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United States Code (Last Updated: May 24, 2014) |
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Title 12. BANKS AND BANKING |
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Chapter 2. NATIONAL BANKS |
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SubChapter I. ORGANIZATION AND GENERAL PROVISIONS |
§ 24a. Financial subsidiaries of national banks
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(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— (i) activities that are financial in nature or incidental to a financial activity pursuant to subsection (b) of this section; and (ii) activities that are permitted for national banks to engage in directly (subject to the same terms and conditions that govern the conduct of the activities by a national bank); (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; (ii) real estate development or real estate investment activities, unless otherwise expressly authorized by law; or (iii) any activity permitted in subparagraph (H) or (I) of section 1843(k)(4) of this title, except activities described in section 1843(k)(4)(H) of this title that may be permitted in accordance with section 122 of the Gramm-Leach-Bliley Act; (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— (i) 45 percent of the consolidated total assets of the parent bank; or (ii) $50,000,000,000; (E) except as provided in paragraph (4), the national bank meets standards of credit-worthiness established by the Comptroller of the Currency or other requirement set forth in paragraph (3); and (F) the national bank has received the approval of the Comptroller of the Currency for the financial subsidiary to engage in such activities, which approval shall be based solely upon the factors set forth in this section. (3) Requirement (A) In general A national bank meets the requirements of this paragraph if the bank is one of the 100 largest insured banks and has not fewer than 1 issue of outstanding debt that meets standards of credit-worthiness or other criteria as the Secretary of the Treasury and the Board of Governors of the Federal Reserve System may jointly establish.
(B) Consolidated total assets For purposes of this paragraph, the size of an insured bank shall be determined on the basis of the consolidated total assets of the bank as of the end of each calendar year.
(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.(6) Indexed asset limit The dollar amount contained in paragraph (2)(D) shall be adjusted according to an indexing mechanism jointly established by regulation by the Secretary of the Treasury and the Board of Governors of the Federal Reserve System.
(7) Coordination with section 1843(l)(2) of this title Section 1843(l)(2) of this title applies to a national bank that controls a financial subsidiary in the manner provided in that 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— (i) such activity has been defined to be financial in nature or incidental to a financial activity for bank holding companies pursuant to section 1843(k)(4) of this title; or (ii) the Secretary of the Treasury determines the activity is financial in nature or incidental to a financial activity in accordance with subparagraph (B). (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— (A) the purposes of this Act applicable criteria (1) In general A national bank that does not continue to meet standards of credit-worthiness established by the Comptroller of the Currency 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— (A) is not supported by any form of credit enhancement, including a guarantee or standby letter of credit; and (B) is not held in whole or in any significant part by any affiliate, officer, director, principal shareholder, or employee of the bank or any other person acting on behalf of or with funds from the bank or an affiliate of the bank. (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— (i) the achievement of a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System (or an equivalent rating under an equivalent rating system) in connection with the most recent examination or subsequent review of the depository institution; and (ii) at least a rating of 2 for management, if such rating is given; or (B) in the case of any depository institution that has not been examined, the existence and use of managerial resources that the appropriate Federal banking agency determines are satisfactory.
References In Text
The Gramm-Leach-Bliley Act, referred to in subsecs. (a)(2)(B)(iii), (b)(2)(A), (3), is Pub. L. 106–102,
Section 25 of the Federal Reserve Act, referred to in subsec. (g)(3)(B), is classified to subchapter I (§ 601 et seq.) of chapter 6 of this title. Section 25A of the Federal Reserve Act is classified to subchapter II (§ 611 et seq.) of chapter 6 of this title.
The Bank Service Company Act, referred to in subsec. (g)(3)(B), is Pub. L. 87–856,
Prior Provisions
A prior section 5136A of the Revised Statutes was renumbered section 5136B by Pub. L. 106–102 and is classified to section 25a of this title.
Amendments
2010—Subsec. (a)(2)(E). Pub. L. 111–203, § 939(d)(1), substituted “standards of credit-worthiness established by the Comptroller of the Currency” for “any applicable rating”.
Subsec. (a)(3). Pub. L. 111–203, § 939(d)(2), substituted “Requirement” for “Rating or comparable requirement” in heading.
Subsec. (a)(3)(A). Pub. L. 111–203, § 939(d)(3), amended subpar. (A) generally. Prior to amendment, text read as follows: “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).”
Subsec. (f). Pub. L. 111–203, § 939(d)(4), substituted “meet standards of credit-worthiness” for “maintain public rating or” in heading.
Subsec. (f)(1). Pub. L. 111–203, § 939(d)(5), substituted “standards of credit-worthiness established by the Comptroller of the Currency” for “any applicable rating”.
Effective Date Of Amendment
Pub. L. 111–203, title IX, § 939(g),
Effective Date
Section effective 120 days after