MODIFYING SEPARATE CAPITALIZATION RULE FOR SAVINGS ASSOCIATIONS’ SUBSIDIARIES ENGAGED IN ACTIVITIES NOT PERMISSIBLE FOR NATIONAL RANKS.

SEC. 963. MODIFYING SEPARATE CAPITALIZATION RULE FOR SAVINGS ASSOCIATIONS’ SUBSIDIARIES ENGAGED IN ACTIVITIES NOT PERMISSIBLE FOR NATIONAL RANKS. (a) In General.—Section 5(t)(6)(D) of the Home Owners’ Loan Act (12 U.S.C. 1464(t)(5)(D)) is amended by redesignating clause (iii) as clause (ix) and by inserting after clause (ii) the following new clauses: “(iii) Agency discretion to prescribe greater percentage.—Subject to clauses (iv), (v), and (vi), the Director may prescribe by order, with respect to a particular qualified savings association, an applicable percentage greater than that provided in clause (ii) if the Director determines, in the Director’s sole discretion, that the use of the greater percentage, under the circumstances— “(I) would not constitute an unsafe or unsound practice; “(II) would not increase the risk to the affected deposit insurance fund; and “(III) would not be likely to result in the association’s being in an unsafe or unsound condition. “(iv) Substantial compliance with approved capital plan.—In the case of a savings association which is subject to a plan submitted under paragraph (7)(D) of this subsection or an order issued under this subsection, a directive issued or plan approved under subsection (s), or a capital restoration plan approved or order issued under section 38 or 39 of the Federal Deposit Insurance Act, an order issued under clause (iii) with respect to the association shall be effective only so long as the association is in substantial compliance with such plan, directive, or order. “(v) Limitation on investments taken into account.—In prescribing the amount by which an applicable percentage under clause (iii) may exceed the applicable percentage under clause (ii) with respect to a particular qualified savings association, the Director may take into account only the sum of— “(I) the association’s investments in, and extensions of credit to, the subsidiary that were made on or before April 12, 1989; and “(II) the association’s investments in, and extensions of credit to, the subsidiary that were made after April 12, 1989, and were necessary to complete projects initiated before April 12, 1989. 106 STAT. 3894 “(vi) Limit.—The applicable percentage limit allowed by the Director in an order under clause (iii) shall not exceed the following limits: “For the following period: The limit is: Prior to July 1, 1994 75 percent July 1, 1994 through June 30, 1995 60 percent July 1, 1996 through June 30, 1996 40 percent After June 30, 1996 0 percent “(vii) Critically undercapitalized institution.—In the case of a savings association that becomes critically undercapitalized (as define ! in section 38 of the Federal Deposit Insurance Act) be determined under this subparagraph without implying clause (iii), clauses (iii) through (v) shall be applied by substituting ‘Corporation’ for ‘Director’ each place such term appears. “(viii) Qualified savings association defined.—For purposes of clause (iii), the term ‘qualified savings association’ means an eligible savings association (as defined in paragraph (3)(B)) which is subject to this paragraph solely because of the real estate investments or other real estate activities of the association’s subsidiary, and— “(I) is adequately capitalized (as defined in section 38 of the Federal Deposit Insurance Act); or “(II) is in compliance with an approved capital restoration plan meeting the requirements of section 38 of the Federal Deposit Insurance Act, and is not critically undercapitalized (as defined in such section).”. (b) Technical and Conforming Amendment.—Clause (ix) of section 5(t)(5)(D) of the Home Owners’ Loan Act (12 U.S.C. 1464(t)(5)(D)) (as so redesignated by subsection (a) of this section) is amended by inserting “or prescribed under clause (iii)” after “clause (ii)”.