"(s) FUNCTIONAL REGULATOR.-The term 'functional regulator' means any Federal agency or State supervisory authority that has supervisory authority over activities of any company which is a diversified holding company, a financial services holding company, or any subsidiary of any such company (other than an insured depository institution).

"(t) NEW FINANCIAL ACTIVITY.-The term 'new financial activity' means any activity described in section 4(c)(8) or 4(c)(15) other than any activity that the Board had determined (by regulation or order that is in effect on December 31, 1992) to be so closely related to banking as to be a proper incident thereto.

"(u) QUALIFIED FINANCIAL ACTIVITY.-The term 'qualified financial activity' means any activity described described in section 4(c)(8) or 4(c)(15).

"(v) FINANCIAL AFFILIATE.-The term 'financial affiliate' means any subsidiary of a financial services holding company or a diversified holding company (other than an insured depository institution) that is engaged in the United States in qualified financial activities.".

(b) CONFORMING AMENDMENTS.-Section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841) is amended

(1) in subsection (c)(2)(J), by striking "to move such Corporation from Federal Savings and Loan Insurance Corporation insurance to Federal Deposit Insurance Corporation insurance" and inserting "to cause such corporation to cease to be a Savings Association Insurance Fund member and become a Bank Insurance Fund member (as defined in section 7(1) of the Federal Deposit Insurance Act)";

(2) in subsection (h)(5), by striking "bank" the 1st place such term appears and inserting "insured depository institution"; and

(3) by striking "bank holding company" each place such term appears (other than in subsection (b)) and inserting "financial services holding company".

SEC. 402. ACQUISITION OF BANKS.

(a) AMENDMENTS TO APPLICATION PROCESS.-Section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842) is amended(1) in subsection (a)

(A) by striking paragraph (3) and inserting the following new paragraph: "(3) for any financial services holding company to acquire ownership or control of any voting shares of any insured depository institution or financial services holding company, for any diversified holding company to acquire ownership or control of any voting shares of any financial services holding company, or for a company to acquire ownership or control of a diversified holding company if, after such acquisition, such company will own or control more than 5 percent of the voting shares of such institution or company;";

(B) by inserting before "Notwithstanding the foregoing" the following new sentence: "No insured depository institution (other than a foreign bank operating an insured branch as defined in section 3(s) of the Federal Deposit Insurance Act) may become a financial services holding company or a diversified holding company.";

(C) by adding at the end the following new sentence: "Notwithstanding paragraph (1), any company that was a bank holding company on December 31, 1992, under this Act (as in effect on such date) shall be a financial services holding company as of January 1, 1993, without further approval by the Board."; and

(D)(i) by striking "or" at the end of subparagraph (A);

(ii) in subparagraph (B), by striking the 1st period and inserting "; or"; and

(iii) by inserting after subparagraph (B) the following new subparagraph:

"(C) the acquisition, by a company, of control of a bank in a reorganization in which a person or group of persons exchange their shares of the bank for shares of a newly formed financial services holding company and receive 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, the bank is a level 1 or level 2 depository institution;

"(ii) the holding company does not engage in any activities other than those of managing and controlling banks as a result of the reorganization; and

"(iii) the company provides 30 days prior notice to the Board.";

(2) in subsection (b)—

(A) by striking the 1st sentence and inserting the following new sentence: "Upon receiving an application under this section from any company to acquire any interest in an insured depository institution, the Board shall give notice to any other appropriate Federal banking agency with respect to such institution and, in the case of a State depository institution, to the appropriate State bank supervisor in order to obtain the views and recommendations of such other agency and such supervisor."; and

(B) in the 3d sentence, by striking "disapproves" and inserting "recommends disapproval of";

(3) in paragraph (1) of subsection (c) (as so redesignated by section 202(d) of this Act)(A) by striking ", or" at the end of subparagraph (A) (as so redesignated) and inserting a semicolon;

(B) by striking the period at the end of subparagraph (B) (as so redesignated) and inserting "; or"; and

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

"(C) any acquisition, merger, or consolidation if the Board determines that the insured depository institution to be acquired or any other insured depository institution controlled by the company involved in the proposal is engaging in any unsafe and unsound practice or, upon consummation of the transaction, would be in an unsafe and unsound condition."; and

(4) by redesignating subsection (d) (as amended by section 301(a) of this Act) and subsections (e) through (g) as subsections (f) through (i), respectively, and inserting after subsection (c) the following new subsections:

"(d) EXPEDITED PROCEDURES FOR ACQUISITION OF ADDITIONAL INSURED DEPOSITORY INSTITUTIONS BY LEVEL 1 FINANCIAL SERVICES HOLDING COMPANIES.

"(1) PROCEDURES.

"(A) NOTICE TO OTHER AGENCIES.-Upon receiving a complete application under this section from a level 1 financial services holding company to acquire an insured depository institution, the Board shall notify any other appropriate Federal banking agency and any appropriate State bank supervisor in the manner provided in subsection (b).

"(B) PERIOD FOR REVIEW.-Notwithstanding subsection (b)(1), any views and recommendations of any other appropriate Federal banking agency and any appropriate State bank supervisor which received notice from the Board pursuant to subparagraph (A) with respect to any application described in such subparagraph shall be submitted by such agency or supervisor to the Board before the end of the 21-day period beginning on the date such notice was received.

"(C) LIMITED PERIOD FOR DISAPPROVAL.—If the Board fails to approve or disapprove any application described in subparagraph (A) before the end of the 45-day period beginning

on the date a complete application is submitted to the Board, the application shall be deemed to have been approved.

"(D) ADJUSTMENT OF PERIOD.-If, in connection with any application described in subparagraph (A), the Board

"(i) determines that an emergency exists which requires expeditious action;

"(ii) determines that immediate action must be taken to prevent the probable failure of an insured depository institution; or

"(iii) is advised by the Federal Deposit Insurance Corporation or the appropriate State bank supervisor that an insured depository institution is in danger of default (as defined in section 3(x)(2) of the Federal Deposit Insurance Act),

the Board may waive or reduce the length of the 45-day notice period referred to in subparagraph (C) with respect to such application.

"(2) EXTENSION OF TIME FOR NOTICE AND HEARING.

"(A) IN GENERAL.-The 45-day period referred to in paragraph (1)(C) may be extended if any other appropriate Federal banking agency or any appropriate State bank supervisor recommends in writing that the Board disapprove an application described in paragraph (1)(A).

"(B) REVIEW PERIOD AND PROCEDURES.-If any other appropriate Federal banking agency or any appropriate State bank supervisor recommends in writing that the Board disapprove an application described in paragraph (1)(A), the Board shall follow the review period and procedures for notice and hearing contained in subsection (b)(1).

(b) CONFORMING AMENDMENTS.-Section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842) (as amended by subsection (a)), is amended

(1) by striking "bank holding company" each place such term appears (other than the last sentence of subsection (a) (as added by this section) or where such term appears in the term "Bank Holding Company Act Amendments of 1970") and inserting "financial services holding company";

(2) in subsection (a)(2), by striking "causes a bank" and inserting instead "causes an insured depository institution"; and

(3) in subsection (a)(4)

(A) by striking "other than a bank" and inserting "other than an insured depository institution"; and

(B) by striking "assets of a bank" and inserting instead "assets of an insured depository institution";

(4) in provision (a)(A), by striking "acquired by a bank" and inserting "acquired by an insured depository institution"; and

(5) in provision (a)(B), by striking "in a bank" and inserting "in an insured depository institution".

SEC. 403. INTERESTS IN NONBANKING ORGANIZATIONS.

(a) INTERESTS IN NONBANKING ORGANIZATIONS.-Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843) is amended(1) in subsection (a), by striking the last 2 sentences;

(2) in subsection (a)(2)

(A) by striking "or in the case of a company which has been continuously" and all that follows through "December 31, 1980," and inserting "or in the case of a company that becomes a financial services holding company as a result of enactment of the Financial Institutions Safety and Consumer Choice Act of 1991, after December 31, 1992";

(B) by striking "unsound banking practices; and in the case of any such company" and all that follows through "this sentence." and inserting "unsound banking practices."; and

(C) by striking the last sentence; (3) in subsection (a)(2)(A)—

(A) by striking "of banking or"; and

(B) by striking "subsidiaries, and" and inserting "subsidiaries and, in the case of a foreign bank, the business of banking, if such business is otherwise permitted through a branch or agency (as defined in section 1(b) of the International Banking Act of 1978); and"; and

(4) in subsection (a)(2)(B), by striking "those permitted under" and all that follows through "under such paragraph" and inserting the following: "those permitted under subsection (c)(8) or (c)(15) in accordance with subsection (i) or (k), subject to all the conditions specified in this section or in any regulation prescribed or order issued by the Board under this section";

(5) subject to subsection (c) of this section, by striking paragraph (8) of subsection (c) and inserting the following new paragraph:

"(8) shares of any company the activities of which the Board, after due notice and opportunity for comment, has determined (by order or regulation) to be of a financial nature (in accordance with subsection (i));";

(6) by striking "or" at the end of subsection (c)(13);

(7) by striking the period at the end of subsection (c)(14) and inserting “; or";

(8) by inserting after paragraph (14) of subsection (c) the following new paragraph:

"(15) shares of any company engaged in— "(A) underwriting, distributing, or dealing in securities;

"(B) organizing, sponsoring, controlling, or distributing the shares of any registered investment company pursuant to the Investment Company Act of 1940;

"(C) securities brokerage, private placement, or investment advisory activities; or

"(D) other activities that require such company to register with the Securities and Exchange Commission as a broker, dealer, government securities broker, government securities dealer, investment company, or investment adviser.";

(9) by striking the last 2 sentences of subsection (c); and

(10) by striking subsection (i) and inserting the following new subsections:

"(i) ACTIVITIES OF A FINANCIAL NATURE."(1) ACTIVITIES APPROVED BEFORE JANUARY 1, 1993. Any activity that the Board has determined (by regulation or order that is in effect on December 31, 1992) to be so closely related to banking as to be a proper incident thereto shall be deemed to be activities of a financial nature for purposes of subsection (c)(8).

"(2) CONTINUATION OF PRIOR ACTIVITIES WITHOUT ADDITIONAL APPROVAL.—In the case of any bank holding company which becomes a financial services holding company on January 1, 1993, as a result of the enactment of the Financial Institutions Safety and Consumer Choice Act of 1991, no approval under subsection (c)(8) shall be required, by reason of the enactment of such Act, in order for

"(A) such holding company or any company any shares of which are held by the holding company to continue to engage, after December 31, 1992, in any activity described in paragraph (1) which was commenced by the holding company or such company before such date pursuant to an approval in effect on such date; or

"(B) the holding company to continue to retain, after December 31, 1992, any shares of any company engaged in any activity described in paragraph (1) if the holding company lawfully acquired the shares, or the company commenced the activity, before such date pursuant to an approval that is in effect on such date.

"(3) SECURITIES ACTIVITIES.

"(A) IN GENERAL.-Notwithstanding paragraph (2), the following activities shall not

be activities of a financial nature for purposes of subsection (c)(8):

"(i) Underwriting, dealing in, or acting as principal in the placement of, securities that a national bank may not underwrite or deal in under section 5136 of the Revised Statutes. "(ii) Securities activities which are described in subsection (c)(15) and are not described in paragraph (1).

"(B) TRANSITION RULE.-Notwithstanding subparagraph (A), any financial services holding company that receives the approval of the Board to underwrite and deal in securities described in subparagraph (A) may continue to engage in such activities pursuant to subsection (c)(8) for a period not to exceed 3 years beginning on the date of the enactment of the Financial Institutions Safety and Consumer Choice Act of 1991, subject to any condition or limitation imposed by the Board.

"(4) REAL ESTATE ACTIVITIES.—

“(A) IN GENERAL.-Real estate investment, management, or development and the purchase and sale of real estate as principal or broker shall not be activities of a financial nature for purposes of subsection (c)(8).

"(B) CONTINUATION OF PRIOR ACTIVITIES.— Notwithstanding subparagraph (A), any activity described in such subparagraph that the Board has determined, before May 3, 1991, by a regulation or order that is in effect on December 31, 1992, to be so closely related to banking as to be a proper incident may continue to be treated by the Board as an activity of a financial nature for purposes of subsection (c)(8).

"(5) LIMITATION ON INSURANCE ACTIVITIES WITHIN THE HOLDING COMPANY.-Providing insurance as a principal, agent, or broker shall not be deemed to be an activity of a financial nature, and no financial services holding company may permit any thrift institution or insured institution (as defined in subsections (i) and (j) of section 2, respectively), subsidiary of such company, or any subsidiary of any such institution, to provide insurance as a principal, agent, or broker, except

"(A) where the insurance is limited to assuring repayment of the outstanding balance due on a specific extension of credit by a financial services holding company or its subsidiary in the event of the death, disability, or involuntary unemployment of the debtor; "(B) in the case of a finance company which is a subsidiary of a financial services holding company, where the insurance is also limited to assuring repayment of the outstanding balance on an extension of credit in the event of loss or damage to any property used as collateral on such extension of credit and, during the period beginning on October 15, 1982, and ending on December 31, 1982, such extension of credit is not more than $10,000 ($25,000 in the case of an extension of credit which is made to finance the purchase of a residential manufactured home and which is secured by such residential manufactured home) and for any given year after 1982, such extension of credit is not more than an amount equal to $10,000 ($25,000 in the case of an extension of credit which is made to finance the purchase of a residential manufactured home and which is secured by such residential manufactured home) increased by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published monthly by the Bureau of Labor Statistics for the period beginning on January 1, 1982, and ending on December 31 of the year preceding the year in which such extension of credit is made:

"(C) any insurance agency activity in a place that

"(i) has a population not exceeding 5,000 (as shown by the last preceding decennial census); or

"(ii) the financial services holding company, after notice and opportunity for a hearing, demonstrates it has inadequate insurance agency facilities;

"(D) any insurance agency activity which was engaged in by the financial services holding company or any of its subsidiaries on May 1, 1982, or which the Board approved for such company or any of its subsidiaries on or before May 1, 1982, including

"(i) sales of insurance at new locations of the same financial services holding company or the same subsidiary or subsidiaries with respect to which insurance was sold on May 1, 1982, or approved to be sold on or before May 1, 1982, if such new locations are confined to the State in which the principal place of business of the financial services holding company is located, any State or States immediately adjacent to such State, and any State or States in which insurance activities were conducted by the financial services holding company or any of its subsidiaries on May 1, 1982, or were approved to be conducted by the financial services holding company or any of its subsidiaries on or before May 1, 1982; and

"(ii) sales of insurance coverages which may become available after May 1, 1982, so long as those coverages insure against the same types of risks as, or are otherwise functionally equivalent to, coverages sold on May 1, 1982, or approved to be sold on or before May 1, 1982 (for purposes of this subparagraph, activities engaged in or approved by the Board on May 1, 1982, shall include activities carried on subsequent to that date as the result of an application to engage in such activities pending on May 1, 1982, and approved subsequent to that date or of the acquisition by such company pursuant to a binding written contract entered into on or before May 1, 1982, of another company engaged in such activities at the time of the acquisition);

"(E) any insurance activity where the activity is limited solely to supervising on behalf of insurance underwriters the activities of retail insurance agents who sell

"(i) fidelity insurance and property and casualty insurance on the real and personal property used in the operations of the financial services holding company or any of its subsidiaries; and

"(ii) group insurance that protects the employees of the financial services holding company or any of its subsidiaries;

"(F) any insurance agency activity engaged in by a financial services holding company, or any of its subsidiaries, which financial services holding company has total assets of $50,000,000 or less, except that such a financial services holding company and its subsidiaries may not engage in the sale of life insurance or annuities except as provided in subparagraph (A), (B), or (C); or

"(G) where the activity is performed, or shares of the company involved are owned, directly or indirectly, by a financial services. holding company which is registered with the Board of Governors of the Federal Reserve System and which, prior to January 1, 1971, was engaged, directly or indirectly, in insurance agency activities as a consequence of approval by the Board prior to January 1, 1971.

"(6) INSURANCE ACTIVITIES OF BANK SUBSIDIARIES OF HOLDING COMPANIES.

"(A) IN GENERAL.-No financial services holding company may permit any bank subsidiary of such company, or any subsidiary of such bank, to provide insurance as a principal, agent or broker beyond the borders of the State in which the subsidiary bank is chartered unless such insurance activities in the nonchartering State are specifically authorized by the statute laws of that State, by language to that effect and not merely by implication.

"(B) CONTINUATION OF PRIOR ACTIVITIES.— Notwithstanding subparagraph (A) or paragraph (5), any financial services holding company (or any successor of such company), or any bank subsidiary of a financial services holding company (and any subsidiary of any such bank subsidiary) may continue insurance activities otherwise prohibited by subparagraph (A) on an interstate basis

"(i) so long as those coverages insure against the same types of risks, or are otherwise functionally equivalent to, coverages provided on or before June 1, 1991;

"(ii) to the extent that those activities were lawful and not the subject of legal challenge on that date; and

"(iii) subject to State regulation and control.

"(7) NONBANK ACTIVITIES OF SAVINGS ASSOCIATION SUBSIDIARIES.

"(A) ACTIVITIES ALLOWED.-Notwithstanding any other provision of this section (other than paragraph (5) and subsection (f)), any qualified savings association and any subsidiary of any such association which is acquired by any financial services holding company after June 1, 1991, may engage in any activity, after such acquisition, in which any Federal savings association or any subsidiary of any Federal savings association may engage in accordance with the Home Owners' Loan Act and regulations prescribed pursuant to such Act.

"(B) QUALIFIED SAVINGS ASSOCIATION DEFINED. For purposes of subparagraph (A), the term 'qualified savings 'qualified savings association' means any savings association which

"(i) was chartered or organized as a savings association before June 1, 1991;

"(ii) had, immediately before the acquisition of such association by the financial services holding company referred to in subparagraph (A), a ratio of tier 1 capital to total assets of 2 percent or less; and

"(iii) will become a level 1 or level 2 depository institution as a result of such acquisition.

"(8) NOTICE OF NEW DETERMINATIONS.Whenever the Board makes a determination under subsection (c)(8) that any activity is an activity of a financial nature, the Board shall publish in the Federal Register, not later than 7 days after such determination is made, the regulation or order by which such determination has been made and a description of the activity.

"(j) PROVISIONS APPLICABLE TO HOLDING COMPANIES WITH SECURITIES AFFILIATES.—

"(1) TRANSFER OF NEW SECURITIES ACTIVITIES OUT OF DEPOSITORY INSTITUTION.—Any financial services holding company that acquires control of a securities affiliate shall not, after the end of the 1-year period beginning on the date of the acquisition, permit any insured depository institution subsidiary of such holding company to engage, directly or indirectly, in the United States in activities described in any subparagraph of subsection (c)(15) except to the extent that such activities

"(A) are specifically authorized by statute for a national bank or authorized by a regulation prescribed or an order, interpretation, or approval issued by the Comptroller of the Currency pursuant to that statute before the date of the enactment of the Financial Institutions Safety and Consumer Choice Act of 1991; and

"(B) do not involve the underwriting or distributing by any national bank of securities backed by or representing an interest in mortgages or other assets originated or purchased by the national bank or any affiliate of the bank.

"(2) SECURITIES ACTIVITIES INVOLVING STATE OR MUNICIPAL OBLIGATIONS.-Notwithstanding paragraph (1), a financial services holding

company which acquires control of a securities affiliate shall

"(A) not permit, after the end of the 1-year period beginning on the date of the acquisition, an insured depository institution subsidiary of such company to underwrite or deal in obligations issued by any State or any political subdivision of any State; and

"(B) permit the activities described in subparagraph (A) to be conducted only by a securities affiliate in accordance with subsection (c)(15).

"(3) BROKER-DEALER ACTIVITIES.-Notwithstanding paragraph (1), effective January 1, 1993, a financial services holding company which controls or acquires control of a securities affiliate shall not permit an insured depository institution subsidiary of such company to operate as a broker or dealer that is required to register under the Securities Exchange Act of 1934.

"(4) CERTAIN INVESTMENT COMPANY SECURITIES.-Notwithstanding paragraph (1), effective January 1, 1993, a financial services holding company which controls or acquires control of a securities affiliate shall not permit an insured depository institution subsidiary of such company to sponsor, organize, promote, or control, or to underwrite the securities, shares, or units of participation issued by, a registered investment company containing assets described in section 408 of the Internal Revenue Code (26 U.S.C. 408).

"(5) AGENCIES OF FOREIGN BANKS SUBJECT TO THIS SUBSECTION.-For purposes of this section, a branch or agency of a foreign bank or a commerical lending company controlled by a foreign bank (as the terms 'branch', 'agency', and 'commercial lending company' are defined in section 1 of the International Banking Act of 1978) shall be treated as a bank.

"(k) NOTICE PROCEDURES FOR NONBANKING ACTIVITIES.

"(1) GENERAL NOTICE PROCEDURE.—

"(A) NOTICE REQUIREMENT.-No financial services holding company may engage in any nonbanking activity or acquire or retain ownership or control of the shares of a company engaged in qualified financial activities without providing the Board with written notice of the proposed transaction or activity at least 45 days before the transaction or activity is proposed to occur or commence.

"(B) CONTENTS OF NOTICE.-The notice submitted to the Board shall contain such information as the Board shall prescribe by regulation or by specific request in connection with a particular notice.

"(C) PROCEDURE FOR AGENCY ACTION.—

"(i) NOTICE OF DISAPPROVAL.-Any notice filed under this subsection shall be deemed to be approved by the Board unless, before the end of the 45-day period beginning on the date the Board receives a complete notice under subparagraph (A), the Board issues an order disapproving the transaction or activity and setting forth the reasons for disapproval.

"(ii) EXTENSION OF PERIOD.-The Board may extend the 45-day period referred to in clause (i) for an additional 45 days.

"(D) APPROVAL BEFORE END OF PERIOD.— “(i) IN GENERAL.-Any transaction or activity may commence before the expiration of any period for disapproval established under this paragraph if the Board issues a written notice of approval.

"(ii) SHORTER PERIODS BY REGULATION.— The Board may prescribe regulations which provide for no notice under this paragraph or for a shorter notice period with respect to particular activities or transactions, except that the Board may not provide for no notice with respect to activities or transactions described in subsection (c)(15).

"(E) EXTENSION OF PERIOD.-In the case of any notice to engage in, or to acquire or re

tain ownership or control of shares of any company engaged in, any activity pursuant to subsection (c)(8) that has not been previously approved by order or regulation, the Board may extend the notice period under this subsection for an additional 90 days.

"(2) GENERAL STANDARDS FOR REVIEW.— "(A) CRITERIA.-In connection with a notice under this subsection, the Board may consider the following criteria:

"(i) The managerial resources of the companies involved.

"(ii) The adequacy of the companies financial resources, including capital, giving consideration to the financial resources and capital of others engaged in similar activities.

"(iii) Any material adverse effect on the safety and soundness or financial condition of any insured depository institution affiliate.

"(iv) Whether, in the case of notice for approval involving activities under subsection. (c)(8) or (c)(15), performance of the activity by a financial services holding company or a subsidiary of such company can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices.

"(B) REQUIREMENTS FOR DISAPPROVAL.-The Board shall not approve any proposed transaction under this subsection if the Board determines that any insured depository institution subsidiary of the financial services holding company is engaging in any unsafe and unsound practice or is in an unsafe and unsound condition.

"(1) MINIMUM CAPITAL REQUIREMENTS FOR NEW FINANCIAL ACTIVITIES.-No financial services holding company may engage in, or acquire or retain the shares of any company engaged in, any new financial activity unless each depository institution subsidiary of such holding company has a ratio of tier 1 capital to total assets of not less than 6 percent.

"(m) MAINTENANCE OF HIGHER CAPITAL.— "(1) CAPITAL MUST BE PROMPTLY RESTORED.-Any financial services services holding company which is controlled by a diversified holding company or which engages, directly or through any subsidiary, in any new financial activity that ceases to qualify as a level 1 financial services holding company shall before the end of the 60-day period beginning on the date such company ceases to qualify as a level 1 financial services holding company

"(A) restore the capital of insured depository institution subsidiaries of such company in an amount sufficient for such company to requalify as a level 1 financial services holding company; or

"(B) submit a capital plan to the Board that will restore the relevant capital measures to the level necessary to requalify as a level 1 financial services holding company.

"(2) FAILURE TO RESTORE CAPITAL OR IMPLEMENT A CAPITAL PLAN.-If a holding company described in paragraph (1) fails to take the actions described in subparagraphs (A) or (B) of paragraph (1) or if the capital plan submitted under paragraph (1) is not approved by the Board or if the company fails to implement the capital plan, the holding company shall

"(A) divest any interest in all insured depository institution subsidiaries that do not meet all currently applicable capital standards; or

"(B) terminate all new financial activities and divest any interest in any subsidiary engaged in any such activity.

"(3) ESTABLISHMENT AND IMPLEMENTATION REQUIRED.

"(A) IN GENERAL.-The Board shall prescribe regulations to carry out the requirements of this section including the establishment of capital standards and minimum capital requirements for financial services holding companies and deadlines for submission and review of plans.

"(B) DEADLINE FOR REGULATIONS.-The Board shall, after notice and opportunity for comment, prescribe final regulations under subparagraph (A) which regulations shall be final not later than January 1, 1993.

"(C) COORDINATION WITH THE FEDERAL DEPOSIT INSURANCE ACT.-The Board and the appropriate Federal banking agencies shall coordinate the application of this subsection with the provisions of sections 5(e) and 38 of the Federal Deposit Insurance Act.

"(4) NOTICE TO OTHER FUNCTIONAL REGULATORS.-Before any holding company is required, pursuant to paragraph (2) of this subsection, to divest any interest in, or terminate any activities of, a company that is required to register with the Securities and Exchange Commission as a broker, dealer, government securities broker, government securities dealer, investment company, or investment adviser, the Board shall provide timely notice to the Securities and Exchange Commission and, in the case of any other company which is subject to any financial responsibility or capital requirements, any functional regulator of such company. "(n) LIMITATIONS ON ACTIVITIES OF FINANCIAL SERVICES HOLDING COMPANIES.

"(1) CONSUMER PROTECTION PROVISIONS.— "(A) DISCLOSURE BY INSURED DEPOSITORY INSTITUTION WITH RESPECT TO SECURITIES ACTIVITIES OF AFFILIATE.-No insured depository institution controlled by a financial services holding company, and no subsidiary of such insured depository institution, shall offer to any customer an opinion on the value of, or the advisability of purchasing or selling, any security or other product or service of which a securities affiliate of such financial services holding company is an underwriter or which such securities affiliate sells, or offers for sale, or in which such securities affiliate makes a marker, unless the insured depository institution or subsidiary provides a 1-time written notice to the customer in accordance with such requirements as the Board may, in consultation with the Securities and Exchange Commission, prescribe by regulation, stating

"(i) that the securities affiliate is an affiliate of the insured depository institution or subsidiary;

"(ii) that the securities affiliate

"(I) is not an insured depository institution; and

"(II) is a separate corporate entity with respect to any insured depository institution (or any subsidiary of such institution) which is an affiliate of such securities affiliate;

"(iii) that the securities or other products or services underwritten, sold, offered, or recommended by the securities affiliate

"(I) are not deposits which are federally insured by the Federal Deposit Insurance Corporation;

"(II) are not instruments which are guaranteed as to either principal or interest by an insured depository institution affiliate of such subsidiary; and

"(III) are not otherwise obligations of any insured depository institution; and

(iv) if applicable, that the securities affiliate underwrote or makes a market in the securities.

"(B) CUSTOMER ACKNOWLEDGMENT OF DISCLOSURE.

"(i) IN GENERAL.-Whenever any insured depository institution or subsidiary of an insured depository institution is required under subparagraph (A), to make disclosures to a customer, such insured depository institution, of subsidiary, or affiliate, as the case

may be, shall obtain a written acknowledgment of receipt by the customer of such disclosures, including the date of receipt and the customer's name, address, and account number.

"(ii) SPECIAL RULE FOR ACCREDITED INVESTORS.-In the case of any customer who is, or meets the requirements for, an accredited investor (as defined in section 2(15) of the Securities Act of 1933)—

"(I) the acknowledgment of the receipt of any disclosure described in clause (i) shall be obtained pursuant to such clause by the insured depository institution or securities affiliate referred to in such clause at the time any account is opened by such customer; and "(II) the institution or the securities affiliate shall not be required to obtain such an acknowledgment from such customer pursuant to clause (i) in connection with any subsequent transaction with respect to such account.

"(C) DISCLOSURES OF CONFIDENTIAL CUSTOMER INFORMATION PROHIBITED.

"(i) IN GENERAL.-No insured depository institution subsidiary of a financial services holding company may disclose, directly or indirectly, any confidential customer information to any person (as defined in section 1 of title 1, United States Code), including any other affiliate, without the prior written consent of the customer. For purposes of this subparagraph, the term 'affiliate' includes a separately identifiable department or division of an insured depository institution that is registered as an investment adviser pursuant to the Investment Advisers Act of 1940.

"(ii) RECORDS OF CUSTOMER CONSENT.Whenever any insured depository institution obtains the prior written consent of a customer for purposes of clause (i), such company shall

"(I) obtain an acknowledgment of such consent by the customer, including the date the consent was acknowledged and the customer's name, address, and any applicable account number;

"(II) obtain such consent separately from any other authorization or consent of the customer;

"(III) inform the customer that the consent is not required as a condition for the performance of services for the customer;

and

"(IV) maintain records of compliance with subclauses (I), (II), and (III).

"(iii) CUSTOMER DEFINED.—

"(I) IN GERERAL.-For purposes of this subparagraph, the term 'customer' means any person who, after the date of enactment of the Financial Institutions Safety and Consumer Choice Act of 1991, establishes a deposit, trust, or credit relationship with an insured depository institution or purchases any service or financial product from such institution.

"(II) TREATMENT OF CERTAIN DEPOSITS.Any renewal of an account in an insured depository institution and any rollover of a deposit in any such account shall be treated as the establishment of a new deposit relationship for purposes of subclause (I).

"(D) CONFIDENTIAL CUSTOMER INFORMATION DEFINED. For purposes of subparagraph (C), the term 'confidential customer information' means financial information regarding any specific individual which has been derived from any record of any insured depository institution and pertains to the individual's relationship with the institution.

"(E) CERTAIN INFORMATION NOT INCLUDED IN DEFINITION. Notwithstanding subparagraphs (C) and (D), the term 'confidential customer information' shall not include

"(i) any information obtainable from an unaffiliated credit bureau or similar entity or information obtainable in the ordinary

course of business from any other unaffiliated entity;

"(ii) any information provided to any credit bureau or similar entity in the ordinary course of business;

"(iii) any information obtainable in connection with insurance

"(I) which is limited to assuring the repayment of the outstanding balance due on an extension of credit in the event of the death, disability, or involuntary unemployment of the debtor;

"(II) on real or personal property obtained by or on behalf of an insured depository institution in the event a debtor has failed to provide reasonable evidence of required insurance in accordance with an extension of credit; or

"(III) to assure the repayment of outstanding balances due in connection with an extension of credit in the event of the loss or damage to property used as collateral on such extension of credit;

"(iv) any information provided

"(I) to any appropriate Federal regulatory agency; or

"(II) in accordance with the Right to Financial Privacy Act of of 1978 to any Government authority (as defined in section 1101(3) of such Act); and

"(v) financial information the use of which (by an insured depository institution, any affiliate of such institution, or any agent of or contractor with such institution or affiliate) is limited to the performance of

"(I) any function which is necessary to maintain a customer's existing deposit, trust, or credit account with the institution, including the collection of any amount due the institution by the customer with respect to any such account; or

"(II) due diligence evaluations in connection with the purchase or sale of loan assets or servicing rights.

"(F) DISCLOSURE OF CUSTOMER INFORMATION. In addition to any requirement or limitation contained in this section, the Board may prescribe regulations limiting disclosures of nonpublic customer information from any insured depository institution and any affiliate of such institution, including an evaluation of the creditworthiness of an issuer or other customer of that insured depository institution or any subsidiary or financial or insurance affiliate of such institution.

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

"(A) IN GENERAL.-In addition to any disclosure required under paragraph (1), in connection with

"(i) any sale of any instrument or financial product by any insured depository institution, or any affiliate of such institution, which does not constitute an insured deposit; "(ii) any acceptance of a deposit by such institution or affiliate that is not an insured deposit; or

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

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

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

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

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

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

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

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

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

"(3) REGULATIONS RELATING TO MISLEADING AND DECEPTIVE PRACTICES.-The appropriate Federal banking agencies shall prescribe regulations jointly to prohibit any insured depository institution from employing any advertisement that would mislead or otherwise cause a reasonable person to believe mistakenly that the institution or the Federal Government is responsible for the activities of an affiliate of the institution, stands behind the affiliate's credit, guarantees any returns on securities or insurance products sold by the affiliate, or is a source of payment of any obligation of or sold by the affiliate.

"(4) REQUIREMENTS APPLICABLE IN THE CASE OF FINANCIAL SERVICES HOLDING COMPANIES WITH SECURITIES AFFILIATES.—

"(A) CERTAIN FINANCIAL TRANSACTIONS OF INSURED DEPOSITORY INSTITUTIONS PROHIBITED. Notwithstanding any provision of subparagraph (E), no insured depository institution subsidiary of a financial services holding company may directly or indirectly engage in any of the following with respect to its securities affiliate:

"(i) Except as provided in subparagraph (C), extend credit to such securities affiliate. “(ii) Issue a guaranty, acceptance, or letter of credit, endorsement, asset purchase agreement, indemnity, insurance, or other credit instrument or facility, including a standby letter of credit, to or for the benefit of such securities affiliate.

"(iii) Purchase for the insured depository institution's own account, or for the account of any subsidiary of the institution, any financial asset of such securities affiliate that is not a security of the United States or any agency of the United States or a security on which the principal and interest are fully guaranteed by the United States or any such agency.

"(iv) Purchase for the insured depository institution's own account, or for the account of any subsidiary of the institution, any security (other than securities issued by an open-end investment company or a unit investment trust) of which such securities affiliate is an underwriter or a member of the selling group, or which such securities affiliate otherwise places, until—

"(I) in the case of an underwriting, 60 days after the end of the underwriting period; or "(II) in the case of a placement, 60 days after completion of the placement.

"(v) Purchase for a customer account in which the insured depository institution or its subsidiary, acting as fiduciary, is authorized to determine the securities to be purchased or sold, any security (other than securities issued by an open-end investment company or a unit investment trust) of which such securities affiliate is an underwriter or a member of the selling group or which such securities affiliate otherwise places until

"(I) in the case of an underwriting, 90 days after the end of the underwriting period, or "(II) in the case of a placement, 90 days after completion of the placement. The provisions of this clause (v) apply whether or not such purchase is authorized by any trust agreement or any other instrument authorizing the insured depository institution or subsidiary to act in such capacity, unless such purchase is permitted by State law, is explicitly authorized in the trust agreement or other instrument establishing the fiduciary relationship, and is effectuated by endorsement by the creator of the trust of a separate document that discloses (in accordance with regulations prescribed by the Board) any conflict of interest that an insured depository institution may have in making such purchase. Notwithstanding any provision of Federal or State law, if the creator of any trust agreement or other instrument referred to in the preceding sentence is incapable of providing the authorization or effectuating an endorsement referred to in such sentence, every beneficiary of such trust or instrument shall provide such authorization or effectuate such endorsement.

"(vi) Extend credit to any investment company which is sponsored, organized, controlled, promoted, or advised by such securities affiliate or the depository institution (including a separately identifiable department or division thereof) or any subsidiary of such institution, except as permitted by regulations prescribed by the Commission pursuant to section 18(f)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-18(f)(3)).

"(vii) Extend credit, or arrange for the extension of credit, or issue a guaranty, acceptance, letter of credit, endorsement, asset purchase agreement, indemnity, insurance, or other credit instrument or facility, including a standby letter of credit, to an issuer of securities for which the securities affiliate is underwriting or placing any security for the purpose of paying, in whole or in part, the principal of, or any interest or dividends on, those securities.

"(viii) Extend credit to a customer of a securities affiliate for the purpose of repaying, in whole or in part, credit extended to such customer by the securities affiliate.

"(ix) Except as provided in subparagraph (G), extend credit, arrange for the extension of credit, or issue a guaranty, acceptance, letter of credit, endorsement, asset purchase agreement, indemnity, insurance, or other credit instrument or facility, including a standby letter of credit, to or for the benefit of the issuer of any security of which such securities affiliate is an underwriter or a member of the selling group, or which the securities affiliate otherwise places, until

"(I) in the case of an underwriting, 90 days after the end of the underwriting period; or "(II) in the case of a placement, 90 days after completion of the placement.

"(x) Except as provided in subparagraph (F), sell any financial asset of the depository institution or a subsidiary thereof to such securities affiliate that is not a security of the United States or any agency of the United States or a security on which the principal and interest are fully guaranteed by the United States or any such agency.

"(B) CERTAIN FINANCIAL TRANSACTIONS OF HOLDING COMPANIES AND SUBSIDIARIES DURING DISTRIBUTIONS PROHIBITED.--No financial services holding company and no subsidiary of a financial services holding company (other than a securities affiliate) may, directly or indirectly, extend credit or arrange for the extension of credit to any person, if such credit is secured by, or is used to purchase, any security that is the subject of a distribution or placement in which a securities affiliate of such financial services hold

ing company participates as an underwriter or member of the selling group or which the securities affiliate otherwise places (other than securities issued by an openend investment company or unit investment trust or securities of the United States or any agency of the United States or securities on which principal and interest are fully guaranteed by the United States or any such agency) until 30 days after the end of the period in which such security is the subject of such distribution or placement.

"(C) EXCEPTION FOR INTRADAY EXTENSIONS OF CREDIT IN CONNECTION WITH CLEARING GOVERNMENT SECURITIES.-Subparagraph (A)(i) shall not apply with respect to any extension of credit which is made for the purchase or sale of any securities of the United States or any agency of the United States or any securities on which the principal and interest are fully guaranteed by the United States or any such agency, if

"(i) the extension of credit is to be repaid on the same calander day;

"(ii) the extension of credit is incidental to the clearing of transactions in those securities through such institution or any subsidiary; and

"(iii) both the principal of, and the interest on, the extension of credit are fully secured, on a market value basis, by securities of the United States or any agency of the United States or securities on which the principal and interest are fully guaranteed by the United States or any such agency.

"(D) PROHIBITIONS ON

CREDIT TREATMENT.

DISCRIMINATORY

“(i) IN GENERAL.-No insured depository institution subsidiary of a financial services holding company shall

"(I) extend or deny credit or services (including clearing services), or vary the terms or conditions thereof, if the effect of such action would be to treat an unaffiliated entity less favorably than any of such institution's affiliates, unless the extension of credit or denial is based on objective criteria and is consistent with sound business practices; or

"(II) extend or deny credit or services or vary the terms or conditions for any such credit or services with the intent of creating a competitive advantage for any of the institution's affiliates.

"(ii) MONITORING OF CLEARING SERVICES REQUIRED.-The Board shall monitor, on at least an annual basis, the availability of United States Government securities clearing services to companies that are brokers and dealers registered under the Securities Exchange Act of 1934 and not affiliated with an insured depository institution, and the price, terms, and conditions of such services.

'(iii) REQUIREMENTS IF CLEARING SERVICES BECOME UNAVAILABLE.—If the Board determines that the services described in clause (ii) have, or are likely to become, unavailable, or are available at prices, terms, or conditions that do not generally permit brokers and dealers that are not affiliated with an insured depository institution a reasonable opportunity to compete in the United States Government securities market, the Board shall

"(I) require insured depository institutions to offer such services at reasonable prices, terms, and conditions to unaffiliated registered brokers and dealers;

"(II) provide such companies direct access to the wire transfer system for the purpose of clearing these securities under terms and conditions that protect the Reserve Bank from loss associated with the clearing credit;

"(III) take such other action as the Board determines to be appropriate to permit registered brokers and dealers that are not affiliated with an insured depository institution to obtain clearing services at reasonable prices, terms, and conditions; or