Federal Deposit Insurance Funds and Regulatory Relief Act of 1996

TABLE OF CONTENTS:

Title I: Thrift and Bank Charter Merger

Subtitle A: Recapitalization of Savings Association

Insurance Fund

Subtitle B: Status of Banks and Savings Associations

Subtitle C: Merger of Insurance Funds

Subtitle D: FICO Interest Costs Shared

Subtitle E: Refunds of Excess Amounts in Deposit Fund

Subtitle F: Limitation on Assessments

Subtitle G: Miscellaneous Provisions

Title II: Transitional Provisions

Title III: Reductions in Government Overregulation

Subtitle A: The Home Mortgage Process

Subtitle B: Community Reinvestment Act Amendments

Subtitle C: Consumer Banking Reforms

Subtitle D: Equal Credit Opportunity Act Amendments

Subtitle E: Consumer Leasing Act Amendments

Title IV: Streamlining Government Regulations

Subtitle A: Regulatory Approval Issues

Subtitle B: Streamlining of Government Regulations;

Miscellaneous Provisions

Title V: Lender Liability

Title VI: Annual Study and Report on Impact on Lending to

Small Business

Federal Deposit Insurance Funds and Regulatory Relief Act of 1996 - Title I: Thrift and Bank Charter Merger - Subtitle A: Recapitalization of Savings Association Insurance Fund - Directs the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) to impose a special assessment on the Savings Association Insurance Fund (SAIF)-assessable deposits of each insured depository institution at a rate that the Board, in its sole discretion, determines will cause the SAIF to achieve the designated reserve ratio on the first business day of January 1998. Allows the Board to exempt weak institutions from such assessment, but requires exemption for certain newly chartered and other defined institutions, which shall pay semiannual assessments at certain former rates during calendar years 1998 through 2001.

(Sec. 101) Authorizes certain institutions facing hardship as a result of the special assessment to elect to pay it in two assessments, plus a third supplemental special assessment, determined according to specified formulae.

Prescribes adjustments of the special assessment for Bank Insurance Fund (BIF) member banks and certain savings associations.

Amends the Federal Deposit Insurance Act (FDIA) to require the deposit into the SAIF of exit fees resulting from a conversion transaction.

Subtitle B: Status of Banks and Savings Associations - Expresses the intent of the Congress to: (1) make a comprehensive review of all issues relating to the merger of the charters of banks and savings associations; (2) pass the appropriate legislation out of both Houses providing for such merger by September 30, 1997; and (3) enact such legislation before the effective date of the merger of insurance funds.

Subtitle C: Merger of Insurance Funds - Declares that the SAIF and the BIF shall be merged into the Deposit Insurance Fund, which shall have a Special Reserve for any excess of the SAIF reserve ratio over the designated reserve ratio. Makes conforming amendments to specified banking statutes.

Subtitle D: FICO Interest Costs Shared - Amends the Federal Home Loan Bank Act (FHLBA) and the Federal Deposit Insurance Act (FDIA) to revise the assessment authority of the Financing Corporation (FICO), extending FICO assessments to all depository institutions insured by the Federal Deposit Insurance Corporation (FDIC) (rather than SAIF members only). Repeals specified limits on the amount that may be assessed.

Subtitle E: Refunds of Excess Amounts in Deposit Fund - Prescribes procedural guidelines for the refund of assessed payments in a deposit insurance fund in excess of the designated reserve amount.

Subtitle F: Limitation on Assessments - Prohibits the FDIC Board of Directors from setting semi-annual assessments in excess of the amount needed to maintain or achieve the designated reserve ratio of a deposit insurance fund.

Subtitle G: Miscellaneous Provisions - Defines certain terms used in Titles I and II of this Act.

Title II: Transitional Provisions - Designates transition periods before the merger of the SAIF and the BIF into the Deposit Insurance Fund during which: (1) any BIF member with SAIF-assessable deposits shall be treated as a SAIF member subject to assessments with respect to such deposits; (2) a cross guarantee mechanism shall be available in the SAIF and BIF, respectively, to cover losses incurred by the sister fund; (3) the semi-annual assessment rates imposed upon SAIF members may not exceed projected costs and expenses for the semi- annual period; (4) the FDIC may take into account deposit shifts between BIF and SAIF member subsidiaries of the same holding company for purposes of assessment determinations; and (5) the Board of Governors of the Federal Reserve Board shall transfer annually specified funds to the Financing Corporation from Federal Reserve surplus funds.

Title III: Reductions in Government Overregulation - Financial Institutions Regulatory Relief Act of 1996 - Subtitle A: The Home Mortgage Process - Amends the Real Estate Settlement Procedures Act (RESPA) to: (1) transfer certain rulemaking authority over disclosure and escrow account requirements from the Secretary of Housing and Urban Development (HUD) to the Board of Governors of the Federal Reserve System (the Board); and (2) declare that the purpose of the Act is to eliminate kickbacks or referrals without directly regulating settlement services prices or wages to bona fide employees that are not designed as a subterfuge to facilitate kickbacks among affiliated companies.

(Sec. 301) Prohibits the Secretary of HUD from publishing a proposed or final regulation unless he or she has used a certain established procedure to attempt to negotiate and develop the rule. Distributes administrative enforcement authority regarding kickbacks and referrals among HUD, the Federal banking agencies, the National Credit Union Administration, the Board, and the Director of the Office of Thrift Supervision. Declares a statutory preference for administrative enforcement over criminal enforcement, except in appropriate cases. Restricts criminal sanctions to willful violations of law (current law penalizes unwillful and unintentional violations as well).

(Sec. 302) Sets a deadline by which the Board must take action under RESPA and the Truth in Lending Act (TILA) to simplify and provide a single format for credit transaction disclosures.

(Sec. 303) Exempts from TILA disclosure requirements any transactions that the Board determines: (1) are not necessary to effectuate the Act's purposes; or (2) do not provide a measurable benefit in the form of useful information or consumer protection.

(Sec. 304) Amends RESPA to repeal disclosure requirements about previously transferred federally related mortgage loans or intentions to transfer them, requiring only that the lender disclose that it may assign, sell or transfer them at any time. Repeals the mandate for model disclosure statements. Removes from the definition of "federally related mortgage loan" any loan secured by a subordinate lien on residential real property (thereby removing second mortgages from RESPA requirements).

(Sec. 305) Revises disclosure requirements to permit alternative disclosures for adjustable rate home mortgages which state that a monthly payment may increase or decrease significantly due to annual percentage rate increases. (Current law requires illustrations how a rate increase or decrease affects monthly payments).

(Sec. 306) Exempts from TILA disclosure requirements certain fees imposed on consumer credit transactions by third party closing agents (including settlement agents, attorneys, escrow and title companies) that are neither expressly required nor retained by the creditor.

(Sec. 307) Denies the right of rescission to certain refinancings or debt consolidations secured by a lien on a consumer's principal dwelling. Revises certain TILA provisions for recovery of fees.

(Sec. 310) Amends the Home Mortgage Disclosure Act of 1975 to: (1) increase from $10 million to $50 million the maximum asset-size of institutions exempt from its purview; (2) authorize the Board to exempt institutions whose asset-size is over $50 million if the burden of compliance outweighs the usefulness of the requisite information; and (3) revise the public availability notification requirements for its mortgage loan transactions.

Subtitle B: Community Reinvestment Act Amendments - Amends the Community Reinvestment Act of 1977 (CRA) to prohibit a supervisory agency from imposing additional burden, recordkeeping, or reporting when examining financial institutions.

(Sec. 322) Exempts a regulated financial institution from CRA examination requirements if: (1) the institution's main office and all its branches are located in a general local governmental unit which does not fall within a metropolitan statistical area; and (2) the institution and its parent bank holding company have aggregate assets of not more than $100 million, adjusted annually for inflation.

(Sec. 323) Sets forth community input and conclusive rating requirements, including evaluation by the appropriate Federal financial supervisory agency of how the institution meets community needs.

(Sec. 324) Defines a "special purpose institution" as one that does not generally accept retail deposits from the public in amounts of less than $100,000, such as wholesale, credit card, and trust institution. Prescribes requirements for assessments of such institutions, including development of standards for them.

(Sec. 325) Revises requirements for positive factors to consider with respect to a regulated financial institution's investments and loans to any minority or women's depository institution or low-income credit union to include investment in or loans to: (1) any joint ventures, entities, or projects providing benefits to distressed communities (regardless of whether or not the recipient institutions or communities are located within the regulated financial institution's chartered service area); and (2) targeted low- and moderate-income communities, including real property loans to such communities. Includes certain other ventures with community development corporations as well.

(Sec. 328) Amends the Federal Home Loan Bank Act to exempt from certain community investment or service reporting requirements members who receive a CRA rating of outstanding or satisfactory.

(Sec. 329) Expresses the sense of the Congress that the appropriate congressional committees should exercise aggressive oversight of the adoption and implementation of any CRA regulation by a Federal supervisory agency after the date of enactment of this Act. Requires such an agency to report to the Congress on the implementation of all CRA regulations.

(Sec. 331) Amends the CRA to prohibit a Federal agency from prescribing any regulation which would: (1) require a financial institution to make any loan or enter into any agreement on the basis of any discriminatory criteria prohibited under Federal law; (2) make any loan to, or enter into any other agreement with, an uncreditworthy person that would jeopardize the institution's safety and soundness; or (3) hinder the institution's full responsibility to provide credit to all community segments.

Subtitle C: Consumer Banking Reforms - Amends the Truth in Savings Act (TISA) to replace the current purpose requiring clear, uniform disclosure of interest rates and fees, with one requiring depository institutions to pay interest on the daily full amount of principal in interest-bearing consumer deposit accounts at the agreed- upon rate of interest.

(Sec. 341) Repeals specified TISA disclosure requirements pertaining to interest rates and terms of accounts.

(Sec. 342) Amends the FDIA to allow depository institutions (including affiliates and subsidiaries) to exchange information without limitation if such information sharing is disclosed and the consumer has opportunity beforehand to direct that the information not be communicated.

(Sec. 344) Amends TILA to permit full creditor restitution payments of adjusted finance charges to a person over an extended period if the enforcing agency determines that this is necessary to avoid causing the creditor to become undercapitalized.

Subtitle D: Equal Credit Opportunity Act Amendments - Equal Credit Opportunity Act Amendments of 1995 - States that the purpose of this Act is to combine the adverse action notification requirements of the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA) with respect to consumer credit applications, and to make the information which must be furnished more understandable.

(Sec. 353) Revises ECOA notification requirements regarding adverse actions against credit applicants. Shields from liability for non-compliance persons who show by a preponderance of the evidence that they maintained reasonable procedures to ensure compliance at the time of the alleged violation.

(Sec. 354) Eliminates specified FCRA disclosure requirements for users of consumer reports with respect to credit denials and adverse actions based on reports of persons other than consumer reporting agencies.

(Sec. 355) Amends ECOA and the Fair Housing Act to add incentives for creditor self-testing and voluntary corrective action by prohibiting review, examination, or acquisition by an applicant in any legal proceeding of a creditor or other person's self-procured test or review of its lending activities, including residential real estate lending, if the self-test has identified discriminatory practices and the creditor or other person has taken or is taking appropriate corrective action to address the discrimination. Specifies circumstances in which an applicant or Government department or agency may obtain and use the results of a self-test in a proceeding or civil action.

(Sec. 356) Specifies conditions under which creditors shall be deemed to be in compliance with ECOA nondiscrimination requirements with respect to any credit decision based solely on the use of an empirically derived, demonstrably and statistically sound credit scoring system.

Subtitle E: Consumer Leasing Act Amendments - Consumer Leasing Act Amendments of 1995 - Amends the Consumer Credit Protection Act (CCPA) to direct the Board to: (1) write regulations or staff commentary to update and clarify requirements and definitions for lease disclosures, contracts, and other issues related to consumer leasing which would carry out the purposes of the Consumer Leasing Act; and (2) publish model disclosure forms and clauses to facilitate compliance with such requirements and aid the consumer in understanding the transaction.

(Sec. 364) Revises CCPA provisions relating to consumer lease advertising, repealing special requirements for radio advertisements.

(Sec. 365) Limits creditor liability for statutory penalties for failure to provide specified consumer lease disclosures.

Title IV: Streamlining Government Regulations - Subtitle A: Regulatory Approval Issues - Amends the Bank Holding Company Act (BHCA) to identify criteria for a well-capitalized and well-managed banking organization under which an acquisition of shares in a nonbanking or another banking organization by a bank holding company, or a merger or consolidation between registered bank holding companies, shall be deemed to be approved. (Current law requires prior Board approval).

(Sec. 403) Amends the FDIA and the National Bank Consolidation and Merger Act to cite conditions under which prior approval is not required for any merger, consolidation, asset acquisition, or liabilities assumption involving only insured depository institution subsidiaries of the same depository institution holding company.

(Sec. 404) Permits any insured depository institution to participate in optional conversion transactions between members of BIF and SAIF (Oakar transactions) without the prior written approval of the responsible agency.

(Sec. 405) Amends the Home Owners' Loan Act (HOLA) to remove from its regulatory purview a bank holding company subject to the BHCA.

(Sec. 407) Amends the Revised Statutes, the Federal Reserve Act (FRA), and the FDIA to delineate conditions under which prior approval is not required for well-capitalized and well-managed banks to establish and operate a branch or seasonal agency.

(Sec. 408) Amends the Revised Statutes and the FDIA to exclude from the definition of "branch" an automated teller machine or remote service unit (thus exempting those entities from approval requirements of such Acts).

(Sec. 410) Amends the FDIA to authorize the appropriate Federal banking agency to waive, on a case-by-case basis, prior notice requirements pertaining to new officer or director appointments of certain undercapitalized or troubled institutions.

(Sec. 413) Amends the Federal Credit Union Act to increase from $10,000 to $50,000 the aggregate amount of loans to Credit Union officials that may be made without approval of the board of directors.

Subtitle B: Streamlining of Government Regulations; Miscellaneous Provisions - Amends the Revised Statutes to repeal the aggregate minimum per-branch capital requirements imposed upon a national banking association and its branches.

(Sec. 422) Amends the FDIA to exclude automated teller machines and bank branches in specified merger or relocation situations from the definition of "bank branch" (thus exempting them from Federal bank closure notification requirements). Makes such exemption retroactive to the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991.

(Sec. 423) Amends the Depository Institutions Management Interlocks Act to exempt management officials of depository institutions or holding companies with small (under 20 percent) market shares from prohibitions against dual service with unaffiliated institutions or companies in the same geographic banking market.

Raises from $1 billion to $2.5 billion (adjusted annually for inflation) the asset-size ceiling beneath which a depository institution or depository holding company may retain directors and management officials performing dual service for nonaffiliated institutions whose total assets do not exceed $1.5 billion (currently $500 million).

Extends permanently the exemption of certain management officials from specified interlocks prohibitions on dual service.

(Sec. 424) Directs the Appraisal Subcommittee of the Financial Institutions Examination Council to accelerate repayment of specified funds to the Treasury.

(Sec. 425) Amends the FRA to permit loans to executive officers, directors, or principal shareholders (insider lending) made pursuant to a benefit or compensation program widely available to employees of the member bank.

Expands the Board's authority to exempt specified executive officers and directors from the proscription against preferential lending terms.

Repeals the requirement that: (1) an executive officer indebted to a bank over a certain lawful amount submit a written report of such debt to the board of directors; and (2) a member bank include in its condition of report all loans to executive officers made since its previous report.

Amends the FRA to permit a member bank to make available to its executive officers: (1) home equity lines of credit of up to $100,000; and (2) loans secured by readily marketable assets.

(Sec. 426) Amends the FDIA to allow the appropriate Federal banking agency to increase from $175 million to $250 million the asset-size ceiling on certain small depository institutions whose mandatory periodic on-site examinations make take place every 18 months instead of annually.

(Sec. 429) Requires each appropriate Federal banking agency and the National Credit Union Administration to conduct a paperwork reduction review, and eliminate any requirements for unnecessary internal written policies.

(Sec. 430) Instructs the Secretary of the Treasury to revise the daily confirmation requirement under the Securities Exchange Act of 1934 concerning hold-in custody repurchase agreements to permit the counterparty to the agreement to waive such confirmation upon receipt of certain disclosures.

(Sec. 431) Requires the Financial Institutions Examination Council and each Federal banking agency represented on it to review and identify unnecessary regulations every ten years and report thereon to the Congress.

(Sec. 432) Amends the International Lending Supervision Act to change from mandatory to discretionary the duty of each appropriate Federal banking agency to require a banking institution to maintain a special reserve whenever the quality of its assets has been impaired by protracted inability of debtors in a foreign country to make payments.

(Sec. 433) Amends FDIA financial management accountability guidelines, among other changes, to exempt well-capitalized and well- managed insured depository institutions from mandatory financial management status reports (although not from the requirement of independent financial audits).

(Sec. 434) Amends the FDIA to exclude outside directors from the primary definition of an "institution-affiliated party" but include them in such definition as independent contractors if they have knowingly or recklessly participated in certain prohibited activities.

(Sec. 235) Amends the International Banking Act of 1978 to prescribe guidelines under which the Board may approve a foreign bank application to establish a U.S. presence even though it is not subject to comprehensive supervision on a consolidated basis in its home country.

(Sec. 436) Directs the Board to avoid unnecessary duplication of foreign bank examinations. Subjects foreign banks to the same on-site examination schedule and examination fee collections as apply to domestic banks.

(Sec. 437) Amends the TILA to redefine "mortgage" as a consumer credit transaction (including a residential mortgage transaction) secured by a subordinate mortgage on the consumer's principal dwelling. Dismisses all TILA administrative enforcement proceedings regarding high-cost, non-subordinate residential mortgage transactions pending upon the date of enactment of this Act.

(Sec. 440) Retitles the Bank Service Corporation Act the "Bank Service Company Act" and amends it to authorize banks under the Act to own limited liability partnerships.

(Sec. 441) Amends the FRA to increase from ten percent to 25 percent the amount of capital and surplus that a national bank may invest in the stock of Edge Act subsidiaries and certain financial service corporations held by a member bank's non-U.S. branches.

(Sec. 442) Requires each appropriate Federal banking agency to report to certain congressional committees on its actions to reconcile Regulatory Accounting Principles and Generally Accepted Accounting Principles.

(Sec. 443) Permits the Comptroller of the Currency to waive the residency requirement for national bank directors.

Title V: Lender Liability - Expresses the sense of the Congress that: (1) a person holding indicia of ownership primarily to protect a security interest in a vessel or facility should not, unless exercising control to a specified extent, be considered to have "participated in management" as that term is used in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA); (2) the term "security interest" as used in CERCLA should include rights accruing to a person to secure repayment of specified obligations; and (3) the Congress should address the potential liability of lenders and fiduciaries with respect to the Superfund (CERCLA) and the Resource Conservation and Recovery Act.

Title VI: Annual Study and Report on Impact on Lending to Small Business - Directs the following agencies to submit a joint annual report to the Congress on the extent to which the regulatory reductions under this Act have resulted in increased lending to small businesses: (1) the Federal Reserve Board; (2) the Director of the Office of Thrift Supervision; (3) the Comptroller of the Currency; and (4) the FDIC Board of Directors.