Calendar No. 204 
106TH CONGRESS 
1ST SESSION 
H. R. 10 
AN ACT 
To enhance competition in the financial services in-
dustry by providing a prudential framework for 
the affiliation of banks, securities firms, and 
other financial service providers, and for other 
purposes. 
JULY 12, 1999 
Received; read twice and placed on the calendar 
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II 
Calendar No. 204 
106TH CONGRESS 
1ST SESSION 
H. R. 10 
IN THE SENATE OF THE UNITED STATES 
JULY 12, 1999 
Received; read twice and placed on the Calendar 
AN ACT 
To enhance competition in the financial services industry 
by providing a prudential framework for the affiliation 
of banks, securities firms, and other financial service 
providers, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CON-
TENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Financial Services Act of 1999’’. 
(b) PURPOSES.—The purposes of this Act are as fol-
lows: 
(1) To enhance competition in the financial 
services industry, in order to foster innovation and 
efficiency. 
(2) To ensure the continued safety and sound-
ness of depository institutions. 
(3) To provide necessary and appropriate pro-
tections for investors and ensure fair and honest 
markets in the delivery of financial services. 
(4) To avoid duplicative, potentially conflicting, 
and overly burdensome regulatory requirements 
through the creation of a regulatory framework for 
financial holding companies that respects the diver-
gent requirements of each of the component busi-
nesses of the holding company, and that is based 
upon principles of strong functional regulation and 
enhanced regulatory coordination. 
(5) To reduce and, to the maximum extent 
practicable, to eliminate the legal barriers preventing 
affiliation among depository institutions, securities 
firms, insurance companies, and other financial serv-
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ice providers and to provide a prudential framework 
for achieving that result. 
(6) To enhance the availability of financial serv-
ices to citizens of all economic circumstances and in 
all geographic areas. 
(7) To enhance the competitiveness of United 
States financial service providers internationally. 
(8) To ensure compliance by depository institu-
tions with the provisions of the Community Rein-
vestment Act of 1977 and enhance the ability of de-
pository institutions to meet the capital and credit 
needs of all citizens and communities, including un-
derserved communities and populations. 
(c) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; purposes; table of contents. 
TITLE I—FACILITATING AFFILIATION AMONG SECURITIES FIRMS, 
INSURANCE COMPANIES, AND DEPOSITORY INSTITUTIONS 
Subtitle A—Affiliations 
Sec. 101. Glass-Steagall Act reformed. 
Sec. 102. Activity restrictions applicable to bank holding companies which are 
not financial holding companies. 
Sec. 103. Financial holding companies. 
Sec. 104. Operation of State law. 
Sec. 105. Mutual bank holding companies authorized. 
Sec. 105A. Public meetings for large bank acquisitions and mergers. 
Sec. 106. Prohibition on deposit production offices. 
Sec. 107. Clarification of branch closure requirements. 
Sec. 108. Amendments relating to limited purpose banks. 
Sec. 109. GAO study of economic impact on community banks, other small fi-
nancial institutions, insurance agents, and consumers. 
Sec. 110. Responsiveness to community needs for financial services. 
Sec. 110A. Study of financial modernization’s affect on the accessibility of 
small business and farm loans. 
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Subtitle B—Streamlining Supervision of Financial Holding Companies 
Sec. 111. Streamlining financial holding company supervision. 
Sec. 112. Elimination of application requirement for financial holding compa-
nies. 
Sec. 113. Authority of State insurance regulator and Securities and Exchange 
Commission. 
Sec. 114. Prudential safeguards. 
Sec. 115. Examination of investment companies. 
Sec. 116. Limitation on rulemaking, prudential, supervisory, and enforcement 
authority of the Board. 
Sec. 117. Equivalent regulation and supervision. 
Sec. 118. Prohibition on FDIC assistance to affiliates and subsidiaries. 
Sec. 119. Repeal of savings bank provisions in the Bank Holding Company Act 
of 1956. 
Sec. 120. Technical amendment. 
Subtitle C—Subsidiaries of National Banks 
Sec. 121. Permissible activities for subsidiaries of national banks. 
Sec. 122. Safety and soundness firewalls between banks and their financial sub-
sidiaries. 
Sec. 123. Misrepresentations regarding depository institution liability for obli-
gations of affiliates. 
Sec. 124. Repeal of stock loan limit in Federal Reserve Act. 
Subtitle D—Wholesale Financial Holding Companies; Wholesale Financial 
Institutions 
CHAPTER 1—WHOLESALE FINANCIAL HOLDING COMPANIES 
Sec. 131. Wholesale financial holding companies established. 
Sec. 132. Authorization to release reports. 
Sec. 133. Conforming amendments. 
CHAPTER 2—WHOLESALE FINANCIAL INSTITUTIONS 
Sec. 136. Wholesale financial institutions. 
Subtitle E—Preservation of FTC Authority 
Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify 
notification and post-approval waiting period for section 3 
transactions. 
Sec. 142. Interagency data sharing. 
Sec. 143. Clarification of status of subsidiaries and affiliates. 
Sec. 144. Annual GAO report. 
Subtitle F—National Treatment 
Sec. 151. Foreign banks that are financial holding companies. 
Sec. 152. Foreign banks and foreign financial institutions that are wholesale fi-
nancial institutions. 
Sec. 153. Representative offices. 
Sec. 154. Reciprocity. 
Subtitle G—Federal Home Loan Bank System Modernization 
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Sec. 161. Short title. 
Sec. 162. Definitions. 
Sec. 163. Savings association membership. 
Sec. 164. Advances to members; collateral. 
Sec. 165. Eligibility criteria. 
Sec. 166. Management of banks. 
Sec. 167. Resolution Funding Corporation. 
Sec. 168. Capital structure of Federal home loan banks. 
Subtitle H—ATM Fee Reform 
Sec. 171. Short title. 
Sec. 172. Electronic fund transfer fee disclosures at any host ATM. 
Sec. 173. Disclosure of possible fees to consumers when ATM card is issued. 
Sec. 174. Feasibility study. 
Sec. 175. No liability if posted notices are damaged. 
Subtitle I—Direct Activities of Banks 
Sec. 181. Authority of national banks to underwrite certain municipal bonds. 
Subtitle J—Deposit Insurance Funds 
Sec. 186. Study of safety and soundness of funds. 
Sec. 187. Elimination of SAIF and DIF special reserves. 
Subtitle K—Miscellaneous Provisions 
Sec. 191. Termination of ‘‘know your customer’’ regulations. 
Sec. 192. Study and report on Federal electronic fund transfers. 
Sec. 193. General Accounting Office study of conflicts of interest. 
Sec. 194. Study of cost of all Federal banking regulations. 
Sec. 195. Study and report on adapting existing legislative requirements to on-
line banking and lending. 
Sec. 196. Regulation of uninsured State member banks. 
Sec. 197. Clarification of source of strength doctrine. 
Sec. 198. Interest rates and other charges at interstate branches. 
Sec. 198A. Interstate branches and agencies of foreign banks. 
Sec. 198B. Fair treatment of women by financial advisers. 
Subtitle L—Effective Date of Title 
Sec. 199. Effective date. 
TITLE II—FUNCTIONAL REGULATION 
Subtitle A—Brokers and Dealers 
Sec. 201. Definition of broker. 
Sec. 202. Definition of dealer. 
Sec. 203. Registration for sales of private securities offerings. 
Sec. 204. Information sharing. 
Sec. 205. Treatment of new hybrid products. 
Sec. 206. Definition of excepted banking product. 
Sec. 207. Additional definitions. 
Sec. 208. Government securities defined. 
Sec. 209. Effective date. 
Sec. 210. Rule of construction. 
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Subtitle B—Bank Investment Company Activities 
Sec. 211. Custody of investment company assets by affiliated bank. 
Sec. 212. Lending to an affiliated investment company. 
Sec. 213. Independent directors. 
Sec. 214. Additional SEC disclosure authority. 
Sec. 215. Definition of broker under the Investment Company Act of 1940. 
Sec. 216. Definition of dealer under the Investment Company Act of 1940. 
Sec. 217. Removal of the exclusion from the definition of investment adviser for 
banks that advise investment companies. 
Sec. 218. Definition of broker under the Investment Advisers Act of 1940. 
Sec. 219. Definition of dealer under the Investment Advisers Act of 1940. 
Sec. 220. Interagency consultation. 
Sec. 221. Treatment of bank common trust funds. 
Sec. 222. Investment advisers prohibited from having controlling interest in 
registered investment company. 
Sec. 223. Statutory disqualification for bank wrongdoing. 
Sec. 224. Conforming change in definition. 
Sec. 225. Conforming amendment. 
Sec. 226. Church plan exclusion. 
Sec. 227. Effective date. 
Subtitle C—Securities and Exchange Commission Supervision of Investment 
Bank Holding Companies 
Sec. 231. Supervision of investment bank holding companies by the Securities 
and Exchange Commission. 
Subtitle D—Disclosure of Customer Costs of Acquiring Financial Products 
Sec. 241. Improved and consistent disclosure. 
Subtitle E—Banks and Bank Holding Companies 
Sec. 251. Consultation. 
TITLE III—INSURANCE 
Subtitle A—State Regulation of Insurance 
Sec. 301. State regulation of the business of insurance. 
Sec. 302. Mandatory insurance licensing requirements. 
Sec. 303. Functional regulation of insurance. 
Sec. 304. Insurance underwriting in national banks. 
Sec. 305. Title insurance activities of national banks and their affiliates. 
Sec. 306. Expedited and equalized dispute resolution for Federal regulators. 
Sec. 307. Consumer protection regulations. 
Sec. 308. Certain State affiliation laws preempted for insurance companies and 
affiliates. 
Sec. 309. Interagency consultation. 
Sec. 310. Definition of State. 
Subtitle B—Redomestication of Mutual Insurers 
Sec. 311. General application. 
Sec. 312. Redomestication of mutual insurers. 
Sec. 313. Effect on State laws restricting redomestication. 
Sec. 314. Other provisions. 
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Sec. 315. Definitions. 
Sec. 316. Effective date. 
Subtitle C—National Association of Registered Agents and Brokers 
Sec. 321. State flexibility in multistate licensing reforms. 
Sec. 322. National Association of Registered Agents and Brokers. 
Sec. 323. Purpose. 
Sec. 324. Relationship to the Federal Government. 
Sec. 325. Membership. 
Sec. 326. Board of directors. 
Sec. 327. Officers. 
Sec. 328. Bylaws, rules, and disciplinary action. 
Sec. 329. Assessments. 
Sec. 330. Functions of the NAIC. 
Sec. 331. Liability of the Association and the directors, officers, and employees 
of the Association. 
Sec. 332. Elimination of NAIC oversight. 
Sec. 333. Relationship to State law. 
Sec. 334. Coordination with other regulators. 
Sec. 335. Judicial review. 
Sec. 336. Definitions. 
Subtitle D—Rental Car Agency Insurance Activities 
Sec. 341. Standard of regulation for motor vehicle rentals. 
Subtitle E—Confidentiality 
Sec. 351. Confidentiality of health and medical information. 
TITLE IV—UNITARY SAVINGS AND LOAN HOLDING COMPANIES 
Sec. 401. Prohibition on new unitary savings and loan holding companies. 
Sec. 402. Retention of ‘‘Federal’’ in name of converted Federal savings associa-
tion. 
TITLE V—PRIVACY 
Subtitle A—Disclosure of Nonpublic Personal Information 
Sec. 501. Protection of nonpublic personal information. 
Sec. 502. Obligations with respect to disclosures of personal information. 
Sec. 503. Disclosure of institution privacy policy. 
Sec. 504. Rulemaking. 
Sec. 505. Enforcement. 
Sec. 506. Fair Credit Reporting Act amendment. 
Sec. 507. Relation to other provisions. 
Sec. 508. Study of information sharing among financial affiliates. 
Sec. 509. Definitions. 
Sec. 510. Effective date. 
Subtitle B—Fraudulent Access to Financial Information 
Sec. 521. Privacy protection for customer information of financial institutions. 
Sec. 522. Administrative enforcement. 
Sec. 523. Criminal penalty. 
Sec. 524. Relation to State laws. 
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Sec. 525. Agency guidance. 
Sec. 526. Reports. 
Sec. 527. Definitions. 
TITLE I—FACILITATING AFFILI-
ATION 
AMONG 
SECURITIES 
FIRMS, INSURANCE COMPA-
NIES, AND DEPOSITORY IN-
STITUTIONS 
Subtitle A—Affiliations 
SEC. 101. GLASS-STEAGALL ACT REFORMED. 
(a) SECTION 20 REPEALED.—Section 20 of the 
Banking Act of 1933 (12 U.S.C. 377) (commonly referred 
to as the ‘‘Glass-Steagall Act’’) is repealed. 
(b) SECTION 32 REPEALED.—Section 32 of the 
Banking Act of 1933 (12 U.S.C. 78) is repealed. 
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK 
HOLDING COMPANIES WHICH ARE NOT FI-
NANCIAL HOLDING COMPANIES. 
(a) IN GENERAL.—Section 4(c)(8) of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1843(c)(8)) is 
amended to read as follows: 
‘‘(8) shares of any company the activities of 
which had been determined by the Board by regula-
tion or order under this paragraph as of the day be-
fore the date of the enactment of the Financial Serv-
ices Act of 1999, to be so closely related to banking 
as to be a proper incident thereto (subject to such 
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terms and conditions contained in such regulation or 
order, unless modified by the Board);’’. 
(b) CONFORMING CHANGES TO OTHER STATUTES.— 
(1) AMENDMENT TO THE BANK HOLDING COM-
PANY ACT AMENDMENTS OF 1970.—Section 105 of 
the Bank Holding Company Act Amendments of 
1970 (12 U.S.C. 1850) is amended by striking ‘‘, to 
engage directly or indirectly in a nonbanking activity 
pursuant to section 4 of such Act,’’. 
(2) AMENDMENT TO THE BANK SERVICE COM-
PANY ACT.—Section 4(f) of the Bank Service Com-
pany Act (12 U.S.C. 1864(f)) is amended by strik-
ing the period and adding at the end the following: 
‘‘as of the day before the date of the enactment of 
the Financial Services Act of 1999.’’. 
SEC. 103. FINANCIAL HOLDING COMPANIES. 
(a) IN GENERAL.—The Bank Holding Company Act 
of 1956 is amended by inserting after section 5 (12 U.S.C. 
1844) the following new section: 
‘‘SEC. 6. FINANCIAL HOLDING COMPANIES. 
‘‘(a) FINANCIAL HOLDING COMPANY DEFINED.— 
For purposes of this section, the term ‘financial holding 
company’ means a bank holding company which meets the 
requirements of subsection (b). 
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‘‘(b) ELIGIBILITY REQUIREMENTS FOR FINANCIAL 
HOLDING COMPANIES.— 
‘‘(1) IN GENERAL.—No bank holding company 
may engage in any activity or directly or indirectly 
acquire or retain shares of any company under this 
section unless the bank holding company meets the 
following requirements: 
‘‘(A) All of the subsidiary depository insti-
tutions of the bank holding company are well 
capitalized. 
‘‘(B) All of the subsidiary depository insti-
tutions of the bank holding company are well 
managed. 
‘‘(C) All of the subsidiary depository insti-
tutions of the bank holding company have 
achieved a rating of ‘satisfactory record of 
meeting community credit needs’, or better, at 
the most recent examination of each such insti-
tution. 
‘‘(D) The company has filed with the 
Board a declaration that the company elects to 
be a financial holding company and certifying 
that the company meets the requirements of 
subparagraphs (A), (B), and (C). 
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‘‘(2) FOREIGN
BANKS
AND
COMPANIES.—For 
purposes of paragraph (1), the Board shall establish 
and apply comparable capital and other operating 
standards to a foreign bank that operates a branch 
or agency or owns or controls a bank or commercial 
lending company in the United States, and any com-
pany that owns or controls such foreign bank, giving 
due regard to the principle of national treatment 
and equality of competitive opportunity. 
‘‘(3) LIMITED EXCLUSIONS FROM COMMUNITY 
NEEDS REQUIREMENTS FOR NEWLY ACQUIRED DE-
POSITORY
INSTITUTIONS.—Any depository institu-
tion acquired by a bank holding company during the 
12-month period preceding the submission of a no-
tice under paragraph (1)(D) and any depository in-
stitution acquired after the submission of such no-
tice may be excluded for purposes of paragraph 
(1)(C) during the 12-month period beginning on the 
date of such acquisition if— 
‘‘(A) the bank holding company has sub-
mitted 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 ‘satisfactory record of 
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meeting community credit needs’, or better, at 
the next examination of the institution; and 
‘‘(B) the plan has been accepted by such 
agency. 
‘‘(c) ENGAGING IN ACTIVITIES THAT ARE FINANCIAL 
IN NATURE.— 
‘‘(1) FINANCIAL ACTIVITIES.— 
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a financial holding company may en-
gage in any activity, and acquire and retain the 
shares of any company engaged in any activity, 
that the Board has determined (by regulation 
or order and in accordance with subparagraph 
(B)) to be— 
‘‘(i) financial in nature or incidental 
to such financial activities; or 
‘‘(ii) complementary to activities au-
thorized under this subsection to the ex-
tent that the amount of such complemen-
tary activities remains small. 
‘‘(B) 
COORDINATION
BETWEEN
THE 
BOARD AND THE SECRETARY OF THE TREAS-
URY.— 
‘‘(i) PROPOSALS RAISED BEFORE THE 
BOARD.— 
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‘‘(I) 
CONSULTATION.—The 
Board shall notify the Secretary of 
the Treasury of, and consult with the 
Secretary of the Treasury concerning, 
any request, proposal, or application 
under this subsection, including a reg-
ulation or order proposed under para-
graph (4), for a determination of 
whether an activity is financial in na-
ture or incidental to such a financial 
activity. 
‘‘(II) 
TREASURY
VIEW.—The 
Board shall not determine that any 
activity is financial in nature or inci-
dental to a financial activity under 
this subsection if the Secretary of the 
Treasury notifies the Board in writ-
ing, not later than 30 days after the 
date of receipt of the notice described 
in subclause (I) (or such longer period 
as the Board determines to be appro-
priate in light of the circumstances) 
that the Secretary of the Treasury be-
lieves that the activity is not financial 
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in nature or incidental to a financial 
activity. 
‘‘(ii) PROPOSALS
RAISED
BY
THE 
TREASURY.— 
‘‘(I) TREASURY
RECOMMENDA-
TION.—The Secretary of the Treasury 
may, at any time, recommend in writ-
ing that the Board find an activity to 
be financial in nature or incidental to 
a financial activity. 
‘‘(II) TIME PERIOD FOR BOARD 
ACTION.—Not later than 30 days 
after the date of receipt of a written 
recommendation from the Secretary of 
the Treasury under subclause (I) (or 
such longer period as the Secretary of 
the Treasury and the Board deter-
mine to be appropriate in light of the 
circumstances), the Board shall deter-
mine whether to initiate a public rule-
making proposing that the subject 
recommended activity be found to be 
financial in nature or incidental to a 
financial activity under this sub-
section, and shall notify the Secretary 
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of the Treasury in writing of the de-
termination of the Board and, in the 
event that the Board determines not 
to seek public comment on the pro-
posal, the reasons for that determina-
tion. 
‘‘(2) FACTORS TO BE CONSIDERED.—In deter-
mining whether an activity is financial in nature or 
incidental to financial activities, the Board shall take 
into account— 
‘‘(A) the purposes of this Act and the Fi-
nancial Services Act of 1999; 
‘‘(B) changes or reasonably expected 
changes in the marketplace in which bank hold-
ing companies compete; 
‘‘(C) changes or reasonably expected 
changes in the technology for delivering finan-
cial services; and 
‘‘(D) whether such activity is necessary or 
appropriate to allow a bank holding company 
and the affiliates of a bank holding company 
to— 
‘‘(i) compete effectively with any com-
pany seeking to provide financial services 
in the United States; 
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‘‘(ii) use any available or emerging 
technological means, including any applica-
tion necessary to protect the security or ef-
ficacy of systems for the transmission of 
data or financial transactions, in providing 
financial services; and 
‘‘(iii) offer customers any available or 
emerging technological means for using fi-
nancial services. 
‘‘(3) ACTIVITIES THAT ARE FINANCIAL IN NA-
TURE.—The following activities shall be considered 
to be financial in nature: 
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding money or se-
curities. 
‘‘(B) Insuring, guaranteeing, or indem-
nifying against loss, harm, damage, illness, dis-
ability, or death, or providing and issuing annu-
ities, and acting as principal, agent, or broker 
for purposes of the foregoing. 
‘‘(C) Providing financial, investment, or 
economic advisory services, including advising 
an investment company (as defined in section 3 
of the Investment Company Act of 1940). 
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‘‘(D) Issuing or selling instruments rep-
resenting interests in pools of assets permissible 
for a bank to hold directly. 
‘‘(E) Underwriting, dealing in, or making 
a market in securities. 
‘‘(F) Engaging in any activity that the 
Board has determined, by order or regulation 
that is in effect on the date of the enactment 
of the Financial Services Act of 1999, to be so 
closely related to banking or managing or con-
trolling banks as to be a proper incident thereto 
(subject to the same terms and conditions con-
tained in such order or regulation, unless modi-
fied by the Board). 
‘‘(G) Engaging, in the United States, in 
any activity that— 
‘‘(i) a bank holding company may en-
gage in outside the United States; and 
‘‘(ii) the Board has determined, under 
regulations issued pursuant to section 
4(c)(13) of this Act (as in effect on the 
day before the date of the enactment of the 
Financial Services Act of 1999) to be 
usual in connection with the transaction of 
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banking or other financial operations 
abroad. 
‘‘(H) Directly or indirectly acquiring or 
controlling, whether as principal, on behalf of 
one or more entities (including entities, other 
than a depository institution, that the bank 
holding company controls) or otherwise, shares, 
assets, or ownership interests (including with-
out limitation debt or equity securities, partner-
ship interests, trust certificates or other instru-
ments representing ownership) of a company or 
other entity, whether or not constituting control 
of such company or entity, engaged in any ac-
tivity not authorized pursuant to this section 
if— 
‘‘(i) the shares, assets, or ownership 
interests are not acquired or held by a de-
pository institution; 
‘‘(ii) such shares, assets, or ownership 
interests are acquired and held by an affil-
iate of the bank holding company that is a 
registered broker or dealer that is engaged 
in securities underwriting activities, or an 
affiliate of such broker or dealer, as part 
of a bona fide underwriting or investment 
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banking activity, including investment ac-
tivities engaged in for the purpose of ap-
preciation and ultimate resale or disposi-
tion of the investment; 
‘‘(iii) such shares, assets, or owner-
ship interests are held only for such a pe-
riod of time as will permit the sale or dis-
position thereof on a reasonable basis con-
sistent with the nature of the activities de-
scribed in clause (ii); and 
‘‘(iv) during the period such shares, 
assets, or ownership interests are held, the 
bank holding company does not actively 
participate in the day to day management 
or operation of such company or entity, ex-
cept insofar as necessary to achieve the ob-
jectives of clause (ii). 
‘‘(I) Directly or indirectly acquiring or con-
trolling, whether as principal, on behalf of one 
or more entities (including entities, other than 
a depository institution or subsidiary of a de-
pository institution, that the bank holding com-
pany controls) or otherwise, shares, assets, or 
ownership interests (including without limita-
tion debt or equity securities, partnership inter-
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ests, trust certificates or other instruments rep-
resenting ownership) of a company or other en-
tity, whether or not constituting control of such 
company or entity, engaged in any activity not 
authorized pursuant to this section if— 
‘‘(i) the shares, assets, or ownership 
interests are not acquired or held by a de-
pository institution or a subsidiary of a de-
pository institution; 
‘‘(ii) such shares, assets, or ownership 
interests are acquired and held by an in-
surance company that is predominantly en-
gaged in underwriting life, accident and 
health, or property and casualty insurance 
(other than credit-related insurance) or 
providing and issuing annuities; 
‘‘(iii) such shares, assets, or owner-
ship interests represent an investment 
made in the ordinary course of business of 
such insurance company in accordance 
with relevant State law governing such in-
vestments; and 
‘‘(iv) during the period such shares, 
assets, or ownership interests are held, the 
bank holding company does not directly or 
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indirectly participate in the day-to-day 
management or operation of the company 
or entity except insofar as necessary to 
achieve the objectives of clauses (ii) and 
(iii). 
‘‘(4) AUTHORIZATION OF NEW FINANCIAL AC-
TIVITIES.—The Board shall, by regulation or order 
and in accordance with paragraph (1)(B), define, 
consistent with the purposes of this Act, the fol-
lowing activities as, and the extent to which such ac-
tivities are, financial in nature or incidental to ac-
tivities which are financial in nature: 
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding financial as-
sets other than money or securities. 
‘‘(B) Providing any device or other instru-
mentality for transferring money or other finan-
cial assets. 
‘‘(C) Arranging, effecting, or facilitating fi-
nancial transactions for the account of third 
parties. 
‘‘(5) POST-CONSUMMATION NOTIFICATION.— 
‘‘(A) IN
GENERAL.—A financial holding 
company that acquires any company, or com-
mences any activity, pursuant to this subsection 
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shall provide written notice to the Board de-
scribing the activity commenced or conducted 
by the company acquired no later than 30 cal-
endar days after commencing the activity or 
consummating the acquisition. 
‘‘(B) APPROVAL NOT REQUIRED FOR CER-
TAIN FINANCIAL ACTIVITIES.—Except as pro-
vided in section 4(j) with regard to the acquisi-
tion of a savings association or in paragraph 
(6) of this subsection, a financial holding com-
pany may commence any activity, or acquire 
any company, pursuant to paragraph (3) or any 
regulation prescribed or order issued under 
paragraph (4), without prior approval of the 
Board. 
‘‘(6) NOTICE REQUIRED FOR LARGE COMBINA-
TIONS.— 
‘‘(A) IN GENERAL.—No financial holding 
company shall directly or indirectly acquire, and 
no company that becomes a financial holding 
company shall directly or indirectly acquire con-
trol of, any company in the United States, in-
cluding through merger, consolidation, or other 
type of business combination, that— 
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‘‘(i) is engaged in activities permitted 
under this subsection or subsection (g); 
and 
‘‘(ii) has consolidated total assets in 
excess of $40,000,000,000, 
unless such holding company has provided no-
tice to the Board, not later than 60 days prior 
to such proposed acquisition or prior to becom-
ing a financial holding company, and during 
that time period, or such longer time period not 
exceeding an additional 60 days, as established 
by the Board, the Board has not issued a notice 
disapproving the proposed acquisition or reten-
tion. 
‘‘(B) FACTORS FOR CONSIDERATION.—In 
reviewing any prior notice filed under this para-
graph, the Board shall take into consider-
ation— 
‘‘(i) whether the company is in com-
pliance with all applicable criteria set forth 
in subsection (b) and the provisions of sub-
section (d); 
‘‘(ii) whether the proposed combina-
tion represents an undue aggregation of 
resources; 
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‘‘(iii) whether the proposed combina-
tion poses a risk to the deposit insurance 
system; 
‘‘(iv) whether the proposed combina-
tion poses a risk to State insurance guar-
anty funds; 
‘‘(v) whether the proposed combina-
tion can reasonably be expected to be in 
the best interests of depositors or policy-
holders of the respective entities; 
‘‘(vi) whether the proposed trans-
action can reasonably be expected to fur-
ther the purposes of this Act and produce 
benefits to the public; and 
‘‘(vii) whether, and the extent to 
which, the proposed combination poses an 
undue risk to the stability of the financial 
system in the United States. 
‘‘(C) 
REQUIRED
INFORMATION.—The 
Board may disapprove any prior notice filed 
under this paragraph if the company submitting 
such notice neglects, fails, or refuses to furnish 
to the Board all relevant information required 
by the Board. 
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‘‘(D) SOLICITATION OF VIEWS OF OTHER 
SUPERVISORY AGENCIES.— 
‘‘(i) IN GENERAL.—Upon receiving a 
prior notice under this paragraph, in order 
to provide for the submission of their views 
and recommendations, the Board shall give 
notice of the proposal to— 
‘‘(I) 
the 
appropriate 
Federal 
banking agency of any bank involved; 
‘‘(II) the appropriate functional 
regulator of any functionally regulated 
nondepository institution (as defined 
in section 5(c)(1)(C)) involved; and 
‘‘(III) the Secretary of the Treas-
ury, the Attorney General, and the 
Federal Trade Commission. 
‘‘(ii) TIMING.—The views and rec-
ommendations of any agency provided no-
tice under this paragraph shall be sub-
mitted to the Board not later than 30 cal-
endar days after the date on which notice 
to the agency was given, unless the Board 
determines that another shorter time pe-
riod is appropriate. 
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‘‘(d) PROVISIONS APPLICABLE TO FINANCIAL HOLD-
ING COMPANIES THAT FAIL TO MEET REQUIREMENTS.— 
‘‘(1) IN GENERAL.—If the Board finds, after 
notice from or consultation with the appropriate 
Federal banking agency, that a financial holding 
company is not in compliance with the requirements 
of subparagraph (A), (B), or (C) of subsection 
(b)(1), the Board shall give notice of such finding to 
the company. 
‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE-
QUIRED.—Within 45 days of receipt by a financial 
holding company of a notice given under paragraph 
(1) (or such additional period as the Board may per-
mit), the company shall execute an agreement ac-
ceptable to the Board to comply with the require-
ments applicable to a financial holding company. 
‘‘(3) AUTHORITY
TO
IMPOSE
LIMITATIONS.— 
Until the conditions described in a notice to a finan-
cial holding company under paragraph (1) are cor-
rected— 
‘‘(A) the Board may impose such limita-
tions on the conduct or activities of the com-
pany or any affiliate of the company as the 
Board determines to be appropriate under the 
circumstances; and 
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‘‘(B) the appropriate Federal banking 
agency may impose such limitations on the con-
duct or activities of an affiliated depository in-
stitution or subsidiary of a depository institu-
tion as the appropriate Federal banking agency 
determines to be appropriate under the cir-
cumstances. 
‘‘(4) FAILURE TO CORRECT.—If, after receiving 
a notice under paragraph (1), a financial holding 
company does not— 
‘‘(A) execute and implement an agreement 
in accordance with paragraph (2); 
‘‘(B) comply with any limitations imposed 
under paragraph (3); 
‘‘(C) in the case of a notice of failure to 
comply with subsection (b)(1)(A), restore each 
depository institution subsidiary to well capital-
ized status before the end of the 180-day period 
beginning on the date such notice is received by 
the company (or such other period permitted by 
the Board); or 
‘‘(D) in the case of a notice of failure to 
comply with subparagraph (B) or (C) of sub-
section (b)(1), restore compliance with any such 
subparagraph by the date the next examination 
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of the depository institution subsidiary is com-
pleted or by the end of such other period as the 
Board determines to be appropriate, 
the Board may require such company, under such 
terms and conditions as may be imposed by the 
Board and subject to such extension of time as may 
be granted in the Board’s discretion, to divest con-
trol of any depository institution subsidiary or, at 
the election of the financial holding company, in-
stead to cease to engage in any activity conducted by 
such company or its subsidiaries pursuant to this 
section. 
‘‘(5) CONSULTATION.—In taking any action 
under this subsection, the Board shall consult with 
all relevant Federal and State regulatory agencies. 
‘‘(e) SAFEGUARDS FOR BANK SUBSIDIARIES.—A fi-
nancial holding company shall assure that— 
‘‘(1) the procedures of the holding company for 
identifying and managing financial and operational 
risks within the company, and the subsidiaries of 
such company, adequately protect the subsidiaries of 
such company which are insured depository institu-
tions or wholesale financial institution from such 
risks; 
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‘‘(2) the holding company has reasonable poli-
cies and procedures to preserve the separate cor-
porate identity and limited liability of such company 
and the subsidiaries of such company, for the pro-
tection of the company’s subsidiary insured deposi-
tory institutions and wholesale financial institutions; 
and 
‘‘(3) the holding company complies with this 
section. 
‘‘(f) 
AUTHORITY
TO
RETAIN
LIMITED
NON-
FINANCIAL ACTIVITIES AND AFFILIATIONS.— 
‘‘(1) IN
GENERAL.—Notwithstanding section 
4(a), a company that is not a bank holding company 
or a foreign bank (as defined in section 1(b)(7) of 
the International Banking Act of 1978) and becomes 
a financial holding company after the date of the en-
actment of the Financial Services Act of 1999 may 
continue to engage in any activity and retain direct 
or indirect ownership or control of shares of a com-
pany engaged in any activity if— 
‘‘(A) the holding company lawfully was en-
gaged in the activity or held the shares of such 
company on September 30, 1997; 
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‘‘(B) the holding company is predomi-
nantly engaged in financial activities as defined 
in paragraph (2); and 
‘‘(C) the company engaged in such activity 
continues to engage only in the same activities 
that such company conducted on September 30, 
1997, and other activities permissible under 
this Act. 
‘‘(2) PREDOMINANTLY
FINANCIAL.—For pur-
poses of this subsection, a company is predominantly 
engaged in financial activities if the annual gross 
revenues derived by the holding company and all 
subsidiaries of the holding company (excluding reve-
nues derived from subsidiary depository institu-
tions), on a consolidated basis, from engaging in ac-
tivities that are financial in nature or are incidental 
to activities that are financial in nature under sub-
section (c) represent at least 85 percent of the con-
solidated annual gross revenues of the company. 
‘‘(3) NO EXPANSION OF GRANDFATHERED COM-
MERCIAL
ACTIVITIES
THROUGH
MERGER
OR
CON-
SOLIDATION.—A financial holding company that en-
gages in activities or holds shares pursuant to this 
subsection, or a subsidiary of such financial holding 
company, may not acquire, in any merger, consolida-
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tion, or other type of business combination, assets of 
any other company which is engaged in any activity 
which the Board has not determined to be financial 
in nature or incidental to activities that are financial 
in nature under subsection (c), except this para-
graph shall not apply with respect to a company that 
owns a broadcasting station licensed under title III 
of the Communications Act of 1934 and the shares 
of which have been controlled by an insurance com-
pany since January 1, 1998. 
‘‘(4) CONTINUING
REVENUE
LIMITATION
ON 
GRANDFATHERED
COMMERCIAL
ACTIVITIES.—Not-
withstanding any other provision of this subsection, 
a financial holding company may continue to engage 
in activities or hold shares in companies pursuant to 
this subsection only to the extent that the aggregate 
annual gross revenues derived from all such activi-
ties and all such companies does not exceed 15 per-
cent of the consolidated annual gross revenues of the 
financial holding company (excluding revenues de-
rived from subsidiary depository institutions). 
‘‘(5) CROSS MARKETING RESTRICTIONS APPLI-
CABLE TO COMMERCIAL ACTIVITIES.—A depository 
institution controlled by a financial holding company 
shall not— 
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‘‘(A) offer or market, directly or through 
any arrangement, any product or service of a 
company whose activities are conducted or 
whose shares are owned or controlled by the fi-
nancial holding company pursuant to this sub-
section or subparagraph (H) or (I) of sub-
section (c)(3); or 
‘‘(B) permit any of its products or services 
to be offered or marketed, directly or through 
any arrangement, by or through any company 
described in subparagraph (A). 
‘‘(6) TRANSACTIONS WITH NONFINANCIAL AF-
FILIATES.—A depository institution controlled by a 
financial holding company may not engage in a cov-
ered transaction (as defined by section 23A(b)(7) of 
the Federal Reserve Act) with any affiliate con-
trolled by the company pursuant to section 10(c), 
this subsection, or subparagraph (H) or (I) of sub-
section (c)(3). 
‘‘(7) SUNSET OF GRANDFATHER.—A financial 
holding company engaged in any activity, or retain-
ing direct or indirect ownership or control of shares 
of a company, pursuant to this subsection, shall ter-
minate such activity and divest ownership or control 
of the shares of such company before the end of the 
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10-year period beginning on the date of the enact-
ment of the Financial Services Act of 1999. The 
Board may, upon application by a financial holding 
company, extend such 10-year period by a period not 
to exceed an additional 5 years if such extension 
would not be detrimental to the public interest. 
‘‘(g) DEVELOPING ACTIVITIES.—A financial holding 
company may engage directly or indirectly, or acquire 
shares of any company engaged, in any activity that the 
Board has not determined to be financial in nature or inci-
dental to financial activities under subsection (c) if— 
‘‘(1) the holding company reasonably concludes 
that the activity is financial in nature or incidental 
to financial activities; 
‘‘(2) the gross revenues from all activities con-
ducted under this subsection represent less than 5 
percent of the consolidated gross revenues of the 
holding company; 
‘‘(3) the aggregate total assets of all companies 
the shares of which are held under this subsection 
do not exceed 5 percent of the holding company’s 
consolidated total assets; 
‘‘(4) the total capital invested in activities con-
ducted under this subsection represents less than 5 
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percent of the consolidated total capital of the hold-
ing company; 
‘‘(5) neither the Board nor the Secretary of the 
Treasury has determined that the activity is not fi-
nancial in nature or incidental to financial activities 
under subsection (c); 
‘‘(6) the holding company is not required to 
provide prior written notice of the transaction to the 
Board under subsection (c)(6); and 
‘‘(7) the holding company provides written noti-
fication to the Board describing the activity com-
menced or conducted by the company acquired no 
later than 10 business days after commencing the 
activity or consummating the acquisition.’’. 
(b) FACTORS FOR CONSIDERATION IN REVIEWING 
APPLICATION BY FINANCIAL HOLDING COMPANY TO AC-
QUIRE BANK.—Section 3(c) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1842(c)) is amended by add-
ing at the end the following new paragraph: 
‘‘(6) ‘TOO BIG TO FAIL’ FACTOR.—In consid-
ering an acquisition, merger, or consolidation under 
this section involving a financial holding company or 
a company that would be any such holding company 
upon the consummation of the transaction, the 
Board shall consider whether, and the extent to 
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which, the proposed acquisition, merger, or consoli-
dation poses an undue risk to the stability of the fi-
nancial system of the United States.’’. 
(c) TECHNICAL AND CONFORMING AMENDMENTS.— 
(1) Section 2 of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1841) is amended by adding 
at the end the following new subsection: 
‘‘(p) INSURANCE COMPANY.—For purposes of sec-
tions 5, 6, and 10, the term ‘insurance company’ includes 
any person engaged in the business of insurance to the 
extent of such activities.’’. 
(2) Section 4(j) of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1843(j)) is amended— 
(A) in paragraph (1)(A), by inserting ‘‘or 
in any complementary activity under section 
6(c)(1)(B)’’ after ‘‘subsection (c)(8) or (a)(2)’’; 
and 
(B) in paragraph (3)— 
(i) by inserting ‘‘, other than any 
complementary 
activity 
under 
section 
6(c)(1)(B),’’ after ‘‘to engage in any activ-
ity’’; and 
(ii) by inserting ‘‘or a company en-
gaged in any complementary activity under 
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section 6(c)(1)(B)’’ after ‘‘insured deposi-
tory institution’’. 
(d) REPORT.— 
(1) IN GENERAL.—By the end of the 4-year pe-
riod beginning on the date of the enactment of this 
Act and every 4 years thereafter, the Board of Gov-
ernors of the Federal Reserve System and the Sec-
retary of the Treasury shall submit a joint report to 
the Congress containing a summary of new activities 
which are financial in nature, including grand-
fathered commercial activities, in which any financial 
holding company is engaged pursuant to subsection 
(c)(1) or (f) of section 6 of the Bank Holding Com-
pany Act of 1956 (as added by subsection (a)). 
(2) OTHER CONTENTS.—Each report submitted 
to the Congress pursuant to paragraph (1) shall also 
contain the following: 
(A) A discussion of actions by the Board 
of Governors of the Federal Reserve System 
and the Secretary of the Treasury, whether by 
regulation, order, interpretation, or guideline or 
by approval or disapproval of an application, 
with regard to activities of financial holding 
companies which are incidental to activities fi-
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nancial in nature or complementary to such fi-
nancial activities. 
(B) An analysis and discussion of the risks 
posed by commercial activities of financial hold-
ing companies to the safety and soundness of 
affiliate depository institutions. 
(C) An analysis and discussion of the ef-
fect of mergers and acquisitions under section 
6 of the Bank Holding Company Act of 1956 
on market concentration in the financial serv-
ices industry. 
(D) An analysis and discussion, by the 
Board and the Secretary in consultation with 
the other Federal banking agencies (as defined 
in section 3(z) of the Federal Deposit Insurance 
Act), of the impact of the implementation of 
this Act, and the amendments made by this 
Act, on the extent of meeting community credit 
needs and capital availability under the Com-
munity Reinvestment Act of 1977. 
SEC. 104. OPERATION OF STATE LAW. 
(a) AFFILIATIONS.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), no State may, by statute, regulation, 
order, interpretation, or other action, prevent or re-
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strict an insured depository institution or wholesale 
financial institution, or a subsidiary or affiliate 
thereof, from being affiliated directly or indirectly or 
associated with any person or entity, as authorized 
or permitted by this Act or any other provision of 
Federal law. 
(2) INSURANCE.—With respect to affiliations 
between insured depository institutions or wholesale 
financial institutions, or any subsidiary or affiliate 
thereof, and persons or entities engaged in the busi-
ness of insurance, paragraph (1) does not prohibit— 
(A) any State from requiring any person 
or entity that proposes to acquire control of an 
entity that is engaged in the business of insur-
ance and domiciled in that State (hereafter in 
this subparagraph referred to as the ‘‘insurer’’) 
to furnish to the insurance regulatory authority 
of that State, not later than 60 days before the 
effective date of the proposed acquisition— 
(i) the name and address of each per-
son by whom, or on whose behalf, the af-
filiation referred to in this subparagraph is 
to be effected (hereafter in this subpara-
graph referred to as the ‘‘acquiring 
party’’); 
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(ii) if the acquiring party is an indi-
vidual, his or her principal occupation and 
all offices and positions held during the 5 
years preceding the date of notification, 
and any conviction of crimes other than 
minor traffic violations during the 10 years 
preceding the date of notification; 
(iii) if the acquiring party is not an 
individual— 
(I) a report of the nature of its 
business operations during the 5 years 
preceding the date of notification, or 
for such shorter period as such person 
and any predecessors thereof shall 
have been in existence; 
(II) an informative description of 
the business intended to be done by 
the acquiring party and any sub-
sidiary thereof; and 
(III) a list of all individuals who 
are, or who have been selected to be-
come, directors or executive officers of 
the acquiring party or who perform, 
or will perform, functions appropriate 
to such positions, including, for each 
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such individual, the information re-
quired by clause (ii); 
(iv) the source, nature, and amount of 
the consideration used, or to be used, in ef-
fecting the merger or other acquisition of 
control, a description of any transaction 
wherein funds were, or are to be, obtained 
for any such purpose, and the identity of 
persons furnishing such consideration, ex-
cept that, if a source of such consideration 
is a loan made in the lender’s ordinary 
course of business, the identity of the lend-
er shall remain confidential if the person 
filing such statement so requests; 
(v) fully audited financial information 
as to the earnings and financial condition 
of each acquiring party for the 5 fiscal 
years preceding the date of notification of 
each such acquiring party, or for such less-
er period as such acquiring party and any 
predecessors thereof shall have been in ex-
istence, and similar unaudited information 
as of a date not earlier than 90 days be-
fore the date of notification, except that, in 
the case of an acquiring party that is an 
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insurer actively engaged in the business of 
insurance, the financial statements of such 
insurer need not be audited, but such audit 
may be required if the need therefor is de-
termined by the insurance regulatory au-
thority of the State; 
(vi) any plans or proposals that each 
acquiring party may have to liquidate such 
insurer, to sell its assets, or to merge or 
consolidate it with any person or to make 
any other material change in its business 
or corporate structure or management; 
(vii) the number of shares of any se-
curity of the insurer that each acquiring 
party proposes to acquire, the terms of any 
offer, request, invitation, agreement, or ac-
quisition, and a statement as to the meth-
od by which the fairness of the proposal 
was arrived at; 
(viii) the amount of each class of any 
security of the insurer that is beneficially 
owned or concerning which there is a right 
to acquire beneficial ownership by each ac-
quiring party; 
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upon interviews or at the suggestion of 
such acquiring party; 
(xii) copies of all tender offers for, re-
quests or invitations for tenders of, ex-
change offers for and agreements to ac-
quire or exchange any securities of the in-
surer and, if distributed, of additional so-
liciting material relating thereto; and 
(xiii) the terms of any agreement, 
contract, or understanding made with any 
broker-dealer as to solicitation of securities 
of the insurer for tender and the amount 
of any fees, commissions, or other com-
pensation to be paid to broker-dealers with 
regard thereto; 
(B) in the case of a person engaged in the 
business of insurance which is the subject of an 
acquisition or change or continuation in control, 
the State of domicile of such person from re-
viewing or taking action (including approval or 
disapproval) with regard to the acquisition or 
change or continuation in control, as long as 
the State reviews and actions— 
(i) are completed by the end of the 
60-day period beginning on the later of the 
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date the State received notice of the pro-
posed action or the date the State received 
the information required under State law 
regarding such acquisition or change or 
continuation in control; 
(ii) do not have the effect of discrimi-
nating, intentionally or unintentionally, 
against an insured depository institution or 
affiliate thereof or against any other per-
son based upon affiliation with an insured 
depository institution; and 
(iii) are based on standards or re-
quirements relating to solvency or manage-
rial fitness; 
(C) any State from requiring an entity 
that is acquiring control of an entity that is en-
gaged in the business of insurance and domi-
ciled in that State to maintain or restore the 
capital requirements of that insurance entity to 
the level required under the capital regulations 
of general applicability in that State to avoid 
the requirement of preparing and filing with the 
insurance regulatory authority of that State a 
plan to increase the capital of the entity, except 
that any determination by the State insurance 
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regulatory authority with respect to such re-
quirement shall be made not later than 60 days 
after the date of notification under subpara-
graph (A); 
(D) any State from taking actions with re-
spect to the receivership or conservatorship of 
any insurance company; 
(E) any State from restricting a change in 
the ownership of stock in an insurance com-
pany, or a company formed for the purpose of 
controlling such insurance company, for a pe-
riod of not more than 3 years beginning on the 
date of the conversion of such company from 
mutual to stock form; or 
(F) any State from requiring an organiza-
tion which has been eligible at any time since 
January 1, 1987, to claim the special deduction 
provided by section 833 of the Internal Revenue 
Code of 1986 to meet certain conditions in 
order to undergo, as determined by the State, 
a reorganization, recapitalization, conversion, 
merger, consolidation, sale or other disposition 
of substantial operating assets, demutualization, 
dissolution, or to undertake other similar ac-
tions and which is governed under a State stat-
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ute enacted on May 22, 1998, relating to hos-
pital, medical, and dental service corporation 
conversions. 
(3) PRESERVATION OF STATE ANTITRUST AND 
GENERAL CORPORATE LAWS.— 
(A) IN GENERAL.—Subject to subsection 
(c) and the nondiscrimination provisions con-
tained in such subsection, no provision in para-
graph (1) shall be construed as affecting State 
laws, regulations, orders, interpretations, or 
other actions of general applicability relating to 
the governance of corporations, partnerships, 
limited liability companies or other business as-
sociations incorporated or formed under the 
laws of that State or domiciled in that State, or 
the applicability of the antitrust laws of any 
State or any State law that is similar to the 
antitrust laws. 
(B) DEFINITION.—The term ‘‘antitrust 
laws’’ has the same meaning as in subsection 
(a) of the first section of the Clayton Act, and 
includes section 5 of the Federal Trade Com-
mission Act to the extent that such section 5 
relates to unfair methods of competition. 
(b) ACTIVITIES.— 
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(1) IN GENERAL.—Except as provided in para-
graph (3), and except with respect to insurance 
sales, solicitation, and cross marketing activities, 
which shall be governed by paragraph (2), no State 
may, by statute, regulation, order, interpretation, or 
other action, prevent or restrict an insured deposi-
tory institution, wholesale financial institution, or 
subsidiary or affiliate thereof from engaging directly 
or indirectly, either by itself or in conjunction with 
a subsidiary, affiliate, or any other entity or person, 
in any activity authorized or permitted under this 
Act. 
(2) INSURANCE SALES.— 
(A) IN GENERAL.—In accordance with the 
legal standards for preemption set forth in the 
decision of the Supreme Court of the United 
States in Barnett Bank of Marion County N.A. 
v. Nelson, 517 U.S. 25 (1996), no State may, 
by statute, regulation, order, interpretation, or 
other action, prevent or significantly interfere 
with the ability of an insured depository institu-
tion or wholesale financial institution, or a sub-
sidiary or affiliate thereof, to engage, directly or 
indirectly, either by itself or in conjunction with 
a subsidiary, affiliate, or any other party, in 
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any insurance sales, solicitation, or cross-mar-
keting activity. 
(B) CERTAIN STATE LAWS PRESERVED.— 
Notwithstanding subparagraph (A), a State 
may impose any of the following restrictions, or 
restrictions which are substantially the same as 
but no more burdensome or restrictive than 
those in each of the following clauses: 
(i) Restrictions prohibiting the rejec-
tion of an insurance policy by an insured 
depository institution, wholesale financial 
institution, or any subsidiary or affiliate 
thereof, solely because the policy has been 
issued or underwritten by any person who 
is not associated with such insured deposi-
tory institution or wholesale financial insti-
tution, or any subsidiary or affiliate there-
of, when such insurance is required in con-
nection with a loan or extension of credit. 
(ii) Restrictions prohibiting a require-
ment for any debtor, insurer, or insurance 
agent or broker to pay a separate charge 
in connection with the handling of insur-
ance that is required in connection with a 
loan or other extension of credit or the 
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provision of another traditional banking 
product by an insured depository institu-
tion, wholesale financial institution, or any 
subsidiary or affiliate thereof, unless such 
charge would be required when the insured 
depository institution or wholesale financial 
institution, or any subsidiary or affiliate 
thereof, is the licensed insurance agent or 
broker providing the insurance. 
(iii) Restrictions prohibiting the use of 
any advertisement or other insurance pro-
motional material by an insured depository 
institution or wholesale financial institu-
tion, or any subsidiary or affiliate thereof, 
that would cause a reasonable person to 
believe mistakenly that— 
(I) a State or the Federal Gov-
ernment is responsible for the insur-
ance sales activities of, or stands be-
hind the credit of, the institution, af-
filiate, or subsidiary; or 
(II) a State, or the Federal Gov-
ernment guarantees any returns on 
insurance products, or is a source of 
payment on any insurance obligation 
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of or sold by the institution, affiliate, 
or subsidiary; 
(iv) Restrictions prohibiting the pay-
ment or receipt of any commission or bro-
kerage fee or other valuable consideration 
for services as an insurance agent or 
broker to or by any person, unless such 
person holds a valid State license regard-
ing the applicable class of insurance at the 
time at which the services are performed, 
except that, in this clause, the term ‘‘serv-
ices as an insurance agent or broker’’ does 
not include a referral by an unlicensed per-
son of a customer or potential customer to 
a licensed insurance agent or broker that 
does not include a discussion of specific in-
surance policy terms and conditions. 
(v) Restrictions prohibiting any com-
pensation paid to or received by any indi-
vidual who is not licensed to sell insurance, 
for the referral of a customer that seeks to 
purchase, or seeks an opinion or advice on, 
any insurance product to a person that 
sells or provides opinions or advice on such 
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product, based on the purchase of insur-
ance by the customer. 
(vi) Restrictions prohibiting the re-
lease of the insurance information of a cus-
tomer (defined as information concerning 
the premiums, terms, and conditions of in-
surance 
coverage, 
including 
expiration 
dates and rates, and insurance claims of a 
customer contained in the records of the 
insured depository institution or wholesale 
financial institution, or a subsidiary or af-
filiate thereof) to any person or entity 
other than an officer, director, employee, 
agent, subsidiary, or affiliate of an insured 
depository institution or a wholesale finan-
cial institution, for the purpose of soliciting 
or selling insurance, without the express 
consent of the customer, other than a pro-
vision that prohibits— 
(I) a transfer of insurance infor-
mation to an unaffiliated insurance 
company, agent, or broker in connec-
tion with transferring insurance in 
force on existing insureds of the in-
sured depository institution or whole-
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sale financial institution, or subsidiary 
or affiliate thereof, or in connection 
with a merger with or acquisition of 
an unaffiliated insurance company, 
agent, or broker; or 
(II) the release of information as 
otherwise authorized by State or Fed-
eral law. 
(vii) Restrictions prohibiting the use 
of health information obtained from the in-
surance records of a customer for any pur-
pose, other than for its activities as a li-
censed agent or broker, without the ex-
press consent of the customer. 
(viii) Restrictions prohibiting the ex-
tension of credit or any product or service 
that is equivalent to an extension of credit, 
lease or sale of property of any kind, or 
furnishing of any services or fixing or vary-
ing the consideration for any of the fore-
going, on the condition or requirement that 
the customer obtain insurance from an in-
sured depository institution, wholesale fi-
nancial institution, a subsidiary or affiliate 
thereof, or a particular insurer, agent, or 
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broker, other than a prohibition that would 
prevent any insured depository institution 
or wholesale financial institution, or any 
subsidiary or affiliate thereof— 
(I) from engaging in any activity 
described in this clause that would not 
violate section 106 of the Bank Hold-
ing Company Act Amendments of 
1970, as interpreted by the Board of 
Governors of the Federal Reserve Sys-
tem; or 
(II) from informing a customer 
or prospective customer that insur-
ance is required in order to obtain a 
loan or credit, that loan or credit ap-
proval is contingent upon the procure-
ment by the customer of acceptable 
insurance, or that insurance is avail-
able from the insured depository insti-
tution or wholesale financial institu-
tion, or any subsidiary or affiliate 
thereof. 
(ix) Restrictions requiring, when an 
application by a consumer for a loan or 
other extension of credit from an insured 
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depository institution or wholesale financial 
institution is pending, and insurance is of-
fered or sold to the consumer or is re-
quired in connection with the loan or ex-
tension of credit by the insured depository 
institution or wholesale financial institu-
tion or any affiliate or subsidiary thereof, 
that a written disclosure be provided to the 
consumer or prospective customer indi-
cating that his or her choice of an insur-
ance provider will not affect the credit de-
cision or credit terms in any way, except 
that the insured depository institution or 
wholesale financial institution may impose 
reasonable requirements concerning the 
creditworthiness of the insurance provider 
and scope of coverage chosen. 
(x) Restrictions requiring clear and 
conspicuous disclosure, in writing, where 
practicable, to the customer prior to the 
sale of any insurance policy that such pol-
icy— 
(I) is not a deposit; 
(II) is not insured by the Federal 
Deposit Insurance Corporation; 
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(III) is not guaranteed by the in-
sured depository institution or whole-
sale financial institution or, if appro-
priate, its subsidiaries or affiliates or 
any person soliciting the purchase of 
or selling insurance on the premises 
thereof; and 
(IV) where appropriate, involves 
investment risk, including potential 
loss of principal. 
(xi) Restrictions requiring that, when 
a customer obtains insurance (other than 
credit insurance or flood insurance) and 
credit from an insured depository institu-
tion or wholesale financial institution, or 
its subsidiaries or affiliates, or any person 
soliciting the purchase of or selling insur-
ance on the premises thereof, the credit 
and insurance transactions be completed 
through separate documents. 
(xii) Restrictions prohibiting, when a 
customer obtains insurance (other than 
credit insurance or flood insurance) and 
credit from an insured depository institu-
tion or wholesale financial institution or its 
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subsidiaries or affiliates, or any person so-
liciting the purchase of or selling insurance 
on the premises thereof, inclusion of the 
expense of insurance premiums in the pri-
mary credit transaction without the ex-
press written consent of the customer. 
(xiii) Restrictions requiring mainte-
nance of separate and distinct books and 
records relating to insurance transactions, 
including all files relating to and reflecting 
consumer complaints, and requiring that 
such insurance books and records be made 
available to the appropriate State insur-
ance regulator for inspection upon reason-
able notice. 
(C) LIMITATIONS.— 
(i) OCC DEFERENCE.—Section 306(e) 
does not apply with respect to any State 
statute, regulation, order, interpretation, 
or other action regarding insurance sales, 
solicitation, or cross marketing activities 
described in subparagraph (A) that was 
issued, adopted, or enacted before Sep-
tember 3, 1998, and that is not described 
in subparagraph (B). 
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(ii) NONDISCRIMINATION.—Subsection 
(c) does not apply with respect to any 
State statute, regulation, order, interpreta-
tion, or other action regarding insurance 
sales, solicitation, or cross marketing ac-
tivities described in subparagraph (A) that 
was issued, adopted, or enacted before 
September 3, 1998, and that is not de-
scribed in subparagraph (B). 
(iii) CONSTRUCTION.—Nothing in this 
paragraph shall be construed to limit the 
applicability of the decision of the Supreme 
Court in Barnett Bank of Marion County 
N.A. v. Nelson, 116 S. Ct. 1103 (1996) 
with respect to a State statute, regulation, 
order, interpretation, or other action that 
is not described in subparagraph (B). 
(iv) LIMITATION
ON
INFERENCES.— 
Nothing in this paragraph shall be con-
strued to create any inference with respect 
to any State statute, regulation, order, in-
terpretation, or other action that is not re-
ferred to or described in this paragraph. 
(3) 
INSURANCE
ACTIVITIES
OTHER
THAN 
SALES.—State statutes, regulations, interpretations, 
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orders, and other actions shall not be preempted 
under subsection (b)(1) to the extent that they— 
(A) relate to, or are issued, adopted, or en-
acted for the purpose of regulating the business 
of insurance in accordance with the Act of 
March 9, 1945 (commonly known as the 
‘‘McCarran-Ferguson Act’’); 
(B) apply only to persons or entities that 
are not insured depository institutions or whole-
sale financial institutions, but that are directly 
engaged in the business of insurance (except 
that they may apply to depository institutions 
engaged in providing savings bank life insur-
ance as principal to the extent of regulating 
such insurance); 
(C) do not relate to or directly or indirectly 
regulate insurance sales, solicitations, or cross- 
marketing activities; and 
(D) are not prohibited under subsection 
(c). 
(4) FINANCIAL ACTIVITIES OTHER THAN INSUR-
ANCE.—No State statute, regulation, interpretation, 
order, or other action shall be preempted under sub-
section (b)(1) to the extent that— 
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(A) it does not relate to, and is not issued 
and adopted, or enacted for the purpose of reg-
ulating, directly or indirectly, insurance sales, 
solicitations, or cross marketing activities cov-
ered under paragraph (2); 
(B) it does not relate to, and is not issued 
and adopted, or enacted for the purpose of reg-
ulating, directly or indirectly, the business of in-
surance activities other than sales, solicitations, 
or cross marketing activities, covered under 
paragraph (3); 
(C) it does not relate to securities inves-
tigations or enforcement actions referred to in 
subsection (d); and 
(D) it— 
(i) does not distinguish by its terms 
between insured depository institutions, 
wholesale financial institutions, and sub-
sidiaries and affiliates thereof engaged in 
the activity at issue and other persons or 
entities engaged in the same activity in a 
manner that is in any way adverse with re-
spect to the conduct of the activity by any 
such insured depository institution, whole-
sale financial institution, or subsidiary or 
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affiliate thereof engaged in the activity at 
issue; 
(ii) as interpreted or applied, does not 
have, and will not have, an impact on de-
pository institutions, wholesale financial in-
stitutions, or subsidiaries or affiliates 
thereof engaged in the activity at issue, or 
any person or entity affiliated therewith, 
that is substantially more adverse than its 
impact on other persons or entities en-
gaged in the same activity that are not in-
sured depository institutions, wholesale fi-
nancial institutions, or subsidiaries or af-
filiates thereof, or persons or entities affili-
ated therewith; 
(iii) does not effectively prevent a de-
pository institution, wholesale financial in-
stitution, or subsidiary or affiliate thereof 
from engaging in activities authorized or 
permitted by this Act or any other provi-
sion of Federal law; and 
(iv) does not conflict with the intent 
of this Act generally to permit affiliations 
that are authorized or permitted by Fed-
eral law. 
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(c) NONDISCRIMINATION.—Except as provided in any 
restrictions described in subsection (b)(2)(B), no State 
may, by statute, regulation, order, interpretation, or other 
action, regulate the insurance activities authorized or per-
mitted under this Act or any other provision of Federal 
law of an insured depository institution or wholesale finan-
cial institution, or subsidiary or affiliate thereof, to the 
extent that such statute, regulation, order, interpretation, 
or other action— 
(1) distinguishes by its terms between insured 
depository institutions or wholesale financial institu-
tions, or subsidiaries or affiliates thereof, and other 
persons or entities engaged in such activities, in a 
manner that is in any way adverse to any such in-
sured depository institution or wholesale financial in-
stitution, or subsidiary or affiliate thereof; 
(2) as interpreted or applied, has or will have 
an impact on depository institutions or wholesale fi-
nancial institutions, or subsidiaries or affiliates 
thereof, that is substantially more adverse than its 
impact on other persons or entities providing the 
same products or services or engaged in the same 
activities that are not insured depository institu-
tions, wholesale financial institutions, or subsidiaries 
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or affiliates thereof, or persons or entities affiliated 
therewith; 
(3) effectively prevents a depository institution 
or wholesale financial institution, or subsidiary or af-
filiate thereof, from engaging in insurance activities 
authorized or permitted by this Act or any other 
provision of Federal law; or 
(4) conflicts with the intent of this Act gen-
erally to permit affiliations that are authorized or 
permitted by Federal law between insured depository 
institutions or wholesale financial institutions, or 
subsidiaries or affiliates thereof, and persons and en-
tities engaged in the business of insurance. 
(d) LIMITATION.—Subsections (a) and (b) shall not 
be construed to affect the jurisdiction of the securities 
commission (or any agency or office performing like func-
tions) of any State, under the laws of such State— 
(1) to investigate and bring enforcement ac-
tions, consistent with section 18(c) of the Securities 
Act of 1933, with respect to fraud or deceit or un-
lawful conduct by any person, in connection with se-
curities or securities transactions; or 
(2) to require the registration of securities or 
the licensure or registration of brokers, dealers, or 
investment advisers (consistent with section 203A of 
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the Investment Advisers Act of 1940), or the associ-
ated persons of a broker, dealer, or investment ad-
viser (consistent with such section 203A). 
(e) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
(1) INSURED DEPOSITORY INSTITUTION.—The 
term ‘‘insured depository institution’’ includes any 
foreign bank that maintains a branch, agency, or 
commercial lending company in the United States. 
(2) STATE.—The term ‘‘State’’ means any 
State of the United States, the District of Columbia, 
any territory of the United States, Puerto Rico, 
Guam, American Samoa, the Trust Territory of the 
Pacific Islands, the Virgin Islands, and the Northern 
Mariana Islands. 
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHOR-
IZED. 
Section 3(g)(2) of the Bank Holding Company Act 
of 1956 (12 U.S.C. 1842(g)(2)) is amended to read as 
follows: 
‘‘(2) REGULATIONS.—A bank holding company 
organized as a mutual holding company shall be reg-
ulated on terms, and shall be subject to limitations, 
comparable to those applicable to any other bank 
holding company.’’. 
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SEC. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISI-
TIONS AND MERGERS. 
(a) BANK HOLDING COMPANY ACT OF 1956.—Sec-
tion 3(c)(2) of the Bank Holding Company Act of 1956 
(12 U.S.C. 1842(c)(2)) is amended— 
(1) by striking ‘‘FACTORS.—In every case’’ and 
inserting ‘‘FACTORS.— 
‘‘(A) IN GENERAL.—In every case’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(B) PUBLIC MEETINGS.—In each case in-
volving one or more insured depository institu-
tions each of which has total assets of 
$1,000,000,000 or more, the Board shall, as 
necessary and on a timely basis, conduct public 
meetings in one or more areas where the Board 
believes, in the sole discretion of the Board, 
there will be a substantial public impact.’’. 
(b) FEDERAL DEPOSIT INSURANCE ACT.—Section 
18(c) of the Federal Deposit Insurance Act (12 U.S.C. 
1828(c)) is amended by adding at the end the following 
new paragraph: 
‘‘(12) PUBLIC MEETINGS.—In each merger trans-
action involving one or more insured depository institu-
tions each of which has total assets of $1,000,000,000 or 
more, the responsible agency shall, as necessary and on 
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a timely basis, conduct public meetings in one or more 
areas where the agency believes, in the sole discretion of 
the agency, there will be a substantial public impact.’’. 
(c) NATIONAL BANK CONSOLIDATION AND MERGER 
ACT.—The National Bank Consolidation and Merger Act 
(12 U.S.C. 215 et seq.) is amended by adding at the end 
the following new section: 
‘‘SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDA-
TIONS AND MERGERS. 
‘‘In each case of a consolidation or merger under this 
Act involving one or more banks each of which has total 
assets of $1,000,000,000 or more, the Comptroller shall, 
as necessary and on a timely basis, conduct public meet-
ings in one or more areas where the Comptroller believes, 
in the sole discretion of the Comptroller, there will be a 
substantial public impact.’’. 
(d) HOME OWNERS’ LOAN ACT.—Section 10(e) of 
the Home Owners’ Loan Act (12 U.S.C. 1463) is amended 
by adding at the end the following new paragraph: 
‘‘(7) PUBLIC
MEETINGS
FOR
LARGE
DEPOSI-
TORY INSTITUTION ACQUISITIONS AND MERGERS.— 
In each case involving one or more insured deposi-
tory institutions each of which has total assets of 
$1,000,000,000 or more, the Director shall, as nec-
essary and on a timely basis, conduct public meet-
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ings in one or more areas where the Director be-
lieves, in the sole discretion of the Director, there 
will be a substantial public impact.’’. 
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OF-
FICES. 
(a) IN GENERAL.—Section 109(d) of the Riegle-Neal 
Interstate Banking and Branching Efficiency Act of 1994 
(12 U.S.C. 1835a(d)) is amended— 
(1) by inserting ‘‘, the Financial Services Act of 
1999,’’ after ‘‘pursuant to this title’’; and 
(2) by inserting ‘‘or such Act’’ after ‘‘made by 
this title’’. 
(b) TECHNICAL AND CONFORMING AMENDMENT.— 
Section 109(e)(4) of the Riegle-Neal Interstate Banking 
and Branching Efficiency Act of 1994 (12 U.S.C. 
1835a(e)(4)) is amended by inserting ‘‘and any branch of 
a bank controlled by an out-of-State bank holding com-
pany (as defined in section 2(o)(7) of the Bank Holding 
Company Act of 1956)’’ before the period. 
SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIRE-
MENTS. 
Section 42(d)(4)(A) of the Federal Deposit Insurance 
Act (12 U.S.C. 1831r–1(d)(4)(A)) is amended by inserting 
‘‘and any bank controlled by an out-of-State bank holding 
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company (as defined in section 2(o)(7) of the Bank Hold-
ing Company Act of 1956)’’ before the period. 
SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE 
BANKS. 
(a) IN GENERAL.—Section 4(f) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1843(f)) is amended— 
(1) in paragraph (2)(A)(ii)— 
(A) by striking ‘‘and’’ at the end of sub-
clause (IX); 
(B) by inserting ‘‘and’’ after the semicolon 
at the end of subclause (X); and 
(C) by inserting after subclause (X) the 
following new subclause: 
‘‘(XI) assets that are derived 
from, or are incidental to, consumer 
lending activities in which institutions 
described in subparagraph (F) or (H) 
of section 2(c)(2) are permitted to en-
gage,’’; 
(2) in paragraph (2), by striking subparagraph 
(B) and inserting the following new subparagraphs: 
‘‘(B) any bank subsidiary of such company 
engages in any activity in which the bank was 
not lawfully engaged as of March 5, 1987, un-
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less the bank is well managed and well capital-
ized; 
‘‘(C) any bank subsidiary of such company 
both— 
‘‘(i) accepts demand deposits or de-
posits that the depositor may withdraw by 
check or similar means for payment to 
third parties; and 
‘‘(ii) engages in the business of mak-
ing commercial loans (and, for purposes of 
this clause, loans made in the ordinary 
course of a credit card operation shall not 
be treated as commercial loans); or 
‘‘(D) after the date of the enactment of the 
Competitive Equality Amendments of 1987, any 
bank subsidiary of such company permits any 
overdraft (including any intraday overdraft), or 
incurs any such overdraft in such bank’s ac-
count at a Federal Reserve bank, on behalf of 
an affiliate, other than an overdraft described 
in paragraph (3).’’; and 
(3) by striking paragraphs (3) and (4) and in-
serting the following new paragraphs: 
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‘‘(3) PERMISSIBLE OVERDRAFTS DESCRIBED.— 
For purposes of paragraph (2)(D), an overdraft is 
described in this paragraph if— 
‘‘(A) such overdraft results from an inad-
vertent computer or accounting error that is be-
yond the control of both the bank and the affil-
iate; 
‘‘(B) such overdraft— 
‘‘(i) is permitted or incurred on behalf 
of an affiliate which is monitored by, re-
ports to, and is recognized as a primary 
dealer by the Federal Reserve Bank of 
New York; and 
‘‘(ii) is fully secured, as required by 
the Board, by bonds, notes, or other obli-
gations which are direct obligations of the 
United States or on which the principal 
and interest are fully guaranteed by the 
United States or by securities and obliga-
tions eligible for settlement on the Federal 
Reserve book entry system; or 
‘‘(C) such overdraft— 
‘‘(i) is incurred on behalf of an affil-
iate solely in connection with an activity 
that is so closely related to banking, or 
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managing or controlling banks, as to be a 
proper incident thereto, to the extent the 
bank incurring the overdraft and the affil-
iate on whose behalf the overdraft is in-
curred each document that the overdraft is 
incurred for such purpose; and 
‘‘(ii) does not cause the bank to vio-
late any provision of section 23A or 23B of 
the Federal Reserve Act, either directly, in 
the case of a member bank, or by virtue of 
section 18(j) of the Federal Deposit Insur-
ance Act, in the case of a nonmember 
bank. 
‘‘(4) DIVESTITURE IN CASE OF LOSS OF EX-
EMPTION.—If any company described in paragraph 
(1) fails to qualify for the exemption provided under 
such paragraph by operation of paragraph (2), such 
exemption shall cease to apply to such company and 
such company shall divest control of each bank it 
controls before the end of the 180-day period begin-
ning on the date that the company receives notice 
from the Board that the company has failed to con-
tinue to qualify for such exemption, unless before 
the end of such 180-day period, the company has— 
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‘‘(A) corrected the condition or ceased the 
activity that caused the company to fail to con-
tinue to qualify for the exemption; and 
‘‘(B) implemented procedures that are rea-
sonably adapted to avoid the reoccurrence of 
such condition or activity. 
The issuance of any notice under this paragraph 
that relates to the activities of a bank shall not be 
construed as affecting the authority of the bank to 
continue to engage in such activities until the expira-
tion of such 180-day period.’’. 
(b) INDUSTRIAL LOAN COMPANIES AFFILIATE OVER-
DRAFTS.—Section 2(c)(2)(H) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1841(c)(2)(H)) is amended 
by inserting before the period at the end ‘‘, or that is oth-
erwise permissible for a bank controlled by a company de-
scribed in section 4(f)(1)’’. 
SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMU-
NITY BANKS, OTHER SMALL FINANCIAL IN-
STITUTIONS, INSURANCE AGENTS, AND CON-
SUMERS. 
(a) STUDY REQUIRED.—The Comptroller General of 
the United States shall conduct a study of the projected 
economic impact and the actual economic impact that the 
enactment of this Act will have on financial institutions, 
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including community banks, registered brokers and deal-
ers and insurance companies, which have total assets of 
$100,000,000 or less, insurance agents, and consumers. 
(b) REPORTS TO THE CONGRESS.— 
(1) IN GENERAL.—The Comptroller General of 
the United States shall submit reports to the Con-
gress, at the times required under paragraph (2), 
containing the findings and conclusions of the 
Comptroller General with regard to the study re-
quired under subsection (a) and such recommenda-
tions for legislative or administrative action as the 
Comptroller General may determine to be appro-
priate. 
(2) TIMING
OF
REPORTS.—The Comptroller 
General shall submit— 
(A) an interim report before the end of the 
6-month period beginning after the date of the 
enactment of this Act; 
(B) another interim report before the end 
of the next 6-month period; and 
(C) a final report before the end of the 1- 
year period after such second 6-month period,’’. 
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SEC. 110. RESPONSIVENESS TO COMMUNITY NEEDS FOR FI-
NANCIAL SERVICES. 
(a) STUDY.—The Secretary of the Treasury, in con-
sultation with the Federal banking agencies (as defined 
in section 3(z) of the Federal Deposit Insurance Act), 
shall conduct a study of the extent to which adequate serv-
ices are being provided as intended by the Community Re-
investment Act of 1977, including services in low- and 
moderate-income neighborhoods and for persons of modest 
means, as a result of the enactment of this Act. 
(b) REPORT.—Before the end of the 2-year period be-
ginning on the date of the enactment of this Act, the Sec-
retary of the Treasury, in consultation with the Federal 
banking agencies, shall submit a report to the Congress 
on the study conducted pursuant to subsection (a) and 
shall include such recommendations as the Secretary de-
termines to be appropriate for administrative and legisla-
tive action with respect to institutions covered under the 
Community Reinvestment Act of 1977. 
SEC. 110A. STUDY OF FINANCIAL MODERNIZATION’S AF-
FECT ON THE ACCESSIBILITY OF SMALL 
BUSINESS AND FARM LOANS. 
(a) STUDY.—The Secretary of the Treasury, in con-
sultation with the Federal banking agencies (as defined 
in Section 3(z) of the Federal Deposit Insurance Act), 
shall conduct a study of the extent to which credit is being 
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provided to and for small business and farms, as a result 
of this Act. 
(b) REPORT.—Before the end of the 5-year period be-
ginning on the date of the enactment of this Act, the Sec-
retary, in consultation with the Federal banking agencies, 
shall submit a report to the Congress on the study con-
ducted pursuant to subsection (a) and shall include such 
recommendations as the Secretary determines to be appro-
priate for administrative and legislative action. 
Subtitle 
B—Streamlining 
Super-
vision 
of 
Financial 
Holding 
Companies 
SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY 
SUPERVISION. 
Section 5(c) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1844(c)) is amended to read as follows: 
‘‘(c) REPORTS AND EXAMINATIONS.— 
‘‘(1) REPORTS.— 
‘‘(A) IN GENERAL.—The Board from time 
to time may require any bank holding company 
and any subsidiary of such company to submit 
reports under oath to keep the Board informed 
as to— 
‘‘(i) its financial condition, systems 
for monitoring and controlling financial 
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and operating risks, and transactions with 
depository institution subsidiaries of the 
holding company; and 
‘‘(ii) compliance by the company or 
subsidiary with applicable provisions of 
this Act. 
‘‘(B) USE OF EXISTING REPORTS.— 
‘‘(i) IN GENERAL.—The Board shall, 
to the fullest extent possible, accept re-
ports in fulfillment of the Board’s report-
ing requirements under this paragraph 
that a bank holding company or any sub-
sidiary of such company has provided or 
been required to provide to other Federal 
and State supervisors or to appropriate 
self-regulatory organizations. 
‘‘(ii) AVAILABILITY.—A bank holding 
company or a subsidiary of such company 
shall provide to the Board, at the request 
of the Board, a report referred to in clause 
(i). 
‘‘(iii) REQUIRED
USE
OF
PUBLICLY 
REPORTED
INFORMATION.—The 
Board 
shall, to the fullest extent possible, accept 
in fulfillment of any reporting or record-
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keeping requirements under this Act infor-
mation that is otherwise required to be re-
ported publicly and externally audited fi-
nancial statements. 
‘‘(iv) REPORTS
FILED
WITH
OTHER 
AGENCIES.—In the event the Board re-
quires a report from a functionally regu-
lated nondepository institution subsidiary 
of a bank holding company of a kind that 
is not required by another Federal or State 
regulator or appropriate self-regulatory or-
ganization, the Board shall request that 
the appropriate regulator or self-regulatory 
organization obtain such report. If the re-
port is not made available to the Board, 
and the report is necessary to assess a ma-
terial risk to the bank holding company or 
any of its subsidiary depository institutions 
or compliance with this Act, the Board 
may require such subsidiary to provide 
such a report to the Board. 
‘‘(C) DEFINITION.—For purposes of this 
subsection, the term ‘functionally regulated 
nondepository institution’ means— 
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‘‘(i) a broker or dealer registered 
under the Securities Exchange Act of 
1934; 
‘‘(ii) an investment adviser registered 
under the Investment Advisers Act of 
1940, or with any State, with respect to 
the investment advisory activities of such 
investment adviser and activities incidental 
to such investment advisory activities; 
‘‘(iii) an insurance company subject to 
supervision by a State insurance commis-
sion, agency, or similar authority; and 
‘‘(iv) an entity subject to regulation 
by the Commodity Futures Trading Com-
mission, with respect to the commodities 
activities of such entity and activities inci-
dental to such commodities activities. 
‘‘(2) EXAMINATIONS.— 
‘‘(A) EXAMINATION AUTHORITY.— 
‘‘(i) IN
GENERAL.—The Board may 
make examinations of each bank holding 
company and each subsidiary of a bank 
holding company. 
‘‘(ii) 
FUNCTIONALLY
REGULATED 
NONDEPOSITORY
INSTITUTION
SUBSIDI-
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ARIES.—Notwithstanding clause (i), the 
Board may make examinations of a func-
tionally regulated nondepository institution 
subsidiary of a bank holding company only 
if— 
‘‘(I) the Board has reasonable 
cause to believe that such subsidiary 
is engaged in activities that pose a 
material risk to an affiliated deposi-
tory institution; or 
‘‘(II) based on reports and other 
available information, the Board has 
reasonable cause to believe that a sub-
sidiary is not in compliance with this 
Act or with provisions relating to 
transactions with an affiliated deposi-
tory institution and the Board cannot 
make such determination through ex-
amination of the affiliated depository 
institution or bank holding company. 
‘‘(B) LIMITATIONS ON EXAMINATION AU-
THORITY FOR BANK HOLDING COMPANIES AND 
SUBSIDIARIES.—Subject 
to 
subparagraph 
(A)(ii), the Board may make examinations 
under subparagraph (A)(i) of each bank holding 
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company and each subsidiary of such holding 
company in order to— 
‘‘(i) inform the Board of the nature of 
the operations and financial condition of 
the holding company and such subsidiaries; 
‘‘(ii) inform the Board of— 
‘‘(I) the financial and operational 
risks within the holding company sys-
tem that may pose a threat to the 
safety and soundness of any sub-
sidiary depository institution of such 
holding company; and 
‘‘(II) the systems for monitoring 
and controlling such risks; and 
‘‘(iii) monitor compliance with the 
provisions of this Act and those governing 
transactions and relationships between any 
subsidiary depository institution and its af-
filiates. 
‘‘(C) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent 
possible, limit the focus and scope of any exam-
ination of a bank holding company to— 
‘‘(i) the bank holding company; and 
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‘‘(ii) any subsidiary of the holding 
company that, because of— 
‘‘(I) the size, condition, or activi-
ties of the subsidiary; or 
‘‘(II) the nature or size of trans-
actions between such subsidiary and 
any depository institution which is 
also a subsidiary of such holding com-
pany, 
could have a materially adverse effect on 
the safety and soundness of any depository 
institution affiliate of the holding company. 
‘‘(D) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent 
possible, use, for the purposes of this para-
graph, the reports of examinations of depository 
institutions made by the appropriate Federal 
and State depository institution supervisory au-
thority. 
‘‘(E) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent 
possible, address the circumstances which might 
otherwise permit or require an examination by 
the Board by forgoing an examination and in-
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stead reviewing the reports of examination 
made of— 
‘‘(i) any registered broker or dealer by 
or on behalf of the Securities and Ex-
change Commission; 
‘‘(ii) any investment adviser registered 
by or on behalf of either the Securities and 
Exchange Commission or any State, which-
ever is required by law; 
‘‘(iii) any licensed insurance company 
by or on behalf of any State regulatory au-
thority responsible for the supervision of 
insurance companies; and 
‘‘(iv) any other subsidiary that the 
Board finds to be comprehensively super-
vised by a Federal or State authority. 
‘‘(3) CAPITAL.— 
‘‘(A) IN GENERAL.—The Board shall not, 
by regulation, guideline, order or otherwise, pre-
scribe or impose any capital or capital adequacy 
rules, guidelines, standards, or requirements on 
any subsidiary of a financial holding company 
that is not a depository institution and— 
‘‘(i) is in compliance with applicable 
capital requirements of another Federal 
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regulatory authority (including the Securi-
ties and Exchange Commission) or State 
insurance authority; 
‘‘(ii) is registered as an investment 
adviser under the Investment Advisers Act 
of 1940, or with any State, whichever is 
required by law; or 
‘‘(iii) is licensed as an insurance agent 
with the appropriate State insurance au-
thority. 
‘‘(B) RULE OF CONSTRUCTION.—Subpara-
graph (A) shall not be construed as preventing 
the Board from imposing capital or capital ade-
quacy rules, guidelines, standards, or require-
ments with respect to— 
‘‘(i) activities of a registered invest-
ment adviser other than investment advi-
sory activities or activities incidental to in-
vestment advisory activities; or 
‘‘(ii) activities of a licensed insurance 
agent other than insurance agency activi-
ties or activities incidental to insurance 
agency activities. 
‘‘(C) LIMITATIONS
ON
INDIRECT
AC-
TION.—In developing, establishing, or assessing 
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holding company capital or capital adequacy 
rules, guidelines, standards, or requirements for 
purposes of this paragraph, the Board shall not 
take into account the activities, operations, or 
investments of an affiliated investment company 
registered under the Investment Company Act 
of 1940, unless the investment company is— 
‘‘(i) a bank holding company; or 
‘‘(ii) controlled by a bank holding 
company by reason of ownership by the 
bank holding company (including through 
all of its affiliates) of 25 percent or more 
of the shares of the investment company, 
and the shares owned by the bank holding 
company have a market value equal to 
more than $1,000,000. 
‘‘(4) TRANSFER OF BOARD AUTHORITY TO AP-
PROPRIATE FEDERAL BANKING AGENCY.— 
‘‘(A) IN
GENERAL.—In the case of any 
bank holding company which is not significantly 
engaged in nonbanking activities, the Board, in 
consultation with the appropriate Federal bank-
ing agency, may designate the appropriate Fed-
eral banking agency of the lead insured deposi-
tory institution subsidiary of such holding com-
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pany as the appropriate Federal banking agen-
cy for the bank holding company. 
‘‘(B) 
AUTHORITY
TRANSFERRED.—An 
agency designated by the Board under subpara-
graph (A) shall have the same authority as the 
Board under this Act to— 
‘‘(i) examine and require reports from 
the bank holding company and any affiliate 
of such company (other than a depository 
institution) under section 5; 
‘‘(ii) approve or disapprove applica-
tions or transactions under section 3; 
‘‘(iii) take actions and impose pen-
alties under subsections (e) and (f) of sec-
tion 5 and section 8; and 
‘‘(iv) take actions regarding the hold-
ing company, any affiliate of the holding 
company (other than a depository institu-
tion), or any institution-affiliated party of 
such company or affiliate under the Fed-
eral Deposit Insurance Act and any other 
statute which the Board may designate. 
‘‘(C) AGENCY ORDERS.—Section 9 of this 
Act and section 105 of the Bank Holding Com-
pany Act Amendments of 1970 shall apply to 
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orders issued by an agency designated under 
subparagraph (A) in the same manner such sec-
tions apply to orders issued by the Board. 
‘‘(5) FUNCTIONAL REGULATION OF SECURITIES 
AND INSURANCE ACTIVITIES.—The Board shall defer 
to— 
‘‘(A) the Securities and Exchange Commis-
sion with regard to all interpretations of, and 
the enforcement of, applicable Federal securi-
ties laws (and rules, regulations, orders, and 
other directives issued thereunder) relating to 
the activities, conduct, and operations of reg-
istered brokers, dealers, investment advisers, 
and investment companies; 
‘‘(B) the relevant State securities authori-
ties with regard to all interpretations of, and 
the enforcement of, applicable State securities 
laws (and rules, regulations, orders, and other 
directives issued thereunder) relating to the ac-
tivities, conduct, and operations of brokers, 
dealers, and investment advisers required to be 
registered under State law; and 
‘‘(C) the relevant State insurance authori-
ties with regard to all interpretations of, and 
the enforcement of, applicable State insurance 
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laws (and rules, regulations, orders, and other 
directives issued thereunder) relating to the ac-
tivities, conduct, and operations of insurance 
companies and insurance agents.’’. 
SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT 
FOR FINANCIAL HOLDING COMPANIES. 
(a) PREVENTION OF DUPLICATIVE FILINGS.—Sec-
tion 5(a) of the Bank Holding Company Act of 1956 (12 
U.S.C. 1844(a)) is amended by adding the following new 
sentence at the end: ‘‘A declaration filed in accordance 
with section 6(b)(1)(D) shall satisfy the requirements of 
this subsection with regard to the registration of a bank 
holding company but not any requirement to file an appli-
cation to acquire a bank pursuant to section 3.’’. 
(b) DIVESTITURE PROCEDURES.—Section 5(e)(1) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(e)(1)) is amended— 
(1) by striking ‘‘Financial Institutions Super-
visory Act of 1966, order’’ and inserting ‘‘Financial 
Institutions Supervisory Act of 1966, at the election 
of the bank holding company— 
‘‘(A) order’’; and 
(2) by striking ‘‘shareholders of the bank hold-
ing company. Such distribution’’ and inserting 
‘‘shareholders of the bank holding company; or 
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‘‘(B) order the bank holding company, after due 
notice and opportunity for hearing, and after con-
sultation with the primary supervisor for the bank, 
which shall be the Comptroller of the Currency in 
the case of a national bank, and the Federal Deposit 
Insurance Corporation and the appropriate State su-
pervisor in the case of an insured nonmember bank, 
to terminate (within 120 days or such longer period 
as the Board may direct) the ownership or control 
of any such bank by such company. 
The distribution referred to in subparagraph (A)’’. 
SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR 
AND SECURITIES AND EXCHANGE COMMIS-
SION. 
(a) BANK HOLDING COMPANIES.—Section 5 of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1844) 
is amended by adding at the end the following new sub-
section: 
‘‘(g) AUTHORITY OF STATE INSURANCE REGULATOR 
AND THE SECURITIES AND EXCHANGE COMMISSION.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of law, any regulation, order, or other ac-
tion of the Board which requires a bank holding 
company to provide funds or other assets to a sub-
sidiary insured depository institution shall not be ef-
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fective nor enforceable with respect to an entity de-
scribed in subparagraph (A) if— 
‘‘(A) such funds or assets are to be pro-
vided by— 
‘‘(i) a bank holding company that is 
an insurance company, a broker or dealer 
registered under the Securities Exchange 
Act of 1934, an investment company reg-
istered under the Investment Company Act 
of 1940, or an investment adviser reg-
istered by or on behalf of either the Securi-
ties and Exchange Commission or any 
State; or 
‘‘(ii) an affiliate of the depository in-
stitution which is an insurance company or 
a broker or dealer registered under the Se-
curities Exchange Act of 1934, an invest-
ment company registered under the Invest-
ment Company Act of 1940, or an invest-
ment adviser registered by or on behalf of 
either the Securities and Exchange Com-
mission or any State; and 
‘‘(B) the State insurance authority for the 
insurance company or the Securities and Ex-
change Commission for the registered broker, 
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dealer, investment adviser (solely with respect 
to investment advisory activities or activities in-
cidental thereto), or investment company, as 
the case may be, determines in writing sent to 
the holding company and the Board that the 
holding company shall not provide such funds 
or assets because such action would have a ma-
terial adverse effect on the financial condition 
of the insurance company or the broker, dealer, 
investment company, or investment adviser, as 
the case may be. 
‘‘(2) NOTICE TO STATE INSURANCE AUTHORITY 
OR SEC REQUIRED.—If the Board requires a bank 
holding company, or an affiliate of a bank holding 
company, which is an insurance company or a 
broker, dealer, investment company, or investment 
adviser described in paragraph (1)(A) to provide 
funds or assets to an insured depository institution 
subsidiary of the holding company pursuant to any 
regulation, order, or other action of the Board re-
ferred to in paragraph (1), the Board shall promptly 
notify the State insurance authority for the insur-
ance company, the Securities and Exchange Com-
mission, or State securities regulator, as the case 
may be, of such requirement. 
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‘‘(3) DIVESTITURE
IN
LIEU
OF
OTHER
AC-
TION.—If the Board receives a notice described in 
paragraph (1)(B) from a State insurance authority 
or the Securities and Exchange Commission with re-
gard to a bank holding company or affiliate referred 
to in that paragraph, the Board may order the bank 
holding company to divest the insured depository in-
stitution not later than 180 days after receiving the 
notice, or such longer period as the Board deter-
mines consistent with the safe and sound operation 
of the insured depository institution. 
‘‘(4) CONDITIONS BEFORE DIVESTITURE.—Dur-
ing the period beginning on the date an order to di-
vest is issued by the Board under paragraph (3) to 
a bank holding company and ending on the date the 
divestiture is completed, the Board may impose any 
conditions or restrictions on the holding company’s 
ownership or operation of the insured depository in-
stitution, including restricting or prohibiting trans-
actions between the insured depository institution 
and any affiliate of the institution, as are appro-
priate under the circumstances.’’. 
(b) SUBSIDIARIES OF DEPOSITORY INSTITUTIONS.— 
The Federal Deposit Insurance Act (12 U.S.C. 1811 et 
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seq.) is amended by adding at the end the following new 
section: 
‘‘SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR 
AND SECURITIES AND EXCHANGE COMMIS-
SION. 
‘‘(a) IN GENERAL.—Notwithstanding any other pro-
vision of law, any regulation, order, or other action of the 
appropriate Federal banking agency which requires a sub-
sidiary to provide funds or other assets to an insured de-
pository institution shall not be effective nor enforceable 
with respect to an entity described in paragraph (1) if— 
‘‘(1) such funds or assets are to be provided by 
a subsidiary which is an insurance company, a 
broker or dealer registered under the Securities Ex-
change Act of 1934, an investment company reg-
istered under the Investment Company Act of 1940, 
or an investment adviser registered by or on behalf 
of either the Securities and Exchange Commission 
or any State; and 
‘‘(2) the State insurance authority for the in-
surance company or the Securities and Exchange 
Commission for the registered broker or dealer, the 
investment company, or the investment adviser, as 
the case may be, determines in writing sent to the 
insured depository institution and the appropriate 
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Federal banking agency that the subsidiary shall not 
provide such funds or assets because such action 
would have a material adverse effect on the financial 
condition of the insurance company or the broker, 
dealer, investment company, or investment adviser, 
as the case may be. 
‘‘(b) NOTICE TO STATE INSURANCE AUTHORITY OR 
SEC REQUIRED.—If the appropriate Federal banking 
agency requires a subsidiary, which is an insurance com-
pany, a broker or dealer, an investment company, or an 
investment adviser (solely with respect to investment advi-
sory activities or activities incidental thereto) described in 
subsection (a)(1) to provide funds or assets to an insured 
depository institution pursuant to any regulation, order, 
or other action of the appropriate Federal banking agency 
referred to in subsection (a), the appropriate Federal 
banking agency shall promptly notify the State insurance 
authority for the insurance company, the Securities and 
Exchange Commission, or State securities regulator, as 
the case may be, of such requirement. 
‘‘(c) DIVESTITURE IN LIEU OF OTHER ACTION.—If 
the appropriate Federal banking agency receives a notice 
described in subsection (a)(2) from a State insurance au-
thority or the Securities and Exchange Commission with 
regard to a subsidiary referred to in that subsection, the 
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appropriate Federal banking agency may order the in-
sured depository institution to divest the subsidiary not 
later than 180 days after receiving the notice, or such 
longer period as the appropriate Federal banking agency 
determines consistent with the safe and sound operation 
of the insured depository institution. 
‘‘(d) CONDITIONS BEFORE DIVESTITURE.—During 
the period beginning on the date an order to divest is 
issued by the appropriate Federal banking agency under 
subsection (c) to an insured depository institution and 
ending on the date the divestiture is complete, the appro-
priate Federal banking agency may impose any conditions 
or restrictions on the insured depository institution’s own-
ership of the subsidiary including restricting or prohibiting 
transactions between the insured depository institution 
and the subsidiary, as are appropriate under the cir-
cumstances.’’. 
SEC. 114. PRUDENTIAL SAFEGUARDS. 
(a) COMPTROLLER OF THE CURRENCY.— 
(1) IN GENERAL.—The Comptroller of the Cur-
rency may, by regulation or order, impose restric-
tions or requirements on relationships or trans-
actions between a national bank and a subsidiary of 
the national bank which the Comptroller finds are 
consistent with the public interest, the purposes of 
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this Act, title LXII of the Revised Statutes of the 
United States, and other Federal law applicable to 
national banks, and the standards in paragraph (2). 
(2) STANDARDS.—The Comptroller of the Cur-
rency may exercise authority under paragraph (1) if 
the Comptroller finds that such action will have any 
of the following effects: 
(A) Avoid any significant risk to the safety 
and soundness of depository institutions or any 
Federal deposit insurance fund. 
(B) Enhance the financial stability of 
banks. 
(C) Avoid conflicts of interest or other 
abuses. 
(D) Enhance the privacy of customers of 
the national bank or any subsidiary of the 
bank. 
(E) Promote the application of national 
treatment and equality of competitive oppor-
tunity between subsidiaries owned or controlled 
by domestic banks and subsidiaries owned or 
controlled by foreign banks operating in the 
United States. 
(3) REVIEW.—The Comptroller of the Currency 
shall regularly— 
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(A) review all restrictions or requirements 
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any 
such restriction or requirement to carry out the 
purposes of the Act, including any purpose de-
scribed in paragraph (2); and 
(B) modify or eliminate any restriction or 
requirement the Comptroller finds is no longer 
required for such purposes. 
(b) BOARD OF GOVERNORS OF THE FEDERAL RE-
SERVE SYSTEM.— 
(1) IN GENERAL.—The Board of Governors of 
the Federal Reserve System may, by regulation or 
order, impose restrictions or requirements on rela-
tionships or transactions— 
(A) between a depository institution sub-
sidiary of a bank holding company and any af-
filiate of such depository institution (other than 
a subsidiary of such institution); or 
(B) between a State member bank and a 
subsidiary of such bank, 
which the Board finds are consistent with the public 
interest, the purposes of this Act, the Bank Holding 
Company Act of 1956, the Federal Reserve Act, and 
other Federal law applicable to depository institution 
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subsidiaries of bank holding companies or State 
banks (as the case may be), and the standards in 
paragraph (2). 
(2) STANDARDS.—The Board of Governors of 
the Federal Reserve System may exercise authority 
under paragraph (1) if the Board finds that such ac-
tion will have any of the following effects: 
(A) Avoid any significant risk to the safety 
and soundness of depository institutions or any 
Federal deposit insurance fund. 
(B) Enhance the financial stability of bank 
holding companies. 
(C) Avoid conflicts of interest or other 
abuses. 
(D) Enhance the privacy of customers of 
the State member bank or any subsidiary of the 
bank. 
(E) Promote the application of national 
treatment and equality of competitive oppor-
tunity between nonbank affiliates owned or con-
trolled by domestic bank holding companies and 
nonbank affiliates owned or controlled by for-
eign banks operating in the United States. 
(3) REVIEW.—The Board of Governors of the 
Federal Reserve System shall regularly— 
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(A) review all restrictions or requirements 
established pursuant to paragraph (1) to deter-
mine whether there is a continuing need for any 
such restriction or requirement to carry out the 
purposes of the Act, including any purpose de-
scribed in paragraph (2); and 
(B) modify or eliminate any restriction or 
requirement the Board finds is no longer re-
quired for such purposes. 
(4) FOREIGN BANKS.— 
(A) IN
GENERAL.—The Board may, by 
regulation or order, impose restrictions or re-
quirements on relationships or transactions be-
tween a branch, agency, or commercial lending 
company of a foreign bank in the United States 
and any affiliate in the United States of such 
foreign bank that the Board finds are con-
sistent with the public interest, the purposes of 
this Act, the Bank Holding Company Act of 
1956, the Federal Reserve Act, and other Fed-
eral law applicable to foreign banks and their 
affiliates in the United States, and the stand-
ards in paragraphs (2) and (3). 
(B) EVASION.—In the event that the 
Board determines that there may be cir-
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cumstances that would result in an evasion of 
this paragraph, the Board may also impose re-
strictions or requirements on relationships or 
transactions between a foreign bank outside the 
United States and any affiliate in the United 
States of such foreign bank that are consistent 
with national treatment and equality of com-
petitive opportunity. 
(c) FEDERAL DEPOSIT INSURANCE CORPORATION.— 
(1) IN GENERAL.—The Federal Deposit Insur-
ance Corporation may, by regulation or order, im-
pose restrictions or requirements on relationships or 
transactions between a State nonmember bank (as 
defined in section 3 of the Federal Deposit Insur-
ance Act) and a subsidiary of the State nonmember 
bank which the Corporation finds are consistent with 
the public interest, the purposes of this Act, the 
Federal Deposit Insurance Act, or other Federal law 
applicable to State nonmember banks and the stand-
ards in paragraph (2). 
(2) STANDARDS.—The Federal Deposit Insur-
ance Corporation may exercise authority under para-
graph (1) if the Corporation finds that such action 
will have any of the following effects: 
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(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 
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(B) modify or eliminate any restriction or 
requirement the Corporation finds is no longer 
required for such purposes. 
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES. 
(a) EXCLUSIVE COMMISSION AUTHORITY.— 
(1) IN GENERAL.—Except as provided in para-
graph (3), the Commission shall be the sole Federal 
agency with authority to inspect and examine any 
registered investment company that is not a bank 
holding company or a savings and loan holding com-
pany. 
(2) PROHIBITION ON BANKING AGENCIES.—Ex-
cept as provided in paragraph (3), a Federal bank-
ing agency may not inspect or examine any reg-
istered investment company that is not a bank hold-
ing company or a savings and loan holding company. 
(3) CERTAIN
EXAMINATIONS
AUTHORIZED.— 
Nothing in this subsection prevents the Federal De-
posit Insurance Corporation, if the Corporation finds 
it necessary to determine the condition of an insured 
depository institution for insurance purposes, from 
examining an affiliate of any insured depository in-
stitution, pursuant to its authority under section 
10(b)(4) of the Federal Deposit Insurance Act, as 
may be necessary to disclose fully the relationship 
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between the depository institution and the affiliate, 
and the effect of such relationship on the depository 
institution. 
(b) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—The Commission shall provide to any Federal 
banking agency, upon request, the results of any examina-
tion, reports, records, or other information with respect 
to any registered investment company to the extent nec-
essary for the agency to carry out its statutory responsibil-
ities. 
(c) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
(1) BANK
HOLDING
COMPANY.—The term 
‘‘bank holding company’’ has the same meaning as 
in section 2 of the Bank Holding Company Act of 
1956. 
(2) COMMISSION.—The term ‘‘Commission’’ 
means the Securities and Exchange Commission. 
(3) FEDERAL
BANKING
AGENCY.—The term 
‘‘Federal banking agency’’ has the same meaning as 
in section 3(z) of the Federal Deposit Insurance Act. 
(4) REGISTERED INVESTMENT COMPANY.—The 
term ‘‘registered investment company’’ means an in-
vestment company which is registered with the Com-
mission under the Investment Company Act of 1940. 
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(5) SAVINGS AND LOAN HOLDING COMPANY.— 
The term ‘‘savings and loan holding company’’ has 
the same meaning as in section 10(a)(1)(D) of the 
Home Owners’ Loan Act. 
SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY 
OF THE BOARD. 
The Bank Holding Company Act of 1956 (12 U.S.C. 
1841 et seq.) is amended by inserting after section 10 the 
following new section: 
‘‘SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SU-
PERVISORY, AND ENFORCEMENT AUTHORITY 
OF THE BOARD. 
‘‘(a) LIMITATION ON DIRECT ACTION.— 
‘‘(1) IN GENERAL.—The Board may not pre-
scribe regulations, issue or seek entry of orders, im-
pose restraints, restrictions, guidelines, require-
ments, safeguards, or standards, or otherwise take 
any action under or pursuant to any provision of 
this Act or section 8 of the Federal Deposit Insur-
ance Act against or with respect to a regulated sub-
sidiary of a bank holding company unless the action 
is necessary to prevent or redress an unsafe or un-
sound practice or breach of fiduciary duty by such 
subsidiary that poses a material risk to— 
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‘‘(A) the financial safety, soundness, or 
stability of an affiliated depository institution; 
or 
‘‘(B) the domestic or international pay-
ment system. 
‘‘(2) CRITERIA
FOR
BOARD
ACTION.—The 
Board shall not take action otherwise permitted 
under paragraph (1) unless the Board finds that it 
is not reasonably possible to effectively protect 
against the material risk at issue through action di-
rected at or against the affiliated depository institu-
tion or against depository institutions generally. 
‘‘(b) LIMITATION ON INDIRECT ACTION.—The Board 
may not prescribe regulations, issue or seek entry of or-
ders, impose restraints, restrictions, guidelines, require-
ments, safeguards, or standards, or otherwise take any ac-
tion under or pursuant to any provision of this Act or sec-
tion 8 of the Federal Deposit Insurance Act against or 
with respect to a financial holding company or a wholesale 
financial holding company where the purpose or effect of 
doing so would be to take action indirectly against or with 
respect to a regulated subsidiary that may not be taken 
directly against or with respect to such subsidiary in ac-
cordance with subsection (a). 
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‘‘(c) ACTIONS SPECIFICALLY AUTHORIZED.—Not-
withstanding subsection (a), the Board may take action 
under this Act or section 8 of the Federal Deposit Insur-
ance Act to enforce compliance by a regulated subsidiary 
with Federal law that the Board has specific jurisdiction 
to enforce against such subsidiary. 
‘‘(d) REGULATED SUBSIDIARY DEFINED.—For pur-
poses of this section, the term ‘regulated subsidiary’ 
means any company that is not a bank holding company 
and is— 
‘‘(1) a broker or dealer registered under the Se-
curities Exchange Act of 1934; 
‘‘(2) an investment adviser registered by or on 
behalf of either the Securities and Exchange Com-
mission or any State, whichever is required by law, 
with respect to the investment advisory activities of 
such investment adviser and activities incidental to 
such investment advisory activities; 
‘‘(3) an investment company registered under 
the Investment Company Act of 1940; 
‘‘(4) an insurance company or an insurance 
agency, with respect to the insurance activities and 
activities incidental to such insurance activities, sub-
ject to supervision by a State insurance commission, 
agency, or similar authority; or 
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‘‘(5) an entity subject to regulation by the Com-
modity Futures Trading Commission, with respect 
to the commodities activities of such entity and ac-
tivities incidental to such commodities activities.’’. 
SEC. 117. EQUIVALENT REGULATION AND SUPERVISION. 
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, the provisions of— 
(1) section 5(c) of the Bank Holding Company 
Act of 1956 (as amended by this Act) that limit the 
authority of the Board of Governors of the Federal 
Reserve System to require reports from, to make ex-
aminations of, or to impose capital requirements on 
bank holding companies and their nonbank subsidi-
aries or that require deference to other regulators; 
and 
(2) section 10A of the Bank Holding Company 
Act of 1956 (as added by this Act) that limit what-
ever authority the Board might otherwise have to 
take direct or indirect action with respect to bank 
holding companies and their nonbank subsidiaries, 
shall also limit whatever authority that a Federal banking 
agency (as defined in section 3(z) of the Federal Deposit 
Insurance Act) might otherwise have under any statute 
to require reports, make examinations, impose capital re-
quirements or take any other direct or indirect action with 
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respect to bank holding companies and their nonbank sub-
sidiaries (including nonbank subsidiaries of depository in-
stitutions), subject to the same standards and require-
ments as are applicable to the Board under such provi-
sions. 
(b) CERTAIN EXAMINATIONS AUTHORIZED.—No pro-
vision of this section shall be construed as preventing the 
Federal Deposit Insurance Corporation, if the Corporation 
finds it necessary to determine the condition of an insured 
depository institution for insurance purposes, from exam-
ining an affiliate of any insured depository institution, 
pursuant to its authority under section 10(b)(4) of the 
Federal Deposit Insurance Act, as may be necessary to 
disclose fully the relationship between the depository insti-
tution and the affiliate, and the effect of such relationship 
on the depository institution. 
SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILI-
ATES AND SUBSIDIARIES. 
Section 11(a)(4)(B) of the Federal Deposit Insurance 
Act (12 U.S.C. 1821(a)(4)(B)) is amended by striking ‘‘to 
benefit any shareholder of’’ and inserting ‘‘to benefit any 
shareholder, affiliate (other than an insured depository in-
stitution that receives assistance in accordance with the 
provisions of this Act), or subsidiary of’’. 
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SEC. 119. REPEAL OF SAVINGS BANK PROVISIONS IN THE 
BANK HOLDING COMPANY ACT OF 1956. 
Section 3(f) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1842(f)) is amended to read as follows: 
‘‘(f) [Repealed].’’. 
SEC. 120. TECHNICAL AMENDMENT. 
Section 2(o)(1)(A) of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1841(o)(1)(A)) is amended by 
striking ‘‘section 38(b)’’ and inserting ‘‘section 38’’. 
Subtitle C—Subsidiaries of 
National Banks 
SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF 
NATIONAL BANKS. 
(a) 
FINANCIAL
SUBSIDIARIES
OF
NATIONAL 
BANKS.—Chapter 1 of title LXII of the Revised Statutes 
of United States (12 U.S.C. 21 et seq.) is amended— 
(1) by redesignating section 5136A as section 
5136C; and 
(2) by inserting after section 5136 (12 U.S.C. 
24) the following new section: 
‘‘SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS. 
‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AUTHOR-
IZED TO ENGAGE IN FINANCIAL ACTIVITIES.— 
‘‘(1) EXCLUSIVE AUTHORITY.—No provision of 
section 5136 or any other provision of this title 
LXII of the Revised Statutes of the United States 
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shall be construed as authorizing a subsidiary of a 
national bank to engage in, or own any share of or 
any other interest in any company engaged in, any 
activity that— 
‘‘(A) is not permissible for a national bank 
to engage in directly; or 
‘‘(B) is conducted under terms or condi-
tions other than those that would govern the 
conduct of such activity by a national bank, 
unless a national bank is specifically authorized by 
the express terms of a Federal statute and not by 
implication or interpretation to acquire shares of or 
an interest in, or to control, such subsidiary, such as 
by paragraph (2) of this subsection and section 25A 
of the Federal Reserve Act. 
‘‘(2) SPECIFIC
AUTHORIZATION
TO
CONDUCT 
ACTIVITIES WHICH ARE FINANCIAL IN NATURE.— 
Subject to paragraphs (3) and (4), a national bank 
may control a financial subsidiary, or hold an inter-
est in a financial subsidiary, that is controlled by in-
sured depository institutions or subsidiaries thereof. 
‘‘(3) ELIGIBILITY REQUIREMENTS.—A national 
bank may control or hold an interest in a company 
pursuant to paragraph (2) only if— 
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‘‘(A) the national bank and all depository 
institution affiliates of the national bank are 
well capitalized; 
‘‘(B) the national bank and all depository 
institution affiliates of the national bank are 
well managed; 
‘‘(C) the national bank and all depository 
institution affiliates of such national bank have 
achieved a rating of ‘satisfactory record of 
meeting community credit needs’, or better, at 
the most recent examination of each such bank 
or institution; and 
‘‘(D) the bank has received the approval of 
the Comptroller of the Currency. 
‘‘(4) ACTIVITY
LIMITATIONS.—In addition to 
any other limitation imposed on the activity of sub-
sidiaries of national banks, a subsidiary of a na-
tional bank may not, pursuant to paragraph (2)— 
‘‘(A) engage as principal in insuring, guar-
anteeing, or indemnifying against loss, harm, 
damage, illness, disability, or death (other than 
in connection with credit-related insurance) or 
in providing or issuing annuities; 
‘‘(B) engage in real estate investment or 
development activities; or 
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‘‘(C) engage in any activity permissible for 
a financial holding company under paragraph 
(3)(I) of section 6(c) of the Bank Holding Com-
pany Act of 1956 (relating to insurance com-
pany investments). 
‘‘(5) SIZE
FACTOR
WITH
REGARD
TO
FREE- 
STANDING
NATIONAL
BANKS.—Notwithstanding 
paragraph (2), a national bank which has total as-
sets of $10,000,000,000 or more may not control a 
subsidiary engaged in financial activities pursuant to 
such paragraph unless such national bank is a sub-
sidiary of a bank holding company. 
‘‘(6) LIMITED EXCLUSIONS FROM COMMUNITY 
NEEDS REQUIREMENTS FOR NEWLY AFFILIATED DE-
POSITORY
INSTITUTIONS.—Any depository institu-
tion which becomes an affiliate of a national bank 
during the 12-month period preceding the date of an 
approval by the Comptroller of the Currency under 
paragraph (3)(D) for such bank, and any depository 
institution which becomes an affiliate of the national 
bank after such date, may be excluded for purposes 
of paragraph (3)(C) during the 12-month period be-
ginning on the date of such affiliation if— 
‘‘(A) the national bank or such depository 
institution has submitted an affirmative plan to 
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the appropriate Federal banking agency to take 
such action as may be necessary in order for 
such institution to achieve a rating of ‘satisfac-
tory record of meeting community credit needs’, 
or better, at the next examination of the insti-
tution; and 
‘‘(B) the plan has been accepted by such 
agency. 
‘‘(7) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply: 
‘‘(A) COMPANY; 
CONTROL; 
AFFILIATE; 
SUBSIDIARY.—The terms ‘company’, ‘control’, 
‘affiliate’, and ‘subsidiary’ have the same mean-
ings as in section 2 of the Bank Holding Com-
pany Act of 1956. 
‘‘(B) FINANCIAL SUBSIDIARY.—The term 
‘financial subsidiary’ means a company which is 
a subsidiary of an insured bank and is engaged 
in financial activities that have been determined 
to be financial in nature or incidental to such 
financial activities in accordance with sub-
section (b) or permitted in accordance with sub-
section (b)(4), other than activities that are 
permissible for a national bank to engage in di-
rectly or that are authorized under the Bank 
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Service Company Act, section 25 or 25A of the 
Federal Reserve Act, or any other Federal stat-
ute (other than this section) that specifically 
authorizes the conduct of such activities by its 
express terms and not by implication or inter-
pretation. 
‘‘(C) WELL CAPITALIZED.—The term ‘well 
capitalized’ has the same meaning as in section 
38 of the Federal Deposit Insurance Act and, 
for purposes of this section, the Comptroller 
shall have exclusive jurisdiction to determine 
whether a national bank is well capitalized. 
‘‘(D) WELL
MANAGED.—The term ‘well 
managed’ means— 
‘‘(i) in the case of a depository insti-
tution that has been examined, unless oth-
erwise determined in writing by the appro-
priate Federal banking agency— 
‘‘(I) the achievement of a com-
posite rating of 1 or 2 under the Uni-
form Financial Institutions Rating 
System (or an equivalent rating under 
an equivalent rating system) in con-
nection with the most recent examina-
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HR 10 PCS 
tion or subsequent review of the de-
pository institution; and 
‘‘(II) at least a rating of 2 for 
management, if that rating is given; 
or 
‘‘(ii) in the case of any depository in-
stitution that has not been examined, the 
existence and use of managerial resources 
that the appropriate Federal banking agen-
cy determines are satisfactory. 
‘‘(E) INCORPORATED
DEFINITIONS.—The 
terms ‘appropriate Federal banking agency’ and 
‘depository institution’ have the same meanings 
as in section 3 of the Federal Deposit Insur-
ance Act. 
‘‘(b) ACTIVITIES THAT ARE FINANCIAL
IN NA-
TURE.— 
‘‘(1) FINANCIAL ACTIVITIES.— 
‘‘(A) IN GENERAL.—For purposes of sub-
section (a)(7)(B), an activity shall be consid-
ered to have been determined to be financial in 
nature or incidental to such financial activities 
only if— 
‘‘(i) such activity is permitted for a fi-
nancial holding company pursuant to sec-
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HR 10 PCS 
tion 6(c)(3) of the Bank Holding Company 
Act of 1956 (to the extent such activity is 
not otherwise prohibited under this section 
or any other provision of law for a sub-
sidiary of a national bank engaged in ac-
tivities pursuant to subsection (a)(2)); or 
‘‘(ii) the Secretary of the Treasury de-
termines the activity to be financial in na-
ture or incidental to such financial activi-
ties in accordance with subparagraph (B) 
or paragraph (3). 
‘‘(B) 
COORDINATION
BETWEEN
THE 
BOARD AND THE SECRETARY OF THE TREAS-
URY.— 
‘‘(i) PROPOSALS RAISED BEFORE THE 
SECRETARY OF THE TREASURY.— 
‘‘(I) CONSULTATION.—The Sec-
retary of the Treasury shall notify the 
Board of, and consult with the Board 
concerning, any request, proposal, or 
application under this subsection, in-
cluding any regulation or order pro-
posed under paragraph (3), for a de-
termination of whether an activity is 
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HR 10 PCS 
financial in nature or incidental to 
such a financial activity. 
‘‘(II) BOARD
VIEW.—The Sec-
retary of the Treasury shall not deter-
mine that any activity is financial in 
nature or incidental to a financial ac-
tivity under this subsection if the 
Board notifies the Secretary in writ-
ing, not later than 30 days after the 
date of receipt of the notice described 
in subclause (I) (or such longer period 
as the Secretary determines to be ap-
propriate 
in 
light 
of 
the 
cir-
cumstances) that the Board believes 
that the activity is not financial in na-
ture or incidental to a financial activ-
ity. 
‘‘(ii) PROPOSALS
RAISED
BY
THE 
BOARD.— 
‘‘(I) 
BOARD
RECOMMENDA-
TION.—The Board may, at any time, 
recommend in writing that the Sec-
retary of the Treasury find an activity 
to be financial in nature or incidental 
to a financial activity (other than an 
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HR 10 PCS 
activity which the Board has sole au-
thority to regulate under subpara-
graph (C)). 
‘‘(II) TIME PERIOD FOR SECRE-
TARIAL ACTION.—Not later than 30 
days after the date of receipt of a 
written recommendation from the 
Board under subclause (I) (or such 
longer period as the Secretary of the 
Treasury and the Board determine to 
be appropriate in light of the cir-
cumstances), the Secretary shall de-
termine whether to initiate a public 
rulemaking proposing that the subject 
recommended activity be found to be 
financial in nature or incidental to a 
financial activity under this sub-
section, and shall notify the Board in 
writing of the determination of the 
Secretary and, in the event that the 
Secretary determines not to seek pub-
lic comment on the proposal, the rea-
sons for that determination. 
‘‘(C) AUTHORITY OVER MERCHANT BANK-
ING.—The Board shall have sole authority to 
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HR 10 PCS 
prescribe regulations and issue interpretations 
to implement this paragraph with respect to ac-
tivities described in section 6(c)(3)(H) of the 
Bank Holding Company Act of 1956. 
‘‘(2) FACTORS TO BE CONSIDERED.—In deter-
mining whether an activity is financial in nature or 
incidental to financial activities, the Secretary shall 
take into account— 
‘‘(A) the purposes of this Act and the Fi-
nancial Services Act of 1999; 
‘‘(B) changes or reasonably expected 
changes in the marketplace in which banks 
compete; 
‘‘(C) changes or reasonably expected 
changes in the technology for delivering finan-
cial services; and 
‘‘(D) whether such activity is necessary or 
appropriate to allow a bank and the subsidiaries 
of a bank to— 
‘‘(i) compete effectively with any com-
pany seeking to provide financial services 
in the United States; 
‘‘(ii) use any available or emerging 
technological means, including any applica-
tion necessary to protect the security or ef-
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HR 10 PCS 
ficacy of systems for the transmission of 
data or financial transactions, in providing 
financial services; and 
‘‘(iii) offer customers any available or 
emerging technological means for using fi-
nancial services. 
‘‘(3) AUTHORIZATION OF NEW FINANCIAL AC-
TIVITIES.—The Secretary of the Treasury shall, by 
regulation or order and in accordance with para-
graph (1)(B), define, consistent with the purposes of 
this Act, the following activities as, and the extent 
to which such activities are, financial in nature or 
incidental to activities which are financial in nature: 
‘‘(A) Lending, exchanging, transferring, in-
vesting for others, or safeguarding financial as-
sets other than money or securities. 
‘‘(B) Providing any device or other instru-
mentality for transferring money or other finan-
cial assets. 
‘‘(C) Arranging, effecting, or facilitating fi-
nancial transactions for the account of third 
parties. 
‘‘(4) DEVELOPING ACTIVITIES.—Subject to sub-
section (a)(2), a financial subsidiary of a national 
bank may engage directly or indirectly, or acquire 
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shares of any company engaged, in any activity that 
the Secretary has not determined to be financial in 
nature or incidental to financial activities under this 
subsection if— 
‘‘(A) the subsidiary reasonably concludes 
that the activity is financial in nature or inci-
dental to financial activities; 
‘‘(B) the gross revenues from all activities 
conducted under this paragraph represent less 
than 5 percent of the consolidated gross reve-
nues of the national bank; 
‘‘(C) the aggregate total assets of all com-
panies the shares of which are held under this 
paragraph do not exceed 5 percent of the na-
tional bank’s consolidated total assets; 
‘‘(D) the total capital invested in activities 
conducted under this paragraph represents less 
than 5 percent of the consolidated total capital 
of the national bank; 
‘‘(E) neither the Secretary of the Treasury 
nor the Board has determined that the activity 
is not financial in nature or incidental to finan-
cial activities under this subsection; and 
‘‘(F) the national bank provides written 
notice to the Secretary of the Treasury describ-
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HR 10 PCS 
ing the activity commenced by the subsidiary or 
conducted by the company acquired no later 
than 10 business days after commencing the ac-
tivity or consummating the acquisition. 
‘‘(c) PROVISIONS APPLICABLE TO NATIONAL BANKS 
THAT FAIL TO MEET REQUIREMENTS.— 
‘‘(1) IN GENERAL.—If a national bank or de-
pository institution affiliate is not in compliance 
with the requirements of subparagraph (A), (B), or 
(C) of subsection (a)(3), the appropriate Federal 
banking agency shall notify the Comptroller of the 
Currency, who shall give notice of such finding to 
the national bank. 
‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE-
QUIRED.—Not later than 45 days after receipt by a 
national bank of a notice given under paragraph (1) 
(or such additional period as the Comptroller of the 
Currency may permit), the national bank and any 
relevant affiliated depository institution shall execute 
an agreement acceptable to the Comptroller of the 
Currency and the other appropriate Federal banking 
agencies, if any, to comply with the requirements ap-
plicable under subsection (a)(3). 
‘‘(3) COMPTROLLER
OF
THE
CURRENCY
MAY 
IMPOSE
LIMITATIONS.—Until the conditions de-
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scribed in a notice to a national bank under para-
graph (1) are corrected— 
‘‘(A) the Comptroller of the Currency may 
impose such limitations on the conduct or ac-
tivities of the national bank or any subsidiary 
of the bank as the Comptroller of the Currency 
determines to be appropriate under the cir-
cumstances; and 
‘‘(B) the appropriate Federal banking 
agency may impose such limitations on the con-
duct or activities of an affiliated depository in-
stitution or any subsidiary of the depository in-
stitution as such agency determines to be ap-
propriate under the circumstances. 
‘‘(4) FAILURE TO CORRECT.—If, after receiving 
a notice under paragraph (1), a national bank and 
other affiliated depository institutions do not— 
‘‘(A) execute and implement an agreement 
in accordance with paragraph (2); 
‘‘(B) comply with any limitations imposed 
under paragraph (3); 
‘‘(C) in the case of a notice of failure to 
comply with subsection (a)(3)(A), restore the 
national bank or any depository institution af-
filiate of the bank to well capitalized status be-
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HR 10 PCS 
fore the end of the 180-day period beginning on 
the date such notice is received by the national 
bank (or such other period permitted by the 
Comptroller of the Currency); or 
‘‘(D) in the case of a notice of failure to 
comply with subparagraph (B) or (C) of sub-
section (a)(3), restore compliance with any such 
subparagraph on or before the date on which 
the next examination of the depository institu-
tion subsidiary is completed or by the end of 
such other period as the Comptroller of the 
Currency determines to be appropriate, 
the Comptroller of the Currency may require such 
national bank, under such terms and conditions as 
may be imposed by the Comptroller of the Currency 
and subject to such extension of time as may be 
granted in the Comptroller of the Currency’s discre-
tion, to divest control of any subsidiary engaged in 
activities pursuant to subsection (a)(2) or, at the 
election of the national bank, instead to cease to en-
gage in any activity conducted by a subsidiary of the 
national bank pursuant to subsection (a)(2). 
‘‘(5) CONSULTATION.—In taking any action 
under this subsection, the Comptroller of the Cur-
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HR 10 PCS 
rency shall consult with all relevant Federal and 
State regulatory agencies.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 1 of title LXII of the Revised Statutes of the 
United States is amended— 
(1) by redesignating the item relating to section 
5136A as section 5136C; and 
(2) by inserting after the item relating to sec-
tion 5136 the following new item: 
‘‘5136A. Subsidiaries of national banks.’’. 
SEC. 122. SAFETY AND SOUNDNESS FIREWALLS BETWEEN 
BANKS AND THEIR FINANCIAL SUBSIDIARIES. 
(a) PURPOSES.—The purposes of this section are— 
(1) to protect the safety and soundness of any 
insured bank that has a financial subsidiary; 
(2) to apply to any transaction between the 
bank and the financial subsidiary (including a loan, 
extension of credit, guarantee, or purchase of as-
sets), other than an equity investment, the same re-
strictions and requirements as would apply if the fi-
nancial subsidiary were a subsidiary of a bank hold-
ing company having control of the bank; and 
(3) to apply to any equity investment of the 
bank in the financial subsidiary restrictions and re-
quirements equivalent to those that would apply if— 
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(A) the bank paid a dividend in the same 
dollar amount to a bank holding company hav-
ing control of the bank; and 
(B) the bank holding company used the 
proceeds of the dividend to make an equity in-
vestment in a subsidiary that was engaged in 
the same activities as the financial subsidiary of 
the bank. 
(b) SAFETY AND SOUNDNESS FIREWALLS APPLICA-
BLE TO SUBSIDIARIES OF BANKS.—The Federal Deposit 
Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
inserting after section 45 (as added by section 113(b) of 
this title) the following new section: 
‘‘SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICA-
BLE TO SUBSIDIARIES OF BANKS. 
‘‘(a) LIMITING THE EQUITY INVESTMENT OF A BANK 
IN A SUBSIDIARY.— 
‘‘(1) CAPITAL
DEDUCTION.—In determining 
whether an insured bank complies with applicable 
regulatory capital standards— 
‘‘(A) the appropriate Federal banking 
agency shall deduct from the assets and tan-
gible equity of the bank the aggregate amount 
of the outstanding equity investments of the 
bank in financial subsidiaries of the bank; and 
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‘‘(B) the assets and liabilities of such fi-
nancial subsidiaries shall not be consolidated 
with those of the bank. 
‘‘(2) INVESTMENT
LIMITATION.—An insured 
bank shall not, without the prior approval of the ap-
propriate Federal banking agency, make any equity 
investment in a financial subsidiary of the bank if 
that investment would, when made, exceed the 
amount that the bank could pay as a dividend with-
out obtaining prior regulatory approval. 
‘‘(3) TREATMENT OF RETAINED EARNINGS.— 
The amount of any net earnings retained by a finan-
cial subsidiary of an insured depository institution 
shall be treated as an outstanding equity investment 
of the bank in the subsidiary for purposes of para-
graph (1). 
‘‘(b) OPERATIONAL
AND FINANCIAL SAFEGUARDS 
FOR THE BANK.—An insured bank that has a financial 
subsidiary shall maintain procedures for identifying and 
managing any financial and operational risks posed by the 
financial subsidiary. 
‘‘(c) MAINTENANCE
OF
SEPARATE
CORPORATE 
IDENTITY AND SEPARATE LEGAL STATUS.— 
‘‘(1) IN
GENERAL.—Each insured bank shall 
ensure that the bank maintains and complies with 
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reasonable policies and procedures to preserve the 
separate corporate identity and legal status of the 
bank and any financial subsidiary or affiliate of the 
bank. 
‘‘(2) EXAMINATIONS.—The appropriate Federal 
banking agency, as part of each examination, shall 
review whether an insured bank is observing the sep-
arate corporate identity and separate legal status of 
any subsidiaries and affiliates of the bank. 
‘‘(d) FINANCIAL SUBSIDIARY DEFINED.—For pur-
poses of this section, the term ‘financial subsidiary’ has 
the meaning given to such term in section 5136A(a)(7)(B) 
of the Revised Statutes of the United States. 
‘‘(e) REGULATIONS.—The appropriate Federal bank-
ing agencies shall jointly prescribe regulations imple-
menting this section.’’. 
(c) TRANSACTIONS BETWEEN FINANCIAL SUBSIDI-
ARIES AND OTHER AFFILIATES.—Section 23A of the Fed-
eral Reserve Act (12 U.S.C. 371c) is amended— 
(1) by redesignating subsection (e) as sub-
section (f); and 
(2) by inserting after subsection (d), the fol-
lowing new subsection: 
‘‘(e) RULES RELATING TO BANKS WITH FINANCIAL 
SUBSIDIARIES.— 
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‘‘(1) FINANCIAL
SUBSIDIARY
DEFINED.—For 
purposes of this section and section 23B, the term 
‘financial subsidiary’ means a company which is a 
subsidiary of a bank and is engaged in activities that 
are financial in nature or incidental to such financial 
activities pursuant to subsection (a)(2) or (b)(4) of 
section 5136A of the Revised Statutes of the United 
States. 
‘‘(2) APPLICATION TO TRANSACTIONS BETWEEN 
A
FINANCIAL
SUBSIDIARY
OF
A
BANK
AND
THE 
BANK.—For purposes of applying this section and 
section 23B to a transaction between a financial 
subsidiary of a bank and the bank (or between such 
financial subsidiary and any other subsidiary of the 
bank which is not a financial subsidiary) and not-
withstanding 
subsection 
(b)(2) 
and 
section 
23B(d)(1), the financial subsidiary of the bank— 
‘‘(A) shall be an affiliate of the bank and 
any other subsidiary of the bank which is not 
a financial subsidiary; and 
‘‘(B) shall not be treated as a subsidiary of 
the bank. 
‘‘(3) APPLICATION TO TRANSACTIONS BETWEEN 
FINANCIAL
SUBSIDIARY
AND
NONBANK
AFFILI-
ATES.— 
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‘‘(A) IN GENERAL.—A transaction between 
a financial subsidiary and an affiliate of the fi-
nancial subsidiary shall not be deemed to be a 
transaction between a subsidiary of a national 
bank and an affiliate of the bank for purposes 
of section 23A or section 23B of the Federal 
Reserve Act. 
‘‘(B) CERTAIN AFFILIATES EXCLUDED.— 
For purposes of subparagraph (A) and notwith-
standing paragraph (4), the term ‘affiliate’ 
shall not include a bank, or a subsidiary of a 
bank, which is engaged exclusively in activities 
permissible for a national bank to engage in di-
rectly or which are authorized by any Federal 
law other than section 5136A of the Revised 
Statutes of the United States. 
‘‘(4) EQUITY
INVESTMENTS
EXCLUDED
SUB-
JECT TO THE APPROVAL OF THE BANKING AGEN-
CY.—Subsection (a)(1) shall not apply so as to limit 
the equity investment of a bank in a financial sub-
sidiary of such bank, except that any investment 
that exceeds the amount of a dividend that the bank 
could pay at the time of the investment without ob-
taining prior approval of the appropriate Federal 
banking agency and is in excess of the limitation 
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HR 10 PCS 
which would apply under subsection (a)(1), but for 
this paragraph, may be made only with the approval 
of the appropriate Federal banking agency (as de-
fined in section 3(q) of the Federal Deposit Insur-
ance Act) with respect to such bank.’’. 
(d) ANTITYING.—Section 106(a) of the Bank Hold-
ing Company Act Amendments of 1970 is amended by 
adding at the end the following new sentence: ‘‘For pur-
poses of this section, a subsidiary of a national bank which 
engages in activities pursuant to subsection (a)(2) or 
(b)(4) of section 5136A of the Revised Statutes of the 
United States shall be deemed to be a subsidiary of a bank 
holding company, and not a subsidiary of a bank.’’. 
SEC. 123. MISREPRESENTATIONS REGARDING DEPOSITORY 
INSTITUTION LIABILITY FOR OBLIGATIONS 
OF AFFILIATES. 
(a) IN GENERAL.—Chapter 47 of title 18, United 
States Code, is amended by inserting after section 1007 
the following new section: 
‘‘§ 1008. Misrepresentations regarding financial insti-
tution liability for obligations of affiliates 
‘‘(a) IN GENERAL.—No institution-affiliated party of 
an insured depository institution or institution-affiliated 
party of a subsidiary or affiliate of an insured depository 
institution shall fraudulently represent that the institution 
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is or will be liable for any obligation of a subsidiary or 
other affiliate of the institution. 
‘‘(b) CRIMINAL PENALTY.—Whoever violates sub-
section (a) shall be fined under this title, imprisoned for 
not more than 5 years, or both. 
‘‘(c) INSTITUTION-AFFILIATED PARTY DEFINED.— 
For purposes of this section, the term ‘institution-affili-
ated party’ has the same meaning as in section 3 of the 
Federal Deposit Insurance Act and any reference in that 
section shall also be deemed to refer to a subsidiary or 
affiliate of an insured depository institution. 
‘‘(d) OTHER DEFINITIONS.—For purposes of this 
section, the terms ‘affiliate’, ‘insured depository institu-
tion’, and ‘subsidiary’ have same meanings as in section 
3 of the Federal Deposit Insurance Act.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 47 of title 18, United States Code, is amended 
by inserting after the item relating to section 1007 the 
following new item: 
‘‘1008. Misrepresentations regarding financial institution liability for obligations 
of affiliates.’’. 
SEC. 124. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RE-
SERVE ACT. 
Section 11 of the Federal Reserve Act (12 U.S.C. 
248) is amended by striking the paragraph designated as 
‘‘(m)’’ and inserting ‘‘(m) [Repealed]’’. 
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HR 10 PCS 
Subtitle 
D—Wholesale 
Financial 
Holding Companies; Wholesale 
Financial Institutions 
CHAPTER 1—WHOLESALE FINANCIAL 
HOLDING COMPANIES 
SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES 
ESTABLISHED. 
Section 10 of the Bank Holding Company Act of 
1956 (12 U.S.C. 1841 et seq.) is amended to read as fol-
lows: 
‘‘SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES. 
‘‘(a) COMPANIES THAT CONTROL WHOLESALE FI-
NANCIAL INSTITUTIONS.— 
‘‘(1) WHOLESALE
FINANCIAL
HOLDING
COM-
PANY
DEFINED.—The term ‘wholesale financial 
holding company’ means any company that— 
‘‘(A) is registered as a bank holding com-
pany; 
‘‘(B) is predominantly engaged in financial 
activities as defined in section 6(f)(2); 
‘‘(C) controls one or more wholesale finan-
cial institutions; 
‘‘(D) does not control— 
‘‘(i) a bank other than a wholesale fi-
nancial institution; 
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‘‘(ii) an insured bank other than an 
institution permitted under subparagraph 
(D), (F), or (G) of section 2(c)(2); or 
‘‘(iii) a savings association; and 
‘‘(E) is not a foreign bank (as defined in 
section 1(b)(7) of the International Banking 
Act of 1978). 
‘‘(2) SAVINGS
ASSOCIATION
TRANSITION
PE-
RIOD.—Notwithstanding paragraph (1)(D)(iii), the 
Board may permit a company that controls a sav-
ings association and that otherwise meets the re-
quirements of paragraph (1) to become supervised 
under paragraph (1), if the company divests control 
of any such savings association within such period 
not to exceed 5 years after becoming supervised 
under paragraph (1) as permitted by the Board. 
‘‘(b) SUPERVISION BY THE BOARD.— 
‘‘(1) IN GENERAL.—The provisions of this sec-
tion shall govern the reporting, examination, and 
capital requirements of wholesale financial holding 
companies. 
‘‘(2) REPORTS.— 
‘‘(A) IN GENERAL.—The Board from time 
to time may require any wholesale financial 
holding company and any subsidiary of such 
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company to submit reports under oath to keep 
the Board informed as to— 
‘‘(i) the company’s or subsidiary’s ac-
tivities, financial condition, policies, sys-
tems for monitoring and controlling finan-
cial and operational risks, and transactions 
with depository institution subsidiaries of 
the holding company; and 
‘‘(ii) the extent to which the company 
or subsidiary has complied with the provi-
sions of this Act and regulations prescribed 
and orders issued under this Act. 
‘‘(B) USE OF EXISTING REPORTS.— 
‘‘(i) IN GENERAL.—The Board shall, 
to the fullest extent possible, accept re-
ports in fulfillment of the Board’s report-
ing requirements under this paragraph 
that the wholesale financial holding com-
pany or any subsidiary of such company 
has provided or been required to provide to 
other Federal and State supervisors or to 
appropriate self-regulatory organizations. 
‘‘(ii) AVAILABILITY.—A wholesale fi-
nancial holding company or a subsidiary of 
such company shall provide to the Board, 
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HR 10 PCS 
at the request of the Board, a report re-
ferred to in clause (i). 
‘‘(C) EXEMPTIONS FROM REPORTING RE-
QUIREMENTS.— 
‘‘(i) IN GENERAL.—The Board may, 
by regulation or order, exempt any com-
pany or class of companies, under such 
terms and conditions and for such periods 
as the Board shall provide in such regula-
tion or order, from the provisions of this 
paragraph and any regulation prescribed 
under this paragraph. 
‘‘(ii) 
CRITERIA
FOR
CONSIDER-
ATION.—In making any determination 
under clause (i) with regard to any exemp-
tion under such clause, the Board shall 
consider, among such other factors as the 
Board may determine to be appropriate, 
the following factors: 
‘‘(I) Whether information of the 
type required under this paragraph is 
available from a supervisory agency 
(as defined in section 1101(7) of the 
Right to Financial Privacy Act of 
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HR 10 PCS 
1978) or a foreign regulatory author-
ity of a similar type. 
‘‘(II) The primary business of the 
company. 
‘‘(III) The nature and extent of 
the domestic and foreign regulation of 
the activities of the company. 
‘‘(3) EXAMINATIONS.— 
‘‘(A) LIMITED USE OF EXAMINATION AU-
THORITY.—The Board may make examinations 
of each wholesale financial holding company 
and each subsidiary of such company in order 
to— 
‘‘(i) inform the Board regarding the 
nature of the operations and financial con-
dition of the wholesale financial holding 
company and its subsidiaries; 
‘‘(ii) inform the Board regarding— 
‘‘(I) the financial and operational 
risks within the wholesale financial 
holding company system that may af-
fect any depository institution owned 
by such holding company; and 
‘‘(II) the systems of the holding 
company and its subsidiaries for mon-
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itoring and controlling those risks; 
and 
‘‘(iii) monitor compliance with the 
provisions of this Act and those governing 
transactions and relationships between any 
depository institution controlled by the 
wholesale financial holding company and 
any of the company’s other subsidiaries. 
‘‘(B) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent 
possible, limit the focus and scope of any exam-
ination of a wholesale financial holding com-
pany under this paragraph to— 
‘‘(i) the holding company; and 
‘‘(ii) any subsidiary (other than an in-
sured depository institution subsidiary) of 
the holding company that, because of the 
size, condition, or activities of the sub-
sidiary, the nature or size of transactions 
between such subsidiary and any affiliated 
depository institution, or the centralization 
of functions within the holding company 
system, could have a materially adverse ef-
fect on the safety and soundness of any de-
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pository institution affiliate of the holding 
company. 
‘‘(C) DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent 
possible, use the reports of examination of de-
pository institutions made by the Comptroller of 
the Currency, the Federal Deposit Insurance 
Corporation, the Director of the Office of Thrift 
Supervision or the appropriate State depository 
institution supervisory authority for the pur-
poses of this section. 
‘‘(D) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent 
possible, address the circumstances which might 
otherwise permit or require an examination by 
the Board by forgoing an examination and by 
instead reviewing the reports of examination 
made of— 
‘‘(i) any registered broker or dealer or 
any registered investment adviser by or on 
behalf of the Commission; and 
‘‘(ii) any licensed insurance company 
by or on behalf of any State government 
insurance agency responsible for the super-
vision of the insurance company. 
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‘‘(E) CONFIDENTIALITY OF REPORTED IN-
FORMATION.— 
‘‘(i) IN
GENERAL.—Notwithstanding 
any other provision of law, the Board shall 
not be compelled to disclose any nonpublic 
information required to be reported under 
this paragraph, or any information sup-
plied to the Board by any domestic or for-
eign regulatory agency, that relates to the 
financial or operational condition of any 
wholesale financial holding company or any 
subsidiary of such company. 
‘‘(ii) COMPLIANCE
WITH
REQUESTS 
FOR INFORMATION.—No provision of this 
subparagraph shall be construed as author-
izing the Board to withhold information 
from the Congress, or preventing the 
Board from complying with a request for 
information from any other Federal de-
partment or agency for purposes within the 
scope of such department’s or agency’s ju-
risdiction, or from complying with any 
order of a court of competent jurisdiction 
in an action brought by the United States 
or the Board. 
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of section 6 may engage in any activity or own 
any shares pursuant to this paragraph. 
‘‘(2) COMMODITIES.— 
‘‘(A) IN GENERAL.—Notwithstanding sec-
tion 4(a), a wholesale financial holding company 
which was predominately engaged as of Janu-
ary 1, 1997, in financial activities in the United 
States (or any successor to any such company) 
may engage in, or directly or indirectly own or 
control shares of a company engaged in, activi-
ties related to the trading, sale, or investment 
in commodities and underlying physical prop-
erties that were not permissible for bank hold-
ing companies to conduct in the United States 
as of January 1, 1997, if such wholesale finan-
cial holding company, or any subsidiary of such 
holding company, was engaged directly, indi-
rectly, or through any such company in any of 
such activities as of January 1, 1997, in the 
United States. 
‘‘(B) LIMITATION.—The attributed aggre-
gate consolidated assets of a wholesale financial 
holding company held under the authority 
granted under this paragraph and not otherwise 
permitted to be held by all wholesale financial 
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HR 10 PCS 
‘‘(B) subject to subparagraph (A), all ref-
erences to the appropriate Federal banking 
agency or to the Corporation in that section 
shall be deemed to be references to the Comp-
troller of the Currency, in the case of a national 
wholesale financial institution, and to the 
Board, in the case of all other wholesale finan-
cial institutions; and 
‘‘(C) in the case of wholesale financial in-
stitutions, the purpose of prompt corrective ac-
tion shall be to protect taxpayers and the finan-
cial system from the risks associated with the 
operation and activities of wholesale financial 
institutions. 
‘‘(3) 
ENFORCEMENT
AUTHORITY.—Section 
3(u), subsections (j) and (k) of section 7, sub-
sections (b) through (n), (s), (u), and (v) of section 
8, and section 19 of the Federal Deposit Insurance 
Act shall apply to a wholesale financial institution in 
the same manner and to the same extent as such 
provisions apply to State member insured banks or 
national banks, as the case may be, and any ref-
erence in such sections to an insured depository in-
stitution shall be deemed to include a reference to a 
wholesale financial institution. 
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HR 10 PCS 
any insurer or an affiliate of such insurer because 
that insurer or any affiliate plans to redomesticate, 
or has redomesticated, pursuant to this subtitle; 
(2) any law that has the purpose or effect of 
impeding the activities of, taking action against, or 
applying any provision of law or regulation to, any 
insured or any insurance licensee or other inter-
mediary because such person has procured insurance 
from or placed insurance with any insurer or affil-
iate of such insurer that plans to redomesticate, or 
has redomesticated, pursuant to this subtitle, but 
only to the extent that such law would treat such in-
sured licensee or other intermediary differently than 
if the person procured insurance from, or placed in-
surance with, an insured licensee or other inter-
mediary which had not redomesticated; 
(3) any law that has the purpose or effect of 
terminating, because of the redomestication of a mu-
tual insurer pursuant to this subtitle, any certificate 
of authority, agent appointment or license, rate ap-
proval, or other approval, of any State insurance 
regulator or other State authority in existence imme-
diately prior to the redomestication in any State 
other than the transferee domicile. 
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