AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956.

SEC. 101. AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956. (a) Definitions.— (1) Amendment to definition of bank.— Section 2(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)) is amended to read as follows: “(c) Bank Defined.— For purposes of this Act— “(1) In general.— Except as provided in paragraph (2), the term ‘bank’ means any of the following: “(A) An insured bank as defined in section 3(h) of the Federal Deposit Insurance Act. “(B) An institution organized under the laws of the United States, any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands which both— “(i) accepts demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others; and “(ii) is engaged in the business of making commercial loans. “(2) Exceptions.— The term ‘bank’ does not include any of the following: “(A) A foreign bank which would be a bank within the meaning of paragraph (1) solely because such bank has an insured or uninsured branch in the United States. “(B) An insured institution (as defined in subsection (j)). “(C) An organization that does not do business in the United States except as an incident to its activities outside the United States. “(D) An institution that functions solely in a trust or fiduciary capacity, if— “(i) all or substantially all of the deposits of such institution are in trust funds and are received in a bona fide fiduciary capacity; “(ii) no deposits of such institution which are insured by the Federal Deposit Insurance Corporation are offered or marketed by or through an affiliate of such institution; 101 STAT. 555 “(iii) such institution does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others or make commercial loans; and “(iv) such institution does not— “(I) obtain payment or payment related services from any Federal Reserve bank, including any service referred to in section 11A of the Federal Reserve Act; or “(II) exercise discount or borrowing privileges pursuant to section 19(b)(7) of the Federal Reserve Act. “(E) A credit union (as described in section 19(b)(1)(A)(iv) of the Federal Reserve Act). “(F) An institution which— “(i) engages only in credit card operations; “(ii) does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others; “(iii) does not accept any savings or time deposit of less than $100,000; “(iv) maintains only one office that accepts deposits; and “(v) does not engage in the business of making commercial loans. “(G) An organization operating under section 25 or section 25(a) of the Federal Reserve Act. “(H) An industrial loan company, industrial bank, or other similar institution which is— “(i) an institution organized under the laws of a State which, on March 5, 1987, had in effect or had under consideration in such State’s legislature a statute which required or would require such institution to obtain insurance under the Federal Deposit Insurance Act— “(I) which does not accept demand deposits that the depositor may withdraw by check or similar means for payment to third parties; “(II) which has total assets of less than $100,000,000; or “(III) the control of which is not acquired by any company after the date of the enactment of the Competitive Equality Amendments of 1987; or “(ii) an institution which does not, directly, indirectly, or through an affiliate, engage in any activity in which it was not lawfully engaged as of March 5, 1987, except that this subparagraph shall cease to apply to any institution which permits any overdraft (including any intraday overdraft), or which incurs any such overdraft in such institution’s account at a Federal Reserve bank, on behalf of an affiliate if such overdraft is not the result of an inadvertent computer or accounting error that is beyond the control of both the institution and the affiliate. “(I) The Investors Fiduciary Trust Company, located in Kansas City, Missouri, so long as such institution— 101 STAT. 556 “(i) engages only in trust, fiduciary, and agency activities in which it was lawfully engaged on March 5, 1987; “(ii) engages in such activities only at the same number of locations at which such activities were conducted on such date; “(iii) does not accept demand deposits other than demand deposits which are maintained by such institution in— “(I) a trust or fiduciary capacity; “(II) the institution’s capacity as a custodian or as a paying, transfer, shareholder servicing, securities clearing, escrow, or dividend disbursing agent; or “(III) any capacity which is incidental to the trust or fiduciary activities of the institution; “(iv) does not engage in the business of making commercial loans; “(v) does not exercise discount or borrowing privileges pursuant to section 19(b)(7) of the Federal Reserve Act; and “(vi) is not directly or indirectly controlled by any company other than a company which directly or indirectly controlled such institution on March 5, 1987. “(J) A savings bank (as defined in section 3(g) of the Federal Deposit Insurance Act) which— “(i) is an insured bank (as defined in section 3(h) of such Act); “(ii) is a subsidiary of the Great Western Financial Corporation as a result of an approval in writing by the State bank supervisor of the State of New York before June 30, 1987; “(iii) meets or exceeds the investment requirements which an insured institution must meet in order to be a qualified thrift lender under section 408(o) of the National Housing Act; and “(iv) does not, directly, or through insurance products such savings bank receives from or provides to the Great Western Financial Corporation, engage in the sale or underwriting of insurance, except that this subparagraph shall cease to apply with respect to such savings bank or any successor institution if any deposits of any other subsidiary or affiliate of the Great Western Financial Corporation which are subject to an assessment of an insurance premium under subsection (b) or (c) of section 404 of the National Housing Act are, directly or indirectly by any device whatsoever, transferred to or acquired by such savings bank or any successor institution which would have the effect of materially reducing such premium assessments. The exemption provided by this subparagraph shall cease to apply if Great Western Financial Corporation uses such savings bank or any successor institution as a vehicle to move such Corporation from Federal Savings and Loan Insurance Corporation insurance to Federal Deposit Insurance Corporation insurance. 101 STAT. 557 “(3) District bank.— The term ‘District bank’ means any bank operating under the Code of Law for the District of Columbia.”. (2) Amendment to definition of thrift institution.— section 2(i) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)) is amended to read as follows: “(i) Thrift Institution.— For purposes of this Act, the term ‘thrift institution’ means— “(1) any domestic building and loan or savings and loan association; “(2) any cooperative bank without capital stock organized and operated for mutual purposes and without profit; “(3) any Federal savings bank; and “(4) any State-chartered savings bank the holding company of which is registered pursuant to section 408 of the National Housing Act.”. (3) Additional definitions.— Section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841) is amended by adding at the end thereof the following new subsections: “(j) Insured Institution.— For purposes of this Act, the term ‘insured institution’ has the meaning given to such term in section 408(a)(1) of the National Housing Act. “(k) Affiliate.— For purposes of this Act, the term ‘affiliate’ means any company that controls, is controlled by, or is under common control with another company. “(l) Savings Bank Holding Company.— For purposes of this Act, the term ‘savings bank holding company’ means any company which controls one or more qualified savings banks if the aggregate total assets of such savings banks constitute, upon formation of the holding company and at all times thereafter, at least 70 percent of the total assets of such company. “(m) Qualified Savings Bank.— For purposes of this Act, the term ‘qualified savings bank’— “(1) means any savings bank (as defined in section 3(g) of the Federal Deposit Insurance Act) which was organized on or before March 5, 1987; and “(2) includes any cooperative bank that is an insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act) and any interim savings bank that is established to facilitate a corporate reorganization, or the formation of a holding company, involving a savings bank described in paragraph (1).”. (b) Immediate Divestiture Requirement.— Section 4(a)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(a)(2)) is amended by adding at the end thereof the following sentence: “Notwithstanding any other provision of this paragraph, if any company that became a bank holding company as a result of the enactment of the Competitive Equality Amendments of 1987 acquired, between March 5, 1987, and the date of the enactment of such Amendments, an institution that became a bank as a result of the enactment of such Amendments, that company shall, upon the enactment of such Amendments, immediately come into compliance with the requirements of this Act.”. (c) Certain Companies Not Treated as Bank Holding Companies; Limitations on Certain Banks.— Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843) is amended by adding at the end thereof the following new subsections: 101 STAT. 558 “(f) Certain Companies Not Treated as Bank Holding Companies.— “(1) In general.— Except as provided in paragraph (9), any company which— “(A) on March 5, 1987, controlled an institution which became a bank as a result of the enactment of the Competitive Equality Amendments of 1987; and “(B) was not a bank holding company on the day before the date of the enactment of the Competitive Equality Amendments of 1987, shall not be treated as a bank holding company for purposes of this Act solely by virtue of such company’s control of such institution. “(2) Loss of exemption.— Paragraph (1) shall cease to apply to any company described in such paragraph if— “(A) such company directly or indirectly— “(i) acquires control of an additional bank or an insured institution (other than an insured institution described in paragraph (10) of this subsection) after March 5, 1987; or “(ii) acquires control of more than 5 percent of the shares or assets of an additional bank or an insured institution other than— “(I) shares acquired in a bona fide fiduciary capacity; “(II) shares held temporarily pursuant to an underwriting commitment in the normal course of an underwriting business; “(III) shares held in an account solely for trading purposes; “(IV) loans or other accounts receivable acquired in the normal course of business; and “(V) shares or assets of an insured institution described in paragraph (10) of this subsection; or “(B) any bank subsidiary of such company fails to comply with the restrictions contained in paragraph (3)(B). “(3) Limitation on banks controlled by paragraph (1) companies.— “(A) Findings.— The Congress finds that banks controlled by companies referred to in paragraph (1) may, because of relationships with affiliates, be involved in conflicts of interest, concentration of resources, or other effects adverse to bank safety and soundness, and may also be able to compete unfairly against banks controlled by bank holding companies by combining banking services with financial services not permissible for bank holding companies. The purpose of this paragraph is to minimize any such potential adverse effects or inequities by temporarily restricting the activities of banks controlled by companies referred to in paragraph (1) until such time as the Congress has enacted proposals to allow, with appropriate safeguards, all banks or bank holding companies to compete on a more equal basis with banks controlled by companies referred to in paragraph (1) or, alternatively, proposals to permanently restrict the activities of banks controlled by companies referred to in paragraph (1). 101 STAT. 559 “(B) Limitations.— Until such time as the Congress has taken action pursuant to subparagraph (A), a bank controlled by a company described in paragraph (1) shall not— “(i) engage in any activity in which such bank was not lawfully engaged as of March 5, 1987; “(ii) offer or market products or services of an affiliate that are not permissible for bank holding companies to provide under subsection (c)(8), or permit its products or services to be offered or marketed by or through an affiliate (other than an affiliate that engages only in activities permissible for bank holding companies under subsection (c)(8)), unless such products or services were being so offered or marketed as of March 5, 1987, and then only in the same manner in which they were being offered or marketed as of that date; “(iii) after the date of the enactment of the Competitive Equality Amendments of 1987, permit any overdraft (including an intraday overdraft), or incur any such overdraft in such bank’s account at a Federal Reserve bank, on behalf of an affiliate, other than an overdraft described in subparagraph (C); or “(iv) increase its assets at an annual rate of more than 7 percent during any 12-month period beginning after the end of the 1-year period beginning on the date of the enactment of the Competitive Equality Amendments of 1987. “(C) Permissible overdrafts described.— For purposes of subparagraph (B)(iii), an overdraft is described in this subparagraph if— “(i) such overdraft results from an inadvertent computer or accounting error that is beyond the control of both the bank and the affiliate; or “(ii) 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. “(4) Divestiture in case of loss of exemption.— If any company described in paragraph (1) loses the exemption provided under such paragraph by operation of paragraph (2), such company shall divest control of each bank it controls within 180 days after such company becomes a bank holding company due to the loss of such exemption. “(5) Subsection ceases to apply under certain circumstances.— This subsection shall cease to apply to any company described in paragraph (1) if such company— “(A) registers as a bank holding company under section 5(a) of this Act; 101 STAT. 560 “(B) immediately upon such registration, complies with all of the requirements of this Act, and regulations prescribed by the Board pursuant to this Act, including the nonbanking restrictions of this section; and “(C) does not, at the time of such registration, control banks in more than one State, the acquisition of which would be prohibited by section 3(d) of this Act if an application for such acquisition by such company were filed under section 3(a) of this Act. “(6) Information requirement.— Each company described in paragraph (1) shall, within 60 days after the date of enactment of the Competitive Equality Amendments of 1987, provide the Board with the name and address of such company, the name and address of each bank such company controls, and a description of each such bank’s activities. “(7) Examination.— The Board may, from time to time, examine a company described in paragraph (1), or a bank controlled by such company, or require reports under oath from appropriate officers or directors of such company or bank solely for purposes of assuring compliance with the provisions of this subsection and enforcing such compliance. “(8) Enforcement.— “(A) In general.— In addition to any other power of the Board, the Board may enforce compliance with the provisions of this Act which are applicable to any company described in paragraph (1), and any bank controlled by such company, under section 8 of the Federal Deposit Insurance Act and such company or bank shall be subject to such section (for such purposes) in the same manner and to the same extent as if such company or bank were a State member insured bank. “(B) Application of other act.— Any violation of this Act by any company described in paragraph (1), and any bank controlled by such company, may also be treated as a violation of the Federal Deposit Insurance Act for purposes of subparagraph (A). “(C) No effect on other authority.— No provision of this paragraph shall be construed as limiting any authority of the Comptroller of the Currency or the Federal Deposit Insurance Corporation. “(9) Tying provisions.— A company described in paragraph (1) shall be— “(A) treated as a bank holding company for purposes of section 106 of the Bank Holding Company Act Amendments of 1970 and section 22(h) of the Federal Reserve Act and any regulation prescribed under any such section; and “(B) subject to the restrictions of section 106 of the Bank Holding Company Act Amendments of 1970, in connection with any transaction involving the products or services of such company or affiliate and those of a bank affiliate, as if such company or affiliate were a bank and such bank were a subsidiary of a bank holding company. “(10) Exemption unaffected by certain emergency acquisitions.— For purposes of clauses (i) and (ii)(V) of paragraph (2)(A), an insured institution is described in this paragraph if— “(A) the insured institution was acquired (or any shares or assets of such institution were acquired) by a company 101 STAT. 561described in paragraph (1) in an acquisition under section 408(m) of the National Housing Act; and “(B) either— “(i) the insured institution is located in a State in which such company controlled a bank on March 5, 1987; or “(ii) the insured institution has total assets of $500,000,000 or more at the time of such acquisition. “(g) Limitations on Certain Banks.— “(1) In general.— Notwithstanding any other provision of this section (other than the last sentence of subsection (a)(2)), a bank holding company which controls an institution that became a bank as a result of the enactment of the Competitive Equality Amendments of 1987 may retain control of such institution if such institution does not— “(A) engage in any activity after the date of the enactment of such Amendments which would have caused such institution to be a bank (as defined in section 2(c), as in effect before such date) if such activities had been engaged in before such date; or “(B) increase the number of locations from which such institution conducts business after March 5, 1987. “(2) Limitations cease to apply under certain circumstances.— The limitations contained in paragraph (1) shall cease to apply to a bank described in such paragraph at such time as the acquisition of such bank, by the bank holding company referred to in such paragraph, would not be prohibited under section 3(d) of this Act if— “(A) an application for such acquisition were filed under section 3(a) of this Act; and “(B) such bank were treated as an additional bank (under section 3(d)). “(h) Tying Provisions.— “(1) Applicable to certain exempt institutions and parent companies.— An institution described in subparagraph (D), (F), (G), (H), (I), or (J) of section 2(c)(2) shall be treated as a bank, and a company that controls such an institution shall be treated as a bank holding company, for purposes of section 106 of the Bank Holding Company Act Amendments of 1970 and section 22(h) of the Federal Reserve Act and any regulation prescribed under any such section. “(2) Applicable with respect to certain transactions.— A company that controls an institution described in subparagraph (D), (F), (G), (H), (I), or (J) of section 2(c)(2) and any of such company’s other affiliates, shall be subject to the tying restrictions of section 106 of the Bank Holding Company Act Amendments of 1970 in connection with any transaction involving the products or services of such company or affiliate and those of such institution, as if such company or affiliate were a bank and such institution were a subsidiary of a bank holding company.”. (d) Savings Bank Activities.— Section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842) is amended by adding at the end thereof the following new subsection: “(f) Savings Bank Subsidiaries of Bank Holding Companies.— “(1) In general.— Notwithstanding any other provision of this Act (other than paragraphs (2) and (3)), any qualified savings bank which is a subsidiary of a bank holding company 101 STAT. 562may engage, directly or through a subsidiary, in any activity in which such savings bank may engage (as a State chartered savings bank) pursuant to express, incidental, or implied powers under any statute or regulation, or under any judicial interpretation of any law, of the State in which such savings bank is located. “(2) Insurance activities.— Except as provided in paragraph (3), any insurance activities of any qualified savings bank which is a subsidiary of a bank holding company shall be limited to insurance activities allowed under section 4(c)(8). “(3) Savings bank life insurance.— Any qualified savings bank permitted, as of March 5, 1987, to engage in the sale or underwriting of savings bank life insurance may sell or underwrite such insurance after such savings bank is a subsidiary of a bank holding company if— “(A) the savings bank is located in the State of Connecticut, Massachusetts, or New York; “(B) such activity is expressly authorized by the law of the State in which such savings bank is located; “(C) the savings bank retains its character as a savings bank; “(D) such activity is carried out by the savings bank directly and not by— “(i) any subsidiary or affiliate of the savings bank; or “(ii) the bank holding company which controls such savings bank; “(E) such activity is carried out by the savings bank in accordance with any residency or employment limitations set forth in the savings bank life insurance statute in effect on March 5, 1987, in the State in which such bank is located; and “(F) such activity is otherwise carried out in the same manner as savings bank life insurance activity is carried out in the State in which such bank is located by savings banks which are not subsidiaries of any bank holding company registered under this Act. “(4) Subsection shall cease to apply under certain circumstances.— If any company which is not a savings bank or a savings bank holding company acquires control of a qualified savings bank, such savings bank shall cease to engage in any activity authorized under paragraph (1) or (3) before the end of the 2-year period beginning on the date such company acquires control, unless such activity is otherwise authorized pursuant to this Act. “(5) Special asset aggregation rule for purposes of paragraph (3).— For the sole purpose of determining whether a qualified savings bank may continue to sell and underwrite savings bank life insurance in accordance with this subsection after control of such savings bank is acquired by a bank holding company, the assets of any other bank affiliated with, or under contract to affiliate with, such savings bank as of March 5, 1987, shall be treated as assets of the savings bank in determining whether such bank holding company is a savings bank holding company.”. (e) Thrift Institutions’ Bank.— Section 2(a)(5)(E) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(5)(E)) is amended to read as follows: 101 STAT. 563 “(E) No company is a bank holding company by virtue of its ownership or control of any State-chartered bank or trust company which— “(i) is wholly owned by thrift institutions or savings banks; and “(ii) is restricted to accepting— “(I) deposits from thrift institutions or savings banks; “(II) deposits arising out of the corporate business of the thrift institutions or savings banks that own the bank or trust company; or “(III) deposits of public moneys.”. (f) Effect on State Authority To Regulate.— Section 7 of the Bank Holding Company Act of 1956 (12 U.S.C. 1846) is amended— (1) by striking out “The enactment by the Congress of the Bank Holding Company Act of 1956 shall not” and inserting in lieu thereof “No provision of this Act shall”; and (2) by inserting “companies,” before “banks”. (g) Amendment to Federal Deposit Insurance Act.— (1) In general.— Section 3(g) of the Federal Deposit Insurance Act (12 U.S.C. 1813(g)) is amended to read as follows: “(g) Savings Bank.— The term ‘savings bank’ means a bank (including a mutual savings bank) which transacts its ordinary banking business strictly as a savings bank under State laws imposing special requirements on such banks governing the manner of investing their funds and of conducting their business.”. (2) Technical and conforming amendment.— Section 27(a) of the Federal Deposit Insurance Act is amended by striking out “and insured mutual savings banks”. (h) 1987 Amendment Transition Rule.— (1) Delay in application of amendment to certain institutions.— If— (A) on March 5, 1987, an institution was not a bank (as defined in section 2(c) of the Bank Holding Company Act of 1956), as in effect on such date; and (B) any person which had a controlling interest in such institution on March 5, 1987, made a public announcement before such date that the transfer or other disposition of such person’s controlling interest in such institution was being considered, the institution shall not become a bank (for purposes of the Bank Holding Company Act of 1956) due to the amendment made to such section 2(c) by this section before the date on which such institution fails to meet any requirement of paragraph (2). (2) Requirements for application of subsection.— This subsection shall not apply with respect to any institution described in paragraph (1) unless— (A) the transfer or other disposition of the controlling interest referred to in such paragraph is completed, or an agreement to make such transfer or other disposition is in effect (or is subject only to final approval by the appropriate Federal and State regulatory agencies), before the end of the 180-day period beginning on the date of the enactment of this title; (B) a written notice by the person acquiring a controlling interest in such institution (pursuant to the transfer or 101 STAT. 564other disposition described in subparagraph (A)) of such person’s intention to operate such institution as an institution described in section 2(c)(2)(F) of the Bank Holding Company Act of 1956, as in effect after the enactment of this title is filed with the Board before the end of the 7-day period beginning on the later of the date of such transfer (or other disposition) or the date of the enactment of this title; and (C) the operation of such institution as an institution described in such section 2(c)(2)(F) begins before the end of the 180-day period beginning on the date the transfer (or other disposition) described in subparagraph (A) is completed. (3) Controlling interest.— For purposes of this subsection, a person has a controlling interest in any institution if such person controls— (A) such institution; or (B) any company which controls such institution, as determined in accordance with the provisions of subsections (b) and (g) of section 2 of the Bank Holding Company Act of 1956.