text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Derivatives Limitations Act of 
  1995''.
  
  SEC. 2. INSURED DEPOSITORY INSTITUTIONS.
  
      The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 
  amended by adding at the end the following new section:
  
  ``SEC. 45. DERIVATIVE INSTRUMENTS.
  
      ``(a) Derivatives Activities.--
              ``(1) General prohibition.--Except as provided in paragraph 
          (2), neither an insured depository institution, nor any 
          affiliate thereof, may purchase, sell, or engage in any 
          transaction involving a derivative financial instrument for the 
          account of that institution or affiliate.
              ``(2) Exceptions.--
                      ``(A) Hedging transactions.--An insured depository 
                  institution may purchase, sell, or engage in hedging 
                  transactions to the extent that such activities are 
                  approved by rule, regulation, or order of the 
                  appropriate Federal banking agency issued in accordance 
                  with paragraph (3).
                      ``(B) Separately capitalized affiliate.--A 
                  separately capitalized affiliate of an insured 
                  depository institution that is not itself an insured 
                  depository institution may purchase, sell, or engage in 
                  a transaction involving a derivative financial 
                  instrument if such affiliate complies with all rules, 
                  regulations, or orders of the appropriate Federal 
                  banking agency issued in accordance with paragraph (3).
                      ``(C) De minimis interests.--An insured depository 
                  institution may purchase, sell, or engage in 
                  transactions involving de minimis interests in 
                  derivative financial instruments for the account of 
                  that institution to the extent that such activity is 
                  defined and approved by rule, regulation, or order of 
                  the appropriate Federal banking agency issued in 
                  accordance with paragraph (3).
                      ``(D) Existing interests.--During the 3-month 
                  period beginning on the date of enactment of this 
                  section, nothing in this section shall be construed--
                              ``(i) as affecting an interest of an 
                          insured depository institution in any 
                          derivative financial instrument that existed on 
                          the date of enactment of this section; or
                              ``(ii) as restricting the ability of the 
                          institution to acquire reasonably related 
                          interests in other derivative financial 
                          instruments for the purpose of resolving or 
                          terminating an interest of the institution in 
                          any derivative financial instrument that 
                          existed on the date of enactment of this 
                          section.
              ``(3) Issuance of rules, regulations, and orders.--The 
          appropriate Federal banking agency shall issue appropriate 
          rules, regulations, and orders governing the exceptions 
          provided for in paragraph (2), including--
                      ``(A) appropriate public notice requirements;
                      ``(B) a requirement that any affiliate described in 
                  paragraph (2)(B) shall clearly and conspicuously notify 
                  the public that none of the assets of the affiliate, 
                  nor the risk of loss associated with the transaction 
                  involving a derivative financial instrument, are 
                  insured under Federal law or otherwise guaranteed by 
                  the Federal Government or the parent company of the 
                  affiliate; and
                      ``(C) any other requirements that the appropriate 
                  Federal banking agency considers to be appropriate.
      ``(b) Definitions.--For purposes of this section--
              ``(1) the term `derivative financial instrument' means--
                      ``(A) an instrument the value of which is derived 
                  from the value of stocks, bonds, other loan 
                  instruments, other assets, interest or currency 
                  exchange rates, or indexes, including qualified 
                  financial contracts (as defined in section 11(e)(8)); 
                  and
                      ``(B) any other instrument that an appropriate 
                  Federal banking agency determines, by regulation or 
                  order, to be a derivative financial instrument for 
                  purposes of this section; and
              ``(2) the term `hedging transaction' means any transaction 
          involving a derivative financial instrument if--
                      ``(A) such transaction is entered into in the 
                  normal course of the institution's business primarily--
                              ``(i) to reduce risk of price change or 
                          currency fluctuations with respect to property 
                          that is held or to be held by the institution; 
                          or
                              ``(ii) to reduce risk of interest rate or 
                          price changes or currency fluctuations with 
                          respect to loans or other investments made or 
                          to be made, or obligations incurred or to be 
                          incurred, by the institution; and
                      ``(B) before the close of the day on which such 
                  transaction was entered into (or such earlier time as 
                  the appropriate Federal banking agency may prescribe by 
                  regulation), the institution clearly identifies such 
                  transaction as a hedging transaction.''.
  
  SEC. 3. INSURED CREDIT UNIONS.
  
      Title II of the Federal Credit Union Act (12 U.S.C. 1781 et seq.) 
  is amended by adding at the end the following new section:
  
  ``SEC. 215. DERIVATIVE INSTRUMENTS.
  
      ``(a) Derivative Activities.--Except as provided in subsection (b), 
  neither an insured credit union, nor any affiliate thereof, may 
  purchase, sell, or engage in any transaction involving a derivative 
  financial instrument.
      ``(b) Applicability of Section 44 of the Federal Deposit Insurance 
  Act.--Section 44 of the Federal Deposit Insurance Act shall apply with 
  respect to insured credit unions and affiliates thereof and to the 
  Board in the same manner that such section applies to insured 
  depository institutions and affiliates thereof (as those terms are 
  defined in section 3 of that Act) and shall be enforceable by the Board 
  with respect to insured credit unions and affiliates under this Act.
      ``(c) Derivative Financial Instrument.--For purposes of this 
  section, the term `derivative financial instrument' means--
              ``(1) an instrument the value of which is derived from the 
          value of stocks, bonds, other loan instruments, other assets, 
          interest or currency exchange rates, or indexes, including 
          qualified financial contracts (as such term is defined in 
          section 207(c)(8)(D)); and
              ``(2) any other instrument that the Board determines, by 
          regulation or order, to be a derivative financial instrument 
          for purposes of this section.''.
  
  SEC. 4. BANK HOLDING COMPANIES.
  
      Section 3 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842) 
  is amended by adding at the end the following new subsection:
      ``(h) Derivatives Activities.--
              ``(1) In general.--A subsidiary of a bank holding company 
          may purchase, sell, or engage in any transaction involving a 
          derivative financial instrument for the account of that 
          subsidiary if that subsidiary--
                      ``(A) is not an insured depository institution or a 
                  subsidiary of an insured depository institution; and
                      ``(B) is separately capitalized from any affiliated 
                  insured depository institution.
              ``(2) Applicability of section 44 of the federal deposit 
          insurance act.--Section 44 of the Federal Deposit Insurance Act 
          shall apply with respect to bank holding companies and the 
          Board in the same manner that those subsections apply to an 
          insured depository institution (as such term is defined in 
          section 3 of that Act) and shall be enforceable by the Board 
          with respect to bank holding companies under this Act.
              ``(3) Derivative financial instrument.--For purposes of 
          this subsection, the term `derivative financial instrument' 
          means--
                      ``(A) an instrument the value of which is derived 
                  from the value of stocks, bonds, other loan 
                  instruments, other assets, interest or currency 
                  exchange rates, or indexes, including qualified 
                  financial contracts (as such term is defined in section 
                  207(c)(8)(D)); and
                      ``(B) any other instrument that the Board 
                  determines, by regulation or order, to be a derivative 
                  financial instrument for purposes of this 
                  subsection.''.
target: Derivatives Limitations Act of 1995 - Amends the Federal Deposit Insurance Act to prohibit an insured depository institution (and any affiliate) from engaging in any transaction involving a derivative financial instrument either for its own account, or that of an affiliate. 
  Permits exceptions for:  (1) hedging transactions; (2) a separately capitalized affiliate (not itself an insured depository insitution) of an insured depository institution; and (3) transactions involving de minimis interest in derivative financial instruments sanctioned by a Federal banking regulatory agency. 
  Requires the appropriate Federal banking agency to promulgate rules governing such exceptions. 
  Amends the Federal Credit Union Act to prohibit an insured credit union and any affiliates from engaging in derivative financial instruments transactions. 
  Subjects credit unions and their affiliates to the interstate bank merger provisions of the Federal Deposit Insurance Act. 
  Amends the Bank Holding Company Act of 1956 to allow a bank holding company subsidiary to engage in derivative financial instrument transactions for its own account if it:  (1) is not an insured depository institution or a subsidiary of one; and (2) is separately capitalized from any affiliated insured depository institution.  Subjects bank holding companies to the interstate bank merger provisions of the Federal Deposit Insurance Act.
feat_title: Derivatives Limitations Act of 1995