Union Calendar No. 217
105TH CONGRESS
1ST SESSION
H. R. 10
[Report No. 105–164, Parts I, II, and III]
A BILL
To enhance competition in the financial services in-
dustry by providing a prudential framework for
the affiliation of banks, securities firms, and
other financial service providers, and for other
purposes.
NOVEMBER 3, 1997
Reported from the Committee on Commerce with an
amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be
printed
IB
Union Calendar No. 217
105TH CONGRESS
1ST SESSION
H. R. 10
[Report No. 105–164, Parts I, II, and III]
To enhance competition in the financial services industry by providing a
prudential framework for the affiliation of banks, securities firms, and
other financial service providers, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 7, 1997
Mr. LEACH (for himself, Mrs. ROUKEMA, Mr. CASTLE, and Mr. LAZIO of New
York) introduced the following bill; which was referred to the Committee
on Banking and Financial Services, and in addition to the Committee on
Commerce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
JULY 3, 1997
Reported from the Committee on Banking and Financial Services with an
amendment
[Strike out all after the enacting clause and insert the part printed in italic]
JULY 3, 1997
Referral to the Committee on Commerce extended for a period ending not
later than September 15, 1997
SEPTEMBER 5, 1997
Referral to the Committee on Commerce extended for a period ending not
later than September 30, 1997
SEPTEMBER 30, 1997
Referral to the Committee on Commerce extended for a period ending not
later than October 31, 1997
OCTOBER 30, 1997
Referral to the Committee on Commerce extended for a period ending not
later than November 3, 1997
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NOVEMBER 3, 1997
Reported from the Committee on Commerce with an amendment, committed
to the Committee of the Whole House on the State of the Union, and
ordered to be printed
[Strike out all after the enacting clause and insert the part printed in boldface roman]
[For text of introduced bill, see copy of bill as introduced on January 7, 1997]
A BILL
To enhance competition in the financial services industry
by providing a prudential framework for the affiliation
of banks, securities firms, and other financial service
providers, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Fi-
nancial Services Competition Act of 1997’’.
(b) PURPOSES.—The purposes of this Act are as fol-
lows:
(1) To ensure the continued safety and soundness
of depository institutions.
(2) To reduce and, to the maximum extent prac-
ticable, to eliminate the legal barriers preventing af-
filiation among depository institutions, securities
firms, insurance companies, and other financial serv-
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ice providers and to provide a prudential framework
for achieving that result.
(3) To enhance competition in the financial serv-
ices industry.
(4) To enhance the availability of financial serv-
ices to citizens of all economic circumstances and in
all geographic areas.
(5) To enhance the competitiveness of United
States financial service providers internationally.
(6) To ensure compliance by depository institu-
tions with the provisions of the Community Reinvest-
ment Act of 1977 and enhance the ability of deposi-
tory institutions to meet the capital and credit needs
of all citizens and communities, including under-
served communities and populations.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; purposes; table of contents.
TITLE I—POWERS AND AFFILIATIONS OF INSURED DEPOSITORY
INSTITUTIONS
Subtitle A—Removing Barriers to Affiliations Between Insured Depository
Institutions and Other Financial Institutions
Sec. 101. Anti-affiliation provisions of ‘‘Glass-Steagall Act’’ repealed.
Sec. 102. Repeal of activity restrictions of Bank Holding Company Act of 1956.
Sec. 103. Qualifying bank holding companies.
Sec. 104. Certain State laws preempted.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106.
Companies not engaged in activities financial in nature.
Sec. 107. Amendment to ensure that banks acquired by other entities do not be-
come deposit production offices.
Sec. 108. Clarification of applicability of branch closure requirements in inter-
state banking operations.
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Subtitle B—Additional Safeguards
Sec. 111. Firewall safeguards.
Sec. 112. Consumer protection.
Sec. 113. Obligations of subsidiaries and affiliates cannot be extended to insured
depository institutions.
Subtitle C—National Council on Financial Services
Sec. 121. Establishment and operation of the council.
Sec. 122. Functions of the council
Sec. 123. Advisory council on community revitalization.
Subtitle D—Bank Holding Company Supervision
Sec. 131. Streamlining bank holding company supervision.
Sec. 132. Administration of the Bank Holding Company Act of 1956.
Sec. 133. Bank holding company capital.
Sec. 134. Authority of State insurance regulator.
Subtitle E—Subsidiaries of Insured Depository Institutions
Sec. 141. Subsidiaries of national banks authorized to engage in financial activi-
ties.
Sec. 142. Activities of subsidiaries of insured State banks.
Sec. 143. Rules applicable to financial subsidiaries.
Subtitle F—Direct Activities of Banks
Sec. 151. Powers of national banks.
Sec. 152. Banking products defined.
Sec. 153. Repeal of stock loan limit in Federal Reserve Act.
Subtitle G—Noninsured Depository Institutions
Sec. 161. Wholesale financial institutions.
Sec. 162. Holding company control of uninsured depository institutions.
Subtitle H—Federal Home Loan Bank System
Sec. 171. Federal home loan banks–
Sec. 172. Membership and collateral.
Sec. 172A. The Office of Finance.
Sec. 172B. Management of banks.
Sec. 173. Advances to nonmember borrowers.
Sec. 174. Powers and duties of banks.
Sec. 174A. Mergers and consolidations of Federal home loan banks.
Sec. 174B. Technical amendments.
Sec. 175. Definitions.
Sec. 176. Resolution funding corporation
Sec. 177. Capital structure of the Federal home loan banks.
Sec. 178. Investments.
Sec. 179. Federal Housing Finance Board.
Subtitle I—Streamlining Antitrust Review of Bank Acquisitions and Mergers
Sec. 181. Amendments to the Bank Holding Company Act of 1956.
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Sec. 182. Amendments to the Federal Deposit Insurance Act to vest in the Attor-
ney General sole responsibility for antitrust review of depository
institution mergers.
Sec. 183. Information filed by depository institutions; interagency data sharing.
Sec. 184. Annual GAO report.
Sec. 185. Applicability of antitrust laws.
Sec. 186. Effective date.
Subtitle J—Redomestication of Mutual Insurers
Sec. 191. Redomestication of mutual insurers.
Sec. 192. Effect on State laws restricting redomestication.
Sec. 193. Definitions.
Sec. 194. Effective date.
Subtitle K—Applying the Principles of National Treatment and Equality of
Competitive Opportunity to Foreign Banks and Foreign Financial Institutions
Sec. 195. Applying the principles of national treatment and equality of competi-
tive opportunity to foreign banks and foreign financial institu-
tions.
Sec. 196. Applying the principles of national treatment and equality of competi-
tive opportunity to foreign banks that are qualifying bank hold-
ing companies.
Sec. 197. Applying the principles of national treatment and equality of competi-
tive opportunity to foreign banks and foreign financial institu-
tions that are wholesale financial institutions.
Subtitle L—Effective Date of Title
Sec. 199. Effective date.
TITLE II—FUNCTIONAL REGULATION
Subtitle A—Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Bank broker and dealer activities.
Sec. 204. Application of this title to banks registered as brokers or dealers.
Sec. 205. Exclusion from SIPC membership of banks registered as brokers or deal-
ers.
Sec. 206. Effective date.
Subtitle B—Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 1940.
Sec. 216. Definition of dealer under the Investment Company Act of 1940.
Sec. 217. Removal of the exclusion from the definition of investment adviser for
banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
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Sec. 222. Investment advisers prohibited from having controlling interest in reg-
istered investment company.
Sec. 223. Conforming change in definition.
Sec. 224. Effective date.
TITLE III—MERGER OF BANK AND THRIFT CHARTERS,
REGULATORS, AND INSURANCE FUNDS
Sec. 301. Short title; definitions.
Subtitle A—Facilitating Conversion of Savings Associations to Banks
Sec. 311. Conversion to State or national banks.
Sec. 312. Mutual national banks and Federal mutual bank holding companies
authorized.
Sec. 313. Grandfathered activities of savings associations.
Sec. 314. Branches of former savings associations.
Sec. 315. Programs for promoting housing finance.
Sec. 316. Savings and loan holding companies.
Sec. 317. Treatment of references in adjustable rate mortgages.
Sec. 318. Cost of funds indexes.
Subtitle B—Ending Separate Federal Regulation of Savings Associations and
Savings and Loan Holding Companies
Sec. 321. State savings associations treated as State banks under Federal banking
law.
Sec. 322. Powers of Federal savings associations accorded to national banks.
Sec. 323. Home Owners’ Loan Act repealed.
Sec. 324. Conforming amendment reflecting elimination of the Federal thrift
charter and the separate system of thrift regulation.
Sec. 325. Conforming amendments to the Federal Home Loan Bank Act.
Sec. 326. Amendments to title 11, United States Code.
Subtitle C—Combining OTS and OCC
Sec. 331. Prohibition of merger or consolidation repealed.
Sec. 332. Secretary of the Treasury required to formulate plans for combining Of-
fice of Thrift Supervision with Office of the Comptroller of the
Currency.
Sec. 333. Office of Thrift Supervision and position of Director of the Office of
Thrift Supervision abolished.
Sec. 334. Reconfiguration of board of directors of FDIC as a result of removal
of Director of the Office of Thrift Supervision.
Sec. 335. Continuation provisions.
Subtitle D—Technical and Conforming Amendments to the Depository
Institution Statutes
Sec. 341. Amendments to the Federal Deposit Insurance Act.
Sec. 342. Amendment to the Bank Holding Company Act of 1956.
Sec. 343. Amendments to the Federal Reserve Act.
Sec. 344. Amendments to Alternative Mortgage Transaction Parity Act of 1982.
Sec. 345. Amendments to the Bank Protection Act of 1968.
Sec. 346. Amendments to the Community Reinvestment Act of 1977.
Sec. 347. Amendments to the Depository Institutions Deregulation and Monetary
Control Act of 1980.
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Sec. 348. Amendments to the Depository Institution Management Interlocks Act.
Sec. 349. Amendment to the Economic Growth and Regulatory Paperwork Reduc-
tion Act of 1996.
Sec. 350. Amendment to the Emergency Home Finance Act of 1970.
Sec. 351. Amendments to the Expedited Funds Availability Act.
Sec. 352. Amendments to the Federal Credit Union Act.
Sec. 353. Amendments to the Federal Financial Institutions Examination Coun-
cil Act of 1978.
Sec. 354. Amendments to the Financial Institutions Reform, Recovery, and En-
forcement Act of 1989.
Sec. 355. Amendments to the Home Mortgage Disclosure Act of 1975.
Sec. 356. Amendments to the Housing and Community Development Act of 1992.
Sec. 357. Amendment to the International Banking Act of 1978.
Sec. 358. Amendments to the National Housing Act.
Sec. 359. Amendment to Public Law 93–495.
Sec. 360. Amendment to the Real Estate Settlement Procedures Act of 1974.
Sec. 361. Amendment to the Revised Statutes of the United States.
Sec. 362. Amendments to the Riegle Community Development and Regulatory
Improvement Act of 1994.
Sec. 363. Amendments to the Right to Financial Privacy Act of 1978.
Sec. 364. Amendments to the Truth in Savings Act.
Sec. 365. Effective date.
Subtitle E—Technical and Conforming Amendments to Other Statutes
Sec. 371. Amendments to the Balanced Budget and Emergency Deficit Control
Act of 1985.
Sec. 372. Amendments to the Consumer Credit Protection Act.
Sec. 373. Amendments to the Flood Disaster Protection Act of 1973.
Sec. 374. Amendments to the Securities Exchange Act of 1934.
Sec. 375. Amendments to title 5, United States Code.
Sec. 376. Amendments to title 18, United States Code.
Sec. 377. Amendment to title 31, United States Code.
Sec. 378. Effective date.
TITLE IV—UNIFORM MULTISTATE LICENSING OF STATE-LICENSED
INSURANCE AGENTS AND BROKERS
Sec. 401. State flexibility in multistate licensing reforms.
Sec. 402. National Association of Registered Agents and Brokers.
Sec. 403. Purpose.
Sec. 404. Relationship to the Federal government.
Sec. 405. Membership.
Sec. 406. Corporate powers.
Sec. 407. Board of directors.
Sec. 408. Officers.
Sec. 409. Meetings of board of directors.
Sec. 410. Bylaws, rules, and disciplinary action.
Sec. 411. Borrowing authority.
Sec. 412. Assessments.
Sec. 413. Functions of the council.
Sec. 414. Liability of the association and the directors, officers, and employees of
the association.
Sec. 415. Relationship to State law.
Sec. 416. Coordination with other regulators.
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Sec. 417. Judicial review.
Sec. 418. Definitions.
TITLE I—POWERS AND AFFILI-
ATIONS OF INSURED DEPOSI-
TORY INSTITUTIONS
Subtitle A—Removing Barriers to
Affiliations Between Insured De-
pository Institutions and Other
Financial Institutions
SEC. 
101. 
ANTI-AFFILIATION 
PROVISIONS 
OF 
‘‘GLASS-
STEAGALL ACT’’ REPEALED.
(a) SECTION 20 REPEALED.—Section 20 of the Bank-
ing Act of 1933 (12 U.S.C. 377) is repealed.
(b) SECTION 32 REPEALED.—Section 32 of the Bank-
ing Act of 1933 (12 U.S.C. 78) is repealed.
SEC. 102. REPEAL OF ACTIVITY RESTRICTIONS OF BANK
HOLDING COMPANY ACT OF 1956.
(a) IN GENERAL.—Section 4 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843) is amended by
striking subsections (a), (b), (c), (e), (h), (i), and (j).
(b) CONFORMING AMENDMENT TO THE BANK HOLDING
COMPANY ACT OF 1956 TO REFLECT EXPANSION OF INSUR-
ANCE AUTHORITY.—Section 3 of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1842(f)) is amended—
(1) by striking subsection (f); and
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(2) by redesignating subsection (g) as subsection
(f).
(c) TECHNICAL
AND CONFORMING AMENDMENT
TO
THE BANK HOLDING COMPANY ACT OF 1956.—Section
2(h)(2) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(h)(2)) is amended by striking the 1st sentence
and inserting the following new sentence: ‘‘A bank holding
company organized under the laws of a foreign country
which is principally engaged in the banking business out-
side of the United States may acquire and hold shares of
any company organized under the laws of a foreign country
(or shares held by such company in any company engaged
in the same general line of business as the investor company
or in a business related to the business of the investor com-
pany) that is principally engaged in business outside the
United States.’’.
(d) CONFORMING CHANGES TO OTHER STATUTES.—
(1) AMENDMENTS
TO
THE
FEDERAL
RESERVE
ACT TO PRESERVE EXEMPTION FROM SECTION 23A.—
Section 23A(d)(5) of the Federal Reserve Act (12
U.S.C. 371c(d)(5)) is amended by striking ‘‘of the
kinds described in section 4(c)(1) of the Bank Holding
Company Act of 1956;’’ and inserting ‘‘engaged or to
be engaged solely in—
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‘‘(A) holding or operating properties used
wholly or substantially by any bank subsidiary
of a bank holding company in the operations of
such bank subsidiary or acquired for such future
use;
‘‘(B) conducting a safe deposit business;
‘‘(C) furnishing services to or performing
services for a bank holding company or its bank
subsidiaries; or
‘‘(D) liquidating assets acquired from a
bank holding company or its bank subsidiaries;’’.
(2) AMENDMENTS TO THE BANK EXPORT SERV-
ICES ACT OF 1982.—Section 206 of the Bank Export
Services Act of 1982 (12 U.S.C. 635a–4) is amend-
ed—
(A) by striking ‘‘as defined in section
4(c)(14)(F)(i) of the Bank Holding Company
Act of 1956’’; and
(B) by inserting at the end of the section the
following: ‘‘For purposes of this section, the term
‘export trading company’ means a company that
does business under the laws of the United States
or any State, that is exclusively engaged in ac-
tivities related to international trade, and that
is organized and operated principally for pur-
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3401(6)) is amended by striking ‘‘4(f)(1)’’and insert-
ing ‘‘6(f)(1)’’.
(8) CONFORMING AMENDMENT TO THE CLAYTON
ACT.—Section 7A(c)(8) of the Clayton Act (15 U.S.C.
18a(c)(8)) is repealed.
SEC. 103. QUALIFYING BANK HOLDING COMPANIES.
(a) IN GENERAL.—The Bank Holding Company Act
of 1956 is amended by inserting after section 5 (12 U.S.C.
1844) the following new section:
‘‘SEC. 6. QUALIFYING BANK HOLDING COMPANIES.
‘‘(a) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
‘‘(1) QUALIFYING
BANK
HOLDING
COMPANY.—
The term ‘qualifying bank holding company’ means
any bank holding company—
‘‘(A) all of the subsidiary depository insti-
tutions of which are well capitalized;
‘‘(B) all of the subsidiary depository insti-
tutions of which are well managed (as defined in
section 5136A(a)(5)(D) of the Revised Statutes of
the United States);
‘‘(C) all of the subsidiary depository insti-
tutions of which have achieved a rating of ‘satis-
factory record of meeting community credit
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needs’, or better, at the most recent examination
of each such institution;
‘‘(D) all of the subsidiary depository insti-
tutions of which have a demonstrable record of
performance in the provision of low-cost lifeline
bank accounts;
‘‘(E) in the case of any bank holding com-
pany which underwrites or sells, or any affiliate
of which underwrites or sells, annuities contracts
or contracts insuring, guaranteeing, or indem-
nifying against loss, harm, damage, illness, dis-
ability, or death, which—
‘‘(i) has not been adjudicated in any
Federal court, or has not entered into a con-
sent decree filed in a Federal court or into
a settlement agreement, premised upon a
violation of the Fair Housing Act for the
activities described in this subparagraph
and is not in violation of any such decree
or settlement agreement as determined by a
court of competent jurisdiction or the agen-
cy with which the decree or agreement was
entered into; or
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‘‘(ii) has been exempted from the re-
quirements of clause (i) by the Board under
subsection (f)(3).
‘‘(F) that is deemed under paragraph (2) to
be engaged in activities in the United States that
are financial in nature or is engaged in activi-
ties that are otherwise permissible under this Act
(other than activities engaged in pursuant to
subsection (k));
‘‘(G) which, with respect to any activities
engaged in outside of the United States, engages
in such activities in conformance with subsection
(f) and section 2(h)(2); and
‘‘(H) that has filed with the Board a dec-
laration that it is a qualifying bank holding
company.
‘‘(2) ACTIVITIES FINANCIAL IN NATURE.—A bank
holding company shall be deemed to be engaged in ac-
tivities that are financial in nature if not less than
85 percent of the gross revenues of such company from
activities conducted in the United States are derived
from financial activities in which such company or
any of its subsidiaries engages.
‘‘(3) FINANCIAL ACTIVITY.—The term ‘financial
activity’ means any 1 or more of the following:
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‘‘(A) Receiving money subject to a deposit
or other repayment obligation.
‘‘(B) Lending, exchanging, transferring, in-
vesting, or safeguarding money or other finan-
cial assets.
‘‘(C) Providing any device or other instru-
mentality for transferring money or other finan-
cial assets;
‘‘(D) Insuring, guaranteeing, or indemnify-
ing against loss, harm, damage, illness, disabil-
ity, or death, or providing and issuing annu-
ities, and acting as principal, agent, or broker
for purposes of the foregoing.
‘‘(E) Providing financial, investment, or
economic advisory or information services, in-
cluding advising an investment company (as de-
fined in section 3 of the Investment Company
Act of 1940).
‘‘(F) Issuing or selling instruments rep-
resenting interests in pools of assets permissible
for a bank to hold directly.
‘‘(G) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of 1
or more entities (including entities other than
depository institutions or subsidiaries of deposi-
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tory institutions that the bank holding company
controls), or otherwise, shares, assets, or owner-
ship interests (including without limitation debt
or equity securities, partnership interests, trust
certificates, or other instruments representing
ownership) of a company or other entity, wheth-
er or not constituting control of such company or
entity, engaged in any activity if—
‘‘(i) the shares, assets, or ownership in-
terests are not acquired or held directly by
a depository institution or a subsidiary of
a depository institution;
‘‘(ii) such shares, assets, or ownership
interests are acquired and held as part of a
bona fide underwriting, or investment bank-
ing activity (including investment activities
engaged in for the purpose of appreciation
and ultimate sale or other disposition of the
investment);
‘‘(iii) such shares, assets, or ownership
interests are held for such a period as will
permit the sale or disposition thereof on a
reasonable basis consistent with the nature
of the activities described in clause (ii); and
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‘‘(iv) during the period such shares, as-
sets, or ownership interests are held, the
bank holding company does not actively
manage or operate the company or entity,
except insofar as necessary to achieve the
objectives of clause (ii).
‘‘(H) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of 1
or more entities (including any subsidiary of the
holding company which is not a depository insti-
tution or a subsidiary of a depository institu-
tion), or otherwise, shares, assets, or ownership
interests (including debt or equity securities,
partnership interests, trust certificates, or other
instruments representing ownership) of a com-
pany or other entity, whether or not constituting
control of such company or entity, engaged in
activities not authorized pursuant to this section
if—
‘‘(i) the shares, assets, or ownership in-
terests are not acquired or held by a deposi-
tory institution or a subsidiary of a deposi-
tory institution;
‘‘(ii) such shares, assets, or ownership
interests are acquired and held by an insur-
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ance company that is predominantly en-
gaged in underwriting life, accident and
health, or property and casualty insurance
(other than credit-related insurance);
‘‘(iii) such shares, assets, or ownership
interests represent an investment made in
the ordinary course of business of such in-
surance affiliate in accordance with rel-
evant State law governing such investments;
and
‘‘(iv) during the period such shares, as-
sets, or ownership interests are held, the
bank holding company does not directly or
indirectly participate in the day-to-day
management or operation of the company
or entity except insofar as necessary to
achieve the objectives of clauses (ii) and
(iii).
‘‘(I) Arranging, effecting or facilitating fi-
nancial transactions for the account of third
parties.
‘‘(J) Underwriting, dealing in, or making a
market in securities.
‘‘(K) Engaging in any activity that was, by
regulation or order, permissible for a bank hold-
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ing company pursuant to section 4(c)(8) of this
Act, as in effect on the day before the date of en-
actment of the Financial Services Competition
Act of 1997.
‘‘(L) Engaging, in the United States, in
any activity that—
‘‘(i) a bank holding company may en-
gage in outside the United States; and
‘‘(ii) the Board determined, under reg-
ulations issued pursuant to section 4(c)(13)
of this Act (as in effect on the day before the
date of enactment of the Financial Services
Competition Act of 1997) to be usual in
connection with the transaction of banking
or other financial operations abroad.
‘‘(M) Owning shares of any company to the
extent permissible under paragraph (6) or (7) of
section 4(c) of this Act, as in effect on the day
before the date of enactment of the Financial
Services Competition Act of 1997.
‘‘(N) Engaging in any activity that the Na-
tional Council on Financial Services determines,
by regulation or order, to be the functional
equivalent of any activity described in 1 or more
of subparagraphs (A) through (M).
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‘‘(O) Engaging in any activity that the Na-
tional Council on Financial Services determines
by regulation or order to be financial, or related
to a financial activity, having taken into ac-
count—
‘‘(i) the purposes of this Act and the
Financial Services Competition Act of 1997;
‘‘(ii) changes or reasonably expected
changes in the market in which bank hold-
ing companies compete;
‘‘(iii) changes or reasonably expected
changes in the technology for delivering fi-
nancial services; and
‘‘(iv) whether such activity is necessary
or appropriate to allow a bank holding
company and its affiliates to—
‘‘(I) compete effectively with any
company seeking to provide financial
services in the United States;
‘‘(II) use any available or emerg-
ing technological means, including any
application necessary to protect the se-
curity or efficacy of systems for the
transmission of data or financial
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transactions, in providing financial
services; and
‘‘(III) offer customers any avail-
able or emerging technological means
for using financial services.
‘‘(4) WELL CAPITALIZED.—The term ‘well cap-
italized’ has the same meaning as in section 38 of the
Federal Deposit Insurance Act. For purposes of this
section, the appropriate Federal banking agency shall
have exclusive jurisdiction to determine whether an
insured depository institution is well capitalized.
‘‘(5) FOREIGN
BANKS
AND
COMPANIES.—For
purposes of paragraph (1), the Board shall establish
and apply comparable capital standards to a foreign
bank that operates a branch or agency or owns or
controls a bank or commercial lending company in
the United States, and any company that owns or
controls such foreign bank, giving due regard to the
principle of national treatment and equality of com-
petitive opportunity.
‘‘(6) LIMITED
EXCLUSIONS
FROM
COMMUNITY
NEEDS REQUIREMENTS FOR NEWLY ACQUIRED DEPOS-
ITORY INSTITUTIONS.—Any depository institution ac-
quired by a bank holding company during the 12-
month period preceding the submission of a notice
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under paragraph (1)(F) and any depository institu-
tion acquired after the submission of such notice may
be excluded for purposes of paragraph (1)(C) during
the 12-month period beginning on the date of such ac-
quisition if—
‘‘(A) the bank holding company has submit-
ted an affirmative plan to the appropriate Fed-
eral banking agency to take such action as may
be necessary in order for such institution to
achieve a rating of ‘satisfactory record of meet-
ing community credit needs’, or better, at the
next examination of the institution; and
‘‘(B) the plan has been accepted by such
agency.
‘‘(b) AUTHORITY TO ENGAGE IN ACTIVITIES WITHOUT
NOTICE.—
‘‘(1) IN GENERAL.—A qualifying bank holding
company may engage, directly or through a subsidi-
ary that is not an insured depository institution (or
a subsidiary thereof), in any activity to the extent
permissible under the Financial Services Competition
Act of 1997 without approval from or notice to the
Board.
‘‘(2) RULE OF CONSTRUCTION.—No provision of
this section shall be construed as authorizing the ac-
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quisition of an depository institution other than in
accordance with section 3.
‘‘(c) RESTRICTIONS APPLICABLE TO NONQUALIFYING
BANK HOLDING COMPANIES.—A bank holding company
that is not a qualifying bank holding company may engage,
directly or indirectly through a subsidiary that is not an
insured depository institution (or a subsidiary of an in-
sured depository institution), only in managing and con-
trolling depository institutions and in any activity that
was permissible under section 4(c) (as in effect on the day
before the date of the enactment of the Financial Services
Competition Act of 1997) other than underwriting securi-
ties which a national bank is not authorized to underwrite,
except as otherwise provided by law.
‘‘(d) PROVISIONS APPLICABLE TO QUALIFYING BANK
HOLDING COMPANIES THAT FAIL
TO MEET REQUIRE-
MENTS.—
‘‘(1) IN GENERAL.—If the Board finds that—
‘‘(A) a qualifying bank holding company is
engaged, directly or indirectly, in any activity
other than activities described in subsection (c);
and
‘‘(B) such company is not in compliance
with the requirements of subsection (a)(1),
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the Board shall give notice to the company to that ef-
fect, describing the conditions giving rise to the no-
tice.
‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE-
QUIRED.—Within 45 days of receipt by a qualifying
bank holding company of a notice given under para-
graph (1) (or such additional period as the Board
may permit), the company shall execute an agreement
with the Board to comply with the requirements ap-
plicable to a qualifying bank holding company.
‘‘(3) BOARD MAY IMPOSE LIMITATIONS.—Until
the conditions described in a notice to a qualifying
bank holding company under paragraph (1) are cor-
rected, the Board may impose such limitations on the
conduct or activities of the company or any affiliate
of the company as the Board determines to be appro-
priate under the circumstances.
‘‘(4) FAILURE TO CORRECT.—If the conditions
described in a notice to a qualifying bank holding
company under paragraph (1) are not corrected with-
in 180 days after receipt by the company of notice
under paragraph (1), the Board may require such
company, under such terms and conditions as may be
imposed by the Board and subject to such extension
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of time as may be granted in the Board’s discretion,
either—
‘‘(A) to divest control of any subsidiary de-
pository institutions; or
‘‘(B) to cease to engage in any activity con-
ducted by such company or its subsidiaries
(other than a depository institution or a subsidi-
ary of a depository institution) that is not an
activity that is permissible under subsection (c).
‘‘(e) SAFEGUARDS
FOR
BANK
SUBSIDIARIES.—A
qualifying bank holding company shall assure that—
‘‘(1) the procedures of the holding company for
identifying and managing financial and operational
risks within the company and the subsidiaries of such
company which are not insured depository institu-
tions (or subsidiaries of such subsidiaries) adequately
protect the subsidiaries of such company which are
insured depository institutions from such risks;
‘‘(2) the holding company has reasonable policies
and procedures to preserve the separate corporate
identity and limited liability of such company and
the subsidiaries of such company, for the protection of
the company’s subsidiary insured depository institu-
tions; and
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‘‘(3) the holding company complies with this sec-
tion.
‘‘(f) EXEMPTIVE AUTHORITY.—
‘‘(1) FOREIGN
BANKS
AND
FOREIGN
INVEST-
MENTS.—The Board may grant exemptions from any
restriction on activities or investments which is other-
wise applicable to a bank holding company, including
a qualifying bank holding company—
‘‘(A) for shares held or activities conducted
by a company organized under the laws of a for-
eign country the greater part of whose business
is conducted outside the United States; or
‘‘(B) for shares held of, or activities con-
ducted by, any company which does no business
in the United States except as an incident to
such company’s international or foreign busi-
ness,
if the Board, by regulation or order, determines that,
under the circumstances and subject to any condition
set forth in the regulation or order, the exemption
would not be substantially at variance with the pur-
poses of this Act or the Financial Services Competi-
tion Act of 1997 and would be in the public interest.
‘‘(2) CONTINUATION OF PRIOR EXEMPTION.—To
the extent that such action would not be substantially
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at variance with the purposes of this Act and subject
to such conditions as the Board considers necessary to
protect the public interest, the Board by order, after
opportunity for hearing, may grant exemptions from
the provisions of subsection (c) to any bank holding
company which controlled 1 bank prior to July 1,
1968, and has not thereafter acquired the control of
any other bank in order—
‘‘(A) to avoid disrupting business relation-
ships that have existed over a long period of
years without adversely affecting the banks or
communities involved;
‘‘(B) to avoid forced sales of small locally
owned banks to purchasers not similarly rep-
resentative of community interests; or
‘‘(C) to allow retention of banks that are so
small in relation to the holding company’s total
interests and so small in relation to the banking
market to be served as to minimize the likelihood
that the bank’s powers to grant or deny credit
may be influenced by a desire to further the
holding company’s other interests.
‘‘(3) VIOLATIONS OF THE FAIR HOUSING ACT.—
The Board may, on a case-by-case basis, exempt a
bank holding company from meeting the terms of sub-
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section (a)(1)(E)(i) in satisfying the definition of
qualified bank holding company.
‘‘(g) CERTAIN COMPANIES NOT TREATED AS BANK
HOLDING COMPANIES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (9), any company which—
‘‘(A) on March 5, 1987, controlled an insti-
tution which became a bank as a result of the en-
actment of the Competitive Equality Amend-
ments of 1987; and
‘‘(B) was not a bank holding company on
the day before the date of the enactment of the
Competitive Equality Amendments of 1987,
shall not be treated as a bank holding company for
purposes of this Act solely by virtue of such compa-
ny’s control of such institution.
‘‘(2) LOSS
OF
EXEMPTION.—Subject to para-
graph (3), a company described in paragraph (1)
shall no longer qualify for the exemption provided
under such paragraph if—
‘‘(A) such company directly or indirectly—
‘‘(i) acquires control of an additional
bank or an insured institution (other than
an insured institution described in para-
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graph (10) or (12) of this subsection) after
March 5, 1987; or
‘‘(ii) acquires control of more than 5
percent of the shares or assets of an addi-
tional bank or a savings association other
than—
‘‘(I) shares held as a bona fide fi-
duciary (whether with or without the
sole discretion to vote such shares);
‘‘(II) shares held by any person as
a bona fide fiduciary solely for the ben-
efit of employees of either the company
described in paragraph (1) or any sub-
sidiary of that company and the bene-
ficiaries of those employees;
‘‘(III) shares held temporarily
pursuant to an underwriting commit-
ment in the normal course of an un-
derwriting business;
‘‘(IV) shares held in an account
solely for trading purposes;
‘‘(V) shares over which no control
is held other than control of voting
rights acquired in the normal course of
a proxy solicitation;
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‘‘(VI) loans or other accounts re-
ceivable acquired in the normal course
of business;
‘‘(VII) shares or assets acquired in
securing or collecting a debt previously
contracted in good faith, during the 2-
year period beginning on the date of
such acquisition or for such additional
time (not exceeding 3 years) as the
Board may permit if the Board deter-
mines that such an extension will not
be detrimental to the public interest;
‘‘(VIII) shares or assets of a sav-
ings association described in para-
graph (10) or (12) of this subsection;
‘‘(IX) shares of a savings associa-
tion held by any insurance company,
as defined in section 2(a)(17) of the
Investment Company Act of 1940, ex-
cept as provided in paragraph (11);
‘‘(X) shares issued in a qualified
stock issuance under section 10(q) of
the Home Owners’ Loan Act; and
‘‘(XI) assets that are derived from,
or are incidental to, activities in which
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institutions 
described 
in 
section
2(c)(2)(F) are permitted to engage,
except that the aggregate amount of shares
held under this clause (other than under
subclauses (I), (II), (III), (IV), (V), and
(VIII)) may not exceed 15 percent of all
outstanding shares or of the voting power of
a savings association;
‘‘(B) any bank subsidiary of such company
engages in any activity in which the bank was
not lawfully engaged as of March 5, 1987, unless
the bank is well managed and well capitalized;
‘‘(C) any bank subsidiary of such company
both—
‘‘(i) accepts demand deposits or depos-
its that the depositor may withdraw by
check or similar means for payment to 3d
parties; and
‘‘(ii) engages in the business of making
commercial loans (and, for purposes of this
clause, loans made in the ordinary course of
a credit card operation shall not be treated
as commercial loans); or
‘‘(D) after the date of the enactment of the
Competitive Equality Amendments of 1987, any
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bank subsidiary of such company permits any
overdraft (including any intraday overdraft), or
incurs any such overdraft in such bank’s account
at a Federal reserve bank, on behalf of an affili-
ate, other than an overdraft described in para-
graph (3).
‘‘(3) PERMISSIBLE OVERDRAFTS DESCRIBED.—
For purposes of paragraph (2)(C), an overdraft is de-
scribed in this paragraph if—
‘‘(A) such overdraft results from an inad-
vertent computer or accounting error that is be-
yond the control of both the bank and the affili-
ate; or
‘‘(B) such overdraft—
‘‘(i) is permitted or incurred on behalf
of an affiliate which is monitored by, re-
ports to, and is recognized as a primary
dealer by the Federal Reserve Bank of New
York; and
‘‘(ii) is fully secured, as required by
the Board, by bonds, notes, or other obliga-
tions which are direct obligations of the
United States or on which the principal
and interest are fully guaranteed by the
United States or by securities and obliga-
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tions eligible for settlement on the Federal
Reserve book entry system.
‘‘(4) DIVESTITURE IN CASE OF LOSS OF EXEMP-
TION.—If any company described in paragraph (1)
fails to qualify for the exemption provided under such
paragraph by operation of paragraph (2), such ex-
emption shall cease to apply to such company and
such company shall divest control of each bank it con-
trols before the end of the 180-day period beginning
on the date that the company receives notice from the
Board that the company has failed to continue to
qualify for such exemption, unless before the end of
such 180-day period, the company has—
‘‘(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.
‘‘(5) SUBSECTION CEASES TO APPLY UNDER CER-
TAIN CIRCUMSTANCES.—This subsection shall cease to
apply to any company described in paragraph (1) if
such company—
‘‘(A) registers as a bank holding company
under section 5(a) of this Act;
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‘‘(8) ENFORCEMENT.—
‘‘(A) IN
GENERAL.—In addition to any
other power of the Board, the Board may enforce
compliance with the provisions of this Act which
are applicable to any company described in
paragraph (1), and any bank controlled by such
company, under section 8 of the Federal Deposit
Insurance Act and such company or bank shall
be subject to such section (for such purposes) in
the same manner and to the same extent as if
such company or bank were a State member in-
sured bank.
‘‘(B) APPLICATION
OF
OTHER
ACT.—Any
violation of this Act by any company described
in paragraph (1), and any bank controlled by
such company, may also be treated as a viola-
tion of the Federal Deposit Insurance Act for
purposes of subparagraph (A).
‘‘(C) NO EFFECT ON OTHER AUTHORITY.—
No provision of this paragraph shall be con-
strued as limiting any authority of the Comp-
troller of the Currency or the Federal Deposit In-
surance Corporation.
‘‘(9) TYING PROVISIONS.—A company described
in paragraph (1) shall be—
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‘‘(A) treated as a bank holding company for
purposes of section 106 of the Bank Holding
Company Act Amendments of 1970 and section
22(h) of the Federal Reserve Act and any regula-
tion prescribed under any such section; and
‘‘(B) subject to the restrictions of section
106 of the Bank Holding Company Act Amend-
ments of 1970, in connection with any trans-
action involving the products or services of such
company or affiliate and those of a bank affili-
ate, as if such company or affiliate were a bank
and such bank were a subsidiary of a bank hold-
ing company.
‘‘(10) EXEMPTION
UNAFFECTED
BY
CERTAIN
EMERGENCY ACQUISITIONS.—For purposes of clauses
(i) and (ii)(VIII) of paragraph (2)(A), an insured in-
stitution is described in this paragraph if—
‘‘(A) the insured institution was acquired
(or any shares or assets of such institution were
acquired) by a company described in paragraph
(1) in an acquisition under section 408(m) of the
National Housing Act or section 13(k) of the
Federal Deposit Insurance Act; and
‘‘(B) either—
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‘‘(i) the insured institution is located
in a State in which such company con-
trolled a bank on March 5, 1987; or
‘‘(ii) the insured institution has total
assets of $500,000,000 or more at the time
of such acquisition.
‘‘(11) SHARES
HELD
BY
INSURANCE
AFFILI-
ATES.—Shares described in clause (ii)(IX) of para-
graph (2)(A) shall not be excluded for purposes of
clause (ii) of such paragraph if—
‘‘(A) all shares held under such clause
(ii)(IX) by all insurance company affiliates of
such savings association in the aggregate exceed
5 percent of all outstanding shares or of the vot-
ing power of the savings association; or
‘‘(B) such shares are acquired or retained
with a view to acquiring, exercising, or transfer-
ring control of the savings association.
‘‘(12) EXEMPTION
UNAFFECTED
BY
CERTAIN
OTHER ACQUISITIONS.—For purposes of clauses (i)
and (ii)(VIII) of paragraph (2)(A), an insured insti-
tution is described in this paragraph if the insured
institution was acquired (or any shares or assets of
such institution were acquired) by a company de-
scribed in paragraph (1)—
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‘‘(A) from the Resolution Trust Corpora-
tion, the Federal Deposit Insurance Corporation,
or the Director of the Office of Thrift Super-
vision, in any capacity; or
‘‘(B) in an acquisition in which the insured
institution has been found to be in danger of de-
fault (as defined in section 3 of the Federal De-
posit Insurance Act) by the appropriate Federal
or State authority.
‘‘(13) SPECIAL RULE RELATING TO SHARES AC-
QUIRED IN A QUALIFIED STOCK ISSUANCE.—A com-
pany described in paragraph (1) that holds shares is-
sued in a qualified stock issuance pursuant to section
10(q) of the Home Owners’ Loan Act by any savings
association or savings and loan holding company
(neither of which is a subsidiary) shall not be deemed
to control such savings association or savings and
loan holding company solely because such company
holds such shares unless—
‘‘(A) the company fails to comply with any
requirement or condition imposed by paragraph
(2)(A)(ii)(X) or section 10(q) of the Home Own-
ers’ Loan Act with respect to such shares; or
‘‘(B) the shares are acquired or retained
with a view to acquiring, exercising, or transfer-
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ring control of the savings association or savings
and loan holding company.
‘‘(h) LIMITATIONS ON CERTAIN BANKS.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this section (other than the last sentence
of subsection (a)(2)), a bank holding company which
controls an institution that became a bank as a result
of the enactment of the Competitive Equality Amend-
ments of 1987 may retain control of such institution
if such institution does not—
‘‘(A) engage in any activity after the date
of the enactment of such Amendments which
would have caused such institution to be a bank
(as defined in section 2(c), as in effect before
such date) if such activities had been engaged in
before such date; or
‘‘(B) increase the number of locations from
which such institution conducts business after
March 5, 1987.
‘‘(2) LIMITATIONS CEASE TO APPLY UNDER CER-
TAIN CIRCUMSTANCES.—The limitations contained in
paragraph (1) shall cease to apply to a bank de-
scribed in such paragraph at such time as the acqui-
sition of such bank, by the bank holding company re-
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ferred to in such paragraph, would not be prohibited
under section 3(d) of this Act if—
‘‘(A) an application for such acquisition
were filed under section 3(a) of this Act; and
‘‘(B) such bank were treated as an addi-
tional bank (under section 3(d)).
‘‘(i) LIMITATION ON BANK HOLDING COMPANY AFFILI-
ATIONS.—
‘‘(1) IN GENERAL.—Except as otherwise provided
in this Act, a bank holding company may not become
affiliated with any company—
‘‘(A) less than 85 percent of the gross reve-
nues of which from activities conducted in the
United States are derived from financial activi-
ties in which such company or any subsidiary of
such company engages; and
‘‘(B) which has consolidated assets, at the
time such affiliation first occurs, of more than
$750,000,000.
‘‘(2) MIRROR IMAGE.—Except as otherwise pro-
vided in this Act, no company that is, or is affiliated
with, a company described in subparagraphs (A) and
(B) of paragraph (1) may become a bank holding
company.
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‘‘(j) TRANSACTIONS
WITH
NONFINANCIAL
AFFILI-
ATES.—A subsidiary insured depository institution of a
bank holding company may not engage in a covered trans-
action (as defined by section 23A(b)(7) of the Federal Re-
serve Act) with any affiliate unless the affiliate is engaged
only in activities that are financial in nature (as defined
in subsection (a)(2)).’’.
(b) GRANDFATHER SHARES HELD UNDER PRIOR EX-
CEPTION.—A company that, on the date of the enactment
of this Act, holds shares on the basis of an exception pro-
vided under section 4 of the Bank Holding Company Act
of 1956, as in effect on the day before such date of enact-
ment, may continue to retain such shares after such date
subject to the same terms and conditions as were applicable,
in accordance with such section 4 (as in effect on such day),
to the retention of the shares by the company before such
date of enactment.
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Section 4 of the Bank Holding Company Act
of 1956 (12 U.S.C. 1843) is amended by striking sub-
sections (d), (f), and (g).
(2) The heading and section designation for sec-
tion 4 of the Bank Holding Company Act of 1956 is
amended to read as follows:
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‘‘SEC. 4. ƒRepealed≈.’’.
(3) Section 2(n) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841(n)) is amended by in-
serting ‘‘ ‘depository institution’,’’ after ‘‘insured de-
pository institution’,’’.
SEC. 104. CERTAIN STATE LAWS PREEMPTED.
(a) IN GENERAL.—No State may by law, regulation,
order, interpretation, or otherwise, prevent or restrict an
insured depository institution or a wholesale financial in-
stitution (as authorized pursuant to section 161 of this Act)
from—
(1) being affiliated with an entity (including an
entity engaged in insurance activities) as authorized
by this Act or any other provision of law; or
(2) engaging, directly or indirectly or in con-
junction with such affiliate, in any activity (includ-
ing the sale of insurance underwritten by an affiliate
or any other insurance activity) authorized under
this Act or any other provision of law.
(b) RULE OF CONSTRUCTION.—No provision of sub-
section (a) shall be construed so as to prohibit a State regu-
lator (after giving notice to the appropriate Federal bank-
ing agency to the extent practicable) from exercising, with
respect to an affiliate of an insured depository institution,
such authority as such State regulator may have under
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State law relating to the rehabilitation, conservatorship, re-
ceivership, or liquidation of the affiliate.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHOR-
IZED.
(a) IN GENERAL.—Section 3(f)(2) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842(f)(2)) (as redesig-
nated by section 102(b) of this Act) is amended to read as
follows:
‘‘(2) REGULATIONS.—A bank holding company
organized as a mutual holding company shall be reg-
ulated on terms, and shall be subject to limitations,
comparable to those applicable to any other bank
holding company.’’.
SEC. 106. COMPANIES NOT ENGAGED IN ACTIVITIES FINAN-
CIAL IN NATURE.
Section 6 of the Bank Holding Company Act of 1956
(as added by section 103 of this Act) is amended by adding
at the end the following new subsection:
‘‘(k) CONTROL OF A QUALIFYING BANK HOLDING COM-
PANY BY A COMPANY NOT ENGAGED IN ACTIVITIES FINAN-
CIAL IN NATURE.—
‘‘(1) IN GENERAL.—
‘‘(A) CONTROL OF 1 BANK AUTHORIZED.—
Notwithstanding subsection (i), a company that
is engaged predominantly in nonfinancial ac-
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tivities on a consolidated basis may only control
a qualifying bank holding company and not
more than 1 bank subject to the provisions of this
subsection.
‘‘(B) EXCLUSION
FROM
TREATMENT
AS
HOLDING COMPANY.—Any company that is en-
gaged predominantly in nonfinancial activities
and controls a qualifying bank holding company
and not more than 1 bank in accordance with
this subsection, shall not become a bank holding
company for purposes of this Act solely by virtue
of such company’s control of such qualifying
bank holding company and bank.
‘‘(C) FINANCIAL ACTIVITIES REQUIRED TO
BE CONDUCTED IN HOLDING COMPANY SUBSIDI-
ARY.—Any financial activity engaged in by a
company that controls a qualifying bank holding
company pursuant to paragraph (1) must con-
duct such activity through a subsidiary of the
qualifying bank holding company.
‘‘(2) CONTROL OF 1 BANK.—The provisions of
subparagraphs (A) and (B) of paragraph (1) shall
not apply to any company if—
‘‘(A) such company directly or indirectly
acquires control of a bank other than—
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‘‘(i) an institution described in section
2(c)(2) or section 6(g)(1) controlled by such
company before the date of enactment of the
Financial Services Competition Act of 1997
that becomes a bank; or
‘‘(ii) a bank with total consolidated as-
sets not in excess of $500,000,000 that has
been chartered for at least 5 years prior to
its date of acquisition by such company;
and such bank is and remains at all times
a subsidiary of a qualifying bank holding
company controlled by such company;
‘‘(B) such company directly or indirectly
acquires control of all or substantially all of the
assets of an additional bank; or
‘‘(C) the gross revenues of the bank con-
trolled by such company exceed 15 percent of the
consolidated gross revenues of such company de-
rived from activities conducted in the United
States.
‘‘(3) ENFORCEMENT
OF
VIOLATIONS.—If the
Board finds that a company is not in compliance
with the provisions of this subsection, the Board shall
enforce the provisions of this subsection in the same
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manner as that described in subsection (d) for a
qualifying bank holding company.
‘‘(4) ANTITYING AND INSIDER TRANSACTIONS.—A
company described in paragraph (1) shall be treated
as a bank holding company for purposes of section
106 of the Bank Holding Company Act Amendments
of 1970 and section 22(h) of the Federal Reserve Act
and any regulation prescribed under any such sec-
tion.’’.
SEC. 107. AMENDMENT TO ENSURE THAT BANKS ACQUIRED
BY OTHER ENTITIES DO NOT BECOME DE-
POSIT PRODUCTION OFFICES.
(a) IN GENERAL.—Section 109(d) of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994
(12 U.S.C. 1835a(d)) is amended—
(1) by inserting ‘‘, the Financial Services Com-
petition Act of 1997,’’ after ‘‘pursuant to this title’’;
and
(2) by inserting ‘‘or such Act’’ after ‘‘made by
this title’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—Sec-
tion 109(e)(4) of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4))
is amended by inserting ‘‘and any branch of a bank con-
trolled by an out-of-State bank holding company (as defined
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in section 2(o)(7) of the Bank Holding Company Act of
1956)’’ before the period.
SEC. 108. CLARIFICATION OF APPLICABILITY OF BRANCH
CLOSURE REQUIREMENTS IN INTERSTATE
BANKING OPERATIONS.
Section 42(d)(4)(A) of the Federal Deposit Insurance
Act (12 U.S.C. 1831r–1(d)(4)(A)) is amended by inserting
‘‘and any bank controlled by an out-of-State bank holding
company (as defined in section 2(o)(7) of the Bank Holding
Company Act of 1956)’’ before the period.
Subtitle B—Additional Safeguards
SEC. 111. FIREWALL SAFEGUARDS.
(a) COMPTROLLER OF THE CURRENCY.—
(1) IN GENERAL.—The Comptroller of the Cur-
rency may, by regulation or order, impose restrictions
or requirements on relationships or transactions be-
tween a national bank and a subsidiary of the na-
tional bank which the Comptroller finds is 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
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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 bank
holding companies.
(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 nonbank affiliates owned or con-
trolled by domestic bank holding companies and
nonbank affiliates 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
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(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 relationships
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 is 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
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paragraph (1) if the Board 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 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 foreign
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
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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.
(c) FEDERAL DEPOSIT INSURANCE CORPORATION.—
(1) IN GENERAL.—The Federal Deposit Insur-
ance Corporation may, by regulation or order, impose
restrictions or requirements on relationships or trans-
actions between a State nonmember bank (as defined
in section 3 of the Federal Deposit Insurance Act)
and a subsidiary of the State nonmember bank which
the Corporation finds is consistent with the public in-
terest, the purposes of this Act, the Federal Deposit
Insurance Act, or other Federal law applicable to
State nonmember banks and the standards in para-
graph (2).
(2) STANDARDS.—The Federal Deposit Insurance
Corporation may exercise authority under paragraph
(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.
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(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 nonmember 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 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
(B) modify or eliminate any restriction or
requirement the Corporation finds is no longer
required for such purposes.
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SEC. 112. CONSUMER PROTECTION.
(a) IN GENERAL.—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. CONSUMER PROTECTION REGULATIONS.
‘‘(a) REGULATIONS REQUIRED.—
‘‘(1) IN GENERAL.—Each Federal banking agen-
cy shall prescribe and publish in final form, not later
than 3 months after the effective date of the Financial
Services Competition Act of 1997, consumer protec-
tion regulations which—
‘‘(A) apply to retail sales, solicitations, ad-
vertising, or offers of any nondeposit product by
any insured depository institution or any person
who is engaged in such activities at an office of
the institution or on behalf of the institution;
and
‘‘(B) meet the requirements of this section
and provide such additional protections for con-
sumers to whom such sales, solicitations, adver-
tising, or offers are directed as the agency deter-
mines to be appropriate.
‘‘(2) APPLICABILITY TO SUBSIDIARIES.—The reg-
ulations prescribed pursuant to paragraph (1) shall
extend such protections to any subsidiaries of an in-
sured depository institution, as deemed appropriate
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by the regulators referred to in paragraph (3), where
such extension is necessary to ensure the consumer
protections provided by this section.
‘‘(3) CONSULTATION AND JOINT REGULATIONS.—
The Federal banking agencies shall consult with each
other and prescribe joint regulations pursuant to
paragraph (1), after consultation with the Securities
and Exchange Commission and the National Associa-
tion of Insurance Commissioners, as appropriate.
‘‘(4) NONDEPOSIT PRODUCT DEFINED.—For pur-
poses of this section, the term ‘nondeposit product’—
‘‘(A) means any investment and insurance
product which is not a deposit;
‘‘(B) includes shares issued by a registered
investment company; and
‘‘(C) does not include—
‘‘(i) any loan or any other extension of
credit by an insured depository institution;
‘‘(ii) any letter of credit;
‘‘(iii) any trust services;
‘‘(iv) any discount; or
‘‘(v) any other instrument or insurance
or investment product specifically excluded
from the definition of such term by regula-
tions prescribed jointly by the Federal bank-
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ing agencies, to the extent necessary to
carry out the purpose of this Act.
‘‘(b) SALES PRACTICES.—The regulations prescribed
pursuant to subsection (a) shall include the following provi-
sions relating to sales practices in connection with the sale
of nondeposit products:
‘‘(1) ANTICOERCION RULES.—
‘‘(A) IN GENERAL.—Anticoercion rules pro-
hibiting an insured depository institution from
engaging in any practice that would lead a
consumer to believe an extension of credit, in
violation of section 106(b) of the Bank Holding
Company Act Amendments of 1970, is condi-
tional upon—
‘‘(i) the purchase of a nondeposit prod-
uct from the institution or any of its affili-
ates or subsidiaries; or
‘‘(ii) an agreement by the consumer
not to obtain, or a prohibition on the
consumer from obtaining, a nondeposit
product from an unaffiliated entity.
‘‘(B) APPLICABILITY
TO
SUBSIDIARIES.—
Regulations prescribed under subparagraph (A)
shall apply to subsidiaries of insured depository
institutions if the regulators determine such ap-
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plication is necessary to prevent coercive activi-
ties.
‘‘(2) SUITABILITY OF PRODUCT.—
‘‘(A) IN
GENERAL.—Standards to ensure
that an investment product sold to a consumer
is suitable and any other nondeposit product is
appropriate for the consumer based on financial
information disclosed by the consumer.
‘‘(B) RULES OF FAIR PRACTICE.—In pre-
scribing the standards under subparagraph (A)
with respect to the sale of investments, the Fed-
eral banking agencies shall take into account the
Rules of Fair Practice of the National Associa-
tion of Securities Dealers.
‘‘(c) DISCLOSURES AND ADVERTISING.—The regula-
tions prescribed pursuant to subsection (a) shall include the
following provisions relating to disclosures and advertising
at the time the consumer opens an account for the purchase
of any nondeposit product or in connection with the initial
purchase of a nondeposit product:
‘‘(1) DISCLOSURES.—
‘‘(A) IN GENERAL.—Requirements that the
following disclosures be made orally and in writ-
ing before the completion of the initial sale and,
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in the case of clause (iv), at the time of applica-
tion for an extension of credit:
‘‘(i) UNINSURED STATUS.—The prod-
uct is not insured by the Federal Deposit
Insurance Corporation, or the United States
Government as appropriate.
‘‘(ii) INSURANCE
PRODUCT.—In the
case of an insurance product, the product is
not guaranteed by an insured depository in-
stitution.
‘‘(iii) INVESTMENT RISK.—In the case
of an investment product, there is an invest-
ment risk associated with the product, in-
cluding possible loss of principal.
‘‘(iv) COERCION.—The approval of an
extension of credit may not be conditioned
on—
‘‘(I) the purchase of a nondeposit
product from the institution in which
the application for credit is pending or
any of its affiliates or subsidiaries; or
‘‘(II) 
an 
agreement 
by 
the
consumer not to obtain, or a prohibi-
tion on the consumer from obtaining, a
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nondeposit product from an unaffili-
ated entity.
‘‘(B) MAKING DISCLOSURE READILY UNDER-
STANDABLE.—Regulations prescribed under sub-
paragraph (A) shall encourage the use of disclo-
sure that is conspicuous, simple, direct, and
readily understandable such as the following:
‘‘(i) ‘NOT FDIC-INSURED’.
‘‘(ii) ‘NOT GUARANTEED BY THE
BANK’.
‘‘(iii) ‘MAY GO DOWN IN VALUE’.
‘‘(C) 
ADJUSTMENTS
FOR
ALTERNATIVE
METHODS OF PURCHASE.—In prescribing the re-
quirements under subparagraphs (A) and (D),
necessary adjustments shall be made for purchase
in person, by telephone or by electronic media to
provide for the most appropriate and complete
form of disclosure and acknowledgements.
‘‘(D) CONSUMER ACKNOWLEDGEMENT.—
‘‘(i) IN GENERAL.—A requirement that
an insured depository institution shall re-
quire any person selling a nondeposit prod-
uct at any office of, or on behalf of, the in-
stitution to obtain, at the time a consumer
receives the disclosures required under sub-
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section (c)(1) or at the time of the initial
purchase by the consumer of such product,
a separate statement, signed and dated by
the consumer, which contains the declara-
tion that the purchaser has received the dis-
closure required under this subsection with
respect to such product.
‘‘(ii) 
APPLICATION
TO
SUBSIDI-
ARIES.—If the regulations require subsidi-
aries of insured depository institutions to
make the disclosures under this section, the
regulations shall require that these subsidi-
aries obtain the consumer acknowledgement
provided for in this subparagraph.
‘‘(2) PROHIBITION ON MISREPRESENTATIONS.—
‘‘(A) INSURANCE.—A prohibition on any
practice, or any advertising, at any office of, or
on behalf of, the insured depository institution,
or any subsidiary as appropriate, which could
mislead any person or otherwise cause a reason-
able person to reach an erroneous belief with re-
spect to—
‘‘(i) the uninsured nature of any non-
deposit insurance product sold, or offered
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for sale by the institution or any subsidiary
of the institution; or
‘‘(ii) the investment risk associated
with any such product.
‘‘(B) SECURITIES.—With regard to securi-
ties, a prohibition on any practice, or any ad-
vertising, at any office of the insured depository
institution, or any subsidiary as appropriate,
which could violate section 10(b) of the Securities
Exchange Act of 1934.
‘‘(d) SEPARATION OF BANKING AND NONBANKING AC-
TIVITIES.—
‘‘(1) REGULATIONS REQUIRED.—The regulations
prescribed pursuant to subsection (a) shall include
such provisions as the Federal banking agencies con-
sider appropriate to ensure that the routine accept-
ance of deposits is kept, to the extent practicable,
physically segregated from nondeposit product activ-
ity.
‘‘(2) 
MINIMUM
REQUIREMENTS.—Regulations
prescribed pursuant to paragraph (1) shall include,
at a minimum, the following requirements:
‘‘(A) SEPARATE SETTING.—A clear delinea-
tion of the setting in which, and the cir-
cumstances under which, transactions involving
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nondeposit products may be effected to ensure
that such activity is conducted in a location
physically segregated from the area where retail
deposits are routinely accepted.
‘‘(B) CERTAIN PERSONS PROHIBITED FROM
SELLING
NONDEPOSIT
PRODUCTS.—Standards
prohibiting any person accepting deposits from
the public in an area where deposits are rou-
tinely taken in an insured depository institution
from selling or offering to sell, or offering an
opinion or investment advice on, any nondeposit
product.
‘‘(C) REFERRALS.—The regulations shall
include standards which permit any such person
to refer a customer who seeks to purchase, or
seeks an opinion or investment advice on, any
nondeposit product to a qualified person who
sells or provides opinions or investment advice
on such product, only if the person making the
referral receives no more than a one-time nomi-
nal fee of a fixed dollar amount for each referral
that does not depend on whether the referral re-
sults in a transaction.
‘‘(D) QUALIFICATION
REQUIREMENTS
AND
TRAINING.—Standards prohibiting any insured
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depository institution from permitting any per-
son to sell or offer for sale, or provide an opinion
or investment advice about, any nondeposit
product in any part of any office of the institu-
tion, or on behalf of the institution, unless such
person—
‘‘(i) is registered with a self-regulatory
organization or the Securities and Ex-
change Commission, as appropriate, as a
broker or dealer, as a representative of a
broker or dealer, or as an investment ad-
viser; or
‘‘(ii) meets qualification and training
requirements which the Federal banking
agencies jointly determine are equivalent to
the training and qualification requirements
applicable to a person who is registered
with a self-regulatory organization or the
Commission as a broker or dealer, as a rep-
resentative of a broker or dealer, or as an
investment adviser, as the case may be; or
‘‘(iii) in the case of insurance sales, is
appropriately qualified.
‘‘(E) COMPENSATION
PROGRAMS.—Stand-
ards to ensure that compensation programs are
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not structured in such a way as to provide in-
centives for the sales of nondeposit products that
are not suitable or appropriate for the consumer.
‘‘(e) CONSUMER GRIEVANCE PROCESS.—The Federal
banking agencies shall jointly establish a consumer com-
plaint mechanism, for receiving and addressing expedi-
tiously meritorious consumer complaints alleging a viola-
tion of regulations issued under the section, which shall—
‘‘(1) establish a group within each regulatory
agency to receive such complaints;
‘‘(2) develop procedures for investigating such
complaints;
‘‘(3) develop procedures for informing consumers
of rights they may have in connection with such com-
plaints; and
‘‘(4) develop procedures for addressing concerns
raised by such complaints, as appropriate.
‘‘(f) NO EFFECT ON OTHER AUTHORITY.—
‘‘(1) IN GENERAL.—No provision of this section
shall be construed as granting, limiting, or otherwise
affecting—
‘‘(A) any authority of the Securities and
Exchange Commission, any self-regulatory orga-
nization, the Municipal Securities Rulemaking
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Board, or the Secretary of the Treasury under
any Federal securities law;
‘‘(B) any authority of any State insurance
commissioner or other State authority under any
State insurance law; or
‘‘(C) the applicability of any Federal secu-
rities law or any State securities or insurance
law, or any regulation prescribed by the Com-
mission, any self-regulatory organization, the
Municipal Securities Rulemaking Board, the
Secretary of the Treasury, or any State insur-
ance commissioner or other State authority pur-
suant to any such law, to any person.
‘‘(2) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply:
‘‘(A) FEDERAL SECURITIES LAW.—The term
‘Federal securities law’ has the meaning given to
the term ‘securities laws’ in section 3(a)(47) of
the Securities Exchange Act of 1934.
‘‘(B) SELF-REGULATORY
ORGANIZATION.—
The term ‘self-regulatory organization’ has the
meaning given to such term in section 3(a)(26)
of the Securities Exchange Act of 1934.’’.
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(b) SAFEGUARDS
APPLICABLE
TO
BROKERS
AND
DEALERS THAT ARE, OR ARE AFFILIATED WITH, INSURED
DEPOSITORY INSTITUTIONS.—
(1) IN GENERAL.—The Securities and Exchange Com-
mission, in consultation with the appropriate Federal bank-
ing agencies, shall carry out the purposes of this section
by prescribing rules regarding sales of securities by—
(A) any insured depository institution reg-
istered as a broker under the Securities Ex-
change Act of 1934; or
(B) any registered broker or dealer that is
a subsidiary or affiliate of an insured depository
institution.
(2) SCOPE OF REGULATIONS.—Regulations pre-
scribed under paragraph (1) shall, at a minimum, es-
tablish requirements with respect to—
(A) disclosures of information concerning
coverage under the Securities Investor Protection
Act of 1970 and the Federal Deposit Insurance
Act; and
(B) disclosures of the financial interest of
the depository institution or any securities sub-
sidiary or securities affiliate with respect to re-
ferrals or transactions.
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(3) MAKING DISCLOSURE READILY UNDERSTAND-
ABLE.—
(A) WRITTEN
DISCLOSURE.—Regulations
prescribed under this subsection shall encourage
the use of disclosure that is simple, direct, and
readily understandable, such as the following:
(i) ‘‘NOT FDIC-INSURED OR SIPC-
INSURED’’.
(ii) ‘‘NOT GUARANTEED BY THE
BANK’’.
(iii) ‘‘MAY GO DOWN IN VALUE’’.
(B) ORAL DISCLOSURE.—Regulations pre-
scribed under this subsection shall encourage the
use of oral disclosure as a supplement to written
disclosure.
(c) AUTHORITY OF NATIONAL COUNCIL ON FINANCIAL
SERVICES.—To carry out the purposes of this section, the
National Council on Financial Services may—
(1) prescribe regulations under section 45 of the
Federal Deposit Insurance Act that are more strin-
gent than those prescribed by the appropriate Federal
banking agencies; and
(2) prescribe regulations under subsection (b)
that are more stringent than those prescribed by the
Securities and Exchange Commission.
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(d) BIENNIAL REVIEW OF REGULATIONS.—Beginning
on June 30, 2001, the National Council on Financial Serv-
ices shall biennially review the regulations prescribed under
this section to determine whether they adequately carry out
the purposes of this section.
(e) DEFINITIONS.—For purposes of this section, the
terms ‘‘appropriate Federal banking agency’’ and ‘‘insured
depository institution’’ have the same meanings as in sec-
tion 3 of the Federal Deposit Insurance Act.
SEC. 113. OBLIGATIONS OF SUBSIDIARIES AND AFFILIATES
CANNOT BE EXTENDED TO INSURED DEPOSI-
TORY INSTITUTIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811
et seq.) is amended by inserting after section 45 (as added
by section 112(a) of this subtitle) the following new section:
‘‘SEC. 46. OBLIGATIONS OF SUBSIDIARIES AND AFFILIATES
CANNOT BE EXTENDED TO INSURED DEPOSI-
TORY INSTITUTIONS.
‘‘(a) IN GENERAL.—Notwithstanding any other law
(including any law relating to insurance), no obligation of
an affiliate or subsidiary of an insured depository institu-
tion arising more than 270 days after the date of enactment
of the Financial Services Competition Act of 1997 may be
charged against such insured depository institution by rea-
son of any ruling, determination, or judgment disregarding
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the separate corporate identity or limited liability of the
insured depository institution or the affiliate or subsidiary.
‘‘(b) MAINTENANCE OF SEPARATE CORPORATE IDEN-
TITY AND SEPARATE LEGAL STATUS.—
‘‘(1) IN
GENERAL.—The appropriate Federal
banking agency shall take steps, including conducting
the review required by paragraph (2), to assure that
each insured depository institution observes the sepa-
rate corporate identity and separate legal status of
each of the institutions’ subsidiaries and affiliates.
‘‘(2) EXAMINATIONS.—Each appropriate Federal
banking agency, when examining an insured deposi-
tory institution, shall review whether the institution
is observing the separate corporate identity and sepa-
rate legal status of the institution’s subsidiaries and
affiliates.
‘‘(c) MISREPRESENTATIONS REGARDING DEPOSITORY
INSTITUTION LIABILITY PROHIBITED.—
‘‘(1) 
IN
GENERAL.—No 
institution-affiliated
party of an insured depository institution or institu-
tion-affiliated party of a subsidiary or affiliate of an
insured depository institution shall fraudulently rep-
resent that the institution is or will be liable for any
obligation of a subsidiary or other affiliate of the in-
stitution.
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‘‘(2) 
CRIMINAL
PENALTY.—Whoever 
violates
paragraph (1) shall be fined not more than $100,000,
imprisoned for not more than 1 year, or both.
‘‘(3) 
INSTITUTION-AFFILIATED
PARTY
DE-
FINED.—For purposes of this subsection, the term ‘in-
stitution-affiliated party’ with respect to a subsidiary
or affiliate has the same meaning as in section 3 ex-
cept references to an insured depository institution
shall be deemed to be references to a subsidiary or af-
filiate of an insured depository institution.
‘‘(d) RULE OF CONSTRUCTION.—This section shall not
be construed as—
‘‘(1) excusing an insured depository institution
from—
‘‘(A) any liability that it has expressly and
lawfully assumed; or
‘‘(B) any liability to which it would be oth-
erwise subject for engaging or participating in
any violation of law or any breach of contract;
‘‘(2) limiting the authority of the Corporation
under section 5(e);
‘‘(3) permitting any obligation to be charged
against an insured depository institution that would
not otherwise be charged against the institution; or
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‘‘(4) prohibiting joint or cooperative marketing,
information sharing, or the purchase or sale of serv-
ices among affiliates.’’.
Subtitle C—National Council on
Financial Services
SEC. 121. ESTABLISHMENT AND OPERATION OF THE COUN-
CIL.
(a) ESTABLISHMENT AND PURPOSES.—As of the date
of enactment of this Act, there is established a National
Council on Financial Services (hereafter in this subtitle re-
ferred to as the ‘‘Council’’), which, among other functions
specified in this Act, shall seek generally to improve the effi-
ciency and competitiveness of the United States financial
services system by increasing coordination among regu-
lators of financial services providers and monitoring inno-
vations in the delivery of financial services for the benefit
of the United States economy and consumers.
(b) MEMBERSHIP.—The Council shall consist of the
following members:
(1) The Secretary of the Treasury.
(2) The Chairman of the Board of Governors of
the Federal Reserve System.
(3) The Chairperson of the Federal Deposit In-
surance Corporation.
(4) The Comptroller of the Currency.
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(5) The Chairman of the Securities and Ex-
change Commission.
(6) The Chairman of the Commodity Futures
Trading Commission.
(7) 1 individual with current or prior experience
in securities regulation at the State level who shall be
appointed by the President, by and with the advice
and consent of the Senate, for a term of 3 years..
(8) 2 individuals with current or prior experi-
ence in insurance regulation at the State level who
shall be appointed by the President (after soliciting
the views of the National Association of Insurance
Commissioners with regard to any such appoint-
ment), by and with the advice and consent of the Sen-
ate, for a term of 3 years.
(9) 1 individual with current or prior experience
in State banking supervision who shall be appointed
by the President, by and with the advice and consent
of the Senate, for a term of 3 years.
(c) CHAIRPERSON.—The Secretary of the Treasury
shall be the Chairperson of the Council.
(d) VICE CHAIRPERSON.—The Chairman of the Board
of Governors of the Federal Reserve System shall be the
Vice-Chairperson of the Council.
(e) COMPENSATION.—
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(1) AGENCY
MEMBERS.—Each member of the
Council specified in paragraphs (1) through (6) of
subsection (b) (hereafter in this section referred to as
‘‘agency members’’) shall serve without additional
compensation.
(2) INDIVIDUAL MEMBER.—The members of the
Council described in paragraph (7), (8), or (9) of sub-
section (b) shall serve without compensation, but shall
be entitled, per diem, to reasonable expenses directly
related to duties carried out as a member of the Coun-
cil.
(f) EXPENSES OF THE COUNCIL.—
(1) AGENCY MEMBER EXPENSES.—The agency of
each agency member of the Council shall be respon-
sible for expenses associated with the agency member’s
participation in the functions of the Council.
(2) OTHER EXPENSES.—Any other expenses of
the Council, including expenses described in sub-
section (e)(2), shall be shared pro rata among the
agencies of the agency members.
(g) ACTION BY THE COUNCIL.—
(1) QUORUM.—A majority of members of the
Council shall constitute a quorum.
(2) FINAL ACTION BY THE COUNCIL.—On mat-
ters determined by the Council to require an affirma-
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tive vote to constitute final action by the Council,
such vote shall require a majority of a quorum of
Council members.
(3) DIRECT
VOTING.—Members of the Council
shall not vote through any designee.
SEC. 122. FUNCTIONS OF THE COUNCIL.
(a) IN GENERAL.—In addition to the authority con-
ferred on the Council by other provisions of this Act, the
Council shall have the authority specified in this section.
(b) AUTHORITY TO ISSUE REGULATIONS.—
(1) CALCULATION OF GROSS REVENUES TEST.—
Before the end of the 1-year period beginning on the
date of enactment of this Act, the Council shall issue
final regulations prescribing the method for calculat-
ing compliance with the gross revenues test for pur-
poses of section 6(a)(2) of the Bank Holding Com-
pany Act of 1956.
(2) RESOLUTION OF DISPUTES INVOLVING THE
DEFINITION OF INSURANCE.—The Council shall deter-
mine whether an activity or product is an insurance
activity or product or a banking activity or product
as provided in section 5136(b)(2) of the Revised Stat-
utes of the United States.
(3) DEFINITION OF FINANCIAL ACTIVITY AND AC-
TIVITY
RELATED
TO
A
FINANCIAL
ACTIVITY.—The
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Council may issue regulations or orders finding an
activity to be financial or related to a financial activ-
ity, or nonfinancial or not related to a financial ac-
tivity, for purposes of section 6(a)(3) of the Bank
Holding Company Act of 1956 or section 5136A of
the Revised Statutes.
(4) ADDITIONAL
SAFEGUARDS.—The Council
may, by regulation or order, impose restrictions or re-
quirements on relationships or transactions involving
a depository institution and any affiliate or subsidi-
ary of any such institution engaged in any activity
that is not permissible for a national bank to engage
in directly, if the Council finds that such restrictions
or requirements will promote safety and soundness in
the financial services system or will enhance
consumer protection.
(c) ENFORCEMENT
OF COUNCIL ACTIONS.—Actions
taken by the Council shall be binding on the agencies rep-
resented on the Council and enforced by the agency respon-
sible for supervising an entity to which an action of the
Council applies.
(d) PRIVACY STUDY.—The members of the National
Council on Financial Services, or the designees of any such
members, in consultation with the Federal Trade Commis-
sion, shall—
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(1) report to the Congress before the end of the
1-year period beginning on the date of the enactment
of this Act on the implications of broader affiliations
between companies and the increasing use of tech-
nology in the provision of financial services for the
ability of consumers to control and safeguard the use
of their financial information; and
(2) make recommendations for appropriate legis-
lative or administrative action, if necessary, to better
safeguard consumer privacy.
SEC. 123. ADVISORY COUNCIL ON COMMUNITY REVITALIZA-
TION.
(a) ESTABLISHMENT AND PURPOSES.—Upon the en-
actment of this Act, the Council shall establish an advisory
council to be known as the Advisory Council on Community
Revitalization (hereafter in this section referred to as the
‘‘Advisory Council’’) to examine the impact of new insur-
ance and securities activities of qualifying bank holding
companies and to make recommendations and reports to the
Congress and the Council in accordance with this section.
(b) MEMBERSHIP.—
(1) IN GENERAL.—The Advisory Council shall
consist of 10 members as follows:
(A) 6 members, 1 appointed by each agency
member (as defined in section 121(e)(1)) from
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among officers and employees of the department,
agency or independent establishment of which
such member is the head.
(B) 1 member appointed by the Secretary of
Commerce from among individuals who, by vir-
tue of their education, training, or experience,
are well-qualified to represent the views of the
insurance industry on the Advisory Council.
(C) 1 member appointed by the Chairman
of the Securities and Exchange Commission from
among individuals who, by virtue of their edu-
cation, training, or experience, are well-qualified
to represent the views of the securities industry
on the Advisory Council.
(D) 2 members appointed by the Secretary
of the Treasury from among representatives of
well-established, nationally recognized consumer
organizations.
(2) CHAIRPERSON.—The member appointed by
the Secretary of the Treasury under paragraph (1)(A)
shall serve as the chairperson of the Advisory Council.
(3) COMPENSATION.—
(A) AGENCY MEMBERS.—Each member of
the Advisory Council who is appointed under
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paragraph (1)(A) shall serve without additional
compensation.
(B) INDIVIDUAL MEMBER.—Each member of
the Advisory Council who is appointed under
subparagraph (B), (C), or (D) of paragraph (1)
shall serve without compensation, but shall re-
ceive travel expenses, including per diem in lieu
of subsistence, in accordance with sections 5702
and 5703 of title 5, United States Code.
(4) TERM.—Each member shall be appointed for
the life of the Advisory Council.
(5) VACANCY.—A vacancy in the Advisory Coun-
cil shall be filled in the manner in which the original
appointment was made.
(6) MEETINGS.—The Advisory Council shall
meet, not less frequently than quarterly, subject to the
call of the chairperson or a majority of the members.
(7) QUORUM.—A majority of the members ap-
pointed under paragraph (1)(A) and a majority of
the members appointed under subparagraphs (B), (C),
and (D) of paragraph (1) shall constitute a quorum
for purposes of agreeing to the contents of any report
submitted under this section but a lesser number may
meet to conduct routine business.
(c) RECOMMENDATIONS AND REPORTS.—
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(1) RECOMMENDATIONS
FOR
MEETING
CREDIT
AND INSURANCE NEEDS.—Before the end of the 1-year
period beginning on the date of the enactment of this
Act, the Advisory Council shall submit recommenda-
tions to the Congress and the Council for enhancing
insurance and securities activities of qualifying bank
holding companies to meet the credit and insurance
needs of all citizens and communities, including un-
derserved communities and populations.
(2) PERIODIC REPORTS ON IMPACT OF ACT FOR
LIMITED PERIOD.—Before the end of the 18-month pe-
riod beginning on the date of the enactment of this
Act and annually thereafter for a 5-year period, the
Advisory Council shall submit a report to the Con-
gress and the Council on the impact this Act (and the
amendments made by this Act to other provisions of
law) on the capital and credit needs of all citizens
and communities, including underserved communities
and populations.
(d) EXPENSES AND ADMINISTRATIVE SUPPORT.—
(1) EXPENSES.—The expenses of the Advisory
Council shall be paid by the Council in the manner
described in section 121(f)(2), except that, for pur-
poses of this paragraph, the Commodity Futures
Trading Commission shall not be included in the dis-
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tribution of expenses among member agencies under
such section.
(2) ADMINISTRATIVE
SUPPORT.—The agencies
represented by members appointed under subsection
(b)(1)(A) shall provide to the Advisory Council the
administrative support services necessary for the Ad-
visory Council to carry out its responsibilities under
this section.
(e) FEDERAL ADVISORY COMMITTEE ACT DOES NOT
APPLY.—The Federal Advisory Committee Act shall not
apply with respect to the Advisory Council.
Subtitle D—Bank Holding Company
Supervision
SEC. 131. STREAMLINING BANK HOLDING COMPANY SUPER-
VISION.
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 to
submit reports, under oath or otherwise, to en-
able the Board to determine compliance with the
provisions of this Act and regulations and orders
issued thereunder.
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‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN
GENERAL.—The Board shall
not require any report pursuant to sub-
paragraph (A) if information sufficient for
the Board to make the determinations re-
quired under subparagraph (A) is reason-
ably available from any other source.
‘‘(ii) USE.—The Board shall, as far as
possible, use the reports of examination or
comparable reports prepared by any Fed-
eral or State regulatory agency, or any self-
regulatory organization for purposes of sub-
paragraph (A).
‘‘(iii) AVAILABILITY.—Each Federal
and State regulatory agency and self-regu-
latory organization referred to in clause (ii)
shall make the reports referred to in such
clause available to the Board upon request.
‘‘(C) EXEMPTIONS
FROM
REPORTING
RE-
QUIREMENTS.—
‘‘(i) IN GENERAL.—The Board may, by
regulation or order, exempt any company
or class of companies, under such terms and
conditions and for such periods as the
Board shall provide, from this paragraph
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and any regulations prescribed under this
paragraph.
‘‘(ii) CRITERIA
FOR
EXEMPTION.—In
granting an exemption under clause (i), the
Board shall consider, among other factors—
‘‘(I) whether information of the
type required under this paragraph is
available from a supervisory agency
(as defined in section 1101(7) of the
Right to Financial Privacy Act of
1978), the Commodity Futures Trad-
ing Commission, or a foreign regu-
latory body of a similar type;
‘‘(II) the primary business of the
company;
‘‘(III) the nature and extent of do-
mestic or foreign regulation of the ac-
tivities of such company; and
‘‘(IV) the absolute and relative
size within the company of the subsidi-
ary depository institutions of the com-
pany.
‘‘(2) EXAMINATIONS.—
‘‘(A) 
EXAMINATION
AUTHORITY.—The
Board may make examinations of each bank
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holding company and each subsidiary thereof,
the cost of which shall be assessed against, and
made payable by such holding company.
‘‘(B) LIMITATIONS
ON
EXAMINATION
AU-
THORITY FOR BANK HOLDING COMPANIES AND
NONBANK SUBSIDIARIES.—The Board may make
examinations of each bank holding company and
each nonbank subsidiary (other than a subsidi-
ary of a depository institution) 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 safe-
ty and soundness of any subsidiary de-
pository institution of such holding
company; and
‘‘(II) the systems of the holding
company; and
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
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subsidiary depository institution and such
subsidiaries.
‘‘(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 nonbank subsidiary of the
holding company (other than a subsidiary
of a depository institution) that, because
of—
‘‘(I) the size, condition, or activi-
ties of the subsidiary;
‘‘(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; or
‘‘(III) the centralization of func-
tions within the holding company sys-
tem,
could have a materially adverse effect on the
safety and soundness of any depository in-
stitution affiliate of the holding company.
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‘‘(D) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use, for the purposes of this section, the
reports of examinations of depository institutions
made by the appropriate Federal and State de-
pository institution supervisory authority.
‘‘(E) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use the reports of examination made
of—
‘‘(i) any registered broker or dealer by
or on behalf of the Securities and Exchange
Commission;
‘‘(ii) any licensed insurance company
by or on behalf of any state regulatory au-
thority responsible for the supervision of in-
surance companies; and
‘‘(iii) any other subsidiary that the
Board finds to be comprehensively super-
vised by a Federal or State authority.
‘‘(3) NOTICE TO BANKING AGENCIES OF FINAN-
CIAL AND OPERATIONAL CONCERNS.—Any agency rep-
resented on the National Council on Financial Serv-
ices or any State supervisory authority shall notify
the Board and the appropriate Federal banking agen-
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cy or State bank supervisor of significant financial or
operational risks to any depository institution result-
ing from the activities of any affiliate of a depository
institution.
‘‘(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 en-
gaged 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 agency
for the bank holding company.
‘‘(B) AUTHORITY TRANSFERRED.—An agen-
cy designated by the Board under subparagraph
(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 bank) under
section 5;
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‘‘(ii) approve or disapprove applica-
tions or transactions under section 3, 6, or
11;
‘‘(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 bank), or any insti-
tution-affiliated party of such company or
affiliate under the Federal Deposit Insur-
ance 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 or-
ders issued by an agency designated under sub-
paragraph (A) in the same manner such sections
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 securities
•HR 10 RH2
laws relating to the activities, conduct, and oper-
ations of registered brokers, dealers, investment
advisers, and investment companies; and
‘‘(B) the relevant State insurance authori-
ties with regard to all interpretations of, and the
enforcement of, applicable State insurance laws
relating to the activities, conduct, and operations
of insurance companies and insurance agents.’’.
SEC. 132. ADMINISTRATION OF THE BANK HOLDING COM-
PANY ACT OF 1956.
(a) PREVENTION OF DUPLICATIVE FILINGS.—Section
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 pursuant to section
6(a)(1)(F) shall satisfy the requirements of this subsection
with regard to the registration of a bank holding company
but not any requirement to file an application 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—
•HR 10 RH2
‘‘(A) order’’; and
(2) by striking ‘‘shareholders of the bank holding
company. Such distribution’’ and inserting ‘‘share-
holders 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 bank’s primary supervisor, which
shall be the Comptroller of the Currency in the case
of a national bank, and the Federal Deposit Insur-
ance Corporation and the appropriate State super-
visor 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. 133. BANK HOLDING COMPANY CAPITAL.
Section 5 of the Bank Holding Company Act of 1956
(12 U.S.C. 1844) is amended by adding at the end the fol-
lowing new subsections:
‘‘(g) [Reserved]
‘‘(h) CAPITAL ADEQUACY GUIDELINES.—
‘‘(1) 
CAPITAL
ADEQUACY
PROVISIONS.—The
Board may adopt capital adequacy rules or guide-
lines for bank holding companies.
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‘‘(2) METHODS OF CALCULATION.—In developing
rules or guidelines under paragraph (1)—
‘‘(A) FOCUS ON DOUBLE LEVERAGE.—The
Board shall address the use by bank holding
companies of debt and other liabilities to fund
capital investments in subsidiary depository in-
stitutions.
‘‘(B) NO
UNWEIGHTED
CAPITAL
RATIO.—
The Board shall not, by rule, regulation, guide-
line, order, or otherwise, impose a capital ratio
that is not based on appropriate risk-weighting
considerations.
‘‘(C) NO CAPITAL REQUIREMENT ON REGU-
LATED ENTITIES.—The Board shall not, by rule,
regulation, guideline, order, or otherwise, impose
any capital adequacy provision on a nondeposi-
tory institution subsidiary that is in compliance
with applicable capital requirements of another
Federal or State regulatory authority.
‘‘(D) 
APPROPRIATE
EXCLUSIONS.—The
Board shall take full account of—
‘‘(i) the capital requirements made ap-
plicable to any nondepository institution
subsidiary by another Federal or State reg-
ulatory authority; and
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‘‘(ii) industry norms for capitalization
of a company’s unregulated subsidiaries
and activities.
‘‘(E) CONSULTATION WITH OTHER SUPER-
VISORS.—The Board shall consult with the ap-
propriate Federal or State regulatory authority
in developing capital adequacy guidelines for
bank holding companies that are predominantly
engaged, either directly or through nondepository
institution subsidiaries, in activities that are su-
pervised by that authority.
‘‘(F) APPROPRIATE
DIFFERENTIATION
OF
HOLDING COMPANIES.—The Board may differen-
tiate between different classes or categories of
bank holding companies, in particular between
bank holding companies that are predominantly
engaged in owning and operating insured depos-
itory institutions, bank holding companies which
do not own or control insured depository institu-
tions, and bank holding companies which are
predominantly engaged in activities that are su-
pervised by another Federal or State regulatory
authority.
‘‘(G) INTERNAL
RISK
MANAGEMENT
MOD-
ELS.—The Board may incorporate internal risk
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Subtitle E—Subsidiaries of Insured
Depository Institutions
SEC. 141. SUBSIDIARIES OF NATIONAL BANKS AUTHORIZED
TO ENGAGE IN FINANCIAL ACTIVITIES.
(a) FINANCIAL SUBSIDIARIES OF NATIONAL BANKS.—
Chapter one 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. 
FINANCIAL 
SUBSIDIARIES 
OF 
NATIONAL
BANKS.
‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AUTHORIZED
TO ENGAGE IN FINANCIAL ACTIVITIES.—
‘‘(1) IN GENERAL.—A subsidiary of a national
bank may engage in an activity that is not permis-
sible for a national bank to engage in directly, but
only if—
‘‘(A) the activity is a financial activity (as
defined in paragraph (4));
‘‘(B) the national bank is well capitalized,
well managed, and achieved a rating of ‘satisfac-
tory record of meeting community credit needs’,
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or better, at the most recent examination of the
bank;
‘‘(C) all depository institution affiliates of
such national bank are well capitalized, well
managed, and have achieved a rating of ‘satis-
factory record of meeting community credit
needs’, or better, at the most recent examination
of each such institution; and
‘‘(D) the bank has received the approval of
the Comptroller of the Currency.
‘‘(2) NO EFFECT ON EDGE ACT OR AGREEMENT
CORPORATIONS.—Paragraph (1) shall not apply with
respect to any subsidiary which is a corporation or-
ganized under section 25A of the Federal Reserve Act
or a corporation operating under section 25 of such
Act.
‘‘(3) OTHER SUBSIDIARIES PROHIBITED.—A na-
tional bank may not control any subsidiary other
than a subsidiary—
‘‘(A) which engages solely in activities that
are permissible for a national bank to engage in
directly or are authorized under paragraph (1);
or
‘‘(B) which a national bank may control
pursuant to section 25 or 25A of the Federal Re-
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serve Act, the Bank Service Company Act, or
any other Act that expressly by its terms author-
izes national banks to control subsidiaries.
‘‘(4) FINANCIAL ACTIVITY DEFINED.—For pur-
poses of this section and subject to paragraph (5), the
term ‘financial activity’ means any 1 or more of the
following:
‘‘(A) Receiving money subject to a deposit
or other repayment obligation.
‘‘(B) Lending, exchanging, transferring, in-
vesting, or safeguarding money or other finan-
cial assets.
‘‘(C) Providing any device or other instru-
mentality for transferring money or other finan-
cial assets.
‘‘(D) Acting as agent or broker in the place-
ment of annuities contracts or contracts insur-
ing, guaranteeing, or indemnifying against loss,
harm, damage, illness, disability, or death.
‘‘(E) Providing financial, investment, or
economic advisory or information services, in-
cluding advising an investment company (as de-
fined in section 3 of the Investment Company
Act of 1940).
•HR 10 RH2
‘‘(F) Issuing or selling instruments rep-
resenting interests in pools of assets permissible
for a bank to hold directly.
‘‘(G) Arranging, effecting, or facilitating fi-
nancial transactions for the account of third
parties.
‘‘(H) Underwriting, dealing in, or making
a market in securities.
‘‘(I) Engaging in any activity that was, by
regulation or order, permissible for a bank hold-
ing company pursuant to section 4(c)(8) of the
Bank Holding Company Act of 1956 (as in effect
on the day before the date of enactment of the Fi-
nancial Services Competition Act of 1997).
‘‘(J) Engaging, in the United States, in
any activity that—
‘‘(i) a bank holding company may en-
gage in outside the United States; and
‘‘(ii) the Board of Governors of the
Federal Reserve System determined, under
regulations issued pursuant to section
4(c)(13) of the Bank Holding Company Act
of 1956 (as in effect on the day before the
date of enactment of the Financial Services
Competition Act of 1997) to be usual in
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connection with the transaction of banking
or other financial operations abroad;
‘‘(K) Owning shares of a company to the
extent permissible under section 4(c)(7) of the
Bank Holding Company Act of 1956 (as in effect
on the day before the date of enactment of the Fi-
nancial Services Competition Act of 1997).
‘‘(L) Engaging in any activity that the Na-
tional Council on Financial Services determines
by regulation or order is the functional equiva-
lent of any activity described in 1 or more of
subparagraphs (A) through (K).
‘‘(M) Engaging in any activity that the Na-
tional Council on Financial Services determines
by regulation or order to be financial, or related
to a financial activity, having taken into ac-
count—
‘‘(i) the purposes of this title and the
Financial Services Competition Act of 1997;
‘‘(ii) changes or reasonably expected
changes in the market in which bank sub-
sidiaries compete;
‘‘(iii) changes or reasonable expected
changes in the technology delivering finan-
cial services; and
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‘‘(iv) whether such activity is necessary
or appropriate to allow a bank and the sub-
sidiaries of a bank to—
‘‘(I) compete effectively with any
company seeking to provide financial
services in the United States;
‘‘(II) use any available or emerg-
ing technological means, including any
application necessary to protect the se-
curity or efficacy of systems for the
transmission of data or financial
transactions, in providing financial
services; and
‘‘(III) offer customers any avail-
able or emerging technological means
for using financial services.
‘‘(5) OTHER DEFINITIONS.—For purposes of this
section, the following definitions shall apply:
‘‘(A) FINANCIAL SUBSIDIARY.—The term ‘fi-
nancial subsidiary’ means a company which—
‘‘(i) is a subsidiary of a national bank
(other than a corporation organized under
section 25A of the Federal Reserve Act or a
corporation operating under section 25 of
such Act); and
100
•HR 10 RH2
‘‘(ii) is engaged in a financial activity
pursuant to paragraph (1) that is not a
permissible activity for a national bank to
engage in directly.
‘‘(B) SUBSIDIARY.—The term ‘subsidiary’
has the meaning given to such term in section 2
of the Bank Holding Company Act of 1956.
‘‘(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 bank that has been
examined, unless otherwise determined in
writing by the Comptroller, the achievement
of—
‘‘(I) a composite rating of 1 or 2
under the Uniform Financial Institu-
tions Rating System (or an equivalent
rating under an equivalent rating sys-
tem) in connection with the most re-
101
•HR 10 RH2
cent examination or subsequent review
of the bank; and
‘‘(II) at least a rating of 2 for
management, if that rating is given; or
‘‘(ii) in the case of any national bank
that has not been examined, the existence
and use of managerial resources that the
Comptroller determines are satisfactory.
‘‘(6) INSURANCE
UNDERWRITING, 
MERCHANT
BANKING, AND DIRECT INVESTMENT.—Except as pro-
vided in section 5136(b)(1)(B) of the Revised Statutes
of the United States, no subsidiary of a national bank
(other than a corporation organized under section
25A of the Federal Reserve Act or a corporation oper-
ating under section 25 of such Act) may underwrite
noncredit-related insurance, engage in real estate in-
vestment or development activities (except to the ex-
tent a national bank is specifically authorized by
statute to engage in any such activity directly), or en-
gage in merchant banking (as described in section
6(a)(3)(G) of the Bank Holding Company Act of
1956).
‘‘(7) LIMITED
EXCLUSIONS
FROM
COMMUNITY
NEEDS REQUIREMENTS FOR NEWLY ACQUIRED DEPOS-
ITORY
INSTITUTIONS.—Any depository institution
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which becomes affiliated with a national bank during
the 12-month period preceding the submission of an
application to acquire a financial subsidiary and
any depository institution which becomes so affiliated
after the approval of such application may be ex-
cluded for purposes of paragraph (1)(C) during the
12-month period beginning on the date of such acqui-
sition if—
‘‘(A) the national bank has submitted an af-
firmative plan to the Comptroller of the Cur-
rency to take such action as may be necessary in
order for such institution to achieve a ‘satisfac-
tory record of meeting community credit needs’,
or better, during the most next examination of
the institution; and
‘‘(B) the plan has been accepted by the
Comptroller.
‘‘(b) CAPITAL DEDUCTION REQUIRED.—
‘‘(1) IN GENERAL.—In determining compliance
with applicable capital standards—
‘‘(A) the amount of a national bank’s equity
investment in a financial subsidiary shall be de-
ducted from the national bank’s assets and tan-
gible equity; and
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‘‘(B) the financial subsidiary’s assets and
liabilities shall not be consolidated with those of
the national bank.
‘‘(2) REGULATIONS REQUIRED.—The Comptrol-
ler shall prescribe regulations implementing this sub-
section.
‘‘(c) SAFEGUARDS FOR THE BANK.—A national bank
that establishes or maintains a financial subsidiary shall
assure that—
‘‘(1) the bank’s procedures for identifying and
managing financial and operational risks within the
bank and financial subsidiaries of the bank ade-
quately protect the bank from such risks;
‘‘(2) the bank has, for the protection of the bank,
reasonable policies and procedures to preserve the sep-
arate corporate identity and limited liability of the
bank and subsidiaries of the bank; and
‘‘(3) the bank complies with this section.
‘‘(d) NATIONAL BANKS WHICH DO NOT COMPLY WITH
REQUIREMENTS OF THIS SECTION.—
‘‘(1) IN
GENERAL.—If the Comptroller deter-
mines that a national bank which controls a financial
subsidiary, or a depository institution affiliate of
such national bank, does not continue to meet the re-
quirements of subsection (a), the Comptroller shall
104
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give notice to the bank to that effect, describing the
conditions giving rise to the notice.
‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE-
QUIRED.—
‘‘(A) CONTENT OF AGREEMENT.—Within 45
days of the receipt by a depository institution of
a notice given under paragraph (1) (or such ad-
ditional period as the Comptroller may permit),
the depository institution failing to meet the re-
quirements of subsection (a) shall execute an
agreement with the appropriate Federal banking
agency for such institution to correct the condi-
tions described in the notice.
‘‘(B) COMPTROLLER
MAY
IMPOSE
LIMITA-
TIONS.—Until the conditions giving rise to the
notice are corrected, the Comptroller may impose
such limitations on the conduct of the business of
the national bank or subsidiary of such bank as
the Comptroller determines to be appropriate
under the circumstances.
‘‘(3) FAILURE TO CORRECT.—If the conditions
described in the notice are not corrected within 180
days after the bank receives the notice, the Comptrol-
ler may require, under such terms and conditions as
may be imposed by the Comptroller and subject to
105
•HR 10 RH2
such extensions of time as may be granted in the dis-
cretion of the Comptroller—
(A) the national bank to divest control of
each subsidiary engaged in an activity that is
not permissible for the bank to engage in di-
rectly; or
‘‘(B) each subsidiary of the national bank to
cease any activity that is not permissible for the
bank to engage in directly.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
chapter one of title LXII of the Revised Statutes of the Unit-
ed States is amended—
(1) by redesignating the item relating to section
5136A as section 5136C; and
(2) by inserting after the item relating to section
5136 the following new item:
‘‘5136A. Financial subsidiaries of national banks.’’.
SEC. 142. ACTIVITIES OF SUBSIDIARIES OF INSURED STATE
BANKS.
Section 24(d) of the Federal Deposit Insurance Act (12
U.S.C. 1831a(d)) is amended—
(1) by adding at the end the following new para-
graphs:
‘‘(3) CONDITIONS ON CERTAIN ACTIVITIES.—
‘‘(A) IN GENERAL.—Subject to the approval
of the appropriate Federal banking agency, a
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•HR 10 RH2
subsidiary of a State bank may engage in an ac-
tivity in which a subsidiary of a national bank
may engage as principal pursuant to subsection
(a)(1) of section 5136A of the Revised Statutes of
the United States but only if the State bank
meets the same requirements which are applica-
ble to national banks under subparagraphs (B)
and (C) of such subsection and subsections (b)
and (c) of such section.
‘‘(B) APPLICATION
OF
SECTION
5136A
OF
REVISED STATUTES.—For purposes of applying
section 5136A of the Revised Statutes of the
United States with regard to the activities of a
subsidiary of a State bank, all references in such
section to the Comptroller of the Currency, or
regulations and orders of the Comptroller, shall
be deemed to be references to the appropriate
Federal banking agency with respect to such
State bank, and regulations and orders of such
agency.
‘‘(4) STATE
BANKS
WHICH
FAIL
TO
COMPLY
WITH PARAGRAPH (3) CONDITIONS.—
‘‘(A) IN GENERAL.—If the appropriate Fed-
eral banking agency determines that a State
bank that controls a subsidiary which is engaged
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as principal in financial activities pursuant to
paragraph (3) does not meet the requirements of
subparagraph (A) of such paragraph, the appro-
priate Federal banking agency shall give notice
to the bank to that effect, describing the condi-
tions giving rise to the notice.
‘‘(A) AGREEMENT TO CORRECT CONDITIONS
REQUIRED.—
‘‘(i) CONTENT OF AGREEMENT.—With-
in 45 days of the receipt by a bank of a no-
tice given under paragraph (1) (or such ad-
ditional period as the appropriate Federal
banking agency for such bank may permit),
the bank failing to meet the requirements of
paragraph (3)(A) shall execute an agree-
ment with the appropriate Federal banking
agency for such bank to correct the condi-
tions described in the notice.
‘‘(B) AGENCY MAY IMPOSE LIMITATIONS.—
Until the conditions giving rise to the notice are
corrected, the appropriate Federal banking agen-
cy for the State bank may impose such limita-
tions on the conduct of the business of the bank
or a subsidiary of the bank as the agency deter-
mines to be appropriate under the circumstances.
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‘‘(C) FAILURE TO CORRECT.—If the condi-
tions described in the notice are not corrected
within 180 days after the bank receives the no-
tice, the appropriate Federal banking agency for
the State may require, under such terms and
conditions as may be imposed by such agency
and subject to such extensions of time as may be
granted in the discretion of the agency—
‘‘(i) the bank to divest control of each
subsidiary engaged in an activity as prin-
cipal that is not permissible for the bank to
engage in directly; or
‘‘(ii) each subsidiary of the bank to
cease any activity as principal that is not
permissible for the bank to engage in di-
rectly.’’.
SEC. 143. RULES APPLICABLE TO FINANCIAL SUBSIDIARIES.
(a) 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 subsection
(f); and
(2) by inserting after subsection (d), the follow-
ing new subsection:
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‘‘(e) RULES RELATING TO BANKS WITH FINANCIAL
SUBSIDIARIES.—
‘‘(1) FINANCIAL
SUBSIDIARY
DEFINED.—For
purposes of this section and section 23B, the term ‘fi-
nancial subsidiary’ means a company which—
‘‘(A) is a subsidiary of a bank (other than
a corporation organized under section 25A of the
Federal Reserve Act or a corporation operating
under section 25 of such Act); and
‘‘(B) is engaged in a financial activity (as
defined in section 5136A(a)(4)) that is not a per-
missible activity for a national bank to engage
in directly.
‘‘(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 subsidi-
ary and any other subsidiary of the bank which is
not a financial subsidiary) and notwithstanding sub-
section (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
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‘‘(B) shall not be treated as a subsidiary of
the bank.
‘‘(3) APPLICATION TO TRANSACTIONS BETWEEN
FINANCIAL SUBSIDIARY AND NONBANK AFFILIATES.—
‘‘(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 notwithstand-
ing 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 directly.
‘‘(4) EQUITY INVESTMENTS EXCLUDED SUBJECT
TO THE APPROVAL OF THE BANKING AGENCY.—Sub-
section (a)(1) shall not apply so as to limit the equity
investment of a bank in a financial subsidiary 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 obtaining prior ap-
proval of the appropriate Federal banking agency and
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is in excess of the limitation 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 defined in section 3(q) of
the Federal Deposit Insurance Act) with respect to
such bank.’’.
(b) TREATMENT OF FINANCIAL SUBSIDIARIES UNDER
OTHER PROVISIONS OF LAW.—
(1) BANK HOLDING COMPANY ACT AMENDMENTS
OF 1970.—Section 106(a) of the Bank Holding Com-
pany Act Amendments of 1970 is amended by adding
at the end the following new sentence: ‘‘For purposes
of this section, a financial subsidiary (as defined in
section 5136A(a)(5)(A) of the Revised Statutes of the
United States or referenced in the 20th undesignated
paragraph of section 9 of the Federal Reserve Act or
section 24(d)(3)(A) of the Federal Deposit Insurance
Act) shall be deemed to be a subsidiary of a bank
holding company, and not a subsidiary of a bank.’’;
and
(2) FEDERAL RESERVE ACT.—The 20th undesig-
nated paragraph of section 9 of the Federal Reserve
Act (12 U.S.C. 335) is amended by adding at the end
of the following new sentence: ‘‘To the extent per-
mitted under State law, a State member bank may
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acquire or establish and retain a financial subsidiary
(as defined in section 5136A(a)(3)(A) of the Revised
Statutes of the United States, except that all ref-
erences in that section to the Comptroller of the Cur-
rency, the Comptroller, or regulations or orders of the
Comptroller shall be deemed to be references to the
Board or regulations or orders of the Board.’’.
Subtitle F—Direct Activities of
Banks
SEC. 151. POWERS OF NATIONAL BANKS.
(a) NATIONAL BANK INSURANCE ACTIVITIES.—Section
5136 of the Revised Statutes of the United States (12 U.S.C.
24) is amended—
(1) by striking ‘‘Upon duly making and filing
articles of association’’ and inserting ‘‘(a) IN GEN-
ERAL.—Upon duly making and filing articles of asso-
ciation’’; and
(2) by adding at the end of the following new
subsections:
‘‘(b) SCOPE OF PRINCIPAL ACTIVITIES.—
‘‘(1) EXISTING PRODUCTS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a national bank may not provide in-
surance in a State as principal.
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‘‘(B) EXCEPTION.—Except for title insur-
ance and annuity contracts as described in
paragraph (3)(A), subparagraph (A) shall not
apply to—
‘‘(i) insurance that national banks or
subsidiaries of national banks had author-
ity to provide as principal pursuant to sub-
section (a) as of January 1, 1997; or
‘‘(ii) a product that was regulated as
insurance as of January 1, 1997, by the ap-
propriate insurance regulatory authority of
the State in which the product is to be pro-
vided but ceases to be so regulated after the
date of enactment of the Financial Services
Competition Act of 1997.
‘‘(2) NEW PRODUCTS.—
‘‘(A) IN GENERAL.—This paragraph shall
apply with regard to any product which—
‘‘(i) is not described in paragraph (1);
and
‘‘(ii) the Comptroller of the Currency
has determined a national bank may pro-
vide as principal.
‘‘(B) PETITION FOR DEFINITION OF OTHER
PRODUCTS.—
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‘‘(i) IN GENERAL.—Any State insur-
ance supervisory agency may petition the
National Council of Financial Services
(hereafter in this paragraph referred to as
the ‘Council’) objecting to a determination
of the Comptroller of the Currency referred
to in subparagraph (A)(ii) and requesting a
determination under 122(b)(2) of the Fi-
nancial Services Competition Act of 1997
whether a product described in subpara-
graph (A) constitutes an insurance product
or a banking product.
‘‘(ii) STATEMENTS AND ARGUMENTS.—
A petition submitted under clause (i) shall
include a concise statement of the questions
presented for review, a concise statement of
any facts material to the consideration of
the questions, and a statement of the argu-
ments of the petitioner on the merits.
‘‘(iii) STATUTE
OF
LIMITATION.—No
petition may be filed with the Council
under clause (i) after the end of the 2-year
period beginning on the date on which the
first public notice is made of the determina-
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tion by the Comptroller to which the peti-
tion relates.
‘‘(iii) FILING WITH COMPTROLLER OF
THE CURRENCY.—A copy of any petition
filed with the Council under clause (i) shall
be filed with the Comptroller of the Cur-
rency at the same time as such filing.
‘‘(C) EXPEDITED REVIEW OF PETITION BY
FEDERAL RESERVE BOARD.—
‘‘(i) REFERRAL TO BOARD.—Upon re-
ceipt of a petition filed with the Council
under subparagraph (B)(i), the Council
shall refer the petition, together with the
statements and arguments accompanying
the petition, to the Board of Governors of
the Federal Reserve System for review.
‘‘(ii) REVIEW.—The Board shall review
the material referred pursuant to clause (i)
to determine whether the petition raises a
substantial question for review, taking into
account the nature of the product and the
history of its regulation, and report the
findings and conclusions of the Board in
connection with such review to the Council
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before the end of the 15-day period begin-
ning on the date of the referral.
‘‘(iii) DISMISSAL
UPON
FINDING
OF
LACK OF A SUBSTANTIAL QUESTION.—If the
Board reports to the Council that the peti-
tion failed to raise a substantial question
for review of the decision of the Comptroller
of the Currency on the merits, the Council
shall dismiss the petition and the deter-
mination of the Comptroller of the Currency
shall constitute final agency action, subject
to judicial review. The Council shall
promptly notify the Comptroller and any
affected party of any such dismissal.
‘‘(iv) DETERMINATION
BY
COUNCIL
UPON
FINDING
OF
A
SUBSTANTIAL
QUES-
TION.—If the Board reports to the Council
that the petition raises a substantial ques-
tion for review of the decision of the Comp-
troller of the Currency on the merits, the
Council shall proceed to consider such peti-
tion under section 122(b)(2) of the Finan-
cial Services Competition Act of 1997 and
in accordance with the subsequent subpara-
graphs of this paragraph.
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‘‘(D) PARTICIPATION OF COMPTROLLER OF
THE CURRENCY AND ANY AFFECTED PARTY.—
‘‘(i) RESPONSE.—Unless notified by
the Council of the dismissal of the petition
under subparagraph (C)(iii), the Comptrol-
ler of the Currency and any affected party
supporting the Comptroller may file, before
the end of the 60-day period beginning on
the date of the filing of any petition with
the Council under subparagraph (B)(i), a
response to such petition with the Council.
‘‘(ii) PARTICIPATION
IN
HEARING.—
The Comptroller of the Currency or any af-
fected party may participate, as a party, in
any hearing under subparagraph (E).
‘‘(E) HEARING.—
‘‘(i) REQUEST.—The State insurance
supervisory agency, the Comptroller of the
Currency, or any affected party may re-
quest a hearing by the Council on any peti-
tion filed with the Council in accordance
with subparagraph (B) which was not dis-
missed under subparagraph (C)(iii).
‘‘(ii) NOTICE
AND
SELECTION
OF
HEARING
OFFICER.—If a hearing is re-
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quested pursuant to clause (i), the Council
shall promptly—
‘‘(I) notify the State insurance su-
pervisory agency, the Comptroller of
the Currency, or any affected party of
such request and the time and place for
such hearing; and
‘‘(II) select a hearing officer from
among administrative law judges who
are employed by agencies that are not
represented on the Council.
‘‘(iii) TIME.—Any hearing under this
subparagraph shall commence before the end
of the 60-day period beginning on the date
a request for such hearing is filed with the
Council under clause (i) and shall be con-
ducted and concluded expeditiously.
‘‘(iv) HEARING ON A RECORD.—In any
hearing under this subparagraph, all issues
shall be determined on a record in accord-
ance with section 554 of title 5, United
States Code.
‘‘(v) RECOMMENDED
OPINION.—Upon
the conclusion of any hearing under this
subparagraph, the administrative law judge
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to restore the relevant deposit insurance fund to the
fund’s designated reserve ratio as of the date the bank
provides a written notice under subsection (a)(1).
‘‘(2) PROCEDURES.—The Corporation shall pre-
scribe, by regulation, procedures for assessing any exit
fee under this subsection.
‘‘(f) TEMPORARY INSURANCE OF DEPOSITS INSURED
AS OF TERMINATION.—
‘‘(1) TRANSITION PERIOD.—The insured deposits
of each depositor in a State bank or a national bank
on the effective date of the voluntary termination of
the bank’s insured status, less all subsequent with-
drawals from any deposits of such depositor, 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 deposits in the de-
pository institution made after the effective 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 au-
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(2) DEPOSITORY INSTITUTION DEFINED.—A de-
pository institution qualifies under this paragraph
for purposes of paragraph (1) if it—
(A)(i) is a savings association on the date
of enactment of the Thrift Charter Transition
Act of 1997; or
(ii) has filed an application to become a
savings association by the date of enactment of
the Thrift Charter Transition Act of 1997; and
(B) on or before the date 2 years after the
date of enactment of this Act, becomes a State or
national bank.
(b) BRANCHING RIGHTS OBTAINED IN ASSISTED AC-
QUISITIONS.—Notwithstanding any other provision of law,
if a depository institution has branching rights under a
contract entered into with the Federal Home Loan Bank
Board or the Federal Savings and Loan Insurance Cor-
poration or pursuant to a resolution of the Federal Home
Loan Bank Board or action of the Office of Thrift Super-
vision or Resolution Trust Corporation as part of a trans-
action in which the depository institution acquired or
merged with a failed or failing savings association (prior
to 1992), the depository institution may continue to branch
in a manner consistent with that contract, resolution, or
action.