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[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 3734 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
2d Session
S. 3734
To address applications for deposit insurance submitted by industrial
banks to the Federal Deposit Insurance Corporation, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 29, 2026
Mr. Kennedy (for himself and Mr. Kim) introduced the following bill;
which was read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
A BILL
To address applications for deposit insurance submitted by industrial
banks to the Federal Deposit Insurance Corporation, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Close the Shadow Banking Loophole
Act''.
SEC. 2. INDUSTRIAL BANKS.
(a) Definitions.--In this section:
(1) Appropriate federal banking agency.--The term
``appropriate Federal banking agency'' has the meaning given
the term in section 3(q) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(q)).
(2) Corporation.--The term ``Corporation'' means the
Federal Deposit Insurance Corporation.
(3) Industrial bank.--The term ``industrial bank'' means an
entity described in section 2(c)(2)(H) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841(c)(2)(H)), as in effect on
the day before the date of enactment of this Act.
(b) Exception From Definition of Bank.--Section 2(c)(2)(H) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841(c)(2)(H)) is amended,
in the matter preceding clause (i), by inserting after ``similar
institution'' the following: ``which has been approved to receive
deposit insurance from the Federal Deposit Insurance Corporation on or
before September 23, 2021 (or, with respect to such an entity to which
section 2(c) of the Close the Shadow Banking Loophole Act applies,
which is in compliance with such section 2(c)), and''.
(c) Treatment of Deposit Insurance Applications Pending on
September 23, 2021.--
(1) In general.--With respect to an industrial bank that,
on the date of enactment of this Act, has an application to
receive deposit insurance pending before the Corporation that
was submitted on or before September 23, 2021, the
Corporation--
(A) shall provide for a 90-day public comment
period and a public hearing with respect to that
application; and
(B) may only approve that application by a \2/3\
vote of the members of the Board of Directors of the
Corporation.
(2) Deadline for approving application.--If the Corporation
does not approve an application described in paragraph (1)
before September 30, 2026, that application shall be deemed to
have been denied.
(3) Rule of construction.--Except to the extent explicitly
provided in this subsection, this subsection may not be
construed to affect the authority of the Corporation to
consider deposit insurance applications under sections 5 and 6
of the Federal Deposit Insurance Act (12 U.S.C. 1815, 1816).
(d) Authority With Respect To Deposit Insurance Applications
Granted After September 23, 2021.--
(1) Definitions.--In this subsection:
(A) Bank; depository institution.--The terms
``bank'' and ``depository institution'' have the
meanings given those terms in section 2 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841), as
amended by this section.
(B) Covered industrial loan company.--The term
``covered industrial loan company'' means an industrial
bank that has an application to receive deposit
insurance from the Corporation approved after September
23, 2021.
(C) Parent company.--The term ``parent company''
means an entity that has control over a covered
industrial loan company.
(D) Primary financial regulatory agency.--With
respect to a parent company, the term ``primary
financial regulatory agency''--
(i) has the meaning given the term in
section 2 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (12 U.S.C. 5301);
and
(ii) with respect to a parent company for
which clause (i) does not apply, means the
Corporation.
(2) Authority.--The primary financial regulatory agency
with respect to a parent company may take any of the following
actions with respect to the parent company:
(A) Conduct such examinations of, and obtain
reports from, the parent company or any subsidiary of
the parent company (other than a bank) as the agency
determines necessary or appropriate to assess each of
the following:
(i) The financial condition of the parent
company or subsidiary.
(ii) The systems of the parent company or
subsidiary for maintaining and controlling
financial and operating risks.
(iii) The transactions of the parent
company or subsidiary with depository
institution subsidiaries of the parent company.
(B) Impose any conditions or restrictions on the
parent company or any subsidiary of the parent company
(other than a bank), including restricting or
prohibiting transactions between the parent company or
subsidiary and any depository institution subsidiary of
the parent company, if those conditions or restrictions
would promote the safety and soundness of the parent
company or any of its depository institution
subsidiaries.
(e) Change of Control.--
(1) In general.--Except as provided in paragraph (2), the
appropriate Federal banking agency shall disapprove a change in
control, as provided in section 7(j) of the Federal Deposit
Insurance Act (12 U.S.C. 1817(j)), of an industrial bank.
(2) Exceptions.--Paragraph (1) shall not apply to a change
in control of an industrial bank--
(A) that--
(i) is in danger of default, as determined
by the appropriate Federal banking agency,
provided that the entity acquiring control of
the industrial bank is an entity described in
clause (iii);
(ii) results from the acquisition of voting
shares of an issuer that controls the
industrial bank and the securities of which are
listed on a national securities exchange, if,
after the acquisition, the acquiring
shareholder (or group of shareholders acting in
concert) holds less than 25 percent of any
class of the voting shares of, and does not
otherwise exercise control over, that issuer;
or
(iii) will be controlled, directly or
indirectly, by an entity subject to
consolidated supervision by the Board of
Governors of the Federal Reserve System as a--
(I) bank holding company;
(II) savings and loan holding
company; or
(III) foreign bank that is treated,
as of July 1, 2020, as a bank holding
company under the International Banking
Act of 1978 (12 U.S.C. 3101 et seq.);
and
(B) that has obtained all regulatory approvals
otherwise required with respect to the change in
control under any applicable Federal or State law,
including section 7(j) of the Federal Deposit Insurance
Act (12 U.S.C. 1817(j)).
SEC. 3. SUPERVISION OF PARENT COMPANIES OF INDUSTRIAL LOAN COMPANIES.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is
amended by inserting after section 5 (12 U.S.C. 1844) the following:
``SEC. 6. SUPERVISION OF PARENT COMPANIES OF INDUSTRIAL LOAN COMPANIES.
``(a) Definitions.--In this section:
``(1) Corporation.--The term `Corporation' means the
Federal Deposit Insurance Corporation.
``(2) Parent company of an industrial loan company.--The
term `parent company of an industrial loan company' means a
company--
``(A) that is not directly or indirectly subject to
a primary financial regulatory agency (as defined in
section 2 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (12 U.S.C. 5301)); and
``(B) that has control over an entity that--
``(i) is an industrial loan company,
industrial bank, or other similar institution;
``(ii) is not a bank; and
``(iii) is not a person regulated by a
State insurance regulator, as that term is
defined in section 1002 of the Consumer
Financial Protection Act of 2010 (12 U.S.C.
5481).
``(b) Authority Relating to a Parent Company of an Industrial Loan
Company.--
``(1) In general.--Subject to paragraph (2), the
Corporation shall have the same authority to require a parent
company of an industrial loan company (or a subsidiary of such
a parent company) to make reports and submit to examinations as
the Board has with respect to a bank holding company or a
subsidiary of a bank holding company.
``(2) Conditions.--In carrying out the report and
examination authority described in paragraph (1) and with
respect to the parent company of an industrial loan company
that has been approved to receive deposit insurance from the
Corporation on or before September 23, 2021, the Corporation
shall tailor any requirements to the size, complexity, and
nature of the business of that parent company.
``(3) Enforcement.--The Corporation may, using the
authorities under section 8 of the Federal Deposit Insurance
Act (12 U.S.C. 1818), enforce the report and examination
authority under this section with respect to a parent company
of an industrial loan company (or a subsidiary of such a parent
company) to the same extent as the Board may enforce the report
and examination authority of the Board with respect to a bank
holding company or a subsidiary of a bank holding company.
``(c) Rule of Construction.--Nothing in this section may be
construed as a reduction of the authority of the Corporation, as in
effect on the date of enactment of this section.
``(d) Rulemaking.--The Corporation may issue rules to implement
this section.''.
SEC. 4. APPLICATION WITH RESPECT TO CONTRACTS AND OTHER AGREEMENTS.
(a) Definition.--In this section, the term ``industrial loan
company'' means an industrial loan company, industrial bank, or other
similar institution.
(b) Application.--This Act, and the amendments made by this Act,
may not be construed to affect or impair--
(1) the authority of the Federal Deposit Insurance
Corporation to enter into any agreement with a parent company
of an industrial loan company (as defined in section 6 of the
Bank Holding Company Act of 1956, as added by section 3 of this
Act) or an industrial loan company, or to impose any condition
in connection with the approval by the Corporation of an
application; or
(2) the validity of any agreement described in paragraph
(1) entered into before the date of enactment of this Act.
<all>
Introduced in Senate
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
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