Section 4. No bank holding company while it owns or controls more than 5 percent of the shares in an insured bank shall acquire or retain after 5 years from the effective date of this act (1) any shares or interest in a nonbanking corporation except safety deposit or fiduciary business; (2) any shares or obligations other than those provided for in the seventh paragraph of section 5136 of the Revised Statutes.

Section 5. No bank holding company owning 5 percent of any insured ank shall, 5 years after date of this act, engage in any business other than that of banking or managing or controlling banks.

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

Section 7. Enactment of this act shall not be construed as preventing any State, to an extent not inconsistent with the act, from exercising the same power and jurisdiction it now has with respect to banks, bank holding companies and subsidiaries.

Section 8. In exercising discretion invested in them in this act the Board of Governors of the Federal Reserve, the Comptroller of the Currency, and the FDIC 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.

Section 9. Violations.-Corporations violating this act shall be subject to a fine of not more than $1,000 a day during which violation continues. Individuals subject to fine of not more than $10,000 or imprisonment of not more than 1 year, or both.

Section 10 (a). Amends section 112 (b) of the Internal Revenue Code to provide

(A) Distributions.-No gain to distribution shall be recognized in the case of receipt of property from a bank holding company ordered to divest itself from such property under provisions of sections 4 and 5 of this act.

(B) Exchanges. No gain or loss to be recognized if bank holding company transfers property it is not authorized to hold under sections 4 and 5 of this act to a corporation organized to receive such property and whose stock is not therein distributed to the shareholders of the bank holding company.

(C) Paragraph A and B just above shall not apply unless Board of Governors of Federal Reserve certifies distribution was of property not permitted to be held under sections 4 and 5 of this act and was necessary to effectuate provision of this act. In such certifications the stocks, securities, or other property so distributed shall be specified and itemized.

(b) Amends section 113 (a) of the Internal Revenue Code to provide the basis for property acquired subject to distribution pursuant to this act.

(c) Section 117 (h) (3) of the Internal Revenue Code is amended to provide that the terms that a person holds property acquired pursuant to distribution required by sections 4 and 5 of this act shall include the time held by the bank holding company prior to such distribution.

[S. 1118, 83d Cong., 1st sess.]

A BILL To provide for the control and regulation of bank holding companies, and for other purposes

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”.

DECLARATION OF POLICY

SEC. 2. For the purposes of this Act a bank holding company and its subsidiary banks shall constitute a branch banking system.

DEFINITIONS

SEC. 3. (a) "Bank holding company" means (1) any company which now or hereafter directly or indirectly owns, controls, or holds with power to vote, 25 percentum or more of the voting shares of each of two or more banks or of a company which is or becomes a bank holding company by virtue of this Act;

and (2) any company which the Board determines, after notice and opportunity for hearing, directly or indirectly (either alone or pursuant to an arrangement or understanding with one or more other persons) a controlling influence over the management or policies of two or more banks.

Notwithstanding the foregoing, the term "bank holding company" shall not include any mutual savings bank or any corporation all of the stock of which is ned by the United States 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 persons beneficially interested in such bank.

Nor shall any corporation or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, be classed as or held to be a bank holding company by reason of the ownership of the stock of any bank as of the effective date of this Act.

(b) "Subsidiary," with respect to a specified bank holding company, means (1) any company 25 per centum or more of whose outstanding voting shares (excluding shares owned by the United States or by any company wholly owned by the United States) is owned or controlled by such bank holding company; or (2) any company the management and policies of which the Board determines, after notice and opportunity for hearing, are in fact subject to a controlling influence by such bank holding company (either alone or pursuant to an agreement or understanding with one or more other persons).

(c) "Company" means any bank, corporation, partnership, joint-stock company, business trust, voting trust, association, or any similar organized group of persons, whether incorporated or not, excluding, however, any such company which is owned by the United States.

(d) "Bank" means any national bank or any State bank, savings bank, or trust company, but shall not include any organization operating under section 25 or 25 (a) of the Federal Reserve Act, or any organization which does not do business within the United States. "State member bank" means any State bank which is a member of the Federal Reserve System. "District bank” means any State bank organized or operating under the Code of Law for the District of Columbia.

(e) "Board" means the Board of Governors of the Federal Reserve System.

REGISTRATION, REPORTS, AND EXAMINATION

SEC. 4. (a) Within ninety days after the effective date of this Act, or within ninety days after becoming a bank holding company, whichever is later, each bank holding company shall register with the Board on forms prescribed by the Board, which shall include such information with respect to the financial condition and operations, management, and intercompany relationships of the bank holding company and its subsidiaries, and related matters, as the Board may deem necessary or appropriate to carry out the purposes of this Act.

(b) The Board is authorized to issue such regulations and orders as may be necessary to enable it to administer and carry out the purposes of this Act and prevent evasions thereof.

(c) The Board from time to time may require reports under oath to keep it informed as to whether the provisions of this Act and such regulations and orders issued thereunder have been complied with; and to ascertain the condition of each bank holding company and each subsidiary thereof. The Board shall, as far as possible, use the reports of examinations made by the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the appropriate State Ank supervisory authority for the purposes of this section.

ACQUISITION OF BANK SHARES OR BANK ASSETS

SEC. 5. (a) It shall be unlawful except with the prior approval of the Board (1) for any action to be taken which results in a company becoming a bank holding company under section 3 (a) (1) of this Act; (2) for any bank holding company to acquire, directly or indirectly, any voting shares of a bank; or (3) for any bank holding company or subsidiary thereof other than a bank to acquire all or substantially all of the assets of a bank.

(b) It shall be unlawful for any bank which is a bank holding company or any bank which is a subsidiary of a bank holding company to acquire all or substantially all of the assets of any bank except with the prior approval of the (1) Comptroller of the Currency if the acquiring bank is a national bank or a District bank, (2) the appropriate State supervisory authority if the acquiring bank is an insured nonmember State bank, or (3) the Board in the case of all other acquiring banks.

(c) Before approving any application under this section, the Federal agency concerned shall give notice to, and allow thirty days within which views and recommendations may be submitted by, the Comptroller of the Currency if the applicant company or any bank affected by the application is a national bank or a District bank; or to the appropriate supervisory authority of the State in which applicant company or any bank affected by the application is a State bank. If the authority so notified by the Federal Agency concerned files its written disapproval of the application within said thirty days' period the application shall not be granted.

(d) Notwithstanding any other provision of this section, no application shall be approved under this section which will permit (1) any bank holding company or any subsidiary thereof to acquire, directly or indirectly, any voting shares of, interest in, or all or substantially all of the assets of any bank located outside of the State in which such bank holding company or subsidiary thereof maintains its principal office and place of business or in which it conducts its principal operations; (2) any bank holding company or subsidiary thereof to acquire, directly or indirectly, any voting shares of or interest in or all or substantially all of the assets of any additional bank except in conformity with the laws governing branches of banks in such State.

INTERESTS IN NONBANKING ORGANIZATIONS

SEC. 6. (a) Except as otherwise provided in this Act, it shall be unlawful for any bank holding company, after two years from the effective date hereof, to own any shares or other securities or obligations of any company other than a bank or to engage in any business other than that of banking. The Board is authorized, upon application by a bank holding company, to extend this period from time to time as to such company for not more than one year at a time if, in its judgment, such an extension would not be detrimental to the public interest. However, nothing herein provided shall be construed to authorize the Board to extend any such period beyond a date five years after the enactment hereof or five years after a company becomes a bank holding company as provided in section 2, whichever is later.

(b) The prohibitions in this section shall not apply

(1) to shares or other securities or obligations owned or acquired by a bank holding company in any company engaged solely in holding or operating properties used wholly or in part by any subsidiary that is a bank in its operations or acquired for such future use or engaged solely in conducting a safe deposit business, or solely in the business of liquidating assets acquired from such bank holding company and its subsidiaries;

(2) to shares, securities, or obligations acquired by a bank holding company which is a bank, or its banking subsidiary, in satisfaction of a debt previously contracted in good faith, but such bank holding company or its subsidiary shall dispose of such shares, securities or obligations within a period of two years from the date on which they were acquired or from the effective date of this Act, whichever is later;

(3) to share, securities, or obligations acquired by a bank holding company from any of its subsidiaries, which subsidiary has been requested to dispose of such voting shares, securities, or obligations by any Federal or State authority having statutory power to examine such subsidiary, but such ba holding company or its subsidiary shall dispose of such shares, securities, or obligations within a period of two years from the date on which they were acquired or from the effective date of this Act, whichever is later;

(4) to shares or other securities or obligations which are held or acquired by a bank, which is a bank holding company, in a fiduciary capacity or which are of the kinds and amounts eligible for investment by national banks under the provisions of section 5136 of the Revised Statutes;

(5) to a nonmember State bank which is a bank holding company if the effect of applying such prohibitions is to prevent such bank from owning any shares or investment which such bank is permitted to own under the laws of the State in which such bank is operating; or

(6) to the ownership by a bank holding company or shares or other securities or obligations of an investment company which is not a bank holding company and which is not engaged in any business other than investing in securities: Provided, That if the Board, after notice and opportunity for hearing, determines that the ownership or control of such shares, securities or obligations of any such investment company is resulting in the violation or evasion of any of the purposes or provisions of this Act, it may by order require such bank holding company to dispose of all or any part thereof forthwith.

BORROWING BY BANK HOLDING COMPANY OR ITS SUBSIDIARIES

SEC. 7. From and after the effective date of this Act, it shall be unlawful for a bank

(a) to invest any of its funds in the capital stock, bonds, debentures, or other obligations of a bank holding company of which it is a subsidiary or a subsidiary of such bank holding company;

(b) to accept the capital stock, bonds, debentures, or other obligations of a bank holding company of which it is a subsidiary or a subsidiary of such bank holding company, as collateral security for advances made to any person or company: Provided, however, That any bank may accept such capital stock, bonds, debentures, or other obligations as a security for debts previously contracted but such collateral shall not be held for a period of over two years;

(c) to purchase securities, other assets or obligations under repurchase agreement from a bank holding company of which it is a subsidiary or a subsidiary of such bank holding company; and

(d) to make any loan or extension of credit to a bank holding company of which it is a subsidiary or to a subsidiary of such bank holding company. Non-interest-bearing deposits to the credit of a bank shall not be deemed to be a loan or advance to the bank of deposit, nor shall the giving of immediate credit to a bank upon uncollected items received in the ordinary course of busi ness be deemed to be a loan or advance to the depositing bank.

The provisions of this section shall not apply (1) to the capital stock, bonds, debentures, or other obligations of any company described in section 6 (b) (1) of this Act, or (2) any company whose subsidiary status has arisen out of a bona fide debt to the bank contracted prior to the date of the creation of such status, or (3) any company whose subsidiary status exists by reason of the ownership or control of voting shares thereof by the bank as executor, administrator, trustee, receiver, agent, or depositary, or in any other fiduciary capacity, except where such shares are held for the benefit of all or a majority of the stockholders of such bank.

RESERVATION OF RIGHTS TO STATES

SEC. 8. The enactment by Congress of the "Bank Holding Company Act of 1953" shall not be construed as preventing any State from exercising such powers and jurisdiction which it now has or may hereafter have with respect to banks, bank holding companies, and subsidiaries thereof.

HEARINGS AND REVIEW

SEC. 9. Any shareholder, bank, holding company affiliate, company, individual, or group directly interested in any transaction or proposal for which approval is required pursuant to the provisions of this Act shall have the right to make application therefor to the appropriate agency having authority to grant or deny such approval pursuant to this Act. If the agency to which any such application is ade shall disapprove the same, it shall be the duty of such agency promptly to notify the applicant or applicants, stating the facts which in the judgment of the agency warrant the adverse finding with respect to any factor or factors. Any person as defined by section 2 (b) of the Administrative Procedure Act directly affected by any order, rule, regulation, or determination made, or other action taken by such agency, or affected by any failure to take action on an application to any such agency under this Act shall have the right, pursuant to the provisions of the Administrative Procedure Act, to a judicial review of any such order, rule, regulation, adjudication, determination, or other action or nonaction of such agency by which such person is adversely affected or aggrieved or has suffered legal wrong. Upon such review the action or nonaction which is the subject thereof shall not be considered to be action committed to agency discretion within

section 10 of the Admiinstrative Procedure Act (Act of June 11, 1946, ch. 324, sec. 10, 60 Stat. 243; title 5, sec. 1009 U. S. C. A.). The facts shall be subject to trial de novo in an appropriate court proceeding, and the action or nonaction of the agency shall be subject to review and may be corrected by the court if the same is shown to be discriminatory, unwarranted by the facts, based on consideration inconsistent with the policies of this Act, or otherwise unlawful within subsection (e) of section 10 of the said Administrative Procedure Act.

PENALTIES

SEC. 10. Any company which willfully violates any provision of this Act, or any regulation or order issued by the Board pursuant thereto, 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. Every officer, director, agent, and employee of a bank holding company shall be subject to the same penalties for false entries in any book, report, or statement of such bank holding company as are applicable to officers, directors, agents, and employees of member banks for false entries in any books, reports, or statements of member banks under section 1005 of title 18, United States Code.

TECHNICAL AMENDMENTS

SEC. 11. (a) The last sentence of the sixteenth paragraph of section 4 of the Federal Reserve Act, as amended, is amended by striking out all of the language therein which follows the colon and by inserting in lieu thereof the following: "Provided, That whenever any member banks within the same Federal Reserve district are subsidiaries of the same bank holding company within the meaning of the Bank Holding Company Act of 1953, participation in any such nomination or election by such member banks, including such bank holding company if it is also a member bank, shall be confined to one of such banks, which may be designated for the purpose by such holding company."

(b) (1) The eighteenth paragraph of section 9 of the Federal Reserve Act is amended by striking out the last sentence of such paragraph.

(2) The twenty-first paragraph of section 9 of the Federal Reserve Act is repealed.

(c) Subsection (c) of section 2 of the Banking Act of 1933, as amended, is repealed.

(d) Section 5144 of the Revised Statutes, as amended, is amended to read as follows:

"SEC. 5144. In all elections of directors, each shareholder shall have the right to vote the number of shares owned by him for as many persons as there are directors to be elected, or to cumulate such shares and give one candidate as many votes as the number of directors multiplied by the number of his shares shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and in deciding all other questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him; except that (1) this shall not be construed as limiting the voting rights of holders of preferred stock under the terms and provisions of articles of association, or amendments thereto, adopted pursuant to the provisions of section 302 (a) of the Emergency Banking and Bank Conservation Act, approved March 9, 1933, as amended; (2) in the election of directors, shares of its own stock held by a national bank as sole trustee, whether registered in its own name as such trustee or in the name of its nominee, shall not be voted by the registered owner unless under the terms of the trust the manner in which such shares shall be voted may be determined by a donor or beneficiary of the trust and unless such donor or beneficiary actually directs how such shares shall be voted; and (3) shares of its own stock held by a national bank and one or more persons as trustees may be voted by such other person or persons, as trustees, in the same manner as if he or they were the sole trustee. Shareholders may vote by proxies duly authorized in writing; but no officer, clerk, teller, or bookkeeper of such bank shall act as proxy; and no shareholder whose liability is past due and unpaid shall be allowed to vote. Whenever shares of stock cannot be voted by reason of being held by the bank as sole trustee, such shares shall be excluded in determining whether matters voted upon by the shareholders were adopted by the requisite percentage of shares."