§ 1865. Prior approval for investments in bank service companies

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

1. 1962

   Pub. L. 87–856 § 5 · 76 Stat. 1132

   Enacted · 12 U.S.C. § 1865

   Pub. L. 87–856, § 5, Oct. 23, 1962, 76 Stat. 1133

   Source evidence

   Code source credit
   Pub. L. 87–856, § 5, Oct. 23, 1962, 76 Stat. 1133

   Enacted provision · exact public law section
   Sec. 5. (a) No bank subject to examination by a Federal supervisory agency may cause to be performed, by contract or otherwise, any bank services for itself, whether on or on its premises, unless assurances satisfactory to the agency prescribed in subsection (b) of this section are furnished to such agency by both the bank and the party performing such services that the performance thereof will be subject to regulation and examination by such agency to the same extent as if such services were being performed by the bank itself on its own premises. (b) The assurances required by subsection (a) of this section shall be given, in the case of— (1) a national banking association or a bank operating under the code of laws for the District of Columbia, to the Comptroller of the Currency; (2) a bank (other than a bank described in paragraph (1)) which is a member of the Federal Reserve System, to the Board of Governors of the Federal Reserve System; and (3) a bank (other than a bank described in paragraph (1) or (2) ) whose deposits are insured by the Federal Deposit Insurance Corporation, to the Board of Directors of the Federal Deposit Insurance Corporation.

2. 1978

   Financial Institutions Regulatory and Interest Rate Control Act of 1978

   Pub. L. 95–630 title III § 308 · 92 Stat. 3641

   Substituted · 12 U.S.C. § 1865

   Pub. L. 95–630 among other changes, substituted provisions requiring banks regularly examined by a Federal supervisory agency, which cause to be performed, by contract or otherwise, any bank service for itself, to notify such supervisory agency of the existence of a service relationship within 30 days after making such service contract or performance of service, whichever occurs first for provisions requiring that no bank subject to examination by a Federal supervisory agency may cause to be performed, by contract or otherwise, any bank service for itself unless satisfactory assurances are furnished to such supervisory agency by both the bank and the party performing such services that the performances thereof will be subject to regulation and examination by such agency to the same extent as if such services were being performed by the bank itself

   Source evidence

   Code amendment note
   Pub. L. 95–630 among other changes, substituted provisions requiring banks regularly examined by a Federal supervisory agency, which cause to be performed, by contract or otherwise, any bank service for itself, to notify such supervisory agency of the existence of a service relationship within 30 days after making such service contract or performance of service, whichever occurs first for provisions requiring that no bank subject to examination by a Federal supervisory agency may cause to be performed, by contract or otherwise, any bank service for itself unless satisfactory assurances are furnished to such supervisory agency by both the bank and the party performing such services that the performances thereof will be subject to regulation and examination by such agency to the same extent as if such services were being performed by the bank itself.

   Enacted provision · exact public law section
   Sec. 308. Section 5 of the Bank Service Corporation Act (12 U.S.C. 1865) is amended to read as follows: “Sec. 5. Whenever any bank which is regularly examined by a Federal supervisory agency, or any subsidiary or affiliate of such bank which is subject to examination by that agency, causes to lie performed, by contract or otherwise, any bank services for itself, whether on or off its premises— “(1) such performance shall be subject to regulation and examination by such agency to the same extent as if the services were being performed by the bank itself on its own premises, and “(2) the bank shall notify such agency of the existence of a Notification. service relationship within 30 days after the making of such service contract or the performance of the service, whichever occurs first.”.

   Effective date note
   Amendment by Pub. L. 95–630 effective on expiration of 120 days after Nov. 10, 1978, see section 2101 of Pub. L. 95–630, set out as an Effective Date note under section 375b of this title.

3. 1982

   Garn-St Germain Depository Institutions Act of 1982

   Pub. L. 97–320 title VII § 709 · 96 Stat. 1469

   Substituted · 12 U.S.C. § 1865

   Pub. L. 97–320 substituted provisions relating to prior approval for investments in bank service corporations for provisions relating to regulation and examination of bank services for a regularly examined bank or its subsidiary or affiliate whether performed on or off its premises. See section 1867(c) of this title

   Source evidence

   Code amendment note
   Pub. L. 97–320 substituted provisions relating to prior approval for investments in bank service corporations for provisions relating to regulation and examination of bank services for a regularly examined bank or its subsidiary or affiliate whether performed on or off its premises. See section 1867(c) of this title.

   Enacted provision · exact public law section
   Sec. 709. bank service corporations The Bank Service Corporation Act (12 U.S.C. 1861 et seq.) is amended to read as follows: “Section 1. “short title and definitions (a) This Act may be cited as the ‘Bank Service 12 USC 1861. Corporation Act’. “(b) For the purpose of this Act— “(1) the term ‘appropriate Federal banking agency’ shall have the meaning provided in section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)); “(2) the term ‘bank service corporation’ means a corporation organized to perform services authorized by this Act, all of the capital stock of which is owned by one or more insured banks; “(3) the term ‘Board’ means the Board of Governors of the Federal Reserve System; “(4) the term ‘depository institution’ means an insured bank, or another financial institution subject to examination by the Federal Home Loan Bank Board or the National Credit Union Administration Board; “(5) the term ‘insured bank’ shall have the meaning provided in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h)); “(6) the term ‘invest’ includes any advance of funds to a bank service corporation, whether by the purchase of stock, the making of a loan, or otherwise, except a payment for rent earned, goods sold and delivered, or services rendered prior to the making of such payment; and “(7) the term ‘principal investor’ means the insured bank that has the largest dollar amount invested in the capital stock of a bank service corporation. In any case where two or more insured banks have equal dollar amounts invested in a bank service corporation, the corporation shall, prior to commencing operations, select one of the insured banks as its principal investor and shall notify the bank’s appropriate Federal banking agency of that choice within 5 business days of its selection. “Sec. 2. “amount of investment in bank service corporation Notwithstanding any limitation or prohibition otherwise 12 USC 1862. imposed by any provision of law exclusively relating to banks, an insured bank may invest not more than 10 per centum of paid-in and unimpaired capital and unimpaired surplus in a bank service corporation. No insured bank shall invest more than 5 per centum of its total assets in bank service corporations. “Sec. 3. “permissible bank service corporation activities for depository institutions Without regard to the provisions of sections 4 and 5 of this 12 USC 1863. Act, an insured bank may invest in a bank service corporation that performs, and a bank service corporation may perform, the following services only for depository institutions: check and deposit sorting and posting, computation and posting of interest and other credits and charges, preparation and mailing of checks, statements, notices, and similar items, or any other clerical, bookkeeping, accounting, statistical, or similar functions performed for a depository institution. “Sec. 4. “permissible bank service corporation activities for other persons (a) A bank service corporation may provide to any person any service authorized by this section, except that a bank service corporation shall not take deposits. “(b) Except with the prior approval of the Board under section 5(b) of this Act in accordance with subsection (f) of this section— “(1) bank service corporation shall not perform the services authorized by this section in any State other than that State in which its shareholders are located; and “(2) all insured bank shareholders of a bank service corporation shall be located in the same State. “(c) A bank service corporation in which a State bank is a shareholder shall perform only those services that such State bank shareholder is authorized to perform under the law of the State in which such State bank operates and shall perform such services only at locations in the State in which such State bank shareholder could be authorized to perform such services. “(d) A bank service corporation in which a national bank is a shareholder shall perform only those services that such national bank shareholder is authorized to perform under this Act and shall perform such services only at locations in the State at which such national bank shareholder could be authorized to perform such services. “(e) A bank service corporation that has both national bank and State bank shareholders shall perform only those services that may lawfully be performed by both its national bank shareholder or shareholders under this Act and its State bank shareholder or shareholders under the law of the State in which such State bank or banks operate and shall perform such services only at locations in the State at which both its State bank and national bank shareholders could be authorized to perform such services. “(f) Notwithstanding the other provisions of this section or any other provision of law, other than the provisions of Federal and State branching law regulating the geographic location of banks to the extent that those laws are applicable to an activity authorized by this subsection, a bank service corporation may perform at any geographic location any service, other than deposit taking, that the Board has determined, by regulation, to be permissible for a bank holding company under section 4(c)(8) of the Bank Holding Company 12 USC 1843. Act. “Sec. 5. “prior approval for investments in bank service corporations (a) No insured bank shall invest in the capital stock of a bank service corporation that performs any service under authority of subsection (c), (d), or (e) of section 4 of this Act without the prior approval of the bank’s appropriate Federal banking agency. “(b) No insured bank shall invest in the capital stock of a bank service corporation that performs any service under authority of section 4(f) of this Act and no bank service corporation shall perform any activity under section 4(f) of this Act without the prior approval of the Board. “(c) In determining whether to approve or deny any application for prior approval under this section, the Board or the appropriate Federal banking agency, as the case may be, is authorized to consid-er the financial and managerial resources and future prospects of the bank or banks and bank service corporation involved, including the financial capability of the bank to make a proposed investment under this Act, and possible adverse effects such as undue concentration of resources, unfair or decreased competition, conflicts of interest, or unsafe or unsound banking practices. “(d) In the event the Board or the appropriate Federal banking agency, as the case may be, fails to act on any application under this section within ninety days of the submission of a complete application to the agency, the application shall be deemed approved. “Sec. 6. “services to nonstockholders No bank service corporation shall unreasonably discriminate 12 USC 1866. in the provision of any services authorized under this Act to any depository institution that does not own stock in the service corporation on the basis of the fact that the nonstockholding institution is in competition with an institution that owns stock in the bank service corporation, except that— “(1) it shall not be considered unreasonable discrimination for a bank service corporation to provide services to a nonstockholding institution only at a price that fully reflects all of the costs of offering those services, including the cost of capital and a reasonable return thereon; and “(2) a bank service corporation may refuse to provide services to a nonstockholding institution if comparable services are available from another source at competitive overall costs, or if the providing of services would be beyond the practical capacity of the service corporation. “Sec. 7. “regulation and examination of bank service corporations (a) A bank service corporation shall be subject to examination 12 USC 1867. and regulation by the appropriate Federal banking agency of its principal investor to the same extent as its principal investor. The appropriate Federal banking agency of the principal shareholder of such a bank service corporation may authorize any other Federal banking agency that supervises any other shareholder of the bank service corporation to make such an examination. “(b) A bank service corporation shall be subject to the provisions of the Financial Institutions Supervisory Act of 1966 (12 U.S.C. 12 USC 1464 note. 1818(b) et seq.) as if the bank service corporation were an insured bank. For this purpose, the appropriate Federal banking agency shall be the appropriate Federal banking agency of the principal investor of the bank service corporation. “(c) Notwithstanding subsection (a) of this section, whenever a bank that is regularly examined by an appropriate Federal banking agency, or any subsidiary or affiliate of such a bank that is subject to examination by that agency, causes to be performed for itself, by contract or otherwise, any services authorized under this Act, whether on or off its premises— “(1) such performance shall be subject to regulation and examination by such agency to the same extent as if such services were being performed by the bank itself on its own premises, and “(2) the bank shall notify such agency of the existence of the service relationship within thirty days after the making of such service contract or the performance of the service, whichever occurs first. “(d) The Board and the appropriate Federal banking agencies are authorized to issue such regulations and orders as may be necessary to enable them to administer and to carry out the purposes of this Act and to prevent evasions thereof.”.

4. 1994

   Riegle Community Development and Regulatory Improvement Act of 1994

   Pub. L. 103–325 § 323(1) · 108 Stat. 2160

   Substituted · 12 U.S.C. § 1865(a)

   Pub. L. 103–325, § 323(1), substituted “prior notice, as determined by” for “the prior approval of”

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 103–325, § 323(1), substituted “prior notice, as determined by” for “the prior approval of”.

   Enacted provision · exact public law section
   (1) in subsection (a), by striking “the prior approval of” and inserting “prior notice, as determined by”; and

5. 1994

   Riegle Community Development and Regulatory Improvement Act of 1994

   Pub. L. 103–325 § 323(2) · 108 Stat. 2160

   Inserted · 12 U.S.C. § 1865(c)

   Pub. L. 103–325, § 323(2), inserted “or whether to approve or disapprove any notice” after “approval”

   Source evidence

   Code amendment note
   Subsec. (c). Pub. L. 103–325, § 323(2), inserted “or whether to approve or disapprove any notice” after “approval”.

   Enacted provision · exact public law section
   (2) in subsection (c), by inserting “or whether to approve or disapprove any notice” after “approval”.

6. 1996

   Department of Commerce and Related Agencies Appropriations Act, 1997

   Pub. L. 104–208 div. A title II § 2613(f) · 110 Stat. 3009

   1. Substituted · 12 U.S.C. § 1865

      Pub. L. 104–208 substituted “companies” for “corporations” wherever appearing in text

   2. Substituted · 12 U.S.C. § 1865

      Pub. L. 104–208 substituted “company” for “corporation” wherever appearing in text

   Source evidence

   Code amendment note
   Pub. L. 104–208 substituted “companies” for “corporations” in section catchline and “company” for “corporation” wherever appearing in text.

   Enacted provision · exact public law section
   (f) Amendments to Section 5.— Section 5 of the Bank Service Corporation Act (12 U.S.C. 1865) is amended— (1) by striking “corporation” each place such term appears and inserting “company”; and (2) in the heading for such section, by striking “corporations” and inserting “companies”.

7. 2006

   Pub. L. 109–351 § 602(b)(4)(A) · 120 Stat. 1966

   1. Substituted · 12 U.S.C. § 1865(a)

      Pub. L. 109–351, § 602(b)(4)(A), substituted “insured depository institution” for “insured bank”

   2. Struck · 12 U.S.C. § 1865(a)

      Pub. L. 109–351, § 602(b)(4)(A), struck out “bank’s” before “appropriate Federal banking agency”

   3. Inserted · 12 U.S.C. § 1865(a)

      Pub. L. 109–351, § 602(b)(4)(A), inserted “for the insured depository institution” before period at end

   Source evidence

   Code amendment note
   Subsec. (a). Pub. L. 109–351, § 602(b)(4)(A), substituted “insured depository institution” for “insured bank”, struck out “bank’s” before “appropriate Federal banking agency”, and inserted “for the insured depository institution” before period at end.

   Enacted provision · exact public law section
   (A) in subsection (a)— (i) by striking “insured bank” and inserting “insured depository institution”; and (ii) by striking “bank’s”; and (iii) by inserting before the period “for the insured depository institution”;

8. 2006

   Pub. L. 109–351 § 602(b)(4)(B) · 120 Stat. 1966

   1. Substituted · 12 U.S.C. § 1865(b)

      Pub. L. 109–351, § 602(b)(4)(B), substituted “insured depository institution” for “insured bank”

   2. Inserted · 12 U.S.C. § 1865(b)

      Pub. L. 109–351, § 602(b)(4)(B), inserted “authorized only” after “performs any service” and “perform any activity”

   Source evidence

   Code amendment note
   Subsec. (b). Pub. L. 109–351, § 602(b)(4)(B), substituted “insured depository institution” for “insured bank” and inserted “authorized only” after “performs any service” and “perform any activity”.

   Enacted provision · exact public law section
   (B) in subsection (b)— (i) by striking “insured bank” and inserting “insured depository institution”; (ii) by inserting “authorized only” after “performs any service”; and (iii) by inserting “authorized only” after “perform any activity”; and

9. 2006

   Pub. L. 109–351 § 602(b)(4)(C) · 120 Stat. 1966

   1. Substituted · 12 U.S.C. § 1865(c)

      Pub. L. 109–351, § 602(b)(4)(C), substituted “any insured depository institution” for “the bank or banks”

   2. Substituted · 12 U.S.C. § 1865(c)

      Pub. L. 109–351, § 602(b)(4)(C), substituted “capability of the insured depository institution” for “capability of the bank”

   Source evidence

   Code amendment note
   Subsec. (c). Pub. L. 109–351, § 602(b)(4)(C), substituted “any insured depository institution” for “the bank or banks” and “capability of the insured depository institution” for “capability of the bank”.

   Enacted provision · exact public law section
   (C) in subsection (c)— (i) by striking “the bank or banks” and inserting “any insured depository institution”; and (ii) by striking “capability of the bank” and inserting “capability of the insured depository institution”.

14 of 14 references resolved to an enrolled provision