Industrial bank holding company regulation

(a)

Definitions

(1)

Industrial bank

Section 3(a) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)) is amended by adding at the end the following new paragraph:

(4)

Industrial bank

The term industrial bank means any insured State bank that is an industrial bank, industrial loan company, or other institution that is excluded, pursuant to section 2(c)(2)(H) of the Bank Holding Company Act of 1956, from the definition of the term bank for purposes of such Act.

(2)

Industrial bank holding company

Section 3(w) of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)) is amended by adding at the end the following new paragraphs:

(8)

Industrial bank holding company

The term industrial bank holding company means any company that— (A)controls (as determined by the Corporation pursuant to section 2(a) of the Bank Holding Company Act of 1956), directly or indirectly, any industrial bank; and (B)is not— (i)1 or more of the following: a bank holding company, a savings and loan holding company, a company that is subject to the Bank Holding Company Act of 1956 pursuant to section 8(a) of the International Banking Act of 1978, or a holding company regulated by the Securities and Exchange Commission pursuant to section 240.15c3–1(a)(7) of title 17 of the Code of Federal Regulations (as in effect on January 29, 2007); or (ii)controlled by a company described in clause (i). (9)

Capital terms relating to industrial bank holding companies

(A)

Adequately capitalized

With respect to an industrial bank holding company, the term adequately capitalized means a level of capitalization which meets or exceeds all applicable Federal regulatory capital standards. (B)

Well capitalized

With respect to an industrial bank holding company, the term well capitalized means a level of capitalization which meets or exceeds the required capital levels for well capitalized industrial bank holding companies established by the Corporation.

(3)

Technical and conforming amendments to other definitions

(A)

Appropriate federal banking agency

Section 3(q)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(3)) is amended— (i)by striking or a foreign and inserting , any foreign; and (ii)by inserting , and any industrial bank holding company and any subsidiary of an industrial bank holding company (other than a bank) after insured branch. (B)

Depository institution holding company

Section 3(w)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(1)) is amended— (i)by striking or a savings and inserting , any savings; and (ii)by inserting , and any industrial bank holding company before the period at the end. (b)

Industrial bank holding company registration and ownership

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding at the end the following new section:

51.

Industrial bank holding company regulation

(a)

Acquisition of industrial bank shares or assets

Section 3 of the Bank Holding Company Act of 1956 (other than section 3(c)(3)(B) of that Act) shall apply to any company that is or would become an industrial bank holding company in the same manner as such section applies to a company that is or would become a bank holding company, except that for purposes of applying this subsection— (1)any reference to a bank holding company in such section 3 shall be deemed to be a reference to an industrial bank holding company; (2)any reference to a bank in such section 3 shall be deemed to be a reference to an industrial bank; (3)any reference to the Board in such section 3 shall be deemed to be a reference to the Corporation; (4)any reference to the Bank Holding Company Act Amendments of 1970 in such section 3 shall be deemed to be a reference to the Industrial Bank Holding Company Act of 2007; (5)any reference to a home State in such section 3 shall be deemed to be a reference to— (A)with respect to an industrial bank holding company, the State in which the total deposits of all banking subsidiaries of such company were the largest on the later of— (i)January 28, 2007; or (ii)the date on which the company becomes an industrial bank holding company under this section; and (B)with respect to an industrial bank, the home State of the bank as determined under section 44(g); (6)any reference to a host State in such section 3 shall be deemed to be a reference to— (A)with respect to an industrial bank holding company, a State, other than the home State of the company, in which the company controls, or seeks to control, an industrial bank subsidiary; and (B)with respect to an industrial bank, the host State of the bank as determined under section 44(g); (7)any reference to an out-of-State bank holding company in such section 3 shall be deemed to be a reference to, with respect to any State, an industrial bank holding company whose home State is another State; and (8)any reference to an out-of-State bank in such section 3 shall be deemed to be a reference to, with respect to any State, an industrial bank whose home State is another State. (b)

Application process

An application filed under subsection (a) to acquire control of an industrial bank shall be treated as an application for a deposit facility for purposes of this Act and any other Federal law. (c)

Registration

(1)

In general

Each industrial bank holding company shall register with the Corporation on forms prescribed by the Corporation before the end of the 180-day period beginning on the later of— (A)the date the company becomes an industrial bank holding company; or (B)the date of the enactment of the Industrial Bank Holding Company Act of 2007. (2)

Information to be included

Each registration submitted under paragraph (1) shall include such information, under oath, with respect to the financial condition, ownership, operations, management, and intercompany relationships of the industrial bank holding company and subsidiaries of such holding company, and other factors (including information described in subsection (d)(1)(C)), as the Corporation may determine to be appropriate to carry out the purposes of this section. (3)

Extension of time for submitting complete information

Upon application by an industrial bank holding company and subject to such requirements, factors, and evidence as the Corporation may require, the Corporation may extend the period described in paragraph (1) within which such company shall register and file the requisite information. (d)

Reports and examinations

(1)

Reports

(A)

Reports required

Each industrial bank holding company and each subsidiary of an industrial bank holding company, other than an industrial bank, shall file with the Corporation such reports as may be required by the Corporation. (B)

Form and manner

Reports filed under subparagraph (A) shall be made under oath and shall be in such form and for such periods, as the Corporation may prescribe. (C)

Information

Each report filed under subparagraph (A) shall contain such information as the Corporation may require concerning— (i)the operations of the industrial bank holding company and the holding company’s subsidiaries; (ii)the financial condition of the industrial bank holding company and such subsidiaries, together with information on systems maintained within the holding company or within any such subsidiary for monitoring and controlling financial and operating risks, and transactions with insured depository institution subsidiaries of the holding company; (iii)compliance by the industrial bank holding company and the holding company’s subsidiaries with all applicable Federal and State law; and (iv)such other information as the Corporation may require. (D)

Acceptance of existing reports

For purposes of this paragraph, the Corporation may accept reports that an industrial bank holding company or any subsidiary of such company has provided or has been required to provide to any other Federal or State supervisor or to any appropriate self-regulatory organization. (2)

Examinations

(A)

In general

Each industrial bank holding company and each subsidiary of each such holding company (other than an industrial bank) shall be subject to such examinations by the Corporation as the Corporation may prescribe for purposes of this section. (B)

Furnishing reports to other agencies

Examination and other reports made or received under this section may be furnished by the Corporation to any other appropriate Federal agency or any appropriate State bank supervisor or other State financial supervisory agency. (C)

Use of reports from other agencies

The Corporation may use, for the purposes of this subsection, reports of examination made by any other appropriate Federal agency, any appropriate State bank supervisor, or any other State financial supervisory authority with respect to any industrial bank holding company or subsidiary of any such holding company, to the extent the Corporation may determine such use to be feasible for such purposes. (3)

Capital

(A)

In general

The Corporation may not, by regulation, guideline, order, or otherwise, prescribe or impose any capital or capital adequacy rules, guidelines, standards, or requirements on any functionally regulated affiliate (as defined in section 45) of any depository institution that is controlled by an industrial bank holding company that— (i)is not a depository institution; and (ii)is— (I)in compliance with the applicable capital requirements of the appropriate Federal supervisory agency of the affiliate (including the Securities and Exchange Commission or State insurance authority); (II)properly registered as an investment adviser under the Investment Advisers Act of 1940, or with any State; or (III)is licensed as an insurance agent with the appropriate State insurance authority. (B)

Rule of construction

Subparagraph (A) shall not be construed as preventing the Corporation from imposing capital or capital adequacy rules, guidelines, standards, or requirements with respect to— (i)activities of a registered investment adviser other than with respect to investment advisory activities or activities incidental to investment advisory activities; or (ii)activities of a licensed insurance agent other than insurance agency activities or activities incidental to insurance agency activities. (e)

Access to information

(1)

Information provided by corporation

Any confidential supervisory information, including examination or other reports, pertaining to an industrial bank furnished by the Corporation to any other Federal agency or any appropriate State supervisory agency shall remain confidential unless the Corporation, in writing, otherwise consents. (2)

Deference to depository institution examinations

Any appropriate Federal supervisory agency of a holding company of an industrial bank shall, to the fullest extent possible, forego any examination of any depository institution subsidiary of the holding company and use the reports of examinations of the institution made by the appropriate Federal banking agency and the appropriate State bank supervisor in lieu of a direct examination. (3)

Information to be provided to corporation

(A)

Request to agency

Upon request by the Corporation, an appropriate Federal supervisory agency may provide to the Corporation information regarding the condition of an industrial bank, any holding company that controls such industrial bank, or any other affiliate of any such holding company that is necessary to assess risk to the industrial bank. (B)

Availability from holding company directly

Notwithstanding section 45, section 115 of the Gramm-Leach-Bliley Act, or any other provision of law (including any regulation), if the information requested under subparagraph (A) is not provided to the Corporation, and the information is necessary to assess risk to the industrial bank, the Corporation may require the holding company or affiliate referred to in such subparagraph with respect to such bank to provide such information to the Corporation. (4)

Examinations by corporation

(A)

in general

Subject to subparagraph (B) and notwithstanding section 45, section 115 of the Gramm-Leach-Bliley Act, or any other provision of law (including any regulation), no law shall be construed as preventing the Corporation from examining an affiliate of an industrial bank pursuant to paragraph (2), (3), or (4) of section 10(b), as may be necessary to disclose fully the relationship between the industrial bank and the affiliate, and the effect of such relationship on the industrial bank, if the Corporation finds such examination necessary to determine the condition of an industrial bank. (B)

Functionally regulated affiliates

Before the Corporation may examine any affiliate of an industrial bank that is— (i)a broker, a dealer, an investment company, or an investment advisor, or (ii)an entity that is subject to consolidated supervision by the Securities and Exchange Commission, other than a depository institution,

the Corporation shall request the Commission to provide the information that the Corporation is seeking to obtain through examination and may proceed with the examination only if the requested information is not provided by the Commission in a timely manner.

(f)

Limitation on control

(1)

In general

Except as provided in paragraph (3) or (4), no industrial bank may be controlled, directly or indirectly, by a commercial firm. (2)

Commercial firm defined

For purposes of this section, the term commercial firm means any entity at least 15 percent of the annual gross revenues of which on a consolidated basis, including all affiliates of the entity, were derived from engaging, on an on-going basis, in activities that are not financial in nature or incidental to a financial activity during at least 3 of the prior 4 calendar quarters, as determined by the Corporation in accordance with regulations which the Corporation shall prescribe. (3)

Pre-2003 exclusions

(A)

Grandfathered institutions

Paragraph (1) shall not apply with respect to any industrial bank— (i)which became an insured depository institution before October 1, 2003, or pursuant to an application for deposit insurance which was approved by the Corporation before such date; and (ii)with respect to which there is no change in control, directly or indirectly, of the bank after September 30, 2003, that requires a registration under this section or an application under section 7(j) or 18(c), section 3 of the Bank Holding Company Act of 1956, or section 10 of the Home Owners’ Loan Act, except a direct or indirect change of control in which— (I)immediately prior to such change in control neither the ultimate acquiring holding company nor the ultimate acquired holding company is a commercial firm; (II)immediately after such change of control the resulting ultimate holding company is not a commercial firm; and (III)the resulting ultimate holding company is subject to consolidated supervision by the Office of Thrift Supervision or a holding company regulated by the Securities and Exchange Commission pursuant to section 240.15c3–1(a)(7) of title 17 of the Code of Federal Regulations (as in effect on January 29, 2007). (B)

Corporate reorganizations permitted

The acquisition of direct or indirect control of the industrial bank referred to in subparagraph (A)(ii) shall not be treated as a change in control for purposes of such subparagraph if— (i)the company acquiring control is itself directly or indirectly controlled by a company that was an affiliate of such bank on the date referred to in such subparagraph, and remains an affiliate at all times after such date; and (ii)the transaction through which the company acquired control of the industrial bank constituted solely a corporate reorganization of a company that controlled the industrial bank on the date referred to in such subparagraph. (4)

Pre-2007 exclusions

(A)

Grandfathered commercial firms

Paragraph (1) shall not apply to any commercial firm— (i)which became a holding company of an industrial bank by virtue of acquiring control of an industrial bank on or after October 1, 2003, and before January 29, 2007; (ii)which does not acquire control of any other depository institution after January 28, 2007; (iii)with respect to which there is no change in control, directly or indirectly, of any depository institution subsidiary after January 28, 2007, that requires a registration under this section or an application under section 7(j) or 18(c), section 3 of the Bank Holding Company Act of 1956, or section 10 of the Home Owners’ Loan Act; and (iv)each industrial bank subsidiary of which remains in compliance with the limitations contained in subparagraph (B). (B)

Activity and branching limitations

An industrial bank subsidiary of a commercial firm described in clauses (i), (ii) and (iii) of subparagraph (A) is in compliance with the requirements of this subparagraph for purposes of subparagraph (A)(iv) so long as the industrial bank— (i)engages only in activities in which the industrial bank was engaged on January 28, 2007; and (ii)does not acquire, establish, or operate any branch, deposit production office, loan production office, automated teller machine, or remote service unit in any State other than the home State of the bank or any host State in which such bank operated branches on January 28, 2007. (C)

Corporate reorganizations permitted

The acquisition of direct or indirect control of a depository institution subsidiary referred to in subparagraph (A)(iii) shall not be treated as a change in control for purposes of such subparagraph if— (i)the company acquiring control is itself directly or indirectly controlled by a company that was an affiliate of such subsidiary on the date referred to in such subparagraph, and remains an affiliate at all times after such date; and (ii)the transaction through which the company acquired control of the depository institution constituted solely a corporate reorganization of a company that controlled the depository institution on the date referred to in such subparagraph. (g)

Procedures and timing for termination of activities or divestiture

(1)

Transition provision

(A)

In general

Any company that fails to comply with the provisions of subsection (f) shall divest its ownership or control of each industrial bank subsidiary of the company not later than the end of the 2-year period beginning on the first date that the company ceased to comply with subsection (f). (B)

Extension of time period

(i)

In general

Upon application by a holding company that controls an industrial bank, the appropriate Federal supervisory agency of such holding company may extend the 2-year period referred to in subparagraph (A) with respect to such company for not more than 1 year if, in such agency’s judgment, such an extension would not be detrimental to the public interest. (ii)

Factors

In making any decision to grant an extension under clause (i) to a holding company of an industrial bank, the appropriate Federal supervisory agent of such holding company shall consider whether— (I)the company has made a good faith effort to divest such interests; and (II)such extension is necessary to avert substantial loss to the company. (2)

Conditions before divestiture

During the 2-year period referred to in paragraph (1)(A) with respect to any company and any extension of such period, the appropriate Federal supervisory agency may impose any conditions or restrictions on the company or any subsidiary of the company (other than a bank), including restricting or prohibiting transactions between the company or subsidiary and any depository institution subsidiary of the company, as are appropriate under the circumstances. (3)

Termination of activities or divestiture of nonbank subsidiaries constituting serious risk

(A)

In general

Notwithstanding any other provision of this section, the appropriate Federal supervisory agency may, whenever such agency has reasonable cause to believe that the continuation by a holding company of an industrial bank of any activity or of ownership or control of any nonbank subsidiary of such holding company, other than a nonbank subsidiary of a depository institution, constitutes a serious risk to the financial safety, soundness, or stability of a depository institution subsidiary of the holding company and is inconsistent with sound banking principles or with the purposes of this section, at the election of the holding company— (i)order such holding company or any such nonbank subsidiary, after due notice and opportunity for hearing, and after considering the views of the appropriate Federal banking agency and, if applicable, appropriate State bank supervisor, to terminate such activities or to terminate (within 120 days or such longer period as the appropriate Federal supervisory agency may direct in unusual circumstances) the ownership or control by such holding company or nonbank subsidiary of any such depository institution subsidiary either by sale or by distribution of the shares of the depository institution subsidiary, in accordance with subparagraph (B), to the shareholders of the holding company of the industrial bank; or (ii)order the holding company of the industrial bank, after due notice and opportunity for hearing, and after consultation with the appropriate State bank supervisor for the industrial bank, to terminate (within 120 days or such longer period as the appropriate Federal supervisory agency may direct) the ownership or control of any such industrial bank by such company. (B)

Pro rata distribution

Any distribution to shareholders referred to in clause (i) shall be pro rata with respect to all of the shareholders of the distributing company, and such company shall not make any charge to any shareholder in connection with such distribution. (4)

Foreign bank ownership

(A)

Industrial banks

After January 28, 2007, no foreign bank may acquire, directly or indirectly, control of an industrial bank unless the Board of Governors of the Federal Reserve System has determined by order, or in the case of a foreign bank that is a savings and loan holding company the Board of Governors of the Federal Reserve System and the Director of Office of Thrift Supervision have jointly determined by order, in connection with the change in control or acquisition of the industrial bank and after consultation with the Corporation, that the foreign bank is subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in the bank’s home country in accordance with the standard in section 3(c)(3)(B) of the Bank Holding Company Act of 1956. (B)

Conforming amendment

Notwithstanding any other provision of law, after the date of enactment of the Industrial Bank Holding Company Act of 2007, the Director of the Office of Thrift Supervision shall not approve any acquisition of a savings association under section 10(e)(2) of the Home Owners’ Loan Act by a foreign bank that is subject to the Bank Holding Company Act of 1956 pursuant to section 8(a) of the International Banking Act of 1978 and that is not a bank holding company unless the Director of the Office of Thrift Supervision and the Board of Governors of the Federal Reserve System have jointly determined, by order, in connection with the acquisition of the savings association that the foreign bank is subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in the bank’s home country in accordance with the standard in section 3(c)(3)(B) of the Bank Holding Company Act of 1956. (5)

Holding company responsibility

(A)

Source of strength

Notwithstanding section 45, a holding company of an industrial bank— (i)shall serve as a source of financial and managerial strength to the subsidiary banks of such holding company; and (ii)shall not conduct the operations of the holding company in an unsafe or unsound manner. (B)

Implementation

The appropriate Federal supervisory agency of the holding company of an industrial bank shall implement the requirements under subparagraph (A). (h)

Administrative provisions

(1)

Agent for service of process

The Corporation may require any industrial bank holding company, or persons connected with such holding company if it is not a corporation, to execute and file a prescribed form of irrevocable appointment of agent for service of process. (2)

Release from registration

The Corporation may at any time, upon the Corporation’s own motion or upon application, release a registered industrial bank holding company from any registration previously made by such company, if the Corporation determines that such company no longer controls any industrial bank. (i)

Definitions

For purposes of this section, the following definitions shall apply: (1)

Appropriate Federal supervisory agency

The term appropriate Federal supervisory agency means, with respect to a company that controls an industrial bank— (A)the Corporation, in the case of a company that is an industrial bank holding company; (B)the Board of Governors of the Federal Reserve System, in the case of a company that is a bank holding company or that is subject to the Bank Holding Company Act of 1956 pursuant to section 8(a) of the International Banking Act of 1978; (C)the Office of Thrift Supervision, in the case of a company that is a savings and loan holding company; and (D)the Securities and Exchange Commission, in the case of a company that is regulated by the Commission pursuant to section 240.15c3–1(a)(7) of title 17 of the Code of Federal Regulations (as in effect on January 29, 2007). (2)

Rule of construction

Under the definition of the term appropriate Federal supervisory agency in paragraph (1), more than 1 agency may be an appropriate Federal supervisory agency with respect to any given company that controls an industrial bank.

(c)

Enforcement

(1)Section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. 1818(b)) is amended by adding at the end the following new paragraph:

(11)

Industrial bank holding companies

This subsection and subsections (c) through (s) and subsection (u) of this section shall apply to any industrial bank holding company, and to any subsidiary (other than a bank) of an industrial bank holding company in the same manner as such subsections apply to State nonmember insured banks.

(2)Section 8(h)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1818(h)(2)) is amended by striking (2) Any party to and inserting (2) Any party aggrieved by an order of any appropriate Federal supervisory agency under section 51 or any party to. (3)Section 8(i) of the Federal Deposit Insurance Act (12 U.S.C. 1818(i)) is amended by striking or 39 each place such term appears and inserting , 39, or 51. (d)

Prompt corrective action

Section 38(f)(2)(H) of the Federal Deposit Insurance Act (12 U.S.C. 1831o(f)(2)(H)) is amended by— (1)by striking bank holding company.—Prohibiting any bank and inserting

holding company.—(i)

Bank holding company

Prohibiting any bank

; and

(2)by adding at the end the following new clause:

(ii)

Industrial bank holding company

Prohibiting any industrial bank holding company having control of the insured depository institution from making any capital distribution without the prior approval of the Corporation.

(e)

Technical and conforming amendments

(1)Section 10(e)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1820(e)(2)) is amended by inserting or section 51 after subsection (b)(4). (2)Section 1101(6) of the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401(6)) is amended— (A)in subparagraph (B), by striking and after the semicolon; (B)in subparagraph (C), by inserting and after the semicolon; and (C)by inserting after paragraph (C) the following new paragraph:

(D)any industrial bank holding company (as defined in section 3(w)(8) of the Federal Deposit Insurance Act);

(3)Section 115 of the Gramm-Leach-Bliley Act (12 U.S.C. 1820a) is amended— (A)in subsection (a), by striking or after bank holding company and inserting , industrial bank holding company, or; (B)in subsection (d)— (i)by redesignating paragraphs (5), (6), and (7) as paragraphs (6), (7), and (8), respectively; and (ii)by inserting after paragraph (4) the following new paragraph:

(5)

Industrial bank holding company

The term industrial bank holding company has the same meaning as in section 3(w)(8) of the Federal Deposit Insurance Act.

(4)Section 304(g)(1) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(g)(1)) is amended by inserting , industrial bank holding company, after bank holding company.