[Congressional Record Volume 144, Number 67 (Friday, May 22, 1998)]
[Extensions of Remarks]
[Page E950]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               FINANCIAL SERVICES COMPETITION ACT OF 1997

                                 ______
                                 

                           HON. SUE W. KELLY

                              of new york

                    in the house of representatives

                         Thursday, May 21, 1998

  Mrs. KELLY. Mr. Speaker, with regard to my earlier colloquy with the 
Chairman on functional regulation which appears on page H3140 of the 
May 13, 1998 edition of the Congressional Record I would briefly like 
to quote from the report language from both the House Banking Committee 
and House Commerce Committee that further illustrates the intent of 
functional regulation of H.R. 10:

       ``An important aspect of this new framework is that it 
     would incorporate functional regulation with the Federal 
     Reserve serving as an umbrella regulator to oversee the new 
     financial holding company structure. Securities affiliates 
     would be required to comply with all applicable Federal 
     Securities law . . . The Act would also provide that 
     insurance affiliates be subject to applicable State insurance 
     regulation and supervision.''
       ``Title I . . . expressly limits the authority of the Board 
     of Governors of the Federal Reserve System (Federal Reserve 
     Board) over the affiliates of financial services holding 
     companies. These limitations are designed to facilitate 
     functional regulation of the operative components of a 
     financial services holding company. Specifically, the 
     preeminent authority of the Securities and Exchange 
     Commission (SEC or Commission) and the State insurance 
     regulators over securities firms and the business of 
     insurance, respectively, is preserved.''
       ``Section 113. Authority of state insurance regulator and 
     Securities and Exchange Commission. This section limits the 
     Federal Reserve Board's ability to require that an insurance 
     company or registered broker or dealer provide funds to an 
     affiliated bank if the State insurance authority or the SEC 
     determines in writing that such action would have a 
     materially adverse effect on the financial condition of the 
     insurance company or the broker dealer. The Committee 
     determined that this provision was necessary to make clear 
     that the source of strength doctrine does not extend to 
     securities and insurance affiliates of banks. The section 
     allows the Federal Reserve Board to require the bank holding 
     company to divest the bank within 180 days of receiving such 
     notice from the State insurance authority or the SEC.
       ``Title III pertains to the regulation of insurance 
     activities, particularly those of national banks, and sets 
     forth appropriate standards for judicial review of regulatory 
     insurance disputes . . . Subtitle A specifically provides for 
     the functional regulation of insurance. The Committee's 
     purpose in the first part of Subtitle A is to reaffirm the 
     McCarran-Ferguson Act and require State licensing for 
     insurance activities.''

  I would like to thank the Chairman and his staff for their assistance 
and agreement with this language as for the intent of functional 
regulation in H.R. 10.

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