Sec. 3. Safe and sound banking

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Section 18(s) of the Federal Deposit Insurance Act ( 12 U.S.C. 1828(s) ) is amended by adding at the end the following: An insured depository institution may not— be or become an affiliate of any insurance company, securities entity, or swaps entity; be in common ownership or control with any insurance company, securities entity, or swaps entity; or engage in any activity that would cause the insured depository institution to qualify as an insurance company, securities entity, or swaps entity.

An individual who is an officer, director, partner, or employee of any securities entity, insurance company, or swaps entity may not serve at the same time as an officer, director, employee, or other institution-affiliated party of any insured depository institution. Clause

(i)does not apply with respect to service by any individual which is otherwise prohibited under clause (i), if the appropriate Federal banking agency determines, by regulation with respect to a limited number of cases, that service by such an individual as an officer, director, employee, or other institution-affiliated party of an insured depository institution would not unduly influence the investment policies of the depository institution or the advice that the institution provides to customers. Subject to a determination under clause (i), any individual described in clause

(i)who, as of the date of enactment of the 21st Century Glass-Steagall Act of 2013 , is serving as an officer, director, employee, or other institution-affiliated party of any insured depository institution shall terminate such service as soon as is practicable after such date of enactment, and in no event, later than the end of the 60-day period beginning on that date of enactment. Any affiliation, common ownership or control, or activity of an insured depository institution with any securities entity, insurance company, or swaps entity, or any other person, as of the date of enactment of the 21st Century Glass-Steagall Act of 2013 , which is prohibited under subparagraph

(A)shall be terminated as soon as is practicable, and in no event later than the end of the 5-year period beginning on that date of enactment. The appropriate Federal banking agency, after opportunity for hearing, at any time, may order termination of an affiliation, common ownership or control, or activity prohibited by clause

(i)before the end of the 5-year period described in clause (i), if the agency determines 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. Subject to a determination under clause (ii), an appropriate Federal banking agency may extend the 5-year period described in clause

(i)as to any particular insured depository institution for not more than an additional 6 months at a time, if— the agency certifies that such extension would promote the public interest and would not pose a significant threat to the stability of the banking system or financial markets in the United States; and such extension, in the aggregate, does not exceed 1 year for any one insured depository institution. Upon receipt of an extension under clause (iii), the insured depository institution shall notify its shareholders and the general public that it has failed to comply with the requirements of clause (i). For purposes of this paragraph, the following definitions shall apply: The term insurance company has the same meaning as in section 2(q) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(q)). Except as provided in clause (iii), the term securities entity — includes any entity engaged in— the issue, flotation, underwriting, public sale, or distribution of stocks, bonds, debentures, notes, or other securities; market making; activities of a broker or dealer, as those terms are defined in section 3(a) of the Securities Exchange Act of 1934; activities of a futures commission merchant; activities of an investment adviser or investment company, as those terms are defined in the Investment Advisers Act of 1940 and the Investment Company Act of 1940, respectively; or hedge fund or private equity investments in the securities of either privately or publicly held companies; and does not include a bank that, pursuant to its authorized trust and fiduciary activities, purchases and sells investments for the account of its customers or provides financial or investment advice to its customers. The term swaps entity means any swap dealer, security-based swap dealer, major swap participant, or major security-based swap participant, that is registered under— the Commodity Exchange Act ( 7 U.S.C. 1 et seq. ); or the Securities Exchange Act of 1934 ( 15 U.S.C. 78a et seq. ). The term insured depository institution — has the same meaning as in section 3(c)(2); and does not include a savings association controlled by a savings and loan holding company, as described in section 10(c)(9)(C) of the Home Owners' Loan Act (12 U.S.C. 1467a(c)(9)(C)). . Section 21 of the Banking Act of 1933 (12 U.S.C. 378) is amended by adding at the end the following: 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). . Section 24 (Seventh) of the Revised Statutes of the United States (12 U.S.C. 24 (Seventh)) is amended to read as follows: Seventh.

(A)To exercise by its board of directors or duly authorized officers or agents, subject to law, all such powers as are necessary to carry on the business of banking. As used in this paragraph, the term business of banking shall be limited to the following core banking services: A national banking association may engage in the business of receiving deposits. A national banking association may— extend credit to individuals, businesses, not for profit organizations, and other entities; discount and negotiate promissory notes, drafts, bills of exchange, and other evidences of debt; and loan money on personal security. A national banking association may participate in payment systems, defined as instruments, banking procedures, and interbank funds transfer systems that ensure the circulation of money. A national banking association may buy, sell, and exchange coin and bullion. A national banking association may invest in investment securities, defined as marketable obligations evidencing indebtedness of any person, copartnership, association, or corporation in the form of bonds, notes, or debentures (commonly known as investment securities ), obligations of the Federal Government, or any State or subdivision thereof, under such further definition of the term investment securities as the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System may jointly prescribe, by regulation. The business of dealing in securities and stock by the association shall be limited to purchasing and selling such securities and stock without recourse, solely upon the order, and for the account of, customers, and in no case for its own account, and the association shall not underwrite any issue of securities or stock. The association may purchase for its own account investment securities under such limitations and restrictions as the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System may jointly prescribe, by regulation. In no event shall the total amount of the investment securities of any one obligor or maker, held by the association for its own account, exceed at any time 10 percent of its capital stock actually paid in and unimpaired and 10 percent of its unimpaired surplus fund, except that such limitation shall not require any association to dispose of any securities lawfully held by it on August 23, 1935. A national banking association shall not invest in a structured or synthetic product, a financial instrument in which a return is calculated based on the value of, or by reference to the performance of, a security, commodity, swap, other asset, or an entity, or any index or basket composed of securities, commodities, swaps, other assets, or entities, other than customarily determined interest rates, or otherwise engage in the business of receiving deposits or extending credit for transactions involving structured or synthetic products. . Section 5(c)(1) of the Home Owners' Loan Act (12 U.S.C. 1464(c)(1)) is amended— by striking subparagraph (Q); and by redesignating subparagraphs

(R)through

(U)as subparagraphs

(Q)through (T), respectively. Section 10(c)(9)(A) of the Home Owners' Loan Act (12 U.S.C. 1467a(c)(9)(A)) is amended by striking permitted— and all that follows through clause

(ii)and inserting permitted under paragraph (1)(C) or (2). . Section 4(c) of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1843(c) ) is amended— in paragraph (8), by striking had been determined and all that follows through the end and inserting the following: “are so closely related to banking so as to be a proper incident thereto, as provided under this paragraph or any rule or regulation issued by the Board under this paragraph, provided that the following shall not be considered closely related for purposes of this paragraph: Serving as an investment advisor (as defined in section 2(a)(20) of the Investment Company Act of 1940 ( 15 U.S.C. 80a–2(a)(20) )) to an investment company registered under that Act, including sponsoring, organizing, and managing a closed-end investment company. Agency transactional services for customer investments, except that this subparagraph may not be construed as prohibiting purchases and sales of investments for the account of customers conducted by a bank (or subsidiary thereof) pursuant to the bank’s trust and fiduciary powers. Investment transactions as principal, except for activities specifically allowed by paragraph (14). Management consulting and counseling activities. ; in paragraph (13), by striking or at the end; by redesignating paragraph

(14)as paragraph (15); and by inserting after paragraph

(13)the following: purchasing, as an end user, any swap, to the extent that— the purchase of any such swap occurs contemporaneously with the underlying hedged item or hedged transaction; there is formal documentation identifying the hedging relationship with particularity at the inception of the hedge; and the swap is being used to hedge against exposure to— changes in the value of an individual recognized asset or liability or an identified portion thereof that is attributable to a particular risk; changes in interest rates; or changes in the value of currency; or . Section 4(a) of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1843(a) ) is amended— in paragraph (1), by striking or at the end; in paragraph (2), by striking the period at the end and inserting ; or ; and by inserting before the undesignated matter following paragraph (2), the following: with the exception of the activities permitted under subsection (c), engage in the business of a securities entity or a swaps entity , as those terms are defined in section 18(s)(6)(D) of the Federal Deposit Insurance Act ( 12 U.S.C. 1828(s)(6)(D) ), including, without limitation, dealing or making markets in securities, repurchase agreements, exchange traded and over-the-counter swaps, as defined by the Commodity Futures Trading Commission and the Securities and Exchange Commission, or structured or synthetic products, as defined in section 24 (Seventh) of the Revised Statutes of the United States (12 U.S.C. 24 (Seventh)), or any other over-the-counter securities, swaps, contracts, or any other agreement that derives its value from, or takes on the form of, such securities, derivatives, or contracts; engage in proprietary trading, as provided by section 13, or any rule or regulation under that section; own, sponsor, or invest in a hedge fund, or private equity fund, or any other fund, as provided by section 13, or any rule or regulation under that section, or any other fund which exhibits the characteristics of a fund that takes on proprietary trading activities or positions; hold ineligible securities or derivatives; engage in market-making; or engage in prime brokerage activities. . Any attempt to structure any contract, investment, instrument, or product in such a manner that the purpose or effect of such contract, investment, instrument, or product is to evade or attempt to evade the prohibitions described in section 18(s)(6) of the Federal Deposit Insurance Act, section 21(c) of the Banking Act of 1933, paragraph (Seventh) of section 24 of the Revised Statutes of the United States, section 5(c)(1) of the Home Owners’ Loan Act, or section 4(a) of the Bank Holding Company Act of 1956, as added or amended by this section, shall be considered a violation of the Federal Deposit Insurance Act, the Banking Act of 1933, section 24 of the Revised Statutes of the United States, the Home Owners’ Loan Act, and the Bank Holding Company Act of 1956, respectively. Notwithstanding any other provision of law, if a Federal agency has reasonable cause to believe that an insured depository institution, securities entity, swaps entity, insurance company, bank holding company, or other entity over which that agency has regulatory authority has made an investment or engaged in an activity in a manner that functions as an evasion of the prohibitions described in paragraph

(1)(including through an abuse of any permitted activity) or otherwise violates such prohibitions, the agency shall— order, after due notice and opportunity for hearing, the entity to terminate the activity and, as relevant, dispose of the investment; order, after the procedures described in clause (i), the entity to pay a penalty equal to 10 percent of the entity’s net profits, averaged over the previous 3 years, into the United States Treasury; and initiate proceedings described in 12 U.S.C. 1818(e) for individuals involved in evading the prohibitions described in paragraph (1). Nothing in this paragraph shall be construed to limit the inherent authority of any Federal agency or State regulatory authority to further restrict any investments or activities under otherwise applicable provisions of law. Each year, each Federal agency having regulatory authority over any entity described in paragraph (2)(A) shall issue a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, and shall make such report available to the public. The report shall identify the number and character of any activities that took place in the preceding year that function as an evasion of the prohibitions described in paragraph (1), the names of the particular entities engaged in those activities, and the actions of the agency taken under paragraph (2). Section 4 of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1843 ), as amended by section 3(a)(1) of this Act, is amended by adding at the end the following: Executives of any bank holding company or its affiliate shall attest in writing, under penalty of perjury, that the bank holding company or affiliate is not engaged in any activity that is prohibited under subsection (a), except to the extent that such activity is permitted under subsection (c). .

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