Calendar No. 105
106TH CONGRESS
1ST SESSION
H. R. 10
[Report No. 106–74, Parts I, II, and III]
A BILL
To enhance competition in the financial services in-
dustry by providing a prudential framework for
the affiliation of banks, securities firms, and
other financial service providers, and for other
purposes.
JUNE 15, 1999
Reported from the Committee on Commerce with an
amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be
printed
IB
Union Calendar No. 105
106TH CONGRESS
1ST SESSION
H. R. 10
[Report No. 106–74, Parts I, II, and III]
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, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 6, 1999
Mr. LEACH (for himself, Mr. MCCOLLUM, Mrs. ROUKEMA, Mr. BAKER, Mr.
LAZIO, Mr. BACHUS, Mr. CASTLE, Mr. KING, Mr. NEY, Mr. COOK, Mr.
LATOURETTE, and Mrs. KELLY) introduced the following bill; which was
referred to the Committee on Banking and Financial Services, and in ad-
dition to the Committee on Commerce, for a period to be subsequently
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned
MARCH 23, 1999
Reported from the Committee on Banking and Financial Services with an
amendment
[Strike out all after the enacting clause and insert the part printed in italic]
MARCH 23, 1999
Referral to the Committee on Commerce extended for a period ending not
later than May 14, 1999
MAY 13, 1999
Referral to the Committee on Commerce extended for a period ending not
later than June 11, 1999
JUNE 11, 1999
Referral to the Committee on Commerce extended for a period ending not
later than June 15, 1999
JUNE 15, 1999
Additional sponsor: Mr. MALONEY of Connecticut
JUNE 15, 1999
Reported from the Committee on Commerce with an amendment, committed
to the Committee of the Whole House on the State of the Union, and
ordered to be printed
[Strike out all after the enacting clause and insert the part printed in boldface roman]
[For text of introduced bill, see copy of bill as introduced on January 6, 1999]
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, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Fi-
nancial Services Act of 1999’’.
(b) PURPOSES.—The purposes of this Act are as fol-
lows:
(1) To enhance competition in the financial serv-
ices industry, in order to foster innovation and effi-
ciency.
(2) To ensure the continued safety and soundness
of depository institutions.
(3) To provide necessary and appropriate protec-
tions for investors and ensure fair and honest markets
in the delivery of financial services.
(4) To avoid duplicative, potentially conflicting,
and overly burdensome regulatory requirements
through the creation of a regulatory framework for fi-
nancial holding companies that respects the divergent
requirements of each of the component businesses of
the holding company, and that is based upon prin-
ciples of strong functional regulation and enhanced
regulatory coordination.
(5) To reduce and, to the maximum extent prac-
ticable, to eliminate the legal barriers preventing af-
filiation among depository institutions, securities
firms, insurance companies, and other financial serv-
ice providers and to provide a prudential framework
for achieving that result.
(6) To enhance the availability of financial serv-
ices to citizens of all economic circumstances and in
all geographic areas.
(7) To enhance the competitiveness of United
States financial service providers internationally.
(8) To ensure compliance by depository institu-
tions with the provisions of the Community Reinvest-
ment Act of 1977 and enhance the ability of deposi-
tory institutions to meet the capital and credit needs
of all citizens and communities, including under-
served communities and populations.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; purposes; table of contents.
TITLE I—FACILITATING AFFILIATION AMONG SECURITIES FIRMS,
INSURANCE COMPANIES, AND DEPOSITORY INSTITUTIONS
Subtitle A—Affiliations
Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies which are
not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 105A. Public hearings for large bank acquisitions and mergers.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. Reports on ongoing FTC study of consumer privacy issues.
Sec. 110. GAO study of economic impact on community banks and other small
financial institutions.
Subtitle B—Streamlining Supervision of Financial Holding Companies
Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding compa-
nies.
Sec. 113. Authority of State insurance regulator and Securities and Exchange
Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and enforcement
authority of the Board.
Sec. 117. Interagency consultation.
Sec. 118. Equivalent regulation and supervision.
Sec. 119. Prohibition on FDIC assistance to affiliates and subsidiaries.
Sec. 120. Repeal of savings bank provisions in the Bank Holding Company Act
of 1956.
Sec. 120A. Technical amendment.
Subtitle C—Subsidiaries of National Banks
Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Safety and soundness firewalls between banks and their financial sub-
sidiaries.
Sec. 123. Misrepresentations regarding depository institution liability for obliga-
tions of affiliates.
Sec. 124. Functional regulation.
Sec. 125. Repeal of stock loan limit in Federal Reserve Act.
Subtitle D—Wholesale Financial Holding Companies; Wholesale Financial
Institutions
CHAPTER 1—WHOLESALE FINANCIAL HOLDING COMPANIES
Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.
CHAPTER 2—WHOLESALE FINANCIAL INSTITUTIONS
Sec. 136. Wholesale financial institutions.
Subtitle E—Preservation of FTC Authority
Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify noti-
fication and post-approval waiting period for section 3 trans-
actions.
Sec. 142. Interagency data sharing.
Sec. 143. Clarification of status of subsidiaries and affiliates.
Sec. 144. Annual GAO report.
Subtitle F—Applying the Principles of National Treatment and Equality of
Competitive Opportunity to Foreign Banks and Foreign Financial Institutions
Sec. 151. Applying the principles of national treatment and equality of competi-
tive opportunity to foreign banks that are financial holding com-
panies.
Sec. 152. Applying the principles of national treatment and equality of competi-
tive opportunity to foreign banks and foreign financial institu-
tions that are wholesale financial institutions.
Sec. 153. Representative offices.
Subtitle G—Federal Home Loan Bank System Modernization
Sec. 161. Short title.
Sec. 162. Definitions.
Sec. 163. Savings association membership.
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.
Sec. 168. Capital structure of Federal home loan banks.
Subtitle H—ATM Fee Reform
Sec. 171. Short title.
Sec. 172. Electronic fund transfer fee disclosures at any host ATM.
Sec. 173. Disclosure of possible fees to consumers when ATM card is issued.
Sec. 174. Feasibility study.
Sec. 175. No liability if posted notices are damaged.
Subtitle I—Customer Service, Education, and Privacy
Sec. 176. Customer protection and education regulations.
Sec. 177. Depository institution privacy policies.
Sec. 178. Confidentiality of health and medical information.
Sec. 179. Financial information privacy.
Sec. 180. Study of current financial privacy laws.
Subtitle J—Direct Activities of Banks
Sec. 181. Authority of national banks to underwrite certain municipal bonds.
Subtitle K—Deposit Insurance Funds
Sec. 186. Study of safety and soundness of funds.
Sec. 187. Elimination of SAIF and DIF special reserves.
Subtitle L—Miscellaneous Provisions
Sec. 191. Termination of ‘‘Know Your Customer’’ regulations.
Sec. 192. GAO study of conflicts of interest
Sec. 193. Clarification of source of strength doctrine.
Sec. 194. Study of cost of all Federal banking regulations.
Sec. 195. Study and report on adapting existing legislative requirements to on-
line banking and lending.
Subtitle M—Effective Date of Title
Sec. 196. Effective date.
TITLE II—FUNCTIONAL REGULATION
Subtitle A—Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Definition and treatment of banking products.
Sec. 206. Qualified investor defined.
Sec. 207. Government securities defined.
Sec. 208. Effective date.
Sec. 209. Rule of construction.
Subtitle B—Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 1940.
Sec. 216. Definition of dealer under the Investment Company Act of 1940.
Sec. 217. Removal of the exclusion from the definition of investment adviser for
banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Investment advisers prohibited from having controlling interest in reg-
istered investment company.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.
Subtitle C—Securities and Exchange Commission Supervision of Investment
Bank Holding Companies
Sec. 231. Supervision of investment bank holding companies by the Securities
and Exchange Commission.
Subtitle D—Studies
Sec. 241. Study of methods to inform investors and consumers of uninsured prod-
ucts.
Sec. 242. Study of limitation on fees associated with acquiring financial prod-
ucts.
TITLE III—INSURANCE
Subtitle A—State Regulation of Insurance
Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. Title insurance activities of national banks and their affiliates.
Sec. 306. Expedited and equalized dispute resolution for Federal regulators.
Sec. 307. Certain State affiliation laws preempted for insurance companies and
affiliates.
Subtitle B—National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the Association and the directors, officers, and employees
of the Association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
TITLE IV—UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Prohibition on new unitary savings and loan holding companies.
Sec. 402. Retention of ‘‘Federal’’ in name of converted Federal savings associa-
tion.
TITLE I—FACILITATING AFFILI-
ATION 
AMONG 
SECURITIES
FIRMS, 
INSURANCE 
COMPA-
NIES, AND DEPOSITORY IN-
STITUTIONS
Subtitle A—Affiliations
SEC. 101. GLASS-STEAGALL ACT REFORMED.
(a) SECTION 20 REPEALED.—Section 20 of the Bank-
ing Act of 1933 (12 U.S.C. 377) (commonly referred to as
the ‘‘Glass-Steagall Act’’) is repealed.
(b) SECTION 32 REPEALED.—Section 32 of the Bank-
ing Act of 1933 (12 U.S.C. 78) is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK
HOLDING COMPANIES WHICH ARE NOT FI-
NANCIAL HOLDING COMPANIES.
(a) IN GENERAL.—Section 4(c)(8) of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amend-
ed to read as follows:
‘‘(8) shares of any company the activities of
which had been determined by the Board by regula-
tion or order under this paragraph as of the day be-
fore the date of the enactment of the Financial Serv-
ices Act of 1999, to be so closely related to banking
as to be a proper incident thereto (subject to such
‘‘(b) ELIGIBILITY REQUIREMENTS
FOR FINANCIAL
HOLDING COMPANIES.—
‘‘(1) IN GENERAL.—No bank holding company
may engage in any activity or directly or indirectly
acquire or retain shares of any company under this
section unless the bank holding company meets the
following requirements:
‘‘(A) All of the subsidiary depository insti-
tutions of the bank holding company are well
capitalized.
‘‘(B) All of the subsidiary depository insti-
tutions of the bank holding company are well
managed.
‘‘(C) All of the subsidiary depository insti-
tutions of the bank holding company have
achieved a rating of ‘satisfactory record of meet-
ing community credit needs’, or better, at the
most recent examination of each such institution;
‘‘(D) In the case of any bank holding com-
pany which underwrites or sells, or any affiliate
of which underwrites or sells, annuities contracts
or contracts insuring, guaranteeing, or indem-
nifying against loss, harm, damage, illness, dis-
ability, or death—
‘‘(i) the company or affiliate has not
been adjudicated in any Federal court, and
has not entered into a consent decree filed
in a Federal court or into a settlement
agreement, premised upon a violation of the
Fair Housing Act for the activities de-
scribed in this subparagraph;
‘‘(ii) if such company or affiliate has
entered into any such consent decree or set-
tlement agreement, the company or the affil-
iate is not in violation of the decree or set-
tlement agreement as determined by a court
of competent jurisdiction or the agency with
which the decree or agreement was entered
into; or
‘‘(iii) the company has been exempted
from the requirements of clauses (i) and (ii)
by the Board under paragraph (4).
‘‘(E) The company has filed with the Board
a declaration that the company elects to be a fi-
nancial holding company and certifying that the
company meets the requirements of subpara-
graphs (A), (B), (C), and (D).
‘‘(2) FOREIGN
BANKS
AND
COMPANIES.—For
purposes of paragraph (1), the Board shall establish
and apply comparable capital and other operating
standards to a foreign bank that operates a branch or
agency or owns or controls a bank or commercial
lending company in the United States, and any com-
pany that owns or controls such foreign bank, giving
due regard to the principle of national treatment and
equality of competitive opportunity.
‘‘(3) LIMITED
EXCLUSIONS
FROM
COMMUNITY
NEEDS REQUIREMENTS FOR NEWLY ACQUIRED DEPOS-
ITORY INSTITUTIONS.—Any depository institution ac-
quired by a bank holding company during the 12-
month period preceding the submission of a notice
under paragraph (1)(E) and any depository institu-
tion acquired after the submission of such notice may
be excluded for purposes of paragraph (1)(C) during
the 12-month period beginning on the date of such ac-
quisition if—
‘‘(A) the bank holding company has sub-
mitted an affirmative plan to the appropriate
Federal banking agency to take such action as
may be necessary in order for such institution to
achieve a rating of ‘satisfactory record of meet-
ing community credit needs’, or better, at the
next examination of the institution; and
‘‘(B) the plan has been accepted by such
agency.
‘‘(4) VIOLATIONS OF THE FAIR HOUSING ACT.—
The Board may, on a case-by-case basis, exempt a
bank holding company from meeting the requirements
of clauses (i) and (ii) of paragraph (1)(D).
‘‘(c) ENGAGING IN ACTIVITIES THAT ARE FINANCIAL
IN NATURE.—
‘‘(1) FINANCIAL ACTIVITIES.—
‘‘(A) IN
GENERAL.—Notwithstanding sec-
tion 4(a), a financial holding company and a
wholesale financial holding company may engage
in any activity, and acquire and retain the
shares of any company engaged in any activity,
that the Board has determined (by regulation or
order and in accordance with subparagraph (B))
to be—
‘‘(i) financial in nature or incidental
to such financial activities; or
‘‘(ii) complementary to activities au-
thorized under this subsection to the extent
that the amount of such complementary ac-
tivities remains small.
‘‘(B) COORDINATION BETWEEN THE BOARD
AND THE SECRETARY OF THE TREASURY.—
‘‘(i) PROPOSALS RAISED BEFORE THE
BOARD.—
‘‘(I) CONSULTATION.—The Board
shall notify the Secretary of the Treas-
ury of, and consult with the Secretary
of the Treasury concerning, any re-
quest, proposal, or application under
this subsection, including a regulation
or order proposed under paragraph
(4), for a determination of whether an
activity is financial in nature or inci-
dental to such a financial activity.
‘‘(II) 
TREASURY
VIEW.—The
Board shall not determine that any ac-
tivity is financial in nature or inci-
dental to a financial activity under
this subsection if the Secretary of the
Treasury notifies the Board in writing,
not later than 30 days after the date of
receipt of the notice described in sub-
clause (I) (or such longer period as the
Board determines to be appropriate in
light of the circumstances) that the
Secretary of the Treasury believes that
the activity is not financial in nature
or incidental to a financial activity.
‘‘(ii) PROPOSALS
RAISED
BY
THE
TREASURY.—
‘‘(I) 
TREASURY
RECOMMENDA-
TION.—The Secretary of the Treasury
may, at any time, recommend in writ-
ing that the Board find an activity to
be financial in nature or incidental to
a financial activity.
‘‘(II) TIME
PERIOD
FOR
BOARD
ACTION.—Not later than 30 days after
the date of receipt of a written rec-
ommendation from the Secretary of the
Treasury under subclause (I) (or such
longer period as the Secretary of the
Treasury and the Board determine to
be appropriate in light of the cir-
cumstances), the Board shall determine
whether to initiate a public rule-
making proposing that the subject rec-
ommended activity be found to be fi-
nancial in nature or incidental to a fi-
nancial activity under this subsection,
and shall notify the Secretary of the
Treasury in writing of the determina-
tion of the Board and, in the event
that the Board determines not to seek
public comment on the proposal, the
reasons for that determination.
‘‘(2) FACTORS TO BE CONSIDERED.—In deter-
mining whether an activity is financial in nature or
incidental to financial activities, the Board shall take
into account—
‘‘(A) the purposes of this Act and the Fi-
nancial Services Act of 1999;
‘‘(B) changes or reasonably expected changes
in the marketplace in which bank holding com-
panies compete;
‘‘(C) changes or reasonably expected changes
in the technology for delivering financial serv-
ices; and
‘‘(D) whether such activity is necessary or
appropriate to allow a bank holding company
and the affiliates of a bank holding company
to—
‘‘(i) compete effectively with any com-
pany seeking to provide financial services
in the United States;
‘‘(ii) use any available or emerging
technological means, including any applica-
tion necessary to protect the security or effi-
cacy of systems for the transmission of data
or financial transactions, in providing fi-
nancial services; and
‘‘(iii) offer customers any available or
emerging technological means for using fi-
nancial services.
‘‘(3) ACTIVITIES THAT ARE FINANCIAL IN NA-
TURE.—The following activities shall be considered to
be financial in nature:
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding money or se-
curities.
‘‘(B) Insuring, guaranteeing, or indem-
nifying against loss, harm, damage, illness, dis-
ability, or death, or providing and issuing annu-
ities, and acting as principal, agent, or broker
for purposes of the foregoing.
‘‘(C) Providing financial, investment, or
economic advisory services, including advising
an investment company (as defined in section 3
of the Investment Company Act of 1940).
‘‘(D) Issuing or selling instruments rep-
resenting interests in pools of assets permissible
for a bank to hold directly.
‘‘(E) Underwriting, dealing in, or making a
market in securities.
‘‘(F) Engaging in any activity that the
Board has determined, by order or regulation
that is in effect on the date of enactment of the
Financial Services Act of 1999, to be so closely
related to banking or managing or controlling
banks as to be a proper incident thereto (subject
to the same terms and conditions contained in
such order or regulation, unless modified by the
Board).
‘‘(G) Engaging, in the United States, in
any activity that—
‘‘(i) a bank holding company may en-
gage in outside the United States; and
‘‘(ii) the Board has determined, under
regulations issued pursuant to section
4(c)(13) of this Act (as in effect on the day
before the date of enactment of the Finan-
cial Services Act of 1999) to be usual in
connection with the transaction of banking
or other financial operations abroad.
or entity except insofar as necessary to
achieve the objectives of clauses (ii) and
(iii).
‘‘(4) AUTHORIZATION OF NEW FINANCIAL ACTIVI-
TIES.—The Board shall, by regulation or order and
in accordance with paragraph (1)(B), define, con-
sistent with the purposes of this Act, the following ac-
tivities as, and the extent to which such activities are,
financial in nature or incidental to activities which
are financial in nature:
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding financial as-
sets other than money or securities.
‘‘(B) Providing any device or other instru-
mentality for transferring money or other finan-
cial assets.
‘‘(C) Arranging, effecting, or facilitating fi-
nancial transactions for the account of third
parties.
‘‘(5) POST-CONSUMMATION NOTIFICATION.—
‘‘(A) IN
GENERAL.—A financial holding
company and a wholesale financial holding com-
pany that acquires any company, or commences
any activity, pursuant to this subsection shall
provide written notice to the Board describing
and recommendations, the Board shall give
notice of the proposal to—
‘‘(I) 
the 
appropriate 
Federal
banking agency of any bank involved;
‘‘(II) the appropriate functional
regulator of any functionally regulated
nondepository institution (as defined
in section 5(c)(1)(C)) involved; and
‘‘(III) the Secretary of the Treas-
ury, the Department of Justice, and
the Federal Trade Commission.
‘‘(ii) TIMING.—The views and rec-
ommendations of any agency provided no-
tice under this paragraph shall be submitted
to the Board not later than 30 calendar
days after the date on which notice to the
agency was given, unless the Board deter-
mines that another shorter time period is
appropriate.
‘‘(d) PROVISIONS APPLICABLE TO FINANCIAL HOLDING
COMPANIES THAT FAIL TO MEET REQUIREMENTS.—
‘‘(1) IN GENERAL.—If a financial holding com-
pany is not in compliance with the requirements of
subparagraph (A), (B), or (C) of subsection (b)(1), the
appropriate Federal banking agency of the subsidiary
depository institution shall notify the Board which
shall give notice of such finding to the company.
‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE-
QUIRED.—Not later than 45 days after receipt by a
financial holding company of a notice given under
paragraph (1) (or such additional period as the
Board may permit), the company and any relevant
depository institution shall execute an agreement ac-
ceptable to the Board and the appropriate Federal
banking agency to comply with the requirements ap-
plicable to a financial holding company.
‘‘(3) AUTHORITY
TO
IMPOSE
LIMITATIONS.—
Until the conditions described in a notice to a finan-
cial holding company under paragraph (1) are
corrected—
‘‘(A) the Board may impose such limita-
tions on the conduct or activities of the company
or any affiliate of the company (other than a de-
pository institution or a subsidiary of a deposi-
tory institution) as the Board determines to be
appropriate under the circumstances; and
‘‘(B) the appropriate Federal banking agen-
cy may impose such limitations on the conduct
or activities of an affiliated depository institu-
tion or subsidiary of a depository institution as
the appropriate Federal banking agency deter-
mines to be appropriate under the circumstances.
‘‘(4) FAILURE TO CORRECT.—If, after receiving a
notice under paragraph (1), a financial holding com-
pany or a depository institution affiliate of such com-
pany does not—
‘‘(A) execute and implement an agreement
in accordance with paragraph (2);
‘‘(B) comply with any limitations imposed
under paragraph (3);
‘‘(C) in the case of a notice of failure to
comply with subsection (b)(1)(A), restore each
depository institution subsidiary to well capital-
ized status before the end of the 180-day period
beginning on the date such notice is received by
the company (or such other period permitted by
the Board); or
‘‘(D) in the case of a notice of failure to
comply with subparagraph (B) or (C) of sub-
section (b)(1), restore compliance with any such
subparagraph on or before the date on which the
next examination of the depository institution
subsidiary is completed or by the end of such
other period as the Board determines to be ap-
propriate,
the Board may require such company, under such
terms and conditions as may be imposed by the
Board and subject to such extension of time as may
be granted in the Board’s discretion, to divest control
of any depository institution subsidiary or, at the
election of the financial holding company, instead to
cease to engage in any activity conducted by such
company or its subsidiaries pursuant to this section.
‘‘(5) CONSULTATION.—In taking any action
under this subsection, the Board shall consult with all
relevant Federal and State regulatory agencies.
‘‘(e) SAFEGUARDS FOR BANK SUBSIDIARIES.—A fi-
nancial holding company shall assure that—
‘‘(1) the procedures of the holding company for
identifying and managing financial and operational
risks within the company, and the subsidiaries of
such company, adequately protect the subsidiaries of
such company which are insured depository institu-
tions from such risks;
‘‘(2) the holding company has reasonable policies
and procedures to preserve the separate corporate
identity and limited liability of such company and
the subsidiaries of such company, for the protection of
the company’s subsidiary insured depository institu-
tions; and
‘‘(3) the holding company complies with this sec-
tion.
‘‘(f) AUTHORITY TO RETAIN LIMITED NONFINANCIAL
ACTIVITIES AND AFFILIATIONS.—
‘‘(1) IN
GENERAL.—Notwithstanding section
4(a), a company that is not a bank holding company
or a foreign bank (as defined in section 1(b)(7) of the
International Banking Act of 1978) and becomes a fi-
nancial holding company after the date of the enact-
ment of the Financial Services Act of 1999 may con-
tinue to engage in any activity and retain direct or
indirect ownership or control of shares of a company
engaged in any activity if—
‘‘(A) the holding company lawfully was en-
gaged in the activity or held the shares of such
company on September 30, 1997;
‘‘(B) the holding company is predominantly
engaged in financial activities as defined in
paragraph (2); and
‘‘(C) the company engaged in such activity
continues to engage only in the same activities
that such company conducted on September 30,
1997, and other activities permissible under this
Act.
‘‘(2) PREDOMINANTLY FINANCIAL.—For purposes
of this subsection, a company is predominantly en-
gaged in financial activities if the annual gross reve-
nues derived by the holding company and all subsidi-
aries of the holding company (excluding revenues de-
rived from subsidiary depository institutions), on a
consolidated basis, from engaging in activities that
are financial in nature or are incidental to activities
that are financial in nature under subsection (c) rep-
resent at least 85 percent of the consolidated annual
gross revenues of the company.
‘‘(3) NO EXPANSION OF GRANDFATHERED COM-
MERCIAL ACTIVITIES THROUGH MERGER OR CONSOLI-
DATION.—A financial holding company that engages
in activities or holds shares pursuant to this sub-
section, or a subsidiary of such financial holding
company, may not acquire, in any merger, consolida-
tion, or other type of business combination, assets of
any other company which is engaged in any activity
which the Board has not determined to be financial
in nature or incidental to activities that are financial
in nature under subsection (c).
‘‘(4) CONTINUING
REVENUE
LIMITATION
ON
GRANDFATHERED
COMMERCIAL
ACTIVITIES.—Not-
withstanding any other provision of this subsection, a
financial holding company may continue to engage in
activities or hold shares in companies pursuant to
this subsection only to the extent that the aggregate
annual gross revenues derived from all such activities
and all such companies does not exceed 15 percent of
the consolidated annual gross revenues of the finan-
cial holding company (excluding revenues derived
from subsidiary depository institutions).
‘‘(5) CROSS MARKETING RESTRICTIONS APPLICA-
BLE TO COMMERCIAL ACTIVITIES.—A depository in-
stitution controlled by a financial holding company
shall not—
‘‘(A) offer or market, directly or through
any arrangement, any product or service of a
company whose activities are conducted or whose
shares are owned or controlled by the financial
holding company pursuant to this subsection or
subparagraph (H) or (I) of subsection (c)(3); or
‘‘(B) permit any of its products or services
to be offered or marketed, directly or through any
arrangement, by or through any company de-
scribed in subparagraph (A).
‘‘(6) TRANSACTIONS WITH NONFINANCIAL AFFILI-
ATES.—An insured depository institution controlled
by a financial holding company or wholesale finan-
‘‘(1) the holding company reasonably concludes
that the activity is financial in nature or incidental
to financial activities;
‘‘(2) the gross revenues from all activities con-
ducted under this subsection represent less than 5 per-
cent of the consolidated gross revenues of the holding
company;
‘‘(3) the aggregate total assets of all companies
the shares of which are held under this subsection do
not exceed 5 percent of the holding company’s consoli-
dated total assets;
‘‘(4) the total capital invested in activities con-
ducted under this subsection represents less than 5
percent of the consolidated total capital of the holding
company;
‘‘(5) neither the Board nor the Secretary of the
Treasury has determined that the activity is not fi-
nancial in nature or incidental to financial activities
under subsection (c);
‘‘(6) the holding company is not required to pro-
vide prior written notice of the transaction to the
Board under subsection (c)(6); and
‘‘(7) the holding company provides written noti-
fication to the Board describing the activity com-
menced or conducted by the company acquired no
later than 10 business days after commencing the ac-
tivity or consummating the acquisition.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—Sec-
tion 4(j) of the Bank Holding Company Act of 1956 (12
U.S.C. 1843(j)) is amended—
(1) in paragraph (1)(A), by inserting ‘‘or in any
complementary activity under section 6(c)(1)(A)(ii)’’
after ‘‘subsection (c)(8) or (a)(2)’’; and
(2) in paragraph (3)—
(A) by inserting ‘‘, other than any com-
plementary 
activity 
under 
section
6(c)(1)(A)(ii),’’ after ‘‘to engage in any activ-
ity’’; and
(B) by inserting ‘‘or a company engaged in
any 
complementary 
activity 
under 
section
6(c)(1)(A)(ii)’’ after ‘‘insured depository institu-
tion’’.
(c) REPORT.—
(1) IN GENERAL.—By the end of the 4-year pe-
riod beginning on the date of the enactment of this
Act and every 4 years thereafter, the Board of Gov-
ernors of the Federal Reserve System and the Sec-
retary of the Treasury shall submit a joint report to
the Congress containing a summary of new activities
which are financial in nature, including grand-
fathered commercial activities, in which any finan-
cial holding company is engaged pursuant to sub-
section (c)(1) or (f) of section 6 of the Bank Holding
Company Act of 1956 (as added by subsection (a)).
(2) OTHER CONTENTS.—Each report submitted
to the Congress pursuant to paragraph (1) shall also
contain the following:
(A) A discussion of actions by the Board of
Governors of the Federal Reserve System and the
Secretary of the Treasury, whether by regulation,
order, interpretation, or guideline or by approval
or disapproval of an application, with regard to
activities of financial holding companies which
are incidental to activities financial in nature or
complementary to such financial activities.
(B) An analysis and discussion of the risks
posed by commercial activities of financial hold-
ing companies to the safety and soundness of af-
filiate depository institutions.
(C) An analysis and discussion of the effect
of mergers and acquisitions under section 6 of
the Bank Holding Company Act of 1956 on mar-
ket concentration in the financial services indus-
try.
(D) An analysis and discussion, by the
Board and the Secretary in consultation with
the other Federal banking agencies (as defined in
section 3(z) of the Federal Deposit Insurance
Act), of the impact of the implementation of this
Act, and the amendments made by this Act, on
the extent of meeting community credit needs
and capital availability under the Community
Reinvestment Act of 1977.
SEC. 104. OPERATION OF STATE LAW.
(a) AFFILIATIONS.—
(1) IN GENERAL.—Except as provided in para-
graph (2), no State may, by statute, regulation, order,
interpretation, or other action, prevent or restrict an
insured depository institution or wholesale financial
institution, or a subsidiary or affiliate thereof, from
being affiliated directly or indirectly or associated
with any person or entity, as authorized or permitted
by this Act or any other provision of Federal law.
(2) INSURANCE.—With respect to affiliations be-
tween insured depository institutions or wholesale fi-
nancial institutions, or any subsidiary or affiliate
thereof, and persons or entities engaged in the busi-
ness of insurance, paragraph (1) does not prohibit
any State from—
(A) requiring any person or entity that pro-
poses to acquire control of an entity that is en-
gaged in the business of insurance and domiciled
in that State (hereafter in this subparagraph re-
ferred to as the ‘‘insurer’’) to furnish to the in-
surance regulatory authority of that State, not
later than 60 days before the effective date of the
proposed acquisition—
(i) the name and address of each per-
son by whom, or on whose behalf, the affili-
ation referred to in this subparagraph is to
be effected (hereafter in this subparagraph
referred to as the ‘‘acquiring party’’);
(ii) if the acquiring party is an indi-
vidual, his or her principal occupation and
all offices and positions held during the 5
years preceding the date of notification, and
any conviction of crimes other than minor
traffic violations during the 10 years pre-
ceding the date of notification;
(iii) if the acquiring party is not an
individual—
(I) a report of the nature of its
business operations during the 5 years
preceding the date of notification, or
for such shorter period as such person
and any predecessors thereof shall have
been in existence;
(II) an informative description of
the business intended to be done by the
acquiring party and any subsidiary
thereof; and
(III) a list of all individuals who
are, or who have been selected to be-
come, directors or executive officers of
the acquiring party or who perform, or
will perform, functions appropriate to
such positions, including, for each such
individual, the information required
by clause (ii);
(iv) the source, nature, and amount of
the consideration used, or to be used, in ef-
fecting the merger or other acquisition of
control, a description of any transaction
wherein funds were, or are to be, obtained
for any such purpose, and the identity of
persons furnishing such consideration, ex-
cept that, if a source of such consideration
is a loan made in the lender’s ordinary
course of business, the identity of the lender
shall remain confidential if the person fil-
ing such statement so requests;
(v) fully audited financial information
as to the earnings and financial condition
of each acquiring party for the 5 fiscal
years preceding the date of notification of
each such acquiring party, or for such lesser
period as such acquiring party and any
predecessors thereof shall have been in exist-
ence, and similar unaudited information as
of a date not earlier than 90 days before the
date of notification, except that, in the case
of an acquiring party that is an insurer ac-
tively engaged in the business of insurance,
the financial statements of such insurer
need not be audited, but such audit may be
required if the need therefor is determined
by the insurance regulatory authority of the
State;
(vi) any plans or proposals that each
acquiring party may have to liquidate such
insurer, to sell its assets, or to merge or con-
solidate it with any person or to make any
other material change in its business or cor-
porate structure or management;
(vii) the number of shares of any secu-
rity of the insurer that each acquiring
party proposes to acquire, the terms of any
offer, request, invitation, agreement, or ac-
quisition, and a statement as to the method
by which the fairness of the proposal was
arrived at;
(viii) the amount of each class of any
security of the insurer that is beneficially
owned or concerning which there is a right
to acquire beneficial ownership by each ac-
quiring party;
(ix) a full description of any contracts,
arrangements, or understandings with re-
spect to any security of the insurer in which
any acquiring party is involved, including
transfer of any of the securities, joint ven-
tures, loan or option arrangements, puts or
calls, 
guarantees 
of 
loans, 
guarantees
against loss or guarantees of profits, divi-
sion of losses or profits, or the giving or
withholding of proxies, and identification of
the persons with whom such contracts, ar-
rangements, or understandings have been
entered into;
(x) a description of the purchase of
any security of the insurer during the 12-
month period preceding the date of notifica-
tion by any acquiring party, including the
dates of purchase, names of the purchasers,
and consideration paid, or agreed to be
paid, therefor;
(xi) a description of any recommenda-
tions to purchase any security of the insurer
made during the 12-month period preceding
the date of notification by any acquiring
party or by any person based upon inter-
views or at the suggestion of such acquiring
party;
(xii) copies of all tender offers for, re-
quests or invitations for tenders of, exchange
offers for and agreements to acquire or ex-
change any securities of the insurer and, if
distributed, of additional soliciting material
relating thereto; and
(xiii) the terms of any agreement, con-
tract, or understanding made with any
broker-dealer as to solicitation of securities
of the insurer for tender and the amount of
any fees, commissions, or other compensa-
tion to be paid to broker-dealers with regard
thereto;
(B) requiring an entity that is acquiring
control of an entity that is engaged in the busi-
ness of insurance and domiciled in that State to
maintain or restore the capital requirements of
that insurance entity to the level required under
the capital regulations of general applicability
in that State to avoid the requirement of pre-
paring and filing with the insurance regulatory
authority of that State a plan to increase the
capital of the entity, except that any determina-
tion by the State insurance regulatory authority
with respect to such requirement shall be made
not later than 60 days after the date of notifica-
tion under subparagraph (A);
(C) taking actions with respect to the re-
ceivership or conservatorship of any insurance
company; or
(D) restricting a change in the ownership of
stock in an insurance company, or a company
formed for the purpose of controlling such insur-
ance company, for a period of not more than 3
years beginning on the date of the conversion of
such company from mutual to stock form.
(3) PRESERVATION
OF
STATE
ANTITRUST
AND
GENERAL CORPORATE LAWS.—
(A) IN GENERAL.—Subject to subsection (c)
and the nondiscrimination provisions contained
in such subsection, no provision in paragraph
(1) shall be construed as affecting State laws,
regulations, orders, interpretations, or other ac-
tions of general applicability relating to the gov-
ernance of corporations, partnerships, limited li-
ability companies or other business associations
incorporated or formed under the laws of that
State or domiciled in that State, or the applica-
bility of the antitrust laws of any State or any
State law that is similar to the antitrust laws.
(B) 
DEFINITION.—The 
term 
‘‘antitrust
laws’’ has the same meaning as in subsection (a)
of the first section of the Clayton Act, and in-
cludes section 5 of the Federal Trade Commis-
sion Act to the extent that such section 5 relates
to unfair methods of competition.
(b) ACTIVITIES.—
(1) IN GENERAL.—Except as provided in para-
graph (3), and except with respect to insurance sales,
solicitation, and cross marketing activities, which
shall be governed by paragraph (2), no State may, by
statute, regulation, order, interpretation, or other ac-
tion, prevent or restrict an insured depository institu-
tion, wholesale financial institution, or subsidiary or
affiliate thereof from engaging directly or indirectly,
either by itself or in conjunction with a subsidiary,
affiliate, or any other entity or person, in any activ-
ity authorized or permitted under this Act.
(2) INSURANCE SALES.—
(A) IN GENERAL.—In accordance with the
legal standards for preemption set forth in the
decision of the Supreme Court of the United
States in Barnett Bank of Marion County N.A.
v. Nelson, 116 S. Ct. 1103 (1996), no State may,
by statute, regulation, order, interpretation, or
other action, prevent or significantly interfere
with the ability of an insured depository institu-
tion or wholesale financial institution, or a sub-
sidiary or affiliate thereof, to engage, directly or
indirectly, either by itself or in conjunction with
a subsidiary, affiliate, or any other party, in
any insurance sales, solicitation, or cross-mar-
keting activity.
(B) CERTAIN STATE LAWS PRESERVED.—
Notwithstanding subparagraph (A), a State may
impose any of the following restrictions, or re-
strictions which are substantially the same as
but no more burdensome or restrictive than those
in each of the following clauses:
(i) Restrictions prohibiting the rejec-
tion of an insurance policy solely because
the policy has been issued or underwritten
by any person who is not associated with
such insured depository institution or
wholesale financial institution, or any sub-
sidiary or affiliate thereof, when such insur-
ance is required in connection with a loan
or extension of credit.
(ii) Restrictions prohibiting a require-
ment for any debtor, insurer, or insurance
agent or broker to pay a separate charge in
connection with the handling of insurance
that is required in connection with a loan
or other extension of credit or the provision
of another traditional banking product, un-
less such charge would be required when the
insured depository institution or wholesale
financial institution, or any subsidiary or
affiliate thereof, is the licensed insurance
agent or broker providing the insurance.
(iii) Restrictions prohibiting the use of
any advertisement or other insurance pro-
motional material by an insured depository
institution or wholesale financial institu-
tion, or any subsidiary or affiliate thereof,
that would cause a reasonable person to be-
lieve mistakenly that—
(I) a State or the Federal Govern-
ment is responsible for the insurance
sales activities of, or stands behind the
credit of, the institution, affiliate, or
subsidiary; or
(II) a State, or the Federal Gov-
ernment guarantees any returns on in-
surance products, or is a source of pay-
ment on any insurance obligation of or
sold by the institution, affiliate, or
subsidiary;
(iv) Restrictions prohibiting the pay-
ment or receipt of any commission or bro-
kerage fee or other valuable consideration
for services as an insurance agent or broker
to or by any person, unless such person
holds a valid State license regarding the ap-
plicable class of insurance at the time at
which the services are performed, except
that, in this clause, the term ‘‘services as an
insurance agent or broker’’ does not include
a referral by an unlicensed person of a cus-
tomer or potential customer to a licensed
insurance agent or broker that does not in-
clude a discussion of specific insurance pol-
icy terms and conditions.
(v) Restrictions prohibiting any com-
pensation paid to or received by any indi-
vidual who is not licensed to sell insurance,
for the referral of a customer that seeks to
purchase, or seeks an opinion or advice on,
any insurance product to a person that sells
or provides opinions or advice on such
product, based on the purchase of insurance
by the customer.
(vi) Restrictions prohibiting the release
of the insurance information of a customer
(defined as information concerning the pre-
miums, terms, and conditions of insurance
coverage, including expiration dates and
rates, and insurance claims of a customer
contained in the records of the insured de-
pository institution or wholesale financial
institution, or a subsidiary or affiliate
thereof) to any person or entity other than
an officer, director, employee, agent, sub-
sidiary, or affiliate of an insured depository
institution or a wholesale financial institu-
tion, for the purpose of soliciting or selling
insurance, without the express consent of the
customer, other than a provision that
prohibits—
(I) a transfer of insurance infor-
mation to an unaffiliated insurance
company, agent, or broker in connec-
tion with transferring insurance in
force on existing insureds of the in-
sured depository institution or whole-
sale financial institution, or sub-
sidiary or affiliate thereof, or in con-
nection with a merger with or acquisi-
tion of an unaffiliated insurance com-
pany, agent, or broker; or
(II) the release of information as
otherwise authorized by State or Fed-
eral law.
(vii) Restrictions prohibiting the use of
health information obtained from the insur-
ance records of a customer for any purpose,
other than for its activities as a licensed
agent or broker, without the express consent
of the customer.
(viii) Restrictions prohibiting the ex-
tension of credit or any product or service
that is equivalent to an extension of credit,
lease or sale of property of any kind, or fur-
nishing of any services or fixing or varying
the consideration for any of the foregoing,
on the condition or requirement that the
customer obtain insurance from the insured
depository institution, wholesale financial
institution, a subsidiary or affiliate thereof,
or a particular insurer, agent, or broker,
other than a prohibition that would prevent
any insured depository institution or whole-
sale financial institution, or any subsidiary
or affiliate thereof—
(I) from engaging in any activity
that would not violate section 106 of
the 
Bank 
Holding 
Company 
Act
Amendments of 1970, as interpreted by
the Board of Governors of the Federal
Reserve System; or
(II) from informing a customer or
prospective customer that insurance is
required in order to obtain a loan or
credit, that loan or credit approval is
contingent upon the procurement by
the customer of acceptable insurance,
or that insurance is available from the
insured 
depository 
institution 
or
wholesale financial institution, or any
subsidiary or affiliate thereof.
(ix) Restrictions requiring, when an
application by a consumer for a loan or
other extension of credit from an insured
depository institution or wholesale financial
institution is pending, and insurance is of-
fered or sold to the consumer or is required
in connection with the loan or extension of
credit by the insured depository institution
or wholesale financial institution or any af-
filiate or subsidiary thereof, that a written
disclosure be provided to the consumer or
prospective customer indicating that his or
her choice of an insurance provider will not
affect the credit decision or credit terms in
any way, except that the insured depository
institution or wholesale financial institu-
tion may impose reasonable requirements
concerning the creditworthiness of the insur-
ance provider and scope of coverage chosen.
(x) Restrictions requiring clear and
conspicuous disclosure, in writing, where
practicable, to the customer prior to the sale
of any insurance policy that such policy—
(I) is not a deposit;
(II) is not insured by the Federal
Deposit Insurance Corporation;
(III) is not guaranteed by the in-
sured depository institution or whole-
sale financial institution or, if appro-
priate, its subsidiaries or affiliates or
any person soliciting the purchase of
or selling insurance on the premises
thereof; and
(IV) where appropriate, involves
investment risk, including potential
loss of principal.
(xi) Restrictions requiring that, when
a customer obtains insurance (other than
credit insurance or flood insurance) and
credit from an insured depository institu-
tion or wholesale financial institution, or
its subsidiaries or affiliates, or any person
soliciting the purchase of or selling insur-
ance on the premises thereof, the credit and
insurance transactions be completed through
separate documents.
(xii) Restrictions prohibiting, when a
customer obtains insurance (other than
credit insurance or flood insurance) and
credit from an insured depository institu-
tion or wholesale financial institution or its
subsidiaries or affiliates, or any person so-
liciting the purchase of or selling insurance
on the premises thereof, inclusion of the ex-
pense of insurance premiums in the pri-
mary credit transaction without the express
written consent of the customer.
(xiii) Restrictions requiring mainte-
nance of separate and distinct books and
records relating to insurance transactions,
including all files relating to and reflecting
consumer complaints, and requiring that
such insurance books and records be made
available to the appropriate State insurance
regulator for inspection upon reasonable no-
tice.
(C) LIMITATIONS.—
(i) OCC DEFERENCE.—Section 306(e)
does not apply with respect to any State
statute, regulation, order, interpretation, or
other action regarding insurance sales, so-
licitation, or cross marketing activities de-
scribed in subparagraph (A) that was
issued, adopted, or enacted before September
3, 1998, and that is not described in sub-
paragraph (B).
(ii) NONDISCRIMINATION.—Subsection
(c) does not apply with respect to any State
statute, regulation, order, interpretation, or
other action regarding insurance sales, so-
licitation, or cross marketing activities de-
scribed in subparagraph (A) that was
issued, adopted, or enacted before September
3, 1998, and that is not described in sub-
paragraph (B).
(iii) CONSTRUCTION.—Nothing in this
paragraph shall be construed to limit the
applicability of the decision of the Supreme
Court in Barnett Bank of Marion County
N.A. v. Nelson, 116 S. Ct. 1103 (1996) with
respect to a State statute, regulation, order,
interpretation, or other action that is not
described in subparagraph (B).
(iv) LIMITATION
ON
INFERENCES.—
Nothing in this paragraph shall be con-
strued to create any inference with respect
to any State statute, regulation, order, in-
terpretation, or other action that is not re-
ferred to or described in this paragraph.
(3) 
INSURANCE
ACTIVITIES
OTHER
THAN
SALES.—State statutes, regulations, interpretations,
orders, and other actions shall not be preempted
under subsection (b)(1) to the extent that they—
(A) relate to, or are issued, adopted, or en-
acted for the purpose of regulating the business
of insurance in accordance with the Act of March
9, 1945 (commonly known as the ‘‘McCarran-
Ferguson Act’’);
(B) apply only to persons or entities that
are not insured depository institutions or whole-
sale financial institutions, but that are directly
engaged in the business of insurance (except that
they may apply to depository institutions en-
gaged in providing savings bank life insurance
as principal to the extent of regulating such in-
surance);
(C) do not relate to or directly or indirectly
regulate insurance sales, solicitations, or cross-
marketing activities; and
(D) are not prohibited under subsection (c).
(4) FINANCIAL ACTIVITIES OTHER THAN INSUR-
ANCE.—No State statute, regulation, interpretation,
order, or other action shall be preempted under sub-
section (b)(1) to the extent that—
(A) it does not relate to, and is not issued
and adopted, or enacted for the purpose of regu-
lating, directly or indirectly, insurance sales, so-
licitations, or cross marketing activities covered
under paragraph (2);
(B) it does not relate to, and is not issued
and adopted, or enacted for the purpose of regu-
lating, directly or indirectly, the business of in-
surance activities other than sales, solicitations,
or cross marketing activities, covered under
paragraph (3);
(C) it does not relate to securities investiga-
tions or enforcement actions referred to in sub-
section (d); and
(D) it—
(i) does not distinguish by its terms be-
tween 
insured 
depository 
institutions,
wholesale financial institutions, and sub-
sidiaries and affiliates thereof engaged in
the activity at issue and other persons or
entities engaged in the same activity in a
manner that is in any way adverse with re-
spect to the conduct of the activity by any
such insured depository institution, whole-
sale financial institution, or subsidiary or
affiliate thereof engaged in the activity at
issue;
(ii) as interpreted or applied, does not
have, and will not have, an impact on de-
pository institutions, wholesale financial in-
stitutions, or subsidiaries or affiliates there-
of engaged in the activity at issue, or any
person or entity affiliated therewith, that is
substantially more adverse than its impact
on other persons or entities engaged in the
same activity that are not insured deposi-
tory institutions, wholesale financial insti-
tutions, or subsidiaries or affiliates thereof,
or persons or entities affiliated therewith;
(iii) does not effectively prevent a de-
pository institution, wholesale financial in-
stitution, or subsidiary or affiliate thereof
from engaging in activities authorized or
permitted by this Act or any other provi-
sion of Federal law; and
(iv) does not conflict with the intent of
this Act generally to permit affiliations that
are authorized or permitted by Federal law.
(c) NONDISCRIMINATION.—Except as provided in any
restrictions described in subsection (b)(2)(B), no State may,
by statute, regulation, order, interpretation, or other action,
regulate the insurance activities authorized or permitted
under this Act or any other provision of Federal law of an
insured depository institution or wholesale financial insti-
tution, or subsidiary or affiliate thereof, to the extent that
such statute, regulation, order, interpretation, or other
action—
(1) distinguishes by its terms between insured
depository institutions or wholesale financial institu-
tions, or subsidiaries or affiliates thereof, and other
persons or entities engaged in such activities, in a
manner that is in any way adverse to any such in-
sured depository institution or wholesale financial in-
stitution, or subsidiary or affiliate thereof;
(2) as interpreted or applied, has or will have an
impact on depository institutions or wholesale finan-
cial institutions, or subsidiaries or affiliates thereof,
that is substantially more adverse than its impact on
other persons or entities providing the same products
or services or engaged in the same activities that are
not insured depository institutions, wholesale finan-
cial institutions, or subsidiaries or affiliates thereof,
or persons or entities affiliated therewith;
(3) effectively prevents a depository institution
or wholesale financial institution, or subsidiary or af-
filiate thereof, from engaging in insurance activities
authorized or permitted by this Act or any other pro-
vision of Federal law; or
(4) conflicts with the intent of this Act generally
to permit affiliations that are authorized or permitted
by Federal law between insured depository institu-
tions or wholesale financial institutions, or subsidi-
aries or affiliates thereof, and persons and entities en-
gaged in the business of insurance.
(d) LIMITATION.—Subsections (a) and (b) shall not be
construed to affect the jurisdiction of the securities commis-
sion (or any agency or office performing like functions) of
any State, under the laws of such State, to investigate and
bring enforcement actions, consistent with section 18(c) of
the Securities Act of 1933, with respect to fraud or deceit
or unlawful conduct by any person, in connection with se-
curities or securities transactions.
(e) DEFINITION.—For purposes of this section, the
term ‘‘State’’ means any State of the United States, the Dis-
trict of Columbia, any territory of the United States, Puerto
Rico, Guam, American Samoa, the Trust Territory of the
Pacific Islands, the Virgin Islands, and the Northern Mar-
iana Islands.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHOR-
IZED.
Section 3(g)(2) of the Bank Holding Company Act of
1956 (12 U.S.C. 1842(g)(2)) is amended to read as follows:
‘‘(2) REGULATIONS.—A bank holding company
organized as a mutual holding company shall be reg-
ulated on terms, and shall be subject to limitations,
comparable to those applicable to any other bank
holding company.’’.
SEC. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISI-
TIONS AND MERGERS.
(a) BANK HOLDING COMPANY ACT OF 1956.—Section
3(c)(2) of the Bank Holding Company Act of 1956 (12
U.S.C. 1842(c)(2)) is amended—
(1) by striking ‘‘FACTORS.—In every case’’ and
inserting ‘‘FACTORS.—
‘‘(A) IN GENERAL.—In every case’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) PUBLIC MEETINGS.—In each case in-
volving 1 or more insured depository institutions
each of which has total assets of $1,000,000,000
or more, the Board shall, as necessary and on a
timely basis, conduct public meetings in 1 or
more areas where the Board believes there will be
a substantial public impact.’’.
(b) FEDERAL DEPOSIT INSURANCE ACT.—Section
18(c) of the Federal Deposit Insurance Act (12 U.S.C.
1828(c)) is amended by adding at the end the following new
paragraph:
‘‘(12) PUBLIC MEETINGS.—In each merger trans-
action involving 1 or more insured depository institu-
tions each of which has total assets of $1,000,000,000
or more, the responsible agency shall, as necessary
and on a timely basis, conduct public meetings in 1
or more areas where the agency believes there will be
a substantial public impact.’’.
(c) NATIONAL BANK CONSOLIDATION AND MERGER
ACT.—The National Bank Consolidation and Merger Act
(12 U.S.C. 215 et seq.) is amended by adding at the end
the following new section:
‘‘SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDA-
TIONS AND MERGERS.
‘‘In each case of a consolidation or merger under this
Act involving 1 or more banks each of which has total assets
of $1,000,000,000 or more, the Comptroller shall, as nec-
essary and on a timely basis, conduct public meetings in
1 or more areas where the Comptroller believes there will
be a substantial public impact.’’.
(d) HOME OWNERS’ LOAN ACT.—Section 10(e) of the
Home Owners’ Loan Act (12 U.S.C. 1463) is amended by
adding at the end the following new paragraph:
‘‘(7) PUBLIC MEETINGS FOR LARGE DEPOSITORY
INSTITUTION ACQUISITIONS AND MERGERS.—In each
case involving 1 or more insured depository institu-
tions each of which has total assets of $1,000,000,000
or more, the Director shall, as necessary and on a
timely basis, conduct public meetings in 1 or more
areas where the Director believes there will be a sub-
stantial public impact.’’.
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OF-
FICES.
(a) IN GENERAL.—Section 109(d) of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994
(12 U.S.C. 1835a(d)) is amended—
(1) by inserting ‘‘, the Financial Services Act of
1999,’’ after ‘‘pursuant to this title’’; and
(2) by inserting ‘‘or such Act’’ after ‘‘made by
this title’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—Sec-
tion 109(e)(4) of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4))
is amended by inserting ‘‘and any branch of a bank con-
trolled by an out-of-State bank holding company (as defined
in section 2(o)(7) of the Bank Holding Company Act of
1956)’’ before the period.
SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIRE-
MENTS.
Section 42(d)(4)(A) of the Federal Deposit Insurance
Act (12 U.S.C. 1831r–1(d)(4)(A)) is amended by inserting
‘‘and any bank controlled by an out-of-State bank holding
company (as defined in section 2(o)(7) of the Bank Holding
Company Act of 1956)’’ before the period.
SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE
BANKS.
(a) IN GENERAL.—Section 4(f) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)) is amended—
(1) in paragraph (2)(A)(ii)—
(A) by striking ‘‘and’’ at the end of sub-
clause (IX);
(B) by inserting ‘‘and’’ after the semicolon
at the end of subclause (X); and
(C) by inserting after subclause (X) the fol-
lowing new subclause:
‘‘(XI) assets that are derived from,
or are incidental to, consumer lending
activities in which institutions de-
scribed in subparagraph (F) or (H) of
section 2(c)(2) are permitted to en-
gage,’’;
(2) in paragraph (2), by striking subparagraph
(B) and inserting the following new subparagraphs:
‘‘(B) any bank subsidiary of such company
engages in any activity in which the bank was
not lawfully engaged as of March 5, 1987, unless
the bank is well managed and well capitalized;
‘‘(C) any bank subsidiary of such company
both—
‘‘(i) accepts demand deposits or depos-
its that the depositor may withdraw by
check or similar means for payment to
third parties; and
‘‘(ii) engages in the business of making
commercial loans (and, for purposes of this
clause, loans made in the ordinary course of
a credit card operation shall not be treated
as commercial loans); or
‘‘(D) after the date of the enactment of the
Competitive Equality Amendments of 1987, any
bank subsidiary of such company permits any
overdraft (including any intraday overdraft), or
incurs any such overdraft in such bank’s account
at a Federal reserve bank, on behalf of an affil-
iate, other than an overdraft described in para-
graph (3).’’; and
(3) by striking paragraphs (3) and (4) and in-
serting the following new paragraphs:
‘‘(3) PERMISSIBLE OVERDRAFTS DESCRIBED.—
For purposes of paragraph (2)(D), an overdraft is de-
scribed in this paragraph if—
‘‘(A) such overdraft results from an inad-
vertent computer or accounting error that is be-
yond the control of both the bank and the affil-
iate;
‘‘(B) such overdraft—
‘‘(i) is permitted or incurred on behalf
of an affiliate which is monitored by, re-
ports to, and is recognized as a primary
dealer by the Federal Reserve Bank of New
York; and
‘‘(ii) is fully secured, as required by
the Board, by bonds, notes, or other obliga-
tions which are direct obligations of the
United States or on which the principal
and interest are fully guaranteed by the
United States or by securities and obliga-
tions eligible for settlement on the Federal
Reserve book entry system; or
‘‘(C) such overdraft—
‘‘(i) is incurred on behalf of an affil-
iate solely in connection with an activity
that is so closely related to banking, or
managing or controlling banks, as to be a
proper incident thereto, to the extent the
bank incurring the overdraft and the affil-
iate on whose behalf the overdraft is in-
curred each document that the overdraft is
incurred for such purpose; and
‘‘(ii) does not cause the bank to violate
any provision of section 23A or 23B of the
Federal Reserve Act, either directly, in the
case of a member bank, or by virtue of sec-
tion 18(j) of the Federal Deposit Insurance
Act, in the case of a nonmember bank.
‘‘(4) DIVESTITURE IN CASE OF LOSS OF EXEMP-
TION.—If any company described in paragraph (1)
fails to qualify for the exemption provided under such
SEC. 109. REPORTS ON ONGOING FTC STUDY OF CONSUMER
PRIVACY ISSUES.
With respect to the ongoing multistage study being
conducted by the Federal Trade Commission on consumer
privacy issues, the Commission shall submit to the Congress
an interim report on the findings and conclusions of the
Commission, together with such recommendations for legis-
lative and administrative action as the Commission deter-
mines to be appropriate, at the conclusion of each stage of
such study and a final report at the conclusion of the study.
SEC. 110. GAO STUDY OF ECONOMIC IMPACT ON COMMU-
NITY BANKS AND OTHER SMALL FINANCIAL
INSTITUTIONS.
(a) STUDY REQUIRED.—The Comptroller General of
the United States shall conduct a study of the projected eco-
nomic impact that the enactment of this Act will have on
financial 
institutions 
which 
have 
total 
assets 
of
$100,000,000 or less.
(b) REPORT TO THE CONGRESS.—The Comptroller
General of the United States shall submit a report to the
Congress before the end of the 6-month period beginning on
the date of the date of the enactment of this Act containing
the findings and conclusions of the Comptroller General
with regard to the study required under subsection (a) and
such recommendations for legislative or administrative ac-
tion as the Comptroller General may determine to be appro-
priate.
Subtitle 
B—Streamlining 
Super-
vision 
of 
Financial 
Holding
Companies
SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY
SUPERVISION.
Section 5(c) of the Bank Holding Company Act of
1956 (12 U.S.C. 1844(c)) is amended to read as follows:
‘‘(c) REPORTS AND EXAMINATIONS.—
‘‘(1) REPORTS.—
‘‘(A) IN GENERAL.—The Board from time to
time may require any bank holding company
and any subsidiary of such company to submit
reports under oath to keep the Board informed as
to—
‘‘(i) its financial condition, systems for
monitoring and controlling financial and
operating risks, and transactions with de-
pository institution subsidiaries of the hold-
ing company; and
‘‘(ii) compliance by the company or
subsidiary with applicable provisions of
this Act.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN GENERAL.—The Board shall, to
the fullest extent possible, accept reports in
fulfillment of the Board’s reporting require-
ments under this paragraph that a bank
holding company or any subsidiary of such
company has provided or been required to
provide to other Federal and State super-
visors or to appropriate self-regulatory or-
ganizations.
‘‘(ii) AVAILABILITY.—A bank holding
company or a subsidiary of such company
shall provide to the Board, at the request of
the Board, a report referred to in clause (i).
‘‘(iii) REQUIRED
USE
OF
PUBLICLY
REPORTED
INFORMATION.—The 
Board
shall, to the fullest extent possible, accept in
fulfillment of any reporting or record-
keeping requirements under this Act infor-
mation that is otherwise required to be re-
ported publicly and externally audited fi-
nancial statements.
‘‘(iv) REPORTS
FILED
WITH
OTHER
AGENCIES.—In the event the Board requires
a report from a functionally regulated non-
depository institution subsidiary of a bank
holding company of a kind that is not re-
quired by another Federal or State regu-
lator or appropriate self-regulatory organi-
zation, the Board shall request that the ap-
propriate regulator or self-regulatory orga-
nization obtain such report. If the report is
not made available to the Board, and the
report is necessary to assess a material risk
to the bank holding company or any of its
subsidiary depository institutions or com-
pliance with this Act, the Board may re-
quire such subsidiary to provide such a re-
port to the Board.
‘‘(C) DEFINITION.—For purposes of this
subsection, the term ‘functionally regulated non-
depository institution’ means—
‘‘(i) a broker or dealer registered under
the Securities Exchange Act of 1934;
‘‘(ii) an investment adviser registered
under the Investment Advisers Act of 1940,
or with any State, with respect to the in-
vestment advisory activities of such invest-
ment adviser and activities incidental to
such investment advisory activities;
‘‘(iii) an insurance company subject to
supervision by a State insurance commis-
sion, agency, or similar authority; and
‘‘(iv) an entity subject to regulation by
the Commodity Futures Trading Commis-
sion, with respect to the commodities activi-
ties of such entity and activities incidental
to such commodities activities.
‘‘(2) EXAMINATIONS.—
‘‘(A) EXAMINATION AUTHORITY.—
‘‘(i) IN
GENERAL.—The Board may
make examinations of each bank holding
company and each subsidiary of a bank
holding company.
‘‘(ii) FUNCTIONALLY REGULATED NON-
DEPOSITORY INSTITUTION SUBSIDIARIES.—
Notwithstanding clause (i), the Board may
make examinations of a functionally regu-
lated nondepository institution subsidiary
of a bank holding company only if—
‘‘(I) the Board has reasonable
cause to believe that such subsidiary is
engaged in activities that pose a mate-
rial risk to an affiliated depository in-
stitution, or
‘‘(II) based on reports and other
available information, the Board has
reasonable cause to believe that a sub-
sidiary is not in compliance with this
Act or with provisions relating to
transactions with an affiliated deposi-
tory institution and the Board cannot
make such determination through ex-
amination of the affiliated depository
institution or bank holding company.
‘‘(B) LIMITATIONS
ON
EXAMINATION
AU-
THORITY FOR BANK HOLDING COMPANIES AND
SUBSIDIARIES.—Subject to subparagraph (A)(ii),
the Board may make examinations under sub-
paragraph (A)(i) of each bank holding company
and each subsidiary of such holding company in
order to—
‘‘(i) inform the Board of the nature of
the operations and financial condition of
the holding company and such subsidiaries;
‘‘(ii) inform the Board of—
‘‘(I) the financial and operational
risks within the holding company sys-
tem that may pose a threat to the safe-
ty and soundness of any subsidiary de-
pository institution of such holding
company; and
‘‘(II) the systems for monitoring
and controlling such risks; and
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
subsidiary depository institution and its af-
filiates.
‘‘(C) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, limit the focus and scope of any exam-
ination of a bank holding company to—
‘‘(i) the bank holding company; and
‘‘(ii) any subsidiary of the holding
company that, because of—
‘‘(I) the size, condition, or activi-
ties of the subsidiary; or
‘‘(II) the nature or size of trans-
actions between such subsidiary and
any depository institution which is
also a subsidiary of such holding com-
pany,
could have a materially adverse effect on the
safety and soundness of any depository in-
stitution affiliate of the holding company.
‘‘(D) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use, for the purposes of this paragraph,
the reports of examinations of depository institu-
tions made by the appropriate Federal and State
depository institution supervisory authority.
‘‘(E) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, address the circumstances which might
otherwise permit or require an examination by
the Board by forgoing an examination and in-
stead reviewing the reports of examination made
of—
‘‘(i) any registered broker or dealer by
or on behalf of the Securities and Exchange
Commission;
‘‘(ii) any registered investment adviser
properly registered by or on behalf of either
the Securities and Exchange Commission or
any State;
‘‘(iii) any licensed insurance company
by or on behalf of any state regulatory au-
thority responsible for the supervision of in-
surance companies; and
‘‘(iv) any other subsidiary that the
Board finds to be comprehensively super-
vised by a Federal or State authority.
‘‘(3) CAPITAL.—
‘‘(A) IN GENERAL.—The Board shall not, by
regulation, guideline, order or otherwise, pre-
scribe or impose any capital or capital adequacy
rules, guidelines, standards, or requirements on
any subsidiary of a financial holding company
that is not a depository institution and—
‘‘(i) is in compliance with applicable
capital requirements of another Federal reg-
ulatory authority (including the Securities
and Exchange Commission) or State insur-
ance authority; or
‘‘(ii) is properly registered as an in-
vestment adviser under the Investment Ad-
visers Act of 1940, or with any State.
‘‘(B) RULE OF CONSTRUCTION.—Subpara-
graph (A) shall not be construed as preventing
the Board from imposing capital or capital ade-
quacy rules, guidelines, standards, or require-
ments with respect to activities of a registered
investment adviser other than investment advi-
sory activities or activities incidental to invest-
ment advisory activities.
‘‘(C) LIMITATIONS ON INDIRECT ACTION.—
In developing, establishing, or assessing holding
company capital or capital adequacy rules,
guidelines, standards, or requirements for pur-
poses of this paragraph, the Board shall not take
into account the activities, operations, or invest-
ments of an affiliated investment company reg-
istered under the Investment Company Act of
1940, if the investment company is not—
‘‘(i) a bank holding company; or
‘‘(ii) controlled by a bank holding com-
pany by reason of ownership by the bank
holding company (including through all of
its affiliates) of 25 percent or more of the
shares of the investment company, where the
shares owned by the bank holding company
have a market value equal to more than
$1,000,000.
‘‘(4) TRANSFER OF BOARD AUTHORITY TO AP-
PROPRIATE FEDERAL BANKING AGENCY.—
‘‘(A) IN GENERAL.—In the case of any bank
holding company which is not significantly en-
gaged in nonbanking activities, the Board, in
consultation with the appropriate Federal bank-
ing agency, may designate the appropriate Fed-
eral banking agency of the lead insured deposi-
tory institution subsidiary of such holding com-
pany as the appropriate Federal banking agency
for the bank holding company.
‘‘(B) AUTHORITY TRANSFERRED.—An agen-
cy designated by the Board under subparagraph
(A) shall have the same authority as the Board
under this Act to—
‘‘(i) examine and require reports from
the bank holding company and any affiliate
of such company (other than a depository
institution) under section 5;
‘‘(ii) approve or disapprove applica-
tions or transactions under section 3;
‘‘(iii) take actions and impose pen-
alties under subsections (e) and (f) of sec-
tion 5 and section 8; and
‘‘(iv) take actions regarding the hold-
ing company, any affiliate of the holding
company (other than a depository institu-
tion), or any institution-affiliated party of
such company or affiliate under the Federal
Deposit Insurance Act and any other stat-
ute which the Board may designate.
‘‘(C) AGENCY ORDERS.—Section 9 of this
Act and section 105 of the Bank Holding Com-
pany Act Amendments of 1970 shall apply to or-
ders issued by an agency designated under sub-
paragraph (A) in the same manner such sections
apply to orders issued by the Board.
‘‘(5) FUNCTIONAL REGULATION OF SECURITIES
AND INSURANCE ACTIVITIES.—The Board shall defer
to—
‘‘(A) the Securities and Exchange Commis-
sion with regard to all interpretations of, and
the enforcement of, applicable Federal securities
laws (and rules, regulations, orders, and other
directives issued thereunder) relating to the ac-
tivities, conduct, and operations of registered
brokers, dealers, investment advisers, and invest-
ment companies;
‘‘(B) the relevant State securities authorities
with regard to all interpretations of, and the en-
forcement of, applicable State securities laws
(and rules, regulations, orders, and other direc-
tives issued thereunder) relating to the activities,
conduct, and operations of registered brokers,
dealers, and investment advisers; and
‘‘(C) the relevant State insurance authori-
ties with regard to all interpretations of, and the
enforcement of, applicable State insurance laws
(and rules, regulations, orders, and other direc-
tives issued thereunder) relating to the activities,
conduct, and operations of insurance companies
and insurance agents.’’.
SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT
FOR FINANCIAL HOLDING COMPANIES.
(a) PREVENTION OF DUPLICATIVE FILINGS.—Section
5(a) of the Bank Holding Company Act of 1956 (12 U.S.C.
1844(a)) is amended by adding the following new sentence
at the end: ‘‘A declaration filed in accordance with section
6(b)(1)(E) shall satisfy the requirements of this subsection
with regard to the registration of a bank holding company
but not any requirement to file an application to acquire
a bank pursuant to section 3.’’.
(b) DIVESTITURE PROCEDURES.—Section 5(e)(1) of
the Bank Holding Company Act of 1956 (12 U.S.C.
1844(e)(1)) is amended—
(1) by striking ‘‘Financial Institutions Super-
visory Act of 1966, order’’ and inserting ‘‘Financial
Institutions Supervisory Act of 1966, at the election
of the bank holding company—
‘‘(A) order’’; and
(2) by striking ‘‘shareholders of the bank holding
company. Such distribution’’ and inserting ‘‘share-
holders of the bank holding company; or
‘‘(B) order the bank holding company, after due
notice and opportunity for hearing, and after con-
sultation with the primary supervisor for the bank,
which shall be the Comptroller of the Currency in the
case of a national bank, and the Federal Deposit In-
surance Corporation and the appropriate State super-
visor in the case of an insured nonmember bank, to
terminate (within 120 days or such longer period as
the Board may direct) the ownership or control of
any such bank by such company.
‘‘The distribution referred to in subparagraph (A)’’.
SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR
AND SECURITIES AND EXCHANGE COMMIS-
SION.
Section 5 of the Bank Holding Company Act of 1956
(12 U.S.C. 1844) is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) AUTHORITY OF STATE INSURANCE REGULATOR
AND THE SECURITIES AND EXCHANGE COMMISSION.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law, any regulation, order, or other ac-
tion of the Board which requires a bank holding com-
pany to provide funds or other assets to a subsidiary
insured depository institution shall not be effective
nor enforceable if—
‘‘(A) such funds or assets are to be provided
by—
‘‘(i) a bank holding company that is
an insurance company or is a broker or
dealer registered under the Securities Ex-
change Act of 1934; or
‘‘(ii) an affiliate of the depository in-
stitution which is an insurance company or
a broker or dealer registered under such Act;
and
‘‘(B) the State insurance authority for the
insurance company or the Securities and Ex-
change Commission for the registered broker or
dealer, as the case may be, determines in writing
sent to the holding company and the Board that
the holding company shall not provide such
funds or assets because such action would have
a material adverse effect on the financial condi-
tion of the insurance company or the broker or
dealer, as the case may be.
‘‘(2) NOTICE TO STATE INSURANCE AUTHORITY
OR SEC REQUIRED.—If the Board requires a bank
holding company, or an affiliate of a bank holding
company, which is an insurance company or a broker
or dealer described in paragraph (1)(A) to provide
funds or assets to an insured depository institution
subsidiary of the holding company pursuant to any
regulation, order, or other action of the Board referred
to in paragraph (1), the Board shall promptly notify
the State insurance authority for the insurance com-
pany or the Securities and Exchange Commission, as
the case may be, of such requirement.
‘‘(3) DIVESTITURE IN LIEU OF OTHER ACTION.—
If the Board receives a notice described in paragraph
(1)(B) from a State insurance authority or the Secu-
rities and Exchange Commission with regard to a
bank holding company or affiliate referred to in that
paragraph, the Board may order the bank holding
company to divest the insured depository institution
not later than 180 days after receiving the notice, or
such longer period as the Board determines consistent
with the safe and sound operation of the insured de-
pository institution.
‘‘(4) CONDITIONS BEFORE DIVESTITURE.—Dur-
ing the period beginning on the date an order to di-
vest is issued by the Board under paragraph (3) to
a bank holding company and ending on the date the
divestiture is completed, the Board may impose any
conditions or restrictions on the holding company’s
ownership or operation of the insured depository in-
stitution, including restricting or prohibiting trans-
actions between the insured depository institution and
any affiliate of the institution, as are appropriate
under the circumstances.’’.
SEC. 114. PRUDENTIAL SAFEGUARDS.
(a) COMPTROLLER OF THE CURRENCY.—
(1) IN GENERAL.—The Comptroller of the Cur-
rency may, by regulation or order, impose restrictions
or requirements on relationships or transactions be-
tween a national bank and a subsidiary of the na-
tional bank which the Comptroller finds are con-
sistent with the public interest, the purposes of this
Act, title LXII of the Revised Statutes of the United
States, and other Federal law applicable to national
banks, and the standards in paragraph (2).
(2) STANDARDS.—The Comptroller of the Cur-
rency may exercise authority under paragraph (1) if
the Comptroller finds that such action will have any
of the following effects:
(A) Avoid any significant risk to the safety
and soundness of depository institutions or any
Federal deposit insurance fund.
(B) Enhance the financial stability of
banks.
(C) Avoid conflicts of interest or other
abuses.
(D) Enhance the privacy of customers of the
national bank or any subsidiary of the bank.
(E) Promote the application of national
treatment and equality of competitive oppor-
tunity between subsidiaries owned or controlled
by domestic banks and subsidiaries owned or
controlled by foreign banks operating in the
United States.
(3) REVIEW.—The Comptroller of the Currency
shall regularly—
(A) review all restrictions or requirements
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any
such restriction or requirement to carry out the
purposes of the Act, including any purpose de-
scribed in paragraph (2); and
(B) modify or eliminate any restriction or
requirement the Comptroller finds is no longer
required for such purposes.
(b) BOARD OF GOVERNORS OF THE FEDERAL RE-
SERVE SYSTEM.—
(1) IN GENERAL.—The Board of Governors of the
Federal Reserve System may, by regulation or order,
impose restrictions or requirements on relationships
or transactions—
(A) between a depository institution sub-
sidiary of a bank holding company and any af-
filiate of such depository institution (other than
a subsidiary of such institution); or
(B) between a State member bank and a
subsidiary of such bank,
which the Board finds are consistent with the public
interest, the purposes of this Act, the Bank Holding
Company Act of 1956, the Federal Reserve Act, and
other Federal law applicable to depository institution
subsidiaries of bank holding companies or State banks
(as the case may be), and the standards in paragraph
(2).
(2) STANDARDS.—The Board of Governors of the
Federal Reserve System may exercise authority under
paragraph (1) if the Board finds that such action will
have any of the following effects:
(A) Avoid any significant risk to the safety
and soundness of depository institutions or any
Federal deposit insurance fund.
(B) Enhance the financial stability of bank
holding companies.
(C) Avoid conflicts of interest or other
abuses.
(D) Enhance the privacy of customers of the
State member bank or any subsidiary of the
bank.
(E) Promote the application of national
treatment and equality of competitive oppor-
tunity between nonbank affiliates owned or con-
trolled by domestic bank holding companies and
nonbank affiliates owned or controlled by foreign
banks operating in the United States.
(3) REVIEW.—The Board of Governors of the
Federal Reserve System shall regularly—
(A) review all restrictions or requirements
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any
such restriction or requirement to carry out the