Eliminating Corporate Shadow Banking Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2839 To amend the Bank Holding Company Act of 1956 to regulate industrial bank holding companies, and for other purposes. IN THE SENATE OF THE UNITED STATES NOVEMBER 12, 2019 Mr. KENNEDY introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Bank Holding Company Act of 1956 to regu- late industrial bank holding companies, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Eliminating Corporate 4 Shadow Banking Act of 2019’’. 5 SEC. 2. INDUSTRIAL BANK HOLDING COMPANY REGULA- 6 TION. 7 (a) DEFINITIONS.—Section 2 of the Bank Holding 8 Company Act of 1956 (12 U.S.C. 1841) is amended— 9 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 2 •S 2839 IS (1) in subsection (c)(2), by redesignating sub- 1 paragraph (H) as subsection (r), moving that sub- 2 section to appear after subsection (q), and adjusting 3 the margins accordingly; 4 (2) in subsection (r), as so redesignated— 5 (A) by striking ‘‘(r) An industrial’’ and in- 6 serting the following: 7 ‘‘(r) INDUSTRIAL BANK.—The term ‘industrial bank’ 8 means an industrial’’; and 9 (B) in the flush text following subpara- 10 graph (B), by striking ‘‘subparagraph’’ and in- 11 serting ‘‘subsection’’; and 12 (3) by adding at the end the following: 13 ‘‘(s) COVERED INDUSTRIAL BANK HOLDING COM- 14 PANY.—The term ‘covered industrial bank holding com- 15 pany’ means any company— 16 ‘‘(1) that, before October 1, 2019, controlled 17 (as determined by the Board pursuant to subsection 18 (a)), directly or indirectly, an industrial bank; 19 ‘‘(2) that did not acquire control of any other 20 depository institution after October 1, 2019; 21 ‘‘(3) with respect to which there is no change 22 in control, directly or indirectly, of any depository 23 institution subsidiary after October 1, 2019, that re- 24 quires a registration under this section or an appli- 25 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 3 •S 2839 IS cation under section 7(j) or 18(c) of the Federal De- 1 posit Insurance Act (12 U.S.C. 1817(j), 1828(c)), 2 section 3 of this Act, or section 10 of the Home 3 Owners’ Loan Act (12 U.S.C. 1467a); and 4 ‘‘(4) that was not— 5 ‘‘(A) a bank holding company; 6 ‘‘(B) a savings and loan holding company; 7 ‘‘(C) a company that is subject to this Act 8 pursuant to section 8(a) of the International 9 Banking Act of 1978 (12 U.S.C. 3106(a)); 10 ‘‘(D) a holding company regulated by the 11 Securities and Exchange Commission pursuant 12 to section 240.15c3–1(a)(7) of title 17, Code of 13 Federal Regulations, as in effect on August 1, 14 2019; or 15 ‘‘(E) controlled by a company described in 16 subparagraph (A), (B), (C), or (D). 17 ‘‘(t) CAPITAL TERMS RELATING TO COVERED INDUS- 18 TRIAL BANK HOLDING COMPANIES.— 19 ‘‘(1) ADEQUATELY CAPITALIZED.—With respect 20 to a covered industrial bank holding company, the 21 term ‘adequately capitalized’ means a level of cap- 22 italization which meets or exceeds all applicable Fed- 23 eral regulatory capital standards. 24 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 4 •S 2839 IS ‘‘(2) WELL CAPITALIZED.—With respect to a 1 covered industrial bank holding company, the term 2 ‘well capitalized’ means a level of capitalization 3 which meets or exceeds the required capital levels for 4 well capitalized covered industrial bank holding com- 5 panies established by the Board.’’. 6 (b) COVERED INDUSTRIAL BANK HOLDING COMPANY 7 REGISTRATION AND OWNERSHIP.—The Bank Holding 8 Company Act of 1956 (12 U.S.C. 1841 et seq.) is amend- 9 ed by adding at the end the following: 10 ‘‘SEC. 15. INDUSTRIAL BANK HOLDING COMPANY REGULA- 11 TION. 12 ‘‘(a) ACQUISITION OF INDUSTRIAL BANK SHARES OR 13 ASSETS.—Section 3 of this Act (other than section 14 3(c)(3)(B)) shall apply to any covered industrial bank 15 holding company in the same manner as that section ap- 16 plies to a company that is or would become a bank holding 17 company, except that for purposes of applying this sub- 18 section— 19 ‘‘(1) any reference to a ‘bank holding company’ 20 in such section 3 shall be deemed to be a reference 21 to a ‘covered industrial bank holding company’; 22 ‘‘(2) any reference to a ‘bank’ in such section 23 3 shall be deemed to be a reference to an ‘industrial 24 bank’; 25 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 5 •S 2839 IS ‘‘(3) any reference to the ‘Bank Holding Com- 1 pany Act Amendments of 1970’ in such section 3 2 shall be deemed to be a reference to the ‘Industrial 3 Bank Holding Company Act of 2019’; 4 ‘‘(4) any reference to a ‘home State’ in such 5 section 3 shall be deemed to be a reference to— 6 ‘‘(A) with respect to a covered industrial 7 bank holding company, the State in which the 8 total deposits of all banking subsidiaries of such 9 company were the largest on the later of— 10 ‘‘(i) October 1, 2019; or 11 ‘‘(ii) the date on which the company 12 becomes a covered industrial bank holding 13 company under this section; and 14 ‘‘(B) with respect to an industrial bank, 15 the home State of the bank as determined 16 under section 44(g) of the Federal Deposit In- 17 surance Act (12 U.S.C. 1831u(g)); 18 ‘‘(5) any reference to a ‘host State’ in such sec- 19 tion 3 shall be deemed to be a reference to— 20 ‘‘(A) with respect to a covered industrial 21 bank holding company, a State, other than the 22 home State of the company, in which the com- 23 pany controls, or seeks to control, an industrial 24 bank subsidiary; and 25 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 6 •S 2839 IS ‘‘(B) with respect to an industrial bank, 1 the host State of the bank as determined under 2 section 44(g) of the Federal Deposit Insurance 3 Act (12 U.S.C. 1831u(g)); 4 ‘‘(6) any reference to an ‘out-of-State bank 5 holding company’ in such section 3 shall be deemed 6 to be a reference to, with respect to any State, a 7 covered industrial bank holding company whose 8 home State is another State; and 9 ‘‘(7) any reference to an ‘out-of-State bank’ in 10 such section 3 shall be deemed to be a reference to, 11 with respect to any State, an industrial bank whose 12 home State is another State. 13 ‘‘(b) APPLICATION PROCESS.—An application filed 14 under subsection (a) to acquire control of an industrial 15 bank shall be treated as an application for a deposit facil- 16 ity for purposes of this Act and any other Federal law. 17 ‘‘(c) REGISTRATION.— 18 ‘‘(1) IN GENERAL.—Each covered industrial 19 bank holding company shall register with the Board 20 on forms prescribed by the Board before the end of 21 the 180-day period beginning on the later of— 22 ‘‘(A) the date the company becomes a cov- 23 ered industrial bank holding company; or 24 ‘‘(B) the date of enactment of this section. 25 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 7 •S 2839 IS ‘‘(2) INFORMATION TO BE INCLUDED.—Each 1 registration submitted under paragraph (1) shall in- 2 clude such information, under oath, with respect to 3 the financial condition, ownership, operations, man- 4 agement, and intercompany relationships of the cov- 5 ered industrial bank holding company and subsidi- 6 aries of the covered industrial bank holding com- 7 pany, and other factors (including information de- 8 scribed in subsection (d)(1)(C)), as the Board may 9 determine to be appropriate to carry out the pur- 10 poses of this section. 11 ‘‘(3) EXTENSION OF TIME FOR SUBMITTING 12 COMPLETE INFORMATION.—Upon application by a 13 covered industrial bank holding company and subject 14 to such requirements, factors, and evidence as the 15 Board may require, the Board may extend the pe- 16 riod described in paragraph (1) within which the 17 covered industrial bank company shall register and 18 file the requisite information. 19 ‘‘(d) REPORTS AND EXAMINATIONS.— 20 ‘‘(1) REPORTS.— 21 ‘‘(A) REPORTS REQUIRED.—Each covered 22 industrial bank holding company and each sub- 23 sidiary of a covered industrial bank holding 24 company, other than an industrial bank, shall 25 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 8 •S 2839 IS file with the Board such reports as may be re- 1 quired by the Board. 2 ‘‘(B) FORM AND MANNER.—Reports filed 3 under subparagraph (A) shall be made under 4 oath and shall be in such form and for such pe- 5 riods as the Board may prescribe. 6 ‘‘(C) INFORMATION.—Each report filed 7 under subparagraph (A) shall contain such in- 8 formation as the Board may require con- 9 cerning— 10 ‘‘(i) the operations of the covered in- 11 dustrial bank holding company and the 12 subsidiaries of the covered industrial bank 13 holding company; 14 ‘‘(ii) the financial condition of the cov- 15 ered industrial bank holding company and 16 the subsidiaries of the covered industrial 17 bank holding company, together with infor- 18 mation on systems maintained within the 19 covered industrial bank holding company 20 or within any subsidiary of the covered in- 21 dustrial bank holding company for moni- 22 toring and controlling financial and oper- 23 ating risks, and transactions with insured 24 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 9 •S 2839 IS depository institution subsidiaries of the 1 covered industrial bank holding company; 2 ‘‘(iii) compliance by the covered indus- 3 trial bank holding company and the sub- 4 sidiaries of the covered industrial bank 5 holding company with all applicable Fed- 6 eral and State laws; and 7 ‘‘(iv) such other information as the 8 Board may require. 9 ‘‘(D) ACCEPTANCE OF EXISTING RE- 10 PORTS.—For purposes of this paragraph, the 11 Board may accept reports that a covered indus- 12 trial bank holding company or any subsidiary of 13 a covered industrial bank holding company has 14 provided or has been required to provide to any 15 other Federal or State supervisor or to any ap- 16 propriate self-regulatory organization. 17 ‘‘(2) EXAMINATIONS.— 18 ‘‘(A) IN GENERAL.—Each covered indus- 19 trial bank holding company and each subsidiary 20 of each covered industrial bank holding com- 21 pany (other than an industrial bank) shall be 22 subject to such examinations by the Board as 23 the Board may prescribe for purposes of this 24 section. 25 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 10 •S 2839 IS ‘‘(B) FURNISHING REPORTS TO OTHER 1 AGENCIES.—Examination and other reports 2 made or received under this section may be fur- 3 nished by the Board to any other appropriate 4 Federal agency or any appropriate State bank 5 supervisor or other State financial supervisory 6 agency. 7 ‘‘(C) USE OF REPORTS FROM OTHER 8 AGENCIES.—The Board may use, for purposes 9 of this subsection, reports of examination made 10 by any other appropriate Federal agency, any 11 appropriate State bank supervisor, or any other 12 State financial supervisory authority with re- 13 spect to any covered industrial bank holding 14 company or subsidiary of the covered industrial 15 bank holding company, to the extent the Board 16 may determine such use to be feasible for such 17 purposes. 18 ‘‘(3) CAPITAL.— 19 ‘‘(A) IN GENERAL.—The Board may not, 20 by regulation, guideline, order, or otherwise, 21 prescribe or impose any capital or capital ade- 22 quacy rules, guidelines, standards, or require- 23 ments on any functionally regulated affiliate (as 24 defined in section 45 of the Federal Deposit In- 25 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 11 •S 2839 IS surance Act (12 U.S.C. 1831v)) of any deposi- 1 tory institution that is controlled by a covered 2 industrial bank holding company that— 3 ‘‘(i) is not a depository institution; 4 and 5 ‘‘(ii) is— 6 ‘‘(I) in compliance with the appli- 7 cable capital requirements of the ap- 8 propriate Federal or State supervisory 9 agency of the affiliate (including the 10 Securities and Exchange Commission 11 or State insurance authority); 12 ‘‘(II) properly registered as an 13 investment adviser— 14 ‘‘(aa) under the Investment 15 Advisers Act of 1940 (15 U.S.C. 16 80b–1 et seq.); or 17 ‘‘(bb) with any State; or 18 ‘‘(III) is licensed as an insurance 19 agent with the appropriate State in- 20 surance authority. 21 ‘‘(B) RULE OF CONSTRUCTION.—Subpara- 22 graph (A) shall not be construed as preventing 23 the Board from imposing capital or capital ade- 24 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 12 •S 2839 IS quacy rules, guidelines, standards, or require- 1 ments with respect to— 2 ‘‘(i) activities of a registered invest- 3 ment adviser other than with respect to in- 4 vestment advisory activities or activities in- 5 cidental to investment advisory activities; 6 or 7 ‘‘(ii) activities of a licensed insurance 8 agent other than insurance agency activi- 9 ties or activities incidental to insurance 10 agency activities. 11 ‘‘(e) ACCESS TO INFORMATION.— 12 ‘‘(1) INFORMATION PROVIDED BY BOARD.—Any 13 confidential supervisory information, including exam- 14 ination or other reports, pertaining to a covered in- 15 dustrial bank holding company furnished by the 16 Board to any other Federal agency or any appro- 17 priate State supervisory agency shall remain con- 18 fidential unless the Board, in writing, otherwise con- 19 sents. 20 ‘‘(2) DEFERENCE TO DEPOSITORY INSTITUTION 21 EXAMINATIONS.—Any appropriate Federal super- 22 visory agency of a covered industrial bank holding 23 company shall, to the fullest extent possible, rely on 24 examination reports made by the appropriate Fed- 25 VerDate Sep 11 2014 03:14 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S2839.IS S2839 kjohnson on DSK79L0C42 with BILLS 13 •S 2839 IS eral banking agency and the app [Text truncated for display. 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