[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1603 Introduced in House (IH)]

113th CONGRESS
  1st Session
                                H. R. 1603

 To support and promote community financial institutions in the mutual 
                     form, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 17, 2013

Mr. Grimm (for himself, Mr. King of New York, and Mr. Meeks) introduced 
 the following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 A BILL


 
 To support and promote community financial institutions in the mutual 
                     form, 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.

    This Act may be cited as the ``Mutual Community Bank Competitive 
Equality Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Mutual financial institutions have been an integral 
        part of the American banking landscape for almost 200 years.
            (2) Such institutions operate for the purpose of serving 
        the local depositors and borrowers and the communities in which 
        they operate.
            (3) Mutual banks play a critical role in encouraging 
        thrift, providing home loans and loans for small businesses.
            (4) Mutual banks are among the strongest financial 
        institutions in the country and are characterized by high 
        capital ratios and conservative, community-focused management.
            (5) Congress deems it necessary to provide for the support 
        and continued development of these vital community financial 
        institutions.

SEC. 3. MUTUAL NATIONAL BANKS AUTHORIZED.

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

``SEC. 5133A. MUTUAL NATIONAL BANKS.

    ``(a) In General.--Notwithstanding the section designated the 
`Third' of section 5134, in order to provide mutual institutions for 
the deposit of funds, the extension of credit, and provision of other 
services, the Comptroller of the Currency may charter mutual national 
banks either de novo or through a conversion of any insured depository 
institution or any State mutual bank or credit union, subject to 
regulations prescribed by the Comptroller of the Currency in accordance 
with this section. The powers conferred by this section are intended to 
provide for the creation and maintenance of mutual national banks as 
bodies corporate existing in perpetuity for the benefit of their 
depositors and the communities in which they operate.
    ``(b) Regulations.--
            ``(1) Regulations of the comptroller.--The Comptroller of 
        the Currency is authorized to prescribe appropriate regulations 
        for the organization, incorporation, governance, conversion, 
        examination, operation, supervision, and regulation of mutual 
        national banks.
            ``(2) Applicability of capital stock requirements.--The 
        Comptroller of the Currency shall prescribe regulations 
        regarding appropriate capital substitutes for the requirements 
        of this title with respect to capital stock, and limitations 
        imposed on national banks under this title based on capital 
        stock, as such requirements shall apply to mutual national 
        banks.
    ``(c) De Novo Charters.--
            ``(1) The Comptroller of the Currency is authorized to 
        issue a certificate of authority to commence the business of 
        banking to a mutual national bank in accordance with the 
        requirements set forth in section 5169, provided that 
        references to `capital stock' shall mean `pledged accounts, 
        nonwithdrawable investment certificates, or similar 
        instruments' by the incorporators.
            ``(2) Upon the issuance of the certificate required by 
        paragraph (1), the mutual national bank shall become a body 
        corporate and the incorporators shall become the first board of 
        directors, with the power and authority to manage the affairs 
        of the bank as herein set forth.
    ``(d) Conversions.--
            ``(1) Conversion of a mutual depository to a mutual 
        national bank.--Subject to such regulations as the Comptroller 
        of the Currency may prescribe, any mutual depository may 
        convert to a mutual national bank by filing with the 
        Comptroller of the Currency a notice of its election to convert 
        on a specified date that is not earlier than 30 days after the 
        date on which the notice is filed, and the mutual depository 
        shall be converted to a mutual national bank charter on the 
        date specified in the notice.
            ``(2) Conversion to stock national bank.--Subject to such 
        regulations as the Comptroller of the Currency may prescribe 
        for the protection of depositors' rights and for any other 
        purpose the Comptroller of the Currency may consider 
        appropriate, any national bank that is organized in the mutual 
        form under subsection (a) may reorganize on an equitable basis 
        as a stock national bank.
            ``(3) Conversion to state banks.--Any national mutual bank 
        may convert to a State bank charter in accordance with 
        regulations prescribed by the Comptroller of the Currency and 
        applicable State law.
    ``(e) Terminating Mutuality.--If a mutual national bank elects to 
terminate mutuality, it must do so by--
            ``(1) liquidating; or
            ``(2) converting on an equitable basis to a national 
        banking association operating in stock form.
    ``(f) Status and Rights of Members.--
            ``(1) In general.--In general, the status of a member is 
        primarily that of a depositor and secondarily that of a holder 
        of an inchoate right to participate in the equity of a mutual 
        national bank upon a liquidation or conversion in accordance 
        with regulations prescribed by the Comptroller of the Currency.
            ``(2) Mandatory rights.--Each member of a mutual national 
        bank shall have the following rights:
                    ``(A) Such rights as may be agreed upon, by 
                contract, between the member and the mutual national 
                bank.
                    ``(B) In the event the board of directors, in its 
                sole discretion, determines a conversion of a mutual 
                national bank to a national banking association 
                operating in stock form is in the best interests of the 
                community in which the bank operates, then the members 
                as of a record date set by the board of directors shall 
                have the first right to subscribe for and purchase 
                stock in the converted bank, on an equitable basis 
                based on the amount of the deposit held by such member 
                as of the record date.
                    ``(C) In the event--
                            ``(i) the board of directors, in its sole 
                        discretion, determines a liquidation of the 
                        mutual national bank is in the best interests 
                        of the community in which the bank operates, 
                        and such board of directors has adopted a plan 
                        of liquidation in accordance with regulations 
                        proscribed by the Comptroller of the Currency, 
                        and the Comptroller of the Currency has 
                        approved if such plan; or
                            ``(ii) if for any other reason the bank is 
                        liquidated by operation of law,
                then the members as of the date of liquidation shall 
                have the right to have credited to their accounts, on a 
                pro rata basis, any residual assets left after the 
                payment of all liabilities and expenses, including 
                expenses of liquidation of the mutual national bank.
    ``(g) Management of the Bank.--The board of directors shall have 
the entire management and control of the affairs of the mutual national 
bank. No depositor or borrower shall have the right to vote on any 
matter relating to the mutual national bank. Any voting rights of 
members prior to a conversion to a mutual national bank shall be 
extinguished upon a conversion to a mutual national bank.
    ``(h) Mutual Holding Company Formation.--A mutual national bank may 
reorganize into the mutual holding company form of organization in 
accordance with regulations promulgated by the Comptroller of the 
Currency.
    ``(i) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Insured depository institution.--The term `insured 
        depository institution' has the same meaning as in section 3 of 
        the Federal Deposit Insurance Act.
            ``(2) Mutual national bank.--The term `mutual national 
        bank' means a national banking association that operates in 
        mutual form and is chartered by the Comptroller of the Currency 
        under this section.
            ``(3) Mutual depository.--The term `mutual depository' 
        means a depository institution that is organized in nonstock 
        form, including a Federal non-stock depository and any form of 
        nonstock depository provided for under State law, the deposits 
        of which are insured by an instrumentality of the Federal 
        Government.
            ``(4) Mutuality.--The term `mutuality' means the quality of 
        being an insured depository institution organized under a 
        Federal or State law providing for the organization of nonstock 
        depository institutions, or a holding company organized under a 
        Federal or State law providing for the organization of nonstock 
        entities that control one or more depository institutions.
            ``(5) Member.--The term `member' means each insured account 
        holder in a mutual depository's savings, demand, or other 
        authorized depository accounts and each insured account holder 
        in such an account in a depository subsidiary of a mutual bank 
        holding company. The board of directors may adopt a bylaw 
        setting a minimum dollar threshold to qualify as a member up to 
        $1,000.
            ``(6) Membership rights.--The term `membership rights' 
        means the rights of each member under this section.
    ``(j) Conforming References.--Unless otherwise provided by the 
Comptroller of the Currency--
            ``(1) any reference in any Federal law to a national bank 
        operating in stock form, including a reference to the term 
        `national banking association', `member bank', `national bank', 
        `national association', `bank', `insured bank', `insured 
        depository institution', or `depository institution', shall be 
        deemed to refer also to a mutual national bank;
            ``(2) any reference in any Federal law to the term `board 
        of directors', `director', or `directors' of a national bank 
        operating in stock form shall be deemed to refer also to the 
        board of a mutual national bank; and
            ``(3) any terms in Federal law that may apply only to a 
        national bank operating in stock form, including the terms 
        `stock', `shares', `shares of stock', `capital stock', `common 
        stock', `stock certificate', `stock certificates', 
        `certificates representing shares of stock', `stock dividend', 
        `transferable stock', `each class of stock', `cumulate such 
        shares', `par value', `preferred stock' shall not apply to a 
        mutual national bank, unless the Comptroller of the Currency 
        determines that the context requires otherwise.''.

SEC. 4. MUTUAL INVESTMENT CERTIFICATES AUTHORIZED.

    Section 38(c)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
Sec.  1831o(c)(1)) is hereby amended by deleting ``subparagraph 
(B)(ii)'' in paragraph ``(A)'' and inserting ``subparagraph (B)(ii) and 
paragraph (C)'' and by adding at the end of subparagraph (B)(ii) the 
following:
                    ``(C)(i) Notwithstanding any other provision of 
                law, a mutual depository, as defined in (12 U.S.C. 
                5133A(h)(3)), is authorized to issue Mutual Investment 
                Certificates, which shall be included as Tier 1 capital 
                for purposes of any capital standards issued by an 
                appropriate Federal banking agency, provided that such 
                certificates must be--
                            ``(I) nonvoting, except that the issuing 
                        mutual depository institution may permit voting 
                        in the event that--
                                    ``(aa) the mutual depository 
                                institution fails to pay dividends for 
                                a minimum of three consecutive dividend 
                                periods, and then the holders of the 
                                class or classes of Mutual Investment 
                                Certificates granted such voting 
                                rights, and voting as a single class, 
                                with one vote for each outstanding 
                                certificate, may elect by a majority 
                                vote a maximum of one-third of the 
                                institution's board of directors, the 
                                directors so elected to serve until the 
                                next annual meeting of the institution 
                                succeeding the payment of all current 
                                and past dividends;
                                    ``(bb) any merger, consolidation, 
                                or reorganization (except in a 
                                supervisory case) is sought to be 
                                authorized, where the issuing 
                                institution is not the survivor, 
                                provided that the regulatory capital of 
                                the resulting institution available for 
                                payment of any class of Mutual 
                                Investment Certificates on liquidation 
                                is less than the regulatory capital 
                                available for such class prior to the 
                                merger, consolidation, or 
                                reorganization;
                                    ``(cc) any action is sought to be 
                                authorized which would create any class 
                                of Mutual Investment Certificates 
                                having a preference or priority over an 
                                outstanding class or classes of Mutual 
                                Investment Certificates;
                                    ``(dd) any action is sought to be 
                                authorized which would adversely change 
                                the specific terms of any class of 
                                Mutual Investment Certificates;
                                    ``(ee) action is sought to be 
                                authorized which would increase the 
                                number of a class of Mutual Investment 
                                Certificates, or the number of a class 
                                of Mutual Investment Certificates 
                                ranking prior to or on parity with 
                                another class of Mutual Investment 
                                Certificates; or
                                    ``(ff) action is sought which would 
                                authorize the issuance of an additional 
                                class or classes of Mutual Investment 
                                Certificates without the institution 
                                having met specific financial 
                                standards;
                            ``(II) redeemable at the sole discretion of 
                        the Board of Directors of the mutual 
                        depository; and
                            ``(III) provide that any dividends paid 
                        must be non-cumulative.
                    ``(ii) Notwithstanding any other provision of law, 
                nonwithdrawable accounts, pledged accounts, mutual 
                capital certificates, or similar instruments, 
                authorized as of the date of the enactment of the 
                Mutual Community Bank Equity Act, shall be included as 
                Tier 1 capital for purposes of any capital standards 
                issued by an appropriate Federal banking agency.
                    ``(iii) The appropriate Federal banking agencies 
                are hereby authorized to prescribe appropriate 
                regulations to implement these provisions.''.

SEC. 5. PROTECTION OF MUTUAL DEPOSITORIES.

    (a) In General.--Subsection (h) of section 10 of the Home Owners' 
Loan Act (12 U.S.C. 1467a(h)) is amended--
            (1) by striking ``or'' after the semicolon at the end of 
        paragraph (2);
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``; or''; and
            (3) by inserting after paragraph (3), the following new 
        paragraph:
            ``(4) any company or any subsidiary of any company, any 
        director, officer, employee, or person owning, controlling, or 
        holding with the power to vote, or holding proxies representing 
        more than 25 percent of the voting shares, of such company or 
        subsidiary, or any director, officer, employee, or person 
        acting in concert with such company or subsidiary, to hold, 
        solicit, or exercise any proxies in respect of a savings 
        association which is a mutual association, with the view or 
        intention to, directly or indirectly, control or attempt to 
        control the mutual association.''.
    (b) Enforcement Action.--Subsection (i) of section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1467a(i)) is amended by inserting after 
paragraph (3) the following new paragraph:
            ``(4) Civil actions by association.--
                    ``(A) Equitable relief.--Any aggrieved mutual 
                savings association may bring a civil action in a court 
                of appropriate jurisdiction and may recover such 
                equitable relief, including injunctive relief, and 
                reasonable attorney's fees, as determined by the court 
                for any violation or attempted violation of paragraph 
                (1) or (4) of subsection (h).
                    ``(B) Proxies null and void.--In addition to any 
                damages or relief under paragraph (1), any proxy held 
                or exercised by any party the holding or exercise of 
                which has been determined to be a violation of 
                paragraph (1) or (4) of subsection (h) shall be deemed 
                null and void, as of the inception of such proxy, and 
                shall not be counted for purposes of determining a 
                quorum at any meeting of such aggrieved mutual 
                association.
                    ``(C) Statute of limitation.--
                            ``(i) In general.--An action may not be 
                        brought under subparagraph (A) after the end of 
                        the 180-day period beginning on the later of--
                                    ``(I) the date of the discovery of 
                                the alleged violation by the aggrieved 
                                mutual savings association; or
                                    ``(II) the date of the enactment of 
                                the Mutual Savings Association 
                                Preservation Act.
                            ``(ii) `No attribution' rule.--For purposes 
                        of clause (i)(I), the knowledge of the facts 
                        and circumstances giving rise to an alleged 
                        violation by any party to the violation shall 
                        not be attributed to the savings 
                        association.''.

SEC. 6. ESTABLISHMENT OF CHARITABLE FOUNDATIONS AUTHORIZED.

    (a) Any mutual holding company or direct or indirect stock 
subsidiary of a mutual holding company may contribute or issue shares 
of such stock subsidiary to a charitable foundation established by the 
mutual holding company or any direct or indirect stock subsidiary of 
the mutual holding company, provided that--
            (1) the charitable foundation qualifies as a 501(c)(3) 
        organization under the Internal Revenue Code, as amended;
            (2) the Foundation's governance complies with regulations 
        adopted by the appropriate Federal banking agency;
            (3) at the time of the contribution or issuance to the 
        charitable foundation, no direct or indirect stock subsidiary 
        of the mutual holding company, nor any affiliate thereof, has 
        issued shares of common stock to any nonaffiliate of the direct 
        or indirect stock subsidiary of the mutual holding company;
            (4) the value of the stock so contributed or issued by the 
        direct or indirect stock subsidiary of the mutual holding 
        company, as determined in accordance with subsection (b), shall 
        not exceed more than 10 percent of the insured depository 
        institution's consolidated Tier 1 capital, as of the quarter 
        end prior to the establishment of the charitable foundation;
            (5) the direct or indirect stock subsidiary of the mutual 
        holding company that contributes or issues the shares to the 
        charitable foundation must reasonably expect to utilize the tax 
        deduction within the time period proscribed by the Internal 
        Revenue Service for contributions to charitable foundations; 
        and
            (6) the mutual holding company and each direct or indirect 
        stock subsidiary of the mutual holding company will be ``well 
        capitalized'' under the prompt corrective action regulations 
        immediately following the contribution to the charitable 
        foundation.
    (b) Prior to any contribution or issuance by a direct or indirect 
stock subsidiary of the mutual holding company to a charitable 
foundation pursuant to subsection (a), the mutual holding company shall 
obtain an appraisal, by an independent appraiser experienced in such 
matters, of the pro forma value of the stock so contributed on a fully 
converted basis. The value of the stock so contributed, as determined 
by the appraiser, shall be limited in accordance with paragraph (4) of 
subsection (b).

SEC. 7. DIVIDENDS PAID BY SUBSIDIARIES OF MUTUAL HOLDING COMPANIES.

    Section 10(o)(11)(B) of the Home Owners' Loan Act (12 U.S.C. 
1467a(o)(11)(B)) is amended by deleting ``or'' at the end of (i), 
deleting the period at the end of (ii) and inserting a semicolon at the 
end thereof, and adding the following:
                            ``(iii) a majority of the board of 
                        directors of the mutual holding company, or a 
                        committee thereof, consists of directors who 
                        are not affiliates of any stock subsidiary of 
                        the mutual holding company and who do not 
                        directly or indirectly own any shares of the 
                        stock to which the waiver would apply, and vote 
                        in favor of the waiver of the dividend; or
                            ``(iv) an independent corporate committee 
                        consisting of persons who are not stockholders, 
                        affiliates, depositors, borrowers, or members 
                        of the mutual holding company or any stock 
                        subsidiary of the mutual holding company vote 
                        in favor of the waiver of the dividend.''.

SEC. 8. PRESERVING MUTUALITY BYLAWS AUTHORIZED.

    (a) The Board of Directors of a mutual depository may adopt a bylaw 
to preserve the mutuality of a mutual depository. Such bylaw provisions 
may include--
            (1) supermajority voting requirements, up to 80 percent, by 
        the members to approve a conversion to stock form;
            (2) a prohibition against any person from serving, or 
        nominating a person to serve, on the Board of Directors of the 
        mutual depository, if such person or nominee has an intention 
        to propose a conversion from mutual to stock form;
            (3) a requirement that any person serving or nominated to 
        serve on the Board of Directors may not propose a conversion 
        from mutual to stock form for a period of time not exceeding 
        five years, as determined by the Board, beginning on the later 
        of the date such bylaw is adopted or such person is elected to 
        serve on the Board;
            (4) a prohibition against any member from proposing a 
        conversion to stock form at any annual or special meeting of 
        members or by the written consent of members; and
            (5) a violation of one or more of the bylaw provisions 
        adopted to preserve mutuality shall be a basis for termination 
        as a member of the Board of Directors.
    (b) Notwithstanding the foregoing, in no event shall any bylaw 
adopted pursuant to section (a) have any force and effect in the event 
the mutual depository is not well capitalized in accordance with the 
rules established by such depositories appropriate Federal banking 
agency.

SEC. 9. APPLICABILITY OF SMALL BANK HOLDING COMPANY POLICY STATEMENT TO 
              SMALL MUTUAL HOLDING COMPANY.

    The Board of Governors of the Federal Reserve shall apply its Small 
Bank Holding Company Policy Statement to any mutual holding company 
that would otherwise qualify as a small bank holding company, if it 
were a bank holding company.
                                 <all>