Dodd-Frank Wall Street Reform Bill & Industrial Banks

The Dodd-Frank bill imposes a three year moratorium on deposit insurance applications for new credit card banks, industrial banks, and trust banks owned by “commercial” companies.  A company is a “commercial firm” if the annual gross revenues derived by the company and all of its affiliates from activities that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956) represent less than 15% of the consolidated annual gross revenues of the company”.

In other words, to be “commercial”  a corporate group must generate more than 85% of gross revenues from non financial activities.  Section 4(k) covers activities permitted for a financial holding company and includes securities, insurance and all activities a bank could engage including affiliated finance companies.

The Act also calls for the Government Accountability Office (the research arm of Congress) to study how financial institutions that are exempt from the Bank Holding Company Act of 1956 impact the safety and soundness of institutions or the stability of the financial system.

The types of banks subject to the study include:

•industrial banks

•credit card banks,

•trust banks,

•thrift holding companies, and

•trust companies and mutual savings banks that have a single bank subsidiary in the same state.

The GAO must report to Congress within 18 months after the date of enactment (January 2012).