[Congressional Record (Bound Edition), Volume 145 (1999), Part 10]
[House]
[Pages 14179-14220]
[From the U.S. Government Publishing Office, www.gpo.gov]



                               AMENDMENTS

  Under clause 8 of rule XVIII, proposed amendments were submitted as 
follows:

                                H.R. 10

                         Offered By: Mr. Dreier

               (Amendment in the Nature of a Substitute)

       Amendment No. 1: Strike out all after the enacting clause 
     and insert the following:

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

       (a) Short Title.--This Act may be cited as the ``Financial 
     Services Act of 1999''.
       (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.
       (3) To provide necessary and appropriate protections for 
     investors and ensure fair and honest markets in the delivery 
     of financial services.
       (4) To avoid duplicative, potentially conflicting, and 
     overly burdensome regulatory requirements through the 
     creation of a regulatory framework for financial holding 
     companies that respects the divergent requirements of each of 
     the component businesses of the holding company, and that is 
     based upon principles of strong functional regulation and 
     enhanced regulatory coordination.
       (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. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 105A. Public meetings for large bank acquisitions and mergers.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. GAO study of economic impact on community banks, other small 
              financial institutions, insurance agents, and consumers.
Sec. 110. Responsiveness to community needs for financial services.

  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.
Sec. 117. Equivalent regulation and supervision.
Sec. 118. Prohibition on FDIC assistance to affiliates and 
              subsidiaries.
Sec. 119. Repeal of savings bank provisions in the Bank Holding Company 
              Act of 1956.
Sec. 120. Technical amendment.

               Subtitle C--Subsidiaries of National Banks

Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Safety and soundness firewalls between banks and their 
              financial subsidiaries.
Sec. 123. Misrepresentations regarding depository institution liability 
              for obligations of affiliates.
Sec. 124. 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--Preservation of FTC Authority

Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify 
              notification and post-approval waiting period for section 
              3 transactions.
Sec. 142. Interagency data sharing.
Sec. 143. Clarification of status of subsidiaries and affiliates.
Sec. 144. Annual GAO report.

                     Subtitle F--National Treatment

Sec. 151. Foreign banks that are financial holding companies.
Sec. 152. Foreign banks and foreign financial institutions that are 
              wholesale financial institutions.
Sec. 153. Representative offices.
Sec. 154. Reciprocity.

        Subtitle G--Federal Home Loan Bank System Modernization

Sec. 161. Short title.
Sec. 162. Definitions.
Sec. 163. Savings association membership.
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.
Sec. 168. Capital structure of Federal home loan banks.

                       Subtitle H--ATM Fee Reform

Sec. 171. Short title.
Sec. 172. Electronic fund transfer fee disclosures at any host ATM.
Sec. 173. Disclosure of possible fees to consumers when ATM card is 
              issued.
Sec. 174. Feasibility study.
Sec. 175. No liability if posted notices are damaged.

                 Subtitle I--Direct Activities of Banks

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

                  Subtitle J--Deposit Insurance Funds

Sec. 186. Study of safety and soundness of funds.
Sec. 187. Elimination of SAIF and DIF special reserves.

                  Subtitle K--Miscellaneous Provisions

Sec. 191. Termination of ``know your customer'' regulations.
Sec. 192. Study and report on Federal electronic fund transfers.
Sec. 193. General Accounting Office study of conflicts of interest.
Sec. 194. Study of cost of all Federal banking regulations.
Sec. 195. Study and report on adapting existing legislative 
              requirements to online banking and lending.
Sec. 196. Regulation of uninsured State member banks.
Sec. 197. Clarification of source of strength doctrine.
Sec. 198. Interest rates and other charges at interstate branches.

                   Subtitle L-Effective Date of Title

Sec. 199. 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. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of excepted banking product.
Sec. 207. Additional definitions.
Sec. 208. Government securities defined.

[[Page 14180]]

Sec. 209. Effective date.
Sec. 210. Rule of construction.

             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. Statutory disqualification for bank wrongdoing.
Sec. 224. Conforming change in definition.
Sec. 225. Conforming amendment.
Sec. 226. Church plan exclusion.
Sec. 227. 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--Disclosure of Customer Costs of Acquiring Financial 
                                Products

Sec. 241. Improved and consistent disclosure.

                          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. Title insurance activities of national banks and their 
              affiliates.
Sec. 306. Expedited and equalized dispute resolution for Federal 
              regulators.
Sec. 307. Consumer protection regulations.
Sec. 308. Certain State affiliation laws preempted for insurance 
              companies and affiliates.
Sec. 309. Interagency consultation.
Sec. 310. Definition of State.

   Subtitle B--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.

           Subtitle C--Rental Car Agency Insurance Activities

Sec. 341. Standard of regulation for motor vehicle rentals.

                      Subtitle D--Confidentiality

Sec. 351. Confidentiality of health and medical information.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

Sec. 401. Prohibition on new unitary savings and loan holding 
              companies.
Sec. 402. Retention of ``Federal'' in name of converted Federal savings 
              association.

                            TITLE V--PRIVACY

                       Subtitle A--Privacy Policy

Sec. 501. Depository institution privacy policies.
Sec. 502. Study of current financial privacy laws.

         Subtitle B--Fraudulent Access to Financial Information

Sec. 521. Privacy protection for customer information of financial 
              institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.

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

     SEC. 102. 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 or order under 
     this paragraph as of the day before the date of the enactment 
     of the Financial Services Act of 1999, to be so closely 
     related to banking as to be a proper incident thereto 
     (subject to such terms and conditions contained in such 
     regulation or order, 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 1999.''.

     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;
       ``(D) 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), (B), and (C).
       ``(2) Foreign banks and companies.--For purposes of 
     paragraph (1), the Board shall establish and apply comparable 
     capital and other operating 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.--Any depository 
     institution acquired by a bank holding company during the 12-
     month period preceding the submission of a notice under 
     paragraph (1)(D) and any depository institution acquired 
     after the submission of such notice may be excluded for 
     purposes of paragraph (1)(C) during the 12-month period 
     beginning on the date of such acquisition if--
       ``(A) 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; and
       ``(B) the plan has been accepted by such agency.
       ``(c) Engaging in Activities That Are Financial in 
     Nature.--
       ``(1) Financial activities.--
       ``(A) In general.--Notwithstanding section 4(a), a 
     financial holding company may engage in any activity, and 
     acquire and retain the shares of any company engaged in any 
     activity, that the Board has determined (by regulation or 
     order and in accordance with subparagraph (B)) to be--
       ``(i) financial in nature or incidental to such financial 
     activities; or

[[Page 14181]]

       ``(ii) complementary to activities authorized under this 
     subsection to the extent that the amount of such 
     complementary activities remains small.
       ``(B) Coordination between the board and the secretary of 
     the treasury.--
       ``(i) Proposals raised before the board.--

       ``(I) Consultation.--The Board shall notify the Secretary 
     of the Treasury of, and consult with the Secretary of the 
     Treasury concerning, any request, proposal, or application 
     under this subsection, including a regulation or order 
     proposed under paragraph (4), for a determination of whether 
     an activity is financial in nature or incidental to such a 
     financial activity.
       ``(II) Treasury view.--The Board shall not determine that 
     any activity is financial in nature or incidental to a 
     financial activity under this subsection if the Secretary of 
     the Treasury notifies the Board in writing, not later than 30 
     days after the date of receipt of the notice described in 
     subclause (I) (or such longer period as the Board determines 
     to be appropriate in light of the circumstances) that the 
     Secretary of the Treasury believes that the activity is not 
     financial in nature or incidental to a financial activity.

       ``(ii) Proposals raised by the treasury.--

       ``(I) Treasury recommendation.--The Secretary of the 
     Treasury may, at any time, recommend in writing that the 
     Board find an activity to be financial in nature or 
     incidental to a financial activity.
       ``(II) Time period for board action.--Not later than 30 
     days after the date of receipt of a written recommendation 
     from the Secretary of the Treasury under subclause (I) (or 
     such longer period as the Secretary of the Treasury and the 
     Board determine to be appropriate in light of the 
     circumstances), the Board shall determine whether to initiate 
     a public rulemaking proposing that the subject recommended 
     activity be found to be financial in nature or incidental to 
     a financial activity under this subsection, and shall notify 
     the Secretary of the Treasury in writing of the determination 
     of the Board and, in the event that the Board determines not 
     to seek public comment on the proposal, the reasons for that 
     determination.

       ``(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 1999;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which bank holding companies compete;
       ``(C) changes or reasonably expected changes in the 
     technology for delivering financial services; and
       ``(D) 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 1999, to 
     be so closely related to banking or managing or controlling 
     banks as to be a proper incident thereto (subject to the same 
     terms and conditions contained in such order or regulation, 
     unless modified by the Board).
       ``(G) Engaging, in the United States, in any activity 
     that--
       ``(i) a bank holding company may engage in outside 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 1999) to be usual in connection with the transaction 
     of banking or other financial operations abroad.
       ``(H) Directly or indirectly acquiring or controlling, 
     whether as principal, on behalf of 1 or more entities 
     (including entities, other than a depository institution, 
     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;
       ``(ii) such shares, assets, or ownership interests are 
     acquired and held by an affiliate of the bank holding company 
     that is a registered broker or dealer that is engaged in 
     securities underwriting activities, or an affiliate of such 
     broker or dealer, as part of a bona fide underwriting or 
     investment 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) or providing and issuing annuities;
       ``(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) Authorization of new financial activities.--The Board 
     shall, by regulation or order and in accordance with 
     paragraph (1)(B), 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 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 or in paragraph 
     (6) of this subsection, a 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.
       ``(6) Notice required for large combinations.--
       ``(A) In general.--No financial holding company shall 
     directly or indirectly acquire, and no company that becomes a 
     financial holding company shall directly or indirectly 
     acquire control of, any company in the United States, 
     including through merger, consolidation, or other type of 
     business combination, that--
       ``(i) is engaged in activities permitted under this 
     subsection or subsection (g); and
       ``(ii) has consolidated total assets in excess of 
     $40,000,000,000,
     unless such holding company has provided notice to the Board, 
     not later than 60 days

[[Page 14182]]

     prior to such proposed acquisition or prior to becoming a 
     financial holding company, and during that time period, or 
     such longer time period not exceeding an additional 60 days, 
     as established by the Board, the Board has not issued a 
     notice disapproving the proposed acquisition or retention.
       ``(B) Factors for consideration.--In reviewing any prior 
     notice filed under this paragraph, the Board shall take into 
     consideration--
       ``(i) whether the company is in compliance with all 
     applicable criteria set forth in subsection (b) and the 
     provisions of subsection (d);
       ``(ii) whether the proposed combination represents an undue 
     aggregation of resources;
       ``(iii) whether the proposed combination poses a risk to 
     the deposit insurance system;
       ``(iv) whether the proposed combination poses a risk to 
     State insurance guaranty funds;
       ``(v) whether the proposed combination can reasonably be 
     expected to be in the best interests of depositors or 
     policyholders of the respective entities;
       ``(vi) whether the proposed transaction can reasonably be 
     expected to further the purposes of this Act and produce 
     benefits to the public; and
       ``(vii) whether, and the extent to which, the proposed 
     combination poses an undue risk to the stability of the 
     financial system in the United States.
       ``(C) Required information.--The Board may disapprove any 
     prior notice filed under this paragraph if the company 
     submitting such notice neglects, fails, or refuses to furnish 
     to the Board all relevant information required by the Board.
       ``(D) Solicitation of views of other supervisory 
     agencies.--
       ``(i) In general.--Upon receiving a prior notice under this 
     paragraph, in order to provide for the submission of their 
     views and recommendations, the Board shall give notice of the 
     proposal to--

       ``(I) the appropriate Federal banking agency of any bank 
     involved;
       ``(II) the appropriate functional regulator of any 
     functionally regulated nondepository institution (as defined 
     in section 5(c)(1)(C)) involved; and
       ``(III) the Secretary of the Treasury, the Attorney 
     General, and the Federal Trade Commission.

       ``(ii) Timing.--The views and recommendations of any agency 
     provided notice under this paragraph shall be submitted to 
     the Board not later than 30 calendar days after the date on 
     which notice to the agency was given, unless the Board 
     determines that another shorter time period is appropriate.
       ``(d) Provisions Applicable to Financial Holding Companies 
     That Fail To Meet Requirements.--
       ``(1) In general.--If the Board finds, after notice from or 
     consultation with the appropriate Federal banking agency, 
     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) Authority to impose limitations.--Until the 
     conditions described in a notice to a financial holding 
     company under paragraph (1) are corrected--
       ``(A) 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; and
       ``(B) the appropriate Federal banking agency may impose 
     such limitations on the conduct or activities of an 
     affiliated depository institution or subsidiary of a 
     depository institution as the appropriate Federal banking 
     agency 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 or wholesale financial institution 
     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 wholesale financial 
     institutions; and
       ``(3) the holding company complies with this section.
       ``(f) Authority To Retain Limited Nonfinancial Activities 
     and Affiliations.--
       ``(1) In general.--Notwithstanding 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 1999 
     may continue to engage in any activity and retain direct or 
     indirect 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 the annual gross revenues derived by the 
     holding company and all subsidiaries of the holding company 
     (excluding revenues derived from subsidiary depository 
     institutions), 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 (excluding revenues derived from subsidiary 
     depository institutions).
       ``(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 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.--A 
     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 section 
     10(c), this subsection, or subparagraph (H) or (I) of 
     subsection (c)(3).
       ``(7) Sunset of grandfather.--A financial holding company 
     engaged in any activity, or retaining direct or indirect 
     ownership or control of shares of a company, pursuant to this 
     subsection, shall terminate such activity and divest 
     ownership or control of the shares of such company before the 
     end of the 10-year period beginning on the date of the 
     enactment of the Financial Services Act of 1999. The Board 
     may, upon application by a

[[Page 14183]]

     financial holding company, extend such 10-year period by a 
     period not to exceed an additional 5 years if such extension 
     would not be detrimental to the public interest.
       ``(g) Developing Activities.--A 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) neither the Board nor the Secretary of the Treasury 
     has determined that the activity is not financial in nature 
     or incidental to financial activities under subsection (c);
       ``(6) the holding company is not required to provide prior 
     written notice of the transaction to the Board under 
     subsection (c)(6); and
       ``(7) 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.''.
       (b) Factors For Consideration in Reviewing Application by 
     Financial Holding Company to Acquire Bank.--Section 3(c) of 
     the Bank Holding Company Act of 1956 (12 U.S.C. 1842(c)) is 
     amended by adding at the end the following new paragraph:
       ``(6) `Too big to fail' factor.--In considering an 
     acquisition, merger, or consolidation under this section 
     involving a financial holding company or a company that would 
     be any such holding company upon the consummation of the 
     transaction, the Board shall consider whether, and the extent 
     to which, the proposed acquisition, merger, or consolidation 
     poses an undue risk to the stability of the financial system 
     of the United States.''.
       (c) Technical and Conforming Amendments.--
       (1) Section 2 of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1841) is amended by adding at the end the following 
     new subsection:
       ``(p) Insurance Company.--For purposes of sections 5, 6, 
     and 10, the term `insurance company' includes any person 
     engaged in the business of insurance to the extent of such 
     activities.''.
       (2) Section 4(j) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1843(j)) is amended--
       (1) in paragraph (1)(A), by inserting ``or in any 
     complementary activity under section 6(c)(1)(B)'' after 
     ``subsection (c)(8) or (a)(2)''; and
       (2) in paragraph (3)--
       (A) by inserting ``, other than any complementary activity 
     under section 6(c)(1)(B),'' after ``to engage in any 
     activity''; and
       (B) by inserting ``or a company engaged in any 
     complementary activity under section 6(c)(1)(B)'' after 
     ``insured depository institution''.
       (d) Report.--
       (1) In general.--By the end of the 4-year period beginning 
     on the date of the enactment of this Act and every 4 years 
     thereafter, the Board of Governors of the Federal Reserve 
     System and the Secretary of the Treasury shall submit a joint 
     report to the Congress containing a summary of new activities 
     which are financial in nature, including grandfathered 
     commercial activities, in which any financial holding company 
     is engaged pursuant to subsection (c)(1) or (f) of section 6 
     of the Bank Holding Company Act of 1956 (as added by 
     subsection (a)).
       (2) Other contents.--Each report submitted to the Congress 
     pursuant to paragraph (1) shall also contain the following:
       (A) A discussion of actions by the Board of Governors of 
     the Federal Reserve System and the Secretary of the Treasury, 
     whether by regulation, order, interpretation, or guideline or 
     by approval or disapproval of an application, with regard to 
     activities of financial holding companies which are 
     incidental to activities financial in nature or complementary 
     to such financial activities.
       (B) An analysis and discussion of the risks posed by 
     commercial activities of financial holding companies to the 
     safety and soundness of affiliate depository institutions.
       (C) An analysis and discussion of the effect of mergers and 
     acquisitions under section 6 of the Bank Holding Company Act 
     of 1956 on market concentration in the financial services 
     industry.
       (D) An analysis and discussion, by the Board and the 
     Secretary in consultation with the other Federal banking 
     agencies (as defined in section 3(z) of the Federal Deposit 
     Insurance Act), of the impact of the implementation of this 
     Act, and the amendments made by this Act, on the extent of 
     meeting community credit needs and capital availability under 
     the Community Reinvestment Act of 1977.

     SEC. 104. OPERATION OF STATE LAW.

       (a) Affiliations.--
       (1) In general.--Except as provided in paragraph (2), no 
     State may, by statute, regulation, order, interpretation, or 
     other action, prevent or restrict an insured depository 
     institution or wholesale financial institution, or a 
     subsidiary or affiliate thereof, from being affiliated 
     directly or indirectly or associated with any person or 
     entity, as authorized or permitted by this Act or any other 
     provision of Federal law.
       (2) Insurance.--With respect to affiliations between 
     insured depository institutions or wholesale financial 
     institutions, or any subsidiary or affiliate thereof, and 
     persons or entities engaged in the business of insurance, 
     paragraph (1) does not prohibit--
       (A) any State from requiring any person or entity that 
     proposes to acquire control of an entity that is engaged in 
     the business of insurance and domiciled in that State 
     (hereafter in this subparagraph referred to as the 
     ``insurer'') to furnish to the insurance regulatory authority 
     of that State, not later than 60 days before the effective 
     date of the proposed acquisition--
       (i) the name and address of each person by whom, or on 
     whose behalf, the affiliation referred to in this 
     subparagraph is to be effected (hereafter in this 
     subparagraph referred to as the ``acquiring party'');
       (ii) if the acquiring party is an individual, his or her 
     principal occupation and all offices and positions held 
     during the 5 years preceding the date of notification, and 
     any conviction of crimes other than minor traffic violations 
     during the 10 years preceding the date of notification;
       (iii) if the acquiring party is not an individual--

       (I) a report of the nature of its business operations 
     during the 5 years preceding the date of notification, or for 
     such shorter period as such person and any predecessors 
     thereof shall have been in existence;
       (II) an informative description of the business intended to 
     be done by the acquiring party and any subsidiary thereof; 
     and
       (III) a list of all individuals who are, or who have been 
     selected to become, directors or executive officers of the 
     acquiring party or who perform, or will perform, functions 
     appropriate to such positions, including, for each such 
     individual, the information required by clause (ii);

       (iv) the source, nature, and amount of the consideration 
     used, or to be used, in effecting the merger or other 
     acquisition of control, a description of any transaction 
     wherein funds were, or are to be, obtained for any such 
     purpose, and the identity of persons furnishing such 
     consideration, except that, if a source of such consideration 
     is a loan made in the lender's ordinary course of business, 
     the identity of the lender shall remain confidential if the 
     person filing such statement so requests;
       (v) fully audited financial information as to the earnings 
     and financial condition of each acquiring party for the 5 
     fiscal years preceding the date of notification of each such 
     acquiring party, or for such lesser period as such acquiring 
     party and any predecessors thereof shall have been in 
     existence, and similar unaudited information as of a date not 
     earlier than 90 days before the date of notification, except 
     that, in the case of an acquiring party that is an insurer 
     actively engaged in the business of insurance, the financial 
     statements of such insurer need not be audited, but such 
     audit may be required if the need therefor is determined by 
     the insurance regulatory authority of the State;
       (vi) any plans or proposals that each acquiring party may 
     have to liquidate such insurer, to sell its assets, or to 
     merge or consolidate it with any person or to make any other 
     material change in its business or corporate structure or 
     management;
       (vii) the number of shares of any security of the insurer 
     that each acquiring party proposes to acquire, the terms of 
     any offer, request, invitation, agreement, or acquisition, 
     and a statement as to the method by which the fairness of the 
     proposal was arrived at;
       (viii) the amount of each class of any security of the 
     insurer that is beneficially owned or concerning which there 
     is a right to acquire beneficial ownership by each acquiring 
     party;
       (ix) a full description of any contracts, arrangements, or 
     understandings with respect to any security of the insurer in 
     which any acquiring party is involved, including transfer of 
     any of the securities, joint ventures, loan or option 
     arrangements, puts or calls, guarantees of loans, guarantees 
     against loss or guarantees of profits, division of losses or 
     profits, or the giving or withholding of proxies, and 
     identification of the persons with whom such contracts, 
     arrangements, or understandings have been entered into;
       (x) a description of the purchase of any security of the 
     insurer during the 12-month period preceding the date of 
     notification by any acquiring party, including the dates of 
     purchase, names of the purchasers, and consideration paid, or 
     agreed to be paid, therefor;
       (xi) a description of any recommendations to purchase any 
     security of the insurer made during the 12-month period 
     preceding the

[[Page 14184]]

     date of notification by any acquiring party or by any person 
     based upon interviews or at the suggestion of such acquiring 
     party;
       (xii) copies of all tender offers for, requests or 
     invitations for tenders of, exchange offers for and 
     agreements to acquire or exchange any securities of the 
     insurer and, if distributed, of additional soliciting 
     material relating thereto; and
       (xiii) the terms of any agreement, contract, or 
     understanding made with any broker-dealer as to solicitation 
     of securities of the insurer for tender and the amount of any 
     fees, commissions, or other compensation to be paid to 
     broker-dealers with regard thereto;
       (B) in the case of a person engaged in the business of 
     insurance which is the subject of an acquisition or change or 
     continuation in control, the State of domicile of such person 
     from reviewing or taking action (including approval or 
     disapproval) with regard to the acquisition or change or 
     continuation in control, as long as the State reviews and 
     actions--
       (i) are completed by the end of the 60-day period beginning 
     on the later of the date the State received notice of the 
     proposed action or the date the State received the 
     information required under State law regarding such 
     acquisition or change or continuation in control;
       (ii) do not have the effect of discriminating, 
     intentionally or unintentionally, against an insured 
     depository institution or affiliate thereof or against any 
     other person based upon affiliation with an insured 
     depository institution; and
       (iii) are based on standards or requirements relating to 
     solvency or managerial fitness;
       (C) any State from requiring an entity that is acquiring 
     control of an entity that is engaged in the business of 
     insurance and domiciled in that State to maintain or restore 
     the capital requirements of that insurance entity to the 
     level required under the capital regulations of general 
     applicability in that State to avoid the requirement of 
     preparing and filing with the insurance regulatory authority 
     of that State a plan to increase the capital of the entity, 
     except that any determination by the State insurance 
     regulatory authority with respect to such requirement shall 
     be made not later than 60 days after the date of notification 
     under subparagraph (A);
       (D) any State from taking actions with respect to the 
     receivership or conservatorship of any insurance company;
       (E) any State from restricting a change in the ownership of 
     stock in an insurance company, or a company formed for the 
     purpose of controlling such insurance company, for a period 
     of not more than 3 years beginning on the date of the 
     conversion of such company from mutual to stock form; or
       (F) any State from requiring an organization which has been 
     eligible at any time since January 1, 1987, to claim the 
     special deduction provided by section 833 of the Internal 
     Revenue Code of 1986 to meet certain conditions in order to 
     undergo, as determined by the State, a reorganization, 
     recapitalization, conversion, merger, consolidation, sale or 
     other disposition of substantial operating assets, 
     demutualization, dissolution, or to undertake other similar 
     actions and which is governed under a State statute enacted 
     on May 22, 1998, relating to hospital, medical, and dental 
     service corporation conversions.
       (3) Preservation of state antitrust and general corporate 
     laws.--
       (A) In general.--Subject to subsection (c) and the 
     nondiscrimination provisions contained in such subsection, no 
     provision in paragraph (1) shall be construed as affecting 
     State laws, regulations, orders, interpretations, or other 
     actions of general applicability relating to the governance 
     of corporations, partnerships, limited liability companies or 
     other business associations incorporated or formed under the 
     laws of that State or domiciled in that State, or the 
     applicability of the antitrust laws of any State or any State 
     law that is similar to the antitrust laws.
       (B) Definition.--The term ``antitrust laws'' has the same 
     meaning as in subsection (a) of the first section of the 
     Clayton Act, and includes section 5 of the Federal Trade 
     Commission Act to the extent that such section 5 relates to 
     unfair methods of competition.
       (b) Activities.--
       (1) In general.--Except as provided in paragraph (3), and 
     except with respect to insurance sales, solicitation, and 
     cross marketing activities, which shall be governed by 
     paragraph (2), no State may, by statute, regulation, order, 
     interpretation, or other action, prevent or restrict an 
     insured depository institution, wholesale financial 
     institution, or subsidiary or affiliate thereof from engaging 
     directly or indirectly, either by itself or in conjunction 
     with a subsidiary, affiliate, or any other entity or person, 
     in any activity authorized or permitted under this Act.
       (2) Insurance sales.--
       (A) In general.--In accordance with the legal standards for 
     preemption set forth in the decision of the Supreme Court of 
     the United States in Barnett Bank of Marion County N.A. v. 
     Nelson, 517 U.S. 25 (1996), no State may, by statute, 
     regulation, order, interpretation, or other action, prevent 
     or significantly interfere with the ability of an insured 
     depository institution or wholesale financial institution, or 
     a subsidiary or affiliate thereof, to engage, directly or 
     indirectly, either by itself or in conjunction with a 
     subsidiary, affiliate, or any other party, in any insurance 
     sales, solicitation, or cross-marketing activity.
       (B) Certain state laws preserved.--Notwithstanding 
     subparagraph (A), a State may impose any of the following 
     restrictions, or restrictions which are substantially the 
     same as but no more burdensome or restrictive than those in 
     each of the following clauses:
       (i) Restrictions prohibiting the rejection of an insurance 
     policy by an insured depository institution, wholesale 
     financial institution, or any subsidiary or affiliate 
     thereof, solely because the policy has been issued or 
     underwritten by any person who is not associated with such 
     insured depository institution or wholesale financial 
     institution, or any subsidiary or affiliate thereof, when 
     such insurance is required in connection with a loan or 
     extension of credit.
       (ii) Restrictions prohibiting a requirement for any debtor, 
     insurer, or insurance agent or broker to pay a separate 
     charge in connection with the handling of insurance that is 
     required in connection with a loan or other extension of 
     credit or the provision of another traditional banking 
     product by an insured depository institution, wholesale 
     financial institution, or any subsidiary or affiliate 
     thereof, unless such charge would be required when the 
     insured depository institution or wholesale financial 
     institution, or any subsidiary or affiliate thereof, is the 
     licensed insurance agent or broker providing the insurance.
       (iii) Restrictions prohibiting the use of any advertisement 
     or other insurance promotional material by an insured 
     depository institution or wholesale financial institution, or 
     any subsidiary or affiliate thereof, that would cause a 
     reasonable person to believe mistakenly that--

       (I) a State or the Federal Government is responsible for 
     the insurance sales activities of, or stands behind the 
     credit of, the institution, affiliate, or subsidiary; or
       (II) a State, or the Federal Government guarantees any 
     returns on insurance products, or is a source of payment on 
     any insurance obligation of or sold by the institution, 
     affiliate, or subsidiary;

       (iv) Restrictions prohibiting the payment or receipt of any 
     commission or brokerage fee or other valuable consideration 
     for services as an insurance agent or broker to or by any 
     person, unless such person holds a valid State license 
     regarding the applicable class of insurance at the time at 
     which the services are performed, except that, in this 
     clause, the term ``services as an insurance agent or broker'' 
     does not include a referral by an unlicensed person of a 
     customer or potential customer to a licensed insurance agent 
     or broker that does not include a discussion of specific 
     insurance policy terms and conditions.
       (v) Restrictions prohibiting any compensation paid to or 
     received by any individual who is not licensed to sell 
     insurance, for the referral of a customer that seeks to 
     purchase, or seeks an opinion or advice on, any insurance 
     product to a person that sells or provides opinions or advice 
     on such product, based on the purchase of insurance by the 
     customer.
       (vi) Restrictions prohibiting the release of the insurance 
     information of a customer (defined as information concerning 
     the premiums, terms, and conditions of insurance coverage, 
     including expiration dates and rates, and insurance claims of 
     a customer contained in the records of the insured depository 
     institution or wholesale financial institution, or a 
     subsidiary or affiliate thereof) to any person or entity 
     other than an officer, director, employee, agent, subsidiary, 
     or affiliate of an insured depository institution or a 
     wholesale financial institution, for the purpose of 
     soliciting or selling insurance, without the express consent 
     of the customer, other than a provision that prohibits--

       (I) a transfer of insurance information to an unaffiliated 
     insurance company, agent, or broker in connection with 
     transferring insurance in force on existing insureds of the 
     insured depository institution or wholesale financial 
     institution, or subsidiary or affiliate thereof, or in 
     connection with a merger with or acquisition of an 
     unaffiliated insurance company, agent, or broker; or
       (II) the release of information as otherwise authorized by 
     State or Federal law.

       (vii) Restrictions prohibiting the use of health 
     information obtained from the insurance records of a customer 
     for any purpose, other than for its activities as a licensed 
     agent or broker, without the express consent of the customer.
       (viii) Restrictions prohibiting the extension of credit or 
     any product or service that is equivalent to an extension of 
     credit, lease or sale of property of any kind, or furnishing 
     of any services or fixing or varying the consideration for 
     any of the foregoing, on the condition or requirement that 
     the customer obtain insurance from an insured depository 
     institution, wholesale financial institution, a subsidiary or 
     affiliate thereof, or a particular insurer, agent, or broker, 
     other than a prohibition that would prevent any insured 
     depository institution or wholesale financial

[[Page 14185]]

     institution, or any subsidiary or affiliate thereof--

       (I) from engaging in any activity described in this clause 
     that would not violate section 106 of the Bank Holding 
     Company Act Amendments of 1970, as interpreted by the Board 
     of Governors of the Federal Reserve System; or
       (II) from informing a customer or prospective customer that 
     insurance is required in order to obtain a loan or credit, 
     that loan or credit approval is contingent upon the 
     procurement by the customer of acceptable insurance, or that 
     insurance is available from the insured depository 
     institution or wholesale financial institution, or any 
     subsidiary or affiliate thereof.

       (ix) Restrictions requiring, when an application by a 
     consumer for a loan or other extension of credit from an 
     insured depository institution or wholesale financial 
     institution is pending, and insurance is offered or sold to 
     the consumer or is required in connection with the loan or 
     extension of credit by the insured depository institution or 
     wholesale financial institution or any affiliate or 
     subsidiary thereof, that a written disclosure be provided to 
     the consumer or prospective customer indicating that his or 
     her choice of an insurance provider will not affect the 
     credit decision or credit terms in any way, except that the 
     insured depository institution or wholesale financial 
     institution may impose reasonable requirements concerning the 
     creditworthiness of the insurance provider and scope of 
     coverage chosen.
       (x) Restrictions requiring clear and conspicuous 
     disclosure, in writing, where practicable, to the customer 
     prior to the sale of any insurance policy that such policy--

       (I) is not a deposit;
       (II) is not insured by the Federal Deposit Insurance 
     Corporation;
       (III) is not guaranteed by the insured depository 
     institution or wholesale financial institution or, if 
     appropriate, its subsidiaries or affiliates or any person 
     soliciting the purchase of or selling insurance on the 
     premises thereof; and
       (IV) where appropriate, involves investment risk, including 
     potential loss of principal.

       (xi) Restrictions requiring that, when a customer obtains 
     insurance (other than credit insurance or flood insurance) 
     and credit from an insured depository institution or 
     wholesale financial institution, or its subsidiaries or 
     affiliates, or any person soliciting the purchase of or 
     selling insurance on the premises thereof, the credit and 
     insurance transactions be completed through separate 
     documents.
       (xii) Restrictions prohibiting, when a customer obtains 
     insurance (other than credit insurance or flood insurance) 
     and credit from an insured depository institution or 
     wholesale financial institution or its subsidiaries or 
     affiliates, or any person soliciting the purchase of or 
     selling insurance on the premises thereof, inclusion of the 
     expense of insurance premiums in the primary credit 
     transaction without the express written consent of the 
     customer.
       (xiii) Restrictions requiring maintenance of separate and 
     distinct books and records relating to insurance 
     transactions, including all files relating to and reflecting 
     consumer complaints, and requiring that such insurance books 
     and records be made available to the appropriate State 
     insurance regulator for inspection upon reasonable notice.
       (C) Limitations.--
       (i) OCC deference.--Section 306(e) does not apply with 
     respect to any State statute, regulation, order, 
     interpretation, or other action regarding insurance sales, 
     solicitation, or cross marketing activities described in 
     subparagraph (A) that was issued, adopted, or enacted before 
     September 3, 1998, and that is not described in subparagraph 
     (B).
       (ii) Nondiscrimination.--Subsection (c) does not apply with 
     respect to any State statute, regulation, order, 
     interpretation, or other action regarding insurance sales, 
     solicitation, or cross marketing activities described in 
     subparagraph (A) that was issued, adopted, or enacted before 
     September 3, 1998, and that is not described in subparagraph 
     (B).
       (iii) Construction.--Nothing in this paragraph shall be 
     construed to limit the applicability of the decision of the 
     Supreme Court in Barnett Bank of Marion County N.A. v. 
     Nelson, 116 S. Ct. 1103 (1996) with respect to a State 
     statute, regulation, order, interpretation, or other action 
     that is not described in subparagraph (B).
       (iv) Limitation on inferences.--Nothing in this paragraph 
     shall be construed to create any inference with respect to 
     any State statute, regulation, order, interpretation, or 
     other action that is not referred to or described in this 
     paragraph.
       (3) Insurance activities other than sales.--State statutes, 
     regulations, interpretations, orders, and other actions shall 
     not be preempted under subsection (b)(1) to the extent that 
     they--
       (A) relate to, or are issued, adopted, or enacted for the 
     purpose of regulating the business of insurance in accordance 
     with the Act of March 9, 1945 (commonly known as the 
     ``McCarran-Ferguson Act'');
       (B) apply only to persons or entities that are not insured 
     depository institutions or wholesale financial institutions, 
     but that are directly engaged in the business of insurance 
     (except that they may apply to depository institutions 
     engaged in providing savings bank life insurance as principal 
     to the extent of regulating such insurance);
       (C) do not relate to or directly or indirectly regulate 
     insurance sales, solicitations, or cross-marketing 
     activities; and
       (D) are not prohibited under subsection (c).
       (4) Financial activities other than insurance.--No State 
     statute, regulation, interpretation, order, or other action 
     shall be preempted under subsection (b)(1) to the extent 
     that--
       (A) it does not relate to, and is not issued and adopted, 
     or enacted for the purpose of regulating, directly or 
     indirectly, insurance sales, solicitations, or cross 
     marketing activities covered under paragraph (2);
       (B) it does not relate to, and is not issued and adopted, 
     or enacted for the purpose of regulating, directly or 
     indirectly, the business of insurance activities other than 
     sales, solicitations, or cross marketing activities, covered 
     under paragraph (3);
       (C) it does not relate to securities investigations or 
     enforcement actions referred to in subsection (d); and
       (D) it--
       (i) does not distinguish by its terms between insured 
     depository institutions, wholesale financial institutions, 
     and subsidiaries and affiliates thereof engaged in the 
     activity at issue and other persons or entities engaged in 
     the same activity in a manner that is in any way adverse with 
     respect to the conduct of the activity by any such insured 
     depository institution, wholesale financial institution, or 
     subsidiary or affiliate thereof engaged in the activity at 
     issue;
       (ii) as interpreted or applied, does not have, and will not 
     have, an impact on depository institutions, wholesale 
     financial institutions, or subsidiaries or affiliates thereof 
     engaged in the activity at issue, or any person or entity 
     affiliated therewith, that is substantially more adverse than 
     its impact on other persons or entities engaged in the same 
     activity that are not insured depository institutions, 
     wholesale financial institutions, or subsidiaries or 
     affiliates thereof, or persons or entities affiliated 
     therewith;
       (iii) does not effectively prevent a depository 
     institution, wholesale financial institution, or subsidiary 
     or affiliate thereof from engaging in activities authorized 
     or permitted by this Act or any other provision of Federal 
     law; and
       (iv) does not conflict with the intent of this Act 
     generally to permit affiliations that are authorized or 
     permitted by Federal law.
       (c) Nondiscrimination.--Except as provided in any 
     restrictions described in subsection (b)(2)(B), no State may, 
     by statute, regulation, order, interpretation, or other 
     action, regulate the insurance activities authorized or 
     permitted under this Act or any other provision of Federal 
     law of an insured depository institution or wholesale 
     financial institution, or subsidiary or affiliate thereof, to 
     the extent that such statute, regulation, order, 
     interpretation, or other action--
       (1) distinguishes by its terms between insured depository 
     institutions or wholesale financial institutions, or 
     subsidiaries or affiliates thereof, and other persons or 
     entities engaged in such activities, in a manner that is in 
     any way adverse to any such insured depository institution or 
     wholesale financial institution, or subsidiary or affiliate 
     thereof;
       (2) as interpreted or applied, has or will have an impact 
     on depository institutions or wholesale financial 
     institutions, or subsidiaries or affiliates thereof, that is 
     substantially more adverse than its impact on other persons 
     or entities providing the same products or services or 
     engaged in the same activities that are not insured 
     depository institutions, wholesale financial institutions, or 
     subsidiaries or affiliates thereof, or persons or entities 
     affiliated therewith;
       (3) effectively prevents a depository institution or 
     wholesale financial institution, or subsidiary or affiliate 
     thereof, from engaging in insurance activities authorized or 
     permitted by this Act or any other provision of Federal law; 
     or
       (4) conflicts with the intent of this Act generally to 
     permit affiliations that are authorized or permitted by 
     Federal law between insured depository institutions or 
     wholesale financial institutions, or subsidiaries or 
     affiliates thereof, and persons and entities engaged in the 
     business of insurance.
       (d) Limitation.--Subsections (a) and (b) shall not be 
     construed to affect the jurisdiction of the securities 
     commission (or any agency or office performing like 
     functions) of any State, under the laws of such State--
       (1) to investigate and bring enforcement actions, 
     consistent with section 18(c) of the Securities Act of 1933, 
     with respect to fraud or deceit or unlawful conduct by any 
     person, in connection with securities or securities 
     transactions; or
       (2) to require the registration of securities or the 
     licensure or registration of brokers, dealers, or investment 
     advisers (consistent with section 203A of the Investment 
     Advisers Act of 1940), or the associated persons of a broker, 
     dealer, or investment adviser (consistent with such section 
     203A).
       (e) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Insured depository institution.--The term ``insured 
     depository institution'' includes any foreign bank that 
     maintains a

[[Page 14186]]

     branch, agency, or commercial lending company in the United 
     States.
       (2) State.--The term ``State'' means any State of the 
     United States, the District of Columbia, any territory of the 
     United States, Puerto Rico, Guam, American Samoa, the Trust 
     Territory of the Pacific Islands, the Virgin Islands, and the 
     Northern Mariana Islands.

     SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.

       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. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISITIONS AND 
                   MERGERS.

       (a) Bank Holding Company Act of 1956.--Section 3(c)(2) of 
     the Bank Holding Company Act of 1956 (12 U.S.C. 1842(c)(2)) 
     is amended--
       (1) by striking ``factors.--In every case'' and inserting 
     ``factors.--
       ``(A) In general.--In every case''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) Public meetings.--In each case involving 1 or more 
     insured depository institutions each of which has total 
     assets of $1,000,000,000 or more, the Board shall, as 
     necessary and on a timely basis, conduct public meetings in 1 
     or more areas where the Board believes, in the sole 
     discretion of the Board, there will be a substantial public 
     impact.''.
       (b) Federal Deposit Insurance Act.--Section 18(c) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1828(c)) is amended 
     by adding at the end the following new paragraph:
       ``(12) Public Meetings.--In each merger transaction 
     involving 1 or more insured depository institutions each of 
     which has total assets of $1,000,000,000 or more, the 
     responsible agency shall, as necessary and on a timely basis, 
     conduct public meetings in 1 or more areas where the agency 
     believes, in the sole discretion of the agency, there will be 
     a substantial public impact.''.
       (c) National Bank Consolidation and Merger Act.--The 
     National Bank Consolidation and Merger Act (12 U.S.C. 215 et 
     seq.) is amended by adding at the end the following new 
     section:

     ``SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDATIONS AND 
                   MERGERS.

       ``In each case of a consolidation or merger under this Act 
     involving 1 or more banks each of which has total assets of 
     $1,000,000,000 or more, the Comptroller shall, as necessary 
     and on a timely basis, conduct public meetings in 1 or more 
     areas where the Comptroller believes, in the sole discretion 
     of the Comptroller, there will be a substantial public 
     impact.''.
       (d) Home Owners' Loan Act.--Section 10(e) of the Home 
     Owners' Loan Act (12 U.S.C. 1463) is amended by adding at the 
     end the following new paragraph:
       ``(7) Public meetings for large depository institution 
     acquisitions and mergers.--In each case involving 1 or more 
     insured depository institutions each of which has total 
     assets of $1,000,000,000 or more, the Director shall, as 
     necessary and on a timely basis, conduct public meetings in 1 
     or more areas where the Director believes, in the sole 
     discretion of the Director, there will be a substantial 
     public impact.''.

     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 1999,'' 
     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.

       (a) In General.--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, 
     consumer lending activities in which institutions described 
     in subparagraph (F) or (H) of section 2(c)(2) 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;
       ``(B) such overdraft--
       ``(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; or
       ``(C) such overdraft--
       ``(i) is incurred on behalf of an affiliate solely in 
     connection with an activity that is so closely related to 
     banking, or managing or controlling banks, as to be a proper 
     incident thereto, to the extent the bank incurring the 
     overdraft and the affiliate on whose behalf the overdraft is 
     incurred each document that the overdraft is incurred for 
     such purpose; and
       ``(ii) does not cause the bank to violate any provision of 
     section 23A or 23B of the Federal Reserve Act, either 
     directly, in the case of a member bank, or by virtue of 
     section 18(j) of the Federal Deposit Insurance Act, in the 
     case of a nonmember bank.
       ``(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.
     The issuance of any notice under this paragraph that relates 
     to the activities of a bank shall not be construed as 
     affecting the authority of the bank to continue to engage in 
     such activities until the expiration of such 180-day 
     period.''.
       (b) Industrial Loan Companies Affiliate Overdrafts.--
     Section 2(c)(2)(H) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841(c)(2)(H)) is amended by inserting before the 
     period at the end ``, or that is otherwise permissible for a 
     bank controlled by a company described in section 4(f)(1)''.

     SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMUNITY BANKS, 
                   OTHER SMALL FINANCIAL INSTITUTIONS, INSURANCE 
                   AGENTS, AND CONSUMERS.

       (a) Study Required.--The Comptroller General of the United 
     States shall conduct a study of the projected economic impact 
     and the actual economic impact that the enactment of this Act 
     will have on financial institutions, including community 
     banks, registered brokers and dealers and insurance 
     companies, which have total assets of $100,000,000 or less, 
     insurance agents, and consumers.
       (b) Reports to the Congress.--
       (1) In general.--The Comptroller General of the United 
     States shall submit reports to the Congress, at the times 
     required under paragraph (2), containing the findings and 
     conclusions of the Comptroller General with regard to the 
     study required under subsection (a) and such recommendations 
     for legislative or administrative action as the Comptroller 
     General may determine to be appropriate.
       (2) Timing of reports.--The Comptroller General shall 
     submit--
       (A) an interim report before the end of the 6-month period 
     beginning after the date of the enactment of this Act;

[[Page 14187]]

       (B) another interim report before the end of the next 6-
     month period; and
       (C) a final report before the end of the 1-year period 
     after such second 6-month period,''

     SEC. 110. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL 
                   SERVICES.

       (a) Study.--The Secretary of the Treasury, in consultation 
     with the Federal banking agencies (as defined in section 3(z) 
     of the Federal Deposit Insurance Act), shall conduct a study 
     of the extent to which adequate services are being provided 
     as intended by the Community Reinvestment Act of 1977, 
     including services in low- and moderate-income neighborhoods 
     and for persons of modest means, as a result of the enactment 
     of this Act.
       (b) Report.--Before the end of the 2-year period beginning 
     on the date of the enactment of this Act, the Secretary of 
     the Treasury, in consultation with the Federal banking 
     agencies, shall submit a report to the Congress on the study 
     conducted pursuant to subsection (a) and shall include such 
     recommendations as the Secretary determines to be appropriate 
     for administrative and legislative action with respect to 
     institutions covered under the Community Reinvestment Act of 
     1977.

  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 any of its subsidiary depository institutions 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, or with any State, 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; 
     or
       ``(II) the nature or size of transactions between such 
     subsidiary and any depository institution which is also a 
     subsidiary of such holding company,

     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 by or on behalf of 
     the Securities and Exchange Commission;
       ``(ii) any investment adviser registered by or on behalf of 
     either the Securities and Exchange Commission or any State, 
     whichever is required by law;
       ``(iii) any licensed insurance company by or on behalf of 
     any state regulatory authority responsible for the 
     supervision of insurance companies; and
       ``(iv) any other subsidiary that the Board finds to be 
     comprehensively supervised by a Federal or State authority.
       ``(3) Capital.--
       ``(A) In general.--The Board 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;
       ``(ii) is registered as an investment adviser under the 
     Investment Advisers Act of 1940, or with any State, whichever 
     is required by law; or
       ``(iii) is licensed as an insurance agent with the 
     appropriate State insurance authority.
       ``(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--
       ``(i) activities of a registered investment adviser other 
     than investment advisory activities or activities incidental 
     to investment advisory activities; or
       ``(ii) activities of a licensed insurance agent other than 
     insurance agency activities or activities incidental to 
     insurance agency activities.
       ``(C) Limitations on indirect action.--In developing, 
     establishing, or assessing holding company capital or capital 
     adequacy rules, guidelines, standards, or requirements for 
     purposes of this paragraph, the Board shall not take into 
     account the activities, operations, or investments of an 
     affiliated investment company registered under the Investment 
     Company Act of 1940, unless the investment company is--
       ``(i) a bank holding company; or
       ``(ii) controlled by a bank holding company by reason of 
     ownership by the bank holding company (including through all 
     of its affiliates) of 25 percent or more of the shares of the 
     investment company, and the shares owned by the bank holding 
     company have a market value equal to more than $1,000,000.
       ``(4) Transfer of board authority to appropriate federal 
     banking agency.--
       ``(A) In general.--In the case of any bank holding company 
     which is not significantly

[[Page 14188]]

     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.
       ``(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 (and rules, regulations, orders, and 
     other directives issued thereunder) relating to the 
     activities, conduct, and operations of registered brokers, 
     dealers, investment advisers, and investment companies;
       ``(B) the relevant State securities authorities with regard 
     to all interpretations of, and the enforcement of, applicable 
     State securities laws (and rules, regulations, orders, and 
     other directives issued thereunder) relating to the 
     activities, conduct, and operations of brokers, dealers, and 
     investment advisers required to be registered under State 
     law; and
       ``(C) the relevant State insurance authorities with regard 
     to all interpretations of, and the enforcement of, applicable 
     State insurance laws (and rules, regulations, orders, and 
     other directives issued thereunder) 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)(D) 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 
     primary supervisor for the bank, 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.

       (a) Bank Holding Companies.--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 with respect to an 
     entity described in subparagraph (A) if--
       ``(A) such funds or assets are to be provided by--
       ``(i) a bank holding company that is an insurance company, 
     a broker or dealer registered under the Securities Exchange 
     Act of 1934, an investment company registered under the 
     Investment Company Act of 1940, or an investment adviser 
     registered by or on behalf of either the Securities and 
     Exchange Commission or any State; or
       ``(ii) an affiliate of the depository institution which is 
     an insurance company or a broker or dealer registered under 
     the Securities Exchange Act of 1934, an investment company 
     registered under the Investment Company Act of 1940, or an 
     investment adviser registered by or on behalf of either the 
     Securities and Exchange Commission or any State ; and
       ``(B) the State insurance authority for the insurance 
     company or the Securities and Exchange Commission for the 
     registered broker, dealer, investment adviser (solely with 
     respect to investment advisory activities or activities 
     incidental thereto), or investment company, 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, dealer, investment company, or investment 
     adviser, 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, dealer, investment company, or 
     investment adviser 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, the Securities and 
     Exchange Commission, or State securities regulator, as the 
     case may be, of such requirement.
       ``(3) Divestiture in lieu of other action.--If the Board 
     receives a notice described in paragraph (1)(B) from a State 
     insurance authority or the Securities and Exchange Commission 
     with regard to a bank holding company or affiliate referred 
     to in that paragraph, the Board may order the bank holding 
     company to divest the insured depository institution not 
     later than 180 days after receiving the 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.''.
       (b) Subsidiaries of Depository Institutions.--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. AUTHORITY OF STATE INSURANCE REGULATOR AND 
                   SECURITIES AND EXCHANGE COMMISSION.

       ``(a) In General.--Notwithstanding any other provision of 
     law, any regulation, order, or other action of the 
     appropriate Federal banking agency which requires a 
     subsidiary to provide funds or other assets to an insured 
     depository institution shall not be effective nor enforceable 
     with respect to an entity described in paragraph (1) if--
       ``(1) such funds or assets are to be provided by a 
     subsidiary which is an insurance company, a broker or dealer 
     registered under the Securities Exchange Act of 1934, an 
     investment company registered under the Investment Company 
     Act of 1940, or an investment adviser registered by or on 
     behalf of either the Securities and Exchange Commission or 
     any State; and
       ``(2) the State insurance authority for the insurance 
     company or the Securities and Exchange Commission for the 
     registered broker or dealer, the investment company, or the 
     investment adviser, as the case may be, determines in writing 
     sent to the insured depository institution and the 
     appropriate Federal banking agency that the subsidiary 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, dealer, investment 
     company, or investment adviser, as the case may be.
       ``(b) Notice to State Insurance Authority or SEC 
     Required.--If the appropriate Federal banking agency requires 
     a subsidiary, which is an insurance company, a broker or 
     dealer, an investment company, or an investment adviser 
     (solely with respect to investment advisory activities or 
     activities incidental thereto) described in subsection (a)(1) 
     to provide funds or assets to an insured depository 
     institution pursuant to any regulation, order, or other 
     action of the appropriate Federal banking agency referred to 
     in subsection (a), the appropriate Federal banking agency 
     shall promptly notify the State insurance authority for the 
     insurance company, the Securities and Exchange Commission, or 
     State securities regulator, as the case may be, of such 
     requirement.
       ``(c) Divestiture in Lieu of Other Action.--If the 
     appropriate Federal banking

[[Page 14189]]

     agency receives a notice described in subsection (a)(2) from 
     a State insurance authority or the Securities and Exchange 
     Commission with regard to a subsidiary referred to in that 
     subsection, the appropriate Federal banking agency may order 
     the insured depository institution to divest the subsidiary 
     not later than 180 days after receiving the notice, or such 
     longer period as the appropriate Federal banking agency 
     determines consistent with the safe and sound operation of 
     the insured depository institution.
       ``(d) Conditions Before Divestiture.--During the period 
     beginning on the date an order to divest is issued by the 
     appropriate Federal banking agency under subsection (c) to an 
     insured depository institution and ending on the date the 
     divestiture is complete, the appropriate Federal banking 
     agency may impose any conditions or restrictions on the 
     insured depository institution's ownership of the subsidiary 
     including restricting or prohibiting transactions between the 
     insured depository institution and the subsidiary, as are 
     appropriate under the circumstances.''.

     SEC. 114. PRUDENTIAL SAFEGUARDS.

       (a) Comptroller of the Currency.--
       (1) In general.--The Comptroller of the Currency may, by 
     regulation or order, impose restrictions or requirements on 
     relationships or transactions between a national bank and a 
     subsidiary of the national bank which the Comptroller finds 
     are consistent with the public interest, the purposes of this 
     Act, title LXII of the Revised Statutes of the United States, 
     and other Federal law applicable to national banks, and the 
     standards in paragraph (2).
       (2) Standards.--The Comptroller of the Currency may 
     exercise authority under paragraph (1) if the Comptroller 
     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 banks.
       (C) Avoid conflicts of interest or other abuses.
       (D) Enhance the privacy of customers of the national bank 
     or any subsidiary of the bank.
       (E) Promote the application of national treatment and 
     equality of competitive opportunity between subsidiaries 
     owned or controlled by domestic banks and subsidiaries owned 
     or controlled by foreign banks operating in the United 
     States.
       (3) Review.--The Comptroller of the Currency 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 
     Comptroller finds is no longer required for such purposes.
       (b) Board of Governors of the Federal Reserve System.--
       (1) In general.--The Board of Governors of the Federal 
     Reserve System may, by regulation or order, impose 
     restrictions or requirements on relationships or 
     transactions--
       (A) between a depository institution subsidiary of a bank 
     holding company and any affiliate of such depository 
     institution (other than a subsidiary of such institution); or
       (B) between a State member bank and a subsidiary of such 
     bank,

     which the Board finds are consistent with the public 
     interest, the purposes of this Act, the Bank Holding Company 
     Act of 1956, the Federal Reserve Act, and other Federal law 
     applicable to depository institution subsidiaries of bank 
     holding companies or State banks (as the case may be), and 
     the standards in paragraph (2).
       (2) Standards.--The Board of Governors of the Federal 
     Reserve System 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 the State member 
     bank or any subsidiary of the bank.
       (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 of Governors of the Federal Reserve 
     System 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.
       (4) Foreign banks.--
       (A) In general.--The Board may, by regulation or order, 
     impose restrictions or requirements on relationships or 
     transactions between a branch, agency, or commercial lending 
     company of a foreign bank in the United States and any 
     affiliate in the United States of such foreign bank that the 
     Board finds are consistent with the public interest, the 
     purposes of this Act, the Bank Holding Company Act of 1956, 
     the Federal Reserve Act, and other Federal law applicable to 
     foreign banks and their affiliates in the United States, and 
     the standards in paragraphs (2) and (3).
       (B) Evasion.--In the event that the Board determines that 
     there may be circumstances that would result in an evasion of 
     this paragraph, the Board may also impose restrictions or 
     requirements on relationships or transactions between 
     operations of a foreign bank outside the United States and 
     any affiliate in the United States of such foreign bank that 
     are consistent with national treatment and equality of 
     competitive opportunity.
       (c) Federal Deposit Insurance Corporation.--
       (1) In general.--The Federal Deposit Insurance Corporation 
     may, by regulation or order, impose restrictions or 
     requirements on relationships or transactions between a State 
     nonmember bank (as defined in section 3 of the Federal 
     Deposit Insurance Act) and a subsidiary of the State 
     nonmember bank which the Corporation finds are consistent 
     with the public interest, the purposes of this Act, the 
     Federal Deposit Insurance Act, or other Federal law 
     applicable to State nonmember banks and the standards in 
     paragraph (2).
       (2) Standards.--The Federal Deposit Insurance Corporation 
     may exercise authority under paragraph (1) if the Corporation 
     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 banks.
       (C) Avoid conflicts of interest or other abuses.
       (D) Enhance the privacy of customers of the State nonmember 
     bank or any subsidiary of the bank.
       (E) Promote the application of national treatment and 
     equality of competitive opportunity between subsidiaries 
     owned or controlled by domestic banks and subsidiaries owned 
     or controlled by foreign banks operating in the United 
     States.
       (3) Review.--The Federal Deposit Insurance Corporation 
     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 
     Corporation finds is no longer required for such purposes.

     SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

       (a) Exclusive Commission Authority.--
       (1) In general.--Except as provided in paragraph (3), 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 or a savings and loan holding 
     company.
       (2) Prohibition on banking agencies.--Except as provided in 
     paragraph (3), a Federal banking agency may not inspect or 
     examine any registered investment company that is not a bank 
     holding company or a savings and loan holding company.
       (3) Certain examinations authorized.-- Nothing in this 
     subsection prevents the Federal Deposit Insurance 
     Corporation, if the Corporation finds it necessary to 
     determine the condition of an insured depository institution 
     for insurance purposes, from examining an affiliate of any 
     insured depository institution, pursuant to its authority 
     under section 10(b)(4) of the Federal Deposit Insurance Act, 
     as may be necessary to disclose fully the relationship 
     between the depository institution and the affiliate, and the 
     effect of such relationship on the depository institution.
       (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 same meaning as 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 same meaning as 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.

[[Page 14190]]

       (5) Savings and loan holding company.--The term ``savings 
     and loan holding company'' has the same meaning as in section 
     10(a)(1)(D) of the Home Owners' Loan Act.

     SEC. 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 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 by or on behalf of 
     either the Securities and Exchange Commission or any State, 
     whichever is required by law, 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, with 
     respect to the insurance activities and activities incidental 
     to such insurance activities, 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.''.

     SEC. 117. EQUIVALENT REGULATION AND SUPERVISION.

       (a) In General.--Notwithstanding any other provision of 
     law, the provisions of--
       (1) section 5(c) of the Bank Holding Company Act of 1956 
     (as amended by this Act) that limit the authority of the 
     Board of Governors of the Federal Reserve System to require 
     reports from, to make examinations of, or to impose capital 
     requirements on bank holding companies and their nonbank 
     subsidiaries or that require deference to other regulators; 
     and
       (2) section 10A of the Bank Holding Company Act of 1956 (as 
     added by this Act) that limit whatever authority the Board 
     might otherwise have to take direct or indirect action with 
     respect to bank holding companies and their nonbank 
     subsidiaries,
     shall also limit whatever authority that a Federal banking 
     agency (as defined in section 3(z) of the Federal Deposit 
     Insurance Act) might otherwise have under any statute to 
     require reports, make examinations, impose capital 
     requirements or take any other direct or indirect action with 
     respect to bank holding companies and their nonbank 
     subsidiaries (including nonbank subsidiaries of depository 
     institutions), subject to the same standards and requirements 
     as are applicable to the Board under such provisions.
       (b) Certain Examinations Authorized.--No provision of this 
     section shall be construed as preventing the Federal Deposit 
     Insurance Corporation, if the Corporation finds it necessary 
     to determine the condition of an insured depository 
     institution for insurance purposes, from examining an 
     affiliate of any insured depository institution, pursuant to 
     its authority under section 10(b)(4) of the Federal Deposit 
     Insurance Act, as may be necessary to disclose fully the 
     relationship between the depository institution and the 
     affiliate, and the effect of such relationship on the 
     depository institution.

     SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILIATES AND 
                   SUBSIDIARIES.

       Section 11(a)(4)(B) of the Federal Deposit Insurance Act 
     (12 U.S.C. 1821(a)(4)(B)) is amended by striking ``to benefit 
     any shareholder of'' and inserting ``to benefit any 
     shareholder, affiliate (other than an insured depository 
     institution that receives assistance in accordance with the 
     provisions of this Act), or subsidiary of''.

     SEC. 119. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK 
                   HOLDING COMPANY ACT OF 1956.

       Section 3(f) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1842(f)) is amended to read as follows:
       ``(f) [Repealed].''.

     SEC. 120. TECHNICAL AMENDMENT.

       Section 2(o)(1)(A) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841(o)(1)(A)) is amended by striking ``section 
     38(b)'' and inserting ``section 38''.

               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 of the United States 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 activities which 
     are financial in nature.--Subject to paragraphs (3) and (4), 
     a national bank may control a financial subsidiary, or hold 
     an interest in a financial subsidiary, that is controlled by 
     insured depository institutions or subsidiaries thereof.
       ``(3) Eligibility requirements.--A national bank may 
     control or hold an interest in a company pursuant to 
     paragraph (2) only if--
       ``(A) the national bank and all depository institution 
     affiliates of the national bank are well capitalized;
       ``(B) the national bank and all depository institution 
     affiliates of the national bank are well managed;
       ``(C) the national bank and all depository institution 
     affiliates of such national bank have achieved a rating of 
     `satisfactory record of meeting community credit needs', or 
     better, at the most recent examination of each such bank or 
     institution; and
       ``(D) the bank has received the approval of the Comptroller 
     of the Currency.
       ``(4) Activity limitations.--In addition to any other 
     limitation imposed on the activity of subsidiaries of 
     national banks, a subsidiary of a national bank may not, 
     pursuant to paragraph (2)--
       ``(A) engage as principal in insuring, guaranteeing, or 
     indemnifying against loss, harm, damage, illness, disability, 
     or death (other than in connection with credit-related 
     insurance) or in providing or issuing annuities;
       ``(B) engage in real estate investment or development 
     activities; or
       ``(C) engage in any activity permissible for a financial 
     holding company under paragraph (3)(I) of section 6(c) of the 
     Bank Holding Company Act of 1956 (relating to insurance 
     company investments).
       ``(5) Size factor with regard to free-standing national 
     banks.--Notwithstanding paragraph (2), a national bank which 
     has total assets of $10,000,000,000 or more may not control a 
     subsidiary engaged in financial activities pursuant to such 
     paragraph unless such national bank is a subsidiary of a bank 
     holding company.
       ``(6) Limited exclusions from community needs requirements 
     for newly affiliated depository institutions.--Any depository 
     institution which becomes an affiliate of a national bank 
     during the 12-month period preceding the date of an approval 
     by the Comptroller of the Currency under paragraph (3)(D) for 
     such bank, and any depository institution which becomes an 
     affiliate

[[Page 14191]]

     of the national bank after such date, may be excluded for 
     purposes of paragraph (3)(C) during the 12-month period 
     beginning on the date of such affiliation if--
       ``(A) the national bank or such depository institution 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; and
       ``(B) the plan has been accepted by such agency.
       ``(7) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       ``(A) Company; control; affiliate; subsidiary.--The terms 
     `company', `control', `affiliate', and `subsidiary' have the 
     same meanings as in section 2 of the Bank Holding Company Act 
     of 1956.
       ``(B) Financial subsidiary.--The term `financial 
     subsidiary' means a company which is a subsidiary of an 
     insured bank and is engaged in financial activities that have 
     been determined to be financial in nature or incidental to 
     such financial activities in accordance with subsection (b) 
     or permitted in accordance with subsection (b)(4), other than 
     activities that are permissible for a national bank to engage 
     in directly or that are authorized under the Bank Service 
     Company Act, section 25 or 25A of the Federal Reserve Act, or 
     any other Federal statute (other than this section) that 
     specifically authorizes the conduct of such activities by its 
     express terms and not by implication or interpretation.
       ``(C) 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.
       ``(D) Well managed.--The term `well managed' means--
       ``(i) in the case of a depository institution that has been 
     examined, unless otherwise determined in writing by the 
     appropriate Federal banking agency--

       ``(I) the achievement of a composite rating of 1 or 2 under 
     the Uniform Financial Institutions Rating System (or an 
     equivalent rating under an equivalent rating system) in 
     connection with the most recent examination or subsequent 
     review of the depository institution; and
       ``(II) at least a rating of 2 for management, if that 
     rating is given; or

       ``(ii) in the case of any depository institution that has 
     not been examined, the existence and use of managerial 
     resources that the appropriate Federal banking agency 
     determines are satisfactory.
       ``(E) Incorporated definitions.--The terms `appropriate 
     Federal banking agency' and `depository institution' have the 
     same meanings as in section 3 of the Federal Deposit 
     Insurance Act.
       ``(b) Activities That Are Financial in Nature.--
       ``(1) Financial activities.--
       ``(A) In general.--For purposes of subsection (a)(7)(B), an 
     activity shall be considered to have been determined to be 
     financial in nature or incidental to such financial 
     activities only if--
       ``(i) such activity is permitted for a financial holding 
     company pursuant to section 6(c)(3) of the Bank Holding 
     Company Act of 1956 (to the extent such activity is not 
     otherwise prohibited under this section or any other 
     provision of law for a subsidiary of a national bank engaged 
     in activities pursuant to subsection (a)(2)); or
       ``(ii) the Secretary of the Treasury determines the 
     activity to be financial in nature or incidental to such 
     financial activities in accordance with subparagraph (B) or 
     paragraph (3).
       ``(B) Coordination between the board and the secretary of 
     the treasury.--
       ``(i) Proposals raised before the secretary of the 
     treasury.--

       ``(I) Consultation.--The Secretary of the Treasury shall 
     notify the Board of, and consult with the Board concerning, 
     any request, proposal, or application under this subsection, 
     including any regulation or order proposed under paragraph 
     (3), for a determination of whether an activity is financial 
     in nature or incidental to such a financial activity.
       ``(II) Board view.--The Secretary of the Treasury shall not 
     determine that any activity is financial in nature or 
     incidental to a financial activity under this subsection if 
     the Board notifies the Secretary in writing, not later than 
     30 days after the date of receipt of the notice described in 
     subclause (I) (or such longer period as the Secretary 
     determines to be appropriate in light of the circumstances) 
     that the Board believes that the activity is not financial in 
     nature or incidental to a financial activity.

       ``(ii) Proposals raised by the board.--

       ``(I) Board recommendation.--The Board may, at any time, 
     recommend in writing that the Secretary of the Treasury find 
     an activity to be financial in nature or incidental to a 
     financial activity (other than an activity which the Board 
     has sole authority to regulate under subparagraph (C)).
       ``(II) Time period for secretarial action.--Not later than 
     30 days after the date of receipt of a written recommendation 
     from the Board under subclause (I) (or such longer period as 
     the Secretary of the Treasury and the Board determine to be 
     appropriate in light of the circumstances), the Secretary 
     shall determine whether to initiate a public rulemaking 
     proposing that the subject recommended activity be found to 
     be financial in nature or incidental to a financial activity 
     under this subsection, and shall notify the Board in writing 
     of the determination of the Secretary and, in the event that 
     the Secretary determines not to seek public comment on the 
     proposal, the reasons for that determination.

       ``(C) Authority over merchant banking.--The Board shall 
     have sole authority to prescribe regulations and issue 
     interpretations to implement this paragraph with respect to 
     activities described in section 6(c)(3)(H) of the Bank 
     Holding Company Act of 1956.
       ``(2) Factors to be considered.--In determining whether an 
     activity is financial in nature or incidental to financial 
     activities, the Secretary shall take into account--
       ``(A) the purposes of this Act and the Financial Services 
     Act of 1999;
       ``(B) changes or reasonably expected changes in the 
     marketplace in which banks 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 and the subsidiaries of a bank 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) Authorization of new financial activities.--The 
     Secretary of the Treasury shall, by regulation or order and 
     in accordance with paragraph (1)(B), 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.
       ``(4) Developing activities.--Subject to subsection (a)(2), 
     a financial subsidiary of a national bank may engage directly 
     or indirectly, or acquire shares of any company engaged, in 
     any activity that the Secretary has not determined to be 
     financial in nature or incidental to financial activities 
     under this subsection if--
       ``(A) the subsidiary reasonably concludes that the activity 
     is financial in nature or incidental to financial activities;
       ``(B) the gross revenues from all activities conducted 
     under this paragraph represent less than 5 percent of the 
     consolidated gross revenues of the national bank;
       ``(C) the aggregate total assets of all companies the 
     shares of which are held under this paragraph do not exceed 5 
     percent of the national bank's consolidated total assets;
       ``(D) the total capital invested in activities conducted 
     under this paragraph represents less than 5 percent of the 
     consolidated total capital of the national bank;
       ``(E) neither the Secretary of the Treasury nor the Board 
     has determined that the activity is not financial in nature 
     or incidental to financial activities under this subsection; 
     and
       ``(F) the national bank provides written notice to the 
     Secretary of the Treasury describing the activity commenced 
     by the subsidiary or conducted by the company acquired no 
     later than 10 business days after commencing the activity or 
     consummating the acquisition.
       ``(c) Provisions Applicable to National Banks That Fail To 
     Meet Requirements.--
       ``(1) In general.--If a national bank or depository 
     institution affiliate is not in compliance with the 
     requirements of subparagraph (A), (B), or (C) of subsection 
     (a)(3), the appropriate Federal banking agency shall notify 
     the Comptroller of the Currency, who shall give notice of 
     such finding to the national bank.
       ``(2) Agreement to correct conditions required.--Not later 
     than 45 days after receipt by a national bank of a notice 
     given under paragraph (1) (or such additional period as the 
     Comptroller of the Currency may permit), the national bank 
     and any relevant affiliated depository institution shall 
     execute an agreement acceptable to the Comptroller of the 
     Currency and the other appropriate Federal banking agencies, 
     if any, to comply with the requirements applicable under 
     subsection (a)(3).
       ``(3) Comptroller of the currency may impose limitations.--
     Until the conditions

[[Page 14192]]

     described in a notice to a national bank under paragraph (1) 
     are corrected--
       ``(A) the Comptroller of the Currency may impose such 
     limitations on the conduct or activities of the national bank 
     or any subsidiary of the bank as the Comptroller of the 
     Currency determines to be appropriate under the 
     circumstances; and
       ``(B) the appropriate Federal banking agency may impose 
     such limitations on the conduct or activities of an 
     affiliated depository institution or any subsidiary of the 
     depository institution as such agency determines to be 
     appropriate under the circumstances.
       ``(4) Failure to correct.--If, after receiving a notice 
     under paragraph (1), a national bank and other affiliated 
     depository institutions do 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 (a)(3)(A), restore the national bank or any 
     depository institution affiliate of the bank to well 
     capitalized status before the end of the 180-day period 
     beginning on the date such notice is received by the national 
     bank (or such other period permitted by the Comptroller of 
     the Currency); or
       ``(D) in the case of a notice of failure to comply with 
     subparagraph (B) or (C) of subsection (a)(3), restore 
     compliance with any such subparagraph on or before the date 
     on which the next examination of the depository institution 
     subsidiary is completed or by the end of such other period as 
     the Comptroller of the Currency determines to be appropriate,

     the Comptroller of the Currency may require such national 
     bank, under such terms and conditions as may be imposed by 
     the Comptroller of the Currency and subject to such extension 
     of time as may be granted in the Comptroller of the 
     Currency's discretion, to divest control of any subsidiary 
     engaged in activities pursuant to subsection (a)(2) or, at 
     the election of the national bank, instead to cease to engage 
     in any activity conducted by a subsidiary of the national 
     bank pursuant to subsection (a)(2).
       ``(5) Consultation.--In taking any action under this 
     subsection, the Comptroller of the Currency shall consult 
     with all relevant Federal and State regulatory agencies.''.
       (b) 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. Subsidiaries of national banks.''.

     SEC. 122. SAFETY AND SOUNDNESS FIREWALLS BETWEEN BANKS AND 
                   THEIR FINANCIAL SUBSIDIARIES.

       (a) Purposes.--The purposes of this section are--
       (1) to protect the safety and soundness of any insured bank 
     that has a financial subsidiary;
       (2) to apply to any transaction between the bank and the 
     financial subsidiary (including a loan, extension of credit, 
     guarantee, or purchase of assets), other than an equity 
     investment, the same restrictions and requirements as would 
     apply if the financial subsidiary were a subsidiary of a bank 
     holding company having control of the bank; and
       (3) to apply to any equity investment of the bank in the 
     financial subsidiary restrictions and requirements equivalent 
     to those that would apply if--
       (A) the bank paid a dividend in the same dollar amount to a 
     bank holding company having control of the bank; and
       (B) the bank holding company used the proceeds of the 
     dividend to make an equity investment in a subsidiary that 
     was engaged in the same activities as the financial 
     subsidiary of the bank.
       (b) Safety and Soundness Firewalls Applicable to 
     Subsidiaries of Banks.--The Federal Deposit Insurance Act (12 
     U.S.C. 1811 et seq.) is amended by inserting after section 45 
     (as added by section 113(b) of this title) the following new 
     section:

     ``SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO 
                   SUBSIDIARIES OF BANKS.

       ``(a) Limiting the Equity Investment of a Bank in a 
     Subsidiary.--
       ``(1) Capital deduction.--In determining whether an insured 
     bank complies with applicable regulatory capital standards--
       ``(A) the appropriate Federal banking agency shall deduct 
     from the assets and tangible equity of the bank the aggregate 
     amount of the outstanding equity investments of the bank in 
     financial subsidiaries of the bank; and
       ``(B) the assets and liabilities of such financial 
     subsidiaries shall not be consolidated with those of the 
     bank.
       ``(2) Investment limitation.--An insured bank shall not, 
     without the prior approval of the appropriate Federal banking 
     agency, make any equity investment in a financial subsidiary 
     of the bank if that investment would, when made, exceed the 
     amount that the bank could pay as a dividend without 
     obtaining prior regulatory approval.
       ``(3) Treatment of retained earnings.--The amount of any 
     net earnings retained by a financial subsidiary of an insured 
     depository institution shall be treated as an outstanding 
     equity investment of the bank in the subsidiary for purposes 
     of paragraph (1).
       ``(b) Operational and Financial Safeguards for the Bank.--
     An insured bank that has a financial subsidiary shall 
     maintain procedures for identifying and managing any 
     financial and operational risks posed by the financial 
     subsidiary.
       ``(c) Maintenance of Separate Corporate Identity and 
     Separate Legal Status.--
       ``(1) In general.--Each insured bank shall ensure that the 
     bank maintains and complies with reasonable policies and 
     procedures to preserve the separate corporate identity and 
     legal status of the bank and any financial subsidiary or 
     affiliate of the bank.
       ``(2) Examinations.--The appropriate Federal banking 
     agency, as part of each examination, shall review whether an 
     insured bank is observing the separate corporate identity and 
     separate legal status of any subsidiaries and affiliates of 
     the bank.
       ``(d) Financial Subsidiary Defined.--For purposes of this 
     section, the term `financial subsidiary' has the meaning 
     given to such term in section 5136A(a)(7)(B) of the Revised 
     Statutes of the United States.
       ``(e) Regulations.--The appropriate Federal banking 
     agencies shall jointly prescribe regulations implementing 
     this section.''.
       (c) Transactions Between Financial Subsidiaries and Other 
     Affiliates.--Section 23A of the Federal Reserve Act (12 
     U.S.C. 371c) is amended--
       (1) by redesignating subsection (e) as subsection (f); and
       (2) by inserting after subsection (d), the following new 
     subsection:
       ``(e) Rules Relating to Banks With Financial 
     Subsidiaries.--
       ``(1) Financial subsidiary defined.--For purposes of this 
     section and section 23B, the term `financial subsidiary' 
     means a company which is a subsidiary of a bank and is 
     engaged in activities that are financial in nature or 
     incidental to such financial activities pursuant to 
     subsection (a)(2) or (b)(4) of section 5136A of the Revised 
     Statutes of the United States.
       ``(2) Application to transactions between a financial 
     subsidiary of a bank and the bank.--For purposes of applying 
     this section and section 23B to a transaction between a 
     financial subsidiary of a bank and the bank (or between such 
     financial subsidiary and any other subsidiary of the bank 
     which is not a financial subsidiary) and notwithstanding 
     subsection (b)(2) and section 23B(d)(1), the financial 
     subsidiary of the bank--
       ``(A) shall be an affiliate of the bank and any other 
     subsidiary of the bank which is not a financial subsidiary; 
     and
       ``(B) shall not be treated as a subsidiary of the bank.
       ``(3) Application to transactions between financial 
     subsidiary and nonbank affiliates.--
       ``(A) In general.--A transaction between a financial 
     subsidiary and an affiliate of the financial subsidiary shall 
     not be deemed to be a transaction between a subsidiary of a 
     national bank and an affiliate of the bank for purposes of 
     section 23A or section 23B of the Federal Reserve Act.
       ``(B) Certain affiliates excluded.--For purposes of 
     subparagraph (A) and notwithstanding paragraph (4), the term 
     `affiliate' shall not include a bank, or a subsidiary of a 
     bank, which is engaged exclusively in activities permissible 
     for a national bank to engage in directly or which are 
     authorized by any Federal law other than section 5136A of the 
     Revised Statutes of the United States.
       ``(4) Equity investments excluded subject to the approval 
     of the banking agency.--Subsection (a)(1) shall not apply so 
     as to limit the equity investment of a bank in a financial 
     subsidiary of such bank, except that any investment that 
     exceeds the amount of a dividend that the bank could pay at 
     the time of the investment without obtaining prior approval 
     of the appropriate Federal banking agency and is in excess of 
     the limitation which would apply under subsection (a)(1), but 
     for this paragraph, may be made only with the approval of the 
     appropriate Federal banking agency (as defined in section 
     3(q) of the Federal Deposit Insurance Act) with respect to 
     such bank.''.
       (d) 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 
     pursuant to subsection (a)(2) or (b)(4) of section 5136A of 
     the Revised Statutes of the United States shall be deemed to 
     be a subsidiary of a bank holding company, and not a 
     subsidiary of a bank.''.

     SEC. 123. 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

[[Page 14193]]

     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 
     5 years, or both.
       ``(c) Institution-Affiliated Party Defined.--For purposes 
     of this section, the term `institution-affiliated party' has 
     the same meaning as in section 3 of the Federal Deposit 
     Insurance Act and any reference in that section shall also be 
     deemed to refer 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. 124. 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]''.

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

            CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES

     SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED.

       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(f)(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)(D)(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:

[[Page 14194]]

       ``(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) Limitations on indirect action.--In developing, 
     establishing, or assessing holding company capital or capital 
     adequacy rules, guidelines, standards, or requirements for 
     purposes of this paragraph, the Board shall not take into 
     account the activities, operations, or investments of an 
     affiliated investment company registered under the Investment 
     Company Act of 1940, unless the investment company is--

       ``(I) a bank holding company; or
       ``(II) controlled by a bank holding company by reason of 
     ownership by the bank holding company (including through all 
     of its affiliates) of 25 percent or more of the shares of the 
     investment company, and the shares owned by the bank holding 
     company have a market value equal to more than $1,000,000.

       ``(vi) Appropriate exclusions.--The Board shall take full 
     account of--

       ``(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.

       ``(vii) 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) Grandfathered activities.--
       ``(A) In general.--Notwithstanding 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 1999, 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 1999, 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) of section 6 may engage in any activity or own 
     any shares pursuant to this paragraph.
       ``(2) 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.--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.
       ``(3) Cross marketing restrictions.--A wholesale financial 
     holding company shall not permit--
       ``(A) any company whose shares it owns or controls pursuant 
     to paragraph (1) or (2) 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 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, may request a determination 
     from the Board that such bank or company be treated as a 
     wholesale financial holding company other than for purposes 
     of subsection (c), subject to such conditions as the Board 
     considers appropriate, giving due regard to the principle of 
     national treatment and equality of competitive opportunity 
     and the requirements imposed on domestic banks and companies.
       ``(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, directly or indirectly, and which engages in any 
     activity pursuant to subsection (c) or (g) of section 6, 
     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 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) 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, except that such bank or company shall be subject to 
     the restrictions of paragraphs (2)(A) and (3) of this 
     subsection.
       ``(5) 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.
       ``(6) Applicability of community reinvestment act of 
     1977.--The branches in the

[[Page 14195]]

     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.''.

     SEC. 132. AUTHORIZATION TO RELEASE REPORTS.

       (a) Federal Reserve Act.--The last sentence of the eighth 
     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.--The Right to 
     Financial Privacy Act of 1978 (12 U.S.C. 3401 et seq.) is 
     amended--
       (1) in section 1101(7) of the (12 U.S.C. 3401(7))--
       (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) in section 1112(e), 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. 1841) is amended by inserting after 
     subsection (p) (as added by section 103(b)(1)) the following 
     new subsections:
       ``(q) Wholesale Financial Institution.--The term `wholesale 
     financial institution' means a wholesale financial 
     institution subject to section 9B of the Federal Reserve Act.
       ``(r) Commission.--The term `Commission' means the 
     Securities and Exchange Commission.
       ``(s) 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 subject 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.
       (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) 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 State 
     wholesale financial institution, or to the Comptroller of the 
     Currency to become a national 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 or national 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;
       ``(B) subject to subparagraph (A), all references to the 
     appropriate Federal banking agency or to the Corporation in 
     that section shall be deemed to be references to the 
     Comptroller of the Currency, in the case of a national 
     wholesale financial institution, and to the Board, in the 
     case of all other wholesale financial institutions; and
       ``(C) in the case of wholesale financial institutions, the 
     purpose of prompt corrective action shall be to protect 
     taxpayers and the financial system from the risks associated 
     with the operation and activities of wholesale financial 
     institutions.
       ``(3) Enforcement authority.--Section 3(u), subsections (j) 
     and (k) of section 7, subsections (b) through (n), (s), (u), 
     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 or national 
     banks, as the case may be, 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 or a national 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, and with the approval of--
       ``(A) the Board, in the case of a State-chartered wholesale 
     financial institution; and
       ``(B) the Comptroller of the Currency, in the case of a 
     national bank wholesale financial institution.
       ``(7) Activities of out-of-state branches of wholesale 
     financial institutions.--A State-chartered wholesale 
     financial institution shall be deemed to be a State bank and 
     an insured State bank for purposes of paragraphs (1), (2), 
     and (3) of section 24(j) of the Federal Deposit Insurance 
     Act.
       ``(8) Discrimination regarding interest rates.--Section 27 
     of the Federal Deposit Insurance Act shall apply to State-
     chartered

[[Page 14196]]

     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.--Except as otherwise provided 
     in section 8A(f) of the Federal Deposit Insurance Act, no 
     deposits held by a wholesale financial institution shall be 
     insured deposits under the Federal Deposit Insurance Act.
       ``(C) Advertising and disclosure.--The Board and the 
     Comptroller of the Currency shall prescribe jointly 
     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 consistent 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 or the authority of the Comptroller of the 
     Currency over national 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.--Not later than 45 
     days after the date 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 not later than 180 days after the date of 
     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 subject to such extension of time as may 
     be granted in the discretion of the Board, 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) Resolution of Wholesale Financial Institutions.--
       ``(1) Conservatorship or receivership.--
       ``(A) Appointment.--The Board may appoint a conservator or 
     receiver 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 or receiver for a national bank.
       ``(B) Powers.--The conservator or receiver for a wholesale 
     financial institution shall exercise the same powers, 
     functions, and duties, subject to the same limitations, as a 
     conservator or receiver for a national bank.
       ``(2) Board authority.--The Board shall have the same 
     authority with respect to any conservator or receiver 
     appointed under paragraph (1), and the wholesale financial 
     institution for which it has been appointed, as the 
     Comptroller of the Currency has with respect to a conservator 
     or receiver for a national bank and the national bank for 
     which the conservator or receiver has been appointed.
       ``(3) Bankruptcy proceedings.--The Comptroller of the 
     Currency (in the case of a national wholesale financial 
     institution) or the Board may direct the conservator or 
     receiver of a wholesale financial institution to file a 
     petition pursuant to title 11, United States Code, in which 
     case, title 11, United States Code, shall apply to the 
     wholesale financial institution in lieu of otherwise 
     applicable Federal or State insolvency law.
       ``(f) Board Backup Authority.--
       ``(1) Notice to the comptroller.--Before taking any action 
     under section 8 of the Federal Deposit Insurance Act 
     involving a wholesale financial institution that is chartered 
     as a national bank, the Board shall notify the Comptroller 
     and recommend that the Comptroller take appropriate action. 
     If the Comptroller fails to take the recommended action or to 
     provide an acceptable plan for addressing the concerns of the 
     Board before the close of the 30-day period beginning on the 
     date of receipt of the formal recommendation from the Board, 
     the Board may take such action.
       ``(2) Exigent circumstances.--Notwithstanding paragraph 
     (1), the Board may exercise its authority without regard to 
     the time period set forth in paragraph (1) where the Board 
     finds that exigent circumstances exist and the Board notifies 
     the Comptroller of the Board's action and of the exigent 
     circumstances.
       ``(g) 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--

[[Page 14197]]

       (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, in the case of an insured State bank, 
     or to the Corporation and the Comptroller of the Currency, in 
     the case of an insured national bank authorized to operate as 
     a wholesale financial institution, 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 
     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, in the case of an insured State bank, 
     or the Corporation and the Comptroller of the Currency, in 
     the case of an insured national bank authorized to operate as 
     a wholesale financial institution, has 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''.
       (d) Technical and Conforming Amendments to the Bankruptcy 
     Code.--
       (1) Bankruptcy code debtors.--Section 109(b)(2) of title 
     11, United States Code, is amended by striking ``; or'' and 
     inserting the following: ``, except that--
       ``(A) a wholesale financial institution established under 
     section 5136B of the Revised Statutes of the United States or 
     section 9B of the Federal Reserve Act may be a debtor if a 
     petition is filed at the direction of the Comptroller of the 
     Currency (in the case of a wholesale financial institution 
     established under section 5136B of the Revised Statutes of 
     the United States) or the Board of Governors of the Federal 
     Reserve System (in the case of any wholesale financial 
     institution); and
       ``(B) a corporation organized under section 25A of the 
     Federal Reserve Act may be a debtor if a petition is filed at 
     the direction of the Board of Governors of the Federal 
     Reserve System; or''.
       (2) Chapter 7 debtors.--Section 109(d) of title 11, United 
     States Code, is amended to read as follows:
       ``(d) Only a railroad and a person that may be a debtor 
     under chapter 7 of this title, except that a stockbroker, a 
     wholesale financial institution established under section 
     5136B of the Revised Statutes of the United States or section 
     9B of the Federal Reserve Act, a corporation organized under 
     section 25A of the Federal Reserve Act, or a commodity 
     broker, may be a debtor under chapter 11 of this title.''.
       (3) Definition of financial institution.--Section 101(22) 
     of title 11, United States Code, is amended to read as 
     follows:
       ``(22) `financial institution' means a person that is a 
     commercial or savings bank, industrial savings bank, savings 
     and loan association, trust company, wholesale financial 
     institution established under section 5136B of the Revised 
     Statutes of the United States or section 9B of the Federal 
     Reserve Act, or corporation organized under section 25A of 
     the Federal Reserve Act and, when any such person is acting 
     as agent or custodian for a customer in connection with a 
     securities contract, as defined in section 741 of this title, 
     such customer,''.
       (4) Subchapter v of chapter 7.--
       (A) In general.--Section 103 of title 11, United States 
     Code, is amended--
       (i) by redesignating subsections (e) through (i) as 
     subsections (f) through (j), respectively; and
       (ii) by inserting after subsection (d) the following:
       ``(e) Subchapter V of chapter 7 of this title applies only 
     in a case under such chapter concerning the liquidation of a 
     wholesale financial institution established under section 
     5136B of the Revised Statutes of the United States or section 
     9B of the Federal Reserve Act, or a corporation organized 
     under section 25A of the Federal Reserve Act.''.
       (B) Wholesale bank liquidation.--Chapter 7 of title 11, 
     United States Code, is amended by adding at the end the 
     following:

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

     ``Sec. 781. Definitions for subchapter

       ``In this subchapter--
       ``(1) the term `Board' means the Board of Governors of the 
     Federal Reserve System;
       ``(2) the term `depository institution' has the same 
     meaning as in section 3 of the Federal Deposit Insurance Act, 
     and includes any wholesale bank;
       ``(3) the term `national wholesale financial institution' 
     means a wholesale financial institution established under 
     section 5136B of the Revised Statutes of the United States; 
     and
       ``(4) the term `wholesale bank' means a national wholesale 
     financial institution, a wholesale financial institution 
     established under section 9B of the Federal Reserve Act,

[[Page 14198]]

     or a corporation organized under section 25A of the Federal 
     Reserve Act.

     ``Sec. 782. Selection of trustee

       ``(a) Notwithstanding any other provision of this title, 
     the conservator or receiver who files the petition shall be 
     the trustee under this chapter, unless the Comptroller of the 
     Currency (in the case of a national wholesale financial 
     institution for which it appointed the conservator or 
     receiver) or the Board (in the case of any wholesale bank for 
     which it appointed the conservator or receiver) designates an 
     alternative trustee. The Comptroller of the Currency or the 
     Board (as applicable) may designate a successor trustee, if 
     required.
       ``(b) Whenever the Comptroller of the Currency or the Board 
     appoints or designates a trustee, chapter 3 and sections 704 
     and 705 of this title shall apply to the Comptroller or the 
     Board, as applicable, in the same way and to the same extent 
     that they apply to a United States trustee.

     ``Sec. 783. Additional powers of trustee

       ``(a) The trustee under this subchapter has power to 
     distribute property not of the estate, including 
     distributions to customers that are mandated by subchapters 
     III and Iv of this chapter.
       ``(b) The trustee under this subchapter may, after notice 
     and a hearing--
       ``(1) sell the wholesale bank to a depository institution 
     or consortium of depository institutions (which consortium 
     may agree on the allocation of the wholesale bank among the 
     consortium);
       ``(2) merge the wholesale bank with a depository 
     institution;
       ``(3) transfer contracts to the same extent as could a 
     receiver for a depository institution under paragraphs (9) 
     and (10) of section 11(e) of the Federal Deposit Insurance 
     Act;
       ``(4) transfer assets or liabilities to a depository 
     institution;
       ``(5) transfer assets and liabilities to a bridge bank as 
     provided in paragraphs (1), (3)(A), (5), (6), and (9) through 
     (13), and subparagraphs (A) through (H) and (K) of paragraph 
     (4) of section 11(n) of the Federal Deposit Insurance Act, 
     except that--
       ``(A) the bridge bank shall be treated as a wholesale bank 
     for the purpose of this subsection; and
       ``(B) any references in any such provision of law to the 
     Federal Deposit Insurance Corporation shall be construed to 
     be references to the appointing agency and that references to 
     deposit insurance shall be omitted.
       ``(c) Any reference in this section to transfers of 
     liabilities includes a ratable transfer of liabilities within 
     a priority class.

     ``Sec. 784. Right to be heard

       ``The Comptroller of the Currency (in the case of a 
     national wholesale financial institution), the Board (in the 
     case of any wholesale bank), or a Federal Reserve bank (in 
     the case of a wholesale bank that is a member of that bank) 
     may raise and may appear and be heard on any issue in a case 
     under this subchapter.
       (C) Conforming amendment.--The table of sections for 
     chapter 7 of title 11, United States Code, is amended by 
     adding at the end the following:

               ``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION

``781. Definitions for subchapter.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.
       (e) Resolution of Edge Corporations.--The 16th undesignated 
     paragraph of section 25A of the Federal Reserve Act (12 
     U.S.C. 624) is amended to read as follows:
       ``(16) Appointment of receiver or conservator.--
       ``(A) In general.--The Board may appoint a conservator or 
     receiver for a corporation organized under the provisions of 
     this section to the same extent and in the same manner as the 
     Comptroller of the Currency may appoint a conservator or 
     receiver for a national bank, and the conservator or receiver 
     for such corporation shall exercise the same powers, 
     functions, and duties, subject to the same limitations, as a 
     conservator or receiver for a national bank.
       ``(B) Equivalent authority.--The Board shall have the same 
     authority with respect to any conservator or receiver 
     appointed for a corporation organized under the provisions of 
     this section under this paragraph and any such corporation as 
     the Comptroller of the Currency has with respect to a 
     conservator or receiver of a national bank and the national 
     bank for which a conservator or receiver has been appointed.
       ``(C) Title 11 petitions.--The Board may direct the 
     conservator or receiver of a corporation organized under the 
     provisions of this section to file a petition pursuant to 
     title 11, United States Code, in which case, title 11, United 
     States Code, shall apply to the corporation in lieu of 
     otherwise applicable Federal or State insolvency law.''.

               Subtitle E--Preservation of FTC Authority

     SEC. 141. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956 
                   TO MODIFY NOTIFICATION AND POST-APPROVAL 
                   WAITING PERIOD FOR SECTION 3 TRANSACTIONS.

       Section 11(b)(1) of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1849(b)(1)) is amended by inserting ``and, if the 
     transaction also involves an acquisition under section 4 or 
     section 6, the Board shall also notify the Federal Trade 
     Commission of such approval'' before the period at the end of 
     the first sentence.

     SEC. 142. INTERAGENCY DATA SHARING.

       To the extent not prohibited by other law, the Comptroller 
     of the Currency, the Director of the Office of Thrift 
     Supervision, the Federal Deposit Insurance Corporation, and 
     the Board of Governors of the Federal Reserve System shall 
     make available to the Attorney General and the Federal Trade 
     Commission any data in the possession of any such banking 
     agency that the antitrust agency deems necessary for 
     antitrust review of any transaction requiring notice to any 
     such antitrust agency or the approval of such agency under 
     section 3, 4, or 6 of the Bank Holding Company Act of 1956, 
     section 18(c) of the Federal Deposit Insurance Act, the 
     National Bank Consolidation and Merger Act, section 10 of the 
     Home Owners' Loan Act, or the antitrust laws.

     SEC. 143. 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.
       (c) Hart-Scott-Rodino Amendments.--
       (1) Banks.--Section 7A(c)(7) of the Clayton Act (15 U.S.C. 
     18a(c)(7)) is amended by inserting before the semicolon at 
     the end the following: ``, except that a portion of a 
     transaction is not exempt under this paragraph if such 
     portion of the transaction (A) is subject to section 6 of the 
     Bank Holding Company Act of 1956; and (B) does not require 
     agency approval under section 3 of the Bank Holding Company 
     Act of 1956''.
       (2) Bank holding companies.--Section 7A(c)(8) of the 
     Clayton Act (15 U.S.C. 18a(c)(8)) is amended by inserting 
     before the semicolon at the end the following: ``, except 
     that a portion of a transaction is not exempt under this 
     paragraph if such portion of the transaction (A) is subject 
     to section 6 of the Bank Holding Company Act of 1956; and (B) 
     does not require agency approval under section 4 of the Bank 
     Holding Company Act of 1956''.

     SEC. 144. ANNUAL GAO REPORT.

       (a) In General.--By the end of the 1-year period beginning 
     on the date of the enactment of this Act and annually 
     thereafter, the Comptroller General of the United States 
     shall submit a report to the Congress on market concentration 
     in the financial services industry and its impact on 
     consumers.
       (b) Analysis.--Each report submitted under subsection (a) 
     shall contain an analysis of--
       (1) the positive and negative effects of affiliations 
     between various types of financial companies, and of 
     acquisitions pursuant to this Act and the amendments made by 
     this Act to other provisions of law, including any positive 
     or negative effects on consumers, area markets, and 
     submarkets thereof or on registered securities brokers and 
     dealers which have been purchased by depository institutions 
     or depository institution holding companies;
       (2) the changes in business practices and the effects of 
     any such changes on the availability of venture capital, 
     consumer credit, and other financial services or products and 
     the availability of capital and credit for small businesses; 
     and
       (3) the acquisition patterns among depository institutions, 
     depository institution holding companies, securities firms, 
     and insurance companies including acquisitions among the 
     largest 20 percent of firms and acquisitions within regions 
     or other limited geographical areas.
       (c) Sunset.--This section shall not apply after the end of 
     the 5-year period beginning on the date of the enactment of 
     this Act.

                     Subtitle F--National Treatment

     SEC. 151. 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)(D) or 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.

[[Page 14199]]

       ``(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 1999, the Board, giving due regard 
     to the principle of national treatment and equality of 
     competitive opportunity, may impose such restrictions and 
     requirements on the conduct of such activities by such 
     foreign bank or company as are comparable to those imposed on 
     a 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 114 of the Financial Services 
     Act.''.

     SEC. 152. 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.''.

     SEC. 153. REPRESENTATIVE OFFICES.

       (a) Definition of ``Representative Office''.--Section 
     1(b)(15) of the International Banking Act of 1978 (12 U.S.C. 
     3101(15)) is amended by striking ``State agency, or 
     subsidiary of a foreign bank'' and inserting ``or State 
     agency''.
       (b) Examinations.--Section 10(c) of the International 
     Banking Act of 1978 (12 U.S.C. 3107(c)) is amended by adding 
     at the end the following: ``The Board may also make 
     examinations of any affiliate of a foreign bank conducting 
     business in any State if the Board deems it necessary to 
     determine and enforce compliance with this Act, the Bank 
     Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or 
     other applicable Federal banking law.''.

     SEC. 154. RECIPROCITY.

       (a) National Treatment Reports.--
       (1) Report required in the event of certain acquisitions.--
       (A) In general.--Whenever a person from a foreign country 
     announces its intention to acquire or acquires a bank, a 
     securities underwriter, broker, or dealer, an investment 
     adviser, or insurance company that ranks within the top 50 
     firms in that line of business in the United States, the 
     Secretary of Commerce, in the case of an insurance company, 
     or the Secretary of the Treasury, in the case of a bank, a 
     securities underwriter, broker, or dealer, or an investment 
     adviser, shall, within the earlier of 6 months of such 
     announcement or such acquisition and in consultation with 
     other appropriate Federal and State agencies, prepare and 
     submit to the Congress a report on whether a United States 
     person would be able, de facto or de jure, to acquire an 
     equivalent sized firm in the country in which such person 
     from a foreign country is located.
       (B) Analysis and recommendations.--If a report submitted 
     under subparagraph (A) states that the equivalent treatment 
     referred to in such subparagraph, de facto and de jure, is 
     not provided in the country which is the subject of the 
     report, the Secretary of Commerce or the Secretary of the 
     Treasury, as the case may be and in consultation with other 
     appropriate Federal and State agencies, shall include in the 
     report analysis and recommendations as to how that country's 
     laws and regulations would need to be changed so that 
     reciprocal treatment would exist.
       (2) Report required before financial services negotiations 
     commence.--The Secretary of Commerce, with respect to 
     insurance companies, and the Secretary of the Treasury, with 
     respect to banks, securities underwriters, brokers, dealers, 
     and investment advisers, shall, not less than 6 months before 
     the commencement of the financial services negotiations of 
     the World Trade Organization and in consultation with other 
     appropriate Federal and State agencies, prepare and submit to 
     the Congress a report containing--
       (A) an assessment of the 30 largest financial services 
     markets with regard to whether reciprocal access is available 
     in such markets to United States financial services 
     providers; and
       (B) with respect to any such financial services markets in 
     which reciprocal access is not available to United States 
     financial services providers, an analysis and recommendations 
     as to what legislative, regulatory, or enforcement changes 
     would be required to ensure full reciprocity for such 
     providers.
       (3) Person of a foreign country defined.--For purposes of 
     this subsection, the term ``person of a foreign country'' 
     means a person, or a person which directly or indirectly owns 
     or controls that person, that is a resident of that country, 
     is organized under the laws of that country, or has its 
     principal place of business in that country.
       (b) Provisions Applicable to Submissions.--
       (1) Notice.--Before preparing any report required under 
     subsection (a), the Secretary of Commerce or the Secretary of 
     the Treasury, as the case may be, shall publish notice that a 
     report is in preparation and seek comment from United States 
     persons.
       (2) Privileged submissions.--Upon the request of the 
     submitting person, any comments or related communications 
     received by the Secretary of Commerce or the Secretary of the 
     Treasury, as the case may be, with regard to the report 
     shall, for the purposes of section 552 of title 5, of the 
     United States Code, be treated as commercial information 
     obtained from a person that is privileged or confidential, 
     regardless of the medium in which the information is 
     obtained. This confidential information shall be the property 
     of the Secretary and shall be privileged from disclosure to 
     any other person. However, this privilege shall not be 
     construed as preventing access to that confidential 
     information by the Congress.
       (3) Prohibition of unauthorized disclosures.--No person in 
     possession of confidential information, provided under this 
     section may disclose that information, in whole or in part, 
     except for disclosure made in published statistical material 
     that does not disclose, either directly or when used in 
     conjunction with publicly available information, the 
     confidential information of any person.

        Subtitle G--Federal Home Loan Bank System Modernization

     SEC. 161. SHORT TITLE.

       This subtitle may be cited as the ``Federal Home Loan Bank 
     System Modernization Act of 1999''.

     SEC. 162. DEFINITIONS.

       Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 
     1422) is amended--
       (1) in paragraph (1), by striking ``term `Board' means'' 
     and inserting ``terms `Finance Board' and `Board' mean'';
       (2) by striking paragraph (3) and inserting the following:
       ``(3) State.--The term `State', in addition to the States 
     of the United States, includes the District of Columbia, 
     Guam, Puerto Rico, the United States Virgin Islands, American 
     Samoa, and the Commonwealth of the Northern Mariana 
     Islands.''; and
       (3) by adding at the end the following new paragraph:
       ``(13) Community financial institution.--
       ``(A) In general.--The term `community financial 
     institution' means a member--
       ``(i) the deposits of which are insured under the Federal 
     Deposit Insurance Act; and
       ``(ii) that has, as of the date of the transaction at 
     issue, less than $500,000,000 in average total assets, based 
     on an average of total assets over the 3 years preceding that 
     date.
       ``(B) Adjustments.--The $500,000,000 limit referred to in 
     subparagraph (A)(ii) shall be adjusted annually by the 
     Finance Board, based on the annual percentage increase, if 
     any, in the Consumer Price Index for all urban consumers, as 
     published by the Department of Labor.''.

     SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP.

       Section 5(f) of the Home Owners' Loan Act (12 U.S.C. 
     1464(f)) is amended to read as follows:
       ``(f) Federal Home Loan Bank Membership.--On and after 
     January 1, 1999, 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.''.

     SEC. 164. ADVANCES TO MEMBERS; COLLATERAL.

       (a) In General.--Section 10(a) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1430(a)) is amended--
       (1) by redesignating paragraphs (1) through (4) as 
     subparagraphs (A) through (D), respectively, and indenting 
     appropriately;
       (2) by striking ``(a) Each'' and inserting the following:
       ``(a) In General.--
       ``(1) All advances.--Each'';
       (3) by striking the 2d sentence and inserting the 
     following:
       ``(2) Purposes of advances.--A long-term advance may only 
     be made for the purposes of--
       ``(A) providing funds to any member for residential housing 
     finance; and
       ``(B) providing funds to any community financial 
     institution for small business, agricultural, rural 
     development, or low-income community development lending.'';
       (4) by striking ``A Bank'' and inserting the following:
       ``(3) Collateral.--A Bank'';
       (5) in paragraph (3) (as so designated by paragraph (4) of 
     this subsection)--
       (A) in subparagraph (C) (as so redesignated by paragraph 
     (1) of this subsection) by striking ``Deposits'' and 
     inserting ``Cash or deposits'';
       (B) in subparagraph (D) (as so redesignated by paragraph 
     (1) of this subsection), by striking the 2d sentence; and

[[Page 14200]]

       (C) by inserting after subparagraph (D) (as so redesignated 
     by paragraph (1) of this subsection) the following new 
     subparagraph:
       ``(E) Secured loans for small business, agriculture, rural 
     development, or low-income community development, or 
     securities representing a whole interest in such secured 
     loans, in the case of any community financial institution.'';
       (6) in paragraph (5)--
       (A) in the 2d sentence, by striking ``and the Board'';
       (B) in the 3d sentence, by striking ``Board'' and inserting 
     ``Federal home loan bank''; and
       (C) by striking ``(5) Paragraphs (1) through (4)'' and 
     inserting the following:
       ``(4) Additional bank authority.--Subparagraphs (A) through 
     (E) of paragraph (3)''; and
       (7) by adding at the end the following:
       ``(5) Review of certain collateral standards.--The Board 
     may review the collateral standards applicable to each 
     Federal home loan bank for the classes of collateral 
     described in subparagraphs (D) and (E) of paragraph (3), and 
     may, if necessary for safety and soundness purposes, require 
     an increase in the collateral standards for any or all of 
     those classes of collateral.
       ``(6) Definitions.--For purposes of this subsection, the 
     terms `small business', `agriculture', `rural development', 
     and `low-income community development' shall have the 
     meanings given those terms by rule or regulation of the 
     Finance Board.''.
       (b) Clerical Amendment.--The section heading for section 10 
     of the Federal Home Loan Bank Act (12 U.S.C. 1430) is amended 
     to read as follows:

     ``SEC. 10. ADVANCES TO MEMBERS.''.

       (c) Conforming Amendments Relating to Members Which Are Not 
     Qualified Thrift Lenders--The 1st of the 2 subsections 
     designated as subsection (e) of section 10 of the Federal 
     Home Loan Bank Act (12 U.S.C. 1430(e)(1)) is amended--
       (1) in the last sentence of paragraph (1), by inserting 
     ``or, in the case of any community financial institution, for 
     the purposes described in subsection (a)(2)'' before the 
     period; and
       (2) in paragraph (5)(C), by inserting ``except that, in 
     determining the actual thrift investment percentage of any 
     community financial institution for purposes of this 
     subsection, the total investment of such member in loans for 
     small business, agriculture, rural development, or low-income 
     community development, or securities representing a whole 
     interest in such loans, shall be treated as a qualified 
     thrift investment (as defined in such section 10(m))'' before 
     the period.

     SEC. 165. ELIGIBILITY CRITERIA.

       Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C. 
     1424(a)) is amended--
       (1) in paragraph (2)(A), by inserting, ``(other than a 
     community financial institution)'' after ``institution''; and
       (2) by adding at the end the following new paragraph:
       ``(3) Limited exemption for community financial 
     institutions.--A community financial institution that 
     otherwise meets the requirements of paragraph (2) may become 
     a member without regard to the percentage of its total assets 
     that is represented by residential mortgage loans, as 
     described in subparagraph (A) of paragraph (2).''.

     SEC. 166. MANAGEMENT OF BANKS.

       (a) Board of Directors.--Section 7(d) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1427(d)) is amended--
       (1) by striking ``(d) The term'' and inserting the 
     following:
       ``(d) Terms of Office.--The term''; and
       (2) by striking ``shall be two years''.
       (b) Compensation.--Section 7(i) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1427(i)) is amended by striking ``, 
     subject to the approval of the board''.
       (c) Repeal of Sections 22A and 27.--The Federal Home Loan 
     Bank Act (12 U.S.C. 1421 et seq.) is amended by striking 
     sections 22A (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447).
       (d) Section 12.--Section 12 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1432) is amended--
       (1) in subsection (a)--
       (A) by striking ``, but, except'' and all that follows 
     through ``ten years'';
       (B) by striking ``subject to the approval of the Board'' 
     the first place that term appears;
       (C) by striking ``and, by its Board of directors,'' and all 
     that follows through ``agent of such bank,'' and inserting 
     ``and, by the board of directors of the bank, to prescribe, 
     amend, and repeal by-laws governing the manner in which its 
     affairs may be administered, consistent with applicable laws 
     and regulations, as administered by the Finance Board. No 
     officer, employee, attorney, or agent of a Federal home loan 
     bank''; and
       (D) by striking ``Board of directors'' where such term 
     appears in the penultimate sentence and inserting ``board of 
     directors''; and
       (2) in subsection (b), by striking ``loans banks'' and 
     inserting ``loan banks''.
       (e) Powers and Duties of Federal Housing Finance Board.--
       (1) Issuance of notices of violations.--Section 2B(a) of 
     the Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) To issue and serve a notice of charges upon a Federal 
     home loan bank or upon any executive officer or director of a 
     Federal home loan bank if, in the determination of the 
     Finance Board, the bank, executive officer, or director is 
     engaging or has engaged in, or the Finance Board has 
     reasonable cause to believe that the bank, executive officer, 
     or director is about to engage in, any conduct that violates 
     any provision of this Act or any law, order, rule, or 
     regulation or any condition imposed in writing by the Finance 
     Board in connection with the granting of any application or 
     other request by the bank, or any written agreement entered 
     into by the bank with the agency, in accordance with the 
     procedures provided in section 1371(c) of the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992. Such 
     authority includes the same authority to take affirmative 
     action to correct conditions resulting from violations or 
     practices or to limit activities of a bank or any executive 
     officer or director of a bank as appropriate Federal banking 
     agencies have to take with respect to insured depository 
     institutions under paragraphs (6) and (7) of section 8(b) of 
     the Federal Deposit Insurance Act, and to have all other 
     powers, rights, and duties to enforce this Act with respect 
     to the Federal home loan banks and their executive officers 
     and directors as the Office of Federal Housing Enterprise 
     Oversight has to enforce the Federal Housing Enterprises 
     Financial Safety and Soundness Act of 1992, the Federal 
     National Mortgage Association Charter Act, or the Federal 
     Home Loan Mortgage Corporation Act with respect to the 
     Federal housing enterprises under the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992.
       ``(6) To address any insufficiencies in capital levels 
     resulting from the application of section 5(f) of the Home 
     Owners' Loan Act.
       ``(7) To sue and be sued, by and through its own 
     attorneys.''.
       (2) Technical amendment.--Section 111 of Public Law 93-495 
     (12 U.S.C. 250) is amended by striking ``Federal Home Loan 
     Bank Board,'' and inserting ``Director of the Office of 
     Thrift Supervision, ``the Federal Housing Finance Board,''.
       (f) Eligibility To Secure Advances.--
       (1) Section 9.--Section 9 of the Federal Home Loan Bank Act 
     (12 U.S.C. 1429) is amended--
       (A) in the 2d sentence, by striking ``with the approval of 
     the Board''; and
       (B) in the 3d sentence, by striking ``, subject to the 
     approval of the Board,''.
       (2) Section 10.--Section 10 of the Federal Home Loan Bank 
     Act (12 U.S.C. 1430) is amended--
       (A) in subsection (c)--
       (i) in the 1st sentence, by striking ``Board'' and 
     inserting ``Federal home loan bank''; and
       (ii) by striking the 2d sentence;
       (B) in subsection (d)--
       (i) in the 1st sentence, by striking ``and the approval of 
     the Board''; and
       (ii) by striking ``Subject to the approval of the Board, 
     any'' and inserting ``Any''; and
       (C) in subsection (j)(1)--
       (i) by striking ``to subsidize the interest rate on 
     advances'' and inserting ``to provide subsidies, including 
     subsidized interest rates on advances'';
       (ii) by striking ``Pursuant'' and inserting the following:
       ``(A) Establishment.--Pursuant''; and
       (iii) by adding at the end the following new subparagraph:
       ``(B) Nondelegation of approval authority.--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.''.
       (g) Section 16.--Section 16(a) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1436(a)) is amended--
       (1) in the 3d sentence--
       (A) by striking ``net earnings'' and inserting ``previously 
     retained earnings or current net earnings''; and
       (B) by striking ``, and then only with the approval of the 
     Federal Housing Finance Board''; and
       (2) by striking the 4th sentence.
       (h) Section 18.--Section 18(b) of the Federal Home Loan 
     Bank Act (12 U.S.C. 1438(b)) is amended by striking paragraph 
     (4).

     SEC. 167. RESOLUTION FUNDING CORPORATION.

       (a) In General.--Section 21B(f)(2)(C) of the Federal Home 
     Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read 
     as follows:
       ``(C) Payments by federal home loan banks.--
       ``(i) In general.--To the extent that the amounts available 
     pursuant to subparagraphs (A) and (B) are insufficient to 
     cover the amount of interest payments, each Federal home loan 
     bank shall pay to the Funding Corporation in each calendar 
     year, 20.75 percent of the net earnings of that bank (after 
     deducting expenses relating to section 10(j) and operating 
     expenses).
       ``(ii) Annual determination.--The Board annually shall 
     determine the extent to which the value of the aggregate 
     amounts paid by the Federal home loan banks exceeds or falls 
     short of the value of an annuity of $300,000,000 per year 
     that commences on the issuance date and ends on the final 
     scheduled maturity date of the obligations, and shall

[[Page 14201]]

     select appropriate present value factors for making such 
     determinations.
       ``(iii) Payment term alterations.--The Board shall extend 
     or shorten the term of the payment obligations of a Federal 
     home loan bank under this subparagraph as necessary to ensure 
     that the value of all payments made by the banks is 
     equivalent to the value of an annuity referred to in clause 
     (ii).
       ``(iv) Term beyond maturity.--If the Board extends the term 
     of payments beyond the final scheduled maturity date for the 
     obligations, each Federal home loan bank shall continue to 
     pay 20.75 percent of its net earnings (after deducting 
     expenses relating to section 10(j) and operating expenses) to 
     the Treasury of the United States until the value of all such 
     payments by the Federal home loan banks is equivalent to the 
     value of an annuity referred to in clause (ii). In the final 
     year in which the Federal home loan banks are required to 
     make any payment to the Treasury under this subparagraph, if 
     the dollar amount represented by 20.75 percent of the net 
     earnings of the Federal home loan banks exceeds the remaining 
     obligation of the banks to the Treasury, the Finance Board 
     shall reduce the percentage pro rata to a level sufficient to 
     pay the remaining obligation.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall become effective on January 1, 1999. Payments made by a 
     Federal home loan bank before that effective date shall be 
     counted toward the total obligation of that bank under 
     section 21B(f)(2)(C) of the Federal Home Loan Bank Act, as 
     amended by this section.

     SEC. 168. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.

       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) Regulations.--
       ``(1) Capital standards.--Not later than 1 year after the 
     date of enactment of the Financial Services Act of 1999, the 
     Finance Board shall issue regulations prescribing uniform 
     capital standards applicable to each Federal home loan bank, 
     which shall require each such bank to meet--
       ``(A) the leverage requirement specified in paragraph (2); 
     and
       ``(B) the risk-based capital requirements, in accordance 
     with paragraph (3).
       ``(2) Leverage requirement.--
       ``(A) In general.--The leverage requirement shall require 
     each Federal home loan bank to maintain a minimum amount of 
     total capital based on the aggregate on-balance sheet assets 
     of the bank and shall be 5 percent.
       ``(B) Treatment of stock and retained earnings.--In 
     determining compliance with the minimum leverage ratio 
     established under subparagraph (A), the paid-in value of the 
     outstanding Class B stock shall be multiplied by 1.5, the 
     paid-in value of the outstanding Class C stock and the amount 
     of retained earnings shall be multiplied by 2.0, and such 
     higher amounts shall be deemed to be capital for purposes of 
     meeting the 5 percent minimum leverage ratio.
       ``(3) Risk-based capital standards.--
       ``(A) In general.--Each Federal home loan bank shall 
     maintain permanent capital in an amount that is sufficient, 
     as determined in accordance with the regulations of the 
     Finance Board, to meet--
       ``(i) the credit risk to which the Federal home loan bank 
     is subject; and
       ``(ii) the market risk, including interest rate risk, to 
     which the Federal home loan bank is subject, based on a 
     stress test established by the Finance Board that rigorously 
     tests for changes in market variables, including changes in 
     interest rates, rate volatility, and changes in the shape of 
     the yield curve.
       ``(B) Consideration of other risk-based standards.--In 
     establishing the risk-based standard under subparagraph 
     (A)(ii), the Finance Board shall take due consideration of 
     any risk-based capital test established pursuant to section 
     1361 of the Federal Housing Enterprises Financial Safety and 
     Soundness Act of 1992 (12 U.S.C. 4611) for the enterprises 
     (as defined in that Act), with such modifications as the 
     Finance Board determines to be appropriate to reflect 
     differences in operations between the Federal home loan banks 
     and those enterprises.
       ``(4) Other regulatory requirements.--The regulations 
     issued by the Finance Board under paragraph (1) shall--
       ``(A) permit each Federal home loan bank to issue, with 
     such rights, terms, and preferences, not inconsistent with 
     this Act and the regulations issued hereunder, as the board 
     of directors of that bank may approve, any 1 or more of--
       ``(i) Class A stock, which shall be redeemable in cash and 
     at par 6 months following submission by a member of a written 
     notice of its intent to redeem such shares;
       ``(ii) Class B stock, which shall be redeemable in cash and 
     at par 5 years following submission by a member of a written 
     notice of its intent to redeem such shares; and
       ``(iii) Class C stock, which shall be nonredeemable;
       ``(B) provide that the stock of a Federal home loan bank 
     may be issued to and held by only members of the bank, and 
     that a bank may not issue any stock other than as provided in 
     this section;
       ``(C) prescribe the manner in which stock of a Federal home 
     loan bank may be sold, transferred, redeemed, or repurchased; 
     and
       ``(D) provide the manner of disposition of outstanding 
     stock held by, and the liquidation of any claims of the 
     Federal home loan bank against, an institution that ceases to 
     be a member of the bank, through merger or otherwise, or that 
     provides notice of intention to withdraw from membership in 
     the bank.
       ``(5) Definitions of capital.--For purposes of determining 
     compliance with the capital standards established under this 
     subsection--
       ``(A) permanent capital of a Federal home loan bank shall 
     include (as determined in accordance with generally accepted 
     accounting principles)--
       ``(i) the amounts paid for the Class C stock and any other 
     nonredeemable stock approved by the Finance Board;
       ``(ii) the amounts paid for the Class B stock, in an amount 
     not to exceed 1 percent of the total assets of the bank; and
       ``(iii) the retained earnings of the bank; and
       ``(B) total capital of a Federal home loan bank shall 
     include--
       ``(i) permanent capital;
       ``(ii) the amounts paid for the Class A stock, Class B 
     stock (excluding any amount treated as permanent capital 
     under subparagraph (5)(A)(ii)), or any other class of 
     redeemable stock approved by the Finance Board;
       ``(iii) consistent with generally accepted accounting 
     principles, and subject to the regulation of the Finance 
     Board, a general allowance for losses, which may not include 
     any reserves or allowances made or held against specific 
     assets; and
       ``(iv) any other amounts from sources available to absorb 
     losses incurred by the bank that the Finance Board determines 
     by regulation to be appropriate to include in determining 
     total capital.
       ``(6) Transition period.--Notwithstanding any other 
     provisions of this Act, the requirements relating to purchase 
     and retention of capital stock of a Federal home loan bank by 
     any member thereof in effect on the day before the date of 
     enactment of the Federal Home Loan Bank System Modernization 
     Act of 1999, shall continue in effect with respect to each 
     Federal home loan bank until the regulations required by this 
     subsection have taken effect and the capital structure plan 
     required by subsection (b) has been approved by the Finance 
     Board and implemented by such bank.
       ``(b) Capital Structure Plan.--
       ``(1) Approval of plans.--Not later than 270 days after the 
     date of publication by the Finance Board of final regulations 
     in accordance with subsection (a), 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 that--
       ``(A) the board of directors determines is best suited for 
     the condition and operation of the bank and the interests of 
     the members of the bank;
       ``(B) meets the requirements of subsection (c); and
       ``(C) meets the minimum capital standards and requirements 
     established under subsection (a) and other regulations 
     prescribed by the Finance Board.
       ``(2) Approval of modifications.--The board of directors of 
     a Federal home loan bank shall submit to the Finance Board 
     for approval any modifications that the bank proposes to make 
     to an approved capital structure plan.
       ``(c) Contents of Plan.--The capital structure plan of each 
     Federal home loan bank shall contain provisions addressing 
     each of the following:
       ``(1) Minimum investment.--
       ``(A) In general.--Each capital structure plan of a Federal 
     home loan bank shall require each member of the bank to 
     maintain a minimum investment in the stock of the bank, the 
     amount of which shall be determined in a manner to be 
     prescribed by the board of directors of each bank and to be 
     included as part of the plan.
       ``(B) Investment alternatives.--
       ``(i) In general.--In establishing the minimum investment 
     required for each member under subparagraph (A), a Federal 
     home loan bank may, in its discretion, include any 1 or more 
     of the requirements referred to in clause (ii), or any other 
     provisions approved by the Finance Board.
       ``(ii) Authorized requirements.--A requirement is referred 
     to in this clause if it is a requirement for--

       ``(I) a stock purchase based on a percentage of the total 
     assets of a member; or
       ``(II) a stock purchase based on a percentage of the 
     outstanding advances from the bank to the member.

       ``(C) Minimum amount.--Each capital structure plan of a 
     Federal home loan bank shall require that the minimum stock 
     investment established for members shall be set at a level 
     that is sufficient for the bank to meet the minimum capital 
     requirements established by the Finance Board under 
     subsection (a).

[[Page 14202]]

       ``(D) Adjustments to minimum required investment.--The 
     capital structure plan of each Federal home loan bank shall 
     impose a continuing obligation on the board of directors of 
     the bank to review and adjust the minimum investment required 
     of each member of that bank, as necessary to ensure that the 
     bank remains in compliance with applicable minimum capital 
     levels established by the Finance Board, and shall require 
     each member to comply promptly with any adjustments to the 
     required minimum investment.
       ``(2) Transition rule.--
       ``(A) In general.--The capital structure plan of each 
     Federal home loan bank shall specify the date on which it 
     shall take effect, and may provide for a transition period of 
     not longer than 3 years to allow the bank to come into 
     compliance with the capital requirements prescribed under 
     subsection (a), and to allow any institution that was a 
     member of the bank on the date of enactment of the Financial 
     Services Act of 1999, to come into compliance with the 
     minimum investment required pursuant to the plan.
       ``(B) Interim purchase requirements.--The capital structure 
     plan of a Federal home loan bank may allow any member 
     referred to in subparagraph (A) that would be required by the 
     terms of the capital structure plan to increase its 
     investment in the stock of the bank to do so in periodic 
     installments during the transition period.
       ``(3) Disposition of shares.--The capital structure plan of 
     a Federal home loan bank shall provide for the manner of 
     disposition of any stock held by a member of that bank that 
     terminates its membership or that provides notice of its 
     intention to withdraw from membership in that bank.
       ``(4) Classes of stock.--
       ``(A) In general.--The capital structure plan of a Federal 
     home loan bank shall afford each member of that bank the 
     option of maintaining its required investment in the bank 
     through the purchase of any combination of classes of stock 
     authorized by the board of directors of the bank and approved 
     by the Finance Board in accordance with its regulations.
       ``(B) Rights requirement.--A Federal home loan bank shall 
     include in its capital structure plan provisions establishing 
     terms, rights, and preferences, including minimum investment, 
     dividends, voting, and liquidation preferences of each class 
     of stock issued by the bank, consistent with Finance Board 
     regulations and market requirements.
       ``(C) Reduced minimum investment.--The capital structure 
     plan of a Federal home loan bank may provide for a reduced 
     minimum stock investment for any member of that bank that 
     elects to purchase Class B, Class C, or any other class of 
     nonredeemable stock, in a manner that is consistent with 
     meeting the minimum capital requirements of the bank, as 
     established by the Finance Board.
       ``(D) Liquidation of claims.--The capital structure plan of 
     a Federal home loan bank shall provide for the liquidation in 
     an orderly manner, as determined by the bank, of any claim of 
     that bank against a member, including claims for any 
     applicable prepayment fees or penalties resulting from 
     prepayment of advances prior to stated maturity.
       ``(5) Limited transferability of stock.--The capital 
     structure plan of a Federal home loan bank shall--
       ``(A) provide that--
       ``(i) any stock issued by that bank shall be available only 
     to, held only by, and tradable only among members of that 
     bank and between that bank and its members; and
       ``(ii) a bank has no obligation to repurchase its 
     outstanding Class C stock but may do so, provided it is 
     consistent with Finance Board regulations and is at a price 
     that is mutually agreeable to the bank and the member; and
       ``(B) establish standards, criteria, and requirements for 
     the issuance, purchase, transfer, retirement, and redemption 
     of stock issued by that bank.
       ``(6) Bank review of plan.--Before filing a capital 
     structure plan with the Finance Board, each Federal home loan 
     bank shall conduct a review of the plan by--
       ``(A) an independent certified public accountant, to 
     ensure, to the extent possible, that implementation of the 
     plan would not result in any write-down of the redeemable 
     bank stock investment of its members; and
       ``(B) at least 1 major credit rating agency, to determine, 
     to the extent possible, whether implementation of the plan 
     would have any material effect on the credit ratings of the 
     bank.
       ``(d) Termination of Membership.--
       ``(1) Voluntary withdrawal.--Any member may withdraw from a 
     Federal home loan bank by providing written notice to the 
     bank of its intent to do so. The applicable stock redemption 
     notice periods shall commence upon receipt of the notice by 
     the bank. Upon the expiration of the applicable notice period 
     for each class of redeemable stock, the member may surrender 
     such stock to the bank, and shall be entitled to receive in 
     cash the par value of the stock. During the applicable notice 
     periods, the member shall be entitled to dividends and other 
     membership rights commensurate with continuing stock 
     ownership.
       ``(2) Involuntary withdrawal.--
       ``(A) In general.--The board of directors of a Federal home 
     loan bank may terminate the membership of any institution if, 
     subject to Finance Board regulations, it determines that--
       ``(i) the member has failed to comply with a provision of 
     this Act or any regulation prescribed under this Act; or
       ``(ii) the member 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 
     the member.
       ``(B) Stock disposition.--An institution, the membership of 
     which is terminated in accordance with subparagraph (A)--
       ``(i) shall surrender redeemable stock to the Federal home 
     loan bank, and shall receive in cash the par value of the 
     stock, upon the expiration of the applicable notice period 
     under subsection (a)(4)(A);
       ``(ii) shall receive any dividends declared on its 
     redeemable stock, during the applicable notice period under 
     subsection (a)(4)(A); and
       ``(iii) shall not be entitled to any other rights or 
     privileges accorded to members after the date of the 
     termination.
       ``(C) Commencement of notice period.--With respect to an 
     institution, the membership of which is terminated in 
     accordance with subparagraph (A), the applicable notice 
     period under subsection (a)(4) for each class of redeemable 
     stock shall commence on the earlier of--
       ``(i) the date of such termination; or
       ``(ii) the date on which the member has provided notice of 
     its intent to redeem such stock.
       ``(3) Liquidation of indebtedness.--Upon the termination of 
     the membership of an institution for any reason, the 
     outstanding indebtedness of the member to the bank shall be 
     liquidated in an orderly manner, as determined by the bank 
     and, upon the extinguishment of all such indebtedness, the 
     bank shall return to the member all collateral pledged to 
     secure the indebtedness.
       ``(e) Redemption of Excess Stock.--
       ``(1) In general.--A Federal home loan bank, in its sole 
     discretion, may redeem or repurchase, as appropriate, any 
     shares of Class A or Class B stock issued by the bank and 
     held by a member that are in excess of the minimum stock 
     investment required of that member.
       ``(2) Excess stock.--Shares of stock held by a member shall 
     not be deemed to be `excess stock' for purposes of this 
     subsection by virtue of a member's submission of a notice of 
     intent to withdraw from membership or termination of its 
     membership in any other manner.
       ``(3) Priority.--A Federal home loan bank may not redeem 
     any excess Class B stock prior to the end of the 5-year 
     notice period, unless the member has no Class A stock 
     outstanding that could be redeemed as excess.
       ``(f) Impairment of Capital.--If the Finance Board or the 
     board of directors of a Federal home loan bank determines 
     that the bank has incurred or is likely to incur losses that 
     result in or are expected to result in charges against the 
     capital of the bank, the bank shall not redeem or repurchase 
     any stock of the bank without the prior approval of the 
     Finance Board while such charges are continuing or are 
     expected to continue. In no case may a bank redeem or 
     repurchase any applicable capital stock if, following the 
     redemption, the bank would fail to satisfy any minimum 
     capital requirement.
       ``(g) Rejoining After Divestiture of All Shares.--
       ``(1) In general.--Except as provided in paragraph (2), and 
     notwithstanding any other provision of this Act, an 
     institution that divests all shares of stock in a Federal 
     home loan bank may not, after such divestiture, acquire 
     shares of any Federal home loan bank before the end of the 5-
     year period beginning on the date of the completion of such 
     divestiture, unless the divestiture is a consequence of a 
     transfer of membership on an uninterrupted basis between 
     banks.
       ``(2) Exception for withdrawals from membership before 
     1998.--Any institution that withdrew from membership in any 
     Federal home loan bank before December 31, 1997, may acquire 
     shares of a Federal home loan bank at any time after that 
     date, subject to the approval of the Finance Board and the 
     requirements of this Act.
       ``(h) Treatment of Retained Earnings.--
       ``(1) In general.--The holders of the Class C stock of a 
     Federal home loan bank, and any other classes of 
     nonredeemable stock approved by the Finance Board (to the 
     extent provided in the terms thereof), shall own the retained 
     earnings, surplus, undivided profits, and equity reserves, if 
     any, of the bank.
       ``(2) No nonredeemable classes of stock.--If a Federal home 
     loan bank has no outstanding Class C or other such 
     nonredeemable stock, then the holders of any other classes of 
     stock of the bank then outstanding shall have ownership in, 
     and a private property right in, the retained earnings, 
     surplus, undivided profits, and equity reserves, if any, of 
     the bank.
       ``(3) Exception.--Except as specifically provided in this 
     section or through the declaration of a dividend or a capital 
     distribution by a Federal home loan bank, or in the event of 
     liquidation of the bank, a member shall have no right to 
     withdraw or otherwise

[[Page 14203]]

     receive distribution of any portion of the retained earnings 
     of the bank.
       ``(4) Limitation.--A Federal home loan bank may not make 
     any distribution of its retained earnings unless, following 
     such distribution, the bank would continue to meet all 
     applicable capital requirements.''.

                       Subtitle H--ATM Fee Reform

     SEC. 171. SHORT TITLE.

       This subtitle may be cited as the ``ATM Fee Reform Act of 
     1999''.

     SEC. 172. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY 
                   HOST ATM.

       Section 904(d) of the Electronic Fund Transfer Act (15 
     U.S.C. 1693b(d)) is amended by adding at the end the 
     following new paragraph:
       ``(3) Fee disclosures at automated teller machines.--
       ``(A) In general.--The regulations prescribed under 
     paragraph (1) shall require any automated teller machine 
     operator who imposes a fee on any consumer for providing host 
     transfer services to such consumer to provide notice in 
     accordance with subparagraph (B) to the consumer (at the time 
     the service is provided) of--
       ``(i) the fact that a fee is imposed by such operator for 
     providing the service; and
       ``(ii) the amount of any such fee.
       ``(B) Notice requirements.--
       ``(i) On the machine.--The notice required under clause (i) 
     of subparagraph (A) with respect to any fee described in such 
     subparagraph shall be posted in a prominent and conspicuous 
     location on or at the automated teller machine at which the 
     electronic fund transfer is initiated by the consumer; and
       ``(ii) On the screen.--The notice required under clauses 
     (i) and (ii) of subparagraph (A) with respect to any fee 
     described in such subparagraph shall appear on the screen of 
     the automated teller machine, or on a paper notice issued 
     from such machine, after the transaction is initiated and 
     before the consumer is irrevocably committed to completing 
     the transaction.
       ``(C) Prohibition on fees not properly disclosed and 
     explicitly assumed by consumer.--No fee may be imposed by any 
     automated teller machine operator in connection with any 
     electronic fund transfer initiated by a consumer for which a 
     notice is required under subparagraph (A), unless--
       ``(i) the consumer receives such notice in accordance with 
     subparagraph (B); and
       ``(ii) the consumer elects to continue in the manner 
     necessary to effect the transaction after receiving such 
     notice.
       ``(D) Definitions.--For purposes of this paragraph, the 
     following definitions shall apply:
       ``(i) Electronic fund transfer.--The term `electronic fund 
     transfer' includes a transaction which involves a balance 
     inquiry initiated by a consumer in the same manner as an 
     electronic fund transfer, whether or not the consumer 
     initiates a transfer of funds in the course of the 
     transaction.
       ``(ii) Automated teller machine operator.--The term 
     `automated teller machine operator' means any person who--

       ``(I) operates an automated teller machine at which 
     consumers initiate electronic fund transfers; and
       ``(II) is not the financial institution which holds the 
     account of such consumer from which the transfer is made.

       ``(iii) Host transfer services.--The term `host transfer 
     services' means any electronic fund transfer made by an 
     automated teller machine operator in connection with a 
     transaction initiated by a consumer at an automated teller 
     machine operated by such operator.''.

     SEC. 173. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM 
                   CARD IS ISSUED.

       Section 905(a) of the Electronic Fund Transfer Act (15 
     U.S.C. 1693c(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (8);
       (2) by striking the period at the end of paragraph (9) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (9) the following new 
     paragraph:
       ``(10) a notice to the consumer that a fee may be imposed 
     by--
       ``(A) an automated teller machine operator (as defined in 
     section 904(d)(3)(D)(ii)) if the consumer initiates a 
     transfer from an automated teller machine which is not 
     operated by the person issuing the card or other means of 
     access; and
       ``(B) any national, regional, or local network utilized to 
     effect the transaction.''.

     SEC. 174. FEASIBILITY STUDY.

       (a) In General.--The Comptroller General of the United 
     States shall conduct a study of the feasibility of requiring, 
     in connection with any electronic fund transfer initiated by 
     a consumer through the use of an automated teller machine--
       (1) a notice to be provided to the consumer before the 
     consumer is irrevocably committed to completing the 
     transaction, which clearly states the amount of any fee which 
     will be imposed upon the consummation of the transaction by--
       (A) any automated teller machine operator (as defined in 
     section 904(d)(3)(D)(ii) of the Electronic Fund Transfer Act) 
     involved in the transaction;
       (B) the financial institution holding the account of the 
     consumer;
       (C) any national, regional, or local network utilized to 
     effect the transaction; and
       (D) any other party involved in the transfer; and
       (2) the consumer to elect to consummate the transaction 
     after receiving the notice described in paragraph (1).
       (b) Factors To Be Considered.--In conducting the study 
     required under subsection (a) with regard to the notice 
     requirement described in such subsection, the Comptroller 
     General shall consider the following factors:
       (1) The availability of appropriate technology.
       (2) Implementation and operating costs.
       (3) The competitive impact any such notice requirement 
     would have on various sizes and types of institutions, if 
     implemented.
       (4) The period of time which would be reasonable for 
     implementing any such notice requirement.
       (5) The extent to which consumers would benefit from any 
     such notice requirement.
       (6) Any other factor the Comptroller General determines to 
     be appropriate in analyzing the feasibility of imposing any 
     such notice requirement.
       (c) Report to the Congress.--Before the end of the 6-month 
     period beginning on the date of the enactment of this Act, 
     the Comptroller General shall submit a report to the Congress 
     containing--
       (1) the findings and conclusions of the Comptroller General 
     in connection with the study required under subsection (a); 
     and
       (2) the recommendation of the Comptroller General with 
     regard to the question of whether a notice requirement 
     described in subsection (a) should be implemented and, if so, 
     how such requirement should be implemented.

     SEC. 175. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.

       Section 910 of the Electronic Fund Transfer Act (15 U.S.C 
     1693h) is amended by adding at the end the following new 
     subsection:
       ``(d) Exception for Damaged Notices.--If the notice 
     required to be posted pursuant to section 904(d)(3)(B)(i) by 
     an automated teller machine operator has been posted by such 
     operator in compliance with such section and the notice is 
     subsequently removed, damaged, or altered by any person other 
     than the operator of the automated teller machine, the 
     operator shall have no liability under this section for 
     failure to comply with section 904(d)(3)(B)(i).''.

                 Subtitle I--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 bank is 
     well capitalized (as defined in section 38 of the Federal 
     Deposit Insurance Act).''.

                  Subtitle J--Deposit Insurance Funds

     SEC. 186. STUDY OF SAFETY AND SOUNDNESS OF FUNDS.

       (a) Study Required.--The Board of Directors of the Federal 
     Deposit Insurance Corporation shall conduct a study of the 
     following issues with regard to the Bank Insurance Fund and 
     the Savings Association Insurance Fund:
       (1) Safety and soundness.--The safety and soundness of the 
     funds and the adequacy of the reserve requirements applicable 
     to the funds in light of--
       (A) the size of the insured depository institutions which 
     are resulting from mergers and consolidations since the 
     effective date of the Riegle-Neal Interstate Banking and 
     Branching Efficiency Act of 1994; and
       (B) the affiliation of insured depository institutions with 
     other financial institutions pursuant to this Act and the 
     amendments made by this Act.
       (2) Concentration levels.--The concentration levels of the 
     funds, taking into account the number of members of each fund 
     and the geographic distribution of such members, and the 
     extent to which either fund is exposed to higher risks due to 
     a regional concentration of members or an insufficient 
     membership base relative to the size of member institutions.
       (3) Merger issues.--Issues relating to the planned merger 
     of the funds, including the cost of merging the funds and the 
     manner in which such costs will be distributed among the 
     members of the respective funds.
       (b) Report Required.--
       (1) In general.--Before the end of the 9-month period 
     beginning on the date of the

[[Page 14204]]

     enactment of this Act, the Board of Directors of the Federal 
     Deposit Insurance Corporation shall submit a report to the 
     Congress on the study conducted pursuant to subsection (a).
       (2) Contents of report.--The report shall include--
       (A) detailed findings of the Board of Directors with regard 
     to the issues described in subsection (a);
       (B) a description of the plans developed by the Board of 
     Directors for merging the Bank Insurance Fund and the Savings 
     Association Insurance Fund, including an estimate of the 
     amount of the cost of such merger which would be borne by 
     Savings Association Insurance Fund members; and
       (C) such recommendations for legislative and administrative 
     action as the Board of Directors determines to be necessary 
     or appropriate to preserve the safety and soundness of the 
     deposit insurance funds, reduce the risks to such funds, 
     provide for an efficient merger of such funds, and for other 
     purposes.
       (c) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Insured depository institution.--The term ``insured 
     depository institution'' has the same meaning as in section 
     3(c) of the Federal Deposit Insurance Act.
       (2) BIF and SAIF members.--The terms ``Bank Insurance Fund 
     member'' and ``Savings Association Insurance Fund member'' 
     have the same meanings as in section 7(l) of the Federal 
     Deposit Insurance Act.

     SEC. 187. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.

       (a) SAIF Special Reserves.--Section 11(a)(6) of the Federal 
     Deposit Insurance Act (12 U.S.C. 1821(a)(6)) is amended by 
     striking subparagraph (L).
       (b) DIF Special Reserves.--Section 2704 of the Deposit 
     Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is 
     amended--
       (1) by striking subsection (b); and
       (2) in subsection (d)--
       (A) by striking paragraph (4);
       (B) in paragraph (6)(C)(i), by striking ``(6) and (7)'' and 
     inserting ``(5), (6), and (7)''; and
       (C) in paragraph (6)(C), by striking clause (ii) and 
     inserting the following:
       ``(ii) by redesignating paragraph (8) as paragraph (5).''.

                  Subtitle K--Miscellaneous Provisions

     SEC. 191. TERMINATION OF ``KNOW YOUR CUSTOMER'' REGULATIONS.

       (a) In General.--None of the proposed regulations described 
     in subsection (b) may be published in final form and, to the 
     extent any such regulation has become effective before the 
     date of the enactment of this Act, such regulation shall 
     cease to be effective as of such date.
       (b) Proposed Regulations Described.--The proposed 
     regulations referred to in subsection (a) are as follows:
       (1) The regulation proposed by the Comptroller of the 
     Currency to amend part 21 of title 12 of the Code of Federal 
     Regulations, as published in the Federal Register on December 
     7, 1998.
       (2) The regulation proposed by the Director of the Office 
     of Thrift Supervision to amend part 563 of title 12 of the 
     Code of Federal Regulations, as published in the Federal 
     Register on December 7, 1998.
       (3) The regulation proposed by the Board of Governors of 
     the Federal Reserve System to amend parts 208, 211, and 225 
     of title 12 of the Code of Federal Regulations, as published 
     in the Federal Register on December 7, 1998.
       (4) The regulation proposed by the Federal Deposit 
     Insurance Corporation to amend part 326 of title 12 of the 
     Code of Federal Regulations, as published in the Federal 
     Register on December 7, 1998.

     SEC. 192. STUDY AND REPORT ON FEDERAL ELECTRONIC FUND 
                   TRANSFERS.

       (a) Study.--The Secretary of the Treasury shall conduct a 
     feasibility study to determine--
       (1) whether all electronic payments issued by Federal 
     agencies could be routed through the Regional Finance Centers 
     of the Department of the Treasury for verification and 
     reconciliation;
       (2) whether all electronic payments made by the Federal 
     Government could be subjected to the same level of 
     reconciliation as United States Treasury checks, including 
     matching each payment issued with each corresponding deposit 
     at financial institutions;
       (3) whether the appropriate computer security controls are 
     in place in order to ensure the integrity of electronic 
     payments;
       (4) the estimated costs of implementing, if so recommended, 
     the processes and controls described in paragraphs (1), (2), 
     and (3); and
       (5) a possible timetable for implementing those processes 
     if so recommended.
       (b) Report to Congress.--Not later than October 1, 2000, 
     the Secretary of the Treasury shall submit a report to 
     Congress containing the results of the study required by 
     subsection (a).
       (c) Definition.--For purposes of this section, the term 
     ``electronic payment'' means any transfer of funds, other 
     than a transaction originated by check, draft, or similar 
     paper instrument, which is initiated through an electronic 
     terminal, telephonic instrument, or computer or magnetic 
     tapes so as to order, instruct, or authorize a debit or 
     credit to a financial account.

     SEC. 193. GENERAL ACCOUNTING OFFICE STUDY OF CONFLICTS OF 
                   INTEREST

       (a) Study Required.--The Comptroller General of the United 
     States shall conduct a study analyzing the conflict of 
     interest faced by the Board of Governors of the Federal 
     Reserve System between its role as a primary regulator of the 
     banking industry and its role as a vendor of services to the 
     banking and financial services industry.
       (b) Specific Conflict Required to Be Addressed.--In the 
     course of the study required under subsection (a), the 
     Comptroller General shall address the conflict of interest 
     faced by the Board of Governors of the Federal Reserve System 
     between the role of the Board as a regulator of the payment 
     system, generally, and its participation in the payment 
     system as a competitor with private entities who are 
     providing payment services.
       (c) Report to Congress.--Before the end of the 1-year 
     period beginning on the date of the enactment of this Act, 
     the Comptroller General shall submit a report to the Congress 
     containing the findings and conclusions of the Comptroller 
     General in connection with the study required under this 
     section, together with such recommendations for such 
     legislative or administrative actions as the Comptroller 
     General may determine to be appropriate, including 
     recommendations for resolving any such conflict of interest.

     SEC. 194. STUDY OF COST OF ALL FEDERAL BANKING REGULATIONS.

       (a) In General.--In accordance with the finding in the 
     Board of Governors of the Federal Reserve System Staff Study 
     Numbered 171 (April, 1998) that ``Further research covering 
     more and different types of regulations and regulatory 
     requirements is clearly needed to make informed decisions 
     about regulations'', the Board of Governors of the Federal 
     Reserve System, in consultation with the other Federal 
     banking agencies (as defined in section 3 of the Federal 
     Deposit Insurance Act) shall conduct a comprehensive study of 
     the total annual costs and benefits of all Federal financial 
     regulations and regulatory requirements applicable to banks.
       (b) Report Required.--Before the end of the 2-year period 
     beginning on the date of the enactment of this Act, the Board 
     of Governors of the Federal Reserve System shall submit a 
     comprehensive report to the Congress containing the findings 
     and conclusions of the Board in connection with the study 
     required under subsection (a) and such recommendations for 
     legislative and administrative action as the Board may 
     determine to be appropriate.

     SEC. 195. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE 
                   REQUIREMENTS TO ONLINE BANKING AND LENDING.

       (a) Study Required.--The Federal banking agencies shall 
     conduct a study of banking regulations regarding the delivery 
     of financial services, including those regulations that may 
     assume that there will be person-to-person contact during the 
     course of a financial services transaction, and report their 
     recommendations on adapting those existing requirements to 
     online banking and lending.
       (b) Report Required.--Within 1 year of the date of the 
     enactment of this Act, the Federal banking agencies shall 
     submit a report to the Congress on the findings and 
     conclusions of the agencies with respect to the study 
     required under subsection (a), together with such 
     recommendations for legislative or regulatory action as the 
     agencies may determine to be appropriate.
       (c) Definition.--For purposes of this section, the term 
     ``Federal banking agencies'' means each Federal banking 
     agency (as defined in section 3(z) of the Federal Deposit 
     Insurance Act).

     SEC. 196. REGULATION OF UNINSURED STATE MEMBER BANKS.

       Section 9 of the Federal Reserve Act (12 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. 197. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.

       Section 18 of the Federal Deposit Insurance Act (21 U.S.C. 
     1828) is amended by adding at the end the following new 
     subsection:
       ``(t) Limitation on Claims.--
       ``(1) In general.--Notwithstanding any other provision of 
     law other than paragraph (2), no person shall have any claim 
     for monetary damages or return of assets or other property 
     against any Federal banking agency (including in its capacity 
     as conservator or receiver) relating to the transfer of 
     money, assets, or other property to increase the capital of 
     an insured depository institution by any depository 
     institution holding company or controlling shareholder for 
     such depository institution, or any affiliate or

[[Page 14205]]

     subsidiary of such depository institution, if at the time of 
     the transfer--
       ``(A) the insured depository institution is subject to any 
     direction issued in writing by a Federal banking agency to 
     increase its capital;
       ``(B) the depository institution is undercapitalized, 
     significantly undercapitalized, or critically 
     undercapitalized (as defined in section 38 of this Act); and
       ``(C) for that portion of the transfer that is made by an 
     entity covered by section 5(g) of the Bank Holding Company 
     Act of 1956 or section 45 of this Act, the Federal banking 
     agency has followed the procedure set forth in such section.
       ``(2) Exception.--No provision of this subsection shall be 
     construed as limiting--
       ``(A) the right of an insured depository institution, a 
     depository institution holding company, or any other agency 
     or person to seek direct review of an order or directive 
     issued by a Federal banking agency under this Act, the Bank 
     Holding Company Act of 1956, the National Bank Receivership 
     Act, the Bank Conservation Act, or the Home Owners' Loan Act;
       ``(B) the rights of any party to a contract pursuant to 
     section 11(e) of this Act; or
       ``(C) the rights of any party to a contract with a 
     depository institution holding company or a subsidiary of a 
     depository institution holding company (other than an insured 
     depository institution).''

     SEC. 198. INTEREST RATES AND OTHER CHARGES AT INTERSTATE 
                   BRANCHES.

       Section 44 of the Federal Deposit Insurance Act (12 U.S.C. 
     1831u) is amended--
       (1) by redesignating subsection (f) as subsection (g); and
       (2) by inserting after subsection (e) the following:
       ``(f) Applicable Rate and Other Charge Limitations.--
       ``(1) In general.--Except as provided for in paragraph (3), 
     upon the establishment of a branch of any insured depository 
     institution in a host State under this section, the maximum 
     interest rate or amount of interest, discount points, finance 
     charges, or other similar charges that may be charged, taken, 
     received, or reserved from time to time in any loan or 
     discount made or upon any note, bill of exchange, financing 
     transaction, or other evidence of debt by any insured 
     depository institution in such State shall be equal to not 
     more than the greater of--
       ``(A) the maximum interest rate or amount of interest, 
     discount points, finance charges, or other similar charges 
     that may be charged, taken, received, or reserved in a 
     similar transaction under the constitution, statutory, or 
     other lows of the home State of the insured depository 
     institution establishing any such branch, without reference 
     to this section, as such maximum interest rate or amount of 
     interest may change from time to time; or
       ``(B) the maximum rate or amount of interest, discount 
     points, finance charges, or other similar charges that may be 
     charged, taken, received, or reserved in a similar 
     transaction by an insured depository institution under the 
     constitution, statutory, or other laws of the host State, 
     without reference to this section.
       ``(2) Preemption.--The limitations established under 
     paragraph (1) shall apply only in any State that has a 
     constitutional provision that sets a maximum lawful rate of 
     interest on any contract at not more than 5 percent per annum 
     above the Federal Reserve Discount Rate or 90-day commercial 
     paper in effect in the Federal Reserve Bank in the Federal 
     Reserve District in which the State is located.
       ``(3) Rule of construction.--No provision of this 
     subsection shall be construed as superseding section 501 of 
     the Depository Institutions Deregulation and Monetary Control 
     Act of 1980.

                   Subtitle L-Effective Date of Title

     SEC. 199. 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 180-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.
       ``(B) Exception for certain bank activities.--A bank shall 
     not be considered to be a broker because the bank engages in 
     any one or more of the following activities under the 
     conditions described:
       ``(i) Third party brokerage arrangements.--The bank enters 
     into a contractual or other written 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 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 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 types of investment vehicles 
     available from the bank and the broker or dealer under the 
     arrangement;
       ``(VI) bank employees do not 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 as permitted under clause (ii) or (viii) 
     of this subparagraph; and
       ``(IX) the bank, broker, or dealer informs each customer 
     that the brokerage services are provided by the broker or 
     dealer and not by the bank and that the securities are not 
     deposits or other obligations of the bank, are not guaranteed 
     by the bank, and are not insured by the Federal Deposit 
     Insurance Corporation.

       ``(ii) Trust activities.--The bank effects transactions in 
     a trustee or fiduciary capacity in its trust department, or 
     another department where the trust or fiduciary activity is 
     regularly examined by bank examiners under the same standards 
     and in the same way as such activities are examined in the 
     trust department, and--

       ``(I) is chiefly compensated for such transactions, 
     consistent with fiduciary principles and standards, on the 
     basis of an administration or annual fee (payable on a 
     monthly, quarterly, or other basis), a percentage of assets 
     under management, or a flat or capped per order processing 
     fee equal to not more than the cost incurred by the bank in 
     connection with executing securities transactions for trustee 
     and fiduciary customers, or any combination of such fees; and
       ``(II) does not 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) Employee benefit plans.--The bank effects 
     transactions, as a registered transfer agent (including as a 
     registrar of stocks), in the securities of an issuer as part 
     of any pension, retirement, profit-sharing, bonus, thrift, 
     savings, incentive, or other similar benefit plan for the 
     employees of that issuer or its affiliates (as defined in 
     section 2 of the Bank Holding Company Act of 1956), if--

       ``(aa) the bank does not solicit transactions or provide 
     investment advice with respect to the purchase or sale of 
     securities in connection with the plan; and
       ``(bb) the bank's compensation for such plan or program 
     consists chiefly of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(II) Dividend reinvestment plans.--The bank effects 
     transactions, as a registered transfer agent (including as a 
     registrar of stocks), in the securities of an issuer as part 
     of that issuer's dividend reinvestment plan, if--

       ``(aa) the bank does not solicit transactions or provide 
     investment advice with respect to the purchase or sale of 
     securities in connection with the plan;

[[Page 14206]]

       ``(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 chiefly of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(III) Issuer plans.--The bank effects transactions, as a 
     registered transfer agent (including as a registrar of 
     stocks), in the securities of an issuer as part of that 
     issuer's plan 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 chiefly of administration fees, or flat or capped 
     per order processing fees, or both.

       ``(IV) Permissible delivery of materials.--The exception to 
     being considered a broker for a bank engaged in activities 
     described in subclauses (I), (II), and (III) will not be 
     affected by 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 1999; or
       ``(bb) otherwise permitted by the Commission.
       ``(v) Sweep accounts.--The bank effects transactions as 
     part of a program for the investment or reinvestment of 
     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 (as defined in 
     section 2 of the Bank Holding Company Act of 1956) of the 
     bank 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 the date that is 1 year after the 
     date of enactment of the Financial Services Act of 1999, is 
     not affiliated with a broker or dealer that has been 
     registered for more than 1 year in accordance with this Act, 
     and engages in dealing, market making, or underwriting 
     activities, other than with respect to exempted securities; 
     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, if the bank maintains records 
     separately identifying the securities and the customer.

       ``(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) of this 
     title 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) Excepted banking products.--The bank effects 
     transactions in excepted banking products, as defined in 
     section 206 of the Financial Services Act of 1999.
       ``(x) Municipal securities.--The bank effects transactions 
     in municipal securities.
       ``(xi) De minimis exception.--The bank effects, other than 
     in transactions referred to in clauses (i) through (x), 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 broker or 
     dealer for execution;
       ``(ii) the trade is a cross trade or other substantially 
     similar trade of a security that--

       ``(I) is made by the bank or between the bank and an 
     affiliated fiduciary; and
       ``(II) is not in contravention of fiduciary principles 
     established under applicable Federal or State law; or

       ``(iii) the trade is conducted in some other manner 
     permitted under rules, regulations, or orders as the 
     Commission may prescribe or issue.
       ``(D) 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 1999, subject to section 15(e) of 
     this title; 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 other separate entity, of securities backed by or 
     representing an interest in notes, drafts, acceptances, 
     loans, leases, receivables, other obligations (other than 
     securities of which the bank is not the issuer), or pools of 
     any such obligations predominantly originated by--

       ``(I) the bank;
       ``(II) an affiliate of any such bank other than a broker or 
     dealer; or
       ``(III) a syndicate of banks of which the bank is a member, 
     if the obligations or pool of obligations consists of 
     mortgage obligations or consumer-related receivables.

       ``(iv) Excepted banking products.--The bank buys or sells 
     excepted banking products, as defined in section 206 of the 
     Financial Services Act of 1999.
       ``(v) Derivative instruments.--The bank issues, buys, or 
     sells any derivative instrument to which the bank is a 
     party--

       ``(I) 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

[[Page 14207]]

     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. 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.''.

     SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS.

       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 Hybrid 
     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 hybrid 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 hybrid product unless the Commission 
     determines that--
       ``(A) the new hybrid 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) Considerations.--In making a determination under 
     paragraph (2), the Commission shall consider--
       ``(A) the nature of the new hybrid product; and
       ``(B) the history, purpose, extent, and appropriateness of 
     the regulation of the new hybrid product under the Federal 
     securities laws and under the Federal banking laws.
       ``(4) Consultation.--In promulgating rules under this 
     subsection, the Commission shall consult with and consider 
     the views of the Board of Governors of the Federal Reserve 
     System regarding the nature of the new hybrid product, the 
     history, purpose, extent, and appropriateness of the 
     regulation of the new product under the Federal banking laws, 
     and the impact of the proposed rule on the banking industry.
       ``(5) New hybrid product.--For purposes of this subsection, 
     the term `new hybrid 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 an excepted banking product, as such term is 
     defined in section 206 of the Financial Services Act of 
     1999.''.

     SEC. 206. DEFINITION OF EXCEPTED BANKING PRODUCT.

       (a) Definition of Excepted Banking Product.--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 
     ``excepted banking product'' means--
       (1) a deposit account, savings account, certificate of 
     deposit, or other deposit instrument issued by a bank;
       (2) a banker's acceptance;
       (3) a letter of credit issued or loan made by a bank;
       (4) a debit account at a bank arising from a credit card or 
     similar arrangement;
       (5) a participation in a loan which the bank or an 
     affiliate of the bank (other than a broker or dealer) funds, 
     participates in, or owns that is sold--
       (A) to qualified investors; or
       (B) to other persons that--
       (i) have the opportunity to review and assess any material 
     information, including information regarding the borrower's 
     creditworthiness; and
       (ii) based on such factors as financial sophistication, net 
     worth, and knowledge and experience in financial matters, 
     have the capability to evaluate the information available, as 
     determined under generally applicable banking standards or 
     guidelines; or
       (6) a derivative instrument that involves or relates to--
       (A) currencies, except options on currencies that trade on 
     a national securities exchange;
       (B) interest rates, except interest rate derivative 
     instruments that--
       (i) are based on a security or a group or index of 
     securities (other than government securities or a group or 
     index of government securities);
       (ii) provide for the delivery of one or more securities 
     (other than government securities); or
       (iii) trade on a national securities exchange; or
       (C) commodities, other rates, indices, or other assets, 
     except derivative instruments that--
       (i) are securities or that are based on a group or index of 
     securities (other than government securities or a group or 
     index of government securities);
       (ii) provide for the delivery of one or more securities 
     (other than government securities); or
       (iii) trade on a national securities exchange.
       (b) Classification Limited.--Classification of a particular 
     product as an excepted banking product pursuant to this 
     section shall not be construed as finding or implying that 
     such product 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.
       (c) Incorporated Definitions.--For purposes of this 
     section--
       (1) the terms ``bank'', ``qualified investor'', and 
     ``securities laws'' have the same meanings given in section 
     3(a) of the Securities Exchange Act of 1934, as amended by 
     this Act; and
       (2) the term ``government securities'' has the meaning 
     given in section 3(a)(42) of such Act (as amended by this 
     Act), and, for purposes of this section, commercial paper, 
     bankers acceptances, and commercial bills shall be treated in 
     the same manner as government securities.

     SEC. 207. ADDITIONAL DEFINITIONS.

       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 an excepted banking 
     product, as defined in paragraphs (1) through (5) of section 
     206(a) of the Financial Services Act of 1999.
       ``(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, 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 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;

[[Page 14208]]

       ``(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;
       ``(ix) any foreign bank (as defined in section 1(b)(7) of 
     the International Banking Act of 1978);
       ``(x) the government of any foreign country;
       ``(xi) any corporation, company, or partnership that owns 
     and invests on a discretionary basis, not less than 
     $10,000,000 in investments;
       ``(xii) any natural person who owns and invests on a 
     discretionary basis, not less than $10,000,000 in 
     investments;
       ``(xiii) any government or political subdivision, agency, 
     or instrumentality of a government who owns and invests on a 
     discretionary basis not less than $50,000,000 in investments; 
     or
       ``(xiv) any multinational or supranational entity or any 
     agency or instrumentality thereof.
       ``(B) Additional authority.--The Commission may, by rule or 
     order, define a `qualified investor' as any other person, 
     taking into consideration such factors as the financial 
     sophistication of the person, 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 sections 15, 15C, and 17A as applied 
     to a bank, a qualified Canadian government obligation as 
     defined in section 5136 of the Revised Statutes of the United 
     States.''.

     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.

     SEC. 210. RULE OF CONSTRUCTION.

       Nothing in this Act shall supersede, affect, or otherwise 
     limit the scope and applicability of the Commodity Exchange 
     Act (7 U.S.C. 1 et seq.).

             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 second, third, fourth, and fifth 
     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 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

[[Page 14209]]

       ``(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 same meanings given 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 given in 
     section 3 of 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 given 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)(A) of the 
     Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(A)) 
     is amended 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 given in 
     section 3 of the Securities Exchange Act of 1934.''.

     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 given in 
     section 3 of 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, 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 other 
     provision of law.
       ``(c) Definition.--For purposes of this section, the term 
     `appropriate Federal banking agency' shall have the same 
     meaning given 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

[[Page 14210]]

     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. STATUTORY DISQUALIFICATION FOR BANK WRONGDOING.

       Section 9(a) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-9(a)) is amended in paragraphs (1) and (2) by 
     striking ``securities dealer, transfer agent,'' and inserting 
     ``securities dealer, bank, transfer agent,''.

     SEC. 224. 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. 225. 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. 226. CHURCH PLAN EXCLUSION.

       Section 3(c)(14) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-3(c)(14)) is amended--
       (1) by redesignating clauses (i) and (ii) of subparagraph 
     (B) as subclauses (I) and (II), respectively;
       (2) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii), respectively;
       (3) by inserting ``(A)'' after ``(14)''; and
       (4) by adding at the end the following new subparagraph:
       ``(B) If a registered investment company would be excluded 
     from the definition of investment company under this 
     subsection but for the fact that some of the company's assets 
     do not satisfy the condition of subparagraph (A)(ii) of this 
     paragraph, then any investment adviser to the company or 
     affiliated person of such investment adviser shall not be 
     subject to the requirements of section 15(g)(1)(B) with 
     respect to shares of the investment company.''.

     SEC. 227. 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 (k); and
       (2) by inserting after subsection (h) the following new 
     subsection:
       ``(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 the date of 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 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.

[[Page 14211]]

       ``(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', `savings association', and 
     `wholesale financial institution' have the same meanings 
     given in section 2 of the Bank Holding Company Act of 1956 
     (12 U.S.C. 1841).
       ``(D) The term `insured bank' has the same meaning given in 
     section 3 of the Federal Deposit Insurance Act.
       ``(E) The term `foreign bank' has the same meaning given 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' mean 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.--
       (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 subparagraph:
       ``(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--Disclosure of Customer Costs of Acquiring Financial 
                                Products

     SEC. 241. IMPROVED AND CONSISTENT DISCLOSURE.

       (a) Revised Regulations Required.--Within one year after 
     the date of enactment of this Act, each Federal financial 
     regulatory authority shall prescribe rules, or revisions to 
     its rules, to improve the accuracy, simplicity, and 
     completeness, and to make more consistent, the disclosure of 
     information by persons subject to the jurisdiction of such 
     regulatory authority concerning any commissions, fees, or 
     other costs incurred by customers in the acquisition of 
     financial products.
       (b) Consultation.--In prescribing rules and revisions under 
     subsection (a), the Federal financial regulatory authorities 
     shall consult with each other and with appropriate State 
     financial regulatory authorities.
       (c) Consideration of Existing Disclosures.--In prescribing 
     rules and revisions under subsection (a), the Federal 
     financial regulatory authorities shall consider the 
     sufficiency and appropriateness of then existing laws and 
     rules applicable to persons subject to their jurisdiction, 
     and may prescribe exemptions from the rules and revisions 
     required by subsection (a) to the extent appropriate in light 
     of the objective of this section to increase the consistency 
     of disclosure practices.
       (d) Enforcement.--Any rule prescribed by a Federal 
     financial regulatory authority pursuant to this section 
     shall, for purposes of enforcement, be treated as a rule 
     prescribed by such regulatory authority pursuant to the 
     statute establishing such regulatory authority's jurisdiction 
     over the persons to whom such rule applies.
       (e) Definition.--As used in this section, the term 
     ``Federal financial regulatory authority'' means the Board of 
     Governors of the Federal Reserve System, the Securities and 
     Exchange Commission, the Comptroller of the Currency, the 
     Federal Deposit Insurance Corporation, the Commodity Futures 
     Trading Commission, and any self-regulatory organization 
     under the supervision of any of the foregoing.

                          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 shall engage in the business of insurance in a 
     State as principal or agent unless such person is licensed as 
     required by the appropriate insurance regulator of such State 
     in accordance with the relevant State insurance law, subject 
     to section 104.

     SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.

       The insurance activities of any person (including a 
     national bank exercising its power

[[Page 14212]]

     to act as agent under the 11th undesignated paragraph of 
     section 13 of the Federal Reserve Act) shall be functionally 
     regulated by the States, subject to section 104.

     SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.

       (a) In General.--Except as provided in section 305, 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, 1999, the Comptroller of the Currency 
     had determined in writing that national banks may provide 
     such product as principal, or national banks were in fact 
     lawfully providing such product as principal;
       (2) no court of relevant jurisdiction had, by final 
     judgment, overturned a determination of the Comptroller of 
     the Currency that national banks may provide such product as 
     principal; and
       (3) the product is not 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, 
     1999, in accordance with the relevant State insurance law, in 
     the State in which the product is provided;
       (2) any product first offered after January 1, 1999, 
     which--
       (A) a State insurance regulator determines shall be 
     regulated as insurance in the State in which the product is 
     provided because the product insures, guarantees, or 
     indemnifies against liability, loss of life, loss of health, 
     or loss through damage to or destruction of property, 
     including, 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; or
       (II) in the event that the product is not a letter of 
     credit or other similar extension of credit, a qualified 
     financial contract, or a financial guaranty, it would qualify 
     for treatment for losses incurred with respect to such 
     product under section 832(b)(5) of the Internal Revenue Code 
     of 1986, if the bank were subject to tax as an insurance 
     company under section 831 of that Code; or

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

     SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND 
                   THEIR AFFILIATES.

       (a) General Prohibition.--No national bank, and no 
     subsidiary of a national bank, may engage in any activity 
     involving the underwriting or sale of title insurance.
       (b) Nondiscrimination Parity Exception.--
       (1) In general.--Notwithstanding any other provision of law 
     (including section 104 of this Act), in the case of any State 
     in which banks organized under the laws of such State are 
     authorized to sell title insurance as agency, a national bank 
     and a subsidiary of a national bank may sell title insurance 
     as agent in such State, but only in the same manner, to the 
     same extent, and under the same restrictions as such State 
     banks are authorized to sell title insurance as agent in such 
     State.
       (2) Coordination with ``wildcard'' provision.--A State law 
     which authorizes State banks to engage in any activities in 
     such State in which a national bank may engage shall not be 
     treated as a statute which authorizes State banks to sell 
     title insurance as agent, for purposes of paragraph (1).
       (c) Grandfathering With Consistent Regulation.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3) and notwithstanding subsections (a) and (b), a national 
     bank, and a subsidiary of a national bank, may conduct title 
     insurance activities which such national bank or subsidiary 
     was actively and lawfully conducting 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 the 
     underwriting 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 other than a subsidiary which provides 
     insurance as principal, the national bank may not directly 
     engage in any activity involving the underwriting of title 
     insurance.
       (d) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes 
     of this section, the terms ``affiliate'' and ``subsidiary'' 
     have the same meanings as in section 2 of the Bank Holding 
     Company Act of 1956.
       (e) Rule of Construction.--No provision of this Act or any 
     other Federal law shall be construed as superseding or 
     affecting a State law which was in effect before the date of 
     the enactment of this Act and which prohibits title insurance 
     from being offered, provided, or sold in such State, or from 
     being underwritten with respect to real property in such 
     State, by any person whatsoever.

     SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR 
                   FEDERAL REGULATORS.

       (a) Filing in Court of Appeals.--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 
     subsection (a) shall complete all action on such petition, 
     including rendering a judgment, before the end of the 60-day 
     period beginning on the date on which such petition is filed, 
     unless all parties to such proceeding agree to any extension 
     of such period.
       (c) Supreme Court Review.--Any request for certiorari to 
     the Supreme Court of the United States of any judgment of a 
     United States Court of Appeals with respect to a petition for 
     review under this section shall be filed with the Supreme 
     Court of the United States as soon as practicable after such 
     judgment is issued.
       (d) Statute of Limitation.--No petition may be filed under 
     this section challenging an order, ruling, determination, or 
     other action of a Federal regulator or State insurance 
     regulator after the later of--
       (1) the end of the 12-month period beginning on the date on 
     which the first public notice is made of such order, ruling, 
     determination or other action in its final form; or
       (2) the end of the 6-month period beginning on the date on 
     which such order, ruling, determination, or other action 
     takes effect.
       (e) Standard of Review.--The court shall decide a petition 
     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. 307. CONSUMER PROTECTION REGULATIONS.

       The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) 
     is amended by inserting after section 46 (as added by section 
     122(b) of this Act) the following new section:

     ``SEC. 47. 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 the 
     Financial Services Act of 1999, consumer protection 
     regulations (which the agencies jointly determine to be 
     appropriate) that--
       ``(A) apply to retail sales practices, solicitations, 
     advertising, or offers of any insurance product by any 
     insured depository institution or 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

[[Page 14213]]

     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
       ``(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'.
       ``(iv) `NOT INSURED BY ANY GOVERNMENT AGENCY'.
       ``(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 is kept, to the 
     extent practicable, physically segregated from insurance 
     product activity.
       ``(2) Requirements.--Regulations prescribed pursuant to 
     paragraph (1) shall include the following:
       ``(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 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) 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.
       ``(f) Effect on Other Authority.--
       ``(1) In general.--No provision of this section shall be 
     construed as granting, limiting, or otherwise affecting--
       ``(A) any authority of the Securities and Exchange 
     Commission, any self-regulatory organization, the Municipal 
     Securities Rulemaking Board, or the Secretary of the Treasury 
     under any Federal securities law; or
       ``(B) except as provided in paragraph (2), any authority of 
     any State insurance commissioner or other State authority 
     under any State law.
       ``(2) Coordination with state law.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     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.
       ``(B) Preemption.--If, with respect to any provision of the 
     regulations prescribed under this section, the Board of 
     Governors of the Federal Reserve System, the Comptroller of 
     the Currency, and the Board of Directors of the Federal 
     Deposit Insurance Corporation determine jointly that the 
     protection afforded by such provision for consumers is 
     greater than the protection provided by a comparable 
     provision of the statutes, regulations, orders, or 
     interpretations referred to in subparagraph (A) of any State, 
     such provision of the regulations prescribed under this 
     section shall supersede the comparable provision of such 
     State statute, regulation, order, or interpretation.
       ``(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. 308. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR 
                   INSURANCE COMPANIES AND AFFILIATES.

       Except as provided in section 104(a)(2), no State may, by 
     law, regulation, order, interpretation, or otherwise--
       (1) prevent or significantly interfere with the ability of 
     any insurer, or any affiliate of an insurer (whether such 
     affiliate is organized as a stock company, mutual holding 
     company, or otherwise), to become a financial holding company 
     or to acquire 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, significantly interfere with, 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.

     SEC. 309. INTERAGENCY CONSULTATION.

       (a) Purpose.--It is the intention of Congress that the 
     Board of Governors of the Federal Reserve System, as the 
     umbrella supervisor for financial holding companies, and the 
     State insurance regulators, as the functional regulators of 
     companies engaged in insurance activities, coordinate efforts 
     to supervise companies that control both a depository 
     institution and a company engaged in insurance activities 
     regulated under State law. In particular, Congress believes 
     that the Board and the State insurance regulators should 
     share, on a confidential basis, information relevant to the 
     supervision of companies that control both a depository 
     institution and a company engaged in insurance activities, 
     including information regarding the financial health of the 
     consolidated organization and information regarding 
     transactions and relationships between insurance

[[Page 14214]]

     companies and affiliated depository institutions. The 
     appropriate Federal banking agencies for depository 
     institutions should also share, on a confidential basis, 
     information with the relevant State insurance regulators 
     regarding transactions and relationships between depository 
     institutions and affiliated companies engaged in insurance 
     activities. The purpose of this section is to encourage this 
     coordination and confidential sharing of information, and to 
     thereby improve both the efficiency and the quality of the 
     supervision of financial holding companies and their 
     affiliated depository institutions and companies engaged in 
     insurance activities.
       (b) Examination Results and Other Information.--
       (1) Information of the board.--Upon the request of the 
     appropriate insurance regulator of any State, the Board may 
     provide any information of the Board regarding the financial 
     condition, risk management policies, and operations of any 
     financial holding company that controls a company that is 
     engaged in insurance activities and is regulated by such 
     State insurance regulator, and regarding any transaction or 
     relationship between such an insurance company and any 
     affiliated depository institution. The Board may provide any 
     other information to the appropriate State insurance 
     regulator that the Board believes is necessary or appropriate 
     to permit the State insurance regulator to administer and 
     enforce applicable State insurance laws.
       (2) Banking agency information.--Upon the request of the 
     appropriate insurance regulator of any State, the appropriate 
     Federal banking agency may provide any information of the 
     agency regarding any transaction or relationship between a 
     depository institution supervised by such Federal banking 
     agency and any affiliated company that is engaged in 
     insurance activities regulated by such State insurance 
     regulator. The appropriate Federal banking agency may provide 
     any other information to the appropriate State insurance 
     regulator that the agency believes is necessary or 
     appropriate to permit the State insurance regulator to 
     administer and enforce applicable State insurance laws.
       (3) State insurance regulator information.--Upon the 
     request of the Board or the appropriate Federal banking 
     agency, a State insurance regulator may provide any 
     examination or other reports, records, or other information 
     to which such insurance regulator may have access with 
     respect to a company which--
       (A) is engaged in insurance activities and regulated by 
     such insurance regulator; and
       (B) is an affiliate of an insured depository institution, 
     wholesale financial institution, or financial holding 
     company.
       (c) Consultation.--Before making any determination relating 
     to the initial affiliation of, or the continuing affiliation 
     of, an insured depository institution, wholesale financial 
     institution, or financial holding company with a company 
     engaged in insurance activities, the appropriate Federal 
     banking agency shall consult with the appropriate State 
     insurance regulator of such company and take the views of 
     such insurance regulator into account in making such 
     determination.
       (d) Effect on Other Authority.--Nothing in this section 
     shall limit in any respect the authority of the appropriate 
     Federal banking agency with respect to an insured depository 
     institution, wholesale financial institution, or bank holding 
     company or any affiliate thereof under any provision of law.
       (e) Confidentiality and Privilege.--
       (1) Confidentiality.--The appropriate Federal banking 
     agency shall not provide any information or material that is 
     entitled to confidential treatment under applicable Federal 
     banking agency regulations, or other applicable law, to a 
     State insurance regulator unless such regulator agrees to 
     maintain the information or material in confidence and to 
     take all reasonable steps to oppose any effort to secure 
     disclosure of the information or material by the regulator. 
     The appropriate Federal banking agency shall treat as 
     confidential any information or material obtained from a 
     State insurance regulator that is entitled to confidential 
     treatment under applicable State regulations, or other 
     applicable law, and take all reasonable steps to oppose any 
     effort to secure disclosure of the information or material by 
     the Federal banking agency.
       (2) Privilege.--The provision pursuant to this section of 
     information or material by a Federal banking agency or State 
     insurance regulator shall not constitute a waiver of, or 
     otherwise affect, any privilege to which the information or 
     material is otherwise subject.
       (f) Definitions.--For purposes of this section, the 
     following definitions shall apply:
       (1) Appropriate federal banking agency; insured depository 
     institution.--The terms ``appropriate Federal banking 
     agency'' and ``insured depository institution'' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.
       (2) Board; financial holding company; and wholesale 
     financial institution.--The terms ``Board'', ``financial 
     holding company'', and ``wholesale financial institution'' 
     have the same meanings as in section 2 of the Bank Holding 
     Company Act of 1956.

     SEC. 310. DEFINITION OF STATE.

       For purposes of this subtitle, the term ``State'' means any 
     State of the United States, the District of Columbia, any 
     territory of the United States, Puerto Rico, Guam, American 
     Samoa, the Trust Territory of the Pacific Islands, the Virgin 
     Islands, and the Northern Mariana Islands.

   Subtitle B--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, not later than 3 years after the date of 
     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 that such producer is 
     permitted to sell or solicit the purchase of insurance in its 
     State, if the producer's home State also awards such licenses 
     on such a reciprocal basis, 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.
       (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

[[Page 14215]]

     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 by subsections (b) and (c) no longer 
     exists, the provisions of this subtitle shall take effect 2 
     years after the date on which such uniformity or reciprocity 
     ceases to exist, 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.
       (g) Uniform Licensing.--Nothing in this section shall be 
     construed to require any State to adopt new or additional 
     licensing requirements to achieve the uniformity necessary to 
     satisfy subsection (a)(1).

     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;
       (2) have succession until dissolved by an Act of Congress;
       (3) not be an agent or instrumentality 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'').

     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 period 
     preceding the date on which 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 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.

[[Page 14216]]

       (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 years as may 
     be prescribed in the bylaws of the Association.
       (b) Criteria for Chairperson.--Only individuals who are 
     members of the NAIC 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) upon 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 subsection.
       (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.--Not later than 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 not later than 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 on which 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 shall 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 clause (ii) of this subparagraph, 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 a 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, or not renewed (hereafter in this section referred 
     to as a ``disciplinary action''), the Association shall bring 
     specific charges, notify such member of such charges, 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.--
       (1) In general.--In any proceeding to review such action, 
     after notice and the opportunity for hearing, the NAIC 
     shall--
       (A) determine whether the action should be taken;
       (B) affirm, modify, or rescind the disciplinary sanction; 
     or
       (C) remand to the Association for further proceedings.
       (2) Dismissal of review.--The NAIC may dismiss a proceeding 
     to review disciplinary action if the NAIC finds that--
       (A) the specific grounds on which the action is based exist 
     in fact;
       (B) the action is in accordance with applicable rules and 
     regulations; and
       (C) such rules and regulations are, and were, applied in a 
     manner consistent with the purposes of this subtitle.

     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 that the NAIC incurs under this subtitle.

[[Page 14217]]



     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) Examinations.--The NAIC may make such examinations and 
     inspections of the Association and require the Association to 
     furnish to the NAIC 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) Report by association.--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 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 beginning 
     on 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), (b), and (c) of 
     section 321; and
       (2) the NAIC has not approved the Association's bylaws as 
     required by section 328 or 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, the following shall apply:
       (1) General appointment power.--The President, with the 
     advice and consent of the 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 subsection (a) take effect, 
     the NAIC shall, not later than 60 days thereafter, provide a 
     list of recommended candidates to the President. If the NAIC 
     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 Senate, 
     make the requisite appointments without considering the views 
     of the NAIC.
       (B) Subsequent appointments.--After the initial 
     appointments, the NAIC 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 NAIC 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.
       (c) Annual Report.--As soon as practicable after the close 
     of each fiscal year, the Association shall submit to the 
     President and to the 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 other actions purporting to regulate insurance 
     producers shall be preempted as provided in subsection (b).
       (b) Prohibited Actions.--No State shall--
       (1) 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) 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) 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 from 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; 
     or
       (4) 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.
       (c) Savings Provision.--Except as provided in subsections 
     (a) and (b), no provision of this section shall be construed 
     as altering or affecting the continuing effectiveness of any 
     law, regulation, provision, or other 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.

     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 shall be 
     required to 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) 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.
       (2) Insurance.--The term ``insurance'' means any product, 
     other than title insurance, defined or regulated as insurance 
     by

[[Page 14218]]

     the appropriate State insurance regulatory authority.
       (3) 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.
       (4) State.--The term ``State'' includes any State, the 
     District of Columbia, American Samoa, Guam, Puerto Rico, and 
     the United States Virgin Islands.
       (5) 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.

           Subtitle C--Rental Car Agency Insurance Activities

     SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHICLE RENTALS.

       (a) Protection Against Retroactive Application of 
     Regulatory and Legal Action.--Except as provided in 
     subsection (b), during the 3-year period beginning on the 
     date of the enactment of this Act, it shall be a presumption 
     that no State law imposes any licensing, appointment, or 
     education requirements on any person who solicits the 
     purchase of or sells insurance connected with, and incidental 
     to, the lease or rental of a motor vehicle.
       (b) Preeminence of State Insurance Law.--No provision of 
     this section shall be construed as altering the validity, 
     interpretation, construction, or effect of--
       (1) any State statute;
       (2) the prospective application of any court judgment 
     interpreting or applying any State statute; or
       (3) the prospective application of any final State 
     regulation, order, bulletin, or other statutorily authorized 
     interpretation or action,
     which, by its specific terms, expressly regulates or exempts 
     from regulation any person who solicits the purchase of or 
     sells insurance connected with, and incidental to, the short-
     term lease or rental of a motor vehicle.
       (c) Scope of Application.--This section shall apply with 
     respect to--
       (1) the lease or rental of a motor vehicle for a total 
     period of 90 consecutive days or less; and
       (2) insurance which is provided in connection with, and 
     incidentally to, such lease or rental for a period of 
     consecutive days not exceeding the lease or rental period.
       (d) Motor Vehicle Defined.--For purposes of this section, 
     the term ``motor vehicle'' has the meaning given to such term 
     in section 13102 of title 49, United States Code.

                      Subtitle D--Confidentiality

     SEC. 351. CONFIDENTIALITY OF HEALTH AND MEDICAL INFORMATION.

       (a) In General.--A company which underwrites or sells 
     annuities contracts or contracts insuring, guaranteeing, or 
     indemnifying against loss, harm, damage, illness, disability, 
     or death (other than credit-related insurance) and any 
     subsidiary or affiliate thereof shall maintain a practice of 
     protecting the confidentiality of individually identifiable 
     customer health and medical and genetic information and may 
     disclose such information only--
       (1) with the consent, or at the direction, of the customer;
       (2) for insurance underwriting and reinsuring policies, 
     account administration, reporting, investigating, or 
     preventing fraud or material misrepresentation, processing 
     premium payments, processing insurance claims, administering 
     insurance benefits (including utilization review activities), 
     providing information to the customer's physician or other 
     health care provider, participating in research projects, 
     enabling the purchase, transfer, merger, or sale of any 
     insurance-related business, or as otherwise required or 
     specifically permitted by Federal or State law; or
       (3) in connection with--
       (A) the authorization, settlement, billing, processing, 
     clearing, transferring, reconciling, or collection of amounts 
     charged, debited, or otherwise paid using a debit, credit, or 
     other payment card or account number, or by other payment 
     means;
       (B) the transfer of receivables, accounts, or interest 
     therein;
       (C) the audit of the debit, credit, or other payment 
     information;
       (D) compliance with Federal, State, or local law;
       (E) compliance with a properly authorized civil, criminal, 
     or regulatory investigation by Federal, State, or local 
     authorities as governed by the requirements of this section; 
     or
       (F) fraud protection, risk control, resolving customer 
     disputes or inquiries, communicating with the person to whom 
     the information relates, or reporting to consumer reporting 
     agencies.
       (b) State Actions for Violations.--In addition to such 
     other remedies as are provided under State law, if the chief 
     law enforcement officer of a State, State insurance 
     regulator, or an official or agency designated by a State, 
     has reason to believe that any person has violated or is 
     violating this title, the State may bring an action to enjoin 
     such violation in any appropriate United States district 
     court or in any other court of competent jurisdiction.
       (c) Effective Date; Sunset.--
       (1) Effective date.--Except as provided in paragraph (2), 
     subsection (a) shall take effect on February 1, 2000.
       (2) Sunset.--Subsection (a) shall not take effect if, or 
     shall cease to be effective on and after the date on which, 
     legislation is enacted that satisfies the requirements in 
     section 264(c)(1) of the Health Insurance Portability and 
     Accountability Act of 1996 (Public Law 104-191; 110 Stat. 
     2033).
       (d) Consultation.--While subsection (a) is in effect, State 
     insurance regulatory authorities, through the National 
     Association of Insurance Commissioners, shall consult with 
     the Secretary of Health and Human Services in connection with 
     the administration of such subsection.

          TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES

     SEC. 401. PROHIBITION ON NEW UNITARY SAVINGS AND LOAN HOLDING 
                   COMPANIES.

       (a) In General.--Section 10(c) of the Home Owners' Loan Act 
     (12 U.S.C. 1467a(c)) is amended by adding at the end the 
     following new paragraph:
       ``(9) Termination of expanded powers for new unitary 
     holding company.--
       ``(A) In general.--Subject to subparagraph (B) and 
     notwithstanding paragraph (3), no company may directly or 
     indirectly, including through any merger, consolidation, or 
     other type of business combination, acquire control of a 
     savings association after March 4, 1999, unless the company 
     is engaged, directly or indirectly (including through a 
     subsidiary other than a savings association), only in 
     activities that are permitted--
       ``(i) under paragraph (1)(C) or (2); or
       ``(ii) for financial holding companies under section 6(c) 
     of the Bank Holding Company Act of 1956.
       ``(B) Existing unitary holding companies and the successors 
     to such companies.--Subparagraph (A) shall not apply, and 
     paragraph (3) shall continue to apply, to a company (or any 
     subsidiary of such company) that--
       ``(i) either--

       ``(I) acquired 1 or more savings associations described in 
     paragraph (3) pursuant to applications at least 1 of which 
     was filed on or before March 4, 1999; or
       ``(II) subject to subparagraph (C), became a savings and 
     loan holding company by acquiring control of the company 
     described in subclause (I); and

       ``(ii) continues to control the savings association 
     referred to in clause (i)(II) or the successor to any such 
     savings association.
       ``(C) Notice process for nonfinancial activities by a 
     successor unitary holding company.--
       ``(i) Notice required.--Subparagraph (B) shall not apply to 
     any company described in subparagraph (B)(i)(II) which 
     engages, directly or indirectly, in any activity other than 
     activities described in clauses (i) and (ii) of subparagraph 
     (A), unless--

       ``(I) in addition to an application to the Director under 
     this section to become a savings and loan holding company, 
     the company submits a notice to the Board of Governors of the 
     Federal Reserve System of such nonfinancial activities in the 
     same manner as a notice of nonbanking activities is filed 
     with the Board under section 4(j) of the Bank Holding Company 
     Act of 1956; and
       ``(II) before the end of the applicable period under such 
     section 4(j), the Board either approves or does not 
     disapprove of the continuation of such activities by such 
     company, directly or indirectly, after becoming a savings and 
     loan holding company.

       ``(ii) Procedure.--Section 4(j) of the Bank Holding Company 
     Act of 1956, including the standards for review, shall apply 
     to any notice filed with the Board under this subparagraph in 
     the same manner as it applies to notices filed under such 
     section.''.
       (b) Technical and Conforming Amendment.--Section 10(c)(3) 
     of the Home Owners' Loan Act (12 U.S.C. 1467a(c)(3)) is 
     amended by striking ``Notwithstanding'' and inserting 
     ``Except as provided in paragraph (9) and notwithstanding''.
       (c) Conforming Amendment.--Section 10(o)(5) of the Home 
     Owners' Loan Act (12 U.S.C. 1467a(o)(5)) is amended--
       (1) in subparagraph (E), by striking ``, except 
     subparagraph (B)''; and
       (2) by adding at the end the following new subparagraph:
       ``(F) In the case of a mutual holding company which is a 
     savings and loan holding company described in subsection 
     (c)(3), engaging in the activities permitted for financial 
     holding companies under section 6(c) of the Bank Holding 
     Company Act of 1956.''.

     SEC. 402. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED 
                   FEDERAL SAVINGS ASSOCIATION.

       Section 2 of the Act entitled ``An Act to enable national 
     banking associations to increase their capital stock and to 
     change their names or locations'', approved May 1, 1886 (12 
     U.S.C. 30), is amended by adding at the end the following new 
     subsection:
       ``(d) Retention of `Federal' in Name of Converted Federal 
     Savings Association.--

[[Page 14219]]

       ``(1) In general.--Notwithstanding subsection (a) or any 
     other provision of law, any depository institution the 
     charter of which is converted from that of a Federal savings 
     association to a national bank or a State bank after the date 
     of the enactment of the Financial Services Act of 1999 may 
     retain the term `Federal' in the name of such institution if 
     such depository institution remains an insured depository 
     institution.
       ``(2) Definitions.--For purposes of this subsection, the 
     terms `depository institution', `insured depository 
     institution', `national bank', and `State bank' have the same 
     meanings as in section 3 of the Federal Deposit Insurance 
     Act.''.

                            TITLE V--PRIVACY

                       Subtitle A--Privacy Policy

     SEC. 501. DEPOSITORY INSTITUTION PRIVACY POLICIES.

       Section 6 of the Bank Holding Company Act of 1956 (as added 
     by section 103 of this title) is amended by adding at the end 
     the following new subsection:
       ``(h) Depository Institution Privacy Policies.--
       ``(1) Disclosure required.--In the case of any insured 
     depository institution which becomes affiliated under this 
     section with a financial holding company, the privacy policy 
     of such depository institution shall be clearly and 
     conspicuously disclosed--
       ``(A) with respect to any person who becomes a customer of 
     the depository institution any time after the depository 
     institution becomes affiliated with such company, to such 
     person at the time at which the business relationship between 
     the customer and the institution is initiated; and
       ``(B) with respect to any person who already is a customer 
     of the depository institution at the time the depository 
     institution becomes affiliated with such company, to such 
     person within a reasonable time after the affiliation is 
     consummated.
       ``(2) Information to be included.--The privacy policy of an 
     insured depository institution which is disclosed pursuant to 
     paragraph (1) shall include--
       ``(A) the policy of the institution with respect to 
     disclosing customer information to third parties, other than 
     agents of the depository institution, for marketing purposes; 
     and
       ``(B) the disclosures required under section 
     603(d)(2)(A)(iii) of the Fair Credit Reporting Act with 
     regard to the right of the customer, at any time, to direct 
     that information referred to in such section not be shared 
     with affiliates of the depository institution.
       ``(3) Applicability.--For purposes of section 10 of the 
     Home Owners' Loan Act, this subsection and subsection (i) 
     shall apply with regard to a savings and loan holding company 
     and any affiliate or insured depository institution 
     subsidiary of such holding company to the same extent and in 
     the same manner this subsection and subsection (i) apply with 
     respect to a financial holding company, affiliate of a 
     financial holding company, or insured depository institution 
     subsidiary of a financial holding company.''.

     SEC. 502. STUDY OF CURRENT FINANCIAL PRIVACY LAWS.

       (a) In General.--The Federal banking agencies shall conduct 
     a study of whether existing laws which regulate the sharing 
     of customer information by insured depository institutions 
     with affiliates of such institutions adequately protect the 
     privacy rights of customers of such institutions.
       (b) Report.--Before the end of the 6-month period beginning 
     on the date of the enactment of this Act, the Federal banking 
     agencies shall submit a report to the Congress containing the 
     findings and conclusions of the agency with respect to the 
     study required under subsection (a), together with such 
     recommendations for legislative or administrative action as 
     the agencies may determine to be appropriate.
       (c) Definitions.--For purposes of this section, the terms 
     ``affiliate'', ``Federal banking agency'', and ``insured 
     depository institution'' have the meanings given to such 
     terms in section 3 of the Federal Deposit Insurance Act.

         Subtitle B--Fraudulent Access to Financial Information

     SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF 
                   FINANCIAL INSTITUTIONS.

       (a) Prohibition on Obtaining Customer Information by False 
     Pretenses.--It shall be a violation of this subtitle for any 
     person to obtain or attempt to obtain, or cause to be 
     disclosed or attempt to cause to be disclosed to any person, 
     customer information of a financial institution relating to 
     another person--
       (1) by making a false, fictitious, or fraudulent statement 
     or representation to an officer, employee, or agent of a 
     financial institution;
       (2) by making a false, fictitious, or fraudulent statement 
     or representation to a customer of a financial institution; 
     or
       (3) by providing any document to an officer, employee, or 
     agent of a financial institution, knowing that the document 
     is forged, counterfeit, lost, or stolen, was fraudulently 
     obtained, or contains a false, fictitious, or fraudulent 
     statement or representation.
       (b) Prohibition on Solicitation of a Person To Obtain 
     Customer Information From Financial Institution Under False 
     Pretenses.--It shall be a violation of this subtitle to 
     request a person to obtain customer information of a 
     financial institution, knowing that the person will obtain, 
     or attempt to obtain, the information from the institution in 
     any manner described in subsection (a).
       (c) Nonapplicability to Law Enforcement Agencies.--No 
     provision of this section shall be construed so as to prevent 
     any action by a law enforcement agency, or any officer, 
     employee, or agent of such agency, to obtain customer 
     information of a financial institution in connection with the 
     performance of the official duties of the agency.
       (d) Nonapplicability to Financial Institutions in Certain 
     Cases.--No provision of this section shall be construed so as 
     to prevent any financial institution, or any officer, 
     employee, or agent of a financial institution, from obtaining 
     customer information of such financial institution in the 
     course of--
       (1) testing the security procedures or systems of such 
     institution for maintaining the confidentiality of customer 
     information;
       (2) investigating allegations of misconduct or negligence 
     on the part of any officer, employee, or agent of the 
     financial institution; or
       (3) recovering customer information of the financial 
     institution which was obtained or received by another person 
     in any manner described in subsection (a) or (b).
       (e) Nonapplicability to Insurance Institutions for 
     Investigation of Insurance Fraud.--No provision of this 
     section shall be construed so as to prevent any insurance 
     institution, or any officer, employee, or agency of an 
     insurance institution, from obtaining information as part of 
     an insurance investigation into criminal activity, fraud, 
     material misrepresentation, or material nondisclosure that is 
     authorized for such institution under State law, regulation, 
     interpretation, or order.
       (f) Nonapplicability to Certain Types of Customer 
     Information of Financial Institutions.--No provision of this 
     section shall be construed so as to prevent any person from 
     obtaining customer information of a financial institution 
     that otherwise is available as a public record filed pursuant 
     to the securities laws (as defined in section 3(a)(47) of the 
     Securities Exchange Act of 1934).
       (g) Nonapplicability to Collection of Child Support 
     Judgments.--No provision of this section shall be construed 
     to prevent any State-licensed private investigator, or any 
     officer, employee, or agent of such private investigator, 
     from obtaining customer information of a financial 
     institution, to the extent reasonably necessary to collect 
     child support from a person adjudged to have been delinquent 
     in his or her obligations by a Federal or State court, and to 
     the extent that such action by a State-licensed private 
     investigator is not unlawful under any other Federal or State 
     law or regulation, and has been authorized by an order or 
     judgment of a court of competent jurisdiction.

     SEC. 522. ADMINISTRATIVE ENFORCEMENT.

       (a) Enforcement by Federal Trade Commission.--Compliance 
     with this subtitle shall be enforced by the Federal Trade 
     Commission in the same manner and with the same power and 
     authority as the Commission has under the title VIII, the 
     Fair Debt Collection Practices Act, to enforce compliance 
     with such title.
       (b) Notice of Actions.--The Federal Trade Commission 
     shall--
       (1) notify the Securities and Exchange Commission whenever 
     the Federal Trade Commission initiates an investigation with 
     respect to a financial institution subject to regulation by 
     the Securities and Exchange Commission;
       (2) notify the Federal banking agency (as defined in 
     section 3(z) of the Federal Deposit Insurance Act) whenever 
     the Commission initiates an investigation with respect to a 
     financial institution subject to regulation by such Federal 
     banking agency; and
       (3) notify the appropriate State insurance regulator 
     whenever the Commission initiates an investigation with 
     respect to a financial institution subject to regulation by 
     such regulator.

     SEC. 523. CRIMINAL PENALTY.

       (a) In General.--Whoever knowingly and intentionally 
     violates, or knowingly and intentionally attempts to violate, 
     section 521 shall be fined in accordance with title 18, 
     United States Code, or imprisoned for not more than 5 years, 
     or both.
       (b) Enhanced Penalty for Aggravated Cases.--Whoever 
     violates, or attempts to violate, section 521 while violating 
     another law of the United States or as part of a pattern of 
     any illegal activity involving more than $100,000 in a 12-
     month period shall be fined twice the amount provided in 
     subsection (b)(3) or (c)(3) (as the case may be) of section 
     3571 of title 18, United States Code, imprisoned for not more 
     than 10 years, or both.

     SEC. 524. RELATION TO STATE LAWS.

       (a) In General.--This subtitle shall not be construed as 
     superseding, altering, or affecting the statutes, 
     regulations, orders, or interpretations in effect in any 
     State, except to the extent that such statutes, regulations, 
     orders, or interpretations are inconsistent with the 
     provisions of this subtitle, and then only to the extent of 
     the inconsistency.
       (b) Greater Protection Under State Law.--For purposes of 
     this section, a State

[[Page 14220]]

     statute, regulation, order, or interpretation is not 
     inconsistent with the provisions of this subtitle if the 
     protection such statute, regulation, order, or interpretation 
     affords any person is greater than the protection provided 
     under this subtitle as determined by the Commission, on its 
     own motion or upon the petition of any interested party.

     SEC. 525. AGENCY GUIDANCE.

       In furtherance of the objectives of this subtitle, each 
     Federal banking agency (as defined in section 3(z) of the 
     Federal Deposit Insurance Act) and the Securities and 
     Exchange Commission or self-regulatory organizations, as 
     appropriate, shall review regulations and guidelines 
     applicable to financial institutions under their respective 
     jurisdictions and shall prescribe such revisions to such 
     regulations and guidelines as may be necessary to ensure that 
     such financial institutions have policies, procedures, and 
     controls in place to prevent the unauthorized disclosure of 
     customer financial information and to deter and detect 
     activities proscribed under section 521.

     SEC. 526. REPORTS.

       (a) Report to the Congress.--Before the end of the 18-month 
     period beginning on the date of the enactment of this Act, 
     the Comptroller General, in consultation with the Federal 
     Trade Commission, Federal banking agencies, the Securities 
     and Exchange Commission, appropriate Federal law enforcement 
     agencies, and appropriate State insurance regulators, shall 
     submit to the Congress a report on the following:
       (1) The efficacy and adequacy of the remedies provided in 
     this subtitle in addressing attempts to obtain financial 
     information by fraudulent means or by false pretenses.
       (2) Any recommendations for additional legislative or 
     regulatory action to address threats to the privacy of 
     financial information created by attempts to obtain 
     information by fraudulent means or false pretenses.
       (b) Annual Report by Administering Agencies.--The Federal 
     Trade Commission and the Attorney General shall submit to 
     Congress an annual report on number and disposition of all 
     enforcement actions taken pursuant to this subtitle.

     SEC. 527. DEFINITIONS.

       For purposes of this subtitle, the following definitions 
     shall apply:
       (1) Customer.--The term ``customer'' means, with respect to 
     a financial institution, any person (or authorized 
     representative of a person) to whom the financial institution 
     provides a product or service, including that of acting as a 
     fiduciary.
       (2) Customer information of a financial institution.--The 
     term ``customer information of a financial institution'' 
     means any information maintained by or for a financial 
     institution which is derived from the relationship between 
     the financial institution and a customer of the financial 
     institution and is identified with the customer.
       (3) Document.--The term ``document'' means any information 
     in any form.
       (4) Financial institution.--
       (A) In general.--The term ``financial institution'' means 
     any institution engaged in the business of providing 
     financial services to customers who maintain a credit, 
     deposit, trust, or other financial account or relationship 
     with the institution.
       (B) Certain financial institutions specifically included.--
     The term ``financial institution'' includes any depository 
     institution (as defined in section 19(b)(1)(A) of the Federal 
     Reserve Act), any broker or dealer, any investment adviser or 
     investment company, any insurance company, any loan or 
     finance company, any credit card issuer or operator of a 
     credit card system, and any consumer reporting agency that 
     compiles and maintains files on consumers on a nationwide 
     basis (as defined in section 603(p)).
       (C) Securities institutions.--For purposes of subparagraph 
     (B)--
       (i) the terms ``broker'' and ``dealer'' have the meanings 
     provided in section 3 of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c);
       (ii) the term ``investment adviser'' has the meaning 
     provided in section 202(a)(11) of the Investment Advisers Act 
     of 1940 (15 U.S.C. 80b-2(a)); and
       (iii) the term ``investment company'' has the meaning 
     provided in section 3 of the Investment Company Act of 1940 
     (15 U.S.C. 80a-3).
       (D) Further definition by regulation.--The Federal Trade 
     Commission, after consultation with Federal banking agencies 
     and the Securities and Exchange Commission, may prescribe 
     regulations clarifying or describing the types of 
     institutions which shall be treated as financial institutions 
     for purposes of this subtitle.

                               H.R. 1658

                  Offered By: Ms. Jackson-Lee of Texas

       Amendment No. 28: Page 2, line 16, strike ``60'' and insert 
     ``10''.

                               H.R. 1658

                  Offered By: Ms. Jackson-Lee of Texas

       Amendment No. 29: Page 3, line 24, strike ``90'' and insert 
     ``30''.

                               H.R. 1658

                  Offered By: Ms. Jackson-Lee of Texas

       Amendment No. 30: Page 5, line 20, strike ``by clear and 
     convincing evidence'' and insert ``by a preponderance of the 
     evidence''.

                               H.R. 1658

                  Offered By: Ms. Jackson-Lee of Texas

       Amendment No. 31: Page 10, lines 23 and 24 strike ``30'' 
     and insert ``10''.


             CONGRESSIONAL RECORD 

                United States
                 of America

This ``bullet'' symbol identifies statements or insertions 
which are not spoken by a member of the Senate on the floor.



June 24, 1999
                                                           June 24, 1999