Close the Shadow Banking Loophole Act
Sponsored By: Senator Kennedy, John [R-LA]
Introduced
Summary
Expand FDIC oversight of industrial banks and their parent companies. This bill would tighten rules for industrial loan companies seeking FDIC deposit insurance and create a new supervisory framework for their parent companies and nonbank subsidiaries.
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- Depositors and consumers would face clearer oversight because regulators could impose conditions and restrictions on covered industrial banks to promote safety and soundness.
- Parent companies and nonbank subsidiaries would move under a new FDIC reporting and examination regime that mirrors the Federal Reserve’s authority over bank holding companies, with tailored rules and enforcement tools.
- Applicants and potential acquirers would see stricter process controls for deposit insurance and control changes, including a required public comment period and a hard deadline for certain pending applications, and a raised approval threshold for those cases.
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Bill Overview
Analyzed Economic Effects
5 provisions identified: 2 benefits, 1 costs, 2 mixed.
FDIC can supervise industrial-bank parents
If enacted, the FDIC would be able to define and supervise a "parent company of an industrial loan company." The FDIC would be able to require reports and exams of those parents and their nonbank subsidiaries similar to the Federal Reserve's powers over bank holding companies. For parents approved to receive FDIC insurance on or before September 23, 2021, the FDIC would tailor requirements to size, complexity, and business type. The FDIC would be able to enforce these rules under its existing enforcement authorities and write implementing rules.
Tighten industrial-bank exemption rules
If enacted, the bill would narrow the bank holding company exception for industrial banks. An entity could claim the exception only if it got FDIC deposit-insurance approval on or before September 23, 2021. An entity subject to the bill's new rules could also qualify only if it is in compliance with that section 2(c) regime.
Block most industrial bank takeovers
If enacted, the appropriate Federal banking agency would have to disapprove most changes in control of an industrial bank. Narrow exceptions would apply, for example when the bank is in danger of default and the buyer is an authorized type, when an acquirer buys voting shares of a listed issuer and holds less than 25% of any voting class and does not exercise control, or when the acquirer will be controlled by an entity already under consolidated Federal Reserve supervision. Any exception would still require all other federal or state approvals, including section 7(j) of the FDIA.
FDIC can keep existing agreements
If enacted, the bill would not stop the FDIC from entering into agreements with an industrial loan company or its parent. The FDIC would still be able to impose conditions when it approves applications. The act would also confirm that agreements made before enactment stay valid.
Public review for pending bank applications
If enacted, the FDIC would have to give a 90-day public comment period and hold a public hearing for any industrial bank deposit-insurance application filed on or before September 23, 2021 that is still pending. The FDIC could only approve such an application by a two-thirds vote of its Board. If the FDIC does not approve the application by September 30, 2026, the application would be deemed denied. The rule would not otherwise change the FDIC's usual authority unless explicitly stated.
Sponsors & CoSponsors
Sponsor
Kennedy, John [R-LA]
LA • R
Cosponsors
Sen. Kim, Andy [D-NJ]
NJ • D
Sponsored 1/29/2026
Roll Call Votes
No roll call votes available for this bill.
View on Congress.gov