CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK RELIEF; DIVESTITURE.

SEC. 107. CROSS MARKETING RESTRICTION; LIMITED PURPOSE BANK RELIEF; DIVESTITURE. (a) Cross Marketing Restriction.—Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)) is amended by striking paragraph (3). (b) Daylight Overdrafts.—Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)) is amended by inserting after paragraph (2) the following new paragraph: “(3) Permissible overdrafts described.—For purposes of paragraph (2)(C), 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 that 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 that 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 permitted or incurred by, or on behalf of, an affiliate in connection with an activity that is financial in nature or incidental to a financial activity; 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 bank that is a member of the Federal Reserve System, or by virtue of section 18(j) of the Federal Deposit Insurance Act, in the case of a bank that is not a member of the Federal Reserve System.”. (c) Industrial Loan Companies; Affiliate Overdrafts.—Section 2(c)(2)(H) of the Bank Holding Company Act of 1956 (12 U.S.C. 113 STAT. 13601841(c)(2)(H)) is amended by inserting “, or that is otherwise permissible for a bank controlled by a company described in section 4(f)(1)” before the period at the end. (d) Activities Limitations.—Section 4(f)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(2)) is amended— (1) by striking “Paragraph (1) shall cease to apply to any company described in such paragraph if—” and inserting “Subject to paragraph (3), a company described in paragraph (1) shall no longer qualify for the exemption provided under that paragraph if—”; (2) in subparagraph (A)— (A) in clause (ii)(IX), by striking “and” at the end; (B) in clause (ii)(X), by inserting “and” after the semicolon; (C) in clause (ii), by inserting after subclause (X) the following new subclause: “(XI) assets that are derived from, or incidental to, activities in which institutions described in subparagraph (F) or (H) of section 2(c)(2) are permitted to engage;”; and (D) by striking “or” at the end; and (3) by striking subparagraph (B) and inserting the following: “(B) any bank subsidiary of such company— “(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 (except that, for purposes of this clause, loans made in the ordinary course of a credit card operation shall not be treated as commercial loans); or “(C) 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 the account of the bank at a Federal reserve bank, on behalf of an affiliate, other than an overdraft described in paragraph (3).”. (e) Divesture Requirement.—Section 4(f)(4) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(4)) is amended to read as follows: “(4) Divesture in case of loss of exemption.—If any company described in paragraph (1) fails to qualify for the exemption provided under paragraph (1) 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 on which 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) either— “(i) corrected the condition or ceased the activity that caused the company to fail to continue to qualify for the exemption; or113 STAT. 1361 “(ii) submitted a plan to the Board for approval to cease the activity or correct the condition in a timely manner (which shall not exceed 1 year); and “(B) implemented procedures that are reasonably adapted to avoid the reoccurrence of such condition or activity.”. (f) Foreign Banks Subsidiaries of Limited Purpose Credit Card Banks.—Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)) is amended by adding at the end the following new paragraph: “(14) Foreign bank subsidiaries of limited purpose credit card banks.— “(A) In general.—An institution described in section 2(c)(2)(F) may control a foreign bank if— “(i) the investment of the institution in the foreign bank meets the requirements of section 25 or 25A of the Federal Reserve Act and the foreign bank qualifies under such sections; “(ii) the foreign bank does not offer any products or services in the United States; and “(iii) the activities of the foreign bank are permissible under otherwise applicable law. “(B) Other limitations inapplicable.—The limitations contained in any clause of section 2(c)(2)(F) shall not apply to a foreign bank described in subparagraph (A) that is controlled by an institution described in such section.”.