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115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-882
======================================================================
TO REQUIRE THE APPROPRIATE FEDERAL BANKING AGENCIES TO RECOGNIZE THE
EXPOSURE-REDUCING NATURE OF CLIENT MARGIN FOR CLEARED DERIVATIVES
_______
August 3, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 4659]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4659) to require the appropriate Federal banking
agencies to recognize the exposure-reducing nature of client
margin for cleared derivatives, having considered the same,
report favorably thereon without amendment and recommend that
the bill do pass.
Purpose and Summary
In September 2014, the Board of Governors of the Federal
Reserve System (Federal Reserve), the Federal Deposit Insurance
Corporation (FDIC), and the Office of the Comptroller of the
Currency (OCC) adopted final rules to implement the
``Supplementary Leverage Ratio'' (SLR). The SLR is the
arithmetic mean of the ratio of Tier 1 capital to total
leverage exposure calculated as of the last day of each month
in the reporting quarter. Among other provisions, many market
participants expressed concerns with the SLR's treatment of
initial margin for cleared derivatives. To address these
concerns, on December 14, 2017, Representative Blaine
Luetkemeyer introduced H.R 4659. H.R. 4659 would require the
Federal Reserve, the FDIC and OCC no later than three months
after enactment to amend their rules for purposes of any
leverage-based capital rule to deduct initial margin with
respect to a centrally-cleared derivative transaction from the
amount of any leverage exposure arising from the guarantee by
the clearing member of that client's derivative obligation to
the central counterparty.
Background and Need for Legislation
The goal of H.R. 4659 is to reduce costs and increase
options for commercial businesses and farmers who use futures
and cleared swaps to manage their business risks by eliminating
the punitive capital charge on cleared derivatives
transactions. H.R. 4659 would accomplish this by requiring the
appropriate Federal banking agencies to recognize the exposure-
reducing nature of client margin for cleared derivatives for
the calculation of the supplementary leverage ratio (SLR).
In response to the 2008 financial crisis, the Basel
Committee on Banking Supervision (Basel Committee) agreed to
modify internationally negotiated bank regulatory standards,
known as the Basel Accords, to increase bank capital
requirements. On July 9, 2013, the federal banking regulators,
including the Federal Reserve, FDIC, and the OCC, issued a
final rule to implement most of the Basel III recommendations.
In addition to raising the simple leverage ratio, Basel III
established a ``supplementary leverage ratio'' (SLR) that
requires certain larger banking organizations to include
leverage exposures that are both on and off asset the bank's
balance sheet, which includes exposures arising from futures,
options, and other derivative transactions. The Basel SLR was
intended to be ``a simple, transparent, non-risk based leverage
ratio to act as a credible supplementary measure to risk-based
capital requirements.'' All banks with at least $250 billion in
total assets and $10 billion in foreign assets must meet an SLR
of 3%. Banks subject to these rules were required to meet the
SLR beginning in January 2018.
Title VII of the Dodd-Frank Act required certain over-the-
counter (OTC) swaps to be centrally cleared in order to take
advantage of the risk mitigating benefits of clearing. As a
result, the role of clearing members and the amount of
transactions cleared by these institutions has expanded
significantly. Although commercial and agricultural businesses,
commonly known as ``end-users'' that use futures and swaps to
manage business risks can only trade cleared derivatives
through a clearing member, as they cannot access clearinghouses
directly.
For centrally cleared derivatives, clearinghouses collect
initial margin on all client trades, which is typically posted
by the business to the clearing member for the purpose of
offsetting exposure to the clearinghouse. Any margin paid to a
clearing member from a customer for cleared derivatives
transactions is legally considered to belong to the customer.
Commodity Futures Trading Commission (CFTC) rules require that
customer margin be posted in the form of either cash or
extremely safe and liquid securities such as U.S. Treasuries
and that such margin be clearly segregated from the bank's own
money. As a result, the clearing member bank and the
corresponding capital regulatory treatment of the cleared swap
transaction ultimately factors into the pricing of the
transaction.
The SLR imposes significant capital requirements on initial
margin, which the clearing member collects to reduce risk on
centrally cleared exposures. Specifically, the leverage ratio
fails to recognize the exposure-reducing effect of segregated
client margin posted to the bank, which is intended to help
cover the clients' obligations as part of guaranteeing the
client trade in the clearing process. For example, a clearing
firm is clearing a transaction that would produce $100 of
client exposure and is holding $10 of customer margin in a
segregated account. If the client defaults, the clearing firm
only owes the clearinghouse $90 because the $10 margin is there
to cover some of the loss. But while the clearing firm's total
exposure is the $90, regulators require the firm to hold
capital for the full $100--instead of allowing the firm to
offset $10 of customer margin in the firm's capital
requirement. This failure of the leverage ratio to recognize
the exposure-reducing effect of segregated margin therefore
increases the amount of required capital that will need to be
allocated to the clearing businesses within these banking
institutions. As stated by CFTC Chairman Christopher Giancarlo,
``[a]pplying the SLR to clearing customer margin reflects a
flawed understanding of central counterparty (CCP) clearing.''
As Kenneth Bentsen the CEO of SIFMA testified on February
14, 2018, ``Because the SLR's approach to client clearing
requires clearing firms to hold capital against these exposures
far in excess of the risks they face,'' the mandate discourages
client clearing activity. The banking regulator's decision to
treat client margin punitively runs counter to both the Dodd-
Frank Act's mandates in Title VII and the G-20's commitment to
promote central clearing. Thus, the economics of providing
central clearing services to customers, the SLR's capital
charges for certain assets, such as cash collateral, discourage
banking organizations and their affiliates from providing such
services to their customers. If neither Congress nor the
banking regulators amend the SLR's treatment of initial margin,
the long-term result would make it less likely for clearing
members to add new clients for derivatives clearing. A healthy
number of clearing members are vital to support derivatives
end-users, including commercial and agricultural businesses as
well as farmers and ranchers who use futures and cleared swaps
to manage their business risks. Derivatives end-users only can
trade swaps through a clearing member--they cannot access
clearinghouses directly.
CFTC Chairman Giancarlo estimated that addressing the
leverage ratio treatment of initial margin would reduce bank
capital by only 1% but would reduce clearing capital costs by
70% and promote additional market activity. The number of firms
engaged in this business has declined from 100 in 2002 to 55 at
the start of 2017, of which only 19 firms actually were holding
initial margin from clients. For specific product classes,
there may be even fewer market providers. Former CFTC Chairman
Timothy Massad raised concerns with industry consolidation
increasing systemic risk by concentrating derivatives clearing
activities in fewer clearing member banks, stating ``if some
clearing members choose to limit customers, or get out of the
clearing business altogether, that may make it harder to deal
with the next time a clearing member defaults.''
Financial regulators in the United Kingdom have announced
that they will take steps to implement an offset for initial
client margin within its domestic leverage ratio, and
legislation has been introduced in the European Union to
provide banks with an offset. Foreign regulators acting
unilaterally to recognize an offset for client margin for
centrally cleared derivatives without the U.S. making a similar
recognition, will leave U.S. banks and their clients at a
significant disadvantage as compared to their overseas
competitors.
H.R. 4659 is consistent with the Department of Treasury's
October 2017 Core Principles Report on Capital Markets which
was issued pursuant to Executive Order 13772 by President Trump
in February 2017. The Treasury Department recommended r an
offset for segregated initial margin held for centrally cleared
derivatives in a firm's leverage ratio. As that Capital Markets
Report correctly recognized, to grant such an offset would have
an insignificant impact on capital requirements. In February
14, 2018 testimony before the Subcommittee on Capital Markets,
Securities, and Investment, Scott O'Malia, Chief Executive
Officer, International Swaps and Derivatives Association noted,
``Properly segregated client cash collateral is not a source of
leverage and risk exposure. However, the rule requires firms to
include these amounts in their calculations. This approach is
unreasonable as cash collateral mitigates risk.''
Hearings
The Financial Services Subcommittee on Capital Markets and
Government Sponsored Enterprises held a hearing examining
matters relating to H.R. 4659 on February 14, 2018.
Committee Consideration
The Committee on Financial Services met in open session on
March 21, 2018, and ordered H.R. 4659 to be reported favorably
to the House without amendment by a recorded vote of 44 yeas to
16 nays (recorded vote no. FC-170), a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House without amendment. The
motion was agreed to by a recorded vote of 44 yeas to 16 nays
(Record vote no. FC-170), a quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 8, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4659, a bill to
require the appropriate Federal banking agencies to recognize
the exposure-reducing nature of client margin for cleared
derivatives.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Kathleen
Gramp and Sarah Puro.
Sincerely,
Mark P. Hadley
(For Keith Hall, Director).
Enclosure.
H.R. 4659--A bill to require the appropriate Federal banking agencies
to recognize the exposure-reducing nature of client margin for
cleared derivatives
Summary: H.R. 4659 would change the calculation of a bank's
supplementary leverage ratio (SLR) to exclude from the ratio's
denominator the amount that a nonbank entity pays to the bank
as collateral for certain derivatives contracts.\1\ Currently,
that collateral--also called the segregated margin--must be
included as an asset in the SLR's denominator.
---------------------------------------------------------------------------
\1\The SLR is a capital-to-assets ratio that accounts for
derivatives and other commitments that are not typically included in a
bank's leverage ratio calculation.
---------------------------------------------------------------------------
CBO estimates that enacting H.R. 4659 would increase
deficits by $44 million over the 2018-2028 period. That amount
includes a net increase in direct spending of $46 million and
an increase in revenues of $2 million. Most of those costs
would be recovered from financial institutions in years after
2028. Because enacting the bill would affect direct spending
and revenues, pay-as-you-go-procedures apply.
CBO estimates that enacting H.R. 4659 would not increase
net direct spending by more than $2.5 billion or on-budget
deficits by more than $5 billion in any of the four consecutive
10-year periods beginning in 2029.
H.R. 4659 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA). Additional fees
imposed by the Federal Deposit Insurance Corporation (FDIC) and
the Office of the Comptroller of the Currency (OCC) would
increase the cost of an existing mandate on private entities
required to pay those assessments. However, CBO estimates that
the incremental cost of the mandate would fall well below the
annual threshold established in UMRA for private-sector
mandates ($160 million in 2018, adjusted for inflation).
Estimated cost to the Federal Government: The estimated
budgetary effect of H.R. 4659 is shown in the following table.
The costs of the legislation fall within budget function 370
(advancement of commerce).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
----------------------------------------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-23 2019-28
--------------------------------------------------------------------------------------------------------------------------------------------------------
INCREASES IN DIRECT SPENDING
Estimated Budget Authority............................... 0 1 5 7 7 7 6 4 4 3 3 27 46
Estimated Outlays........................................ 0 1 5 7 7 7 6 4 4 3 3 27 46
INCREASES IN REVENUES
Estimated Revenues....................................... 0 0 * * * * * * * * * 1 2
NET INCREASE IN THE DEFICIT FROM INCREASES IN DIRECT SPENDING AND REVENUES
Increase in the Deficit.................................. 0 1 5 7 7 7 5 4 3 3 2 26 44
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components do not sum to totals because of rounding; * = between zero and $500,000.
Basis of estimate: The budgetary effects of H.R. 4659 stem
from a small increase in the chance that the FDIC would incur
additional costs to resolve failed financial institutions. The
change in the SLR calculation could reduce the amount of
capital held by about 10 large bank holding companies and their
subsidiary insured depository institutions. For this estimate,
CBO assumes that the bill will be enacted near the end of 2018.
This cost estimate is based on the analysis underlying cost
projections for the FDIC's financial resolution programs
included in CBO's April 2018 baseline budget projections. Those
projections incorporate a weighted probability of different
possibilities for future failures of financial institutions.
Most of those possibilities have a very small probability of
occurring, but if they did, the costs to the FDIC's Deposit
Insurance Fund (DIF) or the Orderly Liquidation Fund (OLF)
would be very large.\2\ In CBO's view federal regulations that
require banks to maintain certain levels of capital and
liquidity lower the FDIC's costs for resolving failed financial
institutions because they increase the proportion of losses
that would be absorbed by shareholders and other creditors.
---------------------------------------------------------------------------
\2\The DIF, which is funded by premiums paid by member
institutions, resolves the assets of failed insured depository
institutions and insures certain deposits up to $250,000 per person.
The OLF was established to resolve failures of certain large,
systemically important financial institutions--banks and nonbanks. In
the event of such a failure, costs to the OLF would be recouped by
assessments (which are recorded as revenues in the budget) collected
from other large financial institutions.
---------------------------------------------------------------------------
CBO estimates that the bill would allow about 10 large bank
holding companies and their insured depository institutions to
exclude certain amounts paid by nonbanks on centrally cleared
derivatives when calculating their SLR. The bill's provisions
could reduce the capital that those institutions must hold
relative to their assets. Changes in the amount of capital that
a bank holds can affect its probability of failure, which in
turn may affect costs incurred by the DIF and the OLF.\3\ The
net effect of implementing the bill would vary among eligible
institutions because the SLR is only one measure used by
federal regulators to determine how much capital a bank must
hold.
---------------------------------------------------------------------------
\3\The academic literature suggests that a 1 percent decrease in
the capital-to-assets ratio for a bank can increase the probability of
failure by between 5 percent and 60 percent. CBO used a midpoint of
that range for this estimate.
---------------------------------------------------------------------------
The effects of the bill on bank holding companies that
would be resolved by the OLF and on insured depository
institutions that would be resolved by the DIF are different
because of the different regulatory requirements for how much
capital those entities must hold relative to their assets.
Based on publicly available information about the current
components of bank balance sheets, CBO expects that the total
capital of the 10 bank holding companies affected by the bill
could decrease by about two-tenths of one percent and that
their associated insured depository institutions could reduce
capital by less than three-quarters of one percent using the
loss and failure rates that underlie CBO's April 2018 baseline
projections for the FDIC. CBO used the estimates of the
decreases in capital to calculate the additional cost to the
government for resolving the affected financial institutions.
As a result, CBO estimates that enacting H.R. 4659 would
increase deficits by $44 million over the 2019-2028 period;
that amount comprises an increase in direct spending of $46
million and an increase in revenues of $2 million.
Uncertainty: CBO endeavors to develop estimates that are in
the middle of the distribution of potential budgetary outcomes.
In this case, budget projections are uncertain because future
decisions by banks and market participants are unknown.
Specifically the reduction in capital that banks hold (if any)
in response to H.R. 4659 could be different than CBO has
estimated. In addition, how any reduction in bank capital might
increase federal costs in the event of a bank failure is also
uncertain. Finally, CBO's estimates under current law are
themselves uncertain because changes in the underlying economy
could have a significant effect on bank health and bank failure
rates. CBO's current law baseline includes a small chance, in
every year, that the economy could experience a downturn that
affects the banking sector.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures were shown in the
table on page 2.
Increase in long-term direct spending and deficits: CBO
estimates that enacting H.R. 4659 would not increase net direct
spending by more than $2.5 billion or on-budget deficits by
more than $5 billion in any of the four consecutive 10-year
periods beginning in 2029.
Mandates: H.R. 4659 contains no intergovernmental mandates
as defined in UMRA. Additional fees imposed by the FDIC and the
OCC would increase the cost of an existing mandate on private
entities required to pay those assessments. However, CBO
estimates that the incremental cost of the mandate would fall
well below the annual threshold established in UMRA for
private-sector mandates ($160 million in 2018, adjusted for
inflation).
Estimate prepared by: Federal costs: Kathleen Gramp and
Sarah Puro; Mandates: Jon Sperl.
Estimate reviewed by: Kim P. Cawley, Chief, Natural
Resources Cost Estimating Unit; Susan Willie, Chief, Mandates
Unit; H. Samuel Papenfuss, Deputy Assistant Director for Budget
Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires
directed rule makings for the Federal Reserve, Federal Deposit
Insurance Corporation and Office of the Comptroller of the
Currency by amending their rules for purposes of any leverage-
based capital rule to deduct initial margin with respect to a
centrally-cleared derivative transaction from the amount of any
leverage exposure arising from the guarantee by the clearing
member of that client's derivative obligation to the central
counterparty.
Section-by-Section Analysis of the Legislation
Section 1. Treatment of client margin
This section amends Section 18(n) of the Federal Deposit
Insurance Act by providing that for the purposes of any
leverage-based capital rule, the amount of any initial margin
provided by a client with respect to a centrally-cleared
derivative obligation shall be deducted from the amount of any
leverage exposure.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
FEDERAL DEPOSIT INSURANCE ACT
* * * * * * *
Sec. 18. (a) Representations of Deposit Insurance.--
(1) Insured depository institutions.--
(A) In general.--Each insured depository
institution shall display at each place of
business maintained by that institution a sign
or signs relating to the insurance of the
deposits of the institution, in accordance with
regulations to be prescribed by the
Corporation.
(B) Statement to be included.--Each sign
required under subparagraph (A) shall include a
statement that insured deposits are backed by
the full faith and credit of the United States
Government.
(2) Regulations.--The Corporation shall prescribe
regulations to carry out this subsection, including
regulations governing the substance of signs required
by paragraph (1) and the manner of display or use of
such signs.
(3) Penalties.--For each day that an insured
depository institution continues to violate paragraph
(1) or any regulation issued under paragraph (2), it
shall be subject to a penalty of not more than $100,
which the Corporation may recover for its use.
(4) False advertising, misuse of fdic names, and
misrepresentation to indicate insured status.--
(A) Prohibition on false advertising and
misuse of fdic names.--No person may represent
or imply that any deposit liability,
obligation, certificate, or share is insured or
guaranteed by the Corporation, if such deposit
liability, obligation, certificate, or share is
not insured or guaranteed by the Corporation--
(i) by using the terms ``Federal
Deposit'', ``Federal Deposit
Insurance'', ``Federal Deposit
Insurance Corporation'', any
combination of such terms, or the
abbreviation ``FDIC'' as part of the
business name or firm name of any
person, including any corporation,
partnership, business trust,
association, or other business entity;
or
(ii) by using such terms or any other
terms, sign, or symbol as part of an
advertisement, solicitation, or other
document.
(B) Prohibition on misrepresentations of
insured status.--No person may knowingly
misrepresent--
(i) that any deposit liability,
obligation, certificate, or share is
insured, under this Act, if such
deposit liability, obligation,
certificate, or share is not so
insured; or
(ii) the extent to which or the
manner in which any deposit liability,
obligation, certificate, or share is
insured under this Act, if such deposit
liability, obligation, certificate, or
share is not so insured, to the extent
or in the manner represented.
(C) Authority of the appropriate federal
banking agency.--The appropriate Federal
banking agency shall have enforcement authority
in the case of a violation of this paragraph by
any person for which the agency is the
appropriate Federal banking agency, or any
institution-affiliated party thereof.
(D) Corporation authority if the appropriate
federal banking agency fails to follow
recommendation.--
(i) Recommendation.--The Corporation
may recommend in writing to the
appropriate Federal banking agency that
the agency take any enforcement action
authorized under section 8 for purposes
of enforcement of this paragraph with
respect to any person for which the
agency is the appropriate Federal
banking agency or any institution-
affiliated party thereof.
(ii) Agency response.--If the
appropriate Federal banking agency does
not, within 30 days of the date of
receipt of a recommendation under
clause (i), take the enforcement action
with respect to this paragraph
recommended by the Corporation or
provide a plan acceptable to the
Corporation for responding to the
situation presented, the Corporation
may take the recommended enforcement
action against such person or
institution-affiliated party.
(E) Additional authority.--In addition to its
authority under subparagraphs (C) and (D), for
purposes of this paragraph, the Corporation
shall have, in the same manner and to the same
extent as with respect to a State nonmember
insured bank--
(i) jurisdiction over--
(I) any person other than a
person for which another agency
is the appropriate Federal
banking agency or any
institution-affiliated party
thereof; and
(II) any person that aids or
abets a violation of this
paragraph by a person described
in subclause (I); and
(ii) for purposes of enforcing the
requirements of this paragraph, the
authority of the Corporation under--
(I) section 10(c) to conduct
investigations; and
(II) subsections (b), (c),
(d) and (i) of section 8 to
conduct enforcement actions.
(F) Other actions preserved.--No provision of
this paragraph shall be construed as barring
any action otherwise available, under the laws
of the United States or any State, to any
Federal or State agency or individual.
(b) No insured depository institution shall pay any dividends
on its capital stock or interest on its capital notes or
debentures (if such interest is required to be paid only out of
net profits) or distribute any of its capital assets while it
remains in default in the payment of any assessment due to the
Corporation; and any director or officer of any insured
depository institution who participates in the declaration or
payment of any such dividend or interest or in any such
distribution shall, upon conviction, be fined not more than
$1,000 or imprisoned not more than one year, or both: Provided,
That, if such default is due to a dispute between the insured
depository institution and the Corporation over the amount of
such assessment, this subsection shall not apply if the insured
depository institution deposits security satisfactory to the
Corporation for payment upon final determination of the issue.
(c)(1) Except with the prior written approval of the
responsible agency, which shall in every case referred to in
this paragraph be the Corporation, no insured depository
institution shall--
(A) merge or consolidate with any noninsured bank or
institution;
(B) assume liability to pay any deposits (including
liabilities which would be ``deposits'' except for the
proviso in section 3(l)(5) of this Act) made in, or
similar liabilities of, any noninsured bank or
institution; or
(C) transfer assets to any noninsured bank or
institution in consideration of the assumption of
liabilities for any portion of the deposits made in
such insured depository institution.
(2) No insured depository institution shall merge or
consolidate with any other insured depository institution or,
either directly or indirectly, acquire the assets of, or assume
liability to pay any deposits made in, any other insured
depository institution except with the prior written approval
of the responsible agency, which shall be--
(A) the Comptroller of the Currency if the acquiring,
assuming, or resulting bank is to be a national bank or
a Federal savings association;
(B) the Board of Governors of the Federal Reserve
System if the acquiring, assuming, or resulting bank is
to be a State member bank; and
(C) the Corporation if the acquiring, assuming, or
resulting bank is to be a State nonmember insured bank
or a State savings association.
(3) Notice of any proposed transaction for which approval is
required under paragraph (1) or (2) (referred to hereafter in
this subsection as a ``merger transaction'') shall, unless the
responsible agency finds that it must act immediately in order
to prevent the probable default of one of the banks or savings
associations involved, be published--
(A) prior to the granting of approval of such
transaction,
(B) in a form approved by the responsible agency,
(C) at appropriate intervals during a period at least
as long as the period allowed for furnishing reports
under paragraph (4) of this subsection, and
(D) in a newspaper of general circulation in the
community or communities where the main offices of the
banks or savings associations involved are located, or,
if there is no such newspaper in any such community,
then in the newspaper of general circulation published
nearest thereto.
(4) Reports on competitive factors.--
(A) Request for report.--In the interests of
uniform standards and subject to subparagraph
(B), before acting on any application for
approval of a merger transaction, the
responsible agency shall--
(i) request a report on the
competitive factors involved from the
Attorney General of the United States;
and
(ii) provide a copy of the request to
the Corporation (when the Corporation
is not the responsible agency).
(B) Furnishing of report.--The report
requested under subparagraph (A) shall be
furnished by the Attorney General to the
responsible agency--
(i) not later than 30 calendar days
after the date on which the Attorney
General received the request; or
(ii) not later than 10 calendar days
after such date, if the requesting
agency advises the Attorney General
that an emergency exists requiring
expeditious action.
(C) Exceptions.--A responsible agency may not
be required to request a report under
subparagraph (A) if--
(i) the responsible agency finds that
it must act immediately in order to
prevent the probable failure of 1 of
the insured depository institutions
involved in the merger transaction; or
(ii) the merger transaction involves
solely an insured depository
institution and 1 or more of the
affiliates of such depository
institution.
(5) The responsible agency shall not approve--
(A) any proposed merger transaction which would
result in a monopoly, or which would be in furtherance
of any combination or conspiracy to monopolize or to
attempt to monopolize the business of banking in any
part of the United States, or
(B) any other proposed merger transaction whose
effect in any section of the country may be
substantially to lessen competition, or to tend to
create a monopoly, or which in any other manner would
be in restraint of trade, unless it finds that the
anticompetitive effects of the proposed transaction are
clearly outweighed in the public interest by the
probable effect of the transaction in meeting the
convenience and needs of the community to be served.
In every case, the responsible agency shall take into
consideration the financial and managerial resources and future
prospects of the existing and proposed institutions, the
convenience and needs of the community to be served, and the
risk to the stability of the United States banking or financial
system.
(6) The responsible agency shall immediately notify the
Attorney General of any approval by it pursuant to this
subsection of a proposed merger transaction. If the agency has
found that it must act immediately to prevent the probable
failure of one of the insured depository institutions involved,
or if the proposed merger transaction is solely between an
insured depository institution and 1 or more of its affiliates,
and the report on the competitive factors has been dispensed
with, the transaction may be consummated immediately upon
approval by the agency. If the agency has advised the Attorney
General under paragraph (4)(B)(ii) of the existence of an
emergency requiring expeditious action and has requested a
report on the competitive factors within 10 days, the
transaction may not be consummated before the fifth calendar
day after the date of approval by the agency. In all other
cases, the transaction may not be consummated before the
thirtieth calendar day after the date of approval by the agency
or, if the agency has not received any adverse comment from the
Attorney General of the United States relating to competitive
factors, such shorter period of time as may be prescribed by
the agency with the concurrence of the Attorney General, but in
no event less than 15 calendar days after the date of approval.
(7)(A) Any action brought under the antitrust laws arising
out of a merger transaction shall be commenced prior to the
earliest time under paragraph (6) at which a merger transaction
approved under paragraph (5) might be consummated. The
commencement of such an action shall stay the effectiveness of
the agency's approval unless the court shall otherwise
specifically order. In any such action, the court shall review
de novo the issues presented.
(B) In any judicial proceeding attacking a merger transaction
approved under paragraph (5) on the ground that the merger
transaction alone and of itself constituted a violation of any
antitrust laws other than section 2 of the Act of July 2, 1890
(section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), the
standards applied by the court shall be identical with those
that the banking agencies are directed to apply under paragraph
(5).
(C) Upon the consummation of a merger transaction in
compliance with this subsection and after the termination of
any antitrust litigation commenced within the period prescribed
in this paragraph, or upon the termination of such period if no
such litigation is commenced therein, the transaction may not
thereafter be attacked in any judicial proceeding on the ground
that it alone and of itself constituted a violation of any
antitrust laws other than section 2 of the Act of July 2, 1890
(section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), but
nothing in this subsection shall exempt any bank or savings
association resulting from a merger transaction from complying
with the antitrust laws after the consummation of such
transaction.
(D) In any action brought under the antitrust laws arising
out of a merger transaction approved by a Federal supervisory
agency pursuant to this subsection, such agency, and any State
banking supervisory agency having jurisdiction within the State
involved, may appear as a party of its own motion and as of
right, and be represented by its counsel.
(8) For the purposes of this subsection, the term ``antitrust
laws'' means the Act of July 2, 1890 (the Sherman Antitrust
Act, 15 U.S.C. 1-7), the Act of October 15, 1914 (the Clayton
Act, 15 U.S.C. 12-27), and any other Acts in pari materia.
(9) Each of the responsible agencies shall include in its
annual report to the Congress a description of each merger
transaction approved by it during the period covered by the
report, along with--
(A) the name and total resources of each bank or
savings association involved;
(B) whether a report was submitted by the Attorney
General under paragraph (4), and, if so, a summary by
the Attorney General of the substance of such report;
and
(C) a statement by the responsible agency of the
basis for its approval.
(10) Until June 30, 1976, the responsible agency shall not
grant any approval required by law which has the practical
effect of permitting a conversion from the mutual to the stock
form of organization, including approval of any application
pending on the date of enactment of this subsection, except
that this sentence shall not be deemed to limit now or
hereafter the authority of the responsible agency to grant
approvals in cases where the responsible agency finds that it
must act in order to maintain the safety, soundness, and
stability of an insured depository institution. The responsible
agency may by rule, regulation, or otherwise and under such
civil penalties (which shall be cumulative to any other
remedies) as it may prescribe take whatever action it deems
necessary or appropriate to implement or enforce this
subsection.
(11) Money laundering.--In every case, the
responsible agency, shall take into consideration the
effectiveness of any insured depository institution
involved in the proposed merger transaction in
combatting money laundering activities, including in
overseas branches.
(12) The provisions of this subsection do not apply to any
merger transaction involving a foreign bank if no party to the
transaction is principally engaged in business in the United
States.
(13)(A) Except as provided in subparagraph (B), the
responsible agency may not approve an application for an
interstate merger transaction if the resulting insured
depository institution (including all insured depository
institutions which are affiliates of the resulting insured
depository institution), upon consummation of the transaction,
would control more than 10 percent of the total amount of
deposits of insured depository institutions in the United
States.
(B) Subparagraph (A) shall not apply to an interstate merger
transaction that involves 1 or more insured depository
institutions in default or in danger of default, or with
respect to which the Corporation provides assistance under
section 13.
(C) In this paragraph--
(i) the term ``interstate merger transaction'' means
a merger transaction involving 2 or more insured
depository institutions that have different home States
and that are not affiliates; and
(ii) the term ``home State'' means--
(I) with respect to a national bank, the
State in which the main office of the bank is
located;
(II) with respect to a State bank or State
savings association, the State by which the
State bank or State savings association is
chartered; and
(III) with respect to a Federal savings
association, the State in which the home office
(as defined by the regulations of the Director
of the Office of Thrift Supervision, or, on and
after the transfer date, the Comptroller of the
Currency) of the Federal savings association is
located.
(d)(1) No State nonmember insured bank shall establish and
operate any new domestic branch unless it shall have the prior
written consent of the Corporation, and no State nonmember
insured bank shall move its main office or any such branch from
one location to another without such consent. No foreign bank
may move any insured branch from one location to another
without such consent. The factors to be considered in granting
or withholding the consent of the Corporation under this
subsection shall be those enumerated in section 6 of this Act.
(2) No State nonmember insured bank shall establish or
operate any foreign branch, except with the prior written
consent of the Corporation and upon such conditions and
pursuant to such regulations as the Corporation may prescribe
from time to time.
(3) Exclusive authority for additional branches.--
(A) In general.--Effective June 1, 1997, a
State nonmember bank may not acquire,
establish, or operate a branch in any State
other than the bank's home State (as defined in
section 44(f)(4)) or a State in which the bank
already has a branch unless the acquisition,
establishment, or operation of a branch in such
State by a State nonmember bank is authorized
under this subsection or section 13(f), 13(k),
or 44.
(B) Retention of branches.--In the case of a
State nonmember bank which relocates the main
office of such bank from 1 State to another
State after May 31, 1997, the bank may retain
and operate branches within the State which was
the bank's home State (as defined in section
44(f)(4)) before the relocation of such office
only to the extent the bank would be
authorized, under this section or any other
provision of law referred to in subparagraph
(A), to acquire, establish, or commence to
operate a branch in such State if--
(i) the bank had no branches in such
State; or
(ii) the branch resulted from--
(I) an interstate merger
transaction approved pursuant
to section 44; or
(II) a transaction after May
31, 1997, pursuant to which the
bank received assistance from
the Corporation under section
13(c).
(4) State ``opt-in'' election to permit interstate
branching through de novo branches.--
(A) In general.--Subject to subparagraph (B),
the Corporation may approve an application by
an insured State nonmember bank to establish
and operate a de novo branch in a State (other
than the bank's home State) in which the bank
does not maintain a branch if--
(i) the law of the State in which the
branch is located, or is to be located,
would permit establishment of the
branch, if the bank were a State bank
chartered by such State; and
(ii) the conditions established in,
or made applicable to this paragraph
by, subparagraph (B) are met.
(B) Conditions on establishment and operation
of interstate branch.--
(i) Establishment.--An application by
an insured State nonmember bank to
establish and operate a de novo branch
in a host State shall be subject to the
same requirements and conditions to
which an application for a merger
transaction is subject under paragraphs
(1), (3), and (4) of section 44(b).
(ii) Operation.--Subsections (c) and
(d)(2) of section 44 shall apply with
respect to each branch of an insured
State nonmember bank which is
established and operated pursuant to an
application approved under this
paragraph in the same manner and to the
same extent such provisions of such
section apply to a branch of a State
bank which resulted from a merger
transaction under such section 44.
(C) De novo branch defined.--For purposes of
this paragraph, the term ``de novo branch''
means a branch of a State bank which--
(i) is originally established by the
State bank as a branch; and
(ii) does not become a branch of such
bank as a result of--
(I) the acquisition by the
bank of an insured depository
institution or a branch of an
insured depository institution;
or
(II) the conversion, merger,
or consolidation of any such
institution or branch.
(D) Home state defined.--The term ``home
State'' means the State by which a State bank
is chartered.
(E) Host state defined.--The term ``host
State'' means, with respect to a bank, a State,
other than the home State of the bank, in which
the bank maintains, or seeks to establish and
maintain, a branch.
(e) The Corporation may require any insured depository
institution to provide protection and indemnity against
burglary, defalcation, and other similar insurable losses.
Whenever any insured depository institution refuses to comply
with any such requirement the Corporation may contract for such
protection and indemnity and add the cost thereof to the
assessment otherwise payable by such bank.
(f) Whenever any insured depository institution (except a
national bank), after written notice of the recommendations of
the Corporation based on a report of examination of such
insured depository institution by an examiner of the
Corporation, shall fail to comply with such recommendations
within one hundred and twenty days after such notice, the
Corporation shall have the power, and is hereby authorized, to
publish only such part of such report of examination as relates
to any recommendation not complied with: Provided, That notice
of intention to make such publication shall be given to the
insured depository institution at least ninety days before such
publication is made.
(h) Penalty for Failure to Timely Pay Assessments.--
(1) In general.--Subject to paragraph (3), any
insured depository institution which fails or refuses
to pay any assessment shall be subject to a penalty in
an amount of not more than 1 percent of the amount of
the assessment due for each day that such violation
continues.
(2) Exception in case of dispute.--Paragraph (1)
shall not apply if--
(A) the failure to pay an assessment is due
to a dispute between the insured depository
institution and the Corporation over the amount
of such assessment; and
(B) the insured depository institution
deposits security satisfactory to the
Corporation for payment upon final
determination of the issue.
(3) Special rule for small assessment amounts.--If
the amount of the assessment which an insured
depository institution fails or refuses to pay is less
than $10,000 at the time of such failure or refusal,
the amount of any penalty to which such institution is
subject under paragraph (1) shall not exceed $100 for
each day that such violation continues.
(4) Authority to modify or remit penalty.--The
Corporation, in the sole discretion of the Corporation,
may compromise, modify or remit any penalty which the
Corporation may assess or has already assessed under
paragraph (1) upon a finding that good cause prevented
the timely payment of an assessment.
(i)(1) No insured State nonmember bank shall, without the
prior consent of the Corporation, reduce the amount or retire
any part of its common or preferred capital stock, or retire
any part of its capital notes or debentures.
(2) No insured Federal depository institution shall convert
into an insured State depository institution if its capital
stock or its surplus will be less than the capital stock or
surplus, respectively, of the converting bank at the time of
the shareholder's meeting approving such conversion, without
the prior written consent of--
(A) the Board of Governors of the Federal Reserve
System if the resulting bank is to be a State member
bank;
(B) the Corporation if the resulting bank is to be a
State nonmember insured bank; and
(C) the Corporation if the resulting institution is
to be an insured State savings association.
(3) Without the prior written consent of the Corporation, no
insured depository institution shall convert into a noninsured
bank or institution.
(4) In granting or withholding consent under this subsection,
the responsible agency shall consider--
(A) the financial history and condition of the bank,
(B) the adequacy of its capital structure,
(C) its future earnings prospects,
(D) the general character and fitness of its
management,
(E) the convenience and needs of the community to be
served, and
(F) whether or not its corporate powers are
consistent with the purposes of this Act.
(j) Restrictions on Transactions With Affiliates and
Insiders.--
(1) Transactions with affiliates.--
(A) In general.--Sections 23A and 23B of the
Federal Reserve Act shall apply with respect to
every nonmember insured bank in the same manner
and to the same extent as if the nonmember
insured bank were a member bank.
(B) Affiliate defined.--For the purpose of
subparagraph (A), any company that would be an
affiliate (as defined in sections 23A and 23B)
of a nonmember insured bank if the nonmember
insured bank were a member bank shall be deemed
to be an affiliate of that nonmember insured
bank.
(2) Extensions of credit to officers, directors, and
principal shareholders.--Subsections (g) and (h) of
section 22 of the Federal Reserve Act shall apply with
respect to every nonmember insured bank in the same
manner and to the same extent as if the nonmember
insured bank were a member bank.
(3) Avoiding extraterritorial application to foreign
banks.--
(A) Transactions with affiliates.--Paragraph
(1) shall not apply with respect to a foreign
bank solely because the foreign bank has an
insured branch.
(B) Extensions of credit to officers,
directors, and principal shareholders.--
Paragraph (2) shall not apply with respect to a
foreign bank solely because the foreign bank
has an insured branch, but shall apply with
respect to the insured branch.
(C) Foreign bank defined.--For purposes of
this paragraph, the term ``foreign bank'' has
the same meaning as in section 1(b)(7) of the
International Banking Act of 1978.
(k) Authority To Regulate or Prohibit Certain Forms of
Benefits to Institution-Affiliated Parties.--
(1) Golden parachutes and indemnification payments.--
The Corporation may prohibit or limit, by regulation or
order, any golden parachute payment or indemnification
payment.
(2) Factors to be taken into account.--The
Corporation shall prescribe, by regulation, the factors
to be considered by the Corporation in taking any
action pursuant to paragraph (1) which may include such
factors as the following:
(A) Whether there is a reasonable basis to
believe that the institution-affiliated party
has committed any fraudulent act or omission,
breach of trust or fiduciary duty, or insider
abuse with regard to the depository institution
or covered company that has had a material
affect on the financial condition of the
institution.
(B) Whether there is a reasonable basis to
believe that the institution-affiliated party
is substantially responsible for--
(i) the insolvency of the depository
institution or covered company;
(ii) the appointment of a conservator
or receiver for the depository
institution; or
(iii) the troubled condition of the
depository institution (as defined in
the regulations prescribed pursuant to
section 32(f)).
(C) Whether there is a reasonable basis to
believe that the institution-affiliated party
has materially violated any applicable Federal
or State banking law or regulation that has had
a material affect on the financial condition of
the institution.
(D) Whether there is a reasonable basis to
believe that the institution-affiliated party
has violated or conspired to violate--
(i) section 215, 656, 657, 1005,
1006, 1007, 1014, 1032, or 1344 of
title 18, United States Code; or
(ii) section 1341 or 1343 of such
title affecting a federally insured
financial institution.
(E) Whether the institution-affiliated party
was in a position of managerial or fiduciary
responsibility.
(F) The length of time the party was
affiliated with the insured depository
institution or covered company, and the degree
to which--
(i) the payment reasonably reflects
compensation earned over the period of
employment; and
(ii) the compensation involved
represents a reasonable payment for
services rendered.
(3) Certain payments prohibited.--No insured
depository institution or covered company may prepay
the salary or any liability or legal expense of any
institution-affiliated party if such payment is made--
(A) in contemplation of the insolvency of
such institution or covered company or after
the commission of an act of insolvency; and
(B) with a view to, or has the result of--
(i) preventing the proper application
of the assets of the institution to
creditors; or
(ii) preferring one creditor over
another.
(4) Golden parachute payment defined.--For purposes
of this subsection--
(A) In general.--The term ``golden parachute
payment'' means any payment (or any agreement
to make any payment) in the nature of
compensation by any insured depository
institution or covered company for the benefit
of any institution-affiliated party pursuant to
an obligation of such institution or covered
company that--
(i) is contingent on the termination
of such party's affiliation with the
institution or covered company; and
(ii) is received on or after the date
on which--
(I) the insured depository
institution or covered company,
or any insured depository
institution subsidiary of such
covered company, is insolvent;
(II) any conservator or
receiver is appointed for such
institution;
(III) the institution's
appropriate Federal banking
agency determines that the
insured depository institution
is in a troubled condition (as
defined in the regulations
prescribed pursuant to section
32(f));
(IV) the insured depository
institution has been assigned a
composite rating by the
appropriate Federal banking
agency or the Corporation of 4
or 5 under the Uniform
Financial Institutions Rating
System; or
(V) the insured depository
institution is subject to a
proceeding initiated by the
Corporation to terminate or
suspend deposit insurance for
such institution.
(B) Certain payments in contemplation of an
event.--Any payment which would be a golden
parachute payment but for the fact that such
payment was made before the date referred to in
subparagraph (A)(ii) shall be treated as a
golden parachute payment if the payment was
made in contemplation of the occurrence of an
event described in any subclause of such
subparagraph.
(C) Certain payments not included.--The term
``golden parachute payment'' shall not
include--
(i) any payment made pursuant to a
retirement plan which is qualified (or
is intended to be qualified) under
section 401 of the Internal Revenue
Code of 1986 or other nondiscriminatory
benefit plan;
(ii) any payment made pursuant to a
bona fide deferred compensation plan or
arrangement which the Board determines,
by regulation or order, to be
permissible; or
(iii) any payment made by reason of
the death or disability of an
institution-affiliated party.
(5) Other definitions.--For purposes of this
subsection--
(A) Indemnification payment.--Subject to
paragraph (6), the term ``indemnification
payment'' means any payment (or any agreement
to make any payment) by any insured depository
institution or covered company for the benefit
of any person who is or was an institution-
affiliated party, to pay or reimburse such
person for any liability or legal expense with
regard to any administrative proceeding or
civil action instituted by the appropriate
Federal banking agency which results in a final
order under which such person--
(i) is assessed a civil money
penalty;
(ii) is removed or prohibited from
participating in conduct of the affairs
of the insured depository institution;
or
(iii) is required to take any
affirmative action described in section
8(b)(6) with respect to such
institution.
(B) Liability or legal expense.--The term
``liability or legal expense'' means--
(i) any legal or other professional
expense incurred in connection with any
claim, proceeding, or action;
(ii) the amount of, and any cost
incurred in connection with, any
settlement of any claim, proceeding, or
action; and
(iii) the amount of, and any cost
incurred in connection with, any
judgment or penalty imposed with
respect to any claim, proceeding, or
action.
(C) Payment.--The term ``payment'' includes--
(i) any direct or indirect transfer
of any funds or any asset; and
(ii) any segregation of any funds or
assets for the purpose of making, or
pursuant to an agreement to make, any
payment after the date on which such
funds or assets are segregated, without
regard to whether the obligation to
make such payment is contingent on--
(I) the determination, after
such date, of the liability for
the payment of such amount; or
(II) the liquidation, after
such date, of the amount of
such payment.
(D) Covered company.--The term ``covered
company'' means any depository institution
holding company (including any company required
to file a report under section 4(f)(6) of the
Bank Holding Company Act of 1956), or any other
company that controls an insured depository
institution.
(6) Certain commercial insurance coverage not treated
as covered benefit payment.--No provision of this
subsection shall be construed as prohibiting any
insured depository institution or covered company, from
purchasing any commercial insurance policy or fidelity
bond, except that, subject to any requirement described
in paragraph (5)(A)(iii), such insurance policy or bond
shall not cover any legal or liability expense of the
institution or covered company which is described in
paragraph (5)(A).
(l) When authorized by State law, a State nonmember insured
bank may, but only with the prior written consent of the
Corporation and upon such conditions and under such regulations
as the Corporation may prescribe from time to time, acquire and
hold, directly or indirectly, stock or other evidences of
ownership in one or more banks or other entities organized
under the law of a foreign country or a dependency or insular
possession of the United States and not engaged, directly or
indirectly, in any activity in the United States except as, in
the judgment of the Board of Directors, shall be incidental to
the international or foreign business of such foreign bank or
entity; and, notwithstanding the provisions of subsection (j)
of this section, such State nonmember insured bank may, as to
such foreign bank or entity, engage in transactions that would
otherwise be covered thereby, but only in the manner and within
the limit prescribed by the Corporation by general or specific
regulation or ruling.
(m) Activities of Savings Associations and Their
Subsidiaries.--
(1) Procedures.--When an insured savings association
establishes or acquires a subsidiary or when an insured
savings association elects to conduct any new activity
through a subsidiary that the insured savings
association controls, the insured savings association--
(A) shall notify the Corporation or the
Comptroller of the Currency, as appropriate,
not less than 30 days prior to the
establishment, or acquisition, of any such
subsidiary, and not less than 30 days prior to
the commencement of any such activity, and in
either case shall provide at that time such
information as each such agency may, by
regulation, require; and
(B) shall conduct the activities of the
subsidiary in accordance with regulations of
the Comptroller of the Currency and orders of
the Corporation and the Comptroller of the
Currency.
(2) Enforcement powers.--With respect to any
subsidiary of an insured savings association:
(A) the Corporation and the Comptroller of
the Currency, as appropriate, shall each have,
with respect to such subsidiary, the respective
powers that each has with respect to the
insured savings association pursuant to this
section or section 8; and
(B) the Corporation or the Comptroller of the
Currency, as appropriate, may determine, after
notice and opportunity for hearing, that the
continuation by the insured savings association
of its ownership or control of, or its
relationship to, the subsidiary--
(i) constitutes a serious risk to the
safety, soundness, or stability of the
insured savings association, or
(ii) is inconsistent with sound
banking principles or with the purposes
of this Act.
Upon making any such determination, the
Corporation or the Office of the Comptroller of
the Currency, as appropriate, shall have
authority to order the insured savings
association to divest itself of control of the
subsidiary. The Corporation or the Comptroller
of the Currency, as appropriate, may take any
other corrective measures with respect to the
subsidiary, including the authority to require
the subsidiary to terminate the activities or
operations posing such risks, as the
Corporation or the Comptroller of the Currency,
respectively, may deem appropriate.
(3) Activities incompatible with deposit insurance.--
(A) In general.--The Corporation may
determine by regulation or order that any
specific activity poses a serious threat to the
Deposit Insurance Fund. Prior to adopting any
such regulation, the Corporation shall, in the
case of a Federal savings association, consult
with the Comptroller of the Currency and shall
provide appropriate State supervisors the
opportunity to comment thereon, and the
Corporation shall specifically take such
comments into consideration. Any such
regulation shall be issued in accordance with
section 553 of title 5, United States Code. If
the Board of Directors makes such a
determination with respect to an activity, the
Corporation shall have authority to order that
no savings association may engage in the
activity directly.
(B) Authority of comptroller of the
currency.--This section does not limit the
authority of the Comptroller of the Currency to
issue regulations to promote safety and
soundness, or to enforce compliance as to
Federal savings associations with other
applicable laws.
(C) Additional authority of fdic to prevent
serious risks to insurance fund.--
Notwithstanding subparagraph (A), the
Corporation may prescribe and enforce such
regulations and issue such orders as the
Corporation determines to be necessary to
prevent actions or practices of savings
associations that pose a serious threat to the
Deposit Insurance Fund.
(4) ``Subsidiary'' defined.--As used in this
subsection, the term ``subsidiary'' does not include an
insured depository institution.
(5) Applicability to certain savings banks.--
Subparagraphs (A) and (B) of paragraph (1) of this
subsection do not apply to--
(A) any Federal savings bank that was
chartered prior to October 15, 1982, as a
savings bank under State law, or
(B) a savings association that acquired its
principal assets from an institution that was
chartered prior to October 15, 1982, as a
savings bank under State law.
(n) Calculation of Capital.--[No appropriate]
(1) Unidentified intangible assets._No appropriate
Federal banking agency shall allow any insured
depository institution to include an unidentifiable
intangible asset in its calculation of compliance with
the appropriate capital standard, if such
unidentifiable intangible asset was acquired after
April 12, 1989, except to the extent permitted under
section 5(t) of the Home Owners' Loan Act.
(2) Treatment of client margin.--For purposes of any
leverage-based capital rule, guideline, standard, or
requirement promulgated, prescribed, or imposed by any
appropriate Federal banking agency on insured
depository institutions, the amount of any initial
margin provided by a client of an insured depository
institution with respect to a centrally-cleared
derivative obligation shall be deducted from the amount
of any leverage exposure arising from the insured
depository institution's guarantee of the client's
derivative obligation to the central counterparty.
(o) Real Estate Lending.--
(1) Uniform regulations.--Not more than 9 months
after the date of enactment of the Federal Deposit
Insurance Corporation Improvement Act of 1991, each
appropriate Federal banking agency shall adopt uniform
regulations prescribing standards for extensions of
credit that are--
(A) secured by liens on interests in real
estate; or
(B) made for the purpose of financing the
construction of a building or other
improvements to real estate.
(2) Standards.--
(A) Criteria.--In prescribing standards under
paragraph (1), the agencies shall consider--
(i) the risk posed to the Deposit
Insurance Fund by such extensions of
credit;
(ii) the need for safe and sound
operation of insured depository
institutions; and
(iii) the availability of credit.
(B) Variations permitted.--In prescribing
standards under paragraph (1), the appropriate
Federal banking agencies may differentiate
among types of loans--
(i) as may be required by Federal
statute;
(ii) as may be warranted, based on
the risk to the Deposit Insurance Fund;
or
(iii) as may be warranted, based on
the safety and soundness of the
institutions.
(3) Loan evaluation standard.--No appropriate Federal
banking agency shall adversely evaluate an investment
or a loan made by an insured depository institution, or
consider such a loan to be nonperforming, solely
because the loan is made to or the investment is in
commercial, residential, or industrial property, unless
such investment or loan may affect the institution's
safety and soundness.
(4) Effective date.--The regulations adopted under
paragraph (1) shall become effective not later than 15
months after the date of enactment of the Federal
Deposit Insurance Corporation Improvement Act of 1991.
Such regulations shall continue in effect except as
uniformly amended by the appropriate Federal banking
agencies, acting in concert.
(p) Periodic Review of Capital Standards.--Each appropriate
Federal banking agency shall, in consultation with the other
Federal banking agencies, biennially review its capital
standards for insured depository institutions to determine
whether those standards require sufficient capital to
facilitate prompt corrective action to prevent or minimize loss
to the Deposit Insurance Fund, consistent with section 38.
(q) Sovereign Risk.--Section 25C of the Federal Reserve Act
shall apply to every nonmember insured bank in the same manner
and to the same extent as if the nonmember insured bank were a
member bank.
(r) Subsidiary Depository Institutions as Agents for Certain
Affiliates.--
(1) In general.--Any bank subsidiary of a bank
holding company may receive deposits, renew time
deposits, close loans, service loans, and receive
payments on loans and other obligations as an agent for
a depository institution affiliate.
(2) Bank acting as agent is not a branch.--
Notwithstanding any other provision of law, a bank
acting as an agent in accordance with paragraph (1) for
a depository institution affiliate shall not be
considered to be a branch of the affiliate.
(3) Prohibitions on activities.--A depository
institution may not--
(A) conduct any activity as an agent under
paragraph (1) or (6) which such institution is
prohibited from conducting as a principal under
any applicable Federal or State law; or
(B) as a principal, have an agent conduct any
activity under paragraph (1) or (6) which the
institution is prohibited from conducting under
any applicable Federal or State law.
(4) Existing authority not affected.--No provision of
this subsection shall be construed as affecting--
(A) the authority of any depository
institution to act as an agent on behalf of any
other depository institution under any other
provision of law; or
(B) whether a depository institution which
conducts any activity as an agent on behalf of
any other depository institution under any
other provision of law shall be considered to
be a branch of such other institution.
(5) Agency relationship required to be consistent
with safe and sound banking practices.--An agency
relationship between depository institutions under
paragraph (1) or (6) shall be on terms that are
consistent with safe and sound banking practices and
all applicable regulations of any appropriate Federal
banking agency.
(6) Affiliated insured savings associations.--An
insured savings association which was an affiliate of a
bank on July 1, 1994, may conduct activities as an
agent on behalf of such bank in the same manner as an
insured bank affiliate of such bank may act as agent
for such bank under this subsection to the extent such
activities are conducted only in--
(A) any State in which--
(i) the bank is not prohibited from
operating a branch under any provision
of Federal or State law; and
(ii) the savings association
maintained an office or branch and
conducted business as of July 1, 1994;
or
(B) any State in which--
(i) the bank is not expressly
prohibited from operating a branch
under a State law described in section
44(a)(2); and
(ii) the savings association
maintained a main office and conducted
business as of July 1, 1994.
(s) Prohibition on Certain Affiliations.--
(1) In general.--No depository institution may be an
affiliate of, be sponsored by, or accept financial
support, directly or indirectly, from any Government-
sponsored enterprise.
(2) Exception for members of a federal home loan
bank.--Paragraph (1) shall not apply with respect to
the membership of a depository institution in a Federal
home loan bank.
(3) Routine business financing.--Paragraph (1) shall
not apply with respect to advances or other forms of
financial assistance provided by a Government-sponsored
enterprise pursuant to the statutes governing such
enterprise.
(4) Student loans.--
(A) In general.--This subsection shall not
apply to any arrangement between the Holding
Company (or any subsidiary of the Holding
Company other than the Student Loan Marketing
Association) and a depository institution, if
the Secretary approves the affiliation and
determines that--
(i) the reorganization of such
Association in accordance with section
440 of the Higher Education Act of
1965, as amended, will not be adversely
affected by the arrangement;
(ii) the dissolution of the
Association pursuant to such
reorganization will occur before the
end of the 2-year period beginning on
the date on which such arrangement is
consummated or on such earlier date as
the Secretary deems appropriate:
Provided, That the Secretary may extend
this period for not more than 1 year at
a time if the Secretary determines that
such extension is in the public
interest and is appropriate to achieve
an orderly reorganization of the
Association or to prevent market
disruptions in connection with such
reorganization, but no such extensions
shall in the aggregate exceed 2 years;
(iii) the Association will not
purchase or extend credit to, or
guarantee or provide credit enhancement
to, any obligation of the depository
institution;
(iv) the operations of the
Association will be separate from the
operations of the depository
institution; and
(v) until the ``dissolution date''
(as that term is defined in section 440
of the Higher Education Act of 1965, as
amended) has occurred, such depository
institution will not use the trade name
or service mark ``Sallie Mae'' in
connection with any product or service
it offers if the appropriate Federal
banking agency for such depository
institution determines that--
(I) the depository
institution is the only
institution offering such
product or service using the
``Sallie Mae'' name; and
(II) such use would result in
the depository institution
having an unfair competitive
advantage over other depository
institutions.
(B) Terms and conditions.--In approving any
arrangement referred to in subparagraph (A) the
Secretary may impose any terms and conditions
on such an arrangement that the Secretary
considers appropriate, including--
(i) imposing additional restrictions
on the issuance of debt obligations by
the Association; or
(ii) restricting the use of proceeds
from the issuance of such debt.
(C) Additional limitations.--In the event
that the Holding Company (or any subsidiary of
the Holding Company) enters into such an
arrangement, the value of the Association's
``investment portfolio'' shall not at any time
exceed the lesser of--
(i) the value of such portfolio on
the date of the enactment of this
subsection; or
(ii) the value of such portfolio on
the date such an arrangement is
consummated. The term ``investment
portfolio'' shall mean all investments
shown on the consolidated balance sheet
of the Association other than--
(I) any instrument or assets
described in section 439(d) of
the Higher Education Act of
1965, as such section existed
on the day before the date of
the repeal of such section;
(II) any direct noncallable
obligations of the United
States or any agency thereof
for which the full faith and
credit of the United States is
pledged; or
(III) cash or cash
equivalents.
(D) Enforcement.--The terms and conditions
imposed under subparagraph (B) may be enforced
by the Secretary in accordance with section 440
of the Higher Education Act of 1965.
(E) Definitions.--For purposes of this
paragraph, the following definition shall
apply--
(i) Association; holding company.--
Notwithstanding any provision in
section 3, the terms ``Association''
and ``Holding Company'' have the same
meanings as in section 440(i) of the
Higher Education Act of 1965.
(ii) Secretary.--The term
``Secretary'' means the Secretary of
the Treasury.
(5) Government-sponsored enterprise defined.--For
purposes of this subsection, the term ``Government-
sponsored enterprise'' has the meaning given to such
term in section 1404(e)(1)(A) of the Financial
Institutions Reform, Recovery, and Enforcement Act of
1989.
(t) Recordkeeping Requirements.--
(1) Requirements.--Each appropriate Federal banking
agency, after consultation with and consideration of
the views of the Commission, shall establish
recordkeeping requirements for banks relying on
exceptions contained in paragraphs (4) and (5) of
section 3(a) of the Securities Exchange Act of 1934.
Such recordkeeping requirements shall be sufficient to
demonstrate compliance with the terms of such
exceptions and be designed to facilitate compliance
with such exceptions.
(2) Availability to commission; confidentiality.--
Each appropriate Federal banking agency shall make any
information required under paragraph (1) available to
the Commission upon request. Notwithstanding any other
provision of law, the Commission shall not be compelled
to disclose any such information. Nothing in this
paragraph shall authorize the Commission to withhold
information from Congress, or prevent the Commission
from complying with a request for information from any
other Federal department or agency or any self-
regulatory organization requesting the information for
purposes within the scope of its jurisdiction, or
complying with an order of a court of the United States
in an action brought by the United States or the
Commission. For purposes of section 552 of title 5,
United States Code, this paragraph shall be considered
a statute described in subsection (b)(3)(B) of such
section 552.
(3) Definition.--As used in this subsection the term
``Commission'' means the Securities and Exchange
Commission.
(u) Limitation on Claims.--
(1) In general.--No person may bring a claim against
any Federal banking agency (including in its capacity
as conservator or receiver) for the return of assets of
an affiliate or controlling shareholder of the insured
depository institution transferred to, or for the
benefit of, an insured depository institution by such
affiliate or controlling shareholder of the insured
depository institution, or a claim against such Federal
banking agency for monetary damages or other legal or
equitable relief in connection with such transfer, if
at the time of the transfer--
(A) the insured depository institution is
subject to any direction issued in writing by a
Federal banking agency to increase its capital;
and
(B) for that portion of the transfer that is
made by an entity covered by section 5(g) of
the Bank Holding Company Act of 1956 or section
45 of this Act, the Federal banking agency has
followed the procedure set forth in such
section.
(2) Definition of claim.--For purposes of paragraph
(1), the term ``claim''--
(A) means a cause of action based on Federal
or State law that--
(i) provides for the avoidance of
preferential or fraudulent transfers or
conveyances; or
(ii) provides similar remedies for
preferential or fraudulent transfers or
conveyances; and
(B) does not include any claim based on
actual intent to hinder, delay, or defraud
pursuant to such a fraudulent transfer or
conveyance law.
(v) Loans by Insured Institutions on Their Own Stock.--
(1) General prohibition.--No insured depository
institution may make any loan or discount on the
security of the shares of its own capital stock.
(2) Exclusion.--For purposes of this subsection, an
insured depository institution shall not be deemed to
be making a loan or discount on the security of the
shares of its own capital stock if it acquires the
stock to prevent loss upon a debt previously contracted
for in good faith.
(w) Written Employment References May Contain Suspicions of
Involvement in Illegal Activity.--
(1) Authority to disclose information.--
Notwithstanding any other provision of law, any insured
depository institution, and any director, officer,
employee, or agent of such institution, may disclose in
any written employment reference relating to a current
or former institution-affiliated party of such
institution which is provided to another insured
depository institution in response to a request from
such other institution, information concerning the
possible involvement of such institution-affiliated
party in potentially unlawful activity.
(2) Information not required.--Nothing in paragraph
(1) shall be construed, by itself, to create any
affirmative duty to include any information described
in paragraph (1) in any employment reference referred
to in paragraph (1).
(3) Malicious intent.--Notwithstanding any other
provision of this subsection, voluntary disclosure made
by an insured depository institution, and any director,
officer, employee, or agent of such institution, under
this subsection concerning potentially unlawful
activity that is made with malicious intent, shall not
be shielded from liability from the person identified
in the disclosure.
(4) Definition.--For purposes of this subsection, the
term ``insured depository institution'' includes any
uninsured branch or agency of a foreign bank.
(x) Privileges Not Affected by Disclosure to Banking Agency
or Supervisor.--
(1) In general.--The submission by any person of any
information to the Bureau of Consumer Financial
Protection, any Federal banking agency, State bank
supervisor, or foreign banking authority for any
purpose in the course of any supervisory or regulatory
process of such Bureau, agency, supervisor, or
authority shall not be construed as waiving,
destroying, or otherwise affecting any privilege such
person may claim with respect to such information under
Federal or State law as to any person or entity other
than such Bureau, agency, supervisor, or authority.
(2) Rule of construction.--No provision of paragraph
(1) may be construed as implying or establishing that--
(A) any person waives any privilege
applicable to information that is submitted or
transferred under any circumstance to which
paragraph (1) does not apply; or
(B) any person would waive any privilege
applicable to any information by submitting the
information to the Bureau of Consumer Financial
Protection, any Federal banking agency, State
bank supervisor, or foreign banking authority,
but for this subsection.
(z) General Prohibition on Sale of Assets.--
(1) In general.--An insured depository institution
may not purchase an asset from, or sell an asset to, an
executive officer, director, or principal shareholder
of the insured depository institution, or any related
interest of such person (as such terms are defined in
section 22(h) of Federal Reserve Act), unless--
(A) the transaction is on market terms; and
(B) if the transaction represents more than
10 percent of the capital stock and surplus of
the insured depository institution, the
transaction has been approved in advance by a
majority of the members of the board of
directors of the insured depository institution
who do not have an interest in the transaction.
(2) Rulemaking.--The Board of Governors of the
Federal Reserve System may issue such rules as may be
necessary to define terms and to carry out the purposes
this subsection. Before proposing or adopting a rule
under this paragraph, the Board of Governors of the
Federal Reserve System shall consult with the
Comptroller of the Currency and the Corporation as to
the terms of the rule.
(y) State Lending Limit Treatment of Derivatives
Transactions.--An insured State bank may engage in a derivative
transaction, as defined in section 5200(b)(3) of the Revised
Statutes of the United States (12 U.S.C. 84(b)(3)), only if the
law with respect to lending limits of the State in which the
insured State bank is chartered takes into consideration credit
exposure to derivative transactions.
* * * * * * *
----------
BANK HOLDING COMPANY ACT OF 1956
* * * * * * *
administration
Sec. 5. (a) Within one hundred and eighty days after the date
of enactment of this Act, or within one hundred and eighty days
after becoming a bank holding company, whichever is later, each
bank holding company shall register with the Board on forms
prescribed by the Board, which shall include such information
with respect to the financial condition and operations,
management, and intercompany relationships of the bank holding
company and its subsidiaries, and related matters, as the Board
may deem necessary or appropriate to carry about the purposes
of this Act. The Board may, in its discretion, extend the time
within which a bank holding company shall register and file the
requisite information. A declaration filed in accordance with
section 4(l)(1)(C) shall satisfy the requirements of this
subsection with regard to the registration of a bank holding
company but not any requirement to file an application to
acquire a bank pursuant to section 3.
(b) The Board is authorized to issue such regulations and
orders, including regulations and orders relating to the
capital requirements for bank holding companies, as may be
necessary to enable it to administer and carry out the purposes
of this Act and prevent evasions thereof. In establishing
capital regulations pursuant to this subsection, the Board
shall seek to make such requirements countercyclical, so that
the amount of capital required to be maintained by a company
increases in times of economic expansion and decreases in times
of economic contraction, consistent with the safety and
soundness of the company.
(c) Reports and Examinations.--
(1) Reports.--
(A) In general.--The Board, from time to
time, may require a 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 and operating risks, and
transactions with depository
institution subsidiaries of the bank
holding company; and
(ii) compliance by the bank holding
company or subsidiary with--
(I) this Act;
(II) Federal laws that the
Board has specific jurisdiction
to enforce against the company
or subsidiary; and
(III) other than in the case
of an insured depository
institution or functionally
regulated subsidiary, any other
applicable provision of Federal
law.
(B) Use of existing reports and other
supervisory information.--The Board shall, to
the fullest extent possible, use--
(i) reports and other supervisory
information that the bank holding
company or any subsidiary thereof has
been required to provide to other
Federal or State regulatory agencies;
(ii) externally audited financial
statements of the bank holding company
or subsidiary;
(iii) information otherwise available
from Federal or State regulatory
agencies; and
(iv) information that is otherwise
required to be reported publicly.
(C) Availability.--Upon the request of the
Board, the bank holding company or a subsidiary
of the bank holding company shall promptly
provide to the Board any information described
in clauses (i) through (iii) of subparagraph
(B).
(2) Examinations.--
(A) In general.--Subject to subtitle B of the
Consumer Financial Protection Act of 2010, the
Board may make examinations of a bank holding
company and each subsidiary of a bank holding
company in order to--
(i) inform the Board of--
(I) the nature of the
operations and financial
condition of the bank holding
company and the subsidiary;
(II) the financial,
operational, and other risks
within the bank holding company
system that may pose a threat
to--
(aa) the safety and
soundness of the bank
holding company or of
any depository
institution subsidiary
of the bank holding
company; or
(bb) the stability of
the financial system of
the United States; and
(III) the systems of the bank
holding company for monitoring
and controlling the risks
described in subclause (II);
and
(ii) monitor the compliance of the
bank holding company and the subsidiary
with--
(I) this Act;
(II) Federal laws that the
Board has specific jurisdiction
to enforce against the company
or subsidiary; and
(III) other than in the case
of an insured depository
institution or functionally
regulated subsidiary, any other
applicable provisions of
Federal law.
(B) Use of reports to reduce examinations.--
For purposes of this paragraph, the Board
shall, to the fullest extent possible, rely
on--
(i) examination reports made by other
Federal or State regulatory agencies
relating to a bank holding company and
any subsidiary of a bank holding
company; and
(ii) the reports and other
information required under paragraph
(1).
(C) Coordination with other regulators.--The
Board shall--
(i) provide reasonable notice to, and
consult with, the appropriate Federal
banking agency, the Securities and
Exchange Commission, the Commodity
Futures Trading Commission, or State
regulatory agency, as appropriate, for
a subsidiary that is a depository
institution or a functionally regulated
subsidiary of a bank holding company
before commencing an examination of the
subsidiary under this section; and
(ii) to the fullest extent possible,
avoid duplication of examination
activities, reporting requirements, and
requests for information.
(3) Capital.--
(A) In general.--The Board may not, by
regulation, guideline, order, or otherwise,
prescribe or impose any capital or capital
adequacy rules, guidelines, standards, or
requirements on any functionally regulated
subsidiary of a bank holding company that--
(i) is not a depository institution;
and
(ii) is--
(I) in compliance with the
applicable capital requirements
of its Federal regulatory
authority (including the
Securities and Exchange
Commission) or State insurance
authority;
(II) properly registered as
an investment adviser under the
Investment Advisers Act of
1940, or with any State; or
(III) is licensed as an
insurance agent with the
appropriate State insurance
authority.
(B) Rule of construction.--Subparagraph (A)
shall not be construed as preventing the Board
from imposing capital or capital adequacy
rules, guidelines, standards, or requirements
with respect to--
(i) activities of a registered
investment adviser other than with
respect to investment advisory
activities or activities incidental to
investment advisory activities; or
(ii) activities of a licensed
insurance agent other than insurance
agency activities or activities
incidental to insurance agency
activities.
(C) Limitations on indirect action.--In
developing, establishing, or assessing bank
holding company capital or capital adequacy
rules, guidelines, standards, or requirements
for purposes of this paragraph, the Board may
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.
(D) Treatment of client margin.--For purposes
of any leverage-based capital rule, guideline,
standard, or requirement promulgated,
prescribed, or imposed by the Board on bank
holding companies, the amount of any initial
margin provided by a client of a bank holding
company or affiliate thereof with respect to a
centrally-cleared derivative obligation shall
be deducted from the amount of any leverage
exposure arising from the guarantee by the bank
holding company or affiliate thereof of the
client's derivative obligation to the central
counterparty.
(4) Functional regulation of securities and insurance
activities.--
(A) Securities activities.--Securities
activities conducted in a functionally
regulated subsidiary of a depository
institution shall be subject to regulation by
the Securities and Exchange Commission, and by
relevant State securities authorities, as
appropriate, subject to section 104 of the
Gramm-Leach-Bliley Act, to the same extent as
if they were conducted in a nondepository
institution subsidiary of a bank holding
company.
(B) Insurance activities.--Subject to section
104 of the Gramm-Leach-Bliley Act, insurance
agency and brokerage activities and activities
as principal conducted in a functionally
regulated subsidiary of a depository
institution shall be subject to regulation by a
State insurance authority to the same extent as
if they were conducted in a nondepository
institution subsidiary of a bank holding
company.
(5) Definition.--For purposes of this subsection, the
term ``functionally regulated subsidiary'' means any
company--
(A) that is not a bank holding company or a
depository institution; and
(B) that is--
(i) a broker or dealer that is
registered under the Securities
Exchange Act of 1934;
(ii) a registered investment adviser,
properly registered by or on behalf of
either the Securities and Exchange
Commission or any State, with respect
to the investment advisory activities
of such investment adviser and
activities incidental to such
investment advisory activities;
(iii) an investment company that is
registered under the Investment Company
Act of 1940;
(iv) an insurance company, with
respect to insurance activities of the
insurance company and activities
incidental to such insurance
activities, that is subject to
supervision by a State insurance
regulator; or
(v) an entity that is subject to
regulation by, or registration with,
the Commodity Futures Trading
Commission, with respect to activities
conducted as a futures commission
merchant, commodity trading adviser,
commodity pool, commodity pool
operator, swap execution facility, swap
data repository, swap dealer, major
swap participant, and activities that
are incidental to such commodities and
swaps activities.
(d) Before the expiration of two years following the date of
enactment of this Act, and each year thereafter in the Board's
annual report to the Congress, the Board shall report to the
Congress the results of the administration of this Act, stating
what, if any, substantial difficulties have been encountered in
carrying out the purposes of this Act, and any recommendations
as to changes in the law which in the opinion of the Board
would be desirable.
(e)(1) Notwithstanding any other provision of this Act, the
Board may, whenever it has reasonable cause to believe that the
continuation by a bank holding company of any activity or of
ownership or control of any of its nonbank subsidiaries, other
than a nonbank subsidiary of a bank, constitutes a serious risk
to the financial safety, soundness, or stability of a bank
holding company subsidiary bank and is inconsistent with sound
banking principles or with the purposes of this Act or with the
Financial Institutions Supervisory Act of 1966, at the election
of the bank holding company--
(A) order the bank holding company or any such
nonbank subsidiaries, after due notice and opportunity
for hearing, and after considering the views of the
bank's primary supervisor, which shall be the
Comptroller of the Currency in the case of a national
bank or the Federal Deposit Insurance Corporation and
the appropriate State supervisory authority in the case
of an insured nonmember bank, to terminate such
activities or to terminate (within one hundred and
twenty days or such longer period as the Board may
direct in unusual circumstances) its ownership or
control of any such subsidiary either by sale or by
distribution of the shares of the subsidiary to the
shareholders of the bank holding company; or
(B) order the bank holding company, after due notice
and opportunity for hearing, and after consultation
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 supervisor 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) shall be pro
rata with respect to all of the shareholders of the
distributing bank holding company, and the holding company
shall not make any charge to its shareholders arising out of
such a distribution.
(2) The Board may in its discretion apply to the United
States district court within the jurisdiction of which the
principal office of the holding company is located, for the
enforcement of any effective and outstanding order issued under
this section, and such court shall have jurisdiction and power
to order and require compliance therewith, but except as
provided in section 9 of this Act, no court shall have
jurisdiction to affect by injunction or otherwise the issuance
or enforcement of any notice or order under this section, or to
review, modify, suspend, terminate, or set aside any such
notice or order.
(f) In the course of or in connection with an application,
examination, investigation or other proceeding under this Act,
the Board, or any member or designated representative thereof,
including any person designated to conduct any hearing under
this Act, shall have the power to administer oaths and
affirmations, to take or cause to be taken depositions, and to
issue, revoke, quash, or modify subpoenas and subpoenas duces
tecum; and the Board is empowered to make rules and regulations
to effectuate the purposes of this subsection. The attendance
of witnesses and the production of documents provided for in
this subsection may be required from any place in any State or
in any territory or other place subject to the jurisdiction of
the United States at any designated place where such proceeding
is being conducted. Any party to proceedings under this Act may
apply to the United States District Court for the District of
Columbia, or the United States district court for the judicial
district or the United States court in any territory in which
such proceeding is being conducted or where the witness resides
or carries on business, for the enforcement of any subpoena or
subpoena duces tecum issued pursuant to this subsection, and
such courts shall have jurisdiction and power to order and
require compliance therewith. Witnesses subpoenaed under this
subsection shall be paid the same fees and mileage that are
paid witnesses in the district courts of the United States. Any
service required under this subsection may be made by
registered mail, or in such other manner reasonably calculated
to give actual notice as the Board may by regulation or
otherwise provide. Any court having jurisdiction of any
proceeding instituted under this subsection may allow to any
such party such reasonable expenses and attorneys' fees as it
deems just and proper. Any person who willfully shall fail or
refuse to attend and testify or to answer any lawful inquiry or
to produce books, papers, correspondence, memoranda, contracts,
agreements, or other records, if in such person's power so to
do, in obedience to the subpoena of the Board, shall be guilty
of a misdemeanor and, upon conviction, shall be subject to a
fine of not more than $1,000 or to imprisonment for a term of
not more than one year or both.
(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 action of the
Board that requires a bank holding company to provide
funds or other assets to a subsidiary depository
institution shall not be effective nor enforceable with
respect to an entity described in subparagraph (A) if--
(A) such funds or assets are to be provided
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 registered 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; or
(ii) an affiliate of the depository
institution that is an insurance
company or a broker or dealer
registered under the Securities
Exchange Act of 1934, an investment
company registered 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
(B) the State insurance authority for the
insurance company or the Securities and
Exchange Commission for the registered broker,
dealer, investment adviser (solely with respect
to investment advisory activities or activities
incidental 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
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.
(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,
that is an insurance company or a broker, dealer,
investment company, or investment adviser described in
paragraph (1)(A) to provide funds or assets to a
depository institution subsidiary of the holding
company pursuant to any regulation, order, or other
action of the Board referred to in paragraph (1), the
Board 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.
(3) Divestiture in lieu of other action.--If the
Board receives a notice described in paragraph (1)(B)
from a State insurance authority or the Securities and
Exchange Commission with regard to a bank holding
company or affiliate referred to in that paragraph, the
Board may order the bank holding company to divest the
depository institution not later than 180 days after
receiving the notice, or such longer period as the
Board determines consistent with the safe and sound
operation of the depository institution.
(4) Conditions before divestiture.--During the period
beginning on the date an order to divest 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
depository institution, including restricting or
prohibiting transactions between the depository
institution and any affiliate of the institution, as
are appropriate under the circumstances.
(5) Rule of construction.--No provision of this
subsection may be construed as limiting or otherwise
affecting, except to the extent specifically provided
in this subsection, the regulatory authority, including
the scope of the authority, of any Federal agency or
department with regard to any entity that is within the
jurisdiction of such agency or department.
* * * * * * *
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HOME OWNERS' LOAN ACT
* * * * * * *
SEC. 10. REGULATION OF HOLDING COMPANIES.
(a) Definitions.--
(1) In general.--As used in this section, unless the
context otherwise requires--
(A) Savings association.--The term ``savings
association'' includes a savings bank or
cooperative bank which is deemed by the
appropriate Federal banking agency to be a
savings association under subsection (l).
(B) Uninsured institution.--The term
``uninsured institution'' means any depository
institution the deposits of which are not
insured by the Federal Deposit Insurance
Corporation.
(C) Company.--The term ``company'' means any
corporation, partnership, trust, joint-stock
company, or similar organization, but does not
include the Federal Deposit Insurance
Corporation, the Resolution Trust Corporation,
any Federal home loan bank, or any company the
majority of the shares of which is owned by the
United States or any State, or by an
instrumentality of the United States or any
State.
(D) Savings and loan holding company.--
(i) In general.--Except as provided
in clause (ii), the term ``savings and
loan holding company'' means any
company that directly or indirectly
controls a savings association or that
controls any other company that is a
savings and loan holding company.
(ii) Exclusion.--The term ``savings
and loan holding company'' does not
include--
(I) a bank holding company
that is registered under, and
subject to, the Bank Holding
Company Act of 1956 (12 U.S.C.
1841 et seq.), or to any
company directly or indirectly
controlled by such company
(other than a savings
association);
(II) a company that controls
a savings association that
functions solely in a trust or
fiduciary capacity as described
in section 2(c)(2)(D) of the
Bank Holding Company Act of
1956 (12 U.S.C. 1841(c)(2)(D));
or
(III) a company described in
subsection (c)(9)(C) solely by
virtue of such company's
control of an intermediate
holding company established
pursuant to section 10A.
(E) Multiple savings and loan holding
company.--The term ``multiple savings and loan
holding company'' means any savings and loan
holding company which directly or indirectly
controls 2 or more savings associations.
(F) Diversified savings and loan holding
company.--The term ``diversified savings and
loan holding company'' means any savings and
loan holding company whose subsidiary savings
association and related activities as permitted
under paragraph (2) of subsection (c) of this
section represented, on either an actual or a
pro forma basis, less than 50 percent of its
consolidated net worth at the close of its
preceding fiscal year and of its consolidated
net earnings for such fiscal year, as
determined in accordance with regulations
issued by the appropriate Federal banking
agency.
(G) Subsidiary.--The term ``subsidiary'' has
the same meaning as in section 3 of the Federal
Deposit Insurance Act.
(H) Affiliate.--The term ``affiliate'' of a
savings association means any person which
controls, is controlled by, or is under common
control with, such savings association.
(I) Bank holding company.--The terms ``bank
holding company'' and ``bank'' have the
meanings given to such terms in section 2 of
the Bank Holding Company Act of 1956.
(J) Acquire.--The term ``acquire'' has the
meaning given to such term in section 13(f)(8)
of the Federal Deposit Insurance Act.
(2) Control.--For purposes of this section, a person
shall be deemed to have control of--
(A) a savings association if the person
directly or indirectly or acting in concert
with one or more other persons, or through one
or more subsidiaries, owns, controls, or holds
with power to vote, or holds proxies
representing, more than 25 percent of the
voting shares of such savings association, or
controls in any manner the election of a
majority of the directors of such association;
(B) any other company if the person directly
or indirectly or acting in concert with one or
more other persons, or through one or more
subsidiaries, owns, controls, or holds with
power to vote, or holds proxies representing,
more than 25 percent of the voting shares or
rights of such other company, or controls in
any manner the election or appointment of a
majority of the directors or trustees of such
other company, or is a general partner in or
has contributed more than 25 percent of the
capital of such other company;
(C) a trust if the person is a trustee
thereof; or
(D) a savings association or any other
company if the Board determines, after
reasonable notice and opportunity for hearing,
that such person directly or indirectly
exercises a controlling influence over the
management or policies of such association or
other company.
(3) Exclusions.--Notwithstanding any other provision
of this subsection, the term ``savings and loan holding
company'' does not include--
(A) any company by virtue of its ownership or
control of voting shares of a savings
association or a savings and loan holding
company acquired in connection with the
underwriting of securities if such shares are
held only for such period of time (not
exceeding 120 days unless extended by the
Board) as will permit the sale thereof on a
reasonable basis; and
(B) any trust (other than a pension, profit-
sharing, shareholders', voting, or business
trust) which controls a savings association or
a savings and loan holding company if such
trust by its terms must terminate within 25
years or not later than 21 years and 10 months
after the death of individuals living on the
effective date of the trust, and is (i) in
existence on June 26, 1967, or (ii) a
testamentary trust created on or after June 26,
1967.
(4) Special rule relating to qualified stock
issuance.--No savings and loan holding company shall be
deemed to control a savings association solely by
reason of the purchase by such savings and loan holding
company of shares issued by such savings association,
or issued by any savings and loan holding company
(other than a bank holding company) which controls such
savings association, in connection with a qualified
stock issuance if such purchase is approved by the
Board under subsection (q)(1)(D), unless the acquiring
savings and loan holding company, directly or
indirectly, or acting in concert with 1 or more other
persons, or through 1 or more subsidiaries, owns,
controls, or holds with power to vote, or holds proxies
representing, more than 15 percent of the voting shares
of such savings association or holding company.
(b) Registration and Examination.--
(1) In general.--Within 90 days after becoming a
savings and loan holding company, each savings and loan
holding company shall register with the Board on forms
prescribed by the Board, which shall include such
information, under oath or otherwise, with respect to
the financial condition, ownership, operations,
management, and intercompany relationships of such
holding company and its subsidiaries, and related
matters, as the Board may deem necessary or appropriate
to carry out the purposes of this section. Upon
application, the Board may extend the time within which
a savings and loan holding company shall register and
file the requisite information.
(2) Reports.--
(A) In general.--Each savings and loan
holding company and each subsidiary thereof,
other than a savings association, shall file
with the Board, such reports as may be required
by the Board. Such reports shall be made under
oath or otherwise, and shall be in such form
and for such periods, as the Board may
prescribe. Each report shall contain such
information concerning the operations of such
savings and loan holding company and its
subsidiaries as the Board may require.
(B) Use of existing reports and other
supervisory information.--The Board shall, to
the fullest extent possible, use--
(i) reports and other supervisory
information that the savings and loan
holding company or any subsidiary
thereof has been required to provide to
other Federal or State regulatory
agencies;
(ii) externally audited financial
statements of the savings and loan
holding company or subsidiary;
(iii) information that is otherwise
available from Federal or State
regulatory agencies; and
(iv) information that is otherwise
required to be reported publicly.
(C) Availability.--Upon the request of the
Board, a savings and loan holding company or a
subsidiary of a savings and loan holding
company shall promptly provide to the Board any
information described in clauses (i) through
(iii) of subparagraph (B).
(3) Books and records.--Each savings and loan holding
company shall maintain such books and records as may be
prescribed by the Board.
(4) Examinations.--
(A) In general.--Subject to subtitle B of the
Consumer Financial Protection Act of 2010, the
Board may make examinations of a savings and
loan holding company and each subsidiary of a
savings and loan holding company system, in
order to--
(i) inform the Board of--
(I) the nature of the
operations and financial
condition of the savings and
loan holding company and the
subsidiary;
(II) the financial,
operational, and other risks
within the savings and loan
holding company system that may
pose a threat to--
(aa) the safety and
soundness of the
savings and loan
holding company or of
any depository
institution subsidiary
of the savings and loan
holding company; or
(bb) the stability of
the financial system of
the United States; and
(III) the systems of the
savings and loan holding
company for monitoring and
controlling the risks described
in subclause (II); and
(ii) monitor the compliance of the
savings and loan holding company and
the subsidiary with--
(I) this Act;
(II) Federal laws that the
Board has specific jurisdiction
to enforce against the company
or subsidiary; and
(III) other than in the case
of an insured depository
institution or functionally
regulated subsidiary, any other
applicable provisions of
Federal law.
(B) Use of reports to reduce examinations.--
For purposes of this subsection, the Board
shall, to the fullest extent possible, rely
on--
(i) the examination reports made by
other Federal or State regulatory
agencies relating to a savings and loan
holding company and any subsidiary; and
(ii) the reports and other
information required under paragraph
(2).
(C) Coordination with other regulators.--The
Board shall--
(i) provide reasonable notice to, and
consult with, the appropriate Federal
banking agency, the Securities and
Exchange Commission, the Commodity
Futures Trading Commission, or State
regulatory agency, as appropriate, for
a subsidiary that is a depository
institution or a functionally regulated
subsidiary of a savings and loan
holding company before commencing an
examination of the subsidiary under
this section; and
(ii) to the fullest extent possible,
avoid duplication of examination
activities, reporting requirements, and
requests for information.
(5) Agent for service of process.--The Board may
require any savings and loan holding company, or
persons connected therewith if it is not a corporation,
to execute and file a prescribed form of irrevocable
appointment of agent for service of process.
(6) Release from registration.--The Board may at any
time, upon the motion or application of the Board,
release a registered savings and loan holding company
from any registration theretofore made by such company,
if the Board determines that such company no longer has
control of any savings association.
(c) Holding Company Activities.--
(1) Prohibited activities.--Except as otherwise
provided in this subsection, no savings and loan
holding company and no subsidiary which is not a
savings association shall--
(A) engage in any activity or render any
service for or on behalf of a savings
association subsidiary for the purpose or with
the effect of evading any law or regulation
applicable to such savings association;
(B) commence any business activity, other
than the activities described in paragraph (2);
or
(C) continue any business activity, other
than the activities described in paragraph (2),
after the end of the 2-year period beginning on
the date on which such company received
approval under subsection (e) of this section
to become a savings and loan holding company
subject to the limitations contained in this
subparagraph.
(2) Exempt activities.--The prohibitions of
subparagraphs (B) and (C) of paragraph (1) shall not
apply to the following business activities of any
savings and loan holding company or any subsidiary (of
such company) which is not a savings association:
(A) Furnishing or performing management
services for a savings association subsidiary
of such company.
(B) Conducting an insurance agency or escrow
business.
(C) Holding, managing, or liquidating assets
owned or acquired from a savings association
subsidiary of such company.
(D) Holding or managing properties used or
occupied by a savings association subsidiary of
such company.
(E) Acting as trustee under deed of trust.
(F) Any other activity--
(i) which the Board, by regulation,
has determined to be permissible for
bank holding companies under section
4(c) of the Bank Holding Company Act of
1956, unless the Board, by regulation,
prohibits or limits any such activity
for savings and loan holding companies;
or
(ii) in which multiple savings and
loan holding companies were authorized
(by regulation) to directly engage on
March 5, 1987.
(G) In the case of a savings and loan holding
company, purchasing, holding, or disposing of
stock acquired in connection with a qualified
stock issuance if the purchase of such stock by
such savings and loan holding company is
approved by the Board pursuant to subsection
(q)(1)(D).
(H) Any activity that is permissible for a
financial holding company (as such term is
defined under section 2(p) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841(p)) to
conduct under section 4(k) of the Bank Holding
Company Act of 1956 if--
(i) the savings and loan holding
company meets all of the criteria to
qualify as a financial holding company,
and complies with all of the
requirements applicable to a financial
holding company, under sections 4(l)
and 4(m) of the Bank Holding Company
Act and section 804(c) of the Community
Reinvestment Act of 1977 (12 U.S.C.
2903(c)) as if the savings and loan
holding company was a bank holding
company; and
(ii) the savings and loan holding
company conducts the activity in
accordance with the same terms,
conditions, and requirements that apply
to the conduct of such activity by a
bank holding company under the Bank
Holding Company Act of 1956 and the
Board's regulations and interpretations
under such Act.
(3) Certain limitations on activities not applicable
to certain holding companies.--Notwithstanding
paragraphs (4) and (6) of this subsection, the
limitations contained in subparagraphs (B) and (C) of
paragraph (1) shall not apply to any savings and loan
holding company (or any subsidiary of such company)
which controls--
(A) only 1 savings association, if the
savings association subsidiary of such company
is a qualified thrift lender (as determined
under subsection (m)); or
(B) more than 1 savings association, if--
(i) all, or all but 1, of the savings
association subsidiaries of such
company were initially acquired by the
company or by an individual who would
be deemed to control such company if
such individual were a company--
(I) pursuant to an
acquisition under section 13(c)
or 13(k) of the Federal Deposit
Insurance Act or section 408(m)
of the National Housing Act; or
(II) pursuant to an
acquisition in which assistance
was continued to a savings
association under section 13(i)
of the Federal Deposit
Insurance Act; and
(ii) all of the savings association
subsidiaries of such company are
qualified thrift lenders (as determined
under subsection (m)).
(4) Prior approval of certain new activities
required.--
(A) In general.--No savings and loan holding
company and no subsidiary which is not a
savings association shall commence, either de
novo or by an acquisition (in whole or in part)
of a going concern, any activity described in
paragraph (2)(F)(i) of this subsection without
the prior approval of the Board.
(B) Factors to be considered.--In considering
any application under subparagraph (A) by any
savings and loan holding company or any
subsidiary of any such company which is not a
savings association, the Board shall consider--
(i) whether the performance of the
activity described in such application
by the company or the subsidiary can
reasonably be expected to produce
benefits to the public (such as greater
convenience, increased competition, or
gains in efficiency) that outweigh
possible adverse effects of such
activity (such as undue concentration
of resources, decreased or unfair
competition, conflicts of interest, or
unsound financial practices);
(ii) the managerial resources of the
companies involved; and
(iii) the adequacy of the financial
resources, including capital, of the
companies involved.
(C) Director may differentiate between new
and ongoing activities.--In prescribing any
regulation or considering any application under
this paragraph, the Board may differentiate
between activities commenced de novo and
activities commenced by the acquisition, in
whole or in part, of a going concern.
(D) Approval or disapproval by order.--The
approval or disapproval of any application
under this paragraph by the Board shall be made
in an order issued by the Board containing the
reasons for such approval or disapproval.
(5) Grace period to achieve compliance.--If any
savings association referred to in paragraph (3) fails
to maintain the status of such association as a
qualified thrift lender, the Board may allow, for good
cause shown, any company that controls such association
(or any subsidiary of such company which is not a
savings association) up to 3 years to comply with the
limitations contained in paragraph (1)(C).
(6) Special provisions relating to certain companies
affected by 1987 amendments.--
(A) Exception to 2-year grace period for
achieving compliance.--Notwithstanding
paragraph (1)(C), any company which received
approval under subsection (e) of this section
to acquire control of a savings association
between March 5, 1987, and August 10, 1987,
shall not continue any business activity other
than an activity described in paragraph (2)
after August 10, 1987.
(B) Exemption for activities lawfully engaged
in before march 5, 1987.--Notwithstanding
paragraph (1)(C) and subject to subparagraphs
(C) and (D), any savings and loan holding
company which received approval, before March
5, 1987, under subsection (e) of this section
to acquire control of a savings association may
engage, directly or through any subsidiary
(other than a savings association subsidiary of
such company), in any activity in which such
company or such subsidiary was lawfully engaged
on such date.
(C) Termination of subparagraph (b)
exemption.--The exemption provided under
subparagraph (B) for activities engaged in by
any savings and loan holding company or a
subsidiary of such company (which is not a
savings association) which would otherwise be
prohibited under paragraph (1)(C) shall
terminate with respect to such activities of
such company or subsidiary upon the occurrence
(after August 10, 1987) of any of the
following:
(i) The savings and loan holding
company acquires control of a bank or
an additional savings association
(other than a savings association
acquired pursuant to section 13(c) or
13(k) of the Federal Deposit Insurance
Act or section 406(f) or 408(m) of the
National Housing Act).
(ii) Any savings association
subsidiary of the savings and loan
holding company fails to qualify as a
domestic building and loan association
under section 7701(a)(19) of the
Internal Revenue Code of 1986.
(iii) The savings and loan holding
company engages in any business
activity--
(I) which is not described in
paragraph (2); and
(II) in which it was not
engaged on March 5, 1987.
(iv) Any savings association
subsidiary of the savings and loan
holding company increases the number of
locations from which such savings
association conducts business after
March 5, 1987 (other than an increase
which occurs in connection with a
transaction under section 13(c) or (k)
of the Federal Deposit Insurance Act or
section 408(m) of the National Housing
Act.
(v) Any savings association
subsidiary of the savings and loan
holding company permits any overdraft
(including an intraday overdraft), or
incurs any such overdraft in its
account at a Federal Reserve bank, on
behalf of an affiliate, unless such
overdraft is the result of an
inadvertent computer or accounting
error that is beyond the control of
both the savings association subsidiary
and the affiliate.
(D) Order to terminate subparagraph (b)
activity.--Any activity described in
subparagraph (B) may also be terminated by the
Board, after opportunity for hearing, if the
Board determines, having due regard for the
purposes of this Act, that such action is
necessary to prevent conflicts of interest or
unsound practices or is in the public interest.
(7) Foreign savings and loan holding company.--
Notwithstanding any other provision of this section,
any savings and loan holding company organized under
the laws of a foreign country as of June 1, 1984
(including any subsidiary thereof which is not a
savings association), which controls a single savings
association on August 10, 1987, shall not be subject to
this subsection with respect to any activities of such
holding company which are conducted exclusively in a
foreign country.
(8) Exemption for bank holding companies.--Except for
paragraph (1)(A), this subsection shall not apply to
any company that is treated as a bank holding company
for purposes of section 4 of the Bank Holding Company
Act of 1956, or any of its subsidiaries.
(9) Prevention of new affiliations between s&l;
holding companies and commercial firms.--
(A) In general.--Notwithstanding paragraph
(3), no company may directly or indirectly,
including through any merger, consolidation, or
other type of business combination, acquire
control of a savings association after May 4,
1999, unless the company is engaged, directly
or indirectly (including through a subsidiary
other than a savings association), only in
activities that are permitted--
(i) under paragraph (1)(C) or (2) of
this subsection; or
(ii) for financial holding companies
under section 4(k) of the Bank Holding
Company Act of 1956.
(B) Prevention of new commercial
affiliations.--Notwithstanding paragraph (3),
no savings and loan holding company may engage
directly or indirectly (including through a
subsidiary other than a savings association) in
any activity other than as described in clauses
(i) and (ii) of subparagraph (A).
(C) Preservation of authority of existing
unitary s&l; holding companies.--Subparagraphs
(A) and (B) do not apply with respect to any
company that was a savings and loan holding
company on May 4, 1999, or that becomes a
savings and loan holding company pursuant to an
application pending before the Office on or
before that date, and that--
(i) meets and continues to meet the
requirements of paragraph (3); and
(ii) continues to control not fewer
than 1 savings association that it
controlled on May 4, 1999, or that it
acquired pursuant to an application
pending before the Office on or before
that date, or the successor to such
savings association.
(D) Corporate reorganizations permitted.--
This paragraph does not prevent a transaction
that--
(i) involves solely a company under
common control with a savings and loan
holding company from acquiring,
directly or indirectly, control of the
savings and loan holding company or any
savings association that is already a
subsidiary of the savings and loan
holding company; or
(ii) involves solely a merger,
consolidation, or other type of
business combination as a result of
which a company under common control
with the savings and loan holding
company acquires, directly or
indirectly, control of the savings and
loan holding company or any savings
association that is already a
subsidiary of the savings and loan
holding company.
(E) Authority to prevent evasions.--The Board
may issue interpretations, regulations, or
orders that the Board determines necessary to
administer and carry out the purpose and
prevent evasions of this paragraph, including a
determination (in consultation with the
appropriate Federal banking agency) that,
notwithstanding the form of a transaction, the
transaction would in substance result in a
company acquiring control of a savings
association.
(F) Preservation of authority for family
trusts.--Subparagraphs (A) and (B) do not apply
with respect to any trust that becomes a
savings and loan holding company with respect
to a savings association, if--
(i) not less than 85 percent of the
beneficial ownership interests in the
trust are continuously owned, directly
or indirectly, by or for the benefit of
members of the same family, or their
spouses, who are lineal descendants of
common ancestors who controlled,
directly or indirectly, such savings
association on May 4, 1999, or a
subsequent date, pursuant to an
application pending before the Office
on or before May 4, 1999; and
(ii) at the time at which such trust
becomes a savings and loan holding
company, such ancestors or lineal
descendants, or spouses of such
descendants, have directly or
indirectly controlled the savings
association continuously since May 4,
1999, or a subsequent date, pursuant to
an application pending before the
Office on or before May 4, 1999.
(d) Transactions With Affiliates.--Transactions between any
subsidiary savings association of a savings and loan holding
company and any affiliate (of such savings association
subsidiary) shall be subject to the limitations and
prohibitions specified in section 11 of this Act.
(e) Acquisitions.--
(1) In general.--It shall be unlawful for--
(A) any savings and loan holding company
directly or indirectly, or through one or more
subsidiaries or through one or more
transactions--
(i) to acquire, except with the prior
written approval of the Board, the
control of a savings association or a
savings and loan holding company, or to
retain the control of such an
association or holding company acquired
or retained in violation of this
section as heretofore or hereafter in
effect;
(ii) to acquire, except with the
prior written approval of the Board, by
the process of merger, consolidation,
or purchase of assets, another savings
association or a savings and loan
holding company, or all or
substantially all of the assets of any
such association or holding company;
(iii) to acquire, by purchase or
otherwise, or to retain, except with
the prior written approval of the
Board, more than 5 percent of the
voting shares of a savings association
not a subsidiary, or of a savings and
loan holding company not a subsidiary,
or in the case of a multiple savings
and loan holding company (other than a
company described in subsection
(c)(8)), to acquire or retain, and the
Board may not authorize acquisition or
retention of, more than 5 percent of
the voting shares of any company not a
subsidiary which is engaged in any
business activity other than the
activities specified in subsection
(c)(2). This clause shall not apply to
shares of a savings association or of a
savings and loan holding company--
(I) held as a bona fide
fiduciary (whether with or
without the sole discretion to
vote such shares);
(II) held temporarily
pursuant to an underwriting
commitment in the normal course
of an underwriting business;
(III) held in an account
solely for trading purposes;
(IV) over which no control is
held other than control of
voting rights acquired in the
normal course of a proxy
solicitation;
(V) acquired in securing or
collecting a debt previously
contracted in good faith,
during the 2-year period
beginning on the date of such
acquisition or for such
additional time (not exceeding
3 years) as the Board may
permit if the Board determines
that such an extension will not
be detrimental to the public
interest;
(VI) acquired under section
408(m) of the National Housing
Act or section 13(k) of the
Federal Deposit Insurance Act;
(VII) held by any insurance
company, as defined in section
2(a)(17) of the Investment
Company Act of 1940, except as
provided in paragraph (6); or
(VIII) acquired pursuant to a
qualified stock issuance if
such purchase is approved by
the Board under subsection
(q)(1)(D);
except that the aggregate amount of
shares held under this clause (other
than under subclauses (I), (II), (III),
(IV), and (VI)) may not exceed 15
percent of all outstanding shares or of
the voting power of a savings
association or savings and loan holding
company; or
(iv) to acquire the control of an
uninsured institution, or to retain for
more than one year after February 14,
1968, or from the date on which such
control was acquired, whichever is
later, except that the Board may upon
application by such company extend such
one-year period from year to year, for
an additional period not exceeding 3
years, if the Board finds such
extension is warranted and is not
detrimental to the public interest; and
(B) any other company, without the prior
written approval of the Board, directly or
indirectly, or through one or more subsidiaries
or through one or more transactions, to acquire
the control of one or more savings
associations, except that such approval shall
not be required in connection with the control
of a savings association, (i) acquired by
devise under the terms of a will creating a
trust which is excluded from the definition of
``savings and loan holding company'' under
subsection (a) of this section, (ii) acquired
in connection with a reorganization in which a
person or group of persons, having had control
of a savings association for more than 3 years,
vests control of that association in a newly
formed holding company subject to the control
of the same person or group of persons, or
(iii) acquired by a bank holding company that
is registered under, and subject to, the Bank
Holding Company Act of 1956, or any company
controlled by such bank holding company. The
Board shall approve an acquisition of a savings
association under this subparagraph unless the
Board finds the financial and managerial
resources and future prospects of the company
and association involved to be such that the
acquisition would be detrimental to the
association or the insurance risk of the
Deposit Insurance Fund, and shall render a
decision within 90 days after submission to the
Board of the complete record on the
application.
Consideration of the managerial resources of a company
or savings association under subparagraph (B) shall
include consideration of the competence, experience,
and integrity of the officers, directors, and principal
shareholders of the company or association.
(2) Factors to be considered.--The Board shall not
approve any acquisition under subparagraph (A)(i) or
(A)(ii), or of more than one savings association under
subparagraph (B) of paragraph (1) of this subsection,
any acquisition of stock in connection with a qualified
stock issuance, any acquisition under paragraph (4)(A),
or any transaction under section 13(k) of the Federal
Deposit Insurance Act, except in accordance with this
paragraph. In every case, the Board shall take into
consideration the financial and managerial resources
and future prospects of the company and association
involved, the effect of the acquisition on the
association, the insurance risk to the Deposit
Insurance Fund, and the convenience and needs of the
community to be served, and shall render a decision
within 90 days after submission to the Board of the
complete record on the application. Consideration of
the managerial resources of a company or savings
association shall include consideration of the
competence, experience, and integrity of the officers,
directors, and principal shareholders of the company or
association. Before approving any such acquisition,
except a transaction under section 13(k) of the Federal
Deposit Insurance Act, the Board shall request from the
Attorney General and consider any report rendered
within 30 days on the competitive factors involved. The
Board shall not approve any proposed acquisition--
(A) which would result in a monopoly, or
which would be in furtherance of any
combination or conspiracy to monopolize or to
attempt to monopolize the savings and loan
business in any part of the United States,
(B) the effect of which in any section of the
country may be substantially to lessen
competition, or tend to create a monopoly, or
which in any other manner would be in restraint
of trade, unless it finds that the
anticompetitive effects of the proposed
acquisition are clearly outweighed in the
public interest by the probable effect of the
acquisition in meeting the convenience and
needs of the community to be served,
(C) if the company fails to provide adequate
assurances to the Board that the company will
make available to the Board such information on
the operations or activities of the company,
and any affiliate of the company, as the Board
determines to be appropriate to determine and
enforce compliance with this Act,
(D) in the case of an application involving a
foreign bank, if the foreign bank is not
subject to comprehensive supervision or
regulation on a consolidated basis by the
appropriate authorities in the bank's home
country, or
(E) in the case of an application by a
savings and loan holding company to acquire an
insured depository institution, if--
(i) the home State of the insured
depository institution is a State other
than the home State of the savings and
loan holding company;
(ii) the applicant (including all
insured depository institutions which
are affiliates of the applicant)
controls, or upon consummation of the
transaction would control, more than 10
percent of the total amount of deposits
of insured depository institutions in
the United States; and
(iii) the acquisition does not
involve an insured depository
institution in default or in danger of
default, or with respect to which the
Federal Deposit Insurance Corporation
provides assistance under section 13 of
the Federal Deposit Insurance Act (12
U.S.C. 1823).
(3) Interstate Acquisitions.--No acquisition shall be
approved by the Board under this subsection which will
result in the formation by any company, through one or
more subsidiaries or through one or more transactions,
of a multiple savings and loan holding company
controlling savings associations in more than one
State, unless--
(A) such company, or a savings association
subsidiary of such company, is authorized to
acquire control of a savings association
subsidiary, or to operate a home or branch
office, in the additional State or States
pursuant to section 13(k) of the Federal
Deposit Insurance Act;
(B) such company controls a savings
association subsidiary which operated a home or
branch office in the additional State or States
as of March 5, 1987; or
(C) the statutes of the State in which the
savings association to be acquired is located
permit a savings association chartered by such
State to be acquired by a savings association
chartered by the State where the acquiring
savings association or savings and loan holding
company is located or by a holding company that
controls such a State chartered savings
association, and such statutes specifically
authorize such an acquisition by language to
that effect and not merely by implication.
(4) Acquisitions by certain individuals.--
(A) In general.--Notwithstanding subsection
(h)(2), any director or officer of a savings
and loan holding company, or any individual who
owns, controls, or holds with power to vote (or
holds proxies representing) more than 25
percent of the voting shares of such holding
company, may acquire control of any savings
association not a subsidiary of such savings
and loan holding company with the prior written
approval of the Board.
(B) Treatment of certain holding companies.--
If any individual referred to in subparagraph
(A) controls more than 1 savings and loan
holding company or more than 1 savings
association, any savings and loan holding
company controlled by such individual shall be
subject to the activities limitations contained
in subsection (c) to the same extent such
limitations apply to multiple savings and loan
holding companies, unless all or all but 1 of
the savings associations (including any
institution deemed to be a savings association
under subsection (l) of this section)
controlled directly or indirectly by such
individual was acquired pursuant to an
acquisition described in subclause (I) or (II)
of subsection (c)(3)(B)(i).
(5) Acquisitions pursuant to certain security
interests.--This subsection and subsection (c)(2) of
this section do not apply to any savings and loan
holding company which acquired the control of a savings
association or of a savings and loan holding company
pursuant to a pledge or hypothecation to secure a loan,
or in connection with the liquidation of a loan, made
in the ordinary course of business. It shall be
unlawful for any such company to retain such control
for more than one year after February 14, 1968, or from
the date on which such control was acquired, whichever
is later, except that the Board may upon application by
such company extend such one-year period from year to
year, for an additional period not exceeding 3 years,
if the Board finds such extension is warranted and
would not be detrimental to the public interest.
(6) Shares held by insurance affiliates.--Shares
described in clause (iii)(VII) of paragraph (1)(A)
shall not be excluded for purposes of clause (iii) of
such paragraph if--
(A) all shares held under such clause
(iii)(VII) by all insurance company affiliates
of such savings association or savings and loan
holding company in the aggregate exceed 5
percent of all outstanding shares or of the
voting power of the savings association or
savings and loan holding company; or
(B) such shares are acquired or retained with
a view to acquiring, exercising, or
transferring control of the savings association
or savings and loan holding company.
(7) Definitions.--For purposes of paragraph (2)(E)--
(A) the terms ``default'', ``in danger of
default'', and ``insured depository
institution'' have the same meanings as in
section 3 of the Federal Deposit Insurance Act
(12 U.S.C. 1813); and
(B) the term ``home State'' means--
(i) with respect to a national bank,
the State in which the main office of
the bank is located;
(ii) with respect to a State bank or
State savings association, the State by
which the savings association is
chartered;
(iii) with respect to a Federal
savings association, the State in which
the home office (as defined by the
regulations of the Board of the Office
of Thrift Supervision, or, on and after
the transfer date, the Comptroller of
the Currency) of the Federal savings
association is located; and
(iv) with respect to a savings and
loan holding company, the State in
which the amount of total deposits of
all insured depository institution
subsidiaries of such company was the
greatest on the date on which the
company became a savings and loan
holding company.
(f) Declaration of Dividend.--Every subsidiary savings
association of a savings and loan holding company shall give
the Board not less than 30 days' advance notice of the proposed
declaration by its directors of any dividend on its guaranty,
permanent, or other nonwithdrawable stock. Such notice period
shall commence to run from the date of receipt of such notice
by the Board. Any such dividend declared within such period, or
without the giving of such notice to the Board, shall be
invalid and shall confer no rights or benefits upon the holder
of any such stock.
(g) Administration and Enforcement.--
(1) In general.--[The Board]
(A) Regulations and orders._The Board is
authorized to issue such regulations and
orders, including regulations and orders
relating to capital requirements for savings
and loan holding companies, as the Board deems
necessary or appropriate to enable the Board to
administer and carry out the purposes of this
section, and to require compliance therewith
and prevent evasions thereof. In establishing
capital regulations pursuant to this
subsection, the appropriate Federal banking
agency shall seek to make such requirements
countercyclical so that the amount of capital
required to be maintained by a company
increases in times of economic expansion and
decreases in times of economic contraction,
consistent with the safety and soundness of the
company.
(B) Treatment of client margin.--For purposes of any
leverage-based capital rule, guideline, standard, or
requirement promulgated, prescribed, or imposed by the
Board on savings and loan holding companies, the amount
of any initial margin provided by a client of a savings
and loan holding company or affiliate thereof with
respect to a centrally-cleared derivative obligation
shall be deducted from the amount of any leverage
exposure arising from the guarantee by the savings and
loan holding company or affiliate thereof of the
client's derivative obligation to the central
counterparty.
(2) Investigations.--The Board may make such
investigations as the Board deems necessary or
appropriate to determine whether the provisions of this
section, and regulations and orders thereunder, are
being and have been complied with by savings and loan
holding companies and subsidiaries and affiliates
thereof. For the purpose of any investigation under
this section, the Board may administer oaths and
affirmations, issue subpenas, take evidence, and
require the production of any books, papers,
correspondence, memorandums, or other records which may
be relevant or material to the inquiry. The attendance
of witnesses and the production of any such records may
be required from any place in any State. The Board may
apply to the United States district court for the
judicial district (or the United States court in any
territory) in which any witness or company subpenaed
resides or carries on business, for enforcement of any
subpena issued pursuant to this paragraph, and such
courts shall have jurisdiction and power to order and
require compliance.
(3) Proceedings.--(A) In any proceeding under
subsection (a)(2)(D) or under paragraph (5) of this
subsection, the Board may administer oaths and
affirmations, take or cause to be taken depositions,
and issue subpenas. The Board may make regulations with
respect to any such proceedings. The attendance of
witnesses and the production of documents provided for
in this paragraph may be required from any place in any
State or in any territory at any designated place where
such proceeding is being conducted. Any party to such
proceedings may apply to the United States District
Court for the District of Columbia, or the United
States district court for the judicial district or the
United States court in any territory in which such
proceeding is being conducted, or where the witness
resides or carries on business, for enforcement of any
subpena issued pursuant to this paragraph, and such
courts shall have jurisdiction and power to order and
require compliance therewith. Witnesses subpenaed under
this section shall be paid the same fees and mileage
that are paid witnesses in the district courts of the
United States.
(B) Any hearing provided for in subsection (a)(2)(D)
or under paragraph (5) of this section shall be held in
the Federal judicial district or in the territory in
which the principal office of the association or other
company is located unless the party afforded the
hearing consents to another place, and shall be
conducted in accordance with the provisions of chapter
5 of title 5, United States Code.
(4) Injunctions.--Whenever it appears to the Board
that any person is engaged or has engaged or is about
to engage in any acts or practices which constitute or
will constitute a violation of the provisions of this
section or of any regulation or order thereunder, the
Board may bring an action in the proper United States
district court, or the United States court of any
territory or other place subject to the jurisdiction of
the United States, to enjoin such acts or practices, to
enforce compliance with this section or any regulation
or order, or to require the divestiture of any
acquisition in violation of this section, or for any
combination of the foregoing, and such courts shall
have jurisdiction of such actions. Upon a proper
showing an injunction, decree, restraining order, order
of divestiture, or other appropriate order shall be
granted without bond.
(5) Cease and desist orders.--(A) Notwithstanding any
other provision of this section, the Board may,
whenever the Board has reasonable cause to believe that
the continuation by a savings and loan holding company
of any activity or of ownership or control of any of
its noninsured subsidiaries constitutes a serious risk
to the financial safety, soundness, or stability of a
savings and loan holding company's subsidiary savings
association and is inconsistent with the sound
operation of a savings association or with the purposes
of this section or section 8 of the Federal Deposit
Insurance Act, order the savings and loan holding
company or any of its subsidiaries, after due notice
and opportunity for hearing, to terminate such
activities or to terminate (within 120 days or such
longer period as the Board directs in unusual
circumstances) its ownership or control of any such
noninsured subsidiary either by sale or by distribution
of the shares of the subsidiary to the shareholders of
the savings and loan holding company. Such distribution
shall be pro rata with respect to all of the
shareholders of the distributing savings and loan
holding company, and the holding company shall not make
any charge to its shareholders arising out of such a
distribution.
(B) The Board may in the discretion of the Board
apply to the United States district court within the
jurisdiction of which the principal office of the
company is located, for the enforcement of any
effective and outstanding order issued under this
section, and such court shall have jurisdiction and
power to order and require compliance therewith. Except
as provided in subsection (j), no court shall have
jurisdiction to affect by injunction or otherwise the
issuance or enforcement of any notice or order under
this section, or to review, modify, suspend, terminate,
or set aside any such notice or order.
(h) Prohibited Acts.--It shall be unlawful for--
(1) any savings and loan holding company or
subsidiary thereof, or any director, officer, employee,
or person owning, controlling, or holding with power to
vote, or holding proxies representing, more than 25
percent of the voting shares, of such holding company
or subsidiary, to hold, solicit, or exercise any
proxies in respect of any voting rights in a savings
association which is a mutual association;
(2) any director or officer of a savings and loan
holding company, or any individual who owns, controls,
or holds with power to vote (or holds proxies
representing) more than 25 percent of the voting shares
of such holding company, to acquire control of any
savings association not a subsidiary of such savings
and loan holding company, unless such acquisition is
approved by the Board pursuant to subsection (e)(4); or
(3) any individual, except with the prior approval of
the Board, to serve or act as a director, officer, or
trustee of, or become a partner in, any savings and
loan holding company after having been convicted of any
criminal offense involving dishonesty or breach of
trust.
(i) Penalties.--
(1) Criminal penalty.--(A) Whoever knowingly violates
any provision of this section or being a company,
violates any regulation or order issued by the Board
under this section, shall be imprisoned not more than 1
year, fined not more than $100,000 per day for each day
during which the violation continues, or both.
(B) Whoever, with the intent to deceive, defraud, or
profit significantly, knowingly violates any provision
of this section shall be fined not more than $1,000,000
per day for each day during which the violation
continues, imprisoned not more than 5 years, or both.
(2) Civil money penalty.--
(A) Penalty.--Any company which violates, and
any person who participates in a violation of,
any provision of this section, or any
regulation or order issued pursuant thereto,
shall forfeit and pay a civil penalty of not
more than $25,000 for each day during which
such violation continues.
(B) Assessment.--Any penalty imposed under
subparagraph (A) may be assessed and collected
by the Board in the manner provided in
subparagraphs (E), (F), (G), and (I) of section
8(i)(2) of the Federal Deposit Insurance Act
for penalties imposed (under such section) and
any such assessment shall be subject to the
provisions of such section.
(C) Hearing.--The company or other person
against whom any civil penalty is assessed
under this paragraph shall be afforded a
hearing if such company or person submits a
request for such hearing within 20 days after
the issuance of the notice of assessment.
Section 8(h) of the Federal Deposit Insurance
Act shall apply to any proceeding under this
paragraph.
(D) Disbursement.--All penalties collected
under authority of this paragraph shall be
deposited into the Treasury.
(E) Violate defined.--For purposes of this
section, the term ``violate'' includes any
action (alone or with another or others) for or
toward causing, bringing about, participating
in, counseling, or aiding or abetting a
violation.
(F) Regulations.--The Board shall prescribe
regulations establishing such procedures as may
be necessary to carry out this paragraph.
(3) Civil money penalty.--
(A) Penalty.--Any company which violates, and
any person who participates in a violation of,
any provision of this section, or any
regulation or order issued pursuant thereto,
shall forfeit and pay a civil penalty of not
more than $25,000 for each day during which
such violation continues.
(B) Assessment; etc.--Any penalty imposed
under subparagraph (A) may be assessed and
collected by the Board in the manner provided
in subparagraphs (E), (F), (G), and (I) of
section 8(i)(2) of the Federal Deposit
Insurance Act for penalties imposed (under such
section) and any such assessment shall be
subject to the provisions of such section.
(C) Hearing.--The company or other person
against whom any penalty is assessed under this
paragraph shall be afforded an agency hearing
if such company or person submits a request for
such hearing within 20 days after the issuance
of the notice of assessment. Section 8(h) of
the Federal Deposit Insurance Act shall apply
to any proceeding under this paragraph.
(D) Disbursement.--All penalties collected
under authority of this paragraph shall be
deposited into the Treasury.
(E) Violate defined.--For purposes of this
section, the term ``violate'' includes any
action (alone or with another or others) for or
toward causing, bringing about, participating
in, counseling, or aiding or abetting a
violation.
(F) Regulations.--The Board shall prescribe
regulations establishing such procedures as may
be necessary to carry out this paragraph.
(4) Notice under this section after separation from
service.--The resignation, termination of employment or
participation, or separation of an institution-
affiliated party (within the meaning of section 3(u) of
the Federal Deposit Insurance Act) with respect to a
savings and loan holding company or subsidiary thereof
(including a separation caused by the deregistration of
such a company or such a subsidiary) shall not affect
the jurisdiction and authority of the Board to issue
any notice and proceed under this section against any
such party, if such notice is served before the end of
the 6-year period beginning on the date such party
ceased to be such a party with respect to such holding
company or its subsidiary (whether such date occurs
before, on, or after the date of the enactment of this
paragraph).
(j) Judicial Review.--Any party aggrieved by an order of the
Board under this section may obtain a review of such order by
filing in the court of appeals of the United States for the
circuit in which the principal office of such party is located,
or in the United States Court of Appeals for the District of
Columbia Circuit, within 30 days after the date of service of
such order, a written petition praying that the order of the
Board be modified, terminated, or set aside. A copy of the
petition shall be forthwith transmitted by the clerk of the
court to the Board, and thereupon the Board shall file in the
court the record in the proceeding, as provided in section 2112
of title 28, United States Code. Upon the filing of such
petition, such court shall have jurisdiction, which upon the
filing of the record shall be exclusive, to affirm, modify,
terminate, or set aside, in whole or in part, the order of the
Board. Review of such proceedings shall be had as provided in
chapter 7 of title 5, United States Code. The judgment and
decree of the court shall be final, except that the same shall
be subject to review by the Supreme Court upon certiorari as
provided in section 1254 of title 28, United States Code.
(k) Savings Clause.--Nothing contained in this section, other
than any transaction approved under subsection (e)(2) of this
section or section 13 of the Federal Deposit Insurance Act,
shall be interpreted or construed as approving any act, action,
or conduct which is or has been or may be in violation of
existing law, nor shall anything herein contained constitute a
defense to any action, suit, or proceeding pending or hereafter
instituted on account of any act, action, or conduct in
violation of the antitrust laws.
(l) Treatment of FDIC Insured State Savings Banks and
Cooperative Banks as Savings Associations.--
(1) In general.--Notwithstanding any other provision
of law, a savings bank (as defined in section 3(g) of
the Federal Deposit Insurance Act) and a cooperative
bank that is an insured bank (as defined in section
3(h) of the Federal Deposit Insurance Act) upon
application shall be deemed to be a savings association
for the purpose of this section, if the appropriate
Federal banking agency determines that such bank is a
qualified thrift lender (as determined under subsection
(m)).
(2) Failure to maintain qualified thrift lender
status.--If any savings bank which is deemed to be a
savings association under paragraph (1) subsequently
fails to maintain its status as a qualified thrift
lender, as determined by the appropriate Federal
banking agency, such bank may not thereafter be a
qualified thrift lender for a period of 5 years.
(m) Qualified Thrift Lender Test.--
(1) In general.--Except as provided in paragraphs (2)
and (7), any savings association is a qualified thrift
lender if--
(A) the savings association qualifies as a
domestic building and loan association, as such
term is defined in section 7701(a)(19) of the
Internal Revenue Code of 1986; or
(B)(i) the savings association's qualified
thrift investments equal or exceed 65 percent
of the savings association's portfolio assets;
and
(ii) the savings association's qualified
thrift investments continue to equal or exceed
65 percent of the savings association's
portfolio assets on a monthly average basis in
9 out of every 12 months.
(2) Exceptions granted by director.--Notwithstanding
paragraph (1), the appropriate Federal banking agency
may grant such temporary and limited exceptions from
the minimum actual thrift investment percentage
requirement contained in such paragraph as the
appropriate Federal banking agency deems necessary if--
(A) the appropriate Federal banking agency
determines that extraordinary circumstances
exist, such as when the effects of high
interest rates reduce mortgage demand to such a
degree that an insufficient opportunity exists
for a savings association to meet such
investment requirements; or
(B) the appropriate Federal banking agency
determines that--
(i) the grant of any such exception
will significantly facilitate an
acquisition under section 13(c) or
13(k) of the Federal Deposit Insurance
Act;
(ii) the acquired association will
comply with the transition requirements
of paragraph (7)(B), as if the date of
the exemption were the starting date
for the transition period described in
that paragraph; and
(iii) the appropriate Federal banking
agency determines that the exemption
will not have an undue adverse effect
on competing savings associations in
the relevant market and will further
the purposes of this subsection.
(3) Failure to become and remain a qualified thrift
lender.--
(A) In general.--A savings association that
fails to become or remain a qualified thrift
lender shall immediately be subject to the
restrictions under subparagraph (B).
(B) Restrictions applicable to savings
associations that are not qualified thrift
lenders.--
(i) Restrictions effective
immediately.--The following
restrictions shall apply to a savings
association beginning on the date on
which the savings association should
have become or ceases to be a qualified
thrift lender:
(I) Activities.--The savings
association shall not make any
new investment (including an
investment in a subsidiary) or
engage, directly or indirectly,
in any other new activity
unless that investment or
activity would be permissible
for the savings association if
it were a national bank, and is
also permissible for the
savings association as a
savings association.
(II) Branching.--The savings
association shall not establish
any new branch office at any
location at which a national
bank located in the savings
association's home State may
not establish a branch office.
For purposes of this subclause,
a savings association's home
State is the State in which the
savings association's total
deposits were largest on the
date on which the savings
association should have become
or ceased to be a qualified
thrift lender.
(III) Dividends.--The savings
association may not pay
dividends, except for dividends
that--
(aa) would be
permissible for a
national bank;
(bb) are necessary to
meet obligations of a
company that controls
such savings
association; and
(cc) are specifically
approved by the
Comptroller of the
Currency and the Board
after a written request
submitted to the
Comptroller of the
Currency and the Board
by the savings
association not later
than 30 days before the
date of the proposed
payment.
(IV) Regulatory authority.--A
savings association that fails
to become or remain a qualified
thrift lender shall be deemed
to have violated section 5 of
the Home Owners' Loan Act (12
U.S.C. 1464) and subject to
actions authorized by section
5(d) of the Home Owners' Loan
Act (12 U.S.C. 1464(d)).
(ii) Additional restrictions
effective after 3 years.--Beginning 3
years after the date on which a savings
association should have become a
qualified thrift lender, or the date on
which the savings association ceases to
be a qualified thrift lender, as
applicable, the savings association
shall not retain any investment
(including an investment in any
subsidiary) or engage, directly or
indirectly, in any activity, unless
that investment or activity--
(I) would be permissible for
the savings association if it
were a national bank; and
(II) is permissible for the
savings association as a
savings association.
(C) Holding company regulation.--Any company
that controls a savings association that is
subject to any provision of subparagraph (B)
shall, within one year after the date on which
the savings association should have become or
ceases to be a qualified thrift lender,
register as and be deemed to be a bank holding
company subject to all of the provisions of the
Bank Holding Company Act of 1956, section 8 of
the Federal Deposit Insurance Act, and other
statutes applicable to bank holding companies,
in the same manner and to the same extent as if
the company were a bank holding company and the
savings association were a bank, as those terms
are defined in the Bank Holding Company Act of
1956.
(D) Requalification.--A savings association
that should have become or ceases to be a
qualified thrift lender shall not be subject to
subparagraph (B) or (C) if the savings
association becomes a qualified thrift lender
by meeting the qualified thrift lender
requirement in paragraph (1) on a monthly
average basis in 9 out of the preceding 12
months and remains a qualified thrift lender.
If the savings association (or any savings
association that acquired all or substantially
all of its assets from that savings
association) at any time thereafter ceases to
be a qualified thrift lender, it shall
immediately be subject to all provisions of
subparagraphs (B) and (C) as if all the periods
described in subparagraphs (B)(ii) and (C) had
expired.
(E) Exemption for specialized savings
associations serving certain military
personnel.--Subparagraph (A) shall not apply to
a savings association subsidiary of a savings
and loan holding company if at least 90 percent
of the customers of the savings and loan
holding company and its subsidiaries and
affiliates are active or former members in the
United States military services or the widows,
widowers, divorced spouses, or current or
former dependents of such members.
(F) Exemption for certain federal savings
associations.--This paragraph shall not apply
to any Federal savings association in existence
as a Federal savings association on the date of
enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989--
(i) that was chartered before October
15, 1982, as a savings bank or a
cooperative bank under State law; or
(ii) that acquired its principal
assets from an association that was
chartered before October 15, 1982, as a
savings bank or a cooperative bank
under State law.
(G) No circumvention of exit moratorium.--
Subparagraph (A) of this paragraph shall not be
construed as permitting any insured depository
institution to engage in any conversion
transaction prohibited under section 5(d) of
the Federal Deposit Insurance Act.
(4) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Actual thrift investment percentage.--The
term ``actual thrift investment percentage''
means the percentage determined by dividing--
(i) the amount of a savings
association's qualified thrift
investments, by
(ii) the amount of the savings
association's portfolio assets.
(B) Portfolio assets.--The term ``portfolio
assets'' means, with respect to any savings
association, the total assets of the savings
association, minus the sum of--
(i) goodwill and other intangible
assets;
(ii) the value of property used by
the savings association to conduct its
business; and
(iii) liquid assets of the type
required to be maintained under section
6 of the Home Owners' Loan Act, as in
effect on the day before the date of
the enactment of the Financial
Regulatory Relief and Economic
Efficiency Act of 2000, in an amount
not exceeding the amount equal to 20
percent of the savings association's
total assets.
(C) Qualified thrift investments.--
(i) In general.--The term ``qualified
thrift investments'' means, with
respect to any savings association, the
assets of the savings association that
are described in clauses (ii) and
(iii).
(ii) Assets includible without
limit.--The following assets are
described in this clause for purposes
of clause (i):
(I) The aggregate amount of
loans held by the savings
association that were made to
purchase, refinance, construct,
improve, or repair domestic
residential housing or
manufactured housing.
(II) Home-equity loans.
(III) Securities backed by or
representing an interest in
mortgages on domestic
residential housing or
manufactured housing.
(IV) Existing obligations of
deposit insurance agencies.--
Direct or indirect obligations
of the Federal Deposit
Insurance Corporation or the
Federal Savings and Loan
Insurance Corporation issued in
accordance with the terms of
agreements entered into prior
to July 1, 1989, for the 10-
year period beginning on the
date of issuance of such
obligations.
(V) New obligations of
deposit insurance agencies.--
Obligations of the Federal
Deposit Insurance Corporation,
the Federal Savings and Loan
Insurance Corporation, the
FSLIC Resolution Fund, and the
Resolution Trust Corporation
issued in accordance with the
terms of agreements entered
into on or after July 1, 1989,
for the 5-year period beginning
on the date of issuance of such
obligations.
(VI) Shares of stock issued
by any Federal home loan bank.
(VII) Loans for educational
purposes, loans to small
businesses, and loans made
through credit cards or credit
card accounts.
(iii) Assets includible subject to
percentage restriction.--The following
assets are described in this clause for
purposes of clause (i):
(I) 50 percent of the dollar
amount of the residential
mortgage loans originated by
such savings association and
sold within 90 days of
origination.
(II) Investments in the
capital stock or obligations
of, and any other security
issued by, any service
corporation if such service
corporation derives at least 80
percent of its annual gross
revenues from activities
directly related to purchasing,
refinancing, constructing,
improving, or repairing
domestic residential real
estate or manufactured housing.
(III) 200 percent of the
dollar amount of loans and
investments made to acquire,
develop, and construct 1- to 4-
family residences the purchase
price of which is or is
guaranteed to be not greater
than 60 percent of the median
value of comparable newly
constructed 1- to 4-family
residences within the local
community in which such real
estate is located, except that
not more than 25 percent of the
amount included under this
subclause may consist of
commercial properties related
to the development if those
properties are directly related
to providing services to
residents of the development.
(IV) 200 percent of the
dollar amount of loans for the
acquisition or improvement of
residential real property,
churches, schools, and nursing
homes located within, and loans
for any other purpose to any
small businesses located within
any area which has been
identified by the appropriate
Federal banking agency, in
connection with any review or
examination of community
reinvestment practices, as a
geographic area or neighborhood
in which the credit needs of
the low- and moderate-income
residents of such area or
neighborhood are not being
adequately met.
(V) Loans for the purchase or
construction of churches,
schools, nursing homes, and
hospitals, other than those
qualifying under clause (IV),
and loans for the improvement
and upkeep of such properties.
(VI) Loans for personal,
family, or household purposes
(other than loans for personal,
family, or household purposes
described in clause (ii)(VII)).
(VII) Shares of stock issued
by the Federal Home Loan
Mortgage Corporation or the
Federal National Mortgage
Association.
(iv) Percentage restriction
applicable to certain assets.--The
aggregate amount of the assets
described in clause (iii) which may be
taken into account in determining the
amount of the qualified thrift
investments of any savings association
shall not exceed the amount which is
equal to 20 percent of a savings
association's portfolio assets.
(v) The term ``qualified thrift
investments'' excludes--
(I) except for home equity
loans, that portion of any loan
or investment that is used for
any purpose other than those
expressly qualifying under any
subparagraph of clause (ii) or
(iii); or
(II) goodwill or any other
intangible asset.
(D) Credit card.--The appropriate Federal
banking agency shall issue such regulations as
may be necessary to define the term ``credit
card''.
(E) Small business.--The appropriate Federal
banking agency shall issue such regulations as
may be necessary to define the term ``small
business''.
(5) Consistent accounting required.--
(A) In determining the amount of a savings
association's portfolio assets, the assets of
any subsidiary of the savings association shall
be consolidated with the assets of the savings
association if--
(i) Assets of the subsidiary are
consolidated with the assets of the
savings association in determining the
savings association's qualified thrift
investments; or
(ii) Residential mortgage loans
originated by the subsidiary are
included pursuant to paragraph
(4)(C)(iii)(I) in determining the
savings association's qualified thrift
investments.
(B) In determining the amount of a savings
association's portfolio assets and qualified
thrift investments, consistent accounting
principles shall be applied.
(6) Special rules for puerto rico and virgin islands
savings associations.--
(A) Puerto rico savings associations.--With
respect to any savings association
headquartered and operating primarily in Puerto
Rico--
(i) the term ``qualified thrift
investments'' includes, in addition to
the items specified in paragraph (4)--
(I) the aggregate amount of
loans for personal, family,
educational, or household
purposes made to persons
residing or domiciled in the
Commonwealth of Puerto Rico;
and
(II) the aggregate amount of
loans for the acquisition or
improvement of churches,
schools, or nursing homes, and
of loans to small businesses,
located within the Commonwealth
of Puerto Rico; and
(ii) the aggregate amount of loans
related to the purchase, acquisition,
development and construction of 1- to
4-family residential real estate--
(I) which is located within
the Commonwealth of Puerto
Rico; and
(II) the value of which (at
the time of acquisition or upon
completion of the development
and construction) is below the
median value of newly
constructed 1- to 4-family
residences in the Commonwealth
of Puerto Rico, which may be
taken into account in
determining the amount of the
qualified thrift investments
and of such savings association
shall be doubled.
(B) Virgin islands savings associations.--
With respect to any savings association
headquartered and operating primarily in the
Virgin Islands--
(i) the term ``qualified thrift
investments'' includes, in addition to
the items specified in paragraph (4)--
(I) the aggregate amount of
loans for personal, family,
educational, or household
purposes made to persons
residing or domiciled in the
Virgin Islands; and
(II) the aggregate amount of
loans for the acquisition or
improvement of churches,
schools, or nursing homes, and
of loans to small businesses,
located within the Virgin
Islands; and
(ii) the aggregate amount of loans
related to the purchase, acquisition,
development and construction of 1- to
4-family residential real estate--
(I) which is located within
the Virgin Islands; and
(II) the value of which (at
the time of acquisition or upon
completion of the development
and construction) is below the
median value of newly
constructed 1- to 4-family
residences in the Virgin
Islands, which may be taken
into account in determining the
amount of the qualified thrift
investments and of such savings
association shall be doubled.
(7) Transitional rule for certain savings
associations.--
(A) In general.--If any Federal savings
association in existence as a Federal savings
association on the date of enactment of the
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989--
(i) that was chartered as a savings
bank or a cooperative bank under State
law before October 15, 1982; or
(ii) that acquired its principal
assets from an association that was
chartered before October 15, 1982, as a
savings bank or a cooperative bank
under State law,
meets the requirements of subparagraph (B),
such savings association shall be treated as a
qualified thrift lender during the period
ending on September 30, 1995.
(B) Subparagraph (b) requirements.--A savings
association meets the requirements of this
subparagraph if, in the determination of the
appropriate Federal banking agency--
(i) the actual thrift investment
percentage of such association does
not, after the date of enactment of the
Financial Institutions Reform,
Recovery, and Enforcement Act of 1989,
decrease below the actual thrift
investment percentage of such
association on July 15, 1989; and
(ii) the amount by which--
(I) the actual thrift
investment percentage of such
association at the end of each
period described in the
following table, exceeds
(II) the actual thrift
investment percentage of such
association on July 15, 1989,
is equal to or greater than the
applicable percentage (as determined
under the following table) of the
amount by which 70 percent exceeds the
actual thrift investment percentage of
such association on such date of
enactment:
For the following The applicable
period: percentage is:
July 1, 1991-September 30, 1992................. 25 percent
October 1, 1992-March 31, 1994.................. 50 percent
April 1, 1994-September 30, 1995................ 75 percent
Thereafter...................................... 100 percent
(C) For purposes of this paragraph, the
actual thrift investment percentage of an
association on July 15, 1989, shall be
determined by applying the definition of
``actual thrift investment percentage'' that
takes effect on July 1, 1991.
(n) Tying Restrictions.--A savings and loan holding company
and any of its affiliates shall be subject to section 5(q) and
regulations prescribed under such section, in connection with
transactions involving the products or services of such company
or affiliate and those of an affiliated savings association as
if such company or affiliate were a savings association.
(o) Mutual Holding Companies.--
(1) In general.--A savings association operating in
mutual form may reorganize so as to become a holding
company by--
(A) chartering an interim savings
association, the stock of which is to be wholly
owned, except as otherwise provided in this
section, by the mutual association; and
(B) transferring the substantial part of its
assets and liabilities, including all of its
insured liabilities, to the interim savings
association.
(2) Directors and certain account holders' approval
of plan required.--A reorganization is not authorized
under this subsection unless--
(A) a plan providing for such reorganization
has been approved by a majority of the board of
directors of the mutual savings association;
and
(B) in the case of an association in which
holders of accounts and obligors exercise
voting rights, such plan has been submitted to
and approved by a majority of such individuals
at a meeting held at the call of the directors
in accordance with the procedures prescribed by
the association's charter and bylaws.
(3) Notice to the director; disapproval period.--
(A) Notice required.--At least 60 days prior
to taking any action described in paragraph
(1), a savings association seeking to establish
a mutual holding company shall provide written
notice to the Board. The notice shall contain
such relevant information as the Board shall
require by regulation or by specific request in
connection with any particular notice.
(B) Transaction allowed if not disapproved.--
Unless the Board within such 60-day notice
period disapproves the proposed holding company
formation, or extends for another 30 days the
period during which such disapproval may be
issued, the savings association providing such
notice may proceed with the transaction, if the
requirements of paragraph (2) have been met.
(C) Grounds for disapproval.--The Board may
disapprove any proposed holding company
formation only if--
(i) such disapproval is necessary to
prevent unsafe or unsound practices;
(ii) the financial or management
resources of the savings association
involved warrant disapproval;
(iii) the savings association fails
to furnish the information required
under subparagraph (A); or
(iv) the savings association fails to
comply with the requirement of
paragraph (2).
(D) Retention of capital assets.--In
connection with the transaction described in
paragraph (1), a savings association may,
subject to the approval of the Board, retain
capital assets at the holding company level to
the extent that such capital exceeds the
association's capital requirement established
by the Board pursuant to subsections (s) and
(t) of section 5.
(4) Ownership.--
(A) In general.--Persons having ownership
rights in the mutual association pursuant to
section 5(b)(1)(B) of this Act or State law
shall have the same ownership rights with
respect to the mutual holding company.
(B) Holders of certain accounts.--Holders of
savings, demand or other accounts of--
(i) a savings association chartered
as part of a transaction described in
paragraph (1); or
(ii) a mutual savings association
acquired pursuant to paragraph (5)(B),
shall have the same ownership rights with
respect to the mutual holding company as
persons described in subparagraph (A) of this
paragraph.
(5) Permitted activities.--A mutual holding company
may engage only in the following activities:
(A) Investing in the stock of a savings
association.
(B) Acquiring a mutual association through
the merger of such association into a savings
association subsidiary of such holding company
or an interim savings association subsidiary of
such holding company.
(C) Subject to paragraph (6), merging with or
acquiring another holding company, one of whose
subsidiaries is a savings association.
(D) Investing in a corporation the capital
stock of which is available for purchase by a
savings association under Federal law or under
the law of any State where the subsidiary
savings association or associations have their
home offices.
(E) Engaging in the activities described in
subsection (c)(2) or (c)(9)(A)(ii).
(6) Limitations on certain activities of acquired
holding companies.--
(A) New activities.--If a mutual holding
company acquires or merges with another holding
company under paragraph (5)(C), the holding
company acquired or the holding company
resulting from such merger or acquisition may
only invest in assets and engage in activities
which are authorized under paragraph (5).
(B) Grace period for divesting prohibited
assets or discontinuing prohibited
activities.--Not later than 2 years following a
merger or acquisition described in paragraph
(5)(C), the acquired holding company or the
holding company resulting from such merger or
acquisition shall--
(i) dispose of any asset which is an
asset in which a mutual holding company
may not invest under paragraph (5); and
(ii) cease any activity which is an
activity in which a mutual holding
company may not engage under paragraph
(5).
(7) Regulation.--A mutual holding company shall be
chartered by the Board and shall be subject to such
regulations as the Board may prescribe. Unless the
context otherwise requires, a mutual holding company
shall be subject to the other requirements of this
section regarding regulation of holding companies.
(8) Capital improvement.--
(A) Pledge of stock of savings association
subsidiary.--This section shall not prohibit a
mutual holding company from pledging all or a
portion of the stock of a savings association
chartered as part of a transaction described in
paragraph (1) to raise capital for such savings
association.
(B) Issuance of nonvoting shares.--This
section shall not prohibit a savings
association chartered as part of a transaction
described in paragraph (1) from issuing any
nonvoting shares or less than 50 percent of the
voting shares of such association to any person
other than the mutual holding company.
(9) Insolvency and liquidation.--
(A) In general.--Notwithstanding any
provision of law, upon--
(i) the default of any savings
association--
(I) the stock of which is
owned by any mutual holding
company; and
(II) which was chartered in a
transaction described in
paragraph (1);
(ii) the default of a mutual holding
company; or
(iii) a foreclosure on a pledge by a
mutual holding company described in
paragraph (8)(A),
a trustee shall be appointed receiver of such
mutual holding company and such trustee shall
have the authority to liquidate the assets of,
and satisfy the liabilities of, such mutual
holding company pursuant to title 11, United
States Code.
(B) Distribution of net proceeds.--Except as
provided in subparagraph (C), the net proceeds
of any liquidation of any mutual holding
company pursuant to subparagraph (A) shall be
transferred to persons who hold ownership
interests in such mutual holding company.
(C) Recovery by corporation.--If the
Corporation incurs a loss as a result of the
default of any savings association subsidiary
of a mutual holding company which is liquidated
pursuant to subparagraph (A), the Corporation
shall succeed to the ownership interests of the
depositors of such savings association in the
mutual holding company, to the extent of the
Corporation's loss.
(10) Definitions.--For purposes of this subsection--
(A) Mutual holding company.--The term
``mutual holding company'' means a corporation
organized as a holding company under this
subsection.
(B) Mutual association.--The term ``mutual
association'' means a savings association which
is operating in mutual form.
(C) Default.--The term ``default'' means an
adjudication or other official determination of
a court of competent jurisdiction or other
public authority pursuant to which a
conservator, receiver, or other legal custodian
is appointed.
(11) Dividends.--
(A) Declaration of dividends.--
(i) Advance notice required.--Each
subsidiary of a mutual holding company
that is a savings association shall
give the appropriate Federal banking
agency and the Board notice not later
than 30 days before the date of a
proposed declaration by the board of
directors of the savings association of
any dividend on the guaranty,
permanent, or other nonwithdrawable
stock of the savings association.
(ii) Invalid dividends.--Any dividend
described in clause (i) that is
declared without giving notice to the
appropriate Federal banking agency and
the Board under clause (i), or that is
declared during the 30-day period
preceding the date of a proposed
declaration for which notice is given
to the appropriate Federal banking
agency and the Board under clause (i),
shall be invalid and shall confer no
rights or benefits upon the holder of
any such stock.
(B) Waiver of dividends.--A mutual holding
company may waive the right to receive any
dividend declared by a subsidiary of the mutual
holding company, if--
(i) no insider of the mutual holding
company, associate of an insider, or
tax-qualified or non-tax-qualified
employee stock benefit plan of the
mutual holding company holds any share
of the stock in the class of stock to
which the waiver would apply; or
(ii) the mutual holding company gives
written notice to the Board of the
intent of the mutual holding company to
waive the right to receive dividends,
not later than 30 days before the date
of the proposed date of payment of the
dividend, and the Board does not object
to the waiver.
(C) Resolution included in waiver notice.--A
notice of a waiver under subparagraph (B) shall
include a copy of the resolution of the board
of directors of the mutual holding company, in
such form and substance as the Board may
determine, together with any supporting
materials relied upon by the board of directors
of the mutual holding company, concluding that
the proposed dividend waiver is consistent with
the fiduciary duties of the board of directors
to the mutual members of the mutual holding
company.
(D) Standards for waiver of dividend.--The
Board may not object to a waiver of dividends
under subparagraph (B) if--
(i) the waiver would not be
detrimental to the safe and sound
operation of the savings association;
(ii) the board of directors of the
mutual holding company expressly
determines that a waiver of the
dividend by the mutual holding company
is consistent with the fiduciary duties
of the board of directors to the mutual
members of the mutual holding company;
and
(iii) the mutual holding company has,
prior to December 1, 2009--
(I) reorganized into a mutual
holding company under
subsection (o);
(II) issued minority stock
either from its mid-tier stock
holding company or its
subsidiary stock savings
association; and
(III) waived dividends it had
a right to receive from the
subsidiary stock savings
association.
(E) Valuation.--
(i) In general.--The appropriate
Federal banking agency shall consider
waived dividends in determining an
appropriate exchange ratio in the event
of a full conversion to stock form.
(ii) Exception.--In the case of a
savings association that has
reorganized into a mutual holding
company, has issued minority stock from
a mid-tier stock holding company or a
subsidiary stock savings association of
the mutual holding company, and has
waived dividends it had a right to
receive from a subsidiary savings
association before December 1, 2009,
the appropriate Federal banking agency
shall not consider waived dividends in
determining an appropriate exchange
ratio in the event of a full conversion
to stock form.
(p) Holding Company Activities Constituting Serious Risk to
Subsidiary Savings Association.--
(1) Determination and imposition of restrictions.--If
the Board or the appropriate Federal banking agency for
the savings association determines that there is
reasonable cause to believe that the continuation by a
savings and loan holding company of any activity
constitutes a serious risk to the financial safety,
soundness, or stability of a savings and loan holding
company's subsidiary savings association, the Board may
impose such restrictions as the Board, in consultation
with the appropriate Federal banking agency for the
savings association determines to be necessary to
address such risk. Such restrictions shall be issued in
the form of a directive to the holding company and any
of its subsidiaries, limiting--
(A) the payment of dividends by the savings
association;
(B) transactions between the savings
association, the holding company, and the
subsidiaries or affiliates of either; and
(C) any activities of the savings association
that might create a serious risk that the
liabilities of the holding company and its
other affiliates may be imposed on the savings
association.
Such directive shall be effective as a cease and desist
order that has become final.
(2) Review of directive.--
(A) Administrative review.--After a directive
referred to in paragraph (1) is issued, the
savings and loan holding company, or any
subsidiary of such holding company subject to
the directive, may object and present in
writing its reasons why the directive should be
modified or rescinded. Unless within 10 days
after receipt of such response the Board
affirms, modifies, or rescinds the directive,
such directive shall automatically lapse.
(B) Judicial review.--If the Board affirms or
modifies a directive pursuant to subparagraph
(A), any affected party may immediately
thereafter petition the United States district
court for the district in which the savings and
loan holding company has its main office or in
the United States District Court for the
District of Columbia to stay, modify, terminate
or set aside the directive. Upon a showing of
extraordinary cause, the savings and loan
holding company, or any subsidiary of such
holding company subject to a directive, may
petition a United States district court for
relief without first pursuing or exhausting the
administrative remedies set forth in this
paragraph.
(q) Qualified Stock Issuance by Undercapitalized Savings
Associations or Holding Companies.--
(1) In general.--For purposes of this section, any
issue of shares of stock shall be treated as a
qualified stock issuance if the following conditions
are met:
(A) The shares of stock are issued by--
(i) an undercapitalized savings
association; or
(ii) a savings and loan holding
company which is not a bank holding
company but which controls an
undercapitalized savings association
if, at the time of issuance, the
savings and loan holding company is
legally obligated to contribute the net
proceeds from the issuance of such
stock to the capital of an
undercapitalized savings association
subsidiary of such holding company.
(B) All shares of stock issued consist of
previously unissued stock or treasury shares.
(C) All shares of stock issued are purchased
by a savings and loan holding company that is
registered, as of the date of purchase, with
the Board in accordance with the provisions of
subsection (b)(1) of this section.
(D) Subject to paragraph (2), the Board
approved the purchase of the shares of stock by
the acquiring savings and loan holding company.
(E) The entire consideration for the stock
issued is paid in cash by the acquiring savings
and loan holding company.
(F) At the time of the stock issuance, each
savings association subsidiary of the acquiring
savings and loan holding company (other than an
association acquired in a transaction pursuant
to subsection (c) or (k) of section 13 of the
Federal Deposit Insurance Act or section 408(m)
of the National Housing Act) has capital (after
deducting any subordinated debt, intangible
assets, and deferred, unamortized gains or
losses) of not less than 6\1/2\ percent of the
total assets of such savings association.
(G) Immediately after the stock issuance, the
acquiring savings and loan holding company
holds not more than 15 percent of the
outstanding voting stock of the issuing
undercapitalized savings association or savings
and loan holding company.
(H) Not more than one of the directors of the
issuing association or company is an officer,
director, employee, or other representative of
the acquiring company or any of its affiliates.
(I) Transactions between the savings
association or savings and loan holding company
that issues the shares pursuant to this section
and the acquiring company and any of its
affiliates shall be subject to the provisions
of section 11.
(2) Approval of acquisitions.--
(A) Additional capital commitments not
required.--The Board shall not disapprove any
application for the purchase of stock in
connection with a qualified stock issuance on
the grounds that the acquiring savings and loan
holding company has failed to undertake to make
subsequent additional capital contributions to
maintain the capital of the undercapitalized
savings association at or above the minimum
level required by the Board or any other
Federal agency having jurisdiction.
(B) Other conditions.--Notwithstanding
subsection (a)(4), the Board may impose such
conditions on any approval of an application
for the purchase of stock in connection with a
qualified stock issuance as the Board
determines to be appropriate, including--
(i) a requirement that any savings
association subsidiary of the acquiring
savings and loan holding company limit
dividends paid to such holding company
for such period of time as the Board
may require; and
(ii) such other conditions as the
Board deems necessary or appropriate to
prevent evasions of this section.
(C) Application deemed approved if not
disapproved within 90 days.--An application for
approval of a purchase of stock in connection
with a qualified stock issuance shall be deemed
to have been approved by the Board if such
application has not been disapproved by the
Board before the end of the 90-day period
beginning on the date such application has been
deemed sufficient under regulations issued by
the Board.
(3) No limitation on class of stock issued.--The
shares of stock issued in connection with a qualified
stock issuance may be shares of any class.
(4) Undercapitalized savings association defined.--
For purposes of this subsection, the term
``undercapitalized savings association'' means any
savings association--
(A) the assets of which exceed the
liabilities of such association; and
(B) which does not comply with one or more of
the capital standards in effect under section
5(t).
(r) Penalty for Failure To Provide Timely and Accurate
Reports.--
(1) First tier.--Any savings and loan holding
company, and any subsidiary of such holding company,
which--
(A) maintains procedures reasonably adapted
to avoid any inadvertent and unintentional
error and, as a result of such an error--
(i) fails to submit or publish any
report or information required under
this section or regulations prescribed
by the Board or appropriate Federal
banking agency, within the period of
time specified by the Board or
appropriate Federal banking agency; or
(ii) submits or publishes any false
or misleading report or information; or
(B) inadvertently transmits or publishes any
report which is minimally late,
shall be subject to a penalty of not more than $2,000
for each day during which such failure continues or
such false or misleading information is not corrected.
Such holding company or subsidiary shall have the
burden of proving by a preponderence of the evidence
that an error was inadvertent and unintentional and
that a report was inadvertently transmitted or
published late.
(2) Second tier.--Any savings and loan holding
company, and any subsidiary of such holding company,
which--
(A) fails to submit or publish any report or
information required under this section or
under regulations prescribed by the Board or
appropriate Federal banking agency, within the
period of time specified by the Board or
appropriate Federal banking agency; or
(B) submits or publishes any false or
misleading report or information,
in a manner not described in paragraph (1) shall be
subject to a penalty of not more than $20,000 for each
day during which such failure continues or such false
or misleading information is not corrected.
(3) Third tier.--If any savings and loan holding
company or any subsidiary of such a holding company
knowingly or with reckless disregard for the accuracy
of any information or report described in paragraph (2)
submits or publishes any false or misleading report or
information, the Board or appropriate Federal banking
agency may assess a penalty of not more than $1,000,000
or 1 percent of total assets of such company or
subsidiary, whichever is less, per day for each day
during which such failure continues or such false or
misleading information is not corrected.
(4) Assessment.--Any penalty imposed under paragraph
(1), (2), or (3) shall be assessed and collected by the
Board or appropriate Federal banking agency in the
manner provided in subparagraphs (E), (F), (G), and (I)
of section 8(i)(2) of the Federal Deposit Insurance Act
(for penalties imposed under such section) and any such
assessment (including the determination of the amount
of the penalty) shall be subject to the provisions of
such subsection.
(5) Hearing.--Any savings and loan holding company or
any subsidiary of such a holding company against which
any penalty is assessed under this subsection shall be
afforded a hearing if such savings and loan holding
company or such subsidiary, as the case may be, submits
a request for such hearing within 20 days after the
issuance of the notice of assessment. Section 8(h) of
the Federal Deposit Insurance Act shall apply to any
proceeding under this subsection.
(s) Mergers, Consolidations, and Other Acquisitions
Authorized.--
(1) In general.--Subject to sections 5(d)(3) and
18(c) of the Federal Deposit Insurance Act and all
other applicable laws, any Federal savings association
may acquire or be acquired by any insured depository
institution.
(2) Expedited approval of acquisitions.--
(A) In general.--Any application by a savings
association to acquire or be acquired by
another insured depository institution which is
required to be filed with the appropriate
Federal banking agency for the savings
association under any applicable law or
regulation shall be approved or disapproved in
writing by the appropriate Federal banking
agency for the savings association before the
end of the 60-day period beginning on the date
such application is filed with the agency.
(B) Extension of period.--The period for
approval or disapproval referred to in
subparagraph (A) may be extended for an
additional 30-day period if the appropriate
Federal banking agency for the savings
association determines that--
(i) an applicant has not furnished
all of the information required to be
submitted; or
(ii) in the judgment of the
appropriate Federal banking agency for
the savings association, any material
information submitted is substantially
inaccurate or incomplete.
(3) Acquire defined.--For purposes of this
subsection, the term ``acquire'' means to acquire,
directly or indirectly, ownership or control through a
merger or consolidation or an acquisition of assets or
assumption of liabilities, provided that following such
merger, consolidation, or acquisition, an acquiring
insured depository institution may not own the shares
of the acquired insured depository institution.
(4) Regulations.--
(A) Required.--The Comptroller shall
prescribe such regulations as may be necessary
to carry out paragraph (1).
(B) Effective date.--The regulations required
under subparagraph (A) shall--
(i) be prescribed in final form
before the end of the 90-day period
beginning on the date of the enactment
of this subsection; and
(ii) take effect before the end of
the 120-day period beginning on such
date.
(5) Limitation.--No provision of this section shall
be construed to authorize a national bank or any
subsidiary thereof to engage in any activity not
otherwise authorized under the National Bank Act or any
other law governing the powers of a national bank.
(t) Exemption for Bank Holding Companies.--This section shall
not apply to a bank holding company that is subject to the Bank
Holding Company Act of 1956, or any company controlled by such
bank holding company.
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