(a) A universal bank shall not make loans under § 26-1401.09(a)(2) through the universal bank, or a subsidiary of the universal bank, in an aggregate amount that exceeds 20% of the universal bank's capital; provided, that:
(1) For the purposes of computing this limitation, loans made to a municipal corporation shall not be included; and
(2) A universal bank may make loans under § 26-1401.09(a)(2) through the universal bank, or a subsidiary of the universal bank, in an aggregate amount not to exceed 50% of the universal bank's capital if the loans made under § 26-1401.09(a)(2) are limited to a liability in the form of a note or bond that:
(A) Is secured by not less than an equal amount of bonds or notes of the United States issued since April 24, 1917 or in certificates of indebtedness of the United States;
(B) Is secured or covered by guarantees, commitments, or agreements to take over or purchase the note or bond, and the guarantee, commitment, or agreement is made by a Federal Reserve Bank, the Small Business Administration, the Department of Defense, or the Federal Maritime Commission; or
(C) Is secured by mortgages or deeds of trust insured by the Federal Housing Administration.
(b) A loan made under § 26-1401.09(a)(2) shall require the prior approval of the board of directors or other governing board of the universal bank or its subsidiary.
(c) An equity interest or other form of interest taken as security in a project funded through a loan made under § 26-1401.09(a)(3) shall require the prior approval of the board of directors or other governing board of the universal bank or its subsidiary.
(d) The Commissioner may suspend a universal bank's authority under § 26- 1401.09(a)(2) or (3) if the Commissioner determines that the universal bank is not exercising, or will not exercise, authority under § 26-1401.09(a)(2) or (3) in a safe and sound manner or that the condition of the universal bank is not, or will not be, safe and sound. In making a determination to suspend a universal bank's authority under this subsection, the Commissioner shall consider the universal bank's capital adequacy, asset quality, earnings quantity, earnings quality, adequacy of liquidity, and sensitivity to market risk; the ability of the management of the universal bank; and any other factor the Commissioner determines is appropriate. If the Commissioner suspends the authority of a universal bank under this subsection, the Commissioner may specify how the universal bank or its subsidiary shall treat an outstanding loan.
(e) A universal bank shall not purchase foreign bonds unless the Commissioner promulgates a rule authorizing the purchase of foreign bonds by universal banks; provided, that a universal bank may purchase a general obligation bond issued by a foreign national government if the bond is payable in United States funds. The Commissioner shall not promulgate a rule under this subsection authorizing a universal bank to invest in foreign bonds issued by a single issuer in an aggregate amount that exceeds 10% of the universal bank's capital.
(f) A universal bank shall not consider any health information obtained from the records of an affiliate of the universal bank that is engaged in the business of insurance in the universal bank's determination of whether to make a loan under § 26-1401.09(a)(2) or in the determination of whether to make any other loan, unless the person to whom the health information relates consents to the consideration of the health information in the universal bank's determination of whether to make the loan.
(g) A universal bank shall not loan any part of its capital, surplus, or deposits on its own capital stock, notes, or debentures as collateral security; provided, that a universal bank may make a loan secured by its own capital stock, notes, or debentures to the same extent that the universal bank may make a loan secured by the capital stock, notes, and debentures of a holding company for the universal bank.
(h) The restrictions and limits in subsections (a), (e), and (f) of this section shall not apply to a liability:
(1) That is secured by not less than an equal dollar amount of direct obligations of the United States which will mature not more than 18 months after the date on which the liability is incurred;
(2) That is a direct obligation of the United States, the District, or a federal or District agency and that is fully and unconditionally guaranteed by the United States or the District;
(3) In the form of a note, debenture, or certificate of interest of the Commodity Credit Corporation; or
(4) Created by the discounting of bills of exchange drawn in good faith against actually existing values or the discounting of commercial or business paper actually owned by the person negotiating the commercial or business paper.
(June 9, 2001, D.C. Law 13-308, § 212, 48 DCR 3244.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For Law 13-308, see notes following § 26-1401.01.
(a)(1) A universal bank shall not acquire an equity interest in a profit-participation project under § 26-1401.09(a)(4) in an aggregate amount that exceeds 20% of the universal bank's capital; provided, that an investment described in § 26-1401.14 shall not be included computation of this limitation. The Commissioner may suspend a universal bank's authority under § 26-1401.09(a)(4) if the Commissioner determines that the universal bank is not exercising this authority under § 26-1401.09(a)(4), will not exercise the authority in a safe and sound manner, or that the condition of the universal bank is not, or will not be, safe and sound. In making a determination to suspend a universal bank's authority under this subsection, the Commissioner shall consider the universal bank's capital adequacy, asset quality, earnings quantity, earnings quality, adequacy of liquidity, and sensitivity to market risk; the ability of the universal bank's management; and any other factor the Commissioner determines is appropriate. If the Commissioner suspends the authority of a universal bank under this subsection, the Commissioner may specify how the universal bank or its subsidiary shall treat an outstanding investment.
(2) The authority granted to a universal bank under § 26-1401.09(a)(4) shall not authorize a universal bank, or a subsidiary of the universal bank, to underwrite insurance.
(b) A universal bank may purchase, sell, underwrite, and hold investment securities, consistent with safe and sound banking practices, under § 26- 1401.09(a)(5) in an amount not to exceed 100% of the universal bank's capital; provided, that:
(1) A universal bank shall not invest an aggregate amount that exceeds 20% of the universal bank's capital in the investment securities of any one obligor or issuer; provided further, that an investment described in § 26-1401.14 shall not be included in the computation of this 20% limitation; and
(2) The underwriting activities of the universal bank shall be conducted through a subsidiary of the universal bank, with the appropriate safeguards to limit the risk exposure of the universal bank and to protect the banking customers of the universal bank;
(c)(1) A universal bank shall not purchase, sell, underwrite, or hold equity securities under § 26-1401.09(a)(6) in an aggregate amount that exceeds 20% of the universal bank's capital; provided, that:
(A) The Commissioner may authorize a universal bank, by written order, to purchase, sell, underwrite, or hold equity securities under § 26- 1401.09(a)(6) in an aggregate amount that exceeds 20% of the universal bank's capital if such greater amount is consistent with safe and sound practices and the safe and sound operation and condition of the universal bank; and
(B) An investment described in § 26-1401.14 shall not be included in the computation of the 20% limitation.
(2) The underwriting activities of universal bank under § 26-1401.09(a)(6) shall be conducted through a subsidiary of the universal bank, with the appropriate safeguards to limit the risk exposure of the universal bank and to protect the banking customers of the universal bank.
(d) A universal bank may purchase, sell, underwrite, and hold investment securities or equity securities in other financial institutions under § 26- 1401.09(a)(5) or (6); provided, that a universal bank shall not purchase and hold stock in a bank chartered under the District of Columbia Banking Code, a national bank, or in a holding company wholly owning a District-chartered or national bank without the authorization of the Commissioner; provided further, that the Commissioner shall not authorize a universal bank to purchase and hold stock under this subsection in an amount that exceeds 10% of the universal bank's capital.
(e)(1) A universal bank may invest in housing projects under § 26- 1401.09(a)(7); provided, that: (1) the aggregate investment in any one housing project shall not exceed 15% of the universal bank's capital and the aggregate investment in all housing projects shall not exceed 50% of the universal bank's capital; and (2) a universal bank shall not invest in a housing project under § 26-1401.09(a)(7) unless the universal bank is in compliance with the capital requirements established by the Commissioner and with the capital maintenance requirements of the universal bank's deposit insurance corporation. An investment described in § 26-1401.14 shall not be included in the computation of the 15% and 50% limitations.
(2) For the purposes of this subsection and of § 26-1401.09(a)(7), the term "housing project" shall mean the development or redevelopment of home sites or housing for sale or rental, including projects for the reconstruction, rehabilitation, or rebuilding of residential properties to meet the minimum standards of health and occupancy, the provision of accommodations for retail stores and other community services that are reasonably related, or incident, to the housing project, and the stock of a corporation that owns a housing project and that is wholly owned by one or more financial institutions.
(f) Except as provided in subsections (b)(1) and (b)(2) of this section, a universal bank may make an investment under § 26-1401.09(a)(3) through (8), directly or through a subsidiary, unless the Commissioner determines that such investment shall be made through a subsidiary or with appropriate safeguards to limit the risk exposure of the universal bank.
(g)(1) A universal bank shall not purchase or hold more than 10% of its own capital stock, notes, or debentures; provided that:
(A) A universal bank may purchase or hold more than 10% of its own capital stock, notes, or debentures, if approved by the Commissioner consistent with safe and sound practices; and
(B) A universal bank may purchase or hold more than 10% of its own capital stock, notes, or debentures if the purchase is necessary to prevent loss upon a debt previously contracted in good faith; provided further, that:
(i) The universal bank shall sell or cancel the stock, notes, or debentures held or purchased under this subparagraph within 12 months of acquisition; and
(ii) Stocks, notes, or debentures held or purchased under this subparagraph shall not be held by the universal bank for more than 6 months if the stock, notes, or debentures can be sold for the amount of the claim of the universal bank against the holder of the debt previously contracted.
(2) Cancellation of stock, notes, or debentures under paragraph (1)(B) of this subsection shall reduce the amount of the universal bank's capital stock, notes, or debentures. If the reduction reduces the universal bank's capital below the minimum level required by the Commissioner, the universal bank shall increase its capital to the amount required by the Commissioner.
(June 9, 2001, D.C. Law 13-308, § 213, 48 DCR 3244.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For Law 13-308, see notes following § 26-1401.01.
The percentage limitations in § 26-1401.13 shall not apply to, and a universal bank may invest without limitation in, any of the following:
(1) Stocks or obligations of a corporation organized for business development by the District, the United States, or a District or federal agency;
(2) Obligations of an urban renewal investment corporation organized under the laws of the District or of the United States;
(3) An equity interest in an insurance company or an insurance holding company organized to provide insurance for universal banks and for persons affiliated with universal banks to the extent that ownership of the equity interest is a prerequisite to obtaining directors' and officers' insurance or blanket bond insurance for the universal bank through the insurance company;
(4) Shares of stock, whether purchased or otherwise acquired, in a corporation acquiring, placing, and operating remote service units or bank communications terminals;
(5) Equity, debt securities, or debt instruments of a service corporation subsidiary of the universal bank;
(6) Advances of federal funds;
(7) Financial futures transactions, financial options transactions, forward commitments, or other financial products for the purpose of reducing, hedging, or otherwise managing the universal bank's interest rate risk exposure; provided, that the prior written approval of the Commissioner shall be required to make the investments described in this paragraph;
(8) A subsidiary of the universal bank organized to exercise corporate fiduciary powers under this chapter;
(9) An agricultural credit corporation; provided, that the universal bank shall not own more than 80% of the stock of an agricultural credit corporation and shall not invest more than 20% of the universal bank's capital in agricultural credit corporations;
(10) Deposit accounts or insured obligations of a financial institution, the accounts of which are insured by a deposit insurance corporation;
(11) Obligations of, or obligations that are fully guaranteed by, the United States;
(12) Stocks or obligations of any Federal Reserve Bank, Federal Home Loan Bank, the Student Loan Marketing Association, the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Federal Deposit Insurance Corporation; or
(13) Any other investment authorized by the Commissioner.
(June 9, 2001, D.C. Law 13-308, § 214, 48 DCR 3244.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For Law 13-308, see notes following § 26-1401.01.
(a)(1) If a universal bank is permitted to engage in the business of insurance or securities under any authority granted by this chapter, the insurance and securities activities of the universal bank shall be subject to the regulation and supervision of the Department and appropriate federal agencies and shall be carried out under all laws, rules, and regulations applicable to insurance and securities; provided, that the Commissioner may exempt a universal bank from a provision of this chapter, or any rule or regulation promulgated under this chapter, which has been preempted by federal law, rule, or regulation.
(2) The Department shall maintain functional regulatory authority over the insurance and securities activities of the insurance or securities subsidiary or holding company affiliate of a universal bank. The regulatory authority of the Department shall include reviewing and taking necessary actions, including approval and disapproval, on applications and other documents or reports concerning a proposed acquisition of, or a change or continuation of control of, an insurer domiciled in the District of Columbia.
(b)(1) A universal bank shall disclose, or cause to be disclosed, to purchasers of, prospective purchasers of, and persons solicited to purchase, an insurance policy of the universal bank that the insurance offered or sold is not a deposit, is not insured by the federal deposit insurance corporation, and is not guaranteed by the universal bank; provided, that this disclosure requirement shall not apply to the solicitation or sale of a credit unemployment insurance policy, group credit life insurance policy, group credit health insurance policy, group credit accident insurance policy, or group credit health and accident insurance policy, or a similar group credit insurance policy covering the person of the insured.
(2) A person soliciting the purchase of, or selling, insurance on the premises of a universal bank shall disclose, or cause to be disclosed, to purchasers of, prospective purchasers of, and persons solicited to purchase, an insurance policy of the universal bank that the insurance offered or sold is not a deposit, is not insured by the federal deposit insurance corporation, and is not guaranteed by the universal bank; provided, that this disclosure requirement shall not apply to the solicitation or sale of a credit unemployment insurance policy, group credit life insurance policy, group credit health insurance policy, group credit accident insurance policy, or group credit health and accident insurance policy, or a similar group credit insurance policy covering the person of the insured.
(3) A disclosure required under paragraph (1) or (2) of this subsection shall be made in writing and in clear and concise language.
(c) If a person obtains insurance and credit from a universal bank, the expense of the credit and insurance transactions shall be disclosed in separate contractual provisions, and the expense of insurance premiums shall not be included in the primary credit transactions without the express written consent of the person; provided, that this subsection shall not apply if the insurance policy being obtained is a flood insurance policy, a credit unemployment insurance policy, a group credit life insurance policy, a group credit health insurance policy, group credit accident insurance policy, or a group credit health and accident insurance policy, or a similar group credit insurance policy covering the person of the insured.
(d)(1) A universal banks shall not condition the making of a loan, including a loan under § 26-1401.09(a)(2), the lease or sale of property of any kind, or the furnishing of any services to a customer on the requirement that the customer obtain insurance from the universal bank, an affiliate or subsidiary of the universal bank, or a particular insurer, agent, or broker. A universal bank shall not fix or vary the consideration charged to a customer for the making of a loan, including a loan under § 26-1401.09(a)(2), the lease or sale of property of any kind, or the furnishing of any services based on whether the customer obtains insurance from the universal bank, an affiliate or subsidiary of the universal bank, or a particular insurer, agent, or broker.
(2) The prohibitions under paragraph (1) of this subsection shall not prevent a universal bank from informing a person that insurance is required to obtain a loan or credit, that loan or credit approval is contingent upon the person's procurement of acceptable insurance, or that insurance is available from the universal bank; provided, that the universal bank shall also inform the person in writing that his or her choice of insurance provider shall not affect the universal bank's credit decision or credit terms; provided further, that the disclosure shall be given again before or at the time that the universal bank, or the person selling or soliciting the purchase of insurance on the premises of the universal bank, solicits the purchase of insurance from a customer who has applied for a loan or extension of credit.
(e)(1) A universal bank may engage in an activity under § 26-1401.09(a)(6) through (19) directly or indirectly through a subsidiary, unless the Commissioner determines that the activity shall be conducted through a subsidiary; provided that:
(A) An underwriting or distribution of annuities under § 26-1401.09(a)(16) shall be conducted only through a non-depository financial institution affiliate of the universal bank unless federal law permits the underwriting and distribution to be conducted through a subsidiary of the financial institution;
(B) An underwriting or distribution of life insurance, accident insurance, health insurance, property insurance, casualty insurance, or any other form of insurance under § 26-1401.09(a)(17) shall be conducted only through a non-depository financial institution affiliate of the universal bank unless federal law permits the underwriting and distribution to be conducted in a subsidiary of the financial institution;
(C) An underwriting, dealing, or market-making in securities under § 26- 1401.09(a)(18) shall be conducted only in a subsidiary of the universal bank; and
(D) A distribution of shares in investment companies under § 26- 1401.09(a)(19) shall only be conducted through a subsidiary of the universal bank.
(2) The Commissioner may require that a subsidiary or affiliate of a universal bank engaged in an activity under § 26-1401.09(a)(6) through (19) implement and maintain appropriate safeguards to limit the risk exposure of the universal bank.
(f) The investment in a subsidiary that engages in an activity under § 26- 1401.09(a)(6) through (19) shall not exceed 20% of the universal bank's capital; provided, that the Commissioner may authorize a higher percentage, by written order, if the percentage is consistent with safe and sound practices and the safe and sound operation and condition of the universal bank.
(g) The aggregate investment in all subsidiaries that engage in an activity under § 26-1401.09(a)(6) through (19) shall not exceed 50% of the universal bank's capital; provided, that the Commissioner may authorize a higher percentage, by written order, if the percentage is consistent with safe and sound practices and the safe and sound operation and condition of the universal bank.
(h) A subsidiary that engages in an activity under § 26-1401.09(a)(6) through (19) may be owned jointly with one or more persons, including universal banks.
(June 9, 2001, D.C. Law 13-308, § 215, 48 DCR 3244; Oct. 19, 2002, D.C. Law 14-213, § 18(f), 49 DCR 8140; June 11, 2004, D.C. Law 15-166, § 2(g), 51 DCR 2817.)
HISTORICAL AND STATUTORY NOTES
Effect of Amendments
D.C. Law 14-213, in subsec. (a)(1), validated a previously made technical correction.
D.C. Law 15-166, in subsec. (a), deleted "of Insurance and Securities Regulation" following "Department", and deleted ", with the approval of the Commissioner of the Department of Insurance and Securities Regulation," following ''Commissioner".
Emergency Act Amendments
For temporary (90 day) amendment of section, see § 2(g) of Consolidation of Financial Services Emergency Amendment Act of 2004 (D.C. Act 15-381, February 27, 2004, 51 DCR 2653).
Legislative History of Laws
For Law 13-308, see notes following § 26-1401.01.
For Law 14-213, see notes following § 26-131.02.
For Law 15-166, see notes following § 26-131.02.
