‘‘(A) corrected the condition or ceased the
activity that caused the company to fail to con-
tinue to qualify for the exemption; and
‘‘(B) implemented procedures that are rea-
sonably adapted to avoid the reoccurrence of
such condition or activity.
The issuance of any notice under this paragraph
that relates to the activities of a bank shall not be
construed as affecting the authority of the bank to
continue to engage in such activities until the expira-
tion of such 180-day period.’’.
(b) INDUSTRIAL LOAN COMPANIES AFFILIATE OVER-
DRAFTS.—Section 2(c)(2)(H) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1841(c)(2)(H)) is amended
by inserting before the period at the end ‘‘, or that is oth-
erwise permissible for a bank controlled by a company de-
scribed in section 4(f)(1)’’.
SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMU-
NITY BANKS, OTHER SMALL FINANCIAL IN-
STITUTIONS, INSURANCE AGENTS, AND CON-
SUMERS.
(a) STUDY REQUIRED.—The Comptroller General of
the United States shall conduct a study of the projected
economic impact and the actual economic impact that the
enactment of this Act will have on financial institutions,
including community banks, registered brokers and deal-
ers and insurance companies, which have total assets of
$100,000,000 or less, insurance agents, and consumers.
(b) REPORTS TO THE CONGRESS.—
(1) IN GENERAL.—The Comptroller General of
the United States shall submit reports to the Con-
gress, at the times required under paragraph (2),
containing the findings and conclusions of the
Comptroller General with regard to the study re-
quired under subsection (a) and such recommenda-
tions for legislative or administrative action as the
Comptroller General may determine to be appro-
priate.
(2) TIMING
OF
REPORTS.—The Comptroller
General shall submit—
(A) an interim report before the end of the
6-month period beginning after the date of the
enactment of this Act;
(B) another interim report before the end
of the next 6-month period; and
(C) a final report before the end of the 1-
year period after such second 6-month period,’’.
SEC. 110. RESPONSIVENESS TO COMMUNITY NEEDS FOR FI-
NANCIAL SERVICES.
(a) STUDY.—The Secretary of the Treasury, in con-
sultation with the Federal banking agencies (as defined
in section 3(z) of the Federal Deposit Insurance Act),
shall conduct a study of the extent to which adequate serv-
ices are being provided as intended by the Community Re-
investment Act of 1977, including services in low- and
moderate-income neighborhoods and for persons of modest
means, as a result of the enactment of this Act.
(b) REPORT.—Before the end of the 2-year period be-
ginning on the date of the enactment of this Act, the Sec-
retary of the Treasury, in consultation with the Federal
banking agencies, shall submit a report to the Congress
on the study conducted pursuant to subsection (a) and
shall include such recommendations as the Secretary de-
termines to be appropriate for administrative and legisla-
tive action with respect to institutions covered under the
Community Reinvestment Act of 1977.
SEC. 110A. STUDY OF FINANCIAL MODERNIZATION’S AF-
FECT ON THE ACCESSIBILITY OF SMALL
BUSINESS AND FARM LOANS.
(a) STUDY.—The Secretary of the Treasury, in con-
sultation with the Federal banking agencies (as defined
in Section 3(z) of the Federal Deposit Insurance Act),
shall conduct a study of the extent to which credit is being
provided to and for small business and farms, as a result
of this Act.
(b) REPORT.—Before the end of the 5-year period be-
ginning on the date of the enactment of this Act, the Sec-
retary, in consultation with the Federal banking agencies,
shall submit a report to the Congress on the study con-
ducted pursuant to subsection (a) and shall include such
recommendations as the Secretary determines to be appro-
priate for administrative and legislative action.
Subtitle 
B—Streamlining 
Super-
vision 
of 
Financial 
Holding
Companies
SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY
SUPERVISION.
Section 5(c) of the Bank Holding Company Act of
1956 (12 U.S.C. 1844(c)) is amended to read as follows:
‘‘(c) REPORTS AND EXAMINATIONS.—
‘‘(1) REPORTS.—
‘‘(A) IN GENERAL.—The Board from time
to time may require any bank holding company
and any subsidiary of such company to submit
reports under oath to keep the Board informed
as to—
‘‘(i) its financial condition, systems
for monitoring and controlling financial
and operating risks, and transactions with
depository institution subsidiaries of the
holding company; and
‘‘(ii) compliance by the company or
subsidiary with applicable provisions of
this Act.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN GENERAL.—The Board shall,
to the fullest extent possible, accept re-
ports in fulfillment of the Board’s report-
ing requirements under this paragraph
that a bank holding company or any sub-
sidiary of such company has provided or
been required to provide to other Federal
and State supervisors or to appropriate
self-regulatory organizations.
‘‘(ii) AVAILABILITY.—A bank holding
company or a subsidiary of such company
shall provide to the Board, at the request
of the Board, a report referred to in clause
(i).
‘‘(iii) REQUIRED
USE
OF
PUBLICLY
REPORTED
INFORMATION.—The 
Board
shall, to the fullest extent possible, accept
in fulfillment of any reporting or record-
keeping requirements under this Act infor-
mation that is otherwise required to be re-
ported publicly and externally audited fi-
nancial statements.
‘‘(iv) REPORTS
FILED
WITH
OTHER
AGENCIES.—In the event the Board re-
quires a report from a functionally regu-
lated nondepository institution subsidiary
of a bank holding company of a kind that
is not required by another Federal or State
regulator or appropriate self-regulatory or-
ganization, the Board shall request that
the appropriate regulator or self-regulatory
organization obtain such report. If the re-
port is not made available to the Board,
and the report is necessary to assess a ma-
terial risk to the bank holding company or
any of its subsidiary depository institutions
or compliance with this Act, the Board
may require such subsidiary to provide
such a report to the Board.
‘‘(C) DEFINITION.—For purposes of this
subsection, the term ‘functionally regulated
nondepository institution’ means—
‘‘(i) a broker or dealer registered
under the Securities Exchange Act of
1934;
‘‘(ii) an investment adviser registered
under the Investment Advisers Act of
1940, or with any State, with respect to
the investment advisory activities of such
investment adviser and activities incidental
to such investment advisory activities;
‘‘(iii) an insurance company subject to
supervision by a State insurance commis-
sion, agency, or similar authority; and
‘‘(iv) an entity subject to regulation
by the Commodity Futures Trading Com-
mission, with respect to the commodities
activities of such entity and activities inci-
dental to such commodities activities.
‘‘(2) EXAMINATIONS.—
‘‘(A) EXAMINATION AUTHORITY.—
‘‘(i) IN
GENERAL.—The Board may
make examinations of each bank holding
company and each subsidiary of a bank
holding company.
‘‘(ii) 
FUNCTIONALLY
REGULATED
NONDEPOSITORY
INSTITUTION
SUBSIDI-
ARIES.—Notwithstanding clause (i), the
Board may make examinations of a func-
tionally regulated nondepository institution
subsidiary of a bank holding company only
if—
‘‘(I) the Board has reasonable
cause to believe that such subsidiary
is engaged in activities that pose a
material risk to an affiliated deposi-
tory institution; or
‘‘(II) based on reports and other
available information, the Board has
reasonable cause to believe that a sub-
sidiary is not in compliance with this
Act or with provisions relating to
transactions with an affiliated deposi-
tory institution and the Board cannot
make such determination through ex-
amination of the affiliated depository
institution or bank holding company.
‘‘(B) LIMITATIONS ON EXAMINATION AU-
THORITY FOR BANK HOLDING COMPANIES AND
SUBSIDIARIES.—Subject 
to 
subparagraph
(A)(ii), the Board may make examinations
under subparagraph (A)(i) of each bank holding
company and each subsidiary of such holding
company in order to—
‘‘(i) inform the Board of the nature of
the operations and financial condition of
the holding company and such subsidiaries;
‘‘(ii) inform the Board of—
‘‘(I) the financial and operational
risks within the holding company sys-
tem that may pose a threat to the
safety and soundness of any sub-
sidiary depository institution of such
holding company; and
‘‘(II) the systems for monitoring
and controlling such risks; and
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
subsidiary depository institution and its af-
filiates.
‘‘(C) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, limit the focus and scope of any exam-
ination of a bank holding company to—
‘‘(i) the bank holding company; and
‘‘(ii) any subsidiary of the holding
company that, because of—
‘‘(I) the size, condition, or activi-
ties of the subsidiary; or
‘‘(II) the nature or size of trans-
actions between such subsidiary and
any depository institution which is
also a subsidiary of such holding com-
pany,
could have a materially adverse effect on
the safety and soundness of any depository
institution affiliate of the holding company.
‘‘(D) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use, for the purposes of this para-
graph, the reports of examinations of depository
institutions made by the appropriate Federal
and State depository institution supervisory au-
thority.
‘‘(E) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, address the circumstances which might
otherwise permit or require an examination by
the Board by forgoing an examination and in-
stead reviewing the reports of examination
made of—
‘‘(i) any registered broker or dealer by
or on behalf of the Securities and Ex-
change Commission;
‘‘(ii) any investment adviser registered
by or on behalf of either the Securities and
Exchange Commission or any State, which-
ever is required by law;
‘‘(iii) any licensed insurance company
by or on behalf of any State regulatory au-
thority responsible for the supervision of
insurance companies; and
‘‘(iv) any other subsidiary that the
Board finds to be comprehensively super-
vised by a Federal or State authority.
‘‘(3) CAPITAL.—
‘‘(A) IN GENERAL.—The Board shall not,
by regulation, guideline, order or otherwise, pre-
scribe or impose any capital or capital adequacy
rules, guidelines, standards, or requirements on
any subsidiary of a financial holding company
that is not a depository institution and—
‘‘(i) is in compliance with applicable
capital requirements of another Federal
regulatory authority (including the Securi-
ties and Exchange Commission) or State
insurance authority;
‘‘(ii) is registered as an investment
adviser under the Investment Advisers Act
of 1940, or with any State, whichever is
required by law; or
‘‘(iii) is licensed as an insurance agent
with the appropriate State insurance au-
thority.
‘‘(B) RULE OF CONSTRUCTION.—Subpara-
graph (A) shall not be construed as preventing
the Board from imposing capital or capital ade-
quacy rules, guidelines, standards, or require-
ments with respect to—
‘‘(i) activities of a registered invest-
ment adviser other than investment advi-
sory activities or activities incidental to in-
vestment advisory activities; or
‘‘(ii) activities of a licensed insurance
agent other than insurance agency activi-
ties or activities incidental to insurance
agency activities.
‘‘(C) LIMITATIONS
ON
INDIRECT
AC-
TION.—In developing, establishing, or assessing
holding company capital or capital adequacy
rules, guidelines, standards, or requirements for
purposes of this paragraph, the Board shall not
take into account the activities, operations, or
investments of an affiliated investment company
registered under the Investment Company Act
of 1940, unless the investment company is—
‘‘(i) a bank holding company; or
‘‘(ii) controlled by a bank holding
company by reason of ownership by the
bank holding company (including through
all of its affiliates) of 25 percent or more
of the shares of the investment company,
and the shares owned by the bank holding
company have a market value equal to
more than $1,000,000.
‘‘(4) TRANSFER OF BOARD AUTHORITY TO AP-
PROPRIATE FEDERAL BANKING AGENCY.—
‘‘(A) IN
GENERAL.—In the case of any
bank holding company which is not significantly
engaged in nonbanking activities, the Board, in
consultation with the appropriate Federal bank-
ing agency, may designate the appropriate Fed-
eral banking agency of the lead insured deposi-
tory institution subsidiary of such holding com-
pany as the appropriate Federal banking agen-
cy for the bank holding company.
‘‘(B) 
AUTHORITY
TRANSFERRED.—An
agency designated by the Board under subpara-
graph (A) shall have the same authority as the
Board under this Act to—
‘‘(i) examine and require reports from
the bank holding company and any affiliate
of such company (other than a depository
institution) under section 5;
‘‘(ii) approve or disapprove applica-
tions or transactions under section 3;
‘‘(iii) take actions and impose pen-
alties under subsections (e) and (f) of sec-
tion 5 and section 8; and
‘‘(iv) take actions regarding the hold-
ing company, any affiliate of the holding
company (other than a depository institu-
tion), or any institution-affiliated party of
such company or affiliate under the Fed-
eral Deposit Insurance Act and any other
statute which the Board may designate.
‘‘(C) AGENCY ORDERS.—Section 9 of this
Act and section 105 of the Bank Holding Com-
pany Act Amendments of 1970 shall apply to
orders issued by an agency designated under
subparagraph (A) in the same manner such sec-
tions apply to orders issued by the Board.
‘‘(5) FUNCTIONAL REGULATION OF SECURITIES
AND INSURANCE ACTIVITIES.—The Board shall defer
to—
‘‘(A) the Securities and Exchange Commis-
sion with regard to all interpretations of, and
the enforcement of, applicable Federal securi-
ties laws (and rules, regulations, orders, and
other directives issued thereunder) relating to
the activities, conduct, and operations of reg-
istered brokers, dealers, investment advisers,
and investment companies;
‘‘(B) the relevant State securities authori-
ties with regard to all interpretations of, and
the enforcement of, applicable State securities
laws (and rules, regulations, orders, and other
directives issued thereunder) relating to the ac-
tivities, conduct, and operations of brokers,
dealers, and investment advisers required to be
registered under State law; and
‘‘(C) the relevant State insurance authori-
ties with regard to all interpretations of, and
the enforcement of, applicable State insurance
laws (and rules, regulations, orders, and other
directives issued thereunder) relating to the ac-
tivities, conduct, and operations of insurance
companies and insurance agents.’’.
SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT
FOR FINANCIAL HOLDING COMPANIES.
(a) PREVENTION OF DUPLICATIVE FILINGS.—Sec-
tion 5(a) of the Bank Holding Company Act of 1956 (12
U.S.C. 1844(a)) is amended by adding the following new
sentence at the end: ‘‘A declaration filed in accordance
with section 6(b)(1)(D) shall satisfy the requirements of
this subsection with regard to the registration of a bank
holding company but not any requirement to file an appli-
cation to acquire a bank pursuant to section 3.’’.
(b) DIVESTITURE PROCEDURES.—Section 5(e)(1) of
the Bank Holding Company Act of 1956 (12 U.S.C.
1844(e)(1)) is amended—
(1) by striking ‘‘Financial Institutions Super-
visory Act of 1966, order’’ and inserting ‘‘Financial
Institutions Supervisory Act of 1966, at the election
of the bank holding company—
‘‘(A) order’’; and
(2) by striking ‘‘shareholders of the bank hold-
ing company. Such distribution’’ and inserting
‘‘shareholders of the bank holding company; or
‘‘(B) order the bank holding company, after due
notice and opportunity for hearing, and after con-
sultation with the primary supervisor for the bank,
which shall be the Comptroller of the Currency in
the case of a national bank, and the Federal Deposit
Insurance Corporation and the appropriate State su-
pervisor in the case of an insured nonmember bank,
to terminate (within 120 days or such longer period
as the Board may direct) the ownership or control
of any such bank by such company.
The distribution referred to in subparagraph (A)’’.
SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR
AND SECURITIES AND EXCHANGE COMMIS-
SION.
(a) BANK HOLDING COMPANIES.—Section 5 of the
Bank Holding Company Act of 1956 (12 U.S.C. 1844)
is amended by adding at the end the following new sub-
section:
‘‘(g) AUTHORITY OF STATE INSURANCE REGULATOR
AND THE SECURITIES AND EXCHANGE COMMISSION.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law, any regulation, order, or other ac-
tion of the Board which requires a bank holding
company to provide funds or other assets to a sub-
sidiary insured depository institution shall not be ef-
fective nor enforceable with respect to an entity de-
scribed in subparagraph (A) if—
‘‘(A) such funds or assets are to be pro-
vided by—
‘‘(i) a bank holding company that is
an insurance company, a broker or dealer
registered under the Securities Exchange
Act of 1934, an investment company reg-
istered under the Investment Company Act
of 1940, or an investment adviser reg-
istered by or on behalf of either the Securi-
ties and Exchange Commission or any
State; or
‘‘(ii) an affiliate of the depository in-
stitution which is an insurance company or
a broker or dealer registered under the Se-
curities Exchange Act of 1934, an invest-
ment company registered under the Invest-
ment Company Act of 1940, or an invest-
ment adviser registered by or on behalf of
either the Securities and Exchange Com-
mission or any State; and
‘‘(B) the State insurance authority for the
insurance company or the Securities and Ex-
change Commission for the registered broker,
dealer, investment adviser (solely with respect
to investment advisory activities or activities in-
cidental thereto), or investment company, as
the case may be, determines in writing sent to
the holding company and the Board that the
holding company shall not provide such funds
or assets because such action would have a ma-
terial adverse effect on the financial condition
of the insurance company or the broker, dealer,
investment company, or investment adviser, as
the case may be.
‘‘(2) NOTICE TO STATE INSURANCE AUTHORITY
OR SEC REQUIRED.—If the Board requires a bank
holding company, or an affiliate of a bank holding
company, which is an insurance company or a
broker, dealer, investment company, or investment
adviser described in paragraph (1)(A) to provide
funds or assets to an insured depository institution
subsidiary of the holding company pursuant to any
regulation, order, or other action of the Board re-
ferred to in paragraph (1), the Board shall promptly
notify the State insurance authority for the insur-
ance company, the Securities and Exchange Com-
mission, or State securities regulator, as the case
may be, of such requirement.
‘‘(3) DIVESTITURE
IN
LIEU
OF
OTHER
AC-
TION.—If the Board receives a notice described in
paragraph (1)(B) from a State insurance authority
or the Securities and Exchange Commission with re-
gard to a bank holding company or affiliate referred
to in that paragraph, the Board may order the bank
holding company to divest the insured depository in-
stitution not later than 180 days after receiving the
notice, or such longer period as the Board deter-
mines consistent with the safe and sound operation
of the insured depository institution.
‘‘(4) CONDITIONS BEFORE DIVESTITURE.—Dur-
ing the period beginning on the date an order to di-
vest is issued by the Board under paragraph (3) to
a bank holding company and ending on the date the
divestiture is completed, the Board may impose any
conditions or restrictions on the holding company’s
ownership or operation of the insured depository in-
stitution, including restricting or prohibiting trans-
actions between the insured depository institution
and any affiliate of the institution, as are appro-
priate under the circumstances.’’.
(b) SUBSIDIARIES OF DEPOSITORY INSTITUTIONS.—
The Federal Deposit Insurance Act (12 U.S.C. 1811 et
seq.) is amended by adding at the end the following new
section:
‘‘SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR
AND SECURITIES AND EXCHANGE COMMIS-
SION.
‘‘(a) IN GENERAL.—Notwithstanding any other pro-
vision of law, any regulation, order, or other action of the
appropriate Federal banking agency which requires a sub-
sidiary to provide funds or other assets to an insured de-
pository institution shall not be effective nor enforceable
with respect to an entity described in paragraph (1) if—
‘‘(1) such funds or assets are to be provided by
a subsidiary which is an insurance company, a
broker or dealer registered under the Securities Ex-
change Act of 1934, an investment company reg-
istered under the Investment Company Act of 1940,
or an investment adviser registered by or on behalf
of either the Securities and Exchange Commission
or any State; and
‘‘(2) the State insurance authority for the in-
surance company or the Securities and Exchange
Commission for the registered broker or dealer, the
investment company, or the investment adviser, as
the case may be, determines in writing sent to the
insured depository institution and the appropriate
Federal banking agency that the subsidiary shall not
provide such funds or assets because such action
would have a material adverse effect on the financial
condition of the insurance company or the broker,
dealer, investment company, or investment adviser,
as the case may be.
‘‘(b) NOTICE TO STATE INSURANCE AUTHORITY OR
SEC REQUIRED.—If the appropriate Federal banking
agency requires a subsidiary, which is an insurance com-
pany, a broker or dealer, an investment company, or an
investment adviser (solely with respect to investment advi-
sory activities or activities incidental thereto) described in
subsection (a)(1) to provide funds or assets to an insured
depository institution pursuant to any regulation, order,
or other action of the appropriate Federal banking agency
referred to in subsection (a), the appropriate Federal
banking agency shall promptly notify the State insurance
authority for the insurance company, the Securities and
Exchange Commission, or State securities regulator, as
the case may be, of such requirement.
‘‘(c) DIVESTITURE IN LIEU OF OTHER ACTION.—If
the appropriate Federal banking agency receives a notice
described in subsection (a)(2) from a State insurance au-
thority or the Securities and Exchange Commission with
regard to a subsidiary referred to in that subsection, the
appropriate Federal banking agency may order the in-
sured depository institution to divest the subsidiary not
later than 180 days after receiving the notice, or such
longer period as the appropriate Federal banking agency
determines consistent with the safe and sound operation
of the insured depository institution.
‘‘(d) CONDITIONS BEFORE DIVESTITURE.—During
the period beginning on the date an order to divest is
issued by the appropriate Federal banking agency under
subsection (c) to an insured depository institution and
ending on the date the divestiture is complete, the appro-
priate Federal banking agency may impose any conditions
or restrictions on the insured depository institution’s own-
ership of the subsidiary including restricting or prohibiting
transactions between the insured depository institution
and the subsidiary, as are appropriate under the cir-
cumstances.’’.
SEC. 114. PRUDENTIAL SAFEGUARDS.
(a) COMPTROLLER OF THE CURRENCY.—
(1) IN GENERAL.—The Comptroller of the Cur-
rency may, by regulation or order, impose restric-
tions or requirements on relationships or trans-
actions between a national bank and a subsidiary of
the national bank which the Comptroller finds are
consistent with the public interest, the purposes of
this Act, title LXII of the Revised Statutes of the
United States, and other Federal law applicable to
national banks, and the standards in paragraph (2).
(2) STANDARDS.—The Comptroller of the Cur-
rency may exercise authority under paragraph (1) if
the Comptroller finds that such action will have any
of the following effects:
(A) Avoid any significant risk to the safety
and soundness of depository institutions or any
Federal deposit insurance fund.
(B) Enhance the financial stability of
banks.
(C) Avoid conflicts of interest or other
abuses.
(D) Enhance the privacy of customers of
the national bank or any subsidiary of the
bank.
(E) Promote the application of national
treatment and equality of competitive oppor-
tunity between subsidiaries owned or controlled
by domestic banks and subsidiaries owned or
controlled by foreign banks operating in the
United States.
(3) REVIEW.—The Comptroller of the Currency
shall regularly—
(A) review all restrictions or requirements
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any
such restriction or requirement to carry out the
purposes of the Act, including any purpose de-
scribed in paragraph (2); and
(B) modify or eliminate any restriction or
requirement the Comptroller finds is no longer
required for such purposes.
(b) BOARD OF GOVERNORS OF THE FEDERAL RE-
SERVE SYSTEM.—
(1) IN GENERAL.—The Board of Governors of
the Federal Reserve System may, by regulation or
order, impose restrictions or requirements on rela-
tionships or transactions—
(A) between a depository institution sub-
sidiary of a bank holding company and any af-
filiate of such depository institution (other than
a subsidiary of such institution); or
(B) between a State member bank and a
subsidiary of such bank,
which the Board finds are consistent with the public
interest, the purposes of this Act, the Bank Holding
Company Act of 1956, the Federal Reserve Act, and
other Federal law applicable to depository institution
subsidiaries of bank holding companies or State
banks (as the case may be), and the standards in
paragraph (2).
(2) STANDARDS.—The Board of Governors of
the Federal Reserve System may exercise authority
under paragraph (1) if the Board finds that such ac-
tion will have any of the following effects:
(A) Avoid any significant risk to the safety
and soundness of depository institutions or any
Federal deposit insurance fund.
(B) Enhance the financial stability of bank
holding companies.
(C) Avoid conflicts of interest or other
abuses.
(D) Enhance the privacy of customers of
the State member bank or any subsidiary of the
bank.
(E) Promote the application of national
treatment and equality of competitive oppor-
tunity between nonbank affiliates owned or con-
trolled by domestic bank holding companies and
nonbank affiliates owned or controlled by for-
eign banks operating in the United States.
(3) REVIEW.—The Board of Governors of the
Federal Reserve System shall regularly—
(A) review all restrictions or requirements
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any
such restriction or requirement to carry out the
purposes of the Act, including any purpose de-
scribed in paragraph (2); and
(B) modify or eliminate any restriction or
requirement the Board finds is no longer re-
quired for such purposes.
(4) FOREIGN BANKS.—
(A) IN
GENERAL.—The Board may, by
regulation or order, impose restrictions or re-
quirements on relationships or transactions be-
tween a branch, agency, or commercial lending
company of a foreign bank in the United States
and any affiliate in the United States of such
foreign bank that the Board finds are con-
sistent with the public interest, the purposes of
this Act, the Bank Holding Company Act of
1956, the Federal Reserve Act, and other Fed-
eral law applicable to foreign banks and their
affiliates in the United States, and the stand-
ards in paragraphs (2) and (3).
(B) EVASION.—In the event that the
Board determines that there may be cir-
cumstances that would result in an evasion of
this paragraph, the Board may also impose re-
strictions or requirements on relationships or
transactions between a foreign bank outside the
United States and any affiliate in the United
States of such foreign bank that are consistent
with national treatment and equality of com-
petitive opportunity.
(c) FEDERAL DEPOSIT INSURANCE CORPORATION.—
(1) IN GENERAL.—The Federal Deposit Insur-
ance Corporation may, by regulation or order, im-
pose restrictions or requirements on relationships or
transactions between a State nonmember bank (as
defined in section 3 of the Federal Deposit Insur-
ance Act) and a subsidiary of the State nonmember
bank which the Corporation finds are consistent with
the public interest, the purposes of this Act, the
Federal Deposit Insurance Act, or other Federal law
applicable to State nonmember banks and the stand-
ards in paragraph (2).
(2) STANDARDS.—The Federal Deposit Insur-
ance Corporation may exercise authority under para-
graph (1) if the Corporation finds that such action
will have any of the following effects:
(A) Avoid any significant risk to the safety
and soundness of depository institutions or any
Federal deposit insurance fund.
(B) Enhance the financial stability of
banks.
(C) Avoid conflicts of interest or other
abuses.
(D) Enhance the privacy of customers of
the State nonmember bank or any subsidiary of
the bank.
(E) Promote the application of national
treatment and equality of competitive oppor-
tunity between subsidiaries owned or controlled
by domestic banks and subsidiaries owned or
controlled by foreign banks operating in the
United States.
(3) REVIEW.—The Federal Deposit Insurance
Corporation shall regularly—
(A) review all restrictions or requirements
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any
such restriction or requirement to carry out the
purposes of the Act, including any purpose de-
scribed in paragraph (2); and
100
(B) modify or eliminate any restriction or
requirement the Corporation finds is no longer
required for such purposes.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) EXCLUSIVE COMMISSION AUTHORITY.—
(1) IN GENERAL.—Except as provided in para-
graph (3), the Commission shall be the sole Federal
agency with authority to inspect and examine any
registered investment company that is not a bank
holding company or a savings and loan holding com-
pany.
(2) PROHIBITION ON BANKING AGENCIES.—Ex-
cept as provided in paragraph (3), a Federal bank-
ing agency may not inspect or examine any reg-
istered investment company that is not a bank hold-
ing company or a savings and loan holding company.
(3) CERTAIN
EXAMINATIONS
AUTHORIZED.—
Nothing in this subsection prevents the Federal De-
posit Insurance Corporation, if the Corporation finds
it necessary to determine the condition of an insured
depository institution for insurance purposes, from
examining an affiliate of any insured depository in-
stitution, pursuant to its authority under section
10(b)(4) of the Federal Deposit Insurance Act, as
may be necessary to disclose fully the relationship
101
between the depository institution and the affiliate,
and the effect of such relationship on the depository
institution.
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—The Commission shall provide to any Federal
banking agency, upon request, the results of any examina-
tion, reports, records, or other information with respect
to any registered investment company to the extent nec-
essary for the agency to carry out its statutory responsibil-
ities.
(c) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) BANK
HOLDING
COMPANY.—The term
‘‘bank holding company’’ has the same meaning as
in section 2 of the Bank Holding Company Act of
1956.
(2) COMMISSION.—The term ‘‘Commission’’
means the Securities and Exchange Commission.
(3) FEDERAL
BANKING
AGENCY.—The term
‘‘Federal banking agency’’ has the same meaning as
in section 3(z) of the Federal Deposit Insurance Act.
(4) REGISTERED INVESTMENT COMPANY.—The
term ‘‘registered investment company’’ means an in-
vestment company which is registered with the Com-
mission under the Investment Company Act of 1940.
102
(5) SAVINGS AND LOAN HOLDING COMPANY.—
The term ‘‘savings and loan holding company’’ has
the same meaning as in section 10(a)(1)(D) of the
Home Owners’ Loan Act.
SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
The Bank Holding Company Act of 1956 (12 U.S.C.
1841 et seq.) is amended by inserting after section 10 the
following new section:
‘‘SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
‘‘(a) LIMITATION ON DIRECT ACTION.—
‘‘(1) IN GENERAL.—The Board may not pre-
scribe regulations, issue or seek entry of orders, im-
pose restraints, restrictions, guidelines, require-
ments, safeguards, or standards, or otherwise take
any action under or pursuant to any provision of
this Act or section 8 of the Federal Deposit Insur-
ance Act against or with respect to a regulated sub-
sidiary of a bank holding company unless the action
is necessary to prevent or redress an unsafe or un-
sound practice or breach of fiduciary duty by such
subsidiary that poses a material risk to—
103
‘‘(A) the financial safety, soundness, or
stability of an affiliated depository institution;
or
‘‘(B) the domestic or international pay-
ment system.
‘‘(2) CRITERIA
FOR
BOARD
ACTION.—The
Board shall not take action otherwise permitted
under paragraph (1) unless the Board finds that it
is not reasonably possible to effectively protect
against the material risk at issue through action di-
rected at or against the affiliated depository institu-
tion or against depository institutions generally.
‘‘(b) LIMITATION ON INDIRECT ACTION.—The Board
may not prescribe regulations, issue or seek entry of or-
ders, impose restraints, restrictions, guidelines, require-
ments, safeguards, or standards, or otherwise take any ac-
tion under or pursuant to any provision of this Act or sec-
tion 8 of the Federal Deposit Insurance Act against or
with respect to a financial holding company or a wholesale
financial holding company where the purpose or effect of
doing so would be to take action indirectly against or with
respect to a regulated subsidiary that may not be taken
directly against or with respect to such subsidiary in ac-
cordance with subsection (a).
104
‘‘(c) ACTIONS SPECIFICALLY AUTHORIZED.—Not-
withstanding subsection (a), the Board may take action
under this Act or section 8 of the Federal Deposit Insur-
ance Act to enforce compliance by a regulated subsidiary
with Federal law that the Board has specific jurisdiction
to enforce against such subsidiary.
‘‘(d) REGULATED SUBSIDIARY DEFINED.—For pur-
poses of this section, the term ‘regulated subsidiary’
means any company that is not a bank holding company
and is—
‘‘(1) a broker or dealer registered under the Se-
curities Exchange Act of 1934;
‘‘(2) an investment adviser registered by or on
behalf of either the Securities and Exchange Com-
mission or any State, whichever is required by law,
with respect to the investment advisory activities of
such investment adviser and activities incidental to
such investment advisory activities;
‘‘(3) an investment company registered under
the Investment Company Act of 1940;
‘‘(4) an insurance company or an insurance
agency, with respect to the insurance activities and
activities incidental to such insurance activities, sub-
ject to supervision by a State insurance commission,
agency, or similar authority; or
105
‘‘(5) an entity subject to regulation by the Com-
modity Futures Trading Commission, with respect
to the commodities activities of such entity and ac-
tivities incidental to such commodities activities.’’.
SEC. 117. EQUIVALENT REGULATION AND SUPERVISION.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, the provisions of—
(1) section 5(c) of the Bank Holding Company
Act of 1956 (as amended by this Act) that limit the
authority of the Board of Governors of the Federal
Reserve System to require reports from, to make ex-
aminations of, or to impose capital requirements on
bank holding companies and their nonbank subsidi-
aries or that require deference to other regulators;
and
(2) section 10A of the Bank Holding Company
Act of 1956 (as added by this Act) that limit what-
ever authority the Board might otherwise have to
take direct or indirect action with respect to bank
holding companies and their nonbank subsidiaries,
shall also limit whatever authority that a Federal banking
agency (as defined in section 3(z) of the Federal Deposit
Insurance Act) might otherwise have under any statute
to require reports, make examinations, impose capital re-
quirements or take any other direct or indirect action with
106
respect to bank holding companies and their nonbank sub-
sidiaries (including nonbank subsidiaries of depository in-
stitutions), subject to the same standards and require-
ments as are applicable to the Board under such provi-
sions.
(b) CERTAIN EXAMINATIONS AUTHORIZED.—No pro-
vision of this section shall be construed as preventing the
Federal Deposit Insurance Corporation, if the Corporation
finds it necessary to determine the condition of an insured
depository institution for insurance purposes, from exam-
ining an affiliate of any insured depository institution,
pursuant to its authority under section 10(b)(4) of the
Federal Deposit Insurance Act, as may be necessary to
disclose fully the relationship between the depository insti-
tution and the affiliate, and the effect of such relationship
on the depository institution.
SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILI-
ATES AND SUBSIDIARIES.
Section 11(a)(4)(B) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(a)(4)(B)) is amended by striking ‘‘to
benefit any shareholder of’’ and inserting ‘‘to benefit any
shareholder, affiliate (other than an insured depository in-
stitution that receives assistance in accordance with the
provisions of this Act), or subsidiary of’’.
107
SEC. 119. REPEAL OF SAVINGS BANK PROVISIONS IN THE
BANK HOLDING COMPANY ACT OF 1956.
Section 3(f) of the Bank Holding Company Act of
1956 (12 U.S.C. 1842(f)) is amended to read as follows:
‘‘(f) [Repealed].’’.
SEC. 120. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841(o)(1)(A)) is amended by
striking ‘‘section 38(b)’’ and inserting ‘‘section 38’’.
Subtitle C—Subsidiaries of
National Banks
SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF
NATIONAL BANKS.
(a) 
FINANCIAL
SUBSIDIARIES
OF
NATIONAL
BANKS.—Chapter 1 of title LXII of the Revised Statutes
of United States (12 U.S.C. 21 et seq.) is amended—
(1) by redesignating section 5136A as section
5136C; and
(2) by inserting after section 5136 (12 U.S.C.
24) the following new section:
‘‘SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.
‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AUTHOR-
IZED TO ENGAGE IN FINANCIAL ACTIVITIES.—
‘‘(1) EXCLUSIVE AUTHORITY.—No provision of
section 5136 or any other provision of this title
LXII of the Revised Statutes of the United States
108
shall be construed as authorizing a subsidiary of a
national bank to engage in, or own any share of or
any other interest in any company engaged in, any
activity that—
‘‘(A) is not permissible for a national bank
to engage in directly; or
‘‘(B) is conducted under terms or condi-
tions other than those that would govern the
conduct of such activity by a national bank,
unless a national bank is specifically authorized by
the express terms of a Federal statute and not by
implication or interpretation to acquire shares of or
an interest in, or to control, such subsidiary, such as
by paragraph (2) of this subsection and section 25A
of the Federal Reserve Act.
‘‘(2) SPECIFIC
AUTHORIZATION
TO
CONDUCT
ACTIVITIES WHICH ARE FINANCIAL IN NATURE.—
Subject to paragraphs (3) and (4), a national bank
may control a financial subsidiary, or hold an inter-
est in a financial subsidiary, that is controlled by in-
sured depository institutions or subsidiaries thereof.
‘‘(3) ELIGIBILITY REQUIREMENTS.—A national
bank may control or hold an interest in a company
pursuant to paragraph (2) only if—
109
‘‘(A) the national bank and all depository
institution affiliates of the national bank are
well capitalized;
‘‘(B) the national bank and all depository
institution affiliates of the national bank are
well managed;
‘‘(C) the national bank and all depository
institution affiliates of such national bank have
achieved a rating of ‘satisfactory record of
meeting community credit needs’, or better, at
the most recent examination of each such bank
or institution; and
‘‘(D) the bank has received the approval of
the Comptroller of the Currency.
‘‘(4) ACTIVITY
LIMITATIONS.—In addition to
any other limitation imposed on the activity of sub-
sidiaries of national banks, a subsidiary of a na-
tional bank may not, pursuant to paragraph (2)—
‘‘(A) engage as principal in insuring, guar-
anteeing, or indemnifying against loss, harm,
damage, illness, disability, or death (other than
in connection with credit-related insurance) or
in providing or issuing annuities;
‘‘(B) engage in real estate investment or
development activities; or
110
‘‘(C) engage in any activity permissible for
a financial holding company under paragraph
(3)(I) of section 6(c) of the Bank Holding Com-
pany Act of 1956 (relating to insurance com-
pany investments).
‘‘(5) SIZE
FACTOR
WITH
REGARD
TO
FREE-
STANDING
NATIONAL
BANKS.—Notwithstanding
paragraph (2), a national bank which has total as-
sets of $10,000,000,000 or more may not control a
subsidiary engaged in financial activities pursuant to
such paragraph unless such national bank is a sub-
sidiary of a bank holding company.
‘‘(6) LIMITED EXCLUSIONS FROM COMMUNITY
NEEDS REQUIREMENTS FOR NEWLY AFFILIATED DE-
POSITORY
INSTITUTIONS.—Any depository institu-
tion which becomes an affiliate of a national bank
during the 12-month period preceding the date of an
approval by the Comptroller of the Currency under
paragraph (3)(D) for such bank, and any depository
institution which becomes an affiliate of the national
bank after such date, may be excluded for purposes
of paragraph (3)(C) during the 12-month period be-
ginning on the date of such affiliation if—
‘‘(A) the national bank or such depository
institution has submitted an affirmative plan to
111
the appropriate Federal banking agency to take
such action as may be necessary in order for
such institution to achieve a rating of ‘satisfac-
tory record of meeting community credit needs’,
or better, at the next examination of the insti-
tution; and
‘‘(B) the plan has been accepted by such
agency.
‘‘(7) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply:
‘‘(A) COMPANY; 
CONTROL; 
AFFILIATE;
SUBSIDIARY.—The terms ‘company’, ‘control’,
‘affiliate’, and ‘subsidiary’ have the same mean-
ings as in section 2 of the Bank Holding Com-
pany Act of 1956.
‘‘(B) FINANCIAL SUBSIDIARY.—The term
‘financial subsidiary’ means a company which is
a subsidiary of an insured bank and is engaged
in financial activities that have been determined
to be financial in nature or incidental to such
financial activities in accordance with sub-
section (b) or permitted in accordance with sub-
section (b)(4), other than activities that are
permissible for a national bank to engage in di-
rectly or that are authorized under the Bank
112
Service Company Act, section 25 or 25A of the
Federal Reserve Act, or any other Federal stat-
ute (other than this section) that specifically
authorizes the conduct of such activities by its
express terms and not by implication or inter-
pretation.
‘‘(C) WELL CAPITALIZED.—The term ‘well
capitalized’ has the same meaning as in section
38 of the Federal Deposit Insurance Act and,
for purposes of this section, the Comptroller
shall have exclusive jurisdiction to determine
whether a national bank is well capitalized.
‘‘(D) WELL
MANAGED.—The term ‘well
managed’ means—
‘‘(i) in the case of a depository insti-
tution that has been examined, unless oth-
erwise determined in writing by the appro-
priate Federal banking agency—
‘‘(I) the achievement of a com-
posite rating of 1 or 2 under the Uni-
form Financial Institutions Rating
System (or an equivalent rating under
an equivalent rating system) in con-
nection with the most recent examina-
113
tion or subsequent review of the de-
pository institution; and
‘‘(II) at least a rating of 2 for
management, if that rating is given;
or
‘‘(ii) in the case of any depository in-
stitution that has not been examined, the
existence and use of managerial resources
that the appropriate Federal banking agen-
cy determines are satisfactory.
‘‘(E) INCORPORATED
DEFINITIONS.—The
terms ‘appropriate Federal banking agency’ and
‘depository institution’ have the same meanings
as in section 3 of the Federal Deposit Insur-
ance Act.
‘‘(b) ACTIVITIES THAT ARE FINANCIAL
IN NA-
TURE.—
‘‘(1) FINANCIAL ACTIVITIES.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a)(7)(B), an activity shall be consid-
ered to have been determined to be financial in
nature or incidental to such financial activities
only if—
‘‘(i) such activity is permitted for a fi-
nancial holding company pursuant to sec-
114
tion 6(c)(3) of the Bank Holding Company
Act of 1956 (to the extent such activity is
not otherwise prohibited under this section
or any other provision of law for a sub-
sidiary of a national bank engaged in ac-
tivities pursuant to subsection (a)(2)); or
‘‘(ii) the Secretary of the Treasury de-
termines the activity to be financial in na-
ture or incidental to such financial activi-
ties in accordance with subparagraph (B)
or paragraph (3).
‘‘(B) 
COORDINATION
BETWEEN
THE
BOARD AND THE SECRETARY OF THE TREAS-
URY.—
‘‘(i) PROPOSALS RAISED BEFORE THE
SECRETARY OF THE TREASURY.—
‘‘(I) CONSULTATION.—The Sec-
retary of the Treasury shall notify the
Board of, and consult with the Board
concerning, any request, proposal, or
application under this subsection, in-
cluding any regulation or order pro-
posed under paragraph (3), for a de-
termination of whether an activity is
115
financial in nature or incidental to
such a financial activity.
‘‘(II) BOARD
VIEW.—The Sec-
retary of the Treasury shall not deter-
mine that any activity is financial in
nature or incidental to a financial ac-
tivity under this subsection if the
Board notifies the Secretary in writ-
ing, not later than 30 days after the
date of receipt of the notice described
in subclause (I) (or such longer period
as the Secretary determines to be ap-
propriate 
in 
light 
of 
the 
cir-
cumstances) that the Board believes
that the activity is not financial in na-
ture or incidental to a financial activ-
ity.
‘‘(ii) PROPOSALS
RAISED
BY
THE
BOARD.—
‘‘(I) 
BOARD
RECOMMENDA-
TION.—The Board may, at any time,
recommend in writing that the Sec-
retary of the Treasury find an activity
to be financial in nature or incidental
to a financial activity (other than an
116
activity which the Board has sole au-
thority to regulate under subpara-
graph (C)).
‘‘(II) TIME PERIOD FOR SECRE-
TARIAL ACTION.—Not later than 30
days after the date of receipt of a
written recommendation from the
Board under subclause (I) (or such
longer period as the Secretary of the
Treasury and the Board determine to
be appropriate in light of the cir-
cumstances), the Secretary shall de-
termine whether to initiate a public
rulemaking proposing that the subject
recommended activity be found to be
financial in nature or incidental to a
financial activity under this sub-
section, and shall notify the Board in
writing of the determination of the
Secretary and, in the event that the
Secretary determines not to seek pub-
lic comment on the proposal, the rea-
sons for that determination.
‘‘(C) AUTHORITY OVER MERCHANT BANK-
ING.—The Board shall have sole authority to
117
prescribe regulations and issue interpretations
to implement this paragraph with respect to ac-
tivities described in section 6(c)(3)(H) of the
Bank Holding Company Act of 1956.
‘‘(2) FACTORS TO BE CONSIDERED.—In deter-
mining whether an activity is financial in nature or
incidental to financial activities, the Secretary shall
take into account—
‘‘(A) the purposes of this Act and the Fi-
nancial Services Act of 1999;
‘‘(B) changes or reasonably expected
changes in the marketplace in which banks
compete;
‘‘(C) changes or reasonably expected
changes in the technology for delivering finan-
cial services; and
‘‘(D) whether such activity is necessary or
appropriate to allow a bank and the subsidiaries
of a bank to—
‘‘(i) compete effectively with any com-
pany seeking to provide financial services
in the United States;
‘‘(ii) use any available or emerging
technological means, including any applica-
tion necessary to protect the security or ef-
118
ficacy of systems for the transmission of
data or financial transactions, in providing
financial services; and
‘‘(iii) offer customers any available or
emerging technological means for using fi-
nancial services.
‘‘(3) AUTHORIZATION OF NEW FINANCIAL AC-
TIVITIES.—The Secretary of the Treasury shall, by
regulation or order and in accordance with para-
graph (1)(B), define, consistent with the purposes of
this Act, the following activities as, and the extent
to which such activities are, financial in nature or
incidental to activities which are financial in nature:
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding financial as-
sets other than money or securities.
‘‘(B) Providing any device or other instru-
mentality for transferring money or other finan-
cial assets.
‘‘(C) Arranging, effecting, or facilitating fi-
nancial transactions for the account of third
parties.
‘‘(4) DEVELOPING ACTIVITIES.—Subject to sub-
section (a)(2), a financial subsidiary of a national
bank may engage directly or indirectly, or acquire
119
shares of any company engaged, in any activity that
the Secretary has not determined to be financial in
nature or incidental to financial activities under this
subsection if—
‘‘(A) the subsidiary reasonably concludes
that the activity is financial in nature or inci-
dental to financial activities;
‘‘(B) the gross revenues from all activities
conducted under this paragraph represent less
than 5 percent of the consolidated gross reve-
nues of the national bank;
‘‘(C) the aggregate total assets of all com-
panies the shares of which are held under this
paragraph do not exceed 5 percent of the na-
tional bank’s consolidated total assets;
‘‘(D) the total capital invested in activities
conducted under this paragraph represents less
than 5 percent of the consolidated total capital
of the national bank;
‘‘(E) neither the Secretary of the Treasury
nor the Board has determined that the activity
is not financial in nature or incidental to finan-
cial activities under this subsection; and
‘‘(F) the national bank provides written
notice to the Secretary of the Treasury describ-
120
ing the activity commenced by the subsidiary or
conducted by the company acquired no later
than 10 business days after commencing the ac-
tivity or consummating the acquisition.
‘‘(c) PROVISIONS APPLICABLE TO NATIONAL BANKS
THAT FAIL TO MEET REQUIREMENTS.—
‘‘(1) IN GENERAL.—If a national bank or de-
pository institution affiliate is not in compliance
with the requirements of subparagraph (A), (B), or
(C) of subsection (a)(3), the appropriate Federal
banking agency shall notify the Comptroller of the
Currency, who shall give notice of such finding to
the national bank.
‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE-
QUIRED.—Not later than 45 days after receipt by a
national bank of a notice given under paragraph (1)
(or such additional period as the Comptroller of the
Currency may permit), the national bank and any
relevant affiliated depository institution shall execute
an agreement acceptable to the Comptroller of the
Currency and the other appropriate Federal banking
agencies, if any, to comply with the requirements ap-
plicable under subsection (a)(3).
‘‘(3) COMPTROLLER
OF
THE
CURRENCY
MAY
IMPOSE
LIMITATIONS.—Until the conditions de-
121
scribed in a notice to a national bank under para-
graph (1) are corrected—
‘‘(A) the Comptroller of the Currency may
impose such limitations on the conduct or ac-
tivities of the national bank or any subsidiary
of the bank as the Comptroller of the Currency
determines to be appropriate under the cir-
cumstances; and
‘‘(B) the appropriate Federal banking
agency may impose such limitations on the con-
duct or activities of an affiliated depository in-
stitution or any subsidiary of the depository in-
stitution as such agency determines to be ap-
propriate under the circumstances.
‘‘(4) FAILURE TO CORRECT.—If, after receiving
a notice under paragraph (1), a national bank and
other affiliated depository institutions do not—
‘‘(A) execute and implement an agreement
in accordance with paragraph (2);
‘‘(B) comply with any limitations imposed
under paragraph (3);
‘‘(C) in the case of a notice of failure to
comply with subsection (a)(3)(A), restore the
national bank or any depository institution af-
filiate of the bank to well capitalized status be-
122
fore the end of the 180-day period beginning on
the date such notice is received by the national
bank (or such other period permitted by the
Comptroller of the Currency); or
‘‘(D) in the case of a notice of failure to
comply with subparagraph (B) or (C) of sub-
section (a)(3), restore compliance with any such
subparagraph on or before the date on which
the next examination of the depository institu-
tion subsidiary is completed or by the end of
such other period as the Comptroller of the
Currency determines to be appropriate,
the Comptroller of the Currency may require such
national bank, under such terms and conditions as
may be imposed by the Comptroller of the Currency
and subject to such extension of time as may be
granted in the Comptroller of the Currency’s discre-
tion, to divest control of any subsidiary engaged in
activities pursuant to subsection (a)(2) or, at the
election of the national bank, instead to cease to en-
gage in any activity conducted by a subsidiary of the
national bank pursuant to subsection (a)(2).
‘‘(5) CONSULTATION.—In taking any action
under this subsection, the Comptroller of the Cur-
123
rency shall consult with all relevant Federal and
State regulatory agencies.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 1 of title LXII of the Revised Statutes of the
United States is amended—
(1) by redesignating the item relating to section
5136A as section 5136C; and
(2) by inserting after the item relating to sec-
tion 5136 the following new item:
‘‘5136A. Subsidiaries of national banks.’’.
SEC. 122. SAFETY AND SOUNDNESS FIREWALLS BETWEEN
BANKS AND THEIR FINANCIAL SUBSIDIARIES.
(a) PURPOSES.—The purposes of this section are—
(1) to protect the safety and soundness of any
insured bank that has a financial subsidiary;
(2) to apply to any transaction between the
bank and the financial subsidiary (including a loan,
extension of credit, guarantee, or purchase of as-
sets), other than an equity investment, the same re-
strictions and requirements as would apply if the fi-
nancial subsidiary were a subsidiary of a bank hold-
ing company having control of the bank; and
(3) to apply to any equity investment of the
bank in the financial subsidiary restrictions and re-
quirements equivalent to those that would apply if—
124
(A) the bank paid a dividend in the same
dollar amount to a bank holding company hav-
ing control of the bank; and
(B) the bank holding company used the
proceeds of the dividend to make an equity in-
vestment in a subsidiary that was engaged in
the same activities as the financial subsidiary of
the bank.
(b) SAFETY AND SOUNDNESS FIREWALLS APPLICA-
BLE TO SUBSIDIARIES OF BANKS.—The Federal Deposit
Insurance Act (12 U.S.C. 1811 et seq.) is amended by
inserting after section 45 (as added by section 113(b) of
this title) the following new section:
‘‘SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICA-
BLE TO SUBSIDIARIES OF BANKS.
‘‘(a) LIMITING THE EQUITY INVESTMENT OF A BANK
IN A SUBSIDIARY.—
‘‘(1) CAPITAL
DEDUCTION.—In determining
whether an insured bank complies with applicable
regulatory capital standards—
‘‘(A) the appropriate Federal banking
agency shall deduct from the assets and tan-
gible equity of the bank the aggregate amount
of the outstanding equity investments of the
bank in financial subsidiaries of the bank; and
125
‘‘(B) the assets and liabilities of such fi-
nancial subsidiaries shall not be consolidated
with those of the bank.
‘‘(2) INVESTMENT
LIMITATION.—An insured
bank shall not, without the prior approval of the ap-
propriate Federal banking agency, make any equity
investment in a financial subsidiary of the bank if
that investment would, when made, exceed the
amount that the bank could pay as a dividend with-
out obtaining prior regulatory approval.
‘‘(3) TREATMENT OF RETAINED EARNINGS.—
The amount of any net earnings retained by a finan-
cial subsidiary of an insured depository institution
shall be treated as an outstanding equity investment
of the bank in the subsidiary for purposes of para-
graph (1).
‘‘(b) OPERATIONAL
AND FINANCIAL SAFEGUARDS
FOR THE BANK.—An insured bank that has a financial
subsidiary shall maintain procedures for identifying and
managing any financial and operational risks posed by the
financial subsidiary.
‘‘(c) MAINTENANCE
OF
SEPARATE
CORPORATE
IDENTITY AND SEPARATE LEGAL STATUS.—
‘‘(1) IN
GENERAL.—Each insured bank shall
ensure that the bank maintains and complies with
126
reasonable policies and procedures to preserve the
separate corporate identity and legal status of the
bank and any financial subsidiary or affiliate of the
bank.
‘‘(2) EXAMINATIONS.—The appropriate Federal
banking agency, as part of each examination, shall
review whether an insured bank is observing the sep-
arate corporate identity and separate legal status of
any subsidiaries and affiliates of the bank.
‘‘(d) FINANCIAL SUBSIDIARY DEFINED.—For pur-
poses of this section, the term ‘financial subsidiary’ has
the meaning given to such term in section 5136A(a)(7)(B)
of the Revised Statutes of the United States.
‘‘(e) REGULATIONS.—The appropriate Federal bank-
ing agencies shall jointly prescribe regulations imple-
menting this section.’’.
(c) TRANSACTIONS BETWEEN FINANCIAL SUBSIDI-
ARIES AND OTHER AFFILIATES.—Section 23A of the Fed-
eral Reserve Act (12 U.S.C. 371c) is amended—
(1) by redesignating subsection (e) as sub-
section (f); and
(2) by inserting after subsection (d), the fol-
lowing new subsection:
‘‘(e) RULES RELATING TO BANKS WITH FINANCIAL
SUBSIDIARIES.—
127
‘‘(1) FINANCIAL
SUBSIDIARY
DEFINED.—For
purposes of this section and section 23B, the term
‘financial subsidiary’ means a company which is a
subsidiary of a bank and is engaged in activities that
are financial in nature or incidental to such financial
activities pursuant to subsection (a)(2) or (b)(4) of
section 5136A of the Revised Statutes of the United
States.
‘‘(2) APPLICATION TO TRANSACTIONS BETWEEN
A
FINANCIAL
SUBSIDIARY
OF
A
BANK
AND
THE
BANK.—For purposes of applying this section and
section 23B to a transaction between a financial
subsidiary of a bank and the bank (or between such
financial subsidiary and any other subsidiary of the
bank which is not a financial subsidiary) and not-
withstanding 
subsection 
(b)(2) 
and 
section
23B(d)(1), the financial subsidiary of the bank—
‘‘(A) shall be an affiliate of the bank and
any other subsidiary of the bank which is not
a financial subsidiary; and
‘‘(B) shall not be treated as a subsidiary of
the bank.
‘‘(3) APPLICATION TO TRANSACTIONS BETWEEN
FINANCIAL
SUBSIDIARY
AND
NONBANK
AFFILI-
ATES.—
128
‘‘(A) IN GENERAL.—A transaction between
a financial subsidiary and an affiliate of the fi-
nancial subsidiary shall not be deemed to be a
transaction between a subsidiary of a national
bank and an affiliate of the bank for purposes
of section 23A or section 23B of the Federal
Reserve Act.
‘‘(B) CERTAIN AFFILIATES EXCLUDED.—
For purposes of subparagraph (A) and notwith-
standing paragraph (4), the term ‘affiliate’
shall not include a bank, or a subsidiary of a
bank, which is engaged exclusively in activities
permissible for a national bank to engage in di-
rectly or which are authorized by any Federal
law other than section 5136A of the Revised
Statutes of the United States.
‘‘(4) EQUITY
INVESTMENTS
EXCLUDED
SUB-
JECT TO THE APPROVAL OF THE BANKING AGEN-
CY.—Subsection (a)(1) shall not apply so as to limit
the equity investment of a bank in a financial sub-
sidiary of such bank, except that any investment
that exceeds the amount of a dividend that the bank
could pay at the time of the investment without ob-
taining prior approval of the appropriate Federal
banking agency and is in excess of the limitation
129
which would apply under subsection (a)(1), but for
this paragraph, may be made only with the approval
of the appropriate Federal banking agency (as de-
fined in section 3(q) of the Federal Deposit Insur-
ance Act) with respect to such bank.’’.
(d) ANTITYING.—Section 106(a) of the Bank Hold-
ing Company Act Amendments of 1970 is amended by
adding at the end the following new sentence: ‘‘For pur-
poses of this section, a subsidiary of a national bank which
engages in activities pursuant to subsection (a)(2) or
(b)(4) of section 5136A of the Revised Statutes of the
United States shall be deemed to be a subsidiary of a bank
holding company, and not a subsidiary of a bank.’’.
SEC. 123. MISREPRESENTATIONS REGARDING DEPOSITORY
INSTITUTION LIABILITY FOR OBLIGATIONS
OF AFFILIATES.
(a) IN GENERAL.—Chapter 47 of title 18, United
States Code, is amended by inserting after section 1007
the following new section:
‘‘§ 1008. Misrepresentations regarding financial insti-
tution liability for obligations of affiliates
‘‘(a) IN GENERAL.—No institution-affiliated party of
an insured depository institution or institution-affiliated
party of a subsidiary or affiliate of an insured depository
institution shall fraudulently represent that the institution
130
is or will be liable for any obligation of a subsidiary or
other affiliate of the institution.
‘‘(b) CRIMINAL PENALTY.—Whoever violates sub-
section (a) shall be fined under this title, imprisoned for
not more than 5 years, or both.
‘‘(c) INSTITUTION-AFFILIATED PARTY DEFINED.—
For purposes of this section, the term ‘institution-affili-
ated party’ has the same meaning as in section 3 of the
Federal Deposit Insurance Act and any reference in that
section shall also be deemed to refer to a subsidiary or
affiliate of an insured depository institution.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section, the terms ‘affiliate’, ‘insured depository institu-
tion’, and ‘subsidiary’ have same meanings as in section
3 of the Federal Deposit Insurance Act.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 47 of title 18, United States Code, is amended
by inserting after the item relating to section 1007 the
following new item:
‘‘1008. Misrepresentations regarding financial institution liability for obligations
of affiliates.’’.
SEC. 124. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RE-
SERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C.
248) is amended by striking the paragraph designated as
‘‘(m)’’ and inserting ‘‘(m) [Repealed]’’.
131
Subtitle 
D—Wholesale 
Financial
Holding Companies; Wholesale
Financial Institutions
CHAPTER 1—WHOLESALE FINANCIAL
HOLDING COMPANIES
SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES
ESTABLISHED.
Section 10 of the Bank Holding Company Act of
1956 (12 U.S.C. 1841 et seq.) is amended to read as fol-
lows:
‘‘SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.
‘‘(a) COMPANIES THAT CONTROL WHOLESALE FI-
NANCIAL INSTITUTIONS.—
‘‘(1) WHOLESALE
FINANCIAL
HOLDING
COM-
PANY
DEFINED.—The term ‘wholesale financial
holding company’ means any company that—
‘‘(A) is registered as a bank holding com-
pany;
‘‘(B) is predominantly engaged in financial
activities as defined in section 6(f)(2);
‘‘(C) controls one or more wholesale finan-
cial institutions;
‘‘(D) does not control—
‘‘(i) a bank other than a wholesale fi-
nancial institution;
132
‘‘(ii) an insured bank other than an
institution permitted under subparagraph
(D), (F), or (G) of section 2(c)(2); or
‘‘(iii) a savings association; and
‘‘(E) is not a foreign bank (as defined in
section 1(b)(7) of the International Banking
Act of 1978).
‘‘(2) SAVINGS
ASSOCIATION
TRANSITION
PE-
RIOD.—Notwithstanding paragraph (1)(D)(iii), the
Board may permit a company that controls a sav-
ings association and that otherwise meets the re-
quirements of paragraph (1) to become supervised
under paragraph (1), if the company divests control
of any such savings association within such period
not to exceed 5 years after becoming supervised
under paragraph (1) as permitted by the Board.
‘‘(b) SUPERVISION BY THE BOARD.—
‘‘(1) IN GENERAL.—The provisions of this sec-
tion shall govern the reporting, examination, and
capital requirements of wholesale financial holding
companies.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—The Board from time
to time may require any wholesale financial
holding company and any subsidiary of such
133
company to submit reports under oath to keep
the Board informed as to—
‘‘(i) the company’s or subsidiary’s ac-
tivities, financial condition, policies, sys-
tems for monitoring and controlling finan-
cial and operational risks, and transactions
with depository institution subsidiaries of
the holding company; and
‘‘(ii) the extent to which the company
or subsidiary has complied with the provi-
sions of this Act and regulations prescribed
and orders issued under this Act.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN GENERAL.—The Board shall,
to the fullest extent possible, accept re-
ports in fulfillment of the Board’s report-
ing requirements under this paragraph
that the wholesale financial holding com-
pany or any subsidiary of such company
has provided or been required to provide to
other Federal and State supervisors or to
appropriate self-regulatory organizations.
‘‘(ii) AVAILABILITY.—A wholesale fi-
nancial holding company or a subsidiary of
such company shall provide to the Board,
134
at the request of the Board, a report re-
ferred to in clause (i).
‘‘(C) EXEMPTIONS FROM REPORTING RE-
QUIREMENTS.—
‘‘(i) IN GENERAL.—The Board may,
by regulation or order, exempt any com-
pany or class of companies, under such
terms and conditions and for such periods
as the Board shall provide in such regula-
tion or order, from the provisions of this
paragraph and any regulation prescribed
under this paragraph.
‘‘(ii) 
CRITERIA
FOR
CONSIDER-
ATION.—In making any determination
under clause (i) with regard to any exemp-
tion under such clause, the Board shall
consider, among such other factors as the
Board may determine to be appropriate,
the following factors:
‘‘(I) Whether information of the
type required under this paragraph is
available from a supervisory agency
(as defined in section 1101(7) of the
Right to Financial Privacy Act of
135
1978) or a foreign regulatory author-
ity of a similar type.
‘‘(II) The primary business of the
company.
‘‘(III) The nature and extent of
the domestic and foreign regulation of
the activities of the company.
‘‘(3) EXAMINATIONS.—
‘‘(A) LIMITED USE OF EXAMINATION AU-
THORITY.—The Board may make examinations
of each wholesale financial holding company
and each subsidiary of such company in order
to—
‘‘(i) inform the Board regarding the
nature of the operations and financial con-
dition of the wholesale financial holding
company and its subsidiaries;
‘‘(ii) inform the Board regarding—
‘‘(I) the financial and operational
risks within the wholesale financial
holding company system that may af-
fect any depository institution owned
by such holding company; and
‘‘(II) the systems of the holding
company and its subsidiaries for mon-
136
itoring and controlling those risks;
and
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
depository institution controlled by the
wholesale financial holding company and
any of the company’s other subsidiaries.
‘‘(B) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, limit the focus and scope of any exam-
ination of a wholesale financial holding com-
pany under this paragraph to—
‘‘(i) the holding company; and
‘‘(ii) any subsidiary (other than an in-
sured depository institution subsidiary) of
the holding company that, because of the
size, condition, or activities of the sub-
sidiary, the nature or size of transactions
between such subsidiary and any affiliated
depository institution, or the centralization
of functions within the holding company
system, could have a materially adverse ef-
fect on the safety and soundness of any de-
137
pository institution affiliate of the holding
company.
‘‘(C) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use the reports of examination of de-
pository institutions made by the Comptroller of
the Currency, the Federal Deposit Insurance
Corporation, the Director of the Office of Thrift
Supervision or the appropriate State depository
institution supervisory authority for the pur-
poses of this section.
‘‘(D) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, address the circumstances which might
otherwise permit or require an examination by
the Board by forgoing an examination and by
instead reviewing the reports of examination
made of—
‘‘(i) any registered broker or dealer or
any registered investment adviser by or on
behalf of the Commission; and
‘‘(ii) any licensed insurance company
by or on behalf of any State government
insurance agency responsible for the super-
vision of the insurance company.
138
‘‘(E) CONFIDENTIALITY OF REPORTED IN-
FORMATION.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of law, the Board shall
not be compelled to disclose any nonpublic
information required to be reported under
this paragraph, or any information sup-
plied to the Board by any domestic or for-
eign regulatory agency, that relates to the
financial or operational condition of any
wholesale financial holding company or any
subsidiary of such company.
‘‘(ii) COMPLIANCE
WITH
REQUESTS
FOR INFORMATION.—No provision of this
subparagraph shall be construed as author-
izing the Board to withhold information
from the Congress, or preventing the
Board from complying with a request for
information from any other Federal de-
partment or agency for purposes within the
scope of such department’s or agency’s ju-
risdiction, or from complying with any
order of a court of competent jurisdiction
in an action brought by the United States
or the Board.
139
‘‘(iii) COORDINATION
WITH
OTHER
LAW.—For purposes of section 552 of title
5, United States Code, this subparagraph
shall be considered to be a statute de-
scribed in subsection (b)(3)(B) of such sec-
tion.
‘‘(iv) DESIGNATION OF CONFIDENTIAL
INFORMATION.—In prescribing regulations
to carry out the requirements of this sub-
section, the Board shall designate informa-
tion described in or obtained pursuant to
this paragraph as confidential information.
‘‘(F) COSTS.—The cost of any examination
conducted by the Board under this section may
be assessed against, and made payable by, the
wholesale financial holding company.
‘‘(4) CAPITAL ADEQUACY GUIDELINES.—
‘‘(A) CAPITAL
ADEQUACY
PROVISIONS.—
Subject to the requirements of, and solely in ac-
cordance with, the terms of this paragraph, the
Board may adopt capital adequacy rules or
guidelines for wholesale financial holding com-
panies.
140
‘‘(B) METHOD OF CALCULATION.—In de-
veloping rules or guidelines under this para-
graph, the following provisions shall apply:
‘‘(i) FOCUS ON DOUBLE LEVERAGE.—
The Board shall focus on the use by whole-
sale financial holding companies of debt
and other liabilities to fund capital invest-
ments in subsidiaries.
‘‘(ii) 
NO
UNWEIGHTED
CAPITAL
RATIO.—The Board shall not, by regula-
tion, guideline, order, or otherwise, impose
under this section a capital ratio that is
not based on appropriate risk-weighting
considerations.
‘‘(iii) NO CAPITAL REQUIREMENT ON
REGULATED
ENTITIES.—The Board shall
not, by regulation, guideline, order or oth-
erwise, prescribe or impose any capital or
capital adequacy rules, standards, guide-
lines, or requirements upon any subsidiary
that—
‘‘(I) is not a depository institu-
tion; and
‘‘(II) is in compliance with appli-
cable capital requirements of another
142
count the activities, operations, or invest-
ments of an affiliated investment company
registered under the Investment Company
Act of 1940, unless the investment com-
pany is—
‘‘(I) a bank holding company; or
‘‘(II) controlled by a bank hold-
ing company by reason of ownership
by the bank holding company (includ-
ing through all of its affiliates) of 25
percent or more of the shares of the
investment company, and the shares
owned by the bank holding company
have a market value equal to more
than $1,000,000.
‘‘(vi) APPROPRIATE
EXCLUSIONS.—
The Board shall take full account of—
‘‘(I) the capital requirements
made applicable to any subsidiary that
is not a depository institution by an-
other Federal regulatory authority or
State insurance authority; and
‘‘(II) industry norms for capital-
ization of a company’s unregulated
subsidiaries and activities.
143
‘‘(vii) INTERNAL RISK MANAGEMENT
MODELS.—The Board may incorporate in-
ternal risk management models of whole-
sale financial holding companies into its
capital adequacy guidelines or rules and
may take account of the extent to which
resources of a subsidiary depository insti-
tution may be used to service the debt or
other liabilities of the wholesale financial
holding company.
‘‘(c) NONFINANCIAL
ACTIVITIES
AND
INVEST-
MENTS.—
‘‘(1) GRANDFATHERED ACTIVITIES.—
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a company that becomes a wholesale
financial holding company may continue to en-
gage, directly or indirectly, in any activity and
may retain ownership and control of shares of
a company engaged in any activity if—
‘‘(i) on the date of the enactment of
the Financial Services Act of 1999, such
wholesale financial holding company was
lawfully engaged in that nonfinancial activ-
ity, held the shares of such company, or
had entered into a contract to acquire
144
shares of any company engaged in such ac-
tivity; and
‘‘(ii) the company engaged in such ac-
tivity continues to engage only in the same
activities that such company conducted on
the date of the enactment of the Financial
Services Act of 1999, and other activities
permissible under this Act.
‘‘(B) NO EXPANSION OF GRANDFATHERED
COMMERCIAL ACTIVITIES THROUGH MERGER OR
CONSOLIDATION.—A wholesale financial holding
company that engages in activities or holds
shares pursuant to this paragraph, or a sub-
sidiary of such wholesale financial holding com-
pany, may not acquire, in any merger, consoli-
dation, or other type of business combination,
assets of any other company which is engaged
in any activity which the Board has not deter-
mined to be financial in nature or incidental to
activities that are financial in nature under sec-
tion 6(c).
‘‘(C) LIMITATION
TO
SINGLE
EXEMP-
TION.—No company that engages in any activ-
ity or controls any shares under subsection (f)
145
of section 6 may engage in any activity or own
any shares pursuant to this paragraph.
‘‘(2) COMMODITIES.—
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a wholesale financial holding company
which was predominately engaged as of Janu-
ary 1, 1997, in financial activities in the United
States (or any successor to any such company)
may engage in, or directly or indirectly own or
control shares of a company engaged in, activi-
ties related to the trading, sale, or investment
in commodities and underlying physical prop-
erties that were not permissible for bank hold-
ing companies to conduct in the United States
as of January 1, 1997, if such wholesale finan-
cial holding company, or any subsidiary of such
holding company, was engaged directly, indi-
rectly, or through any such company in any of
such activities as of January 1, 1997, in the
United States.
‘‘(B) LIMITATION.—The attributed aggre-
gate consolidated assets of a wholesale financial
holding company held under the authority
granted under this paragraph and not otherwise
permitted to be held by all wholesale financial
146
holding companies under this section may not
exceed 5 percent of the total consolidated assets
of the wholesale financial holding company, ex-
cept that the Board may increase such percent-
age of total consolidated assets by such
amounts and under such circumstances as the
Board considers appropriate, consistent with
the purposes of this Act.
‘‘(3) CROSS
MARKETING
RESTRICTIONS.—A
wholesale financial holding company shall not
permit—
‘‘(A) any company whose shares it owns or
controls pursuant to paragraph (1) or (2) to
offer or market any product or service of an af-
filiated wholesale financial institution; or
‘‘(B) any affiliated wholesale financial in-
stitution to offer or market any product or serv-
ice of any company whose shares are owned or
controlled by such wholesale financial holding
company pursuant to such paragraphs.
‘‘(d) QUALIFICATION OF FOREIGN BANK AS WHOLE-
SALE FINANCIAL HOLDING COMPANY.—
‘‘(1) IN GENERAL.—Any foreign bank, or any
company that owns or controls a foreign bank, that
operates a branch, agency, or commercial lending
147
company in the United States, including a foreign
bank or company that owns or controls a wholesale
financial institution, may request a determination
from the Board that such bank or company be treat-
ed as a wholesale financial holding company other
than for purposes of subsection (c), subject to such
conditions as the Board considers appropriate, giv-
ing due regard to the principle of national treatment
and equality of competitive opportunity and the re-
quirements imposed on domestic banks and compa-
nies.
‘‘(2) CONDITIONS
FOR
TREATMENT
AS
A
WHOLESALE FINANCIAL HOLDING COMPANY.—A for-
eign bank and a company that owns or controls a
foreign bank may not be treated as a wholesale fi-
nancial holding company unless the bank and com-
pany meet and continue to meet the following cri-
teria:
‘‘(A) NO INSURED DEPOSITS.—No deposits
held directly by a foreign bank or through an
affiliate (other than an institution described in
subparagraph (D) or (F) of section 2(c)(2)) are
insured under the Federal Deposit Insurance
Act.
148
‘‘(B) CAPITAL
STANDARDS.—The foreign
bank meets risk-based capital standards com-
parable to the capital standards required for a
wholesale financial institution, giving due re-
gard to the principle of national treatment and
equality of competitive opportunity.
‘‘(C) TRANSACTION
WITH
AFFILIATES.—
Transactions between a branch, agency, or com-
mercial lending company subsidiary of the for-
eign bank in the United States, and any securi-
ties affiliate or company in which the foreign
bank (or any company that owns or controls
such foreign bank) has invested, directly or in-
directly, and which engages in any activity pur-
suant to subsection (c) or (g) of section 6, com-
ply 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 comply with such sections
if the bank were a member bank.
‘‘(3) TREATMENT AS A WHOLESALE FINANCIAL
INSTITUTION.—Any foreign bank which is, or is af-
filiated with a company which is, treated as a whole-
sale financial holding company under this subsection
shall be treated as a wholesale financial institution
149
for purposes of subsections (c)(1)(C) and (c)(3) of
section 9B of the Federal Reserve Act, and any such
foreign bank or company shall be subject to para-
graphs (3), (4), and (5) of section 9B(d) of the Fed-
eral Reserve Act, 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) SUPERVISION OF FOREIGN BANK WHICH
MAINTAINS
NO
BANKING
PRESENCE
OTHER
THAN
CONTROL
OF
A
WHOLESALE
FINANCIAL
INSTITU-
TION.—A foreign bank that owns or controls a
wholesale financial institution but does not operate
a branch, agency, or commercial lending company in
the United States (and any company that owns or
controls such foreign bank) may request a deter-
mination from the Board that such bank or com-
pany be treated as a wholesale financial holding
company, except that such bank or company shall be
subject to the restrictions of paragraphs (2)(A) and
(3) of this subsection.
‘‘(5) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed as limiting the author-
ity of the Board under the International Banking
150
Act of 1978 with respect to the regulation, super-
vision, or examination of foreign banks and their of-
fices and affiliates in the United States.
‘‘(6) APPLICABILITY OF COMMUNITY REINVEST-
MENT ACT OF 1977.—The branches in the United
States of a foreign bank that is, or is affiliated with
a company that is, treated as a wholesale financial
holding company shall be subject to section
9B(b)(11) of the Federal Reserve Act as if the for-
eign bank were a wholesale financial institution
under such section. The Board and the Comptroller
of the Currency shall apply the provisions of sections
803(2), 804, and 807(1) of the Community Rein-
vestment Act of 1977 to branches of foreign banks
which receive only such deposits as are permissible
for receipt by a corporation organized under section
25A of the Federal Reserve Act, in the same manner
and to the same extent such sections apply to such
a corporation.’’.
SEC. 132. AUTHORIZATION TO RELEASE REPORTS.
(a) FEDERAL RESERVE ACT.—The last sentence of
the eighth undesignated paragraph of section 9 of the
Federal Reserve Act (12 U.S.C. 326) is amended to read
as follows: ‘‘The Board of Governors of the Federal Re-
serve System, at its discretion, may furnish reports of ex-
151
amination or other confidential supervisory information
concerning State member banks or any other entities ex-
amined under any other authority of the Board to any
Federal or State authorities with supervisory or regulatory
authority over the examined entity, to officers, directors,
or receivers of the examined entity, and to any other per-
son that the Board determines to be proper.’’.
(b) COMMODITY FUTURES TRADING COMMISSION.—
The Right to Financial Privacy Act of 1978 (12 U.S.C.
3401 et seq.) is amended—
(1) in section 1101(7) of the (12 U.S.C.
3401(7))—
(A) by redesignating subparagraphs (G)
and (H) as subparagraphs (H) and (I), respec-
tively; and
(B) by inserting after subparagraph (F)
the following new subparagraph:
‘‘(G) the Commodity Futures Trading
Commission; or’’; and
(2) in section 1112(e), by striking ‘‘and the Se-
curities and Exchange Commission’’ and inserting ‘‘,
the Securities and Exchange Commission, and the
Commodity Futures Trading Commission’’.
SEC. 133. CONFORMING AMENDMENTS.
(a) BANK HOLDING COMPANY ACT OF 1956.—
152
(1) DEFINITIONS.—Section 2 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841) is
amended by inserting after subsection (p) (as added
by section 103(b)(1)) the following new subsections:
‘‘(q) WHOLESALE FINANCIAL INSTITUTION.—The
term ‘wholesale financial institution’ means a wholesale fi-
nancial institution subject to section 9B of the Federal
Reserve Act.
‘‘(r) COMMISSION.—The term ‘Commission’ means
the Securities and Exchange Commission.
‘‘(s) DEPOSITORY INSTITUTION.—The term ‘deposi-
tory institution’—
‘‘(1) has the meaning given to such term in sec-
tion 3 of the Federal Deposit Insurance Act; and
‘‘(2) includes a wholesale financial institution.’’.
(2) DEFINITION OF BANK INCLUDES WHOLE-
SALE FINANCIAL INSTITUTION.—Section 2(c)(1) of
the Bank Holding Company Act of 1956 (12 U.S.C.
1841(c)(1)) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(C) A wholesale financial institution.’’.
(3) 
INCORPORATED
DEFINITIONS.—Section
2(n) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(n)) is amended by inserting ‘‘ ‘insured
bank’,’’ after ‘‘ ‘in danger of default’,’’.
153
(4) EXCEPTION
TO
DEPOSIT
INSURANCE
RE-
QUIREMENT.—Section 3(e) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842(e)) is
amended by adding at the end the following: ‘‘This
subsection shall not apply to a wholesale financial
institution.’’.
(b) FEDERAL DEPOSIT INSURANCE ACT.—Section
3(q)(2)(A) of the Federal Deposit Insurance Act (12
U.S.C. 1813(q)(2)(A)) is amended to read as follows:
‘‘(A) any State member insured bank (ex-
cept a District bank) and any wholesale finan-
cial institution subject to section 9B of the Fed-
eral Reserve Act;’’.
CHAPTER 2—WHOLESALE FINANCIAL
INSTITUTIONS
SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.
(a) NATIONAL WHOLESALE FINANCIAL INSTITU-
TIONS.—
(1) IN GENERAL.—Chapter 1 of title LXII of
the Revised Statutes of the United States (12
U.S.C. 21 et seq.) is amended by inserting after sec-
tion 5136A (as added by section 121(a) of this title)
the following new section:
154
‘‘SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITU-
TIONS.
‘‘(a) AUTHORIZATION OF THE COMPTROLLER RE-
QUIRED.—A national bank may apply to the Comptroller
on such forms and in accordance with such regulations
as the Comptroller may prescribe, for permission to oper-
ate as a national wholesale financial institution.
‘‘(b) REGULATION.—A national wholesale financial
institution may exercise, in accordance with such institu-
tion’s articles of incorporation and regulations issued by
the Comptroller, all the powers and privileges of a national
bank formed in accordance with section 5133 of the Re-
vised Statutes of the United States, subject to section 9B
of the Federal Reserve Act and the limitations and restric-
tions contained therein.
‘‘(c) COMMUNITY REINVESTMENT ACT OF 1977.—A
national wholesale financial institution shall be subject to
the Community Reinvestment Act of 1977.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter 1 of title LXII of the Revised Stat-
utes of the United States is amended by inserting
after the item relating to section 5136A (as added
by section 121(d) of this title) the following new
item:
‘‘5136B. National wholesale financial institutions.’’.
155
(b) WHOLESALE FINANCIAL INSTITUTIONS.—The
Federal Reserve Act (12 U.S.C. 221 et seq.) is amended
by inserting after section 9A the following new section:
‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLE-
SALE FINANCIAL INSTITUTION.—
‘‘(1) APPLICATION REQUIRED.—
‘‘(A) IN GENERAL.—Any bank may apply
to the Board of Governors of the Federal Re-
serve System to become a State wholesale fi-
nancial institution, or to the Comptroller of the
Currency to become a national wholesale finan-
cial institution, and, as a wholesale financial in-
stitution, to subscribe to the stock of the Fed-
eral Reserve bank organized within the district
where the applying bank is located.
‘‘(B) TREATMENT
AS
MEMBER
BANK.—
Any application under subparagraph (A) shall
be treated as an application under, and shall be
subject to the provisions of, section 9.
‘‘(2) INSURANCE TERMINATION.—No bank the
deposits of which are insured under the Federal De-
posit Insurance Act may become a wholesale finan-
cial institution unless it has met all requirements
156
under that Act for voluntary termination of deposit
insurance.
‘‘(b) GENERAL
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) FEDERAL RESERVE ACT.—Except as oth-
erwise provided in this section, wholesale financial
institutions shall be member banks and shall be sub-
ject to the provisions of this Act that apply to mem-
ber banks to the same extent and in the same man-
ner as State member insured banks or national
banks, except that a wholesale financial institution
may terminate membership under this Act only with
the prior written approval of the Board and on
terms and conditions that the Board determines are
appropriate to carry out the purposes of this Act.
‘‘(2) PROMPT CORRECTIVE ACTION.—A whole-
sale financial institution shall be deemed to be an in-
sured depository institution for purposes of section
38 of the Federal Deposit Insurance Act except
that—
‘‘(A) the relevant capital levels and capital
measures for each capital category shall be the
levels specified by the Board for wholesale fi-
nancial institutions;
157
‘‘(B) subject to subparagraph (A), all ref-
erences to the appropriate Federal banking
agency or to the Corporation in that section
shall be deemed to be references to the Comp-
troller of the Currency, in the case of a national
wholesale financial institution, and to the
Board, in the case of all other wholesale finan-
cial institutions; and
‘‘(C) in the case of wholesale financial in-
stitutions, the purpose of prompt corrective ac-
tion shall be to protect taxpayers and the finan-
cial system from the risks associated with the
operation and activities of wholesale financial
institutions.
‘‘(3) 
ENFORCEMENT
AUTHORITY.—Section
3(u), subsections (j) and (k) of section 7, sub-
sections (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 or
national banks, as the case may be, and any ref-
erence in such sections to an insured depository in-
stitution shall be deemed to include a reference to a
wholesale financial institution.
158
‘‘(4) CERTAIN
OTHER
STATUTES
APPLICA-
BLE.—A wholesale financial institution shall be
deemed to be a banking institution, and the Board
shall be the appropriate Federal banking agency for
such bank and all such bank’s affiliates, for pur-
poses of the International Lending Supervision Act.
‘‘(5) BANK MERGER ACT.—A wholesale finan-
cial institution shall be subject to sections 18(c) and
44 of the Federal Deposit Insurance Act in the same
manner and to the same extent the wholesale finan-
cial institution would be subject to such sections if
the institution were a State member insured bank or
a national bank.
‘‘(6) BRANCHING.—Notwithstanding any other
provision of law, a wholesale financial institution
may establish and operate a branch at any location
on such terms and conditions as established by, and
with the approval of—
‘‘(A) the Board, in the case of a State-
chartered wholesale financial institution; and
‘‘(B) the Comptroller of the Currency, in
the case of a national bank wholesale financial
institution.
‘‘(7) ACTIVITIES OF OUT-OF-STATE BRANCHES
OF
WHOLESALE
FINANCIAL
INSTITUTIONS.—A
159
State-chartered wholesale financial institution shall
be deemed to be a State bank and an insured State
bank for purposes of paragraphs (1), (2), and (3) of
section 24(j) of the Federal Deposit Insurance Act.
‘‘(8) DISCRIMINATION
REGARDING
INTEREST
RATES.—Section 27 of the Federal Deposit Insur-
ance Act shall apply to State-chartered wholesale fi-
nancial institutions in the same manner and to the
same extent as such provisions apply to State mem-
ber insured banks and any reference in such section
to a State-chartered insured depository institution
shall be deemed to include a reference to a State-
chartered wholesale financial institution.
‘‘(9) PREEMPTION OF STATE LAWS REQUIRING
DEPOSIT
INSURANCE
FOR
WHOLESALE
FINANCIAL
INSTITUTIONS.—The appropriate State banking au-
thority may grant a charter to a wholesale financial
institution notwithstanding any State constitution or
statute requiring that the institution obtain insur-
ance of its deposits and any such State constitution
or statute is hereby preempted solely for purposes of
this paragraph.
‘‘(10) PARITY FOR WHOLESALE FINANCIAL IN-
STITUTIONS.—A State bank that is a wholesale fi-
nancial institution under this section shall have all
160
of the rights, powers, privileges, and immunities (in-
cluding those derived from status as a federally
chartered institution) of and as if it were a national
bank, subject to such terms and conditions as estab-
lished by the Board.
‘‘(11) COMMUNITY
REINVESTMENT
ACT
OF
1977.—A State wholesale financial institution shall
be subject to the Community Reinvestment Act of
1977.
‘‘(c) SPECIFIC
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) LIMITATIONS ON DEPOSITS.—
‘‘(A) MINIMUM AMOUNT.—
‘‘(i) IN GENERAL.—No wholesale fi-
nancial institution may receive initial de-
posits of $100,000 or less, other than on
an incidental and occasional basis.
‘‘(ii) LIMITATION
ON
DEPOSITS
OF
LESS THAN $100,000.—No wholesale finan-
cial institution may receive initial deposits
of $100,000 or less if such deposits con-
stitute more than 5 percent of the institu-
tion’s total deposits.
‘‘(B) NO DEPOSIT INSURANCE.—Except as
otherwise provided in section 8A(f) of the Fed-
161
eral Deposit Insurance Act, no deposits held by
a wholesale financial institution shall be insured
deposits under the Federal Deposit Insurance
Act.
‘‘(C) ADVERTISING
AND
DISCLOSURE.—
The Board and the Comptroller of the Currency
shall prescribe jointly regulations pertaining to
advertising and disclosure by wholesale financial
institutions to ensure that each depositor is no-
tified that deposits at the wholesale financial in-
stitution are not federally insured or otherwise
guaranteed by the United States Government.
‘‘(2) MINIMUM
CAPITAL
LEVELS
APPLICABLE
TO
WHOLESALE
FINANCIAL
INSTITUTIONS.—The
Board shall, by regulation, adopt capital require-
ments for wholesale financial institutions—
‘‘(A) to account for the status of wholesale
financial institutions as institutions that accept
deposits that are not insured under the Federal
Deposit Insurance Act; and
‘‘(B) to provide for the safe and sound op-
eration of the wholesale financial institution
without undue risk to creditors or other per-
sons, including Federal Reserve banks, engaged
in transactions with the bank.
162
‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE
TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi-
tion to any requirement otherwise applicable to State
member insured banks or applicable, under this sec-
tion, to wholesale financial institutions, the Board
may impose, by regulation or order, upon wholesale
financial institutions—
‘‘(A) limitations on transactions, direct or
indirect, with affiliates to prevent—
‘‘(i) the transfer of risk to the deposit
insurance funds; or
‘‘(ii) an affiliate from gaining access
to, or the benefits of, credit from a Federal
Reserve bank, including overdrafts at a
Federal Reserve bank;
‘‘(B) special clearing balance requirements;
and
‘‘(C) any additional requirements that the
Board determines to be appropriate or nec-
essary to—
‘‘(i) promote the safety and soundness
of the wholesale financial institution or any
insured depository institution affiliate of
the wholesale financial institution;
163
‘‘(ii) prevent the transfer of risk to
the deposit insurance funds; or
‘‘(iii) protect creditors and other per-
sons, including Federal Reserve banks, en-
gaged in transactions with the wholesale fi-
nancial institution.
‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL
INSTITUTIONS.—The Board may, by regulation or
order, exempt any wholesale financial institution
from any provision applicable to a member bank
that is not a wholesale financial institution, if the
Board finds that such exemption is consistent
with—
‘‘(A) the promotion of the safety and
soundness of the wholesale financial institution
or any insured depository institution affiliate of
the wholesale financial institution;
‘‘(B) the protection of the deposit insur-
ance funds; and
‘‘(C) the protection of creditors and other
persons, including Federal Reserve banks, en-
gaged in transactions with the wholesale finan-
cial institution.
‘‘(5) LIMITATION ON TRANSACTIONS BETWEEN
A WHOLESALE FINANCIAL INSTITUTION AND AN IN-
164
SURED BANK.—For purposes of section 23A(d)(1) of
the Federal Reserve Act, a wholesale financial insti-
tution that is affiliated with an insured bank shall
not be a bank.
‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed as limiting the
Board’s authority over member banks or the author-
ity of the Comptroller of the Currency over national
banks under any other provision of law, or to create
any obligation for any Federal Reserve bank to
make, increase, renew, or extend any advance or dis-
count under this Act to any member bank or other
depository institution.
‘‘(d) CAPITAL AND MANAGERIAL REQUIREMENTS.—
‘‘(1) IN GENERAL.—A wholesale financial insti-
tution shall be well capitalized and well managed.
‘‘(2) NOTICE TO COMPANY.—The Board shall
promptly provide notice to a company that controls
a wholesale financial institution whenever such
wholesale financial institution is not well capitalized
or well managed.
‘‘(3) AGREEMENT TO RESTORE INSTITUTION.—
Not later than 45 days after the date of receipt of
a notice under paragraph (2) (or such additional pe-
riod not to exceed 90 days as the Board may per-
165
mit), the company shall execute an agreement ac-
ceptable to the Board to restore the wholesale finan-
cial institution to compliance with all of the require-
ments of paragraph (1).
‘‘(4) LIMITATIONS
UNTIL
INSTITUTION
RE-
STORED.—Until the wholesale financial institution is
restored to compliance with all of the requirements
of paragraph (1), the Board may impose such limi-
tations on the conduct or activities of the company
or any affiliate of the company as the Board deter-
mines to be appropriate under the circumstances.
‘‘(5) FAILURE TO RESTORE.—If the company
does not execute and implement an agreement in ac-
cordance with paragraph (3), comply with any limi-
tation imposed under paragraph (4), restore the
wholesale financial institution to well capitalized sta-
tus not later than 180 days after the date of receipt
by the company of the notice described in paragraph
(2), or restore the wholesale financial institution to
well managed status within such period as the Board
may permit, the company shall, under such terms
and conditions as may be imposed by the Board sub-
ject to such extension of time as may be granted in
the discretion of the Board, divest control of its sub-
sidiary depository institutions.
166
‘‘(6) WELL MANAGED DEFINED.—For purposes
of this subsection, the term ‘well managed’ has the
same meaning as in section 2 of the Bank Holding
Company Act of 1956.
‘‘(e) RESOLUTION OF WHOLESALE FINANCIAL INSTI-
TUTIONS.—
‘‘(1) CONSERVATORSHIP OR RECEIVERSHIP.—
‘‘(A) APPOINTMENT.—The Board may ap-
point a conservator or receiver to take posses-
sion and control of a wholesale financial institu-
tion to the same extent and in the same manner
as the Comptroller of the Currency may appoint
a conservator or receiver for a national bank.
‘‘(B) POWERS.—The conservator or re-
ceiver for a wholesale financial institution shall
exercise the same powers, functions, and duties,
subject to the same limitations, as a conser-
vator or receiver for a national bank.
‘‘(2) BOARD
AUTHORITY.—The Board shall
have the same authority with respect to any conser-
vator or receiver appointed under paragraph (1),
and the wholesale financial institution for which it
has been appointed, as the Comptroller of the Cur-
rency has with respect to a conservator or receiver
167
for a national bank and the national bank for which
the conservator or receiver has been appointed.
‘‘(3) BANKRUPTCY PROCEEDINGS.—The Comp-
troller of the Currency (in the case of a national
wholesale financial institution) or the Board may di-
rect the conservator or receiver of a wholesale finan-
cial institution to file a petition pursuant to title 11,
United States Code, in which case, title 11, United
States Code, shall apply to the wholesale financial
institution in lieu of otherwise applicable Federal or
State insolvency law.
‘‘(f) BOARD BACKUP AUTHORITY.—
‘‘(1) NOTICE TO THE COMPTROLLER.—Before
taking any action under section 8 of the Federal De-
posit Insurance Act involving a wholesale financial
institution that is chartered as a national bank, the
Board shall notify the Comptroller and recommend
that the Comptroller take appropriate action. If the
Comptroller fails to take the recommended action or
to provide an acceptable plan for addressing the con-
cerns of the Board before the close of the 30-day pe-
riod beginning on the date of receipt of the formal
recommendation from the Board, the Board may
take such action.
168
‘‘(2) 
EXIGENT
CIRCUMSTANCES.—Notwith-
standing paragraph (1), the Board may exercise its
authority without regard to the time period set forth
in paragraph (1) where the Board finds that exigent
circumstances exist and the Board notifies the
Comptroller of the Board’s action and of the exigent
circumstances.
‘‘(g) EXCLUSIVE
JURISDICTION.—Subsections (c)
and (e) of section 43 of the Federal Deposit Insurance
Act shall not apply to any wholesale financial institution.’’.
(c) VOLUNTARY TERMINATION OF INSURED STATUS
BY CERTAIN INSTITUTIONS.—
(1) SECTION 8 DESIGNATIONS.—Section 8(a) of
the Federal Deposit Insurance Act (12 U.S.C.
1818(a)) is amended—
(A) by striking paragraph (1); and
(B) 
by 
redesignating 
paragraphs 
(2)
through (10) as paragraphs (1) through (9), re-
spectively.
(2) VOLUNTARY
TERMINATION
OF
INSURED
STATUS.—The Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.) is amended by inserting after
section 8 the following new section:
169
‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS IN-
SURED DEPOSITORY INSTITUTION.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), an insured State bank or a national bank may volun-
tarily terminate such bank’s status as an insured deposi-
tory institution in accordance with regulations of the Cor-
poration if—
‘‘(1) the bank provides written notice of the
bank’s intent to terminate such insured status—
‘‘(A) to the Corporation and the Board of
Governors of the Federal Reserve System, in
the case of an insured State bank, or to the
Corporation and the Comptroller of the Cur-
rency, in the case of an insured national bank
authorized to operate as a wholesale financial
institution, 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
170
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, in
the case of an insured State bank, or the Cor-
poration and the Comptroller of the Currency,
in the case of an insured national bank author-
ized to operate as a wholesale financial institu-
tion, has approved the termination of the
bank’s insured status 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; or
‘‘(2) an insured branch that is required to be
insured under subsection (a) or (b) of section 6 of
the International Banking Act of 1978.
‘‘(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).
171
‘‘(d) INSTITUTION MUST BECOME WHOLESALE FI-
NANCIAL INSTITUTION OR TERMINATE DEPOSIT-TAKING
ACTIVITIES.—Any depository institution which voluntarily
terminates such institution’s status as an insured deposi-
tory institution under this section may not, upon termi-
nation of insurance, accept any deposits unless the institu-
tion is a wholesale financial institution subject to section
9B of the Federal Reserve Act.
‘‘(e) EXIT FEES.—
‘‘(1) IN GENERAL.—Any bank that voluntarily
terminates such bank’s status as an insured deposi-
tory institution under this section shall pay an exit
fee in an amount that the Corporation determines is
sufficient to account for the institution’s pro rata
share of the amount (if any) which would be re-
quired to restore the relevant deposit insurance fund
to the fund’s designated reserve ratio as of the date
the bank provides a written notice under subsection
(a)(1).
‘‘(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.—
172
‘‘(1) TRANSITION PERIOD.—The insured depos-
its of each depositor in a State bank or a national
bank on the effective date of the voluntary termi-
nation of the bank’s insured status, less all subse-
quent withdrawals from any deposits of such deposi-
tor, shall continue to be insured for a period of not
less than 6 months and not more than 2 years, as
determined by the Corporation. During such period,
no additions to any such deposits, and no new de-
posits in the depository institution made after the ef-
fective date of such termination shall be insured by
the Corporation.
‘‘(2) TEMPORARY ASSESSMENTS; OBLIGATIONS
AND DUTIES.—During the period specified in para-
graph (1) with respect to any bank, the bank shall
continue to pay assessments under section 7 as if
the bank were an insured depository institution. The
bank shall, in all other respects, be subject to the
authority of the Corporation and the duties and obli-
gations of an insured depository institution under
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
173
rights with respect to such bank as in the case of
an insured depository institution.
‘‘(g) ADVERTISEMENTS.—
‘‘(1) IN
GENERAL.—A bank that voluntarily
terminates the bank’s insured status under this sec-
tion shall not advertise or hold itself out as having
insured deposits, except that the bank may advertise
the temporary insurance of deposits under sub-
section (f) if, in connection with any such advertise-
ment, the advertisement also states with equal prom-
inence that additions to deposits and new deposits
made after the effective date of the termination are
not insured.
‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS,
AND
SECURITIES.—Any certificate of deposit or
other obligation or security issued by a State bank
or a national bank after the effective date of the vol-
untary termination of the bank’s insured status
under this section shall be accompanied by a con-
spicuous, prominently displayed notice that such cer-
tificate of deposit or other obligation or security is
not insured under this Act.
‘‘(h) NOTICE REQUIREMENTS.—
174
‘‘(1) NOTICE TO THE CORPORATION.—The no-
tice required under subsection (a)(1)(A) shall be in
such form as the Corporation may require.
‘‘(2) NOTICE TO DEPOSITORS.—The notice re-
quired under subsection (a)(1)(B) shall be—
‘‘(A) sent to each depositor’s last address
of record with the bank; and
‘‘(B) in such manner and form as the Cor-
poration finds to be necessary and appropriate
for the protection of depositors.’’.
(3) DEFINITION.—Section 19(b)(1)(A)(i) of the
Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is
amended by inserting ‘‘, or any wholesale financial
institution subject to section 9B of this Act’’ after
‘‘such Act’’.
(d) TECHNICAL AND CONFORMING AMENDMENTS TO
THE BANKRUPTCY CODE.—
(1) BANKRUPTCY
CODE
DEBTORS.—Section
109(b)(2) of title 11, United States Code, is amend-
ed by striking ‘‘; or’’ and inserting the following: ‘‘,
except that—
‘‘(A) a wholesale financial institution es-
tablished under section 5136B of the Revised
Statutes of the United States or section 9B of
the Federal Reserve Act may be a debtor if a
175
petition is filed at the direction of the Comp-
troller of the Currency (in the case of a whole-
sale financial institution established under sec-
tion 5136B of the Revised Statutes of the
United States) or the Board of Governors of
the Federal Reserve System (in the case of any
wholesale financial institution); and
‘‘(B) a corporation organized under section
25A of the Federal Reserve Act may be a debt-
or if a petition is filed at the direction of the
Board of Governors of the Federal Reserve Sys-
tem; or’’.
(2) CHAPTER 7 DEBTORS.—Section 109(d) of
title 11, United States Code, is amended to read as
follows:
‘‘(d) Only a railroad and a person that may be a debt-
or under chapter 7 of this title, except that a stockbroker,
a wholesale financial institution established under section
5136B of the Revised Statutes of the United States or
section 9B of the Federal Reserve Act, a corporation orga-
nized under section 25A of the Federal Reserve Act, or
a commodity broker, may be a debtor under chapter 11
of this title.’’.
176
(3) DEFINITION OF FINANCIAL INSTITUTION.—
Section 101(22) of title 11, United States Code, is
amended to read as follows:
‘‘(22) ‘financial institution’ means a person that
is a commercial or savings bank, industrial savings
bank, savings and loan association, trust company,
wholesale financial institution established under sec-
tion 5136B of the Revised Statutes of the United
States or section 9B of the Federal Reserve Act, or
corporation organized under section 25A of the Fed-
eral Reserve Act and, when any such person is act-
ing as agent or custodian for a customer in connec-
tion with a securities contract, as defined in section
741 of this title, such customer,’’.
(4) SUBCHAPTER V OF CHAPTER 7.—
(A) IN GENERAL.—Section 103 of title 11,
United States Code, is amended—
(i) by redesignating subsections (e)
through (i) as subsections (f) through (j),
respectively; and
(ii) by inserting after subsection (d)
the following:
‘‘(e) Subchapter V of chapter 7 of this title applies
only in a case under such chapter concerning the liquida-
tion of a wholesale financial institution established under
177
section 5136B of the Revised Statutes of the United
States or section 9B of the Federal Reserve Act, or a cor-
poration organized under section 25A of the Federal Re-
serve Act.’’.
(B) WHOLESALE
BANK
LIQUIDATION.—
Chapter 7 of title 11, United States Code, is
amended by adding at the end the following:
‘‘SUBCHAPTER V—WHOLESALE BANK
LIQUIDATION
‘‘§ 781. Definitions for subchapter
‘‘In this subchapter—
‘‘(1) the term ‘Board’ means the Board of Gov-
ernors of the Federal Reserve System;
‘‘(2) the term ‘depository institution’ has the
same meaning as in section 3 of the Federal Deposit
Insurance Act, and includes any wholesale bank;
‘‘(3) the term ‘national wholesale financial insti-
tution’ means a wholesale financial institution estab-
lished under section 5136B of the Revised Statutes
of the United States; and
‘‘(4) the term ‘wholesale bank’ means a na-
tional wholesale financial institution, a wholesale fi-
nancial institution established under section 9B of
the Federal Reserve Act, or a corporation organized
under section 25A of the Federal Reserve Act.
178
‘‘§ 782. Selection of trustee
‘‘(a) Notwithstanding any other provision of this title,
the conservator or receiver who files the petition shall be
the trustee under this chapter, unless the Comptroller of
the Currency (in the case of a national wholesale financial
institution for which it appointed the conservator or re-
ceiver) or the Board (in the case of any wholesale bank
for which it appointed the conservator or receiver) des-
ignates an alternative trustee. The Comptroller of the Cur-
rency or the Board (as applicable) may designate a suc-
cessor trustee, if required.
‘‘(b) Whenever the Comptroller of the Currency or
the Board appoints or designates a trustee, chapter 3 and
sections 704 and 705 of this title shall apply to the Comp-
troller or the Board, as applicable, in the same way and
to the same extent that they apply to a United States
trustee.
‘‘§ 783. Additional powers of trustee
‘‘(a) The trustee under this subchapter has power to
distribute property not of the estate, including distribu-
tions to customers that are mandated by subchapters III
and Iv of this chapter.
‘‘(b) The trustee under this subchapter may, after no-
tice and a hearing—
‘‘(1) sell the wholesale bank to a depository in-
stitution or consortium of depository institutions
179
(which consortium may agree on the allocation of
the wholesale bank among the consortium);
‘‘(2) merge the wholesale bank with a deposi-
tory institution;
‘‘(3) transfer contracts to the same extent as
could a receiver for a depository institution under
paragraphs (9) and (10) of section 11(e) of the Fed-
eral Deposit Insurance Act;
‘‘(4) transfer assets or liabilities to a depository
institution;
‘‘(5) transfer assets and liabilities to a bridge
bank as provided in paragraphs (1), (3)(A), (5), (6),
and (9) through (13), and subparagraphs (A)
through (H) and (K) of paragraph (4) of section
11(n) of the Federal Deposit Insurance Act, except
that—
‘‘(A) the bridge bank shall be treated as a
wholesale bank for the purpose of this sub-
section; and
‘‘(B) any references in any such provision
of law to the Federal Deposit Insurance Cor-
poration shall be construed to be references to
the appointing agency and that references to
deposit insurance shall be omitted.
180
‘‘(c) Any reference in this section to transfers of li-
abilities includes a ratable transfer of liabilities within a
priority class.
‘‘§ 784. Right to be heard
‘‘The Comptroller of the Currency (in the case of a
national wholesale financial institution), the Board (in the
case of any wholesale bank), or a Federal Reserve bank
(in the case of a wholesale bank that is a member of that
bank) may raise and may appear and be heard on any
issue in a case under this subchapter.
(C) 
CONFORMING
AMENDMENT.—The
table of sections for chapter 7 of title 11,
United States Code, is amended by adding at
the end the following:
‘‘SUBCHAPTER V—WHOLESALE BANK LIQUIDATION
‘‘781. Definitions for subchapter.
‘‘782. Selection of trustee.
‘‘783. Additional powers of trustee.
‘‘784. Right to be heard.’’.
(e) RESOLUTION
OF EDGE CORPORATIONS.—The
sixteenth undesignated paragraph of section 25A of the
Federal Reserve Act (12 U.S.C. 624) is amended to read
as follows:
‘‘(16) APPOINTMENT OF RECEIVER OR CONSER-
VATOR.—
‘‘(A) IN GENERAL.—The Board may ap-
point a conservator or receiver for a corporation
181
organized under the provisions of this section to
the same extent and in the same manner as the
Comptroller of the Currency may appoint a con-
servator or receiver for a national bank, and the
conservator or receiver for such corporation
shall exercise the same powers, functions, and
duties, subject to the same limitations, as a
conservator or receiver for a national bank.
‘‘(B) 
EQUIVALENT
AUTHORITY.—The
Board shall have the same authority with re-
spect to any conservator or receiver appointed
for a corporation organized under the provisions
of this section under this paragraph and any
such corporation as the Comptroller of the Cur-
rency has with respect to a conservator or re-
ceiver of a national bank and the national bank
for which a conservator or receiver has been ap-
pointed.
‘‘(C) TITLE
PETITIONS.—The Board
may direct the conservator or receiver of a cor-
poration organized under the provisions of this
section to file a petition pursuant to title 11,
United States Code, in which case, title 11,
United States Code, shall apply to the corpora-
182
tion in lieu of otherwise applicable Federal or
State insolvency law.’’.
Subtitle E—Preservation of FTC
Authority
SEC. 141. AMENDMENT TO THE BANK HOLDING COMPANY
ACT OF 1956 TO MODIFY NOTIFICATION AND
POST-APPROVAL WAITING PERIOD FOR SEC-
TION 3 TRANSACTIONS.
Section 11(b)(1) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1849(b)(1)) is amended by inserting
‘‘and, if the transaction also involves an acquisition under
section 4 or section 6, the Board shall also notify the Fed-
eral Trade Commission of such approval’’ before the pe-
riod at the end of the first sentence.
SEC. 142. INTERAGENCY DATA SHARING.
To the extent not prohibited by other law, the Comp-
troller of the Currency, the Director of the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation,
and the Board of Governors of the Federal Reserve Sys-
tem shall make available to the Attorney General and the
Federal Trade Commission any data in the possession of
any such banking agency that the antitrust agency deems
necessary for antitrust review of any transaction requiring
notice to any such antitrust agency or the approval of such
agency under section 3, 4, or 6 of the Bank Holding Com-
183
pany Act of 1956, section 18(c) of the Federal Deposit
Insurance Act, the National Bank Consolidation and
Merger Act, section 10 of the Home Owners’ Loan Act,
or the antitrust laws.
SEC. 143. CLARIFICATION OF STATUS OF SUBSIDIARIES
AND AFFILIATES.
(a) CLARIFICATION OF FEDERAL TRADE COMMIS-
SION JURISDICTION.—Any person which directly or indi-
rectly controls, is controlled directly or indirectly by, or
is directly or indirectly under common control with, any
bank or savings association (as such terms are defined in
section 3 of the Federal Deposit Insurance Act) and is
not itself a bank or savings association shall not be
deemed to be a bank or savings association for purposes
of the Federal Trade Commission Act or any other law
enforced by the Federal Trade Commission.
(b) SAVINGS PROVISION.—No provision of this sec-
tion shall be construed as restricting the authority of any
Federal banking agency (as defined in section 3 of the
Federal Deposit Insurance Act) under any Federal bank-
ing law, including section 8 of the Federal Deposit Insur-
ance Act.
(c) HART–SCOTT–RODINO AMENDMENTS.—
(1) BANKS.—Section 7A(c)(7) of the Clayton
Act (15 U.S.C. 18a(c)(7)) is amended by inserting
184
before the semicolon at the end the following: ‘‘, ex-
cept that a portion of a transaction is not exempt
under this paragraph if such portion of the trans-
action (A) is subject to section 6 of the Bank Hold-
ing Company Act of 1956; and (B) does not require
agency approval under section 3 of the Bank Hold-
ing Company Act of 1956’’.
(2) 
BANK
HOLDING
COMPANIES.—Section
7A(c)(8) of the Clayton Act (15 U.S.C. 18a(c)(8)) is
amended by inserting before the semicolon at the
end the following: ‘‘, except that a portion of a
transaction is not exempt under this paragraph if
such portion of the transaction (A) is subject to sec-
tion 6 of the Bank Holding Company Act of 1956;
and (B) does not require agency approval under sec-
tion 4 of the Bank Holding Company Act of 1956’’.
SEC. 144. ANNUAL GAO REPORT.
(a) IN GENERAL.—By the end of the 1-year period
beginning on the date of the enactment of this Act and
annually thereafter, the Comptroller General of the United
States shall submit a report to the Congress on market
concentration in the financial services industry and its im-
pact on consumers.
(b) ANALYSIS.—Each report submitted under sub-
section (a) shall contain an analysis of—
185
(1) the positive and negative effects of affili-
ations between various types of financial companies,
and of acquisitions pursuant to this Act and the
amendments made by this Act to other provisions of
law, including any positive or negative effects on
consumers, area markets, and submarkets thereof or
on registered securities brokers and dealers which
have been purchased by depository institutions or
depository institution holding companies;
(2) the changes in business practices and the
effects of any such changes on the availability of
venture capital, consumer credit, and other financial
services or products and the availability of capital
and credit for small businesses; and
(3) the acquisition patterns among depository
institutions, depository institution holding compa-
nies, securities firms, and insurance companies in-
cluding acquisitions among the largest 20 percent of
firms and acquisitions within regions or other lim-
ited geographical areas.
(c) SUNSET.—This section shall not apply after the
end of the 5-year period beginning on the date of the en-
actment of this Act.
186
Subtitle F—National Treatment
SEC. 151. FOREIGN BANKS THAT ARE FINANCIAL HOLDING
COMPANIES.
Section 8(c) of the International Banking Act of
1978 (12 U.S.C. 3106(c)) is amended by adding at the
end the following new paragraph:
‘‘(3) 
TERMINATION
OF
GRANDFATHERED
RIGHTS.—
‘‘(A) IN GENERAL.—If any foreign bank or
foreign company files a declaration under sec-
tion 6(b)(1)(D) or receives a determination
under section 10(d)(1) of the Bank Holding
Company Act of 1956, any authority conferred
by this subsection on any foreign bank or com-
pany to engage in any activity which the Board
has determined to be permissible for financial
holding companies under section 6 of such Act
shall terminate immediately.
‘‘(B) RESTRICTIONS AND REQUIREMENTS
AUTHORIZED.—If a foreign bank or company
that engages, directly or through an affiliate
pursuant to paragraph (1), in an activity which
the Board has determined to be permissible for
financial holding companies under section 6 of
the Bank Holding Company Act of 1956 has
187
not filed a declaration with the Board of its sta-
tus as a financial holding company under such
section or received a determination under sec-
tion 10(d)(1) by the end of the 2-year period
beginning on the date of the enactment of the
Financial Services Act of 1999, the Board, giv-
ing due regard to the principle of national
treatment and equality of competitive oppor-
tunity, may impose such restrictions and re-
quirements on the conduct of such activities by
such foreign bank or company as are com-
parable to those imposed on a financial holding
company organized under the laws of the
United States, including a requirement to con-
duct such activities in compliance with any pru-
dential safeguards established under section
114 of the Financial Services Act.’’.
SEC. 152. FOREIGN BANKS AND FOREIGN FINANCIAL INSTI-
TUTIONS THAT ARE WHOLESALE FINANCIAL
INSTITUTIONS.
Section 8A of the Federal Deposit Insurance Act (as
added by section 136(c)(2) of this Act) is amended by add-
ing at the end the following new subsection:
‘‘(i) VOLUNTARY TERMINATION OF DEPOSIT INSUR-
ANCE.—The provisions on voluntary termination of insur-
188
ance in this section shall apply to an insured branch of
a foreign bank (including a Federal branch) in the same
manner and to the same extent as they apply to an insured
State bank or a national bank.’’.
SEC. 153. REPRESENTATIVE OFFICES.
(a) DEFINITION OF ‘‘REPRESENTATIVE OFFICE’’.—
Section 1(b)(15) of the International Banking Act of 1978
(12 U.S.C. 3101(15)) is amended by striking ‘‘State agen-
cy, or subsidiary of a foreign bank’’ and inserting ‘‘or
State agency’’.
(b) EXAMINATIONS.—Section 10(c) of the Inter-
national Banking Act of 1978 (12 U.S.C. 3107(c)) is
amended by adding at the end the following: ‘‘The Board
may also make examinations of any affiliate of a foreign
bank conducting business in any State if the Board deems
it necessary to determine and enforce compliance with this
Act, the Bank Holding Company Act of 1956 (12 U.S.C.
1841 et seq.), or other applicable Federal banking law.’’.
SEC. 154. RECIPROCITY.
(a) NATIONAL TREATMENT REPORTS.—
(1) REPORT REQUIRED IN THE EVENT OF CER-
TAIN ACQUISITIONS.—
(A) IN
GENERAL.—Whenever a person
from a foreign country announces its intention
to acquire or acquires a bank, a securities un-
189
derwriter, broker, or dealer, an investment ad-
viser, or insurance company that ranks within
the top 50 firms in that line of business in the
United States, the Secretary of Commerce, in
the case of an insurance company, or the Sec-
retary of the Treasury, in the case of a bank,
a securities underwriter, broker, or dealer, or
an investment adviser, shall, within the earlier
of 6 months of such announcement or such ac-
quisition and in consultation with other appro-
priate Federal and State agencies, prepare and
submit to the Congress a report on whether a
United States person would be able, de facto or
de jure, to acquire an equivalent sized firm in
the country in which such person from a foreign
country is located.
(B) ANALYSIS AND RECOMMENDATIONS.—
If a report submitted under subparagraph (A)
states that the equivalent treatment referred to
in such subparagraph, de facto and de jure, is
not provided in the country which is the subject
of the report, the Secretary of Commerce or the
Secretary of the Treasury, as the case may be
and in consultation with other appropriate Fed-
eral and State agencies, shall include in the re-
190
port analysis and recommendations as to how
that country’s laws and regulations would need
to be changed so that reciprocal treatment
would exist.
(2) REPORT
REQUIRED
BEFORE
FINANCIAL
SERVICES
NEGOTIATIONS
COMMENCE.—The Sec-
retary of Commerce, with respect to insurance com-
panies, and the Secretary of the Treasury, with re-
spect to banks, securities underwriters, brokers,
dealers, and investment advisers, shall, not less than
6 months before the commencement of the financial
services negotiations of the World Trade Organiza-
tion and in consultation with other appropriate Fed-
eral and State agencies, prepare and submit to the
Congress a report containing—
(A) an assessment of the 30 largest finan-
cial services markets with regard to whether re-
ciprocal access is available in such markets to
United States financial services providers; and
(B) with respect to any such financial serv-
ices markets in which reciprocal access is not
available to United States financial services
providers, an analysis and recommendations as
to what legislative, regulatory, or enforcement
191
changes would be required to ensure full reci-
procity for such providers.
(3) PERSON
OF
A
FOREIGN
COUNTRY
DE-
FINED.—For purposes of this subsection, the term
‘‘person of a foreign country’’ means a person, or a
person which directly or indirectly owns or controls
that person, that is a resident of that country, is or-
ganized under the laws of that country, or has its
principal place of business in that country.
(b) PROVISIONS APPLICABLE TO SUBMISSIONS.—
(1) NOTICE.—Before preparing any report re-
quired under subsection (a), the Secretary of Com-
merce or the Secretary of the Treasury, as the case
may be, shall publish notice that a report is in prep-
aration and seek comment from United States per-
sons.
(2) PRIVILEGED SUBMISSIONS.—Upon the re-
quest of the submitting person, any comments or re-
lated communications received by the Secretary of
Commerce or the Secretary of the Treasury, as the
case may be, with regard to the report shall, for the
purposes of section 552 of title 5, of the United
States Code, be treated as commercial information
obtained from a person that is privileged or con-
fidential, regardless of the medium in which the in-
192
formation is obtained. This confidential information
shall be the property of the Secretary and shall be
privileged from disclosure to any other person. How-
ever, this privilege shall not be construed as pre-
venting access to that confidential information by
the Congress.
(3) PROHIBITION OF UNAUTHORIZED DISCLO-
SURES.—No person in possession of confidential in-
formation, provided under this section may disclose
that information, in whole or in part, except for dis-
closure made in published statistical material that
does not disclose, either directly or when used in
conjunction with publicly available information, the
confidential information of any person.
Subtitle G—Federal Home Loan
Bank System Modernization
SEC. 161. SHORT TITLE.
This subtitle may be cited as the ‘‘Federal Home
Loan Bank System Modernization Act of 1999’’.
SEC. 162. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12
U.S.C. 1422) is amended—
(1) in paragraph (1), by striking ‘‘term ‘Board’
means’’ and inserting ‘‘terms ‘Finance Board’ and
‘Board’ mean’’;
193
(2) by striking paragraph (3) and inserting the
following:
‘‘(3) STATE.—The term ‘State’, in addition to
the States of the United States, includes the District
of Columbia, Guam, Puerto Rico, the United States
Virgin Islands, American Samoa, and the Common-
wealth of the Northern Mariana Islands.’’; and
(3) by adding at the end the following new
paragraph:
‘‘(13) COMMUNITY FINANCIAL INSTITUTION.—
‘‘(A) IN GENERAL.—The term ‘community
financial institution’ means a member—
‘‘(i) the deposits of which are insured
under the Federal Deposit Insurance Act;
and
‘‘(ii) that has, as of the date of the
transaction 
at 
issue, 
less 
than
$500,000,000 in average total assets,
based on an average of total assets over
the 3 years preceding that date.
‘‘(B) ADJUSTMENTS.—The $500,000,000
limit referred to in subparagraph (A)(ii) shall
be adjusted annually by the Finance Board,
based on the annual percentage increase, if any,
in the Consumer Price Index for all urban con-
194
sumers, as published by the Department of
Labor.’’.
SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners’ Loan Act (12
U.S.C. 1464(f)) is amended to read as follows:
‘‘(f) FEDERAL HOME LOAN BANK MEMBERSHIP.—
On and after January 1, 1999, a Federal savings associa-
tion may become a member of the Federal Home Loan
Bank System, and shall qualify for such membership in
the manner provided by the Federal Home Loan Bank
Act.’’.
SEC. 164. ADVANCES TO MEMBERS; COLLATERAL.
(a) IN GENERAL.—Section 10(a) of the Federal
Home Loan Bank Act (12 U.S.C. 1430(a)) is amended—
(1) by redesignating paragraphs (1) through
(4) as subparagraphs (A) through (D), respectively,
and indenting appropriately;
(2) by striking ‘‘(a) Each’’ and inserting the
following:
‘‘(a) IN GENERAL.—
‘‘(1) ALL ADVANCES.—Each’’;
(3) by striking the second sentence and insert-
ing the following:
‘‘(2) PURPOSES
OF
ADVANCES.—A long-term
advance may only be made for the purposes of—
195
‘‘(A) providing funds to any member for
residential housing finance; and
‘‘(B) providing funds to any community fi-
nancial institution for small business, agricul-
tural, rural development, or low-income commu-
nity development lending.’’;
(4) by striking ‘‘A Bank’’ and inserting the fol-
lowing:
‘‘(3) COLLATERAL.—A Bank’’;
(5) in paragraph (3) (as so designated by para-
graph (4) of this subsection)—
(A) in subparagraph (C) (as so redesig-
nated by paragraph (1) of this subsection) by
striking ‘‘Deposits’’ and inserting ‘‘Cash or de-
posits’’;
(B) in subparagraph (D) (as so redesig-
nated by paragraph (1) of this subsection), by
striking the second sentence; and
(C) by inserting after subparagraph (D)
(as so redesignated by paragraph (1) of this
subsection) the following new subparagraph:
‘‘(E) Secured loans for small business, ag-
riculture, rural development, or low-income
community development, or securities rep-
resenting a whole interest in such secured
196
loans, in the case of any community financial
institution.’’;
(6) in paragraph (5)—
(A) in the second sentence, by striking
‘‘and the Board’’;
(B) in the third sentence, by striking
‘‘Board’’ and inserting ‘‘Federal home loan
bank’’; and
(C) by striking ‘‘(5) Paragraphs (1)
through (4)’’ and inserting the following:
‘‘(4) ADDITIONAL BANK AUTHORITY.—Subpara-
graphs (A) through (E) of paragraph (3)’’; and
(7) by adding at the end the following:
‘‘(5) REVIEW OF CERTAIN COLLATERAL STAND-
ARDS.—The Board may review the collateral stand-
ards applicable to each Federal home loan bank for
the classes of collateral described in subparagraphs
(D) and (E) of paragraph (3), and may, if necessary
for safety and soundness purposes, require an in-
crease in the collateral standards for any or all of
those classes of collateral.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section, the terms ‘small business’, ‘agriculture’,
‘rural development’, and ‘low-income community de-
197
velopment’ shall have the meanings given those
terms by rule or regulation of the Finance Board.’’.
(b) CLERICAL AMENDMENT.—The section heading
for section 10 of the Federal Home Loan Bank Act (12
U.S.C. 1430) is amended to read as follows:
‘‘SEC. 10. ADVANCES TO MEMBERS.’’.
(c) CONFORMING AMENDMENTS RELATING TO MEM-
BERS WHICH ARE NOT QUALIFIED THRIFT LENDERS—
The first of the 2 subsections designated as subsection (e)
of section 10 of the Federal Home Loan Bank Act (12
U.S.C. 1430(e)(1)) is amended—
(1) in the last sentence of paragraph (1), by in-
serting ‘‘or, in the case of any community financial
institution, for the purposes described in subsection
(a)(2)’’ before the period; and
(2) in paragraph (5)(C), by inserting ‘‘except
that, in determining the actual thrift investment per-
centage of any community financial institution for
purposes of this subsection, the total investment of
such member in loans for small business, agri-
culture, rural development, or low-income commu-
nity development, or securities representing a whole
interest in such loans, shall be treated as a qualified
thrift investment (as defined in such section 10(m))’’
before the period.
198
SEC. 165. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1424(a)) is amended—
(1) in paragraph (2)(A), by inserting, ‘‘(other
than a community financial institution)’’ after ‘‘in-
stitution’’; and
(2) by adding at the end the following new
paragraph:
‘‘(3) LIMITED EXEMPTION FOR COMMUNITY FI-
NANCIAL INSTITUTIONS.—A community financial in-
stitution that otherwise meets the requirements of
paragraph (2) may become a member without regard
to the percentage of its total assets that is rep-
resented by residential mortgage loans, as described
in subparagraph (A) of paragraph (2).’’.
SEC. 166. MANAGEMENT OF BANKS.
(a) BOARD OF DIRECTORS.—Section 7(d) of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1427(d)) is
amended—
(1) by striking ‘‘(d) The term’’ and inserting
the following:
‘‘(d) TERMS OF OFFICE.—The term’’; and
(2) by striking ‘‘shall be two years’’.
(b) COMPENSATION.—Section 7(i) of the Federal
Home Loan Bank Act (12 U.S.C. 1427(i)) is amended by
striking ‘‘, subject to the approval of the board’’.
199
(c) REPEAL OF SECTIONS 22A AND 27.—The Fed-
eral Home Loan Bank Act (12 U.S.C. 1421 et seq.) is
amended by striking sections 22A (12 U.S.C. 1442a) and
27 (12 U.S.C. 1447).
(d) SECTION 12.—Section 12 of the Federal Home
Loan Bank Act (12 U.S.C. 1432) is amended—
(1) in subsection (a)—
(A) by striking ‘‘, but, except’’ and all that
follows through ‘‘ten years’’;
(B) by striking ‘‘subject to the approval of
the Board’’ the first place that term appears;
(C) by striking ‘‘and, by its Board of direc-
tors,’’ and all that follows through ‘‘agent of
such bank,’’ and inserting ‘‘and, by the board
of directors of the bank, to prescribe, amend,
and repeal by-laws governing the manner in
which its affairs may be administered, con-
sistent with applicable laws and regulations, as
administered by the Finance Board. No officer,
employee, attorney, or agent of a Federal home
loan bank’’; and
(D) by striking ‘‘Board of directors’’ where
such term appears in the penultimate sentence
and inserting ‘‘board of directors’’; and
200
(2) in subsection (b), by striking ‘‘loans banks’’
and inserting ‘‘loan banks’’.
(e) POWERS AND DUTIES OF FEDERAL HOUSING FI-
NANCE BOARD.—
(1) ISSUANCE OF NOTICES OF VIOLATIONS.—
Section 2B(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1422b(a)) is amended by adding at the
end the following new paragraphs:
‘‘(5) To issue and serve a notice of charges
upon a Federal home loan bank or upon any execu-
tive officer or director of a Federal home loan bank
if, in the determination of the Finance Board, the
bank, executive officer, or director is engaging or
has engaged in, or the Finance Board has reason-
able cause to believe that the bank, executive officer,
or director is about to engage in, any conduct that
violates any provision of this Act or any law, order,
rule, or regulation or any condition imposed in writ-
ing by the Finance Board in connection with the
granting of any application or other request by the
bank, or any written agreement entered into by the
bank with the agency, in accordance with the proce-
dures provided in section 1371(c) of the Federal
Housing Enterprises Financial Safety and Sound-
ness Act of 1992. Such authority includes the same
201
authority to take affirmative action to correct condi-
tions resulting from violations or practices or to
limit activities of a bank or any executive officer or
director of a bank as appropriate Federal banking
agencies have to take with respect to insured deposi-
tory institutions under paragraphs (6) and (7) of
section 8(b) of the Federal Deposit Insurance Act,
and to have all other powers, rights, and duties to
enforce this Act with respect to the Federal home
loan banks and their executive officers and directors
as the Office of Federal Housing Enterprise Over-
sight has to enforce the Federal Housing Enter-
prises Financial Safety and Soundness Act of 1992,
the Federal National Mortgage Association Charter
Act, or the Federal Home Loan Mortgage Corpora-
tion Act with respect to the Federal housing enter-
prises under the Federal Housing Enterprises Fi-
nancial Safety and Soundness Act of 1992.
‘‘(6) To address any insufficiencies in capital
levels resulting from the application of section 5(f)
of the Home Owners’ Loan Act.
‘‘(7) To sue and be sued, by and through its
own attorneys.’’.
(2) TECHNICAL AMENDMENT.—Section 111 of
Public Law 93–495 (12 U.S.C. 250) is amended by
202
striking ‘‘Federal Home Loan Bank Board,’’ and in-
serting ‘‘Director of the Office of Thrift Supervision,
‘‘the Federal Housing Finance Board,’’.
(f) ELIGIBILITY TO SECURE ADVANCES.—
(1) SECTION
9.—Section 9 of the Federal
Home Loan Bank Act (12 U.S.C. 1429) is
amended—
(A) in the second sentence, by striking
‘‘with the approval of the Board’’; and
(B) in the third sentence, by striking ‘‘,
subject to the approval of the Board,’’.
(2) SECTION
10.—Section 10 of the Federal
Home Loan Bank Act (12 U.S.C. 1430) is
amended—
(A) in subsection (c)—
(i) in the first sentence, by striking
‘‘Board’’ and inserting ‘‘Federal home loan
bank’’; and
(ii) by striking the second sentence;
(B) in subsection (d)—
(i) in the first sentence, by striking
‘‘and the approval of the Board’’; and
(ii) by striking ‘‘Subject to the ap-
proval of the Board, any’’ and inserting
‘‘Any’’; and
203
(C) in subsection (j)(1)—
(i) by striking ‘‘to subsidize the inter-
est rate on advances’’ and inserting ‘‘to
provide subsidies, including subsidized in-
terest rates on advances’’;
(ii) by striking ‘‘Pursuant’’ and in-
serting the following:
‘‘(A) ESTABLISHMENT.—Pursuant’’; and
(iii) by adding at the end the fol-
lowing new subparagraph:
‘‘(B) NONDELEGATION OF APPROVAL AU-
THORITY.—Subject to such regulations as the
Finance Board may prescribe, the board of di-
rectors of each Federal home loan bank may
approve or disapprove requests from members
for Affordable Housing Program subsidies, and
may not delegate such authority.’’.
(g) SECTION 16.—Section 16(a) of the Federal Home
Loan Bank Act (12 U.S.C. 1436(a)) is amended—
(1) in the third sentence—
(A) by striking ‘‘net earnings’’ and insert-
ing ‘‘previously retained earnings or current net
earnings’’; and
204
(B) by striking ‘‘, and then only with the
approval of the Federal Housing Finance
Board’’; and
(2) by striking the fourth sentence.
(h) SECTION 18.—Section 18(b) of the Federal Home
Loan Bank Act (12 U.S.C. 1438(b)) is amended by strik-
ing paragraph (4).
SEC. 167. RESOLUTION FUNDING CORPORATION.
(a) IN GENERAL.—Section 21B(f)(2)(C) of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is
amended to read as follows:
‘‘(C) PAYMENTS BY FEDERAL HOME LOAN
BANKS.—
‘‘(i) IN GENERAL.—To the extent that
the amounts available pursuant to sub-
paragraphs (A) and (B) are insufficient to
cover the amount of interest payments,
each Federal home loan bank shall pay to
the Funding Corporation in each calendar
year, 20.75 percent of the net earnings of
that bank (after deducting expenses relat-
ing to section 10(j) and operating ex-
penses).
‘‘(ii) ANNUAL DETERMINATION.—The
Board annually shall determine the extent
205
to which the value of the aggregate
amounts paid by the Federal home loan
banks exceeds or falls short of the value of
an annuity of $300,000,000 per year that
commences on the issuance date and ends
on the final scheduled maturity date of the
obligations, and shall select appropriate
present value factors for making such de-
terminations.
‘‘(iii) 
PAYMENT
TERM
ALTER-
ATIONS.—The Board shall extend or short-
en the term of the payment obligations of
a Federal home loan bank under this sub-
paragraph as necessary to ensure that the
value of all payments made by the banks
is equivalent to the value of an annuity re-
ferred to in clause (ii).
‘‘(iv) TERM
BEYOND
MATURITY.—If
the Board extends the term of payments
beyond the final scheduled maturity date
for the obligations, each Federal home loan
bank shall continue to pay 20.75 percent
of its net earnings (after deducting ex-
penses relating to section 10(j) and oper-
ating expenses) to the Treasury of the
206
United States until the value of all such
payments by the Federal home loan banks
is equivalent to the value of an annuity re-
ferred to in clause (ii). In the final year in
which the Federal home loan banks are re-
quired to make any payment to the Treas-
ury under this subparagraph, if the dollar
amount represented by 20.75 percent of
the net earnings of the Federal home loan
banks exceeds the remaining obligation of
the banks to the Treasury, the Finance
Board shall reduce the percentage pro rata
to a level sufficient to pay the remaining
obligation.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall become effective on January 1, 1999.
Payments made by a Federal home loan bank before that
effective date shall be counted toward the total obligation
of that bank under section 21B(f)(2)(C) of the Federal
Home Loan Bank Act, as amended by this section.
SEC. 168. CAPITAL STRUCTURE OF FEDERAL HOME LOAN
BANKS.
Section 6 of the Federal Home Loan Bank Act (12
U.S.C. 1426) is amended to read as follows:
207
‘‘SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN
BANKS.
‘‘(a) REGULATIONS.—
‘‘(1) CAPITAL STANDARDS.—Not later than 1
year after the date of the enactment of the Financial
Services Act of 1999, the Finance Board shall issue
regulations prescribing uniform capital standards
applicable to each Federal home loan bank, which
shall require each such bank to meet—
‘‘(A) the leverage requirement specified in
paragraph (2); and
‘‘(B) the risk-based capital requirements,
in accordance with paragraph (3).
‘‘(2) LEVERAGE REQUIREMENT.—
‘‘(A) IN GENERAL.—The leverage require-
ment shall require each Federal home loan
bank to maintain a minimum amount of total
capital based on the aggregate on-balance sheet
assets of the bank and shall be 5 percent.
‘‘(B) TREATMENT
OF
STOCK
AND
RE-
TAINED EARNINGS.—In determining compliance
with the minimum leverage ratio established
under subparagraph (A), the paid-in value of
the outstanding Class B stock shall be multi-
plied by 1.5, the paid-in value of the out-
standing Class C stock and the amount of re-
208
tained earnings shall be multiplied by 2.0, and
such higher amounts shall be deemed to be cap-
ital for purposes of meeting the 5 percent min-
imum leverage ratio.
‘‘(3) RISK-BASED CAPITAL STANDARDS.—
‘‘(A) IN
GENERAL.—Each Federal home
loan bank shall maintain permanent capital in
an amount that is sufficient, as determined in
accordance with the regulations of the Finance
Board, to meet—
‘‘(i) the credit risk to which the Fed-
eral home loan bank is subject; and
‘‘(ii) the market risk, including inter-
est rate risk, to which the Federal home
loan bank is subject, based on a stress test
established by the Finance Board that rig-
orously tests for changes in market vari-
ables, including changes in interest rates,
rate volatility, and changes in the shape of
the yield curve.
‘‘(B) CONSIDERATION
OF
OTHER
RISK-
BASED STANDARDS.—In establishing the risk-
based standard under subparagraph (A)(ii), the
Finance Board shall take due consideration of
any risk-based capital test established pursuant
209
to section 1361 of the Federal Housing Enter-
prises Financial Safety and Soundness Act of
1992 (12 U.S.C. 4611) for the enterprises (as
defined in that Act), with such modifications as
the Finance Board determines to be appro-
priate to reflect differences in operations be-
tween the Federal home loan banks and those
enterprises.
‘‘(4) OTHER
REGULATORY
REQUIREMENTS.—
The regulations issued by the Finance Board under
paragraph (1) shall—
‘‘(A) permit each Federal home loan bank
to issue, with such rights, terms, and pref-
erences, not inconsistent with this Act and the
regulations issued hereunder, as the board of
directors of that bank may approve, any one or
more of—
‘‘(i) Class A stock, which shall be re-
deemable in cash and at par 6 months fol-
lowing submission by a member of a writ-
ten notice of its intent to redeem such
shares;
‘‘(ii) Class B stock, which shall be re-
deemable in cash and at par 5 years fol-
lowing submission by a member of a writ-
210
ten notice of its intent to redeem such
shares; and
‘‘(iii) Class C stock, which shall be
nonredeemable;
‘‘(B) provide that the stock of a Federal
home loan bank may be issued to and held by
only members of the bank, and that a bank
may not issue any stock other than as provided
in this section;
‘‘(C) prescribe the manner in which stock
of a Federal home loan bank may be sold,
transferred, redeemed, or repurchased; and
‘‘(D) provide the manner of disposition of
outstanding stock held by, and the liquidation
of any claims of the Federal home loan bank
against, an institution that ceases to be a mem-
ber of the bank, through merger or otherwise,
or that provides notice of intention to withdraw
from membership in the bank.
‘‘(5) DEFINITIONS OF CAPITAL.—For purposes
of determining compliance with the capital standards
established under this subsection—
‘‘(A) permanent capital of a Federal home
loan bank shall include (as determined in ac-
211
cordance with generally accepted accounting
principles)—
‘‘(i) the amounts paid for the Class C
stock and any other nonredeemable stock
approved by the Finance Board;
‘‘(ii) the amounts paid for the Class B
stock, in an amount not to exceed 1 per-
cent of the total assets of the bank; and
‘‘(iii) the retained earnings of the
bank; and
‘‘(B) total capital of a Federal home loan
bank shall include—
‘‘(i) permanent capital;
‘‘(ii) the amounts paid for the Class A
stock, Class B stock (excluding any
amount treated as permanent capital
under subparagraph (5)(A)(ii)), or any
other class of redeemable stock approved
by the Finance Board;
‘‘(iii) consistent with generally accept-
ed accounting principles, and subject to the
regulation of the Finance Board, a general
allowance for losses, which may not include
any reserves or allowances made or held
against specific assets; and
212
‘‘(iv) any other amounts from sources
available to absorb losses incurred by the
bank that the Finance Board determines
by regulation to be appropriate to include
in determining total capital.
‘‘(6) TRANSITION
PERIOD.—Notwithstanding
any other provisions of this Act, the requirements
relating to purchase and retention of capital stock of
a Federal home loan bank by any member thereof in
effect on the day before the date of the enactment
of the Federal Home Loan Bank System Moderniza-
tion Act of 1999, shall continue in effect with re-
spect to each Federal home loan bank until the reg-
ulations required by this subsection have taken ef-
fect and the capital structure plan required by sub-
section (b) has been approved by the Finance Board
and implemented by such bank.
‘‘(b) CAPITAL STRUCTURE PLAN.—
‘‘(1) APPROVAL OF PLANS.—Not later than 270
days after the date of publication by the Finance
Board of final regulations in accordance with sub-
section (a), the board of directors of each Federal
home loan bank shall submit for Finance Board ap-
proval a plan establishing and implementing a cap-
ital structure for such bank that—
213
‘‘(A) the board of directors determines is
best suited for the condition and operation of
the bank and the interests of the members of
the bank;
‘‘(B) meets the requirements of subsection
(c); and
‘‘(C) meets the minimum capital standards
and requirements established under subsection
(a) and other regulations prescribed by the Fi-
nance Board.
‘‘(2) 
APPROVAL
OF
MODIFICATIONS.—The
board of directors of a Federal home loan bank shall
submit to the Finance Board for approval any modi-
fications that the bank proposes to make to an ap-
proved capital structure plan.
‘‘(c) CONTENTS
OF PLAN.—The capital structure
plan of each Federal home loan bank shall contain provi-
sions addressing each of the following:
‘‘(1) MINIMUM INVESTMENT.—
‘‘(A) IN GENERAL.—Each capital structure
plan of a Federal home loan bank shall require
each member of the bank to maintain a min-
imum investment in the stock of the bank, the
amount of which shall be determined in a man-
ner to be prescribed by the board of directors
214
of each bank and to be included as part of the
plan.
‘‘(B) INVESTMENT ALTERNATIVES.—
‘‘(i) IN GENERAL.—In establishing the
minimum investment required for each
member under subparagraph (A), a Fed-
eral home loan bank may, in its discretion,
include any one or more of the require-
ments referred to in clause (ii), or any
other provisions approved by the Finance
Board.
‘‘(ii) AUTHORIZED REQUIREMENTS.—
A requirement is referred to in this clause
if it is a requirement for—
‘‘(I) a stock purchase based on a
percentage of the total assets of a
member; or
‘‘(II) a stock purchase based on a
percentage of the outstanding ad-
vances from the bank to the member.
‘‘(C) MINIMUM
AMOUNT.—Each capital
structure plan of a Federal home loan bank
shall require that the minimum stock invest-
ment established for members shall be set at a
level that is sufficient for the bank to meet the
215
minimum capital requirements established by
the Finance Board under subsection (a).
‘‘(D) ADJUSTMENTS
TO
MINIMUM
RE-
QUIRED
INVESTMENT.—The capital structure
plan of each Federal home loan bank shall im-
pose a continuing obligation on the board of di-
rectors of the bank to review and adjust the
minimum investment required of each member
of that bank, as necessary to ensure that the
bank remains in compliance with applicable
minimum capital levels established by the Fi-
nance Board, and shall require each member to
comply promptly with any adjustments to the
required minimum investment.
‘‘(2) TRANSITION RULE.—
‘‘(A) IN GENERAL.—The capital structure
plan of each Federal home loan bank shall
specify the date on which it shall take effect,
and may provide for a transition period of not
longer than 3 years to allow the bank to come
into compliance with the capital requirements
prescribed under subsection (a), and to allow
any institution that was a member of the bank
on the date of the enactment of the Financial
Services Act of 1999, to come into compliance
216
with the minimum investment required pursu-
ant to the plan.
‘‘(B) 
INTERIM
PURCHASE
REQUIRE-
MENTS.—The capital structure plan of a Fed-
eral home loan bank may allow any member re-
ferred to in subparagraph (A) that would be re-
quired by the terms of the capital structure
plan to increase its investment in the stock of
the bank to do so in periodic installments dur-
ing the transition period.
‘‘(3) DISPOSITION
OF
SHARES.—The capital
structure plan of a Federal home loan bank shall
provide for the manner of disposition of any stock
held by a member of that bank that terminates its
membership or that provides notice of its intention
to withdraw from membership in that bank.
‘‘(4) CLASSES OF STOCK.—
‘‘(A) IN GENERAL.—The capital structure
plan of a Federal home loan bank shall afford
each member of that bank the option of main-
taining its required investment in the bank
through the purchase of any combination of
classes of stock authorized by the board of di-
rectors of the bank and approved by the Fi-
nance Board in accordance with its regulations.
217
‘‘(B) RIGHTS REQUIREMENT.—A Federal
home loan bank shall include in its capital
structure plan provisions establishing terms,
rights, and preferences, including minimum in-
vestment, dividends, voting, and liquidation
preferences of each class of stock issued by the
bank, consistent with Finance Board regula-
tions and market requirements.
‘‘(C) REDUCED MINIMUM INVESTMENT.—
The capital structure plan of a Federal home
loan bank may provide for a reduced minimum
stock investment for any member of that bank
that elects to purchase Class B, Class C, or any
other class of nonredeemable stock, in a manner
that is consistent with meeting the minimum
capital requirements of the bank, as established
by the Finance Board.
‘‘(D) LIQUIDATION OF CLAIMS.—The cap-
ital structure plan of a Federal home loan bank
shall provide for the liquidation in an orderly
manner, as determined by the bank, of any
claim of that bank against a member, including
claims for any applicable prepayment fees or
penalties resulting from prepayment of ad-
vances prior to stated maturity.
218
‘‘(5) LIMITED TRANSFERABILITY OF STOCK.—
The capital structure plan of a Federal home loan
bank shall—
‘‘(A) provide that—
‘‘(i) any stock issued by that bank
shall be available only to, held only by, and
tradable only among members of that bank
and between that bank and its members;
and
‘‘(ii) a bank has no obligation to re-
purchase its outstanding Class C stock but
may do so, provided it is consistent with
Finance Board regulations and is at a
price that is mutually agreeable to the
bank and the member; and
‘‘(B) establish standards, criteria, and re-
quirements for the issuance, purchase, transfer,
retirement, and redemption of stock issued by
that bank.
‘‘(6) BANK REVIEW OF PLAN.—Before filing a
capital structure plan with the Finance Board, each
Federal home loan bank shall conduct a review of
the plan by—
‘‘(A) an independent certified public ac-
countant, to ensure, to the extent possible, that
219
implementation of the plan would not result in
any write-down of the redeemable bank stock
investment of its members; and
‘‘(B) at least one major credit rating agen-
cy, to determine, to the extent possible, whether
implementation of the plan would have any ma-
terial effect on the credit ratings of the bank.
‘‘(d) TERMINATION OF MEMBERSHIP.—
‘‘(1) VOLUNTARY WITHDRAWAL.—Any member
may withdraw from a Federal home loan bank by
providing written notice to the bank of its intent to
do so. The applicable stock redemption notice peri-
ods shall commence upon receipt of the notice by the
bank. Upon the expiration of the applicable notice
period for each class of redeemable stock, the mem-
ber may surrender such stock to the bank, and shall
be entitled to receive in cash the par value of the
stock. During the applicable notice periods, the
member shall be entitled to dividends and other
membership rights commensurate with continuing
stock ownership.
‘‘(2) INVOLUNTARY WITHDRAWAL.—
‘‘(A) IN GENERAL.—The board of directors
of a Federal home loan bank may terminate the
220
membership of any institution if, subject to Fi-
nance Board regulations, it determines that—
‘‘(i) the member has failed to comply
with a provision of this Act or any regula-
tion prescribed under this Act; or
‘‘(ii) the member has been determined
to be insolvent, or otherwise subject to the
appointment of a conservator, receiver, or
other legal custodian, by a State or Fed-
eral authority with regulatory and super-
visory responsibility for the member.
‘‘(B) STOCK DISPOSITION.—An institution,
the membership of which is terminated in ac-
cordance with subparagraph (A)—
‘‘(i) shall surrender redeemable stock
to the Federal home loan bank, and shall
receive in cash the par value of the stock,
upon the expiration of the applicable notice
period under subsection (a)(4)(A);
‘‘(ii) shall receive any dividends de-
clared on its redeemable stock, during the
applicable notice period under subsection
(a)(4)(A); and
221
‘‘(iii) shall not be entitled to any other
rights or privileges accorded to members
after the date of the termination.
‘‘(C) COMMENCEMENT
OF
NOTICE
PE-
RIOD.—With respect to an institution, the
membership of which is terminated in accord-
ance with subparagraph (A), the applicable no-
tice period under subsection (a)(4) for each
class of redeemable stock shall commence on
the earlier of—
‘‘(i) the date of such termination; or
‘‘(ii) the date on which the member
has provided notice of its intent to redeem
such stock.
‘‘(3) LIQUIDATION OF INDEBTEDNESS.—Upon
the termination of the membership of an institution
for any reason, the outstanding indebtedness of the
member to the bank shall be liquidated in an orderly
manner, as determined by the bank and, upon the
extinguishment of all such indebtedness, the bank
shall return to the member all collateral pledged to
secure the indebtedness.
‘‘(e) REDEMPTION OF EXCESS STOCK.—
‘‘(1) IN GENERAL.—A Federal home loan bank,
in its sole discretion, may redeem or repurchase, as
222
appropriate, any shares of Class A or Class B stock
issued by the bank and held by a member that are
in excess of the minimum stock investment required
of that member.
‘‘(2) EXCESS STOCK.—Shares of stock held by
a member shall not be deemed to be ‘excess stock’
for purposes of this subsection by virtue of a mem-
ber’s submission of a notice of intent to withdraw
from membership or termination of its membership
in any other manner.
‘‘(3) PRIORITY.—A Federal home loan bank
may not redeem any excess Class B stock prior to
the end of the 5-year notice period, unless the mem-
ber has no Class A stock outstanding that could be
redeemed as excess.
‘‘(f) IMPAIRMENT
OF CAPITAL.—If the Finance
Board or the board of directors of a Federal home loan
bank determines that the bank has incurred or is likely
to incur losses that result in or are expected to result in
charges against the capital of the bank, the bank shall
not redeem or repurchase any stock of the bank without
the prior approval of the Finance Board while such
charges are continuing or are expected to continue. In no
case may a bank redeem or repurchase any applicable cap-
223
ital stock if, following the redemption, the bank would fail
to satisfy any minimum capital requirement.
‘‘(g) REJOINING
AFTER
DIVESTITURE
OF
ALL
SHARES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), and notwithstanding any other provision
of this Act, an institution that divests all shares of
stock in a Federal home loan bank may not, after
such divestiture, acquire shares of any Federal home
loan bank before the end of the 5-year period begin-
ning on the date of the completion of such divesti-
ture, unless the divestiture is a consequence of a
transfer of membership on an uninterrupted basis
between banks.
‘‘(2) EXCEPTION
FOR
WITHDRAWALS
FROM
MEMBERSHIP
BEFORE
1998.—Any institution that
withdrew from membership in any Federal home
loan bank before December 31, 1997, may acquire
shares of a Federal home loan bank at any time
after that date, subject to the approval of the Fi-
nance Board and the requirements of this Act.
‘‘(h) TREATMENT OF RETAINED EARNINGS.—
‘‘(1) IN GENERAL.—The holders of the Class C
stock of a Federal home loan bank, and any other
classes of nonredeemable stock approved by the Fi-
224
nance Board (to the extent provided in the terms
thereof), shall own the retained earnings, surplus,
undivided profits, and equity reserves, if any, of the
bank.
‘‘(2) 
NO
NONREDEEMABLE
CLASSES
OF
STOCK.—If a Federal home loan bank has no out-
standing Class C or other such nonredeemable stock,
then the holders of any other classes of stock of the
bank then outstanding shall have ownership in, and
a private property right in, the retained earnings,
surplus, undivided profits, and equity reserves, if
any, of the bank.
‘‘(3) EXCEPTION.—Except as specifically pro-
vided in this section or through the declaration of a
dividend or a capital distribution by a Federal home
loan bank, or in the event of liquidation of the bank,
a member shall have no right to withdraw or other-
wise receive distribution of any portion of the re-
tained earnings of the bank.
‘‘(4) LIMITATION.—A Federal home loan bank
may not make any distribution of its retained earn-
ings unless, following such distribution, the bank
would continue to meet all applicable capital require-
ments.’’.
225
Subtitle H—ATM Fee Reform
SEC. 171. SHORT TITLE.
This subtitle may be cited as the ‘‘ATM Fee Reform
Act of 1999’’.
SEC. 172. ELECTRONIC FUND TRANSFER FEE DISCLOSURES
AT ANY HOST ATM.
Section 904(d) of the Electronic Fund Transfer Act
(15 U.S.C. 1693b(d)) is amended by adding at the end
the following new paragraph:
‘‘(3) FEE DISCLOSURES AT AUTOMATED TELL-
ER MACHINES.—
‘‘(A) IN GENERAL.—The regulations pre-
scribed under paragraph (1) shall require any
automated teller machine operator who imposes
a fee on any consumer for providing host trans-
fer services to such consumer to provide notice
in accordance with subparagraph (B) to the
consumer (at the time the service is provided)
of—
‘‘(i) the fact that a fee is imposed by
such operator for providing the service;
and
‘‘(ii) the amount of any such fee.
‘‘(B) NOTICE REQUIREMENTS.—
226
‘‘(i) ON THE MACHINE.—The notice
required under clause (i) of subparagraph
(A) with respect to any fee described in
such subparagraph shall be posted in a
prominent and conspicuous location on or
at the automated teller machine at which
the electronic fund transfer is initiated by
the consumer; and
‘‘(ii) ON
THE
SCREEN.—The notice
required under clauses (i) and (ii) of sub-
paragraph (A) with respect to any fee de-
scribed in such subparagraph shall appear
on the screen of the automated teller ma-
chine, or on a paper notice issued from
such machine, after the transaction is initi-
ated and before the consumer is irrev-
ocably committed to completing the trans-
action.
‘‘(C) PROHIBITION
ON
FEES
NOT
PROP-
ERLY DISCLOSED AND EXPLICITLY ASSUMED BY
CONSUMER.—No fee may be imposed by any
automated teller machine operator in connec-
tion with any electronic fund transfer initiated
by a consumer for which a notice is required
under subparagraph (A), unless—
227
‘‘(i) the consumer receives such notice
in accordance with subparagraph (B); and
‘‘(ii) the consumer elects to continue
in the manner necessary to effect the
transaction after receiving such notice.
‘‘(D) DEFINITIONS.—For purposes of this
paragraph, the following definitions shall apply:
‘‘(i) ELECTRONIC FUND TRANSFER.—
The term ‘electronic fund transfer’ in-
cludes a transaction which involves a bal-
ance inquiry initiated by a consumer in the
same manner as an electronic fund trans-
fer, whether or not the consumer initiates
a transfer of funds in the course of the
transaction.
‘‘(ii) AUTOMATED
TELLER
MACHINE
OPERATOR.—The term ‘automated teller
machine operator’ means any person
who—
‘‘(I) operates an automated teller
machine at which consumers initiate
electronic fund transfers; and
‘‘(II) is not the financial institu-
tion which holds the account of such
228
consumer from which the transfer is
made.
‘‘(iii) HOST
TRANSFER
SERVICES.—
The term ‘host transfer services’ means
any electronic fund transfer made by an
automated teller machine operator in con-
nection with a transaction initiated by a
consumer at an automated teller machine
operated by such operator.’’.
SEC. 173. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS
WHEN ATM CARD IS ISSUED.
Section 905(a) of the Electronic Fund Transfer Act
(15 U.S.C. 1693c(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(8);
(2) by striking the period at the end of para-
graph (9) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (9) the fol-
lowing new paragraph:
‘‘(10) a notice to the consumer that a fee may
be imposed by—
‘‘(A) an automated teller machine operator
(as defined in section 904(d)(3)(D)(ii)) if the
consumer initiates a transfer from an auto-
mated teller machine which is not operated by
229
the person issuing the card or other means of
access; and
‘‘(B) any national, regional, or local net-
work utilized to effect the transaction.’’.
SEC. 174. FEASIBILITY STUDY.
(a) IN GENERAL.—The Comptroller General of the
United States shall conduct a study of the feasibility of
requiring, in connection with any electronic fund transfer
initiated by a consumer through the use of an automated
teller machine—
(1) a notice to be provided to the consumer be-
fore the consumer is irrevocably committed to com-
pleting the transaction, which clearly states the
amount of any fee which will be imposed upon the
consummation of the transaction by—
(A) any automated teller machine operator
(as defined in section 904(d)(3)(D)(ii) of the
Electronic Fund Transfer Act) involved in the
transaction;
(B) the financial institution holding the ac-
count of the consumer;
(C) any national, regional, or local network
utilized to effect the transaction; and
(D) any other party involved in the trans-
fer; and
230
(2) the consumer to elect to consummate the
transaction after receiving the notice described in
paragraph (1).
(b) FACTORS TO BE CONSIDERED.—In conducting
the study required under subsection (a) with regard to the
notice requirement described in such subsection, the
Comptroller General shall consider the following factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice re-
quirement would have on various sizes and types of
institutions, if implemented.
(4) The period of time which would be reason-
able for implementing any such notice requirement.
(5) The extent to which consumers would ben-
efit from any such notice requirement.
(6) Any other factor the Comptroller General
determines to be appropriate in analyzing the feasi-
bility of imposing any such notice requirement.
(c) REPORT TO THE CONGRESS.—Before the end of
the 6-month period beginning on the date of the enact-
ment of this Act, the Comptroller General shall submit
a report to the Congress containing—
231
(1) the findings and conclusions of the Comp-
troller General in connection with the study required
under subsection (a); and
(2) the recommendation of the Comptroller
General with regard to the question of whether a no-
tice requirement described in subsection (a) should
be implemented and, if so, how such requirement
should be implemented.
SEC. 175. NO LIABILITY IF POSTED NOTICES ARE DAM-
AGED.
Section 910 of the Electronic Fund Transfer Act (15
U.S.C 1693h) is amended by adding at the end the fol-
lowing new subsection:
‘‘(d) EXCEPTION FOR DAMAGED NOTICES.—If the
notice required to be posted pursuant to section
904(d)(3)(B)(i) by an automated teller machine operator
has been posted by such operator in compliance with such
section and the notice is subsequently removed, damaged,
or altered by any person other than the operator of the
automated teller machine, the operator shall have no li-
ability under this section for failure to comply with section
904(d)(3)(B)(i).’’.
232
Subtitle I—Direct Activities of
Banks
SEC. 181. AUTHORITY OF NATIONAL BANKS TO UNDER-
WRITE CERTAIN MUNICIPAL BONDS.
The paragraph designated the Seventh of section
5136 of the Revised Statutes of the United States (12
U.S.C. 24(7)) is amended by adding at the end the fol-
lowing new sentence: ‘‘In addition to the provisions in this
paragraph for dealing in, underwriting or purchasing secu-
rities, the limitations and restrictions contained in this
paragraph as to dealing in, underwriting, and purchasing
investment securities for the national bank’s own account
shall not apply to obligations (including limited obligation
bonds, revenue bonds, and obligations that satisfy the re-
quirements of section 142(b)(1) of the Internal Revenue
Code of 1986) issued by or on behalf of any State or polit-
ical subdivision of a State, including any municipal cor-
porate instrumentality of one or more States, or any pub-
lic agency or authority of any State or political subdivision
of a State, if the national bank is well capitalized (as de-
fined in section 38 of the Federal Deposit Insurance
Act).’’.
233
Subtitle J—Deposit Insurance
Funds
SEC. 186. STUDY OF SAFETY AND SOUNDNESS OF FUNDS.
(a) STUDY REQUIRED.—The Board of Directors of
the Federal Deposit Insurance Corporation shall conduct
a study of the following issues with regard to the Bank
Insurance Fund and the Savings Association Insurance
Fund:
(1) SAFETY AND SOUNDNESS.—The safety and
soundness of the funds and the adequacy of the re-
serve requirements applicable to the funds in light
of—
(A) the size of the insured depository insti-
tutions which are resulting from mergers and
consolidations since the effective date of the
Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994; and
(B) the affiliation of insured depository in-
stitutions with other financial institutions pur-
suant to this Act and the amendments made by
this Act.
(2) CONCENTRATION LEVELS.—The concentra-
tion levels of the funds, taking into account the
number of members of each fund and the geographic
distribution of such members, and the extent to
234
which either fund is exposed to higher risks due to
a regional concentration of members or an insuffi-
cient membership base relative to the size of member
institutions.
(3) MERGER
ISSUES.—Issues relating to the
planned merger of the funds, including the cost of
merging the funds and the manner in which such
costs will be distributed among the members of the
respective funds.
(b) REPORT REQUIRED.—
(1) IN GENERAL.—Before the end of the 9-
month period beginning on the date of the enact-
ment of this Act, the Board of Directors of the Fed-
eral Deposit Insurance Corporation shall submit a
report to the Congress on the study conducted pur-
suant to subsection (a).
(2) CONTENTS OF REPORT.—The report shall
include—
(A) detailed findings of the Board of Di-
rectors with regard to the issues described in
subsection (a);
(B) a description of the plans developed by
the Board of Directors for merging the Bank
Insurance Fund and the Savings Association
Insurance Fund, including an estimate of the
235
amount of the cost of such merger which would
be borne by Savings Association Insurance
Fund members; and
(C) such recommendations for legislative
and administrative action as the Board of Di-
rectors determines to be necessary or appro-
priate to preserve the safety and soundness of
the deposit insurance funds, reduce the risks to
such funds, provide for an efficient merger of
such funds, and for other purposes.
(c) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) INSURED DEPOSITORY INSTITUTION.—The
term ‘‘insured depository institution’’ has the same
meaning as in section 3(c) of the Federal Deposit
Insurance Act.
(2) BIF AND SAIF MEMBERS.—The terms
‘‘Bank Insurance Fund member’’ and ‘‘Savings As-
sociation Insurance Fund member’’ have the same
meanings as in section 7(l) of the Federal Deposit
Insurance Act.
236
SEC. 187. ELIMINATION OF SAIF AND DIF SPECIAL RE-
SERVES.
(a) SAIF SPECIAL RESERVES.—Section 11(a)(6) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(6))
is amended by striking subparagraph (L).
(b) DIF SPECIAL RESERVES.—Section 2704 of the
Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821
note) is amended—
(1) by striking subsection (b); and
(2) in subsection (d)—
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking
‘‘(6) and (7)’’ and inserting ‘‘(5), (6), and (7)’’;
and
(C) in paragraph (6)(C), by striking clause
(ii) and inserting the following:
‘‘(ii) by redesignating paragraph (8)
as paragraph (5).’’.
Subtitle K—Miscellaneous
Provisions
SEC. 191. TERMINATION OF ‘‘KNOW YOUR CUSTOMER’’ REG-
ULATIONS.
(a) IN GENERAL.—None of the proposed regulations
described in subsection (b) may be published in final form
and, to the extent any such regulation has become effec-
237
tive before the date of the enactment of this Act, such
regulation shall cease to be effective as of such date.
(b) PROPOSED
REGULATIONS
DESCRIBED.—The
proposed regulations referred to in subsection (a) are as
follows:
(1) The regulation proposed by the Comptroller
of the Currency to amend part 21 of title 12 of the
Code of Federal Regulations, as published in the
Federal Register on December 7, 1998.
(2) The regulation proposed by the Director of
the Office of Thrift Supervision to amend part 563
of title 12 of the Code of Federal Regulations, as
published in the Federal Register on December 7,
1998.
(3) The regulation proposed by the Board of
Governors of the Federal Reserve System to amend
parts 208, 211, and 225 of title 12 of the Code of
Federal Regulations, as published in the Federal
Register on December 7, 1998.
(4) The regulation proposed by the Federal De-
posit Insurance Corporation to amend part 326 of
title 12 of the Code of Federal Regulations, as pub-
lished in the Federal Register on December 7, 1998.
238
SEC. 192. STUDY AND REPORT ON FEDERAL ELECTRONIC
FUND TRANSFERS.
(a) STUDY.—The Secretary of the Treasury shall
conduct a feasibility study to determine—
(1) whether all electronic payments issued by
Federal agencies could be routed through the Re-
gional Finance Centers of the Department of the
Treasury for verification and reconciliation;
(2) whether all electronic payments made by the
Federal Government could be subjected to the same
level of reconciliation as United States Treasury
checks, including matching each payment issued
with each corresponding deposit at financial institu-
tions;
(3) whether the appropriate computer security
controls are in place in order to ensure the integrity
of electronic payments;
(4) the estimated costs of implementing, if so
recommended, the processes and controls described
in paragraphs (1), (2), and (3); and
(5) a possible timetable for implementing those
processes if so recommended.
(b) REPORT TO CONGRESS.—Not later than October
1, 2000, the Secretary of the Treasury shall submit a re-
port to Congress containing the results of the study re-
quired by subsection (a).
239
(c) DEFINITION.—For purposes of this section, the
term ‘‘electronic payment’’ means any transfer of funds,
other than a transaction originated by check, draft, or
similar paper instrument, which is initiated through an
electronic terminal, telephonic instrument, or computer or
magnetic tapes so as to order, instruct, or authorize a
debit or credit to a financial account.
SEC. 193. GENERAL ACCOUNTING OFFICE STUDY OF CON-
FLICTS OF INTEREST
(a) STUDY REQUIRED.—The Comptroller General of
the United States shall conduct a study analyzing the con-
flict of interest faced by the Board of Governors of the
Federal Reserve System between its role as a primary reg-
ulator of the banking industry and its role as a vendor
of services to the banking and financial services industry.
(b) SPECIFIC CONFLICT REQUIRED
TO BE AD-
DRESSED.—In the course of the study required under sub-
section (a), the Comptroller General shall address the con-
flict of interest faced by the Board of Governors of the
Federal Reserve System between the role of the Board as
a regulator of the payment system, generally, and its par-
ticipation in the payment system as a competitor with pri-
vate entities who are providing payment services.
(c) REPORT TO CONGRESS.—Before the end of the
1-year period beginning on the date of the enactment of
240
this Act, the Comptroller General shall submit a report
to the Congress containing the findings and conclusions
of the Comptroller General in connection with the study
required under this section, together with such rec-
ommendations for such legislative or administrative ac-
tions as the Comptroller General may determine to be ap-
propriate, including recommendations for resolving any
such conflict of interest.
SEC. 194. STUDY OF COST OF ALL FEDERAL BANKING REG-
ULATIONS.
(a) IN GENERAL.—In accordance with the finding in
the Board of Governors of the Federal Reserve System
Staff Study Numbered 171 (April, 1998) that ‘‘Further
research covering more and different types of regulations
and regulatory requirements is clearly needed to make in-
formed decisions about regulations’’, the Board of Gov-
ernors of the Federal Reserve System, in consultation with
the other Federal banking agencies (as defined in section
3 of the Federal Deposit Insurance Act) shall conduct a
comprehensive study of the total annual costs and benefits
of all Federal financial regulations and regulatory require-
ments applicable to banks.
(b) REPORT REQUIRED.—Before the end of the 2-
year period beginning on the date of the enactment of this
Act, the Board of Governors of the Federal Reserve Sys-
241
tem shall submit a comprehensive report to the Congress
containing the findings and conclusions of the Board in
connection with the study required under subsection (a)
and such recommendations for legislative and administra-
tive action as the Board may determine to be appropriate.
SEC. 195. STUDY AND REPORT ON ADAPTING EXISTING
LEGISLATIVE REQUIREMENTS TO ONLINE
BANKING AND LENDING.
(a) STUDY REQUIRED.—The Federal banking agen-
cies shall conduct a study of banking regulations regard-
ing the delivery of financial services, including those regu-
lations that may assume that there will be person-to-per-
son contact during the course of a financial services trans-
action, and report their recommendations on adapting
those existing requirements to online banking and lending.
(b) REPORT REQUIRED.—Within 1 year of the date
of the enactment of this Act, the Federal banking agencies
shall submit a report to the Congress on the findings and
conclusions of the agencies with respect to the study re-
quired under subsection (a), together with such rec-
ommendations for legislative or regulatory action as the
agencies may determine to be appropriate.
(c) DEFINITION.—For purposes of this section, the
term ‘‘Federal banking agencies’’ means each Federal
242
banking agency (as defined in section 3(z) of the Federal
Deposit Insurance Act).
SEC. 196. REGULATION OF UNINSURED STATE MEMBER
BANKS.
Section 9 of the Federal Reserve Act (12 U.S.C. 321
et seq.) is amended by adding at the end the following
new paragraph:
‘‘(24) ENFORCEMENT AUTHORITY OVER UNIN-
SURED STATE MEMBER BANKS.—Section 3(u) of the
Federal Deposit Insurance Act, subsections (j) and
(k) of section 7 of such Act, and subsections (b)
through (n), (s), (u), and (v) of section 8 of such
Act shall apply to an uninsured State member bank
in the same manner and to the same extent such
provisions apply to an insured State member bank
and any reference in any such provision to ‘insured
depository institution’ shall be deemed to be a ref-
erence to ‘uninsured State member bank’ for pur-
poses of this paragraph.’’.
SEC. 197. CLARIFICATION OF SOURCE OF STRENGTH DOC-
TRINE.
Section 18 of the Federal Deposit Insurance Act (21
U.S.C. 1828) is amended by adding at the end the fol-
lowing new subsection:
‘‘(t) LIMITATION ON CLAIMS.—
243
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law other than paragraph (2), no person
shall have any claim for monetary damages or re-
turn of assets or other property against any Federal
banking agency (including in its capacity as conser-
vator or receiver) relating to the transfer of money,
assets, or other property to increase the capital of
an insured depository institution by any depository
institution holding company or controlling share-
holder for such depository institution, or any affil-
iate or subsidiary of such depository institution, if at
the time of the transfer—
‘‘(A) the insured depository institution is
subject to any direction issued in writing by a
Federal banking agency to increase its capital;
‘‘(B) the depository institution is under-
capitalized, significantly undercapitalized, or
critically undercapitalized (as defined in section
38 of this Act); and
‘‘(C) for that portion of the transfer that
is made by an entity covered by section 5(g) of
the Bank Holding Company Act of 1956 or sec-
tion 45 of this Act, the Federal banking agency
has followed the procedure set forth in such
section.
244
‘‘(2) EXCEPTION.—No provision of this sub-
section shall be construed as limiting—
‘‘(A) the right of an insured depository in-
stitution, a depository institution holding com-
pany, or any other agency or person to seek di-
rect review of an order or directive issued by a
Federal banking agency under this Act, the
Bank Holding Company Act of 1956, the Na-
tional Bank Receivership Act, the Bank Con-
servation Act, or the Home Owners’ Loan Act;
‘‘(B) the rights of any party to a contract
pursuant to section 11(e) of this Act; or
‘‘(C) the rights of any party to a contract
with a depository institution holding company
or a subsidiary of a depository institution hold-
ing company (other than an insured depository
institution).’’.
SEC. 198. INTEREST RATES AND OTHER CHARGES AT
INTERSTATE BRANCHES.
Section 44 of the Federal Deposit Insurance Act (12
U.S.C. 1831u) is amended—
(1) by redesignating subsection (f) as sub-
section (g); and
(2) by inserting after subsection (e) the fol-
lowing:
245
‘‘(f) APPLICABLE RATE AND OTHER CHARGE LIMI-
TATIONS.—
‘‘(1) IN GENERAL.—Except as provided for in
paragraph (3), upon the establishment of a branch
of any insured depository institution in a host State
under this section, the maximum interest rate or
amount of interest, discount points, finance charges,
or other similar charges that may be charged, taken,
received, or reserved from time to time in any loan
or discount made or upon any note, bill of exchange,
financing transaction, or other evidence of debt by
any insured depository institution in such State shall
be equal to not more than the greater of—
‘‘(A) the maximum interest rate or amount
of interest, discount points, finance charges, or
other similar charges that may be charged,
taken, received, or reserved in a similar trans-
action under the constitution, statutory, or
other lows of the home State of the insured de-
pository 
institution 
establishing 
any 
such
branch, without reference to this section, as
such maximum interest rate or amount of inter-
est may change from time to time; or
‘‘(B) the maximum rate or amount of in-
terest, discount points, finance charges, or
246
other similar charges that may be charged,
taken, received, or reserved in a similar trans-
action by an insured depository institution
under the constitution, statutory, or other laws
of the host State, without reference to this sec-
tion.
‘‘(2) PREEMPTION.—The limitations established
under paragraph (1) shall apply only in any State
that has a constitutional provision that sets a max-
imum lawful rate of interest on any contract at not
more than 5 percent per annum above the Federal
Reserve Discount Rate or 90-day commercial paper
in effect in the Federal Reserve Bank in the Federal
Reserve District in which the State is located.
‘‘(3) RULE OF CONSTRUCTION.—No provision
of this subsection shall be construed as superseding
section 501 of the Depository Institutions Deregula-
tion and Monetary Control Act of 1980.
SEC. 198A. INTERSTATE BRANCHES AND AGENCIES OF FOR-
EIGN BANKS.
Section 5(a)(7) of the International Banking Act of
1978 (12 U.S.C. 3103(a)(7)), is amended to read as fol-
lows:
‘‘(7) ADDITIONAL AUTHORITY FOR INTERSTATE
BRANCHES AND AGENCIES OF FOREIGN BANKS, UP-
247
GRADES OF CERTAIN FOREIGN BANK AGENCIES AND
BRANCHES.—Notwithstanding paragraphs (1) and
(2), a foreign bank may—
‘‘(A) with the approval of the Board and
the Comptroller of the Currency, establish and
operate a Federal branch or Federal agency or,
with the approval of the Board and the appro-
priate State bank supervisor, a State branch or
State agency in any State outside the foreign
bank’s home State if—
‘‘(i) the establishment and operation
of such branch or agency is permitted by
the State in which the branch or agency is
to be established; and
‘‘(ii) in the case of a Federal or State
branch, the branch receives only such de-
posits as would be permitted for a corpora-
tion organized under section 25A of the
Federal Reserve Act (12 U.S.C. 611 et
seq.); or
‘‘(B) with the approval of the Board and
the relevant licensing authority (the Comp-
troller in the case of a Federal branch or the
appropriate State supervisor in the case of a
State branch), upgrade an agency, or a branch
248
of the type referred to in subparagraph (A)(ii),
located in a State outside the foreign bank’s
home State, into a Federal or State branch if—
‘‘(i) the establishment and operation
of such branch is permitted by such State;
and
‘‘(ii) such agency or branch—
‘‘(I) was in operation in such
State on the day before September 29,
1994; or
‘‘(II) has been in operation in
such State for a period of time that
meets the State’s minimum age re-
quirement permitted under section
44(a)(5) of the Federal Deposit Insur-
ance Act.’’.
SEC. 198B. FAIR TREATMENT OF WOMEN BY FINANCIAL AD-
VISERS.
(a) FINDINGS.—The Congress finds as follows:
(1) Women’s stature in society has risen consid-
erably, as they are now able to vote, own property,
and pursue independent careers, and are granted
equal protection under the law.
(2) Women are at least as fiscally responsible
as men, and more than half of all women have sole
249
responsibility for balancing the family checkbook and
paying the bills.
(3) Estate planners, trust officers, investment
advisers, and other financial planners and advisers
still encourage the unjust and outdated practice of
leaving assets in trust for the category of wives and
daughters, along with senile parents, minors, and
mentally incompetent children.
(4) Estate planners, trust officers, investment
advisers, and other financial planners and advisers
still use sales themes and tactics detrimental to
women by stereotyping women as uncomfortable
handling money and needing protection from their
own possible errors of judgment and ‘‘fortune hunt-
ers’’.
(b) SENSE OF THE CONGRESS.—It is the sense of
the Congress that estate planners, trust officers, invest-
ment advisers, and other financial planners and advisers
should—
(1) eliminate examples in their training mate-
rials which portray women as incapable and foolish;
and
(2) develop fairer and more balanced presen-
tations that eliminate outmoded and stereotypical
250
examples which lead clients to take actions that are
financially detrimental to their wives and daughters.
Subtitle L—Effective Date of Title
SEC. 199. EFFECTIVE DATE.
Except with regard to any subtitle or other provision
of this title for which a specific effective date is provided,
this title and the amendments made by this title shall take
effect at the end of the 180-day period beginning on the
date of the enactment of this Act.
TITLE II—FUNCTIONAL
REGULATION
Subtitle A—Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:
‘‘(4) BROKER.—
‘‘(A) IN
GENERAL.—The term ‘broker’
means any person engaged in the business of
effecting transactions in securities for the ac-
count of others.
‘‘(B) EXCEPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be considered to be
a broker because the bank engages in any one
or more of the following activities under the
conditions described:
251
‘‘(i) THIRD
PARTY
BROKERAGE
AR-
RANGEMENTS.—The bank enters into a
contractual or other written arrangement
with a broker or dealer registered under
this title under which the broker or dealer
offers brokerage services on or off the
premises of the bank if—
‘‘(I) such broker or dealer is
clearly identified as the person per-
forming the brokerage services;
‘‘(II) the broker or dealer per-
forms brokerage services in an area
that is clearly marked and, to the ex-
tent practicable, physically separate
from the routine deposit-taking activi-
ties of the bank;
‘‘(III) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the arrangement clearly indi-
cate that the brokerage services are
being provided by the broker or dealer
and not by the bank;
‘‘(IV) any materials used by the
bank to advertise or promote generally
252
the availability of brokerage services
under the arrangement are in compli-
ance with the Federal securities laws
before distribution;
‘‘(V) bank employees (other than
associated persons of a broker or deal-
er who are qualified pursuant to the
rules of a self-regulatory organization)
perform only clerical or ministerial
functions in connection with broker-
age transactions including scheduling
appointments with the associated per-
sons of a broker or dealer, except that
bank employees may forward cus-
tomer funds or securities and may de-
scribe in general terms the types of
investment vehicles available from the
bank and the broker or dealer under
the arrangement;
‘‘(VI) bank employees do not re-
ceive incentive compensation for any
brokerage transaction unless such em-
ployees are associated persons of a
broker or dealer and are qualified
pursuant to the rules of a self-regu-
253
latory organization, except that the
bank employees may receive com-
pensation for the referral of any cus-
tomer if the compensation is a nomi-
nal one-time cash fee of a fixed dollar
amount and the payment of the fee is
not contingent on whether the referral
results in a transaction;
‘‘(VII) such services are provided
by the broker or dealer on a basis in
which all customers which receive any
services are fully disclosed to the
broker or dealer;
‘‘(VIII) the bank does not carry
a securities account of the customer
except as permitted under clause (ii)
or (viii) of this subparagraph; and
‘‘(IX) the bank, broker, or dealer
informs each customer that the bro-
kerage services are provided by the
broker or dealer and not by the bank
and that the securities are not depos-
its or other obligations of the bank,
are not guaranteed by the bank, and
254
are not insured by the Federal De-
posit Insurance Corporation.
‘‘(ii) TRUST
ACTIVITIES.—The bank
effects transactions in a trustee or fidu-
ciary capacity in its trust department, or
another department where the trust or fi-
duciary activity is regularly examined by
bank examiners under the same standards
and in the same way as such activities are
examined in the trust department, and—
‘‘(I) is chiefly compensated for
such transactions, consistent with fi-
duciary principles and standards, on
the basis of an administration or an-
nual fee (payable on a monthly, quar-
terly, or other basis), a percentage of
assets under management, or a flat or
capped per order processing fee equal
to not more than the cost incurred by
the bank in connection with executing
securities transactions for trustee and
fiduciary customers, or any combina-
tion of such fees; and
‘‘(II) does not solicit brokerage
business, other than by advertising
255
that it effects transactions in securi-
ties in conjunction with advertising its
other trust activities.
‘‘(iii) 
PERMISSIBLE
SECURITIES
TRANSACTIONS.—The bank effects trans-
actions in—
‘‘(I) commercial paper, bankers
acceptances, or commercial bills;
‘‘(II) exempted securities;
‘‘(III) qualified Canadian govern-
ment obligations as defined in section
5136 of the Revised Statutes, in con-
formity with section 15C of this title
and the rules and regulations there-
under, or obligations of the North
American Development Bank; or
‘‘(IV) any standardized, credit
enhanced debt security issued by a
foreign government pursuant to the
March 1989 plan of then Secretary of
the Treasury Brady, used by such for-
eign government to retire outstanding
commercial bank loans.
‘‘(iv) 
CERTAIN
STOCK
PURCHASE
PLANS.—
256
‘‘(I) 
EMPLOYEE
BENEFIT
PLANS.—The 
bank 
effects 
trans-
actions, as a registered transfer agent
(including as a registrar of stocks), in
the securities of an issuer as part of
any pension, retirement, profit-shar-
ing, bonus, thrift, savings, incentive,
or other similar benefit plan for the
employees of that issuer or its affili-
ates (as defined in section 2 of the
Bank Holding Company Act of 1956),
if—
‘‘(aa) the bank does not so-
licit transactions or provide in-
vestment advice with respect to
the purchase or sale of securities
in connection with the plan; and
‘‘(bb) the bank’s compensa-
tion for such plan or program
consists chiefly of administration
fees, or flat or capped per order
processing fees, or both.
‘‘(II) DIVIDEND
REINVESTMENT
PLANS.—The 
bank 
effects 
trans-
actions, as a registered transfer agent
257
(including as a registrar of stocks), in
the securities of an issuer as part of
that issuer’s dividend reinvestment
plan, if—
‘‘(aa) the bank does not so-
licit transactions or provide in-
vestment advice with respect to
the purchase or sale of securities
in connection with the plan;
‘‘(bb) the bank does not net
shareholders’ buy and sell orders,
other than for programs for odd-
lot holders or plans registered
with the Commission; and
‘‘(cc) the bank’s compensa-
tion for such plan or program
consists chiefly of administration
fees, or flat or capped per order
processing fees, or both.
‘‘(III) ISSUER PLANS.—The bank
effects transactions, as a registered
transfer agent (including as a reg-
istrar of stocks), in the securities of
an issuer as part of that issuer’s plan
258
for the purchase or sale of that
issuer’s shares, if—
‘‘(aa) the bank does not so-
licit transactions or provide in-
vestment advice with respect to
the purchase or sale of securities
in connection with the plan or
program;
‘‘(bb) the bank does not net
shareholders’ buy and sell orders,
other than for programs for odd-
lot holders or plans registered
with the Commission; and
‘‘(cc) the bank’s compensa-
tion for such plan or program
consists chiefly of administration
fees, or flat or capped per order
processing fees, or both.
‘‘(IV) PERMISSIBLE
DELIVERY
OF
MATERIALS.—The exception to
being considered a broker for a bank
engaged in activities described in sub-
clauses (I), (II), and (III) will not be
affected by a bank’s delivery of writ-
ten or electronic plan materials to em-
259
ployees of the issuer, shareholders of
the issuer, or members of affinity
groups of the issuer, so long as such
materials are—
‘‘(aa) comparable in scope or
nature to that permitted by the
Commission as of the date of the
enactment of the Financial Serv-
ices Act of 1999; or
‘‘(bb) otherwise permitted by
the Commission.
‘‘(v) SWEEP
ACCOUNTS.—The bank
effects transactions as part of a program
for the investment or reinvestment of de-
posit funds into any no-load, open-end
management investment company reg-
istered under the Investment Company Act
of 1940 that holds itself out as a money
market fund.
‘‘(vi) 
AFFILIATE
TRANSACTIONS.—
The bank effects transactions for the ac-
count of any affiliate (as defined in section
2 of the Bank Holding Company Act of
1956) of the bank other than—
260
‘‘(I) a registered broker or deal-
er; or
‘‘(II) an affiliate that is engaged
in merchant banking, as described in
section 6(c)(3)(H) of the Bank Hold-
ing Company Act of 1956.
‘‘(vii) PRIVATE
SECURITIES
OFFER-
INGS.—The bank—
‘‘(I) effects sales as part of a pri-
mary offering of securities not involv-
ing a public offering, pursuant to sec-
tion 3(b), 4(2), or 4(6) of the Securi-
ties Act of 1933 or the rules and reg-
ulations issued thereunder;
‘‘(II) at any time after the date
that is 1 year after the date of the en-
actment of the Financial Services Act
of 1999, is not affiliated with a broker
or dealer that has been registered for
more than 1 year in accordance with
this Act, and engages in dealing, mar-
ket making, or underwriting activities,
other than with respect to exempted
securities; and
261
‘‘(III) effects transactions exclu-
sively with qualified investors.
‘‘(viii) SAFEKEEPING
AND
CUSTODY
ACTIVITIES.—
‘‘(I) IN GENERAL.—The bank, as
part of customary banking activities—
‘‘(aa) provides safekeeping
or custody services with respect
to securities, including the exer-
cise of warrants and other rights
on behalf of customers;
‘‘(bb) facilitates the transfer
of funds or securities, as a custo-
dian or a clearing agency, in con-
nection with the clearance and
settlement 
of 
its 
customers’
transactions in securities;
‘‘(cc) effects securities lend-
ing or borrowing transactions
with or on behalf of customers as
part of services provided to cus-
tomers pursuant to division (aa)
or (bb) or invests cash collateral
pledged in connection with such
transactions; or
262
‘‘(dd) 
holds 
securities
pledged by a customer to another
person or securities subject to
purchase or resale agreements in-
volving a customer, or facilitates
the pledging or transfer of such
securities by book entry or as
otherwise provided under applica-
ble law, if the bank maintains
records separately identifying the
securities and the customer.
‘‘(II) EXCEPTION FOR CARRYING
BROKER
ACTIVITIES.—The exception
to being considered a broker for a
bank engaged in activities described in
subclause (I) shall not apply if the
bank, in connection with such activi-
ties, acts in the United States as a
carrying broker (as such term, and
different formulations thereof, are
used in section 15(c)(3) of this title
and the rules and regulations there-
under) for any broker or dealer, un-
less such carrying broker activities are
engaged in with respect to government
263
securities (as defined in paragraph
(42) of this subsection).
‘‘(ix) 
EXCEPTED
BANKING
PROD-
UCTS.—The bank effects transactions in
excepted banking products, as defined in
section 206 of the Financial Services Act
of 1999.
‘‘(x) MUNICIPAL
SECURITIES.—The
bank effects transactions in municipal se-
curities.
‘‘(xi) DE
MINIMIS
EXCEPTION.—The
bank effects, other than in transactions re-
ferred to in clauses (i) through (x), not
more than 500 transactions in securities in
any calendar year, and such transactions
are not effected by an employee of the
bank who is also an employee of a broker
or dealer.
‘‘(C) BROKER DEALER EXECUTION.—The
exception to being considered a broker for a
bank engaged in activities described in clauses
(ii), (iv), and (viii) of subparagraph (B) shall
not apply if the activities described in such pro-
visions result in the trade in the United States