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1000 - Federal Deposit Insurance Act
{{2-29-08 p.1349}}
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)]
{{2-29-08 p.1350}}
[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 of Investment
Grade.--
(1) IN GENERAL.--No savings association may, directly or
through a subsidiary, acquire or retain any corporate debt security not
of investment grade.
(2) Exception for securities held by qualified
affiliate.--Paragraph (1) shall not apply with respect to any
corporate debt security not of investment grade which is acquired and
retained by any qualified affiliate of a savings association.
(3) TRANSITION RULE.--
(A) IN GENERAL.--The Corporation shall require any
savings association or any subsidiary of any savings association to
divest any corporate debt security not of investment grade the
retention of which is not permissible under paragraph (1) 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 corporate debt security not of investment grade held by
any savings association or subsidiary on the date of enactment of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
the savings association or subsidiary shall be deemed not to be in
violation of the prohibition in paragraph (1) on retaining such
investment so long as the association or subsidiary complies with any
applicable requirement established by the Corporation pursuant to
subparagraph (A) for divesting such securities.
(4) DEFINITIONS.--For purposes of this section--
(A) INVESTMENT GRADE.--Any corporate debt security is
not of "investment grade" unless that security, when acquired by
the savings association or subsidiary, was rated in one of the 4
highest rating categories by at least one nationally recognized
statistical rating organization.
(B) 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.
(C) CERTAIN SECURITIES NOT INCLUDED.--The term
"corporate debt security not of investment grade" 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
5(c)(1) of the Home Owners' Loan Act.
[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]
(e) Transfer of Corporate Debt Security not of Investment
Grade 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 the date of the enactment of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, holds any
corporate debt security not of investment grade may acquire a qualified
note in exchange for the transfer of such security to--
{{10-31-05 p.1351}}
(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
Director of the Office of Thrift Supervision;
(B) the company to which the corporate debt security not of
investment grade 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 the date of
the enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, the insured savings association notifies the
Director of the Office of Thrift Supervision of such association's
intention to transfer the corporate debt security not of investment
grade to the savings and loan holding company or the subsidiary of such
holding company;
(D) the transfer of the corporate debt security not of investment
grade is completed--
(i) before the end of the 1-year period beginning on 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 such date, is controlled by a savings and loan holding
company; or
(ii) before the end of the 2-year period beginning on such date,
in the case of a savings association that is not, as of such date, a
subsidiary of a savings and loan holding company;
(E) the insured savings association receives in exchange for the
corporate debt security not of investment grade the fair market value
of such security;
(F) the Director of the Office of Thrift Supervision has--
(i) approved the transaction; and
(ii) determined that the transfer represents a complete and
effective divestiture of the corporate debt security not of investment
grade and is in compliance with the provisions of this subsection; and
(G) any gain on the sale of the corporate debt security not of
investment grade 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 not of investment
grade 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
not of investment grade transferred in exchange for the note, or by
other collateral of at least equivalent value that is acceptable to the
Director of the Office of Thrift Supervision;
(B) contains provisions acceptable to the Director of the Office
of Thrift Supervision 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 not of
investment grade 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;
{{10-31-05 p.1352}}
(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]
(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)--
(1) IN GENERAL.--The term "activity" includes
acquiring or retaining any investment.
(2) DIVESTITURE OF CERTAIN ASSETS.--Notwithstanding
paragraph (1), subsections (a) and (b) shall not be construed to
require a savings association to divest itself of any assets acquired
before the date of enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act of 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 Director of the Office of Thrift
Supervision 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]
[The page following this is 1359.]
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