FDIC Law, Regulations, Related Acts
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1000 - Federal Deposit Insurance Act
SEC. 28. ACTIVITIES OF SAVINGS
ASSOCIATIONS.
(a) In General.--On and after January 1, 1990, a savings
association chartered under State law may not engage as principal in
any type of activity, or in any activity in an amount, that is not
permissible for a Federal savings association unless--
(1) the Corporation has determined that the activity would pose
no significant risk to the Deposit Insurance Fund; and
(2) the savings association is and continues to be in compliance
with the fully phased-in capital standards prescribed under
section 5(t) of the Home Owners'
Loan Act.
[Codified to 12 U.S.C. 1831e(a)]
[Source: Section 2[28(a)] of the Act of September 21, 1950 (Pub.
L. No. 797), effective September 21, 1950, as added by section 222 of
title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat.
269), effective August 9, 1989; section 8(a)(32) of the Act of February
15, 2006 (Pub. L. No. 109--173; 119 Stat. 3615), effective date shall
take effect on the day of the merger of the Bank Insurance Fund and the
Savings Association Insurance Fund pursuant to the Federal Deposit
Insurance Reform Act of 2005]
(b) Differences of Magnitude Between State and Federal
Powers.--Notwithstanding subsection (a)(1), if an activity
(other than an activity described in
section 5(c)(2)(B) of the Home
Owners' Loan Act) is permissible for a Federal savings association, a
savings association chartered under State law may engage as principal
in that activity in an amount greater than the amount permissible for a
Federal savings association if--
(1) the Corporation has not determined that engaging in that
amount of the activity poses any significant risk to the Deposit
Insurance Fund; and
(2) the savings association chartered under State law is and
continues to be in compliance with the fully phased-in capital
standards prescribed under section 5(t) of the Home Owners' Loan Act.
[Codified to 12 U.S.C. 1831e(b)]
[Source: Section 2[28(b)] of the Act of September 21, 1950 (Pub.
L. No. 797), effective September 21, 1950, as added by section 222 of
title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat.
269), effective August 9, 1989; as amended by section 8(a)(32)(b) of
the Act of February 15, 2006 (Pub. L. No. 109--173; 119 Stat. 3615),
effective February 15, 2006]
(c) Equity Investments by State Savings Associations.--
(1) IN GENERAL.--Notwithstanding subsections (a) and
(b), a savings association chartered under State law may not directly
acquire or retain any equity investment of a type or in an amount that
is not permissible for a Federal savings association.
(2) EXCEPTION FOR SERVICE CORPORATIONS.--Paragraph (1)
does not prohibit a savings association from acquiring or retaining
shares of one or more service corporations if--
(A) the Corporation has determined that no significant
risk to the Deposit Insurance Fund is posed by--
(i) the amount that the association proposes to acquire or
retain; or
(ii) the activities in which the service corporation engages; and
(B) the savings association is and continues to be in compliance
with the fully phased-in capital standards prescribed under
section 5(t) of the Home Owners'
Loan Act.
(3) TRANSITION RULE.--
(A) IN GENERAL.--The Corporation shall require any
savings association to divest any equity investment the retention of
which is not permissible under paragraph (1) or (2) as quickly as can
be prudently done, and in any event not later than July 1, 1994.
(B) TREATMENT OF NONCOMPLIANCE DURING DIVESTMENT.--With
respect to any equity investment held by any savings association on May
1, 1989, the savings association shall be deemed not to be in violation
of the prohibition in paragraph (1) or (2) on retaining such investment
so long as the savings association complies with any applicable
requirement established by the Corporation pursuant to subparagraph (A)
for divesting such investments.
[Codified to 12 U.S.C. 1831e(c)]
[Source: Section 2[28(c)] of the Act of September 21, 1950 (Pub.
L. No. 797), effective September 21, 1950, as added by section 222 of
title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat.
269), effective August 9, 1989; amended by section 602(a)(56) of title
VI of the Act of September 23, 1994 (Pub. L. No. 103--325; 108 Stat.
2290), effective September 23, 1994; section 8(a)(32)(b) of the Act of
February 15, 2006 (Pub. L. No. 109--173; 119 Stat. 3616); effective
February 15, 2006]
(d) Corporate Debt Securities Not.--
(1) IN GENERAL.--No savings association may, directly or
through a subsidiary, acquire or retain any corporate debt security
that does not meet standards of credit-worthiness as established by the
Corporation.
(2) EXCEPTION FOR SECURITIES HELD BY QUALIFIED
AFFILIATE.--Paragraph (1) shall not apply with respect to any
corporate debt security which is acquired and retained by any qualified
affiliate of a savings association.
(3) DEFINITIONS.--For purposes of this section--
(A) QUALIFIED AFFILIATE.--The term "qualified
affiliate" means--
(i) in the case of a stock savings association, an affiliate
other than a subsidiary or an insured depository institution, and
(ii) in the case of a mutual savings association, a subsidiary
other than an insured depository institution, so long as all of the
savings association's investments in and extensions of credit to the
subsidiary are deducted from the savings association's capital.
(B) CERTAIN SECURITIES NOT INCLUDED.--The term
"corporate debt security that does not meet standards of
credit-worthiness as established by the Corporation" does not
include any obligation issued or guaranteed by a corporation that may
be held by a Federal savings association without limitation as to
percentage of assets under subparagraph (D), (E), or (F) of section
1464(c)(1) of this title.
[Codified to 12 U.S.C. 1831e(d)]
[Source: Section 2[28(d)] of the Act of September 21, 1950 (Pub.
L. No. 797), effective September 21, 1950, as added by section 222 of
title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat.
270), effective August 9, 1989; amended by section 602(a)(57) of title
VI of the Act of September 23, 1994 (Pub. L. No. 103--325; 108 Stat.
2290), effective September 23, 1994; section 939 of title III of the
Act of July 21, 2010, (Pub. L. No. 111--203; 124 Stat.
1555)]
(e) Transfer of Corporate Debt Security in Exchange for a
Qualified Note.--
(1) ACQUISITION OF NOTE.--Notwithstanding subsections
(a), (b), and (c) of
section 5
of the Home Owners' Loan Act and any other provision of Federal or
State law governing extensions of credit by savings associations, any
insured savings association, and any subsidiary of any insured savings
association, that, on [August 9, 1989], the date of the enactment of
the Financial Institutions Reform, Recovery, and Enforcement Act of
1989, holds any corporate debt security that does not meet standards of
credit-worthiness as established by the Corporation may acquire a
qualified note in exchange for the transfer of such security to--
(A) any holding company which controls 80 percent or more of the
shares of such insured savings association; or
(B) any company other than an insured savings association, or any
subsidiary of any insured savings association, 80 percent or more of
the shares of which are controlled by such holding company,
if the conditions of paragraph (2) are met.
(2) CONDITIONS FOR EXCHANGE OF SECURITY FOR QUALIFIED
NOTE.--The conditions of this paragraph are met if--
(A) the insured savings association was in compliance with
applicable capital requirements on December 31, 1988, and the insured
savings association after such date--
(i) remains in compliance with applicable capital requirements;
or
(ii) adopts and complies with a capital plan acceptable to the
Comptroller of the Currency or the Corporation, as
appropriate;
(B) the company to which the corporate debt security that does
not meet standards of credit-worthiness established by the Corporation
is transferred is not a bank holding company, an insured savings
association, or a direct or indirect subsidiary of such holding company
or insured savings association;
(C) before the end of the 90-day period beginning on [August 9,
1989], the date of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, the insured savings association
notifies the Comptroller of the Currency or the Corporation, as
appropriate, of such association's intention to transfer the corporate
debt security that does not meet standards of credit-worthiness
established by the Corporation to the savings and loan holding company
or the subsidiary of such holding company;
(D) the transfer of the corporate debt security that does not
meet standards of credit-worthiness established by the Corporation is
completed--
(i) before the end of the 1-year period beginning on [August 9,
1989], the date of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, in the case of an insured
savings association that, as of August 9, 1989, is controlled by a
savings and loan holding company; or
(ii) before the end of the 2-year period beginning on August 9,
1989, in the case of a savings association that is not, as of August 9,
1989, a subsidiary of a savings and loan holding company;
(E) the insured savings association receives in exchange for the
corporate debt security that does not meet standards of
credit-worthiness established by the Corporation the fair market value
of such security;
(F) the Comptroller of the Currency or the Corporation, as
appropriate, has--
(i) approved the transaction; and
(ii) determined that the transfer represents a complete and
effective divestiture of the corporate debt security that does not meet
standards of credit-worthiness established by the Corporation and is in
compliance with the provisions of this subsection; and
(G) any gain on the sale of the corporate debt security that does
not meet standards of credit-worthiness established by the Corporation
is recognized, and included for applicable regulatory capital
requirements, by the insured savings association only at such time and
to the extent that the insured savings association receives payment of
principal on the note in cash in excess of the fair market value of the
transferred corporate debt security that does not meet standards of
credit-worthiness established by the Corporation as carried on the
accounts of the insured savings association immediately prior to the
transfer.
(3) "QUALIFIED NOTE" DEFINED.--The term
"qualified note" means any note that--
(A) is at all times fully secured by the corporate debt security
that does not meet standards of credit-worthiness established by the
Corporation transferred in exchange for the note, or by other
collateral of at least equivalent value that is acceptable to the
Comptroller of the Currency or the Corporation, as appropriate;
(B) contains provisions acceptable to the Comptroller of the
Currency or the Corporation, as appropriate, that would--
(i) prevent any action to encumber or impair the value of the
collateral referred to in subparagraph (A); and
(ii) allow the sale of the corporate debt security that does not
meet standards of credit-worthiness established by the Corporation if
the proceeds of the sale are reinvested in assets of equivalent value;
(C) is on market terms, including interest rate, which must in
all cases be above the insured savings association's borrowing rate for
similar term funds;
(D) is fully repayable over a period of time not to exceed 5
years from the date of transfer;
(E) is repaid with annual principal payments at least as large as
would be necessary to repay the note within 5 years if it were on a
level payment amortization schedule and the interest rate for the first
year of repayment were fixed throughout the amortization period;
(F) is fully guaranteed by each holding company of the insured
savings association that acquires such note; and
(G) is repaid in full in cash in accordance with its terms and
this subsection.
(4) FAILURE TO REPAY ON SCHEDULE.--The exemption
provided by this subsection from subsections (a), (b), and (c) of
section 11 of the Home Owners'
Loan Act and any other applicable provision of Federal or State law
shall terminate immediately if the insured savings association or any
affiliate of such association fails to comply with the terms of the
qualified note or this subsection.
[Codified to 12 U.S.C. 1831e(e)]
[Source: Section 2[28(e)] of the Act of September 21, 1950 (Pub.
L. No. 797), effective September 21, 1950, as added by section 222 of
title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat.
271), effective August 9, 1989; as amended by section
602(a)(58) of title VI of the Act of September 23, 1994
(Pub. L. No. 103--325; 108 Stat. 2291), effective September 23, 1994;
amended by Pub. L. No. 111--203, July 21, 2010; section 363(9)(a) of
title III of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat.
1555), effective July 21, 2010; section 939(a)(2) and (3) of the Act of
July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1886), effective July
21, 2010]
(f) Determinations.--The Corporation shall make
determinations under this section by regulation or order.
[Codified to 12 U.S.C. 1831e(f)]
[Source: Section 2[28(f)] of the Act of September 21, 1950 (Pub.
L. No. 797), effective September 21, 1950, as added by section 222 of
title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat.
272), effective August 9, 1989]
(g) "Activity" Defined.--For purposes of subsections
(a) and (b) of this section--
(1) IN GENERAL.--The term "activity" includes
acquiring or retaining any investment.
(2) DIVESTITURE OF CERTAIN ASSETS.--Notwithstanding
paragraph (1), subsections (a) and (b) of this section shall not be
construed to require a savings association to divest itself of any
assets acquired before August 9, 1989.
[Codified to 12 U.S.C. 1831e(g)]
[Source: Section 2[28(g)] of the Act of September 21, 1950 (Pub.
L. No. 797), effective September 21, 1950, as added by section 222 of
title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat.
272), effective August 9,
1989]
(h) Other Authority Not Affected.--This section may not be
construed as limiting--
(1) any other authority of the Corporation; or
(2) any authority of the Comptroller of the Currency, of the
Corporation, or of a State to impose more stringent restrictions.
[Codified to 12 U.S.C. 1831e(h)]
[Source: Section 2[28(i)] of the Act of September 21, 1950 (Pub.
L. No. 797), effective September 21, 1950, as added by section 222 of
title II of the Act of August 9, 1989 (Pub. L. No. 101--73; 103 Stat.
273), effective August 9, 1989; redesignated as section (h) by section
151(a)(3) of title I of the Act of December 19, 1991 (Pub. L. No.
102--242; 105 Stat. 2284; amended by Pub. L. No. 111--203, July 21,
2010; as amended by section 363(9)(b) of title III of the Act of July
21, 2010 (Pub. L. No. 111--203; 124 Stat. 1555), effective July 21,
2010]
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