Bank Holding Legislation, --

The CHAIRMAN. The committee will please come to order. The bills we are considering, S. 76 and S. 1118, will be inserted in the record for the information of the committee, together with a sectional analysis of each.

(S. 76 and S. 1118 and the sectional analyses follow :)

[S. 76, 83d Cong., 1st sess.]

A BILL To define bank holding companies, control their future expansion, and to require the divestment of nonbanking assets

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Bank Holding Company Act of 1953."

SEC. 2 DEFINITIONS.-(a) "Bank holding company" means any corporation, business trust, partnership, association, or other similar organization which at any time after April 15, 1953, owns or controls, directly or indirectly, 50 per centum or more of the shares of an insured bank (as defined in section 12B (c) (8) of the Federal Reserve Act) or 50 per centum or more of the shares voted for the election of directors of an insured bank at the preceding election, or controls in any manner the election of a majority of the directors of an insured bank, or for the benefit of whose shareholders or members more than 50 per centum of the shares of an insured bank is held by trustees at any time after April 15, 1953; or a successor to any such organization. Notwithstanding the foregoing, the term "bank holding company" shall not include any mutual savings bank, the Federal Deposit Insurance Corporation, or any corporation all of the stock of which is owned by the United States, or any organization which does not own or control more than 5 per centum of the voting shares of more than two banks and is determined by the Board of Governors of the Federal Reserve System not to be engaged directly or indirectly as a business in managing or controlling one or more banks; and no bank shall be a bank holding company by virtue of the ownership or control of shares in a fiduciary capacity, except where such shares are held for the benefit of all or a majority of the rsons beneficially interested in such bank.

(b) The term "successor" shall include any organization which acquires from a bank holding company stock of an insured bank, when and if the relationship between the organization and the bank holding company is such that the transaction effects no substantial change in the control or beneficial ownership of such stock. The Board of Governors of the Federal Reserve System may, by regulation, further define the term "successor" to the extent necessary to prevent evasion of the purposes of this Act.

SEC. 3. No bank holding company shall, while it owns or controls more than 5 per centum of the shares of any insured bank, acquire any shares of any bank except with the approval of

(1) the Board of Governors of the Federal Reserve System if the bank is a State member bank (other than a district bank);

(2) the Comptroller of the Currency if the bank is a national or a district bank; or

(3) the Federal Deposit Insurance Corporation if the bank is a nonmember bank. Before approving any application under this section, the Federal agency concerned shall consider any recommendations or views submitted by the bank supervisory authority of the State in which is located the State bank the stock of which a bank holding company seeks to acquire, such State authority to be given notice of the application and allowed thirty days in which to submit views and recommendations.

SEC. 4. No bank holding company, while it owns or controls more than 5 per centum of the shares of any insured bank, shall acquire, or retain after five years from the effective date of this Act, (1) any shares or similar equity interest in any nonbanking corporations or organizations other than those engaged exclusively in conducting a safe deposit or fiduciary business, or (2) any obligations other than "investment securities" of the types and in the amounts which it could purchase or retain if it were a bank subject to the seventh paragraph of section 5136 of the Revised Statutes; however, this section shall not apply to bank holding companies which are banks of deposit (including trust companies which receive deposits) organized under the laws of a State or of the United States.

SEC. 5. No bank holding company, while it owns or controls more than 5 per centum of the shares of any insured bank, shall, after five years from the effective date of this Act, engage in any business other than that of banking or managing or controlling banks.

SEC. 6. Sections 3, 4, and 5 shall not apply to good-faith transactions by banks or trust companies (a) in a fiduciary capacity, or (b) in the regular course of securing or collecting debts previously contracted.

SEC. 7. The enactment by Congress of the Bank Holding Company Act of 1953 shall not be construed as preventing any State, to an extent not inconsistent with this Act, from exercising the same power and jurisdiction which it now has with respect to banks, bank holding companies, and subsidiaries thereof.

SEC. 8. In the exercise of the discretion vested in them by this Act and other provisions of law with respect to approving or permitting expansion of multipleoffice banking, the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation shall take into consideration the factors specified in section 12B (g) of the Federal Reserve Act, and also the policy of Congress, hereby declared, in favor of local ownership and control of banks and competition in the field of banking.

SEC. 9. Any corporation, business trust, partnership, association, or other similar organization which willfully violates any provision of this Act shall upon conviction be fined not more than $1,000 for each day during which the violation continues. Any individual who willfully participates in a violation of any provision of this Act shall upon conviction be fined not more than $10,000 or imprisoned not more than one year, or both.

SEC. 10. (a) Section 112 (b) of the Internal Revenue Code is amended by inserting at the end thereof the following:

"(11) DISTRIBUTIONS AND EXCHANGES PURSUANT TO BANK HOLDING COMPANY ACT OF 1953.

"(A) Distributions.-In the case of a distribution of property not permitted to be owned by a bank holding company under the provisions of sections 4 or 5 of the Bank Holding Company Act of 1953, held by a bank holding company on the date of enactment of such Act or thereafter legally acquired pursuant to such Act, to a shareholder in such bank holding company as defined in such Act, without the surrend by such shareholder of stock or securities in such company, no gain to the distributee shall be recognized, except to the extent provided in section 113 (a) (23) (A).

"(B) Exchanges. No gain or loss shall be recognized if a bank holding company transfers property not permitted to be owned by a bank, holding company under the provisions of sections 4 or 5 of such Act, to a corporation organized to receive such property solely in exchange for all of the stock of such transferee corporation and such stock is distributed forthwith in a distribution subject to the provisions of subparagraph (A).

"(C) Application of Subparagraphs (A) and (B).—The provisions of subparagraphs (A) and (B) of this paragraph shall not apply unless the Board of Governors of the Federal Reserve System shall certify that such distribution or exchange was of property not permitted to be owned under the provisions of section 4 or 5 of the Bank Holding Company Act of 1953 and was necessary or appropriate to effectuate the provisions of such Act. In such certifications, the Board of Governors of the Federal Reserve System shall specify and itemize the stock, securities, or other property so distributed or exchanged."

(b) Section 113 (a) of the Internal Revenue Code is amended by inserting at the end thereof the following:

"(23) PROPERTY ACQUIRED IN DISTRIBUTION PURSUANT TO BANK HOLDING COMPANY ACT OF 1953.

"(A) If stock or securities or other property are acquired in a distribution subject to the provisions of section 112 (b) (11), then the basis in the case of the stock in respect of which the distribution was made shall be apportioned, under regulations prescribed by the Commissioner with the approval of the Secretary, between such stock and the stock or securities or other property acquired in such distribution. "(B) If property is acquired by a corporation in a transfer from a bank holding company subject to the provisions of section 112 (b) (11) (B), then the basis of such property shall be the same as it would be in the hands of such bank holding company."

"(3) In determining the period for which the taxpayer has held stock or securities received upon a distribution where no gain was recognized to the distributee under the provisions of section 112 (b) (11) (A) or (B) of this chapter, or under the provisions of section 112 (g) of the Revenue Act of 1928 (45 Stat. 818) or of the Revenue Act of 1932 (47 Stat. 197), or under the provisions of section 371 (c) of the Revenue Act of 1938 (52 Stat. 553) or of this chapter, there shall be included the period for which he held the stock or securities in the distributing corporation prior to the receipt of the stock or securities upon such distribution."

SECTIONAL ANALYSIS of S. 76

Section 1. Short title, "Bank Holding Company Act of 1953."

Section 2. Definitions.—(a) “Bank holding company" means any corporation, business trust, partnership, etc., which at any time after April 15, 1953, owns or controls, directly or indirectly, 50 percent or more of the shares of an insured bank or 50 percent of the shares voted for the election of the directors of an insured bank, or controls in any manner the election of the majority of the directors of an insured bank, or for whose benefit the more than 50 percent of the stock is held by trustees.

Term "bank holding company" shall not include any mutual savings bank, the FDIC, any corporation owned by the United States, or any organization that does not own or control more than 5 percent of the voting shares of more than two banks and is determined by the Federal Reserve Board not to be in business of managing or controlling one or more banks; no bank to be a holding company because of ownership of shares in a fiduciary capacity, except where shares are held for benefit of a majority of persons beneficially interested in such bank.

(b) Term "successor" includes any organization which acquires from a bank holding company stock from an insured bank, when and if the relationship beZen the organization and bank holding company is such that the transaction effects no substantial change in the control or beneficial ownership of such stock. Section 3. No bank holding company while it owns or controls more than 5 percent of the shares of any insured bank may acquire any shares of any bank except with the approval of (1) the Board of Governors of the Federal Reserve System, if the bank is a State member bank; (2) the Comptroller of the Currency, if the bank is a national or district bank; or (3) the FDIC, if the bank is a nonmember bank. Before approving any such application, the appropriate Federal agency is to give consideration to views submitted by bank supervisory officials of the State in which is located the State bank being acquired, 30 days after notice shall be given for the submission of such views.

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Bank Holding Legislation, --: Hearings Before ..., 83:1- on S. 76 and S.1118 ...