Financial Modernization bill

TABLE OF CONTENTS:

Title I: Creation and Control of Depository Institution

Holding Companies

Title II: Supervisory Improvements

Title III: Effective Date

Depository Institution Affiliation Act - Title I: Creation and Control of Depository Institution Holding Companies - Sets forth the terms and conditions under which a depository institution holding company (DIHC) can be established and must be operated.

(Sec. 101) Requires any DIHC seeking to acquire control of an insured bank, an insured institution, a bank holding company, a savings and loan holding company, or another DIHC to comply with certain requirements of the Federal Deposit Insurance Act. Establishes penalties and additional procedures for failing to comply with such requirements.

Permits the appropriate Federal regulatory agency (the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Board of Directors of the Federal Deposit Insurance Corporation, or the Federal Home Loan Bank Board) to adopt rules and regulations to prevent an insured depository institution controlled by a DIHC from engaging in unsafe or unsound practices.

Subjects DIHCs to the same restrictions on affiliate transactions that are imposed upon members of a Federal Reserve bank (member banks) under the Federal Reserve Act. Establishes additional restrictions on inter-affiliate transactions, including prohibiting an insured bank or institution that is an affiliate of a DIHC from: (1) extending credit to a securities affiliate or subsidiary; (2) purchasing for its own account the assets of a securities affiliate or subsidiary; or (3) extending credit to an issuer of securities underwritten by a securities affiliate for the purpose of paying the principal of those securities or interest for dividends on those securities. Requires that each DIHC-controlled insured depository institution be well capitalized.

Requires any DIHC in control of an undercapitalized insured depository institution to: (1) enter into an agreement with the appropriate Federal regulatory agency to return the institution to being well capitalized; or (2) divest control of such bank or institution. Prohibits Federal regulatory agencies from imposing requirements pertaining to the capital of a DIHC.

Subjects interstate acquisitions: (1) of an insured bank by an DIHC to the same restrictions that apply to bank holding companies under the Bank Holding Company Act of 1956; and (2) of savings associations by a DIHC to the same restrictions that apply to savings and loan companies.

Prohibits Federal and State governments from enacting laws that discriminate against DIHCs or their affiliates. Preempts any Federal or State provision inconsistent with the purposes of this Act.

Prohibits insured banks and institutions associated with an DIHC from: (1) dealing in or underwriting securities; (2) underwriting insurance; or (3) investing in or developing real estate. Provides certain limitations on DIHC entry into the business of insurance agency or real estate brokerage.

Subjects DIHCs to the tying provisions of the Bank Holding Company Act Amendments of 1970 and to the insider lending prohibitions of the Federal Reserve Act.

Reaffirms that the purpose of this Act is to prevent use of the resources of Federal deposit insurance funds to protect the shareholders or business interests of a DIHC, except through the authorized fulfillment of their obligations to protect the insured deposits of a DIHC-controlled insured depository institution.

Sets forth criminal and civil penalties for violations of this Act.

(Sec. 102) Makes conforming amendments to the Bank Holding Company Act of 1956.

(Sec. 103) Amends the Federal Reserve Act to provide that, for the purpose of restricting loans or extending credit to affiliates, a loan or extension of credit shall not be deemed to be made to an affiliate if: (1) the approval of such loan or extension of credit was in accordance with the same standards and procedures and on substantially the same terms that apply to similar loans or extensions of credit; and (2) such loan or extension of credit was not made for the purpose of evading any requirement of such Act.

(Sec. 104) Amends the Banking Act of 1933 to make certain provisions inapplicable to member banks which are controlled by DIHCs.

(Sec. 105) Makes conforming amendments to the Federal Deposit Insurance Act.

(Sec. 106) Amends the Securities Exchange Act of 1934 to provide for the registration and regulation of broker dealers.

(Sec. 107) Makes conforming amendments to the Home Owners' Loan Act and the Community Reinvestment Act of 1977.

Title II: Supervisory Improvements - Establishes a National Financial Services Oversight Committee to: (1) establish uniform principles and standards for the examination and supervision of financial institutions and other providers of financial services; and (2) recommend additional measures to the Congress to strengthen the separation of insured banks and institutions controlled by DIHCs from the activities of their affiliates.

Title III: Effective Date - Makes this Act effective upon enactment.