ENHANCING EXISTING RESTRICTIONS ON BANK TRANSACTIONS WITH AFFILIATES.

SEC. 608. ENHANCING EXISTING RESTRICTIONS ON BANK TRANSACTIONS WITH AFFILIATES.(a) Affiliate Transactions.—Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is amended—(1) in subsection (b)—(A) in paragraph (1), by striking subparagraph (D) and inserting the following:“(D) any investment fund with respect to which a member bank or affiliate thereof is an investment adviser; and”; and(B) in paragraph (7)—(i) in subparagraph (A), by inserting before the semicolon at the end the following: “, including a purchase of assets subject to an agreement to repurchase”;(ii) in subparagraph (C), by striking “, including assets subject to an agreement to repurchase,”;(iii) in subparagraph (D)—(I) by inserting “or other debt obligations” after “acceptance of securities”; and(II) by striking “or” at the end; and(iv) by adding at the end the following:“(F) a transaction with an affiliate that involves the borrowing or lending of securities, to the extent that the transaction causes a member bank or a subsidiary to have credit exposure to the affiliate; or“(G) a derivative transaction, as defined in paragraph (3) of section 5200(b) of the Revised Statutes of the United States (12 U.S.C. 84(b)), with an affiliate, to the extent that the transaction causes a member bank or a subsidiary to have credit exposure to the affiliate;”;(2) in subsection (c)—(A) in paragraph (1)—(i) in the matter preceding subparagraph (A), by striking “subsidiary” and all that follows through “time of the transaction” and inserting “subsidiary, and any credit exposure of a member bank or a subsidiary to an affiliate resulting from a securities borrowing or lending transaction, or a derivative transaction, shall be secured at all times”; and(ii) in each of subparagraphs (A) through (D), by striking “or letter of credit” and inserting “letter of credit, or credit exposure”;(B) by striking paragraph (2);(C) by redesignating paragraphs (3) through (5) as paragraphs (2) through (4), respectively;(D) in paragraph (2), as so redesignated, by inserting before the period at the end “, or credit exposure to an affiliate resulting from a securities borrowing or lending transaction, or derivative transaction”; and124 STAT. 1609(E) in paragraph (3), as so redesignated—(i) by inserting “or other debt obligations” after “securities”; and(ii) by striking “or guarantee” and all that follows through “behalf of,” and inserting “guarantee, acceptance, or letter of credit issued on behalf of, or credit exposure from a securities borrowing or lending transaction, or derivative transaction to,”;(3) in subsection (d)(4), in the matter preceding subparagraph (A), by striking “or issuing” and all that follows through “behalf of,” and inserting “issuing a guarantee, acceptance, or letter of credit on behalf of, or having credit exposure resulting from a securities borrowing or lending transaction, or derivative transaction to,”; and(4) in subsection (f)—(A) in paragraph (2)—(i) by striking “or order”;(ii) by striking “if it finds” and all that follows through the end of the paragraph and inserting the following: “if—“(i) the Board finds the exemption to be in the public interest and consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding; and“(ii) before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding under clause (i), the Federal Deposit Insurance Corporation does not object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.”;(iii) by striking the Board and inserting the following:“(A) In general.—The Board”; and(iv) by adding at the end the following:“(B) Additional exemptions.—“(i) National banks.—The Comptroller of the Currency may, by order, exempt a transaction of a national bank from the requirements of this section if—“(I) the Board and the Office of the Comptroller of the Currency jointly find the exemption to be in the public interest and consistent with the purposes of this section and notify the Federal Deposit Insurance Corporation of such finding; and“(II) before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding under subclause (I), the Federal Deposit Insurance Corporation does not object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.“(ii) State banks.—The Federal Deposit Insurance Corporation may, by order, exempt a transaction of a State nonmember bank, and the Board may, by order, exempt a transaction of a State member bank, from the requirements of this section if—124 STAT. 1610“(I) the Board and the Federal Deposit Insurance Corporation jointly find that the exemption is in the public interest and consistent with the purposes of this section; and“(II) the Federal Deposit Insurance Corporation finds that the exemption does not present an unacceptable risk to the Deposit Insurance Fund.”; and(B) by adding at the end the following:“(4) Amounts of covered transactions.—The Board may issue such regulations or interpretations as the Board determines are necessary or appropriate with respect to the manner in which a netting agreement may be taken into account in determining the amount of a covered transaction between a member bank or a subsidiary and an affiliate, including the extent to which netting agreements between a member bank or a subsidiary and an affiliate may be taken into account in determining whether a covered transaction is fully secured for purposes of subsection (d)(4). An interpretation under this paragraph with respect to a specific member bank, subsidiary, or affiliate shall be issued jointly with the appropriate Federal banking agency for such member bank, subsidiary, or affiliate.”.(b) Transactions With Affiliates.—Section 23B(e) of the Federal Reserve Act (12 U.S.C. 371c–1(e)) is amended—(1) by striking the undesignated matter following subparagraph (B);(2) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively, and adjusting the clause margins accordingly;(3) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and adjusting the subparagraph margins accordingly;(4) by striking “The Board” and inserting the following:“(1) In general.—The Board”;(5) in paragraph (1)(B), as so redesignated—(A) in the matter preceding clause (i), by inserting before “regulations” the following: “subject to paragraph (2), if the Board finds that an exemption or exclusion is in the public interest and is consistent with the purposes of this section, and notifies the Federal Deposit Insurance Corporation of such finding,”; and(B) in clause (ii), by striking the comma at the end and inserting a period; and(6) by adding at the end the following:“(2) Exception.—The Board may grant an exemption or exclusion under this subsection only if, during the 60-day period beginning on the date of receipt of notice of the finding from the Board under paragraph (1)(B), the Federal Deposit Insurance Corporation does not object, in writing, to such exemption or exclusion, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.”.(c) Home Owners’ Loan Act.—Section 11 of the Home Owners’ Loan Act (12 U.S.C. 1468) is amended by adding at the end the following:“(d) Exemptions.—124 STAT. 1611“(1) Federal savings associations.—The Comptroller of the Currency may, by order, exempt a transaction of a Federal savings association from the requirements of this section if—“(A) the Board and the Office of the Comptroller of the Currency jointly find the exemption to be in the public interest and consistent with the purposes of this section and notify the Federal Deposit Insurance Corporation of such finding; and“(B) before the end of the 60-day period beginning on the date on which the Federal Deposit Insurance Corporation receives notice of the finding under subparagraph (A), the Federal Deposit Insurance Corporation does not object, in writing, to the finding, based on a determination that the exemption presents an unacceptable risk to the Deposit Insurance Fund.“(2) State savings association.—The Federal Deposit Insurance Corporation may, by order, exempt a transaction of a State savings association from the requirements of this section if the Board and the Federal Deposit Insurance Corporation jointly find that—“(A) the exemption is in the public interest and consistent with the purposes of this section; and“(B) the exemption does not present an unacceptable risk to the Deposit Insurance Fund.”.(d) Effective Date.—The amendments made by this section shall take effect 1 year after the transfer date.