I

103D CONGRESS

1ST SESSION H. R. 597

To institute management reforms and eliminate conflicts-of-interest on boards

of directors of depository institutions and depository holding companies,

and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 26, 1993

Mr. KANJORSKI introduced the following bill; which was referred to the

Committee on Banking, Finance and Urban Affairs

A BILL

To institute management reforms and eliminate conflictsof-interest on boards of directors of depository institutions and depository holding companies, and for other

purposes.

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

3 SECTION 1. SHORT TITLE.

4 This act may be cited as the ‘‘Management and Con5 flict of Interest Reform Amendments of 1993’’.

6 SEC. 2. DEFINITIONS.

7 (a) Section 202 of the Depository Institution Man8 agement Interlocks Act (12 U.S.C. 3201) is amended—
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1 (1) by amending paragraph (1) to read as fol2 lows:

3 ‘‘(1) the term ‘depository institution’ means a

4 commercial bank, a foreign bank, a savings bank, a

5 trust company, a savings association, a building and

6 loan association, a homestead association, a coopera7 tive bank, an industrial bank, or a credit union;’’;

8 (2) in paragraph (5), by striking ‘‘and’’;

9 (3) in paragraph (6), by striking the period and

10 inserting ‘‘; and’’; and

11 (4) by adding at the end the following:

12 ‘‘(7) the term ‘outside counsel’ means any indi13 vidual who is not a full time employee of the deposi14 tory institution or depository holding company and

15 who receives compensation, either directly or

16 through a law firm, partnership, or corporation, for

17 legal services or advice rendered to the depository in18 stitution or depository holding company or any of its

19 subsidiaries, affiliates, or holding companies;

20 ‘‘(8) the term ‘outside accountant’ means any

21 individual who is not a full time employee of the de22 pository institution or depository holding company

23 and who receives compensation, either directly or

24 through an accounting firm, partnership, or corpora25 tion, for accounting services or advice rendered to
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1 the depository institution or any of its subsidiaries,

2 affiliates, or holding companies;

3 ‘‘(9) the term ‘outside director’ means an indi4 vidual who is a member of the board of directors

5 who is not an employee or officer with management

6 functions of either the depository institution or de7 pository holding company, or any of its subsidiaries,

8 affiliates, or holding companies; and

9 ‘‘(10) the term ‘control’ has the meaning given

10 to such term in section 2 of the Bank Holding Com11 pany Act of 1956 for bank holding companies and

12 section 10(a)(2) of the Home Owners’ Loan Act for

13 savings and loan holding companies.’’.

14 (b) Section 207(2) of the Depository Institution Man15 agement Interlocks Act (12 U.S.C. 3206(2)) is amended

16 to read as follows:

17 ‘‘(2) the Board of Governors of the Federal Re18 serve System with respect to State banks which are

19 members of the Federal Reserve System, foreign

20 banks, and bank holding companies,’’.
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1 SEC. 3. DUAL SERVICE OF OUTSIDE COUNSEL AND AC2 COUNTANTS ON BOARD OF DIRECTORS PRO3 HIBITED.

4 The Depository Institution Management Interlocks

5 Act (12 U.S.C. 3201 et seq.) is amended by adding at

6 the end the following new section:

7 ‘‘SEC. 211. DUAL SERVICE OF OUTSIDE COUNSEL AND AC8 COUNTANTS ON BOARD OF DIRECTORS PRO9 HIBITED.

10 ‘‘No individual who is an outside counsel or outside

11 accountant of a depository institution or a depository hold12 ing company may serve as a member of board of directors

13 of that depository institution or depository holding com14 pany or any of its subsidiaries, affiliates, or holding com15 panies.’’.

16 SEC. 4. OWNERSHIP DISCLOSURES TO BOARD OF DIREC17 TORS.

18 The Depository Institution Management Interlocks

19 Act (12 U.S.C. 3201 et seq.) (as amended by this act)

20 is amended by adding at the end the following new section:

21 ‘‘SEC. 212. OWNERSHIP DISCLOSURES TO BOARD OF DIREC22 TORS.

23 ‘‘Not less than once each calendar year each deposi24 tory institution and depository holding company shall pro25 vide to each member of its board of directors, and to each

26 member of the board of directors of any depository institu-
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1 tion or depository holding company it controls, a list of

2 the names and principal places of business of each individ3 ual or company which directly or indirectly owns, controls,

4 or has power to vote 5 per centum or more of any class

5 of voting securities of the depository institution or deposi6 tory holding company, and such other information as the

7 appropriate Federal depository institutions regulatory

8 agency shall prescribe by regulation.’’.

9 SEC. 5. CHANGE IN CONTROL DISCLOSURES TO BOARD OF

10 DIRECTORS.

11 The Depository Institution Management Interlocks

12 Act (12 U.S.C. 3201 et seq.) (as amended by this act)

13 is amended by adding at the end the following new section:

14 ‘‘SEC. 213. CHANGE IN CONTROL DISCLOSURES TO BOARD

15 OF DIRECTORS.

16 ‘‘Each depository institution and depository holding

17 company shall provide to each member of its board of di18 rectors, and to each member of the board of directors of

19 any depository institution or depository holding company

20 it controls, with notice of any proposed change in control

21 of the parent depository institution or depository holding

22 company. Such notice shall contain such information as

23 the appropriate Federal depository institutions regulatory

24 agency of the parent depository institution or depository

25 holding company shall prescribe by regulation.’’.
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1 SEC. 6. BOARD OF DIRECTORS CONTROL BY OUTSIDE DI2 RECTORS.

3 The Depository Institution Management Interlocks

4 Act (12 U.S.C. 3201 et seq.) (as amended by this act)

5 is amended by adding at the end the following new section:

6 ‘‘SEC. 214. BOARD OF DIRECTORS CONTROL BY OUTSIDE DI7 RECTORS.

8 ‘‘A majority of the voting members of the board of

9 directors of each depository institution and each deposi10 tory holding company shall be outside directors.’’.

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