Title 12 — Banks and BankingRelease 119-73not60
§1831a Activities of Insured State Banks
Title 12 › Chapter 16— FEDERAL DEPOSIT INSURANCE CORPORATION › § 1831a
Summary
After December 19, 1991, an insured State bank may not do any business that a national bank is not allowed to do unless the federal deposit insurance agency (the Corporation) says the activity poses no big risk to the Deposit Insurance Fund and the bank meets required capital rules. The Corporation must decide within 60 days after getting a complete application, but it can extend that deadline by up to 30 days and must tell the bank. The same rule applies to a bank’s subsidiaries. Banks and their subsidiaries may not underwrite insurance except to the extent national banks may. Some old insurance activities are allowed to continue: insurance reinsured by the Federal Crop Insurance Corporation that existed before September 30, 1991; insurance a well-capitalized bank or its subsidiary was providing as principal in a State on November 21, 1991 (to the same residents or customers); and title insurance required before June 1, 1991 if control of the bank has not changed. Banks in Massachusetts, New York, or Connecticut may sell savings bank life insurance if they meet consumer disclosure rules. The Corporation must study those activities during the 1-year period starting December 19, 1991 and can require changes, suspension, or ending of those activities if they pose a significant risk. An insured State bank may not hold equity investments that a national bank could not hold, except it may keep majority-owned subsidiaries. A bank may invest as a limited partner in projects that build, rehab, or buy housing for lower-income people, but all those investments together cannot exceed 2 percent of the bank’s total assets. Any investment that is not allowed must be sold off as prudently and quickly as possible and in any case by the end of the 5-year period beginning December 19, 1991; investments lawfully held on that date can be kept while following the Corporation’s divestiture rules. A bank in a State that allowed certain stock or registered investment company shares on September 30, 1991, and that held such investments between September 30, 1990 and November 26, 1991, may keep up to an amount equal to 100 percent of its capital, but only after filing a one-time notice and getting the Corporation’s OK within 60 days. Banks must reduce any excess holdings by at least one-third each year during the 3-year period starting December 19, 1991 so they meet the limits by the end of that period. A bank may buy up to 10 percent of a company that provides directors’ liability or bankers’ blanket bonding or that reinsures those policies, and it may buy shares of certain depository institutions if specific conditions are met. The Corporation may require a bank to sell an allowed investment if it would harm the bank’s safety and soundness, but it must have reason to believe harm will occur. The Corporation will make these decisions by rule or order. “Activity” in this rule includes acquiring or keeping investments. Host-State laws apply to out-of-State bank branches the same way they apply to branches of out-of-State national banks; if host law does not apply, home-State law applies.
Full Legal Text
Title 12, §1831a
Banks and Banking — Source: USLM XML via OLRC
(a)(1)After the end of the 1-year period beginning on December 19, 1991, an insured State bank may not engage as principal in any type of activity that is not permissible for a national bank unless—
(A)the Corporation has determined that the activity would pose no significant risk to the Deposit Insurance Fund; and
(B)the State bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency.
(2)(A)The Corporation shall make a determination under paragraph (1)(A) not later than 60 days after receipt of a completed application that may be required under this subsection.
(B)The Corporation may extend the 60-day period referred to in subparagraph (A) for not more than 30 additional days, and shall notify the applicant of any such extension.
(b)(1)Notwithstanding subsection (a), an insured State bank may not engage in insurance underwriting except to the extent that activity is permissible for national banks.
(2)Notwithstanding any other provision of law, an insured State bank or any of its subsidiaries that provided insurance on or before September 30, 1991, which was reinsured in whole or in part by the Federal Crop Insurance Corporation may continue to provide such insurance.
(c)(1)An insured State bank may not, directly or indirectly, acquire or retain any equity investment of a type that is not permissible for a national bank.
(2)Paragraph (1) shall not prohibit an insured State bank from acquiring or retaining an equity investment in a subsidiary of which the insured State bank is a majority owner.
(3)(A)Notwithstanding any other provision of this subsection, an insured State bank may invest as a limited partner in a partnership, the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation, or new construction of a qualified housing project.
(B)The aggregate of the investments of any insured State bank pursuant to this paragraph shall not exceed 2 percent of the total assets of the bank.
(C)As used in this paragraph—
(i)The term “qualified housing project” means residential real estate that is intended to primarily benefit lower income people throughout the period of the investment.
(ii)The term “lower income” means income that is less than or equal to the median income based on statistics from State or Federal sources.
(4)(A)The Corporation shall require any insured State bank to divest any equity investment the retention of which is not permissible under this subsection as quickly as can be prudently done, and in any event before the end of the 5-year period beginning on December 19, 1991.
(B)With respect to any equity investment held by any insured State bank on December 19, 1991, which was lawfully acquired before December 19, 1991, the bank shall be deemed not to be in violation of the prohibition in this subsection on retaining such investment so long as the bank complies with the applicable requirements established by the Corporation for divesting such investments.
(d)(1)After the end of the 1-year period beginning on December 19, 1991, a subsidiary of an insured State bank may not engage as principal in any type of activity that is not permissible for a subsidiary of a national bank unless—
(A)the Corporation has determined that the activity poses no significant risk to the Deposit Insurance Fund; and
(B)the bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency.
(2)(A)Notwithstanding paragraph (1), no subsidiary of an insured State bank may engage in insurance underwriting except to the extent such activities are permissible for national banks.
(B)Notwithstanding subparagraph (A), a well-capitalized insured State bank or any of its subsidiaries that was lawfully providing insurance as principal in a State on November 21, 1991, may continue to provide, as principal, insurance of the same type to residents of the State (including companies or partnerships incorporated in, organized under the laws of, licensed to do business in, or having an office in the State, but only on behalf of their employees resident in or property located in the State), individuals employed in the State, and any other person to whom the bank or subsidiary has provided insurance as principal, without interruption, since such person resided in or was employed in such State.
(C)Subparagraph (A) does not apply to a subsidiary of an insured State bank if—
(i)the insured State bank was required, before June 1, 1991, to provide title insurance as a condition of the bank’s initial chartering under State law; and
(ii)control of the insured State bank has not changed since that date.
(3)(A)The Corporation shall make a determination under paragraph (1)(A) not later than 60 days after receipt of a completed application that may be required under this subsection.
(B)The Corporation may extend the 60-day period referred to in subparagraph (A) for not more than 30 additional days, and shall notify the applicant of any such extension.
(e)(1)No provision of this chapter shall be construed as prohibiting or impairing the sale or underwriting of savings bank life insurance, or the ownership of stock in a savings bank life insurance company, by any insured bank which—
(A)is located in the Commonwealth of Massachusetts or the State of New York or Connecticut; and
(B)meets applicable consumer disclosure requirements with respect to such insurance.
(2)(A)Before the end of the 1-year period beginning on December 19, 1991, the Corporation shall make a finding whether savings bank life insurance activities of insured banks pose or may pose any significant risk to the Deposit Insurance Fund.
(B)(i)The Corporation shall, pursuant to any finding made under subparagraph (A), take appropriate actions to address any risk that exists or may subsequently develop with respect to insured banks described in paragraph (1)(A).
(ii)Actions the Corporation may take under this subparagraph include requiring the modification, suspension, or termination of insurance activities conducted by any insured bank if the Corporation finds that the activities pose a significant risk to any insured bank described in paragraph (1)(A) or to the Deposit Insurance Fund.
(f)(1)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)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)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)(A)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)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)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)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)(A)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)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.
(g)The Corporation shall make determinations under this section by regulation or order.
(h)For purposes of this section, the term “activity” includes acquiring or retaining any investment.
(i)This section shall not be construed as limiting the authority of any appropriate Federal banking agency or any State supervisory authority to impose more stringent restrictions.
(j)(1)The laws of a host State, including laws regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches, shall apply to any branch in the host State of an out-of-State State bank to the same extent as such State laws apply to a branch in the host State of an out-of-State national bank. To the extent host State law is inapplicable to a branch of an out-of-State State bank in such host State pursuant to the preceding sentence, home State law shall apply to such branch.
(2)An insured State bank that establishes a branch in a host State may conduct any activity at such branch that is permissible under the laws of the home State of such bank, to the extent such activity is permissible either for a bank chartered by the host State (subject to the restrictions in this section) or for a branch in the host State of an out-of-State national bank.
(3)No provision of this subsection shall be construed as affecting the applicability of—
(A)any State law of any home State under subsection (b), (c), or (d) of section 1831u of this title; or
(B)Federal law to State banks and State bank branches in the home State or the host State.
(4)The terms “host State”, “home State”, and “out-of-State bank” have the same meanings as in section 1831u(f) 11 See References in Text note below. of this title.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
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, 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.”
Statutory Notes and Related Subsidiaries
Effective Date
of 2006 AmendmentAmendment 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 AmendmentAmendment 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 AmendmentAmendment 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].”
Reference
Citations & Metadata
Citation
12 U.S.C. § 1831a
Title 12 — Banks and Banking
Last Updated
Apr 3, 2026
Release point: 119-73not60