RESTRICTIONS ON INSURED STATE BANK ACTIVITIES.

SEC. 303. RESTRICTIONS ON INSURED STATE BANK ACTIVITIES. (a) In General.— The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by inserting after section 23 the following new section: “SEC. 24. ACTIVITIES OF INSURED STATE BANKS. “(a) In General.— After the end of the 1-year period beginning on the date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991, an insured State bank may not engage as principal in any type of activity that is not permissible for a national bank unless— 105 STAT. 2350 “(1) the Corporation has determined that the activity would pose no significant risk to the appropriate deposit insurance fund; and “(2) the State bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency. “(b) Insurance Underwriting.— “(1) In general.— Notwithstanding subsection (a), an insured State bank may not engage in insurance underwriting except to the extent that activity is permissible for national banks. “(2) Exception for certain federally reinsured crop insurance.— Notwithstanding any other provision of law, an insured State bank or any of its subsidiaries that provided insurance on or before September 30, 1991, which was reinsured in whole or in part by the Federal Crop Insurance Corporation may continue to provide such insurance.”. “(c) Equity Investments by Insured State Banks.— “(1) In general.— An insured State bank may not, directly or indirectly, acquire or retain any equity investment of a type that is not permissible for a national bank. “(2) Exception for certain subsidiaries.— Paragraph (1) shall not prohibit an insured State bank from acquiring or retaining an equity investment in a subsidiary of which the insured State bank is a majority owner. “(3) Exception for qualified housing projects.— “(A) Exception.— Notwithstanding any other provision of this subsection, an insured State bank may invest as a limited partner in a partnership, the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation, or new construction of a qualified housing project. “(B) Limitation.— The aggregate of the investments of any insured State bank pursuant to this paragraph shall not exceed 2 percent of the total assets of the bank. “(C) Qualified housing project defined.— As used in this paragraph— “(i) Qualified housing project.— The term ‘qualified housing project’ means residential real estate that is intended to primarily benefit lower income people throughout the period of the investment. “(ii) Lower income.— The term ‘lower income’ means income that is less than or equal to the median income based on statistics from State or Federal sources. “(4) Transition rule.— “(A) In general.— The Corporation shall require any insured State bank to divest any equity investment the retention of which is not permissible under this subsection as quickly as can be prudently done, and in any event before the end of the 5-year period beginning on the date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991. “(B) Treatment of noncompliance during divestment.— With respect to any equity investment held by any insured State bank on the date of enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991 which was lawfully acquired before such date, the bank shall be deemed not to be in violation of the prohibition in 105 STAT. 2351this subsection on retaining such investment so long as the bank complies with the applicable requirements established by the Corporation for divesting such investments. “(d) Subsidiaries of Insured State Banks.— “(1) In general.— After the end of the 1-year period beginning on the date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991, a subsidiary of an insured State bank may not engage as principal in any type of activity that is not permissible for a subsidiary of a national bank unless— “(A) the Corporation has determined that the activity poses no significant risk to the appropriate deposit insurance fund; and “(B) the bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency. “(2) Insurance underwriting prohibited.— “(A) Prohibition.— Notwithstanding paragraph (1), no subsidiary of an insured State bank may engage in insurance underwriting except to the extent such activities are permissible for national banks. “(B) Continuation of existing activities.— Notwithstanding subparagraph (A), a well-capitalized insured State bank or any of its subsidiaries that was lawfully providing insurance as principal in a State on November 21, 1991, may continue to provide, as principal, insurance of the same type to residents of the State (including companies or partnerships incorporated in, organized under the laws of, licensed to do business in, or having an office in the State, but only on behalf of their employees resident in or property located in the State), individuals employed in the State, and any other person to whom the bank or subsidiary has provided insurance as principal, without interruption, since such person resided in or was employed in such State. “(C) Exception.— Subparagraph (A) does not apply to a subsidiary of an insured State bank if— “(i) the insured State bank was required, before June 1, 1991, to provide title insurance as a condition of the bank’s initial chartering under State law; and “(ii) control of the insured State bank has not changed since that date. “(e) Savings Bank Life Insurance.— “(1) In general.— No provision of this Act shall be construed as prohibiting or impairing the sale or underwriting of savings bank life insurance, or the ownership of stock in a savings bank life insurance company, by any insured bank which— “(A) is located in the Commonwealth of Massachusetts or the State of New York or Connecticut; and “(B) meets the consumer disclosure requirements under section 18(k) with respect to such insurance. “(2) FDIC finding and action regarding risk.— “(A) Finding.— Before the end of the 1-year period beginning on the date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991, the Corporation shall make a finding whether savings bank life insurance activities of insured banks pose or may pose any 105 STAT. 2352significant risk to the insurance fund of which such banks are members. “(B) Actions.— “(i) In general.— The Corporation shall, pursuant to any finding made under subparagraph (A), take appropriate actions to address any risk that exists or may subsequently develop with respect to insured banks described in paragraph (1)(A). “(ii) Authorized actions.— Actions the Corporation may take under this subparagraph include requiring the modification, suspension, or termination of insurance activities conducted by any insured bank if the Corporation finds that the activities pose a significant risk to any insured bank described in paragraph (1)(A) or to the insurance fund of which such bank is a member. “(f) Common and Preferred Stock Investment.— “(1) In general.— An insured State bank shall not acquire or retain, directly or indirectly, any equity investment of a type or in an amount that is not permissible for a national bank or is not otherwise permitted under this section. “(2) Exception for banks in certain states.— Notwithstanding paragraph (1), an insured State bank may, to the extent permitted by the Corporation, acquire and retain ownership of securities described in paragraph (1) to the extent the aggregate amount of such investment does not exceed an amount equal to 100 percent of the bank’s capital if such bank— “(A) is located in a State that permitted, as of September 30, 1991, investment in common or preferred stock listed on a national securities exchange or shares of an investment company registered under the Investment Company Act of 1940; and “(B) made or maintained an investment in such securities during the period beginning on September 30, 1990, and ending on November 26, 1991. “(3) Exception for certain types of institutions.— Notwithstanding paragraph (1), an insured State bank may— “(A) acquire not more than 10 percent of a corporation that only— “(i) provides directors’, trustees’, and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions; or “(ii) reinsures such policies; and “(B) acquire or retain shares of a depository institution if— “(i) the institution engages only in activities permissible for national banks; “(ii) the institution is subject to examination and regulation by a State bank supervisor; “(iii) 20 or more depository institutions own shares of the institution and none of those institutions owns more than 15 percent of the institution’s shares; and “(iv) the institution’s shares (other than directors’ qualifying shares or shares held under or initially acquired through a plan established for the benefit of the 105 STAT. 2353institution’s officers and employees) are owned only by the institution. “(4) Transition period for common and preferred stock investments.— “(A) In general.— During each year in the 3-year period beginning on the date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991, each insured State bank shall reduce by not less than 1/3 of its shares (as of such date of enactment) the bank’s ownership of securities in excess of the amount equal to 100 percent of the capital of such bank. “(B) Compliance at end of period.— By the end of the 3-year period referred to in subparagraph (A), each insured State bank and each subsidiary of a State bank shall be in compliance with the maximum amount limitations on investments referred to in paragraph (1). “(5) Loss of exception upon acquisition.— Any exception applicable under paragraph (2) with respect to any insured State bank shall cease to apply with respect to such bank upon any change in control of such bank or any conversion of the charter of such bank. “(6) Notice and approval.— An insured State bank may only engage in any investment pursuant to paragraph (2) if— “(A) the bank has filed a 1-time notice of the bank’s intention to acquire and retain investments described in paragraph (1); and “(B) the Corporation has determined, within 60 days of receiving such notice, that acquiring or retaining such investments does not pose a significant risk to the insurance fund of which such bank is a member. “(7) Divestiture.— “(A) In general.— The Corporation may require divestiture by an insured State bank of any investment permitted under this subsection if the Corporation determines that such investment will have an adverse effect on the safety and soundness of the bank. “(B) Reasonable standard.— The Corporation shall not require divestiture by any bank pursuant to subparagraph (A) without reason to believe that such investment will have an adverse effect on the safety and soundness of the bank. “(g) Determinations.— The Corporation shall make determinations under this section by regulation or order. “(h) Activity Defined.— For purposes of this section, the term ‘activity’ includes acquiring or retaining any investment. “(i) Other Authority not Affected.— This section shall not be construed as limiting the authority of any appropriate Federal banking agency or any State supervisory authority to impose more stringent restrictions.”. (b) Technical and Conforming Amendment.— The 13th undesignated paragraph of section 9 of the Federal Reserve Act (12 U.S.C. 330) is amended by striking “: Provided, however. That no Federal reserve bank” and inserting “, except that the Board of Governors of the Federal Reserve System may limit the activities of State member banks and subsidiaries of State member banks in a manner consistent with section 24 of the Federal Deposit Insurance Act. No Federal reserve bank”.