View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

101 STAT. 552

PUBLIC LAW 100-86—AUG. 10, 1987

Public Law 100-86
100th Congress
An Act
Aug. 10, 1987
[H.R. 27]

Competitive
Equality
Banking Act of
1987.
12 u s e 226 note.

To regulate nonbank banks, impose a moratorium on certain securities and insurance
activities by banks, recapitalize the Federal Savings and Loan Insurance Corporation, allow emergency interstate bank acquisitions, streamline credit union operations, regulate consumer checkholds, and for other purposes.

Be it enacted by the Senate and House of Representatives
United States of America in Congress assembled,

of the

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This Act may be cited as the "Competitive

Equality Banking Act of 1987".
(b) TABLE OF CONTENTS.—
TITLE I—FINANCIAL INSTITUTIONS COMPETITIVE EQUALITY
Sec 100. Short title.
Sec, 101. Amendments to the Bank Holding Company Act of 1956.
Sec. 102. Amendments to the Federal Reserve Act.
Sec. 103. Securities affiliations of nonmember insured banks.
Sec. 104. Amendments to savings and loan holding company provisions of the
National Housing Act.
Sec 105. Amendment to the Federal Home Loan Bank Act.
Sec 106. Securities affiliations of FSLIC insured institutions.
Sec. 107. Mutual holding company amendments.
Sec. 108. Leasing authority of national banks.
Sec. 109. NOW accounts.
Sec. 110. Exemption from affiliate transaction restrictions.
Sec. 111. Consideration of certain acquisitions.
Sec.
Sec.
Sec.
Sec.
Sec.

TITLE II—MORATORIUM ON CERTAIN NONBANKING ACTIVITIES
201. Moratorium on certain nonbanking activities.
202. Authority of Federal banking agencies.
. ,
_ i
203. Intent of Congress.
204. Amendments to the International Banking Act of 1978.
205. Amendments to the Bank Holding Company Act of 1956.

TITLE III—FSLIC RECAPITALIZATION
301. Short title.
302. Financing corporation established.
303. Mixed ownership government corporation.
304. Recapitalization of FSLIC.
305. FSLIC authority to charge premiums reduced by amount of financing
corporation assessments.
Sec. 306. Miscellaneous provisions.
Sec. 307. Secondary reserve provisions.

Sec.
Sec.
Sec.
Sec.
Sec.

Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

TITLE IV—THRIFT INDUSTRY RECOVERY PROVISIONS
401. Short title.
402. Thrift institution accounting, appraisal, and reserve standards.
403. Audit of Federal Asset Disposition Association.
404. Thrift industry recovery regulations.
405. Capital instrument purchase program.
406. Minimum capital requirements.
407. Improvements in the supervisory process.
408. Prevention of insolvencies.
409. Feasibility study relating to establishment of asset holding corporation.
410. Notice and disapproval procedure required for all applications to the Bank
Board.

PUBLIC LAW 100-86—AUG. 10, 1987
Sec.
Sec.
Sec.
Sec.

101 STAT. 553

Guidelines for asset disposition.
Expansion of use of underutilized minority thrift institutions.
Authority of independent contractors, consultants, and counsel.
Extension of forbearance previously provided in the acquisition of troubled thrift institutions.
Sec. 415. Congressionsd oversight.
Sec. 416. Sunset.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

411.
412.
413.
414.

TITLE V—FINANCIAL INSTITUTIONS EMERGENCY ACQUISITIONS
SOL Short title.
;o
502. FDIC assisted emergency interstate acquisitions.
503. Bridge banks.
504. Conversions.
505. Federal depository institutions regulatory agencies not subject to apport i o n m e n t of funds provisions.
506. Federal depository institutions regulatory agencies not subject to
sequestration.
507. Liquidation proceedings.
508. Capital pools.
509. Permanent extension of certain temporary provisions of law; 5 year extension of net worth certificates.

»«v:l
Sec. 601.
Sec. 602.
Sec. 603.
Sec. 604.
Sec. 605.
Sec. 606.
Sec. 607.
Sec. 608.
Sec. 609.
Sec. 610.
Sec. 611.
Sec. 612.
Sec. 613.

TITLE VI—EXPEDITED FUNDS AVAILABILITY
Short title.
Definitions.
Expedited funds availability schedules.
Safeguard exceptions.
Disclosure of funds availability policies.
Pajmient of interest.
Miscellaneous provisions.
Effect on State law.
Regulations and reports by Board.
Administrative enforcement.
CivU liabUities.
Parity in clearing.
Effective dates.

Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

TITLE Vn—CREDIT UNION AMENDMENTS
5
Short title.
J
Second mortgage and home improvement loans.
..?
Ownership interest.
Faithful performance.
Membership officers.
Nonparticipation.
Property acquisition flexibility.
Treatment of NCUAB funds.
Technical and clarifying amendments; removal and prohibition authority.
Effect of removal or suspension.
Imposition of conservatorship.
Reduction in State comment waiting period.
Authority as conservator.
Liquidation proceedings.
^j
Transfer of FTC jurisdiction to NCUAB.
Assets which may be pledged.

701.
702.
703.
704.
705.
706.
707.
708.
709.
710.
711.
712.
713.
714.
715.
716.

TITLE Vra—LOAN LOSS AMORTIZATION
Sec. 801. Loan loss amortization for agricultural banks.

^

;

1
j

J

TITLE K - F U L L FAITH AND CREDIT OF FEDERALLY INSURED
DEPOSITORY INSTITUTIONS
Sec. 901. Reaffirmation of security of funds deposited in federally insured depository institutions.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.

1001.
1002.
1003.
1004.
1005.
1006.

TITLE X—GOVERNMENT CHECKS
Report on difficulty in cashing Treasury checks.
Time limit on payment of Treasury checks.
Cancellation of Tretisuiy checks.
Limitation on reclamation actions and claims.
Regulations.
Effective date.

•

•*-"•
• >•
-•

'

101 STAT. 554

PUBLIC LAW 100-86—AUG. 10, 1987

TITLE XI—INTEREST TO CERTAIN DEPOSITORS
Sec. 1101. Interest to certain depositors.
Sec.
Sec.
Sec.
Sec.
Sec.

Competitive
KiLnts o
f

TITLE XII—MISCELLANEOUS PROVISIONS
1201. High yield bond study.
1202. Study of competitive issues in the pa}mients mechanism.
1203. Study and reports concerning direct investments.
1204. Adjustable rate mortgage caps.
1205. Separability of provisions.

'

TITLE I—FINANCIAL INSTITUTIONS
COMPETITIVE EQUALITY

1987.
' K«?«f, .-,
12 u s e 226 note. SEC. 100. SHORT TITLE.

.;^V .'

This title may be cited as the "Competitive Equality Amendments
of 1987".
SEC. 101. AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956.
(a) DEFINITIONS.—
(1) AMENDMENT TO DEFINITION OF BANK.—Section 2(c) of the

12 use 1813.

Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)) is
amended to read as follows:
"(c) BANK DEFINED.—For purposes of this Act—
"(1) I N GENERAL.—Except as provided in paragraph (2), the
term 'bank* means any of the following:
"(A) An insured bank as defined in section 3(h) of the
Federal Deposit Insurance Act.
"(B) An institution organized under the laws of the
United States, any State of the United States, the District
of (]!olumbia, any territory of the United States, Puerto
Rico, Guam, American Samoa, or the Virgin Islands which
both—
"(i) accepts demand deposits or deposits that the
depositor may withdraw by check or similar means for
payment to third parties or others; and
(ii) is engaged in the business of making commercied
loans.
"(2) EXCEPTIONS.—The term 'bank' does not include any of the
following:
"(A) A foreign bank which would be a bank within the
meaning of paragraph (1) solely because such bank has an
insured or uninsured branch in the United States.
"(B) An insured institution (as defined in subsection (j))"(C) An organization that does not do business in the
United States except as an incident to its activities outside
the United States.
"(D) An institution that functions solely in a trust or
fiduciary capacity, if—
"(i) all or substantially all of the deposits of such
institution are in trust funds and are received in a bona
fide fiduciary capacity;
"(ii) no deposits of such institution which are insured
by the Federal Deposit Insurance Corporation are offered or marketed by or through an affiliate of such
institution;

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 555

"(iii) such institution does not accept demand deposits or deposits that the depositor may withdraw by
check or similar means for payment to third parties or
others or make commercial loans; and
"(iv) such institution does not—
"(I) obtain payment or pajonent related services
from any Federal Reserve bank, including any
service referred to in section 11A of the Federal
Reserve Act; or
"(11) exercise discount or borrowing privileges
pursuant to section 19(b)(7) of the Federal Reserve
Act.

"(E) A credit union (as described in section 19(b)(lXA)(iv)
of the Federal Reserve Act).
"(F) An institution which—
"(i) engages only in credit card operations;
"(ii) does not accept demand deposits or deposits that
the depositor may withdraw by check or similar means
for payment to third parties or others;
"(iii) does not accept any savings or time deposit of
less than $100,000;
"(iv) maintains only one office that accepts deposits;
and
"(v) does not engage in the business of making
commercial loans.
"(G) An organization operating under section 25 or section 25(a) of the Federal Reserve Act.
"(H) An industrial loan company, industrial bank, or
other similar institution which is—
"(i) an institution organized under the laws of a State
which, on March 5, 1987, had in effect or had under
consideration in such State's legislature a statute
which required or would require such institution to
obtain insurance under the Federal Deposit Insurance
Act—
"(I) which does not accept demand deposits that
the depositor may withdraw by check or similar
means for pajmtient to third parties;
"(II) which has total assets of less than
$100,000,000; or
"(III) the control of which is not acquired by any
company after the date of the enactment of the
Competitive Equality Amendments of 1987; or
"(ii) an institution which does not, directly, indirectly, or through an affiliate, engage in any activity
in which it was not lawfully engaged as of March 5,
1987,
except that this subparagraph shall cease to apply to any
institution which permits any overdraft (including any
intraday overdraft), or which incurs any such overdraft in
such institution's account at a Federal Reserve bank, on
behalf of an affiliate if such overdraft is not the result of an
inadvertent computer or accounting error that is beyond
the control of both the institution and the affiliate.
"(I) The Investors Fiduciary Trust C!ompany, located in
Kansas City, Missouri, so long as such institution—

12 use 248a.
12 u s e 461.

12 use 601604a, 611-631.

12 use 1811
note.

101 STAT. 556

PUBLIC LAW 100-86—AUG. 10, 1987

it
/- Y
• ...
•

"(i) engages only in trust, fiduciary, and agency
activities in which it was lawfully engaged on March 5,
1987;
"(ii) engages in such activities only at the same
number of locations at which such activities were con' ducted on such date;
"(iii) does not accept demand deposits other than
demand deposits which are maintained by such institution in—
"(I) a trust or fiduciary capacity;
':
"(II) the institution's capacity as a custodian or
it
as a pajdng, transfer, shareholder servicing, securi./. ;, . t ties clearing, escrow, or dividend disbursing agent;
or
"(III) any capacity which is incidental to the
trust or fiduciary activities of the institution;
'": >i:,.
"(iv) does not engage in the business of making
^- ;'.- ' commercial loans;
"(v) does not exercise discount or borrowing privi•>'
leges pursuant to section 19(bX7) of the Federal Reserve
12 u s e 461.
Act; and
.. . "(vi) is not directly or indirectly controlled by any
company other than a company which directly or indirectly controlled such institution on March 5, 1987.
"(J) A savings bank (as defined in section 3(g) of t h e
Post, p. 563.
- . Federal Deposit Insurance Act) which—
"(i) is a n insured bank (as defined in section 3(h) of
' '
,
'' such Act);
"(ii) is a subsidiary of the Great Western Financial
: .TR
Corporation as a result of an approval in writing by the
i
-/
State bank supervisor of the State of New York before
June 30,1987;
•
"(iii) meets or exceeds the investment requirements
which an insured institution must meet in order to be a
qualified thrift lender under section 408(o) of the
Post, p. 571.
-.
National Housing Act; and
Isr
"(iv) does not, directly, or through insurance products
such savings bank receives from or provides to the
'\
Great Western Finemcial Corporation, engage in the
sale or underwriting of insurance,
' ." - except that this subparagraph shall cease to apply with
5
;.i
respect to such savings bank or any successor institution if
any deposits of any other subsidiary or affiliate of the Great
'"•'
Western Financial Corporation which are subject to an
assessment of an insurance premium under subsection (b)
Post, p. 601.
or (c) of section 404 of the National Housing Act are,
directly or indirectly by any device whatsoever, transferred
to or acquired by such savings bank or any successor
institution which would have the effect of materially reducing such premium assessments. The exemption provided by
r^v
this subparsigraph shall cease to apply if Great Western
Financial Corporation uses such savings bank or any
V . ,.* successor institution as a vehicle to move such Corporation from Federal Savings and Loan Insurance Corporation
: ' f^tti insurance to Federal Deposit Insurance Corporation
insurance.

v^.-o *;,, ^.i*-^- . :;> i - v ;-.:•;•,/

.-..I.'

••,.?

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 557

"(3) DISTRICT BANK.—The term 'District bank' means any
bank operating under the Code of Law for the District of
Columbia.".
(2) AMENDMENT TO DEFINITION OF THRIFT INSTITUTION,—Sec-

tion 2(i) of the Bank Holding Company Act of 1956 (12 U.S.C.
1841(i)) is amended to read as follows:
"(i) THRIFT INSTITUTION.—For purposes of this Act, the term 'thrift
institution' means—
"(1) any domestic building and loan or savings and loan
association;
"(2) any cooperative bank without capital stock organized and
operated for mutual purposes and without profit;
"(3) any Federal savings bank; and
"(4) any State-chartered savings bank the holding company of
which is registered pursuant to section 408 of the National
Housing Act.".
(3) ADDITIONAL DEFINITIONS.—Section

Post, p. 571.

2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841) is amended by adding a t
the end thereof the following new subsections:
"(j) INSURED INSTITUTION.—For purposes of this Act, the term
'insured institution' has the meaning given to such term in section
408(aXl) of the National Housing Act.
"(k) AFFIUATE.—For purposes of this Act, the term 'affiliate'
means any company that controls, is controlled by, or is under
common control with another company.
"(1) SAVINGS BANK HOLDING COMPANY.—For purposes of this Act,
the term 'savings bank holding company' means any company
which controls one or more qualified savings banks if the aggregate
total assets of such savings banks constitute, upon formation of the
holding company and at all times thereafter, at least 70 percent of
the total assets of such company.
"(m) QUALIFIED SAVINGS BANK.—For purposes of this Act, the
term 'qualified savings bank'—
"(1) means any savings bank (as defined in section 3(g) of the
Federal Deposit Insurance Act) which was organized on or Post, p. 563.
before March 5,1987; and
"(2) includes any cooperative bank that is an insured bank (EIS
defined in section 3(h) of the Federal Deposit Insurance Act) and
any interim savings bank that is established to facilitate a
corporate reorganization, or the formation of a holding company, involving a savings bank described in paragraph (1).".
(b) IMMEDIATE DIVESTITURE REQUIREMENT.—Section 4(a)(2) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1843(a)(2)) is amended
by adding at the end thereof the following sentence: "Notwithstanding any other provision of this paragraph, if any company that
became a bank holding company as a result of the enactment of the
Competitive Equality Amendments of 1987 acquired, between
March 5, 1987, and the date of the enactment of such Amendments,
an institution that became a bank as a result of the enactment of
such Amendments, that company shall, upon the enactment of such
Amendments, immediately come into compliance with the requirements of this Act.".
(c) CERTAIN COMPANIES NOT TREATED AS BANK HOLDING COMPANIES; LIMITATIONS ON CERTAIN BANKS.—Section 4 of the Bank

Holding Company Act of 1956 (12 U.S.C. 1843) is amended by adding
at the end thereof the following new subsections:

101 STAT. 558

PUBLIC LAW 100-86—AUG. 10, 1987

"(f) CERTAIN
COMPANIES.—

q , .

COMPANIES

NOT

TREATED

AS

BANK

HOLDING

"(1) I N GENERAL.—Except as provided in paragraph (9), any
company which—
"(A) on March 5, 1987, controlled an institution which
became a bank as a result of the enactment of the CompetiA}
tive Equality Amendments of 1987; and
"(B) was not a bank holding company on the day before
the date of the enactment of the Competitive Equality
Amendments of 1987,
shall not be treated as a bank holding company for purposes of
this Act solely by virtue of such company's control of such
institution.
"(2) Loss OF EXEMPTION.—Paragraph (1) shall cease to apply to
any company described in such paragraph if—
"(A) such company directly or indirectly—
"(i) acquires control of an additional bank or an
insured institution (other than an insured institution
described in paragraph (10) of this subsection) after
March 5,1987; or
:,..
"(ii) acquires control of more than 5 percent of the
shares or assets of an additional bank or an insured
institution other than—
"(I) shares acquired in a bona fide fiduciary
capacity;
"(II) shares held temporarily pursuant to an
underwriting commitment in the normal course of
an underwriting business;
"(III) shares held in an account solely for trading
purposes;
"(IV) loans or other accounts receivable acquired
.;.
V
in the normal course of business; and
"(V) shares or assets of an insured institution
described in paragraph (10) of this subsection; or
"(B) any bank subsidiary of such company fails to comply
with the restrictions contained in paragraph (3)(B).
"(3) LIMITATION ON BANKS CONTROLLED BY PARAGRAPH
COMPANIES.—

'

(D

"(A) FINDINGS.—The Congress finds that banks controlled
by companies referred to in paragraph (1) may, because of
relationships with affiliates, be involved in conflicts of interest, concentration of resources, or other effects adverse
to bank safety and soundness, and may also be able to
compete unfairly against banks controlled by bank holding
companies by combining banking services with financial
services not permissible for bank holding companies. The
purpose of this paragraph is to minimize any such potential
adverse effects or inequities by temporarily restricting the
activities of banks controlled by companies referred to in
paragraph (1) until such time as the Congress has enacted
proposals to allow, with appropriate safeguards, all banks
or bank holding companies to compete on a more equal
basis with banks controlled by companies referred to in
paragraph (1) or, alternatively, proposals to permanently
restrict the activities of banks controlled by companies
referred to in paragraph (1).

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 559

"(B) LIMITATIONS.—Until such time as the Congress has
taken action pursuant to subparagraph (A), a bank controlled by a company described in paragraph (1) shall not—
"(i) engage in any activity in which such bank was
not lawfully engaged as of March 5,1987;
"(ii) offer or market products or services of an affiliate that are not permissible for bank holding companies to provide under subsection (c)(8), or permit its
products or services to be offered or marketed by or
through an affiliate (other than an affiliate that engages only in activities permissible for bank holding
companies under subsection (c)(8)), unless such products
or services were being so offered or marketed as of
March 5, 1987, and then only in the same manner in
which they were being offered or marketed as of that
date;
"(iii) after the date of the enactment of the Competitive Equality Amendments of 1987, permit any overdraft (including an intraday overdraft), or incur any
such overdraft in such bank's account at a Federal
Reserve bank, on behalf of an affiliate, other than an
overdraft described in subparagraph (C); or
"(iv) increase its assets at an annual rate of more
than 7 percent during any 12-month period beginning
after the end of the 1-year period beginning on the date
of the enactment of the Competitive Equality Amendments of 1987.
"(C) PERMISSIBLE OVERDRAFTS DESCRIBED.—For purposes of

subparagraph (B)(iii), an overdraft is described in this
subparagraph if—
"(i) such overdraft results from an inadvertent computer or accounting error that is beyond the control of
both the bank and the affiliate; or
"(ii) such overdraft—
"(I) is permitted or incurred on behalf of an
affiliate which is monitored by, reports to, and is
recognized as a primary dealer by the Federal
Reserve Bank of New York; and
"(II) is fully secured, as required by the Board, by
bonds, notes, or other obligations which are direct
obligations of the United States or on which the
principal and interest are fully guaranteed by the
United States or by securities and obligations eligible for settlement on the Federal Reserve book
entry system.
"(4) DIVESTITURE IN CASE OF LOSS OF EXEMPTION.—If any company described in paragraph (1) loses the exemption provided
under such paragraph by operation of paragraph (2), such company shall divest control of each bank it controls within 180
days after such company becomes a bank holding company due
to the loss of such exemption.
"(5)

SUBSECTION CEASES TO APPLY

UNDER

L

''

'

,,
T J ."

CERTAIN CIR-

CUMSTANCES.—This subsection shall cease to apply to any company described in paragraph (1) if such company—
"(A) registers as a bank holding company under section
5(a) of this Act;

12 usc 1844.

101 STAT. 560

PUBLIC LAW 100-86—AUG. 10, 1987

;i *
''
*
12 use 1842.

"(B) immediately upon such registration, complies with
all of the requirements of this Act, and regulations prescribed by the Board pursuant to this Act, including the
nonbanking restrictions of this section; and
"(C) does not, at the time of such registration, control
b£inks in more than one State, the acquisition of which
would be prohibited by section 3(d) of this Act if an application for such acquisition by such company were filed under
section 3(a) of this Act.
"(6) INFORMATION REQUIREMENT.—Each company described in

Reports.

paragraph (1) shall, within 60 days after the date of enactment
of the Competitive Equality Amendments of 1987, provide the
Board with the name and address of such company, the name
and address of each bank such company controls, and a description of each such bank's activities.
"(7) EXAMINATION.—The Board may, from time to time, exam-ijs ine a company described in paragraph (1), or a bank controlled
by such company, or require reports under oath from appropriate officers or directors of such company or bank solely for
purposes of assuring compliance with the provisions of this
subsection and enforcing such compliance.
"(8) ENFORCEMENT.—

,
-bii. i
12 u s e 1818.

^, f
^.j^t

12 u s e 1811
note.
^, .^^ ,

"(A) I N GENERAL.—In addition to any other power of the
Board, the Board may enforce compliance with the provisions of this Act which are applicable to any company
described in paragraph (1), and any bank controlled by such
company, under section 8 of the Federal Deposit Insurance
Act and such company or bank shall be subject to such
section (for such purposes) in the same manner and to the
same extent as if such company or bank were a State
member insured bank.
"(B) APPUCATION OF OTHER ACT.—Any violation of this
Act by any company described in paragraph (1), and any
bank controlled by such company, may also be treated as a
violation of the Federal Deposit Insurance Act for purposes
of subparagraph (A).
"(C) N o EFFECT ON OTHER AUTHORITY.—No prOVision of

this paragraph shall be construed as limiting any authority
of the Comptroller of the Currency or the Federal Deposit
Insurance Corporation.
"(9) TYING PROVISIONS.—A company described in paragraph

12 u s e 19711978, 375b.

(1) shall be—
"(A) treated as a bank holding company for purposes of
section 106 of the Bank Holding Company Act Amendments
"'
V Qf j^gYO and section 22(h) of the Federal Reserve Act and
any regulation prescribed under any such section; and
(B) subject to the restrictions of section 106 of the Bank
Holding dompany Act Amendments of 1970, in connection
with any transaction involving the products or services of
such company or affiliate and those of a bank affiliate, as if
Lt! . a ,, g^gjj company or affiliate were a bank and such bank were
a subsidiary of a bank holding company.
5^:

"(10) EXEMPTION UNAFFECTED BY CERTAIN EMERGENCY ACQUISI-

in
TiONS.—For purposes of clauses (i) and (ii)(V) of paragraph (2XA),
,^ an insured institution is described in this paragraph if^
' '
"(A) the insured institution was acquired (or any shares
or assets of such institution were acquired) by a company

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 561

^

described in paragraph (1) in an acquisition under section
408(m) of the National Housing Act; and
"(B) either—
"(i) the insured institution is located in a State in
S'
which such company controlled a bank on March 5,
,,, ^^ ^
1987; or
:
"(ii) the insured institution has total assets of
$500,000,000 or more at the time of such acquisition.

Post, p. 621.

\

"(g) LIMITATIONS ON CERTAIN BANKS.—

"(1) I N GENERAL.—Notwithstanding any other provision of
' '
this section (other than the last sentence of subsection (a)(2)), a
* ;i'
bank holding company which controls an institution that
' '-"
became a bank as a result of the enactment of the Competitive
Equality Amendments of 1987 may retain control of such
institution if such institution does not—
"(A) engage in any activity after the date of the enactment of such Amendments which would have caused such
• "
institution to be a bank (as defined in section 2(c), £is in
effect before such date) if such activities had been engaged Ante, p. 554.
in before such date; or
,_
"(B) increase the number of locations from which such
institution conducts business after March 5,1987.
"(2)

LIMITATIONS

CEASE

TO APPLY

UNDER

CERTAIN

CIR-

CUMSTANCES.—The limitations contained in paragraph (1) shall
cease to apply to a bank described in such paragraph at such
time as the acquisition of such bank, by the bank holding
company referred to in such paragraph, would not be prohibited
under section 3(d) of this Act if—
12 USC 1842.
"(A) an application for such acquisition were filed under
section 3(a) of this Act; and
"(B) such bank were treated as an additional bank (under
section 3(d)).
"(h) TYING PROVISIONS.—
"(1) APPLICABLE TO CERTAIN EXEMPT INSTITUTIONS AND PARENT

COMPANIES.—An institution described in subparagraph (D), (F),
(G), (H), (I), or (J) of section 2(c)(2) shall be treated as a bank, and
a company that controls such an institution shall be treated as a
bank holding company, for purposes of section 106 of the Bank
Holding Company Act Amendments of 1970 and section 22(h) of 12 use
the Federal Reserve Act and any regulation prescribed under 1971-1978.
any such section.
^^ ^^^ ^'^^^•
"(2) APPLICABLE WITH RESPECT TO CERTAIN TRANSACTIONS.—A

company that controls an institution described in subparagraph
(D), (F), (G), (H), (I), or (J) of section 2(c)(2) and any of such
company's other affiliates, shall be subject to the tying restrictions of section 106 of the Bank Holding Company Act Amendments of 1970 in connection with any transaction involving the
products or services of such company or affiliate and those of
such institution, as if such company or affiliate were a bank and
such institution were a subsidiary of a bank holding company.",
(d) SAVINGS BANK ACTIVITIES.—Section 3 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842) is amended by adding at the
end thereof the following new subsection:
"(f) SAVINGS BANK SUBSIDIARIES OF BANK HOLDING COMPANIES.—

"(1) IN GENERAL.—Notwithstanding any other provision of
this Act (other than paragraphs (2) and (3)), any qualified
savings bank which is a subsidiary of a bank holding company

Post, p. 579.

101 STAT. 562

12 u s e 1843.
State and local
governments.

PUBLIC LAW 100-86—AUG. 10, 1987

;; may engage, directly or through a subsidiary, in any activity in
which such savings bank may engage (as a State chartered
savings bank) pursuant to express, incidental, or implied powers
under any statute or regulation, or under any judicial
interpretation of any law, of the State in which such savings
bank is located.
%
"(2) INSURANCE ACTIVITIES.—Except as provided in paragraph
^,: (3), any insurance activities of any qualified savings bank which
is a subsidiary of a bank holding company shall be limited to
insurance activities allowed under section 4(c)(8).
"(3) SAVINGS BANK LIFE INSURANCE.—Any qualified savings

,
Connecticut.
Massachusetts.
New York.

jv .,.
..—

I)
isfki

bank permitted, as of March 5, 1987, to engage in the sale or
underwriting of savings bank life insurance may sell or underwrite such insurance after such savings bank is a subsidiary of a
bank holding company if—
"(A) the savings bank is located in the State of Connecticut, Massachusetts, or New York;
"(B) such activity is expressly authorized by the law of
the State in which such savings bank is located;
"(C) the savings bank retains its character as a savings
; . bank;
"(D) such activity is carried out by the savings bank
directly and not by—
"(i) any subsidiary or affiliate of the savings bank; or
"(ii) the bank holding company which controls such
savings bank;
"(E) such activity is carried out by the savings bank in
accordance with any residency or employment limitations
> set forth in the savings bank life insurance statute in effect
,
on March 5, 1987, in the State in which such bank is

KI>II ' 4 located; and

T ,-

"(F) such activity is otherwise carried out in the same
manner as savings bank life insurance activity is carried
» out in the State in which such bank is located by savings
banks which are not subsidiaries of any bank holding company registered under this Act.
"(4) SUBSECTION SHALL CEASE TO APPLY UNDER CERTAIN CIR-

CUMSTANCES.—If any company which is not a savings bank or a
savings bank holding company acquires control of a qualified
savings bank, such savings bank shall cease to engage in any
activity authorized under paragraph (1) or (3) before the end of
the 2-year period beginning on the date such company acquires
control, unless such activity is otherwise authorized pursuant to
this Act.
"(5) SPECIAL ASSET AGGREGATION RULE FOR PURPOSES OF PARAGRAPH (3).—For the sole purpose of determining whether a

qualified savings bank may continue to sell and underwrite
savings bank life insurance in accordance with this subsection
after control of such savings bank is acquired by a bank holding
company, the assets of any other bank affiliated with, or under
contract to affiliate with, such savings bank as of March 5,1987,
shall be treated as assets of the savings bank in determining
whether such bank holding company is a savings bank holding
company.".
(e) THRIFT INSTITUTIONS' BANK.—Section 2(a)(5)(E) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841(a)(5)(E)) is amended to
read as follows:

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 563

"(E) No company is a bank holding company by virtue of its
ownership or control of any State-chartered bank or trust company
which—
"(i) is wholly owned by thrift institutions or savings banks;
and
"(ii) is restricted to accepting—
"(I) deposits from thrift institutions or savings banks;
*
"(II) deposits arising out of the corporate business of the
thrift institutions or savings banks that own the bank or
;
trust company; or
"(III) deposits of public moneys.".
(f) EFFECT ON STATE AUTHORITY TO REGULATE.—Section 7 of

the

Bank Holding Company Act of 1956 (12 U.S.C. 1846) is amended—
(1) by striking out "The enactment by the Congress of the
Bank Holding Company Act of 1956 shall not" and inserting in
lieu thereof "No provision of this Act shall"; and
(2) by inserting "companies," before "banks".
(g) AMENDMENT TO FEDERAL DEPOSIT INSURANCE ACT.—

(1) IN GENERAL.—Section 3(g) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(g)) is amended to read as follows:
"(g) SAVINGS BANK.—The term 'savings bank' means a bank
(including a mutual savings bank) which transacts its ordinary
banking business strictly as a savings bank under State laws imposing special requirements on such banks governing the manner of
investing their funds and of conducting their business.".
(2) TECHNICAL AND CONFORMING AMENDMENT.—Section

27(a)

of the Federal Deposit Insurance Act is amended by striking out
"and insured mutual savings banks".
(h) 1987 AMENDMENT TRANSITION RULE.—
(1) DELAY IN APPUCATION OF AMENDMENT TO CERTAIN INSTITU-

12 u s e 1831d.
12 u s e 1841
note.

TIONS.—If^

(A) on March 5, 1987, an institution was not a bank (as
defined in section 2(c) of the Bank Holding Company Act of
Ante, p. 554.
1956), as in effect on such date; and
(B) any person which had a controlling interest in such
institution on March 5, 1987, made a public announcement
before such date that the trsinsfer or other disposition of
such person's controlling interest in such institution was
being considered,
the institution shall not become a bank (for purposes of the
Bank Holding Company Act of 1956) due to the amendment 12 u s e 1841
made to such section 2(c) by this section before the date on note.
which such institution fails to meet any requirement of paragraph (2).
(2)

REQUIREMENTS FOR APPUCATION OF SUBSECTION.—This

subsection shall not apply with respect to any institution described in paragraph (1) unless—
(A) the transfer or other disposition of the controlling
interest referred to in such paragraph is completed, or an
agreement to make such transfer or other disposition is in
effect (or is subject only to final approval by the appropriate
Federal and State regulatory agencies), before the end of
J;.
the 180-day period beginning on the date of the enactment
of this title;
, .
(B) a written notice by the person acquiring a controlling
interest in such institution (pursuant to the transfer or

101 STAT. 564

PUBLIC LAW 100-86—AUG. 10, 1987

other disposition described in subparagraph (A)) of such
person's intention to operate such institution as an institution described in section 2(c)(2)(F) of the Bank Holding
'*^''^
Company Act of 1956, as in effect after the enactment of
this title is filed with the Board before the end of the 7-day
period beginning on the later of the date of such transfer (or
other disposition) or the date of the enactment of this title;
and
(C) the operation of such institution as an institution
described in such section 2(c)(2)(F) begins before the end of
the 180-day period beginning on the date the transfer (or
other disposition) described in subparagraph (A) is
completed.
(3) CoNTROLUNG INTEREST.—For purposes of this subsection, a
person has a controlling interest in any institution if such
person controls—
(A) such institution; or
(B) any company which controls such institution,
as determined in accordance with the provisions of subsections
(b) and (g) of section 2 of the Bank Holding Company Act of

Ante, p. 554.

1956.

^

SEC. 102. AMENDMENTS TO THE FEDERAL RESERVE ACT.

(a) I N GENERAL.—The Federal Reserve Act is amended by inserting after section 23A the following:
' ^^

"

'

12 use 371C-1.

'

^ ^^*

-

i:

^ "

'

• '

"RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES

23B. (a) I N GENERAL.—
"(1) TERMS.—A member bank and its subsidiaries may engage
in any of the transactions described in paragraph (2) only—
"(A) on terms and under circumstances, including credit
V- ••
standards, that are substantially the same, or at least as
favorable to such bank or its subsidiary, as those prevailing
at the time for comparable transactions with or involving
other nonaffiliated companies, or
"(B) in the absence of comparable transactions, on terms
^
and under circumstances, including credit standards, that
in good faith would be offered to, or would apply to,
nonaffiliated companies.
"SEC.

"(2) TRANSACTIONS COVERED.—Paragraph (1) applies to

the

following:
"(A) Any covered transaction with an affiliate.
"(B) The sale of securities or other assets to an affiliate,
aifff
including assets subject to an agreement to repurchase.
'A
"(C) The pajmient of money or the furnishing of services
to an affiliate under contract, lease, or otherwise.
"(D) Any transaction in which an affiliate acts as an
agent or broker or receives a fee for its services to the bank
or to any other person.
"(E) Any transaction or series of transactions with a third
party—
"(i) if an affiliate has a financial interest in the third
party, or
i:.; I'Tf ^ :
"(ii) if an affiliate is a participant in such transaction
^^' *•or series of transactions.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 565

"(3) TRANSACTIONS THAT BENEFIT AN AFFIUATE.—For the purpose of this subsection, any transaction by a member bank or its
subsidiary with any person shall be deemed to be a transaction
with an affiliate of such bank if any of the proceeds of the
transaction are used for the benefit of, or transferred to, such
affiliate.
"G)) PROHIBITED TRANSACTIONS.—

"(1) IN GENERAL.—A member bank or its subsidiary—
"(A) shall not purchase as fiduciary any securities or
other assets from any affiliate unless such purchase is
permitted—
"(i) under the instrument creating the fiduciary
^''^
relationship,
"(ii) by court order, or
^'^**"(iii) by law of the jurisdiction governing the fiduciary relationship; and
*' '
"(B) whether acting as principal or fiduciary, shall not
'^'"^^
knowingly purchase or otherwise acquire, during the existence of any underwriting or selling syndicate, any security
if a principal underwriter of that security is an affiliate of
such bank.
"(2) EXCEPTION.—Subparagraph (B) of paragraph (1) shall not
apply if the purchase or acquisition of such securities has been
approved, before such securities are initially offered for sale to
the public, by a majority of the directors of the bank who are
not officers or employees of the bank or any affiliate thereof.
"(3) DEFINITIONS.—For the purpose of this subsection—
"(A) the term 'security' has the meaning given to such
term in section 3(a)(10) of the Securities Exchange Act of
1934; and
"(B) the term 'principal underwriter' means any underwriter who, in connection with a primary distribution of
g<^{.
securities—
"(i) is in privity of contract with the issuer or an
affiliated person of the issuer;
"(ii) acting alone or in concert with one or more other
persons, initiates or directs the formation of an underwriting syndicate; or
"(iii) is allowed a rate of gross commission, spread, or
other profit greater than the rate allowed another
underwriter participating in the distribution.
"(c) ADVERTISING RESTRICTION.—A member bank or any subsidiary
or affiliate of a member bank shall not publish any advertisement or
enter into any agreement stating or suggesting that the bank shall
in any way be responsible for the obligations of its affiliates.
"(d) DEFINITIONS.—For the purpose of this section—
"(1) the term 'affiliate' has the meaning given to such term in
section 23A (but does not include any company described in
section (b)(2) of such section or any bank);
"(2) the terms 'bank', 'subsidiary', 'person', and 'security'
(other than security as used in subsection (b)) have the meanings given to such terms in section 23A; and
"(3) the term 'covered transaction' has the meaning given to
such term in section 23A (but does not include any transaction
which is exempt from such definition under subsection (d) of
such section).

ift

.qq

15 USC 78c.

., /. j ,•__,

12 USC 37ic

"^ ^"
^
'
•'- -"'

101 STAT. 566

PUBLIC LAW 100-86—AUG. 10, 1987

"(e) REGULATIONS.—The Board may prescribe regulations to
administer and carry out the purposes of this section, including—
"(1) regulations to further define terms used in this section;
and
"(2) regulations to—
"(A) exempt transactions or relationships from the
requirements of this section; and
"(B) exclude any subsidiary of a bank holding company
from the definition of affiliate for purposes of this section,
if the Board finds such exemptions or exclusions are in the
public interest and are consistent with the purposes of this
section.".
(b) CONFORMING AMENDMENTS.—Section 18(j) of the Federal De-

posit Insurance Act (12 U.S.C. 18280')) is hereby amended—
(1) by inserting "and section 23B" after "section 23A" at each
place it appears in paragraph (1); Eind
(2) by inserting ", 23B,^' after "23A" in paragraph (3)(A).
(c) TREATMENT OF EDGE ACT AND AGREEMENT CORPORATIONS FOR
PURPOSES OF THE BANK HOLDING COMPANY ACT.—

12 use 611-631.

Ante, pp. 554,
557.
12 use 1841
note.
Ante, p. 561; post,
p 579.
12 use 619 note

Ante, p. 557.

(1) IN GENERAL.—The paragraph of section 25(a) of the Federal
Reserve Act which begins "Except £is otherwise provided in this
section, a majority" (the 11th full paragraph) (12 U.S.C. 619) is
amended by adding at the end thereof the following: "Any
company, other than a bank as defined in section 2 of the Bank
Holding Company Act of 1956, that after March 5,1987, directly
or indirectly acquires control of a corporation organized or
operating under the provisions of this section or section 25 shall
be subject to the provisions of the Bank Holding Company Act
of 1956 in the same manner and to the same extent that bank
holding companies are subject thereto, except that such company shall not by reason of this paragraph be deemed a bank
holding company for the purpose of section 3 of the Bank
Holding Company Act of 1956.".
(2) EXCEPTION.—The amendment made by paragraph (1) does
^°* ^PPly to ^n acquisition pursuant to the application by
Midland Bank, pic, London, England, pending before the Board
of Governors of the Federal Reserve System on July 1, 1987, to
acquire a corporation organized or operating under section 25(a)
of the Federal Reserve Act. If Midland Bank, pic, London,
England, is not otherwise subject to section 4 of the Bank
Holding Company Act of 1956, the financial activities of Midland Bank, pic, London, England, in the United States shall,
upon the determination of the Board of Governors of the Federal Reserve System made at any time, be subject to section 4 of
the Bank Holding Company Act of 1956.
SEC. 103. SECURITIES AFFILIATIONS OF NONMEMBER INSURED BANKS.

,;

(a) I N GENERAL.—Section 18(j) of the Federal Deposit Insurance
Act (12 U.S.C. 1828(j)) is amended by redesignating paragraph (3) (as
amended by section 102(b)(2)) and paragraph (4) as paragraphs (4)
and (5), respectively, and by inserting after paragraph (2) the following new paragraph:
"(3) SECURITIES AFFIUATIONS OF INSURED NONMEMBER BANKS.—

12 use 377.
12 use 78.

"(A) IN GENERAL.—The provisions of section 20 of the Banking
Act of 1933 (relating to affiliations between member banks and
organizations engaged principally in certain securities activities), and the provisions of section 32 of the Banking Act of 1933

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 567

(relating to certain officer, director, or employee relationships
involving a member bank and a person or organization primarily engaged in certain securities activities) shall apply to
every insured nonmember bank in the same manner and to the
same extent as if such insured nonmember bank were a
member bank.
"(B) CONTINUATION OF CERTAIN AFFILIATIONS.—This paragraph shall not prohibit the continuation of such an affiliation
or relationship which commenced before March 5, 1987, or the
establishment of such an officer, director, or employee relationship in connection with any affiliation established before
March 5, 1987.
"(C) 2-YEAR PERIOD.—An affiliation or officer, director, or
employee relationship that becomes unlawful as a result of the
enactment of this paragraph may continue for a period of 2
years after the date of enactment of this paragraph.
"(D) FOREIGN BANKS.—The provisions of this paragraph shall
not apply to any foreign bank, as defined in section 1(b)(7) of the
International Banking Act of 1978, solely because it has an
insured branch in the United States, except that the provisions
of section 32 of the Banking Act of 1933 shall apply to an
insured branch as if it were an insured bank.
"(E) EXCEPTIONS.—The provisions of this paragraph shall not
apply to any institution described in subparagraph (D), (F), or (I)
of section 2(c)(2) of the Bank Holding Company Act of 1956.
"(F) APPLICABILITY.—This paragraph shall apply during the
period beginning on March 6, 1987, and ending on March 1,
1988.".
(b) TECHNICAL AND CONFORMING AMENDMENT.—Section 18(j)(4)(A)
of the Federal Deposit Insurance Act (12 U.S.C. 1828(j)) (as redesignated by subsection (a)) is amended by inserting "or any provision of
section 20 of the Banking Act of 1933," after "or any lawful regulation issued pursuant thereto,".

12 USC 3101.
12 use 78.

Ante, p. 554.

12 use 377.

SEC. 104. AMENDMENTS TO SAVINGS AND LOAN HOLDING COMPANY
PROVISIONS OF THE NATIONAL HOUSING ACT.

(a) DEFINITIONS.—Section 408(a)(1) of the National Housing Act (12
**^''
U.S.C. 1730a(a)(l)) is amended—
(1) by striking out "and" at the end of subparagraph (I);
(2) by striking out the period at the end of subparagraph (J)
and inserting in lieu thereof a semicolon; and
(3) by adding at the end thereof the following new subparagraphs:
"(K) the terms 'bank holding company' and 'bank' have
the meanings given to such terms in subsections (a) and (c),
respectively, of section 2 of the Bank Holding Company Act
of 1956; and
Ante, pp. 554,
"(L) the term 'acquire' has the meaning given to such 557.
term in section 13(f)(8)(E) of the Federal Deposit Insurance
Act.".

(b) HOLDING COMPANY ACTIVITIES.—Section 408(c) of the National
Housing Act (12 U.S.C. 1730a(c)) is amended to read as follows:
"(c) HOLDING COMPANY ACTIVITIES.—
"(1) PROHIBITED ACTIVITIES.—Except as otherwise provided in

this subsection, no savings and loan holding company and no
subsidiary (of such company) which is not an insured institution
shall—

12 u s e 1823.

101 STAT. 568

PUBLIC LAW 100-86—AUG. 10, 1987

"(A) engage in any activity or render any service for or on
behalf of an insured institution subsidiary for the purpose
or with the effect of evading any law or regulation applicable to such insured institution;
"(B) commence any business activity, other than the
activities described in paragraph (2), after the date of the
enactment of the Competitive Equality Amendments of
1987; or
"(C) continue any business activity, other than the activi^., .
ties described in paragraph (2), after the later of^
"(i) the end of the 2-year period beginning on the date
jj,
of the enactment of the Competitive Equality Amend3yi *
ments of 1987; or
'[n :;,
"(ii) the date on which such company received approval under subsection (e) of this section to become a
savings and loan holding company,
"(2) EXEMPT ACTIVITIES.—The prohibitions of subparagraphs
, )ti) ,?
(B) and (C) of paragraph (1) shall not apply to the following
business activities of any savings and loan holding company or
^ •; /'
any subsidiary (of such company) which is not an insured
institution:
"(A) Furnishing or performing management services for
an insured institution subsidiary of such company.
"(B) Conducting an insurance agency or escrow business.
"(C) Holding, managing, or liquidating assets owned or
' "
acquired from an insured institution subsidiary of such
company.
"(D) Holding or managing properties used or occupied by
an insured institution subsidiary of such company.
"(E) Acting as trustee under deed of trust.
li ' "(F) Any other activity—
"(i) which the Board of Governors of the Federal
' ,
Reserve System, by regulation, has determined to be
permissible for bank holding companies under section
12 use 1843.
v .;
4(c) of the Bank Holding Company Act of 1956, unless
the Corporation, by regulation, prohibits or limits any
.? .
such activity for savings and loan holding companies;
.r1
or
"(ii) in which multiple savings and loan holding
..» =, ,.
companies were authorized (by regulation) to directly
engage on March 5,1987.
•j^*
'

"(3) CERTAIN UMITATIONS ON ACTIVITIES NOT APPUCABLE TO

.,.

. ,
'} .

Post, p. 613.

CERTAIN HOLDING COMPANIES.—Notwithstanding paragraphs (4)
and (6) of this subsection, the limitations contained in subparagraphs (B) and (C) of paragraph (1) shall not apply to any
savings and loan holding company (or any subsidiary of such
company) which controls—
"(A) only 1 insured institution, if the insured institution
subsidiary of such company is a qualified thrift lender (as
determined under subsection (o)); or
"(B) more than 1 insured institution, if—
.n ;>? ^
"(i) all, or all but 1, of the insured institution subsidi• '
aries of such company were acquired pursuant to an
**
•
acquisition under subsection (m) of this section or section 406(f); and

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 569

"(ii) all of the insured institution subsidiaries of such
company are qualified thrift lenders (as determined
under subsection (o)).
"(4) PRIOR APPROVAL OF CERTAIN NEW ACTIVITIES REQUIRED.—

"(A) IN GENERAL.—No savings and loan holding company
and no subsidiary (of such company) which is not an insured institution shall commence, either de novo or by an
acquisition (in whole or in part) of a going concern, any
activity described in paragraph (2)(F)(i) of this subsection
without the prior approval of the Corporation.
"(B) FACTORS TO BE CONSIDERED BY CORPORATION.—In

considering any application under subparagraph (A) by any
savings and loan holding company or any subsidiary of any
such company which is not an insured institution, the
Corporation shall consider—
"(i) whether the performance of the activity described in such application by the company or the
subsidiary can reasonably be expected to produce benefits to the public (such as greater convenience, increased competition, or gains in efficiency) that outweigh possiJ)le adverse effects of such activity (such as
undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound financial
practices);
"(ii) the mafiagerial resources of the companies involved; and
"(iii) the adequacy of the financial resources, including capital, of the companies involved.
"(C) CORPORATION MAY DIFFERENTIATE BETWEEN NEW AND
ONGOING ACTIVITIES.—In prescribing any regulation or

considering any application under this paragraph, the Corporation may differentiate between activities commenced
de novo and activities commenced by the acquisition, in
whole or in part, of a going concern.
"(D) APPROVAL OR DISAPPROVAL BY ORDER.—The approval

or disapproval of any application under this paragraph by
the Corporation shall be made in an order issued by the
Corporation containing the reasons for such approval or
disapproval.
"(5) GRACE PERIOD TO ACHIEVE COMPUANCE.—If any insured

institution referred to in paragraph (3) fails to maintain the
status of such institution as a qualified thrift lender, the Corporation may allow, for good cause shown, any company which
controls such institution (or any subsidiary of such company
which is not an insured institution) up to 3 years to comply with
the limitations contained in paragraph (1)(C).
"(6) SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
AFFECTED BY 1987 AMENDMENTS.—
"(A) EXCEPTION TO 2-YEAR GRACE PERIOD FOR ACHIEVING

COMPLIANCE.—Notwithstanding paragraph (l)(C)(i), any
company which received approval under subsection (e) of
this section to acquire control of an insured institution
between March 5, 1987, and the date of the enactment of
the Competitive Equality Amendments of 1987 shall not
continue any business activity other than the activities
described in paragraph (2) after such date of enactment.

' f}' ,^^ \;^

101 STAT. 570

PUBLIC LAW 100-86—AUG. 10, 1987

i'!, V

^

"(B) EXEMPTION FOR ACTIVITIES LAWFULLY ENGAGED IN

BEFORE MARCH 5, 1987.—Notwithstanding paragraph (1)(C)
and subject to subparagraphs (C) and (D), any savings and
loan holding company which received approval, before
March 5,1987, under subsection (e) of this section to acquire
control of an insured institution may engage, directly or
through any subsidiary (other than an insured institution
subsidiary of such company), in any activity in which such
company or such subsidiary was lawfully engaged on such
date.
"(C) TERMINATION OF SUBPARAGRAPH (B) EXEMPTION.—

Post, p. 613.

26 use 7701.
100 Stat. 2095.

The exemption provided under subparagraph (B) for activities engaged in by any savings and loan holding company or
a subsidiary of such company (which is not an insured
institution) which would otherwise be prohibited under
*
:
paragraph (1)(C) shall terminate with respect to such activities of such company or subsidiary upon the occurrence
(after the date of the enactment of the Competitive Equality
Amendments of 1987) of any of the following:
"(i) The savings and loan holding company acquires
control of a bank or an additional insured institution
(other than an insured institution acquired pursuant to
subsection (m) of this section or section 406(0).
"(ii) Any insured institution subsidiary of the savings
and loan holding company fails to qualify as a domestic
building and loan association under section 7701(a)(19)
>-^. .
of the Internal Revenue Code of 1986.
"({{{) The savings and loan holding company engages
...;,
in any business activity—
"(I) which is not described in paragraph (2); and
"(II) in which it was not engaged on March 5,
1987.
"(iv) Any insured institution subsidiary of the savings and loan holding company increases the number of
locations from which such insured institution conducts
business after March 5, 1987 (other than an increase
which occurs in connection with a transaction under
subsection (m) of this section or section 406(f)).
"(v) Any insured institution subsidiary of the savings
and loan holding company permits any overdraft
(including an intraday overdraft), or incurs any such
overdraft in its account at a Federal Reserve bank, on
behalf of an affiliate, unless such overdraft is the result
of an inadvertent computer or accounting error that is
beyond the control of both the insured institution
*
'
subsidiary and the affiliate.
"(D) ORDER BY CORPORATION TO TERMINATE SUBPARAGRAPH
* ''
(B) ACTIVITY.—Any activity described in subparagraph (B)
may also be terminated by the Corporation, after oppor"
^
tunity for hearing, if the Corporation determines, having
due regard for the purposes of this title, that such action is
necessary to prevent conflicts of interest or unsound practices or is in the public interest.
"(7) FOREIGN SAVINGS AND LOAN HOLDING COMPANY.—Notwith-

standing any other provision of this section, any savings and
loan holding company organized under the laws of a foreign
country as of June 1, 1984 (including any subsidiary thereof

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 571

which is not an insured institution), which controls a single
insured institution on the date of enactment of the Competitive
Equality Amendments of 1987 shall not be subject to this
subsection with respect to any activities of such holding company which are conducted exclusively in a foreign country.",
(c) REQUIREMENTS
LENDER.—

FOR TREATMENT

AS A QUAUFIED

THRIFT

(1) I N GENERAL.—Section 408 of the National Housing Act (12
U.S.C. 1730a) is amended by adding at the end thereof the
following new subsection:
"(o) QUAUFIED THRIFT LENDER REQUIREMENTS.—

"(1) I N GENERAL.—Except as provided in paragraphs (2) and
(3), any insured institution shall have the status of a qualified
thrift lender if—
"(A) the qualified thrift investments of such insured
institution equal or exceed 60 percent of the total tangible
assets of such institution; and
"(B) the qualified thrift investments of such insured
institution continue to equal or exceed 60 percent of the
total tangible assets of such institution on an average basis
in 3 out of every 4 quarters and 2 out of every 3 years.

^

"(2) TRANSITION RULE FOR CERTAIN INSTITUTIONS.—

* •-

*
- •

"(A) IN GENERAL.—If any insured institution—
"(i) which was chartered as a savings bank or a
cooperative bank under State law before October 15,
1982; or
"(ii) the principal assets of which were acquired from
an institution which was chartered as a savings bank
or a cooperative bank under State law before October 15, 1982,
meets the requirements of subparagraph (B), such insured
institution shall be treated as a qualified thrift lender
during the 10-year period beginning on January 1, 1988.
"(B)

'

SUBPARAGRAPH

(B)

REQUIREMENTS.—An

insured

institution meets the requirements of this subparagraph if,
in the determination of the Corporation—
"(i) the actual thrift investment percentage of such
institution does not, after the date of the enactment of
the Competitive Equality Amendments of 1987, decrease below the actual thrift investment percentage of
such institution on such date of enactment; and
"(ii) the amount by which—
"(I) the actual thrift investment percentage of
such institution at the end of each period described
in the following table, exceeds
"(II) the actual thrift investment percentage of
such institution on such date of enactment,
is equal to or greater than the applicable percentage (as
determined under the following table) of the amount by
which 60 percent exceeds the actual thrift investment
percentage of such institution on such date of
enactment:

"For the following period:
The 2V'2-year period beginning on such date of enactment
The 5-year period beginning on such date of enactment
The 7y2-year period beginning on such date of enactment

The applicable
percentage is:
25 percent
50 percent
75 percent

'

101 STAT. 572

PUBLIC LAW 100-86—AUG. 10, 1987
"(3) EXCEPTIONS GRANTED BY CORPORATION.—Notwithstanding

paragraph (1), the Corporation may grant such temporary and
limited exceptions from the minimum actual thrift investment
percentage requirement contained in such paragraph as the
Corporation deems necessary if—
"(A) the Corporation determines that extraordinary circumstances exist, such as when the effects of high interest
:: I. .
rates reduce mortgage demand to such a degree that an
.>-:* insufficient opportunity exists for an insured institution to
meet such investment requirements; or
"(B) the Corporation determines that—
"(i) the grant of any such exception will facilitate an
Post, pp. 613,575.
acquisition under section 406(f) or 408(m); and
"(ii) the acquired institution will comply with the
rv
transition requirements of paragraph (2XB).
"(4) FAILURE TO MAINTAIN QTL STATUS.—Any insured institution which fails to maintain its status as a qualified thrift
lender, as determined by the Corporation, may not thereafter be
a qualified thrift lender for a period of 5 years.
(5) DEFINITIONS.—For purposes of this subsection—
"(A) ACTUAL THRIFT INVESTMENT PERCENTAGE.—The term
'actual thrift investment percentage' means the percentage
determined by dividing—
f
"(i) the amount of the qualified thrift investments of
v] ,
an insured institution, by
"(ii) the total amount of tangible assets of such insured institution.
"(B) QuAUFiED THRIFT INVESTMENTS.—The term 'qualified
thrift investments' means, with respect to any insured
institution, the sum of—
"(i) the aggregate amount of loans, equity positions,
or securities held by the insured institution (or any
subsidiary of such institution) which are related to
domestic residential real estate or manufactured
j ft;/,
housing;
"(ii) the value of property used by such institution or
subsidiary in the conduct of the business of such
institution or subsidiary;
"(iii) subject to paragraph (6), the liquid assets of the
type required to be maintained under section 5A of the
12 use 1425a.
Federal Home Loan Bank Act; and
"(iv) subject to paragraph (6), 50 percent of the dollar
amount of the residential mortgage loans originated by
such insured institution or subsidiary and sold within
90 days of origination.
"(6) LIMITATION ON TREATMENT OF CERTAIN ASSETS AS THRIFT

INVESTMENTS.—The aggregate amount of the assets described in
clauses (iii) and (iv) of paragraph (5XB) which may be taken into
account in determining the amount of the qualified thrift
investments of any insured institution shall not exceed the
amount which is equal to 10 percent of the tangible assets of
such institution.
"(7) ADDITIONAL TRANSITION RULE.—The insured institution

described in subsection (rX2XC) shall be treated as a qualified

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 573

thrift lender during the 10-year period beginning on January 1,
1988, if the requirements of paragraph (2)(B) are met by such
institution.".
(2) EFFECTIVE DATE.—The amendment made by paragraph (1)
shall take effect on January 1,1988.
(3) REGULATIONS.—The Federal Savings and Loan Insurance
^ Corporation shall prescribe, under the authority of section
408(h)(1) of the National Housing Act, regulations to carry out
the provisions of the amendment made by paragraph (1) before
January 1,1988.

12 u s e 1730a
note.
12 u s e 1730a
note.

12 use 1730a.

(d) TRANSACTIONS BETWEEN INSURED INSTITUTION SUBSIDIARIES
AND CERTAIN AFFILIATES.—

(1) IN GENERAL.—Section 408 of the National Housing Act (12
U.S.C. 1730a(d)) is amended by adding after subsection (o) (as
added by subsection (c) of this section) the following new
subsection:
"(p) RESTRICTIONS ON ACTIVITIES OF CERTAIN INSURED INSTITUTION
SUBSIDIARIES.—
"(1) TRANSACTIONS WITH CERTAIN AFFILIATES.—

ii)A ,
*r%^i

"(A) I N GENERAL.—Transactions between any insured
i. ii
institution subsidiary of a savings and loan holding company and any affiliate (of such insured institution subsidiary) which is engaged only in business activities described
in subsection (c)(2)(F)(i)—
"(i) shall not be subject to subsection (d); and
"(ii) shall be subject to the limitations and prohibitions specified in sections 23A and 23B of the Federal
Reserve Act in the same manner and to the same 12 u s e 371c;
extent as if such insured institution were a member ante, p. 564.
bank.
"(B) REGULATIONS.—The Corporation may prescribe regulations for the purpose of defining and clarifying the applicability of the limitations and prohibitions described in
subparagraph (A).
"(2) CROSS-MARKETING PRACTICES.—

1,,
-'^ji

"(A) I N GENERAL.—Notwithstanding any other provision
of this section, an insured institution subsidiary of a diversified savings and loan holding company may not offer or
market products or services of an affiliate that are not
permissible for bank holding companies to provide under
section 4(c)(8) of the Bank Holding Company Act of 1956 or 12 u s e 1843.
permit its products or services to be offered or marketed by
or through an affiliate (other than an affiliate that engages
only in activities permissible for bank holding companies
under section 4(c) of that Act), unless such products or
services were being so offered or marketed as of March 5,
1987, and then only in the same manner in which they were
being offered or marketed as of that date.
"(B) EXCEPTION.—This paragraph shall not apply so as to
prohibit an insured institution subsidiary of a diversified
savings and loan holding company from offering or marketing the products or services of an affiliate or from permitting its products or services to be offered or marketed by or
through an affiliate if—
"(i) the savings and loan holding company is a reciprocal interinsurance exchange that acquired control of
the insured institution before January 1, 1984; and

101 STAT. 574
Armed Forces.

PUBLIC LAW 100-86—AUG. 10, 1987
"(ii) at least 90 percent of the customers of the
savings and loan holding company and its subsidiaries
and affiliates are active or former officers in the United
States military services or the widows, widowers, divorced spouses, or current or former dependents of
such officers.".
(2) TECHNICAL AMENDMENT.—Section 408(d) of the National
Housing Act (12 U.S.C. 1730a(d)) is amended by striking out "No
savings and loan" and inserting in lieu thereof "Except as
provided in subsection (p), no savings and loan".
(e) TYING RESTRICTIONS.—Section 408 of the National Housing Act

(12 U.S.C. 1730a) is amended by inserting after subsection (p) (as
added by subsection (d) of this section) the following new subsection:
"(q) TYING RESTRICTIONS.—
"(1) STATE CHARTERED INSURED INSTITUTION SUBSIDIARIES.—A

State chartered insured institution subsidiary of a savings and
loan holding company shall be subject to section 5(q) of the
Home Owners' Loan Act of 1933, and regulations prescribed
under such subsection, in the same manner and to the same
extent as an association (as defined in section 2(d) of such Act).
"(2) HOLDING COMPANIES AND CERTAIN AFFILIATES.—A savings
and loan holding company and any of its affiliates (other than
an insured institution) shall be subject to section 5(q) of the
Home Owners' Loan Act of 1933, and regulations prescribed
under such subsection, in connection with transactions involving the products or services of such company or affiliate and
those of an affiliated insured institution as if such company or
affiliate were an association (as defined in section 2(d) of such
Act).".

12 use 1464.
12 use 1462.

'
' •'

(f) SAVINGS BANK AS INSURED INSTITUTION.—

(1) I N GENERAL.—Section 408(n) of the National Housing Act
(12 U.S.C. 1730a) is amended to read as follows:
"(n) TREATMENT OF F D I C INSURED STATE SAVINGS BANKS AND
COOPERATIVE BANKS AS INSURED INSTITUTIONS.—

Ante, p. 563.

1 ^ il-f
'^

"(1) I N GENERAL.—Notwithstanding any other provision of
law, a savings bank (as defined in section 3(g) of the Federal
Deposit Insurance Act) and a cooperative bank that is an insured bank (as defined in section 3(h) of the Federal Deposit
Insurance Act) upon application shall be deemed to be an
insured institution for the purpose of this section, if the Corporation determines that such bank is a qualified thrift lender
(as determined under subsection (o)).
"(2) FAILURE TO MAINTAIN QTL STATUS.—If any savings bank
which is deemed to be an insured institution under paragraph
(1) subsequently fails to maintain its status as a qualified thrift
lender, as determined by the Corporation, such bank may not
thereafter be a qualified thrift lender for a period of 5 years.".
(2)

12 use 1730a.

TECHNICAL

AND

CONFORMING

AMENDMENT.—Section

408(a)(1)(A) of the National Housing Act (12 U.S.C.
1730a(a)(l)(A)) is amended by adding before the semicolon at the
end thereof the following: "and a savings bank which is deemed
by the Corporation to be an insured institution under subsection (n)".
(g) THRIFT ACQUISITIONS.—Section 408(e)(3) of the National Housing Act (12 U.S.C. 1730(e)) is amended to read as follows:
"(3) INTERSTATE ACQUISITIONS.—No acquisition shall be approved
by the Corporation under this subsection which will result in the

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 575

formation by any company, through one or more subsidiaries or
through one or more transactions, of a multiple savings and loan
holding company controlling insured institutions in more than one
State, unless—
"(A) such company, or an insured institution subsidiary of
such company, is authorized to acquire control of an insured
institution subsidiary, or to operate a home or branch office, in
the additional State or States pursuant to subsection (m);
"(B) such company controls an insured institution subsidiary
which operated a home or branch office in the additional State
or States as of March 5,1987; or
"(C) the statute laws of the State in which the insured institution, control of which is to be acquired, is located are such that
an insured institution chartered by such State could be acquired
by an insured institution chartered by the State where the
acquiring insured institution or savings and loan holding company is located (or by a holding company that controls such a
State-chartered insured institution), and such statute laws
specifically authorize such an acquisition by language to that
effect and not merely by implication.".
(h) EMERGENCY ACQUISITIONS.—Section 408(m)(l)(A)(i) of the National Housing Act (12 U.S.C. 1730a(m)(l)(A)(i)) is amended by inserting "(c)," before "(e)(2)".

..
. .. ^

SEC. 105. AMENDMENT TO THE FEDERAL HOME LOAN BANK ACT.

Section 10 of the Federal Home Loan Bank Act (12 U.S.C. 1430) is
amended by adding at the end thereof the following:
"(e) REDUCED ELIGIBILITY FOR ADVANCES FOR CERTAIN MEMBERS
WHICH ARE NOT QUALIFIED THRIFT LENDERS.—

J

"(1) IN GENERAL.—Except as the Board may prescribe, a
member that is not a qualified thrift lender may not receive
advances in excess of the amount determined by multiplying—
"(A) the total amount of advances that such member
would be eligible to receive in the absence of this subsection; by
"(B) such member's actual thrift investment percentage,
"(2) EXCEPTIONS.—Paragraph (1) does not apply to—
"(A) a savings bank as defined in section 3(g) of the
Federal Deposit Insurance Act;
"(B) an insured institution which was chartered prior to
October 15, 1982, as a savings bank under State law; or
"(C) an insured institution which acquired its principal
assets from an institution which was chartered prior to
October 15,1982, as a savings bank under State law.
"(3) DEFINITIONS.—As used in this subsection—
"(A) INSURED INSTITUTION.—The term 'insured institution' has the same meaning as in section 408(a)(1)(A) of the
National Housing Act.
"(B) QUALIFIED THRIFT LENDER.—The term 'qualified
thrift lender' has the same meaning as in section 408(o) of
the National Housing Act.
"(C) ACTUAL THRIFT INVESTMENT PERCENTAGE.—The term
'actual thrift investment percentage' has the same meaning
as in section 408(o)(5)(A) of the National Housing Act.".

Post, p. 601.
>

^

Ante, p. 563.

'Ante, p. 594.
Ante, p. 571.

101 STAT. 576

PUBLIC LAW 100-86—AUG. 10, 1987

SEC. 106. SECURITIES AFFILIATIONS OF FSLIC INSURED INSTITUTIONS.

(a) IN GENERAL.—Section 408 of the National Housing Act (12
U.S.C. 1730a) is amended by inserting after subsection (q) (as added
by section 104(e) of this title) the following new subsection:
"(r) SECURITIES AFFIUATIONS.—
12 u s e 377.
12 u s e 78.

Washington.

Ante, p. 566.
Minnesota.

"(1) IN GENERAL.—The provisions of section 20 of the Banking
Act of 1933 (relating to affiliations between member banks and
organizations engaged principally in certain securities activities) and the provisions of section 32 of the Banking Act of 1933
(relating to certain officer, director, or employee relationships
involving a member bank and a person or organization primarily engaged in certain securities activities) shall be applicable to every insured institution in the same manner and to
the same extent as if such insured institution were a member
bank.
"(2) EXCEPTIONS.—This subsection does not prohibit—
"(A) the continuation of such an affiliation or relationship which commenced prior to March 5, 1987, or the
.'
establishment of such an officer, director, or employee relationship in connection with any affiliation established
before such date;
"(B) the Washington Mutual Savings Bank, located in the
State of Washington, from acquiring control of one or more
insured institutions or establishing an officer, director, or
employee relationship between such an insured institution
<'i ''•
and any affiliate of the savings bank referred to in section
18(j)(3)(B) of the Federal Deposit Insurance Act;
p.a3P
"(C) the acquisition of Peoples Savings and Loan Association of Owatonna, Minnesota, by Miller and Schroeder
Holdings, Inc. (or any affiliate of such company), or the
establishment of any officer, director, or employee relationship between such association and such company or any
affiliate of such company, including Miller and Schroeder
< J2
Financial, Inc.; or
"(D) such an affiliation or officer, director, or employee
^g,:^^
relationship which results from the acquisition by an
organization described in paragraph (1) of an insured
,, i f
institution under subsection (m) of this section, if such
institution has total assets of $500,000,000 or more at the
.y
time of such acquisition.
"(3) TWO-YEAR PERIOD.—An affiliation or an officer, director,
or employee relationship that becomes unlawful as a result of
the enactment of this subsection may continue for a period of 2
years after the date of the enactment of this subsection.
"(4) EXEMPT ACTIVITIES OF CERTAIN INSTITUTIONS.—Nothing in

Real property.

.R'.'

.ji'

this subsection or section 18(j)(3) of the Federal Deposit Insurance Act prohibits an affiliation or an officer, director, or
employee relationship between an insured institution or an
institution which is eligible to become a member of a Federal
Home Loan Bank, and an organization engaged principally in
the issuance, sale, underwriting, or distribution, at wholesale or
retail, or through syndicate participation, of—
«^^) securities representing or secured by interests in
real estate or real estate loans or pools of real estate loans;
"(B) interests in partnerships formed primarily to own,
operate, manage, or invest in real estate;

PUBLIC LAW 100-86—AUG. 10, 1987

i . i.

101 STAT. 577

"(C) insurance products deemed to be securities, including
without limitation variable annuities and variable life
insurance;
"(D) securities of an investment company, as such term is
defined in the Investment Company Act of 1940; and
"(E) any securities to the extent such issuance, sale,
underwriting, or distribution is permitted for national
banks.

15 USC 80a-l.

"(5) REGULATIONS.—

•i' •

"(A) I N GENERAL.—The Corporation is authorized to issue
rules and regulations and to publish interpretations governing the implementation of this subsection, and shall enforce
the provisions of this subsection.
"(B) FEDERAL DEPOSIT INSURANCE CORPORATION AUTHOR-

^' '

ITY.—For the purpose of paragraph (4), the Federal Deposit
Insurance Corporation is authorized to issue rules and regulations and publish interpretations with respect to savings
banks and other institutions subject to section 18(j)(3) of the
Federal Deposit Insurance Act.".
Ante, p. 566.
(b) EXPIRATION DATE.—The amendment made by subsection (a) 12 use I730a
shall cease to be effective on March 1,1988.
note.
SEC. 107. MUTUAL HOLDING COMPANY AMENDMENTS.

(a) IN GENERAL.—Section 408 of the National Housing Act (12
U.S.C. 1730a) is amended by inserting after subsection (r) (as added
by section 106(a) of this title) the following new subsection:

*
*

"(s) MUTUAL HOLDING COMPANIES.—

"(1) I N GENERAL.—Notwithstanding any provision of Federal
law other than this title, an insured institution operating in
mutual form may reorganize so as to become a holding company
by—
"(A) chartering an interim savings institution, the stock
of which is to be wholly owned by the mutual institution;
and
"(B) transferring the substantial part of its assets and
liabilities, including all of its insured liabilities, to the
interim savings institution.
"(2) DIRECTORS AND CERTAIN ACCOUNT HOLDERS' APPROVAL OF

PLAN REQUIRED.—A reorganization is not authorized under this
subsection unless—
"(A) a plan providing for such reorganization has been
approved by a majority of the board of directors of the
mutual savings institution; and
"(B) in the case of an institution in which holders of
* *
»
accounts and obligors exercise voting rights, such plan has
been submitted to and approved by a majority of such
individuals at a meeting held at the call of the directors in
accordance with the procedures prescribed by the institution's charter and bylaws.
"(3) NOTICE TO THE CORPORATION; DISAPPROVAL PERIOD.—
"(A) NOTICE REQUIRED.—At least 60 days prior to taking

*'

any action described in paragraph (1), an insured institution seeking to establish a mutual holding company shall
provide written notice to the Corporation. The notice shall
contain such relevant information as the Corporation shall
require by regulation or by specific request in connection
with any particular notice.

;»

Kl' t^i

101 STAT. 578

PUBLIC LAW 100-86—AUG. 10, 1987
"(B) TRANSACTION ALLOWED IF NOT DISAPPROVED.—Unless

vf

;.

12 use 1726.

12 use 1464.

it

the Corporation within such 60-day notice period disapproves the proposed holding company formation, or extends for another 30 days the period during which such
disapproval may be issued, the insured institution providing such notice may proceed with the transaction, if the
requirements of paragraph (2) have been met.
"(C) GROUNDS FOR DISAPPROVAL.—The Corporation may
disapprove any proposed holding company formation only
i^"(i) such disapproval is necessary to prevent unsafe
or unsound practices;
"(ii) the financial or management resources of the
insured institution involved warrant disapproval;
"(iii) the insured institution fails to furnish the
information required under subparagraph (A); or
"(iv) the insured institution fails to comply with the
,
requirement of paragraph (2).
"(D) RETENTION OF CAPITAL ASSETS.—In connection with
the transaction described in paragraph (1), an insured
institution may, subject to the approval of the Corporation,
retain capital assets at the holding company level to the
extent that such capital exceeds adequate reserves as prescribed pursuant to section 403(b) or the comparable provisions of State or Federal law.
"(4) OWNERSHIP.—Persons having ownership rights in the
mutual institution pursuant to section 5G3)(1)(B) of the Home
Owners' Loan Act of 1933 or State law shall have the same
ownership rights with respect to the mutual holding company.
"(5) PERMITTED ACTIVITIES.—A mutual holding company may
engage only in the following activities:
"(A) Investing in the stock of an insured institution.
"(B) Acquiring a mutual institution through the merger
of such institution into an insured institution subsidiary of
such holding company or an interim savings institution
subsidiary of such holding company.
"(C) Subject to paragraph (6), merging with or acquiring
another holding company, one of whose subsidiaries is an
insured institution.
"(D) Investing in a corporation the capital stock of which
is available for purchase by an insured institution under
Federal law or under the law of any State where the
subsidiary insured institution or institutions have their
home offices.
"(E) Engaging in the activities described in subsection
(c)(2), except subparagraph (B).
"(6) LIMITATIONS ON CERTAIN ACTIVITIES OF ACQUIRED HOLDING COMPANIES.—

"(A) NEW ACTIVITIES.—If a mutual holding company acquires or merges with another holding company under
paragraph (5)(C), the holding company acquired or the holding company resulting from such merger or acquisition may
only invest in assets and engage in activities which are
authorized under paragraph (5).
"(B) GRACE PERIOD FOR DIVESTING PROHIBITED ASSETS OR
DISCONTINUING PROHIBITED ACTIVITIES.—Not later than 2

years following a merger or acquisition described in para-

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 579

graph (5)(C), the acquired holding company or the holding
company resulting from such merger or acquisition shall—
"(i) dispose of any asset which is an asset in which a
mutual holding company may not invest under paragraph (5); and
"(ii) cease any activity which is an activity in which a
mutual holding company may not engage under paragraph (5).
"(7) REGULATION.—Unless the context otherwise requires, a
mutual holding company shall be subject to the other requirements of this section regarding regulation of holding companies.
"(8) DEFINITIONS.—For purposes of this subsection—
"(A) MUTUAL HOLDING COMPANY.—The term 'mutual
holding company' means a corporation organized as a holding company under this subsection.
"(B) MUTUAL INSTITUTION.—The term 'mutual institution'
means—
"(i) an insured institution; or
"(ii) a savings bank (as defined in section 3(g) of the
Federal Deposit Insurance Act),
which is operating in mutual form.",

:>t:j J:

Ante, p. 563.

(b) AMENDMENT TO THE BANK HOLDING COMPANY ACT.—Section 3

of the Bank Holding Company Act of 1956 (12 U.S.C. 1842) is
amended by adding at the end thereof the following:

Ante, p. 561.

"(g) MUTUAL BANK HOLDING COMPANY.—

"(1) ESTABLISHMENT.—Notwithstanding any provision of Federal law other than this Act, a savings bank or cooperative bank
operating in mutual form may reorganize so as to form a
holding company.
"(2) REGULATION.—A corporation organized as a holding company under this subsection shall be regulated on the same terms
and be subject to the same limitations as any other holding
company which controls a savings bank.".
SEC. 108. LEASING AUTHORITY OF NATIONAL BANKS.

Section 5136 of the Revised Statutes (12 U.S.C. 24) is amended by
adding at the end thereof the following:
"Tenth. To invest in tangible personal property, including,
without limitation, vehicles, manufactured homes, machinery,
equipment, or furniture, for lease financing transactions on a
net lease basis, but such investment may not exceed 10 percent
of the assets of the association.".

Real property.

SEC.109. NOW ACCOUNTS.

Section 2(a)(2) of Public Law 93-100 (12 U.S.C. 1832(a)(2)) is
amended by inserting the term "political," immediately after "educational,".
SEC. 110. EXEMPTION FROM AFFILIATE TRANSACTION RESTRICTIONS.

Section 408 of the National Housing Act (12 U.S.C. 1730a) is
amended by inserting after subsection (s) (as added by section 107(a)
of this title) the following new subsection:
"(t) EXEMPTION.—

"(1) IN GENERAL.—Subject to paragraph (2), but notwithstanding any other provision of law, an insured institution that is a
subsidiary of an insured institution or insured institutions the

Q1_1Q4 n _ Qft

on . /->T o n

L

" - ^^^^

101 STAT. 580

PUBLIC LAW 100-86—AUG. 10, 1987

voting stock of which is 80 percent owned by the same company
shall not be subject—
"(A) to the provisions of subsection (d) of this section as to
transactions with such parent insured institution or aifiliate insured institutions (and their subsidiaries), or
"(B) to the provisions of subsections (f) and (g).
"(2) Low QUAUTY ASSETS.—An insured institution (or its
subsidiary) may not purchase a low quality asset, as such term
12 use 371c.
is defined in section 23A of the Federal Reserve Act, from
another insured institution (or its subsidiary) in a transaction
exempted by this subsection and any transaction with another
insured institution (or its subsidiary) under this subsection shall
be on terms and conditions that are consistent with safe and
sound financial practices.
"(3) DEFINITION.—For purposes of this subsection, an 'insured
r.^ institution' includes an institution that was chartered prior to
October 15, 1982, as a savings bank or cooperative bank under
State law and that is or becomes a savings and loan holding
^
company or is or becomes a subsidiary of a savings and loan
sm ^.v, i i-i^
holding company.".

Ante, p. 574.

26 use 382.

SEC. 111. CONSIDERATION OF CERTAIN ACQUISITIONS.
(a) AMENDMENT TO SECTION 408.—Section 408(e) of the National
Housing Act (12 U.S.C. 1730a(e)) is amended—
(1) by redesignating paragraph (4) as paragraph (5);
(2) by inserting a new paragraph (4) to read as follows:
"(4) CONSIDERATION OF LOSS OF CERTAIN TAX BENEFITS.—
"(A) I N GENERAL.—In each case in which a filing of any
type is required by this section, or regulations prescribed
under this section, before the acquisition of stock of an
insured institution, the Corporation, in evaluating such
filing, may consider the likelihood that the proposed acquisition will result in the loss or reduction of the tax
benefits of the insured institution's net operating loss
carryforwards under section 382 of the Internal Revenue
. 5,; f. Code of 1986.

100 Stat. 2095.

..a';,

"(g) REQUIRED CONSIDERATION IN CERTAIN CASES.—The

u3.i

Post, p. 613.

g|
-L'i

;..;

Corporation shall, with respect to any acquisition, give
consideration to the likelihood of future loss or reduction of
the tax benefits of an insured institution's net operating
loss carryforwards under section 382 of the Internal Revenue Code of 1986 if such net operating loss carryforwards
result from the insured institution's acquisition of one or
more insured institutions under subsection (m) of this sec» tion or section 406(f) or pursuant to acquisitions that are
otherwise deemed to be supervisory cases by the
Corporation.
"(C) PERMITTED TRANSACTIONS.—Notwithstanding subparagraph (A) or (B), the Corporation may permit—
"(i) acquisitions in which the proposed acquirer commits itself in writing to maintain the ratio of tangible
equity capital to liabilities of the insured institution to
be acquired, as determined in accordance with generally accepted accounting principles, in an amount
equal to the ratio in existence at the time of filing with
the Corporation,

_-->ei-i&

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 581

"(ii) acquisitions which are approved by the holders
of a majority of the voting stock of the institution to be
acquired, or
"(iii) acquisitions pursuant to subsection (m) of this
section or section 406(f) or pursuant to acquisitions that Post, p. 613.
are otherwise deemed to be supervisory cases by the
Corporation.",
(b) AMENDMENT TO SECTION 407.—Section 407(q) of the National
Housing Act (12 U.S.C. 1730(q)) is amended—
(1) by redesignating paragraphs (8) through (18) as paragraphs
(9) through (19), respectively;
(2) by inserting a new paragraph (8) to read as follows:
"(8) CONSIDERATION OF LOSS OP CERTAIN TAX BENEFITS.—

"(A) I N GENERAL.—In each case in which a filing of any
type is made under this subsection, or regulations prescribed under this section, before the acquisition of stock of
an insured institution, the Corporation, in evaluating such
filing, may consider the likelihood that the proposed acquisition will result in the loss or reduction of the tax
benefits of an insured institution's net operating loss
carryforwards under section 382 of the Internal Revenue
Code of 1986.
26 use 382.
xr _j
"(B) REQUIRED CONSIDERATION IN CERTAIN CASES.—The l O stat. 2095.
O
Corporation shall, with respect to any acquisition, give
-n
consideration to the likelihood of future loss or reduction of
the tax benefits of an insured institution's net operating
loss carrjrforwards under section 382 of the Internal Revenue Code of 1986 if such net operating loss carry forwards
result from the insured institution's acquisition of one or
more insured institutions under section 406(f) or 408(m) or 12 use I730a.
pursuant to acquisitions that are otherwise deemed to be
supervisory cases by the Corporation.
'(C) PERMITTED TRANSACTIONS.—Notwithstanding subparagraph (A) or (B), the Corporation may permit—
"(i) acquisitions in which the proposed acquirer commits itself in writing to maintain the ratio of tangible
equity capital to liabilities of the insured institutions to
be acquired, as determined in accordance with generally accepted accounting principles, in an amount
equal to the ratio in existence at the time of filing with
the Corporation,
"(ii) acquisitions which are approved by the holders
of a majority of the voting stock of the institution to be
acquired, or
(iii) acquisitions under section 406(f) or 408(m), or
are acquisitions that are otherwise deemed to be supervisory cases by the Corporation.".

TITLE II—MORATORIUM ON CERTAIN
NONBANKING ACTIVITIES
SEC. 20L MORATORIUM ON CERTAIN NONBANKING ACTIVITIES.

12 USC 1841

(a) APPLICABIUTY.—The provisions of this section shall apply "°*®
during the period beginning on March 6, 1987, and ending on
March 1, 1988.

101 STAT. 582

PUBLIC LAW 100-86—AUG. 10, 1987

* (b) MORATORIUM.—

;

I >..

f
'
i
*

V

::'

;•
"^
»'

. ii 1 ivU f I
""

"
^
'•

''

,

J
^

(1) A foreign bank or other company covered by subsection (c)
of section 8 of the International Banking Act of 1978 (12 U.S.C.
3106(c)) shall not, under any provision of law which is not
applicable to domestic bank holding companies, expand any
activity in which it is engaged pursuant to that subsection by
acquiring an interest in, or the assets of, a going concern. This
paragraph shall not apply to any "domestically-controlled affiliate covered in 1978" as defined in that subsection.
(2) A Federal banking agency may not authorize or allow by
action, inaction, or otherwise any bank holding company or
subsidiary or affiliate thereof, any foreign bank or other company subject to the Bank Holding Company Act of 1956 (12
U.S.C. 1841 et seq.) under section 8(a) of the International
Banking Act of 1978 (12 U.S.C. 3106(a)), or any insured bank or
subsidiary or affiliate thereof to engage in the United States to
any extent whatever—
(A) in the flotation, underwriting, public sale, dealing in,
or distribution of securities if that approval would require
the agency to determine that the entity which would conduct such activities would not be engeiged principally in
such activities,
(B) in any securities activity not legally authorized in
writing prior to March 5,1987, or
(C) in the operation of a nondealer marketplace in
options.
Subparagraph (B) shall not affect (i) activities in which any
bank holding company or subsidiary or affiliate thereof, any
foreign bank or other company subject to the Bank Holding
Company Act of 1956 under section 8(a) of the International
Banking Act of 1978, or any insured bank or subsidiary or
affiliate thereof acts only as an agent; (ii) activities which had
been lawfully engaged in prior to March 5, 1987; or (iii) sales or
transactions closed on or before June 30,1987.
(3) A Federal banking agency may not issue any rule, regulation, or order that would have the effect of increasing the
insurance powers of banks, bank holding companies, foreign
banks or other companies subject to the Bank Holding Company
Act of 1956 under section 8(a) of the International Banking Act
of 1978, or banking or nonbanking subsidiaries thereof with
respect to any activities in the United States, either with respect to specific banks or bank holding companies or subsidiaries thereof or generally beyond those expressly authorized for
bank holding companies under subparagraphs (A) through (G)
of section 4(c)(8) of the Bank Holding Company Act of 1956 (12
U.S.C. 1843(c)(8)(A) through (G)).
(4) Except as provided in section 3(f) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842(f)), as added by section
101(d) of this Act, the Board of Governors of the Federal Reserve
System may not approve the acquisition by a bank holding
company or by a foreign bank or other company subject to the
Bank Holding Company Act of 1956 under section 8(a) of the
International Banking Act of 1978, of any company, including a
State-chartered bank, unless the bank holding company, foreign
bank, or other company has agreed to limit the insurance
activities in the United States of the company to be acquired to

PUBLIC LAW 100-86—AUG. 10, 1987
those permissible under section 4(c)(8) of the Bank Holding
Company Act of 1956. This paragraph shall not apply to the
acquisition of a State-chartered bank that upon acquisition
would be subject to the Bank Holding Company Act of 1956,
pursuant to a reorganization plan under which the stockholders
of the bank exchange their shares for shares in a newly created
bank holding company which is not a subsidiary of any other
company or to the acquisition of a State-chartered bank by a
bank holding company that on March 6, 1987, controlled one or
more State-chartered banks that have engaged in insurance
activities identical to those of the newly acquired institution so
long as the bank holding company agrees that it will—
(A) within 2 years of the consummation of its acquisition
of the State-chartered bank, divest or terminate that bank's
impermissible insurance activities, and
(B) limit the bank's insurance activities during that 2year period to the renewal of existing policies.
(5) A national bank or a Federal branch or agency of a foreign
bank may not expand its insurance agency activities pursuant
to the Act of September 7, 1916 (12 U.S.C. 92), into places where
it was not conducting such activities as of March 5, 1987.
(6) A Federal banking agency may not issue any rule, regulation, or order that would have the effect of increasing real
estate powers in the United States of banks, bank holding
companies, foreign banks or other companies subject to the
Bank Holding Company Act of 1956 under section 8(a) of the
International Banking Act of 1978, or of any banking or nonbanking subsidiaries of any such banks or companies.
(c) DEFINITIONS.—As used in this section and section 202—
(1) the term "affiliate" has the same meaning as in section
2(j)(2) of the Bank Holding Company Act of 1956 (12 U.S.C.
1841(j)(2)), as added by section 101(a) of this Act;
(2) the term "bank holding company" has the same meaning
as in section 2(a) of the Bank Holding Company Act of 1956 (12
U.S.C. 1841(a));
(3) the term "Federal banking agency" has the same meaning
as the term "appropriate Federal banking agency" has in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C.
1813(q)); and
(4) the term "insured bank" has the same meaning as in
section 3(h) of the Federal Deposit Insurance Act (12 U.S.C.
1813(h)).
(d) INSURANCE AUTHORITY OF BANKING ORGANIZATIONS.—Nothing

in this section may be construed to increase or reduce the insurance
authority of bank holding companies or banking or nonbanking
subsidiaries thereof or of national banks under current law.
(e) INSURANCE AUTHORITY OF CERTAIN STATE-CHARTERED BANKS.—
(1) FREESTANDING STATE-CHARTERED BANKS.—Nothing in this

section shall be construed to deny any State the authority to
permit its State-chartered banks that are not controlled by bank
holding companies from engaging in any insurance activity.
(2) STATE-CHARTERED SUBSIDIARIES OF BANK HOLDING COMPA-

NIES.—In addition, neither the existence of the moratorium nor
its expiration shall be construed to increase, decrease, or affect
in any way the authority of State-chartered bank subsidiaries of
bank holding companies with respect to insurance activities.

101 STAT. 583
12 USC 1843.

i

12 use 1841
^* ^ c
° vV

12 USC 3106.

101 STAT. 584
12 u s e 1841

PUBLIC LAW 100-86—AUG. 10, 1987

SEC. 202. AUTHORITY OF FEDERAL BANKING AGENCIES.

Nothing in section 201 may be construed to prevent a Federal
banking agency from issuing any rule, regulation, or order pursuant
to its legal authority in existence on the day preceding the date of
enactment of this Act to expand the securities, insurance, or real
estate powers of banks or bank holding companies that are subject
to the moratorium established under section 201 if the effective date
of such rule, regulation, or order is delayed until the expiration of
such moratorium.
;F >
12 u s e 1841

SEC. 203. INTENT OF CONGRESS.
(a) COMPREHENSIVE CONGRESSIONAL REVIEW OF BANKING AND
FINANCIAL LAWS.—It is the intent of the Congress, through the

Committee on Banking, Housing, and Urban Affairs of the Senate
and the Committee on Banking, Finance and Urban Affairs of the
House of Representatives, to conduct a comprehensive review of our
banking and financial laws and to make decisions on the need for
financial restructuring legislation in the light of today's changing
financial environment both domestic and international before the
expiration of such moratorium.
(b) CONGRESSIONAL INTENT NOT TO RENEW OR EXTEND MORATO-

RIUM.—It is the intent of the Congress not to renew or extend the
moratorium established under section 201 whether or not subsequent banking legislation is passed by the Congress.
SEC. 204. AMENDMENTS TO THE INTERNATIONAL BANKING ACT OF 1978.
(a) TERMINATION OF CERTAIN NONBANKING ACTIVITIES.—Section

, . . ^ ^ V 8(c) of the International Banking Act of 1978 (12 U.S.C. 3106(c)) is
amended by adding at the end thereof the following new paragraph:
"(2) The authority conferred by this subsection on a foreign bank
or other company shall terminate 2 years after the date on which
such foreign bank or other company becomes a 'bank holding company' as defined in section 2(a) of the Bank Holding Company Act of
1956 (12 U.S.C. 1841(a)); except that the Board may, upon application
of such foreign bank or other company, extend the 2-year period for
not more than one year at a time, if, in its judgment, such an
extension would not be detrimental to the public interest, but no
such extensions shall exceed 3 years in the aggregate.".
(b) CLERICAL AMENDMENT.—Section 8 of the International Banking Act of 1978 is amended by striking out "(c) After" and inserting
in lieu thereof "(c)(1) After".
SEC. 205. AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956.
(a) EXCEPTION TO NONBANKING PROHIBITIONS.—Section 2(h) of the

Bank Holding Company Act of 1956 (12 U.S.C. 1841(h)) is amended
by striking out paragraph (2) and by adding after paragraph (1) the
following new paragraphs:
"(2) Except as provided in paragraph (3), the prohibitions of
section 4 of this Act shall not apply to shares of any company
organized under the laws of a foreign country (or to shares held by
such company in any company engaged in the same general line of
business as the investor company or in a business related to the
business of the investor company) that is principally engaged in
business outside the United States if such shares are held or acquired by a bank holding company organized under the laws of a
foreign country that is principally engaged in the banking business
outside the United States. For the purpose of this subsection, the

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 585

term 'section 2(hX2) company' means any company whose shares are
held pursuant to this paragraph.
"(3) Nothing in paragraph (2) authorizes a section 2(h)(2) company
to engage in (or acquire or hold more than 5 percent of the outstanding shares of any class of voting securities of a company engaged in)
any banking, securities, insurance, or other financial activities, as
defined by the Board, in the United States. This paragraph does not
prohibit a section 2(h)(2) company from holding shares that were
lawfully acquired before the date of enactment of the Competitive
Equality Banking Act of 1987.
(4) No domestic office or subsidiary of a bank holding company or
subsidiary thereof holding shares of a section 2(hX2) company may
extend credit to a domestic office or subsidiary of such section 2(h)(2)
company on terms more favorable than those afforded similar
borrowers in the United States.
"(5) No domestic banking office or bank subsidiary of a bank
holding company that controls a section 2(h)(2) company may offer
or market products or services of such section 2(h)(2) company, or
permit its products or services to be offered or marketed by or
through such section 2(h)(2) company, unless such products or services were being so offered or marketed as of March 5,1987, and then
only in the same manner in which they were being offered or
marketed as of that date.".

TITLE III—FSLIC RECAPITALIZATION
SEC. 301. SHORT TITLE.

This title may be cited as the "Federal Savings and Loan Insurance Corporation Recapitalization Act of 1987".

Federal Savings
and
Loan Insurance
Corporation
Recapitalization
Act of 1987.
12 u s e 226 note.

SEC. 302. FINANCING CORPORATION ESTABLISHED.

The Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) is
amended by inserting after section 20 the following new section:
"SEC. 21. FINANCING CORPORATION.
"(a) EsTABUSHMENT.—Notwithstanding any other provision of
law, the Board shall charter a corporation to be known as the
Financing C!orporation.
"(b) MANAGEMENT OF FINANCING CORPORATION.—

"(1) DIRECTORATE.—The Financing Corporation shall be under
the management of a directorate composed of 3 members as
follows:
"(A) The Director of the Office of Finance of the Federal
-, H Home Loan Banks (or the head of any successor to such
office).
"(B) 2 members selected by the Federal Home Loan Bank
.},
Board from among the presidents of the Federal Home
Loan Banks.
"(2) TERMS.—Each member appointed under paragraph (1)(B)
shall be appointed for a term of 1 year.
"(3) VACANCY.—If any member leaves the office in which such
member was serving when appointed to the Directorate—
"(A) such member's service on the Directorate shall
terminate on the date such member leaves such office; and
"(B) the successor to the office of such member shall serve
the remainder of such member's term.

12 u s e 1441.

101 STAT. 586

PUBLIC LAW 100-86—AUG. 10, 1987
^

"(4) EQUAL REPRESENTATION OF BANKS.—No president of a

Federal Home Loan Bank may be appointed to serve an addi'0 tional term on the Directorate until such time as the presidents
''•• of each of the other Federal Home Loan Banks have served as
'^ many terms on the Directorate as the president of such bank
• (before the appointment of such president to such additional
^^ term).
J"
"(5) CHAIRPERSON.—The Chairman of the Federal Home Loan
^ Bank Board shall select the chairperson of the Directorate from
among the 3 members of the Directorate.
;^

"(6) STAFF.—

'S,
''^''
,;
^^}!.
;,^^
^^_
^

"(A) No PAID EMPLOYEES.—The Financing Corporation
shall have no paid employees.
"(B) POWERS.—The Directorate may, with the approval of
the Board, authorize the officers, employees, or agents of
the Federal Home Loan Banks to act for and on behalf of
the Financing Corporation in such manner as may be necessary to carry out the functions of the Financing
Corporation.
"(7) ADMINISTRATIVE EXPENSES.—

.

"(A) I N GENERAL.—All administrative expenses of the
Financing Corporation shall be paid by the Federal Home
Loan Banks.
"(B) PRO RATA DISTRIBUTION.—The amount each Federal
• Home Loan Bank shall pay shall be determined by the
Board by multiplying the total administrative expenses for
any period by the percentage arrived at by dividing—
,^
"(i) the aggregate amount the Board required such
bank to invest in the Financing Corporation (as of the
time of such determination) under paragraphs (4) and
(5) of subsection (d) (as computed without regard to
^(
paragraph (3) or (6) of such subsection); by
' ,
"(ii) the aggregate amount the Board required all
Federal Home Loan Banks to invest (as of the time of
such determination) under such paragraphs.
> ^

"(C) ADMINISTRATIVE EXPENSES DEFINED.—For purposes of

this paragraph, the term 'administrative expenses' does not
include—
"(i) issuance costs (as such term is defined in subsec.A; tion (g)(5)(A));
V '.%<,....
"(ii) any interest on (and any redemption premium
with respect to) any obligation of the Financing Cor'- >••
poration; or
"(iii) custodian fees (as such term is defined in subsection (g)(5)(B)).
"(8) REGULATION BY BOARD.—The Directorate shall be subject
to such regulations, orders, and directions as the Board may
prescribe.
^

"(9) No COMPENSATION FROM FINANCING CORPORATION.—Mem-

bers of the Directorate shall receive no pay, allowances, or
'i benefits from the Financing Corporation by reason of their
service on the Directorate.
"(c) POWERS OF FINANCING CORPORATION.—The Financing Corporation shall have only the following powers, subject to the other
provisions of this section and such regulations, orders, and directions as the Board may prescribe:

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 587

"(1) To issue nonvoting capital stock to the Federal Home
Loan Banks.
"(2) To invest in any security issued by the Federal Savings
and Loan Insurance Corporation under section 402(b) of the
National Housing Act.
"(3) To issue debentures, bonds, or other obligations and to
borrow, to give security for any amount borrowed, and to pay
interest on (and any redemption premium with respect to) any
such obligation or amount.
"(4) To impose assessments in accordance with subsection (f).
"(5) To adopt, alter, and use a corporate seal.
"(6) To have succession until dissolved.
"(7) To enter into contracts.
"(8) To sue and be sued in its corporate capacity, and to
complain and defend in any action brought by or against the
Financing Corporation in any State or Federal court of competent jurisdiction.
"(9) To exercise such incidental powers not inconsistent with
the provisions of this section or section 402(b) of the National
Housing Act as are necessary or appropriate to carry out the
provisions of this section.
'(d) CAPITALIZATION OF FINANCING CORPORATION.—
"(1) PURCHASE OF CAPITAL STOCK BY FEDERAL HOME LOAN
BANKS.—

"(A) IN GENERAL.—Each Federal Home Loan Bank shall
invest in nonvoting capital stock of the Financing Corporation at such times and in such amounts as the Board may
prescribe under this subsection.
"(B) PAR VALUE; TRANSFERABILITY.—Each share of stock
issued by the Financing Corporation to a Federal Home
Loan Bank shall have par value in an amount determined
by the Board and shall be transferable only among the
Federal Home Loan Banks in the manner and to the extent
prescribed by the Board at not less than par value.
"(2) AGGREGATE DOLLAR AMOUNT LIMITATION ON ALL INVEST-

MENTS.—The aggregate amount of funds invested by all Federal
Home Loan Banks in nonvoting capital stock of the Financing
Corporation shall not exceed $3,000,000,000.
"(3) MAXIMUM INVESTMENT AMOUNT LIMITATION FOR EACH FEDERAL HOME LOAN BANK.—The cumulative amount of funds in-

vested in nonvoting capital stock of the Financing Corporation
by each Federal Home Loan Bank shall not exceed the aggregate amount of—
"(A) the sum of—
"(i) the reserves maintained by such bank on December 31, 1985, pursuant to the requirement contained in
the first 2 sentences of section 16; and
"(ii) the undivided profits (as defined in paragraph
(7)) of such bank on such date; and
"(B) the sum of—
"(i) the amounts added to reserves after December 31,
1985, pursuant to the requirement contained in the
first 2 sentences of section 16; and
"(ii) the undivided profits of such bank accruing after
such date.
"(4) PRO RATA DISTRIBUTION OF IST $1,000,000,000 INVESTED IN
FINANCING CORPORATION BY HOME LOAN BANKS.—With respcct to

Post, p. 597.

101 STAT. 588

"fi"; q ,ss/^

PUBLIC LAW 100-86—AUG. 10, 1987

:, T. the first $1,000,000,000 which the Board may require the Federal Home Loan Banks to invest in capital stock of the Financ^o,.' ing Corporation under this subsection, the amount which each
9ri Federal Home Loan Bank (or any successor to such bank) shall
invest shall be determined by the Board by applying to the total
- amount of such investment by all such banks the percentage
appearing in the following table for each such bank:
"Bank
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
^'

_^

, '
^*
sJ'jo

"(5)

Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan

Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank

of Boston
of New York
of Pittsburgh
of Atlanta
of Cincinnati
of Indianapolis
of Chicago
of Des Moines
of Dallas
of Topeka
of San Francisco
of Seattle

Percentage
1.8629
9.1006
4.2702
14.4007
8.2653
5.2863
9.6886
6.9301
8.8181
5.2706
19.9644
6.1422

PRO RATA DISTRIBUTION OF AMOUNTS REQUIRED TO BE

INVESTED IN EXCESS OF $1,000,000,000.—With rcspect to any
amount in excess of $1,000,000,000 which the Board may require
the Federal Home Loan Banks to invest in capital stock of the
Financing Corporation under this subsection, the amount which
each Federal Home Loan Bank (or any successor to such bank)
shall invest shall be determined by the Board by multiplying
such excess amount by the percentage arrived at by dividing—
"(A) the sum of the total assets (as of the most recent
' December 31) held by all insured institutions which are
members of such bank; by
"(B) the sum of the total assets (as of such date) held by
all insured institutions which are members of any Federal
Home Loan Bank.

"(6) SPECIAL PROVISIONS RELATING TO MAXIMUM AMOUNT
,-^^ UMITATIONS.—

"(A) IN GENERAL.—If the amount any Federal Home Loan
Bank is required to invest in capital stock of the Financing
Corporation pursuant to a determination by the Board
. , , , under paragraph (5) (or under subparagraph (B) of this
paragraph) exceeds the maximum investment amount applicable with respect to such bank under paragraph (3) at
,:,.., .^^ the time of such determination (hereinafter in this para*""" graph referred to as the 'excess amount')—
"(i) the Board shall require each remaining Federal
,' ^^ .y" : Home Loan Bank to invest (in addition to the amount
,. r
, determined under paragraph (5) for such remaining
bank and subject to the maximum investment amount
.•; , 4 ' . applicable with respect to such remaining bank under
paragraph (3) at the time of such determination) in
such capital stock on behalf of the bank in the amount
. i, determined under subparagraph (B);
"(ii) the Board shall require the bank to subsequently
purchase the excess amount of capital stock from the
;, ', ^, , . remaining banks in the manner described in subparagraph (C); and
,'//£. , K "(iii) the requirements contained in subparagraphs
), ; .A ,? , (D) and (E) relating to the use of net earnings available

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 589

for dividends shall apply to such bank until the bank
has purchased all of the excess amount of capital stock.
"(B) ALLOCATION OF EXCESS AMOUNT AMONG REMAINING

HOME LOAN BANKS,—The amount each remaining Federal
Home Loan Bank shall be required to invest under subparagraph (AXi) is the amount determined by the Board by
multipl5dng the excess amount by the percentage arrived at
by dividing—
"(i) the amount of capital stock of the Financing
Corporation held by such remaining bank a t the time
of such determination; by
"(ii) the aggregate amount of such stock held by all
remaining banks at such time.
"(C) PURCHASE PROCEDURE.—The bank on whose behalf
an investment in capital stock is made under subparagraph
(AXi) shall purchase, annually and a t the issuance price,
from each remaining bank an amount of such stock determined by the Board by multipl3ring the amount available
for such purchases (at the time of such determination) by
the percentage determined under subparagraph (B) with
respect to such remaining bank until the aggregate amount
of such capital stock has been purchased by the bank.
"(D) LIMITATION ON DIVIDENDS.—The amount of dividends

which may be paid for any year by a bank on whose behalf
an investment is made under subparagraph (AXi) shall not
exceed an amount equal to ¥2 of the net earnings available
for dividends of the bank for the year.
"(E) TRANSFER TO ACCOUNT FOR PURCHASE OF STOCK RE-

QUIRED.—Of the net earnings available for dividends for
any year of a bank on whose behalf an investment is made
under subparagraph (AXi), such amount as is necessary to
make the purchases of stock required under subparagraph
(AXii) shall be placed in a reserve account (established in
such manner as the Board shall prescribe by regulations)
the balance in which shall be available only for such purchases.
"(F) N E T EARNINGS AVAILABLE FOR DIVIDENDS DEFINED.—

For purposes of this paragraph, the term 'net earnings
available for dividends means the net earnings of a bank
for any period £is computed after reducing the amount of
earnings for such period by the amount required to be
carried (for such period) to reserves maintained by such
bank pursuant to the first two sentences of section 16 of
this Act.

"(7) UNDIVIDED PROFITS DEFINED.—For purposes of paragraph
(3), the term 'undivided profits' means retained earnings minus
the sum of—
"(A) that portion required to be added to reserves maintained pursuant to the first two sentences of section 16 of
this Act; and
"(B) the dollar amounts held by the respective Federal
Home Loan Banks in special dividend stabilization reserves
on December 31, 1985, as determined under the following
table:

12 u s e 1436.

101 STAT. 590

PUBLIC LAW 100-86—AUG. 10, 1987

"Bank
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal
Federal

Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan
Home Loan

Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank
Bank

of Boston
of New York
of Pittsburgh
of Atlanta
of Cincinnati
of Indianapolis
of Chicago
of Des Moines
of Dallas
of Topeka
of San Francisco
of Seattle

Dollar amount
$3.2 million
7.7 million
5.2 million
12.3 million
5.9 million
37.4 million
6.0 million
32.7 million
45.0 million
13.7 million
21.9 million
33.6 million

"(e) OBUGATIONS OF THE FINANCING CORPORATION.—
"(1) LIMITATION ON AMOUNT OF OUTSTANDING OBUGATIONS.—

The aggregate amount of obligations of the Financing Corporation which may be outstanding at any time (as determined by
the Board) shall not exceed the lesser of^
"(A) an amount equal to the greater of—
"(i) 5 times the amount of the nonvoting capital stock
of the Financing Corporation which is outstanding at
such time; or
"(ii) the sum of the face amounts (the amount of
principal payable at maturity) of securities described in
subsection (g)(2) which are held at such time in the
segregated account established pursusmt to such
subsection; or
"(B) $10,825,000,000.
"(2) ANNUAL UMITATION ON NET NEW BORROWING.—Net new

borrowing by the Financing Corporation—
"(A) shall not exceed an amount equal to $3,750,000,000
in the 1-year period beginning on the date of the enactment
of the Federal Savings and Loan Insurance Corporation
Recapitalization Act of 1987; and
"(B) shall not exceed an amount equal to $3,750,000,000 in
each 1-year period beginning after the 1-year period described in subparagraph (A).
"(3) N E T PROCEEDS TO BE INVESTED IN CAPITAL OF FSUC.—

Post, p. 597.
S;:M .; : I

Subject to such terms and conditions as may be approved by the
Board, the net proceeds of any obligation issued by the Financing Corporation shall be used to—
"(A) purchase capiteil certificates or capital stock issued
by the Federal Savings and Loan Insurance Corporation
under section 4020t))(lXA) of the National Housing Act; or
"(B) refund any previously issued obligation the net proceeds of which were invested in the manner described in
subparagraph (A).
"(4) LIMITATION ON TERM OF OBUGATIONS.—NO obligation of
the Financing Corporation may be issued which matures—
"(A) more than 30 years after the date of issue; or
"(B) after December 31, 2026.
"(5) INVESTMENT OF UNITED STATES FUNDS IN OBUGATIONS.—

Obligations issued under this section by the Financing Corporation with the approval of the Board shall be lawful investments,
and may be accepted as security, for all fiduciary, trust, and
public funds the investment or deposit of which shall be under
the authority or control of the United States or any officer of
the United States.
"(6) MARKET FOR OBUGATIONS.—All persons having the power
to invest in, sell, underwrite, purchase for their own accounts,
accept as security, or otherwise deal in obligations of the Fed-

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 591

eral Home Loan Banks shall also have the power to do so with
respect to obligations of the Financing Corporation.
"(7) N o FULL FAITH AND CREDIT OF THE UNITED STATES.—

Obligations of the Financing Corporation and the interest payable on such obligations shall not be obligations of, or guaranteed as to principal or interest by, the Federal Home Loan
Banks, the United States, or the Federal Savings and Loan
Insurance Corporation and the obligations shall so plainly state.
"(8) TAX EXEMPT STATUS.—

"(A) IN GENERAL.—Except as provided in subparagraph
(B), obligations of the Financing Corporation shall be
exempt from tax both as to principal and interest to the
same extent as any obligation of a Federal Home Loan
Bank is exempt from tax under section 13.
"(B) EXCEPTION.—The Financing Corporation, like the
Federal Home Loan Banks, shall be treated as an agency of
the United States for purposes of the first sentence of
section 3124(b) of title 31, United States Code (relating to
determination of tax status of interest on obligations).

12 USC 1433.

"(9) OBLIGATIONS ARE EXEMPT SECURITIES.—Notwithstanding

paragraph (7), obligations of the Financing Corporation shall be
deemed to be exempt securities (within the meaning of laws
administered by the Securities and Exchange Commission) to
the same extent as securities which are direct obligations of the
United States or are guaranteed as to principal or interest by
the United States.
"(10)

MINORITY PARTICIPATION IN PUBLIC OFFERINGS.—The

Chairman of the Board and the Directorate shall ensure that
minority owned or controlled commercial banks, investment
banking firms, underwriters, and bond counsels throughout the
United States have an opportunity to participate to a significant
degree in any public offering of obligations issued under this
section.
'(f) ASSESSMENT AUTHORITY OF THE FINANCING CORPORATION.—

"(1) IN GENERAL.—The Financing Corporation may, with the
approval of the Board, assess on each insured institution an
assessment, except that the aggregate amount assessed under
this paragraph on any insured institution for any year may not
exceed an amount equal to Vi2th of 1 percent of the aggregate
amount of all accounts of insured members of such insured
institution.
"(2)

>_v, •

SUPPLEMENTAL

ASSESSMENT

AUTHORIZED.—Upon

the

unanimous vote of the Directorate that additional funds are
needed to pay the interest on the obligations of the Financing
Corporation because no other funds are available, the Financing
Corporation may, with the approval of the Board and in addition to any assessment assessed under paragraph (1), assess on
each insured institution an assessment, except that the aggregate amount assessed under this paragraph on any insured
institution for any year may not exceed an amount equal to
Vsth of 1 percent of the aggregate amount of all accounts of
insured members of such insured institution.
"(3) TOTAL AMOUNT OF ASSESSMENTS MAY NOT EXCEED INTEREST

AND FINANCING COSTS.—The aggregate amount of all assessments assessed under paragraphs (1) and (2) for any year may
not exceed—
"(A) the aggregate amount of—

..

^ .*•

101 STAT. 592

PUBLIC LAW 100-86—AUG. 10, 1987
;.«w ?

* 4.

"(i) issuance costs (as such t e r m is defined in subsection (g)(5)(A)) incurred with respect to obligations
issued during such year;
"(ii) interest paid on (and a n y redemption p r e m i u m
paid with respect to) obhgations of t h e Financing
Corporation during such year; a n d
"(iii) custodian fees (as such t e r m is defined in subsection (g)(5)(B)) incurred during such year; m i n u s
"(B) t h e aggregate a m o u n t of a n y p a y m e n t s u n d e r subsection (g)(4) during such year.

y.
K

"(4) T E R M I N A T I O N ASSESSMENTS.—
"(A) ASSESSMENT AUTHORIZED.—The F i n a n c i n g Corpora-

^

. V.
• &^i 5 ^^-J y:t

12 use 1727.

Post, p. 601.

tion shall, with t h e approval of t h e Board, assess a termination assessment on any insured institution which ceases
j->
to be an insured institution.
"(B) MAXIMUM AMOUNT OF ASSESSMENT.—The amount of
i'
the assessment on any institution under subparagraph (A)
J -i
shall be the amount which is equal to the sum of—
"(i) the amount which is equal to 2 times the last
annual insurance premium payable by such institution
under section 404(b) of the National Housing Act
(including the amount of any assessment imposed
under paragraph (1) of this subsection in lieu of any
such premium); and
"(ii) the amount which is the product of—
"(I) the aggregate amount of all accounts of in^ ^
^
^ '•
'
sured members of such institution (as of the date
the institution ceases to be an insured institution);
^
and
"(II) 2 times the rate (expressed as an annual
rate) at which the supplemental assessment under
Rtoi - :i>in
x
section 404(c) of the National Housing Act was
assessed against insured institutions by the Fed'^^
eral Savings and Loan Insurance Corporation in
>
^
1986.
"(C) REDUCTION IN ASSESSMENT ALLOWED FOR WEAKENED

tKti

INSTITUTIONS.—The amount of any assessment which the
Financing Corporation may otherwise impose under this
paragraph on an institution (which ceases to be an insured
institution) may be reduced by such amount as the Financing Corporation, with the approval of the Board, may deem
appropriate when—
"(i) the institution poses a substantial risk to the
assets of the Federal Savings and Loan Insurance Corporation; and
"(ii) such reduction is necessary to assist in the sale
or other disposition of the institution.
"(D) TIME FOR PAYING ASSESSMENT.—
"(i) DUE WITHIN 30 DAYS.—If an

to .. i t , .

Yi©rti »f \
:^

assessment is imposed on an institution under subparagraph (A), the
institution shall be obligated to pay such assessment
before the end of the 30-day period beginning on the
date on which such institution ceases to be an insured
institution.
"(ii)

SEMIANNUAL INSTALLMENTS WITH INTEREST.—

Notwithstanding the requirement of clause (i), an
institution may elect to pay the amount of any assess-

PUBLIC LAW 100-86—AUG. 10, 1987

''-''Ar € ;

101 STAT. 593

ment imposed under subparagraph (A) in semiannual
installments during the period beginning no later than
the end of the 30-day period referred to in clause (i) and
ending no later than the end of the 2-year period
beginning on the date such assessment is imposed,
together with interest accruing on the unpaid balance
of such amount at a variable rate equal to the sum of^
"(I) the bond equivalent yield on 6-month United
States Treasury bills; and
"(II) 100 basis points.
"(E) EXIT FEE EQUAUZATION.—If any institution described

in subparagraph (F) paid any exit fee, or the equivalent
thereof (as determined by the Corporation), on or before the
date of the enactment of the Federal Savings and Loan
Insurance Corporation Recapitalization Act of 1987, the
Corporation shall repay to such institution an amount
equal to the amount by which the amount of such fee
exceeds the amount which such institution would be required to pay if the amount of such fee were determined
under this paragraph as of the date of the enactment of this
Act.

. ^ . ^
'"

"(F) PROVISIONS APPUCABLE TO CERTAIN INSTITUTIONS.—

t"
'
d.
Oif
«. a

^,
tjf/t
'

Except as provided in subparagraph (E), no eissessment
under this paragraph or insurance premium under section
407(d) of the National Housing Act may be imposed on an Post, p. 602.
insured institution which, on or before March 31, 1987,
had—
"(i) its status as an insured institution terminated
voluntarily, involuntarily, or by operation of law in
connection with a conversion into, merger with, acquisition by, consolidation with, reorganization into, or
combination by any means with, an institution the
deposits of which are insured by the Federal Deposit
Insurance Corporation;
"(ii) filed an application or notice with any State
banking agency or authority, or with the Comptroller
of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Corporation or the Federeil Home
Loan Bank Board pursuant to a transaction which,
upon consummation thereof, will result in the termination of the institution's status as an insured institution in connection with its conversion into, merger
with, acquisition by, consolidation with, reorganization
into, or combination by any means with, an institution
the deposits of which are insured by the Federal Deposit Insurance Corporation; or
"(iii) entered into a letter of intent or a written
memorandum of understanding, pursuant to a transaction which will result in the termination of the
institution's status as an insured institution in connection with its conversion into, merger with, acquisition
by consolidation with, reorganization into, or combination by any means with, an institution the deposits of
which are insured by the Federal Deposit Insurance
Corporation.

101 STAT. 594
Michigan.

PUBLIC LAW 100-86—AUG. 10, 1987
"(G) ADDITIONAL PROVISION.—Notwithstanding any other
provision of law, the Federal Savings and Loan Insurance
Corporation shall repay to Comerica, Inc. of Detroit, Michigan, an amount equal to any exit fee or equivalent thereof
paid by Comerica, Inc.
"(5) PAYMENT TO FINANCING CORPORATION.—All assessments
assessed by the Financing Corporation under paragraph (1), (2),
or (4) shall be paid to the Financing Corporation.

"(g) USE AND DISPOSITION OF ASSETS OF THE FINANCING CORPORATION NOT INVESTED IN F S L I C —

Post, p. 597.

12 use 1454,
1455.

"(1) IN GENERAL.—Subject to such regulations, restrictions,
and limitations as may be prescribed by the Board, assets of the
Financing Corporation, which are not invested in capital certificates or capital stock issued by the Federal Savings and Loan
Insurance Corporation under section 402(b)(1)(A) of the National
Housing Act, shall be invested in—
"(A) direct obligations of the United States;
-rt
«(g) obligations, participations, or other instruments of,
or issued by, the Federal National Mortgage Association or
the Government National Mortgage Association;
"(C) mortgages, obligations, or other securities for sale by,
^ ' ' or which have been disposed of by, the Federal Home Loan
Mortgage Corporation under section 305 or 306 of the Federal Home Loan Mortgage Corporation Act; or
"(D) any other security in which it is lawful for fiduciary
and trust funds to be invested under the laws of any State.
^

"(2)

SEGREGATED ACCOUNT FOR ZERO COUPON INSTRUMENTS

** HELD TO ASSURE PAYMENT OF PRINCIPAL.—The Financing Cor**
poration shall invest in, and hold in a segregated account,
noninterest bearing instruments—
"(A) which are securities described in paragraph (1); and
"
"(B) the total of the face amounts (the amount of principal payable at maturity) of which is approximately equal
^^^, ,,
to the aggregate amount of principal on the obligations of
^•>x-. i
^jjg Financing Corporation,
to assure the repayment of principal on obligations of the
Financing Corporation.
"(3)

DOLLAR AMOUNT UMITATION ON INVESTMENT IN ZERO

COUPON INSTRUMENTS FOR SEGREGATED ACCOUNT.—The aggregate amount invested by the Financing Corporation under paragraph (2) shall not exceed $2,200,000,000 (as determined on the
b£isis of the purcheise price).
"(4) EXCEPTION FOR PAYMENT OF ISSUANCE COSTS, INTEREST,

AND CUSTODIAN FEES.—Notwithstanding the requirements of
I paragraph (1), the assets of the Financing Corporation referred
to in paragraph (1) which are not invested under paragraph (2)
may be used to pay—
"(A) issuance costs;
"(B) any interest on (and any redemption premium with
respect to) any obligation of the Financing Corporation; and
"(C) custodian fees.
"(5) DEFINITIONS.—For purposes of this subsection—
"(A) ISSUANCE COSTS.—The term'issuance costs'—
"(i) means issuance fees and commissions incurred by
the Financing Corporation in connection with the issu-

PUBLIC LAW 100-86—AUG. 10, 1987
i %. i

101 STAT. 595

ance or servicing of any obligation of the Financing
Corporation; and
"(ii) includes legal and accounting expenses, trustee
and fiscal and paying agent charges, costs incurred in
connection with preparing and printing offering materials, and advertising expenses, to the extent that any
such cost or expense is incurred by the Financing
Corporation in connection with issuing any obligation.
"(B) CUSTODIAN FEES.—The term 'custodian fee' means—
"(i) any fee incurred by the Financing Corporation in
connection with the transfer of any security to, or the
maintenance of any security in, the segregated account
established under paragraph (2); and
"(ii) any other expense incurred by the Financing
Corporation in connection with the establishment or
maintenance of such account.

L" '.u'"

fi -'

"(h)
MISCELLANEOUS PROVISIONS RELATING TO FINANCING
CORPORATION.—
"(1) TREATMENT FOR CERTAIN PURPOSES.—Except as provided

•

in subsection (e)(8)(B), the Financing Corporation shall be
treated as a Federal Home Loan Bank for purposes of sections
" '^
13 and 23.
12 use 1433,
"(2) FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL 1443.

AGENTS.—The Federal Reserve banks are authorized to act as
depositaries for or fiscal agents or custodians of the Financing
Corporation.
"(3)

APPLICABILITY OF CERTAIN PROVISIONS RELATING TO

GOVERNMENT CORPORATION.—Notwithstanding the fact that no
Government funds may be invested in the Financing Corporation, the Financing Corporation shall be treated, for purposes of
sections 9105, 9107, and 9108 of title 31, United States Code, as a
mixed-ownership Government corporation which has capital of
the Government,
"(i) FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION INDUSTRY ADVISORY COMMITTEE.—

"(1) ESTABLISHMENT.—There is hereby established the Federal
Savings and Loan Insurance Corporation Industry Advisory
Committee (hereinafter in this subsection referred to as the
'Committee').
"(2) MEMBERSHIP.—

. j^

-,.. .

"(A) APPOINTMENT.—The Committee shall consist of 13
members selected as follows:
"(i) 1 member appointed by the Chairman of the
Board from among individuals who are officers of insured institutions and who are not members of the
Board or employees of the Board, the Federal Savings
and Loan Insurance Corporation, or the Board of Directors of any Federal Home Loan Bank.
"(ii) 1 member elected from each Federal Home Loan
Bank district (by the members of the Board of Directors
of each such bank who were elected by the members of
such bank) from among individuals who are officers of
insured institutions.
"(B) TERMS.—Members shall be appointed or elected for
terms of 1 year.

.

101 STAT. 596

PUBLIC LAW 100-86—AUG. 10, 1987

3Jli:>

Reports.

:^'

Post, p. 603.
.AD

OJ

"(C) CHAIRPERSON.—The member appointed under
subparagraph (A)(i) shall be the chairperson of the
Committee.
"(D) VACANCIES.—Any vacancy on the Committee shall
be filled in the manner in which the original appointment
was made.
"(E) PAY AND EXPENSES.—Members of the Committee
shall serve without pay but each member of the Committee
shall be reimbursed, in such manner as the Board may
prescribe by regulation, by the Federal Home Loan Bank
which elected such member (and, in the case of the member
appointed by the Chairman of the Board, by the Board) for
expenses incurred in connection with attendance of such
members at meetings of the Committee.
"(F) MEETINGS.—The Committee shall meet from time to
time at the call of the chairperson or a majority of the
members.
"(3) DUTIES OF THE COMMITTEE.—The duties of the Committee

are as follows:
"(A) To review the reports and budgets prepared pursuant to section 402(k) of the National Housing Act and any
other matter which the Board may present for the Committee's consideration.
"(B) To confer with the Board on the reports, budgets,
and other matters reviewed under subparagraph (A).
"(C) To prepare written comments and recommendations
for the Board and the Federal Savings and Loan Insurance
Corporation with respect to the reports, budgets, and other
matters reviewed under subparagraph (A) (which shall be
submitted to the Board in a timely manner after each
meeting).
"(4) ANNUAL REPORT.—

"(A) REQUIRED.—Not later than January 15 of each year,
the Committee shall submit a report to the Committee on
i'Ci
Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate.
;'
"(B) (CONTENTS.—The report required under subparagraph (A) shall describe the activities of the Committee
during the preceding year and the reports and rec„
ommendations made by the Committee to the Board and
'^
the Federal Savings and Loan Insurance Corporation
during such year.
"(5) REGULATIONS.—The Board shall prescribe such regulations as the Board determines to be appropriate to avoid conflicts of interest with respect to the disclosure to and use by
members of the Committee of information relating to the Board,
the Federal Savings and Loan Insurance Corporation, the Federal Home Loan Banks, and the Federal Asset Disposition
Association.
"(6) FEDERAL ADVISORY COMMITTEE ACT DOES NOT APPLY.—The
5 u s e app.

Federal Advisory Committee Act shall not apply to the
Committee.
"(7) TERMINATION.—The Committee shall terminate when the
Financing Corporation terminates under subsection (j).
"(j) TERMINATION OF THE FINANCING CORPORATION.—

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 597

"(1) IN GENERAL.—The Financing Corporation shall be dissolved, as soon as practicable, after the earlier of—
"(A) the date by which all stock purchased by the Financing Corporation in the Federal Savings and Loan Insurance
Corporation has been retired; or
.,,,
"(B) December 31, 2026.
"(2) BOARD AUTHORITY TO CONCLUDE THE AFFAIRS OF FINANCING

CORPORATION.—Effective on the date of the dissolution of the
Financing Corporation under paragraph (1), the Board may
exercise, on behalf of the Financing Corporation, any power of
the Financing Corporation which the Board determines to be
necessary to settle and conclude the affairs of the Financing
Corporation.
"(k) REGULATIONS.—The Board may prescribe such regulations as
may be necessary to carry out the provisions of this section, including regulations defining terms used in this section.
(1) DEFINITIONS.—For purposes of this section—
"(1) INSURED INSTITUTION.—The term 'insured institution' has
^ the meaning given to such term by section 401(a) of the National Housing Act.
12 USC 1724.
"(2) INSURED MEMBER.—The term 'insured member' has the
meaning given to such term by section 401(b) of the National
Housing Act.
"(3) DIRECTORATE.—The term 'Directorate' means the direc,
torate established in the manner provided in subsection (b)(1) to
manage the Financing Corporation.".
SEC. 303. MIXED OWNERSHIP GOVERNMENT CORPORATION.

Section 9101(2) of title 31, United States Code, is amended by
adding at the end thereof the following new subparagraph:
"(K) ThelFinancing Corporation.".
SEC. 304. RECAPITALIZATION OF FSLIC.

Section 402(b) of the National Housing Act (12 U.S.C. 1725(b)) is
amended to read as follows:
"(b) ISSUANCE AND SALE OF CAPITAL CERTIFICATES AND STOCK TO
FINANCING CORPORATION.—
"(1) AUTHORIZATION TO ISSUE.—

.,,

"(A) I N GENERAL.—Notwithstanding any other provision
of law, the Corporation may issue—
"(i) nonredeemable capital certificates; and
"(ii) redeemable nonvoting capital stock.

^

"(B) REQUIREMENT RELATING TO AMOUNT OF STOCK.—The

^j
^

,

aggregate amount of stock issued by the Corporation under
subparagraph (A)(ii) shall be equal to the aggregate amount
of the investments made by the Federal Home Loan Banks
in the capital stock of the Financing Corporation under
section 21 of the Federal Home Loan Bank Act.
Ante, p. 585.
"(C)

^
"s.>^

CERTIFICATES AND STOCK MAY BE SOLD ONLY TO

FINANCING CORPORATION.—Capital certificates and stock
issued under subparagraph (A) may be sold only to the
Financing Corporation in the manner and to the extent
provided in section 21 of the Federal Home Loan Bank Act
and this subsection.
"(D) PROCEEDS OF SALE ARE PART OF PRIMARY RESERVE.—

The proceeds of any sale of capital certificates or stock
under this paragraph shall Be considered part of the pri-

101 STAT. 598

PUBLIC LAW 100-86—AUG. 10, 1987
mary reserve established by the Corporation pursuant to
section 404(a).
"(E) No DIVIDENDS.—The Corporation shall pay no dividends on any capital certificates or stock issued under this
paragraph.

12 use 1727.

"(2) EQUITY RETURN ACCOUNT.—

"(A) I N GENERAL.—The Corporation shall establish and
maintain (until all capital stock issued under subparagraph
(A)(ii) of paragraph (1) has been paid off and retired) an
equity return account—
"(i) which shall consist only of amounts contributed
in accordance with the requirements of subparagraph
t^--—
(B);
"(ii) which shall not be treated as reserves of the
"
Corporation; and
"(iii) the earnings accruing in which shall be transferred in the manner provided in subparagraph (D).
"(B) CONTRIBUTIONS TO ACCOUNT.—
"(i) No CONTRIBUTION IF RESERVES-TO-ACCOUNTS RATIO

^ , ..
-*'

_,^ ,^, ,
;'':, '",

IS LESS THAN 0.5 PERCENT.—No Contribution shall be
made to the equity reserve account established pursuant to subparagraph (A) in any year in which the
reserves-to-accounts ratio is less than 0.5 percent.
"(ii)

ANNUAL CONTRIBUTIONS REQUIRED.—Except

as

provided in clause (i), the Corporation shall make contributions to the equity reserve account established
pursuant to subparagraph (A)—
"(I) at the end of each year beginning after 1996
. - , ,«.,
through the final payoff year (as defined in clause
' -• > :\
(vii)); and
"(II) in amounts determined under clauses (iii),
(iv), (v), and (vi) of this subparagraph,
"(iii) AMOUNT OF PRIMARY CONTRIBUTION.—The pri., .
mary contribution to the equity return account for any
year for which a contribution is required to be made
shall be the amount determined by dividing—
' "'
"(I) the aggregate amount of capital stock issued
by the Corporation and purchased by the Financing Corporation under paragraph (1)(A); by
•>''••••'.''••
"(II) the number of years between the first year
beginning after 1996 in which the reserves-toaccounts ratio is equal to or greater than 0.5 percent and the final payoff year (taking into account
the first and last year described).
"(iv) AMOUNT OF ADDITIONAL CONTRIBUTION ALLOWED
IF RESERVES-TO-ACCOUNTS RATIO DOES NOT EXCEED 1.25

'"*'
'•''

^

.

'
,

"^'

PERCENT.—In any year in which the reserves-to-accounts ratio is equal to or greater than 1 percent but
less than 1.25 percent, the Federal Home Loan Bank
Board may require the Corporation to make an additional contribution of an amount not to exceed the
amount determined by dividing—
"(I) the investment return amount (as defined in
clause (viii)) computed at an annual compound rate
not to exceed 6 percent; by
"(II) the number of years between the first year
beginning after 1996 in which the reserves-to-

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 599

accounts ratio was equal to or greater than 1 percent and the final payoff year (taking into account
the first and last year described).

i-i't;

"(v) AMOUNT OF ADDITIONAL CONTRIBUTION ALLOWED
IF RESERVES-TO-ACCOUNTS RATIO DOES NOT EXCEED 1.75

v;

fe, ^ r

PERCENT.—In any year in which the reserves-to-accounts ratio is equal to or greater than 1.25 percent but
less than 1.75 percent, the Federal Home Loan Bank
Board may require the Corporation to make an additional contribution of an amount not to exceed the
amount determined by dividing—
"(I) the investment return amount computed at
an annual compound rate not to exceed 8 percent,
minus the sum of any amounts contributed under
clause (iv); by
"(II) the number of years between the first year
beginning after 1996 in which the reserves-toaccounts ratio was equal to or greater than 1.25
percent and the final payoff year (taking into account the first and last year described),
"(vi) AMOUNT OF ADDITIONAL CONTRIBUTION ALLOWED
IF RESERVES-TO-ACCOUNTS RATIO EXCEEDS 1.75 PERCENT.—

„

'^

i '

*" '

In any year in which the reserves-to-accounts ratio is
equal to or greater than 1.75 percent, the Federal
Home Loan Bank Board may require the Corporation
to make an additional contribution of an amount not to
exceed the amount determined by dividing—
"(I) the investment return amount computed at
an annual compound rate not to exceed 10 percent,
minus the sum of any amounts contributed under
clause (iv) or (v); by
"(II) the number of years between the first year
beginning after 1996 in which the reserves-toaccounts ratio was equal to or greater than 1.75
percent and the final payoff year (taking into account the first and last year described).

;:'. i -3 J si

"(vii) FINAL PAYOFF YEAR DEFINED.—For purposes of

this subparagraph, the term 'final payoff year means
the year of maturity of the last maturing obligation of
the Financing Corporation (which was issued under
section 21 of the Federal Home Loan Bank Act and Ante, p. 585.
matures before January 1, 2027).
"(viii) INVESTMENT RETURN AMOUNT.—For purposes

art
J
-K!A

If;»

I

of clauses (iv), (v), and (vi), the term 'investment return
amount' means the amount which would be realized on
the aggregate amount invested by the Financing Corporation in capital stock issued by the Corporation
under paragraph (1) over the period of the investment
if the return on the investment is computed at the rate
described in subclause (I) of the respective clauses.
" ( C ) INVESTMENT OF AMOUNTS IN ACCOUNT.—Amounts

accumulating in the equity return account may be invested
in such manner as the Corporation determines.
"(D) TRANSFER OF EARNINGS TO PRIMARY RESERVE.—Earn-

r

ings accruing on any investment (under subparagraph (O)
of amounts in the equity return account shall be transferred to the primary reserve account of the Corporation

101 STAT. 600
12 use 1727.

PUBLIC LAW 100-86—AUG. 10, 1987
\^^''
'^'

uM

' .
Ante, p. 585.
,,,

established pursuant to section 404(aj as such earnings are
realized by the Corporation and shall not be treated as
amounts in the account.
«^g^ RETIREMENT OF CAPITAL STOCK USING BALANCE IN

ACCOUNT.—Upon maturity of all obligations of the Financing Corporation under section 21 of the Federal Home Loan
Bank Act, the Corporation shall pay off and retire any
capital stock issued under paragraph (IXAXii) using only
amounts accumulated in the equity return account.
"(F) RESERVES-TO-ACCOUNTS RATIO DEFINED.—For purposes

l«

of this paragraph, the term 'reserves-to-accounts ratio'
means, with respect to any year, the amount determined by
dividing—
"(i) the amount of reserves of the Corporation (deter-•i ;/ *'
mined as of December 31 of the preceding year); by
"(ii) the aggregate amount of all accounts of all of its
insured members (determined as of such date).
"(3) FINANCING CORPORATION DEFINED.—For purposes of this
subsection, the term 'Financing Corporation' means the Financing Corporation established under section 21 of the FedereJ
Home Loan Bank Act.
"(4) No REDUCTION OR SUSPENSION OF INSURANCE PREMIUMS

WHILE STOCK IS OUTSTANDING.—Notwithstanding any other
provision of law, the provisions of subsections (bX2) and (g) of
section 404 shall not apply as long as any share of capital stock
issued under paragraph (IXAXii) is outstanding.".
12 use 1727.

SEC. 305. FSLIC AUTHORITY TO CHARGE PREMIUMS REDUCED BY
AMOUNT OF FINANCING CORPORATION ASSESSMENTS.
Section 404 of the National Housing Act is amended by adding at
the end thereof the following new subsection:
"(j) AUTHORITY TO CHARGE PREMIUMS REDUCED BY AMOUNT OF
FINANCING CORPORATION ASSESSMENTS.—Notwithstanding any other

., ^ ,,

provision of this section, the sum of—
"(1) the amount of any premium required to be paid by any
insured institution under subsection (bXD; and
"(2) the amount of any premium authorized to be assessed by
the Corporation under subsection (c) with respect to such
institution,
for any period shall be reduced by the amount of any assessment
paid for such period by such insured institution to the Financing
Corporation pursuant to section 21(f) of the Federal Home Loan
Bank Act.".
SEC. 306. MISCELLANEOUS PROVISIONS.
(a) FEDERAL HOME LOAN BANK DIVIDENDS.—Section 16 of

the

Federal Home Loan Bank Act (12 U.S.C. 1436) is amended by adding
at the end thereof the following new subsection:
"(c) EXCEPTION IN CASE OF LOSSES IN CONNECTION WITH FINANCING CORPORATION STOCK.—

"(1) I N GENERAL.—Notwithstanding subsection (a) of this section, if—
"(A) a Federal Home Loan Bank incurs a chargeoff or an
•
^
expense in connection with such bank's investment in the
JW
L
stockof the Financing Corporation under section 21;

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 601

"(B) the Board determines there is an extraordinary need
for the member institutions of the bank to receive dividends; and
"(C) the bank has reduced all reserves (other than the
reserve account required by the first 2 sentences of subsection (a)) to zero,
the Board may authorize such bank to declare and pay dividends out of undivided profits (as such term is defined in section
21(dX7)) or the reserve account required by the first 2 sentences
of subsection (a).

Ante, p. 585.

"(2) REQUIREMENTS OF SECTION 21 NOT AFFECTED.—Notwith-

standing any pajnnent of dividends by any Federal Home Loan
Bank pursuant to an authorization by the Board under paragraph (1), the applicable provisions of section 21 shall continue
to apply with respect to such bank, and to such bank's investment in the Financing Corporation, in the same manner and to
the same extent as if such payment had not been made.".
(b) CONFORMING AMENDMENT.—Section 402(h) of the National

Housing Act (12 U.S.C. 1725(h)) is amended—
(1) by striking out "After the effective date" and inserting in
lieu thereof "(1) After the effective date"; and
(2) by adding at the end thereof the following new paragraph:
"(2) The first three sentences of paragraph (1) shall not apply to
stock issued by the Corporation to the Financing Corporation under
subsection (bXlXA).".
(c) LIMITATION ON SPECIAL ASSESSMENT.—Section 404(c) of the
National Housing Act (12 U.S.C. 1727(c)) is amended—
(1) by striking out "(c) The Corporation" and inserting in lieu
thereof "(cXD SPECIAL ASSESSMENT.—Subject to paragraph (2),

the Corporation"; and
(2) by adding at the end thereof the following new paragraph:
"(2) LIMITATIONS ON AMOUNT OP ASSESSMENT.—The amount of any

additional premium assessed by the Corporation against any insured
institution under paragraph (1) in any of the following years shall
not exceed the amount listed in connection with each such year in
the following table (unless the Federal Home Loan Board determines that severe pressures on the Corporation exist which necessitate an infusion of additional funds):
The amount of the additional premium
may not exceed:
%8 of 1 percent of the total amount of
the accounts of the insured members
of such institution;
1988
yi2 of 1 percent of the total amount of
the accounts of the insured members
of such institution;
1989
Vie of 1 percent of the total amount of
the accounts of the insured members
of such institution;
1990
V 4 of 1 percent of the total amount of
4
the accounts of the insured members
of such institution;
1991
Vis of 1 percent of the total amount of
the accounts of the insured members
of such institution.".
(d) PRIORFTY OF SECURED INTERESTS.—Section 10 of the Federal

"For yean
1987

Home Loan Bank Act (12 U.S.C. 1430) is amended by adding at the
end thereof the following new subsection:

, A

*;

101 STAT. 602

PUBLIC LAW 100-86—AUG. 10, 1987
"(e) PRIORITY OF CERTAIN SECURED INTERESTS.—Notwithstanding

?^ 1 .: s

any other provision of law, any security interest granted to a
Federal Home Loan Bank by any member of any Federal Home
Loan Bank or any affiliate of any such member shall be entitled to
priority over the claims and rights of any party (including any
receiver, conservator, trustee, or similar party having rights of a
lien creditor) other than claims and rights that—
"(1) would be entitled to priority under otherwise applicable
law; and
"(2) are held by actual bona fide purchasers for value or by
actual secured parties that are secured by actual perfected
security interests.".
(e) COORDINATION OF TERMINATION ASSESSMENT WITH FINAL
INSURANCE PREMIUM.—Section 407(d) of the National Housing Act

(12 U.S.C. 1730(d)) is amended—
(1) by striking out "(d)" and inserting in lieu thereof "(d)(1)
FINAL INSURANCE PREMIUM"; and

(2) by adding at the end thereof the following new paragraph:
"(2) EXCEPTION RELATING TO FINAL INSURANCE PREMIUM.—If an

Ante, p. 585.

institution (whose status as an insured institution is terminated)
pays an assessment to the Financing Corporation under section
21(f)(4) of the Federal Home Loan Bank Act with respect to such
termination, the institution shall not be obligated to pay the final
insurance premium described in the third sentence of paragraph (1).".
(f) SECTION 404(f) DOES NOT APPLY TO INSTITUTIONS WHICH CEASE
TO BE FSLIC INSURED.—Section 404(f) of the National Housing Act
(12 U.S.C. 1727(f)) is amended—
(1) by striking out "(f) I f and inserting in lieu thereof "(f)(1)
PRO RATA DISTRIBUTION ON TERMINATION OF INSURED STATUS.—

12 use 1730

I f ; and
(2) by adding at the end thereof the following new paragraph:
"(2) EXCEPTION.—In the case of an institution which—
"(A) ceases to be an insured institution; and
"(B) is required to pay an assessment to the Financing Corporation under section 21(f)(4) of the Federal Home Loan Bank
Act with respect to the termination of such insured status,
paragraph (1), the last sentence of subsection (eXD, and subsection
(i)(4) shall not apply with respect to such institution.".
(g) SECONDARY RESERVE.—Section 404 of the National Housing Act
(12 U.S.C. 1727) is amended by striking out subsection (h).
(h) 1-YEAR PROHIBITION ON TERMINATION OF FSLIC INSURED

note.

STATUS.—

(1) I N GENERAL.—No association or insured institution may
take any action which would result in the voluntary termination of its status as an insured institution during the 1-year
period beginning on the date of the enactment of this Act.
(2) EXCEPTION.—Paragraph (1) shall not apply with respect to
any association or institution described in section 21(f)(4)(F) of
the Federal Home Loan Bank Act (as added by section 302 of
this title).
(3) AUTHORITY OF FSLIC TO ARRANGE EMERGENCY ACQUISITIONS

12 use 1729
1730a.

NOT AFFECTED.—Paragraph (1) shall not affect the authority of
the Federal Savings and Loan Insurance Corporation to arrange
for the acquisition of an association or insured institution under
section 406(f) or 408(m) of the National Housing Act.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 603

(4) DEFINITIONS.—For purposes of this subsection—
(A) ASSOCIATION.—The term "association" has the meaning given to such term under section 2(d) of the Home
Owners' Loan Act of 1933.
12 use 1462.
(B) INSURED INSTITUTION.—The term "insured institution" has the meaning given to such term in section 401(a)
of the National Housing Act.
12 use 1724.
(i) FSLIC REPORT REQUIREMENTS.—Section 402 of the National
Housing Act is amended by adding at the end thereof the following 12 use 1725.
new subsection:
"(k) REPORTS AND BUDGETS REQUIRED.—
"(1) QUARTERLY REPORTS AND BUDGETS.—Before the end of the

2-week period beginning on the first day of each calendar
quarter, the Corporation shall complete a detailed written
report and budget describing and explaining—
"(A) planned or anticipated activities and estimates of
receipts and expenditures for such calendar quarter; and
"(B) the activities, receipts, and expenditures for the
preceding calendar quarter.
j.

"(2) SEMIANNUAL REPORT.—Before the end of the 30-day

period beginning on the first day of each semiannual period, the
Corporation shall complete a detailed written report and budget
describing and explaining the activities, receipts, and expenditures for the preceding semiannual period.
"(3) SUBMISSION OF SEMIANNUAL REPORT TO CONGRESS.—The

Corporation shall submit a copy of each semiannual report
required under paragraph (2) to the Committee on Banlang,
Finance and Urban Affairs of the House of Representatives and
the Committee on Banking, Housing, and Urban Affairs of the
Senate.
"(4) ACTIVITIES, ETC., OF FEDERAL ASSET DISPOSITION ASSOCIA-

TION.—Activities, receipts, and expenditures of the Federal
Asset Disposition Association (or any successor thereto) shall be
included in any report or budget required under this subsection.
"(5) DEFINITIONS.—For purposes of this subsection—
"(A) ACTIVITIES.—The term 'activities' includes any activity engaged in with respect to any insured institution in
financial difficulty.
"(B) SEMIANNUAL PERIOD.—The term 'semiannual period'
X):x', ; ' means—
"(i) the period beginning on January 1 of any cal-ijni. 2i
endar year and ending June 30 of such year; and
"(ii) the period beginning on July 1 of any calendar
year and ending December 31 of such year.".
SEC. 307. SECONDARY RESERVE PROVISIONS.
(a) OFFSETS AGAINST PREMIUMS AUTHORIZED.—Section 404(e) of the
National Housing Act (12 U.S.C. 1727(e)) is amended—
(1) by striking out "(e) The Corporation" and inserting in lieu
thereof "(e)(1) The Corporation"; and
(2) by adding at the end thereof the following new paragraph:
"(2) SECONDARY RESERVE OFFSETS AGAINST PREMIUMS.—
"(A) OFFSETS IN PREMIUM YEARS BEGINNING BEFORE 1993.—

Subject to the maximum amount limitation contained in
subparagraph (B) and notwithstanding any other provision of
, , law, an insured institution may offset such institution's pro rata
share of the statutorily prescribed amount against any pre-

)

\

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 604

mium assessed against such insured institution under subsection (c) for any premium year beginning after 1987 and before
1993.
"(B) ANNUAL MAXIMUM AMOUNT UMITATION.—The amount of
any offset allowed for any insured institution under subparagraph (A) for any premium year referred to in subparagraph (A)
shall not exceed an amount which is equal to 20 percent of such
institution's pro rata share of the statutorily prescribed amount
(as computed for the calendar year in which such premium year
begins).
"(C) OFFSETS IN PREMIUM YEARS BEGINNING AFTER 1992.—
Notwithstanding any other provision of law, an insured institution may offset such institution's pro rata share of the statutorily prescribed amount against any premium assessed against
such insured institution under this section for any premium
year beginning after 1992.

•* j'
''

''
"^

•

"(D) STATUTORILY PRESCRIBED AMOUNT DEFINED.—For purposes

of this paragraph, the term 'statutorily prescribed amount'
means—
"(i) with respect to calendar year 1988, the sum of
$823,705,000; and
"(ii) with respect to any calendar year beginning after
1988, the sum contained in clause (i) minus the aggregate
amount of offsets made by all insured institutions before
the beginning of the calendar year for which such computation is being made.

^
:

"(E) INSURED INSTITUTION'S PRO RATA AMOUNT.—For purposes

"
:

of this paragraph, an insured institution's pro rata share of the
statutorily prescribed amount is the percentage which is equal
to such institution's pro rata share of the secondary reserve as
determined under this subsection on the day before the date on
which the Corporation ceased to recognize the secondary
reserve.
"(F) PREMIUM YEAR DEFINED.—For purposes of this paragraph,
the term 'premium year' means, with respect to any insured
institution, the 1-year period for which a premium is assessed
against such insured institution under subsection (b) or (c).".

I
-

(b) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) Section 404(dXl) of the National Housing Act (12 U.S.C.
1727(d)) is amended—
(A) by striking out the second sentence of subparagraph (A);
(B) by striking out paragraph (B); and
"''
(C) by striking out "(1)(A)" and inserting in lieu thereof

I

,,,:

•

"(1)".

(2) Section 404(g) of the National Housing Act (12 U.S.C.
1727(g)) is amended by striking out the second sentence.

Thrift Industry
Recovery Act

TITLE IV—THRIFT INDUSTRY RECOVERY
PROVISIONS

12 use 226 note. SEC. 401. SHORT TITLE.
This title may be cited as the "Thrift Industry Recovery Act".

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 605

SEC. 402. THRIFT INSTITUTION ACCOUNTING, APPRAISAL, AND RESERVE
STANDARDS.

(a) FEDERALLY CHARTERED THRIFTS.—The Home Owners' Loan Act 12 use 1468.
of 1933 (12 U.S.C. 1461 et seq.) is amended by redesignating section 9
as section 11 and by inserting after section 8 the following new
section:
"SEC. 9. ACCOUNTING PRINCIPLES
REQUIREMENTS.

AND

OTHER

STANDARDS

AND

12 USC 1467.

"(a) IN GENERAL.—The Board shall prescribe regulations which Regulations.
make the following provisions applicable to associations for regulatory purposes:
"(1) ASSET CLASSIFICATION SYSTEM.—An asset classification
system shall be established which is consistent with the asset
classification system established by the Federal banking agencies, except that such system shall provide that the principal
supervisory agent of the Board for each Federal home losm bank
district may, in such agent's discretion—
"(A) require an £issociation to create additional general
loss reserves on the basis of an evaluation of such institution's assets; or
L>.M"(B) determine whether a restructured loan gisset which
is in a nonperforming status or with respect to which the
borrowers have otherwise failed to remain in compliance
with the repayment terms at the time of such restructuring
shall be classified.
"(2) APPRAISAL STANDARD.—An appraisal standard shall be
established which is consistent with the appraisal standard
established by the Federal banking agencies.
"(3) REAPPRAISAL UPON FORECLOSURE.—Generally accepted Real property.
accounting principles shall apply to any reappraisal of the value
of property securing any loan or other extension of credit upon
any foreclosure on such property by an association (or any other
action by the association in lieu of foreclosure).
"(4) AUTHORIZING USE OF FASB
RESTRUCTURING.—If—

15

FOR TROUBLED DEBT

"(A) an £issociation engages in troubled debt restructuring with respect to any loan by the association; and
"(B) the troubled debt restructuring complies with Statement of Financial Accounting Standards Numbered 5 and
Statement of Financial Accounting Standards Numbered 15
;:>,
(as issued by the Financial Accounting Standards Board),
regulatory accounting principles shall allow the association to
account for the effects of the troubled debt restructuring and to
account for such association's investment in the original debt
f./ instrument (or other agreement which is subject to such
restructuring) in the manner provided in such statements.
Vj

"(5) CERTAIN LOAN LOSS RESERVES TREATED AS CAPITAL FOR

x^

CERTAIN PURPOSES.—Any amount which an association holds in
any account as a general loss reserve may be treated, at the
option of the association, £is capital of the sissociation for purposes of determining regulatory capital or regulatory net worth
with respect to such association, to the extent such treatment is
consistent with the procedures established by the Federal banking agencies,
(b) UNIFORM GAAP ACCOUNTING STANDARDS REQUIRED.—

ili^

'•^' '

101 STAT. 606
Regulations.

PUBLIC LAW 100-86—AUG. 10, 1987

"(D I N GENERAL.—Except a s otherwise provided in t h i s section, t h e Board shall prescribe, by regulation, uniformly
applicable accounting s t a n d a r d s t o be used by all associations
for t h e purpose of d e t e r m i n i n g compliance with a n y r u l e or
:•: regulation issued by t h e Board or t h e Federal Savings a n d Loan
I n s u r a n c e Corporation t o t h e s a m e degree t h a t generally
accepted accounting principles a r e used to d e t e r m i n e compliance w i t h rules a n d regulations of t h e Federal b a n k i n g
agencies.
"(2)

EXCEPTION

FOR CERTAIN

INSTITUTIONS

A N D TRANS-

ACTIONS.—Notwithstanding t h e r e q u i r e m e n t contained in parag r a p h (1)(A), t h e Board m a y suspend t h e application of a n y such
s t a n d a r d w i t h respect t o a n y association or t r a n s a c t i o n if—
"(A) t h e application of such s t a n d a r d t o a n association
a n d a company t h a t controls such association would result
in such association a n d company being t r e a t e d differently
t h a n a b a n k a n d such b a n k ' s holding company considered
on a consolidated basis; a n d
it. vv
"(B) t h e t r a n s a c t i o n w a s consistent w i t h generally
im^^i
accepted accounting principles w h e n such t r a n s a c t i o n w a s
completed.
"(c) ASSET EVALUATIONS.—The Board m a y n o t r e q u i r e a n association to establish reserves against, or w r i t e down t h e v a l u e of, a n y
asset in a n a m o u n t i n excess of t h e a m o u n t which would r e s u l t from
a n evaluation of such asset which is consistent w i t h generally
accepted accounting principles, except t h a t evaluations which a r e
consistent w i t h t h e practice of t h e F e d e r a l b a n k i n g agencies m a y be
used for supervisory purposes.
"(d) A C C O U N T I N G FOR SUBORDINATED D E B T A N D G O O D W I L L . — N o

> i

provision of this section shall affect t h e a u t h o r i t y of t h e Board to
authorize associations t o utilize subordinated debt a n d goodwill in
meeting reserve a n d o t h e r r e g u l a t o r y r e q u i r e m e n t s .
"(e) Loss DEFERRALS.—Notwithstanding a n y o t h e r provision of
this section—
"(1) associations m a y continue, for purposes of d e t e r m i n i n g
regulatory n e t w o r t h a n d capital, t o defer a n d amortize gains
a n d losses from t h e disposition of assets p u r s u a n t t o regulations
of t h e Board in effect before t h e e n a c t m e n t of t h e Thrift Indust r y Recovery Act; a n d
"(2) t h e u s e of such deferrals a n d amortizations, consistently
with t h e regulations referred to i n p a r a g r a p h (1), shall n o t
reduce t h e ability of a n association t o comply w i t h a n y other
r u l e issued or regulation prescribed by t h e Board.
"(f) FEDERAL B A N K I N G A G E N C Y D E F I N E D . — F o r p u r p o s e s of t h i s

section, t h e t e r m 'Federal b a n k i n g agency' m e a n s t h e Comptroller
of t h e Currency, t h e Board of Governors of t h e F e d e r a l Reserve
System, a n d t h e F e d e r a l Deposit I n s u r a n c e Corporation.".
(b) STATE CHARTERED, FEDERALLY INSURED T H R I F T S . — T i t l e IV of

12USC1730h.
Regulations.

t h e N a t i o n a l Housing Act (12 U.S.C. 1724 e t seq.) is a m e n d e d by
adding a t t h e e n d thereof t h e following new section:
"SEC. 415. ACCOUNTING PRINCIPLES AND OTHER STANDARDS AND
REQUIREMENTS.
"(a) I N GENERAL.—The Corporation shall prescribe regulations
which m a k e t h e following provisions applicable t o insured institutions for regulatory purposes:

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 607

"(1) ASSET CLASSIFICATION SYSTEM.—An asset classification
system shall be established which is consistent with the asset
classification system established by the Federal banking agencies, except that such system shall provide the principal supervisory agent of the Federal Home Loan Bank Board for each
Federal home loan bank district may, in such agent's
discretion—
"(A) require an insured institution to create additional
general loss reserves on the basis of an evaluation of such
institution's assets; or
"(B) determine whether a restructured loan asset which
is in a nonperforming status or with respect to which the
borrowers have otherwise failed to remain in compliance
with the repayment terms at the time of such restructuring
shall be classified.
"(2) APPRAISAL STANDARD.—An appraisal standard shall be
established which is consistent with the appraisal standard
established by the Federal banking agencies.
"(3)

REAPPRAISAL UPON FORECLOSURE.—Generally accepted

accounting principles shall apply to any reappraisal of the value
of property securing any loan or other extension of credit upon
any foreclosure on such property by an insured institution (or
any other action by the insured institution in lieu of foreclosure).
"(4) AUTHORIZING USE OF FASB
RESTRUCTURING.—If—

15

FOR TROUBLED DEBT

"(A) an insured institution engages in troubled debt
restructuring with respect to any loan by the insured
institution; and
"(B) the troubled debt restructuring complies with Statement of Financial Accounting Standards Numbered 5 and
Statement of Financial Accounting Standards Numbered 15
(as issued by the Financial Accounting Standards Board),
regulatory accounting principles shall allow the insured institution to account for the effects of the troubled debt restructuring
and to account for such insured institution's investment in the
original debt instrument (or other agreement which is subject to
such restructuring) in the manner provided in such statements.
"(5) CERTAIN LOAN LOSS RESERVES TREATED AS CAPITAL FOR
CERTAIN PURPOSES.—Any amount which an insured institution

holds in any account as a general loss reserve may be treated, at
the option of the insured institution, as capital of the insured
institution for purposes of determining regulatory capital or
regulatory net worth with respect to such insured institution, to
the extent such treatment is consistent with the procedures
established by the Federal banking agencies.
"(b) UNIFORM GAAP ACCOUNTING STANDARDS REQUIRED.—
"(1) IN GENERAL.—Except as otherwise provided in this section, the Corporation shall prescribe, by regulation, uniformly
applicable accounting standards to be used by all insured
institutions for the purpose of determining compliance with any
rule or regulation issued by the Corporation or the Federal
Home Loan Bank Board to the same degree that generally
accepted accounting principles are used to determine compliance with rules and regulations of the Federal banking
agencies.

n

Regulations.
^

;

101 STAT. 608

PUBLIC LAW 100-86—AUG. 10, 1987
"(2)

^
J
'\
'
'
^

EXCEPTION

FOR CERTAIN

INSTITUTIONS

AND TRANS-

ACTIONS.—Notwithstanding the requirement contained in paragraph (1)(A), the Corporation may suspend the appHcation of
any such standard with respect to any insured institution or
any transaction if—
"(A) the application of such standard to an insured
institution and a company that controls such insured
'
institution would result in such insured institution and
company being treated differently than a bank and such
bank's holding company considered on a consolidated basis;
and
"(B) the transaction was consistent with generally
accepted accounting principles when such transaction was
completed.
"(c) ASSET EVALUATIONS.—The Corporation may not require an

insured institution to establish reserves against, or write down the
value of, any asset in an amount in excess of the amount which
would result from an evaluation of such asset which is consistent
with generally accepted accounting principles, except that evaluations which are consistent with the practice of the Federal banking
agencies may be used for supervisory purposes.
"(d) ACCOUNTING FOR SUBORDINATED DEBT AND GOODWILL.—No

12 u s e 1467
note.

provision of this section shall affect the authority of the Corporation
to authorize insured institutions to utilize subordinated debt and
goodwill in meeting reserve and other regulatory requirements.
"(e) Loss DEFERRALS.—Notwithstanding any other provision of
this section—
"(1) insured institutions may continue, for purposes of determining regulatory net worth and capital, to defer and amortize
gains and losses from the disposition of assets pursuant to
*
regulations of the Corporation in effect before the enactment of
the Thrift Industry Recovery Act; and
*
"(2) the use of such deferrals and amortizations, consistently
with the regulations referred to in paragraph (1), shall not
Ji reduce the ability of an insured institution to comply with any
* other rule issued or regulation prescribed by the Corporation.
•' "(f) FEDERAL BANKING AGENCY DEFINED.—For purposes of this
section, the term 'Federal banking agency' means the Comptroller
of the Currency, the Board of Governors of the Federal Reserve
System, and the Federal Deposit Insurance Corporation.".
(c) REPORT TO CONGRESS.—Not later than the end of the 90-day
period beginning on the date of the enactment of this Act—
(1) the Federal Home Loan Bank Board shall submit a copy of
'-> the proposed regulations required to be prescribed under the
'^' amendment made by subsection (a) to the Congress; and
(2) the Federal Savings and Loan Insurance Corporation shall
submit a copy of the proposed regulations required to be pre'^
scribed under the amendment made by subsection (b) to the
Congress.
(d) EFFECTIVE DATE OF REGULATIONS.—

12 u s e 1467
note.

^

(1) I N GENERAL.—Except as provided in paragraph (2), any
regulation required to be prescribed under the amendment
made by subsections (a) and (b) shall be implemented not later
than the end of the 150-day period beginning on the date of the
enactment of this Act.
(2) UNIFORM GAAP ACCOUNTING STANDARDS.—

-IT

PUBLIC LAW 100-86—AUG. 10, 1987

f«t;

^'

.

,. , „,
f...

101 STAT. 609

(A) IN GENERAL.—Except as provided in subparagraph (B), Effective date.
the regulations required to be prescribed pursuant to
subsection (b) of the amendments made by subsections (a)
and (b) of this section shall take effect on December 31,
1987.
(B) COMPLIANCE AT A LATER DATE.—If any association or

insured institution demonstrates to the satisfaction of the
Home Loan Bank Board or the Federal Savings and Loan
Insurance Corporation, as the case may be, that it is not
feasible for such association or institution to achieve
compliance with the regulations referred to in subparagraph (A) by the date contained in such subparagraph, the
Board or Corporation may approve a plan submitted by an
association or insured institution which allows such association or institution to comply with such regulations at a
later date to the extent such later date is the earlier of—
(i) the date by which, in the determination of the
Board or Corporation, it is feasible for such association
or insured institution to achieve compliance with such
regulations; or
^..^ December 31,1993.

SEC. 403. AUDIT OF FEDERAL ASSET DISPOSITION ASSOCIATION.

Section 9105(a) of title 31, United States Code (relating to audits)
is amended by inserting at the end thereof the following new
paragraph:
"(3XA) Notwithstanding any other provision of law and under
such regulations as the Comptroller General may prescribe, the
Comptroller General shall perform a financial audit of the Federal
Asset Disposition Association on whatever basis the Comptroller
General determines to be necessary.
"(B) The Federal Asset Disposition Association shall—
"(i) make available to the Comptroller General for audit all
records and property of, or used or managed by, the Association
> <>^c,
which may be necessary for the audit; and
"(ii) provide the Comptroller General with facilities for verifying transactions with the balances or securities held by any
depositary, fiscal agent, or custodian.
"(C) For purposes of this paragraph, the term 'Federal Asset
Disposition Association' means the savings and loan association
established by the Federal Savings and Loan Insurance Corporation
under section 406 of the National Housing Act to manage and 12 USC 1729.
liquidate nonperforming assets on behalf of such Corporation in
accordance with such section.".
SEC. 404. THRIFT INDUSTRY RECOVERY REGULATIONS.

(a) FEDERALLY CHARTERED THRIFTS.—The Home Owners' Loan Act
of 1933 (12 U.S.C. 1461 et seq.) is amended by adding after section 9
(as added by section 402(a) of this title) the following new section:
"SEC. 10. THRIFT INDUSTRY RECOVERY REGULATIONS.

"(a) I N GENERAL.—The Board shall prescribe capital recovery
regulations for regulating and supervising troubled but well-managed and viable associations in a manner which will maximize the
long-term viability of the thrift industry at the lowest cost to the
Federal Savings and Loan Insurance Corporation.

12 USC 1467a.

101 STAT. 610

Minorities.

Reports.

PUBLIC LAW 100-86—AUG. 10, 1987

"(b) CAPITAL RECOVERY.—The regulations required to be prescribed under subsection (a) shall provide that an association with
net worth of 0.5 percent or more, as determined in accordance with
regulatory accounting principles, may be allowed to continue to
operate and be eligible for capital forbearance if—
"(1) the Board determines that the association's weak capital
condition is—
.
"(A) primarily the result of losses recognized on, the
;
nonperforming status of, or the failure of borrowers to
otherwise remain in compliance with the repayment terms
of, loans, or participations in loans, the value of the collateral for which has been adversely affected by economic
conditions in a designated economically depressed region;
or
"(B) primarily the result of losses recognized on, the
nonperforming status of, or the failure of borrowers to
otherwise remain in compliance with the repayment terms
of, loans, or participation in loans, made by a minority
1;
association 50 percent or more of whose loan assets are
minority loans and 50 percent or more of whose originated
loans are construction or permanent loans for 1 to 4 family
residences;
"(2) the Board determines that the association's weak capital
I
condition is not the result of imprudent operating practices,
,y, such as practices that were speculative at the time the practices
were undertaken, insider abuses, excessive operating expenses,
dividends paid by the association, or actions taken solely for the
purpose of qualifying for capital recovery under this subsection;
"(3) the Board approves a plan submitted by the association
for increasing such association's capital; and
"(4) the association—
"(A) adheres to the plan approved under paragraph (3);
and
"(B) submits regular and complete reports on such
lii
association's progress in meeting the association's goals
under such plan.
"(c) ASSOCIATIONS WITH NET WORTH OF LESS THAN 0.5 PERCENT
MAY PARTICIPATE IN CAPITAL RECOVERY.—In the regulations

.mTi

required to be prescribed under subsection (a), the Board may
provide that a well-managed association with a net worth of less
than 0.5 percent, as determined in accordance with regulatory
accounting principles, may, in the discretion of the Board, be allowed to continue to operate and be eligible for capital forbearance
if—
"(1) the conditions described in each paragraph of subsection
(a) have been met with respect to such association; and
"(2) the association has reasonable and demonstrable prospects of returning to a satisfactory capital level, as determined
by the Board.
"(d) DEFINITIONS.—For purposes of this section—
"(1) DESIGNATED ECONOMICALLY DEPRESSED REGION DEFINED.—

The term 'designated economically depressed region' means any
geographical region which the Board determines, by regulation,
to be a region within which real estate values have suffered
serious declines due to severe economic conditions, such as a
decline in energy or agricultural values or prices.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 611

"(2) MINORITY.—The term 'minority' means any Black American, Native American, Hispanic American, or Asian American.
"(3) MINORITY ASSOCIATION.—The term 'minority association'
means any association of which—
"(A) more than 50 percent of the ownership or control (of
such association) is held by minority individuals; and
"(B) more than 50 percent of the net profit or loss (of such
association) accrues to minority individuals.
"(4) MINORITY LOAN.—The term 'minority loan' means any
obligation or other extension or advance of credit which is made
to 1 or more minority individuals or to any person which is
owned or controlled by 1 or more minority individuals.",

.., , .^
^

(b) STATE CHARTERED, FEDERALLY INSURED THRIFTS.—Title IV of

the National Housing Act (12 U.S.C. 1724 et seq.) is amended by
adding after section 415 (as added by section 402(b) of this title) the
following new section:
"SEC. 416. THRIFT INDUSTRY RECOVERY REGULATIONS.

12 USC 17301.

"(a) IN GENERAL.—The Corporation shall prescribe capital recovery regulations for regulating and supervising troubled but wellmanaged and viable insured institutions in a manner which will
maximize the long-term viability of the thrift industry at the lowest
cost to the Corporation.
"(b) CAPITAL RECOVERY.—The regulations required to be prescribed under subsection (a) shall provide that an insured institution
with net worth of 0.5 percent or more, as determined in accordance
with regulatory accounting principles, may be allowed to continue to
operate and be eligible for capital forbearance if—
"(1) the Corporation determines that the insured institution's
weak capital condition is—
"(A) primarily the result of losses recognized on, the
nonperforming status of, or the failure of borrowers to
otherwise remain in compliance with the repayment terms
of, loans, or participations in loans, the value of the collateral for which has been adversely affected by economic
conditions in a designated economically depressed region;
..
or
"(B) primarily the result of losses recognized on, the Minorities. ^'* ^
nonperforming status of, or the failure of borrowers to
otherwise remain in compliance with the repayment terms
of, loans, or participation in loans, made by a minority
institution 50 percent or more of whose loan assets are
r.
minority loans and 50 percent or more of whose originated
/> ,
loans are construction or permanent loans for 1 to 4 family
residences;
"(2) the Corporation determines that the insured institution's
« weak capital condition is not the result of imprudent operating
practices, such as practices that were speculative at the time
the practices were undertaken, insider abuses, excessive operating expenses, dividends paid by the insured institution, or actions taken solely for the purpose of qualifying for capital
I recovery under this subsection;
i
"(3) the Corporation approves a plan submitted by the insured
,,
institution for increasing such institution's capital; and
J
"(4) the insured institution—
"(A) adheres to the plan approved under paragraph (3);
; I

and

91-194 O - 90 - 21 : QL.3 Part 1

101 STAT. 612

PUBLIC LAW 100-86—AUG. 10, 1987
"(B) submits regular and complete reports on such
institution's progress in meeting the institution's goals
under such plan.

Reports.

"(c) THRIFTS WITH N E T WORTH OF LESS THAN 0.5 PERCENT MAY
PARTICIPATE IN CAPITAL RECOVERY.—In the regulations required to

be prescribed under subsection (a), the Corporation may provide that
a well-managed insured institution with a net worth of less than 0.5
percent, as determined in accordance with regulatory accounting
principles, may, in the discretion of the Corporation, be allowed to
continue to operate and be eligible for capital forbearance if—
"(1) the conditions described in each paragraph of subsection
^ (a) have been met with respect to such insured institution; and
^
"(2) the insured institution has reasonable and demonstrable
^ prospects of returning to a satisfactory capital level, as determined by the Corporation,
"(d) DEFINITIONS.—For purposes of this section—
"(1) DESIGNATED ECONOMICALLY DEPRESSED REGION DEFINED.—

12 u s e 1467a
note.

12 u s e 1467a
note.

12 u s e 1467a
note.

:,, The term 'designated economically depressed region' means any
geographical region which the Corporation determines, by regulation, to be a region within which real estate values have
. suffered serious declines due to severe economic conditions,
such as a decline in energy or agricultural values or prices.
"(2) MINORITY.—The term 'minority' means any Black Amer;, ican. Native American, Hispanic American, or Asian American.
"(3) MINORITY INSTITUTION.—The term 'minority institution'
meansany insured institution of which—
"(A) more than 50 percent of the ownership or control (of
f..i;4j such insured institution) is held by minority individuals;
and
; '
"(B) more than 50 percent of the net profit or loss (of such
insured institution) accrues to minority individuals.
"(4) MINORITY LOAN.—The term 'minority loan' means any
obligation or other extension or advance of credit which is made
to 1 or more minority individuals or to any person which is
owned or controlled by 1 or more minority individuals.".
(c) IMPLEMENTATION REPORT TO CONGRESS.—The Federal Home
Loan Bank Board and the Federal Savings and Loan Insurance
Corporation shall each submit a report to Congress containing the
proposed regulations required to be prescribed under subsection (a)
or (b), as the case may be, not later than the end of the 90-day period
beginning on the date of the enactment of this Act.
(d) EFFECTIVE DATE OF REGULATIONS.—The regulations required to
be prescribed under the amendments made by subsections (a) and (b)
shall be implemented not later than the end of the 150-day period
beginning on the date of the enactment of this Act.
(e) AGENCY STUDY AND REPORT ON, AND CONGRESSIONAL REVIEW
OF, CAPITAL RECOVERY.—
(1) STUDY AND REPORT REQUIRED.—Not later than January

31, 1989, the Federal Home Loan Bank Board and the Federal
Savings and Loan Insurance Corporation shall jointly—
(A) conduct a detailed evaluation of the effectiveness of
>: ica 1' ^jjg regulations required to be prescribed under the amendments made by subsections (a) and (b) in achieving an
increased level of capitalization for thrift institutions; and
'* • ''^'
(B) submit a report to the Congress containing the findings and conclusions of the Board and the Corporation in
*'

PUBLIC LAW 100-86—AUG. 10, 1987
•

connection
graph (A).

with

the study

required

under

101 STAT. 613
subpara-

(2) CONGRESSIONAL REVIEW.—The Committee on Banking, Fi-

nance and Urban Affairs of the House of Representatives and
the Committee on Banking, Housing, and Urban Affairs of the
Senate shall, upon receipt of the report under paragraph (1)(B),
review the regulations and recommend such revisions to the
regulations as may be appropriate.
SEC. 405. CAPITAL INSTRUMENT PURCHASE PROGRAM.

' ^ •

i ;-

Section 406(f) of the National Housing Act (12 U.S.C. 1729(f)) is
amended by adding at the end thereof the following new paragraph:
"(6) CAPITAL INSTRUMENT PURCHASE PROGRAM.—

"(A) I N GENERAL.—Notwithstanding any other provision of
Federal law (other than subparagraph (O) and without limitation on any other authority of the Corporation or the Federal
Home Loan Bank Board, the Corporation may exercise its
authority to purchase capital instruments in the case of any
insured institution for which a plan for increasing capital has
been approved by the Corporation pursuant to section 416 or by
such Board pursuant to section 10 of the Home Owners' Loan
Act of 1933.
"(B) TERMS AND CONDITIONS.—Except as provided in subpara-

Ante, p. 6ii.
Ante, p. 609.

graph (C), the purchEise of capital instruments under subparagraph (A) shall be subject to such terms and conditions as the
Corporation may prescribe.
"(C) WARRANT REQUIREMENT.—

"(i) I N GENERAL.—In the case of an insured institution
with capital stock, the Corporation shall require such
institution to negotiate with the Corporation warrants for
the purchase of shares of stock as a condition for the
purchase of capital instruments by the Corporation, on such
terms and conditions as the Corporation may prescribe,
"(ii) MUTUAL INSTITUTIONS.—If any insured institution—
"(I) which is organized on a mutual basis; and
"(II) with respect to which the Corporation has purs uo'^
chased capital instruments,
>*
converts to a stock charter, such insured institution shall
comply with the requirements of clause (i) immediately
upon such conversion.
"(iii) MAXIMUM AMOUNT.—The amount of shares for
which warrants are negotiated under subparagraph (A)
with respect to any insured institution shall not exceed the
total number of shares outstanding at the time such warrants are issued to the Corporation.
"(iv) REDEMPTION BY INSURED INSTITUTION.—Upon the full
1 i3r • redemption of the capital instruments by an insured
institution, including all accumulated unpaid dividends, the
i >•:. Corporation may, at the discretion of the Corporation, tender the warrants for redemption by the insured
institution.
"(v) PAYMENT ON REDEMPTION.—Upon any redemption of
warrants under clause (iv), the insured institution shall pay
the Corporation the difference between the fair market
c value of the warrants on the date of redemption and the
exercise price of such warrants.

.. . ^ ,
;>

101 STAT. 614

PUBLIC LAW 100-86—AUG. 10, 1987
«.? •

"(vi) PROCEEDS FROM REDEMPTION OF WARRANTS.—The

proceeds of any sale or redemption of warrants under
clause (iv) shall be deposited in and be considered a part of
the primary reserve established under section 404(a).
"(D) DIVIDENDS.—Capital instruments purchased by the Corporation under subparagraph (A) shall pay dividends at a
reasonable rate, as determined by the Corporation, and the rate
shall be indexed to obligations issued by the Secretary of the
Treasury under subchapter I of chapter 31 of title 31, United
States Code.

12 use 1727.

31 use 3101.

"(E) PRIORITY.—

Claims.

^
,s
.

'^
r

"(i) I N GENERAL.—In the event of the liquidation or
reorganization of any insured institution with respect to
which the Corporation holds capital instruments under this
paragraph, the Corporation shall have priority over—
"(I) any claim, other than a claim described in clause
(ii), arising out of any equity interest in such insured
institution; and
"(II) any right of any holder of an equity interest in
such insured institution to participate in future
earnings,
"(ii) DIVIDENDS.—
"(I) No OTHER DIVIDENDS.—No dividends may be paid

'

on any class of equity instruments of any insured
institution (other than a capital instrument held by the
Corporation) until all dividends, including accumulated
unpaid dividends, on the capital instruments are paid.
"(II) PROHIBITION CEASES IF PAYMENT REDEMPTION
PAYMENTS AND DIVIDENDS ARE CURRENT.—If all pay-

^

ments on capital instruments held by the Corporation
with respect to any insured institution, including
redemption payments and dividends, are current, dividends on other classes of equity instruments of such
insured institution may be paid, notwithstanding
subclause (I).".

SEC. 406. MINIMUM CAPITAL REQUIREMENTS.

(a) FEDERALLY CHARTERED THRIFTS.—Section 5 of the Home
Owners' Loan Act of 1933 (12 U.S.C. 1464) is amended by adding at
the end thereof the following new subsection:
"(s) MINIMUM CAPITAL REQUIREMENTS.—

12 use 3907.
12 use 3902.

"(1) IN GENERAL.—Consistent with the purposes of section 908
of the International Lending Supervision Act of 1983 and the
capital requirements established pursuant to such section by
the appropriate Federal banking agencies (as defined in section
903(1) of such Act), the Board shall require all associations to
achieve and maintain adequate capital by—
"(A) establishing minimum levels of capital for associations; and
"(B) using such other methods as the Board determines to
be appropriate.
"(2) MINIMUM CAPITAL LEVELS MAY BE DETERMINED BY BOARD
ON CASE-BY-CASE BASIS.—The Board may establish the minimum

level of capital for an association at such amount or at such
ratio of capital-to-assets as the Board determines to be necessary or appropriate for such association in light of the particular circumstances of the association.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 615

"(3) UNSAFE OR UNSOUND PRACTICE.—In the Board's discretion,
the Board may treat the failure of any association to maintain
capital at or above the minimum level required by the Board
under this subsection as an unsafe or unsound practice within
the meaning of subsection (d).
"(4) DIRECTIVE TO INCREASE CAPITAL.—

"(A) PLAN MAY BE REQUIRED.—In addition to any other

action authorized by law, including paragraph (3), the
Board may issue a directive requiring any association
which fails to maintain capital at or above the minimum
level required by the Board to submit and adhere to a plan
for increasing capital which is acceptable to the Board.
"(B) ENFORCEMENT OF PLAN.—Any directive issued and
plan approved under subparagraph (A) shall be enforceable
under subsection (d)(8) to the same extent and in the same
manner as an outstanding order which was issued under
subsection (d)(2) and has become final.
"(5) PLAN TAKEN INTO ACCOUNT IN OTHER PROCEEDINGS.—The

Board may—
"(A) consider an association's progress in adhering to any
plan required under paragraph (4) whenever such association or any affiliate of such association (including any
company which controls such association) seeks the approval of the Board for any proposal which would have the
effect of diverting earnings, diminishing capital, or otherwise impeding such association's progress in meeting the
minimum level of capital required by the Board; and
"(B) disapprove any proposal referred to in subparagraph
(A) if the Board determines that the proposal would adversely affect the ability of the association to comply with
such plan.",
(b) STATE CHARTERED, FEDERALLY INSURED THRIFTS.—Section 407

of the National Housing Act (12 U.S.C. 1730) is amended by adding
at the end thereof the following new subsection:
"(t) MINIMUM CAPITAL REQUIREMENTS.—

^ ' '

"(1) IN GENERAL.—Consistent with the purposes of section 908
of the International Lending Supervision Act of 1983 and the 12 USC 3907.
capital requirements established pursuant to such section by
the appropriate Federal banking agencies (as defined in section
903(1) of such Act), the Corporation shall require all insured 12 usc 3902.
institutions to achieve and maintain adequate capital by—
"(A) establishing minimum levels of capital for insured
institutions; and
"(B) using such other methods as the Corporation determines to be appropriate.
"(2) MINIMUM CAPITAL LEVELS MAY BE DETERMINED BY CORPORATION ON CASE-BY-CASE BASIS.—The Corporation may estab-

lish the minimum level of capital for an insured institution at
such amount or at such ratio of capital-to-assets as the Corporation determines to be necessary or appropriate for such insured
institution in light of the particular circumstances of the insured institution.
"(3) UNSAFE OR UNSOUND PRACTICE.—In the Corporation's
discretion, the Corporation may treat the failure of any insured
institution to maintain capital at or above the minimum level
required by the Corporation under this subsection as an unsafe
or unsound practice within the meaning of subsection (e).

101 STAT. 616

PUBLIC LAW 100-86—AUG. 10, 1987
"(4) DIRECTIVE TO INCREASE CAPITAL.—
"(A) PLAN MAY BE REQUIRED.—In addition to any other

3;

action authorized by law, including paragraph (3), the Corporation may issue a directive requiring any insured
institution which fails to maintain capital at or above the
minimum level required by the Corporation to submit and
adhere to a plan for increasing capital which is acceptable
to the Corporation.

'•

plan approved under subparagraph (A) shall be enforceable
under subsection (k) to the same extent and in the same
manner as an outstanding order which was issued under
subsection (e) and has become final.

"(B) ENFORCEMENT OF PLAN.—Any directive issued and

"(5) PLAN TAKEN INTO ACCOUNT IN OTHER PROCEEDINGS.—The

Corporation may—
"(A) consider an insured institution's progress in adhering to any plan required under paragraph (4) whenever
sfii*
such insured institution or any affiliate of such insured
institution (including any company which controls such
insured institution) seeks the approval of the Corporation
for any proposal which would have the effect of diverting
V
earnings, diminishing capital, or otherwise impeding such
- .
insured institution's progress in meeting the minimum
level of capital required by the Corporation; and
"(B) disapprove any proposal referred to in subparagraph
•iii.: , (A) if the Corporation determines that the proposal would
adversely affect the ability of the insured institution to
comply with such plan.".
12 u s e 1437

SEC. 407. IMPROVEMENTS IN THE SUPERVISORY PROCESS.
(a) ENHANCED FLEXIBIUTY IN THE SUPERVISORY PROCESS.—The

12 use 1725.
t ; x. J
. ,r Vi ,

Federal Home Loan Bank Board (acting as such under the Federal
Home Loan Bank Act and in the Board's capacity as the board of
trustees of the Federal Savings and Loan Insurance Corporation
under section 402(a) of the National Housing Act) shall issue guidelines which provide greater flexibility for supervisory agents,
examiners, and other employees and agents of the Board, the Federal Savings and Loan Insurance Corporation, and the Federal home
loan banks in applying regulations, standards, and other requirements of the Board or such Corporation with regard to particular
situations or particular thrift institutions.
(b) PARTICULAR GUIDEUNES REQUIRED.—The guidelines issued
under subsection (a) shall contain the following provisions:
(1) FLEXIBLE APPROVAL PROCESS FOR RENEGOTIATED LOANS.—A

provision establishing a flexible procedure for obtaining supervisory approval of the terms of loans renegotiated by thrift
institutions if a supervisory agreement is in effect between such
institution and the principal supervisory agent of the Federal
home loan bank district where such institution is located.
(2) RECOGNITION OF ADDITIONAL FINANCIAL CAPABILITY OF A

I

BORROWER.—A provision permitting examiners and other
employees and agents of the Board, the Federal Savings and
Loan Insurance Corporation, and the Federal home loan banks
to take into account, to the extent consistent with the practices
of the Federal banking agencies, other financial resources of a
borrower (in addition to the financial assets of the borrower
which are pledged to secure a loan) in classifying the assets of

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 617

the thrift institution which holds a loan made to such borrower
or with recourse to the borrower.
(3) APPRAISAL REVIEW.—A provision establishing an appraisal
review system to avoid overly optimistic or conservative
appraisals with the goal of achieving appraisals that are more
consistent in reflecting underlying values.
(4) l-TO-4 FAMILY RESIDENCES.—A provision eliminating the
d scheduled item system except as such system relates to l-to-4
family residences.
(c) DEFINITIONS.—For purposes of subsections (a) and (b)—
(1) THRIFT INSTITUTION.—The term "thrift institution"
c means—
(A) any association (within the meaning given to such
term in section 2(d) of the Home Owners' Loan Act of 1933);
(B) any insured institution (within the meaning given to
•
such term in section 401(a) of the National Housing Act);
*- '
^
and
(C) any member (within the meaning given to such term
in section 2(4) of the Federal Home Loan Bank Act).
•
^
(2) BOARD.—The term "Board" means the Federal Home Loan
* Bank Board.
(3) FEDERAL BANKING AGENCY.—The term "Federal banking
agency" means the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, and the Federal
Deposit Insurance Corporation.
(d) NONADVERSARIAL REVIEW OF CERTAIN SUPERVISORY DECISIONS.—The Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) is
amended by inserting after section 22 the following new section:
"SEC. 22A. INFORMAL REVIEW OF CERTAIN SUPERVISORY DECISIONS.
"(a) REVIEW OF CERTAIN SUPERVISORY DECISIONS.—The Board shall
establish an informal review procedure under which any association, insured institution, or member may obtain a review, by the
principal supervisory agent for the Federal home loan bank district
in which such association, institution, or member is located, of any
decision by any examiner or supervisory agent of the Federal home
loan bank for such district with respect to—
"(1) the appraisal value of—
^,, ,
"(A) any loan held by the association, insured institution,
or member; or
"(B) any property serving as collateral to secure the
repayment of any loan (held by the association, institution,
or member);
"(2) the classification of any loan held by the association,
institution, or member; or
"(3) any requirement imposed on the association, institution,
or member to establish or to add to a reserve or allowance for a
possible loss on any loan held by such institution.
"(b) STANDARDS FOR REVIEW.—The review procedure established
pursuant to subsection (a) shall provide that the principal supervisory agent for the appropriate Federal home loan bank district,
after taking into account the report described in subsection (c)(2) by
the arbiter (or panel of arbiters), shall approve, modify, or set aside
any decision for which a review has been requested on the basis of
the supervisory agent's review of all the facts and the regulations
applicable to such decision and shall take such action as such agent

12 use 1462.
12 use 1724.
12 use 1422.

12 USC 1442a.

101 STAT. 618

PUBLIC LAW 100-86—AUG. 10, 1987

may determine to be necessary or appropriate in light of such
review.
"(c) APPOINTMENT OF INDEPENDENT ARBITER.—The review proce-

.. . _

dure established pursuant to subsection (a) shall provide for the
appointment (by the principal supervisory agent for the appropriate
Federal home loan bank district, upon the filing of a request for a
review under this section by an association, insured institution, or
member) of an independent arbiter (or, upon the request of such
association, institution, or member, a panel of independent arbiters)
who shall—
"(1) review the decision which is the subject of the review in
light of all the facts of the case and the regulations applicable to
such determination; and
"(2) report the conclusions and recommendations of the
independent arbiter (or the panel) with respect to the decision
under review to the principal supervisory agent for the appropriate Federal home loan bank district and the association,
insured institution, or member.
"(d) CONSOLIDATION OF REVIEWS OF RELATED DECISIONS.—The principal supervisory agent may consolidate requests for review under
this section of related decisions and conduct a single review of all
such related decisions.
"(e) 25-DAY ARBITER REVIEW PERIOD; 20-DAY PSA REVIEW
PERIOD.—
"(1) ARBITER REVIEW.—The review procedure established

i.. i .:'' .

pursuant to subsection (a) shall provide that any review described in subsection (c) by an arbiter (or panel of arbiters) shall
be completed before the end of the 25-day period beginning on
the date the request for the review was filed with the principal
supervisory agent.
"(2) REVIEW BY PSA.—The review procedure established pursuant to subsection (a) shall provide that any review by the
principal supervisory agent of an arbiter's report described in
subsection (c)(2) (or the report of a panel of arbiters) shall be
completed before the end of the 20-day period beginning on the
date the agent receives such report.
"(3) ONLY BUSINESS DAYS INCLUDED.—Saturdays, Sundays, and

holidays shall not be taken into account in determining the
periods described in paragraphs (1) and (2).
"(f) CLARIFICATION OF RELATIONSHIP BETWEEN INFORMAL REVIEW
AND OTHER AVAILABLE REVIEW.—
"(1) INFORMAL REVIEW NOT EXCLUSIVE.—The informal review

procedure established pursuant to subsection (a) for reviewing
any decision referred to in such subsection shall be in addition
to, and not in lieu of, any other procedure established by law, or
any regulation of the Board, which provides for formal administrative or judicial review of such decision.
"(2) ONLY THE ORIGINAL DECISION IS WITHIN SCOPE OF ADMINISTRATIVE AND JUDICIAL REVIEW.—If any association, insured

institution, or member seeks administrative or judicial review
of any examiner or supervisory agent decision for which such
association, insured institution, or member obtained an informal review under the procedure established pursuant to subsection (a), such administrative or judicial review shall be carried
out—
"(A) without regard to the fact that such informal review
was made; and
. ,;
. v. .
.« - .
^

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 619

"(B) without admitting into evidence, or otherwise taking
into account, the findings, recommendations, or conclusions
of the principal supervisory agent and the independent
arbiter (or the panel of independent arbiters) which conducted the informal review.
"(3) INFORMAL REVIEW NOT SUBJECT TO FORMAL REVIEW.—The

findings, recommendations, or conclusions of any principal
supervisory agent who conducted a review under the procedure
established pursuant to subsection (a) are not decisions which
may be subject to review by the Board or any court under any
regulation of the Board or any law.
"(g) EXPENSES OF REVIEW BORNE BY ASSOCIATION, INSTITUTION, OR

MEMBER.—All reasonable expenses incurred as a direct or indirect
result of any review under the procedure established pursuant to
subsection (a) shall be paid by the association, insured institution, or
member which requested the review.".
SEC. 408. PREVENTION OF INSOLVENCIES.

Before the end of the 6-month period beginning on the date of the
enactment of this Act, the Federal Home Loan Bank Board shall
submit a report to the Congress containing—
(1) a detailed description of the steps the Board has taken and
is planning to take to prevent additional failures of thrift
institutions; and
(2) such recommendations for legislation as the Board may
determine to be appropriate.

Reports..

SEC. 409. FEASIBILITY STUDY RELATING TO ESTABLISHMENT OF ASSET
HOLDING CORPORATION.

(a) STUDY REQUIRED.—The Federal Home Loan Bank Board shall
study the feasibility of establishing an asset holding corporation to
relieve thrift institutions of the burden of carrying and maintaining
troubled real estate assets by providing for the acquisition of such
assets by such corporation.
(b) FACTORS TO B E CONSIDERED.—In studying the feasibility of
establishing an asset holding corporation, the Federal Home Loan
Bank Board shall—
(1) estimate the cost of establishing and operating such corporation for the purposes intended;
(2) consider whether sufficient capital for the establishment
and operation of the corporation can be obtained from the
private sector or from the Federal home loan bank system
without any Government investment in the corporation;
(3) develop standards for determining the type and condition
of real estate assets which would be eligible for acquisition by
such corporation and estimate the total value of such real
estate; and
(4) develop a proposal for allowing participating thrift institutions to obtain an equity participation in the corporation.
(c) REPORT REQUIRED.—The Federal Home Loan Bank Board shall
prepare and submit to the Committee on Banking, Finance and
Urban Affairs of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs of the Senate, not later
than 6 months after the date of the enactment of this Act, a report
containing the findings and conclusions of the Board with respect to
the study required under subsection (a) and any recommendation of

Real property.

101 STAT. 620

PUBLIC LAW 100-86—AUG. 10, 1987

the Board for legislation which the Board determines may be necessary or appropriate.
12 u s e 1437
note.

SEC. 410. NOTICE AND DISAPPROVAL PROCEDURE REQUIRED FOR ALL
APPLICATIONS TO THE BANK BOARD.

(a) I N GENERAL.—The Federal Home Loan Bank Board shall
promulgate guidelines which provide that with respect to each type
of completed application (other than an application under section
408(g) of the National Housing Act) by any person for approval by
the Federal Home Loan Bank Board or the Federal Savings and
Loan Insurance Corporation, the application shall be deemed to be
approved as of the end of the period prescribed under such guidelines unless the Board or the Federal Savings and Loan Insurance
Corporation, as the case may be, approves or disapproves such
application before the end of such period.
(b) APPLICATION FOR HOLDING COMPANY INDEBTEDNESS.—Section

''(•^.

408(g) of the National Housing Act (12 U.S.C. 1730a(g)) is amended
by adding at the end thereof the following new paragraph:
"(7) Any completed application under this subsection shall be
deemed to be approved as of the end of the 60-day period beginning
on the date such application was filed, unless the Corporation issues
notice of approval or disapproval of the application before the end of
such period.".
(c) REPORT TO CONGRESS.—Before the end of the 60-day period

'

'' ' '

beginning on the date of the enactment of this Act, the Federal
Home Loan Bank Board shall submit to the Committee on Banking,
Finance and Urban Affairs of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the Senate a
report containing the guidelines required to be promulgated under
subsection (a).
(d) EFFECTIVE DATE.—The guidelines required to be promulgated
under subsection (a) shall take effect at the end of the 60-day period
referred to in subsection (c).

12 u s e 1437

SEC. 41L GUIDELINES FOR ASSET DISPOSITION.

Reports.

^^^ later than 6 months after the date of the enactment of this
Act, the Federal Home Loan Bank Board shall submit to the
Committee on Banking, Finance and Urban Affairs of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate a report containing appropriate new
guidelines which—
(1) prevent the dumping of assets over which it has direct or
indirect control; and
(2) the Board shall promulgate at the end of such period.

* n^G

12 u s e 1437
note.

SEC. 412. EXPANSION OF USE OF UNDERUTILIZED MINORITY THRIFT
INSTITUTIONS.

(a) CONSULTATION ON EXPANDED USE.—The Secretary of the Treasury shall consult with the Federal Home Loan Bank Board and the
Federal Savings and Loan Insurance Corporation on methods for
increasing the use of underutilized minority thrift institutions as
depositaries or financial agents of Federal agencies.
(b) DESIGNATION OF MINORITY THRIFT INSTITUTIONS INVOLVED IN
CAPITAL RECOVERY PROGRAM AS UNDERUTILIZED THRIFT.—If the Fed-

Ante, p. 609.

eral Home Loan Bank Board approves any plan submitted under
regulations prescribed under section 10 of the Home Owners' Loan
Act of 1933 (as added by section 404(a) of this title) or section 416 of

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 621

the National Housing Act (as added by section 404(c) of this title) by Ante, p. 6ii.
any minority institution (as defined in each such section), such
minority institution shall be designated by the Board as an
underutilized thrift institution for purposes of increasing the use of
such association as a depositary or financial agent of other Federal
'
j'
agencies.
(c) REPORT TO CONGRESS.—Before the end of the 6-month period

beginning on the date of the enactment of this Act, the Secretary of
the Treasury, the Federal Home Loan Bank Board, and the Federal
Savings and Loan Insurance Corporation shall each submit a report
to the Congress on actions taken by such Secretary or agency
pursuant to subsection (a) or (b).
(d) THRIFT INSTITUTION DEFINED.—For purposes of this section, the
term "thrift institution" has the meaning given to such term in
section 407(c)(1).
SEC. 413. AUTHORITY OF INDEPENDENT CONTRACTORS, CONSULTANTS,
AND COUNSEL.

(a) FEDERALLY CHARTERED THRIFT INSTITUTIONS.—Section 5(d)(6) of
the Home Owners' Loan Act of 1933 (12 U.S.C. 1464(d)(6)) (relating to
appointments of receivers and conservators) is amended by adding
at the end thereof the following new subparagraph:
"(E) DISCLOSURE REQUIREMENT FOR THOSE ACTING ON BEHALF OF

CONSERVATOR.—A conservator shall require that any independent
contractor, consultant, or counsel employed by the conservator in
connection with the conservatorship of an association pursuant to
this section shall fully disclose to all parties with which such
contractor, consultant, or counsel is negotiating, any limitation on
the authority of such contractor, consultant, or counsel to make
legally binding representations on behalf of the conservator.".
(b) FEDERALLY INSURED STATE CHARTERED THRIFT INSTITUTIONS.—

Section 406(b) of the National Housing Act (12 U.S.C. 1730) (relating
to involuntary termination of insurance) is amended by adding at
the end thereof the following new paragraph:
"(4) DISCLOSURE REQUIREMENT FOR THOSE ACTING ON BEHALF OF

CORPORATION.—The Corporation shall require that any independent
contractor, consultant, or counsel employed by the Corporation in
connection with the management or liquidation of an insured
institution shall fully disclose to all parties with which such contractor, consultant, or counsel is negotiating, any limitation on the
authority of such contractor, consultant, or counsel to make legally
binding representations on behalf of the Corporation.".
SEC. 414. EXTENSION OF FORBEARANCE PREVIOUSLY PROVIDED IN THE
ACQUISITION OF TROUBLED THRIFT INSTITUTIONS.

Section 408(m)(l)(A) of the National Housing Act (12 U.S.C.
1730a(m)(l)(A)) is amended by adding at the end thereof the following new clause:
"(iv) If, in connection with a merger, consolidation, transfer, or
acquisition of an insured institution under this subparagraph before
March 31, 1987, forbearance measures have been included in the
agreement governing the supervisory action with respect to such
transaction, the period of forbearance in such agreement shall be
extended for an additional 5 years upon a showing by the acquiring
or resulting insured institution that any failure to meet any requirement, restriction, or limitation specified in such agreement with
respect to any such forbearance measure is attributable to the assets

-•
.. •

101 STAT. 622

PUBLIC LAW 100-86—AUG. 10, 1987

or liabilities (of the acquired or merged insured institution) which
were acquired by or assumed by the acquiring or resulting insured
institution.".
12 u s e 1437
note.

Ante, p. 616.
Reports.

Reports.

SEC. 415. CONGRESSIONAL OVERSIGHT.
(a)

BANKING

COMMITTEE

REVIEW

OF

PANEL

ACTIONS.—The

Committee on Banking, Finance and Urban Affairs of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate shall monitor and review the actions
taken by each review panel established pursuant to the amendment
made by section 407(d) of this Act.
(b) OTHER CONGRESSIONAL OVERSIGHT.—The Federal Home Loan
Bank Board shall submit a report to the Committee on Banking,
Finance and Urban Affairs of the House of Representatives, at the
end of the 6-month period beginning on the date of the enactment of
this title, at the end of the 1-year period beginning on such date, and
on an annual basis after the end of such 1-year period, containing—
(1) a description of the Board's existing manpower and talent;
(2) an estimate of the Board's projected manpower and talent
needs for the year, including the cost of such projected needs;
(3) a description and explanation of the goals and objectives,
of the Board and all its related entities (including the Federal
Asset Disposition Association), for the coming year and the
management strategies to be employed by such entities in
accomplishing such goals and objectives;
(4) a summary of the operations, receipts, expenses, and
expenditures, of the Board and all its related entities (including
the Federal Asset Disposition Association), during the preceding
year; and
(5) a summary of the operations and the aggregate receipts,
expenses, and expenditures of any other person not referred to
in paragraph (4), including receivers, conservators, accountants,
attorneys, and consultants, who is engaged in any activity on
behalf of the Board or any other entity which is referred to in
such paragraph, to the extent such operations, receipts, expenses, and expenditures are in connection with such activity.
(c) APPEARANCE.—The Federal Home Loan Bank Board and the
Federal Savings and Loan Insurance Corporation shall, before the
beginning of each fiscal year, appear before the Committee on
Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of
the Senate to describe and explain each such agency's plans and
proposals with respect to administrative expenses for such fiscal
year.
(d) GUIDELINES FOR EMPLOYMENT OF OUTSIDE ACCOUNTANTS,
ATTORNEYS, CONSERVATORS, AND OTHER CONSULTANTS.—Before the

end of the 6-month period beginning on the date of the enactment of
this Act, the Federal Home Loan Bank Board shall submit to the
Committee on Banking, Finance and Urban Affairs of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate a report containing guidelines to improve the management of and control over all outside accountants,
attorneys, conservators, consultants, and other persons whose services are employed by the Board, the Federal Savings and Loan
Insurance Corporation, the Federal Asset Disposition Association,
the principal supervisory agent for any Federal home loan bank
district, or any other entity created, owned, or controlled by the

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 623

Board in connection with any function for which the Board has
direct or indirect regulatory or supervisory responsibility.
SEC. 416. SUNSET.

12 u s e 1441
note.

(a) I N GENERAL.—The following provisions shall ceeise to be effec- Federal
tive on the date that a notice is published in the Federal Register by Register,
publication.
the Financing Corporation pursuant to subsection (b):
(1) Paragraphs (2), (3), and (5) of—
(A) section 9(a) of the Home Owners' Loan Act of 1933;
•i,

and

(B) section 415(a) of the National Housing Act,
(as added by subsections (a) and (b), respectively, of section 402
of this title).
(2) Section 10 of the Home Owners' Loan Act of 1933 and
section 416 of the National Housing Act (as added by subsections (a) and (b), respectively, of section 404 of this title).
(3) Paragraph (6) of section 406(f) of the National Housing Act
(as added by section 405 of this title).
(4) Section 22A of the Federal Home Loan Bank Act (as added
by section 407(d) of this title).
(5) Section 411 of this title.
(b) NOTICE OF COMPLETION OF N E T N E W BORROWING BY FINANCING

CORPORATION.—When the Financing Corporation established pursuant to section 21 of the Federal Home Loan Bank Act has completed
all net new borrowing under such section, the Financing Corporation shall publish a notice of such fact in the Federal Register.
(c) SAVINGS PROVISION.—The termination by subsection (a) of the
effectiveness of any provision described in such subsection shall not
be construed to affect or limit any authority of the Federal Home
Loan Bank Board or the Federal Savings and Loan Insurance
Corporation to prescribe any regulation or engage in any activity
with respect to any association or insured institution under any
other provision of law.

TITLE V—FINANCIAL INSTITUTIONS
EMERGENCY ACQUISITIONS
SEC. 501. SHORT TITLE.

This title may be cited as the "Financial Institutions Emergency
Acquisitions Amendments of 1987".
SEC. 502. FDIC ASSISTED EMERGENCY INTERSTATE ACQUISITIONS.

(a) GENERAL PROVISIONS.—Section 13(f)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1823(f)(1)) is amended to read as follows:
"(f) ASSISTED EMERGENCY INTERSTATE ACQUISITIONS.—(1) This
subsection shall apply only to an acquisition of an insured bank or a
holding company by an out-of-State bank or out-of-State holding
company for which the Corporation provides assistance under
subsection (c).".
(b) EMERGENCY INTERSTATE ACQUISITIONS OF BANKS IN DANGER OF

CLOSING.—Section 13(f)(3) of the Federal Deposit Insurance Act (12
U.S.C. 1823(f)(3)) is amended to read as follows:
"(3) EMERGENCY INTERSTATE ACQUISITIONS OF INSURED BANKS IN
DANGER OF CLOSING.—

Ante, pp. 605,
606.
Ante, pp. 609,
611.
Ante, p. 613.
Ante, p. 617.
Ante, p. 620.
Federal
Register,
publication.
Ante, p. 585.

Financial
Institutions
Emergency
Acquisitions
Amendments of
1987.
12 u s e 1811
note.

101 STAT. 624

PUBLIC LAW 100-86—AUG. 10, 1987
"(A) ACQUISITION OF INSURED BANKS IN DANGER OF CLOSING.—

One or more out-of-State banks or out-of-State holding companies may acquire and retain all or part of the shares or assets of,
or otherwise acquire and retain—
"(i) an insured bank in danger of closing which has total
assets of $500,000,000 or more; or
"(ii) 2 or more affiliated insured banks in danger of
^^ . closing which have aggregate total assets of $500,000,000 or
^
r*6k;
more, if the aggregate total assets of such banks is equal to
or greater than 33 percent of the aggregate total assets of
all affiliated insured banks.

'''"

2C'

f
'
'

i,;
q
\,.\
»^o
' y-''
/

'

"(B) ACQUISITION OF A HOLDING COMPANY OR OTHER BANK

AFFILIATE.—If one or more out-of-State banks or out-of-State
holding companies acquire 1 or more affiliated insured banks
under subparagraph (A) the aggregate total assets of which is
equal to or greater than 33 percent of the aggregate total assets
of all affiliated insured banks, any such out-of-State bank or
out-of-State holding company may also, as part of the same
^ ' transaction, acquire and retain the shares or assets of, or otherwise acquire and retain—
"(i) the holding company which controls the affiliated
insured banks so acquired; or
"(ii) any other affiliated insured bank.
"(C) REQUEST FOR ASSISTANCE BY CORPORATE BOARD OF DIREC-

TORS.—The Corporation may assist an acquisition or merger
authorized under subparagraph (A) only if the board of directors
or trustees of each insured bank in danger of closing which is
being acquired has requested in writing that the Corporation
assist the acquisition or merger.
"(D) CERTAIN ACQUISITIONS AUTHORIZED AFTER ASSISTANCE IS

,'.
>
•*y .
J, J;

PROVIDED.—Notwithstanding paragraph (1), if—
"(i) a t any time after the date of the enactment of the
Financial Institutions Emergency Acquisitions Amendments of 1987, the Corporation provides any assistance
.. under subsection (c) to an insured bank; and
"* "(ii) at the time such assistance is granted, the insured
bank, the holding company which controls the insured bank
(if any), or any affiliated insured bank is eligible to be
acquired by an out-of-State bank or out-of-State holding
company under this paragraph,
the insured bank, the holding company, and such other affiliated insured bank shall remain eligible, subject to such terms
and conditions as the Corporation (in the Corporation's discretion) may impose, to be acquired by an out-of-State bank or outof-State holding company under this paragraph as long as any
portion of such assistance remains outstanding.
"(E) STATE BANK SUPERVISOR APPROVAL.—The Corporation

may take no final action in connection with any acquisition
under this paragraph unless the State bank supervisor of the
State in which the bank in danger of closing is located approves
the acquisition.
"(F) OTHER REQUIREMENTS NOT AFFECTED.—This paragraph

does not affect any other requirement under Federal or State
law for regulatory approval of an acquisition under this
paragraph.
"(G) ACQUISITION MAY BE CONDITIONED ON RECEIPT OF CONSIDERATION FOR CORPORATION'S ASSISTANCE.—Any acquisition de-

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 625

scribed in subparagraph (D) may be conditioned on the receipt
of such consideration for the Corporation's assistance as the
Board of Directors deems appropriate.".
(c) SPECIAL PROVISIONS APPUCABLE TO EMERGENCY INTERSTATE
ACQUISITIONS.—
(1) COORDINATION WITH CERTAIN STATE LAWS.—Section 13(f)(4)

of the Federal Deposit Insurance Act (12 U.S.C. 1823(f)(4)) is
amended—
(A) by redesignating clauses (i), (ii), and (iii) as subparagraphs (A), (B), and (C), respectively;
(B) by amending subparagraph (A) (as so redesignated) to
read as follows:
"(A) ACQUISITIONS NOT SUBJECT TO CERTAIN OTHER LAWS.—Sec-

tion 3(d) of the Bank Holding Company Act of 1956, any provision of 12 USC 1842.
State law, the constitution of any State, and section 408(e)(3) of the 12 use I730a.
National Housing Act shall not apply to prohibit any acquisition
under paragraph (2) or (3), except that an out-of-State bank may
make such an acquisition only if such ownership is otherwise specifically authorized.'; and
(C) by adding at the end thereof the following new subparagraphs:
"(D) SUBSEQUENT NONEMERGENCY INTERSTATE ACQUISITIONS SUBJECT TO STATE LAW.—

"(i) I N GENERAL.—Any out-of-State bank holding company
which acquires control of a n insured bank in any State under
paragraph (2) or (3) may acquire any other insured bank and
establish branches in such State to the same extent as a bank
holding company whose insured bank subsidiaries' operations
are principally conducted in such State may acquire any other
insured bank or establish branches.
"(ii) DELAYED DATE OF APPUCABILTTY.—Clause (i) shall not
apply with respect to any out-of-State bank holding company
referred to in such clause before the earlier of—
•^ ^
"(I) the end of the 2-year period beginning on the date the
acquisition referred to in such clause with respect to such
company is consummated; or
"(II) the end of any period established under State law
' • during which such out-of-State bank holding company may
not be treated as a bank holding company whose insured
bank subsidiaries' operations are principally conducted in
such State for purposes of acquiring other insured banks or
establishing bank branches,
"(iii) DETERMINATION OP PRINCIPALLY CONDUCTED.—For purposes of this subparagraph, the State in which the operations of
a holding company's insured bank subsidiaries are principally
conducted is the State determined under section 3(d) of the
Bank Holding Company Act of 1956 with respect to such holding
company.
"(E) CERTAIN STATE INTERSTATE BANKING LAWS INAPPLICABLE.—

Any holding company which acquires control of any insured bank or
holding company under paragraph (2) or (3) or subparagraph (D) of
this paragraph shall not, by reason oif such acquisition, be required
under the law of any State to divest any other insured bank or be
prevented from acquiring any other bank or holding company.".
(2) RECIPROCAL BANK PACTS AND MINORITY BANK OWNERSHIP
TAKEN INTO ACCOUNT IN BIDDING PRIORITIES.—Section 13(fX6) of

101 STAT. 626

*

PUBLIC LAW 100-86—AUG. 10, 1987

the Federal Deposit Insurance Act (12 U.S.C. 1823(f)(6)) is
amended—
(A) in subparagraph (B), by striking out clause (ii) and all
that follows through clause (iv) and inserting in lieu thereof
the following new clauses:
"(ii) Second, between depository institutions of the same
type—
"(I) in different States which by statute specifically au«
thorize such acquisitions; or
"(II) in the absence of such statutes, in different States
which are contiguous,
"(iii) Third, between depository institutions of the same type
in different States other than the States described in clause (ii).
"(iv) Fourth, between depository institutions of different types
in the same State.
"(v) Fifth, between depository institutions of different types—
"(I) in different States which by statute specifically au;v
thorize such acquisitions; or
"(II) in the absence of such statutes, in different States
j,
which are contiguous.
"(vi) Sixth, between depository institutions of different types
in different States other than the States described in clause
(v).";and
(B) by amending subparagraph (C) to read as follows:
"(C) MINORITY BANK PRIORITY.—In the case of a minority-controlled bank, the Corporation shall seek an offer from other minority-controlled banks before proceeding with the bidding priorities set
forth in subparagraph (B).".
(3) REAFFIRMATION O F T H E RULE THAT N O ASSISTANCE I S A U THORIZED FOR NONBANK SUBSIDIARIES O F HOLDING COMPANIES.—

Section 13(f) of the Federal Deposit Insurance Act (12 U.S.C.
1823(f)) is amended by adding at the end thereof the following
new paragraph:
"(9) No ASSISTANCE AUTHORIZED FOR NONBANK SUBSIDIARIES OF
HOLDING COMPANIES.—

"(A) I N GENERAL.—The Corporation shall not provide any
assistance to a subsidiary of a holding company which is not an
insured bank in connection with any acquisition under this
subsection.
"(B) INTERMEDIATE HOLDING COMPANY PERMITTED.—This paragraph does not prohibit an intermediate holding company from
being a conduit for assistance ultimately intended for an insured bank.".
(4) REPORTS REQUIRED.—Section 13(f) of the Federal Deposit

Insurance Act (12 U.S.C. 1823(f)) is amended by adding after
paragraph (9) (as added by paragraph (3) of this subsection) the
following new paragraph:
"(10) ANNUAL REPORT.—

"(A) REQUIRED.—In its annual report to Congress the Corporation shall include a report on the acquisitions under this subsection during the preceding year.
"(B) CONTENTS.—The report required under subparagraph (A)
shall contain the following information:
"(i) The number of acquisitions under this subsection.
;V
"(ii) A brief description of each such acquisition and the
.^~
circumstances under which such acquisition occurred.".

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 627

(5) DETERMINATION OF TOTAL ASSETS.—Section 13(f) of the

Federal Deposit Insurance Act (12 U.S.C. 1823(f)) is amended by
adding after paragraph (10) (as added by paragraph (4) of this
subsection) the following new paragraph:
"(11) DETERMINATION OF TOTAL ASSETS.—For purposes of this
subsection, the total assets of any insured bank shall be determined
on the basis of the most recent report of condition of such bank
which is available at the time of such determination.".
(d) BANK IN DANGER OF CLOSING DEFINED.—Section 13(f)(8) of the

Federal Deposit Insurance Act (12 U.S.C. 1823(f)(8)) is amended—
(1) by adding a t the end thereof the following new subparagraph:
"(D) the term 'bank in danger of closing' means an insured
bank with respect to which the appropriate Federal or State
chartering authority certifies in writing that—
"(i)(I) the bank is not likely to be able to meet the
demands of such bank's depositors or pay the obligations of
'
the bank in the normal course of business, and
"(II) there is no reasonable prospect that the bank will be
able to meet such demands or pay such obligations without
Federal assistance; or
"(ii)(I) the bank has incurred or is likely to incur losses
that will deplete all or substantially all of the capital of the
bank, and
"(II) there is no reasonable prospect for the replenishment of the bank's capital without Federal assistance;";
(2) by striking out "and" a t the end of subparagraph (B); and
(3) by striking out the period at the end of subparagraph (C)
and inserting in lieu thereof a semicolon.

^

(e) ACQUIRE DEFINED.—Section 13(f)(8) of the Federal Deposit

Insurance Act (12 U.S.C. 1823(f)(8)) is amended by adding after
subparagraph (D) (as added by subsection (d) of this section) the
following new subparagraph:
"(E) the term 'acquire' means to acquire, directly or
indirectly, ownership or control through—
"(i) an acquisition of shares;
"(ii) an acquisition of assets or assumption of liabilities;
"(iii) a merger or consolidation; or
"(iv) any similar transaction;".
(D AFFIUATED INSURED BANK DEFINED.—Section 13(fK8) of the
Federal Deposit Insurance Act (12 U.S.C. 1823(f)(8)) is amended by
adding after subparagraph (E) (as added by subsection (e) of this
section) the following new subparagraph:
"(F) the term affiliated insured bank' means—
"(i) when used in connection with a reference to a holding
company, an insured bank which is a subsidiary of such
holding company; and
"(ii) when used in connection with a reference to 2 or
more insured banks, insured banks which are subsidiaries
of the same holding company; and".
(g) SUBSIDIARY DEFINED.—Section 13(f)(8) of the Federal Deposit

Insurance Act (12 U.S.C. 1823(fK8)) is amended by adding after
subparagraph (F) (as added by subsection (f) of this section) the
following new subparagraph:
"(G) the term 'subsidiary' has the meaning given to such term
in section 2(d) of the Bank Holding Company Act of 1956.".
(h) WAIVER OF NOTICE AND HEARING REQXJIREMENTS.—

12 USC 1841.

101 STAT. 628

PUBLIC LAW 100-86—AUG. 10, 1987
(1) APPLICATION RELATING TO ACQUISITIONS.—Section 3(b) of

the Bank Holding Company Act of 1956 (12 U.S.C. 1842(b)) is
amended—
(A) by striking out "(b) Upon" and inserting in lieu
thereof

;,, ,

"(b)(1) NOTICE

AND HEARING

REQUIREMENTS.—

Upon"; and
(B) by adding at the end thereof the following new
paragraph:

"(2) WAIVER IN CASE OF BANK IN DANGER OF CLOSING.—If the

Ante, p. 627.

Board receives a certification described in section 13(f)(8)(D) of the
Federal Deposit Insurance Act from the appropriate Federal or
State chartering authority that a bank is in danger of closing, the
Board may dispense with the notice and hearing requirements of
paragraph (1) with respect to any application received by the Board
relating to the acquisition of such bank, the bank holding company
which controls such bank, or any other affiliated bank.".
(2) APPLICATION RELATING TO NONBANKING ACTIVITIES.—Sec-

f
<
f
j
Federal
Register,
publication.
-

tion 4(c)(8) of the Bank Holding Company Act of 1956 (12 U.S.C.
1843(c)(8)) is amended by striking out the semicolon at the end
and inserting in lieu thereof a period and the following new
sentences: "If an application is filed under this paragraph in
connection with an application to make an acquisition pursuant
to section 13(f) of the Federal Deposit Insurance Act, the Board
may dispense with the notice and hearing requirement of this
paragraph and the Board may approve or deny the application
Under this paragraph without notice or hearing. If an application described in the preceding sentence is approved, the Board
gj^^jj publish in the Federal Register, not later than 7 days after
such approval is granted, the order approving the application
and a description of the nonbanking activities involved in the
acquisition;".
(3) EARLY ANTITRUST REVIEW I N CASE O F EMERGENCY ACQUISITION OF F A I U N G BANK.—Section 11(b) of t h e B a n k Holding

Company Act of 1956 (12 U.S.C. 1849(b)) is amended—
(A) by striking out "(b) T h e Board" a n d inserting i n lieu
!fa^.
thereof "(b) A N T I T R U S T R E V I E W . —
"(1) I N GENERAL.—The Board";
,, ,
(B) b y moving all t h a t follows 2 e m s t o t h e right; a n d
*' '
(C) b y adding a t t h e e n d thereof t h e following n e w
"'
paragraph:
"(2) SECTION 13(f) CASES.—(A) If—

.it>c=

"(i) the Federal Deposit Insurance Corporation learns
that a bank insured by such Corporation is in danger of
J'
closing; and
"(ii) the Corporation is considering assisting the acquisition of such bank and its affiliated banks by another bank
li'
or holding company under section 13(f) of the Federal DetS'
posit Insurance Act and such acquisition is subject to the
approval of the Board under section 3 of this Act,
the Corporation shall immediately notify the Board of such
facts.
"(B) Upon receipt of notice from the Federal Deposit Insurance Corporation under subparagraph (A) or at such earlier
time as deemed appropriate by the Board, the Board shall
immediately notify the Attorney General of the United States of
the facts concerning the possible acquisition.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 629

"(C) Within 5 days of receiving notice under subparagraph (B),
the Attorney General shall notify the Board in writing of the
Attorney General's preliminary finding as to the consistency of
the possible acquisition with the antitrust laws.
"(D) The Board may reduce or eliminate the post-approval
waiting period established under paragraph (1) for an acquisition to which this paragraph applies, except that such period
may not be eliminated or reduced to less than 5 days without
the concurrence of the Attorney General.".
(i) TECHNICAL AND CONFORMING AMENDMENTS.—Section 13(f)

of

the Federal Deposit Insurance Act (12 U.S.C. 1823(f)) is amended—
(1) in paragraph (5), by striking out "to permit"; and
(2) in paragraph (6)(A)—
(A) by striking out "where the closed bank" and inserting
in lieu thereof' where the bank"; and
' '
(B) by striking out "in-State bank holding company" and
inserting in lieu thereof "in-State holding company".
SEC. 503. BRIDGE BANKS.
(a) EsTABUSHMENT OF BRIDGE BANKS.—Section 11 of the Federal
Deposit Insurance Act (12 U.S.C. 1821) is amended—
(1) in subsection (h) by striking out "(h) As soon as" and
inserting in lieu thereof "(h) N E W BANKS.—(1) As soon as";
(2) by redesignating subsections (i), (j), (k), and (1) as paragraphs (2), (3), (4), and (5) of subsection (h), respectively; and
(3) by inserting after subsection (h)(5) (as redesignated by
paragraph (2)) the following new subsection:
"(i) BRIDGE BANKS.—

"(1) EsTABUSHMENT.—When an insured bank is closed, the
Corporation, in the Corporation's discretion and subject to the
conditions established in paragraph (2), may establisn a bridge
bank to—
"(A) assume the deposits of the closed bank;
"(B) assume such other liabilities of the closed bank as
the Corporation, in the Corporation's discretion, may determine to be appropriate;
,,
"(C) purchase such assets of the closed bank as the Corporation, in the Corporation's discretion, may determine to
be appropriate; and
.
"(D) perform any other temporary function which the
Corporation may prescribe in accordance with this Act.
"(2) CONDITIONS.—A bridge bank may be established under
paragraph (1) only if the Board of Directors determines that—
"(A) the amount which is reasonably necessary to organize and operate such bridge bank will not exceed the
amount which is reasonably necessary to save the cost of
liquidating, including paying the insured accounts of, the
'
closed bank or banks;
"(B) the continued operation of such insured bank is
essential to provide adequate banking services in the
' '
community where such bank is located; or
"(C) that the continued operation of such insured bank is
in the best interest of the depositors of the closed bank and
the public.
h,,

' *'•

"(3) TRANSFER OF ASSETS AND LIABILITIES.—

"(A) IN GENERAL.—Upon the organization of a bridge
bank pursuant to this subsection, the Corporation, as re-

r

, _
>
r ;>• «

;«;jeM Si

101 STAT. 630

PUBLIC LAW 100-86—AUG. 10, 1987
ceiver, or any other receiver appointed with respect to the
closed insured bank may, subject to the approval of any
such transfer by a court of competent jurisdiction, transfer
any assets and liabilities of the closed insured bank to the
bridge bank.
"(B) INTENT OF CONGRESS RELATING TO CONTINUING OPER-

ATIONS.—It is the intent of the Congress that, in order to
prevent unnecessary hardship or losses to the customers of
the closed bank with respect to which a bridge bank is
established, especially creditworthy farmers, small
businesses, and households, the Corporation should—
"(i) continue to honor commitments made by the
closed bank to creditworthy customers, and
:-f.. '-.
"(ii) not interrupt or terminate adequately secured
loans which are transferred under subparagraph (A)
I .
and are being repaid by the debtor in accordance with
the terms of the loan instrument.
"(4) ORGANIZATION.—
"(A) ARTICLES OF ASSOCIATION.—The articles of associa-

'•f-

12 use 71-75.
12 use 71a.

12 use 51.

tion and the organization certificate of a bridge bank
shall be executed by representatives designated by the
Corporation.
"(B) INSURED NATIONAL BANK.—Each bridge bank shall be
a national bank and shall be insured from the time of the
organization of the bridge bank.
"(C) MANAGEMENT.—Each bridge bank shall be under the
management of a board of directors consisting of 5 members
appointed by the Board of Directors of the Corporation.
"(5) POWERS OF BRIDGE BANKS.—Each bridge bank established
under this subsection shall have all corporate powers of, and be
subject to the same provisions of law as, a national bank, except
that—
"(A) the Corporation may—
"(i) remove the directors of any bridge bank;
' **
"(ii) fix the compensation of members of the board of
^^
directors of any bridge bank; and
"(iii) waive any requirement established under section 5145, 5146, 5147, 5148, or 5149 of the Revised
Statutes (relating to directors of national banks) or
T'
section 31 of the Banking Act of 1933 which would
otherwise be applicable with respect to directors of a
bridge bank by operation of paragraph (4)(B);
"(B) the Corporation may indemnify the directors of a
bridge bank on such terms as the Corporation determines to
be appropriate;
"(C) no requirement under section 5138 of the Revised
Statutes or any other provision of law relating to the
capital of a national bank shall apply with respect to any
bridge bank;
"(D) the Comptroller of the Currency may establish a
,J,
limitation on the extent to which any person may become
t
indebted to any bridge bank without regard to the amount
of the bank's capital or surplus;
"(E) the board of directors of the bridge bank shall elect a
,.^y
chairperson who shall also serve in the position of chief
.:
executive officer;
.-,,
, „
,...

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 631

"(F) no bridge bank shall be required to purchase stock of
any Federal Reserve bank; and
(G) the Comptroller of the Currency may waive any
requirement for a fidelity bond.
"(6) CAPITAL.—

"(A) No CAPITAL REQUIRED.—The Corporation shall not be
required to—
"(i) issue capital stock on behalf of any bridge bank
established under this subsection; or
"(ii) purchase any capital stock of any bridge bank.
"(B) OPERATING FUNDS IN UEU OF CAPITAL.—Upon the

organization of a bridge bank, and thereafter as the Board
of Directors may in its discretion deem necessary or advisable, the Corporation shall promptly make available to the
bridge bank, upon such terms and conditions and in such
form and amounts as the Board of Directors may prescribe,
sufficient funds for the bridge bank to operate.
"(C) AUTHORITY TO ISSUE CAPITAL STOCK.—Whenever in

;^

the judgment of the Board of Directors it is desirable to do
so, the Corporation shall cause capital stock of any bridge
bank to be issued and offered for sale on such terms and
conditions as the Corporation determines to be appropriate
and in an amount sufficient (in the discretion of the Corporation) to make possible the conduct of the business of the
bridge bank on a sound basis.

v

"(7) N o FEDERAL STATUS.—

<

"(A) AGENCY STATUS.—A bridge bank is not an agency,
establishment, or instrumentality of the United States.
"(B) EMPLOYEE STATUS.—Directors, officers, employees, or
agents of the bridge bank are not officers or employees of
the United States for purposes of title 5, United States
Code, or any other provision of law.
"(8) ASSISTANCE AUTHORIZED.—The Corporation may, in its

discretion, provide assistance under section 13(c) to facilitate the
sale or merger of the bridge bank with another insured depository institution in the same manner and to the same extent as
such Eissistance may be provided under such section with respect to a closed insured bank.
"(9) ACQUISITION BY OUT-OF-STATE BANK HOLDING COMPANY.—

Any depository institution, including an out-of-State bank, or
any out-of-State holding company may acquire and retain the
shares or Eissets of, or otherwise acquire and retain a bridge
bank which has assumed the insured deposits of one or more
closed banks which had total assets aggregating $500,000,000 or
more (determined in the manner provided in section 13(f)(ll) at
the time such insured bank was closed) in the same manner and
to the same extent as such depository institution or such out-ofState holding company may acquire a closed insured bank
under section 13(f)(2).
"(10) TERMINATION OF BRIDGE BANK.—

"(A) I N GENERAL.—A bridge bank shall terminate upon
the occurrence of the earliest of the following:
"(i) The bridge bank merges or consolidates with
another bank that is not a bridge bank.
"(ii) The bridge bank sells all or substantially all of
the stock of the bridge bank other than to the Corporation or to another bridge bank.

12 use 1873.

101 STAT. 632

PUBLIC LAW 100-86—AUG. 10, 1987

1v >I?'> " ' Jt

"(iii) A holding company or another bank that is not
a bridge bank assumes all, or substantially all of the
t/iv » deposits or other liabilities of a bridge bank.
"(iv) A period of 2 years following the date the bridge
bank was organized expires without any other disposiM: '/" '
tion of the assets and liabilities of the bank having
occurred.
;%At,
"(B) EXTENSION ALLOWED FOR i YEAR.—If the Board of
Directors finds, after consultation with the Comptroller of
'^ r
the Currency, that an extension of time for winding up the
affairs of the bank is in the best interest of the depositors of
the closed bank and the public, the Corporation may extend
the time period specified in subparagraph (A)(iv) for not to
exceed one year.
"(11) 2 OR MORE BANKS.—The Corporation, in the Corporation's discretion, may establish a bridge bank under this subsection to assume the deposits of, assume any other liabilities of,
and purchase any assets of 2 or more closed banks.".
(b) DEFINITIONS.—Section 3(i) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(i)) is amended to read as follows:
"(i) N E W BANK AND BRIDGE BANK DEFINED.—

Ante, p. 629.

"(1) N E W BANK.—The term 'new bank' means a new national
bank, other than a bridge bank, organized by the Corporation in
5 .. accordance with section 11(h).
"(2) BRIDGE BANK.—The term 'bridge bank' means a new
national bank organized by the Corporation in accordance with
' section ll(i).".
SEC. 504. CONVERSIONS.
(a) AMENDMENT TO THE NATIONAL HOUSING ACT.—Section 403 of

,r >

Infra.

the National Housing Act (12 U.S.C. 1726) is amended by adding at
the end thereof the following:
"(e) If, upon application, and pursuant to a plan of conversion to
an institution of a type eligible to be an insured institution, the
Corporation, in its discretion, determines to grant insurance of
accounts to a savings bank that is an insured bank (as the term
'insured bank' is defined in section 3(h) of the Federal Deposit
Insurance Act), such insurance shall become effective at such time
as the Corporation stipulates, at which time such institution automatically shall lose its status as such an insured bank. No change of
deposit insurance agencies from the Federal Deposit Insurance Corporation to the Corporation shall be treated, for the purposes of
section 18(i) of the Federal Deposit Insurance Act, as involving a
conversion to a noninsured bank or institution, except that the
Corporation shall provide the Federal Deposit Insurance Corporation with notification of any application that, if granted, would
involve such a change of deposit insurance agencies, shall consult
with tht Corporation before disposing of the application, and shall
provide the Federal Deposit Insurance Corporation with notification
of the determination with respect to such application.".
flj) AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT.—
(1) SECTION 18 (c) APPLICABIUTY.—Section 18(cX12) of the Fed-

eral Deposit Insurance Act (12 U.S.C. 1828(cX12)) is amended to
read as follows:
"(12) The provisions of this subsection shall not apply to any
transaction where the acquiring, assuming, or resulting institution
is an insured Federal savings bank or an institution insured by the

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 633

Federal Savings and Loan Insurance Corporation, except that any
insured bank involved in the transaction shall notify the Corporation in writing at least 30 days prior to consummation of the
transaction and, if any approval by the Federal Home Loan Bank
Board or the Federal Savings and Loan Insurance Corporation is
required in connection therewith, such approving authority shall
provide the Corporation with notification of the application for
approval, shall consult with the Corporation before disposing of the
application, and shall provide notification to the Corporation of the
determination with respect to said application.".
(2) SECTION 1 8 (i) APPUCABIUTY.—Section 18(i) of such Act is
amended by adding at the end thereof the following:
"(5) Nothing in this subsection shall apply to a conversion of an
insured bank to an insured institution pursuant to section 403(e) of
the National Housing Act (12 U.S.C. 1726(e)).".

% >^ 11
.
Ante, p. 632.

SEC. 505. FEDERAL DEPOSITORY INSTITUTIONS REGULATORY AGENCIES
NOT SUBJECT TO APPORTIONMENT OF FUNDS PROVISIONS.
(a) FEDERAL DEPOSIT INSURANCE CORPORATION.—Section 7(b) of the

Federal Deposit Insurance Act (12 U.S.C. 18170t))) is amended by
adding at the end thereof the following:
"(9) APPORTIONMENT.—Notwithstanding any other provision of
law, amounts received pursuant to any assessment under this section and any other amounts received by the Corporation shall not be
subject to apportionment for the purpose of chapter 15 of title 31,
United States Code, or under any other authority. .

,,

Ot)) THE COMPTROLLER OF THE CURRENCY.—The second paragraph

of section 5240 of the Revised Statutes (12 U.S.C. 481) is amended by
inserting after the fifth sentence the following: "Such funds shall
not be subject to apportionment for the purpose of chapter 15 of title
31, United States Code, or under any other authority.".

"'

,^
'

31 use I50i et

(c) THE FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION.— seq.

Section 404 of the National Housing Act (12 U.S.C. 1727) is amended
by adding at the end thereof the following:
"(k) APPORTIONMENT.—Notwithstanding any other provision of
law, amounts received by the Corporation pursuant to any assessment under this Act, deposits required under this section and any
other moneys received by the Corporation shall not be subject to
apportionment for the purpose of chapter 15 of title 31, United
States Code, or under any other authority.".
(d) T H E FEDERAL HOME LOAN BANK BOARD.—The Federal Home
Loan Bank Act (12 U.S.C. 1421 et seq.) is amended by inserting after
section 19 (12 U.S.C. 1439) the following:
"SEC. 12A. APPORTIONMENT.

12 USC 1439-1.

"Notwithstanding any other provision of law, amounts received
pursuant to any assessment under this Act and any other moneys
received by the Board shall not be subject to apportionment for tne
purpose of chapter 15 of title 31, United States Code, or under any
other authority.".
(e) THE NATIONAL CREDIT UNION ADMINISTRATION.—Title I of the

Federal Credit Union Act (12 U.S.C. 1751 et seq.) is amended by
adding at the end thereof the following:
"SEC. 128. APPORTIONMENT.

"Notwithstanding any other provision of law, funds received by
the Board pursuant to any method provided by this Act, and in-

12 USC 1772b.

101 STAT. 634

31 use 1501 et

PUBLIC LAW 100-86—AUG. 10, 1987

terest, dividend, or other income thereon, shall not be subject to
apportionment for the purpose of chapter 15 of title 31, United
States Code, or under any other authority.".

seq.
SEC. 506. FEDERAL DEPOSITORY INSTITUTIONS REGULATORY AGENCIES
NOT SUBJECT TO SEQUESTRATION.

2 use 905.
^ J
<

'.

2 use 906.

,,,,,•,

(a) I N GENERAL.—Paragraph (1) of section 255(g) of the Balanced
Budget and Emergency Deficit Control Act of 1985 is amended—
(1) by inserting after the item relating to compensation of the
President the following new item:
"Comptroller of the Currency;";
(2) by inserting after the item relating to the exchange sta.1 bilization fund the following new items:
•
"Federal Deposit Insurance Corporation;
"Federal Home Loan Bank Board;
i^ ?
"Federal Home Loan Bank Board, Federal Savings and
Loan Insurance Corporation;"; and
(3) by inserting after the item relating to intragovernmental
funds the following new items:
"National Credit Union Administration;
'; „ «'
"National Credit Union Administration, central liquidity
facility;
"National Credit Union Administration, credit union
share insurance fund;".
(b) CERTAIN EXPENSES.—Section 256(b) of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended by adding at the
end thereof the following new paragraph:
"(4) Notwithstanding any other provision of law, this subsection shall not apply with respect to the following:
"(A) Comptroller of the Currency.
"(B) Federal Deposit Insurance Corporation.
"(C) Federal Home Loan Bank Board.
"(D) Federal Savings and Loan Insurance Corporation.
i,
"(E) National Credit Union Administration.
"(F) National Credit Union Administration, central
liquidity facility.".
SEC. 507. LIQUIDATION PROCEEDINGS.

Section 11 of the Federal Deposit Insurance Act (12 U.S.C. 1821) is
amended by inserting after subsection (i) (as added by section
503(a)(3) of this title) the following new subsection:
"(j) CONDITIONS APPLICABLE TO LIQUIDATION PROCEEDINGS.—
"(1) CONSIDERATION OF LOCAL ECONOMIC IMPACT REQUIRED.—

~ '
*

'

The Corporation shall fully consider the adverse economic
impact on local communities, including businesses and farms, of
actions to be taken by it during the administration and liquidation of loans of a closed bank.
"(2) ACTIONS TO ALLEVIATE ADVERSE ECONOMIC IMPACT TO BE

CONSIDERED.—The actions which the Corporation shall consider
include the release of proceeds from the sale of products and
t* services for family living and business expenses and shortening
the undue length of the decisionmaking process for the acceptance of offers of settlement contingent upon third party financ•

ing.

"(3) GUIDELINES REQUIRED.—The Corporation shall adopt and
publish procedures and guidelines to minimize adverse eco-

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 635

nomic effects caused by its actions on individual debtors in the
community.".
SEC. 508. CAPITAL POOLS.

(a) FINDINGS.—The Congress hereby finds that—
(1) the Federal Deposit Insurance Corporation has the statutory authority to engage in open bank assistance for failing
banks under section 13(c) of the Federal Deposit Insurance Act 12 use 1873.
to minimize losses to the insurance fund and to provide for the
f stability of the community;
(2) communities in depressed regions of the Nation have had
increasing difficulty in raising capital to infuse into locally
? operated, failing banks;
(3) States have the authority to establish capital pools to
' supplement Federal Deposit Insurance Corporation funds and
outside capital in arranging open banks assistance plans; and
(4) it is not in the public interest to have a fire sale of assets
acquired by the Federal Deposit Insurance Corporation as a
part of their acquisitions of nonperforming loans of failed
banks.
(b) SENSE OF THE CONGRESS.—It is the sense of the Congress that
the Federal Deposit Insurance Corporation should—
(1) exercise its discretionary authority to work with States
which authorize capital pools described in subsection (a)(3) to
save community banks during this time of great economic
distress in certain regions of the country; and
(2) use its discretionary authority to negotiate sale of loans in
the Corporation's capacity as receiver for a closed insured bank
to banks in the area in which such closed bank is located in
order to prevent further asset devaluation.
SEC. 509. PERMANENT EXTENSION OF CERTAIN TEMPORARY PROVISIONS
OF LAW; 5-YEAR EXTENSION OF NET WORTH CERTIFICATES.

(a) PERMANENT EXTENSION.—Part D of title I of the Garn-St
Germain Depository Institutions Act of 1982 is repealed.
(b) 5-YEAR EXTENSION OF N E T WORTH CERTIFICATES.—Section

206(a) of such Act (12 U.S.C. 1729 note) is amended by striking out
"October 13, 1986" and inserting in lieu thereof "October 13, 1991".
(c) PRIOR AMENDMENTS NOT EFFECTIVE.—No amendment made by
part D of title I or section 206 of the Garn-St Germain Depository
Institutions Act of 1982, as in effect before the date of the enactment
of this Act, to any other provision of law shall be deemed to have
taken effect before the date of the enactment of this Act and any
such provision of law shall be in effect as if no such amendment had
been made before such date of enactment.

TITLE VI—EXPEDITED FUNDS
AVAILABILITY

12 u s e 1464
note.
12 u s e 1729,
1823.
12 u s e 1464
note.
12 u s e 1729,
1823.

Expedited Funds
Availability Act.
12 u s e 4001
note.

SEC. 601. SHORT TITLE.

This title may be cited as the "Expedited Funds Availability Act".
SEC. 602. DEFINITIONS.

For purposes of this title—

12 u s e 4001.

101 STAT. 636

PUBLIC LAW 100-86—AUG. 10, 1987

(1) ACCOUNT.—The term "account" means a demand deposit
account or other similar transaction account at a depository
institution.
(2) BOARD.—The term "Board" means the Board of Governors
of the Federal Reserve System.
(3) BUSINESS DAY.—The term "business day" means any day
other than a Saturday, Sunday, or legal holiday.
' .y '
(4) CASH.—The term "cash means United States coins and
,; currency, including Federal Reserve notes.
(5) CASHIER'S CHECK.—The term "cashier's check" means any
t>? check which—
'^i
(A) is drawn on a depository institution;
(B) is signed by an officer or employee of such depository
•
institution; and
(C) is a direct obligation of such depository institution.
(6) CERTIFIED CHECK.—The term "certified check" means any
check with respect to which a depository institution certifies
that—
(A) the signature on the check is genuine; and
(B) such depository institution has set aside funds
iisri' ^ which—
(i) are equal to the amount of the check; and
(ii) will be used only to pay such check.
(7) CHECK.—The term "check" means any negotiable demand
draft drawn on or payable through an office of a depository
institution located in the United States. Such term does not
include noncash items.
(8) CHECK CLEARINGHOUSE ASSOCIATION.—The term "check
clearinghouse association" means any arrangement by which
participant depository institutions exchange deposited checks
on a local basis, including an entire metropolitan area, without
using the check processing facilities of the Federal Reserve
System.
^^
(9) CHECK PROCESSING REGION.—The term "check processing
region" means the geographical area served by a Federal Reserve bank check processing center or such larger area as the
>'
Board may prescribe by regulations.
(10) CONSUMER ACCOUNT.—The term "consumer account"
5, ; .
-, means any account used primarily for personal, family, or
household purposes.
(11) DEPOSITORY CHECK.—The term "depository check" means
,j,r,;,
any cashier's check, certified check, teller's check, and any
other functionally equivalent instrument as determined by the
Board.
(12) DEPOSITORY INSTITUTION.—The term "depository institution" has the meaning given such term in clauses (i) through (vi)
12 use 461.
of section 19(b)(1)(A) of the Federal Reserve Act. Such term also
includes an office, branch, or agency of a foreign bank located in
the United States.
,,,
(13) LOCAL ORIGINATING DEPOSITORY INSTITUTION.—The term
"local originating depository institution" means any originating
depository institution which is located in the same check
' processing region as the receiving depository institution,
(14) NONCASH ITEM.—The term "noncash item" means—
'
(A) a check or other demand item to which a passbook,
certificate, or other document is attached; , ,,-,,.» , . < J

PUBLIC LAW 100-86—AUG. 10, 1987
: tr.

101 STAT. 637

(B) a check or other demand item which is accompanied
by special instructions, such as a request for special advise
of payment or dishonor; or
(C) any similar item which is otherwise classified £is a
noncash item in regulations of the Board.
(15)

NONLOCAL ORIGINATING DEPOSITORY INSTITUTION.—The

A .

term "nonlocal originating depository institution" means any
originating depository institution which is not a local depository
institution.
(16) PROPRIETARY ATM.—The term "proprietary ATM" means
an automated teller machine which is—
(A) located—
(i) at or adjacent to a branch of the receiving depository institution; or
(ii) in close proximity, as defined by the Board, to a
branch of the receiving depository institution; or
(B) owned by, operated exclusively for, or operated by the
receiving depository institution.
(17) ORIGINATING DEPOSITORY INSTITUTION.—The term "originating depository institution" means the branch of a depository
institution on which a check is drawn.
(18) NONPROPRIETARY ATM,—The term "nonproprietary ATM"
means an automated teller machine which is not a proprietary
ATM.
(19) PARTICIPANT.—The term "participant" means a depository institution which—
(A) is located in the same geographic area as that served
by a check clearinghouse association; and
,,,
(B) exchanges checks through the check clearinghouse
association, either directly or through an intermediary.
(20) RECEIVING DEPOSITORY INSTITUTION.—The term "receiving
depository institution" means the branch of a depository institution or the proprietary ATM in which a check is first deposited.
(21) STATE.—The term "State" means any State, the District
of Columbia, the Commonwealth of Puerto Rico, or the Virgin
Islands.
(22) TELLER'S CHECK.—The term "teller's check" means any
check issued by a depository institution and drawn on another
depository institution.
(23) UNITED STATES.—The term "United States" means the
several States, the District of Columbia, the Commonwealth of
Puerto Rico, and the Virgin Islands.
(24) U N I T OF GENERAL LOCAL GOVERNMENT.—The term "unit of
general local government" means any city, county, town, township, parish, village, or other general purpose political subdivision of a State.
(25) WIRE TRANSFER.—The term "wire transfer" h£is such
meaning as the Board shall prescribe by regulations.
SEC. 603. EXPEDITED FUNDS AVAILABILITY SCHEDULES.
(a) NEXT BUSINESS DAY AVAILABILITY FOR CERTAIN DEPOSITS.—
(1) CASH DEPOSITS; WIRE TRANSFERS.—Except as provided in

subsection (e) and in section 604, in any case in which—
(A) any cash is deposited in an account at a receiving
depository institution staffed by individuals employed by
such institution, or

12 USC 4002.

101 STAT. 638

PUBLIC LAW 100-86—AUG. 10, 1987
(B) funds are received by a depository institution by wire
transfer for deposit in an account at such institution,
such cash or funds shall be available for withdrawal not later
than the business day after the business day on which such cash
is deposited or such funds are received for deposit.

State and local

governments.

^ •

(2) GOVERNMENT CHECKS; CERTAIN OTHER CHECKS.—Fuuds

deposited in an account at a depository institution by check
shall be available for withdrawal not later than the business
day after the business day on which such funds are deposited in
the case of—
(A) a check which—
(i) is drawn on the Treasury of the United States; and
^v,
(ii) is endorsed only by the person to whom it was
" '
^
issued;
. .,
(B) a check which—
(i) is drawn by a State;
(ii) is deposited in a receiving depository institution
which is located in such State and is staffed by individuals employed by such institution;
(iii) is deposited with a special deposit slip which
indicates it is a check drawn by a State; and
(iv) is endorsed only by the person to whom it was
issued;
(C) a check which—
(i) is drawn by a unit of general local government;
i^ \|i;'.
^1^ -g deposited in a receiving depository institution
which is located in the same State as such unit of
general local government and is staffed by individuals
employed by such institution;
~'
(iii) is deposited with a special deposit slip which
indicates it is a check drawn by a unit of general local
government; and
(iv) is endorsed only by the person to whom it was
issued;
(D) the first $100 deposited by check or checks on any one
•business day;
(E) a check deposited in a branch of a depository institution and drawn on the same or another branch of the same
depository institution if both such branches are located in
the same State or the same check processing region;
'- '•'
(F) a cashier's check, certified check, teller's check, or
depository check which—
(i) is deposited in a receiving depository institution
which is staffed by individuals employed by such
institution;
(ii) is deposited with a special deposit slip which
indicates it is a CEishier's check, certified check, teller's
-. *
check, or depository check, as the case may be; and
(iii) is endorsed only by the person to whom it was
issued.
(b) PERMANENT SCHEDULE.—

(1) AVAILABIUTY OF FUNDS DEPOSITED BY LOCAL CHECKS.—Subject to paragraph (3) of this subsection, subsections (aX2), (d),
and (e) of this section, and section 604, not more than 1 business
day shall intervene between the business day on which funds
are deposited in an account at a depository institution by a
check drawn on a local originating depository institution and

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 639

the business day on which the funds involved are available for
withdrawal.
(2) AVAILABILITY OF FUNDS DEPOSITED BY NONLOCAL CHECKS.—

Subject to paragraph (3) of this subsection, subsections (a)(2), (d),
and (e) of this section, and section 604, not more than 4 business
days shall intervene between the business day on which funds
are deposited in an account at a depository institution by a
check drawn on a nonlocal originating depository institution
and the business day on which such funds are available for
withdrawal.
(3) TIME PERIOD ADJUSTMENTS FOR CASH WITHDRAWAL OF CERTAIN CHECKS.—

(A) IN GENERAL.—Except as provided in subparagraph (B),
funds deposited in an account in a depository institution by
check (other than a check described in subsection (a)(2))
shall be available for cash withdrawal not later than the
business day after the business day on which such funds
otherwise are available under paragraph (1) or (2).
(B) 5 P.M. CASH AVAILABILITY.—Not more than $400 (or the
maximum amount allowable in the case of a withdrawal
from an automated teller machine but not more than $400)
of funds deposited by one or more checks to which this
paragraph applies shall be available for cash withdrawal
not later than 5 o'clock post meridian of the business day on
which such funds are available under paragraph (1) or (2). If
funds deposited by checks described in both paragraph (1)
and paragraph (2) become available for cash withdrawal
under this paragraph on the same business day, the limitation contained in this subparagraph shall apply to the
aggregate amount of such funds.
(C) $100 AVAILABILITY.—Any amount available for withdrawal under this paragraph shall be in addition to the
amount available under subsection (a)(2)(D).
(4) APPLICABILITY.—This subsection shall apply with respect to
funds deposited by check in an account at a depository institution on or after September 1, 1990, except that the Board may,
by regulation, make this subsection or any part of this subsection applicable earlier than September 1,1990.
(c) TEMPORARY SCHEDULE.—
(1) AVAILABILITY OF LOCAL CHECKS.—

(A) I N GENERAL.—Subject to subparagraph (B) of this
paragraph, subsections (a)(2), (d), and (e) of this section, and
section 604, not more than 2 business days shall intervene
between the business day on which funds are deposited in
an account at a depository institution by a check drawn on
a local originating depository institution and the business
day on which such funds are available for withdrawal.
(B) TIME PERIOD ADJUSTMENT FOR CASH WITHDRAWAL OF

CERTAIN CHECKS.—
(i) IN GENERAL.—Except as provided in clause (ii),
funds deposited in an account in a depository institution by check drawn on a local depository institution
that is not a participant in the same check clearinghouse association as the receiving depository institution (other than a check described in subsection (a)(2))
shall be available for cash withdrawal not later than

101 STAT. 640

PUBLIC LAW 100-86—AUG. 10, 1987
the business day after the business day on which such
funds otherwise are available under subparagraph (A),
(ii) 5 P.M. CASH AVAILABILITY.—Not more than $400
(or the maximum amount allowable in the case of a
withdrawal from an automated teller machine but not
more than $400) of funds deposited by one or more
-' checks to which this subparagraph applies shall be
available for cash withdrawal not later than 5 o'clock
post meridian of the business day on which such funds
are available under subparagraph (A).
(iii) $100 AVAILABILITY.—Any amount available for
withdrawal under this subparagraph shall be in addif:
tion to the amount available under subsection (aX2XD).
(2) AVAILABILITY OF NONLOCAL CHECKS.—Subject to subsections
(a)(2), (d), and (e) of this section and section 604, not more than 6
business days shall intervene between the business day on
which funds are deposited in an account at a depository institution by a check drawn on a nonlocal originating depository
institution and the business day on which such funds are available for withdrawal.
(3) APPUCABILTTY.—This subsection shall apply with respect to
funds deposited by check in an account at a depository institution after August 31,1988, and before September 1,1990, except
as may be otherwise provided under subsection Ot))(4).

Regulations.

(d) TIME PERIOD ADJUSTMENTS.—
(1) REDUCTION GENERALLY.—Notwithstanding any other provi-

sion of law, the Board shall, by regulation, reduce the time
periods established under subsections Ot)), (c), and (e) to as short
a time as possible and equal to the period of time achievable
under the improved check clearing system for a receiving
depository institution to reasonably expect to learn of the
nonpa3mient of most items for each category of checks.
(2)

Alaska.
Hawaii.
Puerto Rico.
Virgin Islands.

EXTENSION FOR CERTAIN DEPOSITS IN NONCONTIGUOUS

STATES OR TERRITORIES.—Notwithstanding any other provision of
law, any time period established under subsection (b), (c), or (e)
shall be extended by 1 business day in the case of any deposit
which is both—
(A) deposited in an account at a depository institution
which is located in Alaska, Hawaii, Puerto Rico, or the
Virgin Islands; and
(B) deposited by a check drawn on an originating depository institution which is not located in the same State,
commonwealth, or territory as the receiving depository
institution.
(e) DEPOSITS AT AN ATM.—
(1) NONPROPRIETARY ATM—TEMPORARY SCHEDULE.—

(A) I N GENERAL.—Not more than 6 business days shall
intervene between the business day a deposit described in
subparagraph (B) is made at a nonproprietary automated
teller machine (for deposit in an account at a depository
institution) and the business day on which funds from such
deposit are available for withdrawal.
(B) DEPOSITS DESCRIBED IN THIS PARAGRAPH.—A deposit is
described in this subparagraph if it is—
(i) a cash deposit;
(ii) a deposit made by a check described in subsection
(a)(2);

PUBLIC LAW 100-86—AUG. 10, 1987

I

,,. •
^^

j^'

p^,.
^

101 STAT. 641

(iii) a deposit made by a check drawn on a local
originating depository institution (other than a check
described in subsection (a)(2)); or
(iv) a deposit made by a check drawn on a nonlocal
originating depository institution (other than a check
described in subsection (a)(2)).
(C) APPUCABILITY.—This paragraph shall apply with respect to funds deposited at a nonproprietary automated
teller machine after August 31, 1988, and before September 1, 1990.

T (2) NONPROPRIETARY ATM—PERMANENT SCHEDULE.—
(A) CASH, GOVERNMENT CHECKS, AND LOCAL CHECKS.—Not

more than 1 business day shall intervene between the
business day on which a deposit described in paragraph
(1)(B) (i), (ii), or (iii) is made at a nonproprietary automated
teller machine (for deposit in an account at a depository
institution) and the business day on which funds from such
deposit are available for withdrawal.
(B) NONLOCAL CHECKS.—Not more than 4 business days
shall intervene between the business day a deposit described in paragraph (l)(B)(iv) is made at a nonproprietary
automated teller machine (for deposit in an account at a
depository institution) and the business day on which funds
from such deposit are available for withdrawal.
(C) DETERMINATION OF "LOCAL ORIGINATING DEPOSITORY

1

INSTITUTION".—For the purpose of this paragraph, a check
is drawn on a local originating depository institution if that
depository institution is located in the same check processing region as the receiving nonproprietary ATM.
(D) APPLICABILITY.—This paragraph shall apply with respect to funds deposited at a nonproprietary automated
teller machine on or after September 1,1990.
(3) PROPRIETARY ATM—TEMPORARY AND PERMANENT SCHED-

ULES.—The provisions of subsections (a), (b), and (c) shall apply
with respect to any funds deposited at a proprietary automated teller machine for deposit in an account at a depository
institution.
(4) STUDY AND REPORT ON ATM'S.—The Board shall, either
directly or through the Consumer Advisory Council, establish
and maintain a dialogue with depository institutions and their
suppliers on the computer software and hardware available for
use by automated teller machines, and shall, not later than
September 1 of each of the first 3 calendar years beginning after
the date of the enactment of this title, report to the Congress
regarding such software and hardware and regarding the potential for improving the processing of automated teller machine
deposits.
(f) CHECK RETURN; NOTICE OF NONPAYMENT.—No provision of this
section shall be construed as requiring that, with respect to all
checks deposited in a receiving depository institution—
(1) such checks be physically returned to such depository
institution; or
(2) any notice of nonpayment of any such check be given to
J such depository institution within the times set forth in subsection (a), (b), (c), or (e) or in the regulations issued under any such
subsection.

101 STAT. 642
12 u s e 4003.

PUBLIC LAW 100-86—AUG. 10, 1987

SEC. 604. SAFEGUARD EXCEPTIONS.

(a) NEW ACCOUNTS.—Notwithstanding section 603, in the case of
any account established at a depository institution by a new depositor, the following provisions shall apply with respect to any deposit
in such account during the 30-day period (or such shorter period as
the Board may establish) beginning on the date such account is
established—
(1) NEXT BUSINESS DAY AVAILABIUTY OF CASH AND CERTAIN

ITEMS.—Except as provided in paragraph (3), in the case of—
(A) any cash deposited in such account;
(B) any funds received by such depository institution by
'
wire transfer for deposit in such account;
'
(C) any funds deposited in such account by cashier's
check, certified check, teller's check, depository check, or
traveler's check; and
(D) any funds deposited by a government check which is
described in subparagraph (A), (B), or (C) of section 603(a)(2),
such cash or funds shall be available for withdrawal on the
business day after the business day on which such cash or funds
are deposited or, in the case of a wire transfer, on the business
day after the business day on which such funds are received for
deposit.
(2) AVAILABILITY OF OTHER ITEMS.—In the case of any funds
deposited in such account by a check (other than a check
described in subparagraph (C) or (D) of paragraph (1)), the
availability for withdrawal of such funds shall not be subject to
the provisions of section 6030>), 603(c), or paragraphs (1) and (2)
of section 603(e).
(3) LIMITATION RELATING TO CERTAIN CHECKS IN EXCESS OF

' $5,000.—In the case of funds deposited in such account during
such period by checks described in subparagraph (C) or (D) of
paragraph (1) the aggregate amount of which exceeds $5,000—
(A) paragraph (1) shall apply only with respect to the first
$5,000 of such aggregate amount; and
(B) not more than 8 business days shall intervene be- tween the business day on which any such funds are deposited and the business day on which such excess amount
shall be available for withdrawal.
Ot)) LARGE OR REDEPOSITED CHECKS; REPEATED OVERDRAFTS.—The

Board may, by regulation, establish reasonable exceptions to any
time limitation established under subsection (b), (c), or (e) of section
603 for—
(1) the amount of deposits by one or more checks that exceeds
the amount of $5,000 in any one day;
(2) checks that have been returned unpaid and redeposited;
and
(3) deposit accounts which have been overdrawn repeatedly.
(c) REASONABLE CAUSE EXCEPTION.—

(1) I N GENERAL.—In accordance with regulations which the
Board shall prescribe, subsections (a)(2)(F), (b), (c), and (e) of
section 603 shall not apply with respect to any check deposited
in an account at a depository institution if the receiving depository institution has reasonable cause to believe that the check is
uncollectible from the originating depository institution. For
purposes of the preceding sentence, reasonable cause to believe
requires the existence of facts which would cause a well-

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 643

grounded belief in the mind of a reasonable person. Such
reasons shall be included in the notice required under subsection (f).
(2) BASIS FOR DETERMINATION.—No determination under this
subsection may be based on any class of checks or persons.
r
(3) OVERDRAFT FEES.—If the receiving depository institution
determines that a check deposited in an account is a check
« described in paragraph (1), the receiving depository institution
shall not assess any fee for any subsequent overdraft with
3 respect to such account, if—
(A) the depositor was not provided with the written notice
fc
required under subsection (f) (with respect to such deteri
mination) at the time the deposit was made;
(B) the overdraft would not have occurred but for the fact
*
* that the funds so deposited are not available; and
(C) the amount of the check is collected from the originat^ing depository institution.
(4) COMPLIANCE.—Each agency referred to in section 610(a)
shall monitor compliance with the requirements of this subsection in each regular examination of a depository institution and
shall describe in each report to the Congress the extent to which
this subsection is being complied with. For the purpose of this
paragraph, each depository institution shall retain a record of
each notice provided under subsection (f) as a result of the
application of this subsection.
(d) EMERGENCY CONDITIONS.—Subject to such regulations as the
Board may prescribe, subsections (b), (c), and (e) of section 603 shall
not apply to funds deposited by check in any receiving depository
institution in the case of^
(1) any interruption of communication facilities;
(2) suspension of payments by another depository institution;
(3) any war; or
(4) any emergency condition beyond the control of the receiving depository institution,
if the receiving depository institution exercises such diligence as the
circumstances require.
(e) PREVENTION OF FRAUD LOSSES.—

(1) I N GENERAL.—The Board may, by regulation or order,
suspend the applicability of this title, or any portion thereof, to
any classification of checks if the Board determines that—
(A) depository institutions are experiencing an unacceptable level of losses due to check-related fraud, and
(B) suspension of this title, or such portion of this title,
with regard to the classification of checks involved in such
fraud is necessary to diminish the volume of such fraud.
(2) SUNSET PROVISION.—No regulation prescribed or order
issued under paragraph (1) shall remain in effect for more than
45 days (excluding Saturdays, Sundays, legal holidays, or any
day either House of Congress is not in session).
(3) REPORT TO CONGRESS.—
(A) NOTICE OF EACH SUSPENSION.—Within

10 days of
prescribing any regulation or issuing any order under paragraph (1), the Board shall transmit a report of such action
to the Committee on Banking, Finance and Urban Affairs
of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate.

91-194 O - 90 - 22 : QL.3 Part 1

^

^'~

101 STAT. 644

PUBLIC LAW 100-86—AUG. 10, 1987

" •

(B) CONTENTS OF REPORT.—Each report under subparagraph (A) shall contain—
(i) the specific reason for prescribing the regulation
'•
or issuing the order;
(,
(ii) evidence considered by the Board in making the
determination under paragraph (1) with respect to such
regrulation or order; and
(iii) specific examples of the check-related fraud
giving rise to such regulation or order.

(f) NOTICE OF EXCEPTION; AVAILABIUTY WITHIN REASONABLE
TIME.—

(1) I N GENERAL.—If any exception contained in this section
(other than subsection (a)) applies with respect to funds deposj^.,. ited in an account a t a depository institution—
(A) the depository institution shall provide notice in the
t.^^a-^ manner provided in paragraph (2) of—
(i) the day the funds shall be made available for
. /»
withdrawal; and
(ii) the reason the exception was invoked; and
(B) except where other time periods are specifically provided in this title, the availability of the funds deposited
shall be governed by the policy of the receiving depository
institution, but shall not exceed a reasonable period of time
^^
^4
as determined by the Board.
(2) TIME FOR NOTICE.—The notice required under paragraph
,fj (1)(A) with respect to a deposit to which an exception contained
in this section applies shall be made by the time provided in the
following subparagraphs:
(A) In the case of a deposit made in person by the
depositor at the receiving depository institution, the deposij, , tory institution shall immediately provide such notice in
writing to the depositor.
(B) In the case of any other deposit (other than a deposit
described in subparagraph (O), the receiving depository
institution shall mail the notice to the depositor not later
than the close of the next business day following the business day on which the deposit is received.
(C) In the case of a deposit to which subsection (d) or (e)
I *^'applies, notice shall be provided by the depository institu^'
tion in accordance with regulations of the Board.
(3) SUBSEQUENT DETERMINATIONS.—If the facts upon which the
determination of the applicability of an exception contained in
subsection (b) or (c) to any deposit only become known to the
•^- receiving depository institution after the time notice is required
under paragraph (2) with respect to such deposit, the depository
institution shall mail such notice to the depositor as soon as
practicable, but not later than the first business day following
the day such facts become known to the depository institution.
12 u s e 4004.

SEC. 605. DISCLOSURE OF FUNDS AVAILABILITY POLICIES.
(a) NOTICE FOR N E W ACCOUNTS.—Before an account is opened at a

depository institution, the depository institution shall provide written notice to the potential customer of the specific policy of such
depository institution with respect to when a customer may withdraw funds deposited into the customer's account.
(b) PREPRINTED DEPOSIT SLIPS.—All preprinted deposit slips that a
depository institution furnishes to its customers shall contain a

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 645

summary notice, as prescribed by the Board in regulations, that
deposited items may not be available for immediate withdrawal.
(c) MAILING OF NOTICE.—
(1) FIRST MAILING AFTER ENACTMENT.—In

the first regularly
scheduled mailing to customers occurring after the effective
date of this section, but not more than 60 days after such
effective date, each depository institution shall send a written
notice containing the specific policy of such depository institution with respect to when a customer may withdraw funds
deposited into such customer's account, unless the depository
institution has provided a disclosure which meets the requirements of this section before such effective date.
(2) SUBSEQUENT CHANGES.—A depository institution shall send
a written notice to customers at least 30 days before implementing any change to the depository institution's policy with respect to when customers may withdraw funds deposited into
consumer accounts, except that any change which expedites the
availability of such funds shall be disclosed not later than 30
days after implementation.
(3) UPON REQUEST.—Upon the request of any person, a depository institution shall provide or send such person a written
notice containing the specific policy of such depository institution with respect to when a customer may withdraw funds
deposited into a customer's account.

' i S;

(d) POSTING OF NOTICE.—
(1) SPECIFIC NOTICE AT MANNED TELLER STATIONS.—Each

depository institution shall post, in a conspicuous place in each
location where deposits are accepted by individuals employed by
such depository institution, a specific notice which describes the
time periods applicable to the availability of funds deposited in
a consumer account.
(2) GENERAL NOTICE AT AUTOMATED TELLER MACHINES.—In the

case of any automated teller machine at which any funds are
received for deposit in an account at any depository institution,
the Board shall prescribe, by regulations, that the owner or
operator of such automated teller machine shall post or provide
a general notice that funds deposited in such machine may not
be immediately available for withdrawal.
(e) NOTICE OF INTEREST PAYMENT POUCY.—If a depository institution described in section 60603) begins the accrual of interest or
dividends at a later date than the date described in section 606(a)
with respect to all funds, including cash, deposited in an interestbearing account at such depository institution, any notice required
to be provided under subsections (a) and (c) shall contain a written
description of the time at which such depository institution begins to
accrue interest or dividends on such funds.
(f) MODEL DISCLOSURE FORMS.—
(1) PREPARED BY BOARD.—The

Board shall publish model
disclosure forms and clauses for common transactions to facilitate compliance with the disclosure requirements of this section
and to aid customers by utilizing readily understandable
language.
(2) USE OF FORMS TO ACHIEVE COMPLIANCE.—A depository
institution shall be deemed to be in compliance with the
requirements of this section if such institution—
(A) uses any appropriate model form or clause as published by the Board, or

;> rs

101 STAT. 646

PUBLIC LAW 100-86—AUG. 10, 1987

•'
*'
^
Federal
Register,
publication.

12 u s e 4005.

12 u s e 461.

(B) uses any such model form or clause and changes such
form or clause by—
(i) deleting any information which is not required by
this title; or
(ii) rearranging the format.
(3) VOLUNTARY USE.—Nothing in this title requires the use of
any such model form or clause prescribed by the Board under
this subsection.
(4) NOTICE AND COMMENT.—Model disclosure forms and
clauses shall be adopted by the Board only after notice duly
given in the Federal Register and an opportunity for public
comment in accordance with section 553 of title 5, United States
Code.

SEC. 606. PAYMENT OF INTEREST.

(a) I N GENERAL.—Except as provided in subsection (b) or (c) and
notwithstanding any other provision of law, interest shall accrue on
funds deposited in an interest-bearing account at a depository
institution beginning not later than the business day on which the
depository institution receives provisional credit for such funds.
(b) SPECIAL RULE FOR CREDIT UNIONS.—Subsection (a) shall not
apply to an account at a depository institution described in section
19(b)(l)(A)(iv) of the Federal Reserve Act if the depository
institution—
(1) begins the accrual of interest or dividends at a later date
than the date described in subsection (a) with respect to all
funds, including cash, deposited in such account; and
(2) provides notice of the interest payment policy in the
manner required under section 605(e).
(c) EXCEPTION FOR CHECKS RETURNED UNPAID.—No provision of

this title shall be construed as requiring the payment of interest or
dividends on funds deposited by a check which is returned unpaid.
12 u s e 4006.

SEC. 607. MISCELLANEOUS PROVISIONS.

(a) AFTER-HOURS DEPOSITS.—For purposes of this title, any deposit
which is made on a Saturday, Sunday, legal holiday, or after the
close of business on any business day shall be deemed to have been
made on the next business day.
(b) AVAILABILITY AT START OF BUSINESS DAY.—Except as provided

in subsections 03)(3) and (c)(1)(B) of section 603, if any provision of
this title requires that funds be available for withdrawal on any
business day, such funds shall be available for withdrawal at the
start of such business day.
(c) EFFECT ON POLICIES OF DEPOSITORY INSTITUTIONS.—No provision

of this title shall be construed as—
(1) prohibiting a depository institution from making funds
g
available for withdrawal in a shorter period of time than the
period of time required by this title; or
(2) affecting a depository institution's right—
(A) to accept or reject a check for deposit;
(B) to revoke any provisional settlement made by the
depository institution with respect to a check accepted by
,.
such institution for deposit;
(C) to charge back the depositor's account for the amount
of such check; or
(D) to claim a refund of such provisional credit.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 647

(d) PROHIBITION ON FREEZING CERTAIN FUNDS IN AN ACCOUNT.—In

any case in which a check is deposited in an account at a depository
institution and the funds represented by such check are not yet
available for withdrawal pursuant to this title, the depository
institution may not freeze any other funds in such account (which
are otherwise available for withdrawal pursuant to this title) solely
because the funds so deposited are not yet available for withdrawal.
(e) EMPLOYEE TRAINING ON AND COMPUANCE WITH THE REQUIREMENTS OF THIS TITLE.—Each depository institution shall—

(1) take such actions as may be necessary fully to inform each
employee (who performs duties subject to the requirements of
this title) of the requirements of this title; and
(2) establish and maintain procedures reasonably designed
to assure and monitor employee compliance with such
requirements.
SEC. 608. EFFECT ON STATE LAW.

12 USC 4007.

(a) I N GENERAL.—Any law or regulation of any State in effect on
September 1, 1989, which requires that funds deposited or received
for deposit in an account at a depository institution chartered by
such State be made available for withdrawal in a shorter period of
time than the period of time provided in this title or in regulations
prescribed by the Board under this title (as in effect on September 1,
1989) shall—
(1) supersede the provisions of this title and any regulations
by the Board to the extent such provisions relate to the time by
which funds deposited or received for deposit in an account
shall be available for withdrawal; and
(2) apply to all federally insured depository institutions
located within such State.
(b) OVERRIDE OF CERTAIN STATE LAWS.—Except as provided in

subsection (a), this title and regulations prescribed under this title
shall supersede any provision of the law of any State, including the
Uniform Commercial Code as in effect in such State, which is
inconsistent with this title or such regulations.
SEC. 609. REGULATIONS AND REPORTS BY BOARD.

(a) IN GENERAL.—After notice and opportunity to submit comment
in accordance with section 553(c) of title 5, United States Code, the
Board shall prescribe regulations—
(1) to carry out the provisions of this title;
(2) to prevent the circumvention or evasion of such provisions;
and
(3) to facilitate compliance with such provisions.
(b) REGULATIONS RELATING TO IMPROVEMENT OF CHECK PROCESSING

SYSTEM.—In order to improve the check processing system, the
Board shall consider (among other proposals) requiring, by regulation, that—
(1) depository institutions be charged based upon notification
that a check or similar instrument will be presented for payment;
(2) the Federal Reserve banks and depository institutions
provide for check truncation;
(3) depository institutions be provided incentives to return
items promptly to the depository institution of first deposit;

12 USC 4008.

101 STAT. 648

PUBLIC LAW 100-86—AUG. 10, 1987

(4) the Federal Reserve banks and depository institutions take
V such actions as are necessary to automate the process of return- ing unpaid checks;
\
(5) each depository institution and Federal Reserve bank—
(A) place its endorsement, and other notations specified
V
in regulations of the Board, on checks in the positions
f
specified in such r e f l a t i o n s ; and
(B) take such actions as are necessary to—
(i) automate the process of reading endorsements;
fiv''
and
'
(ii) eliminate unnecessary endorsements;
(6) within one business day after an originating depository
|v institution is presented a check (for more than such minimum
il amount as the Board may prescribe)—
(A) such originating depository institution determines
whether it will pay such check; and
(B) if such originating depository institution determines
uL
that it will not pay such check, such originating depository
i',
institution directly notify the receiving depository institun
tion of such determination;
;/
(7) regardless of where a check is cleared initially, all re< turned checks be eligible to be returned through the Federal
Reserve System;
(8) Federal Reserve banks and depository institutions participate in the development and implementation of an electronic
^^; clearinghouse process to the extent the Board determines,
^ • pursuant to the study under subsection (f), that such a process is
feasible; and
i
(9) originating depository institutions be permitted to return
unpaid checks directly to, and obtain reimbursement for such
checks directly from, the receiving depository institution.

• '

(c) REGULATORY RESPONSIBIUTY OF BOARD FOR PAYMENT SYSTEM.—

,

<

»
^
(1) RESPONSIBILITY FOR PAYMENT SYSTEM.—In order to carry
^ r out the provisions of this title, the Board of Grovernors of the
Federal Reserve System shall have the responsibility to
regulate—
(A) any aspect of the payment system, including the
receipt, payment, collection, or clearing of checks; and
-,j
(B) any relateid function of the payment system with
respect to checks.
(2) REGULATIONS.—The Board shall prescribe such regulations
as it may determine to be appropriate to carry out its responsibility under paragraph (1).
(d) REPORTS.—
(1) IMPLEMENTATION PROGRESS REPORTS.—
(A) REQUIRED REPORTS.—The Board

.
•

shall transmit a
report to both Houses of the Congress not later than 18, 30,
and 48 months after the date of the enactment of this title.
(B) CONTENTS OF REPORT.—Each such report shall
describe—
(i) the actions taken and progress made by the Board
to implement the schedules established in section 603,
'*

and

(ii) the impact of this title on consumers and depository institutions.
(2) EVALUATION OF TEMPORARY SCHEDULE REPORT.—

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 649

^

(A) REPORT REQUIRED.—The Board shall transmit a report
to both Houses of the Congress not later than 2 years after
the date of the enactment of this title regarding the effects
the temporary schedule established under section 603(c)
have had on depository institutions and the public.
(B) CONTENTS OF REPORT,—Such report shall also assess
'^^
the potential impact the implementation of the schedule
established in section 603(b) will have on depository institu^„ ,,, tions and the public, including an estimate of the risks to
**
and losses of depository institutions and the benefits to
consumers. Such report shall also contain such recommendations for legislative or administrative action as
the Board may determine to be necessary.
•
(3) COMPTROLLER GENERAL EVALUATION REPORT.—Not later
than 6 months after section 603(b) takes effect, the Comptroller
General of the United States shall transmit a report to the
Congress evaluating the implementation and administration of
this title.
(e) CONSULTATION.—In prescribing regulations under subsections
(a) and (b), the Board shall consult with the Comptroller of the
Currency, the Board of Directors of the Federal Deposit Insurance
Corporation, the Federal Home Loan Bank Board, and the National
Credit Union Administration Board.

^^

(f) ELECTRONIC CLEARINGHOUSE STUDY.—
(1) STUDY REQUIRED.—The Board shall study the feasibility of

:

o

modernizing and accelerating the check payment system
through the development of an electronic clearinghouse process
utilizing existing telecommunications technology to avoid the
necessity of actual presentment of the paper instrument to a
payor institution before such institution is charged for the item.
(2) CONSULTATION; FACTORS TO BE STUDIED.—In connection
with the study required under paragraph (1), the Board shall—
(A) consult with appropriate experts in telecommunications technology; and
(B) consider all practical and legal impediments to the
development of an electronic clearinghouse process.
(3) REPORT REQUIRED.—The Board shall report its conclusions
to the Congress within 9 months of the date of the enactment of
this title.

SEC. 610. ADMINISTRATIVE ENFORCEMENT.

12 USC 4009.

(a) ADMINISTRATIVE ENFORCEMENT.—Compliance with the requirements imposed under this title, including regulations prescribed by
and orders issued by the Board of Governors of the Federal Reserve
System under this title, shall be enforced under—
(1) section 8 of the Federal Deposit Insursince Act in the case 12 use I8I8
of—
(A) national banks, by the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other
; : ;
than national banks), by the Board of Governors of the
Federal Reserve System; and
(C) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve
System), by the Board of Directors of the Federal Deposit
Insurance Corporation;
(2) section 5(d) of the Home Owners' Loan Act of 1933, section 12 use 1464.
407 of the National Housing Act, and section 17 of the Federal 12 use nm.

,

101 STAT. 650
12 use 1437.

12 use 1751.

PUBLIC LAW 100-86—AUG. 10, 1987
Home Loan Bank Act, by the Federal Home Loan Bank Board
(acting directly or through the Federal Savings and Loan Insurj ance Corporation), in the case of any institution subject to any
of those provisions; and
(3) the Federal Credit Union Act, by the National Credit
Union Administration Board with respect to any Federal credit
union or insured credit union.
(b) ADDITIONAL POWERS.—
(1) VIOLATION OF THIS TITLE TREATED AS VIOLATION OF OTHER

^ „ ACTS.—For purposes of the exercise by any agency referred to in
subsection (a) of this section of its powers under any Act referred to in that subsection, a violation of any requirement
imposed under this title shall be deemed to be a violation of a
requirement imposed under that Act.
(2) ENFORCEMENT AUTHORITY UNDER OTHER ACTS.—In addition
to its powers under any provision of law specifically referred to
in subsection (a) of this section, each of the agencies referred to
in such subsection may exercise, for purposes of enforcing
compliance with any requirement imposed under this title, any
other authority conferred on it by law.
j
(c) ENFORCEMENT BY THE BOARD.—

!

12 u s e 4010.

"

(1) IN GENERAL,—Except to the extent that enforcement of the
requirements imposed under this title is specifically committed
to some other Government agency under subsection (a) of this
section, the Board of Governors of the Federal Reserve System
shall enforce such requirements.
(2) ADDITIONAL REMEDY.—If the Board determines that—
a
(A) any depository institution which is not a depository
institution described in subsection (a), or
(B) any other person subject to the authority of the Board
under this title, including any person subject to the authority of the Board under section 605(d)(2) or 609(c),
has failed to comply with any requirement imposed by this title
or by the Board under this title, the Board may issue an order
prohibiting any depository institution, any Federal Reserve
bank, or any other person subject to the authority of the Board
from engaging in any activity or transaction which directly or
indirectly involves such noncomplying depository institution or
person (including any activity or transaction involving the receipt, payment, collection, and clearing of checks and any related function of the payment system with respect to checks).
(d) PROCEDURAL RULES.—The authority of the Board to prescribe
regulations under this title does not impair the authority of any
other agency designated in this section to make rules regarding its
own procedures in enforcing compliance with requirements imposed
under this title.
SEC. 611. CIVIL LIABILITY.
(a) CIVIL LIABILITY.—Except as otherwise provided in this section,

any depository institution which fails to comply with any requirement imposed under this title or any regulation prescribed under
this title with respect to any person other than another depository
institution is liable to such person in an amount equal to the sum
of—
(1) any actual damage sustained by such person as a result of
the failure;

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 651

(2)(A) in the case of an individual action, such additional
amount as the court may allow, except that the liability under
this subparagraph shall not be less than $100 nor greater than
$1,000; or
(B) in the case of a class action, such amount as the court may
allow, except that—
(i) as to each member of the class, no minimum recovery
shall be applicable; and
(ii) the total recovery under this subparagraph in any
class action or series of class actions arising out of the same
failure to comply by the same depository institution shall
not be more than the lesser of $500,000 or 1 percent of the
net worth of the depository institution involved; and
(3) in the case of any successful action to enforce the foregoing
liability, the costs of the action, together with a reasonable
attorney's fee as determined by the court.
Qo) CLASS ACTION AWARDS.—In determining the amount of any
award in any class action, the court shall consider, among other
relevant factors—
(1) the amount of any actual damages awarded;
(2) the frequency and persistence of failures of compliance;
(3) the resources of the depository institution;
(4) the number of persons adversely affected; and
.r
(5) the extent to which the failure of compliance was
intentional.

-

(c) BONA FIDE ERRORS.—
(1) GENERAL RULE.—A

depository institution may not be held
liable in any action brought under this section for a violation of
this title if the depository institution demonstrates by a preponderance of the evidence that the violation was not intentional
and resulted from a bona fide error, notwithstanding the
maintenance of procedures reasonably adapted to avoid any
such error.
(2) EXAMPLES.—Examples of a bona fide error include clerical,
calculation, computer malfunction and programming, and
printing errors, except that an error of legal judgment with
respect to a depository institution's obligation under this title is
not a bona fide error.
(d) JURISDICTION.—Any action under this section may be brought
in any United States district court, or in any other court of competent jurisdiction, within one year after the date of the occurrence
of the violation involved.
(e) RELIANCE ON BOARD RULINGS.—No provision of this section
imposing any liability shall apply to any act done or omitted in good
faith in conformity with any rule, regulation, or interpretation
thereof by the Board of Governors of the Federal Reserve System,
notwithstanding the fact that after such act or omission has occurred, such rule, regulation, or interpretation is amended, rescinded, or determined by judicial or other authority to be invalid
for any reason.

s

(f) AUTHORITY TO ESTABLISH RULES REGARDING LOSSES AND LIABILITY AMONG DEPOSITORY INSTITUTIONS.—The Board is authorized to

impose on or allocate among depository institutions the risks of loss
and liability in connection with any aspect of the payment system,
including the receipt, payment, collection, or clearing of checks, and
any related function of the payment system with respect to checks.
Liability under this subsection shall not exceed the amount of the

/, ,,;

101 STAT. 652

PUBLIC LAW 100-86—AUG. 10, 1987

check giving rise to the loss or liability, and, where there is bad
faith, other damages, if any, suffered as a proximate consequence of
any act or omission giving rise to the loss or liability.
SEC. 612. PARITY IN CLEARING.

12 use 248a
"ote.
12 u s e 4001

'

(a) IN GENERAL.—Section 11A of the Federal Reserve Act (12
U.S.C. 248a) is amended by adding at the end thereof the following:
"(e) All depository institutions, as defined in section 19(b)(1) (12
U.S.C. 461(b)(1)), may receive for deposit and as deposits any evidences of transaction accounts, as defined by section 19(b)(1) (12
U.S.C. 461(b)(1)) from other depository institutions, as defined in
section 19(b)(1) (12 U.S.C. 461(b)(1)) or from any office of any Federal
Reserve bank without regard to any Federal or State law restricting
the number or the physical location or locations of such depository
institutions.".
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall take effect on the date of enactment of this title.
SEC. 613. EFFECTIVE DATES.
(a) DATE OF ENACTMENT.—Except as provided in subsection (b),

this title shall take effect on the date of the enactment of this title.
(b) 1 YEAR AFTER DATE OF ENACTMENT.—Sections 603, 604, 605,

606, 610, and 611 shall take effect on September 1,1988.

Ce i U i n
r dt no
Amendments
of 1987.
12 u s e 1751
note.

TITLE VII—CREDIT UNION AMENDMENTS
-^

SEC. 701. SHORT TITLE.

•

^ '
'

"

This title may be cited as the "Credit Union Amendments of
1987".
SEC. 702. SECOND MORTGAGE AND HOME IMPROVEMENT LOANS.

Section 107(5)(A)(ii) of the Federal Credit Union Act (12 U.S.C.
1757(5)(A)(ii)) is amended by striking out "fifteen years" and all that
follows and inserting in lieu thereof "15 years or any longer term
which the Board may allow;".
SEC. 703. OWNERSHIP INTEREST.

"

.

Section 107(6) of the Federal Credit Union Act (12 U.S.C. 1757(6))
is amended by inserting ", representing equity," after "payments".
SEC. 704. FAITHFUL PERFORMANCE.
(a) FINANCIAL OFFICER.—Section 112 of the Federal Credit Union

Act (12 U.S.C. 1761a) is amended by striking out the third sentence
and inserting in lieu thereof the following: "The board shall elect
from their number a financial officer who shall give adequate
fidelity coverage in accordance with section 113(2) of this Act.".
Ot)) ADEQUATE FIDEUTY COVERAGE.—Section 113 of the Federal
Credit Union Act (12 U.S.C. 1761b) is amended by striking out
paragraph (2) and inserting in lieu thereof the following:
"(2) provide adequate fidelity coverage for officers and
employees having custody of or handling funds according to
regulations issued by the Board;".
SEC. 705. MEMBERSHIP OFFICERS.

Section 113(1) of the Federal Credit Union Act (12 U.S.C. 1761b(l))
is amended by striking out "of the board of directors" and inserting
in lieu thereof "of the credit union".
,.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 653

SEC. 706. NONPARTICIPATION.

Section 118 of the Federal Credit Union Act (12 U.S.C. 1764) is
amended—
(1) by striking out "Subject to" in subsection (a) and inserting
in lieu thereof "Except as provided in"; and
(2) by inserting "and enforce" after "adopt" in subsection (b).

»

^

SEC. 707. PROPERTY ACQUISITION FLEXIBILITY.

Section 120(i)(2) of the Federal Credit Union Act (12 U.S.C.
1766(i)(2)) is amended—
(1) by inserting after "reimbursement," the following: "acquire and dispose of, by lease or purchase, real or personal
property, without regard to the provisions of any other law
applicable to executive or independent agencies of the United
States,"; and
(2) by inserting after "this Act" the following: ", in accordance
^ with the rules and regulations or policies established by the
Board not inconsistent with this Act' .
SEC. 708. TREATMENT OF NCUAB FUNDS.

Title I of the Federal Credit Union Act is amended by adding at
the end thereof the following:
"SEC. 129. TRUST FUND.

12 USC 1772c.

"Notwithstanding any other provision of law, all moneys of the
Board shall be treated as trust funds for the purpose of section
256ia)(2) of the Balanced Budget and Emergency Deficit Control Act
of 1^85. This section is effective for fiscal year 1986 and every fiscal Ante, p. 634.
yeai: thereafter.".
SEC.i709. TECHNICAL AND CLARIFYING AMENDMENTS; REMOVAL AND
\
PROHIBITION AUTHORITY.

Section 206(g) of the Federal Credit Union Act (12 U.S.C. 1786(g))
is amended—
• (1) in paragraph (1), by striking out "director, officer, or
committee member" each time it appears and inserting in lieu
thereof "director, officer, committee member, or employee";
(2) in paragraph (2), by striking out "director, officer, or
committee member" each place it appears and inserting in lieu
thereof "director, officer, committee member, or emplovee";
(3) in paragraph (2), by striking out "any other person' and
inserting in lieu thereof "any agent or other person"; and
(4) in paragraph (2), by inserting "employee, agent," before
"or other person '.
SEC. 710. EFFECT OF REMOVAL OR SUSPENSION.

Section 206(g) of the Federal Credit Union Act (12 U.S.C. 1786(g))
is amended by adding at the end thereof the following:
"(7)(A) Any person who, pursuant to this subsection, is removed,
suspended, or prohibited from participation in the conduct of the
affairs of an insured credit union shall also be removed, suspended,
or prohibited from participation in the conduct of the affairs of any
insured institution, any bank holding company or subsidiary of a
bank holding company, any organization organized and operated
under section 25(a) of the Federal Reserve Act or operating under
section 25 of the Federal Reserve Act, and any savings and loan
holding company or subsidiary of a savings and loan holding com-

'

101 STAT. 654
12 use 1701.

PUBLIC LAW 100-86—AUG. 10, 1987

pany (as those terms are defined in the National Housing Act), and
any institution chartered by and subject to regulation by the Farm
Credit Administration without the prior written approval of the
appropriate Federal regulatory agency.
"(B) As used in subsection (g), the term 'insured institution' means
an insured credit union or a depository institution whose accounts
are insured by the Federal Deposit Insurance Corporation or the
Federal Savings and Loan Insurance Corporation.".
SEC. 711. IMPOSITION OF CONSERVATORSHIP.

Section 206(h)(1) of the Federal Credit Union Act (12 U.S.C.
1786(h)(1)) is amended—
(1) by striking out "or" at the end of subparagraph (A);
(2) by striking out the period at the end of subparagraph (B)
and inserting in lieu thereof a semicolon; and
(3) by adding at the end thereof the following:
"(C) there is a willful violation of a cease-and-desist order
which has become final; or
"(D) there is concealment of books, papers, records, or assets
of the credit union or refusal to submit books, papers, records,
or affairs of the credit union for inspection to any examiner or
to any lawful agent of the Board.".
SEC. 712. REDUCTION IN STATE COMMENT WAITING PERIOD.

Section 206(h)(2)(B) of the Federal Credit Union Act (12 U.S.C.
1786(h)(2)(B)) is amended by striking out "ninety" and inserting in
lieu thereof "30".
SEC. 713. AUTHORITY AS CONSERVATOR.

Section 206(h) of the Federal Credit Union Act (12 U.S.C. 1786(h))
is amended—
(1) by redesignating paragraph (8) as paragraph (9); and
(2) by inserting after paragraph (7) the following:
"(8) The conservator shall have all the powers of the members, the
directors, the officers, and the committees of the credit union and
shall be authorized to operate the credit union in its own name or to
conserve its assets in the manner and to the extent authorized by
the Board.".
SEC. 714. LIQUIDATION PROCEEDINGS.
(a) APPLICATION FOR SHOW CAUSE ORDER.—Section 207(a)(1) of the

Federal Credit Union Act (12 U.S.C. 1787(a)(1)) is amended—
(1) by inserting "(A)" after "(1)"; and
(2) by adding at the end thereof the following:
"(B) Not later than 10 days after the date on which the Board
closes a credit union for liquidation pursuant to paragraph (1), or
accepts appointment as liquidating agent pursuant to subsection (b),
such insured credit union may apply to the United States district
court for the judicial district in which the principal office of such
insured credit union is located or the United States District Court
for the District of Columbia, for an order requiring the Board to
show cause why it should not be prohibited from continuing such
liquidation. Except as otherwise provided in this subparagraph, no
court may take any action for or toward the removal of any liquidating agent or, except at the instance of the Board, restrain or affect
the exercise of powers or functions of a liquidating agent.".

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 655

(b) LIQUIDATIONS SUBJECT TO REGULATION OF THE BOARD.—Section

208(c) of the Federal Credit Union Act (12 U.S.C. 1788(c)) is redesignated as subsection (j) of section 207 (12 U.S.C. 1787) and is amended
by striking out "subject to the regulation of the court or other public
body having jurisdiction over the matter" and inserting in lieu
thereof "subject only to the regulation of the Board, or, in cases
where the Board has been appointed liquidating agent solely by a
public authority having jurisdiction over the matter other than said
Board, subject only to the regulation of such public authority".
(c) CONFORMING AMENDMENT.—Section 208(d) of the Federal

Credit Union Act (12 U.S.C. 1788(d)) is redesignated as section 208(c).
SEC. 715. TRANSFER OF FTC JURISDICTION TO NCUAB.
(a) I N GENERAL.—

(1) Sections 5(aX2) and 6(a) of the Federal Trade Commission
Act (15 U.S.C. 45(a)(2) and 46(a)) are amended by inserting
immediately after "section 18(fX3)," the following: "Federal
credit unions described in section 18(f)(4),".
15 use 57a.
(2) Section 6(b) of the Federal Trade Commission Act (15
U.S.C. 46(b)) is amended by inserting immediately after "section
18(f)(3)," the following "Federal credit unions described in section 18(f)(4),".
(b) INVESTIGATIONS OF FOREIGN TRADE CONDITIONS; REPORTS.—The

second proviso in section 6 of the Federal Trade Commission Act (15
U.S.C. 46) is amended—
(1) by inserting immediately after "section 18(f)(3)," the following: "Federal credit unions described in section 18(f)(4),";
and
(2) by inserting immediately after "in business as a savings
and loan institution," the following: "in business as a Federal
credit union,".

^.

(c) REGULATIONS T O B E PRESCRIBED BY NCUAB.—

(1) The second sentence of section 18(D(1) of the Federal Trade
Commission Act (15 U.S.C. 57a(f)(l)) is amended by inserting
immediately after "paragraph (3))" the following: "and the
National Credit Union Administration Board (with respect to
Federal credit unions described in paragraph (4))".
(2) The last sentence of section 18(f)(1) of the Federal Trade
Commission Act (15 U.S.C. 57a(f)(l)) is amended—
(A) by striking "either such" and inserting in lieu thereof
"any such";
(B) by inserting "or Federal credit unions described in
paragraph (4)," immediately after "paragraph (3)," each
place it appears therein; and
(C) by inserting immediately after "with respect to
banks" the following: ", savings and loan institutions or
Federal credit unions".
(3) Section 18(f) of the Federal Trade Commission Act (15
U.S.C. 57a(f)) is amended by redesignating paragraphs (4), (5),
and (6) as paragraphs (5), (6), and (7), respectively, and by
inserting immediately after paragraph (3) the following:
"(4) Compliance with regulations prescribed under this subsection
shall be enforced with respect to Federal credit unions under sections 120 and 206 of the Federal Credit Union Act (12 U.S.C. 1766
and 1786).".

. ,:

101 STAT. 656

PUBLIC LAW 100-86—AUG. 10, 1987

SEC. 716. ASSETS WHICH MAY BE PLEDGED.

State and local
governments.
Indians.

(a) IN GENERAL.—Section 121 of the Federal Credit Union Act (12
U.S.C. 1767) is amended by adding at the end thereof the following
new subsection:
"(b) Any Federal credit union, upon the deposit with it of any
funds by the Federal Government, an Indian tribe, or any State or
local government or political subdivision thereof as otherwise authorized by this Act, is authorized to pledge any of its assets
securing the payment of the funds so deposited.".
(b) CONFORMING AMENDMENT.—Section 121 of the Federal Credit

Union Act (12 U.S.C. 1767) is amended by striking out "Each" in the
first sentence and inserting in lieu thereof "(a) Each".

TITLE VIII—LOAN LOSS AMORTIZATION
SEC. 801. LOAN LOSS AMORTIZATION FOR AGRICULTURAL BANKS.

Ante, p. 623.

Section 13 of the Federal Deposit Insurance Act (12 U.S.C. 1823) is
amended by adding at the end thereof the following:
"(j) LOAN LOSS AMORTIZATION FOR CERTAIN BANKS.—

Fraud.

Real property.

"(1) ELIGIBILITY.—The appropriate Federal banking agency
shall permit an agricultural bank to take the actions referred to
in paragraph (2) if it finds that—
"(A) there is no evidence that fraud or criminal abuse on
the part of the bank led to the losses referred to in para-mi
graph (2); and
' •
"(B) the agricultural bank has a plan to restore its capital, not later than the close of the amortization period
established under paragraph (2), to a level prescribed by the
appropriate Federal banking agency.
"(2) SEVEN-YEAR LOSS AMORTIZATION.—(A) Any loss on any
qualified agricultural loan that an agricultural bank would
otherwise be required to show on its annual financial statement
for any year between December 31, 1983, and January 1, 1992,
may be amortized on its financial statements over a period of
-' not to exceed 7 years, as provided in regulations issued by the
appropriate Federal banking agency.
"(B) An agricultural bank may reappraise any real estate or
other property, real or personal, that it acquired coincident to
' the making of a qualified agricultural loan and that it owned on
January 1, 1983, and any such additional property that it
acquires prior to January 1, 1992. Any loss that such bank
would otherwise be required to show on its annual financial
statements as the result of any such reappraisal may be amortized on its financial statements over a period of not to exceed 7
' years, as provided in regulations issued by the appropriate
Federal banking agency.
"(3) REGULATIONS.—Not later than 90 days after the date of
enactment of this subsection, the appropriate Federal banking
agency shall issue regulations implementing this subsection
with respect to banks that it supervises, including regulations
implementing the capital restoration requirement of paragraph
(1)(B).
"(4) DEFINITIONS.—As used in this subsection—
"(A) the term'agricultural bank'means a bank—
;.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 657

"(i) the deposits of which are insured by the Federal
Deposit Insurance Corporation;
...;; "rfj V,,
(ii) which is located in an area the economy of which
is dependent on agriculture;
"(iii) which has assets of $100,000,000 or less; and
w^' \
"(iv) which has—
"(I) at least 25 percent of its total loans in qualified agricultural loans; or
"(II) fewer than 25 percent of its total loans in
qualified agricultural loans but which the appropriate Federal banking agency or State bank
commissioner recommends to the Corporation for
eligibility under this section, or which the Corporae
tion, on its motion, deems el^ble; and
"(B) the term 'qualified agricultural loan' means a loan
'>' - made to finance the production of agricultural products or
livestock in the United States, a loan secured by farmland
or farm machinery, or such other category of loans as the
appropriate Federal banking agency may deem eligible.
"(5) MAINTENANCE OF PORTFOUO.—As a condition of eligibility
under this subsection, the agricultural bank must agree to
maintain in its loan portfolio a percentage of agricultural loans
' which is not lower than the percentage of such loans in its loan
portfolio on January 1,1986. .

TITLE IX—FULL FAITH AND CREDIT
OF FEDERALLY INSURED DEPOSITORY
INSTITUTIONS
SEC. 901. REAFFIRMATION OF SECURITY OF FUNDS DEPOSITED IN FEDERALLY INSURED DEPOSITORY INSTITUTIONS.

(a) FINDINGS.—The Congress finds and declares that—
(1) since the 1930's, the American people have relied upon
Federal deposit insurance to ensure the safety and security of
their funds in federally insured depository institutions; and
(2) the safety and security of such funds is an essential
element of the American financial system.
0)) SENSE OF CONGRESS.—In view of the findings and declarations
contained in subsection (a), it is the sense of the Congress that it
should reaffirm that deposits up to the statutorily prescribed
£unount in federally insured depository institutions are backed by
the full faith and credit of the United States.

TITLE X—GOVERNMENT CHECKS
SEC. 1001. REPORT ON DIFFICULTY IN CASHING TREASURY CHECKS.

Not later than 6 months after the date of enactment of this Act,
the Comptroller Genersd of the United States shall conduct a study
and transmit a report to the Committee on Banking, Finance and
Urban Affairs of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs of the Senate on the extent
to which individuals who receive Treasury checks have difficulty
cashing such checks.

.• r

101 STAT. 658

PUBLIC LAW 100-86—AUG. 10, 1987

SEC. 1002. TIME LIMIT ON PAYMENT OF TREASURY CHECKS.

Section 3328 of title 31, United States Code, is amended—
(1) by striking out subsection (a) and inserting in lieu thereof
the following:
"(a) TIME LIMIT ON TREASURY CHECKS.—

31 use 3329,
3330.

"(1) I N GENERAL.—Except as provided in sections 3329 and
3330 of this title—
"(A) the Secretary shall not be required to pay a Treasury
check issued on or after the effective date of this section
unless it is negotiated to a financial institution within 12
months after the date on which the check was issued; and
"(B) the Secretary shall not be required to pay a Treasury
check issued before the effective date of this section unless
it is negotiated to a financial institution within 12 months
-*
after such effective date.
"(2) DEFERRAL PENDING SETTLEMENT.—Notwithstanding

the

time limitations imposed by paragraph (1), if the Secretary is on
notice of a question of law or fact about whether a Treasury
check is properly payable when the check is presented for
payment, the Secretary may defer pa3mient on such check until
the Comptroller General settles the question.
7
"(3) Nothing in this subsection shall be construed to affect the
. « underlying obligation of the United States, or any agency
thereof, for which a Treasury check was issued."; and
(2) by adding at the end thereof the following:
"(f) AUTHORITY T O DECUNE PAYMENT.—Nothing in this section
limits the authority of the Secretary to decline payment of a Treasury check after first examination thereof at the Treasury.".
SEC. 1003. CANCELLATION OF TREASURY CHECKS.

Chapter 33 of title 31, United States Code, is amended by adding
at the end of subchapter II the following new section:
"§ 3334. Cancellation and proceeds distribution of Treasury checks
"(a) I N GENERAL.—(1) The Secretary shall provide monthly to each
agency that authorizes the issuance of Treasury checks a list of
those checks issued for such agency on or after such effective date
that have not been paid and have become more than 12 months old
during the preceding month, bejginning with the fourteenth month
following the effective date of this section.
"(2) Such checks shall be canceled by the Secretary and the
proceeds thereof shall be returned to the agency concerned and
credited to the appropriation or fund account initially charged for
thepa5mient.
"(b) CHECKS ISSUED BEFORE EFFECTIVE DATE.—(1) Not later than 18
months after the effective date of this section, the Secretary shall
identify and cancel all Treasury checks issued before such effective
date that have not been paid in accordance with section 3328 of this
title.
"(2) The proceeds from checks canceled pursuant to paragraph (1)
shall be applied to eliminate the balances in accounts that represent
uncollectible accounts receivable and other costs associated with the
payment of checks and check claims by the Department of the
Treasury on behalf of all payment certifying agencies. Any remaining proceeds shall be deposited to the miscellaneous receipts of the
Treasury.
.
• -^ ....

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 659

"(c) No EFFECT ON UNDERLYING OBLIGATION.—Nothing in this
section shall be construed to affect the underlying obligation of the
United States, or any agency thereof, for which a Treasury check
was issued.".
SEC. 1004. LIMITATION ON RECLAMATION ACTIONS AND CLAIMS.

(a) IN GENERAL.—Section 3712(a) of title 31, United States Code, is
amended to read as follows:
"(a) CLAIMS OVER FORGED OR UNAUTHORIZED ENDORSEMENTS.—
"(1) PERIOD FOR CLAIMS.—If the Secretary of the Treasury

Fraud.

determines that a Treasury check has been paid over a forged or
unauthorized endorsement, the Secretary may reclaim the
amount of such check from the presenting bank or any other
endorser that has breached its guarantee of endorsements prior
to—
"(A) the end of the 1-year period beginning on the date of
payment; or
"(B) the expiration of the 180-day period beginning on the
close of the period described in subparagraph (A) if a timely
claim is received under section 3702.
Infra.
"(2) CIVIL ACTIONS.—(A) Except as provided in subparagraph

(B), the United States may bring a civil action to enforce the
liability of an endorser, transferor, depository, or fiscal agent on
a forged or unauthorized signature or endorsement on, or a
change in, a check or warrant issued by the Secretary of the
Treasury, the United States Postal Service, or any disbursing
official or agent not later than 1 year after a check or warrant is
presented to the drawee for payment.
"(B) If the United States has given an endorser written notice
of a claim against the endorser within the time allowed by
subparagraph (A), the 1-year period for bringing a civil action
on that claim under subparagraph (A) shall be extended by 3
years.
"(3) EFFECT ON AGENCY AUTHORITY.—Nothing in this subsection shall be construed to limit the authority of any agency
under subchapter II of chapter 37 of this title.".
31 u s e 3711.
(b) CLAIMS PRESENTED TO AGENCIES.—Section 3702(c) of title 31,
United States Code, is amended to read as follows:
"(c) ONE-YEAR LIMIT FOR CHECK CLAIMS.—(1) Any claim on account of a Treasury check shall be barred unless it is presented to
the agency that authorized the issuance of such check within 1 year
after the date of issuance of the check or the effective date of this
subsection, whichever is later.
"(2) Nothing in this subsection affects the underlying obligation of
the United States, or any agency thereof, for which a Treasury
check was issued.".
SEC. 1005. REGULATIONS.

The Secretary of the Treasury may prescribe such rules, regulations, and procedures as the Secretary deems necessary to implement the amendments made by sections 1002, 1003, and 1004,
including the recertification of Treasury checks which have been
canceled or for which a claim has been asserted or barred.
SEC. 1006. EFFECTIVE DATE.

The amendments made by sections 1002, 1003, and 1004 shall
become effective 6 months after the date of enactment of this Act or

31 u s e 3328
note.

31 u s e 3328
note.

101 STAT. 660

PUBLIC LAW 100-86—AUG. 10, 1987

on such later date as the Secretary of the Treasury may prescribe in
regulations.

TITLE XI—INTEREST TO CERTAIN
'
^,^^_.^,^^_^^^^^:^.^^ DEPOSITORS
_,.^^;'
,

New York.

12 use 1813.

New York.

SEC. 1101. INTEREST TO CERTAIN DEPOSITORS.

(a) PAYMENT OF INTEREST REQUIRED.—Notwithstanding any other
provision of law, the Federal Deposit Insurance Corporation shall
pay interest in accordance with the requirements of subsection (b)
on nonnegotiable certificates (commonly referred to as "yellow certificates") which—
(1) were issued by the Golden Pacific National Bank of New
York, New York, before such bank was declared to be insolvent
by the Comptroller of the Currency on June 21, 1985; and
(2) have been determined to be insured deposits (as such term
is defined in section 3(m)(l) of the Federal Deposit Insurance
Act) in anyj'udicial action or agency proceeding.
(b) COMPUTATION OF INTEREST.—Interest required to be paid under
subsection (a) with respect to any certificate described in such
subsection shall be computed—
(1) on the principal amount of that portion of such certificate
which was determined to be an insured deposit;
(2) at the statutory rate of interest in effect under the law of
the State of New York; and
(3) for the period beginning on June 21, 1985, and ending on
the date on which the holder of such certificate, or the holder's
representative, receives the payment of deposit insurance on
account of such certificate from the Federal Deposit Insurance
Corporation.

TITLE XII—MISCELLANEOUS PROVISIONS
SEC. 1201. HIGH YIELD BOND STUDY.

, ..

i(;

^si: QSti
s;

(a) IN GENERAL.—The Comptroller General, in consultation with
the Securities and Exchange Commission, the Federal Home Loan
Bank Board, the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Savings and Loan
Insurance Corporation, the Federal Deposit Insurance Corporation,
the Secretary of the Treasury, and the Secretary of Labor shall
study on a comparative basis to other types of investments made by
federally insured institutions the issuance of and investment in high
yield, noninvestment grade bonds during the 5 years prior to the
date of enactment of this Act, including—
(1) the identity and rating (as determined by Moody's, Standard and Poor's, or other nationally recognized bond rating
house) of the issuers of these bonds;
(2) the identity of the major purchasers of these bonds, including but not limited to federally insured depository institutions;
(3) the percentage of the total amount of high yield,
noninvestment grade bonds that are issued as a method of
financing
corporate takeovers;
(4) the identity of the purchasers including, but not limited to,
federally insured depository institutions that invest in high

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 661

yield, noninvestment grade bonds that are issued as a method of
financing corporate takeovers;
(5) the purposes for which high jdeld, noninvestment grade
bonds are issued other than for financing corporate takeovers;
(6) a summary and analysis of the adequacy of current State
and Federal laws that regulate investment in high yield,
t
noninvestment grade bonds, by investors including, but not
limited to, federally insured depository institutions and pension
funds; and
(7) a review of the impact of the issuance of and investment in
high yield, noninvestment grade bonds upon corporate debt as it
relates to Federal monetary policy.
(b) OTHER TYPES OF DIRECT INVESTMENT.—In preparing this study,
the Comptroller General, in consultation with the aforementioned
Federal agencies, shall also examine all other types of direct investments made by Federally insured institutions and the effect these
investments have had on Federal insurance funds.
(c) PuBuc HEARING.—In addition to the collection of information
through surveys, public document review, interviews, and other
information-gathering methods, at least one joint public hearing
shall be held during the course of conducting the study.
(d) REPORTING DATE.—The Comptroller General shall transmit a
report containing the results of the study under this section to the
Congress not later than 6 months after the date of enactment of this
Act.
SEC. 1202. STUDY OF COMPETITIVE
MECHANISM.

ISSUES

IN

THE

PAYMENTS

(a) IN GENERAL.—The Comptroller General, in coordination and
consultation with the Board of Governors of the Federal Reserve
System, shall conduct a study of—
(1) the Federal Reserve System's exemption from the imposition of presentment fees;
(2) the impact of the imposition of presentment fees on the
efficiency of the check collection system; and
(3) whether the Federal Reserve System requires check
clearinghouses to provide services to Federal Reserve banks and
whether Federal Reserve banks should pay check clearinghouses for any such services.
(b) REPORTING DATE.—The Comptroller General shall submit its
report to Congress not later than 6 months after the date of enactment of this Act.
SEC. 1203. STUDY AND REPORTS CONCERNING DIRECT INVESTMENTS.

(a) STUDY REQUIRED.—The Federal Home Loan Bank Board shall
conduct a study of the effect of direct investment activities on
insured institutions, including comparative analyses of the effect of
direct investment activities on—
(1) different sized insured institutions;
(2) State chartered insured institutions;
(3) federally chartered insured institutions; and
(4) insured institutions in each of the Supervisory Examinations Rating Classifications.
(b) REPORT REQUIRED.—Not later than 18 months after the date of
enactment of this Act, the Federal Home Loan Bank Board shall
submit to the Committee on Banking, Finance and Urban Affairs of
the House of Representatives and the Committee on Banking, Hous-

, , ,, 5 ,
^^ '
*

12 USC 1437

101 STAT. 662

PUBLIC LAW 100-86—AUG. 10, 1987

ing, and Urban Affairs of the Senate, a report containing the
findings and conclusions of the Board with respect to the study
required under subsection (a), including—
(1) the findings and conclusions of the Board concerning the
i losses to the insurance fund and the degree to which such losses
were the result of direct investment activities with respect to
each of the classes of institutions described in subsection (a); and
(2) a comparison of the effects of direct investment activities
prior to April 16, 1987, and the effect of such activities on or
' after April 16, 1987, for each of the classes of institutions
• described in subsection (a) and the losses to the insurance fund
as a result of such activities.
(c) PRIOR REPORTS TO CONGRESS ON CHANGES T O DIRECT INVESTMENT REGULATIONS.—

(1) I N GENERAL.—Not less than 90 days before final approval
is given by the Federal Home Loan Bank Board to any regulation which repeals or modifies (or has the effect of repealing or
modifying) any regulation limiting direct investment activities,
the Board shall submit to the Committee on Banking, Finance
and Urban Affairs of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the
Senate a report describing the proposed regulation and the
reasons for the proposed regulation, including the effect of such
regulation on the insurance fund.
(2) PROSPECTIVE APPLICATION OF RULE.—Paragraph (1) shall
" not apply with respect to Board Resolution Numbered 87-215
and Board Resolution Numbered 87-215A.
(d) DIRECT INVESTMENT ACTIVITY DEFINED.—For purposes of this
section, the term "direct investment activities" means activities
which are limited under Board Resolution Numbered 87-215 and
Board Resolution Numbered 87-215A.
12 u s e 3806.

15 use 1601
note.
15 use 1640

SEC. 1204. ADJUSTABLE RATE MORTGAGE CAPS.

(a) IN GENERAL.—Any adjustable rate mortgage loan originated by
a creditor shall include a limitation on the maximum interest rate
that may apply during the term of the mortgage loan.
(b) REGULATIONS.—The Board of Governors of the Federal Reserve
System shall prescribe regulations to carry out the purposes of this
section.
(c) ENFORCEMENT.—Any violation of this section shall be treated
as a violation of the Truth in Lending Act and shall be subject to
administrative enforcement under section 108 or civil damages
under section 130 of such Act, or both.
(d) DEFINITIONS.—For the purpose of this section—
(1) the term "creditor" means a person who regularly extends
credit for personal, family, or household purposes; and
(2) the term "adjustable rate mortgage loan" means any loan
secured by a lien on a one- to four-family dwelling unit, including a condominium unit, cooperative housing unit, or mobile
home, where the loan is made pursuant to an agreement under
which the creditor may, from time to time, adjust the rate of
interest.
(e) EFFECTIVE DATE.—This section shall take effect upon the
expiration of 120 days after the date of enactment of this Act.

PUBLIC LAW 100-86—AUG. 10, 1987

101 STAT. 663

SEC. 1205. SEPARABILITY OF PROVISIONS.

If any provision of this Act or the application thereof to any
person or circumstances is held invalid, the remainder of the Act
and the application of the provision to other persons not similarly
situated or to other circumstances shall not be affected thereby.
Approved August 10, 1987.

LEGISLATIVE HISTORY—H.R. 27 (S. 790):
HOUSE REPORTS: No. 100-62 (Comm. on Banking, Finance and Urban Affairs) and
No. 100-261 (Comm. of Conference).
SENATE REPORTS: No. 100-19 accompanying S. 790 (Comm. on Banking, Housing,
and Urban Affairs).
CONGRESSIONAL RECORD, Vol. 133 (1987):
May 5, H.R. 27 considered and passed House.
May 14, considered and passed Senate, amended.
June 11, House disagreed to Senate amendments.
Aug. 3, House agreed to conference report.
Aug. 4, Senate agreed to conference report.
•WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 23 (1987):
Aug. 10, Presidential remarks.

12 USC 226 note.

"'


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102