purposes of the Act, including any purpose de-
scribed in paragraph (2); and
(B) modify or eliminate any restriction or
requirement the Board finds is no longer re-
quired for such purposes.
(4) FOREIGN BANKS.—
(A) IN GENERAL.—The Board may, by reg-
ulation or order, impose restrictions or require-
ments on relationships or transactions between a
branch, agency, or commercial lending company
of a foreign bank in the United States and any
affiliate in the United States of such foreign
bank that the Board finds are consistent with the
public interest, the purposes of this Act, the
Bank Holding Company Act of 1956, the Federal
Reserve Act, and other Federal law applicable to
foreign banks and their affiliates in the United
States, and the standards in paragraphs (2) and
(3).
(B) EVASION.—In the event that the Board
determines that there may be circumstances that
would result in an evasion of this paragraph, the
Board may also impose restrictions or require-
ments on relationships or transactions between
operations of a foreign bank outside the United
States and any affiliate in the United States of
such foreign bank that are consistent with na-
tional treatment and equality of competitive op-
portunity.
(c) FEDERAL DEPOSIT INSURANCE CORPORATION.—
(1) IN GENERAL.—The Federal Deposit Insur-
ance Corporation may, by regulation or order, impose
restrictions or requirements on relationships or trans-
actions between a State nonmember bank (as defined
in section 3 of the Federal Deposit Insurance Act)
and a subsidiary of the State nonmember bank which
the Corporation finds are consistent with the public
interest, the purposes of this Act, the Federal Deposit
Insurance Act, or other Federal law applicable to
State nonmember banks and the standards in para-
graph (2).
(2) STANDARDS.—The Federal Deposit Insurance
Corporation may exercise authority under paragraph
(1) if the Corporation finds that such action will have
any of the following effects:
(A) Avoid any significant risk to the safety
and soundness of depository institutions or any
Federal deposit insurance fund.
(B) Enhance the financial stability of
banks.
(C) Avoid conflicts of interest or other
abuses.
(D) Enhance the privacy of customers of the
State nonmember bank or any subsidiary of the
bank.
(E) Promote the application of national
treatment and equality of competitive oppor-
tunity between subsidiaries owned or controlled
by domestic banks and subsidiaries owned or
controlled by foreign banks operating in the
United States.
(3) REVIEW.—The Federal Deposit Insurance
Corporation shall regularly—
(A) review all restrictions or requirements
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any
such restriction or requirement to carry out the
purposes of the Act, including any purpose de-
scribed in paragraph (2); and
(B) modify or eliminate any restriction or
requirement the Corporation finds is no longer
required for such purposes.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) EXCLUSIVE COMMISSION AUTHORITY.—
(1) IN GENERAL.—Except as provided in para-
graphs (3), (4), and (5), 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 or a savings and loan hold-
ing company.
(2) PROHIBITION ON BANKING AGENCIES.—Ex-
cept as provided in paragraph (3), a Federal banking
agency may not inspect or examine any registered in-
vestment company that is not a bank holding com-
pany or a savings and loan holding company.
(3) CERTAIN
EXAMINATIONS
AUTHORIZED.—
Nothing in this subsection prevents the Federal De-
posit Insurance Corporation, if the Corporation finds
it necessary to determine the condition of an insured
depository institution for insurance purposes, from
examining an affiliate of any insured depository in-
stitution, pursuant to its authority under section
10(b)(4) of the Federal Deposit Insurance Act, as may
be necessary to disclose fully the relationship between
the depository institution and the affiliate, and the ef-
fect of such relationship on the depository institution.
(4) OTS REVIEW OF SAVINGS ASSOCIATIONS.—
No provision of this section shall be construed as pre-
venting the Director of the Office of Thrift Super-
vision, where the Director finds it reasonably nec-
essary to determine the financial condition of a sav-
ings association, from examining or requiring reports
from an affiliate, service company, or subsidiary of
any such savings association pursuant to section 5(d)
of the Home Owners’ Loan Act, solely for the purposes
of disclosing fully the transactions or relationships be-
tween such association and such entities and their ef-
fect on the financial condition of the association.
(5) OCC REVIEW OF NATIONAL BANKS.—No pro-
vision of this section shall be construed as preventing
the Comptroller of the Currency, where the Comp-
troller finds it reasonably necessary to determine the
financial condition of a national bank, from exam-
ining or requiring reports from an affiliate, service
company, or subsidiary of any such national bank
pursuant to section 5240 of the Revised Statutes, sole-
ly for the purposes of disclosing fully the transactions
or relationships between such national bank and such
entities and their effect on the financial condition of
the national bank.
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—The Commission shall provide to any Federal bank-
ing agency, upon request, the results of any examination,
reports, records, or other information with respect to any
registered investment company to the extent necessary for
the agency to carry out its statutory responsibilities.
(c) DEFINITIONS.—For purposes of this section, the fol-
lowing definitions shall apply:
(1) BANK HOLDING COMPANY.—The term ‘‘bank
holding company’’ has the same meaning as in sec-
tion 2 of the Bank Holding Company Act of 1956.
(2) 
COMMISSION.—The 
term 
‘‘Commission’’
means the Securities and Exchange Commission.
(3) FEDERAL
BANKING
AGENCY.—The term
‘‘Federal banking agency’’ has the same meaning as
in section 3(z) of the Federal Deposit Insurance Act.
(4) REGISTERED
INVESTMENT
COMPANY.—The
term ‘‘registered investment company’’ means an in-
vestment company which is registered with the Com-
mission under the Investment Company Act of 1940.
(5) SAVINGS AND LOAN HOLDING COMPANY.—The
term ‘‘savings and loan holding company’’ has the
same meaning as in section 10(a)(1)(D) of the Home
Owners’ Loan Act.
SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
The Bank Holding Company Act of 1956 (12 U.S.C.
1841 et seq.) is amended by inserting after section 10 the
following new section:
‘‘SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY
OF THE BOARD.
‘‘(a) LIMITATION ON DIRECT ACTION.—
‘‘(1) IN
GENERAL.—The Board may not pre-
scribe regulations, issue or seek entry of orders, im-
pose restraints, restrictions, guidelines, requirements,
safeguards, or standards, or otherwise take any action
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 regulated subsidiary of a bank
holding company unless the action is necessary to
prevent or redress an unsafe or unsound practice or
breach of fiduciary duty by such subsidiary that poses
a material risk to—
‘‘(A) the financial safety, soundness, or sta-
bility of an affiliated depository institution; or
‘‘(B) the domestic or international payment
system.
‘‘(2) CRITERIA FOR BOARD ACTION.—The Board
shall not take action otherwise permitted under para-
graph (1) unless the Board finds that it is not reason-
ably possible to effectively protect against the material
risk at issue through action directed at or against the
affiliated depository institution or against depository
institutions generally.
‘‘(b) LIMITATION ON INDIRECT ACTION.—The Board
may not prescribe regulations, issue or seek entry of orders,
impose restraints, restrictions, guidelines, requirements,
safeguards, or standards, or otherwise take any action
under or pursuant to any provision of this Act or section
8 of the Federal Deposit Insurance Act against or with re-
spect to a financial holding company or a wholesale finan-
cial 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 accordance
with subsection (a).
‘‘(c) ACTIONS SPECIFICALLY AUTHORIZED.—Notwith-
standing subsection (a), the Board may take action under
this Act or section 8 of the Federal Deposit Insurance Act
to enforce compliance by a regulated subsidiary with Fed-
eral 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 Secu-
rities Exchange Act of 1934;
‘‘(2) a registered investment adviser, properly
registered by or on behalf of either the Securities and
Exchange Commission or any State, with respect to
the investment advisory activities of such investment
adviser and activities incidental to such investment
advisory activities;
‘‘(3) an investment company registered under the
Investment Company Act of 1940;
‘‘(4) an insurance company or an insurance
agency 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 activi-
ties 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 companies, and
the State insurance regulators, as the functional regulators
of companies engaged in insurance activities, coordinate ef-
forts to supervise companies that control both a depository
institution and a company engaged in insurance activities
regulated under State law. In particular, Congress believes
that the Board and the State insurance regulators should
share, on a confidential basis, information relevant to the
supervision of companies that control both a depository in-
stitution and a company engaged in insurance activities,
including information regarding the financial health of the
consolidated organization and information regarding trans-
actions and relationships between insurance companies and
affiliated depository institutions. The appropriate Federal
banking agencies for depository institutions should also
share, on a confidential basis, information with the relevant
State insurance regulators regarding transactions and rela-
tionships between depository institutions and affiliated
companies engaged in insurance activities. The purpose of
this section is to encourage this coordination and confiden-
tial sharing of information, and to thereby improve both
the efficiency and the quality of the supervision of financial
holding companies and their affiliated depository institu-
tions and companies engaged in insurance activities.
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—
(1) INFORMATION OF THE BOARD.—Upon the re-
quest of the appropriate insurance regulator of any
State, the Board may provide any information of the
Board regarding the financial condition, risk man-
agement 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 trans-
action or relationship between such an insurance
company and any affiliated depository institution.
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 enforce
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 regarding any
transaction or relationship between a depository in-
stitution supervised by such Federal banking agency
and any affiliated company that is engaged in insur-
ance activities regulated by such State insurance reg-
ulator. The appropriate Federal banking agency may
provide any other information to the appropriate
State insurance regulator that the agency believes is
necessary or appropriate to permit the State insur-
ance 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 reg-
ulator may provide any examination or other reports,
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.
100
(d) EFFECT ON OTHER AUTHORITY.—Nothing in this
section shall limit in any respect the authority of the appro-
priate Federal banking agency with respect to an insured
depository institution, wholesale financial institution, or
bank holding company or any affiliate thereof under any
provision of law.
(e) CONFIDENTIALITY AND PRIVILEGE.—
(1) CONFIDENTIALITY.—The appropriate Federal
banking agency shall not provide any information or
material that is entitled to confidential treatment
under applicable Federal banking agency regulations,
or other applicable law, to a State insurance regu-
lator unless such regulator agrees to maintain the in-
formation or material in confidence and to take all
reasonable steps to oppose any effort to secure disclo-
sure of the information or material by the regulator.
The appropriate Federal banking agency shall treat
as confidential any information or material obtained
from a State insurance regulator that is entitled to
confidential treatment under applicable State regula-
tions, or other applicable law, and take all reasonable
steps to oppose any effort to secure disclosure of the
information or material by the Federal banking agen-
cy.
101
(2) PRIVILEGE.—The provision pursuant to this
section of information or material by a Federal bank-
ing agency or State insurance regulator shall not con-
stitute a waiver of, or otherwise affect, any privilege
to which the information or material is otherwise sub-
ject.
(f) DEFINITIONS.—For purposes of this section, the fol-
lowing definitions shall apply:
(1) APPROPRIATE
FEDERAL
BANKING
AGENCY;
INSURED DEPOSITORY INSTITUTION.—The terms ‘‘ap-
propriate Federal banking agency’’ and ‘‘insured de-
pository institution’’ 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 ‘‘whole-
sale financial institution’’ have the same meanings as
in section 2 of the Bank Holding Company Act of
1956.
SEC. 118. EQUIVALENT REGULATION AND SUPERVISION.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, the provisions of—
(1) section 5(c) of the Bank Holding Company
Act of 1956 (as amended by this Act) that limit the
authority of the Board of Governors of the Federal
102
Reserve System to require reports from, to make ex-
aminations of, or to impose capital requirements on
bank holding companies and their nonbank subsidi-
aries or that require deference to other regulators; and
(2) section 10A of the Bank Holding Company
Act of 1956 (as added by this Act) that limit what-
ever authority the Board might otherwise have to take
direct or indirect action with respect to bank holding
companies and their nonbank subsidiaries,
shall also limit whatever authority that a Federal banking
agency (as defined in section 3(z) of the Federal Deposit
Insurance Act) might otherwise have under any statute to
require reports, make examinations, impose capital require-
ments or take any other direct or indirect action with re-
spect to bank holding companies and their nonbank subsidi-
aries (including nonbank subsidiaries of depository institu-
tions), subject to the same standards and requirements as
are applicable to the Board under such provisions.
(b) CERTAIN EXAMINATIONS AUTHORIZED.—
(1) FDIC REVIEW
OF
DEPOSITORY
INSTITU-
TIONS.—No provision of this section shall be con-
strued as preventing the Federal Deposit Insurance
Corporation, if the Corporation finds it necessary to
determine the condition of an insured depository in-
stitution for insurance purposes, from examining an
103
affiliate of any insured depository institution, pursu-
ant to its authority under section 10(b)(4) of the Fed-
eral Deposit Insurance Act, as may be necessary to
disclose fully the relationship between the depository
institution and the affiliate, and the effect of such re-
lationship on the depository institution.
(2) OTS REVIEW OF SAVINGS ASSOCIATIONS.—
No provision of this section shall be construed as pre-
venting the Director of the Office of Thrift Super-
vision, where the Director finds it reasonably nec-
essary to determine the financial condition of a sav-
ings association, from examining or requiring reports
from an affiliate, service company, or subsidiary of
any such savings association pursuant to section 5(d)
of the Home Owners’ Loan Act, solely for the purposes
of disclosing fully the transactions or relationships be-
tween such association and such entities and their ef-
fect on the financial condition of the association.
(3) OCC REVIEW OF NATIONAL BANKING ASSO-
CIATIONS.—No provision of this section shall be con-
strued as preventing the Comptroller of the Currency,
where the Comptroller finds it reasonably necessary to
determine the financial condition of a national bank,
from examining or requiring reports from an affil-
iate, service company, or subsidiary of any such na-
104
tional bank pursuant to section 5240 of the Revised
Statutes, solely for the purposes of disclosing fully the
transactions or relationships between such national
bank and such entities and their effect on the finan-
cial condition of the national bank.
SEC. 119. PROHIBITION ON FDIC ASSISTANCE TO AFFILI-
ATES AND SUBSIDIARIES.
Section 11(a)(4)(B) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(a)(4)(B)) is amended by striking ‘‘to
benefit any shareholder of’’ and inserting ‘‘to benefit any
shareholder, affiliate (other than an insured depository in-
stitution that receives assistance in accordance with the
provisions of this Act), or subsidiary of’’.
SEC. 120. REPEAL OF SAVINGS BANK PROVISIONS IN THE
BANK HOLDING COMPANY ACT OF 1956.
Section 3(f) of the Bank Holding Company Act of 1956
(12 U.S.C. 1842(f)) is amended to read as follows:
‘‘(f) [Repealed].’’.
SEC. 120A. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841(o)(1)(A)) is amended by striking
‘‘section 38(b)’’ and inserting ‘‘section 38’’.
105
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 Statutes of United
States (12 U.S.C. 21 et seq.) is amended—
(1) by redesignating section 5136A as section
5136C; and
(2) by inserting after section 5136 (12 U.S.C.
24) the following new section:
‘‘SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.
‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AUTHORIZED
TO ENGAGE IN FINANCIAL ACTIVITIES.—
‘‘(1) EXCLUSIVE AUTHORITY.—No provision of
section 5136 or any other provision of this title LXII
of the Revised Statutes of the United States shall be
construed as authorizing a subsidiary of a national
bank to engage in, or own any share of or any other
interest in any company engaged in, any activity
that—
‘‘(A) is not permissible for a national bank
to engage in directly; or
106
‘‘(B) is conducted under terms or conditions
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 im-
plication 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 AC-
TIVITIES WHICH ARE FINANCIAL IN NATURE.—Subject
to paragraphs (3) and (4), a national bank may con-
trol a financial subsidiary, or hold an interest in a
financial subsidiary, that is controlled by insured de-
pository institutions or subsidiaries thereof.
‘‘(3) ELIGIBILITY REQUIREMENTS.—A national
bank may control or hold an interest in a company
pursuant to paragraph (2) only if—
‘‘(A) the national bank and all depository
institution affiliates of the national bank are
well capitalized;
‘‘(B) the national bank and all depository
institution affiliates of the national bank are
well managed;
107
‘‘(C) the national bank and all depository
institution affiliates of such national bank have
achieved a rating of ‘satisfactory record of meet-
ing community credit needs’, or better, at the
most recent examination of each such bank or in-
stitution; and
‘‘(D) the bank has received the approval of
the Comptroller of the Currency.
‘‘(4) ACTIVITY LIMITATIONS.—In addition to any
other limitation imposed on the activity of subsidi-
aries of national banks, a subsidiary of a national
bank may not, pursuant to paragraph (2)—
‘‘(A) engage as principal in insuring, guar-
anteeing, or indemnifying against loss, harm,
damage, illness, disability, or death (other than
in connection with credit-related insurance) or
in providing or issuing annuities;
‘‘(B) engage in real estate investment or de-
velopment activities; or
‘‘(C) engage in any activity permissible for
a financial holding company under paragraph
(3)(I) of section 6(c) of the Bank Holding Com-
pany Act of 1956 (relating to insurance com-
pany investments).
108
‘‘(5) SIZE
FACTOR
WITH
REGARD
TO
FREE-
STANDING NATIONAL BANKS.—Notwithstanding para-
graph (2), a national bank which has total assets of
$10,000,000,000 or more may not control a sub-
sidiary engaged in financial activities pursuant to
such paragraph unless such national bank is a sub-
sidiary of a bank holding company.
‘‘(6) LIMITED
EXCLUSIONS
FROM
COMMUNITY
NEEDS REQUIREMENTS FOR NEWLY AFFILIATED DE-
POSITORY INSTITUTIONS.—Any depository institution
which becomes an affiliate of a national bank during
the 12-month period preceding the date of an ap-
proval by the Comptroller of the Currency under
paragraph (3)(D) for such bank, and any depository
institution which becomes an affiliate of the national
bank after such date, may be excluded for purposes of
paragraph (3)(C) during the 12-month period begin-
ning on the date of such affiliation if—
‘‘(A) the national bank or such depository
institution has submitted an affirmative plan to
the appropriate Federal banking agency to take
such action as may be necessary in order for
such institution to achieve a rating of ‘satisfac-
tory record of meeting community credit needs’,
109
or better, at the next examination of the institu-
tion; and
‘‘(B) the plan has been accepted by such
agency.
‘‘(7) DEFINITIONS.—For purposes of this section,
the following definitions shall apply:
‘‘(A) COMPANY; CONTROL; AFFILIATE; SUB-
SIDIARY.—The terms ‘company’, ‘control’, ‘affil-
iate’, and ‘subsidiary’ have the same meanings
as in section 2 of the Bank Holding Company
Act of 1956.
‘‘(B) FINANCIAL SUBSIDIARY.—The term ‘fi-
nancial subsidiary’ means a company which is
a subsidiary of an insured bank and is engaged
in financial activities that have been determined
to be financial in nature or incidental to such fi-
nancial activities in accordance with subsection
(b) or permitted in accordance with subsection
(b)(4), other than activities that are permissible
for a national bank to engage in directly or that
are authorized under the Bank Service Company
Act, section 25 or 25A of the Federal Reserve
Act, or any other Federal statute (other than this
section) that specifically authorizes the conduct
110
of such activities by its express terms and not by
implication or interpretation.
‘‘(C) WELL CAPITALIZED.—The term ‘well
capitalized’ has the same meaning as in section
38 of the Federal Deposit Insurance Act and, for
purposes of this section, the Comptroller shall
have exclusive jurisdiction to determine whether
a national bank is well capitalized.
‘‘(D) WELL
MANAGED.—The term ‘well
managed’ means—
‘‘(i) in the case of a depository institu-
tion that has been examined, unless other-
wise determined in writing by the appro-
priate Federal banking agency—
‘‘(I) the achievement of a com-
posite rating of 1 or 2 under the Uni-
form Financial Institutions Rating
System (or an equivalent rating under
an equivalent rating system) in con-
nection with the most recent examina-
tion or subsequent review of the deposi-
tory institution; and
‘‘(II) at least a rating of 2 for
management, if that rating is given; or
111
‘‘(ii) in the case of any depository in-
stitution that has not been examined, the
existence and use of managerial resources
that the appropriate Federal banking agen-
cy determines are satisfactory.
‘‘(E) 
INCORPORATED
DEFINITIONS.—The
terms ‘appropriate Federal banking agency’ and
‘depository institution’ have the same meanings
as in section 3 of the Federal Deposit Insurance
Act.
‘‘(b) ACTIVITIES THAT ARE FINANCIAL IN NATURE.—
‘‘(1) FINANCIAL ACTIVITIES.—
‘‘(A) IN GENERAL.—For purposes of sub-
section (a)(7)(B), an activity shall be considered
to have been determined to be financial in na-
ture or incidental to such financial activities
only if—
‘‘(i) such activity is permitted for a fi-
nancial holding company pursuant to sec-
tion 6(c)(3) of the Bank Holding Company
Act of 1956 (to the extent such activity is
not otherwise prohibited under this section
or any other provision of law for a sub-
sidiary of a national bank engaged in ac-
tivities pursuant to subsection (a)(2)); or
112
‘‘(ii) the Secretary of the Treasury de-
termines the activity to be financial in na-
ture or incidental to such financial activi-
ties in accordance with subparagraph (B)
or paragraph (3).
‘‘(B) COORDINATION BETWEEN THE BOARD
AND THE SECRETARY OF THE TREASURY.—
‘‘(i) PROPOSALS RAISED BEFORE THE
SECRETARY OF THE TREASURY.—
‘‘(I) CONSULTATION.—The Sec-
retary of the Treasury shall notify the
Board of, and consult with the Board
concerning, any request, proposal, or
application under this subsection, in-
cluding any regulation or order pro-
posed under paragraph (3), for a deter-
mination of whether an activity is fi-
nancial in nature or incidental to such
a financial activity.
‘‘(II) BOARD
VIEW.—The Sec-
retary of the Treasury shall not deter-
mine that any activity is financial in
nature or incidental to a financial ac-
tivity under this subsection if the
Board notifies the Secretary in writ-
113
ing, not later than 30 days after the
date of receipt of the notice described
in subclause (I) (or such longer period
as the Secretary determines to be ap-
propriate in light of the circumstances)
that the Board believes that the activ-
ity is not financial in nature or inci-
dental to a financial activity.
‘‘(ii) PROPOSALS
RAISED
BY
THE
BOARD.—
‘‘(I) BOARD RECOMMENDATION.—
The Board may, at any time, rec-
ommend in writing that the Secretary
of the Treasury find an activity to be
financial in nature or incidental to a
financial activity (other than an activ-
ity which the Board has sole authority
to regulate under subparagraph (C)).
‘‘(II) TIME PERIOD FOR SECRE-
TARIAL
ACTION.—Not later than 30
days after the date of receipt of a writ-
ten recommendation from the Board
under subclause (I) (or such longer pe-
riod as the Secretary of the Treasury
and the Board determine to be appro-
114
priate in light of the circumstances),
the Secretary shall determine whether
to initiate a public rulemaking pro-
posing that the subject recommended
activity be found to be financial in na-
ture or incidental to a financial activ-
ity under this subsection, and shall no-
tify the Board in writing of the deter-
mination of the Secretary and, in the
event that the Secretary determines not
to seek public comment on the pro-
posal, the reasons for that determina-
tion.
‘‘(C) AUTHORITY
OVER
MERCHANT
BANK-
ING.—The Board shall have sole authority to
prescribe regulations and issue interpretations to
implement this paragraph with respect to activi-
ties described in section 6(c)(3)(H) of the Bank
Holding Company Act of 1956.
‘‘(2) FACTORS TO BE CONSIDERED.—In deter-
mining whether an activity is financial in nature or
incidental to financial activities, the Secretary shall
take into account—
‘‘(A) the purposes of this Act and the Fi-
nancial Services Act of 1999;
115
‘‘(B) changes or reasonably expected changes
in the marketplace in which banks compete;
‘‘(C) changes or reasonably expected changes
in the technology for delivering financial serv-
ices; and
‘‘(D) whether such activity is necessary or
appropriate to allow a bank and the subsidiaries
of a bank to—
‘‘(i) compete effectively with any com-
pany seeking to provide financial services
in the United States;
‘‘(ii) use any available or emerging
technological means, including any applica-
tion necessary to protect the security or effi-
cacy of systems for the transmission of data
or financial transactions, in providing fi-
nancial services; and
‘‘(iii) offer customers any available or
emerging technological means for using fi-
nancial services.
‘‘(3) AUTHORIZATION OF NEW FINANCIAL ACTIVI-
TIES.—The Secretary of the Treasury shall, by regu-
lation or order and in accordance with paragraph
(1)(B), define, consistent with the purposes of this
Act, the following activities as, and the extent to
116
which such activities are, financial in nature or inci-
dental to activities which are financial in nature:
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding financial as-
sets other than money or securities.
‘‘(B) Providing any device or other instru-
mentality for transferring money or other finan-
cial assets.
‘‘(C) Arranging, effecting, or facilitating fi-
nancial transactions for the account of third
parties.
‘‘(4) DEVELOPING ACTIVITIES.—Subject to sub-
section (a)(2), a financial subsidiary of a national
bank may engage directly or indirectly, or acquire
shares of any company engaged, in any activity that
the Secretary has not determined to be financial in
nature or incidental to financial activities under this
subsection if—
‘‘(A) the subsidiary reasonably concludes
that the activity is financial in nature or inci-
dental to financial activities;
‘‘(B) the gross revenues from all activities
conducted under this paragraph represent less
than 5 percent of the consolidated gross revenues
of the national bank;
117
‘‘(C) the aggregate total assets of all compa-
nies the shares of which are held under this
paragraph do not exceed 5 percent of the na-
tional bank’s consolidated total assets;
‘‘(D) the total capital invested in activities
conducted under this paragraph represents less
than 5 percent of the consolidated total capital
of the national bank;
‘‘(E) neither the Secretary of the Treasury
nor the Board has determined that the activity
is not financial in nature or incidental to finan-
cial activities under this subsection; and
‘‘(F) the national bank provides written no-
tice to the Secretary of the Treasury describing
the activity commenced by the subsidiary or con-
ducted by the company acquired no later than 10
business days after commencing the activity or
consummating the acquisition.
‘‘(c) PROVISIONS APPLICABLE TO NATIONAL BANKS
THAT FAIL TO MEET REQUIREMENTS.—
‘‘(1) IN GENERAL.—If a national bank or deposi-
tory institution affiliate is not in compliance with the
requirements of subparagraph (A), (B), or (C) of sub-
section (a)(3), the appropriate Federal banking agen-
118
cy shall notify the Comptroller of the Currency, who
shall give notice of such finding to the national bank.
‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE-
QUIRED.—Not later than 45 days after receipt by a
national bank of a notice given under paragraph (1)
(or such additional period as the Comptroller of the
Currency may permit), the national bank and any
relevant affiliated depository institution shall execute
an agreement acceptable to the Comptroller of the
Currency and the other appropriate Federal banking
agencies, if any, to comply with the requirements ap-
plicable under subsection (a)(3).
‘‘(3) COMPTROLLER OF THE CURRENCY MAY IM-
POSE LIMITATIONS.—Until the conditions described in
a notice to a national bank under paragraph (1) are
corrected—
‘‘(A) the Comptroller of the Currency may
impose such limitations on the conduct or activi-
ties of the national bank or any subsidiary of the
bank as the Comptroller of the Currency deter-
mines to be appropriate under the circumstances;
and
‘‘(B) the appropriate Federal banking agen-
cy may impose such limitations on the conduct
or activities of an affiliated depository institu-
119
tion or any subsidiary of the depository institu-
tion as such agency determines to be appropriate
under the circumstances.
‘‘(4) FAILURE TO CORRECT.—If, after receiving a
notice under paragraph (1), a national bank and
other affiliated depository institutions do not—
‘‘(A) execute and implement an agreement
in accordance with paragraph (2);
‘‘(B) comply with any limitations imposed
under paragraph (3);
‘‘(C) in the case of a notice of failure to
comply with subsection (a)(3)(A), restore the na-
tional bank or any depository institution affil-
iate of the bank to well capitalized status before
the end of the 180-day period beginning on the
date such notice is received by the national bank
(or such other period permitted by the Comp-
troller of the Currency); or
‘‘(D) in the case of a notice of failure to
comply with subparagraph (B) or (C) of sub-
section (a)(3), restore compliance with any such
subparagraph on or before the date on which the
next examination of the depository institution
subsidiary is completed or by the end of such
120
other period as the Comptroller of the Currency
determines to be appropriate,
the Comptroller of the Currency may require such na-
tional bank, under such terms and conditions as may
be imposed by the Comptroller of the Currency and
subject to such extension of time as may be granted
in the Comptroller of the Currency’s discretion, to di-
vest control of any subsidiary engaged in activities
pursuant to subsection (a)(2) or, at the election of the
national bank, instead to cease to engage in any ac-
tivity conducted by a subsidiary of the national bank
pursuant to subsection (a)(2).
‘‘(5) CONSULTATION.—In taking any action
under this subsection, the Comptroller of the Currency
shall consult with all relevant Federal and State reg-
ulatory agencies.’’.
(b) 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 section
5136 the following new item:
‘‘5136A. Subsidiaries of national banks.’’.
121
SEC. 122. SAFETY AND SOUNDNESS FIREWALLS BETWEEN
BANKS AND THEIR FINANCIAL SUBSIDIARIES.
(a) PURPOSES.—The purposes of this section are—
(1) to protect the safety and soundness of any in-
sured bank that has a financial subsidiary;
(2) to apply to any transaction between the bank
and the financial subsidiary (including a loan, exten-
sion of credit, guarantee, or purchase of assets), other
than an equity investment, the same restrictions and
requirements as would apply if the financial sub-
sidiary were a subsidiary of a bank holding company
having control of the bank; and
(3) to apply to any equity investment of the
bank in the financial subsidiary restrictions and re-
quirements equivalent to those that would apply if—
(A) the bank paid a dividend in the same
dollar amount to a bank holding company hav-
ing control of the bank; and
(B) the bank holding company used the pro-
ceeds of the dividend to make an equity invest-
ment in a subsidiary that was engaged in the
same activities as the financial subsidiary of the
bank.
(b) SAFETY AND SOUNDNESS FIREWALLS APPLICABLE
TO SUBSIDIARIES OF BANKS.—The Federal Deposit Insur-
122
ance Act (12 U.S.C. 1811 et seq.) is amended by adding
at the end the following new section:
‘‘SEC. 45. SAFETY AND SOUNDNESS FIREWALLS APPLICA-
BLE TO SUBSIDIARIES OF BANKS.
‘‘(a) LIMITING THE EQUITY INVESTMENT OF A BANK
IN A SUBSIDIARY.—
‘‘(1) 
CAPITAL
DEDUCTION.—In 
determining
whether an insured bank complies with applicable
regulatory capital standards—
‘‘(A) the appropriate Federal banking agen-
cy shall deduct from the assets and tangible eq-
uity of the bank the aggregate amount of the out-
standing equity investments of the bank in fi-
nancial subsidiaries of the bank; and
‘‘(B) the assets and liabilities of such finan-
cial subsidiaries shall not be consolidated with
those of the bank.
‘‘(2) 
INVESTMENT
LIMITATION.—An 
insured
bank shall not, without the prior approval of the ap-
propriate Federal banking agency, make any equity
investment in a financial subsidiary of the bank if
that investment would, when made, exceed the amount
that the bank could pay as a dividend without ob-
taining prior regulatory approval.
123
‘‘(3) TREATMENT OF RETAINED EARNINGS.—The
amount of any net earnings retained by a financial
subsidiary of an insured depository institution shall
be treated as an outstanding equity investment of the
bank in the subsidiary for purposes of paragraph (1).
‘‘(b) OPERATIONAL AND FINANCIAL SAFEGUARDS FOR
THE BANK.—An insured bank that has a financial sub-
sidiary shall maintain procedures for identifying and man-
aging any financial and operational risks posed by the fi-
nancial subsidiary.
‘‘(c) MAINTENANCE OF SEPARATE CORPORATE IDEN-
TITY AND SEPARATE LEGAL STATUS.—
‘‘(1) IN GENERAL.—Each insured bank shall en-
sure that the bank maintains and complies with rea-
sonable policies and procedures to preserve the sepa-
rate corporate identity and legal status of the bank
and any financial subsidiary or affiliate of the bank.
‘‘(2) EXAMINATIONS.—The appropriate Federal
banking agency, as part of each examination, shall
review whether an insured bank is observing the sepa-
rate corporate identity and separate legal status of
any subsidiaries and affiliates of the bank.
‘‘(d) FINANCIAL SUBSIDIARY DEFINED.—For purposes
of this section, the term ‘financial subsidiary’ has the mean-
124
ing given to such term in section 5136A(a)(7)(B) of the Re-
vised Statutes of the United States.
‘‘(e) REGULATIONS.—The appropriate Federal bank-
ing agencies shall jointly prescribe regulations imple-
menting this section.’’.
(c) TRANSACTIONS BETWEEN FINANCIAL SUBSIDI-
ARIES AND OTHER AFFILIATES.—Section 23A of the Fed-
eral Reserve Act (12 U.S.C. 371c) is amended—
(1) by redesignating subsection (e) as subsection
(f); and
(2) by inserting after subsection (d), the fol-
lowing new subsection:
‘‘(e) RULES RELATING TO BANKS WITH FINANCIAL
SUBSIDIARIES.—
‘‘(1) FINANCIAL
SUBSIDIARY
DEFINED.—For
purposes of this section and section 23B, the term ‘fi-
nancial subsidiary’ means a company which is a sub-
sidiary of a bank and is engaged in activities that
are financial in nature or incidental to such finan-
cial activities pursuant to subsection (a)(2) or (b)(4)
of section 5136A of the Revised Statutes of the United
States.
‘‘(2) APPLICATION TO TRANSACTIONS BETWEEN A
FINANCIAL SUBSIDIARY OF A BANK AND THE BANK.—
For purposes of applying this section and section 23B
125
to a transaction between a financial subsidiary of a
bank and the bank (or between such financial sub-
sidiary and any other subsidiary of the bank which
is not a financial subsidiary) and notwithstanding
subsection (b)(2) and section 23B(d)(1), the financial
subsidiary of the bank—
‘‘(A) shall be an affiliate of the bank and
any other subsidiary of the bank which is not a
financial subsidiary; and
‘‘(B) shall not be treated as a subsidiary of
the bank.
‘‘(3) APPLICATION TO TRANSACTIONS BETWEEN
FINANCIAL SUBSIDIARY AND NONBANK AFFILIATES.—
‘‘(A) IN GENERAL.—A transaction between
a financial subsidiary and an affiliate of the fi-
nancial subsidiary shall not be deemed to be a
transaction between a subsidiary of a national
bank and an affiliate of the bank for purposes of
section 23A or section 23B of the Federal Reserve
Act.
‘‘(B) CERTAIN AFFILIATES EXCLUDED.—For
purposes of subparagraph (A) and notwith-
standing paragraph (4), the term ‘affiliate’ shall
not include a bank, or a subsidiary of a bank,
which is engaged exclusively in activities permis-
126
sible for a national bank to engage in directly or
which are authorized by any Federal law other
than section 5136A of the Revised Statutes of the
United States.
‘‘(4) EQUITY INVESTMENTS EXCLUDED SUBJECT
TO THE APPROVAL OF THE BANKING AGENCY.—Sub-
section (a)(1) shall not apply so as to limit the equity
investment of a bank in a financial subsidiary of
such bank, except that any investment that exceeds the
amount of a dividend that the bank could pay at the
time of the investment without obtaining prior ap-
proval of the appropriate Federal banking agency and
is in excess of the limitation which would apply
under subsection (a)(1), but for this paragraph, may
be made only with the approval of the appropriate
Federal banking agency (as defined in section 3(q) of
the Federal Deposit Insurance Act) with respect to
such bank.’’.
(d) 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 pursuant to subsection (a)(2) or (b)(4) of section
5136A of the Revised Statutes of the United States shall
127
be deemed to be a subsidiary of a bank holding company,
and not a subsidiary of a bank.’’.
SEC. 123. MISREPRESENTATIONS REGARDING DEPOSITORY
INSTITUTION LIABILITY FOR OBLIGATIONS
OF AFFILIATES.
(a) IN GENERAL.—Chapter 47 of title 18, United
States Code, is amended by inserting after section 1007 the
following new section:
‘‘§ 1008. Misrepresentations regarding financial insti-
tution liability for obligations of affiliates
‘‘(a) IN GENERAL.—No institution-affiliated party of
an insured depository institution or institution-affiliated
party of a subsidiary or affiliate of an insured depository
institution shall fraudulently represent that the institution
is or will be liable for any obligation of a subsidiary or
other affiliate of the institution.
‘‘(b) CRIMINAL PENALTY.—Whoever violates subsection
(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-affiliated
party’ has the same meaning as in section 3 of the Federal
Deposit Insurance Act and any reference in that section
shall also be deemed to refer to a subsidiary or affiliate of
an insured depository institution.
128
‘‘(d) OTHER DEFINITIONS.—For purposes of this sec-
tion, the terms ‘affiliate’, ‘insured depository institution’,
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 fol-
lowing new item:
‘‘1008. Misrepresentations regarding financial institution liability for obligations
of affiliates.’’.
SEC. 124. FUNCTIONAL REGULATION.
The Federal Deposit Insurance Act (12 U.S.C. 1811
et seq.), is amended by inserting after section 45 (as added
by section 122 of this subtitle) the following new section:
‘‘SEC. 46. FUNCTIONAL REGULATION OF SECURITIES SUB-
SIDIARIES AND INSURANCE AGENCY SUBSIDI-
ARIES OF INSURED DEPOSITORY INSTITU-
TIONS.
‘‘(a) BROKER OR DEALER SUBSIDIARY.—A broker or
dealer that is a subsidiary of an insured depository institu-
tion shall be subject to regulation under the Securities Ex-
change Act of 1934 in the same manner and to the same
extent as a broker or dealer that—
‘‘(1) is controlled by the same bank holding com-
pany as controls the insured depository institution;
and
129
‘‘(2) is not an insured depository institution or
a subsidiary of an insured depository institution.
‘‘(b) INSURANCE AGENCY SUBSIDIARY.—An insurance
agency or brokerage that is a subsidiary of an insured de-
pository institution shall be subject to regulation by a State
insurance authority in the same manner and to the same
extent as an insurance agency or brokerage that—
‘‘(1) is controlled by the same bank holding com-
pany as controls the insured depository institution;
and
‘‘(2) is not an insured depository institution or
a subsidiary of an insured depository institution.
‘‘(c) DEFINITIONS.—For purposes of this section, the
terms ‘broker’ and ‘dealer’ have the same meanings as in
section 3 of the Securities Exchange Act of 1934.’’.
SEC. 125. 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]’’.
130
Subtitle 
D—Wholesale 
Financial
Holding Companies; Wholesale
Financial Institutions
CHAPTER 1—WHOLESALE FINANCIAL
HOLDING COMPANIES
SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ES-
TABLISHED.
(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 FINAN-
CIAL INSTITUTIONS.—
‘‘(1) WHOLESALE FINANCIAL HOLDING COMPANY
DEFINED.—The term ‘wholesale financial holding
company’ means any company that—
‘‘(A) is registered as a bank holding com-
pany;
‘‘(B) is predominantly engaged in financial
activities as defined in section 6(f)(2);
‘‘(C) controls 1 or more wholesale financial
institutions;
‘‘(D) does not control—
‘‘(i) a bank other than a wholesale fi-
nancial institution;
131
‘‘(ii) an insured bank other than an
institution permitted under subparagraph
(D), (F), or (G) of section 2(c)(2); or
‘‘(iii) a savings association; and
‘‘(E) is not a foreign bank (as defined in
section 1(b)(7) of the International Banking Act
of 1978).
‘‘(2) SAVINGS
ASSOCIATION
TRANSITION
PE-
RIOD.—Notwithstanding paragraph (1)(D)(iii), the
Board may permit a company that controls a savings
association and that otherwise meets the requirements
of paragraph (1) to become supervised under para-
graph (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 section
shall govern the reporting, examination, and capital
requirements of wholesale financial holding compa-
nies.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—The Board from time to
time may require any wholesale financial hold-
ing company and any subsidiary of such com-
132
pany 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 reports in
fulfillment of the Board’s reporting require-
ments under this paragraph that the whole-
sale financial 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 wholesale fi-
nancial holding company or a subsidiary of
such company shall provide to the Board, at
133
the request of the Board, a report referred to
in clause (i).
‘‘(C) EXEMPTIONS
FROM
REPORTING
RE-
QUIREMENTS.—
‘‘(i) IN GENERAL.—The Board may, by
regulation or order, exempt any company
or class of companies, under such terms and
conditions and for such periods as the
Board shall provide in such regulation or
order, from the provisions of this paragraph
and any regulation prescribed under this
paragraph.
‘‘(ii) CRITERIA FOR CONSIDERATION.—
In making any determination under clause
(i) with regard to any exemption 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
134
1978) or a foreign regulatory authority
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
135
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
depository institution controlled by the
wholesale financial holding company and
any of the company’s other subsidiaries.
‘‘(B) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, limit the focus and scope of any exam-
ination of a wholesale financial holding com-
pany under this paragraph to—
‘‘(i) the holding company; and
‘‘(ii) any subsidiary (other than an in-
sured depository institution subsidiary) of
the holding company that, because of the
size, condition, or activities of the sub-
sidiary, the nature or size of transactions
between such subsidiary and any affiliated
depository institution, or the centralization
of functions within the holding company
system, could have a materially adverse ef-
fect on the safety and soundness of any de-
pository institution affiliate of the holding
company.
136
‘‘(C) 
DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use the reports of examination of depos-
itory institutions made by the Comptroller of the
Currency, the Federal Deposit Insurance Cor-
poration, the Director of the Office of Thrift Su-
pervision or the appropriate State depository in-
stitution supervisory authority for the purposes
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 in-
surance agency responsible for the super-
vision of the insurance company.
‘‘(E) CONFIDENTIALITY OF REPORTED IN-
FORMATION.—
137
‘‘(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 informa-
tion from any other Federal department or
agency for purposes within the scope of such
department’s or agency’s jurisdiction, 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
138
be considered to be a statute described in
subsection (b)(3)(B) of such section.
‘‘(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 compa-
nies.
‘‘(B) METHOD OF CALCULATION.—In devel-
oping rules or guidelines under this paragraph,
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
139
and other liabilities to fund capital invest-
ments in subsidiaries.
‘‘(ii) 
NO
UNWEIGHTED
CAPITAL
RATIO.—The Board shall not, by regulation,
guideline, order, or otherwise, impose under
this section a capital ratio that is not based
on appropriate risk-weighting consider-
ations.
‘‘(iii) NO CAPITAL REQUIREMENT ON
REGULATED
ENTITIES.—The Board shall
not, by regulation, guideline, order or other-
wise, 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) 
CERTAIN
SUBSIDIARIES.—The
Board shall not, by regulation, guideline,
order or otherwise, prescribe or impose any
140
capital or capital adequacy rules, stand-
ards, guidelines, or requirements upon any
subsidiary that is not a depository institu-
tion 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 im-
posing 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) LIMITATIONS
ON
INDIRECT
AC-
TION.—In developing, establishing, or as-
sessing holding company capital or capital
adequacy rules, guidelines, standards, or re-
quirements for purposes of this paragraph,
the Board shall not take into account the
activities, operations, or investments of an
affiliated investment company registered
under the Investment Company Act of 1940,
if the investment company is not—
‘‘(I) a bank holding company; or
141
‘‘(II) controlled by a bank holding
company by reason of ownership by the
bank 
holding 
company 
(including
through all of its affiliates) of 25 per-
cent or more of the shares of the invest-
ment company, where the shares owned
by the bank holding company have a
market value equal to more than
$1,000,000.
‘‘(vi) APPROPRIATE EXCLUSIONS.—The
Board shall take full account of—
‘‘(I) 
the 
capital 
requirements
made applicable to any subsidiary that
is not a depository institution by an-
other Federal regulatory authority or
State insurance authority; and
‘‘(II) industry norms for capital-
ization of a company’s unregulated
subsidiaries and activities.
‘‘(vii) INTERNAL
RISK
MANAGEMENT
MODELS.—The Board may incorporate in-
ternal risk management models of wholesale
financial holding companies into its capital
adequacy guidelines or rules and may take
account of the extent to which resources of
142
a subsidiary depository institution may be
used to service the debt or other liabilities of
the wholesale financial holding company.
‘‘(c) NONFINANCIAL ACTIVITIES AND INVESTMENTS.—
‘‘(1) GRANDFATHERED ACTIVITIES.—
‘‘(A) IN
GENERAL.—Notwithstanding sec-
tion 4(a), a company that becomes a wholesale
financial holding company may continue to en-
gage, directly or indirectly, in any activity and
may retain ownership and control of shares of a
company engaged in any activity if—
‘‘(i) on the date of the enactment of the
Financial Services Act of 1999, such whole-
sale financial holding company was law-
fully engaged in that nonfinancial activity,
held the shares of such company, or had en-
tered into a contract to acquire shares of
any company engaged in such activity; and
‘‘(ii) the company engaged in such ac-
tivity continues to engage only in the same
activities that such company conducted on
the date of the enactment of the Financial
Services Act of 1999, and other activities
permissible under this Act.
143
‘‘(B) NO EXPANSION OF GRANDFATHERED
COMMERCIAL ACTIVITIES THROUGH MERGER OR
CONSOLIDATION.—A wholesale financial holding
company that engages in activities or holds
shares pursuant to this paragraph, or a sub-
sidiary of such wholesale financial holding com-
pany, may not acquire, in any merger, consoli-
dation, or other type of business combination, as-
sets of any other company which is engaged in
any activity which the Board has not determined
to be financial in nature or incidental to activi-
ties that are financial in nature under section
6(c).
‘‘(C) LIMITATION TO SINGLE EXEMPTION.—
No company that engages in any activity or con-
trols any shares under subsection (f) of section 6
may engage in any activity or own any shares
pursuant to this paragraph.
‘‘(2) COMMODITIES.—
‘‘(A) IN
GENERAL.—Notwithstanding sec-
tion 4(a), a wholesale financial holding company
which was predominately engaged as of January
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
144
control shares of a company engaged in, activi-
ties related to the trading, sale, or investment in
commodities and underlying physical properties
that were not permissible for bank holding com-
panies to conduct in the United States as of
January 1, 1997, if such wholesale financial
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 grant-
ed under this paragraph and not otherwise per-
mitted to be held by all wholesale financial hold-
ing companies under this section may not exceed
5 percent of the total consolidated assets of the
wholesale financial holding company, except that
the Board may increase such percentage of total
consolidated assets by such amounts and under
such circumstances as the Board considers ap-
propriate, consistent with the purposes of this
Act.
145
‘‘(3) 
CROSS
MARKETING
RESTRICTIONS.—A
wholesale financial holding company shall not
permit—
‘‘(A) any company whose shares it owns or
controls pursuant to paragraph (1) or (2) to
offer or market any product or service of an af-
filiated wholesale financial institution; or
‘‘(B) any affiliated wholesale financial in-
stitution to offer or market any product or serv-
ice of any company whose shares are owned or
controlled by such wholesale financial holding
company pursuant to such paragraphs.
‘‘(d) QUALIFICATION OF FOREIGN BANK AS WHOLE-
SALE FINANCIAL HOLDING COMPANY.—
‘‘(1) IN GENERAL.—Any foreign bank, or any
company that owns or controls a foreign bank, that
operates a branch, agency, or commercial lending
company in the United States, including a foreign
bank or company that owns or controls a wholesale
financial institution, may request a determination
from the Board that such bank or company be treated
as a wholesale financial holding company (other than
for purposes of subsection (c)), subject to such condi-
tions as the Board deems appropriate, giving due re-
gard to the principle of national treatment and equal-
146
ity of competitive opportunity and the requirements
imposed on domestic banks and companies.
‘‘(2) CONDITIONS FOR TREATMENT AS A WHOLE-
SALE FINANCIAL HOLDING COMPANY.—A foreign bank
and a company that owns or controls a foreign bank
may not be treated as a wholesale financial holding
company unless the bank and company meet and con-
tinue to meet the following criteria:
‘‘(A) NO INSURED DEPOSITS.—No deposits
held directly by a foreign bank or through an af-
filiate (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
147
bank (or any company that owns or controls
such foreign bank), has invested and which en-
gages in any activity authorized only as a result
of the application of subsection (c) or (g) of sec-
tion 6, 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 comply with
such sections if the foreign bank were a member
bank.
‘‘(3) TREATMENT AS A WHOLESALE FINANCIAL
INSTITUTION.—Any foreign bank which is, or is affili-
ated with a company which is, treated as a wholesale
financial holding company under this subsection shall
be treated as a wholesale financial institution for
purposes of paragraphs (1)(C) and (3) of section
9B(c) of the Federal Reserve Act, and any such for-
eign bank or company shall be subject to paragraphs
(3), (4), and (5) of section 9B(d) of the Federal Re-
serve Act, except that the Board may adopt such
modifications, conditions, or exemptions as the Board
deems appropriate, giving due regard to the principle
of national treatment and equality of competitive op-
portunity.
148
‘‘(4) SUPERVISION
OF
FOREIGN
BANK
WHICH
MAINTAINS NO BANKING PRESENCE OTHER THAN CON-
TROL OF A WHOLESALE FINANCIAL INSTITUTION.—A
foreign bank that owns or controls a wholesale finan-
cial 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 determination from the Board
that such bank or company be treated as a wholesale
financial holding company, except that such bank or
company shall be subject to the restrictions of para-
graphs (2)(A) and (3) of this subsection.
‘‘(5) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed as limiting the author-
ity of the Board under the International Banking Act
of 1978 with respect to the regulation, supervision, or
examination of foreign banks and their offices and af-
filiates in the United States.’’.
(b) UNINSURED BANKS.—
(1) UNINSURED STATE BANKS.—Section 9 of the
Federal Reserve Act (12 U.S.C. 321 et seq.) is amend-
ed 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)
149
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 member bank in the same
manner and to the same extent such provisions apply
to an insured member bank and any reference in any
such provision to ‘insured depository institution’ shall
be deemed to be a reference to ‘uninsured member
bank’ for purposes of this paragraph.’’.
(2) UNINSURED NATIONAL BANKS.—Section 5239
of the Revised Statutes of the United States (12
U.S.C. 93) is amended—
(A) by redesignating the 2d of the 2 sub-
sections designated as subsection (d) as sub-
section (e); and
(B) by adding at the end the following new
subsection:
‘‘(f) ENFORCEMENT AUTHORITY OVER UNINSURED
NATIONAL BANKS.—Section 3(u) of the Federal Deposit In-
surance 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 national bank
in the same manner and to the same extent such provisions
apply to an insured national bank and any reference in
any such provision to ‘insured depository institution’ shall
150
be deemed to be a reference to ‘uninsured national bank’
for purposes of this subsection.’’.
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 Reserve System,
at its discretion, may furnish reports of examination or
other confidential supervisory information concerning State
member banks or any other entities examined under any
other authority of the Board to any Federal or State au-
thorities with supervisory or regulatory authority over the
examined entity, to officers, directors, or receivers of the ex-
amined entity, and to any other person that the Board de-
termines to be proper.’’.
(b) COMMODITY FUTURES TRADING COMMISSION.—
The Right to Financial Privacy Act of 1978 (12 U.S.C.
3401 et seq.) is amended—
(1) in section 1101(7) (12 U.S.C. 3401(7))—
(A) by redesignating subparagraphs (G)
and (H) as subparagraphs (H) and (I), respec-
tively; and
(B) by inserting after subparagraph (F) the
following new subparagraph:
151
‘‘(G) the Commodity Futures Trading Com-
mission; or’’; and
(2) in section 1112(e) (12 U.S.C. 3412(e)), 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 Hold-
ing Company Act of 1956 (12 U.S.C. 1842) is amend-
ed by adding at the end the following new subsections:
‘‘(p) WHOLESALE FINANCIAL INSTITUTION.—The term
‘wholesale financial institution’ means a wholesale finan-
cial 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 ‘depository
institution’—
‘‘(1) has the same meaning as in section 3 of the
Federal Deposit Insurance Act; and
‘‘(2) includes a wholesale financial institution.’’.
(2) DEFINITION OF BANK INCLUDES WHOLESALE
FINANCIAL INSTITUTION.—Section 2(c)(1) of the Bank
152
Holding Company Act of 1956 (12 U.S.C. 1841(c)(1))
is amended by adding at the end the following new
subparagraph:
‘‘(C) A wholesale financial institution.’’.
(3) INCORPORATED DEFINITIONS.—Section 2(n)
of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(n)) is amended by inserting ‘‘ ‘insured
bank’,’’ after ‘‘ ‘in danger of default’,’’.
(4) EXCEPTION
TO
DEPOSIT
INSURANCE
RE-
QUIREMENT.—Section 3(e) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1842(e)) is amended by
adding at the end the following: ‘‘This subsection shall
not apply to a wholesale financial institution.’’.
(b) FEDERAL DEPOSIT INSURANCE ACT.—
(1) Section 3(q)(1) of the Federal Deposit Insur-
ance Act (12 U.S.C. 1813(q)(2)(A)) is amended by in-
serting ‘‘national wholesale financial institution au-
thorized by the Comptroller of the Currency pursuant
to section 5136B of the Revised Statutes of the United
States,’’ after ‘‘District bank,’’.
(2) Section 3(q)(2)(A) of the Federal Deposit In-
surance Act (12 U.S.C. 1813(q)(2)(A)) is amended to
read as follows:
‘‘(A) any State member insured bank (ex-
cept a District bank) and any wholesale finan-
153
cial institution as authorized by the Board pur-
suant to section 9B of the Federal Reserve Act,’’.
CHAPTER 2—WHOLESALE FINANCIAL
INSTITUTIONS
SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.
(a) NATIONAL
WHOLESALE
FINANCIAL
INSTITU-
TIONS.—
(1) IN GENERAL.—Chapter one of title LXII of
the Revised Statutes of the United States (12 U.S.C.
21 et seq.) is amended by inserting after section
5136A (as added by section 121(a) of this title) the
following new section:
‘‘SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITU-
TIONS.
‘‘(a) AUTHORIZATION
OF
THE COMPTROLLER RE-
QUIRED.—
‘‘(1) IN GENERAL.—A national bank may apply
to the Comptroller on such forms and in accordance
with such regulations as the Comptroller may pre-
scribe, for permission to operate as a wholesale finan-
cial institution.
‘‘(2) NATIONAL WHOLESALE FINANCIAL INSTITU-
TION.—Any national bank that is approved by the
Comptroller of the Currency to operate as a wholesale
154
financial institution under paragraph (1) shall be
known as a national wholesale financial institution.
‘‘(b) REGULATION.—A national wholesale financial in-
stitution may exercise, in accordance with such institu-
tion’s articles of incorporation and regulations issued by
the Comptroller, all the powers and privileges of a national
bank formed in accordance with section 5133 of the Revised
Statutes of the United States, subject to section 9B of the
Federal Reserve Act and the limitations and restrictions
contained therein.
‘‘(c) COMMUNITY REINVESTMENT ACT OF 1977.—A
national wholesale financial institution shall be subject to
the Community Reinvestment Act of 1977.
‘‘(d) LIMIT ON NUMBER.—Not more than 5 national
wholesale financial institutions may be chartered by the
Comptroller of the Currency.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter one of title LXII of the Revised Stat-
utes of the United States is amended by inserting
after the item relating to section 5136A (as added by
section 121(d) of this title) the following new item:
‘‘5136B. National wholesale financial institutions.’’.
(b) WHOLESALE FINANCIAL INSTITUTIONS.—The Fed-
eral Reserve Act (12 U.S.C. 221 et seq.) is amended by in-
serting after section 9A the following new section:
155
‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLESALE
FINANCIAL INSTITUTION.—
‘‘(1) APPLICATION REQUIRED.—
‘‘(A) IN GENERAL.—Any bank may apply
to the Board of Governors of the Federal Reserve
System to become a State wholesale financial in-
stitution, or to the Comptroller of the Currency
under section 5136B of the Revised Statutes of
the United States to be a national wholesale fi-
nancial institution, and, as a wholesale finan-
cial institution, to subscribe to the stock of the
Federal reserve bank organized within the dis-
trict 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.
‘‘(C) LIMIT ON NUMBER.—Not more than 5
wholesale financial institutions may be approved
by the Board under this subsection.
‘‘(2) INSURANCE TERMINATION.—No bank the de-
posits of which are insured under the Federal Deposit
Insurance Act may become a wholesale financial in-
stitution unless it has met all requirements under
156
that Act for voluntary termination of deposit insur-
ance.
‘‘(b) GENERAL
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) FEDERAL RESERVE ACT.—Except as other-
wise provided in this section, wholesale financial in-
stitutions shall be member banks and shall be subject
to the provisions of this Act that apply to member
banks to the same extent and in the same manner as
State member insured banks or national banks, except
that a wholesale financial institution may terminate
membership under this Act only with the prior writ-
ten approval of the Board and on terms and condi-
tions that the Board determines are appropriate to
carry out the purposes of this Act.
‘‘(2) PROMPT CORRECTIVE ACTION.—A wholesale
financial institution shall be deemed to be an insured
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 finan-
cial institutions;
‘‘(B) subject to subparagraph (A), all ref-
erences to the appropriate Federal banking agen-
157
cy or to the Corporation in that section shall be
deemed to be references to the Comptroller of the
Currency, in the case of a national wholesale fi-
nancial institution authorized under section
5136B(a)(1) of the Revised Statutes of the
United States, and to the Board, in the case of
other wholesale financial institutions; and
‘‘(C) in the case of wholesale financial insti-
tutions, the purpose of prompt corrective action
shall be to protect taxpayers and the financial
system from risks associated with the operation
and activities of wholesale financial institutions.
‘‘(3) ENFORCEMENT AUTHORITY.—Section 3(u),
subsections (j) and (k) of section 7, subsections (b)
through (n), (s), (u), and (v) of section 8, and section
19 of the Federal Deposit Insurance Act shall apply
to a wholesale financial institution in the same man-
ner and to the same extent as such provisions apply
to State member insured banks or national banks, as
the case may be, and any reference in such sections
to an insured depository institution shall be deemed
to include a reference to a wholesale financial institu-
tion.
‘‘(4) CERTAIN OTHER STATUTES APPLICABLE.—
A wholesale financial institution shall be deemed to
158
be a banking institution, and the Board shall be the
appropriate Federal banking agency for such bank
and all such bank’s affiliates, for purposes of the
International Lending Supervision Act.
‘‘(5) BANK MERGER ACT.—A wholesale financial
institution shall be subject to sections 18(c) and 44 of
the Federal Deposit Insurance Act in the same man-
ner and to the same extent the wholesale financial in-
stitution would be subject to such sections if the insti-
tution were a State member insured bank or a na-
tional bank.
‘‘(6) BRANCHING.—Notwithstanding any other
provision of law, a wholesale financial institution
may establish and operate a branch at any location—
‘‘(A) on such terms and conditions as estab-
lished, in the case of a State-chartered wholesale
financial institution, by the Board or, in the
case of a national wholesale financial institu-
tion, by the Comptroller of the Currency; and
‘‘(B) 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 ap-
proval of the Comptroller of the Currency.
159
‘‘(7) ACTIVITIES OF OUT-OF-STATE BRANCHES OF
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(A) GENERAL.—A State-chartered whole-
sale financial institution shall be deemed to be a
State bank and an insured State bank for pur-
poses of paragraphs (1), (2), and (3) of section
24(j) of the Federal Deposit Insurance Act, and
a national wholesale financial institution shall
be deemed to be a national bank for purposes of
section 5155(f) of the Revised Statutes of the
United States.
‘‘(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-char-
tered wholesale financial institution,
the State by which the institution is
chartered.
160
‘‘(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 respect to
any State, a wholesale financial institution
whose home State is another State.
‘‘(8) DISCRIMINATION
REGARDING
INTEREST
RATES.—Section 27 of the Federal Deposit Insurance
Act shall apply to State-chartered wholesale financial
institutions in the same manner and to the same ex-
tent as such provisions apply to State member in-
sured 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 IN-
STITUTIONS.—The appropriate State banking author-
ity may grant a charter to a wholesale financial in-
stitution notwithstanding any State constitution or
statute requiring that the institution obtain insurance
of its deposits and any such State constitution or
161
statute is hereby preempted solely for purposes of this
paragraph.
‘‘(10) PARITY FOR WHOLESALE FINANCIAL INSTI-
TUTIONS.—A State bank that is a wholesale financial
institution under this section shall have all of the
rights, powers, privileges, and immunities (including
those derived from status as a federally chartered in-
stitution) of and as if it were a national bank, subject
to such terms and conditions as established 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 finan-
cial institution may receive initial deposits
of $100,000 or less, other than on an inci-
dental 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-
162
stitute more than 5 percent of the institu-
tion’s total deposits.
‘‘(B) NO DEPOSIT INSURANCE.—Except as
otherwise provided in section 8A(f) of the Federal
Deposit Insurance Act, no deposits held by a
wholesale financial institution shall be insured
deposits under the Federal Deposit Insurance
Act.
‘‘(C) ADVERTISING AND DISCLOSURE.—The
Board and the Comptroller of the Currency shall
prescribe jointly regulations pertaining to adver-
tising and disclosure by wholesale financial in-
stitutions to ensure that each depositor is noti-
fied that deposits at the wholesale financial in-
stitution are not federally insured or otherwise
guaranteed by the United States Government.
‘‘(2) MINIMUM CAPITAL LEVELS APPLICABLE TO
WHOLESALE
FINANCIAL
INSTITUTIONS.—The Board
shall, by regulation, adopt capital requirements 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
163
‘‘(B) to provide for the safe and sound oper-
ation of the wholesale financial institution with-
out undue risk to creditors or other persons, in-
cluding Federal reserve banks, engaged in trans-
actions with the bank.
‘‘(3) ADDITIONAL
REQUIREMENTS
APPLICABLE
TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi-
tion to any requirement otherwise applicable to State
member insured banks or applicable, under this sec-
tion, to wholesale financial institutions, the Board
may impose, by regulation or order, upon wholesale
financial institutions—
‘‘(A) limitations on transactions, direct or
indirect, with affiliates to prevent—
‘‘(i) the transfer of risk to the deposit
insurance funds; or
‘‘(ii) an affiliate from gaining access
to, or the benefits of, credit from a Federal
reserve bank, including overdrafts at a Fed-
eral reserve bank;
‘‘(B) special clearing balance requirements;
and
‘‘(C) any additional requirements that the
Board determines to be appropriate or necessary
to—
164
‘‘(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
‘‘(iii) protect creditors and other per-
sons, including Federal reserve banks, en-
gaged in transactions with the wholesale fi-
nancial institution.
‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL
INSTITUTIONS.—The Board may, by regulation or
order, exempt any wholesale financial institution
from any provision applicable to a member bank that
is not a wholesale financial institution, if the Board
finds that such exemption is consistent with—
‘‘(A) the promotion of the safety and sound-
ness of the wholesale financial institution or any
insured depository institution affiliate of the
wholesale financial institution;
‘‘(B) the protection of the deposit insurance
funds; and
‘‘(C) the protection of creditors and other
persons, including Federal reserve banks, en-
165
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 institu-
tion that is affiliated with an insured bank shall not
be a bank.
‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed as limiting the Board’s
authority over member banks or the authority of the
Comptroller of the Currency over national banks
under any other provision of law, or to create any ob-
ligation for any Federal Reserve bank to make, in-
crease, renew, or extend any advance or discount
under this Act to any member bank or other deposi-
tory 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, in the
case of a State-chartered wholesale financial institu-
tion, or the Comptroller of the Currency, in the case
of a national wholesale financial institution, shall
promptly provide notice to a company that controls
166
a wholesale financial institution whenever such whole-
sale financial institution is not well capitalized or
well managed.
‘‘(3) AGREEMENT TO RESTORE INSTITUTION.—
Not later than 45 days after the date of receipt of a
notice under paragraph (2) (or such additional pe-
riod not to exceed 90 days as the Board or the Comp-
troller of the Currency, as the case may be, may per-
mit), the company shall execute an agreement accept-
able to the Board or the Comptroller of the Currency,
as the case may be, to restore the wholesale financial
institution to compliance with all of the requirements
of paragraph (1).
‘‘(4) 
LIMITATIONS
UNTIL
INSTITUTION
RE-
STORED.—Until the wholesale financial institution is
restored to compliance with all of the requirements of
paragraph (1), the Board or the Comptroller of the
Currency, as the case may be, may impose such limi-
tations on the conduct or activities of the company or
any affiliate of the company as the Board or the
Comptroller of the Currency determines to be appro-
priate 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-
167
tation imposed under paragraph (4), restore the
wholesale financial institution to well capitalized sta-
tus not later than 180 days after the date of receipt
by the company of the notice described in paragraph
(2), or restore the wholesale financial institution to
well managed status within such period as the Board
may permit, the company shall, under such terms
and conditions as may be imposed by the Board or
the Comptroller of the Currency, as the case may be
and subject to such extension of time as may be
granted in the discretion of the Board or the Comp-
troller of the Currency, 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 Com-
pany Act of 1956.
‘‘(e) RESOLUTION OF WHOLESALE FINANCIAL INSTI-
TUTIONS.—
‘‘(1) CONSERVATORSHIP OR RECEIVERSHIP.—
‘‘(A) APPOINTMENT.—The Board may ap-
point a conservator or receiver for a State-char-
tered wholesale financial institution to the same
extent and in the same manner as the Comp-
168
troller of the Currency may appoint a conser-
vator or receiver for a national bank.
‘‘(B) POWERS.—The conservator or receiver
for a wholesale financial institution shall exer-
cise the same powers, functions, and duties, sub-
ject to the same limitations, as a conservator or
receiver for a national bank.
‘‘(2) BOARD AUTHORITY.—The Board shall have
the same authority with respect to any conservator or
receiver appointed for a State-chartered wholesale fi-
nancial institution under paragraph (1), and the
wholesale financial institution for which it has been
appointed, as the Comptroller of the Currency has
with respect to a conservator or receiver for a na-
tional bank and the national bank for which the con-
servator or receiver has been appointed.
‘‘(3) BANKRUPTCY
PROCEEDINGS.—The Comp-
troller of the Currency (in the case of a national
wholesale financial institution approved by the
Comptroller 
of 
the 
Currency 
under 
section
5136B(a)(1) of the Revised Statutes of the United
States) or the Board (in the case of other wholesale
financial institutions) may direct the conservator or
receiver of a wholesale financial institution to file a
petition pursuant to title 11, United States Code, in
169
which case, title 11, United States Code, shall apply
to the wholesale financial institution in lieu of other-
wise applicable Federal or State insolvency law.
‘‘(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.—
(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 STA-
TUS.—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 depository
170
institution in accordance with regulations of the Corpora-
tion if—
‘‘(1) the bank provides written notice of the
bank’s intent to terminate such insured status—
‘‘(A) to the Corporation and the Board of
Governors of the Federal Reserve System, in the
case of an insured State bank, or to the Corpora-
tion and the Comptroller of the Currency, in the
case of an insured national bank authorized to
operate as a wholesale financial institution, not
less than 6 months before the effective date of
such termination; and
‘‘(B) to all depositors at such bank, not less
than 6 months before the effective date of the ter-
mination 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 paragraph
(1) and the Corporation determines that the fund
will equal or exceed the applicable designated re-
serve ratio for the 2 semiannual assessment peri-
ods immediately following such date; or
171
‘‘(B) the Corporation and the Board of Gov-
ernors of the Federal Reserve System, in the case
of an insured State bank, or the Corporation and
the Comptroller of the Currency, in the case of
an insured national bank authorized to operate
as a wholesale financial institution, has ap-
proved the termination of the bank’s insured sta-
tus and the bank pays an exit fee in accordance
with subsection (e).
‘‘(b) EXCEPTION.—Subsection (a) shall not apply with
respect to—
‘‘(1) an insured savings association; or
‘‘(2) an insured branch that is required to be in-
sured under subsection (a) or (b) of section 6 of the
International Banking Act of 1978.
‘‘(c) ELIGIBILITY
FOR INSURANCE TERMINATED.—
Any bank that voluntarily elects to terminate the bank’s
insured status under subsection (a) shall not be eligible for
insurance on any deposits or any assistance authorized
under this Act after the period specified in subsection (f)(1).
‘‘(d) INSTITUTION MUST BECOME WHOLESALE FINAN-
CIAL INSTITUTION OR TERMINATE DEPOSIT-TAKING AC-
TIVITIES.—Any depository institution which voluntarily
terminates such institution’s status as an insured deposi-
tory institution under this section may not, upon termi-
172
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 required
to restore the relevant deposit insurance fund to the
fund’s designated reserve ratio as of the date the bank
provides a written notice under subsection (a)(1).
‘‘(2) PROCEDURES.—The Corporation shall pre-
scribe, by regulation, procedures for assessing any exit
fee under this subsection.
‘‘(f) TEMPORARY INSURANCE OF DEPOSITS INSURED
AS OF TERMINATION.—
‘‘(1) TRANSITION PERIOD.—The insured deposits
of each depositor in a State bank or a national bank
on the effective date of the voluntary termination of
the bank’s insured status, less all subsequent with-
drawals from any deposits of such depositor, shall
continue to be insured for a period of not less than
6 months and not more than 2 years, as determined
173
by the Corporation. During such period, no additions
to any such deposits, and no new deposits in the de-
pository institution made after the effective date of
such termination shall be insured by the Corporation.
‘‘(2) TEMPORARY
ASSESSMENTS; OBLIGATIONS
AND DUTIES.—During the period specified in para-
graph (1) with respect to any bank, the bank shall
continue to pay assessments under section 7 as if the
bank were an insured depository institution. The
bank shall, in all other respects, be subject to the au-
thority of the Corporation and the duties and obliga-
tions of an insured depository institution under this
Act during such period, and in the event that the
bank is closed due to an inability to meet the de-
mands of the bank’s depositors during such period,
the Corporation shall have the same powers and
rights with respect to such bank as in the case of an
insured depository institution.
‘‘(g) ADVERTISEMENTS.—
‘‘(1) IN GENERAL.—A bank that voluntarily ter-
minates the bank’s insured status under this section
shall not advertise or hold itself out as having insured
deposits, except that the bank may advertise the tem-
porary insurance of deposits under subsection (f) if,
in connection with any such advertisement, the adver-
174
tisement also states with equal prominence that addi-
tions to deposits and new deposits made after the ef-
fective 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 na-
tional bank after the effective date of the voluntary
termination of the bank’s insured status under this
section shall be accompanied by a conspicuous,
prominently displayed notice that such certificate of
deposit or other obligation or security is not insured
under this Act.
‘‘(h) NOTICE REQUIREMENTS.—
‘‘(1) NOTICE TO THE CORPORATION.—The notice
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
175
amended by inserting ‘‘, or any wholesale financial
institution subject to section 9B of this Act’’ after
‘‘such Act’’.
(d) TECHNICAL AND CONFORMING AMENDMENTS TO
THE BANKRUPTCY CODE.—
(1) 
BANKRUPTCY
CODE
DEBTORS.—Section
109(b)(2) of title 11, United States Code, is amended
by striking ‘‘; or’’ and inserting the following: ‘‘, ex-
cept that—
‘‘(A) a wholesale financial institution estab-
lished under section 5136B of the Revised Stat-
utes of the United States or section 9B of the
Federal Reserve Act may be a debtor if a peti-
tion is filed at the direction of the Comptroller
of the Currency (in the case of a wholesale finan-
cial institution established under section 5136B
of the Revised Statutes of the United States) or
the Board of Governors of the Federal Reserve
System (in the case of any wholesale financial
institution); and
‘‘(B) a corporation organized under section
25A of the Federal Reserve Act may be a debtor
if a petition is filed at the direction of the Board
of Governors of the Federal Reserve System; or’’.
176
(2) CHAPTER
DEBTORS.—Section 109(d) of
title 11, United States Code, is amended to read as
follows:
‘‘(d) Only a railroad and a person that may be a debt-
or under chapter 7 of this title, except that a stockbroker,
a wholesale financial institution established under section
5136B of the Revised Statutes of the United States or sec-
tion 9B of the Federal Reserve Act, a corporation organized
under section 25A of the Federal Reserve Act, or a com-
modity broker, may be a debtor under chapter 11 of this
title.’’.
(3) DEFINITION OF FINANCIAL INSTITUTION.—
Section 101(22) of title 11, United States Code, is
amended to read as follows:
‘‘(22) ‘financial institution’ means a person that
is a commercial or savings bank, industrial savings
bank, savings and loan association, trust company,
wholesale financial institution established under sec-
tion 5136B of the Revised Statutes of the United
States or section 9B of the Federal Reserve Act, or
corporation organized under section 25A of the Fed-
eral Reserve Act and, when any such person is acting
as agent or custodian for a customer in connection
with a securities contract, as defined in section 741
of this title, such customer,’’.
177
(4) SUBCHAPTER V OF CHAPTER 7.—
(A) IN GENERAL.—Section 103 of title 11,
United States Code, is amended—
(i) by redesignating subsections (e)
through (i) as subsections (f) through (j), re-
spectively; and
(ii) by inserting after subsection (d)
the following:
‘‘(e) Subchapter V of chapter 7 of this title applies only
in a case under such chapter concerning the liquidation of
a wholesale financial institution established under section
5136B of the Revised Statutes of the United States or sec-
tion 9B of the Federal Reserve Act, or a corporation orga-
nized under section 25A of the Federal Reserve Act.’’.
(B) WHOLESALE
BANK
LIQUIDATION.—
Chapter 7 of title 11, United States Code, is
amended by adding at the end the following:
‘‘SUBCHAPTER V—WHOLESALE BANK
LIQUIDATION
‘‘§ 781. Definitions for subchapter
‘‘In this subchapter—
‘‘(1) the term ‘Board’ means the Board of Gov-
ernors of the Federal Reserve System;
178
‘‘(2) the term ‘depository institution’ has the
same meaning as in section 3 of the Federal Deposit
Insurance Act, and includes any wholesale bank;
‘‘(3) the term ‘national wholesale financial insti-
tution’ means a wholesale financial institution estab-
lished under section 5136B of the Revised Statutes of
the United States; and
‘‘(4) the term ‘wholesale bank’ means a national
wholesale financial institution, a wholesale financial
institution established under section 9B of the Federal
Reserve Act, or a corporation organized under section
25A of the Federal Reserve Act.
‘‘§ 782. Selection of trustee
‘‘Notwithstanding any other provision of this title, the
conservator or receiver who files the petition shall be the
trustee under this chapter, unless the Comptroller of the
Currency (in the case of a national wholesale financial in-
stitution for which it appointed the conservator or receiver)
or the Board (in the case of any wholesale bank for which
it appointed the conservator or receiver) designates an al-
ternative trustee. The Comptroller of the Currency or the
Board (as applicable) may designate a successor trustee, if
required.
179
‘‘§ 783. Additional powers of trustee
‘‘(a) The trustee under this subchapter has power, with
permission of the court—
‘‘(1) to sell the wholesale bank to a depository in-
stitution or consortium of depository institutions
(which consortium may agree on the allocation of the
wholesale bank among the consortium);
‘‘(2) to merge the wholesale bank with a deposi-
tory institution;
‘‘(3) to transfer contracts to the same extent as
could a receiver for a depository institution under
paragraphs (9) and (10) of section 11(e) of the Fed-
eral Deposit Insurance Act;
‘‘(4) to transfer assets or liabilities to a deposi-
tory institution;
‘‘(5) to distribute property not of the estate, in-
cluding distributions to customers that are mandated
by subchapters III and IV of this chapter; or
‘‘(6) to transfer assets and liabilities to a bridge
bank as provided in paragraphs (1), (3)(A), (5), (6),
and (9) through (13), and subparagraphs (A) through
(H) and (K) of paragraph (4) of section 11(n) of the
Federal Deposit Insurance Act, except that—
‘‘(A) the bridge bank shall be treated as a
wholesale bank for the purpose of this subsection;
and
180
‘‘(B) any references in any such provision
of law to the Federal Deposit Insurance Corpora-
tion shall be construed to be references to the ap-
pointing agency and that references to deposit
insurance shall be omitted.
‘‘(b) Any reference in this section to transfers of liabil-
ities includes a ratable transfer of liabilities within a pri-
ority class.
‘‘§ 784. Right to be heard
‘‘The Comptroller of the Currency (in the case of a na-
tional wholesale financial institution), the Board (in the
case of any wholesale bank), or a Federal Reserve bank (in
the case of a wholesale bank that is a member of that bank)
may raise and may appear and be heard on any issue in
a case under this subchapter.
‘‘§ 785. Expedited transfers
‘‘The trustee may make a transfer pursuant to section
783 without prior judicial approval, if the Comptroller of
the Currency (in the case of a national wholesale financial
institution for which it appointed the conservator or re-
ceiver) or the Board (in the case of any wholesale bank for
which it appointed the conservator or receiver) determines
that the transfer would be necessary to avert serious adverse
effects on economic conditions or financial stability.’’.
181
(C) CONFORMING AMENDMENT.—The table
of sections for chapter 7 of title 11, United States
Code, is amended by adding at the end the fol-
lowing:
‘‘SUBCHAPTER V—WHOLESALE BANK LIQUIDATION
‘‘781. Definitions for subchapter.
‘‘782. Selection of trustee.
‘‘783. Additional powers of trustee.
‘‘784. Right to be heard.
‘‘785. Expedited transfers.’’.
(e) RESOLUTION OF EDGE CORPORATIONS.—The 16th
undesignated paragraph of section 25A of the Federal Re-
serve Act (12 U.S.C. 624) is amended to read as follows:
‘‘(16) APPOINTMENT OF RECEIVER OR CONSER-
VATOR.—
‘‘(A) IN
GENERAL.—The Board may ap-
point a conservator or receiver for a corporation
organized under the provisions of this section to
the same extent and in the same manner as the
Comptroller of the Currency may appoint a con-
servator or receiver for a national bank, and the
conservator or receiver for such corporation shall
exercise the same powers, functions, and duties,
subject to the same limitations, as a conservator
or receiver for a national bank.
‘‘(B) EQUIVALENT AUTHORITY.—The Board
shall have the same authority with respect to any
conservator or receiver appointed for a corpora-
182
tion organized under the provisions of this sec-
tion under this paragraph and any such cor-
poration as the Comptroller of the Currency has
with respect to a conservator or receiver of a na-
tional bank and the national bank for which a
conservator or receiver has been appointed.
‘‘(C) TITLE 11 PETITIONS.—The Board may
direct the conservator or receiver of a corpora-
tion organized under the provisions of this sec-
tion to file a petition pursuant to title 11,
United States Code, in which case, title 11,
United States Code, shall apply to the corpora-
tion in lieu of otherwise applicable Federal or
State insolvency law.’’.
(f) LIMITATION ON ACCESS TO DISCOUNT WINDOW
AND PAYMENT SYSTEM.—Section 19(b)(1) of the Federal
Reserve Act (12 U.S.C. 461(b)(1)) is amended by adding
at the end the following new subparagraph:
‘‘(G) LIMITATION
ON
WHOLESALE
FINAN-
CIAL INSTITUTIONS.—Not more than 10 whole-
sale financial institutions subject to section 9B
of the Federal Reserve Act may be treated by the
Board as depository institutions, as defined in
subparagraph (A), for purposes of this para-
graph.’’.
183
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 period
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 System
shall make available to the Attorney General and the Fed-
eral Trade Commission any data in the possession of any
such banking agency that the antitrust agency deems nec-
essary for antitrust review of any transaction requiring no-
tice 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 In-
surance Act, the National Bank Consolidation and Merger
184
Act, section 10 of the Home Owners’ Loan Act, or the anti-
trust laws.
SEC. 143. CLARIFICATION OF STATUS OF SUBSIDIARIES
AND AFFILIATES.
(a) CLARIFICATION OF FEDERAL TRADE COMMISSION
JURISDICTION.—Any person which directly or indirectly
controls, is controlled directly or indirectly by, or is directly
or indirectly under common control with, any bank or sav-
ings 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 Com-
mission Act or any other law enforced by the Federal Trade
Commission.
(b) SAVINGS PROVISION.—No provision of this section
shall be construed as restricting the authority of any Fed-
eral banking agency (as defined in section 3 of the Federal
Deposit Insurance Act) under any Federal banking law, in-
cluding section 8 of the Federal Deposit Insurance Act.
(c) 
HART-SCOTT-RODINO
AMENDMENT.—Section
7A(c)(7) of the Clayton Act (15 U.S.C. 18a(c)(7)) is amend-
ed by inserting before the semicolon at the end thereof the
following: ‘‘, except that a portion of a transaction is not
exempt under this paragraph if such portion of the trans-
action (A) requires notice under section 6 of the Bank Hold-
185
ing Company Act of 1956; and (B) does not require ap-
proval 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 be-
ginning on the date of the enactment of this Act and annu-
ally thereafter, the Comptroller General of the United States
shall submit a report to the Congress on market concentra-
tion in the financial services industry and its impact on
consumers.
(b) ANALYSIS.—Each report submitted under sub-
section (a) shall contain an analysis of—
(1) the positive and negative effects of affiliations
between various types of financial companies, and of
acquisitions pursuant to this Act and the amend-
ments made by this Act to other provisions of law, in-
cluding any positive or negative effects on consumers,
area markets, and submarkets thereof or on registered
securities brokers and dealers which have been pur-
chased by depository institutions or depository insti-
tution holding companies;
(2) the changes in business practices and the ef-
fects of any such changes on the availability of ven-
ture capital, consumer credit, and other financial
186
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 limited
geographical areas.
Subtitle F—Applying the Principles
of 
National 
Treatment 
and
Equality of Competitive Oppor-
tunity to Foreign Banks and For-
eign Financial Institutions
SEC. 151. APPLYING THE PRINCIPLES OF NATIONAL TREAT-
MENT AND EQUALITY OF COMPETITIVE OP-
PORTUNITY TO FOREIGN BANKS THAT ARE FI-
NANCIAL 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 section
6(b)(1)(E) of the Bank Holding Company Act of
187
1956, or receives a determination under section
10(d)(1) of the Bank Holding Company Act of
1956, any authority conferred by this subsection
on any foreign bank or company to engage in
any activity which the Board has determined to
be permissible for financial holding companies
under section 6 of such Act shall terminate im-
mediately.
‘‘(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 status
as a financial holding company under such sec-
tion or received a determination under section
10(d)(1) by the end of the 2-year period begin-
ning on the date of enactment of the Financial
Services Act of 1999, the Board, giving due re-
gard to the principle of national treatment and
equality of competitive opportunity, may impose
such restrictions and requirements on the con-
duct of such activities by such foreign bank or
188
company as are comparable to those imposed on
a financial holding company organized under
the laws of the United States, including a re-
quirement to conduct such activities in compli-
ance with any prudential safeguards established
under section 114 of the Financial Services Act
of 1999.’’.
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.’’.
SEC. 153. REPRESENTATIVE OFFICES.
(a) DEFINITION
OF ‘‘REPRESENTATIVE OFFICE’’.—
Section 1(b)(15) of the International Banking Act of 1978
(12 U.S.C. 3101(15)) is amended by striking ‘‘State agency,
189
or subsidiary of a foreign bank’’ and inserting ‘‘or State
agency’’.
(b) EXAMINATIONS.—Section 10(c) of the Inter-
national Banking Act of 1978 (12 U.S.C. 3107(c)) is
amended by adding at the end the following: ‘‘The Board
may also make examinations of any affiliate of a foreign
bank conducting business in any State if the Board deems
it necessary to determine and enforce compliance with this
Act, the Bank Holding Company Act of 1956 (12 U.S.C.
1841 et seq.), or other applicable Federal banking law.’’.
Subtitle G—Federal Home Loan
Bank System Modernization
SEC. 161. SHORT TITLE.
This subtitle may be cited as the ‘‘Federal Home Loan
Bank System Modernization Act of 1999’’.
SEC. 162. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12
U.S.C. 1422) is amended—
(1) in paragraph (1), by striking ‘‘term ‘Board’
means’’ and inserting ‘‘terms ‘Finance Board’ and
‘Board’ mean’’;
(2) by striking paragraph (3) and inserting the
following:
‘‘(3) STATE.—The term ‘State’, in addition to
the States of the United States, includes the District
190
of Columbia, Guam, Puerto Rico, the United States
Virgin Islands, American Samoa, and the Common-
wealth of the Northern Mariana Islands.’’; and
(3) by adding at the end the following new para-
graph:
‘‘(13) COMMUNITY FINANCIAL INSTITUTION.—
‘‘(A) IN GENERAL.—The term ‘community
financial institution’ means a member—
‘‘(i) the deposits of which are insured
under the Federal Deposit Insurance Act;
and
‘‘(ii) that has, as of the date of the
transaction at issue, less than $500,000,000
in average total assets, based on an average
of total assets over the 3 years preceding
that date.
‘‘(B) 
ADJUSTMENTS.—The 
$500,000,000
limit referred to in subparagraph (A)(ii) shall be
adjusted annually by the Finance Board, based
on the annual percentage increase, if any, in the
Consumer Price Index for all urban consumers,
as published by the Department of Labor.’’.
SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners’ Loan Act (12 U.S.C.
1464(f)) is amended to read as follows:
191
‘‘(f) FEDERAL HOME LOAN BANK MEMBERSHIP.—On
and after January 1, 1999, a Federal savings association
may become a member of the Federal Home Loan Bank
System, and shall qualify for such membership in the man-
ner provided by the Federal Home Loan Bank Act.’’.
SEC. 164. ADVANCES TO MEMBERS; COLLATERAL.
(a) IN GENERAL.—Section 10(a) of the Federal Home
Loan Bank Act (12 U.S.C. 1430(a)) is amended—
(1) by redesignating paragraphs (1) through (4)
as subparagraphs (A) through (D), respectively, and
indenting appropriately;
(2) by striking ‘‘(a) Each’’ and inserting the fol-
lowing:
‘‘(a) IN GENERAL.—
‘‘(1) ALL ADVANCES.—Each’’;
(3) by striking the 2d sentence and inserting the
following:
‘‘(2) PURPOSES OF ADVANCES.—A long-term ad-
vance may only be made for the purposes of—
‘‘(A) providing funds to any member for
residential housing finance; and
‘‘(B) providing funds to any community fi-
nancial institution for small business, agricul-
tural, rural development, or low-income commu-
nity development lending.’’;
192
(4) by striking ‘‘A Bank’’ and inserting the fol-
lowing:
‘‘(3) COLLATERAL.—A Bank’’;
(5) in paragraph (3) (as so designated by para-
graph (4) of this subsection)—
(A) in subparagraph (C) (as so redesignated
by paragraph (1) of this subsection) by striking
‘‘Deposits’’ and inserting ‘‘Cash or deposits’’;
(B) in subparagraph (D) (as so redesig-
nated by paragraph (1) of this subsection), by
striking the 2d sentence; and
(C) by inserting after subparagraph (D) (as
so redesignated by paragraph (1) of this sub-
section) the following new subparagraph:
‘‘(E) Secured loans for small business, agri-
culture, rural development, or low-income com-
munity development, or securities representing a
whole interest in such secured loans, in the case
of any community financial institution.’’;
(6) in paragraph (5)—
(A) in the 2d sentence, by striking ‘‘and the
Board’’;
(B) in the 3d sentence, by striking ‘‘Board’’
and inserting ‘‘Federal home loan bank’’; and
193
(C) by striking ‘‘(5) Paragraphs (1) through
(4)’’ and inserting the following:
‘‘(4) ADDITIONAL BANK AUTHORITY.—Subpara-
graphs (A) through (E) of paragraph (3)’’; and
(7) by adding at the end the following:
‘‘(5) REVIEW OF CERTAIN COLLATERAL STAND-
ARDS.—The Board may review the collateral stand-
ards applicable to each Federal home loan bank for
the classes of collateral described in subparagraphs
(D) and (E) of paragraph (3), and may, if necessary
for safety and soundness purposes, require an increase
in the collateral standards for any or all of those
classes of collateral.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section, the terms ‘small business’, ‘agriculture’, ‘rural
development’, and ‘low-income community develop-
ment’ shall have the meanings given those terms by
rule or regulation of the Finance Board.’’.
(b) CLERICAL AMENDMENT.—The section heading for
section 10 of the Federal Home Loan Bank Act (12 U.S.C.
1430) is amended to read as follows:
‘‘SEC. 10. ADVANCES TO MEMBERS.’’.
(c) CONFORMING AMENDMENTS RELATING TO MEM-
BERS WHICH ARE NOT QUALIFIED THRIFT LENDERS—The
1st of the 2 subsections designated as subsection (e) of sec-
194
tion 10 of the Federal Home Loan Bank Act (12 U.S.C.
1430(e)(1)) is amended—
(1) in the last sentence of paragraph (1), by in-
serting ‘‘or, in the case of any community financial
institution, for the purposes described in subsection
(a)(2)’’ before the period; and
(2) in paragraph (5)(C), by inserting ‘‘except
that, in determining the actual thrift investment per-
centage of any community financial institution for
purposes of this subsection, the total investment of
such member in loans for small business, agriculture,
rural development, or low-income community develop-
ment, or securities representing a whole interest in
such loans, shall be treated as a qualified thrift in-
vestment (as defined in such section 10(m))’’ before
the period.
SEC. 165. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act (12
U.S.C. 1424(a)) is amended—
(1) in paragraph (2)(A), by inserting, ‘‘(other
than a community financial institution)’’ after ‘‘in-
stitution’’; and
(2) by adding at the end the following new para-
graph:
195
‘‘(3) LIMITED EXEMPTION FOR COMMUNITY FI-
NANCIAL INSTITUTIONS.—A community financial in-
stitution that otherwise meets the requirements of
paragraph (2) may become a member without regard
to the percentage of its total assets that is represented
by residential mortgage loans, as described in sub-
paragraph (A) of paragraph (2).’’.
SEC. 166. MANAGEMENT OF BANKS.
(a) BOARD OF DIRECTORS.—Section 7(d) of the Fed-
eral Home Loan Bank Act (12 U.S.C. 1427(d)) is
amended—
(1) by striking ‘‘(d) The term’’ and inserting the
following:
‘‘(d) TERMS OF OFFICE.—The term’’; and
(2) by striking ‘‘shall be two years’’.
(b) COMPENSATION.—Section 7(i) of the Federal Home
Loan Bank Act (12 U.S.C. 1427(i)) is amended by striking
‘‘, subject to the approval of the board’’.
(c) REPEAL OF SECTIONS 22A AND 27.—The Federal
Home Loan Bank Act (12 U.S.C. 1421 et seq.) is amended
by striking sections 22A (12 U.S.C. 1442a) and 27 (12
U.S.C. 1447).
(d) SECTION 12.—Section 12 of the Federal Home
Loan Bank Act (12 U.S.C. 1432) is amended—
(1) in subsection (a)—
196
(A) by striking ‘‘, but, except’’ and all that
follows through ‘‘ten years’’;
(B) by striking ‘‘subject to the approval of
the Board’’ the first place that term appears;
(C) by striking ‘‘and, by its Board of direc-
tors,’’ and all that follows through ‘‘agent of such
bank,’’ and inserting ‘‘and, by the board of direc-
tors of the bank, to prescribe, amend, and repeal
by-laws governing the manner in which its af-
fairs may be administered, consistent with ap-
plicable laws and regulations, as administered
by the Finance Board. No officer, employee, at-
torney, or agent of a Federal home loan bank’’;
and
(D) by striking ‘‘Board of directors’’ where
such term appears in the penultimate sentence
and inserting ‘‘board of directors’’; and
(2) in subsection (b), by striking ‘‘loans banks’’
and inserting ‘‘loan banks’’.
(e) POWERS AND DUTIES OF FEDERAL HOUSING FI-
NANCE BOARD.—
(1) ISSUANCE OF NOTICES OF VIOLATIONS.—Sec-
tion 2B(a) of the Federal Home Loan Bank Act (12
U.S.C. 1422b(a)) is amended by adding at the end the
following new paragraphs:
197
‘‘(5) To issue and serve a notice of charges upon
a Federal home loan bank or upon any executive offi-
cer or director of a Federal home loan bank if, in the
determination of the Finance Board, the bank, execu-
tive officer, or director is engaging or has engaged in,
or the Finance Board has reasonable cause to believe
that the bank, executive officer, or director is about to
engage in, any conduct that violates any provision of
this Act or any law, order, rule, or regulation or any
condition imposed in writing by the Finance Board
in connection with the granting of any application or
other request by the bank, or any written agreement
entered into by the bank with the agency, in accord-
ance with the procedures provided in section 1371(c)
of the Federal Housing Enterprises Financial Safety
and Soundness Act of 1992. Such authority includes
the same authority to take affirmative action to cor-
rect conditions resulting from violations or practices
or to limit activities of a bank or any executive officer
or director of a bank as appropriate Federal banking
agencies have to take with respect to insured deposi-
tory institutions under paragraphs (6) and (7) of sec-
tion 8(b) of the Federal Deposit Insurance Act, and
to have all other powers, rights, and duties to enforce
this Act with respect to the Federal home loan banks
198
and their executive officers and directors as the Office
of Federal Housing Enterprise Oversight has to en-
force the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992, the Federal Na-
tional Mortgage Association Charter Act, or the Fed-
eral Home Loan Mortgage Corporation Act with re-
spect to the Federal housing enterprises under the
Federal Housing Enterprises Financial Safety and
Soundness Act of 1992.
‘‘(6) To address any insufficiencies in capital
levels resulting from the application of section 5(f) of
the Home Owners’ Loan Act.
‘‘(7) To sue and be sued, by and through its own
attorneys.’’.
(2) TECHNICAL
AMENDMENT.—Section 111 of
Public Law 93–495 (12 U.S.C. 250) is amended by
striking ‘‘Federal Home Loan Bank Board,’’ and in-
serting ‘‘Director of the Office of Thrift Supervision,
‘‘the Federal Housing Finance Board,’’.
(f) ELIGIBILITY TO SECURE ADVANCES.—
(1) SECTION 9.—Section 9 of the Federal Home
Loan Bank Act (12 U.S.C. 1429) is amended—
(A) in the 2d sentence, by striking ‘‘with the
approval of the Board’’; and
199
(B) in the 3d sentence, by striking ‘‘, subject
to the approval of the Board,’’.
(2) SECTION
10.—Section 10 of the Federal
Home Loan Bank Act (12 U.S.C. 1430) is amended—
(A) in subsection (c)—
(i) in the 1st sentence, by striking
‘‘Board’’ and inserting ‘‘Federal home loan
bank’’; and
(ii) by striking the 2d sentence;
(B) in subsection (d)—
(i) in the 1st sentence, by striking
‘‘and the approval of the Board’’; and
(ii) by striking ‘‘Subject to the ap-
proval of the Board, any’’ and inserting
‘‘Any’’; and
(C) in subsection (j)(1)—
(i) by striking ‘‘to subsidize the interest
rate on advances’’ and inserting ‘‘to provide
subsidies, including subsidized interest rates
on advances’’;
(ii) by striking ‘‘Pursuant’’ and insert-
ing the following:
‘‘(A) ESTABLISHMENT.—Pursuant’’; and
(iii) by adding at the end the following
new subparagraph:
200
‘‘(B) NONDELEGATION
OF
APPROVAL
AU-
THORITY.—Subject to such regulations as the Fi-
nance Board may prescribe, the board of direc-
tors of each Federal home loan bank may ap-
prove or disapprove requests from members for
Affordable Housing Program subsidies, and may
not delegate such authority.’’.
(g) SECTION 16.—Section 16(a) of the Federal Home
Loan Bank Act (12 U.S.C. 1436(a)) is amended—
(1) in the 3d sentence—
(A) by striking ‘‘net earnings’’ and insert-
ing ‘‘previously retained earnings or current net
earnings’’; and
(B) by striking ‘‘, and then only with the
approval of the Federal Housing Finance
Board’’; and
(2) by striking the 4th sentence.
(h) SECTION 18.—Section 18(b) of the Federal Home
Loan Bank Act (12 U.S.C. 1438(b)) is amended by striking
paragraph (4).
SEC. 167. RESOLUTION FUNDING CORPORATION.
(a) IN GENERAL.—Section 21B(f)(2)(C) of the Federal
Home Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amend-
ed to read as follows:
201
‘‘(C) PAYMENTS BY FEDERAL HOME LOAN
BANKS.—
‘‘(i) IN GENERAL.—To the extent that
the amounts available pursuant to subpara-
graphs (A) and (B) are insufficient to cover
the amount of interest payments, each Fed-
eral home loan bank shall pay to the Fund-
ing Corporation in each calendar year,
20.75 percent of the net earnings of that
bank (after deducting expenses relating to
section 10(j) and operating expenses).
‘‘(ii) ANNUAL
DETERMINATION.—The
Board annually shall determine the extent
to which the value of the aggregate amounts
paid by the Federal home loan banks ex-
ceeds or falls short of the value of an annu-
ity of $300,000,000 per year that com-
mences on the issuance date and ends on the
final scheduled maturity date of the obliga-
tions, and shall select appropriate present
value factors for making such determina-
tions.
‘‘(iii) PAYMENT TERM ALTERATIONS.—
The Board shall extend or shorten the term
of the payment obligations of a Federal
202
home loan bank under this subparagraph as
necessary to ensure that the value of all
payments made by the banks is equivalent
to the value of an annuity referred to in
clause (ii).
‘‘(iv) TERM BEYOND MATURITY.—If the
Board extends the term of payments beyond
the final scheduled maturity date for the ob-
ligations, each Federal home loan bank shall
continue to pay 20.75 percent of its net
earnings (after deducting expenses relating
to section 10(j) and operating expenses) to
the Treasury of the United States until the
value of all such payments by the Federal
home loan banks is equivalent to the value
of an annuity referred to in clause (ii). In
the final year in which the Federal home
loan banks are required to make any pay-
ment to the Treasury under this subpara-
graph, if the dollar amount represented by
20.75 percent of the net earnings of the Fed-
eral home loan banks exceeds the remaining
obligation of the banks to the Treasury, the
Finance Board shall reduce the percentage
203
pro rata to a level sufficient to pay the re-
maining obligation.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall become effective on January 1, 1999. Pay-
ments made by a Federal home loan bank before that effec-
tive date shall be counted toward the total obligation of that
bank under section 21B(f)(2)(C) of the Federal Home Loan
Bank Act, as amended by this section.
SEC. 168. CAPITAL STRUCTURE OF FEDERAL HOME LOAN
BANKS.
Section 6 of the Federal Home Loan Bank Act (12
U.S.C. 1426) is amended to read as follows:
‘‘SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN
BANKS.
‘‘(a) REGULATIONS.—
‘‘(1) CAPITAL
STANDARDS.—Not later than 1
year after the date of enactment of the Financial
Services Act of 1999, the Finance Board shall issue
regulations prescribing uniform capital standards ap-
plicable to each Federal home loan bank, which shall
require each such bank to meet—
‘‘(A) the leverage requirement specified in
paragraph (2); and
‘‘(B) the risk-based capital requirements, in
accordance with paragraph (3).
204
‘‘(2) LEVERAGE REQUIREMENT.—
‘‘(A) IN
GENERAL.—The leverage require-
ment shall require each Federal home loan bank
to maintain a minimum amount of total capital
based on the aggregate on-balance sheet assets of
the bank and shall be 5 percent.
‘‘(B) TREATMENT OF STOCK AND RETAINED
EARNINGS.—In determining compliance with the
minimum leverage ratio established under sub-
paragraph (A), the paid-in value of the out-
standing Class B stock shall be multiplied by
1.5, the paid-in value of the outstanding Class C
stock and the amount of retained earnings shall
be multiplied by 2.0, and such higher amounts
shall be deemed to be capital for purposes of
meeting the 5 percent minimum leverage ratio.
‘‘(3) RISK-BASED CAPITAL STANDARDS.—
‘‘(A) IN
GENERAL.—Each Federal home
loan bank shall maintain permanent capital in
an amount that is sufficient, as determined in
accordance with the regulations of the Finance
Board, to meet—
‘‘(i) the credit risk to which the Fed-
eral home loan bank is subject; and
205
‘‘(ii) the market risk, including inter-
est rate risk, to which the Federal home
loan bank is subject, based on a stress test
established by the Finance Board that rigor-
ously tests for changes in market variables,
including changes in interest rates, rate vol-
atility, and changes in the shape of the
yield curve.
‘‘(B) CONSIDERATION
OF
OTHER
RISK-
BASED
STANDARDS.—In establishing the risk-
based standard under subparagraph (A)(ii), the
Finance Board shall take due consideration of
any risk-based capital test established pursuant
to section 1361 of the Federal Housing Enter-
prises Financial Safety and Soundness Act of
1992 (12 U.S.C. 4611) for the enterprises (as de-
fined in that Act), with such modifications as
the Finance Board determines to be appropriate
to reflect differences in operations between the
Federal home loan banks and those enterprises.
‘‘(4) OTHER REGULATORY REQUIREMENTS.—The
regulations issued by the Finance Board under para-
graph (1) shall—
‘‘(A) permit each Federal home loan bank to
issue, with such rights, terms, and preferences,
206
not inconsistent with this Act and the regula-
tions issued hereunder, as the board of directors
of that bank may approve, any 1 or more of—
‘‘(i) Class A stock, which shall be re-
deemable in cash and at par 6 months fol-
lowing submission by a member of a writ-
ten notice of its intent to redeem such
shares;
‘‘(ii) Class B stock, which shall be re-
deemable in cash and at par 5 years fol-
lowing submission by a member of a writ-
ten notice of its intent to redeem such
shares; and
‘‘(iii) Class C stock, which shall be
nonredeemable;
‘‘(B) provide that the stock of a Federal
home loan bank may be issued to and held by
only members of the bank, and that a bank may
not issue any stock other than as provided in
this section;
‘‘(C) prescribe the manner in which stock of
a Federal home loan bank may be sold, trans-
ferred, redeemed, or repurchased; and
‘‘(D) provide the manner of disposition of
outstanding stock held by, and the liquidation of
207
any claims of the Federal home loan bank
against, an institution that ceases to be a mem-
ber of the bank, through merger or otherwise, or
that provides notice of intention to withdraw
from membership in the bank.
‘‘(5) DEFINITIONS OF CAPITAL.—For purposes of
determining compliance with the capital standards
established under this subsection—
‘‘(A) permanent capital of a Federal home
loan bank shall include (as determined in ac-
cordance with generally accepted accounting
principles)—
‘‘(i) the amounts paid for the Class C
stock and any other nonredeemable stock
approved by the Finance Board;
‘‘(ii) the amounts paid for the Class B
stock, in an amount not to exceed 1 percent
of the total assets of the bank; and
‘‘(iii) the retained earnings of the
bank; and
‘‘(B) total capital of a Federal home loan
bank shall include—
‘‘(i) permanent capital;
‘‘(ii) the amounts paid for the Class A
stock, Class B stock (excluding any amount
208
treated as permanent capital under sub-
paragraph (5)(A)(ii)), or any other class of
redeemable stock approved by the Finance
Board;
‘‘(iii) consistent with generally accept-
ed accounting principles, and subject to the
regulation of the Finance Board, a general
allowance for losses, which may not include
any reserves or allowances made or held
against specific assets; and
‘‘(iv) any other amounts from sources
available to absorb losses incurred by the
bank that the Finance Board determines by
regulation to be appropriate to include in
determining total capital.
‘‘(6) TRANSITION PERIOD.—Notwithstanding any
other provisions of this Act, the requirements relating
to purchase and retention of capital stock of a Federal
home loan bank by any member thereof in effect on
the day before the date of enactment of the Federal
Home Loan Bank System Modernization Act of 1999,
shall continue in effect with respect to each Federal
home loan bank until the regulations required by this
subsection have taken effect and the capital structure
209
plan required by subsection (b) has been approved by
the Finance Board and implemented by such bank.
‘‘(b) CAPITAL STRUCTURE PLAN.—
‘‘(1) APPROVAL OF PLANS.—Not later than 270
days after the date of publication by the Finance
Board of final regulations in accordance with sub-
section (a), the board of directors of each Federal
home loan bank shall submit for Finance Board ap-
proval a plan establishing and implementing a cap-
ital structure for such bank that—
‘‘(A) the board of directors determines is
best suited for the condition and operation of the
bank and the interests of the members of the
bank;
‘‘(B) meets the requirements of subsection
(c); and
‘‘(C) meets the minimum capital standards
and requirements established under subsection
(a) and other regulations prescribed by the Fi-
nance Board.
‘‘(2) APPROVAL OF MODIFICATIONS.—The board
of directors of a Federal home loan bank shall submit
to the Finance Board for approval any modifications
that the bank proposes to make to an approved cap-
ital structure plan.
210
‘‘(c) CONTENTS OF PLAN.—The capital structure plan
of each Federal home loan bank shall contain provisions
addressing each of the following:
‘‘(1) MINIMUM INVESTMENT.—
‘‘(A) IN GENERAL.—Each capital structure
plan of a Federal home loan bank shall require
each member of the bank to maintain a min-
imum investment in the stock of the bank, the
amount of which shall be determined in a man-
ner to be prescribed by the board of directors of
each bank and to be included as part of the plan.
‘‘(B) INVESTMENT ALTERNATIVES.—
‘‘(i) IN GENERAL.—In establishing the
minimum investment required for each
member under subparagraph (A), a Federal
home loan bank may, in its discretion, in-
clude any 1 or more of the requirements re-
ferred to in clause (ii), or any other provi-
sions approved by the Finance Board.
‘‘(ii) AUTHORIZED
REQUIREMENTS.—
A requirement is referred to in this clause
if it is a requirement for—
‘‘(I) a stock purchase based on a
percentage of the total assets of a mem-
ber; or
211
‘‘(II) a stock purchase based on a
percentage of the outstanding advances
from the bank to the member.
‘‘(C) MINIMUM
AMOUNT.—Each capital
structure plan of a Federal home loan bank shall
require that the minimum stock investment es-
tablished for members shall be set at a level that
is sufficient for the bank to meet the minimum
capital requirements established by the Finance
Board under subsection (a).
‘‘(D) ADJUSTMENTS TO MINIMUM REQUIRED
INVESTMENT.—The capital structure plan of
each Federal home loan bank shall impose a con-
tinuing obligation on the board of directors of
the bank to review and adjust the minimum in-
vestment required of each member of that bank,
as necessary to ensure that the bank remains in
compliance with applicable minimum capital
levels established by the Finance Board, and
shall require each member to comply promptly
with any adjustments to the required minimum
investment.
‘‘(2) TRANSITION RULE.—
‘‘(A) IN GENERAL.—The capital structure
plan of each Federal home loan bank shall speci-
212
fy the date on which it shall take effect, and may
provide for a transition period of not longer
than 3 years to allow the bank to come into com-
pliance with the capital requirements prescribed
under subsection (a), and to allow any institu-
tion that was a member of the bank on the date
of enactment of the Financial Services Act of
1999, to come into compliance with the min-
imum investment required pursuant to the plan.
‘‘(B) 
INTERIM
PURCHASE
REQUIRE-
MENTS.—The capital structure plan of a Federal
home loan bank may allow any member referred
to in subparagraph (A) that would be required
by the terms of the capital structure plan to in-
crease its investment in the stock of the bank to
do so in periodic installments during the transi-
tion period.
‘‘(3) DISPOSITION
OF
SHARES.—The capital
structure plan of a Federal home loan bank shall pro-
vide for the manner of disposition of any stock held
by a member of that bank that terminates its mem-
bership or that provides notice of its intention to
withdraw from membership in that bank.
‘‘(4) CLASSES OF STOCK.—
213
‘‘(A) IN GENERAL.—The capital structure
plan of a Federal home loan bank shall afford
each member of that bank the option of main-
taining its required investment in the bank
through the purchase of any combination of
classes of stock authorized by the board of direc-
tors of the bank and approved by the Finance
Board in accordance with its regulations.
‘‘(B) RIGHTS
REQUIREMENT.—A Federal
home loan bank shall include in its capital
structure plan provisions establishing terms,
rights, and preferences, including minimum in-
vestment, dividends, voting, and liquidation
preferences of each class of stock issued by the
bank, consistent with Finance Board regulations
and market requirements.
‘‘(C) REDUCED
MINIMUM
INVESTMENT.—
The capital structure plan of a Federal home
loan bank may provide for a reduced minimum
stock investment for any member of that bank
that elects to purchase Class B, Class C, or any
other class of nonredeemable stock, in a manner
that is consistent with meeting the minimum
capital requirements of the bank, as established
by the Finance Board.
214
‘‘(D) LIQUIDATION OF CLAIMS.—The capital
structure plan of a Federal home loan bank shall
provide for the liquidation in an orderly man-
ner, as determined by the bank, of any claim of
that bank against a member, including claims
for any applicable prepayment fees or penalties
resulting from prepayment of advances prior to
stated maturity.
‘‘(5) LIMITED
TRANSFERABILITY
OF
STOCK.—
The capital structure plan of a Federal home loan
bank shall—
‘‘(A) provide that—
‘‘(i) any stock issued by that bank
shall be available only to, held only by, and
tradable only among members of that bank
and between that bank and its members;
and
‘‘(ii) a bank has no obligation to re-
purchase its outstanding Class C stock but
may do so, provided it is consistent with
Finance Board regulations and is at a price
that is mutually agreeable to the bank and
the member; and
‘‘(B) establish standards, criteria, and re-
quirements for the issuance, purchase, transfer,
215
retirement, and redemption of stock issued by
that bank.
‘‘(6) BANK REVIEW OF PLAN.—Before filing a
capital structure plan with the Finance Board, each
Federal home loan bank shall conduct a review of the
plan by—
‘‘(A) an independent certified public ac-
countant, to ensure, to the extent possible, that
implementation of the plan would not result in
any write-down of the redeemable bank stock in-
vestment of its members; and
‘‘(B) at least 1 major credit rating agency,
to determine, to the extent possible, whether im-
plementation of the plan would have any mate-
rial effect on the credit ratings of the bank.
‘‘(d) TERMINATION OF MEMBERSHIP.—
‘‘(1) VOLUNTARY
WITHDRAWAL.—Any member
may withdraw from a Federal home loan bank by
providing written notice to the bank of its intent to
do so. The applicable stock redemption notice periods
shall commence upon receipt of the notice by the
bank. Upon the expiration of the applicable notice pe-
riod for each class of redeemable stock, the member
may surrender such stock to the bank, and shall be
entitled to receive in cash the par value of the stock.
216
During the applicable notice periods, the member
shall be entitled to dividends and other membership
rights commensurate with continuing stock owner-
ship.
‘‘(2) INVOLUNTARY WITHDRAWAL.—
‘‘(A) IN GENERAL.—The board of directors
of a Federal home loan bank may terminate the
membership of any institution if, subject to Fi-
nance Board regulations, it determines that—
‘‘(i) the member has failed to comply
with a provision of this Act or any regula-
tion prescribed under this Act; or
‘‘(ii) the member has been determined
to be insolvent, or otherwise subject to the
appointment of a conservator, receiver, or
other legal custodian, by a State or Federal
authority with regulatory and supervisory
responsibility for the member.
‘‘(B) STOCK DISPOSITION.—An institution,
the membership of which is terminated in ac-
cordance with subparagraph (A)—
‘‘(i) shall surrender redeemable stock to
the Federal home loan bank, and shall re-
ceive in cash the par value of the stock,
217
upon the expiration of the applicable notice
period under subsection (a)(4)(A);
‘‘(ii) shall receive any dividends de-
clared on its redeemable stock, during the
applicable notice period under subsection
(a)(4)(A); and
‘‘(iii) shall not be entitled to any other
rights or privileges accorded to members
after the date of the termination.
‘‘(C) 
COMMENCEMENT
OF
NOTICE
PE-
RIOD.—With respect to an institution, the mem-
bership of which is terminated in accordance
with subparagraph (A), the applicable notice pe-
riod under subsection (a)(4) for each class of re-
deemable stock shall commence on the earlier
of—
‘‘(i) the date of such termination; or
‘‘(ii) the date on which the member has
provided notice of its intent to redeem such
stock.
‘‘(3) LIQUIDATION
OF
INDEBTEDNESS.—Upon
the termination of the membership of an institution
for any reason, the outstanding indebtedness of the
member to the bank shall be liquidated in an orderly
manner, as determined by the bank and, upon the ex-
218
tinguishment of all such indebtedness, the bank shall
return to the member all collateral pledged to secure
the indebtedness.
‘‘(e) REDEMPTION OF EXCESS STOCK.—
‘‘(1) IN GENERAL.—A Federal home loan bank,
in its sole discretion, may redeem or repurchase, as
appropriate, any shares of Class A or Class B stock
issued by the bank and held by a member that are in
excess of the minimum stock investment required of
that member.
‘‘(2) EXCESS STOCK.—Shares of stock held by a
member shall not be deemed to be ‘excess stock’ for
purposes of this subsection by virtue of a member’s
submission of a notice of intent to withdraw from
membership or termination of its membership in any
other manner.
‘‘(3) PRIORITY.—A Federal home loan bank may
not redeem any excess Class B stock prior to the end
of the 5-year notice period, unless the member has no
Class A stock outstanding that could be redeemed as
excess.
‘‘(f) IMPAIRMENT OF CAPITAL.—If the Finance Board
or the board of directors of a Federal home loan bank deter-
mines that the bank has incurred or is likely to incur losses
that result in or are expected to result in charges against
219
the capital of the bank, the bank shall not redeem or repur-
chase any stock of the bank without the prior approval of
the Finance Board while such charges are continuing or
are expected to continue. In no case may a bank redeem
or repurchase any applicable capital stock if, following the
redemption, the bank would fail to satisfy any minimum
capital requirement.
‘‘(g) REJOINING
AFTER
DIVESTITURE
OF
ALL
SHARES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), and notwithstanding any other provision
of this Act, an institution that divests all shares of
stock in a Federal home loan bank may not, after
such divestiture, acquire shares of any Federal home
loan bank before the end of the 5-year period begin-
ning on the date of the completion of such divestiture,
unless the divestiture is a consequence of a transfer of
membership on an uninterrupted basis between banks.
‘‘(2) EXCEPTION FOR WITHDRAWALS FROM MEM-
BERSHIP BEFORE 1998.—Any institution that with-
drew from membership in any Federal home loan
bank before December 31, 1997, may acquire shares of
a Federal home loan bank at any time after that date,
subject to the approval of the Finance Board and the
requirements of this Act.
220
‘‘(h) TREATMENT OF RETAINED EARNINGS.—
‘‘(1) IN GENERAL.—The holders of the Class C
stock of a Federal home loan bank, and any other
classes of nonredeemable stock approved by the Fi-
nance Board (to the extent provided in the terms
thereof), shall own the retained earnings, surplus, un-
divided profits, and equity reserves, if any, of the
bank.
‘‘(2) NO NONREDEEMABLE CLASSES OF STOCK.—
If a Federal home loan bank has no outstanding Class
C or other such nonredeemable stock, then the holders
of any other classes of stock of the bank then out-
standing shall have ownership in, and a private
property right in, the retained earnings, surplus, un-
divided profits, and equity reserves, if any, of the
bank.
‘‘(3) EXCEPTION.—Except as specifically pro-
vided in this section or through the declaration of a
dividend or a capital distribution by a Federal home
loan bank, or in the event of liquidation of the bank,
a member shall have no right to withdraw or other-
wise receive distribution of any portion of the re-
tained earnings of the bank.
‘‘(4) LIMITATION.—A Federal home loan bank
may not make any distribution of its retained earn-
221
ings unless, following such distribution, the bank
would continue to meet all applicable capital require-
ments.’’.
Subtitle H—ATM Fee Reform
SEC. 171. SHORT TITLE.
This subtitle may be cited as the ‘‘ATM Fee Reform
Act of 1999’’.
SEC. 172. ELECTRONIC FUND TRANSFER FEE DISCLOSURES
AT ANY HOST ATM.
Section 904(d) of the Electronic Fund Transfer Act (15
U.S.C. 1693b(d)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(3) FEE DISCLOSURES AT AUTOMATED TELLER
MACHINES.—
‘‘(A) IN
GENERAL.—The regulations pre-
scribed under paragraph (1) shall require any
automated teller machine operator who imposes
a fee on any consumer for providing host trans-
fer services to such consumer to provide notice in
accordance with subparagraph (B) to the con-
sumer (at the time the service is provided) of—
‘‘(i) the fact that a fee is imposed by
such operator for providing the service; and
‘‘(ii) the amount of any such fee.
‘‘(B) NOTICE REQUIREMENTS.—
222
‘‘(i) ON THE MACHINE.—The notice re-
quired under clause (i) of subparagraph (A)
with respect to any fee described in such
subparagraph shall be posted in a promi-
nent and conspicuous location on or at the
automated teller machine at which the elec-
tronic fund transfer is initiated by the con-
sumer; and
‘‘(ii) ON THE SCREEN.—The notice re-
quired under clauses (i) and (ii) of sub-
paragraph (A) with respect to any fee de-
scribed in such subparagraph shall appear
on the screen of the automated teller ma-
chine, or on a paper notice issued from such
machine, after the transaction is initiated
and before the consumer is irrevocably com-
mitted to completing the transaction.
‘‘(C) PROHIBITION ON FEES NOT PROPERLY
DISCLOSED AND EXPLICITLY ASSUMED BY CON-
SUMER.—No fee may be imposed by any auto-
mated teller machine operator in connection
with any electronic fund transfer initiated by a
consumer for which a notice is required under
subparagraph (A), unless—
223
‘‘(i) the consumer receives such notice
in accordance with subparagraph (B); and
‘‘(ii) the consumer elects to continue in
the manner necessary to effect the trans-
action after receiving such notice.
‘‘(D) DEFINITIONS.—For purposes of this
paragraph, the following definitions shall apply:
‘‘(i) ELECTRONIC FUND TRANSFER.—
The term ‘electronic fund transfer’ includes
a transaction which involves a balance in-
quiry initiated by a consumer in the same
manner as an electronic fund transfer,
whether or not the consumer initiates a
transfer of funds in the course of the trans-
action.
‘‘(ii) AUTOMATED
TELLER
MACHINE
OPERATOR.—The term ‘automated teller
machine operator’ means any person who—
‘‘(I) operates an automated teller
machine at which consumers initiate
electronic fund transfers; and
‘‘(II) is not the financial institu-
tion which holds the account of such
consumer from which the transfer is
made.
224
‘‘(iii) HOST
TRANSFER
SERVICES.—
The term ‘host transfer services’ means any
electronic fund transfer made by an auto-
mated teller machine operator in connection
with a transaction initiated by a consumer
at an automated teller machine operated by
such operator.’’.
SEC. 173. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS
WHEN ATM CARD IS ISSUED.
Section 905(a) of the Electronic Fund Transfer Act (15
U.S.C. 1693c(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(8);
(2) by striking the period at the end of para-
graph (9) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (9) the fol-
lowing new paragraph:
‘‘(10) a notice to the consumer that a fee may be
imposed by—
‘‘(A) an automated teller machine operator
(as defined in section 904(d)(3)(D)(ii)) if the
consumer initiates a transfer from an automated
teller machine which is not operated by the per-
son issuing the card or other means of access;
and
225
‘‘(B) any national, regional, or local net-
work utilized to effect the transaction.’’.
SEC. 174. FEASIBILITY STUDY.
(a) IN GENERAL.—The Comptroller General of the
United States shall conduct a study of the feasibility of re-
quiring, in connection with any electronic fund transfer
initiated by a consumer through the use of an automated
teller machine—
(1) a notice to be provided to the consumer before
the consumer is irrevocably committed to completing
the transaction, which clearly states the amount of
any fee which will be imposed upon the consumma-
tion of the transaction by—
(A) any automated teller machine operator
(as defined in section 904(d)(2)(D)(ii) of the
Electronic Fund Transfer Act) involved in the
transaction;
(B) the financial institution holding the ac-
count of the consumer;
(C) any national, regional, or local network
utilized to effect the transaction; and
(D) any other party involved in the trans-
fer; and
226
(2) the consumer to elect to consummate the
transaction after receiving the notice described in
paragraph (1).
(b) FACTORS TO BE CONSIDERED.—In conducting the
study required under subsection (a) with regard to the no-
tice requirement described in such subsection, the Comp-
troller General shall consider the following factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice re-
quirement would have on various sizes and types of
institutions, if implemented.
(4) The period of time which would be reasonable
for implementing any such notice requirement.
(5) The extent to which consumers would benefit
from any such notice requirement.
(6) Any other factor the Comptroller General de-
termines to be appropriate in analyzing the feasi-
bility of imposing any such notice requirement.
(c) REPORT TO THE CONGRESS.—Before the end of the
6-month period beginning on the date of the enactment of
this Act, the Comptroller General shall submit a report to
the Congress containing—
227
(1) the findings and conclusions of the Comp-
troller General in connection with the study required
under subsection (a); and
(2) the recommendation of the Comptroller Gen-
eral with regard to the question of whether a notice
requirement described in subsection (a) should be im-
plemented and, if so, how such requirement should be
implemented.
SEC. 175. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.
Section 910 of the Electronic Fund Transfer Act (15
U.S.C 1693h) is amended by adding at the end the following
new subsection:
‘‘(d) EXCEPTION FOR DAMAGED NOTICES.—If the no-
tice 
required 
to 
be 
posted 
pursuant 
to 
section
904(d)(3)(B)(i) by an automated teller machine operator
has been posted by such operator in compliance with such
section and the notice is subsequently removed, damaged,
or altered by any person other than the operator of the auto-
mated teller machine, the operator shall have no liability
under this section for failure to comply with section
904(d)(3)(B)(i).’’.
228
Subtitle I—Customer Service,
Education, and Privacy
SEC. 176. CUSTOMER SERVICE AND EDUCATION REGULA-
TIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811
et seq.) is amended by inserting after section 46 (as added
by section 124 of this title) the following new section:
‘‘SEC. 47. CUSTOMER SERVICE AND EDUCATION REGULA-
TIONS.
‘‘(a) REGULATIONS REQUIRED.—
‘‘(1) IN GENERAL.—The Federal banking agen-
cies shall prescribe and publish in final form, before
the end of the 1-year period beginning on the date of
enactment of the Financial Services Act of 1999, cus-
tomer protection regulations (which the agencies
jointly determine to be appropriate) that—
‘‘(A) apply to retail sales practices, solicita-
tions, advertising, or offers of any nondeposit
product by any insured depository institution or
any person who is engaged in such activities at
an office of the institution or on behalf of the in-
stitution; and
‘‘(B) are consistent with the requirements of
this Act and provide such additional protections
for customers to whom such sales, solicitations,
229
advertising, or offers are directed as the agency
determines to be appropriate.
‘‘(2) APPLICABILITY TO SUBSIDIARIES.—The reg-
ulations prescribed pursuant to paragraph (1) shall
extend such protections to any subsidiary of an in-
sured depository institution, as deemed appropriate
by the regulators referred to in paragraph (3), where
such extension is determined to be necessary to ensure
the customer protections provided by this section.
‘‘(3) CONSULTATION AND JOINT REGULATIONS.—
The Federal banking agencies shall consult with each
other and prescribe joint regulations pursuant to
paragraph (1), after consultation with the Securities
and Exchange Commission and the State insurance
regulators, as appropriate.
‘‘(4) NONDEPOSIT PRODUCT DEFINED.—For pur-
poses of this section, the term ‘nondeposit product’—
‘‘(A) means any investment and insurance
product which is not a deposit;
‘‘(B) includes shares issued by a registered
investment company; and
‘‘(C) does not include—
‘‘(i) any loan or any other extension of
credit by an insured depository institution;
‘‘(ii) any letter of credit;
230
‘‘(iii) any trust services;
‘‘(iv) any discount; or
‘‘(v) any other instrument or insurance
or investment product specifically excluded
from the definition of such term by regula-
tions prescribed jointly by the Federal bank-
ing agencies, to the extent necessary to
carry out the purposes of this Act.
‘‘(5) INSURANCE PRODUCT DEFINED.—For pur-
poses of this section, the term ‘insurance product’ in-
cludes an annuity contract the income of which is
subject to tax treatment under section 72 of the Inter-
nal Revenue Code of 1986.
‘‘(b) SALES PRACTICES.—
‘‘(1) ANTICOERCION
RULES.—The regulations
prescribed pursuant to subsection (a) shall include
anticoercion rules applicable to the sale of nondeposit
products which prohibit an insured depository insti-
tution from engaging in any practice that would lead
a customer to believe an extension of credit, in viola-
tion of section 106(b) of the Bank Holding Company
Act Amendments of 1970, is conditional upon—
‘‘(A) the purchase of a nondeposit product
from the institution or any of its affiliates; or
231
‘‘(B) an agreement by the customer not to
obtain, or a prohibition on the customer from ob-
taining, a nondeposit product from an unaffili-
ated entity.
‘‘(2) SUITABILITY OF PRODUCT.—
‘‘(A) IN
GENERAL.—The regulations pre-
scribed pursuant to subsection (a) with respect to
the sale of nondeposit products shall include
standards to ensure that an investment product
sold to a customer is suitable and any other non-
deposit product is appropriate for the customer
based on financial information disclosed by the
customer.
‘‘(B) RULES OF FAIR PRACTICE.—In pre-
scribing the standards under subparagraph (A)
with respect to the sale of investments, the Fed-
eral banking agencies shall take into account the
Rules of Fair Practice of the National Associa-
tion of Securities Dealers.
‘‘(c) DISCLOSURES AND ADVERTISING.—The regula-
tions prescribed pursuant to subsection (a) shall include the
following provisions relating to disclosures and advertising
in connection with the initial purchase of a nondeposit
product:
‘‘(1) DISCLOSURES.—
232
‘‘(A) IN GENERAL.—Requirements that the
following disclosures be made orally and in writ-
ing before the completion of the initial sale and,
in the case of clause (iv), at the time of applica-
tion for an extension of credit:
‘‘(i) UNINSURED STATUS.—As appro-
priate, the product is not insured by the
Federal Deposit Insurance Corporation, the
United States Government, or the insured
depository institution.
‘‘(ii) INSURANCE
PRODUCT.—In the
case of an insurance policy which is sold by
the depository institution, or any affiliate
of the institution, as agent, the product is
not an obligation of or guaranteed by the
depository institution.
‘‘(iii) INVESTMENT RISK.—In the case
of an investment product, variable annuity,
or other product which involves an invest-
ment risk, that there is an investment risk
associated with the product, including pos-
sible loss of value.
‘‘(iv) COERCION.—The approval of an
extension of credit may not be conditioned
on—
233
‘‘(I) the purchase of a nondeposit
product from the institution in which
the application for credit is pending or
any of affiliate of the institution; or
‘‘(II) an agreement by the cus-
tomer not to obtain, or a prohibition
on the customer from obtaining, a non-
deposit product from an unaffiliated
entity.
‘‘(B) MAKING DISCLOSURE READILY UNDER-
STANDABLE.—Regulations prescribed under sub-
paragraph (A) shall encourage the use of disclo-
sure that is conspicuous, simple, direct, and
readily understandable, such as the following:
‘‘(i) ‘NOT FDIC–INSURED’.
‘‘(ii) ‘NOT GUARANTEED BY THE
BANK’.
‘‘(iii) ‘MAY GO DOWN IN VALUE’.
‘‘(iv) ‘NOT INSURED BY ANY GOV-
ERNMENT AGENCY’.
‘‘(C) 
ADJUSTMENTS
FOR
ALTERNATIVE
METHODS OF PURCHASE.—In prescribing the re-
quirements under subparagraphs (A) and (D),
necessary adjustments shall be made for purchase
in person, by telephone, or by electronic media to
234
provide for the most appropriate and complete
form of disclosure and acknowledgments.
‘‘(D) CUSTOMER ACKNOWLEDGMENT.—A re-
quirement that an insured depository institution
shall require any person selling a nondeposit
product at any office of, or on behalf of, the in-
stitution to obtain, at the time a customer re-
ceives the disclosures required under this para-
graph or at the time of the initial purchase by
the customer of such product, an acknowledgment
by such customer of the receipt of the disclosure
required under this paragraph with respect to
such product.
‘‘(2) PROHIBITION ON MISREPRESENTATIONS.—A
prohibition on any practice, or any advertising, at
any office of, or on behalf of, the insured depository
institution, or any subsidiary as appropriate, which
could mislead any person or otherwise cause a reason-
able person to reach an erroneous belief with respect
to—
‘‘(A) the uninsured nature of any non-
deposit product sold, or offered for sale, by the
institution or any subsidiary of the institution;
235
‘‘(B) in the case of a nondeposit product
that involves an investment risk, the investment
risk associated with any such product; or
‘‘(C) in the case of a nondeposit product,
the approval of an extension of credit is not con-
ditioned on the purchase of such nondeposit
product and the customer is not prohibited from
purchasing such nondeposit product from an-
other institution.
‘‘(d) SEPARATION OF BANKING AND NONBANKING AC-
TIVITIES.—
‘‘(1) REGULATIONS REQUIRED.—The regulations
prescribed pursuant to subsection (a) shall include
such provisions as the Federal banking agencies con-
sider appropriate to ensure that the routine accept-
ance of deposits is kept, to the extent practicable,
physically segregated from nondeposit product activ-
ity.
‘‘(2) REQUIREMENTS.—Regulations prescribed
pursuant to paragraph (1) shall include the following
requirements:
‘‘(A) SEPARATE SETTING.—A clear delinea-
tion of the setting in which, and the cir-
cumstances under which, transactions involving
nondeposit products should be conducted in a lo-
236
cation physically segregated from an area where
retail deposits are routinely accepted.
‘‘(B) REFERRALS.—Standards which per-
mit any person accepting deposits from the pub-
lic in an area where such transactions are rou-
tinely conducted in an insured depository insti-
tution to refer a customer who seeks to purchase
any nondeposit product to a qualified person
who sells such product, only if the person making
the referral receives no more than a one-time
nominal fee of a fixed dollar amount for each re-
ferral that does not depend on whether the refer-
ral results in a transaction.
‘‘(C) QUALIFICATION
AND
LICENSING
RE-
QUIREMENTS.—Standards prohibiting any in-
sured depository institution from permitting any
person to sell or offer for sale any nondeposit
product in any part of any office of the institu-
tion, or on behalf of the institution, unless such
person is appropriately qualified and licensed.
‘‘(e) CUSTOMER GRIEVANCE PROCESS.—The Federal
banking agencies shall jointly establish a customer com-
plaint mechanism, for receiving and expeditiously address-
ing customer complaints alleging a violation of regulations
issued under this section, which mechanism shall—
237
‘‘(1) establish a group within each regulatory
agency to receive such complaints;
‘‘(2) develop procedures for investigating such
complaints;
‘‘(3) develop procedures for informing customers
of rights they may have in connection with such com-
plaints; and
‘‘(4) develop procedures for addressing concerns
raised by such complaints, as appropriate, including
procedures for the recovery of losses to the extent ap-
propriate.
‘‘(f) EFFECT ON OTHER AUTHORITY.—
‘‘(1) IN GENERAL.—No provision of this section
shall be construed as granting, limiting, or otherwise
affecting—
‘‘(A) any authority of the Securities and
Exchange Commission, any self-regulatory orga-
nization, the Municipal Securities Rulemaking
Board, or the Secretary of the Treasury under
any Federal securities law; or
‘‘(B) except as provided in paragraph (2),
any authority of any State insurance commis-
sioner or other State authority under any State
law.
‘‘(2) COORDINATION WITH STATE LAW.—
238
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), regulations prescribed by a
Federal banking agency under this section shall
not apply to retail sales, solicitations, adver-
tising, or offers of any nondeposit product by
any insured depository institution or to any per-
son who is engaged in such activities at an office
of such institution or on behalf of the institution,
in a State where the State has in effect statutes,
regulations, orders, or interpretations, that are
inconsistent with or contrary to the regulations
prescribed by the Federal banking agencies.
‘‘(B) PREEMPTION.—If, with respect to any
provision of the regulations prescribed under this
section, the Board of Governors of the Federal
Reserve System, the Comptroller of the Currency,
the Director of the Office of Thrift Supervision,
and the Board of Directors of the Federal De-
posit Insurance Corporation determine jointly
that the protection afforded by such provision for
consumers is greater than the protection pro-
vided by a comparable provision of the statutes,
regulations, orders, or interpretations referred to
in subparagraph (A) of any State, such provi-
sion of the regulations prescribed under this sec-
239
tion shall supersede the comparable provision of
such State statute, regulation, order, or interpre-
tation.’’.
SEC. 177. DEPOSITORY INSTITUTION PRIVACY POLICIES.
Section 6 of the Bank Holding Company Act of 1956
(as added by section 103 of this title) is amended by adding
at the end the following new subsection:
‘‘(h) DEPOSITORY INSTITUTION PRIVACY POLICIES.—
‘‘(1) DISCLOSURE
REQUIRED.—In the case of
any insured depository institution which becomes af-
filiated under this section with a financial holding
company, the privacy policy of such depository insti-
tution shall be clearly and conspicuously disclosed—
‘‘(A) with respect to any person who be-
comes a customer of the depository institution
any time after the depository institution becomes
affiliated with such company, to such person at
the time at which the business relationship be-
tween the customer and the institution is initi-
ated; and
‘‘(B) with respect to any person who al-
ready is a customer of the depository institution
at the time the depository institution becomes af-
filiated with such company, to such person with-
240
in a reasonable time after the affiliation is con-
summated.
‘‘(2) INFORMATION TO BE INCLUDED.—The pri-
vacy policy of an insured depository institution
which is disclosed pursuant to paragraph (1) shall
include—
‘‘(A) the policy of the institution with re-
spect to disclosing customer information to third
parties, other than agents of the depository insti-
tution, for marketing purposes; and
‘‘(B) the disclosures required under section
603(d)(2)(A)(iii) of the Fair Credit Reporting
Act with regard to the right of the customer, at
any time, to direct that information referred to
in such section not be shared with affiliates of
the depository institution.
‘‘(3) APPLICABILITY.—For purposes of section 10
of the Home Owners’ Loan Act, this subsection and
subsection (i) shall apply with regard to a savings
and loan holding company and any affiliate or in-
sured depository institution subsidiary of such hold-
ing company to the same extent and in the same
manner this subsection and subsection (i) apply with
respect to a financial holding company, affiliate of a
financial holding company, or insured depository in-
241
stitution subsidiary of a financial holding com-
pany.’’.
SEC. 178. CONFIDENTIALITY OF HEALTH AND MEDICAL IN-
FORMATION.
(a) IN GENERAL.—Section 6 of the Bank Holding
Company Act of 1956 is amended by inserting after sub-
section (h) (as added by section 171 of this subtitle) the
following new subsection:
‘‘(i) CONFIDENTIALITY OF HEALTH AND MEDICAL IN-
FORMATION.—
‘‘(1) IN GENERAL.—If a company which under-
writes or sells annuities contracts or contracts insur-
ing, guaranteeing, or indemnifying against loss,
harm, damage, illness, disability, or death (other than
credit-related insurance) is or becomes a financial
holding company or an affiliate of a financial hold-
ing company, such company shall maintain a prac-
tice of protecting the confidentiality of individually
identifiable customer health and medical information
and may disclose such information only—
‘‘(A) with the consent, or at the direction, of
the customer;
‘‘(B) for insurance underwriting and rein-
suring policies, account administration, report-
ing, investigating, or preventing fraud or mate-
242
rial misrepresentation, processing premium pay-
ments, processing insurance claims or defending
any action relating to such claims, admin-
istering insurance benefits (including utilization
review activities), providing information to the
customer’s physician or other health care pro-
vider, participating in research projects, ena-
bling the purchase, transfer, merger, or sale of
any insurance-related business, or as otherwise
required or specifically permitted by Federal or
State law; or
‘‘(C) in connection with—
‘‘(i) the authorization, settlement, bill-
ing, processing, clearing, transferring, rec-
onciling, or collection of amounts charged,
debited, or otherwise paid using a debit,
credit, or other payment card or account
number, or by other payment means;
‘‘(ii) the transfer of receivables, ac-
counts, or interest therein;
‘‘(iii) the audit of the debit, credit, or
other payment information;
‘‘(iv) compliance with Federal, State,
or local law;
243
‘‘(v) compliance with a properly au-
thorized civil, criminal, or regulatory inves-
tigation by Federal, State, or local authori-
ties as governed by the requirements of this
section; or
‘‘(vi) fraud protection, risk control, re-
solving customer disputes or inquiries, com-
municating with the person to whom the in-
formation relates, or reporting to consumer
reporting agencies.
‘‘(2) EFFECTIVE DATE; SUNSET.—
‘‘(A) EFFECTIVE
DATE.—Except as pro-
vided in subparagraph (B), paragraph (1) shall
take effect on February 1, 2000.
‘‘(B) SUNSET.—Paragraph (1) shall not
take effect if, or shall cease to be effective on and
after the date on which, legislation is enacted
that 
satisfies 
the 
requirements 
in 
section
264(c)(1) of the Health Insurance Portability
and Accountability Act of 1996 (Public Law
104–191; 110 Stat. 2033).
‘‘(3) CONSULTATION.—While paragraph (1) is in
effect, the Board shall consult with the Secretary of
Health and Human Services in connection with the
administration of such paragraph.’’.
244
SEC. 179. FINANCIAL INFORMATION PRIVACY.
(a) IN GENERAL.—The Consumer Credit Protection
Act (15 U.S.C. 1601 et seq.) is amended by adding at the
end the following:
‘‘TITLE X—FINANCIAL INFORMA-
TION PRIVACY PROTECTION
‘‘SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.
‘‘(a) SHORT TITLE.—This title may be cited as the ‘Fi-
nancial Information Privacy Act of 1999’.
‘‘(b) TABLE OF CONTENTS.—The table of contents for
this title is as follows:
‘‘TITLE X—FINANCIAL INFORMATION PRIVACY PROTECTION
‘‘Sec. 1001. Short title; table of contents.
‘‘Sec. 1002. Definitions.
‘‘Sec. 1003. Privacy protection for customer information of financial institutions.
‘‘Sec. 1004. Administrative enforcement.
‘‘Sec. 1005. Civil liability.
‘‘Sec. 1006. Criminal penalty.
‘‘Sec. 1007. Relation to State laws.
‘‘Sec. 1008. Agency guidance.
‘‘SEC. 1002. DEFINITIONS.
‘‘For purposes of this title, the following definitions
shall apply:
‘‘(1) CUSTOMER.—The term ‘customer’ means,
with respect to a financial institution, any individual
(or authorized representative of a person) to whom the
financial institution provides a product or service,
including that of acting as a fiduciary.
‘‘(2) CUSTOMER INFORMATION OF A FINANCIAL
INSTITUTION.—The term ‘customer information of a
245
financial institution’ means any information main-
tained by a financial institution which is derived
from the relationship between the financial institution
and a customer of the financial institution and is
identified with the customer.
‘‘(3) DOCUMENT.—The term ‘document’ means
any information in any form.
‘‘(4) FINANCIAL INSTITUTION.—
‘‘(A) IN GENERAL.—The term ‘financial in-
stitution’ means any institution engaged in the
business of providing financial services to cus-
tomers who maintain a credit, deposit, trust, or
other financial account or relationship with the
institution.
‘‘(B) CERTAIN
FINANCIAL
INSTITUTIONS
SPECIFICALLY
INCLUDED.—The term ‘financial
institution’ includes any depository institution
(as defined in section 19(b)(1)(A) of the Federal
Reserve Act), any loan or finance company, any
credit card issuer or operator of a credit card
system, and any consumer reporting agency that
compiles and maintains files on consumers on a
nationwide basis (as defined in section 603(p)).
‘‘(C) FURTHER
DEFINITION
BY
REGULA-
TION.—The Board of Governors of the Federal
246
Reserve System may prescribe regulations fur-
ther defining the term ‘financial institution’, in
accordance with subparagraph (A), for purposes
of this title.
‘‘SEC. 1003. PRIVACY PROTECTION FOR CUSTOMER INFOR-
MATION OF FINANCIAL INSTITUTIONS.
‘‘(a) PROHIBITION ON OBTAINING CUSTOMER INFOR-
MATION BY FALSE PRETENSES.—It shall be a violation of
this title for any person to obtain or attempt to obtain, or
cause to be disclosed or attempt to cause to be disclosed to
any person, customer information of a financial institution
relating to another person—
‘‘(1) by knowingly making a false, fictitious, or
fraudulent statement or representation to an officer,
employee, or agent of a financial institution with the
intent to deceive the officer, employee, or agent into
relying on that statement or representation for pur-
poses of releasing the customer information;
‘‘(2) by knowingly making a false, fictitious, or
fraudulent statement or representation to a customer
of a financial institution with the intent to deceive
the customer into relying on that statement or rep-
resentation for purposes of releasing the customer in-
formation or authorizing the release of such informa-
tion; or
247
‘‘(3) by knowingly providing any document to
an officer, employee, or agent of a financial institu-
tion, knowing that the document is forged, counterfeit,
lost, or stolen, was fraudulently obtained, or contains
a false, fictitious, or fraudulent statement or represen-
tation, if the document is provided with the intent to
deceive the officer, employee, or agent into relying on
that document for purposes of releasing the customer
information.
‘‘(b) PROHIBITION ON SOLICITATION OF A PERSON TO
OBTAIN CUSTOMER INFORMATION FROM A FINANCIAL IN-
STITUTION UNDER FALSE PRETENSES.—It shall be a viola-
tion of this title to request a person to obtain customer in-
formation of a financial institution, knowing or consciously
avoiding knowing that the person will obtain, or attempt
to obtain, the information from the institution in any man-
ner described in subsection (a).
‘‘(c) NON APPLICABILITY
TO LAW ENFORCEMENT
AGENCIES.—No provision of this section shall be construed
so as to prevent any action by a law enforcement agency,
or any officer, employee, or agent of such agency, to obtain
customer information of a financial institution in connec-
tion with the performance of the official duties of the
agency.
248
‘‘(d) NON APPLICABILITY TO FINANCIAL INSTITUTIONS
IN CERTAIN CASES.—No provision of this section shall be
construed to prevent any financial institution, or any offi-
cer, employee, or agent of a financial institution, from ob-
taining customer information of such financial institution
in the course of—
‘‘(1) testing the security procedures or systems of
such institution for maintaining the confidentiality of
customer information;
‘‘(2) investigating allegations of misconduct or
negligence on the part of any officer, employee, or
agent of the financial institution; or
‘‘(3) recovering customer information of the fi-
nancial institution which was obtained or received by
another person in any manner described in subsection
(a) or (b).
‘‘(e) NON APPLICABILITY TO CERTAIN TYPES OF CUS-
TOMER INFORMATION OF FINANCIAL INSTITUTIONS.—No
provision of this section shall be construed to prevent any
person from obtaining customer information of a financial
institution that otherwise is available as a public record
filed pursuant to the securities laws (as defined in section
3(a)(47) of the Securities Exchange Act of 1934).
‘‘(f) NON APPLICABILITY TO COLLECTION OF CHILD
SUPPORT JUDGMENTS.—No provision of this section shall
249
be construed to prevent any State-licensed private investi-
gator, or any officer, employee, or agent of such private in-
vestigator, from obtaining customer information of a finan-
cial institution, to the extent reasonably necessary to collect
child support from a person adjudged to have been delin-
quent in his or her obligations by a Federal or State court,
and to the extent that such action by a State-licensed pri-
vate investigator is not unlawful under any other Federal
or State law or regulation.
‘‘SEC. 1004. ADMINISTRATIVE ENFORCEMENT.
‘‘(a) ENFORCEMENT
BY FEDERAL TRADE COMMIS-
SION.—Except as provided in subsection (b), compliance
with this title shall be enforced by the Federal Trade Com-
mission in the same manner and with the same power and
authority as the Commission has under the Fair Debt Col-
lection Practices Act to enforce compliance with that title.
‘‘(b) ENFORCEMENT BY OTHER AGENCIES IN CERTAIN
CASES.—
‘‘(1) IN GENERAL.—Compliance with this title
shall be enforced under—
‘‘(A) section 8 of the Federal Deposit Insur-
ance Act, in the case of—
‘‘(i) national banks, and Federal
branches and Federal agencies of foreign
250
banks, by the Office of the Comptroller of
the Currency;
‘‘(ii) member banks of the Federal Re-
serve System (other than national banks),
branches and agencies of foreign banks
(other than Federal branches, Federal agen-
cies, and insured State branches of foreign
banks), 
commercial 
lending 
companies
owned or controlled by foreign banks, and
organizations operating under section 25 or
25A of the Federal Reserve Act, by the
Board;
‘‘(iii) banks insured by the Federal De-
posit Insurance Corporation (other than
members of the Federal Reserve System and
national nonmember banks) and insured
State branches of foreign banks, by the
Board of Directors of the Federal Deposit
Insurance Corporation; and
‘‘(iv) savings associations the deposits
of which are insured by the Federal Deposit
Insurance Corporation, by the Director of
the Office of Thrift Supervision; and
‘‘(B) the Federal Credit Union Act, by the
Administrator of the National Credit Union Ad-
251
ministration with respect to any Federal credit
union.
‘‘(2) VIOLATIONS OF THIS TITLE TREATED AS
VIOLATIONS OF OTHER LAWS.—For the purpose of the
exercise by any agency referred to in paragraph (1)
of its powers under any Act referred to in that para-
graph, a violation of this title shall be deemed to be
a violation of a requirement imposed under that Act.
In addition to its powers under any provision of law
specifically referred to in paragraph (1), each of the
agencies referred to in that paragraph may exercise,
for the purpose of enforcing compliance with this title,
any other authority conferred on such agency by law.
‘‘(c) STATE ACTION FOR VIOLATIONS.—
‘‘(1) AUTHORITY
OF
STATES.—In addition to
such other remedies as are provided under State law,
if the chief law enforcement officer of a State, or an
official or agency designated by a State, has reason
to believe that any person has violated or is violating
this title, the State—
‘‘(A) may bring an action to enjoin such
violation in any appropriate United States dis-
trict court or in any other court of competent ju-
risdiction;
252
‘‘(B) may bring an action on behalf of the
residents of the State to recover damages of not
more than $1,000 for each violation; and
‘‘(C) in the case of any successful action
under subparagraph (A) or (B), shall be award-
ed the costs of the action and reasonable attorney
fees as determined by the court.
‘‘(2) RIGHTS OF FEDERAL REGULATORS.—
‘‘(A) PRIOR NOTICE.—The State shall serve
prior written notice of any action under para-
graph (1) upon the Federal Trade Commission
and, in the case of an action which involves a
financial 
institution 
described 
in 
section
1004(b)(1), the agency referred to in such section
with respect to such institution and provide the
Federal Trade Commission and any such agency
with a copy of its complaint, except in any case
in which such prior notice is not feasible, in
which case the State shall serve such notice im-
mediately upon instituting such action.
‘‘(B) RIGHT TO INTERVENE.—The Federal
Trade Commission or an agency described in
subsection (b) shall have the right—
‘‘(i) to intervene in an action under
paragraph (1);
253
‘‘(ii) upon so intervening, to be heard
on all matters arising therein;
‘‘(iii) to remove the action to the ap-
propriate United States district court; and
‘‘(iv) to file petitions for appeal.
‘‘(3) INVESTIGATORY POWERS.—For purposes of
bringing any action under this subsection, no provi-
sion of this subsection shall be construed as pre-
venting the chief law enforcement officer, or an offi-
cial or agency designated by a State, from exercising
the powers conferred on the chief law enforcement offi-
cer or such official by the laws of such State to con-
duct investigations or to administer oaths or affirma-
tions or to compel the attendance of witnesses or the
production of documentary and other evidence.
‘‘(4) LIMITATION ON STATE ACTION WHILE FED-
ERAL ACTION PENDING.—If the Federal Trade Com-
mission or any agency described in subsection (b) has
instituted a civil action for a violation of this title,
no State may, during the pendency of such action,
bring an action under this section against any de-
fendant named in the complaint of the Federal Trade
Commission or such agency for any violation of this
title that is alleged in that complaint.
254
‘‘SEC. 1005. CIVIL LIABILITY.
‘‘Any person, other than a financial institution, who
fails to comply with any provision of this title with respect
to any financial institution or any customer information
of a financial institution shall be liable to such financial
institution or the customer to whom such information re-
lates in an amount equal to the sum of the amounts deter-
mined under each of the following paragraphs:
‘‘(1) ACTUAL DAMAGES.—The greater of—
‘‘(A) the amount of any actual damage sus-
tained by the financial institution or customer
as a result of such failure; or
‘‘(B) any amount received by the person
who failed to comply with this title, including
an amount equal to the value of any non mone-
tary consideration, as a result of the action
which constitutes such failure.
‘‘(2) ADDITIONAL
DAMAGES.—Such additional
amount as the court may allow.
‘‘(3) ATTORNEYS’ FEES.—In the case of any suc-
cessful action to enforce any liability under para-
graph (1) or (2), the costs of the action, together with
reasonable attorneys’ fees.
‘‘SEC. 1006. CRIMINAL PENALTY.
‘‘(a) IN GENERAL.—Whoever violates, or attempts to
violate, section 1003 shall be fined in accordance with title
255
18, United States Code, or imprisoned for not more than
5 years, or both.
‘‘(b) ENHANCED PENALTY FOR AGGRAVATED CASES.—
Whoever violates, or attempts to violate, section 1003 while
violating another law of the United States or as part of
a pattern of any illegal activity involving more than
$100,000 in a 12-month period shall be fined twice the
amount provided in subsection (b)(3) or (c)(3) (as the case
may be) of section 3571 of title 18, United States Code,
imprisoned for not more than 10 years, or both.
‘‘SEC. 1007. RELATION TO STATE LAWS.
‘‘(a) IN GENERAL.—This title shall not be construed
as superseding, altering, or affecting the statutes, regula-
tions, orders, or interpretations in effect in any State, ex-
cept to the extent that such statutes, regulations, orders, or
interpretations are inconsistent with the provisions of this
title, and then only to the extent of the inconsistency.
‘‘(b) GREATER PROTECTION UNDER STATE LAW.—For
purposes of this section, a State statute, regulation, order,
or interpretation is not inconsistent with the provisions of
this title if the protection such statute, regulation, order,
or interpretation affords any person is greater than the pro-
tection provided under this title.
256
‘‘SEC. 1008. AGENCY GUIDANCE.
‘‘In furtherance of the objectives of this title, each Fed-
eral banking agency (as defined in section 3(z) of the Fed-
eral Deposit Insurance Act) shall issue advisories to deposi-
tory institutions under the jurisdiction of the agency, in
order to assist such depository institutions in deterring and
detecting activities proscribed under section 1003.’’.
(b) REPORT TO CONGRESS ON FINANCIAL PRIVACY.—
Not later than 18 months after the date of enactment of
this Act, the Comptroller General of the United States, in
consultation with the Federal Trade Commission, the Fed-
eral banking agencies, and other appropriate Federal law
enforcement agencies, shall submit to the Congress a report
on—
(1) the efficacy and adequacy of the remedies
provided in the amendments made by subsection (a)
in addressing attempts to obtain financial informa-
tion by fraudulent means or by false pretenses; and
(2) any recommendations for additional legisla-
tive or regulatory action to address threats to the pri-
vacy of financial information created by attempts to
obtain information by fraudulent means or false pre-
tenses.
SEC. 180. STUDY OF CURRENT FINANCIAL PRIVACY LAWS.
(a) IN GENERAL.—The Federal banking agencies shall
conduct a study of whether existing laws which regulate the
257
sharing of customer information by insured depository in-
stitutions with affiliates of such institutions adequately
protect the privacy rights of customers of such institutions.
(b) REPORT.—Before the end of the 6-month period be-
ginning on the date of the enactment of this Act, the Federal
banking agencies shall submit a report to the Congress con-
taining the findings and conclusions of the agency with re-
spect to the study required under subsection (a), together
with such recommendations for legislative or administrative
action as the agencies may determine to be appropriate.
(c) DEFINITIONS.—For purposes of this section, the
terms ‘‘affiliate’’, ‘‘Federal banking agency’’, and ‘‘insured
depository institution’’ have the meanings given to such
terms in section 3 of the Federal Deposit Insurance Act.
Subtitle J—Direct Activities of
Banks
SEC. 181. AUTHORITY OF NATIONAL BANKS TO UNDER-
WRITE CERTAIN MUNICIPAL BONDS.
The paragraph designated the Seventh of section 5136
of the Revised Statutes of the United States (12 U.S.C.
24(7)) is amended by adding at the end the following new
sentence: ‘‘In addition to the provisions in this paragraph
for dealing in, underwriting or purchasing securities, the
limitations and restrictions contained in this paragraph as
to dealing in, underwriting, and purchasing investment se-
258
curities for the national bank’s own account shall not apply
to obligations (including limited obligation bonds, revenue
bonds, and obligations that satisfy the requirements of sec-
tion 142(b)(1) of the Internal Revenue Code of 1986) issued
by or on behalf of any state or political subdivision of a
state, including any municipal corporate instrumentality
of 1 or more states, or any public agency or authority of
any state or political subdivision of a state, if the national
banking association is well capitalized (as defined in sec-
tion 38 of the Federal Deposit Insurance Act).’’.
Subtitle K—Deposit Insurance
Funds
SEC. 186. STUDY OF SAFETY AND SOUNDNESS OF FUNDS.
(a) STUDY REQUIRED.—The Board of Directors of the
Federal Deposit Insurance Corporation shall conduct a
study of the following issues with regard to the Bank Insur-
ance Fund and the Savings Association Insurance Fund:
(1) SAFETY AND SOUNDNESS.—The safety and
soundness of the funds and the adequacy of the reserve
requirements applicable to the funds in light of—
(A) the size of the insured depository insti-
tutions which are resulting from mergers and
consolidations since the effective date of the Rie-
gle-Neal Interstate Banking and Branching Effi-
ciency Act of 1994; and
259
(B) the affiliation of insured depository in-
stitutions with other financial institutions pur-
suant to this Act and the amendments made by
this Act.
(2) CONCENTRATION
LEVELS.—The concentra-
tion levels of the funds, taking into account the num-
ber of members of each fund and the geographic dis-
tribution of such members, and the extent to which ei-
ther fund is exposed to higher risks due to a regional
concentration of members or an insufficient member-
ship base relative to the size of member institutions.
(3) MERGER
ISSUES.—Issues relating to the
planned merger of the funds, including the cost of
merging the funds and the manner in which such
costs will be distributed among the members of the re-
spective funds.
(b) REPORT REQUIRED.—
(1) IN GENERAL.—Before the end of the 9-month
period beginning on the date of the enactment of this
Act, the Board of Directors of the Federal Deposit In-
surance Corporation shall submit a report to the Con-
gress on the study conducted pursuant to subsection
(a).
(2) CONTENTS
OF
REPORT.—The report shall
include—
260
(A) detailed findings of the Board of Direc-
tors with regard to the issues described in sub-
section (a);
(B) a description of the plans developed by
the Board of Directors for merging the Bank In-
surance Fund and the Savings Association In-
surance Fund, including an estimate of the
amount of the cost of such merger which would
be borne by Savings Association Insurance Fund
members; and
(C) such recommendations for legislative
and administrative action as the Board of Direc-
tors determines to be necessary or appropriate to
preserve the safety and soundness of the deposit
insurance funds, reduce the risks to such funds,
provide for an efficient merger of such funds,
and for other purposes.
(c) DEFINITIONS.—For purposes of this section, the fol-
lowing definitions shall apply:
(1) INSURED
DEPOSITORY
INSTITUTION.—The
term ‘‘insured depository institution’’ has the same
meaning as in section 3(c) of the Federal Deposit In-
surance Act.
(2) BIF AND SAIF MEMBERS.—The terms ‘‘Bank
Insurance Fund member’’ and ‘‘Savings Association
261
Insurance Fund member’’ have the same meanings as
in section 7(l) of the Federal Deposit Insurance Act.
SEC. 187. ELIMINATION OF SAIF AND IF SPECIAL RESERVES.
(a) SAIF SPECIAL RESERVES.—Section 11(a)(6) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(6))
is amended by striking subparagraph (L).
(b) IF SPECIAL RESERVES.—Section 2704 of the De-
posit Insurance Funds Act of 1996 (12 U.S.C. 1821 note)
is amended—
(1) by striking subsection (b); and
(2) in subsection (d)—
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking ‘‘(6)
and (7)’’ and inserting ‘‘(5), (6), and (7)’’; and
(C) in paragraph (6)(C), by striking clause
(ii) and inserting the following:
‘‘(ii) by redesignating paragraph (8)
as paragraph (5).’’.
Subtitle L—Miscellaneous
Provisions
SEC. 191. TERMINATION OF ‘‘KNOW YOUR CUSTOMER’’ REG-
ULATIONS.
(a) IN GENERAL.—None of the proposed regulations
described in subsection (b) may be published in final form
and, to the extent any such regulation has become effective
263
flict of interest faced by the Board of Governors of the Fed-
eral Reserve System between its role as a primary regulator
of the banking industry and its role as a vendor of services
to the banking and financial services industry.
(b) SPECIFIC
CONFLICT
REQUIRED
TO
BE
AD-
DRESSED.—In the course of the study required under sub-
section (a), the Comptroller General shall address the con-
flict of interest faced by the Board of Governors of the Fed-
eral Reserve System between the role of the Board as a regu-
lator of the payment system, generally, and its participa-
tion in the payment system as a competitor with private
entities who are providing payment services.
(c) REPORT TO CONGRESS.—Before the end of the 1-
year period beginning on the date of the enactment of this
Act, the Comptroller General shall submit a report to the
Congress containing the findings and conclusions of the
Comptroller General in connection with the study required
under this section, together with such recommendations for
such legislative or administrative actions as the Comp-
troller General may determine to be appropriate, including
recommendations for resolving any such conflict of interest.
264
SEC. 193. CLARIFICATION OF SOURCE OF STRENGTH DOC-
TRINE.
Section 18 of the Federal Deposit Insurance Act (12
U.S.C. 1828) is amended by adding at the end the following
new subsection:
‘‘(t) LIMITATION ON CLAIMS.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law, no person shall have any claim
against any Federal banking agency, in any capac-
ity, or against any conservator or receiver appointed
by any Federal banking agency (including the Cor-
poration as conservator or receiver), arising from or
relating to the transfer of money, assets, or other
property to a depository institution by a controlling
stockholder or a depository institution holding com-
pany, or any affiliate or subsidiary of such deposi-
tory institution holding company, if, at the time of
the transfer, the depository institution—
‘‘(A) is subject to a direction by a Federal
banking agency to increase its capital; or
‘‘(B) 
is 
undercapitalized, 
significantly
undercapitalized, or critically undercapitalized
as defined in section 38.
‘‘(2) EXCEPTION.—No provision of this sub-
section shall be construed as limiting the right of a
depository institution, a controlling stockholder, or a
265
depository institution holding company to seek direct
review of an order or directive issued by a Federal
banking agency in accordance with the procedures
provided by this Act, the National Bank Receivership
Act, the Bank Conservation Act, or the Home Owner’s
Loan Act.’’.
SEC. 194. STUDY OF COST OF ALL FEDERAL BANKING REGU-
LATIONS.
(a) IN GENERAL.—In accordance with the finding in
the Board of Governors of the Federal Reserve System Staff
Study Numbered 171 (April, 1998) that ‘‘Further research
covering more and different types of regulations and regu-
latory requirements is clearly needed to make informed de-
cisions about regulations’’, the Board of Governors of the
Federal Reserve System, in consultation with the other Fed-
eral banking agencies (as defined in section 3 of the Federal
Deposit Insurance Act) shall conduct a comprehensive study
of the total annual costs and benefits of all Federal finan-
cial regulations and regulatory requirements applicable to
banks.
(b) REPORT REQUIRED.—Before the end of the 2-year
period beginning on the date of the enactment of this Act,
the Board of Governors of the Federal Reserve System shall
submit a comprehensive report to the Congress containing
the findings and conclusions of the Board in connection
266
with the study required under subsection (a) and such rec-
ommendations for legislative and administrative action as
the Board may determine to be appropriate.
SEC. 195. STUDY AND REPORT ON ADAPTING EXISTING LEG-
ISLATIVE REQUIREMENTS TO ONLINE BANK-
ING AND LENDING.
(a) STUDY REQUIRED.—The Federal banking agencies
shall conduct a study of banking regulations regarding the
delivery of financial services, including those regulations
that may assume that there will be person-to-person contact
during the course of a financial services transaction, and
report their recommendations on adapting those existing re-
quirements to online banking and lending.
(b) REPORT REQUIRED.—Within 1 year of the date
of the enactment of this Act, the Federal banking agencies
shall submit a report to the Congress on the findings and
conclusions of the agencies with respect to the study re-
quired under subsection (a), together with such rec-
ommendations for legislative or regulatory action as the
agencies may determine to be appropriate.
(c) DEFINITION.—For purposes of this section, the
term ‘‘Federal banking agencies’’ means each Federal bank-
ing agency (as defined in section 3(z) of the Federal Deposit
Insurance Act).
267
Subtitle M—Effective Date of Title
SEC. 196. EFFECTIVE DATE.
Except with regard to any subtitle or other provision
of this title for which a specific effective date is provided,
this title and the amendments made by this title shall take
effect at the end of the 270-day period beginning on the
date of the enactment of this Act.
TITLE II—FUNCTIONAL
REGULATION
Subtitle A—Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(4)) is amended to read as follows:
‘‘(4) BROKER.—
‘‘(A) IN
GENERAL.—The term ‘broker’
means any person engaged in the business of ef-
fecting transactions in securities for the account
of others.
‘‘(B) EXCEPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be considered to be
a broker because the bank engages in any of the
following activities under the conditions de-
scribed:
‘‘(i) THIRD
PARTY
BROKERAGE
AR-
RANGEMENTS.—The bank enters into a con-
268
tractual or other arrangement with a broker
or dealer registered under this title under
which the broker or dealer offers brokerage
services on or off the premises of the bank
if—
‘‘(I) such broker or dealer is clear-
ly identified as the person performing
the brokerage services;
‘‘(II) the broker or dealer performs
brokerage services in an area that is
clearly marked and, to the extent prac-
ticable, physically separate from the
routine deposit-taking activities of the
bank;
‘‘(III) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the contractual or other arrange-
ment clearly indicate that the broker-
age services are being provided by the
broker or dealer and not by the bank;
‘‘(IV) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the contractual or other arrange-
269
ment are in compliance with the Fed-
eral securities laws before distribution;
‘‘(V) bank employees (other than
associated persons of a broker or dealer
who are qualified pursuant to the rules
of a self-regulatory organization) per-
form only clerical or ministerial func-
tions in connection with brokerage
transactions including scheduling ap-
pointments with the associated persons
of a broker or dealer, except that bank
employees may forward customer funds
or securities and may describe in gen-
eral terms the range of investment ve-
hicles available from the bank and the
broker or dealer under the contractual
or other arrangement;
‘‘(VI) bank employees do not di-
rectly receive incentive compensation
for any brokerage transaction unless
such employees are associated persons
of a broker or dealer and are qualified
pursuant to the rules of a self-regu-
latory organization, except that the
bank employees may receive compensa-
270
tion for the referral of any customer if
the compensation is a nominal one-
time cash fee of a fixed dollar amount
and the payment of the fee is not con-
tingent on whether the referral results
in a transaction;
‘‘(VII) such services are provided
by the broker or dealer on a basis in
which all customers which receive any
services are fully disclosed to the broker
or dealer;
‘‘(VIII) the bank does not carry a
securities account of the customer ex-
cept in a customary custodian or trust-
ee capacity; and
‘‘(IX) the bank, broker, or dealer
informs each customer that the broker-
age services are provided by the broker
or dealer and not by the bank and that
the securities are not deposits or other
obligations of the bank, are not guar-
anteed by the bank, and are not in-
sured by the Federal Deposit Insurance
Corporation.
271
‘‘(ii) TRUST ACTIVITIES.—The bank ef-
fects transactions in a trustee capacity, or
effects transactions in a fiduciary capacity
in its trust department or other department
that is regularly examined by bank exam-
iners for compliance with fiduciary prin-
ciples and standards, and (in either case)—
‘‘(I) is primarily compensated for
such transactions on the basis of an
administration or annual fee (payable
on a monthly, quarterly, or other
basis), a percentage of assets under
management, or a flat or capped per
order processing fee equal to not more
than the cost incurred by the bank in
connection with executing securities
transactions for trustee and fiduciary
customers, or any combination of such
fees, consistent with fiduciary prin-
ciples and standards; and
‘‘(II) does not publicly solicit bro-
kerage business, other than by adver-
tising that it effects transactions in se-
curities in conjunction with adver-
tising its other trust activities.
272
‘‘(iii) 
PERMISSIBLE
SECURITIES
TRANSACTIONS.—The bank effects trans-
actions in—
‘‘(I) commercial paper, bankers
acceptances, or commercial bills;
‘‘(II) exempted securities;
‘‘(III) qualified Canadian govern-
ment obligations as defined in section
5136 of the Revised Statutes, in con-
formity with section 15C of this title
and the rules and regulations there-
under, or obligations of the North
American Development Bank; or
‘‘(IV) any standardized, credit en-
hanced debt security issued by a for-
eign government pursuant to the
March 1989 plan of then Secretary of
the Treasury Brady, used by such for-
eign government to retire outstanding
commercial bank loans.
‘‘(iv) 
CERTAIN
STOCK
PURCHASE
PLANS.—
‘‘(I) 
EMPLOYEE
BENEFIT
PLANS.—The bank effects transactions,
as part of its transfer agency activities,
273
in the securities of an issuer as part of
any pension, retirement, profit-shar-
ing, bonus, thrift, savings, incentive, or
other similar benefit plan for the em-
ployees of that issuer or its subsidi-
aries, if—
‘‘(aa) the bank does not so-
licit transactions or provide in-
vestment advice with respect to
the purchase or sale of securities
in connection with the plan; and
‘‘(bb) the bank’s compensa-
tion for such plan or program
consists primarily of administra-
tion fees, or flat or capped per
order processing fees, or both.
‘‘(II) DIVIDEND
REINVESTMENT
PLANS.—The bank effects transactions,
as part of its transfer agency activities,
in the securities of an issuer as part of
that issuer’s dividend reinvestment
plan, if—
‘‘(aa) the bank does not so-
licit transactions or provide in-
vestment advice with respect to