‘‘(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.’’.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) EXCLUSIVE COMMISSION AUTHORITY.—
(1) IN GENERAL.—The Commission shall be the
sole Federal agency with authority to inspect and ex-
amine any registered investment company that is not
a bank holding company.
(2) PROHIBITION ON BANKING AGENCIES.—A
Federal banking agency may not inspect or examine
any registered investment company that is not a
bank holding company.
(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 meaning given to
such term in section 2 of the Bank Holding Com-
pany 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 meaning given to
such term in section 3(z) of the Federal Deposit In-
surance 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.
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) an investment adviser registered under the
Investment Advisers Act of 1940, with respect to the
investment advisory activities of such investment ad-
viser and activities incidental to such investment ad-
visory 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 ap-
propriate 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’’ shall 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’’ shall have the same
meanings as in section 2 of the Bank Holding Com-
pany Act of 1956.
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
that engages in agency activities that have been de-
termined to be financial in nature or incidental to
such financial activities pursuant to and in accord-
ance with section 6(c) of the Bank Holding Com-
pany 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, and has achieved a rating of
satisfactory or better at the most recent exam-
ination of the bank under the Community Rein-
vestment Act of 1977;
‘‘(C) all depository institution affiliates of
the national bank are well capitalized and well
managed, and have achieved a rating of satis-
factory or better at the most recent examina-
tion of each such depository institution under
the Community Reinvestment Act of 1977; and
‘‘(D) the bank has received the approval of
the Comptroller of the Currency.
‘‘(3) DEFINITIONS.—
‘‘(A) COMPANY; CONTROL; SUBSIDIARY.—
The terms ‘company’, ‘control’, and ‘subsidiary’
have the meanings given to such terms in sec-
tion 2 of the Bank Holding Company 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 bank that has
been
examined,
unless
otherwise
deter-
mined in writing by the Comptroller—
‘‘(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 bank;
and
‘‘(II) at least a rating of 2 for
management, if that rating is given;
or
‘‘(ii) in the case of any national bank
that has not been examined, the existence
and use of managerial resources that the
Comptroller determines are satisfactory.
‘‘(b)
LIMITED
EXCLUSIONS
FROM
COMMUNITY
NEEDS REQUIREMENTS FOR NEWLY ACQUIRED DEPOSI-
TORY INSTITUTIONS.—Any depository institution which
becomes affiliated with a national bank during the 24-
month period preceding the submission of an application
to acquire a subsidiary under subsection (a)(2), and any
depository institution which becomes so affiliated after the
approval of such application, may be excluded for purposes
of subsection (a)(2)(B) during the 24-month period begin-
ning on the date of such acquisition if—
‘‘(1) the depository institution has submitted an
affirmative plan to the appropriate Federal banking
agency (as defined in section 3 of the Federal De-
posit Insurance Act) to take such action as may be
necessary in order for such institution to achieve a
‘satisfactory record of meeting community credit
needs’, or better, at the next examination of the in-
stitution under the Community Reinvestment Act of
1977; and
‘‘(2) the plan has been approved by the appro-
priate Federal banking agency.’’.
(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 a foreign bank and is not also a sub-
sidiary of a domestic depository institution),’’ 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 except references to an
insured depository institution shall be deemed to be ref-
erences to a subsidiary 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(g)(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)(C)(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
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,
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
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
‘‘(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—
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
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
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.
‘‘(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
Federal regulatory authority (includ-
ing the Securities and Exchange Com-
mission) or State insurance authority.
‘‘(iv) LIMITATION.—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 is not a depository institution and
that is registered as an investment adviser
under
the
Investment
Advisers
Act
of
1940, except that this clause shall not be
construed as preventing the Board from
imposing capital or capital adequacy rules,
guidelines, standards, or requirements with
respect to activities of a registered invest-
ment adviser other than investment advi-
sory activities or activities incidental to in-
vestment advisory activities.
‘‘(v)
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.
‘‘(vi) 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 1998, 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
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 1998, 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)
of section 6 may engage in any activity or own
any shares pursuant to this paragraph or para-
graph (1).
‘‘(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
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 per-
mit—
‘‘(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—
‘‘(A) operates a branch, agency, or com-
mercial lending company in the United States,
including a foreign bank or company that owns
or controls a wholesale financial institution; and
‘‘(B) owns, controls, or is affiliated with a
security affiliate that engages in underwriting
corporate equity securities,
may request a determination from the Board that
such bank or company be treated as a wholesale fi-
nancial holding company for purposes of subsection
(c).
‘‘(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.
‘‘(B) CAPITAL
STANDARDS.—The foreign
bank meets risk-based capital standards com-
parable to the capital standards required for a
wholesale financial institution, giving due re-
gard to the principle of national treatment and
equality of competitive opportunity.
‘‘(C) TRANSACTION
WITH
AFFILIATES.—
Transactions between a branch, agency, or com-
mercial lending company subsidiary of the for-
eign bank in the United States, and any securi-
ties affiliate or company in which the foreign
bank (or any company that owns or controls
this subsection shall not be eligible for any exception
described in section 2(h).
‘‘(5) SUPERVISION OF FOREIGN BANK WHICH
MAINTAINS
NO
BANKING
PRESENCE
OTHER
THAN
CONTROL
OF
A
WHOLESALE
FINANCIAL
INSTITU-
TION.—A foreign bank that owns or controls a
wholesale financial institution but does not operate
a branch, agency, or commercial lending company in
the United States (and any company that owns or
controls such foreign bank) may request a deter-
mination from the Board that such bank or com-
pany be treated as a wholesale financial holding
company for purposes of subsection (c), except that
such bank or company shall be subject to the restric-
tions of paragraphs (2)(A), (3), and (4) of this sub-
section.
‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed as limiting the author-
ity of the Board under the International Banking
Act of 1978 with respect to the regulation, super-
vision, or examination of foreign banks and their of-
fices and affiliates in the United States.
‘‘(7) APPLICABILITY OF COMMUNITY REINVEST-
MENT ACT OF 1977.—The branches in the United
States of a foreign bank that is, or is affiliated with
a company that is, treated as a wholesale financial
holding
company
shall
be
subject
to
section
9B(b)(11) of the Federal Reserve Act as if the for-
eign bank were a wholesale financial institution
under such section. The Board and the Comptroller
of the Currency shall apply the provisions of sections
803(2), 804, and 807(1) of the Community Rein-
vestment Act of 1977 to branches of foreign banks
which receive only such deposits as are permissible
for receipt by a corporation organized under section
25A of the Federal Reserve Act, in the same manner
and to the same extent such sections apply to such
a corporation.’’.
(b) UNINSURED STATE BANKS.—Section 9 of the
Federal Reserve Act (U.S.C. 321 et seq.) is amended by
adding at the end the following new paragraph:
‘‘(24) ENFORCEMENT AUTHORITY OVER UNIN-
SURED STATE MEMBER BANKS.—Section 3(u) of the
Federal Deposit Insurance Act, subsections (j) and
(k) of section 7 of such Act, and subsections (b)
through (n), (s), (u), and (v) of section 8 of such
Act shall apply to an uninsured State member bank
in the same manner and to the same extent such
provisions apply to an insured State member bank
and any reference in any such provision to ‘insured
depository institution’ shall be deemed to be a ref-
erence to ‘uninsured State member bank’ for pur-
poses of this paragraph.’’.
SEC. 132. AUTHORIZATION TO RELEASE REPORTS.
(a) FEDERAL RESERVE ACT.—The last sentence of
the eighth undesignated paragraph of section 9 of the
Federal Reserve Act (12 U.S.C. 326) is amended to read
as follows: ‘‘The Board of Governors of the Federal Re-
serve System, at its discretion, may furnish reports of ex-
amination or other confidential supervisory information
concerning State member banks or any other entities ex-
amined under any other authority of the Board to any
Federal or State authorities with supervisory or regulatory
authority over the examined entity, to officers, directors,
or receivers of the examined entity, and to any other per-
son that the Board determines to be proper.’’.
(b) COMMODITY FUTURES TRADING COMMISSION.—
(1) Section 1101(7) of the Right to Financial
Privacy Act of 1978 (12 U.S.C. 3401(7)) is amend-
ed—
(A) by redesignating subparagraphs (G)
and (H) as subparagraphs (H) and (I), respec-
tively; and
(B) by inserting after subparagraph (F)
the following new subparagraph:
‘‘(G)
the
Commodity
Futures
Trading
Commission; or’’ and
(2) Section 1112(e) of the Right to Financial
Privacy Act (12 U.S.C. 3412(e)) is amended by
striking ‘‘and the Securities and Exchange Commis-
sion’’ and inserting ‘‘, the Securities and Exchange
Commission, and the Commodity Futures Trading
Commission’’.
SEC. 133. CONFORMING AMENDMENTS.
(a) BANK HOLDING COMPANY ACT OF 1956.—
(1)
DEFINITIONS.—Section
of
the
Bank
Holding Company Act of 1956 (12 U.S.C. 1842) is
amended by adding at the end the following new
subsections:
‘‘(p) WHOLESALE FINANCIAL INSTITUTION.—The
term ‘wholesale financial institution’ means a wholesale fi-
nancial institution subject to section 9B of the Federal
Reserve Act.
‘‘(q) COMMISSION.—The term ‘Commission’ means
the Securities and Exchange Commission.
‘‘(r) DEPOSITORY INSTITUTION.—The term ‘deposi-
tory institution’—
‘‘(1) has the meaning given to such term in sec-
tion 3 of the Federal Deposit Insurance Act; and
‘‘(2) includes a wholesale financial institution.’’.
(2) DEFINITION OF BANK INCLUDES WHOLE-
SALE FINANCIAL INSTITUTION.—Section 2(c)(1) of
the Bank Holding Company Act of 1956 (12 U.S.C.
1841(c)(1)) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(C) A wholesale financial institution.’’.
(3)
INCORPORATED
DEFINITIONS.—Section
2(n) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(n)) is amended by inserting ‘‘ ‘insured
bank’,’’ after ‘‘ ‘in danger of default’,’’.
(4) EXCEPTION
TO
DEPOSIT
INSURANCE
RE-
QUIREMENT.—Section 3(e) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842(e)) is
amended by adding at the end the following: ‘‘This
subsection shall not apply to a wholesale financial
institution.’’.
(b) FEDERAL DEPOSIT INSURANCE ACT.—Section
3(q)(2)(A) of the Federal Deposit Insurance Act (12
U.S.C. 1813(q)(2)(A)) is amended to read as follows:
‘‘(A) any State member insured bank (ex-
cept a District bank) and any wholesale finan-
cial institution as authorized pursuant to sec-
tion 9B of the Federal Reserve Act;’’.
CHAPTER 2—WHOLESALE FINANCIAL
INSTITUTIONS
SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.
(a) NATIONAL WHOLESALE FINANCIAL INSTITU-
TIONS.—
(1) IN GENERAL.—Chapter one of title LXII of
the Revised Statutes of the United States (12
U.S.C. 21 et seq.) is amended by inserting after sec-
tion 5136A (as added by section 121(a) of this title)
the following new section:
‘‘SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITU-
TIONS.
‘‘(a) AUTHORIZATION OF THE COMPTROLLER RE-
QUIRED.—A national bank may apply to the Comptroller
on such forms and in accordance with such regulations
as the Comptroller may prescribe, for permission to oper-
ate as a national wholesale financial institution.
‘‘(b) REGULATION.—A national wholesale financial
institution may exercise, in accordance with such institu-
tion’s articles of incorporation and regulations issued by
the Comptroller, all the powers and privileges of a national
bank formed in accordance with section 5133 of the Re-
vised Statutes of the United States, subject to section 9B
of the Federal Reserve Act and the limitations and restric-
tions contained therein.
‘‘(c) COMMUNITY REINVESTMENT ACT OF 1977.—A
national wholesale financial institution shall be subject to
the Community Reinvestment Act of 1977.
‘‘(d) EXAMINATION REPORTS.—The Comptroller of
the Currency shall, to the fullest extent possible, use the
report of examinations made by the Board of Governors
of the Federal Reserve System of a wholesale financial in-
stitution.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter one of title LXII of the Revised
Statutes of the United States is amended by insert-
ing after the item relating to section 5136A (as
added by section 121(d) of this title) the following
new item:
‘‘5136B. National wholesale financial institutions.’’.
(b) STATE WHOLESALE FINANCIAL INSTITUTIONS.—
The Federal Reserve Act (12 U.S.C. 221 et seq.) is
amended by inserting after section 9A the following new
section:
‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLE-
SALE FINANCIAL INSTITUTION.—
‘‘(1) APPLICATION REQUIRED.—
‘‘(A) IN GENERAL.—Any bank may apply
to the Board of Governors of the Federal Re-
serve System to become a wholesale financial
institution and, as a wholesale financial institu-
tion, to subscribe to the stock of the Federal re-
serve bank organized within the district where
the applying bank is located.
‘‘(B) TREATMENT
AS
MEMBER
BANK.—
Any application under subparagraph (A) shall
be treated as an application under, and shall be
subject to the provisions of section 9.
‘‘(2) INSURANCE TERMINATION.—No bank the
deposits of which are insured under the Federal De-
posit Insurance Act may become a wholesale finan-
cial institution unless it has met all requirements
under that Act for voluntary termination of deposit
insurance.
‘‘(b)
GENERAL
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) FEDERAL RESERVE ACT.—Except as oth-
erwise provided in this section, wholesale financial
institutions shall be member banks and shall be sub-
ject to the provisions of this Act that apply to mem-
ber banks to the same extent and in the same man-
ner as State member insured banks, except that a
wholesale financial institution may terminate mem-
bership under this Act only with the prior written
approval of the Board and on terms and conditions
that the Board determines are appropriate to carry
out the purposes of this Act.
‘‘(2) PROMPT CORRECTIVE ACTION.—A whole-
sale financial institution shall be deemed to be an in-
sured depository institution for purposes of section
38 of the Federal Deposit Insurance Act except
that—
‘‘(A) the relevant capital levels and capital
measures for each capital category shall be the
levels specified by the Board for wholesale fi-
nancial institutions; and
‘‘(B) all references to the appropriate Fed-
eral banking agency or to the Corporation in
that section shall be deemed to be references to
the Board.
‘‘(3) ENFORCEMENT AUTHORITY.—Subsections
(j) and (k) of section 7, subsections (b) through (n),
(s), and (v) of section 8, and section 19 of the Fed-
eral Deposit Insurance Act shall apply to a wholesale
financial institution in the same manner and to the
same extent as such provisions apply to State mem-
ber insured banks and any reference in such sections
to an insured depository institution shall be deemed
to include a reference to a wholesale financial insti-
tution.
‘‘(4)
CERTAIN
OTHER
STATUTES
APPLICA-
BLE.—A
wholesale
financial
institution
shall
be
deemed to be a banking institution, and the Board
shall be the appropriate Federal banking agency for
such bank and all such bank’s affiliates, for pur-
poses of the International Lending Supervision Act.
‘‘(5) BANK MERGER ACT.—A wholesale finan-
cial institution shall be subject to sections 18(c) and
44 of the Federal Deposit Insurance Act in the same
manner and to the same extent the wholesale finan-
cial institution would be subject to such sections if
the institution were a State member insured bank.
‘‘(6) BRANCHING.—Notwithstanding any other
provision of law, a wholesale financial institution
may establish and operate a branch at any location
on such terms and conditions as established by the
Board and, in the case of a State-chartered whole-
sale financial institution, with the approval of the
Board, and, in the case of a national bank wholesale
financial institution, with the approval of the Comp-
troller of the Currency.
‘‘(7) ACTIVITIES OF OUT-OF-STATE BRANCHES
OF WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(A) GENERAL.—A State-chartered whole-
sale financial institution shall be deemed a
State bank and an insured State bank and a
national wholesale financial institution shall be
deemed a national bank for purposes of para-
graphs (1), (2), and (3) of section 24(j) of the
Federal Deposit Insurance Act.
‘‘(B) DEFINITIONS.—The following defini-
tions shall apply solely for purposes of applying
paragraph (1):
‘‘(i) HOME STATE.—The term ‘home
State’ means—
‘‘(I) with respect to a national
wholesale
financial
institution,
the
State in which the main office of the
institution is located; and
‘‘(II) with respect to a State-
chartered wholesale financial institu-
tion, the State by which the institu-
tion is chartered.
‘‘(ii) HOST
STATE.—The term ‘host
State’ means a State, other than the home
State of the wholesale financial institution,
in which the institution maintains, or seeks
to establish and maintain, a branch.
‘‘(iii)
OUT-OF-STATE
BANK.—The
term ‘out-of-State bank’ means, with re-
spect to any State, a wholesale financial
institution whose home State is another
State.
‘‘(8) DISCRIMINATION
REGARDING
INTEREST
RATES.—Section 27 of the Federal Deposit Insur-
ance Act shall apply to State-chartered wholesale fi-
nancial institutions in the same manner and to the
same extent as such provisions apply to State mem-
ber insured banks and any reference in such section
to a State-chartered insured depository institution
shall be deemed to include a reference to a State-
chartered wholesale financial institution.
‘‘(9) PREEMPTION OF STATE LAWS REQUIRING
DEPOSIT
INSURANCE
FOR
WHOLESALE
FINANCIAL
INSTITUTIONS.—The appropriate State banking au-
thority may grant a charter to a wholesale financial
institution notwithstanding any State constitution or
statute requiring that the institution obtain insur-
ance of its deposits and any such State constitution
or statute is hereby preempted solely for purposes of
this paragraph.
‘‘(10) PARITY FOR WHOLESALE FINANCIAL IN-
STITUTIONS.—A State bank that is a wholesale fi-
nancial institution under this section shall have all
of the rights, powers, privileges, and immunities (in-
100
cluding those derived from status as a federally
chartered institution) of and as if it were a national
bank, subject to such terms and conditions as estab-
lished by the Board.
‘‘(11)
COMMUNITY
REINVESTMENT
ACT
OF
1977.—A State wholesale financial institution shall
be subject to the Community Reinvestment Act of
1977.
‘‘(c)
SPECIFIC
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) LIMITATIONS ON DEPOSITS.—
‘‘(A) MINIMUM AMOUNT.—
‘‘(i) IN GENERAL.—No wholesale fi-
nancial institution may receive initial de-
posits of $100,000 or less, other than on
an incidental and occasional basis.
‘‘(ii) LIMITATION
ON
DEPOSITS
OF
LESS THAN $100,000.—No wholesale finan-
cial institution may receive initial deposits
of $100,000 or less if such deposits con-
stitute more than 5 percent of the institu-
tion’s total deposits.
‘‘(B) NO DEPOSIT INSURANCE.—No depos-
its held by a wholesale financial institution shall
101
be insured deposits under the Federal Deposit
Insurance Act.
‘‘(C) ADVERTISING
AND
DISCLOSURE.—
The Board shall prescribe regulations pertain-
ing to advertising and disclosure by wholesale
financial institutions to ensure that each deposi-
tor is notified that deposits at the wholesale fi-
nancial institution are not federally insured or
otherwise guaranteed by the United States Gov-
ernment.
‘‘(2) MINIMUM
CAPITAL
LEVELS
APPLICABLE
TO
WHOLESALE
FINANCIAL
INSTITUTIONS.—The
Board shall, by regulation, adopt capital require-
ments for wholesale financial institutions—
‘‘(A) to account for the status of wholesale
financial institutions as institutions that accept
deposits that are not insured under the Federal
Deposit Insurance Act; and
‘‘(B) to provide for the safe and sound op-
eration of the wholesale financial institution
without undue risk to creditors or other per-
sons, including Federal reserve banks, engaged
in transactions with the bank.
‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE
TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi-
102
tion to any requirement otherwise applicable to State
member insured banks or applicable, under this sec-
tion, to wholesale financial institutions, the Board
may impose, by regulation or order, upon wholesale
financial institutions—
‘‘(A) limitations on transactions, direct or
indirect, with affiliates to prevent—
‘‘(i) the transfer of risk to the deposit
insurance funds; or
‘‘(ii) an affiliate from gaining access
to, or the benefits of, credit from a Federal
reserve bank, including overdrafts at a
Federal reserve bank;
‘‘(B) special clearing balance requirements;
and
‘‘(C) any additional requirements that the
Board determines to be appropriate or nec-
essary to—
‘‘(i) promote the safety and soundness
of the wholesale financial institution or any
insured depository institution affiliate of
the wholesale financial institution;
‘‘(ii) prevent the transfer of risk to
the deposit insurance funds; or
103
‘‘(iii) protect creditors and other per-
sons, including Federal reserve banks, en-
gaged in transactions with the wholesale fi-
nancial institution.
‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL
INSTITUTIONS.—The Board may, by regulation or
order, exempt any wholesale financial institution
from any provision applicable to a member bank
that is not a wholesale financial institution, if the
Board finds that such exemption is not inconsistent
with—
‘‘(A) the promotion of the safety and
soundness of the wholesale financial institution
or any insured depository institution affiliate of
the wholesale financial institution;
‘‘(B) the protection of the deposit insur-
ance funds; and
‘‘(C) the protection of creditors and other
persons, including Federal reserve banks, en-
gaged in transactions with the wholesale finan-
cial institution.
‘‘(5) LIMITATION ON TRANSACTIONS BETWEEN
A WHOLESALE FINANCIAL INSTITUTION AND AN IN-
SURED BANK.—For purposes of section 23A(d)(1) of
the Federal Reserve Act, a wholesale financial insti-
104
tution that is affiliated with an insured bank shall
not be a bank.
‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This
section
shall
not
be
construed
as
limiting
the
Board’s authority over member banks under any
other provision of law, or to create any obligation for
any Federal reserve bank to make, increase, renew,
or extend any advance or discount under this Act to
any member bank or other depository institution.
‘‘(d) CAPITAL AND MANAGERIAL REQUIREMENTS.—
‘‘(1) IN GENERAL.—A wholesale financial insti-
tution shall be well capitalized and well managed.
‘‘(2) NOTICE TO COMPANY.—The Board shall
promptly provide notice to a company that controls
a
wholesale
financial
institution
whenever
such
wholesale financial institution is not well capitalized
or well managed.
‘‘(3) AGREEMENT TO RESTORE INSTITUTION.—
Within 45 days of receipt of a notice under para-
graph (2) (or such additional period not to exceed
90 days as the Board may permit), the company
shall execute an agreement acceptable to the Board
to restore the wholesale financial institution to com-
pliance with all of the requirements of paragraph
(1).
105
‘‘(4)
LIMITATIONS
UNTIL
INSTITUTION
RE-
STORED.—Until the wholesale financial institution is
restored to compliance with all of the requirements
of paragraph (1), the Board may impose such limi-
tations on the conduct or activities of the company
or any affiliate of the company as the Board deter-
mines to be appropriate under the circumstances.
‘‘(5) FAILURE TO RESTORE.—If the company
does not execute and implement an agreement in ac-
cordance with paragraph (3), comply with any limi-
tation imposed under paragraph (4), restore the
wholesale financial institution to well capitalized sta-
tus within 180 days after receipt by the company of
the notice described in paragraph (2), or restore the
wholesale financial institution to well managed sta-
tus within such period as the Board may permit, the
company shall, 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, divest control of its subsidiary depository
institutions.
‘‘(6) WELL MANAGED DEFINED.—For purposes
of this subsection, the term ‘well managed’ has the
same meaning as in section 2 of the Bank Holding
Company Act of 1956.
106
‘‘(e) CONSERVATORSHIP AUTHORITY.—
‘‘(1) IN GENERAL.—The Board may appoint a
conservator to take possession and control of a
wholesale financial institution to the same extent
and in the same manner as the Comptroller of the
Currency may appoint a conservator for a national
bank under section 203 of the Bank Conservation
Act, and the conservator shall exercise the same
powers, functions, and duties, subject to the same
limitations, as are provided under such Act for con-
servators of national banks.
‘‘(2)
BOARD
AUTHORITY.—The
Board
shall
have the same authority with respect to any con-
servator appointed under paragraph (1) and the
wholesale financial institution for which such con-
servator has been appointed as the Comptroller of
the Currency has under the Bank Conservation Act
with respect to a conservator appointed under such
Act and a national bank for which the conservator
has been appointed.
‘‘(f) EXCLUSIVE JURISDICTION.—Subsections (c) and
(e) of section 43 of the Federal Deposit Insurance Act
shall not apply to any wholesale financial institution.’’.
(c) VOLUNTARY TERMINATION OF INSURED STATUS
BY CERTAIN INSTITUTIONS.—
107
(1) SECTION 8 DESIGNATIONS.—Section 8(a) of
the
Federal
Deposit
Insurance
Act
(12
U.S.C.
1818(a)) is amended—
(A) by striking paragraph (1); and
(B)
by
redesignating
paragraphs
(2)
through (10) as paragraphs (1) through (9), re-
spectively.
(2)
VOLUNTARY
TERMINATION
OF
INSURED
STATUS.—The Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.) is amended by inserting after
section 8 the following new section:
‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS IN-
SURED DEPOSITORY INSTITUTION.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), an insured State bank or a national bank may volun-
tarily terminate such bank’s status as an insured deposi-
tory institution in accordance with regulations of the Cor-
poration if—
‘‘(1) the bank provides written notice of the
bank’s intent to terminate such insured status—
‘‘(A) to the Corporation and the Board of
Governors of the Federal Reserve System not
less than 6 months before the effective date of
such termination; and
108
‘‘(B) to all depositors at such bank, not
less than 6 months before the effective date of
the termination of such status; and
‘‘(2) either—
‘‘(A) the deposit insurance fund of which
such bank is a member equals or exceeds the
fund’s designated reserve ratio as of the date
the bank provides a written notice under para-
graph (1) and the Corporation determines that
the fund will equal or exceed the applicable des-
ignated reserve ratio for the 2 semiannual as-
sessment periods immediately following such
date; or
‘‘(B) the Corporation and the Board of
Governors of the Federal Reserve System ap-
proved the termination of the bank’s insured
status and the bank pays an exit fee in accord-
ance with subsection (e).
‘‘(b) EXCEPTION.—Subsection (a) shall not apply
with respect to—
‘‘(1) an insured savings association; or
‘‘(2) an insured branch that is required to be
insured under subsection (a) or (b) of section 6 of
the International Banking Act of 1978.
109
‘‘(c) ELIGIBILITY FOR INSURANCE TERMINATED.—
Any bank that voluntarily elects to terminate the bank’s
insured status under subsection (a) shall not be eligible
for insurance on any deposits or any assistance authorized
under this Act after the period specified in subsection
(f)(1).
‘‘(d) INSTITUTION MUST BECOME WHOLESALE FI-
NANCIAL INSTITUTION OR TERMINATE DEPOSIT-TAKING
ACTIVITIES.—Any depository institution which voluntarily
terminates such institution’s status as an insured deposi-
tory institution under this section may not, upon termi-
nation of insurance, accept any deposits unless the institu-
tion is a wholesale financial institution subject to section
9B of the Federal Reserve Act.
‘‘(e) EXIT FEES.—
‘‘(1) IN GENERAL.—Any bank that voluntarily
terminates such bank’s status as an insured deposi-
tory institution under this section shall pay an exit
fee in an amount that the Corporation determines is
sufficient to account for the institution’s pro rata
share of the amount (if any) which would be re-
quired to restore the relevant deposit insurance fund
to the fund’s designated reserve ratio as of the date
the bank provides a written notice under subsection
(a)(1).
110
‘‘(2) PROCEDURES.—The Corporation shall pre-
scribe, by regulation, procedures for assessing any
exit fee under this subsection.
‘‘(f) TEMPORARY INSURANCE OF DEPOSITS INSURED
AS OF TERMINATION.—
‘‘(1) TRANSITION PERIOD.—The insured depos-
its of each depositor in a State bank or a national
bank on the effective date of the voluntary termi-
nation of the bank’s insured status, less all subse-
quent withdrawals from any deposits of such deposi-
tor, shall continue to be insured for a period of not
less than 6 months and not more than 2 years, as
determined by the Corporation. During such period,
no additions to any such deposits, and no new de-
posits in the depository institution made after the ef-
fective date of such termination shall be insured by
the Corporation.
‘‘(2) TEMPORARY ASSESSMENTS; OBLIGATIONS
AND DUTIES.—During the period specified in para-
graph (1) with respect to any bank, the bank shall
continue to pay assessments under section 7 as if
the bank were an insured depository institution. The
bank shall, in all other respects, be subject to the
authority of the Corporation and the duties and obli-
gations of an insured depository institution under
111
this Act during such period, and in the event that
the bank is closed due to an inability to meet the de-
mands of the bank’s depositors during such period,
the Corporation shall have the same powers and
rights with respect to such bank as in the case of
an insured depository institution.
‘‘(g) ADVERTISEMENTS.—
‘‘(1) IN
GENERAL.—A bank that voluntarily
terminates the bank’s insured status under this sec-
tion shall not advertise or hold itself out as having
insured deposits, except that the bank may advertise
the temporary insurance of deposits under sub-
section (f) if, in connection with any such advertise-
ment, the advertisement also states with equal prom-
inence that additions to deposits and new deposits
made after the effective date of the termination are
not insured.
‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS,
AND
SECURITIES.—Any certificate of deposit or
other obligation or security issued by a State bank
or a national bank after the effective date of the vol-
untary termination of the bank’s insured status
under this section shall be accompanied by a con-
spicuous, prominently displayed notice that such cer-
112
tificate of deposit or other obligation or security is
not insured under this Act.
‘‘(h) NOTICE REQUIREMENTS.—
‘‘(1) NOTICE TO THE CORPORATION.—The no-
tice required under subsection (a)(1)(A) shall be in
such form as the Corporation may require.
‘‘(2) NOTICE TO DEPOSITORS.—The notice re-
quired under subsection (a)(1)(B) shall be—
‘‘(A) sent to each depositor’s last address
of record with the bank; and
‘‘(B) in such manner and form as the Cor-
poration finds to be necessary and appropriate
for the protection of depositors.’’.
(3) DEFINITION.—Section 19(b)(1)(A)(i) of the
Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is
amended by inserting ‘‘, or any wholesale financial
institution subject to section 9B of this Act’’ after
‘‘such Act’’.
113
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 SEC-
TION 3 TRANSACTIONS.
Section 11(b)(1) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1849(b)(1)) is amended by inserting
‘‘and, if the transaction also involves an acquisition under
section 4 or section 6, the Board shall also notify the Fed-
eral Trade Commission of such approval’’ before the pe-
riod at the end of the first sentence.
SEC. 142. INTERAGENCY DATA SHARING.
To the extent not prohibited by other law, the Comp-
troller of the Currency, the Director of the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation,
and the Board of Governors of the Federal Reserve Sys-
tem shall make available to the Attorney General and the
Federal Trade Commission any data in the possession of
any such banking agency that the antitrust agency deems
necessary for antitrust review of any transaction requiring
notice to any such antitrust agency or the approval of such
agency under section 3, 4, or 6 of the Bank Holding Com-
pany Act of 1956, section 18(c) of the Federal Deposit
Insurance Act, the National Bank Consolidation and
114
Merger Act, section 10 of the Home Owners’ Loan Act,
or the antitrust laws.
SEC. 143. CLARIFICATION OF STATUS OF SUBSIDIARIES
AND AFFILIATES.
(a) CLARIFICATION OF FEDERAL TRADE COMMIS-
SION JURISDICTION.—Any person which directly or indi-
rectly controls, is controlled directly or indirectly by, or
is directly or indirectly under common control with, any
bank or savings association (as such terms are defined in
section 3 of the Federal Deposit Insurance Act) and is
not itself a bank or savings association shall not be
deemed to be a bank or savings association for purposes
of the Federal Trade Commission Act or any other law
enforced by the Federal Trade Commission.
(b) SAVINGS PROVISION.—No provision of this sec-
tion shall be construed as restricting the authority of any
Federal banking agency (as defined in section 3 of the
Federal Deposit Insurance Act) under any Federal bank-
ing law, including section 8 of the Federal Deposit Insur-
ance Act.
(c)
HART–SCOTT–RODINO
AMENDMENT.—Section
7A(c)(7) of the Clayton Act (15 U.S.C. 18a(c)(7)) is
amended by inserting before the semicolon at the end
thereof the following: ‘‘, except that a portion of a trans-
action is not exempt under this paragraph if such portion
115
of the transaction (A) requires notice under section 6 of
the Bank Holding Company Act of 1956; and (B) does
not require approval under section 3 or 4 of the Bank
Holding Company Act of 1956’’.
SEC. 144. ANNUAL GAO REPORT.
(a) IN GENERAL.—By the end of the 1-year period
beginning on the date of the enactment of this Act and
annually thereafter, the Comptroller General of the United
States shall submit a report to the Congress on market
concentration in the financial services industry and its im-
pact on consumers.
(b) ANALYSIS.—Each report submitted under sub-
section (a) shall contain an analysis of—
(1) the positive and negative effects of affili-
ations between various types of financial companies,
and of acquisitions pursuant to this Act and the
amendments made by this Act to other provisions of
law, including any positive or negative effects on
consumers, area markets, and submarkets thereof or
on registered securities brokers and dealers which
have been purchased by depository institutions or
depository institution holding companies;
(2) the changes in business practices and the
effects of any such changes on the availability of
venture capital, consumer credit, and other financial
116
services or products and the availability of capital
and credit for small businesses; and
(3) the acquisition patterns among depository
institutions, depository institution holding compa-
nies, securities firms, and insurance companies in-
cluding acquisitions among the largest 20 percent of
firms and acquisitions within regions or other lim-
ited geographical areas.
Subtitle F—Applying the Principles
of
National
Treatment
and
Equality of Competitive Oppor-
tunity
to
Foreign
Banks
and
Foreign Financial Institutions
SEC. 151. APPLYING THE PRINCIPLES OF NATIONAL TREAT-
MENT AND EQUALITY OF COMPETITIVE OP-
PORTUNITY TO FOREIGN BANKS THAT ARE
FINANCIAL HOLDING COMPANIES.
Section 8(c) of the International Banking Act of
1978 (12 U.S.C. 3106(c)) is amended by adding at the
end the following new paragraph:
‘‘(3)
TERMINATION
OF
GRANDFATHERED
RIGHTS.—
‘‘(A) IN GENERAL.—If any foreign bank or
foreign company files a declaration under sec-
tion 6(b)(1)(E) or which receives a determina-
117
tion under section 10(d)(1) of the Bank Hold-
ing Company Act of 1956, any authority con-
ferred by this subsection on any foreign bank or
company to engage in any activity which the
Board has determined to be permissible for fi-
nancial holding companies under section 6 of
such Act shall terminate immediately.
‘‘(B) RESTRICTIONS AND REQUIREMENTS
AUTHORIZED.—If a foreign bank or company
that engages, directly or through an affiliate
pursuant to paragraph (1), in an activity which
the Board has determined to be permissible for
financial holding companies under section 6 of
the Bank Holding Company Act of 1956 has
not filed a declaration with the Board of its sta-
tus as a financial holding company under such
section or received a determination under sec-
tion 10(d)(1) by the end of the 2-year period
beginning on the date of enactment of the Fi-
nancial Services Act of 1998, the Board, giving
due regard to the principle of national treat-
ment and equality of competitive opportunity,
may impose such restrictions and requirements
on the conduct of such activities by such foreign
bank or company as are comparable to those
118
imposed on a financial holding company orga-
nized under the laws of the United States, in-
cluding a requirement to conduct such activities
in compliance with any prudential safeguards
established under section 5(h) of the Bank
Holding Company Act of 1956.’’.
SEC. 152. APPLYING THE PRINCIPLES OF NATIONAL TREAT-
MENT AND EQUALITY OF COMPETITIVE OP-
PORTUNITY TO FOREIGN BANKS AND FOR-
EIGN
FINANCIAL
INSTITUTIONS
THAT
ARE
WHOLESALE FINANCIAL INSTITUTIONS.
Section 8A of the Federal Deposit Insurance Act (as
added by section 136(c)(2) of this Act) is amended by add-
ing at the end the following new subsection:
‘‘(i) VOLUNTARY TERMINATION OF DEPOSIT INSUR-
ANCE.—The provisions on voluntary termination of insur-
ance in this section shall apply to an insured branch of
a foreign bank (including a Federal branch) in the same
manner and to the same extent as they apply to an insured
State bank or a national bank.’’.
Subtitle G—Federal Home Loan
Bank System
SEC. 161. FEDERAL HOME LOAN BANKS.
The first sentence of section 3 of the Federal Home
Loan Bank Act (12 U.S.C. 1423) is amended—
119
(1) by striking ‘‘the continental United States’’
and all that follows through the ‘‘eight’’; and
(2) by inserting ‘‘the States into not less than
1’’ before ‘‘nor’’.
SEC. 162. MEMBERSHIP AND COLLATERAL.
(a) Subsection (f) of section 5 of the Home Owners’
Loan Act (12 U.S.C. 1464) is amended to read as follows:
‘‘(f) FEDERAL HOME LOAN BANK MEMBERSHIP.—
A Federal savings association may become a member, of
the Federal Home Loan Bank System, and shall qualify
for such membership in the manner provided by the Fed-
eral Home Loan Bank Act, beginning January 1, 1999.’’.
(b) Section 10(a)(5) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(a)(5)) is amended—
(1) in the second sentence, by striking ‘‘and the
Board’’; and
(2) in the third sentence, by striking ‘‘Board’’
and inserting ‘‘Bank’’.
(c) Section 10(a) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(a)) is amended—
(1) in the second sentence, by striking ‘‘All
long-term advances’’ and inserting ‘‘Except as pro-
vided in the succeeding sentence, all long-term ad-
vances’’;
120
(2) by inserting after the second sentence, the
following sentence: ‘‘Notwithstanding the preceding
sentence, long-term advances may be made to mem-
bers insured by the Federal Deposit Insurance Cor-
poration which have less than $500,000,000 in total
assets for the purpose of funding small businesses,
agriculture, rural development, or low-income com-
munity development (as defined by the Board).’’;
and
(3) by redesignating paragraph (5) as para-
graph (6) and inserting after paragraph (4) the fol-
lowing new paragraph:
‘‘(5) In the case of any member insured by the
Federal Deposit Insurance Corporation which has
total assets of less than $500,000,000, secured loans
for small business, agriculture, rural development, or
low-income community development, or securities
representing
a
whole
interest
in
such
secured
loans.’’.
(d) Section 4(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1424(a)) is amended by adding at the end the
following new paragraph:
‘‘(3) ELIGIBILITY REQUIREMENTS FOR COMMU-
NITY FINANCIAL INSTITUTIONS.—The requirements
of paragraph (2) (other than subparagraph (B) of
121
such paragraph) shall not apply to any insured de-
pository institution which has total assets of less
than $500,000,000.
(e) Section 10 of the Federal Home Loan Bank Act
(12 U.S.C. 1430) is amended by striking the first of the
2 subsections designated as subsection (e) (relating to
qualified thrift lender status).
SEC. 163. THE OFFICE OF FINANCE.
The Federal Home Loan Bank Act (12 U.S.C. 1421)
is amended by inserting after section 4 the following new
section:
‘‘SEC. 5. THE OFFICE OF FINANCE.
‘‘(a) OPERATION.—The Federal home loan banks
shall operate jointly an office of finance (hereafter in this
section referred to as the ‘Office’) to issue the notes,
bonds, and debentures of the Federal home loan banks
in accordance with this Act.
‘‘(b) POWERS.—Subject to the other provisions of
this Act and such safety and soundness regulations as the
Finance Board may prescribe, the Office shall be author-
ized by the Federal home loan banks to act as the agent
of such banks to issue Federal home loan bank notes,
bonds and debentures pursuant to section 11 of this Act
on behalf of the banks.
‘‘(c) CENTRAL BOARD OF DIRECTORS.—
122
‘‘(1)
ESTABLISHMENT.—The
Federal
home
loan banks shall establish a central board of direc-
tors of the Office to administer the affairs of the Of-
fice in accordance with the provisions of this Act.
‘‘(2) COMPOSITION OF BOARD.—Each Federal
home loan bank shall annually select one individual
who, as of the time of the election, is an officer or
director of such bank to serve as a member of the
central board of directors of the Office.
‘‘(d) STATUS.—Except to the extent expressly pro-
vided in this Act, the Office shall be treated as a Federal
home loan bank for purposes of any law.’’.
SEC. 164. MANAGEMENT OF BANKS.
(a) Subsections (a) and (b) of section 7 of the Federal
Home Loan Bank Act (12 U.S.C. 1427(a) and (b)) are
amended to read as follows:
‘‘(a) The management of each Federal home loan
bank shall be vested in a board of 15 directors, nine of
whom shall be elected by the members in accordance with
this section, six of whom shall be appointed by the Board
referred to in section 2A, and all of whom shall be citizens
of the United States and bona fide residents of the district
in which such bank is located. At least two of the Federal
home loan bank directors who are appointed by the Board
shall be representatives chosen from organizations with
123
more than a 2-year history of representing consumer or
community interests on banking services, credit needs,
housing, or financial consumer protections. No Federal
home loan bank director who is appointed pursuant to this
subsection may, during such bank director’s term of office,
serve as an officer of any Federal home loan bank or a
director or officer of any member of a bank, or hold
shares, or any other financial interest in, any member of
a bank.
‘‘(b) The elective directors shall be divided into three
classes, designated as classes A, B, and C, as nearly equal
in number as possible. Each directorship shall be filled by
a person who is an officer or director of a member located
in that bank’s district. Each class shall represent members
of similar asset size, and the Board shall, to the maximum
extent possible, seek to achieve geographic diversity. The
Finance Board shall establish the minimum and maximum
asset size for each class. Any member shall be entitled to
nominate and elect eligible persons for its class of director-
ship; such offices shall be filled from such nominees by
a plurality of the votes which members of each class may
cast for nominees in their corresponding class of directors
in an election held for the purpose of filling such offices.
Each member shall be permitted to cast one vote for each
share of Federal home loan bank stock owned by that
124
member. No person who is an officer or director of a mem-
ber that fails to meet any applicable capital requirement
is eligible to hold the office of Federal Home Loan Bank
director. As used in this subsection, the term ‘‘member’’
means a member of a Federal home loan bank which was
a member of such Bank as of a record date established
by the Bank.’’.
(b) Section 7 of the Federal Home Loan Bank Act
(12 U.S.C. 1427) is amended—
(1) by striking subsections (c) and (h); and
(2) by redesignating subsections (d), (e), (f),
(g), (i), (j), and (k) as subsections (c), (d), (e), (f),
(g), (h), and (i), respectively.
(c) Subsection (c) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(d)) (as so redesignated
by subsection (b) of this section) is amended by striking
the first and second sentences and inserting the following
two new sentences: ‘‘The term of each position of director
shall be 3 years. No director serving for three consecutive
terms, nor any other officer, director or that member or
any affiliated depository institution, shall be eligible for
another term earlier than 3 years after the expiration of
the last expiring of said 3-year terms. Three elected direc-
tors of different classes as specified by the Finance Board
shall be elected by ballot annually.’’.
125
(d) Subsection (d) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(e)) (as so redesignated
by subsection (b) of this section) is amended to read as
follows:
‘‘(d) TRANSITION PROVISION.—In the first election
after the date of the enactment of the Financial Services
Act of 1998, three directors shall be elected in each of
the 3 classes of elective directorship. The Finance Board
may, in the first election after such date of enactment,
designate the terms of each elected director in each class,
not to exceed 3 years, to assure that, in each subsequent
election, 3 directors from different classes of elective direc-
torships are elected each year.’’.
(e) Subsection (g) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(i)) (as so redesignated
by subsection (b) of this section) is amended by striking
‘‘subject to the approval of the board’’.
SEC. 165. ADVANCES TO NONMEMBER BORROWERS.
Section 10b of the Federal Home Loan Bank Act (12
U.S.C. 1430b) is amended—
(1) in subsection (a), by striking ‘‘(a) IN GEN-
ERAL.—’’;
(2) by striking the fourth sentence of subsection
(a), and inserting ‘‘Notwithstanding the preceding
sentence, if an advance is made for the purpose of
126
facilitating mortgage lending that benefits individ-
uals and families that meet the income requirements
set forth in section 142(d) or 143(f) of the Internal
Revenue
Code
of
1986,
the
advance
may
be
collateralized as provided in section 10(a) of this
Act.’’; and
(3) by striking subsection (b).
SEC. 166. POWERS AND DUTIES OF BANKS.
(a) Subsection (a) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(a)) is amended—
(1) by inserting ‘‘through the Office of Fi-
nance’’ after ‘‘to issue’’; and
(2) by striking ‘‘Board’’ after ‘‘upon such terms
and conditions as the’’ and inserting ‘‘board of di-
rectors of the bank’’.
(b) Subsection (b) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(b)) is amended to read
as follows:
‘‘(b) ISSUANCE
OF FEDERAL HOME LOAN BANK
CONSOLIDATED BONDS.—
‘‘(1) IN GENERAL.— The Office of Finance may
issue consolidated Federal home loan bank bonds
and other consolidated obligations on behalf of the
banks.
127
‘‘(2) JOINT AND SEVERAL OBLIGATION; TERMS
AND CONDITIONS.—Consolidated obligations issued
by the Office of Finance under paragraph (1)
shall—
‘‘(A) be the joint and several obligations of
all the Federal home loan banks; and
‘‘(B) shall be issued upon such terms and
conditions as shall be established by the Office
of Finance subject to such rules and regulations
as the Finance Board may prescribe.’’.
(c) Section 11(f) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(f) (as designated before the redesig-
nation by subsection (e) of this section) is amended by
striking both commas immediately following ‘‘permit’’ and
inserting ‘‘or’’.
(d) Subsection (i) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(i)) is amended by strik-
ing the second undesignated paragraph.
(e) Section 11 of the Federal Home Loan Bank Act
(12 U.S.C. 1431) is amended—
(1) by striking subsection (c); and
(2) by redesignating subsections (d) through (k)
as subsections (c) through (j), respectively.
128
SEC. 167. MERGERS AND CONSOLIDATIONS OF FEDERAL
HOME LOAN BANKS.
Section 26 of the Federal Home Loan Bank Act (12
U.S.C. 1446) is amended by designating the current para-
graph as ‘‘(a)’’ and adding the following new sections:
‘‘(b) Nothing in this section shall preclude voluntary
mergers, combinations or consolidation by or among the
Federal home loan banks pursuant to such regulations as
the Finance Board may prescribe.
‘‘(c) NUMBER OF ELECTED DIRECTORS OF RESULT-
ING BANK.— Subject to section 7 of this Act, any bank
resulting from a merger, combination, or consolidation
pursuant to this section may have a number of elected di-
rectors equal to or less than the total number of elected
directors of all the banks which participated in such trans-
action (as determined immediately before such trans-
action).
‘‘(d) NUMBER OF APPOINTED DIRECTORS OF RE-
SULTING BANK.—The number of appointed directors of
any bank resulting from a merger, combination, or consoli-
dation pursuant to this section shall be a number that is
three less than the number of elected directors.
‘‘(e) ADJUSTMENT
OF DISTRICT BOUNDARIES.—
After consummation of any merger, combination, or con-
solidation of two or more Federal home loan banks, the
Finance Board shall adjust the districts established in sec-
129
tion 3 of this Act to reflect such merger, combination, or
consolidation.’’.
SEC. 168. TECHNICAL AMENDMENTS.
(a) REPEAL OF SECTIONS 22A AND 27.—The Fed-
eral Home Loan Bank Act (12 U.S.C. 1421 et seq.) is
amended by striking sections 22A (12 U.S.C. 1442a) and
27 (12 U.S.C. 1447).
(b) SECTION 12.—
(1) Section 12(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1432(a)) is amended—
(A) by striking ‘‘subject to the approval of
the Board’’ immediately following ‘‘transaction
of its business’’; and
(B) by striking ‘‘and, by its Board of di-
rectors, to prescribe, amend, and repeal by-
laws, rules, and regulations governing the man-
ner in which its affairs may be administered;
and the powers granted to it by law may be ex-
ercised and enjoyed subject to the approval of
the Board. The president of a Federal Home
Loan Bank may also be a member of the Board
of directors thereof, but no other officer, em-
ployee, attorney, or agent of such bank,’’ and
inserting ‘‘and, by the board of directors of the
bank, to prescribe, amend, and repeal by-laws
130
governing the manner in which its affairs may
be administered, consistent with applicable stat-
ute and regulation, as administered by the Fi-
nance Board. No officer, employee, attorney, or
agent of a Federal home loan bank’’.
(2) Section 12 of the Federal Home Loan Bank
Act (12 U.S.C. 1432) is amended by inserting after
subsection (b) the following new subsection:
‘‘(c) PROHIBITION ON EXCESSIVE COMPENSATION.—
‘‘(1) IN GENERAL.—The Finance Board shall
prohibit the Federal home loan banks from provid-
ing compensation to any officer, director, or em-
ployee that is not reasonable and comparable with
the compensation for employment in other similar
businesses involving similar duties and responsibil-
ities. However, the Finance Board may not prescribe
or set a specific level or range of compensation for
any officer, director, or employee.
‘‘(2) REGULATIONS.—The Finance Board, by
regulation, may provide for the requirements of
paragraph (1) to be phased-in over a period not to
exceed 3 years.
‘‘(3) EXCEPTION FOR EXISTING CONTRACTS.—
Paragraph (1) shall not apply to any contract en-
tered into before June 1, 1997.’’.
131
(c) POWERS AND DUTIES OF FEDERAL HOUSING FI-
NANCE BOARD.—
(1) Subsection (a)(1) of section 2B of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1422b(a)(1))
is amended by striking the period at the end of the
sentence and inserting ‘‘; and to have the same pow-
ers, rights, and duties to enforce this Act with re-
spect to the Federal home loan banks and the senior
officers and directors of such banks as the Office of
Federal Housing Enterprise Oversight has over the
Federal housing enterprises and the senior officers
and directors of such enterprises under the Federal
Housing Enterprises Financial Safety and Sound-
ness Act of 1992.’’.
(2) Subsection (b) of section 2B of the Federal
Home Loan Bank Act (12 U.S.C. 1422b(b)) is
amended—
(A) by striking ‘‘(1) BOARD STAFF.—’’;
(B) by striking ‘‘function to any employee,
administrative unit’’ and inserting ‘‘function to
any employee or administrative unit’’;
(C) by striking the second sentence in
paragraph (1); and
(D) by striking paragraph (2).
132
(3) Section 111 of Public Law 93–495 (12
U.S.C. 250) is amended by striking ‘‘Federal Home
Loan Bank Board’’ and inserting ‘‘Federal Housing
Finance Board’’.
(d) ELIGIBILITY TO SECURE ADVANCES.—
(1) SECTION
9.—Section 9 of the Federal
Home Loan Bank Act (12 U.S.C. 1429) is amend-
ed—
(A) in the second sentence, by striking
‘‘with the approval of the Board’’; and
(B) in the third sentence, by striking ‘‘,
subject to the approval of the Board,’’.
(2) SECTION 10.—
(A) Subsection (a) of section 10 of the
Federal Home Loan Bank Act (12 U.S.C.
1430(a)) is amended in paragraph (3), by strik-
ing ‘‘Deposits’’ and inserting ‘‘Cash or depos-
its’’.
(B) Subsection (c) of section 10 of the
Federal Home Loan Bank Act (12 U.S.C.
1430(c)) is amended—
(i) in the first sentence by striking
‘‘Board’’ and inserting ‘‘Federal home loan
bank’’; and
(ii) by striking the second sentence.
133
(C) Subsection (d) of section 10 of the
Federal Home Loan Bank Act (12 U.S.C.
1430(d)) is amended—
(i) in the first sentence, by striking
‘‘and the approval of the Board’’; and
(ii) in the last sentence, by striking
‘‘Subject to the approval of the Board,
any’’ and inserting ‘‘Any’’.
(D) Section 10(j) of the Federal Home
Loan Bank Act (12 U.S.C. 1430(j)) is amend-
ed—
(i) in the first sentence of paragraph
(1) by striking ‘‘to subsidize the interest
rate on advances’’ and inserting ‘‘to pro-
vide subsidies, including subsidized interest
rates on advances’’;
(ii) in paragraphs (2), (3), (4), (5),
(9), (11), and (12) by striking ‘‘advances’’
and ‘‘subsidized advances’’ each place such
terms appear and inserting ‘‘subsidies, in-
cluding subsidized advances’’;
(iii) in paragraph (1), by inserting
‘‘(A)’’ before the first sentence, and insert-
ing the following at the end of the para-
graph:
134
‘‘(B) Subject to such regulations as the Fi-
nance Board may prescribe, the board of direc-
tors of each Federal home loan bank may ap-
prove or disapprove requests from members for
Affordable Housing Program
subsidies,
and
may not delegate such authority.’’;
(iv) in paragraph (2), by striking sub-
paragraph (B) and inserting the following
new subparagraph:
‘‘(B) finance the purchase, construction or
rehabilitation of rental housing if, for a period
of at least 15 years, either 20 percent or more
of the units in such housing are occupied by
and affordable for households whose income is
50 percent or less of area median income (as
determined by the Secretary of Housing and
Urban Development, and as adjusted for family
size); or 40 percent or more of the units in such
housing are occupied by and affordable for
households whose income is 60 percent or less
of area median income (as determined by the
Secretary of Housing and Urban Development,
and as adjusted for family size).’’;
(v) in paragraph (5)—
135
(I) by striking the colon after
‘‘Affordable Housing Program’’;
(II) by striking subparagraphs
(A) and (B); and
(III) by striking ‘‘(C) In 1995,
and subsequent years,’’;
(vi) in paragraph (11)—
(I) by inserting ‘‘, pursuant to a
nomination process that is as broad
and as participatory as possible, and
giving consideration to the size of the
District and the diversity of low- and
moderate-income housing needs and
activities within the District,’’ after
‘‘Advisory Council of 7 to 15 per-
sons’’;
(II) by inserting ‘‘a diverse range
of’’ before ‘‘community and nonprofit
organizations’’; and
(III) by inserting after the first
sentence, the following new sentence:
‘‘Representatives
of
no
one
group
shall constitute an undue proportion
of the membership of the Advisory
Council.’’; and
136
(vii) in paragraph (13), by striking
subparagraph (D) and inserting the follow-
ing new subparagraph:
‘‘(D)
AFFORDABLE.—For
purposes
of
paragraph (2)(B), the term ‘‘affordable’’ means
that the rent with respect to a unit shall not ex-
ceed 30 percent of the income limitation under
paragraph (2)(B) applicable to occupants of
such unit.’’.
(e) SECTION 16.—Subsection (a) of section 16 of the
Federal Home Loan Bank Act (12 U.S.C. 1436) is
amended in the third sentence by striking ‘‘net earnings’’
and inserting ‘‘previously retained earnings or current net
earnings’’; by striking ‘‘, and then only with the approval
of the Federal Housing Finance Board’’; and by striking
the fourth sentence.
(f) SECTION 18.—Subsection (b) of section 18 of the
Federal Home Loan Bank Act (12 U.S.C. 1438) is
amended by striking paragraph (4).
(g) SECTION 11.—Section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431) is amended by inserting
after subsection (j) (as so redesignated by section 166(e)
of this subtitle) the following subsection:
‘‘(k) PROHIBITION ON OTHER ACTIVITIES.—
137
‘‘(1) A Federal home loan bank may not engage
in any activity other than the activities authorized
under this Act and activities incidental to such au-
thorized activities.
‘‘(2) All activities specified in paragraph (1) are
subject to Finance Board approval.’’.
SEC. 169. DEFINITIONS.
Paragraph (3) of section 2 of the Federal Home Loan
Bank Act (12 U.S.C. 1422(3)) is amended to read as fol-
lows:
‘‘(3) The term ‘‘State’’ in addition to the states
of the United States, includes the District of Colum-
bia, Guam, Puerto Rico, the United States Virgin
Islands, American Samoa, and the Commonwealth of
the Northern Mariana Islands.’’.
SEC. 170. RESOLUTION FUNDING CORPORATION.
(a) IN GENERAL.—Section 21B(f)(2)(C) of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is
amended to read as follows:
‘‘(C) PAYMENTS BY FEDERAL HOME LOAN
BANKS.—To the extent the amounts available
pursuant to subparagraphs (A) and (B) are in-
sufficient to cover the amount of interest pay-
ments, each Federal home loan bank shall pay
to the Funding Corporation each calendar year
138
20.75 percent of the net earnings of such bank
(after deducting expenses relating to subsection
(j) of section 10 and operating expenses).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on January 1, 1999.
SEC. 171. CAPITAL STRUCTURE OF THE FEDERAL HOME
LOAN BANKS.
(a) IN GENERAL.—Section 6 of the Federal Home
Loan Bank Act (12 U.S.C. 1426) is amended to read as
follows:
‘‘SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN
BANKS.
‘‘(a) CAPITAL STRUCTURE PLAN.—On or before Jan-
uary 1, 1999, the board of directors of each Federal home
loan bank shall submit for Finance Board approval a plan
establishing and implementing a capital structure for such
bank which—
‘‘(1) the board of directors determines is the
best suited for the condition and operation of the
bank and the interests of the shareholders of the
bank;
‘‘(2) meets the requirements of subsection (b);
and
‘‘(3) meets the minimum capital standards and
requirements established under subsection (c) and
139
any regulations prescribed by the Finance Board
pursuant to such subsection.
‘‘(b) CONTENTS OF PLAN.—The capital structure
plan of each Federal home loan bank shall meet the follow-
ing requirements:
‘‘(1) STOCK PURCHASE REQUIREMENTS.—
‘‘(A) IN GENERAL.—Each capital structure
plan of a Federal home loan bank shall require
the shareholders of the bank to maintain an in-
vestment in the stock of the bank in amount
not less than—
‘‘(i) a minimum percentage of the
total assets of the shareholder; and
‘‘(ii) a minimum percentage of the
outstanding advances from the bank to the
shareholder.
‘‘(B) MINIMUM
PERCENTAGE
LEVELS.—
The minimum percentages established pursuant
to subparagraph (A) shall be set at levels suffi-
cient to meet the bank’s minimum capital re-
quirements established by the Finance Board
under subsection (c).
‘‘(C) MAXIMUM ASSET BASED CAPITAL RE-
QUIREMENT.—The asset-based capital require-
ment applicable to any shareholder of a Federal
140
home loan bank in any year shall not exceed the
lesser of—
‘‘(i) 0.6 percent of a shareholder’s
total assets at the close of the preceding
year; or
‘‘(ii) $300,000,000.
‘‘(D) MAXIMUM ADVANCE-BASED REQUIRE-
MENT.—The advance-based capital requirement
applicable to any shareholder of a Federal home
loan bank shall not exceed 6 percent of the
total outstanding advances from the bank to the
shareholder.
‘‘(E)
MINIMUM
STOCK
PURCHASE
RE-
QUIREMENT AUTHORIZED.—A capital structure
plan may establish a minimum dollar amount of
stock of a Federal home loan bank in which a
shareholder shall be required to invest.
‘‘(2) ADJUSTMENTS TO STOCK PURCHASE RE-
QUIREMENTS.—The capital structure plan adopted
by each Federal home loan bank shall impose a con-
tinuing obligation on the board of directors of the
bank to review and adjust as necessary member
stock purchase requirements in order to ensure that
the bank remains in compliance with applicable min-
141
imum capital levels established by the Finance
Board.
‘‘(3) TRANSITION RULE FOR STOCK PURCHASE
REQUIREMENTS.—
‘‘(A) IN
GENERAL.—A capital structure
plan may allow shareholders who were members
of a Federal home loan bank on the date of the
enactment of the Financial Services Act of
1998 to come into compliance with the asset-
based stock purchase requirement established
under paragraph (1) during a transition period
established under the plan of not more than 3
years, if such requirement exceeds the asset-
based stock purchase requirement in effect on
such date of enactment.
‘‘(B)
INTERIM
PURCHASE
REQUIRE-
MENTS.—A capital structure plan may establish
interim
asset-based
stock
purchase
require-
ments applicable to members referred to in sub-
paragraph (A) during a transition period estab-
lished under subparagraph (A).
‘‘(4) CLASSES OF STOCK.—
‘‘(A) IN GENERAL.—Each capital structure
plan shall afford each shareholder of a Federal
home loan bank the option of meeting the