I
104TH CONGRESS
2D SESSION
H. R. 4182
To enhance competition in the financial services sector and merge the
commercial bank and savings association charters.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 25, 1996
Mrs. ROUKEMA (for herself, Mr. MCCOLLUM, Mr. VENTO, Mr. DREIER, Ms.
FURSE, Mr. FLAKE, Mr. KING, Mr. BONO, and Ms. MCKINNEY) intro-
duced 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 jurisdiction of the
committee concerned
A BILL
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
‘‘Depository Institution Affiliation and Thrift Charter
Conversion Act’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
TITLE I—FINANCIAL SERVICES HOLDING COMPANY ACT
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Sec. 101. Short title.
Subtitle A—General Provisions
Sec. 102. Definitions.
Sec. 103. Changes in control of depository institutions.
Sec. 104. Affiliate transactions.
Sec. 105. Capital requirements.
Sec. 106. Interstate acquisitions of insured banks.
Sec. 107. Differential treatment prohibition; laws inconsistent with this Act.
Sec. 108. Tying and insider lending provisions.
Sec. 109. Reports, examination and enforcement.
Sec. 110. Divestiture.
Sec. 111. Criminal penalties.
Sec. 112. Civil enforcement, cease-and-desist orders, civil money penalties, re-
moval, and prohibition authority.
Sec. 113. Judicial review.
Sec. 114. National Financial Services Committee.
Subtitle B—Securities Activities of Financial Services Holding Companies
Sec. 121. Limitation on securities activities of depository institutions affiliated
with securities affiliates.
Sec. 122. Safeguards relating to securities affiliates.
Sec. 123. Joint standards relating to retail sales of certain nondeposit invest-
ment products.
Subtitle C—Insurance and Real Estate Development Activities of Financial
Services Holding Companies
Sec. 131. Limitation on insurance underwriting and real estate development ac-
tivities of depository institutions.
Sec. 132. Acquisition of preexisting insurance agency by bank holding compa-
nies.
Sec. 133. Existing contracts.
TITLE II—CONFORMING AMENDMENTS TO OTHER LAWS FOR
FINANCIAL SERVICES HOLDING COMPANIES
Sec. 201. Exemption of financial services holding companies from the Bank
Holding Company Act of 1956.
Sec. 202. Amendment to the Federal Reserve Act.
Sec. 203. Amendments to the Banking Act of 1933.
Sec. 204. Amendments to the Federal Deposit Insurance Act.
Sec. 205. Amendment to the Community Reinvestment Act.
Sec. 206. Amendment to the Federal Power Act.
Sec. 207. Amendment to the Right to Financial Privacy Act.
Sec. 208. Amendments to the International Banking Act.
TITLE III—FUNCTIONAL REGULATION AMENDMENTS TO SECURI-
TIES LAWS FOR FINANCIAL SERVICES HOLDING COMPANIES
Subtitle A—Broker Dealer Provisions
Sec. 301. Definition of broker.
Sec. 302. Definition of dealer.
Sec. 303. Power to exempt from the definitions of broker and dealer.
Sec. 304. Margin requirements.
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Subtitle B—Investment Company Provisions
Sec. 311. Custody of investment company assets by affiliated bank.
Sec. 312. Lending to an affiliated investment company.
Sec. 313. Independent directors.
Sec. 314. Additional SEC disclosure authority.
Sec. 315. Definition of broker under the Investment Company Act of 1940.
Sec. 316. Definition of dealer under the Investment Company Act of 1940.
Sec. 317. Removal of the exclusion from the definition of investment adviser for
banks that advise investment companies.
Sec. 318. Definition of broker under the Investment Advisors Act of 1940.
Sec. 319. Definition of dealer under the Investment Advisors Act of 1940.
Sec. 320. Interagency consultation.
Sec. 321. Treatment of bank common trust funds.
Sec. 322. Investment advisers prohibited from having controlling interest in
registered investment company.
Sec. 323. Conforming change in definition.
Sec. 324. Effective date.
TITLE IV—WHOLESALE FINANCIAL INSTITUTIONS OWNED BY
FINANCIAL SERVICES HOLDING COMPANIES
Sec. 401. National wholesale financial institutions.
Sec. 402. State member wholesale financial institutions.
Sec. 403. Amendments to the Federal Deposit Insurance Act.
TITLE V—MERGER OF BANK AND THRIFT CHARTERS,
REGULATORS, AND INSURANCE FUNDS
Subtitle A—Conversion of Thrift Charters
Sec. 501. Short title.
Sec. 502. Termination of Federal savings associations; treatment of State sav-
ings associations as banks for purposes of Federal banking law.
Sec. 503. Treatment of certain activities and affiliations of bank holding com-
panies resulting from this Act.
Sec. 504. Transition provisions for activities of savings associations which con-
vert into or become treated as banks.
Sec. 505. Registration of bank holding companies resulting from conversions of
savings associations to banks or treatment of savings associa-
tions as banks.
Sec. 506. Additional transition provisions and special rules.
Sec. 507. Technical and conforming amendments.
Sec. 508. References to savings associations and state banks in federal law.
Sec. 509. Repeal of Home Owners’ Loan Act.
Sec. 510. Definitions.
Subtitle B—Elimination of Office of Thrift Supervision
Sec. 511. Office of Thrift Supervision abolished.
Sec. 512. Determination of transferred functions and employees.
Sec. 513. Savings provisions.
Sec. 514. Cost of funds indexes.
Sec. 515. References in federal law to director of the Office of Thrift Super-
vision.
Sec. 516. Reconfiguration of board of directors of FDIC as a result of removal
of director of the Office of Thrift Supervision.
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Subtitle C—Merger of BIF and SAIF
Sec. 521. Amendment to Budget Reconciliation Act.
TITLE VI—NATIONAL MARKET FUNDED LENDING INSTITUTIONS
Sec. 601. National market funded lending institutions.
TITLE VII—EFFECTIVE DATE
Sec. 701. Effective date.
SECTION 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress finds that—
(1) current laws and regulations restrain effi-
ciency, competition, and innovation in the design
and delivery of financial services to the disadvantage
of consumers;
(2) restrictions on ownership of depository insti-
tutions and affiliations with other business organiza-
tions interfere with their ability to attract and retain
capital and managerial resources;
(3) the vulnerability of the financial system and
its discrete components is increased and effective
monitoring, supervision, and coordination of actions
during periods of stress is impeded by fragmented
and disparate regulation;
(4) the thrift charter has become obsolete;
(5) market demand and safety and soundness
considerations warrant the creation of a new charter
for uninsured wholesale financial institutions; and
(6) current laws inhibit the ability of domestic
financial markets and intermediaries to respond to
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the serious competitive challenges presented by for-
eign intermediaries and the globalization of markets.
(b) PURPOSES.—The purposes of this Act are to pro-
mote the safety and soundness of the Nation’s financial
system, enhance the quality of regulation and supervision
of financial intermediaries, and achieve a more efficient
market and effective regulatory structure by—
(1) establishing an alternative and comprehen-
sive legislative framework for the creation and regu-
lation of financial services holding companies;
(2) enhancing the capital adequacy of commer-
cial banks, brokers and dealers, and other financial
companies by eliminating prohibitions on common
ownership and affiliation within a financial services
holding company;
(3) permitting affiliates to engage in regulated
activities subject to functional and equal regulation
by the appropriate Federal or State regulator;
(4) insulating and protecting insured depository
institutions through enhanced capital requirements,
expanded restrictions on relationships with affiliates,
broader examination and enforcement authority, and
increased civil and criminal penalties;
(5) permitting the efficient marketing and dis-
tribution of financial services to consumers subject
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to safeguards against coercive tie-ins and other un-
fair and abusive practices;
(6) establishing the National Financial Services
Committee to oversee the evolution and supervision
of the financial services industry and to report to the
Congress;
(7) eliminating the thrift charter and requiring
thrifts to convert to banks, subject to appropriate
transition provisions;
(8) merging the bank and thrift insurance
funds; and
(9) creating new State and Federal charters for
uninsured wholesale financial institutions.
TITLE I—FINANCIAL SERVICES HOLDING
COMPANY ACT
SEC. 101. SHORT TITLE.
This title may be cited as the ‘‘Financial Services
Holding Company Act’’.
Subtitle A—General Provisions
SEC. 102. DEFINITIONS.
For purposes of this Act, the following definitions
apply.
(a) FINANCIAL SERVICES HOLDING COMPANY.—The
term ‘‘financial services holding company’’ means a com-
pany that—
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(1) has filed with the National Financial Serv-
ices Committee a notice stating such company’s in-
tent to comply with the requirements of this Act and
has not withdrawn such notice;
(2) controls, acquires control of, or operates a
depository institution; and
(3) is predominantly a financial company.
(b) COMPANY.—The term ‘‘company’’ means any cor-
poration, partnership, business, trust, association, or simi-
lar organization, or any other trust unless by its terms
it must terminate within 25 years or not later than 21
years and 10 months after the death of individuals living
on the effective date of the trust, but shall not include
any corporation the majority of the shares of which are
owned by the United States or by any State.
(c) BANK HOLDING COMPANY.—The term ‘‘bank
holding company’’ has the same meaning as in section
2(a) of the Bank Holding Company Act of 1956.
(d) CONTROL.—Except as provided in section
107(e)(2), the term ‘‘control’’ means, directly or indi-
rectly, owns or has the power to vote 25 percent or more
of any class of voting securities of a company, or has the
power to elect a majority of the directors of a company,
except that—
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(1) no company shall be deemed to control or
to have acquired control of any other company by
virtue of its ownership of the voting securities of
such other company—
(A) acquired or held in an agency, trust, or
other fiduciary capacity, unless the company
has sole discretionary authority to exercise vot-
ing rights with respect thereto;
(B) acquired or held in connection with or
incidental to the underwriting of securities if
such securities are held only for such period of
time as will permit the sale thereof on a reason-
able basis; or
(C) acquired in securing or collecting a
debt previously contracted in good faith, until 2
years after the date of acquisition or for such
additional period of time as the appropriate
Federal banking agency may permit; and
(2) no company formed for the sole purpose of
participating in a proxy solicitation shall be deemed
to be in control of a company by virtue of its acqui-
sition of voting rights with respect to shares of such
company acquired in the course of such solicitation.
(e) AFFILIATE.—Except as provided in section
107(e)(1), the term ‘‘affiliate’’ of a company means any
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other company which controls, is controlled by, or is under
common control with such company.
(f) SUBSIDIARY.—The term ‘‘subsidiary’’ has the
same meaning as in section 2(d) of the Bank Holding
Company Act of 1956.
(g) DEPOSITORY INSTITUTION AND INSURED DEPOS-
ITORY INSTITUTION.—
(1) IN GENERAL.—The terms ‘‘depository insti-
tution’’ and ‘‘insured depository institution’’ have
the same meanings as in section 3 of the Federal
Deposit Insurance Act, except that the term ‘‘depos-
itory institution’’ also means—
(A) any wholesale financial institution; and
(B) any branch, agency, or commercial
lending company operated in the United States
by a foreign bank.
(2) 
EXCEPTION
RELATED
TO
FOREIGN
BANKS.—Notwithstanding paragraph (1)(B), the
National Financial Services Committee may, for
purposes of any section or provision of this Act, ex-
empt from the definition of ‘‘depository institution’’
any branch, agency, or commercial lending company
operated in the United States by a foreign bank as
the Committee deems appropriate, provided that
such exemption is—
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(A) issued by regulation, and
(B) consistent with the principles of na-
tional treatment and equality of competitive op-
portunity.
(h) LEAD DEPOSITORY INSTITUTION.—The term
‘‘lead depository institution’’ means the largest depository
institution controlled by the financial services holding
company, based on a comparison of the average total as-
sets controlled by each depository institution during the
previous 12-month period.
(i) WHOLESALE
FINANCIAL
INSTITUTION.—The
term ‘‘wholesale financial institution’’ means a national
wholesale financial institution described in section 5136B
of the Revised Statutes of the United States or a State
member wholesale financial institution described in section
9B of the Federal Reserve Act.
(j) FOREIGN BANK TERMS.—
(1) 
IN
GENERAL.—The 
terms 
‘‘agency’’,
‘‘branch’’, ‘‘foreign bank’’, and ‘‘commercial lending
company’’ have the same meaning as in Section 1(b)
of the International Banking Act.
(2) COMMERCIAL
LENDING
COMPANY
OPER-
ATED BY A FOREIGN BANK.—The term ‘‘commercial
lending company operated by a foreign bank’’ means
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a commercial lending company controlled by a for-
eign bank.
(3) BRANCH OR AGENCY OPERATED BY A FOR-
EIGN BANK.—A branch or agency operated by a for-
eign bank shall be deemed to be controlled by that
foreign bank.
(k) DOMESTIC
BRANCH.—The term ‘‘domestic
branch’’ has the same meaning as in section 3(o) of the
Federal Deposit Insurance Act;
(l) PREDOMINANTLY A FINANCIAL COMPANY.
(1) IN
GENERAL.—A company is ‘‘predomi-
nantly a financial company’’ if at least 75 percent
of its business (in the United States) is derived
from—
(A) financial service institutions controlled
by such company; or
(B) financial activities engaged in by such
company or any of its affiliates.
(2) FOREIGN BANK ALTERNATIVE.—As an al-
ternative to a paragraph (1), a foreign bank, and
any company of which a foreign bank is a subsidi-
ary, is ‘‘predominantly a financial company’’ if—
(A) all of the business of such foreign bank
and any such company (including the business
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of direct and indirect subsidiaries of the foreign
bank) in the United States is derived from—
(i) financial services institutions con-
trolled or operated by such foreign bank;
(ii) financial activities engaged in by
such foreign bank or any of its affiliates;
(iii) companies that, with respect to
that foreign bank, would meet the stand-
ard for investment under sections 2(h)(2)
or 4(c)(9) of the Bank Holding Company
Act of 1956 as if that foreign bank were
subject to that Act; or
(iv) activities that, with respect to
that foreign bank, would be permissible
under section 4(c)(9) of the Bank Holding
Company Act of 1956 if that foreign bank
were subject to that Act; and
(B) the amount of banking business con-
ducted outside the United States by such for-
eign bank and such company of which that for-
eign bank is a subsidiary satisfies the standard
described in section 2(h)(2) of the Bank Hold-
ing Company Act of 1956.
(3) RECIPROCAL NATIONAL TREATMENT.—