79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–882 

TO REQUIRE THE APPROPRIATE FEDERAL BANKING AGENCIES TO RECOGNIZE THE EXPOSURE-REDUCING NATURE OF CLIENT MARGIN FOR 

CLEARED DERIVATIVES 

AUGUST 3, 2018.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 4659] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 4659) to require the appropriate Federal banking agencies to recognize the exposure-reducing nature of client margin for 

cleared derivatives, having considered the same, report favorably 

thereon without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

In September 2014, the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance 

Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) adopted final rules to implement the ‘‘Supplementary 

Leverage Ratio’’ (SLR). The SLR is the arithmetic mean of the ratio 

of Tier 1 capital to total leverage exposure calculated as of the last 

day of each month in the reporting quarter. Among other provisions, many market participants expressed concerns with the SLR’s 

treatment of initial margin for cleared derivatives. To address 

these concerns, on December 14, 2017, Representative Blaine 

Luetkemeyer introduced H.R 4659. H.R. 4659 would require the 

Federal Reserve, the FDIC and OCC no later than three months 

after enactment to amend their rules for purposes of any leveragebased capital rule to deduct initial margin with respect to a centrally-cleared derivative transaction from the amount of any leverage exposure arising from the guarantee by the clearing member 

of that client’s derivative obligation to the central counterparty. 

2 

BACKGROUND AND NEED FOR LEGISLATION

The goal of H.R. 4659 is to reduce costs and increase options for 

commercial businesses and farmers who use futures and cleared 

swaps to manage their business risks by eliminating the punitive 

capital charge on cleared derivatives transactions. H.R. 4659 would 

accomplish this by requiring the appropriate Federal banking agencies to recognize the exposure-reducing nature of client margin for 

cleared derivatives for the calculation of the supplementary leverage ratio (SLR). 

In response to the 2008 financial crisis, the Basel Committee on 

Banking Supervision (Basel Committee) agreed to modify internationally negotiated bank regulatory standards, known as the 

Basel Accords, to increase bank capital requirements. On July 9, 

2013, the federal banking regulators, including the Federal Reserve, FDIC, and the OCC, issued a final rule to implement most 

of the Basel III recommendations. 

In addition to raising the simple leverage ratio, Basel III established a ‘‘supplementary leverage ratio’’ (SLR) that requires certain 

larger banking organizations to include leverage exposures that are 

both on and off asset the bank’s balance sheet, which includes exposures arising from futures, options, and other derivative transactions. The Basel SLR was intended to be ‘‘a simple, transparent, 

non-risk based leverage ratio to act as a credible supplementary 

measure to risk-based capital requirements.’’ All banks with at 

least $250 billion in total assets and $10 billion in foreign assets 

must meet an SLR of 3%. Banks subject to these rules were required to meet the SLR beginning in January 2018. 

Title VII of the Dodd-Frank Act required certain over-the-counter 

(OTC) swaps to be centrally cleared in order to take advantage of 

the risk mitigating benefits of clearing. As a result, the role of 

clearing members and the amount of transactions cleared by these 

institutions has expanded significantly. Although commercial and 

agricultural businesses, commonly known as ‘‘end-users’’ that use 

futures and swaps to manage business risks can only trade cleared 

derivatives through a clearing member, as they cannot access clearinghouses directly. 

For centrally cleared derivatives, clearinghouses collect initial 

margin on all client trades, which is typically posted by the business to the clearing member for the purpose of offsetting exposure 

to the clearinghouse. Any margin paid to a clearing member from 

a customer for cleared derivatives transactions is legally considered 

to belong to the customer. Commodity Futures Trading Commission (CFTC) rules require that customer margin be posted in the 

form of either cash or extremely safe and liquid securities such as 

U.S. Treasuries and that such margin be clearly segregated from 

the bank’s own money. As a result, the clearing member bank and 

the corresponding capital regulatory treatment of the cleared swap 

transaction ultimately factors into the pricing of the transaction. 

The SLR imposes significant capital requirements on initial margin, which the clearing member collects to reduce risk on centrally 

cleared exposures. Specifically, the leverage ratio fails to recognize 

the exposure-reducing effect of segregated client margin posted to 

the bank, which is intended to help cover the clients’ obligations as 

part of guaranteeing the client trade in the clearing process. For 

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example, a clearing firm is clearing a transaction that would 

produce $100 of client exposure and is holding $10 of customer 

margin in a segregated account. If the client defaults, the clearing 

firm only owes the clearinghouse $90 because the $10 margin is 

there to cover some of the loss. But while the clearing firm’s total 

exposure is the $90, regulators require the firm to hold capital for 

the full $100—instead of allowing the firm to offset $10 of customer 

margin in the firm’s capital requirement. This failure of the leverage ratio to recognize the exposure-reducing effect of segregated 

margin therefore increases the amount of required capital that will 

need to be allocated to the clearing businesses within these banking institutions. As stated by CFTC Chairman Christopher 

Giancarlo, ‘‘[a]pplying the SLR to clearing customer margin reflects 

a flawed understanding of central counterparty (CCP) clearing.’’ 

As Kenneth Bentsen the CEO of SIFMA testified on February 14, 

2018, ‘‘Because the SLR’s approach to client clearing requires clearing firms to hold capital against these exposures far in excess of 

the risks they face,’’ the mandate discourages client clearing activity. The banking regulator’s decision to treat client margin punitively runs counter to both the Dodd-Frank Act’s mandates in Title 

VII and the G–20’s commitment to promote central clearing. Thus, 

the economics of providing central clearing services to customers, 

the SLR’s capital charges for certain assets, such as cash collateral, 

discourage banking organizations and their affiliates from providing such services to their customers. If neither Congress nor the 

banking regulators amend the SLR’s treatment of initial margin, 

the long-term result would make it less likely for clearing members 

to add new clients for derivatives clearing. A healthy number of 

clearing members are vital to support derivatives end-users, including commercial and agricultural businesses as well as farmers and 

ranchers who use futures and cleared swaps to manage their business risks. Derivatives end-users only can trade swaps through a 

clearing member—they cannot access clearinghouses directly. 

CFTC Chairman Giancarlo estimated that addressing the leverage ratio treatment of initial margin would reduce bank capital by 

only 1% but would reduce clearing capital costs by 70% and promote additional market activity. The number of firms engaged in 

this business has declined from 100 in 2002 to 55 at the start of 

2017, of which only 19 firms actually were holding initial margin 

from clients. For specific product classes, there may be even fewer 

market providers. Former CFTC Chairman Timothy Massad raised 

concerns with industry consolidation increasing systemic risk by 

concentrating derivatives clearing activities in fewer clearing member banks, stating ‘‘if some clearing members choose to limit customers, or get out of the clearing business altogether, that may 

make it harder to deal with the next time a clearing member defaults.’’ 

Financial regulators in the United Kingdom have announced that 

they will take steps to implement an offset for initial client margin 

within its domestic leverage ratio, and legislation has been introduced in the European Union to provide banks with an offset. Foreign regulators acting unilaterally to recognize an offset for client 

margin for centrally cleared derivatives without the U.S. making a 

similar recognition, will leave U.S. banks and their clients at a significant disadvantage as compared to their overseas competitors. 

4 

H.R. 4659 is consistent with the Department of Treasury’s October 2017 Core Principles Report on Capital Markets which was 

issued pursuant to Executive Order 13772 by President Trump in 

February 2017. The Treasury Department recommended r an offset 

for segregated initial margin held for centrally cleared derivatives 

in a firm’s leverage ratio. As that Capital Markets Report correctly 

recognized, to grant such an offset would have an insignificant impact on capital requirements. In February 14, 2018 testimony before the Subcommittee on Capital Markets, Securities, and Investment, Scott O’Malia, Chief Executive Officer, International Swaps 

and Derivatives Association noted, ‘‘Properly segregated client cash 

collateral is not a source of leverage and risk exposure. However, 

the rule requires firms to include these amounts in their calculations. This approach is unreasonable as cash collateral mitigates 

risk.’’ 

HEARINGS

The Financial Services Subcommittee on Capital Markets and 

Government Sponsored Enterprises held a hearing examining matters relating to H.R. 4659 on February 14, 2018. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

March 21, 2018, and ordered H.R. 4659 to be reported favorably to 

the House without amendment by a recorded vote of 44 yeas to 16 

nays (recorded vote no. FC–170), a quorum being present. 

COMMITTEE VOTES

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

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 44 yeas to 16 nays (Record vote no. FC– 

170), a quorum being present. 

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Insert graphic folio 6 HR882.001

Mr. Ms. Maxrne Waters (CA) 

Mr. McHenry X Mrs. Carolyn B. Maloney (NYL ~ 

Mr. King X Ms. Velazquez X 

Mr. Royce (CA) ~ )\ 

Mr. Lucas X 

Mr. Pearce X Mr. X 

Mr. Posey X Mr. X 

Mr. Luetkemeyer Mr. Lynch X 

Mr. Hur1enga X Mr. David Scott (GAl 

Mr. Duffy ... X ML AI Green (lX) . X 

X Mr. Cleaver X 

Ms. Moore X 

X Mr. Ellison 

Mr. Perlmutter X 

Mrs. Wagner X Mr. Himes X 

Mr. Barr X Mr. X 

Mr. Rothfus X 

X X 

Mr. Wrliiams X X 

Mr. Poliquin X 

Mrs. Love x X 

X X 

X X 

Mr. Zeldin x; Mr. Crist X 

Mr. Trott X Mr. Kilwen X 

Mr. Loudermilk X 

Mr. Mooney (WVI ... 

Mr. ;.; 

Davidson X 

Mr. Budd 

Mr. Kustoff 

Ms. Tenney 

Mr. Hollingsworth 
6 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, June 8, 2018. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4659, a bill to require the 

appropriate Federal banking agencies to recognize the exposure-reducing nature of client margin for cleared derivatives. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contacts are Kathleen Gramp and 

Sarah Puro. 

Sincerely, 

MARK P. HADLEY

(For Keith Hall, Director). 

Enclosure. 

H.R. 4659—A bill to require the appropriate Federal banking agencies to recognize the exposure-reducing nature of client margin 

for cleared derivatives 

Summary: H.R. 4659 would change the calculation of a bank’s 

supplementary leverage ratio (SLR) to exclude from the ratio’s denominator the amount that a nonbank entity pays to the bank as 

7 

1The SLR is a capital-to-assets ratio that accounts for derivatives and other commitments 

that are not typically included in a bank’s leverage ratio calculation. 

collateral for certain derivatives contracts.1 Currently, that collateral—also called the segregated margin—must be included as an 

asset in the SLR’s denominator. 

CBO estimates that enacting H.R. 4659 would increase deficits by $44 million over the 2018–2028 period. That amount includes a 

net increase in direct spending of $46 million and an increase in 

revenues of $2 million. Most of those costs would be recovered from 

financial institutions in years after 2028. Because enacting the bill 

would affect direct spending and revenues, pay-as-you-go-procedures apply. 

CBO estimates that enacting H.R. 4659 would not increase net direct spending by more than $2.5 billion or on-budget deficits by 

more than $5 billion in any of the four consecutive 10-year periods 

beginning in 2029. 

H.R. 4659 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA). Additional fees imposed by the Federal Deposit Insurance Corporation (FDIC) and 

the Office of the Comptroller of the Currency (OCC) would increase 

the cost of an existing mandate on private entities required to pay 

those assessments. However, CBO estimates that the incremental 

cost of the mandate would fall well below the annual threshold established in UMRA for private-sector mandates ($160 million in 

2018, adjusted for inflation). 

Estimated cost to the Federal Government: The estimated budgetary effect of H.R. 4659 is shown in the following table. The costs 

of the legislation fall within budget function 370 (advancement of 

commerce). 

By fiscal year, in millions of dollars— 

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019–23 2019–28 

INCREASES IN DIRECT SPENDING 

Estimated Budget Authority ........ 0 1 5 7 7 7 6 4 4 3 3 27 46 

Estimated Outlays ....................... 0 1 5 7 7 7 6 4 4 3 3 27 46 

INCREASES IN REVENUES 

Estimated Revenues ................... 0 0 * * * * * * * * * 1 2 

NET INCREASE IN THE DEFICIT FROM INCREASES IN DIRECT SPENDING AND REVENUES 

Increase in the Deficit ................ 0 1 5 7 7 7 5 4 3 3 2 26 44 

Components do not sum to totals because of rounding; * = between zero and $500,000. 

Basis of estimate: The budgetary effects of H.R. 4659 stem from 

a small increase in the chance that the FDIC would incur additional costs to resolve failed financial institutions. The change in 

the SLR calculation could reduce the amount of capital held by 

about 10 large bank holding companies and their subsidiary insured depository institutions. For this estimate, CBO assumes that 

the bill will be enacted near the end of 2018. 

This cost estimate is based on the analysis underlying cost projections for the FDIC’s financial resolution programs included in 

CBO’s April 2018 baseline budget projections. Those projections incorporate a weighted probability of different possibilities for future 

failures of financial institutions. Most of those possibilities have a 

very small probability of occurring, but if they did, the costs to the 

FDIC’s Deposit Insurance Fund (DIF) or the Orderly Liquidation 

8 

2The DIF, which is funded by premiums paid by member institutions, resolves the assets of failed insured depository institutions and insures certain deposits up to $250,000 per person. 

The OLF was established to resolve failures of certain large, systemically important financial 

institutions—banks and nonbanks. In the event of such a failure, costs to the OLF would be 

recouped by assessments (which are recorded as revenues in the budget) collected from other 

large financial institutions. 3The academic literature suggests that a 1 percent decrease in the capital-to-assets ratio for 

a bank can increase the probability of failure by between 5 percent and 60 percent. CBO used 

a midpoint of that range for this estimate. 

Fund (OLF) would be very large.2 In CBO’s view federal regulations that require banks to maintain certain levels of capital and 

liquidity lower the FDIC’s costs for resolving failed financial institutions because they increase the proportion of losses that would 

be absorbed by shareholders and other creditors. 

CBO estimates that the bill would allow about 10 large bank 

holding companies and their insured depository institutions to exclude certain amounts paid by nonbanks on centrally cleared derivatives when calculating their SLR. The bill’s provisions could reduce the capital that those institutions must hold relative to their 

assets. Changes in the amount of capital that a bank holds can affect its probability of failure, which in turn may affect costs incurred by the DIF and the OLF.3 The net effect of implementing 

the bill would vary among eligible institutions because the SLR is 

only one measure used by federal regulators to determine how 

much capital a bank must hold. 

The effects of the bill on bank holding companies that would be 

resolved by the OLF and on insured depository institutions that 

would be resolved by the DIF are different because of the different 

regulatory requirements for how much capital those entities must 

hold relative to their assets. Based on publicly available information about the current components of bank balance sheets, CBO expects that the total capital of the 10 bank holding companies affected by the bill could decrease by about two-tenths of one percent 

and that their associated insured depository institutions could reduce capital by less than three-quarters of one percent using the 

loss and failure rates that underlie CBO’s April 2018 baseline projections for the FDIC. CBO used the estimates of the decreases in 

capital to calculate the additional cost to the government for resolving the affected financial institutions. As a result, CBO estimates 

that enacting H.R. 4659 would increase deficits by $44 million over 

the 2019–2028 period; that amount comprises an increase in direct 

spending of $46 million and an increase in revenues of $2 million. 

Uncertainty: CBO endeavors to develop estimates that are in the 

middle of the distribution of potential budgetary outcomes. In this 

case, budget projections are uncertain because future decisions by 

banks and market participants are unknown. Specifically the reduction in capital that banks hold (if any) in response to H.R. 4659 

could be different than CBO has estimated. In addition, how any 

reduction in bank capital might increase federal costs in the event 

of a bank failure is also uncertain. Finally, CBO’s estimates under 

current law are themselves uncertain because changes in the underlying economy could have a significant effect on bank health 

and bank failure rates. CBO’s current law baseline includes a small 

chance, in every year, that the economy could experience a downturn that affects the banking sector. 

Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

9 

for legislation affecting direct spending or revenues. The net 

changes in outlays and revenues that are subject to those pay-asyou-go procedures were shown in the table on page 2. 

Increase in long-term direct spending and deficits: CBO estimates that enacting H.R. 4659 would not increase net direct spending by more than $2.5 billion or on-budget deficits by more than 

$5 billion in any of the four consecutive 10-year periods beginning 

in 2029. 

Mandates: H.R. 4659 contains no intergovernmental mandates as 

defined in UMRA. Additional fees imposed by the FDIC and the 

OCC would increase the cost of an existing mandate on private entities required to pay those assessments. However, CBO estimates 

that the incremental cost of the mandate would fall well below the 

annual threshold established in UMRA for private-sector mandates 

($160 million in 2018, adjusted for inflation). 

Estimate prepared by: Federal costs: Kathleen Gramp and Sarah 

Puro; Mandates: Jon Sperl. 

Estimate reviewed by: Kim P. Cawley, Chief, Natural Resources 

Cost Estimating Unit; Susan Willie, Chief, Mandates Unit; H. Samuel Papenfuss, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

10 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires directed rule makings 

for the Federal Reserve, Federal Deposit Insurance Corporation 

and Office of the Comptroller of the Currency by amending their 

rules for purposes of any leverage-based capital rule to deduct initial margin with respect to a centrally-cleared derivative transaction from the amount of any leverage exposure arising from the 

guarantee by the clearing member of that client’s derivative obligation to the central counterparty. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Treatment of client margin 

This section amends Section 18(n) of the Federal Deposit Insurance Act by providing that for the purposes of any leverage-based 

capital rule, the amount of any initial margin provided by a client 

with respect to a centrally-cleared derivative obligation shall be deducted from the amount of any leverage exposure. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

FEDERAL DEPOSIT INSURANCE ACT 

* * * * * * * 

SEC. 18. (a) REPRESENTATIONS OF DEPOSIT INSURANCE.— 

(1) INSURED DEPOSITORY INSTITUTIONS.— 

(A) IN GENERAL.—Each insured depository institution 

shall display at each place of business maintained by that 

institution a sign or signs relating to the insurance of the 

deposits of the institution, in accordance with regulations 

to be prescribed by the Corporation. 

(B) STATEMENT TO BE INCLUDED.—Each sign required 

under subparagraph (A) shall include a statement that inVerDate Sep 11 2014 00:32 Aug 07, 2018 Jkt 079006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR882.XXX HR882
11 

sured deposits are backed by the full faith and credit of 

the United States Government. 

(2) REGULATIONS.—The Corporation shall prescribe regulations to carry out this subsection, including regulations governing the substance of signs required by paragraph (1) and 

the manner of display or use of such signs. 

(3) PENALTIES.—For each day that an insured depository institution continues to violate paragraph (1) or any regulation 

issued under paragraph (2), it shall be subject to a penalty of 

not more than $100, which the Corporation may recover for its 

use. 

(4) FALSE ADVERTISING, MISUSE OF FDIC NAMES, AND MISREPRESENTATION TO INDICATE INSURED STATUS.— 

(A) PROHIBITION ON FALSE ADVERTISING AND MISUSE OF

FDIC NAMES.—No person may represent or imply that any 

deposit liability, obligation, certificate, or share is insured 

or guaranteed by the Corporation, if such deposit liability, 

obligation, certificate, or share is not insured or guaranteed by the Corporation— 

(i) by using the terms ‘‘Federal Deposit’’, ‘‘Federal 

Deposit Insurance’’, ‘‘Federal Deposit Insurance Corporation’’, any combination of such terms, or the abbreviation ‘‘FDIC’’ as part of the business name or 

firm name of any person, including any corporation, 

partnership, business trust, association, or other business entity; or 

(ii) by using such terms or any other terms, sign, or 

symbol as part of an advertisement, solicitation, or 

other document. 

(B) PROHIBITION ON MISREPRESENTATIONS OF INSURED

STATUS.—No person may knowingly misrepresent— 

(i) that any deposit liability, obligation, certificate, 

or share is insured, under this Act, if such deposit liability, obligation, certificate, or share is not so insured; or 

(ii) the extent to which or the manner in which any 

deposit liability, obligation, certificate, or share is insured under this Act, if such deposit liability, obligation, certificate, or share is not so insured, to the extent or in the manner represented. 

(C) AUTHORITY OF THE APPROPRIATE FEDERAL BANKING

AGENCY.—The appropriate Federal banking agency shall 

have enforcement authority in the case of a violation of 

this paragraph by any person for which the agency is the 

appropriate Federal banking agency, or any institution-affiliated party thereof. 

(D) CORPORATION AUTHORITY IF THE APPROPRIATE FEDERAL BANKING AGENCY FAILS TO FOLLOW RECOMMENDATION.— 

(i) RECOMMENDATION.—The Corporation may recommend in writing to the appropriate Federal banking 

agency that the agency take any enforcement action 

authorized under section 8 for purposes of enforcement 

of this paragraph with respect to any person for which 

12 

the agency is the appropriate Federal banking agency 

or any institution-affiliated party thereof. 

(ii) AGENCY RESPONSE.—If the appropriate Federal 

banking agency does not, within 30 days of the date 

of receipt of a recommendation under clause (i), take 

the enforcement action with respect to this paragraph 

recommended by the Corporation or provide a plan acceptable to the Corporation for responding to the situation presented, the Corporation may take the recommended enforcement action against such person or 

institution-affiliated party. 

(E) ADDITIONAL AUTHORITY.—In addition to its authority 

under subparagraphs (C) and (D), for purposes of this 

paragraph, the Corporation shall have, in the same manner and to the same extent as with respect to a State nonmember insured bank— 

(i) jurisdiction over— 

(I) any person other than a person for which another agency is the appropriate Federal banking 

agency or any institution-affiliated party thereof; 

and 

(II) any person that aids or abets a violation of 

this paragraph by a person described in subclause 

(I); and 

(ii) for purposes of enforcing the requirements of this 

paragraph, the authority of the Corporation under— 

(I) section 10(c) to conduct investigations; and 

(II) subsections (b), (c), (d) and (i) of section 8 to 

conduct enforcement actions. 

(F) OTHER ACTIONS PRESERVED.—No provision of this 

paragraph shall be construed as barring any action otherwise available, under the laws of the United States or any 

State, to any Federal or State agency or individual. 

(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 

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 

13 

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 Federal 

savings association; 

(B) the Board of Governors of the Federal Reserve System if 

the acquiring, assuming, or resulting bank is to be a State 

member bank; and 

(C) the Corporation if the acquiring, assuming, or resulting 

bank is to be a State nonmember insured bank or a State 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) REPORTS ON COMPETITIVE FACTORS.— 

(A) REQUEST FOR REPORT.—In the interests of uniform 

standards and subject to subparagraph (B), before acting 

on any application for approval of a merger transaction, 

the responsible agency shall— 

(i) request a report on the competitive factors involved from the Attorney General of the United 

States; and 

(ii) provide a copy of the request to the Corporation 

(when the Corporation is not the responsible agency). 

(B) FURNISHING OF REPORT.—The report requested under 

subparagraph (A) shall be furnished by the Attorney General to the responsible agency— 

(i) not later than 30 calendar days after the date on 

which the Attorney General received the request; or 

(ii) not later than 10 calendar days after such date, 

if the requesting agency advises the Attorney General 

that an emergency exists requiring expeditious action. 

14 

(C) EXCEPTIONS.—A responsible agency may not be required to request a report under subparagraph (A) if— 

(i) the responsible agency finds that it must act immediately in order to prevent the probable failure of 1 

of the insured depository institutions involved in the 

merger transaction; or 

(ii) the merger transaction involves solely an insured 

depository institution and 1 or more of the affiliates of 

such depository institution. 

(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, the convenience and needs of 

the community to be served, and the risk to the stability of the 

United States banking or financial system. 

(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 insured 

depository institutions involved, or if the proposed merger transaction is solely between an insured depository institution and 1 or 

more of its affiliates, and the report on the competitive factors has 

been dispensed with, the transaction may be consummated immediately upon approval by the agency. If the agency has advised the 

Attorney General under paragraph (4)(B)(ii) of the existence of an 

emergency requiring expeditious action and has requested a report 

on the competitive factors within 10 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 unless the court shall otherwise specifically order. In any such action, 

the court shall review de novo the issues presented. 

15 

(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. 

(11) MONEY LAUNDERING.—In every case, the responsible 

agency, shall take into consideration the effectiveness of any 

insured depository institution involved in the proposed merger 

16 

transaction in combatting money laundering activities, including in overseas branches. 

(12) 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. 

(13)(A) Except as provided in subparagraph (B), the responsible 

agency may not approve an application for an interstate merger 

transaction if the resulting insured depository institution (including all insured depository institutions which are affiliates of the resulting insured depository institution), 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) Subparagraph (A) shall not apply to an interstate merger 

transaction that involves 1 or more insured depository institutions 

in default or in danger of default, or with respect to which the Corporation provides assistance under section 13. 

(C) In this paragraph— 

(i) the term ‘‘interstate merger transaction’’ means a merger 

transaction involving 2 or more insured depository institutions 

that have different home States and that are not affiliates; and 

(ii) the term ‘‘home State’’ means— 

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

the main office of the bank is located; 

(II) with respect to a State bank or State savings association, the State by which the State bank or State savings 

association is chartered; and 

(III) with respect to a Federal savings association, the 

State in which the home office (as defined by the regulations of the Director of the Office of Thrift Supervision, or, 

on and after the transfer date, the Comptroller of the Currency) of the Federal savings association is located. 

(d)(1) No State nonmember insured 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 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) 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. 

17 

(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) the law of the State in which the branch is located, or is to be located, would permit establishment 

of the branch, if the bank were a State bank chartered 

by 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) DE 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— 

18 

(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) HOME 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), 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 to make such publication shall 

be given to the insured depository institution at least ninety days 

before such publication is made. 

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

(1) IN GENERAL.—Subject to paragraph (3), any insured depository institution which fails or refuses to pay any assessment shall be subject to a penalty in an amount of not more 

than 1 percent of the amount of the assessment due for each 

day that such violation continues. 

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

apply if— 

(A) the failure to pay an assessment is due to a dispute 

between the insured depository institution and the Corporation over the amount of such assessment; and 

(B) the insured depository institution deposits security 

satisfactory to the Corporation for payment upon final determination of the issue. 

(3) SPECIAL RULE FOR SMALL ASSESSMENT AMOUNTS.—If the 

amount of the assessment which an insured depository institution fails or refuses to pay is less than $10,000 at the time of 

such failure or refusal, the amount of any penalty to which 

such institution is subject under paragraph (1) shall not exceed 

$100 for each day that such violation continues. 

(4) AUTHORITY TO MODIFY OR REMIT PENALTY.—The Corporation, in the sole discretion of the Corporation, may compromise, 

modify or remit any penalty which the Corporation may assess 

or has already assessed under paragraph (1) upon a finding 

that good cause prevented the timely payment of an assessment. 

19 

(i)(1) No insured State nonmember 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 Board of Governors of the Federal Reserve System if 

the resulting bank is to be a State member bank; 

(B) the Corporation if the resulting bank is to be a State 

nonmember insured bank; and 

(C) the Corporation 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. 

(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 WITH AFFILIATES AND INSIDERS.— 

(1) TRANSACTIONS WITH 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.—For 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 WITH AFFILIATES.—Paragraph (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 

20 

bank has an insured branch, but shall apply with respect 

to the insured branch. 

(C) FOREIGN BANK DEFINED.—For 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 TO REGULATE OR PROHIBIT CERTAIN FORMS OF

BENEFITS TO INSTITUTION-AFFILIATED PARTIES.— (1) GOLDEN 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.—The 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: 

(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 

covered 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— 

(i) the insolvency of the depository institution or covered company; 

(ii) the appointment of a conservator or receiver for 

the depository institution; or 

(iii) the troubled condition of the depository institution (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 covered 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 covered company may prepay the salary or any 

liability or legal expense of any institution-affiliated party if 

such payment is made— 

21 

(A) in contemplation of the insolvency of such institution 

or covered 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 covered company for the benefit of any 

institution-affiliated party pursuant to an obligation of 

such institution or covered company that— 

(i) is contingent on the termination of such party’s 

affiliation with the institution or covered company; 

and 

(ii) is received on or after the date on which— 

(I) the insured depository institution or covered 

company, or any insured depository institution 

subsidiary of such covered 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 IN CONTEMPLATION OF AN

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 

22 

(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 covered 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— 

(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. 

(D) COVERED COMPANY.—The term ‘‘covered company’’ 

means any depository institution holding company (including any company required to file a report under section 

4(f)(6) of the Bank Holding Company Act of 1956), or any 

other company that controls an insured depository institution. 

(6) CERTAIN COMMERCIAL INSURANCE COVERAGE NOT TREATED

AS COVERED BENEFIT PAYMENT.—No provision of this subsection shall be construed as prohibiting any insured depository institution or covered company, from purchasing any commercial insurance policy or fidelity bond, except that, subject 

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23 

surance policy or bond shall not cover any legal or liability expense of the institution or covered 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 

within the limit prescribed by the Corporation by general or specific regulation or ruling. 

(m) ACTIVITIES OF SAVINGS ASSOCIATIONS AND THEIR SUBSIDI- ARIES.— 

(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 or the Comptroller of the 

Currency, as appropriate, 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 of the Comptroller of the Currency and orders of the Corporation and the Comptroller 

of the Currency. 

(2) ENFORCEMENT POWERS.—With respect to any subsidiary 

of an insured savings association: 

(A) the Corporation and the Comptroller of the Currency, as appropriate, 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 Corporation or the Comptroller of the Currency, 

as appropriate, 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 

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24 

priate, shall have authority to order the insured savings 

association to divest itself of control of the subsidiary. The 

Corporation or the Comptroller of the Currency, as appropriate, 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 Corporation or the Comptroller of 

the Currency, respectively, may deem appropriate. 

(3) ACTIVITIES INCOMPATIBLE WITH DEPOSIT INSURANCE.— (A) IN GENERAL.—The Corporation may determine by 

regulation or order that any specific activity poses a serious threat to the Deposit Insurance Fund. Prior to adopting any such regulation, the Corporation shall, in the case 

of a Federal savings association, consult with the Comptroller of the Currency and shall provide appropriate State 

supervisors the opportunity to comment thereon, and the 

Corporation shall specifically take such comments into consideration. Any such regulation shall be issued in accordance with section 553 of title 5, United States Code. If the 

Board of Directors makes such a determination with respect to an activity, the Corporation shall have authority 

to order that no savings association may engage in the activity directly. 

(B) AUTHORITY OF COMPTROLLER OF THE CURRENCY.— This section does not limit the authority of the Comptroller 

of the Currency to issue regulations to promote safety and 

soundness, or to enforce compliance as to Federal savings 

associations 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 Deposit 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.—Subparagraphs (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.—øNo appropriate¿ 

(1) UNIDENTIFIED INTANGIBLE ASSETS.—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. 

25 

(2) TREATMENT OF CLIENT MARGIN.—For purposes of any leverage-based capital rule, guideline, standard, or requirement 

promulgated, prescribed, or imposed by any appropriate Federal banking agency on insured depository institutions, the 

amount of any initial margin provided by a client of an insured 

depository institution with respect to a centrally-cleared derivative obligation shall be deducted from the amount of any leverage exposure arising from the insured depository institution’s 

guarantee of the client’s derivative obligation to the central 

counterparty. 

(o) REAL ESTATE LENDING.— (1) UNIFORM 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 Fund by 

such extensions of credit; 

(ii) the need for safe and sound operation of insured 

depository institutions; and 

(iii) the availability of credit. 

(B) VARIATIONS PERMITTED.—In prescribing standards 

under paragraph (1), the appropriate Federal banking 

agencies may differentiate among types of loans— 

(i) as may be required by Federal statute; 

(ii) as may be warranted, based on the risk to the 

Deposit Insurance Fund; or 

(iii) as may be warranted, based on the safety and 

soundness of the institutions. 

(3) LOAN 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 Fund, consistent with section 38. 

26 

(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 CER- TAIN 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.—Notwithstanding 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— 

(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 WITH

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 

27 

(ii) the savings association maintained a main office 

and conducted business as of July 1, 1994. 

(s) PROHIBITION ON CERTAIN AFFILIATIONS.— 

(1) IN 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; 

(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 

28 

(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 

such section existed on the day before the date of 

the repeal of such section; 

(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.—For purposes of this paragraph, the 

following definition 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.—For 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) 

29 

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.—As used in this subsection the term ‘‘Commission’’ means the Securities and Exchange Commission. 

(u) LIMITATION ON CLAIMS.— 

(1) IN 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; and 

(B) 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 THEIR OWN STOCK.— 

30 

(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. 

(w) WRITTEN EMPLOYMENT REFERENCES MAY CONTAIN SUS- PICIONS OF INVOLVEMENT IN ILLEGAL ACTIVITY.— (1) AUTHORITY TO DISCLOSE INFORMATION.—Notwithstanding 

any other provision of law, any insured depository institution, 

and any director, officer, employee, or agent of such institution, 

may disclose in any written employment reference relating to 

a current or former institution-affiliated party of such institution which is provided to another insured depository institution 

in response to a request from such other institution, information concerning the possible involvement of such institution-affiliated party in potentially unlawful activity. 

(2) INFORMATION NOT REQUIRED.—Nothing in paragraph (1) 

shall be construed, by itself, to create any affirmative duty to 

include any information described in paragraph (1) in any employment reference referred to in paragraph (1). 

(3) MALICIOUS INTENT.—Notwithstanding any other provision 

of this subsection, voluntary disclosure made by an insured depository institution, and any director, officer, employee, or 

agent of such institution, under this subsection concerning potentially unlawful activity that is made with malicious intent, 

shall not be shielded from liability from the person identified 

in the disclosure. 

(4) DEFINITION.—For purposes of this subsection, the term 

‘‘insured depository institution’’ includes any uninsured branch 

or agency of a foreign bank. 

(x) PRIVILEGES NOT AFFECTED BY DISCLOSURE TO BANKING

AGENCY OR SUPERVISOR.— (1) IN GENERAL.—The submission by any person of any information to the Bureau of Consumer Financial Protection, any 

Federal banking agency, State bank supervisor, or foreign 

banking authority for any purpose in the course of any supervisory or regulatory process of such Bureau, agency, supervisor, or authority shall not be construed as waiving, destroying, or otherwise affecting any privilege such person may claim 

with respect to such information under Federal or State law as 

to any person or entity other than such Bureau, agency, supervisor, or authority. 

(2) RULE OF CONSTRUCTION.—No provision of paragraph (1) 

may be construed as implying or establishing that— 

(A) any person waives any privilege applicable to information that is submitted or transferred under any circumstance to which paragraph (1) does not apply; or 

(B) any person would waive any privilege applicable to 

any information by submitting the information to the Bureau of Consumer Financial Protection, any Federal banking agency, State bank supervisor, or foreign banking authority, but for this subsection. 

31 

(z) GENERAL PROHIBITION ON SALE OF ASSETS.— (1) IN GENERAL.—An insured depository institution may not 

purchase an asset from, or sell an asset to, an executive officer, 

director, or principal shareholder of the insured depository institution, or any related interest of such person (as such terms 

are defined in section 22(h) of Federal Reserve Act), unless— 

(A) the transaction is on market terms; and 

(B) if the transaction represents more than 10 percent of 

the capital stock and surplus of the insured depository institution, the transaction has been approved in advance by 

a majority of the members of the board of directors of the 

insured depository institution who do not have an interest 

in the transaction. 

(2) RULEMAKING.—The Board of Governors of the Federal 

Reserve System may issue such rules as may be necessary to 

define terms and to carry out the purposes this subsection. Before proposing or adopting a rule under this paragraph, the 

Board of Governors of the Federal Reserve System shall consult with the Comptroller of the Currency and the Corporation 

as to the terms of the rule. 

(y) STATE LENDING LIMIT TREATMENT OF DERIVATIVES TRANS- ACTIONS.—An insured State bank may engage in a derivative 

transaction, as defined in section 5200(b)(3) of the Revised Statutes 

of the United States (12 U.S.C. 84(b)(3)), only if the law with respect to lending limits of the State in which the insured State bank 

is chartered takes into consideration credit exposure to derivative 

transactions. 

* * * * * * * 

BANK HOLDING COMPANY ACT OF 1956 

* * * * * * * 

ADMINISTRATION

SEC. 5. (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, 

including regulations and orders relating to the capital requirements for bank holding companies, as may be necessary to enable 

it to administer and carry out the purposes of this Act and prevent 

evasions thereof. In establishing capital regulations pursuant to 

32 

this subsection, the Board shall seek to make such requirements 

countercyclical, so that the amount of capital required to be maintained by a company increases in times of economic expansion and 

decreases in times of economic contraction, consistent with the 

safety and soundness of the company. 

(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 bank holding company or subsidiary with— 

(I) this Act; 

(II) Federal laws that the Board has specific jurisdiction to enforce against the company or subsidiary; and 

(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provision of Federal 

law. 

(B) USE OF EXISTING REPORTS AND OTHER SUPERVISORY

INFORMATION.—The Board shall, to the fullest extent possible, use— 

(i) reports and other supervisory information that 

the bank holding company or any subsidiary thereof 

has been required to provide to other Federal or State 

regulatory agencies; 

(ii) externally audited financial statements of the 

bank holding company or subsidiary; 

(iii) information otherwise available from Federal or 

State regulatory agencies; and 

(iv) information that is otherwise required to be reported publicly. 

(C) AVAILABILITY.—Upon the request of the Board, the 

bank holding company or a subsidiary of the bank holding 

company shall promptly provide to the Board any information described in clauses (i) through (iii) of subparagraph 

(B). 

(2) EXAMINATIONS.— 

(A) IN GENERAL.—Subject to subtitle B of the Consumer 

Financial Protection Act of 2010, the Board may make examinations of a bank holding company and each subsidiary of a bank holding company in order to— 

(i) inform the Board of— 

(I) the nature of the operations and financial 

condition of the bank holding company and the 

subsidiary; 

(II) the financial, operational, and other risks 

within the bank holding company system that 

may pose a threat to— 

33 

(aa) the safety and soundness of the bank 

holding company or of any depository institution subsidiary of the bank holding company; 

or 

(bb) the stability of the financial system of 

the United States; and 

(III) the systems of the bank holding company 

for monitoring and controlling the risks described 

in subclause (II); and 

(ii) monitor the compliance of the bank holding company and the subsidiary with— 

(I) this Act; 

(II) Federal laws that the Board has specific jurisdiction to enforce against the company or subsidiary; and 

(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provisions of Federal 

law. 

(B) USE OF REPORTS TO REDUCE EXAMINATIONS.—For 

purposes of this paragraph, the Board shall, to the fullest 

extent possible, rely on— 

(i) examination reports made by other Federal or 

State regulatory agencies relating to a bank holding 

company and any subsidiary of a bank holding company; and 

(ii) the reports and other information required under 

paragraph (1). 

(C) COORDINATION WITH OTHER REGULATORS.—The 

Board shall— 

(i) provide reasonable notice to, and consult with, 

the appropriate Federal banking agency, the Securities and Exchange Commission, the Commodity Futures Trading Commission, or State regulatory agency, 

as appropriate, for a subsidiary that is a depository institution or a functionally regulated subsidiary of a 

bank holding company before commencing an examination of the subsidiary under this section; and 

(ii) to the fullest extent possible, avoid duplication of 

examination activities, reporting requirements, and requests for information. 

(3) CAPITAL.— 

(A) IN 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; 

34 

(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. 

(D) TREATMENT OF CLIENT MARGIN.—For purposes of any 

leverage-based capital rule, guideline, standard, or requirement promulgated, prescribed, or imposed by the Board on 

bank holding companies, the amount of any initial margin 

provided by a client of a bank holding company or affiliate 

thereof with respect to a centrally-cleared derivative obligation shall be deducted from the amount of any leverage exposure arising from the guarantee by the bank holding 

company or affiliate thereof of the client’s derivative obligation to the central counterparty. 

(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 Securities 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 

35 

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, or registration with, the Commodity Futures Trading Commission, with respect to activities conducted as a futures commission merchant, commodity trading adviser, commodity pool, commodity pool operator, swap 

execution facility, swap data repository, swap dealer, 

major swap participant, and activities that are incidental to such commodities and swaps 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— 

(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 

36 

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 subpoenas and subpoenas 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 subpoena or subpoena 

duces tecum issued pursuant to this subsection, and such courts 

shall have jurisdiction and power to order and require compliance 

therewith. 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. 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 

37 

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 subpoena 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 SECU- RITIES 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 

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 IN LIEU OF OTHER ACTION.—If the Board receives a notice described in paragraph (1)(B) from a State inVerDate Sep 11 2014 23:10 Aug 06, 2018 Jkt 079006 PO 00000 Frm 00037 Fmt 6659 Sfmt 6601 E:\HR\OC\HR882.XXX HR882
38 

surance 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.—During 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. 

* * * * * * * 

HOME OWNERS’ LOAN ACT 

* * * * * * * 

SEC. 10. REGULATION OF HOLDING COMPANIES. 

(a) DEFINITIONS.— (1) IN 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 appropriate Federal banking agency 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.— (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. 

39 

(ii) EXCLUSION.—The term ‘‘savings and loan holding 

company’’ does not include— 

(I) a bank holding company that is registered 

under, and subject to, the Bank Holding Company 

Act of 1956 (12 U.S.C. 1841 et seq.), or to any 

company directly or indirectly controlled by such 

company (other than a savings association); 

(II) a company that controls a savings association that functions solely in a trust or fiduciary 

capacity as described in section 2(c)(2)(D) of the 

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

1841(c)(2)(D)); or 

(III) a company described in subsection (c)(9)(C) 

solely by virtue of such company’s control of an intermediate holding company established pursuant 

to section 10A. 

(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 appropriate Federal banking 

agency. 

(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 

40 

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 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 

Board 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 Board) 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 Board 

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 Board on forms prescribed by the 

Board, 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 Board may deem necessary or appropriate to carry 

41 

out the purposes of this section. Upon application, the Board 

may extend the time within which a savings and loan holding 

company shall register and file the requisite information. 

(2) REPORTS.— 

(A) IN GENERAL.—Each savings and loan holding company and each subsidiary thereof, other than a savings association, shall file with the Board, such reports as may be 

required by the Board. Such reports shall be made under 

oath or otherwise, and shall be in such form and for such 

periods, as the Board may prescribe. Each report shall contain such information concerning the operations of such 

savings and loan holding company and its subsidiaries as 

the Board may require. 

(B) USE OF EXISTING REPORTS AND OTHER SUPERVISORY

INFORMATION.—The Board shall, to the fullest extent possible, use— 

(i) reports and other supervisory information that 

the savings and loan holding company or any subsidiary thereof has been required to provide to other 

Federal or State regulatory agencies; 

(ii) externally audited financial statements of the 

savings and loan holding company or subsidiary; 

(iii) information that is otherwise available from 

Federal or State regulatory agencies; and 

(iv) information that is otherwise required to be reported publicly. 

(C) AVAILABILITY.—Upon the request of the Board, a savings and loan holding company or a subsidiary of a savings 

and loan holding company shall promptly provide to the 

Board any information described in clauses (i) through (iii) 

of subparagraph (B). 

(3) BOOKS AND RECORDS.—Each savings and loan holding 

company shall maintain such books and records as may be prescribed by the Board. 

(4) EXAMINATIONS.— 

(A) IN GENERAL.—Subject to subtitle B of the Consumer 

Financial Protection Act of 2010, the Board may make examinations of a savings and loan holding company and 

each subsidiary of a savings and loan holding company 

system, in order to— 

(i) inform the Board of— 

(I) the nature of the operations and financial 

condition of the savings and loan holding company 

and the subsidiary; 

(II) the financial, operational, and other risks 

within the savings and loan holding company system that may pose a threat to— 

(aa) the safety and soundness of the savings 

and loan holding company or of any depository institution subsidiary of the savings and 

loan holding company; or 

(bb) the stability of the financial system of 

the United States; and 

42 

(III) the systems of the savings and loan holding 

company for monitoring and controlling the risks 

described in subclause (II); and 

(ii) monitor the compliance of the savings and loan 

holding company and the subsidiary with— 

(I) this Act; 

(II) Federal laws that the Board has specific jurisdiction to enforce against the company or subsidiary; and 

(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provisions of Federal 

law. 

(B) USE OF REPORTS TO REDUCE EXAMINATIONS.—For 

purposes of this subsection, the Board shall, to the fullest 

extent possible, rely on— 

(i) the examination reports made by other Federal or 

State regulatory agencies relating to a savings and 

loan holding company and any subsidiary; and 

(ii) the reports and other information required under 

paragraph (2). 

(C) COORDINATION WITH OTHER REGULATORS.—The 

Board shall— 

(i) provide reasonable notice to, and consult with, 

the appropriate Federal banking agency, the Securities and Exchange Commission, the Commodity Futures Trading Commission, or State regulatory agency, 

as appropriate, for a subsidiary that is a depository institution or a functionally regulated subsidiary of a 

savings and loan holding company before commencing 

an examination of the subsidiary under this section; 

and 

(ii) to the fullest extent possible, avoid duplication of 

examination activities, reporting requirements, and requests for information. 

(5) AGENT FOR SERVICE OF PROCESS.—The Board 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 Board may at any 

time, upon the motion or application of the Board, release a 

registered savings and loan holding company from any registration theretofore made by such company, if the Board 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; 

43 

(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 following 

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, 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 Board, 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 Board pursuant to subsection (q)(1)(D). 

(H) Any activity that is permissible for a financial holding company (as such term is defined under section 2(p) of 

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

1841(p)) to conduct under section 4(k) of the Bank Holding 

Company Act of 1956 if— 

(i) the savings and loan holding company meets all 

of the criteria to qualify as a financial holding company, and complies with all of the requirements applicable to a financial holding company, under sections 

4(l) and 4(m) of the Bank Holding Company Act and 

section 804(c) of the Community Reinvestment Act of 

1977 (12 U.S.C. 2903(c)) as if the savings and loan 

holding company was a bank holding company; and 

(ii) the savings and loan holding company conducts 

the activity in accordance with the same terms, conditions, and requirements that apply to the conduct of 

such activity by a bank holding company under the 

44 

Bank Holding Company Act of 1956 and the Board’s 

regulations and interpretations under such Act. 

(3) CERTAIN 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)). 

(4) PRIOR APPROVAL OF CERTAIN NEW ACTIVITIES REQUIRED.— (A) IN 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 Board. 

(B) FACTORS TO BE CONSIDERED.—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 Board 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 Board 

45 

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 Board shall be made in an order issued by the Board 

containing the reasons for such approval or disapproval. 

(5) GRACE PERIOD TO ACHIEVE COMPLIANCE.—If any savings 

association referred to in paragraph (3) fails to maintain the 

status of such association as a qualified thrift lender, the 

Board 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. 

(B) EXEMPTION FOR ACTIVITIES LAWFULLY ENGAGED IN

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) TERMINATION 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 

46 

(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 TO TERMINATE SUBPARAGRAPH (B) ACTIVITY.— 

Any activity described in subparagraph (B) may also be 

terminated by the Board, after opportunity for hearing, if 

the Board determines, having due regard for the purposes 

of this Act, that such action is necessary to prevent conflicts of interest or unsound practices or is in the public interest. 

(7) FOREIGN 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) EXEMPTION FOR BANK HOLDING COMPANIES.—Except 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 HOLDING

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 

47 

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.—This 

paragraph does not prevent a transaction that— 

(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 Board may 

issue interpretations, regulations, or orders that the Board 

determines necessary to administer and carry out the purpose and prevent evasions of this paragraph, including a 

determination (in consultation with the appropriate Federal banking agency) 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 linVerDate Sep 11 2014 23:10 Aug 06, 2018 Jkt 079006 PO 00000 Frm 00047 Fmt 6659 Sfmt 6601 E:\HR\OC\HR882.XXX HR882
48 

eal 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 WITH 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) IN 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 Board, the control of a savings association or a 

savings and loan holding company, or to retain the 

control of such an association or holding company 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 Board, 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 

Board, 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 Board 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 

49 

the Board may permit if the Board 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 

Board 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 

(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 

Board 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 Board 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 Board, 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 Board shall approve an acquisition of a savings association under this subparagraph unless the Board 

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 Deposit Insurance 

Fund, and shall render a decision within 90 days after 

submission to the Board 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 offiVerDate Sep 11 2014 23:10 Aug 06, 2018 Jkt 079006 PO 00000 Frm 00049 Fmt 6659 Sfmt 6601 E:\HR\OC\HR882.XXX HR882
50 

cers, directors, and principal shareholders of the company or 

association. 

(2) FACTORS TO BE CONSIDERED.—The Board 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 Board 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 Deposit Insurance Fund, and the convenience and needs of 

the community to be served, and shall render a decision within 

90 days after submission to the Board 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 Board shall request from the Attorney General and 

consider any report rendered within 30 days on the competitive 

factors involved. The Board 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 Board 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, 

(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, or 

(E) in the case of an application by a savings and loan 

holding company to acquire an insured depository institution, if— 

(i) the home State of the insured depository institution is a State other than the home State of the savings and loan holding company; 

51 

(ii) the applicant (including all insured depository 

institutions which are affiliates of the applicant) controls, or 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; and 

(iii) the acquisition does not involve an insured depository institution in default or in danger of default, 

or with respect to which the Federal Deposit Insurance Corporation provides assistance under section 13 

of the Federal Deposit Insurance Act (12 U.S.C. 1823). 

(3) INTERSTATE ACQUISITIONS.—No acquisition shall be approved by the Board 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 specifically 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 Board. 

(B) TREATMENT OF CERTAIN HOLDING COMPANIES.—If any 

individual referred to in subparagraph (A) controls more 

than 1 savings and loan holding company or more than 1 

savings association, any savings and loan holding company 

controlled by such individual shall be subject to the activities limitations contained in subsection (c) to the same extent such limitations apply to multiple savings and loan 

holding companies, unless all or all but 1 of the savings associations (including any institution deemed to be a savings association under subsection (l) of this section) controlled directly or indirectly by such individual was acVerDate Sep 11 2014 23:10 Aug 06, 2018 Jkt 079006 PO 00000 Frm 00051 Fmt 6659 Sfmt 6601 E:\HR\OC\HR882.XXX HR882
52 

quired pursuant to an acquisition described in subclause 

(I) or (II) of subsection (c)(3)(B)(i). 

(5) ACQUISITIONS PURSUANT TO CERTAIN SECURITY INTER- ESTS.—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 Board 

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 Board finds such extension is warranted and 

would not be detrimental to the public interest. 

(6) SHARES HELD BY INSURANCE AFFILIATES.—Shares 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. 

(7) DEFINITIONS.—For purposes of paragraph (2)(E)— 

(A) the terms ‘‘default’’, ‘‘in danger of default’’, and ‘‘insured depository institution’’ have the same meanings as 

in section 3 of the Federal Deposit Insurance Act (12 

U.S.C. 1813); and 

(B) the term ‘‘home State’’ means— 

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

which the main office of the bank is located; 

(ii) with respect to a State bank or State savings association, the State by which the savings association is 

chartered; 

(iii) with respect to a Federal savings association, 

the State in which the home office (as defined by the 

regulations of the Board of the Office of Thrift Supervision, or, on and after the transfer date, the Comptroller of the Currency) of the Federal savings association is located; and 

(iv) with respect to a savings and loan holding company, the State in which the amount of total deposits 

of all insured depository institution subsidiaries of 

such company was the greatest on the date on which 

the company became a savings and loan holding company. 

(f) DECLARATION OF DIVIDEND.—Every subsidiary savings association of a savings and loan holding company shall give the Board 

not less than 30 days’ advance notice of the proposed declaration 

by its directors of any dividend on its guaranty, permanent, or 

53 

other nonwithdrawable stock. Such notice period shall commence to 

run from the date of receipt of such notice by the Board. Any such 

dividend declared within such period, or without the giving of such 

notice to the Board, shall be invalid and shall confer no rights or 

benefits upon the holder of any such stock. 

(g) ADMINISTRATION AND ENFORCEMENT.— (1) IN GENERAL.—øThe Board¿ 

(A) REGULATIONS AND ORDERS.—The Board is authorized 

to issue such regulations and orders, including regulations 

and orders relating to capital requirements for savings and 

loan holding companies, as the Board deems necessary or 

appropriate to enable the Board to administer and carry 

out the purposes of this section, and to require compliance 

therewith and prevent evasions thereof. In establishing 

capital regulations pursuant to this subsection, the appropriate Federal banking agency shall seek to make such requirements countercyclical so that the amount of capital 

required to be maintained by a company increases in times 

of economic expansion and decreases in times of economic 

contraction, consistent with the safety and soundness of 

the company. 

(B) TREATMENT OF CLIENT MARGIN.—For purposes of any leverage-based capital rule, guideline, standard, or requirement 

promulgated, prescribed, or imposed by the Board on savings 

and loan holding companies, the amount of any initial margin 

provided by a client of a savings and loan holding company or 

affiliate thereof with respect to a centrally-cleared derivative obligation shall be deducted from the amount of any leverage exposure arising from the guarantee by the savings and loan 

holding company or affiliate thereof of the client’s derivative obligation to the central counterparty. 

(2) INVESTIGATIONS.—The Board may make such investigations as the Board 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 Board 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 Board 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 subsection, the Board 

may administer oaths and affirmations, take or cause to be 

taken depositions, and issue subpenas. The Board may make 

regulations with respect to any such proceedings. The attendance of witnesses and the production of documents provided for 

54 

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. 

(B) Any hearing provided for in subsection (a)(2)(D) or under 

paragraph (5) of this section 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 Board 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 Board 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 Board may, whenever the 

Board 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 Board 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. 

55 

(B) The Board may in the discretion of the Board 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. 

(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 Board pursuant to subsection (e)(4); or 

(3) any individual, except with the prior approval of the 

Board, 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 Board 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 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. 

56 

(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. 

(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 Board 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 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. 

(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 Board shall prescribe regulations establishing such procedures as may be necessary to 

carry out this paragraph. 

(4) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM

SERVICE.—The resignation, termination of employment or participation, or separation of an institution-affiliated party (within the meaning of section 3(u) of the Federal Deposit Insurance 

Act) with respect to a savings and loan holding company or 

subsidiary thereof (including a separation caused by the 

deregistration of such a company or such a subsidiary) shall 

57 

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 company or its subsidiary 

(whether such date occurs before, on, or after the date of the 

enactment of this paragraph). 

(j) JUDICIAL REVIEW.—Any party aggrieved by an order of the 

Board 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 Board be modified, terminated, or set 

aside. A copy of the 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 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. 

(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) TREATMENT 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 appropriate Federal banking agency determines that such bank is a 

qualified thrift lender (as determined under subsection (m)). 

(2) FAILURE TO MAINTAIN 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 appropriate Federal banking agency, such bank may not thereafter be a qualified thrift lender for a period of 5 years. 

(m) QUALIFIED THRIFT LENDER TEST.— 

(1) IN GENERAL.—Except as provided in paragraphs (2) and 

(7), any savings association is a qualified thrift lender if— 

58 

(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 

(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.—Notwithstanding 

paragraph (1), the appropriate Federal banking agency may 

grant such temporary and limited exceptions from the minimum actual thrift investment percentage requirement contained in such paragraph as the appropriate Federal banking 

agency deems necessary if— 

(A) the appropriate Federal banking agency 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 appropriate Federal banking agency 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 appropriate Federal banking agency 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) IN GENERAL.—A savings association that fails to become or remain a qualified thrift lender shall immediately 

be subject to the restrictions under subparagraph (B). 

(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.—The 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 

59 

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 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.—The savings association may 

not pay dividends, except for dividends that— 

(aa) would be permissible for a national 

bank; 

(bb) are necessary to meet obligations of a 

company that controls such savings association; and 

(cc) are specifically approved by the Comptroller of the Currency and the Board after a 

written request submitted to the Comptroller 

of the Currency and the Board by the savings 

association not later than 30 days before the 

date of the proposed payment. 

(IV) REGULATORY AUTHORITY.—A savings association that fails to become or remain a qualified 

thrift lender shall be deemed to have violated section 5 of the Home Owners’ Loan Act (12 U.S.C. 

1464) and subject to actions authorized by section 

5(d) of the Home Owners’ Loan Act (12 U.S.C. 

1464(d)). 

(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) HOLDING 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 

60 

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) EXEMPTION FOR SPECIALIZED SAVINGS ASSOCIATIONS

SERVING CERTAIN MILITARY PERSONNEL.—Subparagraph (A) 

shall not apply to a savings association subsidiary of a savings and loan holding company if at least 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. 

(F) EXEMPTION FOR CERTAIN FEDERAL SAVINGS ASSOCIA- TIONS.—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. 

(G) NO CIRCUMVENTION OF EXIT MORATORIUM.—Subparagraph (A) of this paragraph shall not be construed as permitting any insured depository institution to engage in any 

conversion transaction prohibited under section 5(d) of the 

Federal Deposit Insurance Act. 

(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; 

61 

(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.—The 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 INSUR- ANCE 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) NEW 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. 

(II) Investments in the capital stock or obligations of, and any other security issued by, any 

62 

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 appropriate 

Federal banking agency, 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 moderateincome 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 CERTAIN 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— 

(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 

63 

(II) goodwill or any other intangible asset. 

(D) CREDIT CARD.—The appropriate Federal banking 

agency shall issue such regulations as may be necessary to 

define the term ‘‘credit card’’. 

(E) SMALL BUSINESS.—The appropriate Federal banking 

agency 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 

into account in determining the amount of the 

qualified thrift investments and of such savings 

association shall be doubled. 

(B) VIRGIN ISLANDS SAVINGS ASSOCIATIONS.—With respect to any savings association headquartered and operating primarily in the Virgin Islands— 

64 

(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 ASSOCIA- TIONS.— 

(A) IN GENERAL.—If any Federal savings association in 

existence as a Federal savings association on the date of 

enactment of the Financial Institutions Reform, Recovery, 

and Enforcement Act of 1989— 

(i) that was chartered as a savings bank or a cooperative bank under State law before October 15, 1982; or 

(ii) that acquired its principal assets from an association that was chartered before October 15, 1982, as 

a savings bank or a cooperative bank under State law, 

meets the requirements of subparagraph (B), such savings 

association shall be treated as a qualified thrift lender during the period ending on September 30, 1995. 

(B) SUBPARAGRAPH (B) REQUIREMENTS.—A savings association meets the requirements of this subparagraph if, in 

the determination of the appropriate Federal banking 

agency— 

(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 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 

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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) TYING 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) MUTUAL HOLDING COMPANIES.— 

(1) IN 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.— 

(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 Board. The notice shall contain such relevant information as the Board shall require 

by regulation or by specific request in connection with any 

particular notice. 

(B) TRANSACTION ALLOWED IF NOT DISAPPROVED.—Unless 

the Board 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 noVerDate Sep 11 2014 23:10 Aug 06, 2018 Jkt 079006 PO 00000 Frm 00065 Fmt 6659 Sfmt 9001 E:\HR\OC\HR882.XXX HR882
66 

tice may proceed with the transaction, if the requirements 

of paragraph (2) have been met. 

(C) GROUNDS FOR DISAPPROVAL.—The Board 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 Board, retain 

capital assets at the holding company level to the extent 

that such capital exceeds the association’s capital requirement established by the Board pursuant to subsections (s) 

and (t) of section 5. 

(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 subsidiary 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 HOLD- ING COMPANIES.— (A) NEW ACTIVITIES.—If a mutual holding company acquires or merges with another holding company under 

paragraph (5)(C), the holding company acquired or the 

67 

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 Board and shall be subject to such regulations as 

the Board 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— 

(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. 

68 

(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.—For purposes of this subsection— 

(A) MUTUAL HOLDING COMPANY.—The term ‘‘mutual 

holding company’’ means a corporation organized as a 

holding company under this subsection. 

(B) MUTUAL 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. 

(11) DIVIDENDS.— 

(A) DECLARATION OF DIVIDENDS.— 

(i) ADVANCE NOTICE REQUIRED.—Each subsidiary of 

a mutual holding company that is a savings association shall give the appropriate Federal banking agency 

and the Board notice not later than 30 days before the 

date of a proposed declaration by the board of directors of the savings association of any dividend on the 

guaranty, permanent, or other nonwithdrawable stock 

of the savings association. 

(ii) INVALID DIVIDENDS.—Any dividend described in 

clause (i) that is declared without giving notice to the 

appropriate Federal banking agency and the Board 

under clause (i), or that is declared during the 30-day 

period preceding the date of a proposed declaration for 

which notice is given to the appropriate Federal banking agency and the Board under clause (i), shall be invalid and shall confer no rights or benefits upon the 

holder of any such stock. 

(B) WAIVER OF DIVIDENDS.—A mutual holding company 

may waive the right to receive any dividend declared by a 

subsidiary of the mutual holding company, if— 

(i) no insider of the mutual holding company, associate of an insider, or tax-qualified or non-tax-qualified 

employee stock benefit plan of the mutual holding 

company holds any share of the stock in the class of 

stock to which the waiver would apply; or 

(ii) the mutual holding company gives written notice 

to the Board of the intent of the mutual holding company to waive the right to receive dividends, not later 

than 30 days before the date of the proposed date of 

payment of the dividend, and the Board does not object to the waiver. 

(C) RESOLUTION INCLUDED IN WAIVER NOTICE.—A notice 

of a waiver under subparagraph (B) shall include a copy 

of the resolution of the board of directors of the mutual 

holding company, in such form and substance as the Board 

69 

may determine, together with any supporting materials relied upon by the board of directors of the mutual holding 

company, concluding that the proposed dividend waiver is 

consistent with the fiduciary duties of the board of directors to the mutual members of the mutual holding company. 

(D) STANDARDS FOR WAIVER OF DIVIDEND.—The Board 

may not object to a waiver of dividends under subparagraph (B) if— 

(i) the waiver would not be detrimental to the safe 

and sound operation of the savings association; 

(ii) the board of directors of the mutual holding company expressly determines that a waiver of the dividend by the mutual holding company is consistent 

with the fiduciary duties of the board of directors to 

the mutual members of the mutual holding company; 

and 

(iii) the mutual holding company has, prior to December 1, 2009— 

(I) reorganized into a mutual holding company 

under subsection (o); 

(II) issued minority stock either from its midtier stock holding company or its subsidiary stock 

savings association; and 

(III) waived dividends it had a right to receive 

from the subsidiary stock savings association. 

(E) VALUATION.— 

(i) IN GENERAL.—The appropriate Federal banking 

agency shall consider waived dividends in determining 

an appropriate exchange ratio in the event of a full 

conversion to stock form. 

(ii) EXCEPTION.—In the case of a savings association 

that has reorganized into a mutual holding company, 

has issued minority stock from a mid-tier stock holding company or a subsidiary stock savings association 

of the mutual holding company, and has waived dividends it had a right to receive from a subsidiary savings association before December 1, 2009, the appropriate Federal banking agency shall not consider 

waived dividends in determining an appropriate exchange ratio in the event of a full conversion to stock 

form. 

(p) HOLDING COMPANY ACTIVITIES CONSTITUTING SERIOUS RISK

TO SUBSIDIARY SAVINGS ASSOCIATION.— 

(1) DETERMINATION AND IMPOSITION OF RESTRICTIONS.—If the 

Board or the appropriate Federal banking agency for the savings association 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 Board may 

impose such restrictions as the Board, in consultation with the 

appropriate Federal banking agency for the savings association 

determines to be necessary to address such risk. Such restricVerDate Sep 11 2014 23:10 Aug 06, 2018 Jkt 079006 PO 00000 Frm 00069 Fmt 6659 Sfmt 9001 E:\HR\OC\HR882.XXX HR882
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tions 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 

(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.—After 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 

Board affirms, modifies, or rescinds the directive, such directive shall automatically lapse. 

(B) JUDICIAL REVIEW.—If the Board 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 Board in accordance with the provisions of subsection (b)(1) of this section. 

71 

(D) Subject to paragraph (2), the Board approved the 

purchase of the shares of stock by the acquiring savings 

and loan holding company. 

(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 61⁄2 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 Board 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 Board or any 

other Federal agency having jurisdiction. 

(B) OTHER CONDITIONS.—Notwithstanding subsection 

(a)(4), the Board may impose such conditions on any approval of an application for the purchase of stock in connection with a qualified stock issuance as the Board 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 Board may require; and 

(ii) such other conditions as the Board deems necessary or appropriate to prevent evasions of this section. 

(C) APPLICATION DEEMED APPROVED IF NOT DISAPPROVED

WITHIN 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 Board if such apVerDate Sep 11 2014 23:10 Aug 06, 2018 Jkt 079006 PO 00000 Frm 00071 Fmt 6659 Sfmt 9001 E:\HR\OC\HR882.XXX HR882
72 

plication has not been disapproved by the Board before the 

end of the 90-day period beginning on the date such application has been deemed sufficient under regulations issued 

by the Board. 

(3) NO LIMITATION ON CLASS OF STOCK ISSUED.—The 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 TO PROVIDE TIMELY AND ACCURATE REPORTS.— 

(1) FIRST TIER.—Any 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 Board or appropriate Federal banking 

agency, within the period of time specified by the 

Board or appropriate Federal banking agency; 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.—Any 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 Board or appropriate Federal banking agency, within the period of time specified by the Board or appropriate 

Federal banking 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) THIRD TIER.—If 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 Board or appropriate 

73 

Federal banking agency 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 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 Board or appropriate Federal banking agency 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 AU- THORIZED.— (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 appropriate Federal banking agency for the savings association under any applicable law or regulation shall be approved or disapproved in writing by the appropriate Federal banking agency for the savings association 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 appropriate 

Federal banking agency for the savings association determines that— 

(i) an applicant has not furnished all of the information required to be submitted; or 

(ii) in the judgment of the appropriate Federal banking agency for the savings association, 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. 

74 

(4) REGULATIONS.— (A) REQUIRED.—The Comptroller shall prescribe such 

regulations as may be necessary to carry out paragraph 

(1). 

(B) EFFECTIVE DATE.—The regulations required under 

subparagraph (A) shall— 

(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.—No 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.—This 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. 

* * * * * * * 

Æ