On and after January 1, 1990, a savings association chartered under State law may not engage as principal in any type of activity, or in any activity in an amount, that is not permissible for a Federal savings association unless—

(1) the Corporation has determined that the activity would pose no significant risk to the Deposit Insurance Fund; and

(2) the savings association is and continues to be in compliance with the fully phased-in capital standards prescribed under section 1464(t) of this title.

Notwithstanding subsection (a)(1) of this section, if an activity (other than an activity described in section 1464(c)(2)(B) of this title) is permissible for a Federal savings association, a savings association chartered under State law may engage as principal in that activity in an amount greater than the amount permissible for a Federal savings association if—

(1) the Corporation has not determined that engaging in that amount of the activity poses any significant risk to the Deposit Insurance Fund; and

(2) the savings association chartered under State law is and continues to be in compliance with the fully phased-in capital standards prescribed under section 1464(t) of this title.

Notwithstanding subsections (a) and (b) of this section, a savings association chartered under State law may not directly acquire or retain any equity investment of a type or in an amount that is not permissible for a Federal savings association.

Paragraph (1) does not prohibit a savings association from acquiring or retaining shares of one or more service corporations if—

(A) the Corporation has determined that no significant risk to the Deposit Insurance Fund is posed by—

(i) the amount that the association proposes to acquire or retain; or

(ii) the activities in which the service corporation engages; and

(B) the savings association is and continues to be in compliance with the fully phased-in capital standards prescribed under section 1464(t) of this title.

The Corporation shall require any savings association to divest any equity investment the retention of which is not permissible under paragraph (1) or (2) as quickly as can be prudently done, and in any event not later than July 1, 1994.

With respect to any equity investment held by any savings association on May 1, 1989, the savings association shall be deemed not to be in violation of the prohibition in paragraph (1) or (2) on retaining such investment so long as the savings association complies with any applicable requirement established by the Corporation pursuant to subparagraph (A) for divesting such investments.

No savings association may, directly or through a subsidiary, acquire or retain any corporate debt security not of investment grade.

Paragraph (1) shall not apply with respect to any corporate debt security not of investment grade which is acquired and retained by any qualified affiliate of a savings association.

The Corporation shall require any savings association or any subsidiary of any savings association to divest any corporate debt security not of investment grade the retention of which is not permissible under paragraph (1) as quickly as can be prudently done, and in any event not later than July 1, 1994.

With respect to any corporate debt security not of investment grade held by any savings association or subsidiary on August 9, 1989, the savings association or subsidiary shall be deemed not to be in violation of the prohibition in paragraph (1) on retaining such investment so long as the association or subsidiary complies with any applicable requirement established by the Corporation pursuant to subparagraph (A) for divesting such securities.

For purposes of this section—

Any corporate debt security is not of “investment grade” unless that security, when acquired by the savings association or subsidiary, was rated in one of the 4 highest rating categories by at least one nationally recognized statistical rating organization.

The term “qualified affiliate” means—

(i) in the case of a stock savings association, an affiliate other than a subsidiary or an insured depository institution; and

(ii) in the case of a mutual savings association, a subsidiary other than an insured depository institution, so long as all of the savings association's investments in and extensions of credit to the subsidiary are deducted from the savings association's capital.

The term “corporate debt security not of investment grade” does not include any obligation issued or guaranteed by a corporation that may be held by a Federal savings association without limitation as to percentage of assets under subparagraph (D), (E), or (F) of section 1464(c)(1) of this title.

Notwithstanding subsections (a), (b), and (c) of section 1464 1 of this title and any other provision of Federal or State law governing extensions of credit by savings associations, any insured savings association, and any subsidiary of any insured savings association, that, on August 9, 1989, holds any corporate debt security not of investment grade may acquire a qualified note in exchange for the transfer of such security to—

(A) any holding company which controls 80 percent or more of the shares of such insured savings association; or

(B) any company other than an insured savings association, or any subsidiary of any insured savings association, 80 percent or more of the shares of which are controlled by such holding company,

if the conditions of paragraph (2) are met.

The conditions of this paragraph are met if—

(A) the insured savings association was in compliance with applicable capital requirements on December 31, 1988, and the insured savings association after such date—

(i) remains in compliance with applicable capital requirements; or

(ii) adopts and complies with a capital plan acceptable to the Director of the Office of Thrift Supervision;

(B) the company to which the corporate debt security not of investment grade is transferred is not a bank holding company, an insured savings association, or a direct or indirect subsidiary of such holding company or insured savings association;

(C) before the end of the 90-day period beginning on August 9, 1989, the insured savings association notifies the Director of the Office of Thrift Supervision of such association's intention to transfer the corporate debt security not of investment grade to the savings and loan holding company or the subsidiary of such holding company;

(D) the transfer of the corporate debt security not of investment grade is completed—

(i) before the end of the 1-year period beginning on August 9, 1989, in the case of an insured savings association that, as of August 9, 1989, is controlled by a savings and loan holding company; or

(ii) before the end of the 2-year period beginning on August 9, 1989, in the case of a savings association that is not, as of August 9, 1989, a subsidiary of a savings and loan holding company;

(E) the insured savings association receives in exchange for the corporate debt security not of investment grade the fair market value of such security;

(F) the Director of the Office of Thrift Supervision has—

(i) approved the transaction; and

(ii) determined that the transfer represents a complete and effective divestiture of the corporate debt security not of investment grade and is in compliance with the provisions of this subsection; and

(G) any gain on the sale of the corporate debt security not of investment grade is recognized, and included for applicable regulatory capital requirements, by the insured savings association only at such time and to the extent that the insured savings association receives payment of principal on the note in cash in excess of the fair market value of the transferred corporate debt security not of investment grade as carried on the accounts of the insured savings association immediately prior to the transfer.

The term “qualified note” means any note that—

(A) is at all times fully secured by the corporate debt security not of investment grade transferred in exchange for the note, or by other collateral of at least equivalent value that is acceptable to the Director of the Office of Thrift Supervision;

(B) contains provisions acceptable to the Director of the Office of Thrift Supervision that would—

(i) prevent any action to encumber or impair the value of the collateral referred to in subparagraph (A); and

(ii) allow the sale of the corporate debt security not of investment grade if the proceeds of the sale are reinvested in assets of equivalent value;

(C) is on market terms, including interest rate, which must in all cases be above the insured savings association's borrowing rate for similar term funds;

(D) is fully repayable over a period of time not to exceed 5 years from the date of transfer;

(E) is repaid with annual principal payments at least as large as would be necessary to repay the note within 5 years if it were on a level payment amortization schedule and the interest rate for the first year of repayment were fixed throughout the amortization period;

(F) is fully guaranteed by each holding company of the insured savings association that acquires such note; and

(G) is repaid in full in cash in accordance with its terms and this subsection.

The exemption provided by this subsection from subsections (a), (b), and (c) of section 1468 of this title and any other applicable provision of Federal or State law shall terminate immediately if the insured savings association or any affiliate of such association fails to comply with the terms of the qualified note or this subsection.

The Corporation shall make determinations under this section by regulation or order.

For purposes of subsections (a) and (b) of this section—

The term “activity” includes acquiring or retaining any investment.

Notwithstanding paragraph (1), subsections (a) and (b) of this section shall not be construed to require a savings association to divest itself of any assets acquired before August 9, 1989.

This section may not be construed as limiting—

(1) any other authority of the Corporation; or

(2) any authority of the Director of the Office of Thrift Supervision or of a State to impose more stringent restrictions.

(Sept. 21, 1950, ch. 967, §2[28], as added Pub. L. 101–73, title II, §222, Aug. 9, 1989, 103 Stat. 269; amended Pub. L. 102–242, title I, §151(a)(3), Dec. 19, 1991, 105 Stat. 2284; Pub. L. 103–325, title VI, §602(a)(56)–(58), Sept. 23, 1994, 108 Stat. 2290, 2291; Pub. L. 104–208, div. A, title II, §2704(d)(14)(X), Sept. 30, 1996, 110 Stat. 3009–494; Pub. L. 109–171, title II, §2102(b), Feb. 8, 2006, 120 Stat. 9; Pub. L. 109–173, §8(a)(32), Feb. 15, 2006, 119 Stat. 3615; Pub. L. 111–203, title III, §363(9), title IX, §939(a)(2), (3), July 21, 2010, 124 Stat. 1555, 1885.)

Pub. L. 111–203, title IX, §939(a)(2), (3), (g), July 21, 2010, 124 Stat. 1885, 1887, provided that, effective 2 years after July 21, 2010, this section is amended:

(1) in subsection (d)—

(A) in the heading, by striking out “Not of Investment Grade”;

(B) in paragraph (1), by substituting “that does not meet standards of credit-worthiness as established by the Corporation” for “not of investment grade”;

(C) in paragraph (2), by striking out “not of investment grade”;

(D) by striking paragraph (3);

(E) by redesignating paragraph (4) as (3); and

(F) in paragraph (3), as so redesignated—

(i) by striking out subparagraph (A);

(ii) by redesignating subparagraphs (B) and (C) as (A) and (B), respectively; and

(iii) in subparagraph (B), as so redesignated, by substituting “that does not meet standards of credit-worthiness as established by the Corporation” for “not of investment grade”; and

(2) in subsection (e)—

(A) in the heading, by striking out “Not of Investment Grade”;

(B) in paragraph (1), by substituting “that does not meet standards of credit-worthiness as established by the Corporation” for “not of investment grade”; and

(C) in paragraphs (2) and (3), by substituting “that does not meet standards of credit-worthiness established by the Corporation” for “not of investment grade” wherever appearing.

See Effective Date of 2010 Amendment note below.

Pub. L. 111–203, title III, §§351, 363(9), July 21, 2010, 124 Stat. 1546, 1555, provided that, effective on the transfer date, this section is amended:

(1) in subsection (e)—

(A) in paragraph (2), by substituting “Comptroller of the Currency or the Corporation, as appropriate” for “Director of the Office of Thrift Supervision” in subparagraphs (A)(ii), (C), and (F); and

(B) in paragraph (3), by substituting “Comptroller of the Currency or the Corporation, as appropriate” for “Director of the Office of Thrift Supervision” in subparagraphs (A) and (B); and

(2) in subsection (h)(2), by substituting “Comptroller of the Currency, of the Corporation,” for “Director of the Office of Thrift Supervision”.

See Effective Date of 2010 Amendment note below.

**2006**—Subsecs. (a)(1), (b)(1), (c)(2)(A). Pub. L. 109–173 substituted “Deposit Insurance Fund” for “affected deposit insurance fund”.

Pub. L. 109–171 repealed Pub. L. 104–208, §2704(d)(14)(X). See 1996 Amendment note below.

**1996**—Subsecs. (a)(1), (b)(1), (c)(2)(A). Pub. L. 104–208, §2704(d)(14)(X), which directed substitution of “Deposit Insurance Fund” for “affected deposit insurance fund”, was repealed by Pub. L. 109–171. See Effective Date of 1996 Amendment note below and 2006 Amendment note above.

**1994**—Subsec. (c)(2)(A)(i). Pub. L. 103–325, §602(a)(56), substituted “; or” for “, or”.

Subsec. (d)(4)(C). Pub. L. 103–325, §602(a)(57), substituted “subparagraph” for “subparagraphs”.

Subsec. (e)(4). Pub. L. 103–325, §602(a)(58), substituted “and any other” for “any other”.

**1991**—Subsecs. (h), (i). Pub. L. 102–242 redesignated subsec. (i) as (h) and struck out former subsec. (h) which required that all savings associations with uninsured deposits disclose in clear and conspicuous statements that its deposits were not insured.

Amendment by section 363(9) of Pub. L. 111–203 effective on the transfer date, see section 351 of Pub. L. 111–203, set out as a note under section 906 of Title 2, The Congress.

Amendment by section 939(a)(2), (3) of Pub. L. 111–203 effective 2 years after July 21, 2010, see section 939(g) of Pub. L. 111–203, set out as a note under section 24a of this title.

Amendment by Pub. L. 109–173 effective Mar. 31, 2006, see section 8(b) of Pub. L. 109–173, set out as a note under section 1813 of this title.

Amendment by Pub. L. 109–171 effective no later than the first day of the first calendar quarter that begins after the end of the 90-day period beginning Feb. 8, 2006, see section 2102(c) of Pub. L. 109–171, set out as a Merger of BIF and SAIF note under section 1821 of this title.

Amendment by Pub. L. 104–208 effective Jan. 1, 1999, if no insured depository institution is a savings association on that date, see section 2704(c) of Pub. L. 104–208, formerly set out as a note under section 1821 of this title.

Section 151(a)(3) of Pub. L. 102–242 provided that the amendment made by that section is effective 1 year after Dec. 19, 1991.