Limited Service Bank Act of 1987

Limited Service Bank Act of 1987 - Amends the Bank Holding Company Act of 1956 to revise the definition of "bank" to include any limited service bank formed or acquired after June 24, 1987. Sets forth definitions and transitional rules with respect to limited service banks formed prior to such date. Prohibits a limited service bank from acquiring more than five percent of the outstanding shares or assets of any bank or thrift institution. Allows States to prohibit limited service banks.

Amends the Federal Reserve Act to impose restrictions on the activities of limited service banks formed prior to June 24, 1987. Limits the amount of transactions such a limited service bank may engage in with an affiliate. Sets forth specified collateral requirements for loans or other extensions of credit to an affiliate of such a limited service bank by such a bank or its subsidiaries. Prohibits the purchase of low-quality assets from affiliates by such a limited service bank. Requires that any transaction between such limited service banks and their affiliates must be consistent with safe and sound banking practices.

Authorizes the Federal Reserve Board to: (1) regulate the type and volume of transactions between such limited banks and their affiliates; and (2) limit the extent to which such limited service banks may market products or services marketed or otherwise provided by affiliates. Provides that provisions of the Bank Holding Company Act Amendments of 1970 relating to the prohibition on tying arrangements shall apply to such limited service banks.

Sets forth provisions for the administration and enforcement of this Act.