Chartering mutual national banks and establishing Federal mutual bank holding companies

(a)

In general

Chapter 1 of title LXII of the Revised Statutes of the United States (12 U.S.C. 21 et seq.) is amended by inserting after section 5133 the following new sections:

5133A.

Mutual national banks

(a)

Definitions

In this section and in section 5133B the following definitions shall apply: (1)

Appropriate Federal banking agency

The term appropriate Federal banking agency has the meaning given such term in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). (2)

Depository institution subsidiary

The term depository institution subsidiary means an insured depository institution that is a subsidiary (as such term is defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) of a Federal mutual bank holding company. (3)

Insured depository institution

The term insured depository institution has the meaning given such term in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). (4)

Federal mutual bank holding company

The term Federal mutual bank holding company means a bank holding company operating in mutual form organized under section 5133B that owns, directly or indirectly, a majority of the shares of voting stock of each depository institution subsidiary. (5)

Modification of a Federal mutual bank holding company

The term modification of a Federal mutual bank holding company means— (A)the sale of shares of common or preferred stock in a depository institution subsidiary to any party other than the parent Federal mutual bank holding company of such depository institution subsidiary or a wholly owned subsidiary of that parent; (B)the voluntary grant of a lien on shares of common or preferred stock in a depository institution subsidiary; or (C)any action that affects the corporate structure of the Federal mutual bank holding company and materially impacts the rights of its members. (6)

Mutual capital certificate

The term mutual capital certificate has the meaning given such term in section 38(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1831o(b)(2)). (7)

Mutual depository

The term mutual depository means an insured depository institution operating in a non-stock form, including a Federal non-stock depository and any form of non-stock depository provided for under State law, the deposits of which are insured by an instrumentality of the Federal Government. (8)

Mutual national bank

The term mutual national bank means a mutual depository chartered by the Comptroller of the Currency under this section. (9)

Mutuality

The term mutuality means the quality of being an insured depository institution organized under a Federal or State law providing for the organization of non-stock depository institutions, or a holding company organized under a Federal or State law providing for the organization of non-stock entities that control one or more depository institutions. (10)

National bank

The term national bank means a banking association organized pursuant to section 5133. (11)

Mutual member

The term mutual member means each tax liable depositor in a mutual depository’s savings, demand, or other authorized depository accounts who is not a prior charter member. (12)

Prior charter member

The term prior charter member means each tax liable depositor in a mutual national bank that maintains under its prior mutual depository charter pursuant to subsection (d)(1)(B). (13)

State bank

The term State bank has the meaning given such term in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). (14)

Tax liable depositor

The term tax liable depositor means the single person responsible for paying any Federal taxes due on any interest paid on any deposits held within any savings, demand, or other authorized depository account. (b)

Chartering mutual national banks

Notwithstanding the provision designated the Third of section 5134, in order to establish mutual institutions operating in non-stock form for the deposit of funds, the extension of credit, and provision of other services, the Comptroller of the Currency may charter mutual national banks either de novo or through a conversion of any insured depository institution or any insured credit union (as such term is defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752)), subject to regulations prescribed by the Comptroller of the Currency in accordance with this section. The powers conferred by this section are intended to provide for the creation and maintenance of mutual national banks as bodies corporate existing in perpetuity for the benefit of their depositors and the communities in which they operate. (c)

Regulations

(1)

Regulations of the comptroller

The Comptroller of the Currency is authorized to prescribe appropriate regulations for the organization, incorporation, examination, operation, and regulation of mutual national banks. (2)

Applicability of capital stock requirements

The Comptroller of the Currency shall prescribe regulations applicable to mutual national banks regarding the requirements of this title with respect to capital stock and the limitations imposed on national banks under this title based on capital stock. (d)

Conversions

(1)

Conversion of a mutual depository to a mutual national bank

Subject to such regulations as the Comptroller of the Currency may prescribe, a mutual depository that elects to convert to a mutual national bank shall submit to the Comptroller of the Currency a notice of its election to convert on a specified date that is on or after the date that is 30 days after the date on which the notice is filed. (A)

Charter

The mutual depository shall be converted to a mutual national bank and the Comptroller of the Currency shall issue a charter described in subsection (b) on the specified date described in paragraph (1). (B)

Option to maintain mutual depository charter

After converting and receiving a charter under subparagraph (A), such mutual national bank may continue to exercise the governance, investments, and authorities permitted under its prior mutual depository charter. (2)

Conversion of a mutual national bank to a stock national bank

Subject to such regulations as the Comptroller of the Currency may prescribe for the protection of the rights of mutual members and for any other purpose the Comptroller of the Currency may consider appropriate, any mutual national bank may reorganize as a national bank operating in stock form. (3)

Conversion of a mutual national bank to a State bank

Any mutual national bank may convert to a State bank in accordance with regulations prescribed by the Comptroller of the Currency and applicable State law. (e)

Terminating mutuality

A mutual national bank shall terminate mutuality by— (1)liquidating; or (2)converting to a national bank operating in stock form under subsection (d)(2) or to a State bank under subsection (d)(3). (f)

Status and rights of members

(1)

In general

The status of a mutual member or prior charter member is primarily as a depositor and secondarily as a holder of a contingent right to participate in the equity of such mutual national bank upon a liquidation or conversion pursuant to subsection (e). (2)

Member rights

(A)

Prior charter member rights

The status and rights of a prior charter members shall be governed by the law of the prior mutual depository charter. (B)

Mutual member rights

Each mutual member of a mutual national bank that receives a charter pursuant to subsection (b) shall have the following rights: (i)The right to vote for delegates to the board of directors of such mutual national bank. (ii)The right to attend any meeting of mutual members called by the board of directors of such mutual national bank. (iii)Any other rights agreed upon by contract between the mutual member and the mutual national bank. (3)

Certain voting rights

On questions requiring action by its mutual members, the mutual national bank shall provide in its charter that each such mutual member shall have either— (A)one vote per mutual member; or (B)one vote for each $100, or fraction thereof, of the withdrawal value of the mutual member’s account, but not more than 1,000 votes per mutual member. (4)

Continuity of rights

If a mutual national bank converts to a Federal mutual bank holding company pursuant to section 5133B, a mutual member or prior charter member of such mutual national bank shall have the same rights with respect to that Federal mutual bank holding company as such member had with respect to the mutual national bank immediately prior to such conversion. (5)

Conversion rights

If the board of directors of a mutual national bank, in its sole discretion, determines that a conversion described in paragraph (2) or (3) of subsection (d) is in the best interests of the community in which such bank operates, and the mutual members or prior charter members of such bank approve the conversion through a special proxy, then on a record date set by the board of directors such members shall have the first right to subscribe for and purchase stock in the converted bank. (6)

Liquidation rights

If a mutual national bank is liquidated by operation of law, or if the board of directors of a mutual national bank, in its sole discretion, determines a liquidation of such bank is in the best interests of the community in which such bank operates and the mutual members or prior charter members of such bank approve the liquidation, then on the date of liquidation, members of the liquidated mutual national bank shall have the right to have credited to their accounts, on a pro rata basis, any residual assets that remain after the liquidation of such bank. (g)

Proxies

(1)

In general

A mutual member may give a perpetual proxy to a committee of the board of directors of the mutual depository in writing or electronically. Such proxy may be used to vote on any issue requiring approval of the mutual members. (2)

Use of proxies

A proxy given under paragraph (1) may vote on the conversion of a mutual depository to a mutual national bank and any concurrent or subsequent reorganization to a Federal mutual bank holding company, except that absent a finding by the appropriate Federal banking agency of the mutual depository that action is needed to avoid loss to the Deposit Insurance Fund of the Federal Deposit Insurance Corporation or to protect the stability of the United States financial system, such proxy may not be used to vote in favor of— (A)terminating mutuality for a mutual national bank or a Federal mutual bank holding company; or (B)permitting the modification of a Federal mutual bank holding company. (3)

Effect of conversion or reorganization

A proxy given under paragraph (1) shall continue to be valid after the conversion of a mutual depository to a mutual national bank pursuant to subsection (d)(1)(A) and any concurrent or subsequent reorganization to a Federal mutual bank holding company. (4)

Revoking a proxy

A mutual member may revoke a proxy given under paragraph (1) in writing or electronically. The revocation shall be effective not later than 6 business days after it is made. (h)

Conforming references

Unless otherwise provided by the Comptroller of the Currency— (1)any reference in any Federal law to a national bank operating in stock form, including a reference to the term national banking association, member bank, national bank, national association, bank, insured bank, insured depository institution, or depository institution shall be deemed to refer also to a mutual national bank; (2)any reference in any Federal law to the term board of directors, director, or directors of a national bank operating in stock form shall be deemed to refer also to the board of a mutual national bank; and (3)any terms in Federal law that may apply only to a national bank operating in stock form, including the terms stock, share, shares of stock, capital stock, common stock, stock certificate, stock certificates, certificates representing shares of stock, stock dividend, transferable stock, each class of stock, cumulate such shares, par value, or preferred stock shall not apply to a mutual national bank.

5133B.

Federal mutual bank holding companies

(a)

Reorganization of mutual national bank as a Federal mutual bank holding company

(1)

In general

Subject to approval under the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), a mutual national bank may reorganize into a Federal mutual bank holding company by submitting a reorganization plan to the Board of Governors of the Federal Reserve System (hereinafter referred to as the Board of Governors). (2)

Plan approval

A reorganization plan submitted under paragraph (1) requires the approval of— (A)a majority of the board of directors of the mutual national bank; and (B)a majority of mutual members or prior charter members of the mutual national bank at a meeting held at the call of the board of directors of such bank under the procedures prescribed by the charter or bylaws of such bank. (3)

Conversion to a Federal mutual bank holding company

Upon the approval of the reorganization plan submitted under paragraph (1) and the issuance of the appropriate charters— (A)the substantial part of the assets and liabilities of the mutual national bank, including all of the insured liabilities, shall be transferred to a national bank, a majority of the shares of voting stock of which is owned, directly or indirectly, by the mutual national bank that is to become a Federal mutual bank holding company; and (B)the mutual national bank shall become a Federal mutual bank holding company. (b)

Ownership of depository institution subsidiaries

To avoid terminating mutuality, a Federal mutual bank holding company must own, directly or indirectly, at least a majority of the shares of voting stock of each of its depository institution subsidiaries. (c)

Terminating mutuality

(1)

Liquidating or converting

A Federal mutual bank holding company shall terminate mutuality by liquidating or converting to a bank holding company operating in stock form. (2)

No termination

Notwithstanding paragraph (1), a reorganization of a mutual depository or a modification of a Federal mutual bank holding company may not terminate mutuality. (d)

Retention of capital

In connection with a reorganization described in subsection (a), a mutual national bank may retain capital at the holding company level in order to comply with the capital requirements of the Board of Governors for holding companies. (e)

Other conversions

(1)

Conversion of a State mutual bank holding company to a Federal mutual bank holding company

Subject to such regulations as the Board of Governors may prescribe, a mutual bank holding company organized under State law that elects to convert to a Federal mutual bank holding company— (A)shall submit to the Board of Governors a notice of its election to convert on a specified date that is on or after the date that is 30 days after the date on which the notice is filed; and (B)shall be converted to a Federal mutual bank holding company on such specified date. (2)

Maintenance of original powers, governance, and authorities

Upon conversion to a Federal mutual bank holding company, the entity may continue to exercise the powers, governance, and authorities permitted to it as a mutual bank holding company organized under State law. (3)

Conversion of Federal mutual bank holding company to bank holding company

Subject to such regulations as the Board of Governors may prescribe, any Federal mutual bank holding company that is organized under subsection (a) may reorganize as a bank holding company operating in stock form. (f)

Rights of mutual holding company members

Each tax liable depositor in a savings, demand, or other authorized depository account in depository institution subsidiary shall have the same rights with respect to the Federal mutual bank holding company as such depositor would have had if the depository institution subsidiary had been a mutual national bank. (g)

Regulation

A Federal mutual bank holding company shall be— (1)chartered by the Board of Governors and subject to its regulation and supervision; and (2)regulated under the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) on terms, and subject to limitations, comparable to those applicable to any other bank holding company. (h)

Capital improvement

(1)

Pledge of stock of national bank subsidiary

This section shall not prohibit a Federal mutual bank holding company from pledging all or a portion of the stock of the national bank chartered as part of a transaction described in subsection (a) to raise capital for such national bank. (2)

Issuance of nonvoting shares

This section shall not prohibit a national bank chartered as part of a transaction described in subsection (a) from issuing any nonvoting shares or less than 50 percent of the voting shares of such national bank to any person other than the Federal mutual bank holding company. (i)

Insolvency and liquidation

(1)

In general

Notwithstanding any other provision of law, the Board of Governors may file a petition under chapter 7 of title 11, United States Code, with respect to a Federal mutual bank holding company upon— (A)the default of any depository institution subsidiary, the stock of which is owned by the Federal mutual bank holding company; or (B)a foreclosure on a pledge by the Federal mutual bank holding company described in subsection (h)(1). (2)

Distribution of net proceeds

Except as provided in paragraph (3), the net proceeds of any liquidation of any Federal mutual bank holding company under paragraph (1) shall be transferred to persons who hold an interest in such Federal mutual bank holding company. (3)

Recovery by FDIC

If the Federal Deposit Insurance Corporation incurs a loss as a result of the default of any depository institution subsidiary that is liquidated under paragraph (1), the Federal Deposit Insurance Corporation shall succeed to the interests of the depositors of the depository institution subsidiary as members of the Federal mutual bank holding company to the extent of the Federal Deposit Insurance Corporation’s loss. (j)

Conforming references

Unless otherwise provided by the Board of Governors— (1)any reference in any Federal law to a bank holding company operating in stock form shall be deemed to refer also to a Federal mutual bank holding company; (2)any reference in any Federal law to the term board of directors, director, or directors of a national bank operating in stock form shall be deemed to refer also to the board of a Federal mutual bank holding company; and (3)any terms in Federal law that may apply only to a national bank operating in stock form, including the terms stock, shares, shares of stock, capital stock, common stock, stock certificate, stock certificates, certificates representing shares of stock, stock dividend, transferable stock, each class of stock, cumulate such shares, par value, or preferred stock shall not apply to a Federal mutual bank holding company unless the Board of Governors of the Federal Reserve System determines that context requires otherwise. (k)

Limitation on Federal regulation of mutual depositories

Except as otherwise provided in Federal law, the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation may not adopt or enforce any regulation that contravenes the corporate mutual governance rules prescribed by State law or regulation for mutual depositories unless the Comptroller, Board of Governors, or Corporation finds that the Federal regulation is necessary to assure the safety and soundness of the mutual depository.

(b)

Table of contents amendment

The table of sections for chapter 1 of title LXII of the Revised Statutes of the United States (12 U.S.C. 21 et seq.) is amended by inserting after the item relating to section 5133 the following new items:

Sec. 5133A. Mutual national banks.

Sec. 5133B. Federal mutual bank holding companies.

(c)

Appropriate Federal banking agency for Federal mutual bank holding companies

Section 3(q)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(3)) is amended— (1)in subparagraph (F), by striking ; and and inserting a semicolon at the end; (2)in subparagraph (G), by striking the period at the end and inserting ; and; and (3)by inserting after subparagraph (G) the following new subparagraph:

(H)supervisory or regulatory proceedings arising from the authority given to the Board of Governors under section 5133B of the Revised Statutes of the United States.