I
105TH CONGRESS
1ST SESSION
H.R. 669
To enhance competition in the financial services sector, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 11, 1997
Mr. BAKER (for himself, Mr. MCCOLLUM, Mr. DREIER, Mr. LAFALCE, and
Mr. FLAKE) introduced the following bill; which was referred to the Com-
mittee on Banking and Financial Services, and in addition to the Com-
mittee on Commerce, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned
A BILL
To enhance competition in the financial services sector, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SHORT TITLE
SECTION 1. This Act may be cited as the ‘‘Depository
Institution Affiliation Act’’.
FINDINGS AND PURPOSE
SEC. 2. (a) The Congress hereby finds that—
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(1) current laws and regulations restrain effi-
ciency, competition and innovation in the design and
delivery of financial services to the disadvantage of
consumers;
(2) restrictions on ownership of depository insti-
tutions and affiliations with other business organiza-
tions interferes with their ability to attract and re-
tain capital and managerial resources;
(3) the vulnerability of the financial system and
its discrete components is increased and effective
monitoring, supervision and coordination of actions
during periods of stress is impeded by fragmented
and disparate regulation; and
(4) current laws inhibit the ability of domestic
financial markets and intermediaries to respond to
the serious competitive challenges presented by for-
eign intermediaries and the globalization of markets.
(b) It is the purpose of this act to promote the safety
and soundness of the Nation’s financial system, enhance
the quality of regulation and supervision of financial
intermediaries and achieve a more efficient market and
effective regulatory structure by—
(1) establishing an alternative and comprehen-
sive legislative framework for the creation and regu-
lation of depository institution holding companies;
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TITLE I—CREATION AND CONTROL OF DEPOSI-
TORY INSTITUTION HOLDING COMPANIES
SEC. 101. (a) DEFINITIONS.—For the purposes of
this Act:
(1) The term ‘‘depository institution holding
company’’ means a company that—
(A) has filed with the National Financial
Services Committee a notice stating such com-
pany’s intent to comply with the requirements
of this section and has not withdrawn such no-
tice; and
(B) controls an insured depository institu-
tion, or either (i) has, within the preceding
twelve months, filed a notice under subsection
(b) of this section to acquire control of an in-
sured depository institution, a bank holding
company, a savings and loan holding company
or a depository institution holding company,
which notice has not been disapproved, or (ii)
controls a company which has, within the pre-
ceding twelve months, filed an application for
deposit insurance under section 4 or 5 of the
Federal Deposit Insurance Act (12 U.S.C.
1814, 1815) which has not been disapproved.
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The filing of the notice described in subpara-
graph (A) of this paragraph by a bank holding
company that does not control any banks as de-
fined in section 2(c)(1)(B) of the Bank Holding
Company Act (12 U.S.C. 1814(c)(1)(B)) which
are not insured depository institutions shall in
immediate termination of the status of such
company as a bank holding company, and the
filing of the notice described in subparagraph
(A) of this paragraph by a savings and loan
holding company shall result in the immediate
termination of the status of such company as a
savings and loan holding company.
(2) The term ‘‘bank holding company’’ has the
meaning given to it in section 2(a) of the Bank
Holding Company Act of 1956, as amended (12
U.S.C. 1841(a)).
(3) The term ‘‘savings and loan holding com-
pany’’ has the meaning given to it in section 10(a)
of the Home Owners’ Loan Act of 1933 (12 U.S.C.
1467a(a)).
(4) Except as provided in paragraph 5 of sub-
section (f) of this section, the term ‘‘affiliate’’ of a
company means any other company which controls,
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is controlled by, or is under common control with
such company.
(5) The term ‘‘appropriate Federal banking
agency’’ has the meaning given to it is section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813
(q)).
(6) The term ‘‘insured depository institution’’
has the meaning given to it in section 3(c)(2) of the
Federal 
Deposit 
Insurance 
Act 
(12 
U.S.C.
1813(C)(2)).
(7) The term ‘‘State’’ has the meaning given to
it in section 3(a) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(a)).
(8) The term ‘‘company’’ means any corpora-
tion, partnership, business trust, association, or
similar organization, or any other trust unless by its
items it must terminate within twenty-five years or
not later than twenty-one years and ten months
after the death of individuals living on the effective
date of the trust, but shall not include any corpora-
tion the majority of the shares of which are owned
by the United States or by any State.
(9)(A) The term ‘‘control’’ means the power, di-
rectly or indirectly, to direct the management or
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policies of a company, or to vote 25 per centum or
more of any class of voting securities of a company.
(B) No company shall be deemed to control or
to have acquired control of any other company by
virtue of its ownership of the voting securities of
such other company—
(i) acquired or held in any agency, trust or
other fiduciary capacity;
(ii)(a) acquired or held in connection with
or incidental to the underwriting of securities if
such securities are held only for such period of
time as will permit the sale thereof on a reason-
able basis; or
(b) acquired or held in connection with or
incidental to market making, dealing, trading,
brokerage or other securities related activities
and not with a view to acquiring, exercising or
transferring any control over the management
or policies of such company; or
(iii) acquired in securing or collecting a
debt previously contracted in good faith, until
two years after the date of acquisition or for
such additional period of time as the appro-
priate Federal banking agency may permit.
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(C) No company formed for the sole purpose of
participating in a proxy solicitation is in control of
a company by virtue of its acquisition of voting
rights with respect to shares of such company ac-
quired in the course of such solicitation.
(10) The term ‘‘adequately capitalized with re-
spect to an insured depository institution has the
meaning given to it in section 38(b)(1) of the Fed-
eral 
Deposit 
Insurance 
Act 
(12 
U.S.C.
1831o(b)(1)(B).
(11) The term ‘‘well capitalized’’ has the mean-
ing given to it in section 38(b)(1)(A) of the Federal
Deposit Insurance Act (12 U.S.C. 1831o(b)(1)(A)).
(12) The term ‘‘minimum required capital’’
with respect to an insured depository institution
means the amount of capital that is required for it
to be adequately capitalized.
(b) CHANGES IN CONTROL OF INSURED BANKS AND
INSURED INSTITUTIONS.—No depository institution hold-
ing company acting directly or indirectly, or through or
in concert with one or more other persons, shall acquire
control of an insured depository institution, a bank hold-
ing company, a savings and loan holding company or a
depository institution holding company not controlled by
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such company on the date it became a depository institu-
tion holding company, if such acquisition and control oc-
curs through a purchase, assignment, transfer, pledge or
other disposition of voting stock of such insured depository
institution, bank holding company, savings and loan hold-
ing company or depository institution holding company
unless the depository institution holding company has
complied with the requirements of section 7(j) of the Fed-
eral Deposit Insurance Act (12 U.S.C. 1817(j)). Any fail-
ure to comply with the preceding requirements shall sub-
ject the relevant depository institution holding company
to the penalties and other procedures provided in sub-
sections (i) through (m) of this section, in addition to oth-
erwise applicable penalties.
(c) AFFILIATE TRANSACTIONS.—(1) The appropriate
Federal agency may—
(A) upon a finding of probable harm that can-
not adequately be prevented by less burdensome
rules and regulations, adopt such rules and regula-
tions, consistent with the purposes of this Act, as
may be necessary in order to prevent an insured de-
pository institution that is controlled by a depository
institution holding company from engaging in unsafe
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be adopted in accordance with section 4 of the Administra-
tive Procedure Act (5 U.S.C. 553), except that the appro-
priate Federal banking agency shall give interested per-
sons an opportunity for oral presentations of data, views,
and arguments, in addition to written submissions.
(3) Any transaction that was approved by a Federal
regulatory agency prior to the enactment of this Act shall
be exempt from any rules or regulations adopted pursuant
to subparagraph (A) of paragraph (1) of this subsection.
(4) Subject to subparagraph (B) of paragraph (1) of
this subsection, the provisions of sections 23A and 23B
of the Federal Reserve Act (12 U.S.C. 371c, 371c–1) shall
be applicable to every insured depository institution con-
trolled by a depository institution holding company in the
same manner and to the extent as if such insured deposi-
tory institution were a member bank, and for this purpose,
any company which would be an affiliate of an insured
depository institution for purposes of such sections 23A
and 23B if such insured depository institution were a
member bank shall be deemed to be an affiliate of such
insured depository institution.
(5) No insured depository institution that is an affili-
ate of a depository institution holding company shall, di-
rectly or indirectly—
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(A) extend credit in any manner to a securities
affiliate or a subsidiary thereof;
(B) purchase for its own account assets of a se-
curities affiliate or a subsidiary thereof;
(C) issue a guarantee, acceptance, or letter of
credit, including an endorsement or standby letter of
credit, for the benefit of a securities affiliate or a
subsidiary thereof; or
(D) extend credit in any manner to any invest-
ment company advised by or the shares of which are
distributed by a securities affiliate.
(6) Subparagraphs (A) and (B) of paragraph (5) do
not apply to any extension of credit by an insured deposi-
tory institution made to acquire or sell any securities of
the United States if—
(A) the extension of credit is to be repaid on
the same calendar day;
(B) the extension of credit is incidental to the
clearing of transactions in those securities through
that insured depository institution; and
(C) both the principal of and the interest on the
extension of credit are fully secured by securities of
the United States.
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(7) No insured depository institution that is an affili-
ate of a depository institution holding company shall di-
rectly or indirectly extend credit, or issue or enter into
a standby letter of credit, asset purchase agreement, in-
demnity, guarantee, insurance, or other facility, for the
purpose of enhancing the marketability of a securities
issue underwritten or distributed by a securities affiliate.
(8) No insured depository institution that is an affili-
ate of a depository institution holding company shall
knowingly extend or arrange for the extension of credit,
directly or indirectly, secured by or for the purpose of pur-
chasing any security while, or for thirty days after, that
security is the subject of a distribution in which a securi-
ties affiliate of that insured depository institution partici-
pates as an underwriter or a member of a selling group.
(9) No depository institution that is an affiliate of
a depository institution holding company shall, directly or
indirectly, extend credit to an issuer of securities under-
written by a securities affiliate for the purpose of paying
the principal of those securities or interest for dividends
on those securities.
(10) For the purpose of paragraphs (5), (6), (7), (8),
and (9) of this section, a ‘‘securities affiliate’’ means a
company that engages in underwriting, distributing or
dealing in securities of any type, except that such term
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shall not include insurance products deemed to be securi-
ties, including and without limitation variable annuities
and variable life insurance.
(d) CAPITALIZATION.—(1) Each insured depository
institution that is controlled by a depository institution
holding company shall be well capitalized.
(2) In the event of a finding by the appropriate Fed-
eral banking agency that an insured depository institution
controlled by a depository institution holding company is
not well capitalized, the depository institution holding
company shall (i) execute an agreement with the appro-
priate Federal banking agency within thirty days to return
the insured depository institution within a reasonable pe-
riod of time to being well capitalized or (ii) divest control
of the insured bank or insured institution in an orderly
manner within one hundred and eighty days or such addi-
tional period of time as the appropriate Federal banking
agency may determine is reasonably required in order to
effect such divestiture.
(3) The appropriate Federal banking agency may not
impose by regulation, order, agreement or any other
means any requirement pertaining to the capital of a de-
pository institution holding company.
(e) INTERSTATE ACQUISITIONS AND ACTIVITIES OF
INSURED DEPOSITORY INSTITUTIONS.—(1) No depository
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institution holding company may acquire control of an ad-
ditional insured bank (as such term is defined in section
2(c) of the Bank Holding Company Act of 1956, as
amended (12 U.S.C. 1841(c)), if the acquisition could not
be approved by the Board of Governors of the Federal Re-
serve System under section 3(d)(1)(B), 3(d)(1)(C),
3(d)(1)(D), 3(d)(2), 3(d)(3), 3(d)(4), or 3(d)(5) of the
Bank Holding Company Act of 1956, as amended (12
U.S.C. 1842(d)) were such acquisition made by a bank
holding company except as otherwise authorized pursuant
to 13(f) of the Federal Deposit Insurance Act (12 U.S.C.
1823(f)).
(2) A depository institution holding company shall be
treated as a bank holding company, and any insured de-
pository institution affiliate of a depository institution
holding company shall be treated as a bank subsidiary for
purposes of section 18(r) of the Federal Deposit Insurance
Act (12 U.S.C. 1828(r)).
(3) No depository institution holding company may
acquire control of an additional savings association if the
acquisition would be in violation of section 10(e)(3) of the
Home Owners’ Loan Act of 1933 (12 U.S.C. 1467a(e)(3))
were such acquisition made by a savings and loan holding
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company, except as otherwise authorized pursuant to sec-
tion 13(k) of the Federal Deposit Insurance Act (12
U.S.C. 1823(k)).
(f) DIFFERENTIAL TREATMENT PROHIBITION; LAWS
INCONSISTENT WITH THIS ACT.—(1) Notwithstanding
any other Federal law, no State, and no Federal or State
regulatory agency, including the appropriate Federal
banking agency, may act by law, rule, regulation, order,
or otherwise if the effect of such action would be to dif-
ferentiate insured depository institutions controlled by de-
pository institution holding companies from any other in-
sured depository institutions in a manner adverse to in-
sured depository institutions controlled by depository insti-
tution holding companies, or to differentiate depository in-
stitution holding companies or their affiliates from bank
holding companies or savings and loan holding companies
and their affiliates in a manner adverse to depository insti-
tution holding companies or their affiliates, except to the
extent that the appropriate Federal banking agency may
act to implement this Act as authorized herein.
(2)(A) FINDINGS
AND PURPOSE.—The Congress
hereby finds that certain State laws and regulations have
the purpose or effect of preventing insured depository in-
stitutions from being or becoming affiliate with, companies
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or persons engaged in nonbanking activities. Such laws re-
strain legitimate competition in interstate commerce and
deny consumers freedom of choice in selecting financial
services. Such restrictions also threaten the long-term
safety and soundness of insured depository institutions by
denying them access to capital. Given the preponderant
Federal interest in ensuring competition in national mar-
kets for financial services and in ensuring the safety and
soundness of the federally insured banking and thrift in-
dustries, Congress hereby finds that it is necessary to pre-
empt such anticompetitive State laws and regulations to
the extent necessary to permit the formation and efficient
operation of depository institution holding companies.
However, the Congress also recognizes that there is a le-
gitimate and traditional State interest in ensuring that
State banks and other companies are operated in a safe
and sound manner to serve the interests of the public and
consumers. The preemption provided in the following
paragraph (B) is thus not intended to preempt State laws
that concern the regulation, supervision, and examination
of State chartered entities, and that are not inconsistent
with the purposes of this Act.
(B) PREEMPTION.—Any provision of Federal or
State law, rule, regulation or order that is expressly or
impliedly inconsistent with the provisions and purposes of
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(3) No State or State regulatory agency may act by
law, rule, regulation or order if the effect of such action
would be to impede or prevent an insured bank or insured
institution that is located in another State from qualifying
to maintain or defend in court any action which could be
maintained or defended under similar circumstances by a
company that is located in such other State and that is
not an insured depository institution, provided that the in-
sured depository institution does not establish or operate
in any State so acting or in the State of any State regu-
latory agency so acting as a ‘‘domestic branch’’, as defined
in section 3(o)); except that, where the maintenance or
defense of such an action by a company that is located
in such other State and that is not an insured depository
institution is subject to certain conditions, the mainte-
nance or defense of such an action by an insured deposi-
tory institution located in such other State may be subject
to those same conditions, so long as such conditions are
applied in a nondiscriminatory manner to fulfill legitimate
State objectives and do not have the effect, directly or in-
directly, of denying insured depository institutions located
in other States the opportunity to maintain or defend such
actions.
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(4) Except for licensing, marketing, compensation,
employment or other requirements applied in a non-
discriminatory manner to fulfill legitimate State regu-
latory objectives which are not inconsistent with the pur-
poses of this Act as set forth in section 2 hereof, no State
may through legislative, administrative, executive or judi-
cial action impede or prevent a depository institution hold-
ing company or affiliate thereof from utilizing or com-
pensating any agent, solicitor, broker, employee or other
person located in that State and representing in any lawful
capacity any insured depository institution or any such de-
pository institution holding company or such affiliate
thereof, provided that, where any such person is being uti-
lized or compensated for the performance of activities on
behalf of an insured depository institution, such activities
do not result in the establishment or operation by the in-
sured depository institution of a ‘‘domestic branch,’’ as de-
fined in section 3(o) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(a)), at any location other than the main
or branch offices of such depository institution.
(5) As used in paragraphs (2) through (4) of this
subsection only, the term ‘‘affiliate’’ means a person that
directly or indirectly controls or is controlled by, or is
under common control with the person specified; and the
term ‘‘control,’’ including the terms ‘‘controlled by’’ and
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‘‘under common control with’’, means the power, directly
or indirectly, to direct the management or policies of a
person and shall be presumed to exist if any person, di-
rectly or indirectly, owns, controls, or holds with power
to vote ten per centum or more of the voting securities
of any other person.
(g) SECURITIES, INSURANCE AND REAL ESTATE AC-
TIVITIES OF INSURED BANKS AND INSURED INSTITU-
TIONS.—(1) No insured depository institution that is an
affiliate of a depository institution holding company shall
directly engage in—
(A) dealing in or underwriting securities, or
purchasing or selling securities as agent, except to
the extent that such activities are performed only
with regard to obligations of the United States or
would be authorized for a national bank under sec-
tion 92a of title 12, United States Code;
(B) insurance underwriting; or
(C) real estate investment or development, ex-
cept to the extent that such activities are performed
in relation to the premises of the insured depository
institution or in connection with securing or collect-
ing a debt previously contracted in good faith, or
would be authorized for a national bank under sec-
tion 92a of title 12, United States Code.
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(2) Nothing contained in this subsection shall be con-
strued (A) to prohibit or impede a depository institution
holding company or any affiliate of a depository institution
holding company other than an insured depository institu-
tion from engaging in any of the activities set forth in
paragraph (1), or (B) to prohibit or impede any employee
of an insured depository institution that is an affiliate of
a depository institution holding company from promoting
or advertising products or services of an affiliate of such
insured depository institution that engages in any of such
activities.
(3) No bank holding company which becomes a de-
pository institution holding company and no depository in-
stitution holding company which did not at any time prior
to becoming such a holding company directly or indirectly
engage in insurance agency or real estate brokerage activi-
ties shall commence any insurance agency or real estate
brokerage activities not permissible for bank holding com-
panies under section 4(C)(8) of the Bank Holding Com-
pany Act of 1956, as amended (12 U.S.C. 1843(c)(8)),
unless such activities shall be conducted through an exist-
ing insurance agency or real estate brokerage firm, as the
case may be, acquired directly or indirectly by such deposi-
tory institution holding company or through any successor
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to such insurance agency or real estate brokerage, and un-
less such acquired insurance agency or real estate broker-
age firm shall have been actively engaged in such insur-
ance or real estate agency activities during the two-year
period preceding the date of enactment of this Act.
(4) Nothing in this subsection shall require the
breach of any contract entered into prior to enactment of
this Act.
(h) TYING AND INSIDER LENDING PROVISIONS.—(1)
A depository institution holding company shall be treated
as a bank holding company for purposes of section 106
of the Bank Holding Company Act Amendments of 1970
and section 22(h) of the Federal Reserve Act and any reg-
ulation prescribed under any such section.
(2) A depository institution holding company and any
of such company’s other affiliates shall be subject to sec-
tion 106 of the Bank Holding Company Act Amendments
of 1970, in connection with any transaction involving the
products or services of such company or affiliate and those
of an insured depository institution affiliate, as if such
company or any such company’s other affiliates were an
insured depository institution and such insured depository
institution were a subsidiary of a bank holding company.
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(3) For purposes of this subsection, the appropriate
Federal banking agency shall exercise the authority pro-
vided to the Board of Governors of the Federal Reserve
System in section 106 of the Bank Holding Company Act
Amendments of 1970 and section 2(h) of the Federal Re-
serve Act.
(i) EXAMINATION AND ENFORCEMENT.—(1) The ap-
propriate Federal banking agency shall enforce the provi-
sions of this section and any regulations adopted under
the authority conferred in this section by using its exam-
ination and supervisory powers to ensure that each in-
sured depository institution under its supervision is in
compliance with the limitations of this section.
(2) In no instance shall the benefits of Federal de-
posit insurance coverage applicable to an insured deposi-
tory institution that is controlled by a depository institu-
tion holding company be extended to either such deposi-
tory institution holding company or to any other company
controlled by such depository institution holding company
that is not an insured depository institution. Thus the pur-
pose of this subsection (c) is to prevent the resources of
the Federal deposit insurance funds from being used to
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protect the shareholders or business interests of a deposi-
tory institution holding company, except through the au-
thorized fulfillment of their obligations to protect the in-
sured deposits of an insured depository institution that is
controlled by a depository institution holding company.
(3) The appropriate Federal banking agency may ex-
amine the books, records and affairs of, or require reports
from, any affiliate of an insured depository institution con-
trolled by a depository institution holding company in
order to ensure compliance with the limitations of this sec-
tion.
(4) Whenever it appears to the appropriate Federal
banking agency that any depository institution holding
company is violating, has violated, or is about to violate
any provision of this section or any regulation prescribed
under this section, such agency may, in its discretion,
apply to the appropriate district court of the United States
or the United States court of any territory for—
(A) a temporary or permanent injunction or re-
straining order enjoining such depository institution
holding company from violating this section or any
regulation prescribed under this section; or
(B) such other equitable relief, including dives-
titure, as may be necessary to prevent such violation.
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(5) The district courts of the United States and the
United States court in any territory shall have jurisdiction
and power to issue any injunction or restraining order or
grant any other relief described in paragraph (3). When
appropriate, any injunction, order, or other equitable relief
granted under this subparagraph shall be granted without
requiring the posting of any bond.
(6) Whenever it appears to a State or Federal official
or agency with supervisory or examination authority over
any affiliate of a depository institution holding company
that such affiliate of such depository institution holding
company is violating, has violated, or is about to violate
any provisions of this section or any regulation prescribed
under this section, such official or agency shall promptly
notify the appropriate Federal regulatory authority in
order that the appropriate Federal regulatory authority in
consultation with the notifying agency may determine
whether action under this subsection is appropriate.
(j) DIVESTITURE.—(1) In addition to all its other
regulatory and supervisory powers, if the appropriate Fed-
eral banking agency determines that an insured depository
institution under its supervision has engaged in a continu-
ing course of conduct involving its depository institution
holding company or any affiliate of such holding company
which has had, or has a significant probability of having,
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the effect of causing such insured depository institution
to be in an unsafe or unsound condition, it may make an
initial finding that the depository institution holding com-
pany should be required to terminate its control of the
insured depository institution. If the appropriate Federal
banking agency makes such an initial finding, it shall
within three days so notify the depository institution hold-
ing company controlling the insured depository institution
and the National Financial Services Committee. Such no-
tice shall provide a statement for the basis of the appro-
priate Federal banking agency’s action.
(2) Within thirty days of the receipt of the notice de-
scribed in the preceding paragraph, the depository institu-
tion holding company receiving such notice may request
an agency hearing before the appropriate Federal banking
agency. In such hearing all issues shall be determined pur-
suant to section 5 of the Administrative Procedure Act
(5 U.S.C. 554). The length of the hearing shall be deter-
mined by the appropriate Federal banking agency, and
such hearing may be before a hearing examiner appointed
by such agency. At the conclusion thereof, the appropriate
Federal banking agency shall issue a final order, on the
basis of the record made at such hearing, affirming or re-
versing the initial finding of the appropriate Federal bank-
ing agency. A company that fails to request an agency
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hearing under this paragraph shall be deemed to have con-
sented to the issuance of a final order affirming the initial
finding without the necessity of the hearing provided for
in this paragraph.
(3) If such final order affirms the initial finding, the
depository institution holding company shall, upon comple-
tion of the judicial review, if any, of the appropriate Fed-
eral banking agency’s final order as provided for in sub-
section (m), terminate its control of the insured depository
institution involved within one year.
(k) CRIMINAL PENALTIES.—(1) Any company or in-
sured depository institution which knowingly and willfully
violates or knowingly and willfully participates in a viola-
tion of any provision of this section, or any rule, regulation
or order issued by an appropriate Federal banking agency
pursuant thereto, shall upon conviction be fined for each
violation not more than the greater of $250,000 or an
amount equal to one one-hundredth of 1 per centum of
the minimum required capital of the relevant insured de-
pository institution for each day during which the violation
continues, except that in no case shall any such amount
for any violation or related series of violations exceed 1
per centum of the minimum required capital of the rel-
evant insured depository institution.
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(2) Any officer, director, employee or agent of any
company, insured depository institution and any other
natural person who knowingly and willfully participates in
a violation of any provision of this section or any rule,
regulation, or order issued pursuant thereto, shall upon
conviction be imprisoned not less than five years and fined
for each violation not more than the greater of $250,000
or double the individual’s annual compensation at the time
the violation occurred.
(3) Every officer, director, employee and agent of a
depository institution holding company or insured deposi-
tory institution also shall be subject to same penalties for
false entries in any book, report, or statement of such
company or insured depository institution as are applica-
ble to officers, directors, employees and agents of member
banks for false entries in any books, reports, or statements
of member banks under section 1005 of title 18.
(4) A depository institution holding company and its
affiliates shall be subject to the provisions of title 10, as
amended by the subtitle F of title IX of the Financial In-
stitutions Reform, Recovery and Enforcement Act of 1989
(Public Law 
) and the Comprehensive Thrift and
Bank Fraud Prosecution and Taxpayer Recovery Act of
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(1990 Public Law 
) to the same extent as a reg-
istered bank holding company or savings and loan holding
company or any affiliate of such a company.
(l) CIVIL ENFORCEMENT, CEASE-AND-DESIST OR-
DERS, CIVIL MONEY PENALTIES, REMOVAL AND PROHI-
BITION AUTHORITY.—Subsections (b) through (s) and
subsection (u) of section 1818 of title 12 (12 U.S.C. sec-
tion 1818(b)–(s) and (u)) shall apply to any depository
institution holding company, and to any subsidiary (other
than a depository institution) of a depository institution
holding company, in the same manner as they apply to
a State member insured bank. Nothing in subsection (b)
or (c) of section 1818 of title 12 shall authorize any Fed-
eral banking agency, other than the appropriate Federal
banking agency to issue a notice of charges or cease-and-
desist order against a depository institution holding com-
pany or any subsidiary thereof (other than a depository
institution subsidiary of the bank).
(1) The appropriate Federal banking agency
shall have authority to assess such a civil money
penalty, after giving notice and an opportunity to
the company or insured depository institution, offi-
cer, director, employee, agent or other natural per-
son to submit data, views, and arguments, and after
giving due consideration to the appropriateness of
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the penalty with respect to the size of financial re-
sources and good faith of the company, insured de-
pository institution, or natural person charged, the
gravity of the violation, the history of previous viola-
tions, and any data, views and arguments submitted.
(2) The appropriate Federal banking agency
may, in its discretion, compromise, modify, or remit
any civil money penalty which is subject to imposi-
tion or has been imposed. The appropriate Federal
banking agency may collect such civil money penalty
by agreement with the company, insured bank or in-
sured institution or person, or by bringing an action
in the appropriate United States district court, ex-
cept that in any such action, the company, insured
depository institution or person against whom the
penalty has been assessed shall have a right to trial
de novo.
(m) JUDICIAL REVIEW.—Any part aggrieved by an
appropriate Federal banking agency’s findings or other ac-
tions under this Act may obtain review by the United
States court of appeals of the circuit wherein such party
has its principal place of business or the United States
Court of Appeals for the District of Columbia Circuit, by
filing a notice of appeal in such Court within thirty days
from the date of such action, and simultaneously sending
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a copy of such notice by registered or certified mail to
the appropriate Federal banking agency. The appropriate
Federal banking agency shall promptly certify and file in
such Court the record upon which such action or finding
was based. The actions or findings of appropriate Federal
banking agency shall be set aside if not supported by sub-
stantial evidence or if found to violate procedures estab-
lished by this Act. An initial finding by the appropriate
Federal banking agency under subsection (j) of this sec-
tion shall be subject to judicial review only in the context
of review of a final order under paragraph 2 of subsection
(j).
AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF
1956
SEC. 102. Section 2(c)(2) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1841(c)) is amended by add-
ing the new subparagraph (K) to read as follows:
‘‘(K) An insured bank as defined in section
3(h) of the Federal Deposit Insurance Act (12
U.S.C. 1813(h)) that is controlled by no com-
pany other than a depository institution holding
company as defined in the Depository Institu-
tion Affiliation Act.’’.
AMENDMENTS TO THE FEDERAL RESERVE ACT
SEC. 103. Section 23A of the Federal Reserve Act
(12 U.S.C. 371c) is amended by inserting the following
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at the end of paragraph (a)(2); ‘‘Provided, however, That
notwithstanding the foregoing, a loan or extension of cred-
it shall not be deemed to be made to an affiliate if (i)
the member bank approves such loan or extension of credit
in accordance with substantially the same standards and
procedures and on substantially the same terms that it
applies to similar loans or extensions of credit the proceeds
of which are not transferred to or for the benefit of an
affiliate, and (ii) such loan or extension of credit is not
made for the purposes of evading any of the requirements
of this section.’’.
AMENDMENTS TO THE BANKING ACT OF 1933
SEC. 104. (a) Section 20 of the Banking Act of 1933
(12 U.S.C. 377) is amended by inserting the following new
paragraph after the first paragraph of such section:
‘‘The provisions of this section shall not apply to the
affiliation of any bank that is an affiliate of a depository
institution holding company as defined in the Depository
Institution Affiliation Act with the depository institution
holding company or any other affiliate of the depository
institution holding company.’’.
(b) Section 32 of the Banking Act of 1933 (12 U.S.C.
78) is amended by inserting the following at the end of
the first paragraph of such section: ‘‘The provisions of this
section shall not apply to relationships involving an affili-
ate of a depository institution holding company as defined
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in the Depository Institution Affiliation Act and either
that depository institution holding company or any other
affiliate of that depository institution holding company.’’.
AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE
ACT
SEC. 105. (a) Section 7(j)(8)(B) of the Federal De-
posit Insurance Act (12 U.S.C. 1817(j)(8)(B)) is amended
to read as follows:
‘‘(8)(B) the term ‘control means’ the power, di-
rectly or indirectly, to direct the management or
policies of a company, or to vote 25 per centum or
more of any class of voting securities of a company:
Provided, That, no company shall be deemed to con-
trol or to have acquired control of any other com-
pany by virtue of its ownership of the voting securi-
ties of such other company—
‘‘(i) acquired or held in an agency, trust or
other fiduciary capacity;
‘‘(ii)(I) acquired or held in connection with
or incidental to the underwriting of securities if
such securities are held only for such period of
time as will permit the sale thereof on a reason-
able basis, or
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‘‘(II) acquired or held in connection with
or incidental to market making, dealing, trad-
ing, brokerage or other securities related activi-
ties and not with a view to acquiring, exercising
or transferring any control over the manage-
ment or policies of such company; or
‘‘(iii) acquired in securing or collecting a
debt previously contracted in good faith, until
two years after the date of acquisition: Provided
further, That, no company formed for the sole
purpose of participating in a proxy solicitation
is in control of a company by virtue of its ac-
quisition of voting rights with respect to shares
of such company acquired in the course of such
solicitation.’’.
(b) A new last sentence shall be added to section
7(j)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1817(j)(1)), to read as follows: ‘‘For the purposes of sub-
section (j), the term ‘insured depository institution’ shall
include—
‘‘(i) any ‘bank holding company’, as that
term is defined in section 2 of the Bank Hold-
ing Company Act, which has control of any in-
sured bank (as defined therein), and the appro-
priate Federal banking agency in the case of a
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bank holding company shall be the Board of
Governors of the Federal Reserve System;
‘‘(ii) any ‘savings and loan holding com-
pany,’ as that term is defined in section 10 of
the Home Owners’ Loan Act, which has control
of any insured savings association (as defined
therein), and the appropriate Federal banking
agency, in the case of a savings and loan hold-
ing company shall be the Office of Thrift Su-
pervision; and
‘‘(iii) any ‘depository institution holding
company’, as that term is defined in section
101(a)(1) of the Depository Institution Affili-
ation Act, which has control of any such in-
sured bank, and the appropriate Federal bank-
ing agency in the case of a depository institu-
tion holding company shall be the appropriate
Federal banking agency, as defined in section
101(a)(5) of the Depository Institution Affili-
ation Act, of such insured bank, or each such
agency, if more than one, in the case of a de-
pository institution holding company which has
control of more than one such insured bank.’’.
(c) Section 18(j)(1) of the Federal Deposit Insurance
Act (12 U.S.C. 1828(j)(1)) is amended—
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(1) by deleting ‘‘The’’ at the beginning thereof;
and
(2) by inserting in lieu thereof the following:
‘‘Subject to section 101(c)(1)(B) of the Depository
Institution Affiliation Act, the’’.
AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF
1934
SEC. 106. (a) REGISTRATION
OF BROKERS
AND
DEALERS.—Section 15 of the Securities Exchange Act of
1934 is amended by adding at the end thereof the follow-
ing new subsection:
‘‘(f) The Commission shall not grant registration to
any broker or dealer unless such broker or dealer estab-
lishes to the satisfaction of the Commission that all re-
quirements established by the Depository Institution Af-
filiation Act in connection with the activities of such
broker or dealer (including any capital adequacy require-
ment) have been met.’’.
(b) REGULATION OF BROKERS AND DEALERS.—(1)
Section 15(b)(4) of the Securities Exchange Act of 1934
is amended by inserting ‘‘the Depository Institution Act,’’
after ‘‘the Commodity Exchange Act,’’ in subparagraph
(D).
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(2) Section 15(b)(4) of the Securities Exchange Act
of 1934 is amended by inserting ‘‘the Depository Institu-
tion Affiliation Act,’’ after ‘‘the Commodity Exchange
Act,’’ in subparagraph (E).
AMENDMENT TO THE HOME OWNERS’ LOAN ACT
SEC. 197. Section 11 of the Home Owners’ Loan Act
(12 U.S.C. 1468) is amended by deleting the word ‘‘Sec-
tions’’ at the beginning of subsection (a)(1) and inserting
the following in lieu thereof: ‘‘Subject to section
101(c)(1)(B) of the Depository Institution Affiliation Act,
sections’’.
AMENDMENT TO THE COMMUNITY REINVESTMENT ACT
SEC. 108. Section 3(3) of the Community Reinvest-
ment Act (12 U.S.C. 2902(d)) is amended:
(1) by inserting ‘‘or notice, as appropriate’’
after ‘‘an application’’ and before ‘‘to the appro-
priate Federal financial supervisory agency’’; and
(2) by adding a new paragraph (G) to read as
follows:
‘‘(G) the acquisition of an insured deposi-
tory institution requiring prior notice under sec-
tion 101(b) of the Depository Institution Affili-
ation Act.’’.
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TITLE II—SUPERVISORY IMPROVEMENTS
NATIONAL FINANCIAL SERVICES COMMITTEE
SEC. 201. (a) ESTABLISHMENT OF NATIONAL FI-
NANCIAL SERVICES OVERSIGHT COMMITTEE.—There is
established a National Financial Services Oversight Com-
mittee which shall consist of—
(1) the Secretary of the Treasury,
(2) the Chairman of the Board of Governors of
the Federal Reserve System,
(3) the Chairman of the Board of Directors of
the Federal Deposit Insurance Corporation,
(4) the Director of the Office of Thrift Super-
vision,
(5) the Comptroller of the Currency,
(6) the Secretary of Commerce,
(7) the Attorney General,
(8) the Chairman of the Securities and Ex-
change Commission, and
(9) the Chairman of the Commodities Futures
Trading Commission.
For purposes of this Act, the agencies or departments
headed by members of the Committee shall be referred to
as ‘‘member agencies.’’
(b) CHAIRMAN.—The Chairman of the Committee
shall be the Secretary of the Treasury.
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(c) COMPENSATION.—Each member of the Commit-
tee shall serve without additional compensation, but shall
be entitled to reasonable expenses incurred in carrying out
the official duties as such a member.
(d) PUBLIC MEETINGS.—The Committee shall hold
public meetings at least annually. All meetings of the
Committee shall be conducted in conformity with the pro-
visions of section 3(a) of the Government in the Sunshine
Act (5 U.S.C. 552b). The Committee may not take any
action unless such action is approved by a vote of two-
thirds of the members of the Committee.
(e) SECRETARIAT.—The Department of the Treasury
shall provide the Secretariat for the Committee and shall
assume any expenses arising for execution of the respon-
sibilities of the Committee.
(f) ACCESS TO RECORDS.—For the purpose of carry-
ing out this section, the Committee shall have access to
all books, accounts, records, reports, files, memoranda, pa-
pers, things and property belonging to or in use by any
appropriate Federal banking agency.
(g) FUNCTIONS OF THE COMMITTEE.—(1) the Com-
mittee shall, insofar as is practicable, establish uniform
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principles and standards for the examination and super-
vision of financial institutions and other providers of fi-
nancial services, which shall be applied by the member
agencies.
(2) The Committee shall make recommendations for
uniformity in other supervisory matters, such as, but not
limited to, identifying financial institutions and other pro-
viders of financial services in need of special supervisory
attention, the adequacy of supervisory tools for determin-
ing the impact of affiliate operations on insured depository
institutions and the ability of the member agencies to dis-
cover possible fraud or questionable practices.
(3) The Committee shall, from time to time, rec-
ommend to the Congress additional measures to strength-
en the separation between insured depository institution
controlled by depository institutions holding companies
from the activities of any of their affiliates including, the
imposition of additional restrictions on interaffiliate trans-
actions and the strict application of Federal deposit insur-
ance coverage only for the benefit of depositors of insured
depository institutions that are controlled by a depository
institution holding company.
(h) CONSULTATION WITH STATE REGULATORS.—
The Committee shall consult with the appropriate organi-
zations representing the State regulators of banks, savings
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and loan associations, saving banks, securities firms, in-
surance companies, and other providers of financial serv-
ices, and as deemed appropriate, meet with such State reg-
ulators. The Committee shall invite to each public meeting
of the Committee representatives of such organizations.
(i) STUDIES AND RECOMMENDATIONS.—The Com-
mittee may conduct or authorize studies to carry out the
purposes of this Act. On the basis of such studies, the
Committee may make recommendations to the Congress
and member agencies concerning the implementation of
this Act and changes in statutes and regulations necessary
to promote the strength and stability of the Nation’s fi-
nancial system and financial institutions, the competitive-
ness of providers of financial services in domestic and
international markets and the purposes of this Act. Within
one year of the enactment of this Act, the Committee shall
report to Congress proposed legislative or regulatory ac-
tions that will improve the examination process to permit
better oversight of all insured depository institutions. In
particular, the Committee shall consider whether the num-
ber of or compensation for examiners employed by the ap-
propriate Federal regulatory agencies should be increased.
TITLE III—EFFECTIVE DATE
SEC. 301. This Act shall take effect upon enactment.
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