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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.''.
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.