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 the company, any affiliate of the company, or any representative of the company or affiliate, or

'(ii) the types of activities engaged in, directly or indirectly, by the insured depository institution, any affiliate of the institution, or any representative of the 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 offering or marketing products or services of any financial services holding company of which such institution is an affiliate or any other affiliate of such company or from having the products or services of the insured depository institution offered or marketed by any affiliate of such institution or by any representative of such company or affiliate, except

"(i) with regard to offering and marketing insurance in accordance with section 4(c)(8) and paragraphs (5) and (6) of section 4(i); and "(ii) when the preemption of such State law would permit the offering, marketing, or sale of insurance products or services by an insured depository institution or any subsidiary of such institution if such activity would otherwise be prohibited by operation of State law.

"(2) NO PREEMPTION OF CERTAIN STATE CONSUMER PROTECTION LAWS.-Paragraph (1)(C) shall not exempt any company which is or becomes a financial services holding company, any affiliate of such company, or any representative of any such company or affiliate from complying with, or shall annul, alter, or affect 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, except to the extent that the intent, purpose, or effect of any such law is inconsistent with this subsection or with the purposes of this Act and then only to the extent of the inconsistency.

"(3) NO PREEMPTION OF CERTAIN STATE INSURANCE LAWS.-Paragraph (1)(C) shall not annul, alter, or affect the application of the laws of any State insofar as such laws relate to the conduct of insurance activities by a financial services holding company.

"(4) CONSISTENT LAWS NOT AFFECTED.-Notwithstanding any other provision of this subsection, a State shall not be preempted from enforcing any State law that prohibits any ownership, control, or activity that is prohibited by this Act.

"(5) INSURED DEPOSITORY INSTITUTION DEFINED. For purposes of this subsection, the term insured depository institution' includes a branch, agency, or commercial lending company subsidiary of a foreign bank (as such terms are defined in section 1(b) of the International Banking Act of 1978).". SEC. 406. PENALTIES.

Section 8 of the Bank Holding Company Act of 1956 (12 U.S.C. 1847) is amended

(1) by striking "bank holding company" wherever such term appears and inserting "financial services holding company";

(2) in subsection (a)(2), by striking "profit significantly" and inserting "obtain anything of value";

(3) in section (a)(2), by striking "Every officer, director, agent" and all that follows; and

(4) in subsection (b)(1), by striking "forfeit and".

SEC. 407. CONFORMING AMENDMENTS TO SEC

TION 11.

Section 11 of the Bank Holding Company Act of 1956 (12 U.S.C. 1849) is amended

(1) by striking "bank holding company" each place such term appears and inserting "financial services holding company"; and

(2) in subsection (b)(1), by striking "failure of a bank" and inserting "failure of an insured depository institution".

SEC. 408. APPLICATION OF THE LIMITATIONS OF TYING ARRANGEMENTS AND INSIDER LENDING ΤΟ FINANCIAL SERVICES HOLDING COMPANIES. (a) DEFINITIONS.-Section 106(a) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1971) is amended by striking "bank holding company" and inserting "financial services holding company".

(b) CERTAIN TYING ARRANGEMENTS PROHIBITED.-Section 106(b) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972(b)) is amended

(1) by redesignating paragraph (2) as paragraph (3); and

(2) by inserting after paragraph (1) the following:

"(2)(A) Except as provided in subparagraph (B), a financial services holding company and any subsidiary (other than a bank) of such holding company shall not, in any manner, extend credit, lease, or sell property of any kind, furnish any service, or fix or vary the consideration for any such credit, service, product, or other activity, on the condition that or subject to the requirement that the customer obtain credit, property, or service from an affiliated bank.

"(B) A financial services holding company and any subsidiary (other than a bank) of such holding company may vary the consideration

"(i) for any extension of credit, lease or sale of property of any kind, or the furnishing of any service on the condition that or subject to the requirement that the customer obtain some credit, property, or service from an affiliated bank if the products or services offered to and obtained by the customer are also separately available to such customer on substantially the same terms, including interest rate, collateral, and cost, as those prevailing at the time for comparable transactions that are not subject to such conditions or requirements; or

"(ii) for any loan, discount, deposit, or trust service on the condition that or subject to the requirement that the customer obtain a loan, discount, deposit or trust service from an affiliated bank if such products or services described in this subparagraph are also separately available to such customer.

"(C) The Board may prescribe such regulations to carry out the purposes of this paragraph which may include such restrictions or limitations with respect to subparagraph (B) as the Board determines to be appropriate in the public interest.".

(c) INSIDER LOANS.-Subparagraphs (C) and (D) of section 22(h)(6) of the Federal Reserve Act (12 U.S.C. 375b(6)) are amended by striking "bank holding company" each place such term appears and inserting "financial services holding company".

SEC. 409. PROVISIONS EXEMPTING FINANCIAL SERVICES HOLDING COMPANIES FROM THE SAVINGS AND LOAN HOLDING COMPANY ACT.

Section 10(a) of the Home Owners' Loan Act (12 U.S.C. 1467a(a)) is amended

(1) in paragraph (1), by striking subparagraph (D) and inserting the following new subparagraph:

"(D) SAVINGS AND LOAN HOLDING COMPANY DEFINED.

"(i) IN GENERAL.-Except as provided in clause (ii), the term 'savings and loan holding company' means any company which directly or indirectly controls a savings association or controls any other company which is a savings and loan holding company.

"(ii) CERTAIN COMPANIES EXCLUDED.-The term 'savings and loan holding company' does not include

"(I) any company which is a financial services holding company which is registered under and subject to the Bank Holding Company Act of 1956, other than a company described in section 4(f) of such Act; or

"(II) any subsidiary of any company described in subclause (I)."; and

(2) by inserting after paragraph (4) the following new paragraph:

"(5) EXEMPTION FOR FINANCIAL SERVICES HOLDING COMPANIES.-This section shall not apply to

"(A) any company that is a financial services holding company which is registered under and subject to the provisions of the Bank Holding Company Act of 1956, other than any company described in section 4(f) of such Act; or

"(B) any subsidiary of any company described in subparagraph (A) which is not a savings association.".

SEC. 410. CEASE AND DESIST AUTHORITY.

Section 8(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1818(b)(3)) is amended by striking "bank holding company" each place such term appears and inserting "financial services holding company.".

SEC. 411. EFFECTIVE DATE.

(a) IN GENERAL.-Except as provided in subsection (b), the amendments made by this subtitle shall take effect on January 1, 1993. (b) CERTAIN AMENDMENTS EFFECTIVE IMMEDIATELY.—The amendments made by sections 408 and 409 shall take effect on the date of enactment of this Act.

CHAPTER 2-DEPOSITORY INSTITUTION CONVERSIONS

SEC. 421. FAILING THRIFT CONVERSIONS TO

SAIF-INSURED NATIONAL BANK.

Section 10 of the Home Owners' Loan Act (12 U.S.C. 1467a) is amended by adding at the end the following new subsection:

"(s) TREATMENT OF SAIF-INSURED NATIONAL BANKS.

"(1) IN GENERAL.-Notwithstanding any other provision of law, a national bank that is a Savings Association Insurance Fund member (including any savings association applying for conversion to a national bank charter) upon application shall be deemed to be a savings association for the purpose of this section if the Director determines that"(A) the national bank resulted (or will result) from the conversion of a savings association which, at the time the control of such association was acquired

"(i) was in danger of default (as defined in section 3(x)(2) of the Federal Deposit Insurance Act); or

"(ii) was under the control of a conservator or receiver appointed for such savings association; or

"(B) the national bank has acquired more than an insignificant portion of the assets of a savings association described in clauses (i) or (ii) of subparagraph (A),

and after the conversion or acquisition the bank is a level 1 or level 2 depository institution (as defined in section 38 of the Federal Deposit Insurance Act).

"(2) RULE OF CONSTRUCTION.-No provision of this section shall be construed as affecting

"(A) the power of any national bank described in paragraph (1) to engage in any activity in the same manner and to the same extent as any national bank which is not subject to this section; or

"(B) the authority of any national bank described in paragraph (1) to be an affiliate of any company of which a savings association may be an affiliate under this section.".

SEC. 422. QTL-QUALIFIED NATIONAL BANKS RESULTING FROM CONVERSION OF SAVINGS ASSOCIATIONS. Section 10 of the Home Owners' Loan Act (12 U.S.C. 1467a) is amended by inserting after subsection (s) (as added by section 421 of this subtitle) the following new subsection:

"(t) TREATMENT OF QTL-QUALIFIED NATIONAL BANKS RESULTING FROM SAVINGS ASSOCIATIONS.-Notwithstanding any other provision of law, any national bank which

"(1) meets the requirements for a qualified thrift lender under subsection (m);

"(2) resulted from the conversion of a savings association subsidiary of a savings and loan holding company; and

"(3) is a level 1 or level 2 depository institution,

shall be deemed to be a savings association for purposes of this section.".

SEC. 423. MERGERS AND ACQUISITIONS OF INSURED DEPOSITORY INSTITUTIONS DURING CONVERSION MORATORIUM.

(a) IN GENERAL.-Section 5(d)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3)) is amended to read as follows:

"(3) OPTIONAL CONVERSIONS SUBJECT TO SPECIAL RULES ON DEPOSIT INSURANCE PAYMENTS.

"(A) CONVERSIONS ALLOWED.—

"(i) IN GENERAL.-Notwithstanding paragraph (2)(A) and subject to the requirements of this paragraph, any insured depository institution may participate in a transaction described in clause (ii), (iii), or (iv) of paragraph (2)(B) with the prior written approval of the responsible agency under section 18(c)(2).

"(ii) HOLDING COMPANY SUBSIDIARIES.—If, in connection with any transaction referred to in clause (i), the acquiring, assuming, or resulting depository institution is a Bank Insurance Fund member which is a subsidiary of a bank holding company, the prior written approval of the Board shall be required for such transaction in addition to the approval of any agency referred to clause (i).

"(B) ASSESSMENTS ON DEPOSITS ATTRIBUTABLE TO FORMER DEPOSITORY INSTITUTION.— "(i) ASSESSMENTS BY SAIF.-In the case of any acquiring, assuming, or resulting depository institution which is a Bank Insurance Fund member, that portion of the average assessment base of such member for any semiannual period which is equal to the adjusted attributable deposit amount (determined under subparagraph (C) with respect to the transaction) shall

"(I) be subject to assessment at the assessment rate applicable under section 7 for Savings Association Insurance Fund members;

"(II) not be taken into account for purposes of any assessment under section 7 for Bank Insurance Fund members; and

"(III) be treated as deposits which are insured by the Savings Association Insurance Fund.

"(ii) ASSESSMENTS BY BIF.-In the case of any acquiring, assuming, or resulting depository institution which is a Savings Association Insurance Fund member, that portion of the average assessment base of such member for any semiannual period which is equal to the adjusted attributable deposit amount (determined under subparagraph (C) with respect to the transaction) shall

"(I) be subject to assessment at the assessment rate applicable under section 7 for Bank Insurance Fund members;

"(II) not be taken into account for purposes of any assessment under section 7 for Savings Association Insurance Fund members; and

"(III) be treated as deposits which are insured by the Bank Insurance Fund.

"(C) DETERMINATION OF ADJUSTED ATTRIBUTABLE DEPOSIT AMOUNT.-The adjusted at

tributable deposit amount which shall be taken into account for purposes of determining the amount of the assessment under subparagraph (B) for any semiannual period by any acquiring, assuming, or resulting depository institution in connection with a transaction under subparagraph (A) is the amount which is equal to the sum of—

"(i) the amount of any deposits acquired by the institution in connection with the transaction (as determined at the time of such transaction);

"(ii) the total of the amounts determined under clause (iii) for semiannual periods preceding the semiannual period for which the determination is being made under this subparagraph; and

"(iii) the amount by which the sum of the amounts described in clauses (i) and (ii) would have increased during the preceding semiannual period (other than any semiannual period beginning before the date of such transaction) if such increase occurred at a rate equal to the annual rate of growth of deposits of the acquiring, assuming, or resulting depository institution minus the amount of any deposits acquired through the acquisition, in whole or in part, of another insured depository institution.

"(D) DEPOSIT OF ASSESSMENT.-That portion of any assessment under section 7 which

"(i) is determined in accordance with subparagraph (B)(i) shall be deposited in the Savings Association Insurance Fund; and

"(ii) is determined in accordance with subparagraph (B)(ii) shall be deposited in the Bank Insurance Fund.

"(E) CONDITIONS FOR APPROVAL, GENERALLY.

"(i) FACTORS TO BE CONSIDERED; APPROVAL PROCESS. In reviewing any application for a proposed transaction under subparagraph (A), the responsible agency (and, in the event the acquiring, assuming, or resulting depository institution is a Bank Insurance Fund member which is a subsidiary of a bank holding company, the Board) shall follow the procedures and consider the factors set forth in section 18(c).

"(ii) INFORMATION REQUIRED.-An application to engage in any transaction under this paragraph shall contain such information relating to the factors to be considered for approval as the responsible agency or Board may require, by regulation or by specific request, in connection with any particular application.

“(iii) NO TRANSFER OF DEPOSIT INSURANCE PERMITTED.—This paragraph shall not be construed as authorizing transactions which result in the transfer of any insured depository institution's Federal deposit insurance from 1 Federal deposit insurance fund to the other Federal deposit insurance fund.

"(iv) MINIMUM CAPITAL.-The responsible agency, and the appropriate Federal banking agency for any depository institution holding company, shall disapprove any application for any transaction under this paragraph unless each such agency determines that the acquiring, assuming, or resulting depository institution, and any depository institution holding company which controls such institution, will meet all applicable capital requirements upon consummation of the transaction.

"(F) CERTAIN INTERSTATE TRANSACTIONS.The Board may not approve any transaction under subparagraph (A) in which the acquiring, assuming, or resulting depository institution is a Bank Insurance Fund member which is a subsidiary of a bank holding company unless the Board determines that the transaction would comply with the requirements of section 3(d) of the Bank Holding Company Act of 1956 if, at the time of such transaction, the Savings Association Insurance Fund member involved in such trans

action were a State bank which the bank holding company was applying to acquire.

"(G) EXPEDITED APPROVAL OF ACQUISITIONS.

"(i) IN GENERAL.-Any application by a State nonmember insured bank to acquire another insured depository institution which is required to be filed with the Corporation by subparagraph (A) or any other applicable law or regulation shall be approved or disapproved in writing by the Corporation before the end of the 60-day period beginning on the date such application is filed with the Corporation.

"(ii) EXTENSIONS OF PERIOD.-The period for approval or disapproval referred to in clause (i) may be extended for an additional 30-day period if the Corporation determines that

"(I) an applicant has not furnished all of the information required to be submitted; or "(II) in the Corporation's judgment, any material information submitted is substantially inaccurate or incomplete.

"(H) ALLOCATION OF COSTS IN EVENT OF DEFAULT.-If any acquiring, assuming, or resulting depository institution is in default or danger of default at any time before this paragraph ceases to apply, any loss incurred by the Corporation shall be allocated between the Bank Insurance Fund and the Savings Association Insurance Fund, in amounts reflecting the amount of insured deposits of such acquiring, assuming, or resulting depository institution assessed by the Bank Insurance Fund and the Savings Association Insurance Fund, respectively, under subparagraph (B).

"(I) SUBSEQUENT APPROVAL OF CONVERSION TRANSACTION.—This paragraph shall cease to apply if—

"(i) after the end of the 5-year period referred to in paragraph (2)(A), the Corporation approves an application by any acquiring, assuming, or resulting depository institution to treat the transaction described in subparagraph (A) as a conversion transaction; and

"(ii) the acquiring, assuming, or resulting depository institution pays the amount of any exit and entrance fee assessed by the Corporation under subparagraph (E) of paragraph (2) with respect to such transaction.

"(J) ACQUIRING, ASSUMING, OR RESULTING DEPOSITORY INSTITUTION DEFINED.-For purposes of this paragraph, the term 'acquiring, assuming, or resulting depository institution' means any insured depository institution which

"(i) results from any transaction described in paragraph (2)(B)(ii) and approved under this paragraph;

"(ii) in connection with a transaction described in paragraph (2)(B)(iii) and approved under this paragraph, assumes any liability to pay deposits of another insured depository institution; or

"(iii) in connection with a transaction described in paragraph (2)(B)(iv) and approved under this paragraph, acquires assets from any insured depository institution in consideration of the assumption of liability for any deposits of such institution.".

(b) EFFECTIVE DATE.-The amendment made by subsection (a) to section 5(d)(3)(C) of the Federal Deposit Insurance Act shall apply with respect to semiannual periods beginning after the date of the enactment of this Act.

SEC. 424. MERGERS, CONSOLIDATIONS, AND OTHER ACQUISITIONS AUTHORIZED. (a) FEDERAL SAVINGS ASSOCIATIONS.-Section 10 of the Home Owners' Loan Act (12 U.S.C. 1467a) is amended by inserting after subsection (t) (as added by section 422 of this title) the following new subsection:

"(u) MERGERS, CONSOLIDATIONS, AND OTHER ACQUISITIONS AUTHORIZED.—

"(A) IN GENERAL.-Any application by a savings association to acquire or be acquired by another insured depository institution which is required to be filed with the Director under section 5(d)(3) of the Federal Deposit Insurance Act or any other applicable law or regulation shall be approved or disapproved in writing by the Director before the end of the 60-day period beginning on the date such application is filed with the agenсу.

"(B) EXTENSION OF PERIOD.-The period for approval or disapproval referred to in subparagraph (A) may be extended for an additional 30-day period if the Director determines that

"(i) an applicant has not furnished all of the information required to be submitted; or "(ii) in the Director's judgment, any material information submitted is substantially inaccurate or incomplete.

"(3) ACQUIRE DEFINED.-For purposes of this subsection, the term 'acquire' has the meaning given to such term in section 13(f)(8)(B) of the Federal Deposit Insurance Act.

"(4) REGULATIONS.—

"(A) REQUIRED.-The Director shall prescribe such regulations as may be necessary to carry out paragraph (1).

"(B) EFFECTIVE DATE.-The regulations required under subparagraph (A) shall—

"(i) be prescribed in final form before the end of the 90-day period beginning on the date of the enactment of this subsection; and "(ii) take effect before the end of the 120day period beginning on such date.".

(b) NATIONAL BANKS.-Chapter 1 of title LXII of the Revised Statutes of the United States (12 U.S.C. 5133 et seq.) is amended by adding at the end the following new section: "SEC. 5156A. MERGERS, CONSOLIDATIONS, AND

OTHER ACQUISITIONS AUTHORIZED. "(a) IN GENERAL.-Subject to sections 5(d)(3) and 18(c) of the Federal Deposit Insurance Act, any national bank may acquire or be acquired by any insured depository institution.

“(b) EXPEDITED APPROVAL OF ACQUISITIONS.

"(1) IN GENERAL.-Any application by a national bank to acquire or be acquired by another insured depository institution which is required to be filed with the Comptroller of the Currency by section 5(d)(3) of the Federal Deposit Insurance Act or any other applicable law or regulation shall be approved or disapproved in writing by the agency before the end of the 60-day period beginning on the date such application is filed with the agency.

"(2) EXTENSIONS OF PERIOD.-The period for approval or disapproval referred to in paragraph (1) may be extended for an additional 30-day period if the Comptroller of the Currency determines that

"(A) an applicant has not furnished all of the information required to be submitted; or "(B) in the Comptroller's judgment, any material information submitted is substantially inaccurate or incomplete.

"(c) ACQUIRE DEFINED.-For purposes of this section, the term 'acquire' has the meaning given to such term in section 13(f)(8)(B) of the Federal Deposit Insurance Act.".

SEC. 425. ACQUISITION OF THRIFT INSTITUTIONS BY CERTAIN COMPANIES WHICH CONTROL BANKS AND ARE NOT TREATED AS BANK HOLDING COMPANIES.

(a) IN GENERAL.-Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)) is amended by adding at the end the following new paragraph:

"(14) SAVINGS ASSOCIATION ACQUISITIONS.For purposes of paragraph (2)(A), an insured institution is described in this paragraph if control of the insured institution, or more than 5 percent of the shares of the insured institution, is acquired by a company described in paragraph (1) of this subsection in connection with a transaction—

"(A) which involves the insured institution and a bank controlled by the company;

"(B) which is approved under section 5(d)(3) of the Federal Deposit Insurance Act by the appropriate Federal banking agency (as defined in section 3(q) of the Federal Deposit Insurance Act); and

"(C) in which a bank controlled by such company is the acquiring, assuming, or resulting depository institution (as defined in section 5(d)(3)(I) of the Federal Deposit Insurance Act).".

(b) EXCEPTIONS TO CERTAIN LIMITATIONS ON BANK ACTIVITIES TO FACILITATE ACQUISITIONS.-Section 4(f)(3) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(3)) is amended by adding at the end the following new subparagraph:

"(D) EXCEPTIONS FOR PARAGRAPH (14) MERGERS.-If any company described in paragraph (1) acquires control of any insured institution, or more than 5 percent of the shares of any insured institution, pursuant to a transaction described in paragraph (14)—

"(i) subparagraph (B)(i) shall not apply so as to prohibit the bank which is the acquiring, assuming, or resulting depository institution (as defined in section 5(d)(3)(I) of the Federal Deposit Insurance Act) in connection with such transaction from engaging in any activity in which the insured institution was engaged before the date of such transaction to the extent that

"(I) the activity is permissible for bank holding companies under subsection (c)(8); and

"(II) the bank is not both accepting demand deposits that the depositor may withdraw by check or similar means for payment to third parties or others and engaging in the business of making commercial loans as a result of engaging in such activity; and "(ii) subparagraph (B)(iv) shall not apply to an increase in the assets of the bank controlled by such company as a result of the transaction referred to in paragraph (14) during the 1-year period beginning on the date of such transaction.".

(c) TECHNICAL AMENDMENTS.-Clauses (i) and (ii)(VIII) of section 4(f)(2)(A) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(2)(A)) are amended by striking "(10) or (12)" and inserting "(10), (12), or (14)". CHAPTER 3-FINANCIAL ACTIVITIES OF NATIONAL BANKS

SEC. 431. SECURITIES ACTIVITIES OF NATIONAL BANKS.

(a) IN GENERAL.-The paragraph designated the "Seventh" of section 5136 of the Revised Statutes (12 U.S.C. 24 (Seventh)) (as amended by section 234(b) of this Act) is amended by adding at the end the following: "If a national bank is not an affiliate of a securities affiliate (as defined in section 2 of the Diversified and Financial Services Holding Company Act of 1991), the limitations and restrictions contained in this paragraph with respect to dealing in, underwriting, and purchasing securities for the bank's own account shall not apply to the distribution of securities issued by investment companies (as defined in section 3 of the Investment

Company Act of 1940). Notwithstanding any other provision of law (including this section), a national bank shall not, in the United States and pursuant to any express or incidental power, underwrite, distribute, or sell interests in a pool of assets originated or purchased by the bank or any affiliate of the bank, and the bank shall not continue to engage in such activity pursuant to any order issued by the Comptroller of the Currency. A national bank shall not sponsor, organize or control an investment company registered under the Investment Company Act of 1940. A national bank shall not engage in the United States in any securities activity except to the extent that such activity is specifically authorized by statute, or authorized by a regulation prescribed by, or an order, interpretation, or approval issued by, the Comptroller of the Currency pursuant to such statute, on the date of the enactment of the Financial Institutions Safety and Consumer Choice Act of 1991, and does not involve the underwriting or distributing by any national bank of securities backed by or representing an interest in mortgages or other assets originated or purchased by the national bank or any affiliate of the bank. No subsidiary of a national bank may engage in any activity in which a national bank may not engage.".

(b) REPEAL OF PROVISIONS OF THE BANKING ACT OF 1933.-Effective January 1, 1993, sections 20 and 32 of the Banking Act of 1933 (12 U.S.C. 377 and 78, respectively) are hereby repealed.

(c) CONFORMING AMENDMENTS.-The 20th undesignated paragraph of section 9 of the Federal Reserve Act (12 U.S.C. 335) is amended by inserting after the word "stock" the following: "and with respect to sponsoring, organizing, promoting, or controlling of an investment company registered under the Investment Company Act of 1940".

SEC. 432. INSURANCE ACTIVITIES OF NATIONAL BANKS.

(a) LIMITED INSURANCE ACTIVITIES FOR NATIONAL BANKS LOCATED IN SMALL TOWNS.-In addition to the powers now vested by law in national banks organized under the laws of the United States, any national bank that is located in a place that has a population not exceeding 5,000 (as shown by the preceding decennial census) may engage in insurance sales and insurance solicitation activities. if

(1) the sales and solicitation activities are confined to that place of 5,000 or less and the adjacent rural unincorporated areas closest to that place; and

(2) the insurance is sold only to

(A) individuals who are residents of, or are employed in, any place (including any unincorporated rural area) in such State that has a population not exceeding 5,000 (as shown by the preceding decennial census);

(B) persons

(i) who are engaged in business in any place in such State that has a population not exceeding 5,000 (as shown by the preceding decennial census) and have a principal business office in any such place; or

(ii) whose principal headquarters is located in any such place,

with respect to employees (including owneremployees) who reside in or are principally employed in such place, real property located in such place, personal property which is principally used in such place, or services provided by persons located in such place; and

(C) any other person if the insurance is issued with respect to

(i) real property located in any place in such State that has a population not exceeding 5,000 (as shown by the preceding decennial census); or

(ii) personal property which is principally used in such place.

(b) CERTAIN ACTIVITIES PROHIBITED IN CONNECTION WITH INSURANCE ACTIVITIES.-No national bank which sells insurance pursuant to subsection (a) may—

(1) assume or guarantee the payment of any premium on any insurance policy issued through the agency of the bank by the insurance company for which the bank is acting as agent; or

(2) guarantee the truth of any statement made by an insurance customer in filing such customer's application for insurance.

(c) LIMITATION ON TITLE INSURANCE ACTIVITIES. No national bank may engage, directly or through a subsidiary, in any activity involving the underwriting or sale of title insurance other than title insurance agency activities in which such bank was actively and lawfully engaged, directly or through a subsidiary, as of June 1, 1991. (d) REPEAL.

(1) IN GENERAL.-To the extent the paragraph described in paragraph (2) is in effect on the day before the date of the enactment of this Act (whether as a paragraph of the Act described in such paragraph or as a provision of any other law), such paragraph shall cease to be effective as of such date of enactment.

(2) PARAGRAPH DESCRIBED.-The paragraph described in this paragraph is the paragraph contained in the Act entitled "An Act to amend certain sections of the Act entitled 'Federal Reserve Act' approved December twenty-third, nineteen hundred and thirteen' and approved September 7, 1916 (39 Stat. 753; omitted from the United States Code) which

(A) relates to the authority of national banks in small communities to act as insurance agents and real estate brokers; and

(B) begins "That in addition to the powers now vested by law in national banking association".

SEC. 433. AMENDMENTS TO SECTIONS 23A AND 23B OF THE FEDERAL RESERVE ACT. (a) SECTION 23A.-Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is amended

(1) in subsection (a), by adding at the end the following new paragraphs:

"(5) NOTICE REQUIRED FOR CERTAIN TRANSACTIONS.-No financial services holding company may permit any insured depository institution subsidiary to engage in any covered transaction if the amount of the covered transaction is equal to or greater than the amount which is equal to 5 percent of the capital stock and surplus of the institution unless notice is provided not less than 5 days before such transaction is engaged in to the Board and the appropriate Federal banking agency for the insured depository institution.";

(2) in subsection (b)(1)(D), by striking clause (ii) and inserting the following new clause:

"(ii) any investment company, commodity pool, or other company engaged in substantially the same activities as an investment company or commodity pool with respect to which a member bank or any affiliate of the member bank is an investment adviser (as defined in section 2(a)(20) of the Investment Company Act of 1940) or a commodity trading advisor (as defined in section 2(a)(1)(A) of the Commodity Exchange Act) or for which such bank or affiliate performs activities which are substantially equivalent to those provided by an investment adviser or commodity trading advisor; and";

(3) in subsection (b)(2)(A), by inserting "and of which the member bank owns at least 80 percent of the voting stock" after "member bank";

(4) in subsection (b)(5), by inserting "principally engaged in deposit taking or lending activities" after "trust company";

(5) by striking "or" at the end of subsection (b)(7)(D);

(6) in subsection (b)(7) (E) by inserting "to, or" after "standby letter of credit,";

(7) in subsection (b)(7), by inserting after subparagraph (E) the following new subparagraphs:

"(F) the assumption by a member bank of a liability of any affiliate whether directly or through the transfer of such liability, or the shares of such affiliate, to the member bank affiliate;

"(G) a loan or extension of credit to any company, or the issuance of or participation in a standby letter of credit, asset purchase agreement, indemnification, guarantee, insurance or other facility with any company, the purpose of which is to enhance the marketability of securities or other obligations or assets (other than securities that a member bank may underwrite pursuant to section 5136 of the Revised Statutes) that are underwritten or distributed by the affiliate, unless there is substantial participation by other lenders in such loan, extension of credit, letter of credit, agreement, indemnification, guarantee, insurance or other facility;

or

"(H) any other financial arrangement that is determined by the Board by regulation to be substantially equivalent to a transaction described in this paragraph;";

(8) in subsection (c)(1)

(A) by inserting "to, or" after "letter of credit issued"; and

(B) by striking "at the time of the transaction";

(9) in subsection (c)(4)—

(A) by inserting "the member bank or" after "issued by"; and

(B) by inserting "to, or" after "letter of credit"; and

(10) in subsection (d)(5), by inserting "to the extent that the company provides services solely to affiliated member banks" before the semicolon;

(b) SECTION 23B.

(1) Section 23B(a)(2)(E) of the Federal Reserve Act (12 U.S.C. 371c-1(a)(2)(E)) is amended

(A) in clause (i), by striking ", or" and inserting instead a semicolon;

(B) in clause (ii), by striking the period and inserting instead "; or"; and

(C) by inserting at the end thereof the following new clause:

"(iii) if the third party is a customer of an affiliate (as defined in section 2 of the Bank Holding Company Act of 1956).”.

(2) Section 23B(b)(2) of the Federal Reserve Act (12 U.S.C. 371c-1(b)(2)) is amended by inserting "officers, directors, or employees of" after "of the bank or".

SEC. 434. CUSTOMER DISCLOSURE.

Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by adding at the end the following new subsection:

"(0) CUSTOMER DISCLOSURE REGARDING SECURITIES, INSURANCE AND OTHER NONBANKING PRODUCTS.

"(1) PRODUCTS OFFERED, RECOMMENDED OR SOLD BY DEPOSITORY INSTITUTIONS.-An insured depository institution shall prominently disclose in writing to the institution's customers pursuant to regulations prescribed by the appropriate Federal banking agency, that securities or insurance products offered, recommended, or sold by the insured depository institution are not deposits, are not insured by the Federal Deposit Insurance Corporation, are not guaranteed by the insured depository institution or an affiliated insured depository institution, and are not otherwise an obligation of an insured depository institution unless such is the case.

"(2) PRODUCTS OFFERED, RECOMMENDED OR SOLD ON BANK PREMISES OR THROUGH JOINT

MARKETING ACTIVITIES.-An insured depository institution shall not permit securities or insurance products to be offered, recommended, or sold on the premises of the institution or to customers of the institution as part of joint marketing activities with any other person, unless that person prominently discloses in writing, in addition to the disclosures required in paragraph (1), that such person is not an insured depository institution and is separate from the insured depository institution.

"(3) CUSTOMER'S SIGNED STATEMENT RELATING TO UNINSURED DEPOSITS.—

"(A) REQUIREMENTS.-In connection with"(i) any sale of any instrument or financial product by any insured depository institution, or any affiliate of such institution, which does not constitute an insured deposit;

"(ii) any acceptance of a deposit by such institution or affiliate which is not an insured deposit; or

"(iii) any other transaction which results in the acquisition of any such obligation, instrument, or product from the institution or affiliate,

the institution or affiliate shall obtain from the purchaser, depositor, or acquirer, before the completion of the sale, deposit, or transaction, a separate statement, signed and dated by such person, which contains the following declaration in not less than 18-point boldface type: 'I understand that this is not an insured deposit. The United States Government does not guarantee it. If [name of institution or affiliate] fails, I know that I may lose some or all of my money.'.

"(B) EXCEPTION.-The provisions of this paragraph shall not apply with respect to any transaction

"(i) effected by a broker or dealer registered under the Securities Exchange Act of 1934;

"(ii) involving an insurance activity of any affiliate of an insured depository institution which is not itself an insured depository institution or a subsidiary of such institution if the transaction

"(I) is not engaged in on the premises of any insured depository institution (including any branch) or any subsidiary of such institution;

"(II) is not engaged in by the affiliate in connection with any joint marketing activities between the affiliate and any such institution or subsidiary; and

"(III) does not otherwise involve any such insured depository institution or subsidiary;

or

"(iii) consisting of any loan or other extension of credit by the insured depository institution or affiliate.

"(4) REGULATIONS.-The appropriate Federal banking agencies, with respect to insured depository institutions and financial services holding companies, and the Securities and Exchange Commission, with respect to persons registered with such Commission, may adopt regulations implementing this subsection.".

SEC. 435. BANKERS' BANKS.

(a) ACQUISITION OF INTERESTS.-The paragraph designated the "Seventh." of section 5136 of the Revised Statutes (12 U.S.C. 24 Seventh.) (as amended by sections 234(b) and 431 of this Act) is amended by inserting "or depository institution holding companies" after "providing services for other depository institutions".

(b) ISSUANCE OF CERTIFICATE.-Section 5169(b)(1) of the Revised Statutes (12 U.S.C. 27(b)(1)) is amended by inserting "or depository institution holding companies" after "other depository institutions" the 2d place such term appears.

CHAPTER 4-NONBANKING ACTIVITIES OF FOREIGN BANKS IN THE UNITED STATES SEC. 441. AMENDMENTS TO THE INTERNATIONAL BANKING ACT OF 1978.

(a) TREATMENT OF FOREIGN BANKS.-Section 8(a) of the International Banking Act of 1978 (12 U.S.C. 3106(a)) (as amended by section 207) is amended to read as follows:

"(a) TREATMENT OF FOREIGN BANKS AS HOLDING COMPANIES.

“(1) IN GENERAL.-Except as otherwise provided in this section, any foreign bank which

"(A) maintains a branch or agency in the United States; or

"(B) directly or indirectly owns or controls a commercial lending company organized under State law,

shall be subject to the Bank Holding Company Act of 1956 and sections 105 and 106 of the Bank Holding Company Act Amendments of 1970 in the same manner and to the same extent as a financial services holding company.

"(2) TREATMENT OF FOREIGN BANK HOLDING COMPANIES.-Any company that directly or indirectly owns or controls a foreign bank described in paragraph (1) shall be subject to the Bank Holding Company Act of 1956 in the same manner and to the same extent as a company that owns or controls a financial services holding company.

"(3) COMPARABLE CAPITAL AND OTHER FINANCIAL REQUIREMENTS.—

"(A) DETERMINATION REQUIRED.-In reviewing any notice under section 4 of the Bank Holding Company Act of 1956 by any foreign bank or company controlling a foreign bank to which this section applies, the Board shall disapprove the notice unless the Board determines that the financial resources of such bank or company, including the capital level under section 38 of the Federal Deposit Insurance Act, are comparable to those of a domestic financial services holding company that would be permitted to engage in such activities.

"(B) CRITERIA FOR DETERMINATION.-In making the determination in subparagraph (A), the Board shall

"(i) take into account differences in domestic and foreign accounting standards; and

"(ii) assure that competitive comparability between domestic and foreign banks is maintained.".

(b) AUTHORITY TO TERMINATE GRANDFATHERED STATUS OF ACTIVITIES NOW PERMISSIBLE UNDER THE BANK HOLDING COMPANY ACT OF 1956.-Section 8(c)(1) of the International Banking Act of 1978 (12 U.S.C. 3106(c)(1)) is amended by adding at the end the following new sentence: "Notwithstanding any other provision of this paragraph or any other provision of law, the Board shall terminate any authority conferred under this subsection on any foreign bank or company with respect to an affiliate engaged in the business of underwriting, distributing, or otherwise buying or selling stocks, bonds, and other securities in the United States upon a finding by the Board that such business has been authorized by statute as a permissible activity for financial services holding companies in the United States.".

Subtitle B-Amendments to Federal
Securities Laws

CHAPTER 1-REGULATION OF SECURI-
TIES ACTIVITIES OF DEPOSITORY INSTI-
TUTIONS

PART I-BROKER-DEALER PROVISIONS SEC. 451. DEFINITION OF BROKER.

Section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:

"(4)(A) The term 'broker' means any person engaged in the business of effecting

transactions in securities for the account of others.

"(B) A bank shall not be deemed to be a 'broker' because it engages in one or more of the following activities:

"(i) fiduciary activities (including effecting transactions in the course of such fiduciary activities) permissible for national banks under the first section of the Act of September 28, 1962 (12 U.S.C. 92a), or for State banks under relevant State trust law, except that a bank shall be deemed a broker if, in the conduct of such fiduciary activities, it

"(I) publicly solicits brokerage business; or "(II) is compensated for such business by the payment of commissions or similar remuneration based on effecting transactions in securities (excluding fees calculated as percentage of assets under management); or

"(ii) effects transactions in exempted securities, other than municipal securities, or in commercial paper, bankers' acceptances, or commercial bills.".

SEC. 452. DEFINITION OF DEALER.

Section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows:

"(5)(A) The term 'dealer' means any person engaged in the business of buying and selling securities for his own account through a broker or otherwise.

"(B) Such term does not include

"(i) any person insofar as he buys or sells securities for his own account, either individually or in some fiduciary capacity, but not as part of a regular business; or

"(ii) any bank insofar as the bank (I) buys and sells commercial paper, bankers' acceptances, or commercial bills, or exempted securities, or (II) buys and sells securities for investment purposes for the bank or for accounts in which the bank, acting as trustee, is authorized to determine the securities to be purchased or sold.".

SEC. 453. POWER TO EXEMPT FROM THE DEFINITIONS OF BROKER AND DEALER. Section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c) is amended by adding at the end the following:

"(e) The Commission, by rule, regulation, or order, upon its own motion or upon application, may conditionally or unconditionally exempt any person or class of persons from the definitions of 'broker' or 'dealer,' if the Commission finds that such exemption is consistent with the public interest, the protection of investors, and the purposes of this title.".

SEC. 454. REQUIREMENT THAT BANKS FALLING WITHIN THE DEFINITIONS OF BROKER OR DEALER PLACE THEIR SECURITIES ACTIVITIES IN A SEPARATE CORPORATE ENTITY.

Section 15(a) of the Securities Exchange Act of 1934 (15 U.S.C. 780(a)) is amended to read as follows:

"SEC. 15. (a)(1) It shall be unlawful for any broker or dealer that is either a person other than a natural person or a natural person not associated with a broker or dealer that is a person other than a natural person (other than such a broker or dealer whose business is exclusively intrastate and who does not make use of any facility of a national securities exchange) to make use of the mails or any means or instrumentality of interstate commerce to effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security (other than an exempted security or commercial paper, bankers' acceptances, or commercial bills) unless such broker or dealer is registered in accordance with subsection (b) of this section.

"(2) It shall be unlawful for any bank to act as a broker or dealer, except in the course of an exclusively intrastate business. This subsection shal not preclude a subsidi

ary of a bank that is registered in accordance with subsection (b) from acting as a broker or dealer to any extent otherwise permissible by Federal banking law.

"(3) The Commission, by rule or order, as it deems consistent with the public interest and the protection of investors, may conditionally or unconditionally exempt from paragraphs (1) and (2) of this subsection any broker or dealer or class of brokers or dealers specified in such rule or order.". SEC. 455. PROVISIONS RELATING TO BROKERDEALERS AFFILIATED WITH DEPOSITORY INSTITUTIONS.

The Securities Exchange Act of 1934 is amended by inserting after section 15C (15) U.S.C. 780 5) the following new section: "PROVISIONS RELATING TO CERTAIN BROKERDEALERS AFFILIATED WITH FINANCIAL SERVICES HOLDING COMPANIES

"Sec. 15D. (a) DEFINITIONS.-As used in this section

"(1) the terms 'financial services holding company', 'insured depository institution', 'Board', 'control', 'subsidiary', and 'securities affiliate', have the meanings provided by section 2 of the Bank Holding Company Act of 1956; and

"(2) the term 'affiliated insured depository institution or subsidiary thereof' means, with respect to any securities affiliate that is controlled by a financial services holding company, an insured depository institution that is controlled by such financial services holding company, or a subsidiary of such insured depository institution.

"(b) CONSUMER PROTECTION PROVISIONS."(1) DISCLOSURES BY BANK-AFFILIATED BROKER-DEALERS REGARDING FEDERAL DE

POSIT INSURANCE.—

reg

"(A) GENERAL REQUIREMENT.-Each istered broker or dealer that is an affiliate of an insured depository institution shall provide notice to its customers of the inapplicability of Federal deposit insurance with respect to securities or other financial products recommended, offered, or sold by such broker or dealer to such customers in accordance with regulations which the Commission, in consultation with the Board of Governors of the Federal Reserve System, shall prescribe in accordance with this subsection and consistent with the public interest and the protection of investors.

"(B) CONTENTS OF DISCLOSURES.-The notice required under subparagraph (A) shall be designed to inform customers of a broker or dealer

"(i) that the registered broker or dealer"(I) is not an insured depository institution; and

"(II) is a separate corporate entity with respect to any insured depository institution. affiliate of such broker or dealer;

"(ii) whether the securities or other financial products underwritten, sold, offered, or recommended by the registered broker or dealer

"(I) are deposits which are insured by the Federal Deposit Insurance Corporation;

"(II) are instruments which are guaranteed either as to principal or interest by any insured depository institution affiliate of such broker or dealer;

"(III) are otherwise obligations of any insured depository institution; and

"(iii) whether or not any insured depository institution that is an affiliate of such broker or dealer is permitted under applicable law to extend credit, arrange for the extension of credit, or issue a guaranty, acceptance, letter of credit, endorsement, asset purchase agreement, indemnity, insurance, or other credit instrument or facility, including a standby letter of credit, to or for the benefit of an issuer of any security that the broker or dealer sells or offers for sale; and