Financial Institutions Act

(Measure passed Senate, amended, roll call #577 (79-14))

Financial Institutions Act - =Title I: Payment of Interest on Deposits or Accounts= - Defines "depository institution" and "negotiable order of withdrawal account" (NOW account) for purposes of the Banking Act and the Federal Reserve Act.

Provides, under the Federal Reserve Act, that the prohibition against the payment of interest on demand deposits not be construed to include negotiable order of withdrawal (NOW) accounts.

Adds the Secretary of the Treasury, the Secretary of Housing and Urban Development, and the Administrator of the National Credit Union Administration to the Coordinating Committee of regulatory agencies with which the Board of Governors of the Federal Reserve System shall consult before prescribing limitations on the rates of interest which may be paid by members on demand, time and savings deposits.

Provides that the authority of the Board of Governors of the Federal Reserve System to prescribe limitations on rates of interest paid on deposits of member banks, including authority to prescribe a differential on rates of interest or dividends among different depository institutions, shall expire five years and six months after the effective date of this Act.

Defines "depository institution" and NOW account under the Federal Deposit Insurance Act. Provides that the Board of Directors of the Federal Deposit Insurance Corporation shall, by regulation, prohibit the payment of interest or dividends on demand deposits in insured non-member banks, except that "demand deposits" shall not include NOW accounts.

Provides that the authority of the Board of Directors to prescribe limitations on the rates of interest or dividends, including the authority to prescribe limitations on rates of interest or dividends for nonmember banks different from limitations on rates of interest or dividends for other depository institutions, shall expire five years and six months after the effective date of this Act.

Defines "depository institution" and NOW accounts for purposes of the Federal Home Loan Bank Act. Provides that the Federal Home Loan Bank Board shall, by regulation, prohibit the payment of interest or dividends on demand deposits by members, by institutions which are insured institutions as defined in the National Housing Act, and by nonmember building and loan, savings and loan, and homestead associations, and cooperative banks, except that "demand deposits" shall not include NOW accounts.

Provides that the authority of the Board to prescribe limitations on the rates of interest or dividends, including the authority to prescribe limitations on rates of interest or dividends for member and nonmember institutions different from the limitations on rates of interest or dividends for other depository institutions, shall expire five years and six months after the effective date of this Act.

Requires the Secretary of the Treasury, after consultation with appropriate regulatory agencies, to transmit to Congress within five years after enactment of this Act a report of findings and recommendations regarding regulatory authority to prescribe limitations on rates of interest or dividends paid by depository institutions.

Authorizes the Administrator of the National Credit Union Administration to prescribe limitations on rates of interest or dividends paid on member accounts by federally insured credit unions.

Requires the Administrator to issue rules which prohibit the payment of interest or dividends on demand deposits. States that such rules are not to apply to negotiable order of withdrawal (NOW) accounts.

Terminates the authority of the Administrator to prescribe limitations on rates of interest or dividends paid by insured credit unions on member accounts five years and six months after the effective date of this Act.

Defines "depository institution" and NOW accounts for purposes of the Federal Credit Union Act.

Provides that the financial regulatory agencies shall exercise their authority to regulate ceilings on rates of interest or dividends in a manner which prevents disintermediation and maintains appropriate levels of mortgage credit.

=Title II: Reserves and Expanded Deposit Liability Powers= - Authorizes the Federal Reserve Board to establish reserve requirements on demand deposit accounts and NOW accounts for members of the Federal Home Loan Bank System, Federal credit unions and State chartered credit unions which are members of the National Credit Union Administration Discount Fund after consultation with the Federal Home Loan Bank Board and the Administrator of the National Credit Union Administration.

Revises the Home Owner's Loan Act to permit Federal thrift institutions to offer checking accounts, NOW accounts, and other accounts subject to withdrawal or transferable order or authorization, and to extend credit and offer credit card services.

Provides that, whenever a Federal reserve bank exercises any of the functions of a clearinghouse for its member banks, it shall offer the same services on a nondiscriminatory basis to all depository institutions.

Requires members of the Federal Home Loan Bank System to maintain reserves against demand deposit accounts and NOW accounts in cash or in balances in a Federal Reserve Bank as established by the Federal Reserve Board after consultation with the Federal Home Loan Bank Board.

Authorizes the Secretary of the Treasury to designate a Federal savings and loan association as a depository of public money and as a fiscal agent of the United States Government.

Permits checks, drafts, and NOW account items of depository institutions, in addition to Federal reserve member banks presently authorized under the provisions, to be received on deposit at par at Federal reserve banks.

=Title III: Lending and Investment Powers= - Sets forth categories of permissible loans and investments for Federal associations, including: (1) loans (to which no percentage of assets limitation applies) for residential real estate loans, investments in specified guaranteed Federal, State, and local obligations, loan collateralized within this category, and loans secured by accounts in the association; and (2) loans (to which a 30 percent of assets limitation applies) for educational loans, consumer loans, development or construction loans on residential property, commercial construction loans, investments in certain other Federal and State obligations, community development loans, loans collateralized within this category, investments in service corporations, investments in commercial paper and other corporate debt securities, bank deposits, and bankers' acceptances.

States that Federal associations may: (1) serve as a fiduciary for a living trust or other estate or trust for the benefit of individuals or for any individual or self-employment retirement account or plan; or (2) act as custodian or trustee with respect to securities issued or guaranteed by any financial institution or affiliate.

Allows Federal Home Loan Bank members to satisfy their liquidity requirements, to the extent permitted by the Federal Home Loan Bank Board, by maintaining time or savings deposits in institutions insured by the Federal Savings and Loan Insurance Corporation.

Permits national banks to make real estate loans on the same basis as other loans.

=Title IV: Charters for Thrift Institutions= - Makes it a purpose of Federal associations, under the Homeowners' Loan Act, to make family and consumer loans.

Redesignates the Federal Savings and Loan Insurance Corporation as the Federal Savings Insurance Corporation.

Authorizes Federal thrift institutions to issue capital stock.

=Title V: Credit Unions= - Defines a Federal credit union as a cooperative thrift institution incorporated to encourage thrift, provide credit at fair and reasonable rates of interest, and to serve the financial needs of members and members' families.

Defines terms for "member accounts" and "accounts," under the Federal Credit Union Act, and includes in the definition the terms "demand deposit" and "negotiable order of withdrawal account.

Provides, under such Act, that loans to members may not have a maturity exceeding 12 years, except that, subject to rules of the Administrator, a Federal credit union may make first lien residential real estate loans to its members for their residences with maturities not exceeding 30 years; and that a Federal credit union may make, with maturities not exceeding 15 years, first lien mobile home loans for the purchase of mobile homes to be used as residences by its members, and loans to make home improvements on members' residences.

Limits the interest rate on such loans to one percent per month unless the Administrator permits a higher rate.

Permits Federal credit unions to issue shares, share certificates with varying dividend rates and varying maturities and NOW accounts.

Permits credit unions, in accordance with rules and regulations of the Administrator, to purchase, sell, pledge or discount or otherwise receive or dispose of eligible obligations, as defined by the Administrator.

Provides that the incidental powers of a Federal credit union include meeting the financial needs of its members and the members' families.

Permits credit unions, in accordance with rules and regulations of the Administrator, to sell their assets to other credit unions, to purchase assets of other credit unions, or to assume the liabilities of the selling credit union and those of its members.

States that the management of a Federal credit union shall be by a board of directors, a supervisory committee, and a credit committee.

Prescribes the membership and powers of the board. Directs the board to appoint executive officers. Provides for the establishment of credit committees. Requires such committees to approve loans.

Lowers credit union reserve requirements against loans and risk assets.

Establishes the National Credit Union Administration Discount Fund to meet temporary liquidity needs of Federal and State credit unions, and for that purpose to provide for the orderly transfer of funds among and between credit unions and other financial institutions.

Authorizes the Secretary of the Treasury to lend up to $500,000 to the Fund for initial organizational and operating expenses. Sets forth the Administrator's powers to administer such fund, including the power to deny or grant, upon such terms and conditions as he shall by regulation prescribe, advances from the Fund to members.

=Title VI: Government Insured and Guaranteed Mortgage Loans= - Repeals statutory interest rate ceilings for loans and mortgages insured under the National Housing Act. States that such rates shall be determined by agreement between lender and borrower, unless the Secretary of Housing and Urban Development determines such rates are excessive in view of current rates in the market area.

Requires the Secretary to prescribe regulations to assure that no charges are made in the nature of discounts or points in connection with such mortgages.

=Title VII: Effective Date= - States that the provisions of this Act will become effective upon the enactment of the Uniform Tax Treatment of Financial Institutions Act.