[House Report 110-155]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-155

======================================================================



 
              INDUSTRIAL BANK HOLDING COMPANY ACT OF 2007

                                _______
                                

  May 16, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 698]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Financial Services, to whom was referred the 
bill (H.R. 698) to amend the Federal Deposit Insurance Act to 
establish industrial bank holding company regulation, and for 
other purposes, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     9
Background and Need for Legislation..............................     9
Hearings.........................................................    10
Committee Consideration..........................................    11
Committee Votes..................................................    11
Committee Oversight Findings.....................................    11
Performance Goals and Objectives.................................    12
New Budget Authority, Entitlement Authority, and Tax Expenditures    12
Committee Cost Estimate..........................................    12
Congressional Budget Office Estimate.............................    12
Federal Mandates Statement.......................................    15
Advisory Committee Statement.....................................    15
Constitutional Authority Statement...............................    15
Applicability to Legislative Branch..............................    16
Earmark Identification...........................................    16
Section-by-Section Analysis of the Legislation...................    16
Changes in Existing Law Made by the Bill, as Reported............    20

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Industrial Bank Holding Company Act of 
2007''.

SEC. 2. 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:

``SEC. 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 shall be 
        deemed to be a reference to an `industrial bank';
          ``(3) any reference to the `Board' in such section 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 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.--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, 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.
          ``(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''.

SEC. 3. REGULATIONS.

  The Corporation shall prescribe such regulations as the Corporation 
determines to be appropriate to carry out the amendments made by this 
Act.

                          Purpose and Summary

    H.R. 698, ``Industrial Bank Holding Company Act of 2007,'' 
is intended to restore the traditional separation between 
banking and commerce by prohibiting commercial ownership of 
industrial banks and empowering the Federal Deposit Insurance 
Corporation (FDIC) as the federal supervisor of industrial bank 
holding companies.
    H.R. 698 generally prohibits commercial companies from 
owning industrial banks. A company will be considered 
``commercial'' if it derived 15 percent or more of its gross 
revenue, on a consolidated basis, from non-financial 
activities. Those commercial companies that already own 
industrial banks, however, will be exempt from this prohibition 
under one of two grandfather provisions.
    H.R. 698 also establishes the FDIC as the consolidated 
supervisor of industrial bank holding companies, which are 
companies that control industrial banks and are not already 
subject to consolidated supervision by another federal 
regulator. In addition, the legislation provides the FDIC with 
certain regulatory tools, comparable to those possessed by the 
Federal Reserve, to be able to effectively supervise industrial 
bank holding companies. H.R. 698 gives the FDIC the authority 
to, among others, examine industrial bank holding companies and 
subsidiaries, regulate the acquisition of industrial banks, set 
capital adequacy standards on industrial bank holding 
companies, and apply a similar enforcement regime to industrial 
bank holding companies that the Federal Reserve applies to bank 
holding companies.

                  Background and Need for Legislation

    Under current law, a commercial company cannot own a bank; 
however, a commercial company can own an industrial bank. 
Industrial banks are state-chartered banks that have direct 
access to federal deposit insurance and the Federal Reserve's 
discount window and payments system, and have most of the 
deposit-taking, lending, and other powers of banks. Industrial 
banks, however, operate under a special exception to the 
federal Bank Holding Company Act that allows companies, 
including commercial companies or foreign banks, to own and 
operate industrial banks outside the framework of federal 
supervision and activity restrictions that otherwise apply to 
bank holding companies.
    Federal law places few, limited restrictions on the types 
of activities that an industrial bank may conduct. Industrial 
banks operating under the Bank Holding Company Act exception 
can offer a range of federally insured retail deposit accounts; 
commercial, mortgage, credit card, and other loans; and other 
banking services. Industrial banks with greater than $100 
million in assets may operate under the exception so long as 
they do not accept demand deposits, but many such industrial 
banks offer ``negotiable order of withdrawal'' accounts that 
are the functional equivalent of demand deposits. Federal law 
also allows industrial banks to branch across state lines to 
the same extent as other types of insured banks.
    Only seven states charter entities identified as industrial 
banks by the FDIC: Utah, California, Colorado, Minnesota, 
Hawaii, Indiana and Nevada. Of these, Minnesota, California and 
Colorado no longer permit commercial companies to acquire or 
establish industrial banks, leaving Utah, Nevada and Hawaii as 
the only states permitting new charters for industrial banks 
owned by commercial firms. Hawaii has not chartered any 
industrial banks since at least 1992, and Indiana no longer 
charters any new industrial banks.
    In recent years, the aggregate amount of assets and 
deposits held by all industrial banks has increased 
substantially. Between 1997 and 2006, the aggregate amount of 
assets increased from $25.1 billion to $212.8 billion, an 
increase of more than 750 percent, and the aggregate amount of 
deposits increased from $11.7 billion to $146.7 billion, an 
increase of more than 1,000 percent. The size and nature of 
individual industrial banks have changed as well in recent 
years. The largest industrial bank in 1987 had assets of 
approximately $410 million; the largest industrial bank in 2006 
had more than $67 billion in assets and more than $54 billion 
in deposits, making it among the twenty largest insured banks 
in terms of deposits. Historically, industrial banks were 
locally owned and focused on small consumer loans. Today, many 
industrial banks are controlled by large, internationally 
active companies and used to support complex business plans and 
operations.
    Without this legislation, further expansion of industrial 
banks may undermine the separation of banking and commerce. 
Several concerns are at issue. First, banks affiliated with 
commercial companies may be less willing to provide credit to 
the competitors of their commercial affiliates or may provide 
credit to their commercial affiliates at preferential rates or 
more favorable terms. Second, allowing the mixing of banking 
and commerce might, in effect, lead to an extension of the 
federal safety net to commercial affiliates and make insured 
banks susceptible to the risks facing their commercial 
affiliates. Third, allowing banks and commercial companies to 
affiliate with each other could lead to the concentration of 
economic power in a few very large conglomerates.
    On June 8, 2006, ninety-eight Members of Congress wrote to 
the FDIC requesting a moratorium on new approvals for new 
commercially-owned industrial banks until Congress considers 
the matter. A six-month moratorium was imposed by the FDIC on 
July 28, 2006. Reps. Frank and Gillmor, joined by 115 other 
Members of Congress, wrote to the FDIC on December 7, 2006 and 
requested that the moratorium be extended. On January 31, 2007, 
the FDIC voted to extend the moratorium on approving 
applications for commercially-owned industrial banks for one 
year, through January 31, 2008.

                                Hearings

    The Committee on Financial Services held a legislative 
hearing entitled ``H.R. 698, the Industrial Bank Holding 
Company Act of 2007'' on April 25, 2007. The following 
witnesses testified:

                               PANEL ONE

           The Honorable Sheila C. Bair, Chairman, 
        Federal Deposit Insurance Corporation
           Mr. Donald L. Kohn, Vice Chairman, Board of 
        Governors of the Federal Reserve System
           The Honorable John M. Reich, Director, 
        Office of Thrift Supervision
           Mr. Robert Colby, Deputy Director, Market 
        Regulation, Securities and Exchange Commission
           Commissioner G. Edward Leary, Department of 
        Financial Institutions, State of Utah

                               PANEL TWO

           Ms. Amy Isaacs, National Director, Americans 
        for Democratic Action
           Mr. Arthur Connelly, Chairman and Chief 
        Executive Officer, South Shore Bancorp MHC, on behalf 
        of America's Community Bankers
           Mr. Jim Ghiglieri, President, Alpha 
        Community Bank, on behalf of the Independent Community 
        Bankers of America
           Mr. Earl McVicker, Chairman and Chief 
        Executive Officer, Central Bank & Trust Co., on behalf 
        of American Bankers Association
           Mr. John L. Douglas, Alston & Bird LLP, on 
        behalf of American Financial Services Association
           Mr. Marc Lackritz, Chief Executive Officer, 
        Securities Industry and Financial Markets Association
           Mr. Thomas M. Stevens, Immediate Past 
        President, National Association of Realtors

                        Committee Consideration

    The Committee on Financial Services met in open session on 
May 2, 2007, and ordered reported H.R. 698, the Industrial Bank 
Holding Company Act, as amended, to the House with a favorable 
recommendation.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken with in conjunction with the 
consideration of this legislation. A motion by Mr. Frank to 
report the bill, as amended, to the House with a favorable 
recommendation was agreed to by a voice vote. During 
consideration of the bill, the following amendments were 
considered:
    An amendment in the nature of a substitute by Mr. Frank, 
No. 1, making various substantive and technical changes to the 
bill, was agreed to by a voice vote.
    An amendment to the amendment in the nature of a substitute 
by Mr. Campbell, No. 1a, regarding exceptions, was offered and 
withdrawn.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 698, ``Industrial Bank Holding Company Act of 2007,'' 
will restore the traditional separation between banking and 
commerce by prohibiting commercial ownership of industrial 
banks and empowering the Federal Deposit Insurance Corporation 
(FDIC) as the federal supervisor of industrial bank holding 
companies.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                      May 15, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 698, the 
Industrial Bank Holding Company Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 698--Industrial Bank Holding Company Act of 2007

    Summary: H.R. 698 would amend exiting law regarding federal 
deposit insurance for industrial banks and their holding 
companies. Those institutions are chartered by states and 
subject to regulation by the Federal Deposit Insurance 
Corporation (FDIC) and other federal financial regulators, as 
appropriate. This legislation would set limits on the types of 
industrial banks eligible for federal deposit insurance and 
would clarify federal agencies' authority to supervise those 
entities and their holding companies.
    Enacting this bill would affect direct spending and 
revenues, but CBO estimates that such effects would be 
negligible. H.R. 698 contains intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act (UMRA), but CBO 
estimates that the cost of complying with the requirements 
would not exceed the threshold established in UMRA ($66 million 
in 2007, adjusted annually for inflation).
    The bill contains private-sector mandates as defined in 
UMRA. Those mandates are on industrial bank holding companies, 
and commercial firms and foreign banks that want to own an 
industrial bank. Because future regulatory and business 
decisions are unknown, CBO cannot estimate the cost of some of 
the private-sector mandates in the bill, and is uncertain 
whether the aggregate direct cost of all of the mandates would 
exceed the annual threshold established by UMRA ($131 million 
in 2007, adjusted annually for inflation).
    Estimated costs to the Federal Government: H.R. 698 would 
clarify the terms and conditions for providing federal deposit 
insurance to industrial banks. According to officials at the 
affected financial regulatory agencies, implementing those 
changes would have no significant effect on their workload or 
costs relative to current law. While negligible, those changes 
would affect direct spending and revenues because most 
financial regulatory activities are funded directly by 
regulatory fees, insurance premiums, or revenues (in the case 
of the Federal Reserve Board). Spending by the Securities and 
Exchange Commission, which would have some new authorities 
under this bill, is subject to annual appropriation.
    Provisions limiting eligibility for deposit insurance also 
could affect the volume of insured deposits held by industrial 
banks. Based on historical data on industrial bank deposits, 
CBO estimates that those restrictions would have a negligible 
impact on the aggregate level of deposits and no significant 
effect on the amounts collected for insurance premiums.
    Estimated impact on state, local, and tribal governments: 
H.R. 698 contains intergovernmental mandates as defined in UMRA 
because it would preempt certain state laws. CBO estimates that 
the cost of complying with the requirements would not exceed 
the threshold established in UMRA ($66 million in 2007, 
adjusted annually for inflation) over the next five years.
    Provisions in section 2 would preempt certain state laws by 
prohibiting certain commercial firms from controlling 
industrial banks, a practice currently permitted under state 
law in three states. Utah, Nevada, and Hawaii currently issue 
charters for industrial banks controlled by commercial firms, 
although Hawaii has not done so since 1992. This preemption 
would impose costs on those states in the form of lost revenue 
from fees and corporate income taxes by prohibiting those 
states from chartering new industrial banks that are controlled 
by certain commercial entities. Although CBO cannot predict the 
amount of revenue that would have been collected by the states 
in the absence of legislation, based on information from state 
bank regulators, CBO estimates that losses to states as a 
result of this prohibition would not exceed the threshold 
established in UMRA over the next five years.
    Section 2 also would require certain commercial entities to 
divest ownership of their industrial banks if the bank 
controlled by the commercial entity changes control, engages in 
new activities, or becomes active in new states, or if the 
commercial entity acquires other depository institutions. Three 
additional states--California, Colorado, and Minnesota--no 
longer allow commercial entities to establish or acquire 
industrial banks, but have allowed this practice in the past. A 
fourth state--Indiana--has chartered industrial banks in the 
past but no longer issues new charters. It is possible that 
this provision would result in divestiture and consequently 
additional losses in revenue in those states, but CBO cannot 
predict the likelihood of such actions or the magnitude of any 
such losses.
    Estimated impact on the private sector: The bill contains 
private-sector mandates as defined in UMRA. Those mandates are 
on industrial bank holding companies, and commercial firms and 
foreign banks that want to own an industrial bank. Because 
future regulatory and business decisions are unknown, CBO 
cannot estimate the cost of some of the private-sector mandates 
in the bill, and is uncertain whether the aggregate direct cost 
of all of the mandates would exceed the annual threshold 
established by UMRA ($131 million in 2007, adjusted annually 
for inflation).
    The bill would impose private-sector mandates because it 
would:
           Subject industrial bank holding companies to 
        a new regulatory framework;
           Prohibit commercial firms from acquiring or 
        establishing an industrial bank and limit activities of 
        certain existing commercial firms with industrial 
        banks; and
           Prohibit foreign banks from acquiring an 
        industrial bank without joint approval of the Federal 
        Reserve and the Federal Deposit Insurance Corporation 
        (FDIC).

Industrial bank holding companies

    Section 2 would provide a new regulatory framework for 
industrial bank holding companies and establish the FDIC as the 
consolidated supervisor of industrial bank holding companies. 
Industrial bank holding companies, as defined in the bill, are 
companies that control industrial banks and are not currently 
subject to consolidated supervision by another federal 
regulator. While some of the regulations established under the 
bill may be new, in general, most of the requirements would be 
incremental relative to current regulation. According to 
government sources, implementation of the regulations in the 
bill would be similar to current practice. Hence, the cost of 
complying with the new regulatory framework would be minimal.

Limitations on control and activities of industrial banks

    The bill would prohibit commercial companies (those 
deriving 15 percent or more of their gross revenue, on a 
consolidated basis, from nonfinancial activities) from owning 
an industrial bank. The cost of complying with this mandate 
would be the cost of conducting by other means the financial 
activities that commercial companies would have conducted in 
the industrial bank, or the forgone net income from not being 
able to undertake such activities. The FDIC established a six-
month moratorium on approval of applications with respect to 
industrial banks that would become subsidiaries of companies 
engaged in nonfinancial activities in July 2006 and has 
extended the moratorium through January 31, 2008. According to 
government sources, fewer than a dozen commercial firms have 
pending applications. Because of uncertainty about the business 
plans of pending applicants for ownership of industrial banks 
and the number of such applications that would be approved in 
the absence of this legislation, CBO cannot estimate the cost 
of this mandate.
    Those commercial companies that already owned an industrial 
bank by October 1 , 2003, would be exempt from this prohibition 
as long as no change in control takes place. Commercial 
companies that had an industrial bank after October 1, 2003, 
and before January 28, 2007, could continue their existing 
operations but would be prohibited from acquiring control of 
any other depository institution, from undertaking any new 
activities, and from establishing or acquiring any new 
branches, certain production offices and service units, or ATMs 
other than in their home state or any state where they already 
have branches. The cost of complying with this limitation would 
be the expected net income that affected entities would forgo 
due to the limitations on their industrial bank activities. 
According to government data, only a handful of entities would 
be affected by this limitation. Because of uncertainty about 
the future business plans of those entities, CBO cannot 
estimate the cost of complying with this limitation. Assuming 
those entities are already engaged in activities they had 
planned to conduct over the next five years, the cost of 
complying with this mandate would be small relative to the UMRA 
threshold.

Requirements on foreign banks

    The bill would also require that a foreign bank must obtain 
a ruling from the Federal Reserve (in consultation with the 
FDIC) that the foreign bank is subject to consolidated 
comprehensive supervision in its home country before it can 
acquire an industrial bank. According to government sources, no 
foreign banks are currently seeking to acquire an industrial 
bank. Thus, CBO expects that the cost of this mandate would be 
minimal, if any.
    Estimate prepared by: Federal costs: Kathleen Gramp. Impact 
on state, local, and tribal governments: Elizabeth Cove. Impact 
on the private-sector: Judith Ruud.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 698 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section establishes the short title of the bill, the 
``Industrial Bank Holding Company Act of 2007.''

Section 2. Industrial bank holding company regulation

    This section provides for regulation of industrial bank 
holding companies by amending the Federal Deposit Insurance Act 
(FDIA) to (i) add, among others, definitions of industrial bank 
and industrial bank holding company, (ii) add a new section 51, 
(iii) provide the FDIC with enforcement authority over 
industrial bank holding companies, and (iv) provide the FDIC 
with authority to take certain actions against industrial bank 
holding companies under the prompt corrective action provisions 
of the FDIA. This section also makes a number of technical and 
conforming amendments.

Section 2(a). Definitions

    This subsection establishes various definitions. The term 
``industrial bank holding company'' is defined as any company 
that controls an industrial bank and is not (i) a type of 
company already subject to consolidated supervision by the 
Federal Reserve, the Office of Thrift Supervision (OTS), or the 
Securities and Exchange Commission (SEC), or (ii) controlled by 
a company described in (i). This subsection, along with other 
provisions of this legislation, also clarifies that the FDIC 
may set regulatory capital standards on industrial bank holding 
companies.

Section 2(b). Industrial bank holding company registration and 
        ownership

    This subsection amends the FDIA by adding a new section 51 
to codify the regulation of industrial bank holding companies. 
A specific description of section 51 is set forth below.
            FDIA Section 51(a). Acquisition of industrial bank shares 
                    or assets
    This subsection grants the FDIC the authority to approve 
the formation of industrial bank holding companies and their 
acquisition of industrial banks that is comparable to the 
Federal Reserve's authority over the formation of bank holding 
companies and their acquisition of banks. This subsection 
references section 3 of the Bank Holding Company Act and 
clarifies certain defined terms.
            FDIA Section 51(b). Application process
    This subsection provides that an application under 
subsection (a) will be treated as an application for a deposit 
facility for purposes of this legislation and any other Federal 
law.
            FDIA Section 51(c). Registration
    This subsection provides that each industrial bank holding 
company must register with the FDIC within 180 days of the 
later of the date of becoming an industrial bank holding 
company or the date of the enactment of this legislation. The 
FDIC may extend this 180-day period.
            FDIA Section 51(d). Reports and examinations
    Subparagraph (1) requires industrial bank holding companies 
and their non-industrial bank subsidiaries to file reports with 
the FDIC. The FDIC may accept reports that have been provided 
to other federal or state supervisors or to an appropriate 
self-regulatory organization.
    Subparagraph (2) provides that industrial bank holding 
companies and their non-industrial bank subsidiaries will be 
subject to examination by the FDIC. The FDIC may furnish the 
examination and other reports to any other federal agency or 
any appropriate state bank supervisor. In addition, the FDIC 
may use reports of examination made by any other federal agency 
or any appropriate state bank supervisor.
    Subparagraph (3) mirrors similar language in section 5 of 
the Bank Holding Company Act and limits the FDIC's ability to 
set capital adequacy standards on certain functionally 
regulated affiliates of depository institutions controlled by 
industrial bank holding companies.
            FDIA Section 51(e). Access to information
    Subparagraph (1) provides that any confidential supervisory 
information pertaining to an industrial bank that the FDIC 
shares with other agencies will remain confidential unless the 
FDIC consents in writing.
    Subparagraph (2) directs the appropriate Federal 
supervisory agency of a holding company of an industrial bank 
to forego examination of depository institution subsidiaries to 
the fullest extent possible and instead use the reports of exam 
made by the appropriate banking agency.
    Subparagraph (3) provides that upon request by the FDIC, 
the appropriate Federal supervisory agency may provide 
information to the FDIC regarding an industrial bank, a holding 
company of an industrial bank, or any other affiliates. If this 
information is not provided to the FDIC and is necessary to 
assess the risk to the industrial bank, the FDIC then may 
require that the information be provided by the bank, company, 
or affiliate.
    Subparagraph (4) provides that the FDIC will not be 
prevented from examining a holding company or an affiliate of 
an industrial bank pursuant to section 10(b) of the FDIA if the 
examination is necessary to determine the condition of the 
industrial bank. With regard to entities regulated by the SEC, 
the FDIC will first ask the SEC for information and then 
proceed with the examination only if the SEC does not timely 
provide the information.
    Nothing in this subsection (e) or subsection (g)(5) below 
is intended to affect or alter the existing and well-
established allocation of supervisory responsibilities, 
authorities and functions as well as information-sharing 
arrangements among the Federal banking agencies with respect to 
organizations that are a bank holding company or a savings and 
loan holding company.
            FDIA Section 51(f). Limitation on control
    This subsection provides that no industrial bank may be 
controlled, directly or indirectly, by a commercial firm unless 
it qualifies for one of two grandfather provisions. The test 
for a commercial firm looks back one year: a firm is commercial 
if it had 15 percent or more of its gross revenues on a 
consolidated basis from non-financial activities in three of 
the last four calendar quarters.
    The first grandfather provision in paragraph (3) applies to 
any industrial bank that became an insured depository 
institution or had its application for deposit insurance 
approved before October 1, 2003. Such an industrial bank is 
exempt from the prohibition on commercial ownership of 
industrial banks set forth in paragraph (1) as long as it does 
not undergo a change in control that requires certain 
enumerated regulatory filings. An internal corporate 
reorganization does not result in a loss of the grandfather 
status.
    The second grandfather provision in paragraph (4) applies 
to any commercial firm that became a holding company of an 
industrial bank on or after October 1, 2003 and before January 
29, 2007. Such a commercial firm is exempt from the prohibition 
on commercial ownership of industrial banks set forth in 
paragraph (1) as long as it does not acquire control of another 
insured depository institution after January 28, 2007, does not 
undergo a change in control that requires certain enumerated 
regulatory filings, and does not violate the activity and 
branching limitations set forth in subparagraph (4)(B). An 
internal corporate reorganization does not result in a loss of 
the grandfather status.
    The activity limitation in subparagraph (4)(B)(i) restricts 
any industrial bank subsidiary of a commercial firm from 
commencing new activities after January 28, 2007. It is 
intended that the FDIC apply these activity limitations by 
regulation or order so as to allow the industrial bank to 
engage in a substantially similar activity that falls within 
the same category of activities in which it was engaged prior 
to January 28, 2007, so long as the activity was permissible 
under state law before that date. The activity limitation of 
subparagraph (4)(B)(i) prevents a grandfathered industrial bank 
from materially changing the overall mix of the deposits that 
it offers or receives after January 28, 2007. For example, if 
substantially all of a grandfathered industrial bank's deposits 
were obtained from affiliated persons before January 28, 2007, 
it could not receive a substantial part of its deposits from 
unaffiliated third parties after that date.
            FDIA Section 51(g). Procedures and timing for termination 
                    of activities or divestitures
    Paragraph (1) directs companies that fail to comply with 
the provisions of subsection (f) to divest their industrial 
bank subsidiaries no later than two years after the date such 
companies ceased to comply with subsection (f). Under this 
provision, a company that acquired an existing industrial bank 
would have two years, with the potential for a one-year 
extension, to divest the acquired industrial bank if, after the 
acquisition, the company did not meet the 85 percent financial 
test established by this legislation. However, consistent with 
the prohibition set forth in subsection (f)(1), a company that 
does not meet the 85 percent financial test may not acquire or 
establish a de novo industrial bank.
    Paragraph (2) allows the appropriate Federal supervisory 
agency to impose any conditions or restrictions on the 
companies or their nonbank subsidiaries during the period set 
forth in paragraph (1).
    Paragraph (3) authorizes, after due notice and opportunity 
for hearing, the appropriate Federal supervisory agency to 
order a holding company of an industrial bank, at the election 
of the holding company, either to (i) terminate any activity or 
ownership or control of any nonbank subsidiary (other than a 
nonbank subsidiary of a depository institution) or (ii) 
terminate ownership or control of its industrial bank, for 
reasons of financial safety, soundness, or stability.
    Paragraph (4) provides that a foreign bank may not acquire 
an industrial bank unless the Federal Reserve, after 
consultation with the FDIC, determines that the foreign bank is 
subject to comprehensive consolidated supervision in its home 
country.
    Paragraph (5) applies to all holding companies that own 
industrial banks. This provision is designed to ensure that the 
holding companies of industrial banks, like bank holding 
companies under current law, are required to serve as a source 
of strength to their subsidiary banks and to conduct their 
activities in a safe and sound manner. Under this provision, 
the relevant holding company supervisors would take action as 
necessary to assure that holding companies meet these 
obligations in an appropriate way. For example, the SEC 
requires that the Consolidated Supervised Entities must 
maintain a liquidity portfolio of cash or highly liquid and 
highly rated unencumbered debt instruments. Those liquid assets 
could be available to the industrial bank and other regulated 
entities as required by the relevant regulator.
    It is intended that the FDIC will draft rules governing the 
application of the grandfather provisions and the divestiture 
provisions as well as the definition of ``commercial firm'' in 
subsections 51(f) and 51(g) to avoid interpretations that could 
cause undue hardship on a company subject to this legislation. 
For example, it is intended that the FDIC will undertake to 
implement the definition of ``commercial firm'' in subparagraph 
51(f)(2), which is based on the previous four quarters of 
revenues, so that no restatement of past earnings prior to the 
most recent four quarters will affect a company's compliance 
with the test.
            FDIA Section 51(h). Administrative provisions
    This subsection authorizes the FDIC to require an 
industrial bank holding company to appoint an agent for service 
of process and to release a registered industrial bank holding 
company from any previously made registration.
            FDIA Section 51(i). Definitions
    This subsection defines the term ``appropriate Federal 
supervisory agency,'' with respect to a company that controls 
an industrial bank, as (i) the FDIC for an industrial bank 
holding company, (ii) the Federal Reserve for a bank holding 
company or a company subject to the Bank Holding Company Act 
pursuant to section 8(a) of the International Banking Act, 
(iii) the OTS for a savings and loan holding company, and (iv) 
the SEC for a company regulated by the SEC as a Consolidated 
Supervised Entity under the applicable regulation in effect as 
of January 29, 2007. More than one agency may be the 
appropriate supervisor for a company that controls an 
industrial bank.

Section 2(c). Enforcement

    This subsection amends the FDIA to clarify that industrial 
bank holding companies and their nonbank subsidiaries are 
subject to the existing enforcement provisions in the FDIA.

Section 2(d). Prompt corrective action

    This subsection amends the FDIA to give the FDIC prior 
approval authority over capital distributions by an industrial 
bank holding company if an insured depository institution 
subsidiary is (i) significantly undercapitalized or (ii) 
undercapitalized and fails to submit and implement a capital 
restoration plan.

Section 2(e). Technical and conforming amendments

    This subsection makes technical and conforming changes in 
existing law to include industrial bank holding companies.

Section 3. Regulations

    This section grants the FDIC the authority to issue 
regulations as the FDIC determines appropriate to carry out the 
amendments made by this legislation.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *


  Sec. 3. As used in this Act--
  (a) Definitions of Bank and Related Terms.--
          (1) * * *

           *       *       *       *       *       *       *

          (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.

           *       *       *       *       *       *       *

  (q) Appropriate Federal Banking Agency.--The term 
``appropriate Federal banking agency'' means--
          (1) * * *

           *       *       *       *       *       *       *

          (3) the Federal Deposit Insurance Corporation in the 
        case of a State nonmember insured bank [or a foreign], 
        any foreign bank having an insured branch, and any 
        industrial bank holding company and any subsidiary of 
        an industrial bank holding company (other than a bank); 
        and

           *       *       *       *       *       *       *

  (w) Definitions Relating to Affiliates of Depository 
Institutions.--
          (1) Depository institution holding company.--The term 
        ``depository institution holding company'' means a bank 
        holding company [or a savings], any savings and loan 
        holding company, and any industrial bank holding 
        company.

           *       *       *       *       *       *       *

          (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.

           *       *       *       *       *       *       *

  Sec. 8. (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  (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.

           *       *       *       *       *       *       *

  (h)(1) * * *
  [(2) Any party to] (2) Any party aggrieved by an order of any 
appropriate Federal supervisory agency under section 51 or any 
party to any proceeding under paragraph (1) may obtain a review 
of any order served pursuant to paragraph (1) of this 
subsection (other than an order issued with the consent of the 
depository institution or the institution-affiliated party 
concerned, or an order issued under paragraph (1) of subsection 
(g) of this section) by the filing in the court of appeals of 
the United States for the circuit in which the home office of 
the depository institution is located, or in the United States 
Court of Appeals for the District of Columbia Circuit, within 
thirty days after the date of service of such order, a written 
petition praying that the order of the agency be modified, 
terminated, or set aside. A copy of such petition shall be 
forthwith transmitted by the clerk of the court to the agency, 
and thereupon the agency shall file in the court the record in 
the proceeding, as provided in section 2112 of title 28 of the 
United States Code. Upon the filing of such petition, such 
court shall have jurisdiction, which upon the filing of the 
record shall except as provided in the last sentence of said 
paragraph (1) be exclusive, to affirm, modify, terminate, or 
set aside, in whole or in part, the order of the agency. Review 
of such proceedings shall be had as provided in chapter 7 of 
title 5 of the United States Code. The judgment and decree of 
the court shall be final, except that the same shall be subject 
to review by the Supreme Court upon certiorari, as provided in 
section 1254 of title 28 of the United States Code.

           *       *       *       *       *       *       *

  (i)(1) The appropriate Federal banking agency may in its 
discretion apply to the United States district court, or the 
United States court of any territory, within the jurisdiction 
of which the home office of the depository institution is 
located, for the enforcement of any effective and outstanding 
notice or order issued under this section or under section 38 
[or 39], 39, or 51, and such courts shall have jurisdiction and 
power to order and require compliance herewith; but except as 
otherwise provided in this section or under section 38 [or 39], 
39, or 51 no court shall have jurisdiction to affect by 
injunction or otherwise the issuance or enforcement of any 
notice or order under any such section, or to review, modify, 
suspend, terminate, or set aside any such notice or order.
  (2) Civil money penalty.--
                  (A) First tier.--Any insured depository 
                institution which, and any institution-
                affiliated party who--
                          (i)  * * *
                          (ii) violates any final order or 
                        temporary order issued pursuant to 
                        subsection (b), (c), (e), (g), or (s) 
                        or any final order under section 38 [or 
                        39], 39, or 51;

           *       *       *       *       *       *       *

  Sec. 10. (a) * * *

           *       *       *       *       *       *       *

  (e) Examination Fees.--
          (1) * * *
          (2) Examination of affiliates.--The cost of 
        conducting any examination of any affiliate of any 
        insured depository institution under subsection (b)(4) 
        or section 51 may be assessed by the Corporation 
        against each affiliate which is examined to meet the 
        Corporation's expenses in carrying out such 
        examination.

           *       *       *       *       *       *       *


SEC. 38. PROMPT CORRECTIVE ACTION.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Provisions Applicable to Significantly Undercapitalized 
Institutions and Undercapitalized Institutions That Fail To 
Submit and Implement Capital Restoration Plans.--
          (1) * * *
          (2) Specific actions authorized.--The appropriate 
        Federal banking agency shall carry out this section by 
        taking 1 or more of the following actions:
                  (A) * * *

           *       *       *       *       *       *       *

                  (H) Requiring prior approval for capital 
                distributions by [bank holding company.--
                Prohibiting any bank] holding company.--
                          (i) Bank holding company.--
                        Prohibiting any bank holding company 
                        having control of the insured 
                        depository institution from making any 
                        capital distribution without the prior 
                        approval of the Board of Governors of 
                        the Federal Reserve System.
                          (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.

           *       *       *       *       *       *       *


SEC. 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 shall 
        be deemed to be a reference to an ``industrial bank'';
          (3) any reference to the ``Board'' in such section 
        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 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.--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, 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.
          (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.

           *       *       *       *       *       *       *

                              ----------                              


RIGHT TO FINANCIAL PRIVACY ACT OF 1978

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TITLE XI--RIGHT TO FINANCIAL PRIVACY

           *       *       *       *       *       *       *


                              DEFINITIONS

Sec. 1101. For the purpose of this title, the term--
          (1) * * *

           *       *       *       *       *       *       *

          (6) ``holding company'' means--
                  (A) * * *
                  (B) any company described in section 4(f)(1) 
                of the Bank Holding Company Act of 1956; [and]
                  (C) any savings and loan holding company (as 
                defined in the Home Owners' Loan Act); and
                  (D) any industrial bank holding company (as 
                defined in section 3(w)(8) of the Federal 
                Deposit Insurance Act);

           *       *       *       *       *       *       *

                              ----------                              


GRAMM-LEACH-BLILEY ACT

           *       *       *       *       *       *       *


 TITLE I--FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND 
INSURANCE COMPANIES

           *       *       *       *       *       *       *


Subtitle B--Streamlining Supervision of Bank Holding Companies

           *       *       *       *       *       *       *


SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.

  (a) Exclusive Commission Authority.--Except as provided in 
subsection (c), a Federal banking agency may not inspect or 
examine any registered investment company that is not a bank 
holding company [or], industrial bank holding company, or a 
savings and loan holding company.

           *       *       *       *       *       *       *

  (d) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) * * *

           *       *       *       *       *       *       *

          (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.
          [(5)] (6) Insured depository institution.--The term 
        ``insured depository institution'' has the meaning 
        given the term in section 3(c) of the Federal Deposit 
        Insurance Act.
          [(6)] (7) Registered investment company.--The term 
        ``registered investment company'' means an investment 
        company that is registered with the Commission under 
        the Investment Company Act of 1940.
          [(7)] (8) Savings and loan holding company.--The term 
        ``savings and loan holding company'' has the meaning 
        given the term in section 10(a)(1)(D) of the Home 
        Owners' Loan Act.

           *       *       *       *       *       *       *

                              ----------                              


HOME MORTGAGE DISCLOSURE ACT OF 1975

           *       *       *       *       *       *       *


TITLE III--HOME MORTGAGE DISCLOSURE

           *       *       *       *       *       *       *


              MAINTENANCE OF RECORDS AND PUBLIC DISCLOSURE

  Sec. 304. (a) * * *

           *       *       *       *       *       *       *

  (g) The requirements of subsections (a) and (b) shall not 
apply with respect to mortgage loans that are--
          (1) made (or for which completed applications are 
        received) by any mortgage banking subsidiary of a bank 
        holding company, industrial bank holding company, or 
        savings and loan holding company or by any savings and 
        loan service corporation that originates or purchases 
        mortgage loans; and

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