12 U.S.C. § 1831e — Activities of savings associations
submitted 76 years ago by Pub. L. 101-73 to r/title-12-BANKS-AND-BANKING · 1,707 words · no verdicts yet
State-chartered savings associations generally may not conduct activities or make investments beyond Federal savings-association powers unless the Corporation finds no significant risk and capital standards are met. The section also governs corporate debt securities, qualified notes, divestiture, and stricter regulatory authority.
(a) In general. From January 1, 1990, a State*-chartered savings association may not act as principal in an activity, or amount of an activity, not permitted for a Federal savings association unless the Corporation finds no significant risk to the Deposit Insurance Fund and the association meets fully phased-in capital standards under 12 U.S.C. § 1464(t).
(b) Differences in amount. Except for the activity cited in the statute, a State association may conduct a Federal-permitted activity in a greater amount only if the Corporation has not found significant risk and the association meets those capital standards.
(c) Equity investments. The association may not directly acquire or retain an equity investment not permitted for a Federal savings association. It may hold service-corporation shares if the Corporation finds no significant risk from the amount and activities and the association meets the capital standards. The Corporation must require prompt divestiture, no later than July 1, 1994; a May 1, 1989 holding is not a violation during divestiture if the association follows the Corporation’s requirements.
(d) Corporate debt securities. No savings association may directly or through a subsidiary acquire or retain a corporate debt security that fails the Corporation’s credit*-worthiness standards. This does not apply to a qualified affiliate*. The statute defines qualified affiliate differently for stock and mutual associations and excludes certain obligations that a Federal savings association may hold without an asset-percentage limit.
(e) Qualified-note exchange. An insured savings association holding such a debt security on August 9, 1989 may exchange it for a qualified note from the specified holding company or qualifying company if all listed conditions are met: capital compliance or an acceptable capital plan; a permitted transferee; timely notice; completion within the one- or two-year deadline; fair-market-value consideration; approval and a complete divestiture finding by the Comptroller or Corporation; and recognition of gain only when cash principal payments exceed the recorded fair market value. A qualified note must remain fully secured, protect the collateral, allow a qualifying reinvested sale, use market terms above the association’s comparable borrowing rate, be repaid within five years with required annual principal payments, be fully guaranteed by each acquiring holding company, and be paid in cash. The exemption ends immediately if the association or affiliate fails to follow the note or subsection.
(f) Determinations. The Corporation makes determinations by regulation or order.
(g) Activity. For subsections (a) and (b), “activity” includes acquiring or retaining an investment, but those subsections do not require divesting assets acquired before August 9, 1989.
(h) Other authority. This section does not limit the Corporation’s other authority or the authority of the Comptroller, Corporation, or a State to impose stricter restrictions.
On and after January 1, 1990, a savings association chartered under State* law may not engage as principal in any type of activity, or in any activity in an amount, that is not permissible for a Federal savings association unless—
the Corporation has determined that the activity would pose no significant risk to the Deposit Insurance Fund; and
the savings association is and continues to be in compliance with the fully phased-in capital standards prescribed under section 1464(t) of this title.
Notwithstanding subsection (a)(1), if an activity (other than an activity described in section 1464(c)(2)(B) of this title) is permissible for a Federal savings association, a savings association chartered under State law may engage as principal in that activity in an amount greater than the amount permissible for a Federal savings association if—
the Corporation has not determined that engaging in that amount of the activity poses any significant risk to the Deposit Insurance Fund; and
the savings association chartered under State law is and continues to be in compliance with the fully phased-in capital standards prescribed under section 1464(t) of this title.
Notwithstanding subsections (a) and (b), a savings association chartered under State law may not directly acquire or retain any equity investment of a type or in an amount that is not permissible for a Federal savings association.
Paragraph (1) does not prohibit a savings association from acquiring or retaining shares of one or more service corporations if—
the Corporation has determined that no significant risk to the Deposit Insurance Fund is posed by—
the amount that the association proposes to acquire or retain; or
the activities in which the service corporation engages; and
the savings association is and continues to be in compliance with the fully phased-in capital standards prescribed under section 1464(t) of this title.
The Corporation shall require any savings association to divest any equity investment the retention of which is not permissible under paragraph (1) or (2) as quickly as can be prudently done, and in any event not later than July 1, 1994.
With respect to any equity investment held by any savings association on May 1, 1989, the savings association shall be deemed not to be in violation of the prohibition in paragraph (1) or (2) on retaining such investment so long as the savings association complies with any applicable requirement established by the Corporation pursuant to subparagraph (A) for divesting such investments.
No savings association may, directly or through a subsidiary, acquire or retain any corporate debt security that does not meet standards of credit*-worthiness as established by the Corporation.
Paragraph (1) shall not apply with respect to any corporate debt security which is acquired and retained by any qualified affiliate of a savings association.
For purposes of this section—
The term “qualified affiliate” means—
in the case of a stock savings association, an affiliate other than a subsidiary or an insured depository institution; and
in the case of a mutual savings association, a subsidiary other than an insured depository institution, so long as all of the savings association’s investments in and extensions of credit to the subsidiary are deducted from the savings association’s capital.
The term “corporate debt security that does not meet standards of credit-worthiness as established by the Corporation” does not include any obligation issued or guaranteed by a corporation that may be held by a Federal savings association without limitation as to percentage of assets under subparagraph (D), (E), or (F) of section 1464(c)(1) of this title.
Notwithstanding subsections (a), (b), and (c) of section 1464 1 of this title and any other provision of Federal or State law governing extensions of credit by savings associations, any insured savings association, and any subsidiary of any insured savings association, that, on August 9, 1989, holds any corporate debt security that does not meet standards of credit-worthiness as established by the Corporation may acquire a qualified note in exchange for the transfer of such security to—
any holding company which controls 80 percent or more of the shares of such insured savings association; or
any company other than an insured savings association, or any subsidiary of any insured savings association, 80 percent or more of the shares of which are controlled by such holding company,
if the conditions of paragraph (2) are met.
The conditions of this paragraph are met if—
the insured savings association was in compliance with applicable capital requirements on December 31, 1988, and the insured savings association after such date—
remains in compliance with applicable capital requirements; or
adopts and complies with a capital plan acceptable to the Comptroller of the Currency or the Corporation, as appropriate;
the company to which the corporate debt security that does not meet standards of credit-worthiness established by the Corporation is transferred is not a bank* holding company, an insured savings association, or a direct or indirect subsidiary of such holding company or insured savings association;
before the end of the 90-day period beginning on August 9, 1989, the insured savings association notifies the Comptroller of the Currency or the Corporation, as appropriate, of such association’s intention to transfer the corporate debt security that does not meet standards of credit-worthiness established by the Corporation to the savings and loan holding company or the subsidiary of such holding company;
the transfer of the corporate debt security that does not meet standards of credit-worthiness established by the Corporation is completed—
before the end of the 1-year period beginning on August 9, 1989, in the case of an insured savings association that, as of August 9, 1989, is controlled by a savings and loan holding company; or
before the end of the 2-year period beginning on August 9, 1989, in the case of a savings association that is not, as of August 9, 1989, a subsidiary of a savings and loan holding company;
the insured savings association receives in exchange for the corporate debt security that does not meet standards of credit-worthiness established by the Corporation the fair market value of such security;
the Comptroller of the Currency or the Corporation, as appropriate has—
approved the transaction; and
determined that the transfer represents a complete and effective divestiture of the corporate debt security that does not meet standards of credit-worthiness established by the Corporation and is in compliance with the provisions of this subsection; and
any gain on the sale of the corporate debt security that does not meet standards of credit-worthiness established by the Corporation is recognized, and included for applicable regulatory capital requirements, by the insured savings association only at such time and to the extent that the insured savings association receives payment of principal on the note in cash in excess of the fair market value of the transferred corporate debt security that does not meet standards of credit-worthiness established by the Corporation as carried on the accounts of the insured savings association immediately prior to the transfer.
The term “qualified note” means any note that—
is at all times fully secured by the corporate debt security that does not meet standards of credit-worthiness established by the Corporation transferred in exchange for the note, or by other collateral of at least equivalent value that is acceptable to the Comptroller of the Currency or the Corporation, as appropriate;
contains provisions acceptable to the Comptroller of the Currency or the Corporation, as appropriate, that would—
prevent any action to encumber or impair the value of the collateral referred to in subparagraph (A); and
allow the sale of the corporate debt security that does not meet standards of credit-worthiness established by the Corporation if the proceeds of the sale are reinvested in assets of equivalent value;
is on market terms, including interest rate, which must in all cases be above the insured savings association’s borrowing rate for similar term funds;
is fully repayable over a period of time not to exceed 5 years from the date of transfer;
is repaid with annual principal payments at least as large as would be necessary to repay the note within 5 years if it were on a level payment amortization schedule and the interest rate for the first year of repayment were fixed throughout the amortization period;
is fully guaranteed by each holding company of the insured savings association that acquires such note; and
is repaid in full in cash in accordance with its terms and this subsection.
The exemption provided by this subsection from subsections (a), (b), and (c) of section 1468 of this title and any other applicable provision of Federal or State law shall terminate immediately if the insured savings association or any affiliate of such association fails to comply with the terms of the qualified note or this subsection.
The Corporation shall make determinations under this section by regulation or order.
For purposes of subsections (a) and (b)—
The term “activity” includes acquiring or retaining any investment.
Notwithstanding paragraph (1), subsections (a) and (b) shall not be construed to require a savings association to divest itself of any assets acquired before August 9, 1989.
This section may not be construed as limiting—
any other authority of the Corporation; or
any authority of the Comptroller of the Currency, of the Corporation, or of a State to impose more stringent restrictions.
Source credit: (Sept. 21, 1950, ch. 967, § 2[28], as added Pub. L. 101–73, title II, § 222, Aug. 9, 1989, 103 Stat. 269; amended Pub. L. 102–242, title I, § 151(a)(3), Dec. 19, 1991, 105 Stat. 2284; Pub. L. 103–325, title VI, § 602(a)(56)–(58), Sept. 23, 1994, 108 Stat. 2290, 2291; Pub. L. 104–208, div. A, title II, § 2704(d)(14)(X), Sept. 30, 1996, 110 Stat. 3009–494; Pub. L. 109–171, title II, § 2102(b), Feb. 8, 2006, 120 Stat. 9; Pub. L. 109–173, § 8(a)(32), Feb. 15, 2006, 119 Stat. 3615; Pub. L. 111–203, title III, § 363(9), title IX, § 939(a)(2), (3), July 21, 2010, 124 Stat. 1555, 1885.)
- 1950Enacted · Pub. L. 101-73 · 103 Stat. 269
- 1991Amended · Pub. L. 102-242 · 105 Stat. 2284
- 1994Amended · Pub. L. 103-325 · 108 Stat. 2290, 2291
- 1996Amended · Pub. L. 104-208 · 110 Stat. 3009
- 2006Amended · Pub. L. 109-171 · 120 Stat. 9
- 2006Amended · Pub. L. 109-173 · 119 Stat. 3615
- 2010Amended · Pub. L. 111-203 · 124 Stat. 1555, 1885
A history note hasn’t been published yet. The record shows enactment by Pub. L. 101-73 on 1950-09-21.
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