Deposit Insurance Option Act of 1991

Deposit Insurance Option Act of 1991 - Amends the Federal Deposit Insurance Act to permit an insured depository institution to voluntarily terminate its insured status pursuant to certain administrative guidelines. Denies such option to: (1) an insured Federal savings association; or (2) an insured branch that is required to be insured under the International Banking Act of 1978. Sets forth transition guidelines (including advertising and notice requirements).

Amends the Bank Holding Company Act of 1956 to exempt from its restrictions against interests in nonbanking organizations those holding companies whose banking subsidiaries have voluntarily terminated their insured status. (Thus permitting them to acquire securities interests, insurance interests, real estate brokerage interests, and financial interests closely related to banking.)

Amends the McFadden Act to exempt from its coverage any banks that have voluntarily terminated their insured status.

Amends the Banking Act of 1933 to permit: (1) noninsured banks to affiliate with securities organizations; and (2) securities dealers to participate in noninsured banks.

Amends Federal banking law with respect to bank organization to exempt a national bank that voluntarily terminates its insured status from the limitation on dealing in and underwriting securities.

Amends the Bank Holding Company Act of 1956 to exempt from its insured status requirements any subsidiary banks of holding companies if such subsidiaries have voluntarily terminated their insured status.

 
S 1116 IS
102d CONGRESS
1st Session
S. 1116
To allow certain insured depository institutions to forgo their insured
status and engage in a broad range of restricted financial service activities,
and for other purposes.
IN THE SENATE OF THE UNITED STATES
May 21 (legislative day, APRIL 25), 1991
Mrs. KASSEBAUM introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
A BILL
To allow certain insured depository institutions to forgo their insured
status and engage in a broad range of restricted financial service activities,
and for other purposes.
  Be it enacted by the Senate and House of Representatives of the United
  States of America in Congress assembled,
SECTION 1. SHORT TITLE.
  This Act may be cited as the `Deposit Insurance Option Act of 1991'.
SEC. 2. PURPOSES.
  (a) PURPOSES- To allow certain insured depository institutions to forgo
  their insured status and engage in a broad range of restricted financial
  service activities, and for other purposes.
SEC. 3. FEDERAL DEPOSIT INSURANCE ACT AMENDMENTS.
  (a) IN GENERAL- Section 8 of the Federal Deposit Insurance Act (12 U.S.C
  1818) is amended--
  (1) by inserting `involuntary' after `sec. 8' in the section heading; and
  (2) by striking paragraph (1) of subsection (a); and
  (3) by redesignating paragraphs (2) through (9) of subsection (a) as
  paragraphs (1) through (8), respectively.
  (b) VOLUNTARY TERMINATION OF INSURED STATUS- The Federal Deposit Insurance
  Act (12 U.S.C. 1811 et seq.) is amended by inserting after section 8 the
  following new section:
`SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS INSURED DEPOSITORY INSTITUTION.
  `(a) IN GENERAL- Except as provided in subsection (b), an insured depository
  institution may voluntarily terminate its status as an insured depository
  institution in accordance with regulations of the board of directors for
  purposes of this Act if such institution provides written notice of its
  intent to terminate its insured status--
  `(1) to the corporation, not less than six months before the effective
  date of such termination; and
  `(2) to its depositors, not less than six months before the effective date
  of such termination.
  `(b) EXCEPTION- The option for a depository institution to terminate its
  insured status under subsection (a) shall not be available to--
  `(1) an insured Federal savings association; or
  `(2) an insured branch that is required to be insured under subsection
  (a) or (b) of section 6 of the International Banking Act of 1978.
  `(c) ELIGIBILITY FOR INSURANCE TERMINATED- A depository institution that
  voluntarily elects to terminate its insured status under subsection (a)
  shall not be eligible to receive deposit insurance under this Act of any
  of its deposits after the period specified in subsection (d)(1).
  `(d) Temporary Insurance of Deposits Insured as of Termination-
  `(1) TRANSITION PERIOD- The insured deposits of each depositor in a
  depository institution on the effective date of the voluntary termination
  of the institution's insured status, less all subsequent withdrawals from
  any deposits of such depositor, shall continue to be insured for a period
  of not less than six months nor more than two years, within the discretion
  of the corporation. During such period, no additions to any such deposits,
  and no new deposits in the depository institution made after the effective
  date of such termination shall be insured by the corporation.
  `(2) TEMPORARY ASSESSMENTS; OBLIGATIONS AND DUTIES- During the period
  specified in paragraph (1), a depository institution shall continue to pay
  assessments required under this Act as if it were an insured depository
  institution. Such depository institution shall, in all other respects, be
  subject to the duties and obligations of an insured depository institution
  during such period, and in the event that the depository institution is
  closed due to an inability to meet the demands of its depositors during
  such period, the corporation shall have the same powers and rights with
  respect to such depository institution as in the case of an insured
  depository institution.
  (e) Advertisements-
  `(1) IN GENERAL- A depository institution that voluntarily terminates its
  insured status under this section shall not advertise or hold itself out
  as having insured deposits, except that it may advertise the temporary
  insurance of deposits under subsection (d) if in the same connection, it
  shall also state with equal prominence that additions to deposits and new
  deposits made after the effective date of the termination are not insured.
  `(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS, AND SECURITIES- Any certificate of
  deposit or other obligation or security issued by a depository institution
  after the effective date of the voluntary termination of its insured status
  under this section shall be accompanied by a conspicuous, prominently
  displayed notice that such certificate of deposit or other obligation or
  security is not insured under this Act.
  `(f) Notice Requirements-
  `(1) NOTICE TO THE CORPORATION- The notice to the corporation of a
  depository institution's intent to terminate its insured status required
  under subsection (a) shall be in such form as the corporation may require.
  `(2) NOTICE TO DEPOSITORS- The notice to depositors of a depository
  institution's intent to terminate its insured status required under
  subsection (a) shall be--
  `(A) at such depositor's last address of record with the institution; and
  `(B) in such manner and form as the corporation finds to be necessary and
  appropriate for the protection of depositors.'.
SEC. 4. BANK HOLDING COMPANY ACT AMENDMENTS.
  Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843) is
  amended by redesignating subsections (d) through (i) as subsections (e)
  through (j), respectively, and inserting after subsection (c) the following
  new subsection:
  `(d) Special Exemption for Holding Companies of Noninsured Banks-
  `(1) EXEMPTION- Except as provided in paragraph (2), the prohibitions
  in this section shall not apply to the acquisition or holding by a bank
  holding company, whose banking subsidiaries have voluntarily terminated their
  insured status under section 8A of the Federal Deposit Insurance Act, of--
  `(A) shares of securities firms;
  `(B) shares of insurance firms;
  `(C) shares of real estate brokerage firms;
  `(D) shares described in paragraphs (1) through (7) and (9) through (14)
  of subsection (c); and
  `(E) shares of any company, the activities of which the board has determined
  to be--
  `(i) closely related to banking under subsection (c)(8); or
  `(ii) of a financial nature, and appropriate for a bank holding company
  that is subject to this subsection.
  `(2) SAVINGS PROVISION- The exemption provided for in paragraph (1)
  shall not apply while any of the deposits of a holding company's banking
  subsidiaries remain insured after the effective date of such subsidiary's
  voluntary termination of its insured status in accordance with the transition
  period described in section 8(d)(1) of the Federal Deposit Insurance Act.'.
SEC. 5. EXEMPTIONS FOR NONINSURED BANKS AND THEIR AFFILIATES.
  (a) MCFADDEN ACT- Section 5155(h) of the Revised Statutes (12 U.S.C. 36(h))
  is amended by adding at the end the following: `For purposes of this section,
  such terms shall not include banks that have voluntarily terminated their
  insured status under section 8A of the Federal Deposit Insurance Act.'.
  (b) BANKING ACT OF 1933-
  (1) NONINSURED BANK AFFILIATION WITH SECURITIES ORGANIZATIONS- Section 20
  of the Banking Act of 1933 (12 U.S.C. 377) is amended in the first sentence
  by inserting `that has not voluntarily terminated its insured status under
  section 8A of the Federal Deposit Insurance Act' after `no member bank'.
  (2) PARTICIPATION BY SECURITIES DEALERS IN NONINSURED BANKS- Section 21
  of the Banking Act of 1933 (12 U.S.C. 378) is amended by adding at the
  end the following:
  `(c) Nothing in this section shall be construed to prohibit a person or
  organization described in subsection (a)(1) from engaging in or otherwise
  participating in activities of a bank that has voluntarily terminated its
  insured status under section 8A of the Federal Deposit Insurance Act.'.
  (c) INVESTMENT LIMITATIONS- Section 5136 of the Revised Statutes (12
  U.S.C. 24) is amended by adding at the end of paragraph Seventh the
  following:
  `The limitations and restrictions contained in this paragraph including the
  limitations on dealing in and underwriting securities, shall not apply to a
  national bank that voluntarily terminates its insured status under section
  8A of the Federal Deposit Insurance Act, to the extent that such activities
  are described in section 4(d)(1) of the Bank Holding Company Act of 1956.'.
  (d) INSURANCE REQUIREMENT- Section 3(e) of the Bank Holding Company Act
  of 1956 (12 U.S.C. 1824(e)) is amended by adding at the end the following:
  `This subsection does not apply to a bank that voluntarily terminates its
  insured status under section 8A of the Federal Deposit Insurance Act.'.