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114th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      114-407

======================================================================

 
 TO REQUIRE THE APPROPRIATE FEDERAL BANKING AGENCIES TO TREAT CERTAIN 
MUNICIPAL OBLIGATIONS AS LEVEL 2A LIQUID ASSETS, AND FOR OTHER PURPOSES

                                _______
                                

February 1, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2209]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2209) to require the appropriate Federal banking 
agencies to treat certain municipal obligations as level 2A 
liquid assets, and for other purposes, having considered the 
same, report favorably thereon without amendment and recommend 
that the bill do pass.

                          Purpose and Summary

    Introduced by Representative Luke Messer on May 1, 2015, 
H.R. 2209 amends the Federal Deposit Insurance Act to require 
the Federal banking agencies (the Federal Deposit Insurance 
Corporation (FDIC), the Board of Governors of the Federal 
Reserve System (Federal Reserve), and the Office of the 
Comptroller of the Currency (OCC)) to treat certain municipal 
securities that are liquid, readily marketable, and investment 
grade as of the calculation date as high-quality level 2A 
liquid assets. Under H.R. 2209, the agencies are required to 
implement these changes by amending the rule titled ``Liquidity 
Coverage Ratio: Liquidity Risk Measurement Standards; Final 
Rule.''

                  Background and Need for Legislation

    Given the problem posed by insufficient liquidity during 
the financial crisis, the Basel Committee on Banking 
Supervision reached a consensus that banks should have enough 
cash or easily monetizable assets (such as government 
securities) on hand to survive for 30 days if their usual 
sources of short-term funding disappear. Although requiring 
banks to maintain a higher portion of their assets in the form 
of cash or easily-sold assets would make them better able to 
withstand liquidity crunches, these assets offer a 
significantly lower rate of return than other investments. In 
addition, funds held as cash or government securities cannot be 
loaned, reducing the amount of credit available to the 
financial system and pushing up the price of credit that is 
available.
    The Liquidity Coverage Ration (LCR) is defined as the stock 
of ``high-quality liquid assets'' (HQLAs) divided by the bank's 
net cash outflows over a 30-day time period under an acute 
liquidity stress scenario. The LCR's value must be greater than 
``1'' to ensure that the bank can meets its cash outflow 
obligations. Many market participants believe that the final 
rules to implement the LCR too narrowly defines the approved 
assets that meet the HQLA definition. Qualifying assets include 
domestic sovereign debt issued in domestic currency and some 
public sector entity debt, and high quality non-financial 
corporate bonds. The net cash outflow is calculated through the 
application of run-off rates for liabilities to reflect the 
amount of deposits that will be withdrawn or loans that will 
not be rolled over during a time of financial stress. One cause 
of the recent illiquidity in certain fixed-income markets may 
be that banks striving to satisfy the mandate to hold HQLAs are 
not buying as many bonds that do not qualify as HQLAs.
    On September 3, 2014, the OCC, Federal Reserve, and the 
FDIC issued a final rule that implements the LCR consistent 
with the Basel Committee's policy directive. The final rule is 
designed to strengthen the liquidity risk management of banks, 
savings associations, and bank holding companies. Banks with at 
least $250 billion in total assets or consolidated on-balance 
sheet foreign exposures of at least $10 billion are required to 
be 80 percent compliant by January 1, 2015, and will need to be 
90 percent compliant by January 1, 2016, and 100 percent 
compliant by January 1, 2017.
    For an asset to qualify as a HQLA, it must be liquid and 
readily marketable, a reliable source of funding in repo or 
sales markets, and not an obligation of a financial company. 
Examples of HQLAs include:
     U.S. Treasuries
     Government debt
     Investment grade corporate debt (limited to 15% of 
liquidity)
     Excess reserves held at the Federal Reserve
     Stocks included in the S&P; 500 (limited to 50% of 
liquidity)
     Limited amount of GSE-sponsored debt (Fannie Mae 
and Freddie Mac debt subject to a 15% haircut)--but excluding 
private label mortgage-backed securities
     Sovereign debt (20% risk weight)
    In their final rule to implement the LCR, the OCC, FDIC and 
Federal Reserve excluded municipal securities from HQLA 
treatment. Municipal securities are frequently issued by the 
transportation, housing, and healthcare authorities of state 
and local governments to raise funds to pay for projects 
ranging from bridges and schools to hospitals and recreational 
facilities. A significant number of investors participate in 
the $3.7 trillion municipal securities market: as of September 
2015, individuals directly held about $1.56 trillion of the 
outstanding municipal securities, and another approximately 
$1.04 trillion was held by money market funds, mutual funds, 
and closed end funds on behalf of primarily retail 
investors.\1\ The retail participation rate in the municipal 
securities market is approximately 70 percent.\2\
---------------------------------------------------------------------------
    \1\Securities Industry and Financial Markets Association, ``U.S. 
Municipal Securities Holders'' (Sept. 21, 2015), available at http://
www.sifma.org/uploadedFiles/Research/Statistics/StatisticsFiles/
Municipal-US-Municipal-Holders-SIFMA.xls?n=18927.
    \2\Id.
---------------------------------------------------------------------------
    Critics of the LCR argue that the exclusion of municipal 
securities from HQLA treatment will result in higher borrowing 
costs for state and local governments during times of economic 
stress. Additionally, dis-incentivizing financial institutions 
from holding investment-grade municipal securities could cause 
banks to retreat from the $3.7 trillion market, thereby forcing 
state and local governments to scale back spending on roads, 
schools and other infrastructure projects financed with the 
bonds.
    According to the American Society of Civil Engineers, state 
and local governments are facing an estimated $3.6 trillion 
outlay over the next 5 years to meet infrastructure needs.\3\ 
With such significant costs anticipated, it is important for 
municipalities and states to finance infrastructure projects at 
the lowest possible cost. Classifying investment-grade 
municipal securities as HQLA will help ensure low-cost 
infrastructure financing remains available for state and local 
governments.
---------------------------------------------------------------------------
    \3\http://www.infrastructurereportcard.org/executive-summary/
---------------------------------------------------------------------------
    Members of the Federal Reserve have been sympathetic to 
arguments about the liquidity profile of municipal securities 
and their treatment under the LCR. During a September 2014 
hearing before the Senate Banking Committee, Federal Reserve 
Governor Daniel Tarullo observed that some state and local debt 
is frequently traded and may be ``comparable to that of the 
very liquid corporate bonds'' that qualify as HQLAs.\4\ 
Additionally, during her February 2015 Humphrey-Hawkins 
testimony before the Financial Services Committee, Federal 
Reserve Chair Janet Yellen stated that she hoped ``to be able 
to identify some of those [municipal] bonds that would qualify 
for different LCR treatment. We are in discussions with the 
other banking agencies on that.''\5\
---------------------------------------------------------------------------
    \4\Andrew Ackman and Victoria McGrane, ``Fed Is Expected to Shift 
on Muni Bonds,'' The Wall Street Journal (Apr. 16, 2015) available at: 
http://www.wsj.com/articles/fed-is-expected-to-shift-on-muni-bonds-
1429232200.
    \5\``Monetary Policy and the State of the Economy'': Hearing before 
the Committee on Financial Services, 114th Cong. (2015).
---------------------------------------------------------------------------
    On May 21, 2015, the Federal Reserve issued a proposed rule 
adding certain general obligation state and municipal bonds to 
the definition of HQLAs, noting that its study of the issue 
suggested these instruments should qualify as HQLAs because 
``they have liquidity characteristics sufficiently similar to 
investment grade corporate bonds and other HQLA asset 
classes.''\6\ The proposed rule would allow investment grade, 
general obligation U.S. state and municipal bonds to be counted 
as HQLAs (specifically level 2B liquid assets) up to certain 
levels if they meet the same liquidity criteria that currently 
apply to corporate debt securities. The limits on the amount of 
a state or municipality's bonds that could qualify are based on 
the specific liquidity characteristics of the bonds.\7\
---------------------------------------------------------------------------
    \6\Board of Governors of the Federal Reserve System Press Release 
(May 21, 2015) available at: http://www.federalreserve.gov/newsevents/
press/bcreg/20150521a.htm.
    \7\Id.
---------------------------------------------------------------------------
    The proposed rule would apply only to entities subject to 
the LCR and supervised by the Federal Reserve, including (1) 
bank holding companies, certain savings and loan holding 
companies, and state member banks with $250 billion or more in 
total consolidated assets; (2) state member banks with $10 
billion or more in total consolidated assets that are 
subsidiaries of the above entities; and (3) bank holding 
companies and certain savings and loan holding companies with 
$50 billion or more in total consolidated assets, to which a 
less stringent LCR applies.
    There are limits to the effectiveness of the Federal 
Reserve's rulemaking, however, as neither the OCC nor the FDIC 
plan to follow the Federal Reserve's lead to amend their HQLA 
definitions to include municipal securities. This will likely 
create a bifurcated regulatory system as some entities national 
bank units are subject to the OCC's rule, which would still 
exclude municipal securities from favorable liquidity 
treatment.
    At an October 21, 2015, Financial Institutions and Consumer 
Credit Subcommittee hearing, Paul Kupiec of the American 
Enterprise Institute testified that, ``the change mandated by 
H.R. 2209 is appropriate and consistent with the public 
interest. There is no reason why high quality liquid bonds 
issued by U.S. states and municipalities should receive a lower 
standing than foreign sovereign debt with equivalent (or even 
lesser) credit quality and market liquidity.''

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Financial Institutions and Consumer Credit held a hearing 
examining matters relating to H.R. 2209 on October 21, 2015.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 3, 2015, and ordered H.R. 2209 to be reported 
favorably to the House without amendment by a recorded vote of 
56 yeas to 1 nay (recorded vote no. FC-68), a quorum being 
present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 56 yeas to 1 nay 
(Record vote no. FC-68), a quorum being present.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 2209 
will provide regulatory parity for certain municipal securities 
by requiring federal banking agencies (the Federal Deposit 
Insurance Corporation, the Federal Reserve Board, and the 
Office of the Comptroller of the Currency, to treat investment 
grade municipal securities that are liquid, readily marketable, 
and investment grade as of the calculation date as high-quality 
level 2A assets under the Liquidity Coverage Ratio (LCR).

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, January 15, 2016.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2209, a bill to 
require the appropriate federal banking agencies to treat 
certain municipal obligations as level 2A liquid assets, and 
for other purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sarah Puro.
            Sincerely,
                                        Robert A. Sunshine,
                                         (For Keith Hall, Director)
    Enclosure.

H.R. 2209--A bill to require the appropriate federal banking agencies 
        to treat certain municipal obligations as level 2A liquid 
        assets, and for other purposes

    H.R. 2209 would require the federal banking regulators--the 
Federal Deposit Insurance Corporation (FDIC), the Office of the 
Comptroller of the Currency (OCC), and the Federal Reserve--to 
revise regulations concerning the treatment of municipal bonds 
in bank portfolios.
    Specifically, H.R. 2209 would require the FDIC, the OCC, 
and the Federal Reserve to allow large banks with more than 
$250 billion in consolidated assets or $10 billion in foreign 
assets and any subsidiaries of those institutions with assets 
of at least $10 billion to treat highly rated municipal bonds 
as liquid assets. Liquid assets are used to calculate the 
amount of liquid reserves an institution must have to cover the 
cost of its operating cash flows for 30 days (this requirement 
is known as the liquidity coverage ratio). Based on information 
from the OCC, CBO estimates that less than 5 percent of the 
value of municipal bonds is held by banks subject to such 
regulations and it is very unlikely that small changes in the 
liquidity of assets held by certain large banks would lead to a 
bank failure resulting in costs to the Deposit Insurance Fund. 
As a result, CBO estimates that enacting this provision would 
have no significant cost.
    H.R. 2209 would require the FDIC, the OCC, and the Federal 
Reserve to amend current regulations. Costs incurred by the 
FDIC and the OCC are recorded in the budget as an increase in 
direct spending. Those two agencies are authorized to collect 
premiums and fees from insured depository institutions to cover 
administrative expenses. CBO expects that they would do so to 
recover any costs associated with amending current regulations 
under the bill. Costs to the Federal Reserve System are 
reflected on the federal budget as a reduction in remittances 
to the Treasury (which are recorded in the budget as revenues). 
CBO expects that any additional administrative costs to the 
Federal Reserve under the bill would be insignificant.
    Because enacting H.R. 2209 could affect direct spending and 
revenues, pay-as-you-go procedures apply. However, CBO 
estimates that the net effects would be negligible for each 
year. CBO estimates that enacting H.R. 2209 would not increase 
net direct spending or on-budget deficits by more than $5 
billion in any of the four consecutive 10-year periods 
beginning in 2026.
    H.R. 2209 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments.
    If the OCC or the FDIC increase fees or premiums to offset 
the costs associated with implementing the bill, H.R. 2209 
would increase the cost of an existing mandate on private 
entities required to pay those assessments. CBO expects that 
the incremental cost of the mandate would be small and would 
fall well below the annual threshold for private-sector 
mandates established in UMRA ($154 million in 2016, adjusted 
annually for inflation).
    The CBO staff contacts for this estimate are Sarah Puro 
(for the FDIC and the OCC), Nathaniel Frentz (for the Federal 
Reserve), and Logan Smith (for private-sector mandates). The 
estimate was approved by H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 2209 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 2209 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 2209 contains one directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Treatment of certain municipal debt obligations

    This Section amends the Federal Deposit Insurance Act to 
require federal banking agencies (the Federal Deposit Insurance 
Corporation, the Federal Reserve Board, and the Office of the 
Comptroller of the Currency) to treat certain municipal 
securities that are liquid, readily marketable, and investment 
grade as of the calculation date as high-quality level 2A 
liquid assets. Such change shall be implemented by amending the 
rule titled ``Liquidity Coverage Ratio: Liquidity Risk 
Measurement Standards; Final Rule.''

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *


  Sec. 18. (a) Representations of Deposit Insurance.--
          (1) Insured depository institutions.--
                  (A) In general.--Each insured depository 
                institution shall display at each place of 
                business maintained by that institution a sign 
                or signs relating to the insurance of the 
                deposits of the institution, in accordance with 
                regulations to be prescribed by the 
                Corporation.
                  (B) Statement to be included.--Each sign 
                required under subparagraph (A) shall include a 
                statement that insured deposits are backed by 
                the full faith and credit of the United States 
                Government.
          (2) Regulations.--The Corporation shall prescribe 
        regulations to carry out this subsection, including 
        regulations governing the substance of signs required 
        by paragraph (1) and the manner of display or use of 
        such signs.
          (3) Penalties.--For each day that an insured 
        depository institution continues to violate paragraph 
        (1) or any regulation issued under paragraph (2), it 
        shall be subject to a penalty of not more than $100, 
        which the Corporation may recover for its use.
          (4) False advertising, misuse of fdic names, and 
        misrepresentation to indicate insured status.--
                  (A) Prohibition on false advertising and 
                misuse of fdic names.--No person may represent 
                or imply that any deposit liability, 
                obligation, certificate, or share is insured or 
                guaranteed by the Corporation, if such deposit 
                liability, obligation, certificate, or share is 
                not insured or guaranteed by the Corporation--
                          (i) by using the terms ``Federal 
                        Deposit'', ``Federal Deposit 
                        Insurance'', ``Federal Deposit 
                        Insurance Corporation'', any 
                        combination of such terms, or the 
                        abbreviation ``FDIC'' as part of the 
                        business name or firm name of any 
                        person, including any corporation, 
                        partnership, business trust, 
                        association, or other business entity; 
                        or
                          (ii) by using such terms or any other 
                        terms, sign, or symbol as part of an 
                        advertisement, solicitation, or other 
                        document.
                  (B) Prohibition on misrepresentations of 
                insured status.--No person may knowingly 
                misrepresent--
                          (i) that any deposit liability, 
                        obligation, certificate, or share is 
                        insured, under this Act, if such 
                        deposit liability, obligation, 
                        certificate, or share is not so 
                        insured; or
                          (ii) the extent to which or the 
                        manner in which any deposit liability, 
                        obligation, certificate, or share is 
                        insured under this Act, if such deposit 
                        liability, obligation, certificate, or 
                        share is not so insured, to the extent 
                        or in the manner represented.
                  (C) Authority of the appropriate federal 
                banking agency.--The appropriate Federal 
                banking agency shall have enforcement authority 
                in the case of a violation of this paragraph by 
                any person for which the agency is the 
                appropriate Federal banking agency, or any 
                institution-affiliated party thereof.
                  (D) Corporation authority if the appropriate 
                federal banking agency fails to follow 
                recommendation.--
                          (i) Recommendation.--The Corporation 
                        may recommend in writing to the 
                        appropriate Federal banking agency that 
                        the agency take any enforcement action 
                        authorized under section 8 for purposes 
                        of enforcement of this paragraph with 
                        respect to any person for which the 
                        agency is the appropriate Federal 
                        banking agency or any institution-
                        affiliated party thereof.
                          (ii) Agency response.--If the 
                        appropriate Federal banking agency does 
                        not, within 30 days of the date of 
                        receipt of a recommendation under 
                        clause (i), take the enforcement action 
                        with respect to this paragraph 
                        recommended by the Corporation or 
                        provide a plan acceptable to the 
                        Corporation for responding to the 
                        situation presented, the Corporation 
                        may take the recommended enforcement 
                        action against such person or 
                        institution-affiliated party.
                  (E) Additional authority.--In addition to its 
                authority under subparagraphs (C) and (D), for 
                purposes of this paragraph, the Corporation 
                shall have, in the same manner and to the same 
                extent as with respect to a State nonmember 
                insured bank--
                          (i) jurisdiction over--
                                  (I) any person other than a 
                                person for which another agency 
                                is the appropriate Federal 
                                banking agency or any 
                                institution-affiliated party 
                                thereof; and
                                  (II) any person that aids or 
                                abets a violation of this 
                                paragraph by a person described 
                                in subclause (I); and
                          (ii) for purposes of enforcing the 
                        requirements of this paragraph, the 
                        authority of the Corporation under--
                                  (I) section 10(c) to conduct 
                                investigations; and
                                  (II) subsections (b), (c), 
                                (d) and (i) of section 8 to 
                                conduct enforcement actions.
                  (F) Other actions preserved.--No provision of 
                this paragraph shall be construed as barring 
                any action otherwise available, under the laws 
                of the United States or any State, to any 
                Federal or State agency or individual.
  (b) No insured depository institution shall pay any dividends 
on its capital stock or interest on its capital notes or 
debentures (if such interest is required to be paid only out of 
net profits) or distribute any of its capital assets while it 
remains in default in the payment of any assessment due to the 
Corporation; and any director or officer of any insured 
depository institution who participates in the declaration or 
payment of any such dividend or interest or in any such 
distribution shall, upon conviction, be fined not more than 
$1,000 or imprisoned not more than one year, or both: Provided, 
That, if such default is due to a dispute between the insured 
depository institution and the Corporation over the amount of 
such assessment, this subsection shall not apply if the insured 
depository institution deposits security satisfactory to the 
Corporation for payment upon final determination of the issue.
  (c)(1) Except with the prior written approval of the 
responsible agency, which shall in every case referred to in 
this paragraph be the Corporation, no insured depository 
institution shall--
          (A) merge or consolidate with any noninsured bank or 
        institution;
          (B) assume liability to pay any deposits (including 
        liabilities which would be ``deposits'' except for the 
        proviso in section 3(l)(5) of this Act) made in, or 
        similar liabilities of, any noninsured bank or 
        institution; or
          (C) transfer assets to any noninsured bank or 
        institution in consideration of the assumption of 
        liabilities for any portion of the deposits made in 
        such insured depository institution.
  (2) No insured depository institution shall merge or 
consolidate with any other insured depository institution or, 
either directly or indirectly, acquire the assets of, or assume 
liability to pay any deposits made in, any other insured 
depository institution except with the prior written approval 
of the responsible agency, which shall be--
          (A) the Comptroller of the Currency if the acquiring, 
        assuming, or resulting bank is to be a national bank or 
        a Federal savings association;
          (B) the Board of Governors of the Federal Reserve 
        System if the acquiring, assuming, or resulting bank is 
        to be a State member bank; and
          (C) the Corporation if the acquiring, assuming, or 
        resulting bank is to be a State nonmember insured bank 
        or a State savings association.
  (3) Notice of any proposed transaction for which approval is 
required under paragraph (1) or (2) (referred to hereafter in 
this subsection as a ``merger transaction'') shall, unless the 
responsible agency finds that it must act immediately in order 
to prevent the probable default of one of the banks or savings 
associations involved, be published--
          (A) prior to the granting of approval of such 
        transaction,
          (B) in a form approved by the responsible agency,
          (C) at appropriate intervals during a period at least 
        as long as the period allowed for furnishing reports 
        under paragraph (4) of this subsection, and
          (D) in a newspaper of general circulation in the 
        community or communities where the main offices of the 
        banks or savings associations involved are located, or, 
        if there is no such newspaper in any such community, 
        then in the newspaper of general circulation published 
        nearest thereto.
          (4) Reports on competitive factors.--
                  (A) Request for report.--In the interests of 
                uniform standards and subject to subparagraph 
                (B), before acting on any application for 
                approval of a merger transaction, the 
                responsible agency shall--
                          (i) request a report on the 
                        competitive factors involved from the 
                        Attorney General of the United States; 
                        and
                          (ii) provide a copy of the request to 
                        the Corporation (when the Corporation 
                        is not the responsible agency).
                  (B) Furnishing of report.--The report 
                requested under subparagraph (A) shall be 
                furnished by the Attorney General to the 
                responsible agency--
                          (i) not later than 30 calendar days 
                        after the date on which the Attorney 
                        General received the request; or
                          (ii) not later than 10 calendar days 
                        after such date, if the requesting 
                        agency advises the Attorney General 
                        that an emergency exists requiring 
                        expeditious action.
                  (C) Exceptions.--A responsible agency may not 
                be required to request a report under 
                subparagraph (A) if--
                          (i) the responsible agency finds that 
                        it must act immediately in order to 
                        prevent the probable failure of 1 of 
                        the insured depository institutions 
                        involved in the merger transaction; or
                          (ii) the merger transaction involves 
                        solely an insured depository 
                        institution and 1 or more of the 
                        affiliates of such depository 
                        institution.
  (5) The responsible agency shall not approve--
          (A) any proposed merger transaction which would 
        result in a monopoly, or which would be in furtherance 
        of any combination or conspiracy to monopolize or to 
        attempt to monopolize the business of banking in any 
        part of the United States, or
          (B) any other proposed merger transaction whose 
        effect in any section of the country may be 
        substantially to lessen competition, or to tend to 
        create a monopoly, or which in any other manner would 
        be in restraint of trade, unless it finds that the 
        anticompetitive effects of the proposed transaction are 
        clearly outweighed in the public interest by the 
        probable effect of the transaction in meeting the 
        convenience and needs of the community to be served.
In every case, the responsible agency shall take into 
consideration the financial and managerial resources and future 
prospects of the existing and proposed institutions, the 
convenience and needs of the community to be served, and the 
risk to the stability of the United States banking or financial 
system.
  (6) The responsible agency shall immediately notify the 
Attorney General of any approval by it pursuant to this 
subsection of a proposed merger transaction. If the agency has 
found that it must act immediately to prevent the probable 
failure of one of the insured depository institutions involved, 
or if the proposed merger transaction is solely between an 
insured depository institution and 1 or more of its affiliates, 
and the report on the competitive factors has been dispensed 
with, the transaction may be consummated immediately upon 
approval by the agency. If the agency has advised the Attorney 
General under paragraph (4)(B)(ii) of the existence of an 
emergency requiring expeditious action and has requested a 
report on the competitive factors within 10 days, the 
transaction may not be consummated before the fifth calendar 
day after the date of approval by the agency. In all other 
cases, the transaction may not be consummated before the 
thirtieth calendar day after the date of approval by the agency 
or, if the agency has not received any adverse comment from the 
Attorney General of the United States relating to competitive 
factors, such shorter period of time as may be prescribed by 
the agency with the concurrence of the Attorney General, but in 
no event less than 15 calendar days after the date of approval.
  (7)(A) Any action brought under the antitrust laws arising 
out of a merger transaction shall be commenced prior to the 
earliest time under paragraph (6) at which a merger transaction 
approved under paragraph (5) might be consummated. The 
commencement of such an action shall stay the effectiveness of 
the agency's approval unless the court shall otherwise 
specifically order. In any such action, the court shall review 
de novo the issues presented.
  (B) In any judicial proceeding attacking a merger transaction 
approved under paragraph (5) on the ground that the merger 
transaction alone and of itself constituted a violation of any 
antitrust laws other than section 2 of the Act of July 2, 1890 
(section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), the 
standards applied by the court shall be identical with those 
that the banking agencies are directed to apply under paragraph 
(5).
  (C) Upon the consummation of a merger transaction in 
compliance with this subsection and after the termination of 
any antitrust litigation commenced within the period prescribed 
in this paragraph, or upon the termination of such period if no 
such litigation is commenced therein, the transaction may not 
thereafter be attacked in any judicial proceeding on the ground 
that it alone and of itself constituted a violation of any 
antitrust laws other than section 2 of the Act of July 2, 1890 
(section 2 of the Sherman Antitrust Act, 15 U.S.C. 2), but 
nothing in this subsection shall exempt any bank or savings 
association resulting from a merger transaction from complying 
with the antitrust laws after the consummation of such 
transaction.
  (D) In any action brought under the antitrust laws arising 
out of a merger transaction approved by a Federal supervisory 
agency pursuant to this subsection, such agency, and any State 
banking supervisory agency having jurisdiction within the State 
involved, may appear as a party of its own motion and as of 
right, and be represented by its counsel.
  (8) For the purposes of this subsection, the term ``antitrust 
laws'' means the Act of July 2, 1890 (the Sherman Antitrust 
Act, 15 U.S.C. 1-7), the Act of October 15, 1914 (the Clayton 
Act, 15 U.S.C. 12-27), and any other Acts in pari materia.
  (9) Each of the responsible agencies shall include in its 
annual report to the Congress a description of each merger 
transaction approved by it during the period covered by the 
report, along with--
          (A) the name and total resources of each bank or 
        savings association involved;
          (B) whether a report was submitted by the Attorney 
        General under paragraph (4), and, if so, a summary by 
        the Attorney General of the substance of such report; 
        and
          (C) a statement by the responsible agency of the 
        basis for its approval.
  (10) Until June 30, 1976, the responsible agency shall not 
grant any approval required by law which has the practical 
effect of permitting a conversion from the mutual to the stock 
form of organization, including approval of any application 
pending on the date of enactment of this subsection, except 
that this sentence shall not be deemed to limit now or 
hereafter the authority of the responsible agency to grant 
approvals in cases where the responsible agency finds that it 
must act in order to maintain the safety, soundness, and 
stability of an insured depository institution. The responsible 
agency may by rule, regulation, or otherwise and under such 
civil penalties (which shall be cumulative to any other 
remedies) as it may prescribe take whatever action it deems 
necessary or appropriate to implement or enforce this 
subsection.
          (11) Money laundering.--In every case, the 
        responsible agency, shall take into consideration the 
        effectiveness of any insured depository institution 
        involved in the proposed merger transaction in 
        combatting money laundering activities, including in 
        overseas branches.
  (12) The provisions of this subsection do not apply to any 
merger transaction involving a foreign bank if no party to the 
transaction is principally engaged in business in the United 
States.
  (13)(A) Except as provided in subparagraph (B), the 
responsible agency may not approve an application for an 
interstate merger transaction if the resulting insured 
depository institution (including all insured depository 
institutions which are affiliates of the resulting insured 
depository institution), upon consummation of the transaction, 
would control more than 10 percent of the total amount of 
deposits of insured depository institutions in the United 
States.
  (B) Subparagraph (A) shall not apply to an interstate merger 
transaction that involves 1 or more insured depository 
institutions in default or in danger of default, or with 
respect to which the Corporation provides assistance under 
section 13.
  (C) In this paragraph--
          (i) the term ``interstate merger transaction'' means 
        a merger transaction involving 2 or more insured 
        depository institutions that have different home States 
        and that are not affiliates; and
          (ii) the term ``home State'' means--
                  (I) with respect to a national bank, the 
                State in which the main office of the bank is 
                located;
                  (II) with respect to a State bank or State 
                savings association, the State by which the 
                State bank or State savings association is 
                chartered; and
                  (III) with respect to a Federal savings 
                association, the State in which the home office 
                (as defined by the regulations of the Director 
                of the Office of Thrift Supervision, or, on and 
                after the transfer date, the Comptroller of the 
                Currency) of the Federal savings association is 
                located.
  (d)(1) No State nonmember insured bank shall establish and 
operate any new domestic branch unless it shall have the prior 
written consent of the Corporation, and no State nonmember 
insured bank shall move its main office or any such branch from 
one location to another without such consent. No foreign bank 
may move any insured branch from one location to another 
without such consent. The factors to be considered in granting 
or withholding the consent of the Corporation under this 
subsection shall be those enumerated in section 6 of this Act.
  (2) No State nonmember insured bank shall establish or 
operate any foreign branch, except with the prior written 
consent of the Corporation and upon such conditions and 
pursuant to such regulations as the Corporation may prescribe 
from time to time.
          (3) Exclusive authority for additional branches.--
                  (A) In general.--Effective June 1, 1997, a 
                State nonmember bank may not acquire, 
                establish, or operate a branch in any State 
                other than the bank's home State (as defined in 
                section 44(f)(4)) or a State in which the bank 
                already has a branch unless the acquisition, 
                establishment, or operation of a branch in such 
                State by a State nonmember bank is authorized 
                under this subsection or section 13(f), 13(k), 
                or 44.
                  (B) Retention of branches.--In the case of a 
                State nonmember bank which relocates the main 
                office of such bank from 1 State to another 
                State after May 31, 1997, the bank may retain 
                and operate branches within the State which was 
                the bank's home State (as defined in section 
                44(f)(4)) before the relocation of such office 
                only to the extent the bank would be 
                authorized, under this section or any other 
                provision of law referred to in subparagraph 
                (A), to acquire, establish, or commence to 
                operate a branch in such State if--
                          (i) the bank had no branches in such 
                        State; or
                          (ii) the branch resulted from--
                                  (I) an interstate merger 
                                transaction approved pursuant 
                                to section 44; or
                                  (II) a transaction after May 
                                31, 1997, pursuant to which the 
                                bank received assistance from 
                                the Corporation under section 
                                13(c).
          (4) State ``opt-in'' election to permit interstate 
        branching through de novo branches.--
                  (A) In general.--Subject to subparagraph (B), 
                the Corporation may approve an application by 
                an insured State nonmember bank to establish 
                and operate a de novo branch in a State (other 
                than the bank's home State) in which the bank 
                does not maintain a branch if--
                          (i) the law of the State in which the 
                        branch is located, or is to be located, 
                        would permit establishment of the 
                        branch, if the bank were a State bank 
                        chartered by such State; and
                          (ii) the conditions established in, 
                        or made applicable to this paragraph 
                        by, subparagraph (B) are met.
                  (B) Conditions on establishment and operation 
                of interstate branch.--
                          (i) Establishment.--An application by 
                        an insured State nonmember bank to 
                        establish and operate a de novo branch 
                        in a host State shall be subject to the 
                        same requirements and conditions to 
                        which an application for a merger 
                        transaction is subject under paragraphs 
                        (1), (3), and (4) of section 44(b).
                          (ii) Operation.--Subsections (c) and 
                        (d)(2) of section 44 shall apply with 
                        respect to each branch of an insured 
                        State nonmember bank which is 
                        established and operated pursuant to an 
                        application approved under this 
                        paragraph in the same manner and to the 
                        same extent such provisions of such 
                        section apply to a branch of a State 
                        bank which resulted from a merger 
                        transaction under such section 44.
                  (C) De novo branch defined.--For purposes of 
                this paragraph, the term ``de novo branch'' 
                means a branch of a State bank which--
                          (i) is originally established by the 
                        State bank as a branch; and
                          (ii) does not become a branch of such 
                        bank as a result of--
                                  (I) the acquisition by the 
                                bank of an insured depository 
                                institution or a branch of an 
                                insured depository institution; 
                                or
                                  (II) the conversion, merger, 
                                or consolidation of any such 
                                institution or branch.
                  (D) Home state defined.--The term ``home 
                State'' means the State by which a State bank 
                is chartered.
                  (E) Host state defined.--The term ``host 
                State'' means, with respect to a bank, a State, 
                other than the home State of the bank, in which 
                the bank maintains, or seeks to establish and 
                maintain, a branch.
  (e) The Corporation may require any insured depository 
institution to provide protection and indemnity against 
burglary, defalcation, and other similar insurable losses. 
Whenever any insured depository institution refuses to comply 
with any such requirement the Corporation may contract for such 
protection and indemnity and add the cost thereof to the 
assessment otherwise payable by such bank.
  (f) Whenever any insured depository institution (except a 
national bank), after written notice of the recommendations of 
the Corporation based on a report of examination of such 
insured depository institution by an examiner of the 
Corporation, shall fail to comply with such recommendations 
within one hundred and twenty days after such notice, the 
Corporation shall have the power, and is hereby authorized, to 
publish only such part of such report of examination as relates 
to any recommendation not complied with: Provided, That notice 
of intention to make such publication shall be given to the 
insured depository institution at least ninety days before such 
publication is made.
  (h) Penalty for Failure to Timely Pay Assessments.--
          (1) In general.--Subject to paragraph (3), any 
        insured depository institution which fails or refuses 
        to pay any assessment shall be subject to a penalty in 
        an amount of not more than 1 percent of the amount of 
        the assessment due for each day that such violation 
        continues.
          (2) Exception in case of dispute.--Paragraph (1) 
        shall not apply if--
                  (A) the failure to pay an assessment is due 
                to a dispute between the insured depository 
                institution and the Corporation over the amount 
                of such assessment; and
                  (B) the insured depository institution 
                deposits security satisfactory to the 
                Corporation for payment upon final 
                determination of the issue.
          (3) Special rule for small assessment amounts.--If 
        the amount of the assessment which an insured 
        depository institution fails or refuses to pay is less 
        than $10,000 at the time of such failure or refusal, 
        the amount of any penalty to which such institution is 
        subject under paragraph (1) shall not exceed $100 for 
        each day that such violation continues.
          (4) Authority to modify or remit penalty.--The 
        Corporation, in the sole discretion of the Corporation, 
        may compromise, modify or remit any penalty which the 
        Corporation may assess or has already assessed under 
        paragraph (1) upon a finding that good cause prevented 
        the timely payment of an assessment.
  (i)(1) No insured State nonmember bank shall, without the 
prior consent of the Corporation, reduce the amount or retire 
any part of its common or preferred capital stock, or retire 
any part of its capital notes or debentures.
  (2) No insured Federal depository institution shall convert 
into an insured State depository institution if its capital 
stock or its surplus will be less than the capital stock or 
surplus, respectively, of the converting bank at the time of 
the shareholder's meeting approving such conversion, without 
the prior written consent of--
          (A) the Board of Governors of the Federal Reserve 
        System if the resulting bank is to be a State member 
        bank;
          (B) the Corporation if the resulting bank is to be a 
        State nonmember insured bank; and
          (C) the Corporation if the resulting institution is 
        to be an insured State savings association.
  (3) Without the prior written consent of the Corporation, no 
insured depository institution shall convert into a noninsured 
bank or institution.
  (4) In granting or withholding consent under this subsection, 
the responsible agency shall consider--
          (A) the financial history and condition of the bank,
          (B) the adequacy of its capital structure,
          (C) its future earnings prospects,
          (D) the general character and fitness of its 
        management,
          (E) the convenience and needs of the community to be 
        served, and
          (F) whether or not its corporate powers are 
        consistent with the purposes of this Act.
  (j) Restrictions on Transactions With Affiliates and 
Insiders.--
          (1) Transactions with affiliates.--
                  (A) In general.--Sections 23A and 23B of the 
                Federal Reserve Act shall apply with respect to 
                every nonmember insured bank in the same manner 
                and to the same extent as if the nonmember 
                insured bank were a member bank.
                  (B) Affiliate defined.--For the purpose of 
                subparagraph (A), any company that would be an 
                affiliate (as defined in sections 23A and 23B) 
                of a nonmember insured bank if the nonmember 
                insured bank were a member bank shall be deemed 
                to be an affiliate of that nonmember insured 
                bank.
          (2) Extensions of credit to officers, directors, and 
        principal shareholders.--Subsections (g) and (h) of 
        section 22 of the Federal Reserve Act shall apply with 
        respect to every nonmember insured bank in the same 
        manner and to the same extent as if the nonmember 
        insured bank were a member bank.
          (3) Avoiding extraterritorial application to foreign 
        banks.--
                  (A) Transactions with affiliates.--Paragraph 
                (1) shall not apply with respect to a foreign 
                bank solely because the foreign bank has an 
                insured branch.
                  (B) Extensions of credit to officers, 
                directors, and principal shareholders.--
                Paragraph (2) shall not apply with respect to a 
                foreign bank solely because the foreign bank 
                has an insured branch, but shall apply with 
                respect to the insured branch.
                  (C) Foreign bank defined.--For purposes of 
                this paragraph, the term ``foreign bank'' has 
                the same meaning as in section 1(b)(7) of the 
                International Banking Act of 1978.
  (k) Authority To Regulate or Prohibit Certain Forms of 
Benefits to Institution-Affiliated Parties.--
          (1) Golden parachutes and indemnification payments.--
        The Corporation may prohibit or limit, by regulation or 
        order, any golden parachute payment or indemnification 
        payment.
          (2) Factors to be taken into account.--The 
        Corporation shall prescribe, by regulation, the factors 
        to be considered by the Corporation in taking any 
        action pursuant to paragraph (1) which may include such 
        factors as the following:
                  (A) Whether there is a reasonable basis to 
                believe that the institution-affiliated party 
                has committed any fraudulent act or omission, 
                breach of trust or fiduciary duty, or insider 
                abuse with regard to the depository institution 
                or covered company that has had a material 
                affect on the financial condition of the 
                institution.
                  (B) Whether there is a reasonable basis to 
                believe that the institution-affiliated party 
                is substantially responsible for--
                          (i) the insolvency of the depository 
                        institution or covered company;
                          (ii) the appointment of a conservator 
                        or receiver for the depository 
                        institution; or
                          (iii) the troubled condition of the 
                        depository institution (as defined in 
                        the regulations prescribed pursuant to 
                        section 32(f)).
                  (C) Whether there is a reasonable basis to 
                believe that the institution-affiliated party 
                has materially violated any applicable Federal 
                or State banking law or regulation that has had 
                a material affect on the financial condition of 
                the institution.
                  (D) Whether there is a reasonable basis to 
                believe that the institution-affiliated party 
                has violated or conspired to violate--
                          (i) section 215, 656, 657, 1005, 
                        1006, 1007, 1014, 1032, or 1344 of 
                        title 18, United States Code; or
                          (ii) section 1341 or 1343 of such 
                        title affecting a federally insured 
                        financial institution.
                  (E) Whether the institution-affiliated party 
                was in a position of managerial or fiduciary 
                responsibility.
                  (F) The length of time the party was 
                affiliated with the insured depository 
                institution or covered company, and the degree 
                to which--
                          (i) the payment reasonably reflects 
                        compensation earned over the period of 
                        employment; and
                          (ii) the compensation involved 
                        represents a reasonable payment for 
                        services rendered.
          (3) Certain payments prohibited.--No insured 
        depository institution or covered company may prepay 
        the salary or any liability or legal expense of any 
        institution-affiliated party if such payment is made--
                  (A) in contemplation of the insolvency of 
                such institution or covered company or after 
                the commission of an act of insolvency; and
                  (B) with a view to, or has the result of--
                          (i) preventing the proper application 
                        of the assets of the institution to 
                        creditors; or
                          (ii) preferring one creditor over 
                        another.
          (4) Golden parachute payment defined.--For purposes 
        of this subsection--
                  (A) In general.--The term ``golden parachute 
                payment'' means any payment (or any agreement 
                to make any payment) in the nature of 
                compensation by any insured depository 
                institution or covered company for the benefit 
                of any institution-affiliated party pursuant to 
                an obligation of such institution or covered 
                company that--
                          (i) is contingent on the termination 
                        of such party's affiliation with the 
                        institution or covered company; and
                          (ii) is received on or after the date 
                        on which--
                                  (I) the insured depository 
                                institution or covered company, 
                                or any insured depository 
                                institution subsidiary of such 
                                covered company, is insolvent;
                                  (II) any conservator or 
                                receiver is appointed for such 
                                institution;
                                  (III) the institution's 
                                appropriate Federal banking 
                                agency determines that the 
                                insured depository institution 
                                is in a troubled condition (as 
                                defined in the regulations 
                                prescribed pursuant to section 
                                32(f));
                                  (IV) the insured depository 
                                institution has been assigned a 
                                composite rating by the 
                                appropriate Federal banking 
                                agency or the Corporation of 4 
                                or 5 under the Uniform 
                                Financial Institutions Rating 
                                System; or
                                  (V) the insured depository 
                                institution is subject to a 
                                proceeding initiated by the 
                                Corporation to terminate or 
                                suspend deposit insurance for 
                                such institution.
                  (B) Certain payments in contemplation of an 
                event.--Any payment which would be a golden 
                parachute payment but for the fact that such 
                payment was made before the date referred to in 
                subparagraph (A)(ii) shall be treated as a 
                golden parachute payment if the payment was 
                made in contemplation of the occurrence of an 
                event described in any subclause of such 
                subparagraph.
                  (C) Certain payments not included.--The term 
                ``golden parachute payment'' shall not 
                include--
                          (i) any payment made pursuant to a 
                        retirement plan which is qualified (or 
                        is intended to be qualified) under 
                        section 401 of the Internal Revenue 
                        Code of 1986 or other nondiscriminatory 
                        benefit plan;
                          (ii) any payment made pursuant to a 
                        bona fide deferred compensation plan or 
                        arrangement which the Board determines, 
                        by regulation or order, to be 
                        permissible; or
                          (iii) any payment made by reason of 
                        the death or disability of an 
                        institution-affiliated party.
          (5) Other definitions.--For purposes of this 
        subsection--
                  (A) Indemnification payment.--Subject to 
                paragraph (6), the term ``indemnification 
                payment'' means any payment (or any agreement 
                to make any payment) by any insured depository 
                institution or covered company for the benefit 
                of any person who is or was an institution-
                affiliated party, to pay or reimburse such 
                person for any liability or legal expense with 
                regard to any administrative proceeding or 
                civil action instituted by the appropriate 
                Federal banking agency which results in a final 
                order under which such person--
                          (i) is assessed a civil money 
                        penalty;
                          (ii) is removed or prohibited from 
                        participating in conduct of the affairs 
                        of the insured depository institution; 
                        or
                          (iii) is required to take any 
                        affirmative action described in section 
                        8(b)(6) with respect to such 
                        institution.
                  (B) Liability or legal expense.--The term 
                ``liability or legal expense'' means--
                          (i) any legal or other professional 
                        expense incurred in connection with any 
                        claim, proceeding, or action;
                          (ii) the amount of, and any cost 
                        incurred in connection with, any 
                        settlement of any claim, proceeding, or 
                        action; and
                          (iii) the amount of, and any cost 
                        incurred in connection with, any 
                        judgment or penalty imposed with 
                        respect to any claim, proceeding, or 
                        action.
                  (C) Payment.--The term ``payment'' includes--
                          (i) any direct or indirect transfer 
                        of any funds or any asset; and
                          (ii) any segregation of any funds or 
                        assets for the purpose of making, or 
                        pursuant to an agreement to make, any 
                        payment after the date on which such 
                        funds or assets are segregated, without 
                        regard to whether the obligation to 
                        make such payment is contingent on--
                                  (I) the determination, after 
                                such date, of the liability for 
                                the payment of such amount; or
                                  (II) the liquidation, after 
                                such date, of the amount of 
                                such payment.
                  (D) Covered company.--The term ``covered 
                company'' means any depository institution 
                holding company (including any company required 
                to file a report under section 4(f)(6) of the 
                Bank Holding Company Act of 1956), or any other 
                company that controls an insured depository 
                institution.
          (6) Certain commercial insurance coverage not treated 
        as covered benefit payment.--No provision of this 
        subsection shall be construed as prohibiting any 
        insured depository institution or covered company, from 
        purchasing any commercial insurance policy or fidelity 
        bond, except that, subject to any requirement described 
        in paragraph (5)(A)(iii), such insurance policy or bond 
        shall not cover any legal or liability expense of the 
        institution or covered company which is described in 
        paragraph (5)(A).
  (l) When authorized by State law, a State nonmember insured 
bank may, but only with the prior written consent of the 
Corporation and upon such conditions and under such regulations 
as the Corporation may prescribe from time to time, acquire and 
hold, directly or indirectly, stock or other evidences of 
ownership in one or more banks or other entities organized 
under the law of a foreign country or a dependency or insular 
possession of the United States and not engaged, directly or 
indirectly, in any activity in the United States except as, in 
the judgment of the Board of Directors, shall be incidental to 
the international or foreign business of such foreign bank or 
entity; and, notwithstanding the provisions of subsection (j) 
of this section, such State nonmember insured bank may, as to 
such foreign bank or entity, engage in transactions that would 
otherwise be covered thereby, but only in the manner and within 
the limit prescribed by the Corporation by general or specific 
regulation or ruling.
  (m) Activities of Savings Associations and Their 
Subsidiaries.--
          (1) Procedures.--When an insured savings association 
        establishes or acquires a subsidiary or when an insured 
        savings association elects to conduct any new activity 
        through a subsidiary that the insured savings 
        association controls, the insured savings association--
                  (A) shall notify the Corporation or the 
                Comptroller of the Currency, as appropriate, 
                not less than 30 days prior to the 
                establishment, or acquisition, of any such 
                subsidiary, and not less than 30 days prior to 
                the commencement of any such activity, and in 
                either case shall provide at that time such 
                information as each such agency may, by 
                regulation, require; and
                  (B) shall conduct the activities of the 
                subsidiary in accordance with regulations of 
                the Comptroller of the Currency and orders of 
                the Corporation and the Comptroller of the 
                Currency.
          (2) Enforcement powers.--With respect to any 
        subsidiary of an insured savings association:
                  (A) the Corporation and the Comptroller of 
                the Currency, as appropriate, shall each have, 
                with respect to such subsidiary, the respective 
                powers that each has with respect to the 
                insured savings association pursuant to this 
                section or section 8; and
                  (B) the Corporation or the Comptroller of the 
                Currency, as appropriate, may determine, after 
                notice and opportunity for hearing, that the 
                continuation by the insured savings association 
                of its ownership or control of, or its 
                relationship to, the subsidiary--
                          (i) constitutes a serious risk to the 
                        safety, soundness, or stability of the 
                        insured savings association, or
                          (ii) is inconsistent with sound 
                        banking principles or with the purposes 
                        of this Act.
                Upon making any such determination, the 
                Corporation or the Office of the Comptroller of 
                the Currency, as appropriate, shall have 
                authority to order the insured savings 
                association to divest itself of control of the 
                subsidiary. The Corporation or the Comptroller 
                of the Currency, as appropriate, may take any 
                other corrective measures with respect to the 
                subsidiary, including the authority to require 
                the subsidiary to terminate the activities or 
                operations posing such risks, as the 
                Corporation or the Comptroller of the Currency, 
                respectively, may deem appropriate.
          (3) Activities incompatible with deposit insurance.--
                  (A) In general.--The Corporation may 
                determine by regulation or order that any 
                specific activity poses a serious threat to the 
                Deposit Insurance Fund. Prior to adopting any 
                such regulation, the Corporation shall, in the 
                case of a Federal savings association, consult 
                with the Comptroller of the Currency and shall 
                provide appropriate State supervisors the 
                opportunity to comment thereon, and the 
                Corporation shall specifically take such 
                comments into consideration. Any such 
                regulation shall be issued in accordance with 
                section 553 of title 5, United States Code. If 
                the Board of Directors makes such a 
                determination with respect to an activity, the 
                Corporation shall have authority to order that 
                no savings association may engage in the 
                activity directly.
                  (B) Authority of comptroller of the 
                currency.--This section does not limit the 
                authority of the Comptroller of the Currency to 
                issue regulations to promote safety and 
                soundness, or to enforce compliance as to 
                Federal savings associations with other 
                applicable laws.
                  (C) Additional authority of fdic to prevent 
                serious risks to insurance fund.--
                Notwithstanding subparagraph (A), the 
                Corporation may prescribe and enforce such 
                regulations and issue such orders as the 
                Corporation determines to be necessary to 
                prevent actions or practices of savings 
                associations that pose a serious threat to the 
                Deposit Insurance Fund.
          (4) ``Subsidiary'' defined.--As used in this 
        subsection, the term ``subsidiary'' does not include an 
        insured depository institution.
          (5) Applicability to certain savings banks.--
        Subparagraphs (A) and (B) of paragraph (1) of this 
        subsection do not apply to--
                  (A) any Federal savings bank that was 
                chartered prior to October 15, 1982, as a 
                savings bank under State law, or
                  (B) a savings association that acquired its 
                principal assets from an institution that was 
                chartered prior to October 15, 1982, as a 
                savings bank under State law.
  (n) Calculation of Capital.--No appropriate Federal banking 
agency shall allow any insured depository institution to 
include an unidentifiable intangible asset in its calculation 
of compliance with the appropriate capital standard, if such 
unidentifiable intangible asset was acquired after April 12, 
1989, except to the extent permitted under section 5(t) of the 
Home Owners' Loan Act.
  (o) Real Estate Lending.--
          (1) Uniform regulations.--Not more than 9 months 
        after the date of enactment of the Federal Deposit 
        Insurance Corporation Improvement Act of 1991, each 
        appropriate Federal banking agency shall adopt uniform 
        regulations prescribing standards for extensions of 
        credit that are--
                  (A) secured by liens on interests in real 
                estate; or
                  (B) made for the purpose of financing the 
                construction of a building or other 
                improvements to real estate.
          (2) Standards.--
                  (A) Criteria.--In prescribing standards under 
                paragraph (1), the agencies shall consider--
                          (i) the risk posed to the Deposit 
                        Insurance Fund by such extensions of 
                        credit;
                          (ii) the need for safe and sound 
                        operation of insured depository 
                        institutions; and
                          (iii) the availability of credit.
                  (B) Variations permitted.--In prescribing 
                standards under paragraph (1), the appropriate 
                Federal banking agencies may differentiate 
                among types of loans--
                          (i) as may be required by Federal 
                        statute;
                          (ii) as may be warranted, based on 
                        the risk to the Deposit Insurance Fund; 
                        or
                          (iii) as may be warranted, based on 
                        the safety and soundness of the 
                        institutions.
          (3) Loan evaluation standard.--No appropriate Federal 
        banking agency shall adversely evaluate an investment 
        or a loan made by an insured depository institution, or 
        consider such a loan to be nonperforming, solely 
        because the loan is made to or the investment is in 
        commercial, residential, or industrial property, unless 
        such investment or loan may affect the institution's 
        safety and soundness.
          (4) Effective date.--The regulations adopted under 
        paragraph (1) shall become effective not later than 15 
        months after the date of enactment of the Federal 
        Deposit Insurance Corporation Improvement Act of 1991. 
        Such regulations shall continue in effect except as 
        uniformly amended by the appropriate Federal banking 
        agencies, acting in concert.
  (p) Periodic Review of Capital Standards.--Each appropriate 
Federal banking agency shall, in consultation with the other 
Federal banking agencies, biennially review its capital 
standards for insured depository institutions to determine 
whether those standards require sufficient capital to 
facilitate prompt corrective action to prevent or minimize loss 
to the Deposit Insurance Fund, consistent with section 38.
  (q) Sovereign Risk.--Section 25C of the Federal Reserve Act 
shall apply to every nonmember insured bank in the same manner 
and to the same extent as if the nonmember insured bank were a 
member bank.
  (r) Subsidiary Depository Institutions as Agents for Certain 
Affiliates.--
          (1) In general.--Any bank subsidiary of a bank 
        holding company may receive deposits, renew time 
        deposits, close loans, service loans, and receive 
        payments on loans and other obligations as an agent for 
        a depository institution affiliate.
          (2) Bank acting as agent is not a branch.--
        Notwithstanding any other provision of law, a bank 
        acting as an agent in accordance with paragraph (1) for 
        a depository institution affiliate shall not be 
        considered to be a branch of the affiliate.
          (3) Prohibitions on activities.--A depository 
        institution may not--
                  (A) conduct any activity as an agent under 
                paragraph (1) or (6) which such institution is 
                prohibited from conducting as a principal under 
                any applicable Federal or State law; or
                  (B) as a principal, have an agent conduct any 
                activity under paragraph (1) or (6) which the 
                institution is prohibited from conducting under 
                any applicable Federal or State law.
          (4) Existing authority not affected.--No provision of 
        this subsection shall be construed as affecting--
                  (A) the authority of any depository 
                institution to act as an agent on behalf of any 
                other depository institution under any other 
                provision of law; or
                  (B) whether a depository institution which 
                conducts any activity as an agent on behalf of 
                any other depository institution under any 
                other provision of law shall be considered to 
                be a branch of such other institution.
          (5) Agency relationship required to be consistent 
        with safe and sound banking practices.--An agency 
        relationship between depository institutions under 
        paragraph (1) or (6) shall be on terms that are 
        consistent with safe and sound banking practices and 
        all applicable regulations of any appropriate Federal 
        banking agency.
          (6) Affiliated insured savings associations.--An 
        insured savings association which was an affiliate of a 
        bank on July 1, 1994, may conduct activities as an 
        agent on behalf of such bank in the same manner as an 
        insured bank affiliate of such bank may act as agent 
        for such bank under this subsection to the extent such 
        activities are conducted only in--
                  (A) any State in which--
                          (i) the bank is not prohibited from 
                        operating a branch under any provision 
                        of Federal or State law; and
                          (ii) the savings association 
                        maintained an office or branch and 
                        conducted business as of July 1, 1994; 
                        or
                  (B) any State in which--
                          (i) the bank is not expressly 
                        prohibited from operating a branch 
                        under a State law described in section 
                        44(a)(2); and
                          (ii) the savings association 
                        maintained a main office and conducted 
                        business as of July 1, 1994.
  (s) Prohibition on Certain Affiliations.--
          (1) In general.--No depository institution may be an 
        affiliate of, be sponsored by, or accept financial 
        support, directly or indirectly, from any Government-
        sponsored enterprise.
          (2) Exception for members of a federal home loan 
        bank.--Paragraph (1) shall not apply with respect to 
        the membership of a depository institution in a Federal 
        home loan bank.
          (3) Routine business financing.--Paragraph (1) shall 
        not apply with respect to advances or other forms of 
        financial assistance provided by a Government-sponsored 
        enterprise pursuant to the statutes governing such 
        enterprise.
          (4) Student loans.--
                  (A) In general.--This subsection shall not 
                apply to any arrangement between the Holding 
                Company (or any subsidiary of the Holding 
                Company other than the Student Loan Marketing 
                Association) and a depository institution, if 
                the Secretary approves the affiliation and 
                determines that--
                          (i) the reorganization of such 
                        Association in accordance with section 
                        440 of the Higher Education Act of 
                        1965, as amended, will not be adversely 
                        affected by the arrangement;
                          (ii) the dissolution of the 
                        Association pursuant to such 
                        reorganization will occur before the 
                        end of the 2-year period beginning on 
                        the date on which such arrangement is 
                        consummated or on such earlier date as 
                        the Secretary deems appropriate: 
                        Provided, That the Secretary may extend 
                        this period for not more than 1 year at 
                        a time if the Secretary determines that 
                        such extension is in the public 
                        interest and is appropriate to achieve 
                        an orderly reorganization of the 
                        Association or to prevent market 
                        disruptions in connection with such 
                        reorganization, but no such extensions 
                        shall in the aggregate exceed 2 years;
                          (iii) the Association will not 
                        purchase or extend credit to, or 
                        guarantee or provide credit enhancement 
                        to, any obligation of the depository 
                        institution;
                          (iv) the operations of the 
                        Association will be separate from the 
                        operations of the depository 
                        institution; and
                          (v) until the ``dissolution date'' 
                        (as that term is defined in section 440 
                        of the Higher Education Act of 1965, as 
                        amended) has occurred, such depository 
                        institution will not use the trade name 
                        or service mark ``Sallie Mae'' in 
                        connection with any product or service 
                        it offers if the appropriate Federal 
                        banking agency for such depository 
                        institution determines that--
                                  (I) the depository 
                                institution is the only 
                                institution offering such 
                                product or service using the 
                                ``Sallie Mae'' name; and
                                  (II) such use would result in 
                                the depository institution 
                                having an unfair competitive 
                                advantage over other depository 
                                institutions.
                  (B) Terms and conditions.--In approving any 
                arrangement referred to in subparagraph (A) the 
                Secretary may impose any terms and conditions 
                on such an arrangement that the Secretary 
                considers appropriate, including--
                          (i) imposing additional restrictions 
                        on the issuance of debt obligations by 
                        the Association; or
                          (ii) restricting the use of proceeds 
                        from the issuance of such debt.
                  (C) Additional limitations.--In the event 
                that the Holding Company (or any subsidiary of 
                the Holding Company) enters into such an 
                arrangement, the value of the Association's 
                ``investment portfolio'' shall not at any time 
                exceed the lesser of--
                          (i) the value of such portfolio on 
                        the date of the enactment of this 
                        subsection; or
                          (ii) the value of such portfolio on 
                        the date such an arrangement is 
                        consummated. The term ``investment 
                        portfolio'' shall mean all investments 
                        shown on the consolidated balance sheet 
                        of the Association other than--
                                  (I) any instrument or assets 
                                described in section 439(d) of 
                                the Higher Education Act of 
                                1965, as such section existed 
                                on the day before the date of 
                                the repeal of such section;
                                  (II) any direct noncallable 
                                obligations of the United 
                                States or any agency thereof 
                                for which the full faith and 
                                credit of the United States is 
                                pledged; or
                                  (III) cash or cash 
                                equivalents.
                  (D) Enforcement.--The terms and conditions 
                imposed under subparagraph (B) may be enforced 
                by the Secretary in accordance with section 440 
                of the Higher Education Act of 1965.
                  (E) Definitions.--For purposes of this 
                paragraph, the following definition shall 
                apply--
                          (i) Association; holding company.--
                        Notwithstanding any provision in 
                        section 3, the terms ``Association'' 
                        and ``Holding Company'' have the same 
                        meanings as in section 440(i) of the 
                        Higher Education Act of 1965.
                          (ii) Secretary.--The term 
                        ``Secretary'' means the Secretary of 
                        the Treasury.
          (5) Government-sponsored enterprise defined.--For 
        purposes of this subsection, the term ``Government-
        sponsored enterprise'' has the meaning given to such 
        term in section 1404(e)(1)(A) of the Financial 
        Institutions Reform, Recovery, and Enforcement Act of 
        1989.
  (t) Recordkeeping Requirements.--
          (1) Requirements.--Each appropriate Federal banking 
        agency, after consultation with and consideration of 
        the views of the Commission, shall establish 
        recordkeeping requirements for banks relying on 
        exceptions contained in paragraphs (4) and (5) of 
        section 3(a) of the Securities Exchange Act of 1934. 
        Such recordkeeping requirements shall be sufficient to 
        demonstrate compliance with the terms of such 
        exceptions and be designed to facilitate compliance 
        with such exceptions.
          (2) Availability to commission; confidentiality.--
        Each appropriate Federal banking agency shall make any 
        information required under paragraph (1) available to 
        the Commission upon request. Notwithstanding any other 
        provision of law, the Commission shall not be compelled 
        to disclose any such information. Nothing in this 
        paragraph shall authorize the Commission to withhold 
        information from Congress, or prevent the Commission 
        from complying with a request for information from any 
        other Federal department or agency or any self-
        regulatory organization requesting the information for 
        purposes within the scope of its jurisdiction, or 
        complying with an order of a court of the United States 
        in an action brought by the United States or the 
        Commission. For purposes of section 552 of title 5, 
        United States Code, this paragraph shall be considered 
        a statute described in subsection (b)(3)(B) of such 
        section 552.
          (3) Definition.--As used in this subsection the term 
        ``Commission'' means the Securities and Exchange 
        Commission.
  (u) Limitation on Claims.--
          (1) In general.--No person may bring a claim against 
        any Federal banking agency (including in its capacity 
        as conservator or receiver) for the return of assets of 
        an affiliate or controlling shareholder of the insured 
        depository institution transferred to, or for the 
        benefit of, an insured depository institution by such 
        affiliate or controlling shareholder of the insured 
        depository institution, or a claim against such Federal 
        banking agency for monetary damages or other legal or 
        equitable relief in connection with such transfer, if 
        at the time of the transfer--
                  (A) the insured depository institution is 
                subject to any direction issued in writing by a 
                Federal banking agency to increase its capital; 
                and
                  (B) for that portion of the transfer that is 
                made by an entity covered by section 5(g) of 
                the Bank Holding Company Act of 1956 or section 
                45 of this Act, the Federal banking agency has 
                followed the procedure set forth in such 
                section.
          (2) Definition of claim.--For purposes of paragraph 
        (1), the term ``claim''--
                  (A) means a cause of action based on Federal 
                or State law that--
                          (i) provides for the avoidance of 
                        preferential or fraudulent transfers or 
                        conveyances; or
                          (ii) provides similar remedies for 
                        preferential or fraudulent transfers or 
                        conveyances; and
                  (B) does not include any claim based on 
                actual intent to hinder, delay, or defraud 
                pursuant to such a fraudulent transfer or 
                conveyance law.
  (v) Loans by Insured Institutions on Their Own Stock.--
          (1) General prohibition.--No insured depository 
        institution may make any loan or discount on the 
        security of the shares of its own capital stock.
          (2) Exclusion.--For purposes of this subsection, an 
        insured depository institution shall not be deemed to 
        be making a loan or discount on the security of the 
        shares of its own capital stock if it acquires the 
        stock to prevent loss upon a debt previously contracted 
        for in good faith.
  (w) Written Employment References May Contain Suspicions of 
Involvement in Illegal Activity.--
          (1) Authority to disclose information.--
        Notwithstanding any other provision of law, any insured 
        depository institution, and any director, officer, 
        employee, or agent of such institution, may disclose in 
        any written employment reference relating to a current 
        or former institution-affiliated party of such 
        institution which is provided to another insured 
        depository institution in response to a request from 
        such other institution, information concerning the 
        possible involvement of such institution-affiliated 
        party in potentially unlawful activity.
          (2) Information not required.--Nothing in paragraph 
        (1) shall be construed, by itself, to create any 
        affirmative duty to include any information described 
        in paragraph (1) in any employment reference referred 
        to in paragraph (1).
          (3) Malicious intent.--Notwithstanding any other 
        provision of this subsection, voluntary disclosure made 
        by an insured depository institution, and any director, 
        officer, employee, or agent of such institution, under 
        this subsection concerning potentially unlawful 
        activity that is made with malicious intent, shall not 
        be shielded from liability from the person identified 
        in the disclosure.
          (4) Definition.--For purposes of this subsection, the 
        term ``insured depository institution'' includes any 
        uninsured branch or agency of a foreign bank.
  (x) Privileges Not Affected by Disclosure to Banking Agency 
or Supervisor.--
          (1) In general.--The submission by any person of any 
        information to the Bureau of Consumer Financial 
        Protection, any Federal banking agency, State bank 
        supervisor, or foreign banking authority for any 
        purpose in the course of any supervisory or regulatory 
        process of such Bureau, agency, supervisor, or 
        authority shall not be construed as waiving, 
        destroying, or otherwise affecting any privilege such 
        person may claim with respect to such information under 
        Federal or State law as to any person or entity other 
        than such Bureau, agency, supervisor, or authority.
          (2) Rule of construction.--No provision of paragraph 
        (1) may be construed as implying or establishing that--
                  (A) any person waives any privilege 
                applicable to information that is submitted or 
                transferred under any circumstance to which 
                paragraph (1) does not apply; or
                  (B) any person would waive any privilege 
                applicable to any information by submitting the 
                information to the Bureau of Consumer Financial 
                Protection, any Federal banking agency, State 
                bank supervisor, or foreign banking authority, 
                but for this subsection.
  (y) State Lending Limit Treatment of Derivatives 
Transactions.--An insured State bank may engage in a derivative 
transaction, as defined in section 5200(b)(3) of the Revised 
Statutes of the United States (12 U.S.C. 84(b)(3)), only if the 
law with respect to lending limits of the State in which the 
insured State bank is chartered takes into consideration credit 
exposure to derivative transactions.
  (z) General Prohibition on Sale of Assets.--
          (1) In general.--An insured depository institution 
        may not purchase an asset from, or sell an asset to, an 
        executive officer, director, or principal shareholder 
        of the insured depository institution, or any related 
        interest of such person (as such terms are defined in 
        section 22(h) of Federal Reserve Act), unless--
                  (A) the transaction is on market terms; and
                  (B) if the transaction represents more than 
                10 percent of the capital stock and surplus of 
                the insured depository institution, the 
                transaction has been approved in advance by a 
                majority of the members of the board of 
                directors of the insured depository institution 
                who do not have an interest in the transaction.
          (2) Rulemaking.--The Board of Governors of the 
        Federal Reserve System may issue such rules as may be 
        necessary to define terms and to carry out the purposes 
        this subsection. Before proposing or adopting a rule 
        under this paragraph, the Board of Governors of the 
        Federal Reserve System shall consult with the 
        Comptroller of the Currency and the Corporation as to 
        the terms of the rule.
  (aa) Treatment of Certain Municipal Obligations.--
          (1) In general.--For purposes of the final rule 
        titled ``Liquidity Coverage Ratio: Liquidity Risk 
        Measurement Standards; Final Rule'' (79 Fed. Reg. 
        61439; published October 10, 2014) (the ``Final Rule'') 
        and any other regulation which incorporates a 
        definition of the term ``high-quality liquid asset'', 
        the appropriate Federal banking agencies shall treat a 
        municipal obligation that is both liquid and readily 
        marketable (as defined in the Final Rule) and 
        investment grade as of the calculation date as a high-
        quality liquid asset that is a level 2A liquid asset.
          (2) Definitions.--For purposes of this subsection:
                  (A) Investment grade.--With respect to an 
                obligation, the term ``investment grade'' has 
                the meaning given that term under part 1 of 
                title 12, Code of Federal Regulations.
                  (B) Municipal obligation.--The term 
                ``municipal obligation'' means an obligation of 
                a State or any political subdivision thereof, 
                or any agency or instrumentality of a State or 
                any political subdivision thereof.

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