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Confidential
L-593
OF BANK HOLDING COMPANY AND
ltfTE BILL IL-59ZJ
1*. Covers the entire field of regulation of bank holding oompanies and affiliates of insured banks, repealing present
provisions oovering the regulation of holding company affiliates
and affiliates of member banks (including the provisions relating
to voting permits)*
2* Defines "bank holding company" as an organisation
having at least two subsidiary banks, one of which is an insured
bank. Provides that an organisation shall be a "subsidiary" of
another if 20 per cent or more of its voting shares are owned,
dirootly or indirectly, by the latter, or if the Board determines
that it is subject to a controlling influence by the latter* Dofines "affiliate" of a bank as an organisation (l) whioh is a
subsidiary of the bank, (2) of which the bank is a subsidiary,
or (5) which is a related organization by reason of oommon ownership of sharos or interlocking directorates*
3* Prohibits any new bank holding company*
4. Prohibits future acquisition of any bank stocks,
directly or indireotly, by a bank holding company; except aoquisition of additional stock in banks which were subsidiaries on
January 1, 1938, where, in judgment of Reserve Board, it would
be in public interest and Reserve Board grants its permission for
suoh acquisition*
5. Prohibits any bank from establishing any new branch
while it is a subsidiary of a bonk holding company*
6* Requires all subsidiary banks of bank holding oompanies to become members of the Federal Reserve System* Authorises Reserve Board to waive requirements of law for membership
where necessary*
7* Continuos authority in Reserve Board to make suoh
examinations of each bank holding company, its subsidiary banks
and subsidiary oompanies, and to require submission of such information and reports by such institutions as it deems necessary*
8* With o or tain modifications, continues requirements
oonoorning the establishment of reserves of readily marketable
assets by bank holding oompanies*
9* Roquiros bank holding oompanies to causo their subsidiary banks to pursue sound practices and maintain a sound financial oondition and to causo such banks to havo adoquato capital and surplus funds*



L-59S
-210* Provides penalties for violation, by a bank holding
company or a subsidiary, of the law or the Board's regulations or
orders, suoh as limitations on payment of dividends or fees to a
bank holding company or a subsidiary thereof by subsidiary banks,
on payment of dividends by a bank holding company, and on voting
of stook in subsidiary banks by a bonk holding company, end removal of officers or direotors of a bank holding company*
11. Prohibits any insured bank (l) from making eny loan
or extension of oredit to any of its affiliates, or (2) from making any advance to any person on security consisting of stook or
other securities of any of its affiliates, or (3) from investing
any of its funds in stock or other securities of any of its affiliates* (Some specific exceptions such as are now oontalned in
section 23A of the Federal Reserve Act which relates to suoh relationships between member banks and affiliates*)
12* Prohibits insured banks from having "securities
company11 affiliates after one year, with enforcement by Board in
the case of member banks (as at present under comparable prohibition in Banking Act of 1933) and by the Federal Deposit Insurance
Corporation in case of nonmember insured banks*
13* Continues authority of Board and Comptroller to
require member banks to furnish reports of their affiliates.
Gives Federal Deposit Insurance Corporation liko authority in
the case of nonmomber insured banks*
14* Continues authority of Board and Comptroller to
examine affiliates of member banks. Gives Federal Deposit Insurance Corporation liko authority with respoot to affiliates of
nonmembor insurod banks*

June 8, 1938,