Close the Shadow Banking Loophole Act

This bill changes how industrial banks (a type of bank that can be owned by commercial firms) get deposit insurance from the Federal Deposit Insurance Corporation (FDIC) and increases oversight of their parent companies. It amends the Bank Holding Company Act to narrow the definition of a bank, sets new rules for pending and recent deposit insurance applications, gives regulators new powers over parent companies, and restricts changes in control of industrial banks.

Sec. 2, Industrial banks: The bill amends the Bank Holding Company Act to say that an industrial bank is only exempt from the definition of a bank if it got FDIC deposit insurance on or before September 23, 2021, or if it complies with new rules in this bill. For applications pending on the enactment date that were filed by September 23, 2021, the FDIC must hold a 90-day public comment period and a public hearing, and can only approve by a two-thirds board vote. If not approved by September 30, 2026, the application is denied. For industrial banks that got deposit insurance after September 23, 2021, the parent company's primary financial regulator can examine the parent or its non-bank subsidiaries, get reports, and impose conditions to promote safety and soundness. The appropriate federal banking agency must generally disapprove any change in control of an industrial bank, with exceptions for banks in danger of default, certain stock acquisitions under 25%, or if the new owner is already supervised by the Federal Reserve as a bank holding company, savings and loan holding company, or certain foreign banks.

Sec. 3, Supervision of parent companies of industrial loan companies: This adds a new section to the Bank Holding Company Act. It gives the FDIC the same power to require reports and examinations from a parent company of an industrial loan company (that is not already regulated by a primary financial regulator) as the Federal Reserve has over bank holding companies. For parent companies of industrial loan companies that got deposit insurance on or before September 23, 2021, the FDIC must tailor requirements to the company's size, complexity, and business nature. The FDIC can enforce these powers using existing FDIC enforcement authorities.

Sec. 4, Application with respect to contracts and other agreements: This section says the bill does not affect the FDIC's ability to make agreements with parent companies or industrial loan companies, or impose conditions on applications, and does not affect the validity of any such agreements made before the bill's enactment.