I
104TH CONGRESS
1ST SESSION
H. R. 2520
To enhance competition in the financial services industry by providing a
prudential framework for the affiliation of banks, securities firms, and
other financial service providers, to reduce paperwork and additional
regulatory burdens for depository institutions, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 24, 1995
Mr. LEACH introduced the following bill; which was referred to the Committee
on Banking and Financial Services, and in addition to the Committee on
Commerce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
A BILL
To enhance competition in the financial services industry
by providing a prudential framework for the affiliation
of banks, securities firms, and other financial service
providers, to reduce paperwork and additional regulatory
burdens for depository institutions, and for other pur-
poses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Financial Services Competitiveness and Regulatory Re-
lief Act of 1995’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Section 1. Short title; table of contents.
TITLE I—BANK SECURITIES ACTIVITIES AND AFFILIATIONS
WITH SECURITIES FIRMS AND OTHER FINANCIAL COMPANIES
Subtitle A—Securities Activities
Sec. 101. Anti-affiliation provision of the Banking Act of 1933 repealed.
Sec. 102. Financial services holding companies authorized to have securities af-
filiates.
Sec. 103. Establishment and operations of securities affiliates.
Sec. 104. Safeguards relating to securities affiliates.
Sec. 105. Ownership of shares of certain companies by financial services hold-
ing companies.
Sec. 106. Provisions applicable to limited purpose banks.
Sec. 107. Securities company affiliations of FDIC—insured banks.
Sec. 108. Authority to terminate grandfather rights under the International
Banking Act of 1978.
Sec. 109. Effect on State laws prohibiting the affiliation of banks and securities
companies.
Sec. 110. Interagency agreement relating to retail sales of certain nondeposit
investment products.
Sec. 111. Effective date.
Subtitle B—Investment Bank Holding Companies
Sec. 116. Investment bank holding companies.
Sec. 117. Wholesale financial institutions.
Subtitle C—Financial Activities
Sec. 121. Financial activities.
Sec. 122. No prior approval required for well capitalized and well managed fi-
nancial services holding companies.
Sec. 123. Streamlined examination and reporting requirements for all financial
services holding companies.
Sec. 124. Holding company supervision for financial services holding companies
engaged primarily in nonbanking activities.
Sec. 125. Conversion of unitary savings and loan holding companies to financial
services holding companies.
Sec. 126. Financial services advisory committee.
Sec. 127. Coordination with State law.
Sec. 129. Conforming amendments to the Bank Holding Company Act Amend-
ments of 1970.
Sec. 130. Credit cards for business purposes.
Sec. 131. Disposition of foreclosed assets.
Subtitle D—Interagency Banking and Financial Services Advisory Committee
Sec. 141. Interagency banking and financial services advisory committee.
Subtitle E—Application and Registration Fees
Sec. 151. Authority to impose fees.
TITLE II—FUNCTIONAL REGULATION
Subtitle A—Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Power to exempt from the definitions of broker and dealer.
Sec. 204. Margin requirements.
Sec. 205. Effective date.
Subtitle B—Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Use of underwriting proceeds.
Sec. 213. Lending to an affiliated investment company.
Sec. 214. Independent directors.
Sec. 215. Additional SEC disclosure authority.
Sec. 216. Definition of broker under the Investment Company Act of 1940.
Sec. 217. Definition of dealer under the Investment Company Act of 1940.
Sec. 218. Removal of the exclusion from the definition of investment adviser for
banks that advise investment companies.
Sec. 219. Definition of broker under the Investment Advisers Act of 1940.
Sec. 220. Definition of dealer under the Investment Advisers Act of 1940.
Sec. 221. Interagency consultation.
Sec. 222. Treatment of bank common trust funds.
Sec. 223. Investment advisers prohibited from having controlling interest in
registered investment company.
Sec. 224. Conforming change in definition.
Sec. 225. Effective date.
TITLE III—BANK INSURANCE ACTIVITIES
Sec. 301. Authority of the Comptroller of the Currency.
Sec. 302. National bank community development insurance activities.
TITLE IV—REDUCTIONS IN GOVERNMENT OVERREGULATION
Subtitle A—The Home Mortgage Process
Sec. 401. Regulatory authority over disclosures and escrow accounts under
RESPA transferred to Federal Reserve Board.
Sec. 402. Simplification and unification of disclosures required under RESPA
and TILA for mortgage transactions.
Sec. 403. Increased regulatory flexibility under the Truth in Lending Act.
Sec. 404. Reductions in RESPA regulatory burdens; clarifying amendments.
Sec. 405. Disclosures for adjustable rate mortgages.
Sec. 406. Treatment of certain debt cancellation and deficiency waiver con-
tracts.
Sec. 407. Recovery of fees.
Sec. 408. Home ownership debt counseling notification.
Sec. 409. Home Mortgage Disclosure Act.
Subtitle B—Community Reinvestment Act Amendments
Sec. 421. Expression of congressional intent.
Sec. 422. Increased incentives for lending to low- and moderate-income commu-
nities.
Sec. 423. Prohibition on additional reporting under CRA.
Sec. 424. Technical amendment.
Sec. 425. CRA congressional oversight.
Sec. 426. Consultation among examiners.
Sec. 427. Limitation on regulations.
Subtitle C—Consumer Banking Reforms
Sec. 441. Truth in savings.
Sec. 442. Information sharing.
Sec. 443. Electronic Fund Transfer Act clarification.
Sec. 444. Limit on restitution for truth in lending violations if safety and
soundness of violator would be affected.
Subtitle D—Equal Credit Opportunity Act Amendments
Sec. 451. Short title.
Sec. 452. Findings and purpose.
Sec. 453. Equal Credit Opportunity Act amendments.
Sec. 454. Fair Credit Reporting Act amendments.
Sec. 455. Incentives for self-testing.
Sec. 456. Consultation by Attorney General required in nonreferral cases.
Sec. 457. Effective date.
Subtitle E—Consumer Leasing Act Amendments
Sec. 461. Short title.
Sec. 462. Congressional findings and declaration of purpose.
Sec. 463. Regulations.
Sec. 464. Consumer lease advertising.
Sec. 465. Statutory penalties.
TITLE V—STREAMLINING GOVERNMENT REGULATIONS
Subtitle A—Regulatory Approval Issues
Sec. 501. Streamlined bank acquisitions by well capitalized and well managed
banking organizations.
Sec. 502. Eliminate filing and approval requirements for insured depository in-
stitutions already controlled by the same holding company.
Sec. 503. Eliminate redundant approval requirement for Oakar transactions.
Sec. 504. Elimination of duplicative requirements imposed upon financial serv-
ices holding companies and other regulatory relief under the
Home Owners’ Loan Act.
Sec. 505. Eliminate requirement that approval be obtained for divestitures.
Sec. 506. Eliminate unnecessary branch applications.
Sec. 507. Eliminate branch applications and requirements for ATMs and simi-
lar facilities.
Sec. 508. Eliminate requirement for approval of investments in bank premises
for well capitalized and well managed banks.
Sec. 509. Eliminate unnecessary filing for officer and director appointments.
Sec. 510. Increase in certain credit union loan ceilings.
Subtitle B—Streamlining of Government Regulations; Miscellaneous Provisions
Sec. 521. Eliminate the per-branch capital requirement for national banks and
State member banks.
Sec. 522. Branch closures.
Sec. 523. Amendments to the Depository Institutions Management Interlocks
Act.
Sec. 524. Acceleration of repayment to Treasury.
Sec. 525. Eliminate unnecessary and duplicative recordkeeping and reporting
requirements relating to loans to executive officers and permit
participation in employee benefit plans.
Sec. 526. Expanded regulatory discretion for small bank examinations.
Sec. 527. Cost reimbursement.
Sec. 528. Identification of foreign nonbank financial institution customers.
Sec. 529. Paperwork reduction review.
Sec. 530. Daily confirmations for hold-in-custody repurchase transactions.
Sec. 531. Required regulatory review of regulations.
Sec. 532. Country risk requirements.
Sec. 533. Audit costs.
Sec. 534. Standards for director and officer liability.
Sec. 535. Foreign bank applications.
Sec. 536. Duplicate examination of foreign banks.
Sec. 537. Second mortgages.
Sec. 538. Streamlining FDIC approval of new State bank powers.
Sec. 539. Repeal of call report attestation requirement.
Sec. 540. Authorizing bank service companies to organize as limited liability
partnerships.
Sec. 541. Bank investments in Edge Act and agreement corporations.
Sec. 542. Report on the reconciliation of differences between regulatory ac-
counting principles and generally accepted accounting prin-
ciples.
Sec. 543. Waivers authorized for residency requirement for national bank direc-
tors.
TITLE VI—LENDER LIABILITY
Sec. 601. Lender liability.
TITLE VII—ANNUAL STUDY AND REPORT ON IMPACT ON
LENDING TO SMALL BUSINESS
Sec. 701. Annual study and report.
TITLE I—BANK SECURITIES AC-
TIVITIES AND AFFILIATIONS
WITH SECURITIES FIRMS AND
OTHER 
FINANCIAL 
COMPA-
NIES
Subtitle A—Securities Activities
SEC. 101. ANTI-AFFILIATION PROVISION OF THE BANKING
ACT OF 1933 REPEALED.
(a) SECTION 20 REPEALED.—Section 20 (12 U.S.C.
377) of the Banking Act of 1933 (commonly referred to
as the ‘‘Glass-Steagall Act’’) is repealed.
(b) CONFORMING AMENDMENT TO SECTION 32.—
Section 32 (12 U.S.C. 78) of the Banking Act of 1933
is amended by adding at the end the following sentence:
‘‘This section shall not apply so as to prohibit an officer,
director, or employee of a securities affiliate (as defined
in section 2 of the Financial Services Company Act of
1995) from serving at the same time as an officer, direc-
tor, or employee of a member bank affiliated with that
securities affiliate pursuant to section 10 of such Act. This
section shall not apply so as to prohibit an officer, direc-
tor, or employee of an investment company registered
under the Investment Company Act of 1940 or an invest-
ment adviser registered under the Investment Advisers
Act of 1940 from serving at the same time as an officer,
director, or employee of a member bank.’’.
SEC. 102. FINANCIAL SERVICES HOLDING COMPANIES AU-
THORIZED TO HAVE SECURITIES AFFILIATES.
Section 4(c) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(c)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(13);
(2) by striking the period at the end of para-
graph (14) and inserting ‘‘; or’’; and
(3) by adding after paragraph (14) the follow-
ing new paragraph:
‘‘(15) shares of a securities affiliate in accord-
ance with section 10.’’.
SEC. 103. ESTABLISHMENT AND OPERATIONS OF SECURI-
TIES AFFILIATES.
(a) IN GENERAL.—Section 10 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841 et seq.) is amend-
ed to read as follows:
‘‘SEC. 10. SECURITIES ACTIVITIES.
‘‘(a) ACTIVITIES PERMISSIBLE FOR SECURITIES AF-
FILIATES.—
‘‘(1) IN GENERAL.—A securities affiliate may
engage in 1 or more of the following activities:
‘‘(A) Underwrite, deal in, broker, place, or
distribute securities of any type, provide invest-
ment advice regarding securities of any type,
and engage in other securities activities.
‘‘(B) Sponsor, organize, control, manage,
and act as investment adviser to an investment
company.
‘‘(C) Engage in, or acquire the shares of a
company engaged in, any activity if—
‘‘(i) a provision of section 4(c) permits
financial services holding companies gen-
erally to engage in that activity or acquire
those shares; and
‘‘(ii) either—
‘‘(I) the Board permits the finan-
cial services holding company to en-
gage in that activity or acquire those
shares through the securities affiliate;
or
‘‘(II) a provision of section 4(c)
permits the financial services holding
company to engage in such activity or
acquire such shares without the
Board’s approval.
‘‘(2) FACTOR TO BE CONSIDERED.—In making
determinations pursuant to this section, the Board
shall take into account the need for securities firms
affiliated with banks to be innovative and competi-
tive.
‘‘(b) ACQUIRING INTEREST IN SECURITIES AFFILI-
ATE.—
‘‘(1) NOTICE REQUIRED.—A financial services
holding company shall not, without complying with
and receiving approval pursuant to the notice proce-
dure in section 4(j)(1), directly or indirectly acquire
or retain more than 5 percent of the voting shares
of, or all or substantially all of the assets of, a secu-
rities affiliate (or a company that would be a securi-
ties affiliate if the Board permitted the financial
services holding company to acquire that company).
‘‘(2) CRITERIA
FOR
APPROVAL.—The Board
shall disapprove a notice required under paragraph
(1) unless the Board determines that the require-
ments of the following subparagraphs have been
met:
‘‘(A) CAPITAL.—
‘‘(i) DEPOSITORY INSTITUTIONS.—
‘‘(I) The lead depository institu-
tion of the financial services holding
company is well capitalized.
‘‘(II) Well capitalized depository
institutions control at least 80 percent
of the aggregate total risk-weighted
assets of depository institutions con-
trolled by the financial services hold-
ing company.
‘‘(III) All depository institutions
controlled by the financial services
holding company are well capitalized
or adequately capitalized.
‘‘(ii) RECENTLY
ACQUIRED
DEPOSI-
TORY
INSTITUTIONS.—Depository institu-
tions acquired by a financial services hold-
ing company during the 12-month period
preceding the submission of a notice under
paragraph (1) may be excluded for pur-
poses of clause (i)(II) if—
‘‘(I) the financial services holding
company has submitted a plan to the
appropriate Federal banking agency
to restore the capital of the institution
and the plan has been accepted by
such agency; and
‘‘(II) all such institutions that
are excluded for the purposes of
clause (i)(II) represent, in the aggre-
gate, less than 25 percent of the ag-
gregate total risk-weighted assets of
all depository institutions controlled
by the financial services holding com-
pany.
‘‘(iii) FINANCIAL SERVICES HOLDING
COMPANY.—The financial services holding
company is (and immediately after the ac-
quisition of a securities affiliate would con-
tinue to be) adequately capitalized under
the capital standards applicable, if any, to
such financial services holding company.
‘‘(iv) FOREIGN
BANKS
AND
COMPA-
NIES.—For purposes of applying this sub-
section and other provisions of this section,
the Board shall establish and apply com-
parable capital standards for the acquisi-
tion, retention, and operation of a securi-
ties affiliate in the United States by a for-
eign bank that operates a branch or agen-
cy or owns or controls a bank or commer-
cial lending company in the United States,
and any company that owns or controls
such a foreign bank, giving due regard to
the principle of national treatment and
equality of competitive opportunity.
‘‘(B) ALTERNATIVE CAPITAL TREATMENT
FOR WELL CAPITALIZED FINANCIAL SERVICES
HOLDING COMPANIES.—
‘‘(i) IN GENERAL.—A financial serv-
ices holding company and the depository
institution subsidiaries of such company
shall be deemed to have met the capital re-
quirements set forth in subparagraph (A)
if—
‘‘(I) the holding company files a
written notice with the Board of such
company’s election to meet such cap-
ital requirements in the manner pro-
vided in this subparagraph;
‘‘(II) all depository institutions
controlled by the financial services
holding company are at least ade-
quately capitalized; and
‘‘(III) the financial services hold-
ing company is (and immediately after
the acquisition of a securities affiliate
would continue to be) well capitalized.
‘‘(ii) LOSSES INCURRED BY FDIC.—A
financial services holding company which
makes an election under clause (i) in con-
nection with the acquisition of control of
any securities affiliate shall be liable for
any loss incurred by the Federal Deposit
Insurance Corporation, or any loss which
the Federal Deposit Insurance Corporation
reasonably anticipates incurring in connec-
tion with—
‘‘(I) the default of any insured
depository institution controlled by
the financial services holding com-
pany; or
‘‘(II) any assistance provided by
the Corporation to any insured deposi-
tory institution in danger of default
that is controlled by the financial
services holding company.
‘‘(C) MANAGERIAL RESOURCES.—
‘‘(i) 
IN
GENERAL.—The 
financial
services holding company and each deposi-
tory institution subsidiary of such com-
pany—
‘‘(I) are well managed; and
‘‘(II) were well managed during
the 12-month period preceding the ac-
quisition of a securities affiliate (but
for purposes of this subparagraph the
Board may disregard any depository
institution acquired by the financial
services holding company during that
period).
‘‘(ii) SECURITIES
ACTIVITIES.—The
financial services holding company has the
managerial resources to conduct the pro-
posed securities activities safely and sound-
ly.
‘‘(D) INTERNAL CONTROLS.—The financial
services holding company has established ade-
quate policies and procedures to manage finan-
cial and operational risks, to provide reasonable
assurance of compliance with this section and
other applicable laws, and to provide reasonable
assurance of maintenance of corporate sepa-
rateness within the financial services holding
company.
‘‘(E) NO
DETRIMENTAL
EFFECT
ON
FI-
NANCIAL SERVICES HOLDING COMPANY OR ITS
SUBSIDIARY
DEPOSITORY
INSTITUTIONS.—The
acquisition of a securities affiliate would not ad-
versely affect the safety and soundness of—
‘‘(i) the financial services holding
company; or
‘‘(ii) any depository institution sub-
sidiary of the financial services holding
company.
‘‘(F) CONCENTRATION
OF
RESOURCES.—
The acquisition of a securities affiliate would
not result in an undue concentration of re-
sources in the financial services business.
‘‘(G) RESPONSIVENESS
TO
COMMUNITY
NEEDS.—The lead insured depository institu-
tion subsidiary of the financial services holding
company and insured depository institutions
controlling at least 80 percent of the aggregate
total risk-weighted assets of insured depository
institutions controlled by the financial services
holding company have achieved a ‘satisfactory
record of meeting community credit needs’, or
better, during the most recent examination of
such insured depository institutions.
‘‘(3) LIMITED NOTICE PROCEDURES FOR PRO-
POSALS BY WELL CAPITALIZED AND WELL MANAGED
COMPANIES
TO
ACQUIRE
ADDITIONAL
SECURITIES
AFFILIATES.—A financial services holding company
may, without providing the notice required under
paragraph (1), directly or indirectly acquire the
shares or substantially all of the assets of any com-
pany that is engaged in activities described in sub-
paragraph (A) or (B) of subsection (a)(1), if—
‘‘(A) the financial services holding com-
pany previously received the Board’s approval
under paragraph (1) to control a securities af-
filiate and continues to control the securities af-
filiate pursuant to that approval;
‘‘(B) the acquisition proposal qualifies
under section 4(j)(4);
‘‘(C) the financial services holding com-
pany provides the written notification required
in section 4(j)(5); and
‘‘(D) the acquisition would not result in an
undue concentration of resources in the finan-
cial services business.
‘‘(B) does not disapprove the notice within
30 days after the notice is filed.
‘‘(2) NO PRIOR NOTICE REQUIRED FOR CER-
TAIN FINANCIAL SERVICES HOLDING COMPANIES.—
‘‘(A) IN
GENERAL.—A financial services
holding company shall not be required to pro-
vide prior notice under paragraph (1) if after
making any investment described in paragraph
(1)—
‘‘(i) the financial services holding
company would be adequately capitalized
under the capital standards applicable, if
any, to such financial services holding com-
pany and each of the financial services
holding company’s subsidiary depository
institutions would be well capitalized; and
‘‘(ii) the financial services holding
company and each of its subsidiary deposi-
tory institutions are well managed (but for
purposes of this clause the Board may dis-
regard any depository institution acquired
by the financial services holding company
during the previous 12-month period).
‘‘(B) SUBSEQUENT
NOTICE.—A financial
services holding company that makes an invest-
ment pursuant to subparagraph (A) shall pro-
vide written notice to the Board of the addi-
tional investment within 10 days after making
the investment.
‘‘(3) CRITERIA FOR DISAPPROVING NOTICE.—
The Board may disapprove a notice filed under
paragraph (1) if—
‘‘(A) any depository institution affiliate of
the securities affiliate is undercapitalized; or
‘‘(B) the Board determines that the finan-
cial 
services 
holding 
company 
would 
be
undercapitalized under the capital standards
applicable, if any, to such financial services
holding company after making the investment
or that the investment would otherwise be un-
safe or unsound.
‘‘(4) EMERGENCY APPROVAL.—Notwithstanding
any provision of this subsection, in the event of ad-
verse market conditions, or concerns regarding the
financial or operational condition of the securities
affiliate, the Board may approve any additional in-
vestment in the securities affiliate on an emergency
basis if such additional investment does not ad-
versely affect the safety and soundness of all insured
depository institution affiliates of such securities af-
filiate and does not diminish the ability of the finan-
cial services holding company to maintain an appro-
priate amount of capital in all such insured deposi-
tory institutions.
‘‘(d) PROVISIONS APPLICABLE IF AFFILIATED DE-
POSITORY INSTITUTION CEASES TO BE WELL CAPITAL-
IZED.—
‘‘(1) HOLDING COMPANY ACTION REQUIRED IF
AFFILIATED INSTITUTIONS ARE NOT WELL CAPITAL-
IZED.—
‘‘(A) 
APPLICABILITY.—This 
paragraph
shall apply if—
‘‘(i) the lead depository institution of
the financial services holding company is
not well capitalized, or
‘‘(ii) well capitalized depository insti-
tutions do not control at least 80 percent
of the aggregate total risk-weighted assets
of depository institutions affiliated with the
securities affiliate.
‘‘(B) 
CAPITAL
MAINTENANCE
AGREE-
MENT.—Within 30 days after subparagraph (A)
becomes applicable with respect to any financial
services holding company, such company shall
execute an agreement with the Board—
‘‘(i) to meet the capital requirements
of subparagraph (A) within a reasonable
period of time; or
‘‘(ii) to divest control of the depository
institution in an orderly manner within
180 days, or within such additional period
of time as the Board may determine is rea-
sonably required in order to effect such di-
vestiture.
‘‘(C) RESTRICTIONS ON CERTAIN SECURI-
TIES ACTIVITIES.—If a financial services hold-
ing company fails to meet the requirements of,
or comply with the agreement executed pursu-
ant to, subparagraph (B), a securities affiliate
of such financial services holding company shall
not, beginning 180 days after subparagraph (A)
becomes applicable with respect to such com-
pany, agree to underwrite or deal in, any secu-
rities other than—
‘‘(i) securities expressly authorized by
section 5136 of the Revised Statutes of the
United States as permissible for a national
bank to underwrite or deal in;
‘‘(ii) securities backed by or represent-
ing interests in notes, drafts, acceptances,
loans, leases, receivables, other obligations,
or pools of any such obligations; or
‘‘(iii) securities issued by an open-end
investment company registered under the
Investment Company Act of 1940.
‘‘(D) EXCEPTION.—The Board may permit
the securities affiliate of a financial services
holding company described in subparagraph (C)
to underwrite or deal in securities not described
in clauses (i) through (iii) of such subparagraph
for a period of 1 year from the date on which
subparagraph (A) first becomes applicable with
respect to such company, if—
‘‘(i) the financial services holding
company submits a capital restoration plan
to the Board specifying the steps the fi-
nancial services holding company will take
to meet the requirements of subsection
(b)(2)(A), and containing such other infor-
mation as the Board may require; and
‘‘(ii) the Board approves the plan.
‘‘(E) EXTENSION OF PERIOD.—
‘‘(i) IN GENERAL.—Upon application
by a financial services holding company,
the Board may extend, for not more than
1 year at a time, the period provided in
subparagraph (C).
‘‘(ii) MAXIMUM EXTENSION.—No ex-
tension under clause (i) of the period pro-
vided in subparagraph (C) shall, in the ag-
gregate, exceed 2 years.
‘‘(2) DIVESTITURE
OF
SECURITIES
AFFILI-
ATE.—
‘‘(A) IN
GENERAL.—A financial services
holding company shall divest itself of the securi-
ties affiliate if any of the financial services
holding company’s subsidiary depository institu-
tions has been undercapitalized for more than 6
months.
‘‘(B) EXTENDING TIME.—The Board may
provide additional time, not exceeding 18
months, for a divestiture under subparagraph
(A) if—
‘‘(i) the appropriate Federal banking
agency or, in the case of a foreign bank or
company that owns or controls a foreign
bank, 
the 
Board, 
has 
approved 
the
undercapitalized institution’s capital res-
toration plan; and
‘‘(ii) the Board determines that the
securities affiliate poses no significant risk
to any affiliated depository institution.
‘‘(e) SECURITIES AFFILIATE EXCLUDED IN DETER-
MINING WHETHER FINANCIAL SERVICES HOLDING COM-
PANY IS ADEQUATELY CAPITALIZED.—
‘‘(1) IN GENERAL.—In determining whether a
financial services holding company is adequately cap-
italized—
‘‘(A) the financial services holding compa-
ny’s capital and total assets shall each be re-
duced by—
‘‘(i) an amount equal to the amount
of the financial services holding company’s
equity investment in any securities affili-
ate; and
‘‘(ii) an amount equal to the amount
of any extensions of credit by the financial
services holding company to any securities
affiliate that are considered capital for
purposes of any capital requirement im-
posed on the securities affiliate under sec-
tion 15(c)(3) of the Securities Exchange
Act of 1934; and
‘‘(B) the securities affiliate’s assets and li-
abilities shall not be consolidated with those of
the financial services holding company.
‘‘(2) EXCEPTION FOR NONSECURITIES ACTIVI-
TIES.—Paragraph (1) shall not apply to the extent
that the Board determines by regulation or order
that—
‘‘(A) an item described in such paragraph
relates to activities which are not described in
subparagraph (A) or (B) of subsection (a)(1);
or
‘‘(B) another method of adjusting capital
is more appropriate to ensure the safety and
soundness of depository institutions.
‘‘(3) EXCEPTION
FOR
COMPANIES
ENGAGED
PREDOMINANTLY IN SECURITIES ACTIVITIES.—Para-
graph (1) shall not apply to an investment bank
holding company which is predominantly engaged in
securities activities on a consolidated basis.
‘‘(f) SAFEGUARDS.—Each financial services holding
company and each subsidiary of any such company shall
comply with all applicable safeguard requirements of sec-
tion 11.
‘‘(g) ACTIVITIES NOT PERMISSIBLE FOR DEPOSI-
TORY INSTITUTIONS.—
‘‘(1) IN GENERAL.—A financial services holding
company that acquires control of a securities affili-
ate shall not, after the end of the 1-year period be-
ginning on the date of such acquisition, permit any
depository institution, or any subsidiary of any de-
pository institution, which is controlled by such hold-
ing company—
‘‘(A) to engage, directly or indirectly, in
the United States—
‘‘(i) in underwriting securities backed
by or representing interests in notes,
drafts, acceptances, loans, leases, receiv-
ables, other obligations, or pools of any
such obligations originated or purchased by
the institution or its affiliates; or
‘‘(ii) in underwriting or dealing in any
other securities,
except securities expressly authorized by section
5136 of the Revised Statutes of the United
States as permissible for a national bank to un-
derwrite or deal in; or
‘‘(B) to make an equity investment in any
securities affiliate.
‘‘(2) EXCEPTION FOR CERTAIN EDGE ACT AND
AGREEMENT
CORPORATIONS.—The limitations in
paragraph (1)(A) shall not apply with respect to ac-
tivities conducted by a subsidiary of a financial serv-
ices holding company which is held pursuant to sec-
tion 25 or 25A of the Federal Reserve Act or section
4(c)(13) of this Act.
‘‘(3) RULE OF CONSTRUCTION.—No provision
of this subsection shall be construed as permitting a
securities affiliate to accept deposits in contravention
of section 21 of the Banking Act of 1933.
‘‘(h) APPROVAL OF SECURITIES ACTIVITIES UNDER
SECTION 4(c)(8) RESTRICTED.—The Board shall deny
any notice or application by a financial services holding
company under authority of section 4(c)(8) to engage in,
or acquire the shares of a company engaged in, underwrit-
ing or dealing in securities in the United States, other
than securities expressly authorized by section 5136 of the
Revised Statutes of the United States as permissible for
a national bank to underwrite or deal in.
‘‘(i) BANKERS’ BANKS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, each shareholder of or participant in a com-
pany that controls a depository institution described
in section 5169(b)(1) of the Revised Statutes of the
United States or in a similar statute of any State,
and each subsidiary of such a shareholder or partici-
pant, shall be treated as if such shareholder, partici-
pant, or subsidiary were a subsidiary of that com-
pany.
‘‘(2) EXCEPTION.—This subsection shall not
apply with respect to a shareholder or participant in
a company described in subparagraph (A) (or any
subsidiary of such shareholder or participant) if the
shareholder or participant, and the affiliates of any
such shareholder or participant, do not, in the ag-
gregate, control more than 5 percent of any class of
voting shares of such company.
‘‘(j) SHARES ACQUIRED IN CONNECTION WITH UN-
DERWRITING AND INVESTMENT BANKING ACTIVITIES.—
‘‘(1) IN
GENERAL.—Notwithstanding section
4(a), a financial services holding company may di-
rectly or indirectly acquire or control, whether as
principal, on behalf of 1 or more entities (including
entities, other than a depository institution or sub-
sidiary of a depository institution, that the financial
services holding company controls), or otherwise,
shares, assets, or ownership interests (including
without limitation debt or equity securities, partner-
ship interests, trust certificates, or other instru-
ments representing ownership) of a company or
other entity, whether or not constituting control of
such company or entity, engaged in activities not au-
thorized pursuant to section 4 if—
‘‘(A) the shares, assets, or ownership inter-
ests are not acquired or held by a depository in-
stitution or a subsidiary of a depository institu-
tion;
‘‘(B) such shares, assets, or ownership in-
terests are acquired and held by a securities af-
filiate or an affiliate of a securities affiliate as
part of a bona fide underwriting or investment
banking activity, which includes investment ac-
tivities engaged in for the purpose of apprecia-
tion and ultimate resale or other disposition of
the investment, and such shares, assets, or own-
ership interests are held for such a period of
time as will permit the sale or disposition there-
of on a reasonable basis consistent with the na-
ture of such activities; and
‘‘(C) during the period such shares, assets,
or ownership interests are held, the financial
services holding company does not actively man-
age or operate the company or entity except in-
sofar as necessary to achieve the objectives of
subparagraph (B).
‘‘(2) NO EXPANSION OF UNDERWRITING ACTIVI-
TIES.—No provision of this subsection shall be con-
strued as authorizing any financial services holding
company, or any subsidiary of any such company, to
underwrite or deal in any security.
‘‘(3) ACQUISITION FEE.—No financial services
holding company may acquire any company or other
entity under paragraph (1) unless the Board has re-
ceived, from the holding company, full payment of a
fee which the Board shall impose in accordance with
section 5(h).
‘‘(k) REGISTRATION FEES.—In the case of any finan-
cial services holding company which controls—
‘‘(1) a securities affiliate; or
‘‘(2) any company or entity pursuant to sub-
section (j),
the Board shall assess an annual registration fee in ac-
cordance with section 5(h) on such holding company with
respect to each affiliate, company, or other entity referred
to in paragraph (1) or (2) which is controlled by such
holding company.
‘‘(l) DEFINITIONS.—For purposes of this section and
sections 11 and 12, the following definitions shall apply:
‘‘(1) CAPITAL STOCK AND SURPLUS.—The term
‘capital stock and surplus’ has the same meaning as
in section 23A of the Federal Reserve Act.
‘‘(2) COVERED TRANSACTION.—The term ‘cov-
ered transaction’ has the same meaning as in section
23A of the Federal Reserve Act.
‘‘(3) SECURITY.—
‘‘(A) IN
GENERAL.—The term ‘security’
has the meaning given to such term in section
3(a)(10) of the Securities Exchange Act of
1934.
‘‘(B) EXCEPTIONS.—Notwithstanding any
other provision of law, the term ‘security’ does
not include any of the following for purposes of
this section other than subsection (a):
‘‘(i) A contract of insurance.
‘‘(ii) A deposit account, savings ac-
count, certificate of deposit, or other de-
posit instrument issued by a depository in-
stitution.
‘‘(iii) A share account issued by a sav-
ings association if the account is insured
by the Federal Deposit Insurance Corpora-
tion.
‘‘(iv) A banker’s acceptance.
‘‘(v) A letter of credit issued by a de-
pository institution.
‘‘(vi) A debit account at a depository
institution arising from a credit card or
similar arrangement.
‘‘(vii) A loan or loan participation (as
determined by the Board), including any
debt security issued in connection with sov-
ereign debt restructuring which a bank
purchases and sells pursuant to such
bank’s lending authority.
‘‘(viii) A qualified financial contract
(as defined in section 11(e)(8)(D)(i) of the
Federal Deposit Insurance Act), as deter-
mined by the Board, after consultation
with and consideration of the views of the
Securities and Exchange Commission, ex-
cept that, for purposes of this section other
than subsection (a), such term does not in-
clude—
‘‘(I) any securities contract (as
defined in section 11(e)(8)(D)(ii) of
such Act) that is based on or directly
relates to a security that is not ex-
pressly authorized by section 5136 of
the Revised Statutes of the United
States as permissible for a national
bank to underwrite or deal in unless
the Board determines, after consulta-
tion with and consideration of the
views of the Securities and Exchange
Commission, that such securities con-
tract is appropriate for a bank to un-
derwrite or deal in, taking into ac-
count other qualified financial con-
tracts which a bank is permitted to
underwrite or deal in; and
‘‘(II) any agreement, contract, or
transaction which is determined by
the Federal Deposit Insurance Cor-
poration in a regulation prescribed
after the date of the enactment of the
Financial 
Services 
Competitiveness
and Regulatory Relief Act of 1995 to
be a qualified financial contract unless
the Board determines, after consulta-
tion with and consideration of the
views of the Securities and Exchange
Commission, that such agreement,
contract, or transaction shall be treat-
ed as a qualified financial contract for
purposes of this section.
‘‘(C) BOARD’S
AUTHORITY
TO
EXEMPT
TRADITIONAL
BANKING
PRODUCTS.—Notwith-
standing any other provision of law, the Board
may, by regulation or order, exempt a banking
product from the definition of security if the
Board finds that—
‘‘(i) the product is available in the
course of a banking business and is more
appropriately regulated as a banking prod-
uct; and
‘‘(ii) the exemption is otherwise con-
sistent with the purposes of this section,
the maintenance of fair and orderly mar-
kets, and the protection of investors.
‘‘(D) DEFINITION
FOR
LIMITED
PUR-
POSE.—The fact that a particular instrument is
excluded pursuant to subparagraph (B) or (C)
from the definition of security for purposes of
this section shall not be construed as finding or
implying that such instrument is or is not a se-
curity for purposes of Federal securities laws.
‘‘(E) RESERVATION
OF
AUTHORITY
TO
CHARTERING AUTHORITY.—A determination by
the time the determination becomes
effective.’’.
(b) TRANSITION RULE FOR SECURITIES AFFILIATES
APPROVED UNDER SECTION 4(c)(8).—
(1) CONVERSION TO (4)(c)(15) SUBSIDIARY.—
(A) IN GENERAL.—Except as provided in
subparagraph (B) and paragraphs (3) and (4),
effective 18 months after the date of enactment
of this Act, no financial services holding com-
pany may engage in, or retain the shares of any
company engaged in, underwriting or dealing in
securities based on the approval of an applica-
tion under section 4(c)(8) of the Bank Holding
Company Act of 1956 (as in effect before the
date of the enactment of the Financial Services
Competitiveness and Regulatory Relief Act of
1995) unless the financial services holding com-
pany has obtained the Board’s approval to re-
tain the shares of that company under section
10.
(B) EXCEPTION FOR BANK ELIGIBLE SE-
CURITIES.—Subparagraph (A) shall not apply
with respect to underwriting or dealing in—
(i) securities expressly authorized by
section 5136 of the Revised Statutes of the
United States as permissible for a national
bank to underwrite or deal in; and
(ii) municipal securities.
(2) EXTENDING TIME.—
(A) IN
GENERAL.—The Board may, for
good cause shown, extend the time provided
under paragraph (1) for not more than 18
months.
(B) PENDING
NOTICES.—If a financial
services holding company has filed a notice
under section 10(b) of the Bank Holding Com-
pany Act of 1956 not later than 180 days after
the date of enactment of this Act, paragraph
(1) shall not apply with respect to the company
engaged in such underwriting or dealing until
180 days after the Board has acted on the no-
tice.
(3) CONVERSION PROCEDURES FOR COMPANIES
PREVIOUSLY AUTHORIZED TO CONDUCT SECURITIES
ACTIVITIES.—Any financial services holding com-
pany that controls a company engaged in underwrit-
ing and dealing in corporate debt and equity securi-
ties pursuant to an order issued by the Board under
section 4(c)(8) of the Bank Holding Company Act of
1956 before the date of enactment of the Financial
Services Competitiveness and Regulatory Relief Act
of 1995 shall be treated as follows:
(A) REVENUE TEST AND CERTAIN OTHER
RESTRICTIONS.—Upon filing the notice required
under section 10(b) of the Financial Services
Holding Company Act of 1995, the financial
services holding company shall be relieved
from—
(i) the limitation contained in such
order on the amount of revenue that may
be derived from securities underwriting
and dealing activities; and
(ii) any other restriction contained in
such order that would not be required
under section 11 of such Act, as permitted
by the Board.
(B) EXAMINATION
OF
INTERNAL
CON-
TROLS.—The financial services holding com-
pany shall not, in connection with action on the
notice submitted under section 10(b)(1) of the
Financial Services Holding Company Act of
1995, be subject to an examination of internal
controls under section 10(b)(2)(D) of such Act.
(4) RETENTION
OF
COMPANIES
CONDUCTING
LIMITED SECURITIES ACTIVITIES.—Notwithstanding
paragraph (1), any financial services holding com-
pany that controls a company engaged in underwrit-
ing and dealing in securities (other than corporate
debt or equity securities) pursuant to an order is-
sued by the Board under section 4(c)(8) of the Bank
Holding Company Act of 1956 before the date of en-
actment of the Financial Services Competitiveness
Act and Financial Institutions Regulatory Relief of
1995 may retain control of such company, so long
as such company complies with all of the limitations,
restrictions and conditions, including the limitation
on the revenue that may be derived from such un-
derwriting or dealing activities, contained in such
order.
SEC. 104. SAFEGUARDS RELATING TO SECURITIES AFFILI-
ATES.
(a) IN GENERAL.—The Bank Holding Company Act
of 1956 (12 U.S.C. 1841 et seq.) is amended—
(1) by redesignating sections 11 and 12 as sec-
tions 13 and 14, respectively; and
(2) by inserting after section 10 (as added by
section 103 of this Act) the following new section:
‘‘SEC. 11. SAFEGUARDS RELATING TO SECURITIES AFFILI-
ATES.
‘‘(a) EXTENSIONS
OF CREDIT
AND ASSET PUR-
CHASES RESTRICTED.—
‘‘(1) IN
GENERAL.—No depository institution
affiliated with a securities affiliate shall, directly or
indirectly, do any of the following:
‘‘(A) Extend credit in any manner to the
securities affiliate.
‘‘(B) Issue a guarantee, acceptance, or let-
ter of credit, including an endorsement or a
standby letter of credit, for the benefit of the
securities affiliate.
‘‘(C) Except as provided in paragraph (3),
purchase for its own account, or for the account
of any subsidiary of such institution, financial
assets of the securities affiliate.
‘‘(2) EXCEPTION FOR CLEARING SECURITIES.—
Paragraph (1)(A) shall not apply with respect to an
extension of credit by a well capitalized depository
institution to acquire or sell securities if the follow-
ing conditions are met:
‘‘(A) The extension of credit is incidental
to clearing transactions in those securities
through that depository institution.
‘‘(B) Both the principal of and the interest
on the extension of credit are fully secured by
those securities.
‘‘(C) Either—
‘‘(i) the extension of credit is to be re-
paid before the close of business on the
same business day; or
‘‘(ii) all of the following conditions are
satisfied:
‘‘(I) The securities cannot, in the
ordinary course of business, be cleared
on that business day.
‘‘(II) The extension of credit is to
be repaid before the close of business
on the next business day.
‘‘(III) Extensions of credit sub-
ject to this clause, when aggregated
with all other covered transactions be-
tween the institution and all affiliated
securities affiliates do not exceed 10
percent of the institution’s capital
stock and surplus.
‘‘(D) Either—
‘‘(i) the securities are securities ex-
pressly authorized by section 5136 of the
Revised Statutes of the United States as
permissible for a national bank to under-
write or deal in; or
‘‘(ii) the Board permits transactions
under this paragraph in securities not de-
scribed in clause (i) and the securities af-
filiate provides the depository institution
with such additional security or other as-
surance of performance, if any, as the
Board shall require to prevent such trans-
actions from posing any appreciable risk to
the institution.
‘‘(3) EXCEPTIONS
FOR
CERTAIN
SECURITIES
PURCHASED FOR A DEPOSITORY INSTITUTION’S OWN
ACCOUNT.—Paragraph (1)(C) shall not apply with
respect to purchases at the current market value
(based on reliable and regularly available price
quotations) of—
‘‘(A) securities expressly authorized by sec-
tion 5136 of the Revised Statutes of the United
States as permissible for a national bank to un-
derwrite or deal in; or
‘‘(B) securities that—
‘‘(i) the securities affiliate has been
marking to market daily; and
‘‘(ii) are rated investment grade by at
least 1 nationally recognized statistical rat-
ing organization.
‘‘(4) OTHER
EXCEPTIONS.—The Board may
make exceptions to paragraph (1) for well capital-
ized depository institutions if—
‘‘(A) the transaction is fully secured in ac-
cordance with section 23A(c) of the Federal Re-
serve Act; and
‘‘(B) the aggregate amount of covered
transactions between the institution and all se-
curities affiliates of the financial services hold-
ing company, excluding transactions permitted
under paragraph (2)(C)(i) or (3)(A), does not
exceed 10 percent of the institution’s capital
stock and surplus.
‘‘(b) CREDIT ENHANCEMENT RESTRICTED.—
‘‘(1) IN
GENERAL.—No depository institution
affiliated with a securities affiliate shall, directly or
indirectly, extend credit, or issue or enter into a
standby letter of credit, asset purchase agreement,
indemnity, guarantee, insurance, or other facility,
for the purpose of enhancing the marketability of a
securities issue underwritten by the securities affili-
ate.
‘‘(2) DEFINITION OF TERM BY BOARD.—The
Board shall prescribe a definition for the term ‘for
the purpose of enhancing the marketability of a se-
curities issue’ for purposes of paragraph (1).
‘‘(3) EXCEPTION FOR BANK ELIGIBLE SECURI-
TIES.—Paragraph (1) shall not apply with regard to
securities expressly authorized by section 5136 of
the Revised Statutes of the United States as permis-
sible for a national bank to underwrite or deal in.
‘‘(4) APPLICATION TO WELL CAPITALIZED DE-
POSITORY INSTITUTIONS.—
‘‘(A) IN GENERAL.—A well capitalized de-
pository institution may engage in a transaction
described in paragraph (1) if—
‘‘(i) the depository institution has
adopted appropriate limits on exposure on
a consolidated basis to any single customer
whose securities are underwritten by the
securities affiliate; and
‘‘(ii) the institution and its securities
affiliate have adopted appropriate proce-
dures, including maintenance of necessary
documentary records, to assure that any
such extension of credit, standby letter of
credit, asset purchase agreement, indem-
nity, guarantee, insurance or other facility,
is on an arm’s length basis.
‘‘(B) ARM’S
LENGTH
TRANSACTION
DE-
SCRIBED.—An extension of credit may be con-
sidered to be on an arm’s length basis if the
terms and conditions are substantially the same
as those prevailing at the time for comparable
transactions involving securities that are not
underwritten by the securities affiliate.
‘‘(C) COMPLIANCE WITH PARAGRAPH (1).—
The Board may require, by regulation or order,
compliance with paragraph (1) by well capital-
ized depository institutions exempt under this
paragraph in order to achieve any purpose spec-
ified in subsection (l).
‘‘(c) PROHIBITION ON FINANCING PURCHASE OF SE-
CURITY BEING UNDERWRITTEN.—
‘‘(1) IN GENERAL.—No financial services hold-
ing company or subsidiary of a financial services
holding company (other than a securities affiliate)
shall knowingly extend or arrange for the extension
of credit, directly or indirectly, secured by or for the
purpose of purchasing any security while, or for 30
days after, that security is the subject of a distribu-
tion in which a securities affiliate of that financial
services holding company participates as an under-
writer or a member of a selling group.
‘‘(2) RELIANCE ON ACKNOWLEDGEMENT.—For
purposes of paragraph (1), a financial services hold-
ing company or subsidiary may rely on an express
written acknowledgement signed by the borrower
that the credit is not secured by or for the purpose
of purchasing a security described in this subpara-
graph.
‘‘(3) APPLICATION TO BANK ELIGIBLE SECURI-
TIES.—Paragraph (1) shall not apply with regard to
extensions of credit if the securities are securities ex-
pressly authorized by section 5136 of the Revised
Statutes of the United States as permissible for a
national bank to underwrite or deal in.
‘‘(4) APPLICATION TO WELL CAPITALIZED DE-
POSITORY INSTITUTIONS.—The Board may make ex-
ceptions, by regulation or order, to paragraph (1)
for an extension of credit, after consultation with
and considering the views of the Securities and Ex-
change Commission, if—
‘‘(A) the financial services holding com-
pany is adequately capitalized;
‘‘(B) the financial services holding compa-
ny’s lead depository institution is well capital-
ized;
‘‘(C) well capitalized depository institutions
control at least 80 percent of the assets of de-
pository institutions controlled by the financial
services holding company; and
‘‘(D) all depository institutions controlled
by the financial services holding company are
well capitalized or adequately capitalized.
‘‘(5) CONSISTENCY WITH THE FEDERAL SECU-
RITIES LAWS.—No provision of this subsection shall
be construed as permitting a securities affiliate to
extend or maintain credit, or arrange for an exten-
sion of credit, except in compliance with applicable
provisions of the Securities Exchange Act of 1934
and the regulations prescribed and interpretations
issued under such Act.
‘‘(d) RESTRICTION
ON
EXTENDING
CREDIT
TO
MAKE PAYMENTS ON SECURITIES.—
‘‘(1) IN
GENERAL.—No depository institution
affiliated with a securities affiliate shall, directly or
indirectly, extend credit to an issuer of securities un-
derwritten by the securities affiliate for the purpose