I
105TH CONGRESS
1ST SESSION
H. R. 1655
To amend the Bank Holding Company Act of 1956 to provide additional
relief for limited purpose banks from certain outdated restrictions im-
posed by the Competitive Equality Banking Act of 1987 which by the
express terms of such Act were intended to be temporary and have
now been in place for 10 years, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 16, 1997
Mr. CASTLE (for himself, Mr. LAFALCE, Mr. FOX of Pennsylvania, Mrs.
MALONEY of New York, Mr. KING, and Mr. FRANK of Massachusetts)
introduced the following bill; which was referred to the Committee on
Banking and Financial Services
A BILL
To amend the Bank Holding Company Act of 1956 to pro-
vide additional relief for limited purpose banks from cer-
tain outdated restrictions imposed by the Competitive
Equality Banking Act of 1987 which by the express
terms of such Act were intended to be temporary and
have now been in place for 10 years, 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.
This Act may be cited as the ‘‘Limited Purpose Bank
Amendments of 1997’’.
SEC. 2. BANK ACTIVITIES RESTRICTION.
(a) IN GENERAL.—Section 4(f)(2) of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1843(f)(2)) is
amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(A);
(2) by striking subparagraph (B) and inserting
the following new subparagraph:
‘‘(B) 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 3d
parties; and
‘‘(ii) engages principally in the busi-
ness of making commercial loans (and, for
purposes of this clause, loans made in the
ordinary course of a credit card operation
shall not be treated as commercial loans);
or’’; and
(3) by inserting after paragraph (2) (as amend-
ed by paragraph (2) of this subsection) the following
new subparagraph:
‘‘(C) 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).’’.
(b) ACQUISITION OF CREDIT CARD ASSETS.—Section
4(f)(2)(A)(ii) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(f)(2)(A)(ii)) is amended—
(1) by striking ‘‘and’’ at the end of subclause
(IX);
(2) by inserting ‘‘and’’ after the semicolon at
the end of subclause (X); and
(3) by inserting the following new subclause im-
mediately after subclause (X) (and before the provi-
sion which follows such subclause):
‘‘(XI) assets that are derived
from, or are incidental to, activities in
which institutions described in sub-
section (c)(2)(F) are permitted to en-
gage;’’.
SEC. 3. CROSSMARKETING RESTRICTION.
Section 4(f) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(f)) is amended by striking para-
graph (3).
SEC. 4. RESTRICTION ON DAYLIGHT OVERDRAFTS .
Section 4(f) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(f)) (as amended by section 3) is
amended by inserting after paragraph (2) the following
new paragraph:
‘‘(3) PERMISSIBLE OVERDRAFTS DESCRIBED.—
For purposes of paragraph (2)(C), 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;
‘‘(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
(2) by striking the period at the end of sub-
paragraph (B) and inserting ‘‘; or’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(C) in an acquisition in which the insured
institution has been found to be undercapital-
ized by the appropriate Federal or State au-
thority.’’.
SEC. 6. DIVESTITURE REQUIREMENT.
(a) IN GENERAL.—Paragraph (4) of section 4(f) of
the Bank Holding Company Act of 1956 (12 U.S.C.
1843(f)) is amended to read as follows:
‘‘(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) either—
‘‘(i) corrected the condition or ceased
the activity that caused the company to
fail to continue to qualify for the exemp-
tion; or
‘‘(ii) submitted a plan to the Board to
cease the activity or correct the condition
in a timely manner (which shall not exceed
1 year) and the Board has not disapproved
such plan; and
‘‘(B) implemented procedures that are rea-
sonably adapted to avoid the reoccurrence of
such condition or activity.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—
Section 4(f)(2) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(f)(2)) is amended by striking ‘‘Para-
graph (1) shall cease to apply to any company described
in such paragraph if—’’ and inserting ‘‘Subject to para-
graph (3), a company described in paragraph (1) shall no
longer qualify for the exemption provided under such para-
graph if—’’.
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