[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 10 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                 H. R. 10

To enhance competition in the financial services industry by providing 
a prudential framework for the affiliation of banks, securities firms, 
     and other financial service providers, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 7, 1997

Mr. Leach (for himself, Mrs. Roukema, Mr. Castle, and Mr. Lazio of New 
    York) introduced the following bill; which was referred to the 
  Committee on Banking and Financial Services, and in addition to the 
 Committee on Commerce, for a period to be subsequently determined by 
the Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To enhance competition in the financial services industry by providing 
a prudential framework for the affiliation of banks, securities firms, 
     and other financial service providers, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Financial Services 
Competitiveness Act of 1997''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Section 1. Short title; table of contents.
 TITLE I--BANK SECURITIES ACTIVITIES AND AFFILIATIONS WITH SECURITIES 
                  FIRMS AND OTHER FINANCIAL COMPANIES

                   Subtitle A--Securities Activities

Sec. 101. Anti-affiliation provision of the Banking Act of 1933 
                            repealed.
Sec. 102. Financial services holding companies authorized to have 
                            securities affiliates.
Sec. 103. Establishment and operations of securities affiliates.
Sec. 104. Safeguards relating to securities affiliates.
Sec. 105. Ownership of shares of certain companies by financial 
                            services holding companies.
Sec. 106. Provisions applicable to limited purpose banks.
Sec. 107. Securities company affiliations of FDIC-insured banks.
Sec. 108. Authority to terminate grandfather rights under the 
                            International Banking Act of 1978.
Sec. 109. Effect on State laws prohibiting the affiliation of bank, 
                            securities and insurance companies.
Sec. 110. National Bank special operating subsidiaries.
Sec. 111. Interagency agreement relating to retail sales of certain 
                            nondeposit investment products.
Sec. 112. Effective date.
             Subtitle B--Investment Bank Holding Companies

Sec. 116. Investment bank holding companies.
Sec. 117. Wholesale financial institutions.
                    Subtitle C--Financial Activities

Sec. 121. Financial activities.
Sec. 122. Reserved.
Sec. 123. Streamlined examination and reporting requirements for all 
                            financial services holding companies.
Sec. 124. Holding company supervision for financial services holding 
                            companies engaged primarily in nonbanking 
                            activities.
Sec. 125. Conversion of unitary savings and loan holding companies to 
                            financial services holding companies.
Sec. 126. Reserved.
Sec. 127. Coordination with State law.
Sec. 128. Conforming amendments to the Bank Holding Company Act of 
                            1956.
Sec. 129. Conforming amendments to the Bank Holding Company Act 
                            Amendments of 1970.
Sec. 130. Credit cards for business purposes.
    Subtitle D--Interagency Banking and Financial Services Advisory 
                               Committee

Sec. 141. Interagency banking and financial services advisory 
                            committee.
             Subtitle E--Application and Registration Fees

Sec. 151. Authority to impose fees.
                    TITLE II--FUNCTIONAL REGULATIONS

                    Subtitle A--Brokers and Dealers

Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Power to exempt from the definitions of broker and dealer.
Sec. 204. Effective date.
             Subtitle B--Bank Investment Company Activities

Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 
                            1940.
Sec. 216. Definition of dealer under the Investment Company Act of 
                            1940.
Sec. 217. Removal of the exclusion from the definition of investment 
                            adviser for banks that advise investment 
                            companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 
                            1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 
                            1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Investment advisers prohibited from having controlling 
                            interest in registered investment company.
Sec. 223. Conforming change in definition.
Sec. 224. Effective date.
                  TITLE III--BANK INSURANCE ACTIVITIES

Sec. 301. National bank and holding company insurance activities.
Sec. 302. National bank community development insurance activities.
Sec. 303. Redomestication of mutual life insurers.
                  TITLE IV--THRIFT CHARTER CONVERSION

          Subtitle A--Status of Banks and Savings Associations

Sec. 400. Short title.
Sec. 401. Termination of Federal savings associations; Treatment of 
                            State savings associations as banks for 
                            purposes of Federal banking law.
Sec. 402. Treatment of certain activities and affiliations of bank 
                            holding companies resulting from this Act.
Sec. 403. Transition provisions for activities of savings associations 
                            which convert into or become treated as 
                            banks.
Sec. 404. Registration of bank holding companies resulting from 
                            conversions of savings associations to 
                            banks or treatment of savings associations 
                            as banks.
Sec. 405. Additional transition provisions and special rules.
Sec. 406. Technical and conforming amendments.
Sec. 407. References to savings associations and State banks in Federal 
                            law.
Sec. 408. Repeal of Home Owner's Loan Act.
Sec. 409. Effective date; definitions.
       Subtitle B--Transfer of Functions, Personnel, and Property

Sec. 421. Reorganization of OTS into OCC.
Sec. 422. Savings provision.
Sec. 423. Cost of funds indexes.
Sec. 424. References in Federal law to Director of the Office of Thrift 
                            Supervision.
Sec. 425. Reconfiguration of FDIC Board of Directors as a result of 
                            removal of Director of the Office of Thrift 
                            Supervision.
             Subtitle C--Merger of Deposit Insurance Funds

Sec. 431. Merger of the BIF and SAIF.
                     TITLE V--TECHNICAL CORRECTIONS

Sec. 501. Foreign bank residency requirements.
Sec. 502. Interstate branching.

 TITLE I--BANK SECURITIES ACTIVITIES AND AFFILIATIONS WITH SECURITIES 
                  FIRMS AND OTHER FINANCIAL COMPANIES

                   Subtitle A--Securities Activities

SEC. 101. ANTI-AFFILIATION PROVISION OF THE BANKING ACT OF 1933 
              REPEALED.

    (a) Section 20 Repealed.--Section 20 (12 U.S.C. 377) of the Banking 
Act of 1933 (commonly referred to as the ``Glass-Steagall Act'') is 
repealed.
    (b) Conforming Amendment to Section 32.--Section 32 (12 U.S.C. 78) 
of the Banking Act of 1933 is amended by adding at the end the 
following sentence: ``This section shall not apply so as to prohibit an 
officer, director, or employee of a securities affiliate (as defined in 
section 2 of the Financial Services Holding Company Act of 1997) or a 
special operating subsidiary (as defined in section 5136D of Revised 
Statutes or referenced in undesignated paragraph 20 of section 9 of the 
Federal Reserve Act) that is subject to the Financial Services Holding 
Company Act from serving at the same time as an officer, director, or 
employee of a member bank affiliated with that securities affiliate 
pursuant to section 10 of such Act or with that special operating 
subsidiary as defined in section 5136D of the Revised Statutes or 
referenced in undesignated paragraph 20 of section 9 of the Federal 
Reserve Act. This section shall not apply so as to prohibit an officer, 
director, or employee of an investment company registered under the 
Investment Company Act of 1940 or an investment adviser registered 
under the Investment Advisers Act of 1940 from serving at the same time 
as an officer, director, or employee of a member bank.''.

SEC. 102. FINANCIAL SERVICES HOLDING COMPANIES AUTHORIZED TO HAVE 
              SECURITIES AFFILIATES.

    Section 4(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)) is amended--
            (1) by striking ``or'' at the end of paragraph (13);
            (2) by striking the period at the end of paragraph (14) and 
        inserting ``; or ``; and
            (3) by adding after paragraph (14) the following new 
        paragraph:
            ``(15) shares of a securities affiliate in accordance with 
        section 10.''.

SEC. 103. ESTABLISHMENT AND OPERATIONS OF SECURITIES AFFILIATES.

    (a) In General.--Section 10 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841 et seq.) is amended to read as follows:
``Sec. 10. Securities Activities
    ``(a) Activities Permissible for Securities Affiliates.--
            ``(1) In general.--A securities affiliate may engage in one 
        or more of the following activities:
                    ``(A) Underwrite, deal in, broker, place, or 
                distribute securities of any type, provide investment 
                advice regarding securities of any type, and engage in 
                other securities activities.
                    ``(B) Sponsor, organize, control, manage, and act 
                as investment adviser to an investment company.
                    ``(C) Engage in, or acquire the shares of a company 
                engaged in any activity if--
                            ``(i) a provision of section 4(c) permits 
                        financial services holding companies generally 
                        to engage in that activity or acquire those 
                        shares; and
                            ``(ii) either--
                                    ``(I) the Board permits the 
                                financial services holding company to 
                                engage in that activity or acquire 
                                those shares through the securities 
                                affiliate; or
                                    ``(II) a provision of section 4(c) 
                                permits the financial services holding 
                                company to engage in such activity or 
                                acquire such shares without the Board's 
                                approval.
            ``(2) Factor to be considered.--In making determinations 
        pursuant to this section, the Board shall take into account the 
        need for securities firms affiliated with banks to be 
        innovative and competitive.
    ``(b) Acquiring Interest in Securities Affiliate.--
            ``(1) Notice required.--A financial services holding 
        company shall not, without complying with and receiving 
        approval pursuant to the notice procedure in section 4(j)(1), 
        directly or indirectly acquire or retain more than 5 percent of 
        the voting shares of, or all or substantially all of the assets 
        of, a securities affiliate (or a company that would be a 
        securities affiliate if the Board permitted the financial 
        services holding company to acquire that company).
            ``(2) Criteria for approval.--The Board shall disapprove a 
        notice required under paragraph (1) unless the Board determines 
        that the requirements of the following subparagraphs have been 
        met:
                    ``(A) Capital.--
                            ``(i) Depository institutions.--
                                    ``(I) The lead depository 
                                institution of the financial services 
                                holding company is well capitalized.
                                    ``(II) Well capitalized depository 
                                institutions control at least 80 
                                percent of the aggregate total risk-
                                weighted assets of depository 
                                institutions controlled by the 
                                financial services holding company.
                                    ``(III) All depository institutions 
                                controlled by the financial services 
                                holding company are well capitalized or 
                                adequately capitalized.
                            ``(ii) Recently acquired depository 
                        institutions.--Depository institutions acquired 
                        by a financial services holding company during 
                        the 12-month period preceding the submission of 
                        a notice under paragraph (1) may be excluded 
                        for purposes of clause (i)(II) if--
                                    ``(I) the financial services 
                                holding company has submitted a plan to 
                                the appropriate Federal banking agency 
                                to restore the capital of the 
                                institution and the plan has been 
                                accepted by such agency; and
                                    ``(II) all such institutions that 
                                are excluded for the purposes of clause 
                                (i)(II) represent, in the aggregate, 
                                less than 25 percent of the aggregate 
                                total risk-weighted assets of all 
                                depository institutions controlled by 
                                the financial services holding company.
                            ``(iii) Financial services holding 
                        company.--The financial services holding 
                        company is (and immediately after the 
                        acquisition of a securities affiliate would 
                        continue to be) adequately capitalized under 
                        the capital standards applicable, if any, to 
                        such financial services holding company.
                            ``(iv) Foreign banks and companies.--For 
                        purposes of applying this subsection and other 
                        provisions of this section, the Board shall 
                        establish and apply comparable capital 
                        standards for the acquisition retention, and 
                        operation of a securities affiliate in the 
                        United States by a foreign bank that operates a 
                        branch or agency or owns or controls a bank or 
                        commercial lending company in the United 
                        States, and any company that owns or controls 
                        such a foreign bank, giving due regard to the 
                        principle of national treatment and equality of 
                        competitive opportunity.
                    ``(B) Alternative capital treatment for well 
                capitalized financial services holding companies.--
                            ``(i) In general.--A financial services 
                        holding company and the depository institution 
                        subsidiaries of such company shall be deemed to 
                        have met the capital requirements set forth in 
                        subparagraph (A) if--
                                    ``(I) the holding company files a 
                                written notice with the Board of such 
                                company's election to meet such capital 
                                requirements in the manner provided in 
                                this subparagraph;
                                    ``(II) all depository institutions 
                                controlled by the financial services 
                                holding company are at least adequately 
                                capitalized; and
                                    ``(III) the financial services 
                                holding company is (and immediately 
                                after the acquisition of a securities 
                                affiliate would continue to be) well 
                                capitalized.
                            ``(ii) Losses incurred by fdic.--A 
                        financial services holding company which makes 
                        an election under clause (i) in connection with 
                        the acquisition of control of any securities 
                        affiliate shall be liable for any loss incurred 
                        by the Federal Deposit Insurance Corporation, 
                        or any loss which the Federal Deposit Insurance 
                        Corporation reasonably anticipates incurring in 
                        connection with--
                                    ``(I) the default of any insured 
                                depository institution controlled by 
                                the financial services holding company; 
                                or
                                    ``(II) any assistance provided by 
                                the Corporation to any insured 
                                depository institution in danger of 
                                default that is controlled by the 
                                financial services holding company.
                    ``(C) Managerial resources.--
                            ``(i) In general.--The financial services 
                        holding company and each depository institution 
                        subsidiary of such company--
                                    ``(I) are well managed; and
                                    ``(II) were well managed during the 
                                12-month period preceding the 
                                acquisition of a securities affiliate 
                                (but for purposes of this subparagraph 
                                the Board may disregard any depository 
                                institution acquired by the financial 
                                services holding company during that 
                                period).
                            ``(ii) Securities activities.--The 
                        financial services holding company has the 
                        managerial resources to conduct the proposed 
                        securities activities safely and soundly.
                    ``(D) Internal controls.--The financial services 
                holding company has established adequate policies and 
                procedures to manage financial and operational risks, 
                to provide reasonable assurance of compliance with this 
                section and other applicable laws, and to provide 
                reasonable assurance of maintenance of corporate 
                separateness within the financial services holding 
                company.
                    ``(E) No detrimental effect on financial services 
                holding company or its subsidiary depository 
                institutions.--The acquisition of a securities 
                affiliate would not adversely affect the safety and 
                soundness of--
                            ``(i) the financial services holding 
                        company; or
                            ``(ii) any depository institution 
                        subsidiary of the financial services holding 
                        company.
                    ``(F) Concentration of resources.--The acquisition 
                of a securities affiliate would not result in an undue 
                concentration of resources in the financial services 
                business.
                    ``(G) Responsiveness to community needs.--The lead 
                insured depository institution subsidiary of the 
                financial services holding company and insured 
                depository institutions controlling at least 80 percent 
                of the aggregate total risk-weighted assets of insured 
                depository institutions controlled by the financial 
                services holding company have achieved a `satisfactory 
                record of meeting community credit needs', or better, 
                during the most recent examination of such insured 
                depository institutions.
            ``(3) Limited notice procedures for proposals by well 
        capitalized and well managed companies to acquire additional 
        securities affiliates.--A financial services holding company 
        may, without providing the notice required under paragraph (1), 
        directly or indirectly acquire the shares or substantially all 
        of the assets of any company that is engaged in activities 
        described in subparagraph (A) or (B) of subsection (a)(1), if--
                    ``(A) the financial services holding company 
                previously received the Board's approval under 
                paragraph (1) to control a securities affiliate and 
                continues to control the securities affiliate pursuant 
                to that approval;
                    ``(B) the acquisition proposal qualifies under 
                section 4(j)(4);
                    ``(C) the financial services holding company 
                provides the written notification required in section 
                4(j)(5); and
                    ``(D) the acquisition would not result in an undue 
                concentration of resources in the financial services 
                business.
            ``(4) Application fee.--Notwithstanding any other provision 
        of this Act, no financial services holding company may acquire 
        any securities affiliate or make any additional investment in a 
        securities affiliate in accordance with subsection (c) unless 
        the Board has received, from the company, full payment of a fee 
        which the Board shall impose in accordance with section 5(h).
    ``(c) Additional Investment in Securities Affiliate.--
            ``(1) Prior notice required.--A financial services holding 
        company that has acquired control of a securities affiliate 
        under this section shall not, directly or indirectly, make any 
        additional investment in the securities affiliate that is 
        considered capital for purposes of any capital requirement 
        imposed on the securities affiliate under the Securities 
        Exchange Act of 1934 (other than an extension of credit under a 
        revolving credit agreement approved by the Board), unless the 
        financial services holding company gives the Board prior 
        written notice of the proposed investment and the Board--
                    ``(A) issues a written statement of the Board's 
                intent not to disapprove the notice; or
                    ``(B) does not disapprove the notice within 30 days 
                after the notice is filed.
            ``(2) No prior notice required for certain financial 
        services holding companies.--
                    ``(A) In general.--A financial services holding 
                company shall not be required to provide prior notice 
                under paragraph (1) if after making any investment 
                described in paragraph (1)--
                            ``(i) the financial services holding 
                        company would be adequately capitalized under 
                        the capital standards applicable, if any, to 
                        such financial services holding company and 
                        each of the financial services holding 
                        company's subsidiary depository institutions 
                        would be well capitalized; and
                            ``(ii) the financial services holding 
                        company and each of its subsidiary depository 
                        institutions are well managed (but for purposes 
                        of this clause the Board may disregard any 
                        depository institution acquired by the 
                        financial services holding company during the 
                        previous 12-month period).
                    ``(B) Subsequent notice.--A financial services 
                holding company that makes an investment pursuant to 
                subparagraph (A) shall provide written notice to the 
                Board of the additional investment within 10 days after 
                making the investment.
            ``(3) Criteria for disapproving notice.--The Board may 
        disapprove a notice filed under paragraph (1) if--
                    ``(A) any depository institution affiliate of the 
                securities affiliate is undercapitalized; or
                    ``(B) the Board determines that the financial 
                services holding company would be undercapitalized 
                under the capital standards applicable, if any, to such 
                financial services holding company after making the 
                investment or that the investment would otherwise be 
                unsafe or unsound.
            ``(4) Emergency approval.--Notwithstanding any provision of 
        this subsection, in the event of adverse market conditions, or 
        concerns regarding the financial or operational condition of 
        the securities affiliate, the Board may approve any additional 
        investment in the securities affiliate on an emergency basis if 
        such additional investment does not adversely affect the safety 
        and soundness of all insured depository institution affiliates 
        of such securities affiliate and does not diminish the ability 
        of the financial services holding company to maintain an 
        appropriate amount of capital in all such insured depository 
        institutions.
    ``(d) Provisions Applicable if Affiliated Depository Institution 
Ceases To Be Well Capitalized.--
            ``(1) Holding company action required if affiliated 
        institutions are not well capitalized.--
                    ``(A) Applicability.--This paragraph shall apply 
                if--
                            ``(i) the lead depository institution of 
                        the financial services holding company is not 
                        well capitalized, or
                            ``(ii) well capitalized depository 
                        institutions do not control at least 80 percent 
                        of the aggregate total risk-weighted assets of 
                        depository institutions affiliated with the 
                        securities affiliate.
                    ``(B) Capital maintenance agreement.--Within 30 
                days after subparagraph (A) becomes applicable with 
                respect to any financial services holding company, such 
                company shall execute an agreement with the Board--
                            ``(i) to meet the capital requirements of 
                        subparagraph (A) within a reasonable period of 
                        time; or
                            ``(ii) to divest control of the depository 
                        institution in an orderly manner within 180 
                        days, or within such additional period of time 
                        as the Board may determine is reasonably 
                        required in order to effect such divestiture.
                    ``(C) Restrictions on certain securities 
                activities.--If a financial services holding company 
                fails to meet the requirements of, or comply with the 
                agreement executed pursuant to, subparagraph (B), a 
                securities affiliate of such financial services holding 
                company shall not, beginning 180 days after 
                subparagraph (A) becomes applicable with respect to 
                such company, agree to underwite or deal in, any 
                securities other than--
                            ``(i) securities expressly authorized by 
                        section 5136 of the Revised Statutes of the 
                        United States as permissible for a national 
                        bank to underwrite or deal in;
                            ``(ii) securities backed by or representing 
                        interests in notes, drafts, acceptances, loans, 
                        leases, receivables, other obligations, or 
                        pools of any such obligations; or
                            ``(iii) securities issued by an open-end 
                        investment company registered under the 
                        Investment Company Act of 1940.
                    ``(D) Exception.--The Board may permit the 
                securities affiliate of a financial services holding 
                company described in subparagraph (C) to underwrite or 
                deal in securities not described in clauses (i) through 
                (iii) of such subparagraph for a period of 1 year from 
                the date on which subparagraph (A) first becomes 
                applicable with respect to such company, if--
                            ``(i) the financial services holding 
                        company submits a capital restoration plan to 
                        the Board specifying the steps the financial 
                        services holding holding company will take to 
                        meet the requirements of subsection (b)(2)(A), 
                        and containing such other information as the 
                        Board may require; and
                            ``(ii) the Board approves the plan.
                    ``(E) Extension of period.--
                            ``(i) In general.--Upon application by a 
                        financial services holding company, the Board 
                        may extend, for not more than 1 year at a time, 
                        the period provided in subparagraph (C).
                            ``(ii) Maximum extension.--No extension 
                        under clause (i) of the period provided in 
                        subparagraph (C) shall, in the aggregate, 
                        exceed 2 years.
            ``(2) Divestiture of securities affiliate.--
                    ``(A) In general.--A financial services holding 
                company shall divest itself of the securities affiliate 
                if any of the financial services holding company's 
                subsidiary depository institutions has been 
                undercapitalized for more than 6 months.
                    ``(B) Extending time.--The Board may provide 
                additional time, not exceeding 18 months, for a 
                divestiture under subparagraph (A) if--
                            ``(i) the appropriate Federal banking 
                        agency or, in the case of a foreign bank or 
                        company that owns or controls a foreign bank, 
                        the Board, has approved the undercapitalized 
                        institution's capital restoration plan; and
                            ``(ii) the Board determines that the 
                        securities affiliate poses no significant risk 
                        to any affiliated depository institution.
    ``(e) Securities Affiliate Excluded in Determining Whether 
Financial Services Holding Company is Adequately Capitalized.--
            ``(1) In general.--In determining whether a financial 
        services holding company is adequately capitalized--
                    ``(A) the financial services holding company's 
                capital and total assets shall each be reduced by--
                            ``(i) an amount equal to the amount of the 
                        financial services holding company's equity 
                        investment in any securities affiliate; and
                            ``(ii) an amount equal to the amount of any 
                        extensions of credit by the financial services 
                        holding company to any securities affiliate 
                        that are considered capital for purposes of any 
                        capital requirement imposed on the securities 
                        affiliate under section 15(c)(3) of the 
                        Securities Exchange Act of 1934; and
                    ``(B) the securities affiliate's assets and 
                liabilities shall not be consolidated with those of the 
                financial services holding company.
            ``(2) Exception for nonsecurities activities.--Paragraph 
        (1) shall not apply to the extent that the Board determines by 
        regulation or order that--
                    ``(A) an item described in such paragraph relates 
                to activities which are not described in subparagraph 
                (A) or (B) of subsection (a)(1); or
                    ``(B) another method of adjusting capital is more 
                appropriate to ensure the safety and soundness of 
                depository institutions.
            ``(3) Exception for companies engaged predominantly in 
        securities activities.--Paragraph (1) shall not apply to an 
        investment bank holding company which is predominantly engaged 
        in securities activities on a consolidated basis.
    ``(f) Safeguards.--Each financial services holding company and each 
subsidiary of any such company shall comply with all applicable 
safeguard requirements of section 11.
    ``(g) Activities Not Permissible for Depository Institutions.--
            ``(1) In general.--A financial services holding company 
        that acquires control of a securities affiliate shall not, 
        after the end of the 1-year period beginning on the date of 
        such acquisition, permit any depository institution or any 
        subsidiary (except a special operating subsidiary as defined in 
        section 5136D of the Revised Statutes or referenced in 
        undesignated paragraph 20 of section 9 of the Federal Reserve 
        Act or section 24(d)(1)(C) of the Federal Deposit Insurance 
        Act), of any depository institution, which is controlled by 
        such holding company--
                    ``(A) to engage, directly or indirectly, in the 
                United States--
                            ``(i) in underwriting securities backed by 
                        or representing interests in notes, drafts, 
                        acceptances, loans, leases, receivables, other 
                        obligations, or pools of any such obligations 
                        originated or purchased by the institution or 
                        its affiliates; or
                            ``(ii) in underwriting or dealing in any 
                        other securities, except securities expressly 
                        authorized by section 5136 of the Revised 
                        Statutes of the United States as permissible 
                        for a national bank to underwrite or deal in; 
                        or
                    ``(B) to make an equity investment in any 
                securities affiliate.
            ``(2) Exception for certain edge act and agreement 
        corporations.--The limitations in paragraph (1)(A) shall not 
        apply with respect to activities conducted by a subsidiary of a 
        financial services holding company which is held pursuant to 
        section 25 or 25A of the Federal Reserve Act or section 
        4(c)(13) of this Act.
            ``(3) Rule of construction.--No provision of this 
        subsection shall be construed as permitting a securities 
        affiliate to accept deposits in contravention of section 21 of 
        the Banking Act of 1933.
    ``(h) Approval of Securities Activities Under Section 4(C)(8) 
Restricted.--The Board shall deny any notice or application by a 
financial services holding company under authority of section 4(c)(8) 
to engage in, or acquire the shares of a company engaged in, 
underwriting or dealing in securities in the United States, other than 
securities expressly authorized by section 5136 of the Revised Statutes 
of the United States as permissible for a national bank to underwrite 
or deal in.
    ``(i) Bankers' Banks.--
            ``(1) In general.--For purposes of this section, each 
        shareholder of or participant in a company that controls a 
        depository institution described in section 5169(b)(1) of the 
        Revised Statutes of the United States or in a similar statute 
        of any State, and each subsidiary of such a shareholder or 
        participant, shall be treated as if such shareholder, 
        participant, or subsidiary were a subsidiary of that company.
            ``(2) Exception.--This subsection shall not apply with 
        respect to a shareholder or participant in a company described 
        in subparagraph (A) (or any subsidiary of such shareholder or 
        participant) if the shareholder or participant, and the 
        affiliates of any such shareholder or participant, do not, in 
        the aggregate, control more than 5 percent of any class of 
        voting shares of such company.
    ``(j) Shares Acquired in Connection With Underwriting and 
Investment Banking Activities.--
            ``(1) In general.--Notwithstanding section 4(a), a 
        financial services holding company may directly or indirectly 
        acquire or control, whether as principal, on behalf of one or 
        more entities (including entities, other than a depository 
        institution or subsidiary of a depository institution, that the 
        financial services holding company controls), or otherwise, 
        shares, assets, or ownership interests (including without 
        limitation debt or equity securities, partnership interests, 
        trust certificates, or other instruments representing 
        ownership) of a company or other entity, whether or not 
        constituting control of such company or entity, engaged in 
        activities not authorized pursuant to section 4 if--
                    ``(A) the shares, assets, or ownership interests 
                are not acquired or held by a depository institution or 
                a subsidiary of a depositary institution;
                    ``(B) such shares, assets, or ownership interests 
                are acquired and held by a securities affiliate or an 
                affiliate of a securities affiliate as part of a bona 
                fide underwriting or investment banking activity, which 
                includes investment activities engaged in for the 
                purpose of appreciation and ultimate resale or other 
                disposition of the investment, and such shares, assets, 
                or ownership interests are held for such a period of 
                time as will permit the sale or disposition thereof on 
                a reasonable basis consistent with the nature of such 
                activities; and
                    ``(C) during the period such shares, assets, or 
                ownership interests are held, the financial services 
                holding company does not actively manage or operate the 
                company or entity except insofar as necessary to 
                achieve the objectives of subparagraph (B).
            ``(2) No expansion of underwriting activities.--No 
        provision of this subsection shall be construed as authorizing 
        any financial services holding company, or any subsidiary of 
        any such company, to underwrite or deal in any security.
            ``(3) Acquisition fee.--No financial services holding 
        company may acquire any company or other entity under paragraph 
        (1) unless the Board has received, from the holding company, 
        full payment of a fee which the Board shall impose in 
        accordance with section 5(h).
    ``(k) Registration Fees.--In the case of any financial services 
holding company which controls--
            ``(1) a securities affiliate; or
            ``(2) any company or entity pursuant to subsection (j), the 
        Board shall assess an annual registration fee in accordance 
        with section 5(h) on such holding company with respect to each 
        affiliate, company, or other entity referred to in paragraph 
        (1) or (2) which is controlled by such holding company.
    ``(l) Definitions.--For purposes of this section and sections 11 
and 12, the following definitions shall apply:
            ``(1) Capital stock and surplus.--The term `capital stock 
        and surplus' has the same meaning as in section 23A of the 
        Federal Reserve Act.
            ``(2) Covered transaction.--The term `covered transaction' 
        has the same meaning as in section 23A of the Federal Reserve 
        Act.
            ``(3) Security.--
                    ``(A) In general.--The term `security' has the 
                meaning given to such term in section 3(a)(10) of the 
                Securities Exchange Act of 1934.
                    ``(B) Exceptions.--Notwithstanding any other 
                provision of law, the term `security' does not include 
                any of the following for purposes of this section other 
                than subsection (a):
                            ``(i) A contract of insurance.
                            ``(ii) A deposit account, savings account, 
                        certificate of deposit, or other deposit 
                        instrument issued by a depository institution.
                            ``(iii) A share account issued by a savings 
                        association if the account is insured by the 
                        Federal Deposit Insurance Corporation.
                            ``(iv) A banker's acceptance.
                            ``(v) A letter of credit issued by a 
                        depository institution.
                            ``(vi) A debit account at a depository 
                        institution arising from a credit card or 
                        similar arrangement.
                            ``(vii) A loan or loan participation (as 
                        determined by the Board), including any debt 
                        security issued in connection with sovereign 
                        debt restructuring which a bank purchases and 
                        sells pursuant to such bank's lending 
                        authority.
                            ``(viii) A qualified financial contract (as 
                        defined in section 11(e)(8)(D)(i) of the 
                        Federal Deposit Insurance Act), as determined 
                        by the Board, after consultation with and 
                        consideration of the views of the Securities 
                        and Exchange Commission, except that, for 
                        purposes of this section other than subsection 
                        (a), such term does not include--
                                    ``(I) any securities contract (as 
                                defined in section 11(e)(8)(D)(ii) of 
                                such Act) that is based on or directly 
                                relates to a security that is not 
                                expressly authorized by section 5136 of 
                                the Revised Statutes of the United 
                                States as permissible for a national 
                                bank to underwrite or deal in unless 
                                the Board determines, after 
                                consultation with and consideration of 
                                the views of the Securities and 
                                Exchange Commission, that such 
                                securities contract is appropriate for 
                                a bank to underwrite or deal in, taking 
                                into account other qualified financial 
                                contracts which a bank is permitted to 
                                underwrite or deal in; and
                                    ``(II) any agreement, contract, or 
                                transaction which is determined by the 
                                Federal Deposit Insurance Corporation 
                                in a regulation prescribed after the 
                                date of the enactment of the Financial 
                                Services Competitiveness Act of 1997 to 
                                be a qualified financial contract 
                                unless the Board determines, after 
                                consultation with and consideration of 
                                the views of the Securities and 
                                Exchange Commission, that such 
                                agreement, contract, or transaction 
                                shall be treated as a qualified 
                                financial contract for purposes of this 
                                section.
                    ``(C) Board's authority to exempt traditional 
                banking products.--Notwithstanding any other provision 
                of law, the Board may, by regulation or order, exempt a 
                banking product from the definition of security if the 
                Board finds that--
                            ``(i) the product is available in the 
                        course of a banking business and is more 
                        appropriately regulated as a banking product; 
                        and
                            ``(ii) the exemption is otherwise 
                        consistent with the purposes of this section, 
                        the maintenance of fair and orderly markets, 
                        and the protection of investors.
                    ``(D) Definition for limited purpose.--The fact 
                that a particular instrument is excluded pursuant to 
                subparagraph (B) or (C) from the definition of security 
                for purposes of this section shall not be construed as 
                finding or implying that such instrument is or is not a 
                security for purposes of Federal securities laws.
                    ``(E) Reservation of authority to chartering 
                authority.--A determination by the Board under this 
                paragraph shall not be construed in any way as 
                authorizing a bank to provide any product or service 
                that the bank is not otherwise authorized to provide 
                under relevant law governing the activities and powers 
                of the bank.
                    ``(F) Consultation with commission.--
                            ``(i) Notice and consultation required.--In 
                        determining whether to exempt a banking product 
                        pursuant to subparagraph (C), the Board shall 
                        provide written notice to, consult with, and 
                        consider the views of the Securities and 
                        Exchange Commission.
                            ``(ii) Response and publication.--If the 
                        Securities and Exchange Commission comments in 
                        writing on a proposed determination of the 
                        Board, the Board shall--
                                    ``(I) respond in writing to such 
                                written comment; and
                                    ``(II) at the request of such 
                                commission, publish such comment and 
                                response in the Federal Register at the 
                                time the determination becomes 
                                effective.''.
    (b) Transition Rule for Securities Affiliates Approved Under 
Section 4(c)(8).--
            (1) Conversion to (4)(c)(15) subsidiary.--
                    (A) In general.--Except as provided in subparagraph 
                (B) and paragraphs (3) and (4), effective 18 months 
                after the date of enactment of this Act, no financial 
                services holding company may engage in, or retain the 
                shares of any company engaged in, underwriting or 
                dealing in securities based on the approval of an 
                application under section 4(c)(8) of the Bank Holding 
                Company Act of 1956 (as in effect before the date of 
                the enactment of the Financial Services Competitiveness 
                Act of 1997) unless the financial services holding 
                company has obtained the Board's approval to retain the 
                shares of that company under section 10.
                    (B) Exception for bank eligible securities.--
                Subparagraph (A) shall not apply with respect to 
                underwriting or dealing in--
                            (i) securities expressly authorized by 
                        section 5136 of the Revised Statutes of the 
                        United States as permissible for a national 
                        bank to underwrite or deal in; and
                            (ii) municipal securities.
            (2) Extending time.--
                    (A) In general.--The Board may, for good cause 
                shown, extend the time provided under paragraph (1) for 
                not more than 18 months.
                    (B) Pending notices.--If a financial services 
                holding company has filed a notice under section 10(b) 
                of the Bank Holding Company Act of 1956 not later than 
                180 days after the date of enactment of this Act, 
                paragraph (1) shall not apply with respect to the 
                company engaged in such underwriting or dealing until 
                180 days after the Board has acted on the notice.
            (3) Conversion procedures for companies previously 
        authorized to conduct securities activities.--Any financial 
        services holding company that controls a company engaged in 
        underwriting and dealing in corporate debt and equity 
        securities pursuant to an order issued by the Board under 
        section 4(c)(8) of the Bank Holding Company Act of 1956 before 
        the date of enactment of the Financial Services Competitiveness 
        Act of 1997 shall be treated as follows:
                    (A) Revenue test and certain other restrictions.--
                Upon filing the notice required under section 10(b) of 
                the Financial Services Holding Company Act of 1997, the 
                financial services holding company shall be relieved 
                from--
                            (i) the limitation contained in such order 
                        on the amount of revenue that may be derived 
                        from securities underwriting and dealing 
                        activities; and
                            (ii) any other restriction contained in 
                        such order that would not be required under 
                        section 11 of such Act, as permitted by the 
                        Board.
                    (B) Examination of internal controls.--The 
                financial services holding company shall not, in 
                connection with action on the notice submitted under 
                section 10(b)(1) of the Financial Services Holding 
                Company Act of 1997, be subject to an examination of 
                internal controls under section 10(b)(2)(D) of such 
                Act.
            (4) Retention of companies conducting limited securities 
        activities.--Notwithstanding paragraph (1), any financial 
        services holding company that controls a company engaged in 
        underwriting and dealing in securities (other than corporate 
        debt or equity securities) pursuant to an order issued by the 
        Board under section 4(c)(8) of the Bank Holding Company Act of 
        1956 before the date of enactment of the Financial Services 
        Competitiveness Act of 1997 may retain control of such company, 
        so long as such company complies with all of the limitations, 
        restrictions and conditions, including the limitation on the 
        revenue that may be derived from such underwriting or dealing 
        activities contained in such order.

SEC. 104. SAFEGUARDS RELATING TO SECURITIES AFFILIATES.

    (a) In General.--The Bank Holding Company Act of 1956 (12 U.S.C. 
1841 et seq.) is amended--
            (1) by redesignating sections 11 and 12 as sections 13 and 
        14, respectively; and
            (2) by inserting after section 10 (as added by section 103 
        of this Act) the following new section:
``Sec. 11. Safeguards relating to securities affiliates
    ``(a) Extensions of Credit and Asset Purchases Restricted.--
            ``(1) In general.--No depository institution affiliated 
        with a securities affiliate shall, directly or indirectly, do 
        any of the following:
                    ``(A) Extend credit in any manner to the securities 
                affiliate.
                    ``(B) Issue a guarantee, acceptance, or letter of 
                credit, including an endorsement or a standby letter of 
                credit, for the benefit of the securities affiliate.
                    ``(C) Except as provided in paragraph (3), purchase 
                for its own account, or for the account of any 
                subsidiary of such institution, financial assets of the 
                securities affiliate.
            ``(2) Exception for clearing securities.--Paragraph (1)(A) 
        shall not apply with respect to an extension of credit by a 
        well capitalized depository institution to acquire or sell 
        securities if the following conditions are met:
                    ``(A) The extension of credit is incidental to 
                clearing transactions in those securities through that 
                depository institution.
                    ``(B) Both the principal of and the interest on the 
                extension of credit are fully secured by those 
                securities.
                    ``(C) Either--
                            ``(i) the extension of credit is to be 
                        repaid before the close of business on the same 
                        business day; or
                            ``(ii) all of the following conditions are 
                        satisfied:
                                    ``(I) The securities cannot, in the 
                                ordinary course of business, be cleared 
                                on that business day.
                                    ``(II) The extension of credit is 
                                to be repaid before the close of 
                                business on the next business day.
                                    ``(III) Extensions of credit 
                                subject to this clause, when aggregated 
                                with all other covered transactions 
                                between the institution and all 
                                affiliated securities affiliates do not 
                                exceed 10 percent of the institution's 
                                capital stock and surplus.
                    ``(D) Either--
                            ``(i) the securities are securities 
                        expressly authorized by section 5136 of the 
                        Revised Statutes of the United States as 
                        permissible for a national bank to underwrite 
                        or deal in; or
                            ``(ii) the Board permits transactions under 
                        this paragraph in securities not described in 
                        clause (i) and the securities affiliate 
                        provides the depository institution with such 
                        additional security or other assurance of 
                        performance, if any, as the Board shall require 
                        to prevent such transactions from posing any 
                        appreciable risk to the institution.
            ``(3) Exceptions for certain securities purchased for a 
        depository institution's own account.--Paragraph (1)(C) shall 
        not apply with respect to purchases at the current market value 
        (based on reliable and regularly available price quotations) 
        of--
                    ``(A) securities expressly authorized by section 
                5136 of the Revised Statutes of the United States as 
                permissible for a national bank to underwrite or deal 
                in; or
                    ``(B) securities that--
                            ``(i) the securities affiliate has been 
                        marking to market daily; and
                            ``(ii) are rated investment grade by at 
                        least one nationally recognized statistical 
                        rating organization.
            ``(4) Other exceptions.--A well capitalized depository 
        institution may engage in a transaction described in paragraph 
        (1), if--
                    ``(A) the transaction is fully secured in 
                accordance with section 23A(c) of the Federal Reserve 
                Act; and
                    ``(B) the aggregate amount of covered transactions 
                between the institution and all securities affiliates 
                of the financial services holding company, excluding 
                transactions permitted under paragraph (2)(C)(i) or 
                (3)(A), does not exceed 10 percent of the institution's 
                capital stock and surplus.
    ``(b) Credit Enhancement Restricted.--
            ``(1) In general.--No depository institution affiliated 
        with a securities affiliate shall, directly or indirectly, 
        extend credit, or issue or enter into a standby letter of 
        credit, asset purchase agreement, indemnity, guarantee, 
        insurance, or other facility, for the purpose of enhancing the 
        marketability of a securities issue underwritten by the 
        securities affiliate.
            ``(2) Definition of term by board.--The Board shall 
        prescribe a definition for the term `for the purpose of 
        enhancing the marketability of a securities issue' for purposes 
        of paragraph (1).
            ``(3) Exception for bank eligible securities.--Paragraph 
        (1) shall not apply with regard to securities expressly 
        authorized by section 5136 of the Revised Statutes of the 
        United States as permissible for a national bank to underwrite 
        or deal in.
            ``(4) Application to well capitalized depository 
        institutions.--
                    ``(A) In general.--A well capitalized depository 
                institution may engage in a transaction described in 
                paragraph (1) if--
                            ``(i) the depository institution has 
                        adopted appropriate limits on exposure on a 
                        consolidated basis to any single customer whose 
                        securities are underwritten by the securities 
                        affiliate; and
                            ``(ii) the institution and its securities 
                        affiliate have adopted appropriate procedures, 
                        including maintenance of necessary documentary 
                        records, to assure than any such extension of 
                        credit, standby letter of credit, asset 
                        purchase agreement, indemnity, guarantee, 
                        insurance or other facility, is on an arm's 
                        length basis.
                    ``(B) Arm's length transaction described.--An 
                extension of credit may be considered to be on an arm's 
                length basis if the terms and conditions are 
                substantially the same as those prevailing at the time 
                for comparable transactions involving securities that 
                are not underwritten by the securities affiliate.
                    ``(C) Compliance with paragraph (1).--The Board may 
                require, by regulation or order, compliance with 
                paragraph (1) by well capitalized depository 
                institutions exempt under this paragraph in order to 
                achieve any purpose specified in subsection (1).
    ``(c) Restriction on Extending Credit To Make Payments on 
Securities.--
            ``(1) In general.--No depository institution affiliated 
        with a securities affiliate shall, directly or indirectly, 
        extend credit to an issuer of securities underwritten by the 
        securities affiliate for the purpose of paying the principal of 
        those securities or interest or dividends on those securities.
            ``(2) Exceptions for certain extensions of credit.--
        Paragraph (1) shall not apply to an extension of credit for a 
        documented purpose (other than paying principal, interest, or 
        dividends) if the timing, maturity, and other terms of the 
        credit, taken as a whole, are substantially different from 
        those of the underwritten securities.
            ``(3) Exceptions for bank eligible securities.--Paragraph 
        (1) shall not apply with respect to any security expressly 
        authorized by section 5136 of the Revised Statutes of the 
        United States as permissible for a national bank to underwrite 
        or deal in.
            ``(4) Application to well capitalized depository 
        institutions.--
                    ``(A) In general.--Paragraph (1) shall not apply 
                with respect to well capitalized depository 
                institutions if--
                            ``(i) the depository institution has 
                        adopted appropriate limits on exposure on a 
                        consolidated basis to any single customer whose 
                        securities are underwritten by the securities 
                        affiliate; and
                            ``(ii) the depository institution has 
                        adopted appropriate procedures, including 
                        maintenance of necessary documentary records, 
                        to assure that any extension of credit by the 
                        depository institution to an issuer for the 
                        purpose of paying the principal, interest or 
                        dividends on securities underwritten by the 
                        securities affiliate is on an arm's length 
                        basis.
                    ``(B) Arm's length transaction described.--An 
                extension of credit may be considered to have been made 
                on an arm's length basis if the terms and conditions 
                are substantially the same as those prevailing at the 
                time for comparable transactions with issuers whose 
                securities are not underwritten by the securities 
                affiliate.
                    ``(C) Compliance with subparagraph (a).--The Board 
                may require, by regulation or order, compliance with 
                paragraph (1) by well capitalized depository 
                institutions exempt under this paragraph in order to 
                achieve any purpose specified in subsection (1).
    ``(d) Common Directors and Senior Executive Officers.--
            ``(1) In general.--The Board shall, by regulation or order, 
        prescribe the circumstances under which directors and senior 
        executive officers of a securities affiliate may serve at the 
        same time as directors or senior executive officers of any 
        affiliated depository institutions.
            ``(2) Standards.--The Board, in issuing any regulation or 
        order pursuant to paragraph (1), shall consider appropriate 
        factors including--
                    ``(A) any burdens imposed by restrictions on 
                director and senior executive officer interlocks; and
                    ``(B) the safety and soundness of depository 
                institutions and securities affiliates.
            ``(3) Exception for small financial services holding 
        companies.--
                    ``(A) In general.--Notwithstanding paragraph (1), a 
                director or senior executive officer of a securities 
                affiliate may serve at the same time as a director or 
                senior executive officer of an affiliated depository 
                institution if that institution and all affiliated 
                depository institutions have, in the aggregate, total 
                assets of not more than $500,000,000.
                    ``(B) Inflation adjustment.--The dollar limitation 
                contained in subparagraph (A) shall be adjusted 
                annually after December 31, 1997, by the annual 
                percentage increase in the Consumer Price Index for 
                Urban Wage Earners and Clerical Workers published by 
                the Bureau of Labor Statistics.
            ``(4) Exception for certain regulation k affiliates.--
        Paragraph (1) shall not prohibit a director or senior executive 
        officer of a securities affiliate from serving at the same time 
        as a director or senior executive officer of a depository 
        institution which--
                    ``(A) is organized under section 25 or 25A of the 
                Federal Reserve Act;
                    ``(B) is an affiliate of such securities affiliate; 
                and
                    ``(C) principally engages in business outside the 
                United States.
    ``(e) Disclosure Required by Securities Affiliate.--
            ``(1) In general.--At the time a securities account is 
        opened, a securities affiliate shall conspicuously disclose in 
        writing to each of its customers that--
                    ``(A) securities sold, offered, or recommended by 
                the securities affiliate--
                            ``(i) are not deposits;
                            ``(ii) are not insured by the Federal 
                        Deposit Insurance Corporation;
                            ``(iii) are not guaranteed by an affiliated 
                        insured depository institution;
                            ``(iv) are not otherwise an obligation of 
                        an insured depository institution (unless such 
                        is the case); and
                            ``(v) with regard to any product that 
                        includes any investment component, are subject 
                        to investment risks including possible loss of 
                        principal invested;
                    ``(B) the securities affiliate is not an insured 
                depository institution, and is a corporation separate 
                from any insured depository institution; and
                    ``(C) the securities affiliate may be underwriting 
                or dealing in the securities being sold, offered or 
                recommended, and if so, would have a financial interest 
                in the transaction.
            ``(2) Form of disclosure.--The disclosures required by 
        paragraph (1) shall be made in clear and concise language 
        that--
                    ``(A) is readily comprehensible to customers of the 
                securities affiliate, and
                    ``(B) is designed to promote customer understanding 
                that uninsured investment products are not deposits 
                insured by the Federal Deposit Insurance Corporation.
            ``(3) Board authority.--Subject to paragraph (2), the Board 
        may, in the Board's discretion, prescribe disclosures in 
        addition to the disclosures prescribed by paragraph (1).
    ``(f) Disclosure Required by Insured Depository Institutions.--
            ``(1) In general.--No insured depository institution shall 
        knowingly express any opinion on the value of, or the 
        advisability of purchasing or selling, nonbanking products (as 
        defined by the Board) sold by the insured depository 
        institution or any affiliate of an insured depository 
        institution unless the insured depository institution 
        conspicuously discloses in writing to the customer at the time 
        the type of product is first sold to the customer that--
                    ``(A) the insured depository institution or 
                affiliate (whichever is applicable) is selling the 
                nonbanking product and has a financial interest in the 
                transaction (if such is the case);
                    ``(B) the nonbanking products--
                            ``(i) are not deposits;
                            ``(ii) are not insured by the Federal 
                        Deposit Insurance Corporation;
                            ``(iii) are not guaranteed by the 
                        institution or any other affiliated insured 
                        depository institution;
                            ``(iv) are not otherwise an obligation of 
                        an insured depository institution (unless such 
                        is the case); and
                            ``(v) with regard to any nonbanking product 
                        that includes any investment component, are 
                        subject to investment risks including possible 
                        loss of principal invested; and
                    ``(C) an affiliate, if involved, is not an insured 
                depository institution (unless such is the case), and 
                is a corporation separate from any insured depository 
                institution (unless such is not the case).
            ``(2) Form of disclosure.--The disclosures required by 
        paragraph (1) shall be made in clear and concise language 
        that--
                    ``(A) is readily comprehensible to customers of the 
                insured depository institution, and
                    ``(B) is designed to promote customer understanding 
                that nonbanking products are not deposits insured by 
                the Federal Deposit Insurance Corporation.
            ``(3) Customer acknowledgment of disclosure.--
                    ``(A) In general.--Whenever any insured depository 
                institution or securities affiliate opens an account 
                for the purpose of selling a nondeposit investment 
                product or products to a customer, such insured 
                depository institution or securities affiliate as the 
                case may be, shall obtain a one-time acknowledgment of 
                receipt by the customer or such disclosures, including 
                the date of receipt with the customer's name, address, 
                and the account number.
                    ``(B) Special rule for accredited investors.--In 
                the case of any customer who is, or meets the 
                requirements for, an accredited investor (as defined in 
                section 2(15) of the Securities Act of 1993), the 
                acknowledgment of the receipt of any disclosure 
                described in subparagraph (A) may be obtained by the 
                insured depository institution or securities affiliate 
                at the time any account is opened by such customer.
            ``(4) Board authority.--Subject to paragraph (2), the 
        Board, after consultation with the other appropriate Federal 
        banking agencies, may prescribe disclosures in addition to the 
        disclosures required by paragraph (1).
    ``(g) Improper Disclosure of Confidential Customer Information 
Prohibited.--
            ``(1) In general.--No depository institution subsidiary of 
        a financial services holding company shall disclose to any 
        affiliate of such institution which is not a depository 
        institution, and no affiliate of such company which is not a 
        depository institution shall disclose to any other affiliate 
        which is a depository institution or a subsidiary of such an 
        institution, any nonpublic customer information (including an 
        evaluation of the creditworthiness of an issuer or other 
        customer of that institution or securities affiliate), unless 
        it is clearly and conspicuously disclosed that such information 
        may be communicated among such persons and the customer is 
        given the opportunity, before the time that the information is 
        initially communicated, to direct that such information not be 
        communicated among such persons.
            ``(2) Definition.--For purposes of paragraph (1), the term 
        `nonpublic customer information' does not include--
                    ``(A) customers' names and addresses (unless a 
                customer has specified otherwise);
                    ``(B) information that could be obtained from 
                unaffiliated credit bureaus or similar companies in the 
                ordinary course of business; or
                    ``(C) information that is customarily provided to 
                unaffiliated credit bureaus or similar companies in the 
                ordinary course of business by--
                            ``(i) depository institutions not 
                        affiliated with securities affiliates; or
                            ``(ii) brokers and dealers not affiliated 
                        with depository institutions.
    ``(h) Reciprocal Arrangements Prohibited.--No financial services 
holding company and no subsidiary of a financial services holding 
company may enter into any agreement, understanding, or other 
arrangement under which--
            ``(1) a financial services holding company (or subsidiary 
        of that financial services holding company) agrees to engage in 
        a transaction with, or on behalf of, another financial services 
        holding company (or subsidiary of that financial services 
        holding company), in exchange for
            ``(2) the agreement of the second financial services 
        holding company referred to in paragraph (1) (or a subsidiary 
        of that financial services holding company) to engage in any 
        transaction with, or on behalf of, the first financial services 
        holding company referred to in such paragraph (or any 
        subsidiary of that financial services holding company), for the 
        purpose of evading any requirement or restriction of Federal 
        law on transactions between, or for the benefit of, affiliates 
        of financial services holding companies.
    ``(i) Safeguards Apply to Certain Subsidiaries.--Except as provided 
in this section--
            ``(1) Securities affiliate.--No subsidiary of a securities 
        affiliate may do anything that this section prohibits the 
        securities affiliate from doing.
            ``(2) Depository institution.--No subsidiary of a 
        depository institution (other than a special operating 
        subsidiary as defined in section 5136D of the Revised Statutes 
        or referenced in undesignated paragraph 20 of section 9 of the 
        Federal Reserve Act or section 24(d)(1)(C) of the Federal 
        Deposit Insurance Act) may do anything that this section 
        prohibits the institution from doing.
    ``(j) Authority To Modify and Impose Additional Safeguards; 
Interpretive Authority.--
            ``(1) In general.--The Board may, by regulation or order--
                    ``(A) adopt additional limitations, restrictions or 
                conditions on relationships or transactions among 
                depository institutions, their affiliates, and their 
                customers; and
                    ``(B) make any modification to any limitation, 
                restriction, or condition imposed under this section on 
                relationships or transactions among depository 
                institutions, the affiliates of insured depository 
                institutions, and the customers of such institutions or 
                affiliates, including modifications in addition to 
                those expressly provided for in this section.
            ``(2) Standards.--The Board may not exercise authority 
        under paragraph (1) unless the Board finds that such action is 
        consistent with the purposes of this Act, including--
                    ``(A) the avoidance of any significant risk to the 
                safety and soundness of depository institutions or the 
                Federal deposit insurance funds;
                    ``(B) the enhancement of the financial stability of 
                financial services holding companies;
                    ``(C) the prevention of the subsidization of 
                securities affiliates by depository institutions;
                    ``(D) the avoidance of conflicts of interests or 
                other abuses; and
                    ``(E) the application of the principle of national 
                treatment and equality of competitive opportunity 
                between securities affiliates owned or controlled by 
                domestic financial services holding companies and 
                securities affiliates owned or controlled by foreign 
                banks operating in the United States.
            ``(3) Biennial review.--Beginning 2 years after the date of 
        enactment of the Financial Services Competitiveness Act of 
        1997, the Board shall, on a biennial basis--
                    ``(A) review all restrictions established pursuant 
                to paragraph (1) to determine whether any such 
                restrictions are required any longer to carry out the 
                purposes of this Act; and
                    ``(B) modify or eliminate any such restriction that 
                the Board determines is no longer required to carry out 
                the purposes of this Act.
    ``(k) Compliance Programs Required.--
            ``(1) In general.--Each appropriate Federal banking agency 
        and the Securities and Exchange Commission shall establish a 
        program for--
                    ``(A) sharing information, including reports of 
                examinations, concerning compliance with subtitle A of 
                title I or subtitle A or B of title II of the Financial 
                Services Competitiveness Act of 1997, and the 
                amendments made by such subtitles, by--
                            ``(i) brokers, dealers, investment 
                        advisers, or investment companies that are 
                        registered with the Securities and Exchange 
                        Commission that are affiliated with depository 
                        institutions, or are separately identifiable 
                        departments or divisions of depository 
                        institutions registered as investment advisers; 
                        and
                            ``(ii) depository institutions and their 
                        affiliates;
                    ``(B) enforcing compliance with subtitle A of title 
                I of the Financial Services Competitiveness Act of 
                1997, and the amendments made by such subtitle and 
                paragraphs (4) and (5) of section 3(a) of the 
                Securities Exchange Act of 1934 by entities under its 
                supervision; and
                    ``(C) responding to any complaints from customers 
                about inappropriate cross-marketing of securities 
                products or inadequate disclosure.
            ``(2) Data collection.--
                    ``(A) In general.--The appropriate Federal banking 
                agencies, after consultation with and consideration of 
                the views of the Securities and Exchange Commission, 
                shall (except as otherwise provided by the appropriate 
                Federal banking agency after such consultation) require 
                any depository institution that has affected securities 
                transactions pursuant to any exception enumerated in 
                paragraphs (4) and (5) of section 3(a) of the 
                Securities Exchange Act of 1934 to identify the 
                exceptions relied upon and to submit such information 
                necessary to monitor compliance under such paragraphs.
                    ``(B) Commission access.--The appropriate Federal 
                banking agency shall make any information referred to 
                in subparagraph (A) available to the Securities and 
                Exchange Commission, upon the request of the 
                Commission.
                    ``(C) Compliance.--In implementing the provisions 
                of this paragraph, the appropriate Federal banking 
                agencies shall ensure that any information requests to 
                depository institutions take into account the size and 
                activities of the institutions and do not cause undue 
                reporting burdens.
            ``(3) Commission's enforcement authority.--Without limiting 
        in any way the authority of the appropriate Federal banking 
        agencies under this section, the Securities and Exchange 
        Commission shall have the authority to enforce any subsection 
        of this section against a securities affiliate as if such 
        subsection were a provision of the Securities Exchange Act of 
        1934 to the extent that the subsection applies with respect to 
        the conduct or activities of the securities affiliate.
            ``(4) Examination reports.--
                    ``(A) In general.--The appropriate Federal banking 
                agencies shall, to the fullest extent possible, use the 
                reports of examination of any broker, dealer, 
                investment adviser, or investment company made by or on 
                behalf of the Securities and Exchange Commission and 
                reports made by or on behalf of a registered securities 
                association or national securities exchange, and shall 
                defer to such examinations for compliance with the 
                Federal securities laws.
                    ``(B) Compliance with section 11 safeguards.--The 
                appropriate Federal banking agencies shall--
                            ``(i) to the fullest extent possible, use 
                        the reports of examination of any securities 
                        affiliate made by the appropriate Federal 
                        banking agency for such affiliate; and
                            ``(ii) defer to such examinations for 
                        compliance with the provisions of this section.
            ``(5) Interpretations of the federal securities laws.--The 
        appropriate Federal banking agencies shall defer to the 
        Securities and Exchange Commission regarding all 
        interpretations and enforcement of the Federal securities laws 
        relating to the application of the Federal securities laws to 
        the activities and conduct of brokers, dealers, investment 
        advisers, and investment companies.
            ``(6) Notice of certain actions by sec.--The Securities and 
        Exchange Commission shall give notice to the appropriate 
        Federal banking agency upon the commencement of any 
        disciplinary or law enforcement proceedings by the Commission 
        and a copy of any order entered by the Commission against--
                    ``(A) any broker, dealer, or investment adviser 
                that--
                            ``(i) is registered with the Securities and 
                        Exchange Commission; and
                            ``(ii) is affiliated with, or is a 
                        separately identifiable department or division 
                        of, a depository institution;
                    ``(B) any investment company registered with the 
                Securities and Exchange Commission that is an affiliate 
                of or is advised by an investment adviser affiliated 
                with a depository institution or by a separately 
                identifiable department or division of a depository 
                institution that is a registered investment adviser; or
                    ``(C) any financial services holding company, 
                depository institution, or subsidiary of such company 
                or institution, if the proposed action relates to 
                subtitle A of title I or subtitle A or B of title II of 
                the Financial Services Competitiveness Act of 1997.
            ``(7) Notice of certain actions by appropriate federal 
        banking agencies.--Upon the commencement of any disciplinary or 
        law enforcement proceedings to enforce the provisions of 
        subtitle A of title I of the Financial Services Competitiveness 
        Act of 1997, or any amendment made by such subtitle, by an 
        appropriate Federal banking agency against any broker, dealer, 
        investment adviser, or investment company that is registered 
        under the Federal securities laws and is affiliated with a 
        depository institution or is a separately identifiable 
        department or division of a depository institution, the 
        appropriate Federal banking agency shall give notice to the 
        Securities and Exchange Commission of the proposed action.
            ``(8) Immediate action allowed before notice.--The notice 
        required under paragraph (6) or (7) may be provided promptly 
        after action by the Securities and Exchange Commission or the 
        appropriate Federal banking agency, if--
                    ``(A) the Commission determines that the protection 
                of investors requires immediate action by the 
                Commission and prior notice under paragraph (6) is not 
                practical under the circumstances; or
                    ``(B) the appropriate Federal banking agency 
                determines that concerns for the safety and soundness 
                of a depository institution or its affiliate require 
                immediate action by the agency and prior notice under 
                paragraph (7) is not practical under the circumstances.
            ``(9) Coordinated enforcement actions.--The Securities and 
        Exchange Commission and the appropriate Federal banking 
        agencies shall, to the extent practicable, coordinate 
        supervisory actions based on applicable law where the actions 
        are based on the same or related events or practices.
            ``(10) Investment companies not affiliated with a 
        depository institution.--The appropriate Federal banking agency 
        shall not have authority under this Act or any other provision 
        of law to inspect or examine any investment company registered 
        under the Federal securities laws that is not--
                    ``(A) affiliated with a depository institution; or
                    ``(B) advised by an investment adviser affiliated 
                with a depository institution or by a separately 
                identifiable department or division of a depository 
                institution that is a registered investment adviser.
            ``(11) Use of examination reports.--The appropriate Federal 
        banking agencies shall--
                    ``(A) to the fullest extent possible, use the 
                reports of examination of any investment adviser or 
                investment company made by or on behalf of the 
                Securities and Exchange Commission; and
                    ``(B) defer to such examinations for compliance 
                with the Federal securities laws.
            ``(12) Definition.--For purposes of this subsection, the 
        term `Federal securities laws' means the provisions of Federal 
        law governing securities activities that are within the 
        jurisdiction of the Securities and Exchange Commission under 
        the Securities Act of 1933, the Securities Exchange Act of 
        1934, the Investment Company Act of 1940, the Investment 
        Advisers Act of 1940, and the Trust Indenture Act of 1939.
    ``(l) Foreign Bank Firewalls.--
            ``(1) In general.--A foreign bank that operates a branch, 
        agency, or commercial lending company in the United States and 
        accepts no deposits in the United States, either directly or 
        through an affiliate, that are insured under the Federal 
        Deposit Insurance Act, and any affiliate of such foreign bank, 
        shall not be subject to the restrictions of any subsection of 
        this section, other than subsections (j) and (k), if the 
        conditions described in paragraph (2) are met.
            ``(2) Conditions for applicability of exception.--The 
        conditions of this paragraph have been met with respect to any 
        foreign bank referred to in paragraph (1) if--
                    ``(A) transactions between a securities affiliate 
                of such foreign bank and any branch, agency or 
                commercial lending company operated in the United 
                States by such foreign bank comply with the provisions 
                of sections 23A and 23B of the Federal Reserve Act as 
                if the foreign bank were a member bank; and
                    ``(B) such foreign bank has received a 
                determination from the Board that the bank meets 
                capital standards comparable to those established by 
                the Board for well capitalized financial services 
                holding companies, giving due regard to the principle 
                of national treatment and equality of competitive 
                opportunity, subject to any changes the Board may adopt 
                with respect to such standards.
            ``(3) Applicability of subsection (1) to foreign banks.--
        Any limitation, restriction, condition, or modification adopted 
        by the Board under subsection (j) may be applied by the Board 
        to--
                    ``(A) a foreign bank described in paragraph (1) 
                (and any company that owns or controls such foreign 
                bank);
                    ``(B) any branch, agency or commercial lending 
                company operated by such foreign bank in the United 
                States; or
                    ``(C) any other affiliate of such foreign bank in 
                the United States, if such limitation, restriction, 
                condition, or modification is applied by regulation or 
                order of general applicability under section 
                12(a)(2)(B)(ii) to wholesale financial institutions and 
                securities affiliates controlled by investment bank 
                holding companies, subject to such modifications, 
                conditions, or exemptions as the Board deems 
                appropriate, giving due regard to the principle of 
                national treatment and equality of competitive 
                opportunity.''.
    (b) Amendment to the Federal Reserve Act.--Section 23B(b)(1)(B) of 
the Federal Reserve Act (12 U.S.C. 371c-1(b)(1)(B)) is amended by 
inserting ``and for 30 days thereafter'' after ``during the existence 
of any underwriting or selling syndicate''.
    (c) Exemption From Section 305(b) of the Federal Power Act.--
Section 305(b) of the Federal Power Act shall not apply to any person 
now holding, or proposing to hold, at the same time the position of 
officer or director of a public utility and the position of officer or 
director of a bank, trust company, banking association, or firm 
permitted by section 10 of the Financial Services Holding Company Act 
of 1997 (as amended by section 103(a) of this Act) to underwrite or 
participate in the marketing of securities (including commercial paper) 
of a public utility, if that bank, trust company, banking association, 
or firm does not underwrite or participate in the marketing of 
securities of the public utility for which the person serves, or 
proposes to serve, as an officer or director.
    (d) Amendment to the Right to Financial Privacy Act.--Section 
1112(e) of the Right to Financial Privacy Act (12 U.S.C. 3412(e)) is 
amended as follows--
          (1) by striking ``this title'' and inserting ``law''; and
            (2) by inserting ``, examination reports,'' after 
        ``financial records''.
    ``(e) Regulations to Preserve Separation of Banking and Commerce.--
Section 5(b) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(b)) is amended by inserting ``, including the protection of 
depository institutions and the separation of banking and commerce,'' 
after ``purposes of this Act''.

SEC. 105. OWNERSHIP OF SHARES OF CERTAIN COMPANIES BY FINANCIAL 
              SERVICES HOLDING COMPANIES.

    Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843) 
is amended by adding at the end the following new subsections:
    ``(k) Ownership of Shares of Certain Companies by Financial 
Services Holding Companies.--
            ``(1) Nonconforming financial companies.--Notwithstanding 
        subsection (a), a financial services holding company may retain 
        direct or indirect ownership or control of voting shares of any 
        company that engages in activities not authorized under this 
        section if--
                    ``(A) the financial services holding company held 
                the shares of any company engaged in such activities as 
                of the date of the enactment of the Financial Services 
                Competitiveness Act of 1997 and the financial services 
                holding company was then exempt from the provisions of 
                this section pursuant to subsection (d) as of such 
                date;
                    ``(B) the company engaged in such activities 
                continues to engage only in the same general lines of 
                business and related activities that such company 
                conducted as of the date of the enactment of the 
                Financial Services Competitiveness Act of 1997 (or 
                other activities permitted under subsection (c) or 
                section 10); and
                    ``(C) 80 percent of the aggregate gross revenues of 
                the financial services holding company and the 
                subsidiaries of such holding company as of the date of 
                the enactment of the Financial Services Competitiveness 
                Act of 1997 was attributable to--
                            ``(i) ownership and operation of depository 
                        institutions;
                            ``(ii) activities that are financial in 
                        nature as determined by the Board pursuant to 
                        subsection (c)(8);
                            ``(iii) activities permissible under 
                        section 10; and
                            ``(iv) such other activities that would be 
                        permissible generally for the holding company 
                        as a financial services holding company (other 
                        than as an investment bank holding company).
            ``(2) Nonfinancial companies.--
                    ``(A) In general.--Notwithstanding subsection (a), 
                a financial services holding company engaged 
                predominantly in activities described in section 
                10(a)(1) or 4(c) that becomes a financial services 
                holding company may, during the 5-year period beginning 
                on the date that the company becomes a financial 
                services holding company, retain direct or indirect 
                ownership or control of voting shares of any company 
                that the financial services holding company owns or 
                controls on the date such holding company becomes a 
                financial services holding company.
                    ``(B) Extension of divestiture period.--The Board 
                may extend the period described in subparagraph (A) for 
                an additional period not to exceed 5 years if the 
                Board--
                            ``(i) determines that such extension is 
                        necessary to avert substantial loss to the 
                        financial services holding company; and
                            ``(ii) finds that the financial services 
                        holding company has made good faith efforts to 
                        divest such shares.
                    ``(C) No expansion of nonfinancial companies prior 
                to diverstitute.--Unless an acquisition or activity is 
                permitted in accordance with subsection (c) or section 
                3--
                            ``(i) no financial services holding 
                        company, and no company whose shares are owned 
                        or controlled by a financial services holding 
company in accordance with this paragraph, may acquire any interest in 
or assets of any other company, and
                            ``(ii) no company whose shares are owned or 
                        controlled by a financial services holding 
                        company pursuant to this paragraph may engage 
                        directly or indirectly in any activity that the 
                        company did not conduct on the day before the 
                        financial services holding company registered 
                        as a financial services holding company.
            ``(3) Restrictions on joint marketing.--No depository 
        institution (and no subsidiary of such institution) shall--
                    ``(A) offer or market, directly or indirectly 
                through any arrangement, any product or service of any 
                affiliate whose share are owned or controlled by the 
                financial services holding company pursuant to this 
                subsection or section 10(j); or
                    ``(B) permit any of such depository institution's 
                or subsidiary's products or services to be offered or 
                marketed, directly or indirectly through any 
                arrangement, by or through any affiliate whose shares 
                are owned or controlled by the financial services 
                holding company pursuant to this subsection, section 
                10(j), or subsection (l) unless, in a case involving an 
                affiliate held under this subsection, the product or 
                service is permissible or authorized for financial 
                services holding companies to provide under subsection 
                (c)(8) or section 10.
            ``(4) Depository institution defined.--For purposes of 
        paragraph (3), the term `depository institution' includes a 
        foreign bank.
    ``(l) Shares Acquired in Connection With Insurance Company 
Investment Activities.--
          ``(1) In general.--Notwithstanding subsection (a), a 
        financial services holding company may acquire or control, 
        directly or indirectly, whether as principal, on behalf of one 
        or more entities (including any subsidiary of the holding 
        company which is not a depository institution or a subsidiary 
        of a depository institution), or otherwise, shares, assets, or 
        ownership interests (including debt or equity securities, 
        partnership interests, trust certificates, or other instruments 
        representing ownership) of a company or other entity, whether 
        or not constituting control of such company or entity, engaged 
        in activities not authorized pursuant to this section if--
                    ``(A) the shares, assets, or ownership interests 
                are not acquired or held by a depository institution or 
                a subsidiary of a depository institution;
                    ``(B) such shares, assets, or ownership interests 
                are acquired and held by an insurance affiliate that is 
                predominantly engaged in underwriting life, accident 
                and health, or property and casualty insurance (other 
                than credit-related insurance);
                    ``(C) such shares, assets, or ownership interests 
                represent an investment made in the ordinary course of 
                business of such insurance affiliate in accordance with 
                relevant State law governing such investments; and
                    ``(D) during the period such shares, assets, or 
                ownership interests are held, the financial services 
                holding company does not directly or indirectly 
                participate in the day-to-day management or operation 
                of the company or entity except insofar as necessary to 
                achieve the objectives of subparagraphs (B) and (C).
            ``(2) No expansion of underwriting activities.--No 
        provision of this subsection shall be construed as authorizing 
        any financial services holding company, or any subsidiary of 
        any such company, to underwrite or deal in any security.''.

SEC. 106. PROVISIONS APPLICABLE TO LIMITED PURPOSE BANKS.

    (a) Exception To Restrictions on Nonbank Banks.--
            (1) In general.--Section 4(f)(3) of the Bank Holding 
        Company Act of 1956 (12 U.S.C. 1843(f)(3)) is amended by adding 
        at the end the following new subparagraph:
                    ``(D) Exception to restriction on activities, and 
                certain cross-marketing restrictions.--
                            ``(i) Qualification for exception from 
                        activities restriction.--Notwithstanding 
                        subparagraph (B)(i), a bank controlled by a 
                        company described in paragraph (1) that meets 
                        the requirements of paragraph (14) may engage 
                        in an activity authorized under applicable law 
                        (other than an activity that would have 
                        resulted in the institution being a bank for 
                        purposes of this Act, as in effect on the day 
                        before the date of the enactment of the 
                        Competitive Equality Banking Act of 1987, based 
                        on the activities each bank conducted on March 
                        5, 1987, as reported to the Board) if such 
                        bank, at least 60 days before commencing such 
                        activity, has notified the Board of the bank's 
                        intention to commence such activity and 
                        either--
                                    ``(I) the Board has notified such 
                                bank that the Board will not disapprove 
                                the proposed activity as unsafe or 
                                unsound; or
                                    ``(II) the Board has not, within 60 
                                days after receiving such notice, 
                                disapproved the proposal on the basis 
                                of such criteria.
                            ``(ii) Qualification for exception from 
                        cross-marketing restriction.--Notwithstanding 
                        subparagraph (B)(ii), a bank controlled by a 
                        company described in paragraph (1) that meets 
                        the requirements of paragraph (14) may offer or 
                        market products or services of an affiliate or 
                        permit the bank's products or services to be 
                        offered or marketed in connection with products 
                        or services of an affiliate if such products or 
                        services are offered or marketed only to the 
                        extent permissible for banks or financial 
                        services holding companies to provide by law, 
                        regulation, or order under paragraph (8) or 
                        (15) of subsection (c).
                            ``(iii) Exception from divestiture 
                        requirement for banks restored to well 
                        capitalized level.--If any bank controlled by a 
                        company that meets the requirements of 
                        paragraph (14) ceases to be well capitalized, 
                        the company shall divest control of such bank 
                        in accordance with paragraph (4) unless--
                                    ``(I) within 12 months after the 
                                date the bank ceases to be well 
                                capitalized, the capital of the bank is 
                                restored to the well capitalized level; 
                                and
                                    ``(II) after the end of such 12-
                                month period, the bank remains well 
                                capitalized, subject to the capital 
                                restoration requirements in subclause 
                                (I).
                            ``(iv) Action required if bank ceases to be 
                        adequately capitalized.--If any bank controlled 
                        by a company that meets the requirements 
of paragraph (14) ceases to be adequately capitalized, the company 
shall, within 30 days after the date as of which the bank ceases to be 
adequately capitalized--
                                    ``(I) execute an agreement with the 
                                Board to divest control of such bank in 
                                accordance with paragraph (4); or
                                    ``(II) restore the capital of the 
                                bank to at least the adequately 
                                capitalized level.''.
            (2) Qualifications for companies under paragraph (3)(d).--
        Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1843(f)) is amended by adding at the end the following new 
        paragraph:
            ``(14) Qualifications for companies under paragraph 
        (3)(d).--A company meets the requirements of this paragraph 
        if--
                    ``(A) the company (based on consolidated revenues) 
                engages predominantly in--
                            ``(i) banking;
                            ``(ii) activities that the Board has 
                        determined, or are specified, under subsection 
                        (c)(8) (regardless of the effective date) to be 
                        financial in nature or incidental to such 
                        financial activities;
                            ``(iii) activities permitted under 
                        subparagraph (A) or (B) of section 10(a)(1); 
                        and
                            ``(iv) other activities that would be 
                        permissible for such company as a financial 
                        services holding company (other than as an 
                        investment bank holding company);
                    ``(B) all insured depository institutions 
                controlled by such company are well capitalized and 
                well managed;
                    ``(C) the bank and any affiliate of the bank that 
                is engaged in securities activities described in 
                section 10(a) comply with the safeguards contained in 
                section 11 as if that affiliate were a securities 
                affiliate; and
                    ``(D) the company has provided at least 60 days 
                prior written notice to the Board and, during that 
                period, the Board has not disapproved the proposal.''.
    (b) Amended Divestiture Procedure for Certain Companies.--Section 
4(f)(4) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(4)) 
is amended by adding at the end of the following: ``If any company 
described in paragraph (1) which meets the requirements of paragraph 
(14) fails to qualify for the exemption provided under paragraph (2), 
such company shall divest, in accordance with this paragraph, control 
of each bank the company controls unless, within 12 months after the 
date that the company fails to comply with the provisions of paragraph 
(2), the company has corrected the condition or ceased the activity 
that led to the failure to comply.''.
    (c) Conversion of Certain Nonbank Holding Companies to Financial 
Services Holding Companies.--Section 4(f) of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1843(f)) is amended by inserting after paragraph 
(14) (as added by subsection (a)(2)) the following new paragraph:
            ``(15) Conversion of certain companies to financial 
        services holding companies.--
                    ``(A) In general.--During the 18-month period 
                beginning on the date of the enactment of the Financial 
                Services Competitiveness Act of 1977, any company 
                described in paragraph (1) may become a financial 
                services holding company if--
                            ``(i) the company (on a consolidated basis) 
                        engages predominantly in--
                                    ``(I) banking;
                                    ``(II) activities that the Board 
                                has determined, or are specified, under 
                                subsection (c)(8) (regardless of the 
                                effective date) to be financial in 
                                nature or incidental to such financial 
                                activities;
                                    ``(III) activities permitted under 
                                subparagraph (A) or (B) of section 
                                10(a)(1); and
                                    ``(IV) other activities that would 
                                be permissible for such company as a 
                                financial services holding company 
                                (other than an investment bank holding 
                                company);
                            ``(ii) all insured depository institutions 
                        controlled by such company are well capitalized 
                        and well managed;
                            ``(iii) the company provides written notice 
                        to the Board under sections 4 and 10 at least 
                        60 days before the company becomes a financial 
                        services holding company;
                            ``(iv) the Board does not object to such 
                        transaction before the end of such 60-day 
                        period; and
                            ``(v) the Board has received, from the 
                        company, full payment of a fee which the Board 
                        shall impose in accordance with section 5(h).
                    ``(B) Period to conform other activities.--
                Notwithstanding subsection (a), a company that becomes 
                a financial services holding company pursuant to 
                subparagraph (A) may retain direct or indirect 
                ownership or control of voting shares of any company 
                not otherwise permitted under this section for the 
                period provided in, and subject to the conditions 
                contained in, paragraphs (2) and (3) of section 4(k).
                    ``(C) Electron for reduced supervision.--Any 
                company that becomes a financial services holding 
                company pursuant to subparagraph (A) may elect to be 
                governed by the provisions of paragraphs (3), (4), (5), 
                and (6) of section 5(g), subject to the requirements of 
                such section, if--
                            ``(i) the company, and any insured 
                        depository institution controlled by such 
                        company, meet the requirements of section 5(g) 
                        (other than the requirements of paragraph 
                        (2)(A) of such section);
                            ``(ii) the company does not acquire more 
                        than 5 percent of the shares of any additional 
                        depository institution after the date that such 
                        company becomes a financial services holding 
                        company; and
                            ``(iii) no depository institution 
                        controlled by such company acquires, 
                        establishes, or operates an additional branch 
                        office after the date that the company becomes 
                        a financial services holding company.''.

SEC. 107. SECURITIES COMPANY AFFILIATIONS OF FDIC-INSURED BANKS.

    (a) In General.--Section 18 of the Federal Deposit Insurance Act 
(12 U.S.C. 1828) is amended by adding at the end the following new 
subsections:
    ``(s) Securities Affiliations of Banks.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, a bank shall not be an affiliate of any company that, 
        directly or indirectly, acts as an underwriter or dealer of any 
        security, other than--
                    ``(A) a securities affiliate in accordance with 
                section 10 of the Financial Services Holding Company 
                Act of 1997;
                    ``(B) a special operating subsidiary in accordance 
                with section 5136D of the Revised Statutes or 
                referenced in undesignated paragraph 20 of section 9 of 
                the Federal Reserve Act or section 24(d)(1)(C); or
                    ``(C) a company that underwrites or deals only in 
                securities expressly authorized by section 5136 of the 
                Revised Statutes as permissible for a national bank to 
                underwrite or deal in.
            ``(2) Exceptions.--
                    ``(A) Certain banks not included.--For purposes of 
                this subsection, the term `bank' does not include--
                            ``(i) an insured bank described in 
                        subparagraph (D), (F), or (H) of section 
                        2(c)(2) of the Financial Services Holding 
                        Company Act of 1997; and
                            ``(ii) a Federal branch or an insured 
                        branch (as defined in section 3 of the Federal 
                        Deposit Insurance Act).
                    ``(B) Affiliations with edge act and agreement 
                corporations.--Paragraph (1) shall not apply with 
                respect to the affiliation of a bank with a company 
                held pursuant to section 25 or 25A of the Federal 
                Reserve Act or section 4(c)(13) of the Financial 
                Services Holding Company Act of 1997.
            ``(3) Grandfather provision.--This subsection shall not 
        apply with respect to--
                    ``(A) an affiliation that existed on January 1, 
                1995; or
                    ``(B) any new affiliation by an insured bank that 
                has an affiliation that would be prohibited if the 
                affiliation were not covered by subparagraph (A).
            ``(4) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                    ``(A) Broker.--The term `broker' has the meaning 
                given to such term in section 3(a)(4) of the Securities 
                Exchange Act of 1934.
                    ``(B) Dealer.--The term `dealer' has the meaning 
                given to such term in section 3(a)(5) of the Securities 
                Exchange Act of 1934.
                    ``(C) Security.--The term `security' has the 
                meaning given to such term in section 10(l) of the 
                Financial Services Holding Company Act of 1997.
                    ``(D) Underwriter.--The term `underwriter' has the 
                meaning given to such term in section 2(ll) of the 
                Securities Act of 1933.
            ``(5) Affiliate.--For purposes of this subsection, a 
        separately identifiable department or division (as defined in 
        section 3(a) of the Securities Exchange Act of 1934) of a bank 
        shall be deemed to be a company which is an affiliate of the 
        bank.
    ``(t) Broker-Dealer Registration.--An insured bank may not use the 
United States mails or any means or instrumentality of interstate 
commerce to act as a broker or dealer without registration under the 
Securities Exchange Act of 1934--
            ``(1) except to the extent permitted under the 
        circumstances described in paragraph (4) or (5) of section 3(a) 
        of such Act; or
            ``(2) unless otherwise exempt from registrations as a 
        broker or dealer pursuant to regulations prescribed by the 
        Securities and Exchange Commission.
    ``(u) Examination Reports.--The Federal banking agencies shall, to 
the fullest extent possible, use the reports of examination of any 
broker, dealer, investment adviser, or investment company made by or on 
behalf of the Securities and Exchange Commission and reports made by or 
on behalf of a registered securities association or national securities 
exchange and shall defer to such examination for compliance with 
Federal securities laws.
    ``(v) Interpretations of the Federal Securities Laws.--The 
appropriate Federal banking agencies shall defer to the Securities and 
Exchange Commission regarding all interpretations and enforcement of 
the Federal securities laws relating to the application of the Federal 
securities laws to the activities and conduct of brokers, dealers, 
investment advisers, and investment companies.''.
    (b) Study of Risks to Deposit Insurance System.--
            (1) Study required.--During the 6-month period beginning 18 
        months after the date of the enactment of the Financial 
        Services Competitiveness Act of 1997, the Federal Deposit 
        Insurance Corporation shall conduct a study of the risks posed 
        to the deposit insurance funds by--
                    (A) the affiliation of insured depository 
                institutions with securities affiliates and other 
                institutions described in subsection (s)(1) of section 
                18 of the Federal Deposit Insurance Act (as added by 
                subsection (a) of this section); or
                    (B) any activity described in section 10(a) (as 
                added by section 103(a) of this Act) of the Financial 
                Services Holding Company Act of 1997 (as so 
                redesignated by section 128(a) of this Act) in which 
                insured depository institutions may engage in 
                accordance with any provision of Federal or State law.
            (2) Report to congress and gao.--
                    (A) In general.--Before the end of the 6-month 
                period described in paragraph (1), the Federal Deposit 
                Insurance Corporation shall submit a report to the 
                Congress on the findings and conclusions of the 
                Corporation with respect to the study conducted under 
                such paragraph, together with such conclusions for 
                administrative or legislative action as the Corporation 
                may determine to be appropriate.
                    (B) Details of specific risks.--If the Federal 
                Deposit Insurance Corporation concludes that certain 
                kinds of activities not specifically authorized by 
                statute for insured depository institutions before the 
                date of the enactment of this Act, or the affiliation 
                of insured depository institutions with securities 
                affiliates engaged in certain kinds of securities 
                activities, pose a greater risk to the deposit 
                insurance funds than activities specifically authorized 
                by statute for national banks before January 1, 1995, 
                the report submitted under subparagraph (A) shall 
                contain a detailed explanation of the basis for such 
                conclusion.
                    (C) Transmittal to gao.--The Federal Deposit 
                Insurance Corporation shall transmit a copy of the 
                report referred to in paragraph (1) to the Comptroller 
                General.
            (3) Action by fdic.--If the Federal Deposit Insurance 
        Corporation concludes that any activity or affiliation with 
        respect to insured depository institutions poses a greater risk 
        to any deposit insurance fund than the risk posed by activities 
        specifically authorized by statute for national banks before 
        January 1, 1995, the Federal Deposit Insurance Corporation 
        shall treat such conclusion as a factor to be considered in 
        setting semiannual assessments under section 7(b)(2)(A) of the 
        Federal Deposit Insurance Act.
            (4) Evaluation of report by gao.--The Comptroller General 
        shall--
                    (A) evaluate the report transmitted by the Federal 
                Deposit Insurance Corporation to the Comptroller 
                General under paragraph (2); and
                    (B) submit a report to the Congress on such 
                evaluation, including a discussion on the methodology 
                used by the Corporation to assess risks posed by 
nonbanking activities to the deposit insurance funds.

SEC. 108. AUTHORITY TO TERMINATE GRANDFATHER RIGHTS UNDER THE 
              INTERNATIONAL BANKING ACT OF 1978.

    Section 8(c) of the International Banking Act of 1978 (12 U.S.C. 
3106(c)) is amended by adding at the end the following new paragraph:
            ``(3) Parity in conduct of authorized securities 
        activities.--
                    ``(A) In general.--Notwithstanding the provisions 
                of paragraph (1) or any other provisions of law, any 
                authority conferred under this subsection on any 
                foreign bank or company with respect to securities 
                activities authorized for financial services holding 
                companies in the United States shall terminate 30 days 
                following approval by the Board of an application by 
                such foreign bank or company under section 10 of the 
                Financial Services Holding Company Act of 1997.
                    ``(B) Authority to impose conditions.--If a foreign 
                bank or company that engages directly or through an 
                affiliate in any securities activity pursuant to 
                paragraph (1) has not received approval by the Board 
                under section 10 of the Financial Services Holding 
                Company Act of 1997 to control a securities affiliate 
                by the end of the 3-year period beginning on the 
                effective date of such Act, the Board may impose such 
                limitations and restrictions, including the termination 
                of any activities conducted under paragraph (1) or a 
                requirement that such activities be conducted in 
                compliance with the safeguards of section 11 of such 
                Act, as the Board considers appropriate consistent with 
                the purposes of this Act and the Financial Services 
                Holding Company Act of 1997.''.

SEC. 109. EFFECT ON STATE LAWS PROHIBITING THE AFFILIATION OF BANK, 
              SECURITIES, AND INSURANCE COMPANIES.

    (a) In General.--Section 7 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1846) is amended by adding at the end the following new 
subsections:
    ``(c) Affiliations and Activities.--No State may prohibit or 
limit--
            ``(1) the affiliation of a bank or financial services 
        holding company with a securities affiliate solely because the 
        securities affiliate is engaged in activities described in 
        subparagraph (A) or (B) of section 10(a)(1); or
            ``(2) the insurance or other activities of a subsidiary of 
        a financial services holding company solely because the 
        financial services holding company is no longer exempt under 
        this Act pursuant to section 4(d).
    ``(d) Consistent with section 4(c)(8)(H), any State law is hereby 
preempted to the extent it--
            ``(1) prevents, impedes or burdens any insurer, or any 
        affiliate of an insurer (whether such affiliate is organized as 
        a stock company, mutual holding company or otherwise), from 
        becoming a financial services holding company or acquiring 
        control of an insured depository institution;
            ``(2) limits the amount of an insurer's assets that may be 
        invested in the voting securities of an insured depository 
        institution (or in the parent of such an institution) (provided 
        that the laws of an insurer's State of domicile may limit such 
        amount to an amount that is not less than 5 percent of the 
        insurer's admitted assets); or
            ``(3) prevents, impedes or burdens, or authorizes the 
        insurance regulatory or other authorities of a State other than 
        the State in which an insurer is domiciled to prevent, impede, 
burden or review a plan of reorganization by which the insurer proposes 
to reorganize from mutual form to become a stock insurer whether as a 
direct or indirect subsidiary of a mutual holding company or 
otherwise.''.
    (b) Bank Activities.--No provision of this Act, and no amendment by 
this Act to any other provision of law (other than section 10 or 11 of 
the Financial Services Holding Company Act of 1997 (as added by 
sections 103 and 104 of this Act), section 18(s) of the Federal Deposit 
Insurance Act (as added by section 107 of this Act), or any amendments 
made by title II of this Act), may be construed as affecting the 
authority of any bank to engage in any activity authorized for such 
bank under the law of such bank's home State (as defined in section 
2(o)(4) of the Financial Services Holding Company Act of 1997).

SEC. 110. NATIONAL BANK SPECIAL OPERATING SUBSIDIARIES.

  (a) In General.--The Revised Statutes are amended by adding, after 
section 5136C, the following new section:
``Sec. 5136D.--Special operating subsidiaries
    ``(a) Special Operating Subsidiaries Authorized.--A national bank 
may, acquire or establish a special operating subsidiary as a 
subsidiary of that bank.
    ``(b) Special Operating Subsidiary Defined.--For purposes of this 
section, a `special operating subsidiary' means a subsidiary of a 
national bank that operates in compliance with all of the requirements 
of this section.
    ``(c) Permissible Activities.--A special operating subsidiary of a 
national bank may, with the approval of the Comptroller of the 
Currency, after notice and opportunity for comment, engage in 
activities that are part of or incidental to the business of banking, 
or permissible for national banks under other statutory authority, 
including activities that the national bank is not permitted to conduct 
directly, or conduct in that manner. Such permissible activities 
include the authority to:
            ``(1) Underwrite, deal in, broker, place, or distribute 
        securities of any type, provide investment advice regarding 
        securities of any type, and engage in other securities 
        activities;
            ``(2) Sponsor, organize, control, manage, and act as 
        investment adviser to an investment company.
    ``(d) Insurance Underwriting and Direct Investment.--This section 
shall not be construed as authorizing a special operating subsidiary to 
underwrite non-credit related insurance or directly engage in real 
estate investment or development, except as authorized for a national 
bank itself.
    ``(e) Standards for Approval.--The Comptroller of the Currency may 
not approve a proposal by a national bank to establish or acquire a 
special operating subsidiary to engage in activities described in 
subsection (c) unless the national bank--
            ``(1) is well capitalized after taking account of the 
        deduction provided in subsection (f)(2)(A);
            ``(2) has an `outstanding' or `satisfactory' rating for its 
        record of performance under the Community Reinvestment Act; and
            ``(3) is well managed, as defined in section 2 of the 
        Financial Services Holding Company Act.
    ``(f) Firewalls.--The Comptroller's approval of a special operating 
subsidiary under this section is subject to the following requirements:
            ``(1) Corporate requirements.--
                    ``(A) The special operating subsidiary shall be 
                physically separate and distinct in its operations from 
                the parent bank, including ensuring that the employees 
                of the subsidiary are compensated by the subsidiary 
                (except this requirement shall not be construed to 
                prohibit the parent bank and the special operating 
                subsidiary from sharing the same facility, provided 
                that any area in which the subsidiary conducts business 
                with the public is distinguishable, from the area in 
                which customers of the bank conduct business with the 
                bank);
                    ``(B) The subsidiary shall be held out as a 
                separate and distinct entity from the bank in its 
                written material and direct contact with outside 
                parties and all written marketing material shall 
                clearly state that the subsidiary is a separate entity 
                from the bank and the obligations of the subsidiary are 
                not obligations of the bank;
                  ``(C) The subsidiary's name shall not be the same 
                name as its parent bank, and a subsidiary that has a 
                name similar to its parent bank shall take appropriate 
                steps to minimize the risk of customer confusion, 
                including with respect to the separate character of the 
                two entities and the extent to which their respective 
                obligations are insured or not insured by the Federal 
                Deposit Insurance Corporation;
                    ``(D) The subsidiary shall be adequately 
                capitalized according to relevant industry measures and 
                shall maintain capital adequate to support its 
                activities and to cover reasonably expected expenses 
                and losses;
                    ``(E) The subsidiary shall maintain separate 
                accounting and corporate records;
                    ``(F) The subsidiary shall conduct its operations 
                pursuant to independent policies and procedures that 
                are also intended to inform customers that the 
                subsidiary is an organization separate from the bank;
                    ``(G) Contracts between the subsidiary and the bank 
                for any services shall be on terms and conditions 
                substantially comparable to those available to or from 
                independent entities;
                    ``(H) The subsidiary shall observe appropriate 
                separate corporate formalities, such as separate board 
                of directors' meetings;
                    ``(I) The subsidiary shall maintain a board of 
                directors at least one-third of whom shall not be 
                directors of the bank and shall have relevant expertise 
                capable of overseeing the subsidiary's activities; and
                    ``(J) The subsidiary and the parent bank shall have 
                internal controls appropriate to manage the financial 
                operational risks associated with the subsidiary.
            ``(2) Supervisory requirements.--In any case in which the 
        special operating subsidiary is engaging in activities as 
        principal that are not permissible for the parent bank to 
        engage in directly:
                    ``(A) The bank's capital and total assets shall 
                each be reduced by an amount equal to the bank's equity 
                investment in the subsidiary (for purposes of risk-
                based capital this deduction shall be made equally from 
                tier 1 and tier 2 capital), and the subsidiary's assets 
                and liabilities shall not be consolidated with those of 
                the bank (except that the Comptroller may require the 
                bank to calculate its capital on a consolidated basis 
                for purposes of applying prompt corrective action 
                authorized under section 38 of the Federal Deposit 
                Insurance Act);
                    ``(B) The Comptroller must determine that the bank 
                is an eligible bank under the Comptroller's 
                regulations, both prior to establishing or acquiring a 
                special operating subsidiary and thereafter, taking 
                into account the capital deduction required under 
                subparagraph (A);
                    ``(C) If the bank ceases to be well capitalized for 
                two consecutive quarters, it shall submit to the 
                Comptroller, within the period specified by the 
                Comptroller, an acceptable plan to become well 
                capitalized; and
                    ``(D) A special operating subsidiary engaged in 
                securities activities described in section 10 of the 
                Financial Services Holding Company Act shall be a 
                securities affiliate for purposes of section 11 of the 
                Financial Services Holding Company Act, and any special 
                operating subsidiary and any insured depository 
                institution affiliated with a special operating 
                subsidiary shall comply with the provisions of section 
                11 of that Act.
            ``(3) Authority to modify and impose additional safeguards; 
        interpretive authority.--
                    ``(A) In general.--The Comptroller may, by 
                regulation or order--
                            ``(i) adopt additional limitations, 
                        restrictions or conditions on relationships or 
                        transactions among national banks, their 
                        special operating subsidiaries, and their 
                        customers; and
                            ``(ii) make any modifications to any 
                        limitations, restriction, or condition imposed 
                        under paragraph (1) on relationships or 
                        transactions among national banks, their 
                        special operating subsidiaries and the 
                        customers of those banks or subsidiaries, 
                        including modifications in addition to those 
                        expressly provided for in paragraph (1).
                    ``(B) Standards.--The Comptroller may not exercise 
                authority under subparagraph (A) unless the Comptroller 
                finds that the action is consistent with the purposes 
                of the National Bank Act, including--
                            ``(i) the avoidance of any significant risk 
                        to the safety and soundness of national banks 
                        or the Federal deposit insurance funds;
                            ``(ii) the enhancement of the financial 
                        stability of national banks;
                            ``(iii) the prevention of the subsidization 
                        of special operating subsidiaries by national 
                        banks;
                            ``(iv) the avoidance of conflicts of 
                        interest or other abuses; and
                            ``(v) the application of the principle of 
                        national treatment and equality of competitive 
                        opportunity between special operating 
                        subsidiaries owned or controlled by a national 
                        bank and special operating subsidiaries owned 
                        or controlled by foreign banks operating in the 
                        United States.
                    ``(C) Biennial review.--Beginning two years after 
                the date of enactment of this section, the Comptroller 
                shall, on a biennial basis--
                            ``(i) review all restrictions established 
                        pursuant to subparagraph (A) to determine 
                        whether these restrictions are still required 
                        to carry out the purposes of this section; and
                            ``(ii) modify or eliminate any such 
                        restriction that the Comptroller determines is 
                        no longer required to carry out the purposes of 
                        this section.
    ``(g) Neither a national bank nor a special operating subsidiary of 
a national bank may engage in activities described in section 10(j) of 
the Financial Services Holding Company Act.''.
    (b) Technical and Conforming Amendments.--
            (1) Section 23A(b) of the Federal Reserve Act (12 U.S.C. 
        371c(b)) is amended by redesignating paragraphs (9) and (10) as 
        paragraphs (10) and (11), respectively, and inserting the 
        following new paragraph:
            ``(9) notwithstanding paragraph (2) or section 23B(d)(1) 
        (12 U.S.C. 371c-1(d)(1)), the term `affiliate' shall include a 
        special operating subsidiary (as defined in section 5136D of 
        the Revised Statutes or referenced in undesignated paragraph 20 
        of section 9 of the Federal Reserve Act or section 24(d)(1)(C) 
        of the Federal Deposit Insurance Act) of a bank;'';
            (2) Section 106(a) of the 1970 Amendments to the Bank 
        Holding Company Act is amended by adding at the end the 
        following new sentence: ``A special operating subsidiary (as 
        defined in section 5136D of the Revised Statutes or referenced 
        in undesignated paragraph 20 of section 9 of the Federal 
        Reserve Act or section 24(d)(1)(C) of the Federal Deposit 
        Insurance Act) shall be deemed a subsidiary of a bank holding 
        company, and not a subsidiary of a bank, for purposes of this 
        Act.''; and
            (3) Undesignated paragraph 20 of section 9 of the Federal 
        Reserve Act is amended by adding at the end of the following: 
        ``To the extent permitted under State law, a State member bank 
        may acquire, retain or establish a special operating subsidiary 
        as defined in section 5136D of the Revised Statutes, except 
        that all references in that section to the Comptroller of the 
        Currency, the Comptroller, or rules or orders of the 
        Comptroller shall be deemed to be references to the Board or 
        rules or orders of the Board.''.
            (4) Section 24(d)(1) of the Federal Deposit Insurance Act 
        (12 U.S.C. 1831a(d)(1)) is amended as follows:
                    (A) by deleting ``and'' at the end of subparagraph 
                (A); and
                    (B) by deleting the period at the end of the 
                subparagraph (B) and by adding the following: ``; and
                    ``(C) if the subsidiary is engaged in securities 
                activities described in section 10 of the Financial 
                Services Holding Company Act--
                            ``(i) the subsidiary meets the requirements 
                        applicable to a special operating subsidiary in 
                        section 5136D of the Revised Statutes except 
                        that all references to the Comptroller of the 
                        Currency, the Comptroller, or rules or orders 
                        of the Comptroller shall be deemed to be 
                        references to the Corporation or rules or 
                        orders of the Corporation, and
                            ``(ii) any insured depository institution 
                        affiliated with such subsidiary and the 
                        subsidiary comply with section 11 of the 
                        Financial Services Holding Company Act as if 
                        the subsidiary were a securities affiliate for 
                        purposes of that Act.''.

SEC. 111. INTERAGENCY AGREEMENT RELATING TO RETAIL SALES OF CERTAIN 
              NONDEPOSIT INVESTMENT PRODUCTS.

    Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is 
amended by inserting after subsection (u) (as added by section 107 of 
this Act) the following new subsection:
    ``(v) Joint Standards Relating to Retail Sales of Certain 
Nondeposit Investment Products.--
            ``(1) Securities.--The appropriate Federal banking agencies 
        shall jointly prescribe, after consulting with and considering 
        the views of the Securities and Exchange Commission, standards 
        applicable to any depository institution which--
                    ``(A) is not registered as a broker under the 
                Securities Exchange Act of 1934; and
                    ``(B) effects transactions in securities, including 
                securities issued by an investment company, or 
                annuities.
            ``(2) Other nondeposit investment products.--The 
        appropriate Federal banking agencies shall jointly prescribe 
        standards applicable to any depository institution which 
        effects transactions in any nondeposit investment product not 
        covered under paragraph (1).
            ``(3) Scope of standards.--The standards required under 
        paragraph (1) with respect to securities and annuities referred 
        to in such paragraph and under paragraph (2) with respect to 
        other nondeposit investment products shall, at a minimum, 
        establish requirements with respect to--
                    ``(A) sales practices;
                    ``(B) disclosures and advertising in connection 
                with transactions in such securities, annuities, and 
                other nondeposit investment products, including--
                            ``(i) the content, form, and timing of any 
                        such disclosure; and
                            ``(ii) disclaimers concerning the 
                        noninsured status of the security, annuity, or 
                        other nondeposit investment product;
                    ``(C) the compensation of sales personnel with 
                respect to referrals or transactions;
                    ``(D) the training of and qualifications for 
                personnel involved in such transactions, including 
                training in making an accurate judgment about the 
                suitability of a particular investment product for a 
                prospective customer; and
                    ``(E) the setting in which and the circumstances 
                under which transactions may be effected, and referrals 
                made, by sales personnel with respect to such 
                securities, annuities, other nondeposit investment 
                products.
            ``(4) Comparability requirement.--The standards required 
        under paragraph (1) shall be comparable to the standards 
        applicable to brokers and dealers registered under the 
        Securities Exchange Act of 1934 unless the appropriate Federal 
        banking agencies jointly determine that implementation of 
        comparable standards is not necessary or appropriate for the 
        maintenance of fair and orderly markets or the protection of 
        investors or is not in the public interest.''.

SEC. 112. EFFECTIVE DATE.

    The amendments made by this subtitle shall take effect at the end 
of the 90-day period beginning on the date of the enactment of this 
Act.

             Subtitle B--Investment Bank Holding Companies

SEC. 116. INVESTMENT BANK HOLDING COMPANIES.

    (a) Definitions.--
            (1) In general.--Section 2 of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1842) is amended by adding at the end the 
        following new subsections:
    ``(s) Wholesale Financial Institution.--The term `wholesale 
financial institution' means a wholesale financial institution as 
defined in section 9B of the Federal Reserve Act.
    ``(t) Investment Bank Holding Company.--The term `investment bank 
holding company' means any financial services holding company that--
            ``(1) controls a company engaged in underwriting corporate 
        equity securities pursuant to section 10;
            ``(2) controls a wholesale financial institution; and
            ``(3) if the company is a foreign bank that operates a 
        branch, agency or commercial lending company in the United 
        States, or is a company that controls such foreign bank, is 
        treated as an investment bank holding company because such bank 
        or company meets the criteria in section 12(b) and has received 
        the determination required by such section.''.
            (2) Definition of bank includes wholesale financial 
        institution.--Section 2(c)(1) of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1841(c)(1)) is amended by adding at the end 
        the following new subparagraph:
                    ``(C) A wholesale financial institution.''.
    (b) Investment Bank Holding Companies.--The Bank Holding Company 
Act of 1956 (12 U.S.C. 1841 et seq.) is amended by inserting after 
section 11 (as added by section 104 of this Act) the following new 
section:

``SEC. 12. INVESTMENT BANK HOLDING COMPANIES.

    ``(a) Permissible Affiliations for Investment Bank Holding 
Companies.--
            ``(1) Financial activities.--
                    ``(A) Activities authorized.--An investment bank 
                holding company may directly or indirectly own or 
                control shares of any company engaged in any activity 
                the Board has determined to be financial in nature or 
                incidental to a financial activity or any activity in 
                compliance with subparagraph (B) or (C).
                    ``(B) Incidental activities.--
                            ``(i) In general.--Notwithstanding 
                        subparagraph (A), the aggregate investment by 
                        an investment bank holding company in shares of 
                        companies that engage in nonfinancial 
                        activities shall not at any time exceed 7.5 
                        percent (or such greater percentage as the 
                        Board may determine to be appropriate) of the 
                        consolidated total risk-weighted assets of the 
                        investment bank holding company (excluding 
                        assets of companies held pursuant to this 
                        subparagraph), except that the amount invested 
                        by the investment bank holding company in any 
                        one company (including all affiliates of such 
                        company other than preexisting affiliates of 
                        such investment bank holding company) may not 
                        exceed the amount which is equal to 25 percent 
                        of the total capital and surplus of such 
                        investment bank holding company.
                            ``(ii) Applicability to successor in 
                        interest.--Any successor to any investment bank 
                        holding company referred to in clause (i) may 
                        retain any investments made pursuant to this 
                        subparagraph--
                                    ``(I) during the 5-year period 
                                beginning on the date the succession is 
                                consummated; and
                                    ``(II) with the consent of the 
                                Board, for an additional period not to 
                                exceed 5 years after the 5-year period 
                                referred to in subclause (I),
                        unless the Board determines that the retention 
                        of such investment would jeopardize the safety 
                        and soundness of any insured depository 
                        institution any insured depository institution 
                        affiliate of such successor.
                            ``(iii) Cross marketing restrictions.--A 
                        wholesale financial institution shall not--
                                    ``(I) offer or market, directly or 
                                through any arrangement, any product or 
                                service of an affiliate whose shares 
                                are owned or controlled by the 
                                investment bank holding company 
                                pursuant to this subparagraph or 
                                subparagraph (C); or
                                    ``(II) permit any of such wholesale 
                                financial institution's or subsidiary's 
                                products or services to be offered or 
                                marketed, directly or through any 
                                arrangement, by or through any such 
                                affiliate.
                            ``(iv) Use of common name.--An investment 
                        bank holding company shall not permit a 
                        wholesale financial institution to adopt a name 
                        which is the same as or similar to, or a 
                        variation of, the name or title of an affiliate 
                        engaged in activities pursuant to subparagraph 
                        (B).
                    ``(C) Commodities.--
                            ``(i) In general.--An investment bank 
                        holding company predominately engaged as of 
                        January 1, 1995, in securities activities in 
                        the United States (or any successor to any such 
                        company) may engage in, or directly or 
                        indirectly own or control shares of a company 
                        engaged in, activities related to the trading, 
                        sale, or investment in commodities and 
                        underlying physical properties that were not 
                        permissible for bank holding companies to 
                        conduct in the United States as of January 1, 
                        1995, provided such investment bank holding 
                        company, or any subsidiary of such holding 
                        company, was engaged directly, indirectly, or 
                        through any such company in any of such 
                        activities as of January 1, 1995, in the United 
                        States.
                            ``(ii) Limitation.--Notwithstanding 
                        subparagraphs (A) and (B), the aggregate 
                        investment by an investment bank holding 
                        company in activities under this subparagraph 
                        (other than those otherwise permitted under 
                        this section) shall not at any time exceed 5 
                        percent of the total consolidated assets of the 
                        investment bank holding company.
                            ``(iii) Successor defined.--For purposes of 
                        this subparagraph and subparagraph (B), the 
                        term `successor' means, with respect to any 
                        investment bank holding company described in 
                        clause (i), any company that merges with, or 
                        acquires control of, such investment bank 
                        holding company.
                    ``(D) Qualified investor in an investment bank 
                holding company.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of Federal or State law, a 
                        qualified investor--
                                    ``(I) shall not be, or be deemed to 
                                be, an investment bank holding company, 
                                a financial services holding company, a 
                                bank holding company, or any similar 
                                organization; and
                                    ``(II) shall not be deemed to 
                                control or be affiliated with any such 
                                company or organization or any 
                                subsidiary of any such company or 
                                organization (other than for purposes 
                                of section 23A and 23B of the Federal 
                                Reserve Act),
                        by virtue of the investor's ownership or 
                        control of shares of an investment bank holding 
                        company.
                            ``(ii) Qualified investor defined.--For 
                        purposes of this subparagraph, the term 
                        `qualified investor' means any United States 
                        company (including a parent company and all 
                        subsidiaries of which the parent company holds 
                        at least 80 percent of the total voting equity 
                        securities) which since February 27, 1995, has 
                        directly or indirectly owned or controlled 
                        shares of capital stock representing at least 
                        10 percent, and not more than 45 percent, of 
                        the outstanding voting shares or voting power 
                        of a company that--
                                    ``(I) becomes an investment bank 
                                holding company or a subsidiary of an 
                                investment bank holding company; and
                                    ``(II) before such company became 
                                an investment bank holding company or a 
                                subsidiary of an investment bank 
                                holding company, had more than 50 
                                percent of the company's assets 
                                employed directly or indirectly in 
                                securities activities.
                            ``(iii) Cross-marketing and common name.--A 
                        wholesale financial institution shall not--
                                    ``(I) offer or market products or 
                                services of a qualified investor in the 
                                investment bank holding company of 
                                which the wholesale financial 
                                institution is an affiliate;
                                    ``(II) permit the institution's 
                                products or services to be offered or 
                                marketed in connection with products or 
                                services of such qualified investor; or
                                    ``(III) adopt a name which is the 
                                same as or similar to, or a variation 
                                of, the name or title of such qualified 
                                investor.
                            ``(iv) Examination and reporting.--
                        Notwithstanding any other provision of law, the 
                        Board may conduct examinations of, or require 
                        reports from, a qualified investor only to the 
                        extent that the Board reasonably determines 
                        that such examinations or reports are 
                        necessary--
                                    ``(I) to ensure compliance with 
                                this subparagraph; or
                                    ``(II) to the extent that the 
                                qualified investor is an affiliate of a 
                                wholesale financial institution for 
                                purposes of section 23A of the Federal 
                                Reserve Act, to ensure compliance with 
                                restrictions imposed by law or 
                                regulation on transactions between the 
                                qualified investor and such wholesale 
                                financial institution.
                    ``(E) Consolidated total risk-weighted assets.--For 
                purposes of this paragraph, the following definitions 
                shall apply:
                            ``(i) In general.--The term `consolidated 
                        total risk-weighted assets' shall have the 
                        meaning given to such term in regulations 
                        prescribed by the Board as in effect on the 
                        date of the enactment of the Financial Services 
                        Competitiveness Act of 1997.
                            ``(ii) Application to foreign banks.--In 
                        the case of a foreign bank or a company that 
                        owns or controls a foreign bank, the term 
                        `consolidated total risk-weighted assets' means 
                        total risk-weighted assets held by the foreign 
                        bank or company in the United States in any 
                        Untied States branch, agency, or commercial 
                        lending company subsidiary, any depository 
                        institution controlled by the foreign bank or 
                        company, any subsidiary held under the 
                        authority of this section, section 3, 4, or 10 
                        (other than paragraph (9) or (13) or section 
                        4(c)), or section 25 or 25A of the Federal 
                        Reserve Act.
            ``(2) Securities activities.--
                    ``(A) Institutions must be well capitalized.--The 
                Board shall disapprove a notice under section 10 by an 
                investment bank holding company (or a company seeking 
                to become an investment bank holding company) to 
                acquire a securities affiliate if any wholesale 
                financial institution controlled by the investment bank 
                holding company is not well capitalized or would not be 
                well capitalized following the transaction.
                    ``(B) Transactions with affiliates.--
                            ``(i) In general.--A wholesale financial 
                        institution controlled by an investment bank 
                        holding company shall be treated as a bank for 
                        purposes of the provisions of sections 23A and 
                        23B of the Federal Reserve Act.
                            ``(ii) Other restrictions regarding 
                        securities affiliates determined by the 
                        board.--A securities affiliate of an investment 
                        bank holding company, and a wholesale financial 
                        institution controlled by an investment bank 
                        holding company, shall not be subject to the 
                        provisions of section 11, except that the 
                        securities affiliate and wholesale financial 
                        institution shall be subject to subsections (j) 
                        and (k) of such section in the same manner and 
                        to the same extent such paragraphs would apply 
                        if the wholesale financial institution were an 
                        insured depository institution.
            ``(3) Limitation on affiliation with insured depository 
        institutions.--An investment bank holding company may not, 
        directly or indirectly, own or control--
                    ``(A) any bank, other than a wholesale financial 
                institution;
                    ``(B) any savings association;
                    ``(C) any institution described in section 2(c)(2) 
                (other than subparagraphs (C) and (G) of such section); 
                or
                    ``(D) any institution that accepts--
                            ``(i) initial deposits of $100,000 or less, 
                        other than on an incidental or occasional 
                        basis, or
                            ``(ii) deposits that are insured under the 
                        Federal Deposit Insurance Act.
            ``(4) No deposit insurance fund liability.--No Federal 
        deposit insurance funds may be used in connection with the 
        failure of, or any proposed assistance to, a wholesale 
        financial institution or an investment bank holding company.
            ``(5) Capital of ibhc.--
                    ``(A) In general.--The Board shall not impose any 
                capital requirement on investment bank holding 
                companies or subsidiaries of such companies (other than 
                depository institutions) unless any such requirement is 
                based upon appropriate risk-weighing considerations.
                    ``(B) Applicable accounting principles.--In 
                applying any capital standard to investment bank 
                holding companies, or subsidiaries of such companies, 
                the Board shall utilize uniform accounting principles 
                consistent with generally accepted accounting 
                principles in accordance with section 37(a)(2) of the 
                Federal Deposit Insurance Act.
    ``(b) Qualification of Foreign Bank as Investment Bank Holding 
Company.--
            ``(1) In general.--Any foreign bank that--
                    ``(A) operates a branch, agency or commercial 
                lending company in the United States (and any company 
                that owns or controls such foreign bank), including a 
                foreign bank that does not own or control a wholesale 
                financial institution; and
                    ``(B) controls a security affiliate that engages in 
                underwriting corporate equity securities,
        may request a determination from the Board that such bank or 
        company be treated as an investment bank holding company.
            ``(2) Conditions for treatment as an investment bank 
        holding company.--A foreign bank and a company that owns or 
        controls a foreign bank may not be treated as an investment 
        bank holding company unless the bank and company meet and 
        continue to meet the following criteria:
                    ``(A) No insured deposits.--No deposits held 
                directly by a foreign bank or through an affiliate are 
                insured under the Federal Deposit Insurance Act.
                    ``(B) Capital standards.--The foreign bank meets 
                risk-based capital standards comparable to the capital 
                standards required for a wholesale financial 
                institution, giving due regard to the principle of 
                national treatment and equality of competitive 
                opportunity.
                    ``(C) Transactions with affiliates.--Transactions 
                between a branch, agency, or commercial lending company 
                subsidiary of the foreign bank in the United States, 
                and any securities affiliate or company in which the 
                foreign bank (or any company that owns or controls such 
                foreign bank) has invested pursuant to subsection 
                (a)(1)(B), comply with the provisions of sections 23A 
                and 23B of the Federal Reserve Act in the same manner 
                and to the same extent as such transactions would be 
                required to comply with such sections if the bank were 
                a member bank.
            ``(3) Treatment as a wholesale financial institution.--Any 
        foreign bank which is, or is affiliated with a company which is 
treated as an investment bank holding company under this subsection 
shall be treated as a wholesale financial institution for purposes of 
clauses (iii) and (iv) of subsection (a)(1)(B), subsection 
(a)(2)(B)(ii), and section 5(g), except that the Board may adopt such 
modifications, conditions, or exemptions as the Board deems 
appropriate, giving due regard to the principle of national treatment 
and equality of competitive opportunity.
            ``(4) Nonapplicability of other exemption.--Any foreign 
        bank or company which is treated as an investment bank holding 
        company under this subsection shall not be eligible for any 
        exemption described in section 2(h).
    ``(c) Eligibility of Foreign Banks for Certain Treatment.--
            ``(1) Reciprocal national treatment.--
                    ``(A) In general.--A foreign bank that operates a 
                branch, agency or commercial lending company in the 
                United States, and any company that owns or controls 
                such a foreign bank, shall be eligible for the 
                treatment afforded under subsection (b) or section 
                11(l) only if the home country of such foreign bank or 
                company accords to United States banks the same 
                competitive opportunities in banking as such country 
                accords to domestic banks of such country.
                    ``(B) Coordination with nafta.--Subparagraph (A) 
                shall not apply in derogation of any obligation under 
                the North American Free Trade Agreement.
                    ``(C) Home country defined.--For purposes of 
                subparagraph (A), the term `home country' means, with 
                respect to any foreign bank or company referred to in 
                subparagraph (A), the country under the laws of which 
                the foreign bank or company is organized.
            ``(2) Prevention of evasion.--No foreign bank or bank owned 
        by a former United States national may operate a branch or 
        agency in the United States if the predominance of the assets 
        of such bank were acquired in connection with a merger with, or 
        purchase or assumption of all or substantially all the assets 
        of, a wholesale financial institution.
    ``(d) Rule for Financial Services Holding Companies.--For purposes 
of section 5(g)(2)(A)(ii), any foreign bank (as defined in section 1(b) 
of the International Banking Act of 1978) which is directly or 
indirectly owned, controlled, or operated by a company that--
            ``(1) as of January 1, 1995, was registered as a banking 
        holding company; or
            ``(2) is a successor to any such bank holding company,
shall be treated as a wholesale financial institution.''.
    (c) Conforming Amendments.--
            (1) Exception to deposit insurance requirement.--Section 
        3(e) of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1842(e)) is amended by adding at the end the following: ``This 
        subsection shall not apply to a wholesale financial 
        institution.''
            (2) Section 3(q)(2)(A) of the Federal Deposit Insurance Act 
        (12 U.S.C. 1813(q)(2)(A)) is amended to read as follows:
                    ``(A) any State member insured bank (except a 
                District bank) and wholesale financial institution as 
                authorized pursuant to section 9B of the Federal 
                Reserve Act;''.

SEC. 117. WHOLESALE FINANCIAL INSTITUTIONS.

    (a) In General.--The Federal Reserve Act (12 U.S.C. 221 et seq.) is 
amended by inserting after section 9A the following new section:

``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

    ``(a) Application for Membership as Wholesale Financial 
Institution.--
            ``(1) Application required.--
                    ``(A) In general.--Any bank may apply to the Board 
                of Governors of the Federal Reserve System to become a 
                wholesale financial institution and as a wholesale 
                financial institution, to subscribe to the stock of the 
                Federal reserve bank organized within the district 
                where the applying bank is located.
                    ``(B) Treatment as member bank.--Any application 
                under subparagraph (A) shall be treated as an 
                application under, and shall be subject to the 
                provisions of, section 9.
            ``(2) Insurance termination.--No bank that is insured under 
        the Federal Deposit Insurance Act may become a wholesale 
        financial institution unless it has met all requirements under 
        that Act for voluntary termination of deposit insurance.
            ``(3) Application fee.--No bank or organization may become 
        a wholesale financial institution unless the Board has 
        received, from the bank or organization, full payment of a fee 
        which the Board shall impose in the manner provided under 
        section 5(h) of the Financial Services Holding Company Act of 
        1997.
    ``(b) General Requirements Applicable to Wholesale Financial 
Institutions.--
            ``(1) Federal reserve act.--Except as otherwise provided in 
        this section, wholesale financial institutions shall be member 
        banks and shall be subject to the provisions of this Act that 
        apply to member banks to the same extent and in the same manner 
        as State member insured banks, except that a wholesale 
        financial institution may terminate membership under this Act 
        only with the prior written approval of the Board and on terms 
        and conditions that the Board determines are appropriate to 
        carry out the purposes of this Act.
            ``(2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal Deposit 
        Insurance Act except that--
                    ``(A) the relevant capital levels and capital 
                measures for each capital category shall be the levels 
                specified by the Board for wholesale financial 
                institutions; and
                    ``(B) all references to the appropriate Federal 
                banking agency or to the Corporation in that section 
                shall be deemed to be references to the Board.
            ``(3) Enforcement authority.--Subsections (j) and (k) of 
        section 7, subsections (b) through (n), (s), (u), and (v) of 
        section 8, and section 19 of the Federal Deposit Insurance Act 
        shall apply to a wholesale financial institution in the same 
        manner and to the same extent as such provisions apply to State 
        member insured banks and any reference in such sections to an 
        insured depository institution shall be deemed to include a 
        reference to a wholesale financial institution.
            ``(4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate Federal 
        banking agency for such bank and all such bank's affiliates, 
        for purposes of the International Lending Supervision Act.
            ``(5) Bank merger act.--A wholesale financial institution 
        shall be subject to provisions of sections 18(c) and 44 of the 
        Federal Deposit Insurance Act in the same manner and to the 
        same extent the wholesale financial institution would be 
        subject to such sections if the institution were a State member 
        insured bank.
            ``(6) Registration fee.--The Board shall assess an annual 
        registration fee in the manner provided in section 5(h) of the 
        Financial Services Holding Company Act of 1997 on each 
        wholesale financial institution.
    ``(c) Specific Requirements Applicable to Wholesale Financial 
Institutions.--
            ``(1) Limitations on deposits.--
                    ``(A) Minimum amount.--
                            ``(i) In general.--No wholesale financial 
                        institution may receive initial deposits of 
                        $100,000 or less, other than on an incidental 
                        and occasional basis.
                            ``(ii) Limitation on deposits of less than 
                        $100,000.--No bank may be treated as a 
                        wholesale financial institution if the total 
                        amount of the initial deposits of $100,000 or 
                        less at such bank constitute more than 5 
                        percent of the bank's total deposits.
                    ``(B) No deposit insurance.--No deposits held by a 
                wholesale financial institution shall be insured 
                deposits under the Federal Deposit Insurance Act.
                    ``(C) Advertising and disclosure.--The Board shall 
                prescribe regulations pertaining to advertising and 
                disclosure by wholesale financial institutions to 
                ensure that each depositor is notified that deposits at 
                the wholesale financial institution are not federally 
                insured or otherwise guaranteed by the United States 
                Government.
            ``(2) Special capital requirements applicable to wholesale 
        financial institutions.--
                    ``(A) Minimum capital levels.--
                            ``(i) In general.--The Board shall, by 
                        regulation, adopt capital requirements for 
                        wholesale financial institutions--
                                    ``(I) to account for the status of 
                                wholesale financial institutions as 
                                institutions that accept deposits that 
                                are not insured under the Federal 
                                Deposit Insurance Act; and
                                    ``(II) to provide for the safe and 
                                sound operation of the wholesale 
                                financial institution without undue 
                                risk to creditors or other persons, 
                                including Federal reserve banks, 
                                engaged in transactions with the bank.
                            ``(ii) Minimum tier 1 capital ratio.--The 
                        minimum ratio of tier 1 capital to total risk-
                        weighted assets of wholesale financial 
                        institutions shall be not less than the level 
                        required for a State member insured bank to be 
                        well capitalized unless the Board determines 
                        otherwise, consistent with safety and 
                        soundness.
            ``(3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member banks or applicable, under 
        this section, to wholesale financial institutions, the Board 
        may prescribe, by regulation or order, for wholesale financial 
        institutions--
                    ``(A) limitations on transactions with affiliates 
                to prevent--
                            ``(i) the transfer of risk to the deposit 
                        insurance funds; or
                            ``(ii) an affiliate from gaining access to, 
                        or the benefits of, credit from a Federal 
                        reserve bank, including overdrafts at a Federal 
                        reserve bank;
                    ``(B) special clearing balance requirements; and
                    ``(C) any additional requirements that the Board 
                determines to be appropriate or necessary to--
                            ``(i) promote the safety and soundness of 
                        the wholesale financial institution or any 
                        insured depository institution affiliate of the 
                        wholesale financial institution;
                            ``(ii) prevent the transfer of risk to the 
                        deposit insurance funds; or
                            ``(iii) protect creditors and other 
                        persons, including Federal reserve banks, 
                        engaged in transactions with the wholesale 
                        financial institution.
            ``(4) Exemptions for wholesale financial institutions.--The 
        Board may, by regulation or order, exempt any wholesale 
        financial institution from any provision applicable to a member 
        bank that is not a wholesale financial institution, if the 
        Board finds that such exemption is not inconsistent with--
                    ``(A) the promotion of the safety and soundness of 
                the wholesale financial institution or any insured 
                depository institution affiliate of the wholesale 
                financial institution;
                    ``(B) the protection of the deposit insurance 
                funds; and
                    ``(C) the protection of creditors and other 
                persons, including Federal reserve banks, engaged in 
                transactions with the wholesale financial institution.
            ``(5) Limitation on transactions between a wholesale 
        financial institution and an insured bank.--For purposes of 
        section 23A(d)(1) of the Federal Reserve Act, a wholesale 
        financial institution that is affiliated with an insured bank 
        shall not be a bank.
            ``(6) No effect on other provisions.--This section shall 
        not be construed as limiting the Board's authority over member 
        banks under any other provision of law, or to create any 
        obligation for any Federal reserve bank to make, increase, 
        renew, or extend any advance or discount under this Act to any 
        member bank or other depository institution.
    ``(d) Conservatorship Authority.--
            ``(1) In general.--The Board may appoint a conservator to 
        take possession and control of a wholesale financial 
        institution to the same extent and in the same manner as the 
        Comptroller of the Currency may appoint a conservator for a 
        national bank under section 203 of the Bank Conservation Act, 
        and the conservator shall exercise the same powers, functions, 
        and duties, subject to the same limitations, as are provided 
        under such Act for conservators of national banks.
            ``(2) Board authority.--The Board shall have the same 
        authority with respect to any conservator appointed under 
        paragraph (1) and the wholesale financial institution for which 
        such conservator has been appointed as the Comptroller of the 
        Currency has under the Bank Conservation Act with respect to a 
        conservator appointed under such Act and a national bank for 
        which the conservator has been appointed.
    ``(e) Exclusive Jurisdiction.--Subsections (c) and (e) of section 
43 of the Federal Deposit Insurance Act shall not apply to any 
wholesale financial institution.''.
    (b) Voluntary Termination of Insured Status by Certain 
Institutions.--
            (1) Section 8 designations.--Section 8(a) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
                    (A) by striking paragraph (1); and
                    (B) by redesignating paragraphs (2) through (9) as 
                paragraphs (1) through (8), respectively.
            (2) Voluntary termination of insured status.--The Federal 
        Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
        inserting after section 8 the following new section:
``Sec. 8A. Voluntary termination of status as insured depository 
              institution
    ``(a) In General.--Except as provided in subsection (b), an insured 
State bank or a national bank may voluntarily terminate such bank's 
status as an insured depository institution in accordance with 
regulations of the Corporation if--
            ``(1) the bank provides written notice of the bank's intent 
        to terminate such insured status--
                    ``(A) to the Corporation and the Board of Governors 
                of the Federal Reserve System not less than 6 months 
                before the effective date of such termination; and
                    ``(B) to all depositors at such bank, not less than 
                6 months before the effective date of the termination 
                of such status; and
            ``(2) either--
                    ``(A) the deposit insurance fund of which such bank 
                is a member equals or exceeds the fund's designated 
                reserve ratio as of the date the bank provides a 
                written notice under paragraph (1) and the Corporation 
                determines that the fund will equal or exceed the 
                applicable designated reserve ratio for the 2 
                semiannual assessment periods immediately following 
                such date; or
                    ``(B) the Corporation and the Board of Governors of 
                the Federal Reserve System approve the termination of 
                the bank's insured status and the bank pays an exit fee 
                in accordance with subsection (e).
    ``(b) Exception.--Subsection (a) shall not apply with respect to--
            ``(1) an insured savings association;
            ``(2) an insured branch that is required to be insured 
        under subsection (a) or (b) of section 6 of the International 
        Banking Act of 1978; or
            ``(3) any institution described in section 2(c)(2) of the 
        Bank Holding Company Act of 1956.
    ``(c) Eligibility for Insurance Terminated.--Any bank that 
voluntarily elects to terminate the bank's insured status under 
subsection (a) shall not be eligible for insurance on any deposits or 
any assistance authorized under this Act after the period specified in 
subsection (f)(1).
    ``(d) Institution Must Become Wholesale Financial Institution or 
Terminate Deposit-Taking Activities.--Any depository institution which 
voluntarily terminates such institution's status as an insured 
depository institution under this section may not, upon termination of 
insurance, accept any deposits unless the institution is a wholesale 
financial institution under section 9B of the Federal Reserve Act.
    ``(e) Exit Fees.--
            ``(1) In general.--Any bank that voluntarily terminates 
        such bank's status as an insured depository institution under 
        this section shall pay an exit fee in an amount that the 
        Corporation determines is sufficient to account for the 
        institution's pro rata share of the amount (if any) which would 
        be required to restore the relevant deposit insurance fund to 
        the fund's designated reserve ratio as of the date the bank 
        provides a written notice under subsection (a)(1).
          ``(2) Procedures.--The Corporation shall prescribe, by 
        regulation, procedures for assessing any exit fee under this 
        subsection.
    ``(f) Temporary Insurance of Deposits Insured as of Termination.--
            ``(1) Transition period.--The insured deposits of each 
        depositor in a State bank or a national bank on the effective 
        date of the voluntary termination of the bank's insured status, 
        less all subsequent withdrawals from any deposits of such 
        depositor, shall continue to be insured for a period of not 
        less than 6 months and not more than 2 years, as determined by 
        the Corporation. During such period, no additions to any such 
        deposits, and no new deposits in the depository institution 
        made after the effective date of such termination shall be 
        insured by the Corporation.
            ``(2) Temporary assessments; obligations and duties.--
        During the period specified in paragraph (1) with respect to 
        any bank, the bank shall continue to pay assessments under 
        section 7 as if the bank were an insured depository 
        institution. The bank shall, in all other respects, be subject 
        to the authority of the Corporation and the duties and 
        obligations of an insured depository institution under this Act 
        during such period, and in the event that the bank is closed 
        due to an inability to meet the demands of the bank's 
        depositors during such period, the Corporation shall have the 
        same powers and rights with respect to such bank as in the case 
        of an insured depository institution.
    ``(g) Advertisements.--
            ``(1) In general.--A bank that voluntarily terminates the 
        bank's insured status under this section shall not advertise or 
        hold itself out as having insured deposits, except that the 
        bank may advertise the temporary insurance of deposits under 
        subsection (f) if, in connection with any such advertisement, 
        the advertisement also states with equal prominence that 
        additions to deposits and new deposits made after the effective 
        date of the termination are not insured.
            ``(2) Certificates of deposit, obligations, and 
        securities.--Any certificate of deposit or other obligation or 
        security issued by a State bank or a national bank after the 
        effective date of the voluntary termination of the bank's 
        insured status under this section shall be accompanied by a 
        conspicuous, prominently displayed notice that such certificate 
        of deposit or other obligation or security is not insured under 
        this Act.
    ``(h) Notice Requirements.--
            ``(1) Notice to the corporation.--The notice required under 
        subsection (a)(1)(A) shall be in such form as the Corporation 
        may require.
            ``(2) Notice to depositors.--The notice required under 
        subsection (a)(1)(B) shall be--
                    ``(A) sent to each depositor's last address of 
                record with the bank; and
                    ``(B) in such manner and form as the Corporation 
                finds to be necessary and appropriate for the 
                protection of depositors.''.
            (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
        Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended after ``such 
        Act'' by inserting ``, or any wholesale financial institution 
        as defined in section 9B of this Act''.
    (c) Reports on Discounts and Advances to Wholesale Financial 
Institutions.--Section 10B of the Federal Reserve Act (12 U.S.C. 
347(b)) is amended by adding at the end the following new subsection:
    ``(c) Reports on Discounts and Advances to Wholesale Financial 
Institutions.--
            ``(1) In general.--The Board shall submit a report to the 
        Congress at the end of any year in which any wholesale 
        financial institution has obtained a discount, advance, or 
        other extension of credit from a Federal reserve bank.
            ``(2) Contents.--Any report submitted under paragraph (1) 
        shall explain the circumstances and need for any discount, 
        advance, or other extension of credit to a wholesale financial 
        institution during the period covered by the report, including 
        the type and amount of credit extended and the amount of credit 
        remaining outstanding as of the date of the report.''.

                    Subtitle C--Financial Activities

SEC. 121. FINANCIAL ACTIVITIES.

    Section 4(c)(8) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)(8)) is amended--
            (1) by striking ``shares of any company'' and all that 
        follows through ``for a bank holding company to provide'' and 
        inserting ``shares of any company the activities of which the 
        Board after due notice has determined (by order, regulation, or 
        advisory opinion) to be financial in nature or incidental to 
        such financial activities. In determining whether an activity 
        is financial in nature or incidental to financial activities, 
        the Board shall take into account changes or reasonably 
        expected changes in the marketplace in which financial services 
        holding companies compete as well as changes or reasonably 
        expected changes in the technology by which these services are 
        delivered. In addition, the Board shall take into account 
        activities considered financial activities or banking or 
        financial operations for purposes of the regulation of the 
        Board designated as `Regulation K' (12 CFR 
        211.23(f)(5)(iii)(B)) as in effect on the date of the enactment 
        of the Financial Services Competitiveness Act of 1997. Any 
        activity that the Board has determined, by order or regulation 
        that is in effect on such date to be so closely related to 
        banking or managing or controlling banks as to be a proper 
        incident thereto shall be deemed to be of a financial nature 
        for purposes of this paragraph without further action by the 
        Board (subject to the same terms and conditions contained in 
        such order or regulation, unless modified by the Board), but 
        for purposes of this subsection it shall not be closely related 
        to banking or managing or controlling banks or financial in 
        nature or incidental to a financial activity for a financial 
        services holding company to provide'';
            (2) in the third sentence, by inserting ``and between 
        activities commenced by affiliates of different classes of 
        banks'' before the period at the end; and
            (3) by striking the second sentence.

SEC. 122. RESERVED.

SEC. 123. STREAMLINED EXAMINATION AND REPORTING REQUIREMENTS FOR ALL 
              FINANCIAL SERVICES HOLDING COMPANIES.

    Section 5(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(c)) is amended to read as follows:
    ``(c) Reports and Examinations.--
            ``(1) Purposes.--
                    ``(A) In general.--The purpose of this subsection 
                is to authorize the Board, through reports and 
                examinations, to gather information from a financial 
                services holding company and the subsidiaries of any 
                such holding company regarding the structure, 
                activities, and financial condition of the financial 
                services holding company and such subsidiaries so that 
                the Board can monitor risks within the holding company 
                system that could adversely affect any depository 
                institution subsidiary of the holding company and may 
                monitor and enforce compliance with this Act.
                    ``(B) Purpose not to impose additional burdens on 
                holding companies.--It is the intended purpose of this 
                subsection that the Board shall--
                            ``(i) exercise the Board's authority to 
                        collect information under this section in a 
                        manner that is the least burdensome to 
                        financial services holding companies and the 
                        subsidiaries of such companies; and
                            ``(ii) rely, to the fullest extent 
                        possible, on reports prepared for and 
                        examinations conducted by or for other Federal 
                        and State supervisors.
                    ``(C) Purpose to require carefully tailored 
                examinations.--It is the intended purpose of this 
                subsection that the Board shall tailor the focus and 
                scope of any examination under this section to a 
                financial services holding company or to any subsidiary 
                of such company which, because of financial conditions, 
                activities operations of such subsidiary, the 
                transactions between such subsidiary and other 
                affiliates, or the size of any such subsidiary poses a 
                potential material risk to a depository institution 
                subsidiary of such holding company.
            ``(2) Reports.--
                    ``(A) In general.--The Board from time to time may 
                require any financial services holding company and any 
                subsidiary of such company to submit reports under oath 
                to keep the Board informed as to--
                            ``(i) the company's or the subsidiary's 
                        activities, financial condition, policies, 
                        systems for monitoring and controlling 
                        financial and operational risks, and 
                        transactions with depository institution 
                        subsidiaries of the holding company; and
                            ``(ii) the extent to which the company or 
                        subsidiary has complied with the provisions of 
                        this Act and regulations prescribed and orders 
                        issued under this Act.
                    ``(B) Use of existing reports.--
                            ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that a 
                        financial services holding company or any 
                        subsidiary of such company has been required to 
                        provide to other Federal and State supervisors 
                        or to appropriate self-regulatory 
                        organizations.
                            ``(ii) Availability.--A financial services 
                        holding company or a subsidiary of such company 
                        shall provide to the Board, at the request of 
                        the Board, a report referred to in clause (i).
            ``(3) Examinations.--
                    ``(A) Limited use of examination authority.--The 
                Board may make examinations of each financial services 
                holding company and each subsidiary of such company in 
                order to--
                            ``(i) inform the Board of the nature of the 
                        operations and financial condition of the 
                        financial services holding company and such 
                        subsidiaries;
                            ``(ii) inform the Board of the--
                                    ``(I) financial and operational 
                                risks within the financial services 
                                holding company system that may affect 
                                any depository institution owned by 
                                such holding company; and
                                    ``(II) the systems of the holding 
                                company and such subsidiaries for 
                                monitoring and controlling those risks; 
                                and
                            ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        depository institution controlled by a 
                        financial services holding company and any of 
                        the company's other subsidiaries.
            ``(B) Restricted focus of examinations.--The Board shall, 
        to the fullest extent possible, limit the focus and scope of 
        any examination of a financial services holding company to--
                            ``(i) the holding company; and
                            ``(ii) to any subsidiary (other than a 
                        depository institution subsidiary) of the 
                        holding company which, because of the size, 
                        condition, or activities of the subsidiary, the 
                        nature or size of transactions between such 
                        subsidiary and any depository institution 
                        affiliate, or the centralization of functions 
                        within the holding company system, could have a 
                        materially adverse effect on the safety and 
                        soundness of any depository institution 
                        affiliate of the subsidiary or of the holding 
                        company.
                    ``(C) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use the report 
                of examinations of depository institutions made by the 
                Comptroller of the Currency, the Federal Deposit 
                Insurance Corporation, the Office of Thrift Supervision 
                or the appropriate State depository institution 
                supervisory authority for the purposes of this section.
                    ``(D) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, use the reports 
                of examination made of--
                            ``(i) any registered broker or dealer by or 
                        on behalf of the Securities Exchange 
                        Commission,
                            ``(ii) any licensed insurance company by or 
                        on behalf of any state government insurance 
                        agency responsible for the supervision of the 
                        insurance company, and
                            ``(iii) any other subsidiary that the Board 
                        finds to be comprehensively supervised under 
                        relevant Federal or State law by a Federal or 
                        state agency or authority.
            ``(E) Confidentiality of reported information.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of law, the Board shall not be 
                        compelled to disclose any information required 
                        to be reported under this paragraph, or any 
                        information supplied to the Board by any 
                        domestic or foreign regulatory agency, that 
                        relates to the financial or operational 
                        condition of any financial services holding 
                        company or any subsidiary of such company.
                            ``(ii) Compliance with requests for 
                        information.--No provision of this subparagraph 
                        shall be construed as authorizing the Board to 
                        withhold information from Congress, or 
                        preventing the Board from complying with a 
                        request for information from any other Federal 
                        department or agency for purposes within the 
                        scope of such department's or agency's 
                        jurisdiction, or from complying with an order 
                        of a court of competent jurisdiction in an 
                        action brought by the United States or the 
                        Board.
                            ``(iii) Coordination with other law.--For 
                        purposes of section 552 of title 5, United 
                        States Code, this subparagraph shall be 
                        considered to be a statute described in 
                        subsection (b)(3)(B) of such section.
                            ``(iv) Designation of confidential 
                        information.--In prescribing regulations to 
                        carry out the requirements of this subsection, 
                        the Board shall designate information described 
                        in or obtained pursuant to this paragraph as 
                        confidential information.
                    ``(F) Costs.--The cost of any examination conducted 
                by the Board under this section may be assessed 
                against, and made payable by, such holding company.''.

SEC. 124. HOLDING COMPANY SUPERVISION FOR FINANCIAL SERVICES HOLDING 
              COMPANIES ENGAGED PRIMARILY IN NONBANKING ACTIVITIES.

    Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) 
is amended by adding at the end the following new subsections:
    ``(g) Reduced Supervision of Companies Controlling Principally 
Nondepository Institutions.--
            ``(1) Election.--
                    ``(A) In general.--Any financial services holding 
                company that qualifies under paragraph (2) may make an 
                election to be governed by the approval, capital, 
                reporting and examination requirements of paragraphs 
                (3), (4), (5) and (6) by--
                            ``(i) filing a written notice of such 
                        election with the Board; and
                            ``(ii) if applicable, providing a written 
                        guarantee to the Federal Deposit Insurance 
                        Corporation pursuant to paragraph (2).
                    ``(B) Effective period of election.--An election 
                under subparagraph (A) shall remain in effect--
                            ``(i) so long as the financial services 
                        holding company continues to qualify under 
                        paragraph (2); or
                            ``(ii) until the financial services holding 
                        company revokes the election.
            ``(2) Criteria for election.--A financial services holding 
        company may make an election under paragraph (1) if the company 
        meets all of the following criteria:
                    ``(A) Company principally controls nondepository 
                companies.--
                            ``(i) Financial services holding companies 
                        with depository institutions.--In the case of a 
                        financial services holding company (other than 
                        an investment bank holding company), the 
                        consolidated total risk-weighted assets of all 
                        depository institutions and foreign banks (as 
                        defined in section 1(b)(7) of the International 
                        Banking Act of 1978) controlled by the 
                        financial services holding company--
                                    ``(I) constitute less than 10 
                                percent of the consolidated total risk-
                                weighted assets of such company; and
                                    ``(II) are less than 
                                $5,000,000,000.
                            ``(ii) Investment bank holding companies.--
                        In the case of an investment bank holding 
                        company, the consolidated total risk-weighted 
                        assets of all wholesale financial institutions 
                        controlled by the investment bank holding 
                        company--
                                    ``(I) constitute less than 25 
                                percent of the consolidated total risk-
                                weighted assets of such company; and
                                    ``(II) are less than 
                                $15,000,000,000.
                            ``(iii) Inflation adjustment.--The dollar 
                        limitation contained in clauses (i)(II) and 
                        (ii)(II) shall be adjusted annually after 
                        December 31, 1997, by the annual percentage 
                        increase in the Consumer Price Index for Urban 
                        Wage Earners and Clerical Workers published by 
                        the Bureau of Labor Statistics.
                            ``(iv) Authority to increase limits.--The 
                        Board may increase any of the percentages 
                        referred to in clauses (i)(I) and (ii)(I) and 
                        the dollar amounts described in clauses (i)(II) 
                        and (ii)(II) as the Board may determine to be 
                        appropriate.
                    ``(B) Well capitalized institutions.--Each 
                depository institution controlled by the financial 
                services holding company is well capitalized.
                    ``(C) Well managed institutions.--
                            ``(i) In general.--Each depository 
                        institution controlled by the financial 
                        services holding company received a CAMEL 
                        composite rating of 1 or 2 (or an equivalent 
                        rating under an equivalent rating system) in 
                        the most recent examination of such 
                        institution.
                            ``(ii) Exclusion for newly acquired 
                        institutions.--A depository institution 
                        acquired by a financial services holding 
                        company during the 12-month period ending on 
                        the date of the election by such company under 
                        paragraph (1) may be excluded for purposes of 
                        clause (i) if the financial services holding 
                        company has developed a plan acceptable to the 
                        appropriate Federal banking agency (for such 
                        institution) to restore the capital and 
                        management of the institution.
                    ``(D) Holding company guarantee.--
                            ``(i) In general.--The financial services 
                        holding company provides a written guarantee 
                        acceptable to the Federal Deposit Insurance 
                        Corporation to maintain the capital levels of 
                        each insured depository institution controlled 
                        by the financial services holding company at 
                        not less than the levels required for such 
                        institution to remain well capitalized.
                            ``(ii) Limitation on liability.--The 
                        liability of a financial services holding 
                        company under a guarantee provided under this 
                        subparagraph shall not exceed an amount equal 
                        to 10 percent of the total risk-weighted assets 
                        of the insured depository institution, measured 
                        as of the date that the institution becomes 
                        undercapitalized.
                            ``(iii) Duration of guarantee.--
                        Notwithstanding paragraph (1), a financial 
                        services holding company that has elected 
                        treatment under this subsection shall continue 
                        to be bound by the guarantee made under this 
                        subsection until released in accordance with 
                        this subparagraph.
                            ``(iv) Release from liability.--The Board 
                        shall release a financial services holding 
                        company from the guarantee applicable with 
                        respect to any depository institution 
                        subsidiary of such company--
                                    ``(I) upon the written request of 
                                the financial services holding company 
                                to revoke the company's election under 
                                paragraph (1) if the Board determines 
                                that each depository institution 
                                controlled by the financial services 
                                holding company is well capitalized and 
                                well managed at the time of such 
                                revocation;
                                    ``(II) in the case of a financial 
                                services holding company which no 
                                longer meets the requirements of 
                                subparagraph (A), upon a determination 
                                by the Board that each depository 
                                institution controlled by the financial 
                                services holding company is well 
                                capitalized and well managed;
                                    ``(III) upon the written request of 
                                the financial services holding company 
                                following the divestiture of control of 
                                the depository institution in a 
                                transaction that does not require 
                                Federal assistance if the Board 
                                determines that, immediately following 
                                the divestiture, the depository 
                                institution is or will be well 
                                capitalized; or
                                    ``(IV) upon a determination by the 
                                Board, after consultation with the 
                                Federal Deposit Insurance Corporation, 
                                that, subject to the limit on liability 
                                provided in clause (ii), the financial 
                                services holding company has fully 
                                performed under the guarantee.
                    ``(E) Responsiveness to community needs.--The lead 
                insured depository institution subsidiary of the 
                financial services holding company and insured 
                depository institutions controlling at least 80 percent 
                of the aggregate total risk-weighted assets of insured 
                depository institutions controlled by the financial 
                services holding company have achieved a satisfactory 
                record of meeting community credit needs', or better, 
                during the most recent examination of such insured 
                depository institutions.
            ``(3) No notice or approval required for certain purposes 
        under paragraph (8), (13), or (15) of section 4(c).--
                    ``(A) In general.--Notwithstanding paragraphs (8), 
                (13), and, in the case of an investment bank holding 
                company, (15) of section 4(c), a financial services 
                holding company that has in effect an election under 
                paragraph (1), and any subsidiary of such holding 
                company, may, without prior notice to, or the approval 
                of, the Board under paragraph (8), (13), or, in the 
                case of an investment bank holding company, (15) of 
                section 4(c), engage de novo in any activity, or 
                acquire shares of any company engaged in any activity, 
                if--
                            ``(i) the Board has determined, by order or 
                        regulation in effect at the time the company or 
                        subsidiary commences to engage in such activity 
                        or acquire such shares, that the activity is 
                        permissible for a financial services holding 
                        company or a subsidiary of such company to 
                        engage in under paragraph (8) or (13) of 
                        section 4(c) (and regulations prescribed under 
                        such paragraphs); and
                            ``(ii) the activity is conducted in 
                        compliance with all conditions and limitations 
                        applicable to such activity under any 
                        regulation, order, or advisory opinion 
                        prescribed or issued by the Board.
                    ``(B) Subsequent notice.--A financial services 
                holding company that commences to engage in an 
                activity, or makes an acquisition, in accordance with 
                subparagraph (A) shall inform the Board of such fact, 
                in writing, not later than 10 days after commencing the 
                activity or consummating the acquisition.
            ``(4) Capital.--
                    ``(A) In general.--The Board shall not (by 
                regulation or order), directly or indirectly, establish 
                or apply minimum capital requirements to a financial 
                services holding company which has in effect an 
                election under paragraph (1) unless the Board 
                concludes, on the basis of all information available to 
                the Board, that the financial services holding company 
                is not maintaining sufficient financial resources to 
                meet fully any guarantee required under paragraph (2).
                    ``(B) Criteria for consideration.--For purposes of 
                making a determination under subparagraph (A), the 
                Board shall consider, in addition to any other relevant 
                considerations, the financial condition and the 
                adequacy of the capital of each of the depository 
                institutions controlled by the financial services 
                holding company.
            ``(5) Reports.--
                    ``(A) In general--The reporting requirements 
                contained in subsection (c)(2) shall apply to a 
                financial services holding company which qualifies 
                under this subsection, to the extent provided by the 
                Board.
                    ``(B) Exemptions from reporting requirements.--
                            ``(i) In general. The Board may, by 
                        regulation or order, exempt any company or 
                        class of companies, under such terms and 
                        conditions and for such periods as the Board 
                        shall provide in such regulation or order, from 
                        the provisions of this paragraph and any 
                        regulations prescribed under this paragraph.
                            ``(ii) Criteria for consideration.--In 
                        granting any exemption under clause (i), the 
                        Board shall consider, among other factors--
                                    ``(I) whether information of the 
                                type required under this paragraph is 
                                available from a supervisory agency (as 
                                defined in section 1101(7) of the Right 
                                to Financial Privacy Act of 1978), the 
                                Commodity Futures Trading Commission, 
                                or a foreign regulatory body of a 
                                similar type;
                                    ``(II) the primary business of the 
                                company; and
                                    ``(III) the nature and extent of 
                                domestic or foreign regulations of the 
                                company's activities.
            ``(6) Examinations.--
                    ``(A) Limited use of examination authority for 
                financial services holding companies.--The Board shall 
                not examine, under this section, any financial services 
                holding company described in paragraph (2)(A)(i) for 
                which an election is in effect under paragraph (1) or 
                any subsidiary (other than a depository institution) of 
                such holding company unless--
                            ``(i) the Board determines, on the basis of 
                        all information available to the Board, that--
                                    ``(I) the operations or activities 
                                of the financial services holding 
                                company or any subsidiary of such 
                                company, or any transaction involving 
                                such company or subsidiary and an 
                                affiliated depository institution, may 
                                pose a material risk to the safety and 
                                soundness of any depository institution 
                                owned by such holding company; or
                                    ``(II) the financial services 
                                holding company does not appear to have 
                                sufficient resources to meet the 
                                guarantee required under paragraph (2); 
                                or
                            ``(ii) the Board is unable to accomplish 
                        the purposes describe in subsection (c)(3)(A) 
                        without such examinations.
                    ``(B) Limited use of examination authority for 
                investment bank holding companies.--The Board shall not 
                examine, under this section, any investment bank 
                holding company described in paragraph (2)(A)(ii) which 
                has an election in effect under paragraph (1) or any 
                subsidiary (other than a depository institution) of 
                such holding company unless--
                            ``(i) the Board determines that the 
                        operations or activities of the investment bank 
                        holding company or any subsidiary of such 
                        company, or any transaction involving such 
                        company or subsidiary and an 
affiliated depository institution, may pose a material risk to the 
safety and soundness of any depository institution owned by such 
holding company; or
                            ``(ii) the Board is unable to determine 
                        from reports the nature of the operations, 
                        financial condition, activities, or 
                        effectiveness of the risk management systems of 
                        the investment bank holding company or any 
                        subsidiary of such company, or to assess 
                        compliance with the provisions of this Act and 
                        those governing transactions and relationships 
                        between any depository institution controlled 
                        by the investment bank holding company and the 
                        investment bank holding company or any of such 
                        subsidiaries.
                    ``(C) Restricted focus and deference in 
                examinations.--The Board shall limit the focus and 
                scope of any examination, under this section, of a 
                financial services holding company or investment bank 
                holding company for which an election is in effect 
                under paragraph (1) or of any subsidiary (other than a 
                depository institution) of such holding company and 
                shall defer to examinations conducted by the Securities 
                Exchange Commission or other supervisors in accordance 
                with subparagraphs (B), (C), and (D) of subsection 
                (c)(3).
    ``(h) Capital Requirements for Holding Companies Subject to Dual 
Regulation.--In determining whether to establish and the extent of 
capital requirements that apply to a financial services holding 
company, the Board shall give due consideration to the activities 
conducted by the holding company and its subsidiaries and any 
comparable capital requirements that are imposed on the holding company 
by any other State or Federal regulatory authority.''.

SEC. 125. CONVERSION OF UNITARY SAVINGS AND LOAN HOLDING COMPANIES TO 
              FINANCIAL SERVICES HOLDING COMPANIES.

    The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
amended by inserting after section 5 the following new section:
``Sec. 6. Conversion of unitary savings and loan holding companies to 
              financial services holding companies
    ``(a) Streamlined Procedure for Conversion.--
            ``(1) In general.--During the 18-month period beginning on 
        the date of the enactment of the Financial Services 
        Competitiveness Act of 1997, no approval shall be required 
        under section 3(a) or paragraph (8) or (13) of section 4(c) for 
        any qualified savings and loan holding company to become a 
        financial services holding company for any company that, both 
        prior to January 1, 1995, and on the date of enactment of the 
        Financial Services Competitiveness Act of 1997, is a savings 
        and loan holding company if the requirements of paragraph (2) 
        are met.
            ``(2) Eligibility requirements.--A qualified savings and 
        loan holding company shall be eligible to become a financial 
        services holding company pursuant to paragraph (1) if--
                    ``(A) the company becomes a financial services 
                holding company as the result of the conversion of a 
                savings association controlled by such company as of 
                the date of enactment of the Financial Services 
                Competitiveness Act of 1997 into a bank;
                    ``(B) the company is adequately capitalized before 
                and immediately after the conversion referred to in 
                subparagraph (A);
                    ``(C) all depository institutions controlled by 
                such company are well capitalized before and 
                immediately after such conversion;
                    ``(D) all depository institutions controlled by 
                such company are well managed before the conversion;
                    ``(E) the Board would not be prohibited under any 
                provision of section 3(d) from approving the 
                transaction;
                    ``(F) the activities of the company and of each 
                subsidiary of the company comply with this Act (and 
                regulations prescribed under this Act); and
                    ``(G) the company provides the Board with at least 
                30 days written notice of the proposed conversion, and, 
                before the expiration of such 30-day period, the Board 
                has not objected to the company becoming a financial 
                services holding company based on the criteria 
                contained in this subsection.
            ``(3) Qualified savings and loan holding company defined.--
        For purposes of this subsection, the term `qualified savings 
        and loan holding company' means any company which became a 
        savings and loan holding company before January 1, 1995, and is 
        a savings and loan holding company as of the date of the 
        enactment of the Financial Services Competitiveness Act of 
        1997.
    ``(b) Conversion Fee.--No qualified savings and loan holding 
company may become a financial services holding company pursuant to 
this section unless the Board has received, from such company, full 
payment of a fee which the Board shall impose in accordance with 
section 5(h).''.

SEC. 126. RESERVED.

SEC. 127. COORDINATION WITH STATE LAW.

    Except as specifically provided in section 109, no provision of 
this title, and no amendment made by this title to any other provision 
of law, may be construed as superseding any provision of the law of any 
State which imposes additional requirements or establishes higher 
standards for the safe and sound operation and condition of depository 
institutions (as defined in section 3 of the Federal Deposit Insurance 
Act) and the protection of consumers than the requirements imposed or 
the standards established under this title and the amendments made by 
this title to other provisions of law (including capital standards and 
other safeguards placed on affiliates).

SEC. 128. CONFORMING AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 
              1956.

    (a) Short Title; Table of Contents.--The first section of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841 nt.) is amended to read as 
follows:
``Sec. 1. Short title; table of contents
    ``(a) Short Title.--This Act may be cited as the `Financial 
Services Holding Company Act of 1997'.
    ``(b) Table of Contents.--The table of contents for this Act is as 
follows:

``Sec. 1. Short title; table of contents.
``Sec. 2. Definitions.
``Sec. 3. Acquisition of bank shares or assets.
``Sec. 4. Interests in nonbanking organizations.
``Sec. 5. Administration.
``Sec. 6. Conversion of unitary savings and loan holding companies to 
                            financial services holding companies.
``Sec. 7. Reservation of rights to States.
``Sec. 8. Penalties.
``Sec. 9. Judicial review.
``Sec. 10. Securities activities.
``Sec. 11. Safeguards relating to securities activities.
``Sec. 12. Investment bank holding companies and other financial 
                            activities.
``Sec. 13. Saving provision.
``Sec. 14. Separability of provisions.
    ``(c) References in Other Laws.--Any reference in any Federal or 
State law to a provision of the Bank Holding Company Act of 1956 shall 
be deemed to be a reference to the corresponding provision of this 
Act.''.
    (d) Definitions.--
            (1) Subsection (n) of section 2 of the Bank Holding Company 
        Act of 1956 (12 U.S.C. 1841(n)) is amended by inserting 
        ```depository institution','' before ```insured depository 
        institution'''.
            (2) Subsection (o) of section 2 of the Bank Holding Company 
        Act of 1956 (12 U.S.C. 1841(o)) is amended--
                    (A) by striking paragraph (1) and inserting the 
                following new paragraph:
            ``(1) Lead depository institution.--The term `lead 
        depository institution' means the largest depository 
        institution controlled by the financial services holding 
        company, based on a comparison of the average total assets 
        controlled by each depository institution during the previous 
        12-month period.''; and
                    (B) by adding at the end the following new 
                paragraphs:
            ``(8) Depository institution for certain sections.--
        Notwithstanding subsection (n), the term `depository 
        institution' includes, for purposes of paragraph (1) and 
        sections 4(k), 10, and 11, any branch, agency, or commercial 
        lending company operated in the United States by a foreign 
        bank.
            ``(9) Well managed.--The term `well managed' means--
                    ``(A) in the case of any company or depository 
                institution which receives examinations, the 
                achievement of--
                            ``(i) a CAMEL composite rating of 1 or 2 
                        (or an equivalent rating under an equivalent 
                        rating system) in connection with the most 
                        recent examination or subsequent review of such 
                        company or institution; and
                            ``(ii) at least a satisfactory rating for 
                        management, if such rating is given; or
                    ``(B) in the case of a company or depository 
                institution that has not received an examination 
                rating, the existence and use of managerial resources 
                which the Board determines are satisfactory.''.
            (3) Section 2 of the Bank Holding Company Act of 1956 (12 
        U.S.C. 1841) (as amended by section 116(a)(1) of this Act) is 
        amended by inserting after subsection (o) the following new 
        subsections:
    ``(p) Securities Affiliate.--The term `securities affiliate' means 
any company--
            ``(1) that is (or is required to be) registered under the 
        Securities Exchange Act of 1934 as a broker or dealer; and
            ``(2) the acquisition or retention of the shares or assets 
        of which the Board has approved under section 10.
    ``(q) Capital Terms.--
            ``(1) Depository institutions.--With respect to depository 
        institutions, the terms `well capitalized,' `adequately 
        capitalized' and `undercapitalized' have the meanings given to 
        such terms in accordance with section 38(b) of the Federal 
        Deposit Insurance Act.
            ``(2) Financial services holding company.--The following 
        definitions shall apply with respect to financial services 
        holding companies:
                    ``(A) Adequately capitalized.--The term `adequately 
                capitalized' means a level of capitalization which 
                meets or exceeds the required minimum level established 
                by the Board for each relevant capital measure for 
                financial services holding companies.
                    ``(B) Well capitalized.--The term `well 
                capitalized' means a level of capitalization which 
                meets or exceeds the required capital levels 
                established by the Board for well capitalized financial 
                services holding companies.
            ``(3) Other capital terms.--The terms `tier 1' and `risk-
        weighted assets' have the meaning given those terms in the 
        capital guidelines or regulations established by the Board for 
        financial services holding companies.
    ``(r) Foreign Bank Terms.--For purposes of subsections (s) and (u), 
sections 4(k), 10, and 11, and subsections (b) and (c) of section 12--
            ``(1) the terms `agency', `branch', and `commercial lending 
        company' have the same meaning as in section 1(b) of the 
        International Banking Act of 1978.
            ``(2) the term `foreign bank' means a foreign bank (as 
        defined in section 1(b) of the International Banking Act of 
        1978) which operates a branch, agency or commercial lending 
        company, or owns or controls a bank, in the United States.''.
    (c) Amendment Regarding Conditional Approval of Notices.--Section 
4(a)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(a)(2)) 
is amended by striking ``paragraph (8)'' and all that follows through 
``issued by the Board under such paragraph'' and inserting ``subsection 
(c)(8) or section 4(k), 10, or 11, subject to all the conditions 
specified in those provisions or in any order or regulation issued by 
the Board under those provisions''.
    (d) Amendment to Notice Procedures.--Section 4(j) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1843(j)) (as amended by section 
122 of this title) is amended--
            (1) in paragraph (1)(A), by striking ``subsection (c)(8) or 
        (a)(2)'' and inserting ``subsection (a)(2), (c)(8), (c)(15), or 
        (k)'';
            (2) in paragraph (1)(E)--
                    (A) by striking ``subsection (c)(8) or (a)(2)'' and 
                inserting ``subsection (a)(2), (c)(8), (c)(15), or 
                (k)''; and
                    (B) by striking the last sentence and inserting the 
                following: ``In no event may the Board, without the 
                agreement of the financial services holding company 
                submitting the notice, extend the notice period under 
                this subparagraph beyond the period that ends 180 days 
                after the date that a notice is filed with the Board or 
                the relevant Federal reserve bank in accordance with 
                the regulations of the Board''; and
            (3) in paragraph (2), by redesignating subparagraphs (B) 
        and (C) as subparagraphs (C) and (D), respectively, and 
        inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) Criteria for notices involving securities 
                affiliates.--In considering any notice that involves 
                the acquisition of shares of a securities affiliate 
                pursuant to section 4(c)(15), the Board shall apply the 
                criteria and safeguards contained in this paragraph and 
                in sections 10 and 11.''.
    (e) Elimination of Obsolete Provisions.--The Bank Holding Company 
Act of 1956 (12 U.S.C. 1841 through 1849) is amended--
            (1) in section 4(a)(2)--
                    (A) by striking ``or in the case of a company'' and 
                ending ``after December 31, 1980,''; and
                    (B) by striking the sentence beginning 
                ``Notwithstanding any other provision of this 
                paragraph'';
            (2) in section 4(b), by striking ``After two years from the 
        date of enactment of this Act, no'' and inserting ``No''; and
            (3) in section 5(a)--
                    (A) by striking ``Within one hundred and eighty 
                days after the date of enactment of this Act, or 
                within'' and inserting ``Within''; and
                    (B) by striking ``whichever is later,''.
    (f) Conforming Amendments.--The Bank Holding Company Act of 1956 
(12 U.S.C. 1841 et seq.) is amended as follows:
            (1) In section 3(c)(4), by striking ``one-bank holding 
        company'' each place such term appears and inserting ``one-bank 
        financial services holding company''.
            (2) In section 3(f)(5), by striking ``bank holding 
        company'' the first and second time such term appears and 
        inserting ``financial services holding company''.
            (3) In section 4(i)(3)(A), by striking ``is acquired'' and 
        inserting ``was acquired''.
            (4) By striking ``bank holding companies'' each place such 
        term appears in the following sections and inserting 
        ``financial services holding companies'':
                    (A) Section 3(d).
                    (B) Section 4(f).
                    (C) Section 7(a).
            (5) By striking ``bank holding company's'' each place such 
        term appears in section 4(c)(14) and inserting ``financial 
        services holding company's''.
            (6) By striking ``bank holding company'' each place such 
        term appears in the following sections and inserting 
        ``financial services holding company'':
                    (A) Subsections (a), (d), (e), (g), (h), and (o) of 
                section 2.
                    (B) Subsections (a), (b), (d), (f)(1), (f)(2), and 
                (f)(3) of section 3.
                    (C) Subsections (a), (d), (e), (g), (h), and (j) of 
                section 4.
                    (D) Clause (ii) in the portion of section 4(c) 
                which precedes paragraph (1) of such section.
                    (E) Paragraphs (2), (3), (7), (8), (10), (11), 
                (12)(A), and (14) of section 4(c).
                    (F) Paragraphs (4), (5), and (9) of section 4(f).
                    (G) Paragraphs (1) and (2) of section 4(i).
                    (H) Sections 5, 7(b), 8, and 11.
            (7) In section 4(f)(1), by striking ``bank holding 
        company'' the second place such term appears and inserting 
        ``financial services holding company''.
            (8) In the headings for sections 3(f) and 4(f), by striking 
        ``Bank Holding'' and inserting ``Financial Services Holding''.
            (9) In the heading for section 2(o)(7), by striking 
        ``Bank'' and inserting ``Financial Services''.
    (g) Treatment of Existing Bank Holding Companies.--Section 2(a)(6) 
of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(6)) is 
amended by inserting at the end the following: ``Any company that was a 
bank holding company on the day before the date of enactment of the 
Financial Services Competitiveness Act of 1997 shall, for purposes of 
this chapter, be deemed to have been a financial services holding 
company as of the date on which the company became a bank holding 
company.''.
    (h) Other References.--Any reference in any Federal law to ``bank 
holding company'' or ``bank holding companies'' as those terms were 
defined under the Bank Holding Company Act of 1956 before the enactment 
of this Act shall be deemed to include a reference to ``financial 
services holding company'' and ``financial services holding 
companies'', respectively, as such terms are defined under the 
Financial Services Holding Company Act of 1997.

SEC. 129. CONFORMING AMENDMENTS TO THE BANK HOLDING COMPANY ACT 
              AMENDMENTS OF 1970.

    Section 106 of the Bank Holding Company Act Amendments of 1970 (12 
U.S.C. 1971 through 1978) is amended by striking ``bank holding 
company'' each place such term appears and inserting ``financial 
services holding company''.

SEC. 130. CREDIT CARDS FOR BUSINESS PURPOSES.

    Section 2(c)(2)(F) of the Bank Holding Company Act of 1956 
(relating to the definition of credit card banks) is amended--
            (1) in clause (i), by inserting ``including the provision 
        of credit card accounts for business purposes'' before the 
        semicolon; and
            (2) in clause (v), by inserting ``(other than the provision 
        of credit card accounts for business purposes in connection 
        with the credit card operations referred to in clause (i))'' 
        before the period.

    Subtitle D--Interagency Banking and Financial Services Advisory 
                               Committee

SEC. 141. INTERAGENCY BANKING AND FINANCIAL SERVICES ADVISORY 
              COMMITTEE.

    (a) Establishment; Composition.--There is established the Banking 
and Financial Services Advisory Committee which shall consist of 6 
members as follows:
            (1) The Secretary of the Treasury.
            (2) The Chairman of the Board of Governors of the Federal 
        Reserve System.
            (3) The Chairperson of the Board of Directors of the 
        Federal Deposit Insurance Corporation.
            (4) The Chairman of the Securities and Exchange Commission.
            (5) The Chairperson of the Commodities Futures Trading 
        Commission.
            (6) The Comptroller of the Currency.
    (b) Chairperson.--The chairperson of the Committee shall be the 
Secretary of the Treasury.
    (c) Designation of Officers and Employees.--The members of the 
Committee may, from time to time, designate other officers or employees 
of their respective agencies to carry out their duties on the 
Committee.
    (d) Compensation and Expenses.--Each member of the Committee shall 
serve without additional compensation but shall be entitled to 
reasonable expenses incurred in carrying out official duties as a 
member.
    (e) Function of the Committee.--
            (1) In general.--The Committee shall meet as appropriate to 
        consider matters of mutual interest to the members and to 
        consider making recommendations to the Board of Governors of 
        the Federal Reserve System regarding the types of activities 
        that may be financial in nature for purposes of the Financial 
        Services Holding Company Act and to the Comptroller of the 
        Currency regarding the types of activities that may be 
        incidential to banking for purposes of section 5136 of the 
        Revised Statutes of the United States.
            (2) Consideration of recommendations.--The Board of 
        Governors of the Federal Reserve System and the Comptroller of 
        the Currency, as appropriate, shall take into account any 
        recommendation made to the respective agency by the Committee 
        and, if the agency does not adopt the recommendation, shall 
        provide a written explanation to the Committee.
    (f) Improving the Supervision, Efficiency, and Competitiveness of 
the Financial Services Industry.--
            (1) In general.--The Committee shall seek to improve the 
        supervision, efficiency, and competitiveness of the financial 
        services industry by making recommendations for such 
        legislative or administrative action as the Committee 
        determines to be appropriate to the Congress, each agency or 
        office represented by a member on the Committee, and other 
        agencies or departments of the United States, including 
        recommendations for changes in law and in the regulations, 
        policies, and procedures of any department or agency.
            (2) Printing in federal register.--Recommendations from 
        paragraph (1) shall be printed in the Federal Register and 
        submitted to the Committee on Banking and Financial Services of 
        the House of Representatives and the Committee on Banking, 
        Housing, and Urban Affairs of the Senate.

             Subtitle E--Application and Registration Fees

SEC. 151. AUTHORITY TO IMPOSE FEES.

    Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) 
is amended by inserting after subsection (g) (as added by section 124 
of this Act) the following new subsection:
    ``(h) Fees.--In connection with the administration of this Act, the 
Board may impose fees on any financial services holding company, or any 
company controlled directly or indirectly by such holding company--
            ``(1) for such purposes as the Board determines to be 
        reasonable and appropriate; and
            ``(2) in amounts, determined by the Board, which are at 
        least sufficient to meet the Board's expenses in carrying out 
        this Act with respect to the activity, application, 
        examination, or other incident or status (of such company) for 
        which a fee is imposed under this subsection.''.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

SEC. 201. DEFINITION OF BROKER.

    Section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(4)) is amended to read as follows:
            ``(4) Broker.--
                    ``(A) In general.--The term `broker' means any 
                person engaged in the business of effecting 
                transactions in securities for the account of others.
                    ``(B) Exclusion of banks.--The term `broker' does 
                not include a bank unless such bank--
                            ``(i) publicly solicits the business of 
                        effecting securities transactions for the 
                        account of others; or
                            ``(ii) is compensated for such business by 
                        the payment of commissions or similar 
                        remuneration based on effecting transactions in 
                        securities (other than fees calculated as a 
                        percentage of assets under management) in 
                        excess of the bank's incremental costs directly 
                        attributable to effecting such transactions 
                        (hereafter referred to as `incentive 
                        compensation').
                    ``(C) Exemption for certain bank activities.--A 
                bank shall not be considered to be a broker because the 
                bank engages in any of the following activities under 
                the conditions described:
                            ``(i) Third party brokerage arrangements.--
                        The bank enters into a contractual or other 
                        arrangement with a broker or dealer registered 
                        under this title under which the broker or 
                        dealer offers brokerage services on or off the 
                        premises of the bank if--
                                    ``(I) such broker or dealer is 
                                clearly identified as the person 
                                performing the brokerage services;
                                    ``(II) the broker or dealer 
                                performs brokerage services in an area 
                                that is clearly marked and, unless made 
                                impossible by space or personnel 
                                considerations, physically separate 
                                from the routine deposit-taking 
                                activities of the bank;
                                    ``(III) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement clearly indicate that the 
                                brokerage services are being provided 
                                by the broker or dealer and not by the 
                                bank;
                                    ``(IV) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement are in compliance with the 
                                Federal securities laws before 
                                distribution;
                                    ``(V) bank employees perform only 
                                clerical or ministerial functions in 
                                connection with brokerage transactions, 
                                including scheduling appointments with 
                                the associated persons of a broker or 
                                dealer and, on behalf of a broker or 
                                dealer, transmitting orders or handling 
                                customers funds or securities, except 
                                that bank employees who are not so 
                                qualified may describe in general terms 
                                investment vehicles under the 
                                contractual or other arrangement and 
                                accept customer orders on behalf of the 
                                broker or dealer if such employees have 
                                received training that is substantially 
                                equivalent to the training required for 
                                personnel qualified to sell securities 
                                pursuant to the requirements of a self-
                                regulatory organization (as defined in 
                                section 3(a) of the Securities Exchange 
                                Act of 1934);
                                    ``(VI) bank employees do not 
                                directly receive incentive compensation 
                                for any brokerage transaction unless 
                                such employees are associated persons 
                                of a broker or dealer and are qualified 
                                pursuant to the requirements of a self-
                                regulatory organization (as so defined) 
                                except that the bank employees may 
                                receive nominal cash and noncash 
                                compensation for customer referrals if 
                                the cash compensation is a one-time fee 
                                of a fixed dollar amount and the 
                                payment of the fee is not contingent on 
                                whether the referral results in a 
                                transaction;
                                    ``(VII) such services are provided 
                                by the broker or dealer on a basis in 
                                which all customers which receive any 
                                services are fully disclosed to the 
                                broker or dealer; and
                                    ``(VIII) the broker or dealer 
                                informs each customer that the 
                                brokerage services are provided by the 
                                broker or dealer and not by the bank 
                                and that the securities are not 
                                deposits or other obligations of the 
                                bank, are not guaranteed by the bank, 
                                and are not insured by the Federal 
                                Deposit Insurance Corporation.
                            ``(ii) Trust activities.--The bank engages 
                        in trust activities (including effecting 
                        transactions in the course of such trust 
                        activities) permissible for national banks 
                        under the first section of the Act of September 
                        28, 1962, or for State banks under relevant 
                        State trust statutes or law (including 
                        securities safekeeping, self-directed 
                        individual retirement accounts, or managed 
                        agency accounts or other functionally 
                        equivalent accounts of a bank) unless the 
                        bank--
                                    ``(I) publicly solicits brokerage 
                                business, other than by advertising 
                                that it effects transactions in 
                                securities in conjunction with 
                                advertising its other trust activities; 
                                or
                                    ``(II) receives incentive 
                                compensation for such brokerage 
                                activities.
                            ``(iii) Permissible securities 
                        transactions.--The bank effects transactions in 
                        exempted securities, other than municipal 
                        securities, in commercial paper, bankers 
                        acceptances, commercial bills, qualified 
                        Canadian government obligations as defined in 
                        section 5136 of the Revised Statutes, 
                        obligations of the Washington Metropolitan Area 
                        Transit Authority which are guaranteed by the 
                        Secretary of Transportation under section 9 of 
                        the National Capital Transportation Act of 
                        1969, obligations of the North American 
                        Development Bank, and obligations of any local 
                        public agency (as defined in section 110(h) of 
                        the Housing Act of 1949) or any public housing 
                        agency (as defined in the United States Housing 
                        Act of 1937) that are expressly authorized by 
                        section 5136 of the Revised Statutes of the 
                        United States as permissible for a national 
                        bank to underwrite or deal in.
                            ``(iv) Municipal securities.--The bank 
                        effects transactions in municipal securities.
                            ``(v) Employee and shareholder benefit 
                        plans.--The bank effects transactions as part 
                        of any bonus, profit-sharing, pension, 
                        retirement, thrift, savings, incentive, stock 
                        purchase, stock ownership, stock appreciation, 
                        stock option, dividend reinvestment, or similar 
                        plan for employees or shareholders of an issuer 
                        or its subsidiaries.
                            ``(vi) Sweep accounts.--The bank effects 
                        transactions as part of a program for the 
                        investment or reinvestment of bank deposit 
                        funds into any no-load, open-end management 
                        investment company registered under the 
                        Investment Company Act of 1940 that holds 
                        itself out as a money market fund.
                            ``(vii) Affailiate transactions.--The bank 
                        effects transactions for the account of any 
                        affiliate of the bank, as defined in section 2 
                        of the Financial Services Holding Company Act 
                        of 1997.
                            ``(viii) Private securities offerings.--The 
                        bank--
                                    ``(I) effects sales as part of a 
                                primary offering of securities by an 
                                issuer, not involving a public 
                                offering, pursuant to section 3(b), 
                                4(2), or 4(6) of the Securities Act of 
                                1933 and the rules and regulations 
                                issued thereunder; and
                                    ``(II) effects such sales 
                                exclusively to an accredited investor, 
                                as defined in section 3 of the 
                                Securities Act of 1933.
                            ``(ix) De minimus exemption.--If the bank 
                        does not have a subsidiary or affiliate 
                        registered as a broker or dealer under section 
                        15, the bank effects, other than in 
                        transactions referred to in clauses (i) through 
                        (viii), not more than--
                                    ``(I) 800 transactions in any 
                                calendar year in securities for which a 
                                ready market exists, and
                                    ``(II) 200 other transactions in 
                                securities in any calendar year.
                            ``(x) Safekeeping and custody services.--
                        The bank, as part of customary banking 
                        activities--
                                    ``(I) provides safekeeping or 
                                custody services with respect to 
                                securities, including the exercise of 
                                warrants or other rights on behalf of 
                                customers;
                                    ``(II) clears or settles 
                                transactions in securities;
                                    ``(III) effects securities lending 
                                or borrowing transactions with or on 
                                behalf of customers as part of services 
                                provided to customers pursuant to 
                                subclauses (I) and (II) or invests cash 
                                collateral pledged in connection with 
                                such transactions; or
                                    ``(IV) holds securities pledged by 
                                one customer to another customer or 
                                securities subject to resale agreements 
                                between customers or facilities the 
                                pledging or transfer of such securities 
                                by book entry.
                            ``(xi) Banking products.--The bank effects 
                        transactions in products that--
                                    ``(I) are described in section 
                                10(l)(3)(B) of the Financial Services 
                                Holding Company Act of 1997; or
                                    ``(II) have been exempted by the 
                                Board of Governors of the Federal 
                                Reserve System pursuant to section 
                                10(l)(3)(C) of such Act.
                    ``(D) Exemption for entities subject to section 
                15(e).--The term `broker' does not include a bank 
                that--
                            ``(i) was, immediately prior to the 
                        enactment of the Financial Services 
                        Competitiveness Act of 1997, subject to section 
                        15(e); and
                            ``(ii) is subject to such restrictions and 
                        requirements as the Commission considers 
                        appropriate.''.

SEC. 202. DEFINITION OF DEALER.

    Section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(5)) is amended to read as follows:
            ``(5) Dealer.--
                    ``(A) In general.--The term `dealer' means any 
                person engaged in the business of buying and selling 
                securities for such person's own account through a 
                broker or otherwise.
                    ``(B) Exception for person not engaged in the 
                business of dealing.--The term `dealer' does not 
                include a person that buys or sells securities for such 
                person's own account, either individually or in a 
                fiduciary capacity, but not as a part of a regular 
                business.
                    ``(C) Exemption for certain bank activities.--A 
                bank shall not be considered to be a dealer because the 
                bank engages in any of the following activities under 
                the conditions described:
                            ``(i) The bank buys and sells commercial 
                        paper, bankers acceptances, exempted securities 
                        (other than municipal securities), qualified 
                        Canadian Government obligations as defined in 
                        section 5136 of the Revised Statutes, 
                        obligations of the Washington Metropolitan Area 
                        Transit Authority which are guaranteed by the 
                        Secretary of Transportation under section 9 of 
                        the National Capital Transportation Act of 
                        1969, obligations of the North American 
                        Development Bank, and obligations of any local 
                        public agency (as defined in section 110(h) of 
                        the Housing Act of 1949) or any public housing 
                        agency (as defined in the United States Housing 
                        Act of 1937) that are expressly authorized by 
                        section 5136 of the Revised Statutes of the 
                        United States as permissible for a national 
                        bank to underwrite or deal in.
                            ``(ii) The bank buys and sells municipal 
                        securities.
                            ``(iii) The bank buys and sells securities 
                        for investment purposes for the bank or for 
                        accounts for which the bank acts as a trustee 
                        or fiduciary.
                            ``(iv) The bank--
                                    ``(I) has not been affiliated with 
                                a securities affiliate under section 10 
                                of the Financial Services Holding 
                                Company Act of 1997 for more than 1 
                                year; and
                                    ``(II) engages in the issuance or 
                                sale, through a grantor trust or 
                                otherwise, of securities backed by or 
                                representing an interest in notes, 
                                drafts, acceptances, loans, leases, 
                                receivables, other obligations, or 
                                pools of any such obligations 
                                originated or purchased by the bank or 
                                any affiliate of the bank.
                            ``(v) The bank buys and sells products 
                        that--
                                    ``(I) are described in section 
                                10(l)(3)(B) of the Financial Services 
                                Holding Company Act of 1997; or
                                    ``(II) have been exempted by the 
                                Board of Governors of the Federal 
                                Reserve System pursuant to section 
                                10(l)(3)(C) of such Act.''.

SEC. 203. POWER TO EXEMPT FROM THE DEFINITIONS OF BROKER AND DEALER.

    Section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c) is 
amended by adding at the end the following:
    ``(e) Exemption From Definition of Broker or Dealer.--The 
Commission, by regulation or order, upon its own motion or upon 
application, may conditionally or unconditionally exclude any person or 
class of persons from the definitions of `broker' or `dealer', if the 
Commission finds that such exclusion is consistent with the public 
interest, the protection of investors, and the purposes of this 
title.''.

SEC. 204. EFFECTIVE DATE.

    This subtitle shall become effective 270 days after the date of 
enactment of this Act.

             Subtitle B--Bank Investment Company Activities

SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED BANK.

    (a) Management Companies.--Section 17(f) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
            (1) by redesignating paragraphs (1), (2), and (3) as 
        subparagraphs (A), (B), and (C), respectively;
            (2) by striking ``(f) Every registered'' and inserting
    ``(f) Custody of Securities.--
            ``(1) Every registered'';
            (3) by designating the 2d, 3d, 4th, and 5th sentences of 
        such subsection as paragraphs (2) through (5), respectively, 
        and indenting the left margin of such paragraphs appropriately; 
        and
            (4) by adding at the end the following new paragraph:
            ``(6) Notwithstanding any provision of this subsection, if 
        a bank described in paragraph (1) or an affiliated person of 
        such bank is an affiliated person, promoter, organizer, or 
        sponsor of, or principal underwriter for the registered 
        company, such bank may serve as custodian under this subsection 
        in accordance with such rules, regulations, or orders as the 
        Commission may prescribe, consistent with the protection of 
        investors, after consulting in writing with the appropriate 
        Federal banking agency, as defined in section 3 of the Federal 
        Deposit Insurance Act.''.
    (b) Unit Investment Trusts.--Section 26(a)(1) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-6(a)(1)) is amended by inserting 
before the semicolon at the end the following: ``, except that, if the 
trustee or custodian described in this subsection is an affiliated 
person of such underwriter or depositor, the Commission may adopt rules 
and regulations or issue orders, consistent with the protection of 
investors, prescribing the conditions under which such trustee or 
custodian may serve, after consulting in writing with the appropriate 
Federal banking agency (as defined in section 3 of the Federal Deposit 
Insurance Act)''.
    (c) Fiduciary Duty of Custodian.--Section 36(a) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-35(a)) is amended--
            (1) in paragraph (1), by striking ``or'' at the end;
            (2) in paragraph (2), by striking the period at the end and 
        inserting ``; or ``; and
            (3) by inserting after paragraph (2) the following:
            ``(3) as custodian.''.

SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

    Section 18 of the Investment Company Act of 1940 (15 U.S.C. 80a-18) 
is amended by adding at the end the following:
            ``(1) Notwithstanding any provision of this section, it 
        shall be unlawful for any affiliated person of a registered 
        investment company or any affiliated person of such a person to 
        loan money to such investment company in contravention of such 
        rules, regulations, or orders as the Commission may prescribe 
        in the public interest and consistent with the protection of 
        investors.''.

SEC. 213. INDEPENDENT DIRECTORS.

    (a) In General.--Section 2(a)(19)(A) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
            (1) by striking clause (v) and inserting the following new 
        clause:
                            ``(v) any person (other than a registered 
                        investment company) that, at any time during 
                        the preceding 6 months, has executed any 
                        portfolio transactions for, engaged in any 
                        principal transactions with, or distributed 
                        shares for--
                                    ``(I) the investment company,
                                    ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
                                itself out to investors as a related 
                                company for purposes of investment or 
                                investor services, or
                                    ``(III) any account over which the 
                                investment company's investment adviser 
                                has brokerage placement discretion, or 
                                any affiliated person of such a 
                                person,'';
            (2) by redesignating clause (vi) as clause (vii); and
            (3) by inserting after clause (v) the following new clause:
                            ``(vi) any person (other than a registered 
                        investment company) that, at any time during 
                        the preceding 6 months, has loaned money to--
                                    ``(I) the investment company,
                                    ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
itself out to investors as a related company for purposes of investment 
or investor services, or
                                    ``(III) any account for which the 
                                investment company's investment adviser 
                                has borrowing authority,
                        or any affiliated person of such a person, 
                        or''.
    (b) Conforming Amendment.--Section 2(a)(19)(B) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is amended--
            (1) by striking clause (v) and inserting the following new 
        clause:
                            ``(v) any person (other than a registered 
                        investment company) that, at any time during 
                        the preceding 6 months, has executed any 
                        portfolio transactions for, engaged in any 
                        principal transactions with, or distributed 
                        shares for--
                                    ``(I) any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as such,
                                    ``(II) any investment company 
                                holding itself out to investors, for 
                                purposes of investment or investor 
                                services, as a company related to any 
                                investment company for which the 
                                investment adviser or principal 
                                underwriter serves as such, or
                                    ``(III) any account over which the 
                                investment adviser has brokerage 
                                placement discretion, or any affiliated 
                                person of such a person,'';
            (2) by redesignating clause (vi) as clause (vii); and
            (3) by inserting after clause (v) the following new clause:
                            ``(vi) any person (other than a registered 
                        investment company) that, at any time during 
                        the preceding 6 months, has loaned money to--
                                    ``(I) any investment company for 
                                which the investment adviser or 
                                principal underwriter serves as such,
                                    ``(II) any investment company 
                                holding itself out to investors, for 
                                purposes of investment or investor 
                                services, as a company related to any 
                                investment company for which the 
                                investment adviser or principal 
                                underwriter serves as such, or
                                    ``(III) any account for which the 
                                investment adviser has borrowing 
                                authority,
                        or any affiliated person of such a person, 
                        or''.
    (c) Affiliation of Directors.--Section 10(c) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-10(c)) is amended by striking 
``bank, except'' and inserting ``bank (and its subsidiaries) or any 
single financial services holding company (and its affiliates and 
subsidiaries), as those terms are defined in the Financial Services 
Holding Company Act of 1997, except''.
    (d) Effective Date.--The provisions of subsection (a) of this 
section shall become effective 1 year after the date of enactment of 
this subtitle.

SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

    (a) Misrepresentation.--Section 35(a) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-34(a)) is amended to read as follows:
    ``(a) Misrepresentation of Guarantees.--
            ``(1) In general.--It shall be unlawful for any person, 
        issuing or selling any security of which a registered 
        investment company is the issuer, to represent or imply in any 
        manner whatsoever that such security or company--
                    ``(A) has been guaranteed, sponsored, recommended, 
                or approved by the United States, or any agency, 
                instrumentality or officer of the United States;
                    ``(B) has been insured by the Federal Deposit 
                Insurance Corporation; or
                    ``(C) is guaranteed by or is otherwise an 
                obligation of any bank or insured depository 
                institution.
            ``(2) Disclosures.--Any person issuing or selling the 
        securities of a registered investment company shall prominently 
        disclose that the investment company or any security issued by 
        the investment company--
                    ``(A) is not insured by the Federal Deposit 
                Insurance Corporation;
                    ``(B) is not guaranteed by an affiliated insured 
                depository institution; and
                    ``(C) is not otherwise an obligation of any bank or 
                insured depository institution,
        in accordance with such rules, regulations, or orders as the 
        Commission may prescribe as reasonably necessary or appropriate 
        in the public interest for the protection of investors, after 
        consulting in writing with the appropriate Federal banking 
        agencies.
            ``(3) Definitions.--The terms `insured depository 
        institution' and `appropriate Federal banking agency' have the 
        meaning given to such terms in section 3 of the Federal Deposit 
        Insurance Act.''.
    (b) Deceptive Use of Names.--Section 35(d) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-34(d)) is amended to read as 
follows:
    ``(d) It shall be unlawful for any registered investment company to 
adopt as part of the name or title of such company, or of any 
securities of which it is the issuer, any word or words that the 
Commission finds are materially deceptive or misleading. The Commission 
may adopt such rules or regulations or issue such orders as are 
necessary or appropriate to prevent the use of deceptive or misleading 
names or titles by investment companies.''.

SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY ACT OF 
              1940.

    Section 2(a)(6) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(6)) is amended to read as follows:
        ``(6) The term `broker' has the same meaning as in the 
        Securities Exchange Act of 1934, except that such term does not 
        include any person solely by reason of the fact that such 
person is an underwriter for one or more investment companies.''.

SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY ACT OF 
              1940.

    Section 2(a)(11) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(11)) is amended to read as follows:
            ``(11) The term `dealer' has the same meaning as in the 
        Securities Exchange Act of 1934, but does not include an 
        insurance company or investment company.''.

SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF INVESTMENT 
              ADVISER FOR BANKS THAT ADVISE INVESTMENT COMPANIES.

    (a) Investment Adviser.--Section 202(a)(11) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)) is amended in 
subparagraph (A), by striking ``investment company'' and inserting 
``investment company, except that the term `investment adviser' 
includes any bank or financial services holding company to the extent 
that such bank or financial services holding company acts as an 
investment adviser to a registered investment company, or if, in the 
case of a bank, such services are performed through a separately 
identifiable department or division, the department or division, and 
not the bank itself, shall be deemed to be the investment adviser''.
    (b) Separately Identifiable Department or Division.--Section 202(a) 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended 
by adding at the end the following:
            ``(25) The term `separately identifiable department or 
        division' of a bank means a unit--
                    ``(A) that is under the direct supervision of an 
                officer or officers designated by the board of 
                directors of the bank as responsible for the day-to-day 
                conduct of the bank's investment adviser activities for 
                one or more investment companies, including the 
                supervision of all bank employees engaged in the 
                performance of such activities; and
                    ``(B) for which all of the records relating to its 
                investment adviser activities are separately maintained 
                in or extractable from such unit's own facilities or 
                the facilities of the bank, and such records are so 
                maintained or otherwise accessible as to permit 
                independent examination and enforcement of this Act or 
                the Investment Company Act of 1940 and rules and 
                regulations promulgated under this Act or the 
                Investment Company Act of 1940.''.

SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS ACT OF 
              1940.

    Section 202(a)(3) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(3)) is amended to read as follows:
            ``(3) The term `broker' has the same meaning as in the 
        Securities Exchange Act of 1934.''.

SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS ACT OF 
              1940.

    Section 202(a)(7) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(7)) is amended to read as follows:
            ``(7) The term `dealer' has the same meaning as in the 
        Securities Exchange Act of 1934, but does not include an 
        insurance company or investment company.''.

SEC. 220. INTERAGENCY CONSULTATION.

    The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is 
amended by inserting after section 210 the following new section:
``Sec. 210A. Consultation
    ``(a) Examination Results and Other Information.--
            ``(1) The appropriate Federal banking agency shall provide 
        the Commission upon request the results of any examination, 
        reports, records, or other information as each may have access 
        to with respect to the investment advisory activities of any 
        financial services holding company, bank, or separately 
        identifiable department or division of a bank, that is 
        registered under section 203 of this title, or, in the case of 
        a financial services holding company or bank, that has a 
        subsidiary or a separately identifiable department or division 
        registered under that section, to the extent necessary for the 
        Commission to carry out its statutory responsibilities.
            ``(2) The Commission shall provide to the appropriate 
        Federal banking agency upon request the results of any 
        examination, reports, records, or other information with 
        respect to the investment advisory activities of any financial 
        services holding company, bank, or separately identifiable 
        department or division of a bank, any of which is registered 
        under section 203 of this title, to the extent necessary for 
        the agency to carry out its statutory responsibilities.
    ``(b) Effect on Other Authority.--Nothing herein shall limit in any 
respect the authority of the appropriate Federal banking agency 
with respect to such financial services holding company, bank, or 
department or division under any provision of law.
    ``(c) Definition.--For purposes of this section, the term 
`appropriate Federal banking agency' shall have the same meaning as in 
section 3 of the Federal Deposit Insurance Act.''.

SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

    (a) Securities Act of  1933.--Section 3(a)(2) of the Securities Act 
of 1993 (15 U.S.C. 77c(a)(2)) is amended by striking ``or any interest 
or participation in any common trust fund or similar fund maintained by 
a bank exclusively for the collective investment and reinvestment of 
assets contributed thereto by such bank in its capacity as trustee, 
executor, administrator, or guardian'' and inserting ``or any interest 
or participation in any common trust fund or similar fund that is 
excluded from the definition of the term `investment company' under 
section 3(c)(3) of the Investment Company Act of 1940''.
    (b) Securities Exchange Act of 1934.--Section 3(a)(12)(A)(iii) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)(iii)) is 
amended to read as follows:
                            ``(iii) any interest or participation in 
                        any common trust fund or similar fund that is 
                        excluded from the definition of the term 
                        `investment company' under section 3(c)(3) of 
                        the Investment Company Act of 1940;''.
    (c) Investment Company Act of 1940.--Section 3(c)(3) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is amended by 
inserting before the period the following: ``, if--
                    ``(A) such fund is employed by the bank solely as 
                an aid to the administration of trusts, estates, or 
                other accounts created and maintained for a fiduciary 
                purpose;
                    ``(B) except in connection with the ordinary 
                advertising of the bank's fiduciary services, interests 
                in such fund are not--
                            ``(i) advertised; or
                            ``(ii) offered for sale to the general 
                        public; and
                    ``(C) fees and expenses charged by such fund are 
                not in contravention of fiduciary principles 
                established under applicable Federal or State law''.

SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAVING CONTROLLING 
              INTEREST IN REGISTERED INVESTMENT COMPANY.

    Section 15 of the Investment Company Act of 1940 (15 U.S.C. 80a-15) 
is amended by adding at the end the following new subsection:
    ``(g) Controlling Interest in Investment Company Prohibited.--
            ``(1) In general.--If any investment adviser to a 
        registered investment company, or an affiliated person of that 
        investment adviser, holds a controlling interest in that 
        registered investment company in a trustee or fiduciary 
        capacity, such person shall--
                    ``(A) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any employee benefit 
                plan subject to the Employee Retirement Income Security 
                Act of 1974, transfer the power to vote the shares of 
                the investment company through to another person acting 
                in a fiduciary capacity with respect to the plan who is 
                not an affiliated person of that investment adviser or 
                any affiliated person thereof; or
                    ``(B) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any other person or 
                entity other than an employee benefit plan subject to 
                the Employee Retirement Income Security Act of 1974--
                            ``(i) transfer the power to vote the shares 
                        of the investment company through to--
                                    ``(I) the beneficial owners of the 
                                shares;
                                    ``(II) another person acting in a 
                                fiduciary capacity who is not an 
                                affiliated person of that investment 
                                adviser or any affiliated person 
                                thereof; or
                                    ``(III) any person authorized to 
                                receive statements and information with 
                                respect to the trust who is not an 
                                affiliated person of that investment 
                                adviser or any affiliated person 
                                thereof;
                            ``(ii) vote the shares of the investment 
                        company held by it in the same proportion as 
                        shares held by all other shareholders of the 
                        investment company; or
                            ``(iii) vote the shares of the investment 
                        company as otherwise permitted under such 
                        rules, regulations, or orders as the Commission 
                        may prescribe for the protection of investors.
            ``(2) Exemption.--Paragraph (1) shall not apply to any 
        investment adviser to a registered investment company, or an 
        affiliated person of that investment adviser, holding shares of 
        the investment company in a trustee or fiduciary capacity if 
        that registered investment company consists solely of assets 
        held in such capacities.
            ``(3) Safe harbor.--No investment adviser to a registered 
        investment company or any affiliated person of such investment 
        adviser shall be deemed to have acted unlawfully or to have 
        breached a fiduciary duty under State or Federal law solely by 
        reason of acting in accordance with clause (i), (ii), or (iii) 
        of paragraph (1)(B).
            ``(4) Church plan exemption.--Paragraph (1) shall not apply 
        to any investment adviser to a registered investment company, 
        or an affiliated person of that investment adviser, holding 
        shares in such a capacity, if such investment adviser or such 
        affiliated person is an organization described in section 
        414(e)(3)(A) of the Internal Revenue Code of 1986.''.

SEC. 223. CONFORMING CHANGE IN DEFINITION.

    Section 2(a)(5)) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(5)) is amended by striking ``(A) a banking institution 
organized under the laws of the United States'' and inserting ``(A) a 
depository institution (as defined in section 3 of the Federal Deposit 
Insurance Act) or a branch or agency of a foreign bank (as such terms 
are defined in section 101(b) of the International Banking Act of 
1978)''.

SEC. 224. EFFECTIVE DATE.

    This subtitle shall take effect 90 days after the date of the 
enactment of this Act.

                  TITLE III--BANK INSURANCE ACTIVITIES

SEC. 301. NATIONAL BANK AND HOLDING COMPANY INSURANCE ACTIVITIES.

    (a) State Supervision.--Chapter 1 of title LXII of the Revised 
Statutes of the United States (12 U.S.C. 21 et seq.) is amended--
            (1) by redesignating section 5136A as section 5136C; and
            (2) by inserting after section 5136 (12 U.S.C. 24) the 
        following new section:

``Sec. 5136A. State supervision of insurance

    ``(a) State Regulation of Manner in Which Insurance Is Provided.--
            ``(1) In general.--Subject to paragraph (2), no provision 
        of section 5136, any other section of this title, or section 13 
        of the Federal Reserve Act may be construed as limiting or 
        otherwise impairing the authority of any State to regulate--
                    ``(A) the manner (including the manner of consumer 
                protection) in which a national bank may provide 
                insurance within the State pursuant to section 5136 or 
                5136B of this chapter or section 13 of the Federal 
                Reserve Act; and
                    ``(B) the manner in which a national bank may 
                provide annuity contracts within the State pursuant to 
                section 5136 through, and limited to, consumer 
                disclosure requirements or licensing requirements, 
                procedures, and qualifications.
            ``(2) Standard for state manner regulation.--
        Notwithstanding paragraph (1)--
                    ``(A) Barnett standard for providing insurance as 
                agent or broker.--No State may impose any insurance 
                regulatory requirement relating to providing insurance 
                or annuity contracts, as agent or broker, that prevents 
                or significantly interferes with a national bank's 
                exercise of its powers under section 5136, any other 
                section of this title, or section 13 of the Federal 
                Reserve Act.
                    ``(B) Standard for providing insurance as 
                principal.--No State may impose on a national bank any 
                insurance regulatory requirement relating to providing 
                insurance as principal that treats or has the effect of 
                treating the national bank more restrictively than any 
                other depository institution (as defined in section 
                3(c)(1) of the Federal Deposit Insurance Act) operating 
                in the State.
            ``(3) State views.--In a determination by the Comptroller 
        of the Currency whether for purposes of this subsection any 
        product is insurance or an annuity contract, the Comptroller of 
        the Currency, and any court reviewing the determination of the 
        Comptroller of the Currency, must consider--
                    ``(A) any views of the insurance regulatory 
                authority of the State in which the product is provided 
                or to be provided as to whether the product should be 
                treated as insurance or an annuity contract, including 
                the insurance regulatory authority's views as to the 
                nature of the product and the history of its 
                regulation; and
                    ``(B) any other information relevant as to whether 
                the product should be treated as insurance.
    ``(b) National Bank Authority.--A national bank may not provide 
insurance or annuity contracts as a principal, agent, or broker except 
as provided in this section, the paragraph designated as the `Seventh' 
of section 5136(a) of this chapter, 5136B of this chapter, or section 
13 of the Federal Reserve Act.''.
    (b) Product Regulation.--Section 5136 of the Revised Statutes of 
the United States (12 U.S.C. 24) is amended--
            (1) by striking ``Upon duly making and filing articles of 
        association'' and inserting ``(a) In General.--Upon duly making 
        and filing articles of association''; and
            (2) by adding at the end of the following new subsection:
    ``(b) Scope.--
            ``(1) Principal activities.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                national bank or a subsidiary thereof may not provide a 
                product in a State as principal pursuant to subsection 
                (a) if, as of January 1, 1996, the product was 
                regulated as insurance, in accordance with the relevant 
                State insurance law, by the appropriate insurance 
                regulatory authority of the State in which the product 
                is to be provided.
                    ``(B) Exception.--Except for title insurance and 
                annuity contracts as described in paragraph (4)(A), 
                subparagraph (A) shall not apply to a product that 
                national banks or subsidiaries thereof had authority to 
                provide as principal pursuant to subsection (a) as of 
                January 1, 1996, or to a product that was regulated as 
                insurance as of January 1, 1996, by the appropriate 
                insurance regulatory authority of the State in which 
                the product is to be provided but ceases to be so 
                regulated after the date of enactment of the Financial 
                Services Competitiveness Act of 1997.
            ``(2) Agency and brokerage activities.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                national bank may not provide a product in a State as 
                agent or broker pursuant to subsection (a) if, as of 
                January 1, 1996, the product was regulated as 
                insurance, in accordance with the relevant State 
                insurance law, by the appropriate insurance regulatory 
                authority of the State in which the product is to be 
                provided.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a product that national banks had authority to 
                provide as agent or broker pursuant to subsection (a) 
                as of January 1, 1996, or to a product that was 
                regulated as insurance as of January 1, 1996, by the 
                appropriate insurance regulatory authority of the State 
                in which the product is to be provided but ceases to be 
                so regulated after the date of enactment of the 
                Financial Services Competitiveness Act of 1996.
            ``(3) Other products.--In a determination by the 
        Comptroller of the Currency whether a national bank may 
        provide, as a part of or incidental to the business of banking 
        pursuant to the paragraph designated the `Seventh' of 
        subsection (a), a product that was not regulated, as of January 
        1, 1996, as insurance by the appropriate insurance regulatory 
        authorities of any States in which the product is provided or 
        to be provided, but that any such regulatory authority 
        regulates, or through formal State regulatory action asserts 
        should be regulated, as insurance after that date, the 
        Comptroller of the Currency and any court reviewing the 
        determination of the Comptroller of the Currency, must 
        consider--
                    ``(A) views of insurance regulatory authorities of 
                any States in which the product is provided or to be 
                provided as to whether the product should be treated as 
                insurance, including the insurance regulatory 
                authorities' views as to the nature of the product and 
                the history of its regulation; and
                    ``(B) any other information relevant as to whether 
                the product should be treated as insurance.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) Insurance.--The term `insurance' shall 
                include any annuity contract the income on which is tax 
                deferred under section 72 of the Internal Revenue Code 
                of 1986.
                    ``(B) Product.--The term `product' shall be defined 
                as any product that existed as of January 1, 1996, and 
                a new form of such product that is developed after 
                January 1, 1996.
            ``(5) Authority.--
                    ``(A) In general.--For purposes of this subsection, 
                national banks had authority to provide a product in 
                any State as of January 1, 1996, if on or before such 
                date--
                            ``(i) the Comptroller of the Currency had 
                        determined, in writing, that national banks may 
                        provide the product; or
                            ``(ii) national banks were providing the 
                        product.
                    ``(B) Exception.--Notwithstanding subparagraph (A), 
                national banks did not have authority to provide a 
                product in a State as of January 1, 1996, if on or 
                before such date a court of relevant jurisdiction for 
                such State had, by final judgment, overturned a 
                determination of the Comptroller of the Currency that 
                national banks may provide such product.''.
    (c) Financial Services Holding Company Activities.--Section 4(c)(8) 
of the Financial Services Holding Company Act of 1997 (12 U.S.C. 
1843(c)(8)) is amended by striking ``approval by the Board prior to 
January 1, 1971.'' and inserting the following: ``approval by the Board 
prior to January 1, 1971; (H) effective 90 days after enactment it 
shall be financial in nature to provide insurance as principal, agent, 
or broker in any State, in full compliance with the laws and 
regulations of such State that apply uniformly to each type of 
insurance license or authorization in that State, except that in no 
event shall the company or the financial services holding company, or 
any affiliate of the company or the financial services holding company, 
be subject to any State law or regulation that restricts a bank from 
having an affiliate, agent, or employee in that State licensed to 
provide insurance as principal, agent, or broker. The Board shall 
prescribe regulations concerning insurance affiliations that provide 
equivalent treatment for all stock and mutual insurance companies that 
control or are affiliated with a bank, and fully accommodate and are 
consistent with State law.''.
    (d) Technical and Conforming Amendments.--
            (1) The eleventh undesignated paragraph of section 13 of 
        the Federal Reserve Act (12 U.S.C. 92) is amended by 
        inserting'', and subject to section 5136A of the Revised 
        Statutes of the United States, ``after'' the laws of the United 
        States''.
             (2) The paragraph designated the ``Seventh'' of section 
        5136 of the Revised Statutes of the United States (12 U.S.C. 
        24) is amended by striking ``subject to law,'' and inserting 
        ``subject to subsection (b), section 5136A, and any other 
        provision of law,''.
             (3) Section 1306 of title 18, United States Code, is 
        amended by striking ``5136A'' and inserting ``5136C''.
    (e) Clerical Amendment.--The table of sections for chapter 1 of 
title LXII of the Revised Statutes of the United States is amended--
             (1) by redesignating the item relating to section 5136A as 
        section 5136C; and
             (2) by inserting after the item relating to section 5136 
        the following new item:

``5136A. State supervision of insurance.''.
    (f) Preservation of Financial Services Holding Company Insurance 
Authority.--Except for subsection (c), no provision of this section, 
and no amendment made by this section to any other provision of law, 
may be construed as affecting the authority of a financial services 
holding company to engage in insurance agency activity pursuant to 
section 4 of the Financial Services Holding Company Act of 1997.
    (g) Preservation of State Bank Insurance Activities.--
             (1) In general.--Nothwithstanding section 4 or 7 of the 
        Financial Services Holding Company Act of 1997, no State law, 
        rule, regulation, or order that is adopted after the effective 
        date of this Act and that restricts or impedes a bank from 
        having an affiliate, agent, or employee in that State licensed 
        to provide insurance as principal, agent, or broker, on the 
        basis of an affiliation between a bank, agent, or employee and 
        an insurance company, shall apply to any insured State bank, or 
        any subsidiary of an insured State bank, that was--
                    (A) licensed to provide insurance as principal, 
                agent, or broker within such State on April 24, 1996; 
                and
                     (B) providing such insurance under the terms of 
                section 24 of the Federal Deposit Insurance Act.
            (2) Rule of construction.--No provision of paragraph (1) 
        shall be construed as preventing a State from repealing or 
        revising the authority for all banks or bank subsidiaries 
        chartered by such State to provide insurance as principal, 
        agent, or broker.
    (h) Insurance Affiliations in Nonrestrictive States.--In the case 
of an insurance affiliation that is otherwise permitted in a State in 
accordance with section 4(c)(8)(H) of the Financial Services Holding 
Company Act of 1997, no State law, provision of this section, or 
amendment to any other provision of law may be construed as affecting 
the authority of a national bank to provide as agent or broker 
insurance products provided as principal by the bank's affiliate.

SEC. 302. NATIONAL BANK COMMUNITY DEVELOPMENT INSURANCE ACTIVITIES.

    (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 5136A (as added by section 301(a)(2) of the Act) the following 
new section:
``Sec. 5136B. Insurance sales in empowerment zones
    ``(a) Authority To Sell Insurance as Agent From Empowerment 
Zones.--The Comptroller of the Currency may approve an application by a 
national bank maintaining a main office or full-service branch in an 
empowerment zone to act as an agent or broker from such office or 
branch for any fire, life, or other insurance company authorized to do 
business in the State in which the customer is located if--
            ``(1) the bank provides sufficient evidence that the 
        availability of competitively priced insurance in the 
        empowerment zone is inadequate; and
            ``(2) the insurance is sold only in the empowerment zone.
    ``(b) Application of State Law.--State laws which regulate 
conducting the business of insurance shall apply to national banks and 
their employees that sell insurance as agent or broker under this 
section to the same extent as such laws apply to other entities and 
persons not affiliated with depository institutions except--
            ``(1) in any case in which the Comptroller of the Currency 
        determines, after notice to and comment by the appropriate 
        State insurance officials, that the application of a State law 
        would have an unreasonably discriminatory effect upon the sale 
        of insurance by national banks or their employees in comparison 
        with the effect the application of the State law would have 
        with respect to sale of insurance by other entities; or
            ``(2) when State law by its own terms does not apply to 
        national banks or employees of such banks.
    ``(c) Authority of Comptroller of the Currency.--
            ``(1) In general.--The Comptroller of the Currency may 
        prescribe regulations governing sales of insurance by national 
        banks pursuant to this section.
            ``(2) Enforcement of state law.--The provisions of any 
        State law to which a national bank is subject under this 
        section shall be enforced with respect to such bank by the 
        Comptroller of the Currency.
    ``(d) Definitions.--
            ``(1) Empowerment zone.--The term `empowerment zone' means 
        an area that meets the standards for designation as an 
        empowerment zone or enterprise community under section 1392 of 
        the Internal Revenue Code of 1986 or an Indian reservation.
            ``(2) Full-service branch.--The term `full-service branch' 
        means a staffed facility which has been approved as a branch 
        and offers loan and deposit services.
            ``(3) Indian reservation.--The term `Indian reservation' 
        has the meaning given such term by section 168(j)(6) of the 
        Internal Revenue Code of 1986.''.
    (b) Clerical Amendment.--The table of sections for chapter 1 of 
title LXII of the Revised Statutes of the United States is amended 
by inserting after the item relating to section 5136(A) (as added by 
section 301(e) of this title) the following new item:

``5136B. Insurance sales in empowerment zones.''.

SEC. 303. REDOMESTICATION OF MUTUAL LIFE INSURERS.

    (a) Redomestication.--A mutual life insurer organized under the 
laws of any State may transfer its domicile to a transferee domicile as 
a step in a reorganization in which, pursuant to the laws of the 
transferee domicile, the mutual life insurer becomes a stock life 
insurer, whether as a direct or indirect subsidiary of a mutual holding 
company or otherwise. Upon compliance with the applicable law of the 
transferee domicile governing transfers of domicile and completion of a 
transfer pursuant to this section, the mutual life insurer shall cease 
to be a domestic insurer in the transferor domicile and, as a 
continuation of its corporate existence, shall be a domestic insurer of 
the transferee domicile.
    (b) Licenses, Etc.--The certificate of authority, agents' 
appointments and licenses, rates, approvals and other items which a 
licensed State allows and that are in existence immediately prior to 
the time a redomesticating insurer transfers its domicile pursuant to 
this section shall continue in full force and effect upon transfer if 
the insurer remains duly qualified to transact the business of 
insurance in such licensed State. All outstanding insurance policies 
and annuity contracts of a redomesticating insurer shall remain in full 
force and effect and need not be endorsed as to the new domicile of the 
insurer unless so ordered by the State insurance regulator of a 
licensed State, and the only as to those outstanding policies whose 
owners reside in such licensed State. Applicable State law may require 
a redomesticating insurer to file new policy forms with the State 
insurance regulator of a licensed State on or before the effective date 
of the transfer, but a redomesticating insurer may use existing policy 
forms with appropriate endorsements to reflect the new domicile of the 
redomesticating insurer until the new policy forms are approved for use 
by the State insurance regulator of such licensed State. A 
redomesticating insurer shall give notice of the proposed transfer to 
the State insurance regulator of each licensed State and shall file 
promptly any resulting amendments to corporate documents required to be 
filed by a foreign licensed mutual life insurer with the insurance 
regulator of each such licensed State.
    (c) Preemption of State Laws Restricting Redomestication.--
            (1) Any State law conflicting with the provisions of this 
        section is hereby preempted. Without limiting the generality of 
        the preceding sentence, the following State laws purporting to 
        regulate redomesticated or redomesticating insurers shall be 
        preempted with respect to such insurers:
                    (A) Any provision impeding or intended to impede 
                the activities of, taking any action against, or 
                applying any provision of law or regulation to, any 
                insurer or affiliate of such insurer because that 
                insurer or any affiliate plans to redomesticate or has 
                redomesticated pursuant to this section.
                    (B) Any provision impeding the activities of, 
                taking any action against, or applying any provision of 
                law or regulation to, any insured or any insurance 
                licensee or other intermediary because such insured or 
                such insurance licensee or other intermediary has 
                procured insurance from or placed insurance with any 
                insurer or any affiliate of such insurer that plans to 
                redomesticate or has redomesticated pursuant to this 
                section.
                    (C) any provision purporting to terminate, by 
                reason of the redomestication of a mutual life insurer 
                pursuant to this section, any certificate of authority, 
                agent appointment or license, rate approval or other 
                approval of any State insurance regulator or other 
                State authority in existence immediately prior to the 
                redomestication in any State other than the transferee 
                domicile.
        Where a State applies any State law to a redomesticating or 
        redomesticated insurer or insurers (as well as affiliates of 
        such insurer or insurers) in a different manner than the State 
        has applied such law to insurers that are not redomesticating 
        or redomesticated insurers, such application of such law or 
        regulation to the redomesticating or redomesticated insurer or 
        insurers shall be preempted.
            (2) If any licensed State fails to issue, delays the 
        issuance of, or seeks to revoke an original or renewal 
        certificate of authority of a redomesticated insurer 
        immediately following redomestication, except on grounds and in 
        a manner consistent with its past practices regarding the 
        issuance of certificates of authority to foreign insurers that 
        are not redomesticating, then the redomesticating insurer shall 
        be exempt from any State law of the licensed State to the 
        extent that such State law or the operation of such State law 
        would make unlawful, or regulate, directly or indirectly, the 
        operation of the redomesticated insurer, except that such 
        licensed State may require the redomesticated insurer to--
                    (A) comply with the unfair claim settlement 
                practices of law of the licensed State;
                    (B) pay, on a nondiscriminatory basis, applicable 
                premium and other taxes which are levied on licensed 
                insurers or policyholders under the laws of the 
                licensed State;
                    (C) register with and designate the State insurance 
                regulator as its agent solely for the purpose of 
                receiving service of legal documents or process;
                    (D) submit to an examination by the State insurance 
                regulatory in any licensed State in which the 
                redomesticated insurer is doing business to determine 
                the insurer's financial condition, if (A) the State 
                insurance regulator of the transferee domicile has not 
                begun and has refused to initiate an examination of the 
                redomesticated insurer, and (B) any such examination is 
                coordinated to avoid unjustified duplication and 
                repetition;
                    (E) comply with a lawful order issued in (A) a 
                delinquency proceeding commenced by the State insurance 
                regulator of any licensed State if there has been a 
                judicial finding of financial impairment under 
                paragraph (g) below, or (B) a voluntary dissolution 
                proceeding;
                    (F) comply with any State law regarding deceptive, 
                false or fraudulent acts or practices, except that if 
                the licensed State seeks an injunction regarding the 
                conduct described in this paragraph, such injunction 
                must be obtained from a court of competent jurisdiction 
                as provided in subsection (d).
                    (G) comply with an injunction issued by a court of 
                competent jurisdiction, upon a petition by the State 
                insurance regulator alleging that the redomesticated 
                insurer is in hazardous financial condition or is 
                financially impaired;
                    (H) participate in any insurance insolvency 
                guaranty association on the same basis as any other 
                insurer licensed in the licensed State; and
                    (I) require a person acting, or offering to act, as 
                an insurance licensee for a redomesticated insurer in 
                the licensed State to obtain a license from that State, 
                except that such State may not impose any qualification 
                or requirement which discriminates against a 
                nonresident insurance licensee.
    (d) Judicial Review.--The appropriate United States District Court 
shall have exclusive jurisdiction over litigation arising under this 
section involving any redomesticating or redomesticated company.
    (e) Separability.--If any provision of this section, or the 
application thereof to any person or circumstances, is held invalid, 
the remainder of the Act, and the application of such provision to 
other persons or circumstances, shall not be affected thereby.
    (f) Definition.--As used in this Act, unless the context otherwise 
requires--
            (1) the term ``affiliate'' means a person that controls, is 
        controlled by, or is under common control with, another person;
            (2) the term ``control'', including the terms 
        ``controlling'', ``controlled by'' and ``under common control 
        with'', means the possession, directly or indirectly, of the 
        power to direct or cause the direction of the management and 
        policies of an institution, whether through the ownership of 
        voting securities, by contract or otherwise;
            (3) the term ``court of competent jurisdiction'' means a 
        court authorized pursuant to subsection (d) to adjudicate 
        litigation arising under this section;
            (4) the term ``domicile'' means the State in which an 
        insurer is incorporated, chartered or organized;
            (5) the term ``insurance licensee'' means any person who or 
        which holds a license under State law to act as insurance 
        agent, sub-agent, broker or consultant;
            (6) the term ``institution'' means a corporation, joint 
        stock company, limited liability company, limited liability 
        partnership, association, trust, partnership or any similar 
        entity;
            (7) the term ``licensed State'' means any State, Puerto 
        Rico or the U.S. Virgin Islands in which the redomesticating 
        insurer has a certificate of authority in effect immediately 
        prior to the redomestication;
            (8) the term ``mutual life insurer'' means a mutual life 
        insurer organized under the laws of any State;
            (9) the term ``person'' means an individual, institution, 
        government of governmental agency, State or political 
        subdivision of a State, public corporation, board, association, 
        estate, trustee, or fiduciary, or any similar entity;
            (10) the term ``redomesticated insurer'' means a mutual 
        life insurer that has redomesticated pursuant to this section;
            (11) the term ``redomesticating insurer'' means a mutual 
        life insurer that is redomesticating pursuant to this section;
            (12) the term ``redomestication'' or ``transfer'' means the 
        transfer of the domicile of an mutual life insurer from one 
        State to another State pursuant to this section;
            (13) the term ``State'' means any State or the District of 
        Columbia;
            (14) the term ``State insurance regulatory'' means the 
        principal insurance regulatory authority of a State of Puerto 
        Rico or the U.S. Virgin Islands;
            (15) the term ``State law'' means the statutes of any State 
        or of Puerto Rico or the U.S. Virgin Islands and any 
        regulation, rule, order or requirement promulgated pursuant 
        thereto;
            (16) the term ``transferee domicile'' means the State to 
        which a mutual life insurer is redomesticating pursuant to the 
        provisions of this section;
            (17) the term ``transferor domicile'' means the State from 
        which a mutual life insurer is redomesticating pursuant to the 
        provisions of this section; and
            (18) the term ``voting securities'' means securities of any 
        class or any ownership interest having voting power for the 
        election of the board of directors of a person, other than 
        securities having voting power only because of the occurrence 
        of a contingency.

                  TITLE IV--THRIFT CHARTER CONVERSION

          Subtitle A--Status of Banks and Savings Associations

SEC. 400. SHORT TITLE.

    This title may be cited as the ``Thrift Charter Conversion Act of 
1997.''

SEC. 401. TERMINATION OF FEDERAL SAVINGS ASSOCIATIONS; TREATMENT OF 
              STATE SAVINGS ASSOCIATIONS AS BANKS FOR PURPOSES OF 
              FEDERAL BANKING LAW.

    (a) Termination of Federal Savings Association Charters.--
            (1) In general.--Each Federal savings association shall--
                    (A) convert to a national bank charter;
                    (B) convert to a State depository institution 
                charter; or
                    (C) surrender the charter of such savings 
                association and liquidate the institution.
            (2) Conversion to national bank by operation of law.--If 
        any Federal savings association has not taken any action 
        required under paragraph (1) as of January 1, 1998, the savings 
        association shall--
                    (A) become a national bank on such date by 
                operation of law;
                    (B) immediately file articles of association and an 
                organizational certificate with the Comptroller of the 
                Currency in accordance with sections 5133, 5134, and 
                5135 of the Revised Statutes of the United States; and
                    (C) cease to exist as a Federal savings association 
                as of such date.
            (3) Prohibition on new charters of federal savings 
        associations.--The Director of the Office of Thrift Supervision 
        may not grant any charter for a Federal savings association for 
        which an application was received after the date of the 
        enactment of this Act.
    (b) Treatment of State Savings Associations as Banks for Purposes 
of Federal Banking Law.--
            (1) Amendments to federal deposit insurance act.--Section 3 
        of the Federal Deposit Insurance Act (12 U.S.C. 1813) is 
        amended--
                    (A) by striking paragraph (2) of subsection (a) and 
                inserting the following new paragraph:
            ``(2) State bank.--
                    ``(A) In general.--The term `State bank' means any 
                bank, banking association, trust company, savings bank, 
                industrial bank (or similar depository institution 
                which the Board of Directors finds to be operating 
                substantially in the same manner as an industrial 
                bank), building and loan association, savings and loan 
                association, homestead association, cooperative bank, 
                or other banking institution--
                            ``(i) which is engaged in the business of 
                        receiving deposits, other than trust funds (as 
                        defined in this section); and
                            ``(ii) which--
                                    ``(I) is incorporated under the 
                                laws of any State;
                                    ``(II) is organized and operating 
                                according to the laws of the State in 
                                which such institution is chartered or 
                                organized; or
                                    ``(III) is operating under the Code 
                                of Law for the District of Columbia 
                                (except a national bank).
                    ``(B) Certain insured banks included.--The term 
                `State bank' includes any cooperative bank or other 
                unincorporated bank the deposits of which were insured 
                by the Corporation on the day before the date of the 
                enactment of the Financial Institutions Reform, 
                Recovery, and Enforcement Act of 1989.
                    ``(C) Certain uninsured banks excluded.--The term 
                `State bank' does not include any cooperative bank or 
                other unincorporated bank the deposits of which were 
                not insured by the Corporation on the day before the 
                date of the enactment of the Financial Institutions 
                Reform, Recover, and Enforcement Act of 1989.''; and
                    (B) in subsection (q)--
                            (i) by inserting ``and'' after the 
                        semicolon at the end of paragraph (2);
                            (ii) by striking ``; and'' at the end of 
                        paragraph (3) and inserting a period; and
                            (iii) by striking paragraph (4).
            (2) Amendments to the bank holding company act of 1956.--
        Section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1841) is amended--
                    (A) by striking subparagraph (E) of subsection 
                (a)(5); and
                    (B) by striking subparagraphs (B) and (J) of 
                subsection (c)(2).
            (3) Amendments to the federal reserve act.--The second and 
        third paragraphs of the first section of the Federal Reserve 
        Act (12 U.S.C. 221) are each amended by inserting ``(as defined 
        in section 3(a)(2) of the Federal Deposit Insurance Act)'' 
        after ``State bank''.
    (c) Comparability of Regulation for State-Chartered Depository 
Institutions.--
            (1) Review of state supervision.--The Corporation shall 
        maintain procedures for reviewing, under standards the Board of 
        Directors shall prescribe in regulations, the manner in which 
        State depository institutions are regulated by a State for the 
        purpose of ensuring that State savings associations are no less 
        rigorously regulated by a State than State banks.
            (2) Inadequate state regulation.--If, in connection with a 
        review of State regulation of State depository institutions 
        pursuant to paragraph (1), the Corporation determines that a 
        State regulates savings associations chartered by such State 
        less rigorously than the State regulates banks chartered by 
        such State, the Corporation may take such action under section 
        8(a) of the Federal Deposit Insurance Act as the Corporation 
        determines to be appropriate with respect to savings 
        associations chartered by such State which shall be effective 
        no later than the end of the 1-year period beginning on the 
        date of such determination.
            (3) Definitions.--The following definitions shall apply for 
        purposes of this subsection:
                    (A) State bank.--The term ``State bank'' has the 
                same meaning as in section 3(a)(2) of the Federal 
                Deposit Insurance Act (as in effect on the date of the 
                enactment of the Thrift Charter Conversion Act of 
                1997).
                    (B) State savings association.--The term ``State 
                savings association'' has the same meaning as in 
                section 3(b)(2) of the Federal Deposit Insurance Act 
                (as in effect on the date of the enactment of the 
                Thrift Charter Conversion Act of 1997).
                    (C) State depository institution.--The term ``State 
                depository institution'' has the same meaning as in 
                section 3(c)(5) of the Federal Deposit Insurance Act.

SEC. 402. TREATMENT OF CERTAIN ACTIVITIES AND AFFILIATIONS OF BANK 
              HOLDING COMPANIES RESULTING FROM THIS ACT.

    Section 4 of the Bank Holding Company Act of 1956(12 U.S.C. 1843) 
is amended by adding at the end the following new subsection:
    ``(m) Treatment of Companies Resulting From Savings and Loan 
Holding Companies.--
            ``(1) In general.--Notwithstanding any other provision of 
        this section (other than paragraph (5)) or any other provision 
        of Federal law including sections 20 and 32 of the Banking Act 
        of 1933, a qualified bank holding company may, after such 
        company becomes a bank holding company--
                    ``(A) maintain or enter into any nonbanking 
                affiliation which such company was authorized to 
                maintain or enter into as of January 1, 1997, or was 
                authorized to maintain following a merger of insured 
                depository institution subsidiaries pursuant to an 
                application filed no later than such date; and
                    ``(B) engage, directly or through any affiliate 
                described in subparagraph (A) which is not a bank, in 
                any activity in which such company or any affiliate 
                described in subparagraph (A) was authorized to engage 
                as of January 1, 1997, or in which such company was 
                authorized to engage following a merger of insured 
                depository institution subsidiaries pursuant to an 
                application filed no later than such date, if the 
                requirements of paragraph (4) are met.
            ``(2) Qualified bank holding company defined.--For purposes 
        of this subsection, the term `qualified bank holding company' 
        means--
                    ``(A) any company--
                            ``(i) which--
                                    ``(I) as of January 1, 1997, is a 
                                savings and loan holding company; or
                                    ``(II) as of January 1, 1997, has 
                                filed an application to charter a de 
                                novo Federal savings association and 
                                thereafter becomes a savings and loan 
                                holding company by virtue of the 
                                establishment of such savings 
                                association; and
                            ``(ii) which as of the date referred to in 
                        subclause (I) or (II), as the case may be, is 
                        not a bank holding company and becomes a bank 
                        holding company after such date, or any 
                        subsidiary of such company; and
                    ``(B) any bank holding company which as of January 
                1, 1997--
                            ``(i) is a savings and loan holding 
                        company; and
                            ``(ii) is exempt from this section pursuant 
                        to an order issued by the Board under 
                        subsection (d).
            ``(3) No loss of subsection (d) Exemption.--No qualified 
        bank holding company described in paragraph (2)(B) shall lose 
        the grounds for the exemption under subsection (d) because a 
        savings association which such company controlled, directly or 
        indirectly, as of January 1, 1997, becomes a bank after such 
        date so long as such bank continues to meet the requirements of 
        subparagraphs (A) and (B) of paragraph (4).
            ``(4) Prerequisites for continuation of grandfathered 
        activities and affiliations.--This subsection shall cease to 
        apply with respect to a qualified bank holding company if, at 
        any time after such company first meets the definition of a 
        qualified bank holding company--
                    ``(A) any insured depository institution controlled 
                by such company which, as of the day before the company 
                first meets the definition of a qualified bank holding 
                company--
                            ``(i) was subject to the requirements 
                        contained in section 10(m) of the Home Owners' 
                        Loan Act, as in effect on such date, (and 
                        regulations in effect on such date under such 
                        section) for treatment as a qualified thrift 
                        lender under such section; and
                            ``(ii) was not a savings association 
                        described in section 10(m)(3)(F) of such Act, 
                        as in effect on such date fails to meet any 
                        requirement of such section;
                    ``(B) any insured depository institution controlled 
                by such company fails to comply with any limitation or 
                restriction on the type or amounts of loans or 
                investments of the institution to which such 
                institution was subject as of the date of the enactment 
                of the Thrift Charter Conversion Act of 1997, other 
                than any limitation relating to qualified thrift 
                investments under section 10(m) of the Home Owners' 
                Loan Act, as in effect on such date; or
                    ``(C) the company or any subsidiary of the company 
                acquires more than 5 percent of the shares or assets of 
                any bank or any savings association (as such term is 
                defined in section 3 of the Federal Deposit Insurance 
                Act as in effect on the date of the enactment of the 
                Thrift Charter Conversion Act of 1997) after January 1, 
                1997, unless the assets of such bank or savings 
                association is merged with any insured depository 
                institution which was controlled by such company before 
                January 1, 1997.
            ``(5) Nontransferable.--This subsection shall not apply 
        with respect to any qualified bank holding company if, after 
        January 1, 1997--
                    ``(A) any person not under common control with such 
                company acquires, directly or indirectly, control of 
                the company; or
                    ``(B) the company is the subject of any merger, 
                consolidation, or other similar transaction as a result 
                of which a person not under common control with such 
                company acquires, directly or indirectly, control of 
                such company.
            ``(6) Enforcement.--In addition to any other power of the 
        Board, the Board may enforce compliance with the provisions of 
        this subsection with respect to any qualified bank holding 
        company and any bank controlled by such company under section 8 
        of the Federal Deposit Insurance Act.''.

SEC. 403. TRANSITION PROVISIONS FOR ACTIVITIES OF SAVINGS ASSOCIATIONS 
              WHICH CONVERT INTO OR BECOME TREATED AS BANKS.

     (a) In General.--Notwithstanding any other provision of Federal 
law, any insured depository institution which, as of January 1, 1997, 
is a savings association (as defined in section 3(b) of the Federal 
Deposit Insurance Act (as in effect on such date)) and after such date 
converts to a national or State bank charter or becomes treated as a 
State bank pursuant to the amendment made by section 401(b) may 
continue to engage, directly or indirectly, in any activity in which 
such institution was lawfully engaged as of such date during the 2-year 
period beginning on the effective date of such conversion or the 
effective date of such amendments, as the case may be.
    (b) Two 1-Year Extensions Authorized.--The 2-year period described 
in subsection (a) with respect to any insured depository institution 
may be extended for such institution not to exceed two additional times 
for not more than 1 year each time if the appropriate Federal banking 
agency determines that such extension is necessary to avert substantial 
loss to the institution and is otherwise consistent with the safety and 
soundness of the institution.

SEC. 404. REGISTRATION OF BANK HOLDING COMPANIES RESULTING FROM 
              CONVERSIONS OF SAVINGS ASSOCIATIONS TO BANKS OR TREATMENT 
              OF SAVINGS ASSOCIATIONS AS BANKS.

    Section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842) 
is amended by adding at the end of the following new subsections:
    ``(h) Registration of Certain Bank Holding Companies.--A company 
which, as of January 1, 1997, is a savings and loan holding company (as 
defined in section 10(a)(1)(D) of Home Owners' Loan Act (as in effect 
on such date) and is not a bank holding company shall not be required 
to obtain the approval of the Board under subsection (a) to become a 
bank holding company after January 1, 1997, as a result of the 
conversion of any insured depository institution subsidiary of such 
company into a bank or by virtue of the treatment of any insured 
depository institution subsidiary of such company as a bank pursuant to 
the amendments made by the Thrift Charter Conversion Act of 1997, if 
such company--
            ``(1) registers as a bank holding company with the Board in 
        accordance with section 5(a); and
            ``(2) does not acquire, directly or indirectly, ownership 
        or control of any additional insured depository institution or 
        other company in connection with such conversion or 
        treatment.''.

SEC. 405. ADDITIONAL TRANSITION PROVISIONS AND SPECIAL RULES.

    (a) Mutual National Banks Authorized; Conversion of Mutual Savings 
Associations Into National Banks.--
            (1) In general.--Chapter one 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 section:
``Sec. 5133A. Mutual national banks
    ``(a) In General.--Notwithstanding the paragraph designated the 
``Third'' of section 5134, the Comptroller of the Currency may charter 
national banks organized in the mutual form either de novo or through a 
conversion of any stock national or State bank (as defined in section 3 
of the Federal Deposit Insurance Act) or any State mutual bank or 
credit union, subject to regulations prescribed by the Comptroller of 
the Currency in accordance with this section.
    ``(b) Regulations.--
            ``(1) Transition rules.--National banks organized in the 
        mutual form shall be subject to the regulations of the Director 
        of the Office of Thrift Supervision governing corporate 
        organization, governance, and conversion of mutual 
        institutions, as in effect on January 1, 1997, including parts 
        543, 544, 546, 563b, and 563c of chapter V of title 12 of the 
        Code of Federal Regulations (as in effect on such date), during 
        the 3-year period beginning on the date of the enactment of the 
        Thrift Charter Conversion Act of 1997.
            ``(2) Regulations of the comptroller.--The Comptroller of 
        the Currency shall prescribe appropriate regulations for 
        national banks organized in the mutual form, effective as of 
        the end of the 3-year period referred to in paragraph (1).
            ``(3) Applicability of capital stock requirements.--The 
        Comptroller of the Currency shall prescribe regulations 
        regarding the manner in which requirements of title LXII of the 
        Revised Statutes of the United States with respect to capital 
        stock, and limitations imposed on national banks under such 
        title based on capital stock, shall apply to national banks 
        organized in mutual form pursuant to subsection(a).
    ``(c) Conversions.--
            ``(1) Conversion to stock national bank.--Subject to such 
        regulations as the Comptroller of the Currency may prescribe 
        for the protection of depositors' rights and for any other 
        purpose the Comptroller of the Currency may consider 
        appropriate, any national bank which is organized in mutual 
        form pursuant to paragraph (1) may reorganize as a stock 
        national bank.
            ``(2) Conversions to state banks.--Any national mutual bank 
        may convert to a State bank charter in accordance with 
        regulations prescribed by the Comptroller of the Currency and 
        applicable State law.''.
            (2) Mutual bank holding companies.--Subsection (g) of 
        section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1842(g)) is amended to read as follows:
    ``(g) Mutual Bank Holding Companies.--
            ``(1) In general.--A national mutual bank may reorganize so 
        as to become a holding company by--
                    ``(A) chartering an interim national bank, the 
                stock of which is to be wholly owned, except as 
                otherwise provided in this section, by the national 
                mutual bank; and
                    ``(B) transferring the substantial part of the 
                national mutual bank's assets and liabilities, 
                including all of the bank's insured liabilities, to the 
                interim national bank.
            ``(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 national mutual bank; and
                    ``(B) in the case of a national mutual bank 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 bank's charter and bylaws.
            ``(3) Notice to the board; disapproval period.--
                    ``(A) Notice required.--
                            ``(i) In general.--At least 60 days before 
                        taking any action described in paragraph (1), a 
                        national mutual bank seeking to establish a 
                        mutual holding company shall provide written 
                        notice to the Board.
                            ``(ii) Contents of notice.--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 national mutual 
                bank 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 national mutual bank involved 
                        warrant disapproval;
                            ``(iii) the national mutual bank fails to 
                        furnish the information required under 
                        subparagraph (A); or
                            ``(iv) the national mutual bank fails to 
                        comply with the requirement of paragraph (2).
                    ``(D) Retention of capital assets.--In connection 
                with the transaction described in paragraph (1), a 
                national mutual bank, subject to the approval of the 
                Board, retain capital assets at the holding company 
                level to the extent that the capital retained at the 
                holding company is in excess of the amount of capital 
                required in order for the interim national bank to meet 
                all relevant capital standards established by the 
                Comptroller of the Currency for national banks.
            ``(4) Ownership.--
                    ``(A) In general.--Persons having ownership rights 
                in the national mutual bank under section 5133A of the 
                Revised Statutes of the United States (including 
                paragraph 575.5 of chapter V of title 12 of the Code of 
                Federal Regulations, as in effect on January 1, 1997, 
                and applicable to national mutual banks pursuant to 
                such section) 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 national bank chartered as part of 
                        a transaction described in paragraph (1); or
                            ``(ii) a mutual bank 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 national or State 
                bank.
                    ``(B) Acquiring a mutual bank through the merger of 
                such bank into a national bank subsidiary of such 
                holding company or an interim national bank subsidiary 
                of such holding company.
                    ``(C) Subject to paragraph (6), merging with or 
                acquiring another holding company, one of whose 
                subsidiaries is a national mutual bank.
                    ``(D) Investing in a corporation the capital stock 
                of which is available for purchase by a national mutual 
                bank under Federal law or under the law of any State 
                where the home office of any subsidiary bank is 
                located.
                    ``(E) Engaging in the activities permitted under 
                section 4(c).
            ``(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) Chartering and other requirements.--
                    ``(A) In general.--A mutual holding company shall 
                be chartered by the Board and shall be subject to such 
                regulations as the Board may prescribe.
                    ``(B) Other requirements.--Unless the context 
                otherwise requires, a mutual holding company shall be 
                subject to the other requirements of this Act 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 national bank chartered as part of a 
                transaction described in paragraph (1) to raise capital 
                for such bank.
                    ``(B) Issuance of nonvoting shares.--No provision 
                of this Act shall be construed as prohibiting a 
                national bank 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 bank 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 national bank--
                                    ``(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 
                depository institution 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 depository 
                institution in the mutual holding company, to the 
                extent of the Corporation's loss.
            ``(10) State mutual bank holding company.--
                    ``(A) In general.--Notwithstanding any provision of 
                Federal law, a State bank operating in mutual form may 
                reorganize so as to form a holding company under State 
                law.
                    ``(B) Regulation of state mutual holding company.--
                A corporation organized as a holding company in 
                accordance with subparagraph (A) shall be regulated on 
                the same terms and be subject to the same limitations 
                as any other holding company which controls a bank.
            ``(11) Regulations.--
                    ``(A) Transition rules.--Mutual bank holding 
                companies organized under this subsection shall be 
                subject to the regulations of the Director of the 
                Office of Thrift Supervision governing corporate 
                organization, governance, and conversion of mutual 
                institutions, as in effect on January 1, 1997, 
                including part 575 of chapter V of title 12 of the Code 
                of Federal Regulations (as in effect on such date), 
                during the 3-year period beginning on the date of the 
                enactment of the Thrift Charter Conversion Act of 1997.
                    ``(B) Regulations of the board.--The Board shall 
                prescribe appropriate regulations for mutual holding 
                companies, effective at the end of the 3-year period 
                referred to in subparagraph (A).
            ``(12) No change of control.--Any second stage conversion 
        of a mutual holding company to full stock form shall not be 
        deemed to be a change of control if, in connection with such 
        conversion, no company, directly or indirectly, acquires 
        control of such mutual holding company or any successor to such 
        company.
            ``(13) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                    ``(A) Mutual holding company.--The term `mutual 
                holding company' means a corporation organized as a 
                holding company under this subsection.
                    ``(B) 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.
                    ``(C) National mutual bank.--The term `national 
                mutual bank' means a national bank organized in mutual 
                form under section 5133A of the Revised Statutes of the 
                United States.''.
            (3) Limitation on federal regulation of state banks.--
        Except as otherwise provided in Federal law, the Comptroller of 
        the Currency, Board of Governors of the Federal Reserve System, 
        and Federal Deposit Insurance Corporation may not adopt or 
        enforce any regulation which contravenes the corporate 
        governance rules prescribed by State law or regulation for 
        State banks unless the Comptroller, Board, or Corporation finds 
        that such Federal regulation is necessary to assure the safety 
        and soundness of such State banks.
            (4) Conversions of mutual savings associations to mutual 
        national banks by operation of law.--Notwithstanding any other 
        provision of Federal or State law, any savings association (as 
        defined in section 3 of the Federal Deposit Insurance Act (as 
        in effect on January 1, 1997)) which is organized in mutual 
        form as of the date of the enactment of this Act may become a 
        national mutual bank by operation of law if the association--
                    (A) files the articles of association and 
                organization certificate with the Comptroller of the 
                Currency before January 1, 1998, in accordance with 
                chapter one of title LXII of the Revised Statutes of 
                the United States; and
                    (B) provides such other document or information as 
                the Comptroller of the Currency may prescribe in 
                regulations consistent with this section and section 
                5133A of the Revised Statutes of the United States (as 
                added by paragraph (1) of this subsection).
    (b) Membership in Federal Home Loan Banks.--Any insured depository 
institution which--
            (1) as of the date of the enactment of this Act, is a 
        Federal savings association which, pursuant to section 6(e) of 
        the Federal Home Loan Bank Act, may not voluntarily withdraw 
        from membership in a Federal home loan bank; and
            (2) after such date converts from a Federal savings 
        association to a national bank,
shall continue to be subject to the prohibition under such section on 
voluntary withdrawal from such membership as though such bank were 
still a Federal savings association until the bank ceases to be a 
national bank.
    (c) Branches.--
            (1) In general.--Notwithstanding any provision of the 
        Federal Deposit Insurance Act, the Bank Holding Company Act of 
        1956, or any other Federal or State law, any depository 
        institution which--
                    (A) as of the date of the enactment of this Act, is 
                a savings association; and
                    (B) becomes a bank before January 1, 1998, or, 
                pursuant to the amendments made by this subsection, is 
                treated as a bank as of such date under the Federal 
                Deposit Insurance Act, and any depository institution 
                or bank holding company which acquires such depository 
                institution, may continue, after the depository 
                institution becomes or commences to be treated as a 
                bank, to operate any branch or agency which the savings 
                association was operating as a branch or agency or was 
                in the process of establishing as a branch or agency on 
                January 1, 1997.
            (2) No additional branches.--Paragraph (1) shall not be 
        construed as authorizing the establishment, acquisition, or 
        operation of any additional branch of a depository institution, 
        or the conversion of any agency to a branch, in any State by 
        virtue of the operation by such institution of a branch or 
        agency in such State pursuant to such paragraph except to the 
        extent such establishment, acquisition, operation, or 
        conversion is permitted under the Federal Deposit Insurance 
        Act, Bank Holding Company Act of 1956, and any other applicable 
        Federal or State law.
            (3) Establishing a branch or agency.--For purposes of 
        paragraph (1), a savings association shall be treated as having 
        been in the process of establishing a branch or agency as of 
        January 1, 1997, if, as of such date, the savings association--
                    (A) had received approval from the Director of the 
                Office of Thrift Supervision to establish such branch 
                or agency;
                    (B) had pending with the Director of the Office of 
                Thrift Supervision an application or notice to 
                establish such branch or agency;
                    (C) had a legal and contractual obligation to 
                establish such branch or agency;
                    (D) had received authority from the appropriate 
                Federal banking agency to establish such branch in 
                connection with the assumption of liabilities or an 
                acquisition of an insured depository institution 
                pursuant to subsection (f) or (k) of section 13 of the 
                Federal Deposit Insurance Act or section 408(m) of the 
                National Housing Act (as in effect before the date of 
                the enactment of the Financial Institutions Reform, 
                Recovery, and Enforcement Act of 1989); or
                    (E) in the case of a well capitalized depository 
                institution, is able to demonstrate to the appropriate 
                Federal banking agency that the savings association--
                            (i) had made a significant financial 
                        commitment; and
                            (ii) had taken legally binding action or 
                        incurred a contractual obligation, in 
                        furtherance of the establishment of such branch 
                        or agency.
    (d) Transition Provision Relating to Limitations on Loans to One 
Borrower.--Section 5200 of the Revised Statutes of the United States 
(12 U.S.C. 84) is amended by adding at the end the following new 
subsection:
    ``(e) Transition Provision for Savings Associations Converting to 
National Banks.--In the case of any depository institution which, as of 
January 1, 1997, is a savings association (as defined in section 3(b) 
of the Federal Deposit Insurance Act (as in effect on such date)) and 
becomes a national bank on or before January 1, 1998, any loan, or 
legally binding commitment to make a loan, made or entered into by such 
institution which is outstanding on the date the institution becomes a 
national bank may continue to be held without regard to any limitation 
contained in this section during the 3-year period beginning on such 
date.''.
    (e) Rights and Authority of Banks Resulting From Conversions of 
Savings Associations.--
            (1) In general.--Upon conversion of a savings association 
        to a national or State bank in accordance with this Act and the 
        amendments made by this title or other provisions of law--
                    (A) the national or State bank shall succeed to all 
                rights, benefits, privileges, powers and franchises, 
                and be subject to all the obligations, duties, 
                restrictions, and disabilities, of such savings 
                association under any contract, agreement, document, or 
                instrument in effect at the time of such conversion to 
                which such savings association was a party; and
                    (B) any reference to the savings association in any 
                such contract, agreement, document, or instrument shall 
                be deemed to be a reference to such national or State 
                bank.
            (2) Treatment of bank or savings association.--If the 
        application of paragraph (1) with respect to any national or 
        State bank referred to in such paragraph would--
                    (A) be inconsistent or in conflict with any 
                contract, agreement, document, or instrument described 
                in such paragraph;
                    (B) constitute a default under the contract, 
                agreement, document, or instrument;
                    (C) cause such national or State bank to be in 
                default or breach under any provision of the contract, 
                agreement, document, or instrument, the national or 
                State bank shall be deemed to be, and treated as, a 
                savings association for purposes of the contract, 
                agreement, document, or instrument.
    (f) Transfer and Grandfather of Mutual Holding Companies.--
            (1) Supervision and regulation of mutual holding 
        companies.--
                    (A) In general.--The supervision and regulation of 
                any mutual holding company in existence as of the date 
                of the enactment of this Act is hereby transferred to 
                the Board of Governors of the Federal Reserve System.
                    (B) Transition rules.--Mutual bank holding 
                companies described in subparagraph (A) shall be 
                subject to the regulations of the Director of the 
                Office of Thrift Supervision, as in effect on January 
                1, 1997, including part 575 of chapter V of title 12 of 
                the Code of Federal Regulations (as in effect on such 
                date), during the 3-year period beginning on the date 
                of the enactment of the Thrift Charter Conversion Act 
                of 1997.
            (2) Grandfather of existing federal mutual holding 
        companies.--
                    (A) In general.--Any Federal mutual holding company 
                in existence as of the date of the enactment of this 
                Act shall be subject to section 4(m) of the Bank 
                Holding Company Act of 1956 (as added by section 402 of 
                this title).
                    (B) Treatment under 4(m).--Any treatment of a 
                Federal mutual holding company under section 4(m) shall 
                not be construed as a change in control unless, as a 
                result of the transaction, the holding company no 
                longer controls the entity.

SEC. 406. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Amendments to the Federal Deposit Insurance Act.--
            (1) Section 3(z) of the Federal Deposit Insurance Act (12 
        U.S.C. 1813(z)) is amended by striking ``, the Director of the 
        Office of Thrift Supervision,''.
            (2) Section 8(b) of the Federal Deposit Insurance Act (12 
        U.S.C. 1818(b)) is amended by striking paragraph (9).
            (3) Section 13 of the Federal Deposit Insurance Act (12 
        U.S.C. 1823) is amended by striking subsection (k).
            (4) Subsections (c)(2) and (i)(2) of section 18 of the 
        Federal Deposit Insurance Act (12 U.S.C. 1828) are each 
        amended--
                    (A) in subparagraph (B), by inserting ``and'' after 
                the semicolon;
                    (B) in subparagraph (C), by striking ``; and'' and 
                inserting a period; and
                    (C) by striking subparagraph (D).
            (5) Section 18 of the Federal Deposit Insurance Act (12 
        U.S.C. 1828) is amended by striking subsection (m).
            (6) The Federal Deposit Insurance Act (12 U.S.C. 1811 et 
        seq.) is amended by striking section 28.
    (b) Amendments to the Bank Holding Company Act of 1956.--
            (1) Section 2 of the Bank Holding Company Act of 1956 (12 
        U.S.C. 1841) is amended by striking subsections (i) and (j).
            (2) Section 4(c)(8) of the Bank Holding Company Act of 1956 
        (12 U.S.C. 1843(c)(8)) is amended by striking the sentence 
        preceding the penultimate sentence.
            (3) Section 4(f) of the Bank Holding Company Act of 1956 
        (12 U.S.C. 1843(f)) is amended--
                    (A) in paragraph (2)(A)(i), by striking ``or an 
                insured institution'' and all that follows through ``of 
                this subsection)'';
                    (B) in paragraph (2)(A)(ii)--
                            (i) by striking ``or a savings 
                        association'' where such term appears in the 
                        portion of such paragraph which precedes 
                        subclause (I));
                            (ii) by inserting ``and'' at the end of 
                        subclause (VI);
                            (iii) by striking subclauses (VIII), (IX), 
                        and (X); and
                            (iv) by striking ``(V), and (VIII)'', where 
                        such term appears in the portion of such 
                        paragraph which appears after the end of 
                        subclause (VII), and inserting ``and (V)''; and
                    (C) by striking paragraphs (10), (11), (12), and 
                (13).
            (4) Section 4(i) of the Bank Holding Company Act of 1956 
        (12 U.S.C. 1843(i)) is amended--
                    (A) by striking paragraphs (1) and (2); and
                    (B) in paragraph (3)(A), by striking ``any Federal 
                savings association'' and all that follows through the 
                period at the end of such paragraph and inserting 
                ``such association was authorized to engage under this 
                section as of September 15, 1995.''.
    (c) Other Technical and Conforming Amendments.--
            (1) Section 804(a) of the Alternative Mortgage Transaction 
        Parity Act of 1982 (12 U.S.C. 3803) is amended--
                    (A) in the portion of such subsection which 
                precedes paragraph (1)--
                            (i) by striking ``, and other nonfederally 
                        chartered housing creditors,''; and
                            (ii) by inserting ``and in order to permit 
                        other nonfederally chartered housing creditors 
                        to make, purchase, and enforce alternative 
                        mortgage transactions,'' after ``enforcing 
                        alternative mortgage transactions,''; and
                    (B) in paragraph (1), by inserting ``(as such term 
                is defined in section 3(a) of the Federal Deposit 
                Insurance Act)'' after ``with respect to banks''.
            (2) Section 205 of the Depository Institution Management 
        Interlocks Act (12 U.S.C. 3204) is amended--
                    (A) in the portion of paragraph (8)(A) which 
                precedes clause (i), by striking ``diversified 
                savings'' and all that follows through ``with respect 
                to'' and inserting ``depository institution holding 
                company which, as of January 1, 1997, and at all times 
                thereafter, satisfies the consolidated net worth and 
                consolidated net earnings requirements for a 
                diversified savings and loan holding company (as set 
                forth in section 10(1)(F) of Home Owners' Loan Act, as 
                such section is in effect on such date, and in 
                regulations in effect on such date, which shall be 
                applicable for purposes of this paragraph without 
                regard to the fact that a depository institution 
                subsidiary of such holding company has ceased to be a 
                savings association after January 1, 1997) with respect 
                to''; and
                    (B) by striking paragraph (9).
            (3) Section 19(b)(1)(A) of the Federal Reserve Act (12 
        U.S.C. 461(b)(1)(A)) is amended--
                    (A) by inserting ``and'' after the semicolon at the 
                end of clause (v); and
                    (B) by striking clause (vi).
            (4) Subparagraphs (A), (B), and (C) of section 10(e)(5) of 
        the Federal Home Loan Bank Act (12 U.S.C. 1430(e)(5)) are each 
        amended by inserting before the period at the end ``(as such 
        section is in effect on January 1, 1997)''.

SEC. 407. REFERENCES TO SAVINGS ASSOCIATIONS AND STATE BANKS IN FEDERAL 
              LAW.

    Effective January 1, 1998, any reference in any Federal banking law 
to--
            (1) the term ``savings association'' shall be deemed to be 
        a reference to a bank as defined in section 3(a) of the Federal 
        Deposit Insurance Act; and
            (2) the term ``State bank'' shall be deemed to include any 
        depository institution included in the definition of such term 
        in section 3(a)(2) of such Act.

SEC. 408. REPEAL OF HOME OWNERS' LOAN ACT.

    Effective January 1, 1998, the Home Owners' Loan Act (12 U.S.C. 
1461 et seq.) is hereby repealed.

SEC. 409. EFFECTIVE DATE; DEFINITIONS.

    (a) Effective Date.--The amendments made by this subtitle shall 
take effect on January 1, 1998.
    (b) Definitions.--For purposes of this title, the terms 
``appropriate Federal banking agency'', ``bank holding company'', 
``depository institution'', ``Federal savings association'', ``insured 
depository institution'', ``savings association'', and ``State bank'' 
have the same meanings as in section 3 of the Federal Deposit Insurance 
Act (as in effect on the date of the enactment of this Act).

       Subtitle B--Transfer of Functions, Personnel, and Property

SEC. 421. REORGANIZATION OF OTS INTO OCC.

    Effective on the date of enactment, section 321(e) of title 31, 
United States Code, is amended to read as follows:
    ``(e) OTS Abolished.--No later than 30 days after the enactment of 
the Thrift Charter Conversion Act of 1997, the Secretary of the 
Treasury shall merge the Office of Thrift Supervision with the Office 
of the Comptroller of the Currency.''

SEC. 422. SAVINGS PROVISIONS.

    (a) Existing Rights, Duties, and Obligations Not Affected.--No 
provision of this title shall be construed as affecting the validity of 
any right, duty, or obligation of the United States, the Director of 
the Office of Thrift Supervision, or any person, which existed on the 
day before the date upon which the position of Director of the Office 
of Thrift Supervision and the Office of Thrift Supervision are 
abolished.
    (b) Continuation of Suits.--No action or other proceeding commenced 
by or against the Director of the Office of Thrift Supervision shall 
abate by reason of enactment of this title, except that, effective 
January 1, 1998, the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, or the Board of Governors of the Federal Reserve 
System, as the case may be, shall be substituted as a party to any such 
action or proceeding.
    (c) Continuation of Administrative Rules.--All orders, resolutions, 
determinations, regulations, interpretative rules, other 
interpretations, guidelines, procedures, supervisory and enforcement 
actions, and other advisory material (other than any regulation 
implementing or prescribed pursuant to section 3(f) of the Home Owners' 
Loan Act (as in effect on January 1, 1997)) which--
            (1) have been issued, made, prescribed, or permitted to 
        become effective by the Office of Thrift Supervision, and
            (2) are in effect on December 31, 1997, (or become 
        effective after such date pursuant to the terms of the order, 
        resolution, determination, rule, other interpretation, 
        guideline, procedure, supervisory or enforcement action, and 
        other advisory material, as in effect on such date), shall--
                    (A) continue in effect according to the terms of 
                such orders, resolutions, determinations, regulations, 
                interpretative rules, other interpretations, 
                guidelines, procedures, supervisory or enforcement 
                actions, or other advisory material;
                    (B) be administered by the Comptroller of the 
                Currency, the Federal Deposit Insurance Corporation, or 
                the Board of Governors of the Federal Reserve System; 
                and
                    (C) be enforceable by or against the Comptroller of 
                the Currency, the Federal Deposit Insurance 
                Corporation, or the Board of Governors of the Federal 
                Reserve System until modified, terminated, set aside, 
                or superseded in accordance with applicable law by the 
                Comptroller, Corporation, or Board, by any court of 
                competent jurisdiction, or by operation of law.
    (d) Treatment of References in Adjustable Rate Mortgages Issued 
Before FIRREA.--
            (1) References in prior law.--For purposes of section 
        402(e) of Financial Institutions Reform, Recovery, and 
        Enforcement Act of 1989 (12 U.S.C. 1437 note), any reference in 
        such section to--
                    (A) the Director of the Office of Thrift 
                Supervision shall be deemed to be a reference to the 
                Secretary of the Treasury; and
                    (B) a Savings Association Insurance Fund member 
                shall be deemed to be a reference to an insured 
                depository institution (as defined in section 3 of the 
                Federal Deposit Insurance Act).
    (e) Treatment of References in Adjustable Rate Mortgage Instruments 
Issued After FIRREA.--
            (1) In general.--For purposes of adjustable rate mortgage 
        instruments that are in effect as of the date of enactment of 
        this Act, any reference in the instrument to the Director of 
        the Office of Thrift Supervision or Savings Association 
        Insurance Fund members shall be treated as a reference to the 
        Secretary of the Treasury or insured depository institutions 
        (as defined in section 3 of the Federal Deposit Insurance Act), 
        as appropriate.
            (2) Substitution for indexes.--If any index used to 
        calculate the applicable interest rate on any adjustable rate 
        mortgage instrument is no longer calculated and made available 
        as a direct or indirect result of the enactment of this title, 
        any index--
                    (A) made available by the Secretary of the 
                Treasury; or
                    (B) determined by the Secretary of the Treasury, 
                pursuant to paragraph (4), to be substantially similar 
                to the index which is no longer calculated or made 
                available,
        may be substituted by the holder of any such adjustable rate 
        mortgage instrument upon notice to the borrower.
            (3) Agency action required to provide continued 
        availability of indexes.--Promptly after the enactment of this 
        subsection, the Secretary of the Treasury, the Chairperson of 
        the Federal Deposit Insurance Corporation, and the Comptroller 
        of the Currency shall take such action as may be necessary to 
        assure that the indexes prepared by the Director of the Office 
        of Thrift Supervision immediately before the enactment of this 
        subsection and used to calculate the interest rate on 
        adjustable rate mortgage instruments continue to be available.
            (4) Requirements relating to substitute indexes.--If any 
        agency can no longer make available an index pursuant to 
        paragraph (3), an index that is substantially similar to such 
        index may be substituted for such index for purposes of 
        paragraph (2) if the Secretary of the Treasury determines, 
        after notice and opportunity for comment, that--
                    (A) the new index is based upon data substantially 
                similar to that of the original index; and
                    (B) the substitution of the new index will result 
                in an interest rate substantially similar to the rate 
                in effect at the time the original index became 
                unavailable.

SEC. 423. COST OF FUNDS INDEXES.

    (a) Cost of Funds Index Defined.--The term ``cost of funds index'' 
means any index that is published by a Federal home loan bank and is 
based, in whole or in part, upon the cost of funds of such bank's 
members.
    (b) Calculations Based on Type of Charter and Insurance Fund 
Membership of Members.--If any cost of funds index includes data based 
on charter type, insurance fund membership, or other similar 
characteristics of members of a Federal home loan bank, such index 
shall be calculated after the date of the enactment of this Act using 
data only from insured depository institutions which were bank members 
and whose data was included in such index on or before such date of 
enactment.
    (c) Acquisition of Data.--
            (1) In general.--Each insured depository institution the 
        data from which is required to compile a cost of funds index in 
        accordance with subsection (b) shall provide the Federal home 
        loan bank which maintains the index such information as may be 
        necessary, and in such form as may be appropriate, for the bank 
        to calculate and publish the index.
            (2) Enforcement by banking agencies.--Each appropriate 
        Federal banking agency shall take such action as may be 
        necessary to ensure that insured depository institutions which 
        are required to provide information to any Federal home loan 
        bank under paragraph (1) furnish such information on a timely 
        basis and in the form required by the bank.
            (3) Treatment of institutions.--Notwithstanding any other 
        provision of law, and insured depository institution which 
        furnishes information to a Federal home loan bank pursuant to 
        this section for use in compiling a cost of funds index shall 
        not be deemed to control, directly or indirectly, such index.
    (d) Certain Data Excluded.--Notwithstanding subsections (b) and 
(c), no cost of funds index shall include any data from any insured 
depository institution which results from the merger, consolidation, or 
other combination of a member of a Federal home loan bank with a 
nonmember of any such bank if--
            (1) the total assets of the nonmember exceed the total 
        assets of the bank member at the time of such merger, 
        consolidation, or other combination; or
            (2) in the case of a merger, consolidation, or other merger 
        in which a member of a Federal home loan bank is the resulting 
        insured depository institution, the combined ratio of the 
        average amount of single-family loan balances to average total 
        assets of all insured depository institutions involved in such 
        merger, consolidation, or other combination for the 12-month 
        period ending on the date of such transaction is less than 70 
        percent.
    (e) Other Definitions.--For purposes of this section, the terms 
``appropriate Federal banking agency'' and ``insured depository 
institution'' shall have the same meanings as in section 3 of the 
Federal Deposit Insurance Act.

SEC. 424. REFERENCES IN FEDERAL LAW TO DIRECTOR OF THE OFFICE OF THRIFT 
              SUPERVISION.

    Effective January 1, 1998, any reference in any Federal law to the 
Director of the Office of Thrift Supervision or the Office of Thrift 
Supervision shall be deemed to be a reference to the appropriate 
Federal banking agency (as defined in section 3(q) of the Federal 
Deposit Insurance Act).

SEC. 425. RECONFIGURATION OF FDIC BOARD OF DIRECTORS AS A RESULT OF 
              REMOVAL OF DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION.

    (a) In General.--Section 2(a)(1) of the Federal Deposit Insurance 
Act (12 U.S.C. 1812(a)(1)) is amended to read as follows:
            ``(1) In general.--The management of the Corporation shall 
        be vested in a Board of Directors consisting of 5 members--
                    ``(A) 1 of whom shall be the Comptroller of the 
                Currency; and
                    ``(B) 4 of whom shall be appointed by the 
                President, by and with the advice and consent of the 
                Senate, from among individuals who are citizens of the 
                United States, 1 of whom shall have State bank 
                supervisory experience.''.
    (b) Technical and Conforming Amendments.--(1) Section 2(d)(2) of 
the Federal Deposit Insurance Act (12 U.S.C. 1812(d)(2)) is amended--
            (A) by striking ``or the office of Director of the Office 
        of Thrift Supervision'';
            (B) by striking ``or such Director'';
            (C) by striking ``or the acting Director of the Office of 
        Thrift Supervision, as the case may be''; and
            (D) by striking ``or Director''.
    (2) Section 2(f)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1812(f)(2)) is amended by striking ``or of the Office of Thrift 
Supervision''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect on January 1, 1998.

             Subtitle C--Merger of Deposit Insurance Funds

SEC. 431. MERGER OF THE BIF AND SAIF.

    Section 2704(c) of the Omnibus Consolidation Appropriations Act, 
1997 is amended to read as follows:
    ``(c) Effective Date.--This section and the amendments made by this 
section shall become effective on January 1, 1999, if the FDIC 
determines that--
            (1) the merger of the Bank Insurance Fund and Savings 
        Association Insurance Fund is in the public interest;
            (2) the reserve ratios of both funds are equal to or 
        greater than their designated reserve ratios; and
            (3) a significant number of savings associations have 
        converted to state or national bank charters.''

                     TITLE V--TECHNICAL CORRECTIONS

SEC. 501. FOREIGN BANK RESIDENCY REQUIREMENTS.

    Section 5146 of the Revised Statutes is amended in the first 
sentence by inserting ``and, in the case of an association which is a 
subsidiary or affiliate of a foreign bank, the Comptroller may in his 
discretion waive the requirement of citizenship in the case of not more 
than a minority of the total number of directors'' before the period.

SEC. 502. INTERSTATE BRANCHING.

    Subsection 24(j) of the Federal Deposit Insurance Act is hereby 
amended to read as follows:
    ``(j) Activities of Branches of Out-of-State Banks.--
            ``(1) Application of host state law.--The laws of a host 
        state, including laws regarding community reinvestment, 
        consumer protection, fair lending, and establishment of 
        intrastate branches, shall apply to any branch in the host 
        State of an out-of-State State bank to the same extent as such 
        State laws apply to a branch in the host State of an out-of-
        State national bank.
            ``(2) Activities of branches.--An insured State bank that 
        establishes a branch in a host State may conduct any activity 
        at such branch that is permissible under the laws of the home 
        State of such bank, if such activity is permissible either for 
        a bank chartered by the host State (subject to the restrictions 
        in this section) or for a branch in the host State of an out-
        of-State national bank.
            ``(3) Definitions.--The terms `host State', `home State', 
        and `out-of-State bank' have the same meanings as in section 
        44(f).''
                                 <all>