AMENDMENTS TO SAVINGS AND LOAN HOLDING COMPANY PROVISIONS OF THE NATIONAL HOUSING ACT.

SEC. 104. AMENDMENTS TO SAVINGS AND LOAN HOLDING COMPANY PROVISIONS OF THE NATIONAL HOUSING ACT. (a) Definitions.— Section 408(a)(1) of the National Housing Act (12 U.S.C. 1730a(a)(1)) is amended— (1) by striking out “and” at the end of subparagraph (I); (2) by striking out the period at the end of subparagraph (J) and inserting in lieu thereof a semicolon; and (3) by adding at the end thereof the following new subparagraphs: “(K) the terms ‘bank holding company’ and ‘bank’ have the meanings given to such terms in subsections (a) and (c), respectively, of section 2 of the Bank Holding Company Act of 1956; and “(L) the term ‘acquire’ has the meaning given to such term in section 13(f)(8)(E) of the Federal Deposit Insurance Act.”. (b) Holding Company Activities.— Section 408(c) of the National Housing Act (12 U.S.C. 1730a(c)) is amended to read as follows: “(c) Holding Company Activities.— “(1) Prohibited activities.— Except as otherwise provided in this subsection, no savings and loan holding company and no subsidiary (of such company) which is not an insured institution shall— 101 STAT. 568 “(A) engage in any activity or render any service for or on behalf of an insured institution subsidiary for the purpose or with the effect of evading any law or regulation applicable to such insured institution; “(B) commence any business activity, other than the activities described in paragraph (2), after the date of the enactment of the Competitive Equality Amendments of 1987; or “(C) continue any business activity, other than the activities described in paragraph (2), after the later of— “(i) the end of the 2-year period beginning on the date of the enactment of the Competitive Equality Amendments of 1987; or “(ii) the date on which such company received approval under subsection (e) of this section to become a savings and loan holding company. “(2) Exempt activities.— The prohibitions of subparagraphs (B) and (C) of paragraph (1) shall not apply to the following business activities of any savings and loan holding company or any subsidiary (of such company) which is not an insured institution: “(A) Furnishing or performing management services for an insured institution subsidiary of such company. “(B) Conducting an insurance agency or escrow business. “(C) Holding, managing, or liquidating assets owned or acquired from an insured institution subsidiary of such company. “(D) Holding or managing properties used or occupied by an insured institution subsidiary of such company. “(E) Acting as trustee under deed of trust. “(F) Any other activity— “(i) which the Board of Governors of the Federal Reserve System, by regulation, has determined to be permissible for bank holding companies under section 4(c) of the Bank Holding Company Act of 1956, unless the Corporation, by regulation, prohibits or limits any such activity for savings and loan holding companies; or “(ii) in which multiple savings and loan holding companies were authorized (by regulation) to directly engage on March 5, 1987. “(3) Certain limitations on activities not applicable to certain holding companies.— Notwithstanding paragraphs (4) and (6) of this subsection, the limitations contained in subparagraphs (B) and (C) of paragraph (1) shall not apply to any savings and loan holding company (or any subsidiary of such company) which controls— “(A) only 1 insured institution, if the insured institution subsidiary of such company is a qualified thrift lender (as determined under subsection (o)); or “(B) more than 1 insured institution, if— “(i) all, or all but 1, of the insured institution subsidiaries of such company were acquired pursuant to an acquisition under subsection (m) of this section or section 406(f); and 101 STAT. 569 “(ii) all of the insured institution subsidiaries of such company are qualified thrift lenders (as determined under subsection (o)). “(4) Prior approval of certain new activities required.— “(A) In general.— No savings and loan holding company and no subsidiary (of such company) which is not an insured institution shall commence, either de novo or by an acquisition (in whole or in part) of a going concern, any activity described in paragraph (2)(F)(i) of this subsection without the prior approval of the Corporation. “(B) Factors to be considered by corporation.— In considering any application under subparagraph (A) by any savings and loan holding company or any subsidiary of any such company which is not an insured institution, the Corporation shall consider— “(i) whether the performance of the activity described in such application by the company or the subsidiary can reasonably be expected to produce benefits to the public (such as greater convenience, increased competition, or gains in efficiency) that out-weigh possible adverse effects of such activity (such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound financial practices); “(ii) the managerial resources of the companies involved; and “(iii) the adequacy of the financial resources, including capital, of the companies involved. “(C) Corporation may differentiate between new and ongoing activities.— In prescribing any regulation or considering any application under this paragraph, the Corporation may differentiate between activities commenced de novo and activities commenced by the acquisition, in whole or in part, of a going concern. “(D) Approval or disapproval by order.— The approval or disapproval of any application under this paragraph by the Corporation shall be made in an order issued by the Corporation containing the reasons for such approval or disapproval. “(5) Grace period to achieve compuance.— If any insured institution referred to in paragraph (3) fails to maintain the status of such institution as a qualified thrift lender, the Corporation may allow, for good cause shown, any company which controls such institution (or any subsidiary of such company which is not an insured institution) up to 3 years to comply with the limitations contained in paragraph (1)(C). “(6) Special provisions relating to certain companies affected by 1987 amendments.— “(A) Exception to 2-year grace period for achieving compliance.— Notwithstanding paragraph (1)(C)(i), any company which received approval under subsection (e) of this section to acquire control of an insured institution between March 5, 1987, and the date of the enactment of the Competitive Equality Amendments of 1987 shall not continue any business activity other than the activities described in paragraph (2) after such date of enactment. 101 STAT. 570 “(B) Exemption for activities lawfully engaged in before march 5, 1987.— Notwithstanding paragraph (1)(C) and subject to subparagraphs (C) and (D), any savings and loan holding company which received approval, before March 5, 1987, under subsection (e) of this section to acquire control of an insured institution may engage, directly or through any subsidiary (other than an insured institution subsidiary of such company), in any activity in which such company or such subsidiary was lawfully engaged on such date. “(C) Termination of subparagraph (b) exemption.— The exemption provided under subparagraph (B) for activities engaged in by any savings and loan holding company or a subsidiary of such company (which is not an insured institution) which would otherwise be prohibited under paragraph (1)(C) shall terminate with respect to such activities of such company or subsidiary upon the occurrence (after the date of the enactment of the Competitive Equality Amendments of 1987) of any of the following: “(i) The savings and loan holding company acquires control of a bank or an additional insured institution (other than an insured institution acquired pursuant to subsection (m) of this section or section 406(f). “(ii) Any insured institution subsidiary of the savings and loan holding company fails to qualify as a domestic building and loan association under section 7701(a)(19) of the Internal Revenue Code of 1986. “(iii) The savings and loan holding company engages in any business activity— “(I) which is not described in paragraph (2); and “(II) in which it was not engaged on March 5, 1987. “(iv) Any insured institution subsidiary of the savings and loan holding company increases the number of locations from which such insured institution conducts business after March 5, 1987 (other than an increase which occurs in connection with a transaction under subsection (m) of this section or section 406(f)). “(v) Any insured institution subsidiary of the savings and loan holding company permits any overdraft (including an intraday overdraft), or incurs any such overdraft in its account at a Federal Reserve bank, on behalf of an affiliate, unless such overdraft is the result of an inadvertent computer or accounting error that is beyond the control of both the insured institution subsidiary and the affiliate. “(D) Order by corporation to terminate subparagraph (b) activity.— Any activity described in subparagraph (B) may also be terminated by the Corporation, after opportunity for hearing, if the Corporation determines, having due regard for the purposes of this title, that such action is necessary to prevent conflicts of interest or unsound practices or is in the public interest. “(7) Foreign savings and loan holding company.— Notwithstanding any other provision of this section, any savings and loan holding company organized under the laws of a foreign country as of June 1, 1984 (including any subsidiary thereof 101 STAT. 571which is not an insured institution), which controls a single insured institution on the date of enactment of the Competitive Equality Amendments of 1987 shall not be subject to this subsection with respect to any activities of such holding company which are conducted exclusively in a foreign country.”. (c) Requirements for Treatment as a Qualified Thrift Lender.— (1) In general.— Section 408 of the National Housing Act (12 U.S.C. 1730a) is amended by adding at the end thereof the following new subsection: “(o) Qualified Thrift Lender Requirements.— “(1) In general.— Except as provided in paragraphs (2) and (3), any insured institution shall have the status of a qualified thrift lender if— “(A) the qualified thrift investments of such insured institution equal or exceed 60 percent of the total tangible assets of such institution; and “(B) the qualified thrift investments of such insured institution continue to equal or exceed 60 percent of the total tangible assets of such institution on an average basis in 3 out of every 4 quarters and 2 out of every 3 years. “(2) Transition rule for certain institutions.— “(A) In general.— If any insured institution— “(i) which was chartered as a savings bank or a cooperative bank under State law before October 15, 1982; or “(ii) the principal assets of which were acquired from an institution which was chartered as a savings bank or a cooperative bank under State law before October 15, 1982, meets the requirements of subparagraph (B), such insured institution shall be treated as a qualified thrift lender during the 10-year period beginning on January 1, 1988. “(B) Subparagraph (b) requirements.— An insured institution meets the requirements of this subparagraph if, in the determination of the Corporation— “(i) the actual thrift investment percentage of such institution does not, after the date of the enactment of the Competitive Equality Amendments of 1987, decrease below the actual thrift investment percentage of such institution on such date of enactment; and “(ii) the amount by which— “(I) the actual thrift investment percentage of such institution at the end of each period described in the following table, exceeds “(II) the actual thrift investment percentage of such institution on such date of enactment, is equal to or greater than the applicable percentage (as determined under the following table) of the amount by which 60 percent exceeds the actual thrift investment percentage of such institution on such date of enactment: “For the following period: The applicable percentage is: The 2½-year period beginning on such date of enactment 25 percent The 5-year period beginning on such date of enactment 50 percent The 7½-year period beginning on such date of enactment 75 percent 101 STAT. 572 “(3) Exceptions granted by corporation.— Notwithstanding paragraph (1), the Corporation may grant such temporary and limited exceptions from the minimum actual thrift investment percentage requirement contained in such paragraph as the Corporation deems necessary if— “(A) the Corporation determines that extraordinary circumstances exist, such as when the effects of high interest rates reduce mortgage demand to such a degree that an insufficient opportunity exists for an insured institution to meet such investment requirements; or “(B) the Corporation determines that— “(i) the grant of any such exception will facilitate an acquisition under section 406(f) or 408(m); and “(ii) the acquired institution will comply with the transition requirements of paragraph (2)(B). “(4) Failure to maintain qtl status.— Any insured institution which fails to maintain its status as a qualified thrift lender, as determined by the Corporation, may not thereafter be a qualified thrift lender for a period of 5 years. “(5) Definitions.— For purposes of this subsection— “(A) Actual thrift investment percentage.— The term ‘actual thrift investment percentage’ means the percentage determined by dividing— “(i) the amount of the qualified thrift investments of an insured institution, by “(ii) the total amount of tangible assets of such insured institution. “(B) Qualified thrift investments.— The term ‘qualified thrift investments’ means, with respect to any insured institution, the sum of— “(i) the aggregate amount of loans, equity positions, or securities held by the insured institution (or any subsidiary of such institution) which are related to domestic residential real estate or manufactured housing; “(ii) the value of property used by such institution or subsidiary in the conduct of the business of such institution or subsidiary; “(iii) subject to paragraph (6), the liquid assets of the type required to be maintained under section 5A of the Federal Home Loan Bank Act; and “(iv) subject to paragraph (6), 50 percent of the dollar amount of the residential mortgage loans originated by such insured institution or subsidiary and sold within 90 days of origination. “(6) Limitation on treatment of certain assets as thrift investments.— The aggregate amount of the assets described in clauses (iii) and (iv) of paragraph (5)(B) which may be taken into account in determining the amount of the qualified thrift investments of any insured institution shall not exceed the amount which is equal to 10 percent of the tangible assets of such institution. “(7) Additional transition rule.— The insured institution described in subsection (r)(2)(C) shall be treated as a qualified 101 STAT. 573thrift lender during the 10-year period beginning on January 1, 1988, if the requirements of paragraph (2)(B) are met by such institution.”. (2) Effective date.— The amendment made by paragraph (1) shall take effect on January 1, 1988. (3) Regulations.— The Federal Savings and Loan Insurance Corporation shall prescribe, under the authority of section 408(h)(1) of the National Housing Act, regulations to carry out the provisions of the amendment made by paragraph (1) before January 1, 1988. (d) Transactions Between Insured Institution Subsidiaries and Certain Affiliates.— (1) In general.— Section 408 of the National Housing Act (12 U.S.C. 1730a(d)) is amended by adding after subsection (o) (as added by subsection (c) of this section) the following new subsection: “(p) Restrictions on Activities of Certain Insured Institution Subsidiaries.— “(1) Transactions with certain affiliates.— “(A) In general.— Transactions between any insured institution subsidiary of a savings and loan holding company and any affiliate (of such insured institution subsidiary) which is engaged only in business activities described in subsection (c)(2)(F)(i)— “(i) shall not be subject to subsection (d); and “(ii) shall be subject to the limitations and prohibitions specified in sections 23A and 23B of the Federal Reserve Act in the same manner and to the same extent as if such insured institution were a member bank. “(B) Regulations.— The Corporation may prescribe regulations for the purpose of defining and clarifying the applicability of the limitations and prohibitions described in subparagraph (A). “(2) Cross-marketing practices.— “(A) In general.— Notwithstanding any other provision of this section, an insured institution subsidiary of a diversified savings and loan holding company may not offer or market products or services of an affiliate that are not permissible for bank holding companies to provide under section 4(c)(8) of the Bank Holding Company Act of 1956 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 section 4(c) of that Act), 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. “(B) Exception.— This paragraph shall not apply so as to prohibit an insured institution subsidiary of a diversified savings and loan holding company from offering or marketing the products or services of an affiliate or from permitting its products or services to be offered or marketed by or through an affiliate if— “(i) the savings and loan holding company is a reciprocal interinsurance exchange that acquired control of the insured institution before January 1, 1984; and 101 STAT. 574 “(ii) at least 90 percent of the customers of the savings and loan holding company and its subsidiaries and affiliates are active or former officers in the United States military services or the widows, widowers, divorced spouses, or current or former dependents of such officers.”. (2) Technical amendment.— Section 408(d) of the National Housing Act (12 U.S.C. 1730a(d)) is amended by striking out “No savings and loan” and inserting in lieu thereof “Except as provided in subsection (p), no savings and loan”. (e) Tying Restrictions.— Section 408 of the National Housing Act (12 U.S.C. 1730a) is amended by inserting after subsection (p) (as added by subsection (d) of this section) the following new subsection: “(q) Tying Restrictions.— “(1) State chartered insured institution subsidiaries.— A State chartered insured institution subsidiary of a savings and loan holding company shall be subject to section 5(q) of the Home Owners’ Loan Act of 1933, and regulations prescribed under such subsection, in the same manner and to the same extent as an association (as defined in section 2(d) of such Act). “(2) Holding companies and certain affiliates.— A savings and loan holding company and any of its affiliates (other than an insured institution) shall be subject to section 5(q) of the Home Owners’ Loan Act of 1933, and regulations prescribed under such subsection, in connection with transactions involving the products or services of such company or affiliate and those of an affiliated insured institution as if such company or affiliate were an association (as defined in section 2(d) of such Act).”. (f) Savings Bank as Insured Institution.— (1) In general.— Section 408(n) of the National Housing Act (12 U.S.C. 1730a) is amended to read as follows: “(n) Treatment of FDIC Insured State Savings Banks and Cooperative Banks as Insured Institutions.— “(1) In general.— Notwithstanding any other provision of law, a savings bank (as defined in section 3(g) of the Federal Deposit Insurance Act) and a cooperative bank that is an insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act) upon application shall be deemed to be an insured institution for the purpose of this section, if the Corporation determines that such bank is a qualified thrift lender (as determined under subsection (o)). “(2) Failure to maintain qtl status.— If any savings bank which is deemed to be an insured institution under paragraph (1) subsequently fails to maintain its status as a qualified thrift lender, as determined by the Corporation, such bank may not thereafter be a qualified thrift lender for a period of 5 years.”. (2) Technical and conforming amendment.— Section 408(a)(1)(A) of the National Housing Act (12 U.S.C. 1730a(a)(1)(A)) is amended by adding before the semicolon at the end thereof the following: “and a savings bank which is deemed by the Corporation to be an insured institution under subsection (n)”. (g) Thrift Acquisitions.— Section 408(e)(3) of the National Housing Act (12 U.S.C. 1730(e)) is amended to read as follows: “(3) Interstate Acquisitions.— No acquisition shall be approved by the Corporation under this subsection which will result in the 101 STAT. 575formation by any company, through one or more subsidiaries or through one or more transactions, of a multiple savings and loan holding company controlling insured institutions in more than one State, unless— “(A) such company, or an insured institution subsidiary of such company, is authorized to acquire control of an insured institution subsidiary, or to operate a home or branch office, in the additional State or States pursuant to subsection (m); “(B) such company controls an insured institution subsidiary which operated a home or branch office in the additional State or States as of March 5, 1987; or “(C) the statute laws of the State in which the insured institution, control of which is to be acquired, is located are such that an insured institution chartered by such State could be acquired by an insured institution chartered by the State where the acquiring insured institution or savings and loan holding company is located (or by a holding company that controls such a State-chartered insured institution), and such statute laws specifically authorize such an acquisition by language to that effect and not merely by implication.”. (h) Emergency Acquisitions.— Section 408(m)(1)(A)(i) of the National Housing Act (12 U.S.C. 1730a(m)(1)(A)(i)) is amended by inserting “(c),” before “(e)(2)”.