SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Limited Purpose Bank Amendments of 
1997''.

SEC. 2. BANK ACTIVITIES RESTRICTION.

    (a) In General.--Section 4(f)(2) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(f)(2)) is amended--
            (1) by striking ``or'' at the end of subparagraph (A);
            (2) by striking subparagraph (B) and inserting the 
        following new subparagraph:
                    ``(B) any bank subsidiary of such company both--
                            ``(i) accepts demand deposits or deposits 
                        that the depositor may withdraw by check or 
                        similar means for payment to 3d parties; and
                            ``(ii) engages principally in the business 
                        of making commercial loans (and, for purposes 
                        of this clause, loans made in the ordinary 
                        course of a credit card operation shall not be 
                        treated as commercial loans); or''; and
            (3) by inserting after paragraph (2) (as amended by 
        paragraph (2) of this subsection) the following new 
        subparagraph:
                    ``(C) after the date of the enactment of the 
                Competitive Equality Amendments of 1987, any bank 
                subsidiary of such company permits any overdraft 
                (including any intraday overdraft), or incurs any such 
                overdraft in such bank's account at a Federal reserve 
                bank, on behalf of an affiliate, other than an 
                overdraft described in paragraph (3).''.
    (b) Acquisition of Credit Card Assets.--Section 4(f)(2)(A)(ii) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(2)(A)(ii)) is 
amended--
            (1) by striking ``and'' at the end of subclause (IX);
            (2) by inserting ``and'' after the semicolon at the end of 
        subclause (X); and
            (3) by inserting the following new subclause immediately 
        after subclause (X) (and before the provision which follows 
        such subclause):
                                    ``(XI) assets that are derived 
                                from, or are incidental to, activities 
                                in which institutions described in 
                                subsection (c)(2)(F) are permitted to 
                                engage;''.

SEC. 3. CROSSMARKETING RESTRICTION.

    Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(f)) is amended by striking paragraph (3).

SEC. 4. RESTRICTION ON DAYLIGHT OVERDRAFTS .

    Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(f)) (as amended by section 3) is amended by inserting after 
paragraph (2) the following new paragraph:
            ``(3) Permissible overdrafts described.--For purposes of 
        paragraph (2)(C), an overdraft is described in this paragraph 
        if--
                    ``(A) such overdraft results from an inadvertent 
                computer or accounting error that is beyond the control 
                of both the bank and the affiliate;
                    ``(B) such overdraft--
                            ``(i) is permitted or incurred on behalf of 
                        an affiliate which is monitored by, reports to, 
                        and is recognized as a primary dealer by the 
                        Federal Reserve Bank of New York; and
                            ``(ii) is fully secured, as required by the 
                        Board, by bonds, notes, or other obligations 
                        which are direct obligations of the United 
                        States or on which the principal and interest 
                        are fully guaranteed by the United States or by 
                        securities and obligations eligible for 
                        settlement on the Federal Reserve book entry 
                        system; or
                    ``(C) such overdraft--
                            ``(i) is permitted or incurred by, or on 
                        behalf of, an affiliate that is principally 
                        engaged in activities that are financial in 
                        nature or are incidental to any such 
                        activities; and
                            ``(ii) does not cause the bank to violate 
                        any provision of section 23A or 23B of the 
                        Federal Reserve Act either directly, in the 
                        case of a bank which is a member of the Federal 
                        Reserve System, or by virtue of section 18(j) 
                        of the Federal Deposit Insurance Act, in the 
                        case of a bank which is not a member of the 
                        Federal Reserve System.''.

SEC. 5. RESTRICTION ON ACQUISITIONS OF OTHER INSURED DEPOSITORY 
              INSTITUTIONS.

    Section 4(f)(12) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(f)(12)) is amended--
            (1) by striking ``or'' at the end of subparagraph (A);
            (2) by striking the period at the end of subparagraph (B) 
        and inserting ``; or''; and
            (3) by adding at the end the following new subparagraph:
                    ``(C) in an acquisition in which the insured 
                institution has been found to be undercapitalized by 
                the appropriate Federal or State authority.''.

SEC. 6. DIVESTITURE REQUIREMENT.

    (a) In General.--Paragraph (4) of section 4(f) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1843(f)) is amended to read as follows:
            ``(4) Divestiture in case of loss of exemption.--If any 
        company described in paragraph (1) fails to qualify for the 
        exemption provided under such paragraph by operation of 
        paragraph (2), such exemption shall cease to apply to such 
        company and such company shall divest control of each bank it 
        controls before the end of the 180-day period beginning on the 
        date that the company receives notice from the Board that the 
        company has failed to continue to qualify for such exemption, 
        unless before the end of such 180-day period, the company has--
                    ``(A) either--
                            ``(i) corrected the condition or ceased the 
                        activity that caused the company to fail to 
                        continue to qualify for the exemption; or
                            ``(ii) submitted a plan to the Board to 
                        cease the activity or correct the condition in 
                        a timely manner (which shall not exceed 1 year) 
                        and the Board has not disapproved such plan; 
                        and
                    ``(B) implemented procedures that are reasonably 
                adapted to avoid the reoccurrence of such condition or 
                activity.''.
    (b) Technical and Conforming Amendment.--Section 4(f)(2) of the 
Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(2)) is amended by 
striking ``Paragraph (1) shall cease to apply to any company described 
in such paragraph if--'' and inserting ``Subject to paragraph (3), a 
company described in paragraph (1) shall no longer qualify for the 
exemption provided under such paragraph if--''.
Limited Purpose Bank Amendments of 1997 - Amends the Bank Holding Company Act of 1956 to set forth transactions involving demand deposits, commercial loans, and overdrafts by a bank subsidiary which will cause the parent company to lose its statutory exemption from being treated as a bank holding company. 
Expands the asset class over which a parent company may exercise more than five percent control without losing such exemption. 
Repeals the restrictions placed upon banks under such exempt holding companies' control. 
Permits a parent holding company to retain such exemption if it acquires an insured institution that has been found by Federal or State authority to be undercapitalized. 
Revises divestiture requirements to cite circumstances under which the parent holding company may regain a lost exemption from treatment as a bank holding company.
Limited Purpose Bank Amendments of 1997