Return to Prudent Banking Act of 2017

Summary: Return to Prudent Banking Act of 2017 This bill prohibits an insured depository institution from affiliating with any person or firm engaged principally in, among other things, issuing or selling stocks, bonds, notes, or other securities. Officers, directors and employees of securities firms are prohibited from simultaneously serving as an officer, director, or employee of a depository institution, except in specified circumstances. Any such individual serving as an officer, director, employee, or other institution-affiliated party of any insured depository institution must terminate such service as soon as practicable after enactment of this bill.  Any affiliation of an insured depository institution with any broker, dealer, investment adviser, or investment company must be terminated as soon as practicable. No entity issuing or selling stocks, bonds, or other securities may engage in the business of receiving deposits, which includes the establishment and maintenance of transaction accounts, as defined in the Federal Reserve Act. This bill declares that Congress ratifies the interpretation by the Supreme Court of specified statutory language in Investment Company Institute v. Camp (ICI) regarding permissible activities of banks and securities firms. It further declares that the reasoning of the Court in that case shall continue to apply to the limitations placed upon security affiliations under the Federal Deposit Insurance Act as enacted by this bill. No federal banking agency or federal court shall issue an interpretation regarding such security affiliations that is narrower than that of the court in ICI. This bill repeals certain provisions of the Gramm-Leach-Bliley Act, including those pertaining to regulation of financial holding companies and the conditions for engaging in financial activities.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Return to Prudent Banking Act of 
2017''.

SEC. 2. GLASS-STEAGALL REVIVED.

    (a) Wall Between Commercial Banks and Securities Activities 
Reestablished.--Section 18 of the Federal Deposit Insurance Act (12 
U.S.C. 1828) is amended by adding at the end the following new 
subsection:
    ``(aa) Limitations on Security Affiliations.--
            ``(1) Prohibition on affiliation between insured depository 
        institutions and investment banks or securities firms.--An 
        insured depository institution may not be or become an 
        affiliate of any broker or dealer, any investment adviser, any 
        investment company, or any other person engaged principally in 
        the issue, flotation, underwriting, public sale, or 
        distribution at wholesale or retail or through syndicate 
        participation of stocks, bonds, debentures, notes, or other 
        securities.
            ``(2) Prohibition on officers, directors, and employees of 
        securities firms service on boards of depository 
        institutions.--
                    ``(A) In general.--An individual who is an officer, 
                director, partner, or employee of any broker or dealer, 
                any investment adviser, any investment company, or any 
                other person engaged principally in the issue, 
                flotation, underwriting, public sale, or distribution 
                at wholesale or retail or through syndicate 
                participation of stocks, bonds, debentures, notes, or 
                other securities may not serve at the same time as an 
                officer, director, employee, or other institution-
                affiliated party of any insured depository institution.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                with respect to service by any individual which is 
                otherwise prohibited under such subparagraph if the 
                appropriate Federal banking agency determines, by 
                regulation with respect to a limited number of cases, 
                that service by such individual as an officer, 
                director, employee, or other institution-affiliated 
                party of any insured depository institution would not 
                unduly influence the investment policies of the 
                depository institution or the advice the institution 
                provides to customers.
                    ``(C) Termination of service.--Subject to a 
                determination under subparagraph (B), any individual 
                described in subparagraph (A) who, as of the date of 
                the enactment of the Return to Prudent Banking Act of 
                2017, is serving as an officer, director, employee, or 
                other institution-affiliated party of any insured 
                depository institution shall terminate such service as 
                soon as practicable after such date of enactment and no 
                later than the end of the 60-day period beginning on 
                such date.
            ``(3) Termination of existing affiliation.--
                    ``(A) Orderly wind-down of existing affiliation.--
                Any affiliation of an insured depository institution 
                with any broker or dealer, any investment adviser, any 
                investment company, or any other person, as of the date 
                of the enactment of the Return to Prudent Banking Act 
                of 2017, which is prohibited under paragraph (1) shall 
                be terminated as soon as practicable and in any event 
                no later than the end of the 2-year period beginning on 
                such date of enactment.
                    ``(B) Early termination.--The appropriate Federal 
                banking agency, after opportunity for hearing, may 
                terminate, at any time, the authority conferred by the 
                preceding subparagraph to continue any affiliation 
                subject to such subparagraph until the end of the 
                period referred to in such subparagraph if the agency 
                determines, having due regard for the purposes of this 
                subsection and the Return to Prudent Banking Act of 
                2017, that such action is necessary to prevent undue 
                concentration of resources, decreased or unfair 
                competition, conflicts of interest, or unsound banking 
                practices and is in the public interest.
                    ``(C) Extension.--Subject to a determination under 
                subparagraph (B), an appropriate Federal banking agency 
                may extend the 2-year period referred to in 
                subparagraph (A) from time to time as to any particular 
                insured depository institution for not more than 6 
                months at a time, if, in the judgment of the agency, 
                such an extension would not be detrimental to the 
                public interest, but no such extensions shall in the 
                aggregate exceed 1 year.
            ``(4) Definitions.--For purposes of this subsection, the 
        terms `broker' and `dealer' have the same meanings as in 
        section 3(a) of the Securities Exchange Act of 1934 and the 
        terms `investment adviser' and `investment company' have the 
        meaning given such terms under the Investment Advisers Act of 
        1940 and the Investment Company Act of 1940, respectively.''.
    (b) Prohibition on Banking Activities by Securities Firms 
Clarified.--Section 21 of the Banking Act of 1933 (12 U.S.C. 378) is 
amended by adding at the end the following new subsection:
    ``(c) Business of Receiving Deposits.--For purposes of this 
section, the term `business of receiving deposits' includes the 
establishment and maintenance of any transaction account (as defined in 
section 19(b)(1)(C) of the Federal Reserve Act).''.
    (c) Continued Applicability of ICI v. Camp.--
            (1) In general.--The Congress ratifies the interpretation 
        of the paragraph designated the ``Seventh'' of section 5136 of 
        the Revised Statutes of the United States (12 U.S.C. 24, as 
        amended by section 16 of the Banking Act of 1933 and subsequent 
        amendments) and section 21 of the Banking Act of 1933 (12 
        U.S.C. 378) by the Supreme Court of the United States in the 
        case of Investment Company Institute v. Camp (401 U.S. 617 et 
        seq. (1971)) with regard to the permissible activities of banks 
        and securities firms, except to the extent expressly prescribed 
        otherwise by this section.
            (2) Applicability of reasoning.--The reasoning of the 
        Supreme Court of the United States in the case referred to in 
        paragraph (1) with respect to sections 20 and 32 of the Banking 
        Act of 1933 (as in effect prior to the date of the enactment of 
        the Gramm-Leach-Bliley Act) shall continue to apply to 
        subsection (aa) of section 18 of the Federal Deposit Insurance 
        Act (as added by subsection (a) of this section) except to the 
        extent the scope and application of such subsection as enacted 
        exceed the scope and application of such sections 20 and 32.
            (3) Limitation on agency interpretation or judicial 
        construction.--No appropriate Federal banking agency, by 
        regulation, order, interpretation, or other action, and no 
        court within the United States may construe the paragraph 
        designated the ``Seventh'' of section 5136 of the Revised 
        Statutes of the United States (12 U.S.C. 24, as amended by 
        section 16 of the Banking Act of 1933 and subsequent 
        amendments), section 21 of the Banking Act of 1933, or section 
        18(aa) of the Federal Deposit Insurance Act more narrowly than 
        the reasoning of the Supreme Court of the United States in the 
        case of Investment Company Institute v. Camp (401 U.S. 617 et 
        seq. (1971)) as to the construction and the purposes of such 
        provisions.

SEC. 3. REPEAL OF GRAMM-LEACH-BLILEY ACT PROVISIONS.

    (a) Financial Holding Company.--
            (1) In general.--Section 4 of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1843) is amended by striking subsections 
        (k), (l), (m), (n), and (o).
            (2) Transition.--
                    (A) Orderly wind-down of existing affiliation.--In 
                the case of a bank holding company which, pursuant to 
                the amendments made by paragraph (1), is no longer 
                authorized to control or be affiliated with any entity 
                that was permissible for a financial holding company, 
                any affiliation by the bank holding company which is 
                not permitted for a bank holding company shall be 
                terminated as soon as practicable and in any event no 
                later than the end of the 2-year period beginning on 
                such date of enactment.
                    (B) Early termination.--The Board of Governors of 
                the Federal Reserve System, after opportunity for 
                hearing, may terminate, at any time, the authority 
                conferred by the preceding subparagraph to continue any 
                affiliation subject to such subparagraph until the end 
                of the period referred to in such subparagraph if the 
                Board determines, having due regard to the purposes of 
                this Act, that such action is necessary to prevent 
                undue concentration of resources, decreased or unfair 
                competition, conflicts of interest, or unsound banking 
                practices, and is in the public interest.
                    (C) Extension.--Subject to a determination under 
                subparagraph (B), the Board of Governors of the Federal 
                Reserve System may extend the 2-year period referred to 
                in subparagraph (A) above from time to time as to any 
                particular bank holding company for not more than 6 
                months at a time, if, in the judgment of the Board, 
                such an extension would not be detrimental to the 
                public interest, but no such extensions shall in the 
                aggregate exceed 1 year.
            (3) Technical and conforming amendments.--
                    (A) Section 2 of the Bank Holding Company Act of 
                1956 (12 U.S.C. 1841) is amended by striking subsection 
                (p).
                    (B) Section 5(c) of the Bank Holding Company Act of 
                1956 (12 U.S.C. 1844(c)) is amended--
                            (i) by striking paragraphs (3) and (4); and
                            (ii) by redesignating paragraph (5) as 
                        paragraph (3).
                    (C) Section 5 of the Bank Holding Company Act of 
                1956 (12 U.S.C. 1844) is amended by striking subsection 
                (g).
                    (D) The Federal Deposit Insurance Act (12 U.S.C. 
                1811 et seq.) is amended by striking section 45.
                    (E) Subtitle B of title I of the Gramm-Leach-Bliley 
                Act is amended by striking section 114 (12 U.S.C. 
                1828a) and section 115 (12 U.S.C. 1820a).
    (b) Financial Subsidiaries Repealed.--
            (1) In general.--Section 5136A of the Revised Statutes of 
        the United States (12 U.S.C. 24a) is amended to read as 
        follows:

``SEC. 5136A. [REPEALED].''.

            (2) Transition.--
                    (A) Orderly wind-down of existing affiliation.--In 
                the case of a national bank which, pursuant to the 
                amendments made by paragraph (1), is no longer 
                authorized to control or be affiliated with a financial 
                subsidiary as of the date of the enactment of this Act, 
                such affiliation shall be terminated as soon as 
                practicable and in any event no later than the end of 
                the 2-year period beginning on such date of enactment.
                    (B) Early termination.--The Comptroller of the 
                Currency, after opportunity for hearing, may terminate, 
                at any time, the authority conferred by the preceding 
                subparagraph to continue any affiliation subject to 
                such subparagraph until the end of the period referred 
                to in such subparagraph if the Comptroller determines, 
                having due regard for the purposes of this Act, that 
                such action is necessary to prevent undue concentration 
                of resources, decreased or unfair competition, 
                conflicts of interest, or unsound banking practices and 
                is in the public interest.
                    (C) Extension.--Subject to a determination under 
                subparagraph (B), the Comptroller of the Currency may 
                extend the 2-year period referred to in subparagraph 
                (A) above from time to time as to any particular 
                national bank for not more than 6 months at a time, if, 
                in the judgment of the Comptroller, such an extension 
                would not be detrimental to the public interest, but no 
                such extensions shall in the aggregate exceed 1 year.
            (3) Technical and conforming amendment.--
                    (A) The 20th undesignated paragraph of section 9 of 
                the Federal Reserve Act (12 U.S.C. 335) is amended by 
                striking the last sentence.
                    (B) The Federal Deposit Insurance Act is amended by 
                striking section 46 (12 U.S.C. 1831w).
            (4) Clerical amendment.--The table of sections for chapter 
        one of title LXII of the Revised Statutes of the United States 
        is amended by striking the item relating to section 5136A.
    (c) Definition of Broker.--Section 3(a)(4)(B) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(4)(B)) is amended--
            (1) by striking clauses (i), (iii), (v), (vii), (x), and 
        (xi); and
            (2) by redesignating clauses (ii), (iv), (vi), (viii), and 
        (ix) as clauses (i), (ii), (iii), (iv), and (v), respectively.
    (d) Definition of Dealer.--Section 3(a)(5)(C) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c(a)(5)(C)) is amended--
            (1) by striking clauses (i) and (iii); and
            (2) by redesignating clauses (ii) and (iv) as clauses (i) 
        and (ii), respectively.
    (e) Definition of Identified Banking Product.--Subsection (a) of 
section 206 of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) is 
amended--
            (1) by inserting ``and'' after the semicolon at the end of 
        paragraph (4);
            (2) in paragraph (5)(B)(ii), by striking ``; or'' and 
        inserting a period; and
            (3) by striking paragraph (6) and all that follows through 
        the end of such subsection.
    (f) Definition of Activities Closely Related to Banking.--
            (1) In general.--Section 4(c)(8) of the Bank Holding 
        Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amended by 
        striking ``the day before the date of the enactment of the 
        Gramm-Leach-Bliley Act'' and inserting ``January 1, 1970''.
            (2) Provision allowing for exceptions after report to the 
        congress.--Subsection (j) of section 4 of the Bank Holding 
        Company Act of 1956 (12 U.S.C. 1843(j)) is amended to read as 
        follows:
    ``(j) Approval for Certain Post-1970 Subsection (c)(8) 
Activities.--
            ``(1) In general.--Notwithstanding the limitation of the 
        January 1, 1970, approval deadline in subsection (c)(8), the 
        Board may determine an activity to be so closely related to 
        banking as to be a proper incident thereto for purposes of such 
        subsection, subject to the requirements of this subsection and 
        such terms and conditions as the Board may require.
            ``(2) General standards.--In making any determination under 
        paragraph (1), the Board shall consider whether performance of 
        the activity by a bank holding company or a subsidiary of such 
        company can reasonably be expected to result in a violation of 
        section 18(aa) of the Federal Deposit Insurance Act, section 21 
        of the Banking Act of 1933, or the spirit of section 2(c) of 
        the Return to Prudent Banking Act of 2017, and other possible 
        adverse effects, such as undue concentration of resources, 
        decreased or unfair competition, conflicts of interests, or 
        unsound banking practices.
            ``(3) Report and wait.--No determination of the Board under 
        paragraph (1) may take effect before the end of the 180-day 
        period beginning on the date by which notice of the 
        determination has been submitted to both Houses of the Congress 
        together with a detailed explanation of the activities to which 
        the determination relates and the basis for the determination, 
        unless before the end of such period, such activities have been 
        approved by an Act of Congress.''.
    (g) Repeal of Provision Relating to Foreign Banks Filing as 
Financial Holding Companies.--Section 8(c) of the International Banking 
Act of 1978 (12 U.S.C. 3106(c)) is amended by striking paragraph (3).

SEC. 4. REPORTS TO THE CONGRESS.

    (a) Reports Required.--Each time the Board of Governors of the 
Federal Reserve System, the Comptroller of the Currency, or another 
appropriate Federal banking agency makes a determination or an 
extension under subparagraph (B) or (C) of paragraph (2) or (3) of 
section 18(aa) of the Federal Deposit Insurance Act (as added by 
section 2(a)) or subparagraph (B) or (C) of subsection (a)(2) or (b)(2) 
of section 3, as the case may be, the Board, Comptroller, or agency 
shall promptly submit a report of such determination or extension to 
the Congress.
    (b) Contents.--Each report submitted to the Congress under 
subsection (a) shall contain a detailed description of the basis for 
the determination or extension.