(f) Common and preferred stock investment
(1) In general
An insured State bank shall not acquire or retain, directly or indirectly, any equity investment of a type or in an amount that is not permissible for a national bank or is not otherwise permitted under this section.
(2) Exception for banks in certain States
Notwithstanding paragraph (1), an insured State bank may, to the extent permitted by the Corporation, acquire and retain ownership of securities described in paragraph (1) to the extent the aggregate amount of such investment does not exceed an amount equal to 100 percent of the bank’s capital if such bank—
(A) is located in a State that permitted, as of September 30, 1991, investment in common or preferred stock listed on a national securities exchange or shares of an investment company registered under the Investment Company Act of 1940 [
15 U.S.C. 80a–1 et seq.]; and
(B) made or maintained an investment in such securities during the period beginning on September 30, 1990, and ending on November 26, 1991.
(3) Exception for certain types of institutions
Notwithstanding paragraph (1), an insured State bank may—
(A)
acquire not more than 10 percent of a corporation that only—
(i) provides directors’, trustees’, and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions; or
(ii) reinsures such policies; and
(B)
acquire or retain shares of a depository institution if—
(i) the institution engages only in activities permissible for national banks;
(ii) the institution is subject to examination and regulation by a State bank supervisor;
(iii) 20 or more depository institutions own shares of the institution and none of those institutions owns more than 15 percent of the institution’s shares; and
(iv) the institution’s shares (other than directors’ qualifying shares or shares held under or initially acquired through a plan established for the benefit of the institution’s officers and employees) are owned only by the institution.
(4) Transition period for common and preferred stock investments
(A) In general
During each year in the 3-year period beginning on December 19, 1991, each insured State bank shall reduce by not less than 1/3 of its shares (as of December 19, 1991) the bank’s ownership of securities in excess of the amount equal to 100 percent of the capital of such bank.
(B) Compliance at end of period
By the end of the 3-year period referred to in subparagraph (A), each insured State bank and each subsidiary of a State bank shall be in compliance with the maximum amount limitations on investments referred to in paragraph (1).
(5) Loss of exception upon acquisition
Any exception applicable under paragraph (2) with respect to any insured State bank shall cease to apply with respect to such bank upon any change in control of such bank or any conversion of the charter of such bank.
(6) Notice and approval
An insured State bank may only engage in any investment pursuant to paragraph (2) if—
(A) the bank has filed a 1-time notice of the bank’s intention to acquire and retain investments described in paragraph (1); and
(B) the Corporation has determined, within 60 days of receiving such notice, that acquiring or retaining such investments does not pose a significant risk to the Deposit Insurance Fund.
(7) Divestiture
(A) In general
The Corporation may require divestiture by an insured State bank of any investment permitted under this subsection if the Corporation determines that such investment will have an adverse effect on the safety and soundness of the bank.
(B) Reasonable standard
The Corporation shall not require divestiture by any bank pursuant to subparagraph (A) without reason to believe that such investment will have an adverse effect on the safety and soundness of the bank.
References in Text
The Investment Company Act of 1940, referred to in subsec. (f)(2)(A), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as amended, which is classified generally to subchapter I (§ 80a–1 et seq.) of chapter 2D of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 80a–51 of Title 15 and Tables.
Section 1831u of this title, referred to in subsec. (j)(4), was subsequently amended, and subsec. (f) of section 1831u no longer defines the terms “host State”, “home State”, and “out-of-State bank”. However, such terms are defined elsewhere in that section.
Prior Provisions
A prior section 1831a, act Sept. 21, 1950, ch. 967, § 2[24], as added Dec. 28, 1979, Pub. L. 96–161, title II, § 202, 93 Stat. 1235, provided that if the applicable rate prescribed in subsec. (a) exceeded the rate a State bank would be permitted to charge in absence of that subsection, that State bank could for a business or agricultural loan of $25,000 or more, notwithstanding State law, take or charge on any evidence of debt, interest of not more than 5 per centum in excess of the discount rate in effect at the Federal Reserve Bank in the district where the bank was located, that the taking or charging of interest at a greater rate than that prescribed by subsec. (a), if knowingly done, would be deemed a forfeit of the entire interest on that particular evidence of debt, and that if such greater rate of interest had already been paid, the payor could recover twice the amount of such payment in a civil action commenced within two years of such payment, prior to repeal by Pub. L. 96–221, title V, § 529, Mar. 31, 1980, 94 Stat. 168, effective at close of Mar. 31, 1980.
Another prior section 1831a, act Sept. 21, 1950, ch. 967, § 2[24], as added Nov. 5, 1979, Pub. L. 96–104, title I, § 102, 93 Stat. 789, identical to this section as added by Pub. L. 96–161, was repealed by section 212 of Pub. L. 96–161, effective at the close of Dec. 27, 1979, except that its provisions would continue to apply to any loan made in any State on or after Nov. 5, 1979, but prior to such repeal.
Another prior section 1831a, act Sept. 21, 1950, ch. 967, § 2[24], as added Oct. 29, 1974, Pub. L. 93–501, title II, § 202, 88 Stat. 1558, identical to this section as added by Pub. L. 96–104, was repealed by section 1 of Pub. L. 96–104 except that its provisions shall continue to apply to any loan made in any State during the period specified in section 206 of Pub. L. 93–501.
Amendments
2006—Subsecs. (a)(1)(A), (d)(1)(A). Pub. L. 109–173, § 8(a)(31)(A), substituted “Deposit Insurance Fund” for “appropriate deposit insurance fund”.
Pub. L. 109–171 repealed Pub. L. 104–208, § 2704(d)(14)(W). See 1996 Amendment note below.
Subsec. (e)(2)(A). Pub. L. 109–173, § 8(a)(31)(B), substituted “risk to the Deposit Insurance Fund.” for “risk to the insurance fund of which such banks are members.”
Subsecs. (e)(2)(B)(ii), (f)(6)(B). Pub. L. 109–173, § 8(a)(31)(C), substituted “the Deposit Insurance Fund” for “the insurance fund of which such bank is a member”.
1997—Subsec. (j). Pub. L. 105–24 amended subsec. (j) generally, substituting pars. (1) to (4) for former pars. (1) to (3) relating to general provisions, activities of branches, and definitions, respectively.
1996—Subsec. (a). Pub. L. 104–208, § 2217(1), substituted “Permissible activities” for “In general” in heading, designated existing provisions as par. (1) and inserted heading, redesignated former pars. (1) and (2) as subpars. (A) and (B) of par. (1), respectively, and realigned margins, and added par. (2).
Subsec. (a)(1)(A). Pub. L. 104–208, § 2704(d)(14)(W), which directed substitution of “Deposit Insurance Fund” for “appropriate deposit insurance fund”, was repealed by Pub. L. 109–171. See Effective Date of 1996 Amendment note below and 2006 Amendment note above.
Subsec. (d)(1)(A). Pub. L. 104–208, § 2704(d)(14)(W), which directed substitution of “Deposit Insurance Fund” for “appropriate deposit insurance fund”, was repealed by Pub. L. 109–171. See Effective Date of 1996 Amendment note below and 2006 Amendment note above.
Subsec. (d)(3). Pub. L. 104–208, § 2217(2), added par. (3).
1994—Subsec. (j). Pub. L. 103–328 added subsec. (j).
1992—Subsec. (e)(1)(B). Pub. L. 102–550 amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “meets the consumer disclosure requirements under section 1828(k) of this title with respect to such insurance.”
Effective Date of 2006 Amendment
Amendment by Pub. L. 109–173 effective Mar. 31, 2006, see section 8(b) of Pub. L. 109–173, set out as a note under section 1813 of this title.
Amendment by Pub. L. 109–171 effective no later than the first day of the first calendar quarter that begins after the end of the 90-day period beginning Feb. 8, 2006, see section 2102(c) of Pub. L. 109–171, set out as a Merger of BIF and SAIF note under section 1821 of this title.
Effective Date of 1996 Amendment
Amendment by section 2704(d)(14)(W) of Pub. L. 104–208 effective Jan. 1, 1999, if no insured depository institution is a savings association on that date, see section 2704(c) of Pub. L. 104–208, formerly set out as a note under section 1821 of this title.
Effective Date of 1992 Amendment
Amendment by Pub. L. 102–550 effective as if included in the Federal Deposit Insurance Corporation Improvement Act of 1991, Pub. L. 102–242, as of Dec. 19, 1991, see section 1609(a) of Pub. L. 102–550, set out as a note under section 191 of this title.
Right of State To Opt Out
Pub. L. 105–24, § 3, July 3, 1997, 111 Stat. 239, provided that:
“Nothing in this Act [amending this section and
section 36 of this title and enacting provisions set out as a note under
section 1811 of this title] alters the right of States under
section 525 of Public Law 96–221 [
12 U.S.C. 1785 note].”