[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 669 Introduced in House (IH)]

  1st Session
                                 H.R. 669

To enhance competition in the financial services sector, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 11, 1997

Mr. Baker (for himself, Mr. McCollum, Mr. Dreier, Mr. LaFalce, and Mr. 
    Flake) 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 sector, and for other 
                               purposes.

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

                              short title

    Section 1. This Act may be cited as the ``Depository Institution 
Affiliation Act''.

                          findings and purpose

    Sec. 2. (a) The Congress hereby finds that--
            (1) current laws and regulations restrain efficiency, 
        competition and innovation in the design and delivery of 
        financial services to the disadvantage of consumers;
            (2) restrictions on ownership of depository institutions 
        and affiliations with other business organizations interferes 
        with their ability to attract and retain capital and managerial 
        resources;
            (3) the vulnerability of the financial system and its 
        discrete components is increased and effective monitoring, 
        supervision and coordination of actions during periods of 
        stress is impeded by fragmented and disparate regulation; and
            (4) current laws inhibit the ability of domestic financial 
        markets and intermediaries to respond to the serious 
        competitive challenges presented by foreign intermediaries and 
        the globalization of markets.
    (b) It is the purpose of this act to promote the safety and 
soundness of the Nation's financial system, enhance the quality of 
regulation and supervision of financial intermediaries and achieve a 
more efficient market and effective regulatory structure by--
            (1) establishing an alternative and comprehensive 
        legislative framework for the creation and regulation of 
        depository institution holding companies;
            (2) increasing the capital adequacy of commercial banks, 
        brokers and dealers, and savings and loan associations and 
        other financial companies by eliminating restrictions on common 
        ownership and affiliation within a depository institution 
        holding company;
            (3) permitting affiliates to engage in any activity subject 
        to functional and equal regulation by the appropriate State or 
        Federal regulator;
            (4) insulating and protecting insured depository 
        institutions through higher capital requirements, expanded 
        restrictions on relationship with affiliates, broader 
        examination and enforcement authority and increased civil and 
        criminal penalties;
            (5) permitting the efficient marketing and distribution of 
        financial services to consumers subject to safeguards against 
        coercive tie-ins and other unfair and abusive practices; and
            (6) establishing the National Financial Services Committee 
        to oversee the evolution and supervision of the financial 
        services industry and to report to Congress.

    TITLE I--CREATION AND CONTROL OF DEPOSITORY INSTITUTION HOLDING 
                               COMPANIES

    Sec. 101. (a) Definitions.--For the purposes of this Act:
            (1) The term ``depository institution holding company'' 
        means a company that--
                    (A) has filed with the National Financial Services 
                Committee a notice stating such company's intent to 
                comply with the requirements of this section and has 
                not withdrawn such notice; and
                    (B) controls an insured depository institution, or 
                either (i) has, within the preceding twelve months, 
                filed a notice under subsection (b) of this section to 
                acquire control of an insured depository institution, a 
                bank holding company, a savings and loan holding 
                company or a depository institution holding company, 
                which notice has not been disapproved, or (ii) controls 
                a company which has, within the preceding twelve 
                months, filed an application for deposit insurance 
                under section 4 or 5 of the Federal Deposit Insurance 
                Act (12 U.S.C. 1814, 1815) which has not been 
                disapproved. The filing of the notice described in 
                subparagraph (A) of this paragraph by a bank holding 
                company that does not control any banks as defined in 
                section 2(c)(1)(B) of the Bank Holding Company Act (12 
                U.S.C. 1814(c)(1)(B)) which are not insured depository 
                institutions shall in immediate termination of the 
                status of such company as a bank holding company, and 
                the filing of the notice described in subparagraph (A) 
                of this paragraph by a savings and loan holding company 
                shall result in the immediate termination of the status 
                of such company as a savings and loan holding company.
            (2) The term ``bank holding company'' has the meaning given 
        to it in section 2(a) of the Bank Holding Company Act of 1956, 
        as amended (12 U.S.C. 1841(a)).
            (3) The term ``savings and loan holding company'' has the 
        meaning given to it in section 10(a) of the Home Owners' Loan 
        Act of 1933 (12 U.S.C. 1467a(a)).
            (4) Except as provided in paragraph 5 of subsection (f) of 
        this section, the term ``affiliate'' of a company means any 
        other company which controls, is controlled by, or is under 
        common control with such company.
            (5) The term ``appropriate Federal banking agency'' has the 
        meaning given to it is section 3 of the Federal Deposit 
        Insurance Act (12 U.S.C. 1813 (q)).
            (6) The term ``insured depository institution'' has the 
        meaning given to it in section 3(c)(2) of the Federal Deposit 
        Insurance Act (12 U.S.C. 1813(C)(2)).
            (7) The term ``State'' has the meaning given to it in 
        section 3(a) of the Federal Deposit Insurance Act (12 U.S.C. 
        1813(a)).
            (8) The term ``company'' means any corporation, 
        partnership, business trust, association, or similar 
        organization, or any other trust unless by its items it must 
        terminate within twenty-five years or not later than twenty-one 
        years and ten months after the death of individuals living on 
        the effective date of the trust, but shall not include any 
        corporation the majority of the shares of which are owned by 
        the United States or by any State.
            (9)(A) The term ``control'' means the power, directly or 
        indirectly, to direct the management or policies of a company, 
        or to vote 25 per centum or more of any class of voting 
        securities of a company.
            (B) No company shall be deemed to control or to have 
        acquired control of any other company by virtue of its 
        ownership of the voting securities of such other company--
                    (i) acquired or held in any agency, trust or other 
                fiduciary capacity;
                    (ii)(a) acquired or held in connection with or 
                incidental to the underwriting of securities if such 
                securities are held only for such period of time as 
                will permit the sale thereof on a reasonable basis; or
                    (b) acquired or held in connection with or 
                incidental to market making, dealing, trading, 
                brokerage or other securities related activities and 
                not with a view to acquiring, exercising or 
                transferring any control over the management or 
                policies of such company; or
                    (iii) acquired in securing or collecting a debt 
                previously contracted in good faith, until two years 
                after the date of acquisition or for such additional 
                period of time as the appropriate Federal banking 
                agency may permit.
            (C) No company formed for the sole purpose of participating 
        in a proxy solicitation is in control of a company by virtue of 
        its acquisition of voting rights with respect to shares of such 
        company acquired in the course of such solicitation.
            (10) The term ``adequately capitalized with respect to an 
        insured depository institution has the meaning given to it in 
        section 38(b)(1) of the Federal Deposit Insurance Act (12 
        U.S.C. 1831o(b)(1)(B).
            (11) The term ``well capitalized'' has the meaning given to 
        it in section 38(b)(1)(A) of the Federal Deposit Insurance Act 
        (12 U.S.C. 1831o(b)(1)(A)).
            (12) The term ``minimum required capital'' with respect to 
        an insured depository institution means the amount of capital 
        that is required for it to be adequately capitalized.
    (b) Changes in Control of Insured Banks and Insured Institutions.--
No depository institution holding company acting directly or 
indirectly, or through or in concert with one or more other persons, 
shall acquire control of an insured depository institution, a bank 
holding company, a savings and loan holding company or a depository 
institution holding company not controlled by such company on the date 
it became a depository institution holding company, if such acquisition 
and control occurs through a purchase, assignment, transfer, pledge or 
other disposition of voting stock of such insured depository 
institution, bank holding company, savings and loan holding company or 
depository institution holding company unless the depository 
institution holding company has complied with the requirements of 
section 7(j) of the Federal Deposit Insurance Act (12 U.S.C. 1817(j)). 
Any failure to comply with the preceding requirements shall subject the 
relevant depository institution holding company to the penalties and 
other procedures provided in subsections (i) through (m) of this 
section, in addition to otherwise applicable penalties.
    (c) Affiliate Transactions.--(1) The appropriate Federal agency 
may--
            (A) upon a finding of probable harm that cannot adequately 
        be prevented by less burdensome rules and regulations, adopt 
        such rules and regulations, consistent with the purposes of 
        this Act, as may be necessary in order to prevent an insured 
        depository institution that is controlled by a depository 
        institution holding company from engaging in unsafe or unsound 
        practices that involve the depository institution holding 
        company or any of its affiliates including, without limitation, 
        unsafe or unsound practices that involve covered transactions 
        as defined in section 23A of the Federal Reserve Act (12 U.S.C. 
        371c) and any transactions described in paragraph (2) of 
        subsection (a) of section 23B of the Federal Reserve Act (12 
        U.S.C. 373c-1); and
            (B) by rule, regulation or order, exempt any insured 
        depository institution that is controlled by a depository 
        institution holding company or class of such banks or 
        institutions, or any transaction or class of transactions, from 
        any requirement under the preceding subparagraph or under 
        sections 23A or 23B of the Federal Reserve Act (12 U.S.C. 371c, 
        371c-1), not withstanding the provisions of any other law, 
        rule, regulation or order, if the appropriate Federal banking 
        agency deems such an exemption to be reasonable and not 
        inconsistent with the purposes of this Act and in the public 
        interest.
    (2) Any rule or regulation adopted pursuant to subparagraph (A) of 
paragraph (1) of this subsection shall be adopted in accordance with 
section 4 of the Administrative Procedure Act (5 U.S.C. 553), except 
that the appropriate Federal banking agency shall give interested 
persons an opportunity for oral presentations of data, views, and 
arguments, in addition to written submissions.
    (3) Any transaction that was approved by a Federal regulatory 
agency prior to the enactment of this Act shall be exempt from any 
rules or regulations adopted pursuant to subparagraph (A) of paragraph 
(1) of this subsection.
    (4) Subject to subparagraph (B) of paragraph (1) of this 
subsection, the provisions of sections 23A and 23B of the Federal 
Reserve Act (12 U.S.C. 371c, 371c-1) shall be applicable to every 
insured depository institution controlled by a depository institution 
holding company in the same manner and to the extent as if such insured 
depository institution were a member bank, and for this purpose, any 
company which would be an affiliate of an insured depository 
institution for purposes of such sections 23A and 23B if such insured 
depository institution were a member bank shall be deemed to be an 
affiliate of such insured depository institution.
    (5) No insured depository institution that is an affiliate of a 
depository institution holding company shall, directly or indirectly--
            (A) extend credit in any manner to a securities affiliate 
        or a subsidiary thereof;
            (B) purchase for its own account assets of a securities 
        affiliate or a subsidiary thereof;
            (C) issue a guarantee, acceptance, or letter of credit, 
        including an endorsement or standby letter of credit, for the 
        benefit of a securities affiliate or a subsidiary thereof; or
            (D) extend credit in any manner to any investment company 
        advised by or the shares of which are distributed by a 
        securities affiliate.
    (6) Subparagraphs (A) and (B) of paragraph (5) do not apply to any 
extension of credit by an insured depository institution made to 
acquire or sell any securities of the United States if--
            (A) the extension of credit is to be repaid on the same 
        calendar day;
            (B) the extension of credit is incidental to the clearing 
        of transactions in those securities through that insured 
        depository institution; and
            (C) both the principal of and the interest on the extension 
        of credit are fully secured by securities of the United States.
    (7) No insured depository institution that is an affiliate of a 
depository institution holding company 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 or distributed by a securities affiliate.
    (8) No insured depository institution that is an affiliate of a 
depository institution holding company shall knowingly extend or 
arrange for the extension of credit, directly or indirectly, secured by 
or for the purpose of purchasing any security while, or for thirty days 
after, that security is the subject of a distribution in which a 
securities affiliate of that insured depository institution 
participates as an underwriter or a member of a selling group.
    (9) No depository institution that is an affiliate of a depository 
institution holding company shall, directly or indirectly, extend 
credit to an issuer of securities underwritten by a securities 
affiliate for the purpose of paying the principal of those securities 
or interest for dividends on those securities.
    (10) For the purpose of paragraphs (5), (6), (7), (8), and (9) of 
this section, a ``securities affiliate'' means a company that engages 
in underwriting, distributing or dealing in securities of any type, 
except that such term shall not include insurance products deemed to be 
securities, including and without limitation variable annuities and 
variable life insurance.
    (d) Capitalization.--(1) Each insured depository institution that 
is controlled by a depository institution holding company shall be well 
capitalized.
    (2) In the event of a finding by the appropriate Federal banking 
agency that an insured depository institution controlled by a 
depository institution holding company is not well capitalized, the 
depository institution holding company shall (i) execute an agreement 
with the appropriate Federal banking agency within thirty days to 
return the insured depository institution within a reasonable period of 
time to being well capitalized or (ii) divest control of the insured 
bank or insured institution in an orderly manner within one hundred and 
eighty days or such additional period of time as the appropriate 
Federal banking agency may determine is reasonably required in order to 
effect such divestiture.
    (3) The appropriate Federal banking agency may not impose by 
regulation, order, agreement or any other means any requirement 
pertaining to the capital of a depository institution holding company.
    (e) Interstate Acquisitions and Activities of Insured Depository 
Institutions.--(1) No depository institution holding company may 
acquire control of an additional insured bank (as such term is defined 
in section 2(c) of the Bank Holding Company Act of 1956, as amended (12 
U.S.C. 1841(c)), if the acquisition could not be approved by the Board 
of Governors of the Federal Reserve System under section 3(d)(1)(B), 
3(d)(1)(C), 3(d)(1)(D), 3(d)(2), 3(d)(3), 3(d)(4), or 3(d)(5) of the 
Bank Holding Company Act of 1956, as amended (12 U.S.C. 1842(d)) were 
such acquisition made by a bank holding company except as otherwise 
authorized pursuant to 13(f) of the Federal Deposit Insurance Act (12 
U.S.C. 1823(f)).
    (2) A depository institution holding company shall be treated as a 
bank holding company, and any insured depository institution affiliate 
of a depository institution holding company shall be treated as a bank 
subsidiary for purposes of section 18(r) of the Federal Deposit 
Insurance Act (12 U.S.C. 1828(r)).
    (3) No depository institution holding company may acquire control 
of an additional savings association if the acquisition would be in 
violation of section 10(e)(3) of the Home Owners' Loan Act of 1933 (12 
U.S.C. 1467a(e)(3)) were such acquisition made by a savings and loan 
holding company, except as otherwise authorized pursuant to section 
13(k) of the Federal Deposit Insurance Act (12 U.S.C. 1823(k)).
    (f) Differential Treatment Prohibition; Laws Inconsistent With This 
Act.--(1) Notwithstanding any other Federal law, no State, and no 
Federal or State regulatory agency, including the appropriate Federal 
banking agency, may act by law, rule, regulation, order, or otherwise 
if the effect of such action would be to differentiate insured 
depository institutions controlled by depository institution holding 
companies from any other insured depository institutions in a manner 
adverse to insured depository institutions controlled by depository 
institution holding companies, or to differentiate depository 
institution holding companies or their affiliates from bank holding 
companies or savings and loan holding companies and their affiliates in 
a manner adverse to depository institution holding companies or their 
affiliates, except to the extent that the appropriate Federal banking 
agency may act to implement this Act as authorized herein.
    (2)(A) Findings and Purpose.--The Congress hereby finds that 
certain State laws and regulations have the purpose or effect of 
preventing insured depository institutions from being or becoming 
affiliate with, companies or persons engaged in nonbanking activities. 
Such laws restrain legitimate competition in interstate commerce and 
deny consumers freedom of choice in selecting financial services. Such 
restrictions also threaten the long-term safety and soundness of 
insured depository institutions by denying them access to capital. 
Given the preponderant Federal interest in ensuring competition in 
national markets for financial services and in ensuring the safety and 
soundness of the federally insured banking and thrift industries, 
Congress hereby finds that it is necessary to preempt such 
anticompetitive State laws and regulations to the extent necessary to 
permit the formation and efficient operation of depository institution 
holding companies. However, the Congress also recognizes that there is 
a legitimate and traditional State interest in ensuring that State 
banks and other companies are operated in a safe and sound manner to 
serve the interests of the public and consumers. The preemption 
provided in the following paragraph (B) is thus not intended to preempt 
State laws that concern the regulation, supervision, and examination of 
State chartered entities, and that are not inconsistent with the 
purposes of this Act.
    (B) Preemption.--Any provision of Federal or State law, rule, 
regulation or order that is expressly or impliedly inconsistent with 
the provisions and purposes of this section is hereby preempted, 
including, without limitation, State banking, savings and loan, 
insurance, real estate, securities, finance company, retail or other 
laws which (i) have the purpose or effect of preventing or impeding 
insured depository institutions or affiliates, agents, principals, 
brokers, directors, officers, employees or other representatives of 
such institutions or affiliates thereof from being owned or controlled 
by or from being affiliated in any way with a depository institution 
holding company or any affiliate thereof as a result of the types of 
nonbanking activities engaged in directly or indirectly by such company 
or any affiliate thereof or by any agent, principal, solicitor, broker, 
director, officer, employee or other representative of such company or 
affiliate thereof or (ii) have the purpose or effect of preventing 
insured banks or insured institutions or affiliates, agents, 
principals, brokers, directors, officers, employees or other 
representatives of such institutions or affiliates thereof from 
offering or marketing products or services of their affiliated 
depository institution holding company or any affiliate thereof or from 
having their products or services offered or marketed by their 
affiliated depository institution holding company or any affiliate 
thereof, or by any agent, principal, broker, director, officer, 
employee or other representatives of such company or affiliate thereof.
    (3) No State or State regulatory agency may act by law, rule, 
regulation or order if the effect of such action would be to impede or 
prevent an insured bank or insured institution that is located in 
another State from qualifying to maintain or defend in court any action 
which could be maintained or defended under similar circumstances by a 
company that is located in such other State and that is not an insured 
depository institution, provided that the insured depository 
institution does not establish or operate in any State so acting or in 
the State of any State regulatory agency so acting as a ``domestic 
branch'', as defined in section 3(o)); except that, where the 
maintenance or defense of such an action by a company that is located 
in such other State and that is not an insured depository institution 
is subject to certain conditions, the maintenance or defense of such an 
action by an insured depository institution located in such other State 
may be subject to those same conditions, so long as such conditions are 
applied in a nondiscriminatory manner to fulfill legitimate State 
objectives and do not have the effect, directly or indirectly, of 
denying insured depository institutions located in other States the 
opportunity to maintain or defend such actions.
    (4) Except for licensing, marketing, compensation, employment or 
other requirements applied in a nondiscriminatory manner to fulfill 
legitimate State regulatory objectives which are not inconsistent with 
the purposes of this Act as set forth in section 2 hereof, no State may 
through legislative, administrative, executive or judicial action 
impede or prevent a depository institution holding company or affiliate 
thereof from utilizing or compensating any agent, solicitor, broker, 
employee or other person located in that State and representing in any 
lawful capacity any insured depository institution or any such 
depository institution holding company or such affiliate thereof, 
provided that, where any such person is being utilized or compensated 
for the performance of activities on behalf of an insured depository 
institution, such activities do not result in the establishment or 
operation by the insured depository institution of a ``domestic 
branch,'' as defined in section 3(o) of the Federal Deposit Insurance 
Act (12 U.S.C. 1813(a)), at any location other than the main or branch 
offices of such depository institution.
    (5) As used in paragraphs (2) through (4) of this subsection only, 
the term ``affiliate'' means a person that directly or indirectly 
controls or is controlled by, or is under common control with the 
person specified; and the term ``control,'' including the terms 
``controlled by'' and ``under common control with'', means the power, 
directly or indirectly, to direct the management or policies of a 
person and shall be presumed to exist if any person, directly or 
indirectly, owns, controls, or holds with power to vote ten per centum 
or more of the voting securities of any other person.
    (g) Securities, Insurance and Real Estate Activities of Insured 
Banks and Insured Institutions.--(1) No insured depository institution 
that is an affiliate of a depository institution holding company shall 
directly engage in--
            (A) dealing in or underwriting securities, or purchasing or 
        selling securities as agent, except to the extent that such 
        activities are performed only with regard to obligations of the 
        United States or would be authorized for a national bank under 
        section 92a of title 12, United States Code;
            (B) insurance underwriting; or
            (C) real estate investment or development, except to the 
        extent that such activities are performed in relation to the 
        premises of the insured depository institution or in connection 
        with securing or collecting a debt previously contracted in 
        good faith, or would be authorized for a national bank under 
        section 92a of title 12, United States Code.
    (2) Nothing contained in this subsection shall be construed (A) to 
prohibit or impede a depository institution holding company or any 
affiliate of a depository institution holding company other than an 
insured depository institution from engaging in any of the activities 
set forth in paragraph (1), or (B) to prohibit or impede any employee 
of an insured depository institution that is an affiliate of a 
depository institution holding company from promoting or advertising 
products or services of an affiliate of such insured depository 
institution that engages in any of such activities.
    (3) No bank holding company which becomes a depository institution 
holding company and no depository institution holding company which did 
not at any time prior to becoming such a holding company directly or 
indirectly engage in insurance agency or real estate brokerage 
activities shall commence any insurance agency or real estate brokerage 
activities not permissible for bank holding companies under section 
4(C)(8) of the Bank Holding Company Act of 1956, as amended (12 U.S.C. 
1843(c)(8)), unless such activities shall be conducted through an 
existing insurance agency or real estate brokerage firm, as the case 
may be, acquired directly or indirectly by such depository institution 
holding company or through any successor to such insurance agency or 
real estate brokerage, and unless such acquired insurance agency or 
real estate brokerage firm shall have been actively engaged in such 
insurance or real estate agency activities during the two-year period 
preceding the date of enactment of this Act.
    (4) Nothing in this subsection shall require the breach of any 
contract entered into prior to enactment of this Act.
    (h) Tying and Insider Lending Provisions.--(1) A depository 
institution holding company shall be treated as a bank holding company 
for purposes of section 106 of the Bank Holding Company Act Amendments 
of 1970 and section 22(h) of the Federal Reserve Act and any regulation 
prescribed under any such section.
    (2) A depository institution holding company and any of such 
company's other affiliates shall be subject to section 106 of the Bank 
Holding Company Act Amendments of 1970, in connection with any 
transaction involving the products or services of such company or 
affiliate and those of an insured depository institution affiliate, as 
if such company or any such company's other affiliates were an insured 
depository institution and such insured depository institution were a 
subsidiary of a bank holding company.
    (3) For purposes of this subsection, the appropriate Federal 
banking agency shall exercise the authority provided to the Board of 
Governors of the Federal Reserve System in section 106 of the Bank 
Holding Company Act Amendments of 1970 and section 2(h) of the Federal 
Reserve Act.
    (i) Examination and Enforcement.--(1) The appropriate Federal 
banking agency shall enforce the provisions of this section and any 
regulations adopted under the authority conferred in this section by 
using its examination and supervisory powers to ensure that each 
insured depository institution under its supervision is in compliance 
with the limitations of this section.
    (2) In no instance shall the benefits of Federal deposit insurance 
coverage applicable to an insured depository institution that is 
controlled by a depository institution holding company be extended to 
either such depository institution holding company or to any other 
company controlled by such depository institution holding company that 
is not an insured depository institution. Thus the purpose of this 
subsection (c) is to prevent the resources of the Federal deposit 
insurance funds from being used to protect the shareholders or business 
interests of a depository institution holding company, except through 
the authorized fulfillment of their obligations to protect the insured 
deposits of an insured depository institution that is controlled by a 
depository institution holding company.
    (3) The appropriate Federal banking agency may examine the books, 
records and affairs of, or require reports from, any affiliate of an 
insured depository institution controlled by a depository institution 
holding company in order to ensure compliance with the limitations of 
this section.
    (4) Whenever it appears to the appropriate Federal banking agency 
that any depository institution holding company is violating, has 
violated, or is about to violate any provision of this section or any 
regulation prescribed under this section, such agency may, in its 
discretion, apply to the appropriate district court of the United 
States or the United States court of any territory for--
            (A) a temporary or permanent injunction or restraining 
        order enjoining such depository institution holding company 
        from violating this section or any regulation prescribed under 
        this section; or
            (B) such other equitable relief, including divestiture, as 
        may be necessary to prevent such violation.
    (5) The district courts of the United States and the United States 
court in any territory shall have jurisdiction and power to issue any 
injunction or restraining order or grant any other relief described in 
paragraph (3). When appropriate, any injunction, order, or other 
equitable relief granted under this subparagraph shall be granted 
without requiring the posting of any bond.
    (6) Whenever it appears to a State or Federal official or agency 
with supervisory or examination authority over any affiliate of a 
depository institution holding company that such affiliate of such 
depository institution holding company is violating, has violated, or 
is about to violate any provisions of this section or any regulation 
prescribed under this section, such official or agency shall promptly 
notify the appropriate Federal regulatory authority in order that the 
appropriate Federal regulatory authority in consultation with the 
notifying agency may determine whether action under this subsection is 
appropriate.
    (j) Divestiture.--(1) In addition to all its other regulatory and 
supervisory powers, if the appropriate Federal banking agency 
determines that an insured depository institution under its supervision 
has engaged in a continuing course of conduct involving its depository 
institution holding company or any affiliate of such holding company 
which has had, or has a significant probability of having, the effect 
of causing such insured depository institution to be in an unsafe or 
unsound condition, it may make an initial finding that the depository 
institution holding company should be required to terminate its control 
of the insured depository institution. If the appropriate Federal 
banking agency makes such an initial finding, it shall within three 
days so notify the depository institution holding company controlling 
the insured depository institution and the National Financial Services 
Committee. Such notice shall provide a statement for the basis of the 
appropriate Federal banking agency's action.
    (2) Within thirty days of the receipt of the notice described in 
the preceding paragraph, the depository institution holding company 
receiving such notice may request an agency hearing before the 
appropriate Federal banking agency. In such hearing all issues shall be 
determined pursuant to section 5 of the Administrative Procedure Act (5 
U.S.C. 554). The length of the hearing shall be determined by the 
appropriate Federal banking agency, and such hearing may be before a 
hearing examiner appointed by such agency. At the conclusion thereof, 
the appropriate Federal banking agency shall issue a final order, on 
the basis of the record made at such hearing, affirming or reversing 
the initial finding of the appropriate Federal banking agency. A 
company that fails to request an agency hearing under this paragraph 
shall be deemed to have consented to the issuance of a final order 
affirming the initial finding without the necessity of the hearing 
provided for in this paragraph.
    (3) If such final order affirms the initial finding, the depository 
institution holding company shall, upon completion of the judicial 
review, if any, of the appropriate Federal banking agency's final order 
as provided for in subsection (m), terminate its control of the insured 
depository institution involved within one year.
    (k) Criminal Penalties.--(1) Any company or insured depository 
institution which knowingly and willfully violates or knowingly and 
willfully participates in a violation of any provision of this section, 
or any rule, regulation or order issued by an appropriate Federal 
banking agency pursuant thereto, shall upon conviction be fined for 
each violation not more than the greater of $250,000 or an amount equal 
to one one-hundredth of 1 per centum of the minimum required capital of 
the relevant insured depository institution for each day during which 
the violation continues, except that in no case shall any such amount 
for any violation or related series of violations exceed 1 per centum 
of the minimum required capital of the relevant insured depository 
institution.
    (2) Any officer, director, employee or agent of any company, 
insured depository institution and any other natural person who 
knowingly and willfully participates in a violation of any provision of 
this section or any rule, regulation, or order issued pursuant thereto, 
shall upon conviction be imprisoned not less than five years and fined 
for each violation not more than the greater of $250,000 or double the 
individual's annual compensation at the time the violation occurred.
    (3) Every officer, director, employee and agent of a depository 
institution holding company or insured depository institution also 
shall be subject to same penalties for false entries in any book, 
report, or statement of such company or insured depository institution 
as are applicable to officers, directors, employees and agents of 
member banks for false entries in any books, reports, or statements of 
member banks under section 1005 of title 18.
    (4) A depository institution holding company and its affiliates 
shall be subject to the provisions of title 10, as amended by the 
subtitle F of title IX of the Financial Institutions Reform, Recovery 
and Enforcement Act of 1989 (Public Law       ) and the Comprehensive 
Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of (1990 
Public Law       ) to the same extent as a registered bank holding 
company or savings and loan holding company or any affiliate of such a 
company.
    (l) Civil Enforcement, Cease-and-Desist Orders, Civil Money 
Penalties, Removal and Prohibition Authority.--Subsections (b) through 
(s) and subsection (u) of section 1818 of title 12 (12 U.S.C. section 
1818(b)-(s) and (u)) shall apply to any depository institution holding 
company, and to any subsidiary (other than a depository institution) of 
a depository institution holding company, in the same manner as they 
apply to a State member insured bank. Nothing in subsection (b) or (c) 
of section 1818 of title 12 shall authorize any Federal banking agency, 
other than the appropriate Federal banking agency to issue a notice of 
charges or cease-and-desist order against a depository institution 
holding company or any subsidiary thereof (other than a depository 
institution subsidiary of the bank).
            (1) The appropriate Federal banking agency shall have 
        authority to assess such a civil money penalty, after giving 
        notice and an opportunity to the company or insured depository 
        institution, officer, director, employee, agent or other 
        natural person to submit data, views, and arguments, and after 
        giving due consideration to the appropriateness of the penalty 
        with respect to the size of financial resources and good faith 
        of the company, insured depository institution, or natural 
        person charged, the gravity of the violation, the history of 
        previous violations, and any data, views and arguments 
        submitted.
            (2) The appropriate Federal banking agency may, in its 
        discretion, compromise, modify, or remit any civil money 
        penalty which is subject to imposition or has been imposed. The 
        appropriate Federal banking agency may collect such civil money 
        penalty by agreement with the company, insured bank or insured 
        institution or person, or by bringing an action in the 
        appropriate United States district court, except that in any 
        such action, the company, insured depository institution or 
        person against whom the penalty has been assessed shall have a 
        right to trial de novo.
    (m) Judicial Review.--Any part aggrieved by an appropriate Federal 
banking agency's findings or other actions under this Act may obtain 
review by the United States court of appeals of the circuit wherein 
such party has its principal place of business or the United States 
Court of Appeals for the District of Columbia Circuit, by filing a 
notice of appeal in such Court within thirty days from the date of such 
action, and simultaneously sending a copy of such notice by registered 
or certified mail to the appropriate Federal banking agency. The 
appropriate Federal banking agency shall promptly certify and file in 
such Court the record upon which such action or finding was based. The 
actions or findings of appropriate Federal banking agency shall be set 
aside if not supported by substantial evidence or if found to violate 
procedures established by this Act. An initial finding by the 
appropriate Federal banking agency under subsection (j) of this section 
shall be subject to judicial review only in the context of review of a 
final order under paragraph 2 of subsection (j).

           amendments to the bank holding company act of 1956

    Sec. 102. Section 2(c)(2) of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841(c)) is amended by adding the new subparagraph (K) to 
read as follows:
                    ``(K) An insured bank as defined in section 3(h) of 
                the Federal Deposit Insurance Act (12 U.S.C. 1813(h)) 
                that is controlled by no company other than a 
                depository institution holding company as defined in 
                the Depository Institution Affiliation Act.''.

                 amendments to the federal reserve act

    Sec. 103. Section 23A of the Federal Reserve Act (12 U.S.C. 371c) 
is amended by inserting the following at the end of paragraph (a)(2); 
``Provided, however, That notwithstanding the foregoing, a loan or 
extension of credit shall not be deemed to be made to an affiliate if 
(i) the member bank approves such loan or extension of credit in 
accordance with substantially the same standards and procedures and on 
substantially the same terms that it applies to similar loans or 
extensions of credit the proceeds of which are not transferred to or 
for the benefit of an affiliate, and (ii) such loan or extension of 
credit is not made for the purposes of evading any of the requirements 
of this section.''.

                 amendments to the banking act of 1933

    Sec. 104. (a) Section 20 of the Banking Act of 1933 (12 U.S.C. 377) 
is amended by inserting the following new paragraph after the first 
paragraph of such section:
    ``The provisions of this section shall not apply to the affiliation 
of any bank that is an affiliate of a depository institution holding 
company as defined in the Depository Institution Affiliation Act with 
the depository institution holding company or any other affiliate of 
the depository institution holding company.''.
    (b) Section 32 of the Banking Act of 1933 (12 U.S.C. 78) is amended 
by inserting the following at the end of the first paragraph of such 
section: ``The provisions of this section shall not apply to 
relationships involving an affiliate of a depository institution 
holding company as defined in the Depository Institution Affiliation 
Act and either that depository institution holding company or any other 
affiliate of that depository institution holding company.''.

            amendments to the federal deposit insurance act

    Sec. 105. (a) Section 7(j)(8)(B) of the Federal Deposit Insurance 
Act (12 U.S.C. 1817(j)(8)(B)) is amended to read as follows:
            ``(8)(B) the term `control means' the power, directly or 
        indirectly, to direct the management or policies of a company, 
        or to vote 25 per centum or more of any class of voting 
        securities of a company: Provided, That, no company shall be 
        deemed to control or to have acquired control of any other 
        company by virtue of its ownership of the voting securities of 
        such other company--
                    ``(i) acquired or held in an agency, trust or other 
                fiduciary capacity;
                    ``(ii)(I) acquired or held in connection with or 
                incidental to the underwriting of securities if such 
                securities are held only for such period of time as 
                will permit the sale thereof on a reasonable basis, or
                    ``(II) acquired or held in connection with or 
                incidental to market making, dealing, trading, 
                brokerage or other securities related activities and 
                not with a view to acquiring, exercising or 
                transferring any control over the management or 
                policies of such company; or
                    ``(iii) acquired in securing or collecting a debt 
                previously contracted in good faith, until two years 
                after the date of acquisition: Provided further, That, 
                no company formed for the sole purpose of participating 
                in a proxy solicitation is in control of a company by 
                virtue of its acquisition of voting rights with respect 
                to shares of such company acquired in the course of 
                such solicitation.''.
    (b) A new last sentence shall be added to section 7(j)(1) of the 
Federal Deposit Insurance Act (12 U.S.C. 1817(j)(1)), to read as 
follows: ``For the purposes of subsection (j), the term `insured 
depository institution' shall include--
                    ``(i) any `bank holding company', as that term is 
                defined in section 2 of the Bank Holding Company Act, 
                which has control of any insured bank (as defined 
                therein), and the appropriate Federal banking agency in 
                the case of a bank holding company shall be the Board 
                of Governors of the Federal Reserve System;
                    ``(ii) any `savings and loan holding company,' as 
                that term is defined in section 10 of the Home Owners' 
                Loan Act, which has control of any insured savings 
                association (as defined therein), and the appropriate 
                Federal banking agency, in the case of a savings and 
                loan holding company shall be the Office of Thrift 
                Supervision; and
                    ``(iii) any `depository institution holding 
                company', as that term is defined in section 101(a)(1) 
                of the Depository Institution Affiliation Act, which 
                has control of any such insured bank, and the 
                appropriate Federal banking agency in the case of a 
                depository institution holding company shall be the 
                appropriate Federal banking agency, as defined in 
                section 101(a)(5) of the Depository Institution 
                Affiliation Act, of such insured bank, or each such 
                agency, if more than one, in the case of a depository 
                institution holding company which has control of more 
                than one such insured bank.''.
    (c) Section 18(j)(1) of the Federal Deposit Insurance Act (12 
U.S.C. 1828(j)(1)) is amended--
            (1) by deleting ``The'' at the beginning thereof; and
            (2) by inserting in lieu thereof the following: ``Subject 
        to section 101(c)(1)(B) of the Depository Institution 
        Affiliation Act, the''.

           amendments to the securities exchange act of 1934

    Sec. 106. (a) Registration of Brokers and Dealers.--Section 15 of 
the Securities Exchange Act of 1934 is amended by adding at the end 
thereof the following new subsection:
    ``(f) The Commission shall not grant registration to any broker or 
dealer unless such broker or dealer establishes to the satisfaction of 
the Commission that all requirements established by the Depository 
Institution Affiliation Act in connection with the activities of such 
broker or dealer (including any capital adequacy requirement) have been 
met.''.
    (b) Regulation of Brokers and Dealers.--(1) Section 15(b)(4) of the 
Securities Exchange Act of 1934 is amended by inserting ``the 
Depository Institution Act,'' after ``the Commodity Exchange Act,'' in 
subparagraph (D).
    (2) Section 15(b)(4) of the Securities Exchange Act of 1934 is 
amended by inserting ``the Depository Institution Affiliation Act,'' 
after ``the Commodity Exchange Act,'' in subparagraph (E).

                 amendment to the home owners' loan act

    Sec. 197. Section 11 of the Home Owners' Loan Act (12 U.S.C. 1468) 
is amended by deleting the word ``Sections'' at the beginning of 
subsection (a)(1) and inserting the following in lieu thereof: 
``Subject to section 101(c)(1)(B) of the Depository Institution 
Affiliation Act, sections''.

              amendment to the community reinvestment act

    Sec. 108. Section 3(3) of the Community Reinvestment Act (12 U.S.C. 
2902(d)) is amended:
            (1) by inserting ``or notice, as appropriate'' after ``an 
        application'' and before ``to the appropriate Federal financial 
        supervisory agency''; and
            (2) by adding a new paragraph (G) to read as follows:
                    ``(G) the acquisition of an insured depository 
                institution requiring prior notice under section 101(b) 
                of the Depository Institution Affiliation Act.''.

                   TITLE II--SUPERVISORY IMPROVEMENTS

                 national financial services committee

    Sec. 201. (a) Establishment of National Financial Services 
Oversight Committee.--There is established a National Financial 
Services Oversight Committee which shall consist of--
            (1) the Secretary of the Treasury,
            (2) the Chairman of the Board of Governors of the Federal 
        Reserve System,
            (3) the Chairman of the Board of Directors of the Federal 
        Deposit Insurance Corporation,
            (4) the Director of the Office of Thrift Supervision,
            (5) the Comptroller of the Currency,
            (6) the Secretary of Commerce,
            (7) the Attorney General,
            (8) the Chairman of the Securities and Exchange Commission, 
        and
            (9) the Chairman of the Commodities Futures Trading 
        Commission.
For purposes of this Act, the agencies or departments headed by members 
of the Committee shall be referred to as ``member agencies.''
    (b) Chairman.--The Chairman of the Committee shall be the Secretary 
of the Treasury.
    (c) Compensation.--Each member of the Committee shall serve without 
additional compensation, but shall be entitled to reasonable expenses 
incurred in carrying out the official duties as such a member.
    (d) Public Meetings.--The Committee shall hold public meetings at 
least annually. All meetings of the Committee shall be conducted in 
conformity with the provisions of section 3(a) of the Government in the 
Sunshine Act (5 U.S.C. 552b). The Committee may not take any action 
unless such action is approved by a vote of two-thirds of the members 
of the Committee.
    (e) Secretariat.--The Department of the Treasury shall provide the 
Secretariat for the Committee and shall assume any expenses arising for 
execution of the responsibilities of the Committee.
    (f) Access to Records.--For the purpose of carrying out this 
section, the Committee shall have access to all books, accounts, 
records, reports, files, memoranda, papers, things and property 
belonging to or in use by any appropriate Federal banking agency.
    (g) Functions of the Committee.--(1) the Committee shall, insofar 
as is practicable, establish uniform principles and standards for the 
examination and supervision of financial institutions and other 
providers of financial services, which shall be applied by the member 
agencies.
    (2) The Committee shall make recommendations for uniformity in 
other supervisory matters, such as, but not limited to, identifying 
financial institutions and other providers of financial services in 
need of special supervisory attention, the adequacy of supervisory 
tools for determining the impact of affiliate operations on insured 
depository institutions and the ability of the member agencies to 
discover possible fraud or questionable practices.
    (3) The Committee shall, from time to time, recommend to the 
Congress additional measures to strengthen the separation between 
insured depository institution controlled by depository institutions 
holding companies from the activities of any of their affiliates 
including, the imposition of additional restrictions on interaffiliate 
transactions and the strict application of Federal deposit insurance 
coverage only for the benefit of depositors of insured depository 
institutions that are controlled by a depository institution holding 
company.
    (h) Consultation With State Regulators.--The Committee shall 
consult with the appropriate organizations representing the State 
regulators of banks, savings and loan associations, saving banks, 
securities firms, insurance companies, and other providers of financial 
services, and as deemed appropriate, meet with such State regulators. 
The Committee shall invite to each public meeting of the Committee 
representatives of such organizations.
    (i) Studies and Recommendations.--The Committee may conduct or 
authorize studies to carry out the purposes of this Act. On the basis 
of such studies, the Committee may make recommendations to the Congress 
and member agencies concerning the implementation of this Act and 
changes in statutes and regulations necessary to promote the strength 
and stability of the Nation's financial system and financial 
institutions, the competitiveness of providers of financial services in 
domestic and international markets and the purposes of this Act. Within 
one year of the enactment of this Act, the Committee shall report to 
Congress proposed legislative or regulatory actions that will improve 
the examination process to permit better oversight of all insured 
depository institutions. In particular, the Committee shall consider 
whether the number of or compensation for examiners employed by the 
appropriate Federal regulatory agencies should be increased.

                       TITLE III--EFFECTIVE DATE

    Sec. 301. This Act shall take effect upon enactment.
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