[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 900 Engrossed in Senate (ES)]
106th CONGRESS
1st Session
S. 900
_______________________________________________________________________
AN ACT
To enhance competition in the financial services industry by providing
a prudential framework for the affiliation of banks, securities firms,
insurance companies, 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
Modernization Act of 1999''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
Sec. 101. Glass-Steagall Act repealed.
Sec. 102. Financial activities.
Sec. 103. Conforming amendments.
Sec. 104. Operation of State law.
Subtitle B--Streamlining Supervision of Bank Holding Companies
Sec. 111. Streamlining bank holding company supervision.
Sec. 112. Authority of State insurance regulator and Securities and
Exchange Commission.
Sec. 113. Role of the Board of Governors of the Federal Reserve System.
Sec. 114. Examination of investment companies.
Sec. 115. Equivalent regulation and supervision.
Sec. 116. Interagency consultation.
Sec. 117. Preserving the integrity of FDIC resources.
Subtitle C--Activities of National Banks
Sec. 121. Authority of national banks to underwrite municipal revenue
bonds.
Sec. 122. Subsidiaries of national banks.
Sec. 123. Agency activities.
Sec. 124. Prohibiting fraudulent representations.
Sec. 125. Insurance underwriting by national banks.
Subtitle D--National Treatment of Foreign Financial Institutions
Sec. 151. National treatment of foreign financial institutions.
Sec. 152. Representative offices.
TITLE II--INSURANCE CUSTOMER PROTECTIONS
Sec. 201. Functional regulation of insurance.
Sec. 202. Insurance customer protections.
Sec. 203. Federal and State dispute resolution.
TITLE III--REGULATORY IMPROVEMENTS
Sec. 301. Elimination of SAIF and DIF special reserves.
Sec. 302. Expanded small bank access to S corporation treatment.
Sec. 303. Meaningful CRA examinations.
Sec. 304. Financial information privacy protection.
Sec. 305. Cross marketing restriction; limited purpose bank relief;
divestiture.
Sec. 306. ``Plain language'' requirement for Federal banking agency
rules.
Sec. 307. Retention of ``Federal'' in name of converted Federal savings
association.
Sec. 308. Community Reinvestment Act exemption.
Sec. 309. Bank officers and directors as officers and directors of
public utilities.
Sec. 310. Control of bankers' banks.
Sec. 311. Multistate licensing and interstate insurance sales
activities.
Sec. 312. CRA sunshine requirements.
Sec. 313. Interstate branches and agencies of foreign banks.
Sec. 314. Disclosures to consumers under the Truth in Lending Act.
Sec. 315. Approval for purchases of securities.
Sec. 316. Provision of technical assistance to microenterprises
Sec. 317. Federal reserve audits.
Sec. 318. Study and report on advertising practices of online brokerage
services.
Sec. 319. Eligibility of community development financial institution to
borrow from the Federal Home Loan Bank
system.
TITLE IV--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
Sec. 401. Short title.
Sec. 402. Definitions.
Sec. 403. Savings association membership.
Sec. 404. Advances to members; collateral.
Sec. 405. Eligibility criteria.
Sec. 406. Management of banks.
Sec. 407. Resolution Funding Corporation.
Sec. 408. GAO study on Federal Home Loan Bank System capital.
TITLE V--FUNCTIONAL REGULATION OF BROKERS AND DEALERS
Sec. 501. Definition of broker.
Sec. 502. Definition of dealer.
Sec. 503. Definition and treatment of banking products.
Sec. 504. Qualified investor defined.
Sec. 505. Government securities defined.
Sec. 506. Effective date.
Sec. 507. Rule of construction.
TITLE VI--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 601. Prevention of creation of new S&L holding companies with
commercial affiliates.
Sec. 602. Optional conversion of Federal savings associations.
TITLE VII--ATM FEE REFORM
Sec. 701. Short title.
Sec. 702. Electronic fund transfer fee disclosures at any host ATM.
Sec. 703. Disclosure of possible fees to consumers when ATM card is
issued.
Sec. 704. Feasibility study.
Sec. 705. No liability if posted notices are damaged.
TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND
INSURANCE COMPANIES
Subtitle A--Affiliations
SEC. 101. GLASS-STEAGALL ACT REPEALED.
(a) Section 20 Repealed.--Section 20 of the Banking Act of 1933 (12
U.S.C. 377) (commonly referred to as the ``Glass-Steagall Act'') is
repealed.
(b) Section 32 Repealed.--Section 32 of the Banking Act of 1933 (12
U.S.C. 78) is repealed.
SEC. 102. FINANCIAL ACTIVITIES.
(a) In General.--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) Engaging in Activities That Are Financial in Nature.--
``(1) In general.--Notwithstanding subsection (a), a bank
holding company may engage in any activity, and may acquire and
retain the shares of any company engaged in any activity, that
the Board, in coordination with the Secretary of the Treasury,
determines (by regulation or order) to be financial in nature
or incidental to such financial activities.
``(2) Coordination between the board and the secretary of
the treasury.--
``(A) Proposals raised before the board.--
``(i) Consultation.--The Board shall notify
the Secretary of the Treasury of, and consult
with the Secretary of the Treasury concerning,
any request, proposal, or application under
this subsection for a determination of whether
an activity is financial in nature or
incidental to such a financial activity.
``(ii) Treasury view.--The Board shall not
determine that any activity is financial in
nature or incidental to a financial activity
under this subsection if the Secretary of the
Treasury notifies the Board in writing, not
later than 30 days after the date of receipt of
the notice described in clause (i) (or such
longer period as the Board determines to be
appropriate in light of the circumstances) that
the Secretary of the Treasury believes that the
activity is not financial in nature or
incidental to a financial activity.
``(B) Proposals raised by the treasury.--
``(i) Treasury recommendation.--The
Secretary of the Treasury may, at any time,
recommend in writing that the Board find an
activity to be financial in nature or
incidental to a financial activity.
``(ii) Time period for board action.--Not
later than 30 days after the date of receipt of
a written recommendation from the Secretary of
the Treasury under clause (i) (or such longer
period as the Secretary of the Treasury and the
Board determine to be appropriate in light of
the circumstances), the Board shall determine
whether to initiate a public rulemaking
proposing that the subject recommended activity
be found to be financial in nature or
incidental to a financial activity under this
subsection, and shall notify the Secretary of
the Treasury in writing of the determination of
the Board and, in the event that the Board
determines not to seek public comment on the
proposal, the reasons for that determination.
``(3) Factors to be considered.--The Board shall determine
that an activity is financial in nature or incidental to
financial activities, if the Board finds that such activity is
consistent with--
``(A) the purposes of this Act and the Financial
Services Modernization Act of 1999;
``(B) changes or reasonably expected changes in the
marketplace in which bank holding companies compete;
``(C) changes or reasonably expected changes in the
technology for delivering financial services; and
``(D) fostering--
``(i) effective competition with any
company seeking to provide financial services
in the United States;
``(ii) the efficient delivery of
information and services that are financial in
nature through the use of technological means,
including any application necessary to protect
the security or efficacy of systems for the
transmission of data or financial transactions;
and
``(iii) the provision to customers of any
available or emerging technological means for
using financial services.
``(4) Activities that are financial in nature.--For
purposes of this subsection, the following activities shall be
considered to be financial in nature:
``(A) Lending, exchanging, transferring, investing
for others, or safeguarding money or securities.
``(B) Insuring, guaranteeing, or indemnifying
against loss, harm, damage, illness, disability, or
death, or providing and issuing annuities, and acting
as principal, agent, or broker for purposes of the
foregoing, in any State, in full compliance with the
laws and regulations of that State that apply to each
type of insurance license or authorization in that
State.
``(C) Providing financial, investment, or economic
advisory services, including advising an investment
company (as defined in section 3 of the Investment
Company Act of 1940).
``(D) Issuing or selling instruments representing
interests in pools of assets permissible for a bank to
hold directly.
``(E) Underwriting, dealing in, or making a market
in securities.
``(F) Engaging in any activity that the Board has
determined, by order or regulation that is in effect on
the date of enactment of the Financial Services
Modernization Act of 1999, to be so closely related to
banking or managing or controlling banks as to be a
proper incident thereto (subject to the same terms and
conditions contained in such order or regulation,
unless modified by the Board).
``(G) Engaging, in the United States, in any
activity that--
``(i) a bank holding company may engage in
outside of the United States; and
``(ii) the Board has determined, under
regulations issued pursuant to subsection
(c)(13) (as in effect on the day before the
date of enactment of the Financial Services
Modernization Act of 1999) to be usual in
connection with the transaction of banking or
other financial operations abroad.
``(H) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of 1 or
more entities (including entities, other than a
depository institution or subsidiary of a depository
institution that the bank holding company controls), 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 any activity not authorized pursuant
to this section if--
``(i) the shares, assets, or ownership
interests are not acquired or held by a
depository institution or subsidiary of a
depository institution; and
``(ii) such shares, assets, or ownership
interests are acquired and held by--
(I) a securities affiliate or an
affiliate thereof; or
(II) an affiliate of an insurance
company described in paragraph (I)(ii)
that provides investment advice to an
insurance company and is registered
pursuant to the Investment Advisers Act
of 1940, or an affiliate of such
investment adviser, as part of a bona
fide underwriting or merchant banking
activity, including investment
activities engaged in for the purpose
of appreciation and ultimate resale or
disposition of the investment.
``(I) Directly or indirectly acquiring or
controlling, whether as principal, on behalf of 1 or
more entities (including entities, other than a
depository institution or subsidiary of a depository
institution, that the bank holding company controls),
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 any activity not authorized pursuant
to this section if--
``(i) the shares, assets, or ownership
interests are not acquired or held by a
depository institution or a subsidiary of a
depository institution;
``(ii) such shares, assets, or ownership
interests are acquired and held by an insurance
company that is predominantly engaged in
underwriting life, accident and health, or
property and casualty insurance (other than
credit-related insurance) or providing and
issuing annuities; and
``(iii) such shares, assets, or ownership
interests represent, as determined by the
insurance authority of the State of domicile of
the insurance company, an investment made in
the ordinary course of business of such
insurance company in accordance with relevant
State law governing such investments.
``(J) Activities that the Board determines (by
regulation or order) are complementary to financial
activities, or any other service that the Board
determines (by regulation or order) not to pose a
substantial risk to the safety or soundness of
depository institutions or the financial system
generally.
``(5) Actions required.--
``(A) In general.--The Board shall, by regulation
or order, define, consistent with the purposes of this
Act, the activities described in subparagraph (B) as
financial in nature, and the extent to which such
activities are financial in nature or incidental to
activities that are financial in nature.
``(B) Activities.--The activities described in this
subparagraph are--
``(i) lending, exchanging, transferring,
investing for others, or safeguarding financial
assets other than money or securities;
``(ii) providing any device or other
instrumentality for transferring money or other
financial assets;
``(iii) arranging, effecting, or
facilitating financial transactions for the
account of third parties; and
``(iv) activities that are complementary to
financial activities, or any other service that
the Board determines (by regulation or order)
not to pose a substantial risk to the safety or
soundness of depository institutions or the
financial system generally.
``(6) Required notification.--
``(A) In general.--A bank holding company that
acquires any company or commences any activity pursuant
to this subsection shall provide written notice to the
Board describing the activity commenced or conducted by
the company acquired not later than 30 calendar days
after commencing the activity or consummating the
acquisition, as applicable.
``(B) Approval not required for certain financial
activities.--Except as provided in subsection (j) with
regard to the acquisition of a savings association, a
bank holding company may commence any activity, or
acquire any company, pursuant to paragraph (4) or any
regulation prescribed or order issued under paragraph
(5), without prior approval of the Board.
``(l) Conditions for Engaging in Expanded Financial Activities.--
``(1) In general.--Notwithstanding subsection (k), a bank
holding company may not engage in any activity, or directly or
indirectly acquire or retain shares of any company engaged in
any activity, under subsection (k), other than activities
permissible for a bank holding company under subsection (c)(8),
unless--
``(A) all of the insured depository institution
subsidiaries of the bank holding company are well
capitalized;
``(B) all of the insured depository institution
subsidiaries of the bank holding company are well
managed; and
``(C) the bank holding company has filed with the
Board--
``(i) a declaration that the company elects
to engage in activities or acquire and retain
shares of a company which were not permissible
for a bank holding company to engage in or
acquire before the enactment of the Financial
Services Modernization Act of 1999; and
``(ii) a certification that the company
meets the requirements of subparagraphs (A) and
(B).
``(2) Foreign banks.--For purposes of paragraph (1), the
Board shall apply comparable capital and management standards
to a foreign bank that operates a branch or agency or owns or
controls a commercial lending company in the United States,
giving due regard to the principle of national treatment and
equality of competitive opportunity.
``(3) Definitions.--For purposes of this subsection--
``(A) the term `well capitalized' has the same
meaning as in section 38 of the Federal Deposit
Insurance Act;
``(B) the term `well managed' means--
``(i) in the case of a depository
institution that has been examined, unless
otherwise determined in writing by the
appropriate Federal banking agency--
``(I) the achievement of a
composite rating of 1 or 2 under the
Uniform Financial Institutions Rating
System (or an equivalent rating under
an equivalent rating system) in
connection with the most recent
examination or subsequent review of the
depository institution; and
``(II) at least a rating of 2 for
management, if that rating is given;
``(ii) in the case of any depository
institution that has not been examined, the
existence and use of managerial resources that
the appropriate Federal banking agency
determines are satisfactory; and
``(iii) the terms `appropriate Federal
banking agency' and `depository institution'
have the same meanings as in section 3 of the
Federal Deposit Insurance Act.
``(m) Provisions Applicable to Bank Holding Companies That Fail To
Meet Certain Requirements.--
``(1) In general.--If the Board finds that--
``(A) a bank holding company is engaged, directly
or indirectly, in any activity under subsection (k),
other than activities that are permissible for a bank
holding company under subsection (c)(8); and
``(B) such bank holding company is not in
compliance with the requirements of subsection (l),
the Board shall give notice to the bank holding company to that
effect, describing the conditions giving rise to the notice.
``(2) Agreement to correct conditions required.--Not later
than 45 days after the date of receipt by a bank holding
company of a notice given under paragraph (1) (or such
additional period as the Board may permit), the bank holding
company shall execute an agreement with the Board to comply
with the requirements applicable to a bank holding company
under subsection (l).
``(3) Board may impose limitations.--Until the conditions
described in a notice to a bank holding company under paragraph
(1) are corrected, the Board may impose such limitations on the
conduct or activities of that bank holding company or any
affiliate of that company as the Board determines to be
appropriate under the circumstances and consistent with the
purposes of this Act.
``(4) Failure to correct.--If the conditions described in a
notice to a bank holding company under paragraph (1) are not
corrected within 180 days after the date of receipt by the bank
holding company of a notice under paragraph (1), the Board may
require such bank holding company, under such terms and
conditions as may be imposed by the Board and subject to such
extension of time as may be granted in the discretion of the
Board, either--
``(A) to divest control of any subsidiary insured
depository institutions; or
``(B) to cease to engage in any activity conducted
by such bank holding company or its subsidiaries (other
than a depository institution or a subsidiary of a
depository institution) that is not an activity that is
permissible for a bank holding company under subsection
(c)(8).
``(n) Authority To Retain Commodity Activities and Affiliations.--
Notwithstanding subsection (a), a company that is not a bank holding
company or a foreign bank (as defined in section 1(b)(7) of the
International Banking Act of 1978) and becomes a bank holding company
after the date of enactment of the Financial Services Modernization Act
of 1999, may continue to 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 September 30, 1997, if--
``(1) the bank holding company, or any subsidiary of the
bank holding company, lawfully was engaged, directly or
indirectly, in any of such activities as of September 30, 1997,
in the United States;
``(2) the attributed aggregate consolidated assets of the
company held by the bank holding company pursuant to this
subsection, and not otherwise permitted to be held by a bank
holding company, are equal to not more than 5 percent of the
total consolidated assets of the bank holding company, except
that the Board may increase that percentage by such amounts and
under such circumstances as the Board considers appropriate,
consistent with the purposes of this Act; and
``(3) the bank holding company does not permit--
``(A) any company, the shares of which it owns or
controls pursuant to this subsection, to offer or
market any product or service of an affiliated insured
depository institution; or
``(B) any affiliated insured depository institution
to offer or market any product or service of any
company, the shares of which are owned or controlled by
such bank holding company pursuant to this
subsection.''.
(b) Financial Activities of Bank Holding Companies Ineligible for
Subsection (k) Powers.--
(1) In general.--Section 4(c)(8) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amended to read
as follows:
``(8) shares of any company, the activities of which had
been determined by the Board by regulation or order under this
paragraph as of the day before the date of enactment of the
Financial Services Modernization Act of 1999, to be so closely
related to banking as to be a proper incident thereto (subject
to such terms and conditions contained in such regulation,
unless modified by the Board);''.
(2) Conforming changes to other statutes.--
(A) Amendment to the bank holding company act
amendments of 1970.--Section 105 of the Bank Holding
Company Act Amendments of 1970 (12 U.S.C. 1850) is
amended by striking ``, to engage directly or
indirectly in a nonbanking activity pursuant to section
4 of such Act,''.
(B) Amendment to the bank service company act.--
Section 4(f) of the Bank Service Company Act (12 U.S.C.
1864(f)) is amended by striking the period at the end
and inserting the following: ``as of the day before the
date of enactment of the Financial Services
Modernization Act of 1999.''.
SEC. 103. CONFORMING AMENDMENTS.
Section 10(c)(2)(F)(i) of the Home Owners' Loan Act (12 U.S.C.
1467a(c)(2)(F)(i))is amended--
(1) by inserting ``is permitted for bank holding companies
under subsection (c) or (k) of section 4 of the Bank Holding
Company Act of 1956, or which'' after ``(i) which''; and
(2) by striking ``section 4(c)'' and inserting ``subsection
(c) or (k) of section 4''.
SEC. 104. OPERATION OF STATE LAW.
(a) State Regulation of the Business of Insurance.--The Act
entitled ``An Act to express the intent of Congress with reference to
the regulation of the business of insurance'' and approved March 9,
1945 (15 U.S.C. 1011 et seq.), commonly referred to as the ``McCarran-
Ferguson Act'' remains the law of the United States.
(b) Mandatory Insurance Licensing Requirements.--No person or
entity shall provide insurance in a State as principal or agent unless
such person or entity is licensed, as required by the appropriate
insurance regulator of such State in accordance with the relevant State
insurance laws, subject to subsections (c), (d), and (e).
(c) Affiliations.--
(1) In general.--Except as provided in paragraph (2), no
State may, by statute, regulation, order, interpretation, or
other action, prevent or restrict the affiliations authorized
or permitted by this Act and the amendments made by this Act.
(2) Insurance.--With respect to affiliations between
insured depository institutions, or any subsidiary or affiliate
thereof, and persons or entities engaged in the business of
insurance, paragraph (1) does not prohibit any State from
collecting, reviewing, and taking actions on required
applications and other documents or reports as may be necessary
concerning proposed acquisitions, changes, or continuations of
control of any entity engaged in the business of insurance and
domiciled in that State, if the State actions do not have the
practical effect of discriminating, either intentionally or
unintentionally, against an insured depository institution or a
subsidiary or affiliate thereof, or against any person or
entity based upon affiliation with an insured depository
institution.
(d) Activities.--
(1) In general.--Except as provided in paragraph (3), and
except with respect to insurance sales, solicitation, and cross
marketing activities, which shall be governed by paragraph (2),
no State may, by statute, regulation, order, interpretation or
other action, prevent or restrict an insured depository
institution or subsidiary or affiliate thereof from engaging
directly or indirectly, either by itself or in conjunction with
a subsidiary, affiliate, or any other entity or person, in any
activity authorized or permitted under this Act and the
amendments made by this Act.
(2) Insurance sales.--
(A) In general.--In accordance with the legal
standards for preemption set forth in the decision of
the Supreme Court of the United States in Barnett Bank
of Marion County N.A. v. Nelson, 116 S. Ct. 1103
(1996), no State may, by statute, regulation, order,
interpretation, or other action, prevent or
significantly interfere with the ability of an insured
depository institution, or a subsidiary or affiliate
thereof, to engage, directly or indirectly, either by
itself or in conjunction with a subsidiary, affiliate,
or any other party, in any insurance sales,
solicitation, or cross-marketing activity.
(B) Certain state laws preserved.--Notwithstanding
subparagraph (A), a State may impose any of the
following restrictions, or restrictions that are
substantially the same as but no more burdensome or
restrictive than those in each of the following
clauses:
(i) Restrictions prohibiting the rejection
of an insurance policy solely because the
policy has been issued or underwritten by any
person not associated with such insured
depository institution, or any subsidiary or
affiliate thereof, when such insurance is
required in connection with a loan or extension
of credit.
(ii) Restrictions prohibiting a requirement
for any debtor, insurer, or insurance agent or
broker to pay a separate charge in connection
with the handling of insurance that is required
in connection with a loan or other extension of
credit or the provision of another traditional
banking product, unless such charge would be
required when the insured depository
institution, or any subsidiary or affiliate
thereof, is the licensed insurance agent or
broker providing the insurance.
(iii) Restrictions prohibiting the use of
any advertisement or other insurance
promotional material by an insured depository
institution, or any subsidiary or affiliate
thereof, that would cause a reasonable person
to believe mistakenly that--
(I) a State or the Federal
Government is responsible for the
insurance sales activities of, or
stands behind the credit of, the
institution, affiliate, or subsidiary;
or
(II) a State, or the Federal
Government guarantees any returns on
insurance products, or is a source of
payment on any insurance obligation of
or sold by the institution, affiliate,
or subsidiary.
(iv) Restrictions prohibiting the payment
or receipt of any commission or brokerage fee
or other valuable consideration for services as
an insurance agent or broker to or by any
person, unless such person holds a valid State
license regarding the applicable class of
insurance at the time at which the services are
performed, except that, in this clause, the
term ``services as an insurance agent or
broker'' does not include a referral by an
unlicensed person of a customer or potential
customer to a licensed insurance agent or
broker that does not include a discussion of
specific insurance policy terms and conditions.
(v) Restrictions prohibiting any
compensation paid to or received by any
individual who is not licensed to sell
insurance for the referral of a customer that
seeks to purchase, or seeks an opinion or
advice on, any insurance product to a person
that sells or provides opinions or advice on
such product, based on the purchase of
insurance by the customer.
(vi) Restrictions prohibiting the release
of the insurance information of a customer
(defined as information concerning the
premiums, terms, and conditions of insurance
coverage, including expiration dates and rates,
and insurance claims of a customer contained in
the records of the insured depository
institution, or a subsidiary or affiliate
thereof) to any person or entity other than an
officer, director, employee, agent, subsidiary,
or affiliate of an insured depository
institution, for the purpose of soliciting or
selling insurance, without the express consent
of the customer, other than a provision that
prohibits--
(I) a transfer of insurance
information to an unaffiliated
insurance company, agent, or broker in
connection with transferring insurance
in force on existing insureds of the
insured depository institution, or
subsidiary or affiliate thereof, or in
connection with a merger with or
acquisition of an unaffiliated
insurance company, agent, or broker; or
(II) the release of information as
otherwise authorized by Federal or
State law.
(vii) Restrictions prohibiting the use of
health information obtained from the insurance
records of a customer for any purpose, other
than for its activities as a licensed agent or
broker, without the express consent of the
customer.
(viii) Restrictions prohibiting the
extension of credit (or any product or service
that is equivalent to an extension of credit),
lease or sale of property of any kind, or
furnishing of any services or fixing or varying
the consideration for any of the foregoing, on
the condition or requirement that the customer
obtain insurance from the insured depository
institution, a subsidiary or affiliate thereof,
or a particular insurer, agent, or broker,
other than a prohibition that would prevent any
insured depository institution, or any
subsidiary or affiliate thereof--
(I) from engaging in any activity
that would not violate section 106 of
the Bank Holding Company Act Amendments
of 1970, as interpreted by the Board of
Governors of the Federal Reserve
System; or
(II) from informing a customer or
prospective customer that insurance is
required in order to obtain a loan or
credit, that loan or credit approval is
contingent upon the procurement by the
customer of acceptable insurance, or
that insurance is available from the
insured depository institution, or any
subsidiary or affiliate thereof.
(ix) Restrictions requiring, when an
application by a customer for a loan or other
extension of credit from an insured depository
institution is pending, and insurance is
offered or sold to the customer or is required
in connection with the loan or extension of
credit by the insured depository institution or
any subsidiary or affiliate thereof, that a
written disclosure be provided to the customer
or prospective customer indicating that his or
her choice of an insurance provider will not
affect the credit decision or credit terms in
any way, except that the insured depository
institution may impose reasonable requirements
concerning the creditworthiness of the
insurance provider and scope of coverage
chosen.
(x) Restrictions, requiring clear and
conspicuous disclosure, in writing where
practicable, to the customer prior to the sale
of any insurance policy that such policy--
(I) is not a deposit;
(II) is not insured by the Federal
Deposit Insurance Corporation;
(III) is not guaranteed by the
insured depository institution or, if
appropriate, its subsidiaries or
affiliates or any person soliciting the
purchase of or selling insurance on the
premises thereof; and
(IV) where appropriate, involves
investment risk, including potential
loss of principal.
(xi) Restrictions requiring that, when a
customer obtains insurance (other than credit
insurance or flood insurance) and credit from
an insured depository institution or its
subsidiaries or affiliates, or any person
soliciting the purchase of or selling insurance
on the premises thereof, the credit and
insurance transactions be completed through
separate documents.
(xii) Restrictions prohibiting, when a
customer obtains insurance (other than credit
insurance or flood insurance) and credit from
an insured depository institution or its
subsidiaries or affiliates, or any person
soliciting the purchase of or selling insurance
on the premises thereof, inclusion of the
expense of insurance premiums in the primary
credit transaction without the express written
consent of the customer.
(xiii) Restrictions requiring--
(I) maintenance of separate and
distinct books and records relating to
insurance transactions, including all
files relating to and reflecting
customer complaints; and
(II) that such insurance books and
records be made available to the
appropriate State insurance regulator
for inspection upon reasonable notice.
(C) Limitations.--
(i) OCC deference.--Section 203(e) does not
apply with respect to any State statute,
regulation, order, interpretation, or other
action regarding insurance sales, solicitation,
or cross marketing activities described in
subparagraph (A) that was issued, adopted, or
enacted before September 3, 1998, and that is
not described in subparagraph (B).
(ii) Nondiscrimination.--Subsection (e)
does not apply with respect to any State
statute, regulation, order, interpretation, or
other action regarding insurance sales,
solicitation, or cross marketing activities
described in subparagraph (A) that was issued,
adopted, or enacted before September 3, 1998,
and that is not described in subparagraph (B).
(iii) Construction.--Nothing in this
paragraph shall be construed--
(I) to limit the applicability of
the decision of the Supreme Court in
Barnett Bank of Marion County N.A. v.
Nelson, 116 S. Ct. 1103 (1996) with
respect to any State statute,
regulation, order, interpretation, or
other action that is not referred to or
described in this paragraph; or
(II) to create any inference with
respect to any State statute,
regulation, order, interpretation, or
other action that is not referred to in
this paragraph.
(3) Insurance activities other than sales.--State statutes,
regulations, interpretations, orders, and other actions shall
not be preempted under paragraph (1) to the extent that they--
(A) relate to, or are issued, adopted, or enacted
for the purpose of regulating the business of insurance
in accordance with the Act of March 9, 1945 (commonly
known as the ``McCarran-Ferguson Act'');
(B) apply only to persons or entities that are not
insured depository institutions, but that are directly
engaged in the business of insurance (except that they
may apply to depository institutions engaged in
providing savings bank life insurance as principal to
the extent of regulating such insurance);
(C) do not relate to or directly or indirectly
regulate insurance sales, solicitations, or cross
marketing activities; and
(D) are not prohibited under subsection (e).
(4) Financial activities other than insurance.--No State
statute, regulation, interpretation, order, or other action
shall be preempted under paragraph (1) to the extent that--
(A) it does not relate to, and is not issued and
adopted, or enacted for the purpose of regulating,
directly or indirectly, insurance sales, solicitations,
or cross marketing activities covered under paragraph
(2);
(B) it does not relate to, and is not issued and
adopted, or enacted for the purpose of regulating,
directly or indirectly, the business of insurance
activities other than sales, solicitations, or cross
marketing activities, covered under paragraph (3);
(C) it does not relate to securities investigations
or enforcement actions referred to in subsection (f);
and
(D) it is not prohibited under subsection (e).
(e) Nondiscrimination.--Except as provided in any restriction
described in subsection (d)(2)(B), no State may, by statute,
regulation, order, interpretation, or other action, regulate the
activities authorized or permitted under this Act and the amendments
made by this Act, or any other provision of Federal law, of an insured
depository institution, or subsidiary or affiliate thereof, to the
extent that such statute, regulation, order, interpretation, or other
action--
(1) distinguishes by its terms between insured depository
institutions, or subsidiaries or affiliates thereof, and other
persons or entities engaged in such activities, in a manner
that is in any way adverse to any such insured depository
institution, or subsidiary or affiliate thereof;
(2) as interpreted or applied, has or will have an impact
on insured depository institutions, or subsidiaries or
affiliates thereof, that is substantially more adverse than its
impact on other persons or entities providing the same products
or services or engaged in the same activities that are not
insured depository institutions, or subsidiaries or affiliates
thereof, or persons or entities affiliated therewith;
(3) effectively prevents an insured depository institution,
or subsidiary or affiliate thereof, from engaging in activities
authorized or permitted by this Act and the amendments made by
this Act, or any other provision of Federal law; or
(4) conflicts with the intent of this Act and the
amendments made by this Act generally to permit affiliations
that are authorized or permitted by Federal law.
(f) Limitation.--Subsections (c) and (d) shall not be construed to
affect--
(1) the jurisdiction of the securities commission (or any
agency or office performing like functions) of any State, under
the laws of that State, to investigate and bring enforcement
actions, consistent with section 18(c) of the Securities Act of
1933, with respect to fraud or deceit or unlawful conduct by
any person, in connection with securities or securities
transactions; or
(2) State laws, regulations, orders, interpretations, or
other actions of general applicability relating to the
governance of corporations, partnerships, limited liability
companies, or other business associations incorporated or
formed under the laws of that State or domiciled in that State,
or the applicability of the antitrust laws of any State or any
State law that is similar to the antitrust laws if such laws,
regulations, interpretations, orders, or other actions are not
inconsistent with the purposes of this Act to authorize or
permit certain affiliations and to remove barriers to such
affiliations.
(g) Certain State Affiliation Laws Preempted for Insurance
Companies and Affiliates.--Except as provided in subsection (c)(2), no
State may, by law, regulation, order, interpretation, or otherwise--
(1) prevent or restrict the ability of any insurer, or any
affiliate of an insurer (whether such affiliate is organized as
a stock company, mutual holding company, or otherwise), to
become a bank holding company, or to acquire control of an
insured depository institution, where the practical effect of
such State action would be to discriminate, intentionally or
unintentionally, against an insurer, or any affiliate of an
insurer, based upon its affiliation with an insured depository
institution;
(2) limit the amount of the assets of an insurer that may
be invested in the voting securities of an insured depository
institution (or any company that controls such institution),
except that the laws of the State of domicile of the insurer
may limit the amount of such investment to an amount that is
not less than 5 percent of the admitted assets of the insurer;
or
(3) prevent, restrict, or have the authority to review,
approve, or disapprove a plan of reorganization by which an
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), unless the State is the
State of domicile of the insurer, except that the appropriate
regulatory authority of the State of domicile of the insurer
shall consult with the appropriate regulatory authority in
other States in which the insurer conducts business, regarding
issues affecting the best interests of policyholders.
(h) Motor Vehicle Rental Agency Activities.--
(1) Findings.--Congress finds that--
(A) in many States, the insurance laws are unclear
as to whether personal insurance sales in connection
with the short-term rental or leasing of motor vehicles
should be licensed by the State as an insurance
activity; and
(B) in those States that have not yet implemented
regulations governing the offer or sale of insurance in
connection with the short-term lease or rental of a
motor vehicle, a presumption should exist that no
insurance license is required in connection with such
sales.
(2) Exception for certain insurance products.--Subsection
(b) does not apply to any person or entity who offers or
provides insurance ancillary to a short-term lease or rental
transaction of a motor vehicle in a State that does not, by
statute, rule, or regulation, impose any licensing,
appointment, personal or corporate qualifications, or education
requirements on such persons or entities.
(3) Construction.--Nothing in this subsection shall be
construed to alter the validity or effect of any State law, or
the prospective application of any final State statute, rule,
or regulation which, by its specific terms, expressly regulates
or exempts from regulation any person or entity who offers or
provides insurance ancillary to a short-term lease or rental
transaction of a motor vehicle.
(4) Lease period.--For purposes of this subsection, a
person shall be considered to be providing insurance ancillary
to a short-term lease or rental transaction of a motor vehicle
if the lease or rental transaction is for 60 days or less, and
the insurance is provided for a period of consecutive days not
exceeding the length of the lease or rental.
(5) Effect.--This subsection shall remain in effect during
the period beginning on the date of enactment of this Act and
ending 5 years after that date of enactment.
(i) Definitions.--For purposes of this section--
(1) the term ``antitrust laws'' has the same meaning as in
subsection (a) of the first section of the Clayton Act, and
includes section 5 of the Federal Trade Commission Act (to the
extent that such section 5 relates to unfair methods of
competition);
(2) the term ``insured depository institution'' has the
same meaning as in section 3 of the Federal Deposit Insurance
Act; and
(3) the term ``State'' means any State of the United
States, the District of Columbia, any territory of the United
States, Puerto Rico, Guam, American Samoa, the Trust Territory
of the Pacific Islands, the Virgin Islands, and the Northern
Mariana Islands.
Subtitle B--Streamlining Supervision of Bank Holding Companies
SEC. 111. STREAMLINING BANK HOLDING COMPANY SUPERVISION.
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) Reports.--
``(A) In general.--The Board, from time to time,
may require a bank holding company and any subsidiary
of such company to submit reports under oath to keep
the Board informed as to--
``(i) the financial condition of the bank
holding company or subsidiary, systems for
monitoring and controlling financial and
operating risks, and transactions with
depository institution subsidiaries of the bank
holding company; and
``(ii) compliance by the company or
subsidiary with applicable provisions of this
Act.
``(B) Use of existing reports.--
``(i) In general.--For purposes of
compliance with this paragraph, the Board
shall, to the fullest extent possible, accept--
``(I) reports that a bank holding
company or any subsidiary of such
company has provided or been required
to provide to other Federal or State
supervisors or to appropriate self-
regulatory organizations;
``(II) information that is
otherwise required to be reported
publicly; and
``(III) externally audited
financial statements.
``(ii) Reports filed with other agencies.--
In the event that the Board requires a report
under this subsection from a functionally
regulated subsidiary of a bank holding company
of a kind that is not required by another
Federal or State regulatory authority or an
appropriate self-regulatory organization, the
Board shall request that the appropriate
regulatory authority or self-regulatory
organization obtain such report. If the report
is not made available to the Board, and the
report is necessary to assess a material risk
to the bank holding company or any of its
depository institution subsidiaries or
compliance with this Act, the Board may require
such functionally regulated subsidiary to
provide such a report to the Board.
``(2) Examinations.--
``(A) Examination authority for bank holding
companies and subsidiaries.--Subject to subparagraph
(B), the Board may make examinations of each bank
holding company and each subsidiary of such holding
company in order--
``(i) to inform the Board of the nature of
the operations and financial condition of the
holding company and such subsidiaries;
``(ii) to inform the Board of--
``(I) the financial and operational
risks within the holding company system
that may pose a threat to the safety
and soundness of any depository
institution subsidiary of such holding
company; and
``(II) the systems for monitoring
and controlling such risks; and
``(iii) to monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
depository institution subsidiary and its
affiliates.
``(B) Functionally regulated subsidiaries.--
Notwithstanding subparagraph (A), the Board may make
examinations of a functionally regulated subsidiary of
a bank holding company only if--
``(i) the Board has reasonable cause to
believe that such subsidiary is engaged in
activities that pose a material risk to an
affiliated depository institution; or
``(ii) based on reports and other available
information, the Board has reasonable cause to
believe that a subsidiary is not in compliance
with this Act or with provisions relating to
transactions with an affiliated depository
institution, and the Board cannot make such
determination through examination of the
affiliated depository institution or the bank
holding company.
``(C) Restricted focus of examinations.--The Board
shall, to the fullest extent possible, limit the focus
and scope of any examination of a bank holding company
to--
``(i) the bank holding company; and
``(ii) any subsidiary of the bank holding
company that could have a materially adverse
effect on the safety and soundness of any
depository institution subsidiary of the
holding company due to--
``(I) the size, condition, or
activities of the subsidiary; or
``(II) the nature or size of
transactions between the subsidiary and
any depository institution that is also
a subsidiary of the bank holding
company.
``(D) Deference to bank examinations.--The Board
shall, to the fullest extent possible, for the purposes
of this paragraph, use the reports of examinations of
depository institutions made by the appropriate Federal
and State depository institution supervisory authority.
``(E) Deference to other examinations.--The Board
shall, to the fullest extent possible, forego an
examination by the Board under this paragraph and
instead review the reports of examination made of--
``(i) any registered broker or dealer by or
on behalf of the Securities and Exchange
Commission;
``(ii) any registered investment adviser
properly registered by or on behalf of either
the Securities and Exchange Commission or any
State;
``(iii) any licensed insurance company by
or on behalf of any State regulatory authority
responsible for the supervision of insurance
companies; and
``(iv) any other subsidiary that the Board
finds to be comprehensively supervised by a
Federal or State authority.
``(3) Capital.--
``(A) In general.--The Board may not, by
regulation, guideline, order, or otherwise, prescribe
or impose any capital or capital adequacy rules,
guidelines, standards, or requirements on any
subsidiary of a bank holding company that--
``(i) is not an insured depository
institution; and
``(ii) is--
``(I) in compliance with the
applicable capital requirements of
another Federal regulatory authority
(including the Securities and Exchange
Commission) or State insurance
authority; or
``(II) properly registered as an
investment adviser under the Investment
Advisers Act of 1940, or with any
State.
``(B) Rule of construction.--Subparagraph (A) shall
not be construed as preventing the Board from imposing
capital or capital adequacy rules, guidelines,
standards, or requirements with respect to activities
of a registered investment adviser other than with
respect to investment advisory activities or activities
incidental to investment advisory activities.
``(C) Limitations on indirect action.--In
developing, establishing, or assessing bank holding
company capital or capital adequacy rules, guidelines,
standards, or requirements for purposes of this
paragraph, the Board may not take into account the
activities, operations, or investments of an affiliated
investment company registered under the Investment
Company Act of 1940, if the investment company is not--
``(i) a bank holding company; or
``(ii) controlled by a bank holding company
by reason of ownership by the bank holding
company (including through all of its
affiliates) of 25 percent or more of the shares
of the investment company, where the shares
owned by the bank holding company have a market
value equal to more than $1,000,000.
``(4) Transfer of board authority to appropriate federal
banking agency.--
``(A) In general.--In the case of any bank holding
company that is not significantly engaged in nonbanking
activities, the Board, in consultation with the
appropriate Federal banking agency, may designate the
appropriate Federal banking agency of the lead insured
depository institution subsidiary of such holding
company as the appropriate Federal banking agency for
the bank holding company.
``(B) Authority transferred.--An agency designated
by the Board under subparagraph (A) shall have the same
authority as the Board under this Act--
``(i) to examine and require reports from
the bank holding company and any affiliate of
such company (other than a depository
institution) under this section;
``(ii) to approve or disapprove
applications or transactions under section 3;
``(iii) to take actions and impose
penalties under subsections (e) and (f) of this
section and under section 8; and
``(iv) to take actions regarding the
holding company, any affiliate of the holding
company (other than a depository institution),
or any institution-affiliated party of such
company or affiliate under the Federal Deposit
Insurance Act and any other statute that the
Board may designate.
``(C) Agency orders.--Section 9 of this Act and
section 105 of the Bank Holding Company Act Amendments
of 1970 shall apply to orders issued by an agency
designated under subparagraph (A) in the same manner as
such sections apply to orders issued by the Board.
``(5) Functional regulation of securities and insurance
activities.--
``(A) Securities activities.--Securities activities
conducted in a functionally regulated subsidiary of a
bank shall be subject to regulation by the Securities
and Exchange Commission, and by relevant State
securities authorities, as appropriate, subject to
section 104 of the Financial Services Modernization Act
of 1999, to the same extent as if they were conducted
in a nondepository institution subsidiary of a bank
holding company.
``(B) Insurance activities.--Subject to section 104
of the Financial Services Modernization Act of 1999,
insurance agency and brokerage activities and
activities as principal conducted in a functionally
regulated subsidiary of a bank shall be subject to
regulation by a State insurance authority to the same
extent as if they were conducted in a nondepository
institution subsidiary of a bank holding company.
``(6) Definition.--For purposes of this subsection, the
term `functionally regulated subsidiary' means any company--
``(A) that is not a bank holding company; and
``(B) that is--
``(i) a broker or dealer that is registered
under the Securities Exchange Act of 1934;
``(ii) a registered investment adviser,
properly registered by or on behalf of either
the Securities and Exchange Commission or any
State, with respect to the investment advisory
activities of such investment adviser and
activities incidental to such investment
advisory activities;
``(iii) an investment company that is
registered under the Investment Company Act of
1940;
``(iv) an insurance company or insurance
agency that is subject to supervision by a
State insurance commission, agency, or similar
authority; or
``(v) an entity that is subject to
regulation by the Commodity Futures Trading
Commission, with respect to the commodities
activities of such entity and activities
incidental to such commodities activities.''.
SEC. 112. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND
EXCHANGE COMMISSION.
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 subsection:
``(g) Authority of State Insurance Regulator and the Securities and
Exchange Commission.--
``(1) In general.--Notwithstanding any other provision of
law, any regulation, order, or other action of the Board that
requires a bank holding company to provide funds or other
assets to an insured depository institution subsidiary shall
not be effective nor enforceable, if--
``(A) such funds or assets are to be provided by--
``(i) a bank holding company that is an
insurance company or that is a broker or dealer
registered under the Securities Exchange Act of
1934; or
``(ii) an affiliate of the insured
depository institution that is an insurance
company or a broker or dealer registered under
the Securities Exchange Act of 1934; and
``(B) the State insurance authority for the
insurance company or the Securities and Exchange
Commission for the registered broker or dealer, as the
case may be, determines in a written notice sent to the
bank holding company and to the Board that the bank
holding company shall not provide such funds or assets
because such action would have a material adverse
effect on the financial condition of the insurance
company or the broker or dealer, as the case may be.
``(2) Notice to state insurance authority or sec
required.--If the Board requires a bank holding company, or an
affiliate of a bank holding company, that is an insurance
company or a broker or dealer, as described in paragraph
(1)(A), to provide funds or assets to an insured depository
institution subsidiary of the bank holding company pursuant to
any regulation, order, or other action of the Board referred to
in paragraph (1), the Board shall promptly notify the State
insurance authority for the insurance company or the Securities
and Exchange Commission, as the case may be, of such
requirement.
``(3) Divestiture in lieu of other action.--If the Board
receives a notice described in paragraph (1)(B) from a State
insurance authority or the Securities and Exchange Commission
with regard to a bank holding company or affiliate referred to
in that paragraph, the Board may order the bank holding company
to divest the insured depository institution subsidiary not
later than 180 days after receiving the notice, or such longer
period as the Board determines to be consistent with the safe
and sound operation of the insured depository institution.
``(4) Conditions before divestiture.--During the period
beginning on the date on which an order to divest is issued by
the Board under paragraph (3) to a bank holding company and
ending on the date on which the divestiture is completed, the
Board may impose any conditions or restrictions on ownership or
operation by the bank holding company of the insured depository
institution, including restricting or prohibiting transactions
between the insured depository institution and any affiliate of
the institution, as are appropriate under the circumstances.
``(5) Rule of construction.--No provision of this
subsection may be construed to limit or otherwise affect the
regulatory authority, including the scope of the authority, of
any Federal agency or department with regard to any entity that
is within the jurisdiction of such agency or department.''.
SEC. 113. ROLE OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is
amended by inserting after section 10 the following new section:
``SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND
ENFORCEMENT AUTHORITY OF THE BOARD.
``(a) Limitation on Direct Action.--The Board may not prescribe
regulations, issue or seek entry of orders, impose restraints,
restrictions, guidelines, requirements, safeguards, or standards, or
otherwise take any action under or pursuant to any provision of this
Act or section 8 of the Federal Deposit Insurance Act against or with
respect to a functionally regulated subsidiary of a bank holding
company unless--
``(1) the action is necessary to prevent or redress an
unsafe or unsound practice or breach of fiduciary duty by such
subsidiary that poses a material risk to--
``(A) the financial safety, soundness, or stability
of an affiliated insured depository institution; or
``(B) the domestic or international payment system;
and
``(2) the Board finds that it is not reasonably possible to
protect effectively against the material risk at issue through
action directed at or against the affiliated insured depository
institution or against insured depository institutions
generally.
``(b) Limitation on Indirect Action.--The Board may not prescribe
regulations, issue or seek entry of orders, impose restraints,
restrictions, guidelines, requirements, safeguards, or standards, or
otherwise take any action under or pursuant to any provision of this
Act or section 8 of the Federal Deposit Insurance Act against or with
respect to a bank holding company where the purpose or effect of doing
so would be to take action indirectly against or with respect to a
functionally regulated subsidiary of a bank holding company that may
not be taken directly against or with respect to such subsidiary in
accordance with subsection (a).
``(c) Actions Specifically Authorized.--Notwithstanding subsection
(a), the Board may take action under this Act or section 8 of the
Federal Deposit Insurance Act to enforce compliance by a functionally
regulated subsidiary of a bank holding company with Federal law that
the Board has specific jurisdiction to enforce against such subsidiary.
``(d) `Functionally Regulated Subsidiary' Defined.--For purposes of
this section, the term `functionally regulated subsidiary' has the same
meaning as in section 5(c)(6).''.
SEC. 114. EXAMINATION OF INVESTMENT COMPANIES.
(a) Exclusive Commission Authority.--Except as provided in
subsection (c), a Federal banking agency may not inspect or examine any
registered investment company that is not a bank holding company or a
savings and loan holding company.
(b) Examination Results and Other Information.--The Commission
shall provide to any Federal banking agency, upon request, the results
of any examination, reports, records, or other information with respect
to any registered investment company to the extent necessary for the
agency to carry out its statutory responsibilities.
(c) Certain Examinations Authorized.--Nothing in this section shall
prevent the Corporation, if the Corporation finds it necessary to
determine the condition of an insured depository institution for
insurance purposes, from examining an affiliate of any insured
depository institution, pursuant to its authority under section
10(b)(4) of the Federal Deposit Insurance Act, as may be necessary to
disclose fully the relationship between the insured depository
institution and the affiliate, and the effect of such relationship on
the insured depository institution.
(d) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Bank holding company.--The term ``bank holding
company'' has the same meaning as in section 2 of the Bank
Holding Company Act of 1956.
(2) Corporation.--The term ``Corporation'' means the
Federal Deposit Insurance Corporation.
(3) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(4) Federal banking agency.--The term ``Federal banking
agency'' has the same meaning as in section 3(z) of the Federal
Deposit Insurance Act.
(5) Registered investment company.--The term ``registered
investment company'' means an investment company that is
registered with the Commission under the Investment Company Act
of 1940.
(6) Savings and loan holding company.--The term ``savings
and loan holding company'' has the same meaning as in section
10(a)(1)(D) of the Home Owners' Loan Act.
SEC. 115. EQUIVALENT REGULATION AND SUPERVISION.
(a) In General.--Notwithstanding any other provision of law, the
provisions of--
(1) section 5(c) of the Bank Holding Company Act of 1956
(as amended by this Act) that limit the authority of the Board
of Governors of the Federal Reserve System to require reports
from, to make examinations of, or to impose capital
requirements on holding companies and their functionally
regulated subsidiaries or that require deference to other
regulators;
(2) section 5(g) of the Bank Holding Company Act of 1956
(as added by this Act) that limit the authority of the Board to
require capital from a functionally regulated subsidiary of a
holding company to an insured depository institution subsidiary
of the holding company and to take certain actions including
requiring divestiture of the insured depository institution;
and
(3) section 10A of the Bank Holding Company Act of 1956 (as
added by this Act) that limit whatever authority the Board
might otherwise have to take direct or indirect action with
respect to holding companies and their functionally regulated
subsidiaries,
shall also limit whatever authority that a Federal banking agency (as
defined in section 3 of the Federal Deposit Insurance Act) might
otherwise have under applicable Federal law to require reports, make
examinations, impose capital requirements, or take any other direct or
indirect action with respect to any functionally regulated subsidiary
of an insured depository institution, subject to the same standards and
requirements as are applicable to the Board under those provisions.
(b) Certain Exemption Authorized.--Nothing in this section shall
prevent the Federal Deposit Insurance Corporation, if the Corporation
finds it necessary to determine the condition of an insured depository
institution for insurance purposes, from examining an affiliate of any
insured depository institution, pursuant to its authority under section
10(b)(4) of the Federal Deposit Insurance Act, as may be necessary to
disclose fully the relationship between the depository institution and
the affiliate, and the effect of such relationship on the depository
institution.
(c) ``Functionally Regulated Subsidiary'' Defined.--For purposes of
this section, the term ``functionally regulated subsidiary'' has the
same meaning as in section 5(c)(6) of the Bank Holding Company Act of
1956, as amended by this Act.
SEC. 116. INTERAGENCY CONSULTATION.
(a) Examination Results and Other Information.--
(1) Information of the board.--Upon the request of the
appropriate insurance regulator of any State, the Board may
provide to that regulator any information of the Board
regarding the financial condition, risk management policies,
and operations of any bank holding company that controls a
company that is engaged in insurance activities and is
regulated by that State insurance regulator, and regarding any
transaction or relationship between such an insurance company
and any affiliated depository institution. The Board may
provide any other information to the appropriate State
insurance regulator that the Board believes is necessary or
appropriate to permit the State insurance regulator to
administer and enforce applicable State insurance laws.
(2) Banking agency information.--Upon the request of the
appropriate insurance regulator of any State, the appropriate
Federal banking agency may provide to that regulator any
information of the agency regarding any transaction or
relationship between a depository institution supervised by
that Federal banking agency and any affiliated company that is
engaged in insurance activities regulated by the State
insurance regulator. The appropriate Federal banking agency may
provide any other information to the appropriate State
insurance regulator that the agency believes is necessary or
appropriate to permit the State insurance regulator to
administer and enforce applicable State insurance laws.
(3) State insurance regulator information.--Upon the
request of the appropriate Federal banking agency, a State
insurance regulator may provide any examination or other
reports, records, or other information to which the State
insurance regulator may have access with respect to a company
that--
(A) is engaged in insurance activities and is
regulated by that insurance regulator; and
(B) is an affiliate of an insured depository
institution or a bank holding company.
(b) Consultation.--Before making any determination relating to the
initial affiliation of, or the continuing affiliation of, an insured
depository institution or bank holding company with a company engaged
in insurance activities, the appropriate Federal banking agency shall
consult with the appropriate State insurance regulator of such company
and take the views of such insurance regulator into account in making
such determination.
(c) Effect on Other Authority.--Nothing in this section shall limit
in any respect the authority of the appropriate Federal banking agency
with respect to an insured depository institution or bank holding
company or any affiliate thereof under any provision of law.
(d) Confidentiality and Privilege.--
(1) Confidentiality.--The appropriate Federal banking
agency may not provide any information or material that is
entitled to confidential treatment under applicable Federal
banking agency regulations, or other applicable law, to a State
insurance regulator, unless such regulator agrees to maintain
the information or material in confidence and to take all
reasonable steps to oppose any effort to secure disclosure of
the information or material by the regulator. The appropriate
Federal banking agency shall treat as confidential any
information or material obtained from a State insurance
regulator that is entitled to confidential treatment under
applicable State regulations, or other applicable law, and take
all reasonable steps to oppose any effort to secure disclosure
of the information or material by the Federal banking agency.
(2) Privilege.--The provision pursuant to this section of
information or material by a Federal banking agency or a State
insurance regulator shall not constitute a waiver of, or
otherwise affect, any privilege to which the information or
material is otherwise subject.
(e) Definitions.--For purposes of this section, the following
definitions shall apply:
(1) Appropriate federal banking agency; insured depository
institution.--The terms ``appropriate Federal banking agency''
and ``insured depository institution'' have the same meanings
as in section 3 of the Federal Deposit Insurance Act.
(2) Board; bank holding company.--The terms ``Board'' and
``bank holding company'' have the same meanings as in section 2
of the Bank Holding Company Act of 1956.
SEC. 117. PRESERVING THE INTEGRITY OF FDIC RESOURCES.
Section 11(a)(4)(B) of the Federal Deposit Insurance Act (12 U.S.C.
1821(a)(4)(B)) is amended by striking ``to benefit any shareholder of''
and inserting ``to benefit any shareholder, affiliate (other than an
insured depository institution that receives assistance in accordance
with the provisions of this Act), or subsidiary of''.
Subtitle C--Activities of National Banks
SEC. 121. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE MUNICIPAL REVENUE
BONDS.
The paragraph designated the Seventh of section 5136 of the Revised
Statutes of the United States (12 U.S.C. 24(7)) is amended by adding at
the end the following:
``The limitations and restrictions contained in this paragraph as
to dealing in, underwriting, and purchasing investment securities for
the national bank's own account do not apply to obligations (including
limited obligation bonds, revenue bonds, and obligations that satisfy
the requirements of section 142(b)(1) of the Internal Revenue Code of
1986) issued by or on behalf of any State or political subdivision of a
State, including any municipal corporate instrumentality of 1 or more
States, or any public agency or authority of any State or political
subdivision of a State, if the national banking association is well
capitalized (as defined in section 38 of the Federal Deposit Insurance
Act).''.
SEC. 122. SUBSIDIARIES OF NATIONAL BANKS.
(a) In General.--Chapter one 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. SUBSIDIARIES OF NATIONAL BANKS.
``(a) Authorization To Conduct in Operating Subsidiaries Certain
Activities That Are Financial in Nature.--
``(1) In general.--Subject to paragraph (2), a national
bank may control a financial subsidiary, or hold an interest in
a financial subsidiary, only if--
``(A) the consolidated total assets of the national
bank do not exceed $1,000,000,000;
``(B) the national bank is not an affiliate of a
bank holding company;
``(C) the subject activities are not real estate
development or real estate investment activities,
unless otherwise expressly authorized by law;
``(D) the national bank and each insured depository
institution affiliate of the national bank is well
capitalized and well managed; and
``(E) the national bank has received the approval
of the Comptroller of the Currency to engage in such
activities, which approval shall be based solely upon
the factors set forth in subparagraph (D) and factors
set forth in subsection (c).
``(2) Regulations required.--The Comptroller of the
Currency shall, by regulation, prescribe procedures for the
enforcement of this section.
``(b) Safety and Soundness Fire Walls.--
``(1) Capital reduction required.--In determining
compliance with applicable capital standards for purposes of
subsection (a)(1)(D)--
``(A) the aggregate amount of outstanding equity
investments by a national bank in a financial
subsidiary shall be deducted from the assets and
tangible equity of the national bank; and
``(B) the assets and liabilities of the financial
subsidiary shall not be consolidated with those of the
national bank.
``(2) Investment limitation.--A national bank may not,
without the prior approval of the Comptroller of the Currency,
make any equity investment in a financial subsidiary of the
bank if that investment would, when made, exceed the amount
that the national bank could pay as a dividend without
obtaining prior regulatory approval.
``(c) Safeguards for the Bank.--A national bank that establishes or
maintains a financial subsidiary shall assure that--
``(1) the procedures of the national bank for identifying
and managing financial and operational risks within the
national bank and financial subsidiary adequately protect the
national bank from such risks;
``(2) the bank has, for the protection of the national
bank, reasonable policies and procedures to preserve the
separate corporate identity and limited liability of the
national bank and the financial subsidiaries of the national
bank; and
``(3) the national bank is in compliance with this section.
``(d) Streamlining Regulation and Supervision and Encouraging
Consultation Among Federal and State Regulators.--
``(1) In general.--To the extent that a national bank
engages in activities that are authorized by subsection (a)
through a functionally regulated financial subsidiary, the
regulation and supervision of such subsidiary by the
Comptroller of the Currency, including its ability to require a
contribution of capital or assets to the national bank from
that functionally regulated financial subsidiary, shall be
limited, as set forth under section 115 of the Financial
Services Modernization Act of 1999.
``(2) Interagency consultation.--The provisions of section
116 of the Financial Services Modernization Act of 1999,
relating to interagency consultation, shall apply to the
Comptroller of the Currency and the appropriate State
regulators of functionally regulated financial subsidiaries of
a national bank.
``(e) Preservation of Existing Operating Subsidiary Authority.--
Notwithstanding any other provision of this section--
``(1) a national bank may retain control of a company, or
retain an interest in a company, and conduct through such
company any activities lawfully conducted therein as of the
date of enactment of the Financial Services Modernization Act
of 1999; and
``(2) a national bank may own shares of or any other
interest in any company that is engaged only in activities that
are permissible for the national bank to engage in directly, if
such activities are engaged in under the same terms and
conditions that would govern the conduct if conducted by a
national bank directly.
``(f) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Financial subsidiary.--The term `financial
subsidiary' means a company that--
``(A) is a subsidiary of a national bank; and
``(B) is engaged as principal in any activity that
is permissible for a bank holding company under section
4(k) of the Bank Holding Company Act of 1956 and is not
permissible for national banks to engage in directly.
``(2) Functionally regulated.--The term `functionally
regulated financial subsidiary' means a financial subsidiary
that is--
``(A) a broker or dealer that is registered under
the Securities Exchange Act of 1934;
``(B) an investment adviser that is registered
under the Investment Advisers Act of 1940, or with any
State, with respect to the investment advisory
activities of such investment adviser and activities
incidental to such investment advisory activities;
``(C) an insurance company that is subject to
supervision by a State insurance commission, agency, or
similar authority; and
``(D) an entity that is subject to regulation by
the Commodity Futures Trading Commission, with respect
to the commodities activities of such entity and
activities incidental to such commodities activities.
``(3) Subsidiary.--The term `subsidiary' has the same
meaning as in section 2 of the Bank Holding Company Act of
1956.
``(4) Well capitalized.--The term `well capitalized' has
the same meaning as in section 38 of the Federal Deposit
Insurance Act.
``(5) Well managed.--The term `well managed' means--
``(A) in the case of a depository institution that
has been examined, unless otherwise determined in
writing by the appropriate Federal banking agency--
``(i) the achievement of a composite rating
of 1 or 2 under the Uniform Financial
Institutions Rating System (or an equivalent
rating under an equivalent rating system) in
connection with the most recent examination or
subsequent review of the depository
institution; and
``(ii) at least a rating of 2 for
management, if such rating is given; or
``(B) in the case of any depository institution
that has not been examined, the existence and use of
managerial resources that the appropriate Federal
banking agency determines are satisfactory.
``(6) Incorporated definitions.--The terms `appropriate
Federal banking agency', `depository institution', and `insured
depository institution', have the same meanings as in section 3
of the Federal Deposit Insurance Act.''.
(b) Limiting the Credit Exposure of a National Bank to a Financial
Subsidiary to the Amount of Permissible Credit Exposure to an
Affiliate.--Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is
amended--
(1) by redesignating subsection (e) as subsection (f); and
(2) by inserting after subsection (d), the following new
subsection:
``(e) Rules Relating to National Banks With Financial
Subsidiaries.--
``(1) Financial subsidiary defined.--For purposes of this
section and section 23B, the term `financial subsidiary' has
the same meaning as in section 5136A(f) of the Revised Statutes
of the United States.
``(2) Application to transactions between a financial
subsidiary of a national bank and the national bank.--For
purposes of applying this section and section 23B to a
transaction between a financial subsidiary of a national bank
and the national bank (or between such financial subsidiary and
any other subsidiary of the national bank that is not a
financial subsidiary), and notwithstanding subsection (b)(2) of
this section or section 23B(d)(1)--
``(A) the financial subsidiary of the national
bank--
``(i) shall be deemed to be an affiliate of
the national bank and of any other subsidiary
of the bank that is not a financial subsidiary;
and
``(ii) shall not be deemed to be a
subsidiary of the national bank; and
``(B) a purchase of or investment in equity
securities issued by the financial subsidiary shall not
be deemed to be a covered transaction.
``(3) Application to transactions between financial
subsidiary and nonbank affiliates.--
``(A) In general.--A transaction between a
financial subsidiary and an affiliate of the financial
subsidiary (that is not a subsidiary of a national
bank) shall not be deemed to be a transaction between a
subsidiary of a national bank and an affiliate of that
bank for purposes of section 23A or section 23B.
``(B) Certain affiliates excluded.--For purposes of
this paragraph, the term `affiliate' does not include a
national bank, or a subsidiary of a national bank that
is engaged exclusively in activities permissible for a
national bank to engage in directly or agency
activities permitted under section 123 of the Financial
Services Modernization Act of 1999.''.
(c) Antitying.--Section 106(a) of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C. 1971) is amended by adding at the end the
following: ``For purposes of this section, a financial subsidiary of a
national bank engaging in activities pursuant to section 5136A(a) of
the Revised Statutes of the United States shall be deemed to be a
subsidiary of a bank holding company, and not a subsidiary of a
bank.''.
(d) Clerical Amendment.--The table of sections for chapter one of
title LXII of the Revised Statutes of the United States is amended--
(1) by redesignating the item relating to section 5136A as
relating to section 5136C; and
(2) by inserting after the item relating to section 5136
the following new item:
``5136A. Subsidiaries of national banks.''.
SEC. 123. AGENCY ACTIVITIES.
A national bank may control a company, or hold an interest in a
company that engages in agency activities that have been determined by
the Comptroller of the Currency to be permissible for national banks or
to be financial in nature or incidental to such financial activities
(as determined pursuant to section 4(k) of the Bank Holding Company Act
of 1956) if the company engages in such activities solely as agent and
not directly or indirectly as principal.
SEC. 124. PROHIBITING FRAUDULENT REPRESENTATIONS.
(a) In General.--Chapter 47 of title 18, United States Code, is
amended by inserting after section 1007 the following new section:
``SEC. 1008. MISREPRESENTATIONS REGARDING FINANCIAL INSTITUTION
LIABILITY FOR OBLIGATIONS OF AFFILIATES.
``(a) Prohibition.--It shall be unlawful for an institution-
affiliated party of an insured depository institution or institution-
affiliated party of a subsidiary or affiliate of an insured depository
institution to fraudulently represent that the institution is or will
be liable for any obligation of a subsidiary or other affiliate of the
institution.
``(b) Penalties.--Whoever violates subsection (a) shall be fined
under this title, imprisoned not more than 1 year, or both.
``(c) Institution-Affiliated Party Defined.--For purposes of this
section, the term `institution-affiliated party' has the same meaning
as in section 3 of the Federal Deposit Insurance Act, except that
references to an insured depository institution shall be deemed to
include references to a subsidiary or affiliate of an insured
depository institution.
``(d) Other Definitions.--For purposes of this section, the terms
`affiliate', `insured depository institution', and `subsidiary' have
same meanings as in section 3 of the Federal Deposit Insurance Act.''.
(b) Clerical Amendment.--The table of sections for chapter 47 of
title 18, United States Code, is amended by inserting after the item
relating to section 1007 the following new item:
``1008. Misrepresentations regarding financial institution liability
for obligations of affiliates.''.
SEC. 125. INSURANCE UNDERWRITING BY NATIONAL BANKS.
(a) In General.--
(1) In general.--Except as provided in paragraph (2), a
national bank and the subsidiaries of a national bank may only
provide insurance in a State as principal in accordance with
section 5136A(a) of the Revised Statutes of the United States,
as added by this Act.
(2) Exception.--A national bank and the subsidiaries of a
national bank may provide authorized insurance products as
principal without regard to section 5136A(a) of the Revised
Statutes of the United States, as added by this Act.
(b) Authorized Insurance Products.--For purposes of this section, a
product is an ``authorized insurance product'' if--
(1) as of January 1, 1999, the Comptroller of the Currency
had determined in writing that national banks may provide such
product as principal, or national banks were in fact lawfully
providing such product as principal;
(2) no court of relevant jurisdiction had, by final
judgment, overturned a determination of the Comptroller of the
Currency that national banks may provide such product as
principal; and
(3) the product is not an annuity contract, the income of
which is subject to tax treatment under section 72 of the
Internal Revenue Code of 1986.
(c) Definition.--For purposes of this section, the term
``insurance'' means--
(1) any product regulated as insurance as of January 1,
1999, in accordance with the relevant State insurance law, in
the State in which the product is provided;
(2) any product first offered after January 1, 1999,
which--
(A) a State insurance regulator determines shall be
regulated as insurance in the State in which the
product is provided because the product insures,
guarantees, or indemnifies against liability, loss of
life, loss of health, or loss through damage to or
destruction of property, including surety bonds, life
insurance, health insurance, title insurance, and
property and casualty insurance (such as private
passenger or commercial automobile, homeowners,
mortgage, commercial multiperil, general liability,
professional liability, workers' compensation, fire and
allied lines, farm owners multiperil, aircraft,
fidelity, surety, medical malpractice, ocean marine,
inland marine, and boiler and machinery insurance); and
(B) is not a product or service of a bank that is--
(i) a deposit product;
(ii) a loan, discount, letter of credit, or
other extension of credit;
(iii) a trust or other fiduciary service;
(iv) a qualified financial contract (as
defined in or determined pursuant to section
11(e)(8)(D)(i) of the Federal Deposit Insurance
Act); or
(v) a financial guaranty, except that this
subparagraph shall not apply to a product that
includes an insurance component such that if
the product is offered or proposed to be
offered by the bank as principal--
(I) it would be treated as a life
insurance contract under section 7702
of the Internal Revenue Code of 1986;
or
(II) in the event that the product
is not a letter of credit or other
similar extension of credit, a
qualified financial contract, or a
financial guaranty, it would qualify
for treatment for losses incurred with
respect to such product under section
832(b)(5) of the Internal Revenue Code
of 1986, if the bank were subject to
tax as an insurance company under
section 831 of that Code; and
(3) any annuity contract, the income on which is subject to
tax treatment under section 72 of the Internal Revenue Code of
1986.
Subtitle D--National Treatment of Foreign Financial Institutions
SEC. 151. NATIONAL TREATMENT OF FOREIGN FINANCIAL INSTITUTIONS.
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) Termination of Grandfathered Rights.--
``(A) In general.--If any foreign bank or foreign company
files a declaration under section 4() of the Bank Holding
Company Act of 1956, any authority conferred by this subsection
on any foreign bank or company to engage in any activity that
the Board has determined to be permissible for bank holding
companies under section 4(k) of that Act shall terminate
immediately.
``(B) Restrictions and requirements authorized.--If a
foreign bank or company that engages, directly or through an
affiliate pursuant to paragraph (1), in an activity that the
Board determines to be permissible for bank holding companies
under section 4(k) of the Bank Holding Company Act of 1956, has
not filed a declaration with the Board of its status as a bank
holding company under section 4(l) of that Act by the end of
the 2-year period beginning on the date of enactment of the
Financial Services Modernization Act of 1999, the Board, giving
due regard to the principle of national treatment and equality
of competitive opportunity, may impose such restrictions and
requirements on the conduct of such activities by such foreign
bank or company as are comparable to those imposed on a bank
holding company organized under the laws of the United States,
including a requirement to conduct such activities in
compliance with any prudential safeguards established under
section 10A of the Bank Holding Company Act of 1956.''.
SEC. 152. REPRESENTATIVE OFFICES.
(a) Definition of ``Representative Office''.--Section 1(b)(15) of
the International Banking Act of 1978 (12 U.S.C. 3101(15)) is amended
by striking ``State agency, or subsidiary of a foreign bank'' and
inserting ``or State agency''.
(b) Examinations.--Section 10(c) of the International Banking Act
of 1978 (12 U.S.C. 3107(c)) is amended by adding at the end the
following: ``The Board may also make examinations of any affiliate of a
foreign bank conducting business in any State, if the Board deems it
necessary to determine and enforce compliance with this Act, the Bank
Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or other
applicable Federal banking law.''.
TITLE II--INSURANCE CUSTOMER PROTECTIONS
SEC. 201. FUNCTIONAL REGULATION OF INSURANCE.
The insurance activity of any person or entity shall be
functionally regulated by the States, subject to subsections (c), (d),
and (e) of section 104.
SEC. 202. INSURANCE CUSTOMER PROTECTIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by adding at the end the following new section:
``SEC. 45. INSURANCE CUSTOMER PROTECTIONS.
``(a) Regulations Required.--
``(1) In general.--The Federal banking agencies shall
prescribe and publish in final form, before the end of the 1-
year period beginning on the date of enactment of the Financial
Services Modernization Act of 1999, customer protection
regulations (which the agencies jointly determine to be
appropriate) that--
``(A) apply to retail sales practices,
solicitations, advertising, or offers of any insurance
product by any insured depository institution or any
person that is engaged in such activities at an office
of the institution or on behalf of the institution; and
``(B) are consistent with the requirements of this
Act and provide such additional protections for
customers to whom such sales, solicitations,
advertising, or offers are directed.
``(2) Applicability to subsidiaries.--The regulations
prescribed pursuant to paragraph (1) shall extend such
protections to any subsidiaries of an insured depository
institution as deemed appropriate by the Federal banking
agencies, where such extension is determined to be necessary to
ensure the customer protections provided by this section.
``(3) Consultation and joint regulations.--The Federal
banking agencies shall consult with each other and prescribe
joint regulations pursuant to paragraph (1), after consultation
with the State insurance regulators, as appropriate.
``(b) Sales Practices.--The regulations prescribed pursuant to
subsection (a) shall include antitying and anticoercion rules
applicable to the sale of insurance products that prohibit an insured
depository institution from engaging in any practice that would lead a
customer to believe an extension of credit, in violation of section
106(b) of the Bank Holding Company Act Amendments of 1970, is
conditional upon--
``(1) the purchase of an insurance product from the
institution or any of its affiliates or subsidiaries; or
``(2) an agreement by the customer not to obtain, or a
prohibition on the customer from obtaining, an insurance
product from an unaffiliated entity.
``(c) Disclosures and Advertising.--The regulations prescribed
pursuant to subsection (a) shall include the following provisions
relating to disclosures and advertising in connection with the initial
purchase of an insurance product:
``(1) Disclosures.--
``(A) In general.--Requirements that the following
disclosures be made orally and in writing before the
completion of the initial sale and, in the case of
clauses (iii) and (iv), at the time of application for
an extension of credit:
``(i) Uninsured status.--As appropriate,
the product is not insured by the Federal
Deposit Insurance Corporation, the United
States Government, or the insured depository
institution.
``(ii) Investment risk.--In the case of a
variable annuity or insurance product that
involves an investment risk, that there is an
investment risk associated with the product,
including possible loss of value.
``(iii) Antitying; anticoercion.--The
approval of an extension of credit may not be
conditioned on--
``(I) the purchase of an insurance
product from the institution in which
the application for credit is pending
or any of its affiliates or
subsidiaries; or
``(II) an agreement by the customer
not to obtain, or a prohibition on the
customer from obtaining, an insurance
product from an unaffiliated entity.
``(iv) Prohibition on enhanced treatment
due to other purchases or services.--The
processing of an extension of credit or the
delivery of any other financial product or
service will not be expedited depending upon
the purchase by the customer of any additional
product or service from an affiliated person or
entity of the insured depository institution.
``(B) Making disclosure readily understandable.--
Regulations prescribed under subparagraph (A) shall
encourage the use of disclosure that is conspicuous,
simple, direct, and readily understandable, such as the
following:
``(i) `NOT FDIC-INSURED'.
``(ii) `NOT GUARANTEED BY THE BANK'.
``(iii) `MAY GO DOWN IN VALUE'.
``(C) Limitation.--Nothing in this paragraph
requires the inclusion of the foregoing disclosures in
advertisements of a general nature describing or
listing the services or products offered by an
institution.
``(D) Meaningful disclosures.--Disclosures shall
not be considered to be meaningfully provided under
this paragraph if the institution or its representative
states that disclosures required by this subsection
were available to the customer in printed material
available for distribution, where such printed material
is not provided and such information is not orally
disclosed to the customer.
``(E) Adjustments for alternative methods of
purchase.--In prescribing the requirements under
subparagraphs (A) and (F), necessary adjustments shall
be made for purchase in person, by telephone, or by
electronic media to provide for the most appropriate
and complete form of disclosure and acknowledgments.
``(F) Customer acknowledgment.--A requirement that
an insured depository institution shall require any
person selling an insurance product at any office of,
or on behalf of, the institution to obtain, at the time
at which a customer receives the disclosures required
under this paragraph or at the time of the initial
purchase by the customer of such product, an
acknowledgment by such customer of the receipt of the
disclosure required under this paragraph with respect
to such product.
``(2) Prohibition on misrepresentations.--A prohibition on
any practice, or any advertising, at any office of, or on
behalf of, the insured depository institution, or any
subsidiary, as appropriate, that could mislead any person or
otherwise cause a reasonable person to reach an erroneous
belief with respect to--
``(A) the uninsured nature of any insurance product
sold, or offered for sale, by the institution or any
subsidiary of the institution; or
``(B) in the case of a variable annuity or
insurance product that involves an investment risk, the
investment risk associated with any such product.
``(d) Separation of Banking and Nonbanking Activities.--
``(1) Regulations required.--The regulations prescribed
pursuant to subsection (a) shall include such provisions as the
Federal banking agencies consider appropriate to ensure that
the routine acceptance of deposits is kept, to the extent
practicable, physically segregated from insurance product
activity.
``(2) Requirements.--Regulations prescribed pursuant to
paragraph (1) shall include the following requirements:
``(A) Separate setting.--A clear delineation of the
setting in which, and the circumstances under which,
transactions involving insurance products should be
conducted in a location physically segregated from an
area where retail deposits are routinely accepted.
``(B) Referrals.--Standards that permit any person
accepting deposits from the public in an area where
such transactions are routinely conducted in an insured
depository institution to refer a customer who seeks to
purchase any insurance product to a qualified person
who sells such product, only if the person making the
referral receives no more than a one-time nominal fee
of a fixed dollar amount for each referral that does
not depend on whether the referral results in a
transaction.
``(C) Qualification and licensing requirements.--
Standards prohibiting any insured depository
institution from permitting any person to sell or offer
for sale any insurance product in any part of any
office of the institution, or on behalf of the
institution, unless such person is appropriately
qualified and licensed.
``(e) Effect on Other Authority.--
``(1) In general.--No provision of this section shall be
construed as granting, limiting, or otherwise affecting--
``(A) any authority of the Securities and Exchange
Commission, any self-regulatory organization, the
Municipal Securities Rulemaking Board, or the Secretary
of the Treasury under any Federal securities law; or
``(B) except as provided in paragraph (2), any
authority of any State insurance commission (or any
agency or office performing like functions), or of any
State securities commission (or any agency or office
performing like functions), or other State authority
under any State law.
``(2) Coordination with state law.--
``(A) In general.--Except as provided in
subparagraph (B), insurance customer protection
regulations prescribed by a Federal banking agency
under this section shall not apply to retail sales,
solicitations, advertising, or offers of any insurance
product by any insured depository institution or to any
person who is engaged in such activities at an office
of such institution or on behalf of the institution, in
a State where the State has in effect statutes,
regulations, orders, or interpretations, that are
inconsistent with or contrary to the regulations
prescribed by the Federal banking agencies.
``(B) Preemption.--
``(i) In general.--If, with respect to any
provision of the regulations prescribed under
this section, the Board of Governors of the
Federal Reserve System, the Comptroller of the
Currency, and the Board of Directors of the
Corporation determine jointly that the
protection afforded by such provision for
customers is greater than the protection
provided by a comparable provision of the
statutes, regulations, orders, or
interpretations referred to in subparagraph (A)
of any State, the appropriate State regulatory
authority shall be notified of such
determination in writing.
``(ii) Considerations.--Before making a
final determination under clause (i), the
Federal agencies referred to in clause (i)
shall give appropriate consideration to
comments submitted by the appropriate State
regulatory authorities relating to the level of
protection afforded to consumers under State
law.
``(iii) Federal preemption and ability of
states to override federal preemption.--If the
Federal agencies referred to in clause (i)
jointly determine that any provision of the
regulations prescribed under this section
affords greater protections than a comparable
State law, rule, regulation, order, or
interpretation, those agencies shall send a
written preemption notice to the appropriate
State regulatory authority to notify the State
that the Federal provision will preempt the
State provision and will become applicable
unless, not later than 3 years after the date
of such notice, the State adopts legislation to
override such preemption.
``(f) Non-Discrimination Against Non-Affiliated Agents.--The
Federal banking agencies shall ensure that the regulations prescribed
pursuant to subsection (a) shall not have the practical effect of
discriminating, either intentionally or unintentionally, against any
person engaged in insurance sales or solicitations that is not
affiliated with an insured depository institution.''.
SEC. 203. FEDERAL AND STATE DISPUTE RESOLUTION.
(a) Filing in Court of Appeals.--In the case of a regulatory
conflict between a State insurance regulator and a Federal regulator
regarding insurance issues, including whether a State law, rule,
regulation, order, or interpretation regarding any insurance sales or
solicitation activity is properly treated as preempted under Federal
law, either regulator may seek expedited judicial review of such
determination by the United States Court of Appeals for the circuit in
which the State is located or in the United States Court of Appeals for
the District of Columbia Circuit by filing a petition for review in
such court.
(b) Expedited Review.--The United States Court of Appeals in which
a petition for review if filed in accordance with subsection (a) shall
complete all action on such petition, including rendering a judgment,
before the end of the 60-day period beginning on the date on which such
petition is filed, unless all parties to such proceedings agree to any
extension of such period.
(c) Supreme Court Review.--Any request for certiorari to the
Supreme Court of the United States of any judgment of a United States
Court of Appeals with respect to a petition for review under this
section shall be filed with the Supreme Court of the United States as
soon as practicable after such judgment is issued.
(d) Statute of Limitation.--No action may be filed under this
section challenging an order, ruling, determination, or other action of
a Federal regulator or State insurance regulator after the later of--
(1) the end of the 12-month period beginning on the date on
which the first public notice is made of such order, ruling,
determination or other action in its final form; or
(2) the end of the 6-month period beginning on the date on
which such order, ruling, determination, or other action takes
effect.
(e) Standard of Review.--The court shall decide an action filed
under subsection (a) based on its review on the merits of all questions
presented under State and Federal law, including the nature of the
product or activity and the history and purpose of its regulation under
State and Federal law, according equal deference to the Federal
regulator and the State insurance regulator.
TITLE III--REGULATORY IMPROVEMENTS
SEC. 301. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.
(a) SAIF Special Reserve.--Section 11(a)(6) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(a)(6)) is amended by striking
subparagraph (L).
(b) DIF Special Reserve.--Section 2704 of the Deposit Insurance
Funds Act of 1996 (12 U.S.C. 1821 note) is amended--
(1) by striking subsection (b); and
(2) in subsection (d)--
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking ``(6) and
(7)'' and inserting ``(5), (6), and (7)''; and
(C) in paragraph (6)(C), by striking clause (ii)
and inserting the following:
``(ii) by redesignating paragraph (8) as
paragraph (5).''.
(c) Effective Date.--This section and the amendments made by this
section shall become effective on the date of enactment of this Act.
SEC. 302. EXPANDED SMALL BANK ACCESS TO S CORPORATION TREATMENT.
(a) Study.--The Comptroller General of the United States shall
conduct a study of--
(1) possible revisions to the rules governing S
corporations, including--
(A) increasing the permissible number of
shareholders in such corporations;
(B) permitting shares of such corporations to be
held in individual retirement accounts;
(C) clarifying that interest on investments held
for safety, soundness, and liquidity purposes should
not be considered to be passive income;
(D) discontinuation of the treatment of stock held
by bank directors as a disqualifying personal class of
stock for such corporations; and
(E) improving Federal tax treatment of bad debt and
interest deductions; and
(2) what impact such revisions might have on community
banks.
(b) Report to Congress.--Not later than 6 months after the date of
enactment of this Act, the Comptroller General of the United States
shall submit a report to the Congress on the results of the study
conducted under subsection (a).
(c) Definition.--For purposes of this section, the term ``S
corporation'' has the same meaning as in section 1361(a)(1) of the
Internal Revenue Code of 1986.
SEC. 303. MEANINGFUL CRA EXAMINATIONS.
(a) Compliance.--Notwithstanding any other provision of law, an
insured depository institution rated as ``satisfactory'' or better in
its most recent examination under the Community Reinvestment Act of
1977, and in each such examination during the immediately preceding 36-
month period shall be deemed to be in compliance with the requirements
of that Act until the completion of a subsequent regularly scheduled
examination under that Act, unless substantial verifiable information
arising since the time of its most recent examination under that Act
demonstrating noncompliance is filed with the appropriate Federal
banking agency.
(b) Objections.--
(1) Agency determination.--The appropriate Federal banking
agency shall determine, on a timely basis, whether the
information filed by any person under subsection (a) provides
sufficient proof that the subject insured depository
institution is no longer in compliance with the requirements of
the Community Reinvestment Act of 1977, as provided in
subsection (a).
(2) Burden of proof.--A person filing information under
subsection (a) shall bear the burden of proving to the
satisfaction of the appropriate Federal banking agency, the
substantial verifiable nature of that information.
(c) Definitions.--In this section, the terms ``insured depository
institution'' and ``appropriate Federal banking agency'' have the same
meanings as in section 3 of the Federal Deposit Insurance Act.
SEC. 304. FINANCIAL INFORMATION PRIVACY PROTECTION.
(a) Financial Information Anti-Fraud.--The Consumer Credit
Protection Act (15 U.S.C. 1601 et seq.) is amended by adding at the end
the following:
``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION
``SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.
``(a) Short Title.--This title may be cited as the `Financial
Information Anti-Fraud Act of 1999'.
``(b) Table of Contents.--The table of contents for this title is
as follows:
``TITLE X--FINANCIAL INFORMATION PRIVACY PROTECTION
``Sec. 1001. Short title; table of contents.
``Sec. 1002. Definitions.
``Sec. 1003. Privacy protection for customer information of financial
institutions.
``Sec. 1004. Administrative enforcement.
``Sec. 1005. Civil liability.
``Sec. 1006. Criminal penalty.
``Sec. 1007. Relation to State laws.
``Sec. 1008. Agency guidance.
``SEC. 1002. DEFINITIONS.
``For purposes of this title, the following definitions shall
apply:
``(1) Customer.--The term `customer' means, with respect to
a financial institution, any person (or authorized
representative of a person) to whom the financial institution
provides a product or service, including that of acting as a
fiduciary.
``(2) Customer information of a financial institution.--The
term `customer information of a financial institution' means
any information maintained by a financial institution which is
derived from the relationship between the financial institution
and a customer of the financial institution and is identified
with the customer.
``(3) Document.--The term `document' means any information
in any form.
``(4) Financial institution.--
``(A) In general.--The term `financial institution'
means any institution engaged in the business of
providing financial services to customers who maintain
a credit, deposit, trust, or other financial account or
relationship with the institution.
``(B) Certain financial institutions specifically
included.--The term `financial institution' includes
any depository institution (as defined in section
19(b)(1)(A) of the Federal Reserve Act), any loan or
finance company, any credit card issuer or operator of
a credit card system, and any consumer reporting agency
that compiles and maintains files on consumers on a
nationwide basis (as defined in section 603(p)).
``(C) Further definition by regulation.--The Board
of Governors of the Federal Reserve System may
prescribe regulations further defining the term
`financial institution', in accordance with
subparagraph (A), for purposes of this title.
``SEC. 1003. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF FINANCIAL
INSTITUTIONS.
``(a) Prohibition on Obtaining Customer Information by False
Pretenses.--It shall be a violation of this title for any person to
obtain or attempt to obtain, or cause to be disclosed or attempt to
cause to be disclosed to any person, customer information of a
financial institution relating to another person--
``(1) by knowingly making a false, fictitious, or
fraudulent statement or representation to an officer, employee,
or agent of a financial institution with the intent to deceive
the officer, employee, or agent into relying on that statement
or representation for purposes of releasing the customer
information;
``(2) by knowingly making a false, fictitious, or
fraudulent statement or representation to a customer of a
financial institution with the intent to deceive the customer
into relying on that statement or representation for purposes
of releasing the customer information or authorizing the
release of such information; or
``(3) by knowingly providing any document to an officer,
employee, or agent of a financial institution, knowing that the
document is forged, counterfeit, lost, or stolen, was
fraudulently obtained, or contains a false, fictitious, or
fraudulent statement or representation, if the document is
provided with the intent to deceive the officer, employee, or
agent into relying on that document for purposes of releasing
the customer information.
``(b) Prohibition on Solicitation of a Person To Obtain Customer
Information From Financial Institution Under False Pretenses.--It shall
be a violation of this title to request a person to obtain customer
information of a financial institution, knowing or consciously avoiding
knowing that the person will obtain, or attempt to obtain, the
information from the institution in any manner described in subsection
(a).
``(c) Nonapplicability to Law Enforcement Agencies.--No provision
of this section shall be construed so as to prevent any action by a law
enforcement agency, or any officer, employee, or agent of such agency,
to obtain customer information of a financial institution in connection
with the performance of the official duties of the agency.
``(d) Nonapplicability to Financial Institutions in Certain
Cases.--No provision of this section shall be construed to prevent any
financial institution, or any officer, employee, or agent of a
financial institution, from obtaining customer information of such
financial institution in the course of--
``(1) testing the security procedures or systems of such
institution for maintaining the confidentiality of customer
information;
``(2) investigating allegations of misconduct or negligence
on the part of any officer, employee, or agent of the financial
institution; or
``(3) recovering customer information of the financial
institution which was obtained or received by another person in
any manner described in subsection (a) or (b).
``(e) Nonapplicability to Certain Types of Customer Information of
Financial Institutions.--No provision of this section shall be
construed to prevent any person from obtaining customer information of
a financial institution that otherwise is available as a public record
filed pursuant to the securities laws (as defined in section 3(a)(47)
of the Securities Exchange Act of 1934).
``SEC. 1004. ADMINISTRATIVE ENFORCEMENT.
``(a) Enforcement by Federal Trade Commission.--Except as provided
in subsection (b), compliance with this title shall be enforced by the
Federal Trade Commission in the same manner and with the same power and
authority as the Commission has under the Fair Debt Collection
Practices Act to enforce compliance with that title.
``(b) Enforcement by Other Agencies in Certain Cases.--
``(1) In general.--Compliance with this title shall be
enforced under--
``(A) section 8 of the Federal Deposit Insurance
Act, in the case of--
``(i) national banks, and Federal branches
and Federal agencies of foreign banks, by the
Office of the Comptroller of the Currency;
``(ii) member banks of the Federal Reserve
System (other than national banks), branches
and agencies of foreign banks (other than
Federal branches, Federal agencies, and insured
State branches of foreign banks), commercial
lending companies owned or controlled by
foreign banks, and organizations operating
under section 25 or 25A of the Federal Reserve
Act, by the Board;
``(iii) banks insured by the Federal
Deposit Insurance Corporation (other than
members of the Federal Reserve System and
national nonmember banks) and insured State
branches of foreign banks, by the Board of
Directors of the Federal Deposit Insurance
Corporation; and
``(iv) savings associations the deposits of
which are insured by the Federal Deposit
Insurance Corporation, by the Director of the
Office of Thrift Supervision; and
``(B) the Federal Credit Union Act, by the
Administrator of the National Credit Union
Administration with respect to any Federal credit
union.
``(2) Violations of this title treated as violations of
other laws.--For the purpose of the exercise by any agency
referred to in paragraph (1) of its powers under any Act
referred to in that paragraph, a violation of this title shall
be deemed to be a violation of a requirement imposed under that
Act. In addition to its powers under any provision of law
specifically referred to in paragraph (1), each of the agencies
referred to in that paragraph may exercise, for the purpose of
enforcing compliance with this title, any other authority
conferred on such agency by law.
``(c) State Action for Violations.--
``(1) Authority of states.--In addition to such other
remedies as are provided under State law, if the chief law
enforcement officer of a State, or an official or agency
designated by a State, has reason to believe that any person
has violated or is violating this title, the State--
``(A) may bring an action to enjoin such violation
in any appropriate United States district court or in
any other court of competent jurisdiction;
``(B) may bring an action on behalf of the
residents of the State to recover damages of not more
than $1,000 for each violation; and
``(C) in the case of any successful action under
subparagraph (A) or (B), shall be awarded the costs of
the action and reasonable attorney fees as determined
by the court.
``(2) Rights of federal regulators.--
``(A) Prior notice.--The State shall serve prior
written notice of any action under paragraph (1) upon
the Federal Trade Commission and, in the case of an
action which involves a financial institution described
in section 1004(b)(1), the agency referred to in such
section with respect to such institution and provide
the Federal Trade Commission and any such agency with a
copy of its complaint, except in any case in which such
prior notice is not feasible, in which case the State
shall serve such notice immediately upon instituting
such action.
``(B) Right to intervene.--The Federal Trade
Commission or an agency described in subsection (b)
shall have the right--
``(i) to intervene in an action under
paragraph (1);
``(ii) upon so intervening, to be heard on
all matters arising therein;
``(iii) to remove the action to the
appropriate United States district court; and
``(iv) to file petitions for appeal.
``(3) Investigatory powers.--For purposes of bringing any
action under this subsection, no provision of this subsection
shall be construed as preventing the chief law enforcement
officer, or an official or agency designated by a State, from
exercising the powers conferred on the chief law enforcement
officer or such official by the laws of such State to conduct
investigations or to administer oaths or affirmations or to
compel the attendance of witnesses or the production of
documentary and other evidence.
``(4) Limitation on state action while federal action
pending.--If the Federal Trade Commission or any agency
described in subsection (b) has instituted a civil action for a
violation of this title, no State may, during the pendency of
such action, bring an action under this section against any
defendant named in the complaint of the Federal Trade
Commission or such agency for any violation of this title that
is alleged in that complaint.
``SEC. 1005. CIVIL LIABILITY.
``Any person, other than a financial institution, who fails to
comply with any provision of this title with respect to any financial
institution or any customer information of a financial institution
shall be liable to such financial institution or the customer to whom
such information relates in an amount equal to the sum of the amounts
determined under each of the following paragraphs:
``(1) Actual damages.--The greater of--
``(A) the amount of any actual damage sustained by
the financial institution or customer as a result of
such failure; or
``(B) any amount received by the person who failed
to comply with this title, including an amount equal to
the value of any nonmonetary consideration, as a result
of the action which constitutes such failure.
``(2) Additional damages.--Such additional amount as the
court may allow.
``(3) Attorneys' fees.--In the case of any successful
action to enforce any liability under paragraph (1) or (2), the
costs of the action, together with reasonable attorneys' fees.
``SEC. 1006. CRIMINAL PENALTY.
``(a) In General.--Whoever violates, or attempts to violate,
section 1003 shall be fined in accordance with title 18, United States
Code, or imprisoned for not more than 5 years, or both.
``(b) Enhanced Penalty for Aggravated Cases.--Whoever violates, or
attempts to violate, section 1003 while violating another law of the
United States or as part of a pattern of any illegal activity involving
more than $100,000 in a 12-month period shall be fined twice the amount
provided in subsection (b)(3) or (c)(3) (as the case may be) of section
3571 of title 18, United States Code, imprisoned for not more than 10
years, or both.
``SEC. 1007. RELATION TO STATE LAWS.
``(a) In General.--This title shall not be construed as
superseding, altering, or affecting the statutes, regulations, orders,
or interpretations in effect in any State, except to the extent that
such statutes, regulations, orders, or interpretations are inconsistent
with the provisions of this title, and then only to the extent of the
inconsistency.
``(b) Greater Protection Under State Law.--For purposes of this
section, a State statute, regulation, order, or interpretation is not
inconsistent with the provisions of this title if the protection such
statute, regulation, order, or interpretation affords any person is
greater than the protection provided under this title.
``SEC. 1008. AGENCY GUIDANCE.
``In furtherance of the objectives of this title, each Federal
banking agency (as defined in section 3(z) of the Federal Deposit
Insurance Act) shall issue advisories to depository institutions under
the jurisdiction of the agency, in order to assist such depository
institutions in deterring and detecting activities proscribed under
section 1003.''.
(b) Report to Congress on Financial Privacy.--Not later than 18
months after the date of enactment of this Act, the Comptroller General
of the United States, in consultation with the Federal Trade
Commission, the Federal banking agencies, and other appropriate Federal
law enforcement agencies, shall submit to the Congress a report on--
(1) the efficacy and adequacy of the remedies provided in
the amendments made by subsection (a) in addressing attempts to
obtain financial information by fraudulent means or by false
pretenses; and
(2) any recommendations for additional legislative or
regulatory action to address threats to the privacy of
financial information created by attempts to obtain information
by fraudulent means or false pretenses.
(c) Reports on Ongoing FTC Study of Consumer Privacy Issues.--With
respect to the ongoing multistage study being conducted by the Federal
Trade Commission on consumer privacy issues, the Commission shall
submit to the Congress an interim report on the findings and
conclusions of the Commission, together with such recommendations for
legislative and administrative action as the Commission determines to
be appropriate, at the conclusion of each stage of such study and a
final report at the conclusion of the study.
(d) Consumer Grievance Process.--The Federal banking agencies (as
that term is defined in section 3 of the Federal Deposit Insurance Act)
shall jointly establish a consumer complaint mechanism, for receiving
and expeditiously addressing consumer complaints alleging a violation
of regulations issued under section 45 of the Federal Deposit Insurance
Act (as added by section 202 of this Act), which mechanism shall--
(1) establish a group within each Federal banking agency to
receive such complaints; and
(2) develop procedures for--
(A) investigating such complaints;
(B) informing consumers of rights they may have in
connection with such complaints; and
(C) addressing concerns raised by such complaints,
as appropriate, including procedures for the recovery
of losses, to the extent appropriate.
SEC. 305. CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK RELIEF;
DIVESTITURE.
(a) Cross Marketing Restriction.--Section 4(f) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)) is amended by striking
paragraph (3).
(b) Daylight Overdrafts.--Section 4(f) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(f)) is amended by inserting after paragraph
(2) the following new paragraph:
``(3) Permissible overdrafts described.--For purposes of
paragraph (2)(C), an overdraft is described in this paragraph
if--
``(A) such overdraft results from an inadvertent
computer or accounting error that is beyond the control
of both the bank and the affiliate;
``(B) such overdraft--
``(i) is permitted or incurred on behalf of
an affiliate that is monitored by, reports to,
and is recognized as a primary dealer by the
Federal Reserve Bank of New York; and
``(ii) is fully secured, as required by the
Board, by bonds, notes, or other obligations
that are direct obligations of the United
States or on which the principal and interest
are fully guaranteed by the United States or by
securities and obligations eligible for
settlement on the Federal Reserve book entry
system; or
``(C) such overdraft--
``(i) is permitted or incurred by, or on
behalf of, an affiliate that is engaged in
activities that are so closely related to
banking, or managing or controlling banks, as
to be a proper incident thereto; and
``(ii) does not cause the bank to violate
any provision of section 23A or 23B of the
Federal Reserve Act, either directly, in the
case of a bank that is a member of the Federal
Reserve System, or by virtue of section 18(j)
of the Federal Deposit Insurance Act, in the
case of a bank that is not a member of the
Federal Reserve System.''.
(c) Industrial Loan Companies; Affiliate Overdrafts.--Section
2(c)(2)(H) of the Bank Holding Company Act of 1956 (12 U.S.C.
1841(c)(2)(H)) is amended by inserting before the period at the end ``,
or that is otherwise permissible for a bank controlled by a company
described in section 4(f)(1)''.
(d) Activities Limitations.--Section 4(f)(2) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)(2)) is amended--
(1) by striking ``Paragraph (1) shall cease to apply to any
company described in such paragraph if--'' and inserting
``Subject to paragraph (3), a company described in paragraph
(1) shall no longer qualify for the exemption provided under
that paragraph if--'';
(2) in subparagraph (A)--
(A) in clause (ii)(IX), by striking ``and'' at the
end;
(B) in clause (ii)(X), by inserting ``and'' after
the semicolon;
(C) in clause (ii), by inserting after subclause
(X) the following:
``(XI) assets that are derived
from, or incidental to, activities in
which institutions described in section
2(c)(2)(F) or section 2(c)(2)(H) are
permitted to engage;''; and
(D) by striking ``or'' at the end; and
(3) by striking subparagraph (B) and inserting the
following:
``(B) any bank subsidiary of such company--
``(i) accepts demand deposits or deposits
that the depositor may withdraw by check or
similar means for payment to third parties; and
``(ii) engages in the business of making
commercial loans (except that, for purposes of
this clause, loans made in the ordinary course
of a credit card operation shall not be treated
as commercial loans); or
``(C) after the date of enactment of the
Competitive Equality Amendments of 1987, any bank
subsidiary of such company permits any overdraft
(including any intraday overdraft), or incurs any such
overdraft in the account of the bank at a Federal
reserve bank, on behalf of an affiliate, other than an
overdraft described in paragraph (3).''.
(e) Divestiture Requirement.--Section 4(f)(4) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(f)(4)) is amended to read as
follows:
``(4) Divestiture in case of loss of exemption.--If any
company described in paragraph (1) fails to qualify for the
exemption provided under paragraph (1) by operation of
paragraph (2), such exemption shall cease to apply to such
company and such company shall divest control of each bank it
controls before the end of the 180-day period beginning on the
date on which the company receives notice from the Board that
the company has failed to continue to qualify for such
exemption, unless, before the end of such 180-day period, the
company has--
``(A) either--
``(i) corrected the condition or ceased the
activity that caused the company to fail to
continue to qualify for the exemption; or
``(ii) submitted a plan to the Board for
approval to cease the activity or correct the
condition in a timely manner (which shall not
exceed 1 year); and
``(B) implemented procedures that are reasonably
adapted to avoid the reoccurrence of such condition or
activity.''.
SEC. 306. ``PLAIN LANGUAGE'' REQUIREMENT FOR FEDERAL BANKING AGENCY
RULES.
(a) In General.--Each Federal banking agency shall use plain
language in all proposed and final rulemakings published by the agency
in the Federal Register after January 1, 2000.
(b) Report.--Not later than March 1, 2001, each Federal banking
agency shall submit to the Congress a report that describes how the
agency has complied with subsection (a).
(c) Definitions.--For purposes of this section, the terms ``Federal
banking agency'' and ``State bank supervisor'' have the same meanings
as in section 3 of the Federal Deposit Insurance Act.
SEC. 307. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED FEDERAL SAVINGS
ASSOCIATION.
Section 2 of the Act entitled ``An Act to enable national banking
associations to increase their capital stock and to change their names
or locations'', approved May 1, 1886 (12 U.S.C. 30), is amended by
adding at the end the following new subsection:
``(d) Retention of `Federal' in Name of Converted Federal Savings
Association.--
``(1) In general.--Notwithstanding subsection (a) or any
other provision of law, any depository institution, the charter
of which is converted from that of a Federal savings
association to a national bank or a State bank after the date
of enactment of the Financial Services Modernization Act of
1999 may retain the term `Federal' in the name of such
institution if such institution remains an insured depository
institution.
``(2) Definitions.--For purposes of this subsection, the
terms `depository institution', `insured depository
institution', `national bank', and `State bank' have the same
meanings as in section 3 of the Federal Deposit Insurance
Act.''.
SEC. 308. COMMUNITY REINVESTMENT ACT EXEMPTION.
(a) In General.--No community financial institution shall be
subject to the Community Reinvestment Act of 1977 (12 U.S.C. 2901 et
seq.).
(b) Definition of Community Financial Institution.--As used in this
section, the term ``community financial institution'' means an insured
depository institution (as defined in section 3 of the Federal Deposit
Insurance Act), that has aggregate assets of not more than
$100,000,000, and that is located in a non-metropolitan area.
(c) Adjustments.--The dollar amount referred to in subsection (b)
shall be adjusted annually after December 31, 1999, by the annual
percentage increase in the Consumer Price Index for Urban Wage Earners
and Clerical Workers published by the Bureau of Labor Statistics.
(d) Definition.--For purposes of this section, the term ``non-
metropolitan area'' means any area, no part of which is within an area
designated as a metropolitan statistical area by the Office of
Management and Budget.
SEC. 309. BANK OFFICERS AND DIRECTORS AS OFFICERS AND DIRECTORS OF
PUBLIC UTILITIES.
Section 305(b) of the Federal Power Act (16 U.S.C. 825d(b)) is
amended--
(1) by striking ``(b) After six'' and inserting the
following:
``(b) Interlocking Directorates.--
``(1) In general.--After 6''; and
(2) by adding at the end the following:
``(2) Applicability.--
``(A) In general.--In the circumstances described
in subparagraph (B), paragraph (1) shall not apply to a
person that holds or proposes to hold the positions
of--
``(i) officer or director of a public
utility; and
``(ii) officer or director of a bank, trust
company, banking association, or firm
authorized by law to underwrite or participate
in the marketing of securities of a public
utility.
``(B) Circumstances.--The circumstances described
in this subparagraph are that--
``(i) a person described in subparagraph
(A) does not participate in any deliberations
or decisions of the public utility regarding
the selection of a bank, trust company, banking
association, or firm to underwrite or
participate in the marketing of securities of
the public utility, if the person serves as an
officer or director of a bank, trust company,
banking association, or firm that is under
consideration in the deliberation process;
``(ii) the bank, trust company, banking
association, or firm of which the person is an
officer or director does not engage in the
underwriting of, or participate in the
marketing of, securities of the public utility
of which the person holds the position of
officer or director;
``(iii) the public utility for which the
person serves or proposes to serve as an
officer or director selects underwriters by
competitive procedures; or
``(iv) the issuance of securities the
public utility for which the person serves or
proposes to serve as an officer or director has
been approved by all Federal and State
regulatory agencies having jurisdiction over
the issuance.''.
SEC. 310. CONTROL OF BANKERS' BANKS.
Section 2(a)(5)(E)(i) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(a)(5)(E)(i)) is amended by inserting ``one or more'' before
``thrift institutions''.
SEC. 311. MULTISTATE LICENSING AND INTERSTATE INSURANCE SALES
ACTIVITIES.
(a) Findings.--Congress finds that--
(1) the States regulate the business of insurance,
including the licensing of insurance agents and brokers;
(2) the current State insurance licensing system requires
insurance agents and brokers to obtain licenses on a line-by-
line, class-by-class, producer-by-producer, State-by-State
basis;
(3) in the commercial and industrial insurance arena, this
State-based system usually requires a single agent or broker to
hold scores of licenses if that agent or broker intends to sell
or broker insurance on a nationwide basis;
(4) because of the duplicative licensing requirements both
within States and from State to State, a single insurance agent
or broker must satisfy literally hundreds of administrative
filing requirements to become fully licensed to engage in the
sale of a full range of insurance products on a nationwide
basis;
(5) these administrative requirements appear to be
essentially unrelated to any requisite standards of
professionalism;
(6) many States impose certain requirements on insurance
agents and brokers that pose an undue, discriminatory burden on
nonresident agents, including some States that ban solicitation
of insurance clients by nonresident agents and brokers;
(7) many States impose anticompetitive post-licensure
requirements on nonresident agents and brokers, including
countersignature laws that require an agent or broker servicing
the needs of an out-of-State client to have any insurance
policy that is sold ``countersigned'' by a resident agent;
(8) in some cases, such countersignature laws also require
a nonresident agent or broker to pay at least half of any
commission earned in a State in which the agent or broker is
not a resident to a resident agent or broker; and
(9) such duplicative and onerous filing requirements and
anticompetitive burdens inhibit interstate commerce, constitute
unjustifiable trade barriers, greatly undermine the competition
that this Act seeks to foster.
(b) Sense of Congress.--It is the sense of the Congress that--
(1) by the end of the 36-month period beginning on the date
of enactment of this Act, the States should--
(A) implement uniform insurance agent and broker
licensing application and qualification requirements
that result in a fully reciprocal licensing system; and
(B) eliminate any pre- or post-licensure
requirements that have the practical effect of
discriminating, directly or indirectly, against
nonresident insurance agents or brokers;
(2) if such actions are not taken, Congress should take
steps to directly rectify the problems identified in subsection
(a); and
(3) any entity established by the Congress to so rectify
the problems should be under the supervision and oversight of
the National Association of Insurance Commissioners.
SEC. 312. CRA SUNSHINE REQUIREMENTS.
(a) Disclosure and Reporting.--The Federal Deposit Insurance Act
(12 U.S.C. 1811 et seq.), is amended by adding at the end thereof the
following new section:
``SEC. 46. CRA SUNSHINE REQUIREMENTS.
``(a) Public Disclosure of Agreements.--Any agreement entered into
by an insured depository institution or affiliate with a
nongovernmental entity or person made pursuant to or in connection with
the Community Reinvestment Act involving funds or other resources of
such insured depository institution or affiliate shall be in its
entirety fully disclosed, and the full text thereof made available to
the appropriate Federal banking agency with supervisory responsibility
over the insured depository institution and to the public and shall
obligate each party to comply with the provisions of this section.
``(b) Annual Report of Activity.--Each party to the agreement shall
report, as applicable, to the appropriate Federal banking agency with
supervisory responsibility over the insured depository institution, no
less frequently than once each year, such information as the Federal
banking agency may by rule require relating to the following actions
taken by the party pursuant to an agreement described in subsection (a)
during the previous 12-month period--
``(1) payments, fees or loans made to any party to the
agreement or received from any party to the agreement and the
terms and conditions of the same; and
``(2) aggregate data on loans, investments and services
provided by each party in its community or communities pursuant
to the agreement; and
``(3) such other pertinent matters as determined by rule by
the appropriate Federal banking agency with supervisory
responsibility over the insured depository institution.
The Federal banking agency shall ensure that the regulations
implementing this section do not impose an undue burden on the parties
and that proprietary and confidential information is protected.
``(c) Existing Agreements.--The requirements of subsection (b) (1),
(2), and (3) shall be deemed to be fulfilled with respect to any
agreement made prior to May 5, 1999.
``(d) Secondary Agreements.--Any agreement made on or after May 5,
1999 pursuant to an agreement described in subsection (a) also is
subject to the requirements of subsections (a) and (b).
``(e) Definitions.--
``(1) Agreement.--As used in this section, the term
`agreement' refers to any written contract, written
arrangement, or other written understanding with a value in
excess of $10,000 annually, or a group of substantively related
contracts with an aggregate value of $10,000 annually, made
pursuant to or in connection with the Community Reinvestment
Act of 1977, at least one party to which is an insured
depository institution or affiliate thereof, or entity owned or
controlled by an insured depository institution or affiliate,
whether organized on a profit or not-for-profit basis. The term
`agreement' shall not include any specific contract or
commitment for a loan or extension of credit to individuals,
businesses, farms, or other entities, where the purpose of the
loan or extension of credit does not include any re-lending of
the borrowed funds to other parties.
``(2) Appropriate federal banking agency and insured
depository institution.--As used in this section, the terms
`appropriate Federal banking agency' and `insured depository
institution' have the same meanings as defined in section 3 of
this Act.
``(d) Violations.--Any violation of the provisions of this section
shall be considered a violation of this Act. If the party to the
agreement that is not an insured depository institution or affiliate
fails to comply with this section, the agreement shall not be
enforceable after being given notice and a reasonable period of time to
perform or comply.
``(e) Limitation.--Nothing in this section is intended to provide
any authority upon any appropriate Federal banking agency to enforce
the provisions of the agreements that are subject to the requirements
of subsection (a).
``(f) Regulations.--Each appropriate Federal banking agency shall
prescribe regulations requiring procedures reasonably designed to
assure and monitor compliance with the requirements of this section.''.
SEC. 313. INTERSTATE BRANCHES AND AGENCIES OF FOREIGN BANKS.
Section 5 of the International Banking Act of 1978, as amended (12
U.S.C. 3103), is amended by striking subsection (a)(7) and substituting
the following:
``(7) ADDITIONAL AUTHORITY FOR INTERSTATE BRANCHES AND AGENCIES OF
FOREIGN BANKS; UPGRADES OF CERTAIN FOREIGN BANK AGENCIES
AND BRANCHES
``Notwithstanding paragraphs (1) and (2), a foreign bank may--
``(A) with the approval of the Board and the Comptroller of
the Currency, establish and operate a Federal branch or Federal
agency or, with the approval of the Board and the appropriate
State bank supervisor, a State branch or State agency in any
State outside the foreign bank's home State if--
``(i) the establishment and operation of such
branch or agency is permitted by the State in which the
branch or agency is to be established; and
``(ii) in the case of a Federal or State branch,
the branch receives only such deposits as would be
permitted for a corporation organized under section 25A
of the Federal Reserve Act (12 U.S.C. 611 et seq.); or
``(B) with the approval of the Board and the relevant
licensing authority (the Comptroller in the case of a Federal
branch or the appropriate State supervisor in the case of a
State branch), upgrade an agency, or a branch of the type
referred to in subsection (a)(7)(A)(ii), located in a State
outside the foreign bank's home State, into a Federal or State
branch if the establishment and operation of such branch is
permitted by such State and--
``(i) such agency or branch was in operation in
such State on the day before September 29, 1994, or
``(ii) such agency or branch has been in operation
in such State for a period of time that meets the
State's minimum age requirement permitted under section
1831u(a)(5) of title 12, United States Code.''.
SEC. 314. DISCLOSURES TO CONSUMERS UNDER THE TRUTH IN LENDING ACT.
(a) Disclosure of Late Payment Deadlines and Penalties.--Section
127(b) of the Truth in Lending Act (15 U.S.C. 1637(b)) is amended by
adding at the end the following:
``(12) If a charge is to be imposed due to the failure of
the obligor to make payment on or before a required payment due
date, the date that payment is due or, if different, the date
on which a late payment fee will be charged, shall be stated
prominently in a conspicuous location on the billing statement,
together with the amount of the charge to be imposed if payment
is made after such date.''.
(b) Disclosures Related to ``Teaser Rates''.--Section 127(c) (15
U.S.C. 1637(c)) is amended by inserting after paragraph (5) (as so
redesignated by section 4 of this Act) the following:
``(6) Additional notice concerning `teaser rates'.--
``(A) In general.--An application or solicitation
for a credit card for which a disclosure is required
under this subsection shall contain the disclosure
contained in subparagraph (B) or (C), as appropriate,
if the application or solicitation offers, for an
introductory period of less than 1 year, an annual
percentage rate of interest that--
``(i) is less than the annual percentage
rate of interest that will apply after the end
of the introductory period; or
``(ii) in the case of an annual percentage
rate that varies in accordance with an index,
is less than the current annual percentage rate
under the index that will apply after the end
of such period.
``(B) Fixed annual percentage rate.--If the annual
percentage rate that will apply after the end of the
introductory period will be a fixed rate, the
application or solicitation shall include the following
disclosure: `The annual percentage rate of interest
applicable during the introductory period is not the
annual percentage rate that will apply after the end of
the introductory period. The permanent annual
percentage rate will apply after [insert applicable
date] and will be [insert applicable percentage
rate].'.
``(C) Variable annual percentage rate.--If the
annual percentage rate that will apply after the end of
the introductory period will vary in accordance with an
index, the application or solicitation shall include
the following disclosure: `The annual percentage rate
of interest applicable during the introductory period
is not the annual percentage rate that will apply after
the end of the introductory period. The permanent
annual percentage rate will be determined by an index,
and will apply after [insert applicable date]. If the
index that will apply after such date were applied to
your account today, the annual percentage rate would be
[insert applicable percentage rate].'.
``(D) Conditions for introductory rates.--If the
annual percentage rate of interest that will apply
during the introductory period described in
subparagraph (A) is revocable or otherwise conditioned
upon any action by the obligor, including any failure
by the obligor to pay the minimum payment amount or
finance charge or to make any payment by the stated
monthly payment due date, the application or
solicitation shall include disclosure of--
``(i) the conditions that the obligor must
meet to retain the annual percentage rate of
interest during the introductory period; and
``(ii) the annual percentage rate of
interest that will apply as a result of the
failure of the obligor to meet such conditions.
``(E) Form of disclosure.--The disclosures required
under this paragraph shall be made in a clear and
conspicuous manner, in a prominent fashion.''.
SEC. 315. APPROVAL FOR PURCHASES OF SECURITIES.
Section 23B(b)(2) of the Federal Reserve Act (12 U.S.C. 371c-1) is
amended to read as follows:
``Subparagraph (B) of paragraph (1) shall not apply if the purchase
or acquisition of such securities has been approved, before such
securities are initially offered for sale to the public, by a majority
of the directors of the bank based on a determination that the purchase
is a sound investment for the bank irrespective of the fact that an
affiliate of the bank is a principal underwriter of the securities.''.
SEC. 316. PROVISION OF TECHNICAL ASSISTANCE TO MICROENTERPRISES.
(a) In General.--Title I of the Riegle Community Development and
Regulatory Improvement Act of 1994 (12 U.S.C. 4701 et seq.) is amended
by adding at the end the following:
``Subtitle C--Microenterprise Technical Assistance and Capacity
Building Program
``SEC. 171. SHORT TITLE.
``This subtitle may be cited as the `Program for Investment in
Microentrepreneurs Act of 1999', also referred to as the `PRIME Act'.
``SEC. 172. DEFINITIONS.
``For purposes of this subtitle--
``(1) the term `Administrator' has the same meaning as in
section 103;
``(2) the term `capacity building services' means services
provided to an organization that is, or is in the process of
becoming a microenterprise development organization or program,
for the purpose of enhancing its ability to provide training
and services to disadvantaged entrepreneurs;
``(3) the term `collaborative' means 2 or more nonprofit
entities that agree to act jointly as a qualified organization
under this subtitle;
``(4) the term `disadvantaged entrepreneur' means a
microentrepreneur that is--
``(A) a low-income person;
``(B) a very low-income person; or
``(C) an entrepreneur that lacks adequate access to
capital or other resources essential for business
success, or is economically disadvantaged, as
determined by the Administrator;
``(5) the term `Fund' has the same meaning as in section
103;
``(6) the term `Indian tribe' has the same meaning as in
section 103;
``(7) the term `intermediary' means a private, nonprofit
entity that seeks to serve microenterprise development
organizations and programs as authorized under section 175;
``(8) the term `low-income person' has the same meaning as
in section 103;
``(9) the term `microentrepreneur' means the owner or
developer of a microenterprise;
``(10) the term `microenterprise' means a sole
proprietorship, partnership, or corporation that--
``(A) has fewer than 5 employees; and
``(B) generally lacks access to conventional loans,
equity, or other banking services;
``(11) the term `microenterprise development organization
or program' means a nonprofit entity, or a program administered
by such an entity, including community development corporations
or other nonprofit development organizations and social service
organizations, that provides services to disadvantaged
entrepreneurs or prospective entrepreneurs;
``(12) the term `training and technical assistance' means
services and support provided to disadvantaged entrepreneurs or
prospective entrepreneurs, such as assistance for the purpose
of enhancing business planning, marketing, management,
financial management skills, and assistance for the purpose of
accessing financial services; and
``(13) the term `very low-income person' means having an
income, adjusted for family size, of not more than 150 percent
of the poverty line (as defined in section 673(2) of the
Community Services Block Grant Act (42 U.S.C. 9902(2),
including any revision required by that section).
``SEC. 173. ESTABLISHMENT OF PROGRAM.
``The Administrator shall establish a microenterprise technical
assistance and capacity building grant program to provide assistance
from the Fund in the form of grants to qualified organizations in
accordance with this subtitle.
``SEC. 174. USES OF ASSISTANCE.
``A qualified organization shall use grants made under this
subtitle--
``(1) to provide training and technical assistance to
disadvantaged entrepreneurs;
``(2) to provide training and capacity building services to
microenterprise development organizations and programs and
groups of such organizations to assist such organizations and
programs in developing microenterprise training and services;
``(3) to aid in researching and developing the best
practices in the field of microenterprise and technical
assistance programs for disadvantaged entrepreneurs; and
``(4) for such other activities as the Administrator
determines are consistent with the purposes of this subtitle.
``SEC. 175. QUALIFIED ORGANIZATIONS.
``For purposes of eligibility for assistance under this subtitle, a
qualified organization shall be--
``(1) a nonprofit microenterprise development organization
or program (or a group or collaborative thereof) that has a
demonstrated record of delivering microenterprise services to
disadvantaged entrepreneurs;
``(2) an intermediary;
``(3) a microenterprise development organization or program
that is accountable to a local community, working in
conjunction with a State or local government or Indian tribe;
or
``(4) an Indian tribe acting on its own, if the Indian
tribe can certify that no private organization or program
referred to in this paragraph exists within its jurisdiction.
``SEC. 176. ALLOCATION OF ASSISTANCE; SUBGRANTS.
``(a) Allocation of Assistance.--
``(1) In general.--The Administrator shall allocate
assistance from the Fund under this subtitle to ensure that--
``(A) activities described in section 174(1) are
funded using not less than 75 percent of amounts made
available for such assistance; and
``(B) activities described in section 174(2) are
funded using not less than 15 percent of amounts made
available for such assistance.
``(2) Limit on individual assistance.--No single
organization or entity may receive more than 10 percent of the
total funds appropriated under this subtitle in a single fiscal
year.
``(b) Targeted Assistance.--The Administrator shall ensure that not
less than 50 percent of the grants made under this subtitle are used to
benefit very low-income persons, including those residing on Indian
reservations.
``(c) Subgrants Authorized.--
``(1) In general.--A qualified organization receiving
assistance under this subtitle may provide grants using that
assistance to qualified small and emerging microenterprise
organizations and programs, subject to such rules and
regulations as the Administrator determines to be appropriate.
``(2) Limit on administrative expenses.--Not more than 7.5
percent of assistance received by a qualified organization
under this subtitle may be used for administrative expenses in
connection with the making of subgrants under paragraph (1).
``(d) Diversity.--In making grants under this subtitle, the
Administrator shall ensure that grant recipients include both large and
small microenterprise organizations, serving urban, rural, and Indian
tribal communities and racially and ethnically diverse populations.
``SEC. 177. MATCHING REQUIREMENTS.
``(a) In General.--Financial assistance under this subtitle shall
be matched with funds from sources other than the Federal Government on
the basis of not less than 50 percent of each dollar provided by the
Fund.
``(b) Sources of Matching Funds.--Fees, grants, gifts, funds from
loan sources, and in-kind resources of a grant recipient from public or
private sources may be used to comply with the matching requirement in
subsection (a).
``(c) Exception.--
``(1) In general.--In the case of an applicant for
assistance under this subtitle with severe constraints on
available sources of matching funds, the Administrator may
reduce or eliminate the matching requirements of subsection
(a).
``(2) Limitation.--Not more than 10 percent of the total
funds made available from the Fund in any fiscal year to carry
out this subtitle may be excepted from the matching
requirements of subsection (a), as authorized by paragraph (1)
of this subsection.
``SEC. 178. APPLICATIONS FOR ASSISTANCE.
``An application for assistance under this subtitle shall be
submitted in such form and in accordance with such procedures as the
Fund shall establish.
``SEC. 179. RECORDKEEPING.
``The requirements of section 115 shall apply to a qualified
organization receiving assistance from the Fund under this subtitle as
if it were a community development financial institution receiving
assistance from the Fund under subtitle A.
``SEC. 180. AUTHORIZATION.
``In addition to funds otherwise authorized to be appropriated to
the Fund to carry out this title, there are authorized to be
appropriated to the Fund to carry out this subtitle--
``(1) $15,000,000 for fiscal year 2000;
``(2) $15,000,000 for fiscal year 2001;
``(3) $15,000,000 for fiscal year 2002; and
``(4) $15,000,000 for fiscal year 2003.
``SEC. 181. IMPLEMENTATION.
``The Administrator shall, by regulation, establish such
requirements as may be necessary to carry out this subtitle.''.
(b) Administrative Expenses.--Section 121(a)(2)(A) of the Riegle
Community Development and Regulatory Improvement Act of 1994 (12 U.S.C.
4718(a)(2)(A)) is amended--
(1) by striking ``$5,550,000'' and inserting
``$6,100,000''; and
(2) in the first sentence, by inserting before the period
``, including costs and expenses associated with carrying out
subtitle C''.
(c) Conforming Amendments.--Section 104(d) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4703(d))
is amended--
(1) in paragraph (2)--
(A) by striking ``15'' and inserting ``17'';
(B) in subparagraph (G)--
(i) by striking ``9'' and inserting ``11'';
(ii) by redesignating clauses (iv) and (v)
as clauses (v) and (vi), respectively; and
(iii) by inserting after clause (iii) the
following:
``(iv) 2 individuals who have expertise in
microenterprises and microenterprise
development;''; and
(2) in paragraph (4), in the first sentence, by inserting
before the period ``and subtitle C''.
SEC. 317. FEDERAL RESERVE AUDITS.
(a) In General.--The Federal Reserve Act (12 U.S.C. 221 et seq.) is
amended by inserting after section 11A the following:
``SEC. 11B. ANNUAL INDEPENDENT AUDITS OF FEDERAL RESERVE BANKS.
``(a) Audit Required.--Each Federal reserve bank shall annually
obtain an audit of the financial statements of each Federal reserve
bank (which shall have been prepared in accordance with generally
accepted accounting principles) using generally accepted auditing
standards from an independent auditor that meets the requirements of
subsection (b).
``(b) Auditor's Qualifications.--The independent auditor referred
to in subsection (a) shall--
``(1) be a certified public accountant who is independent
of the Federal Reserve System; and
``(2) meet any other qualifications that the Board may
establish.
``(c) Certification Required.--In each audit required under
subsection (a), the auditor shall certify to the Federal reserve bank
and to the Board that the auditor--
``(1) is a certified public accountant and is independent
of the Federal Reserve System; and
``(2) conducted the audit using generally accepted auditing
standards.
``(d) Certification by Federal Reserve Bank.--Not later than 30
days after the completion of each audit required under subsection (a),
the Federal reserve bank shall provide to the Comptroller General of
the United States--
``(1) a certification that--
``(A) the Federal reserve bank has obtained the
audit required under subsection (a);
``(B) the Federal reserve bank has received the
certifications of the auditor required under subsection
(c); and
``(C) the audit fully complies with subsection (a).
``(e) Detection of Illegal Acts.--
``(1) Audit procedures.--Each audit required by this
section shall include procedures designed to provide reasonable
assurance of detecting illegal acts that would have a direct
and material effect on the determination of financial statement
amounts.
``(2) Reporting possible illegalities.--If, in the course
of conducting an audit required by this section, the
independent auditor detects or otherwise becomes aware of
information indicating that an illegal act (whether or not
perceived to have an effect on the financial statements of the
Federal reserve bank) has or may have occurred, the auditor--
``(A) shall determine whether it is likely that the
illegal act has occurred; and
``(B) shall, if the auditor determines that the
illegal act is likely to have occurred--
``(i) determine and consider the possible
effect of the illegal act on the financial
statements of the Federal reserve bank; and
``(ii) as soon as practicable, inform the
Board that the illegal act is likely to have
occurred.
``(3) Report to congress.--The independent auditor under
this section shall, as soon as practicable, directly report its
conclusions to the Committee on Governmental Affairs of the
Senate and the Committee on Government Reform of the House of
Representatives with regard to any possible illegal act that
has been detected or has otherwise come to the attention of the
auditor during the course of the audit required by this
section, if, after determining that the Board is adequately
informed with respect to such possible illegal act, the auditor
concludes that--
``(A) the possible illegal act has a direct and
material effect on the financial statements of the
Federal reserve bank;
``(B) the Board has not taken timely and
appropriate remedial actions with respect to the
possible illegal act; and
``(C) the failure to take remedial action is
reasonably expected to warrant departure from a
standard report of the auditor when made, or warrant
resignation from the audit engagement.
``(4) Resignation of auditor.--If an independent auditor
resigns from its engagement to audit a Federal reserve bank
under paragraph (3), the auditor shall furnish to the Committee
on Governmental Affairs of the Senate and the Committee on
Government Reform of the House of Representatives, not later
than 1 business day after such resignation, a copy of the
report of the auditor (or documentation of any oral report
given).
``(f) Recordkeeping.--To facilitate compliance with this section,
each Federal reserve bank shall--
``(1) ensure that the books, records, and accounts of the
Federal reserve bank are maintained and kept in sufficient
detail to accurately and fairly reflect the transactions and
dispositions of the assets of the bank;
``(2) devise and maintain a system of internal controls
sufficient to provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain accountability for assets;
``(3) ensure that access to assets of the Federal reserve
bank is permitted only in accordance with the general or
specific authorization of the Board; and
``(4) ensure that--
``(A) the recorded accountability for assets is
compared with the existing assets at reasonable
intervals; and
``(B) appropriate action is taken with respect to
any differences.
``(g) Reports to Board, Congress.--Not later than April 30 of each
year, each Federal reserve bank shall submit a copy of each audit
conducted under this section to the Board, and to the Committee on
Governmental Affairs of the Senate and the Committee on Government
Reform of the House of Representatives.
``SEC. 11C. INDEPENDENT AUDITS OF FEDERAL RESERVE SYSTEM AND FEDERAL
RESERVE BOARD.
``(a) Audit of Reserve System.--The Board shall annually obtain an
audit of the consolidated financial statements of the Federal Reserve
System (which shall have been prepared in accordance with generally
accepted accounting principles) from an independent auditor, using
generally accepted auditing standards, based on reports of audits of
Federal reserve banks submitted to the Board under section 11B(g) and
the audit of the Board under subsection (b) of this section.
``(b) Audit of Board.--
``(1) In general.--The Board shall annually obtain an audit
of the financial statements of the Board (which shall have been
prepared in accordance with generally accepted accounting
principles) from an independent auditor, using generally
accepted auditing standards.
``(2) Priced services audit.--
``(A) In general.--As part of each audit of the
Board required by this subsection, the auditor shall--
``(i) audit the calculation of the private
sector adjustment factor established by the
Board pursuant to section 11A(c)(3) for the
year that is the subject of the audit; and
``(ii) audit the pro forma balance sheet
and income statement for the services described
in section 11A(b), including the determination
of revenue, expenses, and income before income
taxes for each service listed in that section
(in accordance with the criteria specified in
section 11A(c)(3)).
``(B) Report to the board.--The auditor shall
report the results of the audit under subparagraph
(A)(ii) to the Board in written form.
``(3) Limitation.--The evaluations and audits required by
this subsection shall not include deliberations, decisions, or
actions on monetary policy matters, including discount
authority under section 13, reserves of national banks,
securities credit, interest on deposits, and open market
operations.
``(c) Auditor's Qualifications.--An independent auditor referred to
in this section shall--
``(1) be a certified public accountant and be independent
of the Federal Reserve System; and
``(2) meet any other qualifications that the Board may
establish.
``(d) Certification Required.--In each audit required under this
section, the auditor shall certify to the Board that the auditor--
``(1) is a certified public accountant and is independent
of the Federal Reserve System; and
``(2) conducted the audit using generally accepted auditing
standards.
``(e) Detection of Illegal Acts.--
``(1) Audit procedures.--Each audit required by this
section shall include procedures designed to provide reasonable
assurance of detecting illegal acts that would have a direct
and material affect on the determination of financial statement
amounts.
``(2) Reporting possible illegalities.--If, in the course
of conducting an audit of the Federal Reserve System or the
Board as required by this section, the independent auditor
detects or otherwise becomes aware of information indicating
that an illegal act (whether or not perceived to have an effect
on the financial statements of the Federal reserve bank) has or
may have occurred, the auditor--
``(A) shall determine whether it is likely that the
illegal act has occurred; and
``(B) shall, if the auditor determines that the
illegal act is likely to have occurred--
``(i) determine and consider the possible
effect of the illegal act on the financial
statements of the Federal Reserve System or the
Board, as applicable; and
``(ii) as soon as practicable, inform the
Board that the illegal act is likely to have
occurred.
``(3) Report to congress.--An independent auditor under
this section shall directly report, as soon as practicable, its
conclusions to the Committee on Governmental Affairs of the
Senate and the Committee on Government Reform of the House of
Representatives, with regard to any possible illegal act that
has been detected or has otherwise come to the attention of the
auditor during the course of an audit of the Federal Reserve
System or the Board required by this section, if, after
determining that the Board is adequately informed with respect
to such possible illegal act, the auditor concludes that--
``(A) the possible illegal act has a direct and
material effect on the financial statements of the
Federal Reserve System or the Board, as applicable;
``(B) the Board has not taken timely and
appropriate remedial actions with respect to the
possible illegal act; and
``(C) the failure to take remedial action is
reasonably expected to warrant departure from a
standard report of the auditor when made, or warrant
resignation from the audits engagement.
``(4) Resignation of auditor.--If an independent auditor
resigns from its engagement to audit the Federal Reserve System
or the Board under paragraph (3), the auditor shall furnish to
the Committee on Governmental Affairs of the Senate and the
Committee on Government Reform of the House of Representatives,
not later than 1 business day after such resignation, a copy of
the report of the auditor (or documentation of any oral report
given).
``(f) Recordkeeping.--To facilitate compliance with this section,
the Board shall--
``(1) ensure that the books, records, and accounts of the
Board are maintained and kept in sufficient detail to
accurately and fairly reflect the transactions and dispositions
of assets;
``(2) devise and maintain a system of internal controls
sufficient to provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain accountability for assets;
``(3) ensure that access to assets of the Board is
permitted only in accordance with general or specific
authorization of the Board; and
``(4) ensure that--
``(A) the recorded accountability for assets is
compared with the existing assets at reasonable
intervals; and
``(B) appropriate action is taken with respect to
any differences.
``(g) Reports to Congress.--Not later than May 31 of each year, the
Board shall make available all audits and reports required by this
section to the Committee on Governmental Affairs of the Senate and the
Committee on Government Reform of the House of Representatives.''.
(b) Federal Reserve Requirements.--
(1) Clarification of fee schedule requirements.--
(A) In general.--Section 11A(b) of the Federal
Reserve Act (12 U.S.C. 248a(b)) is amended--
(i) by redesignating paragraphs (7) and (8)
as paragraphs (8) and (9), respectively; and
(ii) by inserting after paragraph (6) the
following:
``(7) transportation of paper checks in the clearing
process;''.
(B) Publication of revised schedule.--Not later
than 60 days after the date of enactment of this Act,
the Board of Governors of the Federal Reserve System
shall publish a revision of the schedule of fees
required under section 11A of the Federal Reserve Act
that reflects the changes made in the schedule in
accordance with the amendments made by subparagraph (A)
of this paragraph.
(2) Clarification of applicable pricing criteria.--Section
11A(c) of the Federal Reserve Act (12 U.S.C. 248a(c)) is
amended by striking paragraph (3) and inserting the following:
``(3)(A) In each fiscal year, fees shall be established for
each service provided by the Federal reserve banks on the basis
of all direct and indirect costs actually incurred (excluding
the effect of any pension cost credit) in providing each of the
services, including interest on items credited prior to actual
collection, overhead, and an allocation of imputed costs, which
takes into account the taxes that would have been paid and the
return on capital that would have been provided had the
services been provided by a private business firm.
``(B) The pricing principles referred to in subparagraph
(A) shall be carried out with due regard to competitive factors
and the provision of an adequate level of such services
nationwide.
``(C)(i) Not later than 1 year after the date of enactment
of the Financial Services Modernization Act of 1999, and not
less frequently than once every 3 years thereafter, the Board
shall conduct a comprehensive review of the methodology used to
calculate the private sector adjustment factor pursuant to
section 11A(c)(3), including a public notice and comment
period.
``(ii) In conducting the review under clause (i), the Board
shall publish in the Federal Register all elements of the
methodology in use by the Board in the calculation of the
private sector adjustment factor pursuant to section 11A(c)(3)
provide notice and solicit public comment on the methodology,
requesting commentators to identify areas of the methodology
that are outdated, inappropriate, unnecessary, or that
contribute to an inaccurate result in the calculation of the
private sector adjustment factor.
``(iii) The Board shall--
``(I) publish in the Federal Register a summary of
the comments received under this subparagraph,
identifying significant issues raised; and
``(II) provide comment on such issues and make
changes to the methodology to the extent that the Board
considers to be appropriate.
``(iv) Not later than 30 days after the completion of each
review under clause (i), the Board shall submit to Congress a
report which shall include--
``(I) a summary of any significant issues raised by
public comments received by the Board under this
subparagraph and the relative merits of such issues;
and
``(II) an analysis of whether the Board is able to
address the concerns raised, or whether such concerns
should be addressed by legislation.''.
SEC. 318. STUDY AND REPORT ON ADVERTISING PRACTICES OF ONLINE BROKERAGE
SERVICES.
(a) Study.--The Securities and Exchange Commission (hereafter in
this section referred to as the ``Commission''), in consultation with
the National Association of Securities Dealers and other interested
parties, shall conduct a study of--
(1) the nature and content of advertising by online
brokerage services in all media, including television, on the
Internet, radio, and in print;
(2) if such advertising influences investors and potential
investors to make investment decisions, and if such advertising
improperly influences those investors and potential investors
to make inappropriate investment decisions;
(3) whether such advertising properly discloses the risks
associated with trading and investing in the capital markets;
and
(4) whether--
(A) there are appropriate regulatory mechanisms in
place to prevent any improper or deceptive advertising;
and
(B) the Commission has or needs additional
resources or authority to actively participate in such
regulation.
(b) Report.--Not later than 180 days after the date of enactment of
this Act, the Commission shall submit a report to the Congress on the
results of the study conducted under subsection (a), together with any
recommendations for changes that it considers necessary to protect
investors and potential investors from improper or deceptive
advertising.
SEC. 319. ELIGIBILITY OF COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION TO
BORROW FROM THE FEDERAL HOME LOAN BANK SYSTEM.
Section 10b of the Federal Home Loan Bank Act (12 U.S.C. 1430b) is
amended--
(1) in subsection (a) by striking the second sentence and
inserting the following two sentences: ``Such mortgagees must
be (i) chartered institutions having succession and (ii)
subject to the inspection and supervision of some governmental
agency or a community development financial institution (other
than an insured depository institution or a subsidiary thereof)
that, at the time the advance is made, is certified under the
Community Development Banking and Financial Institutions Act of
1994. The principal activity of such mortgagees in the mortgage
field must consist of lending their own funds and any advances
may be subject to the same collateralization requirements as
applied to other nonmember borrowers.'';
(2) in the last sentence of subsection (a) by replacing the
word ``such'' with ``the same'' and by replacing the phrase
``shall be determined by the board'' with the phrase ``are
comparable extensions of credit to members''; and
(3) in subsection (b) by inserting in the first sentence
between the words ``agency'' and ``for'' the following phrase:
``or a certified community development financial institution''.
TITLE IV--FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION
SEC. 401. SHORT TITLE.
This title may be cited as the ``Federal Home Loan Bank System
Modernization Act of 1999''.
SEC. 402. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) is
amended--
(1) in paragraph (1), by striking ``term `Board' means''
and inserting ``terms `Finance Board' and `Board' mean'';
(2) by striking paragraph (3) and inserting the following:
``(3) State.--The term `State', in addition to the States
of the United States, includes the District of Columbia, Guam,
Puerto Rico, the United States Virgin Islands, American Samoa,
and the Commonwealth of the Northern Mariana Islands.''; and
(3) by adding at the end the following new paragraph:
``(13) Community financial institution.--
``(A) In general.--The term `community financial
institution' means a member--
``(i) the deposits of which are insured
under the Federal Deposit Insurance Act; and
``(ii) that has, as of the date of the
transaction at issue, less than $500,000,000 in
average total assets, based on an average of
total assets over the 3 years preceding that
date.
``(B) Adjustments.--The $500,000,000 limit referred
to in subparagraph (A)(ii) shall be adjusted annually
by the Finance Board, based on the annual percentage
increase, if any, in the Consumer Price Index for all
urban consumers, as published by the Department of
Labor.''.
SEC. 403. SAVINGS ASSOCIATION MEMBERSHIP.
(a) Federal Home Loan Bank Membership.--Section 5(f) of the Home
Owners' Loan Act (12 U.S.C. 1464(f)) is amended to read as follows:
``(f) Federal Home Loan Bank Membership.--On and after June 1,
2000, a Federal savings association may become a member of the Federal
Home Loan Bank System, and shall qualify for such membership in the
manner provided by the Federal Home Loan Bank Act.''.
(b) Withdrawal.--Section 6(e) of the Federal Home Loan Bank Act (12
U.S.C. 1426(e)) is amended by striking ``Any member other than a
Federal savings and loan association may withdraw'' and inserting ``Any
member may withdraw if, on the date of withdrawal there is in effect a
certification by the Finance Board that the withdrawal will not cause
the Federal Home Loan Bank System to fail to meet its obligation under
section 21B(f)(2)(C) to contribute to the debt service for the
obligations issued by the Resolution Funding Corporation''.
SEC. 404. ADVANCES TO MEMBERS; COLLATERAL.
(a) In General.--Section 10(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1430(a)) is amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and indenting
appropriately;
(2) by striking ``(a) Each'' and inserting the following:
``(a) In General.--
``(1) All advances.--Each'';
(3) by striking the second sentence and inserting the
following:
``(2) Purposes of advances.--A long-term advance may only
be made for the purposes of--
``(A) providing funds to any member for residential
housing finance; and
``(B) providing funds to any community financial
institution for small businesses, small farms, and
small agri-businesses.'';
(4) by striking ``A Bank'' and inserting the following:
``(3) Collateral.--A Bank'';
(5) in paragraph (3) (as so designated by paragraph (4) of
this subsection)--
(A) in subparagraph (C) (as so redesignated by
paragraph (1) of this subsection) by striking
``Deposits'' and inserting ``Cash or deposits'';
(B) in subparagraph (D) (as so redesignated by
paragraph (1) of this subsection), by striking the
second sentence; and
(C) by inserting after subparagraph (D) (as so
redesignated by paragraph (1) of this subsection) the
following new subparagraph:
``(E) Secured loans for small business,
agriculture, or securities representing a whole
interest in such secured loans, in the case of any
community financial institution.'';
(6) in paragraph (5)--
(A) in the second sentence, by striking ``and the
Board'';
(B) in the third sentence, by striking ``Board''
and inserting ``Federal Home Loan Bank''; and
(C) by striking ``(5) Paragraphs (1) through (4)''
and inserting the following:
``(4) Additional bank authority.--Subparagraphs (A) through
(E) of paragraph (3)''; and
(7) by adding at the end the following:
``(5) Review of certain collateral standards.--The Board
may review the collateral standards applicable to each Federal
Home Loan Bank for the classes of collateral described in
subparagraphs (D) and (E) of paragraph (3), and may, if
necessary for safety and soundness purposes, require an
increase in the collateral standards for any or all of those
classes of collateral.
``(6) Definitions.--For purposes of this subsection, the
terms `small business', `agriculture', `small farm', and `small
agri-business' shall have the meanings given those terms by
rule or regulation of the Finance Board.''.
(b) Clerical Amendment.--The section heading for section 10 of the
Federal Home Loan Bank Act (12 U.S.C. 1430) is amended to read as
follows:
``SEC. 10. ADVANCES TO MEMBERS.''.
SEC. 405. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 1424(a))
is amended--
(1) in paragraph (2)(A), by inserting, ``(other than a
community financial institution)'' after ``institution'';
(2) in the matter immediately following paragraph (2)(C)--
(A) by striking ``An insured'' and inserting the
following:
``(3) Certain institutions.--An insured''; and
(B) by striking ``preceding sentence'' and
inserting ``paragraph (2)''; and
(3) by adding at the end the following new paragraph:
``(4) Limited exemption for community financial
institutions.--A community financial institution that otherwise
meets the requirements of paragraph (2) may become a member
without regard to the percentage of its total assets that is
represented by residential mortgage loans, as described in
subparagraph (A) of paragraph (2).''.
SEC. 406. MANAGEMENT OF BANKS.
(a) Board of Directors.--Section 7(d) of the Federal Home Loan Bank
Act (12 U.S.C. 1427(d)) is amended--
(1) by striking ``(d) The term'' and inserting the
following:
``(d) Terms of Office.--The term''; and
(2) by striking ``shall be two years''.
(b) Compensation.--Section 7(i) of the Federal Home Loan Bank Act
(12 U.S.C. 1427(i)) is amended by striking ``subject to the approval of
the board''.
(c) Repeal of Sections 22A and 27.--The Federal Home Loan Bank Act
(12 U.S.C. 1421 et seq.) is amended by striking sections 22A (12 U.S.C.
1442a) and 27 (12 U.S.C. 1447).
(d) Section 12.--Section 12 of the Federal Home Loan Bank Act (12
U.S.C. 1432) is amended--
(1) in subsection (a)--
(A) by striking ``, but, except'' and all that
follows through ``ten years'';
(B) by striking ``subject to the approval of the
Board'' each place that term appears;
(C) by striking ``and, by its Board of directors,''
and all that follows through ``agent of such bank,''
and inserting ``and, by the board of directors of the
Bank, to prescribe, amend, and repeal by-laws governing
the manner in which its affairs may be administered,
consistent with applicable laws and regulations, as
administered by the Finance Board. No officer,
employee, attorney, or agent of a Federal Home Loan
Bank''; and
(D) by striking ``Board of directors'' each place
that term appears and inserting ``board of directors'';
and
(2) in subsection (b), by striking ``loans banks'' and
inserting ``loan banks''.
(e) Powers and Duties of Federal Housing Finance Board.--
(1) Issuance of notices of violations.--Section 2B(a) of
the Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is amended
by adding at the end the following new paragraphs:
``(5) To issue and serve a notice of charges upon a Federal
Home Loan Bank or upon any executive officer or director of a
Federal Home Loan Bank if, in the determination of the Finance
Board, the Bank, executive officer, or director is engaging or
has engaged in, or the Finance Board has reasonable cause to
believe that the Bank, executive officer, or director is about
to engage in, any conduct that violates any provision of this
Act or any law, order, rule, or regulation or any condition
imposed in writing by the Finance Board in connection with the
granting of any application or other request by the Bank, or
any written agreement entered into by the Bank with the agency,
in accordance with the procedures provided in section 1371(c)
of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992. Such authority includes the same
authority to take affirmative action to correct conditions
resulting from violations or practices or to limit activities
of a Bank or any executive officer or director of a Bank as
appropriate Federal banking agencies have to take with respect
to insured depository institutions under paragraphs (6) and (7)
of section 8(b) of the Federal Deposit Insurance Act, and to
have all other powers, rights, and duties to enforce this Act
with respect to the Federal Home Loan Banks and their executive
officers and directors as the Office of Federal Housing
Enterprise Oversight has to enforce the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992, the
Federal National Mortgage Association Charter Act, or the
Federal Home Loan Mortgage Corporation Act with respect to the
Federal housing enterprises under the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992.
``(6) To sue and be sued, by and through its own
attorneys.''.
(2) Technical amendment.--Section 111 of Public Law 93-495
(12 U.S.C. 250) is amended by inserting ``Federal Housing
Finance Board,'' after ``Director of the Office of Thrift
Supervision,''.
(f) Eligibility To Secure Advances.--
(1) Section 9.--Section 9 of the Federal Home Loan Bank Act
(12 U.S.C. 1429) is amended--
(A) in the second sentence, by striking ``with the
approval of the Board''; and
(B) in the third sentence, by striking ``, subject
to the approval of the Board,''.
(2) Section 10.--Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended--
(A) in subsection (c)--
(i) in the first sentence, by striking
``Board'' and inserting ``Federal Home Loan
Bank''; and
(ii) in the second sentence, by striking
``held by'' and all that follows before the
period; and
(B) in subsection (d)--
(i) in the first sentence, by striking
``and the approval of the Board''; and
(ii) by striking ``Subject to the approval
of the Board, any'' and inserting ``Any''.
(g) Section 16.--Section 16(a) of the Federal Home Loan Bank Act
(12 U.S.C. 1436(a)) is amended--
(1) in the third sentence--
(A) by striking ``net earnings'' and inserting
``previously retained earnings or current net
earnings''; and
(B) by striking ``, and then only with the approval
of the Federal Housing Finance Board''; and
(2) by striking the fourth sentence.
(h) Section 18.--Section 18(b) of the Federal Home Loan Bank Act
(12 U.S.C. 1438(b)) is amended by striking paragraph (4).
SEC. 407. RESOLUTION FUNDING CORPORATION.
(a) In General.--Section 21B(f)(2)(C) of the Federal Home Loan Bank
Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read as follows:
``(C) Payments by federal home loan banks.--
``(i) In general.--To the extent that the
amounts available pursuant to subparagraphs (A)
and (B) are insufficient to cover the amount of
interest payments, each Federal Home Loan Bank
shall pay to the Funding Corporation in each
calendar year, 20.75 percent of the net
earnings of that Bank (after deducting expenses
relating to section 10(j) and operating
expenses).
``(ii) Annual determination.--The Board
annually shall determine the extent to which
the value of the aggregate amounts paid by the
Federal Home Loan Banks exceeds or falls short
of the value of an annuity of $300,000,000 per
year that commences on the issuance date and
ends on the final scheduled maturity date of
the obligations, and shall select appropriate
present value factors for making such
determinations.
``(iii) Payment term alterations.--The
Board shall extend or shorten the term of the
payment obligations of a Federal Home Loan Bank
under this subparagraph as necessary to ensure
that the value of all payments made by the
Banks is equivalent to the value of an annuity
referred to in clause (ii).
``(iv) Term beyond maturity.--If the Board
extends the term of payment obligations beyond
the final scheduled maturity date for the
obligations, each Federal Home Loan Bank shall
continue to pay 20.75 percent of its net
earnings (after deducting expenses relating to
section 10(j) and operating expenses) to the
Treasury of the United States until the value
of all such payments by the Federal Home Loan
Banks is equivalent to the value of an annuity
referred to in clause (ii). In the final year
in which the Federal Home Loan Banks are
required to make any payment to the Treasury
under this subparagraph, if the dollar amount
represented by 20.75 percent of the net
earnings of the Federal Home Loan Banks exceeds
the remaining obligation of the Banks to the
Treasury, the Finance Board shall reduce the
percentage pro rata to a level sufficient to
pay the remaining obligation.''.
(b) Effective Date.--The amendment made by subsection (a) shall
become effective on June 1, 2000. Payments made by a Federal Home Loan
Bank before that effective date shall be counted toward the total
obligation of that Bank under section 21B(f)(2)(C) of the Federal Home
Loan Bank Act, as amended by this section.
SEC. 408. GAO STUDY ON FEDERAL HOME LOAN BANK SYSTEM CAPITAL.
(a) Study.--The Comptroller General of the United States shall
conduct a study of--
(1) possible revisions to the capital structure of the
Federal Home Loan Bank System, including the need for--
(A) more permanent capital;
(B) a statutory leverage ratio; and
(C) a risk-based capital structure; and
(2) what impact such revisions might have on the operations
of the Federal Home Loan Bank System, including the obligation
of the Federal Home Loan Bank System under section 21B(f)(2)(C)
of the Federal Home Loan Bank Act.
(b) Report to Congress.--Not later than 1 year after the date of
enactment of this Act, the Comptroller General of the United States
shall submit a report to the Congress on the results of the study
conducted under subsection (a).
TITLE V--FUNCTIONAL REGULATION OF BROKERS AND DEALERS
SEC. 501. DEFINITION OF BROKER.
(a) It is the intention of this Act subject to carefully defined
exceptions which do not undermine the dominant principle of functional
regulation to ensure that securities transactions effected by a bank
are regulated by securities regulators, notwithstanding any other
provision of this Act.
(b) 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) Exception 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
of the bank that is clearly marked and,
to the extent practicable, 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 (other than
associated persons of a broker or
dealer who are qualified pursuant to
the rules of a self-regulatory
organization) perform only clerical or
ministerial functions in connection
with brokerage transactions including
scheduling appointments with the
associated persons of a broker or
dealer, except that bank employees may
forward customer funds or securities
and may describe in general terms the
range of investment vehicles available
from the bank and the broker or dealer
under the contractual or other
arrangement;
``(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 rules of a self-
regulatory organization, except that
the bank employees may receive
compensation for the referral of any
customer if the compensation is a
nominal one-time cash 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 that receive any
services are fully disclosed to the
broker or dealer;
``(VIII) the bank does not carry a
securities account of the customer,
except in a customary custodian or
trustee capacity; and
``(IX) the bank, 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 effects
transactions in a trustee capacity, or effects
transactions in a fiduciary capacity in its
trust department or other department that is
regularly examined by bank examiners for
compliance with fiduciary principles and
standards, and does not publicly solicit
brokerage business, other than by advertising
that it effects transactions in securities in
conjunction with advertising its other trust
activities.
``(iii) Permissible securities
transactions.--The bank effects transactions
in--
``(I) commercial paper, bankers
acceptances, or commercial bills;
``(II) exempted securities;
``(III) qualified Canadian
Government obligations, as defined in
section 5136 of the Revised Statutes of
the United States, in conformity with
section 15C of this title and the rules
and regulations thereunder, or
obligations of the North American
Development Bank; or
``(IV) any standardized, credit
enhanced debt security issued by a
foreign government pursuant to the
March 1989 plan of then Secretary of
the Treasury Brady, used by such
foreign government to retire
outstanding commercial bank loans.
``(iv) Certain stock purchase plans.--
``(I) Employee benefit plans.--The
bank effects transactions, as part of
its transfer agency activities, in the
securities of an issuer as part of any
pension, retirement, profit-sharing,
bonus, thrift, savings, incentive, or
other similar benefit plan for the
employees of that issuer or its
subsidiaries, if the bank does not
solicit transactions or provide
investment advice with respect to the
purchase or sale of securities in
connection with the plan.
``(II) Dividend reinvestment
plans.--The bank effects transactions,
as part of its transfer agency
activities, in the securities of an
issuer as part of that issuer's
dividend reinvestment plan, if--
``(aa) the bank does not
solicit transactions or provide
investment advice with respect
to the purchase or sale of
securities in connection with
the plan; and
``(bb) the bank does not
net shareholders' buy and sell
orders, other than for programs
for odd-lot holders or plans
registered with the Commission.
``(III) Issuer plans.--The bank
effects transactions, as part of its
transfer agency activities, in the
securities of an issuer as part of a
plan or program for the purchase or
sale of that issuer's shares, if--
``(aa) the bank does not
solicit transactions or provide
investment advice with respect
to the purchase or sale of
securities in connection with
the plan or program; and
``(bb) the bank does not
net shareholders' buy and sell
orders, other than for programs
for odd-lot holders or plans
registered with the Commission.
``(IV) Permissible delivery of
materials.--The exception to being
considered a broker for a bank engaged
in activities described in subclauses
(I), (II), and (III) will not be
affected by delivery of written or
electronic plan materials by a bank to
employees of the issuer, shareholders
of the issuer, or members of affinity
groups of the issuer, so long as such
materials are--
``(aa) comparable in scope
or nature to that permitted by
the Commission as of the date
of the enactment of the
Financial Services
Modernization Act of 1999; or
``(bb) otherwise permitted
by the Commission.
``(v) 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.
``(vi) Affiliate transactions.--The bank
effects transactions for the account of any
affiliate of the bank (as defined in section 2
of the Bank Holding Company Act of 1956) other
than--
``(I) a registered broker or
dealer; or
``(II) an affiliate that is engaged
in merchant banking, as described in
section 4(k)(4)(H) of the Bank Holding
Company Act of 1956.
``(vii) Private securities offerings.--The
bank effects sales as part of a primary
offering of securities not involving a public
offering, pursuant to section 3(b), 4(2), or
4(6) of the Securities Act of 1933, or the
rules and regulations issued thereunder.
``(viii) Safekeeping and custody
activities.--
``(I) In general.--The bank, as
part of customary banking activities--
``(aa) provides safekeeping
or custody services with
respect to securities,
including the exercise of
warrants and other rights on
behalf of customers;
``(bb) facilitates the
transfer of funds or
securities, as a custodian or a
clearing agency, in connection
with the clearance and
settlement of its customers'
transactions in securities;
``(cc) effects securities
lending or borrowing
transactions with or on behalf
of customers as part of
services provided to customers
pursuant to division (aa) or
(bb) or invests cash collateral
pledged in connection with such
transactions; or
``(dd) holds securities
pledged by a customer to
another person or securities
subject to purchase or resale
agreements involving a
customer, or facilitates the
pledging or transfer of such
securities by book entry or as
otherwise provided under
applicable law.
``(II) Exception for carrying
broker activities.--The exception to
being considered a broker for a bank
engaged in activities described in
subclause (I) shall not apply if the
bank, in connection with such
activities, acts in the United States
as a carrying broker (as such term, and
different formulations thereof, are
used in section 15(c)(3) and the rules
and regulations thereunder) for any
broker or dealer, unless such carrying
broker activities are engaged in with
respect to government securities (as
defined in paragraph (42) of this
subsection).
``(ix) Banking products.--The bank effects
transactions in traditional banking products,
as defined in section 503(a) of the Financial
Services Modernization Act of 1999.
``(x) De minimis exception.--The bank
effects, other than in transactions referred to
in clauses (i) through (ix), not more than 500
transactions in securities in any calendar
year, and such transactions are not effected by
an employee of the bank who is also an employee
of a broker or dealer.
``(C) Execution by broker or dealer.--The exception
to being considered a broker for a bank engaged in
activities described in clauses (ii), (iv), and (viii)
of subparagraph (B) shall not apply if the activities
described in such provisions result in the trade in the
United States of any security that is a publicly traded
security in the United States, unless--
``(i) the bank directs such trade to a
registered broker or dealer for execution;
``(ii) the trade is a cross trade or other
substantially similar trade of a security
that--
``(I) is made by the bank or
between the bank and an affiliated
fiduciary; and
``(II) is not in contravention of
fiduciary principles established under
applicable Federal or State law; or
``(iii) the trade is conducted in some
other manner permitted under such rules,
regulations, or orders as the Commission may
prescribe or issue.
``(D) No effect of bank exemptions on other
commission authority.--The exception to being
considered a broker for a bank engaged in activities
described in subparagraphs (B) and (C) shall not affect
the authority of the Commission under any other
provision of this title or any other securities law.
``(E) Fiduciary capacity.--For purposes of
subparagraph (B)(ii) of this paragraph and paragraph
(5)(C), the term `fiduciary capacity' means--
``(i) in the capacity as trustee, executor,
administrator, registrar of stocks and bonds,
transfer agent, guardian, assignee, receiver,
or custodian, either under a uniform gift to
minor act or for an individual retirement
account, or as an investment adviser if the
bank receives a fee for its investment advice
or services, or as a service provider to any
pension, retirement, profit sharing, bonus,
thrift, savings, incentive, or other similar
benefit plan;
``(ii) in any capacity in which the bank
possesses investment discretion on behalf of
another; or
``(iii) in any other similar capacity.
``(F) Exception for entities subject to section
15(e).--The term `broker' does not include a bank
that--
``(i) was, on the day before the date of
enactment of the Financial Services
Modernization Act of 1999, subject to section
15(e); and
``(ii) is subject to such restrictions and
requirements as the Commission considers
appropriate.''.
SEC. 502. 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) Exception 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) Permissible securities
transactions.--The bank buys or sells--
``(I) commercial paper, bankers
acceptances, or commercial bills;
``(II) exempted securities;
``(III) qualified Canadian
government obligations as defined in
section 5136 of the Revised Statutes of
the United States, in conformity with
section 15C of this title and the rules
and regulations thereunder, or
obligations of the North American
Development Bank; or
``(IV) any standardized, credit
enhanced debt security issued by a
foreign government pursuant to the
March 1989 plan of then Secretary of
the Treasury Brady, used by such
foreign government to retire
outstanding commercial bank loans.
``(ii) Investment, trustee, and fiduciary
transactions.--The bank buys or sells
securities for investment purposes--
``(I) for the bank; or
``(II) for accounts for which the
bank acts in a trustee capacity or
fiduciary capacity.
``(iii) Asset-backed transactions.--The
bank engages in the issuance or sale to
qualified investors, 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
predominantly originated by the bank, or a
syndicate of banks of which the bank is a
member, or an affiliate of any such bank other
than a broker or dealer.
``(iv) Banking products.--The bank buys or
sells traditional banking products, as defined
in section 503(a) of the Financial Services
Modernization Act of 1999.''.
SEC. 503. DEFINITION AND TREATMENT OF BANKING PRODUCTS.
(a) Definition of Traditional Banking Product.--For purposes of
this title and paragraphs (4) and (5) of section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(4), (5)), as amended by this
title, the term ``traditional banking product'' means--
(1) a deposit account, savings account, certificate of
deposit, or other deposit instrument issued by a bank;
(2) a banker's acceptance;
(3) a letter of credit issued or loan made by a bank;
(4) a debit account at a bank arising from a credit card or
similar arrangement;
(5) a participation in a loan which the bank or an
affiliate of the bank (other than a broker or dealer) funds,
participates in, or owns that is sold--
(A) to qualified investors; or
(B) to other persons that--
(i) have the opportunity to review and
assess any material information, including
information regarding the borrower's
creditworthiness; and
(ii) based on such factors as financial
sophistication, net worth, and knowledge and
experience in financial matters, have the
capability to evaluate the information
available, as determined under generally
applicable banking standards or guidelines; and
(6) any swap agreement (as defined in section
11(e)(8)(D)(vi) of the Federal Deposit Insurance Act),
including credit swaps and equity swaps, unless the appropriate
Federal banking agency determines that credit swaps and equity
swaps shall not be included in the definition of such term.
(b) Transactions Involving Hybrid Products.--
(1) Commission authority.--The Commission may, with the
concurrence of the Board, determine, by regulation published in
the Federal Register, that a bank that effects transactions in,
or buys or sells, a new product should be subject to the
registration requirements of this section.
(2) Limitation.--The Commission may not impose the
registration requirements of this section on any bank that
effects transactions in, or buys or sells, a product under this
subsection unless the Commission, with the concurrence of the
Board, determines in the regulations described in paragraph (1)
that--
(A) the subject product is a new product;
(B) the subject product is a security; and
(C) imposing the registration requirements of this
section is necessary or appropriate in the public
interest and for the protection of investors.
(c) Classification Limited.--Classification of a particular product
or instrument as a traditional banking product pursuant to this section
shall not be construed as finding or implying that such product or
instrument is or is not a security for any purpose under the securities
laws, or is or is not an account, agreement, contract, or transaction
for any purpose under the Commodity Exchange Act.
(d) No Limitation on Other Authority To Challenge.--Nothing in this
section shall affect the right or authority of the Board, any
appropriate Federal banking agency, or any interested party under any
other provision of law to object to or seek judicial review as to
whether a product or instrument is or is not appropriately classified
as a traditional banking product under subsection (a).
(e) Other Definitions.--For purposes of this section--
(1) the term ``appropriate Federal banking agency'' has the
same meaning as in section 3 of the Federal Deposit Insurance
Act;
(2) the term ``bank'' has the same meaning as in section
3(a)(6) of the Securities Exchange Act of 1934;
(3) the term ``Board'' means the Board of Governors of the
Federal Reserve System;
(4) the term ``Commission'' means the Securities and
Exchange Commission;
(5) the term ``government securities'' has the same meaning
as in section 3(a)(42) of the Securities Exchange Act of 1934,
and, for purposes of this subsection, commercial paper, bankers
acceptances, and commercial bills shall be treated in the same
manner as government securities;
(6) the term ``new product'' means a product or instrument
offered or provided by a bank that--
(i) was not subject to regulation by the Commission
as a security under the Federal securities laws before
the date of enactment of this Act; and
(ii) is not a traditional banking product; and
(7) the term ``qualified investor'' has the same meaning as
in section 3(a)(54) of the Securities Exchange Act of 1934, as
added by this title.
SEC. 504. QUALIFIED INVESTOR DEFINED.
Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)) is amended by adding at the end the following new paragraphs:
``(54) Qualified investor.--
``(A) Definition.--The term `qualified investor'
means--
``(i) any investment company registered
with the Commission under section 8 of the
Investment Company Act of 1940;
``(ii) any issuer eligible for an exclusion
from the definition of `investment company'
pursuant to section 3(c)(7) of the Investment
Company Act of 1940;
``(iii) any bank (as defined in paragraph
(6)), savings association (as defined in
section 3(b) of the Federal Deposit Insurance
Act), broker, dealer, insurance company (as
defined in section 2(a)(13) of the Securities
Act of 1933), or business development company
(as defined in section 2(a)(48) of the
Investment Company Act of 1940);
``(iv) any small business investment
company licensed by the Small Business
Administration under subsection (c) or (d) of
section 301 of the Small Business Investment
Act of 1958;
``(v) any State sponsored employee benefit
plan, or any other employee benefit plan,
within the meaning of the Employee Retirement
Income Security Act of 1974, other than an
individual retirement account, if the
investment decisions are made by a plan
fiduciary, as defined in section 3(21) of that
Act, which is either a bank, savings and loan
association, insurance company, or registered
investment adviser;
``(vi) any trust whose purchases of
securities are directed by a person described
in clauses (i) through (v) of this
subparagraph;
``(vii) any market intermediary that is
exempt under section 3(c)(2) of the Investment
Company Act of 1940;
``(viii) any associated person of a broker
or dealer, other than a natural person;
``(ix) any foreign bank (as defined in
section 1(b)(7) of the International Banking
Act of 1978);
``(x) the government of any foreign
country;
``(xi) any corporation, company, or
partnership that owns and invests on a
discretionary basis, not less than $10,000,000
in investments;
``(xii) any natural person who owns and
invests on a discretionary basis, not less than
$10,000,000 in investments;
``(xiii) any government or political
subdivision, agency, or instrumentality of a
government who owns and invests on a
discretionary basis, not less than $50,000,000
in investments; or
``(xiv) any multinational or supranational
entity or any agency or instrumentality
thereof.
``(B) Additional authority.--The Commission may, by
rule or order, define a `qualified investor' as any
other person not described in subparagraph (A), taking
into consideration such factors as the financial
sophistication of the person, net worth, and knowledge
and experience in financial matters.''.
SEC. 505. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(42)) is amended--
(1) by striking ``or'' at the end of subparagraph (C);
(2) by striking the period at the end of subparagraph (D)
and inserting ``; or''; and
(3) by adding at the end the following new subparagraph:
``(E) for purposes of section 15C, as applied to a
bank, a qualified Canadian Government obligation, as
defined in section 5136 of the Revised Statutes of the
United States.''.
SEC. 506. EFFECTIVE DATE.
This title shall become effective at the end of the 1-year period
beginning on the date of enactment of this Act.
SEC. 507. RULE OF CONSTRUCTION.
Nothing in this title shall supersede, affect, or otherwise limit
the scope and applicability of the Commodity Exchange Act (7 U.S.C. 1
et seq.).
TITLE VI--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
SEC. 601. PREVENTION OF CREATION OF NEW S&L HOLDING COMPANIES WITH
COMMERCIAL AFFILIATES.
(a) In General.--Section 10(c) of the Home Owners' Loan Act (12
U.S.C. 1467a(c)) is amended by adding at the end the following new
paragraph:
``(9) Prevention of new affiliations between s&l holding
companies and commercial firms.--
``(A) In general.--Notwithstanding paragraph (3),
no company may directly or indirectly, including
through any merger, consolidation, or other type of
business combination, acquire control of a savings
association after May 4, 1999, unless the company is
engaged, directly or indirectly (including through a
subsidiary other than a savings association), only in
activities that are permitted--
``(i) under paragraph (1)(C) or (2) of this
subsection; or
``(ii) for financial holding companies
under section 4(k) of the Bank Holding Company
Act of 1956.
``(B) Prevention of new commercial affiliations.--
Notwithstanding paragraph (3), no savings and loan
holding company may engage directly or indirectly
(including through a subsidiary other than a savings
association) in any activity other than as described in
clauses (i) and (ii) of subparagraph (A).
``(C) Preservation of authority of existing unitary
s&l holding companies.--Subparagraphs (A) and (B) do
not apply with respect to any company that was a
savings and loan holding company on May 4, 1999, or
that becomes a savings and loan holding company
pursuant to an application pending before the Office on
or before that date, and that--
``(i) meets and continues to meet the
requirements of paragraph (3); and
``(ii) continues to control not fewer than
1 savings association that it controlled on May
4, 1999, or that it acquired pursuant to an
application pending before the Office on or
before that date, or the successor to such
savings association.
``(D) Corporate reorganizations permitted.--This
paragraph does not prevent a transaction that--
``(i) involves solely a company under
common control with a savings and loan holding
company from acquiring, directly or indirectly,
control of the savings and loan holding company
or any savings association that is already a
subsidiary of the savings and loan holding
company; or
``(ii) involves solely a merger,
consolidation, or other type of business
combination as a result of which a company
under common control with the savings and loan
holding company acquires, directly or
indirectly, control of the savings and loan
holding company or any savings association that
is already a subsidiary of the savings and loan
holding company.
``(E) Authority to prevent evasions.--The Director
may issue interpretations, regulations, or orders that
the Director determines necessary to administer and
carry out the purpose and prevent evasions of this
paragraph, including a determination that,
notwithstanding the form of a transaction, the
transaction would in substance result in a company
acquiring control of a savings association.
``(F) Preservation of authority for family
trusts.--Subparagraphs (A) and (B) do not apply with
respect to any trust that becomes a savings and loan
holding company with respect to a savings association,
if--
``(i) not less than 85 percent of the
beneficial ownership interests in the trust are
continuously owned, directly or indirectly, by
or for the benefit of members of the same
family, or their spouses, who are lineal
descendants of common ancestors who controlled,
directly or indirectly, such savings
association on May 4, 1999, or a subsequent
date, pursuant to an application pending before
the Office on or before May 4, 1999; and
``(ii) at the time at which such trust
becomes a savings and loan holding company,
such ancestors or lineal descendants, or
spouses of such descendants, have directly or
indirectly controlled the savings association
continuously since May 4, 1999, or a subsequent
date, pursuant to an application pending before
the Office on or before May 4, 1999.''.
(b) Conforming Amendment.--Section 10(o)(5)(E) of the Home Owners'
Loan Act (15 U.S.C. 1467a(o)(5)(E)) is amended by striking ``, except
subparagraph (B)'' and inserting ``or (c)(9)(A)(ii)''.
SEC. 602. OPTIONAL CONVERSION OF FEDERAL SAVINGS ASSOCIATIONS.
Section 5(i) of the Home Owners' Loan Act (12 U.S.C. 1464(i)) is
amended by adding at the end the following new paragraph:
``(5) Conversion to national bank.--Notwithstanding any
other provision of law, any Federal savings association
chartered and in operation prior to the date of enactment of
the Financial Services Modernization Act of 1999, with branches
in one or more States, may convert, at its option, with the
approval of the Comptroller of the Currency, into one or more
National banks, each of which may encompass one or more of the
branches of the Federal savings association in one or more
States; but only if the resulting National bank or banks will
meet any and all financial, management, and capital
requirements applicable to National banks.''.
TITLE VII--ATM FEE REFORM
SEC. 701. SHORT TITLE.
This title may be cited as the ``ATM Fee Reform Act of 1999''.
SEC. 702. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY HOST ATM.
Section 904(d) of the Electronic Fund Transfer Act (15 U.S.C.
1693b(d)) is amended by adding at the end the following:
``(3) Fee disclosures at automated teller, machines.--
``(A) In general.--The regulations prescribed under
paragraph (1) shall require any automated teller
machine operator who imposes a fee on any consumer for
providing host transfer services to such consumer to
provide notice in accordance with subparagraph (B) to
the consumer (at the time the service is provided) of--
``(i) the fact that a fee is imposed by
such operator for providing the service; and
``(ii) the amount of any such fee.
``(B) Notice requirements.--
``(i) On the machine.--The notice required
under clause (i) of subparagraph (A) with
respect to any fee described in such
subparagraph shall be posted in a prominent and
conspicuous location on or at the automated
teller machine at which the electronic fund
transfer is initiated by the consumer; and
``(ii) On the screen.--The notice required
under clauses (i) and (ii) of subparagraph (A)
with respect to any fee described in such
subparagraph shall appear on the screen of the
automated teller machine, or on a paper notice
issued from such machine, after the transaction
is initiated and before the consumer is
irrevocably committed to completing the
transaction.
``(C) Prohibition on fees not properly disclosed
and explicitly assumed by consumer.--No fee may be
imposed by any automated teller machine operator in
connection with any electronic fund transfer initiated
by a consumer for which a notice is required under
subparagraph (A), unless--
``(i) the consumer receives such notice in
accordance with subparagraph (B); and
``(ii) the consumer elects to continue in
the manner necessary to effect the transaction
after receiving such notice.
``(D) Definitions.--For purposes of this paragraph,
the following definitions shall apply:
``(i) Electronic fund transfer.--The term
`electronic fund transfer' includes a
transaction which involves a balance inquiry
initiated by a consumer in the same manner as
an electronic fund transfer, whether or not the
consumer initiates a transfer of funds in the
course of the transaction.
``(ii) Automated teller machine operator.--
The term `automated teller machine operator'
means any person who--
``(I) operates an automated teller
machine at which consumers initiate
electronic fund transfers; and
``(II) is not the financial
institution which holds the account of
such consumer from which the transfer
is made.
``(iii) Host transfer services.--The term
`host transfer services' means any electronic
fund transfer made by an automated teller
machine operator in connection with a
transaction initiated by a consumer at an
automated teller machine operated by such
operator.''.
SEC. 703. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM CARD IS
ISSUED.
Section 905(a) of the Electronic Fund Transfer Act (15 U.S.C.
1693c(a)) is amended--
(1) by striking ``and'' at the end of paragraph (8);
(2) by striking the period at the end of paragraph (9) and
inserting ``; and''; and
(3) by inserting after paragraph (9) the following:
``(10) a notice to the consumer that a fee may be imposed
by--
``(A) an automated teller machine operator (as
defined in section 904(d)(3)(D)(ii)) if the consumer
initiates a transfer from an automated teller machine
which is not operated by the person issuing the card or
other means of access; and
``(B) any national, regional, or local network
utilized to effect the transaction.''.
SEC. 704. FEASIBILITY STUDY.
(a) In General.--The Comptroller General of the United States shall
conduct a study of the feasibility of requiring, in connection with any
electronic and transfer initiated by a consumer through the use of an
automated teller machine--
(1) a notice to be provided to the consumer before the
consumer is irrevocably committed to completing the
transaction, which clearly states the amount of any fee which
will be imposed upon the consummation of the transaction by--
(A) any automated teller machine operator (as
defined in section 904(d)(2)(D)(ii) of the Electronic
Fund Transfer Act) involved in the transaction;
(B) the financial institution holding the account
of the consumer;
(C) any national, regional, or local network
utilized to effect the transaction; and
(D) any other party involved in the transfer; and
(2) the consumer to elect to consummate the transaction
after receiving the notice described in paragraph (1).
(b) Factors To Be Considered.--In conducting the study required
under subsection (a) with regard to the notice requirement described in
such subsection, the Comptroller General shall consider the following
factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice requirement
would have on various sizes and types of institutions, if
implemented.
(4) The period of time which would be reasonable for
implementing any such notice requirement.
(5) The extent to which consumers would benefit from any
such notice requirement.
(6) Any other factor the Comptroller General determines to
be appropriate in analyzing the feasibility of imposing any
such notice requirement.
(c) Report to Congress.--Before the end of the 6-month period
beginning on the date of the enactment of this Act, the Comptroller
General shall submit a report to the Congress containing--
(1) the findings and conclusions of the Comptroller General
in connection with the study required under subsection (a); and
(2) the recommendation of the Comptroller General with
regard to the question of whether a notice requirement
described in subsection (a) should be implemented and, if so,
how such requirement should be implemented.
SEC. 705. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.
Section 910 of the Electronic Fund Transfer Act (15 U.S.C. 1693h)
is amended by adding at the end the following new subsection:
``(d) Exception for Damaged Notices.--If the notice required to be
posted pursuant to section 904(d)(3)(B)(i) by an automated teller
machine operator has been posted by such operator in compliance with
such section and the notice is subsequently removed, damaged, or
altered by any person other than the operator of the automated teller
machine, the operator shall have no liability under this section for
failure to comply with section 904(d)(3)(B)(i).''.
Passed the Senate May 6, 1999.
Attest:
Secretary.
106th CONGRESS
1st Session
S. 900
_______________________________________________________________________
AN ACT
To enhance competition in the financial services industry by providing
a prudential framework for the affiliation of banks, securities firms,
insurance companies, and other financial service providers, and for
other purposes.
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