12 USC 1843 - Interests in nonbanking organizations

U.S Code last checked for updates: Nov 22, 2024

§ 1843.

Interests in nonbanking organizations

(a)

Ownership or control of voting shares of any company not a bank; engagement in activities other than banking

Except as otherwise provided in this chapter, no bank holding company shall—

(1)

after May 9, 1956, acquire direct or indirect ownership or control of any voting shares of any company which is not a bank, or

(2)

after two years from the date as of which it becomes a bank holding company, or in the case of a company which has been continuously affiliated since May 15, 1955, with a company which was registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], prior to May 15, 1955, in such a manner as to constitute an affiliated company within the meaning of that Act, after December 31, 1978, or, in the case of any company which becomes, as a result of the enactment of the Bank Holding Company Act Amendments of 1970, a bank holding company on December 31, 1970, after December 31, 1980, retain direct or indirect ownership or control of any voting shares of any company which is not a bank or bank holding company or engage in any activities other than (A) those of banking or of managing or controlling banks and other subsidiaries authorized under this chapter or of furnishing services to or performing services for its subsidiaries, and (B) those permitted under paragraph (8) of subsection (c) of this section subject to all the conditions specified in such paragraph or in any order or regulation issued by the Board under such paragraph: Provided, That a company covered in 1970 may also engage in those activities in which directly or through a subsidiary (i) it was lawfully engaged on June 30, 1968 (or on a date subsequent to June 30, 1968 in the case of activities carried on as the result of the acquisition by such company or subsidiary, pursuant to a binding written contract entered into on or before June 30, 1968, of another company engaged in such activities at the time of the acquisition), and (ii) it has been continuously engaged since June 30, 1968 (or such subsequent date). The Board by order, after opportunity for hearing, may terminate the authority conferred by the preceding proviso on any company to engage directly or through a subsidiary in any activity otherwise permitted by that proviso if it determines, having due regard to the purposes of this chapter, that such action is necessary to prevent undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices; and in the case of any such company controlling a bank having bank assets in excess of $60,000,000 on or after December 31, 1970, the Board shall determine, within two years after such date (or, if later, within two years after the date on which the bank assets first exceed $60,000,000), whether the authority conferred by the preceding proviso with respect to such company should be terminated as provided in this sentence. Nothing in this paragraph shall be construed to authorize any bank holding company referred to in the preceding proviso, or any subsidiary thereof, to engage in activities authorized by that proviso through the acquisition, pursuant to a contract entered into after June 30, 1968, of any interest in or the assets of a going concern engaged in such activities. Any company which is authorized to engage in any activity pursuant to the preceding proviso or subsection (d) of this section but, as a result of action of the Board, is required to terminate such activity may (notwithstanding any otherwise applicable time limit prescribed in this paragraph) retain the ownership or control of shares in any company carrying on such activity for a period of ten years from the date on which its authority was so terminated by the Board. Notwithstanding any other provision of this paragraph, if any company that became a bank holding company as a result of the enactment of the Competitive Equality Amendments of 1987 acquired, between March 5, 1987, and August 10, 1987, an institution that became a bank as a result of the enactment of such Amendments, that company shall, upon the enactment of such Amendments, immediately come into compliance with the requirements of this chapter.

The Board is authorized, upon application by a bank holding company, to extend the two year period referred to in paragraph (2) above from time to time as to such bank holding company for not more than one year at a time, if, in its judgment, such an extension would not be detrimental to the public interest, but no such extensions shall in the aggregate exceed three years. Notwithstanding any other provision of this chapter, the period ending December 31, 1980, referred to in paragraph (2) above, may be extended by the Board of Governors to December 31, 1984, but only for the divestiture by a bank holding company of real estate or interests in real estate lawfully acquired for investment or development. In making its decision whether to grant such extension, the Board shall consider whether the company has made a good faith effort to divest such interests and whether such extension is necessary to avert substantial loss to the company.

(b)

Statement purporting to represent shares of any company except a bank or bank holding company

(c)

Exemptions

The prohibitions in this section shall not apply to (i) any company that was on January 4, 1977, both a bank holding company and a labor, agricultural, or horticultural organization exempt from taxation under section 501 of title 26, or to any labor, agricultural, or horticultural organization to which all or substantially all of the assets of such company are hereafter transferred, or (ii) a company covered in 1970 more than 85 per centum of the voting stock of which was collectively owned on June 30, 1968, and continuously thereafter, directly or indirectly, by or for members of the same family, or their spouses, who are lineal descendants of common ancestors; and such prohibitions shall not, with respect to any other bank holding company, apply to—

(1)

shares of any company engaged or to be engaged solely in one or more of the following activities: (A) holding or operating properties used wholly or substantially by any banking subsidiary of such bank holding company in the operations of such banking subsidiary or acquired for such future use; or (B) conducting a safe deposit business; or (C) furnishing services to or performing services for such bank holding company or its banking subsidiaries; or (D) liquidating assets acquired from such bank holding company or its banking subsidiaries or acquired from any other source prior to May 9, 1956, or the date on which such company became a bank holding company, whichever is later;

(2)

shares acquired by a bank holding company or any of its subsidiaries in satisfaction of a debt previously contracted in good faith, but such shares shall be disposed of within a period of two years from the date on which they were acquired, except that the Board is authorized upon application by such bank holding company to extend such period of two years from time to time as to such holding company if, in its judgment, such an extension would not be detrimental to the public interest, and, in the case of a bank holding company which has not disposed of such shares within 5 years after the date on which such shares were acquired, the Board may, upon the application of such company, grant additional exemptions if, in the judgment of the Board, such extension would not be detrimental to the public interest and, either the bank holding company has made a good faith attempt to dispose of such shares during such 5-year period, or the disposal of such shares during such 5-year period would have been detrimental to the company, except that the aggregate duration of such extensions shall not extend beyond 10 years after the date on which such shares were acquired;

(3)

shares acquired by such bank holding company from any of its subsidiaries which subsidiary has been requested to dispose of such shares by any Federal or State authority having statutory power to examine such subsidiary, but such bank holding company shall dispose of such shares within a period of two years from the date on which they were acquired;

(4)

shares held or acquired by a bank in good faith in a fiduciary capacity, except where such shares are held under a trust that constitutes a company as defined in section 1841(b) of this title and except as provided in paragraphs (2) and (3) of section 1841(g) of this title;

(5)

shares which are of the kinds and amounts eligible for investment by national banking associations under the provisions of section 24 of this title;

(6)

shares of any company which do not include more than 5 per centum of the outstanding voting shares of such company;

(7)

shares of an investment company which is not a bank holding company and which is not engaged in any business other than investing in securities, which securities do not include more than 5 per centum of the outstanding voting shares of any company;

(8)

shares of any company the activities of which had been determined by the Board by regulation or order under this paragraph as of the day before November 12, 1999, to be so closely related to banking as to be a proper incident thereto (subject to such terms and conditions contained in such regulation or order, unless modified by the Board);

(9)

shares held or activities conducted by any company organized under the laws of a foreign country the greater part of whose business is conducted outside the United States, if the Board by regulation or order determines that, under the circumstances and subject to the conditions set forth in the regulation or order, the exemption would not be substantially at variance with the purposes of this chapter and would be in the public interest;

(10)

shares lawfully acquired and owned prior to May 9, 1956, by a bank which is a bank holding company, or by any of its wholly owned subsidiaries;

(11)

shares owned directly or indirectly by a company covered in 1970 in a company which does not engage in any activities other than those in which the bank holding company, or its subsidiaries, may engage by virtue of this section, but nothing in this paragraph authorizes any bank holding company, or subsidiary thereof, to acquire any interest in or the assets of any going concern (except pursuant to a binding written contract entered into before June 30, 1968, or pursuant to another provision of this chapter) other than one which was a subsidiary on June 30, 1968;

(12)

shares retained or acquired, or activities engaged in, by any company which becomes, as a result of the enactment of the Bank Holding Company Act Amendments of 1970, a bank holding company on December 31, 1970, or by any subsidiary thereof, if such company—

(A)

within the applicable time limits prescribed in subsection (a)(2) of this section (i) ceases to be a bank holding company, or (ii) ceases to retain direct or indirect ownership or control of those shares and to engage in those activities not authorized under this section; and

(B)

complies with such other conditions as the Board may by regulation or order prescribe;

(13)

shares of, or activities conducted by, any company which does no business in the United States except as an incident to its international or foreign business, if the Board by regulation or order determines that, under the circumstances and subject to the conditions set forth in the regulation or order, the exemption would not be substantially at variance with the purposes of this chapter and would be in the public interest; or

(14)

shares of any company which is an export trading company whose acquisition (including each acquisition of shares) or formation by a bank holding company has not been disapproved by the Board pursuant to this paragraph, except that such investments, whether direct or indirect, in such shares shall not exceed 5 per centum of the bank holding company’s consolidated capital and surplus.

(A)

(i)

No bank holding company shall invest in an export trading company under this paragraph unless the Board has been given sixty days’ prior written notice of such proposed investment and within such period has not issued a notice disapproving the proposed investment or extending for up to another thirty days the period during which such disapproval may be issued.

(ii)

The period for disapproval may be extended for such additional thirty-day period only if the Board determines that a bank holding company proposing to invest in an export trading company has not furnished all the information required to be submitted or that in the Board’s judgment any material information submitted is substantially inaccurate.

(iii)

The notice required to be filed by a bank holding company shall contain such relevant information as the Board shall require by regulation or by specific request in connection with any particular notice.

(iv)

The Board may disapprove any proposed investment only if—

(I)

such disapproval is necessary to prevent unsafe or unsound banking practices, undue concentration of resources, decreased or unfair competition, or conflicts of interest;

(II)

the Board finds that such investment would affect the financial or managerial resources of a bank holding company to an extent which is likely to have a materially adverse effect on the safety and soundness of any subsidiary bank of such bank holding company, or

(III)

the bank holding company fails to furnish the information required under clause (iii).

(v)

Leverage.—

The Board may not disapprove any proposed investment solely on the basis of the anticipated or proposed asset-to-equity ratio of the export trading company with respect to which such investment is proposed, unless the anticipated or proposed annual average asset-to-equity ratio is greater than 20-to-1.

(vi)

Within three days after a decision to disapprove an investment, the Board shall notify the bank holding company in writing of the disapproval and shall provide a written statement of the basis for the disapproval.

(vii)

A proposed investment may be made prior to the expiration of the disapproval period if the Board issues written notice of its intent not to disapprove the investment.

(B)

(i)

The total amount of extensions of credit by a bank holding company which invests in an export trading company, when combined with all such extensions of credit by all the subsidiaries of such bank holding company, to an export trading company shall not exceed at any one time 10 per centum of the bank holding company’s consolidated capital and surplus. For purposes of the preceding sentence, an extension of credit shall not be deemed to include any amount invested by a bank holding company in the shares of an export trading company.

(ii)

No provision of any other Federal law in effect on October 1, 1982, relating specifically to collateral requirements shall apply with respect to any such extension of credit.

(iii)

No bank holding company or subsidiary of such company which invests in an export trading company may extend credit to such export trading company or to customers of such export trading company on terms more favorable than those afforded similar borrowers in similar circumstances, and such extension of credit shall not involve more than the normal risk of repayment or present other unfavorable features.

(C)

For purposes of this paragraph, an export trading company—

(i)

may engage in or hold shares of a company engaged in the business of underwriting, selling, or distributing securities in the United States only to the extent that any bank holding company which invests in such export trading company may do so under applicable Federal and State banking laws and regulations; and

(ii)

may not engage in agricultural production activities or in manufacturing, except for such incidental product modification including repackaging, reassembling or extracting byproducts, as is necessary to enable United States goods or services to conform with requirements of a foreign country and to facilitate their sale in foreign countries.

(D)

A bank holding company which invests in an export trading company may be required, by the Board, to terminate its investment or may be made subject to such limitations or conditions as may be imposed by the Board, if the Board determines that the export trading company has taken positions in commodities or commodity contracts, in securities, or in foreign exchange, other than as may be necessary in the course of the export trading company’s business operations.

(E)

Notwithstanding any other provision of law, an Edge Act corporation, organized under section 25(a) 1

 See References in Text note below.

of the Federal Reserve Act (12 U.S.C. 611–631), which is a subsidiary of a bank holding company, or an agreement corporation, operating subject to section 25 of the Federal Reserve Act [12 U.S.C. 601 et seq.], which is a subsidiary of a bank holding company, may invest directly and indirectly in the aggregate up to 5 per centum of its consolidated capital and surplus (25 per centum in the case of a corporation not engaged in banking) in the voting stock of 2

 So in original. Probably should be “or”.

other evidences of ownership in one or more export trading companies.

(F)

For purposes of this paragraph—

(i)

the term “export trading company” means a company which does business under the laws of the United States or any State, which is exclusively engaged in activities related to international trade, and which is organized and operated principally for purposes of exporting goods or services produced in the United States or for purposes of facilitating the exportation of goods or services produced in the United States by unaffiliated persons by providing one or more export trade services.3

 So in original. The period probably should be a semicolon.

(ii)

the term “export trade services” includes, but is not limited to, consulting, international market research, advertising, marketing, insurance (other than acting as principal, agent or broker in the sale of insurance on risks resident or located, or activities performed, in the United States, except for insurance covering the transportation of cargo from any point of origin in the United States to a point of final destination outside the United States), product research and design, legal assistance, transportation, including trade documentation and freight forwarding, communication and processing of foreign orders to and for exporters and foreign purchasers, warehousing, foreign exchange, financing, and taking title to goods, when provided in order to facilitate the export of goods or services produced in the United States;

(iii)

the term “bank holding company” shall include a bank which (I) is organized solely to do business with other banks and their officers, directors, or employees; (II) is owned primarily by the banks with which it does business; and (III) does not do business with the general public. No such other bank, owning stock in a bank described in this clause that invests in an export trading company, shall extend credit to an export trading company in an amount exceeding at any one time 10 per centum of such other bank’s capital and surplus; and

(iv)

the term “extension of credit” shall have the same meaning given such term in the fourth paragraph of section 371c ¹ of this title.

(G)

Determination of status as export trading company.—

(i)

Time period requirements.—

For purposes of determining whether an export trading company is operated principally for the purposes described in subparagraph (F)(i)—

(I)

the operations of such company during the 2-year period beginning on the date such company commences operations shall not be taken into account in making any such determination; and

(II)

not less than 4 consecutive years of operations of such company (not including any portion of the period referred to in subclause (I)) shall be taken into account in making any such determination.

(ii)

Export revenue requirements.—

A company shall not be treated as operated principally for the purposes described in subparagraph (F)(i) unless—

(I)

the revenues of such company from the export, or facilitating the export, of goods or services produced in the United States exceed the revenues of such company from the import, or facilitating the import, into the United States of goods or services produced outside the United States; and

(II)

at least ⅓ of such company’s total revenues are revenues from the export, or facilitating the export, of goods or services produced in the United States by persons not affiliated with such company.

(H)

Inventory.—

(i)

No general limitation.—

The Board may not prescribe by regulation any maximum dollar amount limitation on the value of goods which an export trading company may maintain in inventory at any time.

(ii)

Specific limitation by order.—

Notwithstanding clause (i), the Board may issue an order establishing a maximum dollar amount limitation on the value of goods which a particular export trading company may maintain in inventory at any time (after such company has been operating for a reasonable period of time) if the Board finds that, under the facts and circumstances, such limitation is necessary to prevent risks that would affect the financial or managerial resources of an investor bank holding company to an extent which would be likely to have a materially adverse effect on the safety and soundness of any subsidiary bank of such bank holding company.

The Board shall include in its annual report to the Congress a description and a statement of the reasons for approval of each activity approved by it by order or regulation under such paragraph during the period covered by the report.

(d)

Exemption of company controlling one bank prior to July 1, 1968

(e)

Divestiture of nonexempt shares

(f)

Certain companies not treated as bank holding companies

(1)

In general

Except as provided in paragraph (9), any company which—

(A)

on March 5, 1987, controlled an institution which became a bank as a result of the enactment of the Competitive Equality Amendments of 1987; and

(B)

was not a bank holding company on the day before August 10, 1987,

shall not be treated as a bank holding company for purposes of this chapter solely by virtue of such company’s control of such institution.

(2)

Loss of exemption

Subject to paragraph (3), a company described in paragraph (1) shall no longer qualify for the exemption provided under that paragraph if—

(A)

such company directly or indirectly—

(i)

acquires control of an additional bank or an insured institution (other than an insured institution described in paragraph (10) or (12) of this subsection) after March 5, 1987; or

(ii)

acquires control of more than 5 percent of the shares or assets of an additional bank or a savings association other than—

(I)

shares held as a bona fide fiduciary (whether with or without the sole discretion to vote such shares);

(II)

shares held by any person as a bona fide fiduciary solely for the benefit of employees of either the company described in paragraph (1) or any subsidiary of that company and the beneficiaries of those employees;

(III)

shares held temporarily pursuant to an underwriting commitment in the normal course of an underwriting business;

(IV)

shares held in an account solely for trading purposes;

(V)

shares over which no control is held other than control of voting rights acquired in the normal course of a proxy solicitation;

(VI)

loans or other accounts receivable acquired in the normal course of business;

(VII)

shares or assets acquired in securing or collecting a debt previously contracted in good faith, during the 2-year period beginning on the date of such acquisition or for such additional time (not exceeding 3 years) as the Board may permit if the Board determines that such an extension will not be detrimental to the public interest;

(VIII)

shares or assets of a savings association described in paragraph (10) or (12) of this subsection;

(IX)

shares of a savings association held by any insurance company, as defined in section 2(a)(17) of the Investment Company Act of 1940 [15 U.S.C. 80a–2(a)(17)], except as provided in paragraph (11);

(X)

shares issued in a qualified stock issuance under section 1467a(q) of this title; and

(XI)

assets that are derived from, or incidental to, activities in which institutions described in subparagraph (F) or (H) of section 1841(c)(2) of this title are permitted to engage;

except that the aggregate amount of shares held under this clause (other than under subclauses (I), (II), (III), (IV), (V), and (VIII)) may not exceed 15 percent of all outstanding shares or of the voting power of a savings association;

(B)

any bank subsidiary of such company—

(i)

accepts demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties; and

(ii)

engages in the business of making commercial loans (except that, for purposes of this clause, loans made in the ordinary course of a credit card operation shall not be treated as commercial loans); or

(C)

after August 10, 1987, any bank subsidiary of such company permits any overdraft (including any intraday overdraft), or incurs any such overdraft in the account of the bank at a Federal reserve bank, on behalf of an affiliate, other than an overdraft described in paragraph (3).

(3)

Permissible overdrafts described

For purposes of paragraph (2)(C), an overdraft is described in this paragraph if—

(A)

such overdraft results from an inadvertent computer or accounting error that is beyond the control of both the bank and the affiliate;

(B)

such overdraft—

(i)

is permitted or incurred on behalf of an affiliate that is monitored by, reports to, and is recognized as a primary dealer by the Federal Reserve Bank of New York; and

(ii)

is fully secured, as required by the Board, by bonds, notes, or other obligations that are direct obligations of the United States or on which the principal and interest are fully guaranteed by the United States or by securities and obligations eligible for settlement on the Federal Reserve book entry system; or

(C)

such overdraft—

(i)

is permitted or incurred by, or on behalf of, an affiliate in connection with an activity that is financial in nature or incidental to a financial activity; and

(ii)

does not cause the bank to violate any provision of section 371c or 371c–1 of this title, either directly, in the case of a bank that is a member of the Federal Reserve System, or by virtue of section 18(j) of the Federal Deposit Insurance Act [12 U.S.C. 1828(j)], in the case of a bank that is not a member of the Federal Reserve System.

(4)

Divestiture in case of loss of exemption

If any company described in paragraph (1) fails to qualify for the exemption provided under paragraph (1) by operation of paragraph (2), such exemption shall cease to apply to such company and such company shall divest control of each bank it controls before the end of the 180-day period beginning on the date on which the company receives notice from the Board that the company has failed to continue to qualify for such exemption, unless, before the end of such 180-day period, the company has—

(A)

either—

(i)

corrected the condition or ceased the activity that caused the company to fail to continue to qualify for the exemption; or

(ii)

submitted a plan to the Board for approval to cease the activity or correct the condition in a timely manner (which shall not exceed 1 year); and

(B)

implemented procedures that are reasonably adapted to avoid the reoccurrence of such condition or activity.

(5)

Subsection ceases to apply under certain circumstances

This subsection shall cease to apply to any company described in paragraph (1) if such company—

(A)

registers as a bank holding company under section 1844(a) of this title;

(B)

immediately upon such registration, complies with all of the requirements of this chapter, and regulations prescribed by the Board pursuant to this chapter, including the nonbanking restrictions of this section; and

(C)

does not, at the time of such registration, control banks in more than one State, the acquisition of which would be prohibited by

(6)

Information requirement

(7)

Examination

(8)

Enforcement

(A)

In general

(B)

Application of other act

(C)

No effect on other authority

(9)

Tying provisions

A company described in paragraph (1) shall be—

(A)

treated as a bank holding company for purposes of section 106 of the Bank Holding Company Act Amendments of 1970 [12 U.S.C. 1971 et seq.] and section 22(h) of the Federal Reserve Act [12 U.S.C. 375b] and any regulation prescribed under any such section; and

(B)

subject to the restrictions of section 106 of the Bank Holding Company Act Amendments of 1970 [12 U.S.C. 1971 et seq.], in connection with any transaction involving the products or services of such company or affiliate and those of a bank affiliate, as if such company or affiliate were a bank and such bank were a subsidiary of a bank holding company.

(10)

Exemption unaffected by certain emergency acquisitions

For purposes of clauses (i) and (ii)(VIII) of paragraph (2)(A), an insured institution is described in this paragraph if—

(A)

the insured institution was acquired (or any shares or assets of such institution were acquired) by a company described in paragraph (1) in an acquisition under section 1730a(m) ¹ of this title or section 13(k) of the Federal Deposit Insurance Act [12 U.S.C. 1823(k)]; and

(B)

either—

(i)

the insured institution is located in a State in which such company controlled a bank on March 5, 1987; or

(ii)

the insured institution has total assets of $500,000,000 or more at the time of such acquisition.

(11)

Shares held by insurance affiliates

Shares described in clause (ii)(IX) of paragraph (2)(A) shall not be excluded for purposes of clause (ii) of such paragraph if—

(A)

all shares held under such clause (ii)(IX) by all insurance company affiliates of such savings association in the aggregate exceed 5 percent of all outstanding shares or of the voting power of the savings association; or

(B)

such shares are acquired or retained with a view to acquiring, exercising, or transferring control of the savings association.

(12)

Exemption unaffected by certain other acquisitions

For purposes of clauses (i) and (ii)(VIII) of paragraph (2)(A), an insured institution is described in this paragraph if the insured institution was acquired (or any shares or assets of such institution were acquired) by a company described in paragraph (1)—

(A)

from the Resolution Trust Corporation, the Federal Deposit Insurance Corporation, or the Director of the Office of Thrift Supervision, in any capacity; or

(B)

in an acquisition in which the insured institution has been found to be in danger of default (as defined in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813]) by the appropriate Federal or State authority.

(13)

Special rule relating to shares acquired in a qualified stock issuance

A company described in paragraph (1) that holds shares issued in a qualified stock issuance pursuant to section 1467a(q) of this title by any savings association or savings and loan holding company (neither of which is a subsidiary) shall not be deemed to control such savings association or savings and loan holding company solely because such company holds such shares unless—

(A)

the company fails to comply with any requirement or condition imposed by paragraph (2)(A)(ii)(X) or section 1467a(q) of this title with respect to such shares; or

(B)

the shares are acquired or retained with a view to acquiring, exercising, or transferring control of the savings association or savings and loan holding company.

(14)

Foreign bank subsidiaries of limited purpose credit card banks

(A)

In general

An institution described in section 1841(c)(2)(F) of this title may control a foreign bank if—

(i)

the investment of the institution in the foreign bank meets the requirements of section 25 or 25A of the Federal Reserve Act [12 U.S.C. 601 et seq., 611 et seq.] and the foreign bank qualifies under such sections;

(ii)

the foreign bank does not offer any products or services in the United States; and

(iii)

the activities of the foreign bank are permissible under otherwise applicable law.

(B)

Other limitations inapplicable

(g)

Limitations on certain banks

(1)

In general

Notwithstanding any other provision of this section (other than the last sentence of subsection (a)(2)), a bank holding company which controls an institution that became a bank as a result of the enactment of the Competitive Equality Amendments of 1987 may retain control of such institution if such institution does not—

(A)

engage in any activity after August 10, 1987, which would have caused such institution to be a bank (as defined in section 1841(c) of this title, as in effect before such date) if such activities had been engaged in before such date; or

(B)

increase the number of locations from which such institution conducts business after March 5, 1987.

(2)

Limitations cease to apply under certain circumstances

The limitations contained in paragraph (1) shall cease to apply to a bank described in such paragraph at such time as the acquisition of such bank, by the bank holding company referred to in such paragraph, would not be prohibited under section 1842(d) of this title if—

(A)

an application for such acquisition were filed under section 1842(a) of this title; and

(B)

such bank were treated as an additional bank (under section 1842(d) of this title).

(h)

Tying provisions

(1)

Applicable to certain exempt institutions and parent companies

(2)

Applicable with respect to certain transactions

(i)

Acquisition of savings associations

(1)

In general

(2)

Prohibition on tandem restrictions

(3)

Acquisition of insolvent savings associations

(A)

In general

(B)

“Qualified savings association” defined

For purposes of this paragraph, the term “qualified savings association” means any savings association that—

(i)

was chartered or organized as a savings association before June 1, 1991;

(ii)

had, immediately before the acquisition of such association by the bank holding company referred to in subparagraph (A), negative tangible capital and total insured deposits in excess of $3,000,000,000; and

(iii)

will meet all applicable regulatory capital requirements as a result of such acquisition.

(4)

Solicitation of views

(A)

Notice

Upon receiving any application or notice by a bank holding company to acquire, directly or indirectly, a savings association under subsection (c)(8), the Board shall solicit comments and recommendations from—

(i)

the Comptroller of the Currency, with respect to the acquisition of a Federal savings association; and

(ii)

the Federal Deposit Insurance Corporation, with respect to the acquisition of a State savings association.

(B)

Comment period

(5)

Examination

(A)

Scope

(B)

Access to inspection reports

(6)

Coordination of enforcement efforts

(7)

Repealed. Pub. L. 111–203, title III, § 354(2)(A)(iv), July 21, 2010, 124 Stat. 1547

(8)

Interstate acquisitions

(A)

In general

The Board may not approve an application by a bank holding company to acquire an insured depository institution under subsection (c)(8) or any other provision of this chapter if—

(i)

the home State of such insured depository institution is a State other than the home State of the bank holding company; and

(ii)

the applicant (including all insured depository institutions which are affiliates of the applicant) controls, or 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)

Exception

(j)

Notice procedures for nonbanking activities

(1)

General notice procedure

(A)

Notice requirement

(B)

Contents of notice

(C)

Procedure for agency action

(i)

Notice of disapproval

(ii)

Extension of period

(iii)

Determination of period in case of public hearing

(D)

Approval before end of period

(i)

In general

(ii)

Shorter periods by regulation

(E)

Extension of period

(2)

General standards for review

(A)

Criteria

(B)

Grounds for disapproval

(C)

Conditional action

(3)

No notice required for certain transactions

(4)

Criteria for statutory approval

A proposal qualifies under this paragraph if all of the following criteria are met:

(A)

Financial criteria

Both before and immediately after the proposed transaction—

(i)

the acquiring bank holding company is well capitalized;

(ii)

the lead insured depository institution of such holding company is well capitalized;

(iii)

well capitalized insured depository institutions control at least 80 percent of the aggregate total risk-weighted assets of insured depository institutions controlled by such holding company; and

(iv)

no insured depository institution controlled by such holding company is undercapitalized.

(B)

Managerial criteria

(i)

Well managed

(ii)

Limitation on poorly managed institutions

(C)

Activities permissible

Following consummation of the proposal, the bank holding company engages directly or through a subsidiary solely in—

(i)

activities that are permissible under subsection (c)(8), as determined by the Board by regulation or order thereunder, subject to all of the restrictions, terms, and conditions of such subsection and such regulation or order; and

(ii)

such other activities as are otherwise permissible under this section, subject to the restrictions, terms and conditions, including any prior notice or approval requirements, provided in this section.

(D)

Size of acquisition

(i)

Asset size

(ii)

Consideration

(E)

Notice not otherwise warranted

(F)

Compliance criterion

(5)

Notification

(A)

Commencement of activities approved by rule

(B)

Activities permitted by order and acquisitions

(i)

In general

(ii)

Description of activities and terms

(6)

Recently acquired institutions

Any insured depository institution which has been acquired by a bank holding company during the 12-month period preceding the date on which the company proposes to commence an activity or acquisition pursuant to paragraph (3) may be excluded for purposes of paragraph (4)(B)(ii) if—

(A)

the bank holding company has developed a plan for the institution to restore the capital and management of the institution which is acceptable to the appropriate Federal banking agency; and

(B)

all such insured depository institutions represent, in the aggregate, less than 10 percent of the aggregate total risk-weighted assets of all insured depository institutions controlled by the bank holding company.

(7)

Adjustment of percentages

(k)

Engaging in activities that are financial in nature

(1)

In general

Notwithstanding subsection (a), a financial holding company may engage in any activity, and may acquire and retain the shares of any company engaged in any activity, that the Board, in accordance with paragraph (2), determines (by regulation or order)—

(A)

to be financial in nature or incidental to such financial activity; or

(B)

is complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally.

(2)

Coordination between the Board and the Secretary of the Treasury

(A)

Proposals raised before the Board

(i)

Consultation

(ii)

Treasury view

(B)

Proposals raised by the Treasury

(i)

Treasury recommendation

(ii)

Time period for Board action

(3)

Factors to be considered

In determining whether an activity is financial in nature or incidental to a financial activity, the Board shall take into account—

(A)

the purposes of this chapter and the Gramm-Leach-Bliley Act;

(B)

changes or reasonably expected changes in the marketplace in which financial holding companies compete;

(C)

changes or reasonably expected changes in the technology for delivering financial services; and

(D)

whether such activity is necessary or appropriate to allow a financial holding company and the affiliates of a financial holding company to—

(i)

compete effectively with any company seeking to provide financial services in the United States;

(ii)

efficiently deliver information and services that are financial in nature through the use of technological means, including any application necessary to protect the security or efficacy of systems for the transmission of data or financial transactions; and

(iii)

offer customers any available or emerging technological means for using financial services or for the document imaging of data.

(4)

Activities that are financial in nature

For purposes of this subsection, the following activities shall be considered to be financial in nature:

(A)

Lending, exchanging, transferring, investing for others, or safeguarding money or securities.

(B)

Insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, or death, or providing and issuing annuities, and acting as principal, agent, or broker for purposes of the foregoing, in any State.

(C)

Providing financial, investment, or economic advisory services, including advising an investment company (as defined in section 3 of the Investment Company Act of 1940 [15 U.S.C. 80a–3]).

(D)

Issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly.

(E)

Underwriting, dealing in, or making a market in securities.

(F)

Engaging in any activity that the Board has determined, by order or regulation that is in effect on November 12, 1999, to be so closely related to banking or managing or controlling banks as to be a proper incident thereto (subject to the same terms and conditions contained in such order or regulation, unless modified by the Board).

(G)

Engaging, in the United States, in any activity that—

(i)

a bank holding company may engage in outside of the United States; and

(ii)

the Board has determined, under regulations prescribed or interpretations issued pursuant to subsection (c)(13) (as in effect on the day before November 12, 1999) to be usual in connection with the transaction of banking or other financial operations abroad.

(H)

Directly or indirectly acquiring or controlling, whether as principal, on behalf of 1 or more entities (including entities, other than a depository institution or subsidiary of a depository institution, that the bank holding company controls), or otherwise, shares, assets, or ownership interests (including debt or equity securities, partnership interests, trust certificates, or other instruments representing ownership) of a company or other entity, whether or not constituting control of such company or entity, engaged in any activity not authorized pursuant to this section if—

(i)

the shares, assets, or ownership interests are not acquired or held by a depository institution or subsidiary of a depository institution;

(ii)

such shares, assets, or ownership interests are acquired and held by—

(I)

a securities affiliate or an affiliate thereof; or

(II)

an affiliate of an insurance company described in subparagraph (I)(ii) that provides investment advice to an insurance company and is registered pursuant to the Investment Advisers Act of 1940 [15 U.S.C. 80b–1 et seq.], or an affiliate of such investment adviser;

as part of a bona fide underwriting or merchant or investment banking activity, including investment activities engaged in for the purpose of appreciation and ultimate resale or disposition of the investment;

(iii)

such shares, assets, or ownership interests are held for a period of time to enable the sale or disposition thereof on a reasonable basis consistent with the financial viability of the activities described in clause (ii); and

(iv)

during the period such shares, assets, or ownership interests are held, the bank holding company does not routinely manage or operate such company or entity except as may be necessary or required to obtain a reasonable return on investment upon resale or disposition.

(I)

Directly or indirectly acquiring or controlling, whether as principal, on behalf of 1 or more entities (including entities, other than a depository institution or subsidiary of a depository institution, that the bank holding company controls) or otherwise, shares, assets, or ownership interests (including debt or equity securities, partnership interests, trust certificates or other instruments representing ownership) of a company or other entity, whether or not constituting control of such company or entity, engaged in any activity not authorized pursuant to this section if—

(i)

the shares, assets, or ownership interests are not acquired or held by a depository institution or a subsidiary of a depository institution;

(ii)

such shares, assets, or ownership interests are acquired and held by an insurance company that is predominantly engaged in underwriting life, accident and health, or property and casualty insurance (other than credit-related insurance) or providing and issuing annuities;

(iii)

such shares, assets, or ownership interests represent an investment made in the ordinary course of business of such insurance company in accordance with relevant State law governing such investments; and

(iv)

during the period such shares, assets, or ownership interests are held, the bank holding company does not routinely manage or operate such company except as may be necessary or required to obtain a reasonable return on investment.

(5)

Actions required

(A)

In general

(B)

Activities

The activities described in this subparagraph are as follows:

(i)

Lending, exchanging, transferring, investing for others, or safeguarding financial assets other than money or securities.

(ii)

Providing any device or other instrumentality for transferring money or other financial assets.

(iii)

Arranging, effecting, or facilitating financial transactions for the account of third parties.

(6)

Required notification

(A)

In general

(B)

Approval not required for certain financial activities

(i)

In general

(ii)

Exception

(iii)

Hart-Scott-Rodino filing requirement

(7)

Merchant banking activities

(A)

Joint regulations

(B)

Sunset of restrictions on merchant banking activities of financial subsidiaries

(l)

Conditions for engaging in expanded financial activities

(1)

In general

Notwithstanding subsection (k), (n), or (o), a bank holding company may not engage in any activity, or directly or indirectly acquire or retain shares of any company engaged in any activity, under subsection (k), (n), or (o), other than activities permissible for any bank holding company under subsection (c)(8), unless—

(A)

all of the depository institution subsidiaries of the bank holding company are well capitalized;

(B)

all of the depository institution subsidiaries of the bank holding company are well managed;

(C)

the bank holding company is well capitalized and well managed; and

(D)

the bank holding company has filed with the Board—

(i)

a declaration that the company elects to be a financial holding company to engage in activities or acquire and retain shares of a company that were not permissible for a bank holding company to engage in or acquire before the enactment of the Gramm-Leach-Bliley Act; and

(ii)

a certification that the company meets the requirements of subparagraphs (A), (B), and (C).

(2)

CRA requirement

Notwithstanding subsection (k) or (n) of this section, section 24a(a) of this title, or section 46(a) of the Federal Deposit Insurance Act [12 U.S.C. 1831w(a)], the appropriate Federal banking agency shall prohibit a financial holding company or any insured depository institution from—

(A)

commencing any new activity under subsection (k) or (n) of this section, section 24a(a) of this title, or section 46(a) of the Federal Deposit Insurance Act; or

(B)

directly or indirectly acquiring control of a company engaged in any activity under subsection (k) or (n) of this section, section 24a(a) of this title, or section 46(a) of the Federal Deposit Insurance Act (other than an investment made pursuant to subparagraph (H) or (I) of subsection (k)(4), or section 122 of the Gramm-Leach-Bliley Act, or under section 46(a) of the Federal Deposit Insurance Act by reason of such section 122, by an affiliate already engaged in activities under any such provision);

if any insured depository institution subsidiary of such financial holding company, or the insured depository institution or any of its insured depository institution affiliates, has received in its most recent examination under the Community Reinvestment Act of 1977 [12 U.S.C. 2901 et seq.], a rating of less than “satisfactory record of meeting community credit needs”.

(3)

Foreign banks

(m)

Provisions applicable to financial holding companies that fail to meet certain requirements

(1)

In general

If the Board finds that—

(A)

a financial holding company is engaged, directly or indirectly, in any activity under subsection (k), (n), or (o), other than activities that are permissible for a bank holding company under subsection (c)(8); and

(B)

such financial holding company is not in compliance with the requirements of subsection (l)(1);

the Board shall give notice to the financial holding company to that effect, describing the conditions giving rise to the notice.

(2)

Agreement to correct conditions required

(3)

Board may impose limitations

(4)

Failure to correct

If the conditions described in a notice to a financial holding company under paragraph (1) are not corrected within 180 days after the date of receipt by the financial holding company of a notice under paragraph (1), the Board may require such financial holding company, under such terms and conditions as may be imposed by the Board and subject to such extension of time as may be granted in the discretion of the Board, either—

(A)

to divest control of any subsidiary depository institution; or

(B)

at the election of the financial holding company instead to cease to engage in any activity conducted by such financial holding company or its subsidiaries (other than a depository institution or a subsidiary of a depository institution) that is not an activity that is permissible for a bank holding company under subsection (c)(8).

(5)

Consultation

(n)

Authority to retain limited nonfinancial activities and affiliations

(1)

In general

(A)

the holding company lawfully was engaged in the activity or held the shares of such company on September 30, 1999;

(B)

the holding company is predominantly engaged in financial activities as defined in paragraph (2); and

(C)

the company engaged in such activity continues to engage only in the same activities that such company conducted on September 30, 1999, and other activities permissible under this chapter.

(2)

Predominantly financial

(3)

No expansion of grandfathered commercial activities through merger or consolidation

(4)

Continuing revenue limitation on grandfathered commercial activities

(5)

Cross marketing restrictions applicable to commercial activities

(A)

In general

A depository institution controlled by a financial holding company shall not—

(i)

offer or market, directly or through any arrangement, any product or service of a company whose activities are conducted or whose shares are owned or controlled by the financial holding company pursuant to this subsection or subparagraph (H) or (I) of subsection (k)(4); or

(ii)

permit any of its products or services to be offered or marketed, directly or through any arrangement, by or through any company described in clause (i).

(B)

Rule of construction

Subparagraph (A) shall not be construed as prohibiting an arrangement between a depository institution and a company owned or controlled pursuant to subparagraph (H) or (I) of subsection (k)(4) for the marketing of products or services through statement inserts or Internet websites if—

(i)

such arrangement does not violate section 106 of the Bank Holding Company Act Amendments of 1970 [12 U.S.C. 1971 et seq.]; and

(ii)

the Board determines that the arrangement is in the public interest, does not undermine the separation of banking and commerce, and is consistent with the safety and soundness of depository institutions.

(6)

Transactions with nonfinancial affiliates

(7)

Sunset of grandfather

(o)

Regulation of certain financial holding companies

Notwithstanding subsection (a), a company that is not a bank holding company or a foreign bank (as defined in section 3101(7) of this title) and becomes a financial holding company after November 12, 1999, may continue to engage in, or directly or indirectly own or control shares of a company engaged in, activities related to the trading, sale, or investment in commodities and underlying physical properties that were not permissible for bank holding companies to conduct in the United States as of September 30, 1997, if—

(1)

the holding company, or any subsidiary of the holding company, lawfully was engaged, directly or indirectly, in any of such activities as of September 30, 1997, in the United States;

(2)

the attributed aggregate consolidated assets of the company held by the holding company pursuant to this subsection, and not otherwise permitted to be held by a financial holding company, are equal to not more than 5 percent of the total consolidated assets of the bank holding company, except that the Board may increase that percentage by such amounts and under such circumstances as the Board considers appropriate, consistent with the purposes of this chapter; and

(3)

the holding company does not permit—

(A)

any company, the shares of which it owns or controls pursuant to this subsection, to offer or market any product or service of an affiliated depository institution; or

(B)

any affiliated depository institution to offer or market any product or service of any company, the shares of which are owned or controlled by such holding company pursuant to this subsection.

(May 9, 1956, ch. 240, § 4, 70 Stat. 135; Pub. L. 89–485, § 8, July 1, 1966, 80 Stat. 238; Pub. L. 91–607, title I, § 103, Dec. 31, 1970, 84 Stat. 1763; Pub. L. 95–188, title III, § 301(c), Nov. 16, 1977, 91 Stat. 1389; Pub. L. 95–630, title I, § 112, Nov. 10, 1978, 92 Stat. 3671; Pub. L. 96–221, title VII, § 701(b), Mar. 31, 1980, 94 Stat. 186; Pub. L. 97–290, title II, § 203, Oct. 8, 1982, 96 Stat. 1236; Pub. L. 97–320, title I, §§ 118(a), 141(a)(4), title IV, § 433(b), title VI, § 601, Oct. 15, 1982, 96 Stat. 1479, 1489, 1527, 1536; Pub. L. 97–457, § 30, Jan. 12, 1983, 96 Stat. 2511; Pub. L. 99–514, § 2,

cite as: 12 USC 1843