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§ 1972. —  Certain tying arrangements prohibited; correspondent accounts.



[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 12USC1972]

 
                       TITLE 12--BANKS AND BANKING
 
                     CHAPTER 22--TYING ARRANGEMENTS
 
Sec. 1972. Certain tying arrangements prohibited; correspondent 
        accounts
        
    (1) A bank shall not in any manner extend credit, lease or sell 
property of any kind, or furnish any service, or fix or vary the 
consideration for any of the foregoing, on the condition or 
requirement--
        (A) that the customer shall obtain some additional credit, 
    property, or service from such bank other than a loan, discount, 
    deposit, or trust service;
        (B) that the customer shall obtain some additional credit, 
    property, or service from a bank holding company of such bank, or 
    from any other subsidiary of such bank holding company;
        (C) that the customer provide some additional credit, property, 
    or service to such bank, other than those related to and usually 
    provided in connection with a loan, discount, deposit, or trust 
    service;
        (D) that the customer provide some additional credit, property, 
    or service to a bank holding company of such bank, or to any other 
    subsidiary of such bank holding company; or
        (E) that the customer shall not obtain some other credit, 
    property, or service from a competitor of such bank, a bank holding 
    company of such bank, or any subsidiary of such bank holding 
    company, other than a condition or requirement that such bank shall 
    reasonably impose in a credit transaction to assure the soundness of 
    the credit.

The Board may by regulation or order permit such exceptions to the 
foregoing prohibition and the prohibitions of section 1843(f)(9) and 
1843(h)(2) of this title as it considers will not be contrary to the 
purposes of this chapter.
    (2)(A) No bank which maintains a correspondent account in the name 
of another bank shall make an extension of credit to an executive 
officer or director of, or to any person who directly or indirectly or 
acting through or in concert with one or more persons owns, controls, or 
has the power to vote more than 10 per centum of any class of voting 
securities of, such other bank or to any related interest of such person 
unless such extension of credit is made on substantially the same terms, 
including interest rates and collateral as those prevailing at the time 
for comparable transactions with other persons and does not involve more 
than the normal risk of repayment or present other unfavorable features.
    (B) No bank shall open a correspondent account at another bank while 
such bank has outstanding an extension of credit to an executive officer 
or director of, or other person who directly or indirectly or acting 
through or in concert with one or more persons owns, controls, or has 
the power to vote more than 10 per centum of any class of voting 
securities of, the bank desiring to open the account or to any related 
interest of such person, unless such extension of credit was made on 
substantially the same terms, including interest rates and collateral as 
those prevailing at the time for comparable transactions with other 
persons and does not involve more than the normal risk of repayment or 
present other unfavorable features.
    (C) No bank which maintains a correspondent account at another bank 
shall make an extension of credit to an executive officer or director 
of, or to any person who directly or indirectly acting through or in 
concert with one or more persons owns, controls, or has the power to 
vote more than 10 per centum of any class of voting securities of, such 
other bank or to any related interest of such person, unless such 
extension of credit is made on substantially the same terms, including 
interest rates and collateral as those prevailing at the time for 
comparable transactions with other persons and does not involve more 
than the normal risk of repayment or present other unfavorable features.
    (D) No bank which has outstanding an extension of credit to an 
executive officer or director of, or to any person who directly or 
indirectly or acting through or in concert with one or more persons 
owns, controls, or has the power to vote more than 10 per centum of any 
class of voting securities of, another bank or to any related interest 
of such person shall open a correspondent account at such other bank, 
unless such extension of credit was made on substantially the same 
terms, including interest rates and collateral as those prevailing at 
the time for comparable transactions with other persons and does not 
involve more than the normal risk of repayment or present other 
unfavorable features.
    (E) For purposes of this paragraph, the term ``extension of credit'' 
shall have the meaning prescribed by the Board pursuant to section 375b 
of this title, and the term ``executive officer'' shall have the same 
meaning given it under section 375a of this title.
    (F) Civil money penalty.--
        (i) First tier.--Any bank which, and any institution-affiliated 
    party (within the meaning of section 1813(u) of this title) with 
    respect to such bank who, violates any provision of this paragraph 
    shall forfeit and pay a civil penalty of not more than $5,000 for 
    each day during which such violation continues.
        (ii) Second tier.--Notwithstanding clause (i), any bank which, 
    and any institution-affiliated party (within the meaning of section 
    1813(u) of this title) with respect to such bank who--
            (I)(aa) commits any violation described in clause (i);
            (bb) recklessly engages in an unsafe or unsound practice in 
        conducting the affairs of such bank; or
            (cc) breaches any fiduciary duty;
            (II) which violation, practice, or breach--
                (aa) is part of a pattern of misconduct;
                (bb) causes or is likely to cause more than a minimal 
            loss to such bank; or
                (cc) results in pecuniary gain or other benefit to such 
            party,

    shall forfeit and pay a civil penalty of not more than $25,000 for 
    each day during which such violation, practice, or breach continues.
        (iii) Third tier.--Notwithstanding clauses (i) and (ii), any 
    bank which, and any institution-affiliated party (within the meaning 
    of section 1813(u) of this title) with respect to such bank who--
            (I) knowingly--
                (aa) commits any violation described in clause (i);
                (bb) engages in any unsafe or unsound practice in 
            conducting the affairs of such bank; or
                (cc) breaches any fiduciary duty; and

            (II) knowingly or recklessly causes a substantial loss to 
        such bank or a substantial pecuniary gain or other benefit to 
        such party by reason of such violation, practice, or breach,

    shall forfeit and pay a civil penalty in an amount not to exceed the 
    applicable maximum amount determined under clause (iv) for each day 
    during which such violation, practice, or breach continues.
        (iv) Maximum amounts of penalties for any violation described in 
    clause (iii).--The maximum daily amount of any civil penalty which 
    may be assessed pursuant to clause (iii) for any violation, 
    practice, or breach described in such clause is--
            (I) in the case of any person other than a bank, an amount 
        to not exceed $1,000,000; and
            (II) in the case of a bank, an amount not to exceed the 
        lesser of--
                (aa) $1,000,000; or
                (bb) 1 percent of the total assets of such bank.

        (v) Assessment; etc.--Any penalty imposed under clause (i), 
    (ii), or (iii) may be assessed and collected--
            (I) in the case of a national bank, by the Comptroller of 
        the Currency;
            (II) in the case of a State member bank, by the Board; and
            (III) in the case of an insured nonmember State bank, by the 
        Federal Deposit Insurance Corporation,

    in the manner provided in subparagraphs (E), (F), (G), and (I) of 
    section 1818(i)(2) of this title for penalties imposed (under such 
    section) and any such assessment shall be subject to the provisions 
    of such section.
        (vi) Hearing.--The bank or other person against whom any penalty 
    is assessed under this subparagraph shall be afforded an agency 
    hearing if such bank or person submits a request for such hearing 
    within 20 days after the issuance of the notice of assessment. 
    Section 1818(h) of this title shall apply to any proceeding under 
    this subparagraph.
        (vii) Disbursement.--All penalties collected under authority of 
    this subsection shall be deposited into the Treasury.
        (viii) ``Violate'' defined.--For purposes of this paragraph, the 
    term ``violate'' includes any action (alone or with another or 
    others) for or toward causing, bringing about, participating in, 
    counseling, or aiding or abetting a violation.
        (ix) Regulations.--The Comptroller of the Currency, the Board, 
    and the Federal Deposit Insurance Corporation shall prescribe 
    regulations establishing such procedures as may be necessary to 
    carry out this subparagraph.

    (G)(i) Each executive officer and each stockholder of record who 
directly or indirectly owns, controls, or has the power to vote more 
than 10 per centum of any class of voting securities of an insured bank 
shall make a written report to the board of directors of such bank for 
any year during which such executive officer or shareholder has 
outstanding an extension of credit from a bank which maintains a 
corresponding account in the name of such bank. Such report shall 
include the following information:
        (1) the maximum amount of indebtedness to the bank maintaining 
    the correspondent account during such year of (a) such executive 
    officer or stockholder of record, (b) each company controlled by 
    such executive officer or stockholder, or (c) each political or 
    campaign committee the funds or services of which will benefit such 
    executive officer or stockholder, or which is controlled by such 
    executive officer or stockholder;
        (2) the amount of indebtedness to the bank maintaining the 
    correspondent account outstanding as of a date not more than ten 
    days prior to the date of filing of such report of (a) such 
    executive officer or stockholder of record, (b) each company 
    controlled by such executive officer or stockholder, or (c) each 
    political or campaign committee the funds or services of which will 
    benefit such executive officer or stockholder;
        (3) the range of interest rates charged on such indebtedness of 
    such executive officer or stockholder of record; and
        (4) the terms and conditions of such indebtedness of such 
    executive officer or stockholder of record.

    (ii) The appropriate Federal banking agencies are authorized to 
issue rules and regulations, including definitions of terms, to require 
the reporting and public disclosure of information by any bank or 
executive officer or principal shareholder thereof concerning any 
extension of credit by a correspondent bank to the reporting bank's 
executive officers or principal shareholders, or the related interests 
of such persons.
    (H) For the purpose of this paragraph--
        (i) the term ``bank'' includes a mutual savings bank, a savings 
    bank, and a savings association (as those terms are defined in 
    section 1813 of this title);
        (ii) the term ``related interests of such persons'' includes any 
    company controlled by such executive officer, director, or person, 
    or any political or campaign committee the funds or services of 
    which will benefit such executive officer, director, or person or 
    which is controlled by such executive officer, director, or person; 
    and
        (iii) the terms ``control of a company'' and ``company'' have 
    the same meaning as under section 375b of this title.

    (I) Notice Under This Section After Separation From Service.--The 
resignation, termination of employment or participation, or separation 
of an institution-affiliated party (within the meaning of section 
1813(u) of this title) with respect to such a bank (including a 
separation caused by the closing of such a bank) shall not affect the 
jurisdiction and authority of the appropriate Federal banking agency to 
issue any notice and proceed under this section against any such party, 
if such notice is served before the end of the 6-year period beginning 
on the date such party ceased to be such a party with respect to such 
bank (whether such date occurs before, on, or after August 9, 1989).

(Pub. L. 91-607, title I, Sec. 106(b), Dec. 31, 1970, 84 Stat. 1766; 
Pub. L. 95-630, title VIII, Sec. 801, Nov. 10, 1978, 92 Stat. 3690; Pub. 
L. 97-320, title IV, Secs. 410(f), 424(c), (d)(11), (e), 428, Oct. 15, 
1982, 96 Stat. 1520, 1523, 1526; Pub. L. 101-73, title IX, Secs. 905(h), 
907(i), Aug. 9, 1989, 103 Stat. 461, 473; Pub. L. 102-242, title III, 
Sec. 306(j), Dec. 19, 1991, 105 Stat. 2359; Pub. L. 104-208, div. A, 
title II, Sec. 2216(a), Sept. 30, 1996, 110 Stat. 3009-413.)


                               Amendments

    1996--Par. (1). Pub. L. 104-208, in concluding provisions, inserted 
``and the prohibitions of section 1843(f)(9) and 1843(h)(2) of this 
title'' after ``prohibition''.
    1991--Par. (2)(H)(i). Pub. L. 102-242 inserted before semicolon at 
end ``, a savings bank, and a savings association (as those terms are 
defined in section 1813 of this title)''.
    1989--Par. (2)(F). Pub. L. 101-73, Sec. 907(i), amended subpar. (F) 
generally, revising and restating as cls. (i) to (ix) provisions of 
former cls. (i) to (vii).
    Par. (2)(I). Pub. L. 101-73, Sec. 905(h), added subpar. (I).
    1982--Par. (2)(A) to (D). Pub. L. 97-320, Sec. 428(a)(1)-(4), 
inserted ``or to any related interest of such person'' after ``such 
other bank'' in subpar. (A), ``desiring to open the account'' in subpar. 
(B), ``such other bank'' in subpar. (C), and ``another bank'' in subpar. 
(D).
    Par. (2)(E). Pub. L. 97-320, Sec. 410(f), substituted ``the meaning 
prescribed by the Board pursuant to section 375b of this title'' for 
``the same meaning given it in section 371c of this title''.
    Par. (2)(F)(i). Pub. L. 97-320, Sec. 424(c), (d)(11), inserted 
proviso giving agency discretionary authority to compromise, etc., any 
civil money penalty imposed under such authority, and substituted ``may 
be assessed'' for ``shall be assessed''.
    Par. (2)(F)(iv). Pub. L. 97-320, Sec. 424(e), substituted ``twenty 
days from the service'' for ``ten days from the date''.
    Par. (2)(G)(ii). Pub. L. 97-320, Sec. 428(b)(1), substituted ``(ii) 
The appropriate Federal banking agencies are authorized to issue rules 
and regulations, including definitions of terms, to require the 
reporting and public disclosure of information by any bank or executive 
officer or principal shareholder thereof concerning any extension of 
credit by a correspondent bank to the reporting bank's executive 
officers or principal shareholders, or the related interests of such 
persons.'' for ``(ii) Each insured bank shall compile the reports filed 
pursuant to subparagraph (G)(i) and forward such compilation to the 
Comptroller of the Currency in the case of a national bank, the Board in 
the case of a State member bank, and the Federal Deposit Insurance 
Corporation in the case of an insured nonmember State bank.''
    Par. (2)(G)(iii). Pub. L. 97-320, Sec. 428(b)(2), struck out cl. 
(iii) which required insured banks to include in their section 
1817(k)(1) report a list of names of executive officers or stockholders 
of record owning, controlling, or having more than a 10 per centum 
voting control of any class of voting securities of the bank who file 
information required by subpar. (G)(i) and aggregate amount of 
extensions of credit by correspondent banks to such executive officers 
or stockholders of record, any company controlled by such persons, and 
any political or campaign committee the funds or services of which will 
benefit such persons, or which is controlled by such persons.
    Par. (2)(H). Pub. L. 97-320, Sec. 428(c), added subpar. (H).
    1978--Pub. L. 95-630 designated existing provisions as par. (1), 
redesignated former pars. (1) to (5) as subpars. (A) to (E), and added 
par. (2).


                    Effective Date of 1991 Amendment

    Amendment by Pub. L. 102-242 effective upon earlier of date on which 
final regulations under section 306(m)(1) of Pub. L. 102-242 become 
effective or 150 days after Dec. 19, 1991, see section 306(l) of Pub. L. 
102-242, set out as a note under section 375b of this title.


                    Effective Date of 1989 Amendment

    Amendment by section 907(i) of Pub. L. 101-73 applicable to conduct 
engaged in after Aug. 9, 1989, except that increased maximum penalties 
of $5,000 and $25,000 may apply to conduct engaged in before such date 
if such conduct is not already subject to a notice issued by the 
appropriate agency and occurred after completion of the last report of 
the examination of the institution by the appropriate agency occurring 
before Aug. 9, 1989, see section 907(l) of Pub. L. 101-73, set out as a 
note under section 93 of this title.


                    Effective Date of 1982 Amendment

    Amendment by section 428(b) of Pub. L. 97-320 effective when 
regulations referred to in the amendment become effective as provided in 
section 430 of Pub. L. 97-320, set out as a note under section 1817 of 
this title.


                    Effective Date of 1978 Amendment

    Amendment by Pub. L. 95-630 effective on expiration of 120 days 
after Nov. 10, 1978, see section 2101 of Pub. L. 95-630, set out as an 
Effective Date note under section 375b of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 1464, 1831x, 1973, 1974, 
1975, 1976 of this title.



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