II

105TH CONGRESS

2D SESSION S. 1671

To address the Year 2000 computer problems with regard to financial institutions, to extend examination parity to the Director of the Office of

Thrift Supervision and the National Credit Union Administration, and

for other purposes.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 24, 1998

Mr. BENNETT (for himself and Mr. DODD) introduced the following bill; which

was read twice and referred to the Committee on Banking, Housing, and

Urban Affairs

A BILL

To address the Year 2000 computer problems with regard

to financial institutions, to extend examination parity

to the Director of the Office of Thrift Supervision and

the National Credit Union Administration, 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 ‘‘Examination Parity

5 and Year 2000 Readiness for Financial Institutions Act’’.
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1 SEC. 2. YEAR 2000 READINESS FOR FINANCIAL INSTITU2 TIONS.

3 (a) FINDINGS.—The Congress finds that—

4 (1) the Year 2000 computer problem poses a

5 serious challenge to the American economy, includ6 ing the Nation’s banking and financial services in7 dustries;

8 (2) thousands of banks, savings associations,

9 and credit unions rely heavily on internal informa10 tion technology and computer systems, as well as

11 outside service providers, for mission-critical func12 tions, such as check clearing, direct deposit, account13 ing, automated teller machine networks, credit card

14 processing, and data exchanges with domestic and

15 international borrowers, customers, and other finan16 cial institutions; and

17 (3) Federal financial regulatory agencies must

18 have sufficient examination authority to ensure that

19 the safety and soundness of the Nation’s financial

20 institutions will not be at risk.

21 (b) DEFINITIONS.—For purposes of this section—

22 (1) the terms ‘‘depository institution’’ and

23 ‘‘Federal banking agency’’ have the same meanings

24 as in section 3 of the Federal Deposit Insurance

25 Act;
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1 (2) the term ‘‘Federal home loan bank’’ has the

2 same meaning as in section 2 of the Federal Home

3 Loan Bank Act;

4 (3) the term ‘‘Federal reserve bank’’ means a

5 reserve bank established under the Federal Reserve

6 Act;

7 (4) the term ‘‘insured credit union’’ has the

8 same meaning as in section 101 of the Federal

9 Credit Union Act; and

10 (5) the term ‘‘Year 2000 computer problem’’

11 means, with respect to information technology, any

12 problem which prevents such technology from accu13 rately processing, calculating, comparing, or se14 quencing date or time data—

15 (A) from, into, or between—

16 (i) the 20th and 21st centuries; or

17 (ii) the years 1999 and 2000; or

18 (B) with regard to leap year calculations.

19 (c) SEMINARS AND MODEL APPROACHES TO YEAR

20 2000 COMPUTER PROBLEM.—

21 (1) SEMINARS.—

22 (A) IN GENERAL.—Each Federal banking

23 agency and the National Credit Union Adminis24 tration Board shall offer seminars to all deposi25 tory institutions and insured credit unions
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1 under the jurisdiction of such agency on the im2 plication of the Year 2000 computer problem

3 for—

4 (i) the safe and sound operations of

5 such depository institutions and credit

6 unions; and

7 (ii) transactions with other financial

8 institutions, including Federal reserve

9 banks and Federal home loan banks.

10 (B) CONTENT AND SCHEDULE.—The con11 tent and schedule of seminars offered pursuant

12 to subparagraph (A) shall be determined by

13 each Federal banking agency and the National

14 Credit Union Administration Board taking into

15 account the resources and examination prior16 ities of such agency.

17 (2) MODEL APPROACHES.—

18 (A) IN GENERAL.—Each Federal banking

19 agency and the National Credit Union Adminis20 tration Board shall make available to each de21 pository institution and insured credit union

22 under the jurisdiction of such agency model ap23 proaches to common Year 2000 computer prob24 lems, such as model approaches with regard to
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1 project management, vendor contracts, testing

2 regimes, and business continuity planning.

3 (B) VARIETY OF APPROACHES.—In devel4 oping model approaches to the Year 2000 com5 puter problem pursuant to subparagraph (A),

6 each Federal banking agency and the National

7 Credit Union Administration Board shall take

8 into account the need to develop a variety of ap9 proaches to correspond to the variety of deposi10 tory institutions or credit unions within the ju11 risdiction of the agency.

12 (3) COOPERATION.—In carrying out this sec13 tion, the Federal banking agencies and the National

14 Credit Union Administration Board may cooperate

15 and coordinate their activities with each other, the

16 Financial Institutions Examination Council, and ap17 propriate organizations representing depository insti18 tutions and credit unions.

19 SEC. 3. REGULATION AND EXAMINATION OF SERVICE PRO20 VIDERS.

21 (a) REGULATION AND EXAMINATION OF SAVINGS AS22 SOCIATION SERVICE COMPANIES.—

23 (1) AMENDMENT TO HOME OWNERS’ LOAN

24 ACT.—Section 5(d) of the Home Owners’ Loan Act
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1 (12 U.S.C. 1464(d)) is amended by adding at the

2 end the following:

3 ‘‘(7) REGULATION AND EXAMINATION OF SAV4 INGS ASSOCIATION SERVICE COMPANIES, SUBSIDI5 ARIES, AND SERVICE PROVIDERS.—

6 ‘‘(A) GENERAL EXAMINATION AND REGU7 LATORY AUTHORITY.—A service company or

8 subsidiary that is owned in whole or in part by

9 a savings association shall be subject to exam10 ination and regulation by the Director to the

11 same extent as that savings association.

12 ‘‘(B) EXAMINATION BY OTHER BANKING

13 AGENCIES.—The Director may authorize any

14 other Federal banking agency that supervises

15 any other owner of part of the service company

16 or subsidiary to perform an examination de17 scribed in subparagraph (A).

18 ‘‘(C) APPLICABILITY OF SECTION 8 OF

19 THE FEDERAL DEPOSIT INSURANCE ACT.—A

20 service company or subsidiary that is owned in

21 whole or in part by a saving association shall be

22 subject to the provisions of section 8 of the

23 Federal Deposit Insurance Act as if the service

24 company or subsidiary were an insured deposi25 tory institution. In any such case, the Director
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1 shall be deemed to be the appropriate Federal

2 banking agency, pursuant to section 3(q) of the

3 Federal Deposit Insurance Act.

4 ‘‘(D) SERVICE PERFORMED BY CONTRACT

5 OR OTHERWISE.—Notwithstanding subpara6 graph (A), if a savings association, a subsidiary

7 thereof, or any savings and loan affiliate or en8 tity, as identified by section 8(b)(9) of the Fed9 eral Deposit Insurance Act, that is regularly ex10 amined or subject to examination by the Direc11 tor, causes to be performed for itself, by con12 tract or otherwise, any service authorized under

13 this Act or, in the case of a State savings asso14 ciation, any applicable State law, whether on or

15 off its premises—

16 ‘‘(i) such performance shall be subject

17 to regulation and examination by the Di18 rector to the same extent as if such serv19 ices were being performed by the savings

20 association on its own premises; and

21 ‘‘(ii) the savings association shall no22 tify the Director of the existence of the

23 service relationship not later than 30 days

24 after the earlier of—
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1 ‘‘(I) the date on which the con2 tract is entered into; or

3 ‘‘(II) the date on which the per4 formance of the service is initiated.

5 ‘‘(E) ADMINISTRATION BY THE DIREC6 TOR.—The Director may issue such regulations

7 and orders, including those issued pursuant to

8 section 8 of the Federal Deposit Insurance Act,

9 as may be necessary to enable the Director to

10 administer and carry out this paragraph and to

11 prevent evasion of this paragraph.

12 ‘‘(8) DEFINITIONS.—For purposes of this sec13 tion—

14 ‘‘(A) the term ‘service company’ means—

15 ‘‘(i) any corporation—

16 ‘‘(I) that is organized to perform

17 services authorized by this Act or, in

18 the case of a corporation owned in

19 part by a State savings association,

20 authorized by applicable State law;

21 and

22 ‘‘(II) all of the capital stock of

23 which is owned by 1 or more insured

24 savings associations; and

25 ‘‘(ii) any limited liability company—
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1 ‘‘(I) that is organized to perform

2 services authorized by this Act or, in

3 the case of a company, 1 of the mem4 bers of which is a State savings asso5 ciation, authorized by applicable State

6 law; and

7 ‘‘(II) all of the members of which

8 are 1 or more insured savings associa9 tions;

10 ‘‘(B) the term ‘limited liability company’

11 means any company, partnership, trust, or

12 similar business entity organized under the law

13 of a State (as defined in section 3 of the Fed14 eral Deposit Insurance Act) that provides that

15 a member or manager of such company is not

16 personally liable for a debt, obligation, or liabil17 ity of the company solely by reason of being, or

18 acting as, a member or manager of such com19 pany; and

20 ‘‘(C) the terms ‘State savings association’

21 and ‘subsidiary’ have the same meanings as in

22 section 3 of the Federal Deposit Insurance

23 Act.’’.

24 (2) CONFORMING AMENDMENTS TO SECTION 8

25 OF THE FEDERAL DEPOSIT INSURANCE ACT.—Sec-
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1 tion 8 of the Federal Deposit Insurance Act (12

2 U.S.C. 1818) is amended—

3 (A) in subsection (b)(9), by striking ‘‘to

4 any service corporation of a savings association

5 and to any subsidiary of such service corpora6 tion’’;

7 (B) in subsection (e)(7)(A)(ii), by striking

8 ‘‘(b)(8)’’ and inserting ‘‘(b)(9)’’; and

9 (C) in subsection (j)(2), by striking

10 ‘‘(b)(8)’’ and inserting ‘‘(b)(9)’’.

11 (b) REGULATION AND EXAMINATION OF SERVICE

12 PROVIDERS FOR CREDIT UNIONS.—Title II of the Federal

13 Credit Union Act (12 U.S.C. 1781 et seq.) is amended

14 by inserting after section 206 the following new section:

15 ‘‘SEC. 206A. REGULATION AND EXAMINATION OF CREDIT

16 UNION ORGANIZATIONS AND SERVICE PRO17 VIDERS.

18 ‘‘(a) REGULATION AND EXAMINATION OF CREDIT

19 UNION ORGANIZATIONS.—

20 ‘‘(1) GENERAL EXAMINATION AND REGU21 LATORY AUTHORITY.—A credit union organization

22 shall be subject to examination and regulation by the

23 Board to the same extent as that insured credit

24 union.
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1 ‘‘(2) EXAMINATION BY OTHER BANKING AGEN2 CIES.—The Board may authorize to make an exam3 ination of a credit union organization in accordance

4 with paragraph (1)—

5 ‘‘(A) any Federal regulator agency that su6 pervises any activity of a credit union organiza7 tion; or

8 ‘‘(B) any Federal banking agency that su9 pervises any other person who maintains an

10 ownership interest in a credit union organiza11 tion.

12 ‘‘(b) APPLICABILITY OF SECTION 206.—A credit

13 union organization shall be subject to the provisions of

14 section 206 as if the credit union organization were an

15 insured credit union.

16 ‘‘(c) SERVICE PERFORMED BY CONTRACT OR OTHER17 WISE.—Notwithstanding subsection (a), if an insured

18 credit union or a credit union organization that is regu19 larly examined or subject to examination by the Board,

20 causes to be performed for itself, by contract or otherwise,

21 any service authorized under this Act or, in the case of

22 a State credit union, any applicable State law, whether

23 on or off its premises—

24 ‘‘(1) such performance shall be subject to regu25 lation and examination by the Board to the same ex-
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1 tent as if such services were being performed by the

2 insured credit union or credit union organization

3 itself on its own premises; and

4 ‘‘(2) the insured credit union or credit union or5 ganization shall notify the Board of the existence of

6 the service relationship not later than 30 days after

7 the earlier of—

8 ‘‘(A) the date on which the contract is en9 tered into; or

10 ‘‘(B) the date on which the performance of

11 the service is initiated.

12 ‘‘(d) ADMINISTRATION BY THE BOARD.—The Board

13 may issue such regulations and orders as may be nec14 essary to enable the Board to administer and carry out

15 this section and to prevent evasion of this section.

16 ‘‘(e) DEFINITIONS.—For purposes of this section—

17 ‘‘(1) the term ‘credit union organization’ means

18 any entity that—

19 ‘‘(A) is not a credit union;

20 ‘‘(B) is an entity in which an insured cred21 it union may lawfully hold an ownership inter22 est or investment; and

23 ‘‘(C) is owned in whole or in part by an in24 sured credit union; and
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1 ‘‘(2) the term ‘Federal banking agency’ has the

2 same meaning as in section 3 of the Federal Deposit

3 Insurance Act.

4 ‘‘(f) EXPIRATION OF AUTHORITY.—This section and

5 all powers and authority of the Board under this section

6 shall cease to be effective as of December 31, 2001.’’.

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