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U.S. Code as of:
01/19/04
Section 1843. Interests in nonbanking organizations
(a) Ownership or control of voting shares of any company not a
bank; engagement in activities other than banking
Except as otherwise provided in this chapter, no bank holding
company shall -
(1) after May 9, 1956, acquire direct or indirect ownership or
control of any voting shares of any company which is not a bank,
or
(2) after two years from the date as of which it becomes a bank
holding company, or in the case of a company which has been
continuously affiliated since May 15, 1955, with a company which
was registered under the Investment Company Act of 1940 [15
U.S.C. 80a-1 et seq.], prior to May 15, 1955, in such a manner as
to constitute an affiliated company within the meaning of that
Act, after December 31, 1978, or, in the case of any company
which becomes, as a result of the enactment of the Bank Holding
Company Act Amendments of 1970, a bank holding company on
December 31, 1970, after December 31, 1980, retain direct or
indirect ownership or control of any voting shares of any company
which is not a bank or bank holding company or engage in any
activities other than (A) those of banking or of managing or
controlling banks and other subsidiaries authorized under this
chapter or of furnishing services to or performing services for
its subsidiaries, and (B) those permitted under paragraph (8) of
subsection (c) of this section subject to all the conditions
specified in such paragraph or in any order or regulation issued
by the Board under such paragraph: Provided, That a company
covered in 1970 may also engage in those activities in which
directly or through a subsidiary (i) it was lawfully engaged on
June 30, 1968 (or on a date subsequent to June 30, 1968 in the
case of activities carried on as the result of the acquisition by
such company or subsidiary, pursuant to a binding written
contract entered into on or before June 30, 1968, of another
company engaged in such activities at the time of the
acquisition), and (ii) it has been continuously engaged since
June 30, 1968 (or such subsequent date). The Board by order,
after opportunity for hearing, may terminate the authority
conferred by the preceding proviso on any company to engage
directly or through a subsidiary in any activity otherwise
permitted by that proviso if it determines, having due regard to
the purposes of this chapter, that such action is necessary to
prevent undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices;
and in the case of any such company controlling a bank having
bank assets in excess of $60,000,000 on or after December 31,
1970, the Board shall determine, within two years after such date
(or, if later, within two years after the date on which the bank
assets first exceed $60,000,000), whether the authority conferred
by the preceding proviso with respect to such company should be
terminated as provided in this sentence. Nothing in this
paragraph shall be construed to authorize any bank holding
company referred to in the preceding proviso, or any subsidiary
thereof, to engage in activities authorized by that proviso
through the acquisition, pursuant to a contract entered into
after June 30, 1968, of any interest in or the assets of a going
concern engaged in such activities. Any company which is
authorized to engage in any activity pursuant to the preceding
proviso or subsection (d) of this section but, as a result of
action of the Board, is required to terminate such activity may
(notwithstanding any otherwise applicable time limit prescribed
in this paragraph) retain the ownership or control of shares in
any company carrying on such activity for a period of ten years
from the date on which its authority was so terminated by the
Board. 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 August 10, 1987, an
institution that became a bank as a result of the enactment of
such Amendments, that company shall, upon enactment of such
Amendments, immediately come into compliance with the
requirements of this chapter.
The Board is authorized, upon application by a bank holding
company, to extend the two year period referred to in paragraph (2)
above from time to time as to such bank holding company for not
more than one year at a time, if, in its judgment, such an
extension would not be detrimental to the public interest, but no
such extensions shall in the aggregate exceed three years.
Notwithstanding any other provision of this chapter, the period
ending December 31, 1980, referred to in paragraph (2) above, may
be extended by the Board of Governors to December 31, 1984, but
only for the divestiture by a bank holding company of real estate
or interests in real estate lawfully acquired for investment or
development. In making its decision whether to grant such
extension, the Board shall consider whether the company has made a
good faith effort to divest such interests and whether such
extension is necessary to avert substantial loss to the company.
(b) Statement purporting to represent shares of any company except
a bank or bank holding company
After two years from May 9, 1956, no certificate evidencing
shares of any bank holding company shall bear any statement
purporting to represent shares of any other company except a bank
or a bank holding company, nor shall the ownership, sale, or
transfer of shares of any bank holding company be conditioned in
any manner whatsoever upon the ownership, sale, or transfer of
shares of any other company except a bank or a bank holding
company.
(c) Exemptions
The prohibitions in this section shall not apply to (i) any
company that was on January 4, 1977, both a bank holding company
and a labor, agricultural, or horticultural organization exempt
from taxation under section 501 of title 26, or to any labor,
agricultural, or horticultural organization to which all or
substantially all of the assets of such company are hereafter
transferred, or (ii) a company covered in 1970 more than 85 per
centum of the voting stock of which was collectively owned on June
30, 1968, and continuously thereafter, directly or indirectly, by
or for members of the same family, or their spouses, who are lineal
descendants of common ancestors; and such prohibitions shall not,
with respect to any other bank holding company, apply to -
(1) shares of any company engaged or to be engaged solely in
one or more of the following activities: (A) holding or operating
properties used wholly or substantially by any banking subsidiary
of such bank holding company in the operations of such banking
subsidiary or acquired for such future use; or (B) conducting a
safe deposit business; or (C) furnishing services to or
performing services for such bank holding company or its banking
subsidiaries; or (D) liquidating assets acquired from such bank
holding company or its banking subsidiaries or acquired from any
other source prior to May 9, 1956, or the date on which such
company became a bank holding company, whichever is later;
(2) shares acquired by a bank holding company or any of its
subsidiaries in satisfaction of a debt previously contracted in
good faith, but such shares shall be disposed of within a period
of two years from the date on which they were acquired, except
that the Board is authorized upon application by such bank
holding company to extend such period of two years from time to
time as to such holding company if, in its judgment, such an
extension would not be detrimental to the public interest, and,
in the case of a bank holding company which has not disposed of
such shares within 5 years after the date on which such shares
were acquired, the Board may, upon the application of such
company, grant additional exemptions if, in the judgment of the
Board, such extension would not be detrimental to the public
interest and, either the bank holding company has made a good
faith attempt to dispose of such shares during such 5-year
period, or the disposal of such shares during such 5-year period
would have been detrimental to the company, except that the
aggregate duration of such extensions shall not extend beyond 10
years after the date on which such shares were acquired;
(3) shares acquired by such bank holding company from any of
its subsidiaries which subsidiary has been requested to dispose
of such shares by any Federal or State authority having statutory
power to examine such subsidiary, but such bank holding company
shall dispose of such shares within a period of two years from
the date on which they were acquired;
(4) shares held or acquired by a bank in good faith in a
fiduciary capacity, except where such shares are held under a
trust that constitutes a company as defined in section 1841(b) of
this title and except as provided in paragraphs (2) and (3) of
section 1841(g) of this title;
(5) shares which are of the kinds and amounts eligible for
investment by national banking associations under the provisions
of section 24 of this title;
(6) shares of any company which do not include more than 5 per
centum of the outstanding voting shares of such company;
(7) shares of an investment company which is not a bank holding
company and which is not engaged in any business other than
investing in securities, which securities do not include more
than 5 per centum of the outstanding voting shares of any
company;
(8) shares of any company the activities of which had been
determined by the Board by regulation or order under this
paragraph as of the day before November 12, 1999, to be so
closely related to banking as to be a proper incident thereto
(subject to such terms and conditions contained in such
regulation or order, unless modified by the Board);
(9) shares held or activities conducted by any company
organized under the laws of a foreign country the greater part of
whose business is conducted outside the United States, if the
Board by regulation or order determines that, under the
circumstances and subject to the conditions set forth in the
regulation or order, the exemption would not be substantially at
variance with the purposes of this chapter and would be in the
public interest;
(10) shares lawfully acquired and owned prior to May 9, 1956,
by a bank which is a bank holding company, or by any of its
wholly owned subsidiaries;
(11) shares owned directly or indirectly by a company covered
in 1970 in a company which does not engage in any activities
other than those in which the bank holding company, or its
subsidiaries, may engage by virtue of this section, but nothing
in this paragraph authorizes any bank holding company, or
subsidiary thereof, to acquire any interest in or the assets of
any going concern (except pursuant to a binding written contract
entered into before June 30, 1968, or pursuant to another
provision of this chapter) other than one which was a subsidiary
on June 30, 1968;
(12) shares retained or acquired, or activities engaged in, by
any company which becomes, as a result of the enactment of the
Bank Holding Company Act Amendments of 1970, a bank holding
company on December 31, 1970, or by any subsidiary thereof, if
such company -
(A) within the applicable time limits prescribed in
subsection (a)(2) of this section (i) ceases to be a bank
holding company, or (ii) ceases to retain direct or indirect
ownership or control of those shares and to engage in those
activities not authorized under this section; and
(B) complies with such other conditions as the Board may by
regulation or order prescribe;
(13) shares of, or activities conducted by, any company which
does no business in the United States except as an incident to
its international or foreign business, if the Board by regulation
or order determines that, under the circumstances and subject to
the conditions set forth in the regulation or order, the
exemption would not be substantially at variance with the
purposes of this chapter and would be in the public interest; or
(14) shares of any company which is an export trading company
whose acquisition (including each acquisition of shares) or
formation by a bank holding company has not been disapproved by
the Board pursuant to this paragraph, except that such
investments, whether direct or indirect, in such shares shall not
exceed 5 per centum of the bank holding company's consolidated
capital and surplus.
(A)(i) No bank holding company shall invest in an export
trading company under this paragraph unless the Board has been
given sixty days' prior written notice of such proposed
investment and within such period has not issued a notice
disapproving the proposed investment or extending for up to
another thirty days the period during which such disapproval
may be issued.
(ii) The period for disapproval may be extended for such
additional thirty-day period only if the Board determines that
a bank holding company proposing to invest in an export trading
company has not furnished all the information required to be
submitted or that in the Board's judgment any material
information submitted is substantially inaccurate.
(iii) The notice required to be filed by a bank holding
company shall contain such relevant information as the Board
shall require by regulation or by specific request in
connection with any particular notice.
(iv) The Board may disapprove any proposed investment only if
-
(I) such disapproval is necessary to prevent unsafe or
unsound banking practices, undue concentration of resources,
decreased or unfair competition, or conflicts of interest;
(II) the Board finds that such investment would affect the
financial or managerial resources of a bank holding company
to an extent which is likely to have a materially adverse
effect on the safety and soundness of any subsidiary bank of
such bank holding company, or
(III) the bank holding company fails to furnish the
information required under clause (iii).
(v) Leverage. - The Board may not disapprove any proposed
investment solely on the basis of the anticipated or proposed
asset-to-equity ratio of the export trading company with
respect to which such investment is proposed, unless the
anticipated or proposed annual average asset-to-equity ratio is
greater than 20-to-1.
(vi) Within three days after a decision to disapprove an
investment, the Board shall notify the bank holding company in
writing of the disapproval and shall provide a written
statement of the basis for the disapproval.
(vii) A proposed investment may be made prior to the
expiration of the disapproval period if the Board issues
written notice of its intent not to disapprove the investment.
(B)(i) The total amount of extensions of credit by a bank
holding company which invests in an export trading company,
when combined with all such extensions of credit by all the
subsidiaries of such bank holding company, to an export trading
company shall not exceed at any one time 10 per centum of the
bank holding company's consolidated capital and surplus. For
purposes of the preceding sentence, an extension of credit
shall not be deemed to include any amount invested by a bank
holding company in the shares of an export trading company.
(ii) No provision of any other Federal law in effect on
October 1, 1982, relating specifically to collateral
requirements shall apply with respect to any such extension of
credit.
(iii) No bank holding company or subsidiary of such company
which invests in an export trading company may extend credit to
such export trading company or to customers of such export
trading company on terms more favorable than those afforded
similar borrowers in similar circumstances, and such extension
of credit shall not involve more than the normal risk of
repayment or present other unfavorable features.
(C) For purposes of this paragraph, an export trading company
-
(i) may engage in or hold shares of a company engaged in
the business of underwriting, selling, or distributing
securities in the United States only to the extent that any
bank holding company which invests in such export trading
company may do so under applicable Federal and State banking
laws and regulations; and
(ii) may not engage in agricultural production activities
or in manufacturing, except for such incidental product
modification including repackaging, reassembling or
extracting byproducts, as is necessary to enable United
States goods or services to conform with requirements of a
foreign country and to facilitate their sale in foreign
countries.
(D) A bank holding company which invests in an export trading
company may be required, by the Board, to terminate its
investment or may be made subject to such limitations or
conditions as may be imposed by the Board, if the Board
determines that the export trading company has taken positions
in commodities or commodity contracts, in securities, or in
foreign exchange, other than as may be necessary in the course
of the export trading company's business operations.
(E) Notwithstanding any other provision of law, an Edge Act
corporation, organized under section 25(a) (!1) of the Federal
Reserve Act (12 U.S.C. 611-631), which is a subsidiary of a
bank holding company, or an agreement corporation, operating
subject to section 25 of the Federal Reserve Act [12 U.S.C. 601
et seq.], which is a subsidiary of a bank holding company, may
invest directly and indirectly in the aggregate up to 5 per
centum of its consolidated capital and surplus (25 per centum
in the case of a corporation not engaged in banking) in the
voting stock of other evidences of ownership in one or more
export trading companies.
(F) For purposes of this paragraph -
(i) the term "export trading company" means a company which
does business under the laws of the United States or any
State, which is exclusively engaged in activities related to
international trade, and which is organized and operated
principally for purposes of exporting goods or services
produced in the United States or for purposes of facilitating
the exportation of goods or services produced in the United
States by unaffiliated persons by providing one or more
export trade services.(!2)
(ii) the term "export trade services" includes, but is not
limited to, consulting, international market research,
advertising, marketing, insurance (other than acting as
principal, agent or broker in the sale of insurance on risks
resident or located, or activities performed, in the United
States, except for insurance covering the transportation of
cargo from any point of origin in the United States to a
point of final destination outside the United States),
product research and design, legal assistance,
transportation, including trade documentation and freight
forwarding, communication and processing of foreign orders to
and for exporters and foreign purchasers, warehousing,
foreign exchange, financing, and taking title to goods, when
provided in order to facilitate the export of goods or
services produced in the United States;
(iii) the term "bank holding company" shall include a bank
which (I) is organized solely to do business with other banks
and their officers, directors, or employees; (II) is owned
primarily by the banks with which it does business; and (III)
does not do business with the general public. No such other
bank, owning stock in a bank described in this clause that
invests in an export trading company, shall extend credit to
an export trading company in an amount exceeding at any one
time 10 per centum of such other bank's capital and surplus;
and
(iv) the term "extension of credit" shall have the same
meaning given such term in the fourth paragraph of section
371c (!3) of this title.
(G) Determination of status as export trading company. -
(i) Time period requirements. - For purposes of determining
whether an export trading company is operated principally for
the purposes described in subparagraph (F)(i) -
(I) the operations of such company during the 2-year
period beginning on the date such company commences
operations shall not be taken into account in making any
such determination; and
(II) not less than 4 consecutive years of operations of
such company (not including any portion of the period
referred to in subclause (I)) shall be taken into account
in making any such determination.
(ii) Export revenue requirements. - A company shall not be
treated as operated principally for the purposes described in
subparagraph (F)(i) unless -
(I) the revenues of such company from the export, or
facilitating the export, of goods or services produced in
the United States exceed the revenues of such company from
the import, or facilitating the import, into the United
States of goods or services produced outside the United
States; and
(II) at least 1/3 of such company's total revenues are
revenues from the export, or facilitating the export, of
goods or services produced in the United States by persons
not affiliated with such company.
(H) Inventory. -
(i) No general limitation. - The Board may not prescribe by
regulation any maximum dollar amount limitation on the value
of goods which an export trading company may maintain in
inventory at any time.
(ii) Specific limitation by order. - Notwithstanding clause
(i), the Board may issue an order establishing a maximum
dollar amount limitation on the value of goods which a
particular export trading company may maintain in inventory
at any time (after such company has been operating for a
reasonable period of time) if the Board finds that, under the
facts and circumstances, such limitation is necessary to
prevent risks that would affect the financial or managerial
resources of an investor bank holding company to an extent
which would be likely to have a materially adverse effect on
the safety and soundness of any subsidiary bank of such bank
holding company.
The Board shall include in its annual report to the Congress a
description and a statement of the reasons for approval of each
activity approved by it by order or regulation under such paragraph
during the period covered by the report.
(d) Exemption of company controlling one bank prior to July 1, 1968
To the extent that such action would not be substantially at
variance with the purposes of this chapter and subject to such
conditions as it considers necessary to protect the public
interest, the Board by order, after opportunity for hearing, may
grant exemptions from the provisions of this section to any bank
holding company which controlled one bank prior to July 1, 1968,
and has not thereafter acquired the control of any other bank in
order (1) to avoid disrupting business relationships that have
existed over a long period of years without adversely affecting the
banks or communities involved, or (2) to avoid forced sales of
small locally owned banks to purchasers not similarly
representative of community interests, or (3) to allow retention of
banks that are so small in relation to the holding company's total
interests and so small in relation to the banking market to be
served as to minimize the likelihood that the bank's powers to
grant or deny credit may be influenced by a desire to further the
holding company's other interests.
(e) Divestiture of nonexempt shares
With respect to shares which were not subject to the prohibitions
of this section as originally enacted by reason of any exemption
with respect thereto but which were made subject to such
prohibitions by the subsequent repeal of such exemption, no bank
holding company shall retain direct or indirect ownership or
control of such shares after five years from the date of the repeal
of such exemption, except as provided in paragraph (2) of
subsection (a) of this section. Any bank holding company subject to
such five-year limitation on the retention of nonbanking assets
shall endeavor to divest itself of such shares promptly and such
bank holding company shall report its progress in such divestiture
to the Board two years after repeal of the exemption applicable to
it and annually thereafter.
(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 August
10, 1987,
shall not be treated as a bank holding company for purposes of
this chapter solely by virtue of such company's control of such
institution.
(2) Loss of exemption
Subject to paragraph (3), a company described in paragraph (1)
shall no longer qualify for the exemption provided under that
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) or (12) 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 a savings association
other than -
(I) shares held as a bona fide fiduciary (whether with or
without the sole discretion to vote such shares);
(II) shares held by any person as a bona fide fiduciary
solely for the benefit of employees of either the company
described in paragraph (1) or any subsidiary of that
company and the beneficiaries of those employees;
(III) shares held temporarily pursuant to an underwriting
commitment in the normal course of an underwriting
business;
(IV) shares held in an account solely for trading
purposes;
(V) shares over which no control is held other than
control of voting rights acquired in the normal course of a
proxy solicitation;
(VI) loans or other accounts receivable acquired in the
normal course of business;
(VII) shares or assets acquired in securing or collecting
a debt previously contracted in good faith, during the
2-year period beginning on the date of such acquisition or
for such additional time (not exceeding 3 years) as the
Board may permit if the Board determines that such an
extension will not be detrimental to the public interest;
(VIII) shares or assets of a savings association
described in paragraph (10) or (12) of this subsection;
(IX) shares of a savings association held by any
insurance company, as defined in section 2(a)(17) of the
Investment Company Act of 1940 [15 U.S.C. 80a-2(a)(17)],
except as provided in paragraph (11);
(X) shares issued in a qualified stock issuance under
section 1467a(q) of this title; and
(XI) assets that are derived from, or incidental to,
activities in which institutions described in subparagraph
(F) or (H) of section 1841(c)(2) of this title are
permitted to engage;
except that the aggregate amount of shares held under this
clause (other than under subclauses (I), (II), (III), (IV),
(V), and (VIII)) may not exceed 15 percent of all outstanding
shares or of the voting power of a savings association;
(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 August 10, 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).
(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 371c or 371c-1 of this title, 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 [12 U.S.C. 1828(j)], in the case of a bank that
is not a member of the Federal Reserve System.
(4) Divestiture 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; or
(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.
(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 1844(a)
of this title;
(B) immediately upon such registration, complies with all of
the requirements of this chapter, and regulations prescribed by
the Board pursuant to this chapter, 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 1842(d) of this title if an application
for such acquisition by such company were filed under section
1842(a) of this title.
(6) Information requirement
Each company described in paragraph (1) shall, within 60 days
after August 10, 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 chapter 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 [12 U.S.C. 1818] 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 chapter 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 [12 U.S.C. 1811 et seq.] 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 [12
U.S.C. 1971 et seq.] and section 22(h) of the Federal Reserve
Act [12 U.S.C. 375b] 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 [12 U.S.C. 1971 et
seq.], 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)(VIII) 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
described in paragraph (1) in an acquisition under section
1730a(m) (!4) of this title or section 13(k) of the Federal
Deposit Insurance Act [12 U.S.C. 1823(k)]; 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.
(11) Shares held by insurance affiliates
Shares described in clause (ii)(IX) of paragraph (2)(A) shall
not be excluded for purposes of clause (ii) of such paragraph if
-
(A) all shares held under such clause (ii)(IX) by all
insurance company affiliates of such savings association in the
aggregate exceed 5 percent of all outstanding shares or of the
voting power of the savings association; or
(B) such shares are acquired or retained with a view to
acquiring, exercising, or transferring control of the savings
association.
(12) Exemption unaffected by certain other acquisitions
For purposes of clauses (i) and (ii)(VIII) of paragraph (2)(A),
an insured institution is described in this paragraph if the
insured institution was acquired (or any shares or assets of such
institution were acquired) by a company described in paragraph
(1) -
(A) from the Resolution Trust Corporation, the Federal
Deposit Insurance Corporation, or the Director of the Office of
Thrift Supervision, in any capacity; or
(B) in an acquisition in which the insured institution has
been found to be in danger of default (as defined in section 3
of the Federal Deposit Insurance Act [12 U.S.C. 1813]) by the
appropriate Federal or State authority.
(13) Special rule relating to shares acquired in a qualified
stock issuance
A company described in paragraph (1) that holds shares issued
in a qualified stock issuance pursuant to section 1467a(q) of
this title by any savings association or savings and loan holding
company (neither of which is a subsidiary) shall not be deemed to
control such savings association or savings and loan holding
company solely because such company holds such shares unless -
(A) the company fails to comply with any requirement or
condition imposed by paragraph (2)(A)(ii)(X) or section
1467a(q) of this title with respect to such shares; or
(B) the shares are acquired or retained with a view to
acquiring, exercising, or transferring control of the savings
association or savings and loan holding company.
(14) Foreign bank subsidiaries of limited purpose credit card
banks
(A) In general
An institution described in section 1841(c)(2)(F) of this
title 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 [12 U.S.C. 601 et seq., 611 et seq.] 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
1841(c)(2)(F) of this title shall not apply to a foreign bank
described in subparagraph (A) that is controlled by an
institution described in such section.
(g) Limitations on certain banks
(1) In general
Notwithstanding any other provision of this section (other than
the last sentence of subsection (a)(2) of this section), 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 August 10, 1987, which would
have caused such institution to be a bank (as defined in
section 1841(c) of this title, 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 1842(d)
of this title if -
(A) an application for such acquisition were filed under
section 1842(a) of this title; and
(B) such bank were treated as an additional bank (under
section 1842(d) of this title).
(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 1841(c)(2) of this title 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 [12 U.S.C.
1971 et seq.] and section 22(h) of the Federal Reserve Act [12
U.S.C. 375b] 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
1841(c)(2) of this title 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 [12 U.S.C.
1971 et seq.] 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.
(i) Acquisition of savings associations
(1) In general
The Board may approve an application by any bank holding
company under subsection (c)(8) of this section to acquire any
savings association in accordance with the requirements and
limitations of this section.
(2) Prohibition on tandem restrictions
In approving an application by a bank holding company to
acquire a savings association, the Board shall not impose any
restriction on transactions between the savings association and
its holding company affiliates, except as required under sections
371c and 371c-1 of this title or any other applicable law.
(3) Acquisition of insolvent savings associations
(A) In general
Notwithstanding any other provision of this chapter, any
qualified savings association which became a federally
chartered stock company in December of 1986 and which is
acquired by any bank holding company without Federal financial
assistance after June 1, 1991, and before March 1, 1992, and
any subsidiary of any such association, may after such
acquisition continue to engage within the home State of the
qualified savings association in insurance agency activities in
which any Federal savings association (or any subsidiary
thereof) may engage in accordance with the Home Owners' Loan
Act [12 U.S.C. 1461 et seq.] and regulations pursuant to such
Act if the qualified savings association or subsidiary thereof
was continuously engaged in such activity from June 1, 1991, to
the date of the acquisition.
(B) "Qualified savings association" defined
For purposes of this paragraph, the term "qualified savings
association" means any savings association that -
(i) was chartered or organized as a savings association
before June 1, 1991;
(ii) had, immediately before the acquisition of such
association by the bank holding company referred to in
subparagraph (A), negative tangible capital and total insured
deposits in excess of $3,000,000,000; and
(iii) will meet all applicable regulatory capital
requirements as a result of such acquisition.
(4) Solicitation of views
(A) Notice to Director
Upon receiving any application or notice by a bank holding
company to acquire, directly or indirectly, a savings
association under subsection (c)(8) of this section, the Board
shall solicit comments and recommendations from the Director
with respect to such acquisition.
(B) Comment period
The comments and recommendations of the Director under
subparagraph (A) with respect to any acquisition subject to
such subparagraph shall be transmitted to the Board not later
than 30 days after the receipt by the Director of the notice
relating to such acquisition (or such shorter period as the
Board may specify if the Board advises the Director that an
emergency exists that requires expeditious action).
(5) Examination
(A) Scope
The Board shall consult with the Director, as appropriate, in
establishing the scope of an examination by the Board of a bank
holding company that directly or indirectly controls a savings
association.
(B) Access to inspection reports
Upon the request of the Director, the Board shall furnish the
Director with a copy of any inspection report, additional
examination materials, or supervisory information relating to
any bank holding company that directly or indirectly controls a
savings association.
(6) Coordination of enforcement efforts
The Board and the Director shall cooperate in any enforcement
action against any bank holding company that controls a savings
association, if the relevant conduct involves such association.
(7) "Director" defined
For purposes of this section, the term "Director" means the
Director of the Office of Thrift Supervision.
(j) Notice procedures for nonbanking activities
(1) General notice procedure
(A) Notice requirement
Except as provided in paragraph (3), no bank holding company
may engage in any nonbanking activity or acquire or retain
ownership or control of the shares of a company engaged in
activities based on subsection (c)(8) or (a)(2) of this section
or in any complementary activity under subsection (k)(1)(B) of
this section without providing the Board with written notice of
the proposed transaction or activity at least 60 days before
the transaction or activity is proposed to occur or commence.
(B) Contents of notice
The notice submitted to the Board shall contain such
information as the Board shall prescribe by regulation or by
specific request in connection with a particular notice.
(C) Procedure for agency action
(i) Notice of disapproval
Any notice filed under this subsection shall be deemed to
be approved by the Board unless, before the end of the 60-day
period beginning on the date the Board receives a complete
notice under subparagraph (A), the Board issues an order
disapproving the transaction or activity and setting forth
the reasons for disapproval.
(ii) Extension of period
The Board may extend the 60-day period referred to in
clause (i) for an additional 30 days. The Board may further
extend the period with the agreement of the bank holding
company submitting the notice pursuant to this subsection.
(iii) Determination of period in case of public hearing
In the event a hearing is requested or the Board determines
that a hearing is warranted, the Board may extend the notice
period provided in this subsection for such time as is
reasonably necessary to conduct a hearing and to evaluate the
hearing record. Such extension shall not exceed the 91-day
period beginning on the date that the hearing record is
complete.
(D) Approval before end of period
(i) In general
Any transaction or activity may commence before the
expiration of any period for disapproval established under
this paragraph if the Board issues a written notice of
approval.
(ii) Shorter periods by regulation
The Board may prescribe regulations which provide for a
shorter notice period with respect to particular activities
or transactions.
(E) Extension of period
In the case of any notice to engage in, or to acquire or
retain ownership or control of shares of any company engaged
in, any activity pursuant to subsection (c)(8) or (a)(2) of
this section or in any complementary activity under subsection
(k)(1)(B) of this section that has not been previously approved
by regulation, the Board may extend the notice period under
this subsection for an additional 90 days. The Board may
further extend the period with the agreement of the bank
holding company submitting the notice pursuant to this
subsection.
(2) General standards for review
(A) Criteria
In connection with a notice under this subsection, the Board
shall consider whether performance of the activity by a bank
holding company or a subsidiary of such company can reasonably
be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency,
that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition,
conflicts of interests, or unsound banking practices.
(B) Grounds for disapproval
The Board may deny any proposed transaction or activity for
which notice has been submitted pursuant to this subsection if
the bank holding company submitting such notice neglects,
fails, or refuses to furnish the Board all the information
required by the Board.
(C) Conditional action
Nothing in this subsection limits the authority of the Board
to impose conditions in connection with an action under this
section.
(3) No notice required for certain transactions
No notice under paragraph (1) of this subsection or under
subsection (c)(8) or (a)(2)(B) of this section is required for a
proposal by a bank holding company to engage in any activity,
other than any complementary activity under subsection (k)(1)(B)
of this section, or acquire the shares or assets of any company,
other than an insured depository institution or a company engaged
in any complementary activity under subsection (k)(1)(B) of this
section, if the proposal qualifies under paragraph (4).
(4) Criteria for statutory approval
A proposal qualifies under this paragraph if all of the
following criteria are met:
(A) Financial criteria
Both before and immediately after the proposed transaction -
(i) the acquiring bank holding company is well capitalized;
(ii) the lead insured depository institution of such
holding company is well capitalized;
(iii) well capitalized insured depository institutions
control at least 80 percent of the aggregate total
risk-weighted assets of insured depository institutions
controlled by such holding company; and
(iv) no insured depository institution controlled by such
holding company is undercapitalized.
(B) Managerial criteria
(i) Well managed
At the time of the transaction, the acquiring bank holding
company, its lead insured depository institution, and insured
depository institutions that control at least 90 percent of
the aggregate total risk-weighted assets of insured
depository institutions controlled by such holding company
are well managed.
(ii) Limitation on poorly managed institutions
Except as provided in paragraph (6), no insured depository
institution controlled by the acquiring bank holding company
has received 1 of the 2 lowest composite ratings at the later
of the institution's most recent examination or subsequent
review.
(C) Activities permissible
Following consummation of the proposal, the bank holding
company engages directly or through a subsidiary solely in -
(i) activities that are permissible under subsection (c)(8)
of this section, as determined by the Board by regulation or
order thereunder, subject to all of the restrictions, terms,
and conditions of such subsection and such regulation or
order; and
(ii) such other activities as are otherwise permissible
under this section, subject to the restrictions, terms and
conditions, including any prior notice or approval
requirements, provided in this section.
(D) Size of acquisition
(i) Asset size
The book value of the total assets to be acquired does not
exceed 10 percent of the consolidated total risk-weighted
assets of the acquiring bank holding company.
(ii) Consideration
The gross consideration to be paid for the securities or
assets does not exceed 15 percent of the consolidated Tier 1
capital of the acquiring bank holding company.
(E) Notice not otherwise warranted
For proposals described in paragraph (5)(B), the Board has
not, before the conclusion of the period provided in paragraph
(5)(B), advised the bank holding company that a notice under
paragraph (1) is required.
(F) Compliance criterion
During the 12-month period ending on the date on which the
bank holding company proposes to commence an activity or
acquisition, no administrative enforcement action has been
commenced, and no cease and desist order has been issued
pursuant to section 8 of the Federal Deposit Insurance Act [12
U.S.C. 1818], against the bank holding company or any
depository institution subsidiary of the holding company, and
no such enforcement action, order, or other administrative
enforcement proceeding is pending as of such date.
(5) Notification
(A) Commencement of activities approved by rule
A bank holding company that qualifies under paragraph (4) and
that proposes to engage de novo, directly or through a
subsidiary, in any activity that is permissible under
subsection (c)(8) of this section, as determined by the Board
by regulation, may commence that activity without prior notice
to the Board and must provide written notification to the Board
not later than 10 business days after commencing the activity.
(B) Activities permitted by order and acquisitions
(i) In general
At least 12 business days before commencing any activity
pursuant to paragraph (3) (other than an activity described
in subparagraph (A) of this paragraph) or acquiring shares or
assets of any company pursuant to paragraph (3), the bank
holding company shall provide written notice of the proposal
to the Board, unless the Board determines that no notice or a
shorter notice period is appropriate.
(ii) Description of activities and terms
A notification under this subparagraph shall include a
description of the proposed activities and the terms of any
proposed acquisition.
(6) Recently acquired institutions
Any insured depository institution which has been acquired by a
bank holding company during the 12-month period preceding the
date on which the company proposes to commence an activity or
acquisition pursuant to paragraph (3) may be excluded for
purposes of paragraph (4)(B)(ii) if -
(A) the bank holding company has developed a plan for the
institution to restore the capital and management of the
institution which is acceptable to the appropriate Federal
banking agency; and
(B) all such insured depository institutions represent, in
the aggregate, less than 10 percent of the aggregate total
risk-weighted assets of all insured depository institutions
controlled by the bank holding company.
(7) Adjustment of percentages
The Board may, by regulation, adjust the percentages and the
manner in which the percentages of insured depository
institutions are calculated under paragraph (4)(B)(i), (4)(D), or
(6)(B) if the Board determines that any such adjustment is
consistent with safety and soundness and the purposes of this
chapter.
(k) Engaging in activities that are financial in nature
(1) In general
Notwithstanding subsection (a) of this section, a financial
holding company may engage in any activity, and may acquire and
retain the shares of any company engaged in any activity, that
the Board, in accordance with paragraph (2), determines (by
regulation or order) -
(A) to be financial in nature or incidental to such financial
activity; or
(B) is complementary to a financial activity and does not
pose a substantial risk to the safety or soundness of
depository institutions or the financial system generally.
(2) Coordination between the Board and the Secretary of the
Treasury
(A) Proposals raised before the Board
(i) Consultation
The Board shall notify the Secretary of the Treasury of,
and consult with the Secretary of the Treasury concerning,
any request, proposal, or application under this subsection
for a determination of whether an activity is financial in
nature or incidental to a financial activity.
(ii) Treasury view
The Board shall not determine that any activity is
financial in nature or incidental to a financial activity
under this subsection if the Secretary of the Treasury
notifies the Board in writing, not later than 30 days after
the date of receipt of the notice described in clause (i) (or
such longer period as the Board determines to be appropriate
under the circumstances) that the Secretary of the Treasury
believes that the activity is not financial in nature or
incidental to a financial activity or is not otherwise
permissible under this section.
(B) Proposals raised by the Treasury
(i) Treasury recommendation
The Secretary of the Treasury may, at any time, recommend
in writing that the Board find an activity to be financial in
nature or incidental to a financial activity.
(ii) Time period for Board action
Not later than 30 days after the date of receipt of a
written recommendation from the Secretary of the Treasury
under clause (i) (or such longer period as the Secretary of
the Treasury and the Board determine to be appropriate under
the circumstances), the Board shall determine whether to
initiate a public rulemaking proposing that the recommended
activity be found to be financial in nature or incidental to
a financial activity under this subsection, and shall notify
the Secretary of the Treasury in writing of the determination
of the Board and, if the Board determines not to seek public
comment on the proposal, the reasons for that determination.
(3) Factors to be considered
In determining whether an activity is financial in nature or
incidental to a financial activity, the Board shall take into
account -
(A) the purposes of this chapter and the Gramm-Leach-Bliley
Act;
(B) changes or reasonably expected changes in the marketplace
in which financial holding companies compete;
(C) changes or reasonably expected changes in the technology
for delivering financial services; and
(D) whether such activity is necessary or appropriate to
allow a financial holding company and the affiliates of a
financial holding company to -
(i) compete effectively with any company seeking to provide
financial services in the United States;
(ii) efficiently deliver information and services that are
financial in nature through the use of technological means,
including any application necessary to protect the security
or efficacy of systems for the transmission of data or
financial transactions; and
(iii) offer customers any available or emerging
technological means for using financial services or for the
document imaging of data.
(4) Activities that are financial in nature
For purposes of this subsection, the following activities shall
be considered to be financial in nature:
(A) Lending, exchanging, transferring, investing for others,
or safeguarding money or securities.
(B) Insuring, guaranteeing, or indemnifying against loss,
harm, damage, illness, disability, or death, or providing and
issuing annuities, and acting as principal, agent, or broker
for purposes of the foregoing, in any State.
(C) Providing financial, investment, or economic advisory
services, including advising an investment company (as defined
in section 3 of the Investment Company Act of 1940 [15 U.S.C.
80a-3]).
(D) Issuing or selling instruments representing interests in
pools of assets permissible for a bank to hold directly.
(E) Underwriting, dealing in, or making a market in
securities.
(F) Engaging in any activity that the Board has determined,
by order or regulation that is in effect on November 12, 1999,
to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto (subject to the same
terms and conditions contained in such order or regulation,
unless modified by the Board).
(G) Engaging, in the United States, in any activity that -
(i) a bank holding company may engage in outside of the
United States; and
(ii) the Board has determined, under regulations prescribed
or interpretations issued pursuant to subsection (c)(13) of
this section (as in effect on the day before November 12,
1999) to be usual in connection with the transaction of
banking or other financial operations abroad.
(H) Directly or indirectly acquiring or controlling, whether
as principal, on behalf of 1 or more entities (including
entities, other than a depository institution or subsidiary of
a depository institution, that the bank holding company
controls), or otherwise, shares, assets, or ownership interests
(including debt or equity securities, partnership interests,
trust certificates, or other instruments representing
ownership) of a company or other entity, whether or not
constituting control of such company or entity, engaged in any
activity not authorized pursuant to this section if -
(i) the shares, assets, or ownership interests are not
acquired or held by a depository institution or subsidiary of
a depository institution;
(ii) such shares, assets, or ownership interests are
acquired and held by -
(I) a securities affiliate or an affiliate thereof; or
(II) an affiliate of an insurance company described in
subparagraph (I)(ii) that provides investment advice to an
insurance company and is registered pursuant to the
Investment Advisers Act of 1940 [15 U.S.C. 80b-1 et seq.],
or an affiliate of such investment adviser;
as part of a bona fide underwriting or merchant or investment
banking activity, including investment activities engaged in
for the purpose of appreciation and ultimate resale or
disposition of the investment;
(iii) such shares, assets, or ownership interests are held
for a period of time to enable the sale or disposition
thereof on a reasonable basis consistent with the financial
viability of the activities described in clause (ii); and
(iv) during the period such shares, assets, or ownership
interests are held, the bank holding company does not
routinely manage or operate such company or entity except as
may be necessary or required to obtain a reasonable return on
investment upon resale or disposition.
(I) Directly or indirectly acquiring or controlling, whether
as principal, on behalf of 1 or more entities (including
entities, other than a depository institution or subsidiary of
a depository institution, that the bank holding company
controls) or otherwise, shares, assets, or ownership interests
(including debt or equity securities, partnership interests,
trust certificates or other instruments representing ownership)
of a company or other entity, whether or not constituting
control of such company or entity, engaged in any activity not
authorized pursuant to this section if -
(i) the shares, assets, or ownership interests are not
acquired or held by a depository institution or a subsidiary
of a depository institution;
(ii) such shares, assets, or ownership interests are
acquired and held by an insurance company that is
predominantly engaged in underwriting life, accident and
health, or property and casualty insurance (other than
credit-related insurance) or providing and issuing annuities;
(iii) such shares, assets, or ownership interests represent
an investment made in the ordinary course of business of such
insurance company in accordance with relevant State law
governing such investments; and
(iv) during the period such shares, assets, or ownership
interests are held, the bank holding company does not
routinely manage or operate such company except as may be
necessary or required to obtain a reasonable return on
investment.
(5) Actions required
(A) In general
The Board shall, by regulation or order, define, consistent
with the purposes of this chapter, the activities described in
subparagraph (B) as financial in nature, and the extent to
which such activities are financial in nature or incidental to
a financial activity.
(B) Activities
The activities described in this subparagraph are as follows:
(i) Lending, exchanging, transferring, investing for
others, or safeguarding financial assets other than money or
securities.
(ii) Providing any device or other instrumentality for
transferring money or other financial assets.
(iii) Arranging, effecting, or facilitating financial
transactions for the account of third parties.
(6) Required notification
(A) In general
A financial holding company that acquires any company or
commences any activity pursuant to this subsection shall
provide written notice to the Board describing the activity
commenced or conducted by the company acquired not later than
30 calendar days after commencing the activity or consummating
the acquisition, as the case may be.
(B) Approval not required for certain financial activities
Except as provided in subsection (j) of this section with
regard to the acquisition of a savings association, a financial
holding company may commence any activity, or acquire any
company, pursuant to paragraph (4) or any regulation prescribed
or order issued under paragraph (5), without prior approval of
the Board.
(7) Merchant banking activities
(A) Joint regulations
The Board and the Secretary of the Treasury may issue such
regulations implementing paragraph (4)(H), including
limitations on transactions between depository institutions and
companies controlled pursuant to such paragraph, as the Board
and the Secretary jointly deem appropriate to assure compliance
with the purposes and prevent evasions of this chapter and the
Gramm-Leach-Bliley Act and to protect depository institutions.
(B) Sunset of restrictions on merchant banking activities of
financial subsidiaries
The restrictions contained in paragraph (4)(H) on the
ownership and control of shares, assets, or ownership interests
by or on behalf of a subsidiary of a depository institution
shall not apply to a financial subsidiary (as defined in
section 24a of this title) of a bank, if the Board and the
Secretary of the Treasury jointly authorize financial
subsidiaries of banks to engage in merchant banking activities
pursuant to section 122 of the Gramm-Leach-Bliley Act.
(l) Conditions for engaging in expanded financial activities
(1) In general
Notwithstanding subsection (k), (n), or (o) of this section, a
bank holding company may not engage in any activity, or directly
or indirectly acquire or retain shares of any company engaged in
any activity, under subsection (k), (n), or (o) of this section,
other than activities permissible for any bank holding company
under subsection (c)(8) of this section, unless -
(A) all of the depository institution subsidiaries of the
bank holding company are well capitalized;
(B) all of the depository institution subsidiaries of the
bank holding company are well managed; and
(C) the bank holding company has filed with the Board -
(i) a declaration that the company elects to be a financial
holding company to engage in activities or acquire and retain
shares of a company that were not permissible for a bank
holding company to engage in or acquire before the enactment
of the Gramm-Leach-Bliley Act; and
(ii) a certification that the company meets the
requirements of subparagraphs (A) and (B).
(2) CRA requirement
Notwithstanding subsection (k) or (n) of this section, section
24a(a) of this title, or section 46(a) of the Federal Deposit
Insurance Act [12 U.S.C. 1831w(a)], the appropriate Federal
banking agency shall prohibit a financial holding company or any
insured depository institution from -
(A) commencing any new activity under subsection (k) or (n)
of this section, section 24a(a) of this title, or section 46(a)
of the Federal Deposit Insurance Act; or
(B) directly or indirectly acquiring control of a company
engaged in any activity under subsection (k) or (n) of this
section, section 24a(a) of this title, or section 46(a) of the
Federal Deposit Insurance Act (other than an investment made
pursuant to subparagraph (H) or (I) of subsection (k)(4) of
this section, or section 122 of the Gramm-Leach-Bliley Act, or
under section 46(a) of the Federal Deposit Insurance Act by
reason of such section 122, by an affiliate already engaged in
activities under any such provision);
if any insured depository institution subsidiary of such
financial holding company, or the insured depository institution
or any of its insured depository institution affiliates, has
received in its most recent examination under the Community
Reinvestment Act of 1977 [12 U.S.C. 2901 et seq.], a rating of
less than "satisfactory record of meeting community credit
needs".
(3) Foreign banks
For purposes of paragraph (1), the Board shall apply comparable
capital and management standards to a foreign bank that operates
a branch or agency or owns or controls a commercial lending
company in the United States, giving due regard to the principle
of national treatment and equality of competitive opportunity.
(m) Provisions applicable to financial holding companies that fail
to meet certain requirements
(1) In general
If the Board finds that -
(A) a financial holding company is engaged, directly or
indirectly, in any activity under subsection (k), (n), or (o)
of this section, other than activities that are permissible for
a bank holding company under subsection (c)(8) of this section;
and
(B) such financial holding company is not in compliance with
the requirements of subsection (l)(1) of this section;
the Board shall give notice to the financial holding company to
that effect, describing the conditions giving rise to the notice.
(2) Agreement to correct conditions required
Not later than 45 days after the date of receipt by a financial
holding company of a notice given under paragraph (1) (or such
additional period as the Board may permit), the financial holding
company shall execute an agreement with the Board to comply with
the requirements applicable to a financial holding company under
subsection (l)(1) of this section.
(3) Board may impose limitations
Until the conditions described in a notice to a financial
holding company under paragraph (1) are corrected, the Board may
impose such limitations on the conduct or activities of that
financial holding company or any affiliate of that company as the
Board determines to be appropriate under the circumstances and
consistent with the purposes of this chapter.
(4) Failure to correct
If the conditions described in a notice to a financial holding
company under paragraph (1) are not corrected within 180 days
after the date of receipt by the financial holding company of a
notice under paragraph (1), the Board may require such financial
holding company, under such terms and conditions as may be
imposed by the Board and subject to such extension of time as may
be granted in the discretion of the Board, either -
(A) to divest control of any subsidiary depository
institution; or
(B) at the election of the financial holding company instead
to cease to engage in any activity conducted by such financial
holding company or its subsidiaries (other than a depository
institution or a subsidiary of a depository institution) that
is not an activity that is permissible for a bank holding
company under subsection (c)(8) of this section.
(5) Consultation
In taking any action under this subsection, the Board shall
consult with all relevant Federal and State regulatory agencies
and authorities.
(n) Authority to retain limited nonfinancial activities and
affiliations
(1) In general
Notwithstanding subsection (a) of this section, a company that
is not a bank holding company or a foreign bank (as defined in
section 3101(7) of this title) and becomes a financial holding
company after November 12, 1999, may continue to engage in any
activity and retain direct or indirect ownership or control of
shares of a company engaged in any activity if -
(A) the holding company lawfully was engaged in the activity
or held the shares of such company on September 30, 1999;
(B) the holding company is predominantly engaged in financial
activities as defined in paragraph (2); and
(C) the company engaged in such activity continues to engage
only in the same activities that such company conducted on
September 30, 1999, and other activities permissible under this
chapter.
(2) Predominantly financial
For purposes of this subsection, a company is predominantly
engaged in financial activities if the annual gross revenues
derived by the holding company and all subsidiaries of the
holding company (excluding revenues derived from subsidiary
depository institutions), on a consolidated basis, from engaging
in activities that are financial in nature or are incidental to a
financial activity under subsection (k) of this section represent
at least 85 percent of the consolidated annual gross revenues of
the company.
(3) No expansion of grandfathered commercial activities through
merger or consolidation
A financial holding company that engages in activities or holds
shares pursuant to this subsection, or a subsidiary of such
financial holding company, may not acquire, in any merger,
consolidation, or other type of business combination, assets of
any other company that is engaged in any activity that the Board
has not determined to be financial in nature or incidental to a
financial activity under subsection (k) of this section, except
this paragraph shall not apply with respect to a company that
owns a broadcasting station licensed under title III of the
Communications Act of 1934 [47 U.S.C. 301 et seq.] and the shares
of which are under common control with an insurance company since
January 1, 1998, unless such company is acquired by, or otherwise
becomes an affiliate of, a bank holding company that, at the time
such acquisition or affiliation is consummated, is 1 of the 5
largest domestic bank holding companies (as determined on the
basis of the consolidated total assets of such companies).
(4) Continuing revenue limitation on grandfathered commercial
activities
Notwithstanding any other provision of this subsection, a
financial holding company may continue to engage in activities or
hold shares in companies pursuant to this subsection only to the
extent that the aggregate annual gross revenues derived from all
such activities and all such companies does not exceed 15 percent
of the consolidated annual gross revenues of the financial
holding company (excluding revenues derived from subsidiary
depository institutions).
(5) Cross marketing restrictions applicable to commercial
activities
(A) In general
A depository institution controlled by a financial holding
company shall not -
(i) offer or market, directly or through any arrangement,
any product or service of a company whose activities are
conducted or whose shares are owned or controlled by the
financial holding company pursuant to this subsection or
subparagraph (H) or (I) of subsection (k)(4) of this section;
or
(ii) permit any of its products or services to be offered
or marketed, directly or through any arrangement, by or
through any company described in clause (i).
(B) Rule of construction
Subparagraph (A) shall not be construed as prohibiting an
arrangement between a depository institution and a company
owned or controlled pursuant to subsection (k)(4)(I) of this
section for the marketing of products or services through
statement inserts or Internet websites if -
(i) such arrangement does not violate section 106 of the
Bank Holding Company Act Amendments of 1970 [12 U.S.C. 1971
et seq.]; and
(ii) the Board determines that the arrangement is in the
public interest, does not undermine the separation of banking
and commerce, and is consistent with the safety and soundness
of depository institutions.
(6) Transactions with nonfinancial affiliates
A depository institution controlled by a financial holding
company may not engage in a covered transaction (as defined in
section 371c(b)(7) of this title) with any affiliate controlled
by the company pursuant to this subsection.
(7) Sunset of grandfather
A financial holding company engaged in any activity, or
retaining direct or indirect ownership or control of shares of a
company, pursuant to this subsection, shall terminate such
activity and divest ownership or control of the shares of such
company before the end of the 10-year period beginning on
November 12, 1999. The Board may, upon application by a financial
holding company, extend such 10-year period by a period not to
exceed an additional 5 years if such extension would not be
detrimental to the public interest.
(o) Regulation of certain financial holding companies
Notwithstanding subsection (a) of this section, a company that is
not a bank holding company or a foreign bank (as defined in section
3101(7) of this title) and becomes a financial holding company
after November 12, 1999, may continue to engage in, or directly or
indirectly own or control shares of a company engaged in,
activities related to the trading, sale, or investment in
commodities and underlying physical properties that were not
permissible for bank holding companies to conduct in the United
States as of September 30, 1997, if -
(1) the holding company, or any subsidiary of the holding
company, lawfully was engaged, directly or indirectly, in any of
such activities as of September 30, 1997, in the United States;
(2) the attributed aggregate consolidated assets of the company
held by the holding company pursuant to this subsection, and not
otherwise permitted to be held by a financial holding company,
are equal to not more than 5 percent of the total consolidated
assets of the bank holding company, except that the Board may
increase that percentage by such amounts and under such
circumstances as the Board considers appropriate, consistent with
the purposes of this chapter; and
(3) the holding company does not permit -
(A) any company, the shares of which it owns or controls
pursuant to this subsection, to offer or market any product or
service of an affiliated depository institution; or
(B) any affiliated depository institution to offer or market
any product or service of any company, the shares of which are
owned or controlled by such holding company pursuant to this
subsection.
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