Wholesale Bank Deposit Insurance Act of 1992

Wholesale Bank Deposit Insurance Act of 1992 - Amends the Federal Deposit Insurance Act to authorize certain insured depository institutions to voluntarily terminate their insured status (become uninsured State member banks under the Federal Reserve Act). Precludes such institutions from accepting deposits other than as uninsured State member banks, and requires them to pay to the Federal Deposit Insurance Corporation (FDIC) an exit fee reflecting their pro rata share of the relevant deposit insurance fund's contingent liabilities.

Provides for a transition period during which formerly insured deposits temporarily retain their insured status. Requires the depository institution to notify its depositors and the FDIC of its non-insured status.

Amends the Bank Holding Company Act of 1956 to permit a bank holding company all of whose subsidiary depository institutions are uninsured State member banks to acquire interests in banking and securities firms. (Current law prohibits such affiliations between banking and securities institutions.) Imposes the same requirements upon the acquisition of such interests as would be applicable to a bank holding company that does not own uninsured State member banks.

Restricts the affiliation of uninsured State member banks with other deposit-taking institutions, including proscriptions against affiliations with insured banks, savings associations, and any institution that accepts initial deposits of $100,000 or less (i.e., a retail depository institution).

Amends the McFadden Act to exempt noninsured banks and their affiliates from the conditions placed upon branch banking by national banking associations.

Amends the Banking Act of 1933 to permit securities industry personnel to simultaneously serve with an uninsured State member bank. Amends the Bank Holding Company Act of 1956 to exempt from its insurance requirements uninsured State member banks that are controlled by certain holding companies that control only uninsured State member banks.

Amends the Federal Reserve Act to prescribe guidelines within which uninsured State banks may become members of the Federal Reserve System, subject to its regulatory oversight, including: (1) mandatory status as a wholesale bank (minimum initial deposits of $100,000); (2) special minimum capital requirements; (3) minimum leverage ratios; (4) special capital categories for prompt corrective action (including a critical capital level of at least 150 percent of the corresponding ratio for insured State member banks); and (5) a special discount rate above that applicable to insured depository institutions, and restricted access to discount window borrowing. Grants the Board of Governors of the Federal Reserve System conservatorship authority over such banks.

 
S 2284 IS
102d CONGRESS
2d Session
S. 2284
To permit insured banks to elect to forgo deposit insurance, provided such
banks are subject to oversight by the Board of Governors of the Federal
Reserve System.
IN THE SENATE OF THE UNITED STATES
February 27 (legislative day, JANUARY 30), 1992
Mrs. KASSEBAUM introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
A BILL
To permit insured banks to elect to forgo deposit insurance, provided such
banks are subject to oversight by the Board of Governors of the Federal
Reserve System.
  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 `Wholesale Bank Deposit Insurance Act of 1992'.
SEC. 2. UNINSURED WHOLESALE BANKS.
  (a) VOLUNTARILY TERMINATING INSURED STATUS-
  (1) SECTION 8 DESIGNATIONS- Section 8 of the Federal Deposit Insurance Act
  (12 U.S.C. 1818) is amended--
  (A) in the section heading, by inserting `involuntary' after `sec. 8.'; and
  (B) in subsection (a)--
  (i) by striking paragraph (1); and
  (ii) by redesignating paragraphs (2) through (9) as paragraphs (1) through
  (8), respectively.
  (2) VOLUNTARILY TERMINATING 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. VOLUNTARILY TERMINATING STATUS AS INSURED DEPOSITORY INSTITUTION.
  `(a) IN GENERAL- Except as provided in subsection (b), an insured bank may,
  in accordance with regulations of the Corporation, voluntarily terminate
  its status as an insured depository institution if the institution provides
  written notice of its intent to terminate its insured status--
  `(1) to the Corporation, not less than 6 months before the effective date
  of the termination; and
  `(2) to its depositors, not less than 6 months before the effective date
  of the termination.
  `(b) EXCEPTION- The option to terminate insured status under subsection
  (a) shall not be available to--
  `(1) an insured savings association;
  `(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; or
  `(3) any institution described in section 2(c)(2) of the Bank Holding
  Company Act of 1956.
  `(c) ELIGIBILITY FOR INSURANCE TERMINATED- A depository institution that
  voluntarily elects to terminate its insured status under subsection (a)
  shall not receive insurance on any of its deposits or any other assistance
  authorized under this Act after the period specified in subsection (e)(1).
  `(d) INSTITUTION MUST BECOME UNINSURED STATE MEMBER BANK OR TERMINATE
  DEPOSIT-TAKING ACTIVITIES- Any institution that voluntarily terminates its
  status as an insured depository institution under this section may not,
  upon termination of insurance, accept any deposits unless the institution is
  an uninsured State member bank under section 9B of the Federal Reserve Act.
  `(e) EXIT FEES-
  `(1) IN GENERAL- Any institution that voluntarily terminates its status
  as an insured depository institution under this section shall pay an exit
  fee in an amount that the Corporation determines is sufficient to account
  for the institution's pro rata share of contingent and other liabilities
  of the relevant deposit insurance fund.
  `(2) PROCEDURES- The Corporation shall, by regulation, prescribe procedures
  for assessing any exit fee under this subsection.
  `(f) TEMPORARY INSURANCE OF DEPOSITS INSURED AS OF TERMINATION-
  `(1) TRANSITION PERIOD- The insured deposits of each depositor in an
  insured bank 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 6 months nor more than 2 years, within the discretion of the
  Corporation. During that period, no additions to any such deposits, and no
  new deposits in the depository institution made after the effective date of
  the termination, shall be insured by the Corporation, and no early withdrawal
  penalties shall be charged on insured deposits with a term that exceeds
  the transition period provided by the Corporation under this paragraph.
  `(2) TEMPORARY ASSESSMENTS; OBLIGATIONS AND DUTIES- During the period
  specified in paragraph (1), a depository institution shall--
  `(A) continue to pay assessments required under this Act as if it were an
  insured depository institution;
  `(B) be subject to the authority of the Corporation and the duties and
  obligations of an insured depository institution under this Act; and
  `(C) if the depository institution is closed due to an inability to meet
  the demands of its depositors, be subject to the same powers and rights
  of the Corporation with respect to the institution as in the case of an
  insured depository institution.
  `(g) ADVERTISING-
  `(1) IN GENERAL- An insured bank 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 (f) if in the same connection, it shall also
  state with equal prominence--
  `(A) that additions to deposits and new deposits made after the effective
  date of the termination are not insured; and
  `(B) the date on which all insurance will terminate, as determined under
  subsection (f)(1).
  `(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS, AND SECURITIES- Any certificate
  of deposit or other obligation or security issued by an insured bank after
  the effective date of the voluntary termination of its insured status
  under this section shall include a conspicuous notice that the instrument
  is not insured under this Act.
  `(h) NOTICE REQUIREMENTS-
  `(1) NOTICE TO THE CORPORATION- The notice to the Corporation of an
  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 an 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 to protect depositors.'.
  (3) APPROPRIATE FEDERAL BANKING AGENCY- Section 3(q)(2)(A) of the Federal
  Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A)) is amended by inserting
  `and any uninsured State member bank' before the comma.
  (b) AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956-
  (1) EXEMPTION- Section 4 of the Bank Holding Company Act of 1956 (12
  U.S.C. 1843) is amended by adding at the end the following new subsection:
  `(j) SPECIAL EXEMPTION FOR HOLDING COMPANIES OF UNINSURED BANKS-
  `(1) EXEMPTION- Except as provided in paragraph (2), if all of a  bank
  holding company's subsidiary depository institutions are uninsured State
  member banks, as provided in section 9B of the Federal Reserve Act, that
  bank holding company may, notwithstanding subsection (a), acquire or retain
  direct or indirect ownership or control of--
  `(A) shares of securities firms;
  `(B) shares described in paragraphs (1) through (7) and (9) through (14)
  of subsection (c); and
  `(C) shares of any company, the activities of which the Board, by regulation
  or order, has determined to be--
  `(i) closely related to banking under subsection (c)(8); or
  `(ii) financial, and appropriate for a bank holding company that is subject
  to this subsection.
  `(2) SAVINGS PROVISION- In the case of a bank holding company having
  control of any bank that voluntarily terminates its insured status under
  section 8A of the Federal Deposit Insurance Act, paragraph (1) shall not
  apply before the date on which all of the deposits of such bank cease to
  be insured in accordance with the transition period described in section
  8A(f)(1) of the Federal Deposit Insurance Act.
  `(3) APPROVAL REQUIRED-
  `(A) IN GENERAL- The acquisition or retention of shares referred to in
  paragraph (1)(B) shall be subject to the same requirements, including
  any applicable Board approval or review, as would be applicable to a bank
  holding company that does not own any uninsured State member banks;
  `(B) NONBANKING ACTIVITIES-
  `(i) PRIOR NOTICE REQUIRED- No acquisition may be made under subparagraph
  (A) or (C) of paragraph (1) unless the company has provided the Board not
  less than 60 days prior written notice of the transaction, and during that
  period, the Board has not disapproved the transaction.
  `(ii) EXTENSION FOR NEW ACTIVITIES- Notwithstanding clause (i), in any case
  involving an activity for which the Board has not yet made a determination
  under paragraph (1)(C), the Board may extend the disapproval period for
  not more than an additional 90 days.
  `(4) LIMITATION ON AFFILIATION OF UNINSURED STATE MEMBER BANKS AND OTHER
  DEPOSIT-TAKING INSTITUTIONS- No uninsured State member bank may be an
  affiliate of--
  `(A) any bank, other than an uninsured State member bank;
  `(B) any savings association;
  `(C) any institution described in section 2(c)(2); or
  `(D) any institution that accepts initial deposits of $100,000 or less,
  other than--
  `(i) on an incidental basis; and
  `(ii) if the deposits--
  `(I) are not insured under the Federal Deposit Insurance Act; and
  `(II) are not more than 5 percent of the institution's total deposits.'.
  (2) DEFINITIONS- Section 2 of the Bank Holding Company Act of 1956 (12
  U.S.C. 1841) is amended--
  (A) by adding at the end the following:
  `(n) UNINSURED STATE MEMBER BANK- For purposes of this Act, the term
  `uninsured State member bank' means any institution that is an uninsured
  State member bank in accordance with section 9B of the Federal Reserve
  Act.'; and
  (B) in subsection (c)(1), by adding at the end the following:
  `(C) An uninsured State member bank.'.
  (c) EXEMPTIONS FOR NONINSURED BANKS AND THEIR AFFILIATES-
  (1) 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,
  effective upon the expiration of the transition period provided for in
  subsection (f)(1) of such section.'.
  (2) BANKING ACT OF 1933- Section 32 of the Banking Act of 1933 (12 U.S.C. 78)
  is amended by adding at the end the following: `This section does not
  prohibit any officer, director, partner, employee, or individual described
  in the preceding sentence from serving at the same time as an officer,
  director, or employee of an uninsured State member bank, as defined in
  section 9B of the Federal Reserve Act.'.
  (3) INSURED BANKS- Section 3(e) of the Bank Holding Company Act of
  1956 (12 U.S.C. 1842(e)) is amended by adding at the end the following:
  `This subsection does not apply to an uninsured State member bank that is
  controlled by a company that controls no banks other than uninsured State
  member banks.'.
  (d) UNINSURED STATE MEMBER BANKS- The Federal Reserve Act (12 U.S.C. 221
  et seq.) is amended by inserting after section 9A the following new section:
`SEC. 9B. UNINSURED STATE MEMBER BANKS.
  `(a) APPLICATION FOR MEMBERSHIP AS UNINSURED STATE MEMBER BANK-
  `(1) APPLICATION REQUIRED- Any bank organized under the general laws of any
  State, or incorporated by special law of any State, may apply to the Board
  of Governors of the Federal Reserve System to subscribe to the stock of
  the Federal Reserve bank organized within the district where the applying
  bank is located as an uninsured State member bank. Such application shall
  be treated as an application under, and shall be subject to, section 9.
  `(2) APPROVAL OF MEMBERSHIP- No bank may become an uninsured State member
  bank unless--
  `(A) the Board has approved an application by the bank, under such
  regulations and subject to such restrictions or requirements as the Board
  may prescribe, to be an uninsured State member bank; and
  `(B) in the case of a bank that is insured under the Federal Deposit
  Insurance Act, the bank has met all requirements under that Act for
  voluntary termination of deposit insurance.
  `(b) GENERAL REQUIREMENTS APPLICABLE TO UNINSURED STATE MEMBER BANKS-
  `(1) FEDERAL RESERVE ACT- Except as otherwise provided in this section,
  uninsured State member banks shall be member banks and shall be subject to
  the provisions of this Act that apply to member banks to the same extent
  and in the same manner as State member insured banks, except that an
  uninsured State member bank may terminate membership under this Act only
  with the Board's prior written approval, and on terms and conditions that
  the Board determines are appropriate to carry out this Act.
  `(2) PROMPT CORRECTIVE ACTION- An uninsured State member bank shall be
  deemed to be an insured depository institution for purposes of section 38
  of the Federal Deposit Insurance Act except that--
  `(A) the relevant capital levels and capital measures for each capital
  category shall be those specified by the Board for uninsured State member
  banks under subsection (c);
  `(B) the provisions applicable to well-capitalized insured depository
  institutions shall be inapplicable to uninsured State member banks;
  `(C) the provisions authorizing or requiring a receiver to be appointed
  for an institution shall not apply to an uninsured State member bank, and
  the Board is authorized or required (as the case may be) to terminate the
  uninsured State member bank's membership in the Federal Reserve System; and
  `(D) for purposes of applying section 38 of the Federal Deposit Insurance
  Act to uninsured State member banks, all references in that section to the
  appropriate Federal banking agency or to the Corporation shall be deemed
  to be references to the Board.
  `(3) ENFORCEMENT AUTHORITY- Subsections (j) and (k) of section 7, subsections
  (b) through (n), (s), (u), and (v) of section 8, and section 19 of the
  Federal Deposit Insurance Act shall apply to an uninsured State member
  bank in the same manner and to the same extent as they apply to State
  member insured banks.
  `(4) INTERNATIONAL LENDING SUPERVISION ACT- For purposes of the International
  Lending Supervision Act, an uninsured State member bank shall be deemed
  to be a banking institution and the Board shall be the appropriate Federal
  banking agency for the bank and all of its affiliates.
  `(5) BANK MERGER ACT- An uninsured State member bank shall be subject to
  the Bank Merger Act in the same manner and to the same extent as if the
  uninsured State member bank were a State member insured bank.
  `(c) SPECIFIC REQUIREMENTS APPLICABLE TO UNINSURED STATE MEMBER BANKS-
  `(1) LIMITATIONS ON DEPOSITS-
  `(A) MINIMUM AMOUNT- Pursuant to regulations of the Board, no uninsured State
  member bank shall receive initial deposits of $100,000 or less, other than--
  `(i) on an incidental basis; and
  `(ii) if such deposits are not more than 5 percent of the institution's
  total deposits.
  `(B) NO DEPOSIT INSURANCE- Deposits at an uninsured State member bank are
  not insured deposits under the Federal Deposit Insurance Act.
  `(C) ADVERTISING AND DISCLOSURE- The Board shall prescribe regulations
  pertaining to advertising and disclosure by uninsured State member banks
  to ensure that such a bank notifies each depositor that deposits at the
  uninsured State member bank are not insured or otherwise guaranteed by
  the United States Government.
  `(2) SPECIAL CAPITAL REQUIREMENTS APPLICABLE TO UNINSURED STATE MEMBER BANKS-
  `(A) MINIMUM CAPITAL LEVELS-
  `(i) IN GENERAL- The Board shall, by regulation, adopt capital requirements
  for uninsured State member banks. The capital levels for uninsured State
  member banks shall be sufficiently higher than the capital levels for
  State member insured banks--
  `(I) to account for the status of uninsured State member banks as
  institutions that accept deposits that are not insured under the Federal
  Deposit Insurance Act; and
  `(II) to provide for the safe and sound operation of the uninsured State
  member bank without undue risk to creditors or other persons, including
  Federal Reserve banks, engaged in transactions with the bank.
  `(ii) RELEVANT CAPITAL MEASURES- The relevant capital measures for uninsured
  State member banks shall be the relevant capital measures described in
  section 38(c) of the Federal Deposit Insurance Act, except that the Board
  may specify different relevant capital measures applicable to uninsured
  State member banks than those applicable to insured depository institutions,
  as the Board determines appropriate to carry out this Act.
  `(iii) MINIMUM LEVERAGE RATIO- The minimum ratio of tangible equity to
  total assets of uninsured State member banks shall be not less than 150
  percent of the corresponding ratio for insured State member banks.
  `(B) CAPITAL CATEGORIES FOR PROMPT CORRECTIVE ACTION-
  `(i) IN GENERAL- For purposes of applying section 38 of the Federal Deposit
  Insurance Act, the Board shall, by regulation, establish, for each relevant
  capital measure specified by the Board under subparagraph (A)(ii), the
  levels at which an uninsured State member bank is adequately capitalized,
  undercapitalized, and significantly undercapitalized by reference to the
  relevant minimum capital levels established for uninsured State member banks.
  `(ii) CRITICAL CAPITAL LEVEL- The Board shall, by regulation, establish
  the critical capital level for uninsured State member banks for purposes of
  section 38 of the Federal Deposit Insurance Act. The ratio shall not be less
  than 150 percent of the corresponding ratio for insured State member banks.
  `(3) NONINTEREST-BEARING DEPOSIT- Each uninsured State member bank shall
  maintain on deposit at the  Federal Reserve bank in the district in which the
  member bank is located, a noninterest-bearing deposit in such amount of the
  uninsured State member bank's total deposits as the Board may prescribe. That
  deposit shall be in addition to any reserve, clearing balance, or liquidity
  requirements otherwise applicable to the uninsured State member bank.
  `(4) ADDITIONAL REQUIREMENTS APPLICABLE TO UNINSURED STATE MEMBER BANKS-
  In addition to any requirements otherwise applicable to State member banks
  or otherwise applicable under this section, the Board may, by regulation
  or order, for uninsured State member banks--
  `(A) establish a special discount rate above the rate applicable to insured
  depository institutions;
  `(B) limit transactions with affiliates to prevent an affiliate from
  gaining access to, or the benefits of, credit (including overdrafts)
  from a Federal Reserve bank;
  `(C) establish special clearing balance requirements;
  `(D) limit the availability and use of credit, and on the frequency
  of borrowing, from a Federal Reserve bank, including limitations or
  prohibitions on overdrafts at a  Federal Reserve bank;
  `(E) limit or condition the use of payment or payment-related services
  obtained from any Federal Reserve bank; and
  `(F) establish any additional requirements that the Board determines to
  be appropriate or necessary to--
  `(i) promote the safety and soundness of the uninsured State member bank, or
  `(ii) protect creditors and other persons, including Federal Reserve banks,
  engaged in transactions with the uninsured State member bank.
  `(5) EXEMPTIONS FOR UNINSURED STATE MEMBER BANKS- The Board may, by
  regulation or order, exempt any uninsured State member bank from any
  provision applicable to a State member bank that is not an uninsured
  State member bank, provided that the Board finds that such exemption is
  not inconsistent with--
  `(i) promoting the safety and soundness of the uninsured State member
  bank, and
  `(ii) protecting creditors and other persons, including Federal Reserve
  banks, engaged in transactions with the uninsured State member bank.
  `(6) NO EFFECT ON OTHER PROVISIONS- This section shall not be construed
  to limit the Board's authority over member banks under any other provision
  of law, or to create any obligation for any Federal Reserve bank to make,
  increase, renew, or extend any advance or discount under this Act to any
  member bank or other depository institution.
  `(d) CONSERVATORSHIP AUTHORITY- The Board may appoint a conservator to
  take possession and control of an uninsured State member bank to the
  same extent and in the same manner as the Comptroller of the Currency is
  authorized to appoint a conservator for a national bank under section 203
  of the Bank Conservation Act.
  `(e) DEFINITIONS- For purposes of this section--
  `(1) the term `uninsured State member bank' means a bank whose application
  to become an uninsured State member bank has been approved by the Board
  of Governors of the Federal Reserve System under this section; and
  `(2) the term `State member insured bank' means a State member bank,
  the deposits of which are insured under the Federal Deposit Insurance Act.'.