activity authorized for such bank under the law of such
bank’s home State (as defined in section 2(o)(4) of the Fi-
nancial Services Holding Company Act of 1995).
SEC. 110. MUNICIPAL SECURITIES.
The paragraph designated the ‘‘Seventh’’ of section
5136 of the Revised Statutes of the United States (12 U.S.C.
24) is amended by adding at the end the following new sen-
tences: ‘‘Notwithstanding any limitation and restriction
contained in this paragraph relating to dealing, underwrit-
ing, and purchasing securities and in addition to any au-
thorization in this paragraph to deal in, underwrite or pur-
chase securities, a national bank may deal in, underwrite,
and purchase for such association’s own account any obli-
gation (including general and limited obligation bonds, rev-
enue bonds and obligations that satisfy the requirements of
section 142(b)(1) of the Internal Revenue Code of 1986) is-
sued by or on behalf of any State or political subdivision
of a State, including any municipal corporate instrumen-
talities of 1 or more States, or any public agency or author-
ity of any State or political subdivision of a State, if the
national bank—
‘‘(1) is well capitalized (as defined in section
38(b) of the Federal Deposit Insurance Act); and
‘‘(2) engages in the business of banking.’’.
SEC. 111. INTERAGENCY AGREEMENT RELATING TO RETAIL
SALES OF CERTAIN NONDEPOSIT INVEST-
MENT PRODUCTS.
Section 18 of the Federal Deposit Insurance Act (12
U.S.C. 1828) is amended by inserting after subsection (u)
(as added by section 107 of this Act) the following new sub-
section:
‘‘(v) JOINT STANDARDS RELATING TO RETAIL SALES
OF CERTAIN NONDEPOSIT INVESTMENT PRODUCTS.—
‘‘(1) IN
GENERAL.—The appropriate Federal
banking agencies shall jointly prescribe, after consult-
ing with and considering the views of the Securities
and Exchange Commission, standards applicable to
any insured depository institution which—
‘‘(A) is not registered as a broker under the
Securities Exchange Act of 1934; and
‘‘(B) effects transactions in securities issued
by an investment company or annuities.
‘‘(2) SCOPE OF STANDARDS.—The standards re-
quired under paragraph (1) with respect to securities
and annuities referred to in such paragraph shall, at
a minimum, establish requirements with respect to—
‘‘(A) sales practices;
‘‘(B) disclosures and advertising in connec-
tion with transactions in such securities and an-
nuities, including—
‘‘(i) the content, form, and timing of
any such disclosure; and
‘‘(ii) 
disclaimers 
concerning 
the
noninsured status of the security or annu-
ity;
‘‘(C) the compensation of sales personnel
with respect to referrals or transactions;
‘‘(D) the training of and qualifications for
personnel involved in such transactions, includ-
ing training in making an accurate judgment
about the suitability of a particular investment
product for a prospective customer; and
‘‘(E) the setting in which and the cir-
cumstances under which transactions may be ef-
fected, and referrals made, by sales personnel
with respect to such securities and annuities.’’.
SEC. 112. EFFECTIVE DATE.
The amendments made by this subtitle shall take effect
at the end of the 90-day period beginning on the date of
the enactment of this Act.
Subtitle B—Investment Bank
Holding Companies
SEC. 116. INVESTMENT BANK HOLDING COMPANIES.
(a) DEFINITIONS.—
(1) IN GENERAL.—Section 2 of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1842) is amend-
ed by adding at the end the following new subsections:
‘‘(s) WHOLESALE FINANCIAL INSTITUTION.—The term
‘wholesale financial institution’ means any institution that
is an uninsured State member bank authorized pursuant
to section 9B of the Federal Reserve Act.
‘‘(t) INVESTMENT BANK HOLDING COMPANY.—The
term ‘investment bank holding company’ means any finan-
cial services holding company that—
‘‘(1) controls a company engaged in underwrit-
ing corporate equity securities pursuant to section 10;
‘‘(2) controls a wholesale financial institution;
and
‘‘(3) if the company is a foreign bank that oper-
ates a branch, agency or commercial lending com-
pany in the United States, or is a company that con-
trols such foreign bank, is treated as an investment
bank holding company because such bank or company
meets the criteria in section 12(b) and has received
the determination required by such section.’’.
(2) DEFINITION OF BANK INCLUDES WHOLESALE
FINANCIAL INSTITUTION.—Section 2(c)(1) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841(c)(1))
is amended by adding at the end the following new
subparagraph:
‘‘(C) A wholesale financial institution.’’.
(b) INVESTMENT BANK HOLDING COMPANIES.—The
Bank Holding Company Act of 1956 (12 U.S.C. 1841 et
seq.) is amended by inserting after section 11 (as added by
section 104 of this Act) the following new section:
‘‘SEC. 12. INVESTMENT BANK HOLDING COMPANIES.
‘‘(a) PERMISSIBLE AFFILIATIONS
FOR INVESTMENT
BANK HOLDING COMPANIES.—
‘‘(1) FINANCIAL ACTIVITIES.—
‘‘(A) ACTIVITIES AUTHORIZED.—An invest-
ment bank holding company may directly or in-
directly own or control shares of any company
engaged in any activity the Board has deter-
mined to be financial in nature or incidental to
a financial activity (other than activities ex-
pressly limited under subsection (c)(8)), or any
activity in compliance with subparagraph (B) or
(C).
‘‘(B) INCIDENTAL ACTIVITIES.—
‘‘(i) IN
GENERAL.—Notwithstanding
subparagraph (A), the aggregate investment
by an investment bank holding company in
shares of companies that engage in non-
financial activities and financial activities
(other than those otherwise permitted under
this section) shall not at any time exceed
7.5 percent (or such greater percentage as
the Board may determine to be appro-
priate) of the consolidated total risk-weight-
ed assets of the investment bank holding
company (excluding assets of companies
held pursuant to this subparagraph), except
that the amount invested by the investment
bank holding company in any 1 company
(including all affiliates of such company
other than preexisting affiliates of such in-
vestment bank holding company) may not
exceed the amount which is equal to 25 per-
cent of the total capital and surplus of such
investment bank holding company.
‘‘(ii) APPLICABILITY TO SUCCESSOR IN
INTEREST.—Any successor to any invest-
ment bank holding company referred to in
clause (i) may retain any investments made
pursuant to this subparagraph—
‘‘(I) during the 5-year period be-
ginning on the date the succession is
consummated; and
‘‘(iv) USE OF COMMON NAME.—An in-
vestment bank holding company shall not
permit a wholesale financial institution to
adopt a name which is the same as or simi-
lar to, or a variation of, the name or title
of an affiliate engaged in activities pursu-
ant to subparagraph (B).
‘‘(C) COMMODITIES.—
‘‘(i) 
IN
GENERAL.—An 
investment
bank holding company predominantly en-
gaged as of January 1, 1995, in securities
activities in the United States (or any suc-
cessor to any such company) may engage
in, or directly or indirectly own or control
shares of a company engaged in, activities
related to the trading, sale, or investment in
commodities and underlying physical prop-
erties that were not permissible for bank
holding companies to conduct in the United
States as of January 1, 1995, provided such
investment bank holding company, or any
subsidiary of such holding company, was
engaged directly, indirectly, or through any
such company in any of such activities as
of January 1, 1995, in the United States.
‘‘(ii) 
LIMITATION.—Notwithstanding
subparagraphs (A) and (B), the aggregate
investment by an investment bank holding
company in activities under this subpara-
graph (other than those otherwise permitted
under this section) shall not at any time ex-
ceed 5 percent of the total consolidated as-
sets of the investment bank holding com-
pany.
‘‘(iii) SUCCESSOR DEFINED.—For pur-
poses of this subparagraph and subpara-
graph (B), the term ‘successor’ means, with
respect to any investment bank holding
company described in clause (i), any com-
pany that merges with, or acquires control
of, such investment bank holding company.
‘‘(D) QUALIFIED INVESTOR IN AN INVEST-
MENT BANK HOLDING COMPANY.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of Federal or State law,
a qualified investor—
‘‘(I) shall not be, or be deemed to
be, an investment bank holding com-
pany, a financial services holding com-
pany, a bank holding company, or any
similar organization; and
‘‘(II) shall not be deemed to con-
trol any such company or organization
or any subsidiary of any such com-
pany or organization (other than for
purposes of section 23A and 23B of the
Federal Reserve Act),
by virtue of the investor’s ownership or con-
trol of shares of an investment bank holding
company.
‘‘(ii) 
QUALIFIED
INVESTOR
DE-
FINED.—For purposes of this subparagraph,
the term ‘qualified investor’ means any
United States company (including a parent
company and all subsidiaries of which the
parent company holds at least 80 percent of
the total voting equity securities) which
since February 27, 1995, has directly or in-
directly owned or controlled shares of cap-
ital stock representing at least 10 percent,
and not more than 45 percent, of the out-
standing voting shares or voting power of a
company that—
100
‘‘(I) becomes an investment bank
holding company or a subsidiary of an
investment bank holding company; and
‘‘(II) before such company became
an investment bank holding company
or a subsidiary of an investment bank
holding company, had more than 50
percent of the company’s assets em-
ployed directly or indirectly in securi-
ties activities.
‘‘(iii) CROSS-MARKETING AND COMMON
NAME.—A wholesale financial institution
shall not—
‘‘(I) offer or market products or
services of a qualified investor in the
investment bank holding company of
which the wholesale financial institu-
tion is an affiliate;
‘‘(II) 
permit 
the 
institution’s
products or services to be offered or
marketed in connection with products
or services of such qualified investor; or
‘‘(III) adopt a name which is the
same as or similar to, or a variation
101
of, the name or title of such qualified
investor.
‘‘(iv) EXAMINATION AND REPORTING.—
Notwithstanding any other provision of law,
the Board may conduct examinations of, or
require reports from, a qualified investor
only to the extent that the Board reasonably
determines that such examinations or re-
ports are necessary—
‘‘(I) to ensure compliance with
this subparagraph; or
‘‘(II) to the extent that the quali-
fied investor is an affiliate of a whole-
sale financial institution for purposes
of section 23A of the Federal Reserve
Act, to ensure compliance with restric-
tions imposed by law or regulation on
transactions between the qualified in-
vestor and such wholesale financial in-
stitution.
‘‘(E) SPECIAL RULE.—An investment bank
holding company that owns and controls shares
of a company pursuant to subparagraph (B) or
(C) may not own or control shares of a company
pursuant to section 4(k).
102
‘‘(F) CONSOLIDATED TOTAL RISK-WEIGHT-
ED
ASSETS.—For purposes of this paragraph,
the following definitions shall apply:
‘‘(i) IN GENERAL.—The term ‘consoli-
dated total risk-weighted assets’ shall have
the meaning given to such term in regula-
tions prescribed by the Board as in effect on
the date of the enactment of the Financial
Services Competitiveness Act of 1995.
‘‘(ii) 
APPLICATION
TO
FOREIGN
BANKS.—In the case of a foreign bank or a
company that owns or controls a foreign
bank, the term ‘consolidated total risk-
weighted assets’ means total risk-weighted
assets held by the foreign bank or company
in the United States in any United States
branch, agency, or commercial lending com-
pany subsidiary, any depository institution
controlled by the foreign bank or company,
any subsidiary held under the authority of
this section, section 3, 4, or 10 (other than
paragraph (9) or (13) of section 4(c)), or
section 25 or 25A of the Federal Reserve
Act.
‘‘(2) SECURITIES ACTIVITIES.—
103
‘‘(A) INSTITUTIONS
MUST
BE
WELL
CAP-
ITALIZED.—The Board shall disapprove a notice
under section 10 by an investment bank holding
company (or a company seeking to become an
investment bank holding company) to acquire a
securities affiliate if any wholesale financial in-
stitution controlled by the investment bank hold-
ing company is not well capitalized or would not
be well capitalized following the transaction.
‘‘(B) TRANSACTIONS WITH AFFILIATES.—
‘‘(i) IN GENERAL.—A wholesale finan-
cial institution controlled by an investment
bank holding company shall be treated as a
bank for purposes of the provisions of sec-
tions 23A and 23B of the Federal Reserve
Act.
‘‘(ii) OTHER
RESTRICTIONS
REGARD-
ING
SECURITIES
AFFILIATES
DETERMINED
BY THE BOARD.—A securities affiliate of an
investment bank holding company, and a
wholesale financial institution controlled by
an investment bank holding company, shall
not be subject to the provisions of section 11,
except that the securities affiliate and
wholesale financial institution shall be sub-
104
ject to subsections (l) and (m) of such sec-
tion in the same manner and to the same
extent such paragraphs would apply if the
wholesale financial institution were an in-
sured depository institution.
‘‘(3) LIMITATION ON AFFILIATION WITH INSURED
DEPOSITORY
INSTITUTIONS.—An investment bank
holding company may not, directly or indirectly, own
or control—
‘‘(A) any bank, other than a wholesale fi-
nancial institution;
‘‘(B) any savings association;
‘‘(C) any institution described in section
2(c)(2) (other than subparagraphs (C) and (G)
of such section); or
‘‘(D) any institution that accepts—
‘‘(i) initial deposits of $100,000 or less,
other than on an incidental or occasional
basis, or
‘‘(ii) deposits that are insured under
the Federal Deposit Insurance Act.
‘‘(4) NO DEPOSIT INSURANCE FUND LIABILITY.—
No Federal deposit insurance funds may be used in
connection with the failure of, or any proposed assist-
105
ance to, a wholesale financial institution or an in-
vestment bank holding company.
‘‘(5) CAPITAL OF IBHC.—
‘‘(A) IN
GENERAL.—The Board shall not
impose any capital requirement on investment
bank holding companies or subsidiaries of such
companies (other than depository institutions)
unless any such requirement is based upon ap-
propriate risk-weighing considerations.
‘‘(B) 
APPLICABLE
ACCOUNTING
PRIN-
CIPLES.—In applying any capital standard to
investment bank holding companies, or subsidi-
aries of such companies, the Board shall utilize
uniform accounting principles consistent with
generally accepted accounting principles in ac-
cordance with section 37(a)(2) of the Federal De-
posit Insurance Act.
‘‘(b) QUALIFICATION OF FOREIGN BANK AS INVEST-
MENT BANK HOLDING COMPANY.—
‘‘(1) IN GENERAL.—Any foreign bank that—
‘‘(A) operates a branch, agency or commer-
cial lending company in the United States (and
any company that owns or controls such foreign
bank), including a foreign bank that does not
106
own or control a wholesale financial institution;
and
‘‘(B) controls a security affiliate that en-
gages in underwriting corporate equity securi-
ties,
may request a determination from the Board that
such bank or company be treated as an investment
bank holding company.
‘‘(2) CONDITIONS
FOR
TREATMENT
AS
AN
IN-
VESTMENT BANK HOLDING COMPANY.—A foreign bank
and a company that owns or controls a foreign bank
may not be treated as an investment bank holding
company unless the bank and company meet and con-
tinue to meet the following criteria:
‘‘(A) NO INSURED DEPOSITS.—No deposits
held directly by a foreign bank or through an af-
filiate are insured under the Federal Deposit In-
surance Act.
‘‘(B) CAPITAL
STANDARDS.—The foreign
bank meets risk-based capital standards com-
parable to the capital standards required for a
wholesale financial institution, giving due re-
gard to the principle of national treatment and
equality of competitive opportunity.
107
‘‘(C) TRANSACTIONS
WITH
AFFILIATES.—
Transactions between a branch, agency, or com-
mercial lending company subsidiary of the for-
eign bank in the United States, and any securi-
ties affiliate or company in which the foreign
bank (or any company that owns or controls
such foreign bank) has invested pursuant to sub-
section (a)(1)(B), comply with the provisions of
sections 23A and 23B of the Federal Reserve Act
in the same manner and to the same extent as
such transactions would be required to comply
with such sections if the bank were a member
bank.
‘‘(3) TREATMENT AS A WHOLESALE FINANCIAL
INSTITUTION.—Any foreign bank which is, or is affili-
ated with a company which is, treated as an invest-
ment bank holding company under this subsection
shall be treated as a wholesale financial institution
for purposes of clauses (iii) and (iv) of subsection
(a)(1)(B), subsection (a)(2)(B)(ii), and section 5(g),
except that the Board may adopt such modifications,
conditions, or exemptions as the Board deems appro-
priate, giving due regard to the principle of national
treatment and equality of competitive opportunity.
108
‘‘(4) NONAPPLICABILITY
OF
OTHER
EXEMP-
TION.—Any foreign bank or company which is treated
as an investment bank holding company under this
subsection shall not be eligible for any exemption de-
scribed in section 2(h).
‘‘(c) ELIGIBILITY OF FOREIGN BANKS FOR CERTAIN
TREATMENT.—
‘‘(1) RECIPROCAL NATIONAL TREATMENT.—
‘‘(A) IN GENERAL.—A foreign bank that op-
erates a branch, agency or commercial lending
company in the United States, and any com-
pany that owns or controls such a foreign bank,
shall be eligible for the treatment afforded under
subsection (b) or section 11(n) only if the home
country of such foreign bank or company accords
to United States banks the same competitive op-
portunities in banking as such country accords
to domestic banks of such country.
‘‘(B) COORDINATION
WITH
NAFTA.—Sub-
paragraph (A) shall not apply in derogation of
any obligation under the North American Free
Trade Agreement.
‘‘(C) HOME COUNTRY DEFINED.—For pur-
poses of subparagraph (A), the term ‘home coun-
try’ means, with respect to any foreign bank or
109
company referred to in subparagraph (A), the
country under the laws of which the foreign bank
or company is organized.
‘‘(2) PREVENTION OF EVASION.—No foreign bank
or bank owned by a former United States national
may operate a branch or agency in the United States
if the predominance of the assets of such bank were
acquired in connection with a merger with, or pur-
chase or assumption of all or substantially all the as-
sets of, a wholesale financial institution.
‘‘(d) RULE FOR FINANCIAL SERVICES HOLDING COM-
PANIES.—For purposes of section 5(g)(2)(A)(ii), any for-
eign bank (as defined in section 1(b) of the International
Banking Act of 1978) which is directly or indirectly owned,
controlled, or operated by a company that—
‘‘(1) as of January 1, 1995, was registered as a
bank holding company; or
‘‘(2) is a successor to any such bank holding
company,
shall be treated as a wholesale financial institution.’’.
(c) CONFORMING AMENDMENTS.—
(1) EXCEPTION
TO
DEPOSIT
INSURANCE
RE-
QUIREMENT.—Section 3(e) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1842(e)) is amended by
adding at the end the following: ‘‘This subsection shall
110
not apply to a wholesale financial institution that is
controlled by an investment bank holding company
that controls no banks other than wholesale financial
institutions.’’.
(2) APPROPRIATE FEDERAL BANKING AGENCY.—
Section 3(q)(2)(A) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(q)(2)(A)) is amended to read as
follows:
‘‘(A) any State member insured bank (ex-
cept a District bank) and wholesale financial in-
stitution as authorized pursuant to section 9B of
the Federal Reserve Act;’’.
SEC. 117. WHOLESALE FINANCIAL INSTITUTIONS.
(a) IN GENERAL.—The Federal Reserve Act (12 U.S.C.
221 et seq.) is amended by inserting after section 9A the
following new section:
‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLESALE
FINANCIAL INSTITUTION.—
‘‘(1) APPLICATION REQUIRED.—
‘‘(A) IN GENERAL.—Any bank incorporated
by special law of any State, or organized under
the general laws of any State, may apply to the
Board of Governors of the Federal Reserve Sys-
tem to become a wholesale financial institution
111
and to subscribe to the stock of the Federal re-
serve bank organized within the district where
the applying bank is located.
‘‘(B) 
TREATMENT
AS
STATE
MEMBER
BANK.—Any application under subparagraph
(A) shall be treated as an application to become
a State member bank under, and shall be subject
to the provisions of, section 9.
‘‘(2) INSURANCE TERMINATION.—No bank that is
insured under the Federal Deposit Insurance Act may
become a wholesale financial institution unless it has
met all requirements under that Act for voluntary ter-
mination of deposit insurance.
‘‘(b) GENERAL
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) FEDERAL RESERVE ACT.—Except as other-
wise provided in this section, wholesale financial in-
stitutions shall be member banks and shall be subject
to the provisions of this Act that apply to member
banks to the same extent and in the same manner as
State member insured banks, except that a wholesale
financial institution may terminate membership
under this Act only with the prior written approval
of the Board and on terms and conditions that the
112
Board determines are appropriate to carry out the
purposes of this Act.
‘‘(2) PROMPT CORRECTIVE ACTION.—A wholesale
financial institution shall be deemed to be an insured
depository institution for purposes of section 38 of the
Federal Deposit Insurance Act except that—
‘‘(A) the relevant capital levels and capital
measures for each capital category shall be the
levels specified by the Board for wholesale finan-
cial institutions in accordance with subsection
(c);
‘‘(B) the provisions applicable to well cap-
italized insured depository institutions shall be
inapplicable to wholesale financial institutions;
‘‘(C) the provisions authorizing or requiring
an institution to be placed into receivership shall
not apply to a wholesale financial institution,
and, instead, the Board is authorized or re-
quired, as the case may be, to terminate the
wholesale financial institution’s membership in
the Federal Reserve System or place the bank
into conservatorship; and
‘‘(D) for purposes of applying the provi-
sions of section 38 of the Federal Deposit Insur-
ance Act to wholesale financial institutions, all
113
references to the appropriate Federal banking
agency or to the Corporation in that section
shall be deemed to be references to the Board.
‘‘(3) ENFORCEMENT
AUTHORITY.—Subsections
(j) and (k) of section 7, subsections (b) through (n),
(s), (u), and (v) of section 8, and section 19 of the
Federal Deposit Insurance Act shall apply to a whole-
sale financial institution in the same manner and to
the same extent as such provisions apply to State
member insured banks and any reference in such sec-
tions to an insured depository institution shall be
deemed, for purposes of this paragraph, to be a ref-
erence to a wholesale financial institution.
‘‘(4) CERTAIN OTHER STATUTES APPLICABLE.—
A wholesale financial institution shall be deemed to
be a banking institution, and the Board shall be the
appropriate Federal banking agency for such bank
and all such bank’s affiliates, for purposes of the
International Lending Supervision Act.
‘‘(5) BANK MERGER ACT.—A wholesale financial
institution shall be subject to the provisions of sec-
tions 18(c) and 44 of the Federal Deposit Insurance
Act in the same manner and to the same extent the
wholesale financial institution would be subject to
114
such sections if the institution were a State member
insured bank.
‘‘(c) 
SPECIFIC
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) LIMITATIONS ON DEPOSITS.—
‘‘(A) MINIMUM AMOUNT.—
‘‘(i) IN GENERAL.—Pursuant to such
regulations as the Board may prescribe, no
wholesale financial institution may receive
initial deposits of $100,000 or less, other
than on an incidental and occasional basis.
‘‘(ii) LIMITATION
ON
DEPOSITS
OF
LESS
THAN
$100,000.—No bank may be
treated as a wholesale financial institution
if the total amount of the initial deposits of
$100,000 or less at such bank constitute
more than 5 percent of the bank’s total de-
posits.
‘‘(B) NO DEPOSIT INSURANCE.—No deposits
held by a wholesale financial institution shall be
insured deposits under the Federal Deposit In-
surance Act.
‘‘(C) ADVERTISING AND DISCLOSURE.—The
Board shall prescribe regulations pertaining to
advertising and disclosure by wholesale financial