12 U.S.C. § 1831e | Activities of savings associations

(a)

In general

January 1, 1990On and after , 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)

section 1464(t) of this title the savings association is and continues to be in compliance with the fully phased-in capital standards prescribed under .

(b)

Differences of magnitude between State and Federal powers

section 1464(c)(2)(B) of this titleNotwithstanding subsection (a)(1), if an activity (other than an activity described in ) 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)

section 1464(t) of this title the savings association chartered under State law is and continues to be in compliance with the fully phased-in capital standards prescribed under .

(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)

section 1464(t) of this title the savings association is and continues to be in compliance with the fully phased-in capital standards prescribed under .

(3)

Transition rule

(A)

In general

July 1, 1994The 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 .

(B)

Treatment of noncompliance during divestment

May 1, 1989With respect to any equity investment held by any savings association on , 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.

(d)

Corporate debt securities

(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

section 1464(c)(1) of this titleThe 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 .

(e)

Transfer of corporate debt security in exchange for a qualified note

(1)

Acquisition of note

1 So in original. Probably should be section “1468”.

August 9, 1989Notwithstanding subsections (a), (b), and (c) of section 1464  of this title 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 , 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)

December 31, 1988 the insured savings association was in compliance with applicable capital requirements on , 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)

August 9, 1989 before the end of the 90-day period beginning on , 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)

August 9, 1989August 9, 1989 before the end of the 1-year period beginning on , in the case of an insured savings association that, as of , is controlled by a savings and loan holding company; or

(ii)

August 9, 1989August 9, 1989 before the end of the 2-year period beginning on , in the case of a savings association that is not, as of , 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

section 1468 of this titleThe exemption provided by this subsection from subsections (a), (b), and (c) of 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.

(f)

Determinations

The Corporation shall make determinations under this section by regulation or order.

(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

August 9, 1989Notwithstanding paragraph (1), subsections (a) and (b) shall not be construed to require a savings association to divest itself of any assets acquired before .

(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.

Sept. 21, 1950, ch. 967, § 2 Pub. L. 101–73, title II, § 222Aug. 9, 1989103 Stat. 269 Pub. L. 102–242, title I, § 151(a)(3)Dec. 19, 1991105 Stat. 2284 Pub. L. 103–325, title VI, § 602(a)(56)Sept. 23, 1994108 Stat. 2290 Pub. L. 104–208, div. A, title II, § 2704(d)(14)(X)Sept. 30, 1996110 Stat. 3009–494 Pub. L. 109–171, title II, § 2102(b)Feb. 8, 2006120 Stat. 9 Pub. L. 109–173, § 8(a)(32)Feb. 15, 2006119 Stat. 3615 Pub. L. 111–203, title III, § 363(9)July 21, 2010124 Stat. 1555([28], as added , , ; amended , , ; –(58), , , 2291; , , ; , , ; , , ; , title IX, § 939(a)(2), (3), , , 1885.)

Editorial Notes

Amendments

Pub. L. 111–203, § 939(a)(2)(A)2010—Subsec. (d). , struck out “not of investment grade” after “securities” in heading.

Pub. L. 111–203, § 939(a)(2)(B)Subsec. (d)(1). , substituted “that does not meet standards of credit-worthiness as established by the Corporation” for “not of investment grade”.

Pub. L. 111–203, § 939(a)(2)(C)Subsec. (d)(2). , struck out “not of investment grade” after “security”.

Pub. L. 111–203, § 939(a)(2)(D)Subsec. (d)(3). , (E), redesignated par. (4) as (3) and struck out former par. (3). Prior to amendment, text of par. (3) read as follows:

In generalJuly 1, 1994“(A) .—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 .

Treatment of noncompliance during divestmentAugust 9, 1989“(B) .—With respect to any corporate debt security not of investment grade held by any savings association or subsidiary on , 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.”

Pub. L. 111–203, § 939(a)(2)(F)(i)Subsec. (d)(3)(A). , (ii), redesignated subpar. (B) as (A) and struck out former subpar. (A). Prior to amendment, text of subpar. (A) read as follows: “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.”

Pub. L. 111–203, § 939(a)(2)(F)(iii)Subsec. (d)(3)(B). , substituted “that does not meet standards of credit-worthiness as established by the Corporation” for “not of investment grade”.

Pub. L. 111–203, § 939(a)(2)(F)(ii), redesignated subpar. (C) as (B). Former subpar. (B) redesignated (A).

Pub. L. 111–203, § 939(a)(2)(F)(ii)Subsec. (d)(3)(C). , redesignated subpar. (C) as (B).

Pub. L. 111–203, § 939(a)(2)(E)Subsec. (d)(4). , redesignated par. (4) as (3).

Pub. L. 111–203, § 939(a)(3)(A)Subsec. (e). , struck out “not of investment grade” after “security” in heading.

Pub. L. 111–203, § 939(a)(3)(B)Subsec. (e)(1). , substituted “that does not meet standards of credit-worthiness as established by the Corporation” for “not of investment grade” in introductory provisions.

Pub. L. 111–203, § 363(9)(A)(i)(I)Subsec. (e)(2)(A)(ii). , substituted “Comptroller of the Currency or the Corporation, as appropriate” for “Director of the Office of Thrift Supervision”.

Pub. L. 111–203, § 939(a)(3)(C)Subsec. (e)(2)(B). , substituted “that does not meet standards of credit-worthiness established by the Corporation” for “not of investment grade”.

Pub. L. 111–203, § 939(a)(3)(C)Subsec. (e)(2)(C). , substituted “that does not meet standards of credit-worthiness established by the Corporation” for “not of investment grade”.

Pub. L. 111–203, § 363(9)(A)(i)(II), substituted “Comptroller of the Currency or the Corporation, as appropriate,” for “Director of the Office of Thrift Supervision”.

Pub. L. 111–203, § 939(a)(3)(C)Subsec. (e)(2)(D), (E). , substituted “that does not meet standards of credit-worthiness established by the Corporation” for “not of investment grade”.

Pub. L. 111–203, § 363(9)(A)(i)(III)Subsec. (e)(2)(F). , substituted “Comptroller of the Currency or the Corporation, as appropriate” for “Director of the Office of Thrift Supervision” in introductory provisions.

Pub. L. 111–203, § 939(a)(3)(C)Subsec. (e)(2)(F)(ii). , substituted “that does not meet standards of credit-worthiness established by the Corporation” for “not of investment grade”.

Pub. L. 111–203, § 939(a)(3)(C)Subsec. (e)(2)(G). , substituted “that does not meet standards of credit-worthiness established by the Corporation” for “not of investment grade” in two places.

Pub. L. 111–203, § 939(a)(3)(C)Subsec. (e)(3)(A). , substituted “that does not meet standards of credit-worthiness established by the Corporation” for “not of investment grade”.

Pub. L. 111–203, § 363(9)(A)(ii)(I), substituted “Comptroller of the Currency or the Corporation, as appropriate” for “Director of the Office of Thrift Supervision”.

Pub. L. 111–203, § 939(a)(3)(C)Subsec. (e)(3)(B). , substituted “that does not meet standards of credit-worthiness established by the Corporation” for “not of investment grade”.

Pub. L. 111–203, § 363(9)(A)(ii)(II), substituted “Comptroller of the Currency or the Corporation, as appropriate,” for “Director of the Office of Thrift Supervision” in introductory provisions.

Pub. L. 111–203, § 363(9)(B)Subsec. (h)(2). , substituted “Comptroller of the Currency, of the Corporation,” for “Director of the Office of Thrift Supervision”.

Pub. L. 109–1732006—Subsecs. (a)(1), (b)(1), (c)(2)(A). substituted “Deposit Insurance Fund” for “affected deposit insurance fund”.

Pub. L. 109–171 Pub. L. 104–208, § 2704(d)(14)(X) repealed . See 1996 Amendment note below.

Pub. L. 104–208, § 2704(d)(14)(X)Pub. L. 109–1711996—Subsecs. (a)(1), (b)(1), (c)(2)(A). , which directed substitution of “Deposit Insurance Fund” for “affected deposit insurance fund”, was repealed by . See Effective Date of 1996 Amendment note below and 2006 Amendment note above.

Pub. L. 103–325, § 602(a)(56)1994—Subsec. (c)(2)(A)(i). , substituted “; or” for “, or”.

Pub. L. 103–325, § 602(a)(57)Subsec. (d)(4)(C). , substituted “subparagraph” for “subparagraphs”.

Pub. L. 103–325, § 602(a)(58)Subsec. (e)(4). , substituted “and any other” for “any other”.

Pub. L. 102–2421991—Subsecs. (h), (i). redesignated subsec. (i) as (h) and struck out former subsec. (h) which required that all savings associations with uninsured deposits disclose in clear and conspicuous statements that its deposits were not insured.

Statutory Notes and Related Subsidiaries

Effective Date of 2010 Amendment

section 363(9) of Pub. L. 111–203 section 351 of Pub. L. 111–203 section 906 of Title 2Amendment by effective on the transfer date, see , set out as a note under , The Congress.

Pub. L. 111–203July 21, 2010section 939(g) of Pub. L. 111–203 section 24a of this titleAmendment by section 939(a)(2), (3) of effective 2 years after , see , set out as a note under .

Effective Date of 2006 Amendment

Pub. L. 109–173Mar. 31, 2006section 8(b) of Pub. L. 109–173 section 1813 of this titleAmendment by effective , see , set out as a note under .

Pub. L. 109–171Feb. 8, 2006section 2102(c) of Pub. L. 109–171 section 1821 of this titleAmendment by effective no later than the first day of the first calendar quarter that begins after the end of the 90-day period beginning , see , set out as a Merger of BIF and SAIF note under .

Effective Date of 1996 Amendment

Pub. L. 104–208Jan. 1, 1999section 2704(c) of Pub. L. 104–208 section 1821 of this titleAmendment by effective , if no insured depository institution is a savings association on that date, see , formerly set out as a note under .

Effective Date of 1991 Amendment

Pub. L. 102–242, title I, § 151(a)(3)Dec. 19, 1991105 Stat. 2284Dec. 19, 1991, , , provided that the amendment made by that section is effective 1 year after .