100
‘‘(ii) 
disclaimers 
concerning 
the
noninsured status of the security or annu-
ity;
‘‘(C) the compensation of sales personnel
with respect to referrals or transactions;
‘‘(D) the training of and qualifications for
personnel involved in such transactions, includ-
ing training in making an accurate judgment
about the suitability of a particular investment
product for a prospective customer; and
‘‘(E) the setting in which and the cir-
cumstances under which transactions may be
effected, and referrals made, by sales personnel
with respect to such securities and annuities.
‘‘(3) 
COMPARABILITY
REQUIREMENT.—The
standards required under paragraph (1) shall be
comparable to the standards applicable to brokers
and dealers registered under the Securities Ex-
change Act of 1934 unless the appropriate Federal
banking agencies jointly determine that implementa-
tion of comparable standards is not necessary or ap-
propriate for the maintenance of fair and orderly
markets or the protection of investors or is not in
the public interest.’’.
101
SEC. 111. EFFECTIVE DATE.
The amendments made by this subtitle shall take ef-
fect at the end of the 90-day period beginning on the date
of the enactment of this Act.
Subtitle B—Investment Bank
Holding Companies
SEC. 116. INVESTMENT BANK HOLDING COMPANIES.
(a) DEFINITIONS.—
(1) IN GENERAL.—Section 2 of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1842) is
amended by adding at the end the following new
subsections:
‘‘(s) WHOLESALE FINANCIAL INSTITUTION.—The
term ‘wholesale financial institution’ means any institution
that is an uninsured State member bank authorized pur-
suant to section 9B of the Federal Reserve Act.
‘‘(t) INVESTMENT BANK HOLDING COMPANY.—The
term ‘investment bank holding company’ means any finan-
cial services holding company that—
‘‘(1) controls a company engaged in underwrit-
ing corporate equity securities pursuant to section
10;
‘‘(2) controls a wholesale financial institution;
and
‘‘(3) if the company is a foreign bank that oper-
ates a branch, agency or commercial lending com-
102
pany in the United States, or is a company that con-
trols such foreign bank, is treated as an investment
bank holding company because such bank or com-
pany meets the criteria in section 12(b) and has re-
ceived the determination required by such section.’’.
(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.’’.
(b) INVESTMENT BANK HOLDING COMPANIES.—The
Bank Holding Company Act of 1956 (12 U.S.C. 1841 et
seq.) is amended by inserting after section 11 (as added
by section 104 of this Act) the following new section:
‘‘SEC. 12. INVESTMENT BANK HOLDING COMPANIES.
‘‘(a) PERMISSIBLE AFFILIATIONS FOR INVESTMENT
BANK HOLDING COMPANIES.—
‘‘(1) FINANCIAL ACTIVITIES.—
‘‘(A) ACTIVITIES
AUTHORIZED.—An in-
vestment bank holding company may directly or
indirectly own or control shares of any company
engaged in any activity the Board has deter-
mined to be financial in nature or incidental to
a financial activity (other than activities ex-
103
pressly limited under subsection (c)(8)), or any
activity in compliance with subparagraph (B) or
(C).
‘‘(B) INCIDENTAL ACTIVITIES.—
‘‘(i) IN
GENERAL.—Notwithstanding
subparagraph (A), the aggregate invest-
ment by an investment bank holding com-
pany in shares of companies that engage in
nonfinancial activities and financial activi-
ties (other than those otherwise permitted
under this section) shall not at any time
exceed 7.5 percent (or such greater per-
centage as the Board may determine to be
appropriate) of the consolidated total risk-
weighted assets of the investment bank
holding company (excluding assets of com-
panies held pursuant to this subpara-
graph), except that the amount invested by
the investment bank holding company in
any 1 company (including all affiliates of
such company other than preexisting affili-
ates of such investment bank holding com-
pany) may not exceed the amount which is
equal to 25 percent of the total capital and
104
surplus of such investment bank holding
company.
‘‘(ii) APPLICABILITY
TO
SUCCESSOR
IN INTEREST.—Any successor to any in-
vestment bank holding company referred to
in clause (i) may retain any investments
made pursuant to this subparagraph—
‘‘(I) during the 5-year period be-
ginning on the date the succession is
consummated; and
‘‘(II) with the consent of the
Board, for an additional period not to
exceed 5 years after the 5-year period
referred to in subclause (I),
unless the Board determines that the re-
tention of such investment would jeopard-
ize the safety and soundness of any in-
sured depository institution affiliate of
such successor.
‘‘(iii) CROSS
MARKETING
RESTRIC-
TIONS.—A wholesale financial institution
shall not—
‘‘(I) offer or market, directly or
through any arrangement, any prod-
uct or service of an affiliate whose
105
shares are owned or controlled by the
investment bank holding company
pursuant to this subparagraph or sub-
paragraph (C); or
‘‘(II) permit any of such whole-
sale financial institution’s or subsidi-
ary’s products or services to be of-
fered or marketed, directly or through
any arrangement, by or through any
such affiliate.
‘‘(iv) USE OF COMMON NAME.—An in-
vestment bank holding company shall not
permit a wholesale financial institution to
adopt a name which is the same as or
similar to, or a variation of, the name or
title of an affiliate engaged in activities
pursuant to subparagraph (B).
‘‘(C) COMMODITIES.—
‘‘(i) IN
GENERAL.—An investment
bank holding company predominantly en-
gaged as of January 1, 1995, in securities
activities in the United States (or any suc-
cessor to any such company) may engage
in, or directly or indirectly own or control
shares of a company engaged in, activities
106
related to the trading, sale, or investment
in commodities and underlying physical
properties that were not permissible for
bank holding companies to conduct in the
United States as of January 1, 1995, pro-
vided such investment bank holding com-
pany, or any subsidiary of such holding
company, was engaged directly, indirectly,
or through any such company in any of
such activities as of January 1, 1995, in
the United States.
‘‘(ii) 
LIMITATION.—Notwithstanding
subparagraphs (A) and (B), the aggregate
investment by an investment bank holding
company in activities under this subpara-
graph (other than those otherwise per-
mitted under this section) shall not at any
time exceed 5 percent of the total consoli-
dated assets of the investment bank hold-
ing company.
‘‘(iii) 
SUCCESSOR
DEFINED.—For
purposes of this subparagraph and sub-
paragraph (B), the term ‘successor’ means,
with respect to any investment bank hold-
ing company described in clause (i), any
107
company that merges with, or acquires
control of, such investment bank holding
company.
‘‘(D) QUALIFIED INVESTOR IN AN INVEST-
MENT BANK HOLDING COMPANY.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of Federal or State
law, a qualified investor—
‘‘(I) shall not be, or be deemed to
be, an investment bank holding com-
pany, a financial services holding com-
pany, a bank holding company, or any
similar organization; and
‘‘(II) shall not be deemed to con-
trol any such company or organization
or any subsidiary of any such com-
pany or organization (other than for
purposes of section 23A and 23B of
the Federal Reserve Act),
by virtue of the investor’s ownership or
control of shares of an investment bank
holding company.
‘‘(ii) 
QUALIFIED
INVESTOR
DE-
FINED.—For purposes of this subpara-
graph, the term ‘qualified investor’ means
108
any United States company (including a
parent company and all subsidiaries of
which the parent company holds at least
80 percent of the total voting equity secu-
rities) which since February 27, 1995, has
directly or indirectly owned or controlled
shares of capital stock representing at
least 10 percent, and not more than 45
percent, of the outstanding voting shares
or voting power of a company that—
‘‘(I) becomes an investment bank
holding company or a subsidiary of an
investment bank holding company;
and
‘‘(II) before such company be-
came an investment bank holding
company or a subsidiary of an invest-
ment bank holding company, had
more than 50 percent of the compa-
ny’s assets employed directly or indi-
rectly in securities activities.
‘‘(iii) CROSS-MARKETING
AND
COM-
MON NAME.—A wholesale financial institu-
tion shall not—
109
‘‘(I) offer or market products or
services of a qualified investor in the
investment bank holding company of
which the wholesale financial institu-
tion is an affiliate;
‘‘(II) permit the institution’s
products or services to be offered or
marketed in connection with products
or services of such qualified investor;
or
‘‘(III) adopt a name which is the
same as or similar to, or a variation
of, the name or title of such qualified
investor.
‘‘(iv) EXAMINATION
AND
REPORT-
ING.—Notwithstanding any other provision
of law, the Board may conduct examina-
tions of, or require reports from, a quali-
fied investor only to the extent that the
Board reasonably determines that such ex-
aminations or reports are necessary—
‘‘(I) to ensure compliance with
this subparagraph; or
‘‘(II) to the extent that the quali-
fied investor is an affiliate of a whole-
110
sale financial institution for purposes
of section 23A of the Federal Reserve
Act, to ensure compliance with restric-
tions imposed by law or regulation on
transactions between the qualified in-
vestor and such wholesale financial in-
stitution.
‘‘(E) SPECIAL RULE.—An investment bank
holding company that owns and controls shares
of a company pursuant to subparagraph (B) or
(C) may not own or control shares of a com-
pany pursuant to section 4(k).
‘‘(F) CONSOLIDATED TOTAL RISK-WEIGHT-
ED ASSETS.—For purposes of this paragraph,
the following definitions shall apply:
‘‘(i) IN GENERAL.—The term ‘consoli-
dated total risk-weighted assets’ shall have
the meaning given to such term in regula-
tions prescribed by the Board as in effect
on the date of the enactment of the Finan-
cial Services Competitiveness and Regu-
latory Relief Act of 1995.
‘‘(ii) 
APPLICATION
TO
FOREIGN
BANKS.—In the case of a foreign bank or
a company that owns or controls a foreign
111
bank, the term ‘consolidated total risk-
weighted assets’ means total risk-weighted
assets held by the foreign bank or company
in the United States in any United States
branch, agency, or commercial lending
company subsidiary, any depository institu-
tion controlled by the foreign bank or com-
pany, any subsidiary held under the au-
thority of this section, section 3, 4, or 10
(other than paragraph (9) or (13) of sec-
tion 4(c)), or section 25 or 25A of the
Federal Reserve Act.
‘‘(2) SECURITIES ACTIVITIES.—
‘‘(A) INSTITUTIONS MUST BE WELL CAP-
ITALIZED.—The Board shall disapprove a no-
tice under section 10 by an investment bank
holding company (or a company seeking to be-
come an investment bank holding company) to
acquire a securities affiliate if any wholesale fi-
nancial institution controlled by the investment
bank holding company is not well capitalized or
would not be well capitalized following the
transaction.
‘‘(B) TRANSACTIONS WITH AFFILIATES.—
112
‘‘(i) IN GENERAL.—A wholesale finan-
cial institution controlled by an investment
bank holding company shall be treated as
a bank for purposes of the provisions of
sections 23A and 23B of the Federal Re-
serve Act.
‘‘(ii) OTHER RESTRICTIONS REGARD-
ING SECURITIES AFFILIATES DETERMINED
BY THE BOARD.—A securities affiliate of
an investment bank holding company, and
a wholesale financial institution controlled
by an investment bank holding company,
shall not be subject to the provisions of
section 11, except that the securities affili-
ate and wholesale financial institution shall
be subject to subsections (l) and (m) of
such section in the same manner and to
the same extent such paragraphs would
apply if the wholesale financial institution
were an insured depository institution.
‘‘(3) LIMITATION
ON
AFFILIATION
WITH
IN-
SURED DEPOSITORY INSTITUTIONS.—An investment
bank holding company may not, directly or indi-
rectly, own or control—
113
‘‘(A) any bank, other than a wholesale fi-
nancial institution;
‘‘(B) any savings association;
‘‘(C) any institution described in section
2(c)(2) (other than subparagraphs (C) and (G)
of such section); or
‘‘(D) any institution that accepts—
‘‘(i) initial deposits of $100,000 or
less, other than on an incidental or occa-
sional basis, or
‘‘(ii) deposits that are insured under
the Federal Deposit Insurance Act.
‘‘(4) NO
DEPOSIT
INSURANCE
FUND
LIABIL-
ITY.—No Federal deposit insurance funds may be
used in connection with the failure of, or any pro-
posed assistance to, a wholesale financial institution
or an investment bank holding company.
‘‘(5) CAPITAL OF IBHC.—
‘‘(A) IN GENERAL.—The Board shall not
impose any capital requirement on investment
bank holding companies or subsidiaries of such
companies (other than depository institutions)
unless any such requirement is based upon ap-
propriate risk-weighing considerations.
114
‘‘(B) 
APPLICABLE
ACCOUNTING
PRIN-
CIPLES.—In applying any capital standard to
investment bank holding companies, or subsidi-
aries of such companies, the Board shall utilize
uniform accounting principles consistent with
generally accepted accounting principles in ac-
cordance with section 37(a)(2) of the Federal
Deposit Insurance Act.
‘‘(b) QUALIFICATION OF FOREIGN BANK AS INVEST-
MENT BANK HOLDING COMPANY.—
‘‘(1) IN GENERAL.—Any foreign bank that—
‘‘(A) operates a branch, agency or commer-
cial lending company in the United States (and
any company that owns or controls such foreign
bank), including a foreign bank that does not
own or control a wholesale financial institution;
and
‘‘(B) controls a security affiliate that en-
gages in underwriting corporate equity securi-
ties,
may request a determination from the Board that
such bank or company be treated as an investment
bank holding company.
‘‘(2) CONDITIONS FOR TREATMENT AS AN IN-
VESTMENT
BANK
HOLDING
COMPANY.—A foreign
115
bank and a company that owns or controls a foreign
bank may not be treated as an investment bank
holding company unless the bank and company meet
and continue to meet the following criteria:
‘‘(A) NO INSURED DEPOSITS.—No deposits
held directly by a foreign bank or through an
affiliate 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) TRANSACTIONS 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
such foreign bank) has invested pursuant to
subsection (a)(1)(B), comply with the provisions
of sections 23A and 23B of the Federal Reserve
Act in the same manner and to the same extent
as such transactions would be required to com-
116
ply with such sections if the bank were a mem-
ber bank.
‘‘(3) TREATMENT AS A WHOLESALE FINANCIAL
INSTITUTION.—Any foreign bank which is, or is af-
filiated with a company which is, treated as an in-
vestment bank holding company under this sub-
section shall be treated as a wholesale financial insti-
tution for purposes of clauses (iii) and (iv) of sub-
section (a)(1)(B), subsection (a)(2)(B)(ii), and sec-
tion 5(g), except that the Board may adopt such
modifications, conditions, or exemptions as the
Board deems appropriate, giving due regard to the
principle of national treatment and equality of com-
petitive opportunity.
‘‘(4) NONAPPLICABILITY
OF
OTHER
EXEMP-
TION.—Any foreign bank or company which is treat-
ed as an investment bank holding company under
this subsection shall not be eligible for any exemp-
tion described in section 2(h).
‘‘(c) ELIGIBILITY OF FOREIGN BANKS FOR CERTAIN
TREATMENT.—
‘‘(1) RECIPROCAL NATIONAL TREATMENT.—
‘‘(A) IN GENERAL.—A foreign bank that
operates a branch, agency or commercial lend-
ing company in the United States, and any
117
company that owns or controls such a foreign
bank, shall be eligible for the treatment af-
forded under subsection (b) or section 11(n)
only if the home country of such foreign bank
or company accords to United States banks the
same competitive opportunities in banking as
such country accords to domestic banks of such
country.
‘‘(B) COORDINATION WITH NAFTA.—Sub-
paragraph (A) shall not apply in derogation of
any obligation under the North American Free
Trade Agreement.
‘‘(C) HOME COUNTRY DEFINED.—For pur-
poses of subparagraph (A), the term ‘home
country’ means, with respect to any foreign
bank or company referred to in subparagraph
(A), the country under the laws of which the
foreign bank or company is organized.
‘‘(2) PREVENTION
OF
EVASION.—No foreign
bank or bank owned by a former United States na-
tional may operate a branch or agency in the United
State if the predominance of the assets of such bank
were acquired in connection with a merger with, or
purchase or assumption of all or substantially all the
assets of, a wholesale financial institution.
118
‘‘(d) RULE
FOR FINANCIAL SERVICES HOLDING
COMPANIES.—For purposes of section 5(g)(2)(A)(ii), any
foreign bank (as defined in section 1(b) of the Inter-
national Banking Act of 1978) which is directly or indi-
rectly owned, controlled, or operated by a company that—
‘‘(1) as of January 1, 1995, was registered as
a bank holding company; or
‘‘(2) is a successor to any such bank holding
company,
shall be treated as a wholesale financial institution.’’.
(c) CONFORMING AMENDMENTS.—
(1) 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 that is controlled by an investment bank
holding company that controls no banks other than
wholesale financial institutions.’’.
(2) APPROPRIATE
FEDERAL
BANKING
AGEN-
CY.—Section 3(q)(2)(A) of the Federal Deposit In-
surance 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 wholesale financial in-
119
stitution as authorized pursuant to section 9B
of the Federal Reserve Act;’’.
SEC. 117. WHOLESALE FINANCIAL INSTITUTIONS.
(a) IN GENERAL.—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 incor-
porated by special law of any State, or orga-
nized under the general laws of any State, may
apply to the Board of Governors of the Federal
Reserve System to become a wholesale financial
institution and to subscribe to the stock of the
Federal reserve bank organized within the dis-
trict where the applying bank is located.
‘‘(B) TREATMENT
AS
STATE
MEMBER
BANK.—Any application under subparagraph
(A) shall be treated as an application to become
a State member bank under, and shall be sub-
ject to the provisions of, section 9.
‘‘(2) INSURANCE TERMINATION.—No bank that
is insured under the Federal Deposit Insurance Act
120
may become a wholesale financial institution unless
it has met all requirements under that Act for vol-
untary termination of deposit insurance.
‘‘(3) APPLICATION FEE.—No bank or organiza-
tion may become a wholesale financial institution
unless the Board has received, from the bank or or-
ganization, full payment of a fee which the Board
shall impose in the manner provided under section
5(h) of the Financial Services Holding Company Act
of 1995.
‘‘(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-
121
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 in accordance with sub-
section (c);
‘‘(B) the provisions applicable to well cap-
italized insured depository institutions shall be
inapplicable to wholesale financial institutions;
‘‘(C) the provisions authorizing or requir-
ing an institution to be placed into receivership
shall not apply to a wholesale financial institu-
tion, and, instead, the Board is authorized or
required, as the case may be, to terminate the
wholesale financial institution’s membership in
the Federal Reserve System or place the bank
into conservatorship; and
‘‘(D) for purposes of applying the provi-
sions of section 38 of the Federal Deposit In-
surance Act to wholesale financial institutions,
all references to the appropriate Federal bank-
ing agency or to the Corporation in that section
shall be deemed to be references to the Board.
122
‘‘(3) ENFORCEMENT AUTHORITY.—Subsections
(j) and (k) of section 7, subsections (b) through (n),
(s), (u), and (v) of section 8, and section 19 of the
Federal 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 member insured banks and any reference in
such sections to an insured depository institution
shall be deemed, for purposes of this paragraph, to
be a reference to a wholesale financial institution.
‘‘(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 the provisions of
sections 18(c) and 44 of the Federal Deposit Insur-
ance Act in the same manner and to the same extent
the wholesale financial institution would be subject
to such sections if the institution were a State mem-
ber insured bank.
‘‘(6) REGISTRATION FEE.—The Board shall as-
sess an annual registration fee in the manner pro-
123
vided in section 5(h) of the Financial Services Hold-
ing Company Act of 1995 on each wholesale finan-
cial institution.
‘‘(c) SPECIFIC
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) LIMITATIONS ON DEPOSITS.—
‘‘(A) MINIMUM AMOUNT.—
‘‘(i) IN GENERAL.—Pursuant to such
regulations as the Board may prescribe, no
wholesale financial institution may receive
initial deposits of $100,000 or less, other
than on an incidental and occasional basis.
‘‘(ii) LIMITATION
ON
DEPOSITS
OF
LESS
THAN
$100,000.—No bank may be
treated as a wholesale financial institution
if the total amount of the initial deposits
of $100,000 or less at such bank constitute
more than 5 percent of the bank’s total de-
posits.
‘‘(B) NO DEPOSIT INSURANCE.—No depos-
its held by a wholesale financial institution shall
be insured deposits under the Federal Deposit
Insurance Act.
‘‘(C) ADVERTISING
AND
DISCLOSURE.—
The Board shall prescribe regulations pertain-
124
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) SPECIAL CAPITAL REQUIREMENTS APPLI-
CABLE TO WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(A) MINIMUM CAPITAL LEVELS.—
‘‘(i) IN GENERAL.—The Board shall,
by regulation, adopt capital requirements
for wholesale financial institutions—
‘‘(I) to account for the status of
wholesale financial institutions as in-
stitutions that accept deposits that
are not insured under the Federal De-
posit Insurance Act; and
‘‘(II) to provide for the safe and
sound operation of the wholesale fi-
nancial institution without undue risk
to creditors or other persons, includ-
ing Federal reserve banks, engaged in
transactions with the bank.
‘‘(ii) 
MINIMUM
TIER
CAPITAL
RATIO.—The minimum ratio of tier 1 cap-
125
ital to total risk-weighted assets of whole-
sale financial institutions shall be not less
than the level required for a State member
insured bank to be well capitalized unless
the Board determines otherwise, consistent
with safety and soundness.
‘‘(B) CAPITAL CATEGORIES FOR PROMPT
CORRECTIVE ACTION.—For purposes of apply-
ing section 38 of the Federal Deposit Insurance
Act with respect to any wholesale financial in-
stitution, the Board shall, by regulation, estab-
lish, for each relevant capital measure specified
by the Board under subparagraph (A), the lev-
els at which a wholesale financial institution is
well 
capitalized, 
adequately 
capitalized,
undercapitalized, significantly undercapitalized,
and critically undercapitalized.
‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE
TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi-
tion to any requirement otherwise applicable to State
member banks or applicable, under this section, to
wholesale financial institutions, the Board may pre-
scribe, by regulation or order, for wholesale financial
institutions—
126
‘‘(A) limitations on transactions with affili-
ates to prevent an affiliate from gaining access
to, or the benefits of, credit from a Federal re-
serve 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
‘‘(ii) 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 State member
bank that is not a wholesale financial institution, if
the Board finds that such exemption is not incon-
sistent with—
127
‘‘(A) the promotion of the safety and
soundness of the wholesale financial institution;
and
‘‘(B) the protection of creditors and other
persons, including Federal reserve banks, en-
gaged in transactions with the wholesale finan-
cial institution.
‘‘(5) 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 advances or discount under this Act
to any member bank or other depository institution.
‘‘(d) 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.
128
‘‘(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.
‘‘(e) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
‘‘(1) WHOLESALE
FINANCIAL
INSTITUTION.—
The term ‘wholesale financial institution’ means a
bank whose application to become a wholesale finan-
cial institution and a State member bank has been
approved by the Board under this section.
‘‘(2) DEPOSIT.—The term ‘deposit’ has the
meaning given to such term by the Board under this
Act.
‘‘(3) STATE
MEMBER
INSURED
BANK.—The
term ‘State member insured bank’ means a State
member bank which is an insured bank (as defined
in section 3(h) of the Federal Deposit Insurance
Act).
129
‘‘(f) EXCLUSIVE JURISDICTION.—Subsections (c) and
(e) of section 43 of the Federal Deposit Insurance Act
shall not apply to any wholesale financial institution.’’.
(b) VOLUNTARY TERMINATION OF INSURED STATUS
BY CERTAIN INSTITUTIONS.—
(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 (9) as paragraphs (1) through (8), 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—
130
‘‘(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
‘‘(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-
prove the termination of the bank’s insured sta-
tus and the bank pays an exit fee in accordance
with subsection (e).
‘‘(b) EXCEPTION.—Subsection (a) shall not apply
with respect to—
‘‘(1) an insured savings association;
131
‘‘(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; or
‘‘(3) any institution described in section 2(c)(2)
of the Bank Holding Company Act of 1956.
‘‘(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 under 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
132
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).
‘‘(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
133
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
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
134
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-
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 after ‘‘such Act’’ by inserting ‘‘, or any
wholesale financial institution as defined in section
9B of this Act’’.
(c) REPORTS
ON DISCOUNTS
AND ADVANCES
TO
WHOLESALE FINANCIAL INSTITUTIONS.—Section 10B of
135
the Federal Reserve Act (12 U.S.C. 347(b)) is amended
by adding at the end the following new subsection:
‘‘(c) REPORTS ON DISCOUNTS AND ADVANCES TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) IN GENERAL.—The Board shall submit a
report to the Congress at the end of any year in
which any wholesale financial institution has ob-
tained a discount, advance, or other extension of
credit from a Federal reserve bank.
‘‘(2) CONTENTS.—Any report submitted under
paragraph (1) shall explain the circumstances and
need for any discount, advance, or other extension of
credit to a wholesale financial institution during the
period covered by the report, including the type and
amount of credit extended and the amount of credit
remaining outstanding as of the date of the report.’’.
Subtitle C—Financial Activities
SEC. 121. FINANCIAL ACTIVITIES.
Section 4(c)(8) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1843(c)(8)) is amended—
(1) by striking ‘‘shares of any company’’ and all
that follows through ‘‘for a bank holding company to
provide’’ and inserting ‘‘shares of any company the
activities of which the Board after due notice has de-
termined (by order, regulation, or advisory opinion)
137
controlling banks or financial in nature or incidental
to a financial activity for a financial services holding
company to provide’’;
(2) in the 3d sentence, by inserting ‘‘and be-
tween activities commenced by affiliates of different
classes of banks’’ before the period at the end; and
(3) by striking the 2d sentence.
SEC. 122. NO PRIOR APPROVAL REQUIRED FOR WELL CAP-
ITALIZED AND WELL MANAGED FINANCIAL
SERVICES HOLDING COMPANIES.
Section 4(j) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(j)) is amended—
(1) in paragraph (1), by striking ‘‘No’’ and in-
serting ‘‘Except as provided in paragraph (3) or sec-
tion 10(b)(3), no’’; and
(2) by adding at the end the following new
paragraphs:
‘‘(3) NO
NOTICE
REQUIRED
FOR
CERTAIN
TRANSACTIONS.—Notwithstanding paragraph (1), no
notice under subsection (c)(8) or (a)(2)(B) is re-
quired for a proposal by a financial services holding
company to engage in any activity (other than an ac-
tivity described in subparagraph (A) or (B) of sec-
tion 10(a)(1)) or acquire or retain the shares or as-
138
sets of any company (other than a securities affili-
ate) if the proposal qualifies under paragraph (4).
‘‘(4) CRITERIA FOR STATUTORY APPROVAL.—A
proposal qualifies under this paragraph if all of the
following criteria are met:
‘‘(A) FINANCIAL
CRITERIA.—Both before
and immediately after the proposed trans-
action—
‘‘(i) the acquiring financial services
holding company is well capitalized;
‘‘(ii) the lead depository institution of
such holding company is well capitalized;
‘‘(iii) well capitalized depository insti-
tutions control at least 80 percent of the
aggregate total risk-weighted assets of de-
pository institutions controlled by such
holding company; and
‘‘(iv) no depository institution con-
trolled 
by 
such 
holding 
company 
is
undercapitalized.
‘‘(B) MANAGERIAL CRITERIA.—
‘‘(i) WELL MANAGED.—At the time of
the transaction, the acquiring financial
services holding company, the lead deposi-
tory institution of such holding company,
139
and depository institutions that control at
least 80 percent of the aggregate total
risk-weighted assets of depository institu-
tions controlled by such holding company
are well managed.
‘‘(ii) LIMITATION
ON
POORLY
MAN-
AGED INSTITUTIONS.—No depository insti-
tution which is controlled by the acquiring
financial services holding company has re-
ceived any of the lowest 2 composite rat-
ings at the later of the institution’s most
recent examination or subsequent review.
‘‘(iii) RECENTLY ACQUIRED INSTITU-
TIONS.—Depository institutions acquired
by the financial services holding company
during the 12-month period ending on the
date of the proposed transaction may be
excluded for purposes of clause (ii) if—
‘‘(I) the financial services holding
company has developed a plan accept-
able to the appropriate Federal bank-
ing agency for the institution to re-
store the capital and management of
the institution; and
140
‘‘(II) all such depository institu-
tions represent, in the aggregate, less
than 25 percent of the total risk-
weighted assets of all depository insti-
tutions controlled by the financial
services holding company.
‘‘(C) ACTIVITIES PERMISSIBLE.—Following
consummation of the proposed transaction, the
financial services holding company engages di-
rectly or through a subsidiary solely in—
‘‘(i) activities that are permissible
under subsection (c)(8), as determined by
the Board by any regulation, order, or ad-
visory opinion under such subsection that
is in effect at the time of the proposed
transaction, subject to all of the restric-
tions, terms, and conditions of such sub-
section and such regulation, order, or advi-
sory opinion; and
‘‘(ii) such other activities as are other-
wise permissible under this Act, subject to
the restrictions, terms and conditions, in-
cluding any prior notice or approval re-
quirements, provided in this Act.
‘‘(D) SIZE OF ACQUISITION.—
141
‘‘(i) ASSET SIZE.—The book value of
the total risk-weighted assets acquired does
not exceed 10 percent of the consolidated
total risk-weighted assets of the acquiring
financial services holding company.
‘‘(ii) 
CONSIDERATION.—The 
gross
consideration to be paid for the securities
or assets does not exceed 15 percent of the
consolidated tier 1 capital of the acquiring
financial services holding company.
‘‘(E) NOTICE
NOT
OTHERWISE
WAR-
RANTED.—For proposals described in para-
graph (5)(B), the Board has not, before the
conclusion of the period described in such para-
graph, advised the financial services holding
company that a notice under paragraph (1) is
required.
‘‘(5) NOTIFICATION.—
‘‘(A) COMMENCEMENT OF ACTIVITIES AP-
PROVED BY RULE.—A financial services holding
company that qualifies under paragraph (4)
and proposes to engage de novo, directly or
through a subsidiary, in any activity that is per-
missible under subsection (c)(8), as determined
142
by the Board by regulation, may commence that
activity without prior notice to the Board.
‘‘(B) SUBSEQUENT
NOTICE.—A financial
services holding company that commences an
activity under subsection (c)(8) without prior
notice to the Board shall provide written notice
to the Board no later than 10 business days
after commencing the activity.
‘‘(C) ACTIVITIES
PERMITTED
BY
ORDER
AND ACQUISITIONS.—
‘‘(i) IN GENERAL.—At least 12 busi-
ness days prior to commencing any activity
(other than an activity described in sub-
paragraph (A)) or acquiring shares or as-
sets of any company in a proposal that
qualifies under paragraph (4), the financial
services holding company shall provide
written notice to the Board of the pro-
posal, unless the Board determines that no
notice or a shorter notice period is appro-
priate.
‘‘(ii) DESCRIPTION OF PROPOSED AC-
TIVITIES.—A notice under clause (i) shall
include a description of the proposed ac-
143
tivities and the terms of any proposed ac-
quisition.
‘‘(6) ADJUSTMENT OF AMOUNTS.—The Board
may, by regulation, adjust the amounts and the
manner in which the percentage of depository insti-
tutions is calculated under subparagraph (B)(i),
(B)(iii)(II), or (D) of paragraph (4) if the Board de-
termines that any such adjustment is consistent with
safety and soundness and the purposes of this Act.
‘‘(7) EXPEDITED PROCEDURE FOR NEW ACTIVI-
TIES.—
‘‘(A) EXPEDITED
PREACQUISITION
RE-
VIEW.—After the end of the 12-day period re-
ferred to in paragraph (5)(C) and subject to
any final ruling under subparagraph (B), a fi-
nancial services holding company may acquire a
company engaged in activities that the company
believes are financial in nature for purposes of
subsection (c)(8) and that the Board has not
previously reviewed under such subsection if—
‘‘(i) the proposal qualifies under all of
the criteria in paragraph (4) other than
paragraph (4)(C);
‘‘(ii) the financial services holding
company provides the notice required
144
under paragraph (5)(C), and includes with
such notice an explanation of the facts and
circumstances that provide a reasonable
basis for concluding that the proposed ac-
tivities are financial in nature or incidental
to such financial activities; and
‘‘(iii) before the end of such 12-day
period, the Board has not—
‘‘(I) required a notice under
paragraph (1) with respect to the pro-
posed transaction; or
‘‘(II) advised the financial serv-
ices holding company that the com-
pany has failed to provide a reason-
able basis for concluding that the pro-
posed activities are financial in nature
or incidental to such financial activi-
ties.
‘‘(B) POSTACQUISITION REVIEW.—
‘‘(i) NOTICE
PROCEDURE.—A finan-
cial services holding company which is per-
mitted to make an acquisition under this
paragraph shall file a notice with the
Board in accordance with paragraph (1)
before the end of the 30-day period begin-
145
ning on the date of the consummation of
the acquisition.
‘‘(ii) LIMITED REVIEW.—The Board’s
review of a postconsummation notice re-
quired under this subparagraph shall be
limited to determining whether the pro-
posed activities are permissible under sub-
section (c)(8), including whether the pro-
posal meets the criteria in paragraph
(2)(A).
‘‘(iii) CONDITIONAL ACTION.—No pro-
vision of this paragraph shall be construed
as limiting in any way the authority of the
Board under this section to impose condi-
tions on the conduct of any activity or the
ownership of any company.
‘‘(iv) DIVESTITURE
OF
IMPERMIS-
SIBLE
ACTIVITIES.—If the Board deter-
mines that any proposed activity is not
permissible under subsection (c)(8), the fi-
nancial services holding company shall ter-
minate the activity or divest the company
acquired in reliance on this paragraph be-
fore the end of the 2-year period beginning
on the date of such determination.
146
‘‘(C) INITIAL DECISION NOT PREJUDICIAL
TO SUBSEQUENT DETERMINATION.—A decision
by the Board under subparagraph (A) not to
require a notice under paragraph (1) during the
12-day period referred to in such subparagraph
shall not prejudice the Board’s decision under
subparagraph (B).’’.
SEC. 123. STREAMLINED EXAMINATION AND REPORTING
REQUIREMENTS FOR ALL FINANCIAL SERV-
ICES HOLDING COMPANIES.
Section 5(c) of the Bank Holding Company Act of
1956 (12 U.S.C. 1844(c)) is amended to read as follows—
‘‘(c) REPORTS AND EXAMINATIONS.—
‘‘(1) PURPOSES.—
‘‘(A) IN GENERAL.—The purpose of this
subsection is to authorize the Board, through
reports and examinations, to gather information
from a financial services holding company and
the subsidiaries of any such holding company
regarding the structure, activities, and financial
condition of the financial services holding com-
pany and such subsidiaries so that the Board
can monitor risks within the holding company
system that could adversely affect any deposi-
tory institution subsidiary of the holding com-
147
pany and may monitor and enforce compliance
with this Act.
‘‘(B) PURPOSE
NOT
TO
IMPOSE
ADDI-
TIONAL BURDENS ON HOLDING COMPANIES.—It
is the intended purpose of this subsection that
the Board shall—
‘‘(i) exercise the Board’s authority to
collect information under this section in a
manner that is the least burdensome to fi-
nancial services holding companies and the
subsidiaries of such companies; and
‘‘(ii) rely, to the fullest extent pos-
sible, on reports prepared for and examina-
tions conducted by or for other Federal
and State supervisors.
‘‘(C) PURPOSE
TO
REQUIRE
CAREFULLY
TAILORED EXAMINATIONS.—It is the intended
purpose of this subsection that the Board shall
tailor the focus and scope of any examination
under this section to a financial services holding
company or to any subsidiary of such company
which, because of financial conditions, activities,
operations of such subsidiary, the transactions
between such subsidiary and other affiliates, or
the size of any such subsidiary poses a potential