[Congressional Record Volume 144, Number 31 (Thursday, March 19, 1998)]
[House]
[Pages H1337-H1374]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               AMENDMENTS

  Under clause 6 of rule XXIII, proposed amendments were submitted as 
follows:

                                H.R. 10

                         Offered by: Mr. Leach

               (Amendment in the Nature of a Substitute)

       Amendment No. 1.

     SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Financial 
     Services Act of 1998''.
       (b) Purposes.--The purposes of this Act are as follows:
       (1) To enhance competition in the financial services 
     industry, in order to foster innovation and efficiency.
       (2) To ensure the continued safety and soundness of 
     depository institutions.

[[Page H1338]]

       (3) To provide necessary and appropriate protections for 
     investors and ensure fair and honest markets in the delivery 
     of financial services.
       (4) To provide for appropriate functional regulation of 
     insurance activities.
       (5) To reduce and, to the maximum extent practicable, to 
     eliminate the legal barriers preventing affiliation among 
     depository institutions, securities firms, insurance 
     companies, and other financial service providers and to 
     provide a prudential framework for achieving that result.
       (6) To enhance the availability of financial services to 
     citizens of all economic circumstances and in all geographic 
     areas.
       (7) To enhance the competitiveness of United States 
     financial service providers internationally.
       (8) To ensure compliance by depository institutions with 
     the provisions of the Community Reinvestment Act of 1977 and 
     enhance the ability of depository institutions to meet the 
     capital and credit needs of all citizens and communities, 
     including underserved communities and populations.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; purposes; table of contents.

  TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE 
                 COMPANIES, AND DEPOSITORY INSTITUTIONS

                        Subtitle A--Affiliations

Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies 
              which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Certain State laws preempted.
Sec. 105. Mutual bank holding companies authorized.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.

  Subtitle B--Streamlining Supervision of Financial Holding Companies

Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding 
              companies.
Sec. 113. Authority of State insurance regulator and Securities and 
              Exchange Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and 
              enforcement authority of the Board.

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Misrepresentations regarding depository institution liability 
              for obligations of affiliates.
Sec. 123. Repeal of stock loan limit in Federal reserve act.

Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            Chapter 1--Wholesale Financial Holding Companies

Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.

              Chapter 2--Wholesale Financial Institutions

Sec. 136. Wholesale financial institutions.

  Subtitle E--Streamlining Antitrust Review of Bank Acquisitions and 
                                Mergers

Sec. 141. Amendments to the Bank Holding Company Act of 1956.
Sec. 142. Amendments to the Federal Deposit Insurance Act to vest in 
              the Attorney General sole responsibility for antitrust 
              review of depository institution mergers.
Sec. 143. Information filed by depository institutions; interagency 
              data sharing.
Sec. 144. Applicability of antitrust laws.
Sec. 145. Clarification of status of subsidiaries and affiliates.
Sec. 146. Effective date.

Subtitle F--Applying the Principles of National Treatment and Equality 
   of Competitive Opportunity to Foreign Banks and Foreign Financial 
                              Institutions

Sec. 151. Applying the principles of national treatment and equality of 
              competitive opportunity to foreign banks that are 
              financial holding companies.
Sec. 152. Applying the principles of national treatment and equality of 
              competitive opportunity to foreign banks and foreign 
              financial institutions that are wholesale financial 
              institutions.

               Subtitle G--Federal Home Loan Bank System

Sec. 161. Federal home loan banks-
Sec. 162. Membership and collateral.
Sec. 163. The Office of Finance.
Sec. 164. Management of banks.
Sec. 165. Advances to nonmember borrowers.
Sec. 166. Powers and duties of banks.
Sec. 167. Mergers and consolidations of Federal home loan banks.
Sec. 168. Technical amendments.
Sec. 169. Definitions.
Sec. 170. Resolution funding corporation
Sec. 171. Capital structure of the Federal home loan banks.
Sec. 172. Investments.
Sec. 173. Federal Housing Finance Board.

                 Subtitle H--Direct Activities of Banks

Sec. 181. Authority of national banks to underwrite certain municipal 
              bonds

                  Subtitle I--Effective Date of Title

Sec. 191. Effective date.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Sales practices and complaint procedures.
Sec. 205. Information sharing.
Sec. 206. Definition and treatment of banking products.
Sec. 207. Derivative instrument and qualified investor defined.
Sec. 208. Government securities defined.
Sec. 209. Effective date.

             Subtitle B--Bank Investment Company Activities

Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of 
              1940.
Sec. 216. Definition of dealer under the Investment Company Act of 
              1940.
Sec. 217. Removal of the exclusion from the definition of investment 
              adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of 
              1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of 
              1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Investment advisers prohibited from having controlling 
              interest in registered investment company.
Sec. 223. Conforming change in definition.
Sec. 224. Conforming amendment.
Sec. 225. Effective date.

     Subtitle C--Securities and Exchange Commission Supervision of 
                   Investment Bank Holding Companies

Sec. 231. Supervision of investment bank holding companies by the 
              Securities and Exchange Commission.

                           Subtitle D--Study

Sec. 241. Study of methods to inform investors and consumers of 
              uninsured products.

                          TITLE III--INSURANCE

               Subtitle A--State Regulation of Insurance

Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. New bank agency activities only through acquisition of 
              existing licensed agents.
Sec. 306. Title insurance activities of national banks and their 
              affiliates.
Sec. 307. Expedited and equalized dispute resolution for financial 
              regulators.
Sec. 308. Consumer protection regulations.
Sec. 45. Consumer protection regulations.
Sec. 309. Certain State affiliation laws preempted for insurance 
              companies and affiliates.

             Subtitle B--Redomestication of Mutual Insurers

Sec. 311. General application.
Sec. 312. Redomestication of mutual insurers.
Sec. 313. Effect on State laws restricting redomestication.
Sec. 314. Other provisions.
Sec. 315. Definitions.
Sec. 316. Effective date.

   Subtitle C--National Association of Registered Agents and Brokers

Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the Association and the directors, officers, and 
              employees of the Association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.

 TITLE IV--MERGER OF BANK AND THRIFT HOLDING COMPANIES REGULATORS, AND 
                    BANK AND THRIFT INSURANCE FUNDS

Sec. 401. Short title; definitions.

[[Page H1339]]

  Subtitle A--Facilitating Conversion of Savings Associations to Banks

Sec. 411. Branches of former savings associations.
Sec. 412. Savings and loan holding companies.
Sec. 413. Treatment of references in adjustable rate mortgages.
Sec. 414. Cost of funds indexes.

Subtitle B--Ending Separate Federal Regulation of Savings Associations 
        Branching Rights and Savings and Loan Holding Companies

Sec. 421. State savings associations treated as State banks under 
              Federal banking law.
Sec. 422. Amendments to the Home Owners' Loan Act.
Sec. 423. Conforming amendment relating to merger of deposit insurance 
              funds.
Sec. 424. Conforming amendments to the Federal Home Loan Bank Act.

                   Subtitle C--Combining OTS and OCC

Sec. 431. Prohibition of merger or consolidation repealed.
Sec. 432. Secretary of the Treasury required to formulate plans for 
              combining Office of Thrift Supervision with Office of the 
              Comptroller of the Currency.
Sec. 433. Office of Thrift Supervision and position of Director of the 
              Office of Thrift Supervision abolished.
Sec. 434. Reconfiguration of board of directors of FDIC as a result of 
              removal of Director of the Office of Thrift Supervision.
Sec. 435. Continuation provisions.
  TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE 
                 COMPANIES, AND DEPOSITORY INSTITUTIONS
                        Subtitle A--Affiliations

     SEC. 101. GLASS-STEAGALL ACT REFORMED.

       (a) Section 20 Repealed.--Section 20 (12 U.S.C. 377) of the 
     Banking Act of 1933 (commonly referred to as the ``Glass-
     Steagall Act'') is repealed.
       (b) Section 32 Repealed.--Section 32 (12 U.S.C. 78) of the 
     Banking Act of 1933 is repealed.

     SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING 
                   COMPANIES WHICH ARE NOT FINANCIAL HOLDING 
                   COMPANIES.

       (a) 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 under this 
     paragraph as of the day before the date of the enactment of 
     the Financial Services Act of 1998, 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);''.
       (b) Conforming Changes to Other Statutes.--
       (1) 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,''.
       (2) 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 and adding at the end the 
     following: ``as of the day before the date of enactment of 
     the Financial Services Act of 1998.''.

     SEC. 103. FINANCIAL HOLDING COMPANIES.

       (a) In General.--The Bank Holding Company Act of 1956 is 
     amended by inserting after section 5 (12 U.S.C. 1844) the 
     following new section:

     ``SEC. 6. FINANCIAL HOLDING COMPANIES.

       ``(a) Financial Holding Company Defined.--For purposes of 
     this section, the term `financial holding company' means a 
     bank holding company which meets the requirements of 
     subsection (b).
       ``(b) Eligibility Requirements for Financial Holding 
     Companies.--
       ``(1) In general.--No bank holding company may engage in 
     any activity or directly or indirectly acquire or retain 
     shares of any company under this section unless the bank 
     holding company meets the following requirements:
       ``(A) All of the subsidiary depository institutions of the 
     bank holding company are well capitalized.
       ``(B) All of the subsidiary depository institutions of the 
     bank holding company are well managed.
       ``(C) All of the subsidiary depository institutions of the 
     bank holding company have achieved a rating of `satisfactory 
     record of meeting community credit needs', or better, at the 
     most recent examination of each such institution under the 
     Community Reinvestment Act of 1977.
       ``(D) All of the subsidiary insured depository institutions 
     of the bank holding company (other than any such depository 
     institution which does not, in the ordinary course of the 
     business of the depository institution, offer consumer 
     transaction accounts to the general public) offer and 
     maintain low-cost basic banking accounts.
       ``(E) The company has filed with the Board a declaration 
     that the company elects to be a financial holding company and 
     certifying that the company meets the requirements of 
     subparagraphs (A) through (D).
       ``(2) Foreign banks and companies.--For purposes of 
     paragraph (1), the Board shall establish and apply comparable 
     capital standards to a foreign bank that operates a branch or 
     agency or owns or controls a bank or commercial lending 
     company in the United States, and any company that owns or 
     controls such foreign bank, giving due regard to the 
     principle of national treatment and equality of competitive 
     opportunity.
       ``(3) Limited exclusions from community needs requirements 
     for newly acquired depository institutions.--
       ``(A) In general.--If the requirements of subparagraph (B) 
     are met, any depository institution acquired by a bank 
     holding company during the 24-month period preceding the 
     submission of a declaration under paragraph (1)(E) and any 
     depository institution acquired after the submission of such 
     declaration may be excluded for purposes of paragraph (1)(C) 
     until the later of--
       ``(i) the end of the 24-month period beginning on the date 
     the acquisition of the depository institution by such company 
     is consummated; or
       ``(ii) the date of completion of the 1st examination of 
     such depository institution under the Community Reinvestment 
     Act of 1977 which is conducted after the date of the 
     acquisition of the depository institution.
       ``(B) Requirements.--The requirements of this subparagraph 
     are met with respect to any bank holding company referred to 
     in subparagraph (A) if--
       ``(i) the bank holding company has submitted an affirmative 
     plan to the appropriate Federal banking agency to take such 
     action as may be necessary in order for such institution to 
     achieve a rating of `satisfactory record of meeting community 
     credit needs', or better, at the next examination of the 
     institution under the Community Reinvestment Act of 1977; and
       ``(ii) the plan has been approved by such agency.
       ``(c) Engaging in Activities Financial in Nature.--
       ``(1) In general.--Notwithstanding section 4(a), a 
     financial holding company and a wholesale financial holding 
     company may engage in any activity, and acquire and retain 
     the shares of any company engaged in any activity, which the 
     Board has determined (by regulation or order) to be financial 
     in nature or incidental to such financial activities.
       ``(2) Factors to be considered.--In determining whether an 
     activity is financial in nature or incidental to financial 
     activities, the Board shall take into account--
       ``(A) the purposes of this Act and the Financial Services 
     Act of 1998;
       ``(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) whether such activity is necessary or appropriate to 
     allow a bank holding company and the affiliates of a bank 
     holding company to--
       ``(i) compete effectively with any company seeking to 
     provide financial services in the United States;
       ``(ii) use any available or emerging technological means, 
     including any application necessary to protect the security 
     or efficacy of systems for the transmission of data or 
     financial transactions, in providing financial services; and
       ``(iii) offer customers any available or emerging 
     technological means for using financial services.
       ``(3) Activities that are financial in nature.--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.
       ``(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 Act of 1998, 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 the 
     United States; and
       ``(ii) the Board has determined, under regulations issued 
     pursuant to section 4(c)(13) of this Act (as in effect on the 
     day before the date of enactment of the Financial Services 
     Act of 1998) 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 without limitation debt or equity

[[Page H1340]]

     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;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by a securities affiliate or an affiliate 
     thereof 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;
       ``(iii) such shares, assets, or ownership interests, are 
     held only for such a period of time as will permit the sale 
     or disposition thereof on a reasonable basis consistent with 
     the nature of the activities described in clause (ii); and
       ``(iv) during the period such shares, assets, or ownership 
     interests are held, the bank holding company does not 
     actively participate in the day to day management or 
     operation of such company or entity, except insofar as 
     necessary to achieve the objectives of clause (ii).
       ``(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 without limitation debt or equity 
     securities, partnership interests, trust certificates or 
     other instruments representing ownership) of a company or 
     other entity, whether or not constituting control of such 
     company or entity, engaged in 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);
       ``(iii) such shares, assets, or ownership interests 
     represent an investment made in the ordinary course of 
     business of such insurance company in accordance with 
     relevant State law governing such investments; and
       ``(iv) during the period such shares, assets, or ownership 
     interests are held, the bank holding company does not 
     directly or indirectly participate in the day-to-day 
     management or operation of the company or entity except 
     insofar as necessary to achieve the objectives of clauses 
     (ii) and (iii).
       ``(4) Actions required.--The Board shall, by regulation or 
     order, define, consistent with the purposes of this Act, the 
     following activities as, and the extent to which such 
     activities are, financial in nature or incidental to 
     activities which are financial in nature:
       ``(A) Lending, exchanging, transferring, investing for 
     others, or safeguarding financial assets other than money or 
     securities.
       ``(B) Providing any device or other instrumentality for 
     transferring money or other financial assets;
       ``(C) Arranging, effecting, or facilitating financial 
     transactions for the account of third parties.
       ``(5) Post consummation notification.--
       ``(A) In general.--A financial holding company and a 
     wholesale financial 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 no later than 30 calendar days after commencing the 
     activity or consummating the acquisition.
       ``(B) Approval not required for certain financial 
     activities.--Except as provided in section 4(j) with regard 
     to the acquisition of a savings association, a financial 
     holding company and a wholesale financial holding company may 
     commence any activity, or acquire any company, pursuant to 
     paragraph (3) or any regulation prescribed or order issued 
     under paragraph (4), without prior approval of the Board.
       ``(d) Provisions Applicable to Financial Holding Companies 
     That Fail To Meet Requirements.--
       ``(1) In general.--If the Board finds that a financial 
     holding company is not in compliance with the requirements of 
     subparagraph (A), (B), or (C) of subsection (b)(1), the Board 
     shall give notice of such finding to the company.
       ``(2) Agreement to correct conditions required.--Within 45 
     days of receipt by a financial holding company of a notice 
     given under paragraph (1) (or such additional period as the 
     Board may permit), the company shall execute an agreement 
     acceptable to the Board to comply with the requirements 
     applicable to a financial holding company.
       ``(3) Board may impose limitations.--Until the conditions 
     described in a notice to a financial holding company under 
     paragraph (1) are corrected, the Board may impose such 
     limitations on the conduct or activities of the company or 
     any affiliate of the company as the Board determines to be 
     appropriate under the circumstances.
       ``(4) Failure to correct.--If, after receiving a notice 
     under paragraph (1), a financial holding company does not--
       ``(A) execute and implement an agreement in accordance with 
     paragraph (2);
       ``(B) comply with any limitations imposed under paragraph 
     (3);
       ``(C) in the case of a notice of failure to comply with 
     subsection (b)(1)(A), restore each depository institution 
     subsidiary to well capitalized status before the end of the 
     180-day period beginning on the date such notice is received 
     by the company (or such other period permitted by the Board); 
     or
       ``(D) in the case of a notice of failure to comply with 
     subparagraph (B) or (C) of subsection (b)(1), restore 
     compliance with any such subparagraph by the date the next 
     examination of the depository institution subsidiary is 
     completed or by the end of such other period as the Board 
     determines to be appropriate,

     the Board may require such 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 Board's 
     discretion, to divest control of any depository institution 
     subsidiary or, at the election of the financial holding 
     company, instead to cease to engage in any activity conducted 
     by such company or its subsidiaries pursuant to this section.
       ``(5) Consultation.--In taking any action under this 
     subsection, the Board shall consult with all relevant Federal 
     and State regulatory agencies.
       ``(e) Safeguards for Bank Subsidiaries.--A financial 
     holding company shall assure that--
       ``(1) the procedures of the holding company for identifying 
     and managing financial and operational risks within the 
     company, and the subsidiaries of such company, adequately 
     protect the subsidiaries of such company which are insured 
     depository institutions from such risks;
       ``(2) the holding company has reasonable policies and 
     procedures to preserve the separate corporate identity and 
     limited liability of such company and the subsidiaries of 
     such company, for the protection of the company's subsidiary 
     insured depository institutions; and
       ``(3) the holding company complies with this section.
       ``(f) Nonfinancial Activities.--
       ``(1) In general.--Notwithstanding section 4(a), a 
     financial holding company may engage in activities which are 
     not (or have not been determined to be) financial in nature 
     or incidental to activities which are financial in nature, or 
     acquire and retain ownership and control of the shares of a 
     company engaged in such activities, if--
       ``(A) the aggregate annual gross revenues derived from all 
     such activities and all such companies does not exceed the 
     lesser of--
       ``(i) 5 percent of the consolidated annual gross revenues 
     of the financial holding company; or
       ``(ii) $500,000,000;
       ``(B) the consolidated total assets of any company the 
     shares of which are acquired by the financial holding company 
     pursuant to this paragraph are less than $750,000,000 at the 
     time the shares are acquired by the holding company; and
       ``(C) the holding company provides notice to the Board 
     within 30 days of commencing the activity or acquiring the 
     ownership or control.
       ``(2) Inclusion of grandfathered activities.--For purposes 
     of determining the limits contained in paragraph (1)(A), the 
     gross revenues derived from all activities conducted, and 
     companies the shares of which are held, under subsection (g) 
     shall be considered to be derived or held under this 
     subsection.
       ``(3) Foreign banks.--In lieu of the limitation contained 
     in paragraph (1)(A) in the case of a foreign bank or a 
     company that owns or controls a foreign bank which engages in 
     any activity or acquires or retains ownership or control of 
     shares of any company pursuant to paragraph (1), the 
     aggregate annual gross revenues derived from all such 
     activities and all such companies in the United States shall 
     not exceed the lesser of--
       ``(A) 5 percent of the consolidated annual gross revenues 
     of the foreign bank or company in the United States derived 
     from any branch, agency, commercial lending company, or 
     depository institution controlled by the foreign bank or 
     company and any subsidiary engaged in the United States in 
     activities permissible under section 4 or 6; or
       ``(B) $500,000,000.
       ``(4) Indexing revenue test.--After December 31, 1998, the 
     Board shall annually adjust the dollar amount contained in 
     paragraphs (1)(A) and (3) by the annual percentage increase 
     in the Consumer Price Index for Urban Wage Earners and 
     Clerical Workers published by the Bureau of Labor Statistics.
       ``(5) Nonapplicability of other exemption.--Any foreign 
     bank or company that owns or controls a foreign bank which 
     engages in any activity or acquires or retains ownership or 
     control of shares of any company pursuant to this subsection 
     shall not be eligible for any exception described in section 
     2(h).
       ``(g) Authority To Retain Limited Nonfinancial Activities 
     and Affiliations.--
       ``(1) In general.--Notwithstanding subsection (f)(1) and 
     section 4(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 financial 
     holding company after the date of the enactment of the 
     Financial Services Act of 1998 may continue to engage in any 
     activity and retain direct or indirect

[[Page H1341]]

     ownership or control of shares of a company engaged in any 
     activity if--
       ``(A) the holding company lawfully was engaged in the 
     activity or held the shares of such company on September 30, 
     1997;
       ``(B) the holding company is predominantly engaged in 
     financial activities as defined in paragraph (2); and
       ``(C) the company engaged in such activity continues to 
     engage only in the same activities that such company 
     conducted on September 30, 1997, and other activities 
     permissible under this Act.
       ``(2) Predominantly financial.--For purposes of this 
     subsection, a company is predominantly engaged in financial 
     activities if, as of the day before the company becomes a 
     financial holding company, the annual gross revenues derived 
     by the holding company and all subsidiaries of the holding 
     company, on a consolidated basis, from engaging in activities 
     that are financial in nature or are incidental to activities 
     that are financial in nature under subsection (c) represent 
     at least 85 percent of the consolidated annual gross revenues 
     of the company.
       ``(3) No expansion of grandfathered commercial activities 
     through merger or consolidation.--A financial holding company 
     that engages in activities or holds shares pursuant to this 
     subsection, or a subsidiary of such financial holding 
     company, may not acquire, in any merger, consolidation, or 
     other type of business combination, assets of any other 
     company which is engaged in any activity which the Board has 
     not determined to be financial in nature or incidental to 
     activities that are financial in nature under subsection (c).
       ``(4) Continuing revenue limitation on grandfathered 
     commercial activities.--Notwithstanding any other provision 
     of this subsection, a financial holding company may continue 
     to engage in activities or hold shares in companies pursuant 
     to this subsection only to the extent that the aggregate 
     annual gross revenues derived from all such activities and 
     all such companies does not exceed 15 percent of the 
     consolidated annual gross revenues of the financial holding 
     company.
       ``(5) Cross marketing restrictions applicable to commercial 
     activities.--A depository institution controlled by a 
     financial holding company shall not--
       ``(A) offer or market, directly or through any arrangement, 
     any product or service of a company whose activities are 
     conducted or whose shares are owned or controlled by the 
     financial holding company pursuant to this subsection, 
     subsection (f), or subparagraph (H) or (I) of subsection 
     (c)(3); or
       ``(B) permit any of its products or services to be offered 
     or marketed, directly or through any arrangement, by or 
     through any company described in subparagraph (A).
       ``(6) Transactions with nonfinancial affiliates.--An 
     insured depository institution controlled by a financial 
     holding company may not engage in a covered transaction (as 
     defined by section 23A(b)(7) of the Federal Reserve Act) with 
     any affiliate controlled by the company pursuant to this 
     subsection, subsection (f), or subparagraph (H) or (I) of 
     subsection (c)(3).
       ``(h) Developing Activities.--A financial holding company 
     and a wholesale financial holding company may engage directly 
     or indirectly, or acquire shares of any company engaged, in 
     any activity that the Board has not determined to be 
     financial in nature or incidental to financial activities 
     under subsection (c) if--
       ``(1) the holding company reasonably concludes that the 
     activity is financial in nature or incidental to financial 
     activities;
       ``(2) the gross revenues from all activities conducted 
     under this subsection represent less than 5 percent of the 
     consolidated gross revenues of the holding company;
       ``(3) the aggregate total assets of all companies the 
     shares of which are held under this subsection do not exceed 
     5 percent of the holding company's consolidated total assets;
       ``(4) the total capital invested in activities conducted 
     under this subsection represents less than 5 percent of the 
     consolidated total capital of the holding company;
       ``(5) the Board has not determined that the activity is not 
     financial in nature or incidental to financial activities 
     under subsection (c); and
       ``(6) the holding company provides written notification to 
     the Board describing the activity commenced or conducted by 
     the company acquired no later than 10 business days after 
     commencing the activity or consummating the acquisition.''.

     SEC. 104. CERTAIN STATE LAWS PREEMPTED.

       (a) Affiliations.--No State may by statute, regulation, 
     order, interpretation, or otherwise, prevent or restrict an 
     insured depository institution or a wholesale financial 
     institution from being affiliated with an entity (including 
     an entity engaged in insurance activities) as authorized by 
     this Act or any other provision of Federal law.
       (b) Activities.
       (1) Except as provided in paragraphs (2) and (3) and 
     subject to section 18(c) of the Securities Act of 1933, no 
     State may by statute, regulation, order, interpretation, or 
     otherwise, prevent or restrict an insured depository 
     institution or a wholesale financial institution from 
     engaging, directly or indirectly or in conjunction with an 
     affiliate, in any activity authorized under this Act or any 
     other provision of Federal law.
       (2) As stated by the United States Supreme Court in Barnett 
     Bank of Marion County, N.A. v. Nelson, 116 S.Ct. 1103 (1996), 
     no State may, by statute, regulation, order, interpretation, 
     or otherwise, prevent or significantly interfere with the 
     ability of an insured depository institution or wholesale 
     financial institution to engage, directly or indirectly, or 
     in conjunction with an affiliate, in any insurance sales or 
     solicitation activity, except that--
       (A) State statutes and regulations governing insurance 
     sales and solicitations which are no more restrictive than 
     provisions in the Illinois ``Act Authorizing and Regulating 
     the Sale of Insurance by Financial Institutions, Public Act 
     90-41'' (215 ILCS 5/1400-1416), as in effect on October 1, 
     1997, shall not be deemed to prevent or significantly 
     interfere with the ability of an insured depository 
     institution or wholesale financial institution to engage, 
     directly or indirectly, or in conjunction with an affiliate, 
     in any insurance sales or solicitation activity; and
       (B) subparagraph (A) shall not create any inference 
     regarding State statutes, and regulations governing insurance 
     sales and solicitations which are more restrictive than any 
     provision in the Illinois ``Act Authorizing and Regulating 
     the Sale of Insurance by Financial Institutions'', (Public 
     Act 90-41; 215 ILCS 5/1400-1416), as in effect on October 1, 
     1997.
       (3) State statutes, regulations, orders, and 
     interpretations which are applicable to and are applied in 
     the same manner with respect to insurance underwriting 
     activities of an affiliate of an insured depository 
     institution or a wholesale financial institution as they are 
     applicable to and are applied to an insurance underwriter 
     which is not affiliated with an insured depository 
     institution or a wholesale financial institution shall not be 
     preempted under paragraph (1).

     SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.

       (a) In General.--Section 3(g)(2) of the Bank Holding 
     Company Act of 1956 (12 U.S.C. 1842(g)(2)) is amended to read 
     as follows:
       ``(2) Regulations.--A bank holding company organized as a 
     mutual holding company shall be regulated on terms, and shall 
     be subject to limitations, comparable to those applicable to 
     any other bank holding company.''.

     SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.

       (a) In General.--Section 109(d) of the Riegle-Neal 
     Interstate Banking and Branching Efficiency Act of 1994 (12 
     U.S.C. 1835a(d)) is amended--
       (1) by inserting ``, the Financial Services Act of 1998,'' 
     after ``pursuant to this title''; and
       (2) by inserting ``or such Act'' after ``made by this 
     title''.
       (b) Technical and Conforming Amendment.--Section 109(e)(4) 
     of the Riegle-Neal Interstate Banking and Branching 
     Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended by 
     inserting ``and any branch of a bank controlled by an out-of-
     State bank holding company (as defined in section 2(o)(7) of 
     the Bank Holding Company Act of 1956)'' before the period.

     SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.

       Section 42(d)(4)(A) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1831r-1(d)(4)(A)) is amended by inserting ``and 
     any bank controlled by an out-of-State bank holding company 
     (as defined in section 2(o)(7) of the Bank Holding Company 
     Act of 1956)'' before the period.

     SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.

       Section 4(f) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1843(f)) is amended--
       (1) in paragraph (2)(A)(ii)--
       (A) by striking ``and'' at the end of subclause (IX);
       (B) by inserting ``and'' after the semicolon at the end of 
     subclause (X); and
       (C) by inserting after subclause (X) the following new 
     subclause:

       ``(XI) assets that are derived from, or are incidental to, 
     activities in which institutions described in section 
     2(c)(2)(F) are permitted to engage,'';

       (2) in paragraph (2), by striking subparagraph (B) and 
     inserting the following new subparagraphs:
       ``(B) any bank subsidiary of such company engages in any 
     activity in which the bank was not lawfully engaged as of 
     March 5, 1987, unless the bank is well managed and well 
     capitalized;
       ``(C) any bank subsidiary of such company both--
       ``(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 
     (and, for purposes of this clause, loans made in the ordinary 
     course of a credit card operation shall not be treated as 
     commercial loans); or
       ``(D) after the date of the 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 such bank's 
     account at a Federal reserve bank, on behalf of an affiliate, 
     other than an overdraft described in paragraph (3).''; and
       (3) by striking paragraphs (3) and (4) and inserting the 
     following new paragraphs:
       ``(3) Permissible overdrafts described.--For purposes of 
     paragraph (2)(D), 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; or
       ``(B) such overdraft--

[[Page H1342]]

       ``(i) is permitted or incurred on behalf of an affiliate 
     which 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 which 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.
       ``(4) Divestiture in case of loss of exemption.--If any 
     company described in paragraph (1) fails to qualify for the 
     exemption provided under such paragraph 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 that 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) corrected the condition or ceased the activity that 
     caused the company to fail to continue to qualify for the 
     exemption; and
       ``(B) implemented procedures that are reasonably adapted to 
     avoid the reoccurrence of such condition or activity.''.
  Subtitle B--Streamlining Supervision of Financial Holding Companies

     SEC. 111. STREAMLINING FINANCIAL 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 
     any bank holding company and any subsidiary of such company 
     to submit reports under oath to keep the Board informed as 
     to--
       ``(i) its financial condition, systems for monitoring and 
     controlling financial and operating risks, and transactions 
     with depository institution subsidiaries of the holding 
     company; and
       ``(ii) compliance by the company or subsidiary with 
     applicable provisions of this Act.
       ``(B) Use of existing reports.--
       ``(i) In general.--The Board shall, to the fullest extent 
     possible, accept reports in fulfillment of the Board's 
     reporting requirements under this paragraph that a bank 
     holding company or any subsidiary of such company has 
     provided or been required to provide to other Federal and 
     State supervisors or to appropriate self-regulatory 
     organizations.
       ``(ii) Availability.--A bank holding company or a 
     subsidiary of such company shall provide to the Board, at the 
     request of the Board, a report referred to in clause (i).
       ``(iii) Required use of publicly reported information.--The 
     Board shall, to the fullest extent possible, accept in 
     fulfillment of any reporting or recordkeeping requirements 
     under this Act information that is otherwise required to be 
     reported publicly and externally audited financial 
     statements.
       ``(iv) Reports filed with other agencies.--In the event the 
     Board requires a report from a functionally regulated 
     nondepository institution subsidiary of a bank holding 
     company of a kind that is not required by another Federal or 
     State regulator or appropriate self-regulatory organization, 
     the Board shall request that the appropriate regulator 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 its subsidiary depository institution or 
     compliance with this Act, the Board may require such 
     subsidiary to provide such a report to the Board.
       ``(C) Definition.--For purposes of this subsection, the 
     term `functionally regulated nondepository institution' 
     means--
       ``(i) a broker or dealer registered under the Securities 
     Exchange Act of 1934;
       ``(ii) an investment adviser registered under the 
     Investment Advisers Act of 1940, with respect to the 
     investment advisory activities of such investment adviser and 
     activities incidental to such investment advisory activities;
       ``(iii) an insurance company subject to supervision by a 
     State insurance commission, agency, or similar authority; and
       ``(iv) an entity 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.
       ``(2) Examinations.--
       ``(A) Examination authority.--
       ``(i) In general.--The Board may make examinations of each 
     bank holding company and each subsidiary of a bank holding 
     company.
       ``(ii) Functionally regulated nondepository institution 
     subsidiaries.--Notwithstanding clause (i), the Board may make 
     examinations of a functionally regulated nondepository 
     institution 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 bank holding company.

       ``(B) Limitations on examination authority for bank holding 
     companies and subsidiaries.--Subject to subparagraph (A)(ii), 
     the Board may make examinations under subparagraph (A)(i) of 
     each bank holding company and each subsidiary of such holding 
     company in order to--
       ``(i) inform the Board of the nature of the operations and 
     financial condition of the holding company and such 
     subsidiaries;
       ``(ii) 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 subsidiary depository institution of 
     such holding company; and
       ``(II) the systems for monitoring and controlling such 
     risks; and

       ``(iii) monitor compliance with the provisions of this Act 
     and those governing transactions and relationships between 
     any subsidiary depository institution and its affiliates.
       ``(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 holding company that, because 
     of--

       ``(I) the size, condition, or activities of the subsidiary;
       ``(II) the nature or size of transactions between such 
     subsidiary and any depository institution which is also a 
     subsidiary of such holding company; or
       ``(III) the centralization of functions within the holding 
     company system,

     could have a materially adverse effect on the safety and 
     soundness of any depository institution affiliate of the 
     holding company.
       ``(D) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, use, for the purposes of this 
     paragraph, 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, address the circumstances which 
     might otherwise permit or require an examination by the Board 
     by forgoing an examination and instead reviewing the reports 
     of examination made of--
       ``(i) any registered broker or dealer or registered 
     investment adviser by or on behalf of the Securities and 
     Exchange Commission;
       ``(ii) any licensed insurance company by or on behalf of 
     any state regulatory authority responsible for the 
     supervision of insurance companies; and
       ``(iii) any other subsidiary that the Board finds to be 
     comprehensively supervised by a Federal or State authority.
       ``(3) Capital.--
       ``(A) In general.--The Board shall 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 financial holding company 
     that is not a depository institution and--
       ``(i) is in compliance with applicable capital requirements 
     of another Federal regulatory authority (including the 
     Securities and Exchange Commission) or State insurance 
     authority; or
       ``(ii) is registered as an investment adviser under the 
     Investment Advisers Act of 1940.
       ``(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 investment advisory activities 
     or activities incidental to investment advisory activities.
       ``(4) Transfer of board authority to appropriate federal 
     banking agency.--
       ``(A) In general.--In the case of any bank holding company 
     which 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 to--
       ``(i) examine and require reports from the bank holding 
     company and any affiliate of such company (other than a 
     depository institution) under section 5;
       ``(ii) approve or disapprove applications or transactions 
     under section 3;
       ``(iii) take actions and impose penalties under subsections 
     (e) and (f) of section 5 and section 8; and
       ``(iv) 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 which 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 such sections apply to 
     orders issued by the Board.

[[Page H1343]]

       ``(5) Functional regulation of securities and insurance 
     activities.--The Board shall defer to--
       ``(A) the Securities and Exchange Commission with regard to 
     all interpretations of, and the enforcement of, applicable 
     Federal securities laws relating to the activities, conduct, 
     and operations of registered brokers, dealers, investment 
     advisers, and investment companies; and
       ``(B) the relevant State insurance authorities with regard 
     to all interpretations of, and the enforcement of, applicable 
     State insurance laws relating to the activities, conduct, and 
     operations of insurance companies and insurance agents.''.

     SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT FOR 
                   FINANCIAL HOLDING COMPANIES.

       (a) Prevention of Duplicative Filings.--Section 5(a) of the 
     Bank Holding Company Act of 1956 (12 U.S.C. 1844(a)) is 
     amended by adding the following new sentence at the end: ``A 
     declaration filed in accordance with section 6(b)(1)(E) shall 
     satisfy the requirements of this subsection with regard to 
     the registration of a bank holding company but not any 
     requirement to file an application to acquire a bank pursuant 
     to section 3.''.
       (b) Divestiture Procedures.--Section 5(e)(1) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1844(e)(1)) is 
     amended--
       (1) by striking ``Financial Institutions Supervisory Act of 
     1966, order'' and inserting ``Financial Institutions 
     Supervisory Act of 1966, at the election of the bank holding 
     company--
       ``(A) order''; and
       (2) by striking ``shareholders of the bank holding company. 
     Such distribution'' and inserting ``shareholders of the bank 
     holding company; or
       ``(B) order the bank holding company, after due notice and 
     opportunity for hearing, and after consultation with the 
     bank's primary supervisor, which shall be the Comptroller of 
     the Currency in the case of a national bank, and the Federal 
     Deposit Insurance Corporation and the appropriate State 
     supervisor in the case of an insured nonmember bank, to 
     terminate (within 120 days or such longer period as the Board 
     may direct) the ownership or control of any such bank by such 
     company.

     ``The distribution referred to in subparagraph (A)''.

     SEC. 113. 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 
     which requires a bank holding company to provide funds or 
     other assets to a subsidiary insured depository institution 
     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 is a broker or dealer registered under the Securities 
     Exchange Act of 1934; or
       ``(ii) an affiliate of the depository institution which is 
     an insurance company or a broker or dealer registered under 
     such Act; 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 writing sent to the holding company and the Board that the 
     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, which is an insurance 
     company or a broker or dealer described in paragraph (1)(A) 
     to provide funds or assets to an insured depository 
     institution subsidiary of the 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 such paragraph, the Board may order the bank holding 
     company to divest the insured depository institution within 
     180 days of receiving notice or such longer period as the 
     Board determines consistent with the safe and sound operation 
     of the insured depository institution.
       ``(4) Conditions before divestiture.--During the period 
     beginning on the date an order to divest is issued by the 
     Board under paragraph (3) to a bank holding company and 
     ending on the date the divestiture is completed, the Board 
     may impose any conditions or restrictions on the holding 
     company's ownership or operation 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.''.

     SEC. 114. PRUDENTIAL SAFEGUARDS.

       Section 5 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1844) is amended by inserting after subsection (g) (as 
     added by section 113 of this subtitle) the following new 
     subsection:
       ``(h) Prudential Safeguards.--
       ``(1) In general.--The Board may, by regulation or order, 
     impose restrictions or requirements on relationships or 
     transactions between a depository institution subsidiary of a 
     bank holding company and any affiliate of such depository 
     institution (other than a subsidiary of such institution) 
     which the Board finds is consistent with the public interest, 
     the purposes of this Act, the Financial Services Act of 1998, 
     the Federal Reserve Act, and other Federal law applicable to 
     depository institution subsidiaries of bank holding companies 
     and the standards in paragraph (2).
       ``(2) Standards.--The Board may exercise authority under 
     paragraph (1) if the Board finds that such action will have 
     any of the following effects:
       ``(A) Avoid any significant risk to the safety and 
     soundness of depository institutions or any Federal deposit 
     insurance fund.
       ``(B) Enhance the financial stability of bank holding 
     companies.
       ``(C) Avoid conflicts of interest or other abuses.
       ``(D) Enhance the privacy of customers of depository 
     institutions.
       ``(E) Promote the application of national treatment and 
     equality of competitive opportunity between nonbank 
     affiliates owned or controlled by domestic bank holding 
     companies and nonbank affiliates owned or controlled by 
     foreign banks operating in the United States.
       ``(3) Review.--The Board shall regularly--
       ``(A) review all restrictions or requirements established 
     pursuant to paragraph (1) to determine whether there is a 
     continuing need for any such restriction or requirement to 
     carry out the purposes of the Act, including any purpose 
     described in paragraph (2); and
       ``(B) modify or eliminate any restriction or requirement 
     the Board finds is no longer required for such purposes.''.

     SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

       (a) Exclusive Commission Authority.--
       (1) In general.--The Commission shall be the sole Federal 
     agency with authority to inspect and examine any registered 
     investment company that is not a bank holding company.
       (2) Prohibition on banking agencies.--A Federal banking 
     agency may not inspect or examine any registered investment 
     company that is not a bank 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) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Bank holding company.--The term ``bank holding 
     company'' has the meaning given to such term in section 2 of 
     the Bank Holding Company Act of 1956.
       (2) Commission.--The term ``Commission'' means the 
     Securities and Exchange Commission.
       (3) Federal banking agency.--The term ``Federal banking 
     agency'' has the meaning given to such term in section 3(z) 
     of the Federal Deposit Insurance Act.
       (4) Registered investment company.--The term ``registered 
     investment company'' means an investment company which is 
     registered with the Commission under the Investment Company 
     Act of 1940.

     SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, 
                   AND ENFORCEMENT AUTHORITY OF THE BOARD.

       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.--
       ``(1) In general.--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 regulated 
     subsidiary of a bank holding company unless 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 depository institution; or
       ``(B) the domestic or international payment system.
       ``(2) Criteria for board action.--The Board shall not take 
     action otherwise permitted under paragraph (1) unless the 
     Board finds that it is not reasonably possible to effectively 
     protect against the material risk at issue through action 
     directed at or against the affiliated depository institution 
     or against depository institutions generally.
       ``(b) Limitation on Indirect Action.--The Board may not 
     prescribe regulations, issue

[[Page H1344]]

     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 financial holding company or a 
     wholesale financial holding company where the purpose or 
     effect of doing so would be to take action indirectly against 
     or with respect to a regulated subsidiary 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 regulated subsidiary with Federal law that 
     the Board has specific jurisdiction to enforce against such 
     subsidiary.
       ``(d) Regulated Subsidiary Defined.--For purposes of this 
     section, the term `regulated subsidiary' means any company 
     that is not a bank holding company and is--
       ``(1) a broker or dealer registered under the Securities 
     Exchange Act of 1934;
       ``(2) an investment adviser registered under the Investment 
     Advisers Act of 1940, with respect to the investment advisory 
     activities of such investment adviser and activities 
     incidental to such investment advisory activities;
       ``(3) an investment company registered under the Investment 
     Company Act of 1940;
       ``(4) an insurance company or an insurance agency subject 
     to supervision by a State insurance commission, agency, or 
     similar authority; or
       ``(5) an entity 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.''.
               Subtitle C--Subsidiaries of National Banks

     SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF NATIONAL 
                   BANKS.

       (a) Financial Subsidiaries of National Banks.--Chapter one 
     of title LXII of the Revised Statutes of 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) Subsidiaries of National Banks Authorized To Engage 
     in Financial Activities.--
       ``(1) Exclusive authority.--No provision of section 5136 or 
     any other provision of this title LXII of the Revised 
     Statutes shall be construed as authorizing a subsidiary of a 
     national bank to engage in, or own any share of or any other 
     interest in any company engaged in, any activity that--
       ``(A) is not permissible for a national bank to engage in 
     directly; or
       ``(B) is conducted under terms or conditions other than 
     those that would govern the conduct of such activity by a 
     national bank,

     unless a national bank is specifically authorized by the 
     express terms of a Federal statute and not by implication or 
     interpretation to acquire shares of or an interest in, or to 
     control, such subsidiary, such as by paragraph (2) of this 
     subsection and section 25A of the Federal Reserve Act.
       ``(2) Specific authorization to conduct agency activities 
     which are financial in nature.--A national bank may control a 
     company that engages in agency activities that have been 
     determined to be financial in nature or incidental to such 
     financial activities pursuant to and in accordance with 
     section 6(c) of the Bank Holding Company Act of 1956 if--
       ``(A) the company engages in such activities solely as 
     agent and not directly or indirectly as principal,
       ``(B) the national bank is well capitalized and well 
     managed, and has achieved a rating of satisfactory or better 
     at the most recent examination of the bank under the 
     Community Reinvestment Act of 1977;
       ``(C) all depository institution affiliates of the national 
     bank are well capitalized and well managed, and have achieved 
     a rating of satisfactory or better at the most recent 
     examination of each such depository institution under the 
     Community Reinvestment Act of 1977; and
       ``(D) the bank has received the approval of the Comptroller 
     of the Currency.
       ``(3) Definitions.--
       ``(A) Company; control; subsidiary.--The terms `company', 
     `control', and `subsidiary' have the meanings given to such 
     terms in section 2 of the Bank Holding Company Act of 1956.
       ``(B) Well capitalized.--The term `well capitalized' has 
     the same meaning as in section 38 of the Federal Deposit 
     Insurance Act and, for purposes of this section, the 
     Comptroller shall have exclusive jurisdiction to determine 
     whether a national bank is well capitalized.
       ``(C) Well managed.--The term `well managed' means--
       ``(i) in the case of a bank that has been examined, unless 
     otherwise determined in writing by the Comptroller--

       ``(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 bank; and
       ``(II) at least a rating of 2 for management, if that 
     rating is given; or

       ``(ii) in the case of any national bank that has not been 
     examined, the existence and use of managerial resources that 
     the Comptroller determines are satisfactory.
       ``(b) Limited Exclusions From Community Needs Requirements 
     for Newly Acquired Depository Institutions.--Any depository 
     institution which becomes affiliated with a national bank 
     during the 24-month period preceding the submission of an 
     application to acquire a subsidiary under subsection (a)(2), 
     and any depository institution which becomes so affiliated 
     after the approval of such application, may be excluded for 
     purposes of subsection (a)(2)(B) during the 24-month period 
     beginning on the date of such acquisition if--
       ``(1) the depository institution has submitted an 
     affirmative plan to the appropriate Federal banking agency 
     (as defined in section 3 of the Federal Deposit Insurance 
     Act) to take such action as may be necessary in order for 
     such institution to achieve a `satisfactory record of meeting 
     community credit needs', or better, at the next examination 
     of the institution under the Community Reinvestment Act of 
     1977; and
       ``(2) the plan has been approved by the appropriate Federal 
     banking agency.''.
       (b) Limitation on Certain Activities in Subsidiaries.--
     Section 21(a)(1) of the Banking Act of 1933 (12 U.S.C. 
     378(a)(1)) is amended--
       (1) by inserting ``, or to be a subsidiary of any person, 
     firm, corporation, association, business trust, or similar 
     organization engaged (unless such subsidiary (A) was engaged 
     in such securities activities as of September 15, 1997, or 
     (B) is a nondepository subsidiary of a foreign bank and is 
     not also a subsidiary of a domestic depository 
     institution),'' after ``to engage at the same time''; and
       (2) by inserting ``or any subsidiary of such bank, company, 
     or institution'' after ``or private bankers''.
       (c) Technical and Conforming Amendments.--
       (1) Antitying.--Section 106(a) of the Bank Holding Company 
     Act Amendments of 1970 is amended by adding at the end the 
     following new sentence: ``For purposes of this section, a 
     subsidiary of a national bank which engages in activities as 
     an agent pursuant to section 5136A(a)(2) shall be deemed to 
     be a subsidiary of a bank holding company, and not a 
     subsidiary of a bank.''.
       (2) Section 23b.--Section 23B(a) of the Federal Reserve Act 
     (12 U.S.C. 371c-1(a)) is amended by adding at the end the 
     following new paragraph:
       ``(4) Subsidiary of national bank.--For purposes of this 
     section, a subsidiary of a national bank which engages in 
     activities as an agent pursuant to section 5136A(a)(2) shall 
     be deemed to be an affiliate of the national bank and not a 
     subsidiary of the 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 
     section 5136C; and
        (2) by inserting after the item relating to section 5136 
     the following new item:

``5136A. Financial subsidiaries of national banks.''.

     SEC. 122. MISREPRESENTATIONS REGARDING DEPOSITORY INSTITUTION 
                   LIABILITY FOR OBLIGATIONS OF AFFILIATES.

       (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) In General.--No institution-affiliated party of an 
     insured depository institution or institution-affiliated 
     party of a subsidiary or affiliate of an insured depository 
     institution shall fraudulently represent that the institution 
     is or will be liable for any obligation of a subsidiary or 
     other affiliate of the institution.
       ``(b) Criminal Penalty.--Whoever violates subsection (a) 
     shall be fined under this title, imprisoned for not more than 
     1 year, or both.
       ``(c) Institution-Affiliated Party Defined.--For purposes 
     of this section, the term `institution-affiliated party' with 
     respect to a subsidiary or affiliate has the same meaning as 
     in section 3 except references to an insured depository 
     institution shall be deemed to be 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. 123. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.

       Section 11 of the Federal Reserve Act (12 U.S.C. 248) is 
     amended by striking the paragraph designated as ``(m)'' and 
     inserting ``(m) [Repealed]''.

[[Page H1345]]

Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial 
                              Institutions

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

     SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED.

       (a) Definition and Supervision.--Section 10 of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
     amended to read as follows:

     ``SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.

       ``(a) Companies That Control Wholesale Financial 
     Institutions.--
       ``(1) Wholesale financial holding company defined.--The 
     term `wholesale financial holding company' means any company 
     that--
       ``(A) is registered as a bank holding company;
       ``(B) is predominantly engaged in financial activities as 
     defined in section 6(g)(2);
       ``(C) controls 1 or more wholesale financial institutions;
       ``(D) does not control--
       ``(i) a bank other than a wholesale financial institution;
       ``(ii) an insured bank other than an institution permitted 
     under subparagraph (D), (F), or (G) of section 2(c)(2); or
       ``(iii) a savings association; and
       ``(E) is not a foreign bank (as defined in section 1(b)(7) 
     of the International Banking Act of 1978).
       ``(2) Savings association transition period.--
     Notwithstanding paragraph (1)(C)(iii), the Board may permit a 
     company that controls a savings association and that 
     otherwise meets the requirements of paragraph (1) to become 
     supervised under paragraph (1), if the company divests 
     control of any such savings association within such period 
     not to exceed 5 years after becoming supervised under 
     paragraph (1) as permitted by the Board.
       ``(b) Supervision by the Board.--
       ``(1) In general.--The provisions of this section shall 
     govern the reporting, examination, and capital requirements 
     of wholesale financial holding companies.
       ``(2) Reports.--
       ``(A) In general.--The Board from time to time may require 
     any wholesale financial holding company and any subsidiary of 
     such company to submit reports under oath to keep the Board 
     informed as to--
       ``(i) the company's or subsidiary's activities, financial 
     condition, policies, systems for monitoring and controlling 
     financial and operational risks, and transactions with 
     depository institution subsidiaries of the holding company; 
     and
       ``(ii) the extent to which the company or subsidiary has 
     complied with the provisions of this Act and regulations 
     prescribed and orders issued under this Act.
       ``(B) Use of existing reports.--
       ``(i) In general.--The Board shall, to the fullest extent 
     possible, accept reports in fulfillment of the Board's 
     reporting requirements under this paragraph that the 
     wholesale financial holding company or any subsidiary of such 
     company has provided or been required to provide to other 
     Federal and State supervisors or to appropriate self-
     regulatory organizations.
       ``(ii) Availability.--A wholesale financial holding company 
     or a subsidiary of such company shall provide to the Board, 
     at the request of the Board, a report referred to in clause 
     (i).
       ``(C) Exemptions from reporting requirements.--
       ``(i) In general.--The Board may, by regulation or order, 
     exempt any company or class of companies, under such terms 
     and conditions and for such periods as the Board shall 
     provide in such regulation or order, from the provisions of 
     this paragraph and any regulation prescribed under this 
     paragraph.
       ``(ii) Criteria for consideration.--In making any 
     determination under clause (i) with regard to any exemption 
     under such clause, the Board shall consider, among such other 
     factors as the Board may determine to be appropriate, the 
     following factors:

       ``(I) Whether information of the type required under this 
     paragraph is available from a supervisory agency (as defined 
     in section 1101(7) of the Right to Financial Privacy Act of 
     1978) or a foreign regulatory authority of a similar type.
       ``(II) The primary business of the company.
       ``(III) The nature and extent of the domestic and foreign 
     regulation of the activities of the company.

       ``(3) Examinations.--
       ``(A) Limited use of examination authority.--The Board may 
     make examinations of each wholesale financial holding company 
     and each subsidiary of such company in order to--
       ``(i) inform the Board regarding the nature of the 
     operations and financial condition of the wholesale financial 
     holding company and its subsidiaries;
       ``(ii) inform the Board regarding--

       ``(I) the financial and operational risks within the 
     wholesale financial holding company system that may affect 
     any depository institution owned by such holding company; and
       ``(II) the systems of the holding company and its 
     subsidiaries for monitoring and controlling those risks; and

       ``(iii) monitor compliance with the provisions of this Act 
     and those governing transactions and relationships between 
     any depository institution controlled by the wholesale 
     financial holding company and any of the company's other 
     subsidiaries.
       ``(B) Restricted focus of examinations.--The Board shall, 
     to the fullest extent possible, limit the focus and scope of 
     any examination of a wholesale financial holding company 
     under this paragraph to--
       ``(i) the holding company; and
       ``(ii) any subsidiary (other than an insured depository 
     institution subsidiary) of the holding company that, because 
     of the size, condition, or activities of the subsidiary, the 
     nature or size of transactions between such subsidiary and 
     any affiliated depository institution, or the centralization 
     of functions within the holding company system, could have a 
     materially adverse effect on the safety and soundness of any 
     depository institution affiliate of the holding company.
       ``(C) Deference to bank examinations.--The Board shall, to 
     the fullest extent possible, use the reports of examination 
     of depository institutions made by the Comptroller of the 
     Currency, the Federal Deposit Insurance Corporation, the 
     Director of the Office of Thrift Supervision or the 
     appropriate State depository institution supervisory 
     authority for the purposes of this section.
       ``(D) Deference to other examinations.--The Board shall, to 
     the fullest extent possible, address the circumstances which 
     might otherwise permit or require an examination by the Board 
     by forgoing an examination and by instead reviewing the 
     reports of examination made of--
       ``(i) any registered broker or dealer or any registered 
     investment adviser by or on behalf of the Commission; and
       ``(ii) any licensed insurance company by or on behalf of 
     any State government insurance agency responsible for the 
     supervision of the insurance company.
       ``(E) Confidentiality of reported information.--
       ``(i) In general.--Notwithstanding any other provision of 
     law, the Board shall not be compelled to disclose any 
     nonpublic information required to be reported under this 
     paragraph, or any information supplied to the Board by any 
     domestic or foreign regulatory agency, that relates to the 
     financial or operational condition of any wholesale financial 
     holding company or any subsidiary of such company.
       ``(ii) Compliance with requests for information.--No 
     provision of this subparagraph shall be construed as 
     authorizing the Board to withhold information from the 
     Congress, or preventing the Board from complying with a 
     request for information from any other Federal department or 
     agency for purposes within the scope of such department's or 
     agency's jurisdiction, or from complying with any order of a 
     court of competent jurisdiction in an action brought by the 
     United States or the Board.
       ``(iii) Coordination with other law.--For purposes of 
     section 552 of title 5, United States Code, this subparagraph 
     shall be considered to be a statute described in subsection 
     (b)(3)(B) of such section.
       ``(iv) Designation of confidential information.--In 
     prescribing regulations to carry out the requirements of this 
     subsection, the Board shall designate information described 
     in or obtained pursuant to this paragraph as confidential 
     information.
       ``(F) Costs.--The cost of any examination conducted by the 
     Board under this section may be assessed against, and made 
     payable by, the wholesale financial holding company.
       ``(4) Capital adequacy guidelines.--
       ``(A) Capital adequacy provisions.--Subject to the 
     requirements of, and solely in accordance with, the terms of 
     this paragraph, the Board may adopt capital adequacy rules or 
     guidelines for wholesale financial holding companies.
       ``(B) Method of calculation.--In developing rules or 
     guidelines under this paragraph, the following provisions 
     shall apply:
       ``(i) Focus on double leverage.--The Board shall focus on 
     the use by wholesale financial holding companies of debt and 
     other liabilities to fund capital investments in 
     subsidiaries.
       ``(ii) No unweighted capital ratio.--The Board shall not, 
     by regulation, guideline, order, or otherwise, impose under 
     this section a capital ratio that is not based on appropriate 
     risk-weighting considerations.
       ``(iii) No capital requirement on regulated entities.--The 
     Board shall not, by regulation, guideline, order or 
     otherwise, prescribe or impose any capital or capital 
     adequacy rules, standards, guidelines, or requirements upon 
     any subsidiary that--

       ``(I) is not a depository institution; and
       ``(II) is in compliance with applicable capital 
     requirements of another Federal regulatory authority 
     (including the Securities and Exchange Commission) or State 
     insurance authority.

       ``(iv) Limitation.--The Board shall not, by regulation, 
     guideline, order or otherwise, prescribe or impose any 
     capital or capital adequacy rules, standards, guidelines, or 
     requirements upon any subsidiary that is not a depository 
     institution and that is registered as an investment adviser 
     under the Investment Advisers Act of 1940, except that this 
     clause 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 investment advisory 
     activities or activities incidental to investment advisory 
     activities.
       ``(v) Appropriate exclusions.--The Board shall take full 
     account of--

[[Page H1346]]

       ``(I) the capital requirements made applicable to any 
     subsidiary that is not a depository institution by another 
     Federal regulatory authority or State insurance authority; 
     and
       ``(II) industry norms for capitalization of a company's 
     unregulated subsidiaries and activities.

       ``(vi) Internal risk management models.--The Board may 
     incorporate internal risk management models of wholesale 
     financial holding companies into its capital adequacy 
     guidelines or rules and may take account of the extent to 
     which resources of a subsidiary depository institution may be 
     used to service the debt or other liabilities of the 
     wholesale financial holding company.
       ``(c) Nonfinancial Activities and Investments.--
       ``(1) Authority for limited amounts of new activities and 
     investments.--
       ``(A) In general.--Notwithstanding section 4(a), a 
     wholesale financial holding company may engage in activities 
     which are not (or have not been determined to be) financial 
     in nature or incidental to activities which are financial in 
     nature, or acquire and retain ownership and control of the 
     shares of a company engaged in such activities if--
       ``(i) the aggregate annual gross revenues derived from all 
     such activities and of all such companies does not exceed 5 
     percent of the consolidated annual gross revenues of the 
     wholesale financial holding company or, in the case of a 
     foreign bank or any company that owns or controls a foreign 
     bank, the aggregate annual gross revenues derived from any 
     such activities in the United States does not exceed 5 
     percent of the consolidated annual gross revenues of the 
     foreign bank or company in the United States derived from any 
     branch, agency, commercial lending company, or depository 
     institution controlled by the foreign bank or company and any 
     subsidiary engaged in the United States in activities 
     permissible under section 4 or 6 or this subsection;
       ``(ii) the consolidated total assets of any company the 
     shares of which are acquired pursuant to this subsection are 
     less than $750,000,000 at the time the shares are acquired by 
     the wholesale financial holding company; and
       ``(iii) such company provides notice to the Board within 30 
     days of commencing the activity or acquiring the ownership or 
     control.
       ``(B) Inclusion of grandfathered activities.--For purposes 
     of determining compliance with the limits contained in 
     subparagraph (A), the gross revenues derived from all 
     activities conducted and companies the shares of which are 
     held under paragraph (2) shall be considered to be derived or 
     held under this paragraph.
       ``(C) Report.--No later than 5 years after the date of 
     enactment of the Financial Services Act of 1998, the Board 
     shall submit to the Congress a report regarding the 
     activities conducted and companies held pursuant to this 
     paragraph and the effect, if any, that affiliations permitted 
     under this paragraph have had on affiliated depository 
     institutions. The report shall include recommendations 
     regarding the appropriateness of retaining, increasing, or 
     decreasing the limits contained in those provisions.
       ``(2) Grandfathered activities.--
       ``(A) In general.--Notwithstanding paragraph (1)(A) and 
     section 4(a), a company that becomes a wholesale financial 
     holding company may continue to engage, directly or 
     indirectly, in any activity and may retain ownership and 
     control of shares of a company engaged in any activity if--
       ``(i) on the date of the enactment of the Financial 
     Services Act of 1998, such wholesale financial holding 
     company was lawfully engaged in that nonfinancial activity, 
     held the shares of such company, or had entered into a 
     contract to acquire shares of any company engaged in such 
     activity; and
       ``(ii) the company engaged in such activity continues to 
     engage only in the same activities that such company 
     conducted on the date of the enactment of the Financial 
     Services Act of 1998, and other activities permissible under 
     this Act.
       ``(B) No expansion of grandfathered commercial activities 
     through merger or consolidation.--A wholesale financial 
     holding company that engages in activities or holds shares 
     pursuant to this paragraph, or a subsidiary of such wholesale 
     financial holding company, may not acquire, in any merger, 
     consolidation, or other type of business combination, assets 
     of any other company which is engaged in any activity which 
     the Board has not determined to be financial in nature or 
     incidental to activities that are financial in nature under 
     section 6(c).
       ``(C) Limitation to single exemption.--No company that 
     engages in any activity or controls any shares under 
     subsection (f) or (g) of section 6 may engage in any activity 
     or own any shares pursuant to this paragraph or paragraph 
     (1).
       ``(3) Commodities.--
       ``(A) In general.--Notwithstanding section 4(a), a 
     wholesale financial holding company which was predominately 
     engaged as of January 1, 1997, in financial activities in the 
     United States (or any successor to any such company) may 
     engage in, or directly or indirectly own or control shares of 
     a company engaged in, activities related to the trading, 
     sale, or investment in commodities and underlying physical 
     properties that were not permissible for bank holding 
     companies to conduct in the United States as of January 1, 
     1997, if such wholesale financial holding company, or any 
     subsidiary of such holding company, was engaged directly, 
     indirectly, or through any such company in any of such 
     activities as of January 1, 1997, in the United States.
       ``(B) Limitation.--Notwithstanding paragraph (1)(A)(i), the 
     attributed aggregate consolidated assets of a wholesale 
     financial holding company held under the authority granted 
     under this paragraph and not otherwise permitted to be held 
     by all wholesale financial holding companies under this 
     section may not exceed 5 percent of the total consolidated 
     assets of the wholesale financial holding company, except 
     that the Board may increase such percentage of total 
     consolidated assets by such amounts and under such 
     circumstances as the Board considers appropriate, consistent 
     with the purposes of this Act.
       ``(4) Cross marketing restrictions.--A wholesale financial 
     holding company shall not permit--
       ``(A) any company whose shares it owns or controls pursuant 
     to paragraph (1), (2), or (3) to offer or market any product 
     or service of an affiliated wholesale financial institution; 
     or
       ``(B) any affiliated wholesale financial institution to 
     offer or market any product or service of any company whose 
     shares are owned or controlled by such wholesale financial 
     holding company pursuant to such paragraphs.
       ``(d) Qualification of Foreign Bank as Wholesale Financial 
     Holding Company.--
       ``(1) In general.--Any foreign bank, or any company that 
     owns or controls a foreign bank, that--
       ``(A) operates a branch, agency, or commercial lending 
     company in the United States, including a foreign bank or 
     company that owns or controls a wholesale financial 
     institution; and
       ``(B) owns, controls, or is affiliated with a security 
     affiliate that engages in underwriting corporate equity 
     securities,

     may request a determination from the Board that such bank or 
     company be treated as a wholesale financial holding company 
     for purposes of subsection (c).
       ``(2) Conditions for treatment as a wholesale financial 
     holding company.--A foreign bank and a company that owns or 
     controls a foreign bank may not be treated as a wholesale 
     financial holding company unless the bank and company meet 
     and continue to meet the following criteria:
       ``(A) No insured deposits.--No deposits held directly by a 
     foreign bank or through an affiliate (other than an 
     institution described in subparagraph (D) or (F) of section 
     2(c)(2)) are insured under the Federal Deposit Insurance Act.
       ``(B) Capital standards.--The foreign bank meets risk-based 
     capital standards comparable to the capital standards 
     required for a wholesale financial institution, giving due 
     regard to the principle of national treatment and equality of 
     competitive opportunity.
       ``(C) Transaction with affiliates.--Transactions between a 
     branch, agency, or commercial lending company subsidiary of 
     the foreign bank in the United States, and any securities 
     affiliate or company in which the foreign bank (or any 
     company that owns or controls such foreign bank) has invested 
     pursuant to subsection (d) comply with the provisions of 
     sections 23A and 23B of the Federal Reserve Act in the same 
     manner and to the same extent as such transactions would be 
     required to comply with such sections if the bank were a 
     member bank.
       ``(3) Treatment as a wholesale financial institution.--Any 
     foreign bank which is, or is affiliated with a company which 
     is, treated as a wholesale financial holding company under 
     this subsection shall be treated as a wholesale financial 
     institution for purposes of subsection (c)(4) of this section 
     and subsections (c)(1)(C) and (c)(3) of section 9B of the 
     Federal Reserve Act, and any such foreign bank or company 
     shall be subject to paragraphs (3), (4), and (5) of section 
     9B(d) of the Federal Reserve Act, except that the Board may 
     adopt such modifications, conditions, or exemptions as the 
     Board deems appropriate, giving due regard to the principle 
     of national treatment and equality of competitive 
     opportunity.
       ``(4) Nonapplicability of other exemption.--Any foreign 
     bank or company which is treated as a wholesale financial 
     holding company under this subsection shall not be eligible 
     for any exception described in section 2(h).
       ``(5) Supervision of foreign bank which maintains no 
     banking presence other than control of a wholesale financial 
     institution.--A foreign bank that owns or controls a 
     wholesale financial institution but does not operate a 
     branch, agency, or commercial lending company in the United 
     States (and any company that owns or controls such foreign 
     bank) may request a determination from the Board that such 
     bank or company be treated as a wholesale financial holding 
     company for purposes of subsection (c), except that such bank 
     or company shall be subject to the restrictions of paragraphs 
     (2)(A), (3), and (4) of this subsection.
       ``(6) No effect on other provisions.--This section shall 
     not be construed as limiting the authority of the Board under 
     the International Banking Act of 1978 with respect to the 
     regulation, supervision, or examination of foreign banks and 
     their offices and affiliates in the United States.
       ``(7) Applicability of community reinvestment act of 
     1977.--The branches in the

[[Page H1347]]

     United States of a foreign bank that is, or is affiliated 
     with a company that is, treated as a wholesale financial 
     holding company shall be subject to section 9B(b)(11) of the 
     Federal Reserve Act as if the foreign bank were a wholesale 
     financial institution under such section. The Board and the 
     Comptroller of the Currency shall apply the provisions of 
     sections 803(2), 804, and 807(1) of the Community 
     Reinvestment Act of 1977 to branches of foreign banks which 
     receive only such deposits as are permissible for receipt by 
     a corporation organized under section 25A of the Federal 
     Reserve Act, in the same manner and to the same extent such 
     sections apply to such a corporation.''.
       (b) Uninsured State Banks.--Section 9 of the Federal 
     Reserve Act (U.S.C. 321 et seq.) is amended by adding at the 
     end the following new paragraph:
       ``(24) Enforcement authority over uninsured state member 
     banks.--Section 3(u) of the Federal Deposit Insurance Act, 
     subsections (j) and (k) of section 7 of such Act, and 
     subsections (b) through (n), (s), (u), and (v) of section 8 
     of such Act shall apply to an uninsured State member bank in 
     the same manner and to the same extent such provisions apply 
     to an insured State member bank and any reference in any such 
     provision to `insured depository institution' shall be deemed 
     to be a reference to `uninsured State member bank' for 
     purposes of this paragraph.''.

     SEC. 132. AUTHORIZATION TO RELEASE REPORTS.

       (a) Federal Reserve Act.--The last sentence of the 8th 
     undesignated paragraph of section 9 of the Federal Reserve 
     Act (12 U.S.C. 326) is amended to read as follows: ``The 
     Board of Governors of the Federal Reserve System, at its 
     discretion, may furnish reports of examination or other 
     confidential supervisory information concerning State member 
     banks or any other entities examined under any other 
     authority of the Board to any Federal or State authorities 
     with supervisory or regulatory authority over the examined 
     entity, to officers, directors, or receivers of the examined 
     entity, and to any other person that the Board determines to 
     be proper.''.
       (b) Commodity Futures Trading Commission.--
       (1) Section 1101(7) of the Right to Financial Privacy Act 
     of 1978 (12 U.S.C. 3401(7)) is amended--
       (A) by redesignating subparagraphs (G) and (H) as 
     subparagraphs (H) and (I), respectively; and
       (B) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G) the Commodity Futures Trading Commission; or'' and
       (2) Section 1112(e) of the Right to Financial Privacy Act 
     (12 U.S.C. 3412(e)) is amended by striking ``and the 
     Securities and Exchange Commission'' and inserting ``, the 
     Securities and Exchange Commission, and the Commodity Futures 
     Trading Commission''.

     SEC. 133. CONFORMING AMENDMENTS.

       (a) Bank Holding Company Act of 1956.--
       (1) Definitions.--Section 2 of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1842) is amended by adding at the end the 
     following new subsections:
       ``(p) Wholesale Financial Institution.--The term `wholesale 
     financial institution' means a wholesale financial 
     institution subject to section 9B of the Federal Reserve Act.
       ``(q) Commission.--The term `Commission' means the 
     Securities and Exchange Commission.
       ``(r) Depository Institution.--The term `depository 
     institution'--
       ``(1) has the meaning given to such term in section 3 of 
     the Federal Deposit Insurance Act; and
       ``(2) includes a wholesale financial institution.''.
       (2) Definition of bank includes wholesale financial 
     institution.--Section 2(c)(1) of the Bank Holding Company Act 
     of 1956 (12 U.S.C. 1841(c)(1)) is amended by adding at the 
     end the following new subparagraph:
       ``(C) A wholesale financial institution.''.
       (3) Incorporated definitions.--Section 2(n) of the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841(n)) is amended by 
     inserting `` `insured bank','' after `` `in danger of 
     default',''.
       (4) Exception to deposit insurance requirement.--Section 
     3(e) of the Bank Holding Company Act of 1956 (12 U.S.C. 
     1842(e)) is amended by adding at the end the following: 
     ``This subsection shall not apply to a wholesale financial 
     institution.''
       (b) Federal Deposit Insurance Act.--Section 3(q)(2)(A) of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A)) 
     is amended to read as follows:
       ``(A) any State member insured bank (except a District 
     bank) and any wholesale financial institution as authorized 
     pursuant to section 9B of the Federal Reserve Act;''.

              CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS

     SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.

       (a) National Wholesale Financial Institutions.--
       (1) In general.--Chapter one of title LXII of the Revised 
     Statutes of the United States (12 U.S.C. 21 et seq.) is 
     amended by inserting after section 5136A (as added by section 
     121(a) of this title) the following new section:

     ``SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITUTIONS.

       ``(a) Authorization of the Comptroller Required.--A 
     national bank may apply to the Comptroller on such forms and 
     in accordance with such regulations as the Comptroller may 
     prescribe, for permission to operate as a national wholesale 
     financial institution.
       ``(b) Regulation.--A national wholesale financial 
     institution may exercise, in accordance with such 
     institution's articles of incorporation and regulations 
     issued by the Comptroller, all the powers and privileges of a 
     national bank formed in accordance with section 5133 of the 
     Revised Statutes of the United States, subject to section 9B 
     of the Federal Reserve Act and the limitations and 
     restrictions contained therein.
       ``(c) Community Reinvestment Act of 1977.--A national 
     wholesale financial institution shall be subject to the 
     Community Reinvestment Act of 1977.
       ``(d) Examination Reports.--The Comptroller of the Currency 
     shall, to the fullest extent possible, use the report of 
     examinations made by the Board of Governors of the Federal 
     Reserve System of a wholesale financial institution.''.
       (2) Clerical amendment.--The table of sections for chapter 
     one of title LXII of the Revised Statutes of the United 
     States is amended by inserting after the item relating to 
     section 5136A (as added by section 121(d) of this title) the 
     following new item:

``5136B. National wholesale financial institutions.''.
       (b) State Wholesale Financial Institutions.--The Federal 
     Reserve Act (12 U.S.C. 221 et seq.) is amended by inserting 
     after section 9A the following new section:

     ``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

       ``(a) Application for Membership as Wholesale Financial 
     Institution.--
       ``(1) Application required.--
       ``(A) In general.--Any bank may apply to the Board of 
     Governors of the Federal Reserve System to become a wholesale 
     financial institution and, as a wholesale financial 
     institution, to subscribe to the stock of the Federal reserve 
     bank organized within the district where the applying bank is 
     located.
       ``(B) Treatment as member bank.--Any application under 
     subparagraph (A) shall be treated as an application under, 
     and shall be subject to the provisions of, section 9.
       ``(2) Insurance termination.--No bank the deposits of which 
     are insured under the Federal Deposit Insurance Act may 
     become a wholesale financial institution unless it has met 
     all requirements under that Act for voluntary termination of 
     deposit insurance.
       ``(b) General Requirements Applicable to Wholesale 
     Financial Institutions.--
       ``(1) Federal reserve act.--Except as otherwise provided in 
     this section, wholesale financial institutions shall be 
     member banks and shall be subject to the provisions of this 
     Act that apply to member banks to the same extent and in the 
     same manner as State member insured banks, except that a 
     wholesale financial institution may terminate membership 
     under this Act only with the prior written approval of the 
     Board and on terms and conditions that the Board determines 
     are appropriate to carry out the purposes of this Act.
       ``(2) Prompt corrective action.--A wholesale financial 
     institution shall be deemed to be an insured depository 
     institution for purposes of section 38 of the Federal Deposit 
     Insurance Act except that--
       ``(A) the relevant capital levels and capital measures for 
     each capital category shall be the levels specified by the 
     Board for wholesale financial institutions; and
       ``(B) all references to the appropriate Federal banking 
     agency or to the Corporation in that section shall be deemed 
     to be references to the Board.
       ``(3) Enforcement authority.--Subsections (j) and (k) of 
     section 7, subsections (b) through (n), (s), and (v) of 
     section 8, and section 19 of the Federal Deposit Insurance 
     Act shall apply to a wholesale financial institution in the 
     same manner and to the same extent as such provisions apply 
     to State member insured banks and any reference in such 
     sections to an insured depository institution shall be deemed 
     to include a reference to a wholesale financial institution.
       ``(4) Certain other statutes applicable.--A wholesale 
     financial institution shall be deemed to be a banking 
     institution, and the Board shall be the appropriate Federal 
     banking agency for such bank and all such bank's affiliates, 
     for purposes of the International Lending Supervision Act.
       ``(5) Bank merger act.--A wholesale financial institution 
     shall be subject to sections 18(c) and 44 of the Federal 
     Deposit Insurance Act in the same manner and to the same 
     extent the wholesale financial institution would be subject 
     to such sections if the institution were a State member 
     insured bank.
       ``(6) Branching.--Notwithstanding any other provision of 
     law, a wholesale financial institution may establish and 
     operate a branch at any location on such terms and conditions 
     as established by the Board and, in the case of a State-
     chartered wholesale financial institution, with the approval 
     of the Board, and, in the case of a national bank wholesale 
     financial institution, with the approval of the Comptroller 
     of the Currency.
       ``(7) Activities of out-of-state branches of wholesale 
     financial institutions.--
       ``(A) General.--A State-chartered wholesale financial 
     institution shall be deemed a State bank and an insured State 
     bank and a national wholesale financial institution shall be 
     deemed a national bank for purposes of paragraphs (1), (2), 
     and (3) of section 24(j) of the Federal Deposit Insurance 
     Act.
       ``(B) Definitions.--The following definitions shall apply 
     solely for purposes of applying paragraph (1):

[[Page H1348]]

       ``(i) Home state.--The term `home State' means--

       ``(I) with respect to a national wholesale financial 
     institution, the State in which the main office of the 
     institution is located; and
       ``(II) with respect to a State-chartered wholesale 
     financial institution, the State by which the institution is 
     chartered.

       ``(ii) Host state.--The term `host State' means a State, 
     other than the home State of the wholesale financial 
     institution, in which the institution maintains, or seeks to 
     establish and maintain, a branch.
       ``(iii) Out-of-state bank.--The term `out-of-State bank' 
     means, with respect to any State, a wholesale financial 
     institution whose home State is another State.
       ``(8) Discrimination regarding interest rates.--Section 27 
     of the Federal Deposit Insurance Act shall apply to State-
     chartered wholesale financial institutions in the same manner 
     and to the same extent as such provisions apply to State 
     member insured banks and any reference in such section to a 
     State-chartered insured depository institution shall be 
     deemed to include a reference to a State-chartered wholesale 
     financial institution.
       ``(9) Preemption of state laws requiring deposit insurance 
     for wholesale financial institutions.--The appropriate State 
     banking authority may grant a charter to a wholesale 
     financial institution notwithstanding any State constitution 
     or statute requiring that the institution obtain insurance of 
     its deposits and any such State constitution or statute is 
     hereby preempted solely for purposes of this paragraph.
       ``(10) Parity for wholesale financial institutions.--A 
     State bank that is a wholesale financial institution under 
     this section shall have all of the rights, powers, 
     privileges, and immunities (including those derived from 
     status as a federally chartered institution) of and as if it 
     were a national bank, subject to such terms and conditions as 
     established by the Board.
       ``(11) Community reinvestment act of 1977.--A State 
     wholesale financial institution shall be subject to the 
     Community Reinvestment Act of 1977.
       ``(c) Specific Requirements Applicable to Wholesale 
     Financial Institutions.--
       ``(1) Limitations on deposits.--
       ``(A) Minimum amount.--
       ``(i) In general.--No wholesale financial institution may 
     receive initial deposits of $100,000 or less, other than on 
     an incidental and occasional basis.
       ``(ii) Limitation on deposits of less than $100,000.--No 
     wholesale financial institution may receive initial deposits 
     of $100,000 or less if such deposits constitute more than 5 
     percent of the institution's total deposits.
       ``(B) No deposit insurance.--No deposits held by a 
     wholesale financial institution shall be insured deposits 
     under the Federal Deposit Insurance Act.
       ``(C) Advertising and disclosure.--The Board shall 
     prescribe regulations pertaining to advertising and 
     disclosure by wholesale financial institutions to ensure that 
     each depositor is notified that deposits at the wholesale 
     financial institution are not federally insured or otherwise 
     guaranteed by the United States Government.
       ``(2) Minimum capital levels applicable to wholesale 
     financial institutions.--The Board shall, by regulation, 
     adopt capital requirements for wholesale financial 
     institutions--
       ``(A) to account for the status of wholesale financial 
     institutions as institutions that accept deposits that are 
     not insured under the Federal Deposit Insurance Act; and
       ``(B) to provide for the safe and sound operation of the 
     wholesale financial institution without undue risk to 
     creditors or other persons, including Federal reserve banks, 
     engaged in transactions with the bank.
       ``(3) Additional requirements applicable to wholesale 
     financial institutions.--In addition to any requirement 
     otherwise applicable to State member insured banks or 
     applicable, under this section, to wholesale financial 
     institutions, the Board may impose, by regulation or order, 
     upon wholesale financial institutions--
       ``(A) limitations on transactions, direct or indirect, with 
     affiliates to prevent--
       ``(i) the transfer of risk to the deposit insurance funds; 
     or
       ``(ii) an affiliate from gaining access to, or the benefits 
     of, credit from a Federal reserve bank, including overdrafts 
     at a Federal reserve bank;
       ``(B) special clearing balance requirements; and
       ``(C) any additional requirements that the Board determines 
     to be appropriate or necessary to--
       ``(i) promote the safety and soundness of the wholesale 
     financial institution or any insured depository institution 
     affiliate of the wholesale financial institution;
       ``(ii) prevent the transfer of risk to the deposit 
     insurance funds; or
       ``(iii) protect creditors and other persons, including 
     Federal reserve banks, engaged in transactions with the 
     wholesale financial institution.
       ``(4) Exemptions for wholesale financial institutions.--The 
     Board may, by regulation or order, exempt any wholesale 
     financial institution from any provision applicable to a 
     member bank that is not a wholesale financial institution, if 
     the Board finds that such exemption is not inconsistent 
     with--
       ``(A) the promotion of the safety and soundness of the 
     wholesale financial institution or any insured depository 
     institution affiliate of the wholesale financial institution;
       ``(B) the protection of the deposit insurance funds; and
       ``(C) the protection of creditors and other persons, 
     including Federal reserve banks, engaged in transactions with 
     the wholesale financial institution.
       ``(5) Limitation on transactions between a wholesale 
     financial institution and an insured bank.--For purposes of 
     section 23A(d)(1) of the Federal Reserve Act, a wholesale 
     financial institution that is affiliated with an insured bank 
     shall not be a bank.
       ``(6) No effect on other provisions.--This section shall 
     not be construed as limiting the Board's authority over 
     member banks under any other provision of law, or to create 
     any obligation for any Federal reserve bank to make, 
     increase, renew, or extend any advance or discount under this 
     Act to any member bank or other depository institution.
       ``(d) Capital and Managerial Requirements.--
       ``(1) In general.--A wholesale financial institution shall 
     be well capitalized and well managed.
       ``(2) Notice to company.--The Board shall promptly provide 
     notice to a company that controls a wholesale financial 
     institution whenever such wholesale financial institution is 
     not well capitalized or well managed.
       ``(3) Agreement to restore institution.--Within 45 days of 
     receipt of a notice under paragraph (2) (or such additional 
     period not to exceed 90 days as the Board may permit), the 
     company shall execute an agreement acceptable to the Board to 
     restore the wholesale financial institution to compliance 
     with all of the requirements of paragraph (1).
       ``(4) Limitations until institution restored.--Until the 
     wholesale financial institution is restored to compliance 
     with all of the requirements of paragraph (1), the Board may 
     impose such limitations on the conduct or activities of the 
     company or any affiliate of the company as the Board 
     determines to be appropriate under the circumstances.
       ``(5) Failure to restore.--If the company does not execute 
     and implement an agreement in accordance with paragraph (3), 
     comply with any limitation imposed under paragraph (4), 
     restore the wholesale financial institution to well 
     capitalized status within 180 days after receipt by the 
     company of the notice described in paragraph (2), or restore 
     the wholesale financial institution to well managed status 
     within such period as the Board may permit, the company 
     shall, 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 Board's discretion, divest control of its 
     subsidiary depository institutions.
       ``(6) Well managed defined.--For purposes of this 
     subsection, the term `well managed' has the same meaning as 
     in section 2 of the Bank Holding Company Act of 1956.
       ``(e) Conservatorship Authority.--
       ``(1) In general.--The Board may appoint a conservator to 
     take possession and control of a wholesale financial 
     institution to the same extent and in the same manner as the 
     Comptroller of the Currency may appoint a conservator for a 
     national bank under section 203 of the Bank Conservation Act, 
     and the conservator shall exercise the same powers, 
     functions, and duties, subject to the same limitations, as 
     are provided under such Act for conservators of national 
     banks.
       ``(2) Board authority.--The Board shall have the same 
     authority with respect to any conservator appointed under 
     paragraph (1) and the wholesale financial institution for 
     which such conservator has been appointed as the Comptroller 
     of the Currency has under the Bank Conservation Act with 
     respect to a conservator appointed under such Act and a 
     national bank for which the conservator has been appointed.
       ``(f) Exclusive Jurisdiction.--Subsections (c) and (e) of 
     section 43 of the Federal Deposit Insurance Act shall not 
     apply to any wholesale financial institution.''.
       (c) Voluntary Termination of Insured Status by Certain 
     Institutions.--
       (1) Section 8 designations.--Section 8(a) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
       (A) by striking paragraph (1); and
       (B) by redesignating paragraphs (2) through (10) as 
     paragraphs (1) through (9), respectively.
       (2) Voluntary termination of insured status.--The Federal 
     Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
     inserting after section 8 the following new section:

     ``SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS INSURED 
                   DEPOSITORY INSTITUTION.

       ``(a) In General.--Except as provided in subsection (b), an 
     insured State bank or a national bank may voluntarily 
     terminate such bank's status as an insured depository 
     institution in accordance with regulations of the Corporation 
     if--
       ``(1) the bank provides written notice of the bank's intent 
     to terminate such insured status--
       ``(A) to the Corporation and the Board of Governors of the 
     Federal Reserve System not less than 6 months before the 
     effective date of such termination; and
       ``(B) to all depositors at such bank, not less than 6 
     months before the effective date of the termination of such 
     status; and
       ``(2) either--
       ``(A) the deposit insurance fund of which such bank is a 
     member equals or exceeds the fund's designated reserve ratio 
     as of the date the bank provides a written notice under

[[Page H1349]]

     paragraph (1) and the Corporation determines that the fund 
     will equal or exceed the applicable designated reserve ratio 
     for the 2 semiannual assessment periods immediately following 
     such date; or
       ``(B) the Corporation and the Board of Governors of the 
     Federal Reserve System approved the termination of the bank's 
     insured status and the bank pays an exit fee in accordance 
     with subsection (e).
       ``(b) Exception.--Subsection (a) shall not apply with 
     respect to--
       ``(1) an insured savings association; or
       ``(2) an insured branch that is required to be insured 
     under subsection (a) or (b) of section 6 of the International 
     Banking Act of 1978.
       ``(c) Eligibility for Insurance Terminated.--Any bank that 
     voluntarily elects to terminate the bank's insured status 
     under subsection (a) shall not be eligible for insurance on 
     any deposits or any assistance authorized under this Act 
     after the period specified in subsection (f)(1).
       ``(d) Institution Must Become Wholesale Financial 
     Institution or Terminate Deposit-Taking Activities.--Any 
     depository institution which voluntarily terminates such 
     institution's status as an insured depository institution 
     under this section may not, upon termination of insurance, 
     accept any deposits unless the institution is a wholesale 
     financial institution subject to section 9B of the Federal 
     Reserve Act.
       ``(e) Exit Fees.--
       ``(1) In general.--Any bank that voluntarily terminates 
     such bank's status as an insured depository institution under 
     this section shall pay an exit fee in an amount that the 
     Corporation determines is sufficient to account for the 
     institution's pro rata share of the amount (if any) which 
     would be required to restore the relevant deposit insurance 
     fund to the fund's designated reserve ratio as of the date 
     the bank provides a written notice under subsection (a)(1).
       ``(2) Procedures.--The Corporation shall prescribe, by 
     regulation, procedures for assessing any exit fee under this 
     subsection.
       ``(f) Temporary Insurance of Deposits Insured as of 
     Termination.--
       ``(1) Transition period.--The insured deposits of each 
     depositor in a State bank or a national bank on the effective 
     date of the voluntary termination of the bank's insured 
     status, less all subsequent withdrawals from any deposits of 
     such depositor, shall continue to be insured for a period of 
     not less than 6 months and not more than 2 years, as 
     determined by the Corporation. During such period, no 
     additions to any such deposits, and no new deposits in the 
     depository institution made after the effective date of such 
     termination shall be insured by the Corporation.
       ``(2) Temporary assessments; obligations and duties.--
     During the period specified in paragraph (1) with respect to 
     any bank, the bank shall continue to pay assessments under 
     section 7 as if the bank were an insured depository 
     institution. The bank shall, in all other respects, be 
     subject to the authority of the Corporation and the duties 
     and obligations of an insured depository institution under 
     this Act during such period, and in the event that the bank 
     is closed due to an inability to meet the demands of the 
     bank's depositors during such period, the Corporation shall 
     have the same powers and rights with respect to such bank as 
     in the case of an insured depository institution.
       ``(g) Advertisements.--
       ``(1) In general.--A bank that voluntarily terminates the 
     bank's insured status under this section shall not advertise 
     or hold itself out as having insured deposits, except that 
     the bank may advertise the temporary insurance of deposits 
     under subsection (f) if, in connection with any such 
     advertisement, the advertisement also states with equal 
     prominence that additions to deposits and new deposits made 
     after the effective date of the termination are not insured.
       ``(2) Certificates of deposit, obligations, and 
     securities.--Any certificate of deposit or other obligation 
     or security issued by a State bank or a national bank after 
     the effective date of the voluntary termination of the bank's 
     insured status under this section shall be accompanied by a 
     conspicuous, prominently displayed notice that such 
     certificate of deposit or other obligation or security is not 
     insured under this Act.
       ``(h) Notice Requirements.--
       ``(1) Notice to the corporation.--The notice required under 
     subsection (a)(1)(A) shall be in such form as the Corporation 
     may require.
       ``(2) Notice to depositors.--The notice required under 
     subsection (a)(1)(B) shall be--
       ``(A) sent to each depositor's last address of record with 
     the bank; and
       ``(B) in such manner and form as the Corporation finds to 
     be necessary and appropriate for the protection of 
     depositors.''.
       (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
     Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended by 
     inserting ``, or any wholesale financial institution subject 
     to section 9B of this Act'' after ``such Act''.
  Subtitle E--Streamlining Antitrust Review of Bank Acquisitions and 
                                Mergers

     SEC. 141. AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956.

       (a) Amendments to Section 3 To Require Filing of 
     Application Copies With Antitrust Agencies.--Section 3 of the 
     Bank Holding Company Act of 1956 (12 U.S.C. 1842) is 
     amended--
       (1) in subsection (b) by inserting after paragraph (2) the 
     following new paragraph:
       ``(3) Requirement to file information with antitrust 
     agencies.--Any applicant seeking prior approval of the Board 
     to engage in an acquisition transaction under this section 
     must file simultaneously with the Attorney General and, if 
     the transaction also involves an acquisition under section 4 
     or 6, the Federal Trade Commission copies of any documents 
     regarding the proposed transaction required by the Board.''; 
     and
       (2) in subsection (c)--
       (A) by striking paragraph (1); and
       (B) by redesignating paragraphs (2) through (5) as 
     paragraphs (1) through (4), respectively.
       (b) Amendments to Section 11 To Modify Justice Department 
     Notification and Post-Approval Waiting Period for Section 3 
     Transactions.--Section 11 of the Bank Holding Company Act of 
     1956 (12 U.S.C. 1849) is amended--
       (1) in subsection (b)(1)--
       (A) by striking ``, if the Board has not received any 
     adverse comment from the Attorney General of the United 
     States relating to competitive factors,'';
       (B) by striking ``as may be prescribed by the Board with 
     the concurrence of the Attorney General, but in no event less 
     than 15 calendar days after the date of approval.'' and 
     inserting ``as may be prescribed by the appropriate antitrust 
     agency.''; and
       (C) by striking the 3d to last sentence and the penultimate 
     sentence; and
       (2) by striking subsections (c) and (e) and redesignating 
     subsections (d) and (f) as subsections (c) and (d), 
     respectively.
       (c) Definitions.--Section 2(o) of the Bank Holding Company 
     Act of 1956 (12 U.S.C. 1841(o)) is amended by adding at the 
     end the following new paragraphs:
       ``(8) Antitrust agencies.--The term `antitrust agencies' 
     means the Attorney General and the Federal Trade Commission.
       ``(9) Appropriate antitrust agency.--With respect to a 
     particular transaction, the term `appropriate antitrust 
     agency' means the antitrust agency engaged in reviewing the 
     competitive effects of such transaction.''.

     SEC. 142. AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT TO 
                   VEST IN THE ATTORNEY GENERAL SOLE 
                   RESPONSIBILITY FOR ANTITRUST REVIEW OF 
                   DEPOSITORY INSTITUTION MERGERS.

       Section 18(c) of the Federal Deposit Insurance Act (12 
     U.S.C. 1828) is amended--
       (1) in paragraph (3)(C) by striking ``during a period at 
     least as long as the period allowed for furnishing reports 
     under paragraph (4) of this subsection'';
       (2) by striking paragraph (4) and inserting the following 
     new paragraph:
       ``(4) Factors to be considered.--In determining whether to 
     approve a transaction, the responsible agency shall in every 
     case take into consideration the financial and managerial 
     resources and future prospects of the existing and proposed 
     institutions, and the convenience and needs of the community 
     to be served.'';
       (3) by striking paragraph (5) and inserting the following 
     new paragraph:
       ``(5) Notice to attorney general.--The responsible agency 
     shall immediately notify the Attorney General of any approval 
     by it pursuant to this subsection of a proposed merger 
     transaction. If the responsible agency has found that it must 
     act immediately in order to prevent the probable failure of 
     one of the banks involved, the transaction may be consummated 
     immediately upon approval by the agency. If the responsible 
     agency has notified the other Federal banking agencies 
     referred to in this section of the existence of an emergency 
     requiring expeditious action and has required the submission 
     of views and recommendations within 10 days, the transaction 
     may not be consummated before the 5th calendar day after the 
     date of approval of the responsible agency. In all other 
     cases, the transaction may not be consummated before the 30th 
     calendar day after the date of approval by the agency, or 
     such shorter period of time as may be prescribed by the 
     Attorney General.'';
       (4) by striking paragraph (6) and redesignating paragraphs 
     (7) through (11) as paragraphs (6) through (10), 
     respectively;
       (5) in subparagraph (A) of paragraph (6) (as so 
     redesignated by paragraph (4) of this section)--
       (A) by striking ``(5)'' and inserting ``(4)''; and
       (B) by striking ``(6)'' and inserting ``(5)'';
       (C) by striking ``In any such action, the court shall 
     review de novo the issues presented.'';
       (6) in paragraph (6) (as so redesignated by paragraph (4) 
     of this section)--
       (A) by striking subparagraphs (B) and (D); and
       (B) by redesignating subparagraph (C) as subparagraph (B);
       (7) in paragraph (8) (as so redesignated by paragraph (4) 
     of this section)--
       (A) by inserting ``and'' after the semicolon at the end of 
     subparagraph (A):
       (B) by striking subparagraph (B); and
       (C) by redesignating subparagraph (C) as subparagraph (B); 
     and
       (8) by inserting after paragraph (10) (as so redesignated 
     by paragraph (4) of this section) the following new 
     paragraph:
       ``(11) Requirement to file information with attorney 
     general.--Any applicant seeking prior written approval of the 
     responsible Federal banking agency to engage in a merger 
     transaction under this subsection shall file simultaneously 
     with the Attorney General copies of any documents regarding

[[Page H1350]]

     the proposed transaction required by the Federal banking 
     agency.''.

     SEC. 143. INFORMATION FILED BY DEPOSITORY INSTITUTIONS; 
                   INTERAGENCY DATA SHARING.

       (a) Format of Notice.--
       (1) In general.--Notice of any proposed transaction for 
     which approval is required under section 3 of the Bank 
     Holding Company Act of 1956 or section 18(c) of the Federal 
     Deposit Insurance Act shall be in a format designated and 
     required by the appropriate Federal banking agency (as 
     defined in section 3 of the Federal Deposit Insurance Act) 
     and shall contain a section on the likely competitive effects 
     of the proposed transaction.
       (2) Designation by agency.--The appropriate Federal banking 
     agency, with the concurrence of the antitrust agencies, shall 
     designate and require the form and content of the competitive 
     effects section.
       (3) Notice of suspension.--Upon notification by the 
     appropriate antitrust agency that the competitive effects 
     section of an application is incomplete, the appropriate 
     Federal banking agency shall notify the applicant that the 
     agency will suspend processing of the application until the 
     appropriate antitrust agency notifies the agency that the 
     application is complete.
       (4) Emergency action.--This provision shall not affect the 
     appropriate Federal banking agency's authority to act 
     immediately--
       (A) to prevent the probable failure of 1 of the banks 
     involved; or
       (B) to reduce or eliminate a post approval waiting period 
     in case of an emergency requiring expeditious action.
       (5) Exemption for certain filings.--With the concurrence of 
     the antitrust agencies, the appropriate Federal banking 
     agency may exempt classes of persons, acquisitions, or 
     transactions that are not likely to violate the antitrust 
     laws from the requirement that applicants file a competitive 
     effects section.
       (b) Interagency Data Sharing Requirement.--
       (1) In general.--To the extent not prohibited by other law, 
     the Federal banking agencies shall make available to the 
     antitrust agencies any data in their possession that the 
     antitrust agencies deem necessary for antitrust reviews of 
     transactions requiring approval under section 3 of the Bank 
     Holding Company Act of 1956 or section 18(c) of the Federal 
     Deposit Insurance Act.
       (2) Continuation of data collection and analysis.--The 
     Federal banking agencies shall continue to provide market 
     analysis, deposit share information, and other relevant 
     information for determining market competition as needed by 
     the Attorney General in the same manner such agencies 
     provided analysis and information under section 18(c) of the 
     Federal Deposit Insurance Act and 3(c) of the Bank Holding 
     Company Act of 1956 (as such sections were in effect on the 
     day before the date of the enactment of this Act) and shall 
     continue to collect information necessary or useful for such 
     analysis.
       (c) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Antitrust agencies.--The term ``antitrust agencies'' 
     means the Attorney General and the Federal Trade Commission.
       (2) Appropriate antitrust agency.--With respect to a 
     particular transaction, the term ``appropriate antitrust 
     agency'' means the antitrust agency engaged in reviewing the 
     competitive effects of such transaction.

     SEC. 144. APPLICABILITY OF ANTITRUST LAWS.

       No provision of this subtitle shall be construed as 
     affecting--
       (1) the applicability of antitrust laws (as defined in 
     section 11(d) of the Bank Holding Company Act of 1956; as so 
     redesignated pursuant to this subtitle); or
       (2) the applicability, if any, of any State law which is 
     similar to the antitrust laws.

     SEC. 145. CLARIFICATION OF STATUS OF SUBSIDIARIES AND 
                   AFFILIATES.

       (a) Clarification of Federal Trade Commission 
     Jurisdiction.--Any person which directly or indirectly 
     controls, is controlled directly or indirectly by, or is 
     directly or indirectly under common control with, any bank or 
     savings association (as such terms are defined in section 3 
     of the Federal Deposit Insurance Act) and is not itself a 
     bank or savings association shall not be deemed to be a bank 
     or savings association for purposes of the Federal Trade 
     Commission Act or any other law enforced by the Federal Trade 
     Commission.
       (b) Savings Provision.--No provision of this section shall 
     be construed as restricting the authority of any Federal 
     banking agency (as defined in section 3 of the Federal 
     Deposit Insurance Act) under any Federal banking law, 
     including section 8 of the Federal Deposit Insurance Act.

     SEC. 146. EFFECTIVE DATE.

       This subtitle shall take effect 6 months after the date of 
     enactment of this Act.
Subtitle F--Applying the Principles of National Treatment and Equality 
   of Competitive Opportunity to Foreign Banks and Foreign Financial 
                              Institutions

      SEC. 151. APPLYING THE PRINCIPLES OF NATIONAL TREATMENT AND 
                   EQUALITY OF COMPETITIVE OPPORTUNITY TO FOREIGN 
                   BANKS THAT ARE FINANCIAL HOLDING COMPANIES.

       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 6(b)(1)(E) or which 
     receives a determination under section 10(d)(1) 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 which the Board has determined to be permissible for 
     financial holding companies under section 6 of such 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 which the 
     Board has determined to be permissible for financial holding 
     companies under section 6 of the Bank Holding Company Act of 
     1956 has not filed a declaration with the Board of its status 
     as a financial holding company under such section or received 
     a determination under section 10(d)(1) by the end of the 2-
     year period beginning on the date of enactment of the 
     Financial Services Act of 1998, 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 financial 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 5(h) of the Bank Holding Company 
     Act of 1956.''.

     SEC. 152. APPLYING THE PRINCIPLES OF NATIONAL TREATMENT AND 
                   EQUALITY OF COMPETITIVE OPPORTUNITY TO FOREIGN 
                   BANKS AND FOREIGN FINANCIAL INSTITUTIONS THAT 
                   ARE WHOLESALE FINANCIAL INSTITUTIONS.

       Section 8A of the Federal Deposit Insurance Act (as added 
     by section 136(c)(2) of this Act) is amended by adding at the 
     end the following new subsection:
       ``(i) Voluntary Termination of Deposit Insurance.--The 
     provisions on voluntary termination of insurance in this 
     section shall apply to an insured branch of a foreign bank 
     (including a Federal branch) in the same manner and to the 
     same extent as they apply to an insured State bank or a 
     national bank.''.
               Subtitle G--Federal Home Loan Bank System

     SEC. 161. FEDERAL HOME LOAN BANKS-

       The 1st sentence of section 3 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1423) is amended--
       (1) by striking ``the continental United States'' and all 
     that follows through the ``eight''; and
       (2) by inserting ``the States into not less than 1'' before 
     ``nor''.

     SEC. 162. MEMBERSHIP AND COLLATERAL.

       (a) Subsection (f) of section 5 of the Home Owners' Loan 
     Act (12 U.S.C. 1464) is amended to read as follows:
       ``(f) Federal Home Loan Bank Membership.--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, beginning 
     January 1, 1999.''.
       (b) Section 10(a)(5) of the Federal Home Loan Bank Act (12 
     U.S.C. 1430(a)(5)) is amended--
       (1) in the 2d sentence, by striking ``and the Board''; and
       (2) in the 3d sentence, by striking ``Board'' and inserting 
     ``Bank''.
       (c) Section 10(a) of the Federal Home Loan Bank Act (12 
     U.S.C. 1430(a)) is amended--
       (1) in the 2d sentence, by striking ``All long-term 
     advances'' and inserting ``Except as provided in the 
     succeeding sentence, all long-term advances'';
       (2) by inserting after the 2d sentence, the following 
     sentence: ``Notwithstanding the preceding sentence, long-term 
     advances may be made to members insured by the Federal 
     Deposit Insurance Corporation which have less than 
     $500,000,000 in total assets for the purpose of funding small 
     businesses, agriculture, rural development, or low-income 
     community development (as defined by the Board).''; and
       (3) by redesignating paragraph (5) as paragraph (6) and 
     inserting after paragraph (4) the following new paragraph:
       ``(5) In the case of any member insured by the Federal 
     Deposit Insurance Corporation which has total assets of less 
     than $500,000,000, secured loans for small business, 
     agriculture, rural development, or low-income community 
     development, or securities representing a whole interest in 
     such secured loans.''.
       (d) Section 4(a) of the Federal Home Loan Bank Act (12 
     U.S.C. 1424(a)) is amended by adding at the end the following 
     new paragraph:
       ``(3) Eligibility requirements for community financial 
     institutions.--The requirements of paragraph (2) (other than 
     subparagraph (B) of such paragraph) shall not apply to any 
     insured depository institution which has total assets of less 
     than $500,000,000.
       (e) Section 10 of the Federal Home Loan Bank Act (12 U.S.C. 
     1430) is amended by striking the 1st of the 2 subsections 
     designated as subsection (e) (relating to qualified thrift 
     lender status).

[[Page H1351]]

     SEC. 163. THE OFFICE OF FINANCE.

       The Federal Home Loan Bank Act (12 U.S.C. 1421) is amended 
     by inserting after section 4 the following new section:

     ``SEC. 5. THE OFFICE OF FINANCE.

       ``(a) Operation.--The Federal home loan banks shall operate 
     jointly an office of finance (hereafter in this section 
     referred to as the `Office') to issue the notes, bonds, and 
     debentures of the Federal home loan banks in accordance with 
     this Act.
       ``(b) Powers.--Subject to the other provisions of this Act 
     and such safety and soundness regulations as the Finance 
     Board may prescribe, the Office shall be authorized by the 
     Federal home loan banks to act as the agent of such banks to 
     issue Federal home loan bank notes, bonds and debentures 
     pursuant to section 11 of this Act on behalf of the banks.
       ``(c) Central Board of Directors.--
       ``(1) Establishment.--The Federal home loan banks shall 
     establish a central board of directors of the Office to 
     administer the affairs of the Office in accordance with the 
     provisions of this Act.
       ``(2) Composition of Board.--Each Federal home loan bank 
     shall annually select 1 individual who, as of the time of the 
     election, is an officer or director of such bank to serve as 
     a member of the central board of directors of the Office.
       ``(d) Status.--Except to the extent expressly provided in 
     this Act, the Office shall be treated as a Federal home loan 
     bank for purposes of any law.''.

     SEC. 164. MANAGEMENT OF BANKS.

       (a) Subsections (a) and (b) of section 7 of the Federal 
     Home Loan Bank Act (12 U.S.C. 1427(a) and (b)) are amended to 
     read as follows:
       ``(a) The management of each Federal home loan bank shall 
     be vested in a board of 15 directors, 9 of whom shall be 
     elected by the members in accordance with this section, 6 of 
     whom shall be appointed by the Board referred to in section 
     2A, and all of whom shall be citizens of the United States 
     and bona fide residents of the district in which such bank is 
     located. At least 2 of the Federal home loan bank directors 
     who are appointed by the Board shall be representatives 
     chosen from organizations with more than a 2-year history of 
     representing consumer or community interests on banking 
     services, credit needs, housing, or financial consumer 
     protections. No Federal home loan bank director who is 
     appointed pursuant to this subsection may, during such bank 
     director's term of office, serve as an officer of any Federal 
     home loan bank or a director or officer of any member of a 
     bank, or hold shares, or any other financial interest in, any 
     member of a bank.
       ``(b) The elective directors shall be divided into three 
     classes, designated as classes A, B, and C, as nearly equal 
     in number as possible. Each directorship shall be filled by a 
     person who is an officer or director of a member located in 
     that bank's district. Each class shall represent members of 
     similar asset size, and the Board shall, to the maximum 
     extent possible, seek to achieve geographic diversity. The 
     Finance Board shall establish the minimum and maximum asset 
     size for each class. Any member shall be entitled to nominate 
     and elect eligible persons for its class of directorship; 
     such offices shall be filled from such nominees by a 
     plurality of the votes which members of each class may cast 
     for nominees in their corresponding class of directors in an 
     election held for the purpose of filling such offices. Each 
     member shall be permitted to cast one vote for each share of 
     Federal home loan bank stock owned by that member. No person 
     who is an officer or director of a member that fails to meet 
     any applicable capital requirement is eligible to hold the 
     office of Federal Home Loan Bank director. As used in this 
     subsection, the term ``member'' means a member of a Federal 
     home loan bank which was a member of such Bank as of a record 
     date established by the Bank.''.
       (b) Section 7 of the Federal Home Loan Bank Act (12 U.S.C. 
     1427) is amended--
       (1) by striking subsections (c) and (h); and
       (2) by redesignating subsections (d), (e), (f), (g), (i), 
     (j), and (k) as subsections (c), (d), (e), (f), (g), (h), and 
     (i), respectively.
       (c) Subsection (c) of section 7 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(d)) (as so redesignated by 
     subsection (b) of this section) is amended by striking the 
     1st and 2d sentences and inserting the following 2 new 
     sentences: ``The term of each position of director shall be 3 
     years. No director serving for 3 consecutive terms, nor any 
     other officer, director or that member or any affiliated 
     depository institution, shall be eligible for another term 
     earlier than 3 years after the expiration of the last 
     expiring of said 3-year terms. 3 elected directors of 
     different classes as specified by the Finance Board shall be 
     elected by ballot annually.''.
       (d) Subsection (d) of section 7 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(e)) (as so redesignated by 
     subsection (b) of this section) is amended to read as 
     follows:
       ``(d) Transition Provision.--In the 1st election after the 
     date of the enactment of the Financial Services Act of 1998, 
     3 directors shall be elected in each of the 3 classes of 
     elective directorship. The Finance Board may, in the 1st 
     election after such date of enactment, designate the terms of 
     each elected director in each class, not to exceed 3 years, 
     to assure that, in each subsequent election, 3 directors from 
     different classes of elective directorships are elected each 
     year.''.
       (e) Subsection (g) of section 7 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(i)) (as so redesignated by 
     subsection (b) of this section) is amended by striking 
     ``subject to the approval of the board''.

     SEC. 165. ADVANCES TO NONMEMBER BORROWERS.

       Section 10b of the Federal Home Loan Bank Act (12 U.S.C. 
     1430b) is amended--
       (1) in subsection (a), by striking ``(a) In General.--'';
       (2) by striking the 4th sentence of subsection (a), and 
     inserting ``Notwithstanding the preceding sentence, if an 
     advance is made for the purpose of facilitating mortgage 
     lending that benefits individuals and families that meet the 
     income requirements set forth in section 142(d) or 143(f) of 
     the Internal Revenue Code of 1986, the advance may be 
     collateralized as provided in section 10(a) of this Act.''; 
     and
       (3) by striking subsection (b).

     SEC. 166. POWERS AND DUTIES OF BANKS.

       (a) Subsection (a) of section 11 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1431(a)) is amended--
       (1) by inserting ``through the Office of Finance'' after 
     ``to issue'';
       (2) by striking ``Board'' after ``upon such terms and 
     conditions as the'' and inserting ``board of directors of the 
     bank''.
       (b) Subsection (b) of section 11 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1431(b)) is amended to read as follows:
       ``(b) Issuance of Federal Home Loan Bank Consolidated 
     Bonds.--
       ``(1) In general.-- The Office of Finance may issue 
     consolidated Federal home loan bank bonds and other 
     consolidated obligations on behalf of the banks.
       ``(2) Joint and several obligation; terms and conditions.--
     Consolidated obligations issued by the Office of Finance 
     under paragraph (1) shall--
       ``(A) be the joint and several obligations of all the 
     Federal home loan banks; and
       ``(B) shall be issued upon such terms and conditions as 
     shall be established by the Office of Finance subject to such 
     rules and regulations as the Finance Board may prescribe.''.
       (c) Section 11(f) of the Federal Home Loan Bank Act (12 
     U.S.C. 1430(f) (as designated before the redesignation by 
     subsection (e) of this section) is amended by striking both 
     commas immediately following ``permit'' and inserting ``or''.
       (d) Subsection (i) of section 11 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1431(i)) is amended by striking the 2d 
     undesignated paragraph.
       (e) Section 11 of the Federal Home Loan Bank Act (12 U.S.C. 
     1431) is amended--
       (1) by striking subsection (c); and
       (2) by redesignating subsections (d) through (k) as 
     subsections (c) through (j), respectively.

     SEC. 167. MERGERS AND CONSOLIDATIONS OF FEDERAL HOME LOAN 
                   BANKS.

       Section 26 of the Federal Home Loan Bank Act (12 U.S.C. 
     1446) is amended by designating the current paragraph as 
     ``(a)'' and adding the following new sections:
       ``(b) Nothing in this section shall preclude voluntary 
     mergers, combinations or consolidation by or among the 
     Federal home loan banks pursuant to such regulations as the 
     Finance Board may prescribe.
       ``(c) Number of Elected Directors of Resulting Bank.-- 
     Subject to section 7 of this Act, any bank resulting from a 
     merger, combination, or consolidation pursuant to this 
     section may have a number of elected directors equal to or 
     less than the total number of elected directors of all the 
     banks which participated in such transaction (as determined 
     immediately before such transaction).
       ``(d) Number of Appointed Directors of Resulting Bank.--The 
     number of appointed directors of any bank resulting from a 
     merger, combination, or consolidation pursuant to this 
     section shall be a number that is three less than the number 
     of elected directors.
       ``(e) Adjustment of District Boundaries.--After 
     consummation of any merger, combination, or consolidation of 
     2 or more Federal home loan banks, the Finance Board shall 
     adjust the districts established in section 3 of this Act to 
     reflect such merger, combination, or consolidation.''.

     SEC. 168. TECHNICAL AMENDMENTS.

       (a) 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).
       (b) Section 12.--
       (1) Section 12(a) of the Federal Home Loan Bank Act (12 
     U.S.C. 1432(a)) is amended--
       (A) by striking ``subject to the approval of the Board'' 
     immediately following ``transaction of its business''; and
       (B) by striking ``and, by its Board of directors, to 
     prescribe, amend, and repeal by-laws, rules, and regulations 
     governing the manner in which its affairs may be 
     administered; and the powers granted to it by law may be 
     exercised and enjoyed subject to the approval of the Board. 
     The president of a Federal Home Loan Bank may also be a 
     member of the Board of directors thereof, but no other 
     officer, employee, attorney, or 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 statute and regulation, as administered by the 
     Finance Board. No officer, employee, attorney, or agent of a 
     Federal home loan bank''.

[[Page H1352]]

       (2) Section 12 of the Federal Home Loan Bank Act (12 U.S.C. 
     1432) is amended by inserting after subsection (b) the 
     following new subsection:
       ``(c) Prohibition on Excessive Compensation.--
       ``(1) In general.--The Finance Board shall prohibit the 
     Federal home loan banks from providing compensation to any 
     officer, director, or employee that is not reasonable and 
     comparable with the compensation for employment in other 
     similar businesses involving similar duties and 
     responsibilities. However, the Finance Board may not 
     prescribe or set a specific level or range of compensation 
     for any officer, director, or employee.
       ``(2) Regulations.--The Finance Board, by regulation, may 
     provide for the requirements of paragraph (1) to be phased-in 
     over a period not to exceed 3 years.
       ``(3) Exception for existing contracts.--Paragraph (1) 
     shall not apply to any contract entered into before June 1, 
     1997.''.
       (c) Powers and Duties of Federal Housing Finance Board.--
       (1) Subsection (a)(1) of section 2B of the Federal Home 
     Loan Bank Act (12 U.S.C. 1422b(a)(1)) is amended by striking 
     the period at the end of the sentence and inserting ``; and 
     to have the same powers, rights, and duties to enforce this 
     Act with respect to the Federal home loan banks and the 
     senior officers and directors of such banks as the Office of 
     Federal Housing Enterprise Oversight has over the Federal 
     housing enterprises and the senior officers and directors of 
     such enterprises under the Federal Housing Enterprises 
     Financial Safety and Soundness Act of 1992.''.
       (2) Subsection (b) of section 2B of the Federal Home Loan 
     Bank Act (12 U.S.C. 1422b(b)) is amended--
       (A) by striking ``(1) Board staff.--'';
       (B) by striking ``function to any employee, administrative 
     unit'' and inserting ``function to any employee or 
     administrative unit'';
       (C) by striking the 2d sentence in paragraph (1); and
       (D) by striking paragraph (2).
       (3) Section 111 of Public Law 93-495 (12 U.S.C. 250) is 
     amended by striking ``Federal Home Loan Bank Board'' and 
     inserting ``Federal Housing Finance Board''.
       (d) 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.--
       (A) Subsection (a) of section 10 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1430(a)) is amended in paragraph (3), by 
     striking ``Deposits'' and inserting ``Cash or deposits''.
       (B) Subsection (c) of section 10 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1430(c)) is amended--
       (i) in the 1st sentence by striking ``Board'' and inserting 
     ``Federal home loan bank''; and
       (ii) by striking the 2d sentence.
       (C) Subsection (d) of section 10 of the Federal Home Loan 
     Bank Act (12 U.S.C. 1430(d)) is amended--
       (i) in the 1st sentence, by striking ``and the approval of 
     the Board'';
       (ii) in the last sentence, by striking ``Subject to the 
     approval of the Board, any'' and inserting ``Any''.
       (D) Section 10(j) of the Federal Home Loan Bank Act (12 
     U.S.C. 1430(j)) is amended--
       (i) in the 1st sentence of paragraph (1) by striking ``to 
     subsidize the interest rate on advances'' and inserting ``to 
     provide subsidies, including subsidized interest rates on 
     advances'';
       (ii) in paragraphs (2), (3), (4), (5), (9), (11), and (12) 
     by striking ``advances'' and ``subsidized advances'' each 
     place such terms appear and inserting ``subsidies, including 
     subsidized advances'';
       (iii) in paragraph (1), by inserting ``(A)'' before the 1st 
     sentence, and inserting the following at the end of the 
     paragraph:
       ``(B) Subject to such regulations as the Finance Board may 
     prescribe, the board of directors of each Federal home loan 
     bank may approve or disapprove requests from members for 
     Affordable Housing Program subsidies, and may not delegate 
     such authority.'';
       (iv) in paragraph (2), by striking subparagraph (B) and 
     inserting the following new subparagraph:
       ``(B) finance the purchase, construction or rehabilitation 
     of rental housing if, for a period of at least 15 years, 
     either 20 percent or more of the units in such housing are 
     occupied by and affordable for households whose income is 50 
     percent or less of area median income (as determined by the 
     Secretary of Housing and Urban Development, and as adjusted 
     for family size); or 40 percent or more of the units in such 
     housing are occupied by and affordable for households whose 
     income is 60 percent or less of area median income (as 
     determined by the Secretary of Housing and Urban Development, 
     and as adjusted for family size).'';
       (v) in paragraph (5)--

       (I) by striking the colon after ``Affordable Housing 
     Program'';
       (II) by striking subparagraphs (A) and (B); and
       (III) by striking ``(C) In 1995, and subsequent years,'';

       (vi) in paragraph (11)--

       (I) by inserting ``, pursuant to a nomination process that 
     is as broad and as participatory as possible, and giving 
     consideration to the size of the District and the diversity 
     of low- and moderate-income housing needs and activities 
     within the District,'' after ``Advisory Council of 7 to 15 
     persons'';
       (II) by inserting ``a diverse range of'' before ``community 
     and nonprofit organizations''; and
       (III) by inserting after the 1st sentence, the following 
     new sentence: ``Representatives of no one group shall 
     constitute an undue proportion of the membership of the 
     Advisory Council.''; and

       (vii) in paragraph (13), by striking subparagraph (D) and 
     inserting the following new subparagraph:
       ``(D) Affordable.--For purposes of paragraph (2)(B), the 
     term ``affordable'' means that the rent with respect to a 
     unit shall not exceed 30 percent of the income limitation 
     under paragraph (2)(B) applicable to occupants of such 
     unit.''.
       (e) Section 16.--Subsection (a) of section 16 of the 
     Federal Home Loan Bank Act (12 U.S.C. 1436) is amended in the 
     3d sentence by striking ``net earnings'' and inserting 
     ``previously retained earnings or current net earnings''; by 
     striking ``, and then only with the approval of the Federal 
     Housing Finance Board''; and by striking the 4th sentence.
       (f) Section 18.--Subsection (b) of section 18 of the 
     Federal Home Loan Bank Act (12 U.S.C. 1438) is amended by 
     striking paragraph (4).
       (g) Section 11.--Section 11 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1431) is amended by inserting after subsection 
     (j) (as so redesignated by section 166(e) of this subtitle) 
     the following subsection:
       ``(k) Prohibition on Other Activities.--
       ``(1) A Federal home loan bank may not engage in any 
     activity other than the activities authorized under this Act 
     and activities incidental to such authorized activities.
       ``(2) All activities specified in paragraph (1) are subject 
     to Finance Board approval.''.

     SEC. 169. DEFINITIONS.

       Paragraph (3) of section 2 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1422(3)) is amended to read as follows:
       ``(3) 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.''

     SEC. 170. 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.--To the extent 
     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 each calendar year 20.75 percent of the net 
     earnings of such bank (after deducting expenses relating to 
     subsection (j) of section 10 and operating expenses).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on January 1, 1999.

     SEC. 171. CAPITAL STRUCTURE OF THE FEDERAL HOME LOAN BANKS.

       (a) In General.--Section 6 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1426) is amended to read as follows:

     ``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

       ``(a) Capital Structure Plan.--On or before January 1, 
     1999, the board of directors of each Federal home loan bank 
     shall submit for Finance Board approval a plan establishing 
     and implementing a capital structure for such bank which--
       ``(1) the board of directors determines is the best suited 
     for the condition and operation of the bank and the interests 
     of the shareholders of the bank;
       ``(2) meets the requirements of subsection (b); and
       ``(3) meets the minimum capital standards and requirements 
     established under subsection (c) and any regulations 
     prescribed by the Finance Board pursuant to such subsection.
       ``(b) Contents of Plan.--The capital structure plan of each 
     Federal home loan bank shall meet the following requirements:
       ``(1) Stock purchase requirements.--
       ``(A) In general.--Each capital structure plan of a Federal 
     home loan bank shall require the shareholders of the bank to 
     maintain an investment in the stock of the bank in amount not 
     less than--
       ``(i) a minimum percentage of the total assets of the 
     shareholder; and
       ``(ii) a minimum percentage of the outstanding advances 
     from the bank to the shareholder.
       ``(B) Minimum percentage levels.--The minimum percentages 
     established pursuant to subparagraph (A) shall be set at 
     levels sufficient to meet the bank's minimum capital 
     requirements established by the Finance Board under 
     subsection (c).
       ``(C) Maximum asset based capital requirement.--The asset-
     based capital requirement applicable to any shareholder of a 
     Federal home loan bank in any year shall not exceed the 
     lesser of--
       ``(i) 0.6 percent of a shareholder's total assets at the 
     close of the preceding year; or
       ``(ii) $300,000,000.
       ``(D) Maximum advance-based requirement.--The advance-based 
     capital requirement applicable to any shareholder of a 
     Federal home loan bank shall not exceed 6 percent of the 
     total outstanding advances from the bank to the shareholder.

[[Page H1353]]

       ``(E) Minimum stock purchase requirement authorized.--A 
     capital structure plan may establish a minimum dollar amount 
     of stock of a Federal home loan bank in which a shareholder 
     shall be required to invest.
       ``(2) Adjustments to stock purchase requirements.--The 
     capital structure plan adopted by each Federal home loan bank 
     shall impose a continuing obligation on the board of 
     directors of the bank to review and adjust as necessary 
     member stock purchase requirements in order to ensure that 
     the bank remains in compliance with applicable minimum 
     capital levels established by the Finance Board.
       ``(3) Transition rule for stock purchase requirements.--
       ``(A) In general.--A capital structure plan may allow 
     shareholders who were members of a Federal home loan bank on 
     the date of the enactment of the Financial Services Act of 
     1998 to come into compliance with the asset-based stock 
     purchase requirement established under paragraph (1) during a 
     transition period established under the plan of not more than 
     3 years, if such requirement exceeds the asset-based stock 
     purchase requirement in effect on such date of enactment.
       ``(B) Interim purchase requirements.--A capital structure 
     plan may establish interim asset-based stock purchase 
     requirements applicable to members referred to in 
     subparagraph (A) during a transition period established under 
     subparagraph (A).
       ``(4) Classes of stock.--
       ``(A) In general.--Each capital structure plan shall afford 
     each shareholder of a Federal home loan bank the option of 
     meeting the shareholder's stock purchase requirements through 
     the purchase of any combination of Class A or Class B stock.
       ``(B) Class a stock.--Class A stock shall be stock of a 
     Federal home loan bank that shall be redeemed in cash and at 
     par by the bank no later than 12 months following submission 
     of a written notice by a shareholder of the shareholder's 
     intention to divest all shares of stock in the bank.
       ``(C) Class b stock.--Class B stock shall be stock of a 
     Federal home loan bank that shall be redeemed in cash and at 
     par by the bank no later than 5 years following submission of 
     a written notice by a shareholder of the shareholder's 
     intention to divest all shares of stock in the bank.
       ``(D) Rights requirement.--The Class B stock of a Federal 
     home loan bank may receive a dividend premium over that paid 
     on Class A stock, and may have preferential voting rights in 
     the election of Federal home loan bank directors.
       ``(E) Lower stock purchase requirements for class b 
     stock.--A capital structure plan may provide for lower stock 
     purchase requirements with respect to those shareholder's 
     that elect to purchase Class B stock in a manner that is 
     consistent with meeting the bank's own minimum capital 
     requirements as established by the Finance Board.
       ``(F) No other classes of stock permitted.--No class of 
     stock other than the Class A and Class B stock described in 
     subparagraphs (B) and (C) may be issued by a Federal home 
     loan bank.
       ``(5) Limited transferability of stock.--Each capital 
     structure plan shall provide that any equity securities 
     issued by the bank shall be available only to, held only by, 
     and tradable only among shareholders of the bank.
       ``(c) Capital Standards.--
       ``(1) In general.--The Finance Board shall prescribe, by 
     regulation, uniform capital standards applicable to each 
     Federal home loan bank which shall include--
       ``(A) a leverage limit in accordance with paragraph (2); 
     and
       ``(B) a risk-based capital requirement in accordance with 
     paragraph (3).
       ``(2) Minimum leverage limit.--The leverage limit 
     established by the Finance Board shall require each Federal 
     home loan bank to maintain total capital in an amount not 
     less than 5 percent of the total assets of the bank. In 
     determining compliance with the minimum leverage ratio, the 
     amount of retained earnings and the paid-in value of Class B 
     stock, if any, shall be multiplied by 1.5 and such higher 
     amount shall be deemed to be capital for purposes of meeting 
     the 5 percent minimum leverage ratio.
       ``(3) Risk-based capital standard.--The risk-based capital 
     requirement shall be composed of the following components:
       ``(A) Capital sufficient to meet the credit risk to which a 
     Federal home loan bank is subject, based on an amount which 
     is not less than the amount of tier 1, risk-based capital 
     required by regulations prescribed, or guidelines issued 
     under section 38 of the Federal Deposit Insurance Act for a 
     well capitalized insured depository institution.
       ``(B) Capital sufficient to meet the interest rate risk to 
     which a Federal home loan bank is subject, based on an 
     interest rate stress test applied by the Finance Board that 
     rigorously tests for changes in interest rates, rate 
     volatility, and changes in the shape of the yield curve.
       ``(d) Redemption of Capital.--
       ``(1) In general.--Any shareholder of a Federal home loan 
     bank shall have the right to withdraw the shareholder's 
     membership from a Federal home loan bank and to redeem the 
     shareholder's stock in accordance with the redemption rights 
     associated with the class of stock the shareholder holds, 
     if--
       ``(A) such shareholder has filed a written notice of an 
     intention to redeem all such shares; and
       ``(B) the shareholder has no outstanding advances from any 
     Federal home loan bank at the time of such redemption.
       ``(2) Partial redemption.--A shareholder who files notice 
     of intention to redeem all shares of stock in a Federal home 
     loan bank may redeem not more than 1/2 of all such shares, in 
     cash and at par, 6 months before the date by which the bank 
     is required to redeem such stock pursuant to subparagraph (B) 
     or (C) of subsection (b)(4).
       ``(3) Divestiture.--The board of directors of any Federal 
     home loan bank may, after a hearing, order the divestiture by 
     any shareholder of all ownership interests of such 
     shareholder in the bank, if--
       ``(A) in the opinion of the board of directors, such 
     shareholder has failed to comply with a provision of this Act 
     or any regulation prescribed under this Act; or
       ``(B) the shareholder has been determined to be insolvent, 
     or otherwise subject to the appointment of a conservator, 
     receiver, or other legal custodian, by a State or Federal 
     authority with regulatory and supervisory responsibility for 
     such shareholder.
       ``(4) Retirement of excess stock.--Any shareholder may--
       ``(A) retire shares of Class A stock or, at the option of 
     the shareholder, shares of Class B stock, or any combination 
     of Class A and Class B stock, that are excess to the minimum 
     stock purchase requirements applicable to the shareholder; 
     and
       ``(B) receive from the Federal home loan bank a prompt 
     payment in cash equal to the par value of such stock.
       ``(5) Impairment of capital.--If the Finance Board or the 
     board of directors of a Federal home loan bank determines 
     that the paid-in capital of the bank is, or is likely to be, 
     impaired as a result of losses in or depreciation of the 
     assets of the bank, the Federal home loan bank shall withhold 
     that portion of the amount due any shareholder with respect 
     to any redemption or retirement of any class of stock which 
     bears the same ratio to the total of such amount as the 
     amount of the impaired capital bears to the total amount of 
     capital allocable to such class of stock.
       ``(6) Policies.--Subject to the requirements of this 
     section, the board of directors of each Federal home loan 
     bank shall promptly establish policies, consistent with this 
     Act, governing the capital stock of such bank and other 
     provisions of this section.''.

     SEC. 172. INVESTMENTS.

       Subsection (j) of section 11 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1431) (as so redesignated by section 166(e) of 
     this subtitle) is amended to read as follows:
       ``(j) Investments.--Each bank shall reduce its investments 
     to those necessary for liquidity purposes, for safe and sound 
     operation of the banks, or for housing finance, as 
     administered by the Finance Board.''.

     SEC. 173. FEDERAL HOUSING FINANCE BOARD.

       Section 2A(b)(1) of the Federal Home Loan Bank Act (12 
     U.S.C. 1422(b)(1)) is amended--
       (1) by redesignating subparagraphs (A) and (B) as 
     subparagraphs (B) and (C), respectively;
       (2) by inserting before subparagraph (B) (as so 
     redesignated by paragraph (1) of this section) the following 
     new subparagraph:
       ``(A) The Secretary of the Treasury (or the Secretary of 
     the Treasury's designee), who shall serve without additional 
     compensation.''; and
       (3) in subparagraph (C) (as so redesignated by paragraph 
     (1) of this section) by striking ``Four'' and inserting 
     ``3''.
                 Subtitle H--Direct Activities of Banks

     SEC. 181. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN 
                   MUNICIPAL 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 new sentence: ``In 
     addition to the provisions in this paragraph for dealing in, 
     underwriting or purchasing securities, the limitations and 
     restrictions contained in this paragraph as to dealing in, 
     underwriting, and purchasing investment securities for the 
     national bank's own account shall 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).''.
                  Subtitle I--Effective Date of Title

     SEC. 191. EFFECTIVE DATE.

       Except with regard to any subtitle or other provision of 
     this title for which a specific effective date is provided, 
     this title and the amendments made by this title shall take 
     effect at the end of the 270-day period beginning on the date 
     of the enactment of this Act.
                    TITLE II--FUNCTIONAL REGULATION
                    Subtitle A--Brokers and Dealers

     SEC. 201. DEFINITION OF BROKER.

       Section 3(a)(4) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(4)) is amended to read as follows:
       ``(4) Broker.--
       ``(A) In general.--The term `broker' means any person 
     engaged in the business of effecting transactions in 
     securities for the account of others.

[[Page H1354]]

       ``(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 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 which 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--

       ``(I) effects transactions in a trustee capacity and is 
     primarily compensated based on an annual fee (payable on a 
     monthly, quarterly, or other basis) or percentage of assets 
     under management, or both; or
       ``(II) 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--

       ``(aa) is primarily compensated on the basis of either an 
     annual fee (payable on a monthly, quarterly, or other basis), 
     a percentage of assets under management, or both, and does 
     not receive brokerage commissions or other similar 
     remuneration based on effecting transactions in securities, 
     other than the cost incurred by the bank in connection with 
     executing securities transactions for fiduciary customers; 
     and
       ``(bb) 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, 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) In general.--The bank effects transactions, as part 
     of its transfer agency activities, in--

       ``(aa) 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;
       ``(bb) the securities of an issuer as part of that issuer's 
     dividend reinvestment plan, if the bank does not--
       ``(AA) solicit transactions or provide investment advice 
     with respect to the purchase or sale of securities in 
     connection with the plan;
       ``(BB) net shareholders' buy and sell orders, other than 
     for programs for odd-lot holders or plans registered with the 
     Commission; or
       ``(cc) 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;
       ``(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; and
       ``(CC) the bank's compensation for such plan or program 
     consists of administration fees, or flat or capped per order 
     processing fees, or both, plus the cost incurred by the bank 
     in connection with executing securities transactions 
     resulting from such plan or program.

       ``(II) Permissible delivery of materials.--The exception to 
     being considered a broker for a bank engaged in activities 
     described in subclause (I) will not be affected by a bank's 
     delivery of written or electronic plan materials 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 Act of 1998; 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 6(c)(3)(H) of the Bank Holding company 
     Act of 1956.

       ``(vii) Private securities offerings.--The bank--

       ``(I) 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;
       ``(II) at any time after one year after the date of 
     enactment of the Financial Services Act of 1998, is not 
     affiliated with a broker or dealer that has been registered 
     for more than one year; and
       ``(III) effects transactions exclusively with qualified 
     investors.

       ``(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 206(a) of 
     the Financial Services Act of 1998.
       ``(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) Broker dealer execution.--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 or broker 
     dealer for execution;

[[Page H1355]]

       ``(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 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 commission's authority under any 
     other provision of this Act or any other securities law.
       ``(E) Fiduciary capacity.--For purposes of subparagraph 
     (B)(ii), 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 under a uniform gift to 
     minor act, or as an investment adviser if the bank receives a 
     fee for its investment advice;
       ``(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, immediately prior to the enactment of the 
     Financial Services Act of 1998, subject to section 15(e); and
       ``(ii) is subject to such restrictions and requirements as 
     the Commission considers appropriate.''.

      SEC. 202. DEFINITION OF DEALER.

       Section 3(a)(5) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(5)) is amended to read as follows:
       ``(5) Dealer.--
       ``(A) In general.--The term `dealer' means any person 
     engaged in the business of buying and selling securities for 
     such person's own account through a broker or otherwise.
       ``(B) Exception for person not engaged in the business of 
     dealing.--The term `dealer' does not include a person that 
     buys or sells securities for such person's own account, 
     either individually or in a fiduciary capacity, but not as a 
     part of a regular business.
       ``(C) 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 as a trustee or 
     fiduciary.

       ``(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 206(a) of 
     the Financial Services Act of 1998.
       ``(v) Derivative instruments.--The bank issues, buys, or 
     sells any derivative instrument to which the bank is a 
     party--

       ``(I) to or from a corporation, limited liability company, 
     or partnership that owns and invests on a discretionary 
     basis, not less than $10,000,000 in investments, or to or 
     from a qualified investor, except that if the instrument 
     provides for the delivery of one or more securities (other 
     than a derivative instrument or government security), the 
     transaction shall be effected with or through a registered 
     broker or dealer; or
       ``(II) to or from other persons, except that if the 
     derivative instrument provides for the delivery of one or 
     more securities (other than a derivative instrument or 
     government security), or is a security (other than a 
     government security), the transaction shall be effected with 
     or through a registered broker or dealer; or
       ``(III) to or from any person if the instrument is neither 
     a security nor provides for the delivery of one or more 
     securities (other than a derivative instrument).''.

     SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES 
                   OFFERINGS.

       Section 15A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78o-3) is amended by inserting after subsection (i) 
     the following new subsection:
       ``(j) Registration for Sales of Private Securities 
     Offerings.--A registered securities association shall create 
     a limited qualification category for any associated person of 
     a member who 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 and 
     the rules and regulations thereunder, and shall deem 
     qualified in such limited qualification category, without 
     testing, any bank employee who, in the six month period 
     preceding the date of enactment of this Act, engaged in 
     effecting such sales.''.

     SEC. 204. SALES PRACTICES AND COMPLAINT PROCEDURES.

       Section 18 of the Federal Deposit Insurance Act is amended 
     by adding at the end the following new subsection:
       ``(s) Sales Practices and Complaint Procedures With Respect 
     to Bank Securities Activities.--
       ``(1) Regulations Required.--Each Federal banking agency 
     shall prescribe and publish in final form, not later than 6 
     months after the date of enactment of the Financial Services 
     Act of 1998, regulations which apply to retail transactions, 
     solicitations, advertising, or offers of any security by any 
     insured depository institution or any affiliate thereof other 
     than a registered broker or dealer or an individual acting on 
     behalf of such a broker or dealer who is an associated person 
     of such broker or dealer. Such regulations shall include--
       ``(A) requirements that sales practices comply with just 
     and equitable principles of trade that are substantially 
     similar to the Rules of Fair Practice of the National 
     Association of Securities Dealers; and
       ``(B) requirements prohibiting (i) conditioning an 
     extension of credit on the purchase or sale of a security; 
     and (ii) any conduct leading a customer to believe that an 
     extension of credit is conditioned upon the purchase or sale 
     of a security.
       ``(2) Procedures required.--The appropriate Federal banking 
     agencies shall jointly establish procedures and facilities 
     for receiving and expeditiously processing complaints against 
     any bank or employee of a bank arising in connection with the 
     purchase or sale of a security by a customer, including a 
     complaint alleging a violation of the regulations prescribed 
     under paragraph (1), but excluding a complaint involving an 
     individual acting on behalf of such a broker or dealer who is 
     an associated person of such broker or dealer. The use of any 
     such procedures and facilities by such a customer shall be at 
     the election of the customer. Such procedures shall include 
     provisions to refer a complaint alleging fraud to the 
     Securities and Exchange Commission and appropriate State 
     securities commissions.
       ``(3) Required actions.--The actions required by the 
     Federal banking agencies under paragraph (2) shall include 
     the following:
       ``(A) establishing a group, unit, or bureau within each 
     such agency to receive such complaints;
       ``(B) developing and establishing procedures for 
     investigating, and permitting customers to investigate, such 
     complaints;
       ``(C) developing and establishing procedures for informing 
     customers of the rights they may have in connection with such 
     complaints;
       ``(D) developing and establishing procedures that allow 
     customers a period of at least 6 years to make complaints and 
     that do not require customers to pay the costs of the 
     proceeding; and
       ``(E) developing and establishing procedures for resolving 
     such complaints, including procedures for the recovery of 
     losses to the extent appropriate.
       ``(4) Consultation and joint regulations.--The Federal 
     banking agencies shall consult with each other and prescribe 
     joint regulations pursuant to paragraphs (1) and (2), after 
     consultation with the Securities and Exchange Commission.
       ``(5) Procedures in addition to other remedies.--The 
     procedures and remedies provided under this subsection shall 
     be in addition to, and not in lieu of, any other remedies 
     available under law.
       ``(6) Definition.--As used in this subsection--
       ``(A) the term `security' has the meaning provided in 
     section 3(a)(10) of the Securities Exchange Act of 1934;
       ``(B) the term `registered broker or dealer' has the 
     meaning provided in section 3(a)(48) of such Act; and
       ``(C) the term `associated person' has the meaning provided 
     in section 3(a)(18) of such Act.''.

     SEC. 205. INFORMATION SHARING.

       Section 18 of the Federal Deposit Insurance Act is amended 
     by adding at the end the following new subsection:
       ``(t) Recordkeeping Requirements.--
       ``(1) Requirements.--Each appropriate Federal banking 
     agency, after consultation with and consideration of the 
     views of the Commission, shall establish recordkeeping 
     requirements for banks relying on exceptions contained in 
     paragraphs (4) and (5) of section 3(a) of the Securities 
     Exchange Act of 1934. Such recordkeeping requirements shall 
     be sufficient to demonstrate compliance with the terms of 
     such exceptions and be designed to facilitate compliance with 
     such exceptions. Each appropriate Federal banking agency 
     shall make any such information available to the Commission 
     upon request.
       ``(2) Definitions.--As used in this subsection the term 
     `Commission' means the Securities and Exchange Commission.''.

[[Page H1356]]

     SEC. 206. DEFINITION AND TREATMENT OF BANKING PRODUCTS.

       (a) Definition of Traditional Banking Product.--
       (1) In general.--For purposes of paragraphs (4) and (5) of 
     section 3(a) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(4), (5)), the term `traditional banking 
     product' means--
       (A) a deposit account, savings account, certificate of 
     deposit, or other deposit instrument issued by a bank;
       (B) a banker's acceptance;
       (C) a letter of credit issued or loan made by a bank;
       (D) a debit account at a bank arising from a credit card or 
     similar arrangement;
       (E) 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--
       (i) to qualified investors; or
       (ii) 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; or

       (F) any derivative instrument, whether or not individually 
     negotiated, involving or relating to--
       (i) foreign currencies, except options on foreign 
     currencies that trade on a national securities exchange;
       (ii) interest rates, except interest rate derivative 
     instruments (I) that are based on a security; or (II) that 
     provide for the delivery of one or more securities; or
       (iii) commodities, other rates, indices, or other assets, 
     except derivative instruments that are securities or that 
     provide for the delivery of one or more securities.
       (2) Classification limited.--Classification of a particular 
     product as a traditional banking product pursuant to this 
     subsection shall not be construed as finding or implying that 
     such product is oris 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.
       (3) Definitions.--For purposes of this subsection--
       (A) the term ``bank'' has the meaning provided in section 
     3(a)(6) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78c(a)(6);
       (B) the term ``qualified investor'' has the meaning 
     provided in section 3(a)(55) of such Act; and
       (C) the term ``Federal banking agency'' has the meaning 
     provided in section 3(z) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1813(z)).
       (b) Treatment of New Banking Products for Purposes of 
     Broker/Dealer Requirements.--Section 15 of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding at 
     the end the following new subsection:
       ``(i) Rulemaking to Extend Requirements to New Banking 
     Products.--
       ``(1) Limitation.--The Commission shall not--
       ``(A) require a bank to register as a broker or dealer 
     under this section because the bank engages in any 
     transaction in, or buys or sells, a new banking product; or
       ``(B) bring an action against a bank for a failure to 
     comply with a requirement described in subparagraph (A);

     unless the Commission has imposed such requirement by rule or 
     regulation issued in accordance with this section.
       ``(2) Criteria for rulemaking.--The Commission shall not 
     impose a requirement under paragraph (1) of this subsection 
     with respect to any new banking product unless the Commission 
     determines that--
       ``(A) the new banking product is a security; and
       ``(B) imposing such requirement is necessary or appropriate 
     in the public interest and for the protection of investors, 
     consistent with the requirements of section 3(f).
       ``(3) New banking product.--For purposes of this 
     subsection, the term `new banking product' means a product 
     that--
       ``(A) was not subjected to regulation by the Commission as 
     a security prior to the date of enactment of this subsection; 
     and
       ``(B) is not a traditional banking product, as such term is 
     defined in section 206(a) of the Financial Services Act of 
     1998.
       ``(4) Consultation.--In promulgating rules under this 
     subsection, the Commission shall consult with and consider 
     the views of the appropriate regulatory agencies concerning 
     the proposed rule and the impact on the banking industry.''.

     SEC. 207. DERIVATIVE INSTRUMENT AND QUALIFIED INVESTOR 
                   DEFINED.

       Section 3(a) of the Securities Exchange Act of 1934 is 
     amended by adding at the end the following new paragraphs:
       ``(54) Derivative instrument.--
       ``(A) Definition.--The term `derivative instrument' means 
     any individually negotiated contract, agreement, warrant, 
     note, or option that is based, in whole or in part, on the 
     value of, any interest in, or any quantitative measure or the 
     occurrence of any event relating to, one or more commodities, 
     securities, currencies, interest or other rates, indices, or 
     other assets, but does not include a traditional banking 
     product, as defined in section 206(a) of the Financial 
     Services Act of 1998.
       ``(B) Classification limited.-- Classification of a 
     particular contract as a derivative instrument pursuant to 
     this paragraph shall not be construed as finding or implying 
     that such 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.
       ``(55) Qualified investor.--
       ``(A) Definition.--For purposes of this title and section 
     206(a)(1)(E) of the Financial Services Act of 1998, 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) of this 
     subsection), savings and loan 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 United States Small Business Administration under section 
     301(c) or (d) 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 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; or
       ``(ix) any foreign bank (as defined in section 1(b)(7) of 
     the International Banking Act of 1978).
       ``(B) Additional qualifications defined.--For purposes of 
     paragraphs (4)(B)(vii) and (5)(C)(iii) of this subsection, 
     and section 206(a)(1)(E) of the Financial Services Act of 
     1998, the term `qualified investor' also means--
       ``(i) any corporation, company, or partnership that owns 
     and invests on a discretionary basis, not less than 
     $10,000,000 in investments;
       ``(ii) any natural person who owns and invests on a 
     discretionary basis, not less than $10,000,000 in 
     investments;
       ``(iii) 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
       ``(iv) any multinational or supranational entity or any 
     agency or instrumentality thereof.
       ``(C) Additional authority.--The Commission may, by rule or 
     order, define a `qualified investor' as any other person, 
     other than a natural person, taking into consideration such 
     factors as the person's financial sophistication, net worth, 
     and knowledge and experience in financial matters.''.

     SEC. 208. 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.''.

     SEC. 209. EFFECTIVE DATE.

       This subtitle shall take effect at the end of the 270-day 
     period beginning on the date of the enactment of this Act.
             Subtitle B--Bank Investment Company Activities

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

       (a) Management Companies.--Section 17(f) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
       (1) by redesignating paragraphs (1), (2), and (3) as 
     subparagraphs (A), (B), and (C), respectively;
       (2) by striking ``(f) Every registered'' and inserting the 
     following:
       ``(f) Custody of Securities.--
       ``(1) Every registered'';
       (3) by redesignating the 2d, 3d, 4th, and 5th sentences of 
     such subsection as paragraphs (2) through (5), respectively, 
     and indenting the left margin of such paragraphs 
     appropriately; and
       (4) by adding at the end the following new paragraph:
       ``(6) The Commission may adopt rules and regulations, and 
     issue orders, consistent with the protection of investors, 
     prescribing the conditions under which a bank, or an 
     affiliated person of a bank, either of which is an affiliated 
     person, promoter, organizer, or sponsor of, or principal 
     underwriter for, a registered management company may serve

[[Page H1357]]

     as custodian of that registered management company.''.
       (b) Unit Investment Trusts.--Section 26 of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-26) is amended--
       (1) by redesignating subsections (b) through (e) as 
     subsections (c) through (f), respectively; and
       (2) by inserting after subsection (a) the following new 
     subsection:
       ``(b) The Commission may adopt rules and regulations, and 
     issue orders, consistent with the protection of investors, 
     prescribing the conditions under which a bank, or an 
     affiliated person of a bank, either of which is an affiliated 
     person of a principal underwriter for, or depositor of, a 
     registered unit investment trust, may serve as trustee or 
     custodian under subsection (a)(1).''.
       (c) Fiduciary Duty of Custodian.--Section 36(a) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-35(a)) is 
     amended--
       (1) in paragraph (1), by striking ``or'' at the end;
       (2) in paragraph (2), by striking the period at the end and 
     inserting ``; or''; and
       (3) by inserting after paragraph (2) the following:
       ``(3) as custodian.''.

     SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

       Section 17(a) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-17(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (2);
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``; or''; and
       (3) by adding at the end the following new paragraph:
       ``(4) to loan money or other property to such registered 
     company, or to any company controlled by such registered 
     company, in contravention of such rules, regulations, or 
     orders as the Commission may prescribe or issue consistent 
     with the protection of investors.''.

     SEC. 213. INDEPENDENT DIRECTORS.

       (a) In General.--Section 2(a)(19)(A) of the Investment 
     Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
       (1) by striking clause (v) and inserting the following new 
     clause:
       ``(v) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has executed any portfolio transactions 
     for, engaged in any principal transactions with, or 
     distributed shares for--

       ``(I) the investment company,
       ``(II) any other investment company having the same 
     investment adviser as such investment company or holding 
     itself out to investors as a related company for purposes of 
     investment or investor services, or
       ``(III) any account over which the investment company's 
     investment adviser has brokerage placement discretion,'';

       (2) by redesignating clause (vi) as clause (vii); and
       (3) by inserting after clause (v) the following new clause:
       ``(vi) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has loaned money or other property to--

       ``(I) the investment company,
       ``(II) any other investment company having the same 
     investment adviser as such investment company or holding 
     itself out to investors as a related company for purposes 
     of investment or investor services, or

       ``(III) any account for which the investment company's 
     investment adviser has borrowing authority,''.

       (b) Conforming Amendment.--Section 2(a)(19)(B) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is 
     amended--
       (1) by striking clause (v) and inserting the following new 
     clause:
       ``(v) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has executed any portfolio transactions 
     for, engaged in any principal transactions with, or 
     distributed shares for--

       ``(I) any investment company for which the investment 
     adviser or principal underwriter serves as such,
       ``(II) any investment company holding itself out to 
     investors, for purposes of investment or investor services, 
     as a company related to any investment company for which the 
     investment adviser or principal underwriter serves as such, 
     or
       ``(III) any account over which the investment adviser has 
     brokerage placement discretion,'';

       (2) by redesignating clause (vi) as clause (vii); and
       (3) by inserting after clause (v) the following new clause:
       ``(vi) any person or any affiliated person of a person 
     (other than a registered investment company) that, at any 
     time during the 6-month period preceding the date of the 
     determination of whether that person or affiliated person is 
     an interested person, has loaned money or other property to--

       ``(I) any investment company for which the investment 
     adviser or principal underwriter serves as such,
       ``(II) any investment company holding itself out to 
     investors, for purposes of investment or investor services, 
     as a company related to any investment company for which the 
     investment adviser or principal underwriter serves as such, 
     or
       ``(III) any account for which the investment adviser has 
     borrowing authority,''.

       (c) Affiliation of Directors.--Section 10(c) of the 
     Investment Company Act of 1940 (15 U.S.C. 80a-10(c)) is 
     amended by striking ``bank, except'' and inserting ``bank 
     (together with its affiliates and subsidiaries) or any one 
     bank holding company (together with its affiliates and 
     subsidiaries) (as such terms are defined in section 2 of the 
     Bank Holding Company Act of 1956), except''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect at the end of the 1-year period beginning 
     on the date of enactment of this subtitle.

     SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.

       Section 35(a) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-34(a)) is amended to read as follows:
       ``(a) Misrepresentation of Guarantees.--
       ``(1) In general.--It shall be unlawful for any person, 
     issuing or selling any security of which a registered 
     investment company is the issuer, to represent or imply in 
     any manner whatsoever that such security or company--
       ``(A) has been guaranteed, sponsored, recommended, or 
     approved by the United States, or any agency, instrumentality 
     or officer of the United States;
       ``(B) has been insured by the Federal Deposit Insurance 
     Corporation; or
       ``(C) is guaranteed by or is otherwise an obligation of any 
     bank or insured depository institution.
       ``(2) Disclosures.--Any person issuing or selling the 
     securities of a registered investment company that is advised 
     by, or sold through, a bank shall prominently disclose that 
     an investment in the company is not insured by the Federal 
     Deposit Insurance Corporation or any other government agency. 
     The Commission may adopt rules and regulations, and issue 
     orders, consistent with the protection of investors, 
     prescribing the manner in which the disclosure under this 
     paragraph shall be provided.
       ``(3) Definitions.--The terms `insured depository 
     institution' and `appropriate Federal banking agency' have 
     the meaning given to such terms in section 3 of the Federal 
     Deposit Insurance Act.''.

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

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

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

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

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

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

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

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

[[Page H1358]]

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

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

     SEC. 220. INTERAGENCY CONSULTATION.

       The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
     seq.) is amended by inserting after section 210 the following 
     new section:

     ``SEC. 210A. CONSULTATION.

       ``(a) Examination Results and Other Information.--
       ``(1) The appropriate Federal banking agency shall provide 
     the Commission upon request the results of any examination, 
     reports, records, or other information to which such agency 
     may have access with respect to the investment advisory 
     activities--
       ``(A) of any--
       ``(i) bank holding company,
       ``(ii) bank, or
       ``(iii) separately identifiable department or division of a 
     bank,

     that is registered under section 203 of this title; and
       ``(B) in the case of a bank holding company or bank that 
     has a subsidiary or a separately identifiable department or 
     division registered under that section, of such bank or bank 
     holding company.
       ``(2) The Commission shall provide to the appropriate 
     Federal banking agency upon request the results of any 
     examination, reports, records, or other information with 
     respect to the investment advisory activities of any bank 
     holding company, bank, or separately identifiable department 
     or division of a bank, any of which is registered under 
     section 203 of this title.
       ``(b) Effect on Other Authority.--Nothing in this section 
     shall limit in any respect the authority of the appropriate 
     Federal banking agency with respect to such bank holding 
     company, bank, or department or division under any provision 
     of law.
       ``(c) Definition.--For purposes of this section, the term 
     `appropriate Federal banking agency' shall have the same 
     meaning as in section 3 of the Federal Deposit Insurance 
     Act.''.

     SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.

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

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

       Section 15 of the Investment Company Act of 1940 (15 U.S.C. 
     80a-15) is amended by adding at the end the following new 
     subsection:
       ``(g) Controlling Interest in Investment Company 
     Prohibited.--
       ``(1) In general.--If an investment adviser to a registered 
     investment company, or an affiliated person of that 
     investment adviser, holds a controlling interest in that 
     registered investment company in a trustee or fiduciary 
     capacity, such person shall--
       ``(A) if it holds the shares in a trustee or fiduciary 
     capacity with respect to any employee benefit plan subject to 
     the Employee Retirement Income Security Act of 1974, transfer 
     the power to vote the shares of the investment company 
     through to another person acting in a fiduciary capacity with 
     respect to the plan who is not an affiliated person of that 
     investment adviser or any affiliated person thereof; or
       ``(B) if it holds the shares in a trustee or fiduciary 
     capacity with respect to any person or entity other than an 
     employee benefit plan subject to the Employee Retirement 
     Income Security Act of 1974--
       ``(i) transfer the power to vote the shares of the 
     investment company through to--

       ``(I) the beneficial owners of the shares;
       ``(II) another person acting in a fiduciary capacity who is 
     not an affiliated person of that investment adviser or any 
     affiliated person thereof; or
       ``(III) any person authorized to receive statements and 
     information with respect to the trust who is not an 
     affiliated person of that investment adviser or any 
     affiliated person thereof;

       ``(ii) vote the shares of the investment company held by it 
     in the same proportion as shares held by all other 
     shareholders of the investment company; or
       ``(iii) vote the shares of the investment company as 
     otherwise permitted under such rules, regulations, or orders 
     as the Commission may prescribe or issue consistent with the 
     protection of investors.
       ``(2) Exemption.--Paragraph (1) shall not apply to any 
     investment adviser to a registered investment company, or any 
     affiliated person of that investment adviser, that holds 
     shares of the investment company in a trustee or fiduciary 
     capacity if that registered investment company consists 
     solely of assets held in such capacities.
       ``(3) Safe harbor.--No investment adviser to a registered 
     investment company or any affiliated person of such 
     investment adviser shall be deemed to have acted unlawfully 
     or to have breached a fiduciary duty under State or Federal 
     law solely by reason of acting in accordance with clause (i), 
     (ii), or (iii) of paragraph (1)(B).''.

     SEC. 223. CONFORMING CHANGE IN DEFINITION.

       Section 2(a)(5) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-2(a)(5)) is amended by striking ``(A) a banking 
     institution organized under the laws of the United States'' 
     and inserting ``(A) a depository institution (as defined in 
     section 3 of the Federal Deposit Insurance Act) or a branch 
     or agency of a foreign bank (as such terms are defined in 
     section 1(b) of the International Banking Act of 1978)''.

     SEC. 224. CONFORMING AMENDMENT.

       Section 202 of the Investment Advisers Act of 1940 (15 
     U.S.C. 80b-2) is amended by adding at the end the following 
     new subsection:
       ``(c) Consideration of Promotion of Efficiency, 
     Competition, and Capital Formation.--Whenever pursuant to 
     this title the Commission is engaged in rulemaking and is 
     required to consider or determine whether an action is 
     necessary or appropriate in the public interest, the 
     Commission shall also consider, in addition to the protection 
     of investors, whether the action will promote efficiency, 
     competition, and capital formation.''.

     SEC. 225. EFFECTIVE DATE.

       This subtitle shall take effect 90 days after the date of 
     the enactment of this Act.
     Subtitle C--Securities and Exchange Commission Supervision of 
                   Investment Bank Holding Companies

     SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY 
                   THE SECURITIES AND EXCHANGE COMMISSION.

       (a) Amendment.--Section 17 of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78q) is amended--
       (1) by redesignating subsection (i) as subsection (l); and
       (2) by inserting after subsection (h) the following new 
     subsections:
       ``(i) Investment Bank Holding Companies.--
       ``(1) Elective supervision of an investment bank holding 
     company not having a bank or savings association affiliate.--
       ``(A) In general.--An investment bank holding company that 
     is not--
       ``(i) an affiliate of a wholesale financial institution, an 
     insured bank (other than an institution described in 
     subparagraph (D), (F), or (G) of section 2(c)(2), or held 
     under section 4(f), of the Bank Holding Company Act of 1956), 
     or a savings association,
       ``(ii) a foreign bank, foreign company, or company that is 
     described in section 8(a) of the International Banking Act of 
     1978, or
       ``(iii) a foreign bank that controls, directly or 
     indirectly, a corporation chartered under section 25A of the 
     Federal Reserve Act,

     may elect to become supervised by filing with the Commission 
     a notice of intention to become supervised, pursuant to 
     subparagraph (B) of this paragraph. Any investment bank 
     holding company filing such a notice shall be supervised in 
     accordance with this section and comply with the rules 
     promulgated by the Commission applicable to supervised 
     investment bank holding companies.
       ``(B) Notification of status as a supervised investment 
     bank holding company.--An investment bank holding company 
     that elects under subparagraph (A) to become supervised by 
     the Commission shall file with the Commission a written 
     notice of intention to become supervised by the Commission in 
     such form and containing such information and documents 
     concerning such investment bank holding company as the 
     Commission, by rule, may prescribe as necessary or 
     appropriate in furtherance of the purposes of this section. 
     Unless the Commission finds that such supervision is not 
     necessary or appropriate in furtherance of the purposes of 
     this section, such supervision shall become effective 45 days 
     after receipt of such written notice by the Commission or 
     within such shorter time period as the Commission, by rule or 
     order, may determine.
       ``(2) Election not to be supervised by the commission as an 
     investment bank holding company.--
       ``(A) Voluntary withdrawal.--A supervised investment bank 
     holding company that

[[Page H1359]]

     is supervised pursuant to paragraph (1) may, upon such terms 
     and conditions as the Commission deems necessary or 
     appropriate, elect not to be supervised by the Commission by 
     filing a written notice of withdrawal from Commission 
     supervision. Such notice shall not become effective until one 
     year after receipt by the Commission, or such shorter or 
     longer period as the Commission deems necessary or 
     appropriate to ensure effective supervision of the material 
     risks to the supervised investment bank holding company and 
     to the affiliated broker or dealer, or to prevent evasion of 
     the purposes of this section.
       ``(B) Discontinuation of commission supervision.--If the 
     Commission finds that any supervised investment bank holding 
     company that is supervised pursuant to paragraph (1) is no 
     longer in existence or has ceased to be an investment bank 
     holding company, or if the Commission finds that continued 
     supervision of such a supervised investment bank holding 
     company is not consistent with the purposes of this section, 
     the Commission may discontinue the supervision pursuant to a 
     rule or order, if any, promulgated by the Commission under 
     this section.
       ``(3) Supervision of investment bank holding companies.--
       ``(A) Recordkeeping and reporting.--
       ``(i) In general.--Every supervised investment bank holding 
     company and each affiliate thereof shall make and keep for 
     prescribed periods such records, furnish copies thereof, and 
     make such reports, as the Commission may require by rule, in 
     order to keep the Commission informed as to--

       ``(I) the company's or affiliate's activities, financial 
     condition, policies, systems for monitoring and controlling 
     financial and operational risks, and transactions and 
     relationships between any broker or dealer affiliate of the 
     supervised investment bank holding company; and
       ``(II) the extent to which the company or affiliate has 
     complied with the provisions of this Act and regulations 
     prescribed and orders issued under this Act.

       ``(ii) Form and contents.--Such records and reports shall 
     be prepared in such form and according to such specifications 
     (including certification by an independent public 
     accountant), as the Commission may require and shall be 
     provided promptly at any time upon request by the Commission. 
     Such records and reports may include--

       ``(I) a balance sheet and income statement;
       ``(II) an assessment of the consolidated capital of the 
     supervised investment bank holding company;
       ``(III) an independent auditor's report attesting to the 
     supervised investment bank holding company's compliance with 
     its internal risk management and internal control objectives; 
     and
       ``(IV) reports concerning the extent to which the company 
     or affiliate has complied with the provisions of this title 
     and any regulations prescribed and orders issued under this 
     title.

       ``(B) Use of existing reports.--
       ``(i) In general.--The Commission shall, to the fullest 
     extent possible, accept reports in fulfillment of the 
     requirements under this paragraph that the supervised 
     investment bank holding company or its affiliates have been 
     required to provide to another appropriate regulatory agency 
     or self-regulatory organization.
       ``(ii) Availability.--A supervised investment bank holding 
     company or an affiliate of such company shall provide to the 
     Commission, at the request of the Commission, any report 
     referred to in clause (i).
       ``(C) Examination authority.--
       ``(i) Focus of examination authority.--The Commission may 
     make examinations of any supervised investment bank holding 
     company and any affiliate of such company in order to--

       ``(I) inform the Commission regarding--

       ``(aa) the nature of the operations and financial condition 
     of the supervised investment bank holding company and its 
     affiliates;
       ``(bb) the financial and operational risks within the 
     supervised investment bank holding company that may affect 
     any broker or dealer controlled by such supervised investment 
     bank holding company; and
       ``(cc) the systems of the supervised investment bank 
     holding company and its affiliates for monitoring and 
     controlling those risks; and

       ``(II) monitor compliance with the provisions of this 
     subsection, provisions governing transactions and 
     relationships between any broker or dealer affiliated with 
     the supervised investment bank holding company and any of the 
     company's other affiliates, and applicable provisions of 
     subchapter II of chapter 53, title 31, United States Code 
     (commonly referred to as the `Bank Secrecy Act') and 
     regulations thereunder.

       ``(ii) Restricted focus of examinations.--The Commission 
     shall limit the focus and scope of any examination of a 
     supervised investment bank holding company to--

       ``(I) the company; and
       ``(II) any affiliate of the company that, because of its 
     size, condition, or activities, the nature or size of the 
     transactions between such affiliate and any affiliated broker 
     or dealer, or the centralization of functions within the 
     holding company system, could, in the discretion of the 
     Commission, have a materially adverse effect on the 
     operational or financial condition of the broker or dealer.

       ``(iii) Deference to other examinations.--For purposes of 
     this subparagraph, the Commission shall, to the fullest 
     extent possible, use the reports of examination of an 
     institution described in subparagraph (D), (F), or (G) of 
     section 2(c)(2), or held under section 4(f), of the Bank 
     Holding Company Act of 1956 made by the appropriate 
     regulatory agency, or of a licensed insurance company made by 
     the appropriate State insurance regulator.
       ``(4) Holding company capital.--
       ``(A) Authority.--If the Commission finds that it is 
     necessary to adequately supervise investment bank holding 
     companies and their broker or dealer affiliates consistent 
     with the purposes of this subsection, the Commission may 
     adopt capital adequacy rules for supervised investment bank 
     holding companies.
       ``(B) Method of calculation.--In developing rules under 
     this paragraph:
       ``(i) Double leverage.--The Commission shall consider the 
     use by the supervised investment bank holding company of debt 
     and other liabilities to fund capital investments in 
     affiliates.
       ``(ii) No unweighted capital ratio.--The Commission shall 
     not impose under this section a capital ratio that is not 
     based on appropriate risk-weighting considerations.
       ``(iii) No capital requirement on regulated entities.--The 
     Commission shall not, by rule, regulation, guideline, order 
     or otherwise, impose any capital adequacy provision on a 
     nonbanking affiliate (other than a broker or dealer) that is 
     in compliance with applicable capital requirements of another 
     Federal regulatory authority or State insurance authority.
       ``(iv) Appropriate exclusions.--The Commission shall take 
     full account of the applicable capital requirements of 
     another Federal regulatory authority or State insurance 
     regulator.
       ``(C) Internal risk management models.--The Commission may 
     incorporate internal risk management models into its capital 
     adequacy rules for supervised investment bank holding 
     companies.
       ``(5) Functional regulation of banking and insurance 
     activities of supervised investment bank holding companies.--
     The Commission shall defer to--
       ``(A) the appropriate regulatory agency with regard to all 
     interpretations of, and the enforcement of, applicable 
     banking laws relating to the activities, conduct, ownership, 
     and operations of banks, and institutions described in 
     subparagraph (D), (F), and (G) of section 2(c)(2), or held 
     under section 4(f), of the Bank Holding Company Act of 1956; 
     and
       ``(B) the appropriate State insurance regulators with 
     regard to all interpretations of, and the enforcement of, 
     applicable State insurance laws relating to the activities, 
     conduct, and operations of insurance companies and insurance 
     agents.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) The term `investment bank holding company' means--
       ``(i) any person other than a natural person that owns or 
     controls one or more brokers or dealers; and
       ``(ii) the associated persons of the investment bank 
     holding company.
       ``(B) The term `supervised investment bank holding company' 
     means any investment bank holding company that is supervised 
     by the Commission pursuant to this subsection.
       ``(C) The terms `affiliate', `bank', `bank holding 
     company', `company', `control', and `savings association' 
     have the meanings given to those terms in section 2 of the 
     Bank Holding Company Act of 1956 (12 U.S.C. 1841).
       ``(D) The term `insured bank' has the meaning given to that 
     term in section 3 of the Federal Deposit Insurance Act.
       ``(E) The term `foreign bank' has the meaning given to that 
     term in section 1(b)(7) of the International Banking Act of 
     1978.
       ``(F) The terms ``person associated with an investment bank 
     holding company' and ``associated person of an investment 
     bank holding company' means any person directly or indirectly 
     controlling, controlled by, or under common control with, an 
     investment bank holding company.
       ``(j) Authority To Limit Disclosure of Information.--
     Notwithstanding any other provision of law, the Commission 
     shall not be compelled to disclose any information required 
     to be reported under subsection (h) or (i) or any information 
     supplied to the Commission by any domestic or foreign 
     regulatory agency that relates to the financial or 
     operational condition of any associated person of a broker or 
     dealer, investment bank holding company, or any affiliate of 
     an investment bank holding company. Nothing in this 
     subsection shall authorize the Commission to withhold 
     information from Congress, or prevent the Commission from 
     complying with a request for information from any other 
     Federal department or agency or any self-regulatory 
     organization requesting the information for purposes within 
     the scope of its jurisdiction, or complying with an order of 
     a court of the United States in an action brought by the 
     United States or the Commission. For purposes of section 552 
     of title 5, United States Code, this subsection shall be 
     considered a statute described in subsection (b)(3)(B) of 
     such section 552. In prescribing regulations to carry out the 
     requirements of this subsection, the Commission shall 
     designate information described in or obtained pursuant to 
     subparagraphs (A), (B), and (C) of subsection (i)(5) as 
     confidential information for purposes of section 24(b)(2) of 
     this title.''.
       (b) Conforming Amendments.--

[[Page H1360]]

       (1) Section 3(a)(34) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c(a)(34)) is amended by adding at the end the 
     following new subparagraphs:
       ``(H) When used with respect to an institution described in 
     subparagraph (D), (F), or (G) of section 2(c)(2), or held 
     under section 4(f), of the Bank Holding Company Act of 1956--
       ``(i) the Comptroller of the Currency, in the case of a 
     national bank or a bank in the District of Columbia examined 
     by the Comptroller of the Currency;
       ``(ii) the Board of Governors of the Federal Reserve 
     System, in the case of a State member bank of the Federal 
     Reserve System or any corporation chartered under section 25A 
     of the Federal Reserve Act;
       ``(iii) the Federal Deposit Insurance Corporation, in the 
     case of any other bank the deposits of which are insured in 
     accordance with the Federal Deposit Insurance Act; or
       ``(iv) the Commission in the case of all other such 
     institutions.''.
       (2) Section 1112(e) of the Right to Financial Privacy Act 
     of 1978 (12 U.S.C. 3412(e)) is amended--
       (A) by striking ``this title'' and inserting ``law''; and
       (B) by inserting ``, examination reports'' after 
     ``financial records''.
                           Subtitle D--Study

     SEC. 241. STUDY OF METHODS TO INFORM INVESTORS AND CONSUMERS 
                   OF UNINSURED PRODUCTS.

       Within one year after the date of enactment of this Act, 
     the Comptroller General of the United States shall submit a 
     report to the Congress regarding the efficacy, costs, and 
     benefits of requiring that any depository institution that 
     accepts federally insured deposits and that, directly or 
     through a contractual or other arrangement with a broker, 
     dealer, or agent, buys from, sells to, or effects 
     transactions for retail investors in securities or consumers 
     of insurance to inform such investors and consumers through 
     the use of a logo or seal that the security or insurance is 
     not insured by the Federal Deposit Insurance Corporation.
                          TITLE III--INSURANCE
               Subtitle A--State Regulation of Insurance

     SEC. 301. STATE REGULATION OF THE BUSINESS OF INSURANCE.

       The Act entitled ``An Act to express the intent of the 
     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.

     SEC. 302. 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 law, 
     subject to section 104 of this Act.

     SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.

       The insurance sales activity of any person or entity shall 
     be functionally regulated by the States, subject to section 
     104 of this Act.

     SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.

       (a) In General.--Except as provided in section 306, a 
     national bank and the subsidiaries of a national bank may not 
     provide insurance in a State as principal except that this 
     prohibition shall not apply to authorized products.
       (b) Authorized Products.--For the purposes of this section, 
     a product is authorized if--
       (1) as of January 1, 1997, 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 title insurance, or 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, 
     1997, 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, 1997, 
     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, but not limited to, 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 (B) 
     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, as 
     amended; 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, as amended, if the bank were subject to tax as an 
     insurance company under section 831 of such Code; or

       (3) any annuity contract the income on which is subject to 
     tax treatment under section 72 of the Internal Revenue Code 
     of 1986, as amended.

     SEC. 305. NEW BANK AGENCY ACTIVITIES ONLY THROUGH ACQUISITION 
                   OF EXISTING LICENSED AGENTS.

       If a national bank or a subsidiary of a national bank is 
     not providing insurance as agent in a State as of the date of 
     the enactment of this Act, the national bank and the 
     subsidiary of the national bank may provide insurance (which 
     such bank or subsidiary is otherwise authorized to provide) 
     as agent in such State after such date only by acquiring a 
     company which has been licensed by the appropriate State 
     regulator to provide insurance as agent in such State for not 
     less than 2 years before such acquisition.

     SEC. 306. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND 
                   THEIR AFFILIATES.

       (a) Authority.--
       (1) In general.--Notwithstanding any other provision of 
     this Act or any other law, no national bank, and no 
     subsidiary of a national bank, may engage in any activity 
     involving the underwriting or sale of title insurance other 
     than title insurance activities in which such national bank 
     or subsidiary was actively and lawfully engaged before the 
     date of the enactment of this Act.
       (2) Insurance affiliate.--In the case of a national bank 
     which has an affiliate which provides insurance as principal 
     and is not a subsidiary of the bank, the national bank and 
     any subsidiary of the national bank may not engage in any 
     activity involving the underwriting or sale of title 
     insurance pursuant to paragraph (1).
       (3) Insurance subsidiary.--In the case of a national bank 
     which has a subsidiary which provides insurance as principal 
     and has no affiliate which provides insurance as principal 
     and is not a subsidiary, the national bank may not engage in 
     any activity involving the underwriting or sale of title 
     insurance pursuant to paragraph (1).
       (4) Affiliate and subsidiary defined.--For purposes of this 
     section, the terms ``affiliate'' and ``subsidiary'' have the 
     meaning given such terms in section 2 of the Bank Holding 
     Company Act of 1956.
       (b) Parity Exception.--Notwithstanding subsection (a), in 
     the case of any State in which banks organized under the laws 
     of such State were authorized to sell title insurance as 
     agent as of January 1, 1997, a national bank and a subsidiary 
     of a national bank may sell title insurance as agent in such 
     State in the same manner and to the same extent such State 
     banks are authorized to sell title insurance as agent in such 
     State.

     SEC. 307. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR 
                   FINANCIAL REGULATORS.

       (a) Filing in Court of Appeal.--In the case of a regulatory 
     conflict between a State insurance regulator and a Federal 
     regulator as to whether any product is or is not insurance as 
     defined in section 304(c) of this Act, or whether a State 
     statute, 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 is filed in accordance with 
     paragraph (1) shall complete all action on such petition, 
     including rendering a judgment, before the end of the 60-day 
     period beginning on the date such petition is filed, unless 
     all parties to such proceeding agree to any extension of such 
     period.
       (c) Supreme Court Review.--Any request for certiori 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 United 
     States Supreme Court 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 financial regulator or State 
     insurance regulator after the later of--
       (1) the end of the 12-month period beginning on the date 
     the first public notice is made of such order, ruling, or 
     determination in its final form; or

[[Page H1361]]

       (2) the end of the 6-month period beginning on the date 
     such order, ruling, or determination takes effect.
       (e) Standard of Review.--The court shall decide an action 
     filed under this section 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, without unequal deference.

     SEC. 308. CONSUMER PROTECTION REGULATIONS.

       (a) Regulations Required.--
       (1) In general.--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. CONSUMER PROTECTION REGULATIONS.

       ``(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 the enactment of this 
     Act, consumer protection regulations (which the agencies 
     jointly determine to be appropriate) that--
       ``(A) apply to retail sales, solicitations, advertising, or 
     offers of any insurance product by any insured depository 
     institution or wholesale financial institution or any person 
     who 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 consumers to whom 
     such sales, solicitations, advertising, or offers are 
     directed as the agency determines to be appropriate.
       ``(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 regulators referred 
     to in paragraph (3), where such extension is determined to be 
     necessary to ensure the consumer 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 anticoercion rules applicable 
     to the sale of insurance products which prohibit an insured 
     depository institution from engaging in any practice that 
     would lead a consumer 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 consumer not to obtain, or a 
     prohibition on the consumer 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 clause 
     (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 other insurance product which involves an investment risk, 
     that there is an investment risk associated with the product, 
     including possible loss of value.
       ``(iv) Coercion.--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 consumer not to obtain, or a 
     prohibition on the consumer from obtaining, an insurance 
     product from an unaffiliated entity.

       ``(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) Adjustments for alternative methods of purchase.--In 
     prescribing the requirements under subparagraphs (A) and (D), 
     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.
       ``(D) Consumer 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 a consumer 
     receives the disclosures required under this paragraph or at 
     the time of the initial purchase by the consumer of such 
     product, an acknowledgment by such consumer of the receipt of 
     the disclosure required under this subsection 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, which 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 other 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 and the making of 
     loans 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 which permit any person 
     accepting deposits from, or making loans to, 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) Domestic Violence Discrimination Prohibition.--
       ``(1) In general.--In the case of an applicant for, or an 
     insured under, any insurance product described in paragraph 
     (2), the status of the applicant or insured as a victim of 
     domestic violence, or as a provider of services to victims of 
     domestic violence, shall not be considered as a criterion in 
     any decision with regard to insurance underwriting, pricing, 
     renewal, or scope of coverage of insurance policies, or 
     payment of insurance claims, except as required or expressly 
     permitted under State law.
       ``(2) Scope of application.--The prohibition contained in 
     paragraph (1) shall apply to any insurance product which is 
     sold or offered for sale, as principal, agent, or broker, by 
     any insured depository institution or any person who is 
     engaged in such activities at an office of the institution or 
     on behalf of the institution.
       ``(3) Sense of the congress.--It is the sense of the 
     Congress that, by the end of the 30-month period beginning on 
     the date of the enactment of this Act, the States should 
     enact prohibitions against discrimination with respect to 
     insurance products that are at least as strict as the 
     prohibitions contained in paragraph (1).
       ``(4) Domestic violence defined.--For purposes of this 
     subsection, the term `domestic violence' means the occurrence 
     of 1 or more of the following acts by a current or former 
     family member, household member, intimate partner, or 
     caretaker:
       ``(A) Attempting to cause or causing or threatening another 
     person physical harm, severe emotional distress, 
     psychological trauma, rape, or sexual assault.
       ``(B) Engaging in a course of conduct or repeatedly 
     committing acts toward another person, including following 
     the person without proper authority, under circumstances that 
     place the person in reasonable fear of bodily injury or 
     physical harm.
       ``(C) Subjecting another person to false imprisonment.
       ``(D) Attempting to cause or cause damage to property so as 
     to intimidate or attempt to control the behavior of another 
     person.
       ``(f) Consumer Grievance Process.--The Federal banking 
     agencies shall jointly establish a consumer complaint 
     mechanism, for receiving and expeditiously addressing 
     consumer complaints alleging a violation of regulations 
     issued under the section, which shall--
       ``(1) establish a group within each regulatory agency to 
     receive such complaints;
       ``(2) develop procedures for investigating such complaints;
       ``(3) develop procedures for informing consumers of rights 
     they may have in connection with such complaints; and
       ``(4) develop procedures for addressing concerns raised by 
     such complaints, as appropriate, including procedures for the 
     recovery of losses to the extent appropriate.
       ``(g) Effect on Other Authority.--
       ``(1) No provision of this section shall be construed as 
     granting, limiting, or otherwise affecting--

[[Page H1362]]

       ``(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) any authority of any State insurance commissioner or 
     other State authority under any State law.
       ``(2) 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 wholesale 
     financial 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.
       ``(h) Insurance Product Defined.--For purposes of this 
     section, the term `insurance product' includes an annuity 
     contract the income of which is subject to tax treatment 
     under section 72 of the Internal Revenue Code of 1986.''.

     SEC. 309. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR 
                   INSURANCE COMPANIES AND AFFILIATES.

       No State may, by law, regulation, order, interpretation, or 
     otherwise--
       (1) prevent or restrict any insurer, or any affiliate of an 
     insurer (whether such affiliate is organized as a stock 
     company, mutual holding company, or otherwise), from becoming 
     a financial holding company or acquiring control of an 
     insured depository institution;
       (2) limit the amount of an insurer's assets that may be 
     invested in the voting securities of an insured depository 
     institution (or any company which controls such institution), 
     except that the laws of an insurer's State of domicile may 
     limit the amount of such investment to an amount that is not 
     less than 5 percent of the insurer's admitted assets; 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 such State is 
     the State of domicile of the insurer.
             Subtitle B--Redomestication of Mutual Insurers

     SEC. 311. GENERAL APPLICATION.

       This subtitle shall only apply to a mutual insurance 
     company in a State which has not enacted a law which 
     expressly establishes reasonable terms and conditions for a 
     mutual insurance company domiciled in such State to 
     reorganize into a mutual holding company.

     SEC. 312. REDOMESTICATION OF MUTUAL INSURERS.

       (a) Redomestication.--A mutual insurer organized under the 
     laws of any State may transfer its domicile to a transferee 
     domicile as a step in a reorganization in which, pursuant to 
     the laws of the transferee domicile and consistent with the 
     standards in subsection (f), the mutual insurer becomes a 
     stock insurer that is a direct or indirect subsidiary of a 
     mutual holding company.
       (b) Resulting Domicile.--Upon complying with the applicable 
     law of the transferee domicile governing transfers of 
     domicile and completion of a transfer pursuant to this 
     section, the mutual insurer shall cease to be a domestic 
     insurer in the transferor domicile and, as a continuation of 
     its corporate existence, shall be a domestic insurer of the 
     transferee domicile.
       (c) Licenses Preserved.--The certificate of authority, 
     agents' appointments and licenses, rates, approvals and other 
     items that a licensed State allows and that are in existence 
     immediately prior to the date that a redomesticating insurer 
     transfers its domicile pursuant to this subtitle shall 
     continue in full force and effect upon transfer, if the 
     insurer remains duly qualified to transact the business of 
     insurance in such licensed State.
       (d) Effectiveness of Outstanding Policies and Contracts.--
       (1) In general.--All outstanding insurance policies and 
     annuities contracts of a redomesticating insurer shall remain 
     in full force and effect and need not be endorsed as to the 
     new domicile of the insurer, unless so ordered by the State 
     insurance regulator of a licensed State, and then only in the 
     case of outstanding policies and contracts whose owners 
     reside in such licensed State.
       (2) Forms.--
       (A) Applicable State law may require a redomesticating 
     insurer to file new policy forms with the State insurance 
     regulator of a licensed State on or before the effective date 
     of the transfer.
       (B) Notwithstanding subparagraph (A), a redomesticating 
     insurer may use existing policy forms with appropriate 
     endorsements to reflect the new domicile of the 
     redomesticating insurer until the new policy forms are 
     approved for use by the State insurance regulator of such 
     licensed State.
       (e) Notice.--A redomesticating insurer shall give notice of 
     the proposed transfer to the State insurance regulator of 
     each licensed State and shall file promptly any resulting 
     amendments to corporate documents required to be filed by a 
     foreign licensed mutual insurer with the insurance regulator 
     of each such licensed State.
       (f) Procedural Requirements.--No mutual insurer may 
     redomesticate to another State and reorganize into a mutual 
     holding company pursuant to this section unless the State 
     insurance regulator of the transferee domicile determines 
     that the plan of reorganization of the insurer includes the 
     following requirements:
       (1) Approval by board of directors and policyholders.--The 
     reorganization is approved by at least a majority of the 
     board of directors of the mutual insurer and at least a 
     majority of the policyholders who vote after notice, 
     disclosure of the reorganization and the effects of the 
     transaction on policyholder contractual rights, and 
     reasonable opportunity to vote, in accordance with such 
     notice, disclosure, and voting procedures as are approved by 
     the State insurance regulator of the transferee domicile.
       (2) Continued voting control by policyholders; review of 
     public stock offering.--After the consummation of a 
     reorganization, the policyholders of the reorganized insurer 
     shall have the same voting rights with respect to the mutual 
     holding company as they had before the reorganization with 
     respect to the mutual insurer. With respect to an initial 
     public offering of stock, the offering shall be conducted in 
     compliance with applicable securities laws and in a manner 
     approved by the State insurance regulator of the transferee 
     domicile.
       (3) Award of stock or grant of options to officers and 
     directors.--For a period of 6 months after completion of an 
     initial public offering, neither a stock holding company nor 
     the converted insurer shall award any stock options or stock 
     grants to persons who are elected officers or directors of 
     the mutual holding company, the stock holding company, or the 
     converted insurer, except with respect to any such awards or 
     options to which a person is entitled as a policyholder and 
     as approved by the State insurance regulator of the 
     transferee domicile.
       (4) Contractual rights.--Upon reorganization into a mutual 
     holding company, the contractual rights of the policyholders 
     are preserved.
       (5) Fair and equitable treatment of policyholders.--The 
     reorganization is approved as fair and equitable to the 
     policyholders by the insurance regulator of the transferee 
     domicile.

     SEC. 313. EFFECT ON STATE LAWS RESTRICTING REDOMESTICATION.

       (a) In General.--Unless otherwise permitted by this 
     subtitle, State laws of any transferor domicile that conflict 
     with the purposes and intent of this subtitle are preempted, 
     including but not limited to--
       (1) any law that has the purpose or effect of impeding the 
     activities of, taking any action against, or applying any 
     provision of law or regulation to, any insurer or an 
     affiliate of such insurer because that insurer or any 
     affiliate plans to redomesticate, or has redomesticated, 
     pursuant to this subtitle;
       (2) any law that has the purpose or effect of impeding the 
     activities of, taking action against, or applying any 
     provision of law or regulation to, any insured or any 
     insurance licensee or other intermediary because such person 
     or entity has procured insurance from or placed insurance 
     with any insurer or affiliate of such insurer that plans to 
     redomesticate, or has redomesticated, pursuant to this 
     subtitle, but only to the extent that such law would treat 
     such insured licensee or other intermediary differently than 
     if the person or entity procured insurance from, or placed 
     insurance with, an insured licensee or other intermediary 
     which had not redomesticated;
       (3) any law that has the purpose or effect of terminating, 
     because of the redomestication of a mutual insurer pursuant 
     to this subtitle, any certificate of authority, agent 
     appointment or license, rate approval, or other approval, of 
     any State insurance regulator or other State authority in 
     existence immediately prior to the redomestication in any 
     State other than the transferee domicile.
       (b) Differential Treatment Prohibited.--No State law, 
     regulation, interpretation, or functional equivalent thereof, 
     of a State other than a transferee domicile may treat a 
     redomesticating or redomesticated insurer or any affiliate 
     thereof any differently than an insurer operating in that 
     State that is not a redomesticating or redomesticated 
     insurer.
       (c) Laws Prohibiting Operations.--If any licensed State 
     fails to issue, delays the issuance of, or seeks to revoke an 
     original or renewal certificate of authority of a 
     redomesticated insurer immediately following redomestication, 
     except on grounds and in a manner consistent with its past 
     practices regarding the issuance of certificates of authority 
     to foreign insurers that are not redomesticating, then the 
     redomesticating insurer shall be exempt from any State law of 
     the licensed State to the extent that such State law or the 
     operation of such State law would make unlawful, or regulate, 
     directly or indirectly, the operation of the redomesticated 
     insurer, except that such licensed State may require the 
     redomesticated insurer to--
       (1) comply with the unfair claim settlement practices law 
     of the licensed State;
       (2) pay, on a nondiscriminatory basis, applicable premium 
     and other taxes which are levied on licensed insurers or 
     policyholders under the laws of the licensed State;
       (3) register with and designate the State insurance 
     regulator as its agent solely for the purpose of receiving 
     service of legal documents or process;
       (4) submit to an examination by the State insurance 
     regulator in any licensed state in which the redomesticated 
     insurer is doing

[[Page H1363]]

     business to determine the insurer's financial condition, if--
       (A) the State insurance regulator of the transferee 
     domicile has not begun an examination of the redomesticated 
     insurer and has not scheduled such an examination to begin 
     before the end of the 1-year period beginning on the date of 
     the redomestication; and
       (B) any such examination is coordinated to avoid 
     unjustified duplication and repetition;
       (5) comply with a lawful order issued in--
       (A) a delinquency proceeding commenced by the State 
     insurance regulator of any licensed State if there has been a 
     judicial finding of financial impairment under paragraph (7); 
     or
       (B) a voluntary dissolution proceeding;
       (6) comply with any State law regarding deceptive, false, 
     or fraudulent acts or practices, except that if the licensed 
     State seeks an injunction regarding the conduct described in 
     this paragraph, such injunction must be obtained from a court 
     of competent jurisdiction as provided in section 314(a);
       (7) comply with an injunction issued by a court of 
     competent jurisdiction, upon a petition by the State 
     insurance regulator alleging that the redomesticating insurer 
     is in hazardous financial condition or is financially 
     impaired;
       (8) participate in any insurance insolvency guaranty 
     association on the same basis as any other insurer licensed 
     in the licensed State; and
       (9) require a person acting, or offering to act, as an 
     insurance licensee for a redomesticated insurer in the 
     licensed State to obtain a license from that State, except 
     that such State may not impose any qualification or 
     requirement that discriminates against a nonresident 
     insurance licensee.

     SEC. 314. OTHER PROVISIONS.

       (a) Judicial Review.--The appropriate United States 
     district court shall have exclusive jurisdiction over 
     litigation arising under this section involving any 
     redomesticating or redomesticated insurer.
       (b) Severability.--If any provision of this section, or the 
     application thereof to any person or circumstances, is held 
     invalid, the remainder of the section, and the application of 
     such provision to other persons or circumstances, shall not 
     be affected thereby.

     SEC. 315. DEFINITIONS.

       For purposes of this subtitle, the following definitions 
     shall apply:
       (1) Court of competent jurisdiction.--The term ``court of 
     competent jurisdiction'' means a court authorized pursuant to 
     section 314(a) to adjudicate litigation arising under this 
     subtitle.
       (2) Domicile.--The term ``domicile'' means the State in 
     which an insurer is incorporated, chartered, or organized.
       (3) Insurance licensee.--The term ``insurance licensee'' 
     means any person holding a license under State law to act as 
     insurance agent, subagent, broker, or consultant.
       (4) Institution.--The term ``institution'' means a 
     corporation, joint stock company, limited liability company, 
     limited liability partnership, association, trust, 
     partnership, or any similar entity.
       (5) Licensed state.--The term ``licensed State'' means any 
     State, the District of Columbia, American Samoa, Guam, Puerto 
     Rico, or the United States Virgin Islands in which the 
     redomesticating insurer has a certificate of authority in 
     effect immediately prior to the redomestication.
       (6) Mutual insurer.--The term ``mutual insurer'' means a 
     mutual insurer organized under the laws of any State.
       (7) Person.--The term ``person'' means an individual, 
     institution, government or governmental agency, State or 
     political subdivision of a State, public corporation, board, 
     association, estate, trustee, or fiduciary, or other similar 
     entity.
       (8) Policyholder.--The term ``policyholder'' means the 
     owner of a policy issued by a mutual insurer, except that, 
     with respect to voting rights, the term means a member of a 
     mutual insurer or mutual holding company granted the right to 
     vote, as determined under applicable State law.
       (9) Redomesticated insurer.--The term ``redomesticated 
     insurer'' means a mutual insurer that has redomesticated 
     pursuant to this subtitle.
       (10) Redomesticating insurer.--The term ``redomesticating 
     insurer'' means a mutual insurer that is redomesticating 
     pursuant to this subtitle.
       (11) Redomestication or transfer.--The terms 
     ``redomestication'' and ``transfer'' mean the transfer of the 
     domicile of a mutual insurer from one State to another State 
     pursuant to this subtitle.
       (12) State insurance regulator.--The term ``State insurance 
     regulator'' means the principal insurance regulatory 
     authority of a State, the District of Columbia, American 
     Samoa, Guam, Puerto Rico, or the United States Virgin 
     Islands.
       (13) State law.--The term ``State law'' means the statutes 
     of any State, the District of Columbia, American Samoa, Guam, 
     Puerto Rico, or the United States Virgin Islands and any 
     regulation, order, or requirement prescribed pursuant to any 
     such statute.
       (14) Transferee domicile.--The term ``transferee domicile'' 
     means the State to which a mutual insurer is redomesticating 
     pursuant to this subtitle.
       (15) Transferor domicile.--The term ``transferor domicile'' 
     means the State from which a mutual insurer is 
     redomesticating pursuant to this subtitle.

     SEC. 316. EFFECTIVE DATE.

       This subtitle shall take effect on the date of enactment of 
     this Act.
   Subtitle C--National Association of Registered Agents and Brokers

     SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.

        (a) In General.--The provisions of this subtitle shall 
     take effect unless by the end of the 3-year period beginning 
     on the date of the enactment of this Act at least a majority 
     of the States--
       (1) have enacted uniform laws and regulations governing the 
     licensure of individuals and entities authorized to sell and 
     solicit the purchase of insurance within the State; or
       (2) have enacted reciprocity laws and regulations governing 
     the licensure of nonresident individuals and entities 
     authorized to sell and solicit insurance within those States.
       (b) Uniformity Required.--States shall be deemed to have 
     established the uniformity necessary to satisfy subsection 
     (a)(1) if the States--
       (1) establish uniform criteria regarding the integrity, 
     personal qualifications, education, training, and experience 
     of licensed insurance producers, including the qualification 
     and training of sales personnel in ascertaining the 
     appropriateness of a particular insurance product for a 
     prospective customer;
       (2) establish uniform continuing education requirements for 
     licensed insurance producers;
       (3) establish uniform ethics course requirements for 
     licensed insurance producers in conjunction with the 
     continuing education requirements under paragraph (2);
       (4) establish uniform criteria to ensure that an insurance 
     product, including any annuity contract, sold to a consumer 
     is suitable and appropriate for the consumer based on 
     financial information disclosed by the consumer; and
       (5) do not impose any requirement upon any insurance 
     producer to be licensed or otherwise qualified to do business 
     as a nonresident that has the effect of limiting or 
     conditioning that producer's activities because of its 
     residence or place of operations, except that counter-
     signature requirements imposed on nonresident producers shall 
     not be deemed to have the effect of limiting or conditioning 
     a producer's activities because of its residence or place of 
     operations under this section.
       (c) Reciprocity Required.--States shall be deemed to have 
     established the reciprocity required to satisfy subsection 
     (a)(2) if the following conditions are met:
       (1) Administrative licensing procedures.--At least a 
     majority of the States permit a producer that has a resident 
     license for selling or soliciting the purchase of insurance 
     in its home State to receive a license to sell or solicit the 
     purchase of insurance in such majority of States as a 
     nonresident to the same extent such producer is permitted to 
     sell or solicit the purchase of insurance in its State, 
     without satisfying any additional requirements other than 
     submitting--
       (A) a request for licensure;
       (B) the application for licensure that the producer 
     submitted to its home State;
       (C) proof that the producer is licensed and in good 
     standing in its home State; and
       (D) the payment of any requisite fee to the appropriate 
     authority,

     if the producer's home State also awards such licenses on 
     such a reciprocal basis.
       (2) Continuing education requirements.--A majority of the 
     States accept an insurance producer's satisfaction of its 
     home State's continuing education requirements for licensed 
     insurance producers to satisfy the States' own continuing 
     education requirements if the producer's home State also 
     recognizes the satisfaction of continuing education 
     requirements on such a reciprocal basis.
       (3) No limiting nonresident requirements.--A majority of 
     the States do not impose any requirement upon any insurance 
     producer to be licensed or otherwise qualified to do business 
     as a nonresident that has the effect of limiting or 
     conditioning that producer's activities because of its 
     residence or place of operations, except that 
     countersignature requirements imposed on nonresident 
     producers shall not be deemed to have the effect of limiting 
     or conditioning a producer's activities because of its 
     residence or place of operations under this section.
       (4) Reciprocal reciprocity.--Each of the States that 
     satisfies paragraphs (1), (2), and (3) grants reciprocity to 
     residents of all of the other States that satisfy such 
     paragraphs.
       (d) Determination.--
       (1) NAIC determination.--At the end of the 3-year period 
     beginning on the date of the enactment of this Act, the 
     National Association of Insurance Commissioners shall 
     determine, in consultation with the insurance commissioners 
     or chief insurance regulatory officials of the States, 
     whether the uniformity or reciprocity required by subsections 
     (b) and (c) has been achieved.
       (2) Judicial review.--The appropriate United States 
     district court shall have exclusive jurisdiction over any 
     challenge to the National Association of Insurance 
     Commissioners' determination under this section and such 
     court shall apply the standards set forth in section 706 of 
     title 5, United States Code, when reviewing any such 
     challenge.
       (e) Continued Application.--If, at any time, the uniformity 
     or reciprocity required

[[Page H1364]]

     by subsections (b) and (c) no longer exists, the provisions 
     of this subtitle shall take effect within 2 years, unless the 
     uniformity or reciprocity required by those provisions is 
     satisfied before the expiration of that 2-year period.
       (f) Savings Provision.--No provision of this section shall 
     be construed as requiring that any law, regulation, 
     provision, or action of any State which purports to regulate 
     insurance producers, including any such law, regulation, 
     provision, or action which purports to regulate unfair trade 
     practices or establish consumer protections, including 
     countersignature laws, be altered or amended in order to 
     satisfy the uniformity or reciprocity required by subsections 
     (b) and (c), unless any such law, regulation, provision, or 
     action is inconsistent with a specific requirement of any 
     such subsection and then only to the extent of such 
     inconsistency.

     SEC. 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND 
                   BROKERS.

       (a) Establishment.--There is established the National 
     Association of Registered Agents and Brokers (hereafter in 
     this subtitle referred to as the ``Association'')
       (b) Status.--The Association shall--
       (1) be a nonprofit corporation and be presumed to have the 
     status of an organization described in section 501(c)(6) of 
     the Internal Revenue Code of 1986 unless the Secretary of the 
     Treasury determines that the Association does not meet the 
     requirements of such section;
       (2) have succession until dissolved by an Act of Congress;
       (3) not be an agency or establishment of the United States 
     Government; and
       (4) except as otherwise provided in this Act, be subject 
     to, and have all the powers conferred upon a nonprofit 
     corporation by the District of Columbia Nonprofit Corporation 
     Act (D.C. Code, sec. 29y-1001 et seq.).

     SEC. 323. PURPOSE.

       The purpose of the Association shall be to provide a 
     mechanism through which uniform licensing, appointment, 
     continuing education, and other insurance producer sales 
     qualification requirements and conditions can be adopted and 
     applied on a multistate basis, while preserving the right of 
     States to license, supervise, and discipline insurance 
     producers and to prescribe and enforce laws and regulations 
     with regard to insurance-related consumer protection and 
     unfair trade practices.

     SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.

       The Association shall be subject to the supervision and 
     oversight of the National Association of Insurance 
     Commissioners (hereafter in this subtitle referred to as the 
     ``NAIC'') and shall not be an agency or an instrumentality of 
     the United States Government.

     SEC. 325. MEMBERSHIP.

       (a) Eligibility.--
       (1) In general.--Any State-licensed insurance producer 
     shall be eligible to become a member in the Association.
       (2) Ineligibility for suspension or revocation of 
     license.--Notwithstanding paragraph (1), a State-licensed 
     insurance producer shall not be eligible to become a member 
     if a State insurance regulator has suspended or revoked such 
     producer's license in that State during the 3-year preceding 
     the date such producer applies for membership.
       (3) Resumption of eligibility.--Paragraph (2) shall cease 
     to apply to any insurance producer if--
       (A) the State insurance regulator renews the license of 
     such producer in the State in which the license was suspended 
     or revoked; or
       (B) the suspension or revocation is subsequently 
     overturned.
       (b) Authority To Establish Membership Criteria.--The 
     Association shall have the authority to establish membership 
     criteria that--
       (1) bear a reasonable relationship to the purposes for 
     which the Association was established; and
       (2) do not unfairly limit the access of smaller agencies to 
     the Association membership.
       (c) Establishment of Classes and Categories.--
       (1) Classes of membership.--The Association may establish 
     separate classes of membership, with separate criteria, if 
     the Association reasonably determines that performance of 
     different duties requires different levels of education, 
     training, or experience.
       (2) Categories.--The Association may establish separate 
     categories of membership for individuals and for other 
     persons. The establishment of any such categories of 
     membership shall be based either on the types of licensing 
     categories that exist under State laws or on the aggregate 
     amount of business handled by an insurance producer. No 
     special categories of membership, and no distinct membership 
     criteria, shall be established for members which are insured 
     depository institutions or wholesale financial institutions 
     or for their employees, agents, or affiliates.
       (d) Membership Criteria.--
       (1) In general.--The Association may establish criteria for 
     membership which shall include standards for integrity, 
     personal qualifications, education, training, and experience.
       (2) Minimum standard.--In establishing criteria under 
     paragraph (1), the Association shall consider the highest 
     levels of insurance producer qualifications established under 
     the licensing laws of the States.
       (e) Effect of Membership.--Membership in the Association 
     shall entitle the member to licensure in each State for which 
     the member pays the requisite fees, including licensing fees 
     and, where applicable, bonding requirements, set by such 
     State.
       (f) Annual Renewal.--Membership in the Association shall be 
     renewed on an annual basis.
       (g) Continuing Education.--The Association shall establish, 
     as a condition of membership, continuing education 
     requirements which shall be comparable to or greater than the 
     continuing education requirements under the licensing laws of 
     a majority of the States.
       (h) Suspension and Revocation.--The Association may--
       (1) inspect and examine the records and offices of the 
     members of the Association to determine compliance with the 
     criteria for membership established by the Association; and
       (2) suspend or revoke the membership of an insurance 
     producer if--
       (A) the producer fails to meet the applicable membership 
     criteria of the Association: or
       (B) the producer has been subject to disciplinary action 
     pursuant to a final adjudicatory proceeding under the 
     jurisdiction of a State insurance regulator, and the 
     Association concludes that retention of membership in the 
     Association would not be in the public interest.
       (i) Office of Consumer Complaints.--
       (1) In general.--The Association shall establish an office 
     of consumer complaints that shall--
       (A) receive and investigate complaints from both consumers 
     and State insurance regulators related to members of the 
     Association; and
       (B) recommend to the Association any disciplinary actions 
     that the office considers appropriate, to the extent that any 
     such recommendation is not inconsistent with State law.
       (2) Records and referrals.--The office of consumer 
     complaints of the Association shall--
       (A) maintain records of all complaints received in 
     accordance with paragraph (1) and make such records available 
     to the NAIC and to each State insurance regulator for the 
     State of residence of the consumer who filed the complaint; 
     and
       (B) refer, when appropriate, any such complaint to any 
     appropriate State insurance regulator.
       (3) Telephone and other access.--The office of consumer 
     complaints shall maintain a toll-free telephone number for 
     the purpose of this subsection and, as practicable, other 
     alternative means of communication with consumers, such as an 
     Internet home page.

      SEC. 326. BOARD OF DIRECTORS.

       (a) Establishment.--There is established the board of 
     directors of the Association (hereafter in this subtitle 
     referred to as the ``Board'') for the purpose of governing 
     and supervising the activities of the Association and the 
     members of the Association.
       (b) Powers.--The Board shall have such powers and authority 
     as may be specified in the bylaws of the Association.
       (c) Composition.--
       (1) Members.--The Board shall be composed of 7 members 
     appointed by the NAIC.
       (2) Requirement.--At least 4 of the members of the Board 
     shall have significant experience with the regulation of 
     commercial lines of insurance in at least 1 of the 20 States 
     in which the greatest total dollar amount of commercial-lines 
     insurance is placed in the United States.
       (3) Initial board membership.--
       (A) In general.--If, by the end of the 2-year period 
     beginning on the date of the enactment of this Act, the NAIC 
     has not appointed the initial 7 members of the Board of the 
     Association, the initial Board shall consist of the 7 State 
     insurance regulators of the 7 States with the greatest total 
     dollar amount of commercial-lines insurance in place as of 
     the end of such period.
       (B) Alternate composition.--If any of the State insurance 
     regulators described in subparagraph (A) declines to serve on 
     the Board, the State insurance regulator with the next 
     greatest total dollar amount of commercial-lines insurance in 
     place, as determined by the NAIC as of the end of such 
     period, shall serve as a member of the Board.
       (C) Inoperability.--If fewer than 7 State insurance 
     regulators accept appointment to the Board, the Association 
     shall be established without NAIC oversight pursuant to 
     section 332.
       (d) Terms.--The term of each director shall, after the 
     initial appointment of the members of the Board, be for 3 
     years, with \1/3\ of the directors to be appointed each year.
       (e) Board Vacancies.--A vacancy on the Board shall be 
     filled in the same manner as the original appointment of the 
     initial Board for the remainder of the term of the vacating 
     member.
       (f) Meetings.--The Board shall meet at the call of the 
     chairperson, or as otherwise provided by the bylaws of the 
     Association.

      SEC. 327. OFFICERS.

       (a) In General.--
       (1) Positions.--The officers of the Association shall 
     consist of a chairperson and a vice chairperson of the Board, 
     a president, secretary, and treasurer of the Association, and 
     such other officers and assistant officers as may be deemed 
     necessary.
       (2) Manner of selection.--Each officer of the Board and the 
     Association shall be elected or appointed at such time and in 
     such manner and for such terms not exceeding 3

[[Page H1365]]

     years as may be prescribed in the bylaws of the Association.
       (b) Criteria for Chairperson.-- Only individuals who are 
     members of the National Association of Insurance 
     Commissioners shall be eligible to serve as the chairperson 
     of the board of directors.

      SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.

       (a) Adoption and Amendment of Bylaws.--
       (1) Copy required to be filed with the naic.--The board of 
     directors of the Association shall file with the NAIC a copy 
     of the proposed bylaws or any proposed amendment to the 
     bylaws, accompanied by a concise general statement of the 
     basis and purpose of such proposal.
       (2) Effective date.--Except as provided in paragraph (3), 
     any proposed bylaw or proposed amendment shall take effect--
       (A) 30 days after the date of the filing of a copy with the 
     NAIC;
       (B) upon such later date as the Association may designate; 
     or
       (C) such earlier date as the NAIC may determine.
       (3) Disapproval by the naic.--Notwithstanding paragraph 
     (2), a proposed bylaw or amendment shall not take effect if, 
     after public notice and opportunity to participate in a 
     public hearing--
       (A) the NAIC disapproves such proposal as being contrary to 
     the public interest or contrary to the purposes of this 
     subtitle and provides notice to the Association setting forth 
     the reasons for such disapproval; or
       (B) the NAIC finds that such proposal involves a matter of 
     such significant public interest that public comment should 
     be obtained, in which case it may, after notifying the 
     Association in writing of such finding, require that the 
     procedures set forth in subsection (b) be followed with 
     respect to such proposal, in the same manner as if such 
     proposed bylaw change were a proposed rule change within the 
     meaning of such paragraph.
       (b) Adoption and Amendment of Rules.--
       (1) Filing proposed regulations with the naic.--
       (A) In general.--The board of directors of the Association 
     shall file with the NAIC a copy of any proposed rule or any 
     proposed amendment to a rule of the Association which shall 
     be accompanied by a concise general statement of the basis 
     and purpose of such proposal.
       (B) Other rules and amendments ineffective.--No proposed 
     rule or amendment shall take effect unless approved by the 
     NAIC or otherwise permitted in accordance with this 
     paragraph.
       (2) Initial consideration by the naic.--Within 35 days 
     after the date of publication of notice of filing of a 
     proposal, or before the end of such longer period not to 
     exceed 90 days as the NAIC may designate after such date if 
     the NAIC finds such longer period to be appropriate and sets 
     forth its reasons for so finding, or as to which the 
     Association consents, the NAIC shall--
       (A) by order approve such proposed rule or amendment; or
       (B) institute proceedings to determine whether such 
     proposed rule or amendment should be modified or disapproved.
       (3) NAIC proceedings.--
       (A) In general.--Proceedings instituted by the NAIC with 
     respect to a proposed rule or amendment pursuant to paragraph 
     (2) shall--
       (i) include notice of the grounds for disapproval under 
     consideration;
       (ii) provide opportunity for hearing; and
       (iii) be concluded within 180 days after the date of the 
     Association's filing of such proposed rule or amendment.
       (B) Disposition of proposal.--At the conclusion of any 
     proceeding under subparagraph (A), the NAIC shall, by order, 
     approve or disapprove the proposed rule or amendment.
       (C) Extension of time for consideration.--The NAIC may 
     extend the time for concluding any proceeding under 
     subparagraph (A) for--
       (i) not more than 60 days if the NAIC finds good cause for 
     such extension and sets forth its reasons for so finding; or
       (ii) for such longer period as to which the Association 
     consents.
       (4) Standards for review.--
       (A) Grounds for approval.--The NAIC shall approve a 
     proposed rule or amendment if the NAIC finds that the rule or 
     amendment is in the public interest and is consistent with 
     the purposes of this Act.
       (B) Approval before end of notice period.--The NAIC shall 
     not approve any proposed rule before the end of the 30-day 
     period beginning on the date the Association files proposed 
     rules or amendments in accordance with paragraph (1) unless 
     the NAIC finds good cause for so doing and sets forth the 
     reasons for so finding.
       (5) Alternate procedure.--
       (A) In general.--Notwithstanding any provision of this 
     subsection other than subparagraph (B), a proposed rule or 
     amendment relating to the administration or organization of 
     the Association may take effect--
       (i) upon the date of filing with the NAIC, if such proposed 
     rule or amendment is designated by the Association as 
     relating solely to matters which the NAIC, consistent with 
     the public interest and the purposes of this subsection, 
     determines by rule do not require the procedures set forth in 
     this paragraph; or
       (ii) upon such date as the NAIC shall for good cause 
     determine.
       (B) Abrogation by the naic.--
       (i) In general.--At any time within 60 days after the date 
     of filing of any proposed rule or amendment under 
     subparagraph (A)(i) or (B)(ii), the NAIC may repeal such rule 
     or amendment and require that the rule or amendment be 
     refiled and reviewed in accordance with this paragraph, if 
     the NAIC finds that such action is necessary or appropriate 
     in the public interest, for the protection of insurance 
     producers or policyholders, or otherwise in furtherance of 
     the purposes of this subtitle.
       (ii) Effect of reconsideration by the naic.--Any action of 
     the NAIC pursuant to clause (i) shall--

       (I) not affect the validity or force of a rule change 
     during the period such rule or amendment was in effect; and
       (II) not be considered to be final action.

       (c) Action Required by the NAIC.--The NAIC may, in 
     accordance with such rules as the NAIC determines to be 
     necessary or appropriate to the public interest or to carry 
     out the purposes of this subtitle, require the Association to 
     adopt, amend, or repeal any bylaw, rule or amendment of the 
     Association, whenever adopted.
       (d) Disciplinary Action by the Association.--
       (1) Specification of charges.--In any proceeding to 
     determine whether membership shall be denied, suspended, 
     revoked, and not renewed (hereafter in this section referred 
     to as a ``disciplinary action''), the Association shall bring 
     specific charges, notify such member of such charges and give 
     the member an opportunity to defend against the charges, and 
     keep a record.
       (2) Supporting statement.--A determination to take 
     disciplinary action shall be supported by a statement setting 
     forth--
       (A) any act or practice in which such member has been found 
     to have been engaged;
       (B) the specific provision of this subtitle, the rules or 
     regulations under this subtitle, or the rules of the 
     Association which any such act or practice is deemed to 
     violate; and
       (C) the sanction imposed and the reason for such sanction.
       (e) NAIC Review of Disciplinary Action.--
       (1) Notice to the naic.--If the Association orders any 
     disciplinary action, the Association shall promptly notify 
     the NAIC of such action.
       (2) Review by the naic.--Any disciplinary action taken by 
     the Association shall be subject to review by the NAIC--
       (A) on the NAIC's own motion; or
       (B) upon application by any person aggrieved by such action 
     if such application is filed with the NAIC not more than 30 
     days after the later of--
       (i) the date the notice was filed with the NAIC pursuant to 
     paragraph (1); or
       (ii) the date the notice of the disciplinary action was 
     received by such aggrieved person.
       (f) Effect of Review.--The filing of an application to the 
     NAIC for review of a disciplinary action, or the institution 
     of review by the NAIC on the NAIC's own motion, shall not 
     operate as a stay of disciplinary action unless the NAIC 
     otherwise orders.
       (g) Scope of Review.--
       (A) In general.--In any proceeding to review such action, 
     after notice and the opportunity for hearing, the NAIC 
     shall--
       (i) determine whether the action should be taken;
       (ii) affirm, modify, or rescind the disciplinary sanction; 
     or
       (iii) remand to the Association for further proceedings.
       (B) Dismissal of review.--The NAIC may dismiss a proceeding 
     to review disciplinary action if the NAIC finds that--
       (i) the specific grounds on which the action is based exist 
     in fact;
       (ii) the action is in accordance with applicable rules and 
     regulations; and
       (iii) such rules and regulations are, and were, applied in 
     a manner consistent with the purposes of this Act.

      SEC. 329. ASSESSMENTS.

       (a) Insurance Producers Subject to Assessment.--The 
     Association may establish such application and membership 
     fees as the Association finds necessary to cover the costs of 
     its operations, including fees made reimbursable to the NAIC 
     under subsection (b), except that, in setting such fees, the 
     Association may not discriminate against smaller insurance 
     producers.
       (b) NAIC Assessments.--The NAIC may assess the Association 
     for any costs it incurs under this subtitle.

      SEC. 330. FUNCTIONS OF THE NAIC.

       (a) Administrative Procedure.--Determinations of the NAIC, 
     for purposes of making rules pursuant to section 328, shall 
     be made after appropriate notice and opportunity for a 
     hearing and for submission of views of interested persons.
       (b) Examinations and Reports.--
       (1) The NAIC may make such examinations and inspections of 
     the Association and require the Association to furnish it 
     with such reports and records or copies thereof as the NAIC 
     may consider necessary or appropriate in the public interest 
     or to effectuate the purposes of this subtitle.
       (2) As soon as practicable after the close of each fiscal 
     year, the Association shall submit to the NAIC a written 
     report regarding the conduct of its business, and the 
     exercise of the other rights and powers granted by this 
     subtitle, during such fiscal year. Such report shall include 
     financial statements setting forth the financial position of 
     the Association at the end of such fiscal year and the

[[Page H1366]]

     results of its operations (including the source and 
     application of its funds) for such fiscal year. The NAIC 
     shall transmit such report to the President and the Congress 
     with such comment thereon as the NAIC determines to be 
     appropriate.

      SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIRECTORS, 
                   OFFICERS, AND EMPLOYEES OF THE ASSOCIATION.

       (a) In General.--The Association shall not be deemed to be 
     an insurer or insurance producer within the meaning of any 
     State law, rule, regulation, or order regulating or taxing 
     insurers, insurance producers, or other entities engaged in 
     the business of insurance, including provisions imposing 
     premium taxes, regulating insurer solvency or financial 
     condition, establishing guaranty funds and levying 
     assessments, or requiring claims settlement practices.
       (b) Liability of the Association, Its Directors, Officers, 
     and Employees.--Neither the Association nor any of its 
     directors, officers, or employees shall have any liability to 
     any person for any action taken or omitted in good faith 
     under or in connection with any matter subject to this 
     subtitle.

      SEC. 332. ELIMINATION OF NAIC OVERSIGHT.

       (a) In General.--The Association shall be established 
     without NAIC oversight and the provisions set forth in 
     section 324, subsections (a), (b), (c), and (e) of section 
     328, and sections 329(b) and 330 of this subtitle shall cease 
     to be effective if, at the end of the 2-year period after the 
     date on which the provisions of this subtitle take effect 
     pursuant to section 321--
       (1) at least a majority of the States representing at least 
     50 percent of the total United States commercial-lines 
     insurance premiums have not satisfied the uniformity or 
     reciprocity requirements of subsections (a) and (b) of 
     section 321; and
       (2) the NAIC has not approved the Association's bylaws as 
     required by section 328, the NAIC is unable to operate or 
     supervise the Association, or the Association is not 
     conducting its activities as required under this Act.
       (b) Board Appointments.--If the repeals required by 
     subsection (a) are implemented--
       (1) General appointment power.--The President, with the 
     advice and consent of the United States Senate, shall appoint 
     the members of the Association's Board established under 
     section 326 from lists of candidates recommended to the 
     President by the National Association of Insurance 
     Commissioners.
       (2) Procedures for obtaining national association of 
     insurance commissioners appointment recommendations.--
       (A) Initial determination and recommendations.--After the 
     date on which the provisions of part a of this section take 
     effect, then the National Association of Insurance 
     Commissioners shall have 60 days to provide a list of 
     recommended candidates to the President. If the National 
     Association of Insurance Commissioners fails to provide a 
     list by that date, or if any list that is provided does not 
     include at least 14 recommended candidates or comply with the 
     requirements of section 326(c), the President shall, with the 
     advice and consent of the United States Senate, make the 
     requisite appointments without considering the views of the 
     NAIC.
       (B) Subsequent appointments.--After the initial 
     appointments, the National Association of Insurance 
     Commissioners shall provide a list of at least 6 recommended 
     candidates for the Board to the President by January 15 of 
     each subsequent year. If the National Association of 
     Insurance Commissioners fails to provide a list by that date, 
     or if any list that is provided does not include at least 6 
     recommended candidates or comply with the requirements of 
     section 326(c), the President, with the advice and consent of 
     the Senate, shall make the requisite appointments without 
     considering the views of the NAIC.
       (C) Presidential oversight.--
       (i) Removal.--If the President determines that the 
     Association is not acting in the interests of the public, the 
     President may remove the entire existing Board for the 
     remainder of the term to which the members of the Board were 
     appointed and appoint, with the advice and consent of the 
     Senate, new members to fill the vacancies on the Board for 
     the remainder of such terms.
       (ii) Suspension of rules or actions.--The President, or a 
     person designated by the President for such purpose, may 
     suspend the effectiveness of any rule, or prohibit any 
     action, of the Association which the President or the 
     designee determines is contrary to the public interest.
       (d) Annual Report.--As soon as practicable after the close 
     of each fiscal year, the Association shall submit to the 
     President and to Congress a written report relative to the 
     conduct of its business, and the exercise of the other rights 
     and powers granted by this subtitle, during such fiscal year. 
     Such report shall include financial statements setting forth 
     the financial position of the Association at the end of such 
     fiscal year and the results of its operations (including the 
     source and application of its funds) for such fiscal year.

      SEC. 333. RELATIONSHIP TO STATE LAW.

       (a) Preemption of State Laws.--State laws, regulations, 
     provisions, or actions purporting to regulate insurance 
     producers shall be preempted in the following instances:
       (1) No State shall impede the activities of, take any 
     action against, or apply any provision of law or regulation 
     to, any insurance producer because that insurance producer or 
     any affiliate plans to become, has applied to become, or is a 
     member of the Association.
       (2) No State shall impose any requirement upon a member of 
     the Association that it pay different fees to be licensed or 
     otherwise qualified to do business in that State, including 
     bonding requirements, based on its residency.
       (3) No State shall impose any licensing, appointment, 
     integrity, personal or corporate qualifications, education, 
     training, experience, residency, or continuing education 
     requirement upon a member of the Association that is 
     different than the criteria for membership in the Association 
     or renewal of such membership, except that counter-signature 
     requirements imposed on nonresident producers shall not be 
     deemed to have the effect of limiting or conditioning a 
     producer's activities because of its residence or place of 
     operations under this section.
       (4) No State shall implement the procedures of such State's 
     system of licensing or renewing the licenses of insurance 
     producers in a manner different from the authority of the 
     Association under section 325.
       (b) Savings Provision.--Except as provided in subsection 
     (a), no provision of this section shall be construed as 
     altering or affecting the continuing effectiveness of any 
     law, regulation, provision, or action of any State which 
     purports to regulate insurance producers, including any such 
     law, regulation, provision, or action which purports to 
     regulate unfair trade practices or establish consumer 
     protections, including, but not limited to, countersignature 
     laws.

      SEC. 334. COORDINATION WITH OTHER REGULATORS.

       (a) Coordination With State Insurance Regulators.--The 
     Association shall have the authority to--
       (1) issue uniform insurance producer applications and 
     renewal applications that may be used to apply for the 
     issuance or removal of State licenses, while preserving the 
     ability of each State to impose such conditions on the 
     issuance or renewal of a license as are consistent with 
     section 333;
       (2) establish a central clearinghouse through which members 
     of the Association may apply for the issuance or renewal of 
     licenses in multiple States; and
       (3) establish or utilize a national database for the 
     collection of regulatory information concerning the 
     activities of insurance producers.
       (b) Coordination With the National Association of 
     Securities Dealers.--The Association shall coordinate with 
     the National Association of Securities Dealers in order to 
     ease any administrative burdens that fall on persons that are 
     members of both associations, consistent with the purposes of 
     this subtitle and the Federal securities laws.

      SEC. 335. JUDICIAL REVIEW.

       (a) Jurisdiction.--The appropriate United States district 
     court shall have exclusive jurisdiction over litigation 
     involving the Association, including disputes between the 
     Association and its members that arise under this subtitle. 
     Suits brought in State court involving the Association shall 
     be deemed to have arisen under Federal law and therefore be 
     subject to jurisdiction in the appropriate United States 
     district court.
       (b) Exhaustion of Remedies.--An aggrieved person must 
     exhaust all available administrative remedies before the 
     Association and the NAIC before it may seek judicial review 
     of an Association decision.
       (c) Standards of Review.--The standards set forth in 
     section 553 of title 5, United States Code, shall be applied 
     whenever a rule or bylaw of the Association is under judicial 
     review, and the standards set forth in section 554 of title 
     5, United States Code, shall be applied whenever a 
     disciplinary action of the Association is judicially 
     reviewed.

      SEC. 336. DEFINITIONS.

       For purposes of this subtitle, the following definitions 
     shall apply:
       (1) Insurance.--The term ``insurance'' means any product 
     defined or regulated as insurance by the appropriate State 
     insurance regulatory authority.
       (2) Insurance producer.--The term ``insurance producer'' 
     means any insurance agent or broker, surplus lines broker, 
     insurance consultant, limited insurance representative, and 
     any other person that solicits, negotiates, effects, 
     procures, delivers, renews, continues or binds policies of 
     insurance or offers advice, counsel, opinions or services 
     related to insurance.
       (3) State law.--The term ``State law'' includes all laws, 
     decisions, rules, regulations, or other State action having 
     the effect of law, of any State. A law of the United States 
     applicable only to the District of Columbia shall be treated 
     as a State law rather than a law of the United States.
       (4) State.--The term ``State'' includes any State, the 
     District of Columbia, American Samoa, Guam, Puerto Rico, and 
     the United States Virgin Islands.
       (5) Home state.--The term ``home State'' means the State in 
     which the insurance producer maintains its principal place of 
     residence and is licensed to act as an insurance producer.
 TITLE IV--MERGER OF BANK AND THRIFT HOLDING COMPANIES REGULATORS, AND 
                    BANK AND THRIFT INSURANCE FUNDS

     SEC. 401. SHORT TITLE; DEFINITIONS.

       (a) Short Title.--This title may be cited as the ``Thrift 
     Charter Transition Act of 1998''.

[[Page H1367]]

       (b) Definitions.--Unless otherwise defined in this Act, the 
     terms ``bank holding company'', ``depository institution'', 
     ``Federal savings association'', ``insured depository 
     institution'', ``savings association'', ``State bank'', and 
     ``State savings association'' (as used in the uncodified 
     provisions of this Act) have the same meanings as in section 
     3 of the Federal Deposit Insurance Act, as in effect on the 
     day before the date of enactment of this Act.
  Subtitle A--Facilitating Conversion of Savings Associations to Banks

     SEC. 411. BRANCHES OF FORMER SAVINGS ASSOCIATIONS.

       (a) Branches.--
       (1) Existing branches retained.--Notwithstanding any other 
     provision of law, any depository institution that qualifies 
     under paragraph (2), and any successor to such an 
     institution, may continue to operate any branch or agency 
     that the institution operated as a branch or agency, or was 
     in the process of establishing as a branch or agency, 
     respectively, as of the date of enactment of the Thrift 
     Charter Transition Act of 1998.
       (2) Depository institution defined.--A depository 
     institution qualifies under this paragraph for purposes of 
     paragraph (1) if the institution--
       (A) is a savings association on the date of enactment of 
     the Thrift Charter Transition Act of 1998; or
       (B) has filed an application to become a savings 
     association by the date of enactment of the Thrift Charter 
     Transition Act of 1998.
       (b) Branching Rights Obtained in Assisted Acquisitions.--
     Notwithstanding any other provision of law, if a depository 
     institution has branching rights under a contract entered 
     into with the Federal Home Loan Bank Board or the Federal 
     Savings and Loan Insurance Corporation or pursuant to a 
     resolution of the Federal Home Loan Bank Board or action of 
     the Office of Thrift Supervision or Resolution Trust 
     Corporation as part of a transaction in which the depository 
     institution acquired or merged with a failed or failing 
     savings association (prior to 1992), the depository 
     institution may continue to branch in a manner consistent 
     with that contract, resolution, or action.
       (c) Intrastate Branches.--Any branch operated under 
     subsection (a)(1) in a State other than the depository 
     institution's home State may acquire, establish or operate 
     additional branches in the host State to the same extent as 
     permitted for a national bank with its main office located in 
     the host State.

     SEC. 412. SAVINGS AND LOAN HOLDING COMPANIES.

       Section 3 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1842) is amended by inserting after subsection (f) (as 
     so redesignated by section 102(b)(2) of this Act) the 
     following new subsection:
       ``(g) Savings and Loan Holding Company Powers 
     Grandfathered.--
       ``(1) In general.--A company that qualifies under paragraph 
     (2) may--
       ``(A) maintain or enter into any nonbank affiliation that 
     the company was permitted pursuant to section 10 of the Home 
     Owners' Loan Act to maintain or enter into prior to becoming 
     a bank holding company pursuant to paragraph (2)(C); and
       ``(B) engage in any activity, including holding any asset, 
     in which the company or any affiliate described in 
     subparagraph (A) was permitted pursuant to section 10 of the 
     Home Owners' Loan Act to engage prior to becoming a bank 
     holding company pursuant to paragraph (2)(C).
       ``(2) Qualified grandfathered companies.--
       ``(A) Grandfathered companies defined.--A company qualifies 
     under this paragraph for purposes of paragraph (1) if--
       ``(i) as of September 16, 1997, the company (or any 
     affiliate of such company)--

       ``(I) was a savings and loan holding company (as defined in 
     section 10 of the Home Owners' Loan Act, as in effect on that 
     date); or
       ``(II) had filed an application to become a savings and 
     loan holding company; and

       ``(ii) the company--

       ``(I) becomes a bank holding company by operation of law; 
     or
       ``(II) was exempt from section 4 (as in effect on the date 
     of enactment of the Thrift Charter Transition Act of 1998) 
     under an order issued by the Board under section 4(d) (as in 
     effect on the date of enactment of the Thrift Charter 
     Transition Act of 1998).

       ``(B) Holding companies with identical shareholders.--A 
     company also qualifies under this paragraph for purposes of 
     paragraph (1) if the company--
       ``(i) is formed by a company qualified under subparagraph 
     (A); and
       ``(ii) the shareholders of such company are identical to 
     the shareholders of the company referred to in (i).
       ``(C) Operation of law defined.--For purposes of this 
     subsection, a company becomes a bank holding company by 
     operation of law if the company becomes a bank holding 
     company because a savings association controlled by the 
     company is treated as a bank under an amendment made by the 
     Thrift Charter Transition Act of 1998.
       ``(3) Requirements to retain grandfathered powers.--
       ``(A) In general.--Paragraph (1) shall cease to apply to a 
     company if the company does not comply with this paragraph.
       ``(B) Acquisition of banks .--
       ``(i) In general.--The company may not acquire (by any form 
     of business combination) control of a bank after the date of 
     enactment of the Thrift Charter Transition Act of 1998.
       ``(ii) Exceptions to prohibition.--Clause (i) shall not 
     apply to the acquisition of--

       ``(I) a bank, during the period ending on the date 2 years 
     after the date of enactment of the Thrift Charter Transition 
     Act of 1998, if the acquisition results from the treatment of 
     a savings association as a bank under amendments made by the 
     Thrift Charter Transition Act of 1998;
       ``(II) a bank, if the assets of such bank are merged with 
     an insured depository institution which was controlled by 
     such company before the date of enactment of the Thrift 
     Charter Transition Act of 1998, and if the resulting 
     institution complies with the requirements of Section 10(m) 
     of the Home Owners' Loan Act;
       ``(III) shares held as a bona fide fiduciary (whether with 
     or without the sole discretion to vote such shares);
       ``(IV) shares held by any person as a bona fide fiduciary 
     solely for the benefit of employees of either the company or 
     any subsidiary of the company and the beneficiaries of those 
     employees;
       ``(V) an entity described in section 2(c)(2);
       ``(VI) shares held temporarily pursuant to an underwriting 
     commitment in the normal course of an underwriting business;
       ``(VII) shares held in an account solely for trading 
     purposes;
       ``(VIII) shares over which no control is held other than 
     control of voting rights acquired in the normal course of a 
     proxy solicitation;
       ``(IX) shares or assets acquired in securing or collecting 
     a debt previously contracted in good faith, during the 2-year 
     period beginning on the date of such acquisition or for such 
     additional time (not exceeding 3 years) as the Board may 
     permit if the Board determines that such an extension will 
     not be detrimental to the public interest;
       ``(X) a bank from the Federal Deposit Insurance 
     Corporation, in any capacity; and
       ``(XI) a bank in an acquisition in which the bank has been 
     found to be in danger of default by the appropriate Federal 
     or State authority.

       ``(C) Enforcement of certain asset limitations.--The 
     company may not control a savings association if such savings 
     association, or any successor to such association, fails to 
     comply with the requirements of section 5(c)(2) and section 
     10(m) of the Home Owners' Loan Act as in effect on the day 
     before the date of the enactment of the Thrift Charter 
     Transition Act of 1998.
       ``(4) Grandfathered powers nontransferable.--
       ``(A) In general.--Paragraph (1) shall not apply with 
     respect to any company if after the date of the enactment of 
     the Thrift Charter Transition Act of 1998--
       ``(i) any company (other than a company qualified under 
     paragraph (2)) not under common control with such company as 
     of that date acquires, directly, or indirectly, control of 
     the company; or
       ``(ii) the company is the subject of any merger, 
     consolidation, or other type of business combination as a 
     result of which a company (other than a company qualified 
     under paragraph (2)) not under common control with such 
     company acquires, directly or indirectly, control of such 
     company.
       ``(B) Anti-evasion.--The appropriate Federal banking agency 
     may issue interpretations, regulations, or orders that it 
     deems necessary to administer and carry out the purpose, and 
     prevent evasions, of this paragraph, including determining 
     that (notwithstanding the form of a transaction) the 
     transaction would in substance effect a change in control.
       ``(5) Savings and loan holding companies that become bank 
     holding companies.--
       ``(A) Exclusion from application requirement.--A company 
     that qualifies under subparagraph (B) shall not be required 
     to obtain the approval of the Board under subsection (a) to 
     become a bank holding company if such company becomes a bank 
     holding company after the date of enactment of the Thrift 
     Charter Transition Act of 1998 as a result of the conversion 
     of a savings association subsidiary to a bank or by virtue of 
     the treatment of a savings association subsidiary as a bank 
     under an amendment made by the Thrift Charter Transition Act 
     of 1998.
       ``(B) Companies excluded from application requirement.--A 
     company qualifies for purposes of subparagraph (A) if the 
     company, as of the date of the enactment of the Thrift 
     Charter Transition Act of 1998, was a savings and loan 
     holding company (as defined in section 10(a) of the Home 
     Owners' Loan Act as in effect on that date) or has filed an 
     application to become a savings and loan holding company.
       ``(C) Supervision and regulation of companies that were 
     previously savings and loan holding companies.--
       ``(i) In general.--Any company that qualifies under 
     paragraph (2) and complies with paragraph (3) and was 
     registered and regulated under section 10 of the Home Owners' 
     Loan Act on the day before becoming a bank holding company 
     described in paragraphs (2) and (3) shall continue to be 
     regulated, for a period of 3 years after becoming such 
     holding company, under the terms of section 10 of the Home 
     Owners' Loan Act in the same manner and to the same extent 
     and subject to the same requirements as by the Office of 
     Thrift Supervision before the date of the enactment of the 
     Thrift Charter Transition Act of 1998.

[[Page H1368]]

       ``(ii) Holding company capital exception.--With regard to 
     holding company capital, any company that qualifies under 
     paragraph (2) and complies with paragraph (3) and was 
     registered and regulated under section 10 of the Home Owners' 
     Loan Act before June 19, 1997, or had an application pending 
     to do so on such date, shall continue to be regulated under 
     the terms of section 10 of the Home Owners' Loan Act in the 
     same manner and to the same extent and subject to the same 
     requirements as by the Office of Thrift Supervision before 
     the date of the enactment of the Thrift Charter Transition 
     Act of 1998.
       ``(iii) Submissions to regulators.--A company shall provide 
     for a period of 3 years after becoming a bank holding company 
     described in paragraphs (2) and (3) the appropriate Federal 
     banking agency with--

       ``(I) notice of acquisition of any company not controlled 
     or affiliated on the date of enactment of the Thrift Charter 
     Transition Act of 1998 that is engaged in nonbanking 
     activities within 15 days after completion of any such 
     transaction; and
       ``(II) copies of such quarterly and annual reports as it is 
     otherwise required to file with any other governmental 
     agency.

       ``(iv) Reporting requirements.--The appropriate Federal 
     banking agency may adopt, for a period of 3 years after a 
     company becomes a bank holding company described in 
     paragraphs (2) and (3), reporting requirements substantially 
     similar to and no more burdensome than required by the Office 
     of Thrift Supervision as of January 1, 1997.
       ``(v) Regulatory authority.--The appropriate Federal 
     banking agency shall, for a period of 3 years after a company 
     becomes a bank holding company described in paragraphs (2) 
     and (3)--

       ``(I) have the same authority to examine a company or any 
     subsidiary or affiliate thereof only to the same extent as 
     the Office of Thrift Supervision had as of January 1, 1997; 
     and
       ``(II) conduct only the same type of examination and with 
     the same frequency as the Office of Thrift Supervision prior 
     to January 1, 1997, unless required to prevent an unsafe or 
     unsound activity or course of conduct of the savings 
     institution treated as a bank pursuant to the Thrift Charter 
     Transition Act of 1998.''.

     SEC. 413. TREATMENT OF REFERENCES IN ADJUSTABLE RATE 
                   MORTGAGES.

       (a) Treatment of References in Adjustable Rate Mortgages 
     Issued Before FIRREA.--For purposes of section 402(e) of 
     Financial Institutions Reform, Recovery, and Enactment Act of 
     1989 (12 U.S.C. 1437 note), any reference in such section 
     to--
       (1) the Director of the Office of Thrift Supervision shall 
     be deemed to be a reference to the Secretary of the Treasury; 
     and
       (2) a Savings Association Insurance Fund member shall be 
     deemed to be a reference to an insured depository institution 
     (as defined in section 3 of the Federal Deposit Insurance 
     Act).
       (b) Treatment of References in Adjustable Rate Mortgages 
     Instruments Issued After FIRREA.--
       (1) In general.--For purposes of adjustable rate mortgage 
     instruments that are in effect as of the date of enactment of 
     this Act, any reference in the instrument to the Director of 
     the Office of Thrift Supervision or Savings Association 
     Insurance Fund members shall be treated as a reference to the 
     Secretary of the Treasury or insured depository institutions 
     (as defined in section 3 of the Federal Deposit Insurance 
     Act), as appropriate.
       (2) Substitution for indexes.--If any index used to 
     calculate the applicable interest rate on any adjustable rate 
     mortgage instrument is no longer calculated and made 
     available as a direct or indirect result of the enactment of 
     this title, any index--
       (A) made available by the Secretary of the Treasury; or
       (B) determined by the Secretary of the Treasury, pursuant 
     to paragraph (4), to be substantially similar to the index 
     which is no longer calculated or made available,

     may be substituted by the holder of any such adjustable rate 
     mortgage instrument upon notice to the borrower.
       (3) Agency action required to provide continued 
     availability of indexes.--Promptly after the enactment of 
     this subsection, the Secretary of the Treasury, the 
     Chairperson of the Federal Deposit Insurance Corporation, and 
     the Comptroller of the Currency shall take such action as may 
     be necessary to assure that the indexes prepared by the 
     Director of the Office of Thrift Supervision immediately 
     before the enactment of this subsection and used to calculate 
     the interest rate on adjustable rate mortgage instruments 
     continue to be available.
       (4) Requirements relating to substitute indexes.--If any 
     agency can no longer make available an index pursuant to 
     paragraph (3), an index that is substantially similar to such 
     index may be substituted for such index for purposes of 
     paragraph (2) if the Secretary of the Treasury determines, 
     after notice and opportunity for comment, that--
       (A) the new index is based upon data substantially similar 
     to that of the original index; and
       (B) the substitution of the new index will result in an 
     interest rate substantially similar to the rate in effect at 
     the time the original index became unavailable.

     SEC. 414. COST OF FUNDS INDEXES.

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

     SEC. 421. STATE SAVINGS ASSOCIATIONS TREATED AS STATE BANKS 
                   UNDER FEDERAL BANKING LAW.

       (a) Amendments to the Federal Deposit Insurance Act.--
       (1) Section 44.--Section 44(f) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1831u(f)) is amended by adding at 
     the end the following new paragraph:
       ``(12) Bank.--For purposes of this section, the term `bank' 
     includes any savings association.''.
       (2) Section 3.--Section 3(q) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1813(q)) is amended--
       (A) by inserting ``and'' after the semicolon at the end of 
     paragraph (2);
       (B) by striking ``; and'' at the end of paragraph (3) and 
     inserting a period; and
       (C) by striking paragraph (4).
       (b) Amendments to the Bank Holding Company Act of 1956.--
       (1) Section 2(a)(5) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841(a)(5)) is amended by striking subparagraph 
     (E).
       (2) Section 2(c)(1) of the Bank Holding Company Act is 
     amended by inserting after subparagraph (C) (as added by 
     section 133(a)(2) of this Act) the following new 
     subparagraph:
       ``(D) A savings association.''.
       (3) Section 2(c)(2)(B) of the Bank Holding Company Act is 
     amended to read as follows:
       ``(B) [Repealed].''.
       (4) Section 4(i) of the Bank Holding Company Act is amended 
     to read as follows:
       ``(i) [Repealed].''.
       (c) Amendments to the Home Owners' Loan Act.--Section 5(r) 
     of the Home Owners' Loan Act is amended to read as follows:
       ``(r) In-State Branches.--Subject to section 411 of the 
     Thrift Charter Transition Act of 1998, a Federal savings 
     association may only retain, establish, or operate branches 
     within a State to the same extent a national bank can.''.
       (d) Effective Date.--The amendments made by subsections 
     (a)(2) and (b) shall take effect on January 1, 2000.

     SEC. 422. AMENDMENTS TO THE HOME OWNERS' LOAN ACT.

       (a) Sections 1, 2, and 3.--Sections 1, 2, and 3 of the Home 
     Owners' Loan Act (12 U.S.C. 1461 et seq.) are amended to read 
     as follows:

     ``SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

       ``This Act may be cited as the `Home Owners' Loan Act'.

[[Page H1369]]

                          ``TABLE OF CONTENTS

``Sec. 1. Short title and table of contents.
``Sec. 2. Definitions.
``Sec. 3. Director of the Division of Thrift Supervision.
``Sec. 4. Supervision of savings associations.
``Sec. 5. Federal savings associations.
``Sec. 6. Liquid asset requirements.
``Sec. 7. Applicability.
``Sec. 8. District associations.
``Sec. 9. Examination fees.
``Sec. 10. Qualified thrift lending and mutual holding companies.
``Sec. 11. Transactions with affiliates; extensions of credit to 
              executive officers, directors, and principal 
              shareholders.
``Sec. 12. Advertising.
``Sec. 13. Powers of examiners.
``Sec. 14. Separability provision.

     ``SEC. 2. DEFINITIONS.

       ``For purposes of this Act--
       ``(1) Director.--The term `Director' means the Director of 
     the Division of Thrift Supervision.
       ``(2) Corporation.--The term `Corporation' means the 
     Federal Deposit Insurance Corporation.
       ``(3) Office.--The term `Office' means the Division of 
     Thrift Supervision established under section 3(a).
       ``(4) Savings association.--The term `savings association' 
     means a savings association, as defined in section 3 of the 
     Federal Deposit Insurance Act, the deposits of which are 
     insured by the Corporation.
       ``(5) Federal savings association.--The term `Federal 
     savings association' means a Federal savings association or a 
     Federal savings bank chartered under section 5 of this Act.
       ``(6) National bank.--The term `national bank' has the same 
     meaning as in section 3 of the Federal Deposit Insurance Act.
       ``(7) Federal banking agencies.--The term `Federal banking 
     agencies' means the Office of the Comptroller of the 
     Currency, the Board of Governors of the Federal Reserve 
     System, and the Federal Deposit Insurance Corporation.
       ``(8) State.--The term `State' has the same meaning as in 
     section 3 of the Federal Deposit Insurance Act.
       ``(9) Affiliate.--The term `affiliate' means any person 
     that controls, is controlled by, or is under common control 
     with, a savings association, except as provided in section 
     10.

     ``SEC. 3. DIRECTOR OF THE DIVISION OF THRIFT SUPERVISION.

       ``(a) Establishment of Division.--There is established the 
     Division of Thrift Supervision, which shall be a division of 
     the Office of the Comptroller of the Currency.
       ``(b) Establishment of Position of Director.--
       ``(1) In general.--There is established the position of the 
     Director of the Division of Thrift Supervision, who shall be 
     the head of the Division of Thrift Supervision and shall be 
     subject to the general oversight of the Comptroller of the 
     Currency.
       ``(2) Authority to prescribe regulations.--The Comptroller 
     of the Currency, acting through the Director, may prescribe 
     such regulations and issue such orders as the Comptroller of 
     the Currency, acting through the Director, may determine to 
     be necessary for carrying out this Act and all other laws 
     within the jurisdiction of this Act.
       ``(3) Banking agency rulemaking.--The Secretary of the 
     Treasury may not delay or prevent the issuance of any rule or 
     the promulgation of any regulation by the Comptroller of the 
     Currency, acting through the Director.
       ``(c) Appointment.--The Director shall be appointed by and 
     serve at the pleasure of the Comptroller of the Currency.
       ``(d) Prohibition on Financial Interests.--The Director 
     shall not have a direct or indirect financial interest in any 
     insured depository institution, as defined in section 3 of 
     the Federal Deposit Insurance Act.
       ``(e) Powers of the Comptroller of the Currency With 
     Respect to the Supervision of Savings Associations.--
       ``(1) In general.--The Comptroller of the Currency shall 
     have--
       ``(A) all powers which--
       ``(i) were vested in the Federal Home Loan Bank Board (in 
     the Board's capacity as such) or the Chairman of such Board 
     on the day before the date of the enactment of the Financial 
     Institutions Reform, Recovery, and Enforcement Act of 1989; 
     and
       ``(ii) were not--

       ``(I) transferred to the Federal Deposit Insurance 
     Corporation, the Federal Housing Finance Board, the 
     Resolution Trust Corporation, or the Federal Home Loan 
     Mortgage Corporation pursuant to any amendment made by such 
     Act; or
       ``(II) established under any provision of law repealed by 
     such Act; and

       ``(B) all other powers which were vested in the Director of 
     the Office of Thrift Supervision as of the day before the 
     date of the enactment of the Thrift Charter Transition Act of 
     1998.
       ``(2) Delegation.--The Comptroller of the Currency may 
     delegate such authority to the Director as may be necessary 
     or appropriate for purposes of carrying out this Act.
       ``(f) Funding Through Assessments.--The compensation of the 
     Director and other employees of the Office and all other 
     expenses thereof may be paid from assessments levied under 
     this Act.
       ``(g) GAO Audit.--The Comptroller of the Currency, acting 
     through the Director, shall make available to the Comptroller 
     General of the United States all books and records necessary 
     to audit all of the activities of the Office of Thrift 
     Supervision.''.
       (b) Section 10.--Section 10 of the Home Owners' Loan Act 
     (12 U.S.C. 1467a) is amended to read as follows:

     ``SEC. 10. QUALIFIED THRIFT LENDING AND MUTUAL HOLDING 
                   COMPANIES.

       ``(a) Definitions.--
       ``(1) In general.--As used in this section, unless the 
     context otherwise requires--
       ``(A) Savings association.--The term `savings association' 
     includes a savings bank or cooperative bank which is deemed 
     by the Comptroller of the Currency, acting through the 
     Director, to be a savings association under subsection (l).
       ``(B) Uninsured institution.--The term `uninsured 
     institution' means any depository institution the deposits of 
     which are not insured by the Federal Deposit Insurance 
     Corporation.
       ``(C) Company.--The term `company' means any corporation, 
     partnership, trust, joint-stock company, or similar 
     organization, but does not include the Federal Deposit 
     Insurance Corporation, the Resolution Trust Corporation, any 
     Federal home loan bank, or any company the majority of the 
     shares of which is owned by the United States or any State, 
     or by an instrumentality of the United States or any State.
       ``(D) Subsidiary.--The term `subsidiary' has the same 
     meaning as in section 3 of the Federal Deposit Insurance Act.
       ``(E) Affiliate.--The term `affiliate' of a savings 
     association means any person which controls, is controlled 
     by, or is under common control with, such savings 
     association.
       ``(F) Bank holding company.--The terms `bank holding 
     company' and `bank' have the meanings given to such terms in 
     section 2 of the Bank Holding Company Act of 1956.
       ``(G) Acquire.--The term `acquire' has the meaning given to 
     such term in section 13(f)(8) of the Federal Deposit 
     Insurance Act.
       ``(2) Control.--For purposes of this section, a person 
     shall be deemed to have control of--
       ``(A) a savings association if the person directly or 
     indirectly or acting in concert with one or more other 
     persons, or through one or more subsidiaries, owns, controls, 
     or holds with power to vote, or holds proxies representing, 
     more than 25 percent of the voting shares of such savings 
     association, or controls in any manner the election of a 
     majority of the directors of such association;
       ``(B) any other company if the person directly or 
     indirectly or acting in concert with one or more other 
     persons, or through one or more subsidiaries, owns, controls, 
     or holds with power to vote, or holds proxies representing, 
     more than 25 percent of the voting shares or rights of such 
     other company, or controls in any manner the election or 
     appointment of a majority of the directors or trustees of 
     such other company, or is a general partner in or has 
     contributed more than 25 percent of the capital of such other 
     company;
       ``(C) a trust if the person is a trustee thereof; or
       ``(D) a savings association or any other company if the 
     Comptroller of the Currency, acting through the Director, 
     determines, after reasonable notice and opportunity for 
     hearing, that such person directly or indirectly exercises a 
     controlling influence over the management or policies of such 
     association or other company.
       ``(b) Administration and Enforcement.--
       ``(1) In general.--The Comptroller of the Currency may 
     issue such regulations and orders as the Comptroller of the 
     Currency deems necessary or appropriate to enable the 
     Comptroller of the Currency, acting through the Director, to 
     administer and carry out the purposes of this section, and to 
     require compliance therewith and prevent evasions thereof.
       ``(2) Investigations.--The Comptroller of the Currency, 
     acting through the Director, may make such investigations as 
     the Comptroller of the Currency deems necessary or 
     appropriate to determine whether the provisions of this 
     section, and regulations and orders thereunder, are being and 
     have been complied with by savings associations and mutual 
     holding companies and subsidiaries and affiliates thereof. 
     For the purpose of any investigation under this section, the 
     Comptroller of the Currency, acting through the Director, may 
     administer oaths and affirmations, issue subpoenas, take 
     evidence, and require the production of any books, papers, 
     correspondence, memorandums, or other records which may be 
     relevant or material to the inquiry. The attendance of 
     witnesses and the production of any such records may be 
     required from any place in any State. The Comptroller of the 
     Currency may apply to the United States district court for 
     the judicial district (or the United States court in any 
     territory) in which any witness or company subpoenaed resides 
     or carries on business, for enforcement of any subpoena 
     issued pursuant to this paragraph, and such courts shall have 
     jurisdiction and power to order and require compliance.
       ``(3) Proceedings.--
       ``(A) In general.--In any proceeding under subsection 
     (a)(2)(D) or under paragraph (5) of this subsection, the 
     Comptroller of the Currency, acting through the Director, may 
     administer oaths and affirmations, take or cause to be taken 
     depositions, and issue subpoenas. The Comptroller of the 
     Currency may make regulations with respect to any

[[Page H1370]]

     such proceedings. The attendance of witnesses and the 
     production of documents provided for in this paragraph may be 
     required from any place in any State or in any territory at 
     any designated place where such proceeding is being 
     conducted. Any party to such proceedings may apply to the 
     United States District Court for the District of Columbia, or 
     the United States district court for the judicial district or 
     the United States court in any territory in which such 
     proceeding is being conducted, or where the witness resides 
     or carries on business, for enforcement of any subpoena 
     issued pursuant to this paragraph, and such courts shall have 
     jurisdiction and power to order and require compliance 
     therewith. Witnesses subpoenaed under this section shall be 
     paid the same fees and mileage that are paid witnesses in the 
     district courts of the United States.
       ``(B) Any hearing provided for in subsection (a)(2)(D) or 
     under paragraph (5) of this subsection shall be held in the 
     Federal judicial district or in the territory in which the 
     principal office of the association or other company is 
     located unless the party afforded the hearing consents to 
     another place, and shall be conducted in accordance with the 
     provisions of chapter 5 of title 5, United States Code.
       ``(4) Injunctions.--Whenever it appears to the Comptroller 
     of the Currency, acting through the Director, that any person 
     is engaged or has engaged or is about to engage in any acts 
     or practices which constitute or will constitute a violation 
     of the provisions of this section or of any regulation or 
     order thereunder, the Comptroller of the Currency, acting 
     through the Director, may bring an action in the proper 
     United States district court, or the United States court of 
     any territory or other place subject to the jurisdiction of 
     the United States, to enjoin such acts or practices, to 
     enforce compliance with this section or any regulation or 
     order, or to require the divestiture of any acquisition in 
     violation of this section, or for any combination of the 
     foregoing, and such courts shall have jurisdiction of such 
     actions. Upon a proper showing an injunction, decree, 
     restraining order, order of divestiture, or other appropriate 
     order shall be granted without bond.
       ``(c) Penalties.--
       ``(1) Criminal penalty.--
       ``(A) Violation of section.--Whoever knowingly violates any 
     provision of this section or being a company, violates any 
     regulation or order issued by the Comptroller of the 
     Currency, acting through the Director, under this section, 
     shall be imprisoned not more than 1 year, fined not more than 
     $100,000 per day for each day during which the violation 
     continues, or both.
       ``(B) Violation of section with intent to deceive, defraud, 
     or profit significantly.--Whoever, with the intent to 
     deceive, defraud, or profit significantly, knowingly violates 
     any provision of this section shall be fined not more than 
     $1,000,000 per day for each day during which the violation 
     continues, imprisoned not more than 5 years, or both.
       ``(2) Civil money penalty.--
       ``(A) Penalty.--Any company which violates, and any person 
     who participates in a violation of, any provision of this 
     section, or any regulation or order issued pursuant thereto, 
     shall forfeit and pay a civil penalty of not more than 
     $25,000 for each day during which such violation continues.
       ``(B) Assessment.--Any penalty imposed under subparagraph 
     (A) may be assessed and collected by the Comptroller of the 
     Currency, acting through the Director, in the manner provided 
     in subparagraphs (E), (F), (G), and (I) of section 8(i)(2) of 
     the Federal Deposit Insurance Act for penalties imposed 
     (under such section) and any such assessment shall be subject 
     to the provisions of such section.
       ``(C) Hearing.--The company or other person against whom 
     any civil penalty is assessed under this paragraph shall be 
     afforded a hearing if such company or person submits a 
     request for such hearing within 20 days after the issuance of 
     the notice of assessment. Section 8(h) of the Federal Deposit 
     Insurance Act shall apply to any proceeding under this 
     paragraph.
       ``(D) Disbursement.--All penalties collected under 
     authority of this paragraph shall be deposited into the 
     Treasury.
       ``(E) Violate defined.--For purposes of this section, the 
     term `violate' includes any action (alone or with another or 
     others) for or toward causing, bringing about, participating 
     in, counseling, or aiding or abetting a violation.
       ``(F) Regulations.--The Comptroller of the Currency, acting 
     through the Director, shall prescribe regulations 
     establishing such procedures as may be necessary to carry out 
     this paragraph.
       ``(3) Notice under this section after separation from 
     service.--The resignation, termination of employment or 
     participation, or separation of an institution-affiliated 
     party (within the meaning of section 3(u) of the Federal 
     Deposit Insurance Act) with respect to a savings and loan 
     holding company or subsidiary thereof (including a separation 
     caused by the deregistration of such a company or such a 
     subsidiary) shall not affect the jurisdiction and authority 
     of the Comptroller of the Currency, acting through the 
     Director, to issue any notice and proceed under this section 
     against any such party, if such notice is served before the 
     end of the 6-year period beginning on the date such party 
     ceased to be such a party with respect to such holding 
     company or its subsidiary (whether such date occurs before, 
     on, or after the date of the enactment of this paragraph).
       ``(d) Judicial Review.--Any party aggrieved by an order of 
     the Comptroller of the Currency, acting through the Director, 
     under this section may obtain a review of such order by 
     filing in the court of appeals of the United States for the 
     circuit in which the principal office of such party is 
     located, or in the United States Court of Appeals for the 
     District of Columbia Circuit, within 30 days after the date 
     of service of such order, a written petition praying that the 
     order of the Comptroller of the Currency be modified, 
     terminated, or set aside. A copy of the petition shall be 
     forthwith transmitted by the clerk of the court to the 
     Comptroller of the Currency, and thereupon the Comptroller of 
     the Currency, acting through the Director, shall file in the 
     court the record in the proceeding, as provided in section 
     2112 of title 28, United States Code. Upon the filing of such 
     petition, such court shall have jurisdiction, which upon the 
     filing of the record shall be exclusive, to affirm, modify, 
     terminate, or set aside, in whole or in part, the order of 
     the Comptroller of the Currency. Review of such proceedings 
     shall be had as provided in chapter 7 of title 5, United 
     States Code. The judgment and decree of the court shall be 
     final, except that the same shall be subject to review by the 
     Supreme Court upon certiorari as provided in section 1254 of 
     title 28, United States Code.
       ``(e) Treatment of FDIC Insured State Savings Banks and 
     Cooperative Banks as Savings Associations.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, a savings bank (as defined in section 3(g) of the 
     Federal Deposit Insurance Act) and a cooperative bank that is 
     an insured bank (as defined in section 3(h) of the Federal 
     Deposit Insurance Act) upon application shall be deemed to be 
     a savings association for the purpose of this section, if the 
     Comptroller of the Currency, acting through the Director, 
     determines that such bank is a qualified thrift lender (as 
     determined under subsection (f)).
       (2) Failure to maintain qualified thrift lender status.--If 
     any savings bank which is deemed to be a savings association 
     under paragraph (1) subsequently fails to maintain its status 
     as a qualified thrift lender, as determined by the 
     Comptroller of the Currency (acting through the Director), 
     such bank may not thereafter be a qualified thrift lender for 
     a period of 5 years.
       ``(f) Qualified Thrift Lender Test.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (7), any savings association is a qualified thrift lender 
     if--
       ``(A) either--
       ``(i) the savings association qualifies as a domestic 
     building and loan association, as such term is defined in 
     section 7701(a)(19) of the Internal Revenue Code of 1986; or
       ``(ii)(I) the savings association's qualified thrift 
     investments equal or exceed 65 percent of the savings 
     association's portfolio assets; and
       ``(II) the savings association's qualified thrift 
     investments continue to equal or exceed 65 percent of the 
     savings association's portfolio assets on a monthly average 
     basis in 9 out of every 12 months; and
       ``(B) at least 10 percent of the portfolio assets of the 
     savings association consists of mortgages secured by domestic 
     residential housing or manufactured homes or securities 
     backed by or representing an interest in mortgages which were 
     originated by the savings association and sold within 90 days 
     of origination and are backed by domestic residential housing 
     or manufactured homes.
       ``(2) Exceptions granted by comptroller of the currency, 
     acting through the director.--Notwithstanding paragraph (1), 
     the Comptroller of the Currency, acting through the Director, 
     may grant such temporary and limited exceptions from the 
     minimum actual thrift investment percentage requirement 
     contained in such paragraph as the Comptroller of the 
     Currency, acting through the Director, deems necessary if--
       ``(A) the Comptroller of the Currency, acting through the 
     Director, determines that extraordinary circumstances exist, 
     such as when the effects of high interest rates reduce 
     mortgage demand to such a degree that an insufficient 
     opportunity exists for a savings association to meet such 
     investment requirements; or
       ``(B) the Comptroller of the Currency, acting through the 
     Director, determines that--
       ``(i) the grant of any such exception will significantly 
     facilitate an acquisition under section 13(c) or 13(k) of the 
     Federal Deposit Insurance Act;
       ``(ii) the acquired association will comply with the 
     transition requirements of paragraph (7)(B), as if the date 
     of the exemption were the starting date for the transition 
     period described in that paragraph; and
       ``(iii) the Comptroller of the Currency, acting through the 
     Director, determines that the exemption will not have an 
     undue adverse effect on competing savings associations in the 
     relevant market and will further the purposes of this 
     subsection.
       ``(3) Failure to become and remain a qualified thrift 
     lender.--
       ``(A) In general.--A savings association that fails to 
     become or remain a qualified thrift lender shall either 
     become one or more banks (other than a savings bank) or be 
     subject to subparagraph (B), except as provided in 
     subparagraph (D).
       ``(B) Restrictions applicable to savings associations that 
     are not qualified thrift lenders.--

[[Page H1371]]

       ``(i) Restrictions effective immediately.--The following 
     restrictions shall apply to a savings association beginning 
     on the date on which the savings association should have 
     become or ceases to be a qualified thrift lender:

       ``(I) Activities.--The savings association shall not make 
     any new investment (including an investment in a subsidiary) 
     or engage, directly or indirectly, in any other new activity 
     unless that investment or activity would be permissible for 
     the savings association if it were a national bank, and is 
     also permissible for the savings association as a savings 
     association.
       ``(II) Advances.--The savings association shall not be 
     eligible to obtain new advances from any Federal home loan 
     bank.
       ``(III) Dividends.--The savings association shall be 
     subject to all statutes and regulations governing the payment 
     of dividends by a national bank in the same manner and to the 
     same extent as if the savings association were a national 
     bank.

       ``(ii) Additional restrictions effective after three 
     years.--The following additional restrictions shall apply to 
     a savings association beginning 3 years after the date on 
     which the savings association should have become or ceases to 
     be a qualified thrift lender:

       ``(I) Activities.--The savings association shall not retain 
     any investment (including an investment in any subsidiary) or 
     engage, directly or indirectly, in any activity unless that 
     investment or activity would be permissible for the savings 
     association if it were a national bank, and is also 
     permissible for the savings association as a savings 
     association.
       ``(II) Advances.--The savings association shall repay any 
     outstanding advances from any Federal home loan bank as 
     promptly as can be prudently done consistent with the safe 
     and sound operation of the savings association.

       ``(C) Requalification.--A savings association that should 
     have become or ceases to be a qualified thrift lender shall 
     not be subject to subparagraph (B) if the savings association 
     becomes a qualified thrift lender by meeting the qualified 
     thrift lender requirement in paragraph (1) on a monthly 
     average basis in 9 out of the preceding 12 months and remains 
     a qualified thrift lender. If the savings association (or any 
     savings association that acquired all or substantially all of 
     its assets from that savings association) at any time 
     thereafter ceases to be a qualified thrift lender, it shall 
     immediately be subject to all provisions of subparagraphs (B) 
     as if all the periods described in subparagraph (B)(ii) had 
     expired.
       ``(D) Deposit insurance assessments.--Any bank chartered as 
     a result of the requirements of this section shall be 
     obligated until December 31, 1993, to pay to the Savings 
     Association Insurance Fund the assessments assessed on 
     savings associations under the Federal Deposit Insurance Act. 
     Such association shall also be assessed, on the date of its 
     change of status from a Savings Association Insurance Fund 
     member, the exit fee and entrance fee provided in section 
     5(d) of the Federal Deposit Insurance Act. Such institution 
     shall not be obligated to pay the assessments assessed on 
     banks under the Federal Deposit Insurance Act until--
       ``(i) December 31, 1993, or
       ``(ii) the institution's change of status from a Savings 
     Association Insurance Fund member to a Bank Insurance Fund 
     member,
     whichever is later.
       ``(E) Exemption for specialized savings associations 
     serving certain military personnel.--Subparagraph (A) shall 
     not apply to a savings association subsidiary of a holding 
     company if at least 90 percent of the customers of the 
     holding company and its subsidiaries and affiliates are 
     active or former members in the United States military 
     services or the widows, widowers, divorced spouses, or 
     current or former dependents of such members.
       ``(G) Exemption for certain federal savings associations.--
     This paragraph shall not apply to any Federal savings 
     association in existence as a Federal savings association on 
     the date of enactment of the Financial Institutions Reform, 
     Recovery, and Enforcement Act of 1989--
       ``(i) that was chartered before October 15, 1982, as a 
     savings bank or a cooperative bank under State law; or
       ``(ii) that acquired its principal assets from an 
     association that was chartered before October 15, 1982, as a 
     savings bank or a cooperative bank under State law.
       ``(H) No circumvention of exit moratorium.--Subparagraph 
     (A) of this paragraph shall not be construed as permitting 
     any insured depository institution to engage in any 
     conversion transaction prohibited under section 5(d) of the 
     Federal Deposit Insurance Act.
       ``(4) Definitions.--For purposes of this subsection, the 
     following definitions shall apply:
       ``(A) Actual thrift investment percentage.--The term 
     `actual thrift investment percentage' means the percentage 
     determined by dividing--
       ``(i) the amount of a savings association's qualified 
     thrift investments, by
       ``(ii) the amount of the savings association's portfolio 
     assets.
       ``(B) Portfolio assets.--The term `portfolio assets' means, 
     with respect to any savings association, the total assets of 
     the savings association, minus the sum of--
       ``(i) goodwill and other intangible assets;
       ``(ii) the value of property used by the savings 
     association to conduct its business; and
       ``(iii) liquid assets of the type required to be maintained 
     under section 6 of the Home Owners' Loan Act, in an amount 
     not exceeding the amount equal to 20 percent of the savings 
     association's total assets.
       ``(C) Qualified thrift investments.--
       ``(i) In general.--The term `qualified thrift investments' 
     means, with respect to any savings association, the assets of 
     the savings association that are described in clauses (ii) 
     and (iii).
       ``(ii) Assets includible without limit.--The following 
     assets are described in this clause for purposes of clause 
     (i):

       ``(I) The aggregate amount of loans held by the savings 
     association that were made to purchase, refinance, construct, 
     improve, or repair domestic residential housing or 
     manufactured housing.
       ``(II) Home-equity loans.
       ``(III) Securities backed by or representing an interest in 
     mortgages on domestic residential housing or manufactured 
     housing.
       ``(IV) Existing obligations of deposit insurance 
     agencies.--Direct or indirect obligations of the Federal 
     Deposit Insurance Corporation or the Federal Savings and Loan 
     Insurance Corporation issued in accordance with the terms of 
     agreements entered into prior to July 1, 1989, for the 10-
     year period beginning on the date of issuance of such 
     obligations.
       ``(V) New obligations of deposit insurance agencies.--
     Obligations of the Federal Deposit Insurance Corporation, the 
     Federal Savings and Loan Insurance Corporation, the FSLIC 
     Resolution Fund, and the Resolution Trust Corporation issued 
     in accordance with the terms of agreements entered into on or 
     after July 1, 1989, for the 5-year period beginning on the 
     date of issuance of such obligations.
       ``(VI) Shares of stock issued by any Federal home loan 
     bank.
       ``(VII) Loans for educational purposes, loans to small 
     businesses, and loans made through credit cards or credit 
     card accounts.

       ``(iii) Assets includible subject to percentage 
     restriction.--The following assets are described in this 
     clause for purposes of clause (i):

       ``(I) 50 percent of the dollar amount of the residential 
     mortgage loans originated by such savings association and 
     sold within 90 days of origination.
       ``(II) Investments in the capital stock or obligations of, 
     and any other security issued by, any service corporation if 
     such service corporation derives at least 80 percent of its 
     annual gross revenues from activities directly related to 
     purchasing, refinancing, constructing, improving, or 
     repairing domestic residential real estate or manufactured 
     housing.
       ``(III) 200 percent of the dollar amount of loans and 
     investments made to acquire, develop, and construct 1- to 4-
     family residences the purchase price of which is or is 
     guaranteed to be not greater than 60 percent of the median 
     value of comparable newly constructed 1- to 4-family 
     residences within the local community in which such real 
     estate is located, except that not more than 25 percent of 
     the amount included under this subclause may consist of 
     commercial properties related to the development if those 
     properties are directly related to providing services to 
     residents of the development.
       ``(IV) 200 percent of the dollar amount of loans for the 
     acquisition or improvement of residential real property, 
     churches, schools, and nursing homes located within, and 
     loans for any other purpose to any small businesses located 
     within any area which has been identified by the Comptroller 
     of the Currency, acting through the Director, in connection 
     with any review or examination of community reinvestment 
     practices, as a geographic area or neighborhood in which the 
     credit needs of the low- and moderate-income residents of 
     such area or neighborhood are not being adequately met.
       ``(V) Loans for the purchase or construction of churches, 
     schools, nursing homes, and hospitals, other than those 
     qualifying under clause (IV), and loans for the improvement 
     and upkeep of such properties.
       ``(VI) Loans for personal, family, or household purposes 
     (other than loans for personal, family, or household purposes 
     described in clause (ii)(VII)).
       ``(VII) Shares of stock issued by the Federal Home Loan 
     Mortgage Corporation or the Federal National Mortgage 
     Association.

       ``(iv) Percentage restriction applicable to certain 
     assets.--The aggregate amount of the assets described in 
     clause (iii) which may be taken into account in determining 
     the amount of the qualified thrift investments of any savings 
     association shall not exceed the amount which is equal to 20 
     percent of a savings association's portfolio assets.
       ``(v) Exclusions from definition of qualified thrift 
     investments.--The term `qualified thrift investments' 
     excludes--

       ``(I) except for home equity loans, that portion of any 
     loan or investment that is used for any purpose other than 
     those expressly qualifying under any subparagraph of clause 
     (ii) or (iii); or
       ``(II) goodwill or any other intangible asset.

       ``(D) Credit card.--The Comptroller of the Currency, acting 
     through the Director, shall issue such regulations as may be 
     necessary to define the term `credit card'.
       ``(E) Small business.--The Comptroller of the Currency, 
     acting through the Director, shall issue such regulations as 
     may be necessary to define the term `small business'.
       ``(5) Consistent accounting required.--

[[Page H1372]]

       ``(A) In determining the amount of a savings association's 
     portfolio assets, the assets of any subsidiary of the savings 
     association shall be consolidated with the assets of the 
     savings association if--
       ``(i) Assets of the subsidiary are consolidated with the 
     assets of the savings association in determining the savings 
     association's qualified thrift investments; or
       ``(ii) Residential mortgage loans originated by the 
     subsidiary are included pursuant to paragraph (4)(C)(iii)(I) 
     in determining the savings association's qualified thrift 
     investments.
       ``(B) In determining the amount of a savings association's 
     portfolio assets and qualified thrift investments, consistent 
     accounting principles shall be applied.
       ``(6) Special rules for puerto rico and virgin islands 
     savings associations.--
       ``(A) Puerto rico savings associations.--With respect to 
     any savings association headquartered and operating primarily 
     in Puerto Rico--
       ``(i) the term `qualified thrift investments' includes, in 
     addition to the items specified in paragraph (4)--

       ``(I) the aggregate amount of loans for personal, family, 
     educational, or household purposes made to persons residing 
     or domiciled in the Commonwealth of Puerto Rico; and
       ``(II) the aggregate amount of loans for the acquisition or 
     improvement of churches, schools, or nursing homes, and of 
     loans to small businesses, located within the Commonwealth of 
     Puerto Rico; and

       ``(ii) the aggregate amount of loans related to the 
     purchase, acquisition, development and construction of 1- to 
     4-family residential real estate--

       ``(I) which is located within the Commonwealth of Puerto 
     Rico; and
       ``(II) the value of which (at the time of acquisition or 
     upon completion of the development and construction) is below 
     the median value of newly constructed 1- to 4-family 
     residences in the Commonwealth of Puerto Rico, which may be 
     taken into account in determining the amount of the qualified 
     thrift investments and of such savings association shall be 
     doubled.

       ``(B) Virgin islands savings associations.--With respect to 
     any savings association headquartered and operating primarily 
     in the Virgin Islands--
       ``(i) the term `qualified thrift investments' includes, in 
     addition to the items specified in paragraph (4)--

       ``(I) the aggregate amount of loans for personal, family, 
     educational, or household purposes made to persons residing 
     or domiciled in the Virgin Islands; and
       ``(II) the aggregate amount of loans for the acquisition or 
     improvement of churches, schools, or nursing homes, and of 
     loans to small businesses, located within the Virgin Islands; 
     and

       ``(ii) the aggregate amount of loans related to the 
     purchase, acquisition, development and construction of 1- to 
     4-family residential real estate--

       ``(I) which is located within the Virgin Islands; and
       ``(II) the value of which (at the time of acquisition or 
     upon completion of the development and construction) is below 
     the median value of newly constructed 1- to 4-family 
     residences in the Virgin Islands, which may be taken into 
     account in determining the amount of the qualified thrift 
     investments and of such savings association shall be doubled.

       ``(7) Transitional rule for certain savings associations.--
       ``(A) In general.--If any Federal savings association in 
     existence as a Federal savings association on the date of 
     enactment of the Financial Institutions Reform, Recovery, and 
     Enforcement Act of 1989--
       ``(i) that was chartered as a savings bank or a cooperative 
     bank under State law before October 15, 1982; or
       ``(ii) that acquired its principal assets from an 
     association that was chartered before October 15, 1982, as a 
     savings bank or a cooperative bank under State law,

     meets the requirements of subparagraph (B), such savings 
     association shall be treated as a qualified thrift lender 
     during the period ending on September 30, 1995.
       ``(B) Subparagraph (b) requirements.--A savings association 
     meets the requirements of this subparagraph if, in the 
     determination of the Comptroller of the Currency, acting 
     through the Director--
       ``(i) the actual thrift investment percentage of such 
     association does not, after the date of enactment of the 
     Financial Institutions Reform, Recovery, and Enforcement Act 
     of 1989, decrease below the actual thrift investment 
     percentage of such association on July 15, 1989; and
       ``(ii) the amount by which--

       ``(I) the actual thrift investment percentage of such 
     association at the end of each period described in the 
     following table, exceeds
       ``(II) the actual thrift investment percentage of such 
     association on July 15, 1989,

     is equal to or greater than the applicable percentage (as 
     determined under the following table) of the amount by which 
     70 percent exceeds the actual thrift investment percentage of 
     such association on such date of enactment:

      For the following                                  The applicable
      period:                                            percentage is:
      July 1, 1991-September 30, 1992........................25 percent
      October 1, 1992-March 31, 1994.........................50 percent
      April 1, 1994-September 30, 1995.......................75 percent
      Thereafter............................................100 percent

       ``(C) For purposes of this paragraph, the actual thrift 
     investment percentage of an association on July 15, 1989, 
     shall be determined by applying the definition of `actual 
     thrift investment percentage' that takes effect on July 1, 
     1991.
       ``(g) Mutual Holding Companies.--
       ``(1) In general.--A savings association operating in 
     mutual form may reorganize so as to become a holding company 
     by--
       ``(A) chartering an interim savings association, the stock 
     of which is to be wholly owned, except as otherwise provided 
     in this section, by the mutual association; and
       ``(B) transferring the substantial part of its assets and 
     liabilities, including all of its insured liabilities, to the 
     interim savings association.
       ``(2) Directors and certain account holders' approval of 
     plan required.--A reorganization is not authorized under this 
     subsection unless--
       ``(A) a plan providing for such reorganization has been 
     approved by a majority of the board of directors of the 
     mutual savings association; and
       ``(B) in the case of an association in which holders of 
     accounts and obligors exercise voting rights, such plan has 
     been submitted to and approved by a majority of such 
     individuals at a meeting held at the call of the directors in 
     accordance with the procedures prescribed by the 
     association's charter and bylaws.
       ``(3) Notice to the director; disapproval period.--
       ``(A) Notice required.--At least 60 days prior to taking 
     any action described in paragraph (1), a savings association 
     seeking to establish a mutual holding company shall provide 
     written notice to the Comptroller of the Currency. The notice 
     shall contain such relevant information as the Comptroller of 
     the Currency, acting through the Director, shall require by 
     regulation or by specific request in connection with any 
     particular notice.
       ``(B) Transaction allowed if not disapproved.--Unless the 
     Comptroller of the Currency, acting through the Director, 
     within such 60-day notice period disapproves the proposed 
     holding company formation, or extends for another 30 days the 
     period during which such disapproval may be issued, the 
     savings association providing such notice may proceed with 
     the transaction, if the requirements of paragraph (2) have 
     been met.
       ``(C) Grounds for disapproval.--The Comptroller of the 
     Currency, acting through the Director, may disapprove any 
     proposed holding company formation only if--
       ``(i) such disapproval is necessary to prevent unsafe or 
     unsound practices;
       ``(ii) the financial or management resources of the savings 
     association involved warrant disapproval;
       ``(iii) the savings association fails to furnish the 
     information required under subparagraph (A); or
       ``(iv) the savings association fails to comply with the 
     requirement of paragraph (2).
       ``(D) Retention of capital assets.--In connection with the 
     transaction described in paragraph (1), a savings association 
     may, subject to the approval of the Comptroller of the 
     Currency (acting through the Director), retain capital assets 
     at the holding company level to the extent that such capital 
     exceeds the association's capital requirement established by 
     the Comptroller of the Currency, acting through the Director, 
     pursuant to subsections (s) and (t) of section 5.
       ``(4) Ownership.--
       ``(A) In general.--Persons having ownership rights in the 
     mutual association pursuant to section 5(b)(1)(B) of this Act 
     or State law shall have the same ownership rights with 
     respect to the mutual holding company.
       ``(B) Holders of certain accounts.--Holders of savings, 
     demand or other accounts of--
       ``(i) a savings association chartered as part of a 
     transaction described in paragraph (1); or
       ``(ii) a mutual savings association acquired pursuant to 
     paragraph (5)(B),

     shall have the same ownership rights with respect to the 
     mutual holding company as persons described in subparagraph 
     (A) of this paragraph.
       ``(5) Permitted activities.--A mutual holding company may 
     engage only in the following activities:
       ``(A) Investing in the stock of a savings association.
       ``(B) Acquiring a mutual association through the merger of 
     such association into a savings association subsidiary of 
     such holding company or an interim savings association 
     subsidiary of such holding company.
       ``(C) Subject to paragraph (6), merging with or acquiring 
     another holding company, one of whose subsidiaries is a 
     savings association.
       ``(D) Investing in a corporation the capital stock of which 
     is available for purchase by a savings association under 
     Federal law or under the law of any State where the 
     subsidiary savings association or associations have their 
     home offices.
       ``(6) Limitations on certain activities of acquired holding 
     companies.--
       ``(A) New activities.--If a mutual holding company acquires 
     or merges with another holding company under paragraph 
     (5)(C), the holding company acquired or the holding

[[Page H1373]]

     company resulting from such merger or acquisition may only 
     invest in assets and engage in activities which are 
     authorized under paragraph (5).
       ``(B) Grace period for divesting prohibited assets or 
     discontinuing prohibited activities.--Not later than 2 years 
     following a merger or acquisition described in paragraph 
     (5)(C), the acquired holding company or the holding company 
     resulting from such merger or acquisition shall--
       ``(i) dispose of any asset which is an asset in which a 
     mutual holding company may not invest under paragraph (5); 
     and
       ``(ii) cease any activity which is an activity in which a 
     mutual holding company may not engage under paragraph (5).
       ``(7) Regulation.--A mutual holding company shall be 
     chartered by the Comptroller of the Currency, acting through 
     the Director, and shall be subject to such regulations as the 
     Comptroller of the Currency, acting through the Director, may 
     prescribe. A mutual holding company shall be subject to the 
     other requirements of the Bank Holding Company Act of 1956 
     regarding regulation of holding companies.
       ``(8) Capital improvement.--
       ``(A) Pledge of stock of savings association subsidiary.--
     This section shall not prohibit a mutual holding company from 
     pledging all or a portion of the stock of a savings 
     association chartered as part of a transaction described in 
     paragraph (1) to raise capital for such savings association.
       ``(B) Issuance of nonvoting shares.--This section shall not 
     prohibit a savings association chartered as part of a 
     transaction described in paragraph (1) from issuing any 
     nonvoting shares or less than 50 percent of the voting shares 
     of such association to any person other than the mutual 
     holding company.
       ``(9) Insolvency and liquidation.--
       ``(A) In general.--Notwithstanding any provision of law, 
     upon--
       ``(i) the default of any savings association--

       ``(I) the stock of which is owned by any mutual holding 
     company; and
       ``(II) which was chartered in a transaction described in 
     paragraph (1);

       ``(ii) the default of a mutual holding company; or
       ``(iii) a foreclosure on a pledge by a mutual holding 
     company described in paragraph (8)(A),

     a trustee shall be appointed receiver of such mutual holding 
     company and such trustee shall have the authority to 
     liquidate the assets of, and satisfy the liabilities of, such 
     mutual holding company pursuant to title 11, United States 
     Code.
       ``(B) Distribution of net proceeds.--Except as provided in 
     subparagraph (C), the net proceeds of any liquidation of any 
     mutual holding company pursuant to subparagraph (A) shall be 
     transferred to persons who hold ownership interests in such 
     mutual holding company.
       ``(C) Recovery by corporation.--If the Corporation incurs a 
     loss as a result of the default of any savings association 
     subsidiary of a mutual holding company which is liquidated 
     pursuant to subparagraph (A), the Corporation shall succeed 
     to the ownership interests of the depositors of such savings 
     association in the mutual holding company, to the extent of 
     the Corporation's loss.
       ``(10) Definitions.--For purposes of this subsection--
       ``(A) Mutual holding company.--The term `mutual holding 
     company' means a corporation organized as a holding company 
     under this subsection.
       ``(B) Mutual association.--The term `mutual association' 
     means a savings association which is operating in mutual 
     form.
       ``(C) Default.--The term `default' means an adjudication or 
     other official determination of a court of competent 
     jurisdiction or other public authority pursuant to which a 
     conservator, receiver, or other legal custodian is appointed.
       ``(h) Mergers, Consolidations, and Other Acquisitions 
     Authorized.--
       ``(1) In general.--Subject to sections 5(d)(3) and 18(c) of 
     the Federal Deposit Insurance Act and all other applicable 
     laws, any Federal savings association may acquire or be 
     acquired by any insured depository institution.
       ``(2) Expedited approval of acquisitions.--
       ``(A) In general.--Any application by a savings association 
     to acquire or be acquired by another insured depository 
     institution which is required to be filed with the 
     Comptroller of the Currency under any applicable law or 
     regulation shall be approved or disapproved in writing by the 
     Comptroller of the Currency, acting through the Director, 
     before the end of the 60-day period beginning on the date 
     such application is filed with the agency.
       ``(B) Extension of period.--The period for approval or 
     disapproval referred to in subparagraph (A) may be extended 
     for an additional 30-day period if the Comptroller of the 
     Currency, acting through the Director, determines that--
       ``(i) an applicant has not furnished all of the information 
     required to be submitted; or
       ``(ii) in the judgment of the Comptroller of the Currency, 
     acting through the Director, any material information 
     submitted is substantially inaccurate or incomplete.
       ``(3) Acquire defined.--For purposes of this subsection, 
     the term `acquire' means to acquire, directly or indirectly, 
     ownership or control through a merger or consolidation or an 
     acquisition of assets or assumption of liabilities, provided 
     that following such merger, consolidation, or acquisition, an 
     acquiring insured depository institution may not own the 
     shares of the acquired insured depository institution.
       ``(4) Regulations.--
       ``(A) Required.--The Comptroller of the Currency, acting 
     through the Director, shall prescribe such regulations as may 
     be necessary to carry out paragraph (1).
       ``(B) Effective date.--The regulations required under 
     subparagraph (A) shall--
       ``(i) be prescribed in final form before the end of the 90-
     day period beginning on the date of the enactment of this 
     subsection; and
       ``(ii) take effect before the end of the 120-day period 
     beginning on such date.
       ``(5) Limitation.--No provision of this section shall be 
     construed to authorize a national bank or any subsidiary 
     thereof to engage in any activity not otherwise authorized 
     under the National Bank Act or any other law governing the 
     powers of a national bank.''.

     SEC. 423. CONFORMING AMENDMENT RELATING TO MERGER OF DEPOSIT 
                   INSURANCE FUNDS.

       Section 2704(c) of the Economic Growth and Regulatory 
     Paperwork Reduction Act of 1996 is amended to read as 
     follows:
       ``(c) Effective Date.--This section and the amendments made 
     by this section shall take effect on January 1, 2000.''.

     SEC. 424. CONFORMING AMENDMENTS TO THE FEDERAL HOME LOAN BANK 
                   ACT.

       (a) Amendment to Section 18.--Section 18(c) of the Federal 
     Home Loan Bank Act (12 U.S.C. 1438(c)) is repealed.
       (b) Amendment to Section 22.--Section 22(a) of the Federal 
     Home Loan Bank Act (12 U.S.C. 1442(a)) is amended by striking 
     ``, and the Director of the Office of Thrift Supervision'' 
     each place such appears and inserting ``and'' before ``the 
     Chairperson of the National Credit Union Administration''.
       (c) Effective Date.--This section shall become effective 2 
     years after the date of enactment of this Act.
                   Subtitle C--Combining OTS and OCC

     SEC. 431. PROHIBITION OF MERGER OR CONSOLIDATION REPEALED.

       Section 321 of title 31, United States Code, is amended by 
     striking subsection (e).

     SEC. 432. SECRETARY OF THE TREASURY REQUIRED TO FORMULATE 
                   PLANS FOR COMBINING OFFICE OF THRIFT 
                   SUPERVISION WITH OFFICE OF THE COMPTROLLER OF 
                   THE CURRENCY.

       (a) In General.--Not later than 9 months after the date of 
     the enactment of this Act, the Secretary of the Treasury, in 
     consultation with the Director of the Office of Thrift 
     Supervision and the Comptroller of the Currency, shall 
     formulate a plan for consolidating the Office of Thrift 
     Supervision with the Office of the Comptroller of the 
     Currency by January 1, 2000.
       (b) Consultation.--In formulating the plan pursuant to 
     subsection (a), the Secretary of the Treasury shall consult 
     with the Board of Governors of the Federal Reserve System 
     with regard to the transfer of the regulation of savings and 
     loan holding companies from the Director of the Office of 
     Thrift Supervision to the Board.
       (c) Implementation.--The Director of the Office of Thrift 
     Supervision and the Comptroller of the Currency shall 
     implement that plan, notwithstanding any other provision of 
     Federal banking laws.

     SEC. 433. OFFICE OF THRIFT SUPERVISION AND POSITION OF 
                   DIRECTOR OF THE OFFICE OF THRIFT SUPERVISION 
                   ABOLISHED.

       Effective January 1, 2000, the Office of Thrift Supervision 
     and the position of Director of the Office of Thrift 
     Supervision are abolished.

     SEC. 434. RECONFIGURATION OF BOARD OF DIRECTORS OF FDIC AS A 
                   RESULT OF REMOVAL OF DIRECTOR OF THE OFFICE OF 
                   THRIFT SUPERVISION.

       (a) In General.--Section 2(a)(1) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1812(a)(1)) is amended to read as 
     follows:
       ``(1) In general.--The management of the Corporation shall 
     be vested in a Board of Directors consisting of 5 members--
       ``(A) 1 of whom shall be the Comptroller of the Currency; 
     and
       ``(B) 4 of whom shall be appointed by the President, and 
     with the advice and consent of the Senate, from among 
     individuals who are citizens of the United States, 1 of whom 
     shall have State bank supervisory experience.''.
       (b) Technical and Conforming Amendments.--
       (1) Section 2(d)(2) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1812(d)(2)) is amended--
       (A) by striking ``or the office of Director of the Office 
     of Thrift Supervision'';
       (B) by striking ``or such Director'';
       (C) by striking ``or the acting Director of the Office of 
     Thrift Supervision, as the case may be''; and
       (D) by striking ``or Director''.
       (2) Section 2(f)(2) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1812(f)(2)) is amended by striking ``or of the 
     Office of Thrift Supervision''.
       (c) Effective Date.--The amendments made by subsections (a) 
     and (b) shall take effect on January 1, 2000.

     SEC. 435. CONTINUATION PROVISIONS.

       (a) Continuation of Orders, Resolutions, Determinations and 
     Regulations.--All orders, resolutions, determinations and 
     regulations of the Office of Thrift Supervision that have 
     been issued, made, prescribed or allowed to become effective 
     by the Office of

[[Page H1374]]

     Thrift Supervision (including orders, resolutions, 
     determinations and regulations that relate to the conduct of 
     conservatorship and receiverships), or by a court of 
     competent jurisdiction, and are in effect on the day before 
     the date of enactment, shall continue in effect according to 
     the terms of such orders, resolutions, determinations, and 
     regulations and shall be enforceable by or against the 
     appropriate successor agency until modified, terminated, set 
     aside or superseded in accordance with applicable law by the 
     appropriate successor agency or by a court of competent 
     jurisdiction or by operation of law.
       (b) Continuation of Suits.--No action or other proceeding 
     commenced by or against the Office of Thrift Supervision 
     shall abate because of the enactment of this Act, except that 
     the appropriate successor agency to the Office of Thrift 
     Supervision shall be substituted for the Office of Thrift 
     Supervision as a party to any such action or proceeding.
       (c) Continuation of Agency Services.--Any agency, 
     department, or other instrumentality of the United States, 
     and any successor to such agency, department, or 
     instrumentality, that was providing supporting services to 
     the Office of Thrift Supervision shall--
       (1) continue to provide such services, on a reimbursable 
     basis or as otherwise agreed before the date of enactment, to 
     the Office of Thrift Supervision; and
       (2) consult with the Office of Thrift Supervision to 
     coordinate and facilitate a prompt and reasonable completion 
     or termination of such services.
       (d) Transfer of Property.--Not later than two years of the 
     date of enactment, all property of the Office of Thrift 
     Supervision shall be transferred to the Office of the 
     Comptroller of the Currency, or another appropriate successor 
     agency, in accordance with the division of responsibilities 
     and activities effected by this Act. For purposes of this 
     subsection, the term ``property'' includes, but is not 
     limited to, all interests in real property and all personal 
     property, including financial assets, computer hardware and 
     software, furniture, fixtures, books, accounts, records, 
     reports of examination, work papers and correspondence 
     related to such reports of examination, and any information, 
     materials, property, and assets not specifically listed. The 
     Secretary of the Treasury shall resolve any disagreement 
     between successor agencies.