H.R. 4956 (103rd): Financial Services Competitiveness Act

103rd Congress, 1993–1994. Text as of Aug 12, 1994 (Introduced).

Status & Summary | PDF | Source: GPO

HR 4956 IH

103d CONGRESS

2d Session

H. R. 4956

To create an open and competitive marketplace for financial services which ensures the safety and soundness of the Nation’s financial system as well as the availability of innovative financial products and services for consumers, business, and government at the lowest possible cost, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

August 12, 1994

Mr. NEAL of North Carolina (for himself, Mr. MCCOLLUM, Mr. LAFALCE, Mr. FRANK of Massachusetts, Mr. LAROCCO, Mr. ORTON, Mr. DOOLEY, Mr. RIDGE, Mr. BAKER of Louisiana, and Mr. KING) introduced the following bill; which was referred jointly to the Committees on Banking, Finance and Urban Affairs and Energy and Commerce


A BILL

To create an open and competitive marketplace for financial services which ensures the safety and soundness of the Nation’s financial system as well as the availability of innovative financial products and services for consumers, business, and government at the lowest possible cost, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) SHORT TITLE- This Act may be cited as the ‘Financial Services Competitiveness Act’.

    (b) TABLE OF CONTENTS-

      Sec. 1. Short title; table of contents.

      Sec. 2. Findings and purposes.

      Sec. 3. Definitions.

      Sec. 4. Establishment of a diversified financial services holding company.

      Sec. 5. Compliance with change in control requirements.

      Sec. 6. Adequate capitalization.

      Sec. 7. Additional provisions relating to regulation of insured depository institution subsidiaries.

      Sec. 8. Insider lending and tying provisions.

      Sec. 9. Enforcement and examination; payment system services; oversight.

      Sec. 10. Criminal and civil penalties.

      Sec. 11. Technical and conforming amendments.

SEC. 2. FINDINGS AND PURPOSES.

    (a) FINDINGS- The Congress hereby finds that--

      (1) outdated laws and regulations inhibit innovation, efficiency, and competition in the financial services industry to the detriment of consumers and providers;

      (2) a new legal framework for financial services must be created which will accord all financial service companies equal opportunity to serve the full range of credit and financial needs in the marketplace;

      (3) expanded product and service opportunities for all components of the financial services industry would strengthen individual intermediaries as well as the overall financial system;

      (4) the rapid globalization of the financial service marketplace and the emerging interdependence of major financial markets further underscore the necessity for modernizing domestic laws to maintain the competitiveness of United States financial markets; and

      (5) the regulation of separate segments, subsidiaries, and affiliates along functional lines without regard to ownership or control would serve national priorities better than the present system.

    (b) PURPOSES- The purposes of this Act are as follows:

      (1) To promote the safety and soundness of the Nation’s financial system.

      (2) To promote the availability of financial products and services to consumers, businesses, charitable institutions and government in an efficient and cost-effective manner.

      (3) To promote a legal structure governing providers of financial services that permits open and fair competition and affords all financial services companies equal opportunity to serve the full range of credit and financial needs in the marketplace.

      (4) To ensure that domestic financial institutions and companies are able to compete effectively in international financial markets.

      (5) To encourage regulation of financial activities and companies along functional lines without regard to ownership, control, or affiliation.

SEC. 3. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:

      (1) AFFILIATE- Except as provided in section 105(e), the term ‘affiliate’ means any company which controls, is controlled by, or is under common control with another company.

      (2) ADEQUATELY CAPITALIZED- With respect to an insured depository institution, the term ‘adequately capitalized’ has the same meaning as in section 38(b) of the Federal Deposit Insurance Act.

      (3) APPROPRIATE FEDERAL BANKING AGENCY- The term ‘appropriate Federal banking agency’ has the same meaning as in section 3(q) of the Federal Deposit Insurance Act.

      (4) BANK HOLDING COMPANY- The term ‘bank holding company’ has the same meaning as in section 2(a) of the Bank Holding Company Act of 1956.

      (5) BOARD- The term ‘Board’ means the Board of Governors of the Federal Reserve System.

      (6) COMPANY- The term ‘company’ has the same meaning as in section 2(b) of the Bank Holding Company Act of 1956.

      (7) CONTROL-

        (A) IN GENERAL- Except as provided in subparagraph (B) and section 7(e), the term ‘control’ has the same meaning as in paragraphs (2) and (3) of section 2(a) of the Bank Holding Company Act of 1956.

        (B) EXCEPTIONS-

          (i) ACQUISITIONS INCIDENTAL TO OTHER BUSINESS- No company shall be deemed to control or to have acquired control of any other company for purposes of this title by virtue of the company’s ownership of the voting securities of such other company if the voting securities were--

            (I) acquired or held in an agency, trust, or other fiduciary capacity (whether with or without the sole discretion to vote such securities);

            (II) acquired or held in connection with, or incidental to, the underwriting of securities if such securities are held only for such period of time as will permit the sale of the securities on a reasonable basis;

            (III) acquired or held in connection with, or incidental to, market making, dealing, trading, brokerage or other securities-related activities and not with a view to acquiring, exercising, or transferring any control over the management of policies of such company; or

            (IV) acquired in securing or collecting a debt previously contracted in good faith, until 2 years after the date of acquisition or for such additional period of time as the appropriate Federal banking agency may permit.

          (ii) PROXY SOLICITATION- No company formed for the sole purpose of participating in a proxy solicitation shall be deemed to control another company by virtue of the company’s acquisition of voting rights with respect to shares of such other company which are acquired in the course of such solicitation.

      (8) DEPOSITORY INSTITUTION HOLDING COMPANY- The term ‘depository institution holding company’ has the same meaning as in section 3(w)(1) of the Federal Deposit Insurance Act.

      (9) DIVERSIFIED FINANCIAL SERVICES HOLDING COMPANY- The term ‘diversified financial services holding company’ means a company--

        (A) that has filed a notice with the Board of such company’s intent to become a diversified financial services holding company and comply with the requirements of this Act and has not withdrawn such notice; and

        (B) which is described in at least 1 of the following clauses:

          (i) The company controls an insured depository institution.

          (ii) The company has, within the preceding 12 months, filed a notice under section 4 to acquire control of an insured depository institution or a depository institution holding company and such notice has not been disapproved.

          (iii) The company controls a company which has, within the preceding 12 months, filed an application for deposit insurance under section 4 or 5 of the Federal Deposit Insurance Act which has not been disapproved.

      (10) FINANCIAL INSTITUTION- The term ‘financial institution’ means--

        (A) any bank (as defined in section 3(a)(1) of the Federal Deposit Insurance Act), savings association (as defined in section 3(b)(1) of such Act), insurance company, finance company, real estate company, investment company (as defined in section 3 of the Investment Company Act of 1940), or investment adviser (as defined in section 202 of the Investment Advisers Act of 1940);

        (B) any broker, dealer, government securities broker, government securities dealer, municipal securities broker, or municipal securities dealer (as such terms are defined in the Securities Exchange Act of 1934); or

        (C) any other financial services company that is regulated, supervised, or examined under the laws of any State.

      (11) INSURED DEPOSITORY INSTITUTION- The term ‘insured depository institution’ has the same meaning as in section 3(c)(2) of the Federal Deposit Insurance Act.

      (12) REPRESENTATIVE- The term ‘representative’ includes any agent, principal, solicitor, broker, director, officer, employee, institution-affiliated party (as defined in section 3 of the Federal Deposit Insurance Act), or other representative of any company or insured depository institution or any affiliate of any such company or institution.

      (13) SAVINGS AND LOAN HOLDING COMPANY- The term ‘savings and loan holding company’ has the same meaning as in section 10(a) of the Home Owners’ Loan Act.

      (14) SAVINGS ASSOCIATION- The term ‘savings association’ has the same meaning as in section 3(b) of the Federal Deposit Insurance Act.

      (15) STATE- The term ‘State’ has the same meaning as in section 3(a) of the Federal Deposit Insurance Act.

SEC. 4. ESTABLISHMENT OF A DIVERSIFIED FINANCIAL SERVICES HOLDING COMPANY.

    (a) IN GENERAL- No person may take any action which causes any company to become a diversified financial services holding company without submitting prior notice to the Board in accordance with this section of such person’s intention to establish a diversified financial services holding company.

    (b) NOTICE REQUIREMENTS AND PROCEDURES- The Board shall establish requirements and procedures for the submission of the notice required under this section with respect to the establishment of a diversified financial services holding company.

    (c) COMPLIANCE- Any diversified financial services holding company that fails to comply with this Act and regulations prescribed under this Act shall cease to be a diversified financial services holding company as of the date of such failure to comply.

    (d) REGULATIONS- The Board shall prescribe such regulations as the Board determines to be appropriate to administer and carry out the purposes of this Act.

    (e) TERMINATION OF BANK HOLDING COMPANY STATUS UPON FILING AS DIVERSIFIED FINANCIAL SERVICES HOLDING COMPANY- Section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841) is amended by adding at the end the following new subsection:

    ‘(n) TREATMENT AS BANK HOLDING COMPANY- If--

      ‘(1) a bank holding company files a notice with the Board of such company’s intent to become a diversified financial services holding company and to comply with the requirements of the Financial Services Competitiveness Act; and

      ‘(2) all the banks which are controlled directly or indirectly by a bank holding company are insured banks (as defined in section 3(h) of the Federal Deposit Insurance Act) as of the time of the filing of such notice,

    such company shall not be treated as a bank holding company for purposes of this Act after such filing so long as such notice remains in effect.’.

    (f) TERMINATION OF S&L HOLDING COMPANY STATUS UPON FILING AS DIVERSIFIED FINANCIAL SERVICES HOLDING COMPANY- Section 10 of the Home Owners’ Loan Act (12 U.S.C. 1467a) is amended by adding at the end the following new subsection:

    ‘(t) TREATMENT AS S&L HOLDING COMPANY- If--

      ‘(1) a savings and loan holding company files a notice with the Board of Governors of the Federal Reserve System of such company’s intent to become a diversified financial services holding company and to comply with the requirements of the Financial Services Competitiveness Act; and

      ‘(2) all the savings associations which are controlled directly or indirectly by a savings and loan holding company are insured depository institutions (as defined in section 3(c) of the Federal Deposit Insurance Act) as of the time of the filing of such notice,

    such company shall not be treated as a savings and loan holding company for purposes of this Act after such filing so long as such notice remains in effect.’.

    (g) INAPPLICABILITY OF GLASS-STEAGALL TO DIVERSIFIED FINANCIAL SERVICE HOLDING COMPANIES-

      (1) Section 20 of the Banking Act of 1933 (12 U.S.C. 377) is amended by inserting after the 1st undesignated paragraph the following new paragraph:

    ‘The provisions of this section shall not apply with respect to the affiliation of--

      ‘(A) any bank that is an affiliate of a diversified financial services holding company (as defined in section 3 of the Financial Services Competitiveness Act), with

      ‘(B) such company or any other affiliate of the company.’.

      (2) Section 32 of the Banking Act of 1933 (12 U.S.C. 78) is amended by inserting after the 1st undesignated paragraph the following new paragraph:

    ‘The provisions of this section shall not apply with respect to relationships involving--

      ‘(A) an affiliate of a diversified financial services holding company (as defined in the Financial Services Competitiveness Act); and

      ‘(B) such company or any other affiliate of such company.’.

SEC. 5. COMPLIANCE WITH CHANGE IN CONTROL REQUIREMENTS.

    (a) IN GENERAL- No diversified financial services holding company, acting directly or indirectly, or through or in concert with 1 or more other persons, may acquire control of an insured depository institution, a depository institution holding company, or another diversified financial services holding company through a purchase, assignment, transfer, pledge or other disposition of voting stock of any such institution or company unless the diversified financial services holding company has complied with the requirements of section 7(j) of the Federal Deposit Insurance Act.

    (b) APPLICABILITY OF SECTION 7(j) OF THE FEDERAL DEPOSIT INSURANCE ACT-

      (1) IN GENERAL- Section 7(j) of the Federal Deposit Insurance Act shall apply with respect to a diversified financial services holding company for purposes of subsection (a) in the same manner and to the same extent such section applies to any acquiring party described in such section.

      (2) TREATMENT OF ACQUIRED COMPANY- In applying section 7(j) of the Federal Deposit Insurance Act for purposes of this section--

        (A) the acquisition of a depository institution holding company or a diversified financial services holding company shall be treated as the acquisition of an insured depository institution; and

        (B) the appropriate Federal banking agency shall be--

          (i) in the case of a depository institution holding company, the appropriate Federal banking agency designated under section 3(q) of such Act with respect to the company; and

          (ii) in the case of a diversified financial services company, the Board.

SEC. 6. ADEQUATE CAPITALIZATION.

    (a) NOTIFICATION- If an appropriate Federal banking agency finds that an insured depository institution subsidiary of a diversified financial services holding company is not adequately capitalized (as defined by such agency pursuant to section 38 of the Federal Deposit Insurance Act), the agency shall immediately provide a written notice of such fact to the diversified financial services holding company.

    (b) BOND, GUARANTEE, DEPOSIT, OR SURPLUS CAPITAL-

      (1) IN GENERAL- In addition to any requirement of section 38 of the Federal Deposit Insurance Act applicable to an undercapitalized insured depository institution (as defined pursuant to such section), an appropriate Federal banking agency may require a diversified financial services holding company to which written notice has been provided under subsection (a), with respect to an insured depository institution subsidiary, to--

        (A) provide a bond, guarantee or similar undertaking, in a form prescribed by the appropriate Federal banking agency;

        (B) place and maintain on deposit cash or investment securities (calculated on the basis of principal face amount or the fair market value, whichever is lower) in a segregated, earmarked account at the insured depository institution;

        (C) contribute to the surplus capital of the insured depository institution an amount necessary to adequately capitalize the insured depository institution; or

        (D) reduce the amount of total assets of the institution,

      until the insured depository institution is adequately capitalized pursuant to an agreement described in subsection (c) or otherwise or the diversified financial services holding company divests control of the insured depository institution pursuant to subsection (d).

      (2) TREATMENT OF CONTRIBUTION- To the extent that a contribution to surplus is made pursuant to paragraph (1), the contribution shall be segregated from, and not treated as, capital for any purpose unless and until the contribution is applied as a capital contribution pursuant to this section.

      (3) INVESTMENT SECURITIES- For purposes of this subsection, the term ‘investment securities’ means--

        (A) any security which may be held by a national bank for the bank’s own account pursuant to section 5136 of the Revised Statutes of the United States; and

        (B) may include such other liquid assets as the appropriate Federal banking agency permits under this paragraph.

      (4) DIVIDENDS- Upon receipt of a notice by a diversified financial services holding company pursuant to subsection (a) relating to an insured depository institution controlled by such company--

        (A) the insured depository institution may not declare or pay a dividend to any shareholder; and

        (B) the diversified financial services holding company shall immediately return to the institution any dividend received from the institution during the 270-day period ending on the date the written notice is received by the company.

    (c) APPOINTMENT OF CONSERVATOR-

      (1) IN GENERAL- If--

        (A) a diversified financial services holding company fails to comply with any of the requirements of subsection (b); or

        (B) before the end of the 45-day period beginning on the date a diversified financial services holding company receives a notice pursuant to subsection (a) with respect to an insured depository institution controlled by such company, the company has not--

          (i) caused the institution to become adequately capitalized; or

          (ii) entered into an agreement acceptable to the appropriate Federal banking agency to cause the institution to become adequately capitalized within a reasonable time,

      the appropriate Federal banking agency shall appoint a conservator for the insured depository institution in accordance with the provisions of section 11 of the Federal Deposit Insurance Act.

      (2) SUSPENSION OF APPOINTMENT- An appropriate Federal banking agency may, in the agency’s discretion, suspend the appointment of a conservator under paragraph (1) if--

        (A) the diversified financial services holding company divests, or agrees to divest, control of the insured depository institution in an orderly manner; and

        (B) the appropriate Federal banking agency determines that such divestiture will meet the requirements of subsection (d).

      (3) EXTENSION OF 45-DAY PERIOD- The appropriate Federal banking agency may, in the agency’s discretion and for good cause shown, extend the 45-day period described in paragraph (1) if the agency determines that the condition of the insured depository institution is not likely to weaken materially during any such extension.

    (d) DIVESTITURE-

      (1) IN GENERAL- If, before the end of the 90-day period beginning on the date a diversified financial services holding company receives a notice pursuant to subsection (a) with respect to an insured depository institution subsidiary, the holding company has not--

        (A) caused the insured depository institution to become adequately capitalized; or

        (B) entered into an agreement acceptable to the appropriate Federal banking agency to adequately capitalize the insured depository institution within a reasonable time,

      the appropriate Federal banking agency shall order the diversified financial services holding company to divest control of the institution.

      (2) EXTENSION OF 90-DAY PERIOD- The appropriate Federal banking agency may, in the agency’s discretion and for good cause shown, extend the 90-day period described in paragraph (1) if the agency determines that the condition of the insured depository institution is not likely to weaken materially during any such extension.

      (3) ADDITIONAL CAPITAL- In connection with any divestiture of an insured depository institution pursuant to this subsection or subsection (c)(2) by any diversified financial services holding company and subject to subsection (e), the appropriate Federal banking agency shall order such company to contribute additional capital to such institution or take any other action described in subsection (b) with respect to such institution to the extent necessary for the institution to be adequately capitalized immediately following the consummation of the divestiture.

      (4) APPOINTMENT OF CONSERVATOR- The appropriate Federal banking agency may appoint a conservator for an insured depository institution in accordance with section 11 of the Federal Deposit Insurance Act at any time during the 90-day period described in paragraph (1) or any extension of such period.

    (e) TERMINATION OF CONSERVATORSHIP; RESCISSION OF DIVESTITURE ORDER- If, at any time after the appointment of a conservator under subsection (c) or the issuance of an order under subsection (d) by an appropriate Federal banking agency, the insured depository institution--

      (1) for which the conservator has been appointed; or

      (2) which is the subject of such order,

    becomes adequately capitalized, the appropriate Federal banking agency shall terminate such conservatorship or rescind such order, as the case may be.

    (f) AGGREGATE LIMIT ON REQUIRED CAPITAL INFUSIONS; RELATION TO OTHER LAWS- The maximum amount of liability for a diversified financial services holding company for any capital assistance pursuant to an order issued under this section by an appropriate Federal banking agency with respect to any particular insured depository institution subsidiary shall not exceed the amounts necessary for the institution to become adequately capitalized.

    (g) JUDICIAL REVIEW-

      (1) IN GENERAL- Before the end of the 10-day period beginning on the date of the appointment of a conservator by the appropriate Federal banking agency under this section or the receipt of an order issued by any such agency under subsection (d) with respect to an insured depository institution subsidiary of a diversified financial services holding company, the company may apply to the United States district court for the judicial district in which the principal office of the diversified financial services holding company is located, or the United States District Court for the District of Columbia, for an order requiring the removal of the conservator or for an injunction setting aside, limiting, or suspending the enforcement, operation, or effectiveness of any such order issued.

      (2) COURT ACTION- The court may, upon the merits in any action brought under paragraph (1), dismiss any such action, direct the removal of the conservator, or provide any appropriate relief.

    (h) CAPITAL OF DIVERSIFIED FINANCIAL SERVICES HOLDING COMPANY- No appropriate Federal banking agency may impose by regulation, order, agreement, or any other means any requirement pertaining to the capital of a diversified financial services holding company.

    (i) TERMINATION OF AGREEMENTS- Any agreement entered into pursuant to this section between a diversified financial services holding company and an appropriate Federal banking agency with respect to the capital of an undercapitalized insured depository institution subsidiary of such company shall terminate when the institution becomes adequately capitalized.

SEC. 7. ADDITIONAL PROVISIONS RELATING TO REGULATION OF INSURED DEPOSITORY INSTITUTION SUBSIDIARIES.

    (a) DIFFERENTIAL TREATMENT PROHIBITION- Notwithstanding any other Federal law or the law of any State, no Federal regulatory agency and no State may take any action pursuant to any law, regulation, order, or other authority other than this subtitle if the effect of such action would be--

      (1) to differentiate between--

        (A) insured depository institutions which are controlled by diversified financial services holding companies; and

        (B) other insured depository institutions,

      in a manner which discriminates against insured depository institutions described in subparagraph (A); or

      (2) to differentiate between--

        (A) diversified financial services holding companies or affiliates of such companies; and

        (B) bank holding companies, savings and loan holding companies, or affiliates of any such company

      in a manner which discriminates against diversified financial services holding companies and affiliates of any such company.

    (b) RELATION TO STATE LAW-

      (1) IN GENERAL- No provision of the law or the constitution of any State, including any State law relating to State banks, savings association, real estate, securities, insurance, finance company, retail or the provision of financial or other services, shall prevent or impede or shall be interpreted or applied by any administrative, executive or judicial authority with the purpose or effect of preventing or impeding--

        (A) any insured depository institution, any affiliate of any such institution, or any representative of any such institution or affiliate from being acquired, owned, or controlled by, or from being affiliated in any manner with, any company which is or becomes a diversified financial services holding company, or any affiliate of such company, because of--

          (i) the types of activities engaged in, directly or indirectly, by such insured depository institution, any affiliate of such institution, or any representative of any such institution or affiliate; or

          (ii) the types of activities engaged in, directly or indirectly, by such diversified financial services holding company, any affiliate of such company, or any representative of any such company or affiliate;

        (B) any company which is or becomes a diversified financial services holding company, any affiliate of any such company, or any representative of any such company or affiliate from acquiring, owning, or controlling, or being affiliated in any way with, any insured depository institution or any affiliate of any such institution because of--

          (i) the types of activities engaged in, directly or indirectly, by any such company or affiliate, or any representative of any such company or affiliate; or

          (ii) the types of activities engaged in, directly or indirectly, by any such insured depository institution, any affiliate of any such institution, or any representative of such institution or affiliate; or

        (C) any insured depository institution, any affiliate of any such institution, or any representative of any such institution or affiliate from--

          (i) offering or marketing products or services of any affiliated diversified financial services holding company or any affiliate of such company; or

          (ii) from having the products or services of such insured depository institution, any affiliate of any such institution, or any representative of any such institution or affiliate offered or marketed by such diversified financial services holding company, an affiliate of such company, or by any representative of such company or affiliate.

      (2) RULE OF CONSTRUCTION- No provision of paragraph (1) shall be construed as superseding, altering, or otherwise affecting the application of the laws of any State relating to the examination, supervision, or regulation of providers of financial services or the protection of consumers, or as exempting any company which is or becomes a diversified financial services holding company, any affiliate of any such company, or any representative of any such company or affiliate, except to the extent that the intent, purpose, or effect of those laws is inconsistent with this subsection or with the purposes of this Act and then only to the extent of such inconsistency.

      (3) JUDICIAL DETERMINATION- Any interested party may institute an action in the United States District Court for the District of Columbia or any other appropriate district court of the United States, including an action for declaratory judgment, as may be appropriate to determine whether and to what extent any provision of the constitution or law of any State is superseded by any provision of this subsection or to enjoin application of any such provision.

    (c) ACCESS TO STATE COURTS-

      (1) IN GENERAL- No State may, directly or indirectly, deny an insured depository institution which is not located in that State the right to maintain or defend in a court in that State any action which could be maintained or defended under similar circumstances by a company which--

        (A) is not located in that State; and

        (B) is not an insured depository institution.

      (2) EXCEPTION FOR CERTAIN INSTITUTIONS- Paragraph (1) shall not apply in the case of an insured depository institution described in such paragraph which establishes or maintains a domestic branch (as defined in section 3(o) of the Federal Deposit Insurance Act) in the State referred to in such paragraph if the laws of such State do not permit an out-of-State insured depository institution to establish a domestic branch in such State.

      (3) APPLICABILITY OF VARIOUS CONDITIONS- If the maintenance or defense of an action in the courts of a State by a company which is not located in that State and is not an insured depository institution is subject to conditions which are applied in a nondiscriminatory manner to fulfill legitimate State objectives, the maintenance or defense of such an action by an insured depository institution described in paragraph (1) may be subject to the same conditions to the extent that the conditions do not have the effect, directly or indirectly, of denying the institution the opportunity to maintain or defend such action.

    (d) REPRESENTATIVES-

      (1) IN GENERAL- No State may, directly or indirectly, limit or deny the authority of any diversified financial services holding company or any affiliate of such company to utilize or compensate any representative or other person who is located in that State and is representing such company or affiliate in any lawful capacity.

      (2) EXCEPTION FOR CERTAIN LAWS APPLIED IN NONDISCRIMINATORY MANNER- Paragraph (1) shall not apply with respect to any licensing, marketing, compensation, or employment law or requirement of a State--

        (A) which is applied in a nondiscriminatory manner to fulfill legitimate State regulatory objectives; and

        (B) the intent, purpose, or effect of which is not inconsistent with the purposes of this Act.

      (3) EXCEPTION FOR CERTAIN ACTIVITIES- In the case of any State the laws of which do not permit an out-of-State insured depository institution to establish a domestic branch (as defined in section 3(o) of the Federal Deposit Insurance Act) in such State, paragraph (1) shall not apply with respect to the performance of activities in such State by any representative or other person described in paragraph (1) on behalf of an insured depository institution if the performance of such activities at any location within a State other than the main office or any branch office of such insured depository institution would constitute, under any Federal law or the law of the State, the establishment and operation of a domestic branch in the State.

    (e) AFFILIATE AND CONTROL DEFINED- Notwithstanding section 3, the following definitions shall apply for purposes of this section:

      (1) AFFILIATE- The term ‘affiliate’ means a person that directly or indirectly controls or is controlled by, or is under common control with another person.

      (2) CONTROL-

        (A) IN GENERAL- The term ‘control’ means the power, directly or indirectly, to direct the management or policies of a person.

        (B) PRESUMPTION- A person shall be presumed to control another person if the person, directly or indirectly, owns, controls, or holds with power to vote 10 percent or more of the voting securities of such other person.

SEC. 8. INSIDER LENDING AND TYING PROVISIONS.

    (a) APPLICABILITY OF INSIDER LENDING RESTRICTIONS- A diversified financial services holding company shall be treated as a bank holding company for purposes of section 22(h) of the Federal Reserve Act and any regulation prescribed under such section.

    (b) TYING-

      (1) IN GENERAL- Any diversified financial services holding company and any subsidiary of such company shall be subject to the restrictions of section 106 of the Bank Holding Company Act Amendments of 1970 in connection with any transaction involving the products or services of such company or subsidiary or an insured depository institution affiliate of such company, in the same manner such section would apply if the company or subsidiary was a bank and the insured depository institution subsidiary was a subsidiary of the bank holding company.

      (2) SUBSIDIARY DEFINED- For purposes of paragraph (1), the term ‘subsidiary’ has the same meaning as in section 2(d) of the Bank Holding Company Act of 1956.

SEC. 9. ENFORCEMENT AND EXAMINATION; PAYMENT SYSTEM SERVICES; OVERSIGHT.

    (a) ADMINISTRATIVE ENFORCEMENT-

      (1) IN GENERAL- Compliance with the requirements imposed under this Act and regulations prescribed by any appropriate Federal banking agency shall be enforced by the appropriate Federal banking agency under section 8 of the Federal Deposit Insurance Act.

      (2) ADDITIONAL ENFORCEMENT POWERS-

        (A) VIOLATION OF THIS ACT TREATED AS VIOLATION OF OTHER ACTS- For purposes of applying section 8 of the Federal Deposit Insurance Act with respect to any diversified financial services holding company or any affiliate of such company pursuant to paragraph (1), a violation of a requirement imposed under this Act shall be deemed to be a violation of a requirement imposed under section 8 of the Federal Deposit Insurance Act.

        (B) ENFORCEMENT AUTHORITY UNDER OTHER ACTS- In addition to any appropriate Federal banking agency’s powers under section 8 of the Federal Deposit Insurance Act, each such agency may exercise, for purposes of enforcing compliance with any requirement imposed under this Act, any other authority conferred on such agency by any other law.

    (b) EXAMINATION- The appropriate Federal banking agency may examine the books, records and affairs of, or require reports from, any affiliate of an insured depository institution which is a subsidiary of a diversified financial services holding company in order to ensure compliance with the requirements of this Act.

    (c) FEDERAL RESERVE PAYMENT SERVICES-

      (1) IN GENERAL- All Federal reserve bank services described in section 13 of the Federal Reserve Act, the 14th undesignated paragraph of section 16 of such Act, and the Expedited Funds Availability Act shall be available to all insured depository institutions, on the same terms and conditions and subject to the same limitations and restrictions, without regard to the identity of the insured depository institution’s affiliates, except to the extent necessary to avoid a material adverse effect on a large dollar payment system.

      (2) DEFINITION- For purposes of this subsection, the term ‘a material adverse effect on a large dollar payment system’ means any activity of an insured depository institution which results in violations of any uniformly applied payment system risk-reduction policy cap or limitation established by the Board of Governors of the Federal Reserve System which--

        (A) occur during any period consisting of 5 consecutive business days; and

        (B) exceed the median number of violations for all users of the applicable large dollar payment services during that same period.

      (3) FEDERAL RESERVE ENFORCEMENT POWER-

        (A) ADMINISTRATIVE ENFORCEMENT- In the case of an insured depository institution which has engaged in any activity that has resulted in a material adverse effect on a large dollar payment system, the Board of Governors of the Federal Reserve System shall be treated as the appropriate Federal banking agency for such institution with respect to such activity for purposes of subsection (a).

        (B) EXAMINATION- The Board of Governors of the Federal Reserve System may examine the books, records and affairs of any insured depository institution which has engaged in any activity that has resulted in a material adverse effect on a large dollar payment system, or require reports from any such institution with respect to any such activity.

SEC. 10. CRIMINAL AND CIVIL PENALTIES.

    (a) KNOWING AND INTENTIONAL VIOLATIONS-

      (1) IN GENERAL- Whoever knowingly violates or participates in a violation of--

        (A) any provision of this Act, or any regulation prescribed or order issued by an appropriate Federal banking agency pursuant to this Act;

        (B) being a company, violates any regulation prescribed or order issued by the Board under this Act; or

        (C) any written agreement between--

          (i) any diversified financial services holding company or any affiliate of such company which is not an insured depository institution; and

          (ii) any appropriate Federal banking agency,

      shall be fined under title 18, United States Code, for each day during which the violation continues, imprisoned for not more than 1 year, or both.

      (2) VIOLATIONS WITH INTENT TO DECEIVE, DEFRAUD, OR PROFIT- Whoever, with the intent to deceive, defraud, or profit significantly, knowingly commits a violation, or participates in a violation, described in paragraph (1) shall be fined not more than $1,000,000 for each day during which the violation continues, imprisoned for not more than 5 years, or both.

    (b) FALSE ENTRY OR STATEMENT- Each officer, director, employee, and agent of a diversified financial services holding company or any affiliate of any such company which is not an insured depository institution, shall be subject to the same penalties for false entries in any book, report, or statement of such company as are applicable to officers, directors, employees and agents of member banks, bank holding companies, and savings and loan holding companies for false entries in any books, reports, or statements of member banks, bank holding companies, and savings and loan holding companies under section 1005 of title 18, United States Code, to the extent that any such false entry refers in any material way to the affairs of an insured depository institution affiliate of such company.

    (c) CIVIL PENALTY-

      (1) FIRST TIER- Any person who--

        (A) violates this Act or any regulation prescribed or order issued by the Board under this Act; or

        (B) violates any written agreement between such person and the Board;

      shall forfeit and pay a civil penalty of not more than $5,000 for each day during which such violation continues.

      (2) SECOND TIER- Notwithstanding subparagraph (A), if any person--

        (A) commits any violation described in any clause of subparagraph (A) or breaches any fiduciary duty; and

        (B) such violation or breach--

          (i) is part of a pattern of misconduct;

          (ii) causes or is likely to cause more than a minimal loss to a depository institution; or

          (iii) results in pecuniary gain or other benefit to such person,

      such person shall forfeit and pay a civil penalty of not more than $25,000 for each day during which such violation or breach continues.

      (3) THIRD TIER- Notwithstanding subparagraphs (A) and (B), if any person--

        (A) knowingly commits any violation described in subparagraph (A) or breaches any fiduciary duty; and

        (B) knowingly or recklessly causes a substantial loss to a depository institution or a substantial pecuniary gain or other benefit to such person by reason of such violation or breach,

      such person shall forfeit and pay a civil penalty in an amount not to exceed the applicable maximum amount determined under paragraph (4) for each day during which such violation or breach continues.

      (4) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION DESCRIBED IN SUBPARAGRAPH (C)- The maximum daily amount of any civil penalty which may be assessed pursuant to paragraph (3) for any violation or breach described in such paragraph is--

        (A) in the case of any person other than an insured depository institution, an amount not to exceed $1,000,000; and

        (B) in the case of any insured depository institution, an amount not to exceed the lesser of--

          (i) $1,000,000; or

          (ii) 1 percent of the total assets of such institution.

      (5) ASSESSMENT-

        (A) WRITTEN NOTICE- Any penalty imposed under paragraph (1), (2), or (3) may be assessed and collected by the Board by written notice.

        (B) FINALITY OF ASSESSMENT- If, with respect to any assessment under subparagraph (A), a hearing is not requested pursuant to paragraph (8) within the period of time allowed under such subparagraph, the assessment shall constitute a final and unappealable order.

      (6) AUTHORITY TO MODIFY OR REMIT PENALTY- The Board may compromise, modify, or remit any penalty which the Board may assess or had already assessed under paragraph (1), (2), or (3).

      (7) MITIGATING FACTORS- In determining the amount of any penalty imposed under paragraph (1), (2), or (3), the Board shall take into account the appropriateness of the penalty with respect to--

        (A) the size of financial resources and good faith of the person charged;

        (B) the gravity of the violation;

        (C) the history of previous violations; and

        (D) such other matters as justice may require.

      (8) HEARING- The person against whom any penalty is assessed under this paragraph shall be afforded an agency hearing if such person submits a request for such hearing within 20 days after the issuance of the notice of assessment.

      (9) COLLECTION-

        (A) REFERRAL- If any person fails to pay an assessment after any penalty assessed under this subsection has become final, the Board shall recover the amount assessed by action in the appropriate United States district court.

        (B) APPROPRIATENESS OF PENALTY NOT REVIEWABLE- In any civil action under subparagraph (A), the validity and appropriateness of the penalty shall not be subject to review.

      (10) DISBURSEMENT- All penalties collected under authority of this paragraph shall be deposited into the Treasury.

      (11) REGULATIONS- The Board shall prescribe regulations establishing such procedures as may be necessary to carry out this paragraph.

    (d) VIOLATE DEFINED- For purposes of this section, the term ‘violate’ includes any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling, or aiding and abetting a violation.

SEC. 11. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) BANK HOLDING COMPANY ACT OF 1956-

      (1) Section 2(a)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(1)) is amended by inserting ‘or subsection (n)’ after ‘paragraph (5) of this subsection’.

      (2) Section 2(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)) is amended by adding at the end the following new subparagraph:

        ‘(K) An insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act) which is not controlled by any company other than a diversified financial services holding company (as defined in the Financial Services Competitiveness Act).’.

      (3) Section 5(d) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(d)) is amended by inserting ‘or the Financial Services Competitiveness Act’ after ‘this Act’.

    (b) AMENDMENT TO THE BANK HOLDING COMPANY ACT AMENDMENTS OF 1970- Section 106(b) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972) is amended--

      (1) by adding at the end the following new paragraphs:

      ‘(3) EXEMPTION FOR CERTAIN TYING ARRANGEMENTS- A bank shall not be prohibited from providing a loan, discount, deposit, or trust service, or fixing or varying the consideration of any of the foregoing, on the condition or requirement that--

        ‘(A) the customer shall obtain or provide some additional loan, discount, deposit, or trust service from, or to, such bank or from, or to, such bank holding company of such bank or from, or to, any subsidiary of such bank holding company; or

        ‘(B) the customer provide some additional credit, property, or service to such bank, or to such bank holding company of such bank, or to any subsidiary of such bank holding company, if such additional credit, property, or service is related to and usually provided in connection with a loan, discount, deposit, or trust service.

      ‘(4) EXCEPTIONS BY REGULATION OR ORDER- The Board may, by regulation or order, permit such exceptions to the prohibitions contained in paragraph (1) as the Board considers will not be contrary to the purposes of this title.’;

      (2) in paragraph (1), by striking ‘(1) A bank’ and inserting ‘(1) IN GENERAL- Except as provided in paragraph (3), a bank’;

      (3) in paragraph (1)(A) by striking ‘other than a loan, discount, deposit, or trust service’;

      (4) in paragraph (1)(C) by striking ‘other than those related to and usually provided in connection with a loan, discount, deposit or trust service’; and

      (5) by striking the last sentence of paragraph (1).

    (c) AMENDMENTS TO THE FEDERAL RESERVE ACT- Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is amended by--

      (1) inserting at the end of subsection (a) the following new paragraph:

      ‘(5) CERTAIN LOANS NOT TREATED AS TRANSACTIONS WITH AFFILIATES- Notwithstanding paragraph (2), a loan or extension of credit shall not be deemed to be made to any affiliate, for purposes of this section, if--

        ‘(A) the member bank approves such loan or extension of credit in accordance with substantially the same standards and procedures and on substantially the same terms that it applies to similar loans or extensions of credit the proceeds of which are not transferred to or for the benefit of an affiliate; and

        ‘(B) such loan or extension of credit is not made for the purposes of evading any of the requirements of this section.’; and

      (2) by adding at the end the following new subsection:

    ‘(f) COORDINATION WITH FINANCIAL SERVICES COMPETITIVENESS ACT- The provisions of this section shall be subject to section 102 of the Financial Services Competitiveness Act.’.

    (d) AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT-

      (1) Section 7(j)(8) of the Federal Deposit Insurance Act (12 U.S.C. 1817(j)(8)) is amended to read as follows:

      ‘(8) CONTROL DEFINED-

        ‘(A) IN GENERAL- For purposes of this subsection, the term ‘control’ has the same meaning as in section 2(a) of the Bank Holding Company Act of 1956.

        ‘(B) EXCEPTION FOR SECURITIES ACQUIRED IN CERTAIN CAPACITIES- For purposes of this subsection, no company shall be deemed to control or to have acquired control of any other company by virtue of the company’s ownership of the voting securities of such other company which were--

          ‘(i) acquired or held in an agency, trust, or other fiduciary capacity (whether with or without the sole discretion to vote such securities);

          ‘(ii) acquired or held in connection with or incidental to--

            ‘(I) the underwriting of securities if such securities are held only for such period of time as will permit the sale thereof on a reasonable basis; or

            ‘(II) acquired or held in connection with or incidental to market making, dealing, trading, brokerage or other securities related activities and not with a view to acquiring, exercising or transferring any control over the management or policies of such company; or

          ‘(iii) 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 appropriate Federal banking agency may permit if the appropriate Federal banking agency determines that such extension will not be detrimental to the public interest.

        ‘(C) EXCEPTION FOR COMPANIES FORMED FOR PROXY SOLICITATIONS- For purposes of this subsection, no company formed for the sole purpose of participating in a proxy solicitation shall be deemed to control or to have acquired control of any other company by virtue of the company’s acquisition of voting rights with respect to shares of such other company which were acquired in the course of such solicitation.’.

      (2) Paragraph (9) of section 5(e) of the Federal Deposit Insurance Act (12 U.S.C. 1815 (e)(9)) is amended--

        (A) by striking ‘or’ at the end of subparagraph (A);

        (B) by redesignating subparagraph (B) as subparagraph (C); and

        (C) by inserting after subparagraph (A) the following new subparagraph:

      ‘(B) such institutions are controlled by the same diversified financial services holding company (as defined in section 3(a) of the Financial Services Competitiveness Act); or’.

      (3) Section 3(u) of the Federal Deposit Insurance Act (12 U.S.C. section 1813(u)) is amended--

        (A) in paragraph (1), by inserting ‘, a diversified financial services holding company,’ after ‘bank holding company’; and

        (B) by adding at the end the following new paragraph:

      ‘(7) DIVERSIFIED FINANCIAL SERVICES HOLDING COMPANY- The term ‘diversified financial services holding company’ has the same meaning as in section 3(9) of the Financial Services Competitiveness Act.’.

    (e) AMENDMENT TO THE CLAYTON ACT- Section 7A(c)(8) of the Clayton Act (15 U.S.C. 18a(C)(8)), is amended by striking ‘of 1933 (12 U.S.C. 1464)’ and inserting ‘(12 U.S.C. 1464) or transactions which require agency notification under section 4 of the Financial Services Competitiveness Act or section 7(j) of the Federal Deposit Insurance Act’.

    (f) AMENDMENTS TO THE COMMUNITY REINVESTMENT ACT- Section 803(3) of the Community Reinvestment Act (12 U.S.C. 2902(3)) is amended--

      (1) by inserting ‘or notice, as the case may be,’ after ‘an application’;

      (2) by striking ‘or’ at the end of subparagraph (E);

      (3) by striking the period at the end of subparagraph (F) and inserting ‘; or’; and

      (4) by adding at the end the following new subparagraph:

        ‘(G) the acquisition of an insured bank or an insured institution requiring prior notice under section 4 of the Financial Services Competitiveness Act.’.