SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Financial Services Act of 1998’’.
(b) PURPOSES.—The purposes of this Act are as fol-
lows:
(1) To enhance competition in the financial
services industry, in order to foster innovation and
efficiency.
(2) To ensure the continued safety and sound-
ness of depository institutions.
(3) To provide necessary and appropriate pro-
tections for investors and ensure fair and honest
markets in the delivery of financial services.
(4) To provide for appropriate functional regu-
lation of insurance activities.
(5) To reduce and, to the maximum extent
practicable, to eliminate the legal barriers preventing
affiliation among depository institutions, securities
firms, insurance companies, and other financial serv-
ice providers and to provide a prudential framework
for achieving that result.
(6) To enhance the availability of financial serv-
ices to citizens of all economic circumstances and in
all geographic areas.
(7) To enhance the competitiveness of United
States financial service providers internationally.
(8) To ensure compliance by depository institu-
tions with the provisions of the Community Rein-
vestment Act of 1977 and enhance the ability of de-
pository institutions to meet the capital and credit
needs of all citizens and communities, including un-
derserved 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—FACILITATING AFFILIATION AMONG SECURITIES FIRMS,
INSURANCE COMPANIES, AND DEPOSITORY INSTITUTIONS
Subtitle A—Affiliations
Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies which are
not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Certain State laws preempted.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. Responsiveness to community needs for financial services.
Sec. 110. Reports on ongoing FTC study of consumer privacy issues.
Sec. 110A. GAO study of economic impact on community banks and other
small financial institutions.
Subtitle B—Streamlining Supervision of Financial Holding Companies
Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding compa-
nies.
Sec. 113. Authority of State insurance regulator and Securities and Exchange
Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and enforcement
authority of the Board.
Sec. 117. Interagency consultation.
Subtitle C—Subsidiaries of National Banks
Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Misrepresentations regarding depository institution liability for obli-
gations of affiliates.
Sec. 123. Repeal of stock loan limit in Federal Reserve Act.
Subtitle D—Wholesale Financial Holding Companies; Wholesale Financial
Institutions
CHAPTER 1—WHOLESALE FINANCIAL HOLDING COMPANIES
Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.
CHAPTER 2—WHOLESALE FINANCIAL INSTITUTIONS
Sec. 136. Wholesale financial institutions.
Subtitle E—Preservation of FTC Authority
Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify
notification and post-approval waiting period for section 3
transactions.
Sec. 142. Interagency data sharing.
Sec. 143. Clarification of status of subsidiaries and affiliates.
Sec. 144. Annual GAO report.
Subtitle F—Applying the Principles of National Treatment and Equality of
Competitive Opportunity to Foreign Banks and Foreign Financial Institutions
Sec. 151. Applying the principles of national treatment and equality of competi-
tive opportunity to foreign banks that are financial holding
companies.
Sec. 152. 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 G—Federal Home Loan Bank System
Sec. 161. Federal home loan banks
Sec. 162. Membership and collateral.
Sec. 163. The Office of Finance.
Sec. 164. Management of banks.
Sec. 165. Advances to nonmember borrowers.
Sec. 166. Powers and duties of banks.
Sec. 167. Mergers and consolidations of Federal home loan banks.
Sec. 168. Technical amendments.
Sec. 169. Definitions.
Sec. 170. Resolution funding corporation
Sec. 171. Capital structure of the Federal home loan banks.
Sec. 172. Investments.
Sec. 173. Federal Housing Finance Board.
Subtitle H—Direct Activities of Banks
Sec. 181. Authority of national banks to underwrite certain municipal bonds
Subtitle I—Deposit Insurance Funds
Sec. 186. Study of safety and soundness of funds.
Subtitle J—Effective Date of Title
Sec. 191. Effective date.
TITLE II—FUNCTIONAL REGULATION
Subtitle A—Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Sales practices and complaint procedures.
Sec. 205. Information sharing.
Sec. 206. Definition and treatment of banking products.
Sec. 207. Derivative instrument and qualified investor defined.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.
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.
Sec. 222. Investment advisers prohibited from having controlling interest in
registered investment company.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.
Subtitle C—Securities and Exchange Commission Supervision of Investment
Bank Holding Companies
Sec. 231. Supervision of investment bank holding companies by the Securities
and Exchange Commission.
Subtitle D—Study
Sec. 241. Study of methods to inform investors and consumers of uninsured
products.
Sec. 242. Study of limitation on fees associated with acquiring financial prod-
ucts.
Subtitle E—Disclosure of Customer Costs of Acquiring Financial Products
Sec. 251. Improved and consistent disclosure.
TITLE III—INSURANCE
Subtitle A—State Regulation of Insurance
Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. New bank agency activities only through acquisition of existing li-
censed agents.
Sec. 306. Title insurance activities of national banks and their affiliates.
Sec. 307. Expedited and equalized dispute resolution for financial regulators.
Sec. 308. Consumer protection regulations.
Sec. 309. Certain State affiliation laws preempted for insurance companies and
affiliates.
Subtitle B—Redomestication of Mutual Insurers
Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 315. Definitions.
Sec. 316. Effective date.
Subtitle C—National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the Association and the directors, officers, and employees
of the Association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
TITLE IV—UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Termination of expanded powers for new unitary S&L holding compa-
nies.
Sec. 402. Retention of ‘‘Federal’’ in name of converted Federal savings associa-
tion.
TITLE I—FACILITATING AFFILI-
ATION 
AMONG 
SECURITIES
FIRMS, INSURANCE COMPA-
NIES, AND DEPOSITORY IN-
STITUTIONS
Subtitle A—Affiliations
SEC. 101. GLASS-STEAGALL ACT REFORMED.
(a) SECTION 20 REPEALED.—Section 20 (12 U.S.C.
377) of the Banking Act of 1933 (commonly referred to
as the ‘‘Glass-Steagall Act’’) is repealed.
(b) SECTION 32 REPEALED.—Section 32 (12 U.S.C.
78) of the Banking Act of 1933 is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK
HOLDING COMPANIES WHICH ARE NOT FI-
NANCIAL HOLDING COMPANIES.
(a) IN GENERAL.—Section 4(c)(8) of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1843(c)(8)) is
amended to read as follows:
‘‘(8) shares of any company the activities of
which had been determined by the Board by regula-
tion under this paragraph as of the day before the
date of the enactment of the Financial Services Act
of 1998, to be so closely related to banking as to be
a proper incident thereto (subject to such terms and
‘‘(b) ELIGIBILITY REQUIREMENTS FOR FINANCIAL
HOLDING COMPANIES.—
‘‘(1) IN GENERAL.—No bank holding company
may engage in any activity or directly or indirectly
acquire or retain shares of any company under this
section unless the bank holding company meets the
following requirements:
‘‘(A) All of the subsidiary depository insti-
tutions of the bank holding company are well
capitalized.
‘‘(B) All of the subsidiary depository insti-
tutions of the bank holding company are well
managed.
‘‘(C) All of the subsidiary depository insti-
tutions of the bank holding company have
achieved a rating of ‘satisfactory record of
meeting community credit needs’, or better, at
the most recent examination of each such insti-
tution under the Community Reinvestment Act
of 1977.
‘‘(D) All of the subsidiary insured deposi-
tory institutions of the bank holding company
(other than any such depository institution
which does not, in the ordinary course of the
business of the depository institution, offer con-
sumer transaction accounts to the general pub-
lic) offer and maintain low-cost basic banking
accounts.
‘‘(E) The company has filed with the
Board a declaration that the company elects to
be a financial holding company and certifying
that the company meets the requirements of
subparagraphs (A) through (D).
‘‘(2) 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.
‘‘(3) LIMITED EXCLUSIONS FROM COMMUNITY
NEEDS REQUIREMENTS FOR NEWLY ACQUIRED DE-
POSITORY INSTITUTIONS.—
‘‘(A) IN GENERAL.—If the requirements of
subparagraph (B) are met, any depository insti-
tution acquired by a bank holding company
during the 24-month period preceding the sub-
mission of a declaration under paragraph
(1)(E) and any depository institution acquired
after the submission of such declaration may be
excluded for purposes of paragraph (1)(C) until
the later of—
‘‘(i) the end of the 24-month period
beginning on the date the acquisition of
the depository institution by such company
is consummated; or
‘‘(ii) the date of completion of the
first examination of such depository insti-
tution under the Community Reinvestment
Act of 1977 which is conducted after the
date of the acquisition of the depository in-
stitution.
‘‘(B) REQUIREMENTS.—The requirements
of this subparagraph are met with respect to
any bank holding company referred to in sub-
paragraph (A) if—
‘‘(i) the bank holding company has
submitted an affirmative plan to the ap-
propriate Federal banking agency to take
such action as may be necessary in order
for such institution to achieve a rating of
‘satisfactory record of meeting community
credit needs’, or better, at the next exam-
ination of the institution under the Com-
munity Reinvestment Act of 1977; and
‘‘(ii) the plan has been approved by
such agency.
‘‘(c) ENGAGING IN ACTIVITIES FINANCIAL IN NA-
TURE.—
‘‘(1) IN
GENERAL.—Notwithstanding section
4(a), a financial holding company and a wholesale fi-
nancial holding company may engage in any activity,
and acquire and retain the shares of any company
engaged in any activity, which the Board has deter-
mined (by regulation or order) to be financial in na-
ture or incidental to such financial activities.
‘‘(2) FACTORS TO BE CONSIDERED.—In deter-
mining whether an activity is financial in nature or
incidental to financial activities, the Board shall take
into account—
‘‘(A) the purposes of this Act and the Fi-
nancial Services Act of 1998;
‘‘(B) changes or reasonably expected
changes in the marketplace in which bank hold-
ing companies compete;
‘‘(C) changes or reasonably expected
changes in the technology for delivering finan-
cial services; and
‘‘(D) whether such activity is necessary or
appropriate to allow a bank holding company
and the affiliates of a bank holding company
to—
‘‘(i) compete effectively with any com-
pany seeking to provide financial services
in the United States;
‘‘(ii) use any available or emerging
technological means, including any applica-
tion necessary to protect the security or ef-
ficacy of systems for the transmission of
data or financial transactions, in providing
financial services; and
‘‘(iii) offer customers any available or
emerging technological means for using fi-
nancial services.
‘‘(3) ACTIVITIES THAT ARE FINANCIAL IN NA-
TURE.—The following activities shall be considered
to be financial in nature:
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding money or se-
curities.
‘‘(B) 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.
‘‘(C) Providing financial, investment, or
economic advisory services, including advising
an investment company (as defined in section 3
of the Investment Company Act of 1940).
‘‘(D) Issuing or selling instruments rep-
resenting interests in pools of assets permissible
for a bank to hold directly.
‘‘(E) Underwriting, dealing in, or making
a market in securities.
‘‘(F) Engaging in any activity that the
Board has determined, by order or regulation
that is in effect on the date of enactment of the
Financial Services Act of 1998, to be so closely
related to banking or managing or controlling
banks as to be a proper incident thereto (sub-
ject to the same terms and conditions contained
in such order or regulation, unless modified by
the Board).
‘‘(G) 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 has determined, under
regulations issued pursuant to section
4(c)(13) of this Act (as in effect on the
day before the date of enactment of the Fi-
nancial Services Act of 1998) to be usual
in connection with the transaction of bank-
ing or other financial operations abroad.
‘‘(H) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of 1
or more entities (including entities, other than
a depository institution or subsidiary of a de-
pository institution, that the bank holding com-
pany controls) or otherwise, shares, assets, or
ownership interests (including without limita-
tion debt or equity securities, partnership inter-
ests, trust certificates or other instruments rep-
resenting ownership) of a company or other en-
tity, whether or not constituting control of such
company or entity, engaged in any activity not
authorized pursuant to this section if—
‘‘(i) the shares, assets, or ownership
interests are not acquired or held by a de-
pository institution or subsidiary of a de-
pository institution;
‘‘(ii) such shares, assets, or ownership
interests are acquired and held by a securi-
ties affiliate or an affiliate thereof as part
of a bona fide underwriting or merchant
banking activity, including investment ac-
tivities engaged in for the purpose of ap-
preciation and ultimate resale or disposi-
tion of the investment;
‘‘(iii) such shares, assets, or owner-
ship interests, are held only for such a pe-
riod of time as will permit the sale or dis-
position thereof on a reasonable basis con-
sistent with the nature of the activities de-
scribed in clause (ii); and
‘‘(iv) during the period such shares,
assets, or ownership interests are held, the
bank holding company does not actively
participate in the day to day management
or operation of such company or entity, ex-
cept insofar as necessary to achieve the ob-
jectives of clause (ii).
‘‘(I) Directly or indirectly acquiring or con-
trolling, whether as principal, on behalf of 1 or
more entities (including entities, other than a
depository institution or subsidiary of a deposi-
tory institution, 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 not authorized
pursuant to this section if—
‘‘(i) the shares, assets, or ownership
interests are not acquired or held by a de-
pository institution or a subsidiary of a de-
pository institution;
‘‘(ii) such shares, assets, or ownership
interests are acquired and held by an in-
surance 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 owner-
ship interests represent an investment
made in the ordinary course of business of
such insurance company in accordance
with relevant State law governing such in-
vestments; and
‘‘(iv) during the period such shares,
assets, 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).
‘‘(4) ACTIONS REQUIRED.—The Board shall, by
regulation or order, define, consistent with the pur-
poses of this Act, the following activities as, and the
extent to which such activities are, financial in na-
ture or incidental to activities which are financial in
nature:
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding financial as-
sets other than money or securities.
‘‘(B) Providing any device or other instru-
mentality for transferring money or other finan-
cial assets;
‘‘(C) Arranging, effecting, or facilitating fi-
nancial transactions for the account of third
parties.
‘‘(5) POST CONSUMMATION NOTIFICATION.—
‘‘(A) IN
GENERAL.—A financial holding
company and a wholesale financial holding com-
pany that acquires any company, or commences
any activity, pursuant to this subsection shall
provide written notice to the Board describing
the activity commenced or conducted by the
company acquired no later than 30 calendar
days after commencing the activity or con-
summating the acquisition.
‘‘(B) APPROVAL NOT REQUIRED FOR CER-
TAIN FINANCIAL ACTIVITIES.—Except as pro-
vided in section 4(j) with regard to the acquisi-
tion of a savings association, a financial holding
company and a wholesale financial holding com-
pany may commence any activity, or acquire
any company, pursuant to paragraph (3) or any
regulation prescribed or order issued under
paragraph (4), without prior approval of the
Board.
‘‘(d) PROVISIONS APPLICABLE TO FINANCIAL HOLD-
ING COMPANIES THAT FAIL TO MEET REQUIREMENTS.—
‘‘(1) IN GENERAL.—If the Board finds that a
financial holding company is not in compliance with
the requirements of subparagraph (A), (B), (C), or
(D) of subsection (b)(1), the Board shall give notice
of such finding to the company.
‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE-
QUIRED.—Within 45 days of receipt by a financial
holding company of a notice given under paragraph
(1) (or such additional period as the Board may per-
mit), the company shall execute an agreement ac-
ceptable to the Board to comply with the require-
ments applicable to a financial holding company.
‘‘(3) BOARD MAY IMPOSE LIMITATIONS.—Until
the conditions described in a notice to a financial
holding company under paragraph (1) are corrected,
the Board may impose such limitations on the con-
duct 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, after receiving
a notice under paragraph (1), a financial holding
company does not—
‘‘(A) execute and implement an agreement
in accordance with paragraph (2);
‘‘(B) comply with any limitations imposed
under paragraph (3);
‘‘(C) in the case of a notice of failure to
comply with subsection (b)(1)(A), restore each
depository institution subsidiary to well capital-
ized status before the end of the 180-day period
beginning on the date such notice is received by
the company (or such other period permitted by
the Board); or
‘‘(D) in the case of a notice of failure to
comply with subparagraph (B), (C), or (D) of
subsection (b)(1), restore compliance with any
such subparagraph by the date the next exam-
ination of the depository institution subsidiary
is completed or by the end of such other period
as the Board determines to be appropriate,
the Board may require such company, under such
terms and conditions as may be imposed by the
Board and subject to such extension of time as may
be granted in the Board’s discretion, to divest con-
trol of any depository institution subsidiary or, at
the election of the financial holding company, in-
stead to cease to engage in any activity conducted by
such company or its subsidiaries pursuant to this
section.
‘‘(5) CONSULTATION.—In taking any action
under this subsection, the Board shall consult with
all relevant Federal and State regulatory agencies.
‘‘(e) SAFEGUARDS FOR BANK SUBSIDIARIES.—A fi-
nancial 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, adequately protect the subsidiaries of
such company which are insured depository institu-
tions from such risks;
‘‘(2) the holding company has reasonable poli-
cies and procedures to preserve the separate cor-
porate identity and limited liability of such company
and the subsidiaries of such company, for the pro-
tection of the company’s subsidiary insured deposi-
tory institutions; and
‘‘(3) the holding company complies with this
section.
‘‘(f) 
AUTHORITY
TO
RETAIN
LIMITED
NON-
FINANCIAL ACTIVITIES AND AFFILIATIONS.—
‘‘(1) IN
GENERAL.—Notwithstanding section
4(a), a company that is not a bank holding company
or a foreign bank (as defined in section 1(b)(7) of
the International Banking Act of 1978) and becomes
a financial holding company after the date of the en-
actment of the Financial Services Act of 1998 may
continue to engage in any activity and retain direct
or indirect ownership or control of shares of a com-
pany engaged in any activity if—
‘‘(A) the holding company lawfully was en-
gaged in the activity or held the shares of such
company on September 30, 1997;
‘‘(B) the holding company is predomi-
nantly engaged in financial activities as defined
in paragraph (2); and
‘‘(C) the company engaged in such activity
continues to engage only in the same activities
that such company conducted on September 30,
1997, and other activities permissible under
this Act.
‘‘(2) PREDOMINANTLY
FINANCIAL.—For pur-
poses of this subsection, a company is predominantly
engaged in financial activities if the annual gross
revenues derived by the holding company and all
subsidiaries of the holding company (excluding reve-
nues derived from subsidiary depository institu-
tions), on a consolidated basis, from engaging in ac-
tivities that are financial in nature or are incidental
to activities that are financial in nature under sub-
section (c) represent at least 85 percent of the con-
solidated annual gross revenues of the company.
‘‘(3) NO EXPANSION OF GRANDFATHERED COM-
MERCIAL
ACTIVITIES
THROUGH
MERGER
OR
CON-
SOLIDATION.—A financial holding company that en-
gages in activities or holds shares pursuant to this
subsection, or a subsidiary of such financial holding
company, may not acquire, in any merger, consolida-
tion, or other type of business combination, assets of
any other company which is engaged in any activity
which the Board has not determined to be financial
in nature or incidental to activities that are financial
in nature under subsection (c).
‘‘(4) CONTINUING
REVENUE
LIMITATION
ON
GRANDFATHERED
COMMERCIAL
ACTIVITIES.—Not-
withstanding any other provision of this subsection,
a financial holding company may continue to engage
in activities or hold shares in companies pursuant to
this subsection only to the extent that the aggregate
annual gross revenues derived from all such activi-
ties and all such companies does not exceed 15 per-
cent of the consolidated annual gross revenues of the
financial holding company (excluding revenues de-
rived from subsidiary depository institutions).
‘‘(5) CROSS MARKETING RESTRICTIONS APPLI-
CABLE TO COMMERCIAL ACTIVITIES.—A depository
institution controlled by a financial holding company
shall not—
‘‘(A) offer or market, directly or through
any arrangement, any product or service of a
company whose activities are conducted or
whose shares are owned or controlled by the fi-
nancial holding company pursuant to this sub-
section or subparagraph (H) or (I) of sub-
section (c)(3); or
‘‘(B) permit any of its products or services
to be offered or marketed, directly or through
any arrangement, by or through any company
described in subparagraph (A).
‘‘(6) TRANSACTIONS WITH NONFINANCIAL AF-
FILIATES.—An insured depository institution con-
trolled by a financial holding company may not en-
gage in a covered transaction (as defined by section
23A(b)(7) of the Federal Reserve Act) with any af-
filiate controlled by the company pursuant to this
subsection or subparagraph (H) or (I) of subsection
(c)(3).
‘‘(7) SUNSET OF GRANDFATHER.—A financial
holding company engaged in any activity, or retain-
ing direct or indirect ownership or control of shares
of a company, pursuant to this subsection, shall ter-
minate such activity and divest ownership or control
of the shares of such company before the end of the
10-year period beginning on the date of the enact-
ment of the Financial Services Act of 1998. The
Board may, upon application by a financial holding
company, extend such 10-year period by not to ex-
ceed an additional 5 years if such extension would
not be detrimental to the public interest.
‘‘(g) DEVELOPING ACTIVITIES.—A financial holding
company and a wholesale financial holding company may
engage directly or indirectly, or acquire shares of any com-
pany engaged, in any activity that the Board has not de-
termined to be financial in nature or incidental to financial
activities under subsection (c) if—
‘‘(1) the holding company reasonably concludes
that the activity is financial in nature or incidental
to financial activities;
‘‘(2) the gross revenues from all activities con-
ducted under this subsection represent less than 5
percent of the consolidated gross revenues of the
holding company;
‘‘(3) the aggregate total assets of all companies
the shares of which are held under this subsection
do not exceed 5 percent of the holding company’s
consolidated total assets;
‘‘(4) the total capital invested in activities con-
ducted under this subsection represents less than 5
percent of the consolidated total capital of the hold-
ing company;
‘‘(5) the Board has not determined that the ac-
tivity is not financial in nature or incidental to fi-
nancial activities under subsection (c); and
‘‘(6) the holding company provides written noti-
fication to the Board describing the activity com-
menced or conducted by the company acquired no
later than 10 business days after commencing the
activity or consummating the acquisition.’’.
SEC. 104. CERTAIN STATE LAWS PREEMPTED.
(a) AFFILIATIONS.—No State may by statute, regula-
tion, order, interpretation, or otherwise, prevent or signifi-
cantly interfere with the ability of an insured depository
institution or a wholesale financial institution to be affili-
ated with an entity (including an entity engaged in insur-
ance activities) as authorized by this Act or any other pro-
vision of Federal law.
(b) ACTIVITIES.—
(1) Except as provided in paragraphs (2), (3),
and (4), no State may by statute, regulation, order,
interpretation, or otherwise, prevent or significantly
interfere with the ability of an insured depository in-
stitution or a wholesale financial institution to en-
gage, directly or indirectly or in conjunction with an
affiliate, in any activity authorized under this Act or
any other provision of Federal law.
(2) In accordance with the decision of the Su-
preme Court of the United States in Barnett Bank
of Marion County, N.A. v. Nelson, 116 S.Ct. 1103
(1996), no State may, by statute, regulation, order,
interpretation, or otherwise, prevent or significantly
interfere with the ability of an insured depository in-
stitution or wholesale financial institution to engage,
directly or indirectly, or in conjunction with an affili-
ate, in any insurance sales or solicitation activity,
except that—
(A) State statutes and regulations govern-
ing insurance sales and solicitations which are
no more restrictive than provisions in the Illi-
nois ‘‘Act Authorizing and Regulating the Sale
of Insurance by Financial Institutions, Public
Act 90–41’’ (215 ILCS 5/1400–1416), as in ef-
fect on October 1, 1997, shall not be deemed to
prevent or significantly interfere with the ability
of an insured depository institution or wholesale
financial institution to engage, directly or indi-
rectly, or in conjunction with an affiliate, in any
insurance sales or solicitation activity; and
(B) subparagraph (A) shall not create any
inference regarding State statutes and regula-
tions governing insurance sales and solicitations
other than State statutes and regulations de-
scribed in subparagraph (A).
(3) State statutes, regulations, orders, and in-
terpretations or otherwise shall not be preempted
under paragraph (1) if they—
(A) relate to, or are enacted or issued for
the purpose of regulating, the business of insur-
ance in accordance with the McCarran-Fer-
guson Act;
(B) apply only to entities that are not in-
sured depository institutions or wholesale finan-
cial institutions but which are engaged in the
business of insurance;
(C) do not relate to, and are not enacted
or issued for the purpose of regulating—
(i) cross-marketing; or
(ii) activities, including cross-market-
ing, which are subject to paragraph (2);
(D) are applicable to and are applied in
the same manner with respect to an affiliate of
an insured depository institution or a wholesale
financial institution as they are applicable to
and are applied to those entities that are not
affiliated with an insured depository institution
or a wholesale financial institution; and
(E) do not prevent or significantly inter-
fere with the ability of an insured depository in-
stitution or wholesale financial institution to en-
gage in activities authorized for such institution
under this Act or any other provision of Federal
law.
(4) Paragraphs (1) and (2) shall not be con-
strued as affecting the jurisdiction of the securities
commission (or any agency or office performing like
functions) of any State, under the laws of such
State, to investigate and bring enforcement actions,
consistent with section 18(c) of the Securities Act of
1933, with respect to fraud or deceit or unlawful
conduct by any person, in connection with securities
or securities transactions.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHOR-
IZED.
(a) IN GENERAL.—Section 3(g)(2) of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1842(g)(2)) 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. PROHIBITION ON DEPOSIT PRODUCTION OF-
FICES.
(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 Act of
1998,’’ after ‘‘pursuant to this title’’; and
(2) by inserting ‘‘or such Act’’ after ‘‘made by
this title’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—
Section 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 controlled by an out-of-State bank holding com-
pany (as defined in section 2(o)(7) of the Bank Holding
Company Act of 1956)’’ before the period.
SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIRE-
MENTS.
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 Hold-
ing Company Act of 1956)’’ before the period.
SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE
BANKS.
Section 4(f) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(f)) is amended—
(1) in paragraph (2)(A)(ii)—
(A) by striking ‘‘and’’ at the end of sub-
clause (IX);
(B) by inserting ‘‘and’’ after the semicolon
at the end of subclause (X); and
(C) by inserting after subclause (X) the
following new subclause:
‘‘(XI) assets that are derived
from, or are incidental to, activities in
which institutions described in section
2(c)(2)(F) are permitted to engage,’’;
(2) in paragraph (2), by striking subparagraph
(B) and inserting the following new subparagraphs:
‘‘(B) any bank subsidiary of such company
engages in any activity in which the bank was
not lawfully engaged as of March 5, 1987, un-
less the bank is well managed and well capital-
ized;
‘‘(C) any bank subsidiary of such company
both—
‘‘(i) accepts demand deposits or de-
posits that the depositor may withdraw by
check or similar means for payment to
third parties; and
‘‘(ii) engages in the business of mak-
ing 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
bank subsidiary of such company permits any
overdraft (including any intraday overdraft), or
incurs any such overdraft in such bank’s ac-
count at a Federal reserve bank, on behalf of
an affiliate, other than an overdraft described
in paragraph (3).’’; and
(3) by striking paragraphs (3) and (4) and in-
serting the following new paragraphs:
‘‘(3) PERMISSIBLE OVERDRAFTS DESCRIBED.—
For purposes of paragraph (2)(D), an overdraft is
described 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 obli-
gations 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-
tions eligible for settlement on the Federal
Reserve book entry system.
‘‘(4) DIVESTITURE IN CASE OF LOSS OF EX-
EMPTION.—If any company described in paragraph
(1) fails to qualify for the exemption provided under
such paragraph by operation of paragraph (2), such
exemption shall cease to apply to such company and
such company shall divest control of each bank it
controls before the end of the 180-day period begin-
ning on the date that the company receives notice
from the Board that the company has failed to con-
tinue 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.’’.
SEC. 109. RESPONSIVENESS TO COMMUNITY NEEDS FOR FI-
NANCIAL SERVICES.
(a) STUDY.—The Secretary of the Treasury, in con-
sultation with the Federal banking agencies (as defined
in section 3(z) of the Federal Deposit Insurance Act) and
the Securities and Exchange Commission, shall conduct
a study of the extent to which adequate services are being
provided as intended by the Community Reinvestment Act
of 1977, including services in low- and moderate-income
neighborhoods and for persons of modest means, as a re-
sult of the enactment of this Act.
(b) REPORT.—Before the end of the 2-year period be-
ginning on the date of the enactment of this Act, the Sec-
retary of the Treasury, in consultation with the Federal
banking agencies and the Securities and Exchange Com-
mission, shall submit a report to the Congress on the
study conducted pursuant to subsection (a) and shall in-
clude such recommendations as the Secretary determines
to be appropriate for administrative and legislative action
with respect to institutions covered under the Community
Reinvestment Act of 1977.
SEC. 110. REPORTS ON ONGOING FTC STUDY OF CON-
SUMER PRIVACY ISSUES.
With respect to the ongoing multistage study being
conducted by the Federal Trade Commission on consumer
privacy issues, the Commission shall submit to the Con-
gress an interim report on the findings and conclusions
of the Commission, together with such recommendations
for legislative and administrative action as the Commis-
sion determines to be appropriate, at the conclusion of
each stage of such study and a final report at the conclu-
sion of the study.
SEC. 110A. GAO STUDY OF ECONOMIC IMPACT ON COMMU-
NITY BANKS AND OTHER SMALL FINANCIAL
INSTITUTIONS.
(a) STUDY REQUIRED.—The Comptroller General of
the United States shall conduct a study of the projected
economic impact that the enactment of this Act will have
on financial institutions which have total assets of
$100,000,000 or less.
(b) REPORT TO THE CONGRESS.—The Comptroller
General of the United States shall submit a report to the
Congress before the end of the 6-month period beginning
on the date of the date of the enactment of this Act con-
taining the findings and conclusions of the Comptroller
General with regard to the study required under sub-
section (a) and such recommendations for legislative or
administrative action as the Comptroller General may de-
termine to be appropriate.
Subtitle 
B—Streamlining 
Super-
vision 
of 
Financial 
Holding
Companies
SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY
SUPERVISION.
Section 5(c) of the Bank Holding Company Act of
1956 (12 U.S.C. 1844(c)) is amended to read as follows:
‘‘(c) REPORTS AND EXAMINATIONS.—
‘‘(1) REPORTS.—
‘‘(A) IN GENERAL.—The Board from time
to time may require any bank holding company
and any subsidiary of such company to submit
reports under oath to keep the Board informed
as to—
‘‘(i) its financial condition, systems
for monitoring and controlling financial
and operating risks, and transactions with
depository institution subsidiaries of the
holding company; and
‘‘(ii) compliance by the company or
subsidiary with applicable provisions of
this Act.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN GENERAL.—The Board shall,
to the fullest extent possible, accept re-
ports in fulfillment of the Board’s report-
ing requirements under this paragraph
that a bank holding company or any sub-
sidiary of such company has provided or
been required to provide to other Federal
and State supervisors or to appropriate
self-regulatory organizations.
‘‘(ii) AVAILABILITY.—A bank holding
company or a subsidiary of such company
shall provide to the Board, at the request
of the Board, a report referred to in clause
(i).
‘‘(iii) REQUIRED
USE
OF
PUBLICLY
REPORTED
INFORMATION.—The 
Board
shall, to the fullest extent possible, accept
in fulfillment of any reporting or record-
keeping requirements under this Act infor-
mation that is otherwise required to be re-
ported publicly and externally audited fi-
nancial statements.
‘‘(iv) REPORTS
FILED
WITH
OTHER
AGENCIES.—In the event the Board re-
quires a report from a functionally regu-
lated nondepository institution subsidiary
of a bank holding company of a kind that
is not required by another Federal or State
regulator or appropriate self-regulatory or-
ganization, the Board shall request that
the appropriate regulator or self-regulatory
organization obtain such report. If the re-
port is not made available to the Board,
and the report is necessary to assess a ma-
terial risk to the bank holding company or
its subsidiary depository institution or
compliance with this Act, the Board may
require such subsidiary to provide such a
report to the Board.
‘‘(C) DEFINITION.—For purposes of this
subsection, the term ‘functionally regulated
nondepository institution’ means—
‘‘(i) a broker or dealer registered
under the Securities Exchange Act of
1934;
‘‘(ii) an investment adviser registered
under the Investment Advisers Act of
1940, with respect to the investment advi-
sory activities of such investment adviser
and activities incidental to such investment
advisory activities;
‘‘(iii) an insurance company subject to
supervision by a State insurance commis-
sion, agency, or similar authority; and
‘‘(iv) an entity subject to regulation
by the Commodity Futures Trading Com-
mission, with respect to the commodities
activities of such entity and activities inci-
dental to such commodities activities.
‘‘(2) EXAMINATIONS.—
‘‘(A) EXAMINATION AUTHORITY.—
‘‘(i) IN
GENERAL.—The Board may
make examinations of each bank holding
company and each subsidiary of a bank
holding company.
‘‘(ii) 
FUNCTIONALLY
REGULATED
NONDEPOSITORY
INSTITUTION
SUBSIDI-
ARIES.—Notwithstanding clause (i), the
Board may make examinations of a func-
tionally regulated nondepository institution
subsidiary of a bank holding company only
if—
‘‘(I) the Board has reasonable
cause to believe that such subsidiary
is engaged in activities that pose a
material risk to an affiliated deposi-
tory institution, or
‘‘(II) based on reports and other
available information, the Board has
reasonable cause to believe that a sub-
sidiary is not in compliance with this
Act or with provisions relating to
transactions with an affiliated deposi-
tory institution and the Board cannot
make such determination through ex-
amination of the affiliated depository
institution or bank holding company.
‘‘(B) LIMITATIONS ON EXAMINATION AU-
THORITY FOR BANK HOLDING COMPANIES AND
SUBSIDIARIES.—Subject 
to 
subparagraph
(A)(ii), the Board may make examinations
under subparagraph (A)(i) of each bank holding
company and each subsidiary of such holding
company in order to—
‘‘(i) inform the Board of the nature of
the operations and financial condition of
the holding company and such subsidiaries;
‘‘(ii) inform the Board of—
‘‘(I) the financial and operational
risks within the holding company sys-
tem that may pose a threat to the
safety and soundness of any subsidi-
ary depository institution of such
holding company; and
‘‘(II) the systems for monitoring
and controlling such risks; and
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
subsidiary depository institution and its af-
filiates.
‘‘(C) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, limit the focus and scope of any exam-
ination of a bank holding company to—
‘‘(i) the bank holding company; and
‘‘(ii) any subsidiary of the holding
company that, because of—
‘‘(I) the size, condition, or activi-
ties of the subsidiary;
‘‘(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
institution affiliate of the holding company.
‘‘(D) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use, for the purposes of this para-
graph, the reports of examinations of depository
institutions made by the appropriate Federal
and State depository institution supervisory au-
thority.
‘‘(E) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, address the circumstances which might
otherwise permit or require an examination by
the Board by forgoing an examination and in-
stead reviewing the reports of examination
made of—
‘‘(i) any registered broker or dealer or
registered investment adviser by or on be-
half of the Securities and Exchange Com-
mission;
‘‘(ii) any licensed insurance company
by or on behalf of any state regulatory au-
thority responsible for the supervision of
insurance companies; and
‘‘(iii) any other subsidiary that the
Board finds to be comprehensively super-
vised by a Federal or State authority.
‘‘(3) CAPITAL.—
‘‘(A) IN GENERAL.—The Board shall not,
by regulation, guideline, order or otherwise, pre-
scribe or impose any capital or capital adequacy
rules, guidelines, standards, or requirements on
any subsidiary of a financial holding company
that is not a depository institution and—
‘‘(i) is in compliance with applicable
capital requirements of another Federal
regulatory authority (including the Securi-
ties and Exchange Commission) or State
insurance authority; or
‘‘(ii) is registered as an investment
adviser under the Investment Advisers Act
of 1940.
‘‘(B) RULE OF CONSTRUCTION.—Subpara-
graph (A) shall not be construed as preventing
the Board from imposing capital or capital ade-
quacy rules, guidelines, standards, or require-
ments with respect to activities of a registered
investment adviser other than investment advi-
sory activities or activities incidental to invest-
ment advisory activities.
‘‘(4) TRANSFER OF BOARD AUTHORITY TO AP-
PROPRIATE FEDERAL BANKING AGENCY.—
‘‘(A) IN
GENERAL.—In the case of any
bank holding company which is not significantly
engaged in nonbanking activities, the Board, in
consultation with the appropriate Federal bank-
ing agency, may designate the appropriate Fed-
eral banking agency of the lead insured deposi-
tory institution subsidiary of such holding com-
pany as the appropriate Federal banking agen-
cy for the bank holding company.
‘‘(B) 
AUTHORITY
TRANSFERRED.—An
agency designated by the Board under subpara-
graph (A) shall have the same authority as the
Board under this Act to—
‘‘(i) examine and require reports from
the bank holding company and any affiliate
of such company (other than a depository
institution) under section 5;
‘‘(ii) approve or disapprove applica-
tions or transactions under section 3;
‘‘(iii) take actions and impose pen-
alties under subsections (e) and (f) of sec-
tion 5 and section 8; and
‘‘(iv) take actions regarding the hold-
ing company, any affiliate of the holding
company (other than a depository institu-
tion), or any institution-affiliated party of
such company or affiliate under the Fed-
eral Deposit Insurance Act and any other
statute which the Board may designate.
‘‘(C) AGENCY ORDERS.—Section 9 (of this
Act) and section 105 of the Bank Holding
Company Act Amendments of 1970 shall apply
to orders issued by an agency designated under
subparagraph (A) in the same manner such sec-
tions apply to orders issued by the Board.
‘‘(5) FUNCTIONAL REGULATION OF SECURITIES
AND INSURANCE ACTIVITIES.—The Board shall defer
to—
‘‘(A) the Securities and Exchange Commis-
sion with regard to all interpretations of, and
the enforcement of, applicable Federal securi-
ties laws relating to the activities, conduct, and
operations of registered brokers, dealers, invest-
ment 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 op-
erations of insurance companies and insurance
agents.’’.
SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT
FOR FINANCIAL HOLDING COMPANIES.
(a) PREVENTION OF DUPLICATIVE FILINGS.—Sec-
tion 5(a) of the Bank Holding Company Act of 1956 (12
U.S.C. 1844(a)) is amended by adding the following new
sentence at the end: ‘‘A declaration filed in accordance
with section 6(b)(1)(E) shall satisfy the requirements of
this subsection with regard to the registration of a bank
holding company but not any requirement to file an appli-
cation to acquire a bank pursuant to section 3.’’.
(b) DIVESTITURE PROCEDURES.—Section 5(e)(1) of
the Bank Holding Company Act of 1956 (12 U.S.C.
1844(e)(1)) is amended—
(1) by striking ‘‘Financial Institutions Super-
visory Act of 1966, order’’ and inserting ‘‘Financial
Institutions Supervisory Act of 1966, at the election
of the bank holding company—
‘‘(A) order’’; and
(2) by striking ‘‘shareholders of the bank hold-
ing company. Such distribution’’ and inserting
‘‘shareholders of the bank holding company; or
‘‘(B) order the bank holding company, after due
notice and opportunity for hearing, and after con-
sultation with the 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. 113. AUTHORITY OF STATE INSURANCE REGULATOR
AND SECURITIES AND EXCHANGE COMMIS-
SION.
Section 5 of the Bank Holding Company Act of 1956
(12 U.S.C. 1844) is amended by adding at the end the
following new subsection:
‘‘(g) AUTHORITY OF STATE INSURANCE REGULATOR
AND THE SECURITIES AND EXCHANGE COMMISSION.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law, any regulation, order, or other ac-
tion of the Board which requires a bank holding
company to provide funds or other assets to a sub-
sidiary insured depository institution shall not be ef-
fective nor enforceable if—
‘‘(A) such funds or assets are to be pro-
vided by—
‘‘(i) a bank holding company that is
an insurance company or is a broker or
dealer registered under the Securities Ex-
change Act of 1934; or
‘‘(ii) an affiliate of the depository in-
stitution which is an insurance company or
a broker or dealer registered under such
Act; and
‘‘(B) the State insurance authority for the
insurance company or the Securities and Ex-
gard to a bank holding company or affiliate referred
to in such paragraph, the Board may order the bank
holding company to divest the insured depository in-
stitution within 180 days of receiving notice or such
longer period as the Board determines consistent
with the safe and sound operation of the insured de-
pository institution.
‘‘(4) CONDITIONS BEFORE DIVESTITURE.—Dur-
ing the period beginning on the date an order to di-
vest is issued by the Board under paragraph (3) to
a bank holding company and ending on the date the
divestiture is completed, the Board may impose any
conditions or restrictions on the holding company’s
ownership or operation of the insured depository in-
stitution, including restricting or prohibiting trans-
actions between the insured depository institution
and any affiliate of the institution, as are appro-
priate under the circumstances.’’.
SEC. 114. PRUDENTIAL SAFEGUARDS.
Section 5 of the Bank Holding Company Act of 1956
(12 U.S.C. 1844) is amended by inserting after subsection
(g) (as added by section 113 of this subtitle) the following
new subsection:
‘‘(h) PRUDENTIAL SAFEGUARDS.—
‘‘(1) IN GENERAL.—The Board may, by regula-
tion or order, impose restrictions or requirements on
relationships or transactions between a depository
institution subsidiary of a bank holding company
and any affiliate of such depository institution (other
than a subsidiary of such institution) which the
Board finds is consistent with the public interest,
the purposes of this Act, the Financial Services Act
of 1998, the Federal Reserve Act, and other Federal
law applicable to depository institution subsidiaries
of bank holding companies and the standards in
paragraph (2).
‘‘(2) STANDARDS.—The Board may exercise au-
thority under paragraph (1) if the Board finds that
such action will have any of the following effects:
‘‘(A) Avoid any significant risk to the safe-
ty 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
depository institutions.
‘‘(E) Promote the application of national
treatment and equality of competitive oppor-
tunity between nonbank affiliates owned or con-
trolled by domestic bank holding companies and
nonbank affiliates owned or controlled by for-
eign banks operating in the United States.
‘‘(3) REVIEW.—The Board shall regularly—
‘‘(A) review all restrictions or requirements
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any
such restriction or requirement to carry out the
purposes of the Act, including any purpose de-
scribed in paragraph (2); and
‘‘(B) modify or eliminate any restriction or
requirement the Board finds is no longer re-
quired for such purposes.’’.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) EXCLUSIVE COMMISSION AUTHORITY.—
(1) IN GENERAL.—The Commission shall be the
sole Federal agency with authority to inspect and ex-
amine any registered investment company that is not
a bank holding company.
(2) PROHIBITION ON BANKING AGENCIES.—A
Federal banking agency may not inspect or examine
any registered investment company that is not a
bank holding company.
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—The Commission shall provide to any Federal
banking agency, upon request, the results of any examina-
tion, reports, records, or other information with respect
to any registered investment company to the extent nec-
essary for the agency to carry out its statutory responsibil-
ities.
(c) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) BANK
HOLDING
COMPANY.—The term
‘‘bank holding company’’ has the meaning given to
such term in section 2 of the Bank Holding Com-
pany Act of 1956.
(2) COMMISSION.—The term ‘‘Commission’’
means the Securities and Exchange Commission.
(3) FEDERAL
BANKING
AGENCY.—The term
‘‘Federal banking agency’’ has the meaning given to
such term in section 3(z) of the Federal Deposit In-
surance Act.
(4) REGISTERED INVESTMENT COMPANY.—The
term ‘‘registered investment company’’ means an in-
vestment company which is registered with the Com-
mission under the Investment Company Act of 1940.
SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
The Bank Holding Company Act of 1956 (12 U.S.C.
1841 et seq.) is amended by inserting after section 10 the
following new section:
‘‘SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
‘‘(a) LIMITATION ON DIRECT ACTION.—
‘‘(1) IN GENERAL.—The Board may not pre-
scribe regulations, issue or seek entry of orders, im-
pose restraints, restrictions, guidelines, require-
ments, safeguards, or standards, or otherwise take
any action under or pursuant to any provision of
this Act or section 8 of the Federal Deposit Insur-
ance Act against or with respect to a regulated sub-
sidiary of a bank holding company unless the action
is necessary to prevent or redress an unsafe or un-
sound practice or breach of fiduciary duty by such
subsidiary that poses a material risk to—
‘‘(A) the financial safety, soundness, or
stability of an affiliated depository institution;
or
‘‘(B) the domestic or international pay-
ment system.
‘‘(2) CRITERIA
FOR
BOARD
ACTION.—The
Board shall not take action otherwise permitted
under paragraph (1) unless the Board finds that it
is not reasonably possible to effectively protect
against the material risk at issue through action di-
rected at or against the affiliated depository institu-
tion or against depository institutions generally.
‘‘(b) LIMITATION ON INDIRECT ACTION.—The Board
may not prescribe regulations, issue or seek entry of or-
ders, impose restraints, restrictions, guidelines, require-
ments, safeguards, or standards, or otherwise take any ac-
tion under or pursuant to any provision of this Act or sec-
tion 8 of the Federal Deposit Insurance Act against or
with respect to a financial holding company or a wholesale
financial holding company where the purpose or effect of
doing so would be to take action indirectly against or with
respect to a regulated subsidiary that may not be taken
directly against or with respect to such subsidiary in ac-
cordance with subsection (a).
‘‘(c) ACTIONS SPECIFICALLY AUTHORIZED.—Not-
withstanding subsection (a), the Board may take action
under this Act or section 8 of the Federal Deposit Insur-
ance Act to enforce compliance by a regulated subsidiary
with Federal law that the Board has specific jurisdiction
to enforce against such subsidiary.
‘‘(d) REGULATED SUBSIDIARY DEFINED.—For pur-
poses of this section, the term ‘regulated subsidiary’
means any company that is not a bank holding company
and is—
‘‘(1) a broker or dealer registered under the Se-
curities Exchange Act of 1934;
‘‘(2) an investment adviser registered under the
Investment Advisers Act of 1940, with respect to the
investment advisory activities of such investment ad-
viser and activities incidental to such investment ad-
visory activities;
‘‘(3) an investment company registered under
the Investment Company Act of 1940;
‘‘(4) an insurance company or an insurance
agency subject to supervision by a State insurance
commission, agency, or similar authority; or
‘‘(5) an entity subject to regulation by the Com-
modity Futures Trading Commission, with respect
to the commodities activities of such entity and ac-
tivities incidental to such commodities activities.’’.
SEC. 117. INTERAGENCY CONSULTATION.
(a) PURPOSE.—It is the intention of Congress that
the Board of Governors of the Federal Reserve System,
as the umbrella supervisor for financial holding compa-
nies, and the State insurance regulators, as the functional
(1) INFORMATION OF THE BOARD.—Upon the
request of the appropriate insurance regulator of
any State, the Board may provide any information
of the Board regarding the financial condition, risk
management policies, and operations of any financial
holding company that controls a company that is en-
gaged in insurance activities and is regulated by
such State insurance regulator, and regarding any
transaction or relationship between such an insur-
ance company and any affiliated depository institu-
tion. The Board may provide any other information
to the appropriate State insurance regulator that the
Board believes is necessary or appropriate to permit
the State insurance regulator to administer and en-
force applicable State insurance laws.
(2) BANKING
AGENCY
INFORMATION.—Upon
the request of the appropriate insurance regulator of
any State, the appropriate Federal banking agency
may provide any information of the agency regard-
ing any transaction or relationship between a deposi-
tory institution supervised by such Federal banking
agency and any affiliated company that is engaged
in insurance activities regulated by such State insur-
ance regulator. The appropriate Federal banking
agency may provide any other information to the ap-
propriate State insurance regulator that the agency
believes is necessary or appropriate to permit the
State insurance regulator to administer and enforce
applicable State insurance laws.
(3) STATE INSURANCE REGULATOR INFORMA-
TION.—Upon the request of the Board or the appro-
priate Federal banking agency, a State insurance
regulator may provide any examination or other re-
ports, records, or other information to which such
insurance regulator may have access with respect to
a company which—
(A) is engaged in insurance activities and
regulated by such insurance regulator; and
(B) is an affiliate of an insured depository
institution, wholesale financial institution, or fi-
nancial holding company.
(c) CONSULTATION.—Before making any determina-
tion relating to the initial affiliation of, or the continuing
affiliation of, an insured depository institution, wholesale
financial institution, or financial holding company with a
company engaged in insurance activities, the appropriate
Federal banking agency shall consult with the appropriate
State insurance regulator of such company and take the
views of such insurance regulator into account in making
such determination.
(d) EFFECT ON OTHER AUTHORITY.—Nothing in this
section shall limit in any respect the authority of the ap-
propriate Federal banking agency with respect to an in-
sured depository institution, wholesale financial institu-
tion, or bank holding company or any affiliate thereof
under any provision of law.
(e) CONFIDENTIALITY AND PRIVILEGE.—
(1) CONFIDENTIALITY.—The appropriate Fed-
eral banking agency shall not provide any informa-
tion or material that is entitled to confidential treat-
ment under applicable Federal banking agency regu-
lations, or other applicable law, to a State insurance
regulator unless such regulator agrees to maintain
the information or material in confidence and to
take all reasonable steps to oppose any effort to se-
cure disclosure of the information or material by the
regulator. The appropriate Federal banking agency
shall treat as confidential any information or mate-
rial obtained from a State insurance regulator that
is entitled to confidential treatment under applicable
State regulations, or other applicable law, and take
all reasonable steps to oppose any effort to secure
disclosure of the information or material by the Fed-
eral banking agency.
(2) PRIVILEGE.—The provision pursuant to this
section of information or material by a Federal
banking agency or State insurance regulator shall
not constitute a waiver of, or otherwise affect, any
privilege to which the information or material is oth-
erwise subject.
(f) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) APPROPRIATE FEDERAL BANKING AGENCY;
INSURED
DEPOSITORY
INSTITUTION.—The terms
‘‘appropriate Federal banking agency’’ and ‘‘insured
depository institution’’ shall have the same meanings
as in section 3 of the Federal Deposit Insurance
Act.
(2) BOARD; FINANCIAL
HOLDING
COMPANY;
AND
WHOLESALE
FINANCIAL
INSTITUTION.—The
terms ‘‘Board’’, ‘‘financial holding company’’, and
‘‘wholesale financial institution’’ shall have the same
meanings as in section 2 of the Bank Holding Com-
pany Act of 1956.
Subtitle C—Subsidiaries of
National Banks
SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF
NATIONAL BANKS.
(a) 
FINANCIAL
SUBSIDIARIES
OF
NATIONAL
BANKS.—Chapter one of title LXII of the Revised Stat-
utes of United States (12 U.S.C. 21 et seq.) is amended—
(1) by redesignating section 5136A as section
5136C; and
(2) by inserting after section 5136 (12 U.S.C.
24) the following new section:
‘‘SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.
‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AUTHOR-
IZED TO ENGAGE IN FINANCIAL ACTIVITIES.—
‘‘(1) EXCLUSIVE AUTHORITY.—No provision of
section 5136 or any other provision of this title
LXII of the Revised Statutes shall be construed as
authorizing a subsidiary of a national bank to en-
gage in, or own any share of or any other interest
in any company engaged in, any activity that—
‘‘(A) is not permissible for a national bank
to engage in directly; or
‘‘(B) is conducted under terms or condi-
tions other than those that would govern the
conduct of such activity by a national bank,
unless a national bank is specifically authorized by
the express terms of a Federal statute and not by
implication or interpretation to acquire shares of or
an interest in, or to control, such subsidiary, such as
by paragraph (2) of this subsection and section 25A
of the Federal Reserve Act.
‘‘(2) SPECIFIC
AUTHORIZATION
TO
CONDUCT
AGENCY ACTIVITIES WHICH ARE FINANCIAL IN NA-
TURE.—A national bank may control a company
that engages in agency activities that have been de-
termined to be financial in nature or incidental to
such financial activities pursuant to and in accord-
ance with section 6(c) of the Bank Holding Com-
pany Act of 1956 if—
‘‘(A) the company engages in such activi-
ties solely as agent and not directly or indirectly
as principal;
‘‘(B) the national bank is well capitalized
and well managed, and has achieved a rating of
satisfactory or better at the most recent exam-
ination of the bank under the Community Rein-
vestment Act of 1977;
‘‘(C) all depository institution affiliates of
the national bank are well capitalized and well
managed, and have achieved a rating of satis-
factory or better at the most recent examina-
tion of each such depository institution under
the Community Reinvestment Act of 1977; and
‘‘(D) the bank has received the approval of
the Comptroller of the Currency.
‘‘(3) DEFINITIONS.—
‘‘(A) COMPANY; CONTROL; SUBSIDIARY.—
The terms ‘company’, ‘control’, and ‘subsidiary’
have the meanings given to such terms in sec-
tion 2 of the Bank Holding Company Act of
1956.
‘‘(B) WELL CAPITALIZED.—The term ‘well
capitalized’ has the same meaning as in section
38 of the Federal Deposit Insurance Act and,
for purposes of this section, the Comptroller
shall have exclusive jurisdiction to determine
whether a national bank is well capitalized.
‘‘(C) WELL
MANAGED.—The term ‘well
managed’ means—
‘‘(i) in the case of a bank that has
been examined, unless otherwise deter-
mined in writing by the Comptroller—
‘‘(I) the achievement of a com-
posite rating of 1 or 2 under the Uni-
form Financial Institutions Rating
System (or an equivalent rating under
an equivalent rating system) in con-
nection with the most recent examina-
tion or subsequent review of the bank;
and
‘‘(II) at least a rating of 2 for
management, if that rating is given;
or
‘‘(ii) in the case of any national bank
that has not been examined, the existence
and use of managerial resources that the
Comptroller determines are satisfactory.
‘‘(b) LIMITED
EXCLUSIONS
FROM
COMMUNITY
NEEDS REQUIREMENTS FOR NEWLY ACQUIRED DEPOSI-
TORY INSTITUTIONS.—Any depository institution which
becomes affiliated with a national bank during the 24-
month period preceding the submission of an application
to acquire a subsidiary under subsection (a)(2), and any
depository institution which becomes so affiliated after the
approval of such application, may be excluded for purposes
of subsection (a)(2)(B) during the 24-month period begin-
ning on the date of such acquisition if—
‘‘(1) the depository institution has submitted an
affirmative plan to the appropriate Federal banking
agency (as defined in section 3 of the Federal De-
posit Insurance Act) to take such action as may be
necessary in order for such institution to achieve a
‘satisfactory record of meeting community credit
needs’, or better, at the next examination of the in-
stitution under the Community Reinvestment Act of
1977; and
‘‘(2) the plan has been approved by the appro-
priate Federal banking agency.’’.
(b) LIMITATION ON CERTAIN ACTIVITIES IN SUB-
SIDIARIES.—Section 21(a)(1) of the Banking Act of 1933
(12 U.S.C. 378(a)(1)) is amended—
(1) by inserting ‘‘, or to be a subsidiary of any
person, firm, corporation, association, business trust,
or similar organization engaged (unless such subsidi-
ary (A) was engaged in such securities activities as
of September 15, 1997, or (B) is a nondepository
subsidiary of a foreign bank and is not also a sub-
sidiary of a domestic depository institution),’’ after
‘‘to engage at the same time’’; and
(2) by inserting ‘‘or any subsidiary of such
bank, company, or institution’’ after ‘‘or private
bankers’’.
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) ANTITYING.—Section 106(a) of the Bank
Holding Company Act Amendments of 1970 is
amended by adding at the end the following new
sentence: ‘‘For purposes of this section, a subsidiary
of a national bank which engages in activities as an
agent pursuant to section 5136A(a)(2) shall be
deemed to be a subsidiary of a bank holding com-
pany, and not a subsidiary of a bank.’’.
(2) SECTION 23B.—Section 23B(a) of the Fed-
eral Reserve Act (12 U.S.C. 371c–1(a)) is amended
by adding at the end the following new paragraph:
‘‘(4) SUBSIDIARY
OF
NATIONAL
BANK.—For
purposes of this section, a subsidiary of a national
bank which engages in activities as an agent pursu-
ant to section 5136A(a)(2) shall be deemed to be an
affiliate of the national bank and not a subsidiary of
the bank.’’.
(d) CLERICAL AMENDMENT.—The table of sections
for chapter one of title LXII of the Revised Statutes of
the United States is amended—
(1) by redesignating the item relating to section
5136A as section 5136C; and
(2) by inserting after the item relating to sec-
tion 5136 the following new item:
‘‘5136A. Financial subsidiaries of national banks.’’.
SEC. 122. MISREPRESENTATIONS REGARDING DEPOSITORY
INSTITUTION LIABILITY FOR OBLIGATIONS
OF AFFILIATES.
(a) IN GENERAL.—Chapter 47 of title 18, United
States Code, is amended by inserting after section 1007
the following new section:
‘‘§ 1008. Misrepresentations regarding financial insti-
tution liability for obligations of affiliates
‘‘(a) IN GENERAL.—No institution-affiliated party of
an insured depository institution or institution-affiliated
party of a subsidiary or affiliate of an insured depository
institution shall fraudulently represent that the institution
is or will be liable for any obligation of a subsidiary or
other affiliate of the institution.
‘‘(b) CRIMINAL PENALTY.—Whoever violates sub-
section (a) shall be fined under this title, imprisoned for
not more than 1 year, or both.
‘‘(c) INSTITUTION-AFFILIATED PARTY DEFINED.—
For purposes of this section, the term ‘institution-affili-
ated party’ with respect to a subsidiary or affiliate has
the same meaning as in section 3 except references to an
insured depository institution shall be deemed to be ref-
erences to a subsidiary or affiliate of an insured depository
institution.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section, the terms ‘affiliate’, ‘insured depository institu-
tion’, and ‘subsidiary’ have same meanings as in section
3 of the Federal Deposit Insurance Act.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 47 of title 18, United States Code, is amended
by inserting after the item relating to section 1007 the
following new item:
‘‘1008. Misrepresentations regarding financial institution liability for obligations
of affiliates.’’.
SEC. 123. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RE-
SERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C.
248) is amended by striking the paragraph designated as
‘‘(m)’’ and inserting ‘‘(m) [Repealed]’’.
Subtitle 
D—Wholesale 
Financial
Holding Companies; Wholesale
Financial Institutions
CHAPTER 1—WHOLESALE FINANCIAL
HOLDING COMPANIES
SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES
ESTABLISHED.
(a) DEFINITION AND SUPERVISION.—Section 10 of
the Bank Holding Company Act of 1956 (12 U.S.C. 1841
et seq.) is amended to read as follows:
‘‘SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.
‘‘(a) COMPANIES THAT CONTROL WHOLESALE FI-
NANCIAL INSTITUTIONS.—
‘‘(1) WHOLESALE
FINANCIAL
HOLDING
COM-
PANY
DEFINED.—The term ‘wholesale financial
holding company’ means any company that—
‘‘(A) is registered as a bank holding com-
pany;
‘‘(B) is predominantly engaged in financial
activities as defined in section 6(g)(2);
‘‘(C) controls 1 or more wholesale financial
institutions;
‘‘(D) does not control—
‘‘(i) a bank other than a wholesale fi-
nancial institution;
‘‘(ii) an insured bank other than an
institution permitted under subparagraph
(D), (F), or (G) of section 2(c)(2); or
‘‘(iii) a savings association; and
‘‘(E) is not a foreign bank (as defined in
section 1(b)(7) of the International Banking
Act of 1978).
‘‘(2) SAVINGS
ASSOCIATION
TRANSITION
PE-
RIOD.—Notwithstanding paragraph (1)(C)(iii), the
Board may permit a company that controls a sav-
ings association and that otherwise meets the re-
quirements of paragraph (1) to become supervised
under paragraph (1), if the company divests control
of any such savings association within such period
not to exceed 5 years after becoming supervised
under paragraph (1) as permitted by the Board.
‘‘(b) SUPERVISION BY THE BOARD.—
‘‘(1) IN GENERAL.—The provisions of this sec-
tion shall govern the reporting, examination, and
capital requirements of wholesale financial holding
companies.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—The Board from time
to time may require any wholesale financial
holding company and any subsidiary of such
company to submit reports under oath to keep
the Board informed as to—
‘‘(i) the company’s or subsidiary’s ac-
tivities, financial condition, policies, sys-
tems for monitoring and controlling finan-
cial and operational risks, and transactions
with depository institution subsidiaries of
the holding company; and
‘‘(ii) the extent to which the company
or subsidiary has complied with the provi-
sions of this Act and regulations prescribed
and orders issued under this Act.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN GENERAL.—The Board shall,
to the fullest extent possible, accept re-
ports in fulfillment of the Board’s report-
ing requirements under this paragraph
that the wholesale financial holding com-
pany or any subsidiary of such company
has provided or been required to provide to
other Federal and State supervisors or to
appropriate self-regulatory organizations.
‘‘(ii) AVAILABILITY.—A wholesale fi-
nancial holding company or a subsidiary of
such company shall provide to the Board,
at the request of the Board, a report re-
ferred to in clause (i).
‘‘(C) EXEMPTIONS FROM REPORTING RE-
QUIREMENTS.—
‘‘(i) IN GENERAL.—The Board may,
by regulation or order, exempt any com-
pany or class of companies, under such
terms and conditions and for such periods
as the Board shall provide in such regula-
tion or order, from the provisions of this
paragraph and any regulation prescribed
under this paragraph.
‘‘(ii) 
CRITERIA
FOR
CONSIDER-
ATION.—In making any determination
under clause (i) with regard to any exemp-
tion under such clause, the Board shall
consider, among such other factors as the
Board may determine to be appropriate,
the following factors:
‘‘(I) Whether information of the
type required under this paragraph is
available from a supervisory agency
(as defined in section 1101(7) of the
Right to Financial Privacy Act of
1978) or a foreign regulatory author-
ity of a similar type.
‘‘(II) The primary business of the
company.
‘‘(III) The nature and extent of
the domestic and foreign regulation of
the activities of the company.
‘‘(3) EXAMINATIONS.—
‘‘(A) LIMITED USE OF EXAMINATION AU-
THORITY.—The Board may make examinations
of each wholesale financial holding company
and each subsidiary of such company in order
to—
‘‘(i) inform the Board regarding the
nature of the operations and financial con-
dition of the wholesale financial holding
company and its subsidiaries;
‘‘(ii) inform the Board regarding—
‘‘(I) the financial and operational
risks within the wholesale financial
holding company system that may af-
fect any depository institution owned
by such holding company; and
‘‘(II) the systems of the holding
company and its subsidiaries for mon-
itoring and controlling those risks;
and
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
depository institution controlled by the
wholesale financial holding company and
any of the company’s other subsidiaries.
‘‘(B) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, limit the focus and scope of any exam-
ination of a wholesale financial holding com-
pany under this paragraph to—
‘‘(i) the holding company; and
‘‘(ii) any subsidiary (other than an in-
sured depository institution subsidiary) of
the holding company that, because of the
size, condition, or activities of the subsidi-
ary, the nature or size of transactions be-
tween such subsidiary and any affiliated
depository institution, or the centralization
of functions within the holding company
system, could have a materially adverse ef-
fect on the safety and soundness of any de-
pository institution affiliate of the holding
company.
‘‘(C) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use the reports of examination of de-
pository institutions made by the Comptroller of
the Currency, the Federal Deposit Insurance
Corporation, the Director of the Office of Thrift
Supervision or the appropriate State depository
institution supervisory authority for the pur-
poses of this section.
‘‘(D) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, address the circumstances which might
otherwise permit or require an examination by
the Board by forgoing an examination and by
instead reviewing the reports of examination
made of—
‘‘(i) any registered broker or dealer or
any registered investment adviser by or on
behalf of the Commission; and
‘‘(ii) any licensed insurance company
by or on behalf of any State government
insurance agency responsible for the super-
vision of the insurance company.
‘‘(E) CONFIDENTIALITY OF REPORTED IN-
FORMATION.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of law, the Board shall
not be compelled to disclose any nonpublic
information required to be reported under
this paragraph, or any information sup-
plied to the Board by any domestic or for-
eign regulatory agency, that relates to the
financial or operational condition of any
wholesale financial holding company or any
subsidiary of such company.
‘‘(ii) COMPLIANCE
WITH
REQUESTS
FOR INFORMATION.—No provision of this
subparagraph shall be construed as author-
izing the Board to withhold information
from the Congress, or preventing the
Board from complying with a request for
information from any other Federal de-
partment or agency for purposes within the
scope of such department’s or agency’s ju-
risdiction, or from complying with any
order of a court of competent jurisdiction
in an action brought by the United States
or the Board.
‘‘(iii) COORDINATION
WITH
OTHER
LAW.—For purposes of section 552 of title
5, United States Code, this subparagraph
shall be considered to be a statute de-
scribed in subsection (b)(3)(B) of such sec-
tion.
‘‘(iv) DESIGNATION OF CONFIDENTIAL
INFORMATION.—In prescribing regulations
to carry out the requirements of this sub-
section, the Board shall designate informa-
tion described in or obtained pursuant to
this paragraph as confidential information.
‘‘(F) COSTS.—The cost of any examination
conducted by the Board under this section may
be assessed against, and made payable by, the
wholesale financial holding company.
‘‘(4) CAPITAL ADEQUACY GUIDELINES.—
‘‘(A) CAPITAL
ADEQUACY
PROVISIONS.—
Subject to the requirements of, and solely in ac-
cordance with, the terms of this paragraph, the
Board may adopt capital adequacy rules or
guidelines for wholesale financial holding com-
panies.
‘‘(B) METHOD OF CALCULATION.—In de-
veloping rules or guidelines under this para-
graph, the following provisions shall apply:
‘‘(i) FOCUS ON DOUBLE LEVERAGE.—
The Board shall focus on the use by whole-
sale financial holding companies of debt
and other liabilities to fund capital invest-
ments in subsidiaries.
‘‘(ii) 
NO
UNWEIGHTED
CAPITAL
RATIO.—The Board shall not, by regula-
tion, guideline, order, or otherwise, impose
under this section a capital ratio that is
not based on appropriate risk-weighting
considerations.
‘‘(iii) NO CAPITAL REQUIREMENT ON
REGULATED
ENTITIES.—The Board shall
not, by regulation, guideline, order or oth-
erwise, prescribe or impose any capital or
capital adequacy rules, standards, guide-
lines, or requirements upon any subsidiary
that—
‘‘(I) is not a depository institu-
tion; and
‘‘(II) is in compliance with appli-
cable capital requirements of another
Federal regulatory authority (includ-
ing the Securities and Exchange Com-
mission) or State insurance authority.
‘‘(iv) LIMITATION.—The Board shall
not, by regulation, guideline, order or oth-
erwise, prescribe or impose any capital or
capital adequacy rules, standards, guide-
lines, or requirements upon any subsidiary
that is not a depository institution and
that is registered as an investment adviser
under the Investment Advisers Act of
1940, except that this clause shall not be
construed as preventing the Board from
imposing capital or capital adequacy rules,
guidelines, standards, or requirements with
respect to activities of a registered invest-
ment adviser other than investment advi-
sory activities or activities incidental to in-
vestment advisory activities.
‘‘(v) 
APPROPRIATE
EXCLUSIONS.—
The Board shall take full account of—
‘‘(I) the capital requirements
made applicable to any subsidiary that
is not a depository institution by an-
other Federal regulatory authority or
State insurance authority; and
‘‘(II) industry norms for capital-
ization of a company’s unregulated
subsidiaries and activities.
‘‘(vi) INTERNAL
RISK
MANAGEMENT
MODELS.—The Board may incorporate in-
ternal risk management models of whole-
sale financial holding companies into its
capital adequacy guidelines or rules and
may take account of the extent to which
resources of a subsidiary depository insti-
tution may be used to service the debt or
other liabilities of the wholesale financial
holding company.
‘‘(c) NONFINANCIAL
ACTIVITIES
AND
INVEST-
MENTS.—
‘‘(1) GRANDFATHERED ACTIVITIES.—
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a company that becomes a wholesale
financial holding company may continue to en-
gage, directly or indirectly, in any activity and
may retain ownership and control of shares of
a company engaged in any activity if—
‘‘(i) on the date of the enactment of
the Financial Services Act of 1998, such
wholesale financial holding company was
lawfully engaged in that nonfinancial activ-
ity, held the shares of such company, or
had entered into a contract to acquire
shares of any company engaged in such ac-
tivity; and
‘‘(ii) the company engaged in such ac-
tivity continues to engage only in the same
activities that such company conducted on
the date of the enactment of the Financial
Services Act of 1998, and other activities
permissible under this Act.
‘‘(B) NO EXPANSION OF GRANDFATHERED
COMMERCIAL ACTIVITIES THROUGH MERGER OR
CONSOLIDATION.—A wholesale financial holding
company that engages in activities or holds
shares pursuant to this paragraph, or a subsidi-
ary of such wholesale financial holding com-
pany, may not acquire, in any merger, consoli-
dation, or other type of business combination,
assets of any other company which is engaged
in any activity which the Board has not deter-
mined to be financial in nature or incidental to
activities that are financial in nature under sec-
tion 6(c).
‘‘(C) LIMITATION
TO
SINGLE
EXEMP-
TION.—No company that engages in any activ-
ity or controls any shares under subsection (f)
of section 6 may engage in any activity or own
any shares pursuant to this paragraph or para-
graph (1).
‘‘(2) COMMODITIES.—
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a wholesale financial holding company
which was predominately engaged as of Janu-
ary 1, 1997, in financial activities in the United
States (or any successor to any such company)
may engage in, or directly or indirectly own or
control shares of a company engaged in, activi-
ties related to the trading, sale, or investment
in commodities and underlying physical prop-
erties that were not permissible for bank hold-
ing companies to conduct in the United States
as of January 1, 1997, if such wholesale finan-
cial holding company, or any subsidiary of such
holding company, was engaged directly, indi-
rectly, or through any such company in any of
such activities as of January 1, 1997, in the
United States.
‘‘(B) LIMITATION.—The attributed aggre-
gate consolidated assets of a wholesale financial
holding company held under the authority
granted under this paragraph and not otherwise
permitted to be held by all wholesale financial
holding companies under this section may not
exceed 5 percent of the total consolidated assets
of the wholesale financial holding company, ex-
cept that the Board may increase such percent-
age of total consolidated assets by such
amounts and under such circumstances as the
Board considers appropriate, consistent with
the purposes of this Act.
‘‘(3) CROSS
MARKETING
RESTRICTIONS.—A
wholesale financial holding company shall not per-
mit—
‘‘(A) any company whose shares it owns or
controls pursuant to paragraph (1) or (2) to
offer or market any product or service of an af-
filiated wholesale financial institution; or
‘‘(B) any affiliated wholesale financial in-
stitution to offer or market any product or serv-
ice of any company whose shares are owned or
controlled by such wholesale financial holding
company pursuant to such paragraphs.
‘‘(d) QUALIFICATION OF FOREIGN BANK AS WHOLE-
SALE FINANCIAL HOLDING COMPANY.—
‘‘(1) IN GENERAL.—Any foreign bank, or any
company that owns or controls a foreign bank,
that—
‘‘(A) operates a branch, agency, or com-
mercial lending company in the United States,
including a foreign bank or company that owns
or controls a wholesale financial institution; and
‘‘(B) owns, controls, or is affiliated with a
security affiliate that engages in underwriting
corporate equity securities,
may request a determination from the Board that
such bank or company be treated as a wholesale fi-
nancial holding company for purposes of subsection
(c).
‘‘(2) CONDITIONS
FOR
TREATMENT
AS
A
WHOLESALE FINANCIAL HOLDING COMPANY.—A for-
eign bank and a company that owns or controls a
foreign bank may not be treated as a wholesale fi-
nancial holding company unless the bank and com-
pany meet and continue to meet the following cri-
teria:
‘‘(A) NO INSURED DEPOSITS.—No deposits
held directly by a foreign bank or through an
affiliate (other than an institution described in
subparagraph (D) or (F) of section 2(c)(2)) are
insured under the Federal Deposit Insurance
Act.
‘‘(B) CAPITAL
STANDARDS.—The foreign
bank meets risk-based capital standards com-
parable to the capital standards required for a
wholesale financial institution, giving due re-
gard to the principle of national treatment and
equality of competitive opportunity.
‘‘(C) TRANSACTION
WITH
AFFILIATES.—
Transactions between a branch, agency, or com-
mercial lending company subsidiary of the for-
eign bank in the United States, and any securi-
ties affiliate or company in which the foreign
bank (or any company that owns or controls
such foreign bank) has invested pursuant to
subsection (d) comply with the provisions of
sections 23A and 23B of the Federal Reserve
Act in the same manner and to the same extent
as such transactions would be required to com-
ply with such sections if the bank were a mem-
ber bank.
‘‘(3) TREATMENT AS A WHOLESALE FINANCIAL
INSTITUTION.—Any foreign bank which is, or is af-
filiated with a company which is, treated as a whole-
sale financial holding company under this subsection
shall be treated as a wholesale financial institution
for purposes of subsection (c)(4) of this section and
subsections (c)(1)(C) and (c)(3) of section 9B of the
Federal Reserve Act, and any such foreign bank or
company shall be subject to paragraphs (3), (4), and
(5) of section 9B(d) of the Federal Reserve Act, ex-
cept that the Board may adopt such modifications,
conditions, or exemptions as the Board deems appro-
priate, giving due regard to the principle of national
treatment and equality of competitive opportunity.
‘‘(4) NONAPPLICABILITY
OF
OTHER
EXEMP-
TION.—Any foreign bank or company which is treat-
ed as a wholesale financial holding company under
this subsection shall not be eligible for any exception
described in section 2(h).
‘‘(5) SUPERVISION OF FOREIGN BANK WHICH
MAINTAINS
NO
BANKING
PRESENCE
OTHER
THAN
CONTROL
OF
A
WHOLESALE
FINANCIAL
INSTITU-
TION.—A foreign bank that owns or controls a
wholesale financial institution but does not operate
a branch, agency, or commercial lending company in
the United States (and any company that owns or
controls such foreign bank) may request a deter-
mination from the Board that such bank or com-
pany be treated as a wholesale financial holding
company for purposes of subsection (c), except that
such bank or company shall be subject to the restric-
tions of paragraphs (2)(A), (3), and (4) of this sub-
section.
‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed as limiting the author-
ity of the Board under the International Banking
Act of 1978 with respect to the regulation, super-
vision, or examination of foreign banks and their of-
fices and affiliates in the United States.
‘‘(7) APPLICABILITY OF COMMUNITY REINVEST-
MENT ACT OF 1977.—The branches in the United
States of a foreign bank that is, or is affiliated with
a company that is, treated as a wholesale financial
holding company shall be subject to section
9B(b)(11) of the Federal Reserve Act as if the for-
eign bank were a wholesale financial institution
under such section. The Board and the Comptroller
of the Currency shall apply the provisions of sections
803(2), 804, and 807(1) of the Community Rein-
vestment Act of 1977 to branches of foreign banks
which receive only such deposits as are permissible
for receipt by a corporation organized under section
25A of the Federal Reserve Act, in the same manner
and to the same extent such sections apply to such
a corporation.’’.
(b) UNINSURED STATE BANKS.—Section 9 of the
Federal Reserve Act (U.S.C. 321 et seq.) is amended by
adding at the end the following new paragraph:
‘‘(24) ENFORCEMENT AUTHORITY OVER UNIN-
SURED STATE MEMBER BANKS.—Section 3(u) of the
Federal Deposit Insurance Act, subsections (j) and
(k) of section 7 of such Act, and subsections (b)
through (n), (s), (u), and (v) of section 8 of such
Act shall apply to an uninsured State member bank
in the same manner and to the same extent such
provisions apply to an insured State member bank
and any reference in any such provision to ‘insured
depository institution’ shall be deemed to be a ref-
erence to ‘uninsured State member bank’ for pur-
poses of this paragraph.’’.
SEC. 132. AUTHORIZATION TO RELEASE REPORTS.
(a) FEDERAL RESERVE ACT.—The last sentence of
the eighth undesignated paragraph of section 9 of the
Federal Reserve Act (12 U.S.C. 326) is amended to read
as follows: ‘‘The Board of Governors of the Federal Re-
serve System, at its discretion, may furnish reports of ex-
amination or other confidential supervisory information
concerning State member banks or any other entities ex-
amined under any other authority of the Board to any
Federal or State authorities with supervisory or regulatory
authority over the examined entity, to officers, directors,
or receivers of the examined entity, and to any other per-
son that the Board determines to be proper.’’.
(b) COMMODITY FUTURES TRADING COMMISSION.—
(1) Section 1101(7) of the Right to Financial
Privacy Act of 1978 (12 U.S.C. 3401(7)) is amend-
ed—
(A) by redesignating subparagraphs (G)
and (H) as subparagraphs (H) and (I), respec-
tively; and
(B) by inserting after subparagraph (F)
the following new subparagraph:
‘‘(G) the Commodity Futures Trading
Commission; or’’ and
(2) Section 1112(e) of the Right to Financial
Privacy Act (12 U.S.C. 3412(e)) is amended by
striking ‘‘and the Securities and Exchange Commis-
sion’’ and inserting ‘‘, the Securities and Exchange
Commission, and the Commodity Futures Trading
Commission’’.
SEC. 133. CONFORMING AMENDMENTS.
(a) BANK HOLDING COMPANY ACT OF 1956.—
(1) DEFINITIONS.—Section 2 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1842) is
amended by adding at the end the following new
subsections:
‘‘(p) WHOLESALE FINANCIAL INSTITUTION.—The
term ‘wholesale financial institution’ means a wholesale fi-
nancial institution subject to section 9B of the Federal
Reserve Act.
‘‘(q) COMMISSION.—The term ‘Commission’ means
the Securities and Exchange Commission.
‘‘(r) DEPOSITORY INSTITUTION.—The term ‘deposi-
tory institution’—
‘‘(1) has the meaning given to such term in sec-
tion 3 of the Federal Deposit Insurance Act; and
‘‘(2) includes a wholesale financial institution.’’.
‘‘(c) COMMUNITY REINVESTMENT ACT OF 1977.—A
national wholesale financial institution shall be subject to
the Community Reinvestment Act of 1977.
‘‘(d) EXAMINATION REPORTS.—The Comptroller of
the Currency shall, to the fullest extent possible, use the
report of examinations made by the Board of Governors
of the Federal Reserve System of a wholesale financial in-
stitution.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter one of title LXII of the Revised
Statutes of the United States is amended by insert-
ing after the item relating to section 5136A (as
added by section 121(d) of this title) the following
new item:
‘‘5136B. National wholesale financial institutions.’’.
(b) STATE WHOLESALE FINANCIAL INSTITUTIONS.—
The Federal Reserve Act (12 U.S.C. 221 et seq.) is
amended by inserting after section 9A the following new
section:
‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLE-
SALE FINANCIAL INSTITUTION.—
‘‘(1) APPLICATION REQUIRED.—
‘‘(A) IN GENERAL.—Any bank may apply
to the Board of Governors of the Federal Re-
serve System to become a wholesale financial
institution and, as a wholesale financial institu-
tion, to subscribe to the stock of the Federal re-
serve bank organized within the district where
the applying bank is located.
‘‘(B) TREATMENT
AS
MEMBER
BANK.—
Any application under subparagraph (A) shall
be treated as an application under, and shall be
subject to the provisions of section 9.
‘‘(2) INSURANCE TERMINATION.—No bank the
deposits of which are insured under the Federal De-
posit Insurance Act may become a wholesale finan-
cial institution unless it has met all requirements
under that Act for voluntary termination of deposit
insurance.
‘‘(b) GENERAL
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) FEDERAL RESERVE ACT.—Except as oth-
erwise provided in this section, wholesale financial
institutions shall be member banks and shall be sub-
ject to the provisions of this Act that apply to mem-
ber banks to the same extent and in the same man-
ner as State member insured banks, except that a
wholesale financial institution may terminate mem-
bership under this Act only with the prior written
approval of the Board and on terms and conditions
that the Board determines are appropriate to carry
out the purposes of this Act.
‘‘(2) PROMPT CORRECTIVE ACTION.—A whole-
sale financial institution shall be deemed to be an in-
sured depository institution for purposes of section
38 of the Federal Deposit Insurance Act except
that—
‘‘(A) the relevant capital levels and capital
measures for each capital category shall be the
levels specified by the Board for wholesale fi-
nancial institutions; and
‘‘(B) all references to the appropriate Fed-
eral banking agency or to the Corporation in
that section shall be deemed to be references to
the Board.
‘‘(3) ENFORCEMENT AUTHORITY.—Subsections
(j) and (k) of section 7, subsections (b) through (n),
(s), and (v) of section 8, and section 19 of the Fed-
eral Deposit Insurance Act shall apply to a wholesale
financial institution in the same manner and to the
same extent as such provisions apply to State mem-
ber insured banks and any reference in such sections
to an insured depository institution shall be deemed
to include a reference to a wholesale financial insti-
tution.
‘‘(4) CERTAIN
OTHER
STATUTES
APPLICA-
BLE.—A wholesale financial institution shall be
deemed to be a banking institution, and the Board
shall be the appropriate Federal banking agency for
such bank and all such bank’s affiliates, for pur-
poses of the International Lending Supervision Act.
‘‘(5) BANK MERGER ACT.—A wholesale finan-
cial institution shall be subject to sections 18(c) and
44 of the Federal Deposit Insurance Act in the same
manner and to the same extent the wholesale finan-
cial institution would be subject to such sections if
the institution were a State member insured bank.
‘‘(6) BRANCHING.—Notwithstanding any other
provision of law, a wholesale financial institution
may establish and operate a branch at any location
on such terms and conditions as established by the
Board and, in the case of a State-chartered whole-
sale financial institution, with the approval of the
Board, and, in the case of a national bank wholesale
financial institution, with the approval of the Comp-
troller of the Currency.
‘‘(7) ACTIVITIES OF OUT-OF-STATE BRANCHES
OF WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(A) GENERAL.—A State-chartered whole-
sale financial institution shall be deemed a
State bank and an insured State bank and a
national wholesale financial institution shall be
deemed a national bank for purposes of para-
graphs (1), (2), and (3) of section 24(j) of the
Federal Deposit Insurance Act.
‘‘(B) DEFINITIONS.—The following defini-
tions shall apply solely for purposes of applying
paragraph (1):
‘‘(i) HOME STATE.—The term ‘home
State’ means—
‘‘(I) with respect to a national
wholesale financial institution, the
State in which the main office of the
institution is located; and
‘‘(II) with respect to a State-
chartered wholesale financial institu-
tion, the State by which the institu-
tion is chartered.
‘‘(ii) HOST
STATE.—The term ‘host
State’ means a State, other than the home
State of the wholesale financial institution,
in which the institution maintains, or seeks
to establish and maintain, a branch.
‘‘(iii) 
OUT-OF-STATE
BANK.—The
term ‘out-of-State bank’ means, with re-
spect to any State, a wholesale financial
institution whose home State is another
State.
‘‘(8) DISCRIMINATION
REGARDING
INTEREST
RATES.—Section 27 of the Federal Deposit Insur-
ance Act shall apply to State-chartered wholesale fi-
nancial institutions in the same manner and to the
same extent as such provisions apply to State mem-
ber insured banks and any reference in such section
to a State-chartered insured depository institution
shall be deemed to include a reference to a State-
chartered wholesale financial institution.
‘‘(9) PREEMPTION OF STATE LAWS REQUIRING
DEPOSIT
INSURANCE
FOR
WHOLESALE
FINANCIAL
INSTITUTIONS.—The appropriate State banking au-
thority may grant a charter to a wholesale financial
institution notwithstanding any State constitution or
statute requiring that the institution obtain insur-
ance of its deposits and any such State constitution
or statute is hereby preempted solely for purposes of
this paragraph.
‘‘(10) PARITY FOR WHOLESALE FINANCIAL IN-
STITUTIONS.—A State bank that is a wholesale fi-
nancial institution under this section shall have all
of the rights, powers, privileges, and immunities (in-
100
cluding those derived from status as a federally
chartered institution) of and as if it were a national
bank, subject to such terms and conditions as estab-
lished by the Board.
‘‘(11) COMMUNITY
REINVESTMENT
ACT
OF
1977.—A State wholesale financial institution shall
be subject to the Community Reinvestment Act of
1977.
‘‘(c) SPECIFIC
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) LIMITATIONS ON DEPOSITS.—
‘‘(A) MINIMUM AMOUNT.—
‘‘(i) IN GENERAL.—No wholesale fi-
nancial institution may receive initial de-
posits of $100,000 or less, other than on
an incidental and occasional basis.
‘‘(ii) LIMITATION
ON
DEPOSITS
OF
LESS THAN $100,000.—No wholesale finan-
cial institution may receive initial deposits
of $100,000 or less if such deposits con-
stitute more than 5 percent of the institu-
tion’s total deposits.
‘‘(B) NO DEPOSIT INSURANCE.—No depos-
its held by a wholesale financial institution shall
101
be insured deposits under the Federal Deposit
Insurance Act.
‘‘(C) ADVERTISING
AND
DISCLOSURE.—
The Board shall prescribe regulations pertain-
ing to advertising and disclosure by wholesale
financial institutions to ensure that each deposi-
tor is notified that deposits at the wholesale fi-
nancial institution are not federally insured or
otherwise guaranteed by the United States Gov-
ernment.
‘‘(2) MINIMUM
CAPITAL
LEVELS
APPLICABLE
TO
WHOLESALE
FINANCIAL
INSTITUTIONS.—The
Board shall, by regulation, adopt capital require-
ments for wholesale financial institutions—
‘‘(A) to account for the status of wholesale
financial institutions as institutions that accept
deposits that are not insured under the Federal
Deposit Insurance Act; and
‘‘(B) to provide for the safe and sound op-
eration of the wholesale financial institution
without undue risk to creditors or other per-
sons, including Federal reserve banks, engaged
in transactions with the bank.
‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE
TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi-
102
tion to any requirement otherwise applicable to State
member insured banks or applicable, under this sec-
tion, to wholesale financial institutions, the Board
may impose, by regulation or order, upon wholesale
financial institutions—
‘‘(A) limitations on transactions, direct or
indirect, with affiliates to prevent—
‘‘(i) the transfer of risk to the deposit
insurance funds; or
‘‘(ii) an affiliate from gaining access
to, or the benefits of, credit from a Federal
reserve bank, including overdrafts at a
Federal reserve bank;
‘‘(B) special clearing balance requirements;
and
‘‘(C) any additional requirements that the
Board determines to be appropriate or nec-
essary to—
‘‘(i) promote the safety and soundness
of the wholesale financial institution or any
insured depository institution affiliate of
the wholesale financial institution;
‘‘(ii) prevent the transfer of risk to
the deposit insurance funds; or
103
‘‘(iii) protect creditors and other per-
sons, including Federal reserve banks, en-
gaged in transactions with the wholesale fi-
nancial institution.
‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL
INSTITUTIONS.—The Board may, by regulation or
order, exempt any wholesale financial institution
from any provision applicable to a member bank
that is not a wholesale financial institution, if the
Board finds that such exemption is not inconsistent
with—
‘‘(A) the promotion of the safety and
soundness of the wholesale financial institution
or any insured depository institution affiliate of
the wholesale financial institution;
‘‘(B) the protection of the deposit insur-
ance funds; and
‘‘(C) the protection of creditors and other
persons, including Federal reserve banks, en-
gaged in transactions with the wholesale finan-
cial institution.
‘‘(5) LIMITATION ON TRANSACTIONS BETWEEN
A WHOLESALE FINANCIAL INSTITUTION AND AN IN-
SURED BANK.—For purposes of section 23A(d)(1) of
the Federal Reserve Act, a wholesale financial insti-
104
tution that is affiliated with an insured bank shall
not be a bank.
‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed as limiting the
Board’s authority over member banks under any
other provision of law, or to create any obligation for
any Federal reserve bank to make, increase, renew,
or extend any advance or discount under this Act to
any member bank or other depository institution.
‘‘(d) CAPITAL AND MANAGERIAL REQUIREMENTS.—
‘‘(1) IN GENERAL.—A wholesale financial insti-
tution shall be well capitalized and well managed.
‘‘(2) NOTICE TO COMPANY.—The Board shall
promptly provide notice to a company that controls
a wholesale financial institution whenever such
wholesale financial institution is not well capitalized
or well managed.
‘‘(3) AGREEMENT TO RESTORE INSTITUTION.—
Within 45 days of receipt of a notice under para-
graph (2) (or such additional period not to exceed
90 days as the Board may permit), the company
shall execute an agreement acceptable to the Board
to restore the wholesale financial institution to com-
pliance with all of the requirements of paragraph
(1).
105
‘‘(4) LIMITATIONS
UNTIL
INSTITUTION
RE-
STORED.—Until the wholesale financial institution is
restored to compliance with all of the requirements
of paragraph (1), the Board may impose such limi-
tations on the conduct or activities of the company
or any affiliate of the company as the Board deter-
mines to be appropriate under the circumstances.
‘‘(5) FAILURE TO RESTORE.—If the company
does not execute and implement an agreement in ac-
cordance with paragraph (3), comply with any limi-
tation imposed under paragraph (4), restore the
wholesale financial institution to well capitalized sta-
tus within 180 days after receipt by the company of
the notice described in paragraph (2), or restore the
wholesale financial institution to well managed sta-
tus within such period as the Board may permit, the
company shall, under such terms and conditions as
may be imposed by the Board and subject to such
extension of time as may be granted in the Board’s
discretion, divest control of its subsidiary depository
institutions.
‘‘(6) WELL MANAGED DEFINED.—For purposes
of this subsection, the term ‘well managed’ has the
same meaning as in section 2 of the Bank Holding
Company Act of 1956.
106
‘‘(e) CONSERVATORSHIP AUTHORITY.—
‘‘(1) IN GENERAL.—The Board may appoint a
conservator to take possession and control of a
wholesale financial institution to the same extent
and in the same manner as the Comptroller of the
Currency may appoint a conservator for a national
bank under section 203 of the Bank Conservation
Act, and the conservator shall exercise the same
powers, functions, and duties, subject to the same
limitations, as are provided under such Act for con-
servators of national banks.
‘‘(2) BOARD
AUTHORITY.—The Board shall
have the same authority with respect to any con-
servator appointed under paragraph (1) and the
wholesale financial institution for which such con-
servator has been appointed as the Comptroller of
the Currency has under the Bank Conservation Act
with respect to a conservator appointed under such
Act and a national bank for which the conservator
has been appointed.
‘‘(f) EXCLUSIVE JURISDICTION.—Subsections (c) and
(e) of section 43 of the Federal Deposit Insurance Act
shall not apply to any wholesale financial institution.’’.
(c) VOLUNTARY TERMINATION OF INSURED STATUS
BY CERTAIN INSTITUTIONS.—
107
(1) SECTION 8 DESIGNATIONS.—Section 8(a) of
the Federal Deposit Insurance Act (12 U.S.C.
1818(a)) is amended—
(A) by striking paragraph (1); and
(B) 
by 
redesignating 
paragraphs 
(2)
through (10) as paragraphs (1) through (9), re-
spectively.
(2) VOLUNTARY
TERMINATION
OF
INSURED
STATUS.—The Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.) is amended by inserting after
section 8 the following new section:
‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS IN-
SURED DEPOSITORY INSTITUTION.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), an insured State bank or a national bank may volun-
tarily terminate such bank’s status as an insured deposi-
tory institution in accordance with regulations of the Cor-
poration if—
‘‘(1) the bank provides written notice of the
bank’s intent to terminate such insured status—
‘‘(A) to the Corporation and the Board of
Governors of the Federal Reserve System not
less than 6 months before the effective date of
such termination; and
108
‘‘(B) to all depositors at such bank, not
less than 6 months before the effective date of
the termination of such status; and
‘‘(2) either—
‘‘(A) the deposit insurance fund of which
such bank is a member equals or exceeds the
fund’s designated reserve ratio as of the date
the bank provides a written notice under para-
graph (1) and the Corporation determines that
the fund will equal or exceed the applicable des-
ignated reserve ratio for the 2 semiannual as-
sessment periods immediately following such
date; or
‘‘(B) the Corporation and the Board of
Governors of the Federal Reserve System ap-
proved the termination of the bank’s insured
status and the bank pays an exit fee in accord-
ance with subsection (e).
‘‘(b) EXCEPTION.—Subsection (a) shall not apply
with respect to—
‘‘(1) an insured savings association; or
‘‘(2) an insured branch that is required to be
insured under subsection (a) or (b) of section 6 of
the International Banking Act of 1978.
109
‘‘(c) ELIGIBILITY FOR INSURANCE TERMINATED.—
Any bank that voluntarily elects to terminate the bank’s
insured status under subsection (a) shall not be eligible
for insurance on any deposits or any assistance authorized
under this Act after the period specified in subsection
(f)(1).
‘‘(d) INSTITUTION MUST BECOME WHOLESALE FI-
NANCIAL INSTITUTION OR TERMINATE DEPOSIT-TAKING
ACTIVITIES.—Any depository institution which voluntarily
terminates such institution’s status as an insured deposi-
tory institution under this section may not, upon termi-
nation of insurance, accept any deposits unless the institu-
tion is a wholesale financial institution subject to section
9B of the Federal Reserve Act.
‘‘(e) EXIT FEES.—
‘‘(1) IN GENERAL.—Any bank that voluntarily
terminates such bank’s status as an insured deposi-
tory institution under this section shall pay an exit
fee in an amount that the Corporation determines is
sufficient to account for the institution’s pro rata
share of the amount (if any) which would be re-
quired to restore the relevant deposit insurance fund
to the fund’s designated reserve ratio as of the date
the bank provides a written notice under subsection
(a)(1).
110
‘‘(2) PROCEDURES.—The Corporation shall pre-
scribe, by regulation, procedures for assessing any
exit fee under this subsection.
‘‘(f) TEMPORARY INSURANCE OF DEPOSITS INSURED
AS OF TERMINATION.—
‘‘(1) TRANSITION PERIOD.—The insured depos-
its of each depositor in a State bank or a national
bank on the effective date of the voluntary termi-
nation of the bank’s insured status, less all subse-
quent withdrawals from any deposits of such deposi-
tor, shall continue to be insured for a period of not
less than 6 months and not more than 2 years, as
determined by the Corporation. During such period,
no additions to any such deposits, and no new de-
posits in the depository institution made after the ef-
fective date of such termination shall be insured by
the Corporation.
‘‘(2) TEMPORARY ASSESSMENTS; OBLIGATIONS
AND DUTIES.—During the period specified in para-
graph (1) with respect to any bank, the bank shall
continue to pay assessments under section 7 as if
the bank were an insured depository institution. The
bank shall, in all other respects, be subject to the
authority of the Corporation and the duties and obli-
gations of an insured depository institution under
111
this Act during such period, and in the event that
the bank is closed due to an inability to meet the de-
mands of the bank’s depositors during such period,
the Corporation shall have the same powers and
rights with respect to such bank as in the case of
an insured depository institution.
‘‘(g) ADVERTISEMENTS.—
‘‘(1) IN
GENERAL.—A bank that voluntarily
terminates the bank’s insured status under this sec-
tion shall not advertise or hold itself out as having
insured deposits, except that the bank may advertise
the temporary insurance of deposits under sub-
section (f) if, in connection with any such advertise-
ment, the advertisement also states with equal prom-
inence that additions to deposits and new deposits
made after the effective date of the termination are
not insured.
‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS,
AND
SECURITIES.—Any certificate of deposit or
other obligation or security issued by a State bank
or a national bank after the effective date of the vol-
untary termination of the bank’s insured status
under this section shall be accompanied by a con-
spicuous, prominently displayed notice that such cer-
112
tificate of deposit or other obligation or security is
not insured under this Act.
‘‘(h) NOTICE REQUIREMENTS.—
‘‘(1) NOTICE TO THE CORPORATION.—The no-
tice required under subsection (a)(1)(A) shall be in
such form as the Corporation may require.
‘‘(2) NOTICE TO DEPOSITORS.—The notice re-
quired under subsection (a)(1)(B) shall be—
‘‘(A) sent to each depositor’s last address
of record with the bank; and
‘‘(B) in such manner and form as the Cor-
poration finds to be necessary and appropriate
for the protection of depositors.’’.
(3) DEFINITION.—Section 19(b)(1)(A)(i) of the
Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is
amended by inserting ‘‘, or any wholesale financial
institution subject to section 9B of this Act’’ after
‘‘such Act’’.
113
Subtitle E—Preservation of FTC
Authority
SEC. 141. AMENDMENT TO THE BANK HOLDING COMPANY
ACT OF 1956 TO MODIFY NOTIFICATION AND
POST-APPROVAL WAITING PERIOD FOR SEC-
TION 3 TRANSACTIONS.
Section 11(b)(1) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1849(b)(1)) is amended by inserting
‘‘and, if the transaction also involves an acquisition under
section 4 or section 6, the Board shall also notify the Fed-
eral Trade Commission of such approval’’ before the pe-
riod at the end of the first sentence.
SEC. 142. INTERAGENCY DATA SHARING.
To the extent not prohibited by other law, the Comp-
troller of the Currency, the Director of the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation,
and the Board of Governors of the Federal Reserve Sys-
tem shall make available to the Attorney General and the
Federal Trade Commission any data in the possession of
any such banking agency that the antitrust agency deems
necessary for antitrust review of any transaction requiring
notice to any such antitrust agency or the approval of such
agency under section 3, 4, or 6 of the Bank Holding Com-
pany Act of 1956, section 18(c) of the Federal Deposit
Insurance Act, the National Bank Consolidation and
114
Merger Act, section 10 of the Home Owners’ Loan Act,
or the antitrust laws.
SEC. 143. CLARIFICATION OF STATUS OF SUBSIDIARIES
AND AFFILIATES.
(a) CLARIFICATION OF FEDERAL TRADE COMMIS-
SION JURISDICTION.—Any person which directly or indi-
rectly controls, is controlled directly or indirectly by, or
is directly or indirectly under common control with, any
bank or savings association (as such terms are defined in
section 3 of the Federal Deposit Insurance Act) and is
not itself a bank or savings association shall not be
deemed to be a bank or savings association for purposes
of the Federal Trade Commission Act or any other law
enforced by the Federal Trade Commission.
(b) SAVINGS PROVISION.—No provision of this sec-
tion shall be construed as restricting the authority of any
Federal banking agency (as defined in section 3 of the
Federal Deposit Insurance Act) under any Federal bank-
ing law, including section 8 of the Federal Deposit Insur-
ance Act.
(c) HART–SCOTT–RODINO
AMENDMENT.—Section
7A(c)(7) of the Clayton Act (15 U.S.C. 18a(c)(7)) is
amended by inserting before the semicolon at the end
thereof the following: ‘‘, except that a portion of a trans-
action is not exempt under this paragraph if such portion
115
of the transaction (A) requires notice under section 6 of
the Bank Holding Company Act of 1956; and (B) does
not require approval under section 3 or 4 of the Bank
Holding Company Act of 1956’’.
SEC. 144. ANNUAL GAO REPORT.
(a) IN GENERAL.—By the end of the 1-year period
beginning on the date of the enactment of this Act and
annually thereafter, the Comptroller General of the United
States shall submit a report to the Congress on market
concentration in the financial services industry and its im-
pact on consumers.
(b) ANALYSIS.—Each report submitted under sub-
section (a) shall contain an analysis of—
(1) the positive and negative effects of affili-
ations between various types of financial companies,
and of acquisitions pursuant to this Act and the
amendments made by this Act to other provisions of
law, including any positive or negative effects on
consumers, area markets, and submarkets thereof or
on registered securities brokers and dealers which
have been purchased by depository institutions or
depository institution holding companies;
(2) the changes in business practices and the
effects of any such changes on the availability of
venture capital, consumer credit, and other financial
116
services or products and the availability of capital
and credit for small businesses; and
(3) the acquisition patterns among depository
institutions, depository institution holding compa-
nies, securities firms, and insurance companies in-
cluding acquisitions among the largest 20 percent of
firms and acquisitions within regions or other lim-
ited geographical areas.
Subtitle F—Applying the Principles
of 
National 
Treatment 
and
Equality of Competitive Oppor-
tunity to Foreign Banks and
Foreign Financial Institutions
SEC. 151. APPLYING THE PRINCIPLES OF NATIONAL TREAT-
MENT AND EQUALITY OF COMPETITIVE OP-
PORTUNITY TO FOREIGN BANKS THAT ARE
FINANCIAL HOLDING COMPANIES.
Section 8(c) of the International Banking Act of
1978 (12 U.S.C. 3106(c)) is amended by adding at the
end the following new paragraph:
‘‘(3) 
TERMINATION
OF
GRANDFATHERED
RIGHTS.—
‘‘(A) IN GENERAL.—If any foreign bank or
foreign company files a declaration under sec-
tion 6(b)(1)(E) or which receives a determina-
117
tion under section 10(d)(1) of the Bank Hold-
ing Company Act of 1956, any authority con-
ferred by this subsection on any foreign bank or
company to engage in any activity which the
Board has determined to be permissible for fi-
nancial holding companies under section 6 of
such Act shall terminate immediately.
‘‘(B) RESTRICTIONS AND REQUIREMENTS
AUTHORIZED.—If a foreign bank or company
that engages, directly or through an affiliate
pursuant to paragraph (1), in an activity which
the Board has determined to be permissible for
financial holding companies under section 6 of
the Bank Holding Company Act of 1956 has
not filed a declaration with the Board of its sta-
tus as a financial holding company under such
section or received a determination under sec-
tion 10(d)(1) by the end of the 2-year period
beginning on the date of enactment of the Fi-
nancial Services Act of 1998, the Board, giving
due regard to the principle of national treat-
ment and equality of competitive opportunity,
may impose such restrictions and requirements
on the conduct of such activities by such foreign
bank or company as are comparable to those
118
imposed on a financial holding company orga-
nized under the laws of the United States, in-
cluding a requirement to conduct such activities
in compliance with any prudential safeguards
established under section 5(h) of the Bank
Holding Company Act of 1956.’’.
SEC. 152. APPLYING THE PRINCIPLES OF NATIONAL TREAT-
MENT AND EQUALITY OF COMPETITIVE OP-
PORTUNITY TO FOREIGN BANKS AND FOR-
EIGN FINANCIAL INSTITUTIONS THAT ARE
WHOLESALE FINANCIAL INSTITUTIONS.
Section 8A of the Federal Deposit Insurance Act (as
added by section 136(c)(2) of this Act) is amended by add-
ing at the end the following new subsection:
‘‘(i) VOLUNTARY TERMINATION OF DEPOSIT INSUR-
ANCE.—The provisions on voluntary termination of insur-
ance in this section shall apply to an insured branch of
a foreign bank (including a Federal branch) in the same
manner and to the same extent as they apply to an insured
State bank or a national bank.’’.
Subtitle G—Federal Home Loan
Bank System
SEC. 161. FEDERAL HOME LOAN BANKS.
The first sentence of section 3 of the Federal Home
Loan Bank Act (12 U.S.C. 1423) is amended—
119
(1) by striking ‘‘the continental United States’’
and all that follows through the ‘‘eight’’; and
(2) by inserting ‘‘the States into not less than
1’’ before ‘‘nor’’.
SEC. 162. MEMBERSHIP AND COLLATERAL.
(a) Subsection (f) of section 5 of the Home Owners’
Loan Act (12 U.S.C. 1464) is amended to read as follows:
‘‘(f) FEDERAL HOME LOAN BANK MEMBERSHIP.—
A Federal savings association may become a member, of
the Federal Home Loan Bank System, and shall qualify
for such membership in the manner provided by the Fed-
eral Home Loan Bank Act, beginning January 1, 1999.’’.
(b) Section 10(a)(5) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(a)(5)) is amended—
(1) in the second sentence, by striking ‘‘and the
Board’’; and
(2) in the third sentence, by striking ‘‘Board’’
and inserting ‘‘Bank’’.
(c) Section 10(a) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(a)) is amended—
(1) in the second sentence, by striking ‘‘All
long-term advances’’ and inserting ‘‘Except as pro-
vided in the succeeding sentence, all long-term ad-
vances’’;
120
(2) by inserting after the second sentence, the
following sentence: ‘‘Notwithstanding the preceding
sentence, long-term advances may be made to mem-
bers insured by the Federal Deposit Insurance Cor-
poration which have less than $500,000,000 in total
assets for the purpose of funding small businesses,
agriculture, rural development, or low-income com-
munity development (as defined by the Board).’’;
and
(3) by redesignating paragraph (5) as para-
graph (6) and inserting after paragraph (4) the fol-
lowing new paragraph:
‘‘(5) In the case of any member insured by the
Federal Deposit Insurance Corporation which has
total assets of less than $500,000,000, secured loans
for small business, agriculture, rural development, or
low-income community development, or securities
representing a whole interest in such secured
loans.’’.
(d) Section 4(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1424(a)) is amended by adding at the end the
following new paragraph:
‘‘(3) ELIGIBILITY REQUIREMENTS FOR COMMU-
NITY FINANCIAL INSTITUTIONS.—The requirements
of paragraph (2) (other than subparagraph (B) of
121
such paragraph) shall not apply to any insured de-
pository institution which has total assets of less
than $500,000,000.
(e) Section 10 of the Federal Home Loan Bank Act
(12 U.S.C. 1430) is amended by striking the first of the
2 subsections designated as subsection (e) (relating to
qualified thrift lender status).
SEC. 163. THE OFFICE OF FINANCE.
The Federal Home Loan Bank Act (12 U.S.C. 1421)
is amended by inserting after section 4 the following new
section:
‘‘SEC. 5. THE OFFICE OF FINANCE.
‘‘(a) OPERATION.—The Federal home loan banks
shall operate jointly an office of finance (hereafter in this
section referred to as the ‘Office’) to issue the notes,
bonds, and debentures of the Federal home loan banks
in accordance with this Act.
‘‘(b) POWERS.—Subject to the other provisions of
this Act and such safety and soundness regulations as the
Finance Board may prescribe, the Office shall be author-
ized by the Federal home loan banks to act as the agent
of such banks to issue Federal home loan bank notes,
bonds and debentures pursuant to section 11 of this Act
on behalf of the banks.
‘‘(c) CENTRAL BOARD OF DIRECTORS.—
122
‘‘(1) ESTABLISHMENT.—The Federal home
loan banks shall establish a central board of direc-
tors of the Office to administer the affairs of the Of-
fice in accordance with the provisions of this Act.
‘‘(2) COMPOSITION OF BOARD.—Each Federal
home loan bank shall annually select one individual
who, as of the time of the election, is an officer or
director of such bank to serve as a member of the
central board of directors of the Office.
‘‘(d) STATUS.—Except to the extent expressly pro-
vided in this Act, the Office shall be treated as a Federal
home loan bank for purposes of any law.’’.
SEC. 164. MANAGEMENT OF BANKS.
(a) Subsections (a) and (b) of section 7 of the Federal
Home Loan Bank Act (12 U.S.C. 1427(a) and (b)) are
amended to read as follows:
‘‘(a) The management of each Federal home loan
bank shall be vested in a board of 15 directors, nine of
whom shall be elected by the members in accordance with
this section, six of whom shall be appointed by the Board
referred to in section 2A, and all of whom shall be citizens
of the United States and bona fide residents of the district
in which such bank is located. At least two of the Federal
home loan bank directors who are appointed by the Board
shall be representatives chosen from organizations with
123
more than a 2-year history of representing consumer or
community interests on banking services, credit needs,
housing, or financial consumer protections. No Federal
home loan bank director who is appointed pursuant to this
subsection may, during such bank director’s term of office,
serve as an officer of any Federal home loan bank or a
director or officer of any member of a bank, or hold
shares, or any other financial interest in, any member of
a bank.
‘‘(b) The elective directors shall be divided into three
classes, designated as classes A, B, and C, as nearly equal
in number as possible. Each directorship shall be filled by
a person who is an officer or director of a member located
in that bank’s district. Each class shall represent members
of similar asset size, and the Board shall, to the maximum
extent possible, seek to achieve geographic diversity. The
Finance Board shall establish the minimum and maximum
asset size for each class. Any member shall be entitled to
nominate and elect eligible persons for its class of director-
ship; such offices shall be filled from such nominees by
a plurality of the votes which members of each class may
cast for nominees in their corresponding class of directors
in an election held for the purpose of filling such offices.
Each member shall be permitted to cast one vote for each
share of Federal home loan bank stock owned by that
124
member. No person who is an officer or director of a mem-
ber that fails to meet any applicable capital requirement
is eligible to hold the office of Federal Home Loan Bank
director. As used in this subsection, the term ‘‘member’’
means a member of a Federal home loan bank which was
a member of such Bank as of a record date established
by the Bank.’’.
(b) Section 7 of the Federal Home Loan Bank Act
(12 U.S.C. 1427) is amended—
(1) by striking subsections (c) and (h); and
(2) by redesignating subsections (d), (e), (f),
(g), (i), (j), and (k) as subsections (c), (d), (e), (f),
(g), (h), and (i), respectively.
(c) Subsection (c) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(d)) (as so redesignated
by subsection (b) of this section) is amended by striking
the first and second sentences and inserting the following
two new sentences: ‘‘The term of each position of director
shall be 3 years. No director serving for three consecutive
terms, nor any other officer, director or that member or
any affiliated depository institution, shall be eligible for
another term earlier than 3 years after the expiration of
the last expiring of said 3-year terms. Three elected direc-
tors of different classes as specified by the Finance Board
shall be elected by ballot annually.’’.
125
(d) Subsection (d) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(e)) (as so redesignated
by subsection (b) of this section) is amended to read as
follows:
‘‘(d) TRANSITION PROVISION.—In the first election
after the date of the enactment of the Financial Services
Act of 1998, three directors shall be elected in each of
the 3 classes of elective directorship. The Finance Board
may, in the first election after such date of enactment,
designate the terms of each elected director in each class,
not to exceed 3 years, to assure that, in each subsequent
election, 3 directors from different classes of elective direc-
torships are elected each year.’’.
(e) Subsection (g) of section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427(i)) (as so redesignated
by subsection (b) of this section) is amended by striking
‘‘subject to the approval of the board’’.
SEC. 165. ADVANCES TO NONMEMBER BORROWERS.
Section 10b of the Federal Home Loan Bank Act (12
U.S.C. 1430b) is amended—
(1) in subsection (a), by striking ‘‘(a) IN GEN-
ERAL.—’’;
(2) by striking the fourth sentence of subsection
(a), and inserting ‘‘Notwithstanding the preceding
sentence, if an advance is made for the purpose of
126
facilitating mortgage lending that benefits individ-
uals and families that meet the income requirements
set forth in section 142(d) or 143(f) of the Internal
Revenue Code of 1986, the advance may be
collateralized as provided in section 10(a) of this
Act.’’; and
(3) by striking subsection (b).
SEC. 166. POWERS AND DUTIES OF BANKS.
(a) Subsection (a) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(a)) is amended—
(1) by inserting ‘‘through the Office of Fi-
nance’’ after ‘‘to issue’’; and
(2) by striking ‘‘Board’’ after ‘‘upon such terms
and conditions as the’’ and inserting ‘‘board of di-
rectors of the bank’’.
(b) Subsection (b) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(b)) is amended to read
as follows:
‘‘(b) ISSUANCE
OF FEDERAL HOME LOAN BANK
CONSOLIDATED BONDS.—
‘‘(1) IN GENERAL.— The Office of Finance may
issue consolidated Federal home loan bank bonds
and other consolidated obligations on behalf of the
banks.
127
‘‘(2) JOINT AND SEVERAL OBLIGATION; TERMS
AND CONDITIONS.—Consolidated obligations issued
by the Office of Finance under paragraph (1)
shall—
‘‘(A) be the joint and several obligations of
all the Federal home loan banks; and
‘‘(B) shall be issued upon such terms and
conditions as shall be established by the Office
of Finance subject to such rules and regulations
as the Finance Board may prescribe.’’.
(c) Section 11(f) of the Federal Home Loan Bank
Act (12 U.S.C. 1430(f) (as designated before the redesig-
nation by subsection (e) of this section) is amended by
striking both commas immediately following ‘‘permit’’ and
inserting ‘‘or’’.
(d) Subsection (i) of section 11 of the Federal Home
Loan Bank Act (12 U.S.C. 1431(i)) is amended by strik-
ing the second undesignated paragraph.
(e) Section 11 of the Federal Home Loan Bank Act
(12 U.S.C. 1431) is amended—
(1) by striking subsection (c); and
(2) by redesignating subsections (d) through (k)
as subsections (c) through (j), respectively.
128
SEC. 167. MERGERS AND CONSOLIDATIONS OF FEDERAL
HOME LOAN BANKS.
Section 26 of the Federal Home Loan Bank Act (12
U.S.C. 1446) is amended by designating the current para-
graph as ‘‘(a)’’ and adding the following new sections:
‘‘(b) Nothing in this section shall preclude voluntary
mergers, combinations or consolidation by or among the
Federal home loan banks pursuant to such regulations as
the Finance Board may prescribe.
‘‘(c) NUMBER OF ELECTED DIRECTORS OF RESULT-
ING BANK.— Subject to section 7 of this Act, any bank
resulting from a merger, combination, or consolidation
pursuant to this section may have a number of elected di-
rectors equal to or less than the total number of elected
directors of all the banks which participated in such trans-
action (as determined immediately before such trans-
action).
‘‘(d) NUMBER OF APPOINTED DIRECTORS OF RE-
SULTING BANK.—The number of appointed directors of
any bank resulting from a merger, combination, or consoli-
dation pursuant to this section shall be a number that is
three less than the number of elected directors.
‘‘(e) ADJUSTMENT
OF DISTRICT BOUNDARIES.—
After consummation of any merger, combination, or con-
solidation of two or more Federal home loan banks, the
Finance Board shall adjust the districts established in sec-
129
tion 3 of this Act to reflect such merger, combination, or
consolidation.’’.
SEC. 168. TECHNICAL AMENDMENTS.
(a) REPEAL OF SECTIONS 22A AND 27.—The Fed-
eral Home Loan Bank Act (12 U.S.C. 1421 et seq.) is
amended by striking sections 22A (12 U.S.C. 1442a) and
27 (12 U.S.C. 1447).
(b) SECTION 12.—
(1) Section 12(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1432(a)) is amended—
(A) by striking ‘‘subject to the approval of
the Board’’ immediately following ‘‘transaction
of its business’’; and
(B) by striking ‘‘and, by its Board of di-
rectors, to prescribe, amend, and repeal by-
laws, rules, and regulations governing the man-
ner in which its affairs may be administered;
and the powers granted to it by law may be ex-
ercised and enjoyed subject to the approval of
the Board. The president of a Federal Home
Loan Bank may also be a member of the Board
of directors thereof, but no other officer, em-
ployee, attorney, or agent of such bank,’’ and
inserting ‘‘and, by the board of directors of the
bank, to prescribe, amend, and repeal by-laws