Title I Subtitle A. Affiliations.

Sec. 101. Glass-Steagall Repealed. Repeals Section 20 of Glass-Steagall Act to permit affiliations between securities and banking companies. Repeals Section 32 of the Banking Act of 1933 to permit officers and directors to serve in those capacities with banking and securities firms.

Sec. 102. Financial Activities. Permits bank holding companies to engage in expanded activities that are financial in nature or incidental to such financial activities. The determination of financial activities will be made through a consultative process involving the Federal Reserve Board and the Secretary of the Treasury. Lists the expanded activities considered financial in nature. These activities include insurance and securities underwriting and merchant banking, among others. Expanded financial activities may be engaged in subject to the filing of a notice with the Federal Reserve Board.

In order to engage in expanded financial activities, all insured depository institution subsidiaries of the bank holding company must be well capitalized and well managed; and the bank holding company must certify to such compliance. Failure to comply with these conditions will subject the bank holding company to activities restrictions that may be imposed by the Federal Reserve Board. Noncompliance left uncorrected for more than 180 days after receiving notice from the Federal Reserve Board may subject the bank holding company to divestiture of any subsidiary insured depository institutions or to limitations on certain financial activities.

Sec. 103. Conforming Amendments. Conforming change to the Home Owners' Loan Act of 1933, as amended.

Sec. 104. Operation of State Law. Reaffirms state regulation of the business of insurance. Requires compliance with State insurance licensing requirements, subject to nondiscrimination requirements.

Directs States against preventing or restricting affiliations or activities authorized or permitted by this Act. States generally may not prevent or restrict activities authorized or permitted by the Act where the practical effect of the State action would be to discriminate against insured depository institutions, their subsidiaries or affiliates, or against any person or entity based upon affiliation with an insured depository institution. This section is not, however, intended to limit the jurisdiction of State securities commissions or of State laws relating to the governance of corporations or other entities, or the applicability of State antitrust laws or State laws similar to the antitrust laws. This section is not intended to restrict or limit the authority of national banks to engage in insurance activities under other applicable Federal law as of the date of enactment of this Act. Defines circumstances under which a State statute, regulation, order, interpretation, or other action is deemed to "discriminate" or have the "practical effect of discriminating."

Subtitle B. Streamlining Supervision of Bank Holding Companies.

Sec. 111. Streamlining Bank Holding Company Supervision. The Federal Reserve Board will, to the fullest extent possible, accept existing reports that a bank holding company or subsidiary has provided to other Federal or State regulators.

If the Federal Reserve Board requires a report from a functionally regulated nondepository institution subsidiary of a bank holding company otherwise not required by another Federal or State regulatory authority, the Federal Reserve Board must make a request for that report through the appropriate regulatory authority. If the report is not made available to the Board and is necessary to assess a material risk to the bank holding company or any of its depository institution subsidiaries, the Federal Reserve Board is authorized to require preparation of the report. The Federal Reserve Board is authorized to make examinations of bank holding companies and subsidiaries for specified purposes.

The Federal Reserve Board may make examinations of functionally regulated nondepository institution subsidiaries of bank holding companies only if: reasonable cause exists to believe that the subsidiary is engaged in activities posing a material risk to an affiliated depository institution; or based on reports and other available information the Federal Reserve Board has reasonable cause to believe that a subsidiary is not in compliance with statutory requirements.

The Federal Reserve Board is directed, to the fullest extent possible, to restrict the focus and scope of bank holding company examinations to the holding company itself and to any subsidiary that could have a materially adverse effect on the safety and soundness of any depository institution subsidiary of the holding company. To the fullest extent possible, the Federal Reserve Board must use the exam reports of depository institutions made by appropriate Federal and State depository institution supervisory authorities. To the fullest extent possible, the Federal Reserve Board is directed to forego making its own examinations of brokers or dealers registered with the SEC, investment advisers registered with the SEC or any State, licensed insurance companies, or any other subsidiary that the Board finds to be comprehensively supervised by a Federal or State authority.

The Federal Reserve Board may not unilaterally impose capital requirements on any subsidiary of a bank holding company that is not an insured depository institution and that is in compliance with the capital requirements of another Federal regulatory authority or State insurance authority, or that is registered with the SEC or any State as an investment adviser.

If a bank holding company is not significantly engaged in nonbanking activities, the Federal Reserve Board may, in consultation with the appropriate Federal banking agency of the lead depository institution subsidiary of the holding company, designate that agency as the appropriate Federal banking agency for the holding company. An agency to which the Board transfers authority will have the authority to examine and require reports from the holding company and any affiliate; to approve or disapprove applications or transactions; to take actions and impose penalties with respect to the holding company, any affiliate, or institution-affiliated party.

Functional regulation of securities and insurance activities is preserved, subject to the antidiscrimination provisions of section 104.

Sec. 112. Authority of State Insurance Regulator and Securities and Exchange Commission. The Federal Reserve Board may not require contributions of capital or assets to be made to an insured depository institution subsidiary by a bank holding company that is an insurance company or broker or dealer registered with the SEC, or by an affiliate that is an insurance company or broker or dealer registered with the SEC if the State insurance authority or the SEC prohibits the holding company from making such a contribution because it would have a material adverse effect on the financial condition of the insurance company or broker or dealer. The Federal Reserve Board may order the bank holding company to divest the insured depository institution subsidiary not later than 180 days after the holding company receives notice from its functional regulator prohibiting the contribution of capital or assets. Prior to divestiture, the Federal Reserve Board may restrict or limit activities of the insured depository institution or its affiliates.

Sec. 113. Role of the Board of Governors of the Federal Reserve System. The Federal Reserve Board may not prescribe regulations or issue or seek entry of orders or other requirements against or with respect to a regulated subsidiary of a bank holding company unless the action is necessary to prevent or redress an unsafe or unsound practice or breach of fiduciary duty by the subsidiary that poses a material risk to safety and soundness of an affiliated insured depository institution or the domestic or international payment system.

Sec. 114. Examination of Investment Companies. An investment company that is not a bank holding company or a savings and loan holding company is not subject to examination by a Federal banking agency. Upon request, the SEC is directed to provide to any Federal banking agency its examination reports or other information with respect to any registered investment company.

The FDIC is authorized to examine an affiliate of any insured depository institution necessary to ascertain the relationship between the insured depository institution and the affiliate and the effect of such relationship on the insured depository institution.

Sec. 115. Equivalent Regulation and Supervision. Certain restrictions imposed upon the Federal Reserve Board with respect to requiring reports, making examinations, or imposing capital requirements, are applicable to other Federal banking agencies with regard to their oversight of functionally regulated nondepository subsidiaries of insured depository institutions.

The FDIC is authorized to examine an affiliate of any insured depository institution necessary to ascertain the relationship between the insured depository institution and the affiliate and the effect of such relationship on the insured depository institution.

Sec. 116. Interagency Consultation. Directs Federal and State regulators to share information, consult with each other on certain affiliation issues, and to preserve the confidentiality of shared information.

Sec. 117. Preserving the Integrity of FDIC Resources. Makes clear that FDIC resources will not be used for the benefit of any shareholder, affiliate (other than an insured depository institution) or subsidiary of an insured depository institution.

Subtitle C. Activities of National Banks.

Sec. 121. Authority of National Banks to Underwrite Municipal Revenue Bonds. National banks are permitted to underwrite municipal revenue bonds.

Sec. 122. Subsidiaries of National Banks. Permits national banks with total consolidated assets not exceeding $1 billion and that are not affiliated with bank holding companies to conduct financial activities as principal through operating subsidiaries. Generally real estate development and real estate investment activities are prohibited. In order to engage in expanded activities, a national bank and all insured depository institution affiliates must be well capitalized and well managed and receive the approval of the Comptroller. Compliance with certain safety and soundness firewalls is required. Restrictions are imposed on affiliate transactions and tie-in sales are prohibited.

National banks lawfully conducting activities through an operating subsidiary as of the date of enactment of the Financial Services Modernization Act of 1999 are permitted to continue such activities.

Sec. 123. Agency Activities. National banks, regardless of size, are permitted to engage through subsidiaries, as agent in activities determined by the Comptroller of the Currency to be permissible for national banks or to be financial in nature or incidental to such activities pursuant to section 4(k) of the Bank Holding Company Act.

Sec. 124. Prohibiting Fraudulent Representations. Makes it a criminal offense punishable by imprisonment of up to one year and/or a fine for any institution-affiliated party of an insured depository institution or of a subsidiary or affiliate of an insured depository institution to fraudulently represent that the institution is or will be liable for any obligation of a subsidiary or other affiliate of the institution. 

Sec. 125. Insurance Underwriting by National Banks. Generally, a national bank is permitted to engage in insurance activities as principal through an operating subsidiary in accordance with safety and soundness considerations of section 5136A(a) of the Revised Statutes of the United States (as added by this Act), and provided that the bank has total assets not exceeding $1 billion and is well-capitalized and well-managed. A national bank and subsidiaries of a national bank may provide certain authorized insurance products as principal without regard to section 5136A(a). The section defines "authorized insurance product" and "insurance."

Subtitle E. Applying the Principles of National Treatment and Equality of Competitive Opportunity to Foreign Banks and Foreign Financial Institutions.

Sec. 151. Applying the Principles of National Treatment and Equality of Competitive Opportunity to Certain Foreign Banks. Generally, if a foreign bank elects to engage in expanded financial activities under new authority granted by this Act, its International Bank Act grandfather rights under section 8(c) of the International Banking Act are terminated.

Sec. 152. Representative Offices. Amends the International Banking Act to permit the Federal Reserve Board to examine any affiliate of a foreign bank if deemed necessary by the Board to determine and enforce compliance with this Act, the Bank Holding Company Act, or other applicable Federal banking law.

Title II--Insurance Customer Protections.

Sec. 201. Insurance Customer Protections. The Federal banking agencies are directed to jointly promulgate customer protection regulations applying to retail sales practices, solicitations, advertising, or offers of any insurance product of any insured depository institution or any person engaged in such activities at an office of the institution or on behalf of the institution. The sales practices that the joint regulations should address include antitying and anticoercion in the sale of insurance products and the appropriate disclosures about and advertising of insurance products. The regulations also must address standards for the qualification and licensing of persons selling or offering for sale any insurance product in any part of any office of an insured depository institution.

The Federal banking agencies must assure that the regulations prescribed pursuant to this section do not have the practical effect of discriminating against any person engaged in insurance sales or solicitations that is not affiliated with an insured depository institution.

To the extent the Federal banking authorities believe that any provision of their rules is more protective of customers than a State provision, Federal preemption will occur, but only if the State fails to enact legislation within 3 years of the date of notice from Federal regulators.

Sec. 202. Federal and State Dispute Resolution. The resolution of regulatory conflicts between Federal regulators and State insurance regulators on insurance issues, may be expedited at the Federal appellate court level. The court is directed to accord equal deference to the Federal regulator and the State insurance regulator.

Title III--Regulatory Improvements.

Sec. 301. Elimination of SAIF and DIF Special Reserves. The SAIF and DIF special reserves created in 1996 are eliminated.

Sec. 302. Expanded Small Bank Access to S Corporation Treatment. The GAO is required to report to Congress within six months of the date of enactment on certain revisions to S corporation rules permitting greater access by community banks to S corporation treatment.

Sec. 303. Meaningful CRA Examinations. Deems an insured depository institution to be in compliance with CRA if it achieves a "satisfactory" or better rating in its most recent CRA exam and has done so in each of its CRA exams during the immediately preceding 36-month period. Deemed in compliance status would continue until the next regularly scheduled CRA exam unless substantial verifiable information arising since the time of the most recent CRA exam and demonstrating noncompliance with CRA is filed with the appropriate Federal banking agency. The appropriate Federal banking agency must determine, on a timely basis, whether the information filed by any person against an institution's CRA compliance is of a substantial verifiable nature. The burden of proof is upon the person filing such information.

Sec. 304. Temporary Extension of Bank Insurance Fund Member FICO Assessment Rates. Freezes the current FICO contribution formula for 3 years. By law the FICO rate on BIF-insured deposits must be 1/5 the rate on SAIF-insured deposits. Currently, the FICO rate on BIF deposits is approximately 1.30 basis points, and the rate on SAIF deposits is approximately 6.50 basis points. Without the freeze, on January 1, 2000, both BIF and SAIF members will pay the same on the FICO obligation, about 2.40 basis points on insured deposits. The change provides additional time to weigh arguments whether to merge charters and deposit insurance funds and to consolidate the OTS and the OCC.

Sec. 305. Cross Marketing Restriction; Limited Purpose Bank Relief; Divestiture. Removes the limitations that were placed on institutions that were covered under CEBA in 1987 with respect to permissible activities within the holding company, and cross-marketing of products. In addition, this section grants limited overdraft flexibility to limited purpose institutions and their affiliates. Also modifies the provision of CEBA requiring divestiture of a limited purpose bank in the event the bank or its owner fails to remain qualified for the CEBA exception. Allows limited purpose bank owners to avoid divestiture by promptly correcting the violation (within 180 days of receipt of notice from the Federal Reserve Bank) that would otherwise lead to divestiture.

Sec. 306. "Plain Language" Requirement for Federal Banking Agency Rules. Directs Federal banking agencies to use plain language in all proposed and final rulemakings published by the agency in the Federal Register after January 1, 2000.

Sec. 307. Retention of "Federal" in Name of Converted Federal Savings Association. Allows a Federal savings association converting its charter to that of a national bank or state bank to continue to use the word "Federal" in its name.

Title IV--Federal Home Loan Bank System Reforms.

Sec. 401. Short Title. Federal Home Loan Bank System Reform Act of 1999.

Sec. 402. Definitions. Among the terms defined is "community financial institution," which is an insured depository institution with total assets of less than $500 million.

Sec. 403. Savings Association Membership. On and after June 1, 2000, makes Federal Home Loan Bank System membership voluntary.

Sec. 404. Advances to Members; Collateral. Allows non-QTL qualified banks with less than $500 million in assets (community banks) to use advances for small business, small farm and small agribusiness lending. Also allows community banks to collateralize advances with small business and agricultural loans.

Sec. 405. Eligibility Criteria. Allows community banks to become members without regard to the percentage of total assets represented by residential mortgage loans.

Sec. 406. Management of Banks. Modifies the governance structure of the system to give more authority to the regional banks.

Sec. 407. Resolution Funding Corporation. Changes the financing mechanism, from a flat fee to a percentage of system net earnings, on the system's obligation to pay a portion of the interest on Refinancing Corporation bonds issued to cover the S&L bailout.

Sec. 408. GAO Study on Federal Home Loan Bank System Capital. Directs the Comptroller General of the United States to conduct a study of possible revisions to the capital structure of the Federal Home Loan Bank System.

Title V--Functional Regulation of Brokers and Dealers.

Sec. 501. Definition of Broker. Replaces the current bank exemption from registration as a broker under the Securities Exchange Act with a series of exemptions for banks engaging in certain specified activities.

Sec. 502. Definition of Dealer. Replaces the current bank exemption from registration as a dealer under the Securities Exchange Act with a series of exemptions for particular activities undertaken by banks.

Sec. 503. Definition and Treatment of Banking Products. Specifies that the SEC, with the concurrence of the Federal Reserve Board, may determine by regulation those new products which, if offered or sold by a bank, would subject it to registration with the SEC. A bank may offer or sell "traditional banking products," as defined in this section, without becoming subject to registration with the SEC.

Sec. 504. Qualified Investor Defined. Amends the Securities Exchange Act of 1934 to include a definition of "qualified investor" for purposes of transactions by banks involving certain traditional banking products.

Sec. 505. Government Securities Defined. Amends the definition of "government securities" in the Securities Exchange Act of 1934 to include for purposes of section 15C, as applied to a bank, a qualified Canadian government obligation.

Sec. 506. Effective Date. This title becomes effective one-year after the date of enactment of the Act.

Sec. 507. Rule of Construction. Nothing in this title supersedes, affects, or otherwise limits the scope and applicability of the Commodity Exchange Act.

Title VI--Unitary Savings and Loan Holding Companies.

Sec. 601. Prohibition on New Unitary Savings and Loan Holding Companies. Amends the Home Owners' Loan Act of 1933, as amended, to terminate the current unitary savings and loan holding company authority for all applications other than those approved or pending as of February 28, 1999.