I
103D CONGRESS
2D SESSION
H. R. 4956
To create an open and competitive marketplace for financial services which
ensures the safety and soundness of the Nation’s financial system as
well as the availability of innovative financial products and services
for consumers, business, and government at the lowest possible cost,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
AUGUST 12, 1994
Mr. NEAL of North Carolina (for himself, Mr. MCCOLLUM, Mr. LAFALCE, Mr.
FRANK of Massachusetts, Mr. LAROCCO, Mr. ORTON, Mr. DOOLEY, Mr.
RIDGE, Mr. BAKER of Louisiana, and Mr. KING) introduced the following
bill; which was referred jointly to the Committees on Banking, Finance
and Urban Affairs and Energy and Commerce
A BILL
To create an open and competitive marketplace for financial
services which ensures the safety and soundness of the
Nation’s financial system as well as the availability of
innovative financial products and services for consumers,
business, and government at the lowest possible cost,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Financial Services Competitiveness Act’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.
Sec. 4. Establishment of a diversified financial services holding company.
Sec. 5. Compliance with change in control requirements.
Sec. 6. Adequate capitalization.
Sec. 7. Additional provisions relating to regulation of insured depository institu-
tion subsidiaries.
Sec. 8. Insider lending and tying provisions.
Sec. 9. Enforcement and examination; payment system services; oversight.
Sec. 10. Criminal and civil penalties.
Sec. 11. Technical and conforming amendments.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress hereby finds that—
(1) outdated laws and regulations inhibit inno-
vation, efficiency, and competition in the financial
services industry to the detriment of consumers and
providers;
(2) a new legal framework for financial services
must be created which will accord all financial serv-
ice companies equal opportunity to serve the full
range of credit and financial needs in the market-
place;
(3) expanded product and service opportunities
for all components of the financial services industry
would strengthen individual intermediaries as well as
the overall financial system;
(4) the rapid globalization of the financial serv-
ice marketplace and the emerging interdependence of
major financial markets further underscore the ne-
cessity for modernizing domestic laws to maintain
the competitiveness of United States financial mar-
kets; and
(5) the regulation of separate segments, sub-
sidiaries, and affiliates along functional lines without
regard to ownership or control would serve national
priorities better than the present system.
(b) PURPOSES.—The purposes of this Act are as fol-
lows:
(1) To promote the safety and soundness of the
Nation’s financial system.
(2) To promote the availability of financial
products and services to consumers, businesses,
charitable institutions and government in an effi-
cient and cost-effective manner.
(3) To promote a legal structure governing pro-
viders of financial services that permits open and
fair competition and affords all financial services
companies equal opportunity to serve the full range
of credit and financial needs in the marketplace.
(4) To ensure that domestic financial institu-
tions and companies are able to compete effectively
in international financial markets.
(5) To encourage regulation of financial activi-
ties and companies along functional lines without re-
gard to ownership, control, or affiliation.
SEC. 3. DEFINITIONS.
For purposes of this Act, the following definitions
shall apply:
(1) AFFILIATE.—Except as provided in section
105(e), the term ‘‘affiliate’’ means any company
which controls, is controlled by, or is under common
control with another company.
(2) ADEQUATELY CAPITALIZED.—With respect
to an insured depository institution, the term ‘‘ade-
quately capitalized’’ has the same meaning as in sec-
tion 38(b) of the Federal Deposit Insurance Act.
(3) APPROPRIATE
FEDERAL
BANKING
AGEN-
CY.—The term ‘‘appropriate Federal banking agen-
cy’’ has the same meaning as in section 3(q) of the
Federal Deposit Insurance Act.
(4) BANK
HOLDING
COMPANY.—The term
‘‘bank holding company’’ has the same meaning as
in section 2(a) of the Bank Holding Company Act
of 1956.
(5) BOARD.—The term ‘‘Board’’ means the
Board of Governors of the Federal Reserve System.
(6) COMPANY.—The term ‘‘company’’ has the
same meaning as in section 2(b) of the Bank Hold-
ing Company Act of 1956.
(7) CONTROL.—
(A) IN GENERAL.—Except as provided in
subparagraph (B) and section 7(e), the term
‘‘control’’ has the same meaning as in para-
graphs (2) and (3) of section 2(a) of the Bank
Holding Company Act of 1956.
(B) EXCEPTIONS.—
(i) ACQUISITIONS
INCIDENTAL
TO
OTHER BUSINESS.—No company shall be
deemed to control or to have acquired con-
trol of any other company for purposes of
this title by virtue of the company’s owner-
ship of the voting securities of such other
company if the voting securities were—
(I) acquired or held in an agency,
trust, or other fiduciary capacity
(whether with or without the sole dis-
cretion to vote such securities);
(II) acquired or held in connec-
tion with, or incidental to, the under-
writing of securities if such securities
are held only for such period of time
as will permit the sale of the securi-
ties on a reasonable basis;
(III) acquired or held in connec-
tion with, or incidental to, market
making, dealing, trading, brokerage or
other securities-related activities and
not with a view to acquiring, exercis-
ing, or transferring any control over
the management of policies of such
company; or
(IV) acquired in securing or col-
lecting a debt previously contracted in
good faith, until 2 years after the date
of acquisition or for such additional
period of time as the appropriate Fed-
eral banking agency may permit.
(ii) PROXY SOLICITATION.—No com-
pany formed for the sole purpose of par-
ticipating in a proxy solicitation shall be
deemed to control another company by vir-
tue of the company’s acquisition of voting
rights with respect to shares of such other
company which are acquired in the course
of such solicitation.
(8) DEPOSITORY INSTITUTION HOLDING COM-
PANY.—The term ‘‘depository institution holding
company’’ has the same meaning as in section
3(w)(1) of the Federal Deposit Insurance Act.
(9) DIVERSIFIED FINANCIAL SERVICES HOLD-
ING COMPANY.—The term ‘‘diversified financial serv-
ices holding company’’ means a company—
(A) that has filed a notice with the Board
of such company’s intent to become a diversi-
fied financial services holding company and
comply with the requirements of this Act and
has not withdrawn such notice; and
(B) which is described in at least 1 of the
following clauses:
(i) The company controls an insured
depository institution.
(ii) The company has, within the pre-
ceding 12 months, filed a notice under sec-
tion 4 to acquire control of an insured de-
pository institution or a depository institu-
tion holding company and such notice has
not been disapproved.
(iii) The company controls a company
which has, within the preceding 12
months, filed an application for deposit in-
surance under section 4 or 5 of the Fed-
eral Deposit Insurance Act which has not
been disapproved.
(10) FINANCIAL INSTITUTION.—The term ‘‘fi-
nancial institution’’ means—
(A) any bank (as defined in section 3(a)(1)
of the Federal Deposit Insurance Act), savings
association (as defined in section 3(b)(1) of
such Act), insurance company, finance com-
pany, real estate company, investment company
(as defined in section 3 of the Investment Com-
pany Act of 1940), or investment adviser (as
defined in section 202 of the Investment Advis-
ers Act of 1940);
(B) any broker, dealer, government securi-
ties broker, government securities dealer, mu-
nicipal securities broker, or municipal securities
dealer (as such terms are defined in the Securi-
ties Exchange Act of 1934); or
(C) any other financial services company
that is regulated, supervised, or examined under
the laws of any State.
cial services holding company without submitting prior no-
tice to the Board in accordance with this section of such
person’s intention to establish a diversified financial serv-
ices holding company.
(b) NOTICE REQUIREMENTS AND PROCEDURES.—
The Board shall establish requirements and procedures for
the submission of the notice required under this section
with respect to the establishment of a diversified financial
services holding company.
(c) COMPLIANCE.—Any diversified financial services
holding company that fails to comply with this Act and
regulations prescribed under this Act shall cease to be a
diversified financial services holding company as of the
date of such failure to comply.
(d) REGULATIONS.—The Board shall prescribe such
regulations as the Board determines to be appropriate to
administer and carry out the purposes of this Act.
(e) TERMINATION
OF BANK HOLDING COMPANY
STATUS UPON FILING AS DIVERSIFIED FINANCIAL SERV-
ICES HOLDING COMPANY.—Section 2 of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1841) is amended
by adding at the end the following new subsection:
‘‘(n) TREATMENT AS BANK HOLDING COMPANY.—
If—
‘‘(1) a bank holding company files a notice with
the Board of such company’s intent to become a di-
versified financial services holding company and to
comply with the requirements of the Financial Serv-
ices Competitiveness Act; and
‘‘(2) all the banks which are controlled directly
or indirectly by a bank holding company are insured
banks (as defined in section 3(h) of the Federal De-
posit Insurance Act) as of the time of the filing of
such notice,
such company shall not be treated as a bank holding com-
pany for purposes of this Act after such filing so long as
such notice remains in effect.’’.
(f) TERMINATION OF S&L HOLDING COMPANY STA-
TUS UPON FILING AS DIVERSIFIED FINANCIAL SERVICES
HOLDING COMPANY.—Section 10 of the Home Owners’
Loan Act (12 U.S.C. 1467a) is amended by adding at the
end the following new subsection:
‘‘(t) TREATMENT AS S&L HOLDING COMPANY.—If—
‘‘(1) a savings and loan holding company files
a notice with the Board of Governors of the Federal
Reserve System of such company’s intent to become
a diversified financial services holding company and
to comply with the requirements of the Financial
Services Competitiveness Act; and
‘‘(2) all the savings associations which are con-
trolled directly or indirectly by a savings and loan
holding company are insured depository institutions
(as defined in section 3(c) of the Federal Deposit In-
surance Act) as of the time of the filing of such no-
tice,
such company shall not be treated as a savings and loan
holding company for purposes of this Act after such filing
so long as such notice remains in effect.’’.
(g) INAPPLICABILITY OF GLASS-STEAGALL TO DI-
VERSIFIED FINANCIAL SERVICE HOLDING COMPANIES.—
(1) Section 20 of the Banking Act of 1933 (12
U.S.C. 377) is amended by inserting after the 1st
undesignated paragraph the following new para-
graph:
‘‘The provisions of this section shall not apply with
respect to the affiliation of—
‘‘(A) any bank that is an affiliate of a diversi-
fied financial services holding company (as defined
in section 3 of the Financial Services Competitive-
ness Act), with
‘‘(B) such company or any other affiliate of the
company.’’.
(2) Section 32 of the Banking Act of 1933 (12
U.S.C. 78) is amended by inserting after the 1st un-
designated paragraph the following new paragraph:
‘‘The provisions of this section shall not apply with
respect to relationships involving—
‘‘(A) an affiliate of a diversified financial serv-
ices holding company (as defined in the Financial
Services Competitiveness Act); and
‘‘(B) such company or any other affiliate of
such company.’’.
SEC. 5. COMPLIANCE WITH CHANGE IN CONTROL REQUIRE-
MENTS.
(a) IN GENERAL.—No diversified financial services
holding company, acting directly or indirectly, or through
or in concert with 1 or more other persons, may acquire
control of an insured depository institution, a depository
institution holding company, or another diversified finan-
cial services holding company through a purchase, assign-
ment, transfer, pledge or other disposition of voting stock
of any such institution or company unless the diversified
financial services holding company has complied with the
requirements of section 7(j) of the Federal Deposit Insur-
ance Act.
(b) APPLICABILITY OF SECTION 7(j) OF THE FED-
ERAL DEPOSIT INSURANCE ACT.—
(1) IN GENERAL.—Section 7(j) of the Federal
Deposit Insurance Act shall apply with respect to a
diversified financial services holding company for
purposes of subsection (a) in the same manner and
to the same extent such section applies to any ac-
quiring party described in such section.
(2) TREATMENT OF ACQUIRED COMPANY.—In
applying section 7(j) of the Federal Deposit Insur-
ance Act for purposes of this section—
(A) the acquisition of a depository institu-
tion holding company or a diversified financial
services holding company shall be treated as the
acquisition of an insured depository institution;
and
(B) the appropriate Federal banking agen-
cy shall be—
(i) in the case of a depository institu-
tion holding company, the appropriate
Federal banking agency designated under
section 3(q) of such Act with respect to the
company; and
(ii) in the case of a diversified finan-
cial services company, the Board.
SEC. 6. ADEQUATE CAPITALIZATION.
(a) NOTIFICATION.—If an appropriate Federal bank-
ing agency finds that an insured depository institution
subsidiary of a diversified financial services holding com-
pany is not adequately capitalized (as defined by such
agency pursuant to section 38 of the Federal Deposit In-
surance Act), the agency shall immediately provide a writ-
ten notice of such fact to the diversified financial services
holding company.
(b) BOND, GUARANTEE, DEPOSIT, OR SURPLUS CAP-
ITAL.—
(1) IN GENERAL.—In addition to any require-
ment of section 38 of the Federal Deposit Insurance
Act applicable to an undercapitalized insured deposi-
tory institution (as defined pursuant to such sec-
tion), an appropriate Federal banking agency may
require a diversified financial services holding com-
pany to which written notice has been provided
under subsection (a), with respect to an insured de-
pository institution subsidiary, to—
(A) provide a bond, guarantee or similar
undertaking, in a form prescribed by the appro-
priate Federal banking agency;
(B) place and maintain on deposit cash or
investment securities (calculated on the basis of
principal face amount or the fair market value,