12 U.S.C. § 1831a — Activities of insured State banks
submitted 76 years ago by Pub. L. 102-242 to r/title-12-BANKS-AND-BANKING · 2,087 words · no verdicts yet
This section limits what insured State banks and their subsidiaries may do as principals and what equity investments they may acquire or retain. It sets conditions, exceptions, transition rules, notice requirements, and limits on the activities of branches in other States.
(a) Permissible activities.
(1) In general. After the 1-year period beginning on December 19, 1991, an insured State bank* may not act as principal in any type of activity that a national bank* may not engage in unless (A) the Corporation has determined that the activity would pose no significant risk to the Deposit Insurance Fund, and (B) the State* bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency*.
(2) Processing period.
(A) In general. The Corporation must make the determination under paragraph (1)(A) no later than 60 days after receiving a completed application that may be required under this subsection.
(B) Extension of time period. The Corporation may extend that 60-day period by no more than 30 additional days. It must notify the applicant of the extension.
(b) Insurance underwriting.
(1) In general. Despite subsection (a), an insured State bank may not engage in insurance underwriting except to the extent that the activity is permissible for national banks.
(2) Exception for certain federally reinsured crop insurance. Despite any other law, an insured State bank or one of its subsidiaries that provided insurance on or before September 30, 1991, and that was reinsured in whole or in part by the Federal Crop Insurance Corporation, may continue to provide that insurance.
(c) Equity investments by insured State banks.
(1) In general. An insured State bank may not, directly or indirectly, acquire or retain an equity investment of a type that is not permissible for a national bank.
(2) Exception for certain subsidiaries. Paragraph (1) does not prohibit an insured State bank from acquiring or retaining an equity investment in a subsidiary of which the insured State bank is a majority owner.
(3) Exception for qualified housing projects.
(A) Exception. Despite any other provision of this subsection, an insured State bank may invest as a limited partner in a partnership whose sole purpose is to invest, directly or indirectly, in acquiring, rehabilitating, or newly constructing a qualified housing project.
(B) Limitation. The total of an insured State bank's investments under this paragraph may not exceed 2 percent of the bank's total assets.
(C) Qualified housing project defined. In this paragraph:
(i) Qualified housing project. The term “qualified housing project” means residential real estate intended primarily to benefit lower-income people throughout the period of the investment.
(ii) Lower income. The term “lower income” means income less than or equal to the median income, based on statistics from State or Federal sources.
(4) Transition rule.
(A) In general. The Corporation must require an insured State bank to divest any equity investment whose retention is not permissible under this subsection as quickly as can be done prudently, and in any event before the end of the 5-year period beginning on December 19, 1991.
(B) Treatment of noncompliance during divestment. For an equity investment that an insured State bank held on December 19, 1991, and lawfully acquired before that date, the bank is treated as not violating this subsection's prohibition on retaining the investment as long as the bank follows the Corporation's applicable requirements for divesting such investments.
(d) Subsidiaries of insured State banks.
(1) In general. After the 1-year period beginning on December 19, 1991, a subsidiary of an insured State bank may not act as principal in any type of activity that is not permissible for a subsidiary of a national bank unless (A) the Corporation has determined that the activity poses no significant risk to the Deposit Insurance Fund, and (B) the bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency.
(2) Insurance underwriting prohibited.
(A) Prohibition. Despite paragraph (1), a subsidiary of an insured State bank may not engage in insurance underwriting except to the extent that such activities are permissible for national banks.
(B) Continuation of existing activities. Despite subparagraph (A), a well-capitalized insured State bank or one of its subsidiaries that was lawfully providing insurance as principal in a State on November 21, 1991, may continue to provide, as principal, insurance of the same type to (1) residents of the State, including companies or partnerships incorporated in, organized under the laws of, licensed to do business in, or having an office in the State, but only on behalf of their employees who live in the State or property located in the State; (2) individuals employed in the State; and (3) any other person* to whom the bank or subsidiary has provided insurance as principal, without interruption, since that person lived in or was employed in the State.
(C) Exception. Subparagraph (A) does not apply to a subsidiary of an insured State bank if (i) before June 1, 1991, the insured State bank was required to provide title insurance as a condition of the bank's initial chartering under State law, and (ii) control of the insured State bank has not changed since that date.
(3) Processing period.
(A) In general. The Corporation must make the determination under paragraph (1)(A) no later than 60 days after receiving a completed application that may be required under this subsection.
(B) Extension of time period. The Corporation may extend that 60-day period by no more than 30 additional days. It must notify the applicant of the extension.
(e) Savings bank life insurance.
(1) In general. No provision of this chapter may be interpreted as prohibiting or impairing the sale or underwriting of savings bank life insurance, or the ownership of stock in a savings bank life insurance company, by an insured bank that (A) is located in the Commonwealth of Massachusetts, the State of New York, or the State of Connecticut, and (B) meets applicable consumer* disclosure requirements for that insurance.
(2) FDIC finding and action regarding risk.
(A) Finding. Before the end of the 1-year period beginning on December 19, 1991, the Corporation must determine whether the savings bank life insurance activities of insured banks pose or may pose any significant risk to the Deposit Insurance Fund.
(B) Actions.
(i) In general. Based on a finding under subparagraph (A), the Corporation must take appropriate action to address any risk that exists or may later develop concerning insured banks described in paragraph (1)(A).
(ii) Authorized actions. The Corporation may, under this subparagraph, require an insured bank to modify, suspend, or end insurance activities if the Corporation finds that the activities pose a significant risk to an insured bank described in paragraph (1)(A) or to the Deposit Insurance Fund.
(f) Common and preferred stock investment.
(1) In general. An insured State bank may not, directly or indirectly, acquire or retain any equity investment of a type or in an amount that is not permissible for a national bank or is not otherwise permitted under this section.
(2) Exception for banks in certain States. Despite paragraph (1), to the extent the Corporation permits it, an insured State bank may acquire and retain ownership of the securities described in paragraph (1) up to an aggregate amount equal to 100 percent of the bank's capital if (A) the bank is located in a State that, as of September 30, 1991, permitted investment in common or preferred stock listed on a national securities exchange or in shares of an investment company registered under the Investment Company Act of 1940, and (B) the bank made or maintained an investment in those securities during the period beginning on September 30, 1990, and ending on November 26, 1991.
(3) Exception for certain types of institutions. Despite paragraph (1), an insured State bank may—
(A) acquire no more than 10 percent of a corporation that only (i) provides directors', trustees', and officers' liability insurance coverage or bankers' blanket bond group insurance coverage for insured depository institutions, or (ii) reinsures those policies; and
(B) acquire or retain shares of a depository institution if (i) the institution engages only in activities permissible for national banks; (ii) the institution is examined and regulated by a State bank supervisor; (iii) 20 or more depository institutions own shares of the institution and none owns more than 15 percent of the institution's shares; and (iv) the institution's shares, other than directors' qualifying shares or shares held under or initially acquired through a plan established for the benefit of the institution's officers and employees, are owned only by the institution.
(4) Transition period for common and preferred stock investments.
(A) In general. During each year in the 3-year period beginning on December 19, 1991, each insured State bank must reduce by at least one-third of its shares, measured as of December 19, 1991, the bank's ownership of securities above an amount equal to 100 percent of the bank's capital.
(B) Compliance at end of period. By the end of the 3-year period described in subparagraph (A), each insured State bank and each subsidiary of a State bank must comply with the maximum investment amounts referred to in paragraph (1).
(5) Loss of exception upon acquisition. An exception under paragraph (2) for an insured State bank ends for that bank when control of the bank changes or the bank's charter is converted.
(6) Notice and approval. An insured State bank may engage in an investment under paragraph (2) only if (A) the bank has filed a one-time notice of its intention to acquire and retain investments described in paragraph (1), and (B) within 60 days after receiving that notice, the Corporation has determined that acquiring or retaining those investments does not pose a significant risk to the Deposit Insurance Fund.
(7) Divestiture.
(A) In general. The Corporation may require an insured State bank to divest an investment permitted under this subsection if the Corporation determines that the investment will adversely affect the bank's safety and soundness.
(B) Reasonable standard. The Corporation may not require a bank to divest under subparagraph (A) without reason to believe that the investment will adversely affect the bank's safety and soundness.
(g) Determinations. The Corporation must make determinations under this section by regulation or order.
(h) “Activity” defined. For this section, the term “activity” includes acquiring or retaining any investment.
(i) Other authority not affected. This section does not limit the authority of an appropriate Federal banking agency or any State supervisory authority to impose more stringent restrictions.
(j) Activities of branches of out-of-State banks.
(1) Application of host State law. The laws of a host State, including laws about community reinvestment, consumer protection, fair lending*, and establishing intrastate branches, apply to an out-of-State State bank's branch in the host State to the same extent that those State laws apply to an out-of-State national bank's branch in the host State. To the extent host State law does not apply to the branch under that rule, home State law applies to the branch.
(2) Activities of branches. An insured State bank that establishes a branch in a host State may conduct at that branch any activity permitted under the bank's home State laws, to the extent that the activity is permissible either for a bank chartered by the host State, subject to this section's restrictions, or for an out-of-State national bank's branch in the host State.
(3) Savings provision. Nothing in this subsection changes the applicability of (A) any home-State law under subsection (b), (c), or (d) of 12 U.S.C. § 1831u, or (B) Federal law to State banks and State bank branches in the home State or host State.
(4) Definitions. The terms “host State,” “home State,” and “out-of-State bank” have the same meanings as in 12 U.S.C. § 1831u(f). This section does not define those terms.
After the end of the 1-year period beginning on December 19, 1991, an insured State bank* may not engage as principal in any type of activity that is not permissible for a national bank* unless—
the Corporation has determined that the activity would pose no significant risk to the Deposit Insurance Fund; and
the State* bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency*.
The Corporation shall make a determination under paragraph (1)(A) not later than 60 days after receipt of a completed application that may be required under this subsection.
The Corporation may extend the 60-day period referred to in subparagraph (A) for not more than 30 additional days, and shall notify the applicant of any such extension.
Notwithstanding subsection (a), an insured State bank may not engage in insurance underwriting except to the extent that activity is permissible for national banks.
Notwithstanding any other provision of law, an insured State bank or any of its subsidiaries that provided insurance on or before September 30, 1991, which was reinsured in whole or in part by the Federal Crop Insurance Corporation may continue to provide such insurance.
An insured State bank may not, directly or indirectly, acquire or retain any equity investment of a type that is not permissible for a national bank.
Paragraph (1) shall not prohibit an insured State bank from acquiring or retaining an equity investment in a subsidiary of which the insured State bank is a majority owner.
Notwithstanding any other provision of this subsection, an insured State bank may invest as a limited partner in a partnership, the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation, or new construction of a qualified housing project.
The aggregate of the investments of any insured State bank pursuant to this paragraph shall not exceed 2 percent of the total assets of the bank.
As used in this paragraph—
The term “qualified housing project” means residential real estate that is intended to primarily benefit lower income people throughout the period of the investment.
The term “lower income” means income that is less than or equal to the median income based on statistics from State or Federal sources.
The Corporation shall require any insured State bank to divest any equity investment the retention of which is not permissible under this subsection as quickly as can be prudently done, and in any event before the end of the 5-year period beginning on December 19, 1991.
With respect to any equity investment held by any insured State bank on December 19, 1991, which was lawfully acquired before December 19, 1991, the bank shall be deemed not to be in violation of the prohibition in this subsection on retaining such investment so long as the bank complies with the applicable requirements established by the Corporation for divesting such investments.
After the end of the 1-year period beginning on December 19, 1991, a subsidiary of an insured State bank may not engage as principal in any type of activity that is not permissible for a subsidiary of a national bank unless—
the Corporation has determined that the activity poses no significant risk to the Deposit Insurance Fund; and
the bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency.
Notwithstanding paragraph (1), no subsidiary of an insured State bank may engage in insurance underwriting except to the extent such activities are permissible for national banks.
Notwithstanding subparagraph (A), a well-capitalized insured State bank or any of its subsidiaries that was lawfully providing insurance as principal in a State on November 21, 1991, may continue to provide, as principal, insurance of the same type to residents of the State (including companies or partnerships incorporated in, organized under the laws of, licensed to do business in, or having an office in the State, but only on behalf of their employees resident in or property located in the State), individuals employed in the State, and any other person* to whom the bank or subsidiary has provided insurance as principal, without interruption, since such person resided in or was employed in such State.
Subparagraph (A) does not apply to a subsidiary of an insured State bank if—
the insured State bank was required, before June 1, 1991, to provide title insurance as a condition of the bank’s initial chartering under State law; and
control of the insured State bank has not changed since that date.
The Corporation shall make a determination under paragraph (1)(A) not later than 60 days after receipt of a completed application that may be required under this subsection.
The Corporation may extend the 60-day period referred to in subparagraph (A) for not more than 30 additional days, and shall notify the applicant of any such extension.
No provision of this chapter shall be construed as prohibiting or impairing the sale or underwriting of savings bank life insurance, or the ownership of stock in a savings bank life insurance company, by any insured bank which—
is located in the Commonwealth of Massachusetts or the State of New York or Connecticut; and
meets applicable consumer* disclosure requirements with respect to such insurance.
Before the end of the 1-year period beginning on December 19, 1991, the Corporation shall make a finding whether savings bank life insurance activities of insured banks pose or may pose any significant risk to the Deposit Insurance Fund.
The Corporation shall, pursuant to any finding made under subparagraph (A), take appropriate actions to address any risk that exists or may subsequently develop with respect to insured banks described in paragraph (1)(A).
Actions the Corporation may take under this subparagraph include requiring the modification, suspension, or termination of insurance activities conducted by any insured bank if the Corporation finds that the activities pose a significant risk to any insured bank described in paragraph (1)(A) or to the Deposit Insurance Fund.
An insured State bank shall not acquire or retain, directly or indirectly, any equity investment of a type or in an amount that is not permissible for a national bank or is not otherwise permitted under this section.
Notwithstanding paragraph (1), an insured State bank may, to the extent permitted by the Corporation, acquire and retain ownership of securities described in paragraph (1) to the extent the aggregate amount of such investment does not exceed an amount equal to 100 percent of the bank’s capital if such bank—
is located in a State that permitted, as of September 30, 1991, investment in common or preferred stock listed on a national securities exchange or shares of an investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.]; and
made or maintained an investment in such securities during the period beginning on September 30, 1990, and ending on November 26, 1991.
Notwithstanding paragraph (1), an insured State bank may—
acquire not more than 10 percent of a corporation that only—
provides directors’, trustees’, and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions; or
reinsures such policies; and
acquire or retain shares of a depository institution if—
the institution engages only in activities permissible for national banks;
the institution is subject to examination and regulation by a State bank supervisor;
20 or more depository institutions own shares of the institution and none of those institutions owns more than 15 percent of the institution’s shares; and
the institution’s shares (other than directors’ qualifying shares or shares held under or initially acquired through a plan established for the benefit of the institution’s officers and employees) are owned only by the institution.
During each year in the 3-year period beginning on December 19, 1991, each insured State bank shall reduce by not less than 1/3 of its shares (as of December 19, 1991) the bank’s ownership of securities in excess of the amount equal to 100 percent of the capital of such bank.
By the end of the 3-year period referred to in subparagraph (A), each insured State bank and each subsidiary of a State bank shall be in compliance with the maximum amount limitations on investments referred to in paragraph (1).
Any exception applicable under paragraph (2) with respect to any insured State bank shall cease to apply with respect to such bank upon any change in control of such bank or any conversion of the charter of such bank.
An insured State bank may only engage in any investment pursuant to paragraph (2) if—
the bank has filed a 1-time notice of the bank’s intention to acquire and retain investments described in paragraph (1); and
the Corporation has determined, within 60 days of receiving such notice, that acquiring or retaining such investments does not pose a significant risk to the Deposit Insurance Fund.
The Corporation may require divestiture by an insured State bank of any investment permitted under this subsection if the Corporation determines that such investment will have an adverse effect on the safety and soundness of the bank.
The Corporation shall not require divestiture by any bank pursuant to subparagraph (A) without reason to believe that such investment will have an adverse effect on the safety and soundness of the bank.
The Corporation shall make determinations under this section by regulation or order.
For purposes of this section, the term “activity” includes acquiring or retaining any investment.
This section shall not be construed as limiting the authority of any appropriate Federal banking agency or any State supervisory authority to impose more stringent restrictions.
The laws of a host State, including laws regarding community reinvestment, consumer protection, fair lending*, and establishment of intrastate branches, shall apply to any branch in the host State of an out-of-State State bank to the same extent as such State laws apply to a branch in the host State of an out-of-State national bank. To the extent host State law is inapplicable to a branch of an out-of-State State bank in such host State pursuant to the preceding sentence, home State law shall apply to such branch.
An insured State bank that establishes a branch in a host State may conduct any activity at such branch that is permissible under the laws of the home State of such bank, to the extent such activity is permissible either for a bank chartered by the host State (subject to the restrictions in this section) or for a branch in the host State of an out-of-State national bank.
No provision of this subsection shall be construed as affecting the applicability of—
any State law of any home State under subsection (b), (c), or (d) of section 1831u of this title; or
Federal law to State banks and State bank branches in the home State or the host State.
The terms “host State”, “home State”, and “out-of-State bank” have the same meanings as in section 1831u(f) 1 of this title.
Source credit: (Sept. 21, 1950, ch. 967, § 2[24], as added Pub. L. 102–242, title III, § 303(a), Dec. 19, 1991, 105 Stat. 2349; amended Pub. L. 102–550, title XVI, § 1605(a)(8), Oct. 28, 1992, 106 Stat. 4086; Pub. L. 103–328, title I, § 102(b)(3)(B), Sept. 29, 1994, 108 Stat. 2351; Pub. L. 104–208, div. A, title II, §§ 2217, 2704(d)(14)(W), Sept. 30, 1996, 110 Stat. 3009–414, 3009–494; Pub. L. 105–24, § 2(a), July 3, 1997, 111 Stat. 238; Pub. L. 109–171, title II, § 2102(b), Feb. 8, 2006, 120 Stat. 9; Pub. L. 109–173, § 8(a)(31), Feb. 15, 2006, 119 Stat. 3615.)
- 1950Enacted · Pub. L. 102-242 · 105 Stat. 2349
- 1992Amended · Pub. L. 102-550 · 106 Stat. 4086
- 1994Amended · Pub. L. 103-328 · 108 Stat. 2351
- 1996Amended · Pub. L. 104-208 · 110 Stat. 3009
- 1997Amended · Pub. L. 105-24 · 111 Stat. 238
- 2006Amended · Pub. L. 109-171 · 120 Stat. 9
- 2006Amended · Pub. L. 109-173 · 119 Stat. 3615
A history note hasn’t been published yet. The record shows enactment by Pub. L. 102-242 on 1950-09-21.
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