,i #aacth ,,congress #ast ,session ,h4 ,r4 #afjc ,,in ,,the ,,house ,,of ,,representatives ,april #ag1 #bjac ,mr4 ,grimm 7for himself1 ,mr4 ,king of ,new ,york1 and ,mr4 ,meeks7 introduced the following bill2 which was referred to the ,committee on ,financial ,services ,a ,,bill ,to support and promote community financial institutions in the mutual form1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,mutual ,community ,bank ,competitive ,equality ,act4 #b4 ,findings ,congress finds the following3 7#a7 ,mutual financial institutions have been an integral part of the ,american banking landscape for almost #bjj years4 7#b7 ,such institutions operate for the purpose of serving the local depositors and borrowers and the communities in which they operate4 7#c7 ,mutual banks play a critical role in encouraging thrift1 providing home loans and loans for small businesses4 7#d7 ,mutual banks are among the strongest financial institutions in the country and are characterized by high capital ratios and conservative1 community-focused management4 7#e7 ,congress deems it necessary to provide for the support and continued development of these vital community financial institutions4 #c4 ,mutual national banks authorized ,chapter one of title ,,xii of the ,revised ,statutes of the ,united ,states 7#ab ,u4,s4,c4 #ba et seq47 is amended by inserting after section #eacc the following new section3 #eacc;,a4 ,mutual national banks 7a7 ,in general ,notwithstanding the section designated the ,third of section #eacd1 in order to provide mutual institutions for the deposit of funds1 the extension of credit1 and provision of other services1 the ,comptroller of the ,currency may charter mutual national banks either de novo or through a conversion of any insured depository institution or any ,state mutual bank or credit union1 subject to regulations prescribed by the ,comptroller of the ,currency in accordance with this section4 ,the powers conferred by this section are intended to provide for the creation and maintenance of mutual national banks as bodies corporate existing in perpetuity for the benefit of their depositors and the communities in which they operate4 7b7 ,regulations 7#a7 ,regulations of the comptroller ,the ,comptroller of the ,currency is authorized to prescribe appropriate regulations for the organization1 incorporation1 governance1 conversion1 examination1 operation1 supervision1 and regulation of mutual national banks4 7#b7 ,applicability of capital stock requirements ,the ,comptroller of the ,currency shall prescribe regulations regarding appropriate capital substitutes for the requirements of this title with respect to capital stock1 and limitations imposed on national banks under this title based on capital stock1 as such requirements shall apply to mutual national banks4 7c7 ,de novo charters 7#a7 ,the ,comptroller of the ,currency is authorized to issue a certificate of authority to commence the business of banking to a mutual national bank in accordance with the requirements set forth in section #eafi1 provided that references to capital stock shall mean pledged accounts1 nonwithdrawable investment certificates1 or similar instruments by the incorporators4 7#b7 ,upon the issuance of the certificate required by paragraph 7#a71 the mutual national bank shall become a body corporate and the incorporators shall become the first board of directors1 with the power and authority to manage the affairs of the bank as herein set forth4 7d7 ,conversions 7#a7 ,conversion of a mutual depository to a mutual national bank ,subject to such regulations as the ,comptroller of the ,currency may prescribe1 any mutual depository may convert to a mutual national bank by filing with the ,comptroller of the ,currency a notice of its election to convert on a specified date that is not earlier than #cj days after the date on which the notice is filed1 and the mutual depository shall be converted to a mutual national bank charter on the date specified in the notice4 7#b7 ,conversion to stock national bank ,subject to such regulations as the ,comptroller of the ,currency may prescribe for the protection of depositors' rights and for any other purpose the ,comptroller of the ,currency may consider appropriate1 any national bank that is organized in the mutual form under subsection 7a7 may reorganize on an equitable basis as a stock national bank4 7#c7 ,conversion to state banks ,any national mutual bank may convert to a ,state bank charter in accordance with regulations prescribed by the ,comptroller of the ,currency and applicable ,state law4 7e7 ,terminating mutuality ,if a mutual national bank elects to terminate mutuality1 it must do so by-- 7#a7 liquidating2 or 7#b7 converting on an equitable basis to a national banking association operating in stock form4 7f7 ,status and rights of members 7#a7 ,in general ,in general1 the status of a member is primarily that of a depositor and secondarily that of a holder of an inchoate right to participate in the equity of a mutual national bank upon a liquidation or conversion in accordance with regulations prescribed by the ,comptroller of the ,currency4 7#b7 ,mandatory rights ,each member of a mutual national bank shall have the following rights3 7,a7 ,such rights as may be agreed upon1 by contract1 between the member and the mutual national bank4 7,b7 ,in the event the board of directors1 in its sole discretion1 determines a conversion of a mutual national bank to a national banking association operating in stock form is in the best interests of the community in which the bank operates1 then the members as of a record date set by the board of directors shall have the first right to subscribe for and purchase stock in the converted bank1 on an equitable basis based on the amount of the deposit held by such member as of the record date4 7,c7 ,in the event-- 7i7 the board of directors1 in its sole discretion1 determines a liquidation of the mutual national bank is in the best interests of the community in which the bank operates1 and such board of directors has adopted a plan of liquidation in accordance with regulations proscribed by the ,comptroller of the ,currency1 and the ,comptroller of the ,currency has approved if such plan2 or 7ii7 if for any other reason the bank is liquidated by operation of law1 then the members as of the date of liquidation shall have the right to have credited to their accounts1 on a pro rata basis1 any residual assets left after the payment of all liabilities and expenses1 including expenses of liquidation of the mutual national bank4 7g7 ,management of the bank ,the board of directors shall have the entire management and control of the affairs of the mutual national bank4 ,no depositor or borrower shall have the right to vote on any matter relating to the mutual national bank4 ,any voting rights of members prior to a conversion to a mutual national bank shall be extinguished upon a conversion to a mutual national bank4 7h7 ,mutual holding company formation ,a mutual national bank may reorganize into the mutual holding company form of organization in accordance with regulations promulgated by the ,comptroller of the ,currency4 7i7 ,definitions ,for purposes of this section1 the following definitions shall apply3 7#a7 ,insured depository institution ,the term insured depository institution has the same meaning as in section #c of the ,federal ,deposit ,insurance ,act4 7#b7 ,mutual national bank ,the term mutual national bank means a national banking association that operates in mutual form and is chartered by the ,comptroller of the ,currency under this section4 7#c7 ,mutual depository ,the term mutual depository means a depository institution that is organized in nonstock form1 including a ,federal non-stock depository and any form of nonstock depository provided for under ,state law1 the deposits of which are insured by an instrumentality of the ,federal ,government4 7#d7 ,mutuality ,the term mutuality means the quality of being an insured depository institution organized under a ,federal or ,state law providing for the organization of nonstock depository institutions1 or a holding company organized under a ,federal or ,state law providing for the organization of nonstock entities that control one or more depository institutions4 7#e7 ,member ,the term member means each insured account holder in a mutual depository's savings1 demand1 or other authorized depository accounts and each insured account holder in such an account in a depository subsidiary of a mutual bank holding company4 ,the board of directors may adopt a bylaw setting a minimum dollar threshold to qualify as a member up to #a1jjj4 7#f7 ,membership rights ,the term membership rights means the rights of each member under this section4 7j7 ,conforming references ,unless otherwise provided by the ,comptroller of the ,currency-- 7#a7 any reference in any ,federal law to a national bank operating in stock form1 including a reference to the term national banking association1 member bank1 national bank1 national association1 bank1 insured bank1 insured depository institution1 or depository institution1 shall be deemed to refer also to a mutual national bank2 7#b7 any reference in any ,federal law to the term board of directors1 director1 or directors of a national bank operating in stock form shall be deemed to refer also to the board of a mutual national bank2 and 7#c7 any terms in ,federal law that may apply only to a national bank operating in stock form1 including the terms stock1 shares1 shares of stock1 capital stock1 common stock1 stock certificate1 stock certificates1 certificates representing shares of stock1 stock dividend1 transferable stock1 each class of stock1 cumulate such shares1 par value1 preferred stock shall not apply to a mutual national bank1 unless the ,comptroller of the ,currency determines that the context requires otherwise4 4 #d4 ,mutual investment certificates authorized ,section #ch7;c77#a7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahcao7c77#a77 is hereby amended by deleting subparagraph 7,b77ii7 in paragraph 7,a7 and inserting subparagraph 7,b77ii7 and paragraph 7,c7 and by adding at the end of subparagraph 7,b77ii7 the following3 7,c7 7i7 ,notwithstanding any other provision of law1 a mutual depository1 as defined in 7#ab ,u4,s4,c4 #eacc;,a7h77#c771 is authorized to issue ,mutual ,investment ,certificates1 which shall be included as ,tier #a capital for purposes of any capital standards issued by an appropriate ,federal banking agency1 provided that such certificates must be-- 7,i7 nonvoting1 except that the issuing mutual depository institution may permit voting in the event that-- 7aa7 the mutual depository institution fails to pay dividends for a minimum of three consecutive dividend periods1 and then the holders of the class or classes of ,mutual ,investment ,certificates granted such voting rights1 and voting as a single class1 with one vote for each outstanding certificate1 may elect by a majority vote a maximum of one-third of the institution's board of directors1 the directors so elected to serve until the next annual meeting of the institution succeeding the payment of all current and past dividends2 7bb7 any merger1 consolidation1 or reorganization 7except in a supervisory case7 is sought to be authorized1 where the issuing institution is not the survivor1 provided that the regulatory capital of the resulting institution available for payment of any class of ,mutual ,investment ,certificates on liquidation is less than the regulatory capital available for such class prior to the merger1 consolidation1 or reorganization2 7cc7 any action is sought to be authorized which would create any class of ,mutual ,investment ,certificates having a preference or priority over an outstanding class or classes of ,mutual ,investment ,certificates2 7dd7 any action is sought to be authorized which would adversely change the specific terms of any class of ,mutual ,investment ,certificates2 7ee7 action is sought to be authorized which would increase the number of a class of ,mutual ,investment ,certificates1 or the number of a class of ,mutual ,investment ,certificates ranking prior to or on parity with another class of ,mutual ,investment ,certificates2 or 7ff7 action is sought which would authorize the issuance of an additional class or classes of ,mutual ,investment ,certificates without the institution having met specific financial standards2 7,,ii7 redeemable at the sole discretion of the ,board of ,directors of the mutual depository2 and 7,,iii7 provide that any dividends paid must be non-cumulative4 7ii7 ,notwithstanding any other provision of law1 nonwithdrawable accounts1 pledged accounts1 mutual capital certificates1 or similar instruments1 authorized as of the date of the enactment of the ,mutual ,community ,bank ,equity ,act1 shall be included as ,tier #a capital for purposes of any capital standards issued by an appropriate ,federal banking agency4 7iii7 ,the appropriate ,federal banking agencies are hereby authorized to prescribe appropriate regulations to implement these provisions4 4 #e4 ,protection of mutual depositories 7a7 ,in general ,subsection 7h7 of section #aj of the ,home ,owners' ,loan ,act 7#ab ,u4,s4,c4 #adfg;a7h77 is amended-- 7#a7 by striking or after the semicolon at the end of paragraph 7#b72 7#b7 by striking the period at the end of paragraph 7#c7 and inserting 2 or2 and 7#c7 by inserting after paragraph 7#c71 the following new paragraph3 7#d7 any company or any subsidiary of any company1 any director1 officer1 employee1 or person owning1 controlling1 or holding with the power to vote1 or holding proxies representing more than #be percent of the voting shares1 of such company or subsidiary1 or any director1 officer1 employee1 or person acting in concert with such company or subsidiary1 to hold1 solicit1 or exercise any proxies in respect of a savings association which is a mutual association1 with the view or intention to1 directly or indirectly1 control or attempt to control the mutual association4 4 7b7 ,enforcement action ,subsection 7i7 of section #aj of the ,home ,owners' ,loan ,act 7#ab ,u4,s4,c4 #adfg;a7i77 is amended by inserting after paragraph 7#c7 the following new paragraph3 7#d7 ,civil actions by association 7,a7 ,equitable relief ,any aggrieved mutual savings association may bring a civil action in a court of appropriate jurisdiction and may recover such equitable relief1 including injunctive relief1 and reasonable attorney's fees1 as determined by the court for any violation or attempted violation of paragraph 7#a7 or 7#d7 of subsection 7h74 7,b7 ,proxies null and void ,in addition to any damages or relief under paragraph 7#a71 any proxy held or exercised by any party the holding or exercise of which has been determined to be a violation of paragraph 7#a7 or 7#d7 of subsection 7h7 shall be deemed null and void1 as of the inception of such proxy1 and shall not be counted for purposes of determining a quorum at any meeting of such aggrieved mutual association4 7,c7 ,statute of limitation 7i7 ,in general ,an action may not be brought under subparagraph 7,a7 after the end of the #ahj-;day period beginning on the later of-- 7,i7 the date of the discovery of the alleged violation by the aggrieved mutual savings association2 or 7,,ii7 the date of the enactment of the ,mutual ,savings ,association ,preservation ,act4 7ii7 ,no attribution rule ,for purposes of clause 7i77,i71 the knowledge of the facts and circumstances giving rise to an alleged violation by any party to the violation shall not be attributed to the savings association4 4 #f4 ,establishment of charitable foundations authorized 7a7 ,any mutual holding company or direct or indirect stock subsidiary of a mutual holding company may contribute or issue shares of such stock subsidiary to a charitable foundation established by the mutual holding company or any direct or indirect stock subsidiary of the mutual holding company1 provided that-- 7#a7 the charitable foundation qualifies as a #eja7;c77#c7 organization under the ,internal ,revenue ,code1 as amended2 7#b7 the ,foundation's governance complies with regulations adopted by the appropriate ,federal banking agency2 7#c7 at the time of the contribution or issuance to the charitable foundation1 no direct or indirect stock subsidiary of the mutual holding company1 nor any affiliate thereof1 has issued shares of common stock to any nonaffiliate of the direct or indirect stock subsidiary of the mutual holding company2 7#d7 the value of the stock so contributed or issued by the direct or indirect stock subsidiary of the mutual holding company1 as determined in accordance with subsection 7b71 shall not exceed more than #aj percent of the insured depository institution's consolidated ,tier #a capital1 as of the quarter end prior to the establishment of the charitable foundation2 7#e7 the direct or indirect stock subsidiary of the mutual holding company that contributes or issues the shares to the charitable foundation must reasonably expect to utilize the tax deduction within the time period proscribed by the ,internal ,revenue ,service for contributions to charitable foundations2 and 7#f7 the mutual holding company and each direct or indirect stock subsidiary of the mutual holding company will be 8well capitalized0 under the prompt corrective action regulations immediately following the contribution to the charitable foundation4 7b7 ,prior to any contribution or issuance by a direct or indirect stock subsidiary of the mutual holding company to a charitable foundation pursuant to subsection 7a71 the mutual holding company shall obtain an appraisal1 by an independent appraiser experienced in such matters1 of the pro forma value of the stock so contributed on a fully converted basis4 ,the value of the stock so contributed1 as determined by the appraiser1 shall be limited in accordance with paragraph 7#d7 of subsection 7b74 #g4 ,dividends paid by subsidiaries of mutual holding companies ,section #aj7o77#aa77;,b7 of the ,home ,owners' ,loan ,act 7#ab ,u4,s4,c4 #adfg;a7o77#aa77;,b77 is amended by deleting or at the end of 7i71 deleting the period at the end of 7ii7 and inserting a semicolon at the end thereof1 and adding the following3 7iii7 a majority of the board of directors of the mutual holding company1 or a committee thereof1 consists of directors who are not affiliates of any stock subsidiary of the mutual holding company and who do not directly or indirectly own any shares of the stock to which the waiver would apply1 and vote in favor of the waiver of the dividend2 or 7iv7 an independent corporate committee consisting of persons who are not stockholders1 affiliates1 depositors1 borrowers1 or members of the mutual holding company or any stock subsidiary of the mutual holding company vote in favor of the waiver of the dividend4 4 #h4 ,preserving mutuality bylaws authorized 7a7 ,the ,board of ,directors of a mutual depository may adopt a bylaw to preserve the mutuality of a mutual depository4 ,such bylaw provisions may include-- 7#a7 supermajority voting requirements1 up to #hj percent1 by the members to approve a conversion to stock form2 7#b7 a prohibition against any person from serving1 or nominating a person to serve1 on the ,board of ,directors of the mutual depository1 if such person or nominee has an intention to propose a conversion from mutual to stock form2 7#c7 a requirement that any person serving or nominated to serve on the ,board of ,directors may not propose a conversion from mutual to stock form for a period of time not exceeding five years1 as determined by the ,board1 beginning on the later of the date such bylaw is adopted or such person is elected to serve on the ,board2 7#d7 a prohibition against any member from proposing a conversion to stock form at any annual or special meeting of members or by the written consent of members2 and 7#e7 a violation of one or more of the bylaw provisions adopted to preserve mutuality shall be a basis for termination as a member of the ,board of ,directors4 7b7 ,notwithstanding the foregoing1 in no event shall any bylaw adopted pursuant to section 7a7 have any force and effect in the event the mutual depository is not well capitalized in accordance with the rules established by such depositories appropriate ,federal banking agency4 #i4 ,applicability of small bank holding company policy statement to small mutual holding company ,the ,board of ,governors of the ,federal ,reserve shall apply its ,small ,bank ,holding ,company ,policy ,statement to any mutual holding company that would otherwise qualify as a small bank holding company1 if it were a bank holding company4