In this subtitle the following words have the meanings indicated. “Affiliate” means any association, corporation, business trust, statutory trust, or other similar organization that: Is not a bank service corporation and is controlled by a banking institution through: Direct or indirect ownership or control of more than 50 percent of the voting rights; Control of the election of a majority of the management; Direct or indirect ownership or control of more than 50 percent of the voting rights exercised at the last election of the management; Directors of the banking institution constituting a majority of the management of the organization; or Any direct or indirect control by stockholders of the banking institution, if the stockholders own or control: More than 50 percent of the voting rights in the banking institution; or More than 50 percent of the voting rights exercised at the last election of directors of the banking institution; or Controls a banking institution through: Direct or indirect ownership or control of more than 50 percent of the voting rights; Control of the election of a majority of the directors of the banking institution; Direct or indirect ownership or control of more than 50 percent of the voting rights exercised at the last election of the directors; or The holding of substantially all of the capital stock of the banking institution by trustees for stockholders of the organization. “Bank service corporation” means a corporation: At least some of the stock of which is owned by a banking institution; and That is organized to perform bank service corporation activities of the type permitted under applicable provisions of Title 12 of the United States Code to a bank service corporation owned exclusively by national banking associations. “Management” means the directors, trustees, or other persons exercising similar functions of an association, corporation, business trust, statutory trust, or other similar organization.

This subtitle does not: Affect any affiliate, if the affiliation existed on June 1, 1935; or Apply to a purchase by a banking institution of the stock of a small business investment company under the federal Small Business Investment Act of 1958, except that the value at which the purchased shares are carried on the books of the banking institution may not exceed 2 percent of its unimpaired capital and surplus.

Subject to this section, a banking institution may have an affiliate that: Provides a financial, fiduciary, or insurance service to the banking institution, its other affiliates, or the public; or If it is an affiliate under § 5–401(b)(1)(i) of this subtitle, conducts an activity that is permissible for a banking institution. Except as provided in subsections (d) and (e) of this section, a banking institution that intends to acquire or establish an affiliate, or to conduct a new activity in an existing affiliate, shall apply to and receive the prior approval of the Commissioner. On application of the banking institution, an affiliate shall be approved if: The Commissioner determines that the approval is: Reasonably required to protect the welfare of the general economy of this State and of the banking institution; or Not detrimental to the public interest or to the banking institution; The approval imposes the same conditions that federal law requires or permits as to a national banking association; and The transaction complies with the rules, regulations, and conditions that the Commissioner adopts. Except as provided in subsection (e) of this section, if a banking institution is rated CAMELS 1 or 2 and remains well capitalized in accordance with the requirements of the Federal Deposit Insurance Act, the banking institution may acquire or establish an affiliate, or conduct a new activity in an existing affiliate if: Within 10 days after acquiring or establishing the affiliate or commencing the activity, the banking institution provides notice to the Commissioner of the acquisition or establishment of the affiliate or the activity; and The affiliate only engages in any of the following activities: Holding and managing assets acquired by the banking institution through foreclosure or otherwise in good faith to compromise a doubtful claim, or in the ordinary course of collecting a debt previously contracted; Providing direct services to the banking institution or other affiliates; Making, purchasing, selling, or servicing for others loans or other extensions of credit; or Leasing personal property. No application or notice is required if the activities of a new affiliate: Are limited to those activities previously reported by the banking institution to the Commissioner in connection with the establishment or acquisition of a prior affiliate; Continue to be legally permissible for banking institutions; and Will be conducted subject to the same conditions imposed by the Commissioner for the prior affiliate. All activities and the establishment or acquisition of an affiliate under subsection (d) of this section are subject to: The same conditions that federal law requires or permits as to a national banking association; and The rules, regulations, and conditions that the Commissioner adopts.

The Commissioner has the same authority to examine the business of an affiliate that the Commissioner has as to a banking institution.

Except as provided in this section, or otherwise expressly provided by State law, a banking institution may not have a bank service corporation. If the Commissioner approves, a banking institution may have a bank service corporation. On application of the banking institution, a bank service corporation shall be approved if: The Commissioner determines that approval is: Reasonably required to protect the welfare of the general economy of the State and of the banking institution; and Not detrimental to the public interest or to the banking institution; The approval imposes the same conditions that federal law requires or permits as to a bank service corporation owned exclusively by national banking associations; and The transaction complies with the rules, regulations, and conditions that the Commissioner adopts. This section does not apply to any bank service corporation organized before July 1, 1984.

The Commissioner has the same authority to examine the business of a bank service corporation that the Commissioner has as to a banking institution.

A banking institution may not permit any bank services to be performed for it, whether by contract or otherwise, unless the banking institution and the person performing the bank services give the Commissioner satisfactory assurances that the performance of the bank services will be subject to regulation and examination by the Commissioner to the same extent as if the banking institution itself were performing the bank services.