined under 

subparagraph (B); 

(ii) the Federal Housing Finance Board shall require the bank to subsequently purchase the excess 

amount of capital stock from the remaining banks in 

the manner described in subparagraph (C); and 

(iii) the requirements contained in subparagraphs 

(D) and (E) relating to the use of net earnings shall 

apply to such bank until the bank has purchased all 

of the excess amount of capital stock. 

(B) ALLOCATION OF EXCESS AMOUNT AMONG REMAINING 

HOME LOAN BANKS.—The amount each remaining Federal 

Home Loan Bank shall be required to invest under subparagraph (A)(i) is the amount determined by the Federal 

Housing Finance Board by multiplying the excess amount 

by the percentage arrived at by dividing— 

(i) the amount of capital stock of the Financing 

Corporation held by such remaining bank at the time 

of such determination; by 

(ii) the aggregate amount of such stock held by all 

remaining banks at such time. 

(C) PURCHASE PROCEDURE.—The bank on whose behalf 

an investment in capital stock is made under subparagraph (A)(i) shall purchase, annually and at the issuance 

price, from each remaining bank an amount of such stock 

determined by the Federal Housing Finance Board by multiplying the amount available for such purchases (at the 

time of such determination) by the percentage determined 

under subparagraph (B) with respect to such remaining 

bank until the aggregate amount of such capital stock has 

been purchased by the bank. 

(D) LIMITATION ON DIVIDENDS.—The amount of dividends which may be paid for any year by a bank on whose 

behalf an investment is made under subparagraph (A)(i) 

shall not exceed an amount equal to V2 of the net earnings 

of the bank for the year. 
810 

FEDERAL HOME LOAN BANK ACT 

Sec. 21A 

( E) TRANSFER TO ACCOUNT FOR PURCHASE OF STOCK 

REQUIRED.—Of the net earnings for any year of a bank on 

whose behalf an investment is made under subparagraph 

(A)(i), such amount as is necessary to make the purchases 

of stock required under subparagraph (A)(ii) shall be 

placed in a reserve account (established in such manner as 

the Federal Housing Finance Board shall prescribe by regulations) the balance in which shall be available only for 

such purchases. 

(7) UNDIVIDE D PROFITS DEFINED.—Fo r purposes of paragraph (3), the term "undivided profits'' means retained earnings minus the sum of— 

(A) that portion required to be added to reserves maintained pursuant to the first two sentences of section 16 of 

this Act; and 

(B) the dollar amounts held by the respective Federal 

Home Loan Banks in special dividend stabilization reserves on December 31, 1985, as determined under the following table: 

Bank Dollar amount 

Federal Home Loan Bank of Boston $3.2 million 

Federal Home Loan Bank of New York 7.7 million 

Federal Home Loan Bank of Pittsburgh 5.2 million 

Federal Home Loan Bank of Atlanta 12.3 million 

Federal Home Loan Bank of Cincinnati 5.9 million 

Federal Home Loan Bank of Indianapolis 37.4 million 

Federal Home Loan Bank of Chicago 6.0 million 

Federal Home Loan Bank of Des Moines 32.7 million 

Federal Home Loan Bank of Dallas 45.0 million 

Federal Home Loan Bank of Topeka 13.7 million 

Federal Home Loan Bank of San Francisco 21.9 million 

Federal Home Loan Bank of Seattle 33.6 million 

(e) OBLIGATIONS OF THE FINANCING CORPORATION.— 

(1) LIMITATION ON AMOUNT OF OUTSTANDING OBLIGATIONS.—The aggregate amount of obligations of the Financing 

Corporation which may be outstanding at any time (as determined by the Federal Housing Finance Board) shall not exceed 

the lesser of— 

(A) an amount equal to the greater of— 

(i) 5 times the amount of the nonvoting capital 

stock of the Financing Corporation which is outstanding at such time; or 

(ii) the sum of the face amounts (the amount of 

principal payable at maturity) of securities described 

in subsection (g)(2) which are held at such time in the 

segregated account established pursuant to such subsection; or 

(B) $10,825,000,000. 

(2) TERMINATION OF BORROWING AUTHORITY.—No obligation of the Financing Corporation shall be issued after the date 

of enactment of the Resolution Trust Corporation Refinancing, 

Restructuring, and Improvement Act of 1991. 

(3) LIMITATION ON TERM OF OBLIGATIONS.—No obligation of 

the Financing Corporation may be issued which matures— 

(A) more than 30 years after the date of issue; or 

(B) after December 31, 2026. 
811 FEDERAL HOME LOAN BANK ACT Sec. 21A 

( 4 ) INVESTMEN T OF UNITE D STATES FUND S I N OBLIGATIONS.—Obligations issued under this section by the Financing 

Corporation with the approval of the Federal Housing Finance 

Board shall be lawful investments, and may be accepted as 

security, for all fiduciary, trust, and public funds the investment or deposit of which shall be under the authority or control of the united states or any officer of the united states. 

(5) MARKE T FOR OBLIGATIONS.—All persons having the 

power to invest in, sell, underwrite, purchase for their own accounts, accept as security, or otherwise deal in obligations of 

the Federal Home Loan Banks shall also have the power to do 

so with respect to obligations of the Financing Corporation. 

( 6 ) N o FUL L FAIT H AN D CREDIT OF TH E UNITE D STATES.— 

Obligations of the Financing Corporation and the interest payable on such obligations shall not be obligations of, or guaranteed as to principal or interest by, the Federal Home Loan 

Banks, the United States, or the FSLIC Resolution Fund and 

the obligations shall so plainly state. 

( 7 ) TA X EXEMPT STATUS.— 

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

(B), obligations of the Financing Corporation shall be 

exempt from tax both as to principal and interest to the 

same extent as any obligation of a Federal Home Loan 

Bank is exempt from tax under section 13. 

(B) EXCEPTION.—The Financing Corporation, like the 

Federal Home Loan Banks, shall be treated as an agency 

of the united states for purposes of the first sentence of 

section 3124(b) of title 31, United States Code (relating to 

determination of tax status of interest on obligations). 

( 8 ) OBLIGATION S ARE EXEMPT SECURITIES.—Notwith -

standing paragraph (7),

 1 obligations of the Financing Corporation shall be deemed to be exempt securities (within the meaning of laws administered by the Securities and Exchange Commission) to the same extent as securities which are direct obligations of the united states or are guaranteed as to principal 

or interest by the united states. 

( 9 ) MINORIT Y PARTICIPATION I N PUBLIC OFFERINGS.—Th e 

Chairperson of the Federal Housing Finance Board and the 

Directorate shall ensure that minority owned or controlled 

commercial banks, investment banking firms, underwriters, 

and bond counsels throughout the united states have an 

opportunity to participate to a significant degree in any public 

offering of obligations issued under this section. 

(f) SOURCES OF FUND S FOR INTEREST PAYMENTS; FINANCIN G 

CORPORATION ASSESSMEN T 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) PREENACTMEN T ASSESSMENTS.—The Financing Corporation assessments which were assessed on insured institutions 

pursuant to this section as in effect prior to the date of enact1

 So in original. Probably should refer to paragraph (6) in view of the renumbering of paragraph (7) as (6) by section 512(12)(A) of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 (103 Stat. 407). 
812 

FEDERAL HOME LOAN BANK ACT 

Sec. 21A 

ment of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989. 

(2) NE W 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), except that— 

(A)1 the assessments imposed on insured depository 

institutions with respect to any BiF-assessable deposit 

shall be assessed at a rate equal to V5 of the rate of the 

assessments imposed on insured depository institutions 

with respect to any SAIF-assessable deposit; and 

(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. 

(3) RECEIVERSHIP PROCEEDS.—To the extent the amounts 

available pursuant to paragraphs (1) and (2) are insufficient to 

cover the amount of interest payments, issuance costs, and custodial fees, and if the funds are not required by the Resolution 

Funding Corporation to provide funds for the Funding Corporation Principal Fund under section 21B, the Federal Deposit Insurance Corporation shall transfer to the Financing 

Corporation, from the liquidating dividends and payments 

made on claims received by the FSLIC Resolution Fund (established under section 11A of the Federal Deposit Insurance Act) 

from receiverships, the remaining amount of funds necessary 

for the Financing Corporation to make interest payments. 

( g) US E AN D DISPOSITIO N OF ASSET S OF TH E FINANCIN G COR -

PORATION NO T INVESTED I N FSLIC.— 

(1) IN GENERAL.—Subject to such regulations, restrictions, 

and limitations as may be prescribed by the Federal Housing 

Finance Board, assets of the Financing Corporation, which are 

not invested in capital certificates or capital stock issued by 

the Federal Savings and Loan Insurance Corporation under 

section 402(b)(1)(A) of the National Housing Act before the 

date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and after such date in capital certificates issued by the FSLIC Resolution Fund, shall be 

invested in— 

(A) direct obligations of the United States; 

(B) obligations, participations, or other instruments of, 

or issued by, the Federal National Mortgage Association or 

the Government National Mortgage Association; 

(C) mortgages, obligations, or other securities for sale 

by, or which have been disposed of by, the Federal Home 

Loan Mortgage Corporation under section 305 or 306 of 

the Federal Home Loan Mortgage Corporation Act; or 

1

 Section 2703(c)(2) of the Deposit Insurance Funds Act of 1996 (110 Stat. 3009-485) provides 

that subparagraph (A) shall not apply after December 31, 1999. 
813 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(D) any other security in which it is lawful for fiduciary and trust funds to be invested under the laws of any 

State. 

(2) SEGREGATED ACCOUNT FOR ZERO COUPON INSTRUMENTS 

HELD TO ASSURE PAYMENT OF PRINCIPAL.—The Financing Corporation shall invest in, and hold in a segregated account, noninterest bearing instruments— 

(A) which are securities described in paragraph (1); 

and 

(B) the total of the face amounts (the amount of principal payable at maturity) of which is approximately equal 

to the aggregate amount of principal on the obligations of 

the Financing Corporation, 

to assure the repayment of principal on obligations of the Financing Corporation. For purposes of the foregoing, the Financing Corporation shall be deemed to hold noninterest bearing instruments that it lends temporarily to primary United 

States Treasury dealers in order to enhance market liquidity 

and facilitate deliveries provided that United States Treasury 

securities of equal or greater value have been delivered as collateral. 

(3) DOLLAR AMOUNT LIMITATION ON INVESTMENT I N ZERO 

COUPON INSTRUMENTS FOR SEGREGATED ACCOUNT.—The aggregate amount invested by the Financing Corporation under 

paragraph (2) shall not exceed $2,200,000,000 (as determined 

on the basis of the purchase price). 

(4) EXCEPTION FOR PAYMENT OF ISSUANCE COSTS, INTEREST, 

AND CUSTODIAN FEES.—Notwithstanding the requirements of 

paragraph (1), the assets of the Financing Corporation referred 

to in paragraph (1) which are not invested under paragraph (2) 

may be used to pay— 

(A) issuance costs; 

(B) any interest on (and any redemption premium 

with respect to) any obligation of the Financing Corporation; and 

(C) custodian fees. 

(5) DEFINITIONS.—Fo r purposes of this subsection— 

(A) ISSUANCE COSTS.—The term ''issuance costs''— 

(i) means issuance fees and commissions incurred 

by the Financing Corporation in connection with the 

issuance or servicing of any obligation of the Financing Corporation; and 

(ii) includes legal and accounting expenses, 

trustee and fiscal and paying agent charges, costs incurred in connection with preparing and printing offering materials, and advertising expenses, to the extent 

that any such cost or expense is incurred by the Financing Corporation in connection with issuing any 

obligation. 

(B) CUSTODIAN FEES.—Th e term ''custodian fee'' 

means— 

(i) any fee incurred by the Financing Corporation 

in connection with the transfer of any security to, or 
814 

FEDERAL HOME LOAN BANK ACT 

Sec. 21A 

the maintenance of any security in, the segregated account established under paragraph (2); and 

(ii) any other expense incurred by the Financing 

Corporation in connection with the establishment or 

maintenance of such account. 

(h) MISCELLANEOUS PROVISIONS RELATING TO FINANCING 

CORPORATION.— 

(1) TREATMENT FOR CERTAIN PURPOSES.—Except as provided in subsection (e)(8)(B), the Financing Corporation shall 

be treated as a Federal Home Loan Bank for purposes of sections 13 and 23. 

(2) FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL 

AGENTS.—The Federal Reserve banks are authorized to act as 

depositaries for or fiscal agents or custodians of the Financing 

Corporation. 

(3) APPLICABILITY OF CERTAIN PROVISIONS RELATING TO 

GOVERNMENT CORPORATION.—Notwithstanding the fact that no 

Government funds may be invested in the Financing Corporation, the Financing Corporation shall be treated, for purposes 

of sections 9105, 9107, and 9108 of title 31, United States 

Code, as a mixed-ownership Government corporation which 

has capital of the Government. 

(i) TERMINATION OF THE FINANCING CORPORATION.— 

(1) IN GENERAL.—The Financing Corporation shall be dissolved, as soon as practicable, after the earlier of— 

(A) the maturity and full payment of all obligations 

issued by the Financing Corporation pursuant to this section; or 

(B) December 31, 2026. 

(2) FEDERAL HOUSING FINANCE BOARD AUTHORITY TO CONCLUDE THE AFFAIRS OF FINANCING CORPORATION.—Effective on 

the date of the dissolution of the Financing Corporation under 

paragraph (1), the Federal Housing Finance Board may exercise, on behalf of the Financing Corporation, any power of the 

Financing Corporation which the Federal Housing Finance 

Board determines to be necessary to settle and conclude the affairs of the Financing Corporation. 

(j) REGULATIONS.—The Federal Housing Finance Board may 

prescribe such regulations as may be necessary to carry out the 

provisions of this section, including regulations defining terms used 

in this section. 

(k) DEFINITIONS.—Fo r purposes of this section, the following 

definitions shall apply: 

(1) DIRECTORATE.—The term "Directorate" means the 

directorate established in the manner provided in subsection 

(b)(1) to manage the Financing Corporation.''. 

(2) NE T EARNINGS DEFINED.—Th e term "net earnings'' 

means net earnings without reduction for any chargeoffs or expenses incurred by a Bank in connection with the purchase of 

capital stock of the Financing Corporation or the purchase of 

stock of the Funding Corporation required by the Thrift Depositor Protection Oversight Board under subsections (e) and 

(f) of section 21B. 
815 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(3) INSURE D DEPOSITOR Y INSTITUTION.—Th e term ''insured 

depository institution'' has the same meaning as in section 3 

of the Federal Deposit Insurance Act 

( 4 ) DEPOSI T TERMS. — 

(A) BIF-ASSESSABL E DEPOSITS.—Th e 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). 

(B) SAIF-ASSESSABL E DEPOSIT.—Th e term ''SAIFassessable deposit'' has the meaning given to such term in 

section 2710 of the Deposit Insurance Funds Act of 1996. 

SEC. 2 1 A. [1 2 U.S.C. 1441a] THRIF T DEPOSITO R PROTECTIO N OVER -

SIGH T BOAR D AN D RESOLUTIO N TRUS T CORPORATION. 1 

( a ) OVERSIGH T BOAR D

 2 ESTABLISHED. — 

(1) IN GENERAL.—There is hereby established the Thrift 

Depositor Protection Oversight Board as an instrumentality of 

the United States with the powers and authorities herein provided. 

(2) STATUS.—The Thrift Depositor Protection Oversight 

Board shall oversee and monitor the operations of the Resolution Trust Corporation (hereinafter referred to in this section 

as the ''Corporation'') and shall be accountable for the duties 

assigned to the Thrift Depositor protection oversight Board by 

this Act. The Thrift Depositor protection oversight Board shall 

be an ''agency'' of the United States for purposes of subchapter 

II of chapter 5 and chapter 7 of title 5, United States Code. 

( 3 ) MEMBERSHIP. — 

(A) IN GENERAL.—The Thrift Depositor Protection 

oversight Board shall consist of 7 members— 

(i) the Secretary of the Treasury; 

(ii) the Chairman of the Board of Governors of the 

Federal Reserve System; 

(iii) the Director of the Office of Thrift Supervision; 

(iv) the Chairperson of the Board of Directors of 

the Federal Deposit insurance Corporation; 

(v) the chief executive officer of the Corporation; 

and 

(vi) two independent members appointed by the 

President, with the advice and consent of the Senate. 

Such nominations shall be referred to the Committee 

on Banking, Housing, and Urban Affairs of the Senate. 

(B) POLITICA L AFFILIATION.—Th e independent members shall not be members of the same political party. No 

1Note: The Resolution Trust Corporation has been terminated in accordance with subsection 

(m) of this section. The Thrift Depositor protection oversight Board was abolished under section 

14 of the Homeowners Protection Act of 1998 (12 U.S.C. 1441a note) and the Board's authority 

under subsection (a)(6)(I) of this section was transferred to the Secretary of the Treasury. 

2

 So in law. Probably should have changed ''OVERSIGHT BOARD'' to "THRIFT DEPOSITOR PROTECTIO N OVERSIGH T BOARD''. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 816 

independent member of the Thrift Depositor Protection 

oversight Board shall hold any other appointed office during his or her term as a member. 

(C) CHAIRPERSON.—The Chairperson of the Thrift Depositor Protection Oversight Board shall be the Secretary 

of the Treasury. 

(D) TER M OF OFFICE.—The term of each member (other 

than the independent members) of the Thrift Depositor 

Protection Oversight Board shall expire when such member has fulfilled all of his or her responsibilities under this 

section and section 21B. The term of each independent 

member shall be 3 years. 

(E) QUORU M REQUIRED.—A quorum shall consist of 4 

members of the Thrift Depositor Protection Oversight 

Board and all decisions of the Board shall require an 

affirmative vote of at least a majority of the members voting. 

(4) COMPENSATION AND EXPENSES.— 

(A) EXPENSES.—Members of the Thrift Depositor Protection oversight Board shall receive allowances in accordance with subchapter i of chapter 57 of title 5, united 

states Code, for necessary expenses of travel, lodging, and 

subsistence incurred in attending meetings and other 

activities of the Thrift Depositor Protection Oversight 

Board, as set forth in the bylaws issued by the Thrift Depositor Protection Oversight Board. 

( B) N O ADDITIONAL COMPENSATION FOR UNITED STATES 

OFFICERS OR EMPLOYEES.—Member s of the Thrift Depositor Protection Oversight Board (other than independent 

members) shall receive no additional pay by reason of service on such Board. 

( C) COMPENSATION FOR INDEPENDENT MEMBERS.—The 

independent members of the Thrift Depositor Protection 

oversight Board shall be paid at a rate equal to the daily 

equivalent of the rate of basic pay for level II of the Executive schedule for each day (including travel time) during 

which such member is engaged in the actual performance 

of duties of the Thrift Depositor Protection Oversight 

Board. 

(5) POWERS.—The Thrift Depositor Protection Oversight 

Board shall be a body corporate that shall have the power to— 

(A) adopt, alter, and use a corporate seal; 

(B) provide for a principal or executive officer and such 

other officers and employees as may be necessary to perform the functions of the Thrift Depositor Protection Oversight Board, define their duties, and require surety bonds 

or make other provisions against losses occasioned by acts 

of such persons; 

(C) fix the compensation and number of, and appoint, 

employees for any position established by the Thrift Depositor Protection Oversight Board; 

(D) set and adjust rates of basic pay for employees of 

the Thrift Depositor Protection Oversight Board without 
817 FEDERAL HOME LOAN BANK ACT Sec. 21A 

regard to the provisions of chapter 51 or subchapter iii of 

chapter 53 of title 5, United States Code; 

(E) provide additional compensation and benefits to 

employees of the Thrift Depositor Protection Oversight 

Board if the same type of compensation or benefits are 

then being provided by any other Federal bank regulatory 

agency or, if not then being provided, could be provided by 

such an agency under applicable provisions of law, rule, or 

regulation; in setting and adjusting the total amount of 

compensation and benefits for employees of the Thrift Depositor Protection Oversight Board, the Thrift Depositor 

Protection Oversight Board shall consult with and seek to 

maintain comparability with the other Federal bank regulatory agencies, except that the Thrift Depositor Protection 

oversight Board shall not in any event exceed the compensation and benefits provided by the Federal Deposit 

Insurance Corporation with respect to any comparable 

position; 

(F) with the consent of any executive agency, department, or independent agency utilize the information, services, staff, and facilities of such department or agency, on 

a reimbursable (or other) basis, in carrying out this section; 

(G) prescribe bylaws that are consistent with law to 

provide for the manner in which— 

(i) its officers and employees are selected, and 

(ii) its general operations are to be conducted; 

(H) enter into contracts and modify or consent to the 

modification of any contract or agreement; 

(i) indemnify, from funds made available to it by the 

Corporation, the members, officers, and employees of the 

Thrift Depositor Protection Oversight Board on such terms 

as the Thrift Depositor Protection Oversight Board deems 

proper against any liability under any civil suit pursuant 

to any statute or pursuant to common law with respect to 

any claim arising out of or resulting from any act or omission by such person within the scope of such person's 

employment in connection with any transaction entered 

into involving the disposition of assets (or any interests in 

any assets or any obligations backed by any assets) by the 

Corporation, and the indemnification authorized by this 

provision shall be in addition to and not in lieu of any 

immunities or other protections that may be available to 

such person under applicable law, and this provision does 

not affect any such immunities or other protections; 

(J) sue and be sued in courts of competent jurisdiction; 

and 

(K) exercise any and all powers established under this 

section and such incidental powers as are necessary to 

carry out its powers, duties, and functions under this Act. 

(6) THRIF T DEPOSITOR PROTECTION OVERSIGHT BOARD DUTIES AND AUTHORITIES.—The Thrift Depositor Protection Oversight Board shall have the following duties and authorities 

with respect to the Corporation: 
Sec. 21A FEDERAL HOME LOAN BANK ACT 818 

(A) To review overall strategies, policies, and goals 

established by the Corporation for its activities, which 

shall include such items as the Thrift Depositor protection 

Oversight Board deems likely to have a material effect 

upon the financial condition of the Corporation, the results 

of its operations, or its cash flows, and such items as the 

Thrift Depositor Protection Oversight Board deems to involve substantial issues of public policy. After consultation 

with the Corporation, the Thrift Depositor protection 

Oversight Board may require the modification of any such 

overall strategies, policies, and goals and their implementation. Overall strategies, policies, and goals shall include 

such items as— 

(i) overall strategies, policies, and goals for case 

resolutions, the management and disposition of assets, 

the use of private contractors; 

(ii) the use of notes, guarantees, or other obligations by the Corporation; 

(iii) financial goals, plans, and budgets; and 

(iv) restructuring agreements described in subsection (b)(10)(B). 

(B) To approve prior to implementation financial 

plans, budgets, and periodic financing requests developed 

by the Corporation. 

(C) To review all rules, regulations, standards, principles, procedures, guidelines, and statements that may be 

adopted or announced by the Corporation. The provisions 

of this subparagraph shall not apply to internal administrative policies and procedures (including such matters as 

personnel practices, divisions and organization of staffing, 

delegations of authority, and practices respecting day-today administration of the Corporation's affairs) and determinations or actions described in paragraph (8)

 1 

(D) To review the overall performance of the Corporation on a periodic basis, including its work, management 

activities, and internal controls, and the performance of 

the Corporation relative to approved budget plans. 

(E) To require from the Corporation any reports, documents, and records it deems necessary to carry out its 

oversight responsibilities. 

(F) To establish a national advisory board and regional 

advisory boards. 

(G) To authorize the use of proceeds from any funds 

provided by the Treasury to the Corporation and from any 

financing by the Resolution Funding Corporation established pursuant to section 21B of this Act consistent with 

the approved budget and financial plans of the Corporation 

and to oversee the collection of funds by the Resolution 

Funding Corporation. 

1

 Section 1613(c)(1) of the Housing and Community Development Act of 1992 (P.L. 102-550; 

106 Stat. 4092) amends this subparagraph by striking "paragraph (8) of this subsection'' and 

all that follows through the period at the end and inserting "paragraph (8)''. The amendment 

probably should have inserted "paragraph (8).''. 
819 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(H) To evaluate audits by the inspector General and 

other congressionally required audits. 

(I) To have general oversight over the Resolution 

Funding Corporation as provided under section 21B of this 

Act. 

(J) To authorize, as appropriate, the Corporation's sale 

of capital certificates to the Resolution Funding Corporation. 

(K) To establish the rate of basic pay, benefits, and 

other compensation for the chief executive officer of the 

Corporation. 

(7) TRANSITIO N POLICIES.—Until such time as the Thrift 

Depositor protection oversight Board and the Corporation 

(consistent with paragraph (6) and subsection (b)(11)) adopt 

strategies, policies, goals, regulations, rules, operating principles, procedures, or guidelines, the Corporation may carry out 

its duties in accordance with the strategies, policies, goals, regulations, rules, operating principles, procedures, or guidelines 

of the Federal Deposit insurance Corporation, notwithstanding 

the provisions of section 553 of title 5, United States Code. 

(8) LIMITATIO N O N AUTHORITY.—The Corporation shall 

have the authority, without any prior review, approval, or disapproval by the Thrift Depositor protection oversight Board, 

to make such determinations and take such actions as it deems 

appropriate with respect to case-specific matters involving (i) 

individual case resolutions, (ii) asset liquidations, or (iii) dayto-day operations of the Corporation. The preceding sentence in 

no way limits

 1 the authority of the Thrift Depositor protection 

oversight Board to review overall strategies, policies, and goals 

established by the Corporation. 

(9) DELEGATION.—Except with respect to the meetings required by paragraph (10), nothing in this section shall preclude 

a member of the Thrift Depositor protection oversight Board 

who is a public official from delegating his or her authority to 

an employee or officer of such member's agency or organization, if such employee or officer has been appointed by the 

President with the advice and consent of the Senate. For purposes of the preceding sentence, the Chairman of the Board of 

Governors of the Federal Reserve System may delegate his or 

her authority to another member of the Board of Governors. 

(10) OPE N MEETINGS.—Not less than 6 times each year, the 

Thrift Depositor protection oversight Board shall conduct open 

meetings to review overall strategies, policies, and goals established by the Corporation and to consider such other matters 

as pertain to its functions under this Act. The Thrift Depositor 

protection oversight Board shall maintain a transcript of the 

board's open meetings. 

(11) POWER TO REMOVE; JURISDICTION.—Notwithstanding 

any other provision of law, any civil action, suit, or proceeding 

to which the Thrift Depositor protection oversight Board is a 

party shall be deemed to arise under the laws of the United 

1

 So in original. The term ''shall not be construed as limiting" probably should be substituted 

for ''in no way limits''. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 20 

states, and the united states district courts shall have original 

jurisdiction. The Thrift Depositor Protection Oversight Board 

may, without bond or security, remove any such action, suit, 

or proceeding from a state court to a united states district 

court or to the united states District Court for the District of 

Columbia. 

(12) ADMINISTRATIVE EXPENSES.—The administrative expenses of the Thrift Depositor Protection Oversight Board shall 

be paid by the Corporation, upon request of the Thrift Depositor Protection Oversight Board. 

(13) STANDARDS, POLICIES, PROCEDURES, GUIDELINES, AND 

STATEMENTS.—The Thrift Depositor Protection Oversight 

Board may issue rules, regulations, standards, policies, procedures, guidelines, and statements as the Thrift Depositor Protection oversight Board considers necessary or appropriate to 

carry out its authorities and duties under this Act which shall 

be promulgated pursuant to subchapter i i of chapter 5 of title 

5, united states Code. 

(14) STRATEGIC PLAN FOR CORPORATION OPERATIONS.— 

(A) IN GENERAL.—The chief executive officer of the 

Corporation is authorized to implement the strategic plan 

for conducting the Corporation's functions and activities 

submitted by the former oversight Board to the Congress, 

dated December 31, 1989. 

(B) PROVISIONS OF PLAN.—Th e strategic plan and implementing policies and procedures required under this 

paragraph shall at a minimum contain the following: 

(i) Factors the Corporation shall consider in deciding the order in which failed institutions or categories 

of failed institutions will be resolved. 

(ii) standards the Corporation shall use to select 

the appropriate resolution action for a failed 

institution. 

(iii) with respect to assisted acquisitions, factors 

the Corporation shall consider in deciding whether 

non-performing assets of the failed institution will be 

transferred to the acquiring institution rather than retained by the Corporation for management and disposal. 

(iv) Plans for the disposition of assets. 

(v) Management objectives by which the Corporation's progress in carrying out its duties under this 

section can be measured. 

(vi) A plan for the organizational structure and 

staffing of the Corporation, including an assessment of 

the extent to which the Corporation will perform asset 

management functions and other duties through contracts with public and private entities. 

(vii) Consideration of whether incentives should be 

included in asset management contracts to promote 

active and efficient asset management. 

(viii) standards for adequate competition and fair 

and consistent treatment of offerors. 
821 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(ix) Standards that prohibit discrimination on the 

basis of race, sex, or ethnic group in the solicitation 

and consideration of offers. 

(x) Procedures for the active solicitation of offers 

from minorities and women. 

(xi) Procedures requiring that unsuccessful 

offerors be notified in writing of the decision within 30 

days after the offer has been rejected. 

(xii) Procedures for establishing the market value 

of assets based upon standard market analysis, valuation, and appraisal practices. 

(xiii) Procedures requiring the timely evaluation of 

purchase offers for an institution. 

(xiv) Procedures for bulk sales and auction marketing of assets. 

(xv) Guidelines for determining if the value of an 

asset has decreased so that no reasonable recovery is 

anticipated. In such cases, the Corporation may consider potential public uses of such asset including providing housing for lower income families (including the 

homeless), day care centers for the children of lowand moderate-income families, or such other public 

purpose designated by the Secretary of Housing and 

Urban Development. 

(xvi) Guidelines for the conveyance of assets to 

units of general local government, States, and public 

agencies designated by a unit of general local government or a State, for use in connection with urban 

homesteading programs approved by the Secretary of 

Housing and Urban Development under section 810 of 

the Housing and Community Development Act of 

1974. 

(xvii) Policies and procedures for avoiding political 

favoritism and undue influence in contracts and 

decisions made by the Thrift Depositor Protection 

Oversight Board and the Corporation. 

(15) REPORTS ON ANY MODIFICATION TO ANY STRATEGY, POLICY, OR GOAL.—If, pursuant to paragraph (6)(A), the Thrift Depositor Protection Oversight Board requires the Corporation to 

modify any overall strategy, policy, or goal, such board shall 

submit, before the end of the 30-day period beginning on the 

date on which the board first notifies the Corporation of such 

requirement, to the Committee on Banking, Housing, and 

Urban Affairs of the Senate and the Committee on Banking, 

Finance and Urban Affairs of the House of Representatives an 

explanation of the grounds which the board determined justified the review and the reasons why the modification is necessary to satisfy any such ground. 

(16) TERMINATION.—Th e Thrift Depositor Protection Oversight Board shall terminate not later than 60 days after the 

Thrift Depositor Protection Oversight Board fulfills all of its 

responsibilities under this Act. 

(b) RESOLUTION TRUST CORPORATION ESTABLISHED.— 

(1) ESTABLISHMENT.— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 22 

(A) IN GENERAL.—There is hereby established a Corporation to be known as the Resolution Trust Corporation 

which shall be an instrumentality of the United States. 

(B) STATUS.—The Corporation shall be deemed to be 

an agency of the United States for purposes of subchapter 

II of chapter 5 and chapter 7 of title 5, United States Code, 

when it is acting as a corporation. The Corporation, when 

it is acting as a conservator or receiver of an insured 

depository institution, shall be deemed to be an agency of 

the United States to the same extent as the Federal Deposit insurance Corporation when it is acting as a conservator or receiver of an insured depository institution. 

(C) MANAGEMENT BY CHIEF EXECUTIVE OFFICER.—The 

Corporation shall be managed by or under the direction of 

its chief executive officer. 

(2) GOVERNMENT CORPORATION.—Notwithstanding the fact 

that no Government funds may be invested in the Corporation, 

the Corporation shall be treated, for purposes of sections 9105, 

9107, and 9108 of title 31, United States Code, as a mixedownership Government corporation which has capital of the 

Government. 

(3) DUTIES.—The duties of the Corporation shall be to 

carry out a program, under the general oversight of the Thrift 

Depositor Protection Oversight Board, including: 

(A) To manage and resolve all cases involving depository institutions— 

(i) the accounts of which were insured by the Federal Savings and Loan Insurance Corporation before 

the enactment of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989; and 

(ii) for which a conservator or receiver is appointed after December 31, 1988, and before such date 

as is determined by the Chairperson of the Thrift Depositor Protection Oversight Board, but not earlier 

than January 1, 1995, and not later than July 1, 1995 

(including any institution described in paragraph (6)). 

(B) To develop and establish overall strategies, policies, and goals for the Corporation, subject to review by 

the Thrift Depositor Protection Oversight Board pursuant 

to subsection (a)(6)(A) of this section. 

(C) To conduct the operations of the Corporation in a 

manner which— 

(i) maximizes the net present value return from 

the sale or other disposition of institutions described 

in subparagraph (A) or the assets of such institutions; 

(ii) minimizes the impact of such transactions on 

local real estate and financial markets; 

(iii) makes efficient use of funds obtained from the 

Funding Corporation or from the Treasury; 

(iv) minimizes the amount of any loss realized in 

the resolution of cases; and 

(v) maximizes the preservation of the availability 

and affordability of residential real property for lowand moderate-income individuals. 
823 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(D) To perform any other function authorized under 

this section. 

( 4 ) CONSERVATORSHIP, RECEIVERSHIP, AN D ASSISTANCE

 1 

POWERS.— 

(A) IN GENERAL.—Except as provided in paragraph (5) 

and in addition to any other provision of this section, the 

Corporation shall have the same powers and rights to 

carry out its duties with respect to institutions described 

in paragraph (3)(A) as the Federal Deposit Insurance Corporation has under sections 11, 12, and 13 of the Federal 

Deposit insurance Act with respect to insured depository 

institutions (as defined in section 3 of the Federal Deposit 

insurance Act). 

( B ) MANNE R 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 

affected deposit insurance fund. 

(C) APPEALS.—The Corporation shall implement and 

maintain a program, in a manner acceptable to the Thrift 

Depositor Protection Oversight Board, to provide an appeals process for business and commercial borrowers to appeal decisions by the Corporation (when acting as a conservator) which would have the effect of terminating or otherwise adversely affecting credit or loan agreements, lines of 

credit, and similar arrangements with such borrowers who 

have not defaulted on their obligations. 

( 5 ) LIMITATIO N O N PARAGRAPH (4) POWERS.—Th e 

Corporation— 

(A) may not obligate the Federal Deposit insurance 

Corporation or any funds of the Federal Deposit insurance 

Corporation; and 

(B) in connection with providing assistance to an institution under this subsection, shall be subject to the limitations contained in section 13(c)(4) of the Federal Deposit 

insurance Act. 

( 6 ) CONTINUATIO N OF RTC RECEIVERSHIP OR CONSERVATORSHIP. — 

(A) I N GENERAL.—I f the Corporation is appointed as 

conservator or receiver for any insured depository institution described in paragraph (3)(A) before such date as is 

determined by the Chairperson of the Thrift Depositor Protection oversight Board under paragraph (3)(A)(ii), and a 

conservator or receiver is appointed for such institution on 

or after such date, the Corporation may be appointed as 

conservator or receiver for such institution on or after such 

date as is determined by the Chairperson of the Thrift Depositor Protection Oversight Board under paragraph 

(3)(A)(ii). 

(B) SAIF-INSURE D BANKS.—Notwithstanding any other 

provision of Federal or state law, if the Federal Deposit 

1

 section 141(a)(3)(A) of the Federal Deposit insurance Corporation improvement Act of 1991 

(105 Stat. 2276), struck ''POWERS.—Except as''. The amendment probably should have striken 

"POWERS.—Except as''. Executed according to probable intent. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 24 

insurance Corporation is appointed as conservator or receiver for any Savings Association Insurance Fund member 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. 

(7) OBLIGATIONS AND GUARANTEES.—The Corporation's authority to issue obligations and guarantees shall be subject to 

general supervision by the Thrift Depositor protection oversight Board under subsection (a) and shall be consistent with 

subsection (j). 

(8) STAFF.— 

(A) IN GENERAL.—Except for the chief executive officer 

of the Corporation, the Corporation itself shall have no employees. 

(B) UTILIZATION OF PERSONNEL OF OTHER AGENCIES.— 

(i) FDIC.—The Corporation shall use employees 

(selected by the Corporation) of the Federal Deposit 

insurance Corporation and the Federal Deposit insurance Corporation shall provide such personnel to the 

Corporation for its use. Notwithstanding the foregoing, 

the Federal Deposit insurance Corporation need not 

provide to the Corporation any employee of the Federal Deposit insurance Corporation who was employed 

by the Federal Deposit insurance Corporation on the 

date of enactment of the Resolution Trust Corporation 

Refinancing, Restructuring, and Improvement Act of 

1991 and who had not theretofore been provided to the 

Corporation by the Federal Deposit insurance Corporation. in addition to persons otherwise employed by 

the Federal Deposit insurance Corporation, the Federal Deposit insurance Corporation shall employ, and 

shall provide to the Corporation, such persons as the 

Corporation may request from time to time. Federal 

Deposit insurance Corporation employees provided to 

the Corporation shall be subject to the direction and 

control of the Corporation and any of them may be returned to the Federal Deposit insurance Corporation 

at any time by the Corporation in the discretion of the 

Corporation. The Corporation shall reimburse the Federal Deposit insurance Corporation for the actual costs 

incurred in providing such employees. Any permanent 

employee of the Federal Deposit insurance Corporation who was performing services on behalf of the Corporation immediately prior to the date of enactment of 

the Resolution Trust Corporation Refinancing, 

Restructuring, and Improvement Act of 1991 shall 

continue to be provided to the Corporation after that 

date unless the Corporation determines the services of 

any such employee to be unnecessary, in which case 

such employee shall be returned to a similar position 

performing services on behalf of the Federal Deposit 
825 FEDERAL HOME LOAN BANK ACT Sec. 21A 

insurance Corporation. in any ensuing reduction-inforce or reorganization within the Federal Deposit 

insurance Corporation, any such employee shall compete with the same rights as any other Federal Deposit insurance Corporation employee. The Corporation may use administrative services of the Federal 

Deposit Insurance Corporation and, if it does so, shall 

reimburse the Federal Deposit Insurance Corporation 

for the actual costs of providing such services.1 

(ii) OTHE R AGENCIES.—Wit h the agreement of any 

executive department or agency, the Corporation may 

utilize the personnel of any such executive department 

or agency on a reimbursable basis to cover actual and 

reasonable expenses. 

(C) CHIE F EXECUTIV E OFFICER.—Ther e is established 

the office of chief executive officer of the Corporation. The 

chief executive officer of the Corporation shall be appointed by the president, by and with the advice and consent of the Senate, and shall serve at the pleasure of the 

president. 

( D ) POWER S OF TH E CHIE F EXECUTIV E OFFICER.—Th e 

chief executive officer may exercise all of the powers of the 

Corporation and act for and on behalf of the Corporation, 

and may delegate such authority, as deemed appropriate 

by the chief executive officer, including the power to subdelegate authority, to persons designated by the chief executive officer who are employees of the Federal Deposit 

insurance Corporation utilized by the Corporation or who 

provide services for the Corporation. 

( E ) DEPUT Y CHIE F EXECUTIV E OFFICER. — 

(i) IN GENERAL.—There is hereby established the 

position of deputy chief executive officer of the Corporation. 

(ii) APPOINTMENT.—Th e deputy chief executive officer of the Corporation shall— 

(i) be appointed by the Chairperson of the 

Thrift Depositor Protection Oversight Board, with 

the recommendation of the chief executive officer; 

and 

(II) be an employee of the Federal Deposit 

insurance Corporation in accordance with subparagraph (B)(i). 

(iii) DUTIES.—The deputy chief executive officer 

shall perform such duties as the chief executive officer 

may require. 

(F) ACTIN G CHIE F EXECUTIV E OFFICER.—I n the event of 

a vacancy in the position of chief executive officer or during the absence or disability of the chief executive officer, 

1

 Section 5(e) of P.L. 102-378, 106 Stat. 1358, stated ''section 21A(b)(9)(B)(i) of the Federal 

Home Loan Bank Act (12 U.S.C. 1441a(b)(9)(B)(i)), as amended by section 201 of the Resolution 

Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 (Public Law 102-

233; 105 Stat. 1765), is amended by striking the last 3 sentences.'' The amendment probably 

should have been made to 21A(b)(8)(B)(i). Executed according to probable intent. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 826 

the deputy chief executive officer shall perform the duties 

of the position as the acting chief executive officer. 

(G) GENERAL COUNSEL.—There is established the Office of General Counsel of the Corporation. The chief executive officer, with the concurrence of the Chairperson of 

the Thrift Depositor Protection Oversight Board, may appoint the general counsel, who shall be an employee of the 

Federal Deposit Insurance Corporation, in accordance with 

subparagraph (B)(i). The general counsel shall perform 

such duties as the chief executive officer may require. 

(9) CORPORATE POWERS.—The Corporation shall have the 

following powers: 

(A) To adopt, alter, and use a corporate seal. 

(B) To enter into contracts and modify, or consent to 

the modification of, any contract or agreement to which 

the Corporation is a party or in which the Corporation has 

an interest under this section. 

(C) To make advance, progress, or other payments. 

(D) To acquire, hold, lease, mortgage, maintain, or dispose of, at public or private sale, real and personal property, using any legally available private sector methods including without limitation, securitization of debt or equity, 

limited partnerships, mortgage investment conduits, and 

real estate investment trusts, and otherwise exercise all 

the usual incidents of ownership of property necessary and 

convenient to the operations of the Corporation. 

(E) To sue and be sued in its corporate capacity in any 

court of competent jurisdiction. 

(F) To deposit any securities or funds held by the Corporation in any facility or depositary described in section 

13(b) of the Federal Deposit Insurance Act under the 

terms and conditions applicable to the Federal Deposit 

Insurance Corporation under such section 13(b) and pay 

fees thereof and receive interest thereon. 

(G) To take warrants, voting and nonvoting equity, or 

other participation interests in institutions or assets or 

properties of institutions described in paragraph (3)(A) and 

paragraph (10)(A)(iv). 

(H) To use the United States mails in the same manner and under the same conditions as other departments 

and agencies of the United States. 

(i) To prescribe bylaws that shall be consistent with 

law. 

(J)1 To make loans and, with respect to eligible residential properties, develop risk sharing structures and 

other credit enhancements to assist in the provision of 

property ownership, rental, and cooperative housing opportunities for lower- and moderate-income families. 

1

 Sections 310 and 314(2)(B)(i) of the Resolution Trust Corporation Refinancing, Restructuring, 

and Improvement Act of 1991, redesignated (10) as (9) and (K) as (J). Section 501(a)(1) of such 

Act amended subparagraph (K). The amendment made by section 501(a)(1) probably should 

have amended (9)(J), as redesignated (105 Stat. 1769, 1771). Executed in accordance with probable intent. 
827 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(K) To prepare reports and provide such reports, documents, and records to the Thrift Depositor protection 

oversight Board as required by this section. 

(L) To issue capital certificates to the Resolution 

Funding Corporation consistent with the provisions of section 21B of this Act in the following manner: 

(i) AUTHORIZATION TO ISSUE.—The Corporation is 

hereby authorized to issue to the Resolution Funding 

Corporation nonvoting capital certificates. 

(ii) REQUIREMENT RELATING TO THE AMOUNT OF 

CERTIFICATES.—The amount of certificates issued by 

the Corporation under clause (i) shall be equal to the 

aggregate amount of funds provided by the Resolution 

Funding Corporation to the Corporation under section 

21B. 

(iii) CERTIFICATES MAY BE ISSUED ONLY TO THE 

RESOLUTION FUNDING CORPORATION.—Capital certificates issued under clause (i) may be issued only to the 

Resolution Funding Corporation in the manner and to 

the extent provided in section 21B and this section. 

(iv) N o DIVIDENDS.—The Corporation shall not pay 

dividends on any capital certificates issued under this 

section. 

(M) To exercise any other power established under 

this section and such incidental powers as are necessary to 

carry out its duties and functions under this section. The 

Corporation may indemnify the directors, officers and employees of the Corporation on such terms as the Corporation deems proper against any liability under any civil suit 

pursuant to any statute or pursuant to common law with 

respect to any claim arising out of or resulting from any 

act or omission by such person within the scope of such 

person's employment in connection with any transaction 

entered into involving the disposition of assets (or any interests in any assets or any obligations backed by any assets) by the Corporation. For purposes of this subparagraph, the terms ''officers'' and ''employees'' include officers 

and employees of the Federal Deposit Insurance Corporation or of other agencies who perform services for the Corporation. The indemnification authorized by this subparagraph shall be in addition to and not in lieu of any immunities or other protections that may be available to such 

person under applicable law, and this provision does not 

affect any such immunities or other protections. 

(10) SPECIAL POWERS.— 

(A) I N GENERAL.—In addition to the powers of the Corporation described in paragraph (9), the Corporation shall 

have the following powers: 

(i) CONTRACTS.—The Corporation may enter into 

contracts with any person, corporation, or entity, including State housing finance authorities (as such 

term is defined in section 1301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989) and insured depository institutions, which the 
Sec. 21A FEDERAL HOME LOAN BANK ACT 828 

Corporation determines to be necessary or appropriate 

to carry out its responsibilities under this section. 

such contracts shall be subject to the procedures 

adopted pursuant to paragraph (11). 

(ii) UTILIZATION OF PRIVATE SECTOR.—In carrying 

out the Corporation's duties under this section, the 

Corporation and the Federal Deposit Insurance Corporation shall utilize the services of private persons, 

including real estate and loan portfolio asset management, property management, auction marketing, and 

brokerage services, if such services are available in the 

private sector and the Corporation determines utilization of such services are practicable and efficient. 

(iii) MERGERS AND CONSOLIDATIONS.—The Corporation may require a merger or consolidation of an 

institution or institutions over which the Corporation 

has jurisdiction, if such merger or consolidation is consistent with section 13(c)(4) of the Federal Deposit 

insurance Act. 

(iv) ORGANIZATION OF SAVINGS ASSOCIATIONS.— 

The Corporation may organize 1 or more Federal savings associations— 

(i) which shall be chartered by the Director of 

the office of Thrift supervision, 

(ii) the deposits of which, if any, shall be insured by the Federal Deposit insurance Corporation through the savings Association insurance 

Fund, and 

(iii) which shall operate in accordance with 

subsection (e). 

(v) ORGANIZATION OF BRIDGE BANKS.—The Corporation may organize 1 or more bridge banks pursuant to subsection (i) of section 11 of the Federal Deposit insurance Act with respect to any institution described in paragraph (3)(A) which becomes a bank. 

such bridge bank shall be subject to subsection (e). 

(B) REVIEW OF PRIOR CASES.—The Corporation shall— 

(i) review and analyze all insolvent institution 

cases resolved by the Federal Savings and Loan Insurance Corporation between January 1, 1988, and the 

date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and actively review all means by which it can reduce costs 

under existing Federal Savings and Loan Insurance 

Corporation agreements relating to such cases, including restructuring such agreements; 

(ii) evaluate the costs under existing Federal savings and Loan Insurance Corporation agreements with 

regard to the following— 

(i) capital loss coverage, 

(ii) yield maintenance guarantees, 

(iii) forbearances, 

(iv) tax consequences, and 

(v) any other relevant cost consideration; 
829 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(iii) review the bidding procedures used in resolving such cases in order to determine whether the bidding and negotiating processes were sufficiently competitive; and 

(iv) report to the Thrift Depositor Protection Oversight Board and the Congress pursuant to subsection 

(k). 

( C) PROVISIONS APPLICABLE TO REVIEW OF PRIOR CASES.— 

(i) IN GENERAL.—The Corporation shall exercise 

any and all legal rights to modify, renegotiate, or 

restructure such agreements where savings would be 

realized by such actions. The cost or income of any 

modification shall be a liability or an asset of the Corporation or the FSLIC Resolution Fund as determined 

by the Thrift Depositor Protection Oversight Board. 

Nothing in this paragraph shall be construed as granting the Corporation any legal rights to modify, renegotiate, or restructure agreements between the Federal 

Savings and Loan Insurance Corporation and any 

other party, which did not exist prior to the date of 

enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

(ii) ADDITIONAL PROVISIONS.—The Corporation, in 

modifying, renegotiating, or restructuring the insolvent institution cases resolved by the Federal Savings 

and Loan insurance Corporation between January 1, 

1988, and the date of enactment of the Financial institutions Reform, Recovery and Enforcement Act of 

1989, shall carry out its responsibilities under section 

519(a) of the Department of Veterans Affairs and 

Housing and Urban Development, and Independent 

Agencies Appropriations Act, 1991 (104 Stat. 1386) 

and shall, consistent with achieving the greatest overall financial savings to the Federal Government, pursue all legal means by which the Corporation can reduce both the direct outlays and the tax benefits associated with such cases, including, but not limited to, 

restructuring to eliminate tax-free interest payments 

and renegotiating to capture a larger portion of the 

tax benefits for the Corporation. 

(11) REGULATIONS, POLICIES, AND PROCEDURES.— 

(A) STRATEGIES, POLICIES, AND GOALS.—The Corporation shall adopt the rules, regulations, standards, procedures, guidelines, and statements necessary to implement 

the strategic plan submitted by the former Oversight 

Board to Congress dated December 31, 1989. The Corporation may establish overall strategies, policies, and goals for 

its activities and may issue such rules, regulations, standards, principles, procedures, guidelines, and statements as 

the Corporation considers necessary or appropriate to 

carry out its duties. 

(B) REVIEW, ETC.—Such overall strategies, policies, 

and goals, and such rules, regulations, standards, principles, procedures, guidelines, and statements— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 30 

(i) shall be provided by the Corporation to the 

Thrift Depositor Protection Oversight Board promptly 

or prior to publication or announcement to the extent 

practicable; 

(ii) shall be subject to the review of the Thrift Depositor Protection Oversight Board as provided in subsection (a)(6)(A) (with respect to overall strategies, 

policies, and goals); and 

(iii) shall be promulgated pursuant to subchapter 

II of chapter 5 of title 5 United States Code. 

(C) PREPARATION AND MAINTENANCE OF RECORDS RELATING TO SOLICITATION AND ACCEPTANCE OF OFFERS.—The 

Corporation shall— 

(i) document decisions made in the solicitation and 

selection process and the reasons for the decisions; 

and 

(ii) maintain such documentation in the offices of 

the Corporation, as well as any other documentation 

relating to the solicitation and selection process. 

( D ) DISTRESSED AREAS.— 

(i) I N GENERAL.—In developing its implementing 

policies, the Corporation shall take the action described in clause (ii) to avoid adverse economic impact 

for those real estate markets that are distressed. 

(ii) VALUATION AND DISPOSITION.—The Corporation shall establish an appraisal or other valuation 

method for determining the market value of real property. With respect to a real property asset with a market value in excess of a certain dollar limit (such limit 

to be determined by the chief executive officer of the 

Corporation), consideration shall be given to the volume of assets above such limit and the potential impact of sales in such distressed areas. The Corporation 

shall not sell a real property asset located in a distressed area without obtaining at least the minimum 

disposition price, unless a determination has been 

made that such a transaction furthers the objectives 

set forth in paragraph (3)(C). 

(iii) EXCEPTION.—The provisions of this subparagraph shall not apply to any property as long as such 

property is subject to the requirements of subsection 

(c). 

(E) DEFINITIONS.—Fo r the purposes of this 

subsection— 

(i) The term ''minimum disposition price'' means 

95 percent of the market value established by the Corporation. The chief executive officer, in the chief executive officer's discretion, may change the percentage 

set forth in this definition from time to time if the 

chief executive officer determines that such change 

does not adversely impact the objectives set forth in 

paragraph (3)(C). 

(ii) The term ''sell a real property asset'' means to 

convey all title and interest in a piece of tangible real 
831 FEDERAL HOME LOAN BANK ACT Sec. 21A 

property in which the Corporation has a fee simple or 

equivalent interest. The term ''real property'' does not 

include loans secured by real property, joint ventures, 

participation interests, options, or other similar interests. in addition, the term ''sell'' does not include 

hypothecation of assets, issuance of asset backed securities, issuance of joint ventures, or participation interests, or other similar activities. 

(iii) The term ''distressed area'' means the geographic areas in those political subdivisions designated from time to time by the chief executive officer 

as having depressed real estate markets. Until the 

chief executive officer designates otherwise, such distressed areas shall be the States of Arkansas, Colorado, Louisiana, New Mexico, Oklahoma, and Texas. 

(iv) The term ''market value'' means the most 

probable price which a property should bring in a competitive and open market if— 

(i) all conditions requisite to a fair sale are 

present, 

(ii) the buyer and seller are acting prudently 

and are knowledgeable, and 

(iii) the price is not affected by any undue 

stimulus. 

(F) REAL ESTATE ASSET DIVISION.—The Corporation 

shall establish a Real Estate Asset Division to assist and 

advise the Corporation with respect to the management, 

sale, or other disposition of real property assets of institutions described in paragraph (3)(A). The Real Estate Asset 

Division shall have such duties as the Corporation establishes, including the publication of an inventory of real 

property assets of institutions subject to the jurisdiction of 

the Corporation. Such inventory shall be published before 

January 1, 1990 and updated semiannually thereafter and 

shall identify properties with natural, cultural, recreational, or scientific values of special significance. 

(G) ADVISORY PERSONNEL.—The Corporation shall 

maintain an executive-level position and dedicated staff to 

assist and advise the Corporation and other agencies in 

pursuing cases, civil claims, and administrative enforcement actions against institution-affiliated parties of insured depository institutions under the jurisdiction of the 

Corporation. These personnel shall have such duties as the 

Corporation establishes, including the duty to compile and 

publish a report to the Congress on the coordinated pursuit of claims by all Federal financial institution regulatory agencies, including the Department of Justice and 

the Securities and Exchange Commission. The report shall 

be published before December 31, 1990 and updated semiannually after such date. 

(12) PERIODIC FINANCING REQUESTS.—The Corporation 

shall provide the Thrift Depositor Protection Oversight Board 

with periodic financing requests which shall detail— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 32 

(A) anticipated funding requirements for operations, 

case resolution, and asset liquidation, 

(B) anticipated payments on previously issued notes, 

guarantees, other obligations, and related activities, and 

(C) any proposed use of notes, guarantees or other 

obligations. 

such financing requests shall be submitted on a quarterly 

basis or such other period as the Thrift Depositor Protection 

Oversight Board determines necessary. Following approval by 

the Thrift Depositor Protection Oversight Board, such requests 

shall form the basis for expending funds provided by the Treasury, for transferring funds from the Resolution Funding Corporation to the Corporation and the issuance of capital certificates by the Corporation in exchange therefor. 

(13) GOAL FOR PARTICIPATION OF SMALL BUSINESS CONCERNS.—The Corporation shall have an annual goal that presents the maximum practicable opportunity for small business 

concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, and qualified HUBZone small business concerns (as defined in section 

3(p) of the Small Business Act) to participate in the performance of contracts awarded by the Corporation. 

(14) EXTENSION OF STATUTE OF LIMITATIONS.— 

(A) TORT ACTIONS FOR WHIC H THE PRIOR LIMITATION 

HAS RUN. — 

(i) I N GENERAL.—In the case of any tort claim— 

(i) which is described in clause (ii); and 

(ii) for which the applicable statute of limitations under section 11(d)(14)(A)(ii) of the Federal 

Deposit insurance Act has expired before the date 

of enactment of the Resolution Trust Corporation 

Completion Act; 

the statute of limitations which shall apply to an action brought on such claim by the Corporation in the 

Corporation's capacity as conservator or receiver of an 

institution described in paragraph (3)(A) shall be the 

period determined under subparagraph (C). 

(ii) CLAIMS DESCRIBED.—A tort claim referred to in 

clause (i)(i) with respect to an institution described in 

paragraph (3)(A) is a claim arising from fraud, intentional misconduct resulting in unjust enrichment, or 

intentional misconduct resulting in substantial loss to 

the institution. 

( B) TORT ACTIONS FOR WHIC H THE PRIOR LIMITATION 

HAS NOT RUN. — 

(i) IN GENERAL.—Notwithstanding section 

11(d)(14)(A) of the Federal Deposit Insurance Act, in 

the case of any tort claim— 

(i) which is described in clause (ii); and 

(ii) for which the applicable statute of limitations under section 11(d)(14)(A)(ii) of the Federal 

Deposit insurance Act has not expired as of the 

date of enactment of the Resolution Trust Corporation Completion Act; 
833 FEDERAL HOME LOAN BANK ACT Sec. 21A 

the statute of limitations which shall apply to an action brought on such claim by the Corporation in the 

Corporation's capacity as conservator or receiver of an 

institution described in paragraph (3)(A) shall be the 

period determined under subparagraph (C). 

(ii) CLAIMS DESCRIBED.—A tort claim referred to in 

clause (i)(i) with respect to an institution described in 

paragraph (3)(A) is a claim arising from gross negligence or conduct that demonstrates a greater disregard of a duty of care than gross negligence, including intentional tortious conduct relating to the institution. 

(C) DETERMINATION OF PERIOD.—The period determined under this subparagraph for any claim to which 

subparagraph (A) or (B) applies shall be the longer of— 

(i)

 1 the period beginning on the date the claim accrues (as 

determined pursuant to section 11(d)(14)(B) of the Federal Deposit 

Insurance Act) and ending on December 31, 1995 or ending on the 

date of the termination of the Corporation pursuant to section 

21A(m)(1), whichever is later; or 

(ii) the period applicable under State law for such 

claim. 

(D) SCOPE OF APPLICATION.—Subparagraphs (A) and 

(B) shall not apply to any action which is brought after the 

date of the termination of the Corporation under subsection (m)(1). 

( E) REVIVAL OF EXPIRED STATE CAUSES OF ACTION.—I n 

the case of any tort claim described in subparagraph (A)(ii) 

for which the statute of limitation applicable under State 

law with respect to such claim has expired not more than 

5 years before the appointment of the Corporation as conservator or receiver, the Corporation may bring an action 

as conservator or receiver on such claim without regard to 

the expiration of the statute of limitation applicable under 

State law. 

(15) PURCHASE RIGHTS OF TENANTS.— 

(A) NOTICE.—Except as provided in subparagraph (C), 

the Corporation may make available for sale a 1- to 4-family residence (including a manufactured home) to which 

the Corporation acquires title only after the Corporation 

has provided the household residing in the property notice 

(in writing and mailed to the property) of the availability 

of such property and the preference afforded such household under subparagraph (B). 

(B) PREFERENCE.—In selling such a property, the Corporation shall give preference to any bona fide offer made 

by the household residing in the property, if— 

(i) such offer is substantially similar in amount to 

other offers made within such period (or expected by 

the Corporation to be made within such period); 

(ii) such offer is made during the period beginning 

upon the Corporation making such property available 

1

 Margin so in law. Probably should be moved 6 ems spaces to the right. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 34 

and of a reasonable duration, as determined by the 

Corporation based on the normal period for sale of 

such properties; and 

(iii) the household making the offer complies with 

any other requirements applicable to purchasers of 

such property, including any downpayment and credit 

requirements. 

(C) EXCEPTIONS.—Subparagraphs (A) and (B) shall not 

apply to— 

(i) any residence transferred in connection with 

the transfer of substantially all of the assets of an insured depository institution for which the Corporation 

has been appointed conservator or receiver; 

(ii) any eligible single family property (as such 

term is defined in subsection (c)(9)); or 

(iii) any residence for which the household occupying the residence was the mortgagor under a mortgage on such residence and to which the Corporation 

acquired title pursuant to default on such mortgage. 

(16) PREFERENCE FOR SALES FOR HOMELESS FAMILIES.— 

Subject to paragraph (15), in selling any real property (other 

than eligible residential property and eligible condominium 

property, as such terms are defined in subsection (c)(9)) to 

which the Corporation acquires title, the Corporation shall give 

preference, among offers to purchase the property that will result in the same net present value proceeds, to any offer that 

would provide for the property to be used, during the remaining useful life of the property, to provide housing or shelter for 

homeless persons (as such term is defined in section 103 of the 

Stewart B. McKinney Homeless Assistance Act) or homeless 

families. 

(17) PREFERENCES FOR SALES OF CERTAIN COMMERCIAL 

REAL PROPERTIES.— 

(A) AUTHORITY.—I n selling any eligible commercial 

real properties of the Corporation, the Corporation shall 

give preference, among offers to purchase the property 

that will result in the same net present value proceeds, to 

any offer— 

(i) that is made by a public agency or nonprofit 

organization; and 

(ii) under which the purchaser agrees that the 

property shall be used, during the remaining useful 

life of the property, for offices and administrative purposes of the purchaser to carry out a program to acquire residential properties to provide (i) homeownership and rental housing opportunities for very-low-, 

low-, and moderate-income families, or (ii) housing or 

shelter for homeless persons (as such term is defined 

in section 103 of the Stewart B. McKinney Homeless 

Assistance Act) or homeless families. 

(B) DEFINITIONS.—Fo r purposes of this paragraph, the 

following definitions shall apply: 

(i) ELIGIBLE COMMERCIAL REAL PROPERTY.—The 

term ''eligible commercial real property'' means any 
835 FEDERAL HOME LOAN BANK ACT Sec. 21A 

property (i) to which the Corporation acquires title, 

and (ii) that the Corporation, in the discretion of the 

Corporation, determines is suitable for use for the 

location of offices or other administrative functions involved with carrying out a program referred to in subparagraph (A)(ii). 

(ii) NONPROFI T ORGANIZATION AN D PUBLIC 

AGENCY.—The terms ''nonprofit organization'' and 

''public agency'' have the same meanings as in subsection (c)(9). 

(c) DISPOSITIO N OF ELIGIBL E RESIDENTIA L PROPERTIES.— 

(1) PURPOSE.—The purpose of this subsection is to provide 

homeownership and rental housing opportunities for very lowincome, lower-income, and moderate-income families. 

( 2 ) RULE S GOVERNING DISPOSITION OF ELIGIBLE SINGLE 

FAMILY PROPERTIES.— 

(A) NOTIC E TO CLEARINGHOUSES.—Withi n a reasonable 

period of time after acquiring title to an eligible single 

family property, the Corporation shall provide written notice to clearinghouses. Such notice shall contain basic 

information about the property, including but not limited 

to location, condition, and information relating to the estimated fair market value of the property. Each clearinghouse shall make such information available, upon request, to other public agencies, other nonprofit organizations, and qualifying households. The Corporation shall 

allow public agencies, nonprofit organizations, and qualifying households reasonable access to eligible single family 

property for purposes of inspection. 

( B ) OFFER S TO SELL SINGLE FAMILY PROPERTIES TO 

NONPROFIT ORGANIZATIONS, PUBLIC AGENCIES, AN D QUALIFYIN G HOUSEHOLDS.—Excep t as provided in the last sentence of this subparagraph1

 for the 3-month and one week 

period following the date on which the Corporation makes 

an eligible single family property available for sale, the 

Corporation shall offer to sell the property to (i) qualifying 

households (including qualifying households with members 

who are veterans), or (ii) public agencies or nonprofit organizations that agree to (i) make the property available for 

occupancy by and maintain it as affordable for lower-income families (including lower-income families with members who are veterans) for the remaining useful life of such 

property, or (ii) make the property available for purchase 

by any such family who, except as provided in subparagraph (D), agrees to occupy the property as a principal residence for at least 12 months and who certifies in writing 

that the family intends to occupy the property for at least 

12 months. The restrictions described in subclause (I) of 

the preceding sentence shall be contained in the deed or 

other recorded instrument. if upon the expiration of such 

3-month and one week period, no qualifying household, 

public agency, or nonprofit organization has made a bona 

1

 So in original. Probably should be followed by a comma. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 836 

fide offer to purchase the property, the Corporation may 

offer to sell the property to any purchaser. The Corporation shall actively market eligible single family properties 

for sale to lower-income families and to lower-income families with members who are veterans. To the extent or in 

such amounts as are provided in appropriations Acts for 

additional costs and losses to the Corporation resulting 

from this sentence taking effect, for purposes of this subsection the period referred to in the first and third sentences shall be considered to be the 180-day period following the date on which the Corporation first makes an 

eligible single family property available for sale. 

(C) RECAPTURE OF PROFITS FROM RESALE.—Except as 

provided in subparagraph (D), if any eligible single family 

property sold (i) to a qualifying household, or (ii) to a 

lower-income family pursuant to subparagraph (B)(ii)(ii), 

paragraph (12)(C)(i), or paragraph (13)(B), is resold by the 

qualifying household or lower-income family during the 1-

year period beginning upon initial acquisition by the 

household or lower-income family, the Corporation shall 

recapture 75 percent of the amount of any proceeds from 

the resale that exceed the sum of (i) the original sale price 

for the acquisition of the property by the qualifying household or lower-income family; (ii) the costs of any improvements to the property made after the date of the acquisition, and (iii) any closing costs in connection with the 

acquisition. 

( D ) EXCEPTIONS TO RECAPTURE REQUIREMENT.— 

(i) RELOCATION.—The Corporation (or its successor) may in its discretion waive the applicability (i) 

to any qualifying household of the requirement under 

subparagraph (C) and the requirements relating to 

residency of a qualifying household under paragraphs 

(9)(L)(ii) and (iii), and (II) to any lower-income family 

of the requirement under subparagraph (C) and the 

residency requirements under subparagraph (B)(ii)(ii). 

The Corporation may grant any such a waiver only for 

good cause shown, including any necessary relocation 

of the qualifying household or lower-income family. 

(ii) OTHER RECAPTURE PROVISIONS.—The requirement under subparagraph (C) shall not apply to any 

eligible single family property for which, upon resale 

by the qualifying household or lower-income family 

during the 1-year period beginning upon initial acquisition by the household or family, a portion of the sale 

proceeds or any subsidy provided in connection with 

the acquisition of the property by the household or 

family is required to be recaptured or repaid under 

any other Federal, state, or local law (including section 143(m) of the Internal Revenue Code of 1986) or 

regulation or under any sale agreement. 

( E) EXCEPTION TO AVOID DISPLACEMENT OF EXISTING 

RESIDENTS.—Notwithstanding the first sentence of subparagraph (B), during the 180-day period following the 
837 FEDERAL HOME LOAN BANK ACT Sec. 21A 

date on which the Corporation makes an eligible single 

family property available for sale, the Corporation may sell 

the property to the household residing in the property, but 

only if (i) such household was residing in the property at 

the time notice regarding the property was provided to 

clearinghouses under subparagraph (A), (ii) such sale is 

necessary to avoid the displacement of, and unnecessary 

hardship to, the resident household, (iii) the resident 

household intends to occupy the property as a principal 

residence for at least 12 months, and (iv) and the resident 

household certifies in writing that the household intends 

to occupy the property for at least 12 months. 

(3) RULES GOVERNING DISPOSITION OF ELIGIBLE MULTIFAMILY HOUSING PROPERTIES.—Except as provided under paragraph (6)(D), the Corporation shall dispose of eligible multifamily housing property as follows: 

(A) NOTICE TO CLEARINGHOUSES.—Within a reasonable 

period of time after acquiring title to an eligible multifamily housing property, the Corporation shall provide 

written notice to clearinghouses. Such notice shall contain 

basic information about the property, including but not 

limited to location, number of units (identified by number 

of bedrooms), and information relating to the estimated 

fair market value of the property. The clearinghouses shall 

make such information available, upon request, to qualifying multifamily purchasers. The Corporation shall allow 

qualifying multifamily purchasers reasonable access to an 

eligible multifamily housing property for purposes of 

inspection. 

(B) EXPRESSION OF SERIOUS INTEREST.—Qualifyin g 

multifamily purchasers may give written notice of serious 

interest in a property during a period ending 90 days after 

the time the Corporation provides notice under subparagraph (A). Such notice of serious interest shall be in such 

form and include such information as the Corporation may 

prescribe. 

(C) NOTICE OF READINESS FOR SALE.—Upon the expiration of the period referred to in subparagraph (B) for a 

property, the Corporation shall provide written notice to 

any qualifying multifamily purchaser that has expressed 

serious interest in the property. Such notice shall specify 

the minimum terms and conditions for sale of the property. 

(D) OFFERS TO PURCHASE.—A qualifying multifamily 

purchaser receiving notice in accordance with subparagraph (C) shall have 45 days (from the date notice is received) to make a bona fide offer to purchase a property. 

The Corporation shall accept an offer that complies with 

the terms and conditions established by the Corporation. 

if, before the expiration of such 45-day period, any offer to 

purchase a property initially accepted by the Corporation 

is subsequently rejected or fails (for any reason), the Corporation shall accept another offer to purchase the property made during such period that complies with the terms 
Sec. 21A FEDERAL HOME LOAN BANK ACT 838 

and conditions established by the Corporation (if such another offer is made). The preceding sentence may not be 

construed to require a qualifying multifamily purchaser 

whose offer is accepted during the 45-day period to purchase the property before the expiration of the period. 

( E) LOWER-INCOME OCCUPANCY REQUIREMENTS.— 

(i) SINGLE PROPERTY PURCHASES.—With respect to 

any purchase of a single eligible multifamily housing 

property by a qualifying multifamily purchaser under 

subparagraph (D)— 

(i) not less than 35 percent of all dwelling 

units purchased shall be made available for occupancy by and maintained as affordable for lowerincome and very low-income families during the 

remaining useful life of the property in which the 

units are located; and 

(ii) not less than 20 percent of all dwelling 

units purchased shall be made available for occupancy by and maintained as affordable for very 

low-income families (including very low-income 

families taken into account for purposes of subclause (i)) during the remaining useful life of the 

property in which the units are located. 

(ii) AGGREGATION REQUIREMENTS FOR MULTIPROPERTY PURCHASES.—With respect to any purchase 

under subparagraph (D) by a qualifying multifamily 

purchaser involving more than one eligible multifamily housing property as a part of the same 

negotiation— 

(i) the provisions of clause (i) shall apply in 

the aggregate to the properties so purchased; except that 

(ii) to the extent or in such amounts as are 

provided in appropriations Acts for additional 

costs and losses to the Corporation resulting from 

this subclause taking effect, not less than (a) 40 

percent of the aggregate number of all dwelling 

units purchased shall be made available for occupancy by and maintained as affordable for lowerincome and very low-income families during the 

remaining useful life of the property in which the 

units are located, (b) 20 percent of the aggregate 

number of all dwelling units purchased shall be 

made available for occupancy by and maintained 

as affordable for very low-income families (including very low-income families taken into account 

for purposes of subdivision (a) of this subclause) 

during the remaining useful life of the property in 

which the units are located, and (c) not less than 

10 percent of the dwelling units in each separate 

property purchased shall be made available for 

occupancy by and maintained as affordable for 

lower-income families during the remaining useful 

life of the property in which the units are located. 
839 FEDERAL HOME LOAN BANK ACT Sec. 21A 

The requirements of this subparagraph shall be contained 

in the deed or other recorded instrument. 

( F) SALE OF MULTIFAMILY PROPERTIES TO OTHER PURCHASERS.— 

(i) if, upon the expiration of the period referred to 

in subparagraph (B), no qualifying multifamily purchaser has expressed serious interest in a property, 

the Corporation may offer to sell the property, individually or in combination with other properties, to any 

purchaser. 

(ii) The Corporation may not sell in combination 

with other properties any property which a qualifying 

multifamily purchaser has expressed serious interest 

in purchasing individually. 

(iii) if, upon the expiration of the period referred 

to in subparagraph (D), no qualifying multifamily purchaser has made an offer to purchase the property, the 

Corporation may sell the property, individually or in 

combination with other properties, to any purchaser. 

( G) EXTENSION OF RESTRICTED OFFER PERIODS.—Notwithstanding subparagraph (F), the Corporation may provide notice to clearinghouses regarding, and offer for sale 

under the provisions of subparagraphs (A) through (D), 

any eligible multifamily housing property— 

(i) in which no qualifying multifamily purchaser 

has expressed serious interest during the period 

referred to in subparagraph (B), or 

(ii) for which no qualifying multifamily purchaser 

has made a bona fide offer before the expiration of the 

period referred to in subparagraph (D), 

except that the Corporation may, in the discretion of the 

Corporation, alter the duration of the periods referred to 

in subparagraphs (B) and (D) in offering any property for 

sale under this subparagraph. 

( H ) EXEMPTIONS.— 

(i) CONTINUE D OCCUPANCY OF CURRENT RESIDENTS.—No purchaser of an eligible multifamily housing property may terminate the occupancy of any person residing in the property on the date of purchase 

for purposes of meeting the lower-income occupancy 

requirement applicable to the property under subparagraph (E). The purchaser shall be in compliance with 

this paragraph if each newly vacant dwelling unit is 

reserved for lower-income occupancy until the lowerincome occupancy requirement is met. 

(ii) FINANCIAL INFEASIBILITY.—The Secretary of 

Housing and Urban Development or the State housing 

finance agency for the state in which the property is 

located may temporarily reduce the lower-income occupancy requirements applicable to any property under 

subparagraph (E), if the Secretary or the applicable 

state housing finance agency determines that an owner's compliance with such requirements is no longer 

financially feasible. The owner of the property shall 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 40 

make a good-faith effort to return lower-income occupancy to the level required by subparagraph (E), and 

the Secretary of Housing and Urban Development or 

the State housing finance agency, as appropriate, shall 

review the reduction annually to determine whether 

financial infeasibility continues to exist. 

(4) REN T LIMITATIONS.— 

(A) IN GENERAL.—With respect to properties under 

subparagraph (B), rents charged to tenants for units made 

available for occupancy by very-low income families shall 

not exceed 30 percent of the adjusted income of a family 

whose income equals 50 percent of the median income for 

the area, as determined by the Secretary, with adjustment 

for family size. Rents charged to tenants for units made 

available for occupancy by lower-income families other 

than very low-income families shall not exceed 30 percent 

of the adjusted income of a family whose income equals 65 

percent of the median income for the area, as determined 

by the Secretary, with adjustment for family size. 

(B) APPLICABILITY.—The rent limitations under this 

paragraph shall apply to any eligible single-family property sold pursuant to paragraph (2)(B)(ii)(i) and to any 

multifamily housing property sold pursuant to paragraph 

(3). 

(5) PREFERENCE FOR SALES.—When selling any eligible 

multifamily housing property or combinations of eligible residential properties, the Corporation shall give preference, 

among substantially similar offers, to the offer that would reserve the highest percentage of dwelling units for occupancy or 

purchase by very low-income families and lower-income families and would retain such affordability for the longest term. 

(6) FINANCING OF SALE.— 

( A ) ASSISTANCE BY CORPORATION.— 

(i) SALE PRICE.—The Corporation shall establish a 

market value for each eligible multifamily housing 

property. The Corporation shall sell eligible multifamily housing property at the net realizable market 

value. The Corporation may agree to sell eligible multifamily housing property at a price below the net 

realizable market value to the extent necessary to 

facilitate an expedited sale of such property and enable a public agency or nonprofit organization to comply with the lower-income occupancy requirements applicable to such property under paragraph (3). The 

Corporation may sell eligible single family property or 

eligible condominium property to qualifying households, nonprofit organizations, and public agencies 

without regard to any minimum sale price. 

(ii) PURCHASE LOAN.—The Corporation may provide a loan at market interest rates to the purchaser 

of eligible residential property for all or a portion of 

the purchase price, which loan shall be secured by a 

first or second mortgage on the property. The Corporation may provide such a loan at below market interest 
841 FEDERAL HOME LOAN BANK ACT Sec. 21A 

rates to the extent necessary to facilitate an expedited 

sale of eligible residential property and permit (i) a 

lower-income family to purchase an eligible single 

family property under paragraph (2); or (ii) a public 

agency or nonprofit organization to comply with the 

lower-income occupancy requirements applicable to 

the purchase of an eligible residential property under 

paragraph (2) or (3). The Corporation shall provide 

such loan in a form which would permit its sale or 

transfer to a subsequent holder. in providing financing 

for combinations of eligible multifamily housing properties under this subsection, the Corporation may hold 

a participating share, including a subordinate participation. The Corporation shall periodically provide, to a 

wide range of minority- and women-owned businesses 

engaged in providing affordable housing and to nonprofit organizations, more than 50 percent of the control of which is held by 1 or more minority individuals, 

that are engaged in providing affordable housing, 

information that is sufficient to inform such businesses and organizations of the availability and terms 

of financing under this clause; such information may 

be provided directly, by notices published in periodicals and other publications that regularly provide 

information to such businesses or organizations, and 

through persons and organizations that regularly provide information or services to such businesses or 

organizations. For purposes of this clause, the terms 

"women-owned business'' and ''minority-owned business'' have the meanings given such terms in subsection (r), and the term ''minority'' has the meaning 

given such term in section 1204(c)(3) of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 

1989. 

(B) ASSISTANCE BY HUD.—The Secretary shall take 

such action as may be necessary to expedite the processing 

of applications for assistance under section 202 of the 

Housing Act of 1959, the United States Housing Act of 

1937, title IV of the Stewart B. McKinney Homeless 

Assistance Act, section 810 of the Housing and Community 

Development Act of 1974, and the National Housing Act to 

enable any organization or individual to purchase eligible 

residential property. 

(C) ASSISTANCE BY FMHA.—The Secretary of Agriculture shall take such actions as may be necessary to 

expedite the processing of applications for assistance under 

title V of the Housing Act of 1949 to enable any organization or individual to purchase eligible residential property. 

( D ) EXCEPTION TO DISPOSITION RULES.—Notwith -

standing the requirements under subparagraphs (A), (B), 

(C), (D), (F), and (G) of paragraph (3), the Corporation may 

provide for the disposition of eligible multifamily housing 

properties as necessary to facilitate purchase of such prop-
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 42 

erties for use in connection with the section 202 of the 

Housing Act of 1959. 

( E) URBA N HOMESTEADING ACQUISITION.— 

(i) in providing for bulk acquisition of eligible single family properties by the Secretary under section 

810(1) of the Housing and Community Development 

Act of 1974 and by participating jurisdictions for inclusion in affordable housing activities assisted under 

title II of the Cranston-Gonzales National Affordable 

Housing Act, the Corporation shall agree to an 

amount to be paid for acquisition of such properties. 

The acquisition price shall include discounts for bulk 

purchase and for holding of the property such that the 

acquisition price for each property shall not exceed 50 

percent of the fair market value of the property, as 

valued individually. 

(ii) To the extent necessary to facilitate sale of 

properties to the Secretary and participating jurisdictions, the requirements of paragraphs (2), (5), and 

(6)(A) of this subsection shall not apply to such transactions and property involved in transactions. 

(iii) To facilitate acquisitions by the Secretary and 

participating jurisdictions, the Corporation shall provide the Secretary and participating jurisdictions with 

an inventory of eligible single family properties, not 

less than 4 times each year. 

(7) CONTRACTING RULES.—Contracts entered into under 

this subsection shall not be subject to the requirements of subsection (b)(10)(A). 

(8) USE OF SECONDARY MARKET AGENCIES.— 

(A) I N GENERAL.—In the disposition of eligible residential properties, the Corporation shall, in consultation with 

the Secretary, explore opportunities to work with secondary market entities to provide housing for lower- and 

moderate-income families. 

(B) CREDIT ENHANCEMENT.— 

(i) IN GENERAL.—With respect to such Corporation 

properties, the Secretary may, consistent with statutory authorities, work through the Federal Housing 

Administration, the Government National Mortgage 

Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, 

and other secondary market entities to develop risk 

sharing structures, mortgage insurance, and other 

credit enhancements to assist in the provision of property ownership, rental, and cooperative housing opportunities for lower- and moderate-income families. 

(ii) CERTAIN TAX-EXEMPT BONDS.—The Corporation 

may provide credit enhancements with respect to taxexempt bonds issued on behalf of nonprofit organizations pursuant to section 103, and subpart A of part 

IV of subchapter B of chapter 1, of the Internal Revenue Code of 1986, with respect to the disposition of 
843 FEDERAL HOME LOAN BANK ACT Sec. 21A 

eligible residential properties for the purposes described in clause (i). 

(C) REPORT.—In the annual report submitted by the 

secretary to the Congress, the secretary shall include a 

detailed description of his activities under this paragraph, 

including recommendations for such additional authorization as he deems necessary to implement the provisions of 

this subsection. 

(9) DEFINITIONS.—For purposes of this subsection— 

(A) ADJUSTED INCOME AND INCOME.—The terms "adjusted income'' and ''income'' shall have the meaning given 

such terms in section 3(b) of the United States Housing 

Act of 1937. 

(B) CLEARINGHOUSES.—The term ''clearinghouses'' 

means— 

(i) the state housing finance agency for the state 

in which an eligible residential property is located, 

(ii) the office of Community investment (or other 

comparable division) within the Federal Housing 

Finance Board, and 

(iii) any national nonprofit organizations

 1 (including any nonprofit entity established by the corporation 

established under title IX of the Housing and Community Development Act of 1968) that the Corporation 

determines has the capacity to act as a clearinghouse 

for information. 

(C) CORPORATION.—The term ''Corporation'' means the 

Resolution Trust Corporation. 

(D) ELIGIBLE CONDOMINIUM PROPERTY.—The term ''eligible condominium property'' means a condominium unit, 

as such term is defined in section 604 of the Housing and 

Community Development Act of 1980— 

(i) to which the Corporation acquires title in its 

corporate capacity, its capacity as conservator, or its 

capacity as receiver (including its capacity as the sole 

owner of a subsidiary corporation of a depository institution under conservatorship or receivership, which 

subsidiary has as its principal business the ownership 

of real property); and 

(ii) that has an appraised value that does not 

exceed— 

(I) $67,500 in the case of a 1-family residence, 

$76,000 in the case of a 2-family residence, 

$92,000 in the case of a 3-family residence, and 

$107,000 in the case of a 4-family residence; or 

(ii) only to the extent or in such amounts as 

are provided in appropriation Acts for additional 

costs and losses to the Corporation resulting from 

this subclause taking effect, the amount provided 

in section 203(b)(2)(A) of the National Housing 

Act, except that such amount shall not exceed 

$101,250 in the case of a 1-family residence, 

1

 So in original. Probably should be "organization". 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 44 

$114,000 in the case of a 2-family residence, 

$138,000 in the case of a 3-family residence, and 

$160,500 in the case of a 4-family residence. 

( E) ELIGIBLE MULTIFAMILY HOUSING PROPERTY.— 

(i) BASIC DEFINITION.—Th e term ''eligible multifamily housing property'' means a property consisting 

of more than 4 dwelling units— 

(i) to which the Corporation acquires title 

either in its corporate capacity or as receiver (including its capacity as the sole owner of a subsidiary corporation of a depository institution 

under receivership, which subsidiary has as its 

principal business the ownership of real property), 

but not in its capacity as an operating conservator; and 

(ii) that has an appraised value that does not 

exceed, for such part of the property as may be 

attributable to dwelling use (excluding exterior 

land improvements), $29,500 per family unit without a bedroom, $33,816 per family unit with 1 

bedroom, $41,120 per family unit with 2 bedrooms, $53,195 per family unit with 3 bedrooms, 

and $58,392 per family unit with 4 or more bedrooms. 

(ii) EXPANDED DEFINITION.—Notwithstandin g 

clause (i), to the extent or in such amounts as are provided in appropriations Acts for additional costs and 

losses to the Corporation resulting from this clause 

taking effect, the term ''eligible multifamily housing 

property'' shall mean a property consisting of more 

than 4 dwelling units— 

(i) to which the Corporation acquires title in 

its corporate capacity, its capacity as conservator, 

or its capacity as receiver (including its capacity 

as the sole owner of a subsidiary corporation of a 

depository institution under conservatorship or receivership, which subsidiary has as its principal 

business the ownership of real property); and 

(ii) that has an appraised value that does not 

exceed, for such part of the property as may be 

attributable to dwelling use (excluding exterior 

land improvements), $29,500 per family unit without a bedroom, $33,816 per family unit with 1 

bedroom, $41,120 per family unit with 2 bedrooms, $53,195 per family unit with 3 bedrooms, 

and $58,392 per family unit with 4 or more bedrooms. 

(F) ELIGIBLE RESIDENTIAL PROPERTY.—The term ''eligible residential property'' includes eligible single family 

properties and eligible multifamily housing properties. 

(G) ELIGIBLE SINGLE FAMILY PROPERTY.—The term 

''eligible single family property'' means a 1- to 4-family residence (including a manufactured home)— 
845 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(i) to which the Corporation acquires title in its 

corporate capacity, its capacity as conservator, or its 

capacity as receiver (including its capacity as the sole 

owner of a subsidiary corporation of a depository institution under conservatorship or receivership, which 

subsidiary has as its principal business the ownership 

of real property); and 

(ii) that has an appraised value that does not 

exceed— 

(I) $67,500 in the case of a 1-family residence, 

$76,000 in the case of a 2-family residence, 

$92,000 in the case of a 3-family residence, and 

$107,000 in the case of a 4-family residence; or 

(ii) only to the extent or in such amounts as 

are provided in appropriation Acts for additional 

costs and losses to the Corporation resulting from 

this subclause taking effect, the amount provided 

in section 203(b)(2)(A) of the National Housing 

Act, except that such amount shall not exceed 

$101,250 in the case of a 1-family residence, 

$114,000 in the case of a 2-family residence, 

$138,000 in the case of a 3-family residence, and 

$160,500 in the case of a 4-family residence. 

(H) LOWER-INCOME FAMILIES.—The term ''lower-income families'' means families and individuals whose incomes do not exceed 80 percent of the median income of 

the area involved, as determined by the Secretary, with 

adjustment for family size. 

(I) NET REALIZABLE MARKET VALUE.—The term ''net 

realizable market value'' means a price below the market 

value that takes into account (i) any reductions in holding 

costs resulting from the expedited sale of a property, including but not limited to foregone real estate taxes, insurance, maintenance costs, security costs, and loss of use of 

funds, and (ii) the avoidance, where applicable, of fees paid 

to real estate brokers, auctioneers, or other individuals or 

organizations involved in the sale of property owned by the 

Corporation. 

(J) NONPROFIT ORGANIZATION.—The term ''nonprofit 

organization'' means a private organization (including a 

limited equity cooperative)— 

(i) no part of the net earnings of which inures to 

the benefit of any member, shareholder, founder, contributor, or individual; and 

(ii) that is approved by the Corporation as to 

financial responsibility. 

(K) PUBLIC AGENCY.—The term ''public agency''— 

(i) means any Federal, State, local, or other governmental entity; and 

(ii) includes any public housing agency. 

(L) QUALIFYING HOUSEHOLD.—The term ''qualifying 

household'' means a household (i) who intends to occupy 
Sec. 21A FEDERAL HOME LOAN BANK ACT 846 

eligible single family property as a principle1 residence; 

(ii) who agrees to occupy the property as a principal residence for at least 12 months (except as provided in paragraph (2)(D)); (iii) who certifies in writing that the household intends to occupy the property as a principal residence for at least 12 months (except as provided in paragraph (2)(D)); and (iv) whose income does not exceed 115 

percent of the median income for the area, as determined 

by the Secretary, with adjustment for family size. 

(M) QUALIFYIN G MULTIFAMIL Y PURCHASER.—Th e term 

''qualifying multifamily purchaser'' means (i) a public 

agency, (ii) a nonprofit organization, or (iii) a for-profit 

entity which makes a commitment (for itself or any related 

entity) to satisfy the lower-income occupancy requirements 

specified under paragraph (3)(E) for any eligible multifamily property for which an offer to purchase is made 

during or after the periods specified under paragraph (3). 

(N) RURA L AREA.—Th e term ''rural area'' has the 

meaning given such term in section 520 of the Housing Act 

of 1949. 

(O) SECRETARY.—Th e term "Secretary" means the Secretary of the

 2 Housing and Urban Development. 

(P) STAT E HOUSIN G FINANC E AGENCY.—Th e term 

''State housing finance agency'' means the public agency, 

authority, corporation, or other instrumentality of a State 

that has the authority to provide residential mortgage loan 

financing throughout such State. 

(Q) VER Y LOW-INCOM E FAMILIES.—Th e term ''very-low 

income families'' means families and individuals whose incomes do not exceed 50 percent of the median income of 

the area involved, as determined by the Secretary, with 

adjustment for family size. 

(10) 3 EXEMPTIO N FOR CERTAI N TRANSACTION S WIT H IN -

SURE D DEPOSITOR Y INSTITUTIONS.—Th e provisions of this subsection shall not apply with respect to any eligible residential 

property after the date the Corporation enters into a contract 

to sell such property to an insured depository institution (as 

defined in section 3 of the Federal Deposit Insurance Act), including any sale in connection with a transfer of all or substantially all of the assets of a closed savings association (including 

such property) to an insured depository institution. 

(11 ) THIR D PARTY RIGHTS. — 

(A) IN GENERAL.—The provisions of this subsection, or 

any failure by the Corporation to comply with such provisions, may not be used by any person to attack or defeat 

any title to property once it is conveyed by the Corporation. 

1

 So in original. Probably should be "principal". 

2

 So in original. The word "the" probably should not appear. 

3

 Section 307 of the Resolution Trust Corporation Refinancing, Restructuring, and Enforcement Act of 1991 by its terms amended this paragraph by striking "4" and inserting "6". This 

amendment was probably intended to amend subsection (a)(10). Also, the amendment which was 

made to this paragraph by section 203 of the Resolution Trust Corporation Funding Act of 1991 

was repealed by section 612 of the Resolution Trust Corporation Refinancing, Restructuring, and 

Improvement Act of 1991. 
847 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(B) LOWER-INCOME OCCUPANCY.—The lower-income 

occupancy requirements applicable under paragraphs (2), 

(3), (12)(C), (13)(B), and (14)(C) shall be judicially enforceable against purchasers of property under this subsection 

or their successors in interest by affected very low- and 

lower-income families, State housing finance agencies, and 

any agency, corporation, or authority of the United States 

Government. The parties specified in the preceding sentence shall be entitled to reasonable attorney fees upon 

prevailing in any such judicial action. 

(C) CLEARINGHOUSE.—A clearinghouse shall not be 

subject to suit for its failure to comply with the requirements of this subsection. 

(D) CORPORATION.—The Corporation shall not be liable 

to any depositor, creditor, or shareholder of any insured 

depository institution for which the Corporation has been 

appointed receiver or conservator, or of any subsidiary corporation of a depository institution under conservatorship 

or receivership, or any claimant against such an institution or subsidiary, because the disposition of assets of the 

institution or the subsidiary under this subsection affects 

the amount of return from the assets. 

(12) TRANSFER OF CERTAIN ELIGIBLE RESIDENTIAL PROPERTIES TO STATE HOUSING AGENCIES FOR DISPOSITION.—Notwithstanding paragraphs (2), (3), (5), and (6), the Corporation 

may transfer eligible residential properties to the State housing finance agency or any other State housing agency for the 

State in which the property is located, or to any local housing 

agency in whose jurisdiction the property is located. Transfers 

of eligible residential properties under this paragraph may be 

conducted by direct sale, consignment sale, or any other 

method the Corporation considers appropriate and shall be 

subject to the following requirements: 

(A) INDIVIDUAL OR BULK TRANSFER.—The Corporation 

may transfer such properties individually or in bulk, as 

agreed to by the Corporation and the State housing finance agency or State or local housing agency. 

(B) ACQUISITION PRICE AND DISCOUNT.—The acquisition price paid by the State housing finance agency or 

State or local housing agency to the Corporation for properties transferred under this paragraph shall be an 

amount agreed to by the Corporation and the transferee 

agency. 

(C) LOWER-INCOME USE.—An y State housing finance 

agency or State or local housing agency acquiring properties under this paragraph shall offer to sell or transfer 

the properties only as follows: 

(i) ELIGIBLE SINGLE FAMILY PROPERTIES.—For eligible single family properties— 

(i) to purchasers described under clauses (i) 

and (ii) of paragraph (2)(B); 

(ii) if the purchaser is a purchaser described 

under paragraph (2)(B)(ii)(i), subject to the rent 

limitations under paragraph (4)(A); 
Sec. 21A FEDERAL HOME LOAN BANK ACT 848 

(iii) subject to the requirement in the second 

sentence of paragraph (2)(B); and 

(iv) subject to recapture by the Corporation of 

excess proceeds from resale of the properties 

under subparagraphs (C) and (D) of paragraph (2). 

(ii) ELIGIBLE MULTIFAMILY HOUSING PROPERTIES.— 

For eligible multifamily housing properties— 

(i) to qualifying multifamily purchasers; 

(ii) subject to the lower-income occupancy 

requirements under paragraph (3)(E); 

(iii) subject to the provisions of paragraph 

(3)(H); 

(iv) subject to a preference, among financially 

acceptable offers, to the offer that would reserve 

the highest percentage of dwelling units for occupancy or purchase by very low-income families 

and lower-income families and would retain such 

affordability for the longest term; and 

(v) subject to the rent limitations under paragraph (4)(A). 

(D) AFFORDABILITY.—The State housing finance 

agency or state or local housing agency shall endeavor to 

make the properties transferred under this paragraph 

more affordable to lower-income families based upon the 

extent to which the acquisition price of a property under 

subparagraph (B) is less than the market value of the 

property. 

(13 ) EXCEPTION FOR SALES TO NONPROFIT ORGANIZATIONS 

AND PUBLIC AGENCIES.— 

(A) SUSPENSION OF OFFER PERIODS.—Wit h respect to 

any eligible residential property, the Corporation may (in 

the discretion of the Corporation) suspend any of the 

requirements of subparagraphs (A) and (B) of paragraph 

(2) and subparagraphs (A) through (D) of paragraph (3), as 

applicable, but only to the extent that for the duration of 

the suspension the Corporation negotiates the sale of the 

property to a nonprofit organization or public agency. If 

the property is not sold pursuant to such negotiations, the 

requirements of any provisions suspended shall apply upon 

the termination of the suspension. Any time period referred to in such paragraphs shall toll for the duration of 

any suspension under this subparagraph. 

(B) USE RESTRICTIONS.— 

(i) ELIGIBLE SINGLE FAMILY PROPERTY.—Any eligible single family property sold under this paragraph 

shall be (i) made available for occupancy by and maintained as affordable for lower-income families for the 

remaining useful life of the property, or made available for purchase by such families, (ii) subject to the 

rent limitations under paragraph (4)(A), (iii) subject 

to the requirements relating to residency of a qualifying household under paragraph (9)(L) and to residency of a lower-income family under paragraph 

(2)(B)(ii), and (iv) subject to recapture by the Corpora-
849 FEDERAL HOME LOAN BANK ACT Sec. 21A 

tion of excess proceeds from resale of the property 

under subparagraphs (C) and (D) of paragraph (2). 

(ii) ELIGIBLE MULTIFAMILY HOUSING PROPERTY.— 

Any eligible multifamily housing property sold under 

this paragraph shall comply with the lower-income 

occupancy requirements under paragraph (3)(E) and 

shall be subject to the rent limitations under paragraph (4)(A). 

(14 ) RULES GOVERNING DISPOSITION OF ELIGIBLE CONDOMINIU M PROPERTY.— 

(A) NOTIC E TO CLEARINGHOUSES.—Within a reasonable 

period of time after acquiring title to an eligible condominium property, the Corporation shall provide written 

notice to clearinghouses. Such notice shall contain basic 

information about the property. Each clearinghouse shall 

make such information available, upon request, to purchasers described in clauses (i) through (iv) of subparagraph (B). The Corporation shall allow such purchasers 

reasonable access to an eligible condominium property for 

purposes of inspection. 

(B) OFFERS TO SELL.—For the 180-day period following 

the date on which the Corporation makes an eligible condominium property available for sale, the Corporation may 

offer to sell the property, at the discretion of the Corporation, to 1 or more of the following purchasers: 

(i) Qualifying households. 

(ii) Nonprofit organizations. 

(iii) public agencies. 

(iv) For-profit entities. 

(C) LOWER-INCOME OCCUPANCY REQUIREMENTS.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

any nonprofit organization, public agency, or for-profit 

entity that purchases an eligible condominium property shall (i) make the property available for occupancy by and maintain it as affordable for lower-income families for the remaining useful life of the property, or (ii) make the property available for purchase 

by any such family who, except as provided in subparagraph (E), agrees to occupy the property as a principal residence for at least 12 months and who certifies in writing that the family intends to occupy the 

property for at least 12 months. The restriction described in subclause (I) of the preceding sentence shall 

be contained in the deed or other recorded instrument. 

(ii) MULTIPLE-UNI T PURCHASES.—If any nonprofit 

organization, public agency, or for-profit entity purchases more than 1 eligible condominium property as 

a part of the same negotiation or purchase, the Corporation may (in the discretion of the Corporation) 

waive the requirement under clause (i) and provide instead that not less than 35 percent of all eligible condominium properties purchased shall be (i) made 

available for occupancy by and maintained as affordable for lower-income families for the remaining useful 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 50 

life of the property, or (ii) made available for purchase 

by any such family who, except as provided in subparagraph (E), agrees to occupy the property as a principal residence for at least 12 months and who certifies in writing that the family intends to occupy the 

property for at least 12 months. The restriction described subclause (i) of the preceding sentence shall be 

contained in the deed or other recorded instrument. 

(iii) SALE TO OTHER PURCHASERS.—If, upon the 

expiration of the 180-day period referred to in subparagraph (B), no purchaser described in clauses (i) 

through (iv) of subparagraph (B) has made a bona fide 

offer to purchase the property, the Corporation may 

offer to sell the property to any other purchaser. 

( D ) RECAPTURE OF PROFITS FROM RESALE.—Except as 

provided in subparagraph (E), if any eligible condominium 

property sold (i) to a qualifying household, or (ii) to a 

lower-income family pursuant to subparagraph (C)(i)(ii) or 

(C)(ii)(ii), is resold by the qualifying household or lower-income family during the 1-year period beginning upon initial acquisition by the household or family, the Corporation 

shall recapture 75 percent of the amount of any proceeds 

from the resale that exceed the sum of (i) the original sale 

price for the acquisition of the property by the qualifying 

household or lower-income family, (ii) the costs of any 

improvements to the property made after the date of the 

acquisition, and (iii) any closing costs in connection with 

the acquisition. 

( E ) EXCEPTION TO RECAPTURE REQUIREMENT.—The 

Corporation (or its successor) may in its discretion waive 

the applicability to any qualifying household or lower-income family of the requirement under subparagraph (D) 

and the requirements relating to residency of a qualifying 

household or lower-income family (under paragraph (9)(L) 

and subparagraph (C) of this paragraph, respectively). The 

Corporation may grant any such a waiver only for good 

cause shown, including any necessary relocation of the 

qualifying household or lower-income family. 

( F ) LIMITATIONS ON MULTIPLE UNIT PURCHASES.—The 

Corporation may not sell or offer to sell as part of the 

same negotiation or purchase any eligible condominium 

properties that are not located in the same condominium 

project (as such term is defined in section 604 of the Housing and Community Development Act of 1980). The preceding sentence may not be construed to require all eligible condominium properties offered or sold as part of the 

same negotiation or purchase to be located in the same 

structure. 

(G) REN T LIMITATIONS.—Rent s charged to tenants of 

eligible condominium properties made available for occupancy by very low-income families shall not exceed 30 percent of the adjusted income of a family whose income 

equals 50 percent of the median income for the area, as 

determined by the secretary, with adjustment for family 
851 FEDERAL HOME LOAN BANK ACT Sec. 21A 

size. Rents charged to tenants of eligible condominium 

properties made available for occupancy by lower-income 

families other than very low-income families shall not exceed 30 percent of the adjusted income of a family whose 

income equals 65 percent of the median income for the 

area, as determined by the Secretary, with adjustment for 

family size. 

(15 ) REPORTS TO CONGRESS.— 

(A) IN GENERAL.—The Corporation shall submit to the 

Congress semiannual reports under this paragraph regarding the disposition of eligible residential properties under 

this subsection during the most recently concluded reporting period. The first report under this paragraph shall be 

submitted not later than the expiration of the 4-month period beginning upon the conclusion of the first reporting 

period under subparagraph (B). Subsequent reports shall 

be submitted not less than every 6 months after such expiration. 

(B) REPORTING PERIODS.—For purposes of this paragraph, the term ''reporting period'' means the 6-month period for which a report under this paragraph is made, except that the first reporting period shall be the period 

beginning on the date of the enactment of the Financial 

Institutions Reform, Recovery, and Enforcement Act of 

1989 and ending on the date of the enactment of the Resolution Trust Corporation Refinancing, Restructuring, and 

Improvement Act of 1991. Each successive reporting period 

shall begin upon the conclusion of the preceding reporting 

period. 

( C ) INFORMATION REGARDING PROPERTIES SOLD.—Eac h 

report under this paragraph shall contain information regarding each eligible residential property sold by the Corporation during the applicable reporting period, as follows: 

(i) A description of the property, the location of 

the property, and the number of dwelling units in the 

property. 

(ii) The appraised value of the property. 

(iii) The sale price of the property. 

(iv) For eligible single family properties— 

(i) the income and race of the purchaser of the 

property, if the property is sold to an occupying 

household or is sold for resale to an occupying 

household; and 

(ii) whether the property is reserved for residency by very low- or lower-income families, if the 

property is sold for use as rental property. 

(v) For eligible multifamily housing properties, the 

number and percentage of dwelling units in the property reserved for occupancy by very low- and lower-income families. 

(vi) The number of eligible single family properties 

sold after the expiration of the offer period for such 

properties referred to in paragraph (2)(B). 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 52 

(vii) The number of eligible multifamily housing 

properties sold after the expiration of the periods for 

such properties referred to in subparagraphs (B) and 

(D) of paragraph (3). 

( D ) NUMBE R OF PROPERTIES WITHI N WINDOWS.—Each 

report under this paragraph shall contain the following 

information: 

(i) The number of eligible single family properties 

for which the offer period referred to in paragraph 

(2)(B) had not expired before the conclusion of the applicable reporting period (or had not yet commenced). 

(ii) The number of eligible multifamily housing 

properties for which the 90-day period referred to in 

paragraph (3)(B) had not expired before the conclusion 

of the applicable reporting period (or had not yet commenced). 

(16) NOTICE TO CLEARINGHOUSES REGARDING INELIGIBLE 

PROPERTIES.— 

(A) IN GENERAL.—Within a reasonable period of time 

after acquiring title to an ineligible residential property, 

the Corporation shall, to the extent practicable, provide 

written notice to clearinghouses. 

(B) CONTENT.—For ineligible single family properties, 

such notice shall contain the same information about such 

properties that the notice required under paragraph (2)(A) 

contains with respect to eligible single family properties. 

For ineligible multifamily housing properties, such notice 

shall contain the same information about such properties 

that the notice required under paragraph (3)(A) contains 

with respect to eligible multifamily housing properties. For 

ineligible condominium properties, such notice shall contain the same information about such properties that the 

notice required under paragraph (14)(A) contains with respect to eligible condominium properties. 

(C) AVAILABILITY.—The clearinghouses shall make 

such information available, upon request, to other public 

agencies, other nonprofit organizations, qualifying households, qualifying multifamily purchasers, and other purchasers, as appropriate. 

(D) DEFINITIONS.—Fo r purposes of this paragraph, the 

following definitions shall apply: 

(i) INELIGIBLE CONDOMINIUM PROPERTY.—The term 

''ineligible condominium property'' means a condominium unit, as such term is defined in section 604 of 

the Housing and Community Development Act of 

1980— 

(I) to which the Corporation acquires title in 

its corporate capacity, its capacity as conservator, 

or its capacity as receiver (including its capacity 

as the sole owner of a subsidiary corporation of a 

depository institution under conservatorship or receivership, which subsidiary corporation has as its 

principal business the ownership of real property); 
853 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(ii) that has an appraised value that does not 

exceed the applicable dollar amount limitation for 

the property under paragraph (9)(D)(ii)(II); and 

(iii) that is not an eligible condominium property. 

(ii) INELIGIBLE MULTIFAMILY HOUSING PROPERTY.— 

The term ''ineligible multifamily housing property'' 

means a property consisting of more than 4 dwelling 

units— 

(i) to which the Corporation acquires title in 

its capacity as conservator (including its capacity 

as the sole owner of a subsidiary corporation of a 

depository institution under conservatorship, 

which subsidiary corporation has as its principal 

business the ownership of real property); 

(ii) that has an appraised value that does not 

exceed, for such part of the property as may be 

attributable to dwelling use (excluding exterior 

land improvements), the dollar amount limitations 

under paragraph (9)(E)(i)(II); and 

(iii) that is not an eligible multifamily housing property. 

(iii) INELIGIBLE SINGLE FAMILY PROPERTY.—The 

term ''ineligible single family property'' means a 1- to 

4-family residence (including a manufactured home)— 

(i) to which the Corporation acquires title in 

its corporate capacity, its capacity as conservator, 

or its capacity as receiver (including its capacity 

as the sole owner of a subsidiary corporation of a 

depository institution under conservatorship or receivership, which subsidiary corporation has as its 

principal business the ownership of real property); 

(ii) that has an appraised value that does not 

exceed the applicable dollar amount limitation for 

the property under paragraph (9)(G)(ii)(ii); and 

(iii) that is not an eligible single family property. 

(iv) INELIGIBLE RESIDENTIAL PROPERTY.—The term 

''ineligible residential property'' includes ineligible single family properties, ineligible multifamily housing 

properties, and ineligible condominium properties. 

(17 ) UNIFIE D AFFORDABLE HOUSING PROGRAM.— 

(A) IN GENERAL.—Not later than 4 months after the 

date of enactment of the Resolution Trust Corporation 

Completion Act, the Corporation shall enter into an agreement, as described in section 40(n)(3) of the Federal Deposit Insurance Act, with the Federal Deposit Insurance 

Corporation that sets out a plan for the orderly unification 

of the Corporation's activities, authorities, and responsibilities under this subsection with the authorities, activities, 

and responsibilities of the Federal Deposit Insurance Corporation pursuant to section 40 of the Federal Deposit 

Insurance Act in a manner that best achieves an effective 

and comprehensive affordable housing program manage-
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 54 

ment structure. The agreement shall be entered into after 

consultation with the Affordable Housing Advisory Board 

under section 14(b) of the Resolution Trust Corporation 

Completion Act. 

(B) AUTHORITY AND IMPLEMENTATION.—The Corporation shall have the authority to carry out the provisions of 

the agreement entered into pursuant to subparagraph (A) 

and shall implement such agreement as soon as practicable, but in no event later than 8 months after the date 

of enactment of the Resolution Trust Corporation Completion Act. 

(C) TRANSFER OF AUTHORITY.—Effective upon October 

1, 1995, any remaining authority and responsibilities of 

the Corporation under this subsection shall be carried out 

by the Federal Deposit Insurance Corporation. 

(d) NATIONAL AND REGIONAL ADVISORY BOARDS.— 

(1) NATIONAL ADVISORY BOARD.— 

(A) ESTABLISHMENT.—The Thrift Depositor Protection 

oversight Board shall establish a national advisory board 

to provide information to the Thrift Depositor Protection 

oversight Board, and to advise that Board on policies and 

programs for the sale or other disposition of real property 

assets of institutions which are described in subsection 

(b)(3)(A). 

(B) MEMBERSHIP.—Th e national advisory board shall 

consist of— 

(i) a chairperson appointed by the Thrift Depositor 

protection oversight Board; and 

(ii) the chairpersons of any regional advisory 

boards established pursuant to paragraph (3). 

(C) MEETINGS.—The national advisory board shall 

meet 4 times a year, or more frequently if requested by the 

Corporation. 

(2) [Reserved] 

(3) REGIONAL ADVISORY BOARDS.— 

(A) ESTABLISHMENT.—The Thrift Depositor Protection 

oversight Board shall establish not less than 6 regional 

advisory boards to advise the Corporation on the policies 

and programs for the sale or other disposition of real property assets of institutions descried in subsection (b)(3)(A). 

Such regional advisory boards shall be established in any 

region where the Thrift Depositor Protection Oversight 

Board determines that there exists a significant portfolio 

of real property assets of institutions which are described 

in subsection (b)(3)(A). 

( B) MEMBERSHIP.— 

(i) APPOINTMENT.—Each regional advisory board 

shall consist of 5 members. Each member shall be appointed by the Thrift Depositor Protection Oversight 

Board and shall serve at the pleasure of the Thrift Depositor Protection Oversight Board. The members 

shall be selected from those residents of the region 

who will represent the views of low- and moderate-income consumers and shall businesses, or who have 
8 55 FEDERAL HOME LOAN BANK ACT Sec. 21A 

knowledge and experience regarding business, financial, and real estate matters. 

(ii) TERMS.—Each member of a regional advisory 

board shall serve a term not to exceed 2 years, except 

that the Thrift Depositor Protection Oversight Board 

may provide for classes of members so that the terms 

of not more than 3 members of any such board shall 

expire in any 1 year. 

(C) MEETINGS.—Each regional advisory board shall 

meet 4 times a year, or more frequently if requested by the 

Corporation. A regional advisory board shall conduct its 

meetings in its region. 

(4) PROHIBITION ON COMPENSATION.—Member s of th e na -

tional and regional advisory boards shall serve without compensation, except that such members shall be entitled to 

receive allowances in accordance with subchapter i of chapter 

57 of title 5, united states Code, for necessary expenses of 

travel, lodging, and subsistence incurred in attending official 

meetings and other activities of the boards. 

(5) TREATMENT AS ADVISORY COMMITTEE AND TERMINATION 

OF NATIONAL AND REGIONAL ADVISORY BOARDS.— 

(A) FEDERAL ADVISORY COMMITTEE ACT.—The national 

and regional advisory boards shall be subject to the provisions of the Federal Advisory Committee Act. 

(B) TERMINATION.—Notwithstanding the provisions of 

the Federal Advisory Committee Act, the national advisory 

board and any regional advisory board established pursuant to this subsection which is in existence on the date on 

which the Corporation terminates shall also terminate on 

such date. 

(e) INSTITUTIONS ORGANIZED BY THE CORPORATION.— 

(1) LIMITATIONS ON CERTAIN ACTIVITIES.—All insured 

depository institutions (as defined in section 3 of the Federal 

Deposit Insurance Act) organized by the Corporation under 

this section shall, during the period such institutions are 

within the control of the Corporation, be subject to such limitations, restrictions, and conditions as determined by the Corporation with respect to the following activities: 

(A) Growth of assets. 

(B) Lending and borrowing activities. 

(C) Asset acquisitions. 

(D) use of brokered deposits. 

(E) Payment of deposit rates. 

(F) setting policy or credit standards. 

(G) Capital standards. 

(2) APPLICABILITY OF OTHER PROVISIONS OF LAW.—Except 

as otherwise provided, all insured depository institutions (defined in section 3 of the Federal Deposit insurance Act) organized by the Corporation shall— 

(A) be subject to all laws and rules otherwise applicable to them as insured depository institutions, and 
Sec. 21A FEDERAL HOME LOAN BANK ACT 856 

(B) shall

 1 be subject to the supervision of the appropriate Federal banking agency (as that term is defined in 

section 3 of the Federal Deposit Insurance Act). 

(f) LIMITATION ON CERTAIN CORPORATION ACTIVITIES.— 

(1) CERTAIN SALES PROHIBITED.—The Corporation shall 

prescribe regulations to prohibit the sale of assets of a failed 

institution by the Corporation to any person who— 

(A)(i) has defaulted, or was a member of a partnership 

or an officer or director of a corporation which has defaulted, on 1 or more obligations the aggregate amount of 

which exceed $1,000,000 to such failed institution; 

(ii) has been found to have engaged in fraudulent activity in connection with any obligation referred to in 

clause (i); and 

(iii) proposes to purchase any such asset in whole or 

in part through the use of the proceeds of a loan or 

advance of credit from the Corporation or from any institution subject to the jurisdiction of the Corporation pursuant 

to paragraph (3)(A); 

(B) participated, as an officer or director of such failed 

institution or of any affiliate of such institution, in a material way in transactions that resulted in a substantial loss 

to such failed institution; 

(C) has been removed from, or prohibited from participating in the affairs of, such failed institution pursuant to 

any final enforcement action by an appropriate Federal 

banking agency; or 

(D) has demonstrated a pattern or practice of defalcation regarding obligations to such failed institution. 

(2) SETTLEMENT OF CLAIMS; DEFINITIONS.— 

(A) SETTLEMENT OF CLAIMS.—Nothing in this subsection shall prohibit the Corporation from selling or otherwise transferring any asset to any person if the sale or 

transfer of the asset resolves or settles, or is part of the 

resolution or settlement, of obligations owed by the person 

to the failed institution or the Corporation. 

(B) DEFINITIONS.—Fo r purposes of paragraph (1)— 

(i) DEFAULT.—The term ''default'' means a failure 

to comply with the terms of a loan or other obligation 

to such an extent that the property securing the obligation is foreclosed upon. 

(ii) AFFILIATE.—Th e term ''affiliate'' has the meaning given to such term in section 2(k) of the Bank 

Holding Company Act of 1956. 

(g) EXEMPTION FRO M STATE AND LOCAL TAXATION.—Th e Corporation and the Thrift Depositor Protection Oversight Board, the 

capital, reserves, surpluses, and assets of the Corporation and the 

Thrift Depositor Protection Oversight Board, and the income derived from such capital, reserves, surpluses, or assets shall be 

exempt from State, municipal, and local taxation except taxes on 

real estate held by the Corporation, according to its value as other 

similar property held by other persons is taxed. 

1

 So in original. The word ''shall'' probably should not appear. 
857 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(h) GUARANTEES OF FSLIC.— 

(1) ASSUMPTION BY CORPORATION.—On the date of the 

enactment of this section, the Corporation shall, by operation 

of law (and without further action by the Corporation, the 

Thrift Depositor Protection Oversight Board, the Federal Housing Finance Board, the Federal Savings and Loan Insurance 

Corporation, or any court), assume all rights and obligations of 

the Federal Savings and Loan Insurance Corporation with respect to any guarantee issued by the Federal Savings and Loan 

insurance Corporation during the period beginning on January 

1, 1989, and ending on such date of enactment, in connection 

with any loan to any savings association by any Federal Reserve bank or Federal Home Loan Bank (hereinafter in this 

subsection referred to as a ''lender''). 

(2) PAYMENT BY CORPORATION.—Any obligation assumed by 

the Corporation for any guarantee described in paragraph (1) 

to any lender shall be paid by the Corporation before the end 

of the 1-year period beginning on the date of the enactment of 

this section. payment shall be made from funds or assets available to the Corporation. 

(3) PRIORITY OF CLAIMS OF LENDERS.—Any claim by a 

lender with respect to any obligation assumed by the Corporation for a guarantee described in paragraph (1) shall have priority over all other secured or unsecured obligations of the Corporation. 

(4) TREASURY BACKUP.—If the resources of the Corporation 

are insufficient to pay all the obligations assumed by the Corporation under paragraph (1) within the 1-year period, the Secretary of the Treasury shall pay the amount of any such deficiency. There are hereby appropriated to the Secretary for fiscal year 1989 and each fiscal year thereafter, such sums as 

may be necessary to pay such deficiency. 

(i) FUNDING — 

(1) BORROWING.— 

(A) IN GENERAL.—The Corporation, upon approval of 

the Thrift Depositor Protection Oversight Board, is authorized to borrow from the Treasury. The Secretary of the 

Treasury is authorized and directed to loan to the Corporation, on such terms as may be fixed by the Secretary of the 

Treasury, an amount not exceeding in the aggregate 

$5,000,000,000 outstanding at any one time. 

(B) INTEREST RATE.—Eac h such loan shall bear interest at a rate determined by the Secretary of the Treasury, 

taking into consideration current market yields on outstanding marketable obligations of the United States of 

comparable maturities. 

(2) INTERI M FUNDING.—Th e Secretary of the Treasury shall 

provide the sum of $30,000,000,000 to the Corporation to carry 

out the purposes of this section. 

(3) ADDITIONAL INTERI M FUNDING.—I n addition to amounts 

provided under paragraph (2), the Secretary of the Treasury 

shall provide to the Corporation such sums as may be necessary, not to exceed $25 billion, to carry out the purposes of 

this section. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 858 

(4) CONDITIONS ON AVAILABILITY OF FINAL FUNDING I N EXCESS OF $10,000,000,000.— 

(A) CERTIFICATION REQUIRED.—Of the funds appropriated under paragraph (3) which are provided after April 

1, 1993, any amount in excess of $10,000,000,000 shall not 

be available to the Corporation before the date on which 

the Secretary of the Treasury certifies to the Congress 

that, since the date of enactment of the Resolution Trust 

Corporation Completion Act, the Corporation has taken 

such action as may be necessary to comply with the 

requirements of subsection (w) or that, as of the date of 

the certification, the Corporation is continuing to make 

adequate progress toward full compliance with such 

requirements. 

(B) APPEARANCE UPON REQUEST.—The Secretary of the 

Treasury 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 (A). 

(5) RETUR N TO TREASURY.—If the aggregate amount of 

funds transferred to the Corporation pursuant to this subsection exceeds the amount needed to carry out the purposes 

of this section or to meet the requirements of section 

11(a)(6)(F) of the Federal Deposit Insurance Act, such excess 

amount shall be deposited in the general fund of the Treasury. 

(6) FUNDS ONLY FOR DEPOSITORS.—Notwithstanding an y 

provision of law other than section 13(c)(4)(G) of the Federal 

Deposit Insurance Act, funds appropriated under this section 

shall not be used in any manner to benefit any shareholder 

of— 

(A) any insured depository institution for which the 

Corporation has been appointed conservator or receiver, in 

connection with any type of resolution by the Corporation; 

(B) any other insured depository institution in default 

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

(C) any insured depository institution, in connection 

with the provision of assistance under section 11 or 13 of 

the Federal Deposit Insurance Act with respect to such 

institution, except that this subparagraph shall not prohibit 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) of such Act) 

another insured depository institution. 

(j) MAXIMU M AMOUN T LIMITATIONS ON OUTSTANDING OBLIGATIONS.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

this section, the amount which is equal to— 

(A) the sum of— 

(i) the total amount of contributions received from 

the Resolution Funding Corporation; and 
859 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(ii) the total amount of outstanding obligations of 

the Corporation; minus 

(B) the sum of— 

(i) the amount of cash held by the Corporation; 

and 

(ii) the amount which is equal to 85 percent of the 

Corporation's estimate of the fair market value of 

other assets held by the Corporation, 

may not exceed $50,000,000,000. 

(2) OUTSTANDING OBLIGATION DEFINED.—Fo r purposes of 

this subsection (other than paragraph (3)), the term ''outstanding obligation'' includes— 

(A) any obligation or other liability assumed by the 

Corporation from the Federal Savings and Loan Insurance 

Corporation under this section or pursuant to any provision of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989; 

(B) any guarantee issued by the Corporation; 

(C) the total of the outstanding amounts borrowed 

from the secretary of the Treasury pursuant to subsection 

(i); and 

(D) any other obligation for which the Corporation has 

a direct or contingent liability to pay any amount. 

(3) FUL L FAITH AND CREDIT.—The full faith and credit of 

the united states is pledged to the payment of any obligation 

issued by the Corporation, with respect to both principal and 

interest, if— 

(A) the principal amount of such obligation is stated in 

the obligation; and 

(B) the term to maturity or the date of maturity of 

such obligation is stated in the obligation. 

(4) ESTIMATES OF COSTS OF CONTINGENT LIABILITIES 

REQUIRED.— 

(A) IN GENERAL.—The Corporation shall— 

(i) estimate the cost to such Corporation of any 

contingent liability of the Corporation; and 

(ii) at least once each calendar quarter, make such 

adjustment as is appropriate in the estimate of such 

cost. 

(B) INCLUSION I N FINANCIAL STATEMENTS AND OUTSTANDING OBLIGATIONS.—The estimated amount of the cost 

to the Corporation of any contingent liability of the Corporation (taking into account the most recent adjustment 

to such estimate pursuant to paragraph (A)(ii)) shall be— 

(i) treated as an outstanding obligation of the Corporation for purposes of this subsection; and 

(ii) included in any financial statement of the Corporation. 

(k) REPORTING AND DISCLOSURE OBLIGATIONS.— 

(1) AUDITS.— 

(A) ANNUA L AUDIT.—Notwithstanding section 9105 of 

title 31, United States Code, the Comptroller General shall 

audit annually the financial statements of the Corporation 

in accordance with generally accepted government auditing 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 60 

standards. The audited statements shall be transmitted to 

the Congress by the Thrift Depositor Protection Oversight 

Board not later than 180 days after the end of the Corporation's fiscal year to which those statements apply. 

(B) ACCESS TO BOOKS AND RECORDS.—All books, 

records, accounts, reports, files, and property belonging to 

or used by the Corporation, or the Thrift Depositor Protection Oversight Board shall be made available to the Comptroller General. 

(2) PUBLIC DISCLOSURE OF TRANSACTIONS.— 

(A) DISCLOSURE REQUIRED.—Except as otherwise provided in this subsection, the Corporation shall make available to the public— 

(i) any agreement entered into by the Corporation 

relating to a transaction for which the Corporation 

provides assistance pursuant to section 13(c) of the 

Federal Deposit Insurance Act, not later than 30 days 

after the first meeting of the Thrift Depositor Protection Oversight Board after such agreement is entered 

into; and 

(ii) all agreements relating to cases reviewed by 

the Corporation pursuant to subsection (b)(11)(B). 

( B) EXCEPTION FOR DISCLOSURES AGAINST THE PUBLIC 

INTEREST.— 

(i) IN GENERAL.—The Thrift Depositor Protection 

Oversight Board may withhold from public disclosure 

any document or part of a document if the Thrift Depositor Protection Oversight Board determines, by a 

unanimous affirmative vote of the members of the 

Board, that disclosure would be contrary to the public 

interest. 

(ii) REPORT OF DETERMINATION.—A written report 

shall be made of any determination by the Thrift Depositor Protection Oversight Board to withhold any 

part of a document from public disclosure pursuant to 

clause (i). Such report shall contain a full explanation 

of the specific reasons for such determination. 

(iii) PUBLICATION AND SUBMISSION OF REPORT.— 

The report prepared pursuant to clause (ii) shall be— 

(I) published in the Federal Register; and 

(II) transmitted to the Committee on Banking, 

Finance and Urban Affairs of the House of Representatives and the Committee on Banking, 

Housing, and Urban Affairs of the Senate. 

(C) AGREEMENT DEFINED.—Fo r purposes of this subsection, the term ''agreement'' includes— 

(i) all documents which effectuate the terms and 

conditions of the assisted transaction; 

(ii) a comparison, which the Corporation shall prepare of— 

(i) the estimated cost of the transaction, with 

(ii) the estimated cost of liquidating the insured institution; and 
861 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(iii) a description of any economic or statistical 

assumptions on which such estimates are based. 

(3) DISCLOSURE TO CONGRESS OF TRANSACTIONS.— 

(A) PROSPECTIVE TRANSACTIONS.—The Corporation 

shall make available to the Committee on Banking, Finance and Urban Affairs of the House of Representatives 

and the Committee on Banking, Housing, and urban Affairs of the Senate any agreement entered into by the Corporation relating to a transaction for which the Corporation provides assistance pursuant to section 13(c) of the 

Federal Deposit Insurance Act not later than 25 days after 

the first meeting of the Thrift Depositor Protection Oversight Board after such agreement is entered into. The foregoing requirement is in addition to the Corporation's obligation to make such agreements publicly available pursuant to paragraph (2). 

(B) PRIOR TRANSACTIONS.—The Corporation shall submit a report to the Thrift Depositor Protection Oversight 

Board and the Congress containing the results and conclusions of the review of the 1988 transactions conducted pursuant to subsection (b)(10)(B) and such recommendations 

for legislative action as the Corporation may determine to 

be appropriate. 

(4) ANNUAL REPORTS.— 

(A) IN GENERAL.—The Thrift Depositor Protection 

Oversight Board and the Corporation shall annually submit a full report of their respective operations, activities, 

budgets, receipts, and expenditures for the preceding 12-

month period. 

(B) CONTENTS.—The report required under subparagraph (A) shall include— 

(i) audited statements and such information as is 

necessary to make known the financial condition and 

operations of the Corporation in accordance with generally accepted accounting principles; 

(ii) the Corporation's financial operating plans and 

forecasts (including budgets, estimates of actual and 

future spending, and estimates of actual and future 

cash obligations) taking into account the Corporation's 

financial commitments, guarantees, and other contingent liabilities; 

(iii) the number of minority and women investors 

participating in the bidding process for assisted acquisitions and the disposition of assets and the number of 

successful bids by such investors; 

(iv) a list of the properties sold to State housing 

finance authorities (as such term is defined in section 

1301 of the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989), the individual purchase 

prices of such properties, and an estimate of the premium paid by such authorities for such properties; and 

(v) descriptions of the operations and activities of 

the national and regional advisory boards established 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 62 

under subsection (d) and financial statements detailing the expenses of such boards. 

(C) SUBMISSION TO CONGRESS AND THE PRESIDENT.— 

The Corporation shall submit each annual report required 

under this subsection to the Congress and the President as 

soon as practicable after the end of the calendar year for 

which such report is made but not later than June 30 of 

the year following such calendar year. 

(5) ADDITIONAL REPORTS.— 

(A) REPORTS REQUIRED.—In addition to the annual report required under paragraph (4), the Thrift Depositor 

Protection Oversight Board and the Corporation shall submit to Congress not later than April 30 and October 31 of 

each calendar year, a semiannual report on the activities 

and efforts of the Corporation, the Federal Deposit Insurance Corporation, and the Thrift Depositor Protection 

oversight Board for the 6-month period ending on the last 

day of the month prior to the month in which such report 

is required to be submitted. 

(B) CONTENTS OF REPORT.—Each semiannual report 

required under subparagraph (A) shall include the following information with respect to the Corporation's assets 

and liabilities and to the assets and liabilities of institutions described in subsection (b)(3)(A): 

(i) A statement of the total book value of all assets 

held or managed by the Corporation at the beginning 

and end of the reporting period. 

(ii) A statement of the total book value of such assets which are under contract to be managed by private persons and entities at the beginning and end of 

the reporting period. 

(iii) The number of employees of the Corporation, 

the Federal Deposit Insurance Corporation, and the 

Thrift Depositor Protection Oversight Board at the 

beginning and end of the reporting period. 

(iv) The total amounts expended on employee 

wages, salaries, and overhead, during such period 

which are attributable to— 

(i) contracting with, supervising, or reviewing 

the performance of private contractors, or 

(II) managing or disposing of such assets. 

(v) A statement of the total amount expended on 

private contractors for the management of such assets. 

(vi) A statement of the efforts of the Corporation 

to maximize the efficient utilization of the resources of 

the private sector during the reporting period and in 

future reporting periods and a description of the policies and procedures adopted to ensure adequate competition and fair and consistent treatment of qualified 

third parties seeking to provide services to the Corporation or the Federal Deposit Insurance Corporation. 

(vii) The total book value and total proceeds from 

such assets disposed of during the reporting period. 
863 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(viii) summary data on discounts from book value 

at which such assets were sold or otherwise disposed 

of during the reporting period. 

(ix) A list of all of the areas that carried a distressed area designation during the reporting period 

(including a justification for removal of areas from or 

addition of areas to the list of distressed areas). 

(x) An evaluation of market conditions in distressed areas and a description of any changes in conditions during the reporting period. 

(xi) Any change adopted by the Thrift Depositor 

Protection Oversight Board in a minimum disposition 

price and the reasons for such change. 

(xii) The valuation method or methods adopted by 

the Thrift Depositor Protection Oversight Board or the 

Corporation to value assets and the reasons for selecting such methods. 

(xiii) A complete description of all actions taken by 

the Corporation pursuant to subsections (a), (b), and 

(c) of section 1216 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 with respect to the employment of and contracting with 

minorities, women, and businesses owned or controlled 

by minorities or women and any other activity of the 

Corporation pursuant to the outreach program of the 

Corporation for minorities and women. such description shall specify the steps taken by the Corporation, 

in its corporate capacity and its capacity as conservator or receiver, to implement the minority and 

women outreach programs required by section 1216(c) 

of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 and shall set forth information and data showing— 

(i) the extent to which and means by which 

contract solicitations have been directed to minorities, women, and businesses owned or controlled 

by minorities or women by the Corporation and by 

the Federal Deposit Insurance Corporation on behalf of the Corporation; 

(ii) the extent to which prime contracts and 

subcontracts have been awarded to minorities, 

women, and businesses owned or controlled by 

minorities or women, including data with respect 

to the number of such contracts, the dollar 

amounts thereof, and the percentage of Corporation contracting activity represented thereby (including contracting activity by the Federal Deposit 

insurance Corporation on behalf of the Corporation); 

(iii) contracting and outreach activity with respect to joint ventures and other business 

arrangements in which minorities, women, or 

businesses owned or controlled by minorities or 

women have a participation or interest; and 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 64 

(iv) the extent to which the Corporation's minority and women contracting outreach programs 

have been successful in maximizing opportunities 

through the outreach policies established by the 

Corporation for participation of minorities, 

women, and businesses owned or controlled by 

minorities or women in the Corporation's contracting activities. 

( C ) SUPPLEMENTA L UNAUDITE D FINANCIA L STATEMENTS.—In addition to the annual report required under 

paragraph (4), the Thrift Depositor Protection Oversight 

Board and the Corporation shall submit to the Congress, 

not later than September 30 of each calendar year, an 

unaudited financial statement for the 6-month period ending on June 30 of such year. 

( 6 ) APPEARANCES BEFORE CONGRESSIONAL COMMITTEES. — 

(A)1 SEMIANNUA L APPEARANCE REQUIRED.—No t later 

than 30 days after submission of the semiannual reports 

required by paragraph (5), the Thrift Depositor Protection 

Oversight Board shall appear before the Committee on 

Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and 

Urban Affairs of the Senate to— 

(i) report on the progress made during such period 

in resolving cases involving institutions described in 

subsection (b)(3)(A); 

(ii) provide an estimate of the short-term and 

long-term cost to the United States Government of 

obligations issued or incurred during such period; 

(iii) report on the progress made during such period in selling assets of institutions described in subsection (b)(3)(A) and the impact such sales are having 

on the local markets in which such assets are located; 

(iv) describe the costs incurred by the Corporation 

in issuing obligations, managing and selling assets acquired by the Corporation; 

(v) provide an estimate of the income of the Corporation from assets acquired by the Corporation; 

(vi) provide an assessment of any potential source 

of additional funds for the Corporation; and 

(vii) provide an estimate of the remaining exposure of the United States Government in connection 

with institutions described in subsection (b)(3)(A) 

which, in the Thrift Depositor Protection Oversight 

Board's estimation, will require assistance or liquidation after the end of such period. 

(7) QUARTERLY REPORTS.—No t later than May 31, August 

31, November 30, and the last day of February of each year, 

the Corporation shall submit a report to the Committee on 

Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and 

1

 so in original. No subparagraph (B) has been enacted. 
865 FEDERAL HOME LOAN BANK ACT Sec. 21A 

Urban Affairs of the Senate containing the following information for the preceding calender quarter: 

(A) ASSET SALES.—The report shall contain the following information with respect to assets of institutions 

described in subsection (b)(3)(A) which were disposed of by 

the Corporation during the quarter covered by the report: 

(i) The total amount of the actual sales of assets 

during the quarter. 

(ii) The value of the assets as determined on the 

basis of the amount at which each such asset was accounted for on the books of the institution. 

(iii) The fair market value of the assets as estimated by the Corporation for purposes of securing 

amounts borrowed from the Federal Financing Bank 

by the Corporation. 

(iv) The net recovery on asset sales during the 

quarter. 

(v) A subtotal of the value of the assets disposed 

of during the quarter in each of the following categories: 

(i) Cash and securities. 

(II) Mortgage loans for 1- to 4-family dwellings. 

(iii) Construction and land loans. 

(iv) other mortgage loans. 

(v) Consumer loans. 

(vi) Commercial loans. 

(VII) Real estate owned assets. 

(viii) other assets. 

(B) AUCTIO N SALES.—The report shall contain information regarding auction sales of RTC assets, including the 

following information: 

(i) The date and location of each auction sale during the quarter. 

(ii) The total value of the sales of assets sold during an auction during the quarter. 

(iii) The total value of assets sold at each auction, 

as determined on the basis of the amount at which 

each such asset was accounted for on the books of the 

institution. 

(iv) The total fair market value of assets sold at 

each auction, as estimated by the Corporation. 

(v) The total actual selling price of assets sold during each auction held during the quarter. 

(vi) The net recovery or loss on assets sold during 

an auction during the quarter, by category listed in 

subclauses (I) through (VII) of clause (vii). 

(vii) A subtotal of the value of the assets sold during an auction during the quarter in each of the following categories: 

(i) Cash and securities. 

(II) Mortgage loans for 1- to 4-family dwellings. 

(iii) Construction and land loans. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 866 

(IV) Other mortgage loans. 

(V) Consumer loans. 

(VI) Commercial loans. 

(VII) Real estate owned assets. 

(VIII) Other assets. 

(C) FEDERAL FINANCING BANK LOAN STATUS.—The report shall contain the following information with respect to 

loans from the Federal Financing Bank to the Corporation: 

(i) The total amount of loans outstanding at the 

beginning of the quarter. 

(ii) The total amount of loans originated during 

the quarter. 

(iii) The total amount of loans repaid during the 

quarter. 

(iv) The total amount of loans outstanding at the 

end of the quarter. 

(D) SELLER FINANCING.—Th e report shall contain 

information regarding the Corporation's use of seller financing to encourage the sales of assets during the quarter, including the following: 

(i) A total of the amount of funds used for seller 

financing purposes during the quarter. 

(ii) The number of applications received by the 

Corporation which requested seller financing. 

(iii) A breakdown of the type of assets sold, according to the categories listed in subclauses (I) 

through (VIII) of subparagraph (B)(vii). 

(iv) Projections of the total amount of seller financing which will be needed during the succeeding 2 

quarters. 

(8) OPERATING PLANS.— 

(A) IN GENERAL.—Before the beginning of each calendar quarter, the Thrift Depositor Protection Oversight 

Board shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee 

on Banking, Finance and Urban Affairs of the House of 

Representatives a detailed financial operating plan covering the remaining quarters of the Corporation's fiscal 

year in which that quarter occurs. 

(B) CONTENTS.—A t a minimum, a detailed financial 

operating plan shall include— 

(i) estimates of the aggregate assets of institutions 

that are projected to be resolved in each quarter, 

(ii) the estimated aggregate cost of resolutions in 

each quarter, 

(iii) the estimated aggregate asset sales and principal collections in each quarter, and 

(iv) the Corporation's summary pro forma financial statement at the end of each quarter. 

(9) REPORTS ON SEVERELY TROUBLED INSTITUTIONS.—The 

Director of the Office of Thrift Supervision shall deliver on a 

quarterly basis to the Thrift Depositor Protection Oversight 

Board a list of savings associations for which the Director has 

determined grounds exist, or are likely to exist in the current 
867 FEDERAL HOME LOAN BANK ACT Sec. 21A 

fiscal year of the Corporation and in the next following fiscal 

year of the Corporation, for the appointment of a conservator 

or receiver under the Home Owners' Loan Act. The Thrift Depositor Protection Oversight Board shall report the aggregate 

number and assets of such savings associations to Congress 

within 60 days after June 30 and December 31 of each calendar year. 

(10 ) BUDGET REPORTS.— 

(A) IN GENERAL.—Before the end of each calendar 

quarter, the Thrift Depositor Protection Oversight Board 

and the Corporation shall submit a report to the Committee on Banking, Finance and urban Affairs of the 

House of Representatives and the Committee on Banking, 

Housing, and Urban Affairs of the Senate containing the 

complete annual budget, as approved by the Thrift Depositor Protection Oversight Board. 

( B) ACTIVITIES RELATING TO PHASING OUT RTC OPERATIONS.—Beginning with the report due in the 1st quarter 

of 1994, the report shall include information on the Corporation's activities to phase down its operations and reduce the number of employees and the amount of office 

space and other overhead as the Corporation completes its 

duties under this section and approaches termination. 

(11) EMPLOYEE REPORTS.—The Corporation shall submit 

semiannual reports to the Committee on Banking, Finance and 

Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate 

containing the following information: 

(A) The total number of employees of the Thrift Depositor Protection Oversight Board and the total number of 

individuals performing services directly on behalf of the 

Corporation. 

(B) The total number of individuals performing services for the Corporation as employees of the Federal Deposit Insurance Corporation or any other agency, including 

the General Accounting office and the number from each 

such agency. 

(C) The total number of individuals employed in each 

job classification and employment status, including 

employment on a temporary basis or for an agreed upon 

period of time. 

(l) POWER TO REMOVE; JURISDICTION.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

law, any civil action, suit, or proceeding to which the Corporation is a party shall be deemed to arise under the laws of the 

united states, and the united states district courts shall have 

original jurisdiction over such action, suit, or proceeding. 

(2) CORPORATION AS PARTY.—The Corporation shall be substituted as a party in any civil action, suit, or proceeding to 

which its predecessor in interest was a party with respect to 

institutions which are subject to the management agreement 

dated February 7, 1989, among the Federal Savings and Loan 

Insurance Corporation, the Federal Home Loan Bank Board 

and the Federal Deposit Insurance Corporation. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 868 

(3) REMOVAL AND REMAND.— 

(A) IN GENERAL.—The Corporation, in any capacity 

and without bond or security, may remove any action, suit, 

or proceeding from a State court to the United States district court with jurisdiction over the place where the action, suit, or proceeding is pending, to the United States 

district court for the District of Columbia, or to the United 

States district court with jurisdiction over the principal 

place of business of any institution for which the Corporation has been appointed conservator or receiver if the action, suit, or proceeding is brought against the institution 

or the Corporation as conservator or receiver of such institution. The removal of any such suit or proceeding shall be 

instituted— 

(i) not later than 90 days after the date the Corporation is substituted as a party, or 

(ii) not later than 30 days after service on the Corporation, if the Corporation is named as a party in any 

capacity and if such suit is filed after August 9, 1989. 

(B) SUBSTITUTION.—The Corporation shall be deemed 

substituted in any action, suit, or proceeding for a party 

upon the filing of a copy of the order appointing the Corporation as conservator or receiver for that party or the filing of such other pleading informing the court that the 

Corporation has been appointed conservator or receiver for 

such party. 

(C) APPEAL.—The Corporation may appeal any order 

of remand entered by a United States district court. 

(m) TERMINATION.— 

(1) IN GENERAL.—The Corporation shall terminate not 

later than December 31, 1995. If at the time of its termination, 

the Corporation is acting as a conservator or receiver, the Federal Deposit Insurance Corporation shall succeed the Corporation as conservator or receiver. 

(2) CASE RESOLUTIONS TRANSFERRED.—Simultaneous with 

the termination of the Corporation as provided in paragraph 

(1), all assets and liabilities of the Corporation shall be transferred to the FSLIC Resolution Fund. Thereafter, if there are 

no liabilities of the Corporation outstanding, the FSLIC Resolution Fund shall transfer any net proceeds from the sale of assets to the Resolution Funding Corporation. 

(3) TRANSFER OF PERSONNEL AND SYSTEMS.—In connection 

with the assumption by the Federal Deposit Insurance Corporation of conservatorship and receivership functions with respect to institutions described in subsection (b)(3)(A) and the 

termination of the Corporation pursuant to paragraph (1)— 

(A) any management, resolution, or asset-disposition 

system of the Corporation which the Secretary of the 

Treasury determines, after considering the recommendations of the interagency transition task force under section 

6(c) of the Resolution Trust Corporation Completion Act, 

has been of benefit to the operations of the Corporation 

(including any personal property of the Corporation which 

is used in operating any such system) shall, notwith-
869 FEDERAL HOME LOAN BANK ACT Sec. 21A 

standing paragraph (2), be transferred to and used by the 

Federal Deposit Insurance Corporation in a manner which 

preserves the integrity of the system for so long as such 

system is efficient and cost-effective; and 

(B) any personnel of the Corporation involved with 

any such system who are otherwise eligible to be transferred to the Federal Deposit Insurance Corporation shall 

be transferred to the Federal Deposit Insurance Corporation for continued employment, subject to section 404(9) of 

the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and other applicable provisions of this 

section, with respect to such system. 

(n) CONFLICT OF INTEREST.— 

(1) I N GENERAL.— 

(A) The Thrift Depositor Protection Oversight Board 

and the Corporation shall each be an ''agency'' for purposes 

of title 18, United States Code. Any individual who, pursuant to a contract or any other arrangement, performs functions or activities of the Thrift Depositor Protection Oversight Board or the Corporation, under the direct supervision of an officer or employee of the Thrift Depositor Protection Oversight Board or the Corporation, shall be 

deemed to be an employee of the Thrift Depositor Protection Oversight Board or the Corporation for the purposes 

of title 18, United States Code and this Act. 

(B) Any individual who, pursuant to a contract or any 

other agreement, acts for or on behalf of the Corporation 

shall be deemed to be a public official for the purposes of 

section 201 of title 18, United States Code. 

(2) ESTABLISHMENT OF RULES.—The Thrift Depositor Protection Oversight Board and the Corporation shall, not later 

than 180 days after the date of enactment of this subsection, 

promulgate rules and regulations governing conflict of interest, 

ethical responsibilities, and post-employment restrictions applicable to members, officers, and employees of the Thrift Depositor Protection Oversight Board and the Corporation that shall 

be no less stringent than those applicable to the Federal Deposit insurance Corporation. 

(3) USE OF CONFIDENTIAL INFORMATION.—The Thrift Depositor Protection Oversight Board and the Corporation shall, 

not later than 180 days after the date of enactment of this subsection, promulgate rules and regulations applicable to independent contractors governing conflicts of interest, ethical 

responsibilities, and the use of confidential information consistent with the goals and purposes of titles 18 and 41, United 

States Code. 

(4) POST EMPLOYMENT.—The chief executive officer of the 

Corporation shall be prohibited for a period of 1 year after 

leaving the Corporation from holding any office, position, or 

employment with, or receiving remuneration from, a company 

(other than the Corporation) which, during the time the chief 

executive was employed by the Corporation, participated in 

any case resolution or contract with the Corporation for which 

such person was either responsible or in which such person 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 70 

was personally and substantially involved except that the chief 

executive officer may hold any office, position, or employment 

so long as the chief executive officer does not, during the 1-

year period, provide advice with respect to, participate in decisions relating to, or otherwise provide assistance to such entity 

on the enumerated matters or receive remuneration with respect thereto from such company. 

(5) OTHE R AGENCY EMPLOYEES.—Officer s and employees of 

the Thrift Depositor Protection Oversight Board and the Corporation who are also subject to the ethical rules of another 

agency or Government Corporation

 1 shall file with the Corporation a copy of any financial disclosure statement required 

by such other agency or corporation. 

( 6 ) DISAPPROVAL OF CONTRACTORS.— 

(A) IN GENERAL.—The Thrift Depositor Protection 

oversight Board shall prescribe regulations establishing 

procedures for ensuring that any individual who is performing, directly or indirectly, any function or service on 

behalf of the Corporation meets minimum standards of 

competence, experience, integrity, and fitness. 

( B ) PROHIBITIO N FRO M SERVICE O N BEHALF OF CORPORATION.—The procedures established under subparagraph (A) shall provide that the Corporation shall prohibit 

any person who does not meet the minimum standards of 

competence, experience, integrity, and fitness from— 

(i) entering into any contract with the Corporation; or 

(ii) being employed by the Corporation or any person performing any service for or on behalf of the Corporation. 

( C ) INFORMATIO N REQUIRE D TO BE SUBMITTED.—Th e 

procedures established under subparagraph (A) shall require that any offer submitted to the Corporation by any 

person under this section and any employment application 

submitted to the Corporation by any person shall include— 

(i) a list and description of any instance during 

the preceding 5 years in which the person or company 

under such person's control defaulted on a material 

obligation to an insured depository institution; and 

(ii) such other information as the Board may prescribe by regulation. 

(D) SUBSEQUEN T SUBMISSIONS.—N o offer submitted to 

the Corporation may be accepted unless the offeror agrees 

that no person will be employed, directly or indirectly, by 

the offeror under any contract with the Corporation unless 

all applicable information described in subparagraph (C) 

with respect to any such person is submitted to the Corporation and the Corporation does not disapprove of the direct or indirect employment of such person. Any decision 

made by the Corporation pursuant to this paragraph shall 

be in its sole discretion and shall not be subject to review. 

1

 So in original. Probably should not be capitalized. 
871 FEDERAL HOME LOAN BANK ACT Sec. 21A 

( E) PROHIBITION REQUIRED I N CERTAIN CASES.—The 

standards established under subparagraph (A) shall require the Corporation to prohibit any person who has— 

(i) been convicted of any felony, 

(ii) been removed from, or prohibited from participating in the affairs of, any insured depository institution pursuant to any final enforcement action by any 

appropriate Federal banking agency, 

(iii) demonstrated a pattern or practice of defalcation regarding obligations to insure depository institutions, or 

(iv) caused a substantial loss to Federal deposit 

insurance funds, 

from service on behalf of the Corporation. 

(7) ABROGATION OF CONTRACTS.—The Thrift Depositor Protection Oversight Board or the Corporation may rescind any 

contract with a person who— 

(A) fails to disclose a material fact to the Thrift Depositor Protection Oversight Board or the Corporation, 

(B) would be prohibited under paragraph (6) from providing services to, receiving fees from, or contracting with 

the Corporation or the Thrift Depositor Protection Oversight Board, or 

(C) has been subject to a final enforcement action by 

any Federal bank regulatory agency. 

(8) PRIORITY OF THRIFT DEPOSITOR PROTECTION OVERSIGHT 

BOARD RULES.—To the extent that the rules established under 

this subsection conflict with rules of other agencies or Government corporations, officers, directors, employees, and independent contractors of the Corporation or the Thrift Depositor 

Protection Oversight Board, who are also subject to the conflict 

of interest or ethical rules of another agency or Government 

corporation, shall be governed by the rules and regulations 

established by the Thrift Depositor Protection Oversight Board 

under this subsection when acting for or on behalf of the Corporation. 

(9) DEFINITIONS.—Fo r the purposes of this subsection— 

(A) The term ''company'' has the same meaning as in 

section 2(b) of the Bank Holding Company Act of 1956. 

(B) The term ''control'' has the same meaning given 

such term under regulations promulgated by the Federal 

Home Loan Bank Board with respect to savings and loan 

holding companies as in effect on the day before the date 

of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

(C) The term ''Corporation'' includes the Resolution 

Trust Corporation, the national advisory board, and the regional advisory boards. 

(o) STATUS OF EMPLOYEES.— 

(1) LIABILITY.—A member, officer, or employee of the Corporation or of the Thrift Depositor Protection Oversight Board 

has no liability under the Securities Act of 1933 with respect 

to any claim arising out of or resulting from any act or omission by such person within the scope of such person's employ-
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 72 

ment in connection with any transaction involving the disposition of assets (or any interests in any assets or any obligations 

backed by any assets) by the Corporation. This subsection shall 

not be construed to limit personal liability for criminal acts or 

omissions, willful or malicious misconduct, acts or omissions 

for private gain, or any other acts or omissions outside the 

scope of such person's employment. 

(2) DEFINITIO N For purposes of this subsection, the term 

"employee of the Corporation or of the Thrift Depositor Protection oversight Board'' includes any officer or employee of the 

Federal Deposit Insurance Corporation who performs services 

for the Corporation. 

(3) EFFEC T O N OTHER LAW.—Thi s subsection does not affect1— 

(A) any other immunities and protections that may be 

available under applicable law with respect to such transactions, or 

(B) any other right or remedy against the Corporation, 

against the United States under applicable law, or against 

any person other than a person described in paragraph (1) 

participating in such transactions. 

This subsection shall not be construed to limit or alter in any 

way the immunities that are available under applicable law for 

Federal officials and employees not described in this subsection. 

( p) MANAGEMEN T ENHANCEMEN T GOALS. — 

(1) ACTIO N TO ACHIEVE SPECIFIC GOALS.—Th e Corporation, 

upon the enactment of this subsection, shall take action to assure achievement of the management goals specified in this 

paragraph, as follows: 

(A) MANAGIN G CONSERVATORSHIPS.—The Corporation 

shall standardize procedures with respect to its (i) auditing 

of conservatorships, (ii) ensuring and monitoring of compliance with Corporation policies and procedures by conservatorship managing agents, and (iii) ensuring and monitoring of conservatorship managing agent performance. 

These procedures shall be developed and implemented not 

later than September 30, 1991. 

(B) PACE OF RESOLUTIONS.—Th e Corporation shall 

take all reasonable and necessary steps to reduce the 

length of time institutions remain in conservatorship, with 

the goal that no institution shall be in conservatorship for 

more than 9 months. 

( C ) INFORMATIO N RESOURCES MANAGEMEN T PROGRAM.—The Corporation shall develop and incorporate 

within its strategic plan for information resources management, (i) a translation of program goals into the communication and computer hardware and software, and staff 

needed to accomplish such goals, (ii) a systems architecture to ensure that all systems will work together, and (iii) 

1

 So in original. The term "shall not be construed as affecting" probably should be substituted 

for "does not affect''. 
873 FEDERAL HOME LOAN BANK ACT Sec. 21A 

an identification of Corporation information and systems 

needs at all operational levels. 

( D ) SECURITIES PORTFOLIO MANAGEMENT SYSTEM.—The 

Corporation shall develop within its information architecture framework, a centralized system for the management 

of its portfolio of securities. This system shall be developed 

and implemented not later than September 30, 1991. 

(E) TRACKING REO ASSETS.—The Corporation shall develop, within its information architecture, an effective system to track and inventory real-estate-owned assets. This 

system shall be developed and implemented not later than 

September 30, 1991. 

(F) ASSET VALUATION.—The Corporation shall develop 

a process for the quarterly valuation or updating of valuations of the assets it holds in its capacity as receiver (or 

as a result of such capacity). Such process shall incorporate, to the extent practical, Corporation disposition 

experience. in addition, the necessary information systems 

shall be developed to track and manage these valuations. 

( G) STANDARDIZATION OF DUE DILIGENCE AND MARKET 

FORMAT.—The Corporation shall develop a program for 

performing due diligence on one- to four-family mortgages 

and for marketing such loans on a pooled basis. 

(H) CONTRACTING.—The Corporation, in order to identify the need for any changes in its contracting process 

which would enhance the independence, integrity, consistency and effectiveness of that process, shall consult on a 

regular basis with other agencies and organizations that 

have large scale contracting and procurement systems, and 

shall review on a regular basis its organizational structure 

and relationships. The Corporation shall develop and have 

in widespread use the following: 

(i) A manual setting forth comprehensive policies 

and procedures. 

(ii) A revised and expanded directive that clearly 

and definitively describes the roles and responsibilities 

of all those involved in the contracting process. 

(iii) A revised and expanded directive that sets 

forth in detail the standard procedures to be followed 

in evaluating contractor proposals. 

(iv) A set of standardized solicitation and contract 

documents for use by all Corporation officers. 

(v) A series of standardized contracting training 

modules for use by Corporation personnel and private 

contractors. 

(2) The Corporation shall, not later than September 30, 

1991, file with the Committee on Banking, Housing, and 

Urban Affairs of the Senate, and the Committee on Banking, 

Finance and Urban Affairs of the House of Representatives, a 

report on the progress being made toward full compliance by 

the agency with this subsection, as well as a timetable for completing those items not yet completed. 

(q) RTC , THRIFT DEPOSITOR PROTECTION OVERSIGHT BOARD, 

AND RT C CONTRACTOR EMPLOYEE PROTECTION REMEDY.— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 74 

(1) PROHIBITION AGAINST DISCRIMINATION.—The Corporation, the Thrift Depositor Protection Oversight Board, and any 

person who is performing, directly or indirectly, any function 

or service on behalf of the Corporation or the Thrift Depositor 

Protection Oversight Board may not discharge or otherwise 

discriminate against any employee (including any employee of 

the Federal Deposit insurance Corporation on assignment to 

the Corporation under this section or any personnel referred to 

in subparagraphs (C) and (F) of subsection (a)(5)) with respect 

to compensation, terms, conditions, or privileges of employment 

because the employee (or any person acting pursuant to the request of the employee) provided information to the Corporation, the Thrift Depositor Protection Oversight Board, the Attorney General, or any appropriate Federal banking agency (as 

defined in section 3(q) of the Federal Deposit insurance Act) 

regarding— 

(A) a possible violation of any law or regulation; or 

(B) gross mismanagement, a gross waste of funds, an 

abuse of authority, or a substantial and specific danger to 

public health or safety; 

by the Corporation, the Thrift Depositor Protection Oversight 

Board, or such person or any director, officer, or employee of 

the Corporation, the Thrift Depositor Protection Oversight 

Board, or the person. 

(2) ENFORCEMENT.—Any employee or former employee who 

believes that such employee has been discharged or discriminated against in violation of paragraph (1) may file a civil action in the appropriate united states district court before the 

end of the 2-year period beginning on the date of such discharge or discrimination. 

(3) REMEDIES.—If the district court determines that a violation has occurred, the court may order the Corporation or the 

person which committed the violation to— 

(A) reinstate the employee to the employee's former 

position; 

(B) pay compensatory damages; or 

(C) take other appropriate actions to remedy any past 

discrimination. 

(4) LIMITATION.—The protections of this section shall not 

apply to any employee who— 

(A) deliberately causes or participates in the alleged 

violation of law or regulation; or 

(B) knowingly or recklessly provides substantially 

false information to the Corporation, the Attorney General, 

or any appropriate Federal banking agency. 

(5) BURDENS OF PROOF.—The legal burdens of proof that 

prevail under subchapter III of chapter 12 of title 5, United 

states Code, shall govern adjudication of protected activities 

under this subsection. 

(r) REVIEW AND EVALUATION PROCEDURE FOR CONTRACTS.— 

(1) I N GENERAL.—In the review and evaluation of proposals, the Corporation shall provide additional incentives to 

minority- or women-owned businesses by awarding any such 

business an additional 10 percent of the total technical points 
875 FEDERAL HOME LOAN BANK ACT Sec. 21A 

and an additional 5 percent of the total cost preference points 

achievable in the technical and cost rating process applicable 

with respect to such proposals. 

(2) CERTAIN JOINT VENTURES INCLUDED.—Paragrap h (1) 

shall apply to any proposal submitted by a joint venture in 

which a minority- or woman-owned business has participation 

of not less than 25 percent. 

(3) AUTHORITY TO ADJUST TECHNICAL AND COST PREFERENCE POINTS.—The Corporation may adjust the technical 

and cost preference points applicable in evaluating proposals to 

the extent necessary to ensure the maximum participation 

level possible for minority- or women-owned businesses. 

(4) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 

(A) MINORITY-OWNED BUSINESS.—The term ''minorityowned business'' means a business— 

(i) more than 50 percent of the ownership or control of which is held by 1 or more minority individuals; 

and 

(ii) more than 50 percent of the net profit or loss 

of which accrues to 1 or more minority individuals. 

(B) WOMEN-OWNED BUSINESS.—The term ''women's 

business'' means a business— 

(i) more than 50 percent of the ownership or control of which is held by 1 or more women; 

(ii) more than 50 percent of the net profit or loss 

of which accrues to 1 or more women; and 

(iii) a significant percentage of senior management 

positions of which are held by women. 

(s) ACQUISITION OF BRANCH FACILITIES I N MINORITY NEIGH -

BORHOODS.— 

(1) I N GENERAL.—In the case of any savings association for 

which the Corporation has been appointed conservator or receiver, the Corporation may make available any branch of such 

association which is located in any predominantly minority 

neighborhood to any minority depository institution or women's 

depository institution on the following terms: 

(A) The branch may be made available on a rent-free 

lease basis for not less than 5 years. 

(B) of all expenses incurred in maintaining the operation of the facilities in which such branch is located, the 

institution shall be liable only for the payment of applicable real property taxes, real property insurance, and utilities. 

(C) The lease may provide an option to purchase the 

branch during the term of the lease. 

(2) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 

(A) MINORITY DEPOSITORY INSTITUTION.—The term 

''minority institution'' means a depository institution (as 

defined in section 3(c) of the Federal Deposit Insurance 

Act)— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 876 

(i) more than 50 percent of the ownership or control of which is held by 1 or more minority individuals; 

and 

(ii) more than 50 percent of the net profit or loss 

of which accrues to 1 or more minority individuals. 

(B) WOMEN' S DEPOSITOR Y INSTITUTION.—Th e term 

''women's depository institution'' means a depository institution (as defined in section 3(c) of the Federal Deposit 

Insurance Act)— 

(i) more than 50 percent of the ownership or control of which is held by 1 or more women; 

(ii) more than 50 percent of the net profit or loss 

of which accrues to 1 or more women; and 

(iii) a significant percentage of senior management 

positions of which are held by women. 

(C) MINORITY.—The term ''minority'' has the meaning 

given to such term by section 1204(c)(3) of the Financial 

Institutions Reform, Recovery and Enforcement Act of 

1989. 

( t) ASSISTANC E UNDE R CIRCUMSTANCE S FOR ACQUISITIO N OF 

MAJORITY-OWNE D INSTITUTIONS. — 

(1) I N GENERAL.—I n addition to the assistance provided 

pursuant to the the

 1 minority capital assistance program 

established under subsection (u)(1)2, the Corporation may provide assistance for minority-owned depository institutions and 

minority investors for the acquisition of any savings association for which the Corporation has been appointed conservator 

or receiver and which, before such appointment, was not a minority-owned association, if the Corporation has not received 

acceptable bids for the acquisition of such association without 

offering such assistance. 

(2) ADDITIONA L ASSETS.—I n connection with the acquisition of any savings association for which the Corporation provides assistance under paragraph (1), the Corporation may 

transfer assets of other savings associations for which the Corporation has been appointed conservator or receiver. 

(3) DEFINITIONS.—Fo r purposes of this subsection— 

(A) MINORITY.—The term ''minority'' has the meaning 

given to such term by section 1204(c)(3) of the Financial 

Institutions Reform, Recovery and Enforcement Act of 

1989. 

(B) ACQUISITION.—Th e term ''acquisition'' means any 

transaction in which a savings association is acquired (as 

defined in section 13(f)(8)(B) of the Federal Deposit Insurance Act). 

( u ) MINORIT Y INTERI M CAPITA L ASSISTANC E PROGRAM. — 

(1) IN GENERAL.—The minority interim capital assistance 

program administered by the Corporation pursuant to the policy statement entitled the ''Interim Statement of Policy Re1

 so in law. 

2

 The amendments made to subsections (t)(1) and (u)(1) by section 1614(b)(1) and (2) of the 

Housing and Community Development Act of 1992 (P.L. 102-550; 106 Stat. 4095) were executed 

to this section of the Federal Home Loan Bank Act. The instructions to the amendment made 

by p.L. 102-550 did not provide a section designation. 
877 FEDERAL HOME LOAN BANK ACT Sec. 21A 

garding Resolutions of Minority-Owned Depository Institutions" adopted by the Corporation on January 30, 1990 is 

hereby established by law. 

(2) ASSISTANCE UNDER CIRCUMSTANCES FOR ACQUISITION OF 

MAJORITY-OWNED INSTITUTIONS.—In addition to the assistance 

provided pursuant to the program established under paragraph 

(1), the Corporation shall provide assistance under such program for minority-owned depository institutions and minority 

investors for the acquisition of any savings association for 

which the Corporation has been appointed conservator or receiver and which, before such appointment, was not a minority-owned association, if the Corporation has not received 

acceptable bids for the acquisition of such association without 

offering such assistance. 

(3) EXTENSION OF INTERI M FINANCING PERIOD.—The period 

for repayment of capital assistance provided under the minority interim capital assistance program shall be not less than 2 

years. 

(4) INTEREST RATE.—Th e rate of interest imposed by the 

Corporation in connection with any interim financing provided 

under the minority interim capital assistance program may not 

exceed the average cost of funds to the Corporation as of the 

time such rate is established. 

(5) DEFINITIONS.—Fo r purposes of this subsection, the following definitions shall apply: 

(A) MINORITY.—The term "minority" has the meaning 

given to such term by section 1204(c)(3) of the Financial 

Institutions Reform, Recovery and Enforcement Act of 

1989. 

(B) ACQUISITION.—The term "acquisition" means any 

transaction in which a savings association is acquired (as 

defined in section 13(f)(8)(B) of the Federal Deposit Insurance Act). 

(v) CONTINUATION OF OBLIGATION T O PROVIDE SERVICES.—No 

person obligated to provide services to an insured depository institution at the time the Resolution Trust Corporation is appointed 

conservator or receiver for the institution shall fail to provide those 

services to any person to whom the right to receive those services 

was transferred by the Resolution Trust Corporation after August 

9, 1989, unless the refusal is based on the transferee's failure to 

comply with any material term or condition of the original obligation. This subsection does not limit any authority of the Resolution 

Trust Corporation as conservator or receiver under section 11(e) of 

the Federal Deposit Insurance Act. 

( w) RT C MANAGEMEN T REFORMS.— 

(1) COMPREHENSIVE BUSINESS PLAN.—Th e Corporation 

shall establish and maintain a comprehensive business plan 

covering the operations of the Corporation, including the disposition of assets, for the remainder of the Corporation's existence. 

(2) MARKETING REAL PROPERTY ON A N INDIVIDUAL BASIS.— 

The Corporation shall— 

(A) market any undivided or controlling interest in 

real property, whether held directly or indirectly by an 
Sec. 21A FEDERAL HOME LOAN BANK ACT 878 

institution described in subsection (b)(3)(A), on an individual basis, including sales by auction, for no fewer than 

120 days before such assets may be made available for sale 

or other disposition on a portfolio basis or otherwise included in a multiasset sales initiative, except that this 

subparagraph does not apply to assets that are— 

(i) sold simultaneously with a resolution in which 

a buyer purchases a significant proportion of the assets and assumes a significant proportion of the liabilities, or acts as agent of the Corporation for purposes 

of paying insured deposits, of an institution described 

in subsection (b)(3)(A); or 

(ii) transferred to a new institution organized pursuant to section 11(d)(2)(F) of the Federal Deposit 

insurance Act; and 

(B) prescribe regulations— 

(i) to require that the sale or other disposition of 

any asset consisting of real property on a portfolio 

basis or in connection with any multiasset sales initiative after the end of the 120-day period described in 

subparagraph (A) be justified in writing; and 

(ii) to carry out the requirements of subparagraph 

(A). 

(3) DISPOSITION OF REAL ESTATE RELATED ASSETS.— 

(A) PROCEDURES FOR DISPOSITION OF REAL ESTATE-RELATED ASSETS.—The Corporation shall not sell real property or any nonperforming real estate loan which the Corporation has acquired as receiver or conservator, unless— 

(i) the Corporation has assigned responsibility for 

the management and disposition of such asset to a 

qualified person or entity to— 

(i) analyze each asset on an asset-by-asset 

basis and consider alternative disposition strategies for such asset; 

(ii) develop a written management and disposition plan; and 

(iii) implement that plan for a reasonable period of time; or 

(ii) the Corporation has made a determination in 

writing that a bulk transaction would maximize net 

recovery to the Corporation, while providing opportunity for broad participation by qualified bidders, including minority- and women-owned businesses. 

(B) DEFINITIONS.—I n defining any term for purposes of 

subparagraph (A), the Corporation may, by regulation, 

define— 

(i) the term ''asset'' so as to include properties or 

loans which are legally separate and distinct properties or loans, but which have sufficiently common 

characteristics such that they may be logically treated 

as a single asset; and 

(ii) the term ''qualified person or entity'' so as to 

include any employee of the Thrift Depositor Protec-
879 FEDERAL HOME LOAN BANK ACT Sec. 21A 

tion oversight Board or any employee assigned to the 

Corporation under subsection (b)(8). 

(C) EXCEPTIONS.—This paragraph shall not apply to— 

(i) assets that are— 

(i) sold simultaneously with a resolution in 

which a buyer purchases a significant proportion 

of the assets and assumes a significant proportion 

of the liabilities (or acts as agent of the Corporation for purposes of paying insured deposits) of an 

institution described in subsection (b)(3)(A); or 

(II) transferred to a new institution organized 

pursuant to section 11(d)(2)(F) of the Federal Deposit Insurance Act; 

(ii) nonperforming real estate loans with a book 

value of not more than $1,000,000; 

(iii) real property with a book value of not more 

than $400,000; or 

(iv) real property with a book value of more than 

$400,000 or nonperforming real estate loans with a 

book value of more than $1,000,000 for which the Corporation determines, in writing, that a disposition not 

in conformity with the requirements of subparagraph 

(A) will bring a greater return to the Corporation. 

(D) COORDINATION WIT H PARAGRAPH (2).—No provision 

of this paragraph shall supersede the requirements of 

paragraph (2). 

(4) DIVISION OF MINORITIES AND WOMEN PROGRAMS.— 

(A) IN GENERAL.—The Corporation shall maintain a 

division of minorities and women programs. 

(B) VIC E PRESIDENT.—The head of the division shall be 

a vice president of the Corporation and a member of the 

executive committee of the Corporation. 

(5) CHIEF FINANCIAL OFFICER.— 

(A) IN GENERAL.—The chief executive officer of the 

Corporation shall appoint a chief financial officer for the 

Corporation. 

(B) AUTHORITY.—Th e chief financial officer of the Corporation shall— 

(i) have no operating responsibilities with respect 

to the Corporation other than as chief financial officer; 

(ii) report directly to the chief executive officer of 

the Corporation; and 

(iii) have such authority and duties of chief financial officers of agencies under section 902 of title 31, 

United States Code, as the Thrift Depositor Protection 

oversight Board determines to be appropriate with respect to the Corporation. 

(6) BASIC ORDERING AGREEMENTS.— 

(A) REVISION OF PROCEDURES.—The Corporation shall 

revise the procedure for reviewing and qualifying applicants for eligibility for future contracts in a specified service area (commonly referred to as ''basic ordering agreements'' or ''task ordering agreements'') in such manner as 

may be necessary to ensure that small businesses, minori-
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 80 

ties, and women are not inadvertently excluded from eligibility for such contracts. 

(B) REVIEW OF LISTS.—To ensure the maximum participation level possible of minority- and women-owned 

businesses, the Corporation shall— 

(i) review all lists of contractors determined to be 

eligible for future contracts in a specified service area 

and other contracting mechanisms; and 

(ii) prescribe appropriate regulations and procedures. 

(7) IMPROVEMENT OF CONTRACTING SYSTEMS AND CONTRACTOR OVERSIGHT.—The Corporation shall— 

(A) maintain such procedures and uniform standards 

for— 

(i) entering into contracts between the Corporation and private contractors; and 

(ii) overseeing the performance of contractors and 

subcontractors under such contracts and compliance 

by contractors and subcontractors with the terms of 

contracts and applicable regulations, orders, policies, 

and guidelines of the Corporation, 

as may be appropriate in carrying out the Corporation's 

operations in as efficient and economical a manner as may 

be practicable; 

(B) commit sufficient resources, including personnel, to 

contract oversight and the enforcement of all laws, regulations, orders, policies, and standards applicable to contracts with the Corporation; and 

(C) maintain uniform procurement guidelines for basic 

goods and administrative services to prevent the acquisition of such goods and services at widely different prices. 

(8) AUDI T COMMITTEE.— 

(A) ESTABLISHMENT.—The Thrift Depositor Protection 

Oversight Board shall establish and maintain an audit 

committee. 

(B) DUTIES.—The audit committee shall have the following duties: 

(i) Monitor the internal controls of the Corporation. 

(ii) Monitor the audit findings and recommendations of the inspector general of the Corporation and 

the Comptroller General of the United States and the 

Corporation's response to the findings and recommendations. 

(iii) Maintain a close working relationship with 

the inspector general of the Corporation and the 

Comptroller General of the United States. 

(iv) Regularly report the findings and any recommendation of the audit committee to the Corporation and the Thrift Depositor Protection Oversight 

Board. 

(v) Monitor the financial operations of the Corporation and report any incipient problem identified 
881 FEDERAL HOME LOAN BANK ACT Sec. 21A 

by the audit committee to the Corporation and the 

Thrift Depositor Protection Oversight Board. 

(C) FEDERAL ADVISORY COMMITTEE ACT NOT APPLICABLE.—The audit committee is not an advisory committee 

within the meaning of section 3(2) of the Federal Advisory 

Committee Act. 

(9) CORRECTIVE RESPONSES TO AUDIT PROBLEMS.—The Corporation shall— 

(A) respond to problems identified by auditors of the 

Corporation's financial and asset-disposition operations, including problems identified in audit reports by the inspector general of the Corporation, the Comptroller General of 

the United States, and the audit committee; or 

(B) certify to the Thrift Depositor Protection Oversight 

Board that no action is necessary or appropriate. 

(10) ASSISTANT GENERAL COUNSEL FOR PROFESSIONAL LIABILITY.— 

(A) APPOINTMENT.—Th e Corporation shall appoint, 

within the division of legal services of the Corporation, an 

assistant general counsel for professional liability. 

(B) DUTIES.—The assistant general counsel for professional liability shall— 

(i) direct the investigation, evaluation, and prosecution of all professional liability claims involving the 

Corporation; and 

(ii) supervise all legal, investigative, and other 

personnel and contractors involved in the litigation of 

such claims. 

( C) SEMIANNUAL REPORTS TO THE CONGRESS.—The 

assistant general counsel for professional liability shall 

submit to the Congress a comprehensive litigation report, 

not later than— 

(i) April 30 of each year for the 6-month period 

ending on March 31 of that year; and 

(ii) october 31 of each year for the 6-month period 

ending on September 30 of that year. 

(D) CONTENTS OF REPORTS.—The semiannual reports 

required under subparagraph (C) shall each address the 

activities of the counsel for professional liability under 

subparagraph (B) and all civil actions— 

(i) in which the Corporation is a party, which are 

filed against— 

(i) directors or officers of depository institutions described in subsection (b)(3)(A); or 

(ii) attorneys, accountants, appraisers, or 

other licensed professionals who performed professional services for such depository institutions; 

and 

(ii) which are initiated or pending during the period covered by the report. 

(11) MANAGEMENT INFORMATION SYSTEM.—The Corporation 

shall maintain an effective management information system 

capable of providing complete and current information to the 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 82 

extent the provision of such information is appropriate and 

cost-effective. 

(12) INTERNAL CONTROLS AGAINST FRAUD, WASTE, AND 

ABUSE.—The Corporation shall maintain effective internal controls designed to prevent fraud, waste, and abuse, identify any 

such activity should it occur, and promptly correct any such 

activity. 

(13) FAILURE TO APPOINT CERTAIN OFFICERS OF THE CORPORATION.—The failure to fill any position established under 

this section or any vacancy in any such position, shall be 

treated as a failure to comply with the requirements of this 

subsection for purposes of subsection (i)(4). 

(14) REPORTS.— 

(A) DISCLOSURE OF EXPENDITURES.—The Corporation 

shall include in the annual report submitted pursuant to 

subsection (k)(4) an itemization of the expenditures of the 

Corporation during the year for which funds provided pursuant to subsection (i)(3) were used. 

(B) PUBLIC DISCLOSURE OF SALARIES.—The Corporation shall include in the annual report submitted pursuant 

to subsection (k)(4) a disclosure of the salaries and other 

compensation paid during the year covered by the report 

to directors and senior executive officers at any depository 

institution for which the Corporation has been appointed 

conservator or receiver. 

(15) MINORITY- AND WOMEN-OWNED BUSINESSES CONTRACT 

PARITY GUIDELINES.—The Corporation shall establish guidelines for achieving the goal of a reasonably even distribution 

of contracts awarded to the various subgroups of the class of 

minority- and women-owned businesses and minority- and 

women-owned law firms whose total number of certified contractors comprise not less than 5 percent of all minority- and 

women-owned certified contractors. The guidelines may reflect 

the regional and local geographic distributions of minority subgroups. The distribution of contracts should not be accomplished at the expense of any eligible minority- or womenowned business or law firm in any subgroup that falls below 

the 5 percent threshold in any region or locality. 

(16) CONTRACT SANCTIONS FOR FAILURE TO COMPLY WIT H 

SUBCONTRACT AND JOINT VENTURE REQUIREMENTS.—The Corporation shall prescribe regulations which provide sanctions, 

including contract penalties and suspensions, for violations by 

contractors of requirements relating to subcontractors and joint 

ventures. 

(17) MINORITY PREFERENCE I N ACQUISITION OF INSTITUTIONS I N PREDOMINANTLY MINORITY NEIGHBORHOODS.— 

(A) I N GENERAL.—In considering offers to acquire any 

insured depository institution, or any branch of an insured 

depository institution, located in a predominantly minority 

neighborhood (as defined in regulations prescribed under 

subsection (s)), the Corporation shall give preference to an 

offer from any minority individual, minority-owned business, or a minority depository institution, over any other 

offer that results in the same cost to the Corporation, as 
883 FEDERAL HOME LOAN BANK ACT Sec. 21A 

determined under section 13(c)(4) of the Federal Deposit 

Insurance Act. 

(B) CAPITAL ASSISTANCE.— 

(i) ELIGIBILITY.—I n order to effectuate the purposes of this paragraph, any minority individual, minority-owned business, or a minority depository institution shall be eligible for capital assistance under the 

minority interim capital assistance program established under subsection (u)(1) and subject to the provisions of subsection (u)(3), to the extent that such 

assistance is consistent with the application of section 

13(c)(4) of the Federal Deposit Insurance Act. 

(ii) TERMS AND CONDITIONS.—Subsection (u)(4) 

shall not apply to capital assistance provided under 

this subparagraph. 

(C) PERFORMING ASSETS.—In the case of an acquisition 

of any depository institution or branch described in subparagraph (A) by any minority individual, minority-owned 

business, or a minority depository institution, the Corporation may provide, in connection with such acquisition and 

in addition to performing assets of the depository institution or branch, other performing assets under the control 

of the Corporation in an amount (as determined on the 

basis of the Corporation's estimate of the fair market value 

of the assets) not greater than the amount of net liabilities 

carried on the books of the institution or branch, including 

deposits, which are assumed in connection with the acquisition. 

( D ) FIRST PRIORITY FOR DISPOSITION OF ASSETS.—In 

the case of an acquisition of any depository institution or 

branch described in subparagraph (A) by any minority 

individual, minority-owned business, or a minority depository institution, the disposition of the performing assets of 

the depository institution or branch to such individual, 

business, or minority depository institution shall have a 

first priority over the disposition by the Corporation of 

such assets for any other purpose. 

(E) DEFINITIONS.—Fo r purposes of this paragraph, the 

following definitions shall apply: 

(i) ACQUIRE.—The term ''acquire'' has the same 

meaning as in section 13(f)(8)(B) of the Federal Deposit Insurance Act. 

(ii) MINORITY.—The term ''minority'' has the same 

meaning as in section 1204(c)(3) of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989. 

(iii) MINORITY DEPOSITORY INSTITUTION.—The 

term ''minority depository institution'' has the same 

meaning as in subsection (s)(2). 

(iv) MINORITY-OWNED BUSINESS.—The term ''minority-owned business'' has the same meaning as in 

subsection (r)(4). 

(18) SUBCONTRACTS WIT H MINORITY- AND WOMEN-OWNED 

BUSINESSES.— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 84 

(A) GOALS AND PROCEDURES.— 

(i) REASONABLE GOALS.—The Corporation shall 

establish reasonable goals for contractors for services 

with the Corporation to subcontract with minorityand women-owned businesses and law firms. 

(ii) PROCEDURES.—The Corporation may not enter 

into any contract for the provision of services to the 

Corporation, including legal services, under which the 

contractor would receive fees or other compensation in 

an amount equal to or greater than $500,000, unless 

the Corporation requires the contractor to subcontract 

with minority- or women-owned businesses, including 

law firms, and to pay fees or other compensation to 

such businesses in an amount commensurate with the 

percentage of services provided by the business. 

(iii) EXCEPTIONS.—The Corporation may exclude a 

contract from the requirements of clause (ii) if the 

Chief Executive Officer of the Corporation determines 

in writing that imposing such a subcontracting 

requirement would— 

(i) substantially increase the cost of contract 

performance; or 

(ii) undermine the ability of the contractor to 

perform its obligations under the contract. 

(B) LIMITED WAIVER AUTHORITY.— 

(i) IN GENERAL.—The Corporation may grant a 

waiver from the application of this paragraph to any 

contractor with respect to a contract described in subparagraph (A)(ii), if the contractor certifies to the Corporation that it has determined that no eligible 

minority- or women-owned business is available to 

enter into a subcontract (with respect to such contract) 

and provides an explanation of the basis for such 

determination. 

(ii) WAIVER PROCEDURES.—Any determination to 

grant a waiver under clause (i) shall be made in writing by the Chief Executive Officer of the Corporation. 

(C) REPORT.—Each quarterly report submitted by the 

Corporation pursuant to subsection (k)(7) shall contain a 

description of each exception granted under subparagraph 

(A)(iii) and each waiver granted under subparagraph (B) 

during the quarter covered by the report. 

(D) DEFINITIONS.—For purposes of this paragraph, the 

following definitions shall apply: 

(i) MINORITY.—The term "minority" has the same 

meaning as in section 1204(c)(3) of the Financial Institutions Reform, Recovery, and Enforcement Act of 

1989. 

(ii) MINORITY- AND WOMEN-OWNED BUSINESS.—The 

terms "minority-owned business'' and "women-owned 

business'' have the same meanings as in subsection 

(r)(4). 

(19) CONTRACTING PROCEDURES.— 
885 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(A) PROCEDURES.—In awarding any contract subject to 

the competitive bidding process, the Corporation shall 

apply competitive bidding procedures that are no less 

stringent than those in effect on the date of the enactment 

of the Resolution Trust Corporation Completion Act. 

(B) COST TO TAXPAYER.—Nothing in this Act, or any 

other provision of law, shall supersede the Corporation's 

primary duty of minimizing costs to the taxpayer and 

maximizing the total return to the Government. 

(20) MANAGEMEN T OF LEGAL SERVICES.—To improve the 

management of legal services, the Corporation— 

(A) shall utilize 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 

(B) may only employ outside counsel— 

(i) if the use of outside counsel would provide the 

most practicable, efficient, and cost-effective resolution 

to the action; and 

(ii) under a negotiated fee, contingent fee, or competitively bid fee agreement. 

(21) CLIENT RESPONSIVENESS UNITS.—Th e Corporation 

shall ensure that every regional office of the Corporation contains a client responsiveness unit responsible to the Corporation's ombudsman. 

(x) LIMITATION ON EXCESSIVE COMPENSATION AND CASH 

AWARDS.— 

(1) ESTABLISHMENT OF PERFORMANCE APPRAISAL SYSTEM 

REQUIRED.—The Corporation shall be treated as an agency for 

purposes of sections 4302 and 4304 of title 5, United States 

Code. 

(2) PROCEDURES FOR PAYMENT OF CASH AWARDS.— 

(A) IN GENERAL.—Sections 4502, 4503, and 4505a of 

title 5, United States Code, shall apply with respect to the 

Corporation. 

(B) LIMITATION ON AMOUNT OF CASH AWARDS.—For 

purposes of determining the amount of any performancebased cash award payable to any employee of the Corporation under section 4505a of title 5, United States Code, the 

amount of basic pay of the employee which may be taken 

into account under such section shall not exceed the 

amount which is equal to the annual rate of basic pay payable for level I of the Executive Schedule. 

(3) AL L OTHER CASH AWARDS AND BONUSES PROHIBITED.— 

Except as provided in paragraph (2), no cash award or bonus 

may be made to any employee of the Corporation. 

(4) LIMITATIONS ON CASH AWARDS AND BONUSES.—No employee shall receive any cash award or bonus if such employee 

has given notice of an intent to resign to take a position in the 

private sector before the payment of such cash award or bonus 

or accepts employment in the private sector not later than 60 

days after receipt of such award or bonus. 

(5) LIMITATION ON EXCESSIVE COMPENSATION.—Except as 

provided in paragraphs (6) and (7), no employee may receive 
Sec. 21A FEDERAL HOME LOAN BANK ACT 886 

a total amount of allowances, benefits, basic pay, and other 

compensation, including bonuses and other awards, in excess 

of the total amount of allowances, benefits, basic pay, and 

other compensation, including bonuses and other awards, 

which are provided to the chief executive officer of the Corporation. 

(6) No REDUCTION I N RATE OF PAY.—Th e annual rate of 

basic pay and benefits, including any regional pay differential, 

payable to any employee who was an employee as of the date 

of enactment of the Resolution Trust Corporation Completion 

Act for any year ending after such date of enactment shall not 

be reduced, by reason of paragraph (5), below the annual rate 

of basic pay and benefits, including any regional pay differential, paid to such employee, by reason of such employment, as 

of such date. 

(7) EMPLOYEES SERVING I N ACTING OR TEMPORARY CAPACITY.—In the case of any employee who, as of the date of enactment of the Resolution Trust Corporation Completion Act, is 

serving in an acting capacity or is otherwise temporarily employed at a higher grade than such employee's regular grade 

or position of employment— 

(A) the annual rate of basic pay and benefits, including any regional pay differential, payable to such employee 

in such capacity or at such higher grade shall not be reduced by reason of paragraph (5) so long as such employee 

continues to serve in such capacity or at such higher 

grade; and 

(B) after such employee ceases to serve in such capacity or at such higher grade, paragraph (6) shall be applied 

with respect to such employee by taking into account only 

the annual rate of basic pay and benefits, including any regional pay differential, payable to such employee in such 

employee's regular grade or position of employment. 

(8) DEFINITIONS.— 

(A) ALLOWANCES.—For purposes of paragraph (5), the 

term ''allowances'' does not include any allowance for 

travel and subsistence expenses incurred by an employee 

while away from home or designated post of duty on official business. 

(B) EMPLOYEE.—For purposes of this subsection and 

sections 4302, 4502, 4503, and 4505a of title 5, United 

States Code (as applicable with respect to this subsection), 

the term ''employee'' includes any officer or employee assigned to the Corporation under subsection (b)(8) and any 

officer or employee of the Thrift Depositor Protection Oversight Board. 

(y) AUTHORITY T O EXECUTE CONTRACTS.— 

(1) AUTHORIZED PERSONS.—A person may execute a contract on behalf of the Corporation for the provision of goods or 

services only if— 

(A) that person— 

(i) is a warranted contracting officer appointed by 

the Corporation, or is a managing agent of a savings 
887 FEDERAL HOME LOAN BANK ACT Sec. 21A 

association under the conservatorship of the Corporation; and 

(ii) provides appropriate certification or other 

identification, as required by the Corporation in 

accordance with paragraph (2); 

(B) the notice described in paragraph (4) is included in 

the written contract; and 

(C) that person has appropriate authority to execute 

the contract on behalf of the Corporation in accordance 

with the notice published by the Corporation in accordance 

with paragraph (5). 

(2) PRESENTATION OF IDENTIFICATION.—Prior to executing 

any contract described in paragraph (1) with any person, a 

warranted contracting officer or managing agent shall present 

to that person— 

(A) a valid certificate of appointment (or such other 

identification as may be required by the Corporation) that 

is signed by the appropriate officer of the Corporation; or 

(B) a copy of such certificate, authenticated by the 

Corporation. 

(3) TREATMENT OF UNAUTHORIZED CONTRACTS.—A contract 

described in paragraph (1) that fails to meet the requirements 

of this section— 

(A) shall be null and void; and 

(B) shall not be enforced against the Corporation or its 

agents by any court. 

(4) INCLUSION OF NOTICE I N CONTRACT TERMS.—Eac h written contract described in paragraph (1) shall contain a clear 

and conspicuous statement (in boldface type) in immediate 

proximity to the space reserved for the signatures of the contracting parties as follows: 

''Only warranted contracting officers appointed by the Resolution Trust Corporation or managing agents of associations 

under the conservatorship of the Resolution Trust Corporation 

have the authority to execute contracts on behalf of the Resolution Trust Corporation. Such persons have certain limits on 

their contracting authority. The nature and extent of their contracting authority levels are published in the Federal Register. 

''A warranted contracting officer or a managing agent 

must present identification in the form of a signed certificate 

of appointment (or an authenticated copy of such certificate) or 

other identification, as required by the Corporation, prior to 

executing any contract on behalf of the Resolution Trust Corporation. 

''Any contract that is not executed by a warranted contracting officer or the managing agent of a savings association 

under the conservatorship of the Resolution Trust Corporation, 

acting in conformity with his or her contracting authority, 

shall be null and void, and will not be enforceable by any 

court.''. 

(5) NOTICE OF REQUIREMENTS.—Not later than 30 days 

after the date of enactment of this subsection, the Corporation 

shall publish notice in the Federal Register of— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 888 

(A) the requirements for appointment by the Corporation as a warranted contracting officer; and 

(B) the nature and extent of the contracting authority 

to be exercised by any warranted contracting officer or 

managing agent. 

(6) EXCEPTION.—This section does not apply to— 

(A) any contract between the Corporation and any 

other person governing the purchase or assumption by 

that person of— 

(i) the ownership of a savings association under 

the conservatorship of the Corporation; or 

(ii) the assets or liabilities of a savings association 

under the conservatorship or receivership of the Corporation; or 

(B) any contract executed by the inspector General of 

the Corporation (or any designee thereof) for the provision 

of goods or services to the office of the inspector General 

of the Corporation. 

(7) EXECUTION OF CONTRACTS.—For purposes of this subsection, the execution of a contract includes all modifications to 

such contract. 

(8) EFFECTIVE DATE.—Th e requirements of this subsection 

shall apply to all contracts described in paragraph (1) executed 

on or after the date which is 45 days after the date of enactment of this subsection. 

(z) ADDITIONAL CONTRACTING REQUIREMENTS.— 

(1) I N GENERAL.—No person shall execute, on behalf of the 

Corporation, any contract, or modification to a contract, for 

goods or services exceeding $100,000 in value unless the person executing the contract or modification states in writing 

that— 

(A) the contract or modification is for a fixed price, the 

person has received a written cost estimate for the contract or modification, or a cost estimate cannot be obtained 

as a practical matter with an explanation of why such a 

cost estimate cannot be obtained as a practical matter; 

(B) the person has received the written statement described in paragraph (2); and 

(C) the person is satisfied that the contract or modification to be executed has been approved by a person legally authorized to do so pursuant to a written delegation 

of authority. 

(2) WRITTE N DELEGATION OF AUTHORITY.—A person who 

authorizes a contract, or a modification to a contract, involving 

the Corporation for goods or services exceeding $100,000 in 

value shall state, in writing, that he or she has been delegated 

the authority, pursuant to a written delegation of authority, to 

authorize that contract or modification. 

(3) EFFECT OF FAILURE TO COMPLY.—The failure of any 

person executing a contract, or a modification of a contract, on 

behalf of the Corporation, or authorizing such a contract or 

modification of a contract, to comply with the requirements of 

this subsection shall not void, or serve as grounds to void or 

rescind, any otherwise properly executed contract. 
889 FEDERAL HOME LOAN BANK ACT Sec. 21A 

SEC. 21B. [12 U.S.C. 1441b] RESOLUTION FUNDING CORPORATION 

ESTABLISHED. 

(a) PURPOSE.—The purpose of the Resolution Funding Corporation is to provide funds to the Resolution Trust Corporation to enable the Resolution Trust Corporation to carry out the provisions 

of this Act. 

(b) ESTABLISHMENT.—There is established a corporation to be 

known as the Resolution Funding Corporation. 

(c) MANAGEMEN T OF FUNDIN G CORPORATION. — 

(1) DIRECTORATE.—The Funding Corporation shall be 

under the management of a Directorate composed of 3 members as follows: 

(A) The director of the Office of Finance of the Federal 

Home Loan Banks (or the head of any successor office). 

(B) 2 members selected by the Thrift Depositor Protection Oversight Board from among the presidents of the 

Federal Home Loan Banks.1 

(2) TERMS.—Of the 2 members appointed under paragraph 

(1)(B), 1 shall be appointed for an initial term of 2 years and 

1 shall be appointed for an initial term of 3 years. Thereafter, 

such members shall be appointed for a term of 3 years. 

(3) VACANCY.—If any member leaves the office in which 

such member was serving when appointed to the Directorate— 

(A) such member's service on the Directorate shall terminate on the date such member leaves such office; and 

(B) the successor to the office of such member shall 

serve the remainder of such member's term. 

(4) EQUAL REPRESENTATION OF BANKS.—No president of a 

Federal Home Loan Bank may be appointed to serve an additional term on the Directorate until such time as the presidents of each of the other Federal Home Loan Banks have 

served as many terms as the president of such bank. 

(5) CHAIRPERSON.—The Thrift Depositor Protection Oversight Board shall select the chairperson of the Directorate from 

among the 3 members of the Directorate. 

( 6 ) STAFF. — 

(A) N O PAID EMPLOYEES.—The Funding Corporation 

shall have no paid employees. 

(B) POWERS.—The Directorate may, with the approval 

of the Federal Housing Finance Board authorize the officers, employees, or agents of the Federal Home Loan 

Banks to act for and on behalf of the Funding Corporation 

in such manner as may be necessary to carry out the functions of the Funding Corporation. 

( 7 ) ADMINISTRATIV E EXPENSES. — 

(A) IN GENERAL.—All administrative expenses of the 

Funding Corporation, including custodian fees, shall be 

paid by the Federal Home Loan Banks. 

(B) PRO RATA DISTRIBUTION.—The amount each Federal Home Loan Bank shall pay under subparagraph (A) 

shall be determined by the Thrift Depositor Protection 

1

 Note: The Thrift Depositor Protection Oversight Board was abolished under section 14 of the 

Homeowners Protection Act of 1998 (12 U.S.C. 1441a note) and the Board's authority and duties 

under this section were transferred to the secretary of the Treasury. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 90 

oversight Board by multiplying the total administrative 

expenses for any period by the percentage arrived at by 

dividing— 

(i) the aggregate amount the Thrift Depositor Protection oversight Board required such bank to invest 

in the Funding Corporation (as of the time of such 

determination) under paragraphs (4) and (5) of subsection (e) (computed without regard to paragraphs (3) 

or (6) of such subsection); by 

(ii) the aggregate amount the Thrift Depositor 

Protection Oversight Board required all Federal Home 

Loan Banks to invest (as of the time of such determination) under such paragraphs. 

( 8 ) REGULATIO N B Y THRIF T DEPOSITOR PROTECTION 1 OVERSIGH T BOARD.—Th e Directorate of the Funding Corporation 

shall be subject to such regulations, orders, and directions as 

the Thrift Depositor Protection Oversight Board may prescribe. 

( 9 ) N o COMPENSATIO N FRO M FUNDIN G CORPORATION. — 

Members of the Directorate of the Funding Corporation shall 

receive no pay, allowance, or benefit from the Funding Corporation for serving on the Directorate. 

(d) POWER S OF TH E FUNDIN G CORPORATION.—Th e Funding Corporation shall have only the powers described in paragraphs (1) 

through (9), subject to the other provisions of this section and such 

regulations, orders, and directions as the Thrift Depositor Protection Oversight Board may prescribe: 

(1) ISSU E STOCK.—T o issue nonvoting capital stock to the 

Federal Home Loan Banks. 

( 2 ) PURCHAS E CAPITA L STOCK; TRANSFE R AMOUNTS.—T o 

purchase capital certificates issued by the Resolution Trust 

Corporation under section 21A, and to transfer amounts to the 

Resolution Trust Corporation pursuant to subsection (e)(8) of 

this section. 

(3) ISSU E OBLIGATIONS.—T o issue debentures, bonds, or 

other obligations, and to borrow, to give security for any 

amount borrowed, and to pay interest on (and any redemption 

premium with respect to) any such obligation or amount. 

(4) IMPOS E ASSESSMENTS.—T o impose assessments in 

accordance with subsection (e)(7). 

(5) CORPORATE SEAL.—T o adopt, alter, and use a corporate 

seal. 

(6) SUCCESSION.—T o have succession until dissolved. 

(7) CONTRACTS.—T o enter into contracts. 

(8) AUTHORIT Y TO SUE.—T o sue and be sued in its corporate capacity, and to complain and defend in any action 

brought by or against the Funding Corporation in any state or 

Federal court of competent jurisdiction. 

(9) INCIDENTA L POWERS.—T o exercise such incidental powers not inconsistent with the provisions of this section and section 21A as are necessary and appropriate to carry out the provisions of this section. 

1

 Section 1613(a)(7) of the Housing and Community Development Act of 1992 (P.L. 102-550; 

106 Stat. 4092) incorrectly cites the short title. It amends the Federal Home Loan Act, instead 

the amendment probably should have amended the Federal Home Loan Bank Act. 
891 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(e) CAPITALIZATION OF FUNDIN G CORPORATION, ETC.— 

(1) I N GENERAL.— 

(A) AMOUN T REQUIRED.—The Thrift Depositor Protection oversight Board shall ensure that the aggregate of 

the amounts obtained under this subsection shall be sufficient so that— 

(i) the Funding Corporation may transfer the 

amounts required under paragraph (8); and 

(ii) the total of the face amounts (the amount of 

principal payable at maturity) of noninterest bearing 

instruments in the Funding Corporation Principal 

Fund are equal to the aggregate amount of principal 

on the obligations of the Funding Corporation. 

( B) PURCHASES OF STOCK BY FEDERAL HOME LOAN 

BANKS.—Each Federal Home Loan Bank shall purchase 

stock in the Funding Corporation at times and in amounts 

prescribed by the Thrift Depositor Protection Oversight 

Board. 

(2) PAR VALUE; TRANSFERABILITY.—Each share of stock 

issued by the Funding Corporation to a Federal Home Loan 

Bank shall have a par value in an amount determined by the 

Thrift Depositor Protection Oversight Board and shall be 

transferable at not less than par value only among the Federal 

Home Loan Banks in the manner and to the extent prescribed 

by the Thrift Depositor Protection Oversight Board. 

(3) MAXIMU M INVESTMENT AMOUNT LIMITATION FOR EACH 

FEDERAL HOME LOAN BANK.—Th e cumulative amount of funds 

invested in nonvoting capital stock of the Funding Corporation 

by each Federal Home Loan Bank under paragraph (1) shall 

not at any time exceed the sum of the amounts calculated 

under subparagraphs (A) and (B), as adjusted in subparagraph 

(C), as follows: 

( A) RESERVES AND UNDIVIDED PROFITS ON DECEMBER 

31, 1988.—The sum on December 31, 1988, of— 

(i) the reserves maintained by such Bank pursuant to the reserve requirement contained in the first 

2 sentences of section 16 (as in effect on December 31, 

1988); and 

(ii) the undivided profits of such Bank, minus the 

amounts invested in the capital stock of the Financing 

Corporation pursuant to section 21. 

(B) SUBSEQUENT ADDITIONS TO RESERVES AND UNDIVIDED PROFITS.—The amount, calculated until the date on 

which the Funding Corporation Principal Fund is fully 

funded, equal to— 

(i) the sum of— 

(i) the amounts added to reserves by such 

Bank after December 31, 1988, pursuant to the reserve requirement contained in the first 2 sentences of section 16 (as in effect on December 31, 

1988); and 

(ii) the quarterly additions to undivided profits of the Bank after December 31, 1988; minus 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 92 

(ii) the amounts invested by such Bank in the capital stock of the Financing Corporation after December 

31, 1988, pursuant to the requirement contained in 

section 21. 

(C) ANNUA L ADJUSTMENT.—The amounts in subparagraph (B) shall be adjusted as follows: 

(i) INCREASE I N LIMIT.—I f the aggregate amount 

for all Federal Home Loan Banks determined under 

subparagraph (B)(i) is less than $300,000,000 per year, 

the limit for each Bank shall be increased by an 

amount determined by the Thrift Depositor Protection 

oversight Board by multiplying the aggregate deficiency by the percentage applicable to such Bank arrived at in the manner described in paragraph (5). 

(ii) DECREASE I N LIMIT.—I f the aggregate amount 

for all Federal Home Loan Banks determined under 

subparagraph (B)(i) is more than $300,000,000 per 

year, the limit for each Bank shall be decreased by an 

amount determined by the Thrift Depositor Protection 

oversight Board by multiplying the aggregate excess 

by the percentage applicable to such Bank arrived at 

in the manner described in paragraph (5). 

(4) PRO RATA DISTRIBUTION OF FIRST $1,000,000,000 INVESTED 

I N FUNDING CORPORATION BY FEDERAL HOME LOAN BANKS.—Of 

the first $1,000,000,000 of the aggregate that the Federal 

Housing Finance Board (pursuant to section 21) or the Thrift 

Depositor Protection Oversight Board (under this section) may 

require the Federal Home Loan Banks collectively to invest in 

the capital stock of the Financing Corporation or invest in the 

capital stock of the Funding Corporation, respectively, the 

amount which each Federal Home Loan Bank (or any successor 

to the Bank) shall invest shall be determined by the Federal 

Housing Finance Board or the Thrift Depositor Protection 

Oversight Board (as the case may be) by multiplying the aggregate amount of such investment by all Banks by the percentage appearing in the following table for each such Bank: 

Bank Percentage 

Federal Home Loan Bank of Boston 1.8629 

Federal Home Loan Bank of New York 9.1006 

Federal Home Loan Bank of Pittsburgh 4.2702 

Federal Home Loan Bank of Atlanta 14.4007 

Federal Home Loan Bank of Cincinnati 8.2653 

Federal Home Loan Bank of Indianapolis 5.2863 

Federal Home Loan Bank of Chicago 9.6886 

Federal Home Loan Bank of Des Moines 6.9301 

Federal Home Loan Bank of Dallas 8.8181 

Federal Home Loan Bank of Topeka 5.2706 

Federal Home Loan Bank of San Francisco 19.9644 

Federal Home Loan Bank of Seattle 6.1422 

(5) PRO RATA DISTRIBUTION OF AMOUNTS REQUIRED TO BE 

INVESTED I N 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 
893 FEDERAL HOME LOAN BANK ACT Sec. 21A 

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 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 which 

are members of a Federal Home Loan Bank. 

(6) SPECIAL PROVISIONS RELATING TO MAXIMU M AMOUNT 

LIMITATIONS.— 

(A) I N GENERAL.—If the amount of any Federal Home 

Loan Bank's allocation under paragraph (5) exceeds the 

maximum amount applicable with respect to such Bank (in 

this paragraph referred to as a ''deficient Bank'') under 

paragraph (3) at the time of such determination (in this 

paragraph referred to as the ''excess amount'')— 

(i) the Thrift Depositor Protection Oversight 

Board shall require each Federal Home Loan Bank 

that is not allocated an amount under paragraph (5) 

that exceeds its maximum under paragraph (3) (in 

this paragraph referred to as a ''remaining Bank'') to 

purchase stock in the Funding Corporation (in addition to the amount determined under paragraph (5) for 

such remaining Bank and subject to the maximum 

amount applicable with respect to such remaining 

Bank under paragraph (3) at the time of such determination) on behalf of the deficient Bank the amount 

determined under subparagraph (B); 

(ii) the Thrift Depositor Protection Oversight 

Board shall require the deficient Bank to subsequently 

reimburse the remaining Banks out of its net earnings 

(or reimbursements received from other Banks) in the 

manner described in subparagraphs (C) and (D); and 

(iii) the requirements contained in subparagraph 

(D) relating to the use of net earnings shall apply to 

the deficient Bank until such Bank has reimbursed 

the remaining Banks for all of the excess amount. 

( B) ALLOCATION OF EXCESS AMOUNT AMONG REMAINING 

FEDERAL HOME LOAN BANKS.— 

(i) IN GENERAL.—The amount of stock each remaining Federal Home Loan Bank shall be required to 

purchase under subparagraph (A)(i) is the amount 

determined by the Thrift Depositor Protection Oversight Board by multiplying the excess amount by the 

percentage arrived at by dividing— 

(i) the cumulative amount of stock in the 

Funding Corporation purchased under this subsection by such remaining Bank at the time of 

such determination; by 

(ii) the aggregate of the cumulative amounts 

invested under this subsection by all remaining 

Banks at such time. 
Sec. 21A FEDERAL HOME LOAN BANK ACT 8 94 

(ii) REALLOCATION.—If the allocation under this 

subparagraph results in a remaining Bank exceeding 

its maximum amount under paragraph (3), such excess amount shall be reallocated to the other remaining Bank in accordance with this subparagraph. 

( C) REIMBURSEMENT PROCEDURE.— 

(i) I N GENERAL.—A Bank on whose behalf stock is 

purchased under subparagraph (A)(i) shall make payments annually from amounts, if any, in its reserve 

account (as described in subparagraph (D)) to each 

Bank that made payments on its behalf until a full reimbursement has been completed. A full reimbursement shall require repayment of the excess amounts 

invested by other Banks plus interest which shall accrue at a rate equal to the annual average cost of 

funds in the most recent year to all Federal Home 

Loan Banks and which shall begin to accrue 2 years 

after the investments under subparagraph (A)(i) are 

made. 

(ii) DETERMINATION OF AMOUNTS.—The Thrift Depositor Protection Oversight Board shall annually 

determine the dollar amounts of such reimbursements 

by distributing the amount available for such reimbursements (at the time of such determination) from 

the reimbursing Bank to the Banks that made purchases on its behalf according to the shares of the reimbursing Bank's excess amount that the other Banks 

invested. 

( D ) TRANSFER TO ACCOUNT FOR REIMBURSEMENTS REQUIRED.— 

(i) I N GENERAL.—Of the net earnings for any year 

of a Bank on whose behalf a purchase is made under 

subparagraph (A)(i) and any reimbursements received 

from other Banks, the amount necessary to make the 

reimbursements required under subparagraph (A)(ii) 

shall be placed in a reserve account (established in the 

manner prescribed by the Thrift Depositor Protection 

Oversight Board), which shall be available only for 

such reimbursements. 

(ii) LIMITATION.—Th e total amount placed in such 

reserve account in any year by any Bank shall not exceed an amount equal to 20 percent of the net earnings of such Bank for such year. 

(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: 

(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 
8 95 FEDERAL HOME LOAN BANK ACT Sec. 21A 

members by the Federal Deposit Insurance Corporation 

pursuant to section 7 of the Federal Deposit Insurance 

Act) except that— 

(i) the maximum amount of the aggregate amount 

assessed shall be the amount of additional funds necessary to fund the Funding Corporation Principal 

Fund; 

(ii) the sum of— 

(i) the amount assessed under this subparagraph; and 

(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; 

(iii) the Financing Corporation shall have first priority to make the assessment; and 

(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. 

(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. 

(8) TRANSFER TO RTC.—The Funding Corporation shall 

transfer to the Resolution Trust Corporation $1,200,000,000 in 

fiscal year 1989. 

(f) OBLIGATIONS OF FUNDIN G CORPORATION.— 

(1) ISSUANCE.—The Funding Corporation may issue bonds, 

notes, debentures, and similar obligations in an aggregate 

amount not to exceed $30,000,000,000. No obligation may be 

issued under this paragraph unless, at the time of issuance, 

the face amounts (the amount of principal payable at maturity) 

of noninterest bearing instruments in the Funding Corporation 

Principal Fund are equal to the aggregate amount of principal 

on the obligations of the Funding Corporation that will be outstanding following such issuance. 

(2) INTEREST PAYMENTS.—The Funding Corporation shall 

pay the interest due on such obligations from funds obtained 

for such interest payments from the following sources: 

(A) EARNINGS ON CERTAIN ASSETS.—Earnings on assets 

of the Funding Corporation which are not invested in the 

Funding Corporation Principal Fund shall be used for interest payments on outstanding debt of the Funding Corporation. 

(B) PROCEEDS FROM RESOLUTION TRUST CORPORATION.—To the extent the amounts available pursuant to 

subparagraph (A) are insufficient to cover the amount of 

interest payments, the Resolution Trust Corporation shall 

pay to the Funding Corporation— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 896 

(i) the liquidating dividends and payments made 

on claims received by the Resolution Trust Corporation from receiverships to the extent such proceeds are 

determined by the Thrift Depositor Protection Oversight Board to be in excess of funds presently necessary for resolution costs; and 

(ii) any proceeds from warrants and participations 

acquired by the Resolution Trust Corporation. 

(C) PAYMENTS BY FEDERAL HOME LOAN BANKS.— 

(i) I N GENERAL.—To the extent that the amounts 

available pursuant to subparagraphs (A) and (B) are 

insufficient to cover the amount of interest payments, 

each Federal home loan bank shall pay to the Funding 

Corporation in each calendar year, 20.0 percent of the 

net earnings of that Bank (after deducting expenses 

relating to section 10(j) and operating expenses). 

(ii) ANNUA L DETERMINATION.—The Board annually 

shall determine the extent to which the value of the 

aggregate amounts paid by the Federal home loan 

banks exceeds or falls short of the value of an annuity 

of $300,000,000 per year that commences on the 

issuance date and ends on the final scheduled maturity date of the obligations, and shall select appropriate present value factors for making such determinations, in consultation with the Secretary of the 

Treasury. 

(iii) PAYMENT TERM ALTERATIONS.—The Board 

shall extend or shorten the term of the payment obligations of a Federal home loan bank under this subparagraph as necessary to ensure that the value of all 

payments made by the Banks is equivalent to the 

value of an annuity referred to in clause (ii). 

(iv) TER M BEYOND MATURITY.—If the Board extends the term of payment obligations beyond the final 

scheduled maturity date for the obligations, each Federal home loan bank shall continue to pay 20.0 percent 

of its net earnings (after deducting expenses relating 

to section 10(j) and operating expenses) to the Treasury of the United States until the value of all such 

payments by the Federal home loan banks is equivalent to the value of an annuity referred to in clause 

(ii). in the final year in which the Federal home loan 

banks are required to make any payment to the Treasury under this subparagraph, if the dollar amount represented by 20.0 percent of the net earnings of the 

Federal home loan banks exceeds the remaining obligation of the Banks to the Treasury, the Finance 

Board shall reduce the percentage pro rata to a level 

sufficient to pay the remaining obligation. 

(D) PROCEEDS FROM SALE OF ASSETS.—To the extent 

the amounts available pursuant to subparagraphs (A), (B), 

and (C) are insufficient to cover the amount of interest 

payments, the FSLIC Resolution Fund shall transfer to 

the Funding Corporation any net proceeds from the sale of 
897 FEDERAL HOME LOAN BANK ACT Sec. 21A 

assets received from the Resolution Trust Corporation, 

which shall be used by the Funding Corporation to pay 

such interest. 

( E) TREASURY BACKUP.— 

(i) I N GENERAL.—To the extent the amounts available pursuant to subparagraphs (A), (B), (C), and (D) 

are insufficient to cover the amount of interest payments, the secretary of the Treasury shall pay to the 

Funding Corporation the additional amount due, 

which shall be used by the Funding Corporation to 

pay such interest. 

(ii) LIABILITY OF FUNDING CORPORATION.—In each 

instance where the secretary is required to make a 

payment under this subparagraph to the Funding Corporation, the amount of the payment shall become a liability of the Funding Corporation to be repaid to the 

secretary upon dissolution of the Funding Corporation 

(to the extent the Funding Corporation may have any 

remaining assets). 

(iii) APPROPRIATION OF FUNDS.—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 clause (i). 

(3) PRINCIPAL PAYMENTS.—On maturity of an obligation 

issued under this subsection, the obligation shall be repaid by 

the Funding Corporation from the liquidation of noninterest 

bearing instruments held in the Funding Corporation Principal 

Fund. 

(4) PROCEEDS TO BE TRANSFERRED TO RESOLUTION TRUST 

CORPORATION.—Subject to terms and conditions approved by 

the Thrift Depositor Protection Oversight Board, the proceeds 

(less any discount, plus any premium, net of issuance costs) of 

any obligation issued by the Funding Corporation shall be used 

to— 

(A) purchase the capital certificates issued by the Resolution Trust Corporation under section 21A; or 

(B) refund any previously issued obligation the proceeds of which were transferred in the manner described 

in subparagraph (A). 

(5) INVESTMENT OF UNITED STATES FUNDS I N OBLIGATIONS.—Obligations issued under this section by the Funding 

Corporation, at the direction of the Thrift Depositor Protection 

oversight Board shall be lawful investments, and may be 

accepted as security, for all fiduciary, trust, and public funds 

the investment or deposit of which shall be under the authority 

or control of the united states or any officer of the united 

states. 

(6) MARKET FOR OBLIGATIONS.—All persons having the 

power to invest in, sell, underwrite, purchase for their own accounts, accept as security, or otherwise deal in obligations of 

the Federal Home Loan Banks shall also have the power to do 

so with respect to obligations of the Funding Corporation. 

(7) TA X EXEMPT STATUS.— 
Sec. 21A FEDERAL HOME LOAN BANK ACT 898 

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

(B), obligations of the Funding Corporation shall be 

exempt from tax both as to principal and interest to the 

same extent as any obligation of a Federal Home Loan 

Bank is exempt from tax under section 13 of this Act. 

(B) EXCEPTION.—The Funding Corporation, like the 

Federal Home Loan Banks, shall be treated as an agency 

of the United States for purposes of the first sentence of 

section 3124(b) of title 31, United States Code (relating to 

determination of tax status of interest on obligations). 

(8) OBLIGATIONS NOT EXEMPT SECURITIES.— 

(A) IN GENERAL.—For purposes of the laws administered by the Securities and Exchange Commission, obligations of the Funding Corporation— 

(i) shall not be considered to be securities issued 

or guaranteed by a person controlled or supervised by, 

or acting as an instrumentality of, the Government of 

the United States; and 

(ii) shall not be considered to be ''exempted securities'' within the meaning of section 3(a)(12)(A)(i) of the 

Securities Exchange Act of 1934, except that such obligations shall be considered to be exempted securities 

for purposes of section 15 of such Act. 

(B) AUTHORITY OF COMMISSION.—Notwithstanding subparagraph (A), the Securities and Exchange Commission 

may, by rule or order, consistent with the public interest 

and the protection of investors, exempt securities issued by 

the Funding Corporation from the registration requirements of the Securities Act of 1933, subject to such terms 

and conditions as the Commission may prescribe. 

(9) MINORITY PARTICIPATION I N PUBLIC OR NEGOTIATED OFFERINGS.—The Thrift Depositor Protection Oversight Board 

and the Directorate shall ensure that minority owned or controlled commercial banks, investment banking firms, underwriters, and bond counsels throughout the United States have 

an opportunity to participate to a significant degree in any 

public or negotiated offering of obligations issued under this 

section. 

(10) N O FULL FAITH AND CREDIT OF THE UNITED STATES.— 

Obligations of the Funding Corporation shall not be obligations 

of, or guaranteed as to principal by, the Federal Home Loan 

Bank System, the Federal Home Loan Banks, the United 

States, or the Resolution Trust Corporation and the obligations 

shall so plainly state. The Secretary shall pay interest on such 

obligations as required pursuant to this subsection. 

(g) USE AND DISPOSITION OF ASSETS OF FUNDIN G CORPORATION 

N O T TRANSFERRED TO RESOLUTION TRUST CORPORATION.— 

(1) IN GENERAL.—Subject to regulations, restrictions, and 

limitations prescribed by the Thrift Depositor Protection Oversight Board, assets of the Funding Corporation which are not 

required to be invested in capital certificates issued by the Resolution Trust Corporation under section 21A and are not 

needed for current interest payments shall be invested in direct obligations of the United States issued by the Secretary. 
899 FEDERAL HOME LOAN BANK ACT Sec. 21A 

(2) SEPARATE ACCOUNT FOR ZERO COUPON INSTRUMENTS 

HELD TO ENSURE PAYMENT OF PRINCIPAL.—Except as provided 

in subsection (e)(8), the Funding Corporation shall invest 

amounts received pursuant to subsection (e) in, and hold in a 

separate account to be known as the Funding Corporation 

Principal Fund, noninterest bearing instruments— 

(A) which are direct obligations of the United States 

issued by the Secretary; and 

(B) the total of the face amounts (the amount of principal payable at maturity) of which is approximately equal 

to the aggregate amount of principal on the obligations of 

the Funding Corporation. 

(h) MISCELLANEOUS PROVISIONS.— 

(1) TREATMENT FOR CERTAIN PURPOSES.—Except as provided in subsection (f)(7)(B), the Funding Corporation shall be 

treated as a Federal Home Loan Bank for purposes of section 

13 (to the extent such section relates to State, municipal, and 

local taxation) and section 23. 

(2) FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL 

AGENTS.—The Federal Reserve banks are authorized to act as 

depositaries for or fiscal agents or custodians of the Funding 

Corporation. 

(3) APPLICABILITY OF CERTAIN PROVISIONS RELATING TO 

GOVERNMENT CORPORATIONS.—The Funding Corporation shall 

be treated, for purposes of sections 9105, 9107, and 9108 of 

title 31, United States Code, as a mixed-ownership Government corporation which has capital of the Government. 

(4) JURISDICTION AND POWER TO REMOVE.— 

(A) FEDERAL COURT JURISDICTION.—Notwithstandin g 

any other provision of law, any civil action, suit, or proceeding to which the Funding Corporation is a party shall 

be deemed to arise under the laws of the United States, 

and the United States district courts shall have original 

jurisdiction over such action, suit, or proceeding. 

(B) REMOVAL.—The Funding Corporation may, without 

bond or security, remove any such action, suit, or proceeding from a State court to the United States District 

Court for the District of Columbia. 

(i) ANNUA L REPORT.— 

(1) IN GENERAL.—The Thrift Depositor Protection Oversight Board shall annually submit a full report of the operations, activities, budget, receipts, and expenditures of the 

Funding Corporation for the preceding 12-month period. 

(2) CONTENTS.—The report required under paragraph (1) 

shall include— 

(A) audited statements and any information necessary 

to make known the financial condition and operations of 

the Funding Corporation in accordance with generally 

accepted accounting principles; 

(B) the financial operating plans and forecasts (including estimates of actual and future spending, and estimates 

of actual and future cash obligations) of the Funding Corporation taking into account its financial commitments, 

guarantees, and other contingent liabilities; and 
Sec. 21A FEDERAL HOME LOAN BANK ACT 9 00 

(C) the results of the annual audit of the financial 

transactions of the Funding Corporation conducted by the 

Comptroller General pursuant to section 9105(a) of title 

31, United States Code. 

(3) SUBMISSIO N TO CONGRESS AN D PRESIDENT.—Th e Thrift 

Depositor Protection Oversight Board shall submit each annual 

report required under this subsection to the Congress and the 

president as soon as practicable after the end of the calendar 

year for which the report is made, but not later than June 30 

of the year following such calendar year. 

(j) TERMINATIO N OF FUNDIN G CORPORATION.— 

(1) IN GENERAL.—The Funding Corporation shall be dissolved, as soon as practicable, after the maturity and full payment of all obligations issued by the Funding Corporation 

under this section. 

( 2 ) AUTHORIT Y OF THRIF T DEPOSITOR PROTECTION 1 OVERSIGHT BOARD TO CONCLUDE AFFAIRS OF FUNDIN G CORPORATION.—Effective on the date of the dissolution of the Funding 

Corporation under paragraph (1), the Thrift Depositor Protection oversight Board may exercise on behalf of the Funding 

Corporation any power of the Funding Corporation which the 

Thrift Depositor Protection Oversight Board determines to be 

necessary to settle and conclude the affairs of the Funding Corporation. 

(k) DEFINITIONS.—Fo r purposes of this section: 

(1) ADMINISTRATIV E EXPENSES.—Th e term "administrative 

expenses'' does not include— 

(A) any interest on, or any redemption premium with 

respect to, any obligation of the Funding Corporation; or 

(B) issuance costs. 

(2) CUSTODIA N FEE.—Th e term "custodian fee'' means— 

(A) any fee incurred by the Funding Corporation in 

connection with the transfer of any security to, or the 

maintenance of any security in, the segregated account 

established under subsection (g); and 

(B) any other expense incurred by the Funding Corporation in connection with the establishment or maintenance of such account. 

(3) FUNDIN G CORPORATION.—Th e term "Funding Corporation'' means the Resolution Funding Corporation established in 

subsection (b). 

(4) FUNDIN G CORPORATION PRINCIPAL FUND.—Th e term 

"Funding Corporation Principal Fund'' means the separate account established under subsection (g)(2). 

(5) ISSUANCE COSTS.—Th e term "issuance costs''— 

(A) means issuance fees and commissions incurred by 

the Funding Corporation in connection with the issuance 

or servicing of any obligation of the Funding Corporation; 

and 

(B) includes legal and accounting expenses, trustee 

and fiscal and paying agent charges, costs incurred in con1

 Section 1613(a)(7) of the Housing and Community Development Act of 1992 (P.L. 102-550; 

106 Stat. 4092) incorrectly cites the short title. It amends the Federal Home Loan Act, instead 

the amendment probably should have amended the Federal Home Loan Bank Act. 
901 FEDERAL HOME LOAN BANK ACT Sec. 21A 

nection with preparing and printing offering materials, 

and advertising expenses, to the extent that any such cost 

or expense is incurred by the Funding Corporation in connection with issuing any obligation. 

(6) NET EARNINGS.—The term ''net earnings'' means net 

earnings without reduction for chargeoffs or expenses incurred 

by a Federal Home Loan Bank for the purchase of capital stock 

of the Financing Corporation or payments relating to the 

Funding Corporation required by the Thrift Depositor Protection Oversight Board under subsections (e) and (f). 

(7) THRIFT DEPOSITOR PROTECTION OVERSIGHT BOARD.—The 

term ''Thrift Depositor Protection Oversight Board'' means— 

(A) the Thrift Depositor Protection Oversight Board of 

the Resolution Trust Corporation under section 21A; and 

(B) after the termination of the Resolution Trust 

Corporation— 

(i) the secretary of the Treasury; 

(ii) the Chairman of the Board of Governors of the 

Federal Reserve System; and 

(iii) the Secretary of Housing and Urban Development. 

(8) SAVINGS ASSOCIATION INSURANCE FUND MEMBER.—The 

term ''Savings Association Insurance Fund member'' means a 

savings Association insurance member as such term is defined 

by section 7(l) of the Federal Deposit Insurance Act. 

(9) SECRETARY.—The term ''Secretary'' means the Secretary of the Treasury. 

(10) 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). 

(l) REGULATIONS.—The Thrift Depositor Protection Oversight 

Board may prescribe any regulations necessary to carry out this 

section. 

SEC. 22. [12 U.S.C. 1442] MEMBER FINANCIAL INFORMATION. 

(a) I N GENERAL.—In order to enable the Federal Home Loan 

Banks to carry out the provisions of this Act, the secretary of the 

Treasury, the Comptroller of the Currency, the Chairman of the 

Board of Governors of the Federal Reserve System, the Chairperson of the Federal Deposit Insurance Corporation, the Chairperson of the National Credit Union Administration, and the Director of the office of Thrift supervision, upon request by any Federal 

Home Loan Bank— 

(1) shall make available in confidence to any Federal 

Home Loan Bank, such reports, records, or other information 

as may be available, relating to the condition of any member 

of any Federal Home Loan Bank or any institution with re-
902 

FEDERAL HOME LOAN BANK ACT 

Sec. 21A 

spect to which any such Bank has had or contemplates having 

transactions under this Act; and 

(2) may perform through their examiners or other employees or agents, for the confidential use of the Federal Home 

Loan Bank, examinations of institutions for which such agency 

is the appropriate Federal banking regulatory agency. 

in addition, the Comptroller of the Currency, the Chairman of the 

Board of Governors of the Federal Reserve System, the Chairperson of the National Credit Union Administration, and the Director of the Office of Thrift Supervision shall make available to the 

Board or any Federal Home Loan Bank the financial reports filed 

by members of any Bank to enable the Board or a Bank to compile 

and publish cost of funds indices or other financial or statistical reports. 

(b) CONSENT BY MEMBERS.—Ever y member of a Federal Home 

Loan Bank shall, as a condition precedent thereto, be deemed— 

(1) to consent to such examinations as the Bank or the 

Board may require for the purposes of this Act; 

(2) to agree that reports of examinations by local, State, or 

Federal agencies or institutions may be furnished by such 

authorities to the Bank or the Board upon request; and 

(3) to agree to give the Bank or the Federal agency, upon 

request, such information as they may need to compile and 

publish cost of funds indices and to publish other reports or 

statistical summaries pertaining to the activities of Bank members. 

SEC. 23. [12 U.S.C. 1443] FORM S OF BANK STOCK AN D OBLIGATIONS. 

Any stock, debentures, bonds, notes, or other obligations issued 

under the authority of this Act may be issued in uncertificated 

form, utilizing a book entry method, or in certificated form under 

such rules, regulations, or guidelines as the Board of Directors of 

the Federal Housing Finance Board may provide. 

SEC. 24. [12 U.S.C. 1444] (a) Any organization organized 

under the laws of any State and subject to inspection and regulation under the banking or similar laws of such State shall be eligible to become a member under this Act if— 

(1) it is organized solely for the purpose of supplying credit 

to its members; 

(2) its membership (A) is confined exclusively to building 

and loan associations, savings and loan associations, cooperative banks, and homestead associations; or (B) is confined 

exclusively to savings banks; and 

(3) of the institutions to which its membership is confined 

which are organized within the State, its membership includes 

a majority of such institutions. 

(b) in all respects, but subject to such additional rules and regulations as the Board may provide, any such organization shall be 

a member for the purposes of this Act. 

SEC. 25. [12 U.S.C. 1445] Each Federal Home Loan Bank 

shall have succession until dissolved by the Board under this Act 

or by further Act of Congress. 

SEC. 26. [12 U.S.C. 1446] Whenever the Board finds that the 

efficient and economical accomplishment of the purposes of this Act 
903 FEDERAL HOME LOAN BANK ACT Sec. 21A 

will be aided by such action, and in accordance with such rules, 

regulations, and orders as the Board may prescribe, any Federal 

Home Loan Bank may be liquidated or reorganized, and its stock 

paid off and retired in whole or in part in connection therewith 

after paying or making provision for the payment of its liabilities. 

in the case of any such liquidation or reorganization, any other 

Federal Home Loan Bank may, with the approval of the Board, acquire assets of any such liquidated or reorganized bank and assume liabilities thereof, in whole or in part. 

[SEC. 27. REPEALED BY PUBLIC LAW 106-102, SEC. 606(C), 113 

STAT. 1454.] 

SEC. 28. [12 U.S.C. 1448] If any provision of this Act, or the 

application thereof to any person or circumstances, is held invalid, 

the remainder of the Act, and the application of such provision to 

other persons or circumstances, shall not be affected thereby. 

SEC. 29. That notwithstanding any provisions of law prohibiting bonds of the United States from bearing the circulation privilege, for a period of three years from the date of enactment of this 

Act all outstanding bonds of the United States heretofore issued or 

issued during such period, bearing interest at a rate not exceeding 

3% per centum per annum, shall be receivable by the Treasurer of 

the United States as security for the issuance of circulating notes 

to national banking associations, and upon the deposit with the 

Treasurer of the United States by a national banking association 

of any such bonds, such association shall be entitled to receive circulating notes in the same manner and to the same extent and 

subject to the same conditions and limitations now provided by law 

in the case of 2 per centum gold bonds of the United States bearing 

the circulation privilege; except that the limitation contained in 

section 9 of the Act of July 12, 1882, as amended, with respect to 

the amount of lawful money which may be deposited with the 

Treasurer of the United States by national banking associations for 

the purpose of withdrawing bonds held as security for their circulating notes, shall not apply to the bonds of the United States to 

which the circulation privilege is extended by this section and 

which are held as security for such notes. Nothing contained in this 

section shall be construed to modify, amend, or repeal any law relating to bonds of the United States which now bear the circulation 

privilege. 

As used in this section, the word ''bond'' shall not include 

notes, certificates, or bills issued by the United States. 

There are hereby authorized to be appropriated such sums as 

may be necessary to carry out the provisions of this section. 

SEC. 30. [12 U.S.C. 1449] The right to alter, amend, or repeal 

this Act is hereby expressly reserved. 

FEDERAL RESERVE ACT 

905 

FEDERAL RESERVE ACT1 

(38 Stat. 251; 12 U.S.C. 221 et seq.) 

To provide for the establishment of Federal reserve banks, to furnish an elastic 

currency, to afford means of rediscounting commercial paper, to establish a more 

effective supervision of banking in the united states, and for other purposes. 

[SHORT TITLE AND DEFINITIONS] 

[1. Short title] 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That the short 

title of this Act shall be the ''Federal Reserve Act.'' (12 U.S.C. 226) 

[2. Definition of "bank"] 

Wherever the word ''bank'' is used in this Act, the word shall 

be held to include state bank, banking association, and trust company, except where national banks or Federal reserve banks are 

specifically referred to. (12 U.S.C. 221) 

[3. Definitions of other terms] 

The terms ''national bank'' and ''national banking association'' 

used in this Act shall be held to be synonymous and interchangeable. The term ''member bank'' shall be held to mean any national 

bank, state bank, or bank or trust company which has become a 

member of one of the reserve banks created by this Act. The term 

''board'' shall be held to mean Board of Governors of the Federal 

Reserve System; the term ''district'' shall be held to mean Federal 

reserve district; the term ''reserve bank'' shall be held to mean Federal reserve bank; the term ''the continental United States'' means 

the States of the United States and the District of Columbia. 

The terms ''bonds and notes of the United States'', ''bonds and 

notes of the Government of the United States'', and ''bonds or notes 

of the united states'' used in this Act shall be held to include certificates of indebtedness and Treasury bills issued under section 

3104 of title 31. (12 U.S.C. 221) 

FEDERAL RESERVE DISTRICTS. 

[1. Establishment of reserve cities and districts] 

SEC. 2. As soon as practicable, the Secretary of the Treasury, 

the secretary of Agriculture and the Comptroller of the Currency, 

acting as ''The Reserve Bank Organization Committee,'' shall designate not less than eight nor more than twelve cities to be known 

*A number of sections of the Federal Reserve Act are long or contain unrelated provisions 

and the provisions of each such section appear in more than 1 section of the united states Code. 

in this compilation of this Act, the Code cites for such sections appear at the end of each 

discrete provision. Matter in boldface brackets does not appear in the statute as enacted into 

law by Congress. 

9 07 
Sec. 2 FEDERAL RESERVE ACT 908 

as Federal reserve cities, and shall divide the continental united 

States, excluding Alaska, into districts, each district to contain only 

one of such Federal reserve cities. The determination of said organization committee shall not be subject to review except by the 

Board of Governors of the Federal Reserve System when organized: 

Provided, That the districts shall be apportioned with due regard 

to the convenience and customary course of business and shall not 

necessarily be coterminous with any State or States. The districts 

thus created may be readjusted and new districts may from time 

to time be created by the Board of Governors of the Federal Reserve System, not to exceed twelve in all. Such districts shall be 

known as Federal reserve districts and may be designated by number. When the State of Alaska or Hawaii is hereafter admitted to 

the Union the Federal Reserve districts shall be readjusted by the 

Board of Governors of the Federal Reserve System in such manner 

as to include such State. Every national bank in any State shall, 

upon commencing business or within ninety days after admission 

into the Union of the State in which it is located, become a member 

bank of the Federal Reserve System by subscribing and paying for 

stock in the Federal Reserve bank of its district in accordance with 

the provisions of this Act and shall thereupon be an insured bank 

under the Federal Deposit Insurance Act, and failure to do so shall 

subject such bank to the penalty provided by the sixth paragraph 

of this section. (Partially incorporated in 12 U.S.C. 222 and 223) 

[2. Powers of organization committee] 

Said organization committee shall be authorized to employ 

counsel and expert aid, to take testimony, to send for persons and 

papers, to administer oaths, and to make such investigation as may 

be deemed necessary by the said committee in determining the reserve districts and in designating the cities within such districts 

where such Federal reserve banks shall be severally located. The 

said committee shall supervise the organization in each of the cities 

designated of a Federal reserve bank, which shall include in its 

title the name of the city in which it is situated, as "Federal Reserve Bank of Chicago.'' (Omitted from U.S. Code, except that part 

of last sentence is incorporated in 12 U.S.C. 225) 

[3. Subscription to stock by national banks] 

under regulations to be prescribed by the organization committee, every national banking association in the United States is 

hereby required, and every eligible bank in the United States and 

every trust company within the District of Columbia, is hereby 

authorized to signify in writing, within sixty days after the passage 

of this Act, its acceptance of the terms and provisions hereof. When 

the organization committee shall have designated the cities in 

which Federal reserve banks are to be organized, and fixed the geographical limits of the Federal reserve districts, every national 

banking association within that district shall be required within 

thirty days after notice from the organization committee, to subscribe to the capital stock of such Federal reserve bank in a sum 

equal to six per centum of the paid-up capital stock and surplus of 

such bank, one-sixth of the subscription to be payable on call of the 

organization committee or of the Board of Governors of the Federal 
909 FEDERAL RESERVE ACT Sec. 2 

Reserve System, one-sixth within three months and one-sixth 

within six months thereafter, and the remainder of the subscription, or any part thereof, shall be subject to call when deemed necessary by the Board of Governors of the Federal Reserve System, 

said payments to be in gold or gold certificates. (partially incorporated in 12 U.S.C. 282) 

[4. Liability of shareholders of reserve banks] 

The shareholders of every Federal reserve bank shall be held 

individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such bank to the 

extent of the amount of their subscriptions to such stock at the par 

value thereof in addition to the amount subscribed, whether such 

subscriptions have been paid up in whole or in part, under the provisions of this Act. (12 U.S.C. 502) 

[5. Failure of national bank to accept terms of Act] 

Any national bank failing to signify its acceptance of the terms 

of this Act within the sixty days aforesaid, shall cease to act as a 

reserve agent, upon thirty days' notice, to be given within the discretion of the said organization committee or of the Board of Governors of the Federal Reserve System. (Omitted from U.S. Code) 

[6. Penalty for violation of Act by national banks] 

Should any national banking association in the United States 

now organized fail within one year after the passage of this Act to 

become a member bank or fail to comply with any of the provisions 

of this Act applicable thereto, all of the rights, privileges, and franchises of such association granted to it under the national-bank 

Act, or under the provisions of this Act, shall be thereby forfeited. 

Any noncompliance with or violation of this Act shall, however, be 

determined and adjudged by any court of the United States of competent jurisdiction in a suit brought for that purpose in the district 

or territory in which such bank is located, under direction of the 

Board of Governors of the Federal Reserve System, by the Comptroller of the Currency in his own name before the association shall 

be declared dissolved. in cases of such noncompliance or violation, 

other than the failure to become a member bank under the provisions of this Act, every director who participated in or assented to 

the same shall be held liable in his personal or individual capacity 

for all damages which said bank, its shareholders, or any other person shall have sustained in consequence of such violation. (12 

U.S.C. 501a) 

[7. Effect of dissolution] 

Such dissolution shall not take away or impair any remedy 

against such corporation, its stockholders or officers, for any liability or penalty which shall have been previously incurred. (12 

U.S.C. 501a) 

[8. Stock offered to public] 

Should the subscriptions by banks to the stock of said Federal 

reserve banks or any one or more of them be, in the judgment of 

the organization committee, insufficient to provide the amount of 

capital required therefor, then and in that event the said organiza-
Sec. 2 FEDERAL RESERVE ACT 9 10 

tion committee may, under conditions and regulations to be prescribed by it, offer to public subscription at par such an amount of 

stock in said Federal reserve banks, or any one or more of them, 

as said committee shall determine, subject to the same conditions 

as to payment and stock liability as provided for member banks. 

(Omitted from U.S. Code) 

[9. Limitation on amount to one subscriber] 

No individual, copartnership, or corporation other than a member bank of its district shall be permitted to subscribe for or to hold 

at any time more than $25,000 par value of stock in any Federal 

reserve bank. Such stock shall be known as public stock and may 

be transferred on the books of the Federal reserve bank by the 

chairman of the board of directors of such bank. (12 U.S.C. 283) 

[10. Stock allotted to United States] 

Should the total subscriptions by banks and the public to the 

stock of said Federal reserve banks, or any one or more of them, 

be, in the judgment of the organization committee, insufficient to 

provide the amount of capital required therefor, then and in that 

event the said organization committee shall allot to the united 

States such an amount of said stock as said committee shall determine. Said United States stock shall be paid for at par out of any 

money in the Treasury not otherwise appropriated, and shall be 

held by the Secretary of the Treasury and disposed of for the benefit of the United States in such manner, at such times, and at 

such price, not less than par, as the Secretary of the Treasury shall 

determine. (Omitted from U.S. Code) 

[11. Voting rights] 

Stock not held by member banks shall not be entitled to voting 

power. (12 U.S.C. 285) 

[12. Transfer of stock] 

The Board of Governors of the Federal Reserve System is 

hereby empowered to adopt and promulgate rules and regulations 

governing the transfers of said stock. (12 U.S.C. 286) 

[13. Minimum capital; status of reserve cities] 

No Federal reserve bank shall commence business with a subscribed capital less than $4,000,000. The organization of reserve 

districts and Federal reserve cities shall not be construed as changing the present status of reserve cities, except in so far as this Act 

changes the amount of reserves that may be carried with approved 

reserve agents located therein. The organization committee shall 

have power to appoint such assistants and incur such expenses in 

carrying out the provisions of this Act as it shall deem necessary, 

and such expenses shall be payable by the Treasurer of the united 

States upon voucher approved by the Secretary of the Treasury, 

and the sum of $100,000, or so much thereof as may be necessary, 

is hereby appropriated, out of any moneys in the Treasury not otherwise appropriated, for the payment of such expenses. (Partially 

incorporated in 12 U.S.C. 224 and 281) 
911 FEDERAL RESERVE ACT Sec. 2 

GENERAL POLICY: CONGRESSIONAL REVIEW 

SEC. 2A. The Board of Governors of the Federal Reserve System and the Federal open Market Committee shall maintain long 

run growth of the monetary and credit aggregates commensurate 

with the economy's long run potential to increase production, so as 

to promote effectively the goals of maximum employment, stable 

prices, and moderate long-term interest rates. (12 U.S.C. 225a) 

SEC. 2B. APPEARANCES BEFOR E AN D REPORTS TO TH E CONGRESS. 

(a) APPEARANCES BEFORE THE CONGRESS.— 

(1) IN GENERAL.—The Chairman of the Board shall appear 

before the Congress at semi-annual hearings, as specified in 

paragraph (2), regarding— 

(A) the efforts, activities, objectives and plans of the 

Board and the Federal open Market Committee with respect to the conduct of monetary policy; and 

(B) economic developments and prospects for the future described in the report required in subsection (b). 

(2) SCHEDULE.—The Chairman of the Board shall appear— 

(A) before the Committee on Banking and Financial 

Services of the House of Representatives on or about February 20 of even numbered calendar years and on or about 

July 20 of odd numbered calendar years; 

(B) before the Committee on Banking, Housing, and 

urban Affairs of the senate on or about July 20 of even 

numbered calendar years and on or about February 20 of 

odd numbered calendar years; and 

(C) before either Committee referred to in subparagraph (A) or (B), upon request, following the scheduled 

appearance of the Chairman before the other Committee 

under subparagraph (A) or (B). 

(b) CONGRESSIONAL REPORT.—Th e Board shall, concurrent with 

each semi-annual hearing required by this section, submit a written report to the Committee on Banking, Housing, and Urban Affairs of the senate and the Committee on Banking and Financial 

Services of the House of Representatives, containing a discussion of 

the conduct of monetary policy and economic developments and 

prospects for the future, taking into account past and prospective 

developments in employment, unemployment, production, investment, real income, productivity, exchange rates, international trade 

and payments, and prices. (12 U.S.C. 225b) 

BRANCH OFFICES. 

[1. Establishment of branches of reserve banks] 

SEC. 3. The Board of Governors of the Federal Reserve System 

may permit or require any Federal reserve bank to establish 

branch banks within the Federal reserve district in which it is 

located or within the district of any Federal reserve bank which 

may have been suspended. such branches, subject to such rules 

and regulations as the Board of Governors of the Federal Reserve 

system may prescribe, shall be operated under the supervision of 

a board of directors to consist of not more than seven nor less than 

three directors, of whom a majority of one shall be appointed by the 
Sec. 2 FEDERAL RESERVE ACT 9 12 

Federal reserve bank of the district, and the remaining directors by 

the Board of Governors of the Federal Reserve System. Directors 

of branch banks shall hold office during the pleasure of the Board 

of Governors of the Federal Reserve System. (12 U.S.C. 521) 

[2. Discontinuance of branches] 

The Board of Governors of the Federal Reserve System may at 

any time require any Federal Reserve Bank to discontinue any 

branch of such Federal Reserve Bank established under this section. The Federal Reserve Bank shall thereupon proceed to wind up 

the business of such branch bank, subject to such rules and regulations as the Board of Governors of the Federal Reserve System may 

prescribe. (12 U.S.C. 521) 

[3. Erection of branch buildings] 

No Federal Reserve Bank shall have authority hereafter to 

enter into any contract or contracts for the erection of any branch 

bank building of any kind or character or to authorize the erection 

of any such building, except with the approval of the Board of Governors of the Federal Reserve System. (12 U.S.C. 521) 

FEDERAL RESERVE BANKS. 

[1. Organization of reserve banks] 

SEC. 4. When the organization committee shall have established Federal reserve districts as provided in section two of this 

Act, a certificate shall be filed with the Comptroller of the Currency showing the geographical limits of such districts and the Federal reserve city designated in each of such districts. The Comptroller of the Currency shall thereupon cause to be forwarded to 

each national bank located in each district, and to such other 

banks declared to be eligible by the organization committee which 

may apply therefor, an application blank in form to be approved by 

the organization committee, which blank shall contain a resolution 

to be adopted by the board of directors of each bank executing such 

application, authorizing a subscription to the capital stock of the 

Federal reserve bank organizing in that district in accordance with 

the provisions of this Act. (Omitted from U.S. Code) 

[2. Organization certificate] 

When the minimum amount of capital stock prescribed by this 

Act for the organization of any Federal reserve bank shall have 

been subscribed and allotted, the organization committee shall designate any five banks of those whose applications have been received, to execute a certificate of organization, and thereupon the 

banks so designated shall, under their seals, make an organization 

certificate which shall specifically state the name of such Federal 

reserve bank, the territorial extent of the district over which the 

operations of such Federal reserve bank are to be carried on, the 

city and State in which said bank is to be located, the amount of 

capital stock and the number of shares into which the same is divided, the name and place of doing business of each bank executing 

such certificate, and of all banks which have subscribed to the capital stock of such Federal reserve bank and the number of shares 

subscribed by each, and the fact that the certificate is made to en-
913 FEDERAL RESERVE ACT Sec. 2 

able those banks executing same, and all banks which have subscribed or may thereafter subscribe to the capital stock of such 

Federal reserve bank, to avail themselves of the advantages of this 

Act. (Omitted from U.S. Code) 

[3. Acknowledgment and filing] 

The said organization certificate shall be acknowledged before 

a judge of some court of record or notary public; and shall be, together with the acknowledgment thereof, authenticated by the seal 

of such court, or notary, transmitted to the Comptroller of the Currency, who shall file, record and carefully preserve the same in his 

office. (Omitted from U.S. Code) 

[4. General corporate powers] 

Upon the filing of such certificate with the Comptroller of the 

Currency as aforesaid, the said Federal reserve bank shall become 

a body corporate and as such, and in the name designated in such 

organization certificate, shall have power— 

First. To adopt and use a corporate seal. 

Second. To have succession after the approval of this Act until 

dissolved by Act of Congress or until forfeiture of franchise for violation of law. 

Third. To make contracts. 

Fourth. To sue and be sued, complain and defend, in any court 

of law or equity. 

Fifth. To appoint by its board of directors a president, vice 

presidents, and such officers and employees as are not otherwise 

provided for in this Act, to define their duties, require bonds for 

them and fix the penalty thereof, and to dismiss at pleasure such 

officers or employees. The president shall be the chief executive officer of the bank and shall be appointed by the board of directors, 

with the approval of the Board of Governors of the Federal Reserve 

System, for a term of five years; and all other executive officers and 

all employees of the bank shall be directly responsible to him. The 

first vice president of the bank shall be appointed in the same 

manner and for the same term as the president, and shall, in the 

absence or disability of the president or during a vacancy in the office of president, serve as chief executive officer of the bank. Whenever a vacancy shall occur in the office of the president or the first 

vice president, it shall be filled in the manner provided for original 

appointments; and the person so appointed shall hold office until 

the expiration of the term of his predecessor. 

Sixth. To prescribe by its board of directors, by-laws not inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may 

be exercised and enjoyed. 

Seventh. To exercise by its board of directors, or duly authorized officers or agents, all powers specifically granted by the provisions of this Act and such incidental powers as shall be necessary 

to carry on the business of banking within the limitations prescribed by this Act. 

Eighth. Upon deposit with the Treasurer of the United States 

of any bonds of the United States in the manner provided by existing law relating to national banks, to receive from the Secretary of 
Sec. 2 FEDERAL RESERVE ACT 9 14 

the Treasury circulating notes in blank, registered and 

countersigned as provided by law, equal in amount to the par value 

of the bonds so deposited, such notes to be issued under the same 

conditions and provisions of law as relate to the issue of circulating 

notes of national banks secured by bonds of the United States bearing the circulating privilege, except that the issue of such notes 

shall not be limited to the capital stock of such Federal reserve 

bank. (12 U.S.C. 341) 

[5. Authority to commence business] 

But no Federal reserve bank shall transact any business except such as is incidental and necessarily preliminary to its organization until it has been authorized by the Comptroller of the Currency to commence business under the provisions of this Act. (12 

U.S.C. 341) 

[6. Board of directors] 

Every Federal reserve bank shall be conducted under the 

supervision and control of a board of directors. (12 U.S.C. 301) 

[7. Duties of directors generally] 

The board of directors shall perform the duties usually appertaining to the office of directors of banking associations and all 

such duties as are prescribed by law. (12 U.S.C. 301) 

[8. Administration of affairs; extension of credit] 

Said board of directors shall administer the affairs of said bank 

fairly and impartially and without discrimination in favor of or 

against any member bank or banks and may, subject to the provisions of law and the orders of the Board of Governors of the Federal Reserve System, extend to each member bank such discounts, 

advancements, and accommodations as may be safely and reasonably made with due regard for the claims and demands of other 

member banks, the maintenance of sound credit conditions, and the 

accommodation of commerce, industry, and agriculture. The Board 

of Governors of the Federal Reserve System may prescribe regulations further defining within the limitations of this Act the conditions under which discounts, advancements, and the accommodations may be extended to member banks. Each Federal reserve 

bank shall keep itself informed of the general character and 

amount of the loans and investments of its member banks with a 

view to ascertaining whether undue use is being made of bank 

credit for the speculative carrying of or trading in securities, real 

estate, or commodities, or for any other purpose inconsistent with 

the maintenance of sound credit conditions; and, in determining 

whether to grant or refuse advances, rediscounts or other credit 

accommodations, the Federal reserve bank shall give consideration 

to such information. The chairman of the Federal reserve bank 

shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the 

Board of Governors of the Federal Reserve System, any member 

bank is making such undue use of bank credit, the Board may, in 

its discretion, after reasonable notice and an opportunity for a 

hearing, suspend such bank from the use of the credit facilities of 
915 FEDERAL RESERVE ACT Sec. 2 

the Federal Reserve System and may terminate such suspension or 

may renew it from time to time. (12 U.S.C. 301) 

[9. Number and classes of directors] 

such board of directors shall be selected as hereinafter specified and shall consist of nine members, holding office for three 

years, and divided into three classes, designated as classes A, B, 

and C. (12 U.S.C. 302) 

[10. Class A directors] 

Class A shall consist of three members, without discrimination 

on the basis of race, creed, color, sex, or national origin, who shall 

be chosen by and be representative of the stock-holding banks. (12 

u.s.C. 302) 

[11. Class B directors] 

Class B shall consist of three members, who shall represent 

the public and shall be elected without discrimination on the basis 

of race, creed, color, sex, or national origin, and with due but not 

exclusive consideration to the interests of agriculture, commerce, 

industry, services, labor, and consumers. (12 U.S.C. 302) 

[12. Class C directors] 

Class C shall consist of three members who shall be designated 

by the Board of Governors of the Federal Reserve System. They 

shall be elected to represent the public, without discrimination on 

the basis of race, creed, color, sex, or national origin, and with due 

but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers. when the necessary subscriptions to the capital stock have been obtained for the 

organization of any Federal reserve bank, the Board of Governors 

of the Federal Reserve System shall appoint the class C directors 

and shall designate one of such directors as chairman of the board 

to be selected. Pending the designation of such chairman, the organization committee shall exercise the powers and duties appertaining to the office of chairman in the organization of such Federal 

reserve bank. (Partially incorporated in 12 U.S.C. 302) 

[13. Senator or Representative ineligible] 

No Senator or Representative in Congress shall be a member 

of the Board of Governors of the Federal Reserve System or an officer or a director of a Federal reserve bank. (12 U.S.C. 303) 

[14. Class B directors as employees of banks] 

No director of class B shall be an officer, director, or employee 

of any bank. (12 U.S.C. 303) 

[15. Class C directors as employees or stockholders of bank] 

No director of class C shall be an officer, director, employee, or 

stockholder of any bank. (12 U.S.C. 303). 

[16. Nomination and election of Class A and B directors] 

Directors of Class A and Class B shall be chosen in the following manner: 

The Board of Governors of the Federal Reserve System shall 

classify the member banks of the district into three general groups 
Sec. 2 FEDERAL RESERVE ACT 916 

or divisions, designating each group by number. Each group shall 

consist as nearly as may be of banks of similar capitalization. Each 

member bank shall be permitted to nominate to the chairman of 

the board of directors of the Federal reserve bank of the district 

one candidate for director of Class A and one candidate for director 

of Class B. The candidates so nominated shall be listed by the 

chairman, indicating by whom nominated, and a copy of said list 

shall, within fifteen days after its completion, be furnished by the 

chairman to each member bank. Each member bank by a resolution of the board or by an amendment to its by-laws shall authorize 

its president, cashier, or some other to cast the vote of the member 

bank in the elections of Class A and Class B directors: Provided, 

That whenever any member banks within the same Federal Reserve district are subsidiaries of the same bank holding company 

within the meaning of the Bank Holding Company Act of 1956, 

participation in any such nomination or election by such member 

banks, including such bank holding company if it is also a member 

bank, shall be confined to one of such banks, which may be designated for the purpose by such holding company. (12 U.S.C. 304) 

[17. Preferential ballot] 

Within fifteen days after receipt of the list of candidates the 

duly authorized officer of a member bank shall certify to the chairman his first, second, and other choices for director of Class A and 

Class B, respectively, upon a preferential ballot upon a form furnished by the Chairman of the Board of directors of the Federal reserve bank of the district. Each such officer shall make a cross 

opposite the name of the first second, and other choices for a director of Class A and for a director of Class B, but shall not vote more 

than one choice for any one candidate. No officer or director of a 

member bank shall be eligible to serve as a Class A director unless 

nominated and elected by banks which are members of the same 

group as the member bank of which he is an officer or director. (12 

U.S.C. 304) 

[18. Candidates serving more than one member bank] 

Any person who is an officer or director of more than one member bank shall not be eligible for nominations as a Class A director 

except by banks in the same group as the bank having the largest 

aggregate resources of any of those of which such person is an officer or director. (12 U.S.C. 304) 

[19. Counting the ballots] 

Any candidate having a majority of all votes cast in the column 

of first choice shall be declared elected. if no candidate have a majority of all the votes in the first column, then there shall be added 

together the votes cast by the electors for such candidates in the 

second column and the votes cast for the several candidates in the 

first column. The candidate then having a majority of the electors 

voting and the highest number of combined votes shall be declared 

elected. if no candidate have a majority of electors voting and the 

highest number of votes when the first and second choices shall 

have been added, then the votes cast in the third column for other 

choices shall be added together in like manner, and the candidate 
917 FEDERAL RESERVE ACT Sec. 2 

then having the highest number of votes shall be declared elected. 

An immediate report of election shall be declared. (12 U.S.C. 304) 

[20. Class C directors; chairman and Federal reserve agent; deputy chairman] 

Class C directors shall be appointed by the Board of Governors 

of the Federal Reserve System. They shall have been for at least 

two years residents of the district for which they are appointed, one 

of whom shall be designated by said board as chairman of the 

board of directors of the Federal reserve bank and as ''Federal reserve agent.'' He shall be a person of tested banking experience, 

and in addition to his duties as chairman of the board of directors 

of the Federal reserve bank he shall be required to maintain, under 

regulations to be established by the Board of Governors of the Federal Reserve System, a local office of said board on the premises 

of the Federal reserve bank. He shall make regular reports to the 

Board of Governors of the Federal Reserve System and shall act as 

its official representative for the performance of the functions conferred upon it by this Act. He shall receive an annual compensation 

to be fixed by the Board of Governors of the Federal Reserve System and paid monthly by the Federal reserve bank to which he is 

designated. One of the directors of class C shall be appointed by 

the Board of Governors of the Federal Reserve System as deputy 

chairman to exercise the powers of the chairman of the board when 

necessary. In case of the absence of the chairman and deputy chairman, the third class C director shall preside at meetings of the 

board. (12 U.S.C. 305) 

[21. Assistant Federal reserve agents] 

Subject to the approval of the Board of Governors of the Federal Reserve System, the Federal reserve agent shall appoint one 

or more assistants. Such assistants, who shall be persons of tested 

banking experience, shall assist the Federal reserve agent in the 

performance of his duties and shall also have power to act in his 

name and stead during his absence or disability. The Board of Governors of the Federal Reserve System shall require such bonds of 

the assistant Federal reserve agents as it may deem necessary for 

the protection of the United States. Assistants to the Federal reserve agent shall receive an annual compensation, to be fixed and 

paid in the same manner as that of the Federal reserve agent. (12 

U.S.C. 306) 

[22. Compensation and expenses of directors, officers, and employees] 

Directors of Federal reserve banks shall receive, in addition to 

any compensation otherwise provided, a reasonable allowance for 

necessary expenses in attending meetings of their respective 

boards, which amounts shall be paid by the respective Federal reserve banks. Any compensation that may be provided by boards of 

directors of Federal reserve banks for directors, officers or employees shall be subject to the approval of the Board of Governors of 

the Federal Reserve System. (12 U.S.C. 307) 

[23. Meetings of directors pending organization] 

The Reserve Bank Organization Committee may, in organizing 

Federal reserve banks, call such meetings of bank directors in the 
Sec. 2 FEDERAL RESERVE ACT 918 

several districts as may be necessary to carry out the purposes of 

this Act, and may exercise the functions herein conferred upon the 

chairman of the board of directors of each Federal reserve bank 

pending the complete organization of such bank. (Omitted from 

U.S. Code) 

[24. Terms of directors; vacancies] 

At the first meeting of the full board of directors of each Federal reserve bank, it shall be the duty of the directors of classes A, 

B and C, respectively, to designate one of the members of each 

class whose term of office shall expire in one year from the first 

of January nearest to date of such meeting, one whose term of office shall expire at the end of two years from said date, and one 

whose term of office shall expire at the end of three years from said 

date. Thereafter every director of a Federal reserve bank chosen as 

hereinbefore provided shall hold office for a term of three years. 

vancancies that may occur in the several classes of directors of 

Federal reserve banks may be filled in the manner provided for the 

original selection of such directors, such appointees to hold office 

for the unexpired terms of their predecessors. (12 U.S.C. 308) 

STOCK ISSUES; INCREASE AND DECREASE OF CAPITAL. 

[1. Amount of shares; increase and decrease of capital; surrender and cancellation of stock] 

SEC. 5. The capital stock of each Federal reserve bank shall be 

divided into shares of $100 each. The outstanding capital stock 

shall be increased from time to time as member banks increase 

their capital stock and surplus or as additional banks become members, and may be decreased as member banks reduce their capital 

stock or surplus or cease to be members. Shares of the capital stock 

of Federal reserve banks owned by member banks shall not be 

transferred or hypothecated. When a member bank increases its 

capital stock or surplus, it shall thereupon subscribe for an additional amount of capital stock of the Federal reserve bank of its 

district equal to six per centum of the said increase, one-half of 

said subscription to be paid in the manner hereinbefore provided 

for original subscription, and one-half subject to call of the Board 

of Governors of the Federal Reserve System. A bank applying for 

stock in a Federal reserve bank at any time after the organization 

thereof must subscribe for an amount of the capital stock of the 

Federal reserve bank equal to six per centum of the paid-up capital 

stock and surplus of said applicant bank, paying therefor its par 

value plus one-half of one per centum a month from the period of 

the last dividend. When a member bank reduces its capital stock 

or surplus it shall surrender a proportionate amount of its holdings 

in the capital stock of said Federal Reserve bank. Any member 

bank which holds capital stock of a Federal Reserve bank in excess 

of the amount required on the basis of 6 per centum of its paidup capital stock and surplus shall surrender such excess stock. 

when a member bank voluntarily liquidates it shall surrender all 

of its holdings of the capital stock of said Federal Reserve bank and 

be released from its stock subscription not previously called. In any 

such case the shares surrendered shall be canceled and the member bank shall receive in payment therefor, under regulations to be 
919 FEDERAL RESERVE ACT Sec. 2 

prescribed by the Board of Governors of the Federal system, a sum 

equal to its cash-paid subscriptions on the shares surrendered and 

one-half of 1 per centum a month from the period of the last dividend, not to exceed the book value thereof, less any liability of such 

member bank to the Federal Reserve bank. (12 U.S.C. 287) 

[INSOLVENCY OF MEMBER BANKS] 

[1. Insolvency of member banks] 

SEC. 6. If any member bank shall be declared insolvent and a 

receiver appointed therefor, the stock held by it in said Federal reserve bank shall be canceled, without impairment of its liability, 

and all cash-paid subscriptions on said stock, with one-half of 1 per 

centum per month from the period of last dividend, if earned, not 

to exceed the book value, thereof, shall be first applied to all debts 

of the insolvent member bank to the Federal reserve bank, and the 

balance, if any, shall be paid to the receiver of the insolvent bank. 

(12 U.S.C. 288) 

[2. National bank discontinuing banking operations] 

if any national bank which has not gone into liquidation as 

provided in section 5220 of the Revised Statutes (United States 

Code, title 12, section 181) and for which a receiver has not already 

been appointed for other lawful cause, shall discontinue its banking 

operations for a period of sixty days the Comptroller of the Currency may, if he deems it advisable, appoint a receiver for such 

bank. The stock held by the said national bank in the Federal reserve bank of its district shall thereupon be canceled and said national bank shall receive in payment therefor, under regulations to 

be prescribed by the Board of Governors of the Federal Reserve 

system, a sum equal to its cash-paid subscriptions on the shares 

canceled and one-half of 1 per centum a month from the period of 

the last dividend, if earned, not to exceed the book value thereof, 

less any liability of such national bank to the Federal reserve bank. 

(12 U.S.C. 288) 

DIVISION OF EARNINGS. 

[1. Dividends and surplus fund of reserve banks] 

SEC. 7. (a) DIVIDENDS AND SURPLUS FUNDS OF RESERVE 

BANKS.— 

(1) STOCKHOLDER DIVIDENDS.— 

(A) IN GENERAL.—After all necessary expenses of a 

Federal reserve bank have been paid or provided for, the 

stockholders of the bank shall be entitled to receive an annual dividend of 6 percent on paid-in capital stock. 

(B) DIVIDEN D CUMULATIVE.—The entitlement to dividends under subparagraph (A) shall be cumulative. 

(2) DEPOSIT OF NET EARNINGS I N SURPLUS FUND.—Tha t 

portion of net earnings of each Federal reserve bank which 

remains after dividend claims under paragraph (1)(A) have 

been fully met shall be deposited in the surplus fund of the 

bank. 
Sec. 2 FEDERAL RESERVE ACT 9 20 

[2. Disposition of surplus on dissolution or liquidation] 

(b) TRANSFER FOR FISCAL YEAR 2000.— 

(1) IN GENERAL.—The Federal reserve banks shall transfer 

from the surplus funds of such banks to the Board of Governors of the Federal Reserve System for transfer to the Secretary of the Treasury for deposit in the general fund of the 

Treasury, a total amount of $3,752,000,000 in fiscal year 2000. 

(2) ALLOCATED BY FED.—O f the total amount required to 

be paid by the Federal reserve banks under paragraph (1) for 

fiscal year 2000, the Board shall determine the amount each 

such bank shall pay in such fiscal year. 

(3) REPLENISHMENT OF SURPLUS FUN D PROHIBITED.—During fiscal year 2000, no Federal reserve bank may replenish 

such bank's surplus fund by the amount of any transfer by 

such bank under paragraph (1). 

(b) USE OF EARNINGS TRANSFERRED TO THE TREASURY.—Th e 

net earnings derived by the United States from Federal reserve 

banks shall, in the discretion of the Secretary, be used to supplement the gold reserve held against outstanding United States 

notes, or shall be applied to the reduction of the outstanding 

bonded indebtedness of the United States under regulations to be 

prescribed by the Secretary of the Treasury. Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, and the par value of the stock, shall be paid to 

and become the property of the United States and shall be similarly applied. (12 U.S.C. 290) 

[3. Exemption from taxation] 

(c) EXEMPTION FRO M TAXATION.—Federa l reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate. (12 U.S.C. 531)1 

[CONVERSION OF STATE BANKS INTO NATIONAL BANKS] 

[Section 8 amended section 5154 of the Revised Statutes] 

STATE BANKS AS MEMBERS. 

[1. Applications for membership by State banks] 

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 

*See 31 U.S.C. 3124 for the effect of such section on this paragraph. 
921 FEDERAL RESERVE ACT Sec. 2 

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. (12 U.S.C. 321) 

[2. Continued membership in Federal Reserve System] 

Upon the conversion of a national bank into a State bank, or 

the merger or consolidation of a national bank with a State bank 

which is not a member of the Federal Reserve System, the resulting or continuing State bank may be admitted to membership in 

the Federal Reserve System by the Board of Governors of the Federal Reserve System in accordance with the provisions of this section, but, otherwise, the Federal Reserve bank stock owned by the 

national bank shall be canceled and paid for as provided in section 

5 of this Act. Upon the merger or consolidation of a national bank 

with a State member bank under a State charter, the membership 

of the State bank in the Federal Reserve System shall continue. (12 

U.S.C. 321) 

[3. Branches of State member banks] 

Any such State bank which, at the date of the approval of this 

Act, has established and is operating a branch or branches in conformity with the State law, may retain and operate the same while 

remaining or upon becoming a stockholder of such Federal reserve 

bank; but no such State bank may retain or acquire stock in a Federal reserve bank except upon relinquishment of any branch or 

branches established after the date of the approval of this Act beyond the limits of the city, town, or village in which the parent 

bank is situated. Provided, however, That nothing herein contained 

shall prevent any State member bank from establishing and operating branches in the United States or any dependency or insular 

possession thereof or in any foreign country, on the same terms 

and conditions and subject to the same limitations and restrictions 

as are applicable to the establishment of branches by national 

banks except that the approval of the Board of Governors of the 

Federal Reserve System, instead of the Comptroller of the Currency, shall be obtained before any State member bank may hereafter establish any branch and before any State bank hereafter admitted to membership may retain any branch established after 

February 25, 1927, beyond the limits of the city, town, or village 

in which the parent bank is situated. The approval of the Board 

shall likewise be obtained before any State member bank may 

establish any new branch within the limits of any such city, town, 

or village (except within the District of Columbia.) (12 U.S.C. 321) 

[4. Financial condition, management and powers] 

in acting upon such applications the Board of Governors of the 

Federal Reserve System shall consider the financial condition of 

the applying bank, the general character of its management, and 

whether or not the corporate powers exercised are consistent with 

the purposes of this Act. (12 U.S.C. 322) 
Sec. 2 FEDERAL RESERVE ACT 922 

[5. Payment of subscription] 

Whenever the Board of Governors of the Federal Reserve System shall permit the applying bank to become a stockholder in the 

Federal reserve bank of the district its stock subscription shall be 

payable on call of the Board of Governors of the Federal Reserve 

System, and stock issued to it shall be held subject to the provisions of this Act. (12 U.S.C. 323) 

[6. Provisions of law to be complied with; reports of condition] 

All banks admitted to membership under authority of this section shall be required to comply with the reserve and capital 

requirements of this Act, to conform to those provisions of law imposed on national banks which prohibit such banks from lending on 

or purchasing their own stock and which relate to the withdrawal 

or impairment of their capital stock, and to conform to the provisions of sections 5199(b) and 5204 of the Revised Statutes with respect to the payment of dividends; except that any reference in any 

such provision to the Comptroller of the Currency shall be deemed 

for the purposes of this sentence to be a reference to the Board of 

Governors of the Federal Reserve System. Such banks and the officers, agents, and employees thereof shall also be subject to the provisions of and to the penalties prescribed by sections 334, 656, and 

1005 of Title 18, United States Code, and shall be required to make 

reports of condition and of the payment of dividends to the Federal 

Reserve bank of which they become a member. Not less than three 

of such reports shall be made annually on call of the Federal Reserve bank on dates to be fixed by the Board of Governors of the 

Federal Reserve System. Any bank which (A) maintains procedures 

reasonably adapted to avoid any inadvertent error and, unintentionally and as a result of such an error, fails to make or publish 

any report required under this paragraph, within the period of time 

specified by the Board, or submits or publishes any false or misleading report or information, or (B) inadvertently transmits or 

publishes any report which is minimally late, shall be subject to a 

penalty of not more than $2,000 for each day during which such 

failure continues or such false or misleading information is not corrected. The bank shall have the burden of proving that an error 

was inadvertent and that a report was inadvertently transmitted 

or published late. Any bank which fails to make or publish such 

reports within the period of time specified by the Board, or submits 

or publishes any false or misleading report or information, in a 

manner not described in the 2nd preceding sentence shall be subject to a penalty of not more than $20,000 for each day during 

which such failure continues or such false or misleading information is not corrected. Notwithstanding the preceding sentence, if 

any bank knowingly or with reckless disregard for the accuracy of 

any information or report described in such sentence submits or 

publishes any false or misleading report or information, the Board 

may assess a penalty of not more than $1,000,000 or 1 percent of 

total assets of such bank, whichever is less, per day for each day 

during which such failure continues or such false or misleading 

information is not corrected. Any penalty imposed under any of the 

4 preceding sentences shall be assessed and collected by the Board 

in the manner provided in subparagraphs (E), (F), (G), and (I) of 
923 FEDERAL RESERVE ACT Sec. 2 

section 8(i)(2) of the Federal Deposit Insurance Act (for penalties 

imposed under such section) and any such assessment (including 

the determination of the amount of the penalty) shall be subject to 

the provisions of such section. Any bank against which any penalty 

is assessed under this subsection shall be afforded an agency hearing if such bank submits a request for such hearing within 20 days 

after the issuance of the notice of assessment. section 8(h) of the 

Federal Deposit Insurance Act shall apply to any proceeding under 

this paragraph. Such reports of condition shall be in such form and 

shall contain such information as the Board of Governors of the 

Federal Reserve System may require. (12 U.S.C. 324) 

[7. Examinations] 

As a condition of membership such banks shall likewise be 

subject to examinations made by direction of the Board of Governors of the Federal Reserve System or of the Federal reserve 

bank by examiners selected or approved by the Board of Governors 

of the Federal Reserve System. (12 U.S.C. 325) 

[8. Acceptance of State examinations; expenses; reports of examinations] 

Whenever the directors of the Federal reserve bank shall approve the examinations made by the state authorities, such examinations and the reports thereof may be accepted in lieu of examinations made by examiners selected or approved by the Board of Governors of the Federal Reserve System: Provided, however, That 

when it deems it necessary the board may order special examinations by examiners of its own selection and shall in all cases approve the form of the report. The expenses of all examinations, 

other than those made by state authorities, may, in the discretion 

of the Board of Governors of the Federal Reserve System, be assessed against the banks examined and, when so assessed, shall be 

paid by the banks examined. The Board of Governors of the Federal Reserve System, at its discretion, may furnish any report of 

examination or other confidential supervisory information concerning any state member bank or other entity examined under 

any other authority of the Board, to any Federal or state agency 

or authority with supervisory or regulatory authority over the 

examined entity, to any officer, director, or receiver of the examined entity, and to any other person that the Board determines to 

be proper. (12 U.S.C. 326) 

[9. Forfeiture of membership] 

if at any time it shall appear to the Board of Governors of the 

Federal Reserve System that a member bank has failed to comply 

with the provisions of this section or the regulations of the Board 

of Governors of the Federal Reserve System made pursuant 

thereto, or has ceased to exercise banking functions without a receiver or liquidating agent having been appointed therefor, it shall 

be within the power of the board after hearing to require such bank 

to surrender its stock in the Federal reserve bank and to forfeit all 

rights and privileges of membership. The Board of Governors of the 

Federal Reserve System may restore membership upon due proof 

of compliance with the conditions imposed by this section. (12 

u.s.C. 327) 
Sec. 2 FEDERAL RESERVE ACT 924 

[10. Voluntary withdrawal from membership] 

Any State bank or trust company desiring to withdraw from 

membership in a Federal reserve bank may do so, after six months' 

written notice shall have been filed with the Board of Governors of 

the Federal Reserve System, upon the surrender and cancellation 

of all of its holdings of capital stock in the Federal reserve bank: 

Provided, That the Board of Governors of the Federal Reserve System, in its discretion and subject to such conditions as it may 

prescribe, may waive such six months' notice in individual cases 

and may permit any such State bank or trust company to withdraw 

from membership in a Federal reserve bank prior to the expiration 

of six months from the date of the written notice of its intention 

to withdraw: Provided, however, That no Federal reserve bank 

shall, except under express authority of the Board of Governors of 

the Federal Reserve System, cancel within the same calendar year 

more than twenty-five per centum of its capital stock for the purpose of effecting voluntary withdrawals during that year. All such 

applications shall be dealt with in the order in which they are filed 

with the board. Whenever a member bank shall surrender its stock 

holdings in a Federal reserve bank, or shall be ordered to do so by 

the Board of Governors of the Federal Reserve System, under authority of law, all of its rights and privileges as a member bank 

shall thereupon cease and determine, and after due provision has 

been made for any indebtedness due or to become due to the Federal reserve bank it shall be entitled to a refund of its cash paid 

subscription with interest at the rate of one-half of one per centum 

per month from date of last dividend, if earned, the amount refunded in no event to exceed the book value of the stock at that 

time, and shall likewise be entitled to repayment of deposits and 

of any other balance due from the Federal reserve bank. (12 U.S.C. 

328) 

[11. Capital required for membership] 

No applying bank shall be admitted to membership unless it 

possesses capital stock and surplus which, in the judgment of the 

Board of Governors of the Federal Reserve System, are adequate 

in relation to the character and condition of its assets and to its 

existing and prospective deposit liabilities and other corporate 

responsibilities: Provided, That no bank engaged in the business of 

receiving deposits other than trust funds, which does not possess 

capital stock and surplus in an amount equal to that which would 

be required for the establishment of a national banking association 

in the place in which it is located, shall be admitted to membership 

unless it is, or has been, approved for deposit insurance under the 

Federal Deposit Insurance Act. The capital stock of a State member 

bank shall not be reduced except with the prior consent of the 

Board. (12 U.S.C. 329) 

[12. Waiver of membership requirements as to insured banks] 

in order to facilitate the admission to membership in the Federal Reserve System of any State bank which is required under 

subsection (y) of section 12B

 1 of this Act to become a member of 

*The provision of section 12B(y) requiring membership in Federal Reserve System was repealed by the Act of June 20, 1939 (53 Stat. 842), and all of section 12B was withdrawn and 
925 FEDERAL RESERVE ACT Sec. 10B 

the Federal Reserve System in order to be an insured bank or continue to have any part of its deposits insured under such section 

12B, the Board of Governors of the Federal Reserve System may 

waive in whole or in part the requirements of this section relating 

to the admission of such bank to membership: Provided, That, if 

such bank is admitted with a capital less than that required for the 

organization of a national bank in the same place and its capital 

and surplus are not, in the judgment of the Board of Governors of 

the Federal Reserve System, adequate in relation to its liabilities 

to depositors and other creditors, the said Board may, in its discretion, require such bank to increase its capital and surplus to such 

amount as the Board may deem necessary within such period prescribed by the Board as in its judgment shall be reasonable in view 

of all the circumstances: Provided, however, That no such bank 

shall be required to increase its capital to an amount in excess of 

that required for the organization of a national bank in the same 

place. (Omitted from U.S. Code.) 

[13. Laws to which subject] 

Banks becoming members of the Federal Reserve System 

under authority of this section shall be subject to the provisions of 

this section and to those of this Act which relate specifically to 

member banks, but shall not be subject to examination under the 

provisions of the first two paragraphs of section fifty-two hundred 

and forty of the Revised Statutes as amended by section twentyone of this Act. Subject to the provisions of this Act and to the regulations of the board made pursuant thereto, any bank becoming 

a member of the Federal Reserve System shall retain its full charter and statutory rights as a State bank or trust company, and may 

continue to exercise all corporate powers granted it by the State in 

which it was created, and shall be entitled to all privileges of member banks, except that the Board of Governors of the Federal Reserve System may limit the activities of State member banks and 

subsidiaries of State member banks in a manner consistent with 

section 24 of the Federal Deposit Insurance Act. No Federal reserve 

bank shall be permitted to discount for any State bank or trust 

company notes, drafts, or bills of exchange of any one borrower who 

is liable for borrowed money to such State bank or trust company 

in an amount greater than that which could be borrowed lawfully 

from such State bank or trust company were it a national banking 

association. The Federal reserve bank, as a condition of the discount of notes, drafts, and bills of exchange for such State bank or 

trust company, shall require a certificate or guaranty to the effect 

that the borrower is not liable to such bank in excess of the amount 

provided by this section, and will not be permitted to become liable 

in excess of this amount while such notes, drafts, or bills of exchange are under discount with the Federal reserve bank. (12 

U.S.C. 330) 

[14. False certification of checks] 

it shall be unlawful for any officer, clerk, or agent of any bank 

admitted to membership under authority of this section to certify 

enacted as a separate Act, the Federal Deposit Insurance Act, by the Act of Sept. 21, 1950 (64 

Stat. 873). 
Sec. 10A FEDERAL RESERVE ACT 926 

any check drawn upon such bank unless the person or company 

drawing the check has on deposit therewith at the time such check 

is certified an amount of money equal to the amount specified in 

such check. Any check so certified by duly authorized officers shall 

be a good and valid obligation against such bank, but the act of any 

such officer, clerk, or agent in violation of this section may subject 

such bank to a forfeiture of its membership in the Federal Reserve 

System upon hearing by the Board of Governors of the Federal Reserve System. (12 U.S.C. 331) 

[15. Government depositaries and financial agents] 

All banks or trust companies incorporated by special law or 

organized under the general laws of any State, which are members 

of the Federal reserve system, when designated for that purpose by 

the Secretary of the Treasury, shall be depositaries of public 

money, under such regulations as may be prescribed by the Secretary; and they may also be employed as financial agents of the 

Government; and they shall perform all such reasonable duties, as 

depositaries of public money and financial agents of the Government, as may be required of them. The Secretary of the Treasury 

shall require of the banks and trust companies thus designated satisfactory security, by the deposit of United States bonds or otherwise, for the safe keeping and prompt payment of the public money 

deposited with them and for the faithful performance of their duties as financial agents of the Government. (12 U.S.C. 332) 

[16. Admission to membership of mutual savings banks] 

Any mutual savings bank having no capital stock (including 

any other banking institution the capital of which consists of 

weekly or other time deposits which are segregated from all other 

deposits and are regarded as capital stock for the purposes of taxation and the declaration of dividends), but having surplus and undivided profits not less than the amount of capital required for the 

organization of a national bank in the same place, may apply for 

and be admitted to membership in the Federal Reserve System in 

the same manner and subject to the same provisions of law as 

State banks and trust companies, except that any such savings 

banks shall subscribe for capital stock of the Federal reserve bank 

in an amount equal to six-tenths of 1 per centum of its total deposit 

liabilities as shown by the most recent report of examination of 

such savings bank preceding its admission to membership. Thereafter such subscription shall be adjusted semiannually on the same 

percentage basis in accordance with rules and regulations prescribed by the Board of Governors of the Federal Reserve System. 

if any such mutual savings bank applying for membership is not 

permitted by the laws under which it was organized to purchase 

stock in a Federal reserve bank, it shall, upon admission to the system, deposit with the Federal reserve bank an amount equal to the 

amount which it would have been required to pay in on account of 

a subscription to capital stock. Thereafter such deposit shall be adjusted semiannually in the same manner as subscriptions for stock. 

Such deposits shall be subject to the same conditions with respect 

to repayment as amounts paid upon subscriptions to capital stock 

by other member banks and the Federal reserve bank shall pay in-
927 FEDERAL RESERVE ACT Sec. 10B 

terest thereon at the same rate as dividends are actually paid on 

outstanding shares of stock of such Federal reserve bank. if the 

laws under which any such savings bank was organized be 

amended so as to authorize mutual savings banks to subscribe for 

Federal reserve bank stock, such savings bank shall thereupon subscribe for the appropriate amount of stock in the Federal reserve 

bank, and the deposit hereinbefore provided for in lieu of payment 

upon capital stock shall be applied upon such subscription. if the 

laws under which any such savings bank was organized be not 

amended at the next session of the legislature following the admission of such savings bank to membership so as to authorize mutual 

savings banks to purchase Federal reserve bank stock, or if such 

laws be so amended and such bank fail within six months thereafter to purchase such stock, all of its rights and privileges as a 

member bank shall be forfeited and its membership in the Federal 

Reserve System shall be terminated in the manner prescribed elsewhere in this section with respect to state member banks and trust 

companies. Each such mutual savings bank shall comply with all 

the provisions of law applicable to state member banks and trust 

companies, with the regulations of the Board of Governors of the 

Federal Reserve System and with the conditions of membership 

prescribed for such savings bank at the time of admission to membership, except as otherwise hereinbefore provided with respect to 

capital stock. (12 U.S.C. 333) 

[17. Reports of affiliates] 

Each bank admitted to membership under this section shall 

obtain from each of its affiliates other than member banks and furnish to the Federal reserve bank of its district and to the Board 

of Governors of the Federal Reserve System not less than three reports during each year. such reports shall be in such form as the 

Board of Governors of the Federal Reserve System may prescribe, 

shall be verified by the oath or affirmation of the president or such 

other officer as may be designated by the board of directors of such 

affiliate to verify such reports, and shall disclose the information 

hereinafter provided for as of dates identical with those fixed by 

the Board of Governors of the Federal Reserve System for reports 

of the condition of the affiliated member bank. Each such report of 

an affiliate shall be transmitted as herein provided at the same 

time as the corresponding report of the affiliated member bank, except that the Board of Governors of the Federal Reserve System 

may, in its discretion, extend such time for good cause shown. Each 

such report shall contain such information as in the judgment of 

the Board of Governors of the Federal Reserve System shall be necessary to disclose fully the relations between such affiliate and 

such bank and to enable the Board to inform itself as to the effect 

of such relations upon the affairs of such bank. The reports of such 

affiliates shall be published by the bank under the same conditions 

as govern its own condition reports. (12 U.S.C. 334) 

[18. Additional reports of affiliates] 

Any such affiliated member bank may be required to obtain 

from any such affiliate such additional reports as in the opinion of 

its Federal reserve bank or the Board of Governors of the Federal 
Sec. 10A FEDERAL RESERVE ACT 928 

Reserve System may be necessary in order to obtain a full and 

complete knowledge of the condition of the affiliated member bank. 

Such additional reports shall be transmitted to the Federal reserve 

bank and the Board of Governors of the Federal Reserve System 

and shall be in such form as the Board of Governors of the Federal 

Reserve System may prescribe. (12 U.S.C. 334) 

[19. Failure to obtain reports of affiliates] 

Any such affiliated member bank which fails to obtain from 

any of its affiliates and furnish any report provided for by the two 

preceding paragraphs of this section shall be subject to a penalty 

of $100 for each day during which such failure continues, which, 

by direction of the Board of Governors of the Federal Reserve System, may be collected, by suit or otherwise, by the Federal reserve 

bank of the district in which such member bank is located. (12 

U.S.C. 334) 

[20. Dealings in investment securities and stock] 

State member banks shall be subject to the same limitations 

and conditions with respect to the purchasing, selling, underwriting, and holding of investment securities and stock as are applicable in the case of national banks under paragraph "Seventh'' 

of section 5136 of the Revised Statutes, as amended. This paragraph shall not apply to any interest held by a State member bank 

in accordance with section 5136A of the Revised Statutes of the 

United States and subject to the same conditions and limitations 

provided in such section. (12 U.S.C. 335) 

[21. Stock representing stock of other corporations] 

After the date of the enactment of the Banking Act of 1935, no 

certificate evidencing the stock of any State member bank shall 

bear any statement purporting to represent the stock of any other 

corporation, except a member bank or a corporation engaged on 

June 16, 1934 in holding the bank premises of such member bank, 

nor shall the ownership, sale, or transfer of any certificate representing the stock of any State member bank be conditioned in 

any manner whatsoever upon the ownership, sale, or transfer of a 

certificate representing the stock of any other corporation, except 

a member bank or a corporation engaged on June 16, 1934 in holding the bank premises of such member bank: Provided, That this 

section shall not operate to prevent the ownership, sale, or transfer 

of stock of any other corporation being conditioned upon the ownership, sale, or transfer of a certificate representing stock of a State 

member bank. (12 U.S.C. 336) 

[22. Examinations of affiliates] 

In connection with examinations of State member banks, 

examiners selected or approved by the Board of Governors of the 

Federal Reserve System shall make such examinations of the affairs of all affiliates of such banks as shall be necessary to disclose 

fully the relations between such banks and their affiliates and the 

effect of such relations upon the affairs of such banks. The expense 

of examination of affiliates of any State member bank may, in the 

discretion of the Board of Governors of the Federal Reserve System, be assessed against such bank and, when so assessed, shall 
929 FEDERAL RESERVE ACT Sec. 10B 

be paid by such bank. In the event of the refusal to give any information requested in the course of the examination of any such affiliate, or in the event of the refusal to permit such examination, or 

in the event of the refusal to pay any expense so assessed, the 

Board of Governors of the Federal Reserve System may, in its discretion, require any or all State member banks affiliated with such 

affiliate to surrender their stock in the Federal reserve bank and 

to forfeit all rights and privileges of membership in the Federal Reserve System, as provided in this section. 

[23. Investments to promote the public welfare] 

State1 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 affected 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. (12 U.S.C. 338) 

SECTION 9A. PARTICIPATION I N LOTTERIES PROHIBITED

 2 

[1. Prohibition against participation in lotteries] 

(a) A State member bank may not— 

(1) deal in lottery tickets; 

(2) deal in bets used as a means or substitute for participation in a lottery; 

(3) announce, advertise, or publicize the existence of any 

lottery;

 3 

(4) announce, advertise, or publicize the existence or identity of any participant or winner, as such, in a lottery. 

(b) A State member bank may not permit— 

(1) the use of any part of any of its banking offices by any 

person for any purpose forbidden to the bank under subsection 

(a), or 

(2) direct access by the public from any of its banking offices to any premises used by any person for any purpose forbidden to the bank under subsection (a). 

1

 indentation so in law. 

2

 Heading style, so in law. 

3

 So in original. Probably should end with "or". 
Sec. 10A FEDERAL RESERVE ACT 9 30 

(c) As used in this section— 

(1) The term ''deal in'' includes making, taking, buying, 

selling, redeeming, or collecting. 

(2) The term ''lottery'' includes any arrangement whereby 

three or more persons (the ''participants'') advance money or 

credit to another in exchange for the possibility or expectation 

that one or more but not all of the participants (the ''winners'') 

will receive by reason of their advances more than the amounts 

they have advanced, the identity of the winners being determined by any means which includes— 

(A) a random selection; 

(B) a game, race, or contest; or 

(C) any record or tabulation of the result of one or 

more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner. 

(3) The term ''lottery ticket'' includes any right, privilege, 

or possibility (and any ticket, receipt, record, or other evidence 

of any such right, privilege, or possibility) of becoming a winner in a lottery. 

(d) Nothing contained in this section prohibits a state member 

bank from accepting deposits or cashing or otherwise handling 

checks or other negotiable instruments, or performing other lawful 

banking services for a state operating a lottery, or for an officer or 

employee of that state who is charged with the administration of 

the lottery. 

(e) The Board of Governors of the Federal Reserve System 

shall issue such regulations as may be necessary to the strict 

enforcement of this section and the prevention of evasions thereof. 

(12 U.S.C. 339) 

SEC. 9B. RESOLUTION OF CLEARING BANKS. 

(a) CONSERVATORSHIP OR RECEIVERSHIP.— 

(1) APPOINTMENT.—The Board may appoint a conservator 

or receiver to take possession and control of any uninsured 

state member bank which operates, or operates as, a multilateral clearing organization pursuant to section 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991 

to the same extent and in the same manner as the Comptroller 

of the Currency may appoint a conservator or receiver for a national bank. 

(2) POWERS.—The conservator or receiver for an uninsured 

State member bank referred to in paragraph (1) shall exercise 

the same powers, functions, and duties, subject to the same 

limitations, as a conservator or receiver for a national bank. 

(b) BOARD AUTHORITY.—The Board shall have the same authority with respect to any conservator or receiver appointed under 

subsection (a), and the uninsured state member bank for which the 

conservator or receiver has been appointed, as the Comptroller of 

the Currency has with respect to a conservator or receiver for a national bank and the national bank for which the conservator or receiver has been appointed. 

(c) BANKRUPTCY PROCEEDINGS.—The Board (in the case of an 

uninsured state member bank which operates, or operates as, such 
931 FEDERAL RESERVE ACT Sec. 10B 

a multilateral clearing organization) may direct a conservator or 

receiver appointed for the bank to file a petition pursuant to title 

11, United States Code, in which case, title 11, United States Code, 

shall apply to the bank in lieu of otherwise applicable Federal or 

State insolvency law. (12 U.S.C. 339a) 

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 

[1. Appointment and qualification of members] 

Sec. 10. The Board of Governors of the Federal Reserve System 

(hereinafter referred to as the ''Board'') shall be composed of seven 

members, to be appointed by the President, by and with the advice 

and consent of the Senate, after the date of enactment of the Banking Act of 1935, for terms of fourteen years except as hereinafter 

provided, but each appointive member of the Federal Reserve 

Board in office on such date shall continue to serve as a member 

of the Board until February 1, 1936, and the Secretary of the 

Treasury and the Comptroller of the Currency shall continue to 

serve as members of the Board until February 1, 1936. In selecting 

the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall 

have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country. The members of the Board shall devote their 

entire time to the business of the Board and shall each receive and 

annual salary of $15,000, payable monthly, together with actual 

necessary traveling expenses. (12 U.S.C. 241) 

[2. Members ineligible to serve member banks; term of office; chairman and 

vice chairman] 

The members of the Board shall be ineligible during the time 

they are in office and for two years thereafter to hold any office, 

position, or employment in any member bank, except that this 

restriction shall not apply to a member who has served the full 

term for which he was appointed. Upon the expiration of the term 

of any appointive member of the Federal Reserve Board in office 

on the date of enactment of the Banking Act of 1935, the President 

shall fix the term of the successor to such member at not to exceed 

fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the 

term of not more than one member in any two-year period, and 

thereafter each member shall hold office for a term of fourteen 

years from the expiration of the term of his predecessor, unless 

sooner removed for cause by the President. Of the persons thus appointed, one shall be designated by the President, by and with the 

advice and consent of the Senate, to serve as Chairman of the 

Board for a term of four years, and one shall be designated by the 

President, by and with the consent of the Senate, to serve as Vice 

Chairman of the Board for a term of four years. The chairman of 

the Board, subject to its supervision, shall be its active executive 

officer. Each member of the Board shall within fifteen days after 

notice of appointment make and subscribe to the oath of office. 

Upon the expiration of their terms of office, members of the Board 

shall continue to serve until their successors are appointed and 

have qualified. Any person appointed as a member of the Board 
Sec. 10A FEDERAL RESERVE ACT 9 32 

after the date of enactment of the Banking Act of 1935 shall not 

be eligible for reappointment as such member after he shall have 

served a full term of fourteen years. (12 U.S.C. 242) 

[3. Assessments on Federal reserve banks] 

The Board of Governors of the Federal Reserve System shall 

have power to levy semiannually upon the Federal reserve banks, 

in proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses and the salaries of its members and employees for the half year succeeding the levying of such 

assessment, together with any deficit carried forward from the preceding half year, and such assessments may include amounts sufficient to provide for the acquisition by the Board in its own name 

of such site or building in the District of Columbia as in its judgment alone shall be necessary for the purpose of providing suitable 

and adequate quarters for the performance of its functions. After 

September 1, 2000, the Board may also use such assessments to acquire, in its own name, a site or building (in addition to the facilities existing on such date) to provide for the performance of the 

functions of the Board. After approving such plans, estimates, and 

specifications as it shall have caused to be prepared, the Board 

may, notwithstanding any other provision of law, cause to be constructed on any site so acquired by it a building or buildings suitable and adequate in its judgment for its purposes and proceed to 

take all such steps as it may deem necessary or appropriate in connection with the construction, equipment, and furnishing of such 

building or buildings. The Board may maintain, enlarge, or remodel any building or buildings so acquired or constructed and 

shall have sole control of such building or buildings and space 

therein. (12 U.S.C. 243) 

[4. Principal offices; expenses; deposit of funds; members not to be officers 

or stockholders of banks] 

The principal offices of the Board shall be in the District of Columbia. At meetings of the Board the chairman shall preside, and, 

in his absence, the vice chairman shall preside. in the absence of 

the chairman and the vice chairman, the Board shall elect a member to act as chairman pro tempore. The Board shall determine and 

prescribe the manner in which its obligations shall be incurred and 

its disbursements and expenses allowed and paid, and may leave 

on deposit in the Federal Reserve banks the proceeds of assessments levied upon them to defray its estimated expenses and the 

salaries of its members and employees, whose employment, compensation, leave, and expenses shall be governed solely by the provisions of this Act, specific amendments thereof, and rules and regulations of the Board not inconsistent therewith; and funds derived 

from such assessments shall not be construed to be Government 

funds or appropriated moneys. No member of the Board of Governors of the Federal Reserve System shall be an officer or director 

of any bank, banking institution, trust company, or Federal Reserve bank or hold stock in any bank, banking institution, or trust 

company; and before entering upon his duties as a member of the 

Board of Governors of the Federal Reserve System he shall certify 

under oath that he has complied with this requirement, and such 
933 FEDERAL RESERVE ACT Sec. 10B 

certification shall be filed with the secretary of the Board. Whenever a vacancy shall occur, other than by expiration of term, among 

the six1 members of the Board of Governors of the Federal Reserve 

System appointed by the President as above provided, a successor 

shall be appointed by the President, by and with the advice and 

consent of the senate, to fill such vacancy, and when appointed he 

shall hold office for the unexpired term of his predecessor. (12 

u.s.C. 244) 

[5. Vacancies during recess of Senate] 

The President shall have power to fill all vacancies that may 

happen on the Board of Governors of the Federal Reserve System 

during the recess of the senate by granting commissions which 

shall expire with the next session of the Senate. (12 U.S.C. 245) 

[6. Reservation of powers of Secretary of Treasury] 

Nothing in this Act contained shall be construed as taking 

away any powers heretofore vested by law in the secretary of the 

Treasury which relate to the supervision, management, and control 

of the Treasury Department and bureaus under such department, 

and wherever any power vested by this Act in the Board of Governors of the Federal Reserve System or the Federal reserve agent 

appears to conflict with the powers of the secretary of the Treasury, such powers shall be exercised subject to the supervision and 

control of the Secretary. (12 U.S.C. 246) 

[7. Annual report] 

The Board of Governors of the Federal Reserve System shall 

annually make a full report of its operations to the speaker of the 

House of Representatives, who shall cause the same to be printed 

for the information of the Congress. The report required under this 

paragraph shall include the reports required under section 707 of 

the Equal Credit Opportunity Act, section 18(f)(7) of the Federal 

Trade Commission Act, section 114 of the Truth in Lending Act, 

and the tenth undesignated paragraph of this section. (12 U.S.C. 

247) 

[8. The 8th undesignated paragraph amended section 324 of 

the Revised Statutes] 

[9. Branch Federal Reserve bank buildings] 

No Federal Reserve bank may authorize the acquisition or construction of any branch building, or enter into any contract or other 

obligation for the acquisition or construction of any branch building, without the approval of the Board. (12 U.S.C. 522) 

[10. Record of open market and other policies] 

The Board of Governors of the Federal Reserve System shall 

keep a complete record of the action taken by the Board and by the 

Federal open Market Committee upon all questions of policy relating to open-market operations and shall record therein the votes 

taken in connection with the determination of open-market policies 

and the reasons underlying the action of the Board and the Committee in each instance. The Board shall keep a similar record with 

1

 So in original. Probably should be "seven". 
Sec. 10A FEDERAL RESERVE ACT 9 34 

respect to all questions of policy determined by the Board, and 

shall include in its annual report to the Congress a full account of 

the action so taken during the preceding year with respect to openmarket policies and operations and with respect to the policies 

determined by it and shall include in such report a copy of the 

records required to be kept under the provisions of this paragraph. 

(12 U.S.C. 247a) 

[EMERGENCY ADVANCES TO GROUPS OF MEMBER BANKS] 

[1. Authority of Reserve banks to make advances] 

SEC. 10A. Upon receiving the consent of not less than five 

members of the Board of Governors of the Federal Reserve System, 

any Federal Reserve bank may make advances, in such amount as 

the board of directors of such Federal Reserve bank may determine, to groups of five or more member banks within its district, 

a majority of them independently owned and controlled, upon their 

time or demand promissory notes, provided the bank or banks 

which receive the proceeds of such advances as herein provided 

have no adequate amounts of eligible and acceptable assets available to enable such bank or banks to obtain sufficient credit accommodations from the Federal Reserve bank through rediscounts or 

advances other than as provided in section 10(b). The liability of 

the individual banks in each group must be limited to such proportion of the total amount advanced to such group as the deposit liability of the respective banks bears to the aggregate deposit liability of all banks in such group, but such advances may be made to 

a lesser number of such member banks if the aggregate amount of 

their deposit liability constitutes at least 10 per centum of the entire deposit liability of the member banks within such district. 

Such banks shall be authorized to distribute the proceeds of such 

loans to such of their number and in such amount as they may 

agree upon, but before so doing they shall require such recipient 

banks to deposit with a suitable trustee, representing the entire 

group, their individual notes made in favor of the group protected 

by such collateral security as may be agreed upon. Any Federal Reserve bank making such advance shall charge interest or discount 

thereon at a rate not less than 1 per centum above its discount rate 

in effect at the time of making such advance. No such note upon 

which advances are made by a Federal Reserve bank under this 

section shall be eligible under section 16 of this Act as collateral 

security for Federal Reserve notes. (12 U.S.C. 347a) 

[2. Foreign obligations as security for advances] 

No obligations of any foreign government, individual, partnership, association, or corporation organized under the laws thereof 

shall be eligible as collateral security for advances under this section. (12 U.S.C. 347a) 

[3. Authority of member banks to obligate themselves] 

Member banks are authorized to obligate themselves in accordance with the provisions of this section. (12 U.S.C. 347a) 
935 FEDERAL RESERVE ACT Sec. 10B 

[ADVANCES TO INDIVIDUAL MEMBER BANKS] 

[1. Advances to individual member banks] 

SEC. 10B. (a) IN GENERAL.—Any Federal Reserve bank, under 

rules and regulations prescribed by the Board of Governors of the 

Federal Reserve System, may make advances to any member bank 

on its time or demand notes having maturities of not more than 

four months and which are secured to the satisfaction of such Federal Reserve bank. 

Notwithstanding the foregoing, any Federal Reserve bank, 

under rules and regulations prescribed by the Board of Governors 

of the Federal Reserve System, may make advances to any member 

bank on its time notes having such maturities as the Board may 

prescribe and which are secured by mortgage loans covering a oneto-four family residence. Such advances shall bear interest at a 

rate equal to the lowest discount rate in effect at such Federal Reserve bank on the date of such note. 

(b) LIMITATIONS ON ADVANCES.— 

(1) LIMITATIO N ON EXTENDED PERIODS.—Except as provided 

in paragraph (2), no advances to any undercapitalized depository institution by any Federal Reserve bank under this section may be outstanding for more than 60 days in any 120-day 

period. 

(2) VIABILITY EXCEPTION.— 

(A) I N GENERAL.—If— 

(i) the head of the appropriate Federal banking 

agency certifies in advance in writing to the Federal 

Reserve bank that any depository institution is viable; 

or 

(ii) the Board conducts an examination of any 

depository institution and the Chairman of the Board 

certifies in writing to the Federal Reserve bank that 

the institution is viable, 

the limitation contained in paragraph (1) shall not apply 

during the 60-day period beginning on the date such certification is received. 

(B) EXTENSIONS OF PERIOD.—Th e 60-day period may 

be extended for additional 60-day periods upon receipt by 

the Federal Reserve bank of additional written certifications under subparagraph (A) with respect to each such 

additional period. 

( C ) AUTHORITY TO ISSUE A CERTIFICATE OF VIABILITY 

MAY NOT BE DELEGATED.—The authority of the head of any 

agency to issue a written certification of viability under 

this paragraph may not be delegated to any other person. 

( D ) EXTENDED ADVANCES SUBJECT TO PARAGRAPH (3).— 

Notwithstanding paragraph (1), an undercapitalized 

depository institution which does not have a certificate of 

viability in effect under this paragraph may have advances 

outstanding for more than 60 days in any 120-day period 

if the Board elects to treat— 

(i) such institution as critically undercapitalized 

under paragraph (3); and 
Sec. 10A FEDERAL RESERVE ACT 936 

(ii) any such advance as an advance described in 

subparagraph (A)(i) of paragraph (3). 

(3) ADVANCES TO CRITICALLY UNDERCAPITALIZED DEPOSITORY INSTITUTIONS.— 

(A) LIABILITY FOR INCREASED LOSS.—Notwithstanding 

any other provision of this section, if— 

(i) in the case of any critically undercapitalized 

depository institution— 

(i) any advance under this section to such 

institution is outstanding without payment having 

been demanded as of the end of the 5-day period 

beginning on the date the institution becomes a 

critically undercapitalized depository institution; 

or 

(ii) any new advance is made to such institution under this section after the end of such period; and 

(ii) after the end of that 5-day period, any deposit 

insurance fund in 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, 

the Board shall, subject to the limitations in subparagraph 

(B), be liable to the Federal Deposit Insurance Corporation 

for the excess loss, without regard to the terms of the advance or any collateral pledged to secure the advance. 

(B) LIMITATION ON EXCESS LOSS.—The liability of the 

Board under subparagraph (A) shall not exceed the lesser 

of the following: 

(i) The amount of the loss the Board or any Federal Reserve bank would have incurred on the increases in the amount of advances made after the 5-

day period referred to in subparagraph (A) if those increased advances had been unsecured. 

(ii) The interest received on the increases in the 

amount of advances made after the 5-day period referred to in subparagraph (A). 

(C) FEDERAL RESERVE TO PAY OBLIGATION.—The Board 

shall pay the Federal Deposit Insurance Corporation the 

amount of any liability of the Board under subparagraph 

(A). 

(D) REPORT.—The Board shall report to the Congress 

on any excess loss liability it incurs under subparagraph 

(A), as limited by subparagraph (B)(i), and the reasons 

therefore, not later than 6 months after incurring the liability. 

(4) N o OBLIGATION TO MAKE ADVANCES.—A Federal Reserve bank shall have no obligation to make, increase, renew, 

or extend any advance or discount under this Act to any 

depository institution. 

(5) DEFINITIONS.— 

(A) APPROPRIATE FEDERAL BANKING AGENCY.—The 

term ''appropriate Federal banking agency'' has the same 
937 FEDERAL RESERVE ACT Sec. 10B 

meaning as in section 3 of the Federal Deposit Insurance 

Act. 

(B) CRITICALLY UNDERCAPITALIZED.—The term ''critically undercapitalized'' has the same meaning as in section 

38 of the Federal Deposit Insurance Act. 

(C) DEPOSITORY INSTITUTION.—The term ''depository 

institution'' has the same meaning as in section 3 of the 

Federal Deposit Insurance Act. 

( D ) UNDERCAPITALIZED DEPOSITORY INSTITUTION.—The 

term ''undercapitalized depository institution'' means any 

depository institution which— 

(i) is undercapitalized, as defined in section 38 of 

the Federal Deposit Insurance Act; or 

(ii) has a composite CAMEL rating of 5 under the 

Uniform Financial Institutions Rating System (or an 

equivalent rating by any such agency under a comparable rating system) as of the most recent examination of such institution. 

(E) VIABLE.— A depository institution is ''viable'' if the 

Board or the appropriate Federal banking agency determines, giving due regard to the economic conditions and 

circumstances in the market in which the institution operates, that the institution— 

(i) is not critically undercapitalized; 

(ii) is not expected to become critically undercapitalized; and 

(iii) is not expected to be placed in conservatorship 

or receivership. (12 U.S.C. 347b) 

[POWERS OF BOARD OF GOVERNORS OF THE FEDERAL RESERVE 

SYSTEM] 

SEC. 11. The Board of Governors of the Federal Reserve System shall be authorized and empowered: 

[Examinations and reports] 

(a)(1) To examine at its discretion the accounts, books and affairs of each Federal reserve bank and of each member bank and 

to require such statements and reports as it may deem necessary. 

The said board shall publish once each week a statement showing 

the condition of each Federal reserve bank and a consolidated 

statement for all Federal reserve banks. Such statements shall 

show in detail the assets and liabilities of the Federal reserve 

banks, single and combined, and shall furnish full information regarding the character of the money held as reserve and the 

amount, nature and maturities of the paper and other investments 

owned or held by Federal reserve banks. 

(2) To require any depository institution specified in this paragraph to make, at such intervals as the Board may prescribe, such 

reports of its liabilities and assets as the Board may determine to 

be necessary or desirable to enable the Board to discharge its 

responsibility to monitor and control monetary and credit aggregates. Such reports shall be made (A) directly to the Board in the 

case of member banks and in the case of other depository institutions whose reserve requirements under section 19 of this Act ex-
Sec. 10A FEDERAL RESERVE ACT 938 

ceed zero, and (B) for all other reports to the Board through the 

(i) Federal Deposit Insurance Corporation in the case of insured 

state nonmember banks, savings banks, and mutual savings 

banks, (ii) National Credit union Administration Board in the case 

of insured credit unions, (iii) the Director of the Office of Thrift 

supervision in the case of any savings association which is an insured depository institution (as defined in section 3 of the Federal 

Deposit Insurance Act) or which is a member as defined in section 

2 of the Federal Home Loan Bank Act, and (iv) such State officer 

or agency as the Board may designate in the case of any other type 

of bank, savings and loan association, or credit union. The Board 

shall endeavor to avoid the imposition of unnecessary burdens on 

reporting institutions and the duplication of other reporting 

requirements. Except as otherwise required by law, any data provided to any department, agency, or instrumentality of the united 

states pursuant to other reporting requirements shall be made 

available to the Board. The Board may classify depository institutions for the purposes of this paragraph and may impose different 

requirements on each such class. (12 U.S.C. 248) 

[Rediscounts by one Reserve bank for another] 

(b) To permit, or, on the affirmative vote of at least five members of the Board of Governors of the Federal Reserve System to 

require Federal reserve banks to rediscount the discounted paper 

of other Federal reserve banks at rates of interest to be fixed by 

the Board of Governors of the Federal Reserve System. (12 U.S.C. 

248) 

[Suspension of reserve requirements] 

(c) To suspend for a period not exceeding thirty days, and from 

time to time to renew such suspension for periods not exceeding fifteen days, any reserve requirements specified in this Act. (12 

u.s.C. 248) 

[Issue and retirement of Federal Reserve notes] 

(d) To supervise and regulate through the secretary of the 

Treasury the issue and retirement of Federal reserve notes, except 

for the cancellation and destruction, and accounting with respect to 

such cancellation and destruction, of notes unfit for circulation, and 

to prescribe rules and regulations under which such notes may be 

delivered by the secretary of the Treasury to the Federal reserve 

agents applying therefor. (12 U.S.C. 248) 

[Reclassification of reserve cities] 

(e) To add to the number of cities classified as Reserve cities 

under existing law in which national banking associations are subject to the Reserve requirements set forth in section twenty of this 

Act; or to reclassify existing Reserve cities or to terminate their 

designation as such. (12 U.S.C. 248) 

[Suspension or removal of officers and directors of Reserve banks] 

(f) To suspend or remove any officer or director of any Federal 

reserve bank, the cause of such removal to be forthwith communicated in writing by the Board of Governors of the Federal Re-
939 FEDERAL RESERVE ACT Sec. 10B 

serve System to the removed officer or director and to said bank. 

(12 U.S.C. 248) 

[Charging off losses of Reserve banks] 

(g) To require the writing off of doubtful or worthless assets 

upon the books and balance sheets of Federal reserve banks. (12 

U.S.C. 248) 

[Suspension, liquidation, or reorganization of Reserve banks] 

(h) To suspend, for the violation of any of the provisions of this 

Act, the operations of any Federal reserve bank, to take possession 

thereof, administer the same during the period of suspension, and, 

when deemed advisable, to liquidate or reorganize such bank. (12 

U.S.C. 248) 

[Rules and regulations] 

(i) To require bonds of Federal reserve agents, to make regulations for the safeguarding of all collateral, bonds, Federal reserve 

notes, money or property of any kind deposited in the hands of 

such agents, and said board shall perform the duties, functions, or 

services specified in this Act, and make all rules and regulations 

necessary to enable said board effectively to perform the same. (12 

U.S.C. 248) 

[Supervision over Reserve banks] 

(j) To exercise general supervision over said Federal reserve 

banks. (12 U.S.C. 248) 

[Delegation of functions] 

(k) To delegate, by published order or rule and subject to the 

Administrative Procedure Act, any of its functions, other than 

those relating to rulemaking or pertaining principally to monetary 

and credit policies, to one or more administrative law judges, members or employees of the Board, or Federal Reserve banks. The 

assignment of responsibility for the performance of any function 

that the Board determines to delegate shall be a function of the 

Chairman. The Board shall, upon the vote of one member, review 

action taken at a delegated level within such time and in such 

manner as the Board shall by rule prescribe. (12 U.S.C. 248) 

[Employees of Board of Governors of the Federal Reserve System] 

(l) To employ such attorneys, experts, assistants, clerks, or 

other employees as may be deemed necessary to conduct the business of the board. All salaries and fees shall be fixed in advance 

by said board and shall be paid in the same manner as the salaries 

of the members of said board. All such attorneys, experts, assistants, clerks, and other employees shall be appointed without regard to the provisions of the Act of January sixteenth, eighteen 

hundred and eighty-three (volume twenty-two, United States Statutes at Large, page four hundred and three), and amendments 

thereto, or any rule or regulation made in pursuance thereof: Provided, That nothing herein shall prevent the President from placing said employees in the classified service. (12 U.S.C. 248) 

[Loans by member banks on stock or bond collateral] 

(m) [Repealed] 
Sec. 10A FEDERAL RESERVE ACT 9 40 

(n) To examine, at the Board's discretion, any depository institution, and any affiliate of such depository institution, in connection with any advance to, any discount of any instrument for, or 

any request for any such advance or discount by, such depository 

institution under this Act. (12 U.S.C. 248) 

(o) AUTHORITY T O APPOINT CONSERVATOR OR RECEIVER.—Th e 

Board may appoint the Federal Deposit Insurance Corporation as 

conservator or receiver for a State member bank under section 

11(c)(9) of the Federal Deposit Insurance Act. (12 U.S.C. 248) 

(p) AUTHORITY.—Th e Board may act in its own name and 

through its own attorneys in enforcing any provision of this title, 

regulations promulgated hereunder, or any other law or regulation, 

or in any action, suit, or proceeding to which the Board is a party 

and which involves the Board's regulation or supervision of any 

bank, bank holding company (as defined in section 2 of the Bank 

Holding Company Act of 1956), or other entity, or the administration of its operations. (12 U.S.C. 248) 

PRICING OF SERVICES 

SEC. 11A. (a) Not later than the first day of the sixth month 

after the date of enactment of the Monetary Control Act of 1980, 

the Board shall publish for public comment a set of pricing principles in accordance with this section and a proposed schedule of 

fees based upon those principles for Federal Reserve bank services 

to depository institutions, and not later than the first day of the 

eighteenth month after the date of enactment of the Monetary Control Act of 1980, the Board shall begin to put into effect a schedule 

of fees for such services which is based on those principles. 

(b) The services which shall be covered by the schedule of fees 

under subsection (a) are— 

(1) currency and coin services; 

(2) check clearing and collection services; 

(3) wire transfer services; 

(4) automated clearinghouse services; 

(5) settlement services; 

(6) securities safekeeping services; 

(7) Federal Reserve float; and 

(8) any new services which the Federal Reserve System offers, including but not limited to payment services to effectuate 

the electronic transfer of funds. 

(c) The schedule of fees prescribed pursuant to this section 

shall be based on the following principles: 

(1) All Federal Reserve bank services covered by the fee 

schedule shall be priced explicitly. 

(2) All Federal Reserve bank services covered by the fee 

schedule shall be available to nonmember depository institutions and such services shall be priced at the same fee schedule applicable to member banks, except that nonmembers shall 

be subject to any other terms, including a requirement of balances sufficient for clearing purposes, that the Board may 

determine are applicable to member banks. 

(3) over the long run, fees shall be established on the 

basis of all direct and indirect costs actually incurred in pro-
941 FEDERAL RESERVE ACT Sec. 10B 

viding the Federal Reserve services priced, including interest 

on items credited prior to actual collection, overhead, and an 

allocation of imputed costs which takes into account the taxes 

that would have been paid and the return on capital that 

would have been provided had the services been furnished by 

a private business firm, except that the pricing principles shall 

give due regard to competitive factors and the provision of an 

adequate level of such services nationwide. 

(4) interest on items credited prior to collection shall be 

charged at the current rate applicable in the market for Federal funds. 

(d) The Board shall require reductions in the operating budgets 

of the Federal Reserve banks commensurate with any actual or 

projected decline in the volume of services to be provided by such 

banks. The full amount of any savings so realized shall be paid into 

the United States Treasury. 

(e) All depository institutions, as defined in section 19(b)(1) (12 

U.S.C. 461(b)(1)), may receive for deposit and as deposits any evidences of transaction accounts, as defined by section 19(b)(1) (12 

U.S.C. 461(b)(1)) from other depository institutions, as defined in 

section 19(b)(1) (12 U.S.C. 461(b)(1)) or from any office of any Federal Reserve bank without regard to any Federal or State law restricting the number or the physical location or locations of such 

depository institutions. (12 U.S.C. 248a) 

SEC. 11B. ANNUA L INDEPENDEN T AUDITS OF FEDERA L RESERVE 

BANKS AN D BOARD. 

The Board shall order an annual independent audit of the 

financial statements of each Federal reserve bank and the 

Board.(12 U.S.C. 248b) 

FEDERAL ADVISORY COUNCIL 

[1. Creation, members, and meetings] 

SEC. 12. There is hereby created a Federal Advisory Council, 

which shall consist of as many members as there are Federal reserve districts. Each Federal reserve bank by its board of directors 

shall annually select from its own Federal reserve district one 

member of said council, who shall receive such compensation and 

allowances as may be fixed by his board of directors subject to the 

approval of the Board of Governors of the Federal Reserve System. 

The meetings of said advisory council shall be held at washington, 

District of Columbia, at least four times each year, and oftener if 

called by the Board of Governors of the Federal Reserve System. 

The council may in addition to the meetings above provided for 

hold such other meetings in Washington, District of Columbia, or 

elsewhere, as it may deem necessary, may select its own officers 

and adopt its own methods of procedure, and a majority of its 

members shall constitute a quorum for the transaction of business. 

vacancies in the council shall be filled by the respective reserve 

banks, and members selected to fill vacancies, shall serve for the 

unexpired term. (12 U.S.C. 261) 
Sec. 10A FEDERAL RESERVE ACT 9 42 

[2. Powers] 

The Federal Advisory Council shall have power, by itself or 

through its officers, (1) to confer directly with the Board of Governors of the Federal Reserve System on general business conditions; (2) to make oral or written representations concerning matters within the jurisdiction of said board; (3) to call for information 

and to make recommendations in regard to discount rates, rediscount business, note issues, reserve conditions in the various districts, the purchase and sale of gold or securities by reserve banks, 

open-market operations by said banks, and the general affairs of 

the reserve banking system. (12 U.S.C. 262) 

[FEDERAL OPEN MARKET COMMITTEE] 

[Creation, members, and meetings] 

SEC. 12A. (a) There is hereby created a Federal Open Market 

Committee (hereinafter referred to as the "Committee"), which 

shall consist of the members of the Board of Governors of the Federal Reserve System and five representatives of the Federal Reserve banks to be selected as hereinafter provided. Such representatives shall be presidents or first vice presidents of Federal Reserve 

banks and, beginning with the election for the term commencing 

March 1, 1943, shall be elected annually as follows: One by the 

board of directors of the Federal Reserve Bank of New York, one 

by the boards of directors of the Federal Reserve Banks of Boston, 

Philadelphia, and Richmond, one by the boards of directors of the 

Federal Reserve Banks of Cleveland and Chicago, one by the 

boards of directors of the Federal Reserve Banks of Atlanta, Dallas, 

and St. Louis, and one by the boards of directors of the Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco. In 

such elections each board of directors shall have one vote; and the 

details of such elections may be governed by regulations prescribed 

by the committee, which may be amended from time to time. An 

alternate to serve in the absence of each such representative shall 

likewise be a president or first vice president of a Federal Reserve 

bank and shall be elected annually in the same manner. The meetings of said Committee shall be held at Washington, District of Columbia, at least four times each year upon the call of the chairman 

of the Board of Governors of the Federal Reserve System or at the 

request of any three members of the Committee. (12 U.S.C. 263) 

[Participation of Reserve banks; regulations of Committee] 

(b) No Federal Reserve bank shall engage or decline to engage 

in open-market operations under section 14 of this Act except in 

accordance with the direction of and regulations adopted by the 

Committee. The Committee shall consider, adopt, and transmit to 

the several Federal Reserve banks, regulations relating to the 

open-market transactions of such banks. (12 U.S.C. 263) 

[Governing principles] 

(c) The time, character, and volume of all purchases and sales 

of paper described in section 14 of this Act as eligible for open-market operations shall be governed with a view to accommodating 

commerce and business and with regard to their bearing upon the 

general credit situation of the country. (12 U.S.C. 263) 
943 FEDERAL RESERVE ACT Sec. 10B 

POWERS OF FEDERAL RESERVE BANKS. 

[1. Receipt of deposits and collections] 

SEC. 13. Any Federal reserve bank may receive from any of its 

member banks or other depository institutions, and from the 

united states, deposits of current funds in lawful money, nationalbank notes, Federal reserve notes, or checks, and drafts, payable 

upon presentation or other items, and also, for collection, maturing 

notes and bills; or, solely for purposes of exchange or of collection, 

may receive from other Federal reserve banks deposits of current 

funds in lawful money, national-bank notes, or checks upon other 

Federal reserve banks, and checks and drafts, payable upon presentation within its district or other items, and maturing notes and 

bills payable within its district; or, solely for the purposes of exchange or of collection, may receive from any nonmember bank or 

trust company or other depository institution deposits of current 

funds in lawful money, national-bank notes, Federal reserve notes, 

checks and drafts payable upon presentation or other items, or maturing notes and bills: Provided, Such nonmember bank or trust 

company or other depository institution maintains with the Federal 

reserve bank of its district a balance in such amount as the Board 

determines taking into account items in transit, services provided 

by the Federal Reserve bank, and other factors as the Board may 

deem appropriate: Provided further, That nothing in this or any 

other section of this Act shall be construed as prohibiting a member or nonmember bank or other depository institution from making reasonable charges, to be determined and regulated by the 

Board of Governors of the Federal Reserve System, but in no case 

to exceed 10 cents per $100 or fraction thereof, based on the total 

of checks and drafts presented at any one time, for collection or 

payment of checks and drafts and remission therefor by exchange 

or otherwise; but no such charges shall be made against the Federal reserve banks. 

(12 U.S.C. 342) 

[2. Discount of commercial, agricultural, and industrial paper] 

upon the indorsement of any of its member banks, which shall 

be deemed a waiver of demand, notice and protest by such bank 

as to its own indorsement exclusively, any Federal reserve bank 

may discount notes, drafts, and bills of exchange arising out of actual commercial transactions; that is, notes, drafts, and bills of exchange issued or drawn for agricultural, industrial, or commercial 

purposes, or the proceeds of which have been used, or are to be 

used, for such purposes, the Board of Governors of the Federal Reserve system to have the right to determine or define the character 

of the paper thus eligible for discount, within the meaning of this 

Act. Nothing in this Act contained shall be construed to prohibit 

such notes, drafts, and bills of exchange, secured by staple agricultural products, or other goods, wares, or merchandise from being 

eligible for such discount, and the notes, drafts, and bills of exchange of factors issued as such making advances exclusively to 

producers of staple agricultural products in their raw state shall be 

eligible for such discount; but such definition shall not include 

notes, drafts, or bills covering merely investments or issued or 
Sec. 10A FEDERAL RESERVE ACT 944 

drawn for the purpose of carrying or trading in stocks, bonds, or 

other investment securities, except bonds and notes of the Government of the United States. Notes, drafts, and bills admitted to discount under the terms of this paragraph must have a maturity at 

the time of discount of not more than 90 days, exclusive of grace. 

(12 U.S.C. 343) 

[3. Discounts for individuals, partnerships, and corporations] 

in unusual and exigent circumstances, the Board of Governors 

of the Federal Reserve System, by the affirmative vote of not less 

than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision 

(d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, 

drafts, and bills of exchange are indorsed or otherwise secured to 

the satisfaction of the Federal Reserve bank: Provided, That before 

discounting any such note, draft, or bill of exchange for an individual or a partnership or corporation the Federal reserve bank 

shall obtain evidence that such individual, partnership, or corporation is unable to secure adequate credit accommodations from other 

banking institutions. All such discounts for individuals, partnerships, or corporations shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe. (12 U.S.C. 343) 

[4. Discount or purchase of sight drafts] 

Upon the indorsement of any of its member banks, which shall 

be deemed a waiver of demand, notice, and protest by such bank 

as to its own indorsement exclusively, and subject to regulations 

and limitations to be prescribed by the Board of Governors of the 

Federal Reserve System, any Federal reserve bank may discount or 

purchase bills of exchange payable at sight or on demand which 

grow out of the domestic shipment or the exportation of nonperishable, readily marketable agricultural and other staples and are secured by bills of lading or other shipping documents conveying or 

securing title to such staples: Provided, That all such bills of exchange shall be forwarded promptly for collection, and demand for 

payment shall be made with reasonable promptness after the arrival of such staples at their destination: Provided further, That no 

such bill shall in any event be held by or for the account of a Federal reserve bank for a period in excess of ninety days. In discounting such bills Federal reserve banks may compute the interest 

to be deducted on the basis of the estimated life of each bill and 

adjust the discount after payment of such bills to conform to the 

actual life thereof. (12 U.S.C. 344) 

[5. Limitation on discount of paper of one borrower] 

The aggregate of notes, drafts, and bills upon which any person, copartnership, association, or corporation is liable as maker, 

acceptor, indorser, drawer, or guarantor, rediscounted for any 

member bank, shall at no time exceed the amount for which such 

person, copartnership, association, or corporation may lawfully become liable to a national banking association under the terms of 

section 5200 of the Revised Statutes, as amended: Provided, how-
945 FEDERAL RESERVE ACT Sec. 10B 

ever, That nothing in this paragraph shall be construed to change 

the character or class of paper now eligible for rediscount by Federal reserve banks. (12 U.S.C. 345) 

[6. Discount of acceptances] 

Any Federal reserve bank may discount acceptances of the 

kinds hereinafter described, which have a maturity at the time of 

discount of not more than 90 days' sight, exclusive of days of grace, 

and which are indorsed by at least one member bank: Provided, 

That such acceptances if drawn for an agricultural purpose and secured at the time of acceptance by warehouse receipts or other such 

documents conveying or securing title covering readily marketable 

staples may be discounted with a maturity at the time of discount 

of not more than six months' sight exclusive of days of grace. (12 

U.S.C. 346) 

[7. Acceptances by member banks] 

(7)(A) Any member bank and any Federal or State branch or 

agency of a foreign bank subject to reserve requirements under section 7 of the International Banking Act of 1978 (hereinafter in this 

paragraph referred to as ''institutions''), may accept drafts or bills 

of exchange drawn upon it having not more than six months' sight 

to run, exclusive of days of grace— 

(i) which grow out of transactions involving the importation or exportation of goods; 

(ii) which grow out of transactions involving the domestic 

shipment of goods; or 

(iii) which are secured at the time of acceptance by a warehouse receipt or other such document conveying or securing 

title covering readily marketable staples. 

(B) Except as provided in subparagraph (C), no institution 

shall accept such bills, or be obligated for a participation share in 

such bills, in an amount equal at any time in the aggregate to more 

than 150 per centum of its paid up and unimpaired capital stock 

and surplus or, in the case of a United States branch or agency of 

a foreign bank, its dollar equivalent as determined by the Board 

under subparagraph (H). 

(C) The Board, under such conditions as it may prescribe, may 

authorize, by regulation or order, any institution to accept such 

bills, or be obligated for a participation share in such bills, in an 

amount not exceeding at any time in the aggregate 200 per centum 

of its paid up and unimpaired capital stock and surplus or, in the 

case of a United States branch or agency of a foreign bank, its dollar equivalent as determined by the Board under subparagraph 

(H). 

(D) Notwithstanding subparagraphs (B) and (C), with respect 

to any institution, the aggregate acceptances, including obligations 

for a participation share in such acceptances, growing out of domestic transactions shall not exceed 50 per centum of the aggregate of all acceptances, including obligations for a participation 

share in such acceptances, authorized for such institution under 

this paragraph. 

(E) No institution shall accept bills, or be obligated for a participation share in such bills, whether in a foreign or domestic 
Sec. 10A FEDERAL RESERVE ACT 946 

transaction, for any one person, partnership, corporation, association or other entity in an amount equal at any time in the aggregate to more than 10 per centum of its paid up and unimpaired 

capital stock and surplus, or, in the case of a United States branch 

or agency of a foreign bank, its dollar equivalent as determined by 

the Board under subparagraph (H), unless the institution is secured either by attached documents or by some other actual security growing out of the same transaction as the acceptance. 

(F) with respect to an institution which issues an acceptance, 

the limitations contained in this paragraph shall not apply to that 

portion of an acceptance which is issued by such institution and 

which is covered by a participation agreement sold to another institution. 

(G) in order to carry out the purposes of this paragraph, the 

Board may define any of the terms used in this paragraph, and, 

with respect to institutions which do not have capital or capital 

stock, the Board shall define an equivalent measure to which the 

limitations contained in this paragraph shall apply. 

(H) Any limitation or restriction in this paragraph based on 

paid-up and unimpaired capital stock and surplus of an institution 

shall be deemed to refer, with respect to a United States branch 

or agency of a foreign bank, to the dollar equivalent of the paidup capital stock and surplus of the foreign bank, as determined by 

the Board, and if the foreign bank has more than one United 

States branch or agency, the business transacted by all such 

branches and agencies shall be aggregated in determining compliance with the limitation or restriction. (12 U.S.C. 372) 

[8. Advances to member banks on promissory notes] 

Any Federal reserve bank may make advances for periods not 

exceeding fifteen days to its member banks on their promissory 

notes secured by the deposit or pledge of bonds, notes, certificates 

of indebtedness or Treasury bills of the United States, or by the deposit or pledge of debentures or other such obligations of Federal 

intermediate credit banks which are eligible for purchase by Federal reserve banks under section 13 (a) of this Act, or by the deposit or pledge of bonds issued under the provisions of subsection 

(c) of section 4 of the Home Owners' Loan Act of 1933, as amended; 

and any Federal reserve bank may make advances for periods not 

exceeding ninety days to its member banks on their promissory 

notes secured by such notes, drafts, bills of exchange, or bankers' 

acceptances as are eligible for rediscount or for purchase by Federal reserve banks under the provisions of this Act, or secured by 

such obligations as are eligible for purchase under section 14(b) of 

this Act. All such advances shall be made at rates to be established 

by such Federal reserve banks, such rates to be subject to the review and determination of the Board of Governors of the Federal 

Reserve System. If any member bank to which any such advance 

has been made shall, during the life or continuance of such advance, and despite an official warning of the reserve bank of the 

district or of the Board of Governors of the Federal Reserve System 

to the contrary, increase its outstanding loans secured by collateral 

in the form of stocks, bonds, debentures, or other such obligations, 

or loans made to members of any organized stock exchange, invest-
947 FEDERAL RESERVE ACT Sec. 10B 

ment house, or dealer in securities, upon any obligation, note, or 

bill, secured or unsecured, for the purpose of purchasing and/or carrying stocks, bonds, or other investment securities (except obligations of the united states) such advance shall be deemed immediately due and payable, and such member bank shall be ineligible 

as a borrower at the reserve bank of the district under the provisions of this paragraph for such period as the Board of Governors 

of the Federal Reserve System shall determine: Provided, That no 

temporary carrying or clearance loans made solely for the purpose 

of facilitating the purchase or delivery of securities offered for public subscription shall be included in the loans referred to in this 

paragraph. (12 U.S.C. 347) 

[9. Aggregate liabilities of national banks] 

[The 9th undesignated paragraph of section 13 amended section 5205 of the Revised Statutes, which was repealed by the GainSt Germain Depository Institutions Act of 1982.] 

[10. 1 Regulation by Board of Governors of discounts, purchases and sales] 

The discount and rediscount and the purchase and sale by any 

Federal reserve bank of any bills receivable and of domestic and 

foreign bills of exchange, and of acceptances authorized by this Act, 

shall be subject to such restrictions, limitations, and regulations as 

may be imposed by the Board of Governors of the Federal Reserve 

system. (omitted from u.s. Code) 

[11. 1 National banks as insurance agents or real estate loan brokers] 

That in addition to the powers not vested by law in national 

banking associations organized under the laws of the united states 

any such association located and doing business in any place the 

population of which does not exceed five thousand inhabitants, as 

shown by the last preceding decennial census, may, under such 

rules and regulations as may be prescribed by the Comptroller of 

the Currency, act as the agent for any fire, life, or other insurance 

company authorized by the authorities of the state in which said 

bank is located to do business in said state, by soliciting and selling insurance and collecting premiums on policies issued by such 

company; and may receive for services so rendered such fees or 

commissions as may be agreed upon between the said association 

and the insurance company for which it may act as agent: Provided, however, That no such bank shall in any case assume or 

guarantee the payment of any premium on insurance policies 

issued through its agency by its principal: And provided further, 

That the bank shall not guarantee the truth of any statement 

made by an assured in filing his application for insurance. (12 

u.s.C. 92) 

[12. 1 Bank acceptances to create dollar exchange] 

Any member bank may accept drafts or bills of exchange 

drawn upon it having not more than three months' sight to run, 

exclusive of days of grace, drawn under regulations to be prescribed 

by the Board of Governors of the Federal Reserve System by banks 

1

 The question concerning the effectiveness of this paragraph was resolved in favor of its effectiveness in United States National Bank of Oregon v. Independent Insurance Agents of America, 

Inc., et al.; 508 U.S. 439 (1993). 
Sec. 13 FEDERAL RESERVE ACT 948 

or bankers in foreign countries or dependencies or insular possessions of the United States for the purpose of furnishing dollar exchange as required by the usages of trade in the respective countries, dependencies, or insular possessions. Such drafts or bills may 

be acquired by Federal reserve banks in such amounts and subject 

to such regulations, restrictions, and limitations as may be prescribed by the Board of Governors of the Federal Reserve System: 

Provided, however, That no member bank shall accept such drafts 

or bills of exchange referred to

 1 this paragraph for any one bank 

to an amount exceeding in the aggregate ten per centum of the 

paid-up and unimpaired capital and surplus of the accepting bank 

unless the draft or bill of exchange is accompanied by documents 

conveying or securing title or by some other adequate security: Provided further, That no member bank shall accept such drafts or 

bills in an amount exceeding at any time the aggregate of one-half 

of its paid-up and unimpaired capital and surplus. (omitted from 

U.S. Code) 

[13. Advances to individuals, partnerships, and corporations on direct obligations of the United States] 

Subject to such limitations, restrictions and regulations as the 

Board of Governors of the Federal Reserve System may prescribe, 

any Federal reserve bank may make advances to any individual, 

partnership or corporation on the promissory notes of such individual, partnership or corporation secured by direct obligations of 

the United States or by any obligation which is a direct obligation 

of, or fully guaranteed as to principal and interest by, any agency 

of the United States. Such advances shall be made for periods not 

exceeding 90 days and shall bear interest at rates fixed from time 

to time by the Federal reserve bank, subject to the review and 

determination of the Board of Governors of the Federal Reserve 

System. (12 U.S.C. 347c) 

[14. Transactions between Federal Reserve banks and a branch or agency 

of a foreign bank] 

Subject to such restrictions, limitations, and regulations as 

may be imposed by the Board of Governors of the Federal Reserve 

System, each Federal Reserve bank may receive deposits from, discount paper endorsed by, and make advances to any branch or 

agency of a foreign bank in the same manner and to the same extent that it may exercise such powers with respect to a member 

bank if such branch or agency is maintaining reserves with such 

Reserve bank pursuant to section 7 of the International Banking 

Act of 1978. In exercising any such powers with respect to any such 

branch or agency, each Federal Reserve bank shall give due regard 

to account balances being maintained by such branch or agency 

with such Reserve bank and the proportion of the assets of such 

branch or agency being held as reserves under section 7 of the 

International Banking Act of 1978. For the purposes of this paragraph, the terms ''branch,'' ''agency,'' and ''foreign bank'' shall have 

the same meanings assigned to them in section 1 of the international Banking Act of 1978. (12 U.S.C. 347d) 

1

 So in original. 
949 FEDERAL RESERVE ACT Sec. 10B 

[DISCOUNT OF AGRICULTURAL PAPER] 

[1. Authority of Federal reserve banks to discount agricultural paper] 

SEC. 13A. Upon the indorsement of any of its member banks, 

which shall be deemed a waiver of demand, notice, and protest by 

such bank as to its own indorsement exclusively, any Federal reserve bank may, subject to regulations and limitations to be prescribed by the Board of Governors of the Federal Reserve System, 

discount notes, drafts, and bills of exchange issued or drawn for an 

agricultural purpose, or based upon live stock, and having a maturity, at the time of discount, exclusive of days of grace, not exceeding nine months, and such notes, drafts, and bills of exchange may 

be offered as collateral security for the issuance of Federal reserve 

notes under the provisions of section 16 of this Act: Provided, That 

notes, drafts, and bills of exchange with maturities in excess of six 

months shall not be eligible as a basis for the issuance of Federal 

reserve notes unless secured by warehouse receipts or other such 

negotiable documents conveying or securing title to readily marketable staple agricultural products or by chattel mortgage upon live 

stock which is being fattened for market. (12 U.S.C. 348) 

[2. Rediscounts for, and discount of notes payable to, Federal Intermediate 

Credit Banks] 

That any Federal reserve bank may, subject to regulations and 

limitations to be prescribed by the Board of Governors of the Federal Reserve System, rediscount such notes, drafts, and bills for 

any Federal Intermediate Credit Bank, except that no Federal reserve bank shall rediscount for a Federal Intermediate Credit Bank 

any such note or obligation which bears the indorsement of a nonmember State bank or trust company which is eligible for membership in the Federal reserve system, in accordance with section 9 of 

this Act. Any Federal reserve bank may also, subject to regulations 

and limitations to be prescribed by the Board of Governors of the 

Federal Reserve System, discount notes payable to and bearing the 

indorsement of any Federal intermediate credit bank, covering 

loans or advances made by such bank pursuant to the provisions 

of section 202(a) of Title II of the Federal Farm Loan Act, as 

amended (U.S.C., title 12, ch. 8, sec. 1031), which have maturities 

at the time of discount of not more than nine months, exclusive of 

days of grace, and which are secured by notes, drafts, or bills of exchange eligible for rediscount by Federal Reserve banks. (12 U.S.C. 

349) 

[3. Purchase and sale of debentures of Federal Intermediate Credit Banks] 

Any Federal reserve bank may also buy and sell debentures 

and other such obligations issued by a Federal intermediate Credit 

Bank or by a National Agricultural Credit Corporation, but only to 

the same extent as and subject to the same limitations as those 

upon which it may buy and sell bonds issued under Title i of the 

Federal Farm Loan Act. (12 U.S.C. 350) 

[4. Paper of cooperative marketing associations] 

Notes, drafts, bills of exchange or acceptances issued or drawn 

by cooperative marketing associations composed of producers of 

agricultural products shall be deemed to have been issued or drawn 
Sec. 10A FEDERAL RESERVE ACT 9 50 

for an agricultural purpose, within the meaning of this section, if 

the proceeds thereof have been or are to be advanced by such association to any members thereof for an agricultural purpose, or have 

been or are to be used by such association in making payments to 

any members thereof on account of agricultural products delivered 

by such members to the association, or if such proceeds have been 

or are to be used by such association to meet expenditures incurred 

or to be incurred by the association in connection with the grading, 

processing, packing, preparation for market, or marketing of any 

agricultural product handled by such association for any of its 

members: Provided, That the express enumeration in this paragraph of certain classes of paper of cooperative marketing associations as eligible for rediscount shall not be construed as rendering 

ineligible any other class of paper of such associations which is now 

eligible for rediscount. (12 U.S.C. 351) 

[5. Limitations] 

The Board of Governors of the Federal Reserve System may, 

by regulation, limit to a percentage of the assets of a Federal reserve bank the amount of notes, drafts, acceptances, or bills having 

a maturity in excess of three months, but not exceeding six months, 

exclusive of days of grace, which may be discounted by such bank, 

and the amount of notes, drafts, bills, or acceptances having a 

maturity in excess of six months, but not exceeding nine months, 

which may be rediscounted by such bank. (12 U.S.C. 352) 

OPEN-MARKET OPERATIONS 

[1. Purchase and sale of cable transfers, bank acceptances and bills of exchange] 

SEC. 14. Any Federal reserve bank may, under rules and regulations prescribed by the Board of Governors of the Federal Reserve System, purchase and sell in the open market, at home or 

abroad, either from or to domestic or foreign banks, firms, corporations, or individuals, cable transfers and bankers' acceptances and 

bills of exchange of the kinds and maturities by this Act made eligible for rediscount, with or without the indorsement of a member 

bank. (12 U.S.C. 353) 

[2. Powers] 

Every Federal reserve bank shall have power: 

[Dealings in, and loans on, gold] 

(a) To deal in gold coin and bullion at home or abroad, to make 

loans thereon, exchange Federal reserve notes for gold, gold coin, 

or gold certificates, and to contract for loans of gold coin or bullion, 

giving therefor, when necessary, acceptable security, including the 

hypothecation of United States bonds or other securities which 

Federal reserve banks are authorized to hold; (12 U.S.C. 354) 

[Purchase and sale of obligations of United States, States, counties, etc.] 

(b)(1) To buy and sell, at home or abroad, bonds and notes of 

the United States, bonds issued under the provisions of subsection 
951 FEDERAL RESERVE ACT Sec. 10B 

(c) of section 4 of the Home Owners' Loan Act of 1933,1 as 

amended, and having maturities from date of purchase of not exceeding six months, and bills, notes, revenue bonds, and warrants 

with a maturity from date of purchase of not exceeding six months, 

issued in anticipation of the collection of taxes or in anticipation of 

the receipt of assured revenues by any state, county, district, political subdivision, or municipality in the continental united states, 

including irrigation, drainage and reclamation districts, and obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof, such purchases to be made in 

accordance with rules and regulations prescribed by the Board of 

Governors of the Federal Reserve System. Notwithstanding any 

other provision of this Act, any bonds, notes, or other obligations 

which are direct obligations of the united states or which are fully 

guaranteed by the united states as to principal and interest may 

be bought and sold without regard to maturities but only in the 

open market. (12 U.S.C. 355) 

(2) To buy and sell in the open market, under the direction and 

regulations of the Federal open Market Committee, any obligation 

which is a direct obligation of, or fully guaranteed as to principal 

and interest by, any agency of the United States. (12 U.S.C. 355) 

[Purchase and sale of bills of exchange] 

(c) To purchase from member banks and to sell, with or without its indorsement, bills of exchange arising out of commercial 

transactions, as hereinbefore defined; (12 U.S.C. 356) 

[Rates of discount] 

(d) To establish from time to time, subject to review and determination of the Board of Governors of the Federal Reserve System, 

rates of discount to be charged by the Federal reserve bank for 

each class of paper, which shall be fixed with a view of accommodating commerce and business; but each such bank shall establish 

such rates every fourteen days, or oftener if deemed necessary by 

the Board; (12 U.S.C. 357) 

[Foreign correspondents and agencies] 

(e) To establish accounts with other Federal reserve banks for 

exchange purposes and, with the consent or upon the order and 

direction of the Board of Governors of the Federal Reserve System 

and under regulations to be prescribed by said board, to open and 

maintain accounts in foreign countries, appoint correspondents, 

and establish agencies in such countries wheresoever it may be 

deemed best for the purpose of purchasing, selling, and collecting 

bills of exchange, and to buy and sell, with or without its 

indorsement, through such correspondents or agencies, bills of exchange (or acceptances) arising out of actual commercial transactions which have not more than ninety days to run, exclusive of 

days of grace, and which bear the signature of two or more responsible parties, and, with the consent of the Board of Governors of 

the Federal Reserve System, to open and maintain banking accounts for such foreign correspondents or agencies, or for foreign 

*The Home Owners' Loan Act of 1933 was reenacted as the Home Owners' Loan Act by section 301 of P.L. 101-73. Section 4(c) of such Act does not provide for the issuance of bonds. 
Sec. 10A FEDERAL RESERVE ACT 952 

banks or bankers, or for foreign states as defined in section 25 (b)

 1 

of this Act. Whenever any such account has been opened or agency 

or correspondent has been appointed by a Federal reserve bank, 

with the consent of or under the order and direction of the Board 

of Governors of the Federal Reserve System, any other Federal reserve bank may, with the consent and approval of the Board of 

Governors of the Federal Reserve System, be permitted to carry on 

or conduct, through the Federal reserve bank opening such account 

or appointing such agency or correspondent, any transaction 

authorized by this section under rules and regulations to be prescribed by the board. (12 U.S.C. 358) 

[Purchase and sale of acceptances of Federal Intermediate Credit Banks] 

(f) To purchase and sell in the open market, either from or to 

domestic banks, firms, corporations, or individuals, acceptances of 

Federal Intermediate Credit Banks and of National Agricultural 

Credit Corporations, whenever the Board of Governors of the Federal Reserve System shall declare that the public interest so requires. (12 U.S.C. 359) 

[Relationships and transactions wit h foreign banks and bankers] 

(g) The Board of Governors of the Federal Reserve System 

shall exercise special supervision over all relationships and transactions of any kind entered into by any Federal reserve bank with 

any foreign bank or banker, or with any group of foreign banks or 

bankers, and all such relationships and transactions shall be subject to such regulations, conditions, and limitations as the Board 

may prescribe. No officer or other representative of any Federal reserve bank shall conduct negotiations of any kind with the officers 

or representatives of any foreign bank or banker without first obtaining the permission of the Board of Governors of the Federal Reserve System. The Board of Governors of the Federal Reserve System shall have the right, in its discretion, to be represented in any 

conference or negotiations by such representative or representatives as the Board may designate. A full report of all conferences 

or negotiations, and all understandings or agreements arrived at or 

transactions agreed upon, and all other material facts appertaining 

to such conferences or negotiations, shall be filed with the Board 

of Governors of the Federal Reserve System in writing by a duly 

authorized officer of each Federal reserve bank which shall have 

participated in such conferences or negotiations. (12 U.S.C. 348a) 

GOVERNMENT DEPOSITS 

[1. Federal Reserve banks as depositaries and fiscal agents of United 

States] 

SEC. 15. The moneys held in the general fund of the Treasury, 

except the five per centum fund for the redemption of outstanding 

national bank notes may, upon the direction of the Secretary of the 

Treasury, be deposited in Federal Reserve banks, which banks, 

when required by the Secretary of the Treasury, shall act as fiscal 

agents of the United States; and the revenues of the Government 

1

 Section 25(b) of this Act was redesignated as section 25B by section 142(e)(3) of the Federal 

Deposit Insurance Corporation Improvement Act of 1991 (see 105 Stat. 2281). 
953 FEDERAL RESERVE ACT Sec. 10B 

or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits. (12 

U.S.C. 391)1 

[2. Nonmembe r bank s as depositarie s of Unite d States] 

No public funds of the philippine islands, or of the postal savings, or any Government funds, shall be deposited in the continental United States in any bank not belonging to the system 

established by this Act: Provided, however, That nothing in this Act 

shall be construed to deny the right of the Secretary of the Treasury to use member banks as depositaries. (12 U.S.C. 392) 

[3. Depositarie s an d fiscal agent s of Federa l Intermediat e Credi t Banks ] 

The Federal Reserve banks are authorized to act as depositaries for and fiscal agents of any Federal land bank, Federal intermediate credit bank, bank for cooperatives, or other institutions of 

the Farm Credit System. (12 U.S.C. 393) 

NOT E ISSUES. 

[1. Issuanc e of Federa l Reserv e notes; natur e of obligations; wher e redeem -

able ] 

SEC. 16. Federal Reserve notes, to be issued at the discretion 

of the Board of Governors of the Federal Reserve System for the 

purpose of making advances to Federal Reserve banks through the 

Federal reserve agents as hereinafter set forth and for no other 

purpose, are hereby authorized. The said notes shall be obligations 

of the United States and shall be receivable by all national and 

member banks and Federal Reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful 

money on demand at the Treasury Department of the United 

States, in the city of Washington, District of Columbia, or at any 

Federal Reserve bank. (12 U.S.C. 411) 

[2. Applicatio n for notes b y Federa l Reserv e banks ] 

Any Federal Reserve bank may make application to the local 

Federal Reserve agent for such amount of the Federal Reserve 

notes hereinbefore provided for as it may require. Such application 

shall be accompanied with a tender to the local Federal Reserve 

agent of collateral in amount equal to the sum of the Federal Reserve notes thus applied for and issued pursuant to such application. The collateral security thus offered shall be notes, drafts, bills 

of exchange, or acceptances acquired under section 10A, 10B, 13, 

or 13A of this Act, or bills of exchange endorsed by a member bank 

of any Federal Reserve district and purchased under the provisions 

of section 14 of this Act, or bankers' acceptances purchased under 

the provisions of said section 14, or gold certificates, or Special 

Drawing Right certificates, or any obligations which are direct obligations of, or are fully guaranteed as to principal and interest by, 

the United States or any agency thereof, or assets that Federal Re1

 item 1 of the section designated as section 2 following section 664 of the Treasury, postal 

Service, and General Government Appropriations Act, 1997 (as enacted by section 101(f) of P.L. 

104-208) provided for the selection of national banks as financial agents. Item 2 of such section 

reads as follows: ''2. Make conforming changes to 12 U.S.C. 265, 266, 391, 1452(d), 1767, 1789a, 

2013, 2122 and to 31 U.S.C. 3122 and 3303.''. Due to the inexact nature of the direction, no 

change is shown here. 
Sec. 10A FEDERAL RESERVE ACT 9 54 

serve banks may purchase or hold under section 14 of this Act. In 

no event shall such collateral security be less than the amount of 

Federal Reserve notes applied for. The Federal Reserve agent shall 

each day notify the Board of Governors of the Federal Reserve System of all issues and withdrawals of Federal Reserve notes to and 

by the Federal Reserve bank to which he is accredited. The said 

Board of Governors of the Federal Reserve System may at any time 

call upon a Federal Reserve bank for additional security to protect 

the Federal Reserve notes issued to it. Collateral shall not be required for Federal Reserve notes which are held in the vaults of 

Federal Reserve banks. (12 U.S.C. 412) 

[3. Distinctive letter on notes; destruction of unfit notes] 

Federal Reserve notes shall bear upon their faces a distinctive 

letter and serial number which shall be assigned by the Board of 

Governors of the Federal Reserve System to each Federal Reserve 

bank. Federal Reserve notes unfit for circulation shall be canceled, 

destroyed, and accounted for under procedures prescribed and at 

locations designated by the Secretary of the Treasury. Upon 

destruction of such notes, credit with respect thereto shall be 

apportioned among the twelve Federal Reserve banks as determined by the Board of Governors of the Federal Reserve System. 

(12 U.S.C. 413) 

[4. Granting right to issue notes] 

The Board of Governors of the Federal Reserve System shall 

have the right, acting through the Federal Reserve agent, to grant 

in whole or in part, or to reject entirely the application of any Federal Reserve bank for Federal Reserve notes; but to the extent that 

such applicaton may be granted the Board of Governors of the Federal Reserve System shall, through its local Federal Reserve agent, 

supply Federal Reserve notes to the banks so applying, and such 

bank shall be charged with the amount of the notes issued to it and 

shall pay such rate of interest as may be established by the Board 

of Governors of the Federal Reserve System on only that amount 

of such notes which equals the total amount of its outstanding Federal Reserve notes less the amount of gold certificates held by the 

Federal Reserve agent as collateral security. Federal Reserve notes 

issued to any such bank shall, upon delivery, together with such 

notes of such Federal Reserve bank as may be issued under section 

18 of this Act upon security of United States 2 per centum Government bonds, become a first and paramount lien on all the assets 

of such bank. (12 U.S.C. 414) 

[5. Deposit to reduce liability for outstanding notes] 

Any Federal Reserve bank may at any time reduce its liability 

for outstanding Federal Reserve notes by depositing with the Federal Reserve agent its Federal Reserve notes, gold certificates, Special Drawing Right certificates, or lawful money of the United 

States. Federal Reserve notes so deposited shall not be reissued, 

except upon compliance with the conditions of an original issue. 

The liability of a Federal Reserve bank with respect to its outstanding Federal Reserve notes shall be reduced by any amount 

paid by such bank to the Secretary of the Treasury under section 

4 of the Old Series Currency Adjustment Act. (12 U.S.C. 415) 
955 FEDERAL RESERVE ACT Sec. 10B 

[ 6. Substitutio n of collateral; retiremen t of Federa l Reserv e notes ] 

Any Federal Reserve bank may at its discretion withdraw collateral deposited with the local Federal Reserve agent for the protection of its Federal Reserve notes issued to it and shall at the 

same time substitute therefor other collateral of equal amont with 

the approval of the Federal Reserve agent under regulations to be 

prescribed by the Board of Governors of the Federal Reserve System. Any Federal Reserve bank may retire any of its Federal Reserve notes by depositing them with the Federal Reserve agent or 

with the Treasurer of the United States, and such Federal Reserve 

bank shall thereupon be entitled to receive back the collateral 

deposited with the Federal Reserve agent for the security of such 

notes. Any Federal Reserve bank shall further be entitled to receive back the collateral deposited with the Federal Reserve agent 

for the security of any notes with respect to which such bank has 

made payment to the Secretary of the Treasury under section 4 of 

the Old Series Currency Adjustment Act. Federal Reserve notes so 

deposited shall not be reissued except upon compliance with the 

conditions of an original issue. (12 U.S.C. 415) 

[ 7. Custod y of reserv e notes, gol d certificates , an d lawfu l money ] 

All Federal Reserve notes and all gold certificates, Special 

Drawing Right certificates, and lawful money issued to or deposited 

with any Federal Reserve agent under the provisions of the Federal 

Reserve Act shall hereafter be held for such agent, under such 

rules and regulations as the Board of Governors of the Federal Reserve System may prescribe, in the joint custody of himself and the 

Federal Reserve bank to which he is accredited. Such agent and 

such Federal Reserve bank shall be jointly liable for the safekeeping of such Federal Reserve notes, gold certificates, Special 

Drawing Right certificates, and lawful money. Nothing herein contained, however, shall be construed to prohibit a Federal Reserve 

agent from depositing gold certificates and Special Drawing Right 

certificates with the Board of Governors of the Federal Reserve 

System, to be held by such Board subject to his order, or with the 

Treasurer of the United States for the purposes authorized by law. 

(12 U.S.C. 417) 

[ 8. Engravin g o f plates ; denomination s an d for m o f notes ] 

in order to furnish suitable notes for circulation as Federal reserve notes, the Secretary of the Treasury shall1

 cause plates and 

dies to be engraved in the best manner to guard against counterfeits and fraudulent alterations, and shall have printed therefrom 

and numbered such quantities of such notes of the denominations 

of $1, $2, $5, $10, $20, $50, $100, $500, $1,000, $5,000, $10,000 as 

may be required to supply the Federal reserve banks. Such notes 

shall be in form and tenor as directed by the Secretary of the 

Treasury under the provisions of this Act and shall bear the distinctive numbers of the several Federal reserve banks through 

which they are issued. (12 U.S.C. 418) 

1Section 602(g)(3) of P.L. 103-325 amended the 1st sentence of the 8th undesignated paragraph of section 16 by striking "the Comptroller of the Currency shall under the direction of 

the Secretary of the Treasury,'' and inserting "the Secretary of the Treasury shall''. The amendment probably should have included a comma after ''shall'' in the matter proposed to be stricken. 
Sec. 10A FEDERAL RESERVE ACT 956 

[9. Custody of unissued notes] 

When such notes have been prepared, the notes shall be 

delivered to the Board of Governors of the Federal Reserve 

System subject to the order of the Secretary of the Treasury for 

the delivery of such notes in accordance with this Act. (12 

U.S.C. 419) 

[10. Custody of plates and dies; expenses of issue and retirement of notes] 

The plates and dies to be procured by the Secretary of the 

Treasury for the printing of such circulating notes shall remain 

under his control and direction, and the expenses necessarily incurred in executing the laws relating to the procuring of such 

notes, and all other expenses incidental to their issue and retirement, shall be paid by the Federal reserve banks, and the Board 

of Governors of the Federal Reserve System shall include in its 

estimate of expenses levied against the Federal reserve banks a 

sufficient amount to cover the expenses herein provided for. (12 

U.S.C. 420) 

[11. Examinations of plates, dies, etc.] 

The Secretary of the Treasury may examine the plates, 

dies, bed pieces, and other material used in the printing of 

Federal Reserve notes and issue regulations relating to such 

examinations. (12 U.S.C. 421) 

[12. Appropriation for engraving, etc.] 

1Any appropriation heretofore made out of the general funds 

of the Treasury for engraving plates and dies, the purchase of distinctive paper, or to cover any other expense in connection with the 

printing of national-bank notes or notes provided for by the Act of 

May thirtieth, nineteen hundred and eight, and any distinctive 

paper that may be on hand at the time of the passage of this Act 

may be used in the discretion of the Secretary for the purposes of 

this Act, and should the appropriations heretofore made be insufficient to meet the requirements of this Act in addition to circulating 

notes provided for by existing law, the Secretary is hereby authorized to use so much of any funds in the Treasury not otherwise 

appropriated for the purpose of furnishing the notes aforesaid: Provided, however, That nothing in this section contained shall be construed as exempting national banks or Federal reserve banks from 

their liability to reimburse the United States for any expenses incurred in printing and issuing circulating notes. (omitted from 

U.S. Code) 

[13. Checks and drafts to be received on deposit at par] 

Every Federal reserve bank shall receive on deposit at par 

from depository institutions or from Federal reserve banks checks 

and other items, including negotiable orders of withdrawal and 

share drafts and drafts drawn upon any of its depositors, and when 

remitted by a Federal reserve bank, checks and other items, including negotiable orders of withdrawal and share drafts and drafts 

drawn by any depositor in any other Federal reserve bank or 

1

 See sec. 1(a) of the Permanent Appropriation Repeal Act of 1934 (48 Stat. 1224) for its effect 

on this paragraph. Such section was repealed by P.L. 97-258 (96 Stat. 877, codifying title 31, 

United States Code). 
957 FEDERAL RESERVE ACT Sec. 10B 

depository institution upon funds to the credit of said depositor in 

said reserve bank or depository institution. Nothing herein contained shall be construed as prohibiting a depository institution 

from charging its actual expense incurred in collecting and remitting funds, or for exchange sold to its patrons. The Board of Governors of the Federal Reserve System shall, by rule, fix the charges 

to be collected by the depository institutions from its patrons whose 

checks and other items, including negotiable orders of withdrawal 

and share drafts are cleared through the Federal reserve Bank and 

the charge which may be imposed for the service of clearing or collection rendered by the Federal reserve bank. (12 U.S.C. 360) 

[14. Transfer of funds among Federal Reserve banks] 

The Board of Governors of the Federal Reserve System shall 

make and promulgate from time to time regulations governing the 

transfer of funds and charges therefor among Federal reserve 

banks and their branches, and may at its discretion exercise the 

functions of a clearing house for such Federal reserve banks, or 

may designate a Federal reserve bank to exercise such functions, 

and may also require each such bank to exercise the functions of 

a clearing house for depository institutions. (12 U.S.C. 248(o)) 

[15. Settlement fund] 

The Secretary of the Treasury is hereby authorized and directed to receive deposits of gold or of gold certificates or of Special 

Drawing Right certificates with the Treasurer or any Assistant 

Treasurer of the United States when tendered by any Federal Reserve bank or Federal Reserve agent for credit to its or his account 

with the Board of Governors of the Federal Reserve System. The 

Secretary shall prescribe by regulation the form of receipt to be 

issued by the Treasurer or Assistant Treasurer to the Federal Reserve bank or Federal Reserve agent making the deposit, and a 

duplicate of such receipt shall be delivered to the Board of Governors of the Federal Reserve System by the Treasurer at Washington upon proper advices from any Assistant Treasurer that such 

deposit has been made. Deposits so made shall be held subject to 

the orders of the Board of Governors of the Federal Reserve System 

and deposits of gold or gold certificates shall be payable in gold certificates, and deposits of Special Drawing Right certificates shall be 

payable in Special Drawing Right certificates, on the order of the 

Board of Governors of the Federal Reserve System to any Federal 

Reserve bank or Federal Reserve agent at the Treasury or at the 

subtreasury of the United States nearest the place of business of 

such Federal Reserve bank or such Federal Reserve agent. The 

order used by the Board of Governors of the Federal Reserve System in making such payments shall be signed by the chairman or 

vice chairman, or such other officers or members as the Board may 

by regulation prescribe. The form of such order shall be approved 

by the Secretary of the Treasury. (12 U.S.C. 467) 

[16. Expenses] 

The expenses necessarily incurred in carrying out these provisions, including the cost of the certificates or receipts issued for deposits received, and all expenses incident to the handling of such 

deposits shall be paid by the Board of governors of the Federal Re-
Sec. 10A FEDERAL RESERVE ACT 958 

serve System and included in its assessments against the several 

Federal reserve banks. (12 U.S.C. 467) 

[17. Preservation of provisions of Act of Marc h 14, 1900] 

Nothing in this section shall be construed as amending section 

six of the Act of March fourteenth, nineteen hundred, as amended 

by the Acts of March fourth, nineteen hundred and seven, March 

second, nineteen hundred and eleven, and June twelfth, nineteen 

hundred and sixteen, nor shall the provisions of this section be construed to apply to the deposits made or to the receipts or certificates issued under those Acts. (12 U.S.C. 467) 

[DEPOSIT OF BONDS BY NATIONAL BANKS.] 

[Repeal of provisions requiring national banks to deposit bonds wit h 

United States Treasurer] 

SEC. 17. So much of the provisions of section fifty-one hundred 

and fifty-nine of the Revised Statutes of the United States, and section four of the Act of June twentieth, eighteen hundred and seventy-four, and section eight of the Act of July twelfth, eighteen 

hundred and eighty-two, and of any other provisions of existing 

statutes as require that before any national banking association 

shall be authorized to commence banking business it shall transfer 

and deliver to the Treasurer of the United States a stated amount 

of United States registered bonds, and so much of those provisions 

or of any other provisions of existing statutes as require any national banking association now or hereafter organized to maintain 

a minimum deposit of such bonds with the Treasurer is hereby repealed. (12 U.S.C. 101a note) 

REFUNDING BONDS. 

[1. Application to sell bonds securing circulation] 

SEC. 18. After two years from the passage of this Act, and at 

any time during a period of twenty years thereafter, any member 

bank desiring to retire the whole or any part of its circulating 

notes, may file with the Treasurer of the United States an application to sell for its account, at par and accrued interest, United 

States bonds securing circulation to be retired. (12 U.S.C. 441) 

[2. Purchase of bonds by Federal reserve banks] 

The Treasurer shall, at the end of each quarterly period, furnish the Board of Governors of the Federal Reserve System with 

a list of such applications, and the Board of Governors of the Federal Reserve System may, in its discretion, require the Federal reserve banks to purchase such bonds from the banks whose applications have been filed with the Treasurer at least ten days before 

the end of any quarterly period at which the Board of Governors 

of the Federal Reserve System may direct the purchase to be made: 

Provided, That Federal reserve banks shall not be permitted to 

purchase an amount to exceed $25,000,000 of such bonds in any 

one year, and which amount shall include bonds acquired under 

section four of this Act by the Federal reserve bank. (12 U.S.C. 

442) 
959 FEDERAL RESERVE ACT Sec. 10B 

[3. Allotment of bonds to be purchased] 

Provided further, That the Board of Governors of the Federal 

Reserve System shall allot to each Federal reserve bank such proportion of such bonds as the capital and surplus of such bank shall 

bear to the aggregate capital and surplus of all the Federal reserve 

banks. (12 U.S.C. 442) 

[4. Transfer and payment] 

Upon notice from the Treasurer of the amount of bonds so sold 

for its account, each member bank shall duly assign and transfer, 

in writing, such bonds to the Federal reserve bank purchasing the 

same, and such Federal reserve bank shall, thereupon, deposit lawful money with the Treasurer of the United States for the purchase 

price of such bonds, and the Treasurer shall pay to the member 

bank selling such bonds any balance due after deducting a sufficient sum to redeem its outstanding notes secured by such bonds, 

which notes shall be canceled and permanently retired when 

redeemed. (12 U.S.C. 443) 

[5. Federal reserve bank notes] 

The Federal reserve banks purchasing such bonds shall be permitted to take out an amount of circulating notes equal to the par 

value of such bonds. (12 U.S.C. 444) 

[6. Collateral for notes; form and tenor; redemption; etc.] 

Upon the deposits with the Treasurer of the United States, (a) 

of any direct obligations of the United States or (b) of any notes, 

drafts, bills of exchange, or bankers' acceptances acquired under 

the provisions of this Act, any Federal reserve bank making such 

deposit in the manner prescribed by the Secretary of the Treasury 

shall be entitled to receive from the Secretary of the Treasury circulating notes in blank, duly registered and countersigned. When 

such circulating notes are issued against the security of obligations 

of the United States, the amount of such circulating notes shall be 

equal to the face value of the direct obligations of the United States 

so deposited as security; and, when issued against the security of 

notes, drafts, bills of exchange and bankers' acceptances acquired 

under the provisions of this Act, the amount thereof shall be equal 

to not more than 90 per cent of the estimated value of such notes, 

drafts, bills of exchange and bankers acceptances so deposited as 

security. Such notes shall be the obligations of the Federal reserve 

bank procuring the same, shall be in form prescribed by the Secretary of the Treasury, shall be receivable at par in all parts of the 

United States for the same purposes as are national bank notes, 

and shall be redeemable in lawful money of the United States on 

presentation at the United States Treasury or at the bank of issue. 

The Secretary of the Treasury is authorized and empowered to prescribe regulations governing the issuance, redemption, replacement, retirement and destruction of such circulating notes and the 

release and substitution of security therefor. Such circulating notes 

shall be subject to the same tax as is provided by law for the circulating notes of national banks secured by 2 per cent bonds of the 

United States. No such circulating notes shall be issued under this 

paragraph after the president has declared by proclamation that 

the emergency recognized by the president by proclamation of 
Sec. 10A FEDERAL RESERVE ACT 9 60 

March 6, 1933, has terminated, unless such circulating notes are 

secured by deposits of bonds of the United States bearing the circulation privilege. When required to do so by the Secretary of the 

Treasury, each Federal reserve agent shall act as agent of the 

Treasurer of the United States or of the Secretary of the Treasury, 

or both, for the performance of any of the functions which the 

Treasurer or the Secretary of the Treasury may be called upon to 

perform in carrying out the provisions of this paragraph. Appropriations available for distinctive paper and printing United States 

currency or national bank currency are hereby made available for 

the production of the circulating notes of Federal reserve banks 

herein provided; but the United States shall be remibursed by the 

Federal reserve bank to which such notes are issued for all expenses necessarily incurred in connection with the procuring of 

such notes and all other expenses incidental to their issue, redemption, replacement, retirement and destruction. (Omitted from U.S. 

Code) 

[7. Exchange of 2 per cent gold bonds for 1-year gold notes and 30-year 3 

per cent gold bonds] 

Upon application of any Federal reserve bank, approved by the 

Board of Governors of the Federal Reserve System, the Secretary 

of the Treasury may issue, in exchange for United States two per 

centum gold bonds bearing the circulation privilege, but against 

which no circulation is outstanding, one-year gold notes of the 

United States without the circulation privilege, to an amount not 

to exceed one-half of the two per centum bonds so tendered for exchange, and thirty-year three per centum gold bonds without the 

circulation privilege for the remainder of the two per centum bonds 

so tendered: Provided, That at the time of such exchange the Federal reserve bank obtaining such one-year gold notes shall enter 

into an obligation with the Secretary of the Treasury binding itself 

to purchase from the United States for gold at the maturity of such 

one-year notes, an amount equal to those delivered in exchange for 

such bonds, if so requested by the Secretary, and at each maturity 

of one-year notes so purchased by such Federal reserve bank, to 

purchase from the United States such an amount of one-year notes 

as the Secretary may tender to such bank, not to exceed the 

amount issued to such bank in the first instance, in exchange for 

the two per centum United States gold bonds; said obligation to 

purchase at maturity such notes shall continue in force for a period 

not to exceed thirty years. (12 U.S.C. 446) 

[8. Issue of 1-year Treasury notes and 30-year 3 per cent gold bonds] 

For the purpose of making the exchange herein provided for, 

the Secretary of the Treasury is authorized to issue at par Treasury notes in coupon or registered form as he may prescribe in 

denominations of one hundred dollars, or any multiple thereof, 

bearing interest at the rate of three per centum per annum, payable quarterly, such Treasury notes to be payable not more than 

one year from the date of the issue in gold coin of the present 

standard value, and to be exempt as to principal and interest from 

the payment of all taxes and duties of the United States except as 

provided by this Act, as well as from taxes in any form by or under 
961 FEDERAL RESERVE ACT Sec. 10B 

State, municipal, or local authorities. And for the same purpose, 

the Secretary is authorized and empowered to issue United States 

gold bonds at par, bearing three per centum interest payable thirty 

years from date of issue, such bonds to be of the same general 

tenor and effect and to issued under the same general terms and 

conditions as the United States three per centum bonds without 

the circulation privilege now issued and outstanding. (12 U.S.C. 

447) 

[9. Exchange of 3 per cent bonds for 1-year notes] 

Upon application of any Federal reserve bank, approved by the 

Board of Governors of the Federal Reserve System, the Secretary 

may issue at par such three per centum bonds in exchange for the 

one-year gold notes herein provided for. (12 U.S.C. 448) 

[BANK RESERVES.] 

[Definition of terms] 

SEC. 19. (a) The Board is authorized for the purposes of this 

section to define the terms used in this section, to determine what 

shall be deemed a payment of interest, to determine what types of 

obligations, whether issued directly by a member bank or indirectly 

by an affiliate of a member bank or by other means, and regardless 

of the use of the proceeds, shall be deemed a deposit, and to prescribe such regulations as it may deem necessary to effectuate the 

purposes of this section and to prevent evasions thereof. (12 U.S.C. 

461(a)) 

[Reserve requirements] 

(b) RESERVE REQUIREMENTS.— 

(1) DEFINITIONS.—Th e following definitions and rules 

apply to this subsection, subsection (c), section 11A, the first 

paragraph of section 13, and the second, thirteenth, and fourteenth paragraphs of section 16: 

(A) The term ''depository institution'' means— 

(i) any insured bank as defined in section 3 of the 

Federal Deposit insurance Act or any bank which is 

eligible to make application to become an insured 

bank under section 5 of such Act; 

(ii) any mutual savings bank as defined in section 

3 of the Federal Deposit insurance Act or any bank 

which is eligible to make application to become an insured bank under section 5 of such Act; 

(iii) any savings bank as defined in section 3 of 

the Federal Deposit insurance Act or any bank which 

is eligible to make application to become an insured 

bank under section 5 of such Act; 

(iv) any insured credit union as defined in section 

101 of the Federal Credit Union Act or any credit 

union which is eligible to make application to become 

an insured credit union pursuant to section 201 of 

such Act; 

(v) any member as defined in section 2 of the Federal Home Loan Bank Act; 
Sec. 10A FEDERAL RESERVE ACT 9 62 

(vi) any savings association (as defined in section 

3 of the Federal Deposit Insurance Act) which is an insured depository institution (as defined in such Act) or 

is eligible to apply to become an insured depository 

institution under the Federal Deposit Insurance Act; 

and 

(vii) for the purpose of section 13 and the fourteenth paragraph of section 16, any association or 

entity which is wholly owned by or which consists only 

of institutions referred to in clauses (i) through (vi). 

(B) The term "bank" means any insured or noninsured 

bank, as defined in section 3 of the Federal Deposit Insurance Act, other than a mutual savings bank or a savings 

bank as defined in such section. 

(C) The term "transaction account'' means a deposit or 

account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable 

instrument, payment orders of withdrawal, telephone 

transfers, or other similar items for the purpose of making 

payments or transfers to third persons or others. Such 

term includes demand deposits, negotiable order of withdrawal accounts, savings deposits subject to automatic 

transfers, and share draft accounts. 

(D) The term "nonpersonal time deposits'' means a 

transferable time deposit or account or a time deposit or 

account representing funds deposited to the credit of, or in 

which any beneficial interest is held by, a depositor who 

is not a natural person. 

(E) The term "reservable liabilities'' means transaction 

accounts, nonpersonal time deposits, and all net balances, 

loans, assets, and obligations which are, or may be, subject 

to reserve requirements under paragraph (5). 

(F) in order to prevent evasions of the reserve requirements imposed by this subsection, after consultation with 

the Board of Directors of the Federal Deposit Insurance 

Corporation, the Director of the Office of Thrift Supervision, and the National Credit Union Administration 

Board, the Board of Governors of the Federal Reserve System is authorized to determine, by regulation or order, 

that an account or deposit is a transaction account if such 

account or deposit may be used to provide funds directly 

or indirectly for the purpose of making payments or transfers to third persons or others. 

(2) RESERVE REQUIREMENTS.—(A) Each depository institution shall maintain reserves against its transaction accounts as 

the Board may prescribe by regulation solely for the purpose 

of implementing monetary policy— 

(i) in the ratio of 3 per centum for that portion of its 

total transaction accounts of $25,000,000 or less, subject to 

subparagraph (C); and 

(ii) in the ratio of 12 per centum, or in such other ratio 

as the Board may prescribe not greater than 14 per centum and not less than 8 per centum, for that portion of its 
963 FEDERAL RESERVE ACT Sec. 10B 

total transaction accounts in excess of $25,000,000, subject 

to subparagraph (C). 

(B) Each depository institution shall maintain reserves 

against its nonpersonal time deposits in the ratio of 3 per centum, or in such other ratio not greater than 9 per centum and 

not less than zero per centum as the Board may prescribe by 

regulation solely for the purpose of implementing monetary 

policy. 

(C) Beginning in 1981, not later than December 31 of each 

year the Board shall issue a regulation increasing for the next 

succeeding calendar year the dollar amount which is contained 

in subparagraph (A) or which was last determined pursuant to 

this subparagraph for the purpose of such subparagraph, by an 

amount obtained by multiplying such dollar amount by 80 per 

centum of the percentage increase in the total transaction 

accounts of all depository institutions. The increase in such 

transaction accounts shall be determined by subtracting the 

amount of such accounts on June 30 of the preceding calendar 

year from the amount of such accounts on June 30 of the calendar year involved. In the case of any such 12-month period 

in which there has been a decrease in the total transaction accounts of all depository institutions, the Board shall issue such 

a regulation decreasing for the next succeeding calendar year 

such dollar amount by an amount obtained by multiplying such 

dollar amount by 80 per centum of the percentage decrease in 

the total transaction accounts of all depository institutions. 

The decrease in such transaction accounts shall be determined 

by subtracting the amount of such accounts on June 30 of the 

calendar year involved from the amount of such accounts on 

June 30 of the previous calendar year. 

(D) Any reserve requirement imposed under this subsection shall be uniformly applied to all transaction accounts 

at all depository institutions. Reserve requirements imposed 

under this subsection shall be uniformly applied to nonpersonal time deposits at all depository institutions, except that 

such requirements may vary by the maturity of such deposits. 

(3) WAIVE R OF RATIO LIMITS I N EXTRAORDINARY CIRCUMSTANCES.—Upon a finding by at least 5 members of the 

Board that extraordinary circumstances require such action, 

the Board, after consultation with the appropriate committees 

of the Congress, may impose, with respect to any liability of 

depository institutions, reserve requirements outside the limitations as to ratios and as to types of liabilities otherwise prescribed by paragraph (2) for a period not exceeding 180 days, 

and for further periods not exceeding 180 days each by affirmative action by at least 5 members of the Board in each instance. The Board shall promptly transmit to the Congress a 

report of any exercise of its authority under this paragraph 

and the reasons for such exercise of authority. 

(4) SUPPLEMENTAL RESERVES.—(A) The Board may, upon 

the affirmative vote of not less than 5 members, impose a supplemental reserve requirement on every depository institution 

of not more than 4 per centum of its total transaction accounts. 
Sec. 10A FEDERAL RESERVE ACT 9 64 

Such supplemental reserve requirement may be imposed only 

if— 

(i) the sole purpose of such requirement is to increase 

the amount of reserves maintained to a level essential for 

the conduct of monetary policy; 

(ii) such requirement is not imposed for the purpose of 

reducing the cost burdens resulting from the imposition of 

the reserve requirements pursuant to paragraph (2); 

(iii) such requirement is not imposed for the purpose 

of increasing the amount of balances needed for clearing 

purposes; and 

(iv) on the date on which the supplemental reserve 

requirement is imposed, except as provided in paragraph 

(11), the total amount of reserves required pursuant to 

paragraph (2) is not less than the amount of reserves that 

would be required if the initial ratios specified in paragraph (2) were in effect. 

(B) The Board may require the supplemental reserve 

authorized under subparagraph (A) only after consultation 

with the Board of Directors of the Federal Deposit Insurance 

Corporation, the Director of the Office of Thrift Supervision, 

and the National Credit Union Administration Board. The 

Board shall promptly transmit to the Congress a report with 

respect to any exercise of its authority to require supplemental 

reserves under subparagraph (A) and such report shall state 

the basis for the determination to exercise such authority. 

(C) The supplemental reserve authorized under subparagraph (A) shall be maintained by the Federal Reserve banks in 

an Earnings Participation Account. Except as provided in subsection (c)(1)(A)(ii), such Earnings Participation Account shall 

receive earnings to be paid by the Federal Reserve banks during each calendar quarter at a rate not more than the rate 

earned on the securities portfolio of the Federal Reserve System during the previous calendar quarter. The Board may prescribe rules and regulations concerning the payment of earnings on Earnings Participation Accounts by Federal Reserve 

banks under this paragraph. 

(D) If a supplemental reserve under subparagraph (A) has 

been required of depository institutions for a period of one year 

or more, the Board shall review and determine the need for 

continued maintenance of supplemental reserves and shall 

transmit annual reports to the Congress regarding the need, if 

any, for continuing the supplemental reserve. 

(E) Any supplemental reserve imposed under subparagraph (A) shall terminate at the close of the first 90-day period 

after such requirement is imposed during which the average 

amount of reserves required under paragraph (2) are less than 

the amount of reserves which would be required during such 

period if the initial ratios specified in paragraph (2) were in effect. 

(5) RESERVES RELATED TO FOREIGN OBLIGATIONS OR ASSETS.—Foreign branches, subsidiaries, and international banking facilities of nonmember depository institutions shall maintain reserves to the same extent required by the Board of for-
965 FEDERAL RESERVE ACT Sec. 10B 

eign branches, subsidiaries, and international banking facilities of member banks. In addition to any reserves otherwise required to be maintained pursuant to this subsection, any 

depository institution shall maintain reserves in such ratios as 

the Board may prescribe against— 

(A) net balances owed by domestic offices of such 

depository institution in the United States to its directly 

related foreign offices and to foreign offices of nonrelated 

depository institutions; 

(B) loans to United States residents made by overseas 

offices of such depository institution if such depository 

institution has one or more offices in the United States; 

and 

(C) assets (including participations) held by foreign offices of a depository institution in the United States which 

were acquired from its domestic offices. 

(6) EXEMPTIO N FOR CERTAI N DEPOSITS.—Th e requirements 

imposed under paragraph (2) shall not apply to deposits payable only outside the States of the United States and the District of Columbia, except that nothing in this subsection limits 

the authority of the Board to impose conditions and requirements on member banks under section 25 of this Act or the authority of the Board under section 7 of the International Banking Act of 1978 (12 U.S.C. 3105). 

(7) DISCOUN T AN D BORROWING.—An y depository institution 

in which transaction accounts or nonpersonal time deposits are 

held shall be entitled to the same discount and borrowing 

privileges as member banks. in the administration of discount 

and borrowing privileges, the Board and the Federal Reserve 

banks shall take into consideration the special needs of savings 

and other depository institutions for access to discount and 

borrowing facilities consistent with their long-term asset portfolios and the sensitivity of such institutions to trends in the 

national money markets. 

( 8 ) TRANSITIONA L ADJUSTMENTS.— 

(A) Any depository institution required to maintain reserves under this subsection which was engaged in business on July 1, 1979, but was not a member of the Federal 

Reserve System on or after that date, shall maintain reserves against its deposits during the first twelve-month 

period following the effective date of this paragraph in 

amounts equal to one-eighth of those otherwise required 

by this subsection, during the second such twelve-month 

period in amounts equal to one-fourth of those otherwise 

required, during the third such twelve-month period in 

amounts equal to three-eighths of those otherwise required, during the fourth twelve-month period in amounts 

equal to one-half of those otherwise required, and

 1 during 

the fifth twelve-month period in amounts equal to fiveeighths of those otherwise required, during the sixth 

twelve-month period in amounts equal to three-fourths of 

those otherwise required, and during the seventh twelve1

 So in original. The word "and" probably should be omitted. 
Sec. 10A FEDERAL RESERVE ACT 966 

month period in amounts equal to seven-eighths of those 

otherwise required. This subparagraph does not apply to 

any category of deposits or accounts which are first authorized pursuant to Federal law in any State after April 1, 

1980. 

(B) with respect to any bank which was a member of 

the Federal Reserve System during the entire period 

beginning on July 1, 1979, and ending on the effective date 

of the Monetary Control Act of 1980, the amount of required reserves imposed pursuant to this subsection on 

and after the effective date of such Act that exceeds the 

amount of reserves which would have been required of 

such bank if the reserve ratios in effect during the reserve 

computation period immediately preceding such effective 

date were applied may, at the discretion of the Board and 

in accordance with such rules and regulations as it may 

adopt, be reduced by 75 per centum during the first year 

which begins after such effective date, 50 per centum during the second year, and 25 per centum during the third 

year. 

(C)(i) With respect to any bank which is a member of 

the Federal Reserve System on the effective date of the 

Monetary Control Act of 1980, the amount of reserves 

which would have been required of such bank if the reserve ratios in effect during the reserve computation period immediately preceding such effective date were applied that exceeds the amount of required reserves imposed pursuant to this subsection shall, in accordance with 

such rules and regulations as the Board may adopt, be reduced by 25 per centum during the first year which begins 

after such effective date, 50 per centum during the second 

year, and 75 per centum during the third year. 

(ii) If a bank becomes a member bank during the fouryear period beginning on the effective date of the Monetary 

Control Act of 1980, and if the amount of reserves which 

would have been required of such bank, determined as if 

the reserve ratios in effect during the reserve computation 

period immediately preceding such effective date were applied, and as if such bank had been a member during such 

period, exceeds the amount of reserves required pursuant 

to this subsection, the amount of reserves required to be 

maintained by such bank beginning on the date on which 

such bank becomes a member of the Federal Reserve System shall be the amount of reserves which would have 

been required of such bank if it had been a member on the 

day before such effective date, except that the amount of 

such excess shall, in accordance with such rules and regulations as the Board may adopt, be reduced by 25 per centum during the first year which begins after such effective 

date, 50 per centum during the second year, and 75 per 

centum during the third year. 

(D)(i) Any bank which was a member bank on July 1, 

1979, and which withdrew from membership in the Federal Reserve System during the period beginning on July 
967 FEDERAL RESERVE ACT Sec. 10B 

1, 1979, and ending on March 31, 1980, shall maintain reserves during the first twelve-month period beginning on 

the date of enactment of this clause in amounts equal to 

one-half of those otherwise required by this subsection, 

during the second such twelve-month period in amounts 

equal to two-thirds of those otherwise required, and during 

the third such twelve-month period in amounts equal to 

five-sixths of those otherwise required. 

(ii) Any bank which withdraws from membership in 

the Federal Reserve System on or after the date of enactment of the Depository institutions Deregulation and Monetary Control Act of 1980 shall maintain reserves in the 

same amount as member banks are required to maintain 

under this subsection, pursuant to subparagraphs (B) and 

(C)(i). 

(E) This subparagraph applies to any depository institution that, on August 1, 1978, (i) was engaged in business 

as a depository institution in a State outside the continental limits of the United States, and (ii) was not a member of the Federal Reserve System at any time on or after 

such date. Such a depository institution shall not be required to maintain reserves against such deposits held or 

maintained at its offices located in a State outside the continental limits of the United States until the first day of 

the sixth calendar year which begins after the effective 

date of the Monetary Control Act of 1980. Such a depository institution shall maintain reserves against such deposits during the sixth calendar year which begins after 

such effective date in an amount equal to one-eighth of 

that otherwise required by paragraph (2), during the seventh such year in an amount equal to one-fourth of that 

otherwise required, during the eighth such year in an 

amount equal to three-eighths of that otherwise required, 

during the ninth such year in an amount equal to one-half 

of that otherwise required, during the tenth such year in 

an amount equal to five-eighths of that otherwise required, 

during the eleventh such year in an amount equal to 

three-fourths of that otherwise required, and during the 

twelth such year in an amount equal to seven-eighths of 

that otherwise required. 

(9) EXEMPTION.—This subsection shall not apply with respect to any financial institution which— 

(A) is organized solely to do business with other financial institutions; 

(B) is owned primarily by the financial institutions 

with which it does business; and 

(C) does not do business with the general public. 

(10) WAIVERS.—In individual cases, where a Federal supervisory authority waives a liquidity requirement, or waives the 

penalty for failing to satisfy a liquidity requirement, the Board 

shall waive the reserve requirement, or waive the penalty for 

failing to satisfy a reserve requirement, imposed pursuant to 

this subsection for the depository institution involved when requested by the Federal supervisory authority involved. 
Sec. 10A FEDERAL RESERVE ACT 968 

(11) ADDITIONAL EXEMPTIONS.—(A)(i) Notwithstanding the 

reserve requirement ratios established under paragraphs (2) 

and (5) of this subsection, a reserve ratio of zero per centum 

shall apply to any combination of reservable liabilities, which 

do not exceed $2,000,000 (as adjusted under subparagraph 

(B)), of each depository institution. 

(ii) Each depository institution may designate, in accordance with such rules and regulations as the Board shall prescribe, the types and amounts of reservable liabilities to which 

the reserve ratio of zero per centum shall apply, except that 

transaction accounts which are designated to be subject to a reserve ratio of zero per centum shall be accounts which would 

otherwise be subject to a reserve ratio of 3 per centum under 

paragraph (2). 

(iii) The Board shall minimize the reporting necessary to 

determine whether depository institutions have total 

reservable liabilities of less than $2,000,000 (as adjusted under 

subparagraph (B)). Consistent with the Board's responsibility 

to monitor and control monetary and credit aggregates, depository institutions which have reserve requirements under this 

subsection equal to zero per centum shall be subject to less 

overall reporting requirements than depository institutions 

which have a reserve requirement under this subsection that 

exceeds zero per centum. 

(B)(i) Beginning in 1982, not later than December 31 of 

each year, the Board shall issue a regulation increasing for the 

next succeeding calendar year the dollar amount specified in 

subparagraph (A), as previously adjusted under this subparagraph, by an amount obtained by multiplying such dollar 

amount by 80 per centum of the percentage increase in the 

total reservable liabilities of all depository institutions. 

(ii) The increase in total reservable liabilities shall be 

determined by subtracting the amount of total reservable liabilities on June 30 of the preceding calendar year from the 

amount of total reservable liabilities on June 30 of the calendar year involved. in the case of any such twelve-month period in which there has been a decrease in the total reservable 

liabilities of all depository institutions, no adjustment shall be 

made. A decrease in total reservable liabilities shall be determined by subtracting the amount of total reservable liabilities 

on June 30 of the calendar year involved from the amount of 

total reservable liabilities on June 30 of the previous calendar 

year. (12 U.S.C. 461(b)) 

[Composition of reserves] 

(c)(1) Reserves held by a depository institution to meet the 

requirements imposed pursuant to subsection (b) shall, subject to 

such rules and regulations as the Board shall prescribe, be in the 

form of— 

(A) balances maintained for such purposes by such depository institution in the Federal Reserve bank of which it is a 

member or at which it maintains an account, except that (i) 

the Board may, by regulation or order, permit depository institutions to maintain all or a portion of their required reserves 
969 FEDERAL RESERVE ACT Sec. 10B 

in the form of vault cash, except that any portion so permitted 

shall be identical for all depository institutions, and (ii) vault 

cash may be used to satisfy any supplemental reserve requirement imposed pursuant to subsection (b)(4), except that all 

such vault cash shall be excluded from any computation of 

earnings pursuant to subsection (b)(4)(C); and 

(B) balances maintained by a depository institution which 

is not a member bank in a depository institution which maintains required reserve balances at a Federal Reserve bank, in 

a Federal Home Loan Bank, or in the National Credit Union 

Administration Central Liquidity Facility, if such depository 

institution, Federal Home Loan Bank, or National Credit 

Union Administration Central Liquidity Facility maintains 

such funds in the form of balances in a Federal Reserve bank 

of which it is a member or at which it maintains an account. 

Balances received by a depository institution from a second 

depository institution and used to satisfy the reserve requirement imposed on such second depository institution by this 

section shall not be subject to the reserve requirements of this 

section imposed on such first depository institution, and shall 

not be subject to assessments or reserves imposed on such first 

depository institution pursuant to section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817), section 404 of the National Housing Act1

 (12 U.S.C. 1727), or section 202 of the 

Federal Credit Union Act (12 U.S.C. 1782). 

(2) The balances maintained to meet the reserve requirements 

of subsection (b) by a depository institution in a Federal Reserve 

bank or passed through a Federal Home Loan Bank or the National Credit Union Administration Central Liquidity Facility or 

another depository institution to a Federal Reserve bank may be 

used to satisfy liquidity requirements which may be imposed under 

other provisions of Federal or State law. (12 U.S.C. 461(c)) 

[Member banks making security loans for others] 

(d) No member bank shall act as the medium or agent of any 

nonbanking corporation, partnership, association, business trust, or 

individual in making loans on the security of stocks, bonds, and 

other investment securities to brokers or dealers in stocks, bonds, 

and other investment securities. Every violation of this provision 

by any member bank shall be punishable by a fine of not more 

than $100 per day during the continuance of such violation; and 

such fine may be collected, by suit or otherwise, by the Federal reserve bank of the district in which such member bank is located. 

(12 U.S.C. 374a) 

[Deposits with, and discounts for, nonmember banks] 

(e) No member bank shall keep on deposit with any depository 

institution which is not authorized to have access to Federal Reserve advances under section 10(b) of this Act a sum in excess of 

10 per centum of its own paid-up capital and surplus. No member 

bank shall act as the medium or agent of a nonmember bank in 

applying for or receiving discounts from a Federal reserve bank 

1

 Title IV of the National Housing Act was repealed by section 407 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (see 103 Stat. 363). 
Sec. 10A FEDERAL RESERVE ACT 9 70 

under the provisions of this Act, except by permission of the Board 

of Governors of the Federal Reserve System. (12 U.S.C. 463 and 

374) 

[Checking against and withdrawal of reserve balance] 

(f) The required balance carried by a member bank with a Federal reserve bank may, under the regulations and subject to such 

penalties as may be prescribed by the Board of Governors of the 

Federal Reserve System, be checked against and withdrawn by 

such member bank for the purpose of meeting existing liabilities. 

(12 U.S.C. 464) 

[Deductions in computing reserves] 

(g) In estimating the reserve balances required by this Act, 

member banks may deduct from the amount of their gross demand 

deposits the amounts of balances due from other banks (except 

Federal Reserve banks and foreign banks) and cash items in process of collection payable immediately upon presentation in the 

United States, within the meaning of these terms as defined by the 

Board of Governors of the Federal Reserve System. (12 U.S.C. 465) 

[Banks in dependencies and insular possessions as member banks; reserves] 

(h) National banks, or banks organized under local laws, located in a dependency or insular posssession or any part of the 

United States outside the continental United States may remain 

nonmember banks, and shall in that event maintain reserves and 

comply with all the conditions now provided by law regulating 

them; or said banks may, with the consent of the Board of Governors of the Federal Reserve System, become member banks of 

any one of the reserve districts, and shall in that event take stock, 

maintain reserves, and be subject to all the other provisions of this 

Act.(12 U.S.C. 466) 

[Interest on demand deposits] 

(i) No member bank shall, directly or indirectly, by any device 

whatsoever, pay any interest on any deposit which is payable on 

demand: Provided, That nothing herein contained shall be construed as prohibiting the payment of interest in accordance with 

the terms of any certificate of deposit or other contract entered into 

in good faith which is in force on the date on which the bank becomes subject to the provisions of this paragraph; but no such certificate of deposit or other contract shall be renewed or extended 

unless it shall be modified to conform to this paragraph, and every 

member bank shall take such action as may be necessary to conform to this paragraph as soon as possible consistently with its contractual obligations: Provided further, That this paragraph shall 

not apply to any deposit of such bank which is payable only at an 

office thereof located outside of the States of the United States and 

the District of Columbia: Provided further, That until the expiration of two years after the date of enactment of the Banking Act 

of 1935 this paragraph shall not apply (1) to any deposit made by 
971 FEDERAL RESERVE ACT Sec. 10B 

a savings bank as defined in section 12B1 of this Act, as amended, 

or by a mutual savings bank, or (2) to any deposit of public funds 

made by or on behalf of any State, county, school district, or other 

subdivision or municipality, or to any deposit of trust funds if the 

payment of interest with respect to such deposit of public funds or 

of trust funds is required by State law. So much of existing law as 

requires the payment of interest with respect to any funds deposited by the United States, by any Territory, District, or possession 

thereof (including the Philippine Islands), or by any public instrumentality, agency, or officer of the foregoing, as is inconsistent with 

the provisions of this section as amended, is hereby repealed. Notwithstanding any other provision of this section, a member bank 

may permit withdrawals to be made automatically from a savings 

deposit that consists only of funds in which the entire beneficial interest is held by one or more individuals through payment to the 

bank itself or through transfer of credit to a demand deposit or 

other account pursuant to written authorization from the depositor 

to make such payments or transfers in connection with checks or 

drafts drawn upon the bank, pursuant to terms and conditions prescribed by the Board. (12 U.S.C. 371a) 

[Interes t on, an d paymen t of, tim e an d savings deposits ] 

(j) The Board may from time to time, after consulting with the 

Board of Directors of the Federal Deposit insurance Corporation 

and the Director of the Office of Thrift Supervision, prescribe rules 

governing the payment and advertisement of interest on deposits, 

including limitations on the rates of interest which may be paid by 

member banks on time and savings deposits. The Board may prescribe different rate limitations for different classes of deposits, for 

deposits of different amounts or with different maturities or subject 

to different conditions regarding withdrawal or repayment, according to the nature or location of member banks or their depositors, 

or according to such other reasonable bases as the Board may deem 

desirable in the public interest. No member bank shall pay any 

time deposit before its maturity except upon such conditions and 

in accordance with such rules and regulations as may be prescribed 

by the said Board, or waive any requirement of notice before payment of any savings deposit except as to all savings deposits having the same requirement: Provided, That the provisions of this 

paragraph shall not apply to any deposit which is payable only at 

an office of a member bank located outside of the States of the 

United States and the District of Columbia. During the period commencing on October 15, 1962, and ending on October 15, 1968, the 

provisions of this paragraph shall not apply to the rate of interest 

which may be paid by member banks on time deposits of foreign 

governments, monetary and financial authorities of foreign governments when acting as such, or international financial institutions 

of which the United States is a member. (12 U.S.C. 371b) 

(k)2 No member bank or affiliate thereof, or any successor or 

assignee of such member bank or affiliate or any endorser, guarantor, or surety of such member bank or affiliate may plead, raise, 

1

 Section 12B was repealed and then enacted as the Federal Deposit Insurance Act. See section 3(g) of the Federal Deposit Insurance Act for the definition of ''savings bank''. 

2

This subsection ceased to be effective on July 1, 1977. 
Sec. 19 FEDERAL RESERVE ACT 9 72 

or claim directly or by counterclaim, setoff, or otherwise, with respect to any deposit or obligation of such member bank or affiliate, 

any defense, right, or benefit under any provision of a statute or 

constitution of a State or of a territory of the United States, or of 

any law of the District of Columbia, regulating or limiting the rate 

of interest which may be charged, taken, received, or reserved, and 

any such provision is hereby preempted, and no civil or criminal 

penalty which would otherwise be applicable under such provision 

shall apply to such member bank or affiliate or to any other person. 

(l) CIVI L MONE Y PENALTY.— 

(1) FIRST TIER.—Any member bank which, and any institution-affiliated party (within the meaning of section 3(u) of the 

Federal Deposit Insurance Act) with respect to such member 

bank who, violates any provision of this section, or any regulation issued pursuant thereto, shall forfeit and pay a civil penalty of not more than $5,000 for each day during which such 

violation continues. 

(2) SECOND TIER.—Notwithstanding paragraph (1), any 

member bank which, and any institution-affiliated party 

(within the meaning of section 3(u) of the Federal Deposit 

Insurance Act) with respect to such member bank who— 

(A)(i) commits any violation described in paragraph 

(1); 

(ii) recklessly engages in an unsafe or unsound practice in conducting the affairs of such member bank; or 

(iii) breaches any fiduciary duty; 

(B) which violation, practice, or breach— 

(i) is part of a pattern of misconduct; 

(ii) causes or is likely to cause more than a minimal loss to such member bank; or 

(iii) results in pecuniary gain or other benefit to 

such party, 

shall forfeit and pay a civil penalty of not more than 

$25,000 for each day during which such violation, practice, 

or breach continues. 

(3)1 THIR D TIER.—Notwithstanding paragraphs (1) and 

(2), any member bank which, and any institution-affiliated 

party (within the meaning of section 3(u) of the Federal 

Deposit Insurance Act) with respect to such member bank 

who— 

(A) knowingly— 

(i) commits any violation described in paragraph 

(1); 

(ii) engages in any unsafe or unsound practice in 

conducting the affairs of such member bank; or 

(iii) breaches any fiduciary duty; and 

(B) knowingly or recklessly causes a substantial loss to 

such member bank or a substantial pecuniary gain or 

other benefit to such party by reason of such violation, 

practice, or breach, 

shall forfeit and pay a civil penalty in an amount not to exceed 

the applicable maximum amount determined under paragraph 

1

 indentation so in law. 
973 FEDERAL RESERVE ACT Sec. 10B 

(4) for each day during which such violation, practice, or 

breach continues. 

(4) MAXIMU M AMOUNTS OF PENALTIES FOR ANY VIOLATION 

DESCRIBED I N PARAGRAPH (3).—The maximum daily amount of 

any civil penalty which may be assessed pursuant to paragraph (3) for any violation, practice, or breach described in 

such paragraph is— 

(A) in the case of any person other than a member 

bank, an amount not to exceed $1,000,000; and 

(B) in the case of a member bank, an amount not to 

exceed the lesser of— 

(i) $1,000,000; or 

(ii) 1 percent of the total assets of such member 

bank. 

(5) ASSESSMENT; ETC.—An y penalty imposed under paragraph (1), (2), or (3) may be assessed and collected by the 

Board in the manner provided in subparagraphs (E), (F), (G), 

and (I) of section 8(i)(2) of the Federal Deposit Insurance Act 

for penalties imposed (under such section) and any such 

assessment shall be subject to the provisions of such section. 

(6) HEARING.—The member bank or other person against 

whom any penalty is assessed under this subsection shall be 

afforded an agency hearing if such member bank or person 

submits a request for such hearing within 20 days after the 

issuance of the notice of assessment. Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under 

this subsection. 

(7) DISBURSEMENT.—Al l penalties collected under authority of this subsection shall be deposited into the Treasury. 

(8) VIOLATE DEFINED.—For purposes of this section, the 

term "violate" includes any action (alone or with another or 

others) for or toward causing, bringing about, participating in, 

counseling, or aiding or abetting a violation. 

(9) REGULATIONS.—The Board shall prescribe regulations 

establishing such procedures as may be necessary to carry out 

this subsection. 

( m ) NOTICE UNDE R THIS SECTION AFTER SEPARATION FRO M 

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 member bank (including a separation caused by the 

closing of such a bank) shall not affect the jurisdiction and authority of the Board 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 bank (whether such date occurs 

before, on, or after the date of the enactment of this subsection). 

(12 U.S.C. 505) 

NATIONAL BANK NOTES REDEMPTION FUND AS RESERVE 

[1. Fund for redemption of national bank notes not be counted as reserve] 

SEC. 20. So much of sections two and three of the Act of June 

twentieth, eighteen hundred and seventy-four, entitled "An Act fix-
Sec. 10A FEDERAL RESERVE ACT 9 74 

ing the amount of United States notes, providing for a redistribution of the national-bank currency, and for other purposes'', as provides that the fund deposited by any national banking association 

with the Treasurer of the United States for the redemption of its 

notes shall be counted as a part of its lawful reserve as provided 

in the Act aforesaid, is hereby repealed. And from and after the 

passage of this Act such fund of five per centum shall in no case 

be counted by any national banking association as a part of its lawful reserve. (12 U.S.C. 121) 

BANK EXAMINATIONS. 

[Amendment of section 5240, Revised Statutes] 

[Section 21 amended section 5240 of the Revised Statutes.] 

[OFFENSES OF EXAMINERS, MEMBER BANKS, OFFICERS, AND 

DIRECTORS] 

[SEC. 22. 

[Subsections (a), (b), and (c) were repealed by sec. 21 of the Act 

of June 25, 1948 (62 Stat. 864), but the substance of such subsections was incorporated in sections 212, 213, 215, 655, 1906, and 

1909 of title 18, United States Code.] 

[Purchases by member banks from their directors] 

(d) Any member bank may contract for, or purchase from, any 

of its directors or from any firm of which any of its directors is a 

member, any securities or other property, when (and not otherwise) 

such purchase is made in the regular course of business upon 

terms not less favorable to the bank than those offered to others, 

or when such purchase is authorized by a majority of the board of 

directors not interested in the sale of such securities or property, 

such authority to be evidenced by the affirmative vote or written 

assent of such directors: Provided, however, That when any director, or firm of which any director is a member, acting for or on behalf of others, sells securities or other property to a member bank, 

the Board of Governors of the Federal Reserve System by regulation may, in any or all cases, require a full disclosure to be made, 

on forms to be prescribed by it, of all commissions or other considerations received, and whenever such director or firm, acting in his 

or its own behalf, sells securities or other property to the bank the 

Board of Governors of the Federal Reserve System, by regulation, 

may require a full disclosure of all profit realized from such sale. 

(12 U.S.C. 375) 

[Sales by member banks to their directors] 

Any member bank may sell securities or other property to any 

of its directors, or to a firm of which any of its directors is a member, in the regular course of business on terms not more favorable 

to such director or firm than those offered to others, or when such 

sale is authorized by a majority of the board of directors of a member bank to be evidenced by their affirmative vote or written assent: Provided, however, That nothing in this subsection contained 

shall be construed as authorizing member banks to purchase or sell 
975 FEDERAL RESERVE ACT Sec. 10B 

securities or other property which such banks are not otherwise 

authorized by law to purchase or sell. (12 U.S.C. 375) 

[Interest on deposits of directors, officers, and employees] 

(e) No member bank shall pay to any director, officer, attorney, 

or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors 

on similar deposits with such member bank. (12 U.S.C. 376) 

[Liability for damages resulting from violations] 

(f) if the directors or officers of any member bank shall knowingly violate or permit any of the agents, officers, or directors of 

any member bank to violate any of the provisions of this section 

or regulations of the board made under authority thereof, or any 

of the provisions of sections 217, 218, 219, 220, 655, 1005, 1014, 

1906, or 1909 of Title 18, United States Code, every director and 

officer participating in or assenting to such violation shall be held 

liable in his personal and individual capacity for all damages which 

the member bank, its shareholders, or any other persons shall have 

sustained in consequence of such violation. (12 U.S.C. 503) 

[Loans to executive officers by member banks] 

(g)(1) Except as authorized under this subsection, no member 

bank may extend credit in any manner to any of its own executive 

officers. No executive officer of any member bank may become indebted to that member bank except by means of an extension of 

credit which the bank is authorized to make under this subsection. 

Any extension of credit under this subsection shall be promptly reported to the board of directors of the bank, and may be made only 

if— 

(A) the bank would be authorized to make it to borrowers 

other than its officers; 

(B) it is on terms not more favorable than those afforded 

other borrowers; 

(C) the officer has submitted a detailed current financial 

statement; and 

(D) it is on condition that it shall become due and payable 

on demand of the bank at any time when the officer is indebted to any other bank or banks on account of extensions of 

credit of any one of the three categories respectively referred 

to in paragraphs (2), (3), and (4) in an aggregate amount 

greater than the amount of credit of the same category that 

could be extended to him by the bank of which he is an officer. 

(2) A member bank may make a loan to any executive officer 

of the bank if, at the time the loan is made— 

(A) it is secured by a first lien on a dwelling which is expected, after the making of the loan, to be owned by the officer 

and used by him as his residence, and 

(B) no other loan by the bank to the officer under authority of this paragraph is outstanding. 

(3) A member bank may make extensions of credit to any executive officer of the bank to finance the education of the children of 

the officer. 

(4) A member bank may make extensions of credit not otherwise specifically authorized under this subsection to any executive 
Sec. 10A FEDERAL RESERVE ACT 976 

officer of the bank in an amount prescribed in a regulation of the 

member bank's appropriate Federal banking agency. 

(5) Except to the extent permitted under paragraph (4), a 

member bank may not extend credit to a partnership in which one 

or more of its executive officers are partners having either individually or together a majority interest. For the purposes of paragraph 

(4), the full amount of any credit so extended shall be considered 

to have been extended to each officer of the bank who is a member 

of the partnership. 

(6) Whenever an executive officer of a member bank becomes 

indebted to any bank or banks (other than the one of which he is 

an officer) on account of extensions of credit of any one of the three 

categories respectively referred to in paragraphs (2), (3) and (4) in 

an aggregate amount greater than the aggregate amount of credit 

of the same category that could lawfully be extended to him by the 

bank, he shall make a written report to the board of directors of 

the bank, stating the date and amount of each such extension of 

credit, the security therefor, and the purposes for which the proceeds have been or are to be used. 

(7) This subsection does not prohibit any executive officer of a 

member bank from endorsing or guaranteeing for the protection of 

the bank any loan or other asset previously acquired by the bank 

in good faith or from incurring any indebtedness to the bank for 

the purpose of protecting the bank against loss or giving financial 

assistance to it. 

(8) Each day that any extension of credit in violation of this 

subsection exists is a continuation of the violation for the purposes 

of section 8 of the Federal Deposit Insurance Act. 

(9) Each member bank shall include with (but not as part of) 

each report of condition and copy thereof filed under section 7(a)(3) 

of the Federal Deposit Insurance Act a report of all loans under authority of this subsection made by the bank since its previous report of condition. 

(10) The Board of Governors of the Federal Reserve System 

may prescribe such rules and regulations, including definitions of 

terms, as it deems necessary to effectuate the purposes and to prevent evasions of this subsection. (12 U.S.C. 375a). 

(h) EXTENSIONS OF CREDIT TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS OF MEMBE R BANKS.— 

(1) I N GENERAL.—No member bank may extend credit to 

any of its executive officers, directors, or principal shareholders, or to any related interest of such a person, except to 

the extent permitted under paragraphs (2), (3), (4), (5), and (6). 

(2) PREFERENTIAL TERMS PROHIBITED.— 

(A) I N GENERAL.—A member bank may extend credit 

to its executive officers, directors, or principal shareholders, or to any related interest of such a person, only 

if the extension of credit— 

(i) is made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions by the 

bank with persons who are not executive officers, 

directors, principal shareholders, or employees of the 

bank; 
977 FEDERAL RESERVE ACT Sec. 10B 

(ii) does not involve more than the normal risk of 

repayment or present other unfavorable features; and 

(iii) the bank follows credit underwriting procedures that are not less stringent than those applicable 

to comparable transactions by the bank with persons 

who are not executive officers, directors, principal 

shareholders, or employees of the bank. 

(B) EXCEPTION.—Nothing in this paragraph shall prohibit any extension of credit made pursuant to a benefit or 

compensation program— 

(i) that is widely available to employees of the 

member bank; and 

(ii) that does not give preference to any officer, director, or principal shareholder of the member bank, 

or to any related interest of such person, over other 

employees of the member bank. 

(3) PRIOR APPROVAL REQUIRED.—A member bank may extend credit to a person described in paragraph (1) in an 

amount that, when aggregated with the amount of all other 

outstanding extensions of credit by that bank to each such person and that person's related interests, would exceed an 

amount prescribed by regulation of the appropriate Federal 

banking agency (as defined in section 3 of the Federal Deposit 

Insurance Act) only if— 

(A) the extension of credit has been approved in advance by a majority vote of that bank's entire board of 

directors; and 

(B) the interested party has abstained from participating, directly or indirectly, in the deliberations or voting 

on the extension of credit. 

(4) AGGREGATE LIMIT ON EXTENSIONS OF CREDIT TO ANY 

EXECUTIVE OFFICER, DIRECTOR, OR PRINCIPAL SHAREHOLDER.—A 

member bank may extend credit to any executive officer, director, or principal shareholder, or to any related interest of such 

a person, only if the extension of credit is in an amount that, 

when aggregated with the amount of all outstanding extensions of credit by that bank to that person and that person's 

related interests, would not exceed the limits on loans to a single borrower established by section 5200 of the Revised Statutes. For purposes of this paragraph, section 5200 of the Revised Statutes shall be deemed to apply to a State member 

bank as if the State member bank were a national banking 

association. 

(5) AGGREGATE LIMIT ON EXTENSIONS OF CREDIT TO ALL 

EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS.— 

(A) I N GENERAL.—A member bank may extend credit 

to any executive officer, director, or principal shareholder, 

or to any related interest of such a person, if the extension 

of credit is in an amount that, when aggregated with the 

amount of all outstanding extensions of credit by that 

bank to its executive officers, directors, principal shareholders, and those persons' related interests would not ex-
Sec. 10A FEDERAL RESERVE ACT 978 

ceed the bank's unimpaired capital and unimpaired surplus. 

(B) MOR E STRINGEN T LIMI T AUTHORIZED.—Th e Board 

may, by regulation, prescribe a limit that is more stringent 

than that contained in subparagraph (A). 

( C ) BOARD MA Y MAK E EXCEPTIONS FOR CERTAI N 

BANKS.—The Board may, by regulation, make exceptions to 

subparagraph (A) for member banks with less than 

$100,000,000 in deposits if the Board determines that the 

exceptions are important to avoid constricting the availability of credit in small communities or to attract directors to such banks. In no case may the aggregate amount 

of all outstanding extensions of credit to a bank's executive 

officers, directors, principal shareholders, and those persons' related interests be more than 2 times the bank's 

unimpaired capital and unimpaired surplus. 

( 6 ) OVERDRAFTS BY EXECUTIVE OFFICERS AN D DIRECTORS 

PROHIBITED. — 

(A) I N GENERAL.—I f any executive officer or director 

has an account at the member bank, the bank may not pay 

on behalf of that person an amount exceeding the funds on 

deposit in the account. 

(B) EXCEPTIONS.—Subparagraph (A) does not prohibit 

a member bank from paying funds in accordance with— 

(i) a written preauthorized, interest-bearing extension of credit specifying a method of repayment; or 

(ii) a written preauthorized transfer of funds from 

another account of the executive officer or director at 

that bank. 

( 7 ) PROHIBITIO N O N KNOWINGLY RECEIVIN G UNAUTHORIZE D 

EXTENSIO N OF CREDIT.—N o executive officer, director, or principal shareholder shall knowingly receive (or knowingly permit 

any of that person's related interests to receive) from a member bank, directly or indirectly, any extension of credit not 

authorized under this subsection. 

( 8 ) EXECUTIV E OFFICER, DIRECTOR, OR PRINCIPAL SHAREHOLDE R OF CERTAI N AFFILIATES TREATED AS EXECUTIVE OFFICER, DIRECTOR, OR PRINCIPAL SHAREHOLDER OF MEMBE R 

BANK. — 

(A) IN GENERAL.—For1 purposes of this subsection, 

any executive officer, director, or principal shareholder (as 

the case may be) of any company of which the member 

bank is a subsidiary, or of any other subsidiary of that 

company, shall be deemed to be an executive officer, director, or principal shareholder (as the case may be) of the 

member bank. 

(B) EXCEPTION.—Th e Board may, by regulation, make 

exceptions to subparagraph (A) for any executive officer or 

1

 Section 334(b)(1) of P.L. 103-325 amended this paragraph as follows: 

(b) EXTENSION S OF CREDI T TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS OF MEMBER BANKS.—Section 22(h)(8) of the Federal Reserve Act (12 U.S.C. 375b(8)) 

is amended— 

(1) by striking "MEMBER BANK.—FOR'' and inserting the following: "MEMBER BANK.— 

''(A) IN GENERAL.—For''; and 

The amendment probably should have been to strike "MEMBER BANK.—For''. 
979 FEDERAL RESERVE ACT Sec. 22 

director of a subsidiary of a company that controls the 

member bank if— 

(i) the executive officer or director does not have 

authority to participate, and does not participate, in 

major policymaking functions of the member bank; 

and 

(ii) the assets of such subsidiary do not exceed 10 

percent of the consolidated assets of a company that 

controls the member bank and such subsidiary (and is 

not controlled by any other company). 

(9) DEFINITIONS.—For purposes of this subsection: 

(A) COMPANY.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

the term "company" means any corporation, partnership, business or other trust, association, joint venture, pool syndicate, sole proprietorship, unincorporated organization, or other business entity. 

(ii) EXCEPTIONS.—The term "company" does not 

include— 

(i) an insured depository institution (as defined in section 3 of the Federal Deposit Insurance 

Act); or 

(ii) a corporation the majority of the shares of 

which are owned by the United States or by any 

State. 

(B) CONTROL.—A person controls a company or bank if 

that person, directly or indirectly, or acting through or in 

concert with 1 or more persons— 

(i) owns, controls, or has the power to vote 25 percent or more of any class of the company's voting securities; 

(ii) controls in any manner the election of a majority of the company's directors; or 

(iii) has the power to exercise a controlling influence over the company's management or policies. 

(C) EXECUTIVE OFFICER.—A person is an "executive officer'' of a company or bank if that person participates or 

has authority to participate (other than as a director) in 

major policymaking functions of the company or bank. 

( D ) EXTENSION OF CREDIT.— 

(i) I N GENERAL.—A member bank extends credit 

by making or renewing any loan, granting a line of 

credit, or entering into any similar transaction as a result of which a person becomes obligated (directly or 

indirectly, or by any means whatsoever) to pay money 

or its equivalent to the bank. 

(ii) EXCEPTIONS.—The Board may, by regulation, 

make exceptions to clause (i) for transactions that the 

Board determines pose minimal risk. 

(E)1 MEMBER BANK.—The term "member bank'' includes 

any subsidiary of a member bank. 

1

 indentation so in law. 
Sec. 10A FEDERAL RESERVE ACT 9 80 

(F) PRINCIPAL SHAREHOLDER.—The term ''principal 

shareholder''— 

(i) means any person that directly or indirectly, or 

acting through or in concert with one or more persons, 

owns, controls, or has the power to vote more than 10 

percent of any class of voting securities of a member 

bank or company; and 

(ii) does not include a company of which a member 

bank is a subsidiary. 

(G) RELATED INTEREST.—A ''related interest'' of a person is— 

(i) any company controlled by that person; and 

(ii) any political or campaign committee that is 

controlled by that person or the funds or services of 

which will benefit that person. 

(H) SUBSIDIARY.—The term ''subsidiary'' has the same 

meaning as in section 2 of the Bank Holding Company Act 

of 1956. 

(10) BOARD'S RULEMAKING AUTHORITY.—The Board of Governors of the Federal Reserve System may prescribe such regulations, including definitions of terms, as it determines to be 

necessary to effectuate the purposes and prevent evasions of 

this subsection. (12 U.S.C. 375b) 

INTERBANK LIABILITIES 

SEC. 23. (a) PURPOSE.—The purpose of this section is to limit 

the risks that the failure of a large depository institution (whether 

or not that institution is an insured depository institution) would 

pose to insured depository institutions. 

(b) AGGREGATE LIMITS ON INSURED DEPOSITORY INSTITUTIONS' 

EXPOSURE TO OTHER DEPOSITORY INSTITUTIONS.—The Board shall, 

by regulation or order, prescribe standards that have the effect of 

limiting the risks posed by an insured depository institution's exposure to any other depository institution. 

(c) EXPOSURE DEFINED. — 

(1) IN GENERAL.—For purposes of subsection (b), an insured depository institution's ''exposure'' to another depository 

institution means— 

(A) all extensions of credit to the other depository 

institution, regardless of name or description, including— 

(i) all deposits at the other depository institution; 

(ii) all purchases of securities or other assets from 

the other depository institution subject to an agreement to repurchase; and 

(iii) all guarantees, acceptances, or letters of credit 

(including endorsements or standby letters of credit) 

on behalf of the other depository institution; 

(B) all purchases of or investments in securities issued 

by the other depository institution; 

(C) all securities issued by the other depository institution accepted as collateral for an extension of credit to 

any person; and 
981 FEDERAL RESERVE ACT Sec. 10B 

(D) all similar transactions that the Board by regulation determines to be exposure for purposes of this section. 

(2) EXEMPTIONS.—The Board may, at its discretion, by regulation or order, exempt transactions from the definition of 

"exposure" if it finds the exemptions to be in the public interest 

and consistent with the purpose of this section. 

(3) ATTRIBUTION RULE.—Fo r purposes of this section, any 

transaction by an insured depository institution with any person is a transaction with another depository institution to the 

extent that the proceeds of the transaction are used for the 

benefit of, or transferred to, that other depository institution. 

(d) INSURED DEPOSITORY INSTITUTION.—For purposes of this 

section, the term ''insured depository institution'' has the same 

meaning as in section 3 of the Federal Deposit Insurance Act. 

(e) RULEMAKING AUTHORITY; ENFORCEMENT.—The Board may 

issue such regulations and orders, including definitions consistent 

with this section, as may be necessary to administer and carry out 

the purpose of this section. The appropriate Federal banking 

agency shall enforce compliance with those regulations under section 8 of the Federal Deposit Insurance Act. (12 U.S.C. 371b-2) 

[RELATIONS WIT H AFFILIATES] 

SEC. 23A . (a) RESTRICTIONS ON TRANSACTIONS WIT H AFFILIATES.— 

(1) A member bank and its subsidiaries may engage in a 

covered transaction with an affiliate only if— 

(A) in the case of any affiliate, the aggregate amount 

of covered transactions of the member bank and its subsidiaries will not exceed 10 per centum of the capital stock 

and surplus of the member bank; and 

(B) in the case of all affiliates, the aggregate amount 

of covered transactions of the member bank and its subsidiaries will not exceed 20 per centum of the capital stock 

and surplus of the member bank. 

(2) For the purpose of this section, any transaction by a 

member bank with any person shall be deemed to be a transaction with an affiliate to the extent that the proceeds of the 

transaction are used for the benefit of, or transferred to, that 

affiliate. 

(3) A member bank and its subsidiaries may not purchase 

a low-quality asset from an affiliate unless the bank or such 

subsidiary, pursuant to an independent credit evaluation, committed itself to purchase such asset prior to the time such 

asset was acquired by the affiliate. 

(4) Any covered transactions and any transactions exempt 

under subsection (d) between a member bank and an affiliate 

shall be on terms and conditions that are consistent with safe 

and sound banking practices. 

(b) DEFINITIONS.—Fo r the purpose of this section— 
Sec. 10A FEDERAL RESERVE ACT 9 82 

(1)1 the term ''affiliate'' with respect to a member bank 

means— 

(A) any company that controls the member bank and 

any other company that is controlled by the company that 

controls the member bank; 

(B) a bank subsidiary of the member bank; 

(C) any company— 

(i) that is controlled directly or indirectly, by a 

trust or otherwise, by or for the benefit of shareholders who beneficially or otherwise control, directly 

or indirectly, by trust or otherwise, the member bank 

or any company that controls the member bank; or 

(ii) in which a majority of its directors or trustees 

constitute a majority of the persons holding any such 

office with the member bank or any company that controls the member bank; 

(D)(i) any company, including a real estate investment 

trust, that is sponsored and advised on a contractual basis 

by the member bank or any subsidiary or affiliate of the 

member bank; or 

(ii) any investment company with respect to which a 

member bank or any affiliate thereof is an investment advisor as defined in section 2(a)(20) of the Investment Company Act of 1940; and 

(E) any company that the Board determines by regulation or order to have a relationship with the member bank 

or any subsidiary or affiliate of the member bank, such 

that covered transactions by the member bank or its subsidiary with that company may be affected by the relationship to the detriment of the member bank or its subsidiary; and

 2 

(2) the following shall not be considered to be an affiliate: 

(A) any company, other than a bank, that is a subsidiary of a member bank, unless a determination is made 

under paragraph (1)(E) not to exclude such subsidiary 

company from the definition of affiliate; 

(B) any company engaged solely in holding the premises of the member bank; 

(C) any company engaged solely in conducting a safe 

deposit business; 

(D) any company engaged solely in holding obligations 

of the United States or its agencies or obligations fully 

guaranteed by the United States or its agencies as to principal and interest; and 

(E) any company where control results from the exercise of rights arising out of a bona fide debt previously contracted, but only for the period of time specifically authorized under applicable State or Federal law or regulation 

1

This section was added to the Federal Reserve Act by section 14 of the Banking Act of 1933. 

Section 2(b) of the Banking Act of 1933 also defined the term ''affiliate'' for purposes of such 

Act and any provisions of law amended by such Act. This section was amended in its entirety 

by section 410(b) of the Garn-St Germain Depository Institutions Act of 1982. That amendment 

added the definition of affiliate in this section. 

2

 So in original. The word ''and'' probably should not appear. 
983 FEDERAL RESERVE ACT Sec. 10B 

or, in the absence of such law or regulation, for a period 

of two years from the date of the exercise of such rights 

or the effective date of this Act, whichever date is later, 

subject, upon application, to authorization by the Board for 

good cause shown of extensions of time for not more than 

one year at a time, but such extensions in the aggregate 

shall not exceed three years; 

(3)(A) a company or shareholder shall be deemed to have 

control over another company if— 

(i) such company or shareholder, directly or indirectly, 

or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any 

class of voting securities of the other company; 

(ii) such company or shareholder controls in any manner the election of a majority of the directors or trustees 

of the other company; or 

(iii) the Board determines, after notice and opportunity for hearing, that such company or shareholder, directly or indirectly, exercises a controlling influence over 

the management or policies of the other company; and 

(B) notwithstanding any other provision of this section, no 

company shall be deemed to own or control another company 

by virtue of its ownership or control of shares in a fiduciary capacity, except as provided in paragraph (1)(C) of this subsection or if the company owning or controlling such shares is 

a business trust; 

(4) the term ''subsidiary'' with respect to a specified company means a company that is controlled by such specified 

company; 

(5) the term ''bank'' includes a State bank, national bank, 

banking association, and trust company; 

(6) the term ''company'' means a corporation, partnership, 

business trust, association, or similar organization and, unless 

specifically excluded, the term ''company'' includes a ''member 

bank'' and a ''bank''; 

(7) the term ''covered transaction'' means with respect to 

an affiliate of a member bank— 

(A) a loan or extension of credit to the affiliate; 

(B) a purchase of or an investment in securities issued 

by the affiliate; 

(C) a purchase of assets, including assets subject to an 

agreement to repurchase, from the affiliate, except such 

purchase of real and personal property as may be specifically exempted by the Board by order or regulation; 

(D) the acceptance of securities issued by the affiliate 

as collateral security for a loan or extension of credit to 

any person or company; or 

(E) the issuance of a guarantee, acceptance, or letter 

of credit, including an endorsement or standby letter of 

credit, on behalf of an affiliate; 

(8) the term ''aggregate amount of covered transactions'' 

means the amount of the covered transactions about to be engaged in added to the current amount of all outstanding covered transactions; 
Sec. 10A FEDERAL RESERVE ACT 9 84 

(9) the term "securities" means stocks, bonds, debentures, 

notes, or other similar obligations; and 

(10) the term "low-quality asset'' means an asset that falls 

in any one or more of the following categories: 

(A) an asset classified as "substandard", "doubtful", or 

"loss" or treated as "other loans especially mentioned'' in 

the most recent report of examination or inspection of an 

affiliate prepared by either a Federal or State supervisory 

agency; 

(B) an asset in a nonaccrual status; 

(C) an asset on which principal or interest payments 

are more than thirty days past due; or 

(D) an asset whose terms have been renegotiated or 

compromised due to the deteriorating financial condition of 

the obligor. 

(11 ) REBUTTABLE PRESUMPTION OF CONTROL OF PORTFOLIO 

COMPANIES.—In addition to paragraph (3), a company or shareholder shall be presumed to control any other company if the 

company or shareholder, directly or indirectly, or acting 

through 1 or more other persons, owns or controls 15 percent 

or more of the equity capital of the other company pursuant to 

subparagraph (H) or (i) of section 4(k)(4) of the Bank Holding 

Company Act of 1956 or rules adopted under section 122 of the 

Gramm-Leach-Bliley Act, if any, unless the company or shareholder provides information acceptable to the Board to rebut 

this presumption of control. 

(c) COLLATERAL FOR CERTAIN TRANSACTIONS WIT H AFFILIATES.— 

(1) Each loan or extension of credit to, or guarantee, 

acceptance, or letter of credit issued on behalf of, an affiliate 

by a member bank or its subsidiary shall be secured at the 

time of the transaction by collateral having a market value 

equal to— 

(A) 100 per centum of the amount of such loan or 

extension of credit, guarantee, acceptance, or letter of 

credit, if the collateral is composed of— 

(i) obligations of the United States or its agencies; 

(ii) obligations fully guaranteed by the United 

States or its agencies as to principal and interest; 

(iii) notes, drafts, bills of exchange or bankers' 

acceptances that are eligible for rediscount or purchase by a Federal Reserve Bank; or 

(iv) a segregated, earmarked deposit account with 

the member bank; 

(B) 110 per centum of the amount of such loan or 

extension of credit, guarantee, acceptance, or letter of 

credit if the collateral is composed of obligations of any 

State or political subdivision of any State; 

(C) 120 per centum of the amount of such loan or 

extension of credit, guarantee, acceptance, or letter of 

credit if the collateral is composed of other debt instruments, including receivables; or 

(D) 130 per centum of the amount of such loan or 

extension of credit, guarantee, acceptance, or letter of 
985 FEDERAL RESERVE ACT Sec. 10B 

credit if the collateral is composed of stock, leases, or other 

real or personal property. 

(2) Any such collateral that is subsequently retired or 

amortized shall be replaced by additional eligible collateral 

where needed to keep the percentage of the collateral value relative to the amount of the outstanding loan or extension of 

credit, guarantee, acceptance, or letter of credit equal to the 

minimum percentage required at the inception of the transaction. 

(3) A low-quality asset shall not be acceptable as collateral 

for a loan or extension of credit to, or guarantee, acceptance, 

or letter of credit issued on behalf of, an affiliate. 

(4) The securities issued by an affiliate of the member 

bank shall not be acceptable as collateral for a loan or extension of credit to, or guarantee, acceptance, or letter of credit 

issued on behalf of, that affiliate or any other affiliate of the 

member bank. 

(5) The collateral requirments of this paragraph shall not 

be applicable to an acceptance that is already fully secured 

either by attached documents or by other property having an 

ascertainable market value that is involved in the transaction. 

(d) EXEMPTIONS.—The provisions of this section, except paragraph (a)(4), shall not be applicable to— 

(1) any transaction, subject to the prohibition contained in 

subsection (a)(3), with a bank— 

(A) which controls 80 per centum or more the voting 

shares of the member bank; 

(B) in which the member bank controls 80 per centum 

or more of the voting shares; or 

(C) in which 80 per centum or more of the voting 

shares are controlled by the company that controls 80 per 

centum or more of the voting shares of the member bank; 

(2) making deposits in an affiliated bank or affiliated foreign bank in the ordinary course of correspondent business, 

subject to any restrictions that the Board may prescribe by regulation or order; 

(3) giving immediate credit to an affiliate for uncollected 

items received in the ordinary course of business; 

(4) making a loan or extension of credit to, or issuing a 

guarantee, acceptance, or letter of credit on behalf of, an affiliate that is fully secured by— 

(A) obligations of the United States or its agencies; 

(B) obligations fully guaranteed by the United States 

or its agencies as to principal and interest; or 

(C) a segregated, earmarked deposit account with the 

member bank; 

(5) purchasing securities issued by any company of the 

kinds described in section 4(c)(1) of the Bank Holding Company Act of 1956; 

(6) purchasing assets having a readily identifiable and 

publicly available market quotation and purchased at that 

market quotation or, subject to the prohibition contained in 

subsection (a)(3), purchasing loans on a nonrecourse basis from 

affiliated banks; and 
Sec. 10A FEDERAL RESERVE ACT 986 

(7) purchasing from an affiliate a loan or extension of 

credit that was originated by the member bank and sold to the 

affiliate subject to a repurchase agreement or with recourse. 

(e) RULE S RELATIN G TO BANK S WIT H FINANCIA L SUBSIDIARIES.— 

(1) FINANCIA L SUBSIDIARY DEFINED.—Fo r purposes of this 

section and section 23B, the term ''financial subsidiary'' means 

any company that is a subsidiary of a bank that would be a 

financial subsidiary of a national bank under section 5136A of 

the Revised Statutes of the United States. 

( 2 ) FINANCIA L SUBSIDIARY TREATED AS A N AFFILIATE.—Fo r 

purposes of applying this section and section 23B, and notwithstanding subsection (b)(2) of this section or section 23B(d)(1), 

a financial subsidiary of a bank— 

(A) shall be deemed to be an affiliate of the bank; and 

(B) shall not be deemed to be a subsidiary of the bank. 

( 3 ) EXCEPTION S FOR TRANSACTIONS WIT H FINANCIA L SUBSIDIARIES.— 

( A ) EXCEPTIO N FRO M LIMI T O N COVERED TRANSACTIONS 

WIT H AN Y INDIVIDUA L FINANCIA L SUBSIDIARY.—Notwith -

standing paragraph (2), the restriction contained in subsection (a)(1)(A) shall not apply with respect to covered 

transactions between a bank and any individual financial 

subsidiary of the bank. 

( B ) EXCEPTIO N FOR EARNINGS RETAINE D BY FINANCIA L 

SUBSIDIARIES.—Notwithstanding paragraph (2) or subsection (b)(7), a bank's investment in a financial subsidiary 

of the bank shall not include retained earnings of the 

financial subsidiary. 

(4) ANTI-EVASIO N PROVISION.—Fo r purposes of this section 

and section 23B— 

(A) any purchase of, or investment in, the securities of 

a financial subsidiary of a bank by an affiliate of the bank 

shall be considered to be a purchase of or investment in 

such securities by the bank; and 

(B) any extension of credit by an affiliate of a bank to 

a financial subsidiary of the bank shall be considered to be 

an extension of credit by the bank to the financial subsidiary if the Board determines that such treatment is necessary or appropriate to prevent evasions of this Act and 

the Gramm-Leach-Bliley Act. 

(f) RULEMAKIN G AN D ADDITIONA L EXEMPTIONS. — 

(1) The Board may issue such further regulations and orders, including definitions consistent with this section, as may 

be necessary to administer and carry out the purposes of this 

section and to prevent evasions thereof. 

(2) The Board may, at its discretion, by regulation or order 

exempt transactions or relationships from the requirements of 

this section if it finds such exemptions to be in the public interest and consistent with the purposes of this section. (12 U.S.C. 

371c)1 

1Section 23A of the Federal Reserve Act, as amended by section 410(b) of the Garn-St Germain Depository Institutions Act of 1982, shall apply to any transaction entered into after the 

date of enactment of such Act, except for transactions which are the subject of a binding written 
987 FEDERAL RESERVE ACT Sec. 10B 

( 3 ) RULEMAKIN G REQUIRE D CONCERNIN G DERIVATIV E TRANSACTION S AN D INTRADA Y CREDIT. — 

(A) IN GENERAL.—Not later than 18 months after the 

date of the enactment of the Gramm-Leach-Bliley Act, the 

Board shall adopt final rules under this section to address 

as covered transactions credit exposure arising out of 

derivative transactions between member banks and their 

affiliates and intraday extensions of credit by member 

banks to their affiliates. 

(B) EFFECTIV E DATE.—Th e effective date of any final 

rule adopted by the Board pursuant to subparagraph (A) 

shall be delayed for such period as the Board deems necessary or appropriate to permit banks to conform their 

activities to the requirements of the final rule without 

undue hardship. 

RESTRICTION S O N TRANSACTION S WIT H AFFILIATE S 

SEC . 23B . (a ) I N GENERAL. — 

(1) TERMS.— A member bank and its subsidiaries may engage in any of the transactions described in paragraph (2) 

only— 

(A) on terms and under circumstances, including 

credit standards, that are substantially the same, or at 

least as favorable to such bank or its subsidiary, as those 

prevailing at the time for comparable transactions with or 

involving other nonaffiliated companies, or 

(B) in the absence of comparable transactions, on 

terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply 

to, nonaffiliated companies. 

(2) TRANSACTION S COVERED.—Paragraph (1) applies to the 

following: 

(A) Any covered transaction with an affiliate. 

(B) The sale of securities or other assets to an affiliate, 

including assets subject to an agreement to repurchase. 

(C) The payment of money or the furnishing of services to an affiliate under contract, lease, or otherwise. 

(D) Any transaction in which an affiliate acts as an 

agent or broker or receives a fee for its services to the 

bank or to any other person. 

(E) Any transaction or series of transactions with a 

third party— 

(i) if an affiliate has a financial interest in the 

third party, or 

(ii) if an affiliate is a participant in such transaction or series of transactions. 

( 3 ) TRANSACTION S THA T BENEFI T A N AFFILIATE.—Fo r th e 

purpose of this subsection, any transaction by a member bank 

contract or commitment entered into on or before July 28, 1982, and except that any renewal 

of a participation in a loan outstanding on July 28, 1982, to a company that becomes an affiliate 

as a result of the enactment of such Act, or any participation in a loan to such an affiliate emanating from the renewal of a binding written contract or commitment outstanding on July 28, 

1982, shall not be subject to the collateral requirements of the Act (see section 410(c) of the 

Garn-St Germain Depository Institutions Act of 1982, 96 Stat. 1520). 
Sec. 10A FEDERAL RESERVE ACT 988 

or its subsidiary with any person shall be deemed to be a 

transaction with an affiliate of such bank if any of the proceeds 

of the transaction are used for the benefit of, or transferred to, 

such affiliate. 

( b ) PROHIBITE D TRANSACTIONS. — 

(1) I N GENERAL.— A member bank or its subsidiary— 

(A) shall not purchase as fiduciary any securities or 

other assets from any affiliate unless such purchase is 

permitted— 

(i) under the instrument creating the fiduciary 

relationship, 

(ii) by court order, or 

(iii) by law of the jurisdiction governing the fiduciary relationship; and 

(B) whether acting as principal or fiduciary, shall not 

knowingly purchase or otherwise acquire, during the existence of any underwriting or selling syndicate, any security 

if a principal underwriter of that security is an affiliate of 

such bank. 

[(2) EXCEPTIONS.— ]

 1 Subparagraph (B) of paragraph (1) shall 

not apply if the purchase or acquisition of such securities has been 

approved, before such securities are initially offered for sale to the 

public, by a majority of the directors of the bank based on a determination that the purchase is a sound investment for the bank 

irrespective of the fact that an affiliate of the bank is a principal 

underwriter of the securities. 

(3) DEFINITIONS.—Fo r the purpose of this subsection— 

(A) the term "security'' has the meaning given to such 

term in section 3(a)(10) of the Securities Exchange Act of 

1934; and 

(B) the term "principal underwriter'' means any underwriter who, in connection with a primary distribution of 

securities— 

(i) is in privity of contract with the issuer or an 

affiliated person of the issuer; 

(ii) acting alone or in concert with one or more 

other persons, initiates or directs the formation of an 

underwriting syndicate; or 

(iii) is allowed a rate of gross commission, spread, 

or other profit greater than the rate allowed another 

underwriter participating in the distribution. 

(c) ADVERTISIN G RESTRICTION.— A member bank or any subsidiary or affiliate of a member bank shall not publish any advertisement or enter into any agreement stating or suggesting that the 

bank shall in any way be responsible for the obligations of its affiliates. 

(d) DEFINITIONS.—Fo r the purpose of this section— 

(1) the term "affiliate" has the meaning given to such term 

in section 23A (but does not include any company described in 

section2 (b)(2) of such section or any bank); 

1

 Paragraph (2) was amended in its entirety by section 738 of Public Law 106-102 (113 Stat. 

1480). Such amendment did not reinsert the paragraph designation and heading. 

2

 So in original. Probably should be "subsection". 
989 FEDERAL RESERVE ACT Sec. 10B 

(2) the terms ''bank'', ''subsidiary'', ''person'', and ''security'' 

(other than security as used in subsection (b)) have the meanings given to such terms in section 23A; and 

(3) the term ''covered transaction'' has the meaning given 

to such term in section 23A (but does not include any transaction which is exempt from such definition under subsection 

(d) of such section). 

(e) REGULATIONS.—The Board may prescribe regulations to 

administer and carry out the purposes of this section, including— 

(1) regulations to further define terms used in this section; 

and 

(2) regulations to— 

(A) exempt transactions or relationships from the 

requirements of this section; and 

(B) exclude any subsidiary of a bank holding company 

from the definition of affiliate for purposes of this section, 

if the Board finds such exemptions or exclusions are in the 

public interest and are consistent with the purposes of this section. (12 U.S.C. 371c-1) 

REAL ESTATE LOANS 

SEC. 24. (a) Any national banking association may make, arrange, purchase or sell loans or extensions of credits secured by 

liens on interests in real estate, subject to such terms, conditions, 

and limitations as may be prescribed by the Comptroller of the 

Currency by order, rule, or regulation. 

(b) Notes representing loans made under this section to finance 

the construction of residential or farm buildings and having maturities not to exceed nine months shall be eligible for discount as 

commercial paper within the terms of the second paragraph of section 13 of the Federal Reserve Act if accompanied by a valid and 

binding agreement to advance the full amount of the loan upon the 

completion of the building entered into by an individual, partnership, association, or corporation acceptable to the discounting bank. 

(12 U.S.C. 371) 

SEC. 24A. INVESTMENT I N BANK PREMISES OR STOCK OF CORPORATION HOLDING PREMISES. 

(a) CONDITIONS OF INVESTMENT.—No national bank or State 

member bank shall invest in bank premises, or in the stock, bonds, 

debentures, or other such obligations of any corporation holding the 

premises of such bank, or make loans to or upon the security of any 

such corporation— 

(1) unless the bank receives the prior approval of the 

Comptroller of the Currency (with respect to a national bank) 

or the Board (with respect to a State member bank); 

(2) unless the aggregate of all such investments and loans, 

together with the amount of any indebtedness incurred by any 

such corporation that is an affiliate of the bank, is less than 

or equal to the amount of the capital stock of such bank; or 

(3) unless— 

(A) the aggregate of all such investments and loans, 

together with the amount of any indebtedness incurred by 

any such corporation that is an affiliate of the bank, is less 
Sec. 10A FEDERAL RESERVE ACT 990 

than or equal to 150 percent of the capital and surplus of 

the bank; and 

(B) the bank— 

(i) has a CAMEL composite rating of 1 or 2 under 

the Uniform Financial Institutions Rating System (or 

an equivalent rating under a comparable rating system) as of the most recent examination of such bank; 

(ii) is well capitalized and will continue to be well 

capitalized after the investment or loan; and 

(iii) provides notification to the Comptroller of the 

Currency (with respect to a national bank) or to the 

Board (with respect to a State member bank) not later 

than 30 days after making the investment or loan. 

(b) DEFINITIONS.—For purposes of this section— 

(1) the term ''affiliate'' has the same meaning as in section 

2 of the Banking Act of 1933; and 

(2) the term ''well capitalized'' has the same meaning as in 

section 38(b) of the Federal Deposit Insurance Act. (12 U.S.C. 

371d) 

FOREIGN BRANCHES 

[1. Capital and surplus required to exercise powers] 

SEC. 25. Any national banking association possessing a capital 

and surplus of $1,000,000 or more may file application with the 

Board of Governors of the Federal Reserve System for permission 

to exercise, upon such conditions and under such regulations as 

may be prescribed by the said board, the following powers: (12 

U.S.C. 601) 

[Establishment of foreign branches] 

First. To establish branches in foreign countries or dependencies or insular possessions of the United States for the furtherance of the foreign commerce of the United States, and to act if 

required to do so as fiscal agents of the United States. (12 U.S.C. 

601) 

[Purchase of stock in corporations engaged in foreign banking] 

Second. To invest an amount not exceeding in the aggregate 

ten per centum of its paid-in capital stock and surplus in the stock 

of one or more banks or corporations chartered or incorporated 

under the laws of the United States or of any State thereof, and 

principally engaged in international or foreign banking, or banking 

in a dependency or insular possession of the United States either 

directly or through the agency, ownership, or control of local institutions in foreign countries, or in such dependencies or insular possessions. (12 U.S.C. 601) 

[Acquisition of ownership of foreign banks] 

Third. To acquire and hold, directly or indirectly, stock or other 

evidences of ownership in one or more banks organized under the 

law of a foreign country or a dependency or insular possession of 

the United States and not engaged, directly or indirectly, in any activity in the United States except as, in the judgment of the Board 

of Governors of the Federal Reserve System, shall be incidental to 
991 FEDERAL RESERVE ACT Sec. 10B 

the international or foreign business of such foreign bank; and, notwithstanding the provisions of section 23A of this Act, to make 

loans or extensions of credit to or for the account of such bank in 

the manner and within the limits prescribed by the Board by general or specific regulation or ruling. (12 U.S.C. 601) 

[2. Right of national banks to invest in foreign banking corporations until 

January 1, 1921] 

Until January 1, 1921, any national banking association, without regard to the amount of its capital and surplus, may file application with the Board of Governors of the Federal Reserve System 

for permission, upon such conditions and under such regulations as 

may be prescribed by said board, to invest an amount not exceeding in the aggregate 5 per centum of its paid-in capital and surplus 

in the stock of one or more corporations chartered or incorporated 

under the laws of the United States or of any State thereof and, 

regardless of its location, principally engaged in such phases of 

international or foreign financial operations as may be necessary to 

facilitate the export of goods, wares, or merchandise from the 

United States or any of its dependencies or insular possessions to 

any foreign country: Provided, however, That in no event shall the 

total investments authorized by this section by any one national 

bank exceed 10 per centum of its capital and surplus. (12 U.S.C. 

601) 

[3. Application for permission to exercise powers] 

Such application shall specify the name and capital of the 

banking association filing it, the powers applied for, and the place 

or places where the banking or financial operations proposed are 

to be carried on. The Board of Governors of the Federal Reserve 

System shall have power to approve or to reject such application 

in whole or in part if for any reason the granting of such application is deemed inexpedient, and shall also have power from time 

to time to increase or decrease the number of places where such 

banking operations may be carried on. (12 U.S.C. 601) 

[4. Examinations and reports of condition] 

Every national banking association operating foreign branches 

shall be required to furnish information concerning the condition of 

such branches to the Comptroller of the Currency upon demand, 

and every member bank investing in the capital stock of banks or 

corporations described above shall be required to furnish information concerning the condition of such banks or corporations to the 

Board of Governors of the Federal Reserve System upon demand, 

and the Board of Governors of the Federal Reserve System may 

order special examinations of the said branches, banks, or corporations at such time or times as it may deem best. (12 U.S.C. 602) 

[5. Agreements to restrict operations] 

Before any national bank shall be permitted to purchase stock 

in any such corporation the said corporation shall enter into an 

agreement or undertaking with the Board of Governors of the Federal Reserve System to restrict its operations or conduct its business in such manner or under such limitations and restrictions as 

the said board may prescribe for the place or places wherein such 
Sec. 25A FEDERAL RESERVE ACT 992 

business is to be conducted. if at any time the Board of Governors 

of the Federal Reserve System shall ascertain that the regulations 

prescribed by it are not being complied with, said board is hereby 

authorized and empowered to institute an investigation of the matter and to send for persons and papers, subpoena witnesses, and 

administer oaths in order to satisfy itself as to the actual nature 

of the transactions referred to. Should such investigation result in 

establishing the failure of the corporation in question, or of the national bank or banks which may be stockholders therein, to comply 

with the regulations laid down by the said Board of Governors of 

the Federal Reserve System, such national banks may be required 

to dispose of stock holdings in the said corporation upon reasonable 

notice. (12 U.S.C. 603) 

[6. Accounts of foreign branches] 

Every such national banking association shall conduct the accounts of each foreign branch independently of the accounts of 

other foreign branches established by it and of its home office, and 

shall at the end of each fiscal period transfer to its general ledger 

the profit or loss accrued at each branch as a separate item. (12 

U.S.C. 604) 

[7. Additional banking powers authorized] 

Regulations issued by the Board of Governors of the Federal 

reserve System under this section, in addition to regulating powers 

which a foreign branch may exercise under other provisions of law, 

may authorize such a foreign branch, subject to such conditions 

and requirements as such regulations may prescribe, to exercise 

such further powers as may be usual in connection with the transaction of the business of banking in the places where such foreign 

branch shall transact business. Such regulations shall not authorize a foreign branch to engage in the general business of producing, 

distributing, buying or selling goods, wares, or merchandise; nor, 

except to such limited extent as the Board may deem to be necessary with respect to securities issued by any "foreign state'' as 

defined in section 25(b)1 of this Act, shall such regulations authorize a foreign branch to engage or participate, directly or indirectly, 

in the business of underwriting, selling, or distributing securities. 

(12 U.S.C. 604a) 

BANKING CORPORATIONS AUTHORIZED TO DO FOREIGN BANKING 

BUSINESS 

[1. Organization] 

SEC. 25A. Corporations to be organized for the purpose of engaging in international or foreign banking or other international or 

foreign financial operations, or in banking or other financial operations in a dependency or insular possession of the United States, 

either directly or through the agency, ownership, or control of local 

institutions in foreign countries, or in such dependencies or insular 

possessions as provided by this section, and to act when required 

by the Secretary of the Treasury as fiscal agents of the United 

1

 Section 25(b) was redesignated as section 25B by section 142(e)(3) of the Federal Deposit 

Insurance Corporation Improvement Act of 1991 (see 105 Stat. 2281). 
993 FEDERAL RESERVE ACT Sec. 25A 

States, may be formed by any number of natural persons, not less 

in any case than five: Provided, That nothing in this section shall 

be construed to deny the right of the Secretary of the Treasury to 

use any corporation organized under this section as depositaries in 

Panama and the Panama Canal Zone, or in the Philippine Islands 

and other insular possessions and dependencies of the United 

States. (12 U.S.C. 611) 

[2. Purpose] 

The Congress hereby declares that it is the purpose of this section to provide for the establishment of international banking and 

financial corporations operating under Federal supervision with 

powers sufficiently broad to enable them to compete effectively 

with similar foreign-owned institutions in the United States and 

abroad; to afford to the United States exporter and importer in particular, and to United States commerce, industry, and agriculture 

in general, at all times a means of financing international trade, 

especially United States exports; to foster the participation by regional and smaller banks throughout the United States in the provision of international banking and financing services to all segments of United States agriculture, commerce, and industry, and, 

in particular small business and farming concerns; to stimulate 

competition in the provision of international banking and financing 

services throughout the United States; and, in conjunction with 

each of the preceding purposes, to facilitate and stimulate the export of United States goods, wares, merchandise, commodities, and 

services to achieve a sound United States international trade position. The Board of Governors of the Federal Reserve System shall 

issue rules and regulations under this section consistent with and 

in furtherance of the purposes described in the preceding sentence, 

and, in accordance therewith, shall review and revise any such 

rules and regulations at least once every five years, the first such 

period commencing with the effective date of rules and regulations 

issued pursuant to section 3(a) of the International Banking Act of 

1978, in order to ensure that such purposes are being served in 

light of prevailing economic conditions and banking practices. (12 

U.S.C. 611a) 

[3. Articles of association] 

Such persons shall enter into articles of association which shall 

specify in general terms the objects for which the association is 

formed and may contain any other provisions not inconsistent with 

law which the association may see fit to adopt for the regulation 

of its business and the conduct of its affairs. (12 U.S.C. 612) 

[4. Execution of articles of association; contents of organization certificate] 

Such articles of association shall be signed by all of the persons 

intending to participate in the organization of the corporation and, 

thereafter, shall be forwarded to the Board of Governors of the Federal Reserve System and shall be filed and preserved in its office. 

The persons signing the said articles of association shall, under 

their hands, make an organization certificate which shall specifically state: 
Sec. 25A FEDERAL RESERVE ACT 994 

First. The name assumed by such corporation, which shall be 

subject to the approval of the Board of Governors of the Federal 

Reserve System. 

Second. The place or places where its operations are to be carried on. 

Third. The place in the United States where its home office is 

to be located. 

Fourth. The amount of its capital stock and the number of 

shares into which the same shall be divided. 

Fifth. The names and places of business or residence of the 

persons executing the certificate and the number of shares to which 

each has subscribed. 

Sixth. The fact that the certificate is made to enable the persons subscribing the same, and all other persons, firms, companies, 

and corporations, who or which may thereafter subscribe to or purchase shares of the capital stock of such corporation, to avail themselves of the advantages of this section. (12 U.S.C. 613) 

[5. Filing organization certificate; issuance of permit] 

The persons signing the organization certificate shall duly 

acknowledge the execution thereof before a judge of some court of 

record or notary public, who shall certify thereto under the seal of 

such court or notary, and thereafter the certificate shall be forwarded to the Board of Governors of the Federal Reserve System 

to be filed and preserved in its office. Upon duly making and filing 

articles of association and an organization certificate, and after the 

Board of Governors of the Federal Reserve System has approved 

the same and issued a permit to begin business, the association 

shall become and be a body corporate, and as such and in the name 

designated therein shall have power to adopt and use a corporate 

seal, which may be changed at the pleasure of its board of directors; to have succession for a period of twenty years unless sooner 

dissolved by the act of the shareholders owning two-thirds of the 

stock or by an Act of Congress or unless its franchises become forfeited by some violation of law; to make contracts; to sue and be 

sued, complain, and defend in any court of law or equity; to elect 

or appoint directors; and, by its board of directors, to appoint such 

officers and employees as may be deemed proper, define their authority and duties, require bonds of them, and fix the penalty 

thereof, dismiss such officers or employees, or any thereof, at pleasure and appoint others to fill their places; to prescribe, by its board 

of directors, by-laws not inconsistent with law or with the regulations of the Board of Governors of the Federal Reserve System regulating the manner in which its stock shall be transferred, its 

directors elected or appointed, its officers and employees appointed, 

its property transferred, and the priviliges granted to it by law 

exercised and enjoyed. (12 U.S.C. 614) 

[6. Powers; regulations of Board of Governors of the Federal Reserve System] 

Each corporation so organized shall have power, under such 

rules and regulations as the Board of Governors of the Federal Reserve System may prescribe: 
995 FEDERAL RESERVE ACT Sec. 25A 

[Banking powers] 

(a) To purchase, sell, discount, and negotiate, with or without 

its indorsement or guaranty, notes, drafts, checks, bills of exchange, acceptances, including bankers' acceptances, cable transfers, and other evidences of indebtedness; to purchase and sell, 

with or without its indorsement or guaranty, securities, including 

the obligations of the United States or of any State thereof but not 

including shares of stock in any corporation except as herein provided; to accept bills or drafts drawn upon it subject to such limitations and restrictions as the Board of Governors of the Federal Reserve System may impose; to issue letters of credit; to purchase 

and sell coin, bullion, and exchange; to borrow and to lend money; 

to issue debentures, bonds, and promissory notes under such general conditions as to security and such limitations as the Board of 

Governors of the Federal Reserve System may prescribe; to receive 

deposits outside of the United States and to receive only such deposits within the United States as may be incidential to or for the 

purpose of carrying out transactions in foreign countries or dependencies or insular possessions of the United States; and generally to 

exercise such powers as are incidental to the powers conferred by 

this Act or as may be usual, in the determination of the Board of 

Governors of the Federal Reserve System, in connection with the 

transaction of the business of banking or other financial operations 

in the countries, colonies, dependencies, or possessions in which it 

shall transact business and not inconsistent with the powers specifically granted herein. Nothing contained in this section shall be 

construed to prohibit the Board of Governors of the Federal Reserve System, under its power to prescribe rules and regulations, 

from limiting the aggregate amount of liabilities of any or all 

classes incurred by the corporation and outstanding at any one 

time. Whenever a corporation organized under this section receives 

deposits in the United States authorized by this section it shall 

carry reserves in such amounts as the Board of Governors of the 

Federal Reserve System may prescribe for member banks of the 

Federal Reserve System. (12 U.S.C. 615) 

[Branches] 

(b) To establish and maintain for the transaction of its business branches or agencies in foreign countries, their dependencies 

or colonies, and in the dependencies or insular possessions of the 

United States, at such places as may be approved by the Board of 

Governors of the Federal Reserve System and under such rules and 

regulations as it may prescribe, including countries or dependencies not specified in the original organization certificate. (12 

U.S.C. 615) 

[Ownership of stock in other corporations] 

(c) with the consent of the Board of Governors of the Federal 

Reserve System to purchase and hold stock or other certificates of 

ownership in any other corporation organized under the provisions 

of this section, or under the laws of any foreign country or a colony 

or dependency thereof, or under the laws of any State, dependency, 

or insular possession of the United States but not engaged in the 

general business of buying or selling goods, wares, merchandise or 
Sec. 25A FEDERAL RESERVE ACT 996 

commodities in the United States, and not transacting any business in the United States except such as in the judgment of the 

Board of Governors of the Federal Reserve System may be incidental to its international or foreign business: Provided, however, 

That, except with the approval of the Board of Governors of the 

Federal Reserve System, no corporation organized hereunder shall 

invest in any one corporation an amount in excess of 10 per centum 

of its own capital and surplus, except in a corporation engaged in 

the business of banking, when 15 per centum of its capital and surplus may be so invested: Provided further, That no corporation 

organized hereunder shall purchase, own, or hold stock or certificates of ownership in any other corporation organized hereunder or 

under the laws of any State which is in substantial competition 

therewith, or which holds stock or certificates of ownership in corporations which are in substantial competition with the purchasing 

corporation. (12 U.S.C. 615) 

[7. Purchase of stock to prevent loss on debt previously contracted] 

Nothing contained herein shall prevent corporations organized 

hereunder from purchasing and holding stock in any corporation 

where such purchase shall be necessary to prevent a loss upon a 

debt previously contracted in good faith; and stock so purchased or 

acquired in corporations organized under this section shall within 

six months from such purchase be sold or disposed of at public or 

private sale unless the time to so dispose of same is extended by 

the Board of Governors of the Federal Reserve System. (12 U.S.C. 

615) 

[8. Restrictions on business in United States] 

No corporations organized under this section shall carry on any 

part of its business in the United States except such as, in the 

judgment of the Board of Governors of the Federal Reserve System, 

shall be incidental to its international or foreign business: And provided further, That except such as is incidental and preliminary to 

its organization no such corporation shall exercise any of the powers conferred by this section until it has been duly authorized by 

the Board of Governors of the Federal Reserve System to commence business as a corporation organized under the provisions of 

this section. (12 U.S.C. 616) 

[9. Corporation trading in commodities or attempting to control prices] 

No corporation organized under this section shall engage in 

commerce or trade in commodities except as specifically provided in 

this section, nor shall it either directly or indirectly control or fix 

or attempt to control or fix the price of any such commodities. The 

charter of any corporation violating this provision shall be subject 

to forfeiture in the manner hereinafter provided in this section. it 

shall be unlawful for any director, officer, agent, or employee of any 

such corporation to use or to conspire to use the credit, the funds, 

or the power of the corporation to fix or control the price of any 

such commodities, and any such person violating this provision 

shall be liable to a fine of not less than $1,000 and not exceeding 

$5,000 or imprisonment not less than one year and not exceeding 

five years, or both, in the discretion of the court. (12 U.S.C. 617) 
997 FEDERAL RESERVE ACT Sec. 25A 

[10. Capital stock] 

No corporation shall be organized under the provisions of this 

section with a capital stock of less than $2,000,000, one-quarter of 

which must be paid in before the corporation may be authorized to 

begin business, and the remainder of the capital stock of such corporation shall be paid in installments of at least 10 per centum on 

the whole amount to which the corporation shall be limited as frequently as one installment at the end of each succeeding two 

months from the time of the commencement of its business operations until the whole of the capital stock shall be paid in: Provided, however, That whenever $2,000,000 of the capital stock of 

any corporation is paid in the remainder of the corporation's capital 

stock or any unpaid part of such remainder may, with the consent 

of the Board of Governors of the Federal Reserve System and subject to such regulations and conditions as it may prescribe, be paid 

in upon call from the board of directors; such unpaid subscriptions, 

however, to be included in the maximum of 10 per centum of the 

national bank's capital and surplus which a national bank is permitted under the provisions of this Act to hold in stock of corporations engaged in business of the kind described in this section and 

in section 25 of the Federal Reserve Act as amended. The capital 

stock of any such corporation may be increased at any time, with 

the approval of the Board of Governors of the Federal Reserve System, by a vote of two-thirds of its shareholders or by unanimous 

consent in writing of the shareholders without a meeting and without a formal vote, but any such increase of capital shall be fully 

paid in within ninety days after such approval; and may be reduced 

in like manner, provided that in no event shall it be less than 

$2,000,000. No corporation, except as herein provided, shall during 

the time it shall continue its operations, withdraw or permit to be 

withdrawn, either in the form of dividends or otherwise, any portion of its capital. Any national bank may invest in the stock of any 

corporation organized under this section. The aggregate amount of 

stock held by any national bank in all corporations engaged in 

business of the kind described in this section or section 25 shall not 

exceed an amount equal to 10 percent of the capital and surplus 

of such bank unless the Board determines that the investment of 

an additional amount by the bank would not be unsafe or unsound 

and, in any case, shall not exceed an amount equal to 20 percent 

of the capital and surplus of such bank. (12 U.S.C. 618) 

[11. Citizenship of stockholders] 

Except as otherwise provided in this section, a majority of the 

shares of the capital stock of any such corporation shall at all times 

be held and owned by citizens of the United States, by corporations 

the controlling interest in which is owned by citizens of the United 

States, chartered under the laws of the United States or of a State 

of the United Sates, or by firms or companies, the controlling interest in which is owned by citizens of the United States. Notwithstanding any other provisions of this section, one or more foreign 

banks, institutions organized under the laws of foreign countries 

which own or control foreign banks, or banks organized under the 

laws of the United States, the States of the United States, or the 

District of Columbia, the controlling interests in which are owned 
Sec. 25A FEDERAL RESERVE ACT 998 

by any such foreign banks or institutions, may, with the prior approval of the Board of Governors of the Federal Reserve System 

and upon such terms and conditions and subject to such rules and 

regulations as the Board of Governors of the Federal Reserve System may prescribe, own and hold 50 per centum or more of the 

shares of the capital stock of any corporation organized under this 

section, and any such corporation shall be subject to the same provisions of law as any other corporation organized under this section, and the terms ''controls'' and ''controlling interest'' shall be 

construed consistently with the definition of ''control'' in section 2 

of the Bank Holding Company Act of 1956. For the purposes of the 

preceding sentence of this paragraph the term ''foreign bank'' shall 

have the meaning assigned to it in the International Banking Act 

of 1978. Any company, other than a bank as defined in section 2 

of the Bank Holding Company Act of 1956, that after March 5, 

1987, directly or indirectly acquires control of a corporation organized or operating under the provisions of this section or section 25 

shall be subject to the provisions of the Bank Holding Company Act 

of 1956 in the same manner and to the same extent that bank 

holding companies are subject thereto, except that such company 

shall not by reason of this paragraph be deemed a bank holding 

company for the purpose of section 3 of the Bank Holding Company 

Act of 1956. (12 U.S.C. 619) 

[12. Members of Board of Governors of the Federal Reserve System as 

directors, officers, or stockholders] 

No member of the Board of Governors of the Federal Reserve 

System shall be an officer or director of any corporation organized 

under the provisions of this section, or of any corporation engaged 

in similar business organized under the laws of any State, nor hold 

stock in any such corporation, and before entering upon his duties 

as a member of the Board of Governors of the Federal Reserve System he shall certify under oath to the Secretary of the Treasury 

that he has complied with this requirement. (12 U.S.C. 620) 

[13. Shareholders' liability; corporation not to become member of Federal 

Reserve bank] 

Shareholders in any corporation organized under the provision 

of this section shall be liable for the amount of their unpaid stock 

subscriptions. No such corporation shall become a member of any 

Federal reserve bank. (12 U.S.C. 621) 

[14. Forfeiture of charter for violation of law] 

Should any corporation organized hereunder violate or fail to 

comply with any of the provisions of this section, all of its rights, 

privileges, and franchises derived herefrom may thereby be forfeited. Before any such corporation shall be declared dissolved, or 

its rights, privileges, and franchises forfeited, any noncompliance 

with, or violation of such laws shall, however, be determined and 

adjudged by a court of the United States of competent jurisdiction, 

in a suit brought for that purpose in the district or territory in 

which the home office of such corporation is located, which suit 

shall be brought by the United States at the instance of the Board 

of Governors of the Federal Reserve System or the Attorney General. Upon adjudication of such noncompliance or violation, each di-
999 FEDERAL RESERVE ACT Sec. 25A 

rector and officer who participated in, or assented to, the illegal act 

or acts, shall be liable in his personal or individual capacity for all 

damages which the said corporation shall have sustained in consequence thereof. No dissolution shall take away or impair any 

remedy against the corporation, its stockholders, or officers for any 

liability or penalty previously incurred. (12 U.S.C. 622) 

[15. Voluntary liquidation] 

Any such corporation may go into voluntary liquidation and be 

closed by a vote of its shareholders owning two-thirds of its stock. 

(12 U.S.C. 623) 

(16) APPOINTMENT OF RECEIVER OR CONSERVATOR.— 

(A) IN GENERAL.—The Board may appoint a conservator or receiver for a corporation organized under the provisions of this section to the same extent and in the same 

manner as the Comptroller of the Currency may appoint 

a conservator or receiver for a national bank, and the conservator or receiver for such corporation shall exercise the 

same powers, functions, and duties, subject to the same 

limitations, as a conservator or receiver for a national 

bank. 

(B) EQUIVALENT AUTHORITY.—The Board shall have 

the same authority with respect to any conservator or receiver appointed for a corporation organized under the provisions of this section under this paragraph and any such 

corporation as the Comptroller of the Currency has with 

respect to a conservator or receiver of a national bank and 

the national bank for which a conservator or receiver has 

been appointed. 

(C) TITLE 11 PETITIONS.—The Board may direct the 

conservator or receiver of a corporation organized under 

the provisions of this section to file a petition pursuant to 

title 11, United States Code, in which case, title 11, United 

States Code, shall apply to the corporation in lieu of otherwise applicable Federal or State insolvency law. (12 U.S.C. 

624) 

[17. Stockholders' meetings; records; reports; examinations] 

Every corporation organized under the provisions of this section shall hold a meeting of its stockholders annually upon a date 

fixed in its bylaws, such meeting to be held at its home office in 

the United States. Every such corporation shall keep at its home 

office books containing the names of all stockholders thereof, and 

the names and addresses of the members of its board of directors, 

together with copies of all reports made by it to the Board of Governors of the Federal Reserve System. Every such corporation shall 

make reports to the Board of Governors of the Federal Reserve System at such times and in such form as it may require; and shall 

be subject to examination once a year and at such other times as 

may be deemed necessary by the Board of Governors of the Federal 

Reserve System by examiners appointed by the Board of Governors 

of the Federal Reserve System, the cost of such examinations, including the compensation of the examiners, to be fixed by the 
Sec. 25A FEDERAL RESERVE ACT 1000 

Board of Governors of the Federal Reserve System and to be paid 

by the corporation examined. (12 U.S.C. 625) 

[18. Dividends and surplus fund] 

The directors of any corporation organized under the provisions 

of this section may, semiannually, declare a dividend of so much 

of the net profits of the corporation as they shall judge expedient; 

but each corporation shall, before the declaration of a dividend, 

carry one-tenth of its net profits of the preceding half year to its 

surplus fund until the same shall amount to 20 per centum of its 

capital stock. (12 U.S.C. 626) 

[19. Taxation] 

Any corporation organized under the provisions of this section 

shall be subject to tax by the State within which its home office is 

located in the same manner and to the same extent as other corporations organized under the laws of that State which are 

transacting a similar character of business. The shares of stock in 

such corporation shall also be subject to tax as the personal property of the owners or holders thereof in the same manner and to 

the same extent as the shares of stock in similar State corporations. (12 U.S.C. 627) 

[20. Extension of corporate existence] 

Any corporation organized under the provisions of this section 

may at any time within the two years next previous to the date of 

the expiration of its corporate existence, by a vote of the shareholders owning two-thirds of its stock, apply to the Board of Governors of the Federal Reserve System for its approval to extend the 

period of its corporate existence for a term of not more than twenty 

years, and upon certified approval of the Board of Governors of the 

Federal Reserve System such corporation shall have its corporate 

existence for such extended period unless sooner dissolved by the 

act of the shareholders owning two-thirds of its stock, or by an Act 

of Congress or unless its franchise becomes forfeited by some violation of law. (12 U.S.C. 628) 

[21. Conversion of State corporation into Federal corporation] 

Any bank or banking institution, principally engaged in foreign 

business, incorporated by special law of any State or of the United 

States or organized under the general laws of any State or of the 

United States and having an unimpaired capital sufficient to entitle it to become a corporation under the provisions of this section 

may, by the vote of the shareholders owning not less than twothirds of the capital stock of such bank or banking association, with 

the approval of the Board of Governors of the Federal Reserve System, be converted into a Federal corporation of the kind authorized 

by this section with any name approved by the Board of Governors 

of the Federal Reserve System: Provided, however, That said conversion shall not be in contravention of the State law. In such case 

the articles of association and organization certificate may be executed by a majority of the directors of the bank or banking institution, and the certificate shall declare that the owners of at least 

two-thirds of the capital stock have authorized the directors to 

make such certificate and to change or convert the bank or banking 
1001 FEDERAL RESERVE ACT Sec. 25A 

institution into a Federal corporation. A majority of the directors, 

after executing the articles of association and the organization certificate, shall have power to execute all other papers and to do 

whatever may be required to make its organization perfect and 

complete as a Federal corporation. The shares of any such corporation may continue to be for the same amount each as they were before the conversion, and the directors may continue to be directors 

of the corporation until others are elected or appointed in accordance with the provisions of this section. When the Board of Governors of the Federal Reserve System has given to such corporation 

a certificate that the provisions of this section have been compiled 

with, such corporation and all its stockholders, officers, and employees, shall have the same powers and privileges, and shall be 

subject to the same duties, liabilities, and regulations, in all respects, as shall have been prescribed by this section for corporations originally organized hereunder. (12 U.S.C. 629) 

[22. Criminal offenses of directors, officers, and employees] 

Every officer, director, clerk, employee, or agent of any corporation organized under this section who embezzles, abstracts, or willfully misapplies any of the moneys, funds, credits, securities, evidences of indebtedness or assets of any character of such corporation; or who, without authority from the directors, issues or puts 

forth any certificate of deposit, draws any order or bill of exchange, 

makes any acceptance, assigns any note, bond, debenture, draft, 

bill of exchange, mortgage, judgment, or decree; or who makes any 

false entry in any book, report, or statement of such corporation 

with intent, in either case, to injure or defraud such corporation or 

any other company, body politic or corporate, or any individual person, or to deceive any officer of such corporation, the Board of Governors of the Federal Reserve System, or any agent or examiner 

appointed to examine the affairs of any such corporation; and every 

receiver of any such corporation and every clerk or employee of 

such receiver who shall embezzle, abstract, or willfully misapply or 

wrongfully convert to his own use any moneys, funds, credits, or 

assets of any character which may come into his possession or 

under his control in the execution of his trust or the performance 

of the duties of his employment; and every such receiver or clerk 

or employee of such receiver who shall, with intent to injure or defraud any person, body politic or corporate, or to deceive or mislead 

the Board of Governors of the Federal Reserve System, or any 

agent or examiner appointed to examine the affairs of such receiver, shall make any false entry in any book, report, or record of 

any matter connected with the duties of such receiver; and every 

person who with like intent aids or abets any officer, director, 

clerk, employee, or agent of any corporation organized under this 

section, or receiver or clerk or employee of such receiver as aforesaid in any violation of this section, shall upon conviction thereof 

be imprisoned for not less than two years nor more than ten years, 

and may also be fined not more than $5,000, in the discretion of 

the court. (12 U.S.C. 630) 
Sec. 25B FEDERAL RESERVE ACT 1002 

[23. Representation that United States is liable for obligations] 

whoever being connected in any capacity with any corporation 

organized under this section represents in any way that the United 

States is liable for the payment of any bond or other obligation, or 

the interest thereon, issued or incurred by any corporation organized hereunder, or that the United States incurs any liability in 

respect of any act or omission of the corporation, shall be punished 

by a fine or1 not more than $10,000 and by imprisonment for not 

more than five years. (12 U.S.C. 631) 

[JURISDICTION OF SUITS] 

[1. Suits arising out of foreign banking business] 

SEC. 25B. Notwithstanding any other provision of law all suits 

of a civil nature at common law or in equity to which any corporation organized under the laws of the United States shall be a party, 

arising out of transactions involving international or foreign banking, or banking in a dependency or insular possession of the United 

States, or out of other international or foreign financial operations, 

either directly or through the agency, ownership, or control of 

branches or local institutions in dependencies or insular possessions of the United States or in foreign countries, shall be deemed 

to arise under the laws of the United States, and the district courts 

of the United States shall have original jurisdiction of all such 

suits; and any defendant in any such suit may, at any time before 

the trial thereof, remove such suits from a State court into the district court of the United States for the proper district by following 

the procedure for the removal of causes otherwise provided by law. 

Such removal shall not cause undue delay in the trial of such case 

and a case so removed shall have a place on the calendar of the 

United States court to which it is removed relative to that which 

it held on the State court from which it was removed. (12 U.S.C. 

632) 

[2. Suits involving Federal reserve banks] 

Notwithstanding any other provision of law, all suits of a civil 

nature at common law or in equity to which any Federal Reserve 

bank shall be a party shall be deemed to arise under the laws of 

the United States, and the district courts of the United States shall 

have original jurisdiction of all such suits; and any Federal Reserve 

bank which is a defendant in any such suit may, at any time before 

the trial thereof, remove such suit from a State court into the district court of the United States for the proper district by following 

the procedure for the removal of causes otherwise provided by law. 

No attachment or execution shall be issued against any Federal Reserve bank or its property before final judgment in any suit, action, 

or proceeding in any State, county, municipal, or United States 

court. (12 U.S.C. 632) 

[3. Federal Reserve banks receiving property of foreign States and central 

banks] 

Whenever (1) any Federal Reserve bank has received any property from or for the account of a foreign state which is recognized 

1

 So in original. Probably should be "of'. 
1003 FEDERAL RESERVE ACT Sec. 25B 

by the Government of the United States, or from or for the account 

of a central bank of any such foreign state, and holds such property 

in the name of such foreign state or such central bank; (2) a representative of such foreign state who is recognized by the Secretary 

of State as being the accredited representative of such foreign state 

to the Government of the United States has certified to the Secretary of State the name of a person as having authority to receive, 

control, or dispose of such property; and (3) the authority of such 

person to act with respect to such property is accepted and recognized by the Secretary of State, and so certified by the Secretary 

of State to the Federal Reserve bank, the payment, transfer, delivery, or other disposal of such property by such Federal Reserve 

bank to or upon the order of such person shall be conclusively presumed to be lawful and shall constitute a complete discharge and 

release of any liability of the Federal Reserve bank for or with respect to such property. (12 U.S.C. 632) 

[4. Insured banks receiving property of foreign States and central banks] 

Whenever (1) any insured bank has received any property from 

or for the account of a foreign state which is recognized by the Government of the United States, or from or for the account of a central bank of any such foreign state, and holds such property in the 

name of such foreign state or such central bank; (2) a representative of such foreign state who is recognized by the Secretary of 

State as being the accredited representative of such foreign state 

to the Government of the United States has certified to the Secretary of State the name of a person as having authority to receive, 

control, or dispose of such property; and (3) the authority of such 

person to act with respect to such property is accepted and recognized by the Secretary of State, and so certified by the Secretary 

of State to such insured bank, the payment, transfer, delivery, or 

other disposal of such property by such bank to or upon the order 

of such person shall be conclusively presumed to be lawful and 

shall constitute a complete discharge and release of any liability of 

such bank for or with respect to such property. Any suit or other 

legal proceeding against any insured bank or any officer, director, 

or employee thereof, arising out of the receipt, possession, or disposition of any such property shall be deemed to arise under the 

laws of the United States and the district courts of the United 

States shall have exclusive jurisdiction thereof, regardless of the 

amount involved; and any such bank or any officer, director, or employee thereof which is a defendant in any such suit may at any 

time before trial thereof, remove such suit from a State court into 

the district court of the United States for the proper district by following the procedure for the removal of causes otherwise provided 

by law. (12 U.S.C. 632) 

[5. Licenses relating to property of foreign States and central banks] 

Nothing in this section shall be deemed to repeal or to modify 

in any manner any of the provisions of the Gold Reserve Act of 
Sec. 25C FEDERAL RESERVE ACT 1004 

19341 (ch. 6, 48 Stat. 337), as amended, the Silver Purchase Act 

of 1934 (ch. 674, 48 Stat. 1178), as amended, or subdivision (b) of 

section 5 of the Act of October 6, 1917 (40 Stat. 411), as amended, 

or any actions, regulations, rules, orders, or proclamations taken, 

promulgated, made, or issued pursuant to any of such statutes. In 

any case in which a license to act with respect to any property referred to in this section is required under any of said statutes, regulations, rules, orders, or proclamations, notification to the Secretary of State by the proper Government officer or agency of the 

issuance of an appropriate license or that appropriate licenses will 

be issued on application shall be a prerequisite to any action by the 

Secretary of State pursuant to this section, and the action of the 

Secretary of State shall relate only to such property as is included 

in such notification. Each such notification shall include the terms 

and conditions of such license or licenses and a description of the 

property to which they relate. (12 U.S.C. 632) 

[6. Definitions ] 

For the purposes of this section, (1) the term "property" includes gold, silver, currency, credits, deposits, securities, choses in 

action, and any other form of property, the proceeds thereof, and 

any right, title, or interest therein; (2) the term "foreign state'' includes any foreign government or any department, district, province, county, possession, or other similar governmental organization or subdivision of a foreign government, and any agency or 

instrumentality of any such foreign government or of any such 

organization or subdivision; (3) the term ''central bank'' includes 

any foreign bank or banker authorized to perform any one or more 

of the functions of a central bank; (4) the term ''person'' includes 

any individual, or any corporation, partnership, association, or 

other similar organization; and (5) the term ''insured bank'' shall 

have the meaning given to it in section 12B of this Act.2 (12 U.S.C. 

632) 

SEC. 25C. POTENTIA L LIABILIT Y O N FOREIG N ACCOUNTS . 

(a) EXCEPTION S FRO M REPAYMEN T REQUIREMENT.— A member 

bank shall not be required to repay any deposit made at a foreign 

branch of the bank if the branch cannot repay the deposit due to— 

(1) an act of war, insurrection, or civil strife; or 

(2) an action by a foreign government or instrumentality 

(whether de jure or de facto) in the country in which the 

branch is located; 

unless the member bank has expressly agreed in writing to repay 

the deposit under those circumstances. 

(b) REGULATIONS.—Th e Board and the Comptroller of the Currency may jointly prescribe such regulations as they deem 

necessary to implement this section. (12 U.S.C. 633) 

1

 All of the Gold Reserve Act of 1934 except section 2(b) was repealed by Public Law 97-258, 

96 Stat. 877. Much of the substance of such Act was incorporated in subchapter II of chapter 

51 of title 31, United States Code. 

2

 Section 12B was repealed and reenacted as a separate Act, the Federal Deposit Insurance 

Act, by the Act of Sept. 21, 1950 (64 Stat. 873). The term "insured bank'' is defined in section 

3(h) of the Federal Deposit Insurance Act. 
1005 FEDERAL RESERVE ACT Sec. 10B 

[TAX ON NATIONAL BANK NOTES] 

[1. National currency associations; amendments to National Bank Act] 

[Section 27 amended other Acts.] 

[REDUCTION OF CAPITAL OF NATIONAL BANKS] 

[1. Reduction of capital of national banks] 

[Section 28 amended section 5143 of the Revised Statutes.] 

SEC. 29. CIVI L MONE Y PENALTY. 

(a) FIRST TIER.—Any member bank which, and any institutionaffiliated party (within the meaning of section 3(u) of the Federal 

Deposit Insurance Act) with respect to such member bank who, violates any provision of section 22, 23A, or 23B, or any regulation 

issued pursuant thereto, shall forfeit and pay a civil penalty of not 

more than $5,000 for each day during which such violation continues. 

(b) SECOND TIER.—Notwithstanding subsection (a), any member bank which, and any institution-affiliated party (within the 

meaning of section 3(u) of the Federal Deposit Insurance Act) with 

respect to such member bank who

 1 

(1)(A) commits any violation described in subsection (a); 

(B) recklessly engages in an unsafe or unsound practice in 

conducting the affairs of such member bank; or 

(C) breaches any fiduciary duty; 

(2) which violation, practice, or breach— 

(A) is part of a pattern of misconduct; 

(B) causes or is likely to cause more than a minimal 

loss to such member bank; or 

(C) results in pecuniary gain or other benefit to such 

party, 

shall forfeit and pay a civil penalty of not more than $25,000 for 

each day during which such violation, practice, or breach continues. 

(c) THIR D TIER.—Notwithstanding subsections (a) and (b), any 

member bank which, and any institution-affiliated party (within 

the meaning of section 3(u) of the Federal Deposit Insurance Act) 

with respect to such member bank who— 

(1) knowingly— 

(A) commits any violation described in subsection (a); 

(B) engages in any unsafe or unsound practice in conducting the affairs of such credit union;

 2 or 

(C) breaches any fiduciary duty; and 

(2) knowingly or recklessly causes a substantial loss to 

such credit union or a substantial pecuniary gain or other benefit to such party by reason of such violation, practice, or 

breach, 

shall forfeit and pay a civil penalty in an amount not to exceed the 

applicable maximum amount determined under subsection (d) for 

each day during which such violation, practice, or breach continues. 

(d) MAXIMU M AMOUNTS OF PENALTIES FOR ANY VIOLATION DE -

SCRIBED I N SUBSECTION (c).—The maximum daily amount of any 

1

 So in original. Probably should be followed by a dash. 

2

 So in original. Probably should be "such member bank''. 
Sec. 10A FEDERAL RESERVE ACT 1006 

civil penalty which may be assessed pursuant to subsection (c) for 

any violation, practice, or breach described in such subsection is— 

(1) in the case of any person other than a member bank, 

an amount to not exceed $1,000,000; and 

(2) in the case of a member bank, an amount not to exceed 

the lesser of— 

(A) $1,000,000; or 

(B) 1 percent of the total assets of such member bank. 

(e) ASSESSMENT ; ETC.—An y penalty imposed under subsection 

(a), (b), or (c) shall be assessed and collected by1 

(1) in the case of a national bank, by the Comptroller of 

the Currency; and 

(2) in the case of a State member bank, by the Board, 

in the manner provided in subparagraphs (E), (F), (G), and (I) of 

section 8(i)(2) of the Federal Deposit Insurance Act for penalties 

imposed (under such section) and any such assessment shall be 

subject to the provisions of such section. 

(f) HEARING.—The member bank or other person against whom 

any penalty is assessed under this section shall be afforded an 

agency hearing if such member bank or person submits a request 

for such hearing within 20 days after the issuance of the notice of 

assessment. Section 8(h) of the Federal Deposit Insurance Act shall 

apply to any proceeding under this section. 

(g) DISBURSEMENT.—Al l penalties collected under authority of 

this paragraph shall be deposited into the Treasury. 

(h) VIOLAT E DEFINED.—Fo r purposes of this section, the term 

''violate'' includes any action (alone or with another or others) for 

or toward causing, bringing about, participating in, counseling, or 

aiding or abetting a violation. 

(i) REGULATIONS.—Th e Comptroller of the Currency and the 

Board shall prescribe regulations establishing such procedures as 

may be necessary to carry out this section. 

(m) 2 NOTIC E UNDE R THI S SECTIO N AFTE R SEPARATIO N FRO M 

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 member bank (including a separation caused by the 

closing of such a bank) shall not affect the jurisdiction and authority of the appropriate Federal banking agency 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 

bank (whether such date occurs before, on, or after the date of the 

enactment of this subsection). (12 U.S.C. 504) 

[SAVIN G CLAUSE ] 

SEC. 30. If any clause, sentence, paragraph, or part of this Act 

shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or 

invalidate the remainder of this Act, but shall be confined in its 

operation to the clause, sentence, paragraph, or part thereof di1

 so in original. probably should be followed by a dash rather than ''by''. 

2

so in original. probably should have been designated as subsection (j). 
1007 FEDERAL RESERVE ACT Sec. 10B 

rectly involved in the controversy in which such judgment shall 

have been rendered. (Omitted from U.S. Code) 

[RESERVATION OF RIGHT TO AMEND ] 

SEC. 31. The right to amend, alter, or repeal this Act is hereby 

expressly reserved. (Omitted from U.S. Code) 

FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND 

ENFORCEMENT ACT OF 1989 

1009 

FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND 

ENFORCEMENT ACT OF 19891 

TITL E I—PURPOSES 

SEC. 101. [12 U.S.C. 1811 nt.] PURPOSES. 

The purposes of this Act are as follows: 

(1) To promote, through regulatory reform, a safe and stable system of affordable housing finance. 

(2) To improve the supervision of savings associations by 

strengthening capital, accounting, and other supervisory 

standards. 

(3) To curtail investments and other activities of savings 

associations that pose unacceptable risks to the Federal deposit 

insurance funds. 

(4) To promote the independence of the Federal Deposit 

Insurance Corporation from the institutions the deposits of 

which it insures, by providing an independent board of directors, adequate funding, and appropriate powers. 

(5) To put the Federal deposit insurance funds on a sound 

financial footing. 

(6) To establish an Office of Thrift Supervision in the 

Department of the Treasury, under the general oversight of the 

Secretary of the Treasury. 

(7) To establish a new corporation, to be known as the Resolution Trust Corporation, to contain, manage, and resolve 

failed savings associations. 

(8) To provide funds from public and private sources to 

deal expeditiously with failed depository institutions. 

(9) To strengthen the enforcement powers of Federal regulators of depository institutions. 

(10) To strengthen the civil sanctions and criminal penalties for defrauding or otherwise damaging depository institutions and their depositors. 

TITLE II—FEDERA L DEPOSIT 

INSURANCE CORPORATION 

SEC. 203. [12 U.S.C. 1812 nt.] FDIC BOARD MEMBERS. 

(a) * * * 

1Note: The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 largely 

amended other Acts. Many free-standing provisions of such Act, while still effect, do not have 

a permanent or long-term application and have therefore not been included in this compilation. 

1011 
Sec. 1105 FIRREA OF 1989 1012 

(b) TRANSITION PROVISION.— 

(1) CHAIRPERSON.—Notwithstanding any provision of section 2 of the Federal Deposit Insurance Act, the Chairman of 

the Board of Directors of the Federal Deposit Insurance Corporation on the date of the enactment of the Financial institutions Reform, Recovery, and Enforcement Act of 1989 may continue to serve as the Chairperson until the end of the term to 

which such Chairman was appointed. 

(2) MEMBERS.—Notwithstanding any provision of section 2 

of the Federal Deposit Insurance Act, the appointed member of 

the Board of Directors of the Federal Deposit Insurance Corporation on the date of the enactment of the Financial institutions Reform, Recovery, and Enforcement Act of 1989 who is 

not the Chairman shall continue to serve in office until the 

earlier of— 

(A) the end of the term to which such member was appointed; or 

(B) February 28, 1993, 

except that such member may continue to serve after the end 

of such term until a successor has been appointed and qualified. 

(3) APPOINTMENTS BEFORE MARCH 1, 1993.—Notwith -

standing any provision of section 2 of the Federal Deposit 

Insurance Act, the term of any member appointed to the Board 

of Directors of the Federal Deposit Insurance Corporation before February 28, 1993 (including the term of any Chairperson), shall end on such date. 

TITLE III—SAVINGS ASSOCIATIONS 

SEC. 302. [12 U.S.C. 1467 nt.] SAVINGS PROVISIONS. 

Notwithstanding the amendment made by this title to section 

10 of the Home Owners' Loan Act and the repeal of section 416 of 

the National Housing Act— 

(1) any plan approved by the Federal Home Loan Bank 

Board under such section 10 for any Federal savings association shall continue in effect as long as such association adheres 

to the plan and continues to submit to the Director of the office of Thrift Supervision regular and complete reports on the 

association's progress in meeting the association's goals under 

the plan; and 

(2) any plan approved by the Federal savings and Loan 

Insurance Corporation under such section 416 for any State 

savings association shall continue in effect as long as such 

association adheres to the plan and continues to submit to the 

Federal Deposit Insurance Corporation regular and complete 

reports on the association's progress in meeting the savings 

association's goals under the plan. 
1013 FIRREA OF 1989 Sec. 1104 

SEC. 305. TRANSITIONA L RULES REGARDIN G CERTAI N LOANS AN D 

EFFECTIVE DATES. 

(a) DIVESTITURE OF CERTAIN LOANS AND INVESTMENTS NO T REQUIRED.—[12 U.S.C. 1464 nt.] The limitations on loans and investments contained in section 5(c) of the Home Owners' Loan Act, as 

amended by section 301, do not require the divestiture of any loan 

or investment that was lawful when made under the provisions of 

such section as those provisions were in effect at the time such 

loan or investment was made. 

(b) LOANS SECURED BY NONRESIDENTIAL REA L PROPERTY.—[1 2 

U.S.C. 1464 nt.] 

(1) IN GENERAL.—The Director of the Office of Thrift 

Supervision may, by order, permit a Federal savings association to exceed the limitation set forth in section 5(c)(2)(B)(i) of 

the Home Owners' Loan Act during the period beginning on 

the date of enactment of this Act and ending on June 1, 1991, 

if the Director determines that— 

(A) there is a reasonable prospect that the savings 

association can be in compliance, not later than June 1, 

1991, with the capital standards prescribed under section 

5(t) of the Home Owners' Loan Act; and 

(B) the increased authority— 

(i) is consistent with prudent operating practices, 

and 

(ii) is in accordance with a plan submitted by the 

savings association for— 

(i) an orderly transition to compliance with 

section 5(c)(2)(B)(i), or 

(II) an orderly conversion to a bank charter. 

(2) OTHER EXEMPTIVE AUTHORITY NOT AFFECTED.—Th e authority granted by paragraph (1) is in addition to any authority 

of the Director under section 5(c)(2)(B)(ii) of the Home Owners' 

Loan Act. 

(c) EFFECTIVE DATE.—[1 2 U.S.C. 1461 nt.] The amendments 

made by section 301 relating to civil penalties shall apply with respect to violations committed and activities engaged in after the 

date of the enactment of this Act, except that the increased maximum civil penalties of $5,000 and $25,000 per violation or per day 

may apply to such violations or activities committed or engaged in 

before such date with respect to an institution if such violations or 

activities— 

(1) are not already subject to a notice issued by the appropriate Federal banking agency or the Board (initiating an 

administrative proceeding); and 

(2) occurred after the completion of the last report of examination of the institution by the appropriate Federal banking 

agency (as defined in section 3 of the Federal Deposit Insurance Act) occurring before the date of the enactment of this 

Act. 
Sec. 1105 FIRREA OF 1989 1014 

SEC. 308. [12 U.S.C. 1463 nt.] PRESERVING MINORITY OWNERSHIP OF 

MINORITY FINANCIAL INSTITUTIONS. 

(a) CONSULTATION ON METHODS.—The Secretary of the Treasury shall consult with the Director of the Office of Thrift Supervision and the Chairperson of the Board of Directors of the Federal 

Deposit Insurance Corporation on methods for best achieving the 

following goals: 

(1) Preserving the present number of minority depository 

institutions. 

(2) preserving their minority character in cases involving 

mergers or acquisition of a minority depository institution by 

using general preference guidelines in the following order: 

(A) Same type of minority depository institution in the 

same city. 

(B) Same type of minority depository institution in the 

same State. 

(C) Same type of minority depository institution 

nationwide. 

(D) Any type of minority depository institution in the 

same city. 

(E) Any type of minority depository institution in the 

same State. 

(F) Any type of minority depository institution nationwide. 

(G) Any other bidders. 

(3) providing technical assistance to prevent insolvency of 

institutions not now insolvent. 

(4) promoting and encouraging creation of new minority 

depository institutions. 

(5) providing for training, technical assistance, and educational programs. 

(b) DEFINITIONS.—For purposes of this section— 

(1) MINORITY FINANCIAL INSTITUTION.—The term ''minority 

depository institution'' means any depository institution that— 

(A) if a privately owned institution, 51 percent is 

owned by one or more socially and economically disadvantaged individuals; 

(B) if publicly owned, 51 percent of the stock is owned 

by one or more socially and economically disadvantaged 

individuals; and 

(C) in the case of a mutual institution where the majority of the Board of Directors, account holders, and the 

community which it services is predominantly minority. 

(2) MINORITY.—The term ''minority'' means any black 

American, Native American, Hispanic American, or Asian 

American. 

TITLE IV—TRANSFER OF FUNCTIONS, 

PERSONNEL, AN D PROPERTY 
1015 FIRREA OF 1989 Sec. 1104 

SEC. 402. [12 U.S.C. 1437 nt.] CONTINUATIO N AN D COORDINATIO N OF 

CERTAI N REGULATIONS. 

(a) REGULATIONS RELATING TO INSURANCE FUNCTIONS.—Al l 

regulations and orders of the Federal Savings and Loan Insurance 

Corporation, or the Federal Home Loan Bank Board (in such 

Board's capacity as the board of trustees of such Corporation), 

which are in effect on the date of the enactment of this Act and 

relate to— 

(1) the provision, rates, or cancellation of insurance of accounts; or 

(2) the administration of the insurance fund of the Federal 

Savings and Loan Insurance Corporation, 

shall remain in effect according to the terms of such regulations 

and orders and shall be enforceable by the Federal Deposit Insurance Corporation unless determined otherwise by such Corporation 

after consultation with the Director of the Office of Thrift Supervision and, with respect to regulations and orders relating to the 

scope of deposit insurance coverage, pursuant to subsection (c). 

(b) IDENTIFICATION OF REGULATIONS WHIC H REMAI N I N EFFECT 

PURSUANT TO THIS SECTION.—Befor e the end of the 60-day period 

beginning on the date of the enactment of this Act, the Director of 

the Office of Thrift Supervision and the Chairperson of the Federal 

Deposit Insurance Corporation shall— 

(1) identify the regulations and orders referred to in subsection (a) of this section in accordance with the allocation of 

authority between them under this Act and the amendments 

made by this Act; and 

(2) promptly publish notice of such identification in the 

Federal Register. 

(c) PROCEDURE FOR DIFFERENCES I N DEPOSIT INSURANCE COVERAGE BETWEE N FSLIC AND FDIC.— 

(1) TRANSITION RULE.—Unti l the effective date of regulations prescribed under paragraph (3)(B), any determination of 

the amount of any insured deposit in any depository institution 

which becomes an insured depository institution as a result of 

the amendment made to section 4(a) of the Federal Deposit 

Insurance Act by section 205(1) of this Act shall be made in 

accordance with the regulations and interpretations of the Federal Savings and Loan Insurance Corporation for determining 

the amount of an insured account which were in effect on the 

day before the date of the enactment of this Act. 

(2) LIMITATION ON EXTENT OF COVERAGE.—During th e period beginning on the date of the enactment of this Act and 

ending on the effective date of regulations prescribed under 

paragraph (3)(B), the amount of any insured account which is 

required to be treated as an insured deposit pursuant to paragraph (1) shall not exceed the amount of insurance to which 

such insured account would otherwise have been entitled pursuant to the regulations and interpretations of the Federal 

Savings and Loan Insurance Corporation which were in effect 

on the day before the date of the enactment of this Act. 

(3) UNIFOR M TREATMENT OF INSURED DEPOSITS.—The Federal Deposit Insurance Corporation shall— 
Sec. 1105 FIRREA OF 1989 1016 

(A) review its regulations, principles, and interpretations for deposit insurance coverage and those established 

by the Federal Savings and Loan Insurance Corporation; 

and 

(B) on or before the end of the 270-day period beginning on the date of the enactment of this Act, prescribe a 

uniform set of regulations which shall be applicable to all 

insured deposits in insured depository institutions (except 

to the extent any provision of this Act, any amendment 

made by this Act to the Federal Deposit Insurance Act, or 

any other provision of law requires or explicitly permits 

the Federal Deposit Insurance Corporation to treat insured 

deposits of Savings Association Insurance Fund members 

differently than insured deposits of Bank Insurance Fund 

members). 

(4) FACTORS REQUIRED TO BE CONSIDERED.—In prescribing 

regulations providing for the uniform treatment of deposit 

insurance coverage, the Federal Deposit Insurance Corporation 

shall consider all relevant factors necessary to promote safety 

and soundness, depositor confidence, and the stability of deposits in insured depository institutions. 

(5) NOTICE; EFFECTIVE DATE.—Regulations prescribed 

under this subsection shall— 

(A) provide for effective notice to depositors in insured 

depository institutions of any change in deposit insurance 

coverage which would result under such regulations; and 

(B) take effect on or before the end of the 90-day period beginning on the date such regulations become final. 

(6) DEFINITIONS.—Fo r purposes of this subsection— 

(A) INSURED ACCOUNT.—The term ''insured account'' 

has the meaning given to such term in section 401(c) of the 

National Housing Act (as in effect before the date of the 

enactment of this Act). 

(B) INSURED DEPOSITORY INSTITUTION.—The term ''insured depository institution'' has the meaning given to 

such term in section 3(c)(2) of the Federal Deposit insurance Act. 

(d) INTERI M TREATMENT OF CUSTODIAL ACCOUNTS.— 

(1) IN GENERAL.—Subject to paragraph (2) and notwithstanding subsection (a) or any limitation contained in the Federal Deposit insurance Act relating to the amount of deposit 

insurance available to any 1 borrower, amounts held in custodial accounts in insured depository institutions (as defined in 

section 3(c)(2) of such Act) for the payment of principal, interest, tax, and insurance payments for mortgage borrowers, shall 

be insured under the Federal Deposit insurance Act in the 

amount of $100,000 per mortgage borrower. 

(2) TREATMENT AFTER EFFECTIVE DATE OF NEW REGULATIONS.—After the effective date of the regulations prescribed 

under subsection (c)— 

(A) the amount of deposit insurance available for custodial accounts shall be determined in accordance with 

such regulations; and 
1017 FIRREA OF 1989 Sec. 1104 

(B) paragraph (1) shall cease to apply with respect to 

such accounts. 

(e) TREATMENT OF REFERENCES I N ADJUSTABLE RATE MORTGAGE INSTRUMENTS.— 

(1) IN GENERAL.—For purposes of adjustable rate mortgage 

instruments that are in effect as of the date of enactment of 

this Act, any reference in the instrument to the Federal Savings and Loan Insurance Corporation, the Federal Home Loan 

Bank Board, or institutions insured by the Federal savings 

and Loan Insurance Corporation before such date shall be 

treated as a reference to the Federal Deposit Insurance Corporation, the Federal Housing Finance Board, the Office of 

Thrift supervision, or institutions which are members of the 

Savings Association Insurance Fund, as appropriate on the 

basis of the transfer of functions pursuant to this Act, unless 

the context of the reference requires otherwise. 

(2) SUBSTITUTION FOR INDEXES.—If any index used to calculate the applicable interest rate on any adjustable rate mortgage instrument is no longer calculated and made available as 

a direct or indirect result of the enactment of this Act, any 

index— 

(A) made available by the Director of the Office of 

Thrift Supervision, the Chairperson of the Federal Deposit 

Insurance Corporation, or the Chairperson of the Federal 

Housing Finance Board pursuant to paragraph (3); or 

(B) determined by the Director of the office of Thrift 

Supervision, the Chairperson of the Federal Deposit Insurance Corporation, or the Chairperson of the Federal Housing Finance Board, pursuant to paragraph (4), to be substantially similar to the index which is no longer calculated or made available, 

may be substituted by the holder of any such adjustable rate 

mortgage instrument upon notice to the borrower. 

(3) AGENCY ACTION REQUIRED TO PROVIDE CONTINUED 

AVAILABILITY OF INDEXES.—Promptl y after the enactment of 

this subsection, the Director of the office of Thrift supervision, 

the Chairperson of the Federal Deposit Insurance Corporation, 

and the Chairperson of the Federal Housing Finance Board 

shall take such action as may be necessary to assure that the 

indexes prepared by the Federal Savings and Loan Insurance 

Corporation, the Federal Home Loan Bank Board, and the Federal home loan banks immediately prior to the enactment of 

this subsection and used to calculate the interest rate on 

adjustable rate mortgage instruments continue to be available. 

(4) REQUIREMENTS RELATING TO SUBSTITUTE INDEXES.—If 

any agency can no longer make available an index pursuant to 

paragraph (3), an index that is substantially similar to such 

index may be substituted for such index for purposes of paragraph (2) if the Director of the office of Thrift supervision, the 

Chairperson of the Federal Deposit Insurance Corporation, or 

the Chairperson of the Federal Housing Finance Board, as the 

case may be, determines, after notice and opportunity for comment, that— 
Sec. 1105 FIRREA OF 1989 1018 

(A) the new index is based upon data substantially 

similar to that of the original index; and 

(B) the substitution of the new index will result in an 

interest rate substantially similar to the rate in effect at 

the time the original index became unavailable. 

SEC. 403. [12 U.S.C. 1437 nt.] DETERMINATIO N OF TRANSFERRE D 

FUNCTION S AN D EMPLOYEES. 

(a) AL L FHLBB AND FSLIC EMPLOYEES SHALL BE TRANSFERRED.—All employees of the Federal Home Loan Bank Board 

and the Federal Savings and Loan Insurance Corporation shall be 

identified for transfer under subsection (b) to the Federal Deposit 

Insurance Corporation, the Office of Thrift Supervision, or the Federal Housing Finance Board. 

(b) FUNCTIONS AND EMPLOYEES TRANSFERRED.— 

(1) IN GENERAL.—The Director of the Office of Thrift 

Supervision, the Chairperson of the Oversight Board of the 

Resolution Trust Corporation, the Chairperson of the Federal 

Deposit Insurance Corporation, the Chairperson of the Federal 

Housing Finance Board, and the Chairman of the Federal 

Home Loan Bank Board (as of the day before the date of the 

enactment of this Act) shall jointly determine the functions or 

activities of the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation, and the number 

of employees of such Board and Corporation necessary to perform or support such functions or activities, which are transferred from the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation to the Office of 

Thrift Supervision, the Resolution Trust Corporation, the Federal Deposit Insurance Corporation, or the Federal Housing Finance Board, as the case may be. 

(2) ALLOCATION OF EMPLOYEES.—The Director of the Office 

of Thrift Supervision, the Chairperson of the Oversight Board 

of the Resolution Trust Corporation, the Chairperson of the 

Federal Deposit Insurance Corporation, and the Chairperson of 

the Federal Housing Finance Board shall allocate the employees of the Federal Home Loan Bank Board and the Federal 

Savings and Loan Insurance Corporation consistent with the 

number determined pursuant to paragraph (1) in a manner 

which such Director, Chairman, and Chairpersons, in their sole 

discretion, deem equitable, except that, within work units, the 

agency preferences of individual employees shall be accommodated as far as possible. 

(c) FEDERAL HOM E LOA N BANK PERSONNEL.—Employee s of th e 

Federal home loan banks or the joint offices of such banks who, on 

the day before the date of the enactment of this Act, are performing 

functions or activities on behalf of the Federal Home Loan Bank 

Board or the Federal Savings and Loan Insurance Corporation 

shall be treated as employees of the Federal Home Loan Bank 

Board or the Federal Savings and Loan Insurance Corporation for 

purposes of determining, pursuant to subsection (b)(1), the number 

of employees performing or supporting functions or activities of 

such Board or Corporation to the extent such functions or activities 

are transferred to the Federal Deposit Insurance Corporation, the 
1019 FIRREA OF 1989 Sec. 1104 

Office of Thrift Supervision, the Resolution Trust Corporation, or 

the Federal Housing Finance Board. 

(d) FSLIC EMPLOYEES ENGAGED I N CONSERVATORSHIP OR RECEIVERSHIP FUNCTIONS.—Individuals who, on the day before the 

date of the enactment of this Act, are employed by the Federal Savings and Loan Insurance Corporation in such Corporation's capacity as conservator or receiver of any insured depository institution 

shall be treated as employees of the Federal savings and Loan 

Insurance Corporation for purposes of determining, pursuant to 

subsection (b)(1), the number of employees performing or supporting functions or activities of such Corporation if such conservatorship or receivership is transferred to the Federal Deposit 

Insurance Corporation or the Resolution Trust Corporation. 

SEC. 404. [12 U.S.C. 1437 nt.] RIGHTS OF EMPLOYEES OF ABOLISHE D 

AGENCIES. 

All employees identified for transfer under subsection (b) of 

section 403 (other than individuals described in subsection (c) or (d) 

of such section) shall be entitled to the following rights: 

(1) Each employee so identified shall be transferred to the 

appropriate agency or entity for employment no later than 60 

days after the date of the enactment of this Act and such 

transfer shall be deemed a transfer of function for the purpose 

of section 3503 of title 5, United States Code. 

(2) Each transferred employee shall be guaranteed a position with the same status, tenure, grade, and pay as that held 

on the day immediately preceding the transfer. Each such employee holding a permanent position shall not be involuntarily 

separated or reduced in grade or compensation for 1 year after 

the date of transfer, except for cause or, if the employee is a 

temporary employee, separated in accordance with the terms of 

the appointment. 

(3)(A) In the case of employees occupying positions in the 

excepted service or the senior Executive service, any appointment authority established pursuant to law or regulations of 

the office of personnel Management for filling such positions 

shall be transferred, subject to subparagraph (B). 

(B) An agency or entity may decline a transfer of authority 

under subparagraph (A) (and the employees appointed pursuant thereto) to the extent that such authority relates to positions excepted from the competitive service because of their 

confidential, policy-making, policy-determining, or policy-advocating character, and noncareer positions in the senior Executive Service (within the meaning of section 3132(a)(7) of title 

5, united states Code). 

(4) If any agency or entity to which employees are transferred determines, after the end of the 1-year period beginning 

on the date the transfer of functions to such agency or entity 

is completed, that a reorganization of the combined work force 

is required, that reorganization shall be deemed a ''major reorganization'' for purposes of affording affected employees retirement under section 8336(d)(2) or 8414(b)(1)(B) of title 5, United 

states Code. 

(5) Any employee accepting employment with any agency 

or entity (other than the Office of Thrift Supervision) as a re-
Sec. 1105 FIRREA OF 1989 1020 

sult of such transfer may retain for 1 year after the date such 

transfer occurs membership in any employee benefit program 

of the Federal Home Loan Bank Board, including insurance, to 

which such employee belongs on the date of the enactment of 

this Act if— 

(A) the employee does not elect to give up the benefit 

or membership in the program; and 

(B) the benefit or program is continued by the Director 

of the Office of Thrift Supervision. 

The difference in the costs between the benefits which would 

have been provided by such agency or entity and those provided by this section shall be paid by the Director of the Office 

of Thrift Supervision. If any employee elects to give up membership in a health insurance program or the health insurance 

program is not continued by the Director of the Office of Thrift 

Supervision, the employee shall be permitted to select an alternate Federal health insurance program within 30 days of such 

election or notice, without regard to any other regularly scheduled open season. 

(6) Any employee employed by the Office of Thrift Supervision as a result of the transfer may retain membership in 

any employee benefit program of the Federal Home Loan Bank 

Board, including insurance, which such employee has on the 

date of enactment of this Act, if such employee does not elect 

to give up such membership and the benefit or program is continued by the Director of the Office of Thrift Supervision. If 

any employee elects to give up membership in a health insurance program or the health insurance program is not continued 

by the Director of the Office of Thrift Supervision, such employee shall be permitted to select an alternate Federal health 

insurance program within 30 days of such election or discontinuance, without regard to any other regularly scheduled 

open season. 

(7) A transferring employee in the Senior Executive Service shall be placed in a comparable position at the agency or 

entity to which such employee is transferred. 

(8) Transferring employees shall receive notice of their 

position assignments not later than 120 days after the effective 

date of their transfer. 

(9) Upon the termination of the Resolution Trust Corporation pursuant to section 21A(m) of the Federal Home Loan 

Bank Act, any employee of the Federal Deposit Insurance Corporation assigned to the Resolution Trust Corporation shall be 

reassigned to a position within the Federal Deposit Insurance 

Corporation in accordance with the provisions of paragraphs 

(2) and (4) through (7) of this subsection, except that the liability for any difference in the costs of benefits described in paragraph (5) shall be a liability of the Resolution Trust Corporation and not the Office of Thrift Supervision. 

SEC. 405. [12 U.S.C. 1437 nt.] DIVISIO N OF PROPERTY AN D FACILITIES. 

Before the end of the 60-day period beginning on the date of 

the enactment of this Act, the Director of the Office of Thrift 

Supervision, the Chairperson of the Oversight Board of the Resolu-
1021 FIRREA OF 1989 Sec. 1104 

tion Trust Corporation, the Chairperson of the Federal Deposit 

Insurance Corporation, and the Chairperson of the Federal Housing Finance Board shall jointly divide all property of the Federal 

Savings and Loan Insurance Corporation and the Federal Home 

Loan Bank Board used to perform functions and activities of the 

Federal Home Loan Bank Board among the Office of Thrift Supervision, the Resolution Trust Corporation, the Federal Deposit 

Insurance Corporation, and the Federal Housing Finance Board in 

accordance with the division of responsibilities, functions, and 

activities effected by this Act. Any disagreement between them in 

so doing shall be resolved by the Director of the Office of Management and Budget. 

TITL E VII—FEDERA L HOM E LOA N BANK 

SYSTEM REFORM S 

Subtitle A—Federal Home Loan Bank Act 

Amendments 

SEC. 722. [12 U.S.C. 1437 nt.] TRANSFERRED EMPLOYEES OF FEDERAL 

HOME LOAN BANKS AND JOINT OFFICES. 

(a) IN GENERAL.—Each employee of the Federal Home Loan 

Banks or joint offices of such Banks performing a function identified for transfer under section 403 of this Act, including employees 

who otherwise would be ineligible for employment by the United 

States because of their citizenship, shall be transferred for employment not later than 60 days after the date of the enactment of this 

Act. 

(b) NOTICE TO EMPLOYEES.—Transferring employees shall receive notice of their position assignments not later than 120 days 

after the effective date of their transfer. 

(c) GUARANTEED POSITION.—Each transferred employee shall 

be guaranteed a position with the same status and tenure as that 

held by such employee on the day immediately preceding the transfer. Each such employee holding a permanent position shall not be 

involuntarily separated for one year after the date of transfer, except for cause. 

(d) PAY AND BENEFITS.—Each employee transferred under this 

section shall be entitled to receive, during the one-year period 

immediately following the transfer, pay and benefits comparable to 

those received by such employee immediately preceding the transfer. Where necessary or appropriate to further the safety and 

soundness of the thrift industry, the employing agency may continue the pre-transfer compensation of any transferring employee 

for up to 2 years beyond the expiration of the period provided for 

under the preceding sentence. such pay and benefits shall be subject to the comparability provisions of this Act. Any transferred employee who suffers a reduction of pay or benefits as a result of such 

comparability provisions shall be compensated for such reduction 
Sec. 1105 FIRREA OF 1989 1022 

during the 1 year period following the transfer by assessments 

from the Federal Home Loan Bank or joint office of such Banks, 

from which the employee transferred. In any event, this subsection 

shall only apply to a transferred employee while such employee remains with the agency to which the employee is transferred. 

(e) HEALT H INSURANCE.—If the health insurance program of a 

transferred employee is not continued by the agency to which the 

employee is transferred, such employee may elect to participate in 

the agency's health insurance program notwithstanding health conditions pre-existing at the time of election or enrollment into an 

alternate health insurance program of the agency to which he or 

she is transferred and without regard to any other regularly scheduled open season. Such election shall be made within 30 days of 

the transfer. 

(f) EQUITABLE TREATMENT.—Th e Director of the Office of Thrift 

Supervision or the Chairperson of the Federal Housing Finance 

Board shall take such action as is necessary on a case-by-case basis 

so that employees transferring under this section receive equitable 

treatment regarding credit for prior service with a Federal entity 

or instrumentality, or with a Federal Home Loan Bank or joint office of such Banks, with respect to the transferring employees' 

retirement accounts and the transferring employees' accrued leave 

or vacation time, in recognition of the transferring employees' 

supervisory service. 

(g) SPECIAL RULE FOR CERTAIN ANNUITANTS.—A n individual 

who was a reemployed annuitant on July 26, 1989, and who is 

transferred under this section, shall not be subject to the deduction 

from pay required by section 8344 or 8468 of title 5, United States 

Code, during the 1-year period beginning on the date of enactment 

of the Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989. 

TITLE IX—REGULATORY ENFORCEMEN T AUTHORITY AN D CRIMINA L ENHANCEMENTS 

Subtitle E—Civil Penalties For Violations 

Involving Financial Institutions 

SEC. 951. [12 U.S.C. 1833a] CIVI L PENALTIES. 

(a) IN GENERAL.—Whoever violates any provision of law to 

which this section is made applicable by subsection (c) shall be subject to a civil penalty in an amount assessed by the court in a civil 

action under this section. 

(b) MAXIMU M AMOUN T OF PENALTY.— 

(1) GENERALLY.—The amount of the civil penalty shall not 

exceed $1,000,000. 
1023 FIRREA OF 1989 Sec. 1104 

( 2 ) SPECIA L RUL E FOR CONTINUIN G VIOLATIONS.—I n th e 

case of a continuing violation, the amount of the civil penalty 

may exceed the amount described in paragraph (1) but may not 

exceed the lesser of $1,000,000 per day or $5,000,000. 

( 3 ) SPECIA L RUL E FOR VIOLATION S CREATIN G GAI N OR 

LOSS.—(A) If any person derives pecuniary gain from the violation, or if the violation results in pecuniary loss to a person 

other than the violator, the amount of the civil penalty may exceed the amounts described in paragraphs (1) and (2) but may 

not exceed the amount of such gain or loss. 

(B) As used in this paragraph, the term ''person'' includes 

the Bank Insurance Fund, the Savings Association Insurance 

Fund, and the National Credit Union Share Insurance Fund. 

(c) VIOLATION S TO WHIC H PENALT Y I S APPLICABLE.—Thi s section applies to a violation of, or a conspiracy to violate— 

(1) section 215, 656, 657, 1005, 1006, 1007, 1014, or 1344 

of title 18, United States Code; or 

(2) section 13411 or 1343 of title 18, United States Code, 

affecting a federally insured financial institution. 

This section shall apply to violations occurring on or after August 

10, 1984. 

(d) ATTORNE Y GENERA L TO BRIN G ACTION.— A civil action to recover a civil penalty under this section shall be commenced by the 

Attorney General. 

(e) BURDE N OF PROOF.—I n a civil action to recover a civil penalty under this section, the Attorney General must establish the 

right to recovery by a preponderance of the evidence. 

(f) ADMINISTRATIV E SUBPOENAS. — 

(1) IN GENERAL.—For the purpose of conducting a civil 

investigation in contemplation of a civil proceeding under this 

section, the Attorney General may— 

(A) administer oaths and affirmations; 

(B) take evidence; and 

(C) by subpoena, summon witnesses and require the 

production of any books, papers, correspondence, memoranda, or other records which the Attorney General deems 

relevant or material to the inquiry. Such subpoena may require the attendance of witnesses and the production of 

any such records from any place in the United States at 

any place in the United States designated by the Attorney 

General. 

(2) PROCEDURE S APPLICABLE.—Th e same procedures and 

limitations as are provided with respect to civil investigative 

demands in subsections (g), (h), and (j) of section 1968 of title 

18, United States Code, apply with respect to a subpoena 

issued under this subsection. Process required by such subsections to be served upon the custodian shall be served on the 

1

 Section 2596(d)(1) of the Crime Control Act of 1990 (104 Stat. 4908) amended section 

951(c)(1) by inserting ''287, 1001, 1032,'' before ''1341;''. The term ''1341'' does not appear in 

paragraph (1) of section 951(c). The amendment should probably be to section 951(c)(2) where 

such term does appear. Section 330003 of the Violent Crime Control and Law Enforcement Act 

of 1994 (P.L. 103-322) amended section 2596(d)(1) of the Crime Control Act of 1990 by striking 

''951(c)(1)'' and inserting ''951(c)(2)''. This amendment solved the placement of the amendments 

made by the Crime Control Act but did not remove the semicolon following "1341". 
Sec. 1105 FIRREA OF 1989 1024 

Attorney General. Failure to comply with an order of the court 

to enforce such subpoena shall be punishable as contempt. 

(3) LIMITATION.—I n the case of a subpoena for which the 

return date is less than 5 days after the date of service, no person shall be found in contempt for failure to comply by the return date if such person files a petition under paragraph (2) 

not later than 5 days after the date of service. 

(g) STATUTE OF LIMITATIONS.—A civil action under this section 

may not be commenced later than 10 years after the cause of action 

accrues. 

TITLE X—STUDIES OF FEDERA L DEPOSIT INSURANCE, BANKING SERVICES, AN D TH E SAFETY AN D SOUNDNESS OF GOVERNMENT-SPONSORED 

ENTERPRISES 

SEC. 1002. [12 U.S.C. 1811 nt.] SURVEY OF BANK FEES AN D SERVICES. 

(a) ANNUA L SURVEY REQUIRED.—Th e Board of Governors of the 

Federal Reserve System shall obtain a sample, which is representative by geographic location and size of the institution, of— 

(1) certain retail banking services provided by insured 

depository institutions; and 

(2) the fees, if any, which are imposed by such institutions 

for providing any such service, including fees imposed for not 

sufficient funds, deposit items returned, and automated teller 

machine transactions. 

(b) ANNUA L REPORT TO CONGRESS REQUIRED.— 

(1) PREPARATION.—The Board of Governors of the Federal 

Reserve System shall prepare a report of the results of each 

survey conducted pursuant to subsection (a). 

(2) CONTENTS OF THE REPORT.—Each report prepared pursuant to paragraph (1) shall include— 

(A) a description of any discernible trend, in the Nation as a whole, in each of the 50 States, and in each consolidated metropolitan statistical area or primary metropolitan statistical area (as defined by the Director of the 

Office of Management and Budget), in the cost and availability of retail banking services (including fees imposed 

for providing such services), that delineates differences between insured depository institutions on the basis of both 

the size of the institution and any engagement of the institution in multistate activity; and 

(B) a description of the correlation, if any, among the 

following factors: 

(i) An increase or decrease in the amount of any 

deposit insurance premium assessed by the Federal 

Deposit insurance Corporation against insured depository institutions. 
1025 FIRREA OF 1989 Sec. 1104 

(ii) An increase or decrease in the amount of the 

fees imposed by such institutions for providing retail 

banking services. 

(iii) A decrease in the availability of such services. 

(3) SUBMISSION TO CONGRESS.—The Board of Governors of 

the Federal Reserve System shall submit an annual report to 

the Congress not later than September 1, 1995, and not later 

than June 1 of each subsequent year. 

TITLE XI—REAL ESTATE APPRAISAL 

REFOR M AMENDMENTS 

SEC. 1101. [12 U.S.C. 3331] PURPOSE. 

The purpose of this title is to provide that Federal financial 

and public policy interests in real estate related transactions will 

be protected by requiring that real estate appraisals utilized in connection with federally related transactions are performed in writing, in accordance with uniform standards, by individuals whose 

competency has been demonstrated and whose professional conduct 

will be subject to effective supervision. 

[Section 1102 amended the Federal Financial Institutions Examination Council Act of 1978.] 

SEC. 1103. [12 U.S.C. 3332] FUNCTIONS OF APPRAISAL SUBCOMMITTEE. 

(a) IN GENERAL.—The Appraisal Subcommittee shall— 

(1) monitor the requirements established by States for the 

certification and licensing of individuals who are qualified to 

perform appraisals in connection with federally related transactions, including a code of professional responsibility; 

(2) monitor the requirements established by the Federal 

financial institutions regulatory agencies and the Resolution 

Trust Corporation with respect to— 

(A) appraisal standards for federally related transactions under their jurisdiction, and 

(B) determinations as to which federally related transactions under their jurisdiction require the services of a 

State certified appraiser and which require the services of 

a State licensed appraiser; 

(3) maintain a national registry of State certified and licensed appraisers who are eligible to perform appraisals in federally related transactions; and 

(4) transmit an annual report to the Congress not later 

than January 31 of each year which describes the manner in 

which each function assigned to the Appraisal Subcommittee 

has been carried out during the preceding year. 

(b) MONITORING AND REVIEWING FOUNDATION.—The Appraisal 

Subcommittee shall monitor and review the practices, procedures, 

activities, and organizational structure of the Appraisal Foundation. 

SEC. 1104. [12 U.S.C. 3333] CHAIRPERSON OF APPRAISAL SUBCOMMITTEE; TER M OF CHAIRPERSON; MEETINGS. 

(a) CHAIRPERSON.—The Council shall select the Chairperson of 

the subcommittee. The term of the Chairperson shall be 2 years. 
Sec. 1105 FIRREA OF 1989 1026 

(b) MEETINGS; QUORUM ; VOTING.—Th e Appraisal Subcommittee shall meet at the call of the Chairperson or a majority 

of its members when there is business to be conducted. A majority 

of members of the Appraisal Subcommittee shall constitute a 

quorum but 2 or more members may hold hearings. Decisions of 

the Appraisal Subcommittee shall be made by the vote of a majority of its members. 

SEC. 1105. [12 U.S.C. 3334] OFFICER S AN D STAFF. 

The Chairperson of the Appraisal Subcommittee shall appoint 

such officers and staff as may be necessary to carry out the functions of this title consistent with the appointment and compensation practices of the Council. 

SEC. 1106. [12 U.S.C. 3335] POWERS OF APPRAISA L SUBCOMMITTEE. 

The Appraisal Subcommittee may, for the purpose of carrying 

out this title, establish advisory committees, hold hearings, sit and 

act at times and places, take testimony, receive evidence, provide 

information, and perform research, as the Appraisal Subcommittee 

considers appropriate. 

SEC. 1107. [12 U.S.C. 3336] PROCEDURES FOR ESTABLISHIN G APPRAISAL STANDARDS AN D REQUIRIN G TH E USE OF CERTIFIE D AN D LICENSE D APPRAISERS. 

Appraisal standards and requirements for using State certified 

and licensed appraisers in federally related transactions pursuant 

to this title shall be prescribed in accordance with procedures set 

forth in section 553 of title 5, united States Code, including the 

publication of notice and receipt of written comments or the holding of public hearings with respect to any standards or requirements proposed to be established. 

SEC. 1108. [12 U.S.C. 3337] STARTU P FUNDING . 

(a) IN GENERAL.—For purposes of this title, the Secretary of 

the Treasury shall pay to the Appraisal Subcommittee a one-time 

payment of $5,000,000 on the date of the enactment of this Act. 

Thereafter, expenses of the subcommittee shall be funded through 

the collection of registry fees from certain certified and licensed appraisers pursuant to section 1109 or, if required, pursuant to section 1122(b) of this title. 

(b) ADDITIONAL FUNDS.—Excep t as provided in section 1122(b) 

of this title, funds in addition to the funds provided under subsection (a) may be made available to the Appraisal Subcommittee 

only if authorized and appropriated by law. 

(c) REPAYMENT OF TREASURY LOAN.—No t later than September 

30, 1998, the Appraisal Subcommittee shall repay to the Secretary 

of the Treasury the unpaid portion of the $5,000,000 paid to the 

Appraisal Subcommittee pursuant to this section. 

SEC. 1109. [12 U.S.C. 3338] ROSTER OF STATE CERTIFIE D OR LICENSE D APPRAISERS; AUTHORIT Y TO COLLEC T AN D 

TRANSMI T FEES. 

(a) IN GENERAL.—Each State with an appraiser certifying and 

licensing agency whose certifications and licenses comply with this 

title, shall— 

(1) transmit to the Appraisal Subcommittee, no less than 

annually, a roster listing individuals who have received a State 

certification or license in accordance with this title; and 
1027 FIRREA OF 1989 Sec. 1104 

(2) collect from such individuals who perform or seek to 

perform appraisals in federally related transactions, an annual 

registry fee of not more than $25, such fees to be transmitted 

by the State agencies to the Council on an annual basis. 

Subject to the approval of the Council, the Appraisal Subcommittee 

may adjust the dollar amount of registry fees, up to a maximum 

of $50 per annum, as necessary to carry out its functions under 

this title. 

(b) USE OF AMOUNTS APPROPRIATED OR COLLECTED.—Amount s 

appropriated for or collected by the Appraisal Subcommittee under 

this section shall be used— 

(1) to maintain a registry of individuals who are qualified 

and eligible to perform appraisals in connection with federally 

related transactions; 

(2) to support its activities under this title; 

(3) to reimburse the general fund of the Treasury for 

amounts appropriated to and expended by the Appraisal Subcommittee during the 24-month startup period following the 

date of the enactment of this title; and 

(4) to make grants in such amounts as it deems appropriate to the Appraisal Foundation, to help defray those costs 

of the foundation relating to the activities of its Appraisal 

Standards and Appraiser Qualification Boards. 

SEC. 1110. [12 U.S.C. 3339] FUNCTION S OF TH E FEDERA L FINANCIA L 

INSTITUTION S REGULATOR Y AGENCIES RELATIN G TO APPRAISA L STANDARDS. 

Each Federal financial institutions regulatory agency and the 

Resolution Trust Corporation shall prescribe appropriate standards 

for the performance of real estate appraisals in connection with 

federally related transactions under the jurisdiction of each such 

agency or instrumentality. These rules shall require, at a 

minimum— 

(1) that real estate appraisals be performed in accordance 

with generally accepted appraisal standards as evidenced by 

the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation; and 

(2) that such appraisals shall be written appraisals. 

Each such agency or instrumentality may require compliance with 

additional standards if it makes a determination in writing that 

such additional standards are required in order to properly carry 

out its statutory responsibilities. 

SEC. 1111. [12 U.S.C. 3340] TIM E FOR PROPOSAL AN D ADOPTIO N OF 

STANDARDS. 

Appraisal standards established under this title shall be proposed not later than 6 months and shall be adopted in final form 

and become effective not later than 12 months after the date of the 

enactment of this Act. 

SEC. 1112. [12 U.S.C. 3341] FUNCTION S OF TH E FEDERA L FINANCIA L 

INSTITUTION S REGULATOR Y AGENCIES RELATIN G TO APPRAISE R QUALIFICATIONS. 

(a) IN GENERAL.—Each Federal financial institutions regulatory agency and the Resolution Trust Corporation shall prescribe, 

in accordance with sections 1113 and 1114 of this title, which categories of federally related transactions should be appraised by a 
Sec. 1105 FIRREA OF 1989 1028 

State certified appraiser and which by a State licensed appraiser 

under this title. 

(b) THRESHOLD LEVEL.—Eac h Federal financial institutions 

regulatory agency and the Resolution Trust Corporation may establish a threshold level at or below which a certified or licensed appraiser is not required to perform appraisals in connection with 

federally related transactions, if such agency determines in writing 

that such threshold level does not represent a threat to the safety 

and soundness of financial institutions. 

(c) GA O STUDY OF APPRAISALS I N CONNECTION WIT H REA L ESTATE 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) the cost to any financial institution involved in any 

such transaction; 

(B) the possibility of losses to the Bank Insurance 

Fund, the Savings Association Insurance Fund, or the National Credit Union Share Insurance Fund; 

(C) the cost to any customer involved in any such 

transaction; and 

(D) the effect on low-income housing. 

(2) REPORTS TO CONGRESS AND THE APPROPRIATE FEDERAL 

FINANCIAL INSTITUTIONS REGULATORY AGENCIES.—Upo n completing each of the studies referred to in paragraph (1), the 

Comptroller General shall submit a report on the Comptroller 

General's findings and conclusions with respect to such study 

to the Federal financial institutions regulatory agencies, the 

Committee on Banking, Finance and Urban Affairs of the 

House of Representatives, and the Committee on Banking, 

Housing, and Urban Affairs of the Senate, together with such 

recommendations for legislative or administrative action as the 

Comptroller General determines to be appropriate. 

SEC. 1113. [12 U.S.C. 3342] TRANSACTIONS REQUIRIN G TH E SERVICES 

OF A STATE CERTIFIE D APPRAISER. 

In determining whether an appraisal in connection with a federally related transaction shall be performed by a State certified 

appraiser, an agency or instrumentality under this title shall consider whether transactions, either individually or collectively, are of 

sufficient financial or public policy importance to the United States 

that an individual who performs an appraisal in connection with 

such transactions should be a State certified appraiser, except 

that— 

(1) a State certified appraiser shall be required for all federally related transactions having a value of $1,000,000 or 

more; and 

(2) 1-to-4 unit, single family residential appraisals may be 

performed by State licensed appraisers unless the size and 

complexity requires a State certified appraiser. 
1029 FIRREA OF 1989 Sec. 1104 

SEC. 1114. [12 U.S.C. 3343] TRANSACTIONS REQUIRING THE SERVICES 

OF A STATE LICENSED APPRAISER. 

All federally related transactions not requiring the services of 

a State certified appraiser shall be performed by either a State certified or licensed appraiser. 

SEC. 1115. [12 U.S.C. 3344] TIM E FOR PROPOSAL AND ADOPTION OF 

RULES. 

As appropriate, rules issued under sections 1113 and 1114 

shall be proposed not later than 6 months and shall be effective 

upon adoption in final form not later than 12 months after the date 

of the enactment of this Act. 

SEC. 1116. [12 U.S.C. 3345] CERTIFICATION AND LICENSING REQUIREMENTS. 

(a) IN GENERAL.—For purposes of this title, the term ''State 

certified real estate appraiser'' means any individual who has satisfied the requirements for State certification in a State or territory 

whose criteria for certification as a real estate appraiser currently 

meets the minimum criteria for certification issued by the Appraiser Qualification Board of the Appraisal Foundation. 

(b) RESTRICTION.—No individual shall be a State certified real 

estate appraiser under this section unless such individual has 

achieved a passing grade upon a suitable examination administered by a State or territory that is consistent with and equivalent 

to the Uniform State Certification Examination issued or endorsed 

by the Appraiser Qualification Board of the Appraisal Foundation. 

(c) DEFINITION.—As used in this section, the term ''State licensed appraiser'' means an individual who has satisfied the 

requirements for State licensing in a State or territory. 

(d) ADDITIONAL QUALIFICATION CRITERIA.—Nothing in this title 

shall be construed to prevent any Federal agency or instrumentality under this title from establishing such additional qualification criteria as may be necessary or appropriate to carry out the 

statutory responsibilities of such department, agency, or instrumentality. 

(e) AUTHORITY OF THE APPRAISAL SUBCOMMITTEE.—The Appraisal Subcommittee shall not set qualifications or experience 

requirements for the States in licensing real estate appraisers, including a de minimus standard. Recommendations of the Subcommittee shall be nonbinding on the States. 

SEC. 1117. [12 U.S.C. 3346] ESTABLISHMENT OF STATE APPRAISER 

CERTIFYING AND LICENSING AGENCIES. 

To assure the availability of State certified and licensed appraisers for the performance in a State of appraisals in federally 

related transactions and to assure effective supervision of the 

activities of certified and licensed appraisers, a State may establish 

a State appraiser certifying and licensing agency. 

SEC. 1118. [12 U.S.C. 3347] MONITORING OF STATE APPRAISER CERTIFYING AND LICENSING AGENCIES. 

(a) IN GENERAL.—The Appraisal Subcommittee shall monitor 

State appraiser certifying and licensing agencies for the purpose of 

determining whether a State agency's policies, practices, and procedures are consistent with this title. The Appraisal Subcommittee 

and all agencies, instrumentalities, and federally recognized enti-
Sec. 1105 FIRREA OF 1989 1030 

ties under this title shall not recognize appraiser certifications and 

licenses from States whose appraisal policies, practices, or procedures are found to be inconsistent with this title. 

(b) DISAPPROVAL BY APPRAISAL SUBCOMMITTEE.—The Federal 

financial institutions, regulatory agencies, the Federal National 

Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Resolution Trust Corporation shall accept certifications and licenses awarded by a State appraiser certifying the licensing agency unless the Appraisal Subcommittee issues a written 

finding that— 

(1) the State agency fails to recognize and enforce the 

standards, requirements, and procedures prescribed pursuant 

to this title; 

(2) the State agency is not granted authority by the State 

which is adequate to permit the agency to carry out its functions under this title; or 

(3) decisions concerning appraisal standards, appraiser 

qualifications and supervision of appraiser practices are not 

made in a manner that carries out the purposes of this title. 

(c) REJECTION OF STATE CERTIFICATIONS AND LICENSES.— 

(1) OPPORTUNITY TO BE HEARD OR CORRECT CONDITIONS.— 

Before refusing to recognize a State's appraiser certifications or 

licenses, the Appraisal Subcommittee shall provide that State's 

certifying and licensing agency a written notice of its intention 

not to recognize the State's certified or licensed appraisers and 

ample opportunity to provide rebuttal information or to correct 

the conditions causing the refusal. 

(2) ADOPTION OF PROCEDURES.—The Appraisal Subcommittee shall adopt written procedures for taking actions described in this section. 

(3) JUDICIAL REVIEW.—A decision of the subcommittee 

under this section shall be subject to judicial review. 

SEC. 1119. [12 U.S.C. 3348] RECOGNITIO N OF STATE CERTIFIE D AN D 

LICENSE D APPRAISERS FOR PURPOSES OF THIS TITLE. 

(a) EFFECTIVE DATE FOR USE OF CERTIFIED OR LICENSED APPRAISERS ONLY. — 

(1) IN GENERAL.—Not later than December 31, 1992, all 

appraisals performed in connection with federally related 

transactions shall be performed only by individuals certified or 

licensed in accordance with the requirements of this title. 

(2) EXTENSION OF EFFECTIVE DATE.—Subjec t to th e approval of the council,1

 the Appraisal Subcommittee may extend, until December 31, 1991, the effective date for the use of 

certified or licensed appraisers if it makes a written finding 

that a State has made substantial progress in establishing a 

State certification and licensing system that appears to conform to the provisions of this title. 

(b) TEMPORARY WAIVER OF APPRAISER CERTIFICATION OR LICENSING REQUIREMENTS FOR STATE HAVIN G SCARCITY OF QUALIFIED APPRAISERS.—Subject to the approval of the Council, the Appraisal Subcommittee may waive any requirement relating to certification or licensing of a person to perform appraisals under this 

1

 So in law. Probably should be "Council". 
1031 FIRREA OF 1989 Sec. 1104 

title if the Appraisal Subcommittee or a State agency whose certifications and licenses are in compliance with this title, makes a written determination that there is a scarcity of certified or licensed 

appraisers to perform appraisals in connection with federally related transactions in a State, or in any geographical political subdivision of a State, leading to significant delays in the performance 

of such appraisals. The waiver terminates when the Appraisal Subcommittee determines that such significant delays have been eliminated. 

(c) REPORTS TO STATE CERTIFYING AND LICENSING AGENCIES.— 

The Appraisal Subcommittee, any other Federal agency or instrumentality, or any federally recognized entity shall report any action 

of a State certified or licensed appraiser that is contrary to the purposes of this title, to the appropriate State agency for a disposition 

of the subject of the referral. The State agency shall provide the 

Appraisal Subcommittee or the other Federal agency or instrumentality with a report on its disposition of the matter referred. Subsequent to such disposition, the subcommittee or the agency or 

instrumentality may take such further action, pursuant to written 

procedures, it deems necessary to carry out the purposes of this 

title. 

SEC. 1120. [12 U.S.C. 3349] VIOLATION S I N OBTAININ G AN D PERFORMIN G APPRAISALS I N FEDERALLY RELATE D TRANSACTIONS. 

(a) VIOLATIONS.—Except as authorized by the Appraisal Subcommittee in exercising its waiver authority pursuant to section 

1119(b), it shall be a violation of this section— 

(1) for a financial institution to seek, obtain, or give money 

or any other thing of value in exchange for the performance of 

an appraisal by a person who the institution knows is not a 

State certified or licensed appraiser in connection with a federally related transaction; and 

(2) for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Resolution Trust 

Corporation to knowingly contract for the performance of any 

appraisal by a person who is not a State certified or licensed 

appraiser in connection with a real estate related financial 

transaction defined in section 1121(5) to which such association or corporation is a party. 

(b) PENALTIES.—A financial institution that violates subsection 

(a)(1) shall be subject to civil penalties under section 8(i)(2) of the 

Federal Deposit insurance Act or section 206(k)(2) of the Federal 

Credit union Act, as appropriate. 

(c) PROCEEDING.—A proceeding with respect to a violation of 

this section shall be an administrative proceeding which may be 

conducted by a Federal financial institutions regulatory agency in 

accordance with the procedures set forth in subchapter i i of chapter 5 of title 5, united States Code. 

SEC. 1121. [12 U.S.C. 3350] DEFINITIONS. 

For purposes of this title: 

(1) STATE APPRAISER CERTIFYING AND LICENSING AGENCY.— 

The term "State appraiser certifying and licensing agency'' 

means a State agency established in compliance with this title. 
Sec. 1105 FIRREA OF 1989 1032 

(2) APPRAISAL SUBCOMMITTEE; SUBCOMMITTEE.—The terms 

''Appraisal Subcommittee'' and ''subcommittee'' mean the Appraisal Subcommittee of the Federal Financial Institutions 

Examination Council. 

(3) COUNCIL.—The term ''Council'' means the Federal 

Financial Institutions Examinations Council. 

(4) FEDERALLY RELATED TRANSACTION.—The term ''federally related transaction'' means any real estate-related financial transaction which— 

(A) a federal financial institutions regulatory agency 

or the Resolution Trust Corporation engages in, contracts 

for, or regulates; and 

(B) requires the services of an appraiser. 

(5) REAL ESTATE RELATED FINANCIAL TRANSACTION.—The 

term ''real estate-related financial transaction'' means any 

transaction involving— 

(A) the sale, lease, purchase, investment in or exchange of real property, including interests in property, or 

the financing thereof; 

(B) the refinancing of real property or interests in real 

property; and 

(C) the use of real property or interests in property as 

security for a loan or investment, including mortgagebacked securities. 

(6) FEDERAL FINANCIAL INSTITUTIONS REGULATORY AGENCIES.—The term ''Federal financial institutions regulatory 

agencies'' means the Board of Governors of the Federal Reserve 

System, the Federal Deposit Insurance Corporations,1 the Office of the Comptroller of the Currency, the Office of Thrift 

Supervision, and the National Credit Union Administration. 

(7) FINANCIAL INSTITUTION.—The term ''financial institution'' means an insured depository institution as defined in section 3 of the Federal Deposit Insurance Act or an insured 

credit union as defined in section 101 of the Federal Credit 

Union Act. 

(8) CHAIRPERSON.—The term ''Chairperson'' means the 

Chairperson of the Appraisal Subcommittee selected by the 

council

 2

. 

(9) FOUNDATION.—Th e terms ''Appraisal Foundation'' and 

''Foundation'' means the Appraisal Foundation established on 

November 30, 1987, as a not for profit corporation under the 

laws of illinois. 

(10) WRITTE N APPRAISAL.—The term ''written appraisal'' 

means a written statement used in connection with a federally 

related transaction that is independently and impartially prepared by a licensed or certified appraiser setting forth an opinion of defined value of an adequately described property as of 

a specific date, supported by presentation and analysis of relevant market information. 

SEC. 1122. [12 U.S.C. 3351] MISCELLANEOU S PROVISIONS. 

(a) TEMPORARY PRACTICE.— 

1

 so in original. probably should be ''Corporation''. 

2

 so in original. The word ''council'' probably should be ''Council''. 
1033 FIRREA OF 1989 Sec. 1104 

(1) I N GENERAL.— A State appraiser certifying or licensing 

agency shall recognize on a temporary basis the certification or 

license of an appraiser issued by another State if— 

(A) 1 the property to be appraised is part of a federally related transaction, 

(B) 1 the appraiser's business is of a temporary nature, and 

(C) 1 the appraiser registers with the appraiser certifying 

or licensing agency in the State of temporary practice. 

(2) FEE S FOR TEMPORAR Y PRACTICE.— A State appraiser 

certifying or licensing agency shall not impose excessive fees or 

burdensome requirements, as determined by the Appraisal 

Subcommittee, for temporary practice under this subsection. 

(b) RECIPROCITY.—Th e Appraisal Subcommittee shall encourage the States to develop reciprocity agreements that readily authorize appraisers who are licensed or certified in one State (and 

who are in good standing with their State appraiser certifying or 

licensing agency) to perform appraisals in other States. 

(c) SUPPLEMENTA L FUNDING.—Fund s available to the Federal 

financial institutions regulatory agencies may be made available to 

the Federal Financial Institutions Examination Council2 to support 

the council's

 3 functions under this title. 

(d) PROHIBITIO N AGAINS T DISCRIMINATION.—Criteri a established by the Federal financial institutions regulatory agencies, the 

Federal National Mortgage Association, the Federal Home Loan 

Mortgage Corporation, and the Resolution Trust Corporation for 

appraiser qualifications in addition to State certification or licensing shall not exclude a certified or licensed appraiser for consideration for an assignment solely by virtue of membership or lack of 

membership in any particular appraisal organization. 

(e) OTHE R REQUIREMENTS.— A corporation, partnership, or 

other business entity may provide appraisal services in connection 

with federally related transactions if such appraisal is prepared by 

individuals certified or licensed in accordance with the requirements of this title. An individual who is not a State certified or licensed appraiser may assist in the preparation of an appraisal if— 

(1) the assistant is under the direct supervision of a licensed or certified individual; and 

(2) the final appraisal document is approved and signed by 

an individual who is certified or licensed. 

(f) STUDIES. — 

(1) STUDY.—The Appraisal Subcommittee shall— 

(A) conduct a study to determine whether real estate 

sales and financing information and data that is available 

to real estate appraisers in the States is sufficient to permit appraisers to properly estimate the values of properties in connection with federally related transactions; 

and 

1

 So in original. The left margins of subparagraphs (A) through (C) (as so redesignated by section 1122(3)(A) of the Riegle Community Development and Regulatory Improvement Act of 1994; 

108 Stat. 2222) probably should be moved 2-ems to the right. 

2

 So in original. The word "Federal" does not appear in the name of the Council established 

under section 1004(a) of the Federal Financial Institutions Examination Council Act of 1978. 

3

 So in original. The word "council's" probably should be "Council's". 
Sec. 1105 FIRREA OF 1989 1034 

(B) study the feasibility and desirability of extending 

the provisions of this title to the function of personal property appraising and to personal property appraisers in connection with Federal financial and public policy interests. 

(2) REPORT.—The Appraisal Subcommittee shall— 

(A) report its findings to the Congress with respect to 

the study described in paragraph (1)(A) no later than 12 

months after the date of the enactment of this title, and 

(B) report its findings with respect to the study described in paragraph (1)(B) to Congress not later than 18 

months after the date of the enactment of this title. 

SEC. 1123. [12 U.S.C. 3352] EMERGENCY EXCEPTIONS FOR DISASTER 

AREAS. 

(a) IN GENERAL.—Each Federal financial institutions regulatory agency may, by regulation or order, make exceptions to this 

title, and to standards prescribed pursuant to this title, for transactions involving institutions for which the agency is the primary 

Federal regulator with respect to real property located within a disaster area if the agency— 

(1) makes the exception not later than 30 months after the 

date on which the President determines, pursuant to section 

401 of the Robert T. Stafford Disaster Relief and Emergency 

Assistance Act, that a major disaster exists in the area; and 

(2) determines that the exception— 

(A) would facilitate recovery from the major disaster; 

and 

(B) is consistent with safety and soundness. 

(b) 3-YEAR LIMIT ON EXCEPTIONS.—Any exception made under 

this section shall expire not later than 3 years after the date of the 

determination referred to in subsection (a)(1). 

(c) PUBLICATION REQUIRED.—Any Federal financial institutions 

regulatory agency shall publish in the Federal Register a statement 

that— 

(1) describes any exception made under this section; and 

(2) explains how the exception— 

(A) would facilitate recovery from the major disaster; 

and 

(B) is consistent with safety and soundness. 

(d) DISASTER AREA DEFINED.—For purposes of this section, the 

term "disaster area'' means an area in which the President, pursuant to section 401 of the Robert T. Stafford Disaster Relief and 

Emergency Assistance Act, has determined that a major disaster 

exists. 

TITL E XII—MISCELLANEOU S 

PROVISIONS 

SEC. 1204. [12 U.S.C. 1811 nt.] EXPANSION OF USE OF UNDERUTILIZED 

MINORITY BANKS, WOMEN'S BANKS, AND LOW-INCOME 

CREDIT UNIONS. 

(a) CONSULTATION ON EXPANDED USE.—Th e Secretary of the 

Treasury shall consult with the appropriate Federal banking agen-
1035 FIRREA OF 1989 Sec. 1104 

cies and the National Credit Union Administration Board on methods for increasing the use of underutilized minority banks, women's 

banks, and limited income credit unions as depositaries or financial 

agents of Federal agencies. 

(b) REPORT TO CONGRESS.—The Secretary of the Treasury shall 

include, in the 1st annual report submitted to the Congress under 

section 331(a) of title 31, United States Code, after the completion 

of the consultation required by subsection (a), a report of the actions taken by the Secretary to increase the use of underutilized 

minority banks, women's banks, and limited income credit unions 

as depositaries or financial agents of Federal agencies. 

(c) DEFINITIONS.—For purposes of this section: 

(1) APPROPRIATE FEDERAL BANKING AGENCY.—The term 

''appropriate Federal banking agency'' has the meaning given 

to such term in section 3(q) of the Federal Deposit Insurance 

Act. 

(2) MINORITY BANK.—The term ''minority bank'' means any 

depository institution described in clause (i), (ii), or (iii) of section 19(b)(1)(A) of the Federal Reserve Act— 

(A) more than 50 percent of the ownership or control 

of which is held by 1 or more minority individuals; and 

(B) more than 50 percent of the net profit or loss of 

which accrues to 1 or more minority individuals. 

(3) MINORITY.—The term ''minority'' means any Black 

American, Native American, Hispanic American, or Asian 

American. 

(4) LOW-INCOME CREDIT UNION.—The term ''low-income 

credit union'' means any depository institution described in 

section 19(b)(1)(A)(iv) of the Federal Reserve Act which serves 

predominately low-income members (as defined by the National Credit union Administration Board pursuant to section 

101(5) of the Federal Credit Union Act). 

(5) WOMEN'S BANK.—The term ''women's bank'' means any 

depository institution described in clause (i), (ii), or (iii) of section 19(b)(1)(A) of the Federal Reserve Act— 

(A) more than 50 percent of the outstanding shares of 

which are held by 1 or more women; 

(B) a majority of the directors on the board of directors 

of which are women; and 

(C) a significant percentage of senior management 

positions of which are held by women. 

SEC. 1205. [12 U.S.C. 1818 nt.] CREDIT STANDARDS ADVISORY COMMITTEE. 

(a) ESTABLISHMENT.—There is hereby established the Credit 

Standards Advisory Committee (in this section referred to as the 

''Committee''). 

(b) MEMBERSHIP.— 

(1) APPOINTMENT.—The Committee shall consist of 11 

members, as follows: 

(A) The Chairman of the Board of Governors of the 

Federal Reserve System, or the Chairman's designee. 

(B) The Director of the Office of Thrift Supervision, or 

the Director's designee. 
Sec. 1105 FIRREA OF 1989 1036 

(C) The Chairperson of the Federal Deposit Insurance 

Corporation, or the Chairperson's designee. 

(D) The Comptroller of the Currency, or the Comptroller's designee. 

(E) The Chairman of the National Credit Union 

Administration, or the Chairman's designee. 

(F) 6 members of the public appointed by the President who are knowledgeable with the credit standards and 

lending practices of insured depository institutions, no 

more than 3 of whom shall be from the same political 

party. 

(2) TERMS.—Each member appointed under paragraph 

(1)(F) shall serve for the life of the Committee. 

(3) CHAIRPERSON.—The Chairperson of the Committee 

shall be designated by the President from among the members 

appointed under paragraph (1)(F). 

(4) VACANCIES.—Any vacancy on the Committee shall be 

filled in the manner in which the original appointment was 

made. 

(5) PAY AND EXPENSES.—Members of the Committee shall 

serve without pay but each member of the Committee shall be 

reimbursed for expenses incurred in connection with attendance of such members at meetings of the Committee. All expenses of the Committee shall be shared on a pro rata basis, 

based upon each agency's total budget for the preceding year 

by the Federal financial regulators specified in subparagraphs 

(A) through (E) of paragraph (1). 

(6) MEETINGS.—The Committee shall meet, not less frequently than quarterly, at the call of the chairperson or a majority of the members. 

(c) DUTIES OF THE COMMITTEE.—Th e Committee shall do the 

following: 

(1) REVIEW CREDIT STANDARDS, LENDING PRACTICES, AND 

SUPERVISION BY FEDERAL REGULATORS.—Review the credit 

standards and lending practices of insured depository institutions and the supervision of such standards and practices by 

the Federal financial regulators. 

(2) PREPARE RECOMMENDATIONS.—Prepare written comments and recommendations for the Federal financial regulators to ensure that insured depository institutions adhere to 

prudential credit standards and lending practices that are 

consistent for all insured depository institutions, to the maximum extent possible. 

(3) MONITOR CREDIT STANDARDS, LENDING PRACTICES, AND 

SUPERVISION BY FEDERAL REGULATORS.—Monitor the credit 

standards and lending practices of insured depository institutions, and the supervision of such standards and practices by 

the Federal financial regulators, to ensure that insured depository institutions can meet the demands of a modern and globally competitive financial world. 

(d) ANNUA L REPORT.— 

(1) REQUIRED.—Not later than January 30 of each year, 

the Committee shall submit a report to the Committee on 

Banking, Finance and Urban Affairs of the House of Rep-
1037 FIRREA OF 1989 Sec. 1104 

resentatives and the Committee on Banking, Housing, and 

Urban Affairs of the Senate. 

(2) CONTENTS.—The report required by paragraph (1) shall 

describe the activities of the Committee during the preceding 

year and the reports and recommendations made by the Committee to the Federal financial regulators. 

(e) CONFLIC T OF INTERES T GUIDELINES.—Th e Committee shall 

prescribe such guidelines as the Committee determines to be appropriate to avoid conflicts of interest with respect to the disclosure to 

and use by members of the Committee of information relating to 

insured depository institutions and the Federal financial regulators. 

(f) FEDERA L ADVISOR Y COMMITTE E AC T DOE S NO T APPLY.—Th e 

Federal Advisory Committee Act shall not apply with respect to the 

Committee. 

SEC. 1206. [1 2 U.S.C. 1833b] COMPARABILIT Y I N COMPENSATIO N 

SCHEDULES . 

The Federal Deposit Insurance Corporation, the Comptroller of 

the Currency, the National Credit Union Administration Board, the 

Federal Housing Finance Board, the oversight Board

 1 of the Resolution Trust Corporation, the Farm Credit Administration, and the 

Office of Thrift Supervision, in establishing and adjusting schedules of compensation and benefits which are to be determined 

solely by each agency under applicable provisions of law, shall inform the heads of the other agencies and the Congress of such compensation and benefits and shall seek to maintain comparability regarding compensation and benefits. 

SEC. 1208. [1 2 U.S.C. 1811 nt.] EXPENDITUR E O F TAXPAYE R MONE Y 

ONL Y FO R DEPOSI T INSURANC E PURPOSES . 

Funds appropriated to the Secretary of the Treasury pursuant 

to an authorization contained in this Act, and any amount authorized to be borrowed from the Secretary of the Treasury by any 

entity pursuant to this Act, may only be used as permitted by law, 

and may not otherwise be used for making any payment to any 

shareholder in, or creditor to, any insured depository institution. 

SEC. 1213. [1 2 U.S.C. 1833c] COMPTROLLE R GENERA L AUDI T AN D AC -

CESS T O RECORDS . 

( a ) AUDI T OF AGENCIE S OR OTHE R PERSON S PERFORMIN G FUNC -

TION S UNDE R BANKIN G LAWS. — 

(1) IN GENERAL.—Except as provided in paragraph (2), all 

agencies, corporations, organizations, and other persons of any 

description which perform any function or activity under this 

Act, or any other Act which is amended by this Act, shall be 

subject to audit by the Comptroller General of the United 

States with respect to such function or activity. 

*The Oversight Board was redesignated as the Thrift Depositor Protection Oversight Board 

by the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 

(see section 302(a) of such Act, 105 Stat. 1767) and subsequently abolished under section 14 of 

the Homeowners Protection Act of 1998 (12 U.S.C. 1441a note). The Board's authority and duties were transferred to the Secretary of the Treasury. The Resolution Trust Corporation has 

been abolished (see section 21A(m) of the Federal Home Loan Bank Act). 
Sec. 1105 FIRREA OF 1989 1038 

(2) EXCEPTIONS.—Paragraph (1) shall not apply to— 

(A) any function or activity of the Board of Governors 

of the Federal Reserve system or the Federal Reserve 

banks that is described in any paragraph of section 714(b) 

of title 31, United States Code; and 

(B) any function or activity of the Federal National 

Mortgage Association, except as provided in section 309(j) 

of the Federal National Mortgage Association Charter Act. 

(b) AUDI T OF PERSONS PROVIDING CERTAIN GOODS OR SERVICES.—All persons and organizations which, by contract, grant, or 

otherwise, provide goods or services to, or receive financial assistance from, any agency or other person performing functions or 

activities under this Act shall be subject to audit by the Comptroller General with respect to such provision of goods or services 

or receipt of financial assistance. 

(c) PROVISIONS APPLICABLE TO AUDITS UNDE R THI S SECTION.— 

(1) NATUR E AND SCOPE OF AUDIT.—Th e Comptroller General shall determine the nature, scope, and terms and conditions of audits conducted under this section. 

(2) COORDINATION WIT H OTHER PROVISIONS OF LAW.—Th e 

authority of the Comptroller General under this section shall 

be in addition to any audit authority available to the Comptroller General under other provisions of this Act or any other 

law. 

(3) RIGHTS OF ACCESS, EXAMINATION, AND COPYING.—The 

Comptroller General, and any duly authorized representative 

of the Comptroller General, shall have access to, and the right 

to examine and copy, all records and other recorded information in any form, and to examine any property, within the possession or control of any agency or person which is subject to 

audit under this section which the Comptroller General deems 

relevant to an audit conducted under this section. 

(4) ENFORCEMENT OF RIGHT OF ACCESS.—The Comptroller 

General's right of access to information under this section shall 

be enforceable pursuant to section 716 of title 31, United 

States Code. 

(5) MAINTENANC E OF CONFIDENTIAL RECORDS.—The provisions of section 716(e) of title 31, United States Code, shall 

apply to information obtained by the comptroller General 

under this section. 

SEC. 1216. [12 U.S.C. 1833e] EQUA L OPPORTUNITY. 

(a) IN GENERAL.—For purposes of this Act, Executive Order 

Numbered 11478, providing for equal employment opportunity in 

the Federal Government, shall apply to— 

(1) the Comptroller of the Currency; 

(2) the Director of the office of Thrift supervision; 

(3) the Federal home loan banks; 

(4) the Federal Deposit Insurance Corporation; 
1039 FIRREA OF 1989 Sec. 1104 

(5) the Oversight Board1 of the Resolution Trust Corporation; and 

(6) the Resolution Trust Corporation. 

( b ) AFFIRMATIV E PROGRA M FOR EQUA L EMPLOYMEN T OPPOR -

TUNITY.—For purposes of this Act, sections 1 and 2 of Executive 

Order Numbered 11478, providing for the adoption and implementation of equal employment opportunity, shall apply to the Federal 

National Mortgage Association and the Federal Home Loan Mortgage Corporation. 

(c) SOLICITATIO N OF CONTRACTS.—The Federal Deposit Insurance Corporation, the Comptroller of the Currency, the Director of 

the Office of Thrift Supervision, the Federal Housing Finance 

Board, the Oversight Board1 of the Resolution Trust Corporation, 

and the Resolution Trust Corporation shall each prescribe regulations to establish and oversee a minority outreach program within 

each such agency to ensure inclusion, to the maximum extent possible, of minorities and women, and entities owned by minorities 

and women, including financial institutions, investment banking 

firms, underwriters, accountants, and providers of legal services, in 

all contracts entered into by the agency with such persons or entities, public and private, in order to manage the institutions and 

their assets for which the agency is responsible or to perform such 

other functions authorized under any law applicable to such 

agency. 

(d) REPOR T TO CONGRESS.—Before the end of the 180-day period beginning on the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989— 

(1) the Federal Deposit Insurance Corporation; 

(2) the Comptroller of the Currency; 

(3) the Director of the Office of Thrift Supervision; 

(4) the Federal Housing Finance Board; 

(5) the Oversight Board1

 of the Resolution Trust Corporation; 

(6) the Resolution Trust Corporation; 

(7) the Federal Home Loan Mortgage Corporation; and 

(8) the Federal National Mortgage Association, 

shall each submit to the Congress a report containing a complete 

description of the actions taken by such agency pursuant to subsections (a) and (b) and such recommendations for administrative 

and legislative action as each such agency may determine to be 

appropriate to carry out the purposes of such subsection. 

1

 So in law. The Oversight Board was redesignated as the Thrift Depositor Protection Oversight Board by the Resolution Trust Corporation Refinancing, Restructuring, and Improvement 

Act of 1991 (see section 302(a) of such Act, 105 Stat. 1767) and subsequently abolished under 

section 14 of the Homeowners Protection Act of 1998 (12 U.S.C. 1441a note). The Board's authority and duties were transferred to the Secretary of the Treasury. The Resolution Trust Corporation has been abolished (see section 21A(m) of the Federal Home Loan Bank Act). 
Sec. 1105 FIRREA OF 1989 1040 

TITLE XIII—PARTICIPATIO N BY STATE 

HOUSIN G FINANC E AUTHORITIES 

A N D NONPROFI T ENTITIES 

SEC. 1301. [12 U.S.C. 1441a-1] DEFINITIONS. 

For purposes of this title: 

(1) STATE HOUSING FINANCE AUTHORITY.—The term "State 

housing finance authority'' means any public agency, authority, 

or corporation which— 

(A) serves as an instrumentality of any State or any 

political subdivision of any State; and 

(B) functions as a source of residential mortgage loan 

financing in that State. 

(2) NONPROFIT ENTITY.—The term "nonprofit entity'' means 

any not-for-profit corporation chartered under State law that is 

exempt from Federal taxation under section 501(c) of the Internal Revenue Code of 1986 and no part of the net earnings of 

which inures to the benefit of any member, founder, contributor, or individual (including any nonprofit entity established 

by the corporation established under title IX of the Housing 

and Urban Development Act of 1968). 

(3) MORTGAGE-RELATED ASSETS.—The term "mortgage-related assets'' means— 

(A) residential mortgage loans secured by 1- to 4-family or multifamily dwellings; and 

(B) real property improved with 1- to 4-family or multifamily residential dwellings, 

which are located within the jurisdiction of the applicable State 

housing finance authority or within the geographical area 

served by the nonprofit entity. 

(4) NET INCOME.—The term "net income'' means income 

after deduction of all associated expenses calculated in accordance with generally accepted accounting principles. 

SEC. 1302. [12 U.S.C. 1441a-2] AUTHORIZATION FOR STATE HOUSING 

FINANCE AGENCIES AND NONPROFIT ENTITIES TO PURCHASE MORTGAGE-RELATED ASSETS. 

(a) AUTHORIZATION.—Notwithstanding any other provision of 

Federal or State law, a State housing finance authority or nonprofit 

entity may purchase mortgage-related assets from the Resolution 

Trust Corporation or from financial institutions with respect to 

which the Federal Deposit Insurance Corporation is acting as a 

conservator or receiver (including assets associated with any trust 

business), and any contract for such purchase shall be effective in 

accordance with its terms without any further approval, assignment, or consent with respect to that contract. 

(b) INVESTMENT REQUIREMENT.—Any State housing finance authority or nonprofit entity which purchases mortgage-related assets 

pursuant to subsection (a) shall invest any net income attributable 

to the ownership of those assets in financing, refinancing, or rehabilitating low- and moderate-income housing within the jurisdiction 
1041 FIRREA OF 1989 Sec. 1104 

of the State housing finance authority or within the geographical 

area served by the nonprofit entity. 

GRAMM-LEACH-BLILEY ACT 

1043 

GRAMM-LEACH-BLILEY ACT1 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTIO N 1. SHOR T TITLE ; TABL E O F CONTENTS . 

(a) [12 U.S.C. 1811 nt] SHOR T TITLE.—Thi s Act may be cited 

as the "Gramm-Leach-Bliley Act''. 

TITLE I—FACILITATING AFFILIATIO N 

AMON G BANKS, SECURITIES FIRMS, 

A N D INSURANCE COMPANIES 

Subtitle A—Affiliations 

SEC. 103. FINANCIA L ACTIVITIES . 

(a) * * * 

(d) [ 12 U.S.C. 1843 nt] REPORT. — 

(1) I N GENERAL.—B y the end of the 4-year period beginning on the date of the enactment of this Act, the Board of 

Governors of the Federal Reserve System and the Secretary of 

the Treasury shall submit a joint report to the Congress containing a summary of new activities, including grandfathered 

commercial activities, in which any financial holding company 

is engaged pursuant to subsection (k)(1) or (n) of section 4 of 

the Bank Holding Company Act of 1956 (as added by subsection (a)). 

(2) OTHE R CONTENTS.—Th e report submitted to the Congress pursuant to paragraph (1) shall also contain the following: 

(A) A discussion of actions by the Board of Governors 

of the Federal Reserve System and the Secretary of the 

Treasury, whether by regulation, order, interpretation, or 

guideline or by approval or disapproval of an application, 

with regard to activities of financial holding companies 

that are incidental to activities that are financial in nature 

or complementary to such financial activities. 

1Note: The Gramm-Leach-Bliley Act largely amended other Acts. Many free-standing provisions of such Act, while still effect, do not have a permanent or long-term application and have 

therefore not been included in this compilation. 

104 5 
Sec. 104 GRAMM-LEACH-BLILEY ACT 1046 

(B) An analysis and discussion of the risks posed by 

commercial activities of financial holding companies to the 

safety and soundness of affiliate depository institutions. 

(C) An analysis and discussion of the effect of mergers 

and acquisitions under section 4(k) of the Bank Holding 

Company Act of 1956 on market concentration in the financial services industry. 

SEC. 104. [15 U.S.C. 6701] OPERATIO N OF STATE LAW. 

(a) STATE REGULATION OF THE BUSINESS OF INSURANCE.—The 

Act entitled "An Act to express the intent of Congress with reference to the regulation of the business of insurance'' and approved 

March 9, 1945 (15 U.S.C. 1011 et seq.) (commonly referred to as 

the "McCarran-Ferguson Act'') remains the law of the United 

States. 

(b) MANDATORY INSURANCE LICENSING REQUIREMENTS.—N o 

person shall engage in the business of insurance in a state as principal or agent unless such person is licensed as required by the appropriate insurance regulator of such state in accordance with the 

relevant State insurance law, subject to subsections (c), (d), and (e). 

(c) AFFILIATIONS.— 

(1) IN GENERAL.—Except as provided in paragraph (2), no 

state may, by statute, regulation, order, interpretation, or 

other action, prevent or restrict a depository institution, or an 

affiliate thereof, from being affiliated directly or indirectly or 

associated with any person, as authorized or permitted by this 

Act or any other provision of Federal law. 

(2) INSURANCE.—With respect to affiliations between depository institutions, or any affiliate thereof, and any insurer, 

paragraph (1) does not prohibit— 

(A) any State from— 

(i) collecting, reviewing, and taking actions (including approval and disapproval) on applications and 

other documents or reports concerning any proposed 

acquisition of, or a change or continuation of control 

of, an insurer domiciled in that state; and 

(ii) exercising authority granted under applicable 

state law to collect information concerning any proposed acquisition of, or a change or continuation of 

control of, an insurer engaged in the business of insurance in, and regulated as an insurer by, such state; 

during the 60-day period preceding the effective date of the 

acquisition or change or continuation of control, so long as 

the collecting, reviewing, taking actions, or exercising authority by the state does not have the effect of discriminating, intentionally or unintentionally, against a depository institution or an affiliate thereof, or against any other 

person based upon an association of such person with a depository institution; 

(B) any state from requiring any person that is acquiring control of an insurer domiciled in that state to maintain or restore the capital requirements of that insurer to 

the level required under the capital regulations of general 

applicability in that state to avoid the requirement of pre-
1047 GRAMM-LEACH-BLILEY ACT Sec. 104 

paring and filing with the insurance regulatory authority 

of that State a plan to increase the capital of the insurer, 

except that any determination by the State insurance regulatory authority with respect to such requirement shall 

be made not later than 60 days after the date of notification under subparagraph (A); or 

(C) any State from restricting a change in the ownership of stock in an insurer, or a company formed for the 

purpose of controlling such insurer, after the conversion of 

the insurer from mutual to stock form so long as such restriction does not have the effect of discriminating, intentionally or unintentionally, against a depository institution 

or an affiliate thereof, or against any other person based 

upon an association of such person with a depository institution. 

(d) ACTIVITIES.— 

(1) IN GENERAL.—Except as provided in paragraph (3), and 

except with respect to insurance sales, solicitation, and cross 

marketing activities, which shall be governed by paragraph (2), 

no State may, by statute, regulation, order, interpretation, or 

other action, prevent or restrict a depository institution or an 

affiliate thereof from engaging directly or indirectly, either by 

itself or in conjunction with an affiliate, or any other person, 

in any activity authorized or permitted under this Act and the 

amendments made by this Act. 

(2) INSURANCE SALES.— 

(A) I N GENERAL.—In accordance with the legal standards for preemption set forth in the decision of the Supreme Court of the United States in Barnett Bank of Marion County N.A. v. Nelson, 517 U.S. 25 (1996), no State 

may, by statute, regulation, order, interpretation, or other 

action, prevent or significantly interfere with the ability of 

a depository institution, or an affiliate thereof, to engage, 

directly or indirectly, either by itself or in conjunction with 

an affiliate or any other person, in any insurance sales, solicitation, or crossmarketing activity. 

(B) CERTAIN STATE LAWS PRESERVED.—Notwithstanding subparagraph (A), a State may impose any of the 

following restrictions, or restrictions that are substantially 

the same as but no more burdensome or restrictive than 

those in each of the following clauses: 

(i) Restrictions prohibiting the rejection of an insurance policy by a depository institution or an affiliate of a depository institution, solely because the policy has been issued or underwritten by any person 

who is not associated with such depository institution 

or affiliate when the insurance is required in connection with a loan or extension of credit. 

(ii) Restrictions prohibiting a requirement for any 

debtor, insurer, or insurance agent or broker to pay a 

separate charge in connection with the handling of insurance that is required in connection with a loan or 

other extension of credit or the provision of another 

traditional banking product by a depository institu-
Sec. 104 GRAMM-LEACH-BLILEY ACT 1048 

tion, or any affiliate of a depository institution, unless 

such charge would be required when the depository institution or affiliate is the licensed insurance agent or 

broker providing the insurance. 

(iii) Restrictions prohibiting the use of any advertisement or other insurance promotional material by a 

depository institution or any affiliate of a depository 

institution that would cause a reasonable person to believe mistakenly that— 

(I) the Federal Government or a State is responsible for the insurance sales activities of, or 

stands behind the credit of, the institution or affiliate; or 

(II) a State, or the Federal Government guarantees any returns on insurance products, or is a 

source of payment on any insurance obligation of 

or sold by the institution or affiliate; 

(iv) Restrictions prohibiting the payment or receipt of any commission or brokerage fee or other valuable consideration for services as an insurance agent 

or broker to or by any person, unless such person 

holds a valid State license regarding the applicable 

class of insurance at the time at which the services 

are performed, except that, in this clause, the term 

"services as an insurance agent or broker'' does not include a referral by an unlicensed person of a customer 

or potential customer to a licensed insurance agent or 

broker that does not include a discussion of specific insurance policy terms and conditions. 

(v) Restrictions prohibiting any compensation paid 

to or received by any individual who is not licensed to 

sell insurance, for the referral of a customer that seeks 

to purchase, or seeks an opinion or advice on, any insurance product to a person that sells or provides 

opinions or advice on such product, based on the purchase of insurance by the customer. 

(vi) Restrictions prohibiting the release of the insurance information of a customer (defined as information concerning the premiums, terms, and conditions 

of insurance coverage, including expiration dates and 

rates, and insurance claims of a customer contained in 

the records of the depository institution or an affiliate 

thereof) to any person other than an officer, director, 

employee, agent, or affiliate of a depository institution, 

for the purpose of soliciting or selling insurance, without the express consent of the customer, other than a 

provision that prohibits— 

(i) a transfer of insurance information to an 

unaffiliated insurer in connection with transferring insurance in force on existing insureds of the 

depository institution or an affiliate thereof, or in 

connection with a merger with or acquisition of an 

unaffiliated insurer; or 
1049 GRAMM-LEACH-BLILEY ACT Sec. 206A 

(ii) the release of information as otherwise 

authorized by State or Federal law. 

(vii) Restrictions prohibiting the use of health information obtained from the insurance records of a 

customer for any purpose, other than for its activities 

as a licensed agent or broker, without the express consent of the customer. 

(viii) Restrictions prohibiting the extension of 

credit or any product or service that is equivalent to 

an extension of credit, lease or sale of property of any 

kind, or furnishing of any services or fixing or varying 

the consideration for any of the foregoing, on the condition or requirement that the customer obtain insurance from a depository institution or an affiliate of a 

depository institution, or a particular insurer, agent, 

or broker, other than a prohibition that would prevent 

any such depository institution or affiliate— 

(i) from engaging in any activity described in 

this clause that would not violate section 106 of 

the Bank Holding Company Act Amendments of 

1970, as interpreted by the Board of Governors of 

the Federal Reserve system; or 

(ii) from informing a customer or prospective 

customer that insurance is required in order to obtain a loan or credit, that loan or credit approval 

is contingent upon the procurement by the customer of acceptable insurance, or that insurance is 

available from the depository institution or an affiliate of the depository institution. 

(ix) Restrictions requiring, when an application by 

a consumer for a loan or other extension of credit from 

a depository institution is pending, and insurance is 

offered or sold to the consumer or is required in connection with the loan or extension of credit by the depository institution or any affiliate thereof, that a 

written disclosure be provided to the consumer or prospective customer indicating that the customer's choice 

of an insurance provider will not affect the credit decision or credit terms in any way, except that the depository institution may impose reasonable requirements 

concerning the creditworthiness of the insurer and 

scope of coverage chosen. 

(x) Restrictions requiring clear and conspicuous 

disclosure, in writing, where practicable, to the customer prior to the sale of any insurance policy that 

such policy— 

(i) is not a deposit; 

(ii) is not insured by the Federal Deposit insurance Corporation; 

(iii) is not guaranteed by any depository institution or, if appropriate, an affiliate of any such 

institution or any person soliciting the purchase of 

or selling insurance on the premises thereof; and 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1050 

(iv) where appropriate, involves investment 

risk, including potential loss of principal. 

(xi) Restrictions requiring that, when a customer 

obtains insurance (other than credit insurance or flood 

insurance) and credit from a depository institution, or 

any affiliate of such institution, or any person soliciting the purchase of or selling insurance on the premises thereof, the credit and insurance transactions be 

completed through separate documents. 

(xii) Restrictions prohibiting, when a customer obtains insurance (other than credit insurance or flood 

insurance) and credit from a depository institution or 

an affiliate of such institution, or any person soliciting 

the purchase of or selling insurance on the premises 

thereof, inclusion of the expense of insurance premiums in the primary credit transaction without the 

express written consent of the customer. 

(xiii) Restrictions requiring maintenance of separate and distinct books and records relating to insurance transactions, including all files relating to and reflecting consumer complaints, and requiring that such 

insurance books and records be made available to the 

appropriate State insurance regulator for inspection 

upon reasonable notice. 

( C) LIMITATIONS.— 

(i) OCC DEFERENCE.—Section 304(e) does not 

apply with respect to any State statute, regulation, 

order, interpretation, or other action regarding insurance sales, solicitation, or cross marketing activities 

described in subparagraph (A) that was issued, adopted, or enacted before September 3, 1998, and that is 

not described in subparagraph (B). 

(ii) NONDISCRIMINATION.—Subsection (e) does not 

apply with respect to any State statute, regulation, 

order, interpretation, or other action regarding insurance sales, solicitation, or cross marketing activities 

described in subparagraph (A) that was issued, adopted, or enacted before September 3, 1998, and that is 

not described in subparagraph (B). 

(iii) CONSTRUCTION.—Nothing in this paragraph 

shall be construed— 

(i) to limit the applicability of the decision of 

the Supreme Court in Barnett Bank of Marion 

County N.A. v. Nelson, 517 U.S. 25 (1996) with respect to any State statute, regulation, order, interpretation, or other action that is not referred to or 

described in subparagraph (B); or 

(ii) to create any inference with respect to any 

State statute, regulation, order, interpretation, or 

other action that is not described in this paragraph. 

(3) INSURANCE ACTIVITIES OTHER THA N SALES.—State statutes, regulations, interpretations, orders, and other actions 
1051 GRAMM-LEACH-BLILEY ACT Sec. 206A 

shall not be preempted under paragraph (1) to the extent that 

they— 

(A) relate to, or are issued, adopted, or enacted for the 

purpose of regulating the business of insurance in accordance with the Act entitled "An Act to express the intent of 

Congress with reference to the regulation of the business 

of insurance'' and approved March 9, 1945 (15 U.S.C. 1011 

et seq.) (commonly referred to as the "McCarran-Ferguson 

Act''); 

(B) apply only to persons that are not depository institutions, but that are directly engaged in the business of insurance (except that they may apply to depository institutions engaged in providing savings bank life insurance as 

principal to the extent of regulating such insurance); 

(C) do not relate to or directly or indirectly regulate 

insurance sales, solicitations, or cross marketing activities; 

and 

(D) are not prohibited under subsection (e). 

(4) FINANCIAL ACTIVITIES OTHER THA N INSURANCE.—N o 

State statute, regulation, order, interpretation, or other action 

shall be preempted under paragraph (1) to the extent that— 

(A) it does not relate to, and is not issued and adopted, 

or enacted for the purpose of regulating, directly or indirectly, insurance sales, solicitations, or cross marketing activities covered under paragraph (2); 

(B) it does not relate to, and is not issued and adopted, 

or enacted for the purpose of regulating, directly or indirectly, the business of insurance activities other than 

sales, solicitations, or cross marketing activities, covered 

under paragraph (3); 

(C) it does not relate to securities investigations or enforcement actions referred to in subsection (f); and 

(D) it— 

(i) does not distinguish by its terms between depository institutions, and affiliates thereof, engaged in 

the activity at issue and other persons engaged in the 

same activity in a manner that is in any way adverse 

with respect to the conduct of the activity by any such 

depository institution or affiliate engaged in the activity at issue; 

(ii) as interpreted or applied, does not have, and 

will not have, an impact on depository institutions, or 

affiliates thereof, engaged in the activity at issue, or 

any person who has an association with any such depository institution or affiliate, that is substantially 

more adverse than its impact on other persons engaged in the same activity that are not depository institutions or affiliates thereof, or persons who do not 

have an association with any such depository institution or affiliate; 

(iii) does not effectively prevent a depository institution or affiliate thereof from engaging in activities 

authorized or permitted by this Act or any other provision of Federal law; and 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1052 

(iv) does not conflict with the intent of this Act 

generally to permit affiliations that are authorized or 

permitted by Federal law. 

(e) NONDISCRIMINATION.—Except as provided in any restrictions described in subsection (d)(2)(B), no State may, by statute, 

regulation, order, interpretation, or other action, regulate the insurance activities authorized or permitted under this Act or any 

other provision of Federal law of a depository institution, or affiliate thereof, to the extent that such statute, regulation, order, interpretation, or other action— 

(1) distinguishes by its terms between depository institutions, or affiliates thereof, and other persons engaged in such 

activities, in a manner that is in any way adverse to any such 

depository institution, or affiliate thereof; 

(2) as interpreted or applied, has or will have an impact 

on depository institutions, or affiliates thereof, that is substantially more adverse than its impact on other persons providing 

the same products or services or engaged in the same activities 

that are not depository institutions, or affiliates thereof, or persons or entities affiliated therewith; 

(3) effectively prevents a depository institution, or affiliate 

thereof, from engaging in insurance activities authorized or 

permitted by this Act or any other provision of Federal law; or 

(4) conflicts with the intent of this Act generally to permit 

affiliations that are authorized or permitted by Federal law between depository institutions, or affiliates thereof, and persons 

engaged in the business of insurance. 

(f) LIMITATION.—Subsections (c) and (d) shall not be construed 

to affect— 

(1) the jurisdiction of the securities commission (or any 

agency or office performing like functions) of any State, under 

the laws of such State— 

(A) to investigate and bring enforcement actions, consistent with section 18(c) of the Securities Act of 1933, 

with respect to fraud or deceit or unlawful conduct by any 

person, in connection with securities or securities transactions; or 

(B) to require the registration of securities or the licensure or registration of brokers, dealers, or investment 

advisers (consistent with section 203A of the Investment 

Advisers Act of 1940), or the associated persons of a 

broker, dealer, or investment adviser (consistent with such 

section 203A); or 

(2) State laws, regulations, orders, interpretations, or other 

actions of general applicability relating to the governance of 

corporations, partnerships, limited liability companies, or other 

business associations incorporated or formed under the laws of 

that State or domiciled in that State, or the applicability of the 

antitrust laws of any State or any State law that is similar to 

the antitrust laws if such laws, regulations, orders, interpretations, or other actions are not inconsistent with the purposes 

of this Act to authorize or permit certain affiliations and to remove barriers to such affiliations. 
1053 GRAMM-LEACH-BLILEY ACT Sec. 206A 

(g) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) AFFILIATE.—The term "affiliate" means any company 

that controls, is controlled by, or is under common control with 

another company. 

(2) ANTITRUST LAWS.—The term "antitrust laws" has the 

meaning given the term in subsection (a) of the first section of 

the Clayton Act, and includes section 5 of the Federal Trade 

Commission Act (to the extent that such section 5 relates to 

unfair methods of competition). 

(3) DEPOSITORY INSTITUTION.—The term "depository 

institution''— 

(A) has the meaning given the term in section 3 of the 

Federal Deposit insurance Act; and 

(B) includes any foreign bank that maintains a 

branch, agency, or commercial lending company in the 

United States. 

(4) INSURER.—The term "insurer" means any person engaged in the business of insurance. 

(5) STATE.—The term "State" means any State of the 

United States, the District of Columbia, any territory of the 

United States, Puerto Rico, Guam, American Samoa, the Trust 

Territory of the pacific islands, the virgin islands, and the 

Northern Mariana Islands. 

SEC. 108. [12 U.S.C. 4801 nt] USE OF SUBORDINATED DEBT TO PROTECT FINANCIAL SYSTEM AND DEPOSIT FUNDS FRO M 

"TOO BIG TO FAIL'' INSTITUTIONS. 

(a) STUDY REQUIRED.—The Board of Governors of the Federal 

Reserve system and the secretary of the Treasury shall conduct a 

study of— 

(1) the feasibility and appropriateness of establishing a requirement that, with respect to large insured depository institutions and depository institution holding companies the failure of which could have serious adverse effects on economic 

conditions or financial stability, such institutions and holding 

companies maintain some portion of their capital in the form 

of subordinated debt in order to bring market forces and market discipline to bear on the operation of, and the assessment 

of the viability of, such institutions and companies and reduce 

the risk to economic conditions, financial stability, and any deposit insurance fund; 

(2) if such requirement is feasible and appropriate, the appropriate amount or percentage of capital that should be subordinated debt consistent with such purposes; and 

(3) the manner in which any such requirement could be incorporated into existing capital standards and other issues relating to the transition to such a requirement. 

(b) REPORT.—Before the end of the 18-month period beginning 

on the date of the enactment of this Act, the Board of Governors 

of the Federal Reserve system and the secretary of the Treasury 

shall submit a report to the Congress containing the findings and 

conclusions of the Board and the secretary in connection with the 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1054 

study required under subsection (a), together with such legislative 

and administrative proposals as the Board and the Secretary may 

determine to be appropriate. 

(c) DEFINITIONS.—For purposes of subsection (a), the following 

definitions shall apply: 

(1) BANK HOLDING COMPANY.—The term ''bank holding 

company'' has the meaning given the term in section 2 of the 

Bank Holding Company Act of 1956. 

(2) INSURED DEPOSITORY INSTITUTION.—The term ''insured 

depository institution'' has the meaning given the term in section 3(c) of the Federal Deposit Insurance Act. 

(3) SUBORDINATED DEBT.—The term ''subordinated debt'' 

means unsecured debt that— 

(A) has an original weighted average maturity of not 

less than 5 years; 

(B) is subordinated as to payment of principal and interest to all other indebtedness of the bank, including deposits; 

(C) is not supported by any form of credit enhancement, including a guarantee or standby letter of credit; 

and 

(D) is not held in whole or in part by any affiliate or 

institution-affiliated party of the insured depository institution or bank holding company. 

SEC. 109. [12 U.S.C. 252 nt] STUDY OF FINANCIAL MODERNIZATION'S 

EFFECT ON THE ACCESSIBILITY OF SMALL BUSINESS AND 

FARM LOANS. 

(a) STUDY.—The Secretary of the Treasury, in consultation 

with the Federal banking agencies (as defined in section 3(z) of the 

Federal Deposit Insurance Act), shall conduct a study of the extent 

to which credit is being provided to and for small businesses and 

farms, as a result of this Act and the amendments made by this 

Act. 

(b) REPORT.—Before the end of the 5-year period beginning on 

the date of the enactment of this Act, the Secretary, in consultation 

with the Federal banking agencies, shall submit a report to the 

Congress on the study conducted pursuant to subsection (a) and 

shall include such recommendations as the Secretary determines to 

be appropriate for administrative and legislative action. 

Subtitle B—Streamlining Supervision of 

Bank Holding Companies 

SEC. 114. [12 U.S.C. 1828a] 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— 
1055 GRAMM-LEACH-BLILEY ACT Sec. 206A 

(A) consistent with the purposes of this Act, title LXII 

of the Revised Statutes of the United States, and other 

Federal law applicable to national banks; and 

(B) appropriate to avoid any significant risk to the 

safety and soundness of insured depository institutions or 

any Federal deposit insurance fund or other adverse effects, such as undue concentration of resources, decreased 

or unfair competition, conflicts of interests, or unsound 

banking practices. 

(2) REVIEW.—The Comptroller of the Currency shall 

regularly— 

(A) review all restrictions or requirements established 

pursuant to paragraph (1) to determine whether there is 

a continuing need for any such restriction or requirement 

to carry out the purposes of the Act, including the avoidance of any adverse effect referred to in paragraph (1)(B); 

and 

(B) modify or eliminate any such restriction or requirement the Comptroller finds is no longer required for 

such purposes. 

(b) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.— 

(1) IN GENERAL.—The Board of Governors of the Federal 

Reserve System may, by regulation or order, impose restrictions or requirements on relationships or transactions— 

(A) between a depository institution subsidiary of a 

bank holding company and any affiliate of such depository 

institution (other than a subsidiary of such institution); or 

(B) between a State member bank and a subsidiary of 

such bank; 

if the Board makes a finding described in paragraph (2) with 

respect to such restriction or requirement. 

(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) consistent with the purposes of this Act, the Bank 

Holding Company Act of 1956, the Federal Reserve Act, 

and other Federal law applicable to depository institution 

subsidiaries of bank holding companies or State member 

banks, as the case may be; and 

(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 any Federal deposit insurance fund or other 

adverse effects, such as undue concentration of resources, 

decreased or unfair competition, conflicts of interests, or 

unsound banking practices. 

(3) REVIEW.—The Board of Governors of the Federal Reserve System shall regularly— 

(A) review all restrictions or requirements established 

pursuant to paragraph (1) or (4) to determine whether 

there is a continuing need for any such restriction or requirement to carry out the purposes of the Act, including 

the avoidance of any adverse effect referred to in paragraph (2)(B) or (4)(B); and 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1056 

(B) modify or eliminate any such restriction or requirement the Board finds is no longer required for such 

purposes. 

(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) consistent with the purposes of this Act, the Bank 

Holding Company Act of 1956, the Federal Reserve Act, 

and other Federal law applicable to foreign banks and 

their affiliates in the United States; and 

(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 any Federal 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) consistent with the purposes of this Act, the Federal Deposit Insurance Act, or other Federal law applicable 

to State nonmember banks; and 

(B) appropriate to avoid any significant risk to the 

safety and soundness of depository institutions or any Federal deposit insurance fund or other adverse effects, such 

as undue concentration of resources, decreased or unfair 

competition, conflicts of interests, or unsound banking 

practices. 

(2) REVIEW.—The Federal Deposit Insurance Corporation 

shall regularly— 

(A) review all restrictions or requirements established 

pursuant to paragraph (1) to determine whether there is 

a continuing need for any such restriction or requirement 

to carry out the purposes of the Act, including the avoidance of any adverse effect referred to in paragraph (1)(B); 

and 

(B) modify or eliminate any such restriction or requirement the Corporation finds is no longer required for 

such purposes. 

SEC. 115. [12 U.S.C. 1820a] EXAMINATIO N OF INVESTMEN T COMPANIES. 

(a) EXCLUSIVE COMMISSION AUTHORITY.—Except as provided in 

subsection (c), a Federal banking agency may not inspect or examine any registered investment company that is not a bank holding 

company or a savings and loan holding company. 
1057 GRAMM-LEACH-BLILEY ACT Sec. 206A 

(b) EXAMINATION RESULTS AND OTHER INFORMATION.—The 

Commission shall provide to any Federal banking agency, upon request, the results of any examination, reports, records, or other information with respect to any registered investment company to 

the extent necessary for the agency to carry out its statutory responsibilities. 

(c) CERTAIN EXAMINATIONS AUTHORIZED.—Nothing in this section shall prevent the Corporation, if the Corporation finds it necessary to determine the condition of an insured depository institution for insurance purposes, from examining an affiliate of any insured depository institution, pursuant to its authority under section 10(b)(4) of the Federal Deposit Insurance Act, as may be necessary to disclose fully the relationship between the insured depository institution and the affiliate, and the effect of such relationship 

on the insured depository institution. 

(d) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) BANK HOLDING COMPANY.—The term ''bank holding 

company'' has the meaning given the term in section 2 of the 

Bank Holding Company Act of 1956. 

(2) COMMISSION.—The term "Commission" means the Securities and Exchange Commission. 

(3) CORPORATION.—The term "Corporation" means the 

Federal Deposit Insurance Corporation. 

(4) FEDERAL BANKING AGENCY.—The term ''Federal banking agency'' has the meaning given the term in section 3(z) of 

the Federal Deposit Insurance Act. 

(5) INSURED DEPOSITORY INSTITUTION.—The term ''insured 

depository institution'' has the meaning given the term in section 3(c) of the Federal Deposit Insurance Act. 

(6) REGISTERED INVESTMENT COMPANY.—The term ''registered investment company'' means an investment company 

that is registered with the Commission under the investment 

Company Act of 1940. 

(7) SAVINGS AND LOAN HOLDING COMPANY.—The term ''savings and loan holding company'' has the meaning given the 

term in section 10(a)(1)(D) of the Home Owners' Loan Act. 

Subtitle C—Subsidiaries of National Banks 

SEC. 122. [12 U.S.C. 1843 nt] CONSIDERATION OF MERCHANT BANKING 

ACTIVITIES BY FINANCIAL SUBSIDIARIES. 

After the end of the 5-year period beginning on the date of the 

enactment of the Gramm-Leach-Bliley Act, the Board of Governors 

of the Federal Reserve system and the secretary of the Treasury 

may, if appropriate, after considering— 

(1) the experience with the effects of financial modernization under this Act and merchant banking activities of financial holding companies; 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1058 

(2) the potential effects on depository institutions and the 

financial system of allowing merchant banking activities in financial subsidiaries; and 

(3) other relevant facts; 

jointly adopt rules that permit financial subsidiaries to engage in 

merchant banking activities described in section 4(k)(4)(H) of the 

Bank Holding Company Act of 1956, under such terms and conditions as the Board of Governors of the Federal Reserve System and 

the Secretary of the Treasury jointly determine to be appropriate. 

Subtitle D—Preservation of FTC Authority 

SEC. 132. [12 U.S.C. 1828b] INTERAGENC Y DATA SHARING. 

(a) I N GENERAL.—To the extent not prohibited by other law, 

the Comptroller of the Currency, the Director of the Office of Thrift 

Supervision, the Federal Deposit Insurance Corporation, and the 

Board of Governors of the Federal Reserve System shall make 

available to the Attorney General and the Federal Trade Commission any data in the possession of any such banking agency that 

the antitrust agency deems necessary for antitrust review of any 

transaction requiring notice to any such antitrust agency or the approval of such agency under section 3 or 4 of the Bank Holding 

Company Act of 1956, section 18(c) of the Federal Deposit Insurance Act, the National Bank Consolidation and Merger Act, section 

10 of the Home Owners' Loan Act, or the antitrust laws. 

(b) CONFIDENTIALITY REQUIREMENTS.— 

(1) IN GENERAL.—Any information or material obtained by 

any agency pursuant to subsection (a) shall be treated as confidential. 

(2) PROCEDURES FOR DISCLOSURE.—If any information or 

material obtained by any agency pursuant to subsection (a) is 

proposed to be disclosed to a third party, written notice of such 

disclosure shall first be provided to the agency from which 

such information or material was obtained and an opportunity 

shall be given to such agency to oppose or limit the proposed 

disclosure. 

(3) OTHER PRIVILEGES NOT WAIVED BY DISCLOSURE UNDER 

THIS SECTION.—The provision by any Federal agency of any information or material pursuant to subsection (a) to another 

agency shall not constitute a waiver, or otherwise affect, any 

privilege any agency or person may claim with respect to such 

information under Federal or State law. 

(4) EXCEPTION.—N o provision of this section shall be construed as preventing or limiting access to any information by 

any duly authorized committee of the Congress or the Comptroller General of the United States. 

(c) BANKING AGENCY INFORMATION SHARING.—Th e provisions 

of subsection (b) shall apply to— 

(1) any information or material obtained by any Federal 

banking agency (as defined in section 3(z) of the Federal Deposit Insurance Act) from any other Federal banking agency; 

and 
1059 GRAMM-LEACH-BLILEY ACT Sec. 206A 

(2) any report of examination or other confidential supervisory information obtained by any State agency or authority, 

or any other person, from a Federal banking agency. 

SEC. 133. [15 U.S.C. 41 nt] CLARIFICATIO N OF STATUS OF SUBSIDIARIES AN D AFFILIATES. 

(a) CLARIFICATION OF FEDERAL TRADE COMMISSION JURISDICTION.—Any person that directly or indirectly controls, is controlled 

directly or indirectly by, or is directly or indirectly under common 

control with, any bank or savings association (as such terms are 

defined in section 3 of the Federal Deposit Insurance Act) and is 

not itself a bank or savings association shall not be deemed to be 

a bank or savings association for purposes of any provisions applied 

by the Federal Trade Commission under the Federal Trade Commission Act. 

(b) SAVINGS PROVISION.—N o provision of this section shall be 

construed as restricting the authority of any Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act) 

under any Federal banking law, including section 8 of the Federal 

Deposit insurance Act. 

TITLE II—FUNCTIONA L REGULATIO N 

Subtitle A—Brokers and Dealers 

SEC. 206. [15 U.S.C. 78c] DEFINITIO N OF IDENTIFIE D BANKIN G PRODUCT. 

(a) DEFINITIO N OF IDENTIFIED BANKING PRODUCT.—Fo r purposes of paragraphs (4) and (5) of section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a) (4), (5)), the term "identified 

banking product'' means— 

(1) a deposit account, savings account, certificate of deposit, or other deposit instrument issued by a bank; 

(2) a banker's acceptance; 

(3) a letter of credit issued or loan made by a bank; 

(4) a debit account at a bank arising from a credit card or 

similar arrangement; 

(5) a participation in a loan which the bank or an affiliate 

of the bank (other than a broker or dealer) funds, participates 

in, or owns that is sold— 

(A) to qualified investors; or 

(B) to other persons that— 

(i) have the opportunity to review and assess any 

material information, including information regarding 

the borrower's creditworthiness; and 

(ii) based on such factors as financial sophistication, net worth, and knowledge and experience in financial matters, have the capability to evaluate the 

information available, as determined under generally 

applicable banking standards or guidelines; or 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1060 

(6) any swap agreement, including credit and equity 

swaps, except that an equity swap that is sold directly to any 

person other than a qualified investor (as defined in section 

3(a)(54) of the Securities Act of 1934) shall not be treated as 

an identified banking product. 

(b) DEFINITION OF SWAP AGREEMENT.—For purposes of subsection (a)(6), the term "swap agreement'' means any individually 

negotiated contract, agreement, warrant, note, or option that is 

based, in whole or in part, on the value of, any interest in, or any 

quantitative measure or the occurrence of any event relating to, 

one or more commodities, securities, currencies, interest or other 

rates, indices, or other assets, but does not include any other identified banking product, as defined in paragraphs (1) through (5) of 

subsection (a). 

(c) CLASSIFICATION LIMITED.—Classification of a particular 

product as an identified banking product pursuant to this section 

shall not be construed as finding or implying that such product is 

or is not a security for any purpose under the securities laws, or 

is or is not an account, agreement, contract, or transaction for any 

purpose under the Commodity Exchange Act. 

(d) INCORPORATED DEFINITIONS.—For purposes of this section, 

the terms "bank" and "qualified investor'' have the same meanings 

as given in section 3(a) of the Securities Exchange Act of 1934, as 

amended by this Act. 

SEC. 206A. [15 U.S.C. 78c nt] SWAP AGREEMENT. 

(a) IN GENERAL.—Except as provided in subsection (b), as used 

in this section, the term "swap agreement'' means any agreement, 

contract, or transaction between eligible contract participants (as 

defined in section 1a(12) of the Commodity Exchange Act as in effect on the date of the enactment of this section), other than a person that is an eligible contract participant under section 1a(12)(C) 

of the Commodity Exchange Act, the material terms of which 

(other than price and quantity) are subject to individual negotiation, and that— 

(1) is a put, call, cap, floor, collar, or similar option of any 

kind for the purchase or sale of, or based on the value of, one 

or more interest or other rates, currencies, commodities, indices, quantitative measures, or other financial or economic interests or property of any kind; 

(2) provides for any purchase, sale, payment or delivery 

(other than a dividend on an equity security) that is dependent 

on the occurrence, non-occurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence; 

(3) provides on an executory basis for the exchange, on a 

fixed or contingent basis, of one or more payments based on 

the value or level of one or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, 

indices, quantitative measures, or other financial or economic 

interests or property of any kind, or any interest therein or 

based on the value thereof, and that transfers, as between the 

parties to the transaction, in whole or in part, the financial 

risk associated with a future change in any such value or level 
1061 GRAMM-LEACH-BLILEY ACT Sec. 206A 

without also conveying a current or future direct or indirect 

ownership interest in an asset (including any enterprise or investment pool) or liability that incorporates the financial risk 

so transferred, including any such agreement, contract, or 

transaction commonly known as an interest rate swap, including a rate floor, rate cap, rate collar, cross-currency rate swap, 

basis swap, currency swap, equity index swap, equity swap, 

debt index swap, debt swap, credit spread, credit default swap, 

credit swap, weather swap, or commodity swap; 

(4) provides for the purchase or sale, on a fixed or contingent basis, of any commodity, currency, instrument, interest, 

right, service, good, article, or property of any kind; or 

(5) is any combination or permutation of, or option on, any 

agreement, contract, or transaction described in any of paragraphs (1) through (4). 

(b) EXCLUSIONS.—The term ''swap agreement'' does not 

include— 

(1) any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including any interest therein or based on the value thereof; 

(2) any put, call, straddle, option, or privilege entered into 

on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 relating to foreign currency; 

(3) any agreement, contract, or transaction providing for 

the purchase or sale of one or more securities on a fixed basis; 

(4) any agreement, contract, or transaction providing for 

the purchase or sale of one or more securities on a contingent 

basis, unless such agreement, contract, or transaction predicates such purchase or sale on the occurrence of a bona fide 

contingency that might reasonably be expected to affect or be 

affected by the creditworthiness of a party other than a party 

to the agreement, contract, or transaction; 

(5) any note, bond, or evidence of indebtedness that is a security as defined in section 2(a)(1) of the Securities Act of 1933 

or section 3(a)(10) of the Securities Exchange Act of 1934; or 

(6) any agreement, contract, or transaction that is— 

(A) based on a security; and 

(B) entered into directly or through an underwriter (as 

defined in section 2(a) of the Securities Act of 1933) by the 

issuer of such security for the purposes of raising capital, 

unless such agreement, contract, or transaction is entered 

into to manage a risk associated with capital raising. 

(c) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS.—As used in this section, the term ''swap agreement'' shall 

be construed to include a master agreement that provides for an 

agreement, contract, or transaction that is a swap agreement pursuant to subsections (a) and (b), together with all supplements to 

any such master agreement, without regard to whether the master 

agreement contains an agreement, contract, or transaction that is 

not a swap agreement pursuant to subsections (a) and (b), except 

that the master agreement shall be considered to be a swap agreement only with respect to each agreement, contract, or transaction 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1062 

under the master agreement that is a swap agreement pursuant to 

subsections (a) and (b). 

SEC. 206B. [15 U.S.C. 78c nt] SECURITY-BASED SWAP AGREEMENT. 

As used in this section, the term ''security-based swap agreement'' means a swap agreement (as defined in section 206A) of 

which a material term is based on the price, yield, value, or volatility of any security or any group or index of securities, or any interest therein. 

SEC. 206C. [15 U.S.C. 78c nt] NON-SECURITY-BASED SWAP AGREEMENT. 

As used in this section, the term ''non-security-based swap 

agreement'' means any swap agreement (as defined in section 

206A) that is not a security-based swap agreement (as defined in 

section 206B). 

Subtitle D—Banks and Bank Holding 

Companies 

SEC. 241. [15 U.S.C. 78m nt] CONSULTATION. 

(a) IN GENERAL.—The Securities and Exchange Commission 

shall consult and coordinate comments with the appropriate Federal banking agency before taking any action or rendering any 

opinion with respect to the manner in which any insured depository institution or depository institution holding company reports 

loan loss reserves in its financial statement, including the amount 

of any such loan loss reserve. 

(b) DEFINITIONS.—For purposes of subsection (a), the terms ''insured depository institution'', ''depository institution holding company'', and "appropriate Federal banking agency'' have the same 

meaning as given in section 3 of the Federal Deposit Insurance Act. 

TITLE III—INSURANCE1 

Subtitle A—State Regulation of Insurance 

SEC. 301. [15 U.S.C. 6711] FUNCTIONAL REGULATION OF INSURANCE. 

The insurance activities of any person (including a national 

bank exercising its power to act as agent under the eleventh undesignated paragraph of section 13 of the Federal Reserve Act) shall 

be functionally regulated by the States, subject to section 104. 

SEC. 302. [15 U.S.C. 6712] INSURANCE UNDERWRITING I N NATIONAL 

BANKS. 

(a) IN GENERAL.—Except as provided in section 303, a national 

bank and the subsidiaries of a national bank may not provide insurance in a State as principal except that this prohibition shall 

not apply to authorized products. 

1

 Subtitles B through D of this title are not included here. Subtitle B of such title relates to 

Redomestication of Mutual Insurers, subtitle C relates to National Association of Registered 

Agents and Brokers, and subtitle D relates to Rental Car Agency Insurance Activities. 
1063 GRAMM-LEACH-BLILEY ACT Sec. 206A 

(b) AUTHORIZED PRODUCTS.—For the purposes of this section, 

a product is authorized if— 

(1) as of January 1, 1999, the Comptroller of the Currency 

had determined in writing that national banks may provide 

such product as principal, or national banks were in fact lawfully providing such product as principal; 

(2) no court of relevant jurisdiction had, by final judgment, 

overturned a determination of the Comptroller of the Currency 

that national banks may provide such product as principal; 

and 

(3) the product is not title insurance, or an annuity contract the income of which is subject to tax treatment under section 72 of the Internal Revenue Code of 1986. 

(c) DEFINITION.—For purposes of this section, the term ''insurance'' means— 

(1) any product regulated as insurance as of January 1, 

1999, in accordance with the relevant state insurance law, in 

the state in which the product is provided; 

(2) any product first offered after January 1, 1999, which— 

(A) a state insurance regulator determines shall be 

regulated as insurance in the state in which the product 

is provided because the product insures, guarantees, or indemnifies against liability, loss of life, loss of health, or 

loss through damage to or destruction of property, including, but not limited to, surety bonds, life insurance, health 

insurance, title insurance, and property and casualty insurance (such as private passenger or commercial automobile, homeowners, mortgage, commercial multiperil, 

general liability, professional liability, workers' compensation, fire and allied lines, farm owners multiperil, aircraft, 

fidelity, surety, medical malpractice, ocean marine, inland 

marine, and boiler and machinery insurance); and 

(B) is not a product or service of a bank that is— 

(i) a deposit product; 

(ii) a loan, discount, letter of credit, or other extension of credit; 

(iii) a trust or other fiduciary service; 

(iv) a qualified financial contract (as defined in or 

determined pursuant to section 11(e)(8)(D)(i) of the 

Federal Deposit insurance Act); or 

(v) a financial guaranty, except that this subparagraph (B) shall not apply to a product that includes an 

insurance component such that if the product is offered or proposed to be offered by the bank as 

principal— 

(i) it would be treated as a life insurance contract under section 7702 of the internal Revenue 

Code of 1986; or 

(ii) in the event that the product is not a letter of credit or other similar extension of credit, a 

qualified financial contract, or a financial guaranty, it would qualify for treatment for losses incurred with respect to such product under section 

832(b)(5) of the Internal Revenue Code of 1986, if 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1064 

the bank were subject to tax as an insurance company under section 831 of that Code; or 

(3) any annuity contract, the income on which is subject to 

tax treatment under section 72 of the internal Revenue Code 

of 1986. 

(d) RULE OF CONSTRUCTION.—For purposes of this section, providing insurance (including reinsurance) outside the United states 

that insures, guarantees, or indemnifies insurance products provided in a state, or that indemnifies an insurance company with 

regard to insurance products provided in a state, shall be considered to be providing insurance as principal in that state. 

SEC. 303. [15 U.S.C. 6713] TITL E INSURANC E ACTIVITIES OF NATIONA L 

BANKS AN D THEI R AFFILIATES. 

(a) GENERAL PROHIBITION.—N o national bank may engage in 

any activity involving the underwriting or sale of title insurance. 

(b) NONDISCRIMINATION PARITY EXCEPTION.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

law (including section 104 of this Act), in the case of any State 

in which banks organized under the laws of such state are authorized to sell title insurance as agent, a national bank may 

sell title insurance as agent in such state, but only in the same 

manner, to the same extent, and under the same restrictions 

as such state banks are authorized to sell title insurance as 

agent in such State. 

(2) COORDINATION WIT H "WILDCARD" PROVISION.—A State 

law which authorizes state banks to engage in any activities 

in such state in which a national bank may engage shall not 

be treated as a statute which authorizes state banks to sell 

title insurance as agent, for purposes of paragraph (1). 

(c) GRANDFATHERING WIT H CONSISTENT REGULATION.— 

(1) IN GENERAL.—Except as provided in paragraphs (2) and 

(3) and notwithstanding subsections (a) and (b), a national 

bank, and a subsidiary of a national bank, may conduct title 

insurance activities which such national bank or subsidiary 

was actively and lawfully conducting before the date of the enactment of this Act. 

(2) INSURANCE AFFILIATE.—In the case of a national bank 

which has an affiliate which provides insurance as principal 

and is not a subsidiary of the bank, the national bank and any 

subsidiary of the national bank may not engage in the underwriting of title insurance pursuant to paragraph (1). 

(3) INSURANCE SUBSIDIARY.—In the case of a national bank 

which has a subsidiary which provides insurance as principal 

and has no affiliate other than a subsidiary which provides insurance as principal, the national bank may not directly engage in any activity involving the underwriting of title insurance. 

(d) "AFFILIATE" AND "SUBSIDIARY" DEFINED.—Fo r purposes of 

this section, the terms "affiliate" and "subsidiary" have the same 

meanings as in section 2 of the Bank Holding Company Act of 

1956. 

(e) RULE OF CONSTRUCTION.—No provision of this Act or any 

other Federal law shall be construed as superseding or affecting a 

state law which was in effect before the date of the enactment of 
1065 GRAMM-LEACH-BLILEY ACT Sec. 206A 

this Act and which prohibits title insurance from being offered, provided, or sold in such State, or from being underwritten with respect to real property in such State, by any person whatsoever. 

SEC. 304. [15 U.S.C. 6714] EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR FEDERAL REGULATORS. 

(a) FILING I N COURT OF APPEALS.—In the case of a regulatory 

conflict between a State insurance regulator and a Federal regulator regarding insurance issues, including whether a State law, 

rule, regulation, order, or interpretation regarding any insurance 

sales or solicitation activity is properly treated as preempted under 

Federal law, the Federal or State regulator may seek expedited judicial review of such determination by the united States Court of 

Appeals for the circuit in which the State is located or in the 

united States Court of Appeals for the District of Columbia Circuit 

by filing a petition for review in such court. 

(b) EXPEDITED REVIEW.—The United States Court of Appeals 

in which a petition for review is filed in accordance with subsection 

(a) shall complete all action on such petition, including rendering 

a judgment, before the end of the 60-day period beginning on the 

date on which such petition is filed, unless all parties to such proceeding agree to any extension of such period. 

(c) SUPREME COURT REVIEW.—Any request for certiorari to the 

Supreme Court of the United States of any judgment of a United 

States Court of Appeals with respect to a petition for review under 

this section shall be filed with the Supreme Court of the United 

States as soon as practicable after such judgment is issued. 

(d) STATUTE OF LIMITATION.—No petition may be filed under 

this section challenging an order, ruling, determination, or other 

action of a Federal regulator or State insurance regulator after the 

later of— 

(1) the end of the 12-month period beginning on the date 

on which the first public notice is made of such order, ruling, 

determination or other action in its final form; or 

(2) the end of the 6-month period beginning on the date on 

which such order, ruling, determination, or other action takes 

effect. 

(e) STANDARD OF REVIEW.—The court shall decide a petition 

filed under this section based on its review on the merits of all 

questions presented under State and Federal law, including the nature of the product or activity and the history and purpose of its 

regulation under State and Federal law, without unequal deference. 

SEC. 306. [15 U.S.C. 6715] CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR INSURANCE COMPANIES AND AFFILIATES. 

Except as provided in section 104(c)(2), no State may, by law, 

regulation, order, interpretation, or otherwise— 

(1) prevent or significantly interfere with the ability of any 

insurer, or any affiliate of an insurer (whether such affiliate is 

organized as a stock company, mutual holding company, or 

otherwise), to become a financial holding company or to acquire 

control of a depository institution; 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1066 

(2) limit the amount of an insurer's assets that may be invested in the voting securities of a depository institution (or 

any company which controls such institution), except that the 

laws of an insurer's state of domicile may limit the amount of 

such investment to an amount that is not less than 5 percent 

of the insurer's admitted assets; or 

(3) prevent, significantly interfere with, or have the authority to review, approve, or disapprove a plan of reorganization by which an insurer proposes to reorganize from mutual 

form to become a stock insurer (whether as a direct or indirect 

subsidiary of a mutual holding company or otherwise) unless 

such State is the State of domicile of the insurer. 

SEC. 307. [15 U.S.C. 6716] INTERAGENC Y CONSULTATION. 

(a) PURPOSE.—It is the intention of the Congress that the 

Board of Governors of the Federal Reserve system, as the umbrella 

supervisor for financial holding companies, and the state insurance 

regulators, as the functional regulators of companies engaged in insurance activities, coordinate efforts to supervise companies that 

control both a depository institution and a company engaged in insurance activities regulated under State law. In particular, Congress believes that the Board and the State insurance regulators 

should share, on a confidential basis, information relevant to the 

supervision of companies that control both a depository institution 

and a company engaged in insurance activities, including information regarding the financial health of the consolidated organization 

and information regarding transactions and relationships between 

insurance companies and affiliated depository institutions. The appropriate Federal banking agencies for depository institutions 

should also share, on a confidential basis, information with the relevant state insurance regulators regarding transactions and relationships between depository institutions and affiliated companies 

engaged in insurance activities. The purpose of this section is to 

encourage this coordination and confidential sharing of information, and to thereby improve both the efficiency and the quality of 

the supervision of financial holding companies and their affiliated 

depository institutions and companies engaged in insurance activities. 

(b) EXAMINATION RESULTS AND OTHER INFORMATION.— 

(1) INFORMATION OF THE BOARD.—Upon the request of the 

appropriate insurance regulator of any state, the Board may 

provide any information of the Board regarding the financial 

condition, risk management policies, and operations of any financial holding company that controls a company that is engaged in insurance activities and is regulated by such state insurance regulator, and regarding any transaction or relationship between such an insurance company and any affiliated depository institution. The Board may provide any other information to the appropriate state insurance regulator that the 

Board believes is necessary or appropriate to permit the state 

insurance regulator to administer and enforce applicable state 

insurance laws. 

(2) BANKING AGENCY INFORMATION.—Upon the request of 

the appropriate insurance regulator of any state, the appro-
1067 GRAMM-LEACH-BLILEY ACT Sec. 206A 

priate Federal banking agency may provide any information of 

the agency regarding any transaction or relationship between 

a depository institution supervised by such Federal banking 

agency and any affiliated company that is engaged in insurance activities regulated by such state insurance regulator. 

The appropriate Federal banking agency may provide any 

other information to the appropriate state insurance regulator 

that the agency believes is necessary or appropriate to permit 

the state insurance regulator to administer and enforce applicable state insurance laws. 

(3) STATE INSURANCE REGULATOR INFORMATION.—Upon the 

request of the Board or the appropriate Federal banking agency, a State insurance regulator may provide any examination 

or other reports, records, or other information to which such 

insurance regulator may have access with respect to a company which— 

(A) is engaged in insurance activities and regulated by 

such insurance regulator; and 

(B) is an affiliate of a depository institution or financial holding company. 

(c) CONSULTATION.—Before making any determination relating 

to the initial affiliation of, or the continuing affiliation of, a depository institution or financial holding company with a company engaged in insurance activities, the appropriate Federal banking 

agency shall consult with the appropriate state insurance regulator 

of such company and take the views of such insurance regulator 

into account in making such determination. 

(d) EFFECT ON OTHER AUTHORITY.—Nothing in this section 

shall limit in any respect the authority of the appropriate Federal 

banking agency with respect to a depository institution or bank 

holding company or any affiliate thereof under any provision of 

law. 

(e) CONFIDENTIALITY AND PRIVILEGE.— 

(1) CONFIDENTIALITY.—The appropriate Federal banking 

agency shall not provide any information or material that is 

entitled to confidential treatment under applicable Federal 

banking agency regulations, or other applicable law, to a state 

insurance regulator unless such regulator agrees to maintain 

the information or material in confidence and to take all reasonable steps to oppose any effort to secure disclosure of the 

information or material by the regulator. The appropriate Federal banking agency shall treat as confidential any information 

or material obtained from a state insurance regulator that is 

entitled to confidential treatment under applicable state regulations, or other applicable law, and take all reasonable steps 

to oppose any effort to secure disclosure of the information or 

material by the Federal banking agency. 

(2) PRIVILEGE.—The provision pursuant to this section of 

information or material by a Federal banking agency or State 

insurance regulator shall not constitute a waiver of, or otherwise affect, any privilege to which the information or material 

is otherwise subject. 

(f) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1068 

(1) APPROPRIATE FEDERAL BANKING AGENCY; DEPOSITORY 

INSTITUTION.—The terms "appropriate Federal banking agency'' and "depository institution" have the same meanings as in 

section 3 of the Federal Deposit Insurance Act. 

(2) BOARD AND FINANCIAL HOLDING COMPANY.—The terms 

"Board" and "financial holding company" have the same meanings as in section 2 of the Bank Holding Company Act of 1956. 

SEC. 308. [15 U.S.C. 6717] DEFINITIO N OF STATE. 

For purposes of this subtitle, the term "State" means any State 

of the United States, the District of columbia, any territory of the 

United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the pacific islands, the Virgin islands, and the Northern 

Mariana islands. 

TITLE V—PRIVACY 

Subtitle A—Disclosure of Nonpublic 

Personal Information 

SEC. 501. [15 U.S.C. 6801] PROTECTIO N OF NONPUBLI C PERSONAL INFORMATION . 

(a) PRIVACY OBLIGATION POLICY.—It is the policy of the Congress that each financial institution has an affirmative and continuing obligation to respect the privacy of its customers and to 

protect the security and confidentiality of those customers' nonpublic personal information. 

(b) FINANCIAL INSTITUTIONS SAFEGUARDS.—In furtherance of 

the policy in subsection (a), each agency or authority described in 

section 505(a) shall establish appropriate standards for the financial institutions subject to their jurisdiction relating to administrative, technical, and physical safeguards— 

(1) to insure the security and confidentiality of customer 

records and information; 

(2) to protect against any anticipated threats or hazards to 

the security or integrity of such records; and 

(3) to protect against unauthorized access to or use of such 

records or information which could result in substantial harm 

or inconvenience to any customer. 

SEC. 502. [15 U.S.C. 6802] OBLIGATIONS WIT H RESPECT TO DISCLOSURES OF PERSONAL INFORMATION . 

(a) NOTICE REQUIREMENTS.—Except as otherwise provided in 

this subtitle, a financial institution may not, directly or through 

any affiliate, disclose to a nonaffiliated third party any nonpublic 

personal information, unless such financial institution provides or 

has provided to the consumer a notice that complies with section 

503. 

(b) OPT OUT. — 

(1) I N GENERAL.—A financial institution may not disclose 

nonpublic personal information to a nonaffiliated third party 

unless— 
1069 GRAMM-LEACH-BLILEY ACT Sec. 206A 

(A) such financial institution clearly and conspicuously 

discloses to the consumer, in writing or in electronic form 

or other form permitted by the regulations prescribed 

under section 504, that such information may be disclosed 

to such third party; 

(B) the consumer is given the opportunity, before the 

time that such information is initially disclosed, to direct 

that such information not be disclosed to such third party; 

and 

(C) the consumer is given an explanation of how the 

consumer can exercise that nondisclosure option. 

(2) EXCEPTION.—This subsection shall not prevent a financial institution from providing nonpublic personal information 

to a nonaffiliated third party to perform services for or functions on behalf of the financial institution, including marketing 

of the financial institution's own products or services, or financial products or services offered pursuant to joint agreements 

between two or more financial institutions that comply with 

the requirements imposed by the regulations prescribed under 

section 504, if the financial institution fully discloses the providing of such information and enters into a contractual agreement with the third party that requires the third party to 

maintain the confidentiality of such information. 

(c) LIMITS ON REUSE OF INFORMATION.—Except as otherwise 

provided in this subtitle, a nonaffiliated third party that receives 

from a financial institution nonpublic personal information under 

this section shall not, directly or through an affiliate of such receiving third party, disclose such information to any other person that 

is a nonaffiliated third party of both the financial institution and 

such receiving third party, unless such disclosure would be lawful 

if made directly to such other person by the financial institution. 

(d) LIMITATIONS ON THE SHARING OF ACCOUNT NUMBE R INFORMATION FOR MARKETING PURPOSES.—A financial institution shall 

not disclose, other than to a consumer reporting agency, an account 

number or similar form of access number or access code for a credit 

card account, deposit account, or transaction account of a consumer 

to any nonaffiliated third party for use in telemarketing, direct 

mail marketing, or other marketing through electronic mail to the 

consumer. 

(e) GENERAL EXCEPTIONS.—Subsections (a) and (b) shall not 

prohibit the disclosure of nonpublic personal information— 

(1) as necessary to effect, administer, or enforce a transaction requested or authorized by the consumer, or in connection with— 

(A) servicing or processing a financial product or service requested or authorized by the consumer; 

(B) maintaining or servicing the consumer's account 

with the financial institution, or with another entity as 

part of a private label credit card program or other extension of credit on behalf of such entity; or 

(C) a proposed or actual securitization, secondary market sale (including sales of servicing rights), or similar 

transaction related to a transaction of the consumer; 

(2) with the consent or at the direction of the consumer; 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1070 

(3)(A) to protect the confidentiality or security of the financial institution's records pertaining to the consumer, the service or product, or the transaction therein; (B) to protect against 

or prevent actual or potential fraud, unauthorized transactions, 

claims, or other liability; (C) for required institutional risk control, or for resolving customer disputes or inquiries; (D) to persons holding a legal or beneficial interest relating to the consumer; or (E) to persons acting in a fiduciary or representative 

capacity on behalf of the consumer; 

(4) to provide information to insurance rate advisory organizations, guaranty funds or agencies, applicable rating agencies of the financial institution, persons assessing the institution's compliance with industry standards, and the institution's 

attorneys, accountants, and auditors; 

(5) to the extent specifically permitted or required under 

other provisions of law and in accordance with the Right to Financial Privacy Act of 1978, to law enforcement agencies (including a Federal functional regulator, the Secretary of the 

Treasury with respect to subchapter II of chapter 53 of title 31, 

United States Code, and chapter 2 of title I of Public Law 91-

508 (12 U.S.C. 1951-1959), a State insurance authority, or the 

Federal Trade Commission), self-regulatory organizations, or 

for an investigation on a matter related to public safety; 

(6)(A) to a consumer reporting agency in accordance with 

the Fair Credit Reporting Act, or (B) from a consumer report 

reported by a consumer reporting agency; 

(7) in connection with a proposed or actual sale, merger, 

transfer, or exchange of all or a portion of a business or operating unit if the disclosure of nonpublic personal information 

concerns solely consumers of such business or unit; or 

(8) to comply with Federal, State, or local laws, rules, and 

other applicable legal requirements; to comply with a properly 

authorized civil, criminal, or regulatory investigation or subpoena or summons by Federal, State, or local authorities; or to 

respond to judicial process or government regulatory authorities having jurisdiction over the financial institution for examination, compliance, or other purposes as authorized by law. 

SEC. 503. [15 U.S.C. 6803] DISCLOSURE OF INSTITUTION PRIVACY POLICY. 

(a) DISCLOSURE REQUIRED.—At the time of establishing a customer relationship with a consumer and not less than annually 

during the continuation of such relationship, a financial institution 

shall provide a clear and conspicuous disclosure to such consumer, 

in writing or in electronic form or other form permitted by the regulations prescribed under section 504, of such financial institution's 

policies and practices with respect to— 

(1) disclosing nonpublic personal information to affiliates 

and nonaffiliated third parties, consistent with section 502, including the categories of information that may be disclosed; 

(2) disclosing nonpublic personal information of persons 

who have ceased to be customers of the financial institution; 

and 

(3) protecting the nonpublic personal information of consumers. 
1071 GRAMM-LEACH-BLILEY ACT Sec. 206A 

such disclosures shall be made in accordance with the regulations 

prescribed under section 504. 

(b) INFORMATION T O BE INCLUDED.—Th e disclosure required by 

subsection (a) shall include— 

(1) the policies and practices of the institution with respect 

to disclosing nonpublic personal information to nonaffiliated 

third parties, other than agents of the institution, consistent 

with section 502 of this subtitle, and including— 

(A) the categories of persons to whom the information 

is or may be disclosed, other than the persons to whom the 

information may be provided pursuant to section 502(e); 

and 

(B) the policies and practices of the institution with respect to disclosing of nonpublic personal information of 

persons who have ceased to be customers of the financial 

institution; 

(2) the categories of nonpublic personal information that 

are collected by the financial institution; 

(3) the policies that the institution maintains to protect 

the confidentiality and security of nonpublic personal information in accordance with section 501; and 

(4) the disclosures required, if any, under section 

603(d)(2)(A)(iii) of the Fair Credit Reporting Act. 

SEC. 504. [15 U.S.C. 6804] RULEMAKING. 

(a) REGULATORY AUTHORITY.— 

(1) RULEMAKING.—Th e Federal banking agencies, the National Credit Union Administration, the Secretary of the Treasury, the Securities and Exchange Commission, and the Federal 

Trade Commission shall each prescribe, after consultation as 

appropriate with representatives of state insurance authorities 

designated by the National Association of Insurance Commissioners, such regulations as may be necessary to carry out the 

purposes of this subtitle with respect to the financial institutions subject to their jurisdiction under section 505. 

(2) COORDINATION, CONSISTENCY, AND COMPARABILITY.— 

Each of the agencies and authorities required under paragraph 

(1) to prescribe regulations shall consult and coordinate with 

the other such agencies and authorities for the purposes of assuring, to the extent possible, that the regulations prescribed 

by each such agency and authority are consistent and comparable with the regulations prescribed by the other such 

agencies and authorities. 

(3) PROCEDURES AND DEADLINE.—Such regulations shall be 

prescribed in accordance with applicable requirements of title 

5, united states Code, and shall be issued in final form not 

later than 6 months after the date of the enactment of this Act. 

(b) AUTHORITY T O GRANT EXCEPTIONS.—The regulations prescribed under subsection (a) may include such additional exceptions 

to subsections (a) through (d) of section 502 as are deemed consistent with the purposes of this subtitle. 

SEC. 505. [15 U.S.C. 6805] ENFORCEMENT. 

(a) IN GENERAL.—This subtitle and the regulations prescribed 

thereunder shall be enforced by the Federal functional regulators, 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1072 

the State insurance authorities, and the Federal Trade Commission 

with respect to financial institutions and other persons subject to 

their jurisdiction under applicable law, as follows: 

(1) Under section 8 of the Federal Deposit Insurance Act, 

in the case of— 

(A) national banks, Federal branches and Federal 

agencies of foreign banks, and any subsidiaries of such entities (except brokers, dealers, persons providing insurance, investment companies, and investment advisers), by 

the Office of the Comptroller of the Currency; 

(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

organizations operating under section 25 or 25A of the 

Federal Reserve Act, and bank holding companies and 

their nonbank subsidiaries or affiliates (except brokers, 

dealers, persons providing insurance, investment companies, and investment advisers), by the Board of Governors 

of the Federal Reserve System; 

(c) banks insured by the Federal Deposit insurance 

corporation (other than members of the Federal Reserve 

System), insured State branches of foreign banks, and any 

subsidiaries of such entities (except brokers, dealers, persons providing insurance, investment companies, and investment advisers), by the Board of Directors of the Federal Deposit Insurance Corporation; and 

(D) savings associations the deposits of which are insured by the Federal Deposit insurance corporation, and 

any subsidiaries of such savings associations (except brokers, dealers, persons providing insurance, investment 

companies, and investment advisers), by the Director of 

the office of Thrift Supervision. 

(2) Under the Federal Credit Union Act, by the Board of 

the National Credit Union Administration with respect to any 

federally insured credit union, and any subsidiaries of such an 

entity. 

(3) Under the Securities Exchange Act of 1934, by the Securities and Exchange Commission with respect to any broker 

or dealer. 

(4) Under the Investment Company Act of 1940, by the Securities and Exchange Commission with respect to investment 

companies. 

(5) Under the Investment Advisers Act of 1940, by the Securities and Exchange Commission with respect to investment 

advisers registered with the Commission under such Act. 

(6) Under State insurance law, in the case of any person 

engaged in providing insurance, by the applicable State insurance authority of the State in which the person is domiciled, 

subject to section 104 of this Act. 

(7) Under the Federal Trade Commission Act, by the Federal Trade Commission for any other financial institution or 

other person that is not subject to the jurisdiction of any agen-
1073 GRAMM-LEACH-BLILEY ACT Sec. 206A 

cy or authority under paragraphs (1) through (6) of this subsection. 

(b) ENFORCEMENT OF SECTION 501.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

agencies and authorities described in subsection (a) shall implement the standards prescribed under section 501(b) in the 

same manner, to the extent practicable, as standards prescribed pursuant to section 39(a) of the Federal Deposit insurance Act are implemented pursuant to such section. 

(2) EXCEPTION.—The agencies and authorities described in 

paragraphs (3), (4), (5), (6), and (7) of subsection (a) shall implement the standards prescribed under section 501(b) by rule 

with respect to the financial institutions and other persons 

subject to their respective jurisdictions under subsection (a). 

(c) ABSENCE OF STATE ACTION.—If a State insurance authority 

fails to adopt regulations to carry out this subtitle, such state shall 

not be eligible to override, pursuant to section 47(g)(2)(B)(iii) of the 

Federal Deposit insurance Act, the insurance customer protection 

regulations prescribed by a Federal banking agency under section 

47(a) of such Act. 

(d) DEFINITIONS.—The terms used in subsection (a)(1) that are 

not defined in this subtitle or otherwise defined in section 3(s) of 

the Federal Deposit insurance Act shall have the same meaning as 

given in section 1(b) of the International Banking Act of 1978. 

SEC. 507. [15 U.S.C. 6807] RELATION TO STATE LAWS. 

(a) IN GENERAL.—This subtitle and the amendments made by 

this subtitle shall not be construed as superseding, altering, or affecting any statute, regulation, order, or interpretation in effect in 

any state, except to the extent that such statute, regulation, order, 

or interpretation is inconsistent with the provisions of this subtitle, 

and then only to the extent of the inconsistency. 

(b) GREATER PROTECTION UNDER STATE LAW.—For purposes of 

this section, a state statute, regulation, order, or interpretation is 

not inconsistent with the provisions of this subtitle if the protection 

such statute, regulation, order, or interpretation affords any person 

is greater than the protection provided under this subtitle and the 

amendments made by this subtitle, as determined by the Federal 

Trade Commission, after consultation with the agency or authority 

with jurisdiction under section 505(a) of either the person that initiated the complaint or that is the subject of the complaint, on its 

own motion or upon the petition of any interested party. 

SEC. 508. [15 U.S.C. 6808] STUDY OF INFORMATION SHARING AMONG 

FINANCIAL AFFILIATES. 

(a) IN GENERAL.—The Secretary of the Treasury, in conjunction 

with the Federal functional regulators and the Federal Trade Commission, shall conduct a study of information sharing practices 

among financial institutions and their affiliates. Such study shall 

include— 

(1) the purposes for the sharing of confidential customer 

information with affiliates or with nonaffiliated third parties; 

(2) the extent and adequacy of security protections for such 

information; 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1074 

(3) the potential risks for customer privacy of such sharing 

of information; 

(4) the potential benefits for financial institutions and affiliates of such sharing of information; 

(5) the potential benefits for customers of such sharing of 

information; 

(6) the adequacy of existing laws to protect customer privacy; 

(7) the adequacy of financial institution privacy policy and 

privacy rights disclosure under existing law; 

(8) the feasibility of different approaches, including opt-out 

and opt-in, to permit customers to direct that confidential information not be shared with affiliates and nonaffiliated third 

parties; and 

(9) the feasibility of restricting sharing of information for 

specific uses or of permitting customers to direct the uses for 

which information may be shared. 

(b) CONSULTATION.—The Secretary shall consult with representatives of State insurance authorities designated by the National Association of Insurance Commissioners, and also with financial services industry, consumer organizations and privacy 

groups, and other representatives of the general public, in formulating and conducting the study required by subsection (a). 

(c) REPORT.—On or before January 1, 2002, the Secretary shall 

submit a report to the Congress containing the findings and conclusions of the study required under subsection (a), together with such 

recommendations for legislative or administrative action as may be 

appropriate. 

SEC. 509. [15 U.S.C. 6809] DEFINITIONS. 

As used in this subtitle: 

(1) FEDERAL BANKING AGENCY.—The term ''Federal banking agency'' has the same meaning as given in section 3 of the 

Federal Deposit Insurance Act. 

(2) FEDERAL FUNCTIONAL REGULATOR.—The term ''Federal 

functional regulator'' means— 

(A) the Board of Governors of the Federal Reserve System; 

(B) the Office of the Comptroller of the Currency; 

(C) the Board of Directors of the Federal Deposit Insurance Corporation; 

(D) the Director of the Office of Thrift Supervision; 

(E) the National Credit Union Administration Board; 

and 

(F) the Securities and Exchange Commission. 

(3) FINANCIAL INSTITUTION.— 

(A) IN GENERAL.—The term ''financial institution'' 

means any institution the business of which is engaging in 

financial activities as described in section 4(k) of the Bank 

Holding Company Act of 1956. 

( B) PERSONS SUBJECT TO CFTC REGULATION.—Notwithstanding subparagraph (A), the term ''financial institution'' 

does not include any person or entity with respect to any 

financial activity that is subject to the jurisdiction of the 
1075 GRAMM-LEACH-BLILEY ACT Sec. 206A 

Commodity Futures Trading Commission under the Commodity Exchange Act. 

(C) FAR M CREDIT INSTITUTIONS.—Notwithstandin g subparagraph (A), the term "financial institution" does not include the Federal Agricultural Mortgage Corporation or 

any entity chartered and operating under the Farm Credit 

Act of 1971. 

( D ) OTHER SECONDARY MARKET INSTITUTIONS.—Notwithstanding subparagraph (A), the term "financial institution'' does not include institutions chartered by Congress 

specifically to engage in transactions described in section 

502(e)(1)(C), as long as such institutions do not sell or 

transfer nonpublic personal information to a nonaffiliated 

third party. 

(4) NONPUBLIC PERSONAL INFORMATION.— 

(A) The term "nonpublic personal information" means 

personally identifiable financial information— 

(i) provided by a consumer to a financial institution; 

(ii) resulting from any transaction with the consumer or any service performed for the consumer; or 

(iii) otherwise obtained by the financial institution. 

(B) Such term does not include publicly available information, as such term is defined by the regulations prescribed under section 504. 

(C) Notwithstanding subparagraph (B), such term— 

(i) shall include any list, description, or other 

grouping of consumers (and publicly available information pertaining to them) that is derived using any nonpublic personal information other than publicly available information; but 

(ii) shall not include any list, description, or other 

grouping of consumers (and publicly available information pertaining to them) that is derived without using 

any nonpublic personal information. 

(5) NONAFFILIATED THIRD PARTY.—The term "nonaffiliated 

third party'' means any entity that is not an affiliate of, or related by common ownership or affiliated by corporate control 

with, the financial institution, but does not include a joint employee of such institution. 

(6) AFFILIATE.—The term "affiliate" means any company 

that controls, is controlled by, or is under common control with 

another company. 

(7) NECESSARY TO EFFECT, ADMINISTER, OR ENFORCE.—The 

term ''as necessary to effect, administer, or enforce the transaction'' means— 

(A) the disclosure is required, or is a usual, appropriate, or acceptable method, to carry out the transaction 

or the product or service business of which the transaction 

is a part, and record or service or maintain the consumer's 

account in the ordinary course of providing the financial 

service or financial product, or to administer or service 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1076 

benefits or claims relating to the transaction or the product or service business of which it is a part, and includes— 

(i) providing the consumer or the consumer's 

agent or broker with a confirmation, statement, or 

other record of the transaction, or information on the 

status or value of the financial service or financial 

product; and 

(ii) the accrual or recognition of incentives or bonuses associated with the transaction that are provided by the financial institution or any other party; 

(B) the disclosure is required, or is one of the lawful 

or appropriate methods, to enforce the rights of the financial institution or of other persons engaged in carrying out 

the financial transaction, or providing the product or service; 

(C) the disclosure is required, or is a usual, appropriate, or acceptable method, for insurance underwriting at 

the consumer's request or for reinsurance purposes, or for 

any of the following purposes as they relate to a consumer's insurance: Account administration, reporting, investigating, or preventing fraud or material misrepresentation, processing premium payments, processing insurance 

claims, administering insurance benefits (including utilization review activities), participating in research projects, or 

as otherwise required or specifically permitted by Federal 

or State law; or 

(D) the disclosure is required, or is a usual, appropriate or acceptable method, in connection with— 

(i) the authorization, settlement, billing, processing, clearing, transferring, reconciling, or collection 

of amounts charged, debited, or otherwise paid using 

a debit, credit or other payment card, check, or account number, or by other payment means; 

(ii) the transfer of receivables, accounts or interests therein; or 

(iii) the audit of debit, credit or other payment information. 

(8) STATE INSURANCE AUTHORITY.—The term ''State insurance authority'' means, in the case of any person engaged in 

providing insurance, the State insurance authority of the State 

in which the person is domiciled. 

(9) CONSUMER.—The term "consumer" means an individual 

who obtains, from a financial institution, financial products or 

services which are to be used primarily for personal, family, or 

household purposes, and also means the legal representative of 

such an individual. 

(10) JOINT AGREEMENT.—The term "joint agreement'' 

means a formal written contract pursuant to which two or 

more financial institutions jointly offer, endorse, or sponsor a 

financial product or service, and as may be further defined in 

the regulations prescribed under section 504. 

(11) CUSTOMER RELATIONSHIP.—The term ''time of establishing a customer relationship'' shall be defined by the regulations prescribed under section 504, and shall, in the case of a 
1077 GRAMM-LEACH-BLILEY ACT Sec. 206A 

financial institution engaged in extending credit directly to 

consumers to finance purchases of goods or services, mean the 

time of establishing the credit relationship with the consumer. 

SEC. 510. [15 U.S.C. 6801 nt] EFFECTIVE DATE. 

This subtitle shall take effect 6 months after the date on which 

rules are required to be prescribed under section 504(a)(3), except— 

(1) to the extent that a later date is specified in the rules 

prescribed under section 504; and 

(2) that sections 504 and 506 shall be effective upon enactment. 

Subtitle B—Fraudulent Access to Financial 

Information 

SEC. 521. [15 U.S.C. 6821] PRIVACY PROTECTIO N FOR CUSTOME R INFORMATIO N OF FINANCIA L INSTITUTIONS. 

(a) PROHIBITION ON OBTAINING CUSTOMER INFORMATION BY 

FALSE PRETENSES.—It shall be a violation of this subtitle for any 

person to obtain or attempt to obtain, or cause to be disclosed or 

attempt to cause to be disclosed to any person, customer information of a financial institution relating to another person— 

(1) by making a false, fictitious, or fraudulent statement or 

representation to an officer, employee, or agent of a financial 

institution; 

(2) by making a false, fictitious, or fraudulent statement or 

representation to a customer of a financial institution; or 

(3) by providing any document to an officer, employee, or 

agent of a financial institution, knowing that the document is 

forged, counterfeit, lost, or stolen, was fraudulently obtained, 

or contains a false, fictitious, or fraudulent statement or representation. 

(b) PROHIBITION ON SOLICITATION OF A PERSON T O OBTAIN 

CUSTOMER INFORMATION FRO M FINANCIAL INSTITUTION UNDE R 

FALSE PRETENSES.—It shall be a violation of this subtitle to request a person to obtain customer information of a financial institution, knowing that the person will obtain, or attempt to obtain, 

the information from the institution in any manner described in 

subsection (a). 

(c) NONAPPLICABILITY TO LAW ENFORCEMENT AGENCIES.—N o 

provision of this section shall be construed so as to prevent any action by a law enforcement agency, or any officer, employee, or 

agent of such agency, to obtain customer information of a financial 

institution in connection with the performance of the official duties 

of the agency. 

(d) NONAPPLICABILITY TO FINANCIAL INSTITUTIONS I N CERTAIN 

CASES.—No provision of this section shall be construed so as to prevent any financial institution, or any officer, employee, or agent of 

a financial institution, from obtaining customer information of such 

financial institution in the course of— 

(1) testing the security procedures or systems of such institution for maintaining the confidentiality of customer information; 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1078 

(2) investigating allegations of misconduct or negligence on 

the part of any officer, employee, or agent of the financial institution; or 

(3) recovering customer information of the financial institution which was obtained or received by another person in 

any manner described in subsection (a) or (b). 

(e) NONAPPLICABILITY TO INSURANCE INSTITUTIONS FOR INVESTIGATION OF INSURANCE FRAUD.—N o provision of this section shall 

be construed so as to prevent any insurance institution, or any officer, employee, or agency of an insurance institution, from obtaining 

information as part of an insurance investigation into criminal activity, fraud, material misrepresentation, or material nondisclosure 

that is authorized for such institution under State law, regulation, 

interpretation, or order. 

(f) NONAPPLICABILITY TO CERTAIN TYPES OF CUSTOMER INFORMATION OF FINANCIAL INSTITUTIONS.—No provision of this section 

shall be construed so as to prevent any person from obtaining customer information of a financial institution that otherwise is available as a public record filed pursuant to the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934). 

(g) NONAPPLICABILITY TO COLLECTION OF CHIL D SUPPORT 

JUDGMENTS.—N o provision of this section shall be construed to prevent any State-licensed private investigator, or any officer, employee, or agent of such private investigator, from obtaining customer information of a financial institution, to the extent reasonably necessary to collect child support from a person adjudged to 

have been delinquent in his or her obligations by a Federal or State 

court, and to the extent that such action by a State-licensed private 

investigator is not unlawful under any other Federal or State law 

or regulation, and has been authorized by an order or judgment of 

a court of competent jurisdiction. 

SEC. 522. [15 U.S.C. 6822] ADMINISTRATIVE ENFORCEMENT. 

(a) ENFORCEMENT BY FEDERAL TRADE COMMISSION.—Except as 

provided in subsection (b), compliance with this subtitle shall be 

enforced by the Federal Trade Commission in the same manner 

and with the same power and authority as the Commission has 

under the Fair Debt Collection Practices Act to enforce compliance 

with such Act. 

(b) ENFORCEMENT BY OTHER AGENCIES I N CERTAIN CASES.— 

(1) IN GENERAL.—Compliance with this subtitle shall be 

enforced under— 

(A) section 8 of the Federal Deposit Insurance Act, in 

the case of— 

(i) national banks, and Federal branches and Federal agencies of foreign banks, by the Office of the 

Comptroller of the Currency; 

(ii) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of 

foreign banks (other than Federal branches, Federal 

agencies, and insured State branches of foreign 

banks), commercial lending companies owned or controlled by foreign banks, and organizations operating 
1079 GRAMM-LEACH-BLILEY ACT Sec. 206A 

under section 25 or 25A of the Federal Reserve Act, by 

the Board; 

(iii) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal 

Reserve system and national nonmember banks) and 

insured State branches of foreign banks, by the Board 

of Directors of the Federal Deposit Insurance Corporation; and 

(iv) savings associations the deposits of which are 

insured by the Federal Deposit Insurance Corporation, 

by the Director of the Office of Thrift Supervision; and 

(B) the Federal Credit Union Act, by the Administrator of the National Credit union Administration with 

respect to any Federal credit union. 

(2) VIOLATIONS OF THIS SUBTITLE TREATED AS VIOLATIONS 

OF OTHER LAWS.—For the purpose of the exercise by any agency referred to in paragraph (1) of its powers under any Act referred to in that paragraph, a violation of this subtitle shall be 

deemed to be a violation of a requirement imposed under that 

Act. In addition to its powers under any provision of law specifically referred to in paragraph (1), each of the agencies referred to in that paragraph may exercise, for the purpose of enforcing compliance with this subtitle, any other authority conferred on such agency by law. 

SEC. 523. [15 U.S.C. 6823] CRIMINA L PENALTY. 

(a) IN GENERAL.—Whoever knowingly and intentionally violates, or knowingly and intentionally attempts to violate, section 

521 shall be fined in accordance with title 18, United States Code, 

or imprisoned for not more than 5 years, or both. 

(b) ENHANCE D PENALTY FOR AGGRAVATED CASES.—Whoeve r 

violates, or attempts to violate, section 521 while violating another 

law of the united states or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period shall be 

fined twice the amount provided in subsection (b)(3) or (c)(3) (as 

the case may be) of section 3571 of title 18, united states Code, 

imprisoned for not more than 10 years, or both. 

SEC. 524. [15 U.S.C. 6824] RELATIO N TO STATE LAWS. 

(a) IN GENERAL.—This subtitle shall not be construed as superseding, altering, or affecting the statutes, regulations, orders, or interpretations in effect in any state, except to the extent that such 

statutes, regulations, orders, or interpretations are inconsistent 

with the provisions of this subtitle, and then only to the extent of 

the inconsistency. 

(b) GREATER PROTECTION UNDE R STATE LAW.—For purposes of 

this section, a state statute, regulation, order, or interpretation is 

not inconsistent with the provisions of this subtitle if the protection 

such statute, regulation, order, or interpretation affords any person 

is greater than the protection provided under this subtitle as determined by the Federal Trade Commission, after consultation with 

the agency or authority with jurisdiction under section 522 of either the person that initiated the complaint or that is the subject 

of the complaint, on its own motion or upon the petition of any interested party. 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1080 

SEC. 525. [15 U.S.C. 6825] AGENC Y GUIDANCE. 

in furtherance of the objectives of this subtitle, each Federal 

banking agency (as defined in section 3(z) of the Federal Deposit 

Insurance Act), the National Credit Union Administration, and the 

Securities and Exchange Commission or self-regulatory organizations, as appropriate, shall review regulations and guidelines applicable to financial institutions under their respective jurisdictions 

and shall prescribe such revisions to such regulations and guidelines as may be necessary to ensure that such financial institutions 

have policies, procedures, and controls in place to prevent the unauthorized disclosure of customer financial information and to 

deter and detect activities proscribed under section 521. 

SEC. 526. [15 U.S.C. 6826] REPORTS. 

(a) REPORT TO THE CONGRESS.—Before the end of the 18-month 

period beginning on the date of the enactment of this Act, the 

Comptroller General, in consultation with the Federal Trade Commission, Federal banking agencies, the National Credit Union Administration, the Securities and Exchange Commission, appropriate 

Federal law enforcement agencies, and appropriate State insurance 

regulators, shall submit to the Congress a report on the following: 

(1) The efficacy and adequacy of the remedies provided in 

this subtitle in addressing attempts to obtain financial information by fraudulent means or by false pretenses. 

(2) Any recommendations for additional legislative or regulatory action to address threats to the privacy of financial information created by attempts to obtain information by fraudulent means or false pretenses. 

(b) ANNUA L REPORT BY ADMINISTERING AGENCIES.—Th e Federal Trade Commission and the Attorney General shall submit to 

Congress an annual report on number and disposition of all enforcement actions taken pursuant to this subtitle. 

SEC. 527. [15 U.S.C. 6827] DEFINITIONS. 

For purposes of this subtitle, the following definitions shall 

apply: 

(1) CUSTOMER.—The term ''customer'' means, with respect 

to a financial institution, any person (or authorized representative of a person) to whom the financial institution provides a 

product or service, including that of acting as a fiduciary. 

(2) CUSTOMER INFORMATION OF A FINANCIAL INSTITUTION.— 

The term ''customer information of a financial institution'' 

means any information maintained by or for a financial institution which is derived from the relationship between the financial institution and a customer of the financial institution 

and is identified with the customer. 

(3) DOCUMENT.—The term ''document'' means any information in any form. 

(4) FINANCIAL INSTITUTION.— 

(A) IN GENERAL.—The term ''financial institution'' 

means any institution engaged in the business of providing 

financial services to customers who maintain a credit, deposit, trust, or other financial account or relationship with 

the institution. 
1081 GRAMM-LEACH-BLILEY ACT Sec. 206A 

(B) CERTAIN FINANCIAL INSTITUTIONS SPECIFICALLY INCLUDED.—The term ''financial institution" includes any depository institution (as defined in section 19(b)(1)(A) of the 

Federal Reserve Act), any broker or dealer, any investment 

adviser or investment company, any insurance company, 

any loan or finance company, any credit card issuer or operator of a credit card system, and any consumer reporting 

agency that compiles and maintains files on consumers on 

a nationwide basis (as defined in section 603(p) of the Consumer Credit Protection Act). 

(C) SECURITIES INSTITUTIONS.—For purposes of subparagraph (B)— 

(i) the terms ''broker'' and ''dealer'' have the same 

meanings as given in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c); 

(ii) the term ''investment adviser'' has the same 

meaning as given in section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)); and 

(iii) the term ''investment company'' has the same 

meaning as given in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3). 

( D ) CERTAIN PERSONS AND ENTITIES SPECIFICALLY EXCLUDED.—The term ''financial institution" does not include 

any person or entity with respect to any financial activity 

that is subject to the jurisdiction of the Commodity Futures Trading Commission under the Commodity Exchange Act and does not include the Federal Agricultural 

Mortgage Corporation or any entity chartered and operating under the Farm Credit Act of 1971. 

( E) FURTHER DEFINITION BY REGULATION.—The Federal Trade Commission, after consultation with Federal 

banking agencies and the Securities and Exchange Commission, may prescribe regulations clarifying or describing 

the types of institutions which shall be treated as financial 

institutions for purposes of this subtitle. 

TITLE VII—OTHE R PROVISIONS 

Subtitle C—Other Regulatory 

Improvements 

SEC. 721. EXPANDE D SMALL BANK ACCESS TO S CORPORATION 

TREATMENT. 

(a) STUDY.—The Comptroller General of the United States 

shall conduct a study of— 

(1) possible revisions to the rules governing S corporations, 

including— 

(A) increasing the permissible number of shareholders 

in such corporations; 
Sec. 206A GRAMM-LEACH-BLILEY ACT 1082 

(B) permitting shares of such corporations to be held 

in individual retirement accounts; 

(C) clarifying that interest on investments held for 

safety, soundness, and liquidity purposes should not be 

considered to be passive income; 

(D) discontinuation of the treatment of stock held by 

bank directors as a disqualifying personal class of stock for 

such corporations; and 

(E) improving Federal tax treatment of bad debt and 

interest deductions; and 

(2) what impact such revisions might have on community 

banks. 

(b) REPORT TO THE CONGRESS.—Not later than 6 months after 

the date of the enactment of this Act, the Comptroller General of 

the United States shall submit a report to the Congress on the results of the study conducted under subsection (a). 

(c) DEFINITION.—For purposes of this section, the term "S corporation'' has the meaning given the term in section 1361(a)(1) of 

the Internal Revenue Code of 1986. 

SEC. 722. [12 U.S.C. 4809] "PLAIN LANGUAGE'' REQUIREMENT FOR FEDERAL BANKING AGENCY RULES. 

(a) IN GENERAL.—Each Federal banking agency shall use plain 

language in all proposed and final rulemakings published by the 

agency in the Federal Register after January 1, 2000. 

(b) REPORT.—Not later than March 1, 2001, each Federal banking agency shall submit to the Congress a report that describes 

how the agency has complied with subsection (a). 

(c) DEFINITION.—For purposes of this section, the term ''Federal banking agency'' has the meaning given that term in section 

3 of the Federal Deposit Insurance Act. 

SEC. 728. [12 U.S.C. 241 nt] GENERAL ACCOUNTING OFFICE STUDY OF 

CONFLICTS OF INTEREST. 

(a) STUDY REQUIRED.—The Comptroller General of the United 

States shall conduct a study analyzing the conflict of interest faced 

by the Board of Governors of the Federal Reserve System between 

its role as a primary regulator of the banking industry and its role 

as a vendor of services to the banking and financial services industry. 

(b) SPECIFIC CONFLICT REQUIRED TO BE ADDRESSED.—In the 

course of the study required under subsection (a), the Comptroller 

General shall address the conflict of interest faced by the Board of 

Governors of the Federal Reserve System between the role of the 

Board as a regulator of the payment system, generally, and its participation in the payment system as a competitor with private entities who are providing payment services. 

(c) REPORT TO THE CONGRESS.—Before the end of the 1-year 

period beginning on the date of the enactment of this Act, the 

Comptroller General shall submit a report to the Congress containing the findings and conclusions of the Comptroller General in 

connection with the study required under this section, together 

with such recommendations for such legislative or administrative 

actions as the Comptroller General may determine to be appro-
1083 GRAMM-LEACH-BLILEY ACT Sec. 206A 

priate, including recommendations for resolving any such conflict of 

interest. 

SEC. 729. [12 U.S.C. 4801 nt] STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE REQUIREMENTS TO ONLINE BANKING 

AND LENDING. 

(a) STUDY REQUIRED.—The Federal banking agencies shall conduct a study of banking regulations regarding the delivery of financial services, including those regulations that may assume that 

there will be person-to-person contact during the course of a financial services transaction, and report their recommendations on 

adapting those existing requirements to online banking and lending. 

(b) REPORT REQUIRED.—Before the end of the 2-year period beginning on the date of the enactment of this Act, the Federal banking agencies shall submit a report to the Congress on the findings 

and conclusions of the agencies with respect to the study required 

under subsection (a), together with such recommendations for legislative or regulatory action as the agencies may determine to be appropriate. 

(c) DEFINITION.—For purposes of this section, the term ''Federal banking agencies'' means each Federal banking agency (as defined in section 3(z) of the Federal Deposit Insurance Act). 

SEC. 733. FAIR TREATMENT OF WOMEN BY FINANCIAL ADVISERS. 

it is the sense of the Congress that individuals offering financial advice and products should offer such services and products in 

a nondiscriminatory, nongender-specific manner. 

HOME MORTGAGE DISCLOSURE ACT OF 1975 

1085 

HOME MORTGAGE DISCLOSURE ACT OF 1975 

EXCERPT FRO M PUBLIC LAW 94-200 

[Public Law 94-200; 89 Stat. 1125; 12 U.S.C. 2801 et seq.] 

TITLE III—HOME MORTGAGE DISCLOSURE 

SHORT TITLE 

SEC. 301. [12 U.S.C. 2801 note] This title may be cited as the 

''Home Mortgage Disclosure Act of 1975''. 

FINDINGS AND PURPOSES 

SEC. 302. [12 U.S.C. 2801] (a) The Congress finds that some 

depository institutions have sometimes contributed to the decline of 

certain geographic areas by their failure pursuant to their chartering responsibilities to provide adequate home financing to qualified applicants on reasonable terms and conditions. 

(b) The purpose of this title is to provide the citizens and public officials of the United States with sufficient information to enable them to determine whether depository institutions are filling 

their obligations to serve the housing needs of the communities and 

neighborhoods in which they are located and to assist public officials in their determination of the distribution of public sector 

investments in a manner designed to improve the private investment environment. 

(c) Nothing in this title is intended to, nor shall it be construed 

to, encourage unsound lending practices or the allocation of credit. 

DEFINITIONS 

SEC. 303. [12 U.S.C. 2802] For purposes of this title— 

(1) the term ''mortgage loan'' means a loan which is secured by residential real property or a home improvement loan; 

(2) the term ''depository institution''— 

(A) means— 

(i) any bank (as defined in section 3(a)(1) of the 

Federal Deposit Insurance Act); 

(ii) any savings association (as defined in section 

3(b)(1) of the Federal Deposit Insurance Act); and 

(iii) any credit union, 

which makes federally related mortgage loans as 

determined by the Board; and 

(B) includes any other lending institution (as defined 

in paragraph (4)) other than any institution described in 

subparagraph (A); 

(3) the term ''completed application'' means an application 

in which the creditor has received the information that is regu1087 
Sec. 304 HOME MORTGAGE DISCLOSURE ACT OF 1975 1088 

larly obtained in evaluating applications for the amount and 

type of credit requested; 

(4) the term ''other lending institutions" means any person 

engaged for profit in the business of mortgage lending; 

(5) the term "Board" means the Board of Governors of the 

Federal Reserve System; and 

(6) the term "Secretary" means the Secretary of Housing 

and Urban Development. 

MAINTENANCE OF RECORDS AND PUBLIC DISCLOSURE 

SEC. 304. [12 U.S.C. 2803] (a)(1) Each depository institution 

which has a home office or branch office located within a primary 

metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area that is not comprised of designated primary metropolitan statistical areas, as defined by the 

Department of Commerce shall compile and make available, in 

accordance with regulations of the Board, to the public for inspection and copying at the home office, and at least one branch office 

within each primary metropolitan statistical area, metropolitan 

statistical area, or consolidated metropolitan statistical area that is 

not comprised of designated primary metropolitan statistical areas 

in which the depository institution has an office the number and 

total dollar amount of mortgage loans which were (A) originated (or 

for which the institution received completed applications), or (B) 

purchased by that institution during each fiscal year (beginning 

with the last full fiscal year of that institution which immediately 

preceded the effective date of this title). 

(2) The information required to be maintained and made available under paragraph (1) shall also be itemized in order to clearly 

and conspicuously disclose the following: 

(A) The number and dollar amount for each item referred 

to in paragraph (1), by census tracts for mortgage loans secured by property located within any county with a population 

of more than 30,000, within that primary metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area that is not comprised of designated primary metropolitan statistical areas, otherwise, by county, for 

mortgage loans secured by property located within any other 

county within that standard metropolitan statistical area. 

(B) The number and dollar amount for each item referred 

to in paragraph (1) for all such mortgage loans which are secured by property located outside that primary metropolitan 

statistical area, metropolitan statistical area, or consolidated 

metropolitan statistical area that is not comprised of designated primary metropolitan statistical areas. 

For the purpose of this paragraph, a depository institution which 

maintains offices in more than one primary metropolitan statistical 

area, metropolitan statistical area, or consolidated metropolitan 

statistical area that is not comprised of designated primary metropolitan statistical areas shall be required to make the information 

required by this paragraph available at any such office only to the 

extent that such information relates to mortgage loans which were 

originated or purchased (or for which completed applications were 

received) by an office of that depository institution located in the 
Sec. 304 

HOME MORTGAGE DISCLOSURE ACT OF 1975 

1089 

primary metropolitan statistical area, metropolitan statistical area, 

or consolidated metropolitan statistical area that is not comprised 

of designated primary metropolitan statistical areas in which the 

office making such information available is located. For purposes of 

this paragraph, other lending institutions shall be deemed to have 

a home office or branch office within a primary metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area that is not comprised of designated primary 

metropolitan statistical areas if such institutions have originated or 

purchased or received completed applications for at least 5 mortgage loans in such area in the preceding calendar year. 

(b) Any item of information relating to mortgage loans required 

to be maintained under subsection (a) shall be further itemized in 

order to disclose for each such item— 

(1) the number and dollar amount of mortgage loans which 

are insured under title II of the National Housing Act or under 

title V of the Housing Act of 1949 or which are guaranteed 

under chapter 37 of title 38, United States Code; 

(2) the number and dollar amount of mortgage loans made 

to mortgagors who did not, at the time of execution of the 

mortgage, intend to reside in the property securing the mortgage loan; 

(3) the number and dollar amount of home improvement 

loans; and 

(4) the number and dollar amount of mortgage loans and 

completed applications involving mortgagors or mortgage applicants grouped according to census tract, income level, racial 

characteristics, and gender. 

(c) Any information required to be compiled and made available under this section, other than loan application register information under subsection (j), shall be maintained and made available for a period of five years after the close of the first year during 

which such information is required to be maintained and made 

available. 

(d) Notwithstanding the provisions of subsection (a)(1), data required to be disclosed under this section for 1980 and thereafter 

shall be disclosed for each calendar year. Any depository institution 

which is required to make disclosures under this section but which 

has been making disclosures on some basis other than a calendar 

year basis shall make available a separate disclosure statement 

containing data for any period prior to calendar year 1980 which 

is not covered by the last full year report prior to the 1980 calendar 

year report. 

(e) Subject to subsection (h), the Board shall prescribe a standard format for the disclosures required under this section. 

(f) The Federal Financial Institutions Examination Council, in 

consultation with the Secretary, shall implement a system to facilitate access to data required to be disclosed under this section. Such 

system shall include arrangements for a central depository of data 

in each primary metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area that is not 

comprised of designated primary metropolitan statistical areas. 

Disclosure statements shall be made available to the public for 

inspection and copying at such central depository of data for all 
Sec. 304 HOME MORTGAGE DISCLOSURE ACT OF 1975 1090 

depository institutions which are required to disclose information 

under this section (or which are exempted pursuant to section 

306(b)) and which have a home office or branch office within such 

primary metropolitan statistical area, metropolitan statistical area, 

or consolidated metropolitan statistical area that is not comprised 

of designated primary metropolitan statistical areas. 

(g) The requirements of subsections (a) and (b) shall not apply 

with respect to mortgage loans that are— 

(1) made (or for which completed applications are received) 

by any mortgage banking subsidiary of a bank holding company or savings and loan holding company or by any savings 

and loan service corporation that originates or purchases mortgage loans; and 

(2) approved (or for which completed applications are received) by the Secretary for insurance under title i or i i of the 

National Housing Act. 

(h) SUBMISSION TO AGENCIES.—Th e data required to be disclosed under susbsection (b)(4) shall be submitted to the appropriate agency for each institution reporting under this title. Notwithstanding the requirement of section 304(a)(2)(A) for disclosure 

by census tract, the Board, in cooperation with other appropriate 

regulators, including— 

(1) the Office of the Comptroller of the Currency for national banks and Federal branches and Federal agencies of foreign banks; 

(2) the Director of the Office of Thrift Supervision for savings associations; 

(3) the Federal Deposit Insurance Corporation for banks 

insured by the Federal Deposit Insurance Corporation (other 

than members of the Federal Reserve System), mutual savings 

banks, insured State branches of foreign banks, and any other 

depository institution described in section 303(2)(A) which is 

not otherwise referred to in this paragraph; 

(4) the National Credit Union Administration Board for 

credit unions; and 

(5) the Secretary of Housing and Urban Development for 

other lending institutions not regulated by the agencies referred to in paragraphs (1) through (4), 

shall develop regulations prescribing the format for such disclosures, the method for submission of the data to the appropriate 

regulatory agency, and the procedures for disclosing the information to the public. These regulations shall also require the collection of data required to be disclosed under subsection (b)(4) with 

respect to loans sold by each institution reporting under this title, 

and, in addition, shall require disclosure of the class of the purchaser of such loans. Any reporting institution may submit in writing to the appropriate agency such additional data or explanations 

as it deems relevant to the decision to originate or purchase mortgage loans. 

(i) EXEMPTIO N FRO M CERTAI N DISCLOSURE REQUIREMENTS.— 

The requirements of subsection (b)(4) shall not apply with respect 

to any depository institution described in section 303(2)(A) which 

has total assets, as of the most recent full fiscal year of such institution, of $30,000,000 or less. 
Sec. 304 

HOME MORTGAGE DISCLOSURE ACT OF 1975 

1091 

(j) LOAN APPLICATION REGISTER INFORMATION.— 

(1) I N GENERAL.—In addition to the information required 

to be disclosed under subsections (a) and (b), any depository 

institution which is required to make disclosures under this 

section shall make available to the public, upon request, loan 

application register information (as defined by the Board by 

regulation) in the form required under regulations prescribed 

by the Board. 

(2) FORMAT OF DISCLOSURE.— 

(A) UNEDITE D FORMAT.—Subject to subparagraph (B), 

the loan application register information described in paragraph (1) may be disclosed by a depository institution 

without editing or compilation and in the format in which 

such information is maintained by the institution. 

( B) PROTECTION OF APPLICANT'S PRIVACY INTEREST.— 

The Board shall require, by regulation, such deletions as 

the Board may determine to be appropriate to protect— 

(i) any privacy interest of any applicant, including 

the deletion of the applicant's name and identification 

number, the date of the application, and the date of 

any determination by the institution with respect to 

such application; and 

(ii) a depository institution from liability under 

any Federal or State privacy law. 

(C) CENSUS TRACT FORMAT ENCOURAGED.—It is the 

sense of the Congress that a depository institution should 

provide loan register information under this section in a 

format based on the census tract in which the property is 

located. 

(3) CHANGE OF FORM NOT REQUIRED.—A depository institution meets the disclosure requirement of paragraph (1) if the 

institution provides the information required under such paragraph in the form in which the institution maintains such 

information. 

(4) REASONABLE CHARGE FOR INFORMATION.—Any depository institution which provides information under this subsection may impose a reasonable fee for any cost incurred in 

reproducing such information. 

(5) TIM E OF DISCLOSURE.—The disclosure of the loan application register information described in paragraph (1) for any 

year pursuant to a request under paragraph (1) shall be 

made— 

(A) in the case of a request made on or before March 

1 of the succeeding year, before April 1 of the succeeding 

year; and 

(B) in the case of a request made after March 1 of the 

succeeding year, before the end of the 30-day period beginning on the date the request is made. 

(6) RETENTION OF INFORMATION.—Notwithstandin g subsection (c), the loan application register information described 

in paragraph (1) for any year shall be maintained and made 

available, upon request, for 3 years after the close of the 1st 

year during which such information is required to be maintained and made available. 
Sec. 304 HOME MORTGAGE DISCLOSURE ACT OF 1975 1092 

(7) MINIMIZIN G COMPLIANCE COSTS.—In prescribing regulations under this subsection, the Board shall make every effort 

to minimize the costs incurred by a depository institution in 

complying with this subsection and such regulations. 

(k) DISCLOSURE OF STATEMENTS BY DEPOSITORY INSTITUTIONS.— 

(1) I N GENERAL.—In accordance with procedures established by the Board pursuant to this section, any depository 

institution required to make disclosures under this section— 

(A) shall make a disclosure statement available, upon 

request, to the public no later than 3 business days after 

the institution receives the statement from the Federal 

Financial institutions Examination Council; and 

(B) may make such statement available on a floppy 

disc which may be used with a personal computer or in 

any other media which is not prohibited under regulations 

prescribed by the Board. 

(2) NOTICE THAT DATA IS SUBJECT TO CORRECTION AFTER 

FINAL REVIEW.—An y disclosure statement provided pursuant to 

paragraph (1) shall be accompanied by a clear and conspicuous 

notice that the statement is subject to final review and revision, if necessary. 

(3) REASONABLE CHARGE FOR INFORMATION.—Any depository institution which provides a disclosure statement pursuant to paragraph (1) may impose a reasonable fee for any cost 

incurred in providing or reproducing such statement. 

(l) PROMPT DISCLOSURES.— 

(1) IN GENERAL.—Any disclosure of information pursuant 

to this section or section 310 shall be made as promptly as possible. 

(2) MAXIMU M DISCLOSURE PERIOD.— 

(A) 6- AND 9-MONTH MAXIMU M PERIODS.—Except as 

provided in subsections (j)(5) and (k)(1) and regulations 

prescribed by the Board and subject to subparagraph (B), 

any information required to be disclosed for any year 

beginning after December 31, 1992, under— 

(i) this section shall be made available to the public before September 1 of the succeeding year; and 

(ii) section 310 shall be made available to the public before December 1 of the succeeding year. 

(B) SHORTER PERIODS ENCOURAGED AFTER 1994.—With 

respect to disclosures of information under this section or 

section 310 for any year beginning after December 31, 

1993, every effort shall be made— 

(i) to make information disclosed under this section available to the public before July 1 of the succeeding year; and 

(ii) to make information required to be disclosed 

under section 310 available to the public before September 1 of the succeeding year. 

(3) IMPROVED PROCEDURE.—The Federal Financial Institutions Examination Council shall make such changes in the system established pursuant to subsection (f) as may be necessary 

to carry out the requirements of this subsection. 
Sec. 304 

HOME MORTGAGE DISCLOSURE ACT OF 1975 

1093 

( m ) OPPORTUNITY T O REDUCE COMPLIANCE BURDEN.— 

(1) I N GENERAL.— 

(A) SATISFACTION OF PUBLIC AVAILABILITY REQUIREMENTS.—A depository institution shall be deemed to have 

satisfied the public availability requirements of subsection 

(a) if the institution compiles the information required 

under that subsection at the home office of the institution 

and provides notice at the branch locations specified in 

subsection (a) that such information is available from the 

home office of the institution upon written request. 

( B) PROVISION OF INFORMATION UPON REQUEST.—Not 

later than 15 days after the receipt of a written request for 

any information required to be compiled under subsection 

(a), the home office of the depository institution receiving 

the request shall provide the information pertinent to the 

location of the branch in question to the person requesting 

the information. 

(2) FOR M OF INFORMATION.—In complying with paragraph 

(1), a depository institution shall, in the sole discretion of the 

institution, provide the person requesting the information 

with— 

(A) a paper copy of the information requested; or 

(B) if acceptable to the person, the information 

through a form of electronic medium, such as a computer 

disk. 

ENFORCEMENT 

SEC. 305. [12 U.S.C. 2804] (a) The Board shall prescribe such 

regulations as may be necessary to carry out the purposes of this 

title. These regulations may contain such classifications, differentiations, or other provisions, and may provide for such adjustments 

and exceptions for any class of transactions, as in the judgment of 

the Board are necessary and proper to effectuate the purposes of 

this title, and prevent circumvention or evasion thereof, or to facilitate compliance therewith. 

(b) Compliance with the requirements imposed under this title 

shall be enforced under— 

(1) section 8 of the Federal Deposit Insurance Act, in the 

case of— 

(A) national banks, and Federal branches and Federal 

agencies of foreign banks, by the Office of the Comptroller 

of the Currency; 

(B) member banks of the Federal Reserve System 

(other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, 

and insured State branches of foreign banks), commercial 

lending companies owned or controlled by foreign banks, 

and organizations operating under section 25 or 25(a) of 

the Federal Reserve Act, by the Board; and 

(C) banks insured by the Federal Deposit Insurance 

Corporation (other than members of the Federal Reserve 

System), mutual savings banks as defined in section 3(f) of 

the Federal Deposit Insurance Act (12 U.S.C. 1813(f)), insured State branches of foreign banks, and any other 
Sec. 304 HOME MORTGAGE DISCLOSURE ACT OF 1975 1094 

depository institution not referred to in this paragraph or 

paragraph (2) or (3) of this subsection, by the Board of 

Directors of the Federal Deposit insurance Corporation; 

(2) section 8 of the Federal Deposit Insurance Act, by the 

Director of the Office of Thrift Supervision, in the case of a 

savings association the deposits of which are insured by the 

Federal Deposit insurance Corporation; 

(3) the Federal Credit Union Act, by the Administrator of 

the National Credit Union Administration with respect to any 

credit union; and 

(4) other lending institutions, by the Secretary of Housing 

and Urban Development. 

The terms used in paragraph (1) that are not defined in this title 

or otherwise defined in section 3(s) of the Federal Deposit insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them 

in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 

3101). 

(c) For the purpose of the exercise by any agency referred to 

in subsection (b) of its powers under any Act referred to in that 

subsection, a violation of any requirement imposed under this title 

shall be deemed to be a violation of a requirement imposed under 

that Act. In addition to its powers under any provision of law specifically referred to in subsection (b), each of the agencies referred 

to in that subsection may exercise, for the purpose of enforcing 

compliance with any requirement imposed under this title, any 

other authority conferred on it by law. 

RELATION TO STATE LAWS 

SEC. 306. [12 U.S.C. 2805] (a) This title does not annul, alter, 

or affect, or exempt any State chartered depository institution subject to the provisions of this title from complying with the laws of 

any State or subdivision thereof with respect to public disclosure 

and recordkeeping by depositor institutions, except to the extent 

that those laws are inconsistent with any provision of this title, 

and then only to the extent of the inconsistency. The Board is 

authorized to determine whether such inconsistencies exist. The 

Board may not determine that any such law is inconsistent with 

any provision of this title if the Board determines that such law requires the maintenance of records with greater geographic or other 

detail than is required under this title, or that such law otherwise 

provides greater disclosure than is required under this title. 

(b) The Board may by regulation exempt from the requirements of this title any State chartered depository institution within 

any State or subdivision thereof if it determines that, under the 

law of such State or subdivision, that instititution is subject to 

requirements substantially similar to those imposed under this 

title, and that such law contains adequate provisions for enforcement. Notwithstanding any other provision of this subsection, compliance with the requirements imposed under this subsection shall 

be enforced under— 

(1) section 8 of the Federal Deposit Insurance Act in the 

case of national banks, by the Comptroller of the Currency; 

and 
Sec. 304 

HOME MORTGAGE DISCLOSURE ACT OF 1975 

1095 

(2) section 8 of the Federal Deposit Insurance Act, by the 

Director of the office of Thrift Supervision in the case of a savings association the deposits of which are insured by the Federal Deposit Insurance Corporation. 

RESEARC H AN D IMPROVE D METHOD S 

SEC. 307. [12 U.S.C. 2806] (a)(1) The Director of the Office of 

Thrift Supervision, with the assistance of the Secretary, the Director of the Bureau of the Census, the Comptroller of the Currency, 

the Board of Governors of the Federal Reserve System, the Federal 

Deposit Insurance Corporation, and such other persons as the Director of the office of Thrift Supervision, deems appropriate, shall 

develop, or assist in the improvement of, methods of matching 

addresses and census tracts to facilitate compliance by depository 

institutions in as economical a manner as possible with the 

requirements of this title. 

(2) There is authorized to be appropriated such sums as may 

be necessary to carry out this subsection. 

(3) The Director of the Office of Thrift Supervision, is authorized to utilize, contract with, act through, or compensate any person or agency in order to carry out this subsection. 

(b) The Director of the Office of Thrift Supervision, shall recommend to the Committee on Banking, Finance and Urban Affairs 

of the House of Representatives1 and the Committee on Banking, 

Housing, and Urban Affairs of the Senate such additional legislation as the Director of the Office of Thrift Supervision, deems 

appropriate to carry out the purpose of this title. 

SEC. 308. [1 2 U.S.C. 2807 ] REPORT . 

The Board, in consultation with the Secretary of Housing and 

Urban Development, shall report annually to the Congress on the 

utility of the requirements of section 304(b)(4). 

EFFECTIV E DATE 

SEC. 309. [12 U.S.C. 2808] (a) IN GENERAL.—This title shall 

take effect on the one hundred and eightieth day beginning after 

the date of its enactment. Any institution specified in section 

303(2)(A) which has total assets as of its last full fiscal year of 

$10,000,000 or less is exempt from the provisions of this title. The 

Board, in consultation with the Secretary, may exempt institutions 

described in section 303(2)(B) that are comparable within their 

respective industries to institutions that are exempt under the preceding sentence (as determined without regard to the adjustment 

made by subsection (b)). 

( b ) CP I ADJUSTMENTS. — 

(1) IN GENERAL.—Subject to paragraph (2), the dollar 

amount applicable with respect to institutions described in section 303(2)(A) under the 2d sentence of subsection (a) shall be 

adjusted annually after December 31, 1996, by the annual per1

 Section 1(a) of Public Law 104-14, 109 Stat. 186, provides, in part, that ''any reference in 

any provision of law enacted before January 4, 1995, to .. . the Committee on Banking, Finance and Urban Affairs of the House of Representatives shall be treated as referring to the 

Committee on Banking and Financial Services of the House of Representatives''. This should 

probably be a reference to the Committee on Financial Services of the House of Representatives. 
Sec. 304 HOME MORTGAGE DISCLOSURE ACT OF 1975 1096 

centage increase in the Consumer Price Index for Urban Wage 

Earners and Clerical Workers published by the Bureau of 

Labor Statistics. 

(2) 1-TIME ADJUSTMENT FOR PRIOR INFLATION.—The first 

adjustment made under paragraph (1) after the date of the 

enactment of the Economic Growth and Regulatory Paperwork 

Reduction Act of 1996

 1 shall be the percentage by which— 

(A) the Consumer Price Index described in such paragraph for the calendar year 1996, exceeds 

(B) such Consumer Price Index for the calendar year 

1975. 

(3) ROUNDING.—The dollar amount applicable under paragraph (1) for any calendar year shall be the amount determined in accordance with subparagraphs (A) and (B) of paragraph (2) and rounded to the nearest multiple of $1,000,000. 

COMPILATION OF AGGREGATE DATA 

SEC. 310. [12 U.S.C. 2809] (a) Beginning with data for calendar year 1980, the Federal Financial Institutions Examination 

Council shall compile each year, for each primary metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area that is not comprised of designated primary 

metropolitan statistical areas, aggregate data by census tract for 

all depository institutions which are required to disclose data under 

section 304 or which are exempt pursuant to section 306(b). The 

Council shall also produce tables indicating, for each primary metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area that is not comprised of designated primary metropolitan statistical areas, aggregate lending 

patterns for various categories of census tracts grouped according 

to location, age of housing stock, income level, and racial characteristics. 

(b) The Board shall provide staff and data processing resources 

to the Council to enable it to carry out the provisions of subsection 

(a). 

(c) The data and tables required pursuant to subsection (a) 

shall be made available to the public by no later than December 

31 of the year following the calendar year on which the data is 

based. 

DISCLOSURE BY THE SECRETARY 

SEC. 311. [12 U.S.C. 2810] Beginning with data for calendar 

year 1980, the Secretary shall make publicly available data in the 

Secretary's possession for each mortgagee which is not otherwise 

subject to the requirements of this title and which is not exempt 

pursuant to section 306(b), (and for each mortgagee making mortgage loans exempted under section 304(g)), with respect to mortgage loans approved (or for which completed applications are received) by the Secretary for insurance under title I or II of the National Housing Act. Such data to be disclosed shall consist of data 

comparable to the data which would be disclosed if such mortgagee 

were subject to the requirements of section 304. Disclosure state1

 September 30, 1996. 
Sec. 304 

HOME MORTGAGE DISCLOSURE ACT OF 1975 

1097 

ments containing data for each such mortgagee for a primary metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area that is not comprised of designated primary metropolitan statistical areas shall, at a minimum, be publicly available at the central depository of data established pursuant to section 304(f) for such primary metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area that is not comprised of designated primary 

metropolitan statistical areas. The Secretary shall also compile and 

make publicly available aggregate data for such mortgagees by census tract, and tables indicating aggregate lending patterns, in a 

manner comparable to the information required to be made publicly available in accordance with section 310. 

[TERMINATIO N OF AUTHORITY] 

[SEC. 312. [Repealed.]] 

HOME OWNERS' LOAN ACT 

1099 

HOME OWNERS' LOAN ACT 

(48 Stat. 128; 12 U.S.C. 1461 et seq.) 

AN ACT To provide emergency relief with respect to home mortgage indebtedness, 

to refinance home mortgages, to extend relief to the owners of homes occupied by 

them and who are unable to amortize their debt elsewhere, to amend the Federal 

Home Loan Bank Act, to increase the market for obligations of the United States 

and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTION 1. [12 U.S.C. 1461] SHORT TITLE AND TABLE OF CONTENTS. 

This Act may be cited as the ''Home Owners' Loan Act''. 

TABLE OF CONTENTS 

Sec. 1. Short title and table of contents. 

Sec. 2. Definitions. 

Sec. 3. Director of the Office of Thrift Supervision. 

Sec. 4. Supervision of savings associations. 

Sec. 5. Federal savings associations. 

Sec. 6. Liquid asset requirements.1 

Sec. 7. Applicability. 

Sec. 8. District associations. 

Sec. 9. Examination fees. 

Sec. 10. Regulation of holding companies. 

Sec. 11. Transactions with affiliates; extensions of credit to executive officers, directors, and principal shareholders. 

Sec. 12. Advertising. 

Sec. 13. Powers of examiners. 

Sec. 14. Separability provision. 

SEC. 2. [12 U.S.C. 1462] DEFINITIONS. 

For purposes of this Act— 

(1) DIRECTOR.—The term "Director" means the Director of 

the Office of Thrift Supervision. 

(2) CORPORATION.—The term ''Corporation'' means the 

Federal Deposit Insurance Corporation. 

(3) OFFICE.—The term ''Office'' means the Office of Thrift 

Supervision. 

(4) SAVINGS ASSOCIATION.—The term ''savings association'' 

means a savings association, as defined in section 3 of the Federal Deposit Insurance Act, the deposits of which are insured 

by the Corporation. 

(5) FEDERAL SAVINGS ASSOCIATION.—The term ''Federal 

savings association'' means a Federal savings association or a 

Federal savings bank chartered under section 5 of this Act. 

1

 Section 6 was repealed by section 1201(a) of the Financial Regulatory Relief and Economic 

Efficiency Act of 2000 (114 Stat. 3032) without making a conforming amendment striking the 

item relating to such section in the table of contents. 

1101 
Sec. 3 HOME OWNERS' LOAN ACT 1102 

(6) NATIONAL BANK.—The term ''national bank'' has the 

same meaning as in section 3 of the Federal Deposit Insurance 

Act. 

(7) FEDERAL BANKING AGENCIES.—The term ''Federal banking agencies'' means the office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, 

and the Federal Deposit Insurance Corporation. 

(8) STATE.—The term ''State'' has the same meaning as in 

section 3 of the Federal Deposit Insurance Act. 

(9) AFFILIATE.—Th e term ''affiliate'' means any person that 

controls, is controlled by, or is under common control with, a 

savings association, except as provided in section 10. 

SEC. 3. [12 U.S.C. 1462a] DIRECTOR OF TH E OFFIC E OF THRIF T SUPERVISION. 

(a) ESTABLISHMENT OF OFFICE.—There is established the Office 

of Thrift Supervision, which shall be an office in the Department 

of the Treasury. 

(b) ESTABLISHMENT OF POSITION OF DIRECTOR.— 

(1) IN GENERAL.—There is established the position of the 

Director of the Office of Thrift Supervision, who shall be the 

head of the office of Thrift Supervision and shall be subject to 

the general oversight of the Secretary of the Treasury. 

(2) AUTHORITY TO PRESCRIBE REGULATIONS.—The Director 

may prescribe such regulations and issue such orders as the 

Director may determine to be necessary for carrying out this 

Act and all other laws within the Director's jurisdiction. 

(3) AUTONOMY OF DIRECTOR.—The Secretary of the Treasury may not intervene in any matter or proceeding before the 

Director (including agency enforcement actions) unless otherwise specifically provided by law. 

(4) BANKING AGENCY RULEMAKING.—The Secretary of the 

Treasury may not delay or prevent the issuance of any rule or 

the promulgation of any regulation by the Director. 

(c) APPOINTMENT; TERM. — 

(1) APPOINTMENT.—Th e Director shall be appointed by the 

president, by and with the advice and consent of the Senate, 

from among individuals who are citizens of the United States. 

(2) TERM.—The Director shall be appointed for a term of 

5 years. 

(3) VACANCY.—A vacancy in the position of Director which 

occurs before the expiration of the term for which a Director 

was appointed shall be filled in the manner established in 

paragraph (1) and the Director appointed to fill such vacancy 

shall be appointed only for the remainder of such term. 

(4) SERVICE AFTER END OF TERM.—A n individual may serve 

as Director after the expiration of the term for which appointed 

until a successor Director has been appointed. 

(5) TRANSITIONAL PROVISION.—Notwithstanding paragraphs (1) and (2), the Chairman of the Federal Home Loan 

Bank Board on the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, shall be 

the Director until the date on which that individual's term as 

Chairman of the Federal Home Loan Bank Board would have 

expired. 
1103 HOME OWNERS' LOAN ACT Sec. 3 

(d) PROHIBITION ON FINANCIAL INTERESTS.—The Director shall 

not have a direct or indirect financial interest in any insured 

depository institution, as defined in section 3 of the Federal Deposit Insurance Act. 

(e) POWERS OF THE DIRECTOR.—The Director shall have all 

powers which— 

(1) were vested in the Federal Home Loan Bank Board (in 

the Board's capacity as such) or the Chairman of such Board 

on the day before the date of the enactment of the Financial 

institutions Reform, Recovery, and Enforcement Act of 1989; 

and 

(2) were not— 

(A) transferred to the Federal Deposit Insurance Corporation, the Federal Housing Finance Board, the Resolution Trust Corporation, or the Federal Home Loan Mortgage Corporation pursuant to any amendment made by 

such Act; or 

(B) established under any provision of law repealed by 

such Act. 

(f) STATE HOMESTEAD PROVISIONS.—No provision of this Act or 

any other provision of law administered by the Director shall be 

construed as superseding any homestead provision of any State 

constitution, including any implementing State statute, in effect on 

the date of enactment of the Riegle-Neal Interstate Banking and 

Branching Efficiency Act of 1994, or any subsequent amendment to 

such a State constitutional or statutory provision in effect on such 

date, that exempts the homestead of any person from foreclosure, 

or forced sale, for the payment of all debts, other than a purchase 

money obligation relating to the homestead, taxes due on the 

homestead, or an obligation arising from work and material used 

in constructing improvements on the homestead. 

(g) ANNUA L REPORT REQUIRED.—Th e Director shall make an 

annual report to the Congress. Such report shall include— 

(1) a description of any changes the Director has made or 

is considering making in the district offices of the Office, including a description of the geographic allocation of the office's 

resources and personnel used to carry out examination and 

supervision functions; and 

(2) a description of actions taken to carry out section 308 

of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

(h) STAFF.— 

(1) APPOINTMENT AND COMPENSATION.—The Director shall 

fix the compensation and number of, and appoint and direct, 

all employees of the Office of Thrift Supervision notwithstanding section 301(f)(1) of title 31, United States Code. Such 

compensation shall be paid without regard to the provisions of 

other laws applicable to officers or employees of the united 

States. 

(2) RATES OF BASIC PAY.—Rates of basic pay for employees 

of the Office may be set and adjusted by the Director without 

regard to the provisions of chapter 51 or subchapter ii i of 

chapter 53 of title 5, United States Code. 
Sec. 3 HOME OWNERS' LOAN ACT 1104 

(3) ADDITIONAL COMPENSATION AND BENEFITS.—The Director may provide additional compensation and benefits to employees of the office if the same type of compensation or benefits are then being provided by any Federal banking agency or, 

if not then being provided, could be provided by such an agency 

under applicable provisions of law, rule, or regulation. in setting and adjusting the total amount of compensation and benefits for employees of the Office, the Director shall consult, and 

seek to maintain comparability with, the Federal banking 

agencies. 

(4) DELEGATION AUTHORITY.— 

(A) IN GENERAL.—The Director may— 

(i) designate who shall act as Director in the 

Director's absence; and 

(ii) delegate to any employee, representative, or 

agent any power of the Director. 

(B) LIMITATIONS.—Notwithstanding subparagraph 

(A)(ii), the Director shall not, directly or indirectly— 

(i) after October 10, 1989, delegate to any Federal 

home loan bank or to any officer, director, or employee 

of a Federal home loan bank, any power involving 

examining, supervising, taking enforcement action 

with respect to, or otherwise regulating any savings 

association, savings and loan holding company, or 

other person subject to regulation by the Director; or 

(ii) delegate the Director's authority to serve as a 

member of the Corporation's Board of Directors. 

(i) FUNDIN G THROUGH ASSESSMENTS.—The compensation of the 

Director and other employees of the Office and all other expenses 

thereof may be paid from assessments levied under this Act. 

(j) GAO AUDIT.—The Director shall make available to the 

Comptroller General of the United States all books and records 

necessary to audit all of the activities of the Office of Thrift Supervision. 

SEC. 4. [12 U.S.C. 1463] SUPERVISION OF SAVINGS ASSOCIATIONS. 

(a) FEDERAL SAVINGS ASSOCIATIONS.— 

(1) IN GENERAL.—The Director shall provide for the examination, safe and sound operation, and regulation of savings 

associations. 

(2) REGULATIONS.—The Director may issue such regulations as the Director determines to be appropriate to carry out 

the responsibilities of the Director or the Office. 

(3) SAFE AND SOUND HOUSING CREDIT TO BE ENCOURAGED.—The Director shall exercise all powers granted to the 

Director under this Act so as to encourage savings associations 

to provide credit for housing safely and soundly. 

(b) ACCOUNTING AND DISCLOSURE.— 

(1) IN GENERAL.—The Director shall, by regulation, prescribe uniform accounting and disclosure standards for savings 

associations, to be used in determining savings associations' 

compliance with all applicable regulations. 
1105 HOME OWNERS' LOAN ACT Sec. 3 

(2) SPECIFIC REQUIREMENTS FOR ACCOUNTING STANDARDS.—Subject to section 5(t), the uniform accounting standards prescribed under paragraph (1) shall— 

(A) incorporate generally accepted accounting principles to the same degree that such principles are used to 

determine compliance with regulations prescribed by the 

Federal banking agencies; 

(B) allow for no deviation from full compliance with 

such standards as are in effect after December 31, 1993; 

and 

(C) prior to January 1, 1994, require full compliance 

by savings associations with accounting standards in effect 

at any time before such date not later than provided under 

the schedule in section 563.23-3 of title 12, Code of Federal Regulations (as in effect on May 1, 1989). 

(3) AUTHORITY TO PRESCRIBE MORE STRINGENT ACCOUNTING 

STANDARDS.—The Director may at any time prescribe accounting standards more stringent than required under paragraph 

(2) if the Director determines that the more stringent standards are necessary to ensure the safe and sound operation of 

savings associations. 

(c) STRINGENCY OF STANDARDS.—All regulations and policies of 

the Director governing the safe and sound operation of savings 

associations, including regulations and policies governing asset 

classification and appraisals, shall be no less stringent than those 

established by the Comptroller of the Currency for national banks. 

(d) INVESTMENT OF CERTAIN FUNDS I N ACCOUNTS OF SAVINGS 

ASSOCIATIONS.—The savings accounts and share accounts of savings associations insured by the Corporation shall be lawful investments and may be accepted as security for all public funds of the 

United States, fiduciary and trust funds under the authority or 

control of the United States or any officer thereof, and for the 

funds of all corporations organized under the laws of the United 

States (subject to any regulatory authority otherwise applicable), 

regardless of any limitation of law upon the investment of any such 

funds or upon the acceptance of security for the investment or deposit of any of such funds. 

(e) PARTICIPATION BY SAVINGS ASSOCIATIONS I N LOTTERIES AND 

RELATED ACTIVITIES.— 

(1) PARTICIPATION PROHIBITED.—No savings association 

may— 

(A) deal in lottery tickets; 

(B) deal in bets used as a means or substitute for participation in a lottery; 

(C) announce, advertise, or publicize the existence of 

any lottery; or 

(D) announce, advertise, or publicize the existence or 

identity of any participant or winner, as such, in a lottery. 

(2) USE OF FACILITIES PROHIBITED.—No savings association 

may permit— 

(A) the use of any part of any of its own offices by any 

person for any purpose forbidden to the institution under 

paragraph (1); or 
Sec. 4 HOME OWNERS' LOAN ACT 1106 

(B) direct access by the public from any of its own offices to any premises used by any person for any purpose 

forbidden to the institution under paragraph (1). 

(3) DEFINITIONS.—Fo r purposes of this subsection— 

(A) DEA L IN.—The term ''deal in'' includes making, 

taking, buying, selling, redeeming, or collecting. 

(B) LOTTERY.—The term "lottery" includes any 

arrangement under which— 

(i) 3 or more persons (hereafter in this subparagraph referred to as the ''participants'') advance money 

or credit to another in exchange for the possibility or 

expectation that 1 or more but not all of the participants (hereafter in this paragraph referred to as the 

''winners'') will receive by reason of those participants' 

advances more than the amounts those participants 

have advanced; and 

(ii) the identity of the winners is determined by 

any means which includes— 

(i) a random selection; 

(ii) a game, race, or contest; or 

(iii) any record or tabulation of the result of 

1 or more events in which any participant has no 

interest except for the bearing that event has on 

the possibility that the participant may become a 

winner. 

(C) LOTTERY TICKET.—The term ''lottery ticket'' includes any right, privilege, or possibility (and any ticket, 

receipt, record, or other evidence of any such right, privilege, or possibility) of becoming a winner in a lottery. 

(4) EXCEPTION FOR STATE LOTTERIES.—Paragraphs (1) an d 

(2) shall not apply with respect to any savings association accepting funds from, or performing any lawful services for, any 

State operating a lottery, or any officer or employee of such a 

State who is charged with administering the lottery. 

(5) REGULATIONS.—The Director shall prescribe such regulations as may be necessary to provide for enforcement of this 

subsection and to prevent any evasion of any provision of this 

subsection. 

(f) FEDERALLY RELATED MORTGAGE LOA N DISCLOSURES.—A 

savings association may not make a federally related mortgage 

loan to an agent, trustee, nominee, or other person acting in a fiduciary capacity without requiring that the identity of the person receiving the beneficial interest of such loan shall at all times be revealed to the savings association. At the request of the Director, 

the savings association shall report to the Director the identity of 

such person and the nature and amount of the loan. 

(g) PREEMPTION OF STATE USURY LAWS.—(1) Notwithstanding 

any State law, a savings association may charge interest on any 

extension of credit at a rate of not more than 1 percent in excess 

of the discount rate on 90-day commercial paper in effect at the 

Federal Reserve bank in the Federal Reserve district in which such 

savings association is located or at the rate allowed by the laws of 

the State in which such savings association is located, whichever 

is greater. 
1107 HOME OWNERS' LOAN ACT Sec. 3 

(2) If the rate prescribed in paragraph (1) exceeds the rate 

such savings association would be permitted to charge in the absence of this subsection, the receiving or charging a greater rate of 

interest than that prescribed by paragraph (1), when knowingly 

done, shall be deemed a forfeiture of the entire interest which the 

extension of credit carries with it, or which has been agreed to be 

paid thereon. If such greater rate of interest has been paid, the 

person who paid it may recover, in a civil action commenced in a 

court of appropriate jurisdiction not later than 2 years after the 

date of such payment, an amount equal to twice the amount of the 

interest paid from the savings association taking or receiving such 

interest. 

(h) FOR M AND MATURITY OF SECURITIES.—No savings association shall— 

(1) issue securities which guarantee a definite maturity except with the specific approval of the Director, or 

(2) issue any securities the form of which has not been approved by the Director. 

SEC. 5. [12 U.S.C. 1464] FEDERA L SAVINGS ASSOCIATIONS. 

(a) I N GENERAL.—I n order to provide thrift institutions for the 

deposit of funds and for the extension of credit for homes and other 

goods and services, the Director is authorized, under such regulations as the Director may prescribe— 

(1) to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as 

Federal savings associations (including Federal savings banks), 

and 

(2) to issue charters therefor, 

giving primary consideration of the best practices of thrift institutions in the United States. The lending and investment powers conferred by this section are intended to encourage such institutions 

to provide credit for housing safely and soundly. 

(b) DEPOSITS AND RELATED POWERS.— 

(1) DEPOSIT ACCOUNTS.— 

(A) Subject to the terms of its charter and regulations 

of the Director, a Federal savings association may— 

(i) raise funds through such deposit, share, or 

other accounts, including demand deposit accounts 

(hereafter in this section referred to as ''accounts''); 

and 

(ii) issue passbooks, certificates, or other evidence 

of accounts. 

(B) A Federal savings association may not— 

(i) pay interest on a demand account; or 

(ii) permit any overdraft (including an intraday 

overdraft) on behalf of an affiliate, or incur any such 

overdraft in such savings association's account at a 

Federal reserve bank or Federal home loan bank on 

behalf of an affiliate. 

All savings accounts and demand accounts shall have the 

same priority upon liquidation. Holders of accounts and 

obligors of a Federal savings association shall, to such extent as may be provided by its charter or by regulations 
Sec. 3 HOME OWNERS' LOAN ACT 1108 

of the Director, be members of the savings association, and 

shall have such voting rights and such other rights as are 

thereby provided. 

(C) A Federal savings association may require not less 

than 14 days notice prior to payment of savings accounts 

if the charter of the savings association or the regulations 

of the Director so provide. 

(D) If a Federal savings association does not pay all 

withdrawals in full (subject to the right of the association, 

where applicable, to require notice), the payment of withdrawals from accounts shall be subject to such rules and 

procedures as may be prescribed by the savings association's charter or by regulation of the Director. Except as 

authorized in writing by the Director, any Federal savings 

association that fails to make full payment of any withdrawal when due shall be deemed to be in an unsafe or 

unsound condition. 

(E) Accounts may be subject to check or to withdrawal 

or transfer on negotiable or transferable or other order or 

authorization to the Federal savings association, as the Director may by regulation provide. 

(F) A Federal savings association may establish remote service units for the purpose of crediting savings or 

demand accounts, debiting such accounts, crediting payments on loans, and the disposition of related financial 

transactions, as provided in regulations prescribed by the 

Director. 

(2) OTHER LIABILITIES.—To such extent as the Director 

may authorize in writing, a Federal savings association may 

borrow, may give security, may be surety as defined by the Director and may issue such notes, bonds, debentures, or other 

obligations, or other securities, including capital stock. 

(3) LOANS FROM STATE HOUSING FINANCE AGENCIES.— 

(A) IN GENERAL.—Subject to regulation by the Director 

but without regard to any other provision of this subsection, any Federal savings association that is in compliance with the capital standards in effect under subsection 

(t) may borrow funds from a State mortgage finance 

agency of the State in which the head office of such savings association is situated to the same extent as State law 

authorizes a savings association organized under the laws 

of such State to borrow from the State mortgage finance 

agency. 

(B) INTEREST RATE.—A Federal savings association 

may not make any loan of funds borrowed under subparagraph (A) at an interest rate which exceeds by more than 

1

3

/4 percent per annum the interest rate paid to the State 

mortgage finance agency on the obligations issued to obtain the funds so borrowed. 

(4) MUTUA L CAPITAL CERTIFICATES.—In accordance with 

regulations issued by the Director, mutual capital certificates 

may be issued and sold directly to subscribers or through 

underwriters. Such certificates may be included in calculating 

capital for the purpose of subsection (t) to the extent permitted 
1109 HOME OWNERS' LOAN ACT Sec. 3 

by the Director. The issuance of certificates under this paragraph does not constitute a change of control or ownership 

under this Act or any other law unless there is in fact a change 

in control or reorganization. Regulations relating to the 

issuance and sale of mutual capital certificates shall provide 

that such certificates— 

(A) are subordinate to all savings accounts, savings 

certificates, and debt obligations; 

(B) constitute a claim in liquidation on the general reserves, surplus, and undivided profits of the Federal savings association remaining after the payment in full of all 

savings accounts, savings certificates, and debt obligations; 

(C) are entitled to the payment of dividends; and 

(D) may have a fixed or variable dividend rate. 

(c) LOANS AND INVESTMENTS.—T o 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) LOANS OR INVESTMENTS WITHOUT PERCENTAGE OF ASSETS LIMITATION.—Without limitation as a percentage of assets, the following are permitted: 

(A) ACCOUNT LOANS.—Loans on the security of its savings accounts and loans specifically related to transaction 

accounts. 

( B ) RESIDENTIAL REAL PROPERTY LOANS.—Loans on th e 

security of liens upon residential real property. 

( C ) UNITE D STATES GOVERNMENT SECURITIES.—Investments in obligations of, or fully guaranteed as to principal 

and interest by, the United States. 

( D ) FEDERAL HOM E LOAN BANK AND FEDERAL NATIONAL 

MORTGAGE ASSOCIATION SECURITIES.—Investment s i n th e 

stock or bonds of a Federal home loan bank or in the stock 

of the Federal National Mortgage Association. 

( E) FEDERAL HOM E LOAN MORTGAGE CORPORATION INSTRUMENTS.—Investments in mortgages, obligations, or 

other securities which are or have been sold by the Federal 

Home Loan Mortgage Corporation pursuant to section 305 

or 306 of the Federal Home Loan Mortgage Corporation 

Act. 

( F ) OTHER GOVERNMENT SECURITIES.—Investment s i n 

obligations, participations, securities, or other instruments 

issued by, or fully guaranteed as to principal and interest 

by, the Federal National Mortgage Association, the Student Loan Marketing Association, the Government National Mortgage Association, or any agency of the United 

States. A savings association may issue and sell securities 

which are guaranteed pursuant to section 306(g) of the National Housing Act. 

(G) DEPOSITS.—Investments in accounts of any insured depository institution, as defined in section 3 of the 

Federal Deposit Insurance Act. 

(H) STATE SECURITIES.—Investments in obligations 

issued by any State or political subdivision thereof (including any agency, corporation, or instrumentality of a State 

or political subdivision). A Federal savings association may 
Sec. 4 HOME OWNERS' LOAN ACT 1110 

not invest more than 10 percent of its capital in obligations of any one issuer, exclusive of investments in general 

obligations of any issuer. 

(I) PURCHASE OF INSURED LOANS.—Purchase of loans 

secured by liens on improved real estate which are insured 

or guaranteed under the National Housing Act, the Servicemen's Readjustment Act of 1944, or chapter 37 of title 

38, United States Code. 

(J) HOM E IMPROVEMENT AND MANUFACTURED HOM E 

LOANS.—Loans made to repair, equip, alter, or improve 

any residential real property, and loans made for manufactured home financing. 

( K ) INSURED LOANS TO FINANCE TH E PURCHASE OF FEE 

SIMPLE.—Loans insured under section 240 of the National 

Housing Act. 

( L ) LOANS TO FINANCIAL INSTITUTIONS, BROKERS, AND 

DEALERS.—Loans to— 

(i) financial institutions with respect to which the 

United States or an agency or instrumentality thereof 

has any function of examination or supervision, or 

(ii) any broker or dealer registered with the Securities and Exchange Commission, 

which are secured by loans, obligations, or investments in 

which the Federal savings association has the statutory 

authority to invest directly. 

(M) LIQUIDITY INVESTMENTS.—Investments (other than 

equity investments), identified by the Director, for liquidity purposes, including cash, funds on deposit at a Federal 

reserve bank or a Federal home loan bank, or bankers' 

acceptances. 

( N ) INVESTMEN T I N TH E NATIONAL HOUSING PARTNERSHIP CORPORATION, PARTNERSHIPS, AND JOINT VENTURES.— 

investments in shares of stock issued by a corporation 

authorized to be created pursuant to title IX of the Housing and Urban Development Act of 1968, and investments 

in any partnership, limited partnership, or joint venture 

formed pursuant to section 907(a) or 907(c) of such Act. 

( O ) CERTAI N HU D INSURED OR GUARANTEED INVESTMENTS.—Loans that are secured by mortgages— 

(i) insured under title X of the National Housing 

Act, or 

(ii) guaranteed under title IV of the Housing and 

Urban Development Act of 1968, under part B of the 

National Urban Policy and New Community Development Act of 1970, or under section 802 of the Housing 

and Community Development Act of 1974. 

( P) STATE HOUSING CORPORATION INVESTMENTS.—Obligations of and loans to any State housing corporation, if— 

(i) such obligations or loans are secured directly, 

or indirectly through an agent or fiduciary, by a first 

lien on improved real estate which is insured under 

the provisions of the National Housing Act, and 

(ii) in the event of default, the holder of the obligations or loans has the right directly, or indirectly 
1111 HOME OWNERS' LOAN ACT Sec. 10 

through an agent or fiduciary, to cause to be subject 

to the satisfaction of such obligations or loans the real 

estate described in the first lien or the insurance proceeds under the National Housing Act. 

(Q) INVESTMENT COMPANIES.—A Federal savings association may invest in, redeem, or hold shares or certificates 

issued by any open-end management investment company 

which— 

(i) is registered with the Securities and Exchange 

Commission under the Investment Company Act of 

1940, and 

(ii) the portfolio of which is restricted by such 

management company's investment policy (changeable 

only if authorized by shareholder vote) solely to investments that a Federal savings association by law or 

regulation may, without limitation as to percentage of 

assets, invest in, sell, redeem, hold, or otherwise deal 

in. 

(R) MORTGAGE-BACKED SECURITIES.—Investment s i n 

securities that— 

(i) are offered and sold pursuant to section 4(5) of 

the Securities Act of 1933; or 

(ii) are mortgage related securities (as defined in 

section 3(a)(41) of the Securities Exchange Act of 

1934), 

subject to such regulations as the Director may prescribe, 

including regulations prescribing minimum size of the 

issue (at the time of initial distribution) or minimum 

aggregate sales price, or both. 

(S) SMALL BUSINESS RELATED SECURITIES.—Investments in small business related securities (as defined in 

section 3(a)(53) of the Securities Exchange Act of 1934), 

subject to such regulations as the Director may prescribe, 

including regulations concerning the minimum size of the 

issue (at the time of the initial distribution), the minimum 

aggregate sales price, or both. 

(T) CREDIT CARD LOANS.—Loans made through credit 

cards or credit card accounts. 

(U) EDUCATIONAL LOANS.—Loans made for the payment of educational expenses. 

(2) LOANS OR INVESTMENTS LIMITED TO A PERCENTAGE OF 

ASSETS OR CAPITAL.—The following loans or investments are 

permitted, but only to the extent specified: 

(A) COMMERCIAL AND OTHER LOANS.—Secured or unsecured loans for commercial, corporate, business, or agricultural purposes. The aggregate amount of loans made under 

this subparagraph may not exceed 20 percent of the total 

assets of the Federal savings association, and amounts in 

excess of 10 percent of such total assets may be used 

under this subparagraph only for small business loans, as 

that term is defined by the Director. 

( B) NONRESIDENTIAL REAL PROPERTY LOANS.— 

(i) IN GENERAL.—Loans on the security of liens 

upon nonresidential real property. Except as provided 
Sec. 10 HOME OWNERS' LOAN ACT 1112 

in clause (ii), the aggregate amount of such loans shall 

not exceed 400 percent of the Federal savings association's capital, as determined under subsection (t). 

(ii) EXCEPTION.—The Director may permit a savings association to exceed the limitation set forth in 

clause (i) if the Director determines that the increased 

authority— 

(i) poses no significant risk to the safe and 

sound operation of the association, and 

(ii) is consistent with prudent operating practices. 

(iii) MONITORING.—I f the Director permits any increased authority pursuant to clause (ii), the Director 

shall closely monitor the Federal savings association's 

condition and lending activities to ensure that the savings association carries out all authority under this 

paragraph in a safe and sound manner and complies 

with this subparagraph and all relevant laws and 

regulations. 

(C) INVESTMENTS I N PERSONAL PROPERTY.—Investments in tangible personal property, including vehicles, 

manufactured homes, machinery, equipment, or furniture, 

for rental or sale. investments under this subparagraph 

may not exceed 10 percent of the assets of the Federal savings association. 

( D ) CONSUMER LOANS AND CERTAIN SECURITIES.—A 

Federal savings association may make loans for personal, 

family, or household purposes, including loans reasonably 

incident to providing such credit, and may invest in, sell, 

or hold commercial paper and corporate debt securities, as 

defined and approved by the Director. Loans and other 

investments under this subparagraph may not exceed 35 

percent of the assets of the Federal savings association, except that amounts in excess of 30 percent of the assets 

may be invested only in loans which are made by the association directly to the original obligor and with respect to 

which the association does not pay any finder, referral, or 

other fee, directly or indirectly, to any third party. 

(3) LOANS OR INVESTMENTS LIMITED TO 5 PERCENT OF ASSETS.—The following loans or investments are permitted, but 

not to exceed 5 percent of assets of a Federal savings association for each subparagraph: 

( A) COMMUNITY DEVELOPMENT INVESTMENTS.—Investments in real property and obligations secured by liens on 

real property located within a geographic area or neighborhood receiving concentrated development assistance by a 

local government under title I of the Housing and Community Development Act of 1974. No investment under this 

subparagraph in such real property may exceed an aggregate of 2 percent of the assets of the Federal savings association. 

(B) NONCONFORMING LOANS.—Loans upon the security 

of or respecting real property or interests therein used for 
1113 HOME OWNERS' LOAN ACT Sec. 5 

primarily residential or farm purposes that do not comply 

with the limitations of this subsection. 

(C) CONSTRUCTION LOANS WITHOUT SECURITY.— 

Loans— 

(i) the principal purpose of which is to provide financing with respect to what is or is expected to become primarily residential real estate; and 

(ii) with respect to which the association— 

(i) relies substantially on the borrower's general credit standing and projected future income 

for repayment, without other security; or 

(ii) relies on other assurances for repayment, 

including a guarantee or similar obligation of a 

third party. 

The aggregate amount of such investments shall not exceed the greater of the Federal savings association's capital or 5 percent of its assets. 

(4) OTHER LOANS AND INVESTMENTS.—The following additional loans and other investments to the extent authorized 

below: 

( A) BUSINESS DEVELOPMENT CREDIT CORPORATIONS.—A 

Federal savings association that is in compliance with the 

capital standards prescribed under subsection (t) may invest in, lend to, or to

 1 commit itself to lend to, any business development credit corporation incorporated in the 

State in which the home office of the association is located 

in the same manner and to the same extent as savings 

associations chartered by such State are authorized. The 

aggregate amount of such investments, loans, and commitments of any such Federal savings association shall not exceed one-half of 1 percent of the association's total outstanding loans or $250,000, whichever is less. 

( B) SERVICE CORPORATIONS.—Investments i n th e capital stock, obligations, or other securities of any corporation organized under the laws of the State in which the 

Federal savings association's home office is located, if such 

corporation's entire capital stock is available for purchase 

only by savings associations of such State and by Federal 

associations having their home offices in such State. No 

Federal savings association may make any investment 

under this subparagraph if the association's aggregate outstanding investment under this subparagraph would exceed 3 percent of the association's assets. Not less than 

one-half of the investment permitted under this subparagraph which exceeds 1 percent of the association's assets 

shall be used primarily for community, inner-city, and 

community development purposes. 

( C) FOREIGN ASSISTANCE INVESTMENTS.—Investment s 

in housing project loans having the benefit of any guaranty 

under section 221 of the Foreign Assistance Act of 1961 or 

loans having the benefit of any guarantee under section 

224 of such Act, or any commitment or agreement with re1

 So in original. 
Sec. 10 HOME OWNERS' LOAN ACT 1114 

spect to such loans made pursuant to either of such sections and in the share capital and capital reserve of the 

Inter-American Savings and Loan Bank. This authority extends to the acquisition, holding, and disposition of loans 

guaranteed under section 221 or 222 of such Act. Investments under this subparagraph shall not exceed 1 percent 

of the Federal savings association's assets. 

( D ) SMALL BUSINESS INVESTMENT COMPANIES.—A Federal savings association may invest in stock, obligations, or 

other securities of any small business investment company 

formed pursuant to section 301(d) of the Small Business 

Investment Act of 1958 for the purpose of aiding members 

of a Federal home loan bank. A Federal savings association may not make any investment under this subparagraph if its aggregate outstanding investment under this 

subparagraph would exceed 1 percent of the assets of such 

savings association. 

(E) BANKERS' BANKS.—A Federal savings association 

may purchase for its own account shares of stock of a 

bankers' bank, described in Paragraph Seventh of section 

5136 of the Revised Statutes or in section 5169(b) of the 

Revised Statutes, on the same terms and conditions as a 

national bank may purchase such shares. 

( F) NE W MARKETS VENTURE CAPITAL COMPANIES.—A 

Federal savings association may invest in stock, obligations, or other securities of any New Markets venture 

Capital company as defined in section 351 of the Small 

Business Investment Act of 1958, except that a Federal 

savings association may not make any investment under 

this subparagraph if its aggregate outstanding investment 

under this subparagraph would exceed 5 percent of the 

capital and surplus of such savings association. 

(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 that 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. 

(B) EXTENSION.—Th e Director may extend the 2-year 

period described in subparagraph (A) for not more than 1 

year at a time and not more than 2 years in the aggregate, 

if the Director determines that the extension is consistent 

with the purposes of this Act. 

(6) DEFINITIONS.—A s used in this subsection— 

(A) RESIDENTIAL PROPERTY.—The terms ''residential 

real property'' or ''residential real estate'' mean leaseholds, 

homes (including condominiums and cooperatives, except 

that in connection with loans on individual cooperative 

units, such loans shall be adequately secured as defined by 

the Director) and, combinations of homes or dwelling units 

and business property, involving only minor or incidental 
1115 HOME OWNERS' LOAN ACT Sec. 10 

business use, or property to be improved by construction of 

such structures. 

(B) LOANS.—The term ''loans'' includes obligations and 

extensions or advances of credit; and any reference to a 

loan or investment includes an interest in such a loan or 

investment. 

(d) REGULATORY AUTHORITY.— 

(1) I N GENERAL.— 

(A) ENFORCEMENT.—The Director shall have power to 

enforce this section, section 8 of the Federal Deposit Insurance Act, and regulations prescribed hereunder. In enforcing any provision of this section, regulations prescribed 

under this section, or any other law or regulation, or in 

any other action, suit, or proceeding to which the Director 

is a party or in which the Director is interested, and in the 

administration of conservatorships and receiverships, the 

Director may act in the Director's own name and through 

the Director's own attorneys. Except as otherwise provided, the Director shall be subject to suit (other than 

suits on claims for money damages) by any Federal savings association or director or officer thereof with respect 

to any matter under this section or any other applicable 

law, or regulation thereunder, in the united states district 

court for the judicial district in which the savings association's home office is located, or in the United States District Court for the District of Columbia, and the Director 

may be served with process in the manner prescribed by 

the Federal Rules of Civil Procedure. 

(B) ANCILLARY PROVISIONS.—(i) In making examinations of savings associations, examiners appointed by the 

Director shall have power to make such examinations of 

the affairs of all affiliates of such savings associations as 

shall be necessary to disclose fully the relations between 

such savings associations and their affiliates and the effect 

of such relations upon such savings associations. For purposes of this subsection, the term ''affiliate'' has the same 

meaning as in section 2(b) of the Banking Act of 1933, except that the term ''member bank'' in section 2(b) shall be 

deemed to refer to a savings association. 

(ii) in the course of any examination of any savings 

association, upon request by the Director, prompt and complete access shall be given to all savings association officers, directors, employees, and agents, and to all relevant 

books, records, or documents of any type. 

(iii) upon request made in the course of supervision or 

oversight of any savings association, for the purpose of acting on any application or determining the condition of any 

savings association, including whether operations are 

being conducted safely, soundly, or in compliance with 

charters, laws, regulations, directives, written agreements, 

or conditions imposed in writing in connection with the 

granting of an application or other request, the Director 

shall be given prompt and complete access to all savings 
Sec. 10 HOME OWNERS' LOAN ACT 1116 

association officers, directors, employees, and agents, and 

to all relevant books, records, or documents of any type. 

(iv) if prompt and complete access upon request is not 

given as required in this subsection, the Director may 

apply to the United States district court for the judicial 

district (or the United States court in any territory) in 

which the principal office of the institution is located, or in 

which the person denying such access resides or carries on 

business, for an order requiring that such information be 

promptly provided. 

(v) in connection with examinations of savings associations and affiliates thereof, the Director may— 

(i) administer oaths and affirmations and examine 

and to take and preserve testimony under oath as to 

any matter in respect of the affairs or ownership of 

any such savings association or affiliate, and 

(ii) issue subpenas and, for the enforcement 

thereof, apply to the United States district court for 

the judicial district (or the United States court in any 

territory) in which the principal office of the savings 

association or affiliate is located, or in which the witness resides or carries on business. 

Such courts shall have jurisdiction and power to order and 

require compliance with any such subpena. 

(vi) In any proceeding under this section, the Director 

may administer oaths and affirmations, take depositions, 

and issue subpenas. The Director may prescribe regulations with respect to any such proceedings. The attendance 

of witnesses and the production of documents provided for 

in this subsection may be required from any place in any 

State or in any territory at any designated place where 

such proceeding is being conducted. 

(vii) Any party to a proceeding under this section 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 enforcement of 

any subpena issued pursuant to this subsection or section 

10(c) of the Federal Deposit Insurance Act, 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. 

All expenses of the Director in connection with this section 

shall be considered as nonadministrative expenses. Any 

court having jurisdiction of any proceeding instituted 

under this section by a savings association, or a director 

or officer thereof, may allow to any such party reasonable 

expenses and attorneys' fees. Such expenses and fees shall 

be paid by the savings association. 

(2) CONSERVATORSHIPS AND RECEIVERSHIPS.— 

(A) GROUNDS FOR APPOINTING CONSERVATOR OR RECEIVER FOR INSURED SAVINGS ASSOCIATION.—The Director 
1117 HOME OWNERS' LOAN ACT Sec. 10 

of the Office of Thrift Supervision may appoint a conservator or receiver for any insured savings association if the 

Director determines, in the Director's discretion, that 1 or 

more of the grounds specified in section 11(c)(5) of the Federal Deposit Insurance Act exists. 

(B) POWER OF APPOINTMENT; JUDICIAL REVIEW.—Th e 

Director shall have exclusive power and jurisdiction to appoint a conservator or receiver for a Federal savings association. if, in the opinion of the Director, a ground for the 

appointment of a conservator or receiver for a savings 

association exists, the Director is authorized to appoint ex 

parte and without notice a conservator or receiver for the 

savings association. in the event of such appointment, the 

association may, within 30 days thereafter, bring an action 

in the United States district court for the judicial district 

in which the home office of such association is located, or 

in the United States District Court for the District of Columbia, for an order requiring the Director to remove such 

conservator or receiver, and the court shall upon the merits dismiss such action or direct the Director to remove 

such conservator or receiver. upon the commencement of 

such an action, the court having jurisdiction of any other 

action or proceeding authorized under this subsection to 

which the association is a party shall stay such action or 

proceeding during the pendency of the action for removal 

of the conservator or receiver. 

(C) REPLACEMENT.—The Director may, without any 

prior notice, hearing, or other action, replace a conservator 

with another conservator or with a receiver, but such 

replacement shall not affect any right which the association may have to obtain judicial review of the original 

appointment, except that any removal under this subparagraph shall be removal of the conservator or receiver in office at the time of such removal. 

(D) COURT ACTION.—Except as otherwise provided in 

this subsection, no court may take any action for or toward 

the removal of any conservator or receiver or, except at the 

request of the Director, to restrain or affect the exercise of 

powers or functions of a conservator or receiver. 

( E) POWERS.— 

(i) I N GENERAL.—A conservator shall have all the 

powers of the members, the stockholders, the directors, and the officers of the association and shall be 

authorized to operate the association in its own name 

or to conserve its assets in the manner and to the extent authorized by the Director. 

(ii) FDIC OR RTC AS CONSERVATOR OR RECEIVER.— 

Except as provided in section 21A of the Federal Home 

Loan Bank Act, the Director, at the Director's discretion, may appoint the Federal Deposit insurance 

Corporation or the Resolution Trust Corporation, as 

appropriate, as conservator for a savings association. 

The Director shall appoint only the Federal Deposit 

Insurance Corporation or the Resolution Trust Cor-
Sec. 10 HOME OWNERS' LOAN ACT 1118 

poration, as appropriate, as receiver for a savings 

association for the purpose of liquidation or winding 

up the affairs of such savings association. The conservator or receiver so appointed shall, as such, have 

power to buy at its own sale. The Federal Deposit 

Insurance Corporation, as such conservator or receiver, shall have all the powers of a conservator or receiver, as appropriate, granted under the Federal Deposit Insurance Act, and (when not inconsistent therewith) any other rights, powers, and privileges possessed by conservators or receivers, as appropriate, of 

savings associations under this Act and any other provisions of law. 

( F) DISCLOSURE REQUIREMENT FOR THOSE ACTING ON 

BEHALF OF CONSERVATOR.—A conservator shall require 

that any independent contractor, consultant, or counsel 

employed by the conservator in connection with the conservatorship of a savings association pursuant to this section shall fully disclose to all parties with which such contractor, consultant, or counsel is negotiating, any limitation on the authority of such contractor, consultant, or 

counsel to make legally binding representations on behalf 

of the conservator. 

(3) REGULATIONS.— 

(A) IN GENERAL.—The Director may prescribe regulations for the reorganization, consolidation, liquidation, and 

dissolution of savings associations, for the merger of insured savings associations with insured savings associations, for savings associations in conservatorship and 

receivership, and for the conduct of conservatorships and 

receiverships. The Director may, by regulation or otherwise, provide for the exercise of functions by members, 

stockholders, directors, or officers of a savings association 

during conservatorship and receivership. 

(B) FDIC OR RTC AS CONSERVATOR OR RECEIVER.—In 

any case where the Federal Deposit Insurance Corporation 

or the Resolution Trust Corporation is the conservator or 

receiver, any regulations prescribed by the Director shall 

be consistent with any regulations prescribed by the Federal Deposit Insurance Corporation pursuant to the Federal Deposit Insurance Act. 

(4) REFUSAL TO COMPLY WIT H DEMAND.—Wheneve r a 

conservator or receiver appointed by the Director demands possession of the property, business, and assets of any savings 

association, or of any part thereof, the refusal by any director, 

officer, employee, or agent of such association to comply with 

the demand shall be punishable by a fine of not more than 

$5,000 or imprisonment for not more than one year, or both. 

(5) DEFINITIONS.—A s used in this subsection, the term 

''savings association'' includes any savings association or 

former savings association that retains deposits insured by the 

Corporation, notwithstanding termination of its status as an 

institution insured by the Corporation. 
1119 HOME OWNERS' LOAN ACT Sec. 10 

(6) COMPLIANCE WIT H MONETARY TRANSACTION RECORDKEEPING AND REPORT REQUIREMENTS.— 

(A) COMPLIANCE PROCEDURES REQUIRED.—The Director shall prescribe regulations requiring savings associations to establish and maintain procedures reasonably designed to assure and monitor the compliance of such associations with the requirements of subchapter II of chapter 

53 of title 31, United States Code. 

( B) EXAMINATIONS OF SAVINGS ASSOCIATIONS TO INCLUDE REVIEW OF COMPLIANCE PROCEDURES.— 

(i) IN GENERAL.—Each examination of a savings 

association by the Director shall include a review of 

the procedures required to be established and maintained under subparagraph (A). 

(ii) EXA M REPORT REQUIREMENT.—The report of 

examination shall describe any problem with the procedures maintained by the association. 

(C) ORDER TO COMPLY WIT H REQUIREMENTS.—If th e Director determines that a savings association— 

(i) has failed to establish and maintain the procedures described in subparagraph (A); or 

(ii) has failed to correct any problem with the procedures maintained by such association which was 

previously reported to the association by the Director, 

the Director shall issue an order under section 8 of the 

Federal Deposit Insurance Act requiring such association 

to cease and desist from its violation of this paragraph or 

regulations prescribed under this paragraph. 

(7) REGULATION AND EXAMINATION OF SAVINGS ASSOCIATION 

SERVICE COMPANIES, SUBSIDIARIES, AND SERVICE PROVIDERS.— 

( A) GENERAL EXAMINATION AND REGULATORY 

AUTHORITY.—A service company or subsidiary that is 

owned in whole or in part by a savings association shall 

be subject to examination and regulation by the Director 

to the same extent as that savings association. 

( B) EXAMINATION BY OTHER BANKING AGENCIES.—The 

Director may authorize any other Federal banking agency 

that supervises any other owner of part of the service company or subsidiary to perform an examination described in 

subparagraph (A). 

(C) APPLICABILITY OF SECTION 8 OF THE FEDERAL DEPOSIT INSURANCE ACT.—A service company or subsidiary 

that is owned in whole or in part by a saving association 

shall be subject to the provisions of section 8 of the Federal Deposit Insurance Act as if the service company or 

subsidiary were an insured depository institution. in any 

such case, the Director shall be deemed to be the appropriate Federal banking agency, pursuant to section 3(q) of 

the Federal Deposit Insurance Act. 

( D ) SERVICE PERFORMED BY CONTRACT OR OTHERWISE.—Notwithstanding subparagraph (A), if a savings 

association, a subsidiary thereof, or any savings and loan 

affiliate or entity, as identified by section 8(b)(9) of the 

Federal Deposit Insurance Act, that is regularly examined 
Sec. 10 HOME OWNERS' LOAN ACT 1120 

or subject to examination by the Director, causes to be performed for itself, by contract or otherwise, any service 

authorized under this Act or, in the case of a State savings 

association, any applicable State law, whether on or off its 

premises— 

(i) such performance shall be subject to regulation 

and examination by the Director to the same extent as 

if such services were being performed by the savings 

association on its own premises; and 

(ii) the savings association shall notify the 

Director of the existence of the service relationship not 

later than 30 days after the earlier of— 

(i) the date on which the contract is entered 

into; or 

(ii) the date on which the performance of the 

service is initiated. 

(E) ADMINISTRATION BY THE DIRECTOR.—The Director 

may issue such regulations and orders, including those 

issued pursuant to section 8 of the Federal Deposit Insurance Act, as may be necessary to enable the Director to 

administer and carry out this paragraph and to prevent 

evasion of this paragraph. 

(8) DEFINITIONS.—For purposes of this section— 

(A) the term "service company'' means— 

(i) any corporation— 

(i) that is organized to perform services 

authorized by this Act or, in the case of a corporation owned in part by a State savings association, 

authorized by applicable State law; and 

(ii) all of the capital stock of which is owned 

by 1 or more insured savings associations; and 

(ii) any limited liability company— 

(i) that is organized to perform services 

authorized by this Act or, in the case of a company, 1 of the members of which is a State savings association, authorized by applicable State 

law; and 

(ii) all of the members of which are 1 or more 

insured savings associations; 

(B) the term "limited liability company'' means any 

company, partnership, trust, or similar business entity 

organized under the law of a State (as defined in section 

3 of the Federal Deposit Insurance Act) that provides that 

a member or manager of such company is not personally 

liable for a debt, obligation, or liability of the company 

solely by reason of being, or acting as, a member or manager of such company; and 

(C) the terms "State savings association'' and "subsidiary'' have the same meanings as in section 3 of the 

Federal Deposit Insurance Act. 

(e) CHARACTER AND RESPONSIBILITY.—A charter may be 

granted only— 

(1) to persons of good character and responsibility, 
1121 HOME OWNERS' LOAN ACT Sec. 10 

(2) if in the judgment of the Director a necessity exists for 

such an institution in the community to be served, 

(3) if there is a reasonable probability of its usefulness and 

success, and 

(4) if the association can be established without undue injury to properly conducted existing local thrift and home financing institutions. 

(f) FEDERAL HOM E LOAN BANK MEMBERSHIP.—Afte r th e en d of 

the 6-month period beginning on the date of the enactment of the 

Federal Home Loan Bank System Modernization Act of 1999, a 

Federal savings association may become a member of the Federal 

Home Loan Bank System, and shall qualify for such membership 

in the manner provided by the Federal Home Loan Bank Act. 

(g) PREFERRED SHARES.—[Repealed.] 

(h) DISCRIMINATORY STATE AND LOCAL TAXATION PROHIBITED.—No State, county, municipal, or local taxing authority may 

impose any tax on Federal savings associations or their franchise, 

capital, reserves, surplus, loans, or income greater than that imposed by such authority on other similar local mutual or cooperative thrift and home financing institutions. 

(i) CONVERSIONS.— 

(1) IN GENERAL.—Any savings association which is, or is 

eligible to become, a member of a Federal home loan bank may 

convert into a Federal savings association (and in so doing may 

change directly from the mutual form to the stock form, or 

from the stock form to the mutual form). Such conversion shall 

be subject to such regulations as the Director shall prescribe. 

Thereafter such Federal savings association shall be entitled to 

all the benefits of this section and shall be subject to examination and regulation to the same extent as other associations 

incorporated pursuant to this Act. 

(2) AUTHORITY OF DIRECTOR.—(A) No savings association 

may convert from the mutual to the stock form, or from the 

stock form to the mutual form, except in accordance with the 

regulations of the Director. 

(B) Any aggrieved person may obtain review of a final action of the Director which approves or disapproves a plan of 

conversion pursuant to this subsection only by complying with 

the provisions of section 10(j) of this Act within the time limit 

and in the manner therein prescribed, which provisions shall 

apply in all respects as if such final action were an order the 

review of which is therein provided for, except that such time 

limit shall commence upon publication of notice of such final 

action in the Federal Register or upon the giving of such general notice of such final action as is required by or approved 

under regulations of the Director, whichever is later. 

(C) Any Federal savings association may change its designation from a Federal savings association to a Federal savings bank, or the reverse. 

(3) CONVERSION TO STATE ASSOCIATION.—(A) Any Federal 

savings association may convert itself into a savings association or savings bank organized pursuant to the laws of the 

State in which the principal office of such Federal savings 

association is located if— 
Sec. 10 HOME OWNERS' LOAN ACT 1122 

(i) the state permits the conversion of any savings 

association or savings bank of such State into a Federal 

savings association; 

(ii) such conversion of a Federal savings association 

into such a state savings association is determined— 

(i) upon the vote in favor of such conversion cast 

in person or by proxy at a special meeting of members 

or stockholders called to consider such action, specified 

by the law of the state in which the home office of the 

Federal savings association is located, as required by 

such law for a State-chartered institution to convert 

itself into a Federal savings association, but in no 

event upon a vote of less than 51 percent of all the 

votes cast at such meeting, and 

(ii) upon compliance with other requirements 

reciprocally equivalent to the requirements of such 

State law for the conversion of a State-chartered institution into a Federal savings association; 

(iii) notice of the meeting to vote on conversion shall 

be given as herein provided and no other notice thereof 

shall be necessary; the notice shall expressly state that 

such meeting is called to vote thereon, as well as the time 

and place thereof; and such notice shall be mailed, postage 

prepaid, at least 30 and not more than 60 days prior to the 

date of the meeting, to the Director and to each member 

or stockholder of record of the Federal savings association 

at the member's or stockholder's last address as shown on 

the books of the Federal savings association; 

(iv) when a mutual savings association is dissolved 

after conversion, the members or shareholders of the savings association will share on a mutual basis in the assets 

of the association in exact proportion to their relative 

share or account credits; 

(v) when a stock savings association is dissolved after 

conversion, the stockholders will share on an equitable 

basis in the assets of the association; and 

(vi) such conversion shall be effective upon the date 

that all the provisions of this Act shall have been fully 

complied with and upon the issuance of a new charter by 

the State wherein the savings association is located. 

(B)(i) The act of conversion constitutes consent by the 

institution to be bound by all the requirements that the Director may impose under this Act. 

(ii) The savings association shall upon conversion and 

thereafter be authorized to issue securities in any form currently approved at the time of issue by the Director for 

issuance by similar savings associations in such State. 

(iii) If the insurance of accounts is terminated in connection with such conversion, the notice and other action shall be 

taken as provided by law and regulations for the termination 

of insurance of accounts. 

(4) SAVINGS BANK ACTIVITIES.—(A) To the extent authorized by the Director, but subject to section 18(m)(3) of the Federal Deposit Insurance Act— 
1123 HOME OWNERS' LOAN ACT Sec. 10 

(i) any Federal savings bank chartered as such prior 

to October 15, 1982, may continue to make any investment 

or engage in any activity not otherwise authorized under 

this section, to the degree it was permitted to do so as a 

Federal savings bank prior to October 15, 1982; and 

(ii) any Federal savings bank in existence on the date 

of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and formerly organized as a mutual savings bank under State law may continue to make any investment or engage in any activity 

not otherwise authorized under this section, to the degree 

it was authorized to do so as a mutual savings bank under 

State law. 

(B) The authority conferred by this paragraph may be utilized by any Federal savings association that acquires, by 

merger or consolidation, a Federal savings bank enjoying 

grandfather rights hereunder. 

(5) CONVERSION TO NATIONAL OR STATE BANK.— 

(A) IN GENERAL.—Any Federal savings association 

chartered and in operation before the date of the enactment of the Gramm-Leach-Bliley Act, with branches in 

operation before such date of enactment in 1 or more 

States, may convert, at its option, with the approval of the 

Comptroller of the Currency or the appropriate State bank 

supervisor, into 1 or more national or State banks, each of 

which may encompass 1 or more of the branches of the 

Federal savings association in operation before such date 

of enactment in 1 or more States, but only if each resulting 

national or State bank will meet all financial, management, and capital requirements applicable to the resulting 

national or State bank. 

(B) DEFINITIONS.—For purposes of this paragraph, the 

terms ''State bank'' and ''State bank supervisor'' have the 

meanings given those terms in section 3 of the Federal Deposit Insurance Act. 

(j) SUBSCRIPTION FOR SHARES.—[Repealed.] 

(k) DEPOSITORY OF PUBLIC MONEY.—When designated for that 

purpose by the Secretary of the Treasury, a savings association the 

deposits of which are insured by the Corporation shall be a depository of public money and may be employed as fiscal agent of the 

Government under such regulations as may be prescribed by the 

Secretary and shall perform all such reasonable duties as fiscal 

agent of the Government as may be required of it. A savings association the deposits of which are insured by the Corporation may 

act as agent for any other instrumentality of the United States 

when designated for that purpose by such instrumentality, including services in connection with the collection of taxes and other 

obligations owed the United States, and the Secretary of the Treasury may deposit public money in any such savings association, and 

shall prescribe such regulations as may be necessary to carry out 

the purposes of this subsection. 

(l) RETIREMENT ACCOUNTS.—A Federal savings association is 

authorized to act as trustee of any trust created or organized in the 

United States and forming part of a stock bonus, pension, or profit-
Sec. 10 HOME OWNERS' LOAN ACT 1124 

sharing plan which qualifies or qualified for specific tax treatment 

under section 401(d) of the Internal Revenue Code of 1986 and to 

act as trustee or custodian of an individual retirement account 

within the meaning of section 408 of such Code if the funds of such 

trust or account are invested only in savings accounts or deposits 

in such Federal savings association or in obligations or securities 

issued by such Federal savings association. All funds held in such 

fiduciary capacity by any Federal savings association may be commingled for appropriate purposes of investment, but individual 

records shall be kept by the fiduciary for each participant and shall 

show in proper detail all transactions engaged in under this paragraph. 

( m ) BRANCHING.— 

(1) I N GENERAL.— 

(A) No savings association incorporated under the 

laws of the District of Columbia or organized in the District or doing business in the District shall establish any 

branch or move its principal office or any branch without 

the Director's prior written approval. 

(B) No savings association shall establish any branch 

in the District of Columbia or move its principal office or 

any branch in the District without the Director's prior 

written approval. 

(2) DEFINITION.—Fo r purposes of this subsection the term 

"branch'' means any office, place of business, or facility, other 

than the principal office as defined by the Director, of a savings association at which accounts are opened or payments are 

received or withdrawals are made, or any other office, place of 

business, or facility of a savings association defined by the Director as a branch within the meaning of such sentence. 

(n) TRUSTS.— 

(1) PERMITS.—The Director may grant by special permit to 

a Federal savings association applying therefor the right to act 

as trustee, executor, administrator, guardian, or in any other 

fiduciary capacity in which State banks, trust companies, or 

other corporations which compete with Federal savings associations are permitted to act under the laws of the State in 

which the Federal savings association is located. Subject to the 

regulations of the Director, service corporations may invest in 

State or federally chartered corporations which are located in 

the State in which the home office of the Federal savings association is located and which are engaged in trust activities. 

(2) SEGREGATION OF ASSETS.—A Federal savings association exercising any or all of the powers enumerated in this section shall segregate all assets held in any fiduciary capacity 

from the general assets of the association and shall keep a separate set of books and records showing in proper detail all 

transactions engaged in under this subsection. The State banking authority involved may have access to reports of examination made by the Director insofar as such reports relate to the 

trust department of such association but nothing in this subsection shall be construed as authorizing such State banking 

authority to examine the books, records, and assets of such 

associations. 
1125 HOME OWNERS' LOAN ACT Sec. 10 

(3) PROHIBITIONS.—No Federal savings association shall 

receive in its trust department deposits of current funds subject to check or the deposit of checks, drafts, bills of exchange, 

or other items for collection or exchange purposes. Funds 

deposited or held in trust by the association awaiting investment shall be carried in a separate account and shall not be 

used by the association in the conduct of its business unless it 

shall first set aside in the trust department United States 

bonds or other securities approved by the Director. 

(4) SEPARATE LIEN.—I n the event of the failure of a Federal savings association, the owners of the funds held in trust 

for investment shall have a lien on the bonds or other securities so set apart in addition to their claim against the estate 

of the association. 

(5) DEPOSITS.—Whenever the laws of a State require corporations acting in a fiduciary capacity to deposit securities 

with the State authorities for the protection of private or court 

trusts, Federal savings associations so acting shall be required 

to make similar deposits. Securities so deposited shall be held 

for the protection of private or court trusts, as provided by the 

State law. Federal savings associations in such cases shall not 

be required to execute the bond usually required of individuals 

if State corporations under similar circumstances are exempt 

from this requirement. Federal savings associations shall have 

power to execute such bond when so required by the laws of 

the State involved. 

(6) OATHS AND AFFIDAVITS.—In any case in which the laws 

of a State require that a corporation acting as trustee, executor, administrator, or in any capacity specified in this section, 

shall take an oath or make an affidavit, the president, vice 

president, cashier, or trust officer of such association may take 

the necessary oath or execute the necessary affidavit. 

(7) CERTAIN LOANS PROHIBITED.—It shall be unlawful for 

any Federal savings association to lend any officer, director, or 

employee any funds held in trust under the powers conferred 

by this section. Any officer, director, or employee making such 

loan, or to whom such loan is made, may be fined not more 

than $50,000 or twice the amount of that person's gain from 

the loan, whichever is greater, or may be imprisoned not more 

than 5 years, or may be both fined and imprisoned, in the discretion of the court. 

(8) FACTORS TO BE CONSIDERED.—In reviewing applications 

for permission to exercise the powers enumerated in this section, the Director may consider— 

(A) the amount of capital of the applying Federal savings association, 

(B) whether or not such capital is sufficient under the 

circumstances of the case, 

(C) the needs of the community to be served, and 

(D) any other facts and circumstances that seem to it 

proper. 

The Director may grant or refuse the application accordingly, 

except that no permit shall be issued to any association having 

capital less than the capital required by State law of State 
Sec. 10 HOME OWNERS' LOAN ACT 1126 

banks, trust companies, and corporations exercising such powers. 

(9) SURRENDER OF CHARTER.—(A) Any Federal savings 

association may surrender its right to exercise the powers 

granted under this subsection, and have returned to it any 

securities which it may have deposited with the State authorities, by filing with the Director a certified copy of a resolution 

of its board of directors indicating its intention to surrender its 

right. 

(B) Upon receipt of such resolution, the Director, if satisfied that such Federal savings association has been relieved in 

accordance with state law of all duties as trustee, executor, 

administrator, guardian or other fiduciary, may in the Director's discretion, issue to such association a certificate that such 

association is no longer authorized to exercise the powers 

granted by this subsection. 

(C) Upon the issuance of such a certificate by the Director, 

such Federal savings association (i) shall no longer be subject 

to the provisions of this section or the regulations of the Director made pursuant thereto, (ii) shall be entitled to have returned to it any securities which it may have deposited with 

state authorities, and (iii) shall not exercise thereafter any of 

the powers granted by this section without first applying for 

and obtaining a new permit to exercise such powers pursuant 

to the provisions of this section. 

(D) The Director may prescribe regulations necessary to 

enforce compliance with the provisions of this subsection. 

(10) REVOCATION.—(A) In addition to the authority conferred by other law, if, in the opinion of the Director, a Federal 

savings association is unlawfully or unsoundly exercising, or 

has unlawfully or unsoundly exercised, or has failed for a period of 5 consecutive years to exercise, the powers granted by 

this subsection or otherwise fails or has failed to comply with 

the requirements of this subsection, the Director may issue 

and serve upon the association a notice of intent to revoke the 

authority of the association to exercise the powers granted by 

this subsection. The notice shall contain a statement of the 

facts constituting the alleged unlawful or unsound exercise of 

powers, or failure to exercise powers, or failure to comply, and 

shall fix a time and place at which a hearing will be held to 

determine whether an order revoking authority to exercise 

such powers should issue against the association. 

(B) such hearing shall be conducted in accordance with the 

provisions of subsection (d)(1)(B), and subject to judicial review 

as therein provided, and shall be fixed for a date not earlier 

than 30 days and not later than 60 days after service of such 

notice unless the Director sets an earlier or later date at the 

request of any Federal savings association so served. 

(C) Unless the Federal savings association so served shall 

appear at the hearing by a duly authorized representative, it 

shall be deemed to have consented to the issuance of the revocation order. In the event of such consent, or if upon the 

record made at any such hearing, the Director shall find that 

any allegation specified in the notice of charges has been estab-
1127 HOME OWNERS' LOAN ACT Sec. 10 

lished, the Director may issue and serve upon the association 

an order prohibiting it from accepting any new or additional 

trust accounts and revoking authority to exercise any and all 

powers granted by this subsection, except that such order shall 

permit the association to continue to service all previously 

accepted trust accounts pending their expeditious divestiture 

or termination. 

(D) A revocation order shall become effective not earlier 

than the expiration of 30 days after service of such order upon 

the association so served (except in the case of a revocation 

order issued upon consent, which shall become effective at the 

time specified therein), and shall remain effective and enforceable, except to such extent as it is stayed, modified, terminated, or set aside by action of the Director or a reviewing 

court. 

(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 that 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 a Bank Insurance Fund member 

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

insurance Fund member. 

(B) The Director shall notify the Corporation of any application 

under this Act for conversion to a Federal charter by an institution 

insured by the Corporation, shall consult with the Corporation before disposing of the application, and shall notify the Corporation 

of the Director's determination with respect to such application. 

(C) Notwithstanding any other provision of law, if the Corporation determines that conversion into a Federal stock savings bank 

or the chartering of a Federal stock savings bank is necessary to 

prevent the default of a savings bank it insures or to reopen a savings bank in default that it insured, or if the Corporation determines, with the concurrence of the Director, that severe financial 

conditions exist that threaten the stability of a savings bank insured by the Corporation and that such a conversion or charter is 

likely to improve the financial condition of such savings bank, the 

Corporation shall provide the Director with a certificate of such 

determination, the reasons therefor in conformance with the 

requirements of this Act, and the bank shall be converted or chartered by the Director, pursuant to the regulations thereof, from the 

time the Corporation issues the certificate. 

(D) A bank may be converted under subparagraph (C) only if 

the board of trustees of the bank— 

(i) has specified in writing that the bank is in danger of 

closing or is closed, or that severe financial conditions exist 

that threaten the stability of the bank and a conversion is 

likely to improve the financial condition of the bank; and 

(ii) has requested in writing that the Corporation use the 

authority of subparagraph (C). 
Sec. 10 HOME OWNERS' LOAN ACT 1128 

(E)(i) Before making a determination under subparagraph (D), 

the Corporation shall consult the State bank supervisor of the 

State in which the bank in danger of closing is chartered. The 

State bank supervisor shall be given a reasonable opportunity, and 

in no event less than 48 hours, to object to the use of the provisions 

of subparagraph (D). 

(ii) If the State supervisor objects during such period, the Corporation may use the authority of subparagraph (D) only by an 

affirmative vote of three-fourths of the Board of Directors. The 

Board of Directors shall provide the State supervisor, as soon as 

practicable, with a written certification of its determination. 

(3) A Federal savings bank chartered under this subsection 

shall have the same authority with respect to investments, operations, and activities, and shall be subject to the same restrictions, 

including those applicable to branching and discrimination, as 

would apply to it if it were chartered as a Federal savings bank 

under any other provision of this Act. 

(p) CONVERSIONS.—(1) Notwithstanding any other provision of 

law, and consistent with the purposes of this Act, the Director may 

authorize (or in the case of a Federal savings association, require) 

the conversion of any mutual savings association or Federal mutual 

savings bank that is insured by the Corporation into a Federal 

stock savings association or Federal stock savings bank, or charter 

a Federal stock savings association or Federal stock savings bank 

to acquire the assets of, or merge with such a mutual institution 

under the regulations of the Director. 

(2) Authorizations under this subsection may be made only— 

(A) if the Director has determined that severe financial 

conditions exist which threaten the stability of an association 

and that such authorization is likely to improve the financial 

condition of the association, 

(B) when the Corporation has contracted to provide assistance to such association under section 13 of the Federal Deposit Insurance Act, or 

(C) to assist an institution in receivership. 

(3) A Federal savings bank chartered under this subsection 

shall have the same authority with respect to investments, operations and activities, and shall be subject to the same restrictions, 

including those applicable to branching and discrimination, as 

would apply to it if it were chartered as a Federal savings bank 

under any other provision of this Act, and may engage in any 

investment, activity, or operation that the institution it acquired 

was engaged in if that institution was a Federal savings bank, or 

would have been authorized to engage in had that institution converted to a Federal charter. 

(q) TYING ARRANGEMENTS.—(1) A savings association may not 

in any manner extend credit, lease, or sell property of any kind, or 

furnish any service, or fix or vary the consideration for any of the 

foregoing, on the condition or requirement— 

(A) that the customer shall obtain additional credit, property, or service from such savings association, or from any 

service corporation or affiliate of such association, other than 

a loan, discount, deposit, or trust service; 
1129 HOME OWNERS' LOAN ACT Sec. 5 

(B) that the customer provide additional credit, property, 

or service to such association, or to any service corporation or 

affiliate of such association, other than those related to and 

usually provided in connection with a similar loan, discount, 

deposit, or trust service; and 

(C) that the customer shall not obtain some other credit, 

property, or service from a competitor of such association, or 

from a competitor of any service corporation or affiliate of such 

association, other than a condition or requirement that such 

association shall reasonably impose in connection with credit 

transactions to assure the soundness of credit. 

(2)(A) Any person may sue for and have injunctive relief, in 

any court of the United States having jurisdiction over the parties, 

against threatened loss or damage by reason of a violation of paragraph (1), under the same conditions and principles as injunctive 

relief against threatened conduct that will cause loss or damage is 

granted by courts of equity and under the rules governing such 

proceedings. 

(B) upon the execution of proper bond against damages for an 

injunction improvidently granted and a showing that the danger of 

irreparable loss or damage is immediate, a preliminary injunction 

may issue. 

(3) Any person injured by a violation of paragraph (1) may 

bring an action in any district court of the United States in which 

the defendant resides or is found or has an agent, without regard 

to the amount in controversy, or in any other court of competent 

jurisdiction, and shall be entitled to recover three times the 

amount of the damages sustained, and the cost of suit, including 

a reasonable attorney's fee. Any such action shall be brought 

within 4 years from the date of the occurrence of the violation. 

(4) Nothing contained in this subsection affects in any manner 

the right of the United States or any other party to bring an action 

under any other law of the United States or of any State, including 

any right which may exist in addition to specific statutory authority, challenging the legality of any act or practice which may be 

proscribed by this subsection. No regulation or order issued by the 

Director under this subsection shall in any manner constitute a defense to such action. 

(5) For purposes of this subsection, the term ''loan'' includes 

obligations and extensions or advances of credit. 

(6)1 EXCEPTIONS.—The Director may, by regulation or 

order, permit such exceptions to the prohibitions of this subsection as the Director considers will not be contrary to the 

purposes of this subsection and which conform to exceptions 

granted by the Board of Governors of the Federal Reserve System pursuant to section 106(b) of the Bank Holding Company 

Act Amendments of 1970. 

(r) OUT-OF-STATE BRANCHES.—(1) No Federal savings association may establish, retain, or operate a branch outside the State in 

which the Federal savings association has its home office, unless 

the association qualifies as a domestic building and loan association under section 7701(a)(19) of the Internal Revenue Code of 1986 

1

 indentation so in law. 
Sec. 10 HOME OWNERS' LOAN ACT 1130 

or meets the asset composition test imposed by subparagraph (C) 

of that section on institutions seeking so to qualify, or qualifies as 

a qualified thrift lender, as determined under section 10(m) of this 

Act. No out-of-State branch so established shall be retained or 

operated unless the total assets of the Federal savings association 

attributable to all branches of the Federal savings association in 

that State would qualify the branches as a whole, were they otherwise eligible, for treatment as a domestic building and loan association under section 7701(a)(19) or as a qualified thrift lender, as 

determined under section 10(m) of this Act, as applicable. 

(2) The limitations of paragraph (1) shall not apply if— 

(A) the branch results from a transaction authorized under 

section 13(k) of the Federal Deposit Insurance Act; 

(B) the branch was authorized for the Federal savings 

association prior to October 15, 1982; 

(C) the law of the State where the branch is located, or is 

to be located, would permit establishment of the branch if the 

association was a savings association or savings bank chartered by the state in which its home office is located; or 

(D) the branch was operated lawfully as a branch under 

state law prior to the association's conversion to a Federal 

charter. 

(3) The Director, for good cause shown, may allow Federal savings associations up to 2 years to comply with the requirements of 

this subsection. 

(s) MINIMU M CAPITAL REQUIREMENTS.— 

(1) IN GENERAL.—Consistent with the purposes of section 

908 of the international Lending supervision Act of 1983 and 

the capital requirements established pursuant to such section 

by the appropriate Federal banking agencies (as defined in section 903(1) of such Act), the Director shall require all savings 

associations to achieve and maintain adequate capital by— 

(A) establishing minimum levels of capital for savings 

associations; and 

(B) using such other methods as the Director determines to be appropriate. 

(2) MINIMU M CAPITAL LEVELS MAY BE DETERMINED BY DIRECTOR CASE-BY-CASE.—The Director may, consistent with subsection (t), establish the minimum level of capital for a savings 

association at such amount or at such ratio of capital-to-assets 

as the Director determines to be necessary or appropriate for 

such association in light of the particular circumstances of the 

association. 

(3) UNSAFE OR UNSOUND PRACTICE.—In the Director's discretion, the Director may treat the failure of any savings association to maintain capital at or above the minimum level required by the Director under this subsection or subsection (t) 

as an unsafe or unsound practice. 

(4) DIRECTIVE TO INCREASE CAPITAL.— 

(A) PLAN MAY BE REQUIRED.—In addition to any other 

action authorized by law, including paragraph (3), the Director may issue a directive requiring any savings association which fails to maintain capital at or above the minimum level required by the Director to submit and adhere 
1131 HOME OWNERS' LOAN ACT Sec. 10 

to a plan for increasing capital which is acceptable to the 

Director. 

(B) ENFORCEMENT OF PLAN.—An y directive issued and 

plan approved under subparagraph (A) shall be enforceable under section 8 of the Federal Deposit Insurance Act 

to the same extent and in the same manner as an outstanding order which was issued under section 8 of the 

Federal Deposit Insurance Act and has become final. 

(5) PLA N TAKEN INTO ACCOUNT I N OTHER PROCEEDINGS.— 

The Director may— 

(A) consider a savings association's progress in adhering to any plan required under paragraph (4) whenever 

such association or any affiliate of such association (including any company which controls such association) seeks 

the Director's approval for any proposal which would have 

the effect of diverting earnings, diminishing capital, or otherwise impeding such association's progress in meeting the 

minimum level of capital required by the Director; and 

(B) disapprove any proposal referred to in subparagraph (A) if the Director determines that the proposal 

would adversely affect the ability of the association to comply with such plan. 

(t) CAPITAL STANDARDS.— 

(1) I N GENERAL.— 

(A) REQUIREMENT FOR STANDARDS TO BE PRESCRIBED.—The Director shall, by regulation, prescribe and 

maintain uniformly applicable capital standards for savings associations. Those standards shall include— 

(i) a leverage limit; 

(ii) a tangible capital requirement; and 

(iii) a risk-based capital requirement. 

(B) COMPLIANCE.—A savings association is not in compliance with capital standards for purposes of this subsection unless it complies with all capital standards prescribed under this paragraph. 

(C) STRINGENCY.—The standards prescribed under this 

paragraph shall be no less stringent than the capital 

standards applicable to national banks. 

(D) DEADLINE FOR REGULATIONS.—The Director shall 

promulgate final regulations under this paragraph not 

later than 90 days after the date of enactment of the 

Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989, and those regulations shall become effective 

not later than 120 days after the date of enactment. 

(2) CONTENT OF STANDARDS.— 

(A) LEVERAGE LIMIT.—Th e leverage limit prescribed 

under paragraph (1) shall require a savings association to 

maintain core capital in an amount not less than 3 percent 

of the savings association's total assets. 

(B) TANGIBLE CAPITAL REQUIREMENT.—The tangible 

capital requirement prescribed under paragraph (1) shall 

require a savings association to maintain tangible capital 

in an amount not less than 1.5 percent of the savings association's total assets. 
Sec. 10 HOME OWNERS' LOAN ACT 1132 

(C) RISK-BASED CAPITAL REQUIREMENT.—Notwith -

standing paragraph (1)(C), the risk-based capital requirement prescribed under paragraph (1) may deviate from the 

risk-based capital standards applicable to national banks 

to reflect interest-rate risk or other risks, but such deviations shall not, in the aggregate, result in materially 

lower levels of capital being required of savings associations under the risk-based capital requirement than would 

be required under the risk-based capital standards applicable to national banks. 

(3) TRANSITION RULE.— 

( A) CERTAIN QUALIFYING SUPERVISORY GOODWILL INCLUDED I N CALCULATING CORE CAPITAL.—Notwithstandin g 

paragraph (9)(A), an eligible savings association may include qualifying supervisory goodwill in calculating core 

capital. The amount of qualifying supervisory goodwill that 

may be included may not exceed the applicable percentage 

of total assets set forth in the following table: 

For the following The applicable 

period: percentage is: 

Prior to January 1, 1992 1.500 percent 

January 1, 1992-December 31, 1992 1.000 percent 

January 1, 1993-December 31, 1993 0.750 percent 

January 1, 1994-December 31, 1994 0.375 percent 

Thereafter 0 percent 

(B) ELIGIBLE SAVINGS ASSOCIATIONS.—For purposes of 

subparagraph (A), a savings association is an eligible savings association so long as the Director determines that— 

(i) the savings association's management is competent; 

(ii) the savings association is in substantial compliance with all applicable statutes, regulations, orders, and supervisory agreements and directives; and 

(iii) the savings association's management has not 

engaged in insider dealing, speculative practices, or 

any other activities that have jeopardized the association's safety and soundness or contributed to impairing the association's capital. 

(4) SPECIAL RULES FOR PURCHASED MORTGAGE SERVICING 

RIGHTS.— 

(A) IN GENERAL.—Notwithstanding paragraphs (1)(C) 

and (9), the standards prescribed under paragraph (1) may 

permit a savings association to include in calculating capital for the purpose of the leverage limit and risk-based 

capital requirement prescribed under paragraph (1), on 

terms no less stringent than under both the capital standards applicable to State nonmember banks and (except as 

to the amount that may be included in calculating capital) 

the capital standards applicable to national banks, 90 percent of the fair market value of readily marketable purchased mortgage servicing rights. 

(B) TANGIBLE CAPITAL REQUIREMENT.—Notwith -

standing paragraphs (1)(C) and (9)(C), the standards prescribed under paragraph (1) may permit a savings associa-
1133 HOME OWNERS' LOAN ACT Sec. 10 

tion to include in calculating capital for the purpose of the 

tangible capital requirement prescribed under paragraph 

(1), on terms no less stringent than under both the capital 

standards applicable to State nonmember banks and (except as to the amount that may be included in calculating 

capital) the capital standards applicable to national banks, 

90 percent of the fair market value of readily marketable 

purchased mortgage servicing rights. 

(C) PERCENTAGE LIMITATION PRESCRIBED BY FDIC.— 

Notwithstanding paragraph (1)(C) and subparagraphs (A) 

and (B) of this paragraph— 

(i) for the purpose of subparagraph (A), the maximum amount of purchased mortgage servicing rights 

that may be included in calculating capital under the 

leverage limit and the risk-based capital requirement 

prescribed under paragraph (1) may not exceed the 

amount that could be included if the savings association were an insured State nonmember bank; and 

(ii) for the purpose of subparagraph (B), the Corporation shall prescribe a maximum percentage of the 

tangible capital requirement that savings associations 

may satisfy by including purchased mortgage servicing 

rights in calculating such capital. 

(D) QUARTERLY VALUATION.—The fair market value of 

purchased mortgage servicing rights shall be determined 

not less often than quarterly. 

(5) SEPARATE CAPITALIZATION REQUIRED FOR CERTAIN SUBSIDIARIES.— 

(A) I N GENERAL.—In determining compliance with capital standards prescribed under paragraph (1), all of a savings association's investments in and extensions of credit 

to any subsidiary engaged in activities not permissible for 

a national bank shall be deducted from the savings association's capital. 

(B) EXCEPTION FOR AGENCY ACTIVITIES.—Subpara -

graph (A) shall not apply with respect to a subsidiary engaged, solely as agent for its customers, in activities not 

permissible for a national bank unless the Corporation, in 

its sole discretion, determines that, in the interests of 

safety and soundness, this subparagraph should cease to 

apply to that subsidiary. 

(C) OTHER EXCEPTIONS.—Subparagraph (A) shall not 

apply with respect to any of the following: 

(i) MORTGAGE BANKING SUBSIDIARIES.—A savings 

association's investments in and extensions of credit to 

a subsidiary engaged solely in mortgage-banking 

activities. 

(ii) SUBSIDIARY INSURED DEPOSITORY INSTITUTIONS.—A savings association's investments in and 

extensions of credit to a subsidiary— 

(I) that is itself an insured depository institution or a company the sole investment of which is 

an insured depository institution, and 
Sec. 10 HOME OWNERS' LOAN ACT 1134 

(ii) that was acquired by the parent insured 

depository institution prior to May 1, 1989. 

(iii) CERTAIN FEDERAL SAVINGS BANKS.—Any Federal savings association existing 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 prior to 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 prior to October 15, 

1982, as a savings bank or a cooperative bank 

under State law. 

( D ) TRANSITION RULE.— 

(i) INCLUSION IN CAPITAL.—Notwithstanding subparagraph (A), if a savings association's subsidiary 

was, as of April 12, 1989, engaged in activities not permissible for a national bank, the savings association 

may include in calculating capital the applicable percentage (set forth in clause (ii)) of the lesser of— 

(i) the savings association's investments in 

and extensions of credit to the subsidiary on April 

12, 1989;or 

(ii) the savings association's investments in 

and extensions of credit to the subsidiary on the 

date as of which the savings association's capital 

is being determined. 

(ii) APPLICABLE PERCENTAGE.—For purposes of 

clause (i), the applicable percentage is as follows: 

For the following The applicable 

period: percentage is: 

Prior to July 1, 1990 100 percent 

July 1, 1990—June 30, 1991 90 percent 

July 1, 1991-October 31, 1992 75 percent 

November 1, 1992-June 30, 1993 60 percent 

July 1, 1993—June 30, 1994 40 percent 

Thereafter 0 percent 

(iii) AGENCY DISCRETION TO PRESCRIBE GREATER 

PERCENTAGE.—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 affected 

deposit insurance fund; and 

(iii) would not be likely to result in the association's being in an unsafe or unsound condition. 

(iv) SUBSTANTIAL COMPLIANCE WIT H APPROVED 

CAPITAL PLAN.—In the case of a savings association 

which is subject to a plan submitted under paragraph 
1135 HOME OWNERS' LOAN ACT Sec. 10 

(7)(D) of this subsection or an order issued under this 

subsection, a directive issued or plan approved under 

subsection (s), or a capital restoration plan approved 

or order issued under section 38 or 39 of the Federal 

Deposit Insurance Act, an order issued under clause 

(iii) with respect to the association shall be effective 

only so long as the association is in substantial compliance with such plan, directive, or order. 

(v) LIMITATIO N ON INVESTMENTS TAKEN INTO ACCOUNT.—In prescribing the amount by which an applicable percentage under clause (iii) may exceed the applicable percentage under clause (ii) with respect to a 

particular qualified savings association, the Director 

may take into account only the sum of— 

(i) the association's investments in, and 

extensions of credit to, the subsidiary that were 

made on or before April 12, 1989; and 

(ii) the association's investments in, and 

extensions of credit to, the subsidiary that were 

made after April 12, 1989, and were necessary to 

complete projects initiated before April 12, 1989. 

(vi) LIMIT.—The applicable percentage limit allowed by the Director in an order under clause (iii) 

shall not exceed the following limits: 

For the following period: The limit is: 

Prior to July 1, 1994 75 percent 

July 1, 1994 through June 30, 1995 60 percent 

July 1, 1995 through June 30, 1996 40 percent 

After June 30, 1996 0 percent 

(vii) CRITICALLY UNDERCAPITALIZED INSTITUTION.— 

in the case of a savings association that becomes critically undercapitalized (as defined in section 38 of the 

Federal Deposit Insurance Act) as determined under 

this subparagraph without applying clause (iii), 

clauses (iii) through (v) shall be applied by substituting ''Corporation'' for ''Director'' each place such 

term appears. 

(viii) QUALIFIED SAVINGS ASSOCIATION DEFINED.— 

For purposes of clause (iii), the term ''qualified savings 

association'' means an eligible savings association (as 

defined in paragraph (3)(B)) which is subject to this 

paragraph solely because of the real estate investments or other real estate activities of the association's subsidiary, and— 

(i) is adequately capitalized (as defined in section 38 of the Federal Deposit Insurance Act); or 

(ii) is in compliance with an approved capital 

restoration plan meeting the requirements of section 38 of the Federal Deposit Insurance Act, and 

is not critically undercapitalized (as defined in 

such section). 

(ix) FDIC' S DISCRETION TO PRESCRIBE LESSER PERCENTAGE.—The Corporation may prescribe by order, 
Sec. 10 HOME OWNERS' LOAN ACT 1136 

with respect to a particular savings association, an applicable percentage less than that provided in clause 

(ii) or prescribed under clause (iii) if the Corporation 

determines, in its sole discretion, that the use of a 

greater percentage would, under the circumstances, 

constitute an unsafe or unsound practice or be likely 

to result in the association's being in an unsafe or unsound condition. 

( E) CONSOLIDATION OF SUBSIDIARIES NOT SEPARATELY 

CAPITALIZED.—In determining compliance with capital 

standards prescribed under paragraph (1), the assets and 

liabilities of each of a savings association's subsidiaries 

(other than any subsidiary described in subparagraph 

(C)(ii)) shall be consolidated with the savings association's 

assets and liabilities, unless all of the savings association's 

investments in and extensions of credit to the subsidiary 

are deducted from the savings association's capital pursuant to subparagraph (A). 

(6) CONSEQUENCES OF FAILING TO COMPLY WIT H CAPITAL 

STANDARDS.— 

(A) PRIOR TO JANUARY 1, 1991.—Prior to January 1, 

1991, the Director— 

(i) may restrict the asset growth of any savings 

association not in compliance with capital standards; 

and 

(ii) shall, beginning 60 days following the promulgation of final regulations under this subsection, require any savings association not in compliance with 

capital standards to submit a plan under subsection 

(s)(4)(A) that— 

(i) addresses the savings association's need 

for increased capital; 

(II) describes the manner in which the savings association will increase its capital so as to 

achieve compliance with capital standards; 

(iii) specifies the types and levels of activities 

in which the savings association will engage; 

(iv) requires any increase in assets to be 

accompanied by an increase in tangible capital not 

less in percentage amount than the leverage limit 

then applicable; 

(v) requires any increase in assets to be 

accompanied by an increase in capital not less in 

percentage amount than required under the riskbased capital standard then applicable; and 

(VI) is acceptable to the Director. 

(B) O N OR AFTER JANUARY 1, 1991.—On or after January 1, 1991, the Director— 

(i) shall prohibit any asset growth by any savings 

association not in compliance with capital standards, 

except as provided in subparagraph (C); and 

(ii) shall require any savings association not in 

compliance with capital standards to comply with a 

capital directive issued by the Director (which may in-
1137 HOME OWNERS' LOAN ACT Sec. 10 

clude such restrictions, including restrictions on the 

payment of dividends and on compensation, as the Director determines to be appropriate). 

(C) LIMITE D GROWTH EXCEPTION.—The Director may 

permit any savings association that is subject to subparagraph (B) to increase its assets in an amount not exceeding 

the amount of net interest credited to the savings association's deposit liabilities if— 

(i) the savings association obtains the Director's 

prior approval; 

(ii) any increase in assets is accompanied by an 

increase in tangible capital in an amount not less than 

6 percent of the increase in assets (or, in the Director's 

discretion if the leverage limit then applicable is less 

than 6 percent, in an amount equal to the increase in 

assets multiplied by the percentage amount of the 

leverage limit); 

(iii) any increase in assets is accompanied by an 

increase in capital not less in percentage amount than 

required under the risk-based capital standard then 

applicable; 

(iv) any increase in assets is invested in low-risk 

assets, such as first mortgage loans secured by 1- to 

4-family residences and fully secured consumer loans; 

and 

(v) the savings association's ratio of core capital to 

total assets is not less than the ratio existing on January 1, 1991. 

( D ) ADDITIONAL RESTRICTIONS I N CASE OF EXCESSIVE 

RISKS OR RATES.—The Director may restrict the asset 

growth of any savings association that the Director determines is taking excessive risks or paying excessive rates 

for deposits. 

( E) FAILURE TO COMPLY WIT H PLAN, REGULATION, OR 

ORDER.—The Director shall treat as an unsafe and unsound practice any material failure by a savings association to comply with any plan, regulation, or order under 

this paragraph. 

( F ) EFFECT ON OTHER REGULATORY AUTHORITY.—Thi s 

paragraph does not limit any authority of the Director 

under other provisions of law. 

(7) EXEMPTION FROM CERTAIN SANCTIONS.— 

(A) APPLICATION FOR EXEMPTION.—An y savings association not in compliance with the capital standards prescribed under paragraph (1) may apply to the Director for 

an exemption from any applicable sanction or penalty for 

noncompliance which the Director may impose under this 

Act. 

(B) EFFECT OF GRANT OF EXEMPTION.—If the Director 

approves any savings association's application under subparagraph (A), the only sanction or penalty to be imposed 

by the Director under this Act for the savings association's 

failure to comply with the capital standards prescribed 

under paragraph (1) is the growth limitation contained in 
Sec. 10 HOME OWNERS' LOAN ACT 1138 

paragraph (6)(B) or paragraph (6)(C), whichever is applicable. 

(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 affected deposit insurance fund; 

(ii) the savings association's management is 

competent; 

(iii) the savings association is in substantial 

compliance with all applicable statutes, regulations, orders, and supervisory agreements and 

directives; and 

(iv) the savings association's management 

has not engaged in insider dealing, speculative 

practices, or any other activities that have jeopardized the association's safety and soundness or 

contributed to impairing the association's capital. 

(ii) DENIA L OR REVOCATION OF APPROVAL.—The Di -

rector shall deny any application submitted under 

clause (i) and revoke any prior approval granted with 

respect to any such application if the Director determines that the association's failure to meet any capital 

standards prescribed under paragraph (1) is accompanied by— 

(i) a pattern of consistent losses; 

(ii) substantial dissipation of assets; 

(iii) evidence of imprudent management or 

business behavior; 

(iv) a material violation of any Federal law, 

any law of any State to which such association is 

subject, or any applicable regulation; or 

(v) any other unsafe or unsound condition or 

activity, other than the failure to meet such capital standards. 

(D) SUBMISSION OF PLAN REQUIRED.—Any application 

submitted under subparagraph (A) shall be accompanied 

by a plan which— 

(i) meets the requirements of paragraph (6)(A)(ii); 

and 

(ii) is acceptable to the Director. 

(E) FAILURE TO COMPLY WIT H PLAN.—Th e Director 

shall treat as an unsafe and unsound practice any material failure by any savings association which has been 

granted an exemption under this paragraph to comply 

with the provisions of any plan submitted by such association under subparagraph (D). 

( F) EXEMPTION NOT AVAILABLE WIT H RESPECT TO UNSAFE OR UNSOUND PRACTICES.—This paragraph does not 

limit any authority of the Director under any other provision of law, including section 8 of the Federal Deposit 

Insurance Act, to take any appropriate action with respect 

to any unsafe or unsound practice or condition of any sav-
1139 HOME OWNERS' LOAN ACT Sec. 10 

ings association, other than the failure of such savings 

association to comply with the capital standards prescribed 

under paragraph (1). 

(8) TEMPORARY AUTHORITY TO MAKE EXCEPTIONS FOR ELIGIBLE SAVINGS ASSOCIATIONS.— 

(A) IN GENERAL.—Notwithstanding paragraph (1)(C), 

the Director may, by order, make exceptions to the capital 

standards prescribed under paragraph (1) for eligible savings associations. No exception under this paragraph shall 

be effective after January 1, 1991. 

(B) STANDARDS FOR APPROVAL OR DISAPPROVAL.—In 

determining whether to grant an exception under subparagraph (A), the Director shall apply the same standards as 

apply to determinations under paragraph (7)(C). 

(9) DEFINITIONS.—For purposes of this subsection— 

(A) CORE CAPITAL.—Unless the Director prescribes a 

more stringent definition, the term "core capital'' means 

core capital as defined by the Comptroller of the Currency 

for national banks, less any unidentifiable intangible assets, plus any purchased mortgage servicing rights excluded from the Comptroller's definition of capital but included in calculating the core capital of savings associations pursuant to paragraph (4). 

(B) QUALIFYING SUPERVISORY GOODWILL.—The term 

"qualifying supervisory goodwill'' means supervisory goodwill existing on April 12, 1989, amortized on a straightline 

basis over the shorter of— 

(i) 20 years, or 

(ii) the remaining period for amortization in effect 

on April 12, 1989. 

(C) TANGIBLE CAPITAL.—The term "tangible capital'' 

means core capital minus any intangible assets (as intangible assets are defined by the Comptroller of the Currency 

for national banks). 

(D) TOTAL ASSETS.—The term "total assets'' means 

total assets (as total assets are defined by the Comptroller 

of the Currency for national banks) adjusted in the same 

manner as total assets would be adjusted in determining 

compliance with the leverage limit applicable to national 

banks if the savings association were a national bank. 

(10) USE OF COMPTROLLER'S DEFINITIONS.— 

(A) IN GENERAL.—The standards prescribed under 

paragraph (1) shall include all relevant substantive definitions established by the Comptroller of the Currency for 

national banks. 

(B) SPECIAL RULE.—If the Comptroller of the Currency 

has not made effective regulations defining core capital or 

establishing a risk-based capital standard, the Director 

shall use the definition and standard contained in the 

Comptroller's most recently published final regulations. 

(u) LIMITS ON LOANS TO ON E BORROWER.— 

(1) IN GENERAL.—Section 5200 of the Revised Statutes 

shall apply to savings associations in the same manner and to 

the same extent as it applies to national banks. 
Sec. 10 HOME OWNERS' LOAN ACT 1140 

( 2 ) SPECIA L RULES. — 

(A) Notwithstanding paragraph (1), a savings association may make loans to one borrower under one of the following clauses: 

(i)1 for any purpose, not to exceed $500,000; or 

(ii)

 1 to develop domestic residential housing units, 

not to exceed the lesser of $30,000,000 or 30 percent 

of the savings association's unimpaired capital and 

unimpaired surplus, if— 

(i) the purchase price of each single family 

dwelling unit the development of which is financed under this clause does not exceed 

$500,000; 

(ii) the savings association is and continues to 

be in compliance with the fully phased-in capital 

standards prescribed under subsection (t); 

(III) the Director, by order, permits the savings association to avail itself of the higher limit 

provided by this clause; 

(iv) loans made under this clause to all borrowers do not, in aggregate, exceed 150 percent of 

the savings association's unimpaired capital and 

unimpaired surplus; and 

(v) such loans comply with all applicable 

loan-to-value requirements. 

(B) A savings association's loans to one borrower to finance the sale of real property acquired in satisfaction of 

debts previously contracted in good faith shall not exceed 

50 percent of the savings association's unimpaired capital 

and unimpaired surplus. 

( 3 ) AUTHORIT Y T O IMPOSE MOR E STRINGEN T RESTRIC -

TIONS.—The Director may impose more stringent restrictions 

on a savings association's loans to one borrower if the Director 

determines that such restrictions are necessary to protect the 

safety and soundness of the savings association. 

( v ) REPORT S OF CONDITION. — 

(1) IN GENERAL.—Each association shall make reports of 

conditions to the Director which shall be in a form prescribed 

by the Director and shall contain— 

(A) information sufficient to allow the identification of 

potential interest rate and credit risk; 

(B) a description of any assistance being received by 

the association, including the type and monetary value of 

such assistance; 

(C) the identity of all subsidiaries and affiliates of the 

association; 

(D) the identity, value, type, and sector of investment 

of all equity investments of the associations and subsidiaries; and 

(E) other information that the Director may prescribe. 

( 2 ) PUBLI C DISCLOSURE. — 

1

 So in original. In clauses (i) and (ii) the first letter of the first word probably should be capitalized. Also in clause (i) probably should strike ''; or'' and insert a period. 
1141 HOME OWNERS' LOAN ACT Sec. 10 

(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, the Savings Association Insurance Fund; or 

(ii) that public disclosure would not otherwise be 

in the public interest. 

(B) Any determination made by the Director under 

subparagraph (A) not to permit the public disclosure of 

information shall be made in writing, and if the Director 

restricts any item of information for savings institutions 

generally, the Director shall disclose the reason in detail 

in the Federal Register. 

(C) The Director's determinations under subparagraph 

(A) shall not be subject to judicial review. 

(3) ACCESS BY CERTAIN PARTIES.— 

(A) Notwithstanding paragraph (2), the persons described in subparagraph (B) shall not be denied access to 

any information contained in a report of condition, subject 

to reasonable requirements of confidentiality. Those 

requirements shall not prevent such information from 

being transmitted to the Comptroller General of the 

United States for analysis. 

(B) The following persons are described in this subparagraph for purposes of subparagraph (A): 

(i) the Chairman and ranking minority member of 

the Committee on Banking, Housing, and Urban Affairs of the senate and their designees; and 

(ii) the Chairman and ranking minority member 

of the Committee on Banking, Finance and Urban Affairs of the House of Representatives and their designees. 

(4) FIRST TIER PENALTIES.—Any savings association 

which— 

(A) maintains procedures reasonably adapted to avoid 

any inadvertent and unintentional error and, as a result 

of such an error— 

(i) fails to submit or publish any report or information required by the Director under paragraph (1) 

or (2), within the period of time specified by the Director; or 

(ii) submits or publishes any false or misleading 

report or information; or 

(B) inadvertently transmits or publishes any report 

which is minimally late, 

shall be subject to a penalty of not more than $2,000 for each 

day during which such failure continues or such false or misleading information is not corrected. The savings association 

shall have the burden of proving by a preponderence of the evidence that an error was inadvertent and unintentional and 

that a report was inadvertently transmitted or published late. 
Sec. 10 HOME OWNERS' LOAN ACT 1142 

(5) SECOND TIER PENALTIES.—Any savings association 

which— 

(A) fails to submit or publish any report or information 

required by the Director under paragraph (1) or (2), within 

the period of time specified by the Director; or 

(B) submits or publishes any false or misleading report or information, 

in a manner not described in paragraph (4) shall be subject to 

a penalty of not more than $20,000 for each day during which 

such failure continues or such false or misleading information 

is not corrected. 

(6) THIR D TIER PENALTIES.—If any savings association 

knowingly or with reckless disregard for the accuracy of any 

information or report described in paragraph (5) submits or 

publishes any false or misleading report or information, the Director may assess a penalty of not more than $1,000,000 or 1 

percent of total assets, whichever is less, per day for each day 

during which such failure continues or such false or misleading 

information is not corrected. 

(7) ASSESSMENT.—Any penalty imposed under paragraph 

(4), (5), or (6) shall be assessed and collected by the Director 

in the manner provided in subparagraphs (E), (F), (G), and (i) 

of section 8(i)(2) of the Federal Deposit Insurance Act (for penalties imposed under such section), and any such assessment 

(including the determination of the amount of the penalty) 

shall be subject to the provisions of such subsection. 

(8) HEARING.—Any savings association against which any 

penalty is assessed under this subsection shall be afforded a 

hearing if such savings association submits a request for such 

hearing within 20 days after the issuance of the notice of 

assessment. Section 8(h) of the Federal Deposit Insurance Act 

shall apply to any proceeding under this subsection. 

( w) FORFEITURE OF FRANCHISE FOR MONE Y LAUNDERING OR 

CASH TRANSACTION REPORTING OFFENSES.— 

(1) I N GENERAL.— 

(A) CONVICTION OF TITLE 18 OFFENSE.— 

(I) 1 DUT Y TO NOTIFY.—If a Federal savings association has been convicted of any criminal offense 

under section 1956 or 1957 of title 18, United States 

Code, the Attorney General shall provide to the Director a written notification of the conviction and shall 

include a certified copy of the order of conviction from 

the court rendering the decision. 

(II) 1 NOTICE OF TERMINATION; PRETERMINATION 

HEARING.—After receiving written notification from 

the Attorney General of such a conviction, the Director 

shall issue to the savings association a notice of the 

Director's intention to terminate all rights, privileges, 

and franchises of the savings association and schedule 

a pretermination hearing. 

(B) CONVICTION OF TITLE 31 OFFENSES.—If a Federal 

savings association is convicted of any criminal offense 

1

 So in original. Probably should redesignate subclauses (I) and (II) as clauses (i) and (ii). 
1143 HOME OWNERS' LOAN ACT Sec. 10 

under section 5322 or 5324 of title 31, United States Code, 

after receiving written notification from the Attorney General, the Director may issue to the savings association a 

notice of the Director's intention to terminate all rights, 

privileges, and franchises of the savings association and 

schedule a pretermination hearing. 

(C) JUDICIAL REVIEW.—Subsection (d)(1)(B)(vii) shall 

apply to any proceeding under this subsection. 

(2) FACTORS TO BE CONSIDERED.—In determining whether 

a franchise shall be forfeited under paragraph (1), the Director 

shall take into account the following factors: 

(A) The extent to which directors or senior executive 

officers of the savings association knew of, were involved 

in, the commission of the money laundering offense of 

which the association was found guilty. 

(B) The extent to which the offense occurred despite 

the existence of policies and procedures within the savings 

association which were designed to prevent the occurrence 

of any such offense. 

(C) The extent to which the savings association has 

fully cooperated with law enforcement authorities with respect to the investigation of the money laundering offense 

of which the association was found guilty. 

(D) The extent to which the savings association has 

implemented additional internal controls (since the commission of the offense of which the savings association was 

found guilty) to prevent the occurrence of any other money 

laundering offense. 

(E) The extent to which the interest of the local community in having adequate deposit and credit services 

available would be threatened by the forfeiture of the franchise. 

(3) SUCCESSOR LIABILITY.—This subsection shall not apply 

to a successor to the interests of, or a person who acquires, a 

savings association that violated a provision of law described 

in paragraph (1), if the successor succeeds to the interests of 

the violator, or the acquisition is made, in good faith and not 

for purposes of evading this subsection or regulations prescribed under this subsection. 

(4) DEFINITION.—The term "senior executive officer'' has 

the same meaning as in regulations prescribed under section 

32(f) of the Federal Deposit Insurance Act. 

SEC. 7. [12 U.S.C. 1466] APPLICABILITY. 1 

The provisions of this Act shall apply to the United States and 

to Puerto Rico, Guam, and the Virgin Islands. 

SEC. 8. [12 U.S.C. 1466a] DISTRICT ASSOCIATIONS. 

(a) IN GENERAL.—The Director shall, with respect to all incorporated or unincorporated building, building or loan, building and 

loan, or homestead associations, and similar institutions, of or 

transacting or doing business in the District of Columbia, or main1

 Section 6 was repealed by section 1201(a) of the American Homeownership and Economic 

Opportunity Act of 2000 (P.L. 106-569; 114 Stat. 3032). 
Sec. 10 HOME OWNERS' LOAN ACT 1144 

taining any office in the District of Columbia (other than Federal 

savings associations), have the same powers and functions as to 

examination, operation, and regulation as the Director has with respect to Federal savings associations. 

(b) ADDITIONAL POWERS.—Any such association or institution 

incorporated under the laws of, or organized in, the District of Columbia shall have in addition to any existing statutory authority 

such statutory authority as is vested in Federal savings associations. 

(c) CHARTER AMENDMENTS.—Charters , certificates of incorporation, articles of incorporation, constitutions, bylaws, or other organic documents of associations or institutions referred to in subsection (b) of this section may, without regard to anything contained therein or otherwise, be amended in such manner and to 

such extent and upon such votes if any as the Director may by regulation or otherwise provide. 

(d) LIMITATION.—Nothing in this section shall cause, or permit 

the Director to cause, District of Columbia associations to be or become Federal savings associations, or require the Director to impose on District of Columbia associations the same regulations as 

are imposed on Federal savings associations. 

SEC. 9. [12 U.S.C. 1467] EXAMINATIO N FEES. 

(a) EXAMINATION OF SAVINGS ASSOCIATIONS.—The cost of conducting examinations of savings associations pursuant to section 

5(d) shall be assessed by the Director against each such savings 

association as the Director deems necessary or appropriate. 

(b) EXAMINATION OF AFFILIATES.—The cost of conducting 

examinations of affiliates of savings associations pursuant to this 

Act may be assessed by the Director against each affiliate that is 

examined as the Director deems necessary or appropriate. 

(c) ASSESSMENT AGAINST ASSOCIATION I N CASE OF AFFILIATE'S 

REFUSAL T O PAY.— 

(1) IN GENERAL.—Subject to paragraph (2), if any affiliate 

of any savings association— 

(A) refuses to pay any assessment under subsection 

(b); or 

(B) fails to pay any such assessment before the end of 

the 60-day period beginning on the date of the assessment, 

the Director may assess such cost against, and collect such cost 

from, such savings association. 

(2) AFFILIATE OF MORE THA N 1 SAVINGS ASSOCIATION.—If 

any affiliate referred to in paragraph (1) is an affiliate of more 

than 1 savings association, the assessment with respect to the 

affiliate against, and collected from, any affiliated savings 

association in such proportions as the Director may prescribe. 

(d) CIVIL MONE Y PENALTY FOR AFFILIATE'S REFUSAL T O 

COOPERATE.— 

(1) PENALTY IMPOSED.—If any affiliate of any savings 

association— 

(A) refuses to permit any examiner appointed by the 

Director to make an examination; or 

(B) refuses to provide any information required to be 

disclosed in the course of any examination, 
1145 HOME OWNERS' LOAN ACT Sec. 10 

the savings association shall forfeit and pay a civil penalty of 

not more than $5,000 for each day that any such refusal continues. 

(2) ASSESSMENT AND COLLECTION.—Any penalty imposed 

under paragraph (1) shall be assessed and collected by the Director, in the manner provided in section 8(i)(2) of the Federal 

Deposit Insurance Act. 

(e) REGULATIONS.—Only the Director may prescribe regulations 

with respect to— 

(1) the computation of, and the assessment for, the cost of 

conducting examinations pursuant to this section; and 

(2) the collection and use of such assessments and any fees 

under this section. 

such regulations may establish formulas to determine a fee or 

schedule of fees to cover the costs of examinations and also to cover 

the cost of processing applications, filings, notices, and requests for 

approvals by the Director or the Director's designee. 

(f) COLLECTION THROUGH FDIC OR FEDERAL HOM E LOA N 

BANKS.—The Corporation or the Federal home loan banks shall, 

upon request of and by agreement with the Director, collect fees 

and assessments on behalf of the Director and be reimbursed for 

the actual cost of collection. 

(g) COSTS OF OTHER EXAMINATIONS.— 

(1) EXAMINATION OF FIDUCIARY ACTIVITIES.—In addition to 

any assessment imposed pursuant to subsection (a), the cost of 

conducting examinations of fiduciary activities of savings associations which exercise fiduciary powers (including savings 

associations or similar institutions in the District of Columbia) 

shall be assessed by the Director against such savings associations (or similar institutions). 

(2) EXAMINATIONS I N EXCESS OF 2 PER CALENDAR YEAR.— 

if any savings association or affiliate of a savings association 

is examined by the Director, or the Corporation, as the case 

may be, more than 2 times in any calendar year, the cost of 

conducting such additional examinations shall be assessed, in 

addition to any assessment imposed pursuant to subsection (a), 

by the Director or the Corporation, as the case may be, against 

such savings association or affiliate. 

(h) ADDITIONAL INFORMATION.—Any savings association and 

any affiliate of any savings association shall provide the Director 

with access to any information or report with respect to any examination made by any public regulatory authority and furnish any 

additional information with respect thereto as the Director may require. 

(i) TREATMENT OF EXAMINATION ASSESSMENTS.— 

(1) DEPOSITS.—Amounts received by the Director from 

assessments under this section (other than an assessment 

under subsection (d)(2)) or section 10(b)(4) may be deposited in 

the manner provided in section 5234 of the Revised statutes 

with respect to assessments by the Comptroller of the Currency. 

(2) ASSESSMENTS ARE NOT GOVERNMENT FUNDS.—Th e 

amounts received by the Director from any assessment under 
Sec. 10 HOME OWNERS' LOAN ACT 1146 

this section shall not be construed to be Government or public 

funds or appropriated money. 

(3) ASSESSMENTS ARE NOT SUBJECT TO APPORTIONMENT OF 

FUNDS.—Notwithstanding any other provision of law, the 

amounts received by the Director from any assessment under 

this section shall not be subject to apportionment for the purpose of chapter 15 of title 31, United States Code, or under any 

other authority. 

(j) PROCESSING FEE.—The Director may, in the Director's sole 

discretion, assess against any person that submits to the Director 

an application, filing, notice, or request a fee to cover the cost of 

processing such submission. 

(k) FEES FOR EXAMINATIONS AND SUPERVISORY ACTIVITIES.— 

The Director may assess against institutions for which the Director 

is the appropriate Federal banking agency, as defined in section 3 

of the Federal Deposit Insurance Act, fees to fund the direct and 

indirect expenses of the office as the Director deems necessary or 

appropriate. The fees may be imposed more frequently than annually at the discretion of the Director. 

(l) WORKING CAPITAL.—The Director is authorized to impose 

fees and assessments pursuant to subsections (a), (b), (e), and (k) 

of this section, in excess of actual expenses for any given year, to 

permit the Director to maintain a working capital fund. The Director shall remit to the payors of such fees and assessments any 

funds collected in excess of what he deems necessary to maintain 

such working capital fund. 

(m) USE OF FUNDS.—The Director is authorized to use the combined resources retained through fees and assessments imposed 

pursuant to this section to pay all direct and indirect salary and 

administrative expenses of the office, including contracts and purchases of property and services, and the direct and indirect expenses of the examinations and supervisory activities of the Office. 

SEC. 10. [12 U.S.C. 1467a] REGULATIO N OF HOLDIN G COMPANIES. 

(a) DEFINITIONS.— 

(1) I N GENERAL.—As used in this section, unless the context otherwise requires— 

(A) SAVINGS ASSOCIATION.—The term ''savings association'' includes a savings bank or cooperative bank which is 

deemed by the Director to be a savings association under 

subsection (l). 

(B) UNINSURED INSTITUTION.—The term ''uninsured 

institution'' means any depository institution the deposits 

of which are not insured by the Federal Deposit insurance 

Corporation. 

(C) COMPANY.—The term ''company'' means any corporation, partnership, trust, joint-stock company, or similar organization, but does not include the Federal Deposit 

Insurance Corporation, the Resolution Trust Corporation, 

any Federal home loan bank, or any company the majority 

of the shares of which is owned by the United States or 

any State, or by an instrumentality of the United States 

or any State. 

( D ) SAVINGS AND LOAN HOLDING COMPANY.— 
1147 HOME OWNERS' LOAN ACT Sec. 10 

(i) IN GENERAL.—Except as provided in clause (ii), 

the term ''savings and loan holding company'' means 

any company that directly or indirectly controls a savings association or that controls any other company 

that is a savings and loan holding company. 

(ii) EXCLUSION.—The term ''savings and loan holding company'' does not include a bank holding company that is registered under, and subject to, the Bank 

Holding Company Act of 1956, or to any company directly or indirectly controlled by such company (other 

than a savings association). 

(E) MULTIPLE SAVINGS AND LOAN HOLDING COMPANY.— 

The term ''multiple savings and loan holding company'' 

means any savings and loan holding company which directly or indirectly controls 2 or more savings associations. 

(F) DIVERSIFIED SAVINGS AND LOAN HOLDING COMPANY.—The term ''diversified savings and loan holding 

company'' means any savings and loan holding company 

whose subsidiary savings association and related activities 

as permitted under paragraph (2) of subsection (c) of this 

section represented, on either an actual or a pro forma 

basis, less than 50 percent of its consolidated net worth at 

the close of its preceding fiscal year and of its consolidated 

net earnings for such fiscal year, as determined in accordance with regulations issued by the Director. 

(G) SUBSIDIARY.—The term ''subsidiary'' has the same 

meaning as in section 3 of the Federal Deposit Insurance 

Act. 

(H) AFFILIATE.—The term ''affiliate'' of a savings association means any person which controls, is controlled by, 

or is under common control with, such savings association. 

(I) BANK HOLDING COMPANY.—The terms ''bank holding company'' and ''bank'' have the meanings given to such 

terms in section 2 of the Bank Holding Company Act of 

1956. 

(J) ACQUIRE.—The term ''acquire'' has the meaning 

given to such term in section 13(f)(8) of the Federal Deposit Insurance Act. 

(2) CONTROL.—For purposes of this section, a person shall 

be deemed to have control of— 

(A) a savings association if the person directly or indirectly or acting in concert with one or more other persons, 

or through one or more subsidiaries, owns, controls, or 

holds with power to vote, or holds proxies representing, 

more than 25 percent of the voting shares of such savings 

association, or controls in any manner the election of a majority of the directors of such association; 

(B) any other company if the person directly or indirectly or acting in concert with one or more other persons, 

or through one or more subsidiaries, owns, controls, or 

holds with power to vote, or holds proxies representing, 

more than 25 percent of the voting shares or rights of such 

other company, or controls in any manner the election or 

appointment of a majority of the directors or trustees of 
Sec. 10 HOME OWNERS' LOAN ACT 1148 

such other company, or is a general partner in or has contributed more than 25 percent of the capital of such other 

company; 

(C) a trust if the person is a trustee thereof; or 

(D) a savings association or any other company if the 

Director determines, after reasonable notice and opportunity for hearing, that such person directly or indirectly 

exercises a controlling influence over the management or 

policies of such association or other company. 

(3) EXCLUSIONS.—Notwithstanding any other provision of 

this subsection, the term ''savings and loan holding company'' 

does not include— 

(A) any company by virtue of its ownership or control 

of voting shares of a savings association or a savings and 

loan holding company acquired in connection with the 

underwriting of securities if such shares are held only for 

such period of time (not exceeding 120 days unless extended by the Director) as will permit the sale thereof on 

a reasonable basis; and 

(B) any trust (other than a pension, profit-sharing, 

shareholders', voting, or business trust) which controls a 

savings association or a savings and loan holding company 

if such trust by its terms must terminate within 25 years 

or not later than 21 years and 10 months after the death 

of individuals living on the effective date of the trust, and 

is (i) in existence on June 26, 1967, or (ii) a testamentary 

trust created on or after June 26, 1967. 

(4) SPECIAL RULE RELATING TO QUALIFIED STOCK 

ISSUANCE.—No savings and loan holding company shall be 

deemed to control a savings association solely by reason of the 

purchase by such savings and loan holding company of shares 

issued by such savings association, or issued by any savings 

and loan holding company (other than a bank holding company) which controls such savings association, in connection 

with a qualified stock issuance if such purchase is approved by 

the Director under subsection (q)(1)(D), unless the acquiring 

savings and loan holding company, directly or indirectly, or 

acting in concert with 1 or more other persons, or through 1 

or more subsidiaries, owns, controls, or holds with power to 

vote, or holds proxies representing, more than 15 percent of 

the voting shares of such savings association or holding company. 

(b) REGISTRATION AND EXAMINATION. — 

(1) IN GENERAL.—Within 90 days after becoming a savings 

and loan holding company, each savings and loan holding company shall register with the Director on forms prescribed by 

the Director, which shall include such information, under oath 

or otherwise, with respect to the financial condition, ownership, operations, management, and intercompany relationships 

of such holding company and its subsidiaries, and related matters, as the Director may deem necessary or appropriate to 

carry out the purposes of this section. upon application, the 

Director may extend the time within which a savings and loan 
1149 HOME OWNERS' LOAN ACT Sec. 10 

holding company shall register and file the requisite information. 

(2) REPORTS.—Each savings and loan holding company and 

each subsidiary thereof, other than a savings association, shall 

file with the Director, and the regional office of the Director of 

the district in which its principal office is located, such reports 

as may be required by the Director. Such reports shall be made 

under oath or otherwise, and shall be in such form and for 

such periods, as the Director may prescribe. Each report shall 

contain such information concerning the operations of such 

savings and loan holding company and its subsidiaries as the 

Director may require. 

(3) BOOKS AND RECORDS.—Each savings and loan holding 

company shall maintain such books and records as may be prescribed by the Director. 

(4) EXAMINATIONS.—Each savings and loan holding company and each subsidiary thereof (other than a bank) shall be 

subject to such examinations as the Director may prescribe. 

The cost of such examinations shall be assessed against and 

paid by such holding company. Examination and other reports 

may be furnished by the Director to the appropriate state 

supervisory authority. The Director shall, to the extent deemed 

feasible, use for the purposes of this subsection reports filed 

with or examinations made by other Federal agencies or the 

appropriate State supervisory authority. 

(5) AGENT FOR SERVICE OF PROCESS.—The Director may require any savings and loan holding company, or persons connected therewith if it is not a corporation, to execute and file 

a prescribed form of irrevocable appointment of agent for service of process. 

(6) RELEASE FROM REGISTRATION.—The Director may at 

any time, upon the Director's own motion or upon application, 

release a registered savings and loan holding company from 

any registration theretofore made by such company, if the Director determines that such company no longer has control of 

any savings association. 

(c) HOLDING COMPANY ACTIVITIES.— 

(1) PROHIBITED ACTIVITIES.—Except as otherwise provided 

in this subsection, no savings and loan holding company and 

no subsidiary which is not a savings association shall— 

(A) engage in any activity or render any service for or 

on behalf of a savings association subsidiary for the purpose or with the effect of evading any law or regulation applicable to such savings association; 

(B) commence any business activity, other than the 

activities described in paragraph (2); or 

(C) continue any business activity, other than the 

activities described in paragraph (2), after the end of the 

2-year period beginning on the date on which such company received approval under subsection (e) of this section 

to become a savings and loan holding company subject to 

the limitations contained in this subparagraph. 

(2) EXEMPT ACTIVITIES.—The prohibitions of subparagraphs (B) and (C) of paragraph (1) shall not apply to the fol-
Sec. 10 HOME OWNERS' LOAN ACT 1150 

lowing business activities of any savings and loan holding company or any subsidiary (of such company) which is not a savings association: 

(A) Furnishing or performing management services for 

a savings association subsidiary of such company. 

(B) Conducting an insurance agency or escrow business. 

(C) Holding, managing, or liquidating assets owned or 

acquired from a savings association subsidiary of such 

company. 

(D) Holding or managing properties used or occupied 

by a savings association subsidiary of such company. 

(E) Acting as trustee under deed of trust. 

(F) Any other activity— 

(i) which the Board of Governors of the Federal 

Reserve System, by regulation, has determined to be 

permissible for bank holding companies under section 

4(c) of the Bank Holding Company Act of 1956, unless 

the Director, by regulation, prohibits or limits any 

such activity for savings and loan holding companies; 

or 

(ii) in which multiple savings and loan holding 

companies were authorized (by regulation) to directly 

engage on March 5, 1987. 

(G) in the case of a savings and loan holding company, 

purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of 

such stock by such savings and loan holding company is 

approved by the Director pursuant to subsection (q)(1)(D). 

(3) CERTAI N LIMITATIONS ON ACTIVITIES NOT APPLICABLE TO 

CERTAIN HOLDING COMPANIES.—Notwithstanding paragraphs 

(4) and (6) of this subsection, the limitations contained in subparagraphs (B) and (C) of paragraph (1) shall not apply to any 

savings and loan holding company (or any subsidiary of such 

company) which controls— 

(A) only 1 savings association, if the savings association subsidiary of such company is a qualified thrift lender 

(as determined under subsection (m)); or 

(B) more than 1 savings association, if— 

(i) all, or all but 1, of the savings association subsidiaries of such company were initially acquired by 

the company or by an individual who would be deemed 

to control such company if such individual were a 

company— 

(i) pursuant to an acquisition under section 

13(c) or 13(k) of the Federal Deposit Insurance Act 

or section 408(m) of the National Housing Act; or 

(ii) pursuant to an acquisition in which 

assistance was continued to a savings association 

under section 13(i) of the Federal Deposit Insurance Act; and 

(ii) all of the savings association subsidiaries of 

such company are qualified thrift lenders (as determined under subsection (m)). 
1151 HOME OWNERS' LOAN ACT Sec. 10 

(4) PRIOR APPROVAL OF CERTAIN NEW ACTIVITIES REQUIRED.— 

(A) I N GENERAL.—No savings and loan holding company and no subsidiary which is not a savings association 

shall commence, either de novo or by an acquisition (in 

whole or in part) of a going concern, any activity described 

in paragraph (2)(F)(i) of this subsection without the prior 

approval of the Director. 

(B) FACTORS TO BE CONSIDERED BY DIRECTOR.—In considering any application under subparagraph (A) by any 

savings and loan holding company or any subsidiary of any 

such company which is not a savings association, the Director shall consider— 

(i) whether the performance of the activity described in such application by the company or the subsidiary can reasonably be expected to produce benefits 

to the public (such as greater convenience, increased 

competition, or gains in efficiency) that outweigh possible adverse effects of such activity (such as undue 

concentration of resources, decreased or unfair competition, conflicts of interest, or unsound financial 

practices); 

(ii) the managerial resources of the companies involved; and 

(iii) the adequacy of the financial resources, including capital, of the companies involved. 

( C) DIRECTOR MAY DIFFERENTIATE BETWEEN NEW AND 

ONGOING ACTIVITIES.—In prescribing any regulation or considering any application under this paragraph, the Director may differentiate between activities commenced de 

novo and activities commenced by the acquisition, in whole 

or in part, of a going concern. 

( D ) APPROVAL OR DISAPPROVAL BY ORDER.—The approval or disapproval of any application under this paragraph by the Director shall be made in an order issued by 

the Director containing the reasons for such approval or 

disapproval. 

(5) GRACE PERIOD TO ACHIEVE COMPLIANCE.—If an y savings association referred to in paragraph (3) fails to maintain 

the status of such association as a qualified thrift lender, the 

Director may allow, for good cause shown, any company that 

controls such association (or any subsidiary of such company 

which is not a savings association) up to 3 years to comply 

with the limitations contained in paragraph (1)(C). 

(6) SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES 

AFFECTED BY 1987 AMENDMENTS.— 

(A) EXCEPTION TO 2-YEAR GRACE PERIOD FOR ACHIEVING COMPLIANCE.—Notwithstanding paragraph (1)(C), any 

company which received approval under subsection (e) of 

this section to acquire control of a savings association between March 5, 1987, and August 10, 1987, shall not continue any business activity other than an activity described in paragraph (2) after August 10, 1987. 
Sec. 10 HOME OWNERS' LOAN ACT 1152 

(B) EXEMPTION FOR ACTIVITIES LAWFULLY ENGAGED I N 

BEFORE MARCH 5, 1987.—Notwithstanding paragraph (1)(C) 

and subject to subparagraphs (C) and (D), any savings and 

loan holding company which received approval, before 

March 5, 1987, under subsection (e) of this section to acquire control of a savings association may engage, directly 

or through any subsidiary (other than a savings association subsidiary of such company), in any activity in which 

such company or such subsidiary was lawfully engaged on 

such date. 

(C) TERMINATIO N OF SUBPARAGRAPH (B) EXEMPTION.— 

The exemption provided under subparagraph (B) for activities engaged in by any savings and loan holding company 

or a subsidiary of such company (which is not a savings 

association) which would otherwise be prohibited under 

paragraph (1)(C) shall terminate with respect to such 

activities of such company or subsidiary upon the occurrence (after August 10, 1987) of any of the following: 

(i) The savings and loan holding company acquires 

control of a bank or an additional savings association 

(other than a savings association acquired pursuant to 

section 13(c) or 13(k) of the Federal Deposit Insurance 

Act or section 406(f) or 408(m) of the National Housing 

Act). 

(ii) Any savings association subsidiary of the savings and loan holding company fails to qualify as a domestic building and loan association under section 

7701(a)(19) of the Internal Revenue Code of 1986. 

(iii) The savings and loan holding company engages in any business activity— 

(I) which is not described in paragraph (2); 

and 

(II) in which it was not engaged on March 5, 

1987. 

(iv) Any savings association subsidiary of the savings and loan holding company increases the number 

of locations from which such savings association conducts business after March 5, 1987 (other than an increase which occurs in connection with a transaction 

under section 13(c) or (k) of the Federal Deposit Insurance Act or section 408(m) of the National Housing 

Act. 

(v) Any savings association subsidiary of the savings and loan holding company permits any overdraft 

(including an intraday overdraft), or incurs any such 

overdraft in its account at a Federal Reserve bank, on 

behalf of an affiliate, unless such overdraft is the result of an inadvertent computer or accounting error 

that is beyond the control of both the savings association subsidiary and the affiliate. 

( 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 
1153 HOME OWNERS' LOAN ACT Sec. 10 

for the purposes of this title,

 1 that such action is necessary 

to prevent conflicts of interest or unsound practices or is 

in the public interest. 

(7) FOREIG N SAVINGS AND LOAN HOLDING COMPANY.—Notwithstanding any other provision of this section, any savings 

and loan holding company organized under the laws of a foreign country as of June 1, 1984 (including any subsidiary 

thereof which is not a savings association), which controls a 

single savings association on August 10, 1987, shall not be subject to this subsection with respect to any activities of such 

holding company which are conducted exclusively in a foreign 

country. 

(8) EXEMPTIO N FOR BANK HOLDING COMPANIES.—Excep t for 

paragraph (1)(A), this subsection shall not apply to any company that is treated as a bank holding company for purposes 

of section 4 of the Bank Holding Company Act of 1956, or any 

of its subsidiaries. 

(9) PREVENTION OF NEW AFFILIATIONS BETWEEN S&L HOLDI N G COMPANIES AND COMMERCIAL FIRMS.— 

(A) IN GENERAL.—Notwithstanding paragraph (3), no 

company may directly or indirectly, including through any 

merger, consolidation, or other type of business combination, acquire control of a savings association after May 4, 

1999, unless the company is engaged, directly or indirectly 

(including through a subsidiary other than a savings association), only in activities that are permitted— 

(i) under paragraph (1)(C) or (2) of this subsection; 

or 

(ii) for financial holding companies under section 

4(k) of the Bank Holding Company Act of 1956. 

( B) PREVENTION OF NEW COMMERCIAL AFFILIATIONS.— 

Notwithstanding paragraph (3), no savings and loan holding company may engage directly or indirectly (including 

through a subsidiary other than a savings association) in 

any activity other than as described in clauses (i) and (ii) 

of subparagraph (A). 

( C ) PRESERVATION OF AUTHORITY OF EXISTING UNITARY 

S&L HOLDING COMPANIES.—Subparagraphs (A) and (B) do 

not apply with respect to any company that was a savings 

and loan holding company on May 4, 1999, or that becomes a savings and loan holding company pursuant to an 

application pending before the office on or before that 

date, and that— 

(i) meets and continues to meet the requirements 

of paragraph (3); and 

(ii) continues to control not fewer than 1 savings 

association that it controlled on May 4, 1999, or that 

it acquired pursuant to an application pending before 

the office on or before that date, or the successor to 

such savings association. 

( D ) CORPORATE REORGANIZATIONS PERMITTED.—Thi s 

paragraph does not prevent a transaction that— 

1

 So in original. This Act does not contain titles. 
Sec. 10 HOME OWNERS' LOAN ACT 1154 

(i) involves solely a company under common control with a savings and loan holding company from acquiring, directly or indirectly, control of the savings 

and loan holding company or any savings association 

that is already a subsidiary of the savings and loan 

holding company; or 

(ii) involves solely a merger, consolidation, or 

other type of business combination as a result of which 

a company under common control with the savings 

and loan holding company acquires, directly or indirectly, control of the savings and loan holding company or any savings association that is already a subsidiary of the savings and loan holding company. 

(E) AUTHORITY TO PREVENT EVASIONS.—The Director 

may issue interpretations, regulations, or orders that the 

Director determines necessary to administer and carry out 

the purpose and prevent evasions of this paragraph, including a determination that, notwithstanding the form of 

a transaction, the transaction would in substance result in 

a company acquiring control of a savings association. 

( F ) PRESERVATION OF AUTHORITY FOR FAMILY 

TRUSTS.—Subparagraphs (A) and (B) do not apply with respect to any trust that becomes a savings and loan holding 

company with respect to a savings association, if— 

(i) not less than 85 percent of the beneficial ownership interests in the trust are continuously owned, 

directly or indirectly, by or for the benefit of members 

of the same family, or their spouses, who are lineal 

descendants of common ancestors who controlled, directly or indirectly, such savings association on May 4, 

1999, or a subsequent date, pursuant to an application 

pending before the office on or before May 4, 1999; 

and 

(ii) at the time at which such trust becomes a savings and loan holding company, such ancestors or lineal descendants, or spouses of such descendants, have 

directly or indirectly controlled the savings association 

continuously since May 4, 1999, or a subsequent date, 

pursuant to an application pending before the office 

on or before May 4, 1999. 

(d) TRANSACTIONS WIT H AFFILIATES.—Transactions between 

any subsidiary savings association of a savings and loan holding 

company and any affiliate (of such savings association subsidiary) 

shall be subject to the limitations and prohibitions specified in section 11 of this Act. 

(e) ACQUISITIONS.— 

(1) I N GENERAL.—It shall be unlawful for— 

(A) any savings and loan holding company directly or 

indirectly, or through one or more subsidiaries or through 

one or more transactions— 

(i) to acquire, except with the prior written approval of the Director, the control of a savings association or a savings and loan holding company, or to retain the control of such an association or holding com-
1155 HOME OWNERS' LOAN ACT Sec. 10 

pany acquired or retained in violation of this section 

as heretofore or hereafter in effect; 

(ii) to acquire, except with the prior written approval of the Director, by the process of merger, consolidation, or purchase of assets, another savings association or a savings and loan holding company, or all 

or substantially all of the assets of any such association or holding company; 

(iii) to acquire, by purchase or otherwise, or to retain, except with the prior written approval of the Director, more than 5 percent of the voting shares of a 

savings association not a subsidiary, or of a savings 

and loan holding company not a subsidiary, or in the 

case of a multiple savings and loan holding company 

(other than a company described in subsection (c)(8)), 

to acquire or retain, and the Director may not authorize acquisition or retention of, more than 5 percent of 

the voting shares of any company not a subsidiary 

which is engaged in any business activity other than 

the activities specified in subsection (c)(2). This clause 

shall not apply to shares of a savings association or of 

a savings and loan holding company— 

(i) held as a bona fide fiduciary (whether with 

or without the sole discretion to vote such shares); 

(ii) held temporarily pursuant to an underwriting commitment in the normal course of an 

underwriting business; 

(iii) held in an account solely for trading purposes; 

(iv) over which no control is held other than 

control of voting rights acquired in the normal 

course of a proxy solicitation; 

(v) acquired in securing or collecting a debt 

previously contracted in good faith, during the 2-

year period beginning on the date of such acquisition or for such additional time (not exceeding 3 

years) as the Director may permit if the Director 

determines that such an extension will not be detrimental to the public interest; 

(vi) acquired under section 408(m) of the National Housing Act or section 13(k) of the Federal 

Deposit Insurance Act; 

(vii) held by any insurance company, as defined in section 2(a)(17) of the Investment Company Act of 1940, except as provided in paragraph 

(6); or 

(viii) acquired pursuant to a qualified stock 

issuance if such purchase is approved by the Director under subsection (q)(1)(D); 

except that the aggregate amount of shares held under 

this clause (other than under subclauses (i), (ii), (iii), 

(IV), and (VI)) may not exceed 15 percent of all outstanding shares or of the voting power of a savings 

association or savings and loan holding company; or 
Sec. 10 HOME OWNERS' LOAN ACT 1156 

(iv) to acquire the control of an uninsured institution, or to retain for more than one year after February 14, 1968, or from the date on which such control 

was acquired, whichever is later, except that the Director may upon application by such company extend 

such one-year period from year to year, for an additional period not exceeding 3 years, if the Director 

finds such extension is warranted and is not detrimental to the public interest; and 

(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 Savings Association Insurance Fund or Bank Insurance Fund, 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 under subparagraph (B) shall include consideration of the competence, experience, and integrity of the officers, directors, and principal shareholders of the company or 

association. 

(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 

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 Savings Association Insurance Fund or the Bank Insurance 

Fund, and the convenience and needs of the community to be 

served, and shall render a decision within 90 days after sub-
1157 HOME OWNERS' LOAN ACT Sec. 10 

mission 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) which would result in a monopoly, or which would 

be in furtherance of any combination or conspiracy to 

monopolize or to attempt to monopolize the savings and 

loan business in any part of the United States, 

(B) the effect of which in any section of the country 

may be substantially to lessen competition, or tend to create a monopoly, or which in any other manner would be 

in restraint of trade, unless it finds that the anticompetitive effects of the proposed acquisition are clearly outweighed in the public interest by the probable effect of the 

acquisition in meeting the convenience and needs of the 

community to be served, 

(C) if the company fails to provide adequate assurances to the Director that the company will make available 

to the Director such information on the operations or 

activities of the company, and any affiliate of the company, 

as the Director determines to be appropriate to determine 

and enforce compliance with this Act, or 

(D) in the case of an application involving a foreign 

bank, if the foreign bank is not subject to comprehensive 

supervision or regulation on a consolidated basis by the 

appropriate authorities in the bank's home country. 

(3) INTERSTATE ACQUISITIONS.—No acquisition shall be approved by the Director under this subsection which will result 

in the formation by any company, through one or more subsidiaries or through one or more transactions, of a multiple savings and loan holding company controlling savings associations 

in more than one State, unless— 

(A) such company, or a savings association subsidiary 

of such company, is authorized to acquire control of a savings association subsidiary, or to operate a home or branch 

office, in the additional State or States pursuant to section 

13(k) of the Federal Deposit Insurance Act; 

(B) such company controls a savings association subsidiary which operated a home or branch office in the additional State or States as of March 5, 1987; or 

(C) the statutes of the State in which the savings association to be acquired is located permit a savings association chartered by such State to be acquired by a savings 

association chartered by the State where the acquiring 

savings association or savings and loan holding company is 

located or by a holding company that controls such a State 

chartered savings association, and such statutes specifi-
Sec. 10 HOME OWNERS' LOAN ACT 1158 

cally authorize such an acquisition by language to that effect and not merely by implication. 

(4) ACQUISITIONS BY CERTAIN INDIVIDUALS.— 

(A) IN GENERAL.—Notwithstanding subsection (h)(2), 

any director or officer of a savings and loan holding company, or any individual who owns, controls, or holds with 

power to vote (or holds proxies representing) more than 25 

percent of the voting shares of such holding company, may 

acquire control of any savings association not a subsidiary 

of such savings and loan holding company with the prior 

written approval of the Director. 

(B) TREATMEN T 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 (1)1 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). 

(5) ACQUISITIONS PURSUANT TO CERTAIN SECURITY INTERESTS.—This subsection and subsection (c)(2) of this section do 

not apply to any savings and loan holding company which acquired the control of a savings association or of a savings and 

loan holding company pursuant to a pledge or hypothecation to 

secure a loan, or in connection with the liquidation of a loan, 

made in the ordinary course of business. It shall be unlawful 

for any such company to retain such control for more than one 

year after February 14, 1968, or from the date on which such 

control was acquired, whichever is later, except that the Director may upon application by such company extend such oneyear period from year to year, for an additional period not exceeding 3 years, if the Director finds such extension is warranted and would not be detrimental to the public interest. 

(6) SHARES HELD BY INSURANCE AFFILIATES.—Share s described in clause (iii)(VII) of paragraph (1)(A) shall not be excluded for purposes of clause (iii) of such paragraph if— 

(A) all shares held under such clause (iii)(VII) by all 

insurance company affiliates of such savings association or 

savings and loan holding company in the aggregate exceed 

5 percent of all outstanding shares or of the voting power 

of the savings association or savings and loan holding company; or 

(B) such shares are acquired or retained with a view 

to acquiring, exercising, or transferring control of the savings association or savings and loan holding company. 

(f) DECLARATION OF DIVIDEND.—Every subsidiary savings association of a savings and loan holding company shall give the Direc1

 So in original. Probably should be "subsections (s) and (t) of section 5''. 
1159 HOME OWNERS' LOAN ACT Sec. 10 

tor not less than 30 days' advance notice of the proposed declaration by its directors of any dividend on its guaranty, permanent, or 

other nonwithdrawable stock. Such notice period shall commence to 

run from the date of receipt of such notice by the Director. Any 

such dividend declared within such period, or without the giving of 

such notice to the Director, shall be invalid and shall confer no 

rights or benefits upon the holder of any such stock. 

(g) ADMINISTRATION AND ENFORCEMENT.— 

(1) IN GENERAL.—The Director is authorized to issue such 

regulations and orders as the Director deems necessary or 

appropriate to enable the Director to administer and carry out 

the purposes of this section, and to require compliance therewith and prevent evasions thereof. 

(2) INVESTIGATIONS.—The Director may make such investigations as the Director deems necessary or appropriate to 

determine whether the provisions of this section, and regulations and orders thereunder, are being and have been complied 

with by savings and loan holding companies and subsidiaries 

and affiliates thereof. For the purpose of any investigation 

under this section, the Director may administer oaths and 

affirmations, issue subpenas, take evidence, and require the 

production of any books, papers, correspondence, memorandums, or other records which may be relevant or material to 

the inquiry. The attendance of witnesses and the production of 

any such records may be required from any place in any State. 

The Director may apply to the United States district court for 

the judicial district (or the United States court in any territory) 

in which any witness or company subpenaed resides or carries 

on business, for enforcement of any subpena issued pursuant 

to this paragraph, and such courts shall have jurisdiction and 

power to order and require compliance. 

(3) PROCEEDINGS.—(A) In any proceeding under subsection 

(a)(2)(D) or under paragraph (5) of this section,1 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 enforcement 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. 

1

 So in original. Probably should be "subsection,''. 
Sec. 10 HOME OWNERS' LOAN ACT 1160 

(B) Any hearing provided for in subsection (a)(2)(D) or 

under paragraph (5) of this section1 shall be held in the Federal judicial district or in the territory in which the principal 

office of the association or other company is located unless the 

party afforded the hearing consents to another place, and shall 

be conducted in accordance with the provisions of chapter 5 of 

title 5, United States Code. 

(4) INJUNCTIONS.—Whenever it appears to the Director 

that any person is engaged or has engaged or is about to engage in any acts or practices which constitute or will constitute 

a violation of the provisions of this section or of any regulation 

or order thereunder, the Director may bring an action in the 

proper United States district court, or the United States court 

of any territory or other place subject to the jurisdiction of the 

United States, to enjoin such acts or practices, to enforce compliance with this section or any regulation or order, or to require the divestiture of any acquisition in violation of this section, or for any combination of the foregoing, and such courts 

shall have jurisdiction of such actions. upon a proper showing 

an injunction, decree, restraining order, order of divestiture, or 

other appropriate order shall be granted without bond. 

(5) CEASE AND DESIST ORDERS.—(A) Notwithstanding any 

other provision of this section, the Director may, whenever the 

Director has reasonable cause to believe that the continuation 

by a savings and loan holding company of any activity or of 

ownership or control of any of its noninsured subsidiaries constitutes a serious risk to the financial safety, soundness, or stability of a savings and loan holding company's subsidiary savings association and is inconsistent with the sound operation 

of a savings association or with the purposes of this section or 

section 8 of the Federal Deposit Insurance Act, order the savings and loan holding company or any of its subsidiaries, after 

due notice and opportunity for hearing, to terminate such 

activities or to terminate (within 120 days or such longer period as the Director directs in unusual circumstances) its ownership or control of any such noninsured subsidiary either by 

sale or by distribution of the shares of the subsidiary to the 

shareholders of the savings and loan holding company. Such 

distribution shall be pro rata with respect to all of the shareholders of the distributing savings and loan holding company, 

and the holding company shall not make any charge to its 

shareholders arising out of such a distribution. 

(B) The Director may in the Director's discretion apply to 

the United States district court within the jurisdiction of which 

the principal office of the company is located, for the enforcement of any effective and outstanding order issued under this 

section, and such court shall have jurisdiction and power to 

order and require compliance therewith. Except as provided in 

subsection (j), no court shall have jurisdiction to affect by 

injunction or otherwise the issuance or enforcement of any notice or order under this section, or to review, modify, suspend, 

terminate, or set aside any such notice or order. 

1

 So in original. Probably should be "subsections (s) and (t) of section 5''. 
1161 HOME OWNERS' LOAN ACT Sec. 10 

(h) PROHIBITED ACTS.—It shall be unlawful for— 

(1) any savings and loan holding company or subsidiary 

thereof, or any director, officer, employee, or person owning, 

controlling, or holding with power to vote, or holding proxies 

representing, more than 25 percent of the voting shares, of 

such holding company or subsidiary, to hold, solicit, or exercise 

any proxies in respect of any voting rights in a savings association which is a mutual association; 

(2) any director or officer of a savings and loan holding 

company, or any individual who owns, controls, or holds with 

power to vote (or holds proxies representing) more than 25 percent of the voting shares of such holding company, to acquire 

control of any savings association not a subsidiary of such savings and loan holding company, unless such acquisition is approved by the Director pursuant to subsection (e)(4); or 

(3) any individual, except with the prior approval of the 

Director, to serve or act as a director, officer, or trustee of, or 

become a partner in, any savings and loan holding company 

after having been convicted of any criminal offense involving 

dishonesty or breach of trust. 

(i) PENALTIES.— 

(1) CRIMINAL PENALTY.—(A) Whoever knowingly violates 

any provision of this section or being a company, violates any 

regulation or order issued by the Director under this section, 

shall be imprisoned not more than 1 year, fined not more than 

$100,000 per day for each day during which the violation continues, or both. 

(B) whoever, with the intent to deceive, defraud, or profit 

significantly, knowingly violates any provision of this section 

shall be fined not more than $1,000,000 per day for each day 

during which the violation continues, imprisoned not more 

than 5 years, or both. 

(2) CIVIL MONEY PENALTY.— 

(A) PENALTY.—Any company which violates, and any 

person who participates in a violation of, any provision of 

this section, or any regulation or order issued pursuant 

thereto, shall forfeit and pay a civil penalty of not more 

than $25,000 for each day during which such violation continues. 

(B) ASSESSMENT.—Any penalty imposed under subparagraph (A) may be assessed and collected by the Director in the manner provided in subparagraphs (E), (F), (G), 

and (i) of section 8(i)(2) of the Federal Deposit insurance 

Act for penalties imposed (under such section) and any 

such assessment shall be subject to the provisions of such 

section. 

(C) HEARING.—The company or other person against 

whom any civil penalty is assessed under this paragraph 

shall be afforded a hearing if such company or person submits a request for such hearing within 20 days after the 

issuance of the notice of assessment. Section 8(h) of the 

Federal Deposit Insurance Act shall apply to any proceeding under this paragraph. 
Sec. 10 HOME OWNERS' LOAN ACT 1162 

(D) DISBURSEMENT.—All penalties collected under authority of this paragraph shall be deposited into the Treasury. 

(E) VIOLATE DEFINED.—For purposes of this section, 

the term ''violate'' includes any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation. 

(F) REGULATIONS.—The Director shall prescribe regulations establishing such procedures as may be necessary 

to carry out this paragraph. 

(3) CIVIL MONEY PENALTY.— 

(A) PENALTY.—Any company which violates, and any 

person who participates in a violation of, any provision of 

this section, or any regulation or order issued pursuant 

thereto, shall forfeit and pay a civil penalty of not more 

than $25,000 for each day during which such violation continues. 

(B) ASSESSMENT; ETC.—Any penalty imposed under 

subparagraph (A) may be assessed and collected by the Director in the manner provided in subparagraphs (E), (F), 

(G), and (I) of section 8(i)(2) of the Federal Deposit Insurance Act for penalties imposed (under such section) and 

any such assessment shall be subject to the provisions of 

such section. 

(C) HEARING.—The company or other person against 

whom any penalty is assessed under this paragraph shall 

be afforded an agency hearing if such company or person 

submits a request for such hearing within 20 days after 

the issuance of the notice of assessment. Section 8(h) of 

the Federal Deposit Insurance Act shall apply to any proceeding under this paragraph. 

(D) DISBURSEMENT.—All penalties collected under authority of this paragraph shall be deposited into the Treasury. 

(E) VIOLATE DEFINED.—For purposes of this section, 

the term ''violate'' includes any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation. 

(F) REGULATIONS.—The Director shall prescribe regulations establishing such procedures as may be necessary 

to carry out this paragraph. 

(5) 1 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 

1

 So in original. Probably should be (4). 
1163 HOME OWNERS' LOAN ACT Sec. 10 

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). 

(j) JUDICIA L REVIEW.—Any party aggrieved by an order of the 

Director under this section may obtain a review of such order by 

filing in the court of appeals of the United States for the circuit in 

which the principal office of such party is located, or in the United 

States Court of Appeals for the District of Columbia Circuit, within 

30 days after the date of service of such order, a written petition 

praying that the order of the Director be modified, terminated, or 

set aside. A copy of the petition shall be forthwith transmitted by 

the clerk of the court to the Director, and thereupon the Director 

shall file in the court the record in the proceeding, as provided in 

section 2112 of title 28, United States Code. Upon the filing of such 

petition, such court shall have jurisdiction, which upon the filing 

of the record shall be exclusive, to affirm, modify, terminate, or set 

aside, in whole or in part, the order of the Director. Review of such 

proceedings shall be had as provided in chapter 7 of title 5, United 

States Code. The judgment and decree of the court shall be final, 

except that the same shall be subject to review by the Supreme 

Court upon certiorari as provided in section 1254 of title 28, United 

States Code. 

(k) SAVINGS CLAUSE.—Nothing contained in this section, other 

than any transaction approved under subsection (e)(2) of this section or section 13 of the Federal Deposit Insurance Act, shall be 

interpreted or construed as approving any act, action, or conduct 

which is or has been or may be in violation of existing law, nor 

shall anything herein contained constitute a defense to any action, 

suit, or proceeding pending or hereafter instituted on account of 

any act, action, or conduct in violation of the antitrust laws. 

(l) TREATMEN T OF FDIC INSURED STATE SAVINGS BANKS AND 

COOPERATIVE BANKS AS SAVINGS ASSOCIATIONS.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

law, a savings bank (as defined in section 3(g) of the Federal 

Deposit Insurance Act) and a cooperative bank that is an insured bank (as defined in section 3(h) of the Federal Deposit 

Insurance Act) upon application shall be deemed to be a savings association for the purpose of this section, if the Director 

determines that such bank is a qualified thrift lender (as determined under subsection (m)). 

(2) FAILUR E TO MAINTAI N QUALIFIED THRIFT LENDER STATUS.—If any savings bank which is deemed to be a savings 

association under paragraph (1) subsequently fails to maintain 

its status as a qualified thrift lender, as determined by the Director, such bank may not thereafter be a qualified thrift 

lender for a period of 5 years. 

( m ) QUALIFIE D THRIF T LENDE R TEST. — 

(1) IN GENERAL.—Except as provided in paragraphs (2) and 

(7), any savings association is a qualified thrift lender if— 

(A) the savings association qualifies as a domestic 

building and loan association, as such term is defined in 

section 7701(a)(19) of the Internal Revenue Code of 1986; 

or 
Sec. 10 HOME OWNERS' LOAN ACT 1164 

(B)(i) the savings association's qualified thrift investments equal or exceed 65 percent of the savings association's portfolio assets; and 

(ii) the savings association's qualified thrift investments continue to equal or exceed 65 percent of the savings association's portfolio assets on a monthly average 

basis in 9 out of every 12 months. 

(2) EXCEPTIONS GRANTED BY DIRECTOR.—Notwithstandin g 

paragraph (1), the Director may grant such temporary and limited exceptions from the minimum actual thrift investment 

percentage requirement contained in such paragraph as the 

Director deems necessary if— 

(A) the Director determines that extraordinary circumstances exist, such as when the effects of high interest 

rates reduce mortgage demand to such a degree that an 

insufficient opportunity exists for a savings association to 

meet such investment requirements; or 

(B) the Director determines that— 

(i) the grant of any such exception will significantly facilitate an acquisition under section 13(c) or 

13(k) of the Federal Deposit Insurance Act; 

(ii) the acquired association will comply with the 

transition requirements of paragraph (7)(B), as if the 

date of the exemption were the starting date for the 

transition period described in that paragraph; and 

(iii) the Director determines that the exemption 

will not have an undue adverse effect on competing 

savings associations in the relevant market and will 

further the purposes of this subsection. 

(3) FAILURE TO BECOME AND REMAIN A QUALIFIED THRIFT 

LENDER.— 

(A) I N GENERAL.—A savings association that fails to 

become or remain a qualified thrift lender shall either become one or more banks (other than a savings bank) or be 

subject to subparagraph (B), except as provided in subparagraph (D). 

(B) RESTRICTIONS APPLICABLE TO SAVINGS ASSOCIATIONS THAT ARE NOT QUALIFIED THRIFT LENDERS.— 

(i) RESTRICTIONS EFFECTIVE IMMEDIATELY.—The 

following restrictions shall apply to a savings association beginning on the date on which the savings association should have become or ceases to be a qualified 

thrift lender: 

(I) ACTIVITIES.—Th e savings association shall 

not make any new investment (including an 

investment in a subsidiary) or engage, directly or 

indirectly, in any other new activity unless that 

investment or activity would be permissible for 

the savings association if it were a national bank, 

and is also permissible for the savings association 

as a savings association. 

(II) BRANCHING.—The savings association 

shall not establish any new branch office at any 

location at which a national bank located in the 
1165 HOME OWNERS' LOAN ACT Sec. 10 

savings association's home State may not establish a branch office. For purposes of this subclause, a savings association's home State is the 

State in which the savings association's total deposits were largest on the date on which the savings association should have become or ceased to 

be a qualified thrift lender. 

(III) DIVIDENDS.—Th e savings association 

shall be subject to all statutes and regulations 

governing the payment of dividends by a national 

bank in the same manner and to the same extent 

as if the savings association were a national bank. 

(ii) ADDITIONAL RESTRICTIONS EFFECTIVE AFTER 3 

YEARS.—Beginning 3 years after the date on which a 

savings association should have become a qualified 

thrift lender, or the date on which the savings association ceases to be a qualified thrift lender, as applicable, the savings association shall not retain any 

investment (including an investment in any subsidiary) or engage, directly or indirectly, in any activity, unless that investment or activity— 

(i) would be permissible for the savings association if it were a national bank; and 

(ii) is permissible for the savings association 

as a savings association. 

(C) HOLDIN G COMPANY REGULATION.—Any company 

that controls a savings association that is subject to any 

provision of subparagraph (B) shall, within one year after 

the date on which the savings association should have become or ceases to be a qualified thrift lender, register as 

and be deemed to be a bank holding company subject to 

all of the provisions of the Bank Holding Company Act of 

1956, section 8 of the Federal Deposit Insurance Act, and 

other statutes applicable to bank holding companies, in the 

same manner and to the same extent as if the company 

were a bank holding company and the savings association 

were a bank, as those terms are defined in the Bank Holding Company Act of 1956. 

(D) REQUALIFICATION.—A savings association that 

should have become or ceases to be a qualified thrift 

lender shall not be subject to subparagraph (B) or (C) if 

the savings association becomes a qualified thrift lender by 

meeting the qualified thrift lender requirement in paragraph (1) on a monthly average basis in 9 out of the preceding 12 months and remains a qualified thrift lender. If 

the savings association (or any savings association that acquired all or substantially all of its assets from that savings association) at any time thereafter ceases to be a 

qualified thrift lender, it shall immediately be subject to 

all provisions of subparagraphs (B) and (C) as if all the periods described in subparagraphs (B)(ii) and (C) had expired. 

(E) DEPOSIT INSURANCE ASSESSMENTS.—Any bank 

chartered as a result of the requirements of this section 
Sec. 10 HOME OWNERS' LOAN ACT 1166 

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— 

(i) December 31, 1993, or 

(ii) the institution's change of status from a Savings Association Insurance Fund member to a Bank 

insurance Fund member, 

whichever is later. 

( F) EXEMPTION FOR SPECIALIZED SAVINGS ASSOCIATIONS 

SERVING CERTAIN MILITARY PERSONNEL.—Subparagrap h (A) 

shall not apply to a savings association subsidiary of a savings and loan holding company if at least 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. 

( G) 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. 

( H ) N o 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. 

(4) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 

(A) ACTUAL THRIFT INVESTMENT PERCENTAGE.—The 

term ''actual thrift investment percentage'' means the percentage determined by dividing— 

(i) the amount of a savings association's qualified 

thrift investments, by 

(ii) the amount of the savings association's portfolio assets. 

(B) PORTFOLIO ASSETS.—The term ''portfolio assets'' 

means, with respect to any savings association, the total 

assets of the savings association, minus the sum of— 

(i) goodwill and other intangible assets; 
1167 HOME OWNERS' LOAN ACT Sec. 10 

(ii) the value of property used by the savings association to conduct its business; and 

(iii) liquid assets of the type required to be maintained under section 6 of the Home Owners' Loan Act, 

as in effect on the day before the date of the enactment of the Financial Regulatory Relief and Economic 

Efficiency Act of 2000, in an amount not exceeding the 

amount equal to 20 percent of the savings association's 

total assets. 

(C) QUALIFIED THRIFT INVESTMENTS.— 

(i) IN GENERAL.—The term ''qualified thrift investments'' means, with respect to any savings association, 

the assets of the savings association that are described 

in clauses (ii) and (iii). 

(ii) ASSETS INCLUDIBLE WITHOUT LIMIT.—Th e following assets are described in this clause for purposes 

of clause (i): 

(i) The aggregate amount of loans held by the 

savings association that were made to purchase, 

refinance, construct, improve, or repair domestic 

residential housing or manufactured housing. 

(II) Home-equity loans. 

(III) Securities backed by or representing an 

interest in mortgages on domestic residential 

housing or manufactured housing. 

(IV ) EXISTING OBLIGATIONS OF DEPOSIT INSURANCE AGENCIES.—Direct or indirect obligations of 

the Federal Deposit Insurance Corporation or the 

Federal Savings and Loan Insurance Corporation 

issued in accordance with the terms of agreements 

entered into prior to July 1, 1989, for the 10-year 

period beginning on the date of issuance of such 

obligations. 

( V) NE W OBLIGATIONS OF DEPOSIT INSURANCE 

AGENCIES.—Obligations of the Federal Deposit 

Insurance Corporation, the Federal Savings and 

Loan Insurance Corporation, the FSLIC Resolution Fund, and the Resolution Trust Corporation 

issued in accordance with the terms of agreements 

entered into on or after July 1, 1989, for the 5-

year period beginning on the date of issuance of 

such obligations. 

(VI) Shares of stock issued by any Federal 

home loan bank. 

(vii) Loans for educational purposes, loans to 

small businesses, and loans made through credit 

cards or credit card accounts. 

(iii) ASSETS INCLUDIBLE SUBJECT TO PERCENTAGE 

RESTRICTION.—The following assets are described in 

this clause for purposes of clause (i): 

(i) 50 percent of the dollar amount of the residential mortgage loans originated by such savings 

association and sold within 90 days of origination. 
Sec. 10 HOME OWNERS' LOAN ACT 1168 

(ii) investments in the capital stock or obligations of, and any other security issued by, any 

service corporation if such service corporation derives at least 80 percent of its annual gross revenues from activities directly related to purchasing, 

refinancing, constructing, improving, or repairing 

domestic residential real estate or manufactured 

housing. 

(iii) 200 percent of the dollar amount of loans 

and investments made to acquire, develop, and 

construct 1- to 4-family residences the purchase 

price of which is or is guaranteed to be not greater 

than 60 percent of the median value of comparable newly constructed 1- to 4-family residences within the local community in which such 

real estate is located, except that not more than 

25 percent of the amount included under this subclause may consist of commercial properties related to the development if those properties are directly related to providing services to residents of 

the development. 

(iv) 200 percent of the dollar amount of loans 

for the acquisition or improvement of residential 

real property, churches, schools, and nursing 

homes located within, and loans for any other purpose to any small businesses located within any 

area which has been identified by the Director, in 

connection with any review or examination of 

community reinvestment practices, as a geographic area or neighborhood in which the credit 

needs of the low- and moderate-income residents 

of such area or neighborhood are not being adequately met. 

(v) Loans for the purchase or construction of 

churches, schools, nursing homes, and hospitals, 

other than those qualifying under clause (iv), and 

loans for the improvement and upkeep of such 

properties. 

(vi) Loans for personal, family, or household 

purposes (other than loans for personal, family, or 

household purposes described in clause (ii)(vii)). 

(VII) Shares of stock issued by the Federal 

Home Loan Mortgage Corporation or the Federal 

National Mortgage Association. 

(iv) PERCENTAGE RESTRICTION APPLICABLE TO CERTAI N ASSETS.—The aggregate amount of the assets described in clause (iii) which may be taken into account 

in determining the amount of the qualified thrift 

investments of any savings association shall not exceed the amount which is equal to 20 percent of a savings association's portfolio assets. 

(v) The term ''qualified thrift investments'' 

excludes— 
1169 HOME OWNERS' LOAN ACT Sec. 10 

(i) except for home equity loans, that portion 

of any loan or investment that is used for any purpose other than those expressly qualifying under 

any subparagraph of clause (ii) or (iii); or 

(II) goodwill or any other intangible asset. 

(D) CREDIT CARD.—The Director shall issue such regulations as may be necessary to define the term ''credit 

card''. 

(E) SMALL BUSINESS.—The Director shall issue such 

regulations as may be necessary to define the term ''small 

business''. 

(5) CONSISTENT ACCOUNTING REQUIRED.— 

(A) In determining the amount of a savings association's portfolio assets, the assets of any subsidiary of the 

savings association shall be consolidated with the assets of 

the savings association if— 

(i) Assets of the subsidiary are consolidated with 

the assets of the savings association in determining 

the savings association's qualified thrift investments; 

or 

(ii) Residential mortgage loans originated by the 

subsidiary are included pursuant to paragraph 

(4)(C)(iii)(I) in determining the savings association's 

qualified thrift investments. 

(B) In determining the amount of a savings association's portfolio assets and qualified thrift investments, consistent accounting principles shall be applied. 

(6) SPECIAL RULES FOR PUERTO RICO AND VIRGIN ISLANDS 

SAVINGS ASSOCIATIONS.— 

(A) PUERTO RICO SAVINGS ASSOCIATIONS.—With respect 

to any savings association headquartered and operating 

primarily in puerto Rico— 

(i) the term ''qualified thrift investments'' includes, in addition to the items specified in paragraph 

(4)— 

(i) the aggregate amount of loans for personal, 

family, educational, or household purposes made 

to persons residing or domiciled in the Commonwealth of puerto Rico; and 

(II) the aggregate amount of loans for the acquisition or improvement of churches, schools, or 

nursing homes, and of loans to small businesses, 

located within the Commonwealth of Puerto Rico; 

and 

(ii) the aggregate amount of loans related to the 

purchase, acquisition, development and construction of 

1- to 4-family residential real estate— 

(I) which is located within the Commonwealth 

of puerto Rico; and 

(II) the value of which (at the time of acquisition or upon completion of the development and 

construction) is below the median value of newly 

constructed 1- to 4-family residences in the Commonwealth of puerto Rico, which may be taken 
Sec. 10 HOME OWNERS' LOAN ACT 1170 

into account in determining the amount of the 

qualified thrift investments and of such savings 

association shall be doubled. 

(B) VIRGI N ISLANDS SAVINGS ASSOCIATIONS.—With respect to any savings association headquartered and operating primarily in the Virgin Islands— 

(i) the term ''qualified thrift investments'' includes, in addition to the items specified in paragraph 

(4)— 

(I) the aggregate amount of loans for personal, 

family, educational, or household purposes made 

to persons residing or domiciled in the virgin islands; and 

(ii) the aggregate amount of loans for the acquisition or improvement of churches, schools, or 

nursing homes, and of loans to small businesses, 

located within the virgin islands; and 

(ii) the aggregate amount of loans related to the 

purchase, acquisition, development and construction of 

1- to 4-family residential real estate— 

(i) which is located within the virgin islands; 

and 

(ii) the value of which (at the time of acquisition or upon completion of the development and 

construction) is below the median value of newly 

constructed 1- to 4-family residences in the Virgin 

islands, which may be taken into account in determining the amount of the qualified thrift investments and of such savings association shall be 

doubled. 

(7) TRANSITIONAL RULE FOR CERTAIN SAVINGS ASSOCIATIONS.— 

(A) I N 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 during period1

 ending on September 30, 1995. 

(B) SUBPARAGRAPH (B) REQUIREMENTS.—A savings 

association meets the requirements of this subparagraph 

if, in the determination of the Director— 

(i) the actual thrift investment percentage of such 

association does not, after the date of enactment of the 

Financial institutions Reform, Recovery, and Enforcement Act of 1989, decrease below the actual thrift 

1

 So in original. Probably should be "subsections (s) and (t) of section 5''. 
1171 HOME OWNERS' LOAN ACT Sec. 10 

investment percentage of such association on July 15, 

1989; and 

(ii) the amount by which— 

(i) the actual thrift investment percentage of 

such association at the end of each period described in the following table, exceeds 

(ii) the actual thrift investment percentage of 

such association on July 15, 1989, 

is equal to or greater than the applicable percentage 

(as determined under the following table) of the 

amount by which 70 percent exceeds the actual thrift 

investment percentage of such association on such 

date of enactment: 

For the following The applicable 

period: percentage is: 

July 1, 1991-September 30, 1992 25 percent 

October 1, 1992-March 31, 1994 50 percent 

April 1, 1994-September 30, 1995 75 percent 

Thereafter 100 percent 

(C) For purposes of this paragraph, the actual thrift 

investment percentage of an association on July 15, 1989, 

shall be determined by applying the definition of ''actual 

thrift investment percentage'' that takes effect on July 1, 

1991. 

(n) TYIN G RESTRICTIONS.—A savings and loan holding company 

and any of its affiliates shall be subject to section 5(q) and regulations prescribed under such section, in connection with transactions 

involving the products or services of such company or affiliate and 

those of an affiliated savings association as if such company or 

affiliate were a savings association. 

(o) MUTUA L HOLDIN G COMPANIES.— 

(1) I N GENERAL.—A savings association operating in mutual form may reorganize so as to become a holding company 

by— 

(A) chartering an interim savings association, the 

stock of which is to be wholly owned, except as otherwise 

provided in this section, by the mutual association; and 

(B) transferring the substantial part of its assets and 

liabilities, including all of its insured liabilities, to the interim savings association. 

(2) DIRECTORS AND CERTAIN ACCOUNT HOLDERS' APPROVAL 

OF PLAN REQUIRED.—A reorganization is not authorized under 

this subsection unless— 

(A) a plan providing for such reorganization has been 

approved by a majority of the board of directors of the mutual savings association; and 

(B) in the case of an association in which holders of accounts and obligors exercise voting rights, such plan has 

been submitted to and approved by a majority of such individuals at a meeting held at the call of the directors in 

accordance with the procedures prescribed by the association's charter and bylaws. 

(3) NOTICE TO THE DIRECTOR; DISAPPROVAL PERIOD.— 
Sec. 10 HOME OWNERS' LOAN ACT 1172 

(A) NOTICE REQUIRED.—At least 60 days prior to taking any action described in paragraph (1), a savings association seeking to establish a mutual holding company 

shall provide written notice to the Director. The notice 

shall contain such relevant information as the Director 

shall require by regulation or by specific request in connection with any particular notice. 

( B) TRANSACTION ALLOWED IF NOT DISAPPROVED.—Unless the Director within such 60-day notice period disapproves the proposed holding company formation, or extends for another 30 days the period during which such 

disapproval may be issued, the savings association providing such notice may proceed with the transaction, if the 

requirements of paragraph (2) have been met. 

(C) GROUNDS FOR DISAPPROVAL.—The Director may 

disapprove any proposed holding company formation only 

if— 

(i) such disapproval is necessary to prevent unsafe 

or unsound practices; 

(ii) the financial or management resources of the 

savings association involved warrant disapproval; 

(iii) the savings association fails to furnish the 

information required under subparagraph (A); or 

(iv) the savings association fails to comply with 

the requirement of paragraph (2). 

(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 

requirement established by the Director pursuant to sections

 1 5 (s) and (t) of this Act. 

(4) OWNERSHIP.— 

(A) IN GENERAL.—Persons having ownership rights in 

the mutual association pursuant to section 5(b)(1)(B) of 

this Act or State law shall have the same ownership rights 

with respect to the mutual holding company. 

(B) HOLDERS OF CERTAIN ACCOUNTS.—Holders of savings, demand or other accounts of— 

(i) a savings association chartered as part of a 

transaction described in paragraph (1); or 

(ii) a mutual savings association acquired pursuant to paragraph (5)(B), 

shall have the same ownership rights with respect to the 

mutual holding company as persons described in subparagraph (A) of this paragraph. 

(5) PERMITTED ACTIVITIES.—A mutual holding company 

may engage only in the following activities: 

(A) Investing in the stock of a savings association. 

(B) Acquiring a mutual association through the 

merger of such association into a savings association sub1

 So in original. Probably should be "subsections (s) and (t) of section 5''. 
1173 HOME OWNERS' LOAN ACT Sec. 10 

sidiary of such holding company or an interim savings 

association subsidiary of such holding company. 

(C) Subject to paragraph (6), merging with or acquiring another holding company, one of whose subsidiaries is 

a savings association. 

(D) Investing in a corporation the capital stock of 

which is available for purchase by a savings association 

under Federal law or under the law of any State where the 

subsidiary savings association or associations have their 

home offices. 

(E) Engaging in the activities described in subsection 

(c)(2) or (c)(9)(A)(ii). 

(6) LIMITATIONS ON CERTAIN ACTIVITIES OF ACQUIRED HOLDI NG COMPANIES.— 

(A) NE W ACTIVITIES.—If a mutual holding company acquires or merges with another holding company under 

paragraph (5)(C), the holding company acquired or the 

holding company resulting from such merger or acquisition 

may only invest in assets and engage in activities which 

are authorized under paragraph (5). 

(B) GRACE PERIOD FOR DIVESTING PROHIBITED ASSETS 

OR DISCONTINUING PROHIBITED ACTIVITIES.—Not later than 

2 years following a merger or acquisition described in 

paragraph (5)(C), the acquired holding company or the 

holding company resulting from such merger or acquisition 

shall— 

(i) dispose of any asset which is an asset in which 

a mutual holding company may not invest under paragraph (5); and 

(ii) cease any activity which is an activity in which 

a mutual holding company may not engage under 

paragraph (5). 

(7) REGULATION.—A mutual holding company shall be 

chartered by the Director and shall be subject to such regulations as the Director may prescribe. Unless the context otherwise requires, a mutual holding company shall be subject to 

the other requirements of this section regarding regulation of 

holding companies. 

(8) CAPITAL IMPROVEMENT.— 

(A) PLEDGE OF STOCK OF SAVINGS ASSOCIATION SUBSIDIARY.—This section shall not prohibit a mutual holding 

company from pledging all or a portion of the stock of a 

savings association chartered as part of a transaction described in paragraph (1) to raise capital for such savings 

association. 

(B) ISSUANCE OF NONVOTING SHARES.—This section 

shall not prohibit a savings association chartered as part 

of a transaction described in paragraph (1) from issuing 

any nonvoting shares or less than 50 percent of the voting 

shares of such association to any person other than the 

mutual holding company. 

(9) INSOLVENCY AND LIQUIDATION.— 

(A) IN GENERAL.—Notwithstanding any provision of 

law, upon— 
Sec. 10 HOME OWNERS' LOAN ACT 1174 

(i) the default of any savings association— 

(i) the stock of which is owned by any mutual 

holding company; and 

(ii) which was chartered in a transaction described in paragraph (1); 

(ii) the default of a mutual holding company; or 

(iii) a foreclosure on a pledge by a mutual holding 

company described in paragraph (8)(A), 

a trustee shall be appointed receiver of such mutual holding company and such trustee shall have the authority to 

liquidate the assets of, and satisfy the liabilities of, such 

mutual holding company pursuant to title 11, United 

States Code. 

(B) DISTRIBUTION OF NET PROCEEDS.—Except as provided in subparagraph (C), the net proceeds of any liquidation of any mutual holding company pursuant to subparagraph (A) shall be transferred to persons who hold ownership interests in such mutual holding company. 

(C) RECOVERY BY CORPORATION.—If the Corporation 

incurs a loss as a result of the default of any savings association subsidiary of a mutual holding company which is 

liquidated pursuant to subparagraph (A), the Corporation 

shall succeed to the ownership interests of the depositors 

of such savings association in the mutual holding company, to the extent of the Corporation's loss. 

(10) DEFINITIONS.—Fo r purposes of this subsection— 

(A) MUTUA L HOLDING COMPANY.—The term "mutual 

holding company'' means a corporation organized as a 

holding company under this subsection. 

(B) MUTUA L ASSOCIATION.—The term "mutual association'' means a savings association which is operating in 

mutual form. 

(C) DEFAULT.—The term "default'' means an adjudication or other official determination of a court of competent 

jurisdiction or other public authority pursuant to which a 

conservator, receiver, or other legal custodian is appointed. 

(p) HOLDING COMPANY ACTIVITIES CONSTITUTING SERIOUS RISK 

TO SUBSIDIARY SAVINGS ASSOCIATION.— 

(1) DETERMINATION AND IMPOSITION OF RESTRICTIONS.—If 

the Director determines that there is reasonable cause to believe that the continuation by a savings and loan holding company of any activity constitutes a serious risk to the financial 

safety, soundness, or stability of a savings and loan holding 

company's subsidiary savings association, the Director may impose such restrictions as the Director determines to be necessary to address such risk. Such restrictions shall be issued 

in the form of a directive to the holding company and any of 

its subsidiaries, limiting— 

(A) the payment of dividends by the savings association; 

(B) transactions between the savings association, the 

holding company, and the subsidiaries or affiliates of 

either; and 
1175 HOME OWNERS' LOAN ACT Sec. 10 

(C) any activities of the savings association that might 

create a serious risk that the liabilities of the holding company and its other affiliates may be imposed on the savings association. 

Such directive shall be effective as a cease and desist order 

that has become final. 

(2) REVIEW OF DIRECTIVE.— 

(A) ADMINISTRATIVE REVIEW.—Afte r a directive referred to in paragraph (1) is issued, the savings and loan 

holding company, or any subsidiary of such holding company subject to the directive, may object and present in 

writing its reasons why the directive should be modified or 

rescinded. Unless within 10 days after receipt of such response the Director affirms, modifies, or rescinds the directive, such directive shall automatically lapse. 

(B) JUDICIAL REVIEW.—If the Director affirms or modifies a directive pursuant to subparagraph (A), any affected 

party may immediately thereafter petition the united 

States district court for the district in which the savings 

and loan holding company has its main office or in the 

United States District Court for the District of Columbia 

to stay, modify, terminate or set aside the directive. upon 

a showing of extraordinary cause, the savings and loan 

holding company, or any subsidiary of such holding company subject to a directive, may petition a United States 

district court for relief without first pursuing or exhausting the administrative remedies set forth in this paragraph. 

(q) QUALIFIED STOCK ISSUANCE BY UNDERCAPITALIZED SAVINGS 

ASSOCIATIONS OR HOLDING COMPANIES.— 

(1) IN GENERAL.—For purposes of this section, any issue of 

shares of stock shall be treated as a qualified stock issuance 

if the following conditions are met: 

(A) The shares of stock are issued by— 

(i) an undercapitalized savings association; or 

(ii) a savings and loan holding company which is 

not a bank holding company but which controls an 

undercapitalized savings association if, at the time of 

issuance, the savings and loan holding company is legally obligated to contribute the net proceeds from the 

issuance of such stock to the capital of an undercapitalized savings association subsidiary of such holding company. 

(B) All shares of stock issued consist of previously 

unissued stock or treasury shares. 

(C) All shares of stock issued are purchased by a savings and loan holding company that is registered, as of the 

date of purchase, with the Director in accordance with the 

provisions of subsection (b)(1) of this section. 

(D) Subject to paragraph (2), the Director approved 

the purchase of the shares of stock by the acquiring savings and loan holding company. 
Sec. 10 HOME OWNERS' LOAN ACT 1176 

(E) The entire consideration for the stock issued is 

paid in cash by the acquiring savings and loan holding 

company. 

(F) At the time of the stock issuance, each savings 

association subsidiary of the acquiring savings and loan 

holding company (other than an association acquired in a 

transaction pursuant to subsection (c) or (k) of section 13 

of the Federal Deposit Insurance Act or section 408(m) of 

the National Housing Act) has capital (after deducting any 

subordinated debt, intangible assets, and deferred, 

unamortized gains or losses) of not less than 6V2 percent 

of the total assets of such savings association. 

(G) Immediately after the stock issuance, the acquiring savings and loan holding company holds not more than 

15 percent of the outstanding voting stock of the issuing 

undercapitalized savings association or savings and loan 

holding company. 

(H) Not more than one of the directors of the issuing 

association or company is an officer, director, employee, or 

other representative of the acquiring company or any of its 

affiliates. 

(i) Transactions between the savings association or 

savings and loan holding company that issues the shares 

pursuant to this section and the acquiring company and 

any of its affiliates shall be subject to the provisions of section 11. 

(2) APPROVAL OF ACQUISITIONS.— 

(A) ADDITIONAL CAPITAL COMMITMENTS NOT REQUIRED.—The Director shall not disapprove any application for the purchase of stock in connection with a qualified stock issuance on the grounds that the acquiring savings and loan holding company has failed to undertake to 

make subsequent additional capital contributions to maintain the capital of the undercapitalized savings association 

at or above the minimum level required by the Director or 

any other Federal agency having jurisdiction. 

(B) OTHER CONDITIONS.—Notwithstanding subsection 

(a)(4), the Director may impose such conditions on any approval of an application for the purchase of stock in connection with a qualified stock issuance as the Director 

determines to be appropriate, including— 

(i) a requirement that any savings association 

subsidiary of the acquiring savings and loan holding 

company limit dividends paid to such holding company 

for such period of time as the Director may require; 

and 

(ii) such other conditions as the Director deems 

necessary or appropriate to prevent evasions of this 

section. 

( C ) APPLICATION DEEMED APPROVED IF NOT DISAPPROVED WITHI N 90 DAYS.—An application for approval of 

a purchase of stock in connection with a qualified stock 

issuance shall be deemed to have been approved by the Director if such application has not been disapproved by the 
1177 HOME OWNERS' LOAN ACT Sec. 10 

Director before the end of the 90-day period beginning on 

the date such application has been deemed sufficient 

under regulations issued by the Director. 

(3) N O LIMITATION ON CLASS OF STOCK ISSUED.—Th e shares 

of stock issued in connection with a qualified stock issuance 

may be shares of any class. 

(4) UNDERCAPITALIZED SAVINGS ASSOCIATION DEFINED.— 

For purposes of this subsection, the term ''undercapitalized 

savings association'' means any savings association— 

(A) the assets of which exceed the liabilities of such 

association; and 

(B) which does not comply with one or more of the capital standards in effect under section 5(t). 

(r) PENALTY FOR FAILURE T O PROVIDE TIMEL Y AND ACCURATE 

REPORTS.— 

(1) FIRST TIER.—An y savings and loan holding company, 

and any subsidiary of such holding company, which— 

(A) maintains procedures reasonably adapted to avoid 

any inadvertent and unintentional error and, as a result 

of such an error— 

(i) fails to submit or publish any report or information required under this section or regulations 

prescribed by the Director, within the period of time 

specified by the Director; or 

(ii) submits or publishes any false or misleading 

report or information; or 

(B) inadvertently transmits or publishes any report 

which is minimally late, 

shall be subject to a penalty of not more than $2,000 for each 

day during which such failure continues or such false or misleading information is not corrected. Such holding company or 

subsidiary shall have the burden of proving by a 

preponderence of the evidence that an error was inadvertent 

and unintentional and that a report was inadvertently transmitted or published late. 

(2) SECOND TIER.—An y savings and loan holding company, 

and any subsidiary of such holding company, which— 

(A) fails to submit or publish any report or information 

required under this section or under regulations prescribed 

by the Director, within the period of time specified by the 

Director; or 

(B) submits or publishes any false or misleading report or information, 

in a manner not described in paragraph (1) shall be subject to 

a penalty of not more than $20,000 for each day during which 

such failure continues or such false or misleading information 

is not corrected. 

(3) THIR D TIER.—I f any savings and loan holding company 

or any subsidiary of such a holding company knowingly or with 

reckless disregard for the accuracy of any information or report 

described in paragraph (2) submits or publishes any false or 

misleading report or information, the Director may assess a 

penalty of not more than $1,000,000 or 1 percent of total assets 

of such company or subsidiary, whichever is less, per day for 
Sec. 10 HOME OWNERS' LOAN ACT 1178 

each day during which such failure continues or such false or 

misleading information is not corrected. 

(4) ASSESSMENT.—Any penalty imposed under paragraph 

(1), (2), or (3) shall be assessed and collected by the Director 

in the manner provided in subparagraphs (E), (F), (G), and (I) 

of section 8(i)(2) of the Federal Deposit Insurance Act (for penalties imposed under such section) and any such assessment 

(including the determination of the amount of the penalty) 

shall be subject to the provisions of such subsection. 

(5) HEARING.—Any savings and loan holding company or 

any subsidiary of such a holding company against which any 

penalty is assessed under this subsection shall be afforded a 

hearing if such savings and loan holding company or such subsidiary, as the case may be, submits a request for such hearing 

within 20 days after the issuance of the notice of assessment. 

Section 8(h) of the Federal Deposit Insurance Act shall apply 

to any proceeding under this subsection. 

(s) MERGERS, CONSOLIDATIONS, AND OTHER ACQUISITIONS 

AUTHORIZED.— 

(1) IN GENERAL.—Subject to sections 5(d)(3) and 18(c) of 

the Federal Deposit Insurance Act and all other applicable 

laws, any Federal savings association may acquire or be acquired by any insured depository institution. 

(2) EXPEDITED APPROVAL OF ACQUISITIONS.— 

(A) IN GENERAL.—Any application by a savings association to acquire or be acquired by another insured 

depository institution which is required to be filed with the 

Director under any applicable law or regulation shall be 

approved or disapproved in writing by the Director before 

the end of the 60-day period beginning on the date such 

application is filed with the agency. 

(B) EXTENSION OF PERIOD.—The period for approval or 

disapproval referred to in subparagraph (A) may be extended for an additional 30-day period if the Director 

determines that— 

(i) an applicant has not furnished all of the information required to be submitted; or 

(ii) in the Director's judgment, any material information submitted is substantially inaccurate or incomplete. 

(3) ACQUIRE DEFINED.—For purposes of this subsection, the 

term ''acquire'' means to acquire, directly or indirectly, ownership or control through a merger or consolidation or an acquisition of assets or assumption of liabilities, provided that following such merger, consolidation, or acquisition, an acquiring 

insured depository institution may not own the shares of the 

acquired insured depository institution. 

(4) REGULATIONS.— 

(A) REQUIRED.—The Director shall prescribe such regulations as may be necessary to carry out paragraph (1). 

(B) EFFECTIVE DATE.—The regulations required under 

subparagraph (A) shall— 
1179 HOME OWNERS' LOAN ACT Sec. 10 

(i) be prescribed in final form before the end of the 

90-day period beginning on the date of the enactment 

of this subsection; and 

(ii) take effect before the end of the 120-day period 

beginning on such date. 

(5) LIMITATION.—N o provision of this section shall be construed to authorize a national bank or any subsidiary thereof 

to engage in any activity not otherwise authorized under the 

National Bank Act or any other law governing the powers of 

a national bank. 

(t) EXEMPTION FOR BANK HOLDING COMPANIES.—Thi s section 

shall not apply to a bank holding company that is subject to the 

Bank Holding Company Act of 1956, or any company controlled by 

such bank holding company. 

SEC. 11. [12 U.S.C. 1468] TRANSACTIONS WIT H AFFILIATES; EXTENSIONS OF CREDI T TO EXECUTIVE OFFICERS, DIRECTORS, 

A N D PRINCIPA L SHAREHOLDERS. 

(a) AFFILIATE TRANSACTIONS.— 

(1) IN GENERAL.—Sections 23A and 23B of the Federal Reserve Act shall apply to every savings association in the same 

manner and to the same extent as if the savings association 

were a member bank (as defined in such Act), except that— 

(A) no loan or other extension of credit may be made 

to any affiliate unless that affiliate is engaged only in 

activities described in section 10(c)(2)(F)(i); and 

(B) no savings association may enter into any transaction described in section 23A(b)(7)(B) of the Federal Reserve Act with any affiliate other than with respect to 

shares of a subsidiary. 

(2) SISTER BANK EXEMPTION MADE AVAILABLE TO SAVINGS 

ASSOCIATIONS.— 

(A) SAVINGS ASSOCIATIONS CONTROLLED BY BANK HOLDING COMPANIES.—Every savings association more than 80 

percent of the voting stock of which is owned by a company 

described in section 10(c)(8) shall be treated as a bank for 

purposes of section 23A(d)(1) and section 23B of the Federal Reserve Act, if every savings association and bank 

controlled by such company complies with all applicable 

capital requirements on a fully phased-in basis and without reliance on goodwill. 

(B) SAVINGS ASSOCIATIONS GENERALLY.—Effective on 

and after January 1, 1995, every savings association shall 

be treated as a bank for purposes of section 23A(d)(1) and 

section 23B of the Federal Reserve Act. 

(3) AFFILIATES DESCRIBED.—Any company that would be 

an affiliate (as defined in sections 23A and 23B of the Federal 

Reserve Act) of any savings association if such savings association were a member bank (as such term is defined in such Act) 

shall be deemed to be an affiliate of such savings association 

for purposes of paragraph (1). 

(4) ADDITIONAL RESTRICTIONS AUTHORIZED.—The Director 

may impose such additional restrictions on any transaction between any savings association and any affiliate of such savings 
Sec. 10 HOME OWNERS' LOAN ACT 1180 

association as the Director determines to be necessary to protect the safety and soundness of the savings association. 

(b) EXTENSIONS OF CREDIT TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS.— 

(1) IN GENERAL.—Subsections (g) and (h) of section 22 of 

the Federal Reserve Act shall apply to every savings association in the same manner and to the same extent as if the savings association were a member bank (as defined in such Act). 

(2) ADDITIONAL RESTRICTIONS AUTHORIZED.—The Director 

may impose such additional restrictions on loans or extensions 

of credit to any director or executive officer of any savings 

association, or any person who directly or indirectly owns, controls, or has the power to vote more than 10 percent of any 

class of voting securities of a savings association, as the Director determines to be necessary to protect the safety and soundness of the savings association. 

(c) ADMINISTRATIVE ENFORCEMENT.—The Director may take 

enforcement action with respect to violations of this section pursuant to section 8 or 18(j) of the Federal Deposit Insurance Act, as 

appropriate. 

SEC. 12. [12 U.S.C. 1468a] ADVERTISING. 

No savings association shall carry on any sale, plan, or practices, or any advertising, in violation of regulations promulgated by 

the Director. 

SEC. 13. [12 U.S.C. 1468b] POWERS OF EXAMINERS. 

For the purposes of this Act, examiners appointed by the Director shall— 

(1) be subject to the same requirements, responsibilities, 

and penalties as are applicable to examiners under the Federal 

Reserve Act and title LXII of the Revised Statutes; and 

(2) have, in the exercise of functions under this Act, the 

same powers and privileges as are vested in such examiners by 

law. 

SEC. 14. [12 U.S.C. 1468c] SEPARABILITY PROVISION. 

If any provision of this Act, or the application thereof to any 

person or circumstances, is held invalid, the remainder of the Act, 

and the application of such provision to other persons or circumstances, shall not be affected thereby. 
INTERNATIONAL BANKING ACT OF 1978 

1181 

INTERNATIONAL BANKING ACT OF 1978 

A N ACT To provide for Federal regulation of participation by foreign banks in 

domestic financial markets. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SHORT TITLE; DEFINITIONS AND RULES OF CONSTRUCTION 

SECTION 1. [12 U.S.C. 3101 note] (a) This Act may be cited as 

the "International Banking Act of 1978''. 

(b) [12 U.S.C. 3101] For the purposes of this Act— 

(1) ''agency'' means any office or any place of business of 

a foreign bank located in any state of the united states at 

which credit balances are maintained incidental to or arising 

out of the exercise of banking powers, checks are paid, or 

money is lent but at which deposits may not be accepted from 

citizens or residents of the united states; 

(2) ''Board'' means the Board of Governors of the Federal 

Reserve system; 

(3) ''branch'' means any office or any place of business of 

a foreign bank located in any state of the united states at 

which deposits are received; 

(4) ''Comptroller'' means the Comptroller of the Currency; 

(5) ''Federal agency'' means an agency of a foreign bank 

established and operating under section 4 of this Act; 

(6) ''Federal branch'' means a branch of a foreign bank 

established and operating under section 4 of this Act; 

(7) ''foreign bank'' means any company organized under 

the laws of a foreign country, a territory of the united states, 

puerto Rico, Guam, American samoa, or the virgin islands, 

which engages in the business of banking, or any subsidiary or 

affiliate, organized under such laws, of any such company. For 

the purposes of this Act the term ''foreign bank'' includes, without limitation, foreign commercial banks, foreign merchant 

banks and other foreign institutions that engage in banking 

activities usual in connection with the business of banking in 

the countries where such foreign institutions are organized or 

operating; 

(8) ''foreign country'' means any country other than the 

United States, and includes any colony, dependency, or possession of any such country; 

(9) ''commercial lending company'' means any institution, 

other than a bank or an organization operating under section 

25 of the Federal Reserve Act, organized under the laws of any 

State of the United States, or the District of Columbia which 

maintains credit balances incidental to or arising out of the 

1183 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1184 

exercise of banking powers and engages in the business of 

making commercial loans; 

(10) ''State'' means any State of the United States or the 

District of Columbia; 

(11) ''State agency'' means an agency of a foreign bank 

established and operating under the laws of any State; 

(12) ''State branch'' means a branch of a foreign bank 

established and operating under the laws of any State; 

(13) the terms ''affiliate'', ''bank'', ''bank holding company'', 

''company'', ''control'', and ''subsidiary'' have the same meanings 

assigned to those terms in the Bank Holding Company Act of 

1956, and the terms ''controlled'' and ''controlling'' shall be construed consistently with the term ''control'' as defined in section 2 of the Bank Holding Company Act of 1956; 

(14) ''consolidated'' means consolidated in accordance with 

generally accepted accounting principles in the United States 

consistently applied; 

(15) the term ''representative office'' means any office of a 

foreign bank which is located in any State and is not a Federal 

branch, Federal agency, State branch, or State agency; 

(16) the term ''office'' means any branch, agency, or representative office; and 

(17) the term ''State bank supervisor'' has the meaning 

given to such term in section 3 of the Federal Deposit Insurance Act. 

[§§ 2 and 3 made amendments to other Acts] 

FEDERAL BRANCHES AND AGENCIES 

SEC. 4. [12 U.S.C. 3102] (a) ESTABLISHMENT AND OPERATION 

OF FEDERAL BRANCHES AND AGENCIES.— 

(1) INITIAL FEDERAL BRANCH OR AGENCY.—Except as provided in section 5, a foreign bank which engages directly in a 

banking business outside the United States may, with the approval of the Comptroller, establish one or more Federal 

branches or agencies in any State in which (1) it is not operating a branch or agency pursuant to State law and (2) the 

establishment of a branch or agency, as the case may be, by 

a foreign bank is not prohibited by State law. 

(2) BOARD CONDITIONS REQUIRED TO BE INCLUDED.—I n considering any application for approval under this subsection, the 

Comptroller of the Currency shall include any condition imposed by the Board under section 7(d)(5) as a condition for the 

approval of such application by the agency. 

(b) In establishing and operating a Federal branch or agency, 

a foreign bank shall be subject to such rules, regulations, and orders as the Comptroller considers appropriate to carry out this section, which shall include provisions for service of process and maintenance of branch and agency accounts separate from those of the 

parent bank. Except as otherwise specifically provided in this Act 

or in rules, regulations, or orders adopted by the Comptroller under 

this section, operations of a foreign bank at a Federal branch or 

agency shall be conducted with the same rights and privileges as 

a national bank at the same location and shall be subject to all the 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1185 

same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply under the National Bank Act to a national 

bank doing business at the same location, except that (1) any limitation or restriction based on the capital stock and surplus of a national bank shall be deemed to refer, as applied to a Federal 

branch or agency, to the dollar equivalent of the capital stock and 

surplus of the foreign bank, and if the foreign bank has more than 

one Federal branch or agency the business transacted by all such 

branches and agencies shall be aggregated in determining compliance with the limitation; (2) a Federal branch or agency shall not 

be required to become a member bank, as that term is defined in 

section 1 of the Federal Reserve Act; and (3) a Federal agency shall 

not be required to become an insured bank as that term is defined 

in section 3(h) of the Federal Deposit Insurance Act. The Comptroller of the Currency shall coordinate examinations of Federal 

branches and agencies of foreign banks with examinations conducted by the Board under section 7(c)(1) and, to the extent possible, shall participate in any simultaneous examinations of the 

United States operations of a foreign bank requested by the Board 

under such section. 

(c) In acting on any application to establish a Federal branch 

or agency, the comptroller shall take into account the effects of the 

proposal on competition in the domestic and foreign commerce of 

the United States, the financial and managerial resources and future prospects of the applicant foreign bank and the branch or 

agency, and the convenience and needs of the community to be 

served. 

(d) Notwithstanding any other provision of this section, a foreign bank shall not receive deposits or exercise fiduciary powers at 

any Federal agency. A foreign bank may, however, maintain at a 

Federal agency for the account of others credit balances incidental 

to, or arising out of, the exercise of its lawful powers. 

(e) No foreign bank may maintain both a Federal branch and 

a Federal agency in the same State. 

(f) Any branch or agency operated by a foreign bank in a State 

pursuant to State law and any commercial lending company controlled by a foreign bank may be converted into a Federal branch 

or agency with the approval of the comptroller. in the event of any 

conversion pursuant to this subsection, all of the liabilities of such 

foreign bank previously payable at the State branch or agency, or 

all of the liabilities of the commercial lending company, shall thereafter be payable by such foreign bank at the branch or agency 

established under this subsection. 

(g)(1) Upon the opening of a Federal branch or agency in any 

State and thereafter, a foreign bank, in addition to any deposit 

requirements imposed under section 6 of this Act, shall keep on deposit, in accordance with such rules and regulations as the comptroller may prescribe, with a member bank designated by such foreign bank, dollar deposits or investment securities of the type that 

may be held by national banks for their own accounts pursuant to 

paragraph ''Seventh'' of section 5136 of the Revised Statutes, as 

amended, in an amount as hereinafter set forth. Such depository 

bank shall be located in the State where such branch or agency is 

located and shall be approved by the comptroller if it is a national 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1186 

bank and by the Board of Governors of the Federal Reserve System 

if it is a State Bank. 

(2) The aggregate amount of deposited in investment securities 

(calculated on the basis of principal amount or market value, 

whichever is lower) and dollar deposits for each branch or agency 

established and operating under this section shall be not less than 

the greater of (1) that amount of capital (but not surplus) which 

would be required of a national bank being organized at this location, or (2) 5 per centum of the total liabilities of such branch or 

agency, including acceptances, but excluding (A) accrued expenses, 

and (B) amounts due and other liabilities to offices, branches, agencies, and subsidiaries of such foreign bank. The Comptroller may 

require that the assets deposited pursuant to this subsection shall 

be maintained in such amounts as he may from time to time deem 

necessary or desirable, for the maintenance of a sound financial 

condition, the protection of depositors, and the public interest, but 

such additional amount shall in no event be greater than would be 

required to conform to generally accepted banking practices as 

manifested by banks in the area in which the branch or agency is 

located. 

(3) The deposit shall be maintained with any such member 

bank pursuant to a deposit agreement in such form and containing 

such limitations and conditions as the Comptroller may prescribe. 

So long as it continues business in the ordinary course such foreign 

bank shall, however, be permitted to collect income on the securities and funds so deposited and from time to time examine and exchange such securities. 

(4) Subject to such conditions and requirements as may be prescribed by the Comptroller, each foreign bank shall hold in each 

State in which it has a Federal branch or agency, assets of such 

types and in such amount as the Comptroller may prescribe by 

general or specific regulation or ruling as necessary or desirable for 

the maintenance of a sound financial condition, the protection of 

depositors, creditors and the public interest. in determining compliance with any such prescribed asset requirements, the Comptroller 

shall give credit to (A) assets required to be maintained pursuant 

to paragraphs (1) and (2) of this subsection, (B) reserves required 

to be maintained pursuant to section 7(a) of this Act, and (C) assets 

pledged, and surety bonds payable, to the Federal Deposit insurance Corporation to secure the payment of domestic deposits. The 

Comptroller may prescribe different asset requirements for 

branches or agencies in different States, in order to ensure competitive equality of Federal branches and agencies with State 

branches and agencies and domestic banks in those States. 

(h) ADDITIONAL BRANCHES OR AGENCIES.— 

(1) APPROVAL OF AGENCY REQUIRED.—A foreign bank with 

a Federal branch or agency operating in any State may (A) 

with the prior approval of the Comptroller establish and operate additional branches or agencies in the State in which such 

branch or agency is located on the same terms and conditions 

and subject to the same limitations and restrictions as are applicable to the establishment of branches by a national bank if 

the principal office of such national bank were located at the 

same place as the initial branch or agency in such State of 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1187 

such foreign bank and (B) change the designation of its initial 

branch or agency to any other branch or agency subject to the 

same limitations and restrictions as are applicable to a change 

in the designation of the principal office of a national bank if 

such principal office were located at the same place as such initial branch or agency. 

(2) NOTIC E TO AND COMMENT BY BOARD.—The Comptroller 

of the Currency shall provide the Board with notice and an 

opportunity for comment on any application to establish an 

additional Federal branch or Federal agency under this subsection. 

(1) Authority to operate a Federal branch or agency shall terminate when the parent foreign bank voluntarily relinquishes it or 

when such parent foreign bank is dissolved or its authority or 

existence is otherwise terminated or canceled in the country of its 

organization. If (1) at any time the Comptroller is of the opinion 

or has reasonable cause to believe that such foreign bank has violated or failed to comply with any of the provisions of this section 

or any of the rules, regulations, or orders of the Comptroller made 

pursuant to this section, or (2) a conservator is appointed for such 

foreign bank or a similar proceeding is initiated in the foreign 

bank's country of organization, the Comptroller shall have the 

power, after opportunity for hearing, to revoke the foreign bank's 

authority to operate a Federal branch or agency. The Comptroller 

may, in his discretion, deny such opportunity for hearing if he 

determines such denial to be in the public interest. The Comptroller may restore any such authority upon due proof of compliance with the provisions of this section and the rules, regulations, 

or orders of the Comptroller made pursuant to this section. 

(j)(1) Whenever the Comptroller revokes a foreign bank's authority to operate a Federal branch or agency or whenever any 

creditor of any such foreign bank shall have obtained a judgment 

against it arising out of a transaction with a Federal branch or 

agency in any court of record of the united states or any state of 

the United States and made application, accompanied by a certificate from the clerk of the court stating that such judgment has 

been rendered and has remained unpaid for the space of thirty 

days, or whenever the Comptroller shall become satisfied that such 

foreign bank is insolvent, he may, after due consideration of its affairs, in any such case, appoint a receiver who shall take possession of all the property and assets of such foreign bank in the 

united states and exercise the same rights, privileges, powers, and 

authority with respect thereto as are now exercised by receivers of 

national banks appointed by the Comptroller. 

(2) in any receivership proceeding ordered pursuant to this 

subsection (j), whenever there has been paid to each and every depositor and creditor of such foreign bank whose claim or claims 

shall have been proved or allowed, the full amount of such claims 

arising out of transactions had by them with any branch or agency 

of such foreign bank located in any State of the United States, except (A) claims that would not represent an enforceable legal obligation against such branch or agency if such branch or agency were 

a separate legal entity, and (B) amounts due and other liabilities 

to other offices or branches or agencies of, and wholly owned (ex-
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1188 

cept for a nominal number of directors' shares) subsidiaries of, such 

foreign bank, and all expenses of the receivership, the Comptroller 

or the Federal Deposit Insurance Corporation, where that Corporation has been appointed receiver of the foreign bank, shall turn 

over the remainder, if any, of the assets and proceeds of such foreign bank to the head office of such foreign bank, or to the duly 

appointed domiciliary liquidator or receiver of such foreign bank. 

INTERSTATE BANKING OPERATIONS 

SEC. 5. [12 U.S.C. 3103] (a) INTERSTATE BRANCHING AND 

AGENCY OPERATIONS.— 

(1) FEDERAL BRANCH OR AGENCY.—Subject to the provisions of this Act and with the prior written approval by the 

Board and the Comptroller of the Currency of an application, 

a foreign bank may establish and operate a Federal branch or 

agency in any State outside the home State of such foreign 

bank to the extent that the establishment and operation of 

such branch would be permitted under section 5155(g) of the 

Revised Statutes or section 44 of the Federal Deposit Insurance Act if the foreign bank were a national bank whose home 

State is the same State as the home State of the foreign bank. 

(2) STATE BRANCH OR AGENCY.—Subject to the provisions of 

this Act and with the prior written approval by the Board and 

the appropriate State bank supervisor of an application, a foreign bank may establish and operate a State branch or agency 

in any State outside the home State of such foreign bank to the 

extent that such establishment and operation would be permitted under section 18(d)(4) or 44 of the Federal Deposit 

Insurance Act if the foreign bank were a State bank whose 

home State is the same State as the home State of the foreign 

bank. 

(3) CRITERIA FOR DETERMINATION.—In approving an application under paragraph (1) or (2), the Board and (in the case 

of an application under paragraph (1)) the Comptroller of the 

Currency— 

(A) shall apply the standards applicable to the establishment of a foreign bank office in the United States 

under section 7(d); 

(B) may not approve an application unless the Board 

and (in the case of an application under paragraph (1)) the 

Comptroller of the Currency— 

(i) determine that the foreign bank's financial resources, including the capital level of the bank, are 

equivalent to those required for a domestic bank to be 

approved for branching under section 5155 of the Revised Statutes and section 44 of the Federal Deposit 

Insurance Act; and 

(ii) consult with the Secretary of the Treasury regarding capital equivalency; and 

(C) shall apply the same requirements and conditions 

to which an application for an interstate merger transaction is subject under paragraphs (1), (3), and (4) of section 44(b) of the Federal Deposit Insurance Act. 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1189 

(4) OPERATION.—Subsections (c) and (d)(2) of section 44 of 

the Federal Deposit Insurance Act shall apply with respect to 

each branch and agency of a foreign bank which is established 

and operated pursuant to an application approved under this 

subsection in the same manner and to the same extent such 

provisions of such section apply to a domestic branch of a national or State bank (as such terms are defined in section 3 of 

such Act) which resulted from a merger transaction under such 

section 44. 

(5) EXCLUSIVE AUTHORITY FOR ADDITIONAL BRANCHES.—Except as provided in this section, a foreign bank may not, directly or indirectly, acquire, establish, or operate a branch or 

agency in any State other than the home State of such bank. 

(6) REQUIREMEN T FOR A SEPARATE SUBSIDIARY.—If th e 

Board or the Comptroller of the Currency, taking into account 

differing regulatory or accounting standards, finds that adherence by a foreign bank to capital requirements equivalent to 

those imposed under section 5155 of the Revised Statutes and 

section 44 of the Federal Deposit Insurance Act could be verified only if the banking activities of such bank in the United 

States are carried out in a domestic banking subsidiary within 

the United States, the Board and (in the case of an application 

under paragraph (1)) the Comptroller of the Currency may approve an application under paragraph (1) or (2) subject to a 

requirement that the foreign bank or company controlling the 

foreign bank establish a domestic banking subsidiary in the 

United States. 

(7) ADDITIONAL AUTHORITY FOR INTERSTATE BRANCHES AND 

AGENCIES OF FOREIGN BANKS, UPGRADES OF CERTAIN FOREIGN 

BANK AGENCIES AND BRANCHES.—Notwithstanding paragraphs 

(1) and (2), a foreign bank may— 

(A) with the approval of the Board and the Comptroller of the Currency, establish and operate a Federal 

branch or Federal agency or, with the approval of the 

Board and the appropriate State bank supervisor, a State 

branch or State agency in any State outside the foreign 

bank's home State if— 

(i) the establishment and operation of such branch 

or agency is permitted by the State in which the 

branch or agency is to be established; and 

(ii) in the case of a Federal or State branch, the 

branch receives only such deposits as would be permitted for a corporation organized under section 25A 

of the Federal Reserve Act; or 

(B) with the approval of the Board and the relevant licensing authority (the Comptroller in the case of a Federal 

branch or the appropriate State supervisor in the case of 

a State branch), upgrade an agency, or a branch of the 

type referred to in subparagraph (A)(ii), located in a State 

outside the foreign bank's home State, into a Federal or 

State branch if— 

(i) the establishment and operation of such branch 

is permitted by such State; and 

(ii) such agency or branch— 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1190 

(I) was in operation in such State on the day 

before September 29, 1994; or 

(II) has been in operation in such State for a 

period of time that meets the State's minimum 

age requirement permitted under section 44(a)(5) 

of the Federal Deposit Insurance Act. 

(8) CONTINUING REQUIREMENT FOR MEETING COMMUNITY 

CREDIT NEEDS AFTER INITIAL INTERSTATE ENTRY BY ACQUISITioN. — 

(A) I N GENERAL.—If a foreign bank acquires a bank or 

a branch of a bank, in a State in which the foreign bank 

does not maintain a branch, and such acquired bank is, or 

is part of, a regulated financial institution (as defined in 

section 803 of the Community Reinvestment Act of 1977), 

the Community Reinvestment Act of 1977 shall continue to 

apply to each branch of the foreign bank which results 

from the acquisition as if such branch were a regulated 

financial institution. 

(B) EXCEPTION FOR BRANCH THAT RECEIVES ONLY DEPOSITS PERMISSIBLE FOR A N EDGE ACT CORPORATION.— 

Paragraph (1) shall not apply to any branch that receives 

only such deposits as are permissible for a corporation 

organized under section 25A of the Federal Reserve Act to 

receive. 

(9) HOM E STATE OF DOMESTIC BANK DEFINED.—Fo r purposes of this subsection, the term ''home State'' means— 

(A) with respect to a national bank, the State in which 

the main office of the bank is located; and 

(B) with respect to a State bank, the State by which 

the bank is chartered. 

(b) unless its authority to do so is lawfully revoked otherwise 

than pursuant to this section, a foreign bank, notwithstanding any 

restriction or limitation imposed under subsection (a) of this section, may establish and operate, outside its home State, any State 

branch, State agency, or bank or commercial lending company subsidiary which commenced lawful operation or for which an application to commence business had been lawfully filed with the appropriate State or Federal authority, as the case may be, on or before 

July 27, 1978. Notwithstanding subsection (a), a foreign bank may 

continue to operate, after the enactment of the Riegle-Neal interstate Banking and Branching Efficiency Act of 1994, any Federal 

branch, State branch, Federal agency, State agency, or commercial 

lending company subsidiary which such bank was operating on the 

day before the date of the enactment of such Act to the extent the 

branch, agency, or subsidiary continues, after the enactment of 

such Act, to engage in operations which were lawful under the laws 

in effect on the day before such date. 

(c) DETERMINATION OF HOM E STATE OF FOREIGN BANK.—Fo r 

the purposes of this section— 

(1) in the case of a foreign bank that has any branch, 

agency, subsidiary commercial lending company, or subsidiary 

bank in more than 1 State, the home State of the foreign bank 

is the 1 State of such States which is selected to be the home 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1191 

state by the foreign bank or, in default of any such selection, 

by the Board; and 

(2) in the case of a foreign bank that does not have a 

branch, agency, subsidiary commercial lending company, or 

subsidiary bank in more than 1 state, the home state of the 

foreign bank is the state in which the foreign bank has a 

branch, agency, subsidiary commercial lending company, or 

subsidiary bank. 

(d) CLARIFICATION OF BRANCHING RULES I N THE CASE OF A 

FOREIGN BAN K WIT H A DOMESTIC BANK SUBSIDIARY.—In the case 

of a foreign bank that has a domestic bank subsidiary within the 

united states— 

(1) the fact that such bank controls a domestic bank shall 

not affect the authority of the foreign bank to establish Federal 

and state branches or agencies to the extent permitted under 

subsection (a); and 

(2) the fact that the domestic bank is controlled by a foreign bank which has Federal or State branches or agencies in 

states other than the home state of such domestic bank shall 

not affect the authority of the domestic bank to establish 

branches outside the home state of the domestic bank to the 

extent permitted under section 5155(g) of the Revised Statutes 

or section 18(d)(4) or 44 of the Federal Deposit Insurance Act, 

as the case may be. 

INSURANCE OF DEPOSITS 

SEC. 6. [12 U.S.C. 3104] (a) OBJECTIVE.—I n implementing this 

section, the Comptroller and the Federal Deposit Insurance Corporation shall each, by affording equal competitive opportunities to 

foreign and united states banking organizations in their united 

states operations, ensure that foreign banking organizations do not 

receive an unfair competitive advantage over United States banking organizations. 

(b) No foreign bank may establish or operate a Federal branch 

which receives deposits of less than $100,000 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 $100,000 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. 

(2) Notwithstanding the previous paragraph, a branch of a foreign bank in operation on the date of enactment of this Act which 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1192 

has applied for Federal deposit insurance pursuant to section 5 of 

the Federal Deposit Insurance Act by September 17, 1979, and has 

not had such application denied, may continue to accept domestic 

retail deposits until January 31, 1980. 

(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 $100,000, and requiring deposit insurance 

protection, a foreign bank shall— 

(A) establish 1 or more banking subsidiaries in the 

United States for that purpose; and 

(B) obtain Federal deposit insurance for any such subsidiary in accordance with the Federal Deposit Insurance 

Act. 

(2) EXCEPTION.—Domestic retail deposit accounts with balances of less than $100,000 that require deposit insurance protection may be accepted or maintained in a branch of a foreign 

bank only if such branch was an insured branch on the date 

of the enactment of this subsection. 

(3) INSURED BANKS I N U.S. TERRITORIES.—For purposes of 

this subsection, the term ''foreign bank'' does not include any 

bank organized under the laws of any territory of the united 

States, Puerto Rico, Guam, American Samoa, or the Virgin Islands the deposits of which are insured by the Federal Deposit 

Insurance Corporation pursuant to the Federal Deposit Insurance Act. 

AUTHORITY OF FEDERAL RESERVE SYSTEM 

SEC. 7. [12 U.S.C. 3105] (a)(1)(A) Except as provided in paragraph (2) of this subsection, subsections (a), (b), (c), (d), (f), (g), (i), 

(j), (k), and the second sentence of subsection (e) of section 19 of 

the Federal Reserve Act shall apply to every Federal branch and 

Federal agency of a foreign bank in the same manner and to the 

same extent as if the Federal branch or Federal agency were a 

member bank as that term is defined in section 1 of the Federal 

Reserve Act; but the Board either by general or specific regulation 

or ruling may waive the minimum and maximum reserve ratios 

prescribed under section 19 of the Federal Reserve Act and may 

prescribe any ratio, not more than 22 per centum, for any obligation of any such Federal branch or Federal agency that the Board 

may deem reasonable and appropriate, taking into consideration 

the character of business conducted by such institutions and the 

need to maintain vigorous and fair competition between and among 

such institutions and member banks. The Board may impose reserve requirements on Federal branches and Federal agencies in 

such graduated manner as it deems reasonable and appropriate. 

(B) After consultation and in cooperation with the State bank 

supervisory authorities, the Board may make applicable to any 

State branch or State agency any requirement made applicable to, 

or which the Board has authority to impose upon, any Federal 

branch or agency under subparagraph (A) of this paragraph. 
1193 INTERNATIONAL BANKING ACT OF 1978 Sec. 10 

(2) A branch or agency shall be subject to this subsection only 

if (A) its parent foreign bank has total worldwide consolidated bank 

assets in excess of $1,000,000,000; (B) its parent foreign bank is 

controlled by a foreign company which owns or controls foreign 

banks that in the aggregate have total worldwide consolidated 

bank assets in excess of $1,000,000,000; or (C) its parent foreign 

bank is controlled by a group of foreign companies that own or control foreign banks that in the aggregate have total worldwide consolidated bank assets in excess of $1,000,000,000. 

[Section 7(b) amended the Federal Reserve Act.] 

(c) FOREIGN BANK EXAMINATIONS AND REPORTING.— 

(1) EXAMINATION OF BRANCHES, AGENCIES, AND AFFILIATES.— 

(A) IN GENERAL.—The Board may examine each 

branch or agency of a foreign bank, each commercial lending company or bank controlled by 1 or more foreign banks 

or 1 or more foreign companies that control a foreign bank, 

and other office or affiliate of a foreign bank conducting 

business in any State. 

(B) COORDINATION OF EXAMINATIONS.— 

(i) IN GENERAL.—The Board shall coordinate 

examinations under this paragraph with the Comptroller of the Currency, the Federal Deposit Insurance 

Corporation, and appropriate State bank supervisors 

to the extent such coordination is possible. 

(ii) SIMULTANEOUS EXAMINATIONS.—The Board 

may request simultaneous examinations of each office 

of a foreign bank and each affiliate of such bank operating in the United States. 

(iii) AVOIDANCE OF DUPLICATION.—In exercising its 

authority under this paragraph, the Board shall take 

all reasonable measures to reduce burden and avoid 

unnecessary duplication of examinations. 

(C) ON-SITE EXAMINATION.—Each Federal branch or 

agency, and each State branch or agency, of a foreign bank 

shall be subject to on-site examination by an appropriate 

Federal banking agency or State bank supervisor as frequently as would a national bank or a State bank, respectively, by the appropriate Federal banking agency. 

(D) COST OF EXAMINATIONS.—The cost of any examination under subparagraph (A) shall be assessed against and 

collected from the foreign bank or the foreign company 

that controls the foreign bank, as the case may be, only to 

the same extent that fees are collected by the Board for 

examination of any State member bank. 

(2)1 REPORTING REQUIREMENTS.—Each branch or agency of a 

foreign bank, other than a Federal branch or agency, shall be subject to paragraph 20 and the provision requiring the reports of condition contained in paragraph 6 of section 9 of the Federal Reserve 

Act (12 U.S.C. 335 and 324) to the same extent and in the same 

manner as if the branch or agency were a State member bank. In 

addition to any requirements imposed under section 4 of this Act, 

1

 indentation so in law. 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1194 

each Federal branch and agency shall be subject to subparagraph 

(a) of section 11 of the Federal Reserve Act (12 U.S.C. 248(a)) and 

to paragraph 5 of section 21 of the Federal Reserve Act (12 U.S.C. 

483) to the same extent and in the same manner as if it were a 

member bank. 

(d) ESTABLISHMENT OF FOREIGN BANK OFFICES I N THE UNITE D 

STATES.— 

(1) PRIOR APPROVAL REQUIRED.—No foreign bank may 

establish a branch or an agency, or acquire ownership or control of a commercial lending company, without the prior approval of the Board. 

(2) REQUIRED STANDARDS FOR APPROVAL.— Except as provided in paragraph (6), the Board may not approve an application under paragraph (1) unless it determines that— 

(A) the foreign bank engages directly in the business 

of banking outside of the United States and is subject to 

comprehensive supervision or regulation on a consolidated 

basis by the appropriate authorities in its home country; 

and 

(B) the foreign bank has furnished to the Board the 

information it needs to adequately assess the application. 

(3) STANDARDS FOR APPROVAL.—In acting on any application under paragraph (1), the Board may take into account— 

(A) whether the appropriate authorities in the home 

country of the foreign bank have consented to the proposed 

establishment of a branch, agency or commercial lending 

company in the United States by the foreign bank; 

(B) the financial and managerial resources of the foreign bank, including the bank's experience and capacity to 

engage in international banking; 

(C) whether the foreign bank has provided the Board 

with adequate assurances that the bank will make available to the Board such information on the operations or 

activities of the foreign bank and any affiliate of the bank 

that the Board deems necessary to determine and enforce 

compliance with this Act, the Bank Holding Company Act 

of 1956, and other applicable Federal law; and 

(D) whether the foreign bank and the United States 

affiliates of the bank are in compliance with applicable 

United States law. 

(4) FACTOR.—In acting on an application under paragraph 

(1), the Board shall not make the size of the foreign bank the 

sole determinant factor, and may take into account the needs 

of the community as well as the length of operation of the foreign bank and its relative size in its home country. Nothing in 

this paragraph shall affect the ability of the Board to order a 

State branch, agency, or commercial lending company subsidiary to terminate its activities in the United States pursuant to any standard set forth in this Act. 

(5) ESTABLISHMENT OF CONDITIONS.— The Board may impose such conditions on its approval under this subsection as 

it deems necessary. 

(6) EXCEPTION.— 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1195 

(A) I N GENERAL.—If the Board is unable to find, under 

paragraph (2), that a foreign bank is subject to comprehensive supervision or regulation on a consolidated basis by 

the appropriate authorities in its home country, the Board 

may nevertheless approve an application by such foreign 

bank under paragraph (1) if— 

(i) the appropriate authorities in the home country 

of the foreign bank are actively working to establish 

arrangements for the consolidated supervision of such 

bank; and 

(ii) all other factors are consistent with approval. 

(B) OTHER CONSIDERATIONS.—In deciding whether to 

use its discretion under subparagraph (A), the Board shall 

also consider whether the foreign bank has adopted and 

implements procedures to combat money laundering. The 

Board may also take into account whether the home country of the foreign bank is developing a legal regime to address money laundering or is participating in multilateral 

efforts to combat money laundering. 

(C) ADDITIONAL CONDITIONS.—In approving an application under this paragraph, the Board, after requesting and 

taking into consideration the views of the appropriate 

State bank supervisor or the Comptroller of the Currency, 

as the case may be, may impose such conditions or restrictions relating to the activities or business operations of the 

proposed branch, agency, or commercial lending company 

subsidiary, including restrictions on sources of funding, as 

are considered appropriate. The Board shall coordinate 

with the appropriate State bank supervisor or the Comptroller of the Currency, as appropriate, in the implementation of such conditions or restrictions. 

(D) MODIFICATION OF CONDITIONS.—Any condition or 

restriction imposed by the Board in connection with the 

approval of an application under authority of this paragraph may be modified or withdrawn. 

(7) TIM E PERIOD FOR BOARD ACTION.— 

(A) FINAL ACTION.—The Board shall take final action 

on any application under paragraph (1) not later than 180 

days after receipt of the application, except that the Board 

may extend for an additional 180 days the period within 

which to take final action on such application after providing notice of, and the reasons for, the extension to the 

applicant foreign bank and any appropriate state bank 

supervisor or the Comptroller of the Currency, as appropriate. 

(B) FAILURE TO SUBMIT INFORMATION.—The Board may 

deny any application if it does not receive information requested from the applicant foreign bank or appropriate 

authorities in the home country of the foreign bank in sufficient time to permit the Board to evaluate such information adequately within the time periods for final action set 

forth in subparagraph (A). 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1196 

(C) WAIVER.— A foreign bank may waive the applicability of this paragraph with respect to any application 

under paragraph (1). 

(e) TERMINATION OF FOREIGN BANK OFFICES I N THE UNITE D 

STATES.— 

(1) STANDARDS FOR TERMINATION.—The Board, after notice 

and opportunity for hearing and notice to any appropriate 

State bank supervisor, may order a foreign bank that operates 

a State branch or agency or commercial lending company subsidiary in the United States to terminate the activities of such 

branch, agency, or subsidiary if the Board finds that— 

(A)(i) the foreign bank is not subject to comprehensive 

supervision or regulation on a consolidated basis by the 

appropriate authorities in its home country; and 

(ii) the appropriate authorities in the home country of 

the foreign bank are not making demonstrable progress in 

establishing arrangements for the comprehensive supervision or regulation of such foreign bank on a consolidated 

basis; or 

(B)(i) there is reasonable cause to believe that such 

foreign bank, or any affiliate of such foreign bank, has 

committed a violation of law or engaged in an unsafe or 

unsound banking practice in the United States; and 

(ii) as a result of such violation or practice, the continued operation of the foreign bank's branch, agency or commercial lending company subsidiary in the United States 

would not be consistent with the public interest or with 

the purposes of this Act, the Bank Holding Company Act 

of 1956, or the Federal Deposit Insurance Act. 

However, in making findings under this paragraph, the Board 

shall not make size the sole determinant factor, and may take 

into account the needs of the community as well as the length 

of operation of the foreign bank and its relative size in its 

home country. Nothing in this paragraph shall affect the ability of the Board to order a State branch, agency, or commercial 

lending company subsidiary to terminate its activities in the 

United States pursuant to any standard set forth in this Act. 

(2) DISCRETION TO DENY HEARING.—Th e Board may issue 

an order under paragraph (1) without providing for an opportunity for a hearing if the Board determines that expeditious 

action is necessary in order to protect the public interest. 

(3) EFFECTIVE DATE OF TERMINATION ORDER.—A n order 

issued under paragraph (1) shall take effect before the end of 

the 120-day period beginning on the date such order is issued 

unless the Board extends such period. 

(4) COMPLIANCE WIT H STATE AND FEDERAL LAW.—An y foreign bank required to terminate activities conducted at offices 

or subsidiaries in the United States pursuant to this subsection shall comply with the requirements of applicable Federal and State law with respect to procedures for the closure 

or dissolution of such offices or subsidiaries. 

(5) RECOMMENDATION TO AGENCY FOR TERMINATION OF A 

FEDERAL BRANCH OR AGENCY.—The Board may transmit to the 

Comptroller of the Currency a recommendation that the license 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1197 

of any Federal branch or Federal agency of a foreign bank be 

terminated in accordance with section 4(i) if the Board has reasonable cause to believe that such foreign bank or any affiliate 

of such foreign bank has engaged in conduct for which the 

activities of any State branch or agency may be terminated 

under paragraph (1). 

(6) ENFORCEMENT OF ORDERS.— 

(A) I N GENERAL.—In the case of contumacy of any office or subsidiary of the foreign bank against which— 

(i) the Board has issued an order under paragraph 

(1); or 

(ii) the comptroller of the currency has issued an 

order under section 4(i), 

or a refusal by such office or subsidiary to comply with 

such order, the Board or the comptroller of the currency 

may invoke the aid of the district court of the United 

States within the jurisdiction of which the office or subsidiary is located. 

(B) COURT ORDER.—Any court referred to in subparagraph (A) may issue an order requiring compliance with an 

order referred to in subparagraph (A). 

(7) CRITERIA RELATING TO FOREIGN SUPERVISION.—Not 

later than 1 year after the date of enactment of this subsection, 

the Board, in consultation with the Secretary of the Treasury, 

shall develop and publish criteria to be used in evaluating the 

operation of any foreign bank in the United States that the 

Board has determined is not subject to comprehensive supervision or regulation on a consolidated basis. In developing such 

criteria, the Board shall allow reasonable opportunity for public review and comment. 

(f) JUDICIAL REVIEW.— 

(1) JURISDICTION OF UNITED STATES COURTS OF APPEALS.— 

Any foreign bank— 

(A) whose application under subsection (d) or section 

10(a) has been disapproved by the Board; 

(B) against which the Board has issued an order under 

subsection (e) or section 10(b); or 

(C) against which the Comptroller of the Currency has 

issued an order under section 4(i) of this Act, 

may obtain a review of such order in the United States court 

of appeals for any circuit in which such foreign bank operates 

a branch, agency, or commercial lending company that has 

been required by such order to terminate its activities, or in 

the United States Court of Appeals for the District of Columbia 

circuit, by filing a petition for review in the court before the 

end of the 30-day period beginning on the date the order was 

issued. 

(2) SCOPE OF JUDICIAL REVIEW.—Section 706 of title 5, 

United States Code (other than paragraph (2)(F) of such section) shall apply with respect to any review under paragraph 

(1). 

(g) CONSULTATION WIT H STATE BANK SUPERVISOR.—The Board 

shall request and consider any views of the appropriate State bank 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1198 

supervisor with respect to any application or action under subsection (d) or (e). 

(h) LIMITATIONS ON POWERS OF STATE BRANCHES AND AGENCIES.— 

(1) IN GENERAL.—After the end of the 1-year period beginning on the date of enactment of the Federal Deposit insurance 

Corporation Improvement Act of 1991, a State branch or State 

agency may not engage in any type of activity that is not permissible for a Federal branch unless— 

(A) the Board has determined that such activity is consistent with sound banking practice; and 

(B) in the case of an insured branch, the Federal Deposit Insurance Corporation has determined that the activity would pose no significant risk to the deposit insurance 

fund. 

(2) SINGLE BORROWER LENDING LIMIT.— A State branch or 

State agency shall be subject to the same limitations with respect to loans made to a single borrower as are applicable to 

a Federal branch or Federal agency under section 4(b). 

(3) OTHER AUTHORITY NOT AFFECTED.—Thi s section does 

not limit the authority of the Board or any State supervisory 

authority to impose more stringent restrictions. 

(i) PROCEEDINGS RELATED TO CONVICTION FOR MONE Y LAUNDERING OFFENSES.— 

(1) NOTICE OF INTENTION TO ISSUE ORDER.—If the Board 

finds or receives written notice from the Attorney General 

that— 

(A) any foreign bank which operates a State agency, a 

State branch which is not an insured branch, or a State 

commercial lending company subsidiary; 

(B) any State agency; 

(C) any State branch which is not an insured branch; 

or 

(D) any State commercial lending subsidiary, 

has been found guilty of any money laundering offense, the 

Board shall issue a notice to the agency, branch, or subsidiary 

of the Board's intention to commence a termination proceeding 

under subsection (e). 

(2) DEFINITIONS.—Fo r purposes of this subsection— 

(A) INSURED BRANCH.—The term ''insured branch'' has 

the meaning given such term in section 3(s) of the Federal 

Deposit Insurance Act. 

(B) MONE Y LAUNDERING OFFENSE DEFINED.—Th e term 

''money laundering offense'' means any criminal offense 

under section 1956 or 1957 of title 18, United States Code, 

or under section 5322 of title 31, United States Code. 

(j) STUDY ON EQUIVALENCE OF FOREIGN BANK CAPITAL.—No t 

later than 180 days after enactment of this subsection, the Board 

and the Secretary of the Treasury shall jointly submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Banking, Finance and Urban Affairs of the 

House of Representatives a report— 

(1) analyzing the capital standards contained in the framework for measurement of capital adequacy established by the 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1199 

Supervisory Committee of the Bank for International Settlements, foreign regulatory capital standards that apply to foreign banks conducting banking operations in the united 

states, and the relationship of the Basle and foreign standards 

to risk-based capital and leverage requirements for United 

states banks; and 

(2) establishing guidelines for the adjustments to be used 

by the Board in converting data on the capital of such foreign 

banks to the equivalent risk-based capital and leverage 

requirements for United States banks for purposes of determining whether a foreign bank's capital level is equivalent to 

that imposed on United States banks for purposes of determinations under section 7 of the international Banking Act of 

1978 and sections 3 and 4 of the Bank Holding Company Act 

of 1956. 

An update shall be prepared annually explaining any changes in 

the analysis under paragraph (1) and resulting changes in the 

guidelines pursuant to paragraph (2). 

(k) MANAGEMENT OF SHELL BRANCHES.— 

(1) TRANSACTIONS PROHIBITED.—A branch or agency of a 

foreign bank shall not manage, through an office of the foreign 

bank which is located outside the United States and is managed or controlled by such branch or agency, any type of activity that a bank organized under the laws of the united states, 

any State, or the District of Columbia is not permitted to manage at any branch or subsidiary of such bank which is located 

outside the United States. 

(2) REGULATIONS.—Any regulations promulgated to carry 

out this section— 

(A) shall be promulgated in accordance with section 

13; and 

(B) shall be uniform, to the extent practicable. 

NONBANKING ACTIVITIES 

SEC. 8. [12 U.S.C. 3106] (a) Except as otherwise provided in 

this section (1) any foreign bank that maintains a branch or agency 

in a state, (2) any foreign bank or foreign company controlling a 

foreign bank that controls a commercial lending company organized 

under state law, and (3) any company of which any foreign bank 

or company referred to in (1) and (2) is a subsidiary shall be subject to the provisions of the Bank Holding Company Act of 1956, 

and to sections 105 and 106 of the Bank Holding Company Act 

Amendments of 1970 in the same manner and to the same extent 

that bank holding companies are subject to such provisions. 

(b) Until December 31, 1985, a foreign bank or other company 

to which subsection (a) applies on the date of enactment of this Act 

may retain direct or indirect ownership or control of any voting 

shares of any nonbanking company in the united states that it 

owned, controlled, or held with power to vote on the date of enactment of this Act or engage in any nonbanking activities in the 

United States in which it was engaged on such date. 

(c)(1) After December 31, 1985, a foreign bank or other company to which subsection (a) applies on the date of enactment of 

this Act or on the date of the establishment of a branch in a state 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1200 

an application for which was filed on or before July 26, 1978 may 

continue to engage in nonbanking activities in the United States in 

which directly or through an affiliate it was lawfully engaged on 

July 26, 1978 (or on a date subsequent to July 26, 1978, in the case 

of activities carried on as the result of the direct or indirect acquisition, pursuant to a binding written contract entered into on or before July 26, 1978, of another company engaged in such activities 

at the time of acquisition), and may engage directly or through an 

affiliate in nonbanking activities in the United States which are 

covered by an application to engage in such activities which was 

filed on or before July 26, 1978; except that the Board by order, 

after opportunity for hearing, may terminate the authority conferred by this subsection (c) on any such foreign bank or company 

to engage directly or through an affiliate in any activity otherwise 

permitted by this subsection (c) if it determines having due regard 

to the purposes of this Act and the Bank Holding Company Act of 

1956, that such action is necessary to prevent undue concentration 

of resources, decreased or unfair competition, conflicts of interest, 

or unsound banking practices in the United States. Notwithstanding subsection (a) of this section, a foreign bank or company 

referred to in this subsection may retain ownership or control of 

any voting shares (or, where necessary to prevent dilution of its 

voting interest, acquire additional voting shares) of any domestically-controlled affiliate covered in 1978 which since July 26, 1978, 

has engaged in the business of underwriting, distributing, or otherwise buying or selling stocks, bonds, and other securities in the 

United States, notwithstanding that such affiliate acquired after 

July 26, 1978, an interest in, or any or all of the assets of, a going 

concern, or commences to engage in any new activity or activities. 

Except in the case of affiliates described in the preceding sentence, 

nothing in this subsection (c) shall be construed to authorize any 

foreign bank or company referred to in this subsection (c), or any 

affiliate thereof, to engage in activities authorized by this subsection (c) through the acquisition, pursuant to a contract entered 

into after July 26, 1978, of any interest in or the assets of a going 

concern engaged in such activities. Any foreign bank or company 

that is authorized to engage in any activity pursuant to this subsection (c) but, as a result of action of the Board, is required to terminate such activity may retain the ownership of control of shares 

in any company carrying on such activity for a period of two years 

from the date on which its authority was so terminated by the 

Board. As used in this subsection, the term ''affiliate'' shall mean 

any company more than 5 per centum of whose voting shares is directly or indirectly owned or controlled or held with power to vote 

by the specified foreign bank or company, and the term ''domestically-controlled affiliate covered in 1978'' shall mean an affiliate 

organized under the laws of the United States or any State thereof 

if (i) no foreign bank or group of foreign banks acting in concert 

owns or controls, directly or indirectly, 45 per centum or more of 

its voting shares, and (ii) no more than 20 per centum of the number of directors as established from time to time to constitute the 

whole board of directors and 20 per centum of the executive officers 

of such affiliate are persons affiliated with any such foreign bank. 

For the purpose of the preceding sentence, the term ''persons affili-
1201 INTERNATIONAL BANKING ACT OF 1978 Sec. 8 

ated with any such foreign bank'' shall mean (A) any person who 

is or was an employee, officer, agent, or director of such foreign 

bank or who otherwise has or had such a relationship with such 

foreign bank that would lead such person to represent the interests 

of such foreign bank, and (B) in the case of any director of such 

domestically controlled affiliate covered in 1978, any person in 

favor of whose election as a director votes were cast by less than 

two-thirds of all shares voting in connection with such election 

other than shares owned or controlled, directly or indirectly, by any 

such foreign bank. 

(2) The authority conferred by this subsection on a foreign 

bank or other company shall terminate 2 years after the date on 

which such foreign bank or other company becomes a ''bank holding company'' as defined in section 2(a) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)); except that the Board may, 

upon application of such foreign bank or other company, extend the 

2-year period for not more than one year at a time, if, in its judgment, such an extension would not be detrimental to the public interest, but no such extensions shall exceed 3 years in the aggregate. 

(3) 1 TERMINATION OF GRANDFATHERED RIGHTS.— 

(A) I N GENERAL.—If any foreign bank or foreign company files a declaration under section 4(l)(1)(C) of the 

Bank Holding Company Act of 1956, any authority conferred by this subsection on any foreign bank or company 

to engage in any activity that the Board has determined 

to be permissible for financial holding companies under 

section 4(k) of such Act shall terminate immediately. 

(B) RESTRICTIONS AND REQUIREMENTS AUTHORIZED.—If 

a foreign bank or company that engages, directly or 

through an affiliate pursuant to paragraph (1), in an activity that the Board has determined to be permissible for 

financial holding companies under section 4(k) of the Bank 

Holding Company Act of 1956 has not filed a declaration 

with the Board of its status as a financial holding company 

under such section by the end of the 2-year period beginning on the date of the enactment of the Gramm-LeachBliley Act, the Board, giving due regard to the principle of 

national treatment and equality of competitive opportunity, may impose such restrictions and requirements on 

the conduct of such activities by such foreign bank or company as are comparable to those imposed on a financial 

holding company organized under the laws of the United 

States, including a requirement to conduct such activities 

in compliance with any prudential safeguards established 

under section 114 of the Gramm-Leach-Bliley Act. 

(d) Nothing in this section shall be construed to define a 

branch or agency of a foreign bank or a commercial lending company controlled by a foreign bank or foreign company that controls 

a foreign bank as a ''bank'' for the purposes of any provisions of the 

Bank Holding Company Act of 1956, or section 105 of the Bank 

Holding Company Act Amendments of 1970, except that any such 

1

 Margin so in law. 
1202 

INTERNATIONAL BANKING ACT OF 1978 

Sec. 10 

branch, agency or commercial lending company subsidiary shall be 

deemed a ''bank'' or ''banking subsidiary'', as the case may be, for 

the purposes of applying the prohibitions of section 106 of the Bank 

Holding Company Act Amendments of 1970 and the exemptions 

provided in sections 4(c)(1), 4(c)(2), 4(c)(3), and 4(c)(4) of the Bank 

Holding Company Act of 1956 (12 U.S.C. 1843(c) (1), (2), (3), and 

(4)) to any foreign bank or other company to which subsection (a) 

applies. 

[Section 8(e) amended the Bank Holding Company Act of 

1956.] 

STUDY OF FOREIGN TREATMENT OF UNITED STATES BANKS 

SEC. 9. [12 U.S.C. 601 nt.] (a) The Secretary of the Treasury, 

in conjunction with the Secretary of State, the Board, the Comptroller, and the Federal Deposit Insurance Corporation shall within 

90 days after enactment of this bill commence a study of the extent 

to which banks organized under the laws of the United States or 

any State thereof are denied, whether by law or practice, national 

treatment in conducting banking operations in foreign countries, 

and the effects, if any, of such discrimination of United States exports to those countries. on or before one year after enactment of 

this section, the Secretary of the Treasury shall be required to report his findings, conclusions, and recommendations from such 

study to the Congress and describe the efforts undertaken by the 

United States to eliminate any foreign laws or practices that discriminate against banks organized under the laws of the united 

States or any State thereof, or that serve as a barrier to the financing of United States exports to any foreign country. 

(b) [12 U.S.C. 3106a] (1) Every branch or agency of a foreign 

bank and every commercial lending company controlled by one or 

more foreign banks or by one or more foreign companies that control a foreign bank shall conduct its operations in the United States 

in full compliance with provisions of any law of the United States 

or any State thereof which— 

(A)1 impose requirements that protect the rights of 

consumers in financial transactions, to the extent that the 

branch, agency, or commercial lending company engages in 

activities that are subject to such laws; 

(B)

 1 prohibit discrimination against any individual or 

other person on the basis of the race, color, religion, sex, 

marital status, age, or national origin of (i) such individual 

or other person or (ii) any officer, director, employee, or 

creditor of, or any owner of any interest in, such individual 

or other person; and 

(C)1 apply to national banks or State-chartered banks 

doing business in the State in which such branch or 

agency or commercial lending company, as the case may 

be, is doing business. 

(2) No application for a branch or agency shall be approved by 

the Comptroller or by a State bank supervisory authority, as the 

case may be, unless the entity making the application has agreed 

to conduct all of its operations in the United States in full compli1

 indentation so in law. 
1203 INTERNATIONAL BANKING ACT OF 1978 Sec. 10 

ance with provisions of any law of the united states or any state 

thereof which— 

(A)

 1 impose requirements that protect the rights of 

consumers in financial transactions, to the extent that the 

branch, agency, or commercial lending company engages in 

activities that are subject to such laws; 

(B)

 1 prohibit discrimination against individuals or 

other persons on the basis of the race, color, religion, sex, 

marital status, age, or national origin of (i) such individual 

or other person or (ii) any officer, director, employee, or 

creditor of, or any owner of any interest in, such individual 

or other person; and 

(C)1 apply to national banks or State-chartered banks 

doing business in the State in which the entity to be established is to do business. 

SEC. 10. [12 U.S.C. 3107] REPRESENTATIVE OFFICES. 

(a) PRIOR APPROVAL T O ESTABLISH REPRESENTATIVE OFFICES.— 

(1) I N GENERAL.—No foreign bank may establish a representative office without the prior approval of the Board. 

(2) STANDARDS FOR APPROVAL.—In acting on any application under this paragraph to establish a representative office, 

the Board shall take into account the standards contained in 

section 7(d)(2) and may impose any additional requirements 

that the Board determines to be necessary to carry out the purposes of this Act. 

(b) TERMINATION OF REPRESENTATIVE OFFICES.—The Board 

may order the termination of the activities of a representative office of a foreign bank on the basis of the standards, procedures, and 

requirements applicable under section 7(e) with respect to branches 

and agencies. 

(c) EXAMINATIONS.—The Board may make examinations of each 

representative office of a foreign bank, the cost of which shall be 

assessed against and paid by such foreign bank. The Board may 

also make examinations of any affiliate of a foreign bank conducting business in any state if the Board deems it necessary to 

determine and enforce compliance with this Act, the Bank Holding 

Company Act of 1956, or other applicable Federal banking law. 

(d) COMPLIANCE WIT H STATE LAW.—This Act does not authorize the establishment of a representative office in any State in contravention of State law. 

[Sections 11 and 12 amended other Acts.] 

REGULATION AND ENFORCEMENT 

SEC. 13. [12 U.S.C. 3108] (a) The Comptroller, the Board, and 

the Federal Deposit Insurance Corporation, are authorized and 

empowered to issue such rules, regulations, and orders as each of 

them may deem necessary in order to perform their respective duties and functions under this Act and to administer and carry out 

the provisions and purposes of this Act and prevent evasions 

thereof. 

1

 indentation so in law. 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1204 

(b) ENFORCEMENT.— 

(1) I N GENERAL.—In addition to any powers, remedies, or 

sanctions otherwise provided by law, compliance with the 

requirements imposed under this Act or any amendment made 

by this Act may be enforced under section 8 of the Federal Deposit Insurance Act by any appropriate Federal banking 

agency as defined in that Act. 

(2) AUTHORITY TO ADMINISTER OATHS; SUBPOENA POWER.— 

in the course of, or in connection with, an application, examination, investigation, or other proceeding under this Act, the 

Board, the Comptroller of the Currency, and the Federal Deposit insurance corporation, as the case may be, any member 

of the Board or of the Board of Directors of the Corporation, 

and any designated representative of the Board, Comptroller, 

or Corporation (including any person designated to conduct any 

hearing under this Act) may— 

(A) administer oaths and affirmations and take or 

cause to be taken depositions; and 

(B) issue, revoke, quash, or modify any subpoena, including any subpoena requiring the attendance and testimony of a witness or any subpoenas duces tecum. 

(3) ADMINISTRATIVE ASPECTS OF SUBPOENAS.— 

(A) ATTENDANCE AND PRODUCTION AT DESIGNATED 

SITE.—The attendance of any witness and the production 

of any document pursuant to a subpoena under paragraph 

(2) may be required at the place designated in the subpoena from any place in any State (as defined in section 

3(a)(3) of the Federal Deposit Insurance Act) or other place 

subject to the jurisdiction of the United States. 

(B) SERVICE OF SUBPOENA.—Service of a subpoena 

issued under this subsection may be made by registered 

mail, or in such other manner reasonably calculated to 

give actual notice as the Board, comptroller of the currency, or Federal Deposit Insurance Corporation may by 

regulation or otherwise provide. 

(C) FEES AND TRAVEL EXPENSES.—Witnesses subpoenaed under this subsection shall be paid the same fees and 

mileage that are paid witnesses in the district courts of the 

United States. 

(4) CONTUMACY OR REFUSAL.— 

(A) I N GENERAL.—In the case of contumacy of any person issued a subpoena under this subsection or a refusal 

by such person to comply with such subpoena, the Board, 

Comptroller of the Currency, or Federal Deposit Insurance 

Corporation, or any other party to proceedings in connection with which subpoena was issued may invoke the aid 

of— 

(i) the United States District Court for the District 

of Columbia, or 

(ii) any district court of the United States within 

the jurisdiction of which the proceeding is being conducted or the witness resides or carries on business. 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1205 

(B) COURT ORDER.—Any court referred to in subparagraph (A) may issue an order requiring compliance with a 

subpoena issued under this subsection. 

(5) EXPENSES AND FEES.—Any court having jurisdiction of 

any proceeding instituted under this subsection may allow any 

party to such proceeding such reasonable expenses and attorneys' fees as the court deems just and proper. 

(6) CRIMINA L PENALTY.—Any person who willfully fails or 

refuses to attend and testify or to answer any lawful inquiry 

or to produce books, papers, correspondence, memoranda, contracts, agreements, or other records in accordance with any 

subpoena under this subsection shall be fined under title 18, 

United States Code, imprisoned not more than 1 year, or both. 

Each day during which any such failure or refusal continues 

shall be treated as a separate offense. 

(c) In the case of any provision of the Federal Reserve Act to 

which a foreign bank or branch thereof is subject under this Act, 

and which is made applicable to nonmember insured banks by the 

Federal Deposit Insurance Act, whether by cross-reference to the 

Federal Reserve Act or by a provision in substantially the same 

terms in the Federal Deposit Insurance Act, the administration, 

interpretation, and enforcement of such provision, insofar as it relates to any foreign bank or branch thereof as to which the Board 

is an appropriate Federal banking agency, are vested in the Board, 

but where the making of any report to the Board or a Federal Reserve bank is required under any such provision, the Federal Deposit insurance Corporation may require that a duplicate of any 

such report be sent directly to it. This subsection shall not be construed to impair any power of the Federal Deposit Insurance Corporation to make regular or special examinations or to require special reports. 

REPORT ON MC FADDEN ACT 

SEC. 14. [12 U.S.C. 36 nt.] (a) The President, in consultation 

with the Attorney General, the Secretary of the Treasury, the 

Board, the Comptroller, and the Federal Deposit Insurance Corporation, shall transmit a report to the Congress containing his 

recommendations concerning the applicability of the McFadden Act 

to the present financial, banking, and economic environment, including an analysis of the effects of any proposed amendment to 

such Act on the structure of the banking industry and on the financial and economic environment in general. 

(b) The report required by subsection (a) shall be transmitted 

to the Congress not later than one year after the date of enactment 

of this Act.1 

SEC. 15. [12 U.S.C. 3109] COOPERATIO N WIT H FOREIG N SUPERVISORS. 

(a) DISCLOSURE OF SUPERVISORY INFORMATION TO FOREIGN 

SUPERVISORS.—Notwithstanding any other provision of law, the 

Board, Comptroller of the Currency, Federal Deposit Insurance 

Corporation, and Director of the Office of Thrift Supervision may 

disclose information obtained in the course of exercising super1Such date of enactment was September 7, 1978. 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1206 

visory or examination authority to any foreign bank regulatory or 

supervisory authority if the Board, Comptroller, Corporation, or Director determines that such disclosure is appropriate and will not 

prejudice the interests of the United States. 

(b) REQUIREMENT OF CONFIDENTIALITY.—Before making any 

disclosure of any information to a foreign authority, the Board, 

Comptroller of the Currency, Federal Deposit Insurance Corporation, and Director of the Office of Thrift Supervision shall obtain, 

to the extent necessary, the agreement of such foreign authority to 

maintain the confidentiality of such information to the extent possible under applicable law. 

SEC. 16. [12 U.S.C. 3110] PENALTIES. 

(a) CIVIL MONEY PENALTY.— 

(1) IN GENERAL.—Any foreign bank, and any office or subsidiary of a foreign bank, that violates, and any individual who 

participates in a violation of, any provision of this Act, or any 

regulation prescribed or order issued under this Act, shall forfeit and pay a civil penalty of not more than $25,000 for each 

day during which such violation continues. 

(2) ASSESSMENT PROCEDURES.—Any penalty imposed under 

paragraph (1) may be assessed and collected by the Board or 

the Comptroller of the Currency in the manner provided in 

subparagraphs (E), (F), (G), (H), and (I) of section 8(i)(2) of the 

Federal Deposit Insurance Act for penalties imposed (under 

such section), and any such assessments shall be subject to the 

provisions of such section. 

(3) HEARING PROCEDURE.—Section 8(h) of the Federal Deposit insurance Act shall apply to any proceeding under this 

section. 

(4) DISBURSEMENT.—All penalties collected under authority of this section shall be deposited into the Treasury. 

(5) VIOLATE DEFINED.—For purposes of this section, the 

term ''violate'' includes taking any action (alone or with others) 

for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation. 

(6) REGULATIONS.—The Board and the Comptroller of the 

Currency shall each prescribe regulations establishing such 

procedures as may be necessary to carry out this section. 

(b) 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 foreign bank, or any office or subsidiary of a foreign 

bank (including a separation caused by the termination of a location in the United States), shall not affect the jurisdiction or authority of the Board or the Comptroller of the Currency to issue 

any notice or to 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 an institution-affiliated 

party with respect to such foreign bank or such office or subsidiary 

of a foreign bank (whether such date occurs on, before, or after the 

date of the enactment of the Foreign Bank Supervision Enhancement Act of 1991). 
Sec. 13 

INTERNATIONAL BANKING ACT OF 1978 

1207 

(c) PENALTY FOR FAILURE TO MAK E REPORTS.— 

(1) FIRST TIER.—Any foreign bank, or any office or subsidiary of a foreign bank, that— 

(A) maintains procedures reasonably adapted to avoid 

any inadvertent error and, unintentionally and as a result 

of such error— 

(i) fails to make, submit, or publish such reports 

or information as may be required under this Act or 

under regulations prescribed by the Board or the 

Comptroller of the Currency under this Act, within the 

period of time specified by the agency; or 

(ii) submits or publishes any false or misleading 

report or information; or 

(B) inadvertently transmits or publishes any report 

that is minimally late, 

shall be subject to a penalty of not more than $2,000 for each 

day during which such failure continues or such false or misleading information is not corrected. The foreign bank, or the 

office or subsidiary of a foreign bank, shall have the burden of 

proving that an error was inadvertent and that a report was 

inadvertently transmitted or published late. 

(2) SECOND TIER.—Any foreign bank, or any office or subsidiary of a foreign bank, that— 

(A) fails to make, submit, or publish such reports or 

information as may be required under this Act or under 

regulations prescribed by the Board or the Comptroller of 

the Currency pursuant to this Act, within the time period 

specified by such agency; or 

(B) submits or publishes any false or misleading report or information, 

in a manner not described in paragraph (1) shall be subject to 

a penalty of not more than $20,000 for each day during which 

such failure continues or such false or misleading information 

is not corrected. 

(3) THIR D TIER.—Notwithstanding paragraph (2), if any 

company knowingly or with reckless disregard for the accuracy 

of any information or report described in paragraph (2) submits or publishes any false or misleading report or information, 

the Board or the Comptroller of the Currency may, in the 

Board's or Comptroller's discretion, assess a penalty of not 

more than $1,000,000 or 1 percent of total assets of such foreign bank, or such office or subsidiary of a foreign bank, whichever is less, per day for each day during which such failure 

continues or such false or misleading information is not corrected. 

(4) ASSESSMENT OF PENALTIES.—Any penalty imposed 

under paragraph (1), (2), or (3) shall be assessed and collected 

by the Board or the Comptroller of the Currency in the manner 

provided in subsection (a)(2) (for penalties imposed under such 

subsection) and any such assessment (including the determination of the amount of the penalty) shall be subject to the provisions of such subsection. 
Sec. 13 INTERNATIONAL BANKING ACT OF 1978 1208 

(5) HEARING PROCEDURE.—Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under this 

subsection. 

SEC. 17. [12 U.S.C. 3111] CRIMINA L PENALTY. 

whoever, with the intent to deceive, to gain financially, or to 

cause financial gain or loss to any person, knowingly violates any 

provision of this Act or any regulation or order issued by the appropriate Federal banking agency under this Act shall be imprisoned 

not more than 5 years or fined not more than $1,000,000 for each 

day during which a violation continues, or both. 
INTERNATIONAL LENDING SUPERVISION ACT OF 1983 

1209 

INTERNATIONAL LENDING SUPERVISION ACT OF 19831 

SHOR T TITL E 

SEC. 901. [12 U.S.C. 3901 note] This title may be cited as the 

''International Lending Supervision Act of 1983''. 

DECLARATIO N OF POLIC Y 

SEC. 902. [12 U.S.C. 3901] (a)(1) It is the policy of the Congress to assure that the economic health and stability of the United 

States and the other nations of the world shall not be adversely affected or threatened in the future by imprudent lending practices 

or inadequate supervision. 

(2) This shall be achieved by strengthening the bank regulatory framework to encourage prudent private decisionmaking and 

by enhancing international coordination among bank regulatory 

authorities. 

(b) The Federal banking agencies shall consult with the banking supervisory authorities of other countries to reach understandings aimed at achieving the adoption of effective and consistent supervisory policies and practices with respect to international lending. 

DEFINITION S 

SEC. 903. [12 U.S.C. 3902] For purposes of this title— 

(1) the term ''appropriate Federal banking agency'' has the 

same meaning given such term in section 3(q) of the Federal 

Deposit Insurance Act, except that for purposes of this title 

such term means the Board of Governors of the Federal Reserve System for— 

(A) bank holding companies and any nonbank subsidiary thereof; 

(B) Edge Act corporations organized under section 

25(a) of the Federal Reserve Act; and 

(C) Agreement Corporations operating under section 

25 of the Federal Reserve Act; and 

(2) the term ''banking institution'' means— 

(A)(i) an insured bank as defined in section 3(h) of the 

Federal Deposit Insurance Act or any subsidiary of an insured bank; 

(ii) an Edge Act corporation organized under section 

25(a) of the Federal Reserve Act; and 

(iii) an Agreement Corporation operating under section 

25 of the Federal Reserve Act; and 

*This Act was enacted as title IX of the Domestic Housing and International Recovery and 

Financial Stability Act which was enacted as part of the Supplemental Appropriations Act, 1984 

(P.L. 98-181). 

121 1 
1212 INTERNATIONAL LENDING SUPERVISION ACT OF 1983 Sec. 905A 

(B) to the extent determined by the appropriate Federal banking agency, any agency or branch of a foreign 

bank, and any commercial lending company owned or controlled by one or more foreign banks or companies that 

control a foreign bank as those terms are defined in the 

International Banking Act of 1978. The term ''banking 

institution'' shall not include a foreign bank. 

STRENGTHENED SUPERVISION OF INTERNATIONAL LENDING 

SEC. 904. [12 U.S.C. 3903] (a) Each appropriate Federal banking agency shall evaluate banking institution foreign country exposure and transfer risk for use in banking institution examination 

and supervision. 

(b) Each such agency shall establish examination and supervisory procedures to assure that factors such as foreign country 

exposure and transfer risk are taken into account in evaluating the 

adequacy of the capital of banking institutions. 

RESERVES 

SEC. 905. [12 U.S.C. 3904] (a)(1) Each appropriate Federal 

banking agency shall require a banking institution to establish and 

maintain a special reserve whenever, in the judgment of such 

appropriate Federal banking agency— 

(A) the quality of such banking institution's assets has 

been impaired by a protracted inability of public or private borrowers in a foreign country to make payments on their external indebtedness as indicated by such factors, among others, 

as— 

(i) a failure by such public or private borrowers to 

make full interest payments on external indebtedness; 

(ii) a failure to comply with the terms of any restructured indebtedness; or 

(iii) a failure by the foreign country to comply with 

any International Monetary Fund or other suitable adjustment program; or 

(B) no definite prospects exist for the orderly restoration of 

debt service. 

(2) Such reserves shall be charged against current income and 

shall not be considered as part of capital and surplus or allowances 

for possible loan losses for regulatory, supervisory, or disclosure 

purposes. 

(b) The appropriate Federal banking agencies shall analyze the 

results of foreign loan rescheduling negotiations, assess the loan 

loss risk reflected in rescheduling agreements, and, using the powers set forth in section 908 (regarding capital adequacy), ensure 

that the capital and reserve positions of United States banks are 

adequate to accommodate potential losses on their foreign loans. 

(c) The appropriate Federal banking agencies shall promulgate 

regulations or orders necessary to implement this section within 

one hundred and twenty days after the date of the enactment of 

this title. 
1213 INTERNATIONAL LENDING SUPERVISION ACT OF 1983 Sec. 905A 

SEC. 905A. [12 U.S.C. 3904a] ADDITIONA L RESERVE REQUIREMENTS. 

(a) IN GENERAL.—Each appropriate Federal banking agency 

shall review the exposure to risk of United States banking institutions arising from the medium- and long-term loans made by such 

institutions that are outstanding to any highly indebted country. 

Each agency shall provide direction to such institutions regarding 

additions to general reserves maintained by each banking institution for potential loan losses and special reserves required by such 

agency arising from such review. 

(b) DETERMINATION OF INSTITUTIONAL EXPOSURE TO RISK.—I n 

determining the exposure of an institution to risk for purposes of 

subsection (a), the appropriate Federal banking agency— 

(1) shall determine whether any country exposure that is, 

and has been for at least 2 years, rated in the category ''other 

Transfer Risk Problems'' or the category ''Substandard'' by the 

Interagency Country Exposure Review Committee should be 

reevaluated; 

(2) may exempt, in full or in part, from reserve requirements established pursuant to subsection (a), any loan— 

(A) to a country that enters into a debt reduction, debt 

service reduction, or financing program with its bank 

creditors that is supported by the international Bank for 

Reconstruction and Development or the International Monetary Fund; or 

(B) secured, in whole or in part, by appropriate collateral for payment of interest or principal; 

(3) take into account any other factors which bear on such 

exposure and the particular circumstances of the institution; 

and 

(4) shall consider as indicators of risk, where appropriate, 

the average reserve levels maintained by or required of banking institutions in foreign countries and secondary market 

prices for such loans. 

(c) TIMIN G AND REPORT.— 

(1) DETERMINED BY AGENCY.—Except as provided in paragraph (3), each appropriate Federal banking agency shall 

determine the timing of any addition to reserves required by 

subsection (a). 

(2) REPORT.—Each appropriate Federal banking agency 

shall include in each report required to be made under section 

913(d) after 1989 a report on the actions taken pursuant to 

this section. 

(3) DEADLINE.—Each Federal agency required to undertake a review described in subsection (a) shall complete the review not later than December 31, 1990. 

(d) HIGHLY INDEBTED COUNTRY DEFINED.—As used in this section, the term ''highly indebted country'' means any country designated as a ''Highly Indebted Country'' in the annual World Debt 

Tables most recently published by the international Bank for Reconstruction and Development before the date of the enactment of 

this section. 
1214 INTERNATIONAL LENDING SUPERVISION ACT OF 1983 Sec. 905A 

ACCOUNTING FOR FEES ON INTERNATIONAL LOANS 

SEC. 906. [12 U.S.C. 3905] (a)(1) In order to avoid excessive 

debt service burdens on debtor countries, no banking institution 

shall charge, in connection with the restructuring of an international loan, any fee exceeding the administrative cost of the 

restructuring unless it amortizes such fee over the effective life of 

each such loan. 

(2)(A) Each appropriate Federal banking agency shall promulgate such regulations as are necessary to further carry out the provisions of this subsection. 

(B) The requirement of paragraph (1) shall take effect on the 

date of the enactment of this section. 

(b)(1) Subject to subsection (a), the appropriate Federal banking agencies shall promulgate regulations for accounting for 

agency, commitment, management and other fees charged by a 

banking institution in connection with an international loan. 

(2) such regulations shall establish the accounting treatment 

of such fees for regulatory, supervisory, and disclosure purposes to 

assure that the appropriate portion of such fees is accrued in income over the effective life of each such loan. 

(3) The appropriate Federal banking agencies shall promulgate 

regulations or orders necessary to implement this subsection within 

one hundred and twenty days after the date of the enactment of 

this title. 

COLLECTION AND DISCLOSURE OF CERTAIN INTERNATIONAL LENDING 

DATA 

SEC. 907. [12 U.S.C. 3906] (a) Each appropriate Federal banking agency shall require, by regulation, each banking institution 

with foreign country exposure to submit, no fewer than four times 

each calendar year, information regarding such exposure in a format prescribed by such regulations. 

(b) Each appropriate Federal banking agency shall require, by 

regulation, banking institutions to disclose to the public information regarding material foreign country exposure in relation to assets and to capital. 

(c) The appropriate Federal banking agencies shall promulgate 

regulations or orders necessary to implement this section within 

one hundred and twenty days after the date of the enactment of 

this title. 

CAPITAL ADEQUACY 

SEC. 908. [12 U.S.C. 3907] (a)(1) Each appropriate Federal 

banking agency shall cause banking institutions to achieve and 

maintain adequate capital by establishing minimum levels of capital for such banking institutions and by using such other methods 

as the appropriate Federal banking agency deems appropriate. 

(2) Each appropriate Federal banking agency shall have the 

authority to establish such minimum level of capital for a banking 

institution as the appropriate Federal banking agency, in its discretion, deems to be necessary or appropriate in light of the particular 

circumstances of the banking institution. 
1215 INTERNATIONAL LENDING SUPERVISION ACT OF 1983 Sec. 905A 

(b)(1) Failure of a banking institution to maintain capital at or 

above its minimum level as established pursuant to subsection (a) 

may be deemed by the appropriate Federal banking agency, in its 

discretion, to constitute an unsafe and unsound practice within the 

meaning of section 8 of the Federal Deposit Insurance Act. 

(2)(A) In addition to, or in lieu of, any other action authorized 

by law, including paragraph (1), the appropriate Federal banking 

agency may issue a directive to a banking institution that fails to 

maintain capital at or above its required level as established pursuant to subsection (a). 

(B)(i) Such directive may require the banking institution to 

submit and adhere to a plan acceptable to the appropriate Federal 

banking agency describing the means and timing by which the 

banking institution shall achieve its required capital level. 

(ii) Any such directive issued pursuant to this paragraph, including plans submitted pursuant thereto, shall be enforceable 

under the provisions of section 8(i) of the Federal Deposit Insurance Act to the same extent as an effective and outstanding order 

issued pursuant to section 8(b) of the Federal Deposit Insurance 

Act which has become final. 

(3)(A) Each appropriate Federal banking agency may consider 

such banking institution's progress in adhering to any plan required under this subsection whenever such banking institution, or 

an affiliate thereof, or the holding company which controls such 

banking institution, seeks the requisite approval of such appropriate Federal banking agency for any proposal which would divert 

earnings, diminish capital, or otherwise impede such banking institution's progress in achieving its minimum capital level. 

(B) Such appropriate Federal banking agency may deny such 

approval where it determines that such proposal would adversely 

affect the ability of the banking institution to comply with such 

plan. 

(C) The Chairman of the Board of Governors of the Federal Reserve System and the Secretary of the Treasury shall encourage 

governments, central banks, and regulatory authorities of other 

major banking countries to work toward maintaining and, where 

appropriate, strengthening the capital bases of banking institutions 

involved in international lending. 

FOREIGN LOAN EVALUATIONS 

SEC. 909. [12 U.S.C. 3908] (a)(1) In any case in which one or 

more banking institutions extend credit, whether by loan, lease, 

guarantee, or otherwise, which individually or in the aggregate exceeds $20,000,000, to finance any project which has as a major 

objective the construction or operation of any mining operation, any 

metal or mineral primary processing operation, any fabricating facility or operation, or any metal-making operations (semi and finished) located outside the United States or its territories and possessions, a written economic feasibility evaluation of such foreign 

project shall be prepared and approved in writing by a senior official of the banking institution, or, if more than one banking institution is involved, the lead banking institution, prior to the extension 

of such credit. 

(2) Such evaluation shall— 
1216 INTERNATIONAL LENDING SUPERVISION ACT OF 1983 Sec. 905A 

(A) take into account the profit potential of the project, the 

impact of the project on world markets, the inherent competitive advantages and disadvantages of the project over the entire life of the project, and the likely effect of the project upon 

the overall long-term economic development of the country in 

which the project is located; and 

(B) consider whether the extension of credit can reasonably 

be expected to be repaid from revenues generated by such foreign project without regard to any subsidy, as defined in international agreements, provided by the government involved or 

any instrumentality of any country. 

(b) Such economic feasibility evaluations shall be reviewed by 

representatives of the appropriate Federal banking agencies whenever an examination by such appropriate Federal banking agency 

is conducted. 

(c)(1) The authorities of the Federal banking agencies contained in section 8 of the Federal Deposit Insurance Act and in section 910 of this Act, except those contained in section 910(d), shall 

be applicable to this section. 

(2) No private right of action or claim for relief may be predicated upon this section. 

GENERAL AUTHORITIES 

SEC. 910. [12 U.S.C. 3909] (a)(1) The appropriate Federal 

banking agencies are authorized to interpret and define the terms 

used in this title, and each appropriate Federal banking agency 

shall prescribe rules or regulations or issue orders as necessary to 

effectuate the purposes of this title and to prevent evasions thereof. 

(2) The appropriate Federal banking agency is authorized to 

apply the provisions of this title to any affiliate of an insured bank, 

but only to affiliates for which it is the appropriate Federal banking agency, in order to promote uniform application of this title or 

to prevent evasions thereof. 

(3) For purposes of this section, the term ''affiliate'' shall have 

the same meaning as in section 23A of the Federal Reserve Act, except that the term ''member bank'' in such section shall be deemed 

to refer to an ''insured bank'', as such term is used in section 3(h) 

of the Federal Deposit Insurance Act. 

(b) The appropriate Federal banking agencies shall establish 

uniform systems to implement the authorities provided under this 

title. 

(c)(1) The powers and authorities granted in this title shall be 

supplemental to and shall not be deemed in any manner to derogate from or restrict the authority of each appropriate Federal 

banking agency under section 8 of the Federal Deposit Insurance 

Act or any other law including the authority to require additional 

capital or reserves. 

(2) Any such authority may be used by any appropriate Federal banking agency to ensure compliance by a banking institution 

with the provisions of this title and all rules, regulations, or orders 

issued pursuant thereto. 

(d)(1) Any banking institution which violates, or any officer, director, employee, agent, or other person participating in the conduct of the affairs of such banking institution, who violates any 
1217 INTERNATIONAL LENDING SUPERVISION ACT OF 1983 Sec. 905A 

provision of this title, or any rule, regulation, or order, issued 

under this title, shall forfeit and pay a civil penalty of not more 

than $1,000 per day for each day during which such violation continues. 

(2) Such violations shall be deemed to be a violation of a final 

order under section 8(i)(2) of the Federal Deposit Insurance Act 

and the penalty shall be assessed and collected by the appropriate 

Federal banking agency under the procedures established by, and 

subject to the rights afforded to parties in, such section. 

GAO AUDIT AUTHORITY 

SEC. 911. [12 U.S.C. 3910] (a)(1) Under regulations of the 

Comptroller General, the Comptroller General shall audit the 

appropriate Federal banking agencies (as defined in section 903 of 

this title), but may carry out an onsite examination of an open insured bank or bank holding company only if the appropriate Federal banking agency has consented in writing. 

(2) An audit under this subsection may include a review or 

evaluation of the international regulation, supervision, and examination activities of the appropriate Federal banking agency, including the coordination of such activities with similar activities of 

regulatory authorities of a foreign government or international 

organization. 

(3) Audits of the Federal Reserve Board and Federal Reserve 

banks may not include— 

(A) transactions for, or with, a foreign central bank, government of a foreign country, or nonprivate international financing organization; 

(B) deliberations, decisions, or actions on monetary policy 

matters, including discount window operations, reserves of 

member banks, securities credit, interest on deposits, or open 

market operations; 

(C) transactions made under the direction of the Federal 

Open Market Committee; or 

(D) a part of a discussion or communication among or between members of the Board of Governors of the Federal Reserve System and officers and employees of the Federal Reserve System related to subparagraphs (A) through (C) of this 

paragraph. 

(b)(1)(A) Except as provided in this subsection, an officer or 

employee of the General Accounting Office may not disclose information identifying an open bank, an open bank holding company, 

or a customer of an open or closed bank or bank holding company. 

(B) The Comptroller General may disclose information related 

to the affairs of a closed bank or closed bank holding company 

identifying a customer of the closed bank or closed bank holding 

company only if the Comptroller General believes the customer had 

a controlling influence in the management of the closed bank or 

closed bank holding company or was related to or affiliated with a 

person or group having a controlling influence. 

(2) An officer or employee of the General Accounting Office 

may discuss a customer, bank, or bank holding company with an 

official of an appropriate Federal banking agency and may report 
1218 INTERNATIONAL LENDING SUPERVISION ACT OF 1983 Sec. 905A 

an apparent criminal violation to an appropriate law enforcement 

authority of the United States Government or a State. 

(3) This subsection does not authorize an officer or employee 

of an appropriate Federal banking agency to withhold information 

from a committee of the Congress authorized to have the information. 

(c)(1)(A) To carry out this section, all records and property of 

or used by an appropriate Federal banking agency, including samples of reports of examinations of a bank or bank holding company 

the Comptroller General considers statistically meaningful and 

workpapers and correspondence related to the reports shall be 

made available to the Comptroller General, including such records 

and property pertaining to the coordination of international regulation, supervisor and examination activities of an appropriate Federal banking agency. 

(B) The Comptroller General shall give each appropriate Federal banking agency a current list of officers and employees to 

whom, with proper identification, records and property may be 

made available, and who may make notes or copies necessary to 

carry out an audit. 

(C) Each appropriate Federal banking agency shall give the 

Comptroller General suitable and lockable offices and furniture, 

telephones, and access to copying facilities. 

(2) Except for the temporary removal of workpapers of the 

Comptroller General that do not identify a customer of an open or 

closed bank or bank holding company, an open bank, or an open 

bank holding company, all workpapers of the Comptroller General 

and records and property of or used by an appropriate Federal 

banking agency that the Comptroller General possesses during an 

audit, shall remain in such agency. The Comptroller General shall 

prevent unauthorized access to records or property. 

EQUAL REPRESENTATION FOR THE FEDERAL DEPOSIT INSURANCE 

CORPORATION 

SEC. 912. [12 U.S.C. 3911] As one of the three Federal bank 

regulatory and supervisory agencies, and as the insurer of the 

United States banks involved in international lending, the Federal 

Deposit Insurance Corporation shall be given equal representation 

with the Board of Governors of the Federal Reserve System and 

the Office of the Comptroller of the Currency on the Committee on 

Banking Regulations and supervisory practices of the Group of Ten 

Countries and Switzerland. 
LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000 

1219 

LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000 

TITLE IV—REGULATORY RESPONSIBILITY FOR BANK PRODUCTS1 

SEC. 401. [7 U.S.C. 1 note ] SHOR T TITLE . 

This title may be cited as the ''Legal Certainty for Bank Products Act of 2000''. 

SEC. 402. [7 U.S.C. 27 ] DEFINITIONS . 

(a) BANK.—In this title, the term ''bank'' means— 

(1) any depository institution (as defined in section 3(c) of 

the Federal Deposit Insurance Act); 

(2) any foreign bank or branch or agency of a foreign bank 

(each as defined in section 1(b) of the International Banking 

Act of 1978); 

(3) any Federal or State credit union (as defined in section 

101 of the Federal Credit Union Act); 

(4) any corporation organized under section 25A of the 

Federal Reserve Act; 

(5) any corporation operating under section 25 of the Federal Reserve Act; 

(6) any trust company; or 

(7) any subsidiary of any entity described in paragraph (1) 

through (6) of this subsection, if the subsidiary is regulated as 

if the subsidiary were part of the entity and is not a broker or 

dealer (as such terms are defined in section 3 of the Securities 

Exchange Act of 1934) or a futures commission merchant (as 

defined in section 1a(20) of the Commodity Exchange Act). 

(b) IDENTIFIE D BANKIN G PRODUCT.—I n this title, the term 

''identified banking product'' shall have the same meaning as in 

paragraphs (1) through (5) of section 206(a) of the Gramm-LeachBliley Act, except that in applying such section for purposes of this 

title— 

(1) the term ''bank'' shall have the meaning given in subsection (a) of this section; and 

(2) the term ''qualified investor'' means eligible contract 

participant (as defined in section 1a(12) of the Commodity Exchange Act, as in effect on the date of the enactment of the 

Commodity Futures Modernization Act of 2000). 

(c) HYBRI D INSTRUMENT.—I n this title, the term ''hybrid instrument'' means an identified banking product not excluded by section 

403 of this Act, offered by a bank, having one or more payments 

1

This title, as contained in Appendix E (H.R. 5660; 114 Stat. 2763A-365) of Public Law 106-

554 (entitled the Commodity Futures Modernization Act of 2000), was enacted into law by the 

reference made in section 1(a)(5) of such public law (114 Stat. 2763). 

122 1 
Sec. 403 LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000 1222 

indexed to the value, level, or rate of, or providing for the delivery 

of, one or more commodities (as defined in section 1a(4) of the Commodity Exchange Act). 

(d) COVERED SWAP AGREEMENT.—In this title, the term ''covered swap agreement'' means a swap agreement (as defined in section 206(b) of the Gramm-Leach-Bliley Act), including a credit or 

equity swap, based on a commodity other than an agricultural commodity enumerated in section 1a(4) of the Commodity Exchange 

Act if— 

(1) the swap agreement— 

(A) is entered into only between persons that are eligible contract participants (as defined in section 1a(12) of 

the Commodity Exchange Act, as in effect on the date of 

the enactment of the Commodity Futures Modernization 

Act of 2000) at the time the persons enter into the swap 

agreement; and 

(B) is not entered into or executed on a trading facility 

(as defined in section 1a(33) of the Commodity Exchange 

Act); or 

(2) the swap agreement— 

(A) is entered into or executed on an electronic trading 

facility (as defined in section 1a(10) of the Commodity Exchange Act); 

(B) is entered into on a principal-to-principal basis between parties trading for their own accounts or as described in section 1a(12)(B)(ii) of the Commodity Exchange 

Act; 

(C) is entered into only between persons that are eligible contract participants as described in subparagraph (A), 

(B)(ii), or (C) of section 1a(12) of the Commodity Exchange 

Act, as in effect on the date of the enactment of the Commodity Futures Modernization Act of 2000, at the time the 

persons enter into the swap agreement; and 

(D) is an agreement, contract or transaction in an excluded commodity (as defined in section 1a(13) of the Commodity Exchange Act). 

SEC. 403. [7 U.S.C. 27a] EXCLUSION OF IDENTIFIE D BANKING PRODUCTS COMMONLY OFFERED ON OR BEFORE DECEMBER 5, 

2000. 

No provision of the Commodity Exchange Act shall apply to, 

and the Commodity Futures Trading Commission shall not exercise 

regulatory authority with respect to, an identified banking product 

if— 

(1) an appropriate banking agency certifies that the product has been commonly offered, entered into, or provided in the 

United States by any bank on or before December 5, 2000, 

under applicable banking law; and 

(2) the product was not prohibited by the Commodity Exchange Act and not regulated by the Commodity Futures Trading Commission as a contract of sale of a commodity for future 

delivery (or an option on such a contract) or an option on a 

commodity, on or before December 5, 2000. 
1223 Sec. 403 LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000 1223 

SEC. 404. [7 U.S.C. 27b] EXCLUSION OF CERTAIN IDENTIFIE D BANKING 

PRODUCTS OFFERED BY BANKS AFTER DECEMBER 5, 2000. 

No provision of the Commodity Exchange Act shall apply to, 

and the Commodity Futures Trading Commission shall not exercise 

regulatory authority with respect to, an identified banking product 

which had not been commonly offered, entered into, or provided in 

the United States by any bank on or before December 5, 2000, 

under applicable banking law if— 

(1) the product has no payment indexed to the value, level, 

or rate of, and does not provide for the delivery of, any commodity (as defined in section 1a(4) of the Commodity Exchange 

Act); or 

(2) the product or commodity is otherwise excluded from 

the Commodity Exchange Act. 

SEC. 405. [7 U.S.C. 27c] EXCLUSION OF CERTAIN OTHER IDENTIFIE D 

BANKING PRODUCTS. 

(a) I N GENERAL.—No provision of the Commodity Exchange Act 

shall apply to, and the Commodity Futures Trading Commission 

shall not exercise regulatory authority with respect to, a banking 

product if the product is a hybrid instrument that is predominantly 

a banking product under the predominance test set forth in subsection (b). 

(b) PREDOMINANCE TEST.—A hybrid instrument shall be considered to be predominantly a banking product for purposes of this 

section if— 

(1) the issuer of the hybrid instrument receives payment 

in full of the purchase price of the hybrid instrument substantially contemporaneously with delivery of the hybrid instrument; 

(2) the purchaser or holder of the hybrid instrument is not 

required to make under the terms of the instrument, or any 

arrangement referred to in the instrument, any payment to the 

issuer in addition to the purchase price referred to in paragraph (1), whether as margin, settlement payment, or otherwise during the life of the hybrid instrument or at maturity; 

(3) the issuer of the hybrid instrument is not subject by 

the terms of the instrument to mark-to-market margining 

requirements; and 

(4) the hybrid instrument is not marketed as a contract of 

sale of a commodity for future delivery (or option on such a 

contract) subject to the Commodity Exchange Act. 

(c) MARK-TO-MARKET MARGINING REQUIREMENT.—For purposes 

of subsection (b)(3), mark-to-market margining requirements shall 

not include the obligation of an issuer of a secured debt instrument 

to increase the amount of collateral held in pledge for the benefit 

of the purchaser of the secured debt instrument to secure the 

repayment obligations of the issuer under the secured debt instrument. 

SEC. 406. [7 U.S.C. 27d] ADMINISTRATION OF THE PREDOMINANCE 

TEST. 

(a) I N GENERAL.—No provision of the Commodity Exchange Act 

shall apply to, and the Commodity Futures Trading Commission 

shall not regulate, a hybrid instrument, unless the Commission 
Sec. 403 LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000 1224 

determines, by or under a rule issued in accordance with this section, that— 

(1) the action is necessary and appropriate in the public interest; 

(2) the action is consistent with the Commodity Exchange 

Act and the purposes of the Commodity Exchange Act; and 

(3) the hybrid instrument is not predominantly a banking 

product under the predominance test set forth in section 405(b) 

of this Act. 

(b) CONSULTATION.—Before commencing a rulemaking or making a determination pursuant to a rule issued under this title, the 

Commodity Futures Trading Commission shall consult with and 

seek the concurrence of the Board of Governors of the Federal Reserve System concerning— 

(1) the nature of the hybrid instrument; and 

(2) the history, purpose, extent, and appropriateness of the 

regulation of the hybrid instrument under the Commodity Exchange Act and under appropriate banking laws. 

(c) OBJECTION TO COMMISSION REGULATION.— 

(1) FILIN G OF PETITION FOR REVIEW.—Th e Board of Governors of the Federal Reserve System may obtain review of any 

rule or determination referred to in subsection (a) in the 

United States Court of Appeals for the District of Columbia 

Circuit by filing in the court, not later than 60 days after the 

date of publication of the rule or determination, a written petition requesting that the rule or determination be set aside. 

Any proceeding to challenge any such rule or determination 

shall be expedited by the court. 

(2) TRANSMITTAL OF PETITION AND RECORD.—A copy of a 

petition described in paragraph (1) shall be transmitted as 

soon as possible by the Clerk of the court to an officer or employee of the Commodity Futures Trading Commission designated for that purpose. Upon receipt of the petition, the Commission shall file with the court the rule or determination 

under review and any documents referred to therein, and any 

other relevant materials prescribed by the court. 

(3) EXCLUSIVE JURISDICTION.—On the date of the filing of 

a petition under paragraph (1), the court shall have jurisdiction, which shall become exclusive on the filing of the materials set forth in paragraph (2), to affirm and enforce or to set 

aside the rule or determination at issue. 

(4) STANDARD OF REVIEW.—Th e court shall determine to affirm and enforce or set aside a rule or determination of the 

Commodity Futures Trading Commission under this section, 

based on the determination of the court as to whether— 

(A) the subject product is predominantly a banking 

product; and 

(B) making the provision or provisions of the Commodity Exchange Act at issue applicable to the subject instrument is appropriate in light of the history, purpose, 

and extent of regulation under such Act, this title, and 

under the appropriate banking laws, giving deference neither to the views of the Commodity Futures Trading Com-
1225 Sec. 403 LEGAL CERTAINTY FOR BANK PRODUCTS ACT OF 2000 1225 

mission nor the Board of Governors of the Federal Reserve 

System. 

(5) JUDICIAL STAY.—The filing of a petition by the Board 

pursuant to paragraph (1) shall operate as a judicial stay, until 

the date on which the determination of the court is final (including any appeal of the determination). 

(6) OTHER AUTHORITY TO CHALLENGE.—Any aggrieved 

party may seek judicial review pursuant to section 6(c) of the 

Commodity Exchange Act of a determination or rulemaking by 

the Commodity Futures Trading Commission under this section. 

SEC. 407. [7 U.S.C. 27e] EXCLUSION OF COVERED SWAP AGREEMENTS. 

No provision of the Commodity Exchange Act (other than section 5b of such Act with respect to the clearing of covered swap 

agreements) shall apply to, and the Commodity Futures Trading 

Commission shall not exercise regulatory authority with respect to, 

a covered swap agreement offered, entered into, or provided by a 

bank. 

SEC. 408. [7 U.S.C. 27f] CONTRACT ENFORCEMENT. 

(a) HYBRID INSTRUMENTS.—No hybrid instrument shall be void, 

voidable, or unenforceable, and no party to a hybrid instrument 

shall be entitled to rescind, or recover any payment made with respect to, a hybrid instrument under any provision of Federal or 

State law, based solely on the failure of the hybrid instrument to 

satisfy the predominance test set forth in section 405(b) of this Act 

or to comply with the terms or conditions of an exemption or exclusion from any provision of the Commodity Exchange Act or any 

regulation of the Commodity Futures Trading Commission. 

(b) COVERED SWAP AGREEMENTS.—No covered swap agreement 

shall be void, voidable, or unenforceable, and no party to a covered 

swap agreement shall be entitled to rescind, or recover any payment made with respect to, a covered swap agreement under any 

provision of Federal or State law, based solely on the failure of the 

covered swap agreement to comply with the terms or conditions of 

an exemption or exclusion from any provision of the Commodity 

Exchange Act or any regulation of the Commodity Futures Trading 

Commission. 

(c) PREEMPTION.—This title shall supersede and preempt the 

application of any State or local law that prohibits or regulates 

gaming or the operation of bucket shops (other than antifraud provisions of general applicability) in the case of— 

(1) a hybrid instrument that is predominantly a banking 

product; or 

(2) a covered swap agreement. 

NATIONAL BANK CONSOLIDATION AND MERGER ACT 

1227 

NATIONAL BANK CONSOLIDATION AND MERGER ACT 

CHAP . 209.—A N AC T T O PROVIDE FOR TH E CONSOLIDATION OF TH E NATIONAL 

BANKING ASSOCIATIONS. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTION 1. [12 U.S.C. 215 nt] SHORT TITLE. 

This Act may be cited as the ''National Bank Consolidation and 

Merger Act''. 

SEC. 2. [12 U.S.C. 215] CONSOLIDATION OF BANKS WITHI N TH E SAME 

STATE. 

(a) IN GENERAL.—Any national bank or any bank incorporated 

under the laws of any State may, with the approval of the Comptroller, be consolidated with one or more national banking associations located in the same State under the charter of a national 

banking association on such terms and conditions as may be lawfully agreed upon by a majority of the board of directors of each 

association or bank proposing to consolidate, and be ratified and 

confirmed by the affirmative vote of the shareholders of each such 

association or bank owning at least two-thirds of its capital stock 

outstanding, or by a greater proportion of such capital stock in the 

case of such State bank if the laws of the State where it is organized so require, at a meeting to be held on the call of the directors 

after publishing notice of the time, place, and object of the meeting 

for four consecutive weeks in a newspaper of general circulation 

published in the place where the association or bank is located, or, 

if there is no such newspaper, then in the paper of general circulation published nearest thereto, and after sending such notice to 

each shareholder of record by certified or registered mail at least 

ten days prior to the meeting, except to those shareholders who 

specifically waive notice, but any additional notice shall be given 

to the shareholders of such State bank which may be required by 

the laws of the State where it is organized. Publication of notice 

may be waived, in cases where the Comptroller determines that an 

emergency exists justifying such waiver, by unanimous action of 

the shareholders of the association or State bank. 

(b) The consolidated association shall be liable for all liabilities 

of the respective consolidating banks or associations. The capital 

stock of such consolidated association shall not be less than that 

required under existing law for the organization of a national bank 

in the place in which it is located: Provided, That if such consolidation shall be voted for at such meetings by the necessary majorities 

of the shareholders of each association and State bank proposing 

to consolidate, and thereafter the consolidation shall be approved 

by the Comptroller, any shareholder of any of the associations or 

State banks so consolidated who has voted against such consolida1229 
Sec. 2 NAT'L BANK CONSOLIDATION AND MERGER ACT 1230 

tion at the meeting of the association or bank of which he is a 

stockholder, or who has given notice in writing at or prior to such 

meeting to the presiding officer that he dissents from the plan of 

consolidation, shall be entitled to receive the value of the shares so 

held by him when such consolidation is approved by the Comptroller upon written request made to the consolidated association 

at any time before thirty days after the date of consummation of 

the consolidation, accompanied by the surrender of his stock certificates. 

(c) The value of the shares of any dissenting shareholder shall 

be ascertained, as of the effective date of the consolidation, by an 

appraisal made by a committee of three persons, composed of (1) 

one selected by the vote of the holders of the majority of the stock, 

the owners of which are entitled to payment in cash; (2) one selected by the directors of the consolidated banking association; and 

(3) one selected by the two so selected. The valuation agreed upon 

by any two of the three appraisers shall govern. If the value so 

fixed shall not be satisfactory to any dissenting shareholder who 

has requested payment, that shareholder may, within five days 

after being notified of the appraised value of his shares, appeal to 

the Comptroller, who shall cause a reappraisal to be made which 

shall be final and binding as to the value of the shares of the appellant. 

(d) if, within ninety days from the date of consummation of the 

consolidation, for any reason one or more of the appraisers is not 

selected as herein provided, or the appraisers fail to determine the 

value of such shares, the Comptroller shall upon written request of 

any interested party cause an appraisal to be made which shall be 

final and binding on all parties. The expenses of the Comptroller 

in making the reappraisal or the appraisal, as the case may be, 

shall be paid by the consolidated banking association. The value of 

the shares ascertained shall be promptly paid to the dissenting 

shareholders by the consolidated banking association. Within thirty 

days after payment has been made to all dissenting shareholders 

as provided for in this section the shares of stock of the consolidated banking association which would have been delivered to such 

dissenting shareholders had they not requested payment shall be 

sold by the consolidated banking association at an advertised public auction, unless some other method of sale is approved by the 

Comptroller, and the consolidated banking association shall have 

the right to purchase any of such shares at such public auction, if 

it is the highest bidder therefor, for the purpose of reselling such 

shares within thirty days thereafter to such person or persons and 

at such price not less than par as its board of directors by resolution may determine. If the shares are sold at public auction at a 

price greater than the amount paid to the dissenting shareholders 

the excess in such sale price shall be paid to such shareholders. 

The appraisal of such shares of stock in any state bank shall be 

determined in the manner prescribed by the law of the state in 

such cases, rather than as provided in this section, if such provision is made in the State law; and no such consolidation shall be 

in contravention of the law of the state under which such bank is 

incorporated. 
Sec. 2 

NAT'L BANK CONSOLIDATION AND MERGER ACT 

1231 

(e) The corporate existence of each of the consolidating banks 

or banking associations participating in such consolidation shall be 

merged into and continued in the consolidated national banking 

association and such consolidated national banking association 

shall be deemed to be the same corporation as each bank or banking association participating in the consolidation. All rights, franchises, and interests of the individual consolidating banks or banking associations in and to every type of property (real, personal, 

and mixed) and choses in action shall be transferred to and vested 

in the consolidated national banking association by virtue of such 

consolidation without any deed or other transfer. The consolidated 

national banking association, upon the consolidation and without 

any order or other action on the part of any court or otherwise, 

shall hold and enjoy all rights of property, franchises, and interests, including appointments, designations and nominations, and 

all other rights and interests as trustee, executor, administrator, 

registrar of stocks and bonds, guardian of estates, assignee, receiver, and committee of estates of lunatics, and in every other 

fiduciary capacity, in the same manner and to the same extent as 

such rights, franchises, and interests were held or enjoyed by any 

one of the consolidating banks or banking associations at the time 

of consolidation, subject lo the conditions hereinafter provided. 

(f) where any consolidation bank or banking association, at the 

time of the consolidation, was acting under appointment of any 

court as trustee, executor, administrator, registrar of stocks and 

bonds, guardian of estates, assignee, receiver, or committee of estates of lunatics, or in any other fiduciary capacity, the consolidated national banking association shall be subject to removal by 

a court of competent jurisdiction in the same manner and to the 

same extent as was such consolidating bank or banking association 

prior to the consolidation. Nothing contained in this section shall 

be considered to impair in any manner the right of any court to remove the consolidated national banking association and to appoint 

in lieu thereof a substitute trustee, executor, or other fiduciary, except that such right shall not be exercised in such a manner as to 

discriminate against national banking associations, nor shall any 

consolidated national banking association be removed solely because of the fact that it is a national banking association. 

(g) Stock of the consolidated national banking association may 

be issued as provided by the terms of the consolidation agreement, 

free from any preemptive rights of the shareholders of the respective consolidating banks. 

SEC. 3. [12 U.S.C. 215a] (a) One or more national banking 

associations or one or more State banks, with the approval of the 

Comptroller, under an agreement not inconsistent with this Act, 

may merge into a national banking association located within the 

same State, under the charter of the receiving association. The 

merger agreement shall— 

(1) be agreed upon in writing by a majority of the board 

of directors of each association or State bank participating in 

the plan of merger; 

(2) be ratified and confirmed by the affirmative vote of the 

shareholders of each such association or State bank owning at 
Sec. 2 NAT'L BANK CONSOLIDATION AND MERGER ACT 1232 

least two-thirds of its capital stock outstanding, or by a greater 

proportion of such capital stock in the case of a State bank if 

the laws of the State where it is organized so require, at a 

meeting to be held on the call of the directors, after publishing 

notice of the time, place, and object of the meeting for four consecutive weeks in a newspaper of general circulation published 

in the place where the association or State bank is located, or, 

if there is no such newspaper, then in the newspaper of general circulation published nearest thereto, and after sending 

such notice to each shareholder of record by certified or registered mail at least ten days prior to the meeting, except to 

those shareholders who specifically waive notice, but any additional notice shall be given to the shareholders of such State 

bank which may be required by the laws of the State where 

it is organized. publication of notice may be waived, in cases 

where the Comptroller determines that an emergency exists 

justifying such waiver, by unanimous action of the shareholders of the association or State bank; 

(3) specify the amount of the capital stock of the receiving 

association, which shall not be less than that required under 

existing law for the organization of a national bank in the 

place in which it is located and which will be outstanding upon 

completion of the merger, the amount of stock (if any) to be 

allocated, and cash (if any) to be paid, to the shareholders of 

the association or State bank being merged into the receiving 

association; and 

(4) provide that the receiving association shall be liable for 

all liabilities of the association or State bank being merged into 

the receiving association. 

(b) if a merger shall be voted for at the called meetings by the 

necessary majorities of the shareholders of each association or 

State bank participating in the plan of merger, and thereafter the 

merger shall be approved by the Comptroller, any shareholder of 

any association or State bank to be merged into the receiving association who has voted against such merger at the meeting of the 

association or bank of which he is a stockholder, or has given notice in writing at or prior to such meeting to the presiding officer 

that he dissents from the plan of merger shall be entitled to receive 

the value of the shares so held by him when such merger shall be 

approved by the Comptroller upon written request made to the receiving association at any time before thirty days after the date of 

consummation of the merger, accompanied by the surrender of his 

stock certificates. 

(c) The value of the shares of any dissenting shareholder shall 

be ascertained, as of the effective date of the merger, by an appraisal made by a committee of three persons, composed of (1) one 

selected by the vote of the holders of the majority of the stock, the 

owners of which are entitled to payment in cash; (2) one selected 

by the directors of the receiving associations; and (3) one selected 

by the two so selected. The valuation agreed upon by any two of 

the three appraisers shall govern. if the value so fixed shall not be 

satisfactory to any dissenting shareholder who has requested payment, that shareholder may, within five days after being notified 

of the appraised value of his shares, appeal to the Comptroller, who 
Sec. 2 

NAT'L BANK CONSOLIDATION AND MERGER ACT 

1233 

shall cause a reappraisal to be made which shall be final and binding as to the value of the shares of the appellant. 

(d) if, within ninety days from the date of consummation of the 

merger, for any reason one or more of the appraisers is not selected 

as herein provided, or the appraisers fail to determine the value of 

such shares, the Comptroller shall upon written request of any interested party cause an appraisal to be made which shall be final 

and binding on all parties. The expenses of the Comptroller in 

making the reappraisal or the appraisal, as the case may be, shall 

be paid by the receiving association. The value of the shares 

ascertained shall be promptly paid to the dissenting shareholders 

by the receiving association. The shares of stock of the receiving 

association which would have been delivered to such dissenting 

shareholders had they not requested payment shall be sold by the 

receiving association at an advertised public auction, and the receiving association shall have the right to purchase any of such 

shares at such public auction, if it is the highest bidder therefor, 

for the purpose of reselling such shares within thirty days thereafter to such person or persons and at such price not less than par 

as it board of directors by resolution may determine. if the shares 

are sold at public auction at a price greater than the amount paid 

to the dissenting shareholders, the excess in such sale price shall 

be paid to such dissenting shareholders. The appraisal of such 

shares of stock in any State bank shall be determined in the manner prescribed by the law of the State in such cases, rather than 

as provided in this section, if such provision is made in the State 

law; and no such merger shall be in contravention of the law of the 

State under which such bank is incorporated. The provisions of this 

subsection shall apply only to shareholders of (and stock owned by 

them in) a bank or association being merged into the receiving 

association. 

(e) The corporate existence of each of the merging banks or 

banking associations participating in such merger shall be merged 

into and continued in the receiving association and such receiving 

association shall be deemed to be the same corporation as each 

bank or banking association participating in the merger. All rights, 

franchises, and interests of the individual merging banks or banking associations in and to every type of property (real, personal, 

and mixed) and choses in action shall be transferred to and vested 

in the receiving association by virtue of such merger without any 

deed or other transfer. The receiving association, upon the merger 

and without any order or other action on the part of any court or 

otherwise, shall hold and enjoy all rights of property, franchises, 

and interests, including appointments, designations, and nominations, and all other rights and interests as trustee, executor, 

administrator, registrar or stocks and bonds, guardian of estates, 

assignee, receiver, and committee of estates of lunatics, and in 

every other fiduciary capacity, in the same manner and to the same 

extent as such rights, franchises, and interests were held or enjoyed by any one of the merging banks or banking associations at 

the time or the merger, subject to the conditions hereinafter provided. 

(f) Where any merging bank or banking association, at the 

time of the merger, was acting under appointment of any court as 
Sec. 2 NAT'L BANK CONSOLIDATION AND MERGER ACT 1234 

trustee, executor, administrator, registrar of stocks and bonds, 

guardian of estates, assignee, receiver, or committee of estates of 

lunatics, or in any other fiduciary capacity, the receiving association shall be subject to removal by a court of competent jurisdiction 

in the same manner and to the same extent as was such merging 

bank or banking association prior to the merger. Nothing contained 

in this section shall be considered to impair in any manner the 

right of any court to remove the receiving association and to appoint in lieu thereof a substitute trustee, executor, or other fiduciary, except that such right shall not be exercised in such a manner as to discriminate against national banking associations, nor 

shall any receiving association be removed solely because of the 

fact that it is a national banking association. 

(g) Stock of the receiving association may be issued as provided 

by the terms of the merger agreement, free from any preemptive 

rights of the shareholders of the respective merging banks. 

SEC. 4. [12 U.S.C. 215a-1] INTERSTATE CONSOLIDATIONS AND MERGERS. 

(a) I N GENERAL.—A national bank may engage in a consolidation or merger under this Act with an out-of-State bank if the consolidation or merger is approved pursuant to section 44 of the Federal Deposit Insurance Act. 

(b) SCOPE OF APPLICATION.—Subsection (a) shall not apply 

with respect to any consolidation or merger before June 1, 1997, 

unless the home State of each bank involved in the transaction has 

in effect a law described in section 44(a)(3) of the Federal Deposit 

Insurance Act. 

(c) DEFINITIONS.—The terms ''home State'' and ''out-of-State 

bank'' have the same meaning as in section 44(f) of the Federal Deposit Insurance Act. 

SEC. 5. [12 U.S.C. 215a-2] EXPEDITED PROCEDURES FOR CERTAIN REORGANIZATIONS. 

(a) I N GENERAL.—A national bank may, with the approval of 

the Comptroller, pursuant to rules and regulations promulgated by 

the Comptroller, and upon the affirmative vote of the shareholders 

of such bank owning at least two-thirds of its capital stock outstanding, reorganize so as to become a subsidiary of a bank holding 

company or of a company that will, upon consummation of such reorganization, become a bank holding company. 

(b) REORGANIZATION PLAN.—A reorganization authorized under 

subsection (a) shall be carried out in accordance with a reorganization plan that— 

(1) specifies the manner in which the reorganization shall 

be carried out; 

(2) is approved by a majority of the entire board of directors of the national bank; 

(3) specifies— 

(A) the amount of cash or securities of the bank holding company, or both, or other consideration to be paid to 

the shareholders of the reorganizing bank in exchange for 

their shares of stock of the bank; 

(B) the date as of which the rights of each shareholder 

to participate in such exchange will be determined; and 
Sec. 2 

NAT'L BANK CONSOLIDATION AND MERGER ACT 

1235 

(C) the manner in which the exchange will be carried 

out; and 

(4) is submitted to the shareholders of the reorganizing 

bank at a meeting to be held on the call of the directors in 

accordance with the procedures prescribed in connection with 

a merger of a national bank under section 3. 

(c) RIGHTS OF DISSENTING SHAREHOLDERS.—If, pursuant to this 

section, a reorganization plan has been approved by the shareholders and the Comptroller, any shareholder of the bank who has 

voted against the reorganization at the meeting referred to in subsection (b)(4), or has given notice in writing at or prior to that 

meeting to the presiding officer that the shareholder dissents from 

the reorganization plan, shall be entitled to receive the value of his 

or her shares, as provided by section 3 for the merger of a national 

bank. 

(d) EFFECT OF REORGANIZATION.—The corporate existence of a 

national bank that reorganizes in accordance with this section shall 

not be deemed to have been affected in any way by reason of such 

reorganization. 

(e) APPROVAL UNDER THE BANK HOLDING COMPANY ACT.—Thi s 

section does not affect in any way the applicability of the Bank 

Holding Company Act of 1956 to a transaction described in subsection (a). 

SEC. 6. [12 U.S.C. 215a-3] MERGERS AND CONSOLIDATIONS WIT H SUBSIDIARIES AND NONBANK AFFILIATES. 

(a) IN GENERAL.—Upon the approval of the Comptroller, a national bank may merge with one or more of its nonbank subsidiaries or affiliates. 

(b) SCOPE.—Nothing in this section shall be construed— 

(1) to affect the applicability of section 18(c) of the Federal 

Deposit Insurance Act; or 

(2) to grant a national bank any power or authority that 

is not permissible for a national bank under other applicable 

provisions of law. 

(c) REGULATIONS.—The Comptroller shall promulgate regulations to implement this section. 

SEC. 7. [12 U.S.C. 215b] As used in this Act, the term— 

(1) ''State bank'' means any bank, banking association, 

trust company, savings bank (other than a mutual savings 

bank), or other banking institution which is engaged in the 

business of receiving deposits and which is incorporated under 

the laws of any State, or which is operating under the Code of 

Law for the District of Columbia (except a national banking 

association located in the District of Columbia); 

(2) ''state'' means the several states and Territories, the 

Commonwealth of Puerto Rico, the Virgin Islands, and the District of Columbia; 

(3) ''Comptroller'' means the Comptroller of the Currency; 

and 

(4) ''Receiving association'' means the national banking 

association into which one or more national banking associations or one or more State banks, located within the same 

State, merge. 

NATIONAL BANK RECEIVERSHIP ACT 

1237 

NATIONAL BANK RECEIVERSHIP ACT 

CHAP. 156.—An act authorizing the appointment of receivers of national banks and 

for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTION 1. [12 U.S.C. 191 note] SHORT TITLE. 

This Act may be cited as the ''National Bank Receivership Act''. 

SECTION 2. [12 U.S.C. 191] The Comptroller of the Currency 

may, without prior notice or hearings, appoint a receiver for any 

national bank (and such receiver shall be the Federal Deposit 

insurance Corporation if the national bank is an insured bank (as 

defined in section 3(h) of the Federal Deposit Insurance Act)) if the 

Comptroller determines, in the Comptroller's discretion, that— 

(1) 1 or more of the grounds specified in section 11(c)(5) of 

the Federal Deposit Insurance Act exist; or 

(2) the association's board of directors consists of fewer 

than 5 members. 

SEC. 3. [12 U.S.C. 197] (a) Whenever any national banking 

association shall have been or shall be placed in the hands of a receiver, as provided in section fifty-two hundred and thirty-four and 

other sections of the Revised Statutes of the United States and section 11(c) of the Federal Deposit Insurance Act, and when, as provided in section fifty-two hundred and thirty-six of the Revised 

Statutes of the United States, there has been paid to each and 

every creditor of such association whose claim or claims as such 

creditor shall have been proved or allowed as therein prescribed, 

the full amount of such claims, and all expenses of the receivership, the Comptroller of the Currency or the Federal Deposit insurance Corporation, where that Corporation has been appointed receiver of the bank, shall call a meeting of the shareholders of the 

association by giving notice thereof for thirty days in a newspaper 

published in the town, city, or county where the business of the 

association was carried on, or if no newspaper is there published, 

in the newspaper published nearest thereto. At such meeting the 

shareholders shall determine whether the receiver shall be continued and shall wind up the affairs of the association, or whether an 

agent shall be elected for that purpose, and in so determining the 

shareholders shall vote by ballot, in person or by proxy, each share 

of stock entitling the holder to one vote, and the majority of the 

stock in number of shares shall be necessary to determine whether 

the receiver shall be continued, or whether an agent shall be 

elected. in case such majority shall determine that the receiver 

shall be continued, the receiver shall thereupon proceed with the 

execution of the trust, and shall sell, dispose of, or otherwise collect 

the assets of the association, and shall possess all the powers and 

authority, and be subject to all the duties and liabilities originally 

1239 
Sec. 3 NATIONAL BANK RECEIVERSHIP ACT 1240 

conferred or imposed upon such receiver so far as they remain applicable. in case such meeting shall, by the vote of a majority of 

the stock in number of shares, determine that an agent shall be 

elected, the meeting shall thereupon proceed to elect an agent, voting by ballot, in person or by proxy, each share of stock entitling 

the holder to one vote, and the person who shall receive votes representing at least a majority of stock in number of shares shall be 

declared the agent for the purposes hereinafter provided; and when 

such agent shall have executed a bond to the shareholders conditioned for the payment and discharge in full or, to the extent possible from the remaining assets of the association, of each and 

every claim that may thereafter be proved and allowed by and before a competent court and for the faithful performance of his duties, in the penalty fixed by the shareholders at such meeting, with 

a surety or sureties to be approved by the district court of the 

United States for the district where the business of the association 

was carried on, and shall have filed such bond in the office of the 

clerk of such court, the Comptroller and the receiver, or the Federal Deposit Insurance Corporation, where that Corporation has 

been appointed receiver of the bank, shall thereupon transfer and 

deliver to such agent all the uncollected or other assets of the association then remaining in the hands or subject to the order and 

control of the Comptroller and such receiver, or either of them, or 

the Federal Deposit Insurance Corporation; and for this purpose 

the Comptroller and such receiver, or the Federal Deposit Insurance Corporation, as the case may be, are severally empowered and 

directed to execute any deed, assignment, transfer, or other instrument in writing that may be necessary and proper; and upon the 

execution and delivery of such instrument to such agent the Comptroller and such receiver or the Federal Deposit Insurance Corporation shall by virtue of this Act be discharged from any and all liabilities to the association and to each and all the creditors and 

shareholders thereof. 

(b) Upon receiving such deed, assignment, transfer, or other instrument the person elected such agent shall hold, control, and dispose of the assets and property of the association which he may receive under the terms hereof for the benefit of the shareholders of 

the association, and he may in his own name, or in the name of 

the association, sue and be sued and do all other lawful acts and 

things necessary to finally settle and distribute the assets and 

property in his hands, and may sell, compromise, or compound the 

debts due to the association, with the consent and approval of the 

district court of the United States for the district where the business of the association was carried on, and shall at the conclusion 

of his trust render to such district court a full account of all his 

proceedings, receipts, and expenditures as such agent, which court 

shall, upon due notice, settle and adjust such accounts and discharge such agent and sureties upon such bond. in case any such 

agent so elected shall die, resign, or be removed, any shareholder 

may call a meeting of the shareholders of the association in the 

town, city, or village where the business of the association was carried on, by giving notice thereof for thirty days in a newspaper 

published in such town, city, or village, or if no newspaper is there 

published, in the newspaper published nearest thereto, at which 
Sec. 3 

NATIONAL BANK RECEIVERSHIP ACT 

1241 

meeting the shareholders shall elect an agent, voting by ballet, in 

person or by proxy, each share of stock entitling the holder to one 

vote, and when such agent shall have received votes representing 

at least a majority of the stock in number of shares, and shall have 

executed a bond to the shareholders conditioned for the payment 

and discharge in full or, to the extent possible from the remaining 

assets of the association, of each and every claim that may thereafter be proved and allowed by and before a competent court and 

for the faithful performance of his duties, in the penalty fixed by 

the shareholders at such meeting, with a surety or sureties, to be 

approved by such court, and file such bond in the office of the clerk 

of that court, he shall have all the rights, powers, and duties of the 

agent first elected as hereinbefore provided. At any meeting held 

as hereinbefore provided administrators or executors of deceased 

shareholders may act and sign as the decedent might have done if 

living, and guardians of minors and trustees of other persons may 

so act and sign for their ward or wards or cestui que trust. The 

proceeds of the assets or property of any such association which 

may be undistributed at the time to such meeting or may be subsequently received shall be distributed as follows: 

First. To pay the expenses of the execution of the trust to 

the date of such payment. 

Second. To repay any amount or amounts which have been 

paid in by any shareholder or shareholders of the association 

upon and by reason of any and all assessments made upon the 

stock of the association by order of the Comptroller of the Currency in accordance with the provisions of the statutes of the 

United States. 

Third. To pay the balance ratably among such stockholders, in proportion to the number of shares held and owned 

by each. Such distribution shall be made from time to time as 

the proceeds shall be received and as shall be deemed advisable by the Comptroller of the Currency, or the Federal Deposit Insurance Corporation if continued as receiver of the 

bank under subsection (a) of this section, or such agent, as the 

case may be. 

[Section 4 amends section 5205 of the Revised Statues] 

[Section 5 was repealed by section 5(b) of P.L. 97-258, 96 Stat. 

1068, and was reenacted as section 5153 of title 31, United States 

Code, by such Public Law.] 

SEC. 6.1 That all savings-banks or savings and trust companies 

organized under authority of any act of Congress shall be, and are 

hereby, required to make, to the Comptroller of the Currency, and 

publish, all the reports which national banking-associations are required to make and publish under the provisions of section fifty 

two hundred and eleven, fifty-two hundred and twelve and fifty two 

hundred and thirteen, of the Revised statutes, and shall be subject 

to the same penalties for failure to make or publish such reports 

as are therein provided; which penalties may be collected by suit 

1

 This section apparently was never included in the united states Code or in the table of the 

Statutes at Large. The second sentence of this section is generally considered to have been repealed by the Act entitled ''An Act to establish a Code of Law for the District of Columbia'' and 

approved March 3, 1901, since that sentence applied only to organizations organized in the District of Columbia (see sections 713 and 1636 of such Act; 31 Stat. 1302, 1434). 
Sec. 3 NATIONAL BANK RECEIVERSHIP ACT 1242 

before any court of the United States in the district in which said 

savings banks or savings and trust companies may be located. 
REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

1243 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

[Public Law 93-533; 88 Stat. 1724; 12 U.S.C. 2601 et seq.] 

SHORT TITLE 

SECTION 1. [12 U.S.C. 2601 note] This Act may be cited as the 

''Real Estate Settlement Procedures Act of 1974''. 

FINDINGS AND PURPOSE 

SEC. 2. [12 U.S.C. 2601] (a) The Congress finds that significant reforms in the real estate settlement process are needed to insure that consumers throughout the Nation are provided with 

greater and more timely information on the nature and costs of the 

settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices that have 

developed in some areas of the country. The Congress also finds 

that it has been over two years since the Secretary of Housing and 

Urban Development and the Administrator of Veterans' Affairs 

submitted their joint report to the Congress on ''Mortgage Settlement Costs'' and that the time has come for the recommendations 

for Federal legislative action made in that report to be implemented. 

(b) It is the purpose of this Act to effect certain changes in the 

settlement process for residential real estate that will result— 

(1) in more effective advance disclosure to home buyers 

and sellers of settlement costs; 

(2) in the elimination of kickbacks or referral fees that 

tend to increase unnecessarily the costs of certain settlement 

services; 

(3) in a reduction in the amounts home buyers are required to place in escrow accounts established to insure the 

payment of real estate taxes and insurance; and 

(4) in significant reform and modernization of local record 

keeping of land title information. 

DEFINITIONS 

SEC. 3. [12 U.S.C. 2602] For purposes of this Act— 

(1) the term ''federally related mortgage loan'' includes any 

loan (other than temporary financing such as a construction 

loan) which— 

(A) is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families, including any such secured loan, the proceeds of which are used to prepay or 

pay off an existing loan secured by the same property; and 

1245 
1246 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

Sec. 10 

(B)(i) is made in whole or in part by any lender the 

deposits or accounts of which are insured by any agency of 

the Federal Government, or is made in whole or in part by 

any lender which is regulated by any agency of the Federal 

Government; or 

(ii) is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by the Secretary or any other officer or agency of the Federal Government or under or in connection with a housing or urban 

development program administered by the Secretary or a 

housing or related program administered by any other 

such officer or agency; or 

(iii) is intended to be sold by the originating lender to 

the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home 

Loan Mortgage Corporation, or a financial institution from 

which it is to be purchased by the Federal Home Loan 

Mortgage Corporation; or 

(iv) is made in whole or in part by any ''creditor'', as 

defined in section 103(f) of the Consumer Credit Protection 

Act (15 U.S.C. 1602(f)), who makes or invests in residential real estate loans aggregating more than $1,000,000 

per year, except that for the purpose of this Act, the term 

''creditor'' does not include any agency or instrumentality 

of any state; 

(2) the term ''thing of value'' includes any payment, advance, funds, loan, service, or other consideration; 

(3) the term ''settlement services'' includes any service provided in connection with a real estate settlement including, but 

not limited to, the following: title searchers, title examinations, 

the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property 

surveys, the rendering of credit reports or appraisals, pest and 

fungus inspections, services rendered by a real estate agent or 

broker, the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan 

processing, and the underwriting and funding of loans), and 

the handling of the processing, and closing or settlement; 

(4) the term ''title company'' means any institution which 

is qualified to issue title insurance, directly or through its 

agents, and also refers to any duly authorized agent of a title 

company; 

(5) the term ''person'' includes individuals, corporations, 

associations, partnerships, and trusts; 

(6) the term ''Secretary'' means the Secretary of Housing 

and urban Development; 

(7) the term ''affiliated business arrangement'' means an 

arrangement in which (A) a person who is in a position to refer 

business incident to or a part of a real estate settlement service involving a federally related mortgage loan, or an associate 

of such person, has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1 percent in 

a provider of settlement services; and (B) either of such per-
1247 REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 Sec. 10 

sons directly or indirectly refers such business to that provider 

or affirmately influences the selection of that provider; and 

(8) the term ''associate'' means one who has one or more 

of the following relationships with a person in a position to 

refer settlement business: (A) a spouse, parent, or child of such 

person; (B) a corporation or business entity that controls, is 

controlled by, or is under common control with such person; (C) 

an employer, officer, director, partner, franchisor, or franchisee 

of such person; or (D) anyone who has an agreement, arrangement, or understanding, with such person, the purpose or substantial effect of which is to enable the person in a position to 

refer settlement business to benefit financially from the 

referals of such business. 

UNIFOR M SETTLEMENT STATEMENT 

SEC. 4. [12 U.S.C. 2603] (a) The Secretary, in consultation 

with the Administrator of Veterans' Affairs, the Federal Deposit 

Insurance Corporation, and the Director of the Office of Thrift 

Supervision, shall develop and prescribe a standard form for the 

statement of settlement costs which shall be used (with such variations as may be necessary to reflect differences in legal and 

administrative requirements or practices in different areas of the 

country) as the standard real estate settlement form in all transactions in the United States which involve federally related mortgage loans. Such form shall conspicuously and clearly itemize all 

charges imposed upon the borrower and all charges imposed upon 

the seller in connection with the settlement and shall indicate 

whether any title insurance premium included in such charges covers or insures the lender's interest in the property, the borrower's 

interest, or both. The Secretary may, by regulation, permit the 

deletion from the form prescribed under this section of items which 

are not, under local laws or customs, applicable in any locality, except that such regulation shall require that the numerical code prescribed by the Secretary be retained in forms to be used in all localities. Nothing in this section may be construed to require that that 

part of the standard form which relates to the borrower's transaction to be furnished to the seller, or to require that that part of 

the standard form which relates to the seller be furnished to the 

borrower. 

(b) The form prescribed under this section shall be completed 

and made available for inspection by the borrower at or before settlement by the person conducting the settlement, except that (1) 

the Secretary may exempt from the requirements of this section 

settlements occurring in localities where the final settlement statement is not customarily provided at or before the date of settlement, or settlements where such requirements are impractical and 

(2) the borrower may, in accordance with regulations of the Secretary, waive his right to have the form made available at such 

time. Upon the request of the borrower to inspect the form prescribed under this section during the business day immediately 

preceding the day of settlement, the person who will conduct the 

settlement shall permit the borrower to inspect those items which 

are known to such person during such preceding day. 
1248 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

Sec. 10 

SPECIAL INFORMATION BOOKLETS 

SEC. 5. [12 U.S.C. 2604] (a) The Secretary shall prepare and 

distribute booklets to help persons borrowing money to finance the 

purchase of residential real estate better to understand the nature 

and costs of real estate settlement services. The Secretary shall distribute such booklets to all lenders which make federally related 

mortgage loans. 

(b) Each booklet shall be in such form and detail as the Secretary shall prescribe and, in addition to such other information as 

the secretary may provide, shall include in clear and concise 

language— 

(1) a description and explanation of the nature and purpose of each cost incident to a real estate settlement; 

(2) an explanation and sample of the standard real estate 

settlement form developed and prescribed under section 4; 

(3) a description and explanation of the nature and purpose of escrow accounts when used in connection with loans secured by residential real estate; 

(4) an explanation of the choices available to buyers of residential real estate in selecting persons to provide necessary 

services incident to a real estate settlement; and 

(5) an explanation of the unfair practices and unreasonable 

or unnecessary charges to be avoided by the prospective buyer 

with respect to a real estate settlement. 

(c) Each lender shall include with the booklet a good faith estimate of the amount or range of charges for specific settlement services the borrower is likely to incur in connection with the settlement as prescribed by the Secretary. Such booklets shall take into 

consideration differences in real estate settlement procedures 

which may exist among the several states and territories of the 

united states and among separate political subdivisions within the 

same State and territory. 

(d) Each lender referred to in subsection (a) shall provide the 

booklet described in such subsection to each person from whom it 

receives or for whom it prepares a written application to borrow 

money to finance the purchase of residential real estate. Such booklet shall be provided by delivering it or placing it in the mail not 

later than 3 business days after the lender receives the application, 

but no booklet need be provided if the lender denies the application 

for credit before the end of the 3-day period. 

(e) Booklets may be printed and distributed by lenders if their 

form and content are approved by the secretary as meeting the 

requirements of subsection (b) of this section. 

SERVICING OF MORTGAGE LOANS AND ADMINISTRATION OF ESCROW 

ACCOUNTS 

SEC. 6. [12 U.S.C. 2605] (a) DISCLOSURE TO APPLICANT RELATI NG TO ASSIGNMENT, SALE, OR TRANSFER OF LOA N SERVICING.— 

Each person who makes a federally related mortgage loan shall disclose to each person who applies for the loan, at the time of application for the loan, whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while 

the loan is outstanding. 
1249 REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 Sec. 6 

(b) NOTICE BY TRANSFEROR OR 1 LOA N SERVICING AT TIM E OF 

TRANSFER.— 

(1) NOTICE REQUIREMENT.—Each servicer of any federally 

related mortgage loan shall notify the borrower in writing of 

any assignment, sale, or transfer of the servicing of the loan 

to any other person. 

(2) TIM E OF NOTICE.— 

(A) IN GENERAL.—Except as provided under subparagraphs (B) and (C), the notice required under paragraph 

(1) shall be made to the borrower not less than 15 days before the effective date of transfer of the servicing of the 

mortgage loan (with respect to which such notice is made). 

(B) EXCEPTION FOR CERTAIN PROCEEDINGS.—The notice 

required under paragraph (1) shall be made to the borrower not more than 30 days after the effective date of 

assignment, sale, or transfer of the servicing of the mortgage loan (with respect to which such notice is made) in 

any case in which the assignment, sale, or transfer of the 

servicing of the mortgage loan is preceded by— 

(i) termination of the contract for servicing the 

loan for cause; 

(ii) commencement of proceedings for bankruptcy 

of the servicer; or 

(iii) commencement of proceedings by the Federal 

Deposit Insurance Corporation or the Resolution Trust 

Corporation for conservatorship or receivership of the 

servicer (or an entity by which the servicer is owned 

or controlled). 

( C) EXCEPTION FOR NOTICE PROVIDED AT CLOSING.— 

The provisions of subparagraphs (A) and (B) shall not 

apply to any assignment, sale, or transfer of the servicing 

of any mortgage loan if the person who makes the loan 

provides to the borrower, at settlement (with respect to the 

property for which the mortgage loan is made), written notice under paragraph (3) of such transfer. 

(3) CONTENTS OF NOTICE.—Th e notice required under paragraph (1) shall include the following information: 

(A) The effective date of transfer of the servicing described in such paragraph. 

(B) The name, address, and toll-free or collect call telephone number of the transferee servicer. 

(C) A toll-free or collect call telephone number for (i) 

an individual employed by the transferor servicer, or (ii) 

the department of the transferor servicer, that can be contacted by the borrower to answer inquiries relating to the 

transfer of servicing. 

(D) The name and toll-free or collect call telephone 

number for (i) an individual employed by the transferee 

servicer, or (ii) the department of the transferee servicer, 

that can be contacted by the borrower to answer inquiries 

relating to the transfer of servicing. 

1

 So in law. Probably should be ''OF'' . 
1250 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

Sec. 10 

(E) The date on which the transferor servicer who is 

servicing the mortgage loan before the assignment, sale, or 

transfer will cease to accept payments relating to the loan 

and the date on which the transferee servicer will begin to 

accept such payments. 

(F) Any information concerning the effect the transfer 

may have, if any, on the terms of or the continued availability of mortgage life or disability insurance or any other 

type of optional insurance and what action, if any, the borrower must take to maintain coverage. 

(G) A statement that the assignment, sale, or transfer 

of the servicing of the mortgage loan does not affect any 

term or condition of the security instruments other than 

terms directly related to the servicing of such loan. 

(c) NOTICE BY TRANSFEREE OF LOA N SERVICING AT TIM E OF 

TRANSFER.— 

(1) NOTICE REQUIREMENT.—Each transferee servicer to 

whom the servicing of any federally related mortgage loan is 

assigned, sold, or transferred shall notify the borrower of any 

such assignment, sale, or transfer. 

(2) TIM E OF NOTICE.— 

(A) IN GENERAL.—Except as provided in subparagraphs (B) and (C), the notice required under paragraph 

(1) shall be made to the borrower not more than 15 days 

after the effective date of transfer of the servicing of the 

mortgage loan (with respect to which such notice is made). 

(B) EXCEPTION FOR CERTAIN PROCEEDINGS.—The notice 

required under paragraph (1) shall be made to the borrower not more than 30 days after the effective date of 

assignment, sale, or transfer of the servicing of the mortgage loan (with respect to which such notice is made) in 

any case in which the assignment, sale, or transfer of the 

servicing of the mortgage loan is preceded by— 

(i) termination of the contract for servicing the 

loan for cause; 

(ii) commencement of proceedings for bankruptcy 

of the servicer; or 

(iii) commencement of proceedings by the Federal 

Deposit Insurance Corporation or the Resolution Trust 

Corporation for conservatorship or receivership of the 

servicer (or an entity by which the servicer is owned 

or controlled). 

( C) EXCEPTION FOR NOTICE PROVIDED AT CLOSING.— 

The provisions of subparagraphs (A) and (B) shall not 

apply to any assignment, sale, or transfer of the servicing 

of any mortgage loan if the person who makes the loan 

provides to the borrower, at settlement (with respect to the 

property for which the mortgage loan is made), written notice under paragraph (3) of such transfer. 

(3) CONTENTS OF NOTICE.—Any notice required under 

paragraph (1) shall include the information described in subsection (b)(3). 

(d) TREATMENT OF LOAN PAYMENTS DURIN G TRANSFER PERIOD.—During the 60-day period beginning on the effective date of 
1251 REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 Sec. 10 

transfer of the servicing of any federally related mortgage loan, a 

late fee may not be imposed on the borrower with respect to any 

payment on such loan and no such payment may be treated as late 

for any other purposes, if the payment is received by the transferor 

servicer (rather than the transferee servicer who should properly 

receive payment) before the due date applicable to such payment. 

(e) DUT Y OF LOA N SERVICER T O RESPOND TO BORROWER INQUIRIES.— 

(1) NOTICE OF RECEIPT OF INQUIRY.— 

(A) I N GENERAL.—If any servicer of a federally related 

mortgage loan receives a qualified written request from 

the borrower (or an agent of the borrower) for information 

relating to the servicing of such loan, the servicer shall 

provide a written response acknowledging receipt of the 

correspondence within 20 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested 

is taken within such period. 

(B) QUALIFIED WRITTEN REQUEST.—For purposes of 

this subsection, a qualified written request shall be a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, 

that— 

(i) includes, or otherwise enables the servicer to 

identify, the name and account of the borrower; and 

(ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the 

account is in error or provides sufficient detail to the 

servicer regarding other information sought by the 

borrower. 

(2) ACTION WIT H RESPECT TO INQUIRY.—No t later than 60 

days (excluding legal public holidays, Saturdays, and Sundays) 

after the receipt from any borrower of any qualified written request under paragraph (1) and, if applicable, before taking any 

action with respect to the inquiry of the borrower, the servicer 

shall— 

(A) make appropriate corrections in the account of the 

borrower, including the crediting of any late charges or 

penalties, and transmit to the borrower a written notification of such correction (which shall include the name and 

telephone number of a representative of the servicer who 

can provide assistance to the borrower); 

(B) after conducting an investigation, provide the borrower with a written explanation or clarification that 

includes— 

(i) to the extent applicable, a statement of the reasons for which the servicer believes the account of the 

borrower is correct as determined by the servicer; and 

(ii) the name and telephone number of an individual employed by, or the office or department of, the 

servicer who can provide assistance to the borrower; or 

(C) after conducting an investigation, provide the borrower with a written explanation or clarification that 

includes— 
1252 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

Sec. 10 

(i) information requested by the borrower or an 

explanation of why the information requested is unavailable or cannot be obtained by the servicer; and 

(ii) the name and telephone number of an individual employed by, or the office or department of, the 

servicer who can provide assistance to the borrower. 

(3) PROTECTION OF CREDIT RATING.—During the 60-day period beginning on the date of the servicer's receipt from any 

borrower of a qualified written request relating to a dispute regarding the borrower's payments, a servicer may not provide 

information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, 

to any consumer reporting agency (as such term is defined 

under section 603 of the Fair Credit Reporting Act). 

(f) DAMAGES AND COSTS.—Whoever fails to comply with any 

provision of this section shall be liable to the borrower for each 

such failure in the following amounts: 

(1) INDIVIDUALS.—In the case of any action by an individual, an amount equal to the sum of— 

(A) any actual damages to the borrower as a result of 

the failure; and 

(B) any additional damages, as the court may allow, in 

the case of a pattern or practice of noncompliance with the 

requirements of this section, in an amount not to exceed 

$1,000. 

(2) CLASS ACTIONS.—In the case of a class action, an 

amount equal to the sum of— 

(A) any actual damages to each of the borrowers in the 

class as a result of the failure; and 

(B) any additional damages, as the court may allow, in 

the case of a pattern or practice of noncompliance with the 

requirements of this section, in an amount not greater 

than $1,000 for each member of the class, except that the 

total amount of damages under this subparagraph in any 

class action may not exceed the lesser of— 

(i) $500,000; or 

(ii) 1 percent of the net worth of the servicer. 

(3) COSTS.—In addition to the amounts under paragraph 

(1) or (2), in the case of any successful action under this section, the costs of the action, together with any attorneys fees 

incurred in connection with such action as the court may determine to be reasonable under the circumstances. 

(4) NONLIABILITY.—A transferor or transferee servicer 

shall not be liable under this subsection for any failure to comply with any requirement under this section if, within 60 days 

after discovering an error (whether pursuant to a final written 

examination report or the servicer's own procedures) and before the commencement of an action under this subsection and 

the receipt of written notice of the error from the borrower, the 

servicer notifies the person concerned of the error and makes 

whatever adjustments are necessary in the appropriate account 

to ensure that the person will not be required to pay an 

amount in excess of any amount that the person otherwise 

would have paid. 
1253 REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 Sec. 10 

(g) ADMINISTRATION OF ESCROW ACCOUNTS.—If the terms of 

any federally related mortgage loan require the borrower to make 

payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer 

shall make payments from the escrow account for such taxes, 

insurance premiums, and other charges in a timely manner as such 

payments become due. 

(h) PREEMPTION OF CONFLICTING STATE LAWS.—Notwithstanding any provision of any law or regulation of any State, a person who makes a federally related mortgage loan or a servicer shall 

be considered to have complied with the provisions of any such 

State law or regulation requiring notice to a borrower at the time 

of application for a loan or transfer of the servicing of a loan if such 

person or servicer complies with the requirements under this section regarding timing, content, and procedures for notification of 

the borrower. 

(i) DEFINITIONS.—For purposes of this section: 

(1) EFFECTIVE DATE OF TRANSFER.—The term ''effective 

date of transfer'' means the date on which the mortgage payment of a borrower is first due to the transferee servicer of a 

mortgage loan pursuant to the assignment, sale, or transfer of 

the servicing of the mortgage loan. 

(2) SERVICER.—The term ''servicer'' means the person 

responsible for servicing of a loan (including the person who 

makes or holds a loan if such person also services the loan). 

The term does not include— 

(A) the Federal Deposit Insurance Corporation or the 

Resolution Trust Corporation, in connection with assets acquired, assigned, sold, or transferred pursuant to section 

13(c) of the Federal Deposit Insurance Act or as receiver 

or conservator of an insured depository institution; and 

(B) the Government National Mortgage Association, 

the Federal National Mortgage Association, the Federal 

Home Loan Mortgage Corporation, the Resolution Trust 

Corporation, or the Federal Deposit insurance Corporation, in any case in which the assignment, sale, or transfer 

of the servicing of the mortgage loan is preceded by— 

(i) termination of the contract for servicing the 

loan for cause; 

(ii) commencement of proceedings for bankruptcy 

of the servicer; or 

(iii) commencement of proceedings by the Federal 

Deposit Insurance Corporation or the Resolution Trust 

Corporation for conservatorship or receivership of the 

servicer (or an entity by which the servicer is owned 

or controlled). 

(3) SERVICING.—The term ''servicing'' means receiving any 

scheduled periodic payments from a borrower pursuant to the 

terms of any loan, including amounts for escrow accounts described in section 10, and making the payments of principal 

and interest and such other payments with respect to the 

amounts received from the borrower as may be required pursuant to the terms of the loan. 
1254 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

Sec. 10 

(j) TRANSITION.— 

(1) ORIGINATOR LIABILITY.—A person who makes a federally related mortgage loan shall not be liable to a borrower because of a failure of such person to comply with subsection (a) 

with respect to an application for a loan made by the borrower 

before the regulations referred to in paragraph (3) take effect. 

(2) SERVICER LIABILITY.—A servicer of a federally related 

mortgage loan shall not be liable to a borrower because of a 

failure of the servicer to perform any duty under subsection 

(b), (c), (d), or (e) that arises before the regulations referred to 

in paragraph (3) take effect. 

(3) REGULATIONS AND EFFECTIVE DATE.—Th e Secretary 

shall, by regulations that shall take effect not later than April 

20, 1991, establish any requirements necessary to carry out 

this section. Such regulations shall include the model disclosure statement required under subsection (a)(2). 

SEC. 7. [12 U.S.C. 2606] EXEMPTE D TRANSACTIONS. 

(a) IN GENERAL.—This Act does not apply to credit transactions 

involving extensions of credit— 

(1) primarily for business, commercial, or agricultural purposes; or 

(2) to government or governmental agencies or instrumentalities. 

(b) INTERPRETATION.—In prescribing regulations under section 

19(a), the Secretary shall ensure that, with respect to subsection 

(a) of this section, the exemption for credit transactions involving 

extensions of credit primarily for business, commercial, or agricultural purposes, as provided in section 7(1) of the Real Estate Settlement Procedures Act of 1974 shall be the same as the exemption 

for such credit transactions under section 104(1) of the Truth in 

Lending Act. 

PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES 

SEC. 8. [12 U.S.C. 2607] (a) No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to 

any agreement or understanding, oral or otherwise, that business 

incident to or a part of a real estate settlement service involving 

a federally related mortgage loan shall be referred to any person. 

(b) No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the 

rendering of a real estate settlement service in connection with a 

transaction involving a federally related mortgage loan other than 

for services actually performed. 

(c) Nothing in this section shall be construed as prohibiting (1) 

the payment of a fee (A) to attorneys at law for services actually 

rendered or (B) by a title company to its duly appointed agent for 

services actually performed in the issuance of a policy of title insurance or (C) by a lender to its duly appointed agent for services 

actually performed in the making of a loan, (2) the payment to any 

person of a bona fide salary or compensation or other payment for 

goods or facilities actually furnished or for services actually performed, (3) payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and 
1255 REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 Sec. 8 

brokers, (4) affiliated business arrangements so long as (A) a disclosure is made of the existence of such an arrangement to the person 

being referred and, in connection with such referral, such person 

is provided a written estimate of the charge or range of charges 

generally made by the provider to which the person is referred (i) 

in the case of a face-to-face referral or a referral made in writing 

or by electronic media, at or before the time of the referral (and 

compliance with this requirement in such case may be evidenced 

by a notation in a written, electronic, or similar system of records 

maintained in the regular course of business); (ii) in the case of a 

referral made by telephone, within 3 business days after the referral by telephone,1

 (and in such case an abbreviated verbal disclosure of the existence of the arrangement and the fact that a written disclosure will be provided within 3 business days shall be 

made to the person being referred during the telephone referral); 

or (iii) in the case of a referral by a lender (including a referral by 

a lender to an affiliated lender), at the time the estimates required 

under section 5(c) are provided (notwithstanding clause (i) or (ii)); 

and any required written receipt of such disclosure (without regard 

to the manner of the disclosure under clause (i), (ii), or (iii)) may 

be obtained at the closing or settlement (except that a person making a face-to-face referral who provides the written disclosure at or 

before the time of the referral shall attempt to obtain any required 

written receipt of such disclosure at such time and if the person 

being referred chooses not to acknowledge the receipt of the disclosure at that time, that fact shall be noted in the written, electronic, 

or similar system of records maintained in the regular course of 

business by the person making the referral), (B) such person is not 

required to use any particular provider of settlement services, and 

(C) the only thing of value that is received from the arrangement, 

other than the payments permitted under this subsection, is a return on the ownership interest or franchise relationship, or (5) such 

other payments or classes of payments or other transfers as are 

specified in regulations prescribed by the Secretary, after consultation with the Attorney General, the Secretary of Veterans Affairs, 

the Federal Home Loan Bank Board, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve 

System, and the Secretary of Agriculture. For purposes of the preceding sentence, the following shall not be considered a violation of 

clause (4)(B): (i) any arrangement that requires a buyer, borrower, 

or seller to pay for the services of an attorney, credit reporting 

agency, or real estate appraiser chosen by the lender to represent 

the lender's interest in a real estate transaction, or (ii) any 

arrangement where an attorney or law firm represents a client in 

a real estate transaction issues or arranges for the issuance of a 

policy of title insurance in the transaction directly as agent or 

through a separate corporate title insurance agency that may be 

established by that attorney or law firm and operated as an adjunct to his or its law practice. 

(d)(1) Any person or persons who violate the provisions of this 

section shall be fined not more than $10,000 or imprisoned for not 

more than one year, or both. 

1

 So in original. 
1256 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

Sec. 10 

(2) Any person or persons who violate the prohibitions or limitations of this section shall be jointly and severally liable to the 

person or persons charged for the settlement service involved in the 

violation in an amount equal to three times the amount of any 

charge paid for such settlement service. 

(3) No person or persons shall be liable for a violation of the 

provisions of section 8(c)(4)(A) if such person or persons proves by 

a preponderance of the evidence that such violation was not intentional and resulted from a bona fide error notwithstanding maintenance of procedures that are reasonably adapted to avoid such 

error. 

(4) The secretary, the Attorney General of any state, or the 

insurance commissioner of any state may bring an action to enjoin 

violations of this section. 

(5) in any private action brought pursuant to this subsection, 

the court may award to the prevailing party the court costs of the 

action together with reasonable attorneys fees. 

(6) No provision of state law or regulation that imposes more 

stringent limitations on affiliated business arrangements shall be 

construed as being inconsistent with this section. 

TITLE COMPANIES 

SEC. 9. [12 U.S.C. 2608] (a) No seller of property that will be 

purchased with the assistance of a federally related mortgage loan 

shall require directly or indirectly, as a condition to selling the 

property, that title insurance covering the property to be purchased 

by the buyer from any particular title company. 

(b) Any seller who violates the provisions of subsection (a) shall 

be liable to the buyer in an amount equal to three times all charges 

made for such title insurance. 

ESCROW ACCOUNTS 

SEC. 10. [12 U.S.C. 2609] (a) I N GENERAL.—A lender, in connection with a federally related mortgage loan, may not require the 

borrower or prospective borrower— 

(1) to deposit in any escrow account which may be established in connection with such loan for the purpose of assuring 

payment of taxes, insurance premiums, or other charges with 

respect to the property, in connection with the settlement, an 

aggregate sum (for such purpose) in excess of a sum that will 

be sufficient to pay such taxes, insurance premiums and other 

charges attributable to the period beginning on the last date 

on which each such charge would have been paid under the 

normal lending practice of the lender and local custom, provided that the selection of each such date constitutes prudent 

lending practice, and ending on the due date of its first full 

installment payment under the mortgage, plus one-sixth of the 

estimated total amount of such taxes, insurance premiums and 

other charges to be paid on dates, as provided above, during 

the ensuing twelve-month period; or 

(2) to deposit in any such escrow account in any month 

beginning with the first full installment payment under the 

mortgage a sum (for the purpose of assuring payment of taxes, 
1257 REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 Sec. 10 

insurance premiums and other charges with respect to the 

property) in excess of the sum of (A) one-twelfth of the total 

amount of the estimated taxes, insurance premiums and other 

charges which are reasonably anticipated to be paid on dates 

during the ensuing twelve months which dates are in accordance with the normal lending practice of the lender and local 

custom, provided that the selection of each such date constitutes prudent lending practice, plus (B) such amount as is 

necessary to maintain an additional balance in such escrow account not to exceed one-sixth of the estimated total amount of 

such taxes, insurance premiums and other charges to be paid 

on dates, as provided above, during the ensuing twelve-month 

period: Provided, however, That in the event the lender determines there will be or is a deficiency he shall not be prohibited 

from requiring additional monthly deposits in such escrow account to avoid or eliminate such deficiency. 

(b) NOTIFICATION OF SHORTAGE I N ESCROW ACCOUNT.—If the 

terms of any federally related mortgage loan require the borrower 

to make payments to the servicer (as the term is defined in section 

6(i)) of the loan for deposit into an escrow account for the purpose 

of assuring payment of taxes, insurance premiums, and other 

charges with respect to the property, the servicer shall notify the 

borrower not less than annually of any shortage of funds in the escrow account. 

(c) ESCROW ACCOUNT STATEMENTS.— 

(1) INITIAL STATEMENT.— 

(A) IN GENERAL.—Any servicer that has established an 

escrow account in connection with a federally related mortgage loan shall submit to the borrower for which the escrow account has been established a statement clearly 

itemizing the estimated taxes, insurance premiums, and 

other charges that are reasonably anticipated to be paid 

from the escrow account during the first 12 months after 

the establishment of the account and the anticipated dates 

of such payments. 

(B) TIM E OF SUBMISSION.—The statement required 

under subparagraph (A) shall be submitted to the borrower at closing with respect to the property for which the 

mortgage loan is made or not later than the expiration of 

the 45-day period beginning on the date of the establishment of the escrow account. 

(C) INITIAL STATEMENT AT CLOSING.—Any servicer may 

submit the statement required under subparagraph (A) to 

the borrower at closing and may incorporate such statement in the uniform settlement statement required under 

section 4. The Secretary shall issue regulations prescribing 

any changes necessary to the uniform settlement statement under section 4 that specify how the statement required under subparagraph (A) of this section shall be 

incorporated in the uniform settlement statement. 

(2) ANNUA L STATEMENT.— 

(A) IN GENERAL.—Any servicer that has established or 

continued an escrow account in connection with a federally 

related mortgage loan shall submit to the borrower for 
1258 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

Sec. 10 

which the escrow account has been established or continued a statement clearly itemizing, for each period described in subparagraph (B) (during which the servicer 

services the escrow account), the amount of the borrower's 

current monthly payment, the portion of the monthly payment being placed in the escrow account, the total amount 

paid into the escrow account during the period, the total 

amount paid out of the escrow account during the period 

for taxes, insurance premiums, and other charges (as separately identified), and the balance in the escrow account at 

the conclusion of the period. 

(B) TIM E OF SUBMISSION.—Th e statement required 

under subparagraph (A) shall be submitted to the borrower not less than once for each 12-month period, the 

first such period beginning on the first January 1st that 

occurs after the date of the enactment of the CranstonGonzalez National Affordable Housing Act,1

 and shall be 

submitted not more than 30 days after the conclusion of 

each such 1-year period. 

( d) PENALTIES. — 

(1) I N GENERAL.—I n the case of each failure to submit a 

statement to a borrower as required under subsection (c), the 

Secretary shall assess to the lender or escrow servicer failing 

to submit the statement a civil penalty of $50 for each such 

failure, but the total amount imposed on such lender or escrow 

servicer for all such failures during any 12-month period referred to in subsection (b)2

 may not exceed $100,000. 

(2) INTENTIONA L VIOLATIONS.—I f any failure to which paragraph (1) applies is due to intentional disregard of the requirement to submit the statement, then, with respect to such 

failure— 

(A) the penalty imposed under paragraph (1) shall be 

$100; and 

(B) in the case of any penalty determined under subparagraph (A), the $100,000 limitation under paragraph 

(1) shall not apply. 

LIMITATION S AN D DISCLOSURES WIT H RESPECT TO CERTAI N 

FEDERALLY RELATED MORTGAGE LOANS 

SEC. 11. (a) The Federal Deposit Insurance Act is amended by 

adding at the end thereof the following new section: 

''SEC. 25. (a) No insured bank, or mutual savings or cooperative bank which is not an insured bank, shall make any federally 

related mortgage loan to any agent, trustee, nominee, or other person acting in a fiduciary capacity without the prior condition that 

the identity of the person receiving the beneficial interest of such 

loan shall at all times be revealed to the bank. At the request of 

the Corporation, the bank shall report to the Corporation on the 

identity of such person and the nature and amount of the loan, discount, or other extension of credit. 

1

 The date of enactment was November 28, 1990. 

2

 So in law. Probably intended to refer to subsection (c). 
1259 REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 Sec. 10 

''(b) In addition to other available remedies, this section may 

be enforced with respect to mutual savings and cooperative banks 

which are not insured banks in accordance with section 8 of this 

Act, and for such purpose such mutual savings and cooperative 

banks shall be held and considered to be state nonmember insured 

banks and the appropriate Federal agency with respect to such mutual savings and cooperative banks shall be the Federal Deposit 

Insurance Corporation.'' 

(b) Title IV of the National Housing Act is amended by adding 

at the end thereof the following new section: 

''SEC. 413. No insured institution shall make any federally related mortgage loan to any agent, trustee, nominee, or other person 

acting in a fiduciary capacity without the prior condition that the 

identity of the person receiving the beneficial interest of such loan 

shall at all times be revealed to the institution. At the request of 

the Federal Home Loan Bank Board, the insured institution shall 

report to the Board on the identity of such person and the nature 

and amount of the loan.'' 

(c) The Federal Deposit Insurance Corporation or the Federal 

Home Loan Bank Board as appropriate may by regulation exempt 

classes or types of transactions from the provisions added by this 

section if the Corporation or the Board determines that the purposes of such provisions would not be advanced materially by their 

application to such transactions. 

PROHIBITION OF FEES FOR PREPARATION OF TRUTH-IN-LENDING, 

UNIFOR M SETTLEMENT, AND ESCROW ACCOUNT STATEMENTS 

SEC. 12. [12 U.S.C. 2610] No fee shall be imposed or charge 

made upon any other person (as a part of settlement costs or otherwise) by a lender in connection with a federally related mortgage 

loan made by it (or a loan for the purchase of a mobile home), or 

by a servicer (as the term is defined under section 6(i)), for or on 

account of the preparation and submission by such lender or 

servicer of the statement or statements required (in connection 

with such loan) by sections 4 and 10(c) of this Act or by the Truth 

in Lending Act. 

[Sections 13, 14, and 15 repealed, Pub. L. 104-208.] 

JURISDICTION OF COURTS 

SEC. 16. [12 U.S.C. 2614] Any action pursuant to the provisions of section 6, 8, or 9 may be brought in the United States district court or in any other court of competent jurisdiction, for the 

district in which the property involved is located, or where the violation is alleged to have occurred, within 3 years in the case of a 

violation of section 6 and 1 year in the case of a violation of section 

8 or 9 from the date of the occurrence of the violation, except that 

actions brought by the secretary, the Attorney General of any 

state, or the insurance commissioner of any state may be brought 

within 3 years from the date of the occurrence of the violation. 
1260 

REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 

Sec. 10 

VALIDITY OF CONTRACTS AND LIENS 

SEC. 17. [12 U.S.C. 2615] Nothing in this Act shall affect the 

validity or enforceability of any sale or contract for the sale of real 

property or any loan, loan agreement, mortgage, or lien made or 

arising in connection with a federally related mortgage loan. 

RELATION TO STATE LAWS 

SEC. 18. [12 U.S.C. 2616] This Act does not annul, alter, or 

affect, or exempt any person subject to the provisions of this Act 

from complying with, the laws of any State with respect to settlement practices, except to the extent that those laws are inconsistent with any provision of this Act, and then only to the extent 

of the inconsistency. The Secretary is authorized to determine 

whether such inconsistencies exist. The Secretary may not determine that any State law is inconsistent with any provision of this 

Act if the Secretary determines that such laws gives greater protection to the consumer. In making these determinations the Secretary shall consult with the appropriate Federal agencies. 

AUTHORITY OF TH E SECRETARY 

SEC. 19. [12 U.S.C. 2617] (a) The Secretary is authorized to 

prescribe such rules and regulations, to make such interpretations, 

and to grant such reasonable exemptions for classes of transactions, as may be necessary to achieve the purposes of this Act. 

(b) No provision of this Act or the laws of any State imposing 

any liability shall apply to any act done or omitted in good faith 

in conformity with any rule, regulation, or interpretation thereof by 

the Secretary or the Attorney General, notwithstanding that after 

such act or omission has occurred, such rule, regulation, or 

interpretation is amended, rescinded, or determined by judicial or 

other authority to be invalid for any reason. 

(c)(1) The Secretary may investigate any facts, conditions, 

practices, or matters that may be deemed necessary or proper to 

aid in the enforcement of the provisions of this Act, in prescribing 

of rules and regulations thereunder, or in securing information to 

serve as a basis for recommending further legislation concerning 

real estate settlement practices. To aid in the investigations, the 

Secretary is authorized to hold such hearings, administer such 

oaths, and require by subpena the attendance and testimony of 

such witnesses and production of such documents as the Secretary 

deems advisable. 

(2) Any district court of the United States within the jurisdiction of which an inquiry is carried on may, in the case of contumacy or refusal to obey a subpena of the Secretary issued under 

this section, issue an order requiring compliance therewith; and 

any failure to obey such order of the court may be punished by 

such court as a contempt thereof. 

(d) DELA Y OF EFFECTIVENESS OF RECEN T FINA L REGULATION 

RELATING TO PAYMENTS TO EMPLOYEES.— 

(1) IN GENERAL.—The amendment to part 3500 of title 24 

of the Code of Federal Regulations contained in the final regulation prescribed by the Secretary and published in the Federal 
1261 REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 Sec. 10 

Register on June 7, 1996, which will, as of the effective date 

of such amendment— 

(A) eliminate the exemption for payments by an employer to employees of such employer for referral activities 

which is currently codified as section 3500.14(g)(1)(vii) of 

such title 24; and 

(B) replace such exemption with a more limited 

exemption in new clauses (vii), (viii), and (ix) of section 

3500.14 of such title 24, 

shall not take effect before July 31, 1997. 

(2) CONTINUATIO N OF PRIOR RULE.—The regulation codified 

as section 3500.14(g)(1)(vii) of title 24 of the Code of Federal 

Regulations, relating to employer-employee payments, as in effect on May 1, 1996, shall remain in effect until the date the 

amendment referred to in paragraph (1) takes effect in accordance with such paragraph. 

(3) PUBLI C NOTIC E OF EFFECTIVE DATE.—The Secretary 

shall provide public notice of the date on which the amendment referred to in paragraph (1) will take effect in accordance 

with such paragraph not less than 90 days and not more than 

180 days before such effective date. 

EFFECTIVE DATE 

SEC. 20. [12 U.S.C. 2601 note] The provisions of this Act, and 

the amendments made thereby, shall become effective one hundred 

and eighty days after the date of the enactment of this Act.1 

1

The date of enactment was December 22, 1974. 

RESOLUTION TRUST CORPORATION FUNDING ACT OF 1991 

1263 

RESOLUTION TRUST CORPORATION FUNDING 

ACT OF 19911 

TITLE I—RTC RESOLUTION PROCESS 

A N D FUNDIN G 

SEC. 102. [1 2 U.S.C. 1441a nt. ] REPORTS . 

(a) * * * 

(c) TIMELINES S OF REPORTS. — 

(1) I N GENERAL.—A t any time when an agency is delinquent in providing information to Congress or any of its committees as required by paragraph (1), (4), (5), (6), (8), or (9) of 

section 21A(k) of the Federal Home Loan Bank Act or by subsection (b) of this section, the president of the oversight Board, 

and the head of any agency responsible for such delinquency 

shall, within 15 days of such delinquency, in testimony before 

the Committee on Banking, Housing, and Urban Affairs of the 

Senate and the Committee on Banking, Finance and Urban Affairs of the House of Representatives— 

(A) explain the causes of such delinquency; and 

(B) describe what steps are being taken to correct it 

and prevent its recurrence. 

Testimony shall not be required pursuant to the preceding sentence before either Committee if the Chairman and Ranking 

Member of such Committee agree that such testimony is not 

necessary. For purposes of this paragraph, the term ''head of 

an agency'' means the chief executive officer of the Resolution 

Trust Corporation with respect to reports to be filed by such 

Corporation, the Director of the Office of Thrift Supervision 

with respect to reports to be filed by such office, and the 

Comptroller General with respect to audits to be conducted by 

the General Accounting Office. 

(2) TRANSITIO N RULE.—An y information described in paragraph (1) of this subsection that is delinquent on the date of 

enactment of this Act shall be provided to the appropriate committees of Congress not later than 30 days following enactment 

of this Act. Failure to provide such information as required by 

this paragraph shall be considered as a delinquency under the 

provisions of paragraph (1). 

1Note: The Resolution Trust Corporation Funding Act of 1991 largely amended other provisions of law. 

126 5 

RESOLUTION TRUST CORPORATION REFINANCING, 

RESTRUCTURING, AND IMPROVEMENT ACT OF 1991 

1267 

RESOLUTION TRUST CORPORATION REFINANCING, 

RESTRUCTURING, AND IMPROVEMENT ACT OF 19911 

TITL E III—REFOR M OF TH E RTC 

SEC. 317. [1 2 U.S.C. 1441a nt. ] SAVING S PROVISIONS . 

( a ) SAVING S PROVISIONS. — 

( 1 ) EXISTIN G RIGHTS, DUTIES , AN D OBLIGATION S NO T AFFECTED.—This title2

 shall not affect the validity of any right, 

duty, or obligation of the United States, the Corporation, the 

Oversight Board, or any other person, that— 

(A) arises under or pursuant to the Federal Home 

Loan Bank Act, or any other provision of law applicable 

with respect to the Oversight Board; and 

(B) existed on the day before the effective date of the 

Resolution Trust Corporation Thrift Depositor Protection 

Reform Act of 1991. 

(2) CONTINUATIO N OF SUITS.—No action or other proceeding commenced by or against the Oversight Board, with respect to any function of the Oversight Board, shall abate by 

reason of the enactment of this Act, except that the Thrift Depositor Protection Oversight Board shall continue as party to 

any such action or proceeding, notwithstanding the change of 

name of the Oversight Board. 

( b ) CONTINUATIO N OF ORDERS , RESOLUTIONS , DETERMINATIONS , 

A N D REGULATIONS.—All orders, resolutions, determinations, and 

regulations that— 

(1) have been issued, made, prescribed, or allowed to become effective by the Oversight Board (including orders, resolutions, determinations, and regulations which relate to the 

conduct of conservatorships and receiverships), or by a court of 

competent jurisdiction, in the performance of functions under 

the Federal Home Loan Bank Act; and 

(2) are in effect on the effective date of the Resolution 

Trust Corporation Thrift Depositor Protection Reform Act of 

1991, 

1Note: The Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act 

of 1991 largely amended other provisions of law. 

2

Title III, among other amendments, redesignated the Oversight Board as the Thrift Depositor Protection Oversight Board (see section 302(a), 105 Stat. 1767). Such Board was subsequently abolished under section 14 of the Homeowners Protection Act of 1998 (12 U.S.C. 1441a 

note). The Board's authority and duties were transferred to the Secretary of the Treasury. The 

Resolution Trust Corporation has been abolished (see section 21A(m) of the Federal Home Loan 

Bank Act). 

126 9 
Sec. 618 RTC REF., RESTR., AND IMP. ACT OF 1991 1270 

shall continue in effect according to the terms of such orders, resolutions, determinations, and regulations, and shall be enforceable 

by or against the Thrift Depositor Protection Oversight Board, or 

the Resolution Trust Corporation, by any court of competent jurisdiction, or by operation of law, notwithstanding the change of name 

of the Oversight Board. 

TITLE VI—RESOLUTION TRUST CORPORATION AFFORDABLE HOUSING 

PROGRA M 

SEC. 618. [12 U.S.C. 1831n nt.] RISK-WEIGHTIN G OF HOUSIN G LOANS 

F OR PURPOSES OF CAPITA L REQUIREMENTS. 

(a) SINGLE FAMILY HOUSING LOANS.— 

(1) 5 0 PERCENT RISK-WEIGHTED CLASSIFICATION.— 

(a)xlN GENERAL.—To provide consistent regulatory 

treatment of loans made for the construction of single family housing, not later than the expiration of the 120-day 

period beginning on the date of this Act each Federal 

banking agency shall amend the regulations and guidelines of the agency establishing minimum acceptable capital levels to provide that any single family residence construction loan described under subparagraph (B) shall be 

considered as a loan within the 50 percent risk-weighted 

category. 

(B) REQUIREMENTS.—Subparagraph (A) shall apply to 

any construction loan— 

(i) made for the construction of a residence consisting of 1 to 4 dwelling units; 

(ii) under which the lender has acquired from the 

lender originating the mortgage loan for purchase of 

the residence, before the making of the construction 

loan— 

(I) documentation demonstrating that the 

buyer of the residence intends to purchase the residence and has the ability to obtain a mortgage 

loan sufficient to purchase the residence; and 

(II) any other documentation from the mortgage lender that the appropriate Federal banking 

agency may consider appropriate to provide assurance of the buyer's intent to purchase the property 

(including written commitments and letters of intent); 

(iii) under which the borrower requires the buyer 

of the residence to make a nonrefundable deposit to 

the borrower in an amount (as determined by the 

appropriate Federal banking agency) of not less than 

1 percent of the principal amount of mortgage loan ob1

 So in original. This subparagraph probably should be designated as "(A)". 
Sec. 618 

RTC REF., RESTR., AND IMP. ACT OF 1991 

1271 

tained by the borrower for purchase of the residence, 

for use in defraying costs relating to any cancellation 

of the purchase contract of the buyer; and 

(iv) that meets any other underwriting characteristics that the appropriate Federal banking agency 

may establish, consistent with the purposes of the 

minimum acceptable capital requirements to maintain 

the safety and soundness of financial institutions. 

(2) 10 0 PERCENT RISK-WEIGHTED CLASSIFICATION.—Not 

later than the expiration of the 120-day period beginning on 

the date of this Act each Federal banking agency shall amend 

the regulations and guidelines of the agency establishing minimum acceptable capital levels to provide that— 

(A) any single family residence construction loan for a 

residence for which the purchase contract is canceled shall 

be considered as a loan within the 100 percent riskweighted category; and 

(B) the lender of any single family residence construction loan shall promptly notify the appropriate Federal 

banking agency of any such cancellation. 

(b) MULTIFAMILY HOUSING LOANS.— 

(1) 5 0 PERCENT RISK-WEIGHTED CLASSIFICATION.— 

(A) I N GENERAL.—To provide consistent regulatory 

treatment of loans made for the purchase of multifamily 

rental and homeowner properties, not later than the expiration of the 120-day period beginning on the date of this 

Act each Federal banking agency shall amend the regulations and guidelines of the agency establishing minimum 

acceptable capital levels to provide that any multifamily 

housing loan described under subparagraph (B) and any 

security collateralized by such a loan shall be considered 

as a loan or security within the 50 percent risk-weighted 

category. 

(B) REQUIREMENTS.—Subparagraph (A) shall apply to 

any loan— 

(i) secured by a first lien on a residence consisting 

of more than 4 dwelling units; 

(ii) under which— 

(i) the rate of interest does not change over 

the term of the loan, (b) the principal obligation 

does not exceed 80 percent of the appraised value 

of the property, and (c) the ratio of annual net 

operating income generated by the property (before payment of any debt service on the loan) to 

annual debt service on the loan is not less than 

120 percent; or 

(ii) the rate of interest changes over the term 

of the loan, (b) the principal obligation does not 

exceed 75 percent of the appraised value of the 

property, and (c) the ratio of annual net operating 

income generated by the property (before payment 

of any debt service on the loan) to annual debt 

service on the loan is not less than 115 percent; 

(iii) under which— 
Sec. 618 RTC REF., RESTR., AND IMP. ACT OF 1991 1272 

(i) amortization of principal and interest occurs over a period of not more than 30 years; 

(ii) the minimum maturity for repayment of 

principal is not less than 7 years; and 

(iii) timely payment of all principal and interest, in accordance with the terms of the loan, occurs for a period of not less than 1 year; and 

(iv) that meets any other underwriting characteristics that the appropriate Federal banking agency 

may establish, consistent with the purposes of the 

minimum acceptable capital requirements to maintain 

the safety and soundness of financial institutions. 

(2) SALE PURSUANT TO PRO RATA LOSS SHARING ARRANGEMENTS.—Not later than the expiration of the 120-day period 

beginning on the date of this Act, each Federal banking agency 

shall amend the regulations and guidelines of the agency 

establishing minimum acceptable capital levels to provide that 

any loan fully secured by a first lien on a multifamily housing 

property that is sold subject to a pro rata loss sharing arrangement by an institution subject to the jurisdiction of the agency 

shall be treated as sold to the extent that loss is incurred by 

the purchaser of the loan. For purposes of this paragraph, the 

term ''pro rata loss sharing arrangement'' means an agreement 

providing that the purchaser of a loan shares in any loss incurred on the loan with the selling institution on a pro rata 

basis. 

(3) SALE PURSUANT TO OTHER ARRANGEMENTS FOR LOSS.— 

Not later than the expiration of the 180-day period beginning 

on the date of the enactment of this Act, each Federal banking 

agency shall amend the regulations and guidelines of the 

agency establishing minimum acceptable capital levels to take 

into account other loss sharing arrangements, in connection 

with the sale by an institution subject to the jurisdiction of the 

agency of any loan that is fully secured by a first lien on multifamily housing property, for purposes of determining the extent to which such loans shall be treated as sold. For purposes 

of this paragraph, the term ''other loss sharing arrangement'' 

means an agreement providing that the purchaser of a loan 

shares in any loss incurred on the loan with the selling institution on other than a pro rata basis. 

(c) APPROPRIATE FEDERAL BANKIN G AGENCY.—Fo r purposes of 

this section, the term ''Federal banking agency'' means the Board 

of Governors of the Federal Reserve System, the Federal Deposit 

insurance Corporation, the Comptroller of the Currency, and the 

Director of the Office of Thrift Supervision. 
TITLE LXII OF THE REVISED STATUTES OF THE UNITED 

STATES 

1273 

REVISED STATUTES OF THE UNITED STATES

 1 

TITLE LXII.—NATIONAL BANKS.—CH. 1. 

T I T L E L X I I. 

NATIONAL BANKS. 

C H A P T E R O N E. 

ORGANIZATIO N AN D POWERS. 

Sec. 

5133. Formation of national banking associations. 

5134. Requisites of organization certificate. 

5135. How certificate shall be acknowledged and filed. 

5136. Corporate powers of associations. 

5136A. Financial subsidiaries of national banks. 

5136B. Participation in lotteries prohibited. 

5137. Power to hold real property. 

5138. Requisite amount of capital.2 

5139. Shares of stock and transfers. 

5140. How payment of the capital stock made and proved. 

5142. Increase of capital stock. 

5143. Reduction of capital stock. 

5144. Right of shareholders to vote. 

5145. Election of directors. 

5146. Requisite qualifications of directors. 

5147. Oath required from directors. 

5148. Filling vacancies. 

5149. Proceedings where no election is held on the proper day. 

5150. Election of president of the board. 

5152. Executors, trustees, &c., not personally liable. 

5153. Duties and liabilities when designated as depositaries of public moneys. 

5154. Organization of State banks as national banking associations. 

5155. State banks having branches. 

5156. Reservation of rights of associations organized under act of 1863. 

5156A. Mergers, consolidations, and other acquisitions authorized. 

1

 in the case of the few sections of this title which are codified to more than 1 section of the 

United States Code, the Code citation appears at the end of each discrete provision. Section 

5595 of the Revised Statutes of the United States designates the short title of the Revised Statutes as "The Revised Statutes of the United States''. 

2

 Section 5138 of the Revised Statutes of the United States was repealed by section 1201(a) 

of the Financial Regulatory Relief and Economic Efficiency Act of 2000 (114 Stat. 3037) without 

making a conforming amendment striking the item relating to such section in the table of contents. 

1275 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1276 

SEC. 5133. [12 U.S.C. 21] Associations for carrying on the 

business of banking under this Title may be formed by any number 

of natural persons, not less in any case than five. They shall enter 

into articles of association, which shall specify in general terms the 

object for which the association is formed, and may contain any 

other provisions, not inconsistent with law, which the association 

may see fit to adopt for the regulation of its business and the conduct of its affairs. These articles shall be signed by the persons 

uniting to form the association, and a copy of them shall be forwarded to the Comptroller of the Currency, to be filed and preserved in his office. 

SEC. 5134. [12 U.S.C. 22] The persons uniting to form such an 

association shall, under their hands, make an organization certificate, which shall specifically state: 

First. The name assumed by such association; which name 

shall include the word "national". 

Second. The place where its operations of discount and deposit 

are to be carried on, designating the State, Territory, or district, 

and the particular county and city, town, or village. 

Third. The amount of capital stock and the number of shares 

into which the same is to be divided. 

Fourth. The names and places of residence of the shareholders 

and the number of shares held by each of them. 

Fifth. The fact that the certificate is made to enable such persons to avail themselves of the advantages of this Title. 

SEC. 5135. [12 U.S.C. 23] The organization certificate shall be 

acknowledged before a judge of some court of record, or notary public; and shall be, together with the acknowledgment thereof, 

authenticated by the seal of such court, or notary, transmitted to 

the Comptroller of the Currency, who shall record and carefully 

preserve the same in his office. 

SEC. 5136. [12 U.S.C. 24] 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— 

First. To adopt and use a corporate seal. 

Second. To have succession from the date of the approval of 

this Act, or from the date of its organization if organized after such 

date of approval until such time as it be dissolved by the act of its 

shareholders owning two-thirds of its stock, or until its franchise 

becomes forfeited by reason of violation of law, or until terminated 

by either a general or a special Act of Congress or until its affairs 

be placed in the hands of a receiver and finally wound up by him. 

Third. To make contracts. 

Fourth. To sue and be sued, complain and defend, in any court 

of law and equity, as fully as natural persons. 

Fifth. To elect or appoint directors, and by its board of directors to appoint a president, vice-president, cashier, and other officers, define their duties, require bonds of them and fix the penalty 

thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places. 

Sixth. To prescribe, by its board of directors, by-laws not inconsistent with law, regulating the manner in which its stock shall be 
1277 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

transferred, its directors elected or appointed, its officers appointed, its property transferred, its general business conducted, 

and the privileges granted to it by law exercised and enjoyed. 

Seventh. To exercise by its board of directors or duly authorized officers or agents, subject to law, all such incidental powers as 

shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on 

personal security; and by obtaining, issuing, and circulating notes 

according to the provisions of this title. The business of dealing in 

securities and stock by the association shall be limited to purchasing and selling such securities and stock without recourse, 

solely upon the order, and for the account of, customers, and in no 

case for its own account, and the association shall not underwrite 

any issue of securities or stock: Provided, That the association may 

purchase for its own account investment securities under such limitations and restrictions as the Comptroller of the Currency may by 

regulation prescribe. in no event shall the total amount of the investment securities of any one obligor or maker, held by the association for its own account, exceed at any time 10 per centum of 

its capital stock actually paid in and unimpaired and 10 per centum of its unimpaired surplus fund, except that this limitation 

shall not require any association to dispose of any securities lawfully held by it on the date of enactment of the Banking Act of 

1935. As used in this section the term "investment securities" shall 

mean marketable obligations evidencing indebtedness of any person, copartnership, association, or corporation in the form of bonds, 

notes and/or debentures commonly known as investment securities 

under such further definition of the term ''investment securities'' as 

may by regulation be prescribed by the Comptroller of the Currency. Except as hereinafter provided or otherwise permitted by 

law, nothing herein contained shall authorize the purchase by the 

association for its own account of any shares of stock of any corporation. The limitations and restrictions herein contained as to 

dealing in, underwriting and purchasing for its own account, investment securities shall not apply to obligations of the united 

states, or general obligations of any state or of any political subdivision thereof, or obligations of the Washington Metropolitan 

Area Transit Authority which are guaranteed by the Secretary of 

Transportation under section 9 of the National Capital Transportation Act of 1969, or obligations issued under authority of the Federal Farm Loan Act, as amended, or issued by the thirteen banks 

for cooperatives or any of them or the Federal Home Loan Banks, 

or obligations which are insured by the secretary of Housing and 

urban Development under title Xi of the National Housing Act, or 

obligations which are insured by the secretary of Housing and 

urban Development (hereafter in this sentence referred to as the 

''secretary'' pursuant to section 207 of the National Housing Act, 

if the debentures to be issued in payment of such insured obligations are guaranteed as to principal and interest by the united 

states, or obligations, participations, or other instruments of or 

issued by the Federal National Mortgage Association or the Government National Mortgage Association, or mortgages, obligations, 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1278 

or other securities which are or ever have been sold by the Federal 

Home Loan Mortgage Corporation pursuant to section 305 or section 306 of the Federal Home Loan Mortgage Corporation Act1

 or 

obligations of the Federal Financing Bank1 or obligations of the 

Environmental Financing Authority1 or obligations or other instruments or securities of the Student Loan Marketing Association,2 

or3 such obligations of any local public agency (as defined in section 110 (h) of the Housing Act of 1949) as are secured by an agreement between the local public agency and the Secretary in which 

the local public agency agrees to borrow from said Secretary and 

said Secretary agrees to lend to said local public agency, monies in 

an aggregate amount which (together with any other monies irrevocably committed to the payment of interest on such obligations) 

will suffice to pay, when due, the interest on and all installments 

(including the final installment) of the principal of such obligations, 

which monies under the terms of said agreement are required to 

be used for such payments, or such obligations of a public housing 

agency (as defined in the United States Housing Act of 1937, as 

amended) as are secured (1) by an agreement between the public 

housing agency and the Secretary in which the public housing 

agency agrees to borrow from the Secretary and the Secretary 

agrees to lend to the public housing agency, prior to the maturity 

of such obligations, monies in an amount which (together with any 

other monies irrevocably committed to the payment of interest on 

such obligations) will suffice to pay the principal of such obligations 

with interest to maturity thereon, which monies under the terms 

of said agreement are required to be used for the purpose of paying 

the principal of and the interest on such obligations at their maturity, (2) by a pledge of annual contributions under an annual contributions contract between such public housing agency and the 

Secretary if such contract shall contain the covenant by the Secretary which is authorized by subsection (b) of section 224

 of the 

United States Housing Act of 1937, as amended, and if the maximum sum and the maximum period specified in such contract pursuant to said subsection 22(b)

 4 shall not be less than the annual 

amount and the period for payment which are requisite to provide 

for the payment when due of all installments of principal and interest on such obligations, or (3) by a pledge or both annual contributions under an annual contributions contract containing the covenant by the Secretary which is authorized by section 6(g) of the 

United States Housing Act of 1937, and a loan under an agreement 

between the local public housing agency and the Secretary in which 

the public housing agency agrees to borrow from the Secretary, and 

the Secretary agrees to lend to the public housing agency, prior to 

1

 So in law. Probably should have a comma before "or obligations". 

2

 Public Law 92-318, sec. 133(c)(1), 86 Stat. 269, amended the sixth sentence of the seventh 

paragraph of section 5136. This amendment incorrectly stated that the word "participation" appears in the sixth sentence. The amendment should have included the word "participations". 

3

 Public Law 81-171, sec. 602(a), 63 Stat. 439, amended the last sentence of the seventh paragraph of section 5136. The amendment probably should have been made to the penultimate sentence. The last sentence was added by P.L. 81-142, sec. 1, 63 Stat. 298. 

4

 Section 206(1) of the Housing and Community Development Act of 1974 (88 Stat. 668) 

amended this sentence by striking "1421a(b) of title 42" [the U.S.C. citation for section 22(b) 

of the United States Housing Act of 1937] and inserting "6(g) of the United States Housing Act 

of 1937". The amendment should probably have been made by striking the references to section 

22(b) of such Act in both forms such references appear. 
1279 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

the maturity of the obligations involved, moneys in an amount 

which (together with any other moneys irrevocably committed 

under the annual contributions contract to the payment of principal and interest on such obligations) will suffice to provide for the 

payment when due of all installments of principal and interest on 

such obligations, which moneys under the terms of the agreement 

are required to be used for the purpose of paying the principal and 

interest on such obligations at their maturity: Provided, That in 

carrying on the business commonly known as the safe-deposit business the association shall not invest in the capital stock of a corporation organized under the law of any State to conduct a safedeposit business in an amount in excess of 15 per centum of the 

capital stock of the association actually paid in and unimpaired 

and 15 per centum of its unimpaired surplus. The limitations and 

restrictions herein contained as to dealing in and underwriting investment securities shall not apply to obligations issued by the 

International Bank for Reconstruction and Development, the European Bank for Reconstruction and Development, the Inter-American Development Bank, Bank for Economic Cooperation and Development in the Middle East and North Africa, the Asian Development Bank1

 the African Development Bank, the Inter-American 

Investment Corporation, or the International Finance Corporation, 

or obligations issued by any State or political subdivision or any 

agency of a State or political subdivision for housing, university, or 

dormitory purposes, which are at the time eligible for purchase by 

a national bank for its own account, nor to bonds, notes and other 

obligations issued by the Tennessee Valley Authority2 or by the 

United States Postal Service,:3 Provided, That no association shall 

hold obligations issued by any of said organizations as a result of 

underwriting, dealing, or purchasing for its own account (and for 

this purpose obligations as to which it is under commitment shall 

be deemed to be held by it) in a total amount exceeding at any one 

time 10 per centum of its capital stock actually paid in and 

unimpaired and 10 per centum of its unimpaired surplus fund. 

Notwithstanding any other provision in this paragraph, the association may purchase for its own account shares of stock issued by 

a corporation authorized to be created pursuant to title iX of the 

Housing and Urban Development Act of 1968, and may make investments in a partnership, limited partnership, or joint venture 

formed pursuant to section 907(a) or 907(c) of that Act. Notwithstanding any other provision of this paragraph, the association may 

purchase for its own account shares of stock issued by any State 

housing corporation incorporated in the State in which the association is located and may make investments in loans and commitments for loans to any such corporation: Provided, That in no event 

shall the total amount of such stock held for its own account and 

such investments in loans and commitments made by the association exceed at any time 5 per centum of its capital stock actually 

1

 So in law. Probably should have a comma. 

2

 Public Law 91-375, sec. 6(d), 84 Stat. 776, amended the seventh paragraph of section 5136 

by making an insertion after the phrase "nor to bonds, notes, and other obligations issued by 

the Tennessee Valley Authority". This phrase should not have included the comma following the 

word "notes". 

3

 So in law. 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1280 

paid in and unimpaired plus 5 per centum of its unimpaired surplus fund. Notwithstanding any other provision in this paragraph, 

the association may purchase for its own account shares of stock 

issued by a corporation organized solely for the purpose of making 

loans to farmers and ranchers for agricultural purposes, including 

the breeding, raising, fattening, or marketing of livestock. However, unless the association owns at least 80 per centum of the 

stock of such agricultural credit corporation the amount invested 

by the association at any one time in the stock of such corporation 

shall not exceed 20 per centum of the unimpaired capital and surplus of the association: Provided further, That notwithstanding any 

other provision of this paragraph, the association may purchase for 

its own account shares of stock of a bank insured by the Federal 

Deposit Insurance Corporation or a holding company which owns 

or controls such an insured bank if the stock of such bank or company is owned exclusively (except to the extent directors' qualifying 

shares are required by law) by depository institutions or depository 

institution holding companies (as defined in section 3 of the Federal Deposit Insurance Act) and such bank or company and all subsidiaries thereof are engaged exclusively in providing services to or 

for other depository institutions, their holding companies, and the 

officers, directors, and employees of such institutions and companies, and in providing correspondent banking services at the request of other depository institutions or their holding companies 

(also referred to as a "banker's bank'')1, but in no event shall the 

total amount of such stock held by the association in any bank or 

holding company exceed at any time 10 per centum of the associations capital stock and paid in and unimpaired surplus and in no 

event shall the purchase of such stock result in an association's acquiring more than 5 per centum of any class of voting securities of 

such bank or company. The limitations and restrictions contained 

in this paragraph as to an association purchasing for its own account investment securities shall not apply to securities that (A) 

are offered and sold pursuant to section 4(5) of the Securities Act 

of 1933 (15 U.S.C. 77d(5)); (B) are small business related securities 

(as defined in section 3(a)(53) of the Securities Exchange Act of 

1934); or (C) are mortgage related securities

 2 (as that term is defined in section 3(a)(41) of the Securities Exchange Act of 1934 (15 

U.S.C. 78c(a)(41)). The exception provided for the securities described in subparagraphs (A), (B), and (C) shall be subject to such 

regulations as the Comptroller of the Currency may prescribe, including regulations prescribing minimum size of the issue (at the 

time of initial distribution) or minimum aggregate sales prices, or 

1

 Section 322(a)(1)(B) of P.L. 103-325 attempted to amended the 5th proviso of paragraph Seventh of section 5136 by striking "services for other depository institutions and their officers, directors and employees'' and inserting the following: "services to or for other depository institutions, their holding companies, and the officers, directors, and employees of such institutions 

and companies, and in providing correspondent banking services at the request of other depository institutions or their holding companies (also referred to as a 'banker's bank')''. The amendment probably should have included a comma after ''directors'' in the matter to be stricken. The 

amendment has been executed in accordance with the probable intent. 

2

 Section 206(c) of P.L. 103-325 attempted to amend the last sentence in the first full paragraph of paragraph Seventh, by striking ''or (B) are mortgage related securities'' and inserting 

the following: ''(B) are small business related securities (as defined in section 3(a)(53) of the Securities Exchange Act of 1934); or (C) are mortgage related securities''. The amendment probably 

should have been made to the third to the last sentence in the first full paragraph of paragraph 

Seventh. The amendment has been executed in accordance with the probable intent. 
1281 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

both. A national banking association may deal in, underwrite, and 

purchase for such association's own account qualified Canadian 

government obligations to the same extent that such association 

may deal in, underwrite, and purchase for such association's own 

account obligations of the united states or general obligations of 

any state or of any political subdivision thereof. For purposes of 

this paragraph— 

(1)1 the term ''qualified Canadian government obligations" 

means any debt obligation which is backed by Canada, any 

province of Canada, or any political subdivision of any such 

province to a degree which is comparable to the liability of the 

united states, any state, or any political subdivision thereof 

for any obligation which is backed by the full faith and credit 

of the united states, such state, or such political subdivision, 

and such term includes any debt obligation of any agent of 

Canada or any such province or any political subdivision of 

such province if— 

(A) 1 the obligation of the agent is assumed in such 

agent's capacity as agent for Canada or such province or 

such political subdivision; and 

(B)

 1 Canada, such province, or such political subdivision on whose behalf such agent is acting with respect to 

such obligation is ultimately and unconditionally liable for 

such obligation; and 

(2)

 1 the term ''province of Canada'' means a province of 

Canada and includes the Yukon Territory and the Northwest 

Territories and their successors. 

in addition to the provisions in this paragraph for dealing in, 

underwriting, or purchasing securities, the limitations and restrictions contained in this paragraph as to dealing in, underwriting, 

and purchasing investment securities for the national bank's own 

account shall not apply to obligations (including limited obligation 

bonds, revenue bonds, and obligations that satisfy the requirements of section 142(b)(1) of the Internal Revenue Code of 1986) 

issued by or on behalf of any state or political subdivision of a 

state, including any municipal corporate instrumentality of 1 or 

more states, or any public agency or authority of any state or 

political subdivision of a state, if the national bank is well capitalized (as defined in section 38 of the Federal Deposit insurance Act). 

Eighth. To contribute to community funds, or to charitable, 

philanthropic, or benevolent instrumentalities conducive to public 

welfare, such sums as its board of directors may deem expedient 

and in the interests of the association, if it is located in a state the 

laws of which do not expressly prohibit state banking institutions 

from contributing to such funds or instrumentalities. 

Ninth. To issue and sell securities which are guaranteed pursuant to section 306(g) of the National Housing Act. 

Tenth. To invest in tangible personal property, including, without limitation, vehicles, manufactured homes, machinery, equipment, or furniture, for lease financing transactions on a net lease 

basis, but such investment may not exceed 10 percent of the assets 

of the association. 

1

 so in law. probably should be redesignated as subparagraphs and clauses. 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1282 

Eleventh.1 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 affected 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. 

SEC. 5136A. [12 U.S.C. 24a] FINANCIA L SUBSIDIARIES OF NATIONA L 

BANKS. 

(a) AUTHORIZATION T O CONDUCT I N SUBSIDIARIES CERTAIN 

ACTIVITIES THA T ARE FINANCIAL I N NATURE.— 

(1) IN GENERAL.—Subject to paragraph (2), a national bank 

may control a financial subsidiary, or hold an interest in a 

financial subsidiary. 

(2) CONDITIONS AND REQUIREMENTS.—A national bank may 

control a financial subsidiary, or hold an interest in a financial 

subsidiary, only if— 

(A) the financial subsidiary engages only in— 

(i) activities that are financial in nature or incidental to a financial activity pursuant to subsection 

(b); and 

(ii) activities that are permitted for national banks 

to engage in directly (subject to the same terms and 

conditions that govern the conduct of the activities by 

a national bank); 

(B) the activities engaged in by the financial subsidiary as a principal do not include— 

(i) insuring, guaranteeing, or indemnifying against 

loss, harm, damage, illness, disability, or death (except 

to the extent permitted under section 302 or 303(c) of 

the Gramm-Leach-Bliley Act) or providing or issuing 

annuities the income of which is subject to tax treatment under section 72 of the Internal Revenue Code 

of 1986; 

(ii) real estate development or real estate investment activities, unless otherwise expressly authorized 

by law; or 

1

 indentation so in law. 
1283 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

(iii) any activity permitted in subparagraph (H) or 

(I) of section 4(k)(4) of the Bank Holding Company Act 

of 1956, except activities described in section 

4(k)(4)(H) that may be permitted in accordance with 

section 122 of the Gramm-Leach-Bliley Act; 

(C) the national bank and each depository institution 

affiliate of the national bank are well capitalized and well 

managed; 

(D) the aggregate consolidated total assets of all financial subsidiaries of the national bank do not exceed the 

lesser of— 

(i) 45 percent of the consolidated total assets of 

the parent bank; or 

(ii) $50,000,000,000; 

(E) except as provided in paragraph (4), the national 

bank meets any applicable rating or other requirement set 

forth in paragraph (3); and 

(F) the national bank has received the approval of the 

Comptroller of the Currency for the financial subsidiary to 

engage in such activities, which approval shall be based 

solely upon the factors set forth in this section. 

(3) RATING OR COMPARABLE REQUIREMENT.— 

(A) I N GENERAL.—A national bank meets the requirements of this paragraph if— 

(i) the bank is 1 of the 50 largest insured banks 

and has not fewer than 1 issue of outstanding eligible 

debt that is currently rated within the 3 highest 

investment grade rating categories by a nationally recognized statistical rating organization; or 

(ii) the bank is 1 of the second 50 largest insured 

banks and meets the criteria set forth in clause (i) or 

such other criteria as the Secretary of the Treasury 

and the Board of Governors of the Federal Reserve 

System may jointly establish by regulation and determine to be comparable to and consistent with the purposes of the rating required in clause (i). 

(B) CONSOLIDATED TOTAL ASSETS.—For purposes of 

this paragraph, the size of an insured bank shall be determined on the basis of the consolidated total assets of the 

bank as of the end of each calendar year. 

(4) FINANCIAL AGENCY SUBSIDIARY.—The requirement in 

paragraph (2)(E) shall not apply with respect to the ownership 

or control of a financial subsidiary that engages in activities 

described in subsection (b)(1) solely as agent and not directly 

or indirectly as principal. 

(5) REGULATIONS REQUIRED.—Before the en d of th e 270 -

day period beginning on the date of the enactment of the 

Gramm-Leach-Bliley Act, the Comptroller of the Currency 

shall, by regulation, prescribe procedures to implement this 

section. 

(6) INDEXED ASSET LIMIT.—The dollar amount contained in 

paragraph (2)(D) shall be adjusted according to an indexing 

mechanism jointly established by regulation by the Secretary 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1284 

of the Treasury and the Board of Governors of the Federal Reserve System. 

(7) COORDINATION WIT H SECTION 4(l)(2) OF THE BANK HOLDI NG COMPANY ACT OF 1956.—Section 4(l)(2) of the Bank Holding 

Company Act of 1956 applies to a national bank that controls 

a financial subsidiary in the manner provided in that section. 

(b) ACTIVITIES THA T ARE FINANCIAL I N NATURE.— 

(1) FINANCIAL ACTIVITIES.— 

(A) I N GENERAL.—An activity shall be financial in nature or incidental to such financial activity only if— 

(i) such activity has been defined to be financial in 

nature or incidental to a financial activity for bank 

holding companies pursuant to section 4(k)(4) of the 

Bank Holding Company Act of 1956; or 

(ii) the Secretary of the Treasury determines the 

activity is financial in nature or incidental to a financial activity in accordance with subparagraph (B). 

(B) COORDINATION BETWEEN THE BOARD AND THE SECRETARY OF THE TREASURY.— 

(i) PROPOSALS RAISED BEFORE THE SECRETARY OF 

THE TREASURY.— 

(I) CONSULTATION.—The Secretary of the 

Treasury shall notify the Board of, and consult 

with the Board concerning, any request, proposal, 

or application under this section for a determination of whether an activity is financial in nature 

or incidental to a financial activity. 

(II) BOARD VIEW.—Th e Secretary of the Treasury shall not determine that any activity is financial in nature or incidental to a financial activity 

under this section if the Board notifies the Secretary in writing, not later than 30 days after the 

date of receipt of the notice described in subclause 

(i) (or such longer period as the Secretary determines to be appropriate under the circumstances) 

that the Board believes that the activity is not 

financial in nature or incidental to a financial activity or is not otherwise permissible under this 

section. 

(ii) PROPOSALS RAISED BY THE BOARD.— 

(I) BOARD RECOMMENDATION.—The Board 

may, at any time, recommend in writing that the 

Secretary of the Treasury find an activity to be 

financial in nature or incidental to a financial activity for purposes of this section. 

(II ) TIM E PERIOD FOR SECRETARIAL ACTION.— 

Not later than 30 days after the date of receipt of 

a written recommendation from the Board under 

subclause (i) (or such longer period as the Secretary of the Treasury and the Board determine to 

be appropriate under the circumstances), the Secretary shall determine whether to initiate a public 

rulemaking proposing that the subject recommended activity be found to be financial in na-
1285 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

ture or incidental to a financial activity under this 

section, and shall notify the Board in writing of 

the determination of the secretary and, in the 

event that the secretary determines not to seek 

public comment on the proposal, the reasons for 

that determination. 

(2) FACTORS TO BE CONSIDERED.—In determining whether 

an activity is financial in nature or incidental to a financial activity, the secretary shall take into account— 

(A) the purposes of this Act and the Gramm-LeachBliley Act; 

(B) changes or reasonably expected changes in the 

marketplace in which banks compete; 

(C) changes or reasonably expected changes in the 

technology for delivering financial services; and 

(D) whether such activity is necessary or appropriate 

to allow a bank and the subsidiaries of a bank to— 

(i) compete effectively with any company seeking 

to provide financial services in the united states; 

(ii) efficiently deliver information and services 

that are financial in nature through the use of technological means, including any application necessary to 

protect the security or efficacy of systems for the 

transmission of data or financial transactions; and 

(iii) offer customers any available or emerging 

technological means for using financial services or for 

the document imaging of data. 

(3) AUTHORIZATION OF NEW FINANCIAL ACTIVITIES.—The 

Secretary of the Treasury shall, by regulation or order and in 

accordance with paragraph (1)(B), define, consistent with the 

purposes of this Act and the Gramm-Leach-Bliley Act, the following activities as, and the extent to which such activities 

are, financial in nature or incidental to a financial activity: 

(A) Lending, exchanging, transferring, investing for 

others, or safeguarding financial assets other than money 

or securities. 

(B) providing any device or other instrumentality for 

transferring money or other financial assets. 

(C) Arranging, effecting, or facilitating financial transactions for the account of third parties. 

(c) CAPITAL DEDUCTION.— 

(1) CAPITAL DEDUCTION REQUIRED.—In determining compliance with applicable capital standards— 

(A) the aggregate amount of the outstanding equity 

investment, including retained earnings, of a national 

bank in all financial subsidiaries shall be deducted from 

the assets and tangible equity of the national bank; and 

(B) the assets and liabilities of the financial subsidiaries shall not be consolidated with those of the national 

bank. 

(2) FINANCIAL STATEMENT DISCLOSURE OF CAPITAL DEDUCTION.—Any published financial statement of a national bank 

that controls a financial subsidiary shall, in addition to providing information prepared in accordance with generally 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1286 

accepted accounting principles, separately present financial 

information for the bank in the manner provided in paragraph 

(1). 

(d) SAFEGUARDS FOR THE BANK.— A national bank that establishes or maintains a financial subsidiary shall assure that— 

(1) the procedures of the national bank for identifying and 

managing financial and operational risks within the national 

bank and the financial subsidiary adequately protect the national bank from such risks; 

(2) the national bank has, for the protection of the bank, 

reasonable policies and procedures to preserve the separate 

corporate identity and limited liability of the national bank 

and the financial subsidiaries of the national bank; and 

(3) the national bank is in compliance with this section. 

(e) PROVISIONS APPLICABLE TO NATIONAL BANKS THA T FAIL T O 

CONTINUE TO MEE T CERTAIN REQUIREMENTS.— 

(1) I N GENERAL.—If a national bank or insured depository 

institution affiliate does not continue to meet the requirements 

of subsection (a)(2)(C) or subsection (d), the Comptroller of the 

Currency shall promptly give notice to the national bank to 

that effect describing the conditions giving rise to the notice. 

(2) AGREEMENT TO CORRECT CONDITIONS.—Not later than 

45 days after the date of receipt by a national bank of a notice 

given under paragraph (1) (or such additional period as the 

Comptroller of the Currency may permit), the national bank 

shall execute an agreement with the Comptroller of the Currency and any relevant insured depository institution affiliate 

shall execute an agreement with its appropriate Federal banking agency to comply with the requirements of subsection 

(a)(2)(C) and subsection (d). 

(3) IMPOSITION OF CONDITIONS.—Unti l the conditions described in a notice under paragraph (1) are corrected— 

(A) the Comptroller of the Currency may impose such 

limitations on the conduct or activities of the national 

bank or any subsidiary of the national bank as the Comptroller of the Currency determines to be appropriate under 

the circumstances and consistent with the purposes of this 

section; and 

(B) the appropriate Federal banking agency may impose such limitations on the conduct or activities of any 

relevant insured depository institution affiliate or any subsidiary of the institution as such agency determines to be 

appropriate under the circumstances and consistent with 

the purposes of this section. 

(4) FAILURE TO CORRECT.—If the conditions described in a 

notice to a national bank under paragraph (1) are not corrected 

within 180 days after the date of receipt by the national bank 

of the notice, the Comptroller of the Currency may require the 

national bank, under such terms and conditions as may be imposed by the Comptroller and subject to such extension of time 

as may be granted in the discretion of the Comptroller, to divest control of any financial subsidiary. 
1287 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

(5) CONSULTATION.—In taking any action under this subsection, the Comptroller shall consult with all relevant Federal 

and State regulatory agencies and authorities. 

(f) FAILURE T O MAINTAI N PUBLIC RATING OR MEE T APPLICABLE 

CRITERIA.— 

(1) I N GENERAL.—A national bank that does not continue 

to meet any applicable rating or other requirement of subsection (a)(2)(E) after acquiring or establishing a financial subsidiary shall not, directly or through a subsidiary, purchase or 

acquire any additional equity capital of any financial subsidiary until the bank meets such requirements. 

(2) EQUITY CAPITAL.—For purposes of this subsection, the 

term ''equity capital'' includes, in addition to any equity instrument, any debt instrument issued by a financial subsidiary, if 

the instrument qualifies as capital of the subsidiary under any 

Federal or State law, regulation, or interpretation applicable to 

the subsidiary. 

(g) DEFINITIONS.—Fo r purposes of this section, the following 

definitions shall apply: 

(1) AFFILIATE, COMPANY, CONTROL, AND SUBSIDIARY.—The 

terms ''affiliate'', ''company'', ''control'', and ''subsidiary'' have 

the meanings given those terms in section 2 of the Bank Holding Company Act of 1956. 

(2) APPROPRIATE FEDERAL BANKING AGENCY, DEPOSITORY 

INSTITUTION, INSURED BANK, AND INSURED DEPOSITORY INSTITUTION.—The terms ''appropriate Federal banking agency'', 

''depository institution'', ''insured bank'', and ''insured depository institution'' have the meanings given those terms in section 3 of the Federal Deposit Insurance Act. 

(3) FINANCIAL SUBSIDIARY.—The term ''financial subsidiary'' means any company that is controlled by 1 or more insured depository institutions other than a subsidiary that— 

(A) engages solely in activities that national banks are 

permitted to engage in directly and are conducted subject 

to the same terms and conditions that govern the conduct 

of such activities by national banks; or 

(B) a national bank is specifically authorized by the 

express terms of a Federal statute (other than this section), and not by implication or interpretation, to control, 

such as by section 25 or 25A of the Federal Reserve Act 

or the Bank Service Company Act. 

(4) ELIGIBLE DEBT.—Th e term ''eligible debt'' means unsecured long-term debt that— 

(A) is not supported by any form of credit enhancement, including a guarantee or standby letter of credit; 

and 

(B) is not held in whole or in any significant part by 

any affiliate, officer, director, principal shareholder, or employee of the bank or any other person acting on behalf of 

or with funds from the bank or an affiliate of the bank. 

(5) WEL L CAPITALIZED.—The term ''well capitalized'' has 

the meaning given the term in section 38 of the Federal Deposit Insurance Act. 

(6) WEL L MANAGED.—The term ''well managed'' means— 
Sec. 5136B REVISED STATUTES OF THE UNITED STATES 1288 

(A) in the case of a depository institution that has 

been examined, unless otherwise determined in writing by 

the appropriate Federal banking agency— 

(i) the achievement of a composite rating of 1 or 

2 under the Uniform Financial Institutions Rating 

System (or an equivalent rating under an equivalent 

rating system) in connection with the most recent 

examination or subsequent review of the depository 

institution; and 

(ii) at least a rating of 2 for management, if such 

rating is given; or 

(B) in the case of any depository institution that has 

not been examined, the existence and use of managerial 

resources that the appropriate Federal banking agency 

determines are satisfactory. 

SEC. 5136B. [12 U.S.C. 25a] (a) A national bank may not— 

(1) deal in lottery tickets; 

(2) deal in bets used as a means or substitute for participation in a lottery; 

(3) announce, advertise, or publicize the existence of any 

lottery;

 1 

(4) announce, advertise, or publicize the existence or identity of any participant or winner, as such, in a lottery. 

(b) A national bank may not permit— 

(1) the use of any part of any of its banking offices by any 

person for any purpose forbidden to the bank under subsection 

(a), or 

(2) direct access by the public from any of its banking offices to any premises used by any person for any purpose forbidden to the bank under subsection (a). 

(c) As used in this section— 

(1) The term ''deal in'' includes making, taking, buying, 

selling, redeeming, or collecting. 

(2) The term ''lottery'' includes any arrangement whereby 

three or more persons (the ''participants'') advance money or 

credit to another in exchange for the possibility or expectation 

that one or more but not all of the participants (the ''winners'') 

will receive by reason of their advances more than the amounts 

they have advanced, the identity of the winners being determined by any means which includes— 

(A) a random selection; 

(B) a game, race, or contest; or 

(C) any record or tabulation of the result of one or 

more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner. 

(3) The term ''lottery ticket'' includes any right, privilege, 

or possibility (and any ticket, receipt, record, or other evidence 

of any such right, privilege, or possibility) of becoming a winner in a lottery. 

(d) Nothing contained in this section prohibits a national bank 

from accepting deposits or cashing or otherwise handling checks or 

1

 So in original. Probably should end with "or". 
1289 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

other negotiable instruments, or performing other lawful banking 

services for a state operating a lottery, or for an officer or employee 

of that state who is charged with the administration of the lottery. 

(e) The Comptroller of the Currency shall issue such regulations as may be necessary to the strict enforcement of this section 

and the prevention of evasions thereof. 

SEC. 5137. [12 U.S.C. 29] A national banking association may 

purchase, hold, and convey real estate, for the following purposes, 

and for no others: 

First. such as shall be necessary for its accommodation in the 

transaction of its business. 

second. such as shall be mortgaged to it in good faith by way 

of security for debts previously contracted. 

Third. Such as shall be conveyed to it in satisfaction of debts 

previously contracted in the course of its dealings. 

Fourth. such as it shall purchase at sales under judgments, 

decrees, or mortgages held by the association, or shall purchase to 

secure debts due to it. 

But no such association shall hold the possession of any real 

estate under mortgage, or the title and possession of any real estate purchased to secure any debts due to it, for a longer period 

than five years except as otherwise provided in this section. 

For real estate in the possession of a national banking association upon application by the association, the Comptroller of the 

Currency may approve the possession of any such real estate by 

such association for a period longer than five years, but not to exceed an additional five years, if (1) the association has made a good 

faith attempt to dispose of the real estate within the five-year period, or (2) disposal within the five-year period would be detrimental to the association. upon notification by the association to 

the Comptroller of the Currency that such conditions exist that require the expenditure of funds for the development and improvement of such real estate, and subject to such conditions and limitations as the Comptroller of the Currency shall prescribe, the association may expend such funds as are needed to enable such association to recover its total investment. 

Notwithstanding the five-year holding limitation of this section 

or any other provision of this title, any national banking association which on the date of enactment of this paragraph held, directly or indirectly, real estate, including any subsurface rights or 

interests therein, that since December 31, 1979, had not been valued on the books of such association for more than a nominal 

amount, may continue to hold such real estate, rights, or interests 

for such longer period of time as would be permitted a state chartered bank by the law of the state in which the association is located if the aggregate amount of earnings from such real estate, 

rights, or interests is separately disclosed in the annual financial 

statements of the association. 

[Section 5138 of the Revised Statutes (12 U.S.C 51) is repealed, 

see section 1233(c) of P.L. 106-569, 114Stat. 3037.] 

SEC. 5139. [12 U.S.C. 52] The capital stock of each association 

shall be divided into shares of $100 each, or into shares of such less 

amount as may be provided in the articles of association, and be 

deemed personal property, and transferable on the books of the 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1290 

association in such manner as may be prescribed in the by-laws or 

articles of association. Every person becoming a shareholder by 

such transfer shall, in proportion to his shares, succeed to all rights 

and liabilities of the prior holder of such shares; and no change 

shall be made in the articles of association by which the rights, 

remedies, or security of the existing creditors of the association 

shall be impaired. 

Certificates hereafter issued representing shares of stock of the 

association shall state (1) the name and location of the association, 

(2) the name of the holder of record of the stock represented 

thereby, (3) the number and class of shares which the certificate 

represents, and (4) if the association shall issue stock of more than 

one class, the respective rights, preferences, privileges, voting 

rights, powers, restrictions, limitations, and qualifications of each 

class of stock issued shall be stated in full or in summary upon the 

front or back of the certificates or shall be incorporated by a reference to the articles of association set forth on the front of the certificates. Every certificate shall be signed by the president and the 

cashier of the association, or by such other officers as the bylaws 

of the association shall provide, and shall be sealed with the seal 

of the association. 

After the date of the enactment of the Banking Act of 1935, no 

certificate evidencing the stock of any such association shall bear 

any statement purporting to represent the stock of any other corporation, except a member bank or a corporation engaged on June 

16, 1934 in holding the bank premises of such association, nor shall 

the ownership, sale, or transfer of any certificate representing the 

stock of any such association be conditioned in any manner whatsoever upon the ownership, sale, or transfer of a certificate representing the stock of any other corporation, except a member bank 

or a corporation engaged on June 16, 1934 in holding the bank 

premises of such association: Provided, That this section shall not 

operate to prevent the ownership, sale, or transfer of stock of any 

other corporation being conditioned upon the ownership, sale, or 

transfer of a certificate representing stock of a national banking 

association. 

SEC. 5140. [12 U.S.C. 53] All of the capital stock of every national banking association shall be paid in before it shall be authorized to commence business. 

[Section 5141 of the Revised Statutes (12 U.S.C 54) is repealed, 

see section 5 of P.L. 86-230, 73 Stat. 457.] 

SEC. 5142. [12 U.S.C. 57] Any national banking association 

may, with the approval of the Comptroller of the Currency, and by 

a vote of shareholders owning two-thirds of the stock of such associations, increase its capital stock to any sum approved by the said 

comptroller, but no increase in capital shall be valid until the 

whole amount of such increase is paid in and notice thereof, duly 

acknowledged before a notary public by the president, vice president, or cashier of said association, has been transmitted to the 

Comptroller of the Currency and his certificate obtained specifying 

the amount of such increase in capital stock and his approval 

thereof, and that it has been duly paid in as part of the capital of 

such association: Provided, however, That a national banking asso-
1291 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

ciation may, with the approval of the Comptroller of the Currency, 

and by the vote of shareholders owning two-thirds of the stock of 

such association, increase its capital stock by the declaration of a 

stock dividend, provided that the surplus of said association, after 

the approval of the increase, shall be at least equal to 20 per centum of the capital stock as increased. Such increase shall not be 

effective until a certificate certifying to such declaration of dividend, signed by the president, vice president, or cashier of said 

association and duly acknowledged before a notary public, shall 

have been forwarded to the Comptroller of the Currency and his 

certificate obtained specifying the amount of such increase of capital stock by stock dividend, and his approval thereof. 

SEC. 5143. [12 U.S.C. 59] Any association formed under this 

title may, by the vote of shareholders owning two-thirds of its capital stock, reduce its capital to any sum not below the amount required by this title to authorize the formation of associations; but 

no such reduction shall be allowable which will reduce the capital 

of the association below the amount required for its outstanding 

circulation, nor shall any reduction be made until the amount of 

the proposed reduction has been reported to the Comptroller of the 

Currency and such reduction has been approved by the said Comptroller of the Currency and no shareholder shall be entitled to any 

distribution of cash or other assets by reason of any reduction of 

the common capital of any association unless such distribution 

shall have been approved by the Comptroller of the Currency and 

by the affirmative vote of at least two-thirds of the shares of each 

class of stock outstanding, voting as classes. 

SEC. 5144. [12 U.S.C. 61] In all elections of directors, each 

shareholder shall have the right to vote the number of shares 

owned by him for as many persons as there are directors to be 

elected, or to cumulate such shares and give one candidate as 

many votes as the number of directors multiplied by the number 

of his shares shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and in deciding all other questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by 

him; except that (1) this shall not be construed as limiting the voting rights of holders of preferred stock under the terms and provisions of articles of association, or amendments thereto, adopted 

pursuant to the provisions of section 302(a) of the Emergency 

Banking and Bank Conservation Act, approved March 9, 1933, as 

amended; (2) in the election of directors, shares of its own stock 

held by a national bank as sole trustee, whether registered in its 

own name as such trustee or in the name of its nominee, shall not 

be voted by the registered owner unless under the terms of the 

trust the manner in which such shares shall be voted may be 

determined by a donor or beneficiary of the trust and unless such 

donor or beneficiary actually directs how such shares shall be 

voted; and (3) shares of its own stock held by a national bank and 

one or more persons as trustees may be voted by such other person 

or persons, as trustees, in the same manner as if he or they were 

the sole trustee. Shareholders may vote by proxies duly authorized 

in writing; but no officer, clerk, teller, or bookkeeper of such bank 

shall act as proxy; and no shareholder whose liability is past due 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1292 

and unpaid shall be allowed to vote. whenever shares of stock cannot be voted by reason of being held by the bank as sole trustee 

such shares shall be excluded in determining whether matters 

voted upon by the shareholders were adopted by the requisite percentage of shares. 

SEC. 5145. [12 U.S.C. 71] The affairs of each association shall 

be managed by not less than five directors, who shall be elected by 

the shareholders at a meeting to be held at any time before the 

association is authorized by the Comptroller of the Currency to 

commence the business of banking; and afterward at meetings to 

be held on such day of each year as is specified therefor in the bylaws. The directors shall hold office for a period of not more than 

3 years, and until their successors are elected and have qualified. 

in accordance with regulations issued by the Comptroller of the 

Currency, a national bank may adopt bylaws that provide for staggering the terms of its directors. 

SEC. 5146. [12 U.S.C. 72] Every director must during his 

whole term of service, be a citizen of the United States, and at 

least a majority1 of the directors must have resided in the State, 

Territory, or District in which the association is located, or within 

one hundred miles of the location of the office of the association, 

for at least one year immediately preceding their election, and 

must be residents of such State or within a one-hundred-mile territory of the location of the association during their continuance in 

office, except that the Comptroller may, in the discretion of the 

Comptroller, waive the requirement of residency, and waive the 

requirement of citizenship in the case of not more than a minority 

of the total number of directors. Every director must own in his or 

her own right either shares of the capital stock of the association 

of which he or she is a director the aggregate par value of which 

is not less than $1,000, or an equivalent interest, as determined by 

the Comptroller of the Currency, in any company which has control 

over such association within the meaning of section 2 of the Bank 

Holding Company Act of 1956 (12 U.S.C. 1841). If the capital of the 

bank does not exceed $25,000, every director must own in his or 

her own right either shares of such capital stock the aggregate par 

value of which is not less than $500, or an equivalent interest, as 

determined by the Comptroller of the Currency, in any company 

which has control over such association within the meaning of section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841). 

Any director who ceases to be the owner of the required number 

of shares of the stock, or who becomes in any other manner disqualified, shall thereby vacate his place. 

SEC. 5147. [12 U.S.C. 73] Each director, when appointed or 

elected, shall take an oath that he will, so far as the duty devolves 

on him, diligently and honestly administer the affairs of such association, and will not knowingly violate or willingly permit to be violated, any of the provisions of this title, and that he is the owner 

in good faith, and in his own right, of the number of shares of stock 

required by this title, subscribed by him, or standing in his name 

on the books of the association, and that the same is not hypoth1

 Section 313 of P.L. 103-325 attempted to amend section 5146 by striking "two thirds'' and 

inserting ''a majority''. The amendment probably should have stricken ''two-thirds''. 
1293 REVISED STATUTES OF THE UNITED STATES Sec. 5136 A 

ecated, or in any way pledged, as security for any loan or debt. The 

oath shall be taken before a notary public, properly authorized and 

commissioned by the state in which he resides, or before any other 

officer having an official seal and authorized by the state to administer oaths, except that the oath shall not be taken before any such 

notary public or other officer who is an officer of the director's 

bank. The oath, subscribed by the director making it, and certified 

by the notary public or other officer before whom it is taken, shall 

be immediately transmitted to the Comptroller of the Currency and 

shall be filed and preserved in his office for a period of ten years. 

SEC. 5148. [12 U.S.C. 74] Any vacancy in the board shall be 

filled by appointment by the remaining directors, and any director 

so appointed shall hold his place until the next election. 

SEC. 5149. [12 U.S.C. 75] When the day fixed in the bylaws 

for the regular annual meeting of the shareholders falls on a legal 

holiday in the State in which the bank is located, the shareholders 

meeting shall be held, and the directors elected, on the next following banking day. If, from any cause, an election of directors is 

not made on the day fixed, or in the event of a legal holiday, on 

the next following banking day, an election may be held on any 

subsequent day within sixty days of the day fixed, to be designated 

by the board of directors, or, if the directors fail to fix the day, by 

shareholders representing two-thirds of the shares, at least ten 

days' notice thereof in all cases having been given by first-class 

mail to the shareholders. 

SEC. 5150. [12 U.S.C. 76] The president of the bank shall be 

a member of the board and shall be the chairman thereof, but the 

board may designate a director in lieu of the president to be chairman of the board, who shall perform such duties as may be designated by the board. 

[Section 5151 of the Revised Statutes (12 U.S.C. 63) is repealed.

 1 ] 

SEC. 5152. [12 U.S.C. 66] Persons holding stock as executors, 

administrators, guardians, or trustees, shall not be personally subject to any liabilities as stockholders; but the estates and funds in 

their hands shall be liable in like manner and to the same extent 

as the testator, intestate, ward, or person interested in such trustfunds would be, if living and competent to act and hold the stock 

in his own name. 

SEC. 5153. [12 U.S.C. 90] All national banking associations, 

designated for that purpose by the Secretary of the Treasury, shall 

be depositaries of public money, under such regulations as may be 

prescribed by the Secretary; and they may also be employed as 

financial agents of the Government; and they shall perform all 

such reasonable duties, as depositaries of public money and financial agents of the Government, as may be required of them. The 

Secretary of the Treasury shall require the associations thus designated to give satisfactory security, by the deposit of United States 

bonds and otherwise, for the safekeeping and prompt payment of 

the public money deposited with them, and for the faithful performance of their duties as financial agents of the Government: Provided, That the Secretary shall, on or before the first of January 

1

 Section 5151 was repealed by section 7 of P.L. 88-230, 73 Stat. 457. 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1294 

of each year, make a public statement of the securities required 

during that year for such deposits. And every association so designated as receiver or depositary of the public money shall take 

and receive at par all of the national currency bills, by whatever 

association issued, which have been paid into the Government for 

internal revenue, or for loans or stocks: Provided, That the Secretary of the Treasury shall distribute the deposits herein provided 

for, as far as practicable, equitably between the different States 

and sections. 

Any national banking association may, upon the deposit with 

it of any funds by any State or political subdivision thereof or any 

agency or other governmental instrumentality of one or more 

States or political subdivisions thereof, including any officer, employee, or agent thereof in his official capacity, give security for the 

safekeeping and prompt payment of the funds so deposited to the 

same extent and of the same kind as is authorized by the law of 

the State in which such association is located in the case of other 

banking institutions in the State. 

Any national banking association may, upon the deposit with 

it of any funds by any federally recognized Indian tribe, or any officer, employee, or agent thereof in his or her official capacity, give 

security for the safekeeping and prompt payment of the funds so 

deposited by the deposit of United States bonds and otherwise as 

may be prescribed by the Secretary of the Treasury for public funds 

under the first paragraph of this section. 

Notwithstanding the Federal Property and Administrative Services 

Act of 1949, as amended, the Secretary may select associations as 

financial agents in accordance with any process the Secretary 

deems appropriate and their reasonable duties may include the 

provision of electronic benefit transfer services (including Stateadministered benefits with the consent of the States), as defined by 

the Secretary.1 

SEC. 5154. [12 U.S.C. 35] Any bank incorporated by special 

law of any State or of the United States or organized under the 

general laws of any State or of the United States and having an 

unimpaired capital sufficient to entitle it to become a national 

banking association under the provisions of the existing laws may, 

by the vote of the shareholders owning not less than fifty-one per 

centum of the capital stock of such bank or banking association, 

with the approval of the Comptroller of the Currency be converted 

into a national banking association, with a name that contains the 

word "national": Provided, however, That said conversion shall not 

be in contravention of the State law. In such case the articles of 

association and organization certificate may be executed by a majority of the directors of the bank or banking institution, and the 

certificate shall declare that the owners of fifty-one per centum of 

the capital stock have authorized the directors to make such certificate and to change or convert the bank or banking institution into 

1

This paragraph was added to 12 U.S.C. 90 (which is where this section is codified) by item 

1 of the section designated as section 2 following section 664 of the Treasury, Postal Service, 

and General Government Appropriations Act, 1997 (as enacted by section 101(f) of P.L. 104-

208). The 1st line of the paragraph should probably be indented. item 2 of such section reads 

as follows: ''2. Make conforming changes to 12 U.S.C. 265, 266, 391, 1452(d), 1767, 1789a, 2013, 

2122 and to 31 U.S.C. 3122 and 3303.''. 
1295 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

a national association. A majority of the directors, after executing 

the articles of association and the organization certificate, shall 

have power to execute all other papers and to do whatever may be 

required to make its organization perfect and complete as a national association. The shares of any such bank may continue to be 

for the same amount each as they were before the conversion, and 

the directors may continue to be directors of the association until 

others are elected or appointed in accordance with the provisions 

of the statutes of the United States. When the Comptroller has 

given to such bank or banking association a certificate that the provisions of this Act have been complied with, such bank or banking 

association, and all its stockholders, officers, and employees, shall 

have the same powers and privileges, and shall be subject to the 

same duties, liabilities, and regulations, in all respects, as shall 

have been prescribed by the Federal Reserve Act and by the national banking Act for associations originally organized as national 

banking associations. 

The Comptroller of the Currency may, in his discretion and 

subject to such conditions as he may prescribe, permit such converting bank to retain and carry at a value determined by the 

Comptroller such of the assets of such converting bank as do not 

conform to the legal requirements relative to assets acquired and 

held by national banking associations. 

SEC. 5155. [12 U.S.C. 36] The conditions upon which a national banking association may retain or establish and operate a 

branch or branches are the following: 

(a) A national banking association may retain and operate such 

branch or branches as it may have in lawful operation at the date 

of the approval of this Act, and any national banking association 

which has continuously maintained and operated not more than 

one branch for a period of more than twenty-five years immediately 

preceding the approval of this Act may continue to maintain and 

operate such branch. 

(b)(1) A national bank resulting from the conversion of a State 

bank may retain and operate as a branch any office which was a 

branch of the State bank immediately prior to conversion if such 

office— 

(A) might be established under subsection (c) of this section as a new branch of the resulting national bank, and is approved by the Comptroller of the Currency for continued operation as a branch of the resulting national bank; 

(B) was a branch of any bank on February 25, 1927; or 

(C) is approved by the Comptroller of the Currency for continued operation as a branch of the resulting national bank. 

The Comptroller of the Currency may not grant approval under 

clause (C) of this paragraph if a State bank (in a situation identical 

to that of the national bank) resulting from the conversion of a national bank would be prohibited by the law of such State from retaining and operating as a branch an identically situated office 

which was a branch of the national bank immediately prior to conversion. 

(2) A national bank (referred to in this paragraph as the ''resulting bank''), resulting from the consolidation of a national bank 

(referred to in this paragraph as the ''national bank'') under whose 
Sec. 5136A REVISED STATUTES OF THE UNITED STATES 1296 

charter the consolidation is effected with another bank or banks, 

may retain and operate as a branch any office which, immediately 

prior to such consolidation, was in operation as— 

(A) a main office or branch office of any bank (other than 

the national bank) participating in the consolidation if, under 

subsection (c) of this section, it might be established as a new 

branch of the resulting bank, and if the Comptroller of the 

Currency approves of its continued operation after the consolidation; 

(B) a branch of any bank participating in the consolidation, and which, on February 25, 1927, was in operation as a 

branch of any bank; or 

(C) a branch of the national bank and which, on February 

25, 1927, was not in operation as a branch of any bank, if the 

Comptroller of the Currency approves of its continued operation after the consolidation. 

The Comptroller of the Currency may not grant approval under 

clause (C) of this paragraph if a State bank (in a situation identical 

to that of the resulting national bank) resulting from the consolidation into a State bank of another bank or banks would be prohibited by the law of such State from retaining and operating as a 

branch an identically situated office which was a branch of the 

State bank immediately prior to consolidation. 

(3) As used in this subsection, the term ''consolidation'' includes a merger. 

(c) A national banking association may, with the approval of 

the Comptroller of the Currency, establish and operate new 

branches: (1) Within the limits of the city, town or village in which 

said association is situated, if such establishment and operation 

are at the time expressly authorized to State banks by the law of 

the State in question; and (2) at any point within the State in 

which said association is situated, if such establishment and operation are at the time authorized to State banks by the statute law 

of the State in question by language specifically granting such authority affirmatively and not merely by implication or recognition, 

and subject to the restrictions as to location imposed by the law of 

the State on State banks. in any State in which State banks are 

permitted by statute law to maintain branches within county or 

greater limits, if no bank is located and doing business in the place 

where the proposed agency is to be located, any national banking 

association situated in such State may, with the approval of the 

Comptroller of the Currency, establish and operate, without regard 

to the capital requirements of this section, a seasonal agency in 

any resort community within the limits of the county in which the 

main office of such association is located, for the purpose of receiving and paying out deposits, issuing and cashing checks and drafts, 

and doing business incident thereto: Provided, That any permit 

issued under this sentence shall be revoked upon the opening of a 

State or national bank in such community. Except as provided in 

the immediately preceding sentence, no such association shall 

establish a branch outside of the city, town, or village in which it 

is situated unless it has a combined capital stock and surplus equal 

to the combined amount of capital stock and surplus, if any, required by the law of the State in which such association is situated 
1297 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

for the establishment of such branches by State banks, or, if the 

law of such State requires only a minimum capital stock for the 

establishment of such branches by State banks, unless such association has not less than an equal amount of capital stock. 

(d) BRANCHES RESULTING FRO M INTERSTATE MERGER TRANSACTIONS.—A national bank resulting from an interstate merger 

transaction (as defined in section 44(f)(6) of the Federal Deposit 

Insurance Act) may maintain and operate a branch in a State other 

than the home State (as defined in subsection (g)(3)(B)) of such 

bank in accordance with section 44 of the Federal Deposit insurance Act. 

(e) EXCLUSIVE AUTHORITY FOR ADDITIONAL BRANCHES.— 

(1) IN GENERAL.—Effective June 1, 1997, a national bank 

may not acquire, establish, or operate a branch in any State 

other than the bank's home State (as defined in subsection 

(g)(3)(B)) or a State in which the bank already has a branch 

unless the acquisition, establishment, or operation of such 

branch in such State by such national bank is authorized 

under this section or section 13(f), 13(k), or 44 of the Federal 

Deposit Insurance Act. 

(2) RETENTION OF BRANCHES.—In the case of a national 

bank which relocates the main office of such bank from 1 State 

to another State after May 31, 1997, the bank may retain and 

operate branches within the State which was the bank's home 

State (as defined in subsection (g)(3)(B)) before the relocation 

of such office only to the extent the bank would be authorized, 

under this section or any other provision of law referred to in 

paragraph (1), to acquire, establish, or commence to operate a 

branch in such State if— 

(A) the bank had no branches in such State; or 

(B) the branch resulted from— 

(i) an interstate merger transaction approved pursuant to section 44 of the Federal Deposit insurance 

Act; or 

(ii) a transaction after May 31, 1997, pursuant to 

which the bank received assistance from the Federal 

Deposit insurance Corporation under section 13(c) of 

such Act. 

(f) LAW APPLICABLE TO INTERSTATE BRANCHING OPERATIONS.— 

(1) LAW APPLICABLE TO NATIONAL BANK BRANCHES.— 

(A) IN GENERAL.—The laws of the host State regarding 

community reinvestment, consumer protection, fair lending, and establishment of intrastate branches shall apply 

to any branch in the host State of an out-of-State national 

bank to the same extent as such State laws apply to a 

branch of a bank chartered by that State, except— 

(i) when Federal law preempts the application of 

such State laws to a national bank; or 

(ii) when the Comptroller of the Currency determines that the application of such State laws would 

have a discriminatory effect on the branch in comparison with the effect the application of such State laws 

would have with respect to branches of a bank chartered by the host State. 
1298 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

(B) ENFORCEMENT OF APPLICABLE STATE LAWS.—The 

provisions of any State law to which a branch of a national 

bank is subject under this paragraph shall be enforced, 

with respect to such branch, by the Comptroller of the 

Currency. 

(C) REVIEW AND REPORT ON ACTIONS BY COMPTROLLER.—The Comptroller of the Currency shall conduct 

an annual review of the actions it has taken with regard 

to the applicability of State law to national banks (or their 

branches) during the preceding year, and shall include in 

its annual report required under section 333 of the Revised 

Statutes (12 U.S.C. 14) the results of the review and the 

reasons for each such action. The first such review and report after the date of enactment of this subparagraph shall 

encompass all such actions taken on or after January 1, 

1992. 

(2) TREATMENT OF BRANCH AS BANK.—All laws of a host 

State, other than the laws regarding community reinvestment, 

consumer protection, fair lending, establishment of intrastate 

branches, and the application or administration of any tax or 

method of taxation, shall apply to a branch (in such State) of 

an out-of-State national bank to the same extent as such laws 

would apply if the branch were a national bank the main office 

of which is in such State. 

(3) RULE OF CONSTRUCTION.—No provision of this subsection may be construed as affecting the legal standards for 

preemption of the application of State law to national banks. 

(g) STATE ''OPT-IN'' ELECTION T O PERMIT INTERSTATE BRANCHING THROUGH D E NOVO BRANCHES.— 

(1) IN GENERAL.—Subject to paragraph (2), the Comptroller 

of the Currency may approve an application by a national bank 

to establish and operate a de novo branch in a State (other 

than the bank's home State) in which the bank does not maintain a branch if— 

(A) there is in effect in the host State a law that— 

(i) applies equally to all banks; and 

(ii) expressly permits all out-of-State banks to 

establish de novo branches in such State; and 

(B) the conditions established in, or made applicable to 

this paragraph by, paragraph (2) are met. 

(2) CONDITIONS ON ESTABLISHMENT AND OPERATION OF 

INTERSTATE BRANCH.— 

(A) ESTABLISHMENT.—An application by a national 

bank to establish and operate a de novo branch in a host 

State shall be subject to the same requirements and conditions to which an application for an interstate merger 

transaction is subject under paragraphs (1), (3), and (4) of 

section 44(b) of the Federal Deposit insurance Act. 

(B) OPERATION.—Subsections (c) and (d)(2) of section 

44 of the Federal Deposit insurance Act shall apply with 

respect to each branch of a national bank which is established and operated pursuant to an application approved 

under this subsection in the same manner and to the same 

extent such provisions of such section 44 apply to a branch 
1299 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

of a national bank which resulted from an interstate 

merger transaction approved pursuant to such section 44. 

(3) DEFINITIONS.—The following definitions shall apply for 

purposes of this section: 

(A) DE NOVO BRANCH.—The term ''de novo branch'' 

means a branch of a national bank which— 

(i) is originally established by the national bank 

as a branch; and 

(ii) does not become a branch of such bank as a result of— 

(i) the acquisition by the bank of an insured 

depository institution or a branch of an insured 

depository institution; or 

(ii) the conversion, merger, or consolidation of 

any such institution or branch. 

(B) HOME STATE.—The term ''home State'' means the 

State in which the main office of a national bank is located. 

(C) HOST STATE.—The term ''host State'' means, with 

respect to a bank, a State, other than the home State of 

the bank, in which the bank maintains, or seeks to establish and maintain, a branch. 

(h) [Repealed] 

(i) No branch of any national banking association shall be 

established or moved from one location to another without first obtaining the consent and approval of the Comptroller of the Currency. 

(j) The term ''branch'' as used in this section shall be held to 

include any branch bank, branch office, branch agency, additional 

office, or any branch place of business located in any State or Territory of the United States or in the District of Columbia at which 

deposits are received, or checks paid, or money lent. The term 

''branch'', as used in this section, does not include an automated 

teller machine or a remote service unit. 

(k) This section shall not be construed to amend or repeal section 25 of the Federal Reserve Act, as amended, authorizing the 

establishment by national banking associations of branches in foreign countries, or dependencies, or insular possessions of the 

United States. 

(l) The words ''State bank,'' ''State banks,'' ''bank,'' or ''banks,'' 

as used in this section, shall be held to include trust companies, 

savings banks, or other such corporations or institutions carrying 

on the banking business under the authority of State laws. 

SEC. 5156. [12 U.S.C. 39] Nothing in this Title shall affect any 

appointments made, acts done, or proceedings had or commenced 

prior to the third day of June, eighteen hundred and sixty-four, in 

or toward the organization of any national banking association 

under the act of February twenty-five, eighteen hundred and sixtythree; but all associations which, on the third day of June, eighteen 

hundred and sixty-four, were organized or commenced to be organized under that act, shall enjoy all the rights and privileges 

granted, and be subject to all the duties, liabilities, and restrictions 

imposed by this Title, notwithstanding all the steps prescribed by 
1300 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

this Title for the organization of associations were not pursued, if 

such associations were duly organized under this act. 

SEC. 5156A. [12 U.S.C. 215c] MERGERS, CONSOLIDATIONS, AN D OTHE R 

ACQUISITION S AUTHORIZED . 

(a) IN GENERAL.—Subject to sections 5(d)(3) and 18(c) of the 

Federal Deposit Insurance Act and all other applicable laws, any 

national bank may acquire or be acquired by any insured depository institution. 

(b) EXPEDITED APPROVAL OF ACQUISITIONS.— 

(1) IN GENERAL.—Any application by a national bank to acquire or be acquired by another insured depository institution 

which is required to be filed with the Comptroller of the Currency under any applicable law or regulation shall be approved 

or disapproved in writing by the agency before the end of the 

60-day period beginning on the date such application is filed 

with the agency. 

(2) EXTENSIONS OF PERIOD.—The period for approval or 

disapproval referred to in paragraph (1) may be extended for 

an additional 30-day period if the Comptroller of the Currency 

determines that— 

(A) an applicant has not furnished all of the information required to be submitted; or 

(B) in the Comptroller's judgment, any material information submitted is substantially inaccurate or incomplete. 

(c) RULE OF CONSTRUCTION.—No provision of this section shall 

be construed as authorizing a national bank or a subsidiary of a 

national bank to engage in any activity not otherwise authorized 

under this Act or any other law governing the powers of national 

banks. 

(d) ACQUIRE DEFINED.—Fo r purposes of this section, the term 

''acquire'' means to acquire, directly or indirectly, ownership or control through a merger or consolidation or an acquisition of assets 

or assumption of liabilities, provided that following such merger, 

consolidation, or acquisition, an acquiring insured depository institution may not own the shares of the acquired insured depository 

institution. 
C H A P T E R T W O. 

OBTAINING AN D ISSUING CIRCULATING NOTES. 

Sec. 

5157. What associations are governed by chapters 2, 3, and 4. 

5168. Comptroller to determine if association can commence business. 

5169. Certificate of authority to commence banking to be issued. 

SEC. 5157. [12 U.S.C. 37] The provisions of chapters two, 

three, and four of this Title, which are expressed without restrictive words, as applying to ''national banking associations,'' or to 

''associations,'' apply to all associations organized to carry on the 

business of banking under any act of Congress. 

[Sections 5158-5167 of the Revised Statutes (12 U.S.C 102, 

101a, and 168-175) are repealed.1] 

SEC. 5168. [12 U.S.C. 26] Whenever a certificate is transmitted to the Comptroller of the Currency, as provided in this Title, 

and the association transmitting the same notifies the Comptroller 

that all of its capital stock has been duly paid in, and that such 

association has complied with all the provisions of this Title required to be complied with before an association shall be authorized to commence the business of banking, the Comptroller shall 

examine into the condition of such association, ascertain especially 

the amount of money paid in on account of its capital, the name 

and place of residence of each of its directors, and the amount of 

the capital stock of which each is the owner in good faith, and generally whether such association has complied with all the provisions of this Title required to entitle it to engage in the business 

of banking; and shall cause to be made and attested by the oaths 

of a majority of the directors, and by the president or cashier of the 

association, a statement of all the facts necessary to enable the 

Comptroller to determine whether the association is lawfully entitled to commence the business of banking. 

SEC. 5169. [12 U.S.C. 27] (a) If, upon a careful examination 

of the facts so reported, and of any other facts which may come to 

the knowledge of the Comptroller, whether by means of a special 

commission appointed by him for the purpose of inquiring into the 

condition of such association, or otherwise, it appears that such 

association is lawfully entitled to commence the business of banking, the Comptroller shall give to such association a certificate, 

under his hand and official seal, that such association has complied 

with all the provisions required to be complied with before commencing the business of banking, and that such association is 

authorized to commence such business. But the Comptroller may 

1

 Sections 5158-5167 repealed by section 602(e) of P.L. 103-325, 108 Stat. 2292. 

1301 
1302 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

withhold from an association his certificate authorizing the commencement of business, whenever he has reason to suppose that 

the shareholders have formed the same for any other than the 

legitimate objects contemplated by this Title. A National Bank 

Association, to which the Comptroller of the Currency has heretofore issued or hereafter issues such certificate, is not illegally 

constituted solely because its operations are or have been required 

by the Comptroller of the Currency to be limited to those of a trust 

company and activities related thereto. 

(b)(1) The Comptroller of the Currency may also issue a certificate of authority to commence the business of banking pursuant to 

this section to a national banking association which is owned exclusively (except to the extent directors' qualifying shares are required 

by law) by other depository institutions or depository institution 

holding companies and is organized to engage exclusively in providing services to or for other depository institutions, their holding 

companies, and the officers, directors, and employees of such institutions and companies, and in providing correspondent banking 

services at the request of other depository institutions or their 

holding companies (also referred to as a ''banker's bank'')

 1

. 

(2) Any national banking association chartered pursuant to 

paragraph (1) shall be subject to such rules, regulations, and orders 

as the Comptroller deems appropriate, and, except as otherwise 

specifically provided in such rules, regulations, or orders, shall be 

vested with or subject to the same rights, privileges, duties, restrictions, penalties, liabilities, conditions, and limitations that would 

apply under the national banking laws to a national bank. 

[Sections 5170-5189 of the Revised Statutes are repealed.

 2 ] 

1

 Section 322(a)(2)(B) of P.L. 103-325 attempted to amend section 5169(b)(1) by striking ''services for other depository institutions and their officers, directors and employees'' and inserting 

the following: ''services to or for other depository institutions, their holding companies, and the 

officers, directors, and employees of such institutions and companies, and in providing correspondent banking services at the request of other depository institutions or their holding companies (also referred to as a 'banker's bank')''. The amendment probably should have included 

a comma after ''directors'' in the matter proposed to be stricken. The amendment has been executed in accordance with the probable intent. 

2

 Section 5170 repealed by section 602(e) of P.L. 103-325, 108 Stat. 2291. Section 5171 repealed by section 10 of the Act entitled ''An Act to enable national-banking associations to extend thier corporate existence and for other purposes'', and approved July 12, 1882 (22 Stat. 

163). Sections 5172-5174 repealed by section 602(e) of P.L. 103-325, 108 Stat. 2292. Section 

5175 was repealed by the Act of October 5, 1917 (Chap. 74, 40 Stat. 342). Section 5176 was 

repealed by section 10 of the Act of July 12, 1882 (Chap. 290, 22 Stat. 165). Section 5177 was 

repealed by the Act of January 14, 1875 (Chap. 15, 18 Stat. 296). Sections 5178-5181 were 

apparently repealed by section 12 of the Act of March 14, 1900 (Chap. 41, 31 Stat. 49), pursuant 

to the terms of such section, because of an inconsistency between such sections 5178-5181 and 

the requirements of such section 12. Sections 5182-5186 repealed by section 602(e) of P.L. 103-

325, 108 Stat. 2292. Section 5187 was repealed by section 21 of the Act of June 25, 1948 (Chap. 

645, 62 Stat. 862) but the substance was incorporated in section 334 of title 18, united States 

Code. Sections 5188 and 5189 were repealed by the Act of March 4, 1909 (Chap. 321, 35 Stat. 

1153) but the substance of such sections was incorporated into the provisions of criminal law 

which were codified by such Act and have since been reenacted in title 18, united States Code. 
C H A P T E R T H R E E. 

REGULATION OF TH E BANKING BUSINESS. 

Sec. 

5190. Place of business of banking associations. 

5191. ''Lawful-money reserve'' prescribed. 

5192. What may be counted toward the ''lawful-money reserve.'' 

5197. Limitation upon rate of interest which may be taken. 

5198. Consequences of taking usurious interest. 

5199. Dividends. 

5200. Limit to liabilities which may be incurred by any one person, &c. 

5201. Associations not to loan purchase their own stock.1 

5204. Prohibition upon withdrawal of capital. 

5205. Enforcing payment of deficiency in capital stock. 

5207. United States notes not to be held as collateral, &c.; penalty. 

5208. Penalty for falsely certifying checks. 

5210. List of shareholders, &c., to be kept. 

5211. Reports to Comptroller of the Currency. 

5213. Penalty for failure to make reports. 

5214. Duties payable to the United States. 

5215. Half-yearly return of circulation, deposit, and capital stock. 

5216. Penalty for failure to make return. 

5217. Penalty for failure to pay duties. 

5218. Refunding excessive duties. 

5219. State taxation. 

SEC. 5190. [12 U.S.C. 81] The general business of each national banking association shall be transacted in the place specified 

in its organization certificate and in the branch or branches, if any, 

established or maintained by it in accordance with the provisions 

of section 5155 of the Revised Statutes, as amended by this Act. 

SEC. 5191. [12 U.S.C. 141] Every national banking association 

in either of the following cities: Albany, Baltimore, Boston, Cincinnati, Chicago, Cleveland, Detroit, Louisville, Milwaukee, New 

orleans, New York, Philadelphia, Pittsburgh, Saint Louis, San 

Francisco, and Washington, shall at all times have on hand, in lawful money of the United States, an amount equal to at least 

twenty-five per centum of the aggregate amount of its notes in circulation and its deposits; and every other association shall at all 

times have on hand, in lawful money of the United States, an 

amount equal to at least fifteen per centum of the aggregate 

amount of its notes in circulation, and of its deposits. Whenever the 

lawful money of any association in any of the cities named shall 

be below the amount of twenty-five per centum of its circulation 

and deposits, and whenever the lawful money of any other association shall be below fifteen per centum of its circulation and depos1

 Section 1207(a) of the Financial Regulatory Relief and Economic Efficiency Act of 2000 (114 

Stat. 3034) amended section 5201 of the Revised Statutes of the United States in its entirety 

without making a conforming amendment to the item relating to such section in the table of 

contents. 

1303 
1304 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

its, such association shall not increase its liabilities by making any 

new loans or discounts other than by discounting or purchasing 

bills of exchange payable at sight, nor make any dividend of its 

profits until the required proportion, between the aggregate 

amount of its outstanding notes of circulation and deposits and its 

lawful money of the United States, has been restored. And the 

Comptroller of the Currency may notify any association, whose lawful-money reserve shall be below the amount above required to be 

kept on hand, to make good such reserve; and if such association 

shall fail for thirty days thereafter so to make good its reserve of 

lawful money, the Comptroller may, with the concurrence of the 

Secretary of the Treasury, appoint a receiver to wind up the business of the association, as provided in section fifty-two hundred 

and thirty-four. 

SEC. 5192. [12 U.S.C. 144] Four-fifths of the reserve of 15 per 

centum which a national bank located in a dependency or insular 

possession or any part of the United States outside of the continental United States, and not a member of the Federal Reserve 

System, is required to keep, may consist of balances due such bank 

from associations approved by the Comptroller of the Currency and 

located in any one of the reserve cities as now or hereafter defined 

by law or designated by the Board of Governors of the Federal Reserve System. 

[Sections 5193 and 5194 of the Revised Statutes are repealed.

 1 ] 

[Section 5195 and 5196 of the Revised Statutes (12 U.S.C 123 

and 89) are repealed.

 2 ] 

SEC. 5197. [12 U.S.C. 85] Any association may take, receive, 

reserve, and charge on any loan or discount made, or upon any 

notes, bills of exchange, or other evidences of debt, interest at the 

rate allowed by the laws of the State, Territory, or District where 

the bank is located, or at a rate of 1 per centum in excess of the 

discount rate on ninety-day commercial paper in effect at the Federal reserve bank in the Federal reserve district where the bank 

is located, whichever may be the greater, and no more, except that 

where by the laws of any State a different rate is limited for banks 

organized under State laws, the rate so limited shall be allowed for 

associations organized or existing in any such State under this 

title. When no rate is fixed by the laws of the State, or Territory, 

or District, the bank may take, receive, reserve, or charge a rate 

not exceeding 7 per centum, or 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal 

reserve bank in the Federal reserve district where the bank is located, whichever may be the greater, and such interest may be 

taken in advance, reckoning the days for which the note, bill, or 

other evidence of debt has to run. The maximum amount of interest or discount to be charged at a branch of an association located 

outside of the States of the United States and the District of Columbia shall be at the rate allowed by the laws of the country, ter1

 Section 5193 was repealed by the 1st section of the Act of March 4, 1907 (Chap. 2913, 34 

Stat. 1289). Section 5194 related to section 5193 but was not repealed by such Act and it is 

not apparent when and by which Act such section was repealed. 

2

 Sections 5195 and 5196 repealed by section 602(e) of P.L. 103-325, 108 Stat. 2291, 2292. 
1305 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

ritory, dependency, province, dominion, insular possession, or other 

political subdivision where the branch is located. And the purchase, 

discount, or sale of a bona-fide bill of exchange, payable at another 

place than the place of such purchase, discount, or sale, at not 

more than the current rate of exchange for sight-drafts in addition 

to the interest, shall not be considered as taking or receiving a 

greater rate of interest. 

SEC. 5198. The taking, receiving, reserving, or charging a rate 

of interest greater than is allowed by the preceding section, when 

knowingly done, shall be deemed a forfeiture of the entire interest 

which the note, bill, or other evidence of debt carries with it, or 

which has been agreed to be paid thereon. in case the greater rate 

of interest has been paid, the person by whom it has been paid, or 

his legal representatives, may recover back, in an action in the nature of an action of debt, twice the amount of the interest thus paid 

from the association taking or receiving the same; provided such 

action is commenced within two years from the time the usurious 

transaction occurred. [12 U.S.C. 86] Any action or proceeding 

against a national banking association for which the Federal Deposit insurance Corporation has been appointed receiver, or against 

the Federal Deposit Insurance Corporation as receiver of such association, shall be brought in the district or territorial court of the 

United States held within the district in which that association's 

principal place of business is located, or, in the event any State, 

county, or municipal court has jurisdiction over such an action or 

proceeding, in such court in the county or city in which that association's principal place of business is located. [12 U.S.C. 94] 

SEC. 5199. [12 U.S.C. 60] (a) The directors of any national 

banking association may, quarterly, semiannually or annually, declare a dividend of so much of the undivided profits of the association, subject to the limitations in subsection (b), as they shall judge 

expedient, except that until the surplus fund of such association 

shall equal its common capital, no dividends shall be declared unless there has been carried to the surplus fund not less than onetenth part of the association's net income of the preceding half year 

in the case of quarterly or semiannual dividends, or not less than 

one-tenth part of its net income of the preceding two consecutive 

half-year periods in the case of annual dividends: Provided, That 

for the purposes of this section, any amounts paid into a fund for 

the retirement of any preferred stock of any such association out 

of its net income for such period or periods shall be deemed to be 

additions to its surplus fund if, upon the retirement of such preferred stock, the amounts so paid into such retirement fund may 

then properly be carried to surplus. in any such case the association shall be obligated to transfer to surplus the amounts so paid 

into such retirement fund on account of the preferred stock as such 

stock is retired. 

(b) The approval of the Comptroller of the Currency shall be 

required if the total of all dividends declared by such association 

in any calendar year shall exceed the total of its net income of that 

year combined with its retained net income of the preceding two 

years, less any required transfers to surplus or a fund for the 

retirement of any preferred stock. 
1306 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

SEC. 5200. [12 U.S.C. 84] (a)(1) The total loans and extensions 

of credit by a national banking association to a person outstanding 

at one time and not fully secured, as determined in a manner consistent with paragraph (2) of this subsection, by collateral having 

a market value at least equal to the amount of the loan or extension of credit shall not exceed 15 per centum of the unimpaired 

capital and unimpaired surplus of the association. 

(2) The total loans and extensions of credit by a national banking association to a person outstanding at one time and fully secured by readily marketable collateral having a market value, as 

determined by reliable and continuously available price quotations, 

at least equal to the amount of the funds outstanding shall not exceed 10 per centum of the unimpaired capital and unimpaired surplus of the association. This limitation shall be separate from and 

in addition to the limitation contained in paragraph (1) of this subsection. 

(b) For the purposes of this section— 

(1) the term ''loans and extensions of credit'' shall include 

all direct or indirect advances of funds to a person made on the 

basis of any obligation of that person to repay the funds or 

repayable from specific property pledged by or on behalf of the 

person and, to the extent specified by the Comptroller of the 

Currency, such term shall also include any liability of a national banking association to advance funds to or on behalf of 

a person pursuant to a contractual commitment; and 

(2) the term ''person'' shall include an individual, sole proprietorship, partnership, joint venture, association, trust, estate, business trust, corporation, sovereign government or 

agency, instrumentality, or political subdivision thereof, or any 

similar entity or organization. 

(c) The limitations contained in subsection (a) shall be subject 

to the following exceptions: 

(1) Loans or extensions of credit arising from the discount 

of commercial or business paper evidencing an obligation to the 

person negotiating it with recourse shall not be subject to any 

limitation based on capital and surplus. 

(2) The purchase of bankers' acceptances of the kind described in section 13 of the Federal Reserve Act and issued by 

other banks shall not be subject to any limitation based on capital and surplus. 

(3) Loans and extensions of credit secured by bills of lading, warehouse receipts, or similar documents transferring or 

securing title to readily marketable staples shall be subject to 

a limitation of 35 per centum of capital and surplus in addition 

to the general limitations if the market value of the staples securing each additional loan or extension of credit at all times 

equals or exceeds 115 per centum of the outstanding amount 

of such loan or extension of credit. The staples shall be fully 

covered by insurance whenever it is customary to insure such 

staples. 

(4) Loans or extensions of credit secured by bonds, notes, 

certificates of indebtedness, or Treasury bills of the United 

States or by other such obligations fully guaranteed as to prin-
1307 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

cipal and interest by the United States shall not be subject to 

any limitation based on capital and surplus. 

(5) Loans or extensions of credit to or secured by unconditional takeout commitments or guarantees of any department, 

agency, bureau, board, commission, or establishment of the 

United States or any corporation wholly owned directly or indirectly by the United States shall not be subject to any limitations based on capital and surplus. 

(6) Loans or extensions of credit secured by a segregated 

deposit account in the lending bank shall not be subject to any 

limitation based on capital and surplus. 

(7) Loans or extensions of credit to any financial institution or to any receiver, conservator, superintendent of banks, 

or other agent in charge of the business and property of such 

financial institution, when such loans or extensions of credit 

are approved by the Comptroller of the Currency, shall not be 

subject to any limitation based on capital and surplus. 

(8)(A) Loans and extensions of credit arising from the discount of negotiable or nonnegotiable installment consumer 

paper which carries a full recourse endorsement or unconditional guarantee by the person transferring the paper shall be 

subject under this section to a maximum limitation equal to 25 

per centum of such capital and surplus, notwithstanding the 

collateral requirements set forth in subsection (a)(2). 

(B) if the bank's files or the knowledge of its officers of the 

financial condition of each maker of such consumer paper is 

reasonably adequate, and an officer of the bank designated for 

that purpose by the board of directors of the bank certifies in 

writing that the bank is relying primarily upon the responsibility of each maker for payment of such loans or extension of 

credit and not upon any full or partial recourse endorsement 

or guarantee by the transferor, the limitations of this section 

as to the loans or extensions of credit of each such maker shall 

be the sole applicable loan limitations. 

(9)(A) Loans and extensions of credit secured by shipping 

documents or instruments transferring or securing title covering livestock or giving a lien on livestock when the market 

value of the livestock securing the obligation is not at any time 

less than 115 per centum of the face amount of the note covered, shall be subject under this section, notwithstanding the 

collateral requirements set forth in subsection (a)(2), to a maximum limitation equal to 25 per centum of such capital and 

surplus. 

(B) Loans and extensions of credit which arise from the 

discount by dealers in dairy cattle of paper given in payment 

for dairy cattle, which paper carries a full recourse endorsement or unconditional guarantee of the seller, and which are 

secured by the cattle being sold, shall be subject under this 

section, notwithstanding the collateral requirements set forth 

in subsection (a)(2), to a limitation of 25 per centum of such 

capital and surplus. 

(10) Loans or extensions of credit to the Student Loan 

Marketing Association shall not be subject to any limitation 

based on capital and surplus. 
1308 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

(d)(1) The Comptroller of the Currency may prescribe rules and 

regulations to administer and carry out the purposes of this section 

including rules or regulations to define or further define terms 

used in this section and to establish limits or requirements other 

than those specified in this section for particular classes or categories of loans or extensions of credit. 

(2) The Comptroller of the Currency also shall have authority 

to determine when a loan putatively made to a person shall for 

purposes of this section be attributed to another person. 

SEC. 5201. [1 2 U.S.C. 83 ] LOAN S B Y BAN K O N IT S OW N STOCK . 

(a) GENERA L PROHIBITION.—N o national bank shall make any 

loan or discount on the security of the shares of its own capital 

stock. 

(b) EXCLUSION.—For purposes of this section, a national bank 

shall not be deemed to be making a loan or discount on the security 

of the shares of its own capital stock if it acquires the stock to prevent loss upon a debt previously contracted for in good faith. 

[Section 5202 of the Revised Statutes is repealed.1] 

[Section 5203 of the Revised Statutes (12 U.S.C 87) is repealed

 2 ] 

SEC. 5204. [12 U.S.C. 56] No association, or any member 

thereof, shall, during the time it shall continue its banking operations, withdraw, or permit to be withdrawn, either in the form of 

dividends or otherwise, any portion of its capital. if losses have at 

any time been sustained by any such association, equal to or exceeding its undivided profits then on hand, no dividend shall be 

made; and no dividend shall ever be made by any association, while 

it continues its banking operations, to an amount greater than its 

undivided profits, subject to other applicable provisions of law. But 

nothing in this section shall prevent the reduction of the capital 

stock of the association under section fifty-one hundred and fortythree. 

SEC. 5205. [12 U.S.C. 55] Every association which shall have 

failed to pay up its capital stock, as required by law, and every 

association whose capital stock shall have become impaired by 

losses or otherwise, shall, within three months after receiving notice thereof from the Comptroller of the Currency, pay the deficiency in the capital stock, by assessment upon the shareholders 

pro rata for the amount of capital stock held by each; and the 

Treasurer of the United States shall withhold the interest upon all 

bonds held by him in trust for any such association, upon notification from the Comptroller of the Currency, until otherwise notified 

by him. if any such association shall fail to pay up its capital stock, 

and shall refuse to go into liquidation, as provided by law, for three 

months after receiving notice from the Comptroller, a receiver may 

be appointed to close up the business of the association, according 

to the provisions of section fifty-two hundred and thirty-four: And 

provided, That if any shareholder or shareholders of such bank 

shall neglect or refuse, after three months' notice, to pay the 

1

 Section 5202 repealed by section 402 of the Garn-St Germain Depository Institutions Act of 

1982 (96 Stat. 1510). 

2

 Section 5203 repealed by section 602(e) of P.L. 103-325, 108 Stat. 2291. 
1309 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

assessment, as provided in this section, it shall be the duty of the 

board of directors to cause a sufficient amount of the capital stock 

of such shareholder or shareholders to be sold at public auction 

(after thirty days' notice shall be given by posting such notice of 

sale in the office of the bank, and by publishing such notice in a 

newspaper of the city or town in which the bank is located, or in 

a newspaper published nearest thereto,) to make good the deficiency, and the balance, if any, shall be returned to such delinquent shareholder or shareholders. 

[Section 5206 of the Revised Statutes (12 U.S.C 88) is repealed.

 1 ] 

SEC. 5207. [12 U.S.C. 582] No association shall hereafter offer 

or receive United States notes or national-bank notes as security 

or as collateral security for any loan of money, or for a consideration agree to withhold the same from use, or offer or receive the 

custody or promise of custody of such notes as security, or as collateral security, or consideration for any loan of money. Any association offending against the provisions of this section shall be deemed 

guilty of a misdemeanor, and shall be fined not more than one 

thousand dollars and a further sum equal to one-third of the money 

so loaned. The officer or officers of any association who shall make 

any such loan shall be liable for a further sum equal to one-quarter 

of the money loaned; and any fine or penalty incurred by a violation of this section shall be recoverable for the benefit of the party 

bringing such suit. 

SEC. 5208. [12 U.S.C. 501]

 2 It shall be unlawful for any officer, director, agent, or employee of any Federal reserve bank, or 

any member bank as defined in the Act of December 23, 1913, 

known as the Federal Reserve Act, to certify any check drawn upon 

such Federal reserve bank or member bank unless the person, 

firm, or corporation drawing the check has on deposit with such 

Federal reserve bank or member bank, at the time such check is 

certified, an amount of money not less than the amount specified 

in such check. Any check so certified by a duly authorized officer, 

director, agent, or employee shall be a good and valid obligation 

against such Federal reserve bank or member bank; but the act of 

any officer, director, agent, or employee of any such Federal reserve 

bank or member bank in violation of this section shall, in the discretion of the Board of Governors of the Federal Reserve System, 

subject, such Federal reserve bank to the penalties imposed by section 11, subsection (h) of the Federal Reserve Act, and shall subject 

such member bank, if a national bank, to the liabilities and proceedings on the part of the Comptroller of the Currency provided 

for in section 5234, Revised Statues, and shall, in the discretion of 

the Board of Governors of the Federal Reserve System, subject any 

other member bank to the penalties imposed by section 9 of said 

Federal Reserve Act for the violation of any of the provisions of 

said Act. 

1

 Section 5206 repealed by section 602(e) of P.L. 103-325, 108 Stat. 2291. 

2

 Section 5208 was codified in 2 sections of title 12, United States Code, sections 501 and 591. 

Section 5208 was listed in the table of repealed sections of the Revised Statutes in section 21 

of the Act of June 25, 1948 (Chap. 645, [62 Stat. 862]. Since that table of repealed sections also 

indicated that the corresponding United States Code section was 591, such section 21 has been 

construed as repealing only the portion of section 5208 which was codified in 12 U.S.C. 591. 
1310 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

[Section 5209 of the Revised Statutes is repealed.1] 

SEC. 5210. [12 U.S.C. 62] The president and cashier of every 

national banking association shall cause to be kept at all times a 

full and correct list of the names and residences of all the shareholders in the association, and the number of shares held by each, 

in the office where its business is transacted. Such list shall be 

subject to the inspection of all the shareholders and creditors of the 

association, and the officers authorized to access taxes under State 

authority, during business-hours of each day in which business 

may be legally transacted. A copy of such list, verified by the oath 

of such president or cashier, shall be transmitted to the Comptroller of the Currency within ten days of any demand therefor 

made by him. 

SEC. 5211. [12 U.S.C. 161] (a) Every association shall make 

reports of condition to the Comptroller of the Currency in accordance with the Federal Deposit insurance Act. The Comptroller of 

the Currency may call for additional reports of condition, in such 

form and containing such information as he may prescribe, on 

dates to be fixed by him, and may call for special reports from any 

particular association whenever in his judgment the same are necessary for his use in the performance of his supervisory duties. 

Each report of condition shall contain a declaration by the president, a vice president, the cashier, or by any other officer designated by the board of directors of the bank to make such declaration, that the report is true and correct to the best of his knowledge 

and belief. The correctness of the report of condition shall be attested by the signatures of least three of the directors of the bank 

other than the officer making such declaration, with the declaration that the report has been examined by them and to the best 

of their knowledge and belief is true and correct. Each report shall 

exhibit in detail and under appropriate heads the resources and liabilities of the association at the close of business on any past day 

specified by the Comptroller, and shall be transmitted to the Comptroller within the period of time specified by the Comptroller. Special reports called for by the Comptroller need contain only such 

information as is specified by the Comptroller in his request therefore, and publication of such reports need to be made only if directed by the Comptroller. 

(b) Every association shall make to the Comptroller reports of 

the payment of dividends, including advance reports of dividends 

proposed to be declared or paid in such cases and under such conditions as the Comptroller deems necessary to carry out the purposes 

of the laws relating to national banking associations in such form 

and at such times as he may require. 

(c) Each national banking association shall obtain from each of 

its affiliates other than member banks and furnish to the Comptroller of the Currency not less than four reports during each year, 

in such form as the Comptroller may prescribe, verified by the oath 

or affirmation of the president or such other officer as may be designated by the board of directors of such affiliate to verify such reports, disclosing the information hereinafter provided for as of 

1

 Section 5209 was repealed by section 21 of the Act of June 25, 1948 (Chap. 645, 62 Stat. 

862), but the substance of such section was incorporated into sections 334, 656, and 1005 of title 

18, United States Code. 
1311 REVISED STATUTES OF THE UNITED STATES Sec. 5136 A 

dates identical with those for which the Comptroller shall during 

such year require the reports of the condition of the association. 

Each such report of an affiliate shall be transmitted to the Comptroller at the same time as the corresponding report of the association, except that the Comptroller may, in his discretion, extend 

such time for good cause shown. Each such report shall contain 

such information as in the judgment of the Comptroller of the Currency shall be necessary to disclose fully the relations between such 

affiliate and such bank and to enable the Comptroller to inform 

himself as to the effect of such relations upon the affairs of such 

bank. The Comptroller shall also have power to call for additional 

reports with respect to any such affiliate whenever in his judgment 

the same are necessary in order to obtain a full and complete 

knowledge of the conditions of the association with which it is 

affiliated. Such additional reports shall be transmitted to the 

Comptroller of the Currency in such form as he may prescribe. 

[Section 5212 of the Revised Statutes is repealed1] 

SEC. 5213. [12 U.S.C. 164] PENALT Y FO R FAILUR E T O MAK E REPORTS . 

(a) FIRST TIER.—An y association which— 

(1) maintains procedures reasonably adapted to avoid any 

inadvertent error and, unintentionally and as a result of such 

an error— 

(A) fails to make, obtain, transmit, or publish any report or information required by the Comptroller of the 

Currency under section 5211 of this chapter, within the period of time specified by the Comptroller; or 

(B) submits or publishes any false or misleading report or information; or 

(2) inadvertently transmits or publishes any report which 

is minimally late, 

shall be subject to a penalty of not more than $2,000 for each day 

during which such failure continues or such false or misleading 

information is not corrected. The association shall have the burden 

of proving that an error was inadvertent and that a report was 

inadvertently transmitted or published late. 

(b) SECON D TIER.—An y association which— 

(1) fails to make, obtain, transmit, or publish any report 

or information required by the Comptroller of the Currency 

under section 5211 of this chapter, within the period of time 

specified by the Comptroller; or 

(2) submits or publishes any false or misleading report or 

information, 

in a manner not described in subsection (a) shall be subject to a 

penalty of not more than $20,000 for each day during which such 

failure continues or such false or misleading information is not corrected. 

(c) THIR D TIER.—Notwithstanding subsections (a) and (b), if 

any association knowingly or with reckless disregard for the accuracy of any information or report described in subsection (b) submits or publishes any false or misleading report or information, the 

Comptroller may assess a penalty of not more than $1,000,000 or 

1

 Section 5212 repealed by section 22(a) of P.L. 86-230, (73 Stat. 466). 
1312 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

1 percent of total assets of the association, whichever is less per 

day for each day during which such failure continues or such false 

or misleading information is not corrected. 

(d) ASSESSMENT, ETC.—Any penalty imposed under subsection 

(a), (b), or (c) shall be assessed and collected by the Comptroller of 

the Currency in the manner provided in subparagraphs (E), (F), 

(G), and (I) of section 8(i)(2) of the Federal Deposit Insurance Act 

(for penalties imposed under such section) and any such assessment (including the determination of the amount of the penalty) 

shall be subject to the provisions of such section. 

(e) HEARING.—Any association against which any penalty is assessed under this subsection shall be afforded an agency hearing 

if such association submits a request for such hearing within 20 

days after the issuance of the notice of assessment. Section 8(h) of 

the Federal Deposit Insurance Act shall apply to any proceeding 

under this section. 

SEC. 5214. [12 U.S.C. 541] In lieu of all existing taxes, every 

association shall pay to the Treasurer of the United States, in the 

months of January and July, a duty of one-half of one per centum 

each half-year upon the average amount of its notes in circulation, 

and a duty of one-quarter of one per centum each half-year upon 

the average amount of its deposits, and a duty of one-quarter of 

one per centum each half-year on the average amount of its capital 

stock, beyond the amount invested in United States bonds. 

SEC. 5215. [Omitted from Code] In order to enable the Treasurer to assess the duties imposed by the preceding section, each 

association shall, within ten days from the first days of January 

and July of each year, make a return, under the oath of its president or cashier, to the Treasurer of the United States, in such form 

as the Treasurer may prescribe, of the average amount of its notes 

in circulation, and of the average amount of its deposits, and of the 

average amount of its capital stock, beyond the amount invested in 

United States bonds, for the six months next preceding the most 

recent first day of January or July. Every association which fails 

so to make such return shall be liable to a penalty of two hundred 

dollars, to be collected either out of the interest as it may become 

due such association on the bonds deposited with the Treasurer, or, 

at his option, in the manner in which penalties are to be collected 

of other corporations under the laws of the United States. 

SEC. 5216. [Omitted from Code] Whenever any association 

falls to make the half-yearly return required by the preceding section, the duties to be paid by such association shall be assessed 

upon the amount of notes delivered to such association by the 

Comptroller of the Currency, and upon the highest amount of its 

deposits and capital stock, to be ascertained in such manner as the 

Treasurer may deem best. 

SEC. 5217. [Omitted from Code] Whenever an association fails 

to pay the duties imposed by the three preceding sections, the sums 

due may be collected in the manner provided for the collection of 

United States taxes from other corporations; or the Treasurer may 

reserve the amount out of the interest, as it may become due, on 

the bonds deposited with him by such defaulting association. 

SEC. 5218. [Omitted from Code] In all cases where an association has paid or may pay in excess of what may be or has been 
1313 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

found due from it, on account of the duty required to be paid to the 

Treasurer of the United States, the association may state an account therefor, which, on being certified by the Treasurer of the 

United States, and found by the First Comptroller of the Treasury, 

shall be refunded in the ordinary manner by warrant on the 

Treasury. 

SEC. 5219. For the purposes of any tax law enacted under authority of the United States or any State, a national bank shall be 

treated as a bank organized and existing under the laws of the 

State or other jurisdiction within which its principal office is 

located. 

C H A P T E R F O U R. 

DISSOLUTION AN D RECEIVERSHIP. 

Sec. 

5220. Voluntary dissolution of associations. 

5221. Notice of intent to dissolve. 

5234. Appointment of receivers. 

5235. Notice to present claims. 

5236. Dividends. 

5238. Fees and expenses. 

5239. Penalty for violation of this Title. 

5239A. Regulatory authority. 

5240. Appointment of occasional examiners. 

5241. Limit of visitorial powers. 

5242. Transfers, when void. 

[5244. Interpretations concerning preemption of certain state laws.]

 1 

SEC. 5220. [12 U.S.C. 181] Any association may go into liquidation and be closed by the vote of its shareholders owning twothirds of its stock. if the liquidation is to be effected in whole or 

in part through the sale of any of its assets to and the assumption 

of its deposit liabilities by another bank, the purchase and sale 

agreement must also be approved by its shareholders owning twothirds of its stock unless an emergency exists and the Comptroller 

of the Currency specifically waives such requirement for shareholder approval. 

The shareholders shall designate one or more persons to act as 

liquidating agent or committee, who shall conduct the liquidation 

in accordance with law and under the supervision of the board of 

directors, who shall require a suitable bond to be given by said 

agent or committee. The liquidating agent or committee shall 

render annual reports to the Comptroller of the Currency on the 

31st day of December of each year showing the progress of said liquidation until the same is completed. The liquidating agent or committee shall also make an annual report to a meeting of the shareholders to be held on the date fixed in the articles of association 

for the annual meeting, at which meeting the shareholders may, if 

they see fit, by a vote representing a majority of the entire stock 

of the bank, remove the liquidating agent or committee and appoint 

one or more others in place thereof. A special meeting of the shareholders may be called at any time in the same manner as if the 

bank continued an active bank and at said meeting the shareholders may, by vote of the majority of the stock, remove the liquidating agent or committee. The Comptroller of the Currency is 

authorized to have an examination made at any time into the af1

 Section 114 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (P.L. 

103-328; 108 Stat. 2366) amended chapter 4 of title LXII of the Revised Statutes by adding at 

the end a new section 5244, but did not add such item to the table of sections. 

1315 
1316 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

fairs of the liquidating bank until the claims of all creditors have 

been satisfied, and the expense of making such examinations shall 

be assessed against such bank in the same manner as in the case 

of examinations made pursuant to section 5240 of the Revised 

Statues, as amended (U.S.C., title 12, secs. 484, 485; Supp. vii, 

title 12, secs. 481-483). 

SEC. 5221. [12 U.S.C. 182] Whenever a vote is taken to go into 

liquidation it shall be the duty of the board of directors to cause 

notice of this fact to be certified, under the seal of the association, 

by its president or cashier, to the Comptroller of the Currency, and 

publication thereof to be made for a period of two months in every 

issue of a newspaper published in the city or town in which the 

association is located, or if no newspaper is there published, then 

in the newspaper published nearest thereto, that the association is 

closing up its affairs, and notifying its creditors to present their 

claims against the association for payment. 

[Sections 5222-5233 of the Revised Statutes (12 U.S.C 183-

186, 131-134, 137, 138, 135, and 136) are repealed.1] 

SEC. 5234. [12 U.S.C. 192] On becoming satisfied, as specified 

in section fifty-two hundred and twenty-six and fifty-two hundred 

and twenty-seven, that any association is in default, the Comptroller of the Currency may forthwith appoint a receiver, and require of him such bond and security as he deems proper. Such receiver, under the direction of the Comptroller, shall take possession 

of the books, records, and assets of every description of such association, collect all debts, dues, and claims belonging to it, and, upon 

order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts, and, on a like order, may sell all 

the real and personal property of such association, on such terms 

as the court shall direct. Such receiver, shall pay over all money 

so made to the Treasurer of the United States, subject to the order 

of the Comptroller, and also make report to the Comptroller of all 

his acts and proceedings: Provided, That the comptroller may, if he 

deems proper, deposit any of the money so made in any regular 

Government depositary, or in any State or national bank either of 

the city or town in which the insolvent bank was located, or of a 

city or town as adjacent thereto as practicable; if such deposit is 

made he shall require the depositary to deposit United States 

bonds or other satisfactory securities with the Treasurer of the 

United States for the safe-keeping and prompt payment of the 

money so deposited: Provided, That no security in the form of deposit of United States bonds, or otherwise, shall be required in the 

case of such parts of the deposits as are insured under section, 12B 

of the Federal Reserve Act, as amended. Such depositary shall pay 

upon such money interest at such rate as the comptroller may prescribe, not less, however, than two per centum per annum upon the 

average monthly amount of such deposits. 

SEC. 5235. [12 U.S.C. 193] The Comptroller shall, upon appointing a receiver, cause notice to be given, by advertisement in 

such newspapers as he may direct, for three consecutive months, 

calling on all persons who may have claims against such association to present the same, and to make legal proof thereof. 

1

 Sections 5222-5233 repealed by section 602(e) of P.L. 103-325, 108 Stat. 2292. 
1317 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

SEC. 5236. [12 U.S.C. 194] From time to time, the Comptroller 

shall make a ratable dividend of the money so paid over to him by 

such receiver on all such claims as may have been proved to his 

satisfaction or adjudicated in a court of competent jurisdiction, and, 

as the proceeds of the assets of such association are paid over to 

him, shall make further dividends on all claims previously proved 

or adjudicated; and the remainder of the proceeds, if any, shall be 

paid over to the shareholders of such association, or their legal representatives, in proportion to the stock by them respectively held. 

[Section 5237 of the Revised Statutes (12 U.S.C 195) is repealed.

 1 ] 

SEC. 5238. [12 U.S.C. 196] All expenses of any preliminary or 

other examinations into the condition of any association shall be 

paid by such association. All expenses of any receivership shall be 

paid out of the assets of such association before distribution of the 

proceeds thereof. 

SEC. 5239. [12 U.S.C. 93] (a) If the directors of any national 

banking association shall knowingly violate, or knowingly permit 

any of the officers, agents, or servants of the association to violate 

any of the provisions of this Title, all the rights, privileges, and 

franchises of the association shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, district, or territorial court of the United States, in a suit 

brought for that purpose by the Comptroller of the Currency, in his 

own name, before the association shall be declared dissolved. And 

in cases of such violation, every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person, shall have sustained in consequence 

of such violation. 

( b ) CIVI L MONE Y PENALTY. — 

(1) FIRS T TIER.—Any national banking association which, 

and any institution-affiliated party (within the meaning of section 3(u) of the Federal Deposit insurance Act) with respect to 

such association who, violates any provision of this title or any 

of the provisions of the first section of the Act of September 28, 

1962, (76 Stat. 668; 12 U.S.C. 92a), or any regulation issued 

pursuant thereto, shall forfeit and pay a civil penalty of not 

more than $5,000 for each day during which such violation 

continues. 

(2) SECON D TIER.—Notwithstanding paragraph (1), any national banking association which, and any institution-affiliated 

party within the meaning of section 3(u) of the Federal Deposit 

insurance Act) with respect to such association who, commits 

any violation described in paragraph (1) which— 

(A)(i) commits any violation described in any paragraph (1); 

(ii) recklessly engages in an unsafe or unsound practice in conducting the affairs of such association; or 

(iii) breaches any fiduciary duty;

 2 

(B) which violation, practice, or breach— 

1

 Section 5237 repealed by section 602(e) of P.L. 103-325, 108 Stat. 2292. 

2

 So in original. probably should end with ''; and''. 
1318 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

(i) is part of a pattern of misconduct; 

(ii) causes or is likely to cause more than a minimal loss to such association; or 

(iii) results in pecuniary gain or other benefit to 

such party. 

shall forfeit and pay a civil penalty of not more than $25,000 

for each day during which such violation, practice, or breach 

continues. 

(3) THIR D TIER.—Notwithstanding paragraphs (1) and (2), 

any national banking association which, and any institutionaffiliated party (within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect to such association 

who— 

(A) knowingly— 

(i) commits any violation described in paragraph 

(1); 

(ii) engages in any unsafe or unsound practice in 

conducting the affairs of such association; or 

(iii) breaches any fiduciary duty; and 

(B) knowingly or recklessly causes a substantial loss to 

such association or a substantial pecuniary gain or other 

benefit to such party by reason of such violation, practice, 

or breach, 

shall forfeit and pay a civil penalty in an amount not to 

exceed the applicable maximum amount determined under 

paragraph (4) for each day during which such violation, 

practice, or breach continues. 

(4) MAXIMU M AMOUNTS OF PENALTIES FOR ANY VIOLATION 

DESCRIBED I N PARAGRAPH (3).—The maximum daily amount of 

any civil penalty which may be assessed pursuant to paragraph (3) for any violation, practice, or breach described in 

such paragraph is— 

(A) in the case of any person other than a national 

banking association, an amount to not exceed $1,000,000; 

and 

(B) in the case of a national banking association, an 

amount not to exceed the lesser of— 

(i) $1,000,000; or 

(ii) 1 percent of the total assets of such association. 

(5) ASSESSMENT; ETC.—Any penalty imposed under paragraph (1), (2), or (3) shall be assessed and collected by the 

Comptroller of the Currency in the manner provided in subparagraphs (E), (F), (G), and (I) of section 8(i)(2) of the Federal 

Deposit Insurance Act for penalties imposed (under such section) and any such assessment shall be subject to the provisions of such section. 

(6) HEARING.—The association or other person against 

whom any penalty is assessed under this subsection shall be 

afforded an agency hearing if such association or person submits a request for such hearing within 20 days after the 

issuance of the notice of assessment. Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under 

this subsection. 
1319 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

(7) DISBURSEMENT.—Al l penalties collected under authority of this subsection shall be deposited into the Treasury. 

(8) VIOLATE DEFINED.—For purposes of this section, the 

term "violate" includes any action (alone or with another or 

others) for or toward causing, bringing about, participating in, 

counseling, or aiding or abetting a violation. 

(12)1 REGULATIONS.—The Comptroller shall prescribe regulations establishing such procedures as may be necessary to 

carry out this subsection. 

(c) NOTICE UNDE R THIS SECTION AFTER SEPARATION FRO M 

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 such an association (including a separation caused by the 

closing of such an association) shall not affect the jurisdiction and 

authority of the Comptroller of the Currency 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 

association (whether such date occurs before, on, or after the date 

of the enactment of this subsection). 

(d) FORFEITURE OF FRANCHISE FOR MONE Y LAUNDERING OR 

CASH TRANSACTION REPORTING OFFENSES.— 

(1) I N GENERAL.— 

(A) CONVICTION OF TITLE 18 OFFENSES.— 

(i) DUT Y TO NOTIFY.—If a national bank, a Federal 

branch, or Federal agency has been convicted of any 

criminal offense under section 1956 or 1957 of title 18, 

United States Code, the Attorney General shall provide to the Comptroller of the Currency a written notification of the conviction and shall include a certified 

copy of the order of conviction from the court rendering the decision. 

(ii) NOTICE OF TERMINATION; PRETERMINATION 

HEARING.—After receiving written notification from 

the Attorney General of such a conviction, the Comptroller of the Currency shall issue to the national 

bank, Federal branch, or Federal agency a notice of 

the Comptroller's intention to terminate all rights, 

privileges, and franchises of the bank, Federal branch, 

or Federal agency and schedule a pretermination hearing. 

(B) CONVICTION OF TITLE 31 OFFENSES.—If a national 

bank, a Federal branch, or a Federal agency is convicted 

of any criminal offense under section 5322 or 5324 of title 

31, United States Code, after receiving written notification 

from the Attorney General, the Comptroller of the Currency may issue to the national bank, Federal branch, or 

Federal agency a notice of the Comptroller's intention to 

terminate all rights, privileges, and franchises of the bank, 

Federal branch, or Federal agency and schedule a 

pretermination hearing. 

1

 So in original. Probably should be redesignated as "(9)". 
1320 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

(C) JUDICIAL REVIEW.—Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under 

this subsection. 

(2) FACTORS TO BE CONSIDERED.—In determining whether 

a franchise shall be forfeited under paragraph (1), the Comptroller of the Currency shall take into account the following 

factors: 

(A) The extent to which directors or senior executive 

officers of the national bank, Federal branch, or Federal 

agency knew of, or were involved in, the commission of the 

money laundering offense of which the bank, Federal 

branch, or Federal agency was found guilty. 

(B) The extent to which the offense occurred despite 

the existence of policies and procedures within the national bank, Federal branch, or Federal agency which were 

designed to prevent the occurrence of any such offense. 

(C) The extent to which the national bank, Federal 

branch, or Federal agency has fully cooperated with law 

enforcement authorities with respect to the investigation of 

the money laundering offense of which the bank, Federal 

branch, or Federal agency was found guilty. 

(D) The extent to which the national bank, Federal 

branch, or Federal agency has implemented additional internal controls (since the commission of the offense of 

which the bank, Federal branch, or Federal agency was 

found guilty) to prevent the occurrence of any other money 

laundering offense. 

(E) The extent to which the interest of the local community in having adequate deposit and credit services 

available would be threatened by the forfeiture of the franchise. 

(3) SUCCESSOR LIABILITY.—This subsection shall not apply 

to a successor to the interests of, or a person who acquires, a 

bank, a Federal branch, or a Federal agency that violated a 

provision of law described in paragraph (1), if the successor 

succeeds to the interests of the violator, or the acquisition is 

made, in good faith and not for purposes of evading this subsection or regulations prescribed under this subsection. 

(4) DEFINITION.—The term "senior executive officer'' has 

the same meaning as in regulations prescribed under section 

32(f) of the Federal Deposit Insurance Act. 

(d)1 AUTHORITY.—The Comptroller of the Currency may act in 

the Comptroller's own name and through the Comptroller's own 

attorneys in enforcing any provision of this title, regulations thereunder, or any other law or regulation, or in any action, suit, or proceeding to which the Comptroller of the Currency is a party. 

SEC. 5239A. [12 U.S.C. 93a] Except to the extent that authority to issue such rules and regulations has been expressly and 

exclusively granted to another regulatory agency, the Comptroller 

of the Currency is authorized to prescribe rules and regulations to 

carry out the responsibilities of the office, except that the authority 

1

 So in original. Subsection (d), as added by section 331(b)(3) of P.L. 103-325 (108 Stat. 2232), 

probably should be redesignated as subsection (e). 
1321 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

conferred by this section does not apply to section 5155 of the Revised Statutes or to securities activities of National Banks under 

the Act commonly known as the ''Glass-Steagall Act.'' 

SEC. 5240. The Comptroller of the Currency, with the approval 

of the Secretary of the Treasury, shall appoint examiners who shall 

examine every national bank as often as the Comptroller of the 

Currency shall deem necessary. The examiner making the examination of any national bank shall have power to make a thorough 

examination of all the affairs of the bank and in doing so he shall 

have power to administer oaths and to examine any of the officers 

and agents thereof under oath and shall make a full and detailed 

report of the condition of said bank to the Comptroller of the Currency: Provided, That in making the examination of any national 

bank the examiners shall include such an examination of the affairs of all its affiliates other than member banks as shall be necessary to disclose fully the relations between such bank and such 

affiliates and the effect of such relations upon the affairs of such 

bank; and in the event of the refusal to give any information required in the course of the examination of any such affiliate, or in 

the event of the refusal to permit such examination, all the rights, 

privileges, and franchises of the bank shall be subject to forfeiture 

in accordance with section 2 of the Federal Reserve Act, as 

amended (U.S.C., title 12, secs. 141, 222-225, 281-286, and 502). 

The Comptroller of the Currency shall have power, and he is 

hereby authorized, to publish the report of his examination of any 

national banking association or affiliate which shall not within one 

hundred and twenty days after notification of the recommendations 

or suggestions of the Comptroller, based on said examination, have 

complied with the same to his satisfaction. Ninety days' notice 

prior to such publicity shall be given to the bank or affiliate. [12 

U.S.C. 481] 

The examiner making the examination of any affiliate of a national bank shall have power to make a thorough examination of 

all the affairs of the affiliate, and in doing so he shall have power 

to administer oaths and to examine any of the officers, directors, 

employees, and agents thereof under oath and to make a report of 

his findings to the Comptroller of the Currency. if any affiliate of 

a national bank refuses to pay any assessments, fees, or other 

charges imposed by the Comptroller of the Currency pursuant to 

this section or fails to make such payment not later than 60 days 

after the date on which they are imposed, the Comptroller of the 

Currency may impose such assessments, fees, or charges against 

the affiliated national bank, and such assessments, fees, or charges 

shall be paid by such national bank. if the affiliation is with 2 or 

more national banks, such assessments, fees, or charges may be 

imposed on, and collected from, any or all of such national banks 

in such proportions as the Comptroller of the Currency may prescribe. The examiners and assistant examiners making the examinations of national banking associations and affiliates thereof 

herein provided for and the chief examiners, reviewing examiners 

and other persons whose services may be required in connection 

with such examinations or the reports thereof, shall be employed 

by the Comptroller of the Currency with the approval of the Secretary of the Treasury; the employment and compensation of exam-
1322 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

iners, chief examiners, reviewing examiners, assistant examiners, 

and of the other employees of the office of the Comptroller of the 

Currency whose compensation is and shall be paid from assessments on banks or affiliates thereof or from other fees or charges 

imposed pursuant to this section shall be without regard to the provisions of other laws applicable to officers or employees of the 

United States. The funds derived from such assessments, fees, or 

charges may be deposited by the Comptroller of the Currency in 

accordance with the provisions of section 5234 of the Revised Statutes (U.S.C., title 12, sec. 192) and shall not be construed to be 

Government funds or appropriated monies; and the Comptroller of 

the Currency is authorized and empowered to prescribe regulations 

governing the computation and assessment of the expenses of 

examinations herein provided for and the collection of such assessments from the banks and/or affiliates examined or of other fees or 

charges imposed pursuant to this section. Such funds shall not be 

subject to apportionment for the purpose of chapter 15 of title 31, 

United States Code, or under any other authority. If any affiliate 

of a national bank shall refuse to permit an examiner to make an 

examination of the affiliate or shall refuse to give any information 

required in the course of any such examination, the national bank 

with which it is affiliated shall be subject to a penalty of not more 

than $5,000 for each day that any such refusal shall continue. Such 

penalty may be assessed by the Comptroller of the Currency and 

collected in the same manner as expenses of examinations. [12 

U.S.C. 481] 

Notwithstanding any of the preceding provisions of this section 

or section 301(f)(1) of title 31, United States Code, to the contrary, 

the Comptroller of the Currency shall fix the compensation and 

number of, and appoint and direct, all employees of the office of 

the Comptroller of the Currency. Rates of basic pay for all employees of the office may be set and adjusted by the Comptroller without regard to the provisions of chapter 51 or subchapter III of chapter 53 of title 5, United States Code. The Comptroller may provide 

additional compensation and benefits to employees of the office if 

the same type of compensation or benefits are then being provided 

by any other Federal bank regulatory agency or, if not then being 

provided, could be provided by such an agency under applicable 

provisions of law, rule, or regulations. in setting and adjusting the 

total amount of compensation and benefits for employees of the office, the Comptroller shall consult with, and seek to maintain comparability with, other Federal banking agencies. [12 U.S.C. 482] 

The Comptroller of the Currency may impose and collect 

assessments, fees, or other charges as necessary or appropriate to 

carry out the responsibilities of the office of the Comptroller. Such 

assessments, fees, and other charges shall be set to meet the 

Comptroller's expenses in carrying out authorized activities. [12 

U.S.C. 482] 

in addition to the examinations made and conducted by the 

Comptroller of the Currency, every Federal reserve bank may, with 

the approval of the Federal reserve agent or the Board of Governors of the Federal Reserve System, provide for special examination of member banks within its district. The expense of such 

examinations may, in the discretion of the Board of Governors of 
1323 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

the Federal Reserve System, be assessed against the banks examined, and, when so assessed, shall be paid by the banks examined. 

Such examinations shall be so conducted as to inform the Federal 

reserve bank of the condition of its member banks and of the lines 

of credit which are being extended by them. Every Federal reserve 

bank shall at all times furnish to the Board of Governors of the 

Federal Reserve System such information as may be demanded 

concerning the condition of any member bank within the distict of 

the said Federal reserve bank. [12 U.S.C. 483] 

(A) No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts 

of justice or such as shall be, or have been exercised or directed 

by Congress or by either House thereof or by any committee 

of Congress or of either House duly authorized. [12 U.S.C. 

484] 

(B) Notwithstanding subparagraph (A), lawfully authorized 

State auditors and examiners may, at reasonable times and 

upon reasonable notice to a bank, review its records solely to 

ensure compliance with applicable State unclaimed property or 

escheat laws upon reasonable cause to believe that the bank 

has failed to comply with such laws. [12 U.S.C. 484] 

The Board of Governors of the Federal Reserve System shall, 

at least once each year, order an examination of each Federal reserve bank, and upon joint application of ten member banks the 

Board of Governors of the Federal Reserve System shall order a 

special examination and report of the condition of any Federal reserve bank. The Comptroller of the Currency, upon the request of 

the Board of Governors of the Federal Reserve System, is authorized to assign examiners appointed under this section to examine 

foreign operations of State banks which are members of the Federal Reserve System. [12 U.S.C. 485, 481]

 1 

SEC. 5241. [Omitted from Code] No association shall be subject to any visitorial powers other than such as are authorized by 

this Title, or are vested in the courts of justice. 

SEC. 5242. [12 U.S.C. 91] All transfers of the notes, bonds, 

bills of exchange, or other evidences of debt owing to any national 

banking association, or of deposits to its credit; all assignments of 

mortgages, sureties on real estate, or of judgments or decrees in its 

favor; all deposits of money, bullion, or other valuable thing for its 

use, or for the use of any of its shareholders or creditors; and all 

payments of money to either, made after the commission of an act 

of insolvency, or in contemplation thereof, made with a view to prevent the application of its assets in the manner prescribed by this 

chapter, or with a view of the preference of one creditor to another, 

except in payment of its circulating notes, shall be utterly null and 

void; and no attachment, injunction, or execution, shall be issued 

against such association or its property before final judgment in 

any suit, action, or proceeding, in any State, county, or municipal 

court. 

*The 1st sentence of this paragraph is codified as section 485 of title 12, United States Code. 

The 2d sentence is codified as the last sentence of section 481 of such title 12. 
1324 

REVISED STATUTES OF THE UNITED STATES 

Sec. 5136A 

[Section 5243 of the Revised Statutes was repealed.1] 

SEC. 5244. [12 U.S.C. 43] INTERPRETATION S CONCERNIN G PREEMP -

TIO N O F CERTAI N STATE LAWS. 

( a ) NOTIC E AN D OPPORTUNITY FOR COMMEN T REQUIRED.—Be -

fore issuing any opinion letter or interpretive rule, in response to 

a request or upon the agency's own motion, that concludes that 

Federal law preempts the application to a national bank of any 

State law regarding community reinvestment, consumer protection, 

fair lending, or the establishment of intrastate branches, or before 

making a determination under section 5155(f)(1)(A)(ii) of the Revised Statutes, the appropriate Federal banking agency (as defined 

in section 3 of the Federal Deposit insurance Act) shall— 

(1) publish in the Federal Register notice of the preemption or discrimination issue that the agency is considering (including a description of each State law at issue); 

(2) give interested parties not less than 30 days in which 

to submit written comments; and 

(3) in developing the final opinion letter or interpretive 

rule issued by the agency, or making any determination under 

section 5155(f)(1)(A)(ii) of the Revised Statutes, consider any 

comments received. 

(b) PUBLICATIO N REQUIRED.—Th e appropriate Federal banking 

agency shall publish in the Federal Register— 

(1) any final opinion letter or interpretive rule concluding 

that Federal law preempts the application of any State law regarding community reinvestment, consumer protection, fair 

lending, or establishment of intrastate branches to a national 

bank; and 

(2) any determination under section 5155(f)(1)(A)(ii) of the 

Revised Statutes. 

(c) EXCEPTIONS. — 

(1) N o NE W ISSUE OR SIGNIFICANT BASIS.—Thi s section 

shall not apply with respect to any opinion letter or interpretive rule that— 

(A) raises issues of Federal preemption of State law 

that are essentially identical to those previously resolved 

by the courts or on which the agency has previously issued 

an opinion letter or interpretive rule; or 

(B) responds to a request that contains no significant 

legal basis on which to make a preemption determination. 

( 2 ) JUDICIAL , LEGISLATIVE, OR INTRAGOVERNMENTA L MATERIALS.—This section shall not apply with respect to materials 

prepared for use in judicial proceedings or submission to Congress or a Member of Congress, or for intragovernmental use. 

(3) EMERGENCY.—Th e appropriate Federal banking agency 

may make exceptions to subsection (a) if— 

(A) the agency determines in writing that the exception is necessary to avoid a serious and imminent threat 

to the safety and soundness of any national bank; or 

(B) the opinion letter or interpretive rule is issued in 

connection with— 

1

 Section 5243 was repealed by the Act of June 25, 1948 (Chap. 645, 62 Stat. 862) but the 

substance was incorporated in section 709 of title 18, United States Code. 
1325 REVISED STATUTES OF THE UNITED STATES Sec. 5136A 

(i) an acquisition of 1 or more banks in default or 

in danger of default (as such terms are defined in section 3 of the Federal Deposit Insurance Act); or 

(ii) an acquisition with respect to which the 

Federal Deposit Insurance Corporation provides 

assistance under section 13(c) of the Federal Deposit 

Insurance Act. 

RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY 

IMPROVEMENT ACT OF 1994 

1327 

RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY 

IMPROVEMENT ACT OF 19941 

A N ACT To reduce administrative requirements for insured depository institutions 

to the extent consistent with safe and sound banking practices, to facilitate the 

establishment of community development financial institutions, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTIO N 1. SHOR T TITLE ; TABLE OF CONTENTS 

(a) SHORT TITLE.—This Act may be cited as the ''Riegle Community Development and Regulatory Improvement Act of 1994''. 

(b) TABLE OF CONTENTS.—Th e table of contents for this Act is 

as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—COMMUNITY DEVELOPMENT AND CONSUMER PROTECTION 

Subtitle A—Community Development Banking and Financial Institutions Act 

Sec. 101. Short title. 

Sec. 102. Findings and purposes. 

Sec. 103. Definitions. 

Sec. 104. Establishment of National Fund for Community Development Banking. 

Sec. 105. Applications for assistance. 

Sec. 106. Community partnerships. 

Sec. 107. Selection of institutions. 

Sec. 108. Assistance provided by the Fund. 

Sec. 109. Training. 

Sec. 110. Encouragement of private entities. 

Sec. 111. Collection and compilation of information. 

Sec. 112. Investment of receipts and proceeds. 

Sec. 113. Capitalization assistance to enhance liquidity. 

Sec. 114. Incentives for depository institution participation. 

Sec. 115. Recordkeeping. 

Sec. 116. Special provisions with respect to institutions that are supervised by Federal banking agencies. 

Sec. 117. Studies and reports; examination and audit. 

Sec. 118. Inspector General. 

Sec. 119. Enforcement. 

Sec. 120. Community Development Revolving Loan Fund for credit unions. 

Sec. 121. Authorization of appropriations. 

Subtitle B—Home Ownership and Equity Protection 

Sec. 151. Short title. 

Sec. 152. Consumer protections for certain mortgages. 

Sec. 153. Civil liability. 

Sec. 154. Reverse mortgage disclosure. 

Sec. 155. Regulations. 

Sec. 156. Applicability. 

Sec. 157. Federal Reserve study. 

1

 Note: The Riegle Community Development and Regulatory Improvement Act of 1994 (Public 

Law 103-325; 108 Stat. 2160) largely amended other Acts. 

1329 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1330 

Sec. 158. Hearings on home equity lending.

 1 

Sec. 201. 

Sec. 202. 

Sec. 203. 

Sec. 204. 

Sec. 205. 

Sec. 206. 

Sec. 207. 

Sec. 208. 

Sec. 209. 

Sec. 210. 

TITLE II—SMALL BUSINESS CAPITAL FORMATION 

Subtitle A—Small Business Loan Securitization 

Short title. 

Small business related security. 

Applicability of margin requirements. 

Borrowing in the course of business. 

Small business related securities as collateral. 

investment by depository institutions. 

Preemption of State law. 

insured depository institution capital requirements for transfers of small 

business obligations. 

Joint study on the impact of additional securities based on pooled obligations. 

Consistent use of financial terminology. 

Subtitle B—Small Business Capital Enhancement 

Findings and purposes. 

Definitions. 

Approving States for participation. 

Participation agreements. 

Terms of participation agreements. 

Reports. 

Reimbursement by the Fund. 

Reimbursement to the Fund. 

Regulations. 

Authorization of appropriations. 

Effective date. 

Sec. 251. 

Sec. 252. 

Sec. 253. 

Sec. 254. 

Sec. 255. 

Sec. 256. 

Sec. 257. 

Sec. 258. 

Sec. 259. 

Sec. 260. 

Sec. 261. 

TITLE III—PAPERWORK REDUCTION AND REGULATORY IMPROVEMENT 

incorporated definitions. 

Administrative consideration of burden with new regulations. 

Streamlining of regulatory requirements. 

Elimination of duplicative filings. 

Coordinated and unified examinations. 

Eighteen-month examination rule for certain small institutions. 

Call report simplification. 

Repeal of publication requirements. 

Regulatory appeals process, ombudsman, and alternative dispute resolution. 

Electronic filing of currency transaction reports. 

Bank Secrecy Act publication requirements. 

Exemption of business loans from Real Estate Settlement Procedures Act 

requirements. 

Flexibility in choosing boards of directors. 

Holding company audit requirements. 

State regulation of real estate appraisals. 

Acceleration of effective date for interaffiliate transactions. 

Collateralization of public deposits. 

Modification of regulatory provisions. 

Expedited procedures. 

Exemption of certain holding company formations from registration under 

the Securities Act of 1933. 

Reduction of post-approval waiting periods for certain acquisitions and 

mergers. 

Bankers' banks. 

Bank Service Corporation Act amendment. 

Merger transaction reports. 

Credit card accounts receivable sales. 

Sec. 301. 

Sec. 302. 

Sec. 303. 

Sec. 304. 

Sec. 305. 

Sec. 306. 

Sec. 307. 

Sec. 308. 

Sec. 309. 

Sec. 310. 

Sec. 311. 

Sec. 312. 

Sec. 313. 

Sec. 314. 

Sec. 315. 

Sec. 316. 

Sec. 317. 

Sec. 318. 

Sec. 319. 

Sec. 320. 

Sec. 321. 

Sec. 322. 

Sec. 323. 

Sec. 324. 

Sec. 325. 

1

 Section 725 of Public Law 106-102 (113 Stat. 1471) added a new subtitle C at the end of 

title i establishing the microenterprise technical assistance and capacity building program. Such 

subtitle consists of sections 171 through 181. The amendment did not make a conforming 

amendment to the table of sections. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1331 

Sec. 326. Limiting potential liability on foreign accounts. 

Sec. 327. GAO reports. 

Sec. 328. Study and report on capital standards and their impact on the economy. 

Sec. 329. Study on the impact of the payment of interest on reserves. 

Sec. 330. Study and report on the consumer credit system. 

Sec. 331. Clarification of provisions relating to administrative autonomy. 

Sec. 332. Exemption for business accounts. 

Sec. 333. Study on check-related fraud. 

Sec. 334. Insider lending. 

Sec. 335. Revisions of standards. 

Sec. 336. Alternative rules for radio advertising. 

Sec. 337. Deposit broker registration. 

Sec. 338. Amendments to the Depository Institution Management Interlocks Act. 

Sec. 339. Adverse information about consumers. 

Sec. 340. Simplified disclosure for existing depositors. 

Sec. 341. Feasibility study of data bank. 

Sec. 342. Timely completion of CRA review. 

Sec. 343. Time limit on agency consideration of completed applications. 

Sec. 344. Waiver of right of rescission for certain refinancing transactions. 

Sec. 345. Clarification of RESpA disclosure requirements. 

Sec. 346. Notice procedures for bank holding companies to seek approval to engage 

in certain activities. 

Sec. 347. Commercial mortgage related securities. 

Sec. 348. Clarifying amendment relating to data collection. 

Sec. 349. Guidelines for examinations. 

Sec. 350. Revising regulatory requirements for transfers of all types of assets with 

TITLE IV—MONEY LAUNDERING 

Sec. 401. Short title. 

Sec. 402. Reform of CTR exemption requirements to reduce number and size of reports consistent with effective law enforcement. 

Sec. 403. Single designee for reporting of suspicious transactions. 

Sec. 404. Improvement of identification of money laundering schemes. 

Sec. 405. Negotiable instruments drawn on foreign banks subject to recordkeeping 

and reporting requirements. 

Sec. 406. Imposition of civil money penalties by appropriate Federal banking agencies. 

Sec. 407. Uniform State licensing and regulation of check cashing, currency exchange, and money transmitting businesses. 

Sec. 408. Registration of money transmitting businesses to promote effective law 

enforcement. 

Sec. 409. Uniform Federal regulation of casinos. 

Sec. 410. Authority to grant exemptions to States with effective regulation and enforcement. 

Sec. 411. Criminal and civil penalties for structuring domestic and international 

transactions. 

Sec. 412. GAO study of cashiers' checks. 

Sec. 413. Technical amendments and corrections. 

TITLE V—NATIONAL FLOOD INSURANCE REFORM 

Sec. 501. Short title. 

Subtitle A—Definitions 

Sec. 511. Flood Disaster Protection Act of 1973. 

Sec. 512. National Flood Insurance Act of 1968. 

Subtitle B—Compliance and Increased Participation 

Sec. 521. Nonwaiver of flood purchase requirement for recipients of Federal disaster assistance. 

Sec. 522. Expanded flood insurance purchase requirements. 

Sec. 523. Escrow of flood insurance payments. 

Sec. 524. Placement of flood insurance by lenders. 

Sec. 525. Penalties for failure to require flood insurance or notify. 

Sec. 526. Fees for determining applicability of flood insurance purchase requirements. 

Sec. 527. Notice requirements. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1332 

Sec. 528. Standard hazard determination forms. 

Sec. 529. Examinations regarding compliance. 

Sec. 530. Financial institutions Examination Council. 

Sec. 531. Clerical amendment. 

Subtitle C—Ratings and Incentives for Community Floodplain Management 

Programs 

Sec. 541. Community rating system and incentives for community floodplain management. 

Sec. 542. Funding. 

Subtitle D—Mitigation of Flood Risks 

Sec. 551. Repeal of flooded property purchase and loan program. 

Sec. 552. Termination of erosion-threatened structures program. 

Sec. 553. Mitigation assistance program. 

Sec. 554. Establishment of National Flood Mitigation Fund. 

Sec. 555. Additional coverage for compliance with land use and control measures. 

Subtitle E—Task Forces 

Sec. 561. Flood Insurance Interagency Task Force. 

Sec. 562. Task Force on Natural and Beneficial Functions of the Floodplain. 

Subtitle F—Miscellaneous Provisions 

Sec. 571. Extension of flood insurance program. 

Sec. 572. Limitation on premium increases. 

Sec. 573. Maximum flood insurance coverage amounts. 

Sec. 574. Flood insurance program arrangements with private insurance entities. 

Sec. 575. Updating of flood maps. 

Sec. 576. Technical Mapping Advisory Council. 

Sec. 577. Evaluation of erosion hazards. 

Sec. 578. Study of economic effects of charging actuarially based premium rates for 

pre-FIRM structures. 

Sec. 579. Effective dates of policies. 

Sec. 580. Agricultural structures. 

Sec. 581. Implementation review by Director. 

Sec. 582. Prohibited flood disaster assistance. 

Sec. 583. Regulations. 

Sec. 584. Relation to State and local laws. 

TITLE VI—MISCELLANEOUS PROVISIONS 

Sec. 601. Oversight hearings. 

Sec. 602. Technical amendments to the Federal banking laws. 

TITL E I—COMMUNITY DEVELOPMEN T 

A N D CONSUMER PROTECTION 

Subtitle A—Community Development 

Banking and Financial Institutions Act 

SEC. 101. [12 U.S.C. 4701 nt] SHORT TITLE. 

This subtitle may be cited as the ''Community Development 

Banking and Financial Institutions Act of 1994''. 

SEC. 102. [12 U.S.C. 4701] FINDINGS AN D PURPOSES. 

(a) FINDINGS.—The Congress finds that— 

(1) many of the Nation's urban, rural, and Native American communities face critical social and economic problems 

arising in part from the lack of economic growth, people living 

in poverty, and the lack of employment and other opportunities; 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1333 

(2) the restoration and maintenance of the economies of 

these communities will require coordinated development strategies, intensive supportive services, and increased access to equity investments and loans for development activities, including investment in businesses, housing, commercial real estate, 

human development, and other activities that promote the 

long-term economic and social viability of the community; and 

(3) community development financial institutions have 

proven their ability to identify and respond to community 

needs for equity investments, loans, and development services. 

(b) PURPOSE.—The purpose of this subtitle is to create a Community Development Financial Institutions Fund to promote economic revitalization and community development through investment in and assistance to community development financial institutions, including enhancing the liquidity of community development financial institutions. 

SEC. 103. [12 U.S.C. 4702] DEFINITIONS. 

For purposes of this subtitle, the following definitions shall 

apply: 

(1) ADMINISTRATOR.—The term ''Administrator'' means the 

Administrator of the Fund appointed under section 104(b). 

(2) APPROPRIATE FEDERAL BANKING AGENCY.—The term 

''appropriate Federal banking agency'' has the same meaning 

as in section 3 of the Federal Deposit Insurance Act, and also 

includes the National Credit Union Administration Board with 

respect to insured credit unions. 

(3) AFFILIATE.—Th e term ''affiliate'' has the same meaning 

as in section 2(k) of the Bank Holding Company Act of 1956. 

(4) BOARD.—The term ''Board'' means the Community 

Development Advisory Board established under section 104(d). 

(5) COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION.— 

(A) IN GENERAL.—The term ''community development 

financial institution'' means a person (other than an individual) that— 

(i) has a primary mission of promoting community 

development; 

(ii) serves an investment area or targeted 

population; 

(iii) provides development services in conjunction 

with equity investments or loans, directly or through 

a subsidiary or affiliate; 

(iv) maintains, through representation on its governing board or otherwise, accountability to residents 

of its investment area or targeted population; and 

(v) is not an agency or instrumentality of the 

United States, or of any State or political subdivision 

of a State. 

( B) CONDITIONS FOR QUALIFICATION OF HOLDING COMPANIES.— 

(i) CONSOLIDATED TREATMENT.—A depository institution holding company may qualify as a community 

development financial institution only if the holding 

company and the subsidiaries and affiliates of the 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1334 

holding company collectively satisfy the requirements 

of subparagraph (A). 

(ii) EXCLUSION OF SUBSIDIARY OR AFFILIATE FOR 

FAILURE TO MEET CONSOLIDATED TREATMENT RULE.— 

No subsidiary or affiliate of a depository institution 

holding company may qualify as a community development financial institution if the holding company and 

the subsidiaries and affiliates of the holding company 

do not collectively meet the requirements of subparagraph (A). 

(C) CONDITIONS FOR SUBSIDIARIES.—No subsidiary of 

an insured depository institution may qualify as a community development financial institution if the insured 

depository institution and its subsidiaries do not collectively meet the requirements of subparagraph (A). 

(6) COMMUNITY PARTNER.—The term "community partner'' 

means a person (other than an individual) that provides loans, 

equity investments, or development services, including a 

depository institution holding company, an insured depository 

institution, an insured credit union, a nonprofit organization, 

a State or local government agency, a quasi-governmental 

entity, and an investment company authorized to operate pursuant to the Small Business Investment Act of 1958. 

(7) COMMUNITY PARTNERSHIP.—The term ''community partnership'' means an agreement between a community development financial institution and a community partner to provide 

development services, loans, or equity investments, to an 

investment area or targeted population. 

(8) DEPOSITORY INSTITUTION HOLDING COMPANY.—The term 

''depository institution holding company'' has the same meaning as in section 3 of the Federal Deposit Insurance Act. 

(9) DEVELOPMENT SERVICES.—The term ''development services'' means activities that promote community development 

and are integral to lending or investment activities, 

including— 

(A) business planning; 

(B) financial and credit counseling; and 

(C) marketing and management assistance. 

(10) FUND.—The term ''Fund'' means the Community 

Development Financial institutions Fund established under 

section 104(a). 

(11) INDIA N RESERVATION.—The term ''Indian reservation'' 

has the same meaning as in section 4(10) of the Indian Child 

Welfare Act of 1978, and shall include land held by incorporated Native groups, regional corporations, and village corporations, as defined in or established pursuant to the Alaska 

Native Claims Settlement Act, public domain indian allotments, and former indian reservations in the State of oklahoma. 

(12) INDIA N TRIBE.—Th e term ''Indian tribe'' means any Indian tribe, band, pueblo, nation, or other organized group or 

community, including any Alaska Native village or regional or 

village corporation, as defined in or established pursuant to the 

Alaska Native Claims Settlement Act, which is recognized as 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1335 

eligible for the special programs and services provided by the 

United States to Indians because of their status as Indians. 

(13) INSURED COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION.—The term ''insured community development financial 

institution'' means any community development financial institution that is an insured depository institution or an insured 

credit union. 

(14) INSURED CREDIT UNION.—The term ''insured credit 

union'' has the same meaning as in section 101(7) of the Federal Credit Union Act. 

(15) INSURED DEPOSITORY INSTITUTION.—The term ''insured 

depository institution'' has the same meaning as in section 3 

of the Federal Deposit insurance Act. 

(16) INVESTMENT AREA.—The term ''investment area'' 

means a geographic area (or areas) including an indian reservation that— 

(A)(i) meets objective criteria of economic distress 

developed by the Fund, which may include the percentage 

of low-income families or the extent of poverty, the rate of 

unemployment or underemployment, rural population outmigration, lag in population growth, and extent of blight 

and disinvestment; and 

(ii) has significant unmet needs for loans or equity 

investments; or 

(B) encompasses or is located in an empowerment zone 

or enterprise community designated under section 1391 of 

the Internal Revenue Code of 1986. 

(17) LOW-INCOME.—The term ''low-income'' means having 

an income, adjusted for family size, of not more than— 

(A) for metropolitan areas, 80 percent of the area median income; and 

(B) for nonmetropolitan areas, the greater of— 

(i) 80 percent of the area median income; or 

(ii) 80 percent of the statewide nonmetropolitan 

area median income. 

(18) STATE.—The term ''State'' has the same meaning as in 

section 3 of the Federal Deposit insurance Act. 

(19) SUBSIDIARY.—The term ''subsidiary'' has the same 

meaning as in section 3 of the Federal Deposit insurance Act, 

except that a community development financial institution that 

is a corporation shall not be considered to be a subsidiary of 

any insured depository institution or depository institution 

holding company that controls less than 25 percent of any class 

of the voting shares of such corporation, and does not otherwise control in any manner the election of a majority of the 

directors of the corporation. 

(20) TARGETED POPULATION.—The term ''targeted population'' means individuals, or an identifiable group of individuals, including an Indian tribe, who— 

(A) are low-income persons; or 

(B) otherwise lack adequate access to loans or equity 

investments. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1336 

(21) TRAINING PROGRAM.—The term ''training program'' 

means the training program operated by the Fund under section 109. 

SEC. 104. [12 U.S.C. 4703] ESTABLISHMEN T OF NATIONA L FUN D FOR 

COMMUNITY DEVELOPMEN T BANKING. 

(a) ESTABLISHMENT.— 

(1) IN GENERAL.—There is established a corporation to be 

known as the Community Development Financial Institutions 

Fund that shall have the duties and responsibilities specified 

by this subtitle and subtitle B of title II. The Fund shall have 

succession until dissolved. The offices of the Fund shall be in 

Washington, D.C. The Fund shall not be affiliated with or be 

within any other agency or department of the Federal Government. 

(2) WHOLLY OWNED GOVERNMENT CORPORATION.—The 

Fund shall be a wholly owned Government corporation in the 

executive branch and shall be treated in all respects as an 

agency of the United States, except as otherwise provided in 

this subtitle. 

(b) MANAGEMEN T OF FUND. — 

(1) APPOINTMENT OF ADMINISTRATOR.—The management of 

the Fund shall be vested in an Administrator, who shall be appointed by the President, by and with the advice and consent 

of the Senate. The Administrator shall not engage in any other 

business or employment during service as the Administrator. 

(2) CHIEF FINANCIAL OFFICER.—The Administrator shall 

appoint a chief financial officer, who shall have the authority 

and functions of an agency Chief Financial Officer under section 902 of title 31, United States Code. In the event of a vacancy in the position of the Administrator or during the absence or disability of the Administrator, the chief financial officer shall perform the duties of the position of Administrator. 

(3) OTHER OFFICERS AND EMPLOYEES.—The Administrator 

may appoint such other officers and employees of the Fund as 

the Administrator determines to be necessary or appropriate. 

(4) EXPEDITED HIRING.—Durin g the 2-year period beginning on the date of enactment of this Act, the Administrator 

may— 

(A) appoint and terminate the individuals referred to 

in paragraphs (2) and (3) without regard to the civil service laws and regulations; and 

(B) fix the compensation of the individuals referred to 

in paragraph (3) without regard to the provisions of chapter 51 and subchapter III of chapter 53 of title 5, United 

States Code, relating to classification of positions and General Schedule pay rates, except that the rate of pay for 

such individuals may not exceed the rate payable for level 

V of the Executive Schedule under section 5316 of such 

title. 

(c) GENERAL POWERS.—In carrying out the functions of the 

Fund, the Administrator— 

(1) shall have all necessary and proper authority to carry 

out this subtitle and subtitle B of title II; 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1337 

(2) shall have the power to adopt, alter, and use a corporate seal for the Fund, which shall be judicially noticed; 

(3) may adopt, amend, and repeal bylaws, rules, and regulations governing the manner in which business of the Fund 

may be conducted and such rules and regulations as may be 

necessary or appropriate to implement this subtitle and subtitle B of title II; 

(4) may enter into, perform, and enforce such agreements, 

contracts, and transactions as may be deemed necessary or 

appropriate to the conduct of activities authorized under this 

subtitle and subtitle B of title ii; 

(5) may determine the character of and necessity for 

expenditures of the Fund and the manner in which they shall 

be incurred, allowed, and paid; 

(6) may utilize or employ the services of personnel of any 

agency or instrumentality of the United States with the consent of the agency or instrumentality concerned on a reimbursable or nonreimbursable basis; and 

(7) may execute all instruments necessary or appropriate 

in the exercise of any of the functions of the Fund under this 

subtitle and subtitle B of title II and may delegate to the officers of the Fund such of the powers and responsibilities of the 

Administrator as the Administrator deems necessary or appropriate for the administration of the Fund. 

(d) ADVISORY BOARD.— 

(1) ESTABLISHMENT.—There is established an advisory 

board to the Fund to be known as the Community Development Advisory Board, which shall be operated in accordance 

with the provisions of the Federal Advisory Committee Act, except that section 14 of that Act does not apply to the Board. 

(2) MEMBERSHIP.—The Board shall consist of 15 members, 

including— 

(A) the Secretary of Agriculture or his or her designee; 

(B) the Secretary of Commerce or his or her designee; 

(C) the Secretary of Housing and Urban Development 

or his or her designee; 

(D) the Secretary of the interior or his or her designee; 

(E) the Secretary of the Treasury or his or her designee; 

(F) the Administrator of the Small Business Administration or his or her designee; and 

(G) 9 private citizens, appointed by the president, who 

shall be selected, to the maximum extent practicable, to 

provide for national geographic representation and racial, 

ethnic, and gender diversity, including— 

(i) 2 individuals who are officers of existing community development financial institutions; 

(ii) 2 individuals who are officers of insured 

depository institutions; 

(iii) 2 individuals who are officers of national consumer or public interest organizations; 

(iv) 2 individuals who have expertise in community development; and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1338 

(v) 1 individual who has personal experience and 

specialized expertise in the unique lending and community development issues confronted by indian tribes 

on Indian reservations. 

(3) CHAIRPERSON.—The members of the Board specified in 

paragraph (2)(G) shall select, by majority vote, a chairperson 

of the Board, who shall serve for a term of 2 years. 

(4) BOARD FUNCTION.—It shall be the function of the Board 

to advise the Administrator on the policies of the Fund regarding activities under this subtitle. The Board shall not advise 

the Administrator on the granting or denial of any particular 

application. 

(5) TERMS OF PRIVATE MEMBERS.— 

(A) IN GENERAL.—Each member of the Board appointed under paragraph (2)(G) shall serve for a term of 4 

years. 

(B) VACANCIES.—Any member appointed to fill a vacancy occurring prior to the expiration of the term for 

which the previous member was appointed shall be appointed for the remainder of such term. Members may continue to serve following the expiration of their terms until 

a successor is appointed. 

(6) MEETINGS.—The Board shall meet at least annually 

and at such other times as requested by the Administrator or 

the chairperson. A majority of the members of the Board shall 

constitute a quorum. 

(7) REIMBURSEMENT FOR EXPENSES.—The members of the 

Board may receive reimbursement for travel, per diem, and 

other necessary expenses incurred in the performance of their 

duties, in accordance with the Federal Advisory Committee 

Act. 

(8) COSTS AND EXPENSES.—The Fund shall provide to the 

Board all necessary staff and facilities. 

[Subsection (e) amended another law.] 

(f) GOVERNMENT CORPORATION CONTROL AC T EXEMPTION.— 

Section 9107(b) of title 31, United States Code, shall not apply to 

deposits of the Fund made pursuant to section 108. 

(g) LIMITATION OF FUN D AND FEDERAL LIABILITY.—Th e liability 

of the Fund and the United States Government arising out of any 

investment in a community development financial institution in 

accordance with this subtitle shall be limited to the amount of the 

investment. The Fund shall be exempt from any assessments and 

other liabilities that may be imposed on controlling or principal 

shareholders by any Federal law or the law of any State, Territory, 

or the District of Columbia. Nothing in this subsection shall affect 

the application of any Federal tax law. 

(h) PROHIBITION ON ISSUANCE OF SECURITIES.—The Fund may 

not issue stock, bonds, debentures, notes, or other securities. 

[Subsection (i) amended another law.] 

(j) ASSISTED INSTITUTIONS NO T UNITE D STATES INSTRUMENTALITIES.—A community development financial institution or other 

organization that receives assistance pursuant to this subtitle shall 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1339 

not be deemed to be an agency, department, or instrumentality of 

the United States. 

(k) TRANSITION PERIOD.— 

(1) IN GENERAL.—During the transition period, the Secretary of the Treasury may— 

(A) assist in the establishment of the administrative 

functions of the Fund listed in paragraph (2); and 

(B) hire not more than 6 individuals to serve as employees of the Fund during the transition period. 

(2) CONTINUED SERVICE.—Individuals hired in accordance 

with paragraph (1)(B) may continue to serve as employees of 

the Fund after the transition period. 

(3) ADMINISTRATIVE FUNCTIONS.—The administrative functions referred to in paragraph (1)(A) shall be limited to— 

(A) establishing accounting, information, and recordkeeping systems for the Fund; and 

(B) procuring office space, equipment, and supplies. 

(4) EXPEDITED HIRING.—Durin g the transition period, the 

Secretary of the Treasury may— 

(A) appoint and terminate the individuals referred to 

in paragraph (1)(B) without regard to the civil service laws 

and regulations; and 

(B) fix the compensation of the individuals referred to 

in paragraph (1)(B) without regard to the provisions of 

chapter 51 and subchapter III of chapter 53 of title 5, 

United States Code, relating to classification of positions 

and General Schedule pay rates, except that the rate of 

pay for such individuals may not exceed the rate payable 

for level V of the Executive Schedule under section 5316 

of such title. 

(5) CERTAIN EMPLOYEES.—Durin g the transition period, 

employees of the Department of the Treasury may only comprise less than one-half of the total number of individuals 

hired in accordance with paragraph (1)(B). 

(6) TRANSITION EXPENSES.—Amount s previously appropriated to the Department of the Treasury may be used to pay 

obligations and expenses of the Fund incurred under this section, and such amounts may be reimbursed by the Fund to the 

Department of the Treasury from amounts appropriated to the 

Fund for fiscal year 1995. 

(7) DEFINITION.—Fo r purposes of this subsection, the term 

''transition period'' means the period beginning on the date of 

enactment of this Act and ending on the date on which the 

Administrator is appointed. 

SEC. 105. [12 U.S.C. 4704] APPLICATION S FOR ASSISTANCE. 

(a) FOR M AND PROCEDURES.—An application for assistance 

under this subtitle shall be submitted in such form and in accordance with such procedures as the Fund shall establish. 

(b) MINIMU M REQUIREMENTS.—Except as provided in sections 

106 and 113, the Fund shall require an application— 

(1) to establish that the applicant is, or will be, a community development financial institution; 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1340 

(2) to include a comprehensive strategic plan for the organization that contains— 

(A) a business plan of not less than 5 years in duration that demonstrates that the applicant will be properly 

managed and will have the capacity to operate as a community development financial institution that will not be 

dependent upon assistance from the Fund for continued 

viability; 

(B) an analysis of the needs of the investment area or 

targeted population and a strategy for how the applicant 

will attempt to meet those needs; 

(C) a plan to coordinate use of assistance from the 

Fund with existing Federal, State, local, and tribal government assistance programs, and private sector financial 

services; 

(D) an explanation of how the proposed activities of 

the applicant are consistent with existing economic, community, and housing development plans adopted by or applicable to an investment area or targeted population; and 

(E) a description of how the applicant will coordinate 

with community organizations and financial institutions 

which will provide equity investments, loans, secondary 

markets, or other services to investment areas or targeted 

populations; 

(3) to include a detailed description of the applicant's plans 

and likely sources of funds to match the amount of assistance 

requested from the Fund; 

(4) in the case of an applicant that has previously received 

assistance under this subtitle, to demonstrate that the 

applicant— 

(A) has substantially met its performance goals and 

otherwise carried out its responsibilities under this subtitle and the assistance agreement; and 

(B) will expand its operations into a new investment 

area or serve a new targeted population, offer more products or services, or increase the volume of its business; 

(5) in the case of an applicant with a prior history of serving investment areas or targeted populations, to demonstrate 

that the applicant— 

(A) has a record of success in serving investment areas 

or targeted populations; and 

(B) will expand its operations into a new investment 

area or to serve a new targeted population, offer more 

products or services, or increase the volume of its current 

business; and 

(6) to include such other information as the Fund deems 

appropriate. 

(c) PREAPPLICATION OUTREAC H PROGRAM.—Th e Fund shall provide an outreach program to identify and provide information to 

potential applicants and may provide technical assistance to potential applicants, but shall not assist in the preparation of any 

application. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1341 

SEC. 106. [12 U.S.C. 4705] COMMUNITY PARTNERSHIPS. 

(a) APPLICATION.—An application for assistance may be filed 

jointly by a community development financial institution and a 

community partner to carry out a community partnership. 

(b) APPLICATION REQUIREMENTS.—The Fund shall require a 

community partnership application— 

(1) to meet the minimum requirements established for 

community development financial institutions under section 

105(b), except that the criteria specified in paragraphs (1) and 

(2)(A) of section 105(b) shall not apply to the community 

partner; 

(2) to describe how each coapplicant will participate in carrying out the community partnership and how the partnership 

will enhance activities serving the investment area or targeted 

population; and 

(3) to demonstrate that the community partnership activities are consistent with the strategic plan submitted by the 

community development financial institution coapplicant. 

(c) SELECTION CRITERIA.—The Fund shall consider a community partnership application based on— 

(1) the community development financial institution 

coapplicant— 

(A) meeting the minimum selection criteria described 

in section 105; and 

(B) satisfying the selection criteria of section 107; 

(2) the extent to which the community partner coapplicant 

will participate in carrying out the partnership; 

(3) the extent to which the community partnership will enhance the likelihood of success of the community development 

financial institution coapplicant's strategic plan; and 

(4) the extent to which service to the investment area or 

targeted population will be better performed by a partnership 

as opposed to the individual community development financial 

institution coapplicant. 

(d) LIMITATION ON DISTRIBUTION OF ASSISTANCE.—Assistance 

provided upon approval of an application under this section shall 

be distributed only to the community development financial institution coapplicant, and shall not be used to fund any activities carried out directly by the community partner or an affiliate or subsidiary thereof. 

(e) OTHER REQUIREMENTS AND LIMITATIONS.—All other 

requirements and limitations imposed by this subtitle on a community development financial institution assisted under this subtitle 

shall apply (in the manner that the Fund determines to be appropriate) to assistance provided to carry out community partnerships. 

The Fund may establish additional guidelines and restrictions on 

the use of Federal funds to carry out community partnerships. 

SEC. 107. [12 U.S.C. 4706] SELECTION OF INSTITUTIONS. 

(a) SELECTION CRITERIA.—Except as provided in section 113, 

the Fund shall, in its sole discretion, select community development financial institution applicants meeting the requirements of 

section 105 for assistance based on— 

(1) the likelihood of success of the applicant in meeting the 

goals of its comprehensive strategic plan; 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1342 

(2) the experience and background of the management 

team; 

(3) the extent of need for equity investments, loans, and 

development services within the investment areas or targeted 

populations; 

(4) the extent of economic distress within the investment 

areas or the extent of need within the targeted populations, as 

those factors are measured by objective criteria; 

(5) the extent to which the applicant will concentrate 

its activities on serving its investment areas or targeted 

populations; 

(6) the amount of firm commitments to meet or exceed the 

matching requirements and the likely success of the plan for 

raising the balance of the match; 

(7) the extent to which the matching funds are derived 

from private sources; 

(8) the extent to which the proposed activities will expand 

economic opportunities within the investment areas or the targeted populations; 

(9) whether the applicant is, or will become, an insured 

community development financial institution; 

(10) the extent of support from the investment areas or 

targeted populations; 

(11) the extent to which the applicant is, or will be, community-owned or community-governed; 

(12) the extent to which the applicant will increase its resources through coordination with other institutions or participation in a secondary market; 

(13) in the case of an applicant with a prior history of serving investment areas or targeted populations, the extent of success in serving them; and 

(14) other factors deemed to be appropriate by the Fund. 

(b) GEOGRAPHIC DIVERSITY.—I n selecting applicants for assistance, the Fund shall seek to fund a geographically diverse group 

of applicants, which shall include applicants from metropolitan, 

nonmetropolitan, and rural areas. 

SEC. 108. [12 U.S.C. 4707] ASSISTANCE PROVIDE D BY TH E FUND . 

(a) FORMS OF ASSISTANCE.— 

(1) IN GENERAL.—The Fund may provide— 

(A) financial assistance through equity investments, 

deposits, credit union shares, loans, and grants; and 

(B) technical assistance— 

(i) directly; 

(ii) through grants; or 

(iii) by contracting with organizations that possess 

expertise in community development finance, without 

regard to whether the organizations receive or are eligible to receive assistance under this subtitle. 

(2) EQUITY INVESTMENTS.— 

(A) LIMITATION ON EQUITY INVESTMENTS.—The Fund 

shall not own more than 50 percent of the equity of a community development financial institution and may not control the operations of such institution. The Fund may hold 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1343 

only transferable, nonvoting equity investments in the 

institution. Such equity investments may provide for convertibility to voting stock upon transfer by the Fund. 

(B) FUN D DEEMED NOT TO CONTROL.—Notwithstandin g 

any other provision of law, the Fund shall not be deemed 

to control a community development financial institution 

by reason of any assistance provided under this subtitle for 

the purpose of any other applicable law to the extent that 

the Fund complies with subparagraph (A). Nothing in this 

subparagraph shall affect the application of any Federal 

tax law. 

(3) DEPOSITS.—Deposits made pursuant to this section in 

an insured community development financial institution shall 

not be subject to any requirement for collateral or security. 

(4) LIMITATIONS ON OBLIGATIONS.—Direct loan obligations 

may be incurred by the Fund only to the extent that appropriations of budget authority to cover their cost, as defined in section 502(5) of the Congressional Budget Act of 1974, are made 

in advance. 

(b) USES OF FINANCIAL ASSISTANCE.— 

(1) IN GENERAL.—Financial assistance made available 

under this subtitle may be used by assisted community development financial institutions to serve investment areas or targeted populations by developing or supporting— 

(A) commercial facilities that promote revitalization, 

community stability, or job creation or retention; 

(B) businesses that— 

(i) provide jobs for low-income people or are owned 

by low-income people; or 

(ii) enhance the availability of products and services to low-income people; 

(C) community facilities; 

(D) the provision of basic financial services; 

(E) housing that is principally affordable to low-income people, except that assistance used to facilitate 

homeownership shall only be used for services and lending 

products— 

(i) that serve low-income people; and 

(ii) that— 

(i) are not provided by other lenders in the 

area; or 

(ii) complement the services and lending 

products provided by other lenders that serve the 

investment area or targeted population; and 

(F) other businesses and activities deemed appropriate 

by the Fund. 

(2) LIMITATIONS.—N o assistance made available under this 

subtitle may be expended by a community development financial institution (or an organization receiving assistance under 

section 113) to pay any person to influence or attempt to influence any agency, elected official, officer, or employee of a State 

or local government in connection with the making, award, 

extension, continuation, renewal, amendment, or modification 

of any State or local government contract, grant, loan, or coop-
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1344 

erative agreement (as such terms are defined in section 1352 

of title 31, United States Code). 

(c) USES OF TECHNICAL ASSISTANCE.— 

(1) TYPES OF ACTIVITIES.—Technical assistance may be 

used for activities that enhance the capacity of a community 

development financial institution, such as training of management and other personnel and development of programs and 

investment or loan products. 

(2) AVAILABILITY OF TECHNICAL ASSISTANCE.—The Fund 

may provide technical assistance, regardless of whether or not 

the recipient also receives financial assistance under this 

section. 

(d) AMOUN T OF ASSISTANCE.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the 

Fund may provide not more than $5,000,000 of assistance, in 

the aggregate, during any 3-year period to any 1 community 

development financial institution and its subsidiaries and 

affiliates. 

(2) EXCEPTION.—The Fund may provide not more than 

$3,750,000 of assistance in addition to the amount specified in 

paragraph (1) during the same 3-year period to an existing 

community development financial institution that proposes to 

establish a subsidiary or affiliate for the purpose of serving an 

investment area or targeted population outside of any State 

and outside of any metropolitan area presently served by the 

institution, if— 

(A) the subsidiary or affiliate— 

(i) would be a community development financial 

institution; and 

(ii) independently— 

(I) meets the selection criteria described in 

section 105; and 

(II) satisfies the selection criteria of section 

107; and 

(B) no other application for assistance to serve the 

investment area or targeted population has been submitted to the Administrator within a reasonable period of 

time preceding the date of receipt of the application at 

issue. 

(3) TIMIN G OF ASSISTANCE.—Assistance may be provided as 

described in paragraphs (1) and (2) in a lump sum or over a 

period of time, as determined by the Fund. 

(e) MATCHIN G REQUIREMENTS.— 

(1) IN GENERAL.—Assistance other than technical assistance shall be matched with funds from sources other than the 

Federal Government on the basis of not less than one dollar for 

each dollar provided by the Fund. Such matching funds shall 

be at least comparable in form and value to assistance provided by the Fund. The Fund shall provide no 

assistance (other than technical assistance) until a community 

development financial institution has secured firm commitments for the matching funds required. 

(2) EXCEPTION.—I n the case of an applicant with severe 

constraints on available sources of matching funds, the Fund 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1345 

may permit an applicant to comply with the matching requirements of paragraph (1) by— 

(A) reducing such matching requirement by 50 percent; or 

(B) permitting an applicant to provide matching funds 

in a form to be determined at the discretion of the Fund, 

if such applicant— 

(i) has total assets of less than $100,000; 

(ii) serves nonmetropolitan or rural areas; and 

(iii) is not requesting more than $25,000 in assistance. 

(3) LIMITATION.—Not more than 25 percent of the total 

funds disbursed in any fiscal year by the Fund may be 

matched as authorized under paragraph (2). 

(4) CONSTRUCTION OF "FEDERAL GOVERNMENT FUNDS''.— 

For purposes of this subsection, notwithstanding section 

105(a)(9) of the Housing and Community Development Act of 

1974, funds provided pursuant to such Act shall be considered 

to be Federal Government funds. 

(f) TERM S AND CONDITIONS.— 

(1) SOUNDNESS OF UNREGULATED INSTITUTIONS.—The Fund 

shall— 

(A) ensure, to the maximum extent practicable, that 

each community development financial institution (other 

than an insured community development financial institution or depository institution holding company) assisted 

under this subtitle is financially and managerially sound 

and maintains appropriate internal controls; 

(B) require such institution to submit, not less than 

once during each 18-month period, a statement of financial 

condition audited by an independent certified public 

accountant as part of the report required by section 

115(e)(1); and 

(C) require that all assistance granted under this section is used by the community development financial institution or community development partnership in a manner 

consistent with the purposes of this subtitle. 

(2) ASSISTANCE AGREEMENT.— 

(A) IN GENERAL.—Before providing any assistance 

under this subtitle, the Fund and each community development financial institution to be assisted shall enter into 

an agreement that requires the institution to comply with 

performance goals and abide by other terms and conditions 

pertinent to assistance received under this subtitle. 

(B) PERFORMANCE GOALS.—Performance goals shall be 

negotiated between the Fund and each community development financial institution receiving assistance based 

upon the strategic plan submitted pursuant to section 

105(b)(2). Such goals may be modified with the consent of 

the parties, or as provided in subparagraph (C). Performance goals for insured community development financial 

institutions shall be determined in consultation with the 

appropriate Federal banking agency. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1346 

(C) SANCTIONS.—The agreement shall provide that, in 

the event of fraud, mismanagement, noncompliance with 

this subtitle, or noncompliance with the terms of the 

agreement, the Fund, in its discretion, may— 

(i) require changes to the performance goals imposed pursuant to subparagraph (B); 

(ii) require changes to the strategic plan submitted pursuant to section 105(b)(2); 

(iii) revoke approval of the application; 

(iv) reduce or terminate assistance; 

(v) require repayment of assistance; 

(vi) bar an applicant from reapplying for assistance from the Fund; and 

(vii) take such other actions as the Fund deems 

appropriate. 

( D ) CONSULTATION WIT H TRIBAL GOVERNMENTS.—In reviewing the performance of any assisted community development financial institution, the investment area of which 

includes an indian reservation, or the targeted population 

of which includes an indian tribe, the Fund shall consult 

with, and seek input from, any appropriate tribal government. 

(g) AUTHORITY T O SELL EQUITY INVESTMENTS AND LOANS.— 

The Fund may, at any time, sell its equity investments and loans, 

but the Fund shall retain the power to enforce limitations on 

assistance entered into in accordance with the requirements of this 

subtitle until the performance goals related to the investment or 

loan have been met. 

(h) N o AUTHORITY T O LIMI T SUPERVISION AND REGULATION.— 

Nothing in this subtitle shall affect any authority of the appropriate Federal banking agency to supervise and regulate any institution or company. 

SEC. 109. [12 U.S.C. 4708] TRAINING. 

(a) IN GENERAL.—The Fund may operate a training program to 

increase the capacity and expertise of community development 

financial institutions and other members of the financial services 

industry to undertake community development finance activities. 

(b) PROGRAM ACTIVITIES.—Th e training program shall provide 

educational programs to assist community development financial 

institutions and other members of the financial services industry in 

developing lending and investment products, underwriting and 

servicing loans, managing equity investments, and providing development services targeted to areas of economic distress, low-income 

persons, and persons who lack adequate access to loans and equity 

investments. 

(c) PARTICIPATION.—The training program shall be made available to community development financial institutions and other 

members of the financial services industry that serve or seek to 

serve areas of economic distress, low-income persons, and persons 

who lack adequate access to loans and equity investments. 

(d) CONTRACTING.—The Fund may offer the training program 

described in this section directly or through a contract with other 

organizations. The Fund may contract to provide the training pro-
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1347 

gram through organizations that possess special expertise in community development, without regard to whether the organizations 

receive or are eligible to receive assistance under this subtitle. 

(e) COORDINATION.—The Fund shall coordinate with other 

appropriate Federal departments or agencies that operate similar 

training programs in order to prevent duplicative efforts. 

(f) REGULATORY FEE FOR PROVIDING TRAINING SERVICES.— 

(1) GENERAL RULE.—Th e Fund may, at the discretion of 

the Administrator and in accordance with this subsection, assess and collect regulatory fees solely to cover the costs of the 

Fund in providing training services under a training program 

operated in accordance with this section. 

(2) PERSONS SUBJECT TO FEE.—Fees may be assessed 

under paragraph (1) only on persons who participate in the 

training program. 

(3) LIMITATION ON MANNER OF COLLECTION.—Fees ma y be 

assessed and collected under this subsection only in such manner as may reasonably be expected to result in the collection 

of an aggregate amount of fees during any fiscal year which 

does not exceed the aggregate costs of the Fund for such year 

in providing training services under a training program operated in accordance with this section 

(4) LIMITATION ON AMOUNT OF FEE.—Th e amount of any 

fee assessed under this subsection on any person may not exceed the amount which is reasonably based on the proportion 

of the training services provided under a training program 

operated in accordance with this section which relate to such 

person. 

SEC. 110. [12 U.S.C. 4709] ENCOURAGEMEN T OF PRIVATE ENTITIES. 

The Fund may facilitate the organization of corporations in 

which the Federal Government has no ownership interest. The purpose of any such entity shall be to assist community development 

financial institutions in a manner that is complementary to the 

activities of the Fund under this subtitle. Any such entity shall be 

managed exclusively by persons not employed by the Federal Government or any agency or instrumentality thereof, or by any State 

or local government or any agency or instrumentality thereof. 

SEC. 111. [12 U.S.C. 4710] COLLECTIO N AN D COMPILATIO N OF INFORMATION . 

The Fund shall— 

(1) collect and compile information pertinent to community 

development financial institutions that will assist in creating, 

developing, expanding, and preserving such institutions; and 

(2) make such information available to promote the purposes of this subtitle. 

SEC. 112. [12 U.S.C. 4711] INVESTMEN T OF RECEIPTS AN D PROCEEDS. 

(a) ESTABLISHMENT OF ACCOUNT.—An y dividends on equity 

investments and proceeds from the disposition of investments, deposits, or credit union shares that are received by the Fund as a 

result of assistance provided pursuant to section 108 or 113, and 

any fees received pursuant to section 109(f) shall be deposited and 

accredited to an account of the Fund in the United States Treasury 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1348 

(hereafter in this section referred to as ''the account'') established 

to carry out the purpose of this subtitle. 

(b) INVESTMENTS.—Upon request of the Administrator, the Secretary of the Treasury shall invest amounts deposited in the account in public debt securities with maturities suitable to the needs 

of the Fund, as determined by the Administrator, and bearing interest at rates determined by the Secretary of the Treasury, comparable to current market yields on outstanding marketable obligations of the United States of similar maturities. 

(c) AVAILABILITY.—Amounts deposited into the account and interest earned on such amounts pursuant to this section shall be 

available to the Fund until expended. 

SEC. 113. [12 U.S.C. 4712] CAPITALIZATION ASSISTANCE TO ENHANCE 

LIQUIDITY. 

(a) ASSISTANCE.— 

(1) IN GENERAL.—The Fund may provide assistance for the 

purpose of providing capital to organizations to purchase loans 

or otherwise enhance the liquidity of community development 

financial institutions, if— 

(A) the primary purpose of such organizations is to 

promote community development; and 

(B) any assistance received is matched with funds— 

(i) from sources other than the Federal Government; 

(ii) on the basis of not less than one dollar for 

each dollar provided by the Fund; and 

(iii) that are comparable in form and value to the 

assistance provided by the Fund. 

(2) LIMITATION ON OTHER ASSISTANCE.—An organization 

that receives assistance under this section may not receive 

other financial or technical assistance under this subtitle. 

(3) CONSTRUCTION OF FEDERAL GOVERNMENT FUNDS.—For 

purposes of this subsection, notwithstanding section 105(a)(9) 

of the Housing and Community Development Act of 1974, 

funds provided pursuant to such Act shall be considered to be 

Federal Government funds. 

(b) SELECTION.—The selection of organizations to receive 

assistance under this section shall be at the discretion of the Fund 

and in accordance with criteria established by the Fund. in establishing such criteria, the Fund shall take into account the criteria 

contained in sections 105(b) and 107, as appropriate. 

(c) AMOUNT OF ASSISTANCE.—The Fund may provide a total of 

not more than $5,000,000 of assistance to an organization or its 

subsidiaries or affiliates under this section during any 3-year period. Assistance may be provided in a lump sum or over a period 

of time, as determined by the Fund. 

(d) AUDIT AND REPORT REQUIREMENTS.—Organizations that receive assistance from the Fund in accordance with this section 

shall— 

(1) submit to the Fund, not less than once in every 18-

month period, financial statements audited by an independent 

certified public accountant, as part of the report required by 

paragraph (2); 

(2) submit an annual report on its activities; and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1349 

(3) keep such records as may be necessary to disclose the 

manner in which any assistance under this section is used. 

(e) LIMITATIONS ON LIABILITY.— 

(1) LIABILITY OF FUND.—Th e liability of the Fund and the 

United States Government arising out of the provision of 

assistance to any organization in accordance with this section 

shall be limited to the amount of such assistance. The Fund 

shall be exempt from any assessments and any other liabilities 

that may be imposed on controlling or principal shareholders 

by any Federal law or the law of any State, or territory. Nothing in this paragraph shall affect the application of Federal tax 

law. 

(2) LIABILITY OF GOVERNMENT.—Thi s section does not 

oblige the Federal Government, either directly or indirectly, to 

provide any funds to any organization assisted pursuant to this 

section, or to honor, reimburse, or otherwise guarantee any 

obligation or liability of such an organization. This section 

shall not be construed to imply that any such organization or 

any obligations or securities of any such organization are 

backed by the full faith and credit of the United States. 

(f) USE OF PROCEEDS.—Any proceeds from the sale of loans by 

an organization assisted under this section shall be used by the 

seller for community development purposes. 

SEC. 114. [12 U.S.C. 4713] INCENTIVES FOR DEPOSITORY INSTITUTIO N 

PARTICIPATION . 

(a) FUNCTION OF ADMINISTRATOR.— 

(1) I N GENERAL.—Of any funds appropriated pursuant to 

the authorization in section 121(a), the funds made available 

for use in carrying out this section in accordance with section 

121(a)(4) shall be administered by the Administrator of the 

Fund, in consultation with— 

(A) the Federal banking agencies (as defined in section 

3 of the Federal Deposit Insurance Act) and the National 

Credit Union Administration; 

(B) the individuals named pursuant to clauses (ii) and 

(iv) of section 104(d)(2)(G); and 

(C) any other representatives of insured depository 

institutions or other persons as the Administrator may 

determine to be appropriate. 

(2) APPLICABILITY OF BANK ENTERPRISE ACT OF 1991.—Subject to subsection (b) and the consultation requirement of paragraph (1)— 

(A) section 233 of the Bank Enterprise Act of 1991 

shall be applicable to the Administrator, for purposes of 

this section, in the same manner and to the same extent 

that such section is applicable to the Community Enterprise Assessment Credit Board; 

(B) the Administrator shall, for purposes of carrying 

out this section and section 233 of the Bank Enterprise Act 

of 1991— 

(i) have all powers and rights of the Community 

Enterprise Assessment Credit Board under section 233 

of the Bank Enterprise Act of 1991 to administer and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1350 

enforce any provision of such section 233 which is applicable to the Administrator under this section; and 

(ii) shall be subject to the same duties and restrictions imposed on the Community Enterprise Assessment Credit Board; and 

(C) the Administrator shall— 

(i) have all powers and rights of an appropriate 

Federal banking agency under section 233(b)(2) of the 

Bank Enterprise Act of 1991 to approve or disapprove 

the designation of qualified distressed communities for 

purposes of this section and provide information and 

assistance with respect to any such designation; and 

(ii) shall be subject to the same duties imposed on 

the appropriate Federal banking agencies under such 

section 233(b)(2). 

(3) AWARDS.—The Administrator shall determine the 

amount of assessment credits, and shall make awards of those 

credits. 

(4) REGULATIONS AND GUIDELINES.—The Administrator 

may prescribe such regulations and issue such guidelines as 

the Administrator determines to be appropriate to carry out 

this section. 

(5) EXCEPTIONS TO APPLICABILITY.—Notwithstanding paragraphs (1) through (4) of this subsection, subsections (a)(1) and 

(e)(2) of section 233 of the Bank Enterprise Act of 1991, and 

any other provision of the Federal Deposit Insurance Act relating to the Bank Enterprise Act of 1991, do not apply to the 

Administrator for purposes of this subtitle. 

(b) PROVISIONS RELATING TO ADMINISTRATION OF THIS 

SECTION.— 

(1) NE W LIFELINE ACCOUNTS.—In applying section 233 of 

the Bank Enterprise Act of 1991 for purposes of this section, 

the Administrator shall treat the provision of new lifeline accounts by an insured depository institution as an activity 

which is qualified to be taken into account under section 

233(a)(2)(A) of such Act. 

(2) DETERMINATION OF ASSESSMENT CREDIT.—For the purpose of this subtitle, section 233(a)(3) of the Bank Enterprise 

Act of 1991 (12 U.S.C. 1834a(a)(3)) shall be applied by substituting the following text: 

''(3) AMOUN T OF ASSESSMENT CREDIT.—The amount of an 

assessment credit which may be awarded to an insured depository institution to carry out the qualified activities of the institution or of the subsidiaries of the institution pursuant to this 

section for any semiannual period shall be equal to the sum 

of— 

''(A) with respect to qualifying activities described in 

paragraph (2)(A), the amount which is equal to— 

''(i) 5 percent of the sum of the amounts determined under such subparagraph, in the case of an 

institution which is not a community development 

financial institution; or 

''(ii) 15 percent of the sum of the amounts determined under such subparagraph, in the case of an 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1351 

institution which is a community development financial institution; and 

"(B) with respect to qualifying activities described in 

paragraph (2)(C), 15 percent of the amounts determined 

under such subparagraph.''. 

(3) ADJUSTMENT OF PERCENTAGE.—Section 233(a)(5) of the 

Bank Enterprise Act of 1991 shall be applied for purposes of 

this section by— 

(A) substituting "institutions which are community 

development financial institutions'' for "institutions which 

meet the community development organization requirements under section 234''; and 

(B) substituting "institutions which are not community 

development financial institutions'' for "institutions which 

do not meet such requirements''. 

(4) DESIGNATION OF QDC.—Section 233(b)(2) of the Bank 

Enterprise Act of 1991 shall be applied for purposes of this section without regard to subparagraph (A)(ii) of such section 

233(b)(2). 

(5) OPERATION ON ANNUAL BASIS.—The Administrator may, 

in the Administrator's discretion, apply section 233 of the Bank 

Enterprise Act of 1991 for purposes of this section by providing 

community enterprise assessment credits with respect to annual periods rather than semiannual periods. 

(6) OUTREACH.—The Administrator shall ensure that information about the Bank Enterprise Act of 1991 under this section is widely disseminated to all interested parties. 

(7) QUALIFIED ACTIVITIES.—For the purpose of this subtitle, section 233(a)(2)(A) of the Bank Enterprise Act of 1991 

shall be applied by inserting "of the increase'' after "the 

amount''. 

[Subsection (c) amended other laws.] 

SEC. 115. [12 U.S.C. 4714] RECORDKEEPING. 

(a) I N GENERAL.—A community development financial institution receiving assistance from the Fund shall keep such records, for 

such periods as may be prescribed by the Fund and necessary to 

disclose the manner in which any assistance under this subtitle is 

used and to demonstrate compliance with the requirements of this 

subtitle. 

(b) USER PROFILE INFORMATION.—The Fund shall require each 

community development financial institution or other organization 

receiving assistance from the Fund to compile such data, as is 

determined to be appropriate by the Fund, on the gender, race, ethnicity, national origin, or other pertinent information concerning 

individuals that utilize the services of the assisted institution to 

ensure that targeted populations and low-income residents of 

investment areas are adequately served. 

(c) ACCESS TO RECORDS.—The Fund shall have access on demand, for the purpose of determining compliance with this subtitle, 

to any records of a community development financial institution or 

other organization that receives assistance from the Fund. 

(d) REVIEW.—Not less than annually, the Fund shall review 

the progress of each assisted community development financial 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1352 

institution in carrying out its strategic plan, meeting its performance goals, and satisfying the terms and conditions of its assistance 

agreement. 

(e) REPORTING.— 

(1) ANNUA L REPORTS.—The Fund shall require each community development financial institution receiving assistance 

under this subtitle to submit an annual report to the Fund on 

its activities, its financial condition, and its success in meeting 

performance goals, in satisfying the terms and conditions of its 

assistance agreement, and in complying with other requirements of this subtitle, in such form and manner as the Fund 

shall specify. 

(2) AVAILABILITY OF REPORTS.—The Fund, after deleting or 

redacting any material as appropriate to protect privacy or proprietary interests, shall make such reports submitted under 

paragraph (1) available for public inspection. 

SEC. 116. [12 U.S.C. 4715] SPECIAL PROVISIONS WIT H RESPECT TO 

INSTITUTION S THA T AR E SUPERVISED BY FEDERA L 

BANKIN G AGENCIES. 

(a) CONSULTATION WIT H APPROPRIATE AGENCIES.—The Fund 

shall consult with and consider the views of the appropriate Federal banking agency prior to providing assistance under this subtitle to— 

(1) an insured community development financial institution; 

(2) any community development financial institution that 

is examined by or subject to the reporting requirements of an 

appropriate Federal banking agency; or 

(3) any community development financial institution that 

has as its community partner an institution that is examined 

by or subject to the reporting requirements of an appropriate 

Federal banking agency. 

(b) REQUESTS FOR INFORMATION, REPORTS, OR RECORDS.— 

(1) IN GENERAL.—Except as provided in paragraph (4), notwithstanding any other provisions of this subtitle, prior to directly requesting information from or imposing reporting or 

recordkeeping requirements on an insured community development financial institution or other institution that is examined 

by or subject to the reporting requirements of an appropriate 

Federal banking agency, the Fund shall consult with the 

appropriate Federal banking agency to determine if the information requested is available from or may be obtained by such 

agency in the form, format, or detail required by the Fund. 

(2) TIMIN G OF RESPONSE FROM APPROPRIATE FEDERAL 

BANKING AGENCY.—If the information, reports, or records requested by the Fund pursuant to paragraph (1) are not provided by the appropriate Federal banking agency in less than 

15 calendar days after the date on which the material is requested, the Fund may request the information from or impose 

the recordkeeping or reporting requirements directly on such 

institutions with notice to the appropriate Federal banking 

agency. 

(3) ELIMINATION OF DUPLICATIVE INFORMATION AND REPORTING REQUIREMENTS.—The Fund shall use any information 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1353 

provided the appropriate Federal banking agency under this 

section to the extent practicable to eliminate duplicative requests for information and reports from, and recordkeeping by 

an insured community development financial institution or 

other institution that is examined by or subject to the reporting requirements of an appropriate Federal banking agency. 

(4) EXCEPTION.—Notwithstanding paragraphs (1) and (2), 

the Fund may require an insured community development 

financial institution or other institution that is examined by or 

subject to the reporting requirements of an appropriate Federal banking agency to provide information with respect to the 

institution's implementation of its strategic plan or compliance 

with the terms of its assistance agreement under this subtitle, 

after providing notice to the appropriate Federal banking 

agency. 

(c) EXCLUSION FOR EXAMINATION REPORTS.—Nothing in this 

section shall be construed to permit the Fund to require an insured 

community development financial institution or other institution 

that is examined by or subject to the reporting requirements of an 

appropriate Federal banking agency, to obtain, maintain, or furnish an examination report of any appropriate Federal banking 

agency or records contained in or related to such a report. 

(d) SHARING OF INFORMATION.—The Fund and the appropriate 

Federal banking agency shall promptly notify each other of material concerns about an insured community development financial 

institution or other institution that is examined by or subject to the 

reporting requirements of an appropriate Federal banking agency, 

and share appropriate information relating to such concerns. 

(e) DISCLOSURE PROHIBITED.—Neither the Fund nor the appropriate Federal banking agency shall disclose confidential information obtained pursuant to this section from any party without the 

written consent of that party. 

(f) PRIVILEGE MAINTAINED.—The Fund, the appropriate Federal banking agency, and any other party providing information 

under this section shall not be deemed to have waived any privilege applicable to any information or data, or any portion thereof, 

by providing such information or data to the other party or by permitting such data or information, or any copies or portions thereof, 

to be used by the other party. 

(g) EXCEPTIONS.—Nothing in this section shall authorize the 

Fund or the appropriate Federal banking agency to withhold information from the Congress or prevent it from complying with a request for information from a Federal department or agency in compliance with applicable law. 

(h) SANCTIONS.— 

(1) NOTIFICATION.—The Fund shall notify the appropriate 

Federal banking agency before imposing any sanction pursuant 

to the authority in section 108(f)(2)(C) on an insured community development financial institution or other institution that 

is examined by or subject to the reporting requirements of that 

agency. 

(2) EXCEPTIONS.—The Fund shall not impose a sanction referred to in paragraph (1) if the appropriate Federal banking 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1354 

agency, in writing, not later than 30 calendar days after receiving notice from the Fund— 

(A) objects to the proposed sanction; 

(B) determines that the sanction would— 

(i) have a material adverse effect on the safety 

and soundness of the institution; or 

(ii) impede or interfere with an enforcement action 

against that institution by that agency; 

(C) proposes a comparable alternative action; and 

(D) specifically explains— 

(i) the basis for the determination under subparagraph (B) and, if appropriate, provides documentation 

to support the determination; and 

(ii) how the alternative action suggested pursuant 

to subparagraph (C) would be as effective as the sanction proposed by the Fund in securing compliance with 

this subtitle and deterring future noncompliance. 

(i) SAFETY AND SOUNDNESS CONSIDERATIONS.—The Fund and 

each appropriate Federal banking agency shall cooperate and respond to requests from each other and from other appropriate Federal banking agencies in a manner that ensures the safety and 

soundness of the insured community development financial institution or other institution that is examined by or subject to the reporting requirements of an appropriate Federal banking agency. 

SEC. 117. [12 U.S.C. 4716] STUDIES AN D REPORTS; EXAMINATIO N AN D 

AUDIT . 

(a) ANNUA L REPORT BY THE FUND.—Th e Fund shall conduct an 

annual evaluation of the activities carried out by the Fund and the 

community development financial institutions and other organizations assisted pursuant to this subtitle, and shall submit a report 

of its findings to the President and the Congress not later than 120 

days after the end of each fiscal year of the Fund. The report shall 

include financial statements audited in accordance with subsection (f). 

(b) OPTIONAL STUDIES.—Th e Fund may conduct such studies as 

the Fund determines necessary to further the purpose of this subtitle and to facilitate investment in distressed communities. The 

findings of any studies conducted pursuant to this subsection shall 

be included in the report required by subsection (a). 

(c) NATIVE AMERICA N LENDIN G STUDY.— 

(1) IN GENERAL.—The Fund shall conduct a study on lending and investment practices on indian reservations and other 

land held in trust by the United States. Such study shall— 

(A) identify barriers to private financing on such 

lands; and 

(B) identify the impact of such barriers on access to 

capital and credit for Native American populations. 

(2) REPORT.—Not later than 12 months after the date on 

which the Administrator is appointed, the Fund shall submit 

a report to the President and the Congress that— 

(A) contains the findings of the study conducted under 

paragraph (1); 

(B) recommends any necessary statutory and regulatory changes to existing Federal programs; and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1355 

(C) makes policy recommendations for community 

development financial institutions, insured depository 

institutions, secondary market institutions, and other private sector capital institutions to better serve such 

populations. 

(d) INVESTMENT, GOVERNANCE, AND ROLE OF FUND.—Thirt y 

months after the appointment and qualification of the Administrator, the Comptroller General of the United States shall submit 

to the President and the Congress a study evaluating the structure, 

governance, and performance of the Fund. 

(e) CONSULTATION.—In the conduct of the studies required 

under this section, the Fund shall consult, as appropriate, with the 

Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, 

the Federal Housing Finance Board, the Farm Credit Administration, the Director of the Office of Thrift Supervision, the National 

Credit Union Administration Board, Indian tribal governments, 

community reinvestment organizations, civil rights organizations, 

consumer organizations, financial organizations, and such representatives of agencies or other persons, at the discretion of the 

Fund. 

(f) EXAMINATION AND AUDIT.—Th e financial statements of the 

Fund shall be audited in accordance with section 9105 of title 31, 

United States Code, except that audits required by section 9105(a) 

of such title shall be performed annually. 

SEC. 118. INSPECTOR GENERAL. 

(a) * * * 

(b) AUTHORIZATION OF APPROPRIATIONS.—There are authorized 

to be appropriated such sums as may be necessary for the operation of the Office of Inspector General established by the amendments made by subsection (a). 

SEC. 119. [12 U.S.C. 4717] ENFORCEMENT. 

(a) REGULATIONS.— 

(1) IN GENERAL.—Not later than 180 days after the 

appointment and qualification of the Administrator, the Fund 

shall promulgate such regulations as may be necessary to carry 

out this subtitle. 

(2) REGULATIONS REQUIRED.—The regulations promulgated 

under paragraph (1) shall include regulations applicable to 

community development financial institutions that are not insured depository institutions to— 

(A) prevent conflicts of interest on the part of directors, officers, and employees of community development 

financial institutions as the Fund determines to be appropriate; and 

(B) establish such standards with respect to loans by 

a community development financial institution to any director, officer, or employee of such institution as the Fund 

determines to be appropriate, including loan amount 

limitations. 

(b) ADMINISTRATIVE ENFORCEMENT.—The provisions of this 

subtitle, and regulations prescribed and agreements entered into 

under this subtitle, shall be enforced under section 8 of the Federal 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1356 

Deposit Insurance Act by the appropriate Federal banking agency, 

in the case of an insured community development financial institution. A violation of this subtitle, or any regulation prescribed under 

or any agreement entered into under this subtitle, shall be treated 

as a violation of the Federal Deposit Insurance Act. 

[Subsection (c) amended another law.] 

[Section 120 amended another law.] 

SEC. 121. [12 U.S.C. 4718] AUTHORIZATIO N OF APPROPRIATIONS. 

(a) FUN D AUTHORIZATION.— 

(1) I N GENERAL.—To carry out this subtitle, there are 

authorized to be appropriated to the Fund, to remain available 

until expended— 

(A) $60,000,000 for fiscal year 1995; 

(B) $104,000,000 for fiscal year 1996; 

(C) $107,000,000 for fiscal year 1997; and 

(D) $111,000,000 for fiscal year 1998; 

or such greater sums as may be necessary to carry out this 

subtitle. 

(2) ADMINISTRATIVE EXPENSES.— 

(A) I N GENERAL.—Of amounts authorized to be appropriated to the Fund pursuant to this section, not more 

than $5,550,000 may be used by the Fund in each fiscal 

year to pay the administrative costs and expenses of the 

Fund. Costs associated with the training program established under section 109 and the technical assistance program established under section 108 shall not be considered 

to be administrative expenses for purposes of this 

paragraph. 

(B) CALCULATIONS.—The amounts referred to in paragraphs (3) and (4) shall be calculated after subtracting the 

amount referred to in subparagraph (A) of this paragraph 

from the total amount appropriated to the Fund in accordance with paragraph (1) in any fiscal year. 

(3) CAPITALIZATION ASSISTANCE.—Not more than 5 percent 

of the amounts authorized to be appropriated under paragraph 

(1) may be used as provided in section 113. 

(4) AVAILABILITY FOR FUNDING SECTION 114.—33V3 percent 

of the amounts appropriated to the Fund for any fiscal year 

pursuant to the authorization in paragraph (1) shall be available for use in carrying out section 114. 

(5) SUPPORT OF COMMUNITY DEVELOPMENT FINANCIAL 

INSTITUTIONS.—The Administrator shall allocate funds authorized under this section, to the maximum extent practicable, for 

the support of community development financial 

institutions. 

(b) COMMUNITY DEVELOPMENT CREDIT UNIO N REVOLVING LOA N 

FUND.—There are authorized to be appropriated for the purposes 

of the Community Development Credit Union Revolving Loan 

Fund— 

(1) $4,000,000 for fiscal year 1995; 

(2) $2,000,000 for fiscal year 1996; 

(3) $2,000,000 for fiscal year 1997; and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1357 

(4) $2,000,000 for fiscal year 1998. 

(c) BUDGETARY TREATMENT.—Amount s authorized to be appropriated under this section shall be subject to discretionary spending 

caps, as provided in section 601 of the Congressional Budget Act 

of 1974, and therefore shall reduce by an equal amount funds made 

available for other discretionary spending programs. 

Subtitle B—Home Ownership and Equity 

Protection1 

SEC. 155. [15 U.S.C. 1602 nt] REGULATIONS. 

Not later than 180 days after the date of enactment of this 

Act,2 the Board of Governors of the Federal Reserve System shall 

issue such regulations as may be necessary to carry out this subtitle, and such regulations shall become effective on the date on 

which disclosure regulations are required to become effective under 

section 105(d) of the Truth in Lending Act. 

SEC. 156. [15 U.S.C. 1602 nt] APPLICABILITY. 

This subtitle, and the amendments made by this subtitle, shall 

apply to every mortgage referred to in section 103(aa) of the Truth 

in Lending Act (as added by section 152(a) of this Act) consummated on or after the date on which regulations issued under 

section 155 become effective. 

SEC. 157. [15 U.S.C. 1601 nt] FEDERAL RESERVE STUDY. 

During the period beginning 180 days after the date of enactment of this Act and ending 2 years after that date of enactment, 

the Board of Governors of the Federal Reserve System shall conduct a study and submit to the Congress a report, including recommendations for any appropriate legislation, regarding— 

(1) whether a consumer engaging in an open end credit 

transaction (as defined in section 103 of the Truth in Lending 

Act) secured by the consumer's principal dwelling is provided 

adequate protections under Federal law, including section 

127A of the Truth in Lending Act; and 

(2) whether a more appropriate interest rate index exists 

for purposes of subparagraph (A) of section 103(aa)(1) of the 

Truth in Lending Act (as added by section 152(a) of this Act) 

than the yield on Treasury securities referred to in that subparagraph. 

SEC. 158. [15 U.S.C. 1601 nt] HEARINGS O N HOM E EQUITY LENDING. 

(a) HEARINGS.—Not less than once during the 3-year period 

beginning on the date of enactment of this Act, and regularly thereafter, the Board of Governors of the Federal Reserve System, in 

consultation with the Consumer Advisory Council of the Board, 

shall conduct a public hearing to examine the home equity loan 

market and the adequacy of existing regulatory and legislative pro1

 Sections 152 through 154 amended other laws. Section 151 provided that this subtitle may 

be cited as the "Homeownership and Equity Protection Act of 1994''. 

2

 Such date of enactment was September 23, 1994. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1358 

visions and the provisions of this subtitle in protecting the interests of consumers, and low-income consumers in particular. 

(b) PARTICIPATION.—In conducting hearings required by subsection (a), the Board of Governors of the Federal Reserve System 

shall solicit participation from consumers, representatives of consumers, lenders, and other interested parties. 

Subtitle C—Microenterprise Technical 

Assistance and Capacity Building Program 

SEC. 171. SHORT TITLE. 

This subtitle may be cited as the ''Program for Investment in 

Microentrepreneurs Act of 1999'', also referred to as the ''PRIME 

Act''. 

SEC. 172. DEFINITIONS. 

For purposes of this subtitle, the following definitions shall 

apply: 

(1) ADMINISTRATION.—The term ''Administration'' means 

the Small Business Administration. 

(2) ADMINISTRATOR.—The term ''Administrator'' means the 

Administrator of the Small Business Administration. 

(3) CAPACITY BUILDING SERVICES.—The term ''capacity 

building services'' means services provided to an organization 

that is, or that is in the process of becoming, a microenterprise 

development organization or program, for the purpose of enhancing its ability to provide training and services to disadvantaged entrepreneurs. 

(4) COLLABORATIVE.—The term ''collaborative'' means 2 or 

more nonprofit entities that agree to act jointly as a qualified 

organization under this subtitle. 

(5) DISADVANTAGED ENTREPRENEUR.—The term ''disadvantaged entrepreneur'' means a microentrepreneur that is— 

(A) a low-income person; 

(B) a very low-income person; or 

(C) an entrepreneur that lacks adequate access to capital or other resources essential for business success, or is 

economically disadvantaged, as determined by the Administrator. 

(6) INDIAN TRIBE.—The term ''Indian tribe'' has the meaning given the term in section 103. 

(7) INTERMEDIARY.—The term ''intermediary'' means a private, nonprofit entity that seeks to serve microenterprise development organizations and programs as authorized under section 175. 

(8) LOW-INCOME PERSON.—The term ''low-income person'' 

has the meaning given the term in section 103. 

(9) MICROENTREPRENEUR.—The term ''microentrepreneur'' 

means the owner or developer of a microenterprise. 

(10) MICROENTERPRISE.—The term ''microenterprise'' 

means a sole proprietorship, partnership, or corporation that— 

(A) has fewer than 5 employees; and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1359 

(B) generally lacks access to conventional loans, equity, or other banking services. 

(11) MICROENTERPRISE DEVELOPMENT ORGANIZATION OR 

PROGRAM.—The term ''microenterprise development organization or program'' means a nonprofit entity, or a program 

administered by such an entity, including community development corporations or other nonprofit development organizations and social service organizations, that provides services to 

disadvantaged entrepreneurs. 

(12) TRAINING AND TECHNICAL ASSISTANCE.—The term 

''training and technical assistance'' means services and support 

provided to disadvantaged entrepreneurs, such as assistance 

for the purpose of enhancing business planning, marketing, 

management, financial management skills, and assistance for 

the purpose of accessing financial services. 

(13) VER Y LOW-INCOME PERSON.—The term ''very low-income person'' means having an income, adjusted for family 

size, of not more than 150 percent of the poverty line (as defined in section 673(2) of the Community Services Block Grant 

Act (42 U.S.C. 9902(2)), including any revision required by that 

section). 

SEC. 173. ESTABLISHMEN T OF PROGRAM. 

The Administrator shall establish a microenterprise technical 

assistance and capacity building grant program to provide assistance from the Administration in the form of grants to qualified 

organizations in accordance with this subtitle. 

SEC. 174. USES OF ASSISTANCE. 

A qualified organization shall use grants made under this 

subtitle— 

(1) to provide training and technical assistance to disadvantaged entrepreneurs; 

(2) to provide training and capacity building services to 

microenterprise development organizations and programs and 

groups of such organizations to assist such organizations and 

programs in developing microenterprise training and services; 

(3) to aid in researching and developing the best practices 

in the field of microenterprise and technical assistance programs for disadvantaged entrepreneurs; and 

(4) for such other activities as the Administrator determines are consistent with the purposes of this subtitle. 

SEC. 175. QUALIFIE D ORGANIZATIONS. 

For purposes of eligibility for assistance under this subtitle, a 

qualified organization shall be— 

(1) a nonprofit microenterprise development organization 

or program (or a group or collaborative thereof) that has a 

demonstrated record of delivering microenterprise services to 

disadvantaged entrepreneurs; 

(2) an intermediary; 

(3) a microenterprise development organization or program 

that is accountable to a local community, working in conjunction with a State or local government or indian tribe; or 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1360 

(4) an indian tribe acting on its own, if the indian tribe 

can certify that no private organization or program referred to 

in this paragraph exists within its jurisdiction. 

SEC. 176. ALLOCATIO N OF ASSISTANCE; SUBGRANTS. 

(a) ALLOCATION OF ASSISTANCE.— 

(1) IN GENERAL.—The Administrator shall allocate assistance from the Administration under this subtitle to ensure 

that— 

(A) activities described in section 174(1) are funded 

using not less than 75 percent of amounts made available 

for such assistance; and 

(B) activities described in section 174(2) are funded 

using not less than 15 percent of amounts made available 

for such assistance. 

(2) LIMI T ON INDIVIDUAL ASSISTANCE.—No single person 

may receive more than 10 percent of the total funds appropriated under this subtitle in a single fiscal year. 

(b) TARGETED ASSISTANCE.—The Administrator shall ensure 

that not less than 50 percent of the grants made under this subtitle 

are used to benefit very low-income persons, including those residing on indian reservations. 

(c) SUBGRANTS AUTHORIZED.— 

(1) I N GENERAL.—A qualified organization receiving assistance under this subtitle may provide grants using that assistance to qualified small and emerging microenterprise organizations and programs, subject to such rules and regulations as 

the Administrator determines to be appropriate. 

(2) LIMI T ON ADMINISTRATIVE EXPENSES.—Not more than 

7.5 percent of assistance received by a qualified organization 

under this subtitle may be used for administrative expenses in 

connection with the making of subgrants under paragraph (1). 

(d) DIVERSITY.—I n making grants under this subtitle, the 

Administrator shall ensure that grant recipients include both large 

and small microenterprise organizations, serving urban, rural, and 

indian tribal communities serving diverse populations. 

(e) PROHIBITION ON PREFERENTIAL CONSIDERATION OF CERTAIN 

SBA PROGRAM PARTICIPANTS.—In making grants under this subtitle, the Administrator shall ensure that any application made by 

a qualified organization that is a participant in the program established under section 7(m) of the Small Business Act does not receive preferential consideration over applications from other qualified organizations that are not participants in such program. 

SEC. 177. MATCHIN G REQUIREMENTS. 

(a) IN GENERAL.—Financial assistance under this subtitle shall 

be matched with funds from sources other than the Federal Government on the basis of not less than 50 percent of each dollar provided by the Administration. 

(b) SOURCES OF MATCHIN G FUNDS.—Fees, grants, gifts, funds 

from loan sources, and in-kind resources of a grant recipient from 

public or private sources may be used to comply with the matching 

requirement in subsection (a). 

(c) EXCEPTION.— 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1361 

(1) I N GENERAL.—In the case of an applicant for assistance 

under this subtitle with severe constraints on available sources 

of matching funds, the Administrator may reduce or eliminate 

the matching requirements of subsection (a). 

(2) LIMITATION.—Not more than 10 percent of the total 

funds made available from the Administration in any fiscal 

year to carry out this subtitle may be excepted from the matching requirements of subsection (a), as authorized by paragraph 

(1) of this subsection. 

SEC. 178. APPLICATIONS FOR ASSISTANCE. 

An application for assistance under this subtitle shall be submitted in such form and in accordance with such procedures as the 

Administrator shall establish. 

SEC. 179. RECORDKEEPING. 

The requirements of section 115 shall apply to a qualified organization receiving assistance from the Administration under this 

subtitle as if it were a community development financial institution 

receiving assistance from the Fund under subtitle A. 

SEC. 180. AUTHORIZATION. 

in addition to funds otherwise authorized to be appropriated to 

the Fund to carry out this title, there are authorized to be appropriated to the Administrator to carry out this subtitle— 

(1) $15,000,000 for fiscal year 2000; 

(2) $15,000,000 for fiscal year 2001; 

(3) $15,000,000 for fiscal year 2002; and 

(4) $15,000,000 for fiscal year 2003. 

SEC. 181. IMPLEMENTATION. 

The Administrator shall, by regulation, establish such requirements as may be necessary to carry out this subtitle. 

TITLE II—SMALL BUSINESS CAPITAL 

FORMATIO N 

Subtitle A—Small Business Loan 

Securitization 

SEC. 201. [15 U.S.C. 78a nt] SHORT TITLE. 

This subtitle may be cited as the ''Small Business Loan 

Securitization and Secondary Market Enhancement Act of 1994''. 

[Sections 202 through 207 amended other laws.] 

SEC. 208. [12 U.S.C. 1835] INSURED DEPOSITORY INSTITUTION CAPITAL REQUIREMENTS FOR TRANSFERS OF SMALL BUSINESS OBLIGATIONS. 

(a) ACCOUNTING PRINCIPLES.—The accounting principles applicable to the transfer of a small business loan or a lease of personal 

property with recourse contained in reports or statements required 

to be filed with Federal banking agencies by a qualified insured 

depository institution shall be consistent with generally accepted 

accounting principles. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1362 

(b) CAPITAL AND RESERVE REQUIREMENTS.—Wit h respect to the 

transfer of a small business loan or lease of personal property with 

recourse that is a sale under generally accepted accounting principles, each qualified insured depository institution shall— 

(1) establish and maintain a reserve equal to an amount 

sufficient to meet the reasonable estimated liability of the 

institution under the recourse arrangement; and 

(2) include, for purposes of applicable capital standards 

and other capital measures, only the amount of the retained 

recourse in the risk-weighted assets of the institution. 

(c) QUALIFIED INSTITUTIONS CRITERIA.—A n insured depository 

institution is a qualified insured depository institution for purposes 

of this section if, without regard to the accounting principles or 

capital requirements referred to in subsections (a) and (b), the 

institution is— 

(1) well capitalized; or 

(2) with the approval, by regulation or order, of the appropriate Federal banking agency, adequately capitalized. 

(d) AGGREGATE AMOUN T OF RECOURSE.—The total outstanding 

amount of recourse retained by a qualified insured depository institution with respect to transfers of small business loans and leases 

of personal property under subsections (a) and (b) shall not 

exceed— 

(1) 15 percent of the risk-based capital of the institution; 

or 

(2) such greater amount, as established by the appropriate 

Federal banking agency by regulation or order. 

(e) INSTITUTIONS THA T CEASE T O BE QUALIFIED OR EXCEED 

AGGREGATE LIMITS.—I f an insured depository institution ceases to 

be a qualified insured depository institution or exceeds the limits 

under subsection (d), this section shall remain applicable to any 

transfers of small business loans or leases of personal property that 

occurred during the time that the institution was qualified and did 

not exceed such limit. 

(f) PROMPT CORRECTIVE ACTION NO T AFFECTED.—Th e capital of 

an insured depository institution shall be computed without regard 

to this section in determining whether the institution is adequately 

capitalized, undercapitalized, significantly undercapitalized, or 

critically undercapitalized under section 38 of the Federal Deposit 

Insurance Act. 

(g) REGULATIONS REQUIRED.—No t later than 180 days after the 

date of enactment of this Act each appropriate Federal banking 

agency shall promulgate final regulations implementing this section. 

(h) ALTERNATIVE SYSTEM PERMITTED.— 

(1) I N GENERAL.—At the discretion of the appropriate Federal banking agency, this section shall not apply if the regulations of the agency provide that the aggregate amount of capital and reserves required with respect to the transfer of small 

business loans and leases of personal property with recourse 

does not exceed the aggregate amount of capital and reserves 

that would be required under subsection (b). 

(2) EXISTING TRANSACTIONS NOT AFFECTED.—Notwith -

standing paragraph (1), this section shall remain in effect with 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1363 

respect to transfers of small business loans and leases of personal property with recourse by qualified insured depository 

institutions occurring before the effective date of regulations 

referred to in paragraph (1). 

(i) DEFINITIONS.—For purposes of this section— 

(1) the term "adequately capitalized'' has the same meaning as in section 38(b) of the Federal Deposit insurance Act; 

(2) the term "appropriate Federal banking agency'' has the 

same meaning as in section 3 of the Federal Deposit insurance 

Act; 

(3) the term "capital standards'' has the same meaning as 

in section 38(c) of the Federal Deposit insurance Act; 

(4) the term "Federal banking agencies'' has the same 

meaning as in section 3 of the Federal Deposit insurance Act; 

(5) the term "insured depository institution'' has the same 

meaning as in section 3 of the Federal Deposit insurance Act; 

(6) the term "other capital measures'' has the meaning as 

in section 38(c) of the Federal Deposit insurance Act; 

(7) the term "recourse" has the meaning given to such 

term under generally accepted accounting principles; 

(8) the term "small business'' means a business that meets 

the criteria for a small business concern established by the 

Small Business Administration under section 3(a) of the Small 

Business Act; and 

(9) the term "well capitalized'' has the same meaning as in 

section 38(b) of the Federal Deposit Insurance Act. 

SEC. 209. [15 U.S.C. 78b nt] JOINT STUDY ON THE IMPACT OF ADDITIONAL SECURITIES BASED ON POOLED OBLIGATIONS. 

(a) JOINT STUDY REQUIRED.—The Board and the Commission 

shall conduct a joint study of the impact of the provisions of this 

subtitle (including the amendments made by this subtitle) on the 

credit and securities markets. Such study shall evaluate— 

(1) the impact of the provisions of this subtitle on the 

availability of credit for business and commercial enterprises 

in general, and the availability of credit in particular for— 

(A) businesses in low- and moderate-income areas; 

(B) businesses owned by women and minorities; 

(C) community development efforts; 

(D) community development financial institutions; 

(E) businesses in different geographical regions; and 

(F) a diversity of types of businesses; 

(2) the structure and operation of the markets that develop 

for small business related securities and commercial mortgage 

related securities, including the types of entities (such as pension funds and insurance companies) that are significant purchasers of such securities, the extent to which such entities are 

sophisticated investors, the use of credit enhancements in obtaining investment-grade ratings, any conflicts of interest that 

arise in such markets, and any adverse effects of such markets 

on commercial real estate ventures, pension funds, or pension 

fund beneficiaries; 

(3) the extent to which the provisions of this subtitle with 

regard to margin requirements, the number of eligible investment rating categories, preemption of State law, and the treat-
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1364 

ment of such securities as government securities for the purpose of State investment limitations, affect the structure and 

operation of such markets; and 

(4) in view of the findings made pursuant to paragraphs 

(2) and (3), any additional suitability or disclosure requirements or other investor protections that should be required. 

(b) REPORTS.— 

(1) IN GENERAL.—The Board and the Commission shall 

submit to the Congress a report on the results of the study required by subsection (a) before the end of— 

(A) the 2-year period beginning on the date of enactment of this Act; 

(B) the 4-year period beginning on such date of enactment; and 

(C) the 6-year period beginning on such date of 

enactment. 

(2) CONTENTS OF REPORT.—Each report required under 

paragraph (1) shall contain or be accompanied by such recommendations for administrative or legislative action as the 

Board and the Commission consider appropriate and may include recommendations regarding the need to develop a system 

for reporting additional information concerning investments by 

the entities described in subsection (a)(2). 

(c) DEFINITIONS.—As used in this section— 

(1) the term "Board" means the Board of Governors of the 

Federal Reserve System; and 

(2) the term "Commission" means the Securities and Exchange Commission. 

SEC. 210. [12 U.S.C. 3305 nt] CONSISTENT USE OF FINANCIAL TERMINOLOGY. 

Not later than 2 years after the date of enactment of this Act, 

the Financial institutions Examination Council shall report to the 

Congress on its recommendations for the use of consistent financial 

terminology by depository institutions for small business loans or 

leases of personal property which are sold for the creation of small 

business related securities (as defined in section 3(a)(53)(A) of the 

Securities Exchange Act of 1934). 

Subtitle B—Small Business Capital 

Enhancement 

SEC. 251. [12 U.S.C. 4741] FINDINGS AN D PURPOSES. 

(a) FINDINGS.—The Congress finds that— 

(1) small business concerns are a vital part of the economy, 

accounting for the majority of new jobs, new products, and new 

services created in the United States; 

(2) adequate access to debt capital is a critical component 

for small business development, productivity, expansion, and 

success in the United States; 

(3) commercial banks are the most important suppliers of 

debt capital to small business concerns in the United States; 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1365 

(4) commercial banks and other depository institutions 

have various incentives to minimize their risk in financing 

small business concerns; 

(5) as a result of such incentives, many small business concerns with economically sound financing needs are unable to 

obtain access to needed debt capital; 

(6) the small business capital access programs implemented by certain States are a flexible and efficient tool to assist financial institutions in providing access to needed debt 

capital for many small business concerns in a manner consistent with safety and soundness regulations; 

(7) a small business capital access program would complement other programs which assist small business concerns 

in obtaining access to capital; and 

(8) Federal policy can stimulate and accelerate efforts by 

States to implement small business capital access programs by 

providing an incentive to States, while leaving the 

administration of such programs to each participating State. 

(b) PURPOSES.—By encouraging States to implement administratively efficient capital access programs that encourage commercial banks and other depository institutions to provide access to 

debt capital for a broad portfolio of small business concerns, and 

thereby promote a more efficient and effective debt market, the 

purposes of this subtitle are— 

(1) to promote economic opportunity and growth; 

(2) to create jobs; 

(3) to promote economic efficiency; 

(4) to enhance productivity; and 

(5) to spur innovation. 

SEC. 252. [12 U.S.C. 4742] DEFINITIONS. 

For purposes of this subtitle— 

(1) the term ''Fund'' means the Community Development 

Financial Institutions Fund established under section 104; 

(2) the term ''appropriate Federal banking agency''— 

(A) has the same meaning as in section 3 of the Federal Deposit Insurance Act; and 

(B) includes the National Credit Union Administration 

Board in the case of any credit union the deposits of which 

are insured in accordance with the Federal Credit Union 

Act; 

(3) the term ''early loan'' means a loan enrolled at a time 

when the aggregate covered amount of loans previously enrolled under the Program by a particular participating financial institution is less than $5,000,000; 

(4) the term ''enrolled loan'' means a loan made by a participating financial institution that is enrolled by a participating State in accordance with this subtitle; 

(5) the term ''financial institution'' means any federally 

chartered or State-chartered commercial bank, savings association, savings bank, or credit union; 

(6) the term ''participating financial institution'' means any 

financial institution that has entered into a participation 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1366 

agreement with a participating State in accordance with section 254; 

(7) the term ''participating State'' means any State that 

has been approved for participation in the Program in accordance with section 253; 

(8) the term ''passive real estate ownership'' means ownership of real estate for the purpose of deriving income from 

speculation, trade, or rental, except that such term shall not 

include— 

(A) the ownership of that portion of real estate being 

used or intended to be used for the operation of the business of the owner of the real estate (other than the business of passive ownership of real estate); or 

(B) the ownership of real estate for the purpose of construction or renovation, until the completion of the construction or renovation phase; 

(9) the term ''Program'' means the Small Business Capital 

Enhancement Program established under this subtitle; 

(10) the term ''reserve fund'' means a fund, established by 

a participating State, earmarked for a particular participating 

financial institution, for the purposes of— 

(A) depositing all required premium charges paid by 

the participating financial institution and by each borrower receiving a loan under the Program from a participating financial institution; 

(B) depositing contributions made by the participating 

State; and 

(C) covering losses on enrolled loans by disbursing 

accumulated funds; and 

(11) the term ''State'' means— 

(A) a State of the United States; 

(B) the District of Columbia; 

(C) any political subdivision of a State of the United 

States, which subdivision has a population in excess of the 

population of the least populated State of the United 

States; and 

(D) any other political subdivision of a State of the 

United States that the Fund determines has the capacity 

to participate in the program. 

SEC. 253. [12 U.S.C. 4743] APPROVING STATES FOR PARTICIPATION. 

(a) APPLICATION.—Any State may apply to the Fund for approval to be a participating State under the Program and to be eligible for reimbursement by the Fund pursuant to section 257. 

(b) APPROVAL CRITERIA.—The Fund shall approve a State to be 

a participating State, if— 

(1) a specific department or agency of the State has been 

designated to implement the Program; 

(2) all legal actions necessary to enable such designated 

department or agency to implement the Program have been 

accomplished; 

(3) funds in the amount of at least $1 for every 2 people 

residing in the State (as of the last decennial census for which 

data have been released) are available and have been legally 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1367 

committed to contributions by the State to reserve funds, with 

such funds being available without time limit and without requiring additional legal action, except that such requirements 

shall not be construed to limit the authority of the State to 

take action at a later time that results in the termination of 

its obligation to enroll loans and make contributions to reserve 

funds; 

(4) the State has prescribed a form of participation agreement to be entered into between it and each participating 

financial institution that is consistent with the requirements 

and purposes of this subtitle; and 

(5) the State and the Fund have executed a reimbursement 

agreement that conforms to the requirements of this subtitle. 

(c) EXISTING STATE PROGRAMS.— 

(1) I N GENERAL.—A State that is not a participating State, 

but that has its own capital access program providing portfolio 

insurance for business loans (based on a separate loss reserve 

fund for each financial institution), may apply at any time to 

the Fund to be approved to be a participating State. The Fund 

shall approve such State to be a participating State, and to be 

eligible for reimbursements by the Fund pursuant to section 

257, if the State— 

(A) satisfies the requirements of subsections (a) and 

(b); and 

(B) certifies that each affected financial institution has 

satisfied the requirements of section 254. 

(2) APPLICABLE TERMS OF PARTICIPATION.— 

(A) STATUS OF INSTITUTIONS.—If a State is approved 

for participation under paragraph (1), each financial institution with a participation agreement in effect with the 

participating State shall immediately be considered a participating financial institution. Reimbursements may be 

made under section 237 in connection with all contributions made to the reserve fund by the State in connection 

with lending that occurs on or after the date on which the 

Fund approves the State for participation. 

( B) EFFECTIVE DATE OF PARTICIPATION.—If a n 

amended participation agreement that conforms with section 255 is required in order to secure participation approval by the Fund, contributions subject to reimbursement under section 257 shall include only those contributions made to a reserve fund with respect to loans enrolled 

on or after the date that an amended participation agreement between the participating State and the participating 

financial institution becomes effective. 

(C) USE OF ACCUMULATED RESERVE FUNDS.—A State 

that is approved for participation in accordance with this 

subsection may continue to implement the program utilizing the reserve funds accumulated under the State 

program. 

(d) PRIOR APPROPRIATIONS REQUIREMENT.—Th e Fund shall not 

approve a State for participation in the Program until at least 

$50,000,000 has been appropriated to the Fund (subject to an 

appropriations Act), without fiscal year limitation, for the purpose 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1368 

of making reimbursements pursuant to section 257 and otherwise 

carrying out this subtitle. 

(e) AMENDMENTS TO AGREEMENTS.—If a State that has been 

approved to be a participating State wishes to amend its form of 

participation agreement and continue to be a participating State, 

such State shall submit such amendment for review by the Fund 

in accordance with subsection (b)(4). Any such amendment shall become effective only after it has been approved by the Fund. 

SEC. 254. [12 U.S.C. 4744] PARTICIPATIO N AGREEMENTS. 

(a) I N GENERAL.—A participating State may enter into a participation agreement with any financial institution determined by 

the participating State, after consultation with the appropriate 

Federal banking agency, to have sufficient commercial lending 

experience and financial and managerial capacity to participate in 

the Program. The determination by the State shall not be reviewable by the Fund. 

(b) PARTICIPATING FINANCIAL INSTITUTIONS.—Upon entering 

into the participation agreement with the participating State, the 

financial institution shall become a participating financial institution eligible to enroll loans under the Program. 

SEC. 255. [12 U.S.C. 4745] TERM S OF PARTICIPATIO N AGREEMENTS. 

(a) IN GENERAL.—The participation agreement to be entered 

into by a participating State and a participating financial institution shall include all provisions required by this section, and shall 

not include any provisions inconsistent with the provisions of this 

section. 

(b) ESTABLISHMENT OF SEPARATE RESERVE FUNDS.— A separate 

reserve fund shall be established by the participating State for 

each participating financial institution. All funds credited to a reserve fund shall be the exclusive property of the participating 

State. Each reserve fund shall be an administrative account for the 

purposes of— 

(1) receiving all required premium charges to be paid by 

the borrower and participating financial institution and contributions by the participating State; and 

(2) disbursing funds, either to cover losses sustained by the 

participating financial institution in connection with loans 

made under the program, or as contemplated by subsections 

(d) and (r). 

(c) INVESTMENT AUTHORITY.—Subject to applicable State law, 

the participating State may invest, or cause to be invested, funds 

held in a reserve fund by establishing a deposit account at the participating financial institution in the name of the participating 

State. In the event that funds in the reserve fund are not deposited 

in such an account, such funds shall be invested in a form that the 

participating State determines is safe and liquid. 

(d) EARNED INCOME AND INTEREST.—Interest or income earned 

on the funds credited to a reserve fund shall be deemed to be part 

of the reserve fund, except that a participating State may, as further specified in the participation agreement, provide authority for 

the participating State to withdraw some or all of such interest or 

income earned. 

(e) LOA N TERMS AND CONDITIONS.— 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1369 

(1) I N GENERAL.—A loan to be filed for enrollment under 

the Program may be made with such interest rate, fees, and 

other terms and conditions as agreed upon by the participating 

financial institution and the borrower, consistent with applicable law. 

(2) LINES OF CREDIT.—If a loan to be filed for enrollment 

is in the form of a line of credit, the amount of the loan shall 

be considered to be the maximum amount that can be drawn 

by the borrower against the line of credit. 

(f) ENROLLMENT PROCESS.— 

(1) FILING. — 

(A) I N GENERAL.—A participating financial institution 

shall file each loan made under the Program for enrollment by completing and submitting to the participating 

State a form prescribed by the participating State. 

(B) FORM.—The form referred to in subparagraph (A) 

shall include a representation by the participating financial institution that it has complied with the participation 

agreement in enrolling the loan with the State. 

(C) PREMIU M CHARGES.—Accompanying the completed 

form shall be the nonrefundable premium charges paid by 

the borrower and the participating financial institution, or 

evidence that such premium charges have been deposited 

into the deposit account containing the reserve fund, if applicable. 

(D) SUBMISSION.—The participation agreement shall 

require that the items required by this subsection shall be 

submitted to the participating State by the participating 

financial institutions not later than 10 calendar days after 

a loan is made. 

(2) ENROLLMENT BY STATE.—Upon receipt by the participating State of the filing submitted in accordance with paragraph (1), the participating State shall promptly enroll the 

loan and make a matching contribution to the reserve fund in 

accordance with subsection (j), unless the information submitted indicates that the participating financial institution has 

not complied with the participation agreement in enrolling the 

loan. 

(g) COVERAGE AMOUNT.—I n filing a loan for enrollment under 

the Program, the participating financial institution may specify an 

amount to be covered under the Program that is less than the full 

amount of the loan. 

(h) PREMIU M CHARGES.— 

(1) MINIMU M AND MAXIMU M AMOUNTS.—The premium 

charges payable to the reserve fund by the borrower and the 

participating financial institution shall be prescribed by the 

participating financial institution, within minimum and maximum limits set forth in the participation agreement. The participation agreement shall establish minimum and maximum 

limits whereby the sum of the premium charges paid in connection with a loan by the borrower and the participating 

financial institution is not less than 3 percent nor more than 

7 percent of the amount of the loan covered under the Program. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1370 

(2) ALLOCATION OF PREMIUM CHARGES.—The participation 

agreement shall specify terms for allocating premium charges 

between the borrower and the participating financial institution. However, if the participating financial institution is required to pay any of the premium charges, the participation 

agreement shall authorize the participating financial institution to recover from the borrower the cost of the payment of 

the participating financial institution, in any manner on which 

the participating financial institution and the borrower agree. 

(i) RESTRICTIONS.— 

(1) ACTIONS PROHIBITED.—Except as provided in subsection 

(h) and paragraph (2) of this subsection, the participating State 

may not— 

(A) impose any restrictions or requirements, relating 

to the interest rate, fees, collateral, or other business 

terms and conditions of the loan; or 

(B) condition enrollment of a loan in the Program on 

the review by the State of the risk or creditworthiness of 

a loan. 

(2) EFFECT ON OTHER LAW.—Nothing in this subtitle shall 

affect the applicability of any other law to the conduct by a 

participating financial institution of its business. 

(j) STATE CONTRIBUTIONS.—In enrolling a loan under the Program, the participating State shall contribute to the reserve fund 

an amount, as provided for in the participation agreement, which 

shall not be less than the sum of the amount of premium charges 

paid by the borrower and the participating financial institution. 

(k) ELEMENTS OF CLAIMS.— 

(1) FILING.—If a participating financial institution charges 

off all or part of an enrolled loan, such participating financial 

institution may file a claim for reimbursement with the participating State by submitting a form that— 

(A) includes the representation by the participating 

financial institution that it is filing the claim in accordance with the terms of the applicable participation agreement; and 

(B) contains such other information as may be required by the participating State. 

(2) TIMING.—Any claim filed under paragraph (1) shall be 

filed contemporaneously with the action of the participating 

financial institution to charge off all or part of an enrolled 

loan. The participating financial institution shall determine 

when and how much to charge off on an enrolled loan, in a 

manner consistent with its usual method for making such 

determinations on business loans that are not enrolled loans 

under this subtitle. 

(l) ELEMENTS OF CLAIMS.—A claim filed by a participating 

financial institution may include the amount of principal charged 

off, not to exceed the covered amount of the loan. Such claim may 

also include accrued interest and out-of-pocket expenses, if and to 

the extent provided for under the participation agreement. 

( m ) PAYMENT OF CLAIMS.— 

(1) IN GENERAL.—Except as provided in subsection (n) and 

paragraph (2) of this subsection, upon receipt of a claim filed 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1371 

in accordance with this section and the participation agreement, the participating State shall promptly pay to the participating financial institution, from funds in the reserve fund, the 

full amount of the claim as submitted. 

(2) INSUFFICIENT RESERVE FUNDS.—I f there are insufficient 

funds in the reserve fund to cover the entire amount of a claim 

of a participating financial institution, the participating State 

shall pay to the participating financial institution an amount 

equal to the current balance in the reserve fund. if the enrolled 

loan for which the claim has been filed— 

(A) is not an early loan, such payment shall be deemed 

fully to satisfy the claim, and the participating financial 

institution shall have no other or further right to receive 

any amount from the reserve fund with respect to such 

claim; or 

(B) is an early loan, such payment shall not be deemed 

fully to satisfy the claim of the participating financial 

institution, and at such time as the remaining balance of 

the claim does not exceed 75 percent of the balance in the 

reserve fund, the participating State shall, upon the request of the participating financial institution, pay any remaining amount of the claim. 

(n) DENIA L OF CLAIMS.—A participating State may deny a 

claim if a representation or warranty made by the participating 

financial institution to the participating State at the time that the 

loan was filed for enrollment or at the time that the claim was submitted was known by the participating financial institution to be 

false. 

(o) SUBSEQUENT RECOVERY OF CLAI M AMOUNT.—If , subsequent 

to payment of a claim by the participating State, a participating 

financial institution recovers from a borrower any amount for 

which payment of the claim was made, the participating financial 

institution shall promptly pay to the participating State for deposit 

into the reserve fund the amount recovered, less any expenses incurred by the institution in collection of such amount. 

(p) PARTICIPATION AGREEMENT TERMS.— 

(1) I N GENERAL.—In connection with the filing of a loan for 

enrollment in the Program, the participation agreement— 

(A) shall require the participating financial institution 

to obtain an assurance from each borrower that— 

(i) the proceeds of the loan will be used for a business purpose; 

(ii) the loan will not be used to finance passive 

real estate ownership; and 

(iii) the borrower is not— 

(i) an executive officer, director, or principal 

shareholder of the participating financial institution; 

(ii) a member of the immediate family of an 

executive officer, director, or principal shareholder 

of the participating financial institution; or 

(iii) a related interest of any such executive 

officer, director, principal shareholder, or member 

of the immediate family; 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1372 

(B) shall require the participating financial institution 

to provide assurances to the participating State that the 

loan has not been made in order to place under the protection of the Program prior debt that is not covered under 

the Program and that is or was owed by the borrower to 

the participating financial institution or to an affiliate of 

the participating financial institution; 

(C) may provide that if— 

(i) a participating financial institution makes a 

loan to a borrower that is a refinancing of a loan previously made to the borrower by the participating 

financial institution or an affiliate of the participating 

financial institution; 

(ii) such prior loan was not enrolled in the Program; and 

(iii) additional or new financing is extended by the 

participating financial institution as part of the refinancing, 

the participating financial institution may file the loan for 

enrollment, with the amount to be covered under the Program not to exceed the amount of any additional or new 

financing; and 

(D) may include additional restrictions on the eligibility of loans or borrowers that are not inconsistent with 

the provisions and purposes of this subtitle. 

(2) DEFINITIONS.—For purposes of this subsection, the 

terms "executive officer'', "director", "principal shareholder'', 

"immediate family'', and "related interest'' refer to the same 

relationship to a participating financial institution as the relationship described in part 215 of title 12 of the Code of Federal 

Regulations, or any successor to such part. 

(q) TERMINATION CLAUSE.—In each participation agreement, 

the participating State shall reserve for itself the ability to terminate its obligation to enroll loans under the Program. Any such termination shall be prospective only, and shall not apply to amounts 

of loans enrolled under the Program prior to such 

termination. 

(r) ALLOWABLE WITHDRAWALS FRO M FUND.—The participation 

agreement may provide that, if, for any consecutive period of not 

less than 24 months, the aggregate outstanding balance of all enrolled loans for a participating financial institution is continually 

less than the outstanding balance in the reserve fund for that participating financial institution, the participating State, in its discretion, may withdraw an amount from the reserve fund to bring the 

balance in the reserve fund down to the outstanding balance of all 

such enrolled loans. 

(s) GRANDFATHERED PROVISION.— 

(1) SPECIAL TREATMENT OF PREMIUM CHARGES.—Notwithstanding subsection (b) or (d), the participation agreement, if 

explicitly authorized by a statute enacted by the State before 

the date of enactment of this Act, may allow a participating 

financial institution to treat the premium charges paid by the 

participating financial institution and the borrower into the reserve fund, and interest or income earned on funds in the re-
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1373 

serve fund that are deemed to be attributable to such premium 

charges, as assets of the participating financial institution for 

accounting purposes, subject to withdrawal by the participating financial institution only— 

(A) for the payment of claims approved by the participating State in accordance with this section; and 

(B) upon the participating financial institution's withdrawal from authority to make new loans under the 

program. 

(2) PAYMENT OF POST-WITHDRAWAL CLAIMS.—Afte r an y 

withdrawal of assets from the reserve fund pursuant to paragraph (1)(B), any future claims filed by the participating financial institution on loans remaining in its capital access program portfolio shall only be paid from funds remaining in the 

reserve fund to the extent that, in the aggregate, such claims 

exceed the sum of the amount of such withdrawn assets, and 

interest on that amount, imputed at the same rate as income 

would have accrued had the amount not been withdrawn. 

(3) CONDITIONS FOR TERMINATING SPECIAL AUTHORITY.—If 

the Fund determines that the inclusion in a participation 

agreement of the provisions authorized by this subsection is resulting in the enrollment of loans under the program that are 

likely to have been made without assistance provided under 

this subtitle, the Fund may notify the participating State that 

henceforth, the Fund will only make reimbursements to the 

State under section 257 with respect to a loan if the participation agreement between the participating State and each participating financial institution has been amended to conform 

with this section, without exercise of the special authority 

granted by this subsection. 

SEC. 256. [12 U.S.C. 4746] REPORTS. 

(a) RESERVE FUNDS REPORT.—O n or before the last day of each 

calendar quarter, a participating State shall submit to the Fund a 

report of contributions to reserve funds made by the participating 

State during the previous calendar quarter. if the participating 

State has made contributions to one or more reserve funds during 

the previous quarter, the report shall— 

(1) indicate the total amount of such contributions; 

(2) indicate the amount of contributions which is subject to 

reimbursement, which shall be equal to the total amount of 

contributions, unless one of the limitations contained in section 

257 is applicable; 

(3) if one of the limitations in section 257 is applicable, 

provide documentation of the applicability of such limitation 

for each loan for which the limitation applies; and 

(4) include a certification by the participating State that— 

(A) the information provided in accordance with paragraphs (1), (2), and (3) is accurate; 

(B) funds in an amount meeting the minimum requirements of section 253(b)(3) continue to be available and legally committed to contributions by the State to reserve 

funds, less any amount that has been contributed by the 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1374 

State to reserve funds subsequent to the State being approved for participation in the Program; 

(C) there has been no unapproved amendment to any 

participation agreement or the form of participation agreements; and 

(D) the participating State is otherwise implementing 

the Program in accordance with this subtitle and regulations issued pursuant to section 259. 

(b) ANNUA L DATA.—No t later than March 31 of each year, each 

participating State shall submit to the Fund annual data indicating 

the number of borrowers financed under the Program, the total 

amount of covered loans, and breakdowns by industry type, loan 

size, annual sales, and number of employees of the borrowers financed. 

(c) FORM.—The reports and data filed pursuant to subsections 

(a) and (b) shall be in such form as the Fund may require. 

SEC. 257. [12 U.S.C. 4747] REIMBURSEMEN T BY TH E FUND . 

(a) REIMBURSEMENTS.—No t later than 30 calendar days after 

receiving a report filed in compliance with section 256, the Fund 

shall reimburse the participating State in an amount equal to 50 

percent of the amount of contributions by the participating State 

to the reserve funds that are subject to reimbursement by the Fund 

pursuant to section 256 and this section. The Fund shall reimburse 

participating States, as it receives reports pursuant to section 

256(a), until available funds are expended. 

(b) SIZE OF ASSISTED BORROWER.—The Fund shall not provide 

any reimbursement to a participating State with respect to an enrolled loan made to a borrower that has 500 or more employees at 

the time that the loan is enrolled in the Program. 

(c) THREE-YEA R MAXIMUM.—Th e amount of reimbursement to 

be provided by the Fund to a participating State over any 3-year 

period in connection with loans made to any single borrower or any 

group of borrowers among which a common enterprise exists shall 

not exceed $75,000. For purposes of this subsection, ''common 

enterprise'' shall have the same meaning as in part 32 of title 12 

of the Code of Federal Regulations, or any successor to that part. 

(d) LOANS TOTALING LESS THA N $2,000,000.—In connection 

with a loan in which the covered amount of the loan plus the covered amount of all previous loans enrolled by a participating financial institution does not exceed $2,000,000, the amount of reimbursement by the Fund to the participating State shall not exceed 

the lesser of— 

(1) 75 percent of the sum of the premium charges paid to 

the reserve fund by the borrower and the participating financial institution; or 

(2) 5.25 percent of the covered amount of the loan. 

(e) LOANS TOTALING MOR E THA N $2,000,000.—In connection 

with a loan in which the sum of the covered amounts of all previous loans enrolled by the participating financial institution in the 

Program equals or exceeds $2,000,000, the amount of reimbursement to be provided by the Fund to the participating State shall 

not exceed the lesser of— 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1375 

(1) 50 percent of the sum of the premium charges paid by 

the borrower and the participating financial institution; or 

(2) 3.5 percent of the covered amount of the loan. 

(f) OTHER AMOUNTS.—In connection with the enrollment of a 

loan that will cause the aggregate covered amount of all enrolled 

loans to exceed $2,000,000, the amount of reimbursement by the 

Fund to the participating State shall be determined— 

(1) by applying subsection (d) to the portion of the loan, 

which when added to the aggregate covered amount of all previously enrolled loans equals $2,000,000; and 

(2) by applying subsection (e) to the balance of the loan. 

SEC. 258. [12 U.S.C. 4748] REIMBURSEMENT TO THE FUND. 

(a) I N GENERAL.—If a participating State withdraws funds 

from a reserve fund pursuant to terms of the participation agreement permitted by subsection (d) or (r) of section 255, such participating State shall, not later than 15 calendar days after such withdrawal, submit to the Fund an amount computed by multiplying 

the amount withdrawn by the appropriate factor, as determined 

under subsection (b). 

(b) FACTOR.—The appropriate factor shall be obtained by dividing the total amount of contributions that have been made by the 

participating State to all reserve funds which were subject to 

reimbursement— 

(1) by 2; and 

(2) by the total amount of contributions made by the participating State to all reserve funds, including if applicable, 

contributions that have been made by the State prior to becoming a participating State if the State continued its own capital 

access program in accordance with section 253(b). 

(c) USE OF REIMBURSEMENTS.—The Fund may use funds reimbursed pursuant to this section to make reimbursements under section 257. 

SEC. 259. [12 U.S.C. 4749] REGULATIONS. 

The Fund shall promulgate appropriate regulations to implement this subtitle. 

SEC. 260. [12 U.S.C. 4750] AUTHORIZATION OF APPROPRIATIONS. 

(a) AMOUNT.—There are authorized to be appropriated to the 

Fund $50,000,000 to carry out this subtitle. 

(b) BUDGETARY TREATMENT.—The amount authorized to be 

appropriated under subsection (a) shall be subject to discretionary 

spending caps, as provided in section 601 of the Congressional 

Budget Act of 1974, and therefore shall reduce by an equal amount 

funds made available for other discretionary spending programs. 

SEC. 261. [12 U.S.C. 4741 nt] EFFECTIVE DATE. 

This subtitle shall become effective on January 6, 1996. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1376 

TITLE III—PAPERWORK REDUCTIO N 

A N D REGULATORY IMPROVEMEN T 

SEC. 301. [12 U.S.C. 4801] INCORPORATE D DEFINITIONS. 

unless otherwise specifically provided in this title, for purposes 

of this title— 

(1) the terms "appropriate Federal banking agency'', "Federal banking agencies'', "insured depository institution", and 

"State bank supervisor'' have the same meanings as in section 

3 of the Federal Deposit Insurance Act; and 

(2) the term "insured credit union'' has the same meaning 

as in section 101 of the Federal Credit Union Act. 

SEC. 302. [12 U.S.C. 4802] ADMINISTRATIVE CONSIDERATION OF BURD E N WIT H NEW REGULATIONS. 

(a) AGENCY CONSIDERATIONS.—In determining the effective 

date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, each Federal banking 

agency shall consider, consistent with the principles of safety and 

soundness and the public interest— 

(1) any administrative burdens that such regulations 

would place on depository institutions, including small depository institutions and customers of depository institutions; and 

(2) the benefits of such regulations. 

(b) ADEQUATE TRANSITION PERIOD FOR NE W REGULATIONS.— 

(1) IN GENERAL.—New regulations and amendments to regulations prescribed by a Federal banking agency which impose 

additional reporting, disclosures, or other new requirements on 

insured depository institutions shall take effect on the first day 

of a calendar quarter which begins on or after the date on 

which the regulations are published in final form, unless— 

(A) the agency determines, for good cause published 

with the regulation, that the regulation should become 

effective before such time; 

(B) the regulation is issued by the Board of Governors 

of the Federal Reserve System in connection with the implementation of monetary policy; or 

(C) the regulation is required to take effect on a date 

other than the date determined under this paragraph pursuant to any other Act of Congress. 

(2) EARLY COMPLIANCE.—Any person who is subject to a 

regulation described in paragraph (1) may comply with the regulation before the effective date of the regulation. 

SEC. 303. [12 U.S.C. 4803] STREAMLININ G OF REGULATORY REQUIREMENTS. 

(a) REVIEW OF REGULATIONS; REGULATORY UNIFORMITY.—During the 2-year period beginning on the date of enactment of this 

Act, each Federal banking agency shall, consistent with the principles of safety and soundness, statutory law and policy, and the 

public interest— 

(1) conduct a review of the regulations and written policies 

of that agency to— 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1377 

(A) streamline and modify those regulations and policies in order to improve efficiency, reduce unnecessary 

costs, and eliminate unwarranted constraints on credit 

availability; 

(B) remove inconsistencies and outmoded and duplicative requirements; and 

(C) with respect to regulations prescribed pursuant to 

section 18(o) of the Federal Deposit Insurance Act, consider the impact that such standards have on the availability of credit for small business, residential, and agricultural purposes, and on low- and moderate-income communities; 

(2) review the extent to which existing regulations require 

insured depository institutions and insured credit unions to 

produce unnecessary internal written policies and eliminate 

such requirements, where appropriate; 

(3) work jointly with the other Federal banking agencies to 

make uniform all regulations and guidelines implementing 

common statutory or supervisory policies; and 

(4) submit a joint report to the Congress at the end of such 

2-year period detailing the progress of the agencies in carrying 

out this subsection. 

(b) REVIEW OF DISCLOSURES.—The Board of Governors of the 

Federal Reserve System, in consultation with the consumer advisory council to such Board, consumers, representatives of consumers, lenders, and other interested persons, shall— 

(1) review the regulations and written policies of the Board 

with respect to disclosures pursuant to the Truth in Lending 

Act with regard to variable-rate mortgages in order to simplify 

the disclosures, if necessary, and make the disclosures more 

meaningful and comprehensible to consumers; 

(2) implement any necessary regulatory changes, consistent with applicable law; and 

(3) not later than 2 years after completion of the review required by paragraph (1), submit a report to the Congress on 

the results of its actions taken in accordance with this subsection and any recommended legislative actions. 

SEC. 304. [12 U.S.C. 4804] ELIMINATIO N OF DUPLICATIVE FILINGS. 

The Federal banking agencies shall work jointly— 

(1) to eliminate, to the extent practicable, duplicative or 

otherwise unnecessary requests for information in connection 

with applications or notices to the agencies; and 

(2) to harmonize, to the extent practicable, any inconsistent publication and public notice requirements. 

[Sections 305 and 306 amended other laws.] 

SEC. 307. [12 U.S.C. 4805] CALL REPOR T SIMPLIFICATION . 

(a) MODERNIZATION OF CALL REPORT FILIN G AND DISCLOSURE 

SYSTEM.—In order to reduce the administrative requirements pertaining to bank reports of condition, savings association financial 

reports, and bank holding company consolidated and parent-only 

financial statements, and to improve the timeliness of such reports 

and statements, the Federal banking agencies shall— 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1378 

(1) work jointly to develop a system under which— 

(A) insured depository institutions and their affiliates 

may file such reports and statements electronically; and 

(B) the Federal banking agencies may make such reports and statements available to the public electronically; 

and 

(2) not later than 1 year after the date of enactment of this 

Act, report to the Congress and make recommendations for legislation that would enhance efficiency for filers and users of 

such reports and statements. 

(b) UNIFOR M REPORTS AND SIMPLIFICATION OF INSTRUCTIONS.— 

The Federal banking agencies shall, consistent with the principles 

of safety and soundness, work jointly— 

(1) to adopt a single form for the filing of core information 

required to be submitted under Federal law to all such agencies in the reports and statements referred to in subsection (a); 

and 

(2) to simplify instructions accompanying such reports and 

statements and to provide an index to the instructions that is 

adequate to meet the needs of both filers and users. 

(c) REVIEW OF CALL REPORT SCHEDULE.—Eac h Federal banking agency shall— 

(1) review the information required by schedules 

supplementing the core information referred to in subsection 

(b); and 

(2) eliminate requirements that are not warranted for reasons of safety and soundness or other public purposes. 

[Section 308 amended other laws.] 

SEC. 309. [12 U.S.C. 4806] REGULATORY APPEALS PROCESS, OMBUDSMAN, AN D ALTERNATIVE DISPUTE RESOLUTION. 

(a) IN GENERAL.—Not later than 180 days after the date of 

enactment of this Act, each appropriate Federal banking agency 

and the National Credit Union Administration Board shall establish an independent intra-agency appellate process. The process 

shall be available to review material supervisory determinations 

made at insured depository institutions or at insured credit unions 

that the agency supervises. 

(b) REVIEW PROCESS.—In establishing the independent appellate process under subsection (a), each agency shall ensure that— 

(1) any appeal of a material supervisory determination by 

an insured depository institution or insured credit union is 

heard and decided expeditiously; and 

(2) appropriate safeguards exist for protecting the appellant from retaliation by agency examiners. 

(c) COMMEN T PERIOD.—No t later than 90 days after the date 

of enactment of this Act, each appropriate Federal banking agency 

and the National Credit Union Administration Board shall provide 

public notice and opportunity for comment on proposed guidelines 

for the establishment of an appellate process under this section. 

(d) AGENCY OMBUDSMAN.— 

(1) ESTABLISHMENT REQUIRED.—Not later than 180 days 

after the date of enactment of this Act, each Federal banking 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1379 

agency and the National Credit Union Administration Board 

shall appoint an ombudsman. 

(2) DUTIES OF OMBUDSMAN.—The ombudsman appointed in 

accordance with paragraph (1) for any agency shall— 

(A) act as a liaison between the agency and any affected person with respect to any problem such party may 

have in dealing with the agency resulting from the regulatory activities of the agency; and 

(B) assure that safeguards exist to encourage complainants to come forward and preserve confidentiality. 

(e) ALTERNATIVE DISPUTE RESOLUTION PILOT PROGRAM.— 

(1) IN GENERAL.—Not later than 18 months after the date 

of enactment of this Act, each Federal banking agency and the 

National Credit Union Administration Board shall develop and 

implement a pilot program for using alternative means of dispute resolution of issues in controversy (hereafter in this section referred to as the ''alternative dispute resolution program'') that is consistent with the requirements of subchapter 

IV of chapter 5 of title 5, United States Code, if the parties to 

the dispute, including the agency, agree to such proceeding. 

(2) STANDARDS.—An alternative dispute resolution pilot 

program developed under paragraph (1) shall— 

(A) be fair to all interested parties to a dispute; 

(B) resolve disputes expeditiously; and 

(C) be less costly than traditional means of dispute 

resolution, including litigation. 

(3) INDEPENDENT EVALUATION.—Not later than 18 months 

after the date on which a pilot program is implemented under 

paragraph (1), the Administrative Conference of the United 

States shall submit to the Congress a report containing— 

(A) an evaluation of that pilot program; 

(B) the extent to which the pilot programs meet the 

standards established under paragraph (2); 

(C) the extent to which parties to disputes were offered alternative means of dispute resolution and the frequency with which the parties, including the agencies, 

accepted or declined to use such means; and 

(D) any recommendations of the Conference to improve 

the alternative dispute resolution procedures of the Federal banking agencies and the National Credit Union 

Administration Board. 

(4) IMPLEMENTATION OF PROGRAM.—At any time after completion of the evaluation under paragraph (3)(A), any Federal 

banking agency and the National Credit Union Administration 

Board may implement an alternative dispute resolution program throughout the agency, taking into account the results of 

that evaluation. 

(5) COORDINATION WIT H EXISTING AGENCY ADR PROGRAMS.— 

(A) EVALUATION REQUIRED.—If any Federal banking 

agency or the National Credit Union Administration maintains an alternative dispute resolution program as of the 

date of enactment of this Act under any other provision of 

law, the Administrative Conference of the United States 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1380 

shall include such program in the evaluation conducted 

under paragraph (3)(A). 

(B) MULTIPLE ADR PROGRAMS.—No provision of this 

section shall be construed as precluding any Federal banking agency or the National Credit Union Administration 

Board from establishing more than 1 alternative means of 

dispute resolution. 

(f) DEFINITIONS.—For purposes of this section, the following 

definitions shall apply: 

(1) MATERIAL SUPERVISORY DETERMINATIONS.—The term 

"material supervisory determinations''— 

(A) includes determinations relating to— 

(i) examination ratings; 

(ii) the adequacy of loan loss reserve provisions; 

and 

(iii) loan classifications on loans that are significant to an institution; and 

(B) does not include a determination by a Federal 

banking agency or the National Credit Union Administration Board to appoint a conservator or receiver for an insured depository institution or a liquidating agent for an 

insured credit union, as the case may be, or a decision to 

take action pursuant to section 38 of the Federal Deposit 

Insurance Act or section 212 of the Federal Credit Union 

Act, as appropriate. 

(2) INDEPENDENT APPELLATE PROCESS.—The term "independent appellate process'' means a review by an agency official who does not directly or indirectly report to the agency 

official who made the material supervisory determination 

under review. 

(3) ALTERNATIVE MEANS OF DISPUTE RESOLUTION.—The 

term "alternative means of dispute resolution'' has the meaning given to such term in section 571 of title 5, United States 

Code. 

(4) ISSUES I N CONTROVERSY.—The term "issues in controversy'' means— 

(A) any final agency decision involving any claim 

against an insured depository institution or insured credit 

union for which the agency has been appointed conservator 

or receiver or for which a liquidating agent has been appointed, as the case may be; 

(B) any final action taken by an agency in the agency's 

capacity as conservator or receiver for an insured depository institution or by the liquidating agent appointed for 

an insured credit union; and 

(C) any other issue for which the appropriate Federal 

banking agency or the National Credit Union Administration Board determines that alternative means of dispute 

resolution would be appropriate. 

(g) EFFECT ON OTHER AUTHORITY.—Nothing in this section 

shall affect the authority of an appropriate Federal banking agency 

or the National Credit Union Administration Board to take enforcement or supervisory action. 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1381 

[Sections 310 through 327 amended other laws.] 

SEC. 328. [12 U.S.C. 4801 nt] STUDY AND REPORT ON CAPITAL STANDARDS AND THEIR IMPACT ON THE ECONOMY. 

(a) IN GENERAL.—The Secretary of the Treasury, in consultation with the Federal banking agencies, shall conduct a study of 

the effect that the implementation of risk-based capital standards 

for depository institutions, including the Basle international capital 

standards, is having on— 

(1) the safety and soundness of insured depository institutions; 

(2) the availability of credit, particularly to individuals and 

small businesses; and 

(3) economic growth. 

(b) REPORT.— 

(1) IN GENERAL.—Before the end of the 1-year period 

beginning on the date of enactment of this Act, the Secretary 

of the Treasury shall submit a report to the Congress on the 

findings and conclusions of the Secretary with respect to the 

study conducted under subsection (a). 

(2) RECOMMENDATIONS.—The report shall contain any recommendations with respect to capital standards that the Secretary of the Treasury may determine to be appropriate. 

SEC. 329. [12 U.S.C. 4801 nt] STUDY ON THE IMPACT OF THE PAYMENT 

OF INTEREST ON RESERVES. 

(a) FEDERAL RESERVE STUDY.—Not later than 180 days after 

the date of enactment of this Act, the Board of Governors of the 

Federal Reserve System, in consultation with the Federal Deposit 

Insurance Corporation and the National Credit Union Administration Board, shall conduct a study and report to the Congress on— 

(1) the necessity, for monetary policy purposes, of continuing to require insured depository institutions to maintain 

sterile reserves; 

(2) the appropriateness of paying a market rate of interest 

to insured depository institutions on sterile reserves or, in the 

alternative, providing for payment of such interest into the 

appropriate deposit insurance fund; 

(3) the monetary impact that the failure to pay interest on 

sterile reserves has had on insured depository institutions, including an estimate of the total dollar amount of interest and 

the potential income lost by insured depository institutions; 

and 

(4) the impact that the failure to pay interest on sterile reserves has had on the ability of the banking industry to compete with nonbanking providers of financial services and with 

foreign banks. 

(b) BUDGETARY IMPACT STUDY.—Not later than 180 days after 

the date of enactment of this Act, the Director of the Office of Management and Budget and the Director of the Congressional Budget 

office, in consultation with the Committees on the Budget of the 

Senate and the House of Representatives, shall jointly conduct a 

study and report to the Congress on the budgetary impact of— 

(1) paying a market rate of interest to insured depository 

institutions on sterile reserves; and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1382 

(2) paying such interest into the respective deposit insurance funds. 

SEC. 330. [12 U.S.C. 4801 nt] STUDY AND REPORT ON THE CONSUMER 

CREDIT SYSTEM. 

(a) STUDY.—The Secretary of the Treasury, in consultation 

with the Board of Governors of the Federal Reserve System, the 

Administrator of the Small Business Administration, the Secretary 

of Housing and Urban Development, and the other Federal banking 

agencies, shall conduct a study of the process, including any Federal laws, by which credit is made available for consumers and 

small businesses in order to identify procedures, including any Federal laws, which have the effect of— 

(1) reducing the amount of credit available for such purposes or the number of persons eligible for such credit; 

(2) increasing the level of consumer inconvenience, cost, 

and time delays in connection with the extension of consumer 

and small business credit without corresponding benefit with 

respect to the protection of consumers or small businesses or 

the safety and soundness of insured depository institutions; 

and 

(3) increasing costs and burdens on insured depository 

institutions, insured credit unions, and other lenders without 

corresponding benefit with respect to the protection of consumers or small business concerns or to the safety and soundness of insured institutions. 

(b) REPORT.— 

(1) IN GENERAL.—Not later than 1 year after the date of 

enactment of this Act, the Secretary of the Treasury shall submit a report to the Congress on the findings and conclusions 

of the Secretary with respect to the study conducted under subsection (a). 

(2) RECOMMENDATIONS.—The report required by paragraph 

(1) shall contain any recommendations for administrative action or statutory changes that the Secretary of the Treasury 

may determine to be appropriate. 

(c) PUBLIC PARTICIPATION.—In conducting the study required 

by subsection (a), comments shall be solicited from consumers, representatives of consumers, insured depository institutions, insured 

credit unions, other lenders, and other interested parties. 

[Sections 331 and 332 amended other laws.] 

SEC. 333. [12 U.S.C. 4801 nt] STUDY ON CHECK-RELATED FRAUD. 

(a) STUDY.—The Board of Governors of the Federal Reserve 

System (hereafter in this section referred to as the ''Board'') shall 

conduct a study on the advisability of extending the 1-business-day 

period specified in section 603(b)(1) of the Expedited Funds Availability Act, regarding availability of funds deposited by local 

checks, to 2 business days. 

(b) CONSIDERATIONS.—In conducting the study under subsection (a), the Board shall consider— 

(1) whether there is a pattern of significant increases in 

check-related losses at depository institutions attributable to 

the provisions of the Expedited Funds Availability Act; and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1383 

(2) whether extension of the time period referred to in subsection (a) is necessary to diminish the volume of any such 

check-related losses. 

(c) REPORT TO THE CONGRESS.—Not later than 2 years after 

the date of enactment of this Act, the Board shall submit a report 

to the Congress concerning the results of the study conducted 

under this section and including any recommendations for legislative action. 

[Sections 334 through 340 amended other laws.] 

SEC. 341. [12 U.S.C. 4801 nt] FEASIBILITY STUDY OF DATA BANK. 

(a) IN GENERAL.—Not later than 18 months after the date of 

enactment of this Act, the Federal Financial Institutions Examination Council shall— 

(1) study the feasibility, including the costs and benefits to 

insured depository institutions, of establishing and maintaining a data bank for reports submitted by any depository institution to a Federal banking agency; and 

(2) report the results of such study to the Congress. 

(b) ADDITIONAL FACTORS.—The study required under subsection (a) shall consider the feasibility of— 

(1) permitting depository institutions to file reports directly with the data bank; and 

(2) permitting Federal banking agencies, State bank supervisors, and the public to obtain access to any appropriate report on file with the data bank which such agency or supervisor or the public is otherwise authorized to receive. 

SEC. 342. [12 U.S.C. 4801 nt] TIMELY COMPLETION OF CRA REVIEW. 

The comprehensive regulatory review of the Community Reinvestment Act of 1977 that, as of the date of enactment of this Act, 

is being conducted by the Federal banking agencies, shall be completed at the earliest practicable time. 

SEC. 343. [12 U.S.C. 4807] TIM E LIMI T ON AGENCY CONSIDERATION OF 

COMPLETED APPLICATIONS. 

(a) IN GENERAL.—Each Federal banking agency shall take final 

action on any application to the agency before the end of the 1-year 

period beginning on the date on which a completed application is 

received by the agency. 

(b) WAIVER BY APPLICANT AUTHORIZED.—Any person submitting an application to a Federal banking agency may waive the applicability of subsection (a) with respect to such application at any 

time. 

SEC. 344. [12 U.S.C. 4801 nt] WAIVER OF RIGHT OF RESCISSION FOR 

CERTAIN REFINANCING TRANSACTIONS. 

Not later than 6 months after the date of enactment of this 

Act, the Board of Governors of the Federal Reserve System, in consultation with the consumer advisory council to such Board, consumers, representatives of consumers, lenders, and other interested 

parties, shall submit recommendations to the Congress regarding 

whether a waiver or modification, at the option of a consumer, of 

the right of rescission under section 125 of the Truth in Lending 

Act with respect to transactions which constitute a refinancing or 

consolidation (with no new advances) of the principal balance then 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1384 

due, and any accrued and unpaid finance charges of an existing 

extension of credit by a different creditor secured by an interest in 

the same property, would benefit consumers. 

[Sections 345 through 349 amended other laws.] 

SEC. 350. [12 U.S.C. 4808] REVISING REGULATORY REQUIREMENTS FOR 

TRANSFERS OF ALL TYPES OF ASSETS WIT H RECOURSE. 

(a) REVIEW AND REVISION OF REGULATIONS.— 

(1) IN GENERAL.—During the 180-day period beginning on 

the date of enactment of this Act, each appropriate Federal 

banking agency shall, consistent with the principles of safety 

and soundness and the public interest— 

(A) review the agency's regulations and written policies relating to transfers of assets with recourse by insured 

depository institutions; and 

(B) in consultation with the other Federal banking 

agencies, promulgate regulations that better reflect the 

exposure of an insured depository institution to credit risk 

from transfers of assets with recourse. 

(2) REGULATIONS REQUIRED.—Before the en d of th e 180-

day period beginning on the date of enactment of this Act, each 

appropriate Federal banking agency shall prescribe the regulations developed pursuant to paragraph (1)(B). 

(b) REGULATIONS REQUIRED.— 

(1) IN GENERAL.—After the end of the 180-day period 

beginning on the date of enactment of this Act, the amount of 

risk-based capital required to be maintained, under regulations 

prescribed by the appropriate Federal banking agency, by any 

insured depository institution with respect to assets transferred with recourse by such institution may not exceed the 

maximum amount of recourse for which such institution is contractually liable under the recourse agreement. 

(2) EXCEPTION FOR SAFETY AND SOUNDNESS.—The appropriate Federal banking agency may require any insured depository institution to maintain risk-based capital in an amount 

greater than the amount determined under paragraph (1), if 

the agency determines, by regulation or order, that such higher 

amount is necessary for safety and soundness reasons. 

(c) COORDINATION WIT H SECTION 208(b).—This section shall 

not be construed as superseding the applicability of section 208(b). 

(d) DEFINITIONS.—For purposes of this section, the terms 

"appropriate Federal banking agency'', "Federal banking agency'', 

and "insured depository institution'' have the same meanings as in 

section 3 of the Federal Deposit Insurance Act. 

TITL E IV—MONEY LAUNDERIN G 

SEC. 401. SHORT TITLE. 

This title may be cited as the "Money Laundering Suppression 

Act of 1994''. 

[sections 402 and 403 amended other laws.] 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1385 

SEC. 404. [31 U.S.C. 5318 nt] IMPROVEMEN T OF IDENTIFICATIO N OF 

MONEY LAUNDERIN G SCHEMES. 

(a) ENHANCED TRAINING, EXAMINATIONS, AND REFERRALS BY 

BANKING AGENCIES.—Befor e the end of the 6-month period beginning on the date of enactment of this Act, each appropriate Federal 

banking agency shall, in consultation with the Secretary of the 

Treasury and other appropriate law enforcement agencies— 

(1) review and enhance training and examination procedures to improve the identification of money laundering 

schemes involving depository institutions; and 

(2) review and enhance procedures for referring cases to 

any appropriate law enforcement agency. 

(b) IMPROVED REPORTING OF CRIMINAL SCHEMES BY LAW 

ENFORCEMENT AGENCIES.—Th e Secretary of the Treasury and each 

appropriate law enforcement agency shall provide, on a regular 

basis, information regarding money laundering schemes and activities involving depository institutions to each appropriate Federal 

banking agency in order to enhance each agency's ability to examine for and identify money laundering activity. 

(c) REPORT TO CONGRESS.—The Financial Institutions Examination Council shall submit a report on the progress made in carrying out subsection (a) and the usefulness of information received 

pursuant to subsection (b) to the Congress by the end of the 1-year 

period beginning on the date of enactment of this Act. 

(d) DEFINITION.—Fo r purposes of this section, the term ''appropriate Federal banking agency'' has the same meaning as in section 

3 of the Federal Deposit Insurance Act. 

[Sections 405 and 406 amended other laws.] 

SEC. 407. [31 U.S.C. 5311 nt] UNIFOR M STATE LICENSING AN D REGULATIO N OF CHEC K CASHING, CURRENCY EXCHANGE, AN D 

MONEY TRANSMITTIN G BUSINESSES. 

(a) UNIFOR M LAWS AND ENFORCEMENT.—For purposes of preventing money laundering and protecting the payment system from 

fraud and abuse, it is the sense of the Congress that the several 

States should— 

(1) establish uniform laws for licensing and regulating 

businesses which— 

(A) provide check cashing, currency exchange, or 

money transmitting or remittance services, or issue or redeem money orders, travelers' checks, and other similar instruments; and 

(B) are not depository institutions (as defined in section 5313(g) of title 31, United States Code); and 

(2) provide sufficient resources to the appropriate State 

agency to enforce such laws and regulations prescribed pursuant to such laws. 

(b) MODEL STATUTE.—It is the sense of the Congress that the 

several States should develop, through the auspices of the National 

Conference of Commissioners on Uniform State Laws, the American Law Institute, or such other forum as the States may determine to be appropriate, a model statute to carry out the goals described in subsection (a) which would include the 

following: 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1386 

(1) LICENSING REQUIREMENTS.—A requirement that any 

business described in subsection (a)(1) be licensed and regulated by an appropriate State agency in order to engage in any 

such activity within the State. 

(2) LICENSING STANDARDS.—A requirement that— 

(A) in order for any business described in subsection 

(a)(1) to be licensed in the State, the appropriate State 

agency shall review and approve— 

(i) the business record and the capital adequacy of 

the business seeking the license; and 

(ii) the competence, experience, integrity, and 

financial ability of any individual who— 

(i) is a director, officer, or supervisory employee of such business; or 

(ii) owns or controls such business; and 

(B) any record, on the part of any business seeking the 

license or any person referred to in subparagraph (A)(ii), 

of— 

(i) any criminal activity; 

(ii) any fraud or other act of personal dishonesty; 

(iii) any act, omission, or practice which constitutes a breach of a fiduciary duty; or 

(iv) any suspension or removal, by any agency or 

department of the United States or any State, from 

participation in the conduct of any federally or State 

licensed or regulated business, 

may be grounds for the denial of any such license by the 

appropriate State agency. 

(3) REPORTING REQUIREMENTS.—A requirement that any 

business described in subsection (a)(1)— 

(A) disclose to the appropriate State agency the fees 

charged to consumers for services described in subsection 

(a)(1)(A); and 

(B) conspicuously disclose to the public, at each location of such business, the fees charged to consumers for 

such services. 

(4) PROCEDURES TO ENSURE COMPLIANCE WIT H FEDERAL 

CASH TRANSACTION REPORTING REQUIREMENTS.—A civil or 

criminal penalty for operating any business referred to in paragraph (1) without establishing and complying with appropriate 

procedures to ensure compliance with subchapter i i of chapter 

53 of title 31, United States Code (relating to records and reports on monetary instruments transactions). 

(5) CRIMINAL PENALTIES FOR OPERATION OF BUSINESS WITHOUT A LICENSE.—A criminal penalty for operating any business 

referred to in paragraph (1) without a license within the State 

after the end of an appropriate transition period beginning on 

the date of enactment of such model statute by the State. 

(c) STUDY REQUIRED.—Th e Secretary of the Treasury shall conduct a study of— 

(1) the progress made by the several States in developing 

and enacting a model statute which— 

(A) meets the requirements of subsection (b); and 

(B) furthers the goals of— 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1387 

(i) preventing money laundering by businesses 

which are required to be licensed under any such statute; and 

(ii) protecting the payment system, including the 

receipt, payment, collection, and clearing of checks, 

from fraud and abuse by such businesses; and 

(2) the adequacy of— 

(A) the activity of the several States in enforcing the 

requirements of such statute; and 

(B) the resources made available to the appropriate 

State agencies for such enforcement activity. 

(d) REPORT REQUIRED.—No t later than the end of the 3-year 

period beginning on the date of enactment of this Act and not later 

than the end of each of the first two 1-year periods beginning after 

the end of such 3-year period, the Secretary of the Treasury shall 

submit a report to the Congress containing the findings and recommendations of the Secretary in connection with the study under 

subsection (c), together with such recommendations for legislative 

and administrative action as the Secretary may determine to be 

appropriate. 

(e) RECOMMENDATIONS I N CASES OF INADEQUATE REGULATION 

AND ENFORCEMENT BY STATES.—If the Secretary of the Treasury 

determines that any State has been unable to— 

(1) enact a statute which meets the requirements described in subsection (b); 

(2) undertake adequate activity to enforce such statute; or 

(3) make adequate resources available to the appropriate 

State agency for such enforcement activity, 

the report submitted pursuant to subsection (d) shall contain recommendations of the Secretary which are designed to facilitate the 

enactment and enforcement by the State of such a statute. 

(f) FEDERAL FUNDIN G STUDY.— 

(1) STUDY REQUIRED.—The Secretary of the Treasury shall 

conduct a study to identify possible available sources of Federal funding to cover costs which will be incurred by the States 

in carrying out the purposes of this section. 

(2) REPORT.—The Secretary of the Treasury shall submit a 

report to the Congress on the study conducted pursuant to 

paragraph (1) not later than the end of the 18-month period 

beginning on the date of enactment of this Act. 

SEC. 408. REGISTRATION OF MONEY TRANSMITTIN G BUSINESSES T O 

PROMOTE EFFECTIVE LAW ENFORCEMENT. 

(a) [31 U.S.C. 5330 nt] FINDINGS AND PURPOSES.— 

(1) FINDINGS.—The Congress hereby finds the following: 

(A) Money transmitting businesses are subject to the 

recordkeeping and reporting requirements of subchapter II 

of chapter 53 of title 31, United States Code. 

(B) Money transmitting businesses are largely unregulated businesses and are frequently used in sophisticated 

schemes to— 

(i) transfer large amounts of money which are the 

proceeds of unlawful enterprises; and 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1388 

(ii) evade the requirements of such subchapter ii, 

the Internal Revenue Code of 1986, and other laws of 

the United States. 

(C) information on the identity of money transmitting 

businesses and the names of the persons who own or control, or are officers or employees of, a money transmitting 

business would have a high degree of usefulness in criminal, tax, or regulatory investigations and proceedings. 

(2) PURPOSE.—It is the purpose of this section to establish 

a registration requirement for businesses engaged in providing 

check cashing, currency exchange, or money transmitting or 

remittance services, or issuing or redeeming money orders, 

travelers' checks, and other similar instruments to assist the 

Secretary of the Treasury, the Attorney General, and other 

supervisory and law enforcement agencies to effectively enforce 

the criminal, tax, and regulatory laws and prevent such money 

transmitting businesses from engaging in illegal activities. 

[Subsections (b), (c), and (d) amended other laws.] 

[Sections 409 through 411 amended other laws.] 

SEC. 412. GAO STUDY OF CASHIERS' CHECKS. 

(a) STUDY REQUIRED.—The Comptroller General of the United 

States shall conduct a study to— 

(1) determine the extent to which the practice of issuing of 

cashiers' checks by financial institutions is vulnerable to 

money laundering schemes; 

(2) determine the extent to which additional recordkeeping 

requirements should be imposed on financial institutions which 

issue cashiers' checks; and 

(3) analyze such other factors relating to the use and regulation of cashiers' checks as the Comptroller General determines to be appropriate. 

(b) REPORT REQUIRED.—Before the end of the 6-month period 

beginning on the date of enactment of this Act, the Comptroller 

General shall submit a report to the Congress containing— 

(1) the findings and conclusions of the Comptroller General 

in connection with the study conducted pursuant to subsection 

(a); and 

(2) such recommendations for legislative and administrative action as the Comptroller General may determine to be 

appropriate. 

[Section 413 amended other laws.] 

[Title V consists of the National Flood Insurance Reform Act 

of 1994.] 
Sec. 101 RIEGLE COMMUNITY DEVELOPMENT & REGULATORY IMPROVEMENT 1389 

TITLE VI—GENERA L PROVISIONS 

[Section 601 expresses the sense of the Senate with regard to 

oversight hearings on all matters relating to the Madison Guaranty 

Savings and Loan Association (''MGS&L''), Whitewater Development Corporation and Capital Management Services Inc. (''CMS'').] 

[Section 602 consist of technical amendments to other laws.] 

RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING 

EFFICIENCY ACT OF 1994 

1391 

RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING 

EFFICIENCY ACT OF 1994 

A N ACT TO amend the Bank Holding Company Act of 1956, the Revised Statutes 

of the United States, and the Federal Deposit Insurance Act to provide for interstate banking and branching. 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTIO N 1. SHOR T TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ''Riegle-Neal 

Interstate Banking and Branching Efficiency Act of 1994''. 

(b) TABLE OF CONTENTS.—Th e table of contents for this Act is 

as follows: 

TITLE I—INTERSTATE BANKING AND BRANCHING 

Sec. 101. Interstate banking. 

Sec. 102. Interstate bank mergers. 

Sec. 103. State ''opt-in'' election to permit interstate branching through de novo 

branches. 

Sec. 104. Branching by foreign banks. 

Sec. 105. Coordination of examination authority. 

Sec. 106. Branch closures. 

Sec. 107. Equalizing competitive opportunities for United States and foreign banks. 

Sec. 108. Federal Reserve Board study on bank fees. 

Sec. 109. Prohibition against deposit production offices. 

Sec. 110. Community Reinvestment Act evaluation of banks with interstate 

branches. 

Sec. 111. Restatement of existing law. 

Sec. 112. GAO report on data collection under interstate branching. 

Sec. 113. Maximum interest rate on certain FMH A loans. 

Sec. 114. Notice requirements for banking agency decisions preempting State law. 

Sec. 115. Moratorium on examination fees under the International Banking Act of 

1978. 

TITLE II—GENERAL PROVISIONS 

Sec. 201. Amendments to Federal Deposit Insurance Act and Federal Home Loan 

Bank Act. 

Sec. 202. Sense of the Senate concerning multilateral export controls. 

Sec. 203. Amendments relating to silver medals for Persian Gulf veterans. 

Sec. 204. Commemoration of 1995 Special Olympic World Games. 

Sec. 205. National Community Service Commemorative Coins. 

Sec. 206. Robert F. Kennedy Memorial Commemorative Coins. 

Sec. 207. United States Military Academy Bicentennial Commemorative Coins. 

Sec. 208. United States Botanic Garden Commemorative Coins. 

Sec. 209. Mount Rushmore Commemorative Coins. 

Sec. 210. Study and report on the United States financial services system. 

Sec. 211. Flexibility in choosing boards of directors. 

1393 
Sec. 109 RIEGLE-NEAL INTERSTATE BANKING 1394 

TITLE I—INTERSTATE BANKING AN D 

BRANCHING 1 

[Sections 101 through 108 amended other laws.] 

SEC. 109. [12 U.S.C. 1835a] PROHIBITIO N AGAINS T DEPOSI T PRODUC -

TIO N OFFICES. 

(a) REGULATIONS.—Th e appropriate Federal banking agencies 

shall prescribe uniform regulations effective June 1, 1997, which 

prohibit any out-of-State bank from using any authority to engage 

in interstate branching pursuant to this title, or any amendment 

made by this title to any other provision of law, primarily for the 

purpose of deposit production. 

(b) GUIDELINE S FOR MEETIN G CREDI T NEEDS.—Regulation s 

issued under subsection (a) shall include guidelines to ensure that 

interstate branches operated by an out-of-State bank in a host 

State are reasonably helping to meet the credit needs of the communities which the branches serve. 

(c) LIMITATIO N O N OUT-OF-STATE LOANS. — 

(1) LIMITATION.—Regulations issued under subsection (a) 

shall require that, beginning no earlier than 1 year after establishment or acquisition of an interstate branch or branches in 

a host State by an out-of-State bank, if the appropriate Federal 

banking agency for the out-of-State bank determines that the 

bank's level of lending in the host State relative to the deposits 

from the host State (as reasonably determinable from available 

information including the agency's sampling of the bank's loan 

files during an examination or such data as is otherwise available) is less than half the average of total loans in the host 

State relative to total deposits from the host State (as determinable from relevant sources) for all banks the home State of 

which is such State— 

(A) the appropriate Federal banking agency for the 

out-of-State bank shall review the loan portfolio of the 

bank and determine whether the bank is reasonably helping to meet the credit needs of the communities served by 

the bank in the host State; and 

(B) if the agency determines that the out-of-State bank 

is not reasonably helping to meet those needs— 

(i) the agency may order that an interstate branch 

or branches of such bank in the host State be closed 

unless the bank provides reasonable assurances to the 

satisfaction of the appropriate Federal banking agency 

that the bank has an acceptable plan that will reasonably help to meet the credit needs of the communities 

served by the bank in the host State, and 

(ii) the out-of-State bank may not open a new 

interstate branch in the host State unless the bank 

provides reasonable assurances to the satisfaction of 

the appropriate Federal banking agency that the bank 

1

 Note: The Reigle-Neal interstate Banking and Branching Efficiency Act of 1994 largely 

amended other Acts. 
1395 RIEGLE-NEAL INTERSTATE BANKING Sec. 109 

will reasonably help to meet the credit needs of the 

community that the new branch will serve. 

(2) CONSIDERATIONS.—In making a determination under 

paragraph (1)(A), the appropriate Federal banking agency shall 

consider— 

(A) whether the interstate branch or branches of the 

out-of-state bank were formerly part of a failed or failing 

depository institution; 

(B) whether the interstate branch was acquired under 

circumstances where there was a low loan-to-deposit ratio 

because of the nature of the acquired institution's business 

or loan portfolio; 

(C) whether the interstate branch or branches of the 

out-of-state bank have a higher concentration of commercial or credit card lending, trust services, or other specialized activities; 

(D) the ratings received by the out-of-State bank 

under the Community Reinvestment Act of 1977; 

(E) economic conditions, including the level of loan demand, within the communities served by the interstate 

branch or branches of the out-of-state bank; and 

(F) the safe and sound operation and condition of the 

out-of-State bank. 

(3) BRANCH CLOSING PROCEDURE.— 

(A) NOTICE REQUIRED.—Before exercising any authority under paragraph (1)(B)(i), the appropriate Federal 

banking agency shall issue to the bank a notice of the 

agency's intention to close an interstate branch or 

branches and shall schedule a hearing. 

(B) HEARING.—Section 8(h) of the Federal Deposit 

Insurance Act shall apply to any proceeding brought under 

this paragraph. 

(d) APPLICATION.—This section shall apply with respect to any 

interstate branch established or acquired in a host State pursuant 

to this title or any amendment made by this title to any other provision of law. 

(e) DEFINITIONS.—Fo r the purposes of this section, the following definitions shall apply: 

(1) APPROPRIATE FEDERAL BANKING AGENCY, BANK, STATE, 

AND STATE BANK.—Th e terms "appropriate Federal banking 

agency'', "bank'', "State'', and "State bank'' have the same 

meanings as in section 3 of the Federal Deposit Insurance Act. 

(2) HOM E STATE.—The term "home State'' means— 

(A) in the case of a national bank, the State in which 

the main office of the bank is located; and 

(B) in the case of a State bank, the State by which the 

bank is chartered. 

(3) HOST STATE.—The term "host State'' means a State in 

which a bank establishes a branch other than the home State 

of the bank. 

(4) INTERSTATE BRANCH.—The term "interstate branch'' 

means a branch established pursuant to this title or any 

amendment made by this title to any other provision of law 

and any branch of a bank controlled by an out-of-State bank 
Sec. 109 RIEGLE-NEAL INTERSTATE BANKING 1396 

holding company (as defined in section 2(o)(7) of the Bank 

Holding Company Act of 1956). 

(5) OUT-OF-STATE BANK.—The term ''out-of-State bank'' 

means, with respect to any State, a bank the home State of 

which is another State and, for purposes of this section, includes a foreign bank, the home State of which is another 

State. 

[Section 110 amended other laws.] 

SEC. 111. [12 U.S.C. 1811 nt] RESTATEMENT OF EXISTING LAW. 

No provision of this title and no amendment made by this title 

to any other provision of law shall be construed as affecting in any 

way— 

(1) the authority of any State or political subdivision of 

any State to adopt, apply, or administer any tax or method of 

taxation to any bank, bank holding company, or foreign bank, 

or any affiliate of any such bank, bank holding company, or 

foreign bank, to the extent that such tax or tax method is otherwise permissible by or under the Constitution of the United 

States or other Federal law; 

(2) the right of any State, or any political subdivision of 

any State, to impose or maintain a nondiscriminatory franchise 

tax or other nonproperty tax instead of a franchise tax in 

accordance with section 3124 of title 31, United States Code; 

or 

(3) the applicability of section 5197 of the Revised Statutes 

or section 27 of the Federal Deposit insurance Act. 

SEC. 112. GAO REPORT ON DATA COLLECTION UNDER INTERSTATE 

BRANCHING. 

(a) IN GENERAL.—The Comptroller General of the United 

States shall submit to the Congress, not later than 9 months after 

the date of enactment of this Act, a report that— 

(1) examines statutory and regulatory requirements for insured depository institutions to collect and report deposit and 

lending data; and 

(2) determines what modifications to such requirements 

are needed, so that the implementation of the interstate 

branching provisions contained in this title will result in no 

material loss of information important to regulatory or congressional oversight of insured depository institutions. 

(b) CONSULTATION.—The Comptroller General, in preparing the 

report required by this section, shall consult with individuals representing the appropriate Federal banking agencies, insured 

depository institutions, consumers, community groups, and other 

interested parties. 

(c) DEFINITIONS.—For purposes of this section, the terms 

''appropriate Federal banking agency'' and ''insured depository 

institution'' have the same meanings as in section 3 of the Federal 

Deposit insurance Act. 

[Sections 113 and 114 amended other laws.] 
1397 RIEGLE-NEAL INTERSTATE BANKING Sec. 109 

SEC. 115. MORATORIU M O N EXAMINATIO N FEES UNDE R TH E INTER -

NATIONA L BANKIN G AC T OF 1978. 

(a) [12 U.S.C. 3105 nt] BRANCHES, AGENCIES, AND AFFILIATES.—Section 7(c)(1)(D) of the International Banking Act of 1978 

shall not apply with respect to any examination under section 

7(c)(1)(A) of such Act which begins before or during the 3-year period beginning on July 25, 1994. 

(b) [12 U.S.C. 3107 nt] REPRESENTATIVE OFFICES.—The provision of section 10(c) of the International Banking Act of 1978 relating to the cost of examinations under such section shall not apply 

with respect to any examination under such section which begins 

before or during the 3-year period beginning on July 25, 1994. 

TITLE II—GENERAL PROVISIONS 

[Section 201 amended other laws. Section 202 expresses the 

sense of the Senate regarding multilatural export controls. Section 

203 amends another law. Sections 204 through 209 consist of Commemorative Coin Acts.] 

SEC. 210. [12 U.S.C. 1811 nt] STUDY AN D REPOR T O N TH E UNITE D 

STATES FINANCIA L SERVICES SYSTEM. 

(a) STUDY.— 

(1) IN GENERAL.—The Secretary of the Treasury (hereafter 

in this section referred to as the ''Secretary'') shall, after consultation with the Advisory Commission on Financial Services 

established under subsection (b), and consultation in accordance with paragraph (3), conduct a study of matters relating 

to the strengths and weaknesses of the United States financial 

services system in meeting the needs of the system's users, including the needs of— 

(A) individual consumers and households; 

(B) communities; 

(C) agriculture; 

(D) small-, medium-, and large-sized businesses; 

(E) governmental and nonprofit entities; and 

(F) exporters and other users of international financial 

services. 

(2) MATTERS STUDIED.—The study required under paragraph (1) shall include consideration of— 

(A) the changes underway in the national and international economies and the financial services industry, 

and how those changes affect the financial services system's ability to efficiently meet the needs of the national 

economy and the system's users during the next 10 years 

and beyond; and 

(B) the adequacy of existing statutes and regulations, 

and the existing regulatory structure, to meet the needs of 

the financial services system's users effectively, efficiently, 

and without unfair, anticompetitive, or discriminatory 

practices. 

(3) CONSULTATION.—Consultation in accordance with this 

paragraph means consultation with— 
Sec. 109 RIEGLE-NEAL INTERSTATE BANKING 1398 

(A) the Board of Governors of the Federal Reserve System; 

(B) the Commodity Futures Trading Commission; 

(C) the Comptroller of the Currency; 

(D) the Director of the Office of Thrift Supervision; 

(E) the Federal Deposit Insurance Corporation; 

(F) the Secretary of the Department of Housing and 

urban Development; 

(G) the Securities and Exchange Commission; 

(H) the Director of the Congressional Budget Office; 

and 

(I) the Comptroller General of the United States. 

(b) ADVISORY COMMISSION ON FINANCIAL SERVICES.— 

(1) ESTABLISHMENT.—There is established the Advisory 

Commission on Financial Services (hereafter in this section referred to as the ''Advisory Commission''). 

(2) MEMBERSHIP OF COMMISSION.—The Advisory 

Commission— 

(A) shall consist of not less than 9 nor more than 14 

members appointed by the Secretary from among 

individuals— 

(i) who are— 

(I) users of the financial services system; or 

(II) experts in finance or on the financial 

services system; and 

(ii) who are not employees of the Federal Government; and 

(B) shall include representatives of business, agriculture, and consumers. 

(3) CHAIRPERSON.—The Secretary or the Secretary's designee shall serve as Chairperson of the Advisory Commission. 

(4) TRAVEL EXPENSES.—Members of the Advisory Commission shall be allowed travel expenses, including per diem in 

lieu of subsistence, at rates authorized for employees of agencies under subchapter I of chapter 57 of title 5, United States 

Code, while away from their homes or regular places of business in performing services for the Advisory Commission. 

(5) TERMINATION.—The Advisory Commission shall terminate 30 days after the date of submission of the report required under subsection (d). 

(c) RECOMMENDATIONS.—Based on the results of the study conducted under subsection (a), the Secretary shall develop such recommendations as may be appropriate for changes in statutes, 

regulations, and policies to improve the operation of the financial 

services system, including changes to better— 

(1) meet the needs of, and assure access to the system for, 

current and potential users; 

(2) promote economic growth; 

(3) protect consumers; 

(4) promote competition and efficiency; 

(5) avoid risk to the taxpayers; 

(6) control systemic risk; and 

(7) eliminate discrimination. 
1399 RIEGLE-NEAL INTERSTATE BANKING Sec. 109 

(d) REPORT.—Not later than 15 months after the date of enactment of this Act, the Secretary shall submit to the President pro 

tempore of the Senate and the Speaker of the House of Representatives a report describing the study conducted under subsection (a) 

and any recommendations developed under subsection (c). 

[Section 211 amended another law.] 

RIGHT TO FINANCIAL PRIVACY ACT OF 1978 

1401 

RIGHT TO FINANCIAL PRIVACY ACT OF 19781 

(Pub. L. 95-630, 92 Stat. 3697) 

SEC. 1100. [12 U.S.C. 3401 nt.] This title may be cited as the 

''Right to Financial Privacy Act of 1978''. 

DEFINITIONS 

SEC. 1101. [12 U.S.C. 3401] For the purpose of this title, the 

term— 

(1) ''financial institution'' means any office of a bank, savings bank, card issuer as defined in section 103 of the Consumers Credit Protection Act (15 U.S.C. 1602(n)), industrial 

loan company, trust company, savings association, building 

and loan, or homestead association (including cooperative 

banks), credit union, or consumer finance institution, located in 

any State or territory of the United States, the District of Columbia, Puerto Rico, Guam, American Samoa, or the Virgin Islands; 

(2) ''financial record'' means an original of, a copy of, or 

information known to have been derived from, any record held 

by a financial institution pertaining to a customer's relationship with the financial institution; 

(3) ''Government authority'' means any agency or department of the United States, or any officer, employee, or agent 

thereof; 

(4) ''person'' means an individual or a partnership of five 

or fewer individuals; 

(5) ''customer'' means any person or authorized representative of that person who utilized or is utilizing any service of a 

financial institution, or for whom a financial institution is acting or has acted as a fiduciary, in relation to an account maintained in the person's name; 

(6) ''holding company'' means— 

(A) any bank holding company (as defined in section 

2 of the Bank Holding Company Act of 1956); 

(B) any company described in section 4(f)(1) of the 

Bank Holding Company Act of 1956; and 

(C) any savings and loan holding company (as defined 

in the Home owners' Loan Act); 

(7) ''supervisory agency'' means with respect to any particular financial institution, holding company, or any subsidiary of a financial institution or holding company, any of the 

following which has statutory authority to examine the finan-

*This title was enacted by the Financial Institutions Regulatory and Interest Rate Control 

Act of 1978 (92 Stat. 3697 et seq.). 

1403 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1404 

cial condition, business operations, or records or transactions of 

that institution, holding company, or subsidiary— 

(A) the Federal Deposit Insurance Corporation; 

(B) Director, Office of Thrift Supervision; 

(C) the National Credit Union Administration; 

(D) the Board of Governors of the Federal Reserve 

System; 

(E) the Comptroller of the Currency; 

(F) the Securities and Exchange Commission; 

(G) the Commodity Futures Trading Commission; 

(H) the Secretary of the Treasury, with respect to the 

Bank Secrecy Act and the Currency and Foreign Transactions Reporting Act (Public Law 91-508, title I and II); 

or 

(I) any State banking or securities department or 

agency: and 

(8) ''law enforcement inquiry'' means a lawful investigation 

or official proceeding inquiring into a violation of, or failure to 

comply with, any criminal or civil statute or any regulation, 

rule, or order issued pursuant thereto. 

CONFIDENTIALITY OF RECORDS—GOVERNMENT AUTHORITIES 

SEC. 1102. [12 U.S.C. 3402] Except as provided by section 

1103 (c) or (d), 1113, or 1114, no Government authority may have 

access to or obtain copies of, or the information contained in the 

financial records of any customer from a financial institution unless the financial records are reasonably described and— 

(1) such customer has authorized such disclosure in 

accordance with section 1104; 

(2) such financial records are disclosed in response to an 

administrative subpena or summons which meets the requirements of section 1105; 

(3) such financial records are disclosed in response to a 

search warrant which meets the requirements of section 1106; 

(4) such financial records are disclosed in response to a judicial subpena which meets the requirements of section 1107; 

or 

(5) such financial records are disclosed in response to a formal written request which meets the requirements of section 

1108. 

CONFIDENTIALITY OF RECORDS—FINANCIAL INSTITUTIONS 

SEC. 1103. [12 U.S.C. 3403] (a) No financial institution, or officer, employees, or agent of a financial institution, may provide to 

any Government authority access to or copies of, or the information 

contained in, the financial records of any customer except in 

accordance with the provisions of this title. 

(b) A financial institution shall not release the financial 

records of a customer until the Government authority seeking such 

records certifies in writing to the financial institution that it has 

complied with the applicable provisions of this title. 

(c) Nothing in this title shall preclude any financial institution, 

or any officer, employee, or agent of a financial institution, from 
1405 RIGHT TO FINANCIAL PRIVACY Sec. 1104 

notifying a Government authority that such institution, or officer, 

employee, or agent has information which may be relevant to a 

possible violation of any statute or regulation. Such information 

may include only the name or other identifying information concerning any individual, corporation, or account involved in and the 

nature of any suspected illegal activity. Such information may be 

disclosed notwithstanding any constitution, law, or regulation of 

any State or political subdivision thereof to the contrary. Any 

financial institution, or officer, employee, or agent thereof, making 

a disclosure of information pursuant to this subsection, shall not be 

liable to the customer under any law or regulation of the united 

States or any constitution, law, or regulation of any State or political subdivision thereof, for such disclosure or for any failure to notify the customer of such disclosure. 

(d)(1) Nothing in this title shall preclude a financial institution, as an incident to perfecting a security interest, proving a 

claim in bankruptcy, or otherwise collecting on a debt owing either 

to the financial institution itself or in its role as a fiduciary, from 

providing copies of any financial record to any court or Government 

authority. 

(2) Nothing in this title shall preclude a financial institution, 

as an incident to processing an application for assistance to a customer in the form of a Government loan, loan guaranty, or loan 

insurance agreement, or as an incident to processing a default on, 

or administering, a Government guaranteed or insured loan, from 

initiating contact with an appropriate Government authority for 

the purpose of providing any financial record necessary to permit 

such authority to carry out its responsibilities under a loan, loan 

guaranty, or loan insurance agreement. 

CUSTOMER AUTHORIZATIONS 

SEC. 1104. [12 U.S.C. 3404] (a) A customer may authorize disclosure under section 1102(1) if he furnishes to the financial institution and to the Government authority seeking to obtain such disclosure a signed and dated statement which— 

(1) authorizes such disclosure for a period not in excess of 

three months; 

(2) states that the customer may revoke such authorization 

at any time before the financial records are disclosed; 

(3) identifies the financial records which are authorized to 

be disclosed; 

(4) specifies the purposes for which, and the Government 

authority to which, such records may be disclosed; and 

(5) states the customer's rights under this title. 

(b) No such authorization shall be required as a condition of 

doing business with any financial institution. 

(c) The customer has the right, unless the Government authority obtains a court order as provided in section 1109, to obtain a 

copy of the record which the financial institution shall keep of all 

instances in which the customer's record is disclosed to a Government authority pursuant to this section, including the identity of 

the Government authority to which such disclosure is made. 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1406 

ADMINISTRATIVE SUBPENA AND SUMMONS 

SEC. 1105. [12 U.S.C. 3405] A Government authority may obtain financial records under section 1102(2) pursuant to an administrative subpena or summons otherwise authorized by law only 

if— 

(1) there is reason to believe that the records sought are 

relevant to a legitimate law enforcement inquiry; 

(2) a copy of the subpena or summons has been served 

upon the customer or mailed to his last known address on or 

before the date on which the subpena or summons was served 

on the financial institution together with the following notice 

which shall state with reasonable specificity the nature of the 

law enforcement inquiry: 

''Records or information concerning your transactions held 

by the financial institution named in the attached subpena or 

summons are being sought by this (agency or department) in 

accordance with the Right to Financial Privacy Act of 1978 for 

the following purpose: If you desire that such records or information not be made available, you must: 

''1. Fill out the accompanying motion paper and sworn 

statement or write one of your own, stating that you are 

the customer whose records are being requested by the 

Government and either giving the reasons you believe that 

the records are not relevant to the legitimate law enforcement inquiry stated in this notice or any other legal basis 

for objecting to the release of the records. 

''2. File the motion and statement by mailing or delivering them to the clerk of any one of the following united 

States district courts. 

''3. Serve the Government authority requesting the 

records by mailing or delivering a copy of your motion and 

statement to 

''4. Be prepared to come to court and present your 

position in further detail. 

''5. You do not need to have a lawyer, although you 

may wish to employ one to represent you and protect your 

rights. 

If you do not follow the above procedures, upon the expiration 

of ten days from the date of service or fourteen days from the 

date of mailing of this notice, the records or information requested therein will be made available. These records may be 

transferred to other Government authorities for legitimate law 

enforcement inquiries, in which event you will be notified after 

the transfer.''; and 

(3) ten days have expired from the date of service of the 

notice or fourteen days have expired from the date of mailing 

the notice to the customer and within such time period the customer has not filed a sworn statement and motion to quash in 

an appropriate court, or the customer challenge provisions of 

section 1110 have been complied with. 
1407 RIGHT TO FINANCIAL PRIVACY Sec. 1104 

SEARCH WARRANTS 

SEC. 1106. [12 U.S.C. 3406] (a) A Government authority may 

obtain financial records under section 1102(3) only if it obtains a 

search warrant pursuant to the Federal Rules of Criminal Procedure. 

(b) No later than ninety days after the Government authority 

serves the search warrant, it shall mail to the customer's last 

known address a copy of the search warrant together with the following notice: 

''Records or information concerning your transactions held by 

the financial institution named in the attached search warrant 

were obtained by this (agency or department) on (date) for the following purpose: . You may have rights under the Right to 

Financial Privacy Act of 1978.''. 

(c) Upon application of the Government authority, a court may 

grant a delay in the mailing of the notice required in subsection 

(b), which delay shall not exceed one hundred and eighty days following the service of the warrant, if the court makes the findings 

required in section 1109(a). If the court so finds, it shall enter an 

ex parte order granting the requested delay and an order prohibiting the financial institution from disclosing that records have 

been obtained or that a search warrant for such records has been 

executed. Additional delays of up to ninety days may be granted by 

the court upon application, but only in accordance with this subsection. Upon expiration of the period of delay of notification of the 

customer, the following notice shall be mailed to the customer 

along with a copy of the search warrant: 

''Records or information concerning your transactions held by 

the financial institution named in the attached search warrant 

were obtained by this (agency or department) on (date). Notification was delayed beyond the statutory ninety-day delay period pursuant to a determination by the court that such notice would seriously jeopardize an investigation concerning . You may have 

rights under the Right to Financial Privacy Act of 1978.''. 

JUDICIAL SUBPENA 

SEC. 1107. [12 U.S.C. 3407] A Government authority may obtain financial records under section 1102(4) pursuant to judicial 

subpena only if— 

(1) such subpena is authorized by law and there is reason 

to believe that the records sought are relevant to a legitimate 

law enforcement inquiry; 

(2) a copy of the subpena has been served upon the customer or mailed to his last known address on or before the 

date on which the subpena was served on the financial institution together with the following notice which shall state with 

reasonable specificity the nature of the law enforcement inquiry: 

''Records or information concerning your transactions 

which are held by the financial institution named in the attached subpena are being sought by this (agency or department 

or authority) in accordance with the Right to Financial Privacy 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1408 

Act of 1978 for the following purpose: If you desire that such 

records or information not be made available, you must: 

''1. Fill out the accompanying motion paper and sworn 

statement or write one of your own, stating that you are 

the customer whose records are being requested by the 

Government and either giving the reasons you believe that 

the records are not relevant to the legitimate law enforcement inquiry stated in this notice or any other legal basis 

for objecting to the release of the records. 

''2. File the motion and statement by mailing or delivering them to the clerk of the Court. 

''3. Serve the Government authority requesting the 

records by mailing or delivering a copy of your motion and 

statement to 

''4. Be prepared to come to court and present your 

position in further detail. 

''5. You do not need to have a lawyer, although you 

may wish to employ one to represent you and protect your 

rights. 

if you do not follow the above procedures, upon the expiration 

of ten days from the date of service or fourteen days from the 

date of mailing of this notice, the records or information requested therein will be made available. These records may be 

transferred to other government authorities for legitimate law 

enforcement inquiries, in which event you will be notified after 

the transfer''; and 

(3) ten days have expired from the date of service or fourteen days from the date of mailing of the notice to the customer and within such time period the customer has not filed 

a sworn statement and motion to quash in an appropriate 

court, or the customer challenge provisions of section 1110 

have been complied with. 

FORMAL WRITTE N REQUEST 

SEC. 1108. [12 U.S.C. 3408] A Government authority may request financial records under section 1102(5) pursuant to a formal 

written request only if— 

(1) no administrative summons or subpena authority reasonably appears to be available to that Government authority 

to obtain financial records for the purpose for which such 

records are sought; 

(2) the request is authorized by regulations promulgated 

by the head of the agency or department; 

(3) there is reason to believe that the records sought are 

relevant to a legitimate law enforcement inquiry; and 

(4)(A) a copy of the request has been served upon the customer or mailed to his last known address on or before the 

date on which the request was made to the financial institution together with the following notice which shall state with 

reasonable specificity the nature of the law enforcement inquiry: 

''Records or information concerning your transactions held 

by the financial institution named in the attached request are 

being sought by this (agency or department) in accordance with 
1409 RIGHT TO FINANCIAL PRIVACY Sec. 1104 

the Right to Financial Privacy Act of 1978 for the following 

purpose: 

''If you desire that such records or information not be 

made available, you must: 

''1. Fill out the accompanying motion paper and sworn 

statement or write one of your own, stating that you are 

the customer whose records are being requested by the 

Government and either giving the reasons you believe that 

the records are not relevant to the legitimate law enforcement inquiry stated in this notice or any other legal basis 

for objecting to the release of the records. 

''2. File the motion and statement by mailing or delivering them to the clerk of any one of the following united 

States District Courts. 

''3. Serve the Government authority requesting the 

records by mailing or delivering a copy of your motion and 

statement to . 

''4. Be prepared to come to court and present your 

position in further detail. 

''5. You do not need to have a lawyer, although you 

may wish to employ one to represent you and protect your 

rights. 

If you do not follow the above procedures, upon the expiration 

of ten days from the date of service or fourteen days from the 

date of mailing of this notice, the records or information requested therein may be made available. These records may be 

transferred to other Government authorities for legitimate law 

enforcement inquiries, in which event you will be notified after 

the transfer.''; and 

(B) ten days have expired from the date of service or fourteen days from the date of mailing of the notice by the customer and within such time period the customer has not filed 

a sworn statement and an application to enjoin the Government authority in an appropriate court, or the customer challenge provisions of section 1110 have been complied with. 

DELAYED NOTICE—PRESERVATION OF RECORDS 

SEC. 1109. [12 U.S.C. 3409] (a) Upon application of the Government authority, the customer notice required under section 

1104(c), 1105(2), 1106(c), 1107(2), 1108(4), or 1112(b) may be delayed by order of an appropriate court if the presiding judge or 

magistrate finds that— 

(1) the investigation being conducted is within the lawful 

jurisdiction of the Government authority seeking the financial 

records; 

(2) there is reason to believe that the records being sought 

are relevant to a legitimate law enforcement inquiry; and 

(3) there is reason to believe that such notice will result 

in— 

(A) endangering life or physical safety of any person; 

(B) flight from prosecution; 

(C) destruction of or tampering with evidence; 

(D) intimidation of potential witnesses; or 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1410 

(E) otherwise seriously jeopardizing an investigation 

or official proceeding or unduly delaying a trial or ongoing 

official proceeding to the same extent as the circumstances 

in the preceeding subparagraphs. 

An application for delay must be made with reasonable specificity. 

(b)(1) If the court makes the findings required in paragraphs 

(1), (2), and (3) of subsection (a), it shall enter an ex parte order 

granting the requested delay for a period not to exceed ninety days 

and an order prohibiting the financial institution from disclosing 

that records have been obtained or that a request for records has 

been made, except that, if the records have been sought by a Government authority exercising financial controls over foreign accounts in the United States under section 5(b) of the Trading with 

the Enemy Act (50 U.S.C. App. 5(b)), the International Emergency 

Economic Powers Act (title II, Public Law 95-223), or section 5 of 

the United Nations Participation Act (22 U.S.C. 287c), and the 

court finds that there is reason to believe that such notice may endanger the lives or physical safety of a customer or group of customers, or any person or group of persons associated with a customer, the court may specify that the delay be indefinite. 

(2) Extensions of the delay of notice provided in paragraph (1) 

of up to ninety days each may be granted by the court upon application, but only in accordance with this subsection. 

(3) Upon expiration of the period of delay of notification under 

paragraph (1) or (2), the customer shall be served with or mailed 

a copy of the process or request together with the following notice 

which shall state with reasonable specificity the nature of the law 

enforcement inquiry: 

''Records or information concerning your transactions which 

are held by the financial institution named in the attached process 

or request were supplied to or requested by the Government authority named in the process or requests on (date). Notification was 

withheld pursuant to a determination by the (title of court so ordering) under the Right to Financial Privacy Act of 1978 that such 

notice might (state reason). The purpose of the 

investigation or official proceeding was .''. 

(c) when access to financial records is obtained pursuant to 

section 1114(b) (emergency access), the Government authority 

shall, unless a court has authorized delay of notice pursuant to 

subsections (a) and (b), as soon as practicable after such records 

are obtained serve upon the customer, or mail by registered or certified mail to his last known address, a copy of the request to the 

financial institution together with the following notice which shall 

state with reasonable specificity the nature of the law enforcement 

inquiry: 

''Records concerning your transactions held by the financial 

institution named in the attached request were obtained by (agency 

or department) under the Right to Financial Privacy Act of 1978 

on (date) for the following purpose: 

Emergency access to such records was obtained on the grounds 

that (state grounds).''. 

(d) Any memorandum, affidavit, or other paper filed in connection with a request for delay in notification shall be preserved by 

the court. Upon petition by the customer to whom such records per-
1411 RIGHT TO FINANCIAL PRIVACY Sec. 110 4 

tain, the court may order disclosure of such papers to the petitioner 

unless the court makes the findings required in subsection (a). 

CUSTOMER CHALLENGE PROVISIONS 

SEC. 1110. [12 U.S.C. 3410] (a) Within ten days of service or 

within fourteen days of mailing of a subpena, summons, or formal 

written request, a customer may file a motion to quash an administrative summons or judicial subpena, or an application to enjoin a 

Government authority from obtaining financial records pursuant to 

a formal written request, with copies served upon the Government 

authority. A motion to quash a judicial subpena shall be filed in 

the court which issued the subpena. A motion to quash an administrative summons or an application to enjoin a Government authority from obtaining records pursuant to a formal written request 

shall be filed in the appropriate United States district court. Such 

motion or application shall contain an affidavit or sworn 

statement— 

(1) stating that the applicant is a customer of the financial 

institution from which financial records pertaining to him have 

been sought; and 

(2) stating the applicant's reasons for believing that the 

financial records sought are not relevant to the legitimate law 

enforcement inquiry stated by the Government authority in its 

notice, or that there has not been substantial compliance with 

the provisions of this title. 

Service shall be made under this section upon a Government authority by delivering or mailing by registered or certified mail a 

copy of the papers to the person, office, or department specified in 

the notice which the customer has received pursuant to this title. 

For the purposes of this section, ''delivery'' has the meaning stated 

in rule 5(b) of the Federal Rules of Civil Procedure. 

(b) if the court finds that the customer has compiled with subsection (a), it shall order the Government authority to file a sworn 

response, which may be filed in camera if the Government includes 

in its response the reasons which make in camera review appropriate. if the court is unable to determine the motion or application 

on the basis of the parties' initial allegations and response, the 

court may conduct such additional proceedings as it deems appropriate. All such proceedings shall be completed and the motion or 

application decided within seven calendar days of the filing of the 

Government's response. 

(c) if the court finds that the applicant is not the customer to 

whom the financial records sought by the Government authority 

pertain, or that there is a demonstrable reason to believe that the 

law enforcement inquiry is legitimate and a reasonable belief that 

the records sought are relevant to that inquiry, it shall deny the 

motion or application, and, in the case of an administrative summons or court order other than a search warrant, order such process enforced. if the court finds that the applicant is the customer 

to whom the records sought by the Government authority pertain, 

and that there is not a demonstrable reason to believe that the law 

enforcement inquiry is legitimate and a reasonable belief that the 

records sought are relevant to that inquiry, or that there has not 

been substantial compliance with the provisions of this title, it 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1412 

shall order the process quashed or shall enjoin the Government 

authority's formal written request. 

(d) A court ruling denying a motion or application under this 

section shall not be deemed a final order and no interlocutory appeal may be taken therefrom by the customer. An appeal of a ruling denying a motion or application under this section may be 

taken by the customer (1) within such period of time as provided 

by law as part of any appeal from a final order in any legal proceeding initiated against him arising out of or based upon the 

financial records, or (2) within thirty days after a notification that 

no legal proceeding is contemplated against him. The Government 

authority obtaining the financial records shall promptly notify a 

customer when a determination has been made that no legal proceeding against him is contemplated. After one hundred and eighty 

days from the denial of the motion or application, if the Government authority obtaining the records has not initiated such a proceeding, a supervisory official of the Government authority shall 

certify to the appropriate court that no such determination has 

been made. The court may require that such certifications be made, 

at reasonable intervals thereafter, until either notification to the 

customer has occurred or a legal proceeding is initiated as described in clause (A). 

(e) The challenge procedures of this title constitute the sole judicial remedy available to a customer to oppose disclosure of financial records pursuant to this title. 

(f) Nothing in this title shall enlarge or restrict any rights of 

a financial institution to challenge requests for records made by a 

Government authority under existing law. Nothing in this title 

shall entitle a customer to assert the rights of a financial institution. 

DUTY OF FINANCIAL INSTITUTIONS 

SEC. 1111. [12 U.S.C. 3411] Upon receipt of a request for 

financial records made by a Government authority under section 

1105 or 1107, the financial institution shall, unless otherwise provided by law, proceed to assemble the records requested and must 

be prepared to deliver the records to the Government authority 

upon receipt of the certificate required under section 1103(b). 

USE OF INFORMATION 

SEC. 1112. [12 U.S.C. 3412] (a) Financial records originally obtained pursuant to this title shall not be transferred to another 

agency or department unless the transferring agency or department certifies in writing that there is reason to believe that the 

records are relevant to a legitimate law enforcement inquiry within 

the jurisdiction of the receiving agency or department. 

(b) when financial records subject to this title are tranferred 

pursuant to subsection (a), the transferring agency or department 

shall, within fourteen days, send to the customer a copy of the certification made pursuant to subsection (a) and the following notice, 

which shall state the nature of the law enforcement inquiry with 

reasonable specificity: ''Copies of, or information contained in, your 

financial records lawfully in possession of have 
1413 RIGHT TO FINANCIAL PRIVACY Sec. 1104 

been furnished to pursuant to the Right of 

Financial Privacy Act of 1978 for the following purpose: 

. If you believe that this transfer has not been made to further a 

legitimate law enforcement inquiry, you may have legal rights 

under the Financial Privacy Act of 1978 or the Privacy Act of 

1974.'' 

(c) Notwithstanding subsection (b), notice to the customer may 

be delayed if the transferring agency or department has obtained 

a court order delaying notice pursuant to section 1109 (a) and (b) 

and that order is still in effect, of if the receiving agency or department obtains a court order authorizing a delay in notice pursuant 

to section 1109 (a) and (b). Upon the expiration of any such period 

of delay, the transferring agency or department shall serve to the 

customer the notice specified in subsection (b) above and the 

agency or department that obtained the court order authorizing a 

delay in notice pursuant to section 1109 (a) and (b) shall serve to 

the customer the notice specified in section 1109 (b). 

(d) Nothing in this title prohibits any supervisory agency from 

exchanging examination reports or other information with another 

supervisory agency. Nothing in this title prohibits the transfer of 

a customer's financial records needed by counsel for a Government 

authority to defend an action brought by the customer. Nothing in 

this title shall authorize the withholding of information by any officer or employee of a supervisory agency from a duly authorized 

committee or subcommittee of the Congress. 

(e) Notwithstanding section 1101(6) or any other provision of 

law, the exchange of financial records, examination reports or other 

information with respect to a financial institution, holding company, or a subsidiary of a depository institution or holding company,

 1 among and between the five member supervisory agencies 

of the Federal Financial Institutions Examination Council, the 

Securities and Exchange Commission, and the Commodity Futures 

Trading Commission is permitted. 

(f) TRANSFE R T O ATTORNE Y GENERAL. — 

(1) IN GENERAL.—Nothing in this title shall apply when 

financial records obtained by an agency or department of the 

United States are disclosed or transferred to the Attorney General or the Secretary of the Treasury upon the certification by 

a supervisory level official of the transferring agency or department that— 

(A) there is reason to believe that the records may be 

relevant to a violation of Federal criminal law; and 

(B) the records were obtained in the exercise of the 

agency's or department's supervisory or regulatory functions. 

(2) LIMITATIO N O N USE.—Records so transferred shall be 

used only for criminal investigative or prosecutive purposes, for 

civil actions under section 951 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, or for forfeiture 

under sections 981 or 982 of title 18, United States Code, by 

Amendment made by section 944 of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989, 103 Stat. 498 inserted '', holding company, or a subsidiary of a depository institution or holding company,'' after ''with respect to a depository institution''. Insert probably should have been placed after ''with respect to a financial institution''. 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1414 

the Department of Justice and only for criminal investigative 

purposes relating to money laundering and other financial 

crimes by the Department of the Treasury and shall, upon 

completion of the investigation or prosecution (including any 

appeal), be returned only to the transferring agency or department. No agency or department so transferring such records 

shall be deemed to have waived any privilege applicable to 

those records under law. 

EXCEPTIONS 

SEC. 1113. [12 U.S.C. 3413] (a) Nothing in this title prohibits 

the disclosure of any financial records or information which is not 

identified with or identifiable as being derived from the financial 

records of a particular customer. 

(b) This chapter shall not apply to the examination by or disclosure to any supervisory agency of financial records or information in the exercise of its supervisory, regulatory, or monetary functions, including conservatorship or receivership functions, with respect to any financial institution, holding company, subsidiary of a 

financial institution or holding company, institution-affiliated party 

(within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect to a financial institution, holding company, 

or subsidiary, or other person participating in the conduct of the 

affairs thereof. 

(c) Nothing in this title prohibits the disclosure of financial 

records in accordance with procedures authorized by the internal 

Revenue Code. 

(d) Nothing in this title shall authorize the withholding of 

financial records or information required to be reported in accordance with any Federal statute or rule promulgated thereunder. 

(e) Nothing in this title shall apply when financial records are 

sought by a Government authority under the Federal Rules of Civil 

or Criminal Procedure or comparable rules of other courts in connection with litigation to which the Government authority and the 

customer are parties. 

(f) Nothing in this title shall apply when financial records are 

sought by a Government authority pursuant to an administrative 

subpena issued by an administrative law judge in an adjudicatory 

proceeding subject to section 554 of title 5, United States Code, and 

to which the Government authority and the customer are parties. 

(g) The notice requirements of this title and sections 1110 and 

1112 shall not apply when a Government authority by a means described in section 1102 and for a legitimate law enforcement inquiry is seeking only the name, address, account number, and type 

of account of any customer or ascertainable group of customers 

associated (1) with a financial transaction or class of financial 

transactions, or (2) with a foreign country or subdivision thereof in 

the case of a Government authority exercising financial controls 

over foreign accounts in the United States under section 5(b) of the 

Trading with the Enemy Act (50 U.S.C. App. 5(b)); the International Emergency Economic Powers Act (title II, Public Law 95-

223); or section 5 of the United Nations Participation Act (22 

U.S.C. 287(c)). 
1415 RIGHT TO FINANCIAL PRIVACY Sec. 1104 

(h)(1) Nothing in this title (except sections 1103, 1117 and 

1118) shall apply when financial records are sought by a Government authority— 

(A) in connection with a lawful proceeding, investigation, 

examination, or inspection directed at a financial institution 

(whether or not such proceeding, investigation, examination, or 

inspection is also directed at a customer) or at a legal entity 

which is not a customer; or 

(B) in connection with the authority's consideration or 

administration of assistance to the customer in the form of a 

Government loan, loan guaranty, or loan insurance program. 

(2) when financial records are sought pursuant to this subsection, the Government authority shall submit to the financial 

institution the certificate required by section 1103(b). For access 

pursuant to paragraph (1)(B), no further certification shall be required for subsequent access by the certifying Government authority during the term of the loan, loan guaranty, or loan insurance 

agreement. 

(3) After the effective date of this title, whenever a customer 

applies for participation in a Government loan, loan guaranty, or 

loan insurance program, the Government authority administering 

such program shall give the customer written notice of the 

authority's access rights under this subsection. No further notification shall be required for subsequent access by that authority during the term of the loan, loan guaranty, or loan insurance agreement. 

(4) Financial records obtained pursuant to this subsection may 

be used only for the purpose for which they were originally obtained, and may be transferred to another agency or department 

only when the transfer is to facilitate a lawful proceeding, investigation, examination, or inspection directed at a financial institution (whether or not such proceeding, investigation, examination, or 

inspection is also directed at a customer), or at a legal entity which 

is not a customer, except that— 

(A) nothing in this paragraph prohibits the use or transfer 

of a customer's financial records needed by counsel representing a Government authority in a civil action arising from 

a Government loan, loan guaranty, or loan insurance agreement; and 

(B) nothing in this paragraph prohibits a Government authority providing assistance to a customer in the form of a 

loan, loan guaranty, or loan insurance agreement from using 

or transferring financial records necessary to process, service 

or foreclose a loan, or to collect on an indebtedness to the Government resulting from a customer's default. 

(5) Notification that financial records obtained pursuant to this 

subsection may relate to a potential civil, criminal, or regulatory 

violation by a customer may be given to an agency or department 

with jurisdiction over the violation, and such agency or department 

may than seek access to the records pursuant to the provisions of 

this title. 

(6) Each financial institution shall keep a notation of each disclosure made pursuant to paragraph (1)(B) of this subsection, including the date of such disclosure and the Government authority 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1416 

to which it was made. The customer shall be entitled to inspect this 

information. 

(1) Nothing in this title (except sections 1115 and 1120) shall 

apply to any subpena or court order issued in connection with proceedings before a grand jury, except that a court shall have authority to order a financial institution, on which a grand jury subpena 

for customer records has been served, not to notify the customer of 

the existence of the subpena or information that has been furnished to the grand jury, under the circumstances and for the period specified and pursuant to the procedures established in section 

1109 of the Right to Financial Privacy Act of 1978 (12 U.S.C. 3409). 

(j) This title shall not apply when financial records are sought 

by the General Accounting Office pursuant to an authorized proceeding, investigation, examination or audit directed at a government authority. 

(k)(1) Nothing in this title shall apply to the disclosure by the 

financial institution of the name and address of any customer to 

the Department of the Treasury, the Social Security Administration, or the Railroad Retirement Board, where the disclosure of 

such information is necessary to, and such information is used 

solely for the purpose of, the proper administration of section 1441 

of the Internal Revenue Code of 1954, title II of the Social Security 

Act, or the Railroad Retirement Act of 1974. 

(2) Notwithstanding any other provision of law, any request 

authorized by paragraph (1) (and the information contained 

therein) may be used by the financial institution or its agents 

solely for the purpose of providing the customer's name and address to the Department of the Treasury, the Social Security 

Administration, or the Railroad Retirement Board and shall be 

barred from redisclosure by the financial institution or its agents. 

(l) CRIMES AGAINST FINANCIA L INSTITUTIONS BY INSIDERS.— 

Nothing in this title shall apply when any financial institution or 

supervisory agency provides any financial record of any officer, director, employee, or controlling shareholder (within the meaning of 

subparagraph (A) or (B) of section 2(a)(2) of the Bank Holding 

Company Act of 1956 or subparagraph (A) or (B) of section 

408(a)(2) of the National Housing Act) of such institution, or of any 

major borrower from such institution who there is reason to believe 

may be acting in concert with any such officer, director, employee, 

or controlling shareholder, to the Attorney General of the united 

States, to a State law enforcement agency, or, in the case of a possible violation of subchapter II of chapter 53 of title 31, United 

States Code, to the Secretary of the Treasury if there is reason to 

believe that such record is relevant to a possible violation by such 

person of— 

(1) any law relating to crimes against financial institutions 

or supervisory agencies by directors, officers, employees, or 

controlling shareholders of, or by borrowers from, financial 

institutions; or 

(2) any provision of subchapter II of chapter 53 of title 31, 

United States Code or of section 1956 or 1957 of title 18, 

United States Code. 
1417 RIGHT TO FINANCIAL PRIVACY Sec. 1104 

No supervisory agency which transfers any such record under this 

subsection shall be deemed to have waived any privilege applicable 

to that record under law. 

(m) This title shall not apply to the examination by or disclosure to employees or agents of the Board of Governors of the Federal Reserve System or any Federal Reserve Bank of financial 

records or information in the exercise of the Federal Reserve System's authority to extend credit to the financial institutions or others. 

(n) This title shall not apply to the examination by or disclosure to the Resolution Trust Corporation or its employees or agents 

of financial records or information in the exercise of its conservatorship, receivership, or liquidation functions with respect to 

a financial institution. 

(o) This title shall not apply to the examination by or disclosure to the Federal Housing Finance Board or any of the Federal 

home loan banks of financial records or information in the exercise 

of the Federal Housing Finance Board's authority to extend credit 

(either directly or through a Federal home loan bank) to financial 

institutions or others. 

(p)(1) Nothing in this title shall apply to the disclosure by the 

financial institution of the name and address of any customer to 

the Department of Veterans Affairs where the disclosure of such 

information is necessary to, and such information is used solely for 

the purposes of, the proper administration of benefits programs 

under laws administered by the Secretary. 

(2) Notwithstanding any other provision of law, any request 

authorized by paragraph (1) (and the information contained 

therein) may be used by the financial institution or its agents 

solely for the purpose of providing the customer's name and address to the Department of Veterans Affairs and shall be barred 

from redisclosure by the financial institution or its agents. 

(q) Nothing in this title shall apply to the disclosure of any 

financial record or information to a Government authority in conjunction with a Federal contractor-issued travel charge card issued 

for official Government travel. 

SPECIAL PROCEDURES 

SEC. 1114. [12 U.S.C. 3414] (a)(1) Nothing in this title (except 

sections 1115, 1117, 1118, and 1121) shall apply to the production 

and disclosure of financial records pursuant to requests from— 

(A) a Government authority authorized to conduct foreign 

counter- or foreign positive-intelligence activities for purposes 

of conducting such activities; or 

(B) the Secret Service for the purpose of conducting its protective functions (18 U.S.C. 3056; 3 U.S.C. 202, Public Law 90-

331, as amended). 

(2) In the instances specified in paragraph (1), the Government 

authority shall submit to the financial institution the certificate required in section 1103(b) signed by a supervisory official of a rank 

designated by the head of the Government authority. 

(3) No financial institution, or officer, employee, or agent of 

such institution, shall disclose to any person that a Government 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1418 

authority described in paragraph (1) has sought or obtained access 

to a customer's financial records. 

(4) The Government authority specified in paragraph (1) shall 

compile an annual tabulation of the occasions in which this section 

was used. 

(5)(A) Financial institutions, and officers, employees, and 

agents thereof, shall comply with a request for a customer's or entity's financial records made pursuant to this subsection by the Federal Bureau of Investigation when the Director of the Federal Bureau of Investigation (or the Director's designee) certifies in writing 

to the financial institution that such records are sought for foreign 

counterintelligence purposes and that there are specific and 

articulable facts giving reason to believe that the customer or 

entity whose records are sought is a foreign power or an agent of 

a foreign power as defined in section 101 of the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1801). 

(B) The Federal Bureau of Investigation may disseminate 

information obtained pursuant to this paragraph only as provided 

in guidelines approved by the Attorney General for foreign intelligence collection and foreign counterintelligence investigations conducted by the Federal Bureau of investigation, and, with respect to 

dissemination to an agency of the United States, only if such information is clearly relevant to the authorized responsibilities of such 

agency. 

(C) on a semiannual basis the Attorney General shall fully inform the Permanent Select Committee on Intelligence of the House 

of Representatives and the Select Committee on Intelligence of the 

Senate concerning all requests made pursuant to this paragraph. 

(D) No financial institution, or officer, employee, or agent of 

such institution, shall disclose to any person that the Federal Bureau of investigation has sought or obtained access to a customer's 

or entity's financial records under this paragraph. 

(b)(1) Nothing in this title shall prohibit a Government authority from obtaining financial records from a financial institution if 

the Government authority determines that delay in obtaining access to such records would create imminent danger of— 

(A) physical injury to any person; 

(B) serious property damage; or 

(C) flight to avoid prosecution. 

(2) In the instances specified in paragraph (1), the Government 

shall submit to the financial institution the certificate required in 

section 1103(b) signed by a supervisory official of a rank designated 

by the head of the Government authority. 

(3) Within five days of obtaining access to financial records 

under this subsection, the Government authority shall file with the 

appropriate court a signed, sworn statement of a supervisory official of a rank designated by the head of the Government authority 

setting forth the grounds for the emergency access. The Government authority shall thereafter comply with notice the provisions 

of section 1109(c). 

(4) The Government authority specified in paragraph (1) shall 

compile an annual tabulation of the occasions in which this section 

was used. 
1419 RIGHT TO FINANCIAL PRIVACY Sec. 1104 

COST REIMBURSEMENT 

SEC. 1115. [12 U.S.C. 3415] (a) Except for records obtained 

pursuant to section 1103(d) or 1113 (a) through (h), or as otherwise 

provided by law, a Government authority shall pay to the financial 

institution assembling or providing financial records pertaining to 

a customer and in accordance with procedures established by this 

title a fee for reimbursement for such costs as are reasonably necessary and which have been directly incurred in searching for, reproducing, or transporting books, papers, records, or other data required or requested to be produced. The Board of Governors of the 

Federal Reserve System shall, by regulation, establish the rates 

and conditions under which such payment may be made. 

(b) This section shall take effect on October 1, 1979. 

JURISDICTION 

SEC. 1116. [12 U.S.C. 3416] An action to enforce any provision 

of this title may be brought in any appropriate United States district court without regard to the amount in controversy within 

three years from the date on which the violation occurs or the date 

of discovery of such violation, whichever is later. 

CIVIL PENALTIES 

SEC. 1117. [12 U.S.C. 3417] (a) Any agency or department of 

the United States or financial institution obtaining or disclosing 

financial records or information contained therein in violation of 

this title is liable to the customer to whom such records relate in 

an amount equal to the sum of— 

(1) $100 without regard to the volume of records involved; 

(2) any actual damages sustained by the customer as a result of the disclosure; 

(3) such punitive damages as the court may allow, where 

the violation is found to have been willful or intentional; and 

(4) in the case of any successful action to enforce liability 

under this section, the costs of the action together with reasonable attorney's fees as determined by the court. 

(b) whenever the court determines that any agency or department of the United States has violated any provision of this title 

and the court finds that the circumstances surrounding the violation raise questions of whether an officer or employee of the department or agency acted willfully or intentionally with respect to the 

violation, the Civil Service Commission shall promptly initiate a 

proceeding to determine whether disciplinary action is warranted 

against the agent or employee who was primarily responsible for 

the violation. The Commission after investigation and consideration 

of the evidence submitted, shall submit its findings and recommendations to the administrative authority of the agency concerned and shall send copies of the findings and recommendations 

to the officer or employee or his representative. The administrative 

authority shall take the corrective action that the Commission recommends. 

(c) Any financial institution or agent or employee thereof making a disclosure of financial records pursuant to this title in goodfaith reliance upon a certificate by any Government authority or 
Sec. 1102 RIGHT TO FINANCIAL PRIVACY 1420 

pursuant to the provisions of section 1113(l) shall not be liable to 

the customer for such disclosure under this title, the constitution 

of any State, or any law or regulation of any State or any political 

subdivision of any State. 

(d) The remedies and sanctions described in this title shall be 

the only authorized judicial remedies and sanctions for violations 

of this title. 

INJUNCTIVE RELIEF 

SEC. 1118. [12 U.S.C. 3418] In addition to any other remedy 

contained in this title, injunctive relief shall be available to require 

that the procedures of this title are complied with. In the event of 

any successful action, costs together with reasonable attorney's fees 

as determined by the court may be recovered. 

SUSPENSION OF STATUTES OF LIMITATION S 

SEC. 1119. [12 U.S.C. 3419] If any individual files a motion or 

application under this title which has the effect of delaying the access of a Government authority to financial records pertaining to 

such individual, any applicable statute of limitations shall be 

deemed to be tolled for the period extending from the date such 

motion or application was filed until the date upon which the motion or application is decided. 

GRAND JURY INFORMATIO N 

SEC. 1120. [12 U.S.C. 3420] (a) Financial records about a customer obtained from a financial institution pursuant to a subpena 

issued under the authority of a Federal grand jury— 

(1) shall be returned and actually presented to the grand 

jury unless the volume of such records makes such return and 

actual presentation impractical in which case the grand jury 

shall be provided with a description of the contents of the 

records.;1 

(2) shall be used only for the purpose of considering 

whether to issue an indictment or presentment by that grand 

jury, or of prosecuting a crime for which that indictment or 

presentment is issued, or for a purpose authorized by rule 6(e) 

of the Federal Rules of Criminal Procedure; 

(3) shall be destroyed or returned to the financial institution if not used for one of the purposes specified in paragraph 

(2); and 

(4) shall not be maintained, or a description of the contents 

of such records shall not be maintained by any Government 

authority other than in the sealed records of the grand jury, 

unless such record has been used in the prosecution of a crime 

for which the grand jury issued an indictment or presentment 

or for a purpose authorized by rule 6(e) of the Federal Rules 

of Criminal Procedure. 

(b)(1) No officer, director, partner, employee, or shareholder of, 

or agent or attorney for, a financial institution shall, directly or indirectly, notify any person named in a grand jury subpoena served 

1

 So in law. Period probably should be deleted. See section 6186(e) of P.L. 100-690, 102 Stat. 

4358. 
1421 RIGHT TO FINANCIAL PRIVACY Sec. 1104 

on such institution in connection with an investigation relating to 

a possible— 

(A) crime against any financial institution or supervisory 

agency or crime involving a violation of the Controlled Substance Act, the Controlled Substances Import and Export Act, 

section 1956 or 1957 of title 18, sections 5313, 5316 and 5324 

of title 31, or section 60501 of the Internal Revenue Code of 

1986;or 

(B) conspiracy to commit such a crime, 

about the existence or contents of such subpoena, or information 

that has been furnished to the grand jury in response to such subpoena. 

(2) Section 8 of the Federal Deposit Insurance Act and section 

206(k)(2) of the Federal Credit Union Act shall apply to any violation of this subsection. 

[Section 1121 repealed by section 3001(d) of Public Law 104-66 

(109 Stat. 734).] 

SECURITIES AND EXCHANGE COMMISSION 

SEC. 1122. [12 U.S.C. 3422] Except as provided in the Securities Exchange Act of 1934, this Act shall apply with respect to the 

Securities and Exchange Commission. 

SUBTITLE IV OF TITLE 31, UNITED STATES CODE 

1423 

SUBTITLE IV—MONEY 

CHAPTER 

51. COINS AND CURRENCY 

53. MONETARY TRANSACTIONS 

Sec. 

5101 

5301 

CHAPTER 51—COINS AND CURRENCY 

SUBCHAPTER I—MONETARY SYSTEM 

Sec. 

5101. Decimal system. 

5102. Standard weight. 

5103. Legal tender. 

SUBCHAPTER II—GENERAL AUTHORITY 

5111. Minting and issuing coins, medals, and numismatic items. 

5112. Denominations, specifications, and design of coins. 

5113. Tolerances and testing of coins. 

5114. Engraving and printing currency and security documents. 

5115. United States currency notes. 

5116. Buying and selling gold and silver. 

5117. Transferring gold and gold certificates. 

5118. Gold clauses and consent to sue. 

5119. Redemption and cancellation of currency. 

5120. Obsolete, mutilated, and worn coins and currency. 

5121. Refining, assaying, and valuation of bullion. 

5122. Payment to depositors. 

SUBCHAPTER III—UNITE D STATES MINT 1 

5131. organization. 

5132. Administrative. 

5133. Settlement of accounts. 

5134. Numismatic Public Enterprise Fund. 

5135. Numismatic Public Enterprise Fund.2 

SUBCHAPTER IV—BUREAU OF ENGRAVING AND PRINTING 

5141. Operation of the Bureau. 

5142. Bureau of Engraving and Printing Fund. 

5143. Payment for services. 

5144. Providing impressions of portraits and vignettes. 

5151. Conversion of currency of foreign countries. 

5152. Value of United States money holdings in international institutions. 

5153. Counterfeit currency. 

5154. State taxation. 

5155. Providing engraved plates of portraits of deceased members of Congress. 

1

 So in law. Typeface is wrong. Should be conformed to other subchapters. 

2

 Does not match section catchline. Also a section heading for a new section 5136 was added 

by P.L. 104-52, but no conforming change was made to insert a new item in the table of sections. 

SUBCHAPTER V—MISCELLANEOUS 

1425 
§ 51 41 CH. 51—COINS AND CURRENCY 1426 

SUBCHAPTER I—MONETARY SYSTEM 

§ 5101. Decimal system 

United States money is expressed in dollars, dimes or tenths, 

cents or hundreths, and mills or thousandths. A dime is a tenth of 

a dollar, a cent is a hundredth of a dollar, and a mill is a thousandth of a dollar. 

§ 5102. Standard weight 

The standard troy pound of the National Bureau of Standards 

of the Department of Commerce shall be the standard used to ensure that the weight of United States coins conforms to specifications in section 5112 of this title. 

§ 5103. Legal tender 

United States coins and currency (including Federal reserve 

notes and circulating notes of Federal reserve banks and national 

banks) are legal tender for all debts, public charges, taxes, and 

dues. Foreign gold or silver coins are not legal tender for debts. 

SUBCHAPTER II—GENERAL AUTHORITY 

§ 5111. Minting and issuing coins, medals, and numismatic 

items 

(a) The Secretary of the Treasury— 

(1) shall mint and issue coins described in section 5112 of 

this title in amounts the Secretary decides are necessary to 

meet the needs of the United States; 

(2) may prepare national medal dies and strike national 

and other medals if it does not interfere with regular minting 

operations but may not prepare private medal dies; 

(3) may prepare and distribute numismatic items; and 

(4) may mint coins for a foreign country if the minting 

does not interfere with regular minting operations, and shall 

prescribe a charge for minting the foreign coins equal to the 

cost of the minting (including labor, materials, and the use of 

machinery). 

(b) The Department of the Treasury has a coinage metal fund 

and a coinage profit fund. The Secretary may use the coinage metal 

fund to buy metal to mint coins. The Secretary shall credit the 

coinage profit fund with the amount by which the nominal value 

of the coins minted from the metal exceeds the cost of the metal. 

The Secretary shall charge the coinage profit fund with waste incurred in minting coins and the cost of distributing the coins, including the cost of coin bags and pallets. The Secretary shall deposit in the Treasury as miscellaneous receipts excess amounts in 

the coinage profit fund. 

(c) PROCUREMENTS RELATING TO COI N PRODUCTION.— 

(1) IN GENERAL.—The Secretary may make contracts, on 

conditions the Secretary decides are appropriate and are in the 

public interest, to acquire articles, materials, supplies, and 

services (including equipment, manufacturing facilities, patents, patent rights, technical knowledge, and assistance) necessary to produce the coins referred to in this title. 
1427 CH. 51—COINS AND CURRENCY § 5112 

(2) DOMESTI C CONTROL OF COINAGE.—(A ) Subject to subparagraph (B), in order to protect the national security through 

domestic control of the coinage process, the Secretary shall acquire only such articles, materials, supplies, and services (including equipment, manufacturing facilities, patents, patent 

rights, technical knowledge, and assistance) for the production 

of coins as have been produced or manufactured in the United 

States unless the Secretary determines it to be inconsistent 

with the public interest, or the cost to be unreasonable, and 

publishes in the Federal Register a written finding stating the 

basis for the determination. 

(B) Subparagraph (A) shall apply only in the case of a bid 

or offer from a supplier the principal place of business of which 

is in a foreign country which does not accord to United States 

companies the same competitive opportunities for procurements in connection with the production of coins as it accords 

to domestic companies. 

(3) DETERMINATION. — 

(A) IN GENERAL.—Any determination of the Secretary 

referred to in paragraph (2) shall not be reviewable in any 

administrative proceeding or court of the United States. 

(B) OTHE R RIGHTS UNAFFECTED.—Thi s paragraph does 

not alter or annul any right of review that arises under 

any provision of any law or regulation of the United States 

other than paragraph (2). 

(4) Nothing in paragraph (2) of this subsection in any way 

affects the procurement by the Secretary of gold and silver for 

the production of coins by the United States Mint. 

(d)(1) The Secretary may prohibit or limit the exportation, 

melting, or treatment of United States coins when the Secretary 

decides the prohibition or limitation is necessary to protect the 

coinage of the United States. 

(2) A person knowingly violating an order or license issued or 

regulation prescribed under paragraph (1) of this subsection, shall 

be fined not more than $10,000, imprisoned not more than 5 years, 

or both. 

(3) Coins exported, melted, or treated in violation of an order 

or license issued or regulation prescribed, and metal resulting from 

the melting or treatment, shall be forfeited to the United States 

Government. The powers of the Secretary and the remedies available to enforce forfeitures are those provided in part II of subchapter C of chapter 75 of the Internal Revenue Code of 1954 (26 

U.S.C. 7321 et seq.). 

§ 5112. Denominations, specifications, and design of coins 

(a) The Secretary of the Treasury may mint and issue only the 

following coins: 

(1) a dollar coin that is 1.043 inches in diameter. 

(2) a half dollar coin that is 1.205 inches in diameter and 

weighs 11.34 grams. 

(3) a quarter dollar coin that is 0.955 inch in diameter and 

weighs 5.67 grams. 

(4) a dime coin that is 0.705 inch in diameter and weighs 

2.268 grams. 
§ 51 41 CH. 51—COINS AND CURRENCY 1428 

(5) a 5-cent coin that is 0.835 inch in diameter and weighs 

5 grams. 

(6) except as provided under subsection (c) of this section, 

a one-cent coin that is 0.75 inch in diameter and weights 3.11 

grams. 

(7) A fifty dollar gold coin that is 32.7 millimeters in diameter, weighs 33.931 grams, and contains one troy ounce of 

fine gold. 

(8) A twenty-five dollar gold coin that is 27.0 millimeters 

in diameter, weighs 16.966 grams, and contains one-half troy 

ounce of fine gold. 

(9) A ten dollar gold coin that is 22.0 millimeters in diameter, weighs 8.483 grams, and contains one-fourth troy ounce of 

fine gold. 

(10) A five dollar gold coin that is 16.5 millimeters in diameter, weighs 3.393 grams, and contains one-tenth troy ounce 

of fine gold. 

(b) The half dollar, quarter dollar, and dime coins are clad 

coins with 3 layers of metal. The 2 identical outer layers are an 

alloy of 75 percent copper and 25 percent nickel. The inner layer 

is copper. The outer layers are metallurgically bonded to the inner 

layer and weight at least 30 percent of the weight of the coin. The 

dollar coin shall be golden in color, have a distinctive edge, have 

tactile and visual features that make the denomination of the coin 

readily discernible, be minted and fabricated in the United States, 

and have similar metallic, anti-counterfeiting properties as united 

States coinage in circulation on the date of enactment of the United 

States $1 Coin Act of 1997. The 5-cent coin is an alloy of 75 percent 

copper and 25 percent nickel. In minting 5-cent coins, the Secretary 

shall use bars that vary not more than 2.5 percent from the percent of nickel required. Except as provided under subsection (c) of 

this section, the one-cent coin is an alloy of 95 percent copper and 

5 percent zinc. In minting gold coins, the Secretary shall use alloys 

that vary not more than 0.1 percent from the percent of gold required. The specifications for alloys are by weight. 

(c) The Secretary may prescribe the weight and the composition of copper and zinc in the alloy of the one-cent coin that the 

Secretary decides are appropriate when the Secretary decides that 

a different weight and alloy of copper and zinc are necessary to ensure an adequate supply of one-cent coins to meet the needs of the 

United States. 

(d)(1) United States coins shall have the inscription ''In God 

We Trust''. The obverse side of each coin shall have the inscription 

''Liberty''. The reverse side of each coin shall have the inscriptions 

''United States of America'' and ''E Pluribus Unum'' and a designation of the value of the coin. The design on the reverse side of the 

dollar, half dollar, and quarter dollar is an eagle. The Secretary of 

the Treasury, in consultation with the Congress, shall select appropriate designs for the obverse and reverse sides of the dollar coin. 

However, to prevent or alleviate a shortage of a denomination, the 

Secretary may inscribe coins of the denomination with the year 

that was last inscribed on coins of the denomination. 

(2) The Secretary shall prepare the devices, models, hubs, and 

dies for coins, emblems, devices, inscriptions, and designs author-
1429 CH. 51—COINS AND CURRENCY § 5112 

ized under this chapter. The Secretary may adopt and prepare new 

designs or models of emblems or devices that are authorized in the 

same way as when new coins or devices are authorized. The Secretary may change the design or die of a coin only once within 25 

years of the first adoption of the design, model, hub, or die for that 

coin. The Secretary may procure services under section 3109 of title 

5 in carrying out this paragraph. 

(e) Notwithstanding any other provision of law, the Secretary 

shall mint and issue, in quantities sufficient to meet public demand, coins which— 

(1) are 40.6 millimeters in diameter and weigh 31.103 

grams; 

(2) contain .999 fine silver; 

(3) have a design— 

(A) symbolic of Liberty on the obverse side; and 

(B) of an eagle on the reverse side; 

(4) have inscriptions of the year of minting or issuance, 

and the words ''Liberty'', ''In God We Trust'', ''United States of 

America'', ''1 Oz. Fine Silver'', ''E Pluribus Unum'', and ''One 

Dollar''; and 

(5) have reeded edges. 

(f) SILVER COINS. — 

(1) SALE PRICE.—The Secretary shall sell the coins minted 

under subsection (e) to the public at a price equal to the market value of the bullion at the time of sale, plus the cost of 

minting, marketing, and distributing such coins (including 

labor, materials, dies, use of machinery, and promotional and 

overhead expenses). 

(2) BUL K SALES.—The Secretary shall make bulk sales of 

the coins minted under subsection (e) at a reasonable discount. 

(3) NUMISMATI C ITEMS.—For purposes of section 5132(a)(1) 

of this title, all coins minted under subsection (e) shall be considered to be numismatic items. 

(g) For purposes of section 5132(a)(1) of this title, all coins 

minted under subsection (e) of this section shall be considered to 

be numismatic items. 

(h) The coins issued under this title shall be legal tender as 

provided in section 5103 of this title. 

(i)(1) Notwithstanding section 5111(a)(1) of this title, the Secretary shall mint and issue the gold coins described in paragraphs 

(7), (8), (9), and (10) of subsection (a) of this section, in quantities 

sufficient to meet public demand, and such gold coins shall— 

(A) have a design determined by the Secretary, except that 

the fifty dollar gold coin shall have— 

(i) on the obverse side, a design symbolic of Liberty; 

and 

(ii) on the reverse side, a design representing a family 

of eagles, with the male carrying an olive branch and flying above a nest containing a female eagle and hatchlings; 

(B) have inscriptions of the denomination, the weight of 

the fine gold content, the year of minting or issuance, and the 

words ''Liberty'', ''In God We Trust'', ''United States of America'', and ''E Pluribus Unum'', and 

(C) have reeded edges. 
§ 51 41 CH. 51—COINS AND CURRENCY 1430 

(2)(A) The Secretary shall sell the coins minted under this subsection to the public at a price equal to the market value of the bullion at the time of sale, plus the cost of minting, marketing, and 

distributing such coins (including labor, materials, dies, use of machinery, and promotional and overhead expenses). 

(B) The Secretary shall make bulk sales of the coins minted 

under this subsection at a reasonable discount. 

(3) For purposes of section 5132(a)(1) of this title, all coins 

minted under this subsection shall be considered to be numismatic 

items. 

(4)(A) Notwithstanding any other provisions of law and subject 

to subparagraph (B), the Secretary of the Treasury may change the 

diameter, weight, or design of any coin minted under this subsection or the fineness of the gold in the alloy of any such coin if 

the Secretary determines that the specific diameter, weight, design, 

or fineness of gold which differs from that otherwise required by 

law is appropriate for such coin. 

(B) The Secretary may not mint any coin with respect to which 

a determination has been made by the Secretary under subparagraph (A) before the end of the 30-day period beginning on the date 

a notice of such determination is published in the Federal Register. 

(j) GENERAL WAIVE R OF PROCUREMENT REGULATIONS.— 

(1) IN GENERAL.—Except as provided in paragraph (2), no 

provision of law governing procurement or public contracts 

shall be applicable to the procurement of goods or services necessary for minting, marketing, or issuing any coin authorized 

under paragraph (7), (8), (9), or (10) of subsection (a) or subsection (e), including any proof version of any such coin. 

(2) EQUA L EMPLOYMENT OPPORTUNITY.—Paragrap h (1) 

shall not relieve any person entering into a contract with respect to any coin referred to in such paragraph from complying 

with any law relating to equal employment opportunity. 

(C) The Secretary may continue to mint and issue coins in 

accordance with the specifications contained in paragraphs (7), (8), 

(9), and (10) of subsection (a) and paragraph (1)(A) of this subsection at the same time the Secretary in minting and issuing 

other bullion and proof gold coins under this subsection in accordance with such program procedures and coin specifications, designs, varieties, quantities, denominations, and inscriptions as the 

Secretary, in the Secretary's discretion, may prescribe from time to 

time. 

(k) The Secretary may mint and issue plantinum bullion coins 

and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the 

Secretary, in the Secretary's discretion, may prescribe from time to 

time. 

(l) REDESIGN AND ISSUANCE OF QUARTER DOLLAR I N COMMEMORATION OF EAC H OF THE 5 0 STATES.— 

(1) REDESIGN BEGINNING I N 1999.— 

(A) IN GENERAL.—Notwithstanding the fourth sentence 

of subsection (d)(1) and subsection (d)(2), quarter dollar 

coins issued during the 10-year period beginning in 1999, 

shall have designs on the reverse side selected in accord-
1431 CH. 51—COINS AND CURRENCY § 5112 

ance with this subsection which are emblematic of the 50 

States. 

(B) TRANSITION PROVISION.—Notwithstanding subparagraph (A), the Secretary may continue to mint and issue 

quarter dollars in 1999 which bear the design in effect before the redesign required under this subsection and an 

inscription of the year ''1998'' as required to ensure a 

smooth transition into the 10-year program under this 

subsection. 

( C ) FLEXIBILITY WIT H REGARD TO PLACEMENT OF 

INSCRIPTIONS.—Notwithstanding subsection (d)(1), the Secretary may select a design for quarter dollars issued during the 10-year period referred to in subparagraph (A) in 

which— 

(i) the inscription described in the second sentence 

of subsection (d)(1) appears on the reverse side of any 

such quarter dollars; and 

(ii) any inscription described in the third sentence 

of subsection (d)(1) or the designation of the value of 

the coin appears on the obverse side of any such quarter dollars. 

(2) SINGLE STATE DESIGNS.—The design on the reverse side 

of each quarter dollar issued during the 10-year period referred 

to in paragraph (1) shall be emblematic of 1 of the 50 States. 

(3) ISSUANCE OF COINS COMMEMORATING 5 STATES DURING 

EACH OF THE 10 YEARS.— 

(A) IN GENERAL.—The designs for the quarter dollar 

coins issued during each year of the 10-year period referred to in paragraph (1) shall be emblematic of 5 States 

selected in the order in which such States ratified the Constitution of the United States or were admitted into the 

union, as the case may be. 

(B) NUMBE R OF EACH OF 5 COIN DESIGNS I N EACH 

YEAR.—Of the quarter dollar coins issued during each year 

of the 10-year period referred to in paragraph (1), the Secretary of the Treasury shall prescribe, on the basis of such 

factors as the Secretary determines to be appropriate, the 

number of quarter dollars which shall be issued with each 

of the 5 designs selected for such year. 

(4) SELECTION OF DESIGN.— 

(A) IN GENERAL.—Each of the 50 designs required 

under this subsection for quarter dollars shall be— 

(i) selected by the Secretary after consultation 

with— 

(I) the Governor of the State being commemorated, or such other State officials or group as the 

State may designate for such purpose; and 

(II) the Commission of Fine Arts; and 

(ii) reviewed by the Citizens Commemorative Coin 

Advisory Committee. 

(B) SELECTION AND APPROVAL PROCESS.—Designs for 

quarter dollars may be submitted in accordance with the 

design selection and approval process developed by the 

Secretary in the sole discretion of the Secretary. 
§ 51 41 CH. 51—COINS AND CURRENCY 1432 

(C) PARTICIPATION.—The Secretary may include participation by State officials, artists from the States, engravers of the United States Mint, and members of the 

general public. 

(D) STANDARDS.—Because it is important that the Nation's coinage and currency bear dignified designs of which 

the citizens of the United States can be proud, the Secretary shall not select any frivolous or inappropriate design for any quarter dollar minted under this subsection. 

( E) PROHIBITION ON CERTAIN REPRESENTATIONS.—No 

head and shoulders portrait or bust of any person, living 

or dead, and no portrait of a living person may be included 

in the design of any quarter dollar under this subsection. 

(5) TREATMENT AS NUMISMATIC ITEMS.—For purposes of 

sections 5134 and 5136, all coins minted under this subsection 

shall be considered to be numismatic items. 

(6) ISSUANCE.— 

(A) QUALITY OF COINS.—The Secretary may mint and 

issue such number of quarter dollars of each design selected under paragraph (4) in uncirculated and proof qualities as the Secretary determines to be appropriate. 

(B) SILVER COINS.—Notwithstanding subsection (b), 

the Secretary may mint and issue such number of quarter 

dollars of each design selected under paragraph (4) as the 

Secretary determines to be appropriate, with a content of 

90 percent silver and 10 percent copper. 

(C) SOURCES OF BULLION.—The Secretary shall obtain 

silver for minting coins under subparagraph (B) from 

available resources, including stockpiles established under 

the Strategic and Critical Materials Stock Piling Act. 

(7) APPLICATION I N EVENT OF THE ADMISSION OF ADDITIONAL STATES.—If any additional State is admitted into the 

Union before the end of the 10-year period referred to in paragraph (1), the Secretary of the Treasury may issue quarter dollar coins, in accordance with this subsection, with a design 

which is emblematic of such State during any 1 year of such 

10-year period, in addition to the quarter dollar coins issued 

during such year in accordance with paragraph (3)(A). 

( m ) COMMEMORATIVE COI N PROGRAM RESTRICTIONS.— 

(1) MAXIMU M NUMBER.—Beginning January 1, 1999, the 

Secretary may mint and issue commemorative coins under this 

section during any calendar year with respect to not more than 

2 commemorative coin programs. 

(2) MINTAGE LEVELS.— 

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

(B), in carrying out any commemorative coin program, the 

Secretary shall mint— 

(i) not more than 750,000 clad half-dollar coins; 

(ii) not more than 500,000 silver one-dollar coins; 

and 

(iii) not more than 100,000 gold five-dollar or tendollar coins. 

(B) EXCEPTION.—If the Secretary determines, based on 

independent, market-based research conducted by a des-
1433 CH. 51—COINS AND CURRENCY § 5112 

ignated recipient organization of a commemorative coin 

program, that the mintage levels described in subparagraph (A) are not adequate to meet public demand for that 

commemorative coin, the Secretary may waive one or more 

of the requirements of subparagraph (A) with respect to 

that commemorative coin program. 

( C) DESIGNATED RECIPIENT ORGANIZATION DEFINED.— 

For purposes of this paragraph, the term 'designated recipient organization' means any organization designated, 

under any provision of law, as the recipient of any surcharge imposed on the sale of any numismatic item. 

§ 5113. Tolerances and testing of coins 

(a) The Secretary of the Treasury may prescribe reasonable 

manufacturing tolerances for specifications in section 5112 of this 

title (except for specifications that are limits) for the dollar, half 

dollar, quarter dollar, and dime coins. The weight of the 5-cent coin 

may vary not more than 0.194 gram. The weight of the one-cent 

coin may vary not more than 0.13 gram. Any gold coin issued 

under section 5112 of this title shall contain the full weight of gold 

stated on the coin. 

(b) The Secretary shall keep a record of the kind, number, and 

weight of each group of coins minted and test a number of the coins 

separately to determine if the coins conform to the weight specified 

in section 5112(a) of this title. If the coins tested do not conform, 

the Secretary— 

(1) shall weigh each coin of the group separately and deface the coins that do not conform and cast them into bars for 

reminting; or 

(2) may remelt the group of coins. 

§ 5114. Engraving and printing currency and security documents 

(a) The Secretary of the Treasury shall engrave and print 

United States currency and bonds of the United States Government 

and currency and bonds of United States territories and possessions from intaglio plates on plate printing presses the Secretary 

selects. However, other security documents and checks may be 

printed by any process the Secretary selects. Engraving and printing shall be carried out within the Department of the Treasury if 

the Secretary decides the engraving and printing can be carried out 

as cheaply, perfectly, and safely as outside the Department. 

(b) United States currency has the inscription ''In God We 

Trust'' in a place the Secretary decides is appropriate. Only the 

portrait of a deceased individual may appear on United States currency and securities. The name of the individual shall be inscribed 

below the portrait. 

(c) The Secretary may make a contract for a period of not more 

than 4 years to manufacture distinctive paper for United States 

currency and securities. To promote competition among manufacturers of the distinctive paper, the Secretary may split the award 

for the manufacture of the paper between the 2 bidders with the 

lowest prices a pound. When the Secretary decides that it is nec-
§ 51 41 CH. 51—COINS AND CURRENCY 1434 

essary to operate more than one mill to manufacture distinctive 

paper, the Secretary may— 

(1) employ individuals temporarily at rates of pay equivalent to the rates of pay of regular employees; and 

(2) charge the pay of the temporary employees to the 

appropriation available for manufacturing distinctive paper. 

§ 5115. United States currency notes 

(a) The Secretary of the Treasury may issue United States currency notes. The notes— 

(1) are payable to bearer; and 

(2) shall be in a form and in denominations of at least one 

dollar that the Secretary prescribes. 

(b) The amount of United States currency notes outstanding 

and in circulation— 

(1) may not be more than $300,000,000; and 

(2) may not be held or used for a reserve. 

§ 5116. Buying and selling gold and silver 

(a)(1) With the approval of the President, the Secretary of the 

Treasury may— 

(A) buy and sell gold in the way, in amounts, at rates, and 

on conditions the Secretary considers most advantageous to the 

public interest; and 

(B) buy the gold with any direct obligations of the United 

States Government or United States coins and currency 

authorized by law, or with amounts in the Treasury not otherwise appropriated. 

(2) Amounts received from the purchase of gold are an asset 

of the general fund of the Treasury. Amounts received from the 

sale of gold shall be deposited by the Secretary in the general fund 

of the Treasury and shall be used for the sole purpose of reducing 

the national debt. 

(3) The Secretary shall acquire gold for the coins issued under 

section 5112(i) of this title by purchase of gold mined from natural 

deposits in the United States, or in a territory or possession of the 

United States, within one year after the month in which the ore 

from which it is derived was mined. The Secretary shall pay not 

more than the average world price for the gold. in the absence of 

available supplies of such gold at the average world price, the Secretary may use gold from reserves held by the United States to 

mint the coins issued under section 5112(i) of this title. The Secretary shall issue such regulations as may be necessary to carry 

out this paragraph. 

(b)(1) The Secretary may buy silver mined from natural deposits in the United States, or in a territory or possession of the 

United States, that is brought to a United States mint or assay office within one year after the month in which the ore from which 

it is derived was mined. The Secretary may use the coinage metal 

fund under section 5111(b) of this title to buy silver under this subsection. 

(2) The Secretary may sell or use Government silver to mint 

coins, except silver transferred to stockpiles established under the 

Strategic and Critical Materials Stock Piling Act (50 U.S.C. 98 et 
1435 CH. 51—COINS AND CURRENCY § 5112 

seq.). The Secretary shall obtain the silver for the coins authorized 

under section 5112(e) of this title by purchase from stockpiles 

established under the Strategic and Critical Materials Stock piling 

Act (50 U.S.C. 98 et seq.). The Secretary shall sell silver under conditions the Secretary considers appropriate for at least 

$1.292929292 a fine troy ounce. 

§ 5117. Transferring gold and gold certificates 

(a) All right, title, and interest, and every claim of the Board 

of Governors of the Federal Reserve System, a Federal reserve 

bank, and a Federal reserve agent, in and to gold is transferred to 

and vests in the United States Government to be held in the Treasury. Payment for the transferred gold is made by crediting equivalent amounts in dollars in accounts established in the Treasury 

under the 15th paragraph of section 16 of the Federal Reserve Act 

(12 U.S.C. 467). Gold not in the possession of the Government shall 

be held in custody for the Government and delivered on the order 

of the Secretary of the Treasury. The Board of Governors, Federal 

reserve banks, and Federal reserve agents shall give instructions 

and take action necessary to ensure that the gold is so held and 

delivered. 

(b) The Secretary shall issue gold certificates against gold 

transferred under subsection (a) of this section. The Secretary may 

issue gold certificates against other gold held in the Treasury. The 

Secretary may prescribe the form and denominations of the certificates. The amount of outstanding certificates may be not more than 

the value (for the purpose of issuing those certificates, of 42 and 

two-ninths dollars a fine troy ounce) of the gold held against gold 

certificates. The Secretary shall hold gold in the Treasury equal to 

the required dollar amount as security for gold certificates issued 

after January 29, 1934. 

(c) With the approval of the President, the Secretary may prescribe regulations the Secretary considers necessary to carry out 

this section. 

§ 5118. Gold clauses and consent to sue 

(a) In this section 

(1) ''gold clause'' means a provision in or related to an obligation alleging to give the obligee a right to require payment 

in— 

(A) gold; 

(B) a particular United States coin or currency; or 

(C) United States money measured in gold or a particular United States coin or currency. 

(2) ''public debt obligation'' means a domestic obligation 

issued or guaranteed by the United States Government to 

repay money or interest. 

(b) The United States Government may not pay out any gold 

coin. A person lawfully holding United States coins and currency 

may present the coins and currency to the Secretary of the Treasury for exchange (dollar for dollar) for other United States coins 

and currency (other than gold and silver coins) that may be lawfully held. The Secretary shall make the exchange under regulations prescribed by the Secretary. 
§ 51 41 CH. 51—COINS AND CURRENCY 1436 

(c)(1) The Government withdraws its consent given to anyone 

to assert against the Government, its agencies, or its officers, employees, or agents, a claim— 

(A) on a gold clause public debt obligation or interest on 

the obligation; 

(B) for United States coins or currency; or 

(C) arising out of the surrender, requisition, seizure, or acquisition of United States coins or currency, gold, or silver involving the effect or validity of a change in the metallic content 

of the dollar or in a regulation about the value of money. 

(2) Paragraph (1) of this subsection does not apply to a proceeding in which no claim is made for payment or credit in an 

amount greater than the face or nominal value in dollars of public 

debt obligations or United States coins or currency involved in the 

proceeding. 

(3) Except when consent is not withdrawn under this subsection, an amount appropriated for payment on public debt obligations and for United States coins and currency may be expended 

only dollar for dollar. 

(d)(1) In this subsection, ''obligation'' means any obligation (except United States currency) payable in United States money. 

(2) An obligation issued containing a gold clause or governed 

by a gold clause is discharged on payment (dollar for dollar) in 

United States coin or currency that is legal tender at the time of 

payment. This paragraph does not apply to an obligation issued 

after October 27, 1977. This paragraph shall apply to any obligation issued on or before October 27, 1977, notwithstanding any 

assignment or novation of such obligation after october 27, 1977, 

unless all parties to the assignment or novation specifically agree 

to include a gold clause in the new agreement. Nothing in the preceding sentence shall be construed to affect the enforceability of a 

Gold Clause contained in any obligation issued after October 27, 

1977 if the enforceability of that Gold Clause has been finally adjudicated before the date of enactment of the Economic Growth and 

Regulatory Paperwork Reduction Act of 1996. 

§ 5119. Redemption and cancellation of currency 

(a) Except to the extent authorized in regulations the Secretary 

of the Treasury prescribes with the approval of the President, the 

Secretary may not redeem United States currency (including Federal reserve notes and circulating notes of Federal reserve banks 

and national banks) in gold. However, the Secretary shall redeem 

gold certificates owned by the Federal reserve banks at times and 

in amounts the Secretary decides are necessary to maintain the 

equal purchasing power of each kind of United States currency. 

When redemption in gold is authorized, the redemption may be 

made only in gold bullion bearing the stamp of a United States 

mint or assay office in an amount equal at the time of redemption 

to the currency presented for redemption. 

(b)(1) Except as provided in subsection (c)(1) of this section, the 

following are public debts having no interest: 

(A) gold certificates issued before January 30, 1934. 

(B) silver certificates. 
§ 51 41 

CH. 51—COINS AND CURRENCY 

1437 

(C) notes issued under the Act of July 14, 1890 (ch. 708, 

26 Stat. 289). 

(D) Federal Reserve notes for which payment was made 

under section 4 of the Old Series Currency Adjustment Act. 

(E) United States currency notes, including those issued 

under section 1 of the Act of February 25, 1862 (ch. 33, 12 

Stat. 345), the Act of July 11, 1862 (ch. 142, 12 Stat. 532), the 

resolution of January 17, 1863 (P.R. 9; 12 Stat. 822), section 

2 of the Act of March 3, 1863 (ch. 73, 12 Stat. 710), or section 

5115 of this title. 

(2) REDEMPTION , CANCELLATION, AND DESTRUCTION OF CURRENCY.—The Secretary shall— 

(A) redeem any currency described in paragraph (1) 

from the general fund of the Treasury upon presentment 

to the Secretary; and 

(B) cancel and destroy such currency upon redemption. 

The Secretary shall not be required to reissue United States currency notes upon redemption. 

(c)(1) The Secretary may determine the amount of the following United States currency that will not be presented for 

redemption because the currency has been destroyed or 

irretrievably lost: 

(A) circulating notes of Federal reserve banks and national 

banks issued before July 1, 1929, for which the United States 

Government has assumed liability. 

(B) outstanding currency referred to in subsection (b)(1) of 

this section. 

(2) When the Secretary makes a determination under this subsection, the Secretary shall reduce the amount of that currency outstanding by the amount the Secretary determines will not be redeemed and credit the appropriate receipt account. 

(d) To provide a historical collection of United States currency, 

the Secretary may withhold from cancellation and destruction and 

transfer to a special account one piece of each design, issue, or series of each denomination of each kind of currency (including circulating notes of Federal reserve banks and national banks) after 

redemption. The Secretary may make appropriate entries in Treasury accounts because of the transfers. 

§ 5120. Obsolete, mutilated, and worn coins and currency 

(a)(1) The Secretary of the Treasury shall melt obsolete and 

worn United States coins withdrawn from circulation. The Secretary may use the metal from melting the coins for reminting or 

may sell the metal. The Secretary shall account for the following 

in the coinage metal fund under section 5111(b) of this title: 

(A) obsolete and worn coins and the metal from melting 

the coins. 

(B) proceeds from the sale of the metal. 

(C) losses incurred in the sale of the metal. 

(D) losses incurred because of the difference between the 

face value of the coins melted and the coins melted from the 

metal. 

(2) The Secretary shall reimburse the coinage metal fund for 

losses under paragraph (1)(C) and (D) of this subsection out of 
§ 51 41 CH. 51—COINS AND CURRENCY 1438 

amounts in the coinage profit fund under section 5111(b) of this 

title. 

(b) The Secretary shall— 

(1) cancel and destroy (by a secure process) obsolete, mutilated, and worn United States currency withdrawn from circulation; and 

(2) dispose of the residue of the currency and notes. 

(c) The Comptroller General shall audit the cancellation and 

destruction of United States currency and the accounting of the 

cancellation and destruction. Records the Comptroller General considers necessary to make an effective audit easier shall be made 

available to the Comptroller General. 

§ 5121. Refining, assaying, and valuation of bullion 

(a) The Secretary of the Treasury shall— 

(1) melt and refine bullion; 

(2) as required, assay coins, metal, and bullion; 

(3) cast gold and silver bullion deposits into bars; and 

(4) cast alloys into bars for minting coins. 

(b) A person owning gold or silver bullion may deposit the bullion with the Secretary to be cast into fine, standard fineness, or 

unrefined bars weighing at least 5 troy ounces. when practicable, 

the Secretary shall weigh the bullion in front of the depositor. The 

Secretary shall give the depositor a receipt for the bullion stating 

the description and weight of the bullion. when the Secretary has 

to melt the bullion or remove base metals before the value of the 

bullion can be determined, the weight is the weight after the melting or removal of the metals. The Secretary may refuse a deposit 

of gold bullion if the deposit is less than $100 in value or the bullion is so base that it is unsuitable for the operations of the Bureau 

of Mint. 

(c) when the gold and silver are combined in bullion that is 

deposited and either the gold or silver is so little that it cannot be 

separated economically, the Secretary may not pay the depositor 

for the gold or silver that cannot be separated. 

(d)(1) Under conditions prescribed by the Secretary, a person 

may exchange unrefined bullion for fine bars when— 

(A) gold and silver are combined in the bullion in proportions that cannot be economically refined; or 

(B) necessary supplies of acids cannot be procured at reasonable rates. 

(2) The charge for refining in an exchange under this subsection may be not more than the charge imposed in an exchange 

of unrefined bullion for refined bullion. 

(e) The Secretary shall prepare bars for payment of deposits. 

The Secretary shall stamp each bar with a designation of the 

weight and fineness of the bar and a symbol the Secretary considers suitable to prevent fraudulent imitation of the bar. 

§ 5122. Payment to depositors 

(a) The Secretary of the Treasury shall determine the fineness, 

weight, and value of each deposit and bar under section 5121 of 

this title. The value and the amount of charges under subsection 

(b) of this section shall be based on the fineness and weight of the 
1439 CH. 51—COINS AND CURRENCY § 5112 

bullion. The Secretary shall give the depositor a statement of the 

charges and the net amount of the deposit to be paid in money or 

bars of the same species of bullion as that deposited. 

(b) The Secretary shall impose a charge equal to the average 

cost of material, labor, waste, and use of machinery of a United 

States mint or assay office for— 

(1) melting and refining bullion; 

(2) using copper as an alloy when bullion deposited is 

above standard; 

(3) separating gold and silver combined in the bullion; and 

(4) preparing bars. 

(c) The Secretary shall pay to the depositor or to a person designated by the depositor money or bars equivalent to the bullion 

deposited as soon as practicable after the value of the deposit is 

determined. if demanded, the Secretary shall pay depositors in the 

order in which the bullion is deposited with the Secretary. However, when there is an unavoidable delay in determining the value 

of a deposit, the Secretary shall pay subsequent depositors. When 

practicable and convenient, the Secretary shall pay depositors in 

the denominations requested by the depositor. After the depositor 

is paid, the bullion is the property of the United States Government. 

(d) To allow the Secretary to pay depositors with as little delay 

as possible, the Secretary shall keep in the mints and assay offices, 

when possible, money and bullion the Secretary decides are convenient and necessary. 

SUBCHAPTER III—UNITE D STATES MINT 1 

§ 5131. Organization 

(a) The United States Mint has— 

(1) a United States mint at Philadelphia, Pennsylvania. 

(2) a United States mint at Denver, Colorado. 

(3) a United States mint at West Point, New York. 

(4) a United States mint at San Francisco, California. 

(b) The Secretary of the Treasury shall carry out duties and 

powers related to refining and assaying bullion, minting coins, 

striking medals, and numismatic items at the mints. However, 

until the Secretary decides that the mints are adequate for minting 

and striking an ample supply of coins and medals, the Secretary 

may use any facility of the United States Mint to mint coins and 

strike medals and to store coins and medals. 

(c) Laws on mints, officers and employees of mints, and punishment of offenses related to mints and minting coins apply to 

assay offices, as applicable. 

§ 5132. Administrative 

(a)(1) Except as provided in this chapter, the Secretary of the 

Treasury shall deposit in the Treasury as miscellaneous receipts 

amounts the Secretary receives from the operations of the United 

States Mint. Expenditures made from appropriated funds which 

1

 So in law. Should be set 10 pt. Roman caps. 
§ 51 41 CH. 51—COINS AND CURRENCY 1440 

are subsequently determined to be properly chargeable to the 

Numismatic Public Enterprise Fund established by section 5134 

shall be reimbursed by such Fund to the appropriation. The Secretary shall annually sell to the public, directly and by mail, sets 

of uncirculated and proof coins minted under paragraphs (1) 

through (6) of section 5112(a) of this title, and shall solicit such 

sales through the use of the customer list of the Mint. Except with 

respect to amounts deposited in the Numismatic Public Enterprise 

Fund in accordance with section 5134, the Secretary may not use 

amounts the Secretary receives from profits on minting coins or 

from charges on gold or silver bullion under section 5122 to pay 

officers and employees. 

(2)(A) In addition to the coins described in paragraph (1), the 

Secretary shall sell annually to the public directly and by mail, sets 

of proof coins minted under paragraphs (1) through (6) of section 

5112(a). 

(B) Notwithstanding any other provision of law, for purposes of 

this paragraph— 

(i) the coins described in paragraphs (2) through (4) of section 5112(a) shall be made of an alloy of 90 percent silver and 

10 percent copper; and 

(ii) all coins minted under this paragraph shall have a mint 

mark indicating the place of manufacture. 

(C) All coins minted under this paragraph shall be considered to 

be— 

(i) numismatic items for purposes of paragraph (1) and section 5111(a)(3); and 

(ii) legal tender, as provided in section 5103. 

(D) The Secretary shall obtain silver for coins minted under this 

paragraph by purchase from stockpiles established under the Strategic and Critical Materials Stock Piling Act (50 U.S.C. 98 et seq.). 

At such time as the silver stockpile is depleted, the Secretary shall 

obtain silver for such coins by purchase of silver mined from natural deposits in the United States or in a territory or possession 

of the United States not more than 1 year following the month in 

which the ore from which it is derived was mined. The Secretary 

shall pay not more than the average world price for such silver. 

The Secretary may issue such regulations as may be necessary to 

carry out this subparagraph. 

(3) Not more than $46,511,0001 may be appropriated to the Secretary for the fiscal year ending on September 30, 1988, to pay 

costs of the mints. Not more than $965,000 of amounts appropriated pursuant to the preceding sentence shall remain available 

until expended for research and development. 

(4) of amounts appropriated pursuant to paragraph (3), not more 

than $75,000 may be expended for the purpose of hosting the Inter1

 Section 211 of the United States Mint Reauthorization and Reform Act (P.L. 102-390) states 

the following: 

SEC. 211. REAUTHORIZATIO N OF APPROPRIATIONS FOR FISCAL YEAR 1993. 

Section 5132(a) of title 31, United States Code, is amended— 

(1) in paragraph (2)— 

(A) by striking ''$46,511,000'' and inserting ''$54,208,000''; and 

(B) by striking ''1988'' and inserting ''1993''; and 

(2) by striking paragraphs (3) and (4). 

The amendments probably should have been made to paragraphs (3), (4), and (5) respectively. 
1441 CH. 51—COINS AND CURRENCY § 5112 

national Mint Directors' Conference in the United States in 1988, 

including reception, representation, and transportation expenses. 

(5) Notwithstanding sections 3302 and 9701 of this title, the Director of the Mint may— 

(A) collect from participants at the International Mint Directors' Conference reasonable amounts imposed as fees and other 

assessments in connection with such conference; 

(B) hold and administer the amounts referred to in subparagraph (A); and 

(C) spend on behalf of the United States the amounts referred to in subparagraph (A) to pay expenses incurred in connection with such conference, including reception, representation, and transportation expenses. 

(b) To the extent the Secretary decides is necessary, the Secretary may use amounts received from depositors for refining bullion and the proceeds from the sale of byproducts (including spent 

acids from surplus bullion recovered in refining processes) to pay 

the costs of refining the bullion (including labor, material, waste, 

and loss on the sale of sweeps). The Secretary may not use 

amounts appropriated for the mints to pay those costs. 

(c) The Secretary shall make an annual report at the end of 

each fiscal year on the operation of the United States Mint. 

§ 5133. Settlement of accounts 

(a) The Secretary of the Treasury shall— 

(1) charge the superintendent of each mint with the 

amount in weight of standard metal of bullion the superintendent receives from the Secretary; 

(2) credit each superintendent with the amount in weight 

of coins, clippings, and other bullion the superintendent returns to the Secretary; and 

(3) charge separately to each superintendent who shall account for, copper to be used in the alloy of gold and silver bullion. 

(b) SETTLEMENT OF ACCOUNTS.— 

(1) I N GENERAL.—At least once each year, the Secretary of 

the Treasury shall settle the accounts of the superintendents 

of the mints. 

(2) PROCEDURE.—At any settlement under this subsection, 

the superintendent shall— 

(A) return to the Secretary any coin, clipping, or other 

bullion in the possession of the superintendent; and 

(B) present the Secretary with a statement of bullion received and returned since the last settlement (including 

any bullion returned for settlement). 

(3) AUDIT.—The Secretary shall— 

(A) audit the accounts of each superintendent; and 

(B) allow each superintendent the waste of precious metals that the Secretary determines is necessary— 

(i) for refining and minting (within the limitations 

which the Secretary shall prescribe); and 

(ii) for casting fine gold and silver bars (within the 

limit prescribed for refining), except that any waste 
§ 51 41 CH. 51—COINS AND CURRENCY 1442 

allowance under this clause may not apply to deposit 

operations. 

(c) After settlement, the Secretary shall compare the amount 

of gold and silver bullion and coins on hand with the total liabilities of the mints. The Secretary also shall make a statement of the 

ordinary expense account. 

(d) The Secretary shall procure for each mint a series of standard weights corresponding to the standard troy pound of the National Bureau of Standards of the Department of Commerce. The 

series shall include a one pound weight and multiples and subdivisions of one pound from .01 grain to 25 pounds. At least once a 

year, the Secretary shall test the weights normally used in transactions at the mints against the standard weights. 

§ 5134. Numismatic Public Enterprise Fund 

(a) DEFINITIONS.—For purposes of this section— 

(1) FUND.—The term "Fund" means the Numismatic Public 

Enterprise Fund. 

(2) MINT.—The term "Mint" means the United States 

Mint. 

(3) NUMISMATIC ITEM.—The term "numismatic item'' 

means any medal, proof coin, uncirculated coin, bullion coin, or 

other coin specifically designated by statute as a numismatic 

item, including products and accessories related to any such 

medal, coin, or item. 

(4) NUMISMATIC OPERATIONS AND PROGRAMS.—The term 

"numismatic operations and programs"— 

(A) means the activities concerning, and assets utilized in, the production, administration, sale, and management of numismatic items and the Numismatic Public 

Enterprise Fund; and 

(B) includes capital, personnel salaries, functions relating to operations, marketing, distribution, promotion, 

advertising, and official reception and representation, the 

acquisition or replacement of equipment, and the renovation or modernization of facilities (other than the construction or acquisition of new buildings). 

(5) SECRETARY.—The term "Secretary" means the Secretary of the Treasury. 

(b) ESTABLISHMENT OF FUND.—There is hereby established in 

the Treasury of the United States a revolving Numismatic Public 

Enterprise Fund consisting of amounts deposited in the fund under 

subsection (c)(2) of this section or section 221(b) of the United 

States Mint Reauthorization and Reform Act of 1992 which shall 

be available to the Secretary for numismatic operations and programs of the United States Mint without fiscal year limitation. 

(c) OPERATIONS OF THE FUND.— 

(1) PAYMENT OF EXPENSES.—Any expense incurred by the 

Secretary for numismatic operations and programs which the 

Secretary determines, in the Secretary's sole discretion, to be 

ordinary and reasonable incidents of the numismatic business 

shall be paid out of the Fund, including any expense incurred 

pursuant to any obligation or other commitment of Mint 
1443 CH. 51—COINS AND CURRENCY § 5112 

numismatic operations and programs which was entered into 

before the beginning of fiscal year 1993. 

(2) DEPOSIT OF RECEIPTS.—All receipts from numismatic 

operations and programs shall be deposited into the Fund, including amounts attributable to any surcharge imposed with 

respect to the sale of any numismatic item. 

(3) TRANSFER OF SEIGNIORAGE.—The Secretary shall transfer monthly from the Fund to the general fund of the Treasury 

an amount equal to the total amount on the seigniorage of 

numismatic items sold since the date of any preceding transfer. 

(4) EXPENSES OF CITIZENS COMMEMORATIVE COIN ADVISORY 

COMMITTEE.—For purposes of paragraph (1), any expense incurred by the Secretary in connection with the Citizens Commemorative Coin Advisory Committee established under section 5135 shall be treated as an expense incurred for numismatic operations and programs which is an ordinary and reasonable incident of the numismatic business. 

(5) TRANSFER OF EXCESS AMOUNTS TO THE TREASURY.— 

(A) I N GENERAL.—At such times as the Secretary 

determines to be appropriate, the Secretary shall transfer 

any amount in the Fund which the Secretary determines 

to be in excess of the amount required by the Fund to the 

Treasury for deposit as miscellaneous receipts. 

(B) REPORT TO CONGRESS.—The Secretary shall submit 

an annual report to the Congress containing— 

(i) a statement of the total amount transferred to 

the Treasury pursuant to subparagraph (A) during the 

period covered by the report; 

(ii) a statement of the amount by which the 

amount on deposit in the Fund at the end of the period covered by the report exceeds the estimated operating costs of the Fund for the 1-year period beginning 

at the end of such period; and 

(iii) an explanation of the specific purposes for 

which such excess amounts are being retained in the 

Fund. 

(d) BUDGET TREATMENT.— 

(1) IN GENERAL.—The Secretary shall prepare budgets for 

the Fund, and estimates and statements of financial condition 

of the Fund in accordance with the requirements of section 

9103 which shall be submitted to the President for inclusion in 

the budget submitted under section 1105. 

(2) INCLUSION I N ANNUAL REPORT.—Statement s of th e 

financial condition of the Fund shall be included in the Secretary's annual report on the operation of the Mint. 

(3) TREATMENT AS WHOLLY OWNED GOVERNMENT CORPORATION FOR CERTAIN PURPOSES.—Section 9104 shall apply to the 

Fund to the same extent such section applies to wholly owned 

Government corporations. 

(e) FINANCIAL STATEMENTS, AUDITS, AND REPORTS.— 

(1) ANNUA L FINANCIAL STATEMENT REQUIRED.—By the end 

of each calendar year, the Secretary shall prepare an annual 

financial statement of the Fund for the fiscal year which ends 

during such calendar year. 
§ 51 41 CH. 51—COINS AND CURRENCY 1444 

(2) CONTENTS OF FINANCIAL STATEMENT.—Each statement 

prepared pursuant to paragraph (1) shall, at a minimum, 

contain— 

(A) the overall financial position (including assets and 

liabilities) of the Fund as of the end of the fiscal year; 

(B) the results of the numismatic operations and programs of the Fund during the fiscal year; 

(C) the cash flows or the changes in financial position 

of the Fund; 

(D) a reconciliation of the financial statement to the 

budget reports of the Fund; and 

(E) a supplemental schedule detailing— 

(i) the costs and expenses for the production, for 

the marketing, and for the distribution of each 

denomination of circulating coins produced by the 

Mint during the fiscal year and the per-unit cost of 

producing, of marketing, and of distributing each 

denomination of such coins; and 

(ii) the gross revenue derived from the sales of 

each such denomination of coins. 

(3) ANNUA L AUDITS.— 

(A) IN GENERAL.—Each annual financial statement 

prepared under paragraph (1) shall be audited— 

(i) by— 

(i) an independent external auditor; or 

(II) the Inspector General of the Department 

of the Treasury, 

as designated by the Secretary; and 

(ii) in accordance with the generally accepted Government auditing standards issued by the Comptroller 

General of the United States. 

(B) AUDITOR'S REPORT REQUIRED.—The auditor designated to audit any financial statement of the Fund pursuant to subparagraph (A) shall submit a report— 

(i) to the Secretary by March 31 of the year beginning after the end of the fiscal year covered by such 

financial statement; and 

(ii) containing the auditor's opinion on— 

(i) the financial statement of the Fund; 

(ii) the internal accounting and administrative controls and accounting systems of the Fund; 

and 

(iii) the Fund's compliance with applicable 

laws and regulations. 

(4) ANNUA L REPORT ON FUND. — 

(A) REPORT REQUIRED.—By April 30 of each year, the 

Secretary shall submit a report on the Fund for the most 

recently completed fiscal year to the President, the Congress, and the Director of the Office of Management and 

Budget. 

(B) CONTENTS OF ANNUAL REPORT.—The annual report 

required under subparagraph (A) for any fiscal year shall 

include— 
1445 CH. 51—COINS AND CURRENCY § 5112 

(i) the financial statement prepared under paragraph (1) for such fiscal year; 

(ii) the audit report submitted to the Secretary 

pursuant to paragraph (3)(B) for such fiscal year; 

(iii) a description of activities carried out during 

such fiscal year; 

(iv) a summary of information relating to numismatic operations and programs contained in the reports on systems on internal accounting and administrative controls and accounting systems submitted to 

the president and the Congress under section 3512(c); 

(v) a summary of the corrective actions taken with 

respect to material weaknesses relating to numismatic 

operations and programs identified in the reports prepared under section 3512(c); 

(vi) any other information the Secretary considers 

appropriate to fully inform the Congress concerning 

the financial management of the Fund; and 

(vii) a statement of the total amount of excess 

funds transferred to the Treasury. 

(5) MARKETIN G REPORT.— 

(A) REPORT REQUIRED FOR 10 YEARS.—For each fiscal 

year beginning before fiscal year 2003, the Secretary shall 

submit an annual report on all marketing activities and 

expenses of the Fund to the Congress before the end of the 

3-month period beginning at the end of such fiscal year. 

(B) CONTENTS OF REPORT.—The report submitted pursuant to subparagraph (A) shall contain a detailed description of— 

(i) the sources of income including surcharges; and 

(ii) expenses incurred for manufacturing, materials, overhead, packaging, marketing, and shipping. 

(f) CONDITIONS ON PAYMEN T OF SURCHARGES TO RECIPIEN T 

ORGANIZATIONS.— 

(1) PAYMEN T OF SURCHARGES.—Notwithstanding any other 

provision of law, no amount derived from the proceeds of any 

surcharge imposed on the sale of any numismatic item shall be 

paid from the fund to any designated recipient organization 

unless— 

(A) all numismatic operation and program costs allocable to the program under which such numismatic item 

is produced and sold have been recovered; and 

(B) the designated recipient organization submits an 

audited financial statement that demonstrates to the satisfaction of the Secretary of the Treasury that, with respect 

to all projects or purposes for which the proceeds of such 

surcharge may be used, the organization has raised funds 

from private sources for such projects and purposes in an 

amount that is equal to or greater than the maximum 

amount the organization may receive from the proceeds of 

such surcharge. 

(2) ANNUA L AUDITS.— 

( A ) ANNUA L AUDITS OF RECIPIENTS REQUIRED.—Eac h 

designated recipient organization that receives any pay-
§ 51 41 CH. 51—COINS AND CURRENCY 1446 

ment from the fund of any amount derived from the proceeds of any surcharge imposed on the sale of any numismatic item shall provide, as a condition for receiving any 

such amount, for an annual audit, in accordance with generally accepted government auditing standards by an independent public accountant selected by the organization, of 

all such payments to the organization beginning in the 

first fiscal year of the organization in which any such 

amount is received and continuing until all amounts received by such organization from the fund with respect to 

such surcharges are fully expended or placed in trust. 

(B) MINIMU M REQUIREMENTS FOR ANNUAL AUDITS.—A t 

a minimum, each audit of a designated recipient organization pursuant to subparagraph (A) shall report— 

(i) the amount of payments received by the designated recipient organization from the fund during 

the fiscal year of the organization for which the audit 

is conducted that are derived from the proceeds of any 

surcharge imposed on the sale of any numismatic 

item; 

(ii) the amount expended by the designated recipient organization from the proceeds of such surcharges 

during the fiscal year of the organization for which the 

audit is conducted; and 

(iii) whether all expenditures by the designated 

recipient organization during the fiscal year of the 

organization for which the audit is conducted from the 

proceeds of such surcharges were for authorized purposes. 

( C) RESPONSIBILITY OF ORGANIZATION TO ACCOUNT FOR 

EXPENDITURES OF SURCHARGES.—Each designated recipient 

organization that receives any payment from the fund of 

any amount derived from the proceeds of any surcharge 

imposed on the sale of any numismatic item shall take 

appropriate steps, as a condition for receiving any such 

payment, to ensure that the receipt of the payment and 

the expenditure of the proceeds of such surcharge by the 

organization in each fiscal year of the organization can be 

accounted for separately from all other revenues and 

expenditures of the organization. 

(D) SUBMISSION OF AUDIT REPORT.—Not later than 90 

days after the end of any fiscal year of a designated recipient organization for which an audit is required under subparagraph (A), the organization shall— 

(i) submit a copy of the report to the Secretary of 

the Treasury; and 

(ii) make a copy of the report available to the public. 

(E) USE OF SURCHARGES FOR AUDITS.—An y designated 

recipient organization that receives any payment from the 

fund of any amount derived from the proceeds of any surcharge imposed on the sale of any numismatic item may 

use the amount received to pay the cost of an audit required under subparagraph (A). 
1447 CH. 51—COINS AND CURRENCY § 5112 

(F) WAIVE R OF PARAGRAPH.—The Secretary of the 

Treasury may waive the application of any subparagraph 

of this paragraph to any designated recipient organization 

for any fiscal year after taking into account the amount of 

surcharges that such organization received or expended 

during such year. 

( G) NONAPPLICABILITY TO FEDERAL ENTITIES.—Thi s 

paragraph shall not apply to any Federal agency or department or any independent establishment in the executive 

branch that receives any payment from the fund of any 

amount derived from the proceeds of any surcharge imposed on the sale of any numismatic item. 

(H) AVAILABILITY OF BOOKS AND RECORDS.—An organization that receives any payment from the fund of any 

amount derived from the proceeds of any surcharge imposed on the sale of any numismatic item shall provide, as 

a condition for receiving any such payment, to the Inspector General of the Department of the Treasury or the 

Comptroller General of the United States, upon the request of such Inspector General or the Comptroller General, all books, records, and work papers belonging to or 

used by the organization, or by any independent public 

accountant who audited the organization in accordance 

with subparagraph (A), which may relate to the receipt or 

expenditure of any such amount by the organization. 

(3) USE OF AGENTS OR ATTORNEYS TO INFLUENCE COMMEMORATIVE COIN LEGISLATION.—No portion of any payment 

from the fund to any designated recipient organization of any 

amount derived from the proceeds of any surcharge imposed on 

the sale of any numismatic item may be used, directly or indirectly, by the organization to compensate any agent or attorney 

for services rendered to support or influence in any way legislative action of the Congress relating to such numismatic item. 

(4) DESIGNATED RECIPIENT ORGANIZATION DEFINED.—Fo r 

purposes of this subsection, the term ''designated recipient 

organization'' means any organization designated, under any 

provision of law, as the recipient of any surcharge imposed on 

the sale of any numismatic item. 

(g) QUARTERLY FINANCIAL REPORTS.— 

(1) IN GENERAL.—Not later than the 30th day of each 

month following each calendar quarter through and including 

the final period of sales with respect to any commemorative 

coin program authorized on or after the date of enactment of 

the Treasury, Postal Service, and General Government Appropriations Act, 1997, the Mint shall submit to the Congress a 

quarterly financial report in accordance with this subsection. 

(2) REQUIREMENTS.—Each report submitted under paragraph (1) shall include, with respect to the calendar quarter at 

issue— 

(A) a detailed financial statement, prepared in accordance with generally accepted accounting principles, that 

includes financial information specific to that quarter, as 

well as cumulative financial information relating to the entire program; 
§ 51 41 CH. 51—COINS AND CURRENCY 1448 

(B) a detailed accounting of— 

(i) all costs relating to marketing efforts; 

(ii) all funds projected for marketing use; 

(iii) all costs for employee travel relating to the 

promotion of commemorative coin programs; 

(iv) all numismatic items minted, sold, not sold, 

and rejected during the production process; and 

(v) the costs of melting down all rejected and 

unsold products; 

(C) adequate market-based research for all commemorative coin programs; and 

(D) a description of the efforts of the Mint in keeping 

the sale price of numismatic items as low as practicable. 

§ 5135. Citizens Commemorative Coin Advisory Committee 

(a) ESTABLISHMENT REQUIRED.— 

(1) IN GENERAL.—The Secretary of the Treasury shall 

establish a Citizens Commemorative Coin Advisory Committee 

(hereafter in this section referred to as the ''Advisory Committee'') to advise the Secretary on the selection of subjects and 

designs for commemorative coins. 

(2) OVERSIGHT OF ADVISORY COMMITTEE.—The Advisory 

Committee shall be subject to the direction of the Secretary of 

the Treasury. 

(3) MEMBERSHIP.— 

(A) VOTING MEMBERS.—The Advisory Committee shall 

consist of 7 members appointed by the Secretary of the 

Treasury— 

(i) 3 of whom shall be appointed from among individuals specially qualified to serve on the committee 

by reason of their education, training, or experience in 

art, art history, museum or numismatic collection 

curation, or numismatics; 

(ii) 1 of whom shall be appointed from among officers or employees of the United States Mint who will 

represent the interests of the Mint; and 

(iii) 3 of whom shall be appointed from among 

individuals who will represent the interest of the general public. 

(B) NONVOTING MEMBER.—A member of the Commission of Fine Arts may participate in the proceedings of the 

Advisory Committee as a nonvoting member. 

(4) TERMS.— 

(A) IN GENERAL.—Each individual appointed to the 

Advisory Committee under clause (i) or (iii) of paragraph 

(3)(A) shall be appointed for a term of 4 years. 

(B) INTERI M APPOINTMENTS.—Any member appointed 

to fill a vacancy occurring before the expiration of the term 

for which such member's predecessor was appointed shall 

be appointed only for the remainder of such term. 

(C) CONTINUATION OF SERVICE.—Each member appointed under clause (i) or (iii) of paragraph (3)(A) may 

continue to serve after the expiration of the term to which 
1449 CH. 51—COINS AND CURRENCY § 5112 

such member was appointed until a successor has been appointed and qualified. 

( 5 ) COMPENSATION ; TRAVEL EXPENSES.— 

( A ) N O COMPENSATION.—Member s of th e Advisor y 

Committee shall serve without pay. 

(B) TRAVE L EXPENSES.—Member s of the Advisory 

Committee shall be entitled to receive travel or transportation expenses, or a per diem allowance in lieu of expenses, while away from such member's home or place of 

business in connection with such member's service on the 

Advisory Committee. 

(6) FUNDING.—The expenses of the Advisory Committee 

which the Secretary of the Treasury determines are reasonable 

and appropriate shall be paid by the Secretary in the manner 

provided in section 5134. 

( 7 ) CHAIRPERSON.— 

(A) IN GENERAL.—Subject to subparagraph (B), the 

Chairperson of the Advisory Committee shall be elected by 

the members of the Advisory Committee from among such 

members. 

(B) EXCEPTION.—Th e member appointed pursuant to 

paragraph (3)(A)(ii) (or the alternate to that member) may 

not serve as the Chairperson of the Advisory Committee, 

beginning on June 1, 1999. 

(b) DUTIES. — 

( 1 ) PREPARATION OF PROPOSALS FOR COMMEMORATIVE 

COINS FOR 5-YEAR PERIOD.—Th e Advisory Committee shall— 

(A) designate annually the events, persons, or places 

that the Advisory Committee recommends be commemorated by the issuance of commemorative coins in each of 

the 5 calendar years succeeding the year in which such 

designation is made; 

(B) make recommendations with respect to the mintage level for any commemorative coin recommended under 

subparagraph (A); and 

(C) submit a report to the Congress containing a 

description of the events, persons, or places which the 

Committee recommends be commemorated by a coin, the 

mintage level recommended for any such commemorative 

coin, and the committee's reasons for such 

recommendations. 

(2) DESIG N SELECTION.—Th e Advisory Committee shall review proposed designs for commemorative coins and provide 

recommendations to the Secretary of the Treasury with respect 

to such proposals. 

(c) FEDERA L ADVISOR Y COMMITTE E AC T NO T APPLICABLE.—Th e 

Federal Advisory Committee Act shall not apply to the Advisory 

Committee. 

SEC. 5136 UNITE D STATES MIN T PUBLIC ENTERPRISE FUND .

 1 

1

 The amendment made by section 522 of the Treasury, Postal Service, and General Government Appropriations Act, 1996 (P.L. 104-52) probably should have included the body of the section. Such section provides as follows: 

Continued 
§ 51 41 CH. 51—COINS AND CURRENCY 1450 

SUBCHAPTER IV—BUREAU OF ENGRAVING AND PRINTING 

§ 5141. Operation of the Bureau 

(a) The Secretary of the Treasury shall prepare and submit to 

the President an annual business-type budget for the Bureau of 

Engraving and Printing. 

(b)(1) The Secretary shall maintain in the Bureau an integrated accounting system with internal controls that— 

(A) ensures adequate control over assets and liabilities of 

the Bureau of Engraving and Printing Fund described in section 5142 of this title; 

(B) develops accurate production costs to enable the Bureau to recover those costs on the basis of the work requisitioned; 

(C) provides for replacement of capitalized equipment and 

other fixed assets by maintaining adequate depreciation reserves based on original cost or appraised values; 

(D) discloses the financial condition and operations of the 

Fund on an accrual basis of accounting; and 

(E) provides information for the prior fiscal year on the annual budget of the Bureau. 

SEC. 522. Subchapter III of chapter 51 of subtitle IV of title 31, United States Code, is 

amended by adding at the end thereof the following new section: ''SEC. 5136 UNITED STATES MINT 

PUBLIC ENTERPRISE FUND.'' There shall be established in the Treasury of the United States, a 

United States Mint Public Enterprise Fund (the ''Fund'') for fiscal year 1996 and hereafter: Provided, That all receipts from Mint operations and programs, including the production and sale 

of numismatic items, the production and sale of circulating coinage, the protection of Government assets, and gifts and bequests of property, real or personal shall be deposited into the 

Fund and shall be available without fiscal year limitations: Provided further, That all expenses 

incurred by the Secretary of the Treasury for operations and programs of the United States 

Mint that the Secretary of the Treasury determines, in the Secretary's sole discretion, to be ordinary and reasonable incidents of Mint operations and programs, and any expense incurred pursuant to any obligation or other commitment of Mint operations and programs that was entered 

into before the establishment of the Fund, shall be paid out of the Fund: Provided further, That 

not to exceed 6.2415 percent of the nominal value of the coins minted, shall be paid out of the 

Fund for the circulating coin operations and programs in fiscal year 1996 for those operations 

and programs previously provided for by appropriation: Provided further, That the Secretary of 

the Treasury may borrow such funds from the General Fund as may be necessary to meet existing liabilities and obligations incurred prior to the receipt of revenues into the Fund: Provided 

further, That the General Fund shall be reimbursed for such funds by the Fund within one year 

of the date of the loan: Provided further, That the Fund may retain receipts from the Federal 

Reserve System from the sale of circulating coins at face value for deposit into the Fund (retention of receipts is for the circulating operations and programs): Provided further, That the Secretary of the Treasury shall transfer to the Fund all assets and liabilities of the Mint operations 

and programs, including all Numismatic Public Enterprise Fund assets and liabilities, all receivables, unpaid obligations and unobligated balances from the Mint's appropriation, the Coinage 

Profit Fund, and the Coinage Metal Fund, and the land and buildings of the Philadelphia Mint, 

Denver Mint, and the Fort Knox Bullion Depository: Provided further, That the Numismatic 

Public Enterprise Fund, the Coinage Profit Fund and the Coinage Metal Fund shall cease to 

exist as separate funds as their activites and functions are subsumed under and subject to the 

Fund, and the requirements of 31 USC 5134(c)(4), (c)(5)(B), and (d) and (e) of the Numismatic 

Public Enterprise Fund shall apply to the Fund: Provided further, That at such times as the 

Secretary of the Treasury determines appropriate, but not less than annually, any amount in 

the Fund that is determined to be in excess of the amount required by the Fund shall be transferred to the Treasury for deposit as miscellaneous receipts: Provided further, That the term 

''Mint operations and programs'' means (1) the activities concerning, and assets utilized in, the 

production, administration, distribution, marketing, purchase, sale, and management of coinage, 

numismatic items, the protection and safeguarding of Mint assets and those non-Mint assets 

in the custody of the Mint, and the Fund; and (2) includes capital, personnel salaries and compensation, functions relating to operations, marketing, distribution, promotion, advertising, official reception and representation, the acquisition or replacement of equipment, the renovation 

or modernization of facilities, and the construction or acquisition of new buildings: Provided further, That the term ''numismatic item'' includes any medal, proof coin, numismatic collectible, 

other monetary issuances and products and accessories related to any such medal, coin: Provided further, That provisions of law governing procurement or public contracts shall not be applicable to the procurement of goods or services necessary for carrying out Mint programs and 

operations. 
1451 CH. 51—COINS AND CURRENCY § 5112 

(2) The accounting system shall conform to principles and 

standards prescribed by the Comptroller General to carry out this 

subsection. The Comptroller General may review the system to ensure conformity to the principles and standards and its effectiveness of operation. 

(c) An officer or employee in the clerical-mechanical service of 

the Bureau assigned to an established shift or tour of duty at least 

half of which occurs between 6 p.m. and 6 a.m. is entitled to pay 

for the regular 40-hour week (except when on leave) at a rate of 

pay 15 percent higher than the day rate for the same work. 

§ 5142. Bureau of Engraving and Printing Fund 

(a) The Department of the Treasury has a Bureau of Engraving and Printing Fund. Amounts— 

(1) in the Fund are available to operate the Bureau of Engraving and Printing; 

(2) in the Fund remain available until expended; and 

(3) may be appropriated to the Fund. 

(b) The Fund consists of— 

(1) property and physical assets (except buildings and 

land) acquired by the Bureau; 

(2) all amounts received by the Bureau; and 

(3) proceeds from the disposition of property and assets acquired by the Fund. 

(c) The capital of the Fund consists of— 

(1) amounts appropriated to the Fund; 

(2) physical assets of the Bureau (except buildings and 

land) as of the close of business June 30, 1951; and 

(3) all payments made after June 30, 1974, under section 

5143 of this title at prices adjusted to permit buying capital 

equipment and to provide future working capital. 

(d) The Secretary shall deposit each fiscal year, in the Treasury as miscellaneous receipts, amounts accruing to the Fund in the 

prior fiscal year that the Secretary decides are in excess of the 

needs of the Fund. However, the Secretary may use the excess 

amounts to restore capital of the Fund reduced by the difference 

between the charges for services of the Bureau and the cost of providing those services. 

(e) The Secretary shall maintain a special deposit account in 

the Treasury for the Fund. The Secretary shall credit the account 

with amounts appropriated to the Fund and receipts of the Bureau 

without depositing the receipts in the Treasury as miscellaneous 

receipts. 

§ 5143. Payment for services 

The Secretary of the Treasury shall impose charges for Bureau 

of Engraving and Printing services the Secretary provides to an 

agency. The charges shall be in amounts the Secretary considers 

adequate to cover the costs of the services (including administrative 

costs related to providing the services). The agency shall pay 

promptly bills submitted by the Secretary. 
§ 51 41 CH. 51—COINS AND CURRENCY 1452 

§ 5144. Providing impressions of portraits and vignettes 

The Secretary of the Treasury may provide impressions from 

an engraved portrait or vignette in the possession of the Bureau of 

Engraving and Printing. An impression shall be provided— 

(1) at the request of— 

(A) a member of Congress; 

(B) a head of an agency; 

(C) an art association; or 

(D) a library; and 

(2) for a charge and under conditions the Secretary decides 

are necessary to protect the public interest. 

SUBCHAPTER V—MISCELLANEOUS 

§ 5151. Conversion of currency of foreign countries 

(a) In this section— 

(1) ''buying rate'' means the buying rate in the market in 

New York, New York, for cable transfers payable in the currency of a foreign country to be converted. 

(2) when merchandise is exported on a day that banks are 

generally closed in New York, the buying rate at noon on the 

last prior business day is deemed to be the buying rate at noon 

on the day the merchandise is exported. 

(b) The value of coins of a foreign country expressed in United 

States money is the value of the pure metal of the standard coin 

of the foreign country. The Secretary of the Treasury shall estimate 

the values of standard coins of the country quarterly and publish 

the values on the first day of January, April, July, and October of 

each year. 

(c) Except as provided in this section, conversion of currency of 

a foreign country into United States currency for assessment and 

collection of duties on merchandise imported into the United States 

shall be made at values published by the Secretary under subsection (b) of this section for the quarter in which the merchandise 

is exported. 

(d) If the Secretary has not published a value for the quarter 

in which the merchandise is exported, or if the value published by 

the Secretary varies by at least 5 percent from a value measured 

by the buying rate at noon on the day the merchandise is exported, 

the conversion of the currency of the foreign country shall be made 

at a value— 

(1) equal to the buying rate at noon on the day the merchandise is exported; or 

(2) prescribed by regulation of the Secretary for the currency that is equal to the first buying rate certified for that 

currency by the Federal Reserve Bank of New York under subsection (e) of this section in the quarter in which the merchandise is exported, but only if the buying rate at noon on the day 

the merchandise is exported varies less than 5 percent from 

the buying rate first certified. 

(e) The Federal Reserve Bank of New York shall decide the 

buying rate and certify the rate to the Secretary. The Secretary 

shall publish the rate at times and to the extent the Secretary considers necessary. In deciding the buying rate, the Bank may— 
1453 CH. 51—COINS AND CURRENCY § 5112 

(1) consider the last ascertainable transactions and 

quotations (direct or through exchange of other currencies); 

and 

(2) if there is no buying rate, calculate the rate from— 

(A) actual transactions and quotations in demand or 

time bills of exchange; or 

(B) the last ascertainable transactions and quotations 

outside the United States in or for exchange payable in 

United States currency or foreign currency. 

§ 5152. Value of United States money holdings in international institutions 

The Secretary of the Treasury shall maintain the value in 

terms of gold of the holdings of United States money of the International Bank for Reconstruction and Development, the InterAmerican Development Bank, the International Development Association, and the Asian Development Bank to the extent provided in 

the articles of agreement of those institutions. Amounts necessary 

to maintain the value may be appropriated. Amounts appropriated 

under this section remain available until expended. 

§ 5153. Counterfeit currency 

Disbursing officials of the United States Government and officers of national banks shall stamp or mark the word ''counterfeit'', 

''altered'', or ''worthless'' on counterfeit notes intended to circulate 

as currency that are presented to them. An official or officer wrongfully stamping or marking an item of genuine United States currency (including a Federal reserve note or a circulating note of Federal reserve banks and national banks) shall redeem the currency 

at face value when presented. 

§ 5154. State taxation 

A State or a territory or possession of the United States may 

tax United States coins and currency (including Federal reserve 

notes are circulating notes of Federal reserve banks and national 

banks) as money on hand or on deposit in the same way and at 

the same rate that the State, territory, or possession taxes other 

forms of money. This section does not affect a law taxing national 

banks. 

§ 5155. Providing engraved plates of portraits of deceased 

members of Congress 

On conditions the Secretary of the Treasury decides, the Secretary may send an engraved plate of a portrait of a deceased Senator or Representative to an heir or legal representative of such a 

Senator or Representative. 
CHAPTER 53—MONETARY TRANSACTIONS 

SUBCHAPTER I—CREDIT AND MONETARY EXPANSION 

Sec. 

5301. Buying obligations of the United States Government. 

5302. Stabilizing exchange rates and arrangements. 

5303. Reserved coins and currencies of foreign countries. 

5304. Regulations. 

SUBCHAPTER II—RECORDS AND REPORTS ON MONETARY INSTRUMENTS 

TRANSACTIONS 

5311. Declaration of purpose. 

5312. Definitions and application. 

5313. Reports on domestic coins and currency transactions. 

5314. Records and reports on foreign financial agency transactions. 

5315. Reports on foreign currency transactions. 

5316. Reports on exporting and importing monetary instruments. 

5317. Search and forfeiture of monetary instruments. 

5318. Compliance, exemptions, and summons authority. 

5319. Availability of reports. 

5320. injunctions. 

5321. Civil penalties. 

5322. Criminal penalties. 

5323. Rewards for informants. 

5324. Structuring transactions to evade reporting requirement prohibited. 

5325. identification required to purchase certain monetary instruments. 

5326. Records of certain domestic coin and currency transactions. 

[5327. Repealed.] 

5328. whistleblower protections. 

5329. Staff commentaries. 

5330. Registration of money transmitting businesses. 

SUBCHAPTER III—MONEY LAUNDERING AND RELATED FINANCIAL 

CRIMES 

5340. Definitions. 

PART 1—NATIONAL MONEY LAUNDERING AND RELATED FINANCIAL CRIMES STRATEGY 

5341. National money laundering and related financial crimes strategy. 

5342. High-risk money laundering and related financial crime areas. 

PART 2—FINANCIAL CRIME-FREE COMMUNITIES SUPPORT PROGRAM 

5351. Establishment of financial crime-free communities support program. 

5352. Program authorization. 

5353. information collection and dissemination with respect to grant recipients. 

5354. Grants for fighting money laundering and related financial crimes. 

5355. Authorization of appropriations. 

SUBCHAPTER I—CREDIT AND MONETARY EXPANSION 

§ 5301. Buying obligations of the United States Government 

(a) The President may direct the Secretary of the Treasury to 

make an agreement with the Federal reserve banks and the Board 

of Governors of the Federal Reserve System when the President decides that the foreign commerce of the United States is affected adversely because— 

1454 
1455 CH. 53—MONETARY TRANSACTIONS § 5302 

(1) the value of coins and currency of a foreign country 

compared to the present standard value of gold is depreciating; 

(2) action is necessary to regulate and maintain the parity 

of United States coins and currency; 

(3) an economic emergency requires an expansion of credit; 

or 

(4) an expansion of credit is necessary so that the United 

States Government and the governments of other countries can 

stabilize the value of coins and currencies of a country. 

(b) Under an agreement under subsection (a) of this section, 

the Board shall permit the banks (and the Board is authorized to 

permit the banks notwithstanding another law) to agree that the 

banks will— 

(1) conduct through each entire specified period open market operations in obligations of the United States Government 

or corporations in which the Government is the majority stockholder; and 

(2) buy directly and hold an additional $3,000,000,000 of 

obligations of the Government for each agreed period, unless 

the Secretary consents to the sale of the obligations before the 

end of the period. 

(c) With the approval of the Secretary, the Board may require 

Federal reserve banks to take action the Secretary and Board consider necessary to prevent unreasonable credit expansion. 

§ 5302. Stabilizing exchange rates and arrangements 

(a)(1) The Department of the Treasury has a stabilization fund. 

The fund is available to carry out this section, section 18 of the 

Bretton Woods Agreement Act (22 U.S.C. 286e-3), and section 3 of 

the Special Drawing Rights Act (22 U.S.C. 286o), and for investing 

in obligations of the United States Government those amounts in 

the fund the Secretary of the Treasury, with the approval of the 

President, decides are not required at the time to carry out this 

section. Proceeds of sales and investments, earnings, and interest 

shall be paid into the fund and are available to carry out this section. However, the fund is not available to pay administrative expenses. 

(2) Subject to approval by the President, the fund is under the 

exclusive control of the Secretary, and may not be used in a way 

that direct control and custody pass from the President and the 

Secretary. Decisions of the Secretary are final and may not be reviewed by another officer or employee of the Government. 

(b) Consistent with the obligations of the Government in the 

International Monetary Fund on orderly exchange arrangements 

and a stable system of exchange rates, the Secretary or an agency 

designated by the Secretary, with the approval of the President, 

may deal in gold, foreign exchange, and other instruments of credit 

and securities the Secretary considers necessary. However, a loan 

or credit to a foreign entity or government of a foreign country may 

be made for more than 6 months in any 12-month period only if 

the President gives Congress a written statement that unique or 

emergency circumstances require the loan or credit be for more 

than 6 months. 
1456 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(c)(1) By the 30th day after the end of each month, the Secretary shall give the Committee on Banking, Finance and Urban 

Affairs of the House of Representatives and the Committee on 

Banking, Housing, and Urban Affairs of the Senate a detailed 

financial statement on the stabilization fund showing all agreements made or renewed, all transactions occurring during the 

month, and all projected liabilities. 

(2) The Secretary shall report each year to the President and 

Congress on the operation of the fund. 

(d) A repayment of any part of the first subscription payment 

of the Government to the International Monetary Fund, previously 

paid from the stabilization fund, shall be deposited in the Treasury 

as a miscellaneous receipt. 

§ 5303. Reserved coins and currencies of foreign countries 

An agency may use coins and currencies of a foreign country 

the United States Government holds that are or may be reserved 

for a specific program or activity of an agency. The agency shall reimburse the Treasury from appropriations and shall replace the 

coins and currencies when they are needed for the program or activity for which they were reserved originally. 

§ 5304. Regulations 

With the approval of the President, the Secretary of the Treasury may prescribe regulations— 

(1) to carry out section 5301 of this title; and 

(2) the Secretary considers necessary to carry out section 

5302 of this title. 

SUBCHAPTER II—RECORDS AND REPORTS ON MONETARY 

INSTRUMENTS TRANSACTIONS 

§ 5311. Declaration of purpose. 

It is the purpose of this subchapter (except section 5315) to require certain reports or records where they have a high degree of 

usefulness in criminal, tax, or regulatory investigations or proceedings. 

§ 5312. Definitions and application 

(a) In this subchapter— 

(1) ''financial agency'' means a person acting for a person 

(except for a country, a monetary or financial authority acting 

as a monetary or financial authority, or an international financial institution of which the United States Government is a 

member) as a financial institution, bailee, depository trustee, 

or agent, or acting in a similar way related to money, credit, 

securities, gold, or a transaction in money, credit, securities, or 

gold. 

(2) ''financial institution'' means— 

(A) an insured bank (as defined in section 3(h) of the 

Federal Deposit Insurance Act (12 U.S.C. 1813(h))); 

(B) a commercial bank or trust company; 

(C) a private banker; 
1457 CH. 53—MONETARY TRANSACTIONS § 5302 

(D) an agency or branch of a foreign bank in the 

United States; 

(E) an insured institution (as defined in section 401(a) 

of the National Housing Act (12 U.S.C. 1724(a))); 

(F) a thrift institution; 

(G) a broker or dealer registered with the Securities 

and Exchange Commission under the Securities Exchange 

Act of 1934 (15 U.S.C. 78a et seq.); 

(H) a broker or dealer in securities or commodities; 

(i) an investment banker or investment company; 

(J) a currency exchange; 

(K) an issuer, redeemer, or cashier of travelers' checks, 

checks, money orders, or similar instruments; 

(L) an operator or a credit card system; 

(M) an insurance company; 

(N) a dealer in precious metals, stones, or jewels; 

(o) a pawnbroker; 

(P) a loan or finance company; 

(Q) a travel agency; 

(R) a licensed sender of money; 

(S) a telegraph company; 

(T) a business engaged in vehicle sales, including automobile, airplane, and boat sales; 

(U) persons involved in real estate closings and settlements; 

(V) the United States Postal Service; 

(W) an agency of the United States Government or of 

a State or local government carrying out a duty or power 

of a business described in this paragraph; 

(X) a casino, gambling casino, or gaming establishment with an annual gaming revenue of more than 

$1,000,000 which— 

(i) is licensed as a casino, gambling casino, or 

gaming establishment under the laws of any State or 

any political subdivision of any State; or 

(ii) is an indian gaming operation conducted 

under or pursuant to the Indian Gaming Regulatory 

Act other than an operation which is limited to class 

I gaming (as defined in section 4(6) of such Act); 

(Y) any business or agency which engages in any activity which the Secretary of the Treasury determines, by 

regulation, to be an activity which is similar to, related to, 

or a substitute for any activity in which any business described in this paragraph is authorized to engage; or 

(Z) any other business designated by the Secretary 

whose cash transactions have a high degree of usefulness 

in criminal, tax, or regulatory matters. 

(3) "monetary instruments" means— 

(A) United States coins and currency; 

(B) as the Secretary may prescribe by regulation, coins 

and currency of a foreign country, travelers' checks, bearer 

negotiable instruments, bearer investment securities, 

bearer securities, stock on which title is passed on delivery, and similar material; and 
1458 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(C) as the Secretary of the Treasury shall provide by 

regulation for purposes of section 5316, checks, drafts, 

notes, money orders, and other similar instruments which 

are drawn on or by a foreign financial institution and are 

not in bearer form. 

(4) ''person'', in addition to its meaning under section 1 of 

title 1, includes a trustee, a representative of an estate and, 

when the Secretary prescribes, a governmental entity. 

(5) ''United States'' means the States of the United States, 

the District of Columbia, and, when the Secretary prescribes 

by regulation, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, American Samoa, 

the Trust Territory of the Pacific Islands, a territory or possession of the United States, or a military or diplomatic establishment. 

(b) In this subchapter— 

(1) ''domestic financial agency'' and ''domestic financial 

institution'' apply to an action in the United States of a financial agency or institution. 

(2) ''foreign financial agency'' and ''foreign financial institution'' apply to an action outside the United States of a financial 

agency or institution. 

§ 5313. Reports on domestic coins and currency transactions 

(a) When a domestic financial institution is involved in a transaction for the payment, receipt, or transfer of United States coins 

or currency (or other monetary instruments the Secretary of the 

Treasury prescribes), in an amount, denomination, or amount and 

denomination, or under circumstances the Secretary prescribes by 

regulation, the institution and any other participant in the transaction the Secretary may prescribe shall file a report on the transaction at the time and in the way the Secretary prescribes. A participant acting for another person shall make the report as the 

agent or bailee of the person and identify the person for whom the 

transaction is being made. 

(b) The Secretary may designate a domestic financial institution as an agent of the United States Government to receive a report under this section. However, the Secretary may designate a 

domestic financial institution that is not insured, chartered, examined, or registered as a domestic financial institution only if the 

institution consents. The Secretary may suspend or revoke a designation for a violation of this subchapter or a regulation under 

this subchapter (except a violation of section 5315 of this title or 

a regulation prescribed under section 5315), section 411 of the National Housing Act (12 U.S.C. 1730d), or section 21 of the Federal 

Deposit Insurance Act (12 U.S.C. 1829b). 

(c)(1) A person (except a domestic financial institution designated under subsection (b) of this section) required to file a report 

under this section shall file the report— 

(A) with the institution involved in the transaction if the 

institution was designated; 

(B) in the way the Secretary prescribes when the institution was not designated; or 

(C) with the Secretary. 
1459 CH. 53—MONETARY TRANSACTIONS § 5302 

(2) The Secretary shall prescribe— 

(A) the filing procedure for a domestic financial institution 

designated under subsection (b) of this section; and 

(B) the way the institution shall submit reports filed with 

it. 

(d) MANDATORY EXEMPTIONS FRO M REPORTING REQUIREMENTS.— 

(1) IN GENERAL.—The Secretary of the Treasury shall 

exempt, pursuant to section 5318(a)(6), a depository institution 

from the reporting requirements of subsection (a) with respect 

to transactions between the depository institution and the following categories of entities: 

(A) Another depository institution. 

(B) A department or agency of the United States, any 

State, or any political subdivision of any State. 

(C) Any entity established under the laws of the 

United States, any State, or any political subdivision of 

any State, or under an interstate compact between 2 or 

more States, which exercises governmental authority on 

behalf of the United States or any such State or political 

subdivision. 

(D) Any business or category of business the reports 

on which have little or no value for law enforcement purposes. 

(2) NOTICE OF EXEMPTION.—The Secretary of the Treasury 

shall publish in the Federal Register at such times as the Secretary determines to be appropriate (but not less frequently 

than once each year) a list of all the entities whose transactions with a depository institution are exempt under this 

subsection from the reporting requirements of subsection (a). 

(e) DISCRETIONARY EXEMPTIONS FRO M REPORTING REQUIREMENTS.— 

(1) IN GENERAL.—The Secretary of the Treasury may 

exempt, pursuant to section 5318(a)(6), a depository institution 

from the reporting requirements of subsection (a) with respect 

to transactions between the depository institution and a qualified business customer of the institution on the basis of information submitted to the Secretary by the institution in accordance with procedures which the Secretary shall establish. 

(2) QUALIFIED BUSINESS CUSTOMER DEFINED.—Fo r purposes of this subsection, the term ''qualified business customer'' 

means a business which— 

(A) maintains a transaction account (as defined in section 19(b)(1)(C) of the Federal Reserve Act) at the depository institution; 

(B) frequently engages in transactions with the 

depository institution which are subject to the reporting 

requirements of subsection (a); and 

(C) meets criteria which the Secretary determines are 

sufficient to ensure that the purposes of this subchapter 

are carried out without requiring a report with respect to 

such transactions. 
1460 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(3) CRITERIA FOR EXEMPTION.—The Secretary of the Treasury shall establish, by regulation, the criteria for granting and 

maintaining an exemption under paragraph (1). 

(4) GUIDELINES.— 

(A) IN GENERAL.—The Secretary of the Treasury shall 

establish guidelines for depository institutions to follow in 

selecting customers for an exemption under this 

subsection. 

(B) CONTENTS.—The guidelines may include a description of the types of businesses or an itemization of specific 

businesses for which no exemption will be granted under 

this subsection to any depository institution. 

(5) ANNUA L REVIEW.—Th e Secretary of the Treasury shall 

prescribe regulations requiring each depository institution to— 

(A) review, at least once each year, the qualified business customers of such institution with respect to whom 

an exemption has been granted under this subsection; and 

(B) upon the completion of such review, resubmit 

information about such customers, with such modifications 

as the institution determines to be appropriate, to the Secretary for the Secretary's approval. 

(6) 2-YEAR PHASE-IN PROVISION.—Durin g the 2-year period 

beginning on the date of enactment of the Money Laundering 

Suppression Act of 1994, this subsection shall be applied by 

the Secretary on the basis of such criteria as the Secretary 

determines to be appropriate to achieve an orderly implementation of the requirements of this subsection. 

(f) PROVISIONS APPLICABLE TO MANDATORY AND DISCRETIONARY 

EXEMPTIONS.— 

(1) LIMITATION ON LIABILITY OF DEPOSITORY INSTITUTIONS.—No depository institution shall be subject to any penalty which may be imposed under this subchapter for the failure of the institution to file a report with respect to a transaction with a customer for whom an exemption has been 

granted under subsection (d) or (e) unless the institution— 

(A) knowingly files false or incomplete information to 

the Secretary with respect to the transaction or the customer engaging in the transaction; or 

(B) has reason to believe at the time the exemption is 

granted or the transaction is entered into that the customer or the transaction does not meet the criteria established for granting such exemption. 

(2) COORDINATION WIT H OTHER PROVISIONS.—Any exemption granted by the Secretary of the Treasury under section 

5318(a) in accordance with this section, and any transaction 

which is subject to such exemption, shall be subject to any 

other provision of law applicable to such exemption, 

including— 

(A) the authority of the Secretary, under section 

5318(a)(6), to revoke such exemption at any time; and 

(B) any requirement to report, or any authority to require a report on, any possible violation of any law or regulation or any suspected criminal activity. 
1461 CH. 53—MONETARY TRANSACTIONS § 5302 

(g) DEPOSITORY INSTITUTION DEFINED.—Fo r purposes of this 

section, the term ''depository institution''— 

(1) has the meaning given to such term in section 

19(b)(1)(A) of the Federal Reserve Act; and 

(2) includes— 

(A) any branch, agency, or commercial lending company (as such terms are defined in section 1(b) of the 

international Banking Act of 1978); 

(B) any corporation chartered under section 25A of the 

Federal Reserve Act; and 

(C) any corporation having an agreement or undertaking with the Board of Governors of the Federal Reserve 

System under section 25 of the Federal Reserve Act. 

§ 5314. Records and reports on foreign financial agency 

transactions 

(a) Considering the need to avoid impeding or controlling the 

export or import of monetary instruments and the need to avoid 

burdening unreasonably a person making a transaction with a foreign financial agency, the Secretary of the Treasury shall require 

a resident or citizen of the United States or a person in, and doing 

business in, the United States, to keep records, file reports, or keep 

records and file reports, when the resident, citizen, or person 

makes a transaction or maintains a relation for any person with a 

foreign financial agency. The records and reports shall contain the 

following information in the way and to the extent the Secretary 

prescribes; 

(1) the identity and address of participants in a transaction or relationship. 

(2) the legal capacity in which a participant is acting. 

(3) the identity of real parties in interest. 

(4) a description of the transaction. 

(b) The Secretary may prescribe— 

(1) a reasonable classification of persons subject to or 

exempt from a requirement under this section or a regulation 

under this section; 

(2) a foreign country to which a requirement or a regulation under this section applies if the Secretary decides applying 

the requirement or regulation to all foreign countries is unnecessary or undesirable; 

(3) the magnitude of transactions subject to a requirement 

or a regulation under this section; 

(4) the kind of transaction subject to or exempt from a 

requirement or a regulation under this section; and 

(5) other matters the Secretary considers necessary to 

carry out this section or a regulation under this section. 

(c) A person shall be required to disclose a record required to 

be kept under this section or under a regulation under this section 

only as required by law. 

§ 5315. Reports on foreign currency transactions 

(a) Congress finds that— 

(1) moving mobile capital can have a significant impact on 

the proper functioning of the international monetary system; 
1462 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(2) it is important to have the most feasible current and 

complete information on the kind and source of capital flows, 

including transactions by large United States businesses and 

their foreign affiliates; and 

(3) additional authority should be provided to collect information on capital flows under section 5(b) of the Trading With 

the Enemy Act (50 App. U.S.C. 5(b)) and section 8 of the 

Bretton Woods Agreement Act (22 U.S.C. 286f). 

(b) In this section, ''United States person'' and ''foreign person 

controlled by a United States person'' have the same meanings 

given those terms in section 7(f)(2) (A) and (C), respectively, of the 

Securities and Exchange Act of 1934 (15 U.S.C. 78g(f)(2)(A), (C)). 

(c) The Secretary of the Treasury shall prescribe regulations 

consistent with subsection (a) of this section requiring reports on 

foreign currency transactions conducted by a United States person 

or a foreign person controlled by a United States person. The regulations shall require that a report contain information and be submitted at the time and in the way, with reasonable exception and 

classifications, necessary to carry out this section. 

§ 5316. Reports on exporting and importing monetary instruments 

(a) Except as provided in subsection (c) of this section, a person 

or an agent or bailee of the person shall file a report under subsection (b) of this section when the person, agent, or bailee 

knowingly— 

(1) transports, is about to transport, or has transported, 

monetary instruments of more than $10,000 at one time— 

(A) from a place in the United States to or through a 

place outside the United States; or 

(B) to a place in the United States from or through a 

place outside the United States; or 

(2) receives monetary instruments of more than $10,000 at 

one time transported into the United States from or through 

a place outside the United States. 

(b) A report under this section shall be filed at the time and 

place the Secretary of the Treasury prescribes. The report shall 

contain the following information to the extent the Secretary prescribes: 

(1) the legal capacity in which the person filing the report 

is acting. 

(2) the origin, destination, and route of the monetary instruments. 

(3) when the monetary instruments are not legally and 

beneficially owned by the person transporting the instruments, 

or if the person transporting the instruments personally is not 

going to use them, the identity of the person that gave the instruments to the person transporting them, the identity of the 

person who is to receive them, or both. 

(4) the amount and kind of monetary instruments transported. 

(5) additional information. 

(c) This section or a regulation under this section does not 

apply to a common carrier of passengers when a passenger pos-
1463 CH. 53—MONETARY TRANSACTIONS § 5302 

sesses a monetary instrument, or to a common carrier of goods if 

the shipper does not declare the instrument. 

(d) CUMULATION OF CLOSELY RELATED EVENTS.—Th e Secretary 

of the Treasury may prescribe regulations under this section defining the term ''at one time'' for purposes of subsection (a). Such regulations may permit the cumulation of closely related events in 

order that such events may collectively be considered to occur at 

one time for the purposes of subsection (a). 

§ 5317. Search and forfeiture of monetary instruments 

(a) The Secretary of the Treasury may apply to a court of competent jurisdiction for a search warrant when the Secretary reasonably believes a monetary instrument is being transported and a report on the instrument under section 5316 of this title has not been 

filed or contains a material omission or misstatement. The Secretary shall include a statement of information in support of the 

warrant. on a showing of probable cause, the court may issue a 

search warrant for a designated person or a designated or described place or physical object. This subsection does not affect the 

authority of the Secretary under another law. 

(b) SEARCHES AT BORDER.—For purposes of ensuring compliance with the requirements of section 5316, a customs officer may 

stop and search, at the border and without a search warrant, any 

vehicle, vessel, aircraft, or other conveyance, any envelope or other 

container, and any person entering or departing from the United 

States. 

(c) If a report required under section 5316 with respect to any 

monetary instrument is not filed (or if filed, contains a material 

omission or misstatement of fact), the instrument and any interest 

in property, including a deposit in a financial institution, traceable 

to such instrument may be seized and forfeited to the United 

States Government. Any property, real or personal, involved in a 

transaction or attempted transaction in violation of section 5324(b), 

or any property traceable to such property, may be seized and forfeited to the United States Government. A monetary instrument 

transported by mail or a common carrier, messenger, or bailee is 

being transported under this subsection from the time the instrument is delivered to the United States Postal Service, common carrier, messenger, or bailee through the time it is delivered to the addressee, intended recipient, or agent of the addressee or intended 

recipient without being transported further in, or taken out of, the 

United States. 

§ 5318. Compliance, exemptions, and summons authority 

(a) GENERAL POWERS OF SECRETARY.—The Secretary of the 

Treasury may (except under section 5315 of this title and regulations prescribed under section 5315)— 

(1) except as provided in subsection (b)(2), delegate duties 

and powers under this subchapter to an appropriate supervising agency and the United States Postal Service; 

(2) require a class of domestic financial institutions to 

maintain appropriate procedures to ensure compliance with 

this subchapter and regulations prescribed under this subchapter or to guard against money laundering; 
1464 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(3) examine any books, papers, records, or other data of domestic financial institutions relevant to the recordkeeping or 

reporting requirements of this subchapter; 

(4) summon a financial institution, an officer or employee 

of a financial institution (including a former officer or employee), or any person having possession, custody, or care of 

the reports and records required under this subchapter, to appear before the Secretary of the Treasury or his delegate at a 

time and place named in the summons and to produce such 

books, papers, records, or other data, and to give testimony, 

under oath, as may be relevant or material to an investigation 

described in subsection (b); 

(5) exempt from the requirements of this subchapter any 

class of transactions within any State if the Secretary determines that— 

(A) under the laws of such State, that class of transactions is subject to requirements substantially similar to 

those imposed under this subchapter; and 

(B) there is adequate provision for the enforcement of 

such requirements; and 

(6) prescribe an appropriate exemption from a requirement 

under this subchapter and regulations prescribed under this 

subchapter. The Secretary may revoke an exemption under 

this paragraph or paragraph (5) by actually or constructively 

notifying the parties affected. A revocation is effective during 

judicial review. 

(b) LIMITATIONS ON SUMMONS POWER.— 

(1) SCOPE OF POWER.—The Secretary of the Treasury may 

take any action described in paragraph (3) or (4) of subsection 

(a) only in connection with investigations for the purpose of 

civil enforcement of violations of this subchapter, section 21 of 

the Federal Deposit Insurance Act, section 411 of the National 

Housing Act, or chapter 2 of Public Law 91-508 (12 U.S.C. 

1951 et seq.) or any regulation under any such provision. 

(2) AUTHORITY TO ISSUE.—A summons may be issued 

under subsection (a)(4) only by, or with the approval of, the 

Secretary of the Treasury or a supervisory level delegate of the 

Secretary of the Treasury. 

(c) ADMINISTRATIVE ASPECTS OF SUMMONS.— 

(1) PRODUCTION AT DESIGNATED SITE.—A summons issued 

pursuant to this section may require that books, papers, 

records, or other data stored or maintained at any place be 

produced at any designated location in any State or in any territory or other place subject to the jurisdiction of the United 

States not more than 500 miles distant from any place where 

the financial institution operates or conducts business in the 

United States. 

(2) FEES AND TRAVEL EXPENSES.—Persons summoned 

under this section shall be paid the same fees and mileage for 

travel in the United States that are paid witnesses in the 

courts of the United States. 

(3) No LIABILITY FOR EXPENSES.—The United States shall 

not be liable for any expense, other than an expense described 
1465 CH. 53—MONETARY TRANSACTIONS § 5302 

in paragraph (2), incurred in connection with the production of 

books, papers, records, or other data under this section. 

(d) SERVICE OF SUMMONS.—Service of a summons issued under 

this section may be by registered mail or in such other manner calculated to give actual notice as the Secretary may prescribe by regulation. 

(e) CONTUMACY OR REFUSAL.— 

(1) REFERRAL TO ATTORNEY GENERAL.—In case of contumacy by a person issued a summons under paragraph (3) or (4) 

of subsection (a) or a refusal by such person to obey such summons, the Secretary of the Treasury shall refer the matter to 

the Attorney General. 

(2) JURISDICTION OF COURT.—The Attorney General may 

invoke the aid of any court of the United States within the 

jurisdiction of which— 

(A) the investigation which gave rise to the summons 

is being or has been carried on; 

(B) the person summoned is an inhabitant; or 

(C) the person summoned carries on business or may 

be found, 

to compel compliance with the summons. 

(3) COURT ORDER.—The court may issue an order requiring 

the person summoned to appear before the Secretary or his 

delegate to produce books, papers, records, and other data, to 

give testimony as may be necessary to explain how such material was compiled and maintained, and to pay the costs of the 

proceeding. 

(4) FAILURE TO COMPLY WIT H ORDER.—Any failure to obey 

the order of the court may be punished by the court as a contempt thereof. 

(5) SERVICE OF PROCESS.—All process in any case under 

this subsection may be served in any judicial district in which 

such person may be found. 

(f) WRITTE N AND SIGNED STATEMENT REQUIRED.—N o person 

shall qualify for an exemption under subsection (a)(5) unless the 

relevant financial institution prepares and maintains a statement 

which— 

(1) describes in detail the reasons why such person is 

qualified for such exemption; and 

(2) contains the signature of such person. 

(g) REPORTING OF SUSPICIOUS TRANSACTIONS.— 

(1) IN GENERAL.—The Secretary may require any financial 

institution, and any director, officer, employee, or agent of any 

financial institution, to report any suspicious transaction relevant to a possible violation of law or regulation. 

(2) NOTIFICATION PROHIBITED.—A financial institution, and 

a director, officer, employee, or agent of any financial institution, who voluntarily reports a suspicious transaction, or that 

reports a suspicious transaction pursuant to this section or any 

other authority, may not notify any person involved in the 

transaction that the transaction has been reported. 

(3) LIABILITY FOR DISCLOSURES.—Any financial institution 

that makes a disclosure of any possible violation of law or regulation or a disclosure pursuant to this subsection or any other 
1466 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

authority, and any director, officer, employee, or agent of such 

institution, shall not be liable to any person under any law or 

regulation of the United States or any constitution, law, or regulation of any State or political subdivision thereof, for such 

disclosure or for any failure to notify the person involved in the 

transaction or any other person of such disclosure. 

(4) SINGLE DESIGNEE FOR REPORTING SUSPICIOUS 

TRANSACTIONS.— 

(A) I N GENERAL.—In requiring reports under paragraph (1) of suspicious transactions, the Secretary of the 

Treasury shall designate, to the extent practicable and 

appropriate, a single officer or agency of the United States 

to whom such reports shall be made. 

(B) DUTY OF DESIGNEE.—The officer or agency of the 

United States designated by the Secretary of the Treasury 

pursuant to subparagraph (A) shall refer any report of a 

suspicious transaction to any appropriate law enforcement 

or supervisory agency. 

( C) COORDINATION WIT H OTHER REPORTING REQUIREMENTS.—Subparagraph (A) shall not be construed as precluding any supervisory agency for any financial institution from requiring the financial institution to submit any 

information or report to the agency or another agency pursuant to any other applicable provision of law. 

(h) ANTI-MONE Y LAUNDERING PROGRAMS.— 

(1) I N GENERAL.—In order to guard against money laundering through financial institutions, the Secretary may require financial institutions to carry out anti-money laundering 

programs, including at a minimum 

(A) the development of internal policies, procedures, 

and controls, 

(B) the designation of a compliance officer, 

(C) an ongoing employee training program, and 

(D) an independent audit function to test programs. 

(2) REGULATIONS.—The Secretary may prescribe minimum 

standards for programs established under paragraph (1). 

§ 5319. Availability of reports 

The Secretary of the Treasury shall make information in a report filed under section 5313, 5314, or 5316 of this title available 

to an agency, including any State financial institutions supervisory 

agency, on request of the head of the agency. The report shall be 

available for a purpose consistent with those sections or a regulation prescribed under those sections. The Secretary may only require reports on the use of such information by any State financial 

institutions supervisory agency for other than supervisory purposes. However, a report and records of reports are exempt from 

disclosure under section 552 of title 5. 

§ 5320. Injunctions 

When the Secretary of the Treasury believes a person has violated, is violating, or will violate this subchapter or a regulation 

prescribed or order issued under this subchapter, the Secretary 

may bring a civil action in the appropriate district court of the 
1467 CH. 53—MONETARY TRANSACTIONS § 5302 

United States or appropriate United States court of a territory or 

possession of the United States to enjoin the violation or to enforce 

compliance with the subchapter, regulation, or order. An injunction 

or temporary restraining order shall be issued without bond. 

§ 5321. Civil penalties 

(a)(1) A domestic financial institution, and a partner, director, 

officer, or employee of a domestic financial institution, willfully violating this subchapter or a regulation prescribed under this subchapter (except sections 5314 and 5315 of this title or a regulation 

prescribed under sections 5314 and 5315) is liable to the United 

States Government for a civil penalty of not more than the greater 

of the amount (not to exceed $100,000) involved in the transaction 

(if any) or $25,000. For a violation of section 5318(a)(2) of this title 

or a regulation prescribed under section 5318(a)(2), a separate violation occurs for each day the violation continues and at each office, 

branch, or place of business at which a violation occurs or continues. 

(2) The Secretary of the Treasury may impose an additional 

civil penalty on a person not filing a report, or filing a report containing a material omission or misstatement, under section 5316 of 

this title or a regulation prescribed under section 5316. A civil penalty under this paragraph may not be more than the amount of the 

monetary instrument for which the report was required. A civil 

penalty under this paragraph is reduced by an amount forfeited 

under section 5317(b) of this title. 

(3) A person not filing a report under a regulation prescribed 

under section 5315 of this title or not complying with an injunction 

under section 5320 of this title enjoining a violation of, or enforcing 

compliance with, section 5315 or a regulation prescribed under section 5315, is liable to the Government for a civil penalty of not 

more than $10,000. 

(4) STRUCTURED TRANSACTION VIOLATION.— 

(A) PENALTY AUTHORIZED.—The Secretary of the Treasury 

may impose a civil money penalty on any person who violates 

any provision of section 5324. 

(B) MAXIMU M AMOUNT LIMITATION.—The amount of any 

civil money penalty imposed under subparagraph (A) shall not 

exceed the amount of the coins and currency (or such other 

monetary instruments as the Secretary may prescribe) involved in the transaction with respect to which such penalty is 

imposed. 

( C) COORDINATION WIT H FORFEITURE PROVISION.—The 

amount of any civil money penalty imposed by the Secretary 

under subparagraph (A) shall be reduced by the amount of any 

forfeiture to the United States in connection with the transaction with respect to which such penalty is imposed. 

(5) FOREIGN FINANCIAL AGENCY TRANSACTION VIOLATION.— 

(A) PENALTY AUTHORIZED.—The Secretary of the Treasury 

may impose a civil money penalty on any person who willfully 
1468 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

violates or any person willfully causing any violation of1 any 

violation of any provision of section 5314. 

(B) MAXIMU M AMOUN T LIMITATION.—Th e amount of any 

civil money penalty imposed under subparagraph (A) shall not 

exceed— 

(i) in the case of violation of such section involving a 

transaction, the greater of— 

(i) the amount (not to exceed $100,000) of the 

transaction; or 

(ii) $25,000; and 

(ii) in the case of violation of such section involving a 

failure to report the existence of an account or any identifying information required to be provided with respect to 

such account, the greater of— 

(I) an amount (not to exceed $100,000) equal to 

the balance in the account at the time of the violation; 

or 

(ii) $25,000. 

(6) 2 NEGLIGENCE. — 

(A) IN GENERAL.—The Secretary of the Treasury may 

impose a civil money penalty of not more than $500 on any 

financial institution which negligently violates any provision of this subchapter or any regulation prescribed under 

this subchapter. 

(B) PATTER N OF NEGLIGEN T ACTIVITY.—I f any financial 

institution engages in a pattern of negligent violations of 

any provision of this subchapter or any regulation prescribed under this subchapter, the Secretary of the Treasury may, in addition to any penalty imposed under subparagraph (A) with respect to any such violation, impose 

a civil money penalty of not more than $50,000 on the 

financial institution. 

(b) TIM E LIMITATION S FOR ASSESSMENTS AN D COMMENCEMEN T 

OF CIVI L ACTIONS. — 

(1) ASSESSMENTS.—Th e Secretary of the Treasury may assess a civil penalty under subsection (a) at any time before the 

end of the 6-year period beginning on the date of the transaction with respect to which the penalty is assessed. 

(2) CIVI L ACTIONS.—Th e Secretary may commence a civil 

action to recover a civil penalty assessed under subsection (a) 

at any time before the end of the 2-year period beginning on 

the later of— 

(A) the date the penalty was assessed; or 

(B) the date any judgment becomes final in any criminal action under section 5322 in connection with the same 

transaction with respect to which the penalty is assessed. 

(c) The Secretary may remit any part of a forfeiture under subsection (c) or (d) of section 5817 of this title or civil penalty under 

subsection (a)(2) of this section. 

( d) CRIMINA L PENALTY NO T EXCLUSIVE OF CIVI L PENALTY.— A 

civil money penalty may be imposed under subsection (a) with re-

!So in law. P.L. 103-325 and P.L. 103-322 both amended section 5321(a)(5)(A) by inserting 

"any violation of' after "causing". 

2

 Margin so in law. 
1469 CH. 53—MONETARY TRANSACTIONS § 5302 

spect to any violation of this subchapter notwithstanding the fact 

that a criminal penalty is imposed with respect to the same violation. 

(e) DELEGATIO N OF ASSESSMENT AUTHORITY TO BANKIN G 

AGENCIES.— 

(1) IN GENERAL.—The Secretary of the Treasury shall delegate, in accordance with section 5318(a)(1) and subject to such 

terms and conditions as the Secretary may impose in accordance with paragraph (3), any authority of the Secretary to assess a civil money penalty under this section on depository 

institutions (as defined in section 3 of the Federal Deposit 

insurance Act) to the appropriate Federal banking agencies (as 

defined in such section 3). 

(2) AUTHORITY OF AGENCIES.—Subject to any term or condition imposed by the Secretary of the Treasury under 

paragraph (3), the provisions of this section shall apply to an 

appropriate Federal banking agency to which is delegated any 

authority of the Secretary under this section in the same manner such provisions apply to the Secretary. 

(3) TERM S AND CONDITIONS.— 

(A) IN GENERAL.—The Secretary of the Treasury shall 

prescribe by regulation the terms and conditions which 

shall apply to any delegation under paragraph (1). 

(B) MAXIMU M DOLLAR AMOUNT.—The terms and conditions authorized under subparagraph (A) may include, in 

the Secretary's sole discretion, a limitation on the amount 

of any civil penalty which may be assessed by an appropriate Federal banking agency pursuant to a delegation 

under paragraph (1). 

§ 5322. Criminal penalties 

(a) A person willfully violating this subchapter or a regulation 

prescribed under this subchapter (except section 5315 or 5324 of 

this title or a regulation prescribed under section 5315 or 5324) 

shall be fined not more than $250,000, or imprisoned for not more 

than five years, or both. 

(b) a person willfully violating this subchapter or a regulation 

prescribed under this subchapter (except section 5315 or 5324 of 

this title or a regulation prescribed under section 5315 or 5324), 

while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-

month period, shall be fined not more than $500,000, imprisoned 

for not more than 10 years, or both. 

(c) For a violation of section 5318(a)(2) of this title or a regulation prescribed under section 5318(a)(2), a separate violation occurs 

for each day the violation continues and at each office, branch, or 

place of business at which a violation occurs or continues. 

§ 5323. Rewards for informants 

(a) The Secretary may pay a reward to an individual who provides original information which leads to a recovery of a criminal 

fine, civil penalty, or forfeiture, which exceeds $50,000, for a violation of this chapter. 
1470 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(b) The Secretary shall determine the amount of a reward 

under this section. The Secretary may not award more than 25 per 

centum of the net amount of the fine, penalty, or forfeiture collected or $150,000, whichever is less. 

(c) An officer or employee of the United States, a State, or a 

local government who provides information described in subsection 

(a) in the performance of official duties is not eligible for a reward 

under this section. 

(d) There are authorized to be appropriated such sums as may 

be necessary to carry out the provisions of this section. 

§ 5324. Structuring transactions to evade reporting requirement prohibited 

(a) DOMESTIC COI N AND CURRENCY TRANSACTIONS.—No person 

shall for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such 

section— 

(1) cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 

5325 or any regulation prescribed under any such section; 

(2) cause or attempt to cause a domestic financial institution to file a report required under section 5313(a) or 5325 or 

any regulation prescribed under any such section that contains 

a material omission or misstatement of fact; or 

(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more 

domestic financial institutions. 

(b) INTERNATIONAL MONETARY INSTRUMENT TRANSACTIONS.— 

No person shall, for the purpose of evading the reporting requirements of section 5316— 

(1) fail to file a report required by section 5316, or cause 

or attempt to cause a person to fail to file such a report; 

(2) file or cause or attempt to cause a person to file a report required under section 5316 that contains a material 

omission or misstatement of fact; or 

(3) structure or assist in structuring, or attempt to structure or assist in structuring, any importation or exportation of 

monetary instruments. 

(c) CRIMINAL PENALTY.— 

(1) IN GENERAL.—Whoever violates this section shall be 

fined in accordance with title 18, United States Code, imprisoned for not more than 5 years, or both. 

(2) ENHANCED PENALTY FOR AGGRAVATED CASES.—Whoever 

violates this section while violating another law of the United 

States or as part of a pattern of any illegal activity involving 

more than $100,000 in a 12-month period shall be fined twice 

the amount provided in subsection (b)(3) or (c)(3) (as the case 

may be) of section 3571 of title 18, United States Code, imprisoned for not more than 10 years, or both. 

§ 5325. Identification required to purchase certain monetary 

instruments 

(a) I N GENERAL.—N o financial institution may issue or sell a 

bank check, cashier's check, traveler's check, or money order to any 
1471 CH. 53—MONETARY TRANSACTIONS § 5302 

individual in connection with a transaction or group of such contemporaneous transactions which involves United States coins or 

currency (or such other monetary instruments as the Secretary 

may prescribe) in amounts or denominations of $3,000 or more 

unless— 

(1) the individual has a transaction account with such 

financial institution and the financial institution— 

(A) verifies that fact through a signature card or other 

information maintained by such institution in connection 

with the account of such individual; and 

(B) records the method of verification in accordance 

with regulations which the Secretary of the Treasury shall 

prescribe; or 

(2) the individual furnishes the financial institution with 

such forms of identification as the Secretary of the Treasury 

may require in regulations which the Secretary shall prescribe 

and the financial institution verifies and records such information in accordance with regulations which such Secretary shall 

prescribe. 

(b) REPORT TO SECRETARY UPO N REQUEST.—An y information 

required to be recorded by any financial institution under paragraph (1) or (2) of subsection (a) shall be reported by such institution to the Secretary of the Treasury at the request of such Secretary. 

(c) TRANSACTION ACCOUNT DEFINED.—Fo r purposes of this section, the term ''transaction account'' has the meaning given to such 

term in section 19(b)(1)(C) of the Federal Reserve Act. 

§ 5326. Records of certain domestic coin and currency transactions 

(a) I N GENERAL.—If the Secretary of the Treasury finds, upon 

the Secretary's own initiative or at the request of an appropriate 

Federal or State law enforcement official, that reasonable grounds 

exist for concluding that additional recordkeeping and reporting 

requirements are necessary to carry out the purposes of this subtitle and prevent evasions thereof, the Secretary may issue an 

order requiring any domestic financial institution or group of domestic financial institutions in a geographic area— 

(1) to obtain such information as the Secretary may describe in such order concerning— 

(A) any transaction in which such financial institution 

is involved for the payment, receipt, or transfer of United 

States coins or currency (or such other monetary instruments as the Secretary may describe in such order) the 

total amounts or denominations of which are equal to or 

greater than an amount which the Secretary may prescribe; and 

(B) any other person participating in such transaction; 

(2) to maintain a record of such information for such period of time as the Secretary may require; and 

(3) to file a report with respect to any transaction described in paragraph (1)(A) in the manner and to the extent 

specified in the order. 
1472 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(b) AUTHORITY T O ORDER DEPOSITORY INSTITUTIONS T O OBTAIN 

REPORTS FRO M CUSTOMERS.— 

(1) IN GENERAL.—The Secretary of the Treasury may, by 

regulation or order, require any depository institution (as defined in section 3(c) of the Federal Deposit Insurance Act)— 

(A) to request any financial institution (other than a 

depository institution) which engages in any reportable 

transaction with the depository institution to provide the 

depository institution with a copy of any report filed by the 

financial institution under this subtitle with respect to any 

prior transaction (between such financial institution and 

any other person) which involved any portion of the coins 

or currency (or monetary instruments) which are involved 

in the reportable transaction with the depository institution; and 

(B) if no copy of any report described in subparagraph 

(A) is received by the depository institution in connection 

with any reportable transaction to which such subparagraph applies, to submit (in addition to any report required under this subtitle with respect to the reportable 

transaction) a written notice to the Secretary that the 

financial institution failed to provide any copy of such report. 

(2) REPORTABLE TRANSACTION DEFINED.—Fo r purposes of 

this subsection, the term "reportable transaction'' means any 

transaction involving coins or currency (or such other monetary 

instruments as the Secretary may describe in the regulation or 

order) the total amounts or denominations of which are equal 

to or greater than an amount which the Secretary may prescribe. 

(c) NONDISCLOSURE OF ORDERS.—No financial institution or officer, director, employee or agent of a financial institution subject 

to an order under this section may disclose the existence of, or 

terms of, the order to any person except as prescribed by the Secretary. 

(d) MAXIMU M EFFECTIVE PERIOD FOR ORDER.—N o order issued 

under subsection (a) shall be effective for more than 60 days unless 

renewed pursuant to the requirements of subsection (a). 

[§ 5327. Repealed by section 2223(1) of P.L. 104-208 (110 Stat. 

3009-430)] 

§ 5328. Whistleblower protections 

(a) PROHIBITION AGAINST DISCRIMINATION.—N o financial institution may discharge or otherwise discriminate against any employee with respect to compensation, terms, conditions, or privileges of employment because the employee (or any person acting 

pursuant to the request of the employee) provided information to 

the Secretary of the Treasury, the Attorney General, or any Federal supervisory agency regarding a possible violation of any provision of this subchapter or section 1956, 1957, or 1960 of title 18, 

or any regulation under any such provision, by the financial institution or any director, officer, or employee of the financial institution. 
1473 CH. 53—MONETARY TRANSACTIONS § 530 2 

(b) ENFORCEMENT.—An y employee or former employee who believes that such employee has been discharged or discriminated 

against in violation of subsection (a) may file a civil action in the 

appropriate United States district court before the end of the 2-

year period beginning on the date of such discharge or 

discrimination. 

(c) REMEDIES.—If the district court determines that a violation 

has occurred, the court may order the financial institution which 

committed the violation to— 

(1) reinstate the employee to the employee's former 

position; 

(2) pay compensatory damages; or 

(3) take other appropriate actions to remedy any past discrimination. 

(d) LIMITATION.—Th e protections of this section shall not apply 

to any employee who— 

(1) deliberately causes or participates in the alleged violation of law or regulation; or 

(2) knowingly or recklessly provides substantially false 

information to the Secretary, the Attorney General, or any 

Federal supervisory agency. 

(e) COORDINATION WIT H OTHER PROVISIONS OF LAW.—Thi s section shall not apply with respect to any financial institution which 

is subject to section 33 of the Federal Deposit Insurance Act, section 213 of the Federal Credit Union Act, or section 21A(q) of the 

Home Owners' Loan Act (as added by section 251(c) of the Federal 

Deposit Insurance Corporation Improvement Act of 1991). 

SEC. 5329. STAFF COMMENTARIES. 1 

The Secretary shall— 

(1) publish all written rulings interpreting this subchapter; 

and 

(2) annually issue a staff commentary on the regulations 

issued under this subchapter. 

§ 5330. Registration of money transmitting businesses 

(a) REGISTRATION WIT H SECRETARY OF THE TREASURY REQUIRED.— 

(1) IN GENERAL.—Any person who owns or controls a 

money transmitting business shall register the business 

(whether or not the business is licensed as a money transmitting business in any State) with the Secretary of the Treasury 

not later than the end of the 180-day period beginning on the 

later of— 

(A) the date of enactment of the Money Laundering 

Suppression Act of 1994; or 

(B) the date on which the business is established. 

(2) FOR M AND MANNER OF REGISTRATION.—Subject to the 

requirements of subsection (b), the Secretary of the Treasury 

shall prescribe, by regulation, the form and manner for registering a money transmitting business pursuant to paragraph 

(1). 

1

 So in law. This heading does not conform to the style for existing section headings. 
1474 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(3) BUSINESSES REMAIN SUBJECT TO STATE LAW.—Thi s section shall not be construed as superseding any requirement of 

State law relating to money transmitting businesses operating 

in such State. 

(4) FALSE AND INCOMPLETE INFORMATION.—The filing of 

false or materially incomplete information in connection with 

the registration of a money transmitting business shall be considered as a failure to comply with the requirements of this 

subchapter. 

(b) CONTENTS OF REGISTRATION.—The registration of a money 

transmitting business under subsection (a) shall include the following information: 

(1) The name and location of the business. 

(2) The name and address of each person who— 

(A) owns or controls the business; 

(B) is a director or officer of the business; or 

(C) otherwise participates in the conduct of the affairs 

of the business. 

(3) The name and address of any depository institution at 

which the business maintains a transaction account (as defined 

in section 19(b)(1)(C) of the Federal Reserve Act). 

(4) An estimate of the volume of business in the coming 

year (which shall be reported annually to the Secretary). 

(5) Such other information as the Secretary of the Treasury may require. 

(c) AGENTS OF MONE Y TRANSMITTING BUSINESSES.— 

(1) MAINTENANCE OF LISTS OF AGENTS OF MONEY TRANSMITTING BUSINESSES.—Pursuant to regulations which the Secretary of the Treasury shall prescribe, each money transmitting business shall— 

(A) maintain a list containing the names and 

addresses of all persons authorized to act as an agent for 

such business in connection with activities described in 

subsection (d)(1)(A) and such other information about such 

agents as the Secretary may require; and 

(B) make the list and other information available on 

request to any appropriate law enforcement agency. 

(2) TREATMENT OF AGENT AS MONEY TRANSMITTING BUSINESS.—The Secretary of the Treasury shall prescribe regulations establishing, on the basis of such criteria as the Secretary 

determines to be appropriate, a threshold point for treating an 

agent of a money transmitting business as a money transmitting business for purposes of this section. 

(d) DEFINITIONS.—Fo r purposes of this section, the following 

definitions shall apply: 

(1) MONE Y TRANSMITTING BUSINESS.—The term ''money 

transmitting business'' means any business other than the 

United States Postal Service which— 

(A) provides check cashing, currency exchange, or 

money transmitting or remittance services, or issues or redeems money orders, travelers' checks, and other similar 

instruments; 

(B) is required to file reports under section 5313; and 
1475 CH. 53—MONETARY TRANSACTIONS § 530 2 

(C) is not a depository institution (as defined in section 5313(g)). 

(2) MONE Y TRANSMITTING SERVICE.—The term ''money 

transmitting service'' includes accepting currency or funds 

denominated in the currency of any country and transmitting 

the currency or funds, or the value of the currency or funds, 

by any means through a financial agency or institution, a Federal reserve bank or other facility of the Board of Governors of 

the Federal Reserve System, or an electronic funds transfer 

network. 

(e) CIVIL PENALTY FOR FAILURE T O COMPLY WIT H REGISTRATION REQUIREMENTS.— 

(1) IN GENERAL.—Any person who fails to comply with any 

requirement of this section or any regulation prescribed under 

this section shall be liable to the United States for a civil penalty of $5,000 for each such violation. 

(2) CONTINUING VIOLATION.—Each day a violation described in paragraph (1) continues shall constitute a separate 

violation for purposes of such paragraph. 

(3) ASSESSMENTS.—Any penalty imposed under this subsection shall be assessed and collected by the Secretary of the 

Treasury in the manner provided in section 5321 and any such 

assessment shall be subject to the provisions of such section. 

SUBCHAPTER III—MONEY LAUNDERING AND RELATED 

FINANCIAL CRIMES 

§ 5340. Definitions 

For purposes of this subchapter, the following definitions shall 

apply: 

(1) DEPARTMENT OF THE TREASURY LAW ENFORCEMENT ORGANIZATIONS.—The term ''Department of the Treasury law enforcement organizations'' has the meaning given to such term 

in section 9703(p)(1). 

(2) MONE Y LAUNDERING AND RELATED FINANCIAL CRIME.— 

The term ''money laundering and related financial crime''— 

(A) means the movement of illicit cash or cash equivalent proceeds into, out of, or through the United States, or 

into, out of, or through United States financial institutions, as defined in section 5312 of title 31, United States 

Code; or 

(B) has the meaning given that term (or the term used 

for an equivalent offense) under State and local criminal 

statutes pertaining to the movement of illicit cash or cash 

equivalent proceeds. 

(3) SECRETARY.—The term ''Secretary'' means the Secretary of the Treasury. 

(4) ATTORNEY GENERAL.—The term ''Attorney General'' 

means the Attorney General of the United States. 
1476 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

PART 1—NATIONA L MONE Y LAUNDERING AND RELATED FINANCIAL 

CRIMES STRATEGY 

§ 5341. National money laundering and related financial 

crimes strategy 

(a) DEVELOPMENT AND TRANSMITTAL TO CONGRESS.— 

(1) DEVELOPMENT.—Th e President, acting through the Secretary and in consultation with the Attorney General, shall develop a national strategy for combating money laundering and 

related financial crimes. 

(2) TRANSMITTAL TO CONGRESS.—By February 1 of 1999, 

2000, 2001, 2002, and 2003, the President shall submit a national strategy developed in accordance with paragraph (1) to 

the Congress. 

(3) SEPARATE PRESENTATION OF CLASSIFIED MATERIAL.— 

Any part of the strategy that involves information which is 

properly classified under criteria established by Executive 

Order shall be submitted to the Congress separately in classified form. 

(b) DEVELOPMENT OF STRATEGY.—The national strategy for 

combating money laundering and related financial crimes shall address any area the President, acting through the Secretary and in 

consultation with the Attorney General, considers appropriate, including the following: 

(1) GOALS, OBJECTIVES, AND PRIORITIES.—Comprehensive , 

research-based goals, objectives, and priorities for reducing 

money laundering and related financial crime in the United 

States. 

(2) PREVENTION.—Coordination of regulatory and other efforts to prevent the exploitation of financial systems in the 

United States for money laundering and related financial 

crimes, including a requirement that the Secretary shall— 

(A) regularly review enforcement efforts under this 

subchapter and other provisions of law and, when appropriate, modify existing regulations or prescribe new regulations for purposes of preventing such criminal activity; and 

(B) coordinate prevention efforts and other enforcement action with the Board of Governors of the Federal 

Reserve System, the Securities and Exchange Commission, 

the Federal Trade Commission, other Federal banking 

agencies, the National Credit Union Administration Board, 

and such other Federal agencies as the Secretary, in consultation with the Attorney General, determines to be appropriate. 

(3) DETECTION AND PROSECUTION INITIATIVES.—A description of operational initiatives to improve detection and prosecution of money laundering and related financial crimes and the 

seizure and forfeiture of proceeds and instrumentalities derived from such crimes. 

(4) ENHANCEMENT OF THE ROLE OF THE PRIVATE FINANCIAL 

SECTOR I N PREVENTION.—The enhancement of partnerships between the private financial sector and law enforcement agencies with regard to the prevention and detection of money laundering and related financial crimes, including providing incen-
1477 CH. 53—MONETARY TRANSACTIONS § 5302 

tives to strengthen internal controls and to adopt on an industrywide basis more effective policies. 

(5) ENHANCEMENT OF INTERGOVERNMENTAL COOPERATION.—The enhancement of— 

(A) cooperative efforts between the Federal Government and State and local officials, including State and 

local prosecutors and other law enforcement officials; and 

(B) cooperative efforts among the several States and 

between State and local officials, including State and local 

prosecutors and other law enforcement officials, 

for financial crimes control which could be utilized or should 

be encouraged. 

(6) PROJECT AND BUDGET PRIORITIES.—A 3-year projection 

for program and budget priorities and achievable projects for 

reductions in financial crimes. 

(7) ASSESSMENT OF FUNDING.—A complete assessment of 

how the proposed budget is intended to implement the strategy 

and whether the funding levels contained in the proposed 

budget are sufficient to implement the strategy. 

(8) DESIGNATED AREAS.—A description of geographical 

areas designated as ''high-risk money laundering and related 

financial crime areas'' in accordance with, but not limited to, 

section 5342. 

(9) PERSONS CONSULTED.—Persons or officers consulted by 

the Secretary pursuant to subsection (d). 

(10) DATA REGARDING TRENDS I N MONEY LAUNDERING AND 

RELATED FINANCIAL CRIMES.—The need for additional information necessary for the purpose of developing and analyzing 

data in order to ascertain financial crime trends. 

(11) IMPROVED COMMUNICATIONS SYSTEMS.—A plan for enhancing the compatibility of automated information and facilitating access of the Federal Government and State and local 

governments to timely, accurate, and complete information. 

(c) EFFECTIVENESS REPORT.—A t the time each national strategy for combating financial crimes is transmitted by the President 

to the Congress (other than the first transmission of any such 

strategy) pursuant to subsection (a), the Secretary shall submit a 

report containing an evaluation of the effectiveness of policies to 

combat money laundering and related financial crimes. 

(d) CONSULTATIONS.—In addition to the consultations required 

under this section with the Attorney General, in developing the national strategy for combating money laundering and related financial crimes, the Secretary shall consult with— 

(1) the Board of Governors of the Federal Reserve System 

and other Federal banking agencies and the National Credit 

Union Administration Board; 

(2) State and local officials, including State and local prosecutors; 

(3) the Securities and Exchange Commission; 

(4) the Commodities and Futures Trading Commission; 

(5) the Director of the Office of National Drug Control Policy, with respect to money laundering and related financial 

crimes involving the proceeds of drug trafficking; 
1478 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(6) the Chief of the United States Postal Inspection Service; 

(7) to the extent appropriate, State and local officials responsible for financial institution and financial market regulation; 

(8) any other State or local government authority, to the 

extent appropriate; 

(9) any other Federal Government authority or instrumentality, to the extent appropriate; and 

(10) representatives of the private financial services sector, 

to the extent appropriate. 

§ 5342. High-risk money laundering and related financial 

crime areas 

(a) FINDINGS AND PURPOSE.— 

(1) FINDINGS.—The Congress finds the following: 

(A) Money laundering and related financial crimes frequently appear to be concentrated in particular geographic 

areas, financial systems, industry sectors, or financial institutions. 

(B) While the Secretary has the responsibility to act 

with regard to Federal offenses which are being committed 

in a particular locality or are directed at a single institution, because modern financial systems and institutions 

are interconnected to a degree which was not possible until 

recently, money laundering and other related financial 

crimes are likely to have local, State, national, and international effects wherever they are committed. 

(2) PURPOSE AND OBJECTIVE.—It is the purpose of this section to provide a mechanism for designating any area where 

money laundering or a related financial crime appears to be occurring at a higher than average rate such that— 

(A) a comprehensive approach to the problem of such 

crime in such area can be developed, in cooperation with 

State and local law enforcement agencies, which utilizes 

the authority of the Secretary to prevent such activity; or 

(B) such area can be targeted for law enforcement action. 

(b) ELEMEN T OF NATIONAL STRATEGY.—The designation of certain areas as areas in which money laundering and related financial crimes are extensive or present a substantial risk shall be an 

element of the national strategy developed pursuant to section 

5341(b). 

(c) DESIGNATION OF AREAS.— 

(1) DESIGNATION BY SECRETARY.—The Secretary, after taking into consideration the factors specified in subsection (d), 

shall designate any geographical area, industry, sector, or institution in the United States in which money laundering and 

related financial crimes are extensive or present a substantial 

risk as a ''high-risk money laundering and related financial 

crimes area''. 

(2) CASE-BY-CASE DETERMINATION I N CONSULTATION WIT H 

THE ATTORNEY GENERAL.—In addition to the factors specified in 

subsection (d), any designation of any area under paragraph 
1479 CH. 53—MONETARY TRANSACTIONS § 5302 

(1) shall be made on the basis of a determination by the Secretary, in consultation with the Attorney General, that the particular area, industry, sector, or institution is being victimized 

by, or is particularly vulnerable to, money laundering and related financial crimes. 

(3) SPECIFIC INITIATIVES.—Any head of a department, bureau, or law enforcement agency, including any State or local 

prosecutor, involved in the detection, prevention, and suppression of money laundering and related financial crimes and any 

State or local official or prosecutor may submit— 

(A) a written request for the designation of any area 

as a high-risk money laundering and related financial 

crimes area; or 

(B) a written request for funding under section 5351 

for a specific prevention or enforcement initiative, or to determine the extent of financial criminal activity, in an 

area. 

(d) FACTORS.—In considering the designation of any area as a 

high-risk money laundering and related financial crimes area, the 

Secretary shall, to the extent appropriate and in consultation with 

the Attorney General, take into account the following factors: 

(1) The population of the area. 

(2) The number of bank and nonbank financial institution 

transactions which originate in such area or involve institutions located in such area. 

(3) The number of stock or commodities transactions which 

originate in such area or involve institutions located in such 

area. 

(4) Whether the area is a key transportation hub with any 

international ports or airports or an extensive highway system. 

(5) Whether the area is an international center for banking 

or commerce. 

(6) The extent to which financial crimes and financial 

crime-related activities in such area are having a harmful impact in other areas of the country. 

(7) The number or nature of requests for information or 

analytical assistance which— 

(A) are made to the analytical component of the Department of the Treasury; and 

(B) originate from law enforcement or regulatory authorities located in such area or involve institutions or 

businesses located in such area or residents of such area. 

(8) The volume or nature of suspicious activity reports 

originating in the area. 

(9) The volume or nature of currency transaction reports 

or reports of cross-border movements of currency or monetary 

instruments originating in, or transported through, the area. 

(10) Whether, and how often, the area has been the subject 

of a geographical targeting order. 

(11) Observed changes in trends and patterns of money 

laundering activity. 

(12) Unusual patterns, anomalies, growth, or other 

changes in the volume or nature of core economic statistics or 

indicators. 
1480 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

(13) Statistics or indicators of unusual or unexplained volumes of cash transactions. 

(14) Unusual patterns, anomalies, or changes in the volume or nature of transactions conducted through financial institutions operating within or outside the United States. 

(15) The extent to which State and local governments and 

State and local law enforcement agencies have committed resources to respond to the financial crime problem in the area 

and the degree to which the commitment of such resources reflects a determination by such government and agencies to address the problem aggressively. 

(16) The extent to which a significant increase in the allocation of Federal resources to combat financial crimes in such 

area is necessary to provide an adequate State and local response to financial crimes and financial crime-related activities 

in such area. 

PART 2—FINANCIAL CRIME-FREE COMMUNITIES SUPPORT PROGRAM 

§ 5351. Establishment of financial crime-free communities 

support program 

(a) ESTABLISHMENT.—The Secretary of the Treasury, in consultation with the Attorney General, shall establish a program to 

support local law enforcement efforts in the development and implementation of a program for the detection, prevention, and suppression of money laundering and related financial crimes. 

(b) PROGRAM.—In carrying out the program, the Secretary of 

the Treasury, in consultation with the Attorney General, shall— 

(1) make and track grants to grant recipients; 

(2) provide for technical assistance and training, data collection, and dissemination of information on state-of-the-art 

practices that the Secretary determines to be effective in detecting, preventing, and suppressing money laundering and related financial crimes; and 

(3) provide for the general administration of the program. 

(c) ADMINISTRATION.—The Secretary shall appoint an administrator to carry out the program. 

(d) CONTRACTING.—The Secretary may employ any necessary 

staff and may enter into contracts or agreements with Federal and 

State law enforcement agencies to delegate authority for the execution of grants and for such other activities necessary to carry out 

this chapter. 

§ 5352. Program authorization 

(a) GRANT ELIGIBILITY.—To be eligible to receive an initial 

grant or a renewal grant under this part, a State or local law enforcement agency or prosecutor shall meet each of the following criteria: 

(1) APPLICATION.—The State or local law enforcement 

agency or prosecutor shall submit an application to the Secretary in accordance with section 5353(a)(2). 

(2) ACCOUNTABILITY.—The State or local law enforcement 

agency or prosecutor shall— 
1481 CH. 53—MONETARY TRANSACTIONS § 5302 

(A) establish a system to measure and report 

outcomes— 

(i) consistent with common indicators and evaluation protocols established by the Secretary, in consultation with the Attorney General; and 

(ii) approved by the Secretary; 

(B) conduct biennial surveys (or incorporate local surveys in existence at the time of the evaluation) to measure 

the progress and effectiveness of the coalition; and 

(C) provide assurances that the entity conducting an 

evaluation under this paragraph, or from which the applicant receives information, has experience in gathering 

data related to money laundering and related financial 

crimes. 

(b) GRANT AMOUNTS.— 

(1) GRANTS.— 

(A) IN GENERAL.—Subject to subparagraph (D), for a 

fiscal year, the Secretary of the Treasury, in consultation 

with the Attorney General, may grant to an eligible applicant under this section for that fiscal year, an amount determined by the Secretary of the Treasury, in consultation 

with the Attorney General, to be appropriate. 

(B) SUSPENSION OF GRANTS.—If such grant recipient 

fails to continue to meet the criteria specified in subsection 

(a), the Secretary may suspend the grant, after providing 

written notice to the grant recipient and an opportunity to 

appeal. 

(C) RENEWAL GRANTS.—Subject to subparagraph (D), 

the Secretary may award a renewal grant to a grant recipient under this subparagraph for each fiscal year following the fiscal year for which an initial grant is awarded. 

(D) LIMITATION.—The amount of a grant award under 

this paragraph may not exceed $750,000 for a fiscal year. 

(2) GRANT AWARDS.— 

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

(B), the Secretary may, with respect to a community, make 

a grant to one eligible applicant that represents that community. 

(B) EXCEPTION.—The Secretary may make a grant to 

more than one eligible applicant that represent a community if— 

(i) the eligible coalitions demonstrate that the coalitions are collaborating with one another; and 

(ii) each of the coalitions has independently met 

the requirements set forth in subsection (a). 

(c) CONDITION RELATING TO PROCEEDS OF ASSET FORFEITURES.— 

(1) I N GENERAL.—No grant may be made or renewed under 

this part to any State or local law enforcement agency or prosecutor unless the agency or prosecutor agrees to donate to the 

Secretary of the Treasury for the program established under 

this part any amount received by such agency or prosecutor 

(after the grant is made) pursuant to any criminal or civil for-
1482 

CH. 53—MONETARY TRANSACTIONS 

§ 5302 

feiture under chapter 46 of title 18, United States Code, or any 

similar provision of State law. 

(2) SCOPE OF APPLICATION.—Paragraph (1) shall not apply 

to any amount received by a State or local law enforcement 

agency or prosecutor pursuant to any criminal or civil forfeiture referred to in such paragraph in excess of the aggregate 

amount of grants received by such agency or prosecutor under 

this part. 

(d) ROLLING GRANT APPLICATION PERIODS.—In establishing the 

program under this part, the Secretary shall take such action as 

may be necessary to ensure, to the extent practicable, that— 

(1) applications for grants under this part may be filed at 

any time during a fiscal year; and 

(2) some portion of the funds appropriated under this part 

for any such fiscal year will remain available for grant applications filed later in the fiscal year. 

§ 5353. Information collection and dissemination with respect to grant recipients 

(a) APPLICANT AND GRANTEE INFORMATION.— 

(1) APPLICATION PROCESS.—The Secretary shall issue requests for proposal, as necessary, regarding, with respect to 

the grants awarded under section 5352, the application process, grant renewal, and suspension or withholding of renewal 

grants. Each application under this paragraph shall be in writing and shall be subject to review by the Secretary. 

(2) REPORTING.—The Secretary shall, to the maximum extent practicable and in a manner consistent with applicable 

law, minimize reporting requirements by a grant recipient and 

expedite any application for a renewal grant made under this 

part. 

(b) ACTIVITIES OF SECRETARY.—The Secretary may— 

(1) evaluate the utility of specific initiatives relating to the 

purposes of the program; 

(2) conduct an evaluation of the program; and 

(3) disseminate information described in this subsection 

to— 

(A) eligible State local law enforcement agencies or 

prosecutors; and 

(B) the general public. 

§ 5354. Grants for fighting money laundering and related financial crimes 

(a) I N GENERAL.— After the end of the 1-year period beginning 

on the date the first national strategy for combating money laundering and related financial crimes is submitted to the Congress in 

accordance with section 5341, and subject to subsection (b), the 

Secretary may review, select, and award grants for State or local 

law enforcement agencies and prosecutors to provide funding necessary to investigate and prosecute money laundering and related 

financial crimes in high-risk money laundering and related financial crime areas. 

(b) SPECIAL PREFERENCE.—Special preference shall be given to 

applications submitted to the Secretary which demonstrate collabo-
1483 CH. 53—MONETARY TRANSACTIONS § 5302 

rative efforts of two or more State and local law enforcement agencies or prosecutors who have a history of Federal, State, and local 

cooperative law enforcement and prosecutorial efforts in responding 

to such criminal activity. 

§ 5355. Authorization of appropriations 

There are authorized to be appropriated the following amounts 

for the following fiscal years to carry out the purposes of this subchapter: 

For fiscal year: The amount authorized is: 

1999 $5,000,000. 

2000 $7,500,000. 

2001 $10,000,000. 

2002 $12,500,000. 

2003 $15,000,000. 

TRUTH IN SAVINGS ACT 

1485 

Subtitle F—Truth in Savings1 

SEC. 261. [12 U.S.C. 4301 nt.] SHORT TITLE. 

This subtitle may be cited as the ''Truth in Savings Act''. 

SEC. 262. [12 U.S.C. 4301] FINDINGS AND PURPOSE. 

(a) FINDINGS.—The Congress hereby finds that economic stability would be enhanced, competition between depository institutions would be improved, and the ability of the consumer to make 

informed decisions regarding deposit accounts, and to verify accounts, would be strengthened if there was uniformity in the disclosure of terms and conditions on which interest is paid and fees are 

assessed in connection with such accounts. 

(b) PURPOSE.—It is the purpose of this subtitle to require the 

clear and uniform disclosure of— 

(1) the rates of interest which are payable on deposit accounts by depository institutions; and 

(2) the fees that are assessable against deposit accounts, 

so that consumers can make a meaningful comparison between the 

competing claims of depository institutions with regard to deposit 

accounts. 

SEC. 263. [12 U.S.C. 4302] DISCLOSURE OF INTEREST RATES AND 

TERMS OF ACCOUNTS. 

(a) IN GENERAL.—Except as provided in subsections (b) and (c), 

each advertisement, announcement, or solicitation initiated by any 

depository institution or deposit broker relating to any demand or 

interest-bearing account offered by an insured depository institution which includes any reference to a specific rate of interest payable on amounts deposited in such account, or to a specific yield or 

rate of earnings on amounts so deposited, shall state the following 

information, to the extent applicable, in a clear and conspicuous 

manner: 

(1) The annual percentage yield. 

(2) The period during which such annual percentage yield 

is in effect. 

(3) All minimum account balance and time requirements 

which must be met in order to earn the advertised yield (and, 

in the case of accounts for which more than 1 yield is stated, 

each annual percentage yield and the account minimum balance requirement associated with each such yield shall be in 

close proximity and have equal prominence). 

(4) The minimum amount of the initial deposit which is required to open the account in order to obtain the yield advertised, if such minimum amount is greater than the minimum 

balance necessary to earn the advertised yield. 

1

 This Act was enacted as subtitle F of title I I of the Federal Deposit Insurance Corporation 

Improvement Act of 1991. 

1487 
Sec. 264 TRUTH IN SAVINGS ACT 1488 

(5) A statement that regular fees or other conditions could 

reduce the yield. 

(6) A statement that an interest penalty is required for 

early withdrawal. 

(b) BROADCAST AND ELECTRONIC MEDI A AND OUTDOOR ADVERTISING EXCEPTION.—The Board may, by regulation, exempt advertisements, announcements, or solicitations made by any broadcast 

or electronic medium or outdoor advertising display not on the 

premises of the depository institution from any disclosure requirements described in paragraph (4) or (5) of subsection (a) if the 

Board finds that any such disclosure would be unnecessarily burdensome. 

(c) DISCLOSURE REQUIRED FOR ON-PREMISES DISPLAYS.— 

The disclosure requirements contained in this section shall 

not apply to any sign (including a rate board) disclosing a rate 

or rates of interest which is displayed on the premises of the 

depository institution if such sign contains— 

(1) the accompanying annual percentage yield; and 

(2) a statement that the consumer should request further 

information from an employee of the depository institution concerning the fees and terms applicable to the advertised account. 

(d) MISLEADING DESCRIPTIONS OF FREE OR NO-COST ACCOUNTS 

PROHIBITED.—N o advertisement, announcement, or solicitation 

made by any depository institution or deposit broker may refer to 

or describe an account as a free or no-cost account (or words of 

similar meaning) if— 

(1) in order to avoid fees or service charges for any 

period— 

(A) a minimum balance must be maintained in the account during such period; or 

(B) the number of transactions during such period 

may not exceed a maximum number; or 

(2) any regular service or transaction fee is imposed. 

(e) MISLEADING OR INACCURATE ADVERTISEMENTS, ETC., PROHIBITED.—N o depository institution or deposit broker shall make 

any advertisement, announcement, or solicitation relating to a deposit account that is inaccurate or misleading or that misrepresents its deposit contracts. 

SEC. 264. [12 U.S.C. 4304] ACCOUN T SCHEDULE. 

(a) IN GENERAL.—Each depository institution shall maintain a 

schedule of fees, charges, interest rates, and terms and conditions 

applicable to each class of accounts offered by the depository institution, in accordance with the requirements of this section and regulations which the Board shall prescribe. The Board shall specify, 

in regulations, which fees, charges, penalties, terms, conditions, 

and account restrictions must be included in a schedule required 

under this subsection. A depository institution need not include in 

such schedule any information not specified in such regulation. 

(b) INFORMATION ON FEES AND CHARGES.—The schedule required under subsection (a) with respect to any account shall contain the following information: 
1489 TRUTH IN SAVINGS ACT Sec. 264 

(1) A description of all fees, periodic service charges, and 

penalties which may be charged or assessed against the account (or against the account holder in connection with such 

account), the amount of any such fees, charge, or penalty (or 

the method by which such amount will be calculated), and the 

conditions under which any such amount will be assessed. 

(2) All minimum balance requirements that affect fees, 

charges, and penalties, including a clear description of how 

each such minimum balance is calculated. 

(3) Any minimum amount required with respect to the initial deposit in order to open the account. 

(c) INFORMATION ON INTEREST RATES.—The schedule required 

under subsection (a) with respect to any account shall include the 

following information: 

(1) Any annual percentage yield. 

(2) The period during which any such annual percentage 

yield will be in effect. 

(3) Any annual rate of simple interest. 

(4) The frequency with which interest will be compounded 

and credited. 

(5) A clear description of the method used to determine the 

balance on which interest is paid. 

(6) The information described in paragraphs (1) through 

(4) with respect to any period after the end of the period referred to in paragraph (2) (or the method for computing any 

information described in any such paragraph), if applicable. 

(7) Any minimum balance which must be maintained to 

earn the rates and obtain the yields disclosed pursuant to this 

subsection and a clear description of how any such minimum 

balance is calculated. 

(8) A clear description of any minimum time requirement 

which must be met in order to obtain the yields disclosed pursuant to this subsection and any information described in paragraph (1), (2), (3), or (4) that will apply if any time requirement 

is not met. 

(9) A statement, if applicable, that any interest which has 

accrued but has not been credited to an account at the time of 

a withdrawal from the account will not be paid by the depository institution or credited to the account by reason of such 

withdrawal. 

(10) Any provision or requirement relating to nonpayment 

of interest, including any charge or penalty for early withdrawal, and the conditions under which any such charge or 

penalty may be assessed. 

(d) OTHER INFORMATION.—The schedule required under subsection (a) shall include such other disclosures as the Board may 

determine to be necessary to allow consumers to understand and 

compare accounts, including frequency of interest rate adjustments, 

account restrictions, and renewal policies for time accounts. 

(e) STYLE AND FORMAT.—Schedules required under subsection 

(a) shall be written in clear and plain language and be presented 

in a format designed to allow consumers to readily understand the 

terms of the accounts offered. 
Sec. 264 TRUTH IN SAVINGS ACT 1490 

SEC. 265. [12 U.S.C. 4304] DISCLOSUR E REQUIREMENT S FOR CERTAI N 

ACCOUNTS. 

The Board shall require, in regulations which the Board shall 

prescribe, such modification in the disclosure requirements under 

this Act relating to annual percentage yield as may be necessary 

to carry out the purposes of this Act in the case of— 

(1) accounts with respect to which determination of annual 

percentage yield is based on an annual rate of interest that is 

guaranteed for a period of less than 1 year; 

(2) variable rate accounts; 

(3) accounts which, pursuant to law, do not guarantee payment of a stated rate; 

(4) multiple rate accounts; and 

(5) accounts with respect to which determination of annual 

percentage yield is based on an annual rate of interest that is 

guaranteed for a stated term. 

SEC. 266. [12 U.S.C. 4305] DISTRIBUTIO N OF SCHEDULES. 

(a) I N GENERAL.—A schedule required under section 264 for an 

appropriate account shall be— 

(1) made available to any person upon request; 

(2) provided to any potential customer before an account is 

opened or a service is rendered; and 

(3) provided to the depositor, in the case of any time deposit which has a maturity of more than 30 days is renewable 

at maturity without notice from the depositor, at least 30 days 

before the date of maturity. 

(b) DISTRIBUTION I N CASE OF CERTAIN INITIA L DEPOSITS.—If — 

(1) a depositor is not physically present at an office of a 

depository institution at the time an initial deposit is accepted 

with respect to an account established by or for such person; 

and 

(2) the schedule required under section 264(a) has not 

been furnished previously to such depositor, 

the depository institution shall mail the schedule to the depositor 

at the address shown on the records of the depository institution 

for such account no later than 10 days after the date of the initial 

deposit. 

(c) DISTRIBUTION OF NOTIC E OF CERTAIN CHANGES.—If — 

(1) any change is made in any term or condition which is 

required to be disclosed in the schedule required under section 

264(a) with respect to any account; and 

(2) the change may reduce the yield or adversely affect any 

holder of the account, 

all account holders who may be affected by such change shall be 

notified and provided with a description of the change by mail at 

least 30 days before the change takes effect. 

(d) DISTRIBUTION I N CASE OF ACCOUNTS ESTABLISHED BY MOR E 

THA N 1 INDIVIDUA L OR BY A GROUP.—I f an account is established 

by more than 1 individual or for a person other than an individual, 

any distribution described in this section with respect to such account meets the requirements of this section if the distribution is 

made to 1 of the individuals who established the account or 1 individual representative of the person on whose behalf such account 

was established. 
1491 TRUTH IN SAVINGS ACT Sec. 264 

(e) NOTICE TO ACCOUNT HOLDERS AS OF THE EFFECTIVE DATE 

OF REGULATIONS.—For any account for which the depository institution delivers an account statement on a quarterly or more frequent basis, the depository institution shall include on or with any 

regularly scheduled mailing posted or delivered within 180 days 

after publication of regulations issued by the Board in final form, 

a statement that the account holder has the right to request an account schedule containing the terms, charges, and interest rates of 

the account, and that the account holder may wish to request such 

an account schedule. 

SEC. 267. [12 U.S.C. 4306] PAYMEN T OF INTEREST. 

(a) CALCULATED ON FUL L AMOUN T OF PRINCIPAL.—Interes t on 

an interest-bearing account at any depository institution shall be 

calculated by such institution on the full amount of principal in the 

account for each day of the stated calculation period at the rate or 

rates of interest disclosed pursuant to this Act. 

(b) N o PARTICULAR METHO D OF COMPOUNDING INTEREST REQUIRED.—Subsection (a) shall not be construed as prohibiting or requiring the use of any particular method of compounding or crediting of interest. 

(c) DATE BY WHIC H INTEREST MUS T ACCRUE.—Interes t on accounts that are subject to this Act shall begin to accrue not later 

than the business day specified for interest-bearing accounts in section 606 of the Expedited Funds Availability Act, subject to subsections (b) and (c) of such section. 

SEC. 268. [12 U.S.C. 4307] PERIODI C STATEMENTS. 

Each depository institution shall include on or with each periodic statement provided to each account holder at such institution 

a clear and conspicuous disclosure of the following information with 

respect to such account: 

(1) The annual percentage yield earned. 

(2) The amount of interest earned. 

(3) The amount of any fees or charges imposed. 

(4) The number of days in the reporting period. 

SEC. 269. [12 U.S.C. 4308] REGULATIONS. 

(a) I N GENERAL.— 

(1) REGULATIONS REQUIRED.—Before the end of th e 9-

month period beginning on the date of the enactment of this 

Act, the Board, after consultation with each agency referred to 

in section 270(a) and public notice and opportunity for comment, shall prescribe regulations to carry out the purpose and 

provisions of this Act. 

(2) EFFECTIVE DATE OF REGULATIONS.—The regulations 

prescribed under paragraph (1) shall take effect not later than 

9 months after publication in final form. 

(3) CONTENTS OF REGULATIONS.—The regulations prescribed under paragraph (1) may contain such classifications, 

differentiations, or other provisions, and may provide for such 

adjustments and exceptions for any class of accounts as, in the 

judgment of the Board, are necessary or proper to carry out 

the purposes of this Act, to prevent circumvention or evasion 

of the requirements of this Act, or to facilitate compliance 

with the requirements of this Act. 
Sec. 264 TRUTH IN SAVINGS ACT 1492 

(4) DATE OF APPLICABILITY.—The provisions of this Act 

shall not apply with respect to any depository institution before the effective date of regulations prescribed by the Board 

under this subsection (or by the National Credit Union Administration Board under section 12(b),1

 in the case of any depository institution described in clause (iv) of section 19(b)(1)(A) of 

the Federal Reserve Act). 

(b) MODE L FORMS AND CLAUSES.— 

(1) IN GENERAL.—The Board shall publish model forms and 

clauses for common disclosures to facilitate compliance with 

this Act. in devising such forms, the Board shall consider the 

use by depository institutions of data processing or similar 

automated machines. 

(2) USE OF FORMS AND CLAUSES DEEMED I N COMPLIANCE.— 

Nothing in this Act may be construed to require a depository 

institution to use any such model form or clause prescribed by 

the Board under this subsection. A depository institution shall 

be deemed to be in compliance with the disclosure provisions 

of this Act if the depository institution— 

(A) uses any appropriate model form or clause as published by the Board; or 

(B) uses any such model form or clause and changes 

it by— 

(i) deleting any information which is not required 

by this Act; or 

(ii) rearranging the format, 

if in making such deletion or rearranging the format, the 

depository institution does not affect the substance, clarity, 

or meaningful sequence of the disclosure. 

(3) PUBLIC NOTICE AND OPPORTUNITY FOR COMMENT.— 

Model disclosure forms and clauses shall be adopted by the 

Board after duly given notice in the Federal Register and an 

opportunity for public comment in accordance with section 553 

of title 5, United States Code. 

SEC. 270. [12 U.S.C. 4309] ADMINISTRATIV E ENFORCEMENT . 

(a) IN GENERAL.—Compliance with the requirements imposed 

under this Act shall be enforced under— 

(1) section 8 of the Federal Deposit Insurance Act— 

(A) by the appropriate Federal banking agency (as defined in section 3(q) of the Federal Deposit Insurance Act) 

in the case of insured depository institutions (as defined in 

section 3(c)(2) of such Act); 

(B) by the Federal Deposit Insurance Corporation in 

the case of depository institutions described in clause (i), 

(ii), or (iii) of section 19(b)(1)(A) of the Federal Reserve Act 

which are not insured depository institutions (as defined in 

section 3(c)(2) of the Federal Deposit Insurance Act); and 

(C) by the Director of the Office of Thrift Supervision 

in the case of depository institutions described in clause (v) 

and or (vi) of section 19(b)(1)(A) of the Federal Reserve Act 

which are not insured depository institutions (as defined in 

section 3(c)(2) of the Federal Deposit Insurance Act); and 

1

 So in original. Should probably be ''section 272(b)''. 
1493 TRUTH IN SAVINGS ACT Sec. 264 

(2) the Federal Credit Union Act, by the National Credit 

Union Administration Board in the case of depository institutions described in clause (iv) of section 19(b)(1)(A) of the Federal Reserve Act. 

(b) ADDITIONA L ENFORCEMEN T POWERS. — 

( 1 ) VIOLATIO N OF THIS ACT TREATED AS VIOLATIO N OF 

OTHER ACTS.—Fo r purposes of the exercise by any agency referred to in subsection (a) of such agency's powers under any 

Act referred to in such subsection, a violation of a requirement 

imposed under this Act shall be deemed to be a violation of a 

requirement imposed under that Act. 

( 2 ) ENFORCEMEN T AUTHORITY UNDE R OTHER ACTS.—I n 

addition to the powers of any agency referred to in subsection 

(a) under any provision of law specifically referred to in such 

subsection, each such agency may exercise, for purposes of enforcing compliance with any requirement imposed under this 

Act, any other authority conferred on such agency by law. 

(c) REGULATION S BY AGENCIES OTHE R THA N TH E BOARD.—Th e 

authority of the Board to issue regulations under this Act does not 

impair the authority of any other agency referred to in subsection 

(a) to make rules regarding its own procedures in enforcing compliance with the requirements imposed under this Act. 

SEC. 271. [12 U.S.C. 4310] CIVI L LIABILITY. 1 

(a) CIVI L LIABILITY.—Excep t as otherwise provided in this section, any depository institution which fails to comply with any 

requirement imposed under this Act or any regulation prescribed 

under this Act with respect to any person who is an account holder 

is liable to such person in an amount equal to the sum of— 

(1) any actual damage sustained by such person as a result 

of the failure; 

(2)(A) in the case of an individual action, such additional 

amount as the court may allow, except that the liability under 

this subparagraph shall not be less than $100 nor greater than 

$1,000; or 

(B) in the case of a class action, such amount as the court 

may allow, except that— 

(i) as to each member of the class, no minimum recovery shall be applicable; and 

(ii) the total recovery under this subparagraph in any 

class action or series of class actions arising out of the 

same failure to comply by the same depository institution 

shall not be more than the lesser of $500,000 or 1 percent 

of the net worth of the depository institution involved; and 

(3) in the case of any successful action to enforce any liability under paragraph (1) or (2), the costs of the action, together with a reasonable attorney's fee as determined by the 

court. 

(b) CLASS ACTIO N AWARDS.—I n determining the amount of any 

award in any class action, the court shall consider, among other 

relevant factors— 

1

 Pursuant to section 2604(a) of P.L. 104-208 (110 Stat. 3009-487) this section is repealed 

effective ''as of the end of the 5-year period beginning on the date of the enactment of this Act'' 

[Sept. 30, 1996]. 
Sec. 264 TRUTH IN SAVINGS ACT 1494 

(1) the amount of any actual damages awarded; 

(2) the frequency and persistence of failures of compliance; 

(3) the resources of the depository institution; 

(4) the number of persons adversely affected; and 

(5) the extent to which the failure of compliance was 

intentional. 

(c) BONA FID E ERRORS.— 

(1) GENERAL RULE.—A depository institution may not be 

held liable in any action brought under this section for a violation of this Act if the depository institution demonstrates by a 

preponderance of the evidence that the violation was not intentional and resulted from a bona fide error, notwithstanding the 

maintenance of procedures reasonably adapted to avoid any 

such error. 

(2) EXAMPLES.—Examples of a bona fide error include clerical, calculation, computer malfunction and programming, and 

printing errors, except that an error of legal judgment with respect to a depository institution's obligation under this Act is 

not a bona fide error. 

(d) N O LIABILITY FOR OVERPAYMENT.—A depository institution 

may not be held liable in any action under this section for a violation of this Act if the violation has resulted in— 

(1) an interest payment to the account holder in an 

amount greater than the amount determined under any disclosed rate of interest applicable with respect to such payment; 

or 

(2) a charge to the consumer in an amount less than the 

amount determined under the disclosed charge or fee schedule 

applicable with respect to such charge. 

(e) JURISDICTION.—Any action under this section may be 

brought in any United States district court, or in any other court 

of competent jurisdiction, within 1 year after the date of the occurrence of the violation involved. 

(f) RELIANCE ON BOARD RULINGS.—No provision of this section 

imposing any liability shall apply to any act done or omitted in 

good faith in conformity with any regulation or order, or any 

interpretation of any regulation or order, of the Board, or in conformity with any interpretation or approval by an official or employee of the Board duly authorized by the Board to issue such 

interpretation or approval under procedures prescribed by the 

Board, notwithstanding, the fact that after such act or omission 

has occurred, such regulation, order, interpretation, or approval is 

amended, rescinded, or determined by judicial or other authority to 

be invalid for any reason. 

(g) NOTIFICATION OF AND ADJUSTMENT FOR ERRORS.—A depository institution shall not be liable under this section or section 270 

for any failure to comply with any requirement imposed under this 

Act with respect to any account if— 

(1) before— 

(A) the end of the 60-day period beginning on the date 

on which the depository institution discovered the failure 

to comply; 
1495 TRUTH IN SAVINGS ACT Sec. 264 

(B) any action is instituted against the depository 

institution by the account holder under this section with 

respect to such failure to comply; and 

(C) any written notice of such failure to comply is 

received by the depository institution from the account 

holder, 

the depository institution notifies the account holder of the failure of such institution to comply with such requirement; and 

(2) the depository institution makes such adjustments as 

may be necessary with respect to such account to ensure that— 

(A) the account holder will not be liable for any 

amount in excess of the amount actually disclosed with respect to any fee or charge; 

(B) the account holder will not be liable for any fee or 

charge imposed under any condition not actually disclosed; 

and 

(C) interest on amounts in such account will accrue at 

the annual percentage yield, and under the conditions, 

actually disclosed (and credit will be provided for interest 

already accrued at a different annual percentage yield and 

under different conditions than the yield or conditions disclosed). 

(h) MULTIPLE INTERESTS I N 1 ACCOUNT.—If more than 1 person 

holds an interest in any account— 

(1) the minimum and maximum amounts of liability under 

subsection (a)(2)(A) for any failure to comply with the requirements of this Act shall apply with respect to such account; and 

(2) the court shall determine the manner in which the 

amount of any such liability with respect to such account shall 

be distributed among such persons. 

(i) CONTINUING FAILURE TO DISCLOSE.— 

(1) CERTAIN CONTINUING FAILURES TREATED AS 1 VIOLATION.—Except as provided in paragraph (2), the continuing 

failure of any depository institution to disclose any particular 

term required to be disclosed under this Act with respect to a 

particular account shall be treated as a single violation for purposes of determining the amount of any liability of such institution under subsection (a) for such failure to disclose. 

(2) SUBSEQUENT FAILURE TO DISCLOSE.—The continuing 

failure of any depository institution to disclose any particular 

term required to be disclosed under this Act with respect to a 

particular account after judgment has been rendered in favor 

of the account holder in connection with a prior failure to disclose such term with respect to such account shall be treated 

as a subsequent violation for purposes of determining liability 

under subsection (a). 

(3) COORDINATION WIT H SECTION 270.—This subsection 

shall not limit or otherwise affect the enforcement power under 

section 270 of any agency referred to in subsection (a) of such 

section. 

SEC. 272. [12 U.S.C. 4311] CREDI T UNIONS. 

(a) I N GENERAL.—N o regulation prescribed by the Board under 

this Act shall apply directly with respect to any depository institu-
Sec. 264 TRUTH IN SAVINGS ACT 1496 

tion described in clause (iv) of section 19(b)(1)(A) of the Federal Reserve Act. 

(b) REGULATIONS PRESCRIBED BY THE NCUA.—Within 90 days 

of the effective date of any regulation prescribed by the Board 

under this Act, the National Credit Union Administration Board 

shall prescribe a regulation substantially similar to the regulation 

prescribed by the Board taking into account the unique nature of 

credit unions and the limitations under which they may pay dividends on member accounts. 

SEC. 273. [12 U.S.C. 4312] EFFECT ON STATE LAW. 

The provisions of this Act do not supersede any provisions of 

the law of any State relating to the disclosure of yields payable or 

terms for accounts to the extent such State law requires the disclosure of such yields or terms for accounts, except to the extent that 

those laws are inconsistent with the provisions of this Act, and 

then only to the extent of the inconsistency. The Board may determine whether such inconsistencies exist. 

SEC. 274. [12 U.S.C. 4313] DEFINITIONS. 

For the purposes of this Act— 

(1) ACCOUNT.—The term ''account'' means any account intended for use by and generally used by consumers primarily 

for personal, family, or household purposes that is offered by 

a depository institution into which a consumer deposits funds, 

including demand accounts, time accounts, negotiable order of 

withdrawal accounts, and share draft accounts. 

(2) ANNUAL PERCENTAGE YIELD.—The term ''annual percentage yield'' means the total amount of interest that would 

be received on a $100 deposit, based on the annual rate of simple interest and the frequency of compounding for a 365-day 

period, expressed as a percentage calculated by a method 

which shall be prescribed by the Board in regulations. 

(3) ANNUAL RATE OF SIMPLE INTEREST.—The term ''annual 

rate of simple interest''— 

(A) means the annualized rate of interest paid with 

respect to each compounding period, expressed as a percentage; and 

(B) may be referred to as the ''annual percentage 

rate''. 

(4) BOARD.—The term ''Board'' means the Board of Governors of the Federal Reserve System. 

(5) DEPOSIT BROKER.—The term ''deposit broker''— 

(A) has the meaning given to such term in section 

29(f)(1) of the Federal Deposit Insurance Act; and 

(B) includes any person who solicits any amount from 

any other person for deposit in an insured depository institution. 

(6) DEPOSITORY INSTITUTION.—The term ''depository institution'' has the meaning given such term in clauses (i) through 

(vi) of section 19(b)(1)(A) of the Federal Reserve Act, but does 

not include any nonautomated credit union that was not required to comply with the requirements of this title as of the 

date of enactment of the Economic Growth and Regulatory 
1497 TRUTH IN SAVINGS ACT Sec. 264 

Paperwork Reduction Act of 1996, pursuant to the determination of the National Credit Union Administration Board. 

(7) INTEREST.—The term ''interest'' includes dividends paid 

with respect to share draft accounts which are accounts within 

the meaning of paragraph (3). 

(8) MULTIPLE RATE ACCOUNT.—The term ''multiple rate 

account'' means any account that has 2 or more annual rates 

of simple interest which take effect at the same time or in succeeding periods and which are known at the time of disclosure. 

ELIMINATION OF REPORTING REQUIREMENTS 

EXCERPT FRO M FEDERA L REPORTS ELIMINATIO N AN D SUNSET ACT 

OF 1995 

[Public Law 104-66; 109 Stat. 733; 31 U.S.C. 1113 note] 

SEC. 3003. [31 U.S.C. 1113 note] TERMINATIO N OF REPORTIN G 

REQUIREMENTS. 

(a) TERMINATION.— 

(1) IN GENERAL.—Subject to the provisions of paragraph (2) 

of this subsection and subsection (d), each provision of law requiring the submittal to Congress (or any committee of the 

Congress) of any annual, semiannual, or other regular periodic 

report specified on the list described under subsection (c) shall 

cease to be effective, with respect to that requirement, May 15, 

2000. 

(2) EXCEPTION.—The provisions of paragraph (1) shall not 

apply to any report required under— 

(A) the Inspector General Act of 1978 (5 U.S.C. App.); 

or 

(B) the Chief Financial Officers Act of 1990 (Public 

Law 101-576), including provisions enacted by the amendments made by that Act. 

(b) IDENTIFICATION OF WASTEFUL REPORTS.—The President 

shall include in the first annual budget submitted pursuant to section 1105 of title 31, United States Code, after the date of enactment of this Act1

 a list of reports that the President has determined are unnecessary or wasteful and the reasons for such determination. 

(c) LIST OF REPORTS.—The list referred to under subsection (a) 

is the list prepared by the Clerk of the House of Representatives 

for the first session of the One Hundred Third Congress under 

clause 2 of rule III of the Rules of the House of Representatives 

(House Document No. 103-7). 

(d) SPECIFIC REPORTS EXEMPTED.—Subsection (a)(1) shall not 

apply to any report required under— 

1

 December 21, 1995. 

1499 
Sec. 1101 REPORTS ELIMINATION 1500 

EXCERPT FRO M AMERICA N HOMEOWNERSHIP AN D ECONOMIC 

OPPORTUNITY ACT OF 2000 

[Public Law 106-569; 114 Stat. 3029; 31 U.S.C. 1113 note] 

TITLE XI—BANKING AN D HOUSING 

AGENCY REPORTS 

SEC. 1101. SHORT TITLE. 

This title may be cited as the ''Federal Reporting Act of 2000''. 

SEC. 1102. PRESERVATION OF CERTAIN REPORTING REQUIREMENTS. 

Section 3003(a)(1) of the Federal Reports Elimination and Sunset Act of 1995 (31 U.S.C. 1113 note) shall not apply to any report 

required to be submitted under any of the following provisions of 

law: 

(1) Section 3 of the Employment Act of 1946 (15 U.S.C. 

1022). 

(2) Section 309 of the Defense Production Act of 1950 (50 

U.S.C. App. 2099). 

(3) Section 603 of the Public Works and Economic Development Act of 1965 (42 U.S.C. 3213). 

(4) Section 7(o)(1) of the Department of Housing and 

Urban Development Act (42 U.S.C. 3535(o)(1)). 

(5) Section 540(c) of the National Housing Act (12 U.S.C. 

1735f-18(c)). 

(6) Paragraphs (2) and (6) of section 808(e) of the Civil 

Rights Act of 1968 (42 U.S.C. 3608(e)). 

(7) Section 1061 of the Housing and Community Development Act of 1992 (42 U.S.C. 4856). 

(8) Section 203(v) of the National Housing Act (12 U.S.C. 

1709(v)), as added by section 504 of the Housing and Community Development Act of 1992 (Public Law 102-550; 106 Stat. 

3780). 

(9) Section 802 of the Housing Act of 1954 (12 U.S.C. 

1701o). 

(10) Section 8 of the Department of Housing and Urban 

Development Act (42 U.S.C. 3536). 

(11) Section 1320 of the National Flood Insurance Act of 

1968 (42 U.S.C. 4027). 

(12) Section 4(e)(2) of the Department of Housing and 

Urban Development Act (42 U.S.C. 3533(e)(2)). 

(13) Section 205(g) of the National Housing Act (12 U.S.C. 

1711(g)). 

(14) Section 701(c)(1) of the International Financial Institutions Act (22 U.S.C. 262d(c)(1)). 

(15) Paragraphs (1) and (2) of section 5302(c) of title 31, 

United States Code. 

(16) Section 18(f)(7) of the Federal Trade Commission Act 

(15 U.S.C. 57a(f)(7)). 

(17) Section 333 of the Revised Statutes of the United 

States (12 U.S.C. 14). 

(18) Section 3(g) of the Home Owners' Loan Act (12 U.S.C. 

1462a(g)). 
1501 REPORTS ELIMINATION Sec. 1104 

(19) Section 304 of the Appalachian Regional Development 

Act of 1965 (40 U.S.C. App. 304). 

(20) Sections 2(b)(1)(A), 8(a), 8(c), 10(g)(1), and 11(c) of the 

Export-Import Bank Act of 1945 (12 U.S.C. 635(b)(1)(A), 

635g(a), 635g(c), 635i-3(g), and 635i-5(c)). 

(21) Section 17(a) of the Federal Deposit Insurance Act (12 

U.S.C. 1827(a)). 

(22) Section 13 of the Federal Financing Bank Act of 1973 

(12 U.S.C. 2292). 

(23) Section 2B(d) of the Federal Home Loan Bank Act (12 

U.S.C. 1422b(d)). 

(24) Section 1002(b) of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (12 U.S.C. 1811 note). 

(25) Section 8 of the Fair Credit and Charge Card Disclosure Act of 1988 (15 U.S.C. 1637 note). 

(26) Section 136(b)(4)(B) of the Truth in Lending Act (15 

U.S.C. 1646(b)(4)(B)). 

(27) Section 707 of the Equal Credit Opportunity Act (15 

U.S.C. 1691f). 

(28) Section 114 of the Truth in Lending Act (15 U.S.C. 

1613). 

(29) The seventh undesignated paragraph of section 10 of 

the Federal Reserve Act (12 U.S.C. 247). 

(30) The tenth undesignated paragraph of section 10 of the 

Federal Reserve Act (12 U.S.C. 247a). 

(31) Section 815 of the Fair Debt Collection Practices Act 

(15 U.S.C. 1692m). 

(32) Section 102(d) of the Federal Credit Union Act (12 

U.S.C. 1752a(d)). 

(33) Section 21B(i) of the Federal Home Loan Bank Act (12 

U.S.C. 1441b(i)). 

(34) Section 607(a) of the Housing and Community Development Amendments of 1978 (42 U.S.C. 8106(a)). 

(35) Section 708(l) of the Defense Production Act of 1950 

(50 U.S.C. App. 2158(l)). 

(36) Section 2546 of the Comprehensive Thrift and Bank 

Fraud Prosecution and Taxpayer Recovery Act of 1990 (28 

U.S.C. 522 note). 

(37) Section 202(b)(8) of the National Housing Act (12 

U.S.C. 1708(b)(8)). 

SEC. 1103. COORDINATION OF REPORTING REQUIREMENTS. 

SEC. 1104. ELIMINATIO N OF CERTAI N REPORTING REQUIREMENTS.