Collapse to view only § 1846. Reservation of rights to States
- § 1841. Definitions
- § 1842. Acquisition of bank shares or assets
- § 1843. Interests in nonbanking organizations
- § 1844. Administration
- § 1845. Repealed.
- § 1846. Reservation of rights to States
- § 1847. Penalties
- § 1848. Judicial review
- § 1848a. Repealed.
- § 1849. Saving provision
- § 1850. Acquisition of subsidiary and tying arrangement: Federal Reserve Board proceedings; application for authorization; competitor as party in interest and person aggrieved; judicial review
- § 1850a. Securities holding companies
- § 1851. Prohibitions on proprietary trading and certain relationships with hedge funds and private equity funds
- § 1852. Concentration limits on large financial firms
§ 1841. Definitions
(a)
(1) Except as provided in paragraph (5) of this subsection, “bank holding company” means any company which has control over any bank or over any company that is or becomes a bank holding company by virtue of this chapter.
(2) Any company has control over a bank or over any company if—
(A) the company directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company;
(B) the company controls in any manner the election of a majority of the directors or trustees of the bank or company; or
(C) the Board determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company.
(3) For the purposes of any proceeding under paragraph (2)(C) of this subsection, there is a presumption that any company which directly or indirectly owns, controls, or has power to vote less than 5 per centum of any class of voting securities of a given bank or company does not have control over that bank or company.
(4) In any administrative or judicial proceeding under this chapter, other than a proceeding under paragraph (2)(C) of this subsection, a company may not be held to have had control over any given bank or company at any given time unless that company, at the time in question, directly or indirectly owned, controlled, or had power to vote 5 per centum or more of any class of voting securities of the bank or company, or had already been found to have control in a proceeding under paragraph (2)(C).
(5) Notwithstanding any other provision of this subsection—
(A) No bank and no company owning or controlling voting shares of a bank is a bank holding company by virtue of its ownership or control of shares in a fiduciary capacity, except as provided in paragraphs (2) and (3) of subsection (g) of this section. For the purpose of the preceding sentence, bank shares shall not be deemed to have been acquired in a fiduciary capacity if the acquiring bank or company has sole discretionary authority to exercise voting rights with respect thereto; except that this limitation is applicable in the case of a bank or company acquiring such shares prior to December 31, 1970, only if the bank or company has the right consistent with its obligations under the instrument, agreement, or other arrangement establishing the fiduciary relationship to divest itself of such voting rights and fails to exercise that right to divest within a reasonable period not to exceed one year after December 31, 1970.
(B) No company is a bank holding company by virtue of its ownership or control of shares acquired by it in connection with its underwriting of securities if such shares are held only for such period of time as will permit the sale thereof on a reasonable basis.
(C) No company formed for the sole purpose of participating in a proxy solicitation is a bank holding company by virtue of its control of voting rights of shares acquired in the course of such solicitation.
(D) No company is a bank holding company by virtue of its ownership or control of shares acquired in securing or collecting a debt previously contracted in good faith, until two years after the date of acquisition. The Board is authorized upon application by a company to extend, from time to time for not more than one year at a time, the two-year period referred to herein for disposing of any shares acquired by a company in the regular course of securing or collecting a debt previously contracted in good faith, if, in the Board’s judgment, such an extension would not be detrimental to the public interest, but no such extension shall in the aggregate exceed three years.
(E) No company is a bank holding company by virtue of its ownership or control of any State-chartered bank or trust company which—
(i) is wholly owned by 1 or more thrift institutions or savings banks; and
(ii) is restricted to accepting—(I) deposits from thrift institutions or savings banks;(II) deposits arising out of the corporate business of the thrift institutions or savings banks that own the bank or trust company; or(III) deposits of public moneys.
(F) No trust company or mutual savings bank which is an insured bank under the Federal Deposit Insurance Act [12 U.S.C. 1811 et seq.] is a bank holding company by virtue of its direct or indirect ownership or control of one bank located in the same State, if (i) such ownership or control existed on December 31, 1970, and is specifically authorized by applicable State law, and (ii) the trust company or mutual savings bank does not after that date acquire an interest in any company that, together with any other interest it holds in that company, will exceed 5 per centum of any class of the voting shares of that company, except that this limitation shall not be applicable to investments of the trust company or mutual savings bank, direct and indirect, which are otherwise in accordance with the limitations applicable to national banks under section 24 of this title.
(6) For the purposes of this chapter, any successor to a bank holding company shall be deemed to be a bank holding company from the date on which the predecessor company became a bank holding company.
(b) “Company” means any corporation, partnership, business trust, association, or similar organization, or any other trust unless by its terms it must terminate within twenty-five years or not later than twenty-one years and ten months after the death of individuals living on the effective date of the trust but shall not include any corporation the majority of the shares of which are owned by the United States or by any State, and shall not include a qualified family partnership. “Company covered in 1970” means a company which becomes a bank holding company as a result of the enactment of the Bank Holding Company Act Amendments of 1970 and which would have been a bank holding company on June 30, 1968, if those amendments had been enacted on that date.
(c)Bank Defined.—For purposes of this chapter—
(1)In general.—Except as provided in paragraph (2), the term “bank” means any of the following:
(A) An insured bank as defined in section 3(h) of the Federal Deposit Insurance Act [12 U.S.C. 1813(h)].
(B) An institution organized under the laws of the United States, any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands which both—
(i) accepts demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others; and
(ii) is engaged in the business of making commercial loans.
(2)Exceptions.—The term “bank” does not include any of the following:
(A) A foreign bank which would be a bank within the meaning of paragraph (1) solely because such bank has an insured or uninsured branch in the United States.
(B) An insured institution (as defined in subsection (j)).
(C) An organization that does not do business in the United States except as an incident to its activities outside the United States.
(D) An institution that functions solely in a trust or fiduciary capacity, if—
(i) all or substantially all of the deposits of such institution are in trust funds and are received in a bona fide fiduciary capacity;
(ii) no deposits of such institution which are insured by the Federal Deposit Insurance Corporation are offered or marketed by or through an affiliate of such institution;
(iii) such institution does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others or make commercial loans; and
(iv) such institution does not—(I) obtain payment or payment related services from any Federal Reserve bank, including any service referred to in section 11A of the Federal Reserve Act [12 U.S.C. 248a]; or(II) exercise discount or borrowing privileges pursuant to section 19(b)(7) of the Federal Reserve Act [12 U.S.C. 461(b)(7)].
(E) A credit union (as described in section 19(b)(1)(A)(iv) of the Federal Reserve Act [12 U.S.C. 461(b)(1)(A)(iv)]).
(F) An institution, including an institution that accepts collateral for extensions of credit by holding deposits under $100,000, and by other means which—
(i) engages only in credit card operations;
(ii) does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others;
(iii) does not accept any savings or time deposit of less than $100,000;
(iv) maintains only one office that accepts deposits; and
(v) does not engage in the business of making commercial loans, other than credit card loans that are made to businesses that meet the criteria for a small business concern to be eligible for business loans under regulations established by the Small Business Administration under part 121 of title 13, Code of Federal Regulations.
(G) An organization operating under section 25 or section 25(a) 1
1 See References in Text note below.
of the Federal Reserve Act.(H) An industrial loan company, industrial bank, or other similar institution which is—
(i) an institution organized under the laws of a State which, on March 5, 1987, had in effect or had under consideration in such State’s legislature a statute which required or would require such institution to obtain insurance under the Federal Deposit Insurance Act [12 U.S.C. 1811 et seq.]—(I) which does not accept demand deposits that the depositor may withdraw by check or similar means for payment to third parties;(II) which has total assets of less than $100,000,000; or(III) the control of which is not acquired by any company after August 10, 1987; or
(ii) an institution which does not, directly, indirectly, or through an affiliate, engage in any activity in which it was not lawfully engaged as of March 5, 1987,
except that this subparagraph shall cease to apply to any institution which permits any overdraft (including any intraday overdraft), or which incurs any such overdraft in such institution’s account at a Federal Reserve bank, on behalf of an affiliate if such overdraft is not the result of an inadvertent computer or accounting error that is beyond the control of both the institution and the affiliate, or that is otherwise permissible for a bank controlled by a company described in section 1843(f)(1) of this title.
(d) “Subsidiary”, with respect to a specified bank holding company, means (1) any company 25 per centum or more of whose voting shares (excluding shares owned by the United States or by any company wholly owned by the United States) is directly or indirectly owned or controlled by such bank holding company, or is held by it with power to vote; (2) any company the election of a majority of whose directors is controlled in any manner by such bank holding company; or (3) any company with respect to the management of policies of which such bank holding company has the power, directly or indirectly, to exercise a controlling influence, as determined by the Board, after notice and opportunity for hearing.
(e) The term “successor” shall include any company which acquires directly or indirectly from a bank holding company shares of any bank, when and if the relationship between such company and the bank holding company is such that the transaction effects no substantial change in the control of the bank or beneficial ownership of such shares of such bank. The Board may, by regulation, further define the term “successor” to the extent necessary to prevent evasion of the purposes of this chapter.
(f) “Board” means the Board of Governors of the Federal Reserve System.
(g) For the purposes of this chapter—
(1) shares owned or controlled by any subsidiary of a bank holding company shall be deemed to be indirectly owned or controlled by such bank holding company; and
(2) shares held or controlled directly or indirectly by trustees for the benefit of (A) a company, (B) the shareholders or members of a company, or (C) the employees (whether exclusively or not) of a company, shall be deemed to be controlled by such company, unless the Board determines that such treatment is not appropriate in light of the facts and circumstances of the case and the purposes of this chapter.
(h)
(1) Except as provided by paragraph (2), the application of this chapter and of section 371c of this title shall not be affected by the fact that a transaction takes place wholly or partly outside the United States or that a company is organized or operates outside the United States.
(2) Except as provided in paragraph (3), the prohibitions of section 1843 of this title shall not apply to shares of any company organized under the laws of a foreign country (or to shares held by such company in any company engaged in the same general line of business as the investor company or in a business related to the business of the investor company) that is principally engaged in business outside the United States if such shares are held or acquired by a bank holding company organized under the laws of a foreign country that is principally engaged in the banking business outside the United States. For the purpose of this subsection, the term “section 2(h)(2) company” means any company whose shares are held pursuant to this paragraph.
(3) Nothing in paragraph (2) authorizes a section 2(h)(2) company to engage in (or acquire or hold more than 5 percent of the outstanding shares of any class of voting securities of a company engaged in) any banking, securities, insurance, or other financial activities, as defined by the Board, in the United States. This paragraph does not prohibit a section 2(h)(2) company from holding shares that were lawfully acquired before August 10, 1987.
(4) No domestic office or subsidiary of a bank holding company or subsidiary thereof holding shares of a section 2(h)(2) company may extend credit to a domestic office or subsidiary of such section 2(h)(2) company on terms more favorable than those afforded similar borrowers in the United States.
(5) No domestic banking office or bank subsidiary of a bank holding company that controls a section 2(h)(2) company may offer or market products or services of such section 2(h)(2) company, or permit its products or services to be offered or marketed by or through such section 2(h)(2) company, unless such products or services were being so offered or marketed as of March 5, 1987, and then only in the same manner in which they were being offered or marketed as of that date.
(i)Thrift Institution.—For purposes of this chapter, the term “thrift institution” means—
(1) any domestic building and loan or savings and loan association;
(2) any cooperative bank without capital stock organized and operated for mutual purposes and without profit;
(3) any Federal savings bank; and
(4) any State-chartered savings bank the holding company of which is registered pursuant to section 1730a 1 of this title.
(j)Definition of Savings Associations and Related Term.—The term “savings association” or “insured institution” means—
(1) any Federal savings association or Federal savings bank;
(2) any building and loan association, savings and loan association, homestead association, or cooperative bank if such association or cooperative bank is a member of the Deposit Insurance Fund; and
(3) any savings bank or cooperative bank which is deemed by the appropriate Federal banking agency to be a savings association under section 1467a(l) of this title.
(k)Affiliate.—For purposes of this chapter, the term “affiliate” means any company that controls, is controlled by, or is under common control with another company.
(l)Savings Bank Holding Company.—For purposes of this chapter, the term “savings bank holding company” means any company which controls one or more qualified savings banks if the aggregate total assets of such savings banks constitute, upon formation of the holding company and at all times thereafter, at least 70 percent of the total assets of such company.
(m)
(n)Incorporated Definitions.—For purposes of this chapter, the terms “depository institution”, “insured depository institution”, “appropriate Federal banking agency”, “default”, “in danger of default”, and “State bank supervisor” have the same meanings as in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813].
(o)Other Definitions.—For purposes of this chapter, the following definitions shall apply:
(1)Capital terms.—
(A)Insured depository institutions.—With respect to insured depository institutions, the terms “well capitalized”, “adequately capitalized”, and “undercapitalized” have the same meanings as in section 38 of the Federal Deposit Insurance Act [12 U.S.C. 1831o].
(B)Bank holding company.—
(i)Adequately capitalized.—With respect to a bank holding company, the term “adequately capitalized” means a level of capitalization which meets or exceeds all applicable Federal regulatory capital standards.
(ii)Well capitalized.—A bank holding company is “well capitalized” if it meets the required capital levels for well capitalized bank holding companies established by the Board.
(C)Other capital terms.—The terms “Tier 1” and “risk-weighted assets” have the meanings given those terms in the capital guidelines or regulations established by the Board for bank holding companies.
(2)Antitrust laws.—Except as provided in section 1849 of this title, the term “antitrust laws”—
(A) has the same meaning as in subsection (a) of section 12 of title 15; and
(B) includes section 45 of title 15 to the extent that such section 45 relates to unfair methods of competition.
(3)Branch.—The term “branch” means a domestic branch (as defined in section 3 of the Federal Deposit Insurance Act [12 U.S.C. 1813]).
(4)Home state.—The term “home State” means—
(A) with respect to a national bank, the State in which the main office of the bank is located;
(B) with respect to a State bank, the State by which the bank is chartered;
(C) with respect to a bank holding company, the State in which the total deposits of all banking subsidiaries of such company are the largest on the later of—
(i)July 1, 1966; or
(ii) the date on which the company becomes a bank holding company under this chapter;
(D) with respect to a State savings association, the State by which the savings association is chartered; and
(E) 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,1 the Comptroller of the Currency) of the Federal savings association is located.
(5)Host state.—The term “host State” means—
(A) 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; and
(B) with respect to a bank holding company, a State, other than the home State of the company, in which the company controls, or seeks to control, a bank subsidiary.
(6)Out-of-state bank.—The term “out-of-State bank” means, with respect to any State, a bank whose home State is another State.
(7)Out-of-state bank holding company.—The term “out-of-State bank holding company” means, with respect to any State, a bank holding company whose home State is another State.
(8)Lead insured depository institutions.—
(A)In general.—The term “lead insured depository institution” means the largest insured depository institution controlled by the subject bank holding company at any time, based on a comparison of the average total risk-weighted assets controlled by each insured depository institution during the previous 12-month period.
(B)Branch or agency.—For purposes of this paragraph and section 1843(j)(4) of this title, the term “insured depository institution” includes any branch or agency operated in the United States by a foreign bank.
(9)Well managed.—The term “well managed” means—
(A) in the case of any company or depository institution which receives examinations, the achievement of—
(i) a CAMEL composite rating of 1 or 2 (or an equivalent rating under an equivalent rating system) in connection with the most recent examination or subsequent review of such company or institution; and
(ii) at least a satisfactory rating for management, if such rating is given; or
(B) in the case of a company or depository institution that has not received an examination rating, the existence and use of managerial resources which the Board determines are satisfactory.
(10)Qualified family partnership.—The term “qualified family partnership” means a general or limited partnership that the Board determines—
(A) does not directly control any bank, except through a registered bank holding company;
(B) does not control more than 1 registered bank holding company;
(C) does not engage in any business activity, except indirectly through ownership of other business entities;
(D) has no investments other than those permitted for a bank holding company pursuant to section 1843(c) of this title;
(E) is not obligated on any debt, either directly or as a guarantor;
(F) has partners, all of whom are either—
(i) individuals related to each other by blood, marriage (including former marriage), or adoption; or
(ii) trusts for the primary benefit of individuals related as described in clause (i); and
(G) has filed with the Board a statement that includes—
(i) the basis for the eligibility of the partnership under subparagraph (F);
(ii) a list of the existing activities and investments of the partnership;
(iii) a commitment to comply with this paragraph;
(iv) a commitment to comply with section 7 of the Federal Deposit Insurance Act [12 U.S.C. 1817] with respect to any acquisition of control of an insured depository institution occurring after September 30, 1996; and
(v) a commitment to be subject, to the same extent as if the qualified family partnership were a bank holding company—(I) to examination by the Board to assure compliance with this paragraph; and(II) to section 8 of the Federal Deposit Insurance Act [12 U.S.C. 1818].
(p)Financial Holding Company.—For purposes of this chapter, the term “financial holding company” means a bank holding company that meets the requirements of section 1843(l)(1) of this title.
(q)Insurance Company.—For purposes of sections 1843 and 1844 of this title, the term “insurance company” includes any person engaged in the business of insurance to the extent of such activities.
(May 9, 1956, ch. 240, § 2, 70 Stat. 133; Pub. L. 89–485, §§ 1–6, July 1, 1966, 80 Stat. 236, 237; Pub. L. 91–607, title I, § 101, Dec. 31, 1970, 84 Stat. 1760; Pub. L. 95–188, title III, § 301(b), Nov. 16, 1977, 91 Stat. 1389; Pub. L. 95–369, § 8(e), Sept. 17, 1978, 92 Stat. 623; Pub. L. 97–320, title I, § 118(b), title III, § 333, title IV, § 404(d)(1), Oct. 15, 1982, 96 Stat. 1479, 1504, 1512; Pub. L. 100–86, title I, § 101(a), (e), title II, § 205(a), Aug. 10, 1987, 101 Stat. 554, 562, 584; Pub. L. 101–73, title VI, § 602(a), Aug. 9, 1989, 103 Stat. 409; Pub. L. 103–328, title I, § 101(c), Sept. 29, 1994, 108 Stat. 2341; Pub. L. 104–208, div. A, title II, §§ 2207, 2208(b), 2304(b), 2610, 2704(d)(17), Sept. 30, 1996, 110 Stat. 3009–406, 3009–408, 3009–425, 3009–475, 3009–495; Pub. L. 106–102, title I, §§ 103(c)(1), 107(c), 119, title VII, § 724, Nov. 12, 1999, 113 Stat. 1351, 1359, 1373, 1471; Pub. L. 108–386, § 8(c)(1), Oct. 30, 2004, 118 Stat. 2231; Pub. L. 109–171, title II, § 2102(b), Feb. 8, 2006, 120 Stat. 9; Pub. L. 109–173, § 9(h)(1), Feb. 15, 2006, 119 Stat. 3618; Pub. L. 109–351, title VII, §§ 706, 727(a), Oct. 13, 2006, 120 Stat. 1987, 2003; Pub. L. 111–203, title III, § 354(1), title VI, §§ 623(b)(2), 628, July 21, 2010, 124 Stat. 1546, 1635, 1640.)
§ 1842. Acquisition of bank shares or assets
(a) Prior approval of Board as necessary; exceptions; disposition, time extension; subsequent approval or disposition upon disapprovalIt shall be unlawful, except with the prior approval of the Board, (1) for any action to be taken that causes any company to become a bank holding company; (2) for any action to be taken that causes a bank to become a subsidiary of a bank holding company; (3) for any bank holding company to acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, such company will directly or indirectly own or control more than 5 per centum of the voting shares of such bank; (4) for any bank holding company or subsidiary thereof, other than a bank, to acquire all or substantially all of the assets of a bank; or (5) for any bank holding company to merge or consolidate with any other bank holding company. Notwithstanding the foregoing this prohibition shall not apply to (A) shares acquired by a bank, (i) 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, or (ii) in the regular course of securing or collecting a debt previously contracted in good faith, but any shares acquired after May 9, 1956, in securing or collecting any such previously contracted debt shall be disposed of within a period of two years from the date on which they were acquired; (B) additional shares acquired by a bank holding company in a bank in which such bank holding company owned or controlled a majority of the voting shares prior to such acquisition; or (C) the acquisition, by a company, of control of a bank in a reorganization in which a person or group of persons exchanges their shares of the bank for shares of a newly formed bank holding company and receives after the reorganization substantially the same proportional share interest in the holding company as they held in the bank except for changes in shareholders’ interests resulting from the exercise of dissenting shareholders’ rights under State or Federal law if—
(i) immediately following the acquisition—(I) the bank holding company meets the capital and other financial standards prescribed by the Board by regulation for such a bank holding company; and(II) the bank is adequately capitalized (as defined in section 1831o of this title);
(ii) the holding company does not engage in any activities other than those of managing and controlling banks as a result of the reorganization;
(iii) the company provides 30 days prior notice to the Board and the Board does not object to such transaction during such 30-day period; and
(iv) the holding company will not acquire control of any additional bank as a result of the reorganization..1
1 So in original.
The Board is authorized upon application by a bank to extend, from time to time for not more than one year at a time, the two-year period referred to above for disposing of any shares acquired by a bank in the regular course of securing or collecting a debt previously contracted in good faith, if, in the Board’s judgment, such an extension would not be detrimental to the public interest, but no such extension shall in the aggregate exceed three years. For the purpose of the preceding sentence, bank shares acquired after December 31, 1970, shall not be deemed to have been acquired in good faith in a fiduciary capacity if the acquiring bank or company has sole discretionary authority to exercise voting rights with respect thereto, but in such instances acquisitions may be made without prior approval of the Board if the Board, upon application filed within ninety days after the shares are acquired, approves retention or, if retention is disapproved, the acquiring bank disposes of the shares or its sole discretionary voting rights within two years after issuance of the order of disapproval.
(b) Application for approval; notice to Comptroller of Currency or State authority; views and recommendations; disapproval; hearing; order of Board; nonaction deemed grant of application; procedure in emergencies or probable failures requiring immediate Board action and orders
(1) Notice and hearing requirements
(2) Waiver in case of bank in danger of closing
(c) Factors for consideration by Board
(1) Competitive factorsThe Board shall not approve—
(A) any acquisition or merger or consolidation under this section 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 acquisition or merger or consolidation under this section 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 or 4
4 So in original. Probably should be “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.(2) Banking and community factors
(3) Supervisory factorsThe Board shall disapprove any application under this section by any company if—
(A) the company fails to provide the Board with adequate assurances that the company will make available to the Board such information on the operations or activities of the company, and any affiliate of the company, as the Board determines to be appropriate to determine and enforce compliance with this chapter; or
(B) in the case of an application involving a foreign bank, the foreign bank is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in the bank’s home country.
(4) Treatment of certain bank stock loans
(5) Managerial resources
(6) Money laundering
(7) Financial stability
(d) Interstate banking
(1) Approvals authorized
(A) Acquisition of banks
(B) Preservation of State age laws
(i) In general
(ii) Special rule for State age laws specifying a period of more than 5 years
(C) Shell banks
(D) Effect on State contingency lawsNo provision of this subsection shall be construed as affecting the applicability of a State law that makes an acquisition of a bank contingent upon a requirement to hold a portion of such bank’s assets available for call by a State-sponsored housing entity established pursuant to State law, if—
(i) the State law does not have the effect of discriminating against out-of-State banks, out-of-State bank holding companies, or subsidiaries of such banks or bank holding companies;
(ii) that State law was in effect as of September 29, 1994;
(iii) the Federal Deposit Insurance Corporation has not determined that compliance with such State law would result in an unacceptable risk to the Deposit Insurance Fund; and
(iv) the appropriate Federal banking agency for such bank has not found that compliance with such State law would place the bank in an unsafe or unsound condition.
(2) Concentration limits
(A) Nationwide concentration limits
(B) Statewide concentration limits other than with respect to initial entriesThe Board may not approve an application pursuant to paragraph (1)(A) if—
(i) immediately before the consummation of the acquisition for which such application is filed, the applicant (including any insured depository institution affiliate of the applicant) controls any insured depository institution or any branch of an insured depository institution in the home State of any bank to be acquired or in any host State in which any such bank maintains a branch; and
(ii) the applicant (including all insured depository institutions which are affiliates of the applicant), upon consummation of the acquisition, would control 30 percent or more of the total amount of deposits of insured depository institutions in any such State.
(C) Effectiveness of State deposit caps
(D) Exceptions to subparagraph (B)The Board may approve an application pursuant to paragraph (1)(A) without regard to the applicability of subparagraph (B) with respect to any State if—
(i) there is a limitation described in subparagraph (C) in a State statute, regulation, or order which has the effect of permitting a bank or bank holding company (including all insured depository institutions which are affiliates of the bank or bank holding company) to control a greater percentage of total deposits of all insured depository institutions in the State than the percentage permitted under subparagraph (B); or
(ii) the acquisition is approved by the appropriate State bank supervisor of such State and the standard on which such approval is based does not have the effect of discriminating against out-of-State banks, out-of-State bank holding companies, or subsidiaries of such banks or holding companies.
(E) “Deposit” defined
(3) Community reinvestment complianceIn determining whether to approve an application under paragraph (1)(A), the Board shall—
(A) comply with the responsibilities of the Board regarding such application under section 2903 of this title; and
(B) take into account the applicant’s record of compliance with applicable State community reinvestment laws.
(4) Applicability of antitrust lawsNo provision of this subsection shall be construed as affecting—
(A) the applicability of the antitrust laws; or
(B) the applicability, if any, of any State law which is similar to the antitrust laws.
(5) Exception for banks in default or in danger of defaultThe Board may approve an application pursuant to paragraph (1)(A) which involves—
(A) an acquisition of 1 or more banks in default or in danger of default; or
(B) an acquisition with respect to which assistance is provided under section 1823(c) of this title;
without regard to subparagraph (B) or (D) of paragraph (1) or paragraph (2) or (3).
(e) Insured depository institution
(f) [Repealed]
(g) Mutual bank holding company
(1) Establishment
(2) Regulations
(May 9, 1956, ch. 240, § 3, 70 Stat. 134; Pub. L. 89–485, § 7, July 1, 1966, 80 Stat. 237; Pub. L. 91–607, title I, § 102, Dec. 31, 1970, 84 Stat. 1763; Pub. L. 95–188, title III, §§ 301(a), 302, Nov. 16, 1977, 91 Stat. 1388, 1389; Pub. L. 96–221, title VII, §§ 712(b), (c), 713, Mar. 31, 1980, 94 Stat. 189, 190; Pub. L. 97–320, title I, §§ 118(c), 141(a)(4), title IV, § 404(d)(2), Oct. 15, 1982, 96 Stat. 1479, 1489, 1512; Pub. L. 100–86, title I, §§ 101(d), 107(b), title V, §§ 502(h)(1), 509(a), Aug. 10, 1987, 101 Stat. 561, 579, 628, 635; Pub. L. 101–73, title VI, § 602(b), Aug. 9, 1989, 103 Stat. 409; Pub. L. 102–242, title II, §§ 202(d), 210, Dec. 19, 1991, 105 Stat. 2290, 2298; Pub. L. 103–325, title III, §§ 319(a), 322(c)(1), Sept. 23, 1994, 108 Stat. 2224, 2227; Pub. L. 103–328, title I, § 101(a), Sept. 29, 1994, 108 Stat. 2339; Pub. L. 106–102, title I, §§ 105, 118, Nov. 12, 1999, 113 Stat. 1359, 1373; Pub. L. 107–56, title III, § 327(a)(1), Oct. 26, 2001, 115 Stat. 318; Pub. L. 108–386, § 8(c)(2), Oct. 30, 2004, 118 Stat. 2232; Pub. L. 109–173, § 9(h)(2), Feb. 15, 2006, 119 Stat. 3618; Pub. L. 111–203, title VI, §§ 604(d), 607(a), July 21, 2010, 124 Stat. 1601, 1607.)
§ 1843. Interests in nonbanking organizations
(a) Ownership or control of voting shares of any company not a bank; engagement in activities other than bankingExcept 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) ExemptionsThe 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
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 22 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
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 generalExcept 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 exemptionSubject 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 describedFor 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 exemptionIf 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 circumstancesThis 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 provisionsA 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 acquisitionsFor 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 affiliatesShares 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 acquisitionsFor 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 issuanceA 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 generalAn 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 generalNotwithstanding 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 circumstancesThe 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” definedFor 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) NoticeUpon 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 generalThe 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 approvalA proposal qualifies under this paragraph if all of the following criteria are met:
(A) Financial criteriaBoth 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 permissibleFollowing 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 institutionsAny 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 generalNotwithstanding 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 consideredIn 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 natureFor 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) ActivitiesThe 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 generalNotwithstanding 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 requirementNotwithstanding 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 generalIf 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 correctIf 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 generalNotwithstanding 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 any activity and retain direct or indirect ownership or control of shares of a company engaged in any activity if—
(A) the holding company lawfully was engaged in the activity or held the shares of such company on September 30, 1999;
(B) the holding company is predominantly engaged in financial activities as defined in paragraph (2); and
(C) the company engaged in such activity continues to engage only in the same activities that such company conducted on September 30, 1999, and other activities permissible under this chapter.
(2) Predominantly financial
(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 generalA 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 constructionSubparagraph (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 companiesNotwithstanding 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,
§ 1844. Administration
(a) Registration of bank holding company
(b) Regulations and orders
(c) Reports and examinations
(1) Reports
(A) In generalThe Board, from time to time, may require a bank holding company and any subsidiary of such company to submit reports under oath to keep the Board informed as to—
(i) its financial condition, systems for monitoring and controlling financial and operating risks, and transactions with depository institution subsidiaries of the bank holding company; and
(ii) compliance by the bank holding company or subsidiary with—(I) this chapter;(II) Federal laws that the Board has specific jurisdiction to enforce against the company or subsidiary; and(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provision of Federal law.
(B) Use of existing reports and other supervisory informationThe Board shall, to the fullest extent possible, use—
(i) reports and other supervisory information that the bank holding company or any subsidiary thereof has been required to provide to other Federal or State regulatory agencies;
(ii) externally audited financial statements of the bank holding company or subsidiary;
(iii) information otherwise available from Federal or State regulatory agencies; and
(iv) information that is otherwise required to be reported publicly.
(C) Availability
(2) Examinations
(A) In generalSubject to subtitle B of the Consumer Financial Protection Act of 2010 [12 U.S.C. 5511 et seq.], the Board may make examinations of a bank holding company and each subsidiary of a bank holding company in order to—
(i) inform the Board of—(I) the nature of the operations and financial condition of the bank holding company and the subsidiary;(II) the financial, operational, and other risks within the bank holding company system that may pose a threat to—(aa) the safety and soundness of the bank holding company or of any depository institution subsidiary of the bank holding company; or(bb) the stability of the financial system of the United States; and(III) the systems of the bank holding company for monitoring and controlling the risks described in subclause (II); and
(ii) monitor the compliance of the bank holding company and the subsidiary with—(I) this chapter;(II) Federal laws that the Board has specific jurisdiction to enforce against the company or subsidiary; and(III) other than in the case of an insured depository institution or functionally regulated subsidiary, any other applicable provisions of Federal law.
(B) Use of reports to reduce examinationsFor purposes of this paragraph, the Board shall, to the fullest extent possible, rely on—
(i) examination reports made by other Federal or State regulatory agencies relating to a bank holding company and any subsidiary of a bank holding company; and
(ii) the reports and other information required under paragraph (1).
(C) Coordination with other regulatorsThe Board shall—
(i) provide reasonable notice to, and consult with, the appropriate Federal banking agency, the Securities and Exchange Commission, the Commodity Futures Trading Commission, or State regulatory agency, as appropriate, for a subsidiary that is a depository institution or a functionally regulated subsidiary of a bank holding company before commencing an examination of the subsidiary under this section; and
(ii) to the fullest extent possible, avoid duplication of examination activities, reporting requirements, and requests for information.
(3) Capital
(A) In generalThe Board may not, by regulation, guideline, order, or otherwise, prescribe or impose any capital or capital adequacy rules, guidelines, standards, or requirements on any functionally regulated subsidiary of a bank holding company that—
(i) is not a depository institution; and
(ii) is—(I) in compliance with the applicable capital requirements of its Federal regulatory authority (including the Securities and Exchange Commission) or State insurance authority;(II) properly registered as an investment adviser under the Investment Advisers Act of 1940 [15 U.S.C. 80b–1 et seq.], or with any State; or(III) is licensed as an insurance agent with the appropriate State insurance authority.
(B) Rule of constructionSubparagraph (A) shall not be construed as preventing the Board from imposing capital or capital adequacy rules, guidelines, standards, or requirements with respect to—
(i) activities of a registered investment adviser other than with respect to investment advisory activities or activities incidental to investment advisory activities; or
(ii) activities of a licensed insurance agent other than insurance agency activities or activities incidental to insurance agency activities.
(C) Limitations on indirect actionIn developing, establishing, or assessing bank holding company capital or capital adequacy rules, guidelines, standards, or requirements for purposes of this paragraph, the Board may not take into account the activities, operations, or investments of an affiliated investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], unless the investment company is—
(i) a bank holding company; or
(ii) controlled by a bank holding company by reason of ownership by the bank holding company (including through all of its affiliates) of 25 percent or more of the shares of the investment company, and the shares owned by the bank holding company have a market value equal to more than $1,000,000.
(4) Functional regulation of securities and insurance activities
(A) Securities activities
(B) Insurance activities
(5) DefinitionFor purposes of this subsection, the term “functionally regulated subsidiary” means any company—
(A) that is not a bank holding company or a depository institution; and
(B) that is—
(i) a broker or dealer that is registered under the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.];
(ii) a registered investment adviser, properly registered by or on behalf of either the Securities and Exchange Commission or any State, with respect to the investment advisory activities of such investment adviser and activities incidental to such investment advisory activities;
(iii) an investment company that is registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.];
(iv) an insurance company, with respect to insurance activities of the insurance company and activities incidental to such insurance activities, that is subject to supervision by a State insurance regulator; or
(v) an entity that is subject to regulation by, or registration with, the Commodity Futures Trading Commission, with respect to activities conducted as a futures commission merchant, commodity trading adviser, commodity pool, commodity pool operator, swap execution facility, swap data repository, swap dealer, major swap participant, and activities that are incidental to such commodities and swaps activities.
(d) Reports to the Congress; recommendations
(e) Termination of activities or ownership or control of nonbank subsidiaries constituting serious risk
(1) Notwithstanding any other provision of this chapter, the Board may, whenever it has reasonable cause to believe that the continuation by a bank holding company of any activity or of ownership or control of any of its nonbank subsidiaries, other than a nonbank subsidiary of a bank, constitutes a serious risk to the financial safety, soundness, or stability of a bank holding company subsidiary bank and is inconsistent with sound banking principles or with the purposes of this chapter or with the Financial Institutions Supervisory Act of 1966, at the election of the bank holding company—
(A) order the bank holding company or any such nonbank subsidiaries, after due notice and opportunity for hearing, and after considering the views of the bank’s primary supervisor, which shall be the Comptroller of the Currency in the case of a national bank or the Federal Deposit Insurance Corporation and the appropriate State supervisory authority in the case of an insured nonmember bank, to terminate such activities or to terminate (within one hundred and twenty days or such longer period as the Board may direct in unusual circumstances) its ownership or control of any such subsidiary either by sale or by distribution of the shares of the subsidiary to the shareholders of the bank holding company; or
(B) order the bank holding company, after due notice and opportunity for hearing, and after consultation with the primary supervisor for the bank, which shall be the Comptroller of the Currency in the case of a national bank, and the Federal Deposit Insurance Corporation and the appropriate State supervisor in the case of an insured nonmember bank, to terminate (within 120 days or such longer period as the Board may direct) the ownership or control of any such bank by such company.
The distribution referred to in subparagraph (A) shall be pro rata with respect to all of the shareholders of the distributing bank holding company, and the holding company shall not make any charge to its shareholders arising out of such a distribution.
(2) The Board may in its discretion apply to the United States district court within the jurisdiction of which the principal office of the holding company is located, for the enforcement of any effective and outstanding order issued under this section, and such court shall have jurisdiction and power to order and require compliance therewith, but except as provided in section 1848 of this title, no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order under this section, or to review, modify, suspend, terminate, or set aside any such notice or order.
(f) Powers of Board respecting applications, examinations, or other proceedings
(g) Authority of State insurance regulator and the Securities and Exchange Commission
(1) In generalNotwithstanding any other provision of law, any regulation, order, or other action of the Board that requires a bank holding company to provide funds or other assets to a subsidiary depository institution shall not be effective nor enforceable with respect to an entity described in subparagraph (A) if—
(A) such funds or assets are to be provided by—
(i) a bank holding company that is an insurance company, a broker or dealer registered under the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], an investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], or an investment adviser registered by or on behalf of either the Securities and Exchange Commission or any State; or
(ii) an affiliate of the depository institution that is an insurance company or a broker or dealer registered under the Securities Exchange Act of 1934, an investment company registered under the Investment Company Act of 1940, or an investment adviser registered by or on behalf of either the Securities and Exchange Commission or any State; and
(B) the State insurance authority for the insurance company or the Securities and Exchange Commission for the registered broker, dealer, investment adviser (solely with respect to investment advisory activities or activities incidental thereto), or investment company, as the case may be, determines in writing sent to the holding company and the Board that the holding company shall not provide such funds or assets because such action would have a material 2
2 So in original. Probably should be “materially”.
adverse effect on the financial condition of the insurance company or the broker, dealer, investment company, or investment adviser, as the case may be.(2) Notice to State insurance authority or SEC required
(3) Divestiture in lieu of other action
(4) Conditions before divestiture
(5) Rule of construction
(h) Data standards
(1) Requirement
(2) Consistency
(May 9, 1956, ch. 240, § 5, 70 Stat. 137; Pub. L. 95–630, title I, §§ 105(a), 106(b), Nov. 10, 1978, 92 Stat. 3646, 3648; Pub. L. 106–102, title I, §§ 111, 112(a), 116, Nov. 12, 1999, 113 Stat. 1362, 1366, 1372; Pub. L. 111–203, title III, § 354(3), title VI, §§ 604(a)–(c)(1), 616(a), July 21, 2010, 124 Stat. 1547, 1599–1601, 1615; Pub. L. 117–263, div. E, title LVIII, § 5861(c), Dec. 23, 2022, 136 Stat. 3434.)
§ 1845. Repealed. Pub. L. 89–485, § 9, July 1, 1966, 80 Stat. 240
§ 1846. Reservation of rights to States
(a) In general
(b) State taxation authority not affected
(May 9, 1956, ch. 240, § 7, 70 Stat. 138; Pub. L. 100–86, title I, § 101(f), Aug. 10, 1987, 101 Stat. 563; Pub. L. 103–328, title I, § 101(b), Sept. 29, 1994, 108 Stat. 2341.)
§ 1847. Penalties
(a) Criminal penalty
(1) Whoever knowingly violates any provision of this chapter or, being a company, violates any regulation or order issued by the Board under this chapter, shall be imprisoned not more than 1 year, fined not more than $100,000 per day for each day during which the violation continues, or both.
(2) Whoever, with the intent to deceive, defraud, or profit significantly, knowingly violates any provision of this chapter shall be imprisoned not more than 5 years, fined not more than $1,000,000 per day for each day during which the violation continues, or both.
Every officer, director, agent, and employee of a bank holding company shall be subject to the same penalties for false entries in any book, report, or statement of such bank holding company as are applicable to officers, directors, agents, and employees of member banks for false entries in any books, reports, or statements of member banks under section 1005 of title 18.
(b) Civil money penalty
(1) Penalty
(2) Assessment; etc.
(3) Hearing
(4) Disbursement
(5) “Violate” defined
(6) Regulations
(c) Notice under this section after separation from service
(d) Penalty for failure to make reports
(1) First tierAny company which—
(A) maintains procedures reasonably adapted to avoid any inadvertent error and, unintentionally and as a result of such an error—
(i) fails to make, submit, or publish such reports or information as may be required under this chapter or under regulations prescribed by the Board pursuant to this chapter, within the period of time specified by the Board; or
(ii) submits or publishes any false or misleading report or information; or
(B) inadvertently transmits or publishes any report which is minimally late,
shall be subject to a penalty of not more than $2,000 for each day during which such failure continues or such false or misleading information is not corrected. The company shall have the burden of proving that an error was inadvertent and that a report was inadvertently transmitted or published late.
(2) Second tierAny company which—
(A) fails to make, submit, or publish such reports or information as may be required under this chapter or under regulations prescribed by the Board pursuant to this chapter, within the period of time specified by the Board; or
(B) submits or publishes any false or misleading report or information,
in a manner not described in paragraph (1) shall be subject to a penalty of not more than $20,000 for each day during which such failure continues or such false or misleading information is not corrected.
(3) Third tier
(4) Assessment; etc.
(5) Hearing
(May 9, 1956, ch. 240, § 8, 70 Stat. 138; Pub. L. 95–630, title I, § 106(a), Nov. 10, 1978, 92 Stat. 3647; Pub. L. 97–320, title IV, § 424(a), (d)(4), Oct. 15, 1982, 96 Stat. 1522, 1523; Pub. L. 101–73, title IX, §§ 905(i), 907(j), 911(e), Aug. 9, 1989, 103 Stat. 461, 475, 481.)
§ 1848. Judicial review
Any party aggrieved by an order of the Board under this chapter may obtain a review of such order in the United States Court of Appeals within any circuit wherein such party has its principal place of business or in the Court of Appeals in the District of Columbia, by filing in the court, within thirty days after the entry of the Board’s order, a petition praying that the order of the Board be set aside. A copy of such petition shall be forthwith transmitted to the Board by the clerk of the court, and thereupon the Board shall file in the court the record made before the Board, as provided in section 2112 of title 28. Upon the filing of such petition the court shall have the jurisdiction to affirm, set aside, or modify the order of the Board and to require the Board to take such action with regard to the matter under review as the court deems proper. The findings of the Board as to the facts, if supported by substantial evidence, shall be conclusive.
(May 9, 1956, ch. 240, § 9, 70 Stat. 138; Pub. L. 85–791, § 34, Aug. 28, 1958, 72 Stat. 951; Pub. L. 89–485, § 10, July 1, 1966, 80 Stat. 240.)
§ 1848a. Repealed. Pub. L. 111–203, title VI, § 604(c)(2), July 21, 2010, 124 Stat. 1601
§ 1849. Saving provision
(a) General rule
(b) Antitrust review
(1) In general
(2) Section 1823(f) cases
(A) If—
(i) the Federal Deposit Insurance Corporation learns that a bank insured by such Corporation is in danger of closing; and
(ii) the Corporation is considering assisting the acquisition of such bank and its affiliated banks by another bank or holding company under section 1823(f) of this title and such acquisition is subject to the approval of the Board under section 1842 of this title;
the Corporation shall immediately notify the Board of such facts.
(B) Upon receipt of notice from the Federal Deposit Insurance Corporation under subparagraph (A) or at such earlier time as deemed appropriate by the Board, the Board shall immediately notify the Attorney General of the United States of the facts concerning the possible acquisition.
(C) Within 5 days of receiving notice under subparagraph (B), the Attorney General shall notify the Board in writing of the Attorney General’s preliminary finding as to the consistency of the possible acquisition with the antitrust laws.
(D) The Board may reduce or eliminate the post-approval waiting period established under paragraph (1) for an acquisition to which this paragraph applies, except that such period may not be eliminated or reduced to less than 5 days without the concurrence of the Attorney General.
(c) Antitrust proceedings; Board and State banking agency as party; representation by counsel
(d) Treatment of merger transactions consummated prior or subsequent to May 9, 1956, and not in litigation prior to July 1, 1966
(e) Antitrust litigation; substantive law applicable to proceedings pending on or after July 1, 1966, with respect to merger transactions
(f) “Antitrust laws” defined
(May 9, 1956, ch. 240, § 11, 70 Stat. 146; Pub. L. 89–485, § 11, July 1, 1966, 80 Stat. 240; Pub. L. 91–607, title I, § 104, Dec. 31, 1970, 84 Stat. 1766; Pub. L. 95–188, title III, § 303, Nov. 16, 1977, 91 Stat. 1390; Pub. L. 100–86, title V, § 502(h)(3), Aug. 10, 1987, 101 Stat. 628; Pub. L. 103–325, title III, § 321(a), Sept. 23, 1994, 108 Stat. 2226; Pub. L. 106–102, title I, § 131, Nov. 12, 1999, 113 Stat. 1382.)
§ 1850. Acquisition of subsidiary and tying arrangement: Federal Reserve Board proceedings; application for authorization; competitor as party in interest and person aggrieved; judicial review
With respect to any proceeding before the Federal Reserve Board wherein an applicant seeks authority to acquire a subsidiary which is a bank under section 1842 of this title or to engage in an activity otherwise prohibited under chapter 22 of this title, a party who would become a competitor of the applicant or subsidiary thereof by virtue of the applicant’s or its subsidiary’s acquisition, entry into the business involved, or activity, shall have the right to be a party in interest in the proceeding and, in the event of an adverse order of the Board, shall have the right as an aggrieved party to obtain judicial review thereof as provided in section 1848 of this title or as otherwise provided by law.
(Pub. L. 91–607, title I, § 105, Dec. 31, 1970, 84 Stat. 1766; Pub. L. 106–102, title I, § 102(b)(1), Nov. 12, 1999, 113 Stat. 1341.)
§ 1850a. Securities holding companies
(a) DefinitionsIn this section—
(1) the term “associated person of a securities holding company” means a person directly or indirectly controlling, controlled by, or under common control with, a securities holding company;
(2) the term “foreign bank” has the same meaning as in section 3101(7) of this title;
(3) the term “insured bank” has the same meaning as in section 1813 of this title;
(4) the term “securities holding company”—
(A) means—
(i) a person (other than a natural person) that owns or controls 1 or more brokers or dealers registered with the Commission; and
(ii) the associated persons of a person described in clause (i); and
(B) does not include a person that is—
(i) a nonbank financial company supervised by the Board under title I; 1
1 See References in Text note below.
(ii) an insured bank (other than an institution described in subparagraphs 2
2 So in original. Probably should be “subparagraph”.
(D), (F), or (H) of section 2(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)) 33 So in original. Another closing parenthesis probably should appear.
or a savings association;(iii) an affiliate of an insured bank (other than an institution described in subparagraphs 2 (D), (F), or (H) of section 2(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)) 3 or an affiliate of a savings association;
(iv) a foreign bank, foreign company, or company that is described in section 3106(a) of this title;
(v) a foreign bank that controls, directly or indirectly, a corporation chartered under section 25A of the Federal Reserve Act (12 U.S.C. 611 et seq.); or
(vi) subject to comprehensive consolidated supervision by a foreign regulator;
(5) the term “supervised securities holding company” means a securities holding company that is supervised by the Board of Governors under this section; and
(6) the terms “affiliate”, “bank”, “bank holding company”, “company”, “control”, “savings association”, and “subsidiary” have the same meanings as in section 2 of the Bank Holding Company Act of 1956 [12 U.S.C. 1841].
(b) Supervision of a securities holding company not having a bank or savings association affiliate
(1) In general
(2) Registration as a supervised securities holding company
(A) Registration
(B) Effective date
(c) Supervision of securities holding companies
(1) Recordkeeping and reporting
(A) Recordkeeping and reporting required
(B) Form and contents
(i) In general(I) be prepared in such form and according to such specifications (including certification by a registered public accounting firm), as the Board of Governors may require; and(II) be provided promptly to the Board of Governors at any time, upon request by the Board of Governors.
(ii) ContentsRecords and reports required to be made, furnished, or kept under this paragraph may include—(I) a balance sheet or income statement of the supervised securities holding company or an affiliate of a supervised securities holding company;(II) an assessment of the consolidated capital and liquidity of the supervised securities holding company;(III) a report by an independent auditor attesting to the compliance of the supervised securities holding company with the internal risk management and internal control objectives of the supervised securities holding company; and(IV) a report concerning the extent to which the supervised securities holding company or affiliate has complied with the provisions of this section and any regulations prescribed and orders issued under this section.
(2) Use of existing reports
(A) In general
(B) Availability
(3) Examination authority
(A) Focus of examination authority
(B) Deference to other examinations
(d) Capital and risk management
(1) In general
(2) Differentiation
(3) ContentAny standards imposed on a supervised securities holding company under this subsection shall take into account—
(A) the differences among types of business activities carried out by the supervised securities holding company;
(B) the amount and nature of the financial assets of the supervised securities holding company;
(C) the amount and nature of the liabilities of the supervised securities holding company, including the degree of reliance on short-term funding;
(D) the extent and nature of the off-balance sheet exposures of the supervised securities holding company;
(E) the extent and nature of the transactions and relationships of the supervised securities holding company with other financial companies;
(F) the importance of the supervised securities holding company as a source of credit for households, businesses, and State and local governments, and as a source of liquidity for the financial system; and
(G) the nature, scope, and mix of the activities of the supervised securities holding company.
(4) Notice
(e) Other provisions of law applicable to supervised securities holding companies
(1) Federal Deposit Insurance Act
(2) Bank Holding Company Act of 1956
(Pub. L. 111–203, title VI, § 618, July 21, 2010, 124 Stat. 1616.)
§ 1851. Prohibitions on proprietary trading and certain relationships with hedge funds and private equity funds
(a) In general
(1) ProhibitionUnless otherwise provided in this section, a banking entity shall not—
(A) engage in proprietary trading; or
(B) acquire or retain any equity, partnership, or other ownership interest in or sponsor a hedge fund or a private equity fund.
(2) Nonbank financial companies supervised by the Board
(b) Study and rulemaking
(1) StudyNot later than 6 months after July 21, 2010, the Financial Stability Oversight Council shall study and make recommendations on implementing the provisions of this section so as to—
(A) promote and enhance the safety and soundness of banking entities;
(B) protect taxpayers and consumers and enhance financial stability by minimizing the risk that insured depository institutions and the affiliates of insured depository institutions will engage in unsafe and unsound activities;
(C) limit the inappropriate transfer of Federal subsidies from institutions that benefit from deposit insurance and liquidity facilities of the Federal Government to unregulated entities;
(D) reduce conflicts of interest between the self-interest of banking entities and nonbank financial companies supervised by the Board, and the interests of the customers of such entities and companies;
(E) limit activities that have caused undue risk or loss in banking entities and nonbank financial companies supervised by the Board, or that might reasonably be expected to create undue risk or loss in such banking entities and nonbank financial companies supervised by the Board;
(F) appropriately accommodate the business of insurance within an insurance company, subject to regulation in accordance with the relevant insurance company investment laws, while protecting the safety and soundness of any banking entity with which such insurance company is affiliated and of the United States financial system; and
(G) appropriately time the divestiture of illiquid assets that are affected by the implementation of the prohibitions under subsection (a).
(2) Rulemaking
(A) In general
(B) Coordinated rulemaking
(i) Regulatory authorityThe regulations issued under this paragraph shall be issued by—(I) the appropriate Federal banking agencies, jointly, with respect to insured depository institutions;(II) the Board, with respect to any company that controls an insured depository institution, or that is treated as a bank holding company for purposes of section 8 of the International Banking Act,1
1 See References in Text note below.
any nonbank financial company supervised by the Board, and any subsidiary of any of the foregoing (other than a subsidiary for which an agency described in subclause (I), (III), or (IV) is the primary financial regulatory agency);(III) the Commodity Futures Trading Commission, with respect to any entity for which the Commodity Futures Trading Commission is the primary financial regulatory agency, as defined in section 5301 of this title; and(IV) the Securities and Exchange Commission, with respect to any entity for which the Securities and Exchange Commission is the primary financial regulatory agency, as defined in section 5301 of this title.(ii) Coordination, consistency, and comparability
(iii) Council role
(c) Effective date
(1) In generalExcept as provided in paragraphs (2) and (3), this section shall take effect on the earlier of—
(A) 12 months after the date of the issuance of final rules under subsection (b); or
(B) 2 years after July 21, 2010.
(2) Conformance period for divestiture
(3) Extended transition for illiquid funds
(A) Application
(B) Time limit on approval
(4) Divestiture requiredExcept as otherwise provided in subsection (d)(1)(G), a banking entity may not engage in any activity prohibited under subsection (a)(1)(B) after the earlier of—
(A) the date on which the contractual obligation to invest in the illiquid fund terminates; and
(B) the date on which any extensions granted by the Board under paragraph (3) expire.
(5) Additional capital during transition period
(6) Special rulemaking
(d) Permitted activities
(1) In generalNotwithstanding the restrictions under subsection (a), to the extent permitted by any other provision of Federal or State law, and subject to the limitations under paragraph (2) and any restrictions or limitations that the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, may determine, the following activities (in this section referred to as “permitted activities”) are permitted:
(A) The purchase, sale, acquisition, or disposition of obligations of the United States or any agency thereof, obligations, participations, or other instruments of or issued by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, a Federal Home Loan Bank, the Federal Agricultural Mortgage Corporation, or a Farm Credit System institution chartered under and subject to the provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and obligations of any State or of any political subdivision thereof.
(B) The purchase, sale, acquisition, or disposition of securities and other instruments described in subsection (h)(4) in connection with underwriting or market-making-related activities, to the extent that any such activities permitted by this subparagraph are designed not to exceed the reasonably expected near term demands of clients, customers, or counterparties.
(C) Risk-mitigating hedging activities in connection with and related to individual or aggregated positions, contracts, or other holdings of a banking entity that are designed to reduce the specific risks to the banking entity in connection with and related to such positions, contracts, or other holdings.
(D) The purchase, sale, acquisition, or disposition of securities and other instruments described in subsection (h)(4) on behalf of customers.
(E) Investments in one or more small business investment companies, as defined in section 102 1 of the Small Business Investment Act of 1958 (15 U.S.C. 662), investments designed primarily to promote the public welfare, of the type permitted under paragraph (11) of section 24 of this title, or investments that are qualified rehabilitation expenditures with respect to a qualified rehabilitated building or certified historic structure, as such terms are defined in section 47 of title 26 or a similar State historic tax credit program.
(F) The purchase, sale, acquisition, or disposition of securities and other instruments described in subsection (h)(4) by a regulated insurance company directly engaged in the business of insurance for the general account of the company and by any affiliate of such regulated insurance company, provided that such activities by any affiliate are solely for the general account of the regulated insurance company, if—
(i) the purchase, sale, acquisition, or disposition is conducted in compliance with, and subject to, the insurance company investment laws, regulations, and written guidance of the State or jurisdiction in which each such insurance company is domiciled; and
(ii) the appropriate Federal banking agencies, after consultation with the Financial Stability Oversight Council and the relevant insurance commissioners of the States and territories of the United States, have not jointly determined, after notice and comment, that a particular law, regulation, or written guidance described in clause (i) is insufficient to protect the safety and soundness of the banking entity, or of the financial stability of the United States.
(G) Organizing and offering a private equity or hedge fund, including serving as a general partner, managing member, or trustee of the fund and in any manner selecting or controlling (or having employees, officers, directors, or agents who constitute) a majority of the directors, trustees, or management of the fund, including any necessary expenses for the foregoing, only if—
(i) the banking entity provides bona fide trust, fiduciary, or investment advisory services;
(ii) the fund is organized and offered only in connection with the provision of bona fide trust, fiduciary, or investment advisory services and only to persons that are customers of such services of the banking entity;
(iii) the banking entity does not acquire or retain an equity interest, partnership interest, or other ownership interest in the funds except for a de minimis investment subject to and in compliance with paragraph (4);
(iv) the banking entity complies with the restrictions under paragraphs (1) and (2) of subparagraph (f);
(v) the banking entity does not, directly or indirectly, guarantee, assume, or otherwise insure the obligations or performance of the hedge fund or private equity fund or of any hedge fund or private equity fund in which such hedge fund or private equity fund invests;
(vi) the banking entity does not share with the hedge fund or private equity fund, for corporate, marketing, promotional, or other purposes, the same name or a variation of the same name, except that the hedge fund or private equity fund may share the same name or a variation of the same name as a banking entity that is an investment adviser to the hedge fund or private equity fund, if—(I) such investment adviser is not an insured depository institution, a company that controls an insured depository institution, or a company that is treated as a bank holding company for purposes of section 8 of the International Banking Act of 1978 (12 U.S.C. 3106);(II) such investment adviser does not share the same name or a variation of the same name as an insured depository institution, any company that controls an insured depository institution, or any company that is treated as a bank holding company for purposes of section 8 of the International Banking Act of 1978 (12 U.S.C. 3106); and(III) such name does not contain the word “bank”;
(vii) no director or employee of the banking entity takes or retains an equity interest, partnership interest, or other ownership interest in the hedge fund or private equity fund, except for any director or employee of the banking entity who is directly engaged in providing investment advisory or other services to the hedge fund or private equity fund; and
(viii) the banking entity discloses to prospective and actual investors in the fund, in writing, that any losses in such hedge fund or private equity fund are borne solely by investors in the fund and not by the banking entity, and otherwise complies with any additional rules of the appropriate Federal banking agencies, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, as provided in subsection (b)(2), designed to ensure that losses in such hedge fund or private equity fund are borne solely by investors in the fund and not by the banking entity.
(H) Proprietary trading conducted by a banking entity pursuant to paragraph (9) or (13) of section 1843(c) of this title, provided that the trading occurs solely outside of the United States and that the banking entity is not directly or indirectly controlled by a banking entity that is organized under the laws of the United States or of one or more States.
(I) The acquisition or retention of any equity, partnership, or other ownership interest in, or the sponsorship of, a hedge fund or a private equity fund by a banking entity pursuant to paragraph (9) or (13) of section 1843(c) of this title solely outside of the United States, provided that no ownership interest in such hedge fund or private equity fund is offered for sale or sold to a resident of the United States and that the banking entity is not directly or indirectly controlled by a banking entity that is organized under the laws of the United States or of one or more States.
(J) Such other activity as the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission determine, by rule, as provided in subsection (b)(2), would promote and protect the safety and soundness of the banking entity and the financial stability of the United States.
(2) Limitation on permitted activities
(A) In generalNo transaction, class of transactions, or activity may be deemed a permitted activity under paragraph (1) if the transaction, class of transactions, or activity—
(i) would involve or result in a material conflict of interest (as such term shall be defined by rule as provided in subsection (b)(2)) between the banking entity and its clients, customers, or counterparties;
(ii) would result, directly or indirectly, in a material exposure by the banking entity to high-risk assets or high-risk trading strategies (as such terms shall be defined by rule as provided in subsection (b)(2));
(iii) would pose a threat to the safety and soundness of such banking entity; or
(iv) would pose a threat to the financial stability of the United States.
(B) Rulemaking
(3) Capital and quantitative limitations
(4) De minimis investment
(A) In generalA banking entity may make and retain an investment in a hedge fund or private equity fund that the banking entity organizes and offers, subject to the limitations and restrictions in subparagraph (B) for the purposes of—
(i) establishing the fund and providing the fund with sufficient initial equity for investment to permit the fund to attract unaffiliated investors; or
(ii) making a de minimis investment.
(B) Limitations and restrictions on investments
(i) Requirement to seek other investors
(ii) Limitations on size of investmentsNotwithstanding any other provision of law, investments by a banking entity in a hedge fund or private equity fund shall—(I) not later than 1 year after the date of establishment of the fund, be reduced through redemption, sale, or dilution to an amount that is not more than 3 percent of the total ownership interests of the fund;(II) be immaterial to the banking entity, as defined, by rule, pursuant to subsection (b)(2), but in no case may the aggregate of all of the interests of the banking entity in all such funds exceed 3 percent of the Tier 1 capital of the banking entity.
(iii) Capital
(C) Extension
(e) Anti-evasion
(1) Rulemaking
(2) Termination of activities or investment
(f) Limitations on relationships with hedge funds and private equity funds
(1) In general
(2) Treatment as member bank
(3) Permitted services
(A) In generalNotwithstanding paragraph (1), the Board may permit a banking entity to enter into any prime brokerage transaction with any hedge fund or private equity fund in which a hedge fund or private equity fund managed, sponsored, or advised by such banking entity has taken an equity, partnership, or other ownership interest, if—
(i) the banking entity is in compliance with each of the limitations set forth in subsection (d)(1)(G) with regard to a hedge fund or private equity fund organized and offered by such banking entity;
(ii) the chief executive officer (or equivalent officer) of the banking entity certifies in writing annually (with a duty to update the certification if the information in the certification materially changes) that the conditions specified in subsection (d)(1)(g)(v) 2
2 So in original. Probably should be “(d)(1)(G)(v)”.
are satisfied; and(iii) the Board has determined that such transaction is consistent with the safe and sound operation and condition of the banking entity.
(B) Treatment of prime brokerage transactions
(4) Application to nonbank financial companies supervised by the Board
(g) Rules of construction
(1) Limitation on contrary authority
(2) Sale or securitization of loans
(3) Authority of Federal agencies and State regulatory authorities
(h) DefinitionsIn this section, the following definitions shall apply:
(1) Banking entityThe term “banking entity” means any insured depository institution (as defined in section 1813 of this title
(A) that functions solely in a trust or fiduciary capacity, if—
(i) all or substantially all of the deposits of such institution are in trust funds and are received in a bona fide fiduciary capacity;
(ii) no deposits of such institution which are insured by the Federal Deposit Insurance Corporation are offered or marketed by or through an affiliate of such institution;
(iii) such institution does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others or make commercial loans; and
(iv) such institution does not—(I) obtain payment or payment related services from any Federal Reserve bank, including any service referred to in section 248a of this title; or(II) exercise discount or borrowing privileges pursuant to section 461(b)(7) of this title; or
(B) that does not have and is not controlled by a company that has—
(i) more than $10,000,000,000 in total consolidated assets; and
(ii) total trading assets and trading liabilities, as reported on the most recent applicable regulatory filing filed by the institution, that are more than 5 percent of total consolidated assets.
(2) Hedge fund; private equity fund
(3) Nonbank financial company supervised by the Board
(4) Proprietary trading
(5) SponsorThe term to “sponsor” a fund means—
(A) to serve as a general partner, managing member, or trustee of a fund;
(B) in any manner to select or to control (or to have employees, officers, or directors, or agents who constitute) a majority of the directors, trustees, or management of a fund; or
(C) to share with a fund, for corporate, marketing, promotional, or other purposes, the same name or a variation of the same name, except as permitted under subsection (d)(1)(G)(vi).
(6) Trading account
(7) Illiquid fund
(A) In generalThe term “illiquid fund” means a hedge fund or private equity fund that—
(i) as of May 1, 2010, was principally invested in, or was invested and contractually committed to principally invest in, illiquid assets, such as portfolio companies, real estate investments, and venture capital investments; and
(ii) makes all investments pursuant to, and consistent with, an investment strategy to principally invest in illiquid assets. In issuing rules regarding this subparagraph, the Board shall take into consideration the terms of investment for the hedge fund or private equity fund, including contractual obligations, the ability of the fund to divest of assets held by the fund, and any other factors that the Board determines are appropriate.
(B) Hedge fund
(May 9, 1956, ch. 240, § 13, as added Pub. L. 111–203, title VI, § 619, July 21, 2010, 124 Stat. 1620; amended Pub. L. 115–174, title II, §§ 203, 204, May 24, 2018, 132 Stat. 1309.)
§ 1852. Concentration limits on large financial firms
(a) DefinitionsIn this section—
(1) the term “Council” means the Financial Stability Oversight Council;
(2) the term “financial company” means—
(A) an insured depository institution;
(B) a bank holding company;
(C) a savings and loan holding company;
(D) a company that controls an insured depository institution;
(E) a nonbank financial company supervised by the Board under title I of the Dodd-Frank Wall Street Reform and Consumer Protection Act [12 U.S.C. 5311 et seq.]; and
(F) a foreign bank or company that is treated as a bank holding company for purposes of this chapter; and
(3) the term “liabilities” means—
(A) with respect to a United States financial company—
(i) the total risk-weighted assets of the financial company, as determined under the risk-based capital rules applicable to bank holding companies, as adjusted to reflect exposures that are deducted from regulatory capital; less
(ii) the total regulatory capital of the financial company under the risk-based capital rules applicable to bank holding companies;
(B) with respect to a foreign-based financial company—
(i) the total risk-weighted assets of the United States operations of the financial company, as determined under the applicable risk-based capital rules, as adjusted to reflect exposures that are deducted from regulatory capital; less
(ii) the total regulatory capital of the United States operations of the financial company, as determined under the applicable risk-based capital rules; and
(C) with respect to an insurance company or other nonbank financial company supervised by the Board, such assets of the company as the Board shall specify by rule, in order to provide for consistent and equitable treatment of such companies.
(b) Concentration limit
(c) Exception to concentration limitWith the prior written consent of the Board, the concentration limit under subsection (b) shall not apply to an acquisition—
(1) of a bank in default or in danger of default;
(2) with respect to which assistance is provided by the Federal Deposit Insurance Corporation under section 1823(c) of this title; or
(3) that would result only in a de minimis increase in the liabilities of the financial company.
(d) Rulemaking and guidance
(e) Council study and rulemaking
(1) Study and recommendationsNot later than 6 months after July 21, 2010, the Council shall—
(A) complete a study of the extent to which the concentration limit under this section would affect financial stability, moral hazard in the financial system, the efficiency and competitiveness of United States financial firms and financial markets, and the cost and availability of credit and other financial services to households and businesses in the United States; and
(B) make recommendations regarding any modifications to the concentration limit that the Council determines would more effectively implement this section.
(2) Rulemaking
(May 9, 1956, ch. 240, § 14, as added Pub. L. 111–203, title VI, § 622, July 21, 2010, 124 Stat. 1632.)