§ 1831a. — Activities of insured State banks.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1831a]
TITLE 12--BANKS AND BANKING
CHAPTER 16--FEDERAL DEPOSIT INSURANCE CORPORATION
Sec. 1831a. Activities of insured State banks
(a) Permissible activities
(1) In general
After the end of the 1-year period beginning on December 19,
1991, an insured State bank may not engage as principal in any type
of activity that is not permissible for a national bank unless--
(A) the Corporation has determined that the activity would
pose no significant risk to the appropriate deposit insurance
fund; and
(B) the State bank is, and continues to be, in compliance
with applicable capital standards prescribed by the appropriate
Federal banking agency.
(2) Processing period
(A) In general
The Corporation shall make a determination under paragraph
(1)(A) not later than 60 days after receipt of a completed
application that may be required under this subsection.
(B) Extension of time period
The Corporation may extend the 60-day period referred to in
subparagraph (A) for not more than 30 additional days, and shall
notify the applicant of any such extension.
(b) Insurance underwriting
(1) In general
Notwithstanding subsection (a) of this section, an insured State
bank may not engage in insurance underwriting except to the extent
that activity is permissible for national banks.
(2) Exception for certain federally reinsured crop insurance
Notwithstanding any other provision of law, an insured State
bank or any of its subsidiaries that provided insurance on or before
September 30, 1991, which was reinsured in whole or in part by the
Federal Crop Insurance Corporation may continue to provide such
insurance.
(c) Equity investments by insured State banks
(1) In general
An insured State bank may not, directly or indirectly, acquire
or retain any equity investment of a type that is not permissible
for a national bank.
(2) Exception for certain subsidiaries
Paragraph (1) shall not prohibit an insured State bank from
acquiring or retaining an equity investment in a subsidiary of which
the insured State bank is a majority owner.
(3) Exception for qualified housing projects
(A) Exception
Notwithstanding any other provision of this subsection, an
insured State bank may invest as a limited partner in a
partnership, the sole purpose of which is direct or indirect
investment in the acquisition, rehabilitation, or new
construction of a qualified housing project.
(B) Limitation
The aggregate of the investments of any insured State bank
pursuant to this paragraph shall not exceed 2 percent of the
total assets of the bank.
(C) Qualified housing project defined
As used in this paragraph--
(i) Qualified housing project
The term ``qualified housing project'' means residential
real estate that is intended to primarily benefit lower
income people throughout the period of the investment.
(ii) Lower income
The term ``lower income'' means income that is less than
or equal to the median income based on statistics from State
or Federal sources.
(4) Transition rule
(A) In general
The Corporation shall require any insured State bank to
divest any equity investment the retention of which is not
permissible under this subsection as quickly as can be prudently
done, and in any event before the end of the 5-year period
beginning on December 19, 1991.
(B) Treatment of noncompliance during divestment
With respect to any equity investment held by any insured
State bank on December 19, 1991, which was lawfully acquired
before December 19, 1991, the bank shall be deemed not to be in
violation of the prohibition in this subsection on retaining
such investment so long as the bank complies with the applicable
requirements established by the Corporation for divesting such
investments.
(d) Subsidiaries of insured State banks
(1) In general
After the end of the 1-year period beginning on December 19,
1991, a subsidiary of an insured State bank may not engage as
principal in any type of activity that is not permissible for a
subsidiary of a national bank unless--
(A) the Corporation has determined that the activity poses
no significant risk to the appropriate deposit insurance fund;
and
(B) the bank is, and continues to be, in compliance with
applicable capital standards prescribed by the appropriate
Federal banking agency.
(2) Insurance underwriting prohibited
(A) Prohibition
Notwithstanding paragraph (1), no subsidiary of an insured
State bank may engage in insurance underwriting except to the
extent such activities are permissible for national banks.
(B) Continuation of existing activities
Notwithstanding subparagraph (A), a well-capitalized insured
State bank or any of its subsidiaries that was lawfully
providing insurance as principal in a State on November 21,
1991, may continue to provide, as principal, insurance of the
same type to residents of the State (including companies or
partnerships incorporated in, organized under the laws of,
licensed to do business in, or having an office in the State,
but only on behalf of their employees resident in or property
located in the State), individuals employed in the State, and
any other person to whom the bank or subsidiary has provided
insurance as principal, without interruption, since such person
resided in or was employed in such State.
(C) Exception
Subparagraph (A) does not apply to a subsidiary of an
insured State bank if--
(i) the insured State bank was required, before June 1,
1991, to provide title insurance as a condition of the
bank's initial chartering under State law; and
(ii) control of the insured State bank has not changed
since that date.
(3) Processing period
(A) In general
The Corporation shall make a determination under paragraph
(1)(A) not later than 60 days after receipt of a completed
application that may be required under this subsection.
(B) Extension of time period
The Corporation may extend the 60-day period referred to in
subparagraph (A) for not more than 30 additional days, and shall
notify the applicant of any such extension.
(e) Savings bank life insurance
(1) In general
No provision of this chapter shall be construed as prohibiting
or impairing the sale or underwriting of savings bank life
insurance, or the ownership of stock in a savings bank life
insurance company, by any insured bank which--
(A) is located in the Commonwealth of Massachusetts or the
State of New York or Connecticut; and
(B) meets applicable consumer disclosure requirements with
respect to such insurance.
(2) FDIC finding and action regarding risk
(A) Finding
Before the end of the 1-year period beginning on December
19, 1991, the Corporation shall make a finding whether savings
bank life insurance activities of insured banks pose or may pose
any significant risk to the insurance fund of which such banks
are members.
(B) Actions
(i) In general
The Corporation shall, pursuant to any finding made
under subparagraph (A), take appropriate actions to address
any risk that exists or may subsequently develop with
respect to insured banks described in paragraph (1)(A).
(ii) Authorized actions
Actions the Corporation may take under this subparagraph
include requiring the modification, suspension, or
termination of insurance activities conducted by any insured
bank if the Corporation finds that the activities pose a
significant risk to any insured bank described in paragraph
(1)(A) or to the insurance fund of which such bank is a
member.
(f) Common and preferred stock investment
(1) In general
An insured State bank shall not acquire or retain, directly or
indirectly, any equity investment of a type or in an amount that is
not permissible for a national bank or is not otherwise permitted
under this section.
(2) Exception for banks in certain States
Notwithstanding paragraph (1), an insured State bank may, to the
extent permitted by the Corporation, acquire and retain ownership of
securities described in paragraph (1) to the extent the aggregate
amount of such investment does not exceed an amount equal to 100
percent of the bank's capital if such bank--
(A) is located in a State that permitted, as of September
30, 1991, investment in common or preferred stock listed on a
national securities exchange or shares of an investment company
registered under the Investment Company Act of 1940 [15 U.S.C.
80a-1 et seq.]; and
(B) made or maintained an investment in such securities
during the period beginning on September 30, 1990, and ending on
November 26, 1991.
(3) Exception for certain types of institutions
Notwithstanding paragraph (1), an insured State bank may--
(A) acquire not more than 10 percent of a corporation that
only--
(i) provides directors', trustees', and officers'
liability insurance coverage or bankers' blanket bond group
insurance coverage for insured depository institutions; or
(ii) reinsures such policies; and
(B) acquire or retain shares of a depository institution
if--
(i) the institution engages only in activities
permissible for national banks;
(ii) the institution is subject to examination and
regulation by a State bank supervisor;
(iii) 20 or more depository institutions own shares of
the institution and none of those institutions owns more
than 15 percent of the institution's shares; and
(iv) the institution's shares (other than directors'
qualifying shares or shares held under or initially acquired
through a plan established for the benefit of the
institution's officers and employees) are owned only by the
institution.
(4) Transition period for common and preferred stock
investments
(A) In general
During each year in the 3-year period beginning on December
19, 1991, each insured State bank shall reduce by not less than
1/3 of its shares (as of December 19, 1991) the bank's ownership
of securities in excess of the amount equal to 100 percent of
the capital of such bank.
(B) Compliance at end of period
By the end of the 3-year period referred to in subparagraph
(A), each insured State bank and each subsidiary of a State bank
shall be in compliance with the maximum amount limitations on
investments referred to in paragraph (1).
(5) Loss of exception upon acquisition
Any exception applicable under paragraph (2) with respect to any
insured State bank shall cease to apply with respect to such bank
upon any change in control of such bank or any conversion of the
charter of such bank.
(6) Notice and approval
An insured State bank may only engage in any investment pursuant
to paragraph (2) if--
(A) the bank has filed a 1-time notice of the bank's
intention to acquire and retain investments described in
paragraph (1); and
(B) the Corporation has determined, within 60 days of
receiving such notice, that acquiring or retaining such
investments does not pose a significant risk to the insurance
fund of which such bank is a member.
(7) Divestiture
(A) In general
The Corporation may require divestiture by an insured State
bank of any investment permitted under this subsection if the
Corporation determines that such investment will have an adverse
effect on the safety and soundness of the bank.
(B) Reasonable standard
The Corporation shall not require divestiture by any bank
pursuant to subparagraph (A) without reason to believe that such
investment will have an adverse effect on the safety and
soundness of the bank.
(g) Determinations
The Corporation shall make determinations under this section by
regulation or order.
(h) ``Activity'' defined
For purposes of this section, the term ``activity'' includes
acquiring or retaining any investment.
(i) Other authority not affected
This section shall not be construed as limiting the authority of any
appropriate Federal banking agency or any State supervisory authority to
impose more stringent restrictions.
(j) Activities of branches of out-of-State banks
(1) Application of host State law
The laws of a host State, including laws regarding community
reinvestment, consumer protection, fair lending, and establishment
of intrastate branches, shall apply to any branch in the host State
of an out-of-State State bank to the same extent as such State laws
apply to a branch in the host State of an out-of-State national
bank. To the extent host State law is inapplicable to a branch of an
out-of-State State bank in such host State pursuant to the preceding
sentence, home State law shall apply to such branch.
(2) Activities of branches
An insured State bank that establishes a branch in a host State
may conduct any activity at such branch that is permissible under
the laws of the home State of such bank, to the extent such activity
is permissible either for a bank chartered by the host State
(subject to the restrictions in this section) or for a branch in the
host State of an out-of-State national bank.
(3) Savings provision
No provision of this subsection shall be construed as affecting
the applicability of--
(A) any State law of any home State under subsection (b),
(c), or (d) of section 1831u of this title; or
(B) Federal law to State banks and State bank branches in
the home State or the host State.
(4) Definitions
The terms ``host State'', ``home State'', and ``out-of-State
bank'' have the same meanings as in section 1831u(f) \1\ of this
title.
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\1\ See References in Text note below.
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(Sept. 21, 1950, ch. 967, Sec. 2[24], as added Pub. L. 102-242, title
III, Sec. 303(a), Dec. 19, 1991, 105 Stat. 2349; amended Pub. L. 102-
550, title XVI, Sec. 1605(a)(8), Oct. 28, 1992, 106 Stat. 4086; Pub. L.
103-328, title I, Sec. 102(b)(3)(B), Sept. 29, 1994, 108 Stat. 2351;
Pub. L. 104-208, div. A, title II, Secs. 2217, 2704(d)(14)(W), Sept. 30,
1996, 110 Stat. 3009-414, 3009-494; Pub. L. 105-24, Sec. 2(a), July 3,
1997, 111 Stat. 238.)
References in Text
The Investment Company Act of 1940, referred to in subsec.
(f)(2)(A), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as
amended, which is classified generally to subchapter I (Sec. 80a-1 et
seq.) of chapter 2D of Title 15, Commerce and Trade. For complete
classification of this Act to the Code, see section 80a-51 of Title 15
and Tables.
Section 1831u of this title, referred to in subsec. (j)(4), was
subsequently amended, and subsec. (f) of section 1831u no longer defines
the terms ``host State'', ``home State'', and ``out-of-State bank''.
However, such terms are defined elsewhere in that section.
Prior Provisions
A prior section 1831a, act Sept. 21, 1950, ch. 967, Sec. 2[24], as
added Dec. 28, 1979, Pub. L. 96-161, title II, Sec. 202, 93 Stat. 1235,
provided that if the applicable rate prescribed in subsec. (a) exceeded
the rate a State bank would be permitted to charge in absence of that
subsection, that State bank could for a business or agricultural loan of
$25,000 or more, notwithstanding State law, take or charge on any
evidence of debt, interest of not more than 5 per centum in excess of
the discount rate in effect at the Federal Reserve Bank in the district
where the bank was located, that the taking or charging of interest at a
greater rate than that prescribed by subsec. (a), if knowingly done,
would be deemed a forfeit of the entire interest on that particular
evidence of debt, and that if such greater rate of interest had already
been paid, the payor could recover twice the amount of such payment in a
civil action commenced within two years of such payment, prior to repeal
by Pub. L. 96-221, title V, Sec. 529, Mar. 31, 1980, 94 Stat. 168,
effective at close of Mar. 31, 1980.
Another prior section 1831a, act Sept. 21, 1950, ch. 967,
Sec. 2[24], as added Nov. 5, 1979, Pub. L. 96-104, title I, Sec. 102, 93
Stat. 789, identical to this section as added by Pub. L. 96-161, was
repealed by section 212 of Pub. L. 96-161, effective at the close of
Dec. 27, 1979, except that its provisions would continue to apply to any
loan made in any State on or after Nov. 5, 1979, but prior to such
repeal.
Another prior section 1831a, act Sept. 21, 1950, ch. 967,
Sec. 2[24], as added Oct. 29, 1974, Pub. L. 93-501, title II, Sec. 202,
88 Stat. 1558, identical to this section as added by Pub. L. 96-104, was
repealed by section 1 of Pub. L. 96-104 except that its provisions shall
continue to apply to any loan made in any State during the period
specified in section 206 of Pub. L. 93-501.
Amendments
1997--Subsec. (j). Pub. L. 105-24 amended subsec. (j) generally,
substituting pars. (1) to (4) for former pars. (1) to (3) relating to
general provisions, activities of branches, and definitions,
respectively.
1996--Subsec. (a). Pub. L. 104-208, Sec. 2217(1), substituted
``Permissible activities'' for ``In general'' in heading, designated
existing provisions as par. (1) and inserted heading, redesignated
former pars. (1) and (2) as subpars. (A) and (B) of par. (1),
respectively, and realigned margins, and added par. (2).
Subsec. (a)(1)(A). Pub. L. 104-208, Sec. 2704(d)(14)(W), which
directed substitution of ``Deposit Insurance Fund'' for ``appropriate
deposit insurance fund'', was not executed. See Effective Date of 1996
Amendment note below.
Subsec. (d)(1)(A). Pub. L. 104-208, Sec. 2704(d)(14)(W), which
directed substitution of ``Deposit Insurance Fund'' for ``appropriate
deposit insurance fund'', was not executed. See Effective Date of 1996
Amendment note below.
Subsec. (d)(3). Pub. L. 104-208, Sec. 2217(2), added par. (3).
1994--Subsec. (j). Pub. L. 103-328 added subsec. (j).
1992--Subsec. (e)(1)(B). Pub. L. 102-550 amended subpar. (B)
generally. Prior to amendment, subpar. (B) read as follows: ``meets the
consumer disclosure requirements under section 1828(k) of this title
with respect to such insurance.''
Effective Date of 1996 Amendment
Amendment by section 2704(d)(14)(W) of Pub. L. 104-208 effective
Jan. 1, 1999, if no insured depository institution is a savings
association on that date, see section 2704(c) of Pub. L. 104-208, set
out as a note under section 1821 of this title.
Effective Date of 1992 Amendment
Amendment by Pub. L. 102-550 effective as if included in the Federal
Deposit Insurance Corporation Improvement Act of 1991, Pub. L. 102-242,
as of Dec. 19, 1991, see section 1609(a) of Pub. L. 102-550, set out as
a note under section 191 of this title.
Right of State To Opt Out
Section 3 of Pub. L. 105-24 provided that: ``Nothing in this Act
[amending this section and section 36 of this title and enacting
provisions set out as a note under section 1811 of this title] alters
the right of States under section 525 of Public Law 96-221 [12 U.S.C.
1785 note].''
Section Referred to in Other Sections
This section is referred to in sections 330, 1831w of this title.
