S. 3538 — Close the Shadow Banking Loophole Act

This bill provides for the federal regulation and supervision of industrial banks, also known as industrial loan companies (ILCs), and their parent companies. ILCs are state-chartered institutions owned by nonfinancial businesses (parent companies) that provide several services similar to banks, such as originating loans and processing payments. Under current law, the parent companies are not subject to federal banking supervision, however, the Federal Deposit Insurance Corporation (FDIC) may grant deposit insurance to these institutions. Under the bill, certain pending ILC deposit insurance applications must receive votes from two-thirds of the FDIC board to be approved. The bill also sets...