I
106TH CONGRESS
1ST SESSION
H. R. 10
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
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
‘‘Financial Services Act of 1999’’.
(b) PURPOSES.—The purposes of this Act are as fol-
lows:
(1) To enhance competition in the financial
services industry, in order to foster innovation and
efficiency.
(2) To ensure the continued safety and sound-
ness of depository institutions.
(3) To provide necessary and appropriate pro-
tections 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
financial holding companies that respects the diver-
gent requirements of each of the component busi-
nesses of the holding company, and that is based
upon principles of strong functional regulation and
enhanced regulatory coordination.
(5) To reduce and, to the maximum extent
practicable, to eliminate the legal barriers preventing
affiliation 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 Rein-
vestment Act of 1977 and enhance the ability of de-
pository institutions to meet the capital and credit
needs of all citizens and communities, including un-
derserved 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. 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.
Subtitle C—Subsidiaries of National Banks
Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Misrepresentations regarding depository institution liability for obli-
gations of affiliates.
Sec. 123. 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
notification and post-approval waiting period for section 3
transactions.
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
companies.
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.
Subtitle H—Direct Activities of Banks
Sec. 181. Authority of national banks to underwrite certain municipal bonds.
Subtitle I—Deposit Insurance Funds
Sec. 186. Study of safety and soundness of funds.
Sec. 187. Elimination of SAIF and DIF special reserves.
Subtitle J—Effective Date of Title
Sec. 191. 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. Sales practices and complaint procedures.
Sec. 205. Information sharing.
Sec. 206. Definition and treatment of banking products.
Sec. 207. Derivative instrument and qualified investor defined.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. 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
registered 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
products.
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. Consumer protection regulations.
Sec. 308. Certain State affiliation laws preempted for insurance companies and
affiliates.
Sec. 309. Publication of preemption of State laws.
Subtitle B—Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 315. Definitions.
Sec. 316. Effective date.
Subtitle C—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. Prevention of creation of new savings and loan holding companies
with commercial affiliates.
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
Banking 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
Banking 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
amended to read as follows:
‘‘(8) shares of any company the activities of
which had been determined by the Board by regula-
tion under this paragraph as of the day before the
date of the enactment of the Financial Services Act
of 1999, to be so closely related to banking as to be
a proper incident thereto (subject to such terms and
conditions contained in such regulation, unless modi-
fied by the Board);’’.
(b) CONFORMING CHANGES TO OTHER STATUTES.—
(1) AMENDMENT TO THE BANK HOLDING COM-
PANY ACT AMENDMENTS OF 1970.—Section 105 of
the Bank Holding Company Act Amendments of
1970 (12 U.S.C. 1850) is amended by striking ‘‘, to
engage directly or indirectly in a nonbanking activity
pursuant to section 4 of such Act,’’.
(2) AMENDMENT TO THE BANK SERVICE COM-
PANY ACT.—Section 4(f) of the Bank Service Com-
pany Act (12 U.S.C. 1864(f)) is amended by strik-
ing the period and adding at the end the following:
‘‘as of the day before the date of enactment of the
Financial Services Act of 1999.’’.
SEC. 103. FINANCIAL HOLDING COMPANIES.
The Bank Holding Company Act of 1956 is amended
by inserting after section 5 (12 U.S.C. 1844) the following
new section:
‘‘SEC. 6. FINANCIAL HOLDING COMPANIES.
‘‘(a) FINANCIAL HOLDING COMPANY DEFINED.—
For purposes of this section, the term ‘financial holding
company’ means a bank holding company which meets the
requirements of subsection (b).
‘‘(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) The company has filed with the
Board a declaration that the company elects to
be a financial holding company and certifying
that the company meets the requirements of
subparagraphs (A) and (B) and paragraph (2).
‘‘(2) COMMUNITY
NEEDS
REQUIREMENT.—No
bank holding company may become a financial hold-
ing company unless all of the subsidiary depository
institutions of the bank holding company have
achieved a rating of ‘satisfactory record of meeting
community credit needs’, or better, at the most re-
cent examination of each such institution under the
Community Reinvestment Act of 1977.
‘‘(3) 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.
‘‘(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 en-
gage 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) to be financial in nature or incidental
to such financial activities.
‘‘(B) 
COORDINATION
BETWEEN
THE
BOARD AND THE DEPARTMENT OF THE TREAS-
URY.—
‘‘(i) PROPOSALS RAISED BEFORE THE
BOARD.—
‘‘(I) 
CONSULTATION.—The
Board shall notify the Secretary of
the Treasury of, and consult with the
Secretary of the Treasury concerning,
any request, proposal, or application
under this subsection for a determina-
tion of whether an activity is financial
in nature or incidental to such a fi-
nancial activity.
‘‘(II) 
TREASURY
VIEW.—The
Board shall not determine that any
activity is financial in nature or inci-
dental to a financial activity under
this subsection if the Secretary of the
Treasury notifies the Board in writ-
ing, not later than 30 days after the
date of receipt of the notice described
in subclause (I) (or such longer period
as the Board determines to be appro-
priate in light of the circumstances)
that the Secretary of the Treasury be-
lieves 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
recommendation from the Secretary of
the Treasury under subclause (I) (or
such longer period as the Secretary of
the Treasury and the Board deter-
mine to be appropriate in light of the
circumstances), the Board shall deter-
mine whether to initiate a public rule-
making proposing that the subject
recommended activity be found to be
financial in nature or incidental to a
financial activity under this sub-
section, and shall notify the Secretary
of the Treasury in writing of the de-
termination of the Board and, in the
event that the Board determines not
to seek public comment on the pro-
posal, the reasons for that determina-
tion.
‘‘(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 hold-
ing companies compete;
‘‘(C) changes or reasonably expected
changes in the technology for delivering finan-
cial services; 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 ef-
ficacy of systems for the transmission of
data or financial transactions, in providing
financial 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 indemnify-
ing against loss, harm, damage, illness, disabil-
ity, 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 (sub-
ject 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 Fi-
nancial Services Act of 1999) to be usual
in connection with the transaction of bank-
ing or other financial operations abroad.
‘‘(H) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of 1
or more entities (including entities, other than
a depository institution or subsidiary of a de-
pository institution, that the bank holding com-
pany controls) or otherwise, shares, assets, or
ownership interests (including without limita-
tion debt or equity securities, partnership inter-
ests, trust certificates or other instruments rep-
resenting ownership) of a company or other en-
tity, whether or not constituting control of such
company or entity, engaged in any activity not
authorized pursuant to this section if—
‘‘(i) the shares, assets, or ownership
interests are not acquired or held by a de-
pository institution or subsidiary of a de-
pository institution;
‘‘(ii) such shares, assets, or ownership
interests are acquired and held by a securi-
ties affiliate or an affiliate thereof as part
of a bona fide underwriting or merchant
banking activity, including investment ac-
tivities engaged in for the purpose of ap-
preciation and ultimate resale or disposi-
tion of the investment;
‘‘(iii) such shares, assets, or owner-
ship interests are held only for such a pe-
riod of time as will permit the sale or dis-
position thereof on a reasonable basis con-
sistent with the nature of the activities de-
scribed in clause (ii); and
‘‘(iv) during the period such shares,
assets, or ownership interests are held, the
bank holding company does not actively
participate in the day to day management
or operation of such company or entity, ex-
cept insofar as necessary to achieve the ob-
jectives of clause (ii).
‘‘(I) Directly or indirectly acquiring or con-
trolling, whether as principal, on behalf of 1 or
more entities (including entities, other than a
depository institution or subsidiary of a deposi-
tory institution, that the bank holding company
controls) or otherwise, shares, assets, or owner-
ship interests (including without limitation debt
or equity securities, partnership interests, trust
certificates or other instruments representing
ownership) of a company or other entity, wheth-
er or not constituting control of such company
or entity, engaged in any activity not authorized
pursuant to this section if—
‘‘(i) the shares, assets, or ownership
interests are not acquired or held by a de-
pository institution or a subsidiary of a de-
pository institution;
‘‘(ii) such shares, assets, or ownership
interests are acquired and held by an in-
surance company that is predominantly en-
gaged in underwriting life, accident and
health, or property and casualty insurance
(other than credit-related insurance) or
providing and issuing annuities;
‘‘(iii) such shares, assets, or owner-
ship interests represent an investment
made in the ordinary course of business of
such insurance company in accordance
with relevant State law governing such in-
vestments; and
‘‘(iv) during the period such shares,
assets, or ownership interests are held, the
bank holding company does not directly or
indirectly participate in the day-to-day
management or operation of the company
or entity except insofar as necessary to
achieve the objectives of clauses (ii) and
(iii).
‘‘(4) ACTIONS REQUIRED.—The Board shall, by
regulation or order, define, consistent with the pur-
poses of this Act, the following activities as, and the
extent to which such activities are, financial in na-
ture 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
the activity commenced or conducted by the
company acquired no later than 30 calendar
days after commencing the activity or con-
summating the acquisition.
‘‘(B) APPROVAL NOT REQUIRED FOR CER-
TAIN FINANCIAL ACTIVITIES.—Except as pro-
vided in section 4(j) with regard to the acquisi-
tion of a savings association or in paragraph
(6) of this subsection, a financial holding com-
pany and a wholesale financial holding company
may commence any activity, or acquire any
company, pursuant to paragraph (3) or any
regulation prescribed or order issued under
paragraph (4), without prior approval of the
Board.
‘‘(6) NOTICE REQUIRED FOR LARGE COMBINA-
TIONS.—
‘‘(A) IN GENERAL.—No financial holding
company or wholesale financial holding com-
pany shall directly or indirectly acquire, and no
company that becomes a financial holding com-
pany or a wholesale financial holding company
shall directly or indirectly acquire control of,
any company in the United States, including
through merger, consolidation, or other type of
business combination, that—
‘‘(i) is engaged in activities permitted
under this subsection or subsection (g);
and
‘‘(ii) has consolidated total assets in
excess of $40,000,000,000,
unless such holding company has provided no-
tice to the Board, not later than 60 days prior
to such proposed acquisition or prior to becom-
ing a financial holding company or wholesale fi-
nancial holding company, and during that time
period, or such longer time period not exceeding
an additional 60 days, as established by the
Board, the Board has not issued a notice dis-
approving the proposed acquisition or retention.
‘‘(B) FACTORS FOR CONSIDERATION.—In
reviewing any prior notice filed under this para-
graph, 
the 
Board 
shall 
take 
into
consideration—
‘‘(i) whether the company is in com-
pliance with all applicable criteria set forth
in subsection (b) and the provisions of sub-
section (d);
‘‘(ii) whether the proposed combina-
tion represents an undue aggregation of
resources;
‘‘(iii) whether the proposed combina-
tion poses a risk to the deposit insurance
system;
‘‘(iv) whether the proposed combina-
tion poses a risk to State insurance guar-
anty funds;
‘‘(v) whether the proposed combina-
tion can reasonably be expected to be in
the best interests of depositors or policy-
holders of the respective entities; and
‘‘(vi) whether the proposed trans-
action can reasonably be expected to
produce benefits to the public.
‘‘(C) 
REQUIRED
INFORMATION.—The
Board may disapprove any prior notice filed
under this paragraph if the company submitting
such notice neglects, fails, or refuses to furnish
to the Board all relevant information required
by the Board.
‘‘(D) SOLICITATION OF VIEWS OF OTHER
SUPERVISORY AGENCIES.—
‘‘(i) IN GENERAL.—Upon receiving a
prior notice under this paragraph, in order
to provide for the submission of their views
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 submit-
ted to the Board not later than 30 cal-
endar days after the date on which notice
to the agency was given, unless the Board
determines that another shorter time pe-
riod is appropriate.
‘‘(d) PROVISIONS APPLICABLE TO FINANCIAL HOLD-
ING COMPANIES THAT FAIL TO MEET REQUIREMENTS.—
‘‘(1) IN GENERAL.—If the Board finds that a
financial holding company is not in compliance with
the requirements of subparagraph (A) or (B) of sub-
section (b)(1), the Board 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 shall execute an
agreement acceptable to the Board to comply with
the requirements applicable to a financial holding
company.
‘‘(3) BOARD MAY IMPOSE LIMITATIONS.—Until
the conditions described in a notice to a financial
holding company under paragraph (1) are corrected,
the Board may impose such limitations on the con-
duct or activities of the company or any affiliate of
the company as the Board determines to be appro-
priate under the circumstances.
‘‘(4) FAILURE TO CORRECT.—If, after receiving
a notice under paragraph (1), a financial holding
company 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) of subsection
(b)(1), restore compliance with any such sub-
paragraph 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 con-
trol of any depository institution subsidiary or, at
the election of the financial holding company, in-
stead 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 poli-
cies and procedures to preserve the separate cor-
porate identity and limited liability of such company
and the subsidiaries of such company, for the pro-
tection of the company’s subsidiary insured deposi-
tory institutions; and
‘‘(3) the holding company complies with this
section.
‘‘(f) 
AUTHORITY
TO
RETAIN
LIMITED
NON-
FINANCIAL 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 financial holding company after the date of the en-
actment of the Financial Services Act of 1999 may
continue to engage in any activity and retain direct
or indirect ownership or control of shares of a com-
pany 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 predomi-
nantly 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 pur-
poses of this subsection, a company is predominantly
engaged in financial activities if the annual gross
revenues derived by the holding company and all
subsidiaries of the holding company (excluding reve-
nues derived from subsidiary depository institu-
tions), on a consolidated basis, from engaging in ac-
tivities that are financial in nature or are incidental
to activities that are financial in nature under sub-
‘‘(5) CROSS MARKETING RESTRICTIONS APPLI-
CABLE TO COMMERCIAL ACTIVITIES.—A depository
institution 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 fi-
nancial holding company pursuant to this sub-
section or subparagraph (H) or (I) of sub-
section (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
described in subparagraph (A).
‘‘(6) TRANSACTIONS WITH NONFINANCIAL AF-
FILIATES.—An insured depository institution con-
trolled by a financial holding company or wholesale
financial holding company may not engage in a cov-
ered transaction (as defined by section 23A(b)(7) of
the Federal Reserve Act) with any affiliate con-
trolled by the company pursuant to section 10(c),
this subsection, or subparagraph (H) or (I) of sub-
section (c)(3).
‘‘(7) SUNSET OF GRANDFATHER.—A financial
holding company engaged in any activity, or retain-
ing direct or indirect ownership or control of shares
of a company, pursuant to this subsection, shall ter-
minate such activity and divest ownership or control
of the shares of such company before the end of the
10-year period beginning on the date of the enact-
ment of the Financial Services Act of 1999. The
Board may, upon application by a financial holding
company, extend such 10-year period by a period not
to exceed an additional 5 years if such extension
would not be detrimental to the public interest.
‘‘(g) DEVELOPING ACTIVITIES.—A financial holding
company and a wholesale financial holding company may
engage directly or indirectly, or acquire shares of any com-
pany engaged, in any activity that the Board has not de-
termined to be financial in nature or incidental to financial
activities under subsection (c) if—
‘‘(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
percent 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
consolidated 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 hold-
ing company;
‘‘(5) the Board has not determined that the ac-
tivity is not financial in nature or incidental to fi-
nancial activities under subsection (c);
‘‘(6) the holding company is not required to
provide 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
activity or consummating the acquisition.’’.
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 re-
strict 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
between insured depository institutions or wholesale
financial 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
proposes to acquire control of an entity that is
engaged in the business of insurance and domi-
ciled in that State (hereafter in this subpara-
graph referred to as the ‘‘insurer’’) to furnish
to the insurance regulatory authority of that
State, not later than 60 days before the effec-
tive date of the proposed acquisition—
(i) the name and address of each per-
son by whom, or on whose behalf, the af-
filiation referred to in this subparagraph is
to be effected (hereafter in this subpara-
graph 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
preceding 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 subsidi-
ary 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 re-
quired 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 lend-
er shall remain confidential if the person
filing 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 less-
er period as such acquiring party and any
predecessors thereof shall have been in ex-
istence, and similar unaudited information
as of a date not earlier than 90 days be-
fore the date of notification, except that, in
the case of an acquiring party that is an
insurer actively 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 de-
termined by the insurance regulatory au-
thority 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
consolidate it with any person or to make
any other material change in its business
or corporate structure or management;
(vii) the number of shares of any se-
curity 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 meth-
od 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, in-
cluding transfer of any of the securities,
joint ventures, loan or option arrange-
ments, puts or calls, guarantees of loans,
guarantees against loss or guarantees of
profits, division of losses or profits, or the
giving or withholding of proxies, and iden-
tification of the persons with whom such
contracts, arrangements, or understand-
ings 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 notifi-
cation by any acquiring party, including
the dates of purchase, names of the pur-
chasers, and consideration paid, or agreed
to be paid, therefor;
(xi) a description of any recommenda-
tions to purchase any security of the in-
surer made during the 12-month period
preceding the date of notification by any
acquiring party or by any person based
upon interviews or at the suggestion of
such acquiring party;
(xii) copies of all tender offers for, re-
quests or invitations for tenders of, ex-
change offers for and agreements to ac-
quire or exchange any securities of the in-
surer and, if distributed, of additional so-
liciting material relating thereto; and
(xiii) the terms of any agreement,
contract, 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 com-
pensation 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 notifi-
cation 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 com-
pany formed for the purpose of controlling such
insurance company, for a period of not more
than 3 years beginning on the date of the con-
version of such company from mutual to stock
form.
(3) PRESERVATION OF STATE ANTITRUST AND
GENERAL CORPORATE LAWS.—
(A) IN GENERAL.—Nothing 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
includes section 5 of the Federal Trade Com-
mission 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 action, prevent or restrict an insured deposi-
tory institution, 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 activity 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, interpreta-
tion, or other action, prevent or significantly
interfere with the ability of an insured deposi-
tory institution or wholesale financial institu-
tion, or a subsidiary or affiliate thereof, to en-
gage, directly or indirectly, either by itself or
in conjunction with a subsidiary, affiliate, or
any other party, in any insurance sales, solicita-
tion, or cross-marketing activity.
(B) CERTAIN STATE LAWS PRESERVED.—
Notwithstanding subparagraph (A), a State
may impose any of the following restrictions, or
restrictions 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 in-
surance 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 insur-
ance that is required in connection with a
loan or other extension of credit or the
provision of another traditional banking
product, unless such charge would be re-
quired when the insured depository institu-
tion or wholesale financial institution, or
any subsidiary or affiliate thereof, is the li-
censed 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
believe mistakenly that—
(I) a State or the Federal Gov-
ernment is responsible for the insur-
ance sales activities of, or stands be-
hind the credit of, the institution, af-
filiate, or subsidiary; or
(II) a State, or the Federal Gov-
ernment guarantees any returns on
insurance products, or is a source of
payment 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 regard-
ing the applicable class of insurance at the
time at which the services are performed,
except that, in this clause, the term ‘‘serv-
ices as an insurance agent or broker’’ does
not include a referral by an unlicensed per-
son of a customer or potential customer to
a licensed insurance agent or broker that
does not include a discussion of specific in-
surance policy 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 insur-
ance by the customer.
(vi) Restrictions prohibiting the re-
lease of the insurance information of a cus-
tomer (defined as information concerning
the premiums, terms, and conditions of in-
surance 
coverage, 
including 
expiration
dates and rates, and insurance claims of a
customer contained in the records of the
insured depository institution or wholesale
financial institution, or a subsidiary or af-
filiate thereof) to any person or entity
other than an officer, director, employee,
agent, subsidiary, or affiliate of an insured
depository institution or a wholesale finan-
cial institution, for the purpose of soliciting
or selling insurance, without the express
consent of the customer, other than a pro-
vision 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 subsidiary
or affiliate thereof, or in connection
with a merger with or acquisition of
an unaffiliated insurance company,
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 in-
surance records of a customer for any pur-
pose, other than for its activities as a li-
censed agent or broker, without the ex-
press 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
furnishing of any services or fixing or vary-
ing the consideration for any of the fore-
going, on the condition or requirement that
the customer obtain insurance from the in-
sured depository institution, wholesale fi-
nancial 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 wholesale 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 Fed-
eral Reserve System; or
(II) from informing a customer
or prospective customer that insur-
ance is required in order to obtain a
loan or credit, that loan or credit ap-
proval is contingent upon the procure-
ment by the customer of acceptable
insurance, or that insurance is avail-
able from the insured depository insti-
tution or wholesale financial institu-
tion, 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 re-
quired in connection with the loan or ex-
tension of credit by the insured depository
institution or wholesale financial institu-
tion, that a written disclosure be provided
to the consumer or prospective customer
indicating that his or her choice of an in-
surance provider will not affect the credit
decision or credit terms in any way, except
that the insured depository institution or
wholesale financial institution, or subsidi-
ary or affiliate thereof, may impose reason-
able requirements concerning the credit-
worthiness of the insurance 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
any subsidiary or affiliate thereof, or any
person soliciting the purchase of or selling
insurance on the premises thereof, the
credit and insurance transactions be com-
pleted 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
expense of insurance premiums in the pri-
mary credit transaction without the ex-
press 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 insur-
ance regulator for inspection upon reason-
able notice.
(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,
solicitation, or cross marketing activities
described in subparagraph (A) that was
issued, adopted, or enacted before Septem-
ber 3, 1998, and that is not described in
subparagraph (B).
(ii) NONDISCRIMINATION.—Subsection
(c) does not apply with respect to any
State statute, regulation, order, interpreta-
tion, or other action regarding insurance
sales, solicitation, or cross marketing ac-
tivities described in subparagraph (A) that
was issued, adopted, or enacted before
September 3, 1998, and that is not de-
scribed in subparagraph (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
engaged in providing savings bank life insur-
ance as principal to the extent of regulating
such insurance);
(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 reg-
ulating, directly or indirectly, insurance sales,
solicitations, or cross marketing activities cov-
ered under paragraph (2);
(B) it does not relate to, and is not issued
and adopted, or enacted for the purpose of reg-
ulating, 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 inves-
tigations or enforcement actions referred to in
subsection (d); and
(D) it—
(i) does not distinguish by its terms
between 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
thereof 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 en-
gaged in the same activity that are not in-
sured depository institutions, wholesale fi-
nancial institutions, or subsidiaries or af-
filiates thereof, or persons or entities affili-
ated 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 Fed-
eral 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 per-
mitted under this Act or any other provision of Federal
law of an insured depository institution or wholesale finan-
cial institution, 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 fi-
nancial 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 institu-
tions, wholesale financial 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
provision of Federal law; or
(4) conflicts with the intent of this Act gen-
erally to permit affiliations that are authorized or
permitted by Federal law between insured depository
institutions or wholesale financial institutions, or
subsidiaries or affiliates thereof, and persons and en-
tities engaged in the business of insurance.
(d) LIMITATION.—Subsections (a) and (b) shall not
be construed to affect the jurisdiction of the securities
commission (or any agency or office performing like func-
tions) of any State, under the laws of such State, to inves-
tigate and bring enforcement actions, consistent with sec-
tion 18(c) of the Securities Act of 1933, with respect to
fraud or deceit or unlawful conduct by any person, in con-
nection with securities or securities transactions.
(e) DEFINITION.—For purposes of this section, the
term ‘‘State’’ means any State of the United States, the
District 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 North-
ern Mariana 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. 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.—
Section 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 controlled by an out-of-State bank holding com-
pany (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 Hold-
ing 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
following new subclause:
‘‘(XI) assets that are derived
from, or are incidental to, activities in
which institutions described in section
2(c)(2)(F) are permitted to engage,’’;
(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, un-
less the bank is well managed and well capital-
ized;
‘‘(C) any bank subsidiary of such company
both—
‘‘(i) accepts demand deposits or de-
posits that the depositor may withdraw by
check or similar means for payment to
third parties; and
‘‘(ii) engages in the business of mak-
ing 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 ac-
count at a Federal reserve bank, on behalf of
an affiliate, other than an overdraft described
in paragraph (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
described 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 affili-
ate; or
‘‘(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 obli-
gations 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.
‘‘(4) DIVESTITURE IN CASE OF LOSS OF EX-
EMPTION.—If any company described in paragraph
(1) fails to qualify for the exemption provided under
such paragraph by operation of paragraph (2), such
exemption shall cease to apply to such company and
such company shall divest control of each bank it
controls before the end of the 180-day period begin-
ning on the date that the company receives notice
from the Board that the company has failed to con-
tinue to qualify for such exemption, unless before
the end of such 180-day period, the company has—
‘‘(A) corrected the condition or ceased the
activity that caused the company to fail to con-
tinue to qualify for the exemption; and
‘‘(B) implemented procedures that are rea-
sonably adapted to avoid the reoccurrence of
such condition or activity.’’.
(b) INDUSTRIAL LOAN COMPANIES AFFILIATE OVER-
DRAFTS.—Section 2(c)(2)(H) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1841(c)(2)(H)) is amended
by inserting before the period at the end ‘‘, or that is oth-
erwise permissible for a bank controlled by a company de-
scribed in section 4(f)(1)’’.
SEC. 109. REPORTS ON ONGOING FTC STUDY OF CON-
SUMER 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 Con-
gress an interim report on the findings and conclusions
of the Commission, together with such recommendations
for legislative and administrative action as the Commis-
sion determines to be appropriate, at the conclusion of
each stage of such study and a final report at the conclu-
sion 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
economic 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 con-
taining the findings and conclusions of the Comptroller
General with regard to the study required under sub-
section (a) and such recommendations for legislative or
administrative action as the Comptroller General may de-
termine to be appropriate.
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
depository institution subsidiaries of the
holding 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 re-
ports in fulfillment of the Board’s report-
ing requirements under this paragraph
that a bank holding company or any sub-
sidiary of such company has provided or
been required to provide to other Federal
and State supervisors or to appropriate
self-regulatory organizations.
‘‘(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 re-
quires a report from a functionally regu-
lated nondepository institution subsidiary
of a bank holding company of a kind that
is not required by another Federal or State
regulator or appropriate self-regulatory or-
ganization, the Board shall request that
the appropriate regulator or self-regulatory
organization obtain such report. If the re-
port is not made available to the Board,
and the report is necessary to assess a ma-
terial risk to the bank holding company or
any of its subsidiary depository institutions
or compliance with this Act, the Board
may require such subsidiary to provide
such a report to the Board.
‘‘(C) DEFINITION.—For purposes of this
subsection, the term ‘functionally regulated
nondepository 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 investment advisory activities of such
investment 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 Com-
mission, with respect to the commodities
activities of such entity and activities inci-
dental 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
NONDEPOSITORY
INSTITUTION
SUBSIDI-
ARIES.—Notwithstanding clause (i), the
Board may make examinations of a func-
tionally regulated 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
material risk to an affiliated deposi-
tory institution, 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 subparagraph (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
safety and soundness of any subsidi-
ary depository 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;
‘‘(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; or
‘‘(III) the centralization of func-
tions within the holding company sys-
tem,
could have a materially adverse effect on
the safety and soundness of any depository
institution 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 para-
graph, the reports of examinations of depository
institutions made by the appropriate Federal
and State depository institution supervisory au-
thority.
‘‘(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 Ex-
change Commission;
‘‘(ii) any registered investment adviser
properly registered by or on behalf of ei-
ther the Securities and Exchange Commis-
sion or any State;
‘‘(iii) any licensed insurance company
by or on behalf of any state regulatory au-
thority responsible for the supervision of
insurance 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
regulatory authority (including the Securi-
ties and Exchange Commission) or State
insurance 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
AC-
TION.—In developing, establishing, or assessing
holding company capital or capital adequacy
rules, guidelines, standards, or requirements for
purposes of this paragraph, the Board shall not
take into account the activities, operations, or
investments of an affiliated investment company
registered 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
company 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 hold-
ing 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
engaged 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 agen-
cy for the bank holding company.
‘‘(B) 
AUTHORITY
TRANSFERRED.—An
agency designated by the Board under subpara-
graph (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 Fed-
eral Deposit Insurance Act and any other
statute 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
orders issued by an agency designated under
subparagraph (A) in the same manner such sec-
tions 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 securi-
ties laws (and rules, regulations, orders, and
other directives issued thereunder) relating to
the activities, conduct, and operations of reg-
istered brokers, dealers, investment advisers,
and investment companies;
‘‘(B) the relevant State securities authori-
ties with regard to all interpretations of, and
the enforcement of, applicable State securities
laws (and rules, regulations, orders, and other
directives issued thereunder) relating to the ac-
tivities, 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
directives issued thereunder) relating to the ac-
tivities, conduct, and operations of insurance
companies and insurance agents.’’.
SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT
FOR FINANCIAL HOLDING COMPANIES.
(a) PREVENTION OF DUPLICATIVE FILINGS.—Sec-
tion 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)(C) shall satisfy the requirements of
this subsection with regard to the registration of a bank
holding company but not any requirement to file an appli-
cation 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 hold-
ing company. Such distribution’’ and inserting
‘‘shareholders 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
Insurance Corporation and the appropriate State su-
pervisor 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
following 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
company to provide funds or other assets to a sub-
sidiary insured depository institution shall not be ef-
fective nor enforceable if—
‘‘(A) such funds or assets are to be pro-
vided 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 writ-
ing 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 in-
stitution 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 company or the Securities and Exchange
Commission, as the case may be, of such require-
ment.
‘‘(3) DIVESTITURE
IN
LIEU
OF
OTHER
AC-
TION.—If the Board receives a notice described in
paragraph (1)(B) from a State insurance authority
or the Securities and Exchange Commission with re-
gard 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 in-
stitution not later than 180 days after receiving the
notice, or such longer period as the Board deter-
mines consistent with the safe and sound operation
of the insured depository 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 appro-
priate under the circumstances.’’.
SEC. 114. PRUDENTIAL SAFEGUARDS.
Section 5 of the Bank Holding Company Act of 1956
(12 U.S.C. 1844) is amended by inserting after subsection
(g) (as added by section 113 of this subtitle) the following
new subsection:
‘‘(h) PRUDENTIAL SAFEGUARDS.—
‘‘(1) IN GENERAL.—The Board may, by regula-
tion or order, impose restrictions or requirements on
relationships or transactions between a depository
institution subsidiary of a bank holding company
and any affiliate of such depository institution (other
than a subsidiary of such institution) which the
Board finds is consistent with the public interest,
the purposes of this Act, the Financial Services Act
of 1999, the Federal Reserve Act, and other Federal
law applicable to depository institution subsidiaries
of bank holding companies and the standards in
paragraph (2).
‘‘(2) STANDARDS.—The Board may exercise au-
thority under paragraph (1) if the Board finds that
such action would—
‘‘(A) avoid any significant risk to the safe-
ty 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
depository institutions; or
‘‘(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 for-
eign banks operating in the United States.
‘‘(3) REVIEW.—The Board 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 Board finds is no longer re-
quired for such purposes.
‘‘(4) FOREIGN
BANKS.—The Board may, by
regulation or order, impose restrictions or require-
ments on relationships or transactions between a
foreign bank and any affiliate in the United States
of such foreign bank that the Board finds are con-
sistent with the public interest, the purposes of this
Act, the Financial Services Act of 1999, the Federal
Reserve Act, and other Federal law applicable to for-
eign banks and their affiliates in the United States,
and the standards in paragraphs (2) and (3).’’.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) EXCLUSIVE COMMISSION AUTHORITY.—
(1) IN GENERAL.—Except as provided in para-
graph (3), the Commission shall be the sole Federal
agency with authority to inspect and examine any
registered investment company that is not a bank
holding company or a savings and loan holding com-
pany.
(2) PROHIBITION ON BANKING AGENCIES.—Ex-
cept as provided in paragraph (3), a Federal bank-
ing agency may not inspect or examine any reg-
istered investment company that is not a bank hold-
ing company or a savings and loan holding company.
(3) CERTAIN
EXAMINATIONS
AUTHORIZED.—
Nothing in this subsection prevents the Federal De-
posit Insurance Corporation, if the Corporation finds
it necessary to determine the condition of an insured
depository institution for insurance purposes, from
examining an affiliate of any insured depository in-
stitution, pursuant to its authority under section
10(b)(4) of the Federal Deposit Insurance Act, as
may be necessary to disclose fully the relationship
between the depository institution and the affiliate,
and the effect of such relationship on the depository
institution.
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—The Commission shall provide to any Federal
banking agency, upon request, the results of any examina-
tion, reports, records, or other information with respect
to any registered investment company to the extent nec-
essary for the agency to carry out its statutory responsibil-
ities.
(c) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) BANK
HOLDING
COMPANY.—The term
‘‘bank holding company’’ has the same meaning as
in section 2 of the Bank Holding Company Act of
1956.
(2) COMMISSION.—The term ‘‘Commission’’
means the Securities and Exchange Commission.
(3) FEDERAL
BANKING
AGENCY.—The term
‘‘Federal banking agency’’ has the same meaning as
in section 3(z) of the Federal Deposit Insurance Act.
(4) REGISTERED INVESTMENT COMPANY.—The
term ‘‘registered investment company’’ means an in-
vestment company which is registered with the Com-
mission under the Investment Company Act of 1940.
(5) SAVINGS AND LOAN HOLDING COMPANY.—
The term ‘‘savings and loan holding company’’ has
the same meaning as in section 10(a)(1)(D) of the
Home Owners’ Loan Act.
SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
The Bank Holding Company Act of 1956 (12 U.S.C.
1841 et seq.) is amended by inserting after section 10 the
following new section:
‘‘SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
‘‘(a) LIMITATION ON DIRECT ACTION.—
‘‘(1) IN GENERAL.—The Board may not pre-
scribe regulations, issue or seek entry of orders, im-
pose restraints, restrictions, guidelines, require-
ments, safeguards, or standards, or otherwise take
any action under or pursuant to any provision of
this Act or section 8 of the Federal Deposit Insur-
ance Act against or with respect to a regulated sub-
sidiary of a bank holding company unless the action
is necessary to prevent or redress an unsafe or un-
sound practice or breach of fiduciary duty by such
subsidiary that poses a material risk to—
‘‘(A) the financial safety, soundness, or
stability of an affiliated depository institution;
or
‘‘(B) the domestic or international pay-
ment system.
‘‘(2) CRITERIA
FOR
BOARD
ACTION.—The
Board shall not take action otherwise permitted
under paragraph (1) unless the Board finds that it
is not reasonably possible to effectively protect
against the material risk at issue through action di-
rected at or against the affiliated depository institu-
tion or against depository institutions generally.
‘‘(b) LIMITATION ON INDIRECT ACTION.—The Board
may not prescribe regulations, issue or seek entry of or-
ders, impose restraints, restrictions, guidelines, require-
ments, safeguards, or standards, or otherwise take any ac-
tion under or pursuant to any provision of this Act or sec-
tion 8 of the Federal Deposit Insurance Act against or
with respect to a financial holding company or a wholesale
financial holding company where the purpose or effect of
doing so would be to take action indirectly against or with
respect to a regulated subsidiary that may not be taken
directly against or with respect to such subsidiary in ac-
cordance with subsection (a).
‘‘(c) ACTIONS SPECIFICALLY AUTHORIZED.—Not-
withstanding subsection (a), the Board may take action
under this Act or section 8 of the Federal Deposit Insur-
ance Act to enforce compliance by a regulated subsidiary
with Federal law that the Board has specific jurisdiction
to enforce against such subsidiary.
‘‘(d) REGULATED SUBSIDIARY DEFINED.—For pur-
poses of this section, the term ‘regulated subsidiary’
means any company that is not a bank holding company
and is—
‘‘(1) a broker or dealer registered under the Se-
curities Exchange Act of 1934;
‘‘(2) a registered investment adviser, properly
registered by or on behalf of either the Securities
and Exchange Commission or any State, with re-
spect to the investment advisory activities of such in-
vestment adviser and activities incidental to such in-
vestment advisory activities;
‘‘(3) an investment company registered under
the Investment Company Act of 1940;
‘‘(4) an insurance company or an insurance
agency subject to supervision by a State insurance
commission, agency, or similar authority; or
‘‘(5) an entity subject to regulation by the Com-
modity Futures Trading Commission, with respect
to the commodities activities of such entity and ac-
tivities incidental to such commodities activities.’’.
SEC. 117. INTERAGENCY CONSULTATION.
(a) PURPOSE.—It is the intention of Congress that
the Board of Governors of the Federal Reserve System,
as the umbrella supervisor for financial holding compa-
nies, and the State insurance regulators, as the functional
regulators of companies engaged in insurance activities,
coordinate efforts to supervise companies that control both
a depository institution and a company engaged in insur-
ance activities regulated under State law. In particular,
Congress believes that the Board and the State insurance
regulators should share, on a confidential basis, informa-
tion relevant to the supervision of companies that control
both a depository institution and a company engaged in
insurance activities, including information regarding the
financial health of the consolidated organization and infor-
mation regarding transactions and relationships between
insurance companies and affiliated depository institutions.
The appropriate Federal banking agencies for depository
institutions should also share, on a confidential basis, in-
formation with the relevant State insurance regulators re-
garding transactions and relationships between depository
institutions and affiliated companies engaged in insurance
activities. The purpose of this section is to encourage this
coordination and confidential sharing of information, and
to thereby improve both the efficiency and the quality of
the supervision of financial holding companies and their
affiliated depository institutions and companies engaged
in insurance activities.
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—
(1) INFORMATION OF THE BOARD.—Upon the
request of the appropriate insurance regulator of
any State, the Board may provide any information
of the Board regarding the financial condition, risk
management policies, and operations of any financial
holding company that controls a company that is en-
gaged in insurance activities and is regulated by
such State insurance regulator, and regarding any
transaction or relationship between such an insur-
ance company and any affiliated depository institu-
tion. The Board may provide any other information
to the appropriate State insurance regulator that the
Board believes is necessary or appropriate to permit
the State insurance regulator to administer and en-
force applicable State insurance laws.
(2) BANKING
AGENCY
INFORMATION.—Upon
the request of the appropriate insurance regulator of
any State, the appropriate Federal banking agency
may provide any information of the agency regard-
ing any transaction or relationship between a deposi-
tory institution supervised by such Federal banking
agency and any affiliated company that is engaged
in insurance activities regulated by such State insur-
ance regulator. The appropriate Federal banking
agency may provide any other information to the ap-
propriate State insurance regulator that the agency
believes is necessary or appropriate to permit the
State insurance regulator to administer and enforce
applicable State insurance laws.
(3) STATE INSURANCE REGULATOR INFORMA-
TION.—Upon the request of the Board or the appro-
priate Federal banking agency, a State insurance
regulator may provide any examination or other re-
ports, records, or other information to which such
insurance regulator may have access with respect to
a company which—
(A) is engaged in insurance activities and
regulated by such insurance regulator; and
(B) is an affiliate of an insured depository
institution, wholesale financial institution, or fi-
nancial holding company.
(c) CONSULTATION.—Before making any determina-
tion relating to the initial affiliation of, or the continuing
affiliation of, an insured depository institution, wholesale
financial institution, or financial holding company with a
company engaged in insurance activities, the appropriate
Federal banking agency shall consult with the appropriate
State insurance regulator of such company and take the
views of such insurance regulator into account in making
such determination.
(d) EFFECT ON OTHER AUTHORITY.—Nothing in
this section shall limit in any respect the authority of the
appropriate Federal banking agency with respect to an in-
sured depository institution, wholesale financial institu-
tion, or bank holding company or any affiliate thereof
under any provision of law.
(e) CONFIDENTIALITY AND PRIVILEGE.—
(1) CONFIDENTIALITY.—The appropriate Fed-
eral banking agency shall not provide any informa-
tion or material that is entitled to confidential treat-
ment under applicable Federal banking agency regu-
lations, or other applicable law, to a State insurance
regulator unless such regulator agrees to maintain
the information or material in confidence and to
take all reasonable steps to oppose any effort to se-
cure disclosure of the information or material by the
regulator. The appropriate Federal banking agency
shall treat as confidential any information or mate-
rial obtained from a State insurance regulator that
is entitled to confidential treatment under applicable
State regulations, or other applicable law, and take
all reasonable steps to oppose any effort to secure
disclosure of the information or material by the Fed-
eral banking agency.
(2) PRIVILEGE.—The provision pursuant to this
section of information or material by a Federal
banking agency or State insurance regulator shall
not constitute a waiver of, or otherwise affect, any
privilege to which the information or material is oth-
erwise subject.
(f) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) APPROPRIATE FEDERAL BANKING AGENCY;
INSURED
DEPOSITORY
INSTITUTION.—The terms
‘‘appropriate Federal banking agency’’ and ‘‘insured
depository institution’’ have the same meanings as
in section 3 of the Federal Deposit Insurance Act.
(2) BOARD; FINANCIAL
HOLDING
COMPANY;
AND
WHOLESALE
FINANCIAL
INSTITUTION.—The
terms ‘‘Board’’, ‘‘financial holding company’’, and
‘‘wholesale financial institution’’ have the same
meanings as in section 2 of the Bank Holding Com-
pany Act of 1956.
SEC. 118. EQUIVALENT REGULATION AND SUPERVISION.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, the provisions of—
(1) section 5(c) of the Bank Holding Company
Act of 1956 (as amended by this Act) that limit the
authority of the Board of Governors of the Federal
Reserve System to require reports from, to make ex-
aminations of, or to impose capital requirements on
bank holding companies and their nonbank subsidi-
aries; and
(2) section 10A of the Bank Holding Company
Act of 1956 (as added by this Act) that limit what-
ever authority the Board might otherwise have to
take direct or indirect action with respect to bank
holding companies and their nonbank subsidiaries,
shall also limit whatever authority that the Federal De-
posit Insurance Corporation might otherwise have under
any statute to require reports, make examinations, impose
capital requirements or take any other direct or indirect
action with respect to bank holding companies and their
nonbank subsidiaries (including nonbank subsidiaries of
depository institutions), subject to the same standards and
requirements as are applicable to the Board under such
provisions.
(b) CERTAIN EXAMINATIONS AUTHORIZED.—Noth-
ing in this section shall prevent the Federal Deposit Insur-
ance Corporation, if the Corporation finds it necessary to
determine the condition of an insured depository institu-
tion for insurance purposes, from examining an affiliate
of any insured depository institution, pursuant to its au-
thority under section 10(b)(4) of the Federal Deposit In-
surance Act, as may be necessary to disclose fully the rela-
tionship between the depository institution and the affili-
ate, and the effect of such relationship on the depository
institution.
SEC. 119. PROHIBITION ON FDIC ASSISTANCE TO AFFILI-
ATES AND SUBSIDIARIES.
Section 11(a)(4)(B) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(a)(4)(B)) is amended by striking ‘‘to
benefit any shareholder of’’ and inserting ‘‘to benefit any
shareholder, affiliate (other than an insured depository in-
stitution that receives assistance in accordance with the
provisions of this Act), or subsidiary of’’.
Subtitle C—Subsidiaries of
National Banks
SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF
NATIONAL BANKS.
(a) 
FINANCIAL
SUBSIDIARIES
OF
NATIONAL
BANKS.—Chapter one of title LXII of the Revised Stat-
utes of United States (12 U.S.C. 21 et seq.) is amended—
(1) by redesignating section 5136A as section
5136C; and
(2) by inserting after section 5136 (12 U.S.C.
24) the following new section:
‘‘SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.
‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AUTHOR-
IZED TO ENGAGE IN FINANCIAL ACTIVITIES.—
‘‘(1) EXCLUSIVE AUTHORITY.—No provision of
section 5136 or any other provision of this title
LXII of the Revised Statutes shall be construed as
authorizing a subsidiary of a national bank to en-
gage in, or own any share of or any other interest
in any company engaged in, any activity that—
‘‘(A) is not permissible for a national bank
to engage in directly; or
‘‘(B) is conducted under terms or condi-
tions other than those that would govern the
conduct of such activity by a national bank,
unless a national bank is specifically authorized by
the express terms of a Federal statute and not by
implication or interpretation to acquire shares of or
an interest in, or to control, such subsidiary, such as
by paragraph (2) of this subsection and section 25A
of the Federal Reserve Act.
‘‘(2) SPECIFIC
AUTHORIZATION
TO
CONDUCT
AGENCY ACTIVITIES WHICH ARE FINANCIAL IN NA-
TURE.—A national bank may control a company, or
hold an interest in a company that is wholly owned
by an insured depository institution or subsidiary
thereof, that engages in agency activities that have
been determined to be financial in nature or inciden-
tal to such financial activities pursuant to and in ac-
cordance with section 6(c) of the Bank Holding
Company Act of 1956 if—
‘‘(A) the company engages in such activi-
ties solely as agent and not directly or indirectly
as principal;
‘‘(B) the national bank is well capitalized
and well managed;
‘‘(C) all depository institution affiliates of
the national bank are well capitalized and well
managed; and
‘‘(D) the bank has received the approval of
the Comptroller of the Currency.
‘‘(3) COMMUNITY
NEEDS
REQUIREMENT.—A
national bank may not acquire control of, or an in-
terest in, any company under paragraph (2) unless
the national bank, and all depository institution af-
filiates of the national bank, have achieved a rating
of ‘satisfactory record of meeting community credit
needs’, or better, at the most recent examination of
each such bank or institution under the Community
Reinvestment Act of 1977.
‘‘(4) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply:
‘‘(A) COMPANY; 
CONTROL; 
AFFILIATE;
SUBSIDIARY.—The terms ‘company’, ‘control’,
‘affiliate’, and ‘subsidiary’ have the same mean-
ings as in section 2 of the Bank Holding Com-
pany Act of 1956.
‘‘(B) WELL CAPITALIZED.—The term ‘well
capitalized’ has the same meaning as in section
38 of the Federal Deposit Insurance Act and,
for purposes of this section, the Comptroller
shall have exclusive jurisdiction to determine
whether a national bank is well capitalized.
‘‘(C) WELL
MANAGED.—The term ‘well
managed’ means—
‘‘(i) in the case of a depository insti-
tution that has been examined, unless oth-
erwise determined in writing by the appro-
priate Federal banking agency—
‘‘(I) the achievement of a com-
posite rating of 1 or 2 under the Uni-
form Financial Institutions Rating
System (or an equivalent rating under
an equivalent rating system) in con-
nection with the most recent examina-
tion or subsequent review of the de-
pository institution; and
‘‘(II) at least a rating of 2 for
management, if that rating is given;
or
‘‘(ii) in the case of any depository in-
stitution that has not been examined, the
existence and use of managerial resources
that the appropriate Federal banking agen-
cy determines are satisfactory.
‘‘(D) INCORPORATED
DEFINITIONS.—The
terms ‘appropriate Federal banking agency’ and
‘depository institution’ have the same meanings
as in section 3 of the Federal Deposit Insur-
ance Act.’’.
(b) LIMITATION ON CERTAIN ACTIVITIES IN SUB-
SIDIARIES.—Section 21(a)(1) of the Banking Act of 1933
(12 U.S.C. 378(a)(1)) is amended—
(1) by inserting ‘‘, or to be a subsidiary of any
person, firm, corporation, association, business trust,
or similar organization engaged (unless such subsidi-
ary (A) was engaged in such securities activities as
of September 15, 1997, or (B) is a nondepository
subsidiary of (i) a foreign bank and is not also a
subsidiary of a domestic depository institution, or
(ii) an unincorporated private bank that is not in-
sured under the Federal Deposit Insurance Act),’’
after ‘‘to engage at the same time’’; and
(2) by inserting ‘‘or any subsidiary of such
bank, company, or institution’’ after ‘‘or private
bankers’’.
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) ANTITYING.—Section 106(a) of the Bank
Holding Company Act Amendments of 1970 is
amended by adding at the end the following new
sentence: ‘‘For purposes of this section, a subsidiary
of a national bank which engages in activities as an
agent pursuant to section 5136A(a)(2) shall be
deemed to be a subsidiary of a bank holding com-
pany, and not a subsidiary of a bank.’’.
(2) SECTION 23B.—Section 23B(a) of the Fed-
eral Reserve Act (12 U.S.C. 371c–1(a)) is amended
by adding at the end the following new paragraph:
‘‘(4) SUBSIDIARY
OF
NATIONAL
BANK.—For
purposes of this section, a subsidiary of a national
bank which engages in activities as an agent pursu-
ant to section 5136A(a)(2) shall be deemed to be an
affiliate of the national bank and not a subsidiary of
the bank.’’.
(d) CLERICAL AMENDMENT.—The table of sections
for chapter one of title LXII of the Revised Statutes of
the United States is amended—
(1) by redesignating the item relating to section
5136A as section 5136C; and
(2) by inserting after the item relating to sec-
tion 5136 the following new item:
‘‘5136A. Financial subsidiaries of national banks.’’.
SEC. 122. MISREPRESENTATIONS REGARDING DEPOSITORY
INSTITUTION LIABILITY FOR OBLIGATIONS
OF AFFILIATES.
(a) IN GENERAL.—Chapter 47 of title 18, United
States Code, is amended by inserting after section 1007
the following new section:
‘‘§ 1008. Misrepresentations regarding financial insti-
tution liability for obligations of affiliates
‘‘(a) IN GENERAL.—No institution-affiliated party of
an insured depository institution or institution-affiliated
party of a subsidiary or affiliate of an insured depository
institution shall fraudulently represent that the institution
is or will be liable for any obligation of a subsidiary or
other affiliate of the institution.
‘‘(b) CRIMINAL PENALTY.—Whoever violates sub-
section (a) shall be fined under this title, imprisoned for
not more than 1 year, or both.
‘‘(c) INSTITUTION-AFFILIATED PARTY DEFINED.—
For purposes of this section, the term ‘institution-affili-
ated party’ with respect to a subsidiary or affiliate has
the same meaning as in section 3 of the Federal Deposit
Insurance Act, except that references to an insured deposi-
tory institution shall be deemed to be references to a sub-
sidiary or affiliate of an insured depository institution.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section, the terms ‘affiliate’, ‘insured depository institu-
tion’, and ‘subsidiary’ have same meanings as in section
3 of the Federal Deposit Insurance Act.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 47 of title 18, United States Code, is amended
by inserting after the item relating to section 1007 the
following new item:
‘‘1008. Misrepresentations regarding financial institution liability for obligations
of affiliates.’’.
SEC. 123. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RE-
SERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C.
248) is amended by striking the paragraph designated as
‘‘(m)’’ and inserting ‘‘(m) [Repealed]’’.
Subtitle 
D—Wholesale 
Financial
Holding Companies; Wholesale
Financial Institutions
CHAPTER 1—WHOLESALE FINANCIAL
HOLDING COMPANIES
SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES
ESTABLISHED.
(a) DEFINITION AND SUPERVISION.—Section 10 of
the Bank Holding Company Act of 1956 (12 U.S.C. 1841
et seq.) is amended to read as follows:
‘‘SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.
‘‘(a) COMPANIES THAT CONTROL WHOLESALE FI-
NANCIAL INSTITUTIONS.—
‘‘(1) WHOLESALE
FINANCIAL
HOLDING
COM-
PANY
DEFINED.—The term ‘wholesale financial
holding company’ means any company that—
‘‘(A) is registered as a bank holding com-
pany;
‘‘(B) is predominantly engaged in financial
activities as defined in section 6(f)(2);
‘‘(C) controls 1 or more wholesale financial
institutions;
‘‘(D) does not control—
‘‘(i) a bank other than a wholesale fi-
nancial institution;
‘‘(ii) an insured bank other than an
institution permitted under subparagraph
(D), (F), or (G) of section 2(c)(2); or
‘‘(iii) a savings association; and
‘‘(E) is not a foreign bank (as defined in
section 1(b)(7) of the International Banking
Act of 1978).
‘‘(2) SAVINGS
ASSOCIATION
TRANSITION
PE-
RIOD.—Notwithstanding paragraph (1)(D)(iii), the
Board may permit a company that controls a sav-
ings association and that otherwise meets the re-
quirements of paragraph (1) to become supervised
under paragraph (1), if the company divests control
of any such savings association within such period,
not to exceed 5 years after becoming supervised
under paragraph (1), as permitted by the Board.
‘‘(b) SUPERVISION BY THE BOARD.—
‘‘(1) IN GENERAL.—The provisions of this sec-
tion shall govern the reporting, examination, and
capital requirements of wholesale financial holding
companies.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—The Board from time
to time may require any wholesale financial
holding company and any subsidiary of such
100
company to submit reports under oath to keep
the Board informed as to—
‘‘(i) the company’s or subsidiary’s ac-
tivities, financial condition, policies, sys-
tems for monitoring and controlling finan-
cial and operational risks, and transactions
with depository institution subsidiaries of
the holding company; and
‘‘(ii) the extent to which the company
or subsidiary has complied with the provi-
sions of this Act and regulations prescribed
and orders issued under this Act.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN GENERAL.—The Board shall,
to the fullest extent possible, accept re-
ports in fulfillment of the Board’s report-
ing requirements under this paragraph
that the wholesale financial holding com-
pany or any subsidiary of such company
has provided or been required to provide to
other Federal and State supervisors or to
appropriate self-regulatory organizations.
‘‘(ii) AVAILABILITY.—A wholesale fi-
nancial holding company or a subsidiary of
such company shall provide to the Board,
101
at the request of the Board, a report re-
ferred to in clause (i).
‘‘(C) EXEMPTIONS FROM REPORTING RE-
QUIREMENTS.—
‘‘(i) IN GENERAL.—The Board may,
by regulation or order, exempt any com-
pany or class of companies, under such
terms and conditions and for such periods
as the Board shall provide in such regula-
tion or order, from the provisions of this
paragraph and any regulation prescribed
under this paragraph.
‘‘(ii) 
CRITERIA
FOR
CONSIDER-
ATION.—In making any determination
under clause (i) with regard to any exemp-
tion under such clause, the Board shall
consider, among such other factors as the
Board may determine to be appropriate,
the following factors:
‘‘(I) Whether information of the
type required under this paragraph is
available from a supervisory agency
(as defined in section 1101(7) of the
Right to Financial Privacy Act of
102
1978) or a foreign regulatory author-
ity of a similar type.
‘‘(II) The primary business of the
company.
‘‘(III) The nature and extent of
the domestic and foreign regulation of
the activities of the company.
‘‘(3) EXAMINATIONS.—
‘‘(A) LIMITED USE OF EXAMINATION AU-
THORITY.—The Board may make examinations
of each wholesale financial holding company
and each subsidiary of such company in order
to—
‘‘(i) inform the Board regarding the
nature of the operations and financial con-
dition of the wholesale financial holding
company and its subsidiaries;
‘‘(ii) inform the Board regarding—
‘‘(I) the financial and operational
risks within the wholesale financial
holding company system that may af-
fect any depository institution owned
by such holding company; and
103
‘‘(II) the systems of the holding
company and its subsidiaries for mon-
itoring and controlling those risks;
and
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
depository institution controlled by the
wholesale financial holding company and
any of the company’s other subsidiaries.
‘‘(B) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, limit the focus and scope of any exam-
ination of a wholesale financial holding com-
pany under this paragraph to—
‘‘(i) the holding company; and
‘‘(ii) any subsidiary (other than an in-
sured depository institution subsidiary) of
the holding company that, because of the
size, condition, or activities of the subsidi-
ary, the nature or size of transactions be-
tween such subsidiary and any affiliated
depository institution, or the centralization
of functions within the holding company
system, could have a materially adverse ef-
104
fect on the safety and soundness of any de-
pository institution affiliate of the holding
company.
‘‘(C) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use the reports of examination of de-
pository institutions made by the Comptroller of
the Currency, the Federal Deposit Insurance
Corporation, the Director of the Office of Thrift
Supervision or the appropriate State depository
institution supervisory authority for the pur-
poses of this section.
‘‘(D) 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 by
instead reviewing the reports of examination
made of—
‘‘(i) any registered broker or dealer or
any registered investment adviser by or on
behalf of the Commission; and
‘‘(ii) any licensed insurance company
by or on behalf of any State government
105
insurance agency responsible for the super-
vision of the insurance company.
‘‘(E) CONFIDENTIALITY OF REPORTED IN-
FORMATION.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of law, the Board shall
not be compelled to disclose any nonpublic
information required to be reported under
this paragraph, or any information sup-
plied to the Board by any domestic or for-
eign regulatory agency, that relates to the
financial or operational condition of any
wholesale financial holding company or any
subsidiary of such company.
‘‘(ii) COMPLIANCE
WITH
REQUESTS
FOR INFORMATION.—No provision of this
subparagraph shall be construed as author-
izing the Board to withhold information
from the Congress, or preventing the
Board from complying with a request for
information from any other Federal de-
partment or agency for purposes within the
scope of such department’s or agency’s ju-
risdiction, or from complying with any
order of a court of competent jurisdiction
106
in an action brought by the United States
or the Board.
‘‘(iii) COORDINATION
WITH
OTHER
LAW.—For purposes of section 552 of title
5, United States Code, this subparagraph
shall be considered to be a statute de-
scribed in subsection (b)(3)(B) of such sec-
tion.
‘‘(iv) DESIGNATION OF CONFIDENTIAL
INFORMATION.—In prescribing regulations
to carry out the requirements of this sub-
section, the Board shall designate informa-
tion described in or obtained pursuant to
this paragraph as confidential information.
‘‘(F) COSTS.—The cost of any examination
conducted by the Board under this section may
be assessed against, and made payable by, the
wholesale financial holding company.
‘‘(4) CAPITAL ADEQUACY GUIDELINES.—
‘‘(A) CAPITAL
ADEQUACY
PROVISIONS.—
Subject to the requirements of, and solely in ac-
cordance with, the terms of this paragraph, the
Board may adopt capital adequacy rules or
guidelines for wholesale financial holding com-
panies.
107
‘‘(B) METHOD OF CALCULATION.—In de-
veloping rules or guidelines under this para-
graph, the following provisions shall apply:
‘‘(i) FOCUS ON DOUBLE LEVERAGE.—
The Board shall focus on the use by whole-
sale financial holding companies of debt
and other liabilities to fund capital invest-
ments in subsidiaries.
‘‘(ii) 
NO
UNWEIGHTED
CAPITAL
RATIO.—The Board shall not, by regula-
tion, guideline, order, or otherwise, impose
under this section a capital ratio that is
not based on appropriate risk-weighting
considerations.
‘‘(iii) NO CAPITAL REQUIREMENT ON
REGULATED
ENTITIES.—The Board shall
not, by regulation, guideline, order or oth-
erwise, prescribe or impose any capital or
capital adequacy rules, standards, guide-
lines, or requirements upon any subsidiary
that—
‘‘(I) is not a depository institu-
tion; and
‘‘(II) is in compliance with appli-
cable capital requirements of another
109
count the activities, operations, or invest-
ments of an affiliated investment company
registered under the Investment Company
Act of 1940, if the investment company is
not—
‘‘(I) a bank holding company; or
‘‘(II) controlled by a bank hold-
ing company by reason of ownership
by the bank holding company (includ-
ing 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.
‘‘(vi) APPROPRIATE
EXCLUSIONS.—
The Board shall take full account of—
‘‘(I) the capital requirements
made applicable to any subsidiary that
is not a depository institution by an-
other Federal regulatory authority or
State insurance authority; and
‘‘(II) industry norms for capital-
ization of a company’s unregulated
subsidiaries and activities.
110
‘‘(vii) INTERNAL RISK MANAGEMENT
MODELS.—The Board may incorporate in-
ternal risk management models of whole-
sale financial holding companies into its
capital adequacy guidelines or rules and
may take account of the extent to which
resources of a subsidiary depository insti-
tution may be used to service the debt or
other liabilities of the wholesale financial
holding company.
‘‘(c) NONFINANCIAL
ACTIVITIES
AND
INVEST-
MENTS.—
‘‘(1) GRANDFATHERED ACTIVITIES.—
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a company that becomes a wholesale
financial holding company may continue to en-
gage, directly or indirectly, in any activity and
may retain ownership and control of shares of
a company engaged in any activity if—
‘‘(i) on the date of the enactment of
the Financial Services Act of 1999, such
wholesale financial holding company was
lawfully engaged in that nonfinancial activ-
ity, held the shares of such company, or
had entered into a contract to acquire
111
shares of any company engaged in such ac-
tivity; and
‘‘(ii) the company engaged in such ac-
tivity continues to engage only in the same
activities that such company conducted on
the date of the enactment of the Financial
Services Act of 1999, and other activities
permissible under this Act.
‘‘(B) NO EXPANSION OF GRANDFATHERED
COMMERCIAL ACTIVITIES THROUGH MERGER OR
CONSOLIDATION.—A wholesale financial holding
company that engages in activities or holds
shares pursuant to this paragraph, or a subsidi-
ary of such wholesale financial holding com-
pany, may not acquire, in any merger, consoli-
dation, or other type of business combination,
assets of any other company which is engaged
in any activity which the Board has not deter-
mined to be financial in nature or incidental to
activities that are financial in nature under sec-
tion 6(c).
‘‘(C) LIMITATION
TO
SINGLE
EXEMP-
TION.—No company that engages in any activ-
ity or controls any shares under subsection (f)
112
of section 6 may engage in any activity or own
any shares pursuant to this paragraph.
‘‘(2) COMMODITIES.—
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a wholesale financial holding company
which was predominately engaged as of Janu-
ary 1, 1997, in financial activities in the United
States (or any successor to any such company)
may engage in, or directly or indirectly own or
control shares of a company engaged in, activi-
ties related to the trading, sale, or investment
in commodities and underlying physical prop-
erties that were not permissible for bank hold-
ing companies to conduct in the United States
as of January 1, 1997, if such wholesale finan-
cial holding company, or any subsidiary of such
holding company, was engaged directly, indi-
rectly, or through any such company in any of
such activities as of January 1, 1997, in the
United States.
‘‘(B) LIMITATION.—The attributed aggre-
gate consolidated assets of a wholesale financial
holding company held under the authority
granted under this paragraph and not otherwise
permitted to be held by all wholesale financial
113
holding companies under this section may not
exceed 5 percent of the total consolidated assets
of the wholesale financial holding company, ex-
cept that the Board may increase such percent-
age of total consolidated assets by such
amounts and under such circumstances as the
Board considers appropriate, consistent with
the purposes of this Act.
‘‘(3) CROSS
MARKETING
RESTRICTIONS.—A
wholesale financial holding company shall not
permit—
‘‘(A) any company whose shares it owns or
controls pursuant to paragraph (1) or (2) to
offer or market any product or service of an af-
filiated wholesale financial institution; or
‘‘(B) any affiliated wholesale financial in-
stitution to offer or market any product or serv-
ice of any company whose shares are owned or
controlled by such wholesale financial holding
company pursuant to such paragraphs.
‘‘(d) QUALIFICATION OF FOREIGN BANK AS WHOLE-
SALE FINANCIAL HOLDING COMPANY.—
‘‘(1) IN GENERAL.—Any foreign bank, or any
company that owns or controls a foreign bank, that
operates a branch, agency, or commercial lending
114
company in the United States, including a foreign
bank or company that owns or controls a wholesale
financial institution, may request a determination
from the Board that such bank or company be treat-
ed as a wholesale financial holding company (other
than for purposes of subsection (c)), subject to such
conditions as the Board deems appropriate, giving
due regard to the principle of national treatment
and equality of competitive opportunity and the re-
quirements imposed on domestic banks and compa-
nies.
‘‘(2) CONDITIONS
FOR
TREATMENT
AS
A
WHOLESALE FINANCIAL HOLDING COMPANY.—A for-
eign bank and a company that owns or controls a
foreign bank may not be treated as a wholesale fi-
nancial holding company unless the bank and com-
pany meet and continue to meet the following cri-
teria:
‘‘(A) NO INSURED DEPOSITS.—No deposits
held directly by a foreign bank or through an
affiliate (other than an institution described in
subparagraph (D) or (F) of section 2(c)(2)) are
insured under the Federal Deposit Insurance
Act.
270
the State insurance regulator of the transferee domi-
cile.
(2) CONTINUED VOTING CONTROL BY POLICY-
HOLDERS; REVIEW OF PUBLIC STOCK OFFERING.—
After the consummation of a reorganization, the pol-
icyholders of the reorganized insurer shall have the
same voting rights with respect to the mutual hold-
ing company as they had before the reorganization
with respect to the mutual insurer. With respect to
an initial public offering of stock, the offering shall
be conducted in compliance with applicable securities
laws and in a manner approved by the State insur-
ance regulator of the transferee domicile.
(3) AWARD OF STOCK OR GRANT OF OPTIONS
TO OFFICERS AND DIRECTORS.—For a period of 6
months after completion of an initial public offering,
neither a stock holding company nor the converted
insurer shall award any stock options or stock
grants to persons who are elected officers or direc-
tors of the mutual holding company, the stock hold-
ing company, or the converted insurer, except with
respect to any such awards or options to which a
person is entitled as a policyholder and as approved
by the State insurance regulator of the transferee
domicile.