Conference report filed in House (11/02/1999)
Gramm-Leach-Bliley Act -Title I: Facilitating Affiliation Among Banks, Securities Firms, and Insurance Companies-Subtitle A: Affiliations- Amends the Banking Act of 1933 (Glass-Steagall Act) to repeal prohibitions: (1) against affiliation of any Federal Reserve member bank with an entity engaged principally in securities activities (securities affiliate); and (2) against simultaneous service by any officer, director, or employee of a securities firm as an officer, director, or employee of any member bank (interlocking directorates).
(Sec. 103) Amends the Bank Holding Company Act of 1956 (BHCA) to permit a financial holding company (FHC) to engage in any activity or to acquire the shares of any company whose activities have been determined by the Board of Governors of the Federal Reserve System (the Board), after mandatory consultation with the Secretary of the Treasury (Secretary), to be either financial in nature, or incidental or complementary to financial activities without posing a substantial risk to the safety and soundness of depository institutions, or of the financial system generally. Prescribes consultation and coordination guidelines. Permits the Board and the Secretary to authorize financial subsidiaries of banks to engage in merchant banking.
Permits such financial activities upon the condition that all insured bank holding company (BHC) subsidiary depository institutions are well capitalized and well-managed, and upon BHC certification that they meet certain Board standards.
Authorizes the appropriate Federal banking agency to prohibit an FHC or insured depository institution from commencing any new activity, or acquiring control of a company engaged in such activity, if any of its insured depository institution subsidiaries or affiliates failed to receive a satisfactory rating at its most recent examination under the Community Reinvestment Act of 1977 (CRA).
Instructs the Board to apply capital and management standards that are comparable to a U.S. counterpart of a foreign bank that operates a branch or agency, or owns or controls a commercial lending company in the United States, giving due regard to the principle of national treatment and equality of competitive opportunity.
Cites circumstances under which certain companies that become BHCs after enactment of this Act are authorized to continue their commodities transactions and affiliations. Sets forth cross-marketing restrictions for FHC-controlled depository institutions. Nullifies a BHC election to become an FHC if its subsidiary insured depository institutions failed to achieve a rating of "satisfactory record of meeting community credit needs" at its most recent examination.
(Sec. 104) Retains the McCarran-Ferguson Act as the law of the United States.
Proscribes any State laws which impede or restrict insurance sales activities by an insured depository institution.Enumerates permissible State restrictions upon certain insurance sales practices conducted by insured depository institutions.Preserves certain State regulatory oversight over insurance. Preempts certain State affiliation laws governing insurance companies and affiliates.
Prohibits State regulation of the insurance activities of an insured depository institution or its affiliate that in any way discriminates adversely between insured depository institutions and other entities engaged in insurance activities.
(Sec. 105) Mandates that mutual BHCs be regulated on the same terms as BHCs.
(Sec. 106) Amends the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 to apply to any branch of a bank owned by an out-of-State BHC its prohibition against interstate branching by an out-of-state bank primarily to establish deposit production offices.
(Sec. 107) Amends the BHCA with regard to: (1) overdraft errors; (2) divestiture requirements; and (3) foreign bank subsidiaries of limited purpose credit card banks.
(Sec. 108) Directs the Board and the Secretary to study and report to Congress on the feasibility of requiring large insured depository institutions and depository institution holding companies whose failure could have serious adverse effects upon financial stability to maintain some portion of their capital in the form of subordinated debt in order to reduce the risk to any deposit insurance fund, and to minimize financial instability ("too big to fail syndrome").
(Sec. 109) Instructs the Secretary to study and report to Congress on the extent to which credit is being provided to small businesses and farms as a result of this Act.
Subtitle B: Streamlining Supervision of Financial Holding Companies- Prohibits the Board from imposing any capital or capital adequacy criteria upon a BHC subsidiary that is not an insured depository institution, and is: (1) in compliance with State or Federal capitalization rules; (2) registered under the Investment Advisers Act of 1940; or (3) licensed as an insurance agent in the State. Prohibits the Board, when developing capital adequacy requirements, from taking into consideration any affiliated investment company which is neither a BHC, nor controlled by one holding 25 percent or more shares of the investment company worth more than $1 million.
(Sec. 111) Subjects securities and insurance activities conducted by a functionally regulated subsidiary of a bank to the jurisdiction of the Securities and Exchange Commission (SEC) and State regulatory authority, respectively.
(Sec. 112) Declares ineffective and non-enforceable any Board actions requiring an insurance company BHC or a registered securities broker-dealer BHC to provide assets to a subsidiary insured depository institution if either the State insurance authority or the SEC determines in writing that such actions would have a material adverse effect on the BHC's financial condition.Permits the Board to order divestiture of the subsidiary in lieu of other action.
States that BHCA restraints placed upon Board authority over BHCs and their functionally regulated subsidiaries also limit the authority of the Federal banking agencies with respect to those companies and their subsidiaries. Allows the Federal Deposit Insurance Corporation (FDIC) to examine the affiliate of any depository institution to disclose fully its relationship with the institution, and the effect of that relationship on the institution.
(Sec. 113) Prohibits the Board from taking certain statutory action against a functionally regulated BHC subsidiary unless it is necessary to prevent or redress an unsafe or unsound practice or breach of fiduciary duty that poses a material risk to the financial safety, soundness, or stability of either an affiliated depository institution or to the domestic or international payment systems.
(Sec. 114) Sets forth criteria under which the Comptroller of the Currency, the Board, and the FDIC, are authorized to restrict with prudential safeguards the relationships or transactions between entities and subsidiaries under their respective jurisdictions.
(Sec. 115) Denies a Federal banking agency examination authority over a registered investment company that is neither a BHC nor a savings and loan holding company.Grants the FDIC examination authority over an insured depository institution affiliate if necessary to determine the condition of the insured depository institution for insurance purposes.
(Sec. 116) Provides that a declaration filed by a company seeking to be an FHC shall satisfy BHC registration requirements but not any requirement to file an application to acquire a bank.
Revises BHCA divestiture procedures to permit a BHC to elect divestiture of either a nonbanking subsidiary or an insured depository institution.
(Sec. 117) Amends the FDIA to prohibit the use of the Bank Insurance Fund and the Savings Association Insurance Fund (SAIF) to benefit any shareholder or affiliate (other than an insured depository institution receiving FDIA assistance) (currently only any shareholder) of any insured depository institution: (1) in Federal conservatorship or receivership; (2) in default or in danger of default, or (3) in connection with the provision of certain insurance or other specified assistance.
(Sec. 118) Amends the BHCA of 1956 to repeal strictures governing activities of BHC subsidiaries in connection with insurance and savings bank life insurance.
Subtitle C: Subsidiaries of National Banks- Amends Federal banking law to set forth a statutory framework within which a national bank may control or hold an interest in a financial subsidiary. Restricts such subsidiary to activities that are: (1) financial in nature; or (2) permissible for a national bank to engage in directly. Bars such subsidiary from engaging in certain insurance, or real estate development and investment activities.
(Sec. 121) Prescribes guidelines for mandatory coordination between the Secretary and the Board with respect to any determination of whether an activity is financial in nature or incidental to a financial activity.
Requires a national bank that establishes or maintains a financial subsidiary to have in place: (1) procedures for identifying financial and operational risks within the bank and its subsidiary that adequately protect the bank from such risks; and (2) procedures to preserve the separate corporate identity and limited liability of the bank and its subsidiary.
Amends the Federal Reserve Act (FRA) to set forth: (1) statutory parameters for transactions between national banks and their financial subsidiaries; (2) a rebuttable presumption of control of portfolio companies; and (3) a deadline by which the Board must adopt final rules regarding derivative transactions and intraday credit.
Amends the FDIA to set forth requirements for safety and soundness firewalls applicable to financial subsidiaries of insured State banks that are in compliance with this Act. Permits State banks to retain interests or control in subsidiaries acquired prior to enactment of this Act.
(Sec. 122) Authorizes the Board and the Secretary to jointly adopt rules permitting financial subsidiaries to engage in certain merchant banking activities five years after enactment of this Act.
Subtitle D: Preservation of FTC Authority- Amends the BHCA to require the Board to notify the Federal Trade Commission (FTC) of its approval of a proposed acquisition, merger, or consolidation which involves acquisition of nonbanking interests.
(Sec. 132) Directs designated Federal banking agencies to make data available to the Attorney General and the FTC that they deem necessary for antitrust review under specified statutes.Prescribes confidentiality guidelines for such data and banking agency information sharing.
(Sec. 133) Excludes from FTC jurisdiction any nondepository institution subsidiary or affiliate of a bank or savings association.
Amends the Clayton Act to apply its premerger notification and waiting period requirements to any portion of a merger or acquisition transaction that does require notice under BHCA but does not require approval.
Subtitle E: National Treatment- Amends the International Banking Act of 1978 (IBA) to terminate immediately the grandfathered authority of a foreign bank or company to engage in any (nonbanking) financial activity if it files a BHCA declaration to function as a qualified BHC engaging in activities or acquiring and retaining shares of a company not permissible for a BHC before enactment of this Act. Allows imposition of restrictions and requirements comparable to those imposed on a domestic FHC if a grandfathered foreign bank or company does not file such a declaration within two years after enactment of this Act.
(Sec. 142) Amends the IBA to authorize the Board to examine any affiliate of a foreign bank conducting business in any State in which the Board deems it necessary to determine and enforce compliance with Federal banking law.
Subtitle F: Direct Activities of Banks- Amends Federal banking law to provide that limitations placed on securities transactions by a national banking association for its own account do not apply to State, local, or municipal bond transactions by a well-capitalized national banking association.
Subtitle G: Effective Date- Sets forth the effective date of title I of this Act.
Title II: Functional Regulation-Subtitle A: Brokers and Dealers- Amends the Securities Exchange Act of 1934 (Exchange Act) to include certain bank activities within the definition of "broker" and "dealer" (thus subjecting them to registration requirements and regulation under the Exchange Act).
(Sec. 203) Requires a registered securities association to create a limited qualification category, without a testing requirement, for certain bank employees effecting sales as part of a non-public primary securities offering (private placement sales).
(Sec. 205) Prohibits the SEC from requiring a bank to register as a broker or dealer because it engages in new hybrid product transactions unless such requirement has been promulgated pursuant to rulemaking procedures in accordance with this Act.Prohibits the SEC from imposing a requirement regarding a new hybrid product unless it determines that such product is a security necessitating such requirement in the public interest and for investor protection. Prescribes procedural guidelines under which the Board may obtain judicial review of any final SEC regulation.
(Sec. 206) Amends the Exchange Act to include a qualified Canadian government obligation within the definition of: (1) an identified financial product; (2) a swap agreement; (3) a qualified investor; and (4) a government security.
Subtitle B: Bank Investment Company Activities- Amends the Investment Company Act of 1940 to authorize the SEC (after consultation with designated Federal banking agencies) to prescribe conditions under which a bank or its affiliate, in addition to serving as promoter, organizer, or principal underwriter for either a registered management company, or a registered unit investment trust, may also serve as custodian of such company or trust.
(Sec. 212) Declares it unlawful for an affiliate, promoter, or principal underwriter for a registered investment company to lend to such company or its subsidiaries in contravention of SEC requirements.
(Sec. 213) Revises the definition of "interested person" to identify transactions, services, and loans taking place during the six months preceding determination of an "interested person" which would make a person an affiliated person of a broker or dealer.
Prohibits a registered investment company from having a majority of its board of directors composed of personnel or senior officers of the subsidiaries of any one bank, or of any single BHC, its affiliates, and subsidiaries.
(Sec. 214) Modifies guidelines pertaining to unlawful misrepresentation of guarantees, and to the deceptive use of names.
(Sec. 215) Redefines "broker" to exclude any person who would be deemed a broker solely by reason of the fact that such person is an underwriter for one or more investment companies.
(Sec. 216) Redefines "dealer" to exclude an insurance or an investment company.
(Sec. 217) Amends the Investment Advisers Act of 1940 to redefine "investment adviser" to remove the exclusion for banks that advise investment companies.Revises the definitions of broker and dealer.
(Sec. 220) Mandates interagency sharing between a Federal banking agency and the SEC regarding examination results and other information pertaining to the investment advisory activities of a registered BHC and its separately identifiable departments or divisions.
(Sec. 221) Amends the Securities Act of 1933 and the Exchange Act to exclude from their purview any interest or participation in any common trust fund (or similar fund) that is excluded from the definition of "investment company" under the Investment Company Act of 1940. Amends the Investment Company Act of 1940 to revise such exclusion guidelines for certain bank common trust funds.
Subtitle C: Securities and Exchange Commission Supervision of Investment Bank Holding Companies- Amends the Exchange Act to permit certain investment BHCs without a bank or savings association affiliate to elect SEC supervision.
(Sec. 231) Provides for voluntary withdrawal from SEC supervision by specified investment bank holding companies.Sets forth the parameters of SEC supervision of investment bank holding companies.
Mandates SEC deference to regulatory banking agencies and State insurance regulators with respect to the banking and insurance laws under their respective purviews.
Shields the SEC from compulsory disclosure (except to Congress) of certain information furnished by a domestic or foreign regulatory agency regarding the financial or operational condition of: (1) any associated person of a broker or dealer; or (2) any investment bank holding company or its affiliate.
Subtitle D: Banks and Bank Holding Companies- Requires the SEC to consult and coordinate comments with the appropriate Federal banking agency before taking action or rendering an opinion regarding the manner in which an insured depository institution or depository institution holding company reports loan loss reserves in its financial statement, including the amount of such reserves.
Title III: Insurance-Subtitle A: State Regulation of Insurance- Mandates State functional regulation of insurance sales activity (including a national bank exercising FRA agency powers).
(Sec. 302) Prohibits a national bank and its subsidiaries from providing insurance as principal in a State, except for certain authorized products (which may not include title insurance or taxable annuity contracts).
(Sec. 303) Prohibits national banks and subsidiaries from selling or underwriting title insurance, except for certain grandfathered banks and subsidiaries already doing so.Permits a national bank and its subsidiary to sell title insurance as agent in a State which permits its State banks to do so, subject to the same conditions.
(Sec. 304) Establishes expedited dispute resolution for regulatory conflicts between State insurance regulators and Federal financial regulators.
(Sec. 305) Amends the FDIA to direct the Federal banking agencies to issue consumer protection regulations that: (1) prohibit an insured depository institution from conditioning the extension of consumer credit upon insurance product purchases from the institution; (2) require physical segregation of banking activities from insurance product activities; and (3) prohibit discrimination against victims of domestic violence.
Mandates that the Federal banking agencies jointly establish a consumer complaint mechanism to address expeditiously violations of this Act.
(Sec. 306) Preempts State law restricting: (1) insurance companies or insurance affiliates from becoming an FHC or acquiring control of a depository institution; and (2) the amount of an insurer's assets that can be invested in a bank (except that the insurer's State of domicile may limit such investments to five percent of the insurer's admitted assets).Preempts State laws that restrict reorganization by an insurer from mutual form to stock form.
(Sec. 307) Declares that it is the intention of Congress that the Federal Reserve Board, as the umbrella supervisor for financial holding companies, and the State insurance regulators, as the functional regulators of companies engaged in insurance activities, coordinate efforts (including confidential sharing of information on financial condition, risk management policies, operations, transactions, and institutional relationship) to supervise companies that control both a depository institution and a company engaged in insurance activities regulated under State law.