§ 24a. Financial subsidiaries of national banks
(a)
Authorization to conduct in subsidiaries certain activities that are financial in nature
(1)
In general
Subject to paragraph (2), a national bank may control a financial subsidiary, or hold an interest in a financial subsidiary.
(2)
Conditions and requirements
A national bank may control a financial subsidiary, or hold an interest in a financial subsidiary, only if—
(A)
the financial subsidiary engages only in—
(B)
the activities engaged in by the financial subsidiary as a principal do not include—
(i)
insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, or death (except to the extent permitted under section 302 or 303(c) of the Gramm-Leach-Bliley Act [15 U.S.C. 6712 or 6713
(c)]) or providing or issuing annuities the income of which is subject to tax treatment under section
72 of title
26;
(C)
the national bank and each depository institution affiliate of the national bank are well capitalized and well managed;
(D)
the aggregate consolidated total assets of all financial subsidiaries of the national bank do not exceed the lesser of—
(3)
Rating or comparable requirement
(A)
In general
A national bank meets the requirements of this paragraph if—
(i)
the bank is 1 of the 50 largest insured banks and has not fewer than 1 issue of outstanding eligible debt that is currently rated within the 3 highest investment grade rating categories by a nationally recognized statistical rating organization; or
(ii)
the bank is 1 of the second 50 largest insured banks and meets the criteria set forth in clause (i) or such other criteria as the Secretary of the Treasury and the Board of Governors of the Federal Reserve System may jointly establish by regulation and determine to be comparable to and consistent with the purposes of the rating required in clause (i).
(4)
Financial agency subsidiary
The requirement in paragraph (2)(E) shall not apply with respect to the ownership or control of a financial subsidiary that engages in activities described in subsection (b)(1) of this section solely as agent and not directly or indirectly as principal.
(5)
Regulations required
Before the end of the 270-day period beginning on November 12, 1999, the Comptroller of the Currency shall, by regulation, prescribe procedures to implement this section.
(b)
Activities that are financial in nature
(1)
Financial activities
(A)
In general
An activity shall be financial in nature or incidental to such financial activity only if—
(B)
Coordination between the Board and the Secretary of the Treasury
(i)
Proposals raised before the Secretary of the Treasury
(I)
Consultation
The Secretary of the Treasury shall notify the Board of, and consult with the Board concerning, any request, proposal, or application under this section for a determination of whether an activity is financial in nature or incidental to a financial activity.
(II)
Board view
The Secretary of the Treasury shall not determine that any activity is financial in nature or incidental to a financial activity under this section if the Board notifies the Secretary in writing, not later than 30 days after the date of receipt of the notice described in subclause (I) (or such longer period as the Secretary determines to be appropriate under the circumstances) that the Board believes that the activity is not financial in nature or incidental to a financial activity or is not otherwise permissible under this section.
(ii)
Proposals raised by the Board
(I)
Board recommendation
The Board may, at any time, recommend in writing that the Secretary of the Treasury find an activity to be financial in nature or incidental to a financial activity for purposes of this section.
(II)
Time period for secretarial action
Not later than 30 days after the date of receipt of a written recommendation from the Board under subclause (I) (or such longer period as the Secretary of the Treasury and the Board determine to be appropriate under the circumstances), the Secretary shall determine whether to initiate a public rulemaking proposing that the subject recommended activity be found to be financial in nature or incidental to a financial activity under this section, and shall notify the Board in writing of the determination of the Secretary and, in the event that the Secretary determines not to seek public comment on the proposal, the reasons for that determination.
(2)
Factors to be considered
In determining whether an activity is financial in nature or incidental to a financial activity, the Secretary shall take into account—
(D)
whether such activity is necessary or appropriate to allow a bank and the subsidiaries of a bank to—
(i)
compete effectively with any company seeking to provide financial services in the United States;
(3)
Authorization of new financial activities
The Secretary of the Treasury shall, by regulation or order and in accordance with paragraph (1)(B), define, consistent with the purposes of this Act [1] and the Gramm-Leach-Bliley Act, the following activities as, and the extent to which such activities are, financial in nature or incidental to a financial activity:
(c)
Capital deduction
(1)
Capital deduction required
In determining compliance with applicable capital standards—
(2)
Financial statement disclosure of capital deduction
Any published financial statement of a national bank that controls a financial subsidiary shall, in addition to providing information prepared in accordance with generally accepted accounting principles, separately present financial information for the bank in the manner provided in paragraph (1).
(d)
Safeguards for the bank
A national bank that establishes or maintains a financial subsidiary shall assure that—
(1)
the procedures of the national bank for identifying and managing financial and operational risks within the national bank and the financial subsidiary adequately protect the national bank from such risks;
(e)
Provisions applicable to national banks that fail to continue to meet certain requirements
(1)
In general
If a national bank or insured depository institution affiliate does not continue to meet the requirements of subsection (a)(2)(C) of this section or subsection (d) of this section, the Comptroller of the Currency shall promptly give notice to the national bank to that effect describing the conditions giving rise to the notice.
(2)
Agreement to correct conditions
Not later than 45 days after the date of receipt by a national bank of a notice given under paragraph (1) (or such additional period as the Comptroller of the Currency may permit), the national bank shall execute an agreement with the Comptroller of the Currency and any relevant insured depository institution affiliate shall execute an agreement with its appropriate Federal banking agency to comply with the requirements of subsection (a)(2)(C) of this section and subsection (d) of this section.
(3)
Imposition of conditions
Until the conditions described in a notice under paragraph (1) are corrected—
(A)
the Comptroller of the Currency may impose such limitations on the conduct or activities of the national bank or any subsidiary of the national bank as the Comptroller of the Currency determines to be appropriate under the circumstances and consistent with the purposes of this section; and
(B)
the appropriate Federal banking agency may impose such limitations on the conduct or activities of any relevant insured depository institution affiliate or any subsidiary of the institution as such agency determines to be appropriate under the circumstances and consistent with the purposes of this section.
(4)
Failure to correct
If the conditions described in a notice to a national bank under paragraph (1) are not corrected within 180 days after the date of receipt by the national bank of the notice, the Comptroller of the Currency may require the national bank, under such terms and conditions as may be imposed by the Comptroller and subject to such extension of time as may be granted in the discretion of the Comptroller, to divest control of any financial subsidiary.
(f)
Failure to maintain public rating or meet applicable criteria
(1)
In general
A national bank that does not continue to meet any applicable rating or other requirement of subsection (a)(2)(E) of this section after acquiring or establishing a financial subsidiary shall not, directly or through a subsidiary, purchase or acquire any additional equity capital of any financial subsidiary until the bank meets such requirements.
(2)
Equity capital
For purposes of this subsection, the term “equity capital” includes, in addition to any equity instrument, any debt instrument issued by a financial subsidiary, if the instrument qualifies as capital of the subsidiary under any Federal or State law, regulation, or interpretation applicable to the subsidiary.
(g)
Definitions
For purposes of this section, the following definitions shall apply:
(1)
Affiliate, company, control, and subsidiary
The terms “affiliate”, “company”, “control”, and “subsidiary” have the meanings given those terms in section
1841 of this title.
(2)
Appropriate Federal banking agency, depository institution, insured bank, and insured depository institution
The terms “appropriate Federal banking agency”, “depository institution”, “insured bank”, and “insured depository institution” have the meanings given those terms in section
1813 of this title.
(3)
Financial subsidiary
The term “financial subsidiary” means any company that is controlled by 1 or more insured depository institutions other than a subsidiary that—
(A)
engages solely in activities that national banks are permitted to engage in directly and are conducted subject to the same terms and conditions that govern the conduct of such activities by national banks; or
(B)
a national bank is specifically authorized by the express terms of a Federal statute (other than this section), and not by implication or interpretation, to control, such as by section 25 or 25A of the Federal Reserve Act [12 U.S.C. 601 et seq., 611 et seq.] or the Bank Service Company Act [12 U.S.C. 1861 et seq.].
(4)
Eligible debt
The term “eligible debt” means unsecured long-term debt that—
(5)
Well capitalized
The term “well capitalized” has the meaning given the term in section
1831o of this title.
(6)
Well managed
The term “well managed” means—
(A)
in the case of a depository institution that has been examined, unless otherwise determined in writing by the appropriate Federal banking agency—
[1] So in original.