§ 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.