Return to Prudent Banking Act of 2023

I 118TH CONGRESS 1ST SESSION H. R. 2714 To repeal certain provisions of the Gramm-Leach-Bliley Act and revive the separation between commercial banking and the securities business, in the manner provided in the Banking Act of 1933, the so-called ‘‘Glass- Steagall Act’’, and for other purposes. IN THE HOUSE OF REPRESENTATIVES APRIL 19, 2023 Ms. KAPTUR (for herself, Ms. NORTON, Ms. OMAR, Ms. PINGREE, Ms. WILD, Ms. TLAIB, Mr. POCAN, and Mrs. WATSON COLEMAN) introduced the fol- lowing bill; which was referred to the Committee on Financial Services A BILL To repeal certain provisions of the Gramm-Leach-Bliley Act and revive the separation between commercial banking and the securities business, in the manner provided in the Banking Act of 1933, the so-called ‘‘Glass-Steagall Act’’, 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 ‘‘Return to Prudent 4 Banking Act of 2023’’. 5 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 2714 IH SEC. 2. GLASS-STEAGALL REVIVED. 1 (a) WALL BETWEEN COMMERCIAL BANKS AND SE- 2 CURITIES ACTIVITIES REESTABLISHED.—Section 18 of 3 the Federal Deposit Insurance Act (12 U.S.C. 1828) is 4 amended by adding at the end the following new sub- 5 section: 6 ‘‘(bb) LIMITATIONS ON SECURITY AFFILIATIONS.— 7 ‘‘(1) PROHIBITION ON AFFILIATION BETWEEN 8 INSURED DEPOSITORY INSTITUTIONS AND INVEST- 9 MENT BANKS OR SECURITIES FIRMS.—An insured 10 depository institution may not be or become an affil- 11 iate of any broker or dealer, any investment adviser, 12 any investment company, or any other person en- 13 gaged principally in the issue, flotation, under- 14 writing, public sale, or distribution at wholesale or 15 retail or through syndicate participation of stocks, 16 bonds, debentures, notes, or other securities. 17 ‘‘(2) PROHIBITION ON OFFICERS, DIRECTORS 18 AND EMPLOYEES OF SECURITIES FIRMS SERVICE ON 19 BOARDS OF DEPOSITORY INSTITUTIONS.— 20 ‘‘(A) IN GENERAL.—An individual who is 21 an officer, director, partner, or employee of any 22 broker or dealer, any investment adviser, any 23 investment company, or any other person en- 24 gaged principally in the issue, flotation, under- 25 writing, public sale, or distribution at wholesale 26 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 2714 IH or retail or through syndicate participation of 1 stocks, bonds, debentures, notes, or other secu- 2 rities may not serve at the same time as an of- 3 ficer, director, employee, or other institution-af- 4 filiated party of any insured depository institu- 5 tion. 6 ‘‘(B) EXCEPTION.—Subparagraph (A) 7 shall not apply with respect to service by any 8 individual which is otherwise prohibited under 9 such subparagraph if the appropriate Federal 10 banking agency determines, by regulation with 11 respect to a limited number of cases, that serv- 12 ice by such individual as an officer, director, 13 employee, or other institution-affiliated party of 14 any insured depository institution would not un- 15 duly influence the investment policies of the de- 16 pository institution or the advice the institution 17 provides to customers. 18 ‘‘(C) TERMINATION OF SERVICE.—Subject 19 to a determination under subparagraph (B), 20 any individual described in subparagraph (A) 21 who, as of the date of the enactment of the Re- 22 turn to Prudent Banking Act of 2023, is serv- 23 ing as an officer, director, employee, or other 24 institution-affiliated party of any insured depos- 25 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 2714 IH itory institution shall terminate such service as 1 soon as practicable after such date of enact- 2 ment and no later than the end of the 60-day 3 period beginning on such date. 4 ‘‘(3) TERMINATION OF EXISTING AFFILI- 5 ATION.— 6 ‘‘(A) ORDERLY WIND-DOWN OF EXISTING 7 AFFILIATION.—Any affiliation of an insured de- 8 pository institution with any broker or dealer, 9 any investment adviser, any investment com- 10 pany, or any other person, as of the date of the 11 enactment of the Return to Prudent Banking 12 Act of 2023, which is prohibited under para- 13 graph (1) shall be terminated as soon as prac- 14 ticable and in any event no later than the end 15 of the 2-year period beginning on such date of 16 enactment. 17 ‘‘(B) EARLY TERMINATION.—The appro- 18 priate Federal banking agency, after oppor- 19 tunity for hearing, may terminate, at any time, 20 the authority conferred by the preceding sub- 21 paragraph to continue any affiliation subject to 22 such subparagraph until the end of the period 23 referred to in such subparagraph if the agency 24 determines, having due regard for the purposes 25 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 2714 IH of this subsection and the Return to Prudent 1 Banking Act of 2023, that such action is nec- 2 essary to prevent undue concentration of re- 3 sources, decreased or unfair competition, con- 4 flicts of interest, or unsound banking practices 5 and is in the public interest. 6 ‘‘(C) EXTENSION.—Subject to a deter- 7 mination under subparagraph (B), an appro- 8 priate Federal banking agency may extend the 9 2-year period referred to in subparagraph (A) 10 from time to time as to any particular insured 11 depository institution for not more than 6 12 months at a time, if, in the judgment of the 13 agency, such an extension would not be detri- 14 mental to the public interest, but no such exten- 15 sions shall in the aggregate exceed 1 year. 16 ‘‘(4) DEFINITIONS.—For purposes of this sub- 17 section, the terms ‘broker’ and ‘dealer’ have the 18 same meanings as in section 3(a) of the Securities 19 Exchange Act of 1934 and the terms ‘investment 20 adviser’ and ‘investment company’ have the meaning 21 given such terms under the Investment Advisers Act 22 of 1940 and the Investment Company Act of 1940, 23 respectively.’’. 24 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 2714 IH (b) PROHIBITION ON BANKING ACTIVITIES BY SECU- 1 RITIES FIRMS CLARIFIED.—Section 21 of the Banking 2 Act of 1933 (12 U.S.C. 378) is amended by adding at 3 the end the following new subsection: 4 ‘‘(c) BUSINESS OF RECEIVING DEPOSITS.—For pur- 5 poses of this section, the term ‘business of receiving depos- 6 its’ includes the establishment and maintenance of any 7 transaction account (as defined in section 19(b)(1)(C) of 8 the Federal Reserve Act).’’. 9 (c) CONTINUED APPLICABILITY OF ICI VS. CAMP.— 10 (1) IN GENERAL.—The Congress ratifies the in- 11 terpretation of the paragraph designated the ‘‘Sev- 12 enth’’ of section 5136 of the Revised Statutes of the 13 United States (12 U.S.C. 24, as amended by section 14 16 of the Banking Act of 1933 and subsequent 15 amendments) and section 21 of the Banking Act of 16 1933 (12 U.S.C. 378) by the Supreme Court of the 17 United States in the case of Investment Company 18 Institute v. Camp (401 U.S. 617 et seq. (1971)) 19 with regard to the permissible activities of banks 20 and securities firms, except to the extent expressly 21 prescribed otherwise by this section. 22 (2) APPLICABILITY OF REASONING.—The rea- 23 soning of the Supreme Court of the United States 24 in the case referred to in paragraph (1) with respect 25 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 2714 IH to sections 20 and 32 of the Banking Act of 1933 1 (as in effect prior to the date of the enactment of 2 the Gramm-Leach-Bliley Act) shall continue to apply 3 to subsection (bb) of section 18 of the Federal De- 4 posit Insurance Act (as added by subsection (a) of 5 this section) except to the extent the scope and ap- 6 plication of such subsection as enacted exceed the 7 scope and application of such sections 20 and 32. 8 (3) LIMITATION ON AGENCY INTERPRETATION 9 OR JUDICIAL CONSTRUCTION.—No appropriate Fed- 10 eral banking agency, by regulation, order, interpre- 11 tation, or other action, and no court within the 12 United States may construe the paragraph des- 13 ignated the ‘‘Seventh’’ of section 5136 of the Re- 14 vised Statutes of the United States (12 U.S.C. 24, 15 as amended by section 16 of the Banking Act of 16 1933 and subsequent amendments), section 21 of 17 the Banking Act of 1933, or section 18(bb) of the 18 Federal Deposit Insurance Act more narrowly than 19 the reasoning of the Supreme Court of the United 20 States in the case of Investment Company Institute 21 v. Camp (401 U.S. 617 et seq. (1971)) as to the 22 construction and the purposes of such provisions. 23 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 2714 IH SEC. 3. REPEAL OF GRAMM-LEACH-BLILEY ACT PROVI- 1 SIONS. 2 (a) FINANCIAL HOLDING COMPANY.— 3 (1) IN GENERAL.—Section 4 of the Bank Hold- 4 ing Company Act of 1956 (12 U.S.C. 1843) is 5 amended by striking subsections (k), (l), (m), (n), 6 and (o). 7 (2) TRANSITION.— 8 (A) ORDERLY WIND-DOWN OF EXISTING 9 AFFILIATION.—In the case of a bank holding 10 company which, pursuant to the amendments 11 made by paragraph (1), is no longer authorized 12 to control or be affiliated with any entity that 13 was permissible for a financial holding com- 14 pany, any affiliation by the bank holding com- 15 pany which is not permitted for a bank holding 16 company shall be terminated as soon as prac- 17 ticable and in any event no later than the end 18 of the 2-year period beginning on such date of 19 enactment. 20 (B) EARLY TERMINATION.—The Board of 21 Governors of the Federal Reserve System, after 22 opportunity for hearing, may terminate, at any 23 time, the authority conferred by the preceding 24 subparagraph to continue any affiliation subject 25 to such subparagraph until the end of the pe- 26 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •HR 2714 IH riod referred to in such subparagraph if the 1 Board determines, having due regard to the 2 purposes of this Act, that such action is nec- 3 essary to prevent undue concentration of re- 4 sources, decreased or unfair competition, con- 5 flicts of interest, or unsound banking practices, 6 and is in the public interest. 7 (C) EXTENSION.—Subject to a determina- 8 tion under subparagraph (B), the Board of 9 Governors of the Federal Reserve System may 10 extend the 2-year period referred to in subpara- 11 graph (A) above from time to time as to any 12 particular bank holding company for not more 13 than 6 months at a time, if, in the judgment of 14 the Board, such an extension would not be det- 15 rimental to the public interest, but no such ex- 16 tensions shall in the aggregate exceed 1 year. 17 (3) TECHNICAL AND CONFORMING AMEND- 18 MENTS.— 19 (A) Section 2 of the Bank Holding Com- 20 pany Act of 1956 (12 U.S.C. 1841) is amended 21 by striking subsection (p). 22 (B) Section 5(c) of the Bank Holding 23 Company Act of 1956 (12 U.S.C. 1844(c)) is 24 amended— 25 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •HR 2714 IH (i) by striking paragraphs (3) and (4); 1 and 2 (ii) by redesignating paragraph (5) as 3 paragraph (3). 4 (C) Section 5 of the Bank Holding Com- 5 pany Act of 1956 (12 U.S.C. 1844) is amended 6 by striking subsection (g). 7 (D) The Federal Deposit Insurance Act 8 (12 U.S.C. 1811 et seq.) is amended by striking 9 section 45. 10 (E) Subtitle B of title I of the Gramm- 11 Leach-Bliley Act is amended by striking section 12 114 (12 U.S.C. 1828a) and section 115 (12 13 U.S.C. 1820a). 14 (b) FINANCIAL SUBSIDIARIES REPEALED.— 15 (1) IN GENERAL.—Section 5136A of the Re- 16 vised Statutes of the United States (12 U.S.C. 24a) 17 is amended to read as follows: 18 ‘‘SEC. 5136A. [REPEALED].’’. 19 (2) TRANSITION.— 20 (A) ORDERLY WIND-DOWN OF EXISTING 21 AFFILIATION.—In the case of a national bank 22 which, pursuant to the amendments made by 23 paragraph (1), is no longer authorized to con- 24 trol or be affiliated with a financial subsidiary 25 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •HR 2714 IH as of the date of the enactment of this Act, 1 such affiliation shall be terminated as soon as 2 practicable and in any event no later than the 3 end of the 2-year period beginning on such date 4 of enactment. 5 (B) EARLY TERMINATION.—The Comp- 6 troller of the Currency, after opportunity for 7 hearing, may terminate, at any time, the au- 8 thority conferred by the preceding subpara- 9 graph to continue any affiliation subject to such 10 subparagraph until the end of the period re- 11 ferred to in such subparagraph if the Comp- 12 troller determines, having due regard for the 13 purposes of this Act, that such action is nec- 14 essary to prevent undue concentration of re- 15 sources, decreased or unfair competition, con- 16 flicts of interest, or unsound banking practices 17 and is in the public interest. 18 (C) EXTENSION.—Subject to a determina- 19 tion under subparagraph (B), the Comptroller 20 of the Currency may extend the 2-year period 21 referred to in subparagraph (A) above from 22 time to time as to any particular national bank 23 for not more than 6 months at a time, if, in the 24 judgment of the Comptroller, such an extension 25 VerDate Sep 11 2014 00:43 Apr 26, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2714.IH H2714 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •HR 2714 IH would not be detrimental to the public interest, 1 but no such extensions shall in the aggregate 2 exceed 1 year. 3 (3) TECHNICAL AND CONFORMING AMEND- 4 MENT.— 5 (A) The 20th undesignated paragraph of 6 section 9 of the Federal Reserve Act (12 U.S.C. 7 335) is amended by striking the last sentence. 8 (B) The Federal Deposit Insurance Act is 9 amended by striking section 46 (12 U.S.C. 10 1831w). 11 (4) CLERICAL AMENDMENT.—The table of sec- 12 tions for chapter one of title LXII of the Revised 13 Statutes of the United States [Text truncated for display. Full text available on Congress.gov.]