The House Banking Committee recently finished work on a massive package of regulatory relief measures introduced by Rep. Doug Bereuter, R-Neb. A number of important amendments were added as the panel wended its way through long hours of debate on the bill, formally the Financial Institutions Regulatory Relief Act of 1995. The following is a summary of some of the key provisions in the legislation as approved by the House Banking Committee last week.
Community Reinvestment Act. Banks with under $100 million in assets and located outside of metropolitan statistical areas would be exempted from the CRA. Additionally, an amendment introduced by Rep. Jerry Weller, R- Ill., would exempt a bank from CRA if it and its bank holding company do not have aggregate assets in excess of $100 million.
Banks under $250 million of assets with at least "satisfactory" CRA ratings would be allowed to self-certify that they are complying with the 1977 reinvestment law.
An amendment added by Rep. Bill McCollum, R-Fla., would eliminate the enforcement mechanism in the Community Reinvestment Act. Instead, CRA performance would be factored into the management portion of an institution's Camel rating.
Under the amendment, community groups' protests - which currently can block mergers and branch openings or closings - no longer would be able to hold up such applications.
Fair-Lending. A number of provisions that diluted the Justice Department's ability to pursue fair-lending investigations were removed during the full committee vote. Rep. Maurice Hinchey, D-N.Y., reinstated the use of statistical data that show disparate impact in lending discrimination cases.
Another amendment restored the ability of the Attorney General to initiate fair-lending suits, but mandated that such cases may be brought only after consultation with the appropriate banking agency.
Truth-in-Lending. The bill addresses the Rodash decision, which allowed consumers to repudiate mortgages. It would also require coordination and simplification of the mortgage-related disclosures required by Truth-in- Lending and the Real Estate Settlement Procedures Act.
Truth-in-Savings. The bill would repeal most of the Truth-in-Savings disclosure requirements while leaving in place the disclosure of basic account information - minus the annual percentage yield. Also remaining in place is the requirement that institutions pay interest on the full amount of the principal for each day of the calculation period at the stated rate of interest.
Information sharing. The bill would allow financial institutions to share customer information among affiliates and subsidiaries, while giving consumers the opportunity to opt out of such information sharing.
Electronic Funds Transfer Act. The bill clarifies that the act applies to stored value cards only when the card is actually used to access an account to effect a transaction.
Real Estate Settlement Procedures Act. Nearly all of Respa rulemaking authority is transferred from the Department of Housing and Urban Development to the Federal Reserve Board. Rulemaking jurisdiction over section 8, which covers kickbacks in real estate settlements, remains with HUD.
Enforcement authority for section 8 is split among HUD and the appropriate banking regulators.
Home Mortgage Disclosure Act. Institutions under $50 million are exempted from reporting HMDA data.
Nonbanking acquisitions. Well-capitalized and well-managed bank holding companies would be permitted to acquire and engage in permissible nonbanking activities without prior approval. Holding companies would be required to notify the Fed in advance.
Branch applications. Branch applications for well-capitalized, Camel 1 or 2 institutions with at least a "satisfactory" CRA rating would be eliminated.
Management Interlocks Act. Asset size thresholds in the act would be adjusted to account for inflation and the industry's general growth. Interlocks between organizations that together control less than 20% of a local market's deposits would be exempted from the Act.
Audit committees. Currently, all banks with over $500 million of assets must have an audit committee composed entirely of outside directors.
The bill would exempt all well-capitalized and well-managed institutions from this rule. It would also allow the Federal Deposit Insurance Corp. to let any bank that experiences hardship in getting enough outside directors have a simple majority on its audit committee.
Insurance. A provision added by House Banking Committee Chairman Jim Leach at the behest of House GOP leaders bans the Comptroller of the Currency from expanding national banks' insurance power. States would regulate bank insurance sales but would not be allowed to discriminate against national banks.
Annuity sales would be protected under the bill, which gives states the right to regulate only disclosures and licensing.
An amendment by Rep. Michael Castle, R-Del., would strengthen the antidiscrimination language in the "Comptroller's moratorium" by requiring state restrictions on national banks to be the least restrictive way to accomplish a state's regulatory goals. The Castle amendment also would ensure that states cannot ban the use of letters of credit.
And, thanks to an amendment added by Rep. Richard Baker, R-La., bank holding companies would be able to own insurance companies in accordance with state laws.
Rep. Floyd Flake, D-N.Y., added an amendment that would allow national banks to sell insurance in empowerment zones.
Qualified thrift lenders. An amendment added by Rep. Weller during the full committee deliberations would allow savings institutions to be qualified thrift lenders by satisfying either the QTL test or the Internal Revenue Service asset composition tax test. Currently, thrifts have to pass both tests.
Outside directors and accountants. The bill would repeal a requirement that independent public accountants confirm management's assertions on the effectiveness of an institution's internal financial controls and adherence to safety and soundness rules.
