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at 10 A.M. EDT
June 12, 1984
Statement by
Paul A. Volcker
Chairman, Board of Governors of the Federal Reserve System
before the
Comffiittee on Banking, Finance and Urban Affairs
United States House of Representatives
June 12, 1984
I appreciate
the opportunity
to review
with
you
proposals to restructure the laws governing bank and thrift
holding company activities.
I am hopeful that these hearings
will represent the conclusion of an extensive review by the
Congress of legislative proposals affecting the competitive
environment in the markets for banking and other
financial
services, so that much needed legislation can be enacted this
year.
I have on several occasions expressed my conviction,
before Congressional Committees and elsewhere, that we must
move with a sense of urgency to reform the existing legislative
framework
governing
"banking"
organizations.
The
time
remaining for Congressional action in this session has grown
shorter, but the pressures of events remain.
The banking and
financial system will evolve in new directions.
question
is whether
The only
that evolution will procede within a
framework established by the Congress, with full consideration
and a balancing of the public interests involved, or whether it
will procede
entirely under
the
impetus of market
forces
pushing around, and over, a legislative structure set in quite
different circumstances years ago.
The latter possibility cannot be satisfactory, opening
the clear danger that the overriding public
interest
in a
strong, stable and competitive financial system will be lost.
New
technologies,
intense
market
pressures,
the
growing
aggressiveness of states in competing with each other for jobs
in banking, and potentially conflicting decisions of regulators
and
courts
attempting
to
apply
old
laws
to
today's
circumstances, all demand a considered and adequate response*
Your Committee has the opportunity to take a leading role in
that effort.
The basic framework within which we at the Federal
Reserve approach these questions can be simply summarized:
--
We want
to encourage
fair competition
in the
provision of banking and financial services;
-
We want to promote efficiency and minimal cost to
benefit consumers;
We
want
to protect
against
concentration
of
economic resources, discrimination, conflicts of
interest, and other potential abuses; and
We want
implying
soundness
a strong
and
continuing
of
banks
stable banking
attention
and
to
other
system,
safety
and
depository
institutions.
These goals in some circumstances will, to be sure, be
in conflict or point to different approaches.
they must be appropriately
balanced•
Consequently,
In approaching
that
balance, the normal perception for most industries —- that we
can simply look to the marketplace to promote competition and
efficiency —• must be considered in the light of the crucial
•3-
importance of maintaining confidence in banking institutions,
continuity in the provisions of money and payments systems,
and, the ability of the central bank to conduct
effective
monetary policy*
Public policy has long recognized the importance of
protecting the safety and soundness of banks and depository
institutions generally?
they perform a unique and
critical
role in the financial system as operators of the payments
system, as custodians of the bulk of liquid
savings, as
unbiased suppliers of short-term credit, and as the critical
link between monetary policy and the economy.
In our judgment,
those concerns remain central today in any consideration of
banking legislation.
Recent developments only emphasize the
point.
One aspect of those concerns is reflected
in the
federal "safety net" long provided by the discount window and
deposit
insurance, and
that
"safety net" also
implies an
effective supervisory and regulatory framework for depository
institutions
to
contain
excessive
risk.
Moreover,
that
framework must, to a degree, extend to holding companies of
which the depository institutions are a part because banking
institutions cannot be wholly separated from the fortunes of
their affiliates and from the success or failure of their
business objectives*
-4-
At the same time, banking and thrift
organisations
must be able to compete., and compete effectively and profitably
in the marketplace, if they are to be strong
and
stable
institutions, capable of serving the public and public policy
effectively.
That need
legislative framework.
itself requires adaptation of the
It is establishing that balance among
the needs for soundness, continuity, and competitive strength
that represent the legislative challenge before you.
The Current Situation
The accelerated pace of change in the structure of our
financial system grows out of several developments that are by
now well
known.
technology has
New
led
to
communications
and
computerization
data
of
many
processing
financial
services and a blurring in the capacities of banks, thrifts,
and other potential suppliers of financial services.
There are
greater opportunities for providing efficient services and more
services by banks and nonbanks alike*
At the same time,
business and consumer experience with inflation and related
higher
interest
rates of the late 1970!s and
1980's has
increased sensitivity to yield differentials and has put a
premium on the ability to move money quickly both nationally
and internationally.
Removal
of
interest
rate
ceilings
on
depository
institutions liabilities, and aggressive competition with new
forms of liquid deposits and deposit substitutes, have spurred
-5-
efforts to attain new sources of income through fees, through
expanded asset powers, and by operating interstate.
same
time, nonbanks, offering
broadly
similar
At the
types
of
financial instruments, have sought ways to enter the banking
business in order to gain access to federal deposit insurance
and to the payments mechanism without having all the burdens
carried by the regulated banking sector,,
There have been numerous
driving change.
new services.
reactions
to the
We see new combinations of financial firms and
Increasingly,
it seems, those services
similar to those offered by banks —
are
money market funds, cash
management accounts and more recently brokerage of
deposits.
forces
insured
The phenomenon known as "nonbank banks,18 growing out
of loopholes
in current
law, provide a vehicle by which
financial and nonfinancial firms can enter the banking business
outside the framework of law and regulation surrounding bank
holding companies, actually or potentially violating the policy
proscriptions against the combining of banking and commerce,
and in the case of banks themselves, the established policies
limiting interstate banking.
Among depository institutions the
distinctions are also blurring, with many thrifts increasingly
assuming the characteristics of banks.
Moreover, "bank-like"
thrifts are also able, particularly under much more liberal
laws in some states, to undertake activities prohibited
banks.
for
-6-
.Koiv, we can also see a strong movement among states to
enact banking laws more permissive than federal law —- in an
effort to attract institutions, to enhance state revenues, and
to create
new
state
employment
opportunities -- with
the
obvious potential for undermining federal law and policy.
as
those
efforts
become
generalized,
they
will
self-defeating even in their immediate purpose*
And,
be
Meanwhile, the
decisions of federal regulators in the framework of existing
law may be, or appear to be, inconsistent, whether they are
meant
to
intent.
facilitate
change
or
to maintain
Such decisions are increasingly
Congressional
subject
to court
challenges to stop or speed the process, as they impact on
particular private interest concerns, and the courts themselves
are hard pressed to apply old laws to new circumstances.
As
regulators
and
legislators
concerned
with
the
public interest, we must be sensitive to abiding and valid
concerns of the public interest without blocking responses to
real needs in the marketplace•
As things now stand, there is
no assurance that the process of change will adequately address
public policy concerns*
Quite the opposite -— it is clear that
some of the time-tested tenets of banking law and policy are
being undermined as market pressures and competitive instincts
play against an outmoded legal and regulatory framework.
The
longer difficult decisions about the direction in which change
should be encouraged
or discouraged
by public policy are
postponed/ the more difficult these decisions will ultimately
become*
And, more importantly in my view, delay only increases
the risks that policy concerns -- including the safety and
soundness of the banking system -— will be undermined.
o Bank ing Legislation
In previous
Senate
Banking
testimony on these
Committee,
I
have
issues before
suggested
that
the
new
legislation, should now address several areas affecting banking
institutions.
Those are:
(a) a strengthened definition of a bank;
(b) a definition of a "qualified11 thrift;
(c) statutory guidelines to govern the division of
state and federal authority in the area of banking
organization powers;
(d) new procedures to streamline application of the
Bank Holding Company Act; and
(e) expanded powers of depository institutions holding
companies.
That testimony described in considerable detail our position on
each of these areas and, rather than reviewing those positions
again, 1 have attached my Senate testimony to this statement
for the use of the Committee.
The legislation introduced by Chairman St Germain and
Mr« Wylie ~- The Financial Institutions Equity Act of 1984 •—
deals ifi a broadly appropriate way with the first three areas I
-8-
have mentioned.
So far as they go, the provisions closely
parallel the views of the Federal Reserve Board.
Specifically/
they would more adequately define what a bank is, define the
essential nature of a thrift eligible for the privilege of
"unitary5' savings and loan holding company treatment, and limit
the ability of states to regulate banking in ways inconsistent
with
federal
policy.
Provisions
important in any legislation.
along
these
lines
are
What is necessary, however, is
redefinitions of the powers of bank holding companies in a
manner more in line with present needs, while consistent with
safety and soundness as a whole*
Therefore,
I urge the
Committee, in its consideration of the legislation, to add the
two vital elements now omitted?
namely the streamlining of
provisions under the Bank Holding Company Act and expanded
powers of depository institutions holding companies.
In reviewing H.R. 5734, my comments will be fairly
general.
Therefore,
I have
appended
specific
legislative
language encompassing suggested changes that tlie Committee may
wish to consider*
The definition of a bank proposed
(1) an FD1C
insurance,
insured
or
(3) a
bank,
(2) a bank
depository
in H.R. 5734 --
eligible
institution
for
that
FDIC
accepts
transaction accounts and makes commercial loans -- is the one
originally
recommended
by
the
Federal
Reserve*
The
new
definition would close the nonbank bank loophole in current
law, and would not allow so-called
"consumer banks" to be
exempt from the Bank Holding Company Act.
We believe it to be
basically sound.
We have suggested a few limited changes to the basic
definition in the bill in Senate testimony attached.
Those
changes are designed to avoid impacting unnecessarily a limited
number
of
state-charterd
nonbank
institutions
should
the
Committee wish to do so, although we fully agree that nonbank
depository institutions such as industrial banks and privately
insured thrifts should be covered by the basic policies of the
bank and S&L holding company acts.
An important provision of the bill would provide for
divestiture of institutions that are defined as banks if the
parent owner is engaged in businesses that are inconsistent
with the restrictions and limitations of the Bank
Holding
Company Act, without providing any grandfathering.
While we
have been willing to support provisions which would permit a
limited amount of grandfathering for institutions proceeding in
good faith before legislative proposals were introduced, we
agree that such exceptions should be made with great caution.
I would like to remind the Committee of a related
point
concerning
regulate banks
equity
among
to preserve
the
financial
institutions:
we
integrity of the nation's
payments mechanism and to meet the needs of monetary policy.
-10-
It has been the longstanding Board view that authority should
be provided to it to define transaction accounts and to apply
reserve requirements to institutions that are not
formally
depository
by the
institutions
(and thus are not covered
prudential rules applicable to these institutions and their
holding
companies) but
that do offer
transaction
similar to those offered by banks and thrifts.
accounts
As long as
these close substitutes for bank deposits are free from reserve
requirements# potential competitive advantages relative to bank
deposits
exist, particularly
required reserves.
disparity
could be
when no interest
is paid
on
At some time, the result of the competitive
to complicate
the
task
of
conducting
monetary policy.
Thus,
the Board believes
it would be prudent
to
incorporate into the bill a provision whereby it would have
authority
to determine
if
instruments
issued
by
nonbank
institutions allowing third-party payment have, in fact, the
essential characteristic of transaction accounts and should
thus be subject to reserve requirements.
expect
to use
this authority
demonstrate its necessity.
unless
The Board would not
conditions
arose
to
Also, we believe that institutions
with such powers should be subject to requirements pertaining
to reporting of deposits.
-11-
As In the case of nonbank banks, there has been
increasingly clear recognition of the need to adopt rules to
assure equality of treatment of various types of depository
institutions exercising similar or overlapping powers*
Thrift
institutions have become more like banks with respect to the
powers they are aljLowed to exercise, and
that has become
increasingly true with respect to the powers they do exercise*
Moreover, the powers available to thrift institutions in other
respects extend well beyond those available to banks and even
over time will call into question the basic separation of
banking
and
commerce
now
incorporated
in public
policy*
Considerations of competitive equity alone dictate that the
privileges and restrictions of banks and thrifts be brought
into a more coherent relationship*
of competitive equity.
But it is not just a matter
Restrictions on powers of bank holding
companies and on "nonbank banks1* will inevitably be undercut,
and rapidly, to the extent thrift institutions with banking
powers can simply substitute as a vehicle for combining various
activities.
The need for action is reflected in the interest
of a variety of nonfinancial and financial businesses in the
acquisition of thrifts in order to benefit from their bank-like
powers, to have expanded opportunity for branching, to gain
access
to
federal
deposit
insurance, and
to
be
direct
participants in the payments mechanism while retaining their
range of nonbanking, and even nonfinancial, business.
•12-
I recognize that there are difficult questions posed
by firms that already have operations on both sides of the line
between commerce
"thrift banking.8'
and
In the past, some
industrial or commercial firms have owned thrifts operating as
separate and distinct
arising.
entities without significant problems
But in the environment we now face, these questions
need to be approached anew, and a firm policy established with
respect to which combinations are acceptable and which are not.
H.R. 5734
approaches
this
issue
by
defining
a
"qualified" thrift institution to be a thrift which has at
least 65 percent of its assets in residential mortgages or
related investments*
This test must be met within two years,
except for mutual and stock savings banks which are given a 10
year period to comply.
be precluded
Further, "nonqualified" thrifts would
from engaging in commercial lending activities
whether or not they are part of a holding company.
Similarly,
commercial lending activities would not be permitted by those
"qualified" thrifts that are owned by a unitary S&L holding
company that engages in activities not permitted for a multiple
S&L holding company.
We
appropriate
believe
that
this
qualified
thrift
for a savings and loan holding
test
is
company to be
eligible for treatment as a unitary thrift holding company,
with the special benefits that status carries*
Further, we
believe the basket of assets to be included under H.R* 5734 in
-13-
the 65 percent ratio, which would include residential mortgages
or mortgaged backed securities, mobile home loans, loans for
home improvement, or participation in any of these instruments
is appropriate and consistent with the historic purposes and
the special benefits Congress has given to thrifts as housing
lenders .
Based
on
this
definition,
accordliftg
to
our
calculations, almost three-quarters of FSLIC institutions would
currently meet this test.
We believe that the transition periods provided
H.R. 5734 —
in
two years for S&L's and 10 years for mutual or
stock savings banks, with interim targets as set in the bill,
represent
reasonable
timeframes
for thrift
institutions
to
decide whether they wish to be excluded from holding company
act policies and continue to be treated as thrifts or conform
to those policies as do banks.
If necessary,
a
longer
transition period than two years could be considered for S&L's,
provided they meet interim targets.
Further we agree that
ownership of a thrift by an industrial or commercial firm could
be continued
during
the transition period
and
thereafter,
provided that "tandem" operations between the holding company
and its depository subsidiary or vice versa are not permitted.
Some clarification of the proposed treatment of banks
and
thrifts
desirable.
operations
with
The
regard
Board's
to
tandem
position
between a thrift
operations
has
been
would
that
institution and an
be
tandem
affiliated
-14-
nonbanking subsidiaries of the parent holding company -- in
either direction —
should not be permitted*
That
is, the
thrift could, not jointly market or offer its services and the
products or service of the nonbanking affiliates * and
the
nonbanking affiliates could not market or offer the products or
services of the thrift.
clearly
indicate
directions.
that
We believe the legislation
the prohibition would work
In the Appendix, we have suggested
should
in both
legislative
language to accomplish this result and to make a number of
other technical changes*
The
limitations
bill
also
applies
to relationships
the
between
affiliates of bank holding companies.
tandem
banks
operations
and
nonbanking
Bank holding companies
are already subject to strict anti-tying prohibitions in the
Bank Holding
Company Act and
in the Board's regulations.
Considering these provisions and the activities limitations of
the Bank Holding Company Act, 1 would not see any need for the
provisions
of Section 2{b) of H e R o 5734 related
to tandem
operations between banks and bank holding companies*
Finally, the bill prohibits the affiliation of thrifts
and securities firms applying the Glass-Steagail Act to insured
and uninsured savings and loan associations.
Such a provision
is necessary to assure safety and soundness and competitive
equity, has been recommended by the Federal Home Loan Bank
Board, and is strongly supported by the Federal Reserve Board.
-15-
t2lriYl^ies_2^L-§tate-Chartered Depository Institutions
There has been concern expressed about authorizations
by states permitting banks or thrifts (and their subsidiaries)
to conduct nonbanking businesses that would not otherwise be
permitted
to bank holding
federal laws.
makes
sense
companies under present
or new
The question must certainly be asked whether it
for Congress
to work
out
carefully
balanced
arrangements for depository holding companies in the conduct of
nonbanking activities, taking full account of what is necessary
to assure a safe and
subsequently
established
for reasons
far
sound banking
different
and
for state-chartered
that
system, only to see
inconsistent
arrangements
institutions under state law
are often more
concerned
with
shifting
revenues and jobs than with the overriding need to provide a
secure and stable banking system.
H.R* 5734 deals with this problem by permitting states
to authorize activities beyond the scope of Section 4(c)(8) of
the Bank Holding Company Act or Section 408 of the National
Housing Act, but requiring that such activities be conducted
only
within
the authorizing
state
and
provided
only
to
residents of the state.
These provisions directly address the problems created
by certain state actions, such as in South Dakota, where
nonbanking
activities, such as
insurance
underwriting
and
brokerage,- by state-chartered banks are encouraged so long as
-16-
these activities are directed largely out of state.
the proposal would allow an area of state
Moreover,
initiative and
experimentation consistent with the traditions of the dual
banking system*
At the same time, the Board believes one additional
step should ?oe taken to enforce basic national policy when
questions of safety and soundness are fundamentally at stake*
That step would involve a Congressional decision to rule out
specific activities for banks or their affiliates that the
Congress specifically decides to prohibit or limit on grounds
that the safety or stability of the banking system might be
impaired —
provision
areas in which the federal governmentt. through the
of a national
overriding interest*
"safety
net,"1 has
a unique
and
For example, if Congress reaffirms its
decision to exclude banking organizations from participating in
underwriting
corporate
debt
and
equity,
or
limits
the
participation of these organizations in real estate development
on grounds of risk, as we believe appropriate, the states
should not be able to overrule that judgment and expose the
insured depository system to those risks.
A similar point
might be made with respect to insurance underwriting and the
general prohibitions on links between commerce and banking.
However, in areas where safety and soundness are not so heavily
involved, such as in a decision to authorise real estate or
insurance brokerage powers or travel
institutions,
but
rather
involve
services
questions
of
for banking
consumer
-17-
protection
and
competitive
equity,
an
overriding
interest does not appear to be present*
legislatures
might
authorize
banking
federal
Consequently, state
organizations
to
participate in these activities within the confines of their
own state, as H.R. 5734 provides.
Here each state may be in at
least as good a position as the federal government to make the
judgment as to what is desirable to protect local customers and
local interests, while encouraging a competitive environment
and efficiency.
In sum, we would suggest that the balance between
federal and state interest be struck as follows:
states may
not authorize activities that Congress has ruled out of bounds
for
safety
and
soundness
reasons;
states
may
optionally
authorize other activities but only if they are
conducted
within separate affiliates within their borders and provided to
their own residents.
We have attached to this testimony a
draft of these provisions which the Committee may find useful.
Other Provisions of H.R. 5734
The legislation contains several other provisions all
having
to
do
institutions
with
and
securities
their
appropriately
extend
intermingling
of banking
activities
holding
companies.
Glass-Steagall
and
of
depository
It
prohibitions
security
dealings
would
on
to
the
cover
affiliations with securities firms by all banks and thrifts.
Currently the Glass-Steagall prohibitions arguably cover only
-18-
member banks*
The statutory omission of explicit coverage of
nonmember banks is an anomaly that appears to have developed as
an oversight rather than by Congressional
intent.
Explicit
coverage of thrifts is overdue, both to assure safety and
soundness
and
as
a matter
of
competitive
equity.
legislation would also close another potential
making it clear that the Glass-Steagall
The
loophole by
limitations on the
affiliation of securities firms and depository
institutions
apply when securities activities are conducted in affiliates of
depository institutions.
We support these provisions.
The bill would also prohibit all retail
brokerage
activities for ail types of depository institutions or their
holding
companies.
brokerage" —
This would
shorthand
for
include
so-called
"discount
a passive
brokerage
function
separated from research and active management or advice with
respect to specific accounts or stocks.
Discount brokerage,
involving the purchase and sale of securities at the request
and initiative of a customer, has been approved
holding companies by the Federal Reserve Board.
for bank
In the Board's
view, that activity does not raise questions of safety and
soundness or of conflict of interest, and is an appropriate and
natural extension of services that banks and other depositories
have historically offered to their customers.
Particularly
when conducted
depository
in a
separate
subsidiary
of a
institution holding company, we see no public policy reason why
-19-
these
institutions
brokerage
service.
should
not be able
to offer
In fact, considerations
of
discount
competitive
equality and potential benefits to consumers would suggest that
such
activities
believe
that
would
discount
have positive public
brokerage
should
depository institution holding companies*
benefits.
be permitted
We
for
A more substantive
question would arise with respect to general stock brokerage
activities*
If the Congress feels it important to provide
limitations in this area, we would confine such limitations
only to a combination of brokerage with the dissemination of
advice and research, and active solicitation of transactions in
particular securities.
Bank Holding Company Procedures
As I noted above, the Federal Reserve has recommended
that banking legislation should include amendments to the Bank
Holding Company Act to permit new procedures for streamlining
the processing of applications under the Act.
do not appear
in H.R. 5734.
These provisions
The Board believes
the new
procedures that are contained in legislation being considered
in the Senate would minimize the cost and burdens of regulation
of holding companies, would provide the Board with adequate
supervisory authority over the activities of holding companies
and their nonbanking subsidiaries, and are fully
with the public interest.
consistent
These provisions are desirable not
only to avoid unnecessary procedural delays for bank holding
-20-
companies but
also are necessary
to place
bank
holding
companies on more equal footing with their competitors by
eliminating the need for a positive finding of public benefits
and
for
formal
hearings.
As
things
now
stand,
those
requirements/ which other businesses do not face in undertaking
new activities, can become a tool for competitors to limit bank
entry into lines of activity now dominated by others*
In the proposed approach, new activities could
go
forward, after notice to the Federal Reserve Board, unless the
Board found grounds for disapproval under statutory criteria,
relevant to broad public policy considerations.
Specifically,
new initiatives could be disapproved if inadequacy of financial
and managerial resources would be demonstrated, if resources
would be widely concentrated, or if there were adverse affects
on bank safety and soundness«
As further protection., the Board
would also have general authority to set out regulations on
nonbanking
activities
to assure
"safe and
sound
financial
practices," including appropriate capital standards.
The purpose of those provisions, and the provision
reducing the scope for judicial review by competitors, is to
reduce unnecessary
necessary
interests.
level
of
regulatory
burdens
supervision
While potentially
to
while maintaining . a
protect
dilatory
public
policy
formal hearings
on
applications would be limited, formal rulemaking procedures
would, of course, remain in place with respect to decisions to
-21-
add new activities to permissible bank holding company powers.
The Board would continue to request public comments on notices
and
hold
informal
hearings,
when
necessary,
to
obtain
information necessary to make decisions.
Our conclusion is that those provisions
adequately
balance the need for reducing the regulatory burdens with the
requirement
for adequate
provisions of the Bank
supervision
Holding
to enforce
Company Act.
I
fully the
strongly
recommend that these provisions be included in legislation now
before the Committee.
New Activities for Bank Holding Company
H.R. 5734 provides for no new expanded powers for bank
holding companies.
In our view, considerations of competitive
equality as among types of financial institutions
(including
thrifts), potential benefits to consumers of a broader range of
suppliers of financial services, and the need for banks to
broaden their earning capacity strongly point to an increase in
the range of banking related activities permitted bank holding
companies.
The point is reinforced by the need to assure that
these companies are in a position to take advantage of the
burgeoning
technological developments that are enhancing the
delivery of financial services.
As I have stressed, those considerations must be •—
and
they can be —
concerns:
balanced
assurance of
against
other public
fair and open competition
policy
in the
provision
of
credit
and
other
services,
maintenance
of
impartiality of banks and credit judgments, and avoidance of
practices that can undermine the strength of the bank itself,
and the banking system more generally.,
before the Senate deals
considering
with
each of the most
My earlier testimony
these questions
at
significant powers
length,
in turn.
Rather than burden you by reiterating that analysis here, I
would only point out that in approaching these questions, we
firmly believe the issues of safety and soundness of concern to
members of the Committee can be appropriately addressed in the
legislative process
consistent
with a broadening
of bank
holding company powers.
Interstate Banking
We surely need a fresh Congressional review of our
entire policy toward interstate banking.
While 1 understand
the difficulties involved in this issue, we also must recognize
that the proliferation of nonbank affiliates of bank holding
companies
production
operating
and
across
"Edge Act88
state
lines,
offices, national
marketing of credit card and related
action
of
some
states
integrated
themselves
to
and
loan
regional
services, the current
permit
entry
of
out-of-state banking organizations, and the broader powers of
thrift institutions able to operate interstate, have by now led
to interstate banking c3e jracto for many banking services.
But
this de facto system has inherent inefficiencies and gaps, and
-23-
in some instances may be more difficult to operate, from the
standpoint of the bank, or to supervise from the standpoint of
the regulator*
While most of the issues in this controversial area
will need to be held over to a later Congress, the present
movement towards regional interstate banking arrangements does
raise major constitutional and public policy issues that need
to be dealt with now.
Recently, in three bank holding company
merger applications under New England reciprocal statutes, the
Board had to address Constitutional issues inherent in these
discriminatory arrangements*
As anticipated, the basic issues
in these cases are now before the federal courts.
We cannot anticipate the outcome of those actions, but
we do believe the matter should be decided as a matter of
Congressional policy, not by regulators or courts attempting to
read the legislature's intent into old laws originally intended
to deal with different problems•
If Congress wishes to support
regional arrangements, legislation explicitly authorizing that
approach should be enacted.
We believe, as a matter of public
policy, such authorization should be for a strictly limited
period, and viewed as a transition toward interstate banking
arrangements that avoid "Baikanization" of banking into regions*
Brokered_Deposj t s_
An
important
issue that has received
considerable
attention is the proliferation of insured brokered deposits.
-24-
Developments in this area are an example of how the marketplace
can respond to one element of governmental intervention —
in
this case federal deposit insurance —- in a manner that can
have unintended and undesirable effects.
agencies are rightly
brokered deposits*
concerned
about
The deposit insurance
the proliferation
of
Indeed, brokered deposits have in a number
of instances facilitated extremely rapid, unsustainable growth
and
excessive
risk-taking
by
some
institutions
that
subsequently failed or are now in serious financial condition*
If permitted to expand without appropriate constraints, such
activities could have serious and unintended effects on the
insurance funds and the structure of depository institutions.
The Board has taken the position that legislation to
permit regulatory agencies to set a cap on insured brokered
deposits —
at a jLow level, such as five percent of deposits or
tied to capital —- would be appropriate.
I have
legislative language that would accomplish this*
attached
In our view,
it should be added to this legislation*
Conclusion
I cannot emphasize strongly enough the urgent need for
definitive Congressional action on the legislation now before
you during the current session.
any longer, for if they are#
Decisions cannot be postponed
the financial system will be
markedly restructured without guidance from the Congress,
The
-25-
legislation before you —
H.R. 5734 •— is a positive step, and
as indicated, we support the main thrustf so far as it goes.
What we find lacking in the bill is an appropriate
response to the need for striking an appropriate balance in the
powers
permitted
bank
holding
companies.
Without
such
provision, the job of reform will be incomplete, only to be
left to later Congresses, and at risk to the
competitive
strength of the banking organizations upon which we rely so
heavily*
Members of the Committee have called attention to the
degree of pressures and strains in the banking system that have
called into play the federal safety net*
I believe we must be
extremely careful in drawing conclusions from those events.
While the overall stability of the banking system should not be
in question, in individual
instances there may
indeed be
question raised, for bankers and supervisors alike, about the
conduct of traditional banking business.
Appropriate standards
for capital, for liquidity, and for credit risk are continuing
questions that deserve, and are receiving, our attention.
But those questions affecting the use of existing
powers are not directly at issue in this legislation.
The
matters covered by H.R. 5734 do deal with some implicit threats
to safety and soundness, particularly from the proliferation of
competition in banking by unregulated institutions.
New powers
need to be assessed in the light of those concerns as well.
-26-
But simply prohibiting banking organizations from competing in
areas consistent with criteria of safety and soundness —
areas
that would in fact enhance their prospects and stability —does not serve either the consumer or other public policy
concerns.
To that extent, H.R. 5734 strikes us as incomplete
legislation, deferring issues that need to be resolved*
In sum, the basic policies of the Bank Holding Company
Act
against
excessive
risk,
conflicts
of
interest,
impartiality in the credit granting process, and concentration
of resources, remetin sound*
Those principles are now being
undermined by a haphazard pattern of interindustry acquisitions
and by new combinations of banking, securities, insurance and
commercial products.
Decisions shaped by market forces working
around present outmoded
law will
not produce
a
coherent
framework and can only in the end undermine and weaken the
fabric of the banking system•
This is a critical time in our financial history*
You
have a unique opportunity to adapt the enduring principles to
present needs.
The time is already late.
But the issues are clearly
before you, ready for decision and action.
I urge you to move
ahead with a sense of urgency, to protect and strengthen the
financial system.
- 0 -
SUGGESTED AMENDMENTS TO H.R. 5734
Definition of Bank
Amend lines 11-13 on page 2 to read as follows:
11
(i) accepts transaction accounts; and"
Amend line 4, page 3 to add a new paragraph
define "transaction account":
(3) to
"(3) The term 'transaction account5 means a demand
deposit or negotiable order of withdrawal account,
savings account subject to automatic transfer,
share draft account, or other deposit that the
depositor may withdraw by check, payment order of
withdrawal, negotiable or transferable instrument,
or other means, including electronic means, for the
purpose of making payments or transfers to third
parties or others.13
Explanation
This amendment would clarify that the "bank*
definition is intended to include demand deposits that are not
subject to withdrawal by check, as well as other accounts that
are functionally equivalent to checking accounts.
This
amendment essentially applies the definition of transaction
account in the Monetary Control Act of 1980.
2.
Exclusion of non-federally insured savings and cooperative
Amend line 19 on page 2 to read as follows:
11
(B) an insured institution or uninsured
institution as defined in section 408(a) of the
National Housing Act;"
Delete subparagraph (C), lines 21 to 23, page 2.
Explanation
Tnis amendment would exclude from the "bank"
definition privately insured savings banks and cooperative
oanks, in addition to privately insured S&Ls.
The bill
currently excludes only privately insured S&Ls, This amendment
would seem appropriate in view of the provision in section 6 of
the bill subjecting savings banks and cooperative banks to the
Savings and Loan Holding Company Act.
3.
Clarification amendment
Amend lines 7^ 8, and 9 on page 3 to read as follows:
"such paragraph (2)) shall not apply in the case of
a company that becomes a bank holding company as a
result of the enactment of the Financial
Institutions Equity Act of 1984 on the date of such
enactment."
Explanation
The provision in the existing bill could oe
interpreted to apply only with respect to companies that become
bank holding companies after the date of enactment and not on
the date of enactment. The amendment would clarify the intent
of the provision to apply to companies that become bank holding
companies on the date of enactment of the bill as a result of
enactment*
4.
Tandem operations
Amend line 11* page 9 by inserting after the words
"tandem operations" the words "with such holding company or any
subsidiary or affiliate thereof*5'
Amend subparagraph (B) on line 17, page 9 and
subparagraph (B) on line 1, page 10 to read as follows:
*{B) An insured or uninsured institution that is a
subsidiary of a savings and loan holding company
may engage in tandem operations with such holding
company or with a subsidiary or affiliate thereof
only if such holding company or such subsidiary or
affiliate thereof, as the case may be^ is engaged
solely in an activity or activities permissible for
a multiple savings and loan holding company under
subsection (c) of this section*
n (C)
For purposes of this subsection^ the term
'tandem operations1 means the offering or marketing
of the products or services of an insured or
uninsured institution by or to an affiliate or the
offering or marketing by an insured or uninsured
institution of the products or services of an
affiliate."
Explanation
This amendment would clarify that the tandem operation
restriction applies to the provision of services Dy a
- 3 subsidiary thrift ;to an. affiliate. This amendment also would
clarify that the tandem operation restriction runs to
affiliates as well as to the thrift itself. Finally, the
amendment would clarify the intent of the bill to permit a
subsidiary of a unitary savings and loan holding company to
engage in tandem operations with an affiliate, provided the
affiliate is engaged in an activity permissible for a multiple
savings and loan holding company under the National Housing Act
5.
Securities activities of depository institutions
Amend Section 4 of tne bill (line 8, page h) to read
as follows:
te
(a) For purposes of section 21{a)(l) of the
Banking Act of 1933, a person or entity shall be
deemed to be engaged in the business of receiving
deposits if it is controlled in any manner by
another person or entity that engages at the same
time, to any extent whatsoever, in the business of
receiving deposits subject to check or to repayment
upon presentation of a passbook, certificate of
deposit, or other evidence of debt, or upon request
of the depositor."
Amend line 14, page 5 by changing the numeral "2" to
the letter w b* and deleting lines 17 to 19, page 5,
Explanation
This amendment would clarify the intent of this
provision to apply the section 21 prohibitions to any company
tnat is controlled by an institution that accepts deposits.
6.
Unitary S&L holding company exemption
Delete subsection (o)(l)(A) on lines 6-13 of page 8.
Redesignate paragraphs (6)(B) and (C) on page 10 as
paragraphs (C) and (D) and move paragraph (B) beginning at line
14 on page 8 to line 20 on page 10,
Redesignate paragraphs (2), (3), (4), (5), and (6) on
pages 9 and 10 as paragraphs, (3), (4), (5), (6), and (7),
respectively, and substitute "subparagraph (B) of this
subsection" for "subsection (o)" in line 13 on page 7.
- 4 Explanation
The first amendment would delete proposed subsection
(o)(l)(A), wnich would apply the activity restrictions of the
Savings and Loan Holding Company Act to savings and loan
holding companies whose subsidiary insured or uninsured
institutions become nonqualified institutions. This section
appears to be redundant since the activity restrictions in
proposed suosection (n)(l) on page 7 of the bill would apply to
such companies,
The second amendment is a technical amendment to
transfer the phase-in provision to the definition of "qualified
institution" since the provision is written in such a way as to
effectively amend that definition*
The tnird amendment
reflect the above changes.
is a
technical
amendment
to
on commercial lending
The bill prohibits nonqualifying thrifts and a thrift
owned by a unitary savings and loan holding company from
engaging in any commercial lending activity*
The bill,
however/ does not define the term or specify whether the term
includes only secured or unsecured loans for commercialf
corporate/ business or agricultural purposes (as authorized
under 12 U.S.C. 1464(c) (1) (R) up to 10 percent of a thrift's
assets) or loans on non-residential property (authorized up to
40 percent of a thrift's assets under 12 U.S.C. 1464(c)(1)(B))
and other types of commercial loans that are not encompassed
under 12 U.S.C. 1464(c)(1)(R).
The Committee may wish to clarify the scope of the
commercial lending covered by these sections of.the bill.
8 • i^JL-LYiJrL^JLJ^ILJL*-&te chartered depository institutions
Amend section 7 of the bill to read as follows:
NONBANKING ACTIVITIES PROHIBITED FOR STATE
DEPOSITORY INSTITUTIONS
Sec, 7 (a) Section 7 of the Bank Holding Company Act
of 1956/ as amended (12 U.S.C. 1846)/ is hereby amended by
inserting at the beginning thereof "(a)fi and adding the
following new subsections.
"(b) Nothing in this Act shall prohibit a bank from
engaging directly in an activity authorized by the state in
which suon oank is chartered/ except that:
— 5 —
"(1) if such activity is not permissible for a
Dank holding company under section 4 of this Act, a bank may
conduct such activity directly or indirectly only in the state
authorizing the activity and only for the bank's customers
located in that state; and
w
(2) a bank snail not engage directly or
indirectly in any activity prohibited for a member bank or
affiliate thereof under the Banking Act of 1933 or in any real
estate investment or development or insurance underwriting
activity except to the extent permissible for a Dank holding
company under this Act.
*(c) Notwithstanding suosection (b) of this section, a
bank that, on or before July 1, 1983, commenced any activity
tnat would have been prohibited by this section if commenced
after enactment of this section may continue to engage in such
activity. A bank that, after July 1, 1983, commenced any
activity that would have been prohibited by this section if
commenced after enactment of this section shall terminate such
activity within six months of enactment of this section.".
(b) Section 408 of the National Housing Act (12 U.S.C.
1730a) is hereby amended by adding the following new subsection
(o):
w
(o)(l) Nothing in this section shall prohibit an
insured or uninsured institution from engaging directly or
indirectly in an activity authorized by the state in which such
insured or uninsured institution is chartered, except that:
*(A) if such activity is not permissible for a
multiple savings and loan holding company under section 408 of
the National Housing Act (12 U.S.C. 1730a), an insured or
uninsured institution may conduct such activity, directly or
indirectly, only in the state authorizing the activity and only
for the institution's customers located in that state; and
M
(B) an insured or uninsured institution may not
engage directly or indirectly in any activity prohibited for a
member Dank or affiliate thereof under the Banking Act of 1933
or in any real estate investment or development or insurance
underwriting activity prohibited for a multiple savings and
loan holding company under subsection (c) of this section.
Nothing in this subsection shall prohibit a state-chartered
savings and loan association or savings bank from engaging in
any activity expressly permitted by statute for a Federal
savings and loan association or Federal savings bank.
88
{2) Notwithstanding paragrapn (1) of this
subsection, an insured or uninsured institution that, on or
before July 1, I9&3r commenced, directly or indirectly, any
activity that would have been prohibited oy this subsection if
commenced after enactment of this subsection may continue to
engage in such activity,, An insured or uninsured institution
tnat, after July 1, 1983^ commenced any activity, directly or
indirectly, that would have been prohibited by this subsection
if commenced after enactment of this subsection shall terminate
such activity within six months of enactment of this
subsection*"*
Explanation
Tnis amendment proiiioits banks and thrifts from
engaging, directly or through a subsidiary, in any activity
authorized oy state law that is prohibited under the Bank
Holding Company Act^ in the case of banks, or the Savings and
Loan Holding Company Act, in the case of thrifts.
This amendment also provides that this section does
not authorize any state cnartered depository institution to
engage in any real estate investment or development or
insurance underwriting activity except to the extent
permissible for a bank holding company under the Bank Holding
Company Act, or for a multiple savings and loan holding company
under the National Housing Act* In addition, authority could
be included whicn would allow the Board and the FSLIC to
designate other activities as raising safety and soundness
issues and thus not eligible for authorization by the states
for state chartered institutions. The amendment provides that
an institution that commenced an activity before July 1, 1983,
that would De prohibited by this bill, may continue to engage
in tne activity.
An institution that commenced such a
prohibited activity after July 1, 1983^ must terminate the
activity within six months.
i*^i^
Redesignata subsection (D) at line 18 on page 14 as
subsection (c) since there is a preceding subsection (b).
Clarify to whicn section subsection
line 1 on page 15 applies.
(c) beginning
a I:
Amend section 8 beginning at line 5 on page 15 to read as
follows:
" SEC » 8 o A d e p c) $ i I o r y in * 1 1 1 u t X o a t n,,, t z c mva e n ••*..• e s
b e t w e e n M a y 24,, 1.984« e n d t h e d a t e o f t h e e n a c t m e n t o f t.!-i8
A c t , a ay a c t i v i t y thai: hecoiwes p r o n i b i t e d D y t h i s Act oh:sij
c e a s e s u e h p i o h :U;- i t e c. a c t :l v i. t y o n 3 u. c \ i d a t c o t e n d c z iVr ^ n t, :r;:
- 7 10 .
Reserve Reguij^ements on other transaction accourrts
Add a new section 9 to the bill to read as follows:
SEC. 9 (a) Section 19(b) of the Federal Reserve Act (12
U.S.C. 461(b)) is amended by adding at the end thereof the
following:
"(12) (A) The Board may, if it deems it appropriate to
implement monetary policy, require by regulation any person,
company, or otner entity not otherwise subject to reserve
requirements under paragraphs (2) or (5) of this subsection to
maintain reserves against its transaction accounts, including
transaction accounts held in the form of shares*
"(B) The Board may vary the reserve requirements
imposed under this paragraph from those established for
depository institutions, but the ratios specified for such
reserve requirements shall not be more than the ratios
specified for depository institutions under this subsection.,
"(C) Reserves held under this paragraph shall be
maintained in the same form and subject to the same conditions
as are applicable to reserves maintained by depository
institutions but subject to such transitional adjustments as
the Board may prescribe,
"(D) The exemption from reserve requirements
provided in paragraph (11) of this subsection shall also apply
to transaction accounts subject to reserve requirements under
this paragraph.
"(E)(i)
The Board may require any person,
company,, or other entity required to maintain reserves under
tnis paragraph to make, at such intervals as the Board may
prescribe, such reports of its assets, liabilities and capital
as the Board may determine to be necessary or desirable to
enable the Board to discharge its responsibilities to monitor
and control monetary and credit aggregates.
"(ii) The Board shall have the authority to
make inspections, using such examiners as the Board selects or
approves, of the books and records of each person, company, or
other entity required to maintain reserves under this paragraph
for the purpose of verifying the accuracy and completeness of
reports submitted to trie Board by such persons, companies or
entities•
"(P) A person, company, or other entity required
to maintain reserves under this paragraph shall not be eligible
for extensions of credit from the Federal Reserve Banks, except
- 8 under paragraphs 3 and 13 of section 13 of this Act, and except
to the extent the Board determines is necessary for the
maintenance of reserve balances, shall not be entitled to
receive Federal Reserve Bank services, except such services as
are necessary to maintain a required reserve balance with a
Federal Reserve Bank, as determined by the Board.
"(13) Any depository institution, person, company
or other entity that is required to maintain reserves pursuant
to this section and that violates any provision of this section
or any regulation issued thereunder shall be subject to a civil
money penalty of $1,000 per day for each day such violation
shall continue, which shall be assessed and collected in
accordance with the provisions of section 505 of this Title as
if the person, company, or entity were a member bank.".
(b) Section 19(1^(1) of the Federal Reserve Act (12
U.S.C. 505(1)) is amended by striking out "$100" and inserting
in lieu thereof "$1,000".
Explanation
This section would authorize the Board to impose
reserve requirements on nondepository institutions that
maintain transaction accounts, on a standby basis and only to
the extent such action is appropriate for the implementation of
monetary policy.
At the end of the bill, add a new section .1.0 to read
as follows:
"SEC* 10.
upon enactment.s*
This Act snail be effective
immediately
Since many of the bili8s provisions are structured so
that they must apply on the date of enactment in order to serve
the purpose for which they have been included^ the bill should
include a provision specifically providing for an immediate
effective date.
PROPOSED LEGISLATIVE LANGUAGE FOR
BROKERED DEPOSITS
SHORT TITLE
SEC. 1.
This Act
shall be
referred
to as
the
"Financial Institutions Supervisory Improvements Act of 1984SB.
LIMIT ON INSURED BROKERED DEPOSITS
SEC. 2«
No
insured
depository
institution
shall
* accept an insured deposit placed by or through a deposit broker
if accepting such a deposit would cause the outstanding amount
of the institution's insured deposits placed by or through
deposit brokers to be in excess of five per centum of its daily
average total deposits for the three month period ending on the
day before the deposit is placed.
TRANSITIONAL ADJUSTMENT PERIOD
SEC. 3.
outstanding
(a)
An insured depository institution with
insured deposits placed by or through
deposit
brokers in excess of five percent of total deposits on the date
of
enactment
of
the
Financial
Institutions
Supervisory
Improvements Act of 1984 shall have a transitional period of
six months from the effective date of this Act to first comply
with the limit established by section 2.
(b)
During the transitional period, the limitation
applicable to such an insured depository institution shall not
exceed the amount of its insured deposits outstanding placed by
. or through deposit brokers on [date bill is introduced].
appropriate
Federal
supervisory
agencies
shall, at
The
their
discretion* issue joint rules and regulations under Section. 5
of this Act establishing such additional limitations during the
-2-
transitional adjustment period as may be required to assure
compliance with section 2 of this Act at the end of
the
transitional adjustment period*
DEFINITIONS
SEC« 4.
(a)
(1)
As used in this A c t —
The term "deposit broker11 shall m e a n —
(A)
any person engaged in the business
of (i) placing funds, or facilitating the placement of
funds,
of
third
institutions*
depository
or
parties
(ii)
institutions
with
insured
placing
for
funds
the
depository
with
purpose
insured
of
selling
interests in those deposits to third parties?
(B)
an
agent
or
trustee
who
establishes a deposit account to facilitate a business
arrangement with an insured depository institution to use
the proceeds of the account to fund a prearranged loan; and
(C)
including
an
a trustee or plan administrator,
investment advisor
therewith, of a Keogh
Plan or
acting
in
Individual
connection
Retirement
Account established pursuant to 26 U.S.C. §§ 401, 408.
(2)
"deposit broker"
Notwithstanding
shall
not
paragraph 1, the term
include
such
entities as determined by joint rules and
issued under Section 5 of this Act.
persons
or
regulations
(b)
The
term
"insured
depository
institution"
shall w<::a.n an Insured bank^ as defined in section 3(i) of
the Federal Deposit
Insurance Act, an insured
savings bank, defined
Deposit
in section 3(t) of
Insurance Act, or an
insured
Federal
the Federal
institution, as
defined in section 401(a) of the National Housing Act.
(c)
meaning
as
The term
in
"deposit88 shall have
section 3(^1) of
the
Federal
the same
Deposit
Insurance Act, and shall include deposits, accounts, or
shares authorized for associations under section 5{fo) (1)
of the Home Owners 8 Loan Act of 1933*
(d)
The term "insured deposit" shall mean (1) an
insured deposit as defined in section 3{m) of the Federal
Deposit Insurance Act?
or
(2) an insured account, as
defined in section 401(c) of the National Housing Act.
(e)
The term
agency" shall mean
"appropriate Federal
supervisory
(1) the appropriate Federal banking
agency, as defined in section 3(g) of the Federal Deposit
Insurance Act, with respect to an insured bank, as defined
in section 3(i) of such Act, or a deposit broker that
conducts business with an insured bank; and
(2) the
Federal Home Loan Bank Board with respect to an insured
institution, as defined in section 401(a) of the Natonal
Housing Act, or a deposit broker that conducts business
with an insured institution*
REGULATIONS
SEC* 5.
The Comptroller of the Currency, the
Board of Governors of the Federal Reserve System,
Federal Deposit
the
Insurance Corporation, and the Federal
Home 1/3an Bank Board shall adopt jointly such rules and
regulations as necessary to effectuate the purposes of
this Act and to prevent evasions thereof*
PENALTIES
SEC. 6.
(a)
Any insured depository institution,
any officer, director, employee, agent, or other person
participating in the conduct of the affairs of such an
insured depository institution violating any provision of
this Act, or any regulation or order issued under the
authority of this Act, shall forfeit and pay a civil money
penalty of not more than $10,000 per day for each day
during which such violation continues:
appropriate
Federal
supervisory
agency
Provided, That the
may,
in
its
discretion, compromise* modify* or remit any civil money
penalty which is subject to imposition or has been imposed
under authority of this section.
assessed
and
collected foy the
The penalty may be
appropriate
supervisory agency hy written notice.
section,
the
term
"violates"
includes
Federal
As used in this
without
any
limitation any action (alone or with another or others)
for or toward causing, bringing about, participating in,
counseling, or aiding or abetting a violation.
—5 —
(b)
Any action to impose a civil money penalty
shall otherwise
follow
the
procedures
set
forth
in
section 8(i)(2)(ii) through (vii) of the Federal Deposit
Insurance Act for the appropriate Federal banking agency,
as
defined
in
section 3(g) of
the
Federal
Deposit
Insurance Act, or section 4G7(k)(3)(B) through (G) of the
National Housing Act for the Federal Home Loan Bank Board.
EFFECTIVE DATE
SEC, 7.
This Act shall become effective ninety
days after enactment.
-6SECTION BY SECTION ANALYSIS
SEC. 1.
This Act may be cited as the Financial
Institutions Supervisory Improvements Act of 1984.
SEC. 2.
This
section
prohibits
an
insured
depository institution from accepting an insured brokered
deposit
if such a deposit
depository
institution
to
would
have
cause
the
insured
outstanding
insured
brokered deposits on the day the deposit is accepted of
more than five percent of its daily average total deposits
over the previous three months.
A violation would not
occur if an insured depository institution held insured
brokered deposits in excess of the five percent limit by
virtue of a runoff of other
deposits.
However, no
additional insured brokered deposits could be accepted
until such time that accepting an insured deposit placed
by or through a broker would not result in the institution
exceeding the limitation on insured brokered deposits.
SEC. 3.
A transitional period of six months from
the effective date of the Act is provided for insured
depository institutions to meet the limit established by
the Act.
During this period, an institution would have a
dollar "cap" on insured brokered deposits equal to the
amount of insured brokered deposits outstanding on the
date that the legislation is introduced.
The supervisory
agencies
are
given
the
discretion
to
issue
joint
regulations requiring a phase-down of or other limitation
on insured brokered deposits during the transition period
to assure compliance with the 5 percent "cap" at the end
of the transition period.
SEC« 4.
This
section
including "deposit broker/1
person engaged
defines
key
terrasf
A "deposit broker" iseans any
in the business of
placing
funds, or
facilitating the placement of funds, of third parties with
insured depository institutions* ox for the purpose of
selling participations
in shares of deposits to third
parties, or one who establishes a deposit account under an
arrangement such that the funds Mould be used to make a
prearranged loan.
It also includes a trustee or plan
administrator, including an investment adviser acting in
connection
therewith, of
Retirement Account.
a Keogh
Plan or
Individual
Other terms are defined by reference
to existing provisions in the Federal Deposit Insurance
Act, the Home Owners1 Loan Act, and the National Housing
Act.
SEC. 5«
The
three banking
agencies and
the
Federal Home Loan Bank Board are given joint rulemaking
powers to carry out the purposes of this Act.
SEC. 6.
Civil money penalties may be imposed by
the appropriate federal supervisory agency for violations
of this Act.
Such penalties may be up to $10,000 for each
day that a violation continues*
Civil money penalties
could be imposed for example, if a depository institution
exceeds its limit on brokered deposits*
SEC* 7*
The effective date of this title is
deferred 90 davs from date of enactment.
@FedFRASER