SECTION 1. SHORT TITLE.

    This Act shall be cited as the ``Depository Institution Service 
Corporation Reform Act of 1994''.

            TITLE I--BANK SERVICE CORPORATION ACT AMENDMENTS

SEC. 101. SERVICE CORPORATION REFORMS.

    The Bank Service Corporation Act (Public Law 87-856, 76 Stat. 1132, 
12 U.S.C. 1861 et seq.) is amended to read as follows:

``SECTION 1. SHORT TITLE; DEFINITIONS.

    ``(a) This Act may be cited as the `Depository Institutions Service 
Corporation Act'.
    ``(b) For the purpose of this chapter--
            ``(1) the term `appropriate Federal banking agency' shall 
        have the meaning provided in section 3(q) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1813(q));
            ``(2) the term `depository institution service corporation' 
        means a corporation organized to perform services authorized by 
        this Act, all of the capital stock of which is owned by one or 
        more insured depository institutions;
            ``(3) the term `Board' means the Board of Governors of the 
        Federal Reserve System;
            ``(4) the terms `depository institution', `insured 
        depository institution' and `institution-affiliated party' have 
        the meaning as in section 3 of the Federal Deposit Insurance 
        Act (12 U.S.C. 1813);
            ``(5) the term `invest' includes any advance of funds to a 
        depository institution service corporation, whether by the 
        purchase of stock, the making of a loan, or otherwise, except a 
        payment for rent earned, goods sold and delivered, or services 
        rendered prior to the making of such payment; and
            ``(6) the term `principal investor' means the insured 
        depository institution that has the largest dollar amount 
        invested in the capital stock of a depository institution 
        service corporation. In any case where two or more insured 
        depository institutions have equal dollar amounts invested in a 
        depository institution service corporation, the corporation 
        shall, prior to commencing operations, select one of the 
        insured depository institutions as its principal investor and 
        shall notify the depository institution's appropriate Federal 
        banking agency of that choice within 5 business days of its 
        selection.

``SEC. 2. AMOUNT OF INVESTMENT IN DEPOSITORY INSTITUTION SERVICE 
              CORPORATION.

    ``(a) Depository Institutions.--Notwithstanding any limitation or 
prohibition otherwise imposed by any provision of law exclusively 
relating to depository institutions, an insured depository institution 
may invest in a depository institution service corporation, provided 
that it invests no more than--
            ``(1) 10 per centum of paid-in and unimpaired capital and 
        unimpaired surplus in any single depository institution service 
        corporation;
            ``(2) 20 per centum of paid-in and unimpaired capital and 
        unimpaired surplus in depository institution service 
        corporations; or
            ``(3) 3 per centum of its total assets in depository 
        institution service corporations.
    ``(b) Institution-Affiliated Parties.--Without the prior written 
approval of the appropriate Federal banking agency, no depository 
institution service corporation may pay management fees, in any manner, 
to an institution-affiliated party or any corporation owned by an 
institution-affiliated party.

``SEC. 3. PERMISSIBLE SERVICE CORPORATION ACTIVITIES FOR DEPOSITORY 
              INSTITUTIONS.

    ``Without regard to the provisions of sections 4 and 5 of this Act, 
an insured depository institution may invest in a depository 
institution service corporation that performs, and a depository 
institution service corporation may perform, the following services 
only for depository institutions: check and deposit sorting and 
posting, computation and posting of interest and other credits and 
charges, preparation and mailing of checks, statements, notices, and 
similar items, or any other clerical, bookkeeping, accounting, 
statistical, or similar functions performed for a depository 
institution.

``SEC. 4. PERMISSIBLE DEPOSITORY INSTITUTION SERVICE CORPORATION 
              ACTIVITIES FOR OTHER PERSONS.

    ``(a) Services Permissible Other Than Taking Deposits.--A 
depository institution service corporation may provide to any person 
any service authorized by this section, except that a depository 
institution service corporation shall not take deposits.
    ``(b) Permissible Services.--
            ``(1) In general.--A depository institution service 
        corporation shall not perform any type of service or engage in 
        any activity not permissible for a national bank.
            ``(2) Waiver.--The appropriate Federal banking agency may 
        waive the requirements of this section, if--
                    ``(A) the agency determines an activity would pose 
                no significant risk to the appropriate deposit 
                insurance fund; and
                    ``(B) the depository institution is in compliance 
                with applicable capital standards prescribed by the 
                appropriate Federal banking agency.
    ``(c) Geographic Location.--Notwithstanding the other provisions of 
this section or any other provision of law, other than the provisions 
of Federal and State branching law regulating the geographic location 
of banks to the extent that those laws are applicable to an activity 
authorized by this subsection, a depository institution service 
corporation may perform at any geographic location any service, other 
than deposit taking, that the Board has determined, by regulation, to 
be permissible for a bank holding company under section 4(c)(8) of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1843(c)(8)).

``SEC. 5. PRIOR APPROVAL FOR INVESTMENTS IN DEPOSITORY INSTITUTION 
              SERVICE CORPORATIONS.

    ``(a) Approval of Federal Banking Agency.--No insured depository 
institution shall invest in the capital stock of a depository 
institution service corporation that performs any service under 
authority of section 4(b) of this Act without the prior approval of the 
depository institution's appropriate Federal banking agency.
    ``(b) Approval of Board.--No insured depository institution shall 
invest in the capital stock of a depository institution service 
corporation that performs any service under authority of section 4(c) 
of this Act and no depository institution service corporation shall 
perform any activity under section 4(c) of this Act without the prior 
approval of the Board.
    ``(c) Considerations in Determining Approval.--In determining 
whether to approve or deny any application for prior approval under 
this section, the Board or the appropriate Federal banking agency, as 
the case may be, is authorized to consider the financial and managerial 
resources and future prospects of the depository institution or 
depository institutions and depository institution service corporation 
involved, including the financial capability of the depository 
institution to make a proposed investment under this chapter, and 
possible adverse effects such as undue concentration of resources, 
unfair or decreased competition, conflicts of interest, or unsafe or 
unsound banking practices.
    ``(d) Failure To Act on Application for Approval.--In the event the 
Board or the appropriate Federal banking agency, as the case may be, 
fails to act on any application under this section within ninety days 
of the submission of a complete application to the agency, the 
application shall be deemed approved.

``SEC. 6. SERVICES TO NONSTOCKHOLDERS.

    No depository institution service corporation shall unreasonably 
discriminate in the provision of any services authorized under this 
chapter to any depository institution that does not own stock in the 
service corporation on the basis of the fact that the nonstockholding 
institution is in competition with an institution that owns stock in 
the depository institution service corporation, except that--
            ``(1) it shall not be considered unreasonable 
        discrimination for a depository institution service corporation 
        to provide services to a nonstockholding institution only at a 
        price that fully reflects all of the costs of offering those 
        services, including the cost of capital and a reasonable return 
        thereon; and
            ``(2) a depository institution service corporation may 
        refuse to provide services to a nonstockholding institution if 
        comparable services are available from another source at 
        competitive overall costs, or if the providing of services 
        would be beyond the practical capacity of the service 
        corporation.

``SEC. 7. REGULATION AND EXAMINATION OF DEPOSITORY INSTITUTION SERVICE 
              CORPORATIONS.

    ``(a) Principal Investor.--A depository institution service 
corporation shall be subject to examination and regulation by the 
appropriate Federal banking agency of its principal investor to the 
same extent as its principal investor. The appropriate Federal banking 
agency of the principal shareholder of such a depository institution 
service corporation may authorize any other Federal banking agency that 
supervises any other shareholder of the depository institution service 
corporation to make such an examination.
    ``(b) Enforcement.--A depository institution service corporation 
shall be subject to the provisions of section 8 of the Federal Deposit 
Insurance Act (12 U.S.C. 1818) as if the depository institution service 
corporation were an insured depository institution. For this purpose, 
the appropriate Federal banking agency shall be the appropriate Federal 
banking agency of the principal investor of the depository institution 
service corporation.
    ``(c) Services Performed by Contract or Otherwise.--Notwithstanding 
subsection (a) of this section, whenever a depository institution that 
is regularly examined by an appropriate Federal banking agency, or any 
subsidiary or affiliate of such a depository institution that is 
subject to examination by that agency, causes to be performed for 
itself, by contract or otherwise, any services authorized under this 
Act, whether on or off its premises--
            ``(1) such performance shall be subject to regulation and 
        examination by such agency to the same extent as if such 
        services were being performed by the depository institution 
        itself on its own premises, and
            ``(2) the depository institution shall notify such agency 
        of the existence of the service relationship within thirty days 
        after the making of such service contract or the performance of 
        the service, whichever occurs first.
    ``(d) Issuance of Regulations and Orders.--The Board and the 
appropriate Federal banking agencies are authorized to issue such 
regulations and orders as may be necessary to enable them to administer 
and to carry out the purposes of this chapter and to prevent evasions 
thereof.''.
Output: Depository Institution Service Corporation Reform Act of 1994 - 
Title I:  Bank Service Corporation Act Amendments
 - Amends the Bank Service Corporation Act to place insured depository institutions under its jurisdiction and rename such Act the "Depository Institutions Service Corporation Act." 
Allows an insured depository institution to invest in more than one depository institution service corporation.  Prescribes investment limits, and reduces from five percent to three percent the percentage of total assets that may be so invested. 
Requires a depository institution service corporation to obtain prior written approval of the appropriate Federal banking agency before paying management fees to an institution-affiliated party (or to any corporation owned by such party). 
Prohibits a depository institution service corporation from performing activities or services that are not permissible for a national bank.