H. Rept. 115-465 - FINANCIAL INSTITUTION LIVING WILL IMPROVEMENT ACT OF 2017115th Congress (2017-2018)
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115th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 115-465
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FINANCIAL INSTITUTION LIVING WILL IMPROVEMENT ACT OF 2017
_______
December 14, 2017.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 4292]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4292) to reform the living will process under
the Dodd-Frank Wall Street Reform and Consumer Protection Act,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Financial Institution Living Will
Improvement Act of 2017''.
SEC. 2. LIVING WILL REFORMS.
(a) In General.--Section 165(d) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (12 U.S.C. 5365(d)) is amended--
(1) in paragraph (1), by striking ``periodically'' and
inserting ``every 2 years''; and
(2) in paragraph (3)--
(A) by striking ``The Board'' and inserting the
following:
``(A) In general.--The Board'';
(B) by striking ``shall review'' and inserting the
following: ``shall--
``(i) review'';
(C) by striking the period and inserting ``; and'';
and
(D) by adding at the end the following:
``(ii) not later than the end of the 6-month
period beginning on the date the company
submits the resolution plan, provide feedback
to the company on such plan.
``(B) Disclosure of assessment framework.--The Board
of Governors and the Corporation shall publicly
disclose the assessment framework that is used to
review information under this paragraph.''.
(b) Treatment of Other Resolution Plan Requirements.--
(1) In general.--With respect to an appropriate Federal
banking agency that requires a banking organization to submit
to the agency a resolution plan not described under section
165(d) of the Dodd-Frank Wall Street Reform and Consumer
Protection Act--
(A) the respective agency shall ensure that the
review of such resolution plan is consistent with the
requirements contained in the amendments made by this
Act;
(B) the agency may not require the submission of such
a resolution plan more often than every 2 years; and
(C) paragraphs (6) and (7) of such section 165(d)
shall apply to such a resolution plan.
(2) Definitions.--For purposes of this subsection:
(A) Appropriate federal banking agency.--The term
``appropriate Federal banking agency''--
(i) has the meaning given such term under
section 3 of the Federal Deposit Insurance Act;
and
(ii) means the National Credit Union
Administration, in the case of an insured
credit union.
(B) Banking organization.--The term ``banking
organization'' means--
(i) an insured depository institution;
(ii) an insured credit union;
(iii) a depository institution holding
company;
(iv) a company that is treated as a bank
holding company for purposes of section 8 of
the International Banking Act; and
(v) a U.S. intermediate holding company
established by a foreign banking organization
pursuant to section 252.153 of title 12, Code
of Federal Regulations.
(C) Insured credit union.--The term ``insured credit
union'' has the meaning given that term under section
101 of the Federal Credit Union Act.
(D) Other banking terms.--The terms ``depository
institution holding company'' and ``insured depository
institution'' have the meaning given those terms,
respectively, under section 3 of the Federal Deposit
Insurance Act.
(c) Rule of Construction.--Nothing in this Act, or any amendment made
by this Act, shall be construed as limiting the authority of an
appropriate Federal banking agency (as defined under subsection (b)(2))
to obtain information from an institution in connection with such
agency's authority to examine or require reports from the institution.
Purpose and Summary
Introduced by Representative Lee Zeldin on November 7,
2017, H.R. 4292, the ``Financial Institution Living Will
Improvement Act of 2017'' amends Title I of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (``Dodd-Frank Act'')
to reform the ``living will'' process and require bank holding
companies to submit to the Board of Governors of the Federal
Reserve System (Federal Reserve) and the Federal Deposit
Insurance Corporation (FDIC) resolution plans every two years.
This bill also requires the Federal Reserve and FDIC to
provide feedback to a bank holding company regarding a
submitted resolution plan within six months after its
submission. This bill also requires the Federal Reserve and
FDIC to publicly disclose the assessment framework used to
review the adequacy of resolution plans.
Background and Need for Legislation
Section 165 of the Dodd-Frank Act requires bank holding
companies with total consolidated assets of $50 billion or more
(also known as systemically-important financial institutions
(SIFIs), and nonbank financial companies designated by the
Financial Stability Oversight Council (FSOC) for supervision to
annually submit detailed plans to the Federal Reserve and the
Federal Deposit Insurance Company (FDIC) that describes the
company's strategy for rapid and orderly resolution under the
Bankruptcy Code in the event of its material financial distress
or failure. If the Federal Reserve and FDIC jointly conclude
that a SIFI has failed to produce a ``credible'' plan for its
orderly resolution, they can take a series of punitive
measures, including the imposition of ``more stringent capital,
leverage, or liquidity requirements, or restrictions on the
growth, activities, or operations of the company, or any
subsidiary thereof.''\1\ Failure to remedy the deficiencies
identified by the prudential regulators can ultimately result
in the Federal Reserve and FDIC ordering the firm ``to divest
certain assets or operations.''\2\
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\1\Dodd-Frank Act Sec. 165(d)(5)(A).
\2\Dodd-Frank Act Sec. 165(d)(5)(B).
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In an April 2016 report, entitled ``Regulators Have Refined
Their Review Processes but Could Improve Transparency and
Timeliness,'' the Government Accountability Office (GAO)
examined the process used by regulators under Section 165 of
the Dodd-Frank Act to review SIFI resolution plans.\3\ The GAO
concluded that while the reviewing regulators have sought to
reduce the burden of the resolution plan requirements, there
were still weaknesses to be addressed.\4\ Specifically, the GAO
determined that the Federal Reserve and FDIC should increase
transparency by disclosing their assessment frameworks and
criteria, noting that:
---------------------------------------------------------------------------
\3\See ``RESOLUTION PLANS: Regulators Have Refined Their Review
Processes but Could Improve Transparency and Timeliness'', GAO-16-341:
Published: Apr 12, 2016. Publicly Released: Apr 12, 2016. available at
https://www.gao.gov/products/GAO-16-341.
\4\GAO, GAO-16-341, Resolution Plans: Regulators Have Refined Their
Review Processes But Could Improve Transparency And Timeliness (April
12, 2016), available at: http://www.gao.gov/products/GAO-16-341.
. . . a better understanding of the regulators'
assessment frameworks could give the larger companies a
more complete understanding of the key factors that can
lead to plan deficiencies. Likewise, disclosure of the
regulators' criteria could help motivate smaller
companies to reduce their systemic risk and understand
---------------------------------------------------------------------------
how they might qualify to file reduced plans.
In addition to assessment transparency, the GAO also found
a need to increase timeliness of guidance and feedback. The GAO
concluded that:
FDIC and the Federal Reserve have taken about 9
months on average to review resolution plans and
jointly provide companies with guidance or feedback.
Because the resolution plan rule requires companies to
file plans annually, some companies may not have
sufficient time to fully incorporate such guidance or
feedback into their subsequent plans and obtain their
board of directors' approval of the plans by the
submission deadline.
As such, the GAO recommended that regulators should:
publicly disclose information about their respective frameworks
for assessing and recommending to their boards whether a plan
is not credible or would not facilitate an orderly resolution
under the Code; publicly disclose aspects of their criteria
used to decide which companies are allowed to file a reduced
plan; and revise the resolution plan rule's annual filing
requirement to provide sufficient time not only for the
regulators to complete their plan reviews and provide feedback
but also for companies to address and incorporate regulators'
feedback in subsequent plan filings.
The Federal Reserve and FDIC have also recognized the need
to reform the living wills framework. During a June 22, 2017
hearing before the Committee on Banking, Housing and Urban
Affairs of the U.S. Senate, both FDIC Chairman Martin Gruenberg
and Federal Reserve Chair Nominee, and current-Governor Jay
Powell mutually testified that both regulators:
. . . believe it is worthwhile to consider extending
the cycle for living will submissions from annual to
once every two years, and focusing every other of these
filings on key topics of interest and material changes
from the prior full plan submission. In addition, there
may be opportunities to greatly reduce the submission
requirements for a large number of firms due to their
relatively small, simple, and domestically focused
activities
With Chairman Gruenberg adding that, ``[s]uch an approach could
limit full plan filing requirements to firms that are large,
complex, or have a systemically critical operation.''
In June 2017, the Treasury Department issued the first in a
series of reports to the President in response to Executive
Order 13772 on Core Principles for Regulating the United States
Financial System. The report, entitled, ``A Financial System
That Creates Economic Opportunities: Banks and Credit Unions,''
focused on regulatory relief recommendations for those
institutions. With regard to living wills guidance, the
Treasury Report recommended that institutions be provided a two
year submission cycle, and that the Federal Reserve complete
reviews and provide feedback of living wills proposals within
six months of submission.
As implemented by federal regulators, the living will
process has devolved into an opaque and hugely expensive
exercise in command-and-control Washington, top-down
regulation. H.R. 4292, as amended, is a measured and
appropriate response to fix many of the challenges that
financial institutions experience in their efforts to comply
with the living will statutory regulatory mandates.
Hearings
The Committee on Financial Services held a hearing
examining matters relating to H.R. 4292 on April 26, 2017 and
April 28, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
November 14, 2017, and November 15, 2017, and ordered H.R. 4292
to be reported favorably to the House as amended by a recorded
vote of 60 yeas to 0 nays (recorded vote no. FC-106), a quorum
being present. Before the motion to report was offered, the
Committee adopted an amendment offered by Ms. Waters by voice
vote.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House with amendment. The
motion was agreed to by a recorded vote of 60 yeas to 0 nays
(Record vote no. FC-106), a quorum being present.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 4292
will reform the living wills submission process to make it more
transparent, responsive, and efficient for submitting bank
holding companies.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, December 8, 2017.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4292, the
Financial Institution Living Will Improvement Act of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Sarah Puro.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 4292--Financial Institution Living Will Improvement Act of 2017
H.R. 4292 would codify current regulatory practices by
requiring certain financial institutions to submit resolution
plans (known as living wills) to the Federal Deposit Insurance
Corporation (FDIC) and the Federal Reserve once every two
years. The bill also would require the FDIC and the Federal
Reserve to provide additional feedback to those financial
institutions about their living wills and to publicly disclose
their assessment framework.
H.R. 4292 would impose a small administrative cost on both
agencies. Such costs to the FDIC are recorded in the budget as
an increase in direct spending; costs incurred by the Federal
Reserve are treated as reductions in remittances to the
Treasury. Such reductions are recorded in the budget as
reductions in revenues.
Because enacting H.R. 4292 would affect direct spending and
revenues, pay-as-you-go procedures apply. However, using
information from those agencies, CBO estimates that the net
budgetary effects would be insignificant for each year.
CBO estimates that enacting H.R. 4292 would not
significantly increase net direct spending or on-budget
deficits in any of the four consecutive 10-year periods
beginning in 2028.
H.R. 4292 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contacts for this estimate are Sarah Puro
(for the FDIC) and Nathaniel Frentz (for the Federal Reserve).
The estimate was approved by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed
rulemakings: The Committee estimates that the bill requires no
directed rulemakings within the meaning of such section.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 4292 as the ``Financial Institution
Living Will Improvement Act of 2017''.
Section 2. Living will reforms
This section 165(d) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act to require bank holding companies
submit to the Federal Reserve Board (Federal Reserve) and the
Federal Deposit Insurance Corporation (FDIC) resolution plans
every two years. This section also requires the Federal Reserve
and FDIC to provide feedback within six months of the
submission of a resolution plan by a company. This section also
requires the Federal Reserve and FDIC to publicly disclose the
assessment framework used to review the adequacy of resolution
plans.
This section also requires an appropriate Federal banking
agency follow the above cited requirements for any resolution
plan not described under section 165(d) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT
* * * * * * *
TITLE I--FINANCIAL STABILITY
* * * * * * *
Subtitle C--Additional Board of Governors Authority for Certain Nonbank
Financial Companies and Bank Holding Companies
* * * * * * *
SEC. 165. ENHANCED SUPERVISION AND PRUDENTIAL STANDARDS FOR NONBANK
FINANCIAL COMPANIES SUPERVISED BY THE BOARD OF
GOVERNORS AND CERTAIN BANK HOLDING COMPANIES.
(a) In General.--
(1) Purpose.--In order to prevent or mitigate risks
to the financial stability of the United States that
could arise from the material financial distress or
failure, or ongoing activities, of large,
interconnected financial institutions, the Board of
Governors shall, on its own or pursuant to
recommendations by the Council under section 115,
establish prudential standards for nonbank financial
companies supervised by the Board of Governors and bank
holding companies with total consolidated assets equal
to or greater than $50,000,000,000 that--
(A) are more stringent than the standards and
requirements applicable to nonbank financial
companies and bank holding companies that do
not present similar risks to the financial
stability of the United States; and
(B) increase in stringency, based on the
considerations identified in subsection (b)(3).
(2) Tailored application.--
(A) In general.--In prescribing more
stringent prudential standards under this
section, the Board of Governors may, on its own
or pursuant to a recommendation by the Council
in accordance with section 115, differentiate
among companies on an individual basis or by
category, taking into consideration their
capital structure, riskiness, complexity,
financial activities (including the financial
activities of their subsidiaries), size, and
any other risk-related factors that the Board
of Governors deems appropriate.
(B) Adjustment of threshold for application
of certain standards.--The Board of Governors
may, pursuant to a recommendation by the
Council in accordance with section 115,
establish an asset threshold above
$50,000,000,000 for the application of any
standard established under subsections (c)
through (g).
(b) Development of Prudential Standards.--
(1) In general.--
(A) Required standards.--The Board of
Governors shall establish prudential standards
for nonbank financial companies supervised by
the Board of Governors and bank holding
companies described in subsection (a), that
shall include--
(i) risk-based capital requirements
and leverage limits, unless the Board
of Governors, in consultation with the
Council, determines that such
requirements are not appropriate for a
company subject to more stringent
prudential standards because of the
activities of such company (such as
investment company activities or assets
under management) or structure, in
which case, the Board of Governors
shall apply other standards that result
in similarly stringent risk controls;
(ii) liquidity requirements;
(iii) overall risk management
requirements;
(iv) resolution plan and credit
exposure report requirements; and
(v) concentration limits.
(B) Additional standards authorized.--The
Board of Governors may establish additional
prudential standards for nonbank financial
companies supervised by the Board of Governors
and bank holding companies described in
subsection (a), that include--
(i) a contingent capital requirement;
(ii) enhanced public disclosures;
(iii) short-term debt limits; and
(iv) such other prudential standards
as the Board or Governors, on its own
or pursuant to a recommendation made by
the Council in accordance with section
115, determines are appropriate.
(2) Standards for foreign financial companies.--In
applying the standards set forth in paragraph (1) to
any foreign nonbank financial company supervised by the
Board of Governors or foreign-based bank holding
company, the Board of Governors shall--
(A) give due regard to the principle of
national treatment and equality of competitive
opportunity; and
(B) take into account the extent to which the
foreign financial company is subject on a
consolidated basis to home country standards
that are comparable to those applied to
financial companies in the United States.
(3) Considerations.--In prescribing prudential
standards under paragraph (1), the Board of Governors
shall--
(A) take into account differences among
nonbank financial companies supervised by the
Board of Governors and bank holding companies
described in subsection (a), based on--
(i) the factors described in
subsections (a) and (b) of section 113;
(ii) whether the company owns an
insured depository institution;
(iii) nonfinancial activities and
affiliations of the company; and
(iv) any other risk-related factors
that the Board of Governors determines
appropriate;
(B) to the extent possible, ensure that small
changes in the factors listed in subsections
(a) and (b) of section 113 would not result in
sharp, discontinuous changes in the prudential
standards established under paragraph (1) of
this subsection;
(C) take into account any recommendations of
the Council under section 115; and
(D) adapt the required standards as
appropriate in light of any predominant line of
business of such company, including assets
under management or other activities for which
particular standards may not be appropriate.
(4) Consultation.--Before imposing prudential
standards or any other requirements pursuant to this
section, including notices of deficiencies in
resolution plans and more stringent requirements or
divestiture orders resulting from such notices, that
are likely to have a significant impact on a
functionally regulated subsidiary or depository
institution subsidiary of a nonbank financial company
supervised by the Board of Governors or a bank holding
company described in subsection (a), the Board of
Governors shall consult with each Council member that
primarily supervises any such subsidiary with respect
to any such standard or requirement.
(5) Report.--The Board of Governors shall submit an
annual report to Congress regarding the implementation
of the prudential standards required pursuant to
paragraph (1), including the use of such standards to
mitigate risks to the financial stability of the United
States.
(c) Contingent Capital.--
(1) In general.--Subsequent to submission by the
Council of a report to Congress under section 115(c),
the Board of Governors may issue regulations that
require each nonbank financial company supervised by
the Board of Governors and bank holding companies
described in subsection (a) to maintain a minimum
amount of contingent capital that is convertible to
equity in times of financial stress.
(2) Factors to consider.--In issuing regulations
under this subsection, the Board of Governors shall
consider--
(A) the results of the study undertaken by
the Council, and any recommendations of the
Council, under section 115(c);
(B) an appropriate transition period for
implementation of contingent capital under this
subsection;
(C) the factors described in subsection
(b)(3)(A);
(D) capital requirements applicable to the
nonbank financial company supervised by the
Board of Governors or a bank holding company
described in subsection (a), and subsidiaries
thereof; and
(E) any other factor that the Board of
Governors deems appropriate.
(d) Resolution Plan and Credit Exposure Reports.--
(1) Resolution plan.--The Board of Governors shall
require each nonbank financial company supervised by
the Board of Governors and bank holding companies
described in subsection (a) to report [periodically]
every 2 years to the Board of Governors, the Council,
and the Corporation the plan of such company for rapid
and orderly resolution in the event of material
financial distress or failure, which shall include--
(A) information regarding the manner and
extent to which any insured depository
institution affiliated with the company is
adequately protected from risks arising from
the activities of any nonbank subsidiaries of
the company;
(B) full descriptions of the ownership
structure, assets, liabilities, and contractual
obligations of the company;
(C) identification of the cross-guarantees
tied to different securities, identification of
major counterparties, and a process for
determining to whom the collateral of the
company is pledged; and
(D) any other information that the Board of
Governors and the Corporation jointly require
by rule or order.
(2) Credit exposure report.--The Board of Governors
shall require each nonbank financial company supervised
by the Board of Governors and bank holding companies
described in subsection (a) to report periodically to
the Board of Governors, the Council, and the
Corporation on--
(A) the nature and extent to which the
company has credit exposure to other
significant nonbank financial companies and
significant bank holding companies; and
(B) the nature and extent to which other
significant nonbank financial companies and
significant bank holding companies have credit
exposure to that company.
(3) Review.--[The Board]
(A) In general._The Board of Governors and
the Corporation [shall review] shall--
(i) review the information provided
in accordance with this subsection by
each nonbank financial company
supervised by the Board of Governors
and bank holding company described in
subsection (a)[.]; and
(ii) not later than the end of the 6-
month period beginning on the date the
company submits the resolution plan,
provide feedback to the company on such
plan.
(B) Disclosure of assessment framework.--The
Board of Governors and the Corporation shall
publicly disclose the assessment framework that
is used to review information under this
paragraph.
(4) Notice of deficiencies.--If the Board of
Governors and the Corporation jointly determine, based
on their review under paragraph (3), that the
resolution plan of a nonbank financial company
supervised by the Board of Governors or a bank holding
company described in subsection (a) is not credible or
would not facilitate an orderly resolution of the
company under title 11, United States Code--
(A) the Board of Governors and the
Corporation shall notify the company of the
deficiencies in the resolution plan; and
(B) the company shall resubmit the resolution
plan within a timeframe determined by the Board
of Governors and the Corporation, with
revisions demonstrating that the plan is
credible and would result in an orderly
resolution under title 11, United States Code,
including any proposed changes in business
operations and corporate structure to
facilitate implementation of the plan.
(5) Failure to resubmit credible plan.--
(A) In general.--If a nonbank financial
company supervised by the Board of Governors or
a bank holding company described in subsection
(a) fails to timely resubmit the resolution
plan as required under paragraph (4), with such
revisions as are required under subparagraph
(B), the Board of Governors and the Corporation
may jointly impose more stringent capital,
leverage, or liquidity requirements, or
restrictions on the growth, activities, or
operations of the company, or any subsidiary
thereof, until such time as the company
resubmits a plan that remedies the
deficiencies.
(B) Divestiture.--The Board of Governors and
the Corporation, in consultation with the
Council, may jointly direct a nonbank financial
company supervised by the Board of Governors or
a bank holding company described in subsection
(a), by order, to divest certain assets or
operations identified by the Board of Governors
and the Corporation, to facilitate an orderly
resolution of such company under title 11,
United States Code, in the event of the failure
of such company, in any case in which--
(i) the Board of Governors and the
Corporation have jointly imposed more
stringent requirements on the company
pursuant to subparagraph (A); and
(ii) the company has failed, within
the 2-year period beginning on the date
of the imposition of such requirements
under subparagraph (A), to resubmit the
resolution plan with such revisions as
were required under paragraph (4)(B).
(6) No limiting effect.--A resolution plan submitted
in accordance with this subsection shall not be binding
on a bankruptcy court, a receiver appointed under title
II, or any other authority that is authorized or
required to resolve the nonbank financial company
supervised by the Board, any bank holding company, or
any subsidiary or affiliate of the foregoing.
(7) No private right of action.--No private right of
action may be based on any resolution plan submitted in
accordance with this subsection.
(8) Rules.--Not later than 18 months after the date
of enactment of this Act, the Board of Governors and
the Corporation shall jointly issue final rules
implementing this subsection.
(e) Concentration Limits.--
(1) Standards.--In order to limit the risks that the
failure of any individual company could pose to a
nonbank financial company supervised by the Board of
Governors or a bank holding company described in
subsection (a), the Board of Governors, by regulation,
shall prescribe standards that limit such risks.
(2) Limitation on credit exposure.--The regulations
prescribed by the Board of Governors under paragraph
(1) shall prohibit each nonbank financial company
supervised by the Board of Governors and bank holding
company described in subsection (a) from having credit
exposure to any unaffiliated company that exceeds 25
percent of the capital stock and surplus (or such lower
amount as the Board of Governors may determine by
regulation to be necessary to mitigate risks to the
financial stability of the United States) of the
company.
(3) Credit exposure.--For purposes of paragraph (2),
``credit exposure'' to a company means--
(A) all extensions of credit to the company,
including loans, deposits, and lines of credit;
(B) all repurchase agreements and reverse
repurchase agreements with the company, and all
securities borrowing and lending transactions
with the company, to the extent that such
transactions create credit exposure for the
nonbank financial company supervised by the
Board of Governors or a bank holding company
described in subsection (a);
(C) all guarantees, acceptances, or letters
of credit (including endorsement or standby
letters of credit) issued on behalf of the
company;
(D) all purchases of or investment in
securities issued by the company;
(E) counterparty credit exposure to the
company in connection with a derivative
transaction between the nonbank financial
company supervised by the Board of Governors or
a bank holding company described in subsection
(a) and the company; and
(F) any other similar transactions that the
Board of Governors, by regulation, determines
to be a credit exposure for purposes of this
section.
(4) Attribution rule.--For purposes of this
subsection, any transaction by a nonbank financial
company supervised by the Board of Governors or a bank
holding company described in subsection (a) with any
person is a transaction with a company, to the extent
that the proceeds of the transaction are used for the
benefit of, or transferred to, that company.
(5) Rulemaking.--The Board of Governors may issue
such regulations and orders, including definitions
consistent with this section, as may be necessary to
administer and carry out this subsection.
(6) Exemptions.--This subsection shall not apply to
any Federal home loan bank. The Board of Governors may,
by regulation or order, exempt transactions, in whole
or in part, from the definition of the term ``credit
exposure'' for purposes of this subsection, if the
Board of Governors finds that the exemption is in the
public interest and is consistent with the purpose of
this subsection.
(7) Transition period.--
(A) In general.--This subsection and any
regulations and orders of the Board of
Governors under this subsection shall not be
effective until 3 years after the date of
enactment of this Act.
(B) Extension authorized.--The Board of
Governors may extend the period specified in
subparagraph (A) for not longer than an
additional 2 years.
(f) Enhanced Public Disclosures.--The Board of Governors may
prescribe, by regulation, periodic public disclosures by
nonbank financial companies supervised by the Board of
Governors and bank holding companies described in subsection
(a) in order to support market evaluation of the risk profile,
capital adequacy, and risk management capabilities thereof.
(g) Short-term Debt Limits.--
(1) In general.--In order to mitigate the risks that
an over-accumulation of short-term debt could pose to
financial companies and to the stability of the United
States financial system, the Board of Governors may, by
regulation, prescribe a limit on the amount of short-
term debt, including off-balance sheet exposures, that
may be accumulated by any bank holding company
described in subsection (a) and any nonbank financial
company supervised by the Board of Governors.
(2) Basis of limit.--Any limit prescribed under
paragraph (1) shall be based on the short-term debt of
the company described in paragraph (1) as a percentage
of capital stock and surplus of the company or on such
other measure as the Board of Governors considers
appropriate.
(3) Short-term debt defined.--For purposes of this
subsection, the term ``short-term debt'' means such
liabilities with short-dated maturity that the Board of
Governors identifies, by regulation, except that such
term does not include insured deposits.
(4) Rulemaking authority.--In addition to prescribing
regulations under paragraphs (1) and (3), the Board of
Governors may prescribe such regulations, including
definitions consistent with this subsection, and issue
such orders, as may be necessary to carry out this
subsection.
(5) Authority to issue exemptions and adjustments.--
Notwithstanding the Bank Holding Company Act of 1956
(12 U.S.C. 1841 et seq.), the Board of Governors may,
if it determines such action is necessary to ensure
appropriate heightened prudential supervision, with
respect to a company described in paragraph (1) that
does not control an insured depository institution,
issue to such company an exemption from or adjustment
to the limit prescribed under paragraph (1).
(h) Risk Committee.--
(1) Nonbank financial companies supervised by the
board of governors.--The Board of Governors shall
require each nonbank financial company supervised by
the Board of Governors that is a publicly traded
company to establish a risk committee, as set forth in
paragraph (3), not later than 1 year after the date of
receipt of a notice of final determination under
section 113(e)(3) with respect to such nonbank
financial company supervised by the Board of Governors.
(2) Certain bank holding companies.--
(A) Mandatory regulations.--The Board of
Governors shall issue regulations requiring
each bank holding company that is a publicly
traded company and that has total consolidated
assets of not less than $10,000,000,000 to
establish a risk committee, as set forth in
paragraph (3).
(B) Permissive regulations.--The Board of
Governors may require each bank holding company
that is a publicly traded company and that has
total consolidated assets of less than
$10,000,000,000 to establish a risk committee,
as set forth in paragraph (3), as determined
necessary or appropriate by the Board of
Governors to promote sound risk management
practices.
(3) Risk committee.--A risk committee required by
this subsection shall--
(A) be responsible for the oversight of the
enterprise-wide risk management practices of
the nonbank financial company supervised by the
Board of Governors or bank holding company
described in subsection (a), as applicable;
(B) include such number of independent
directors as the Board of Governors may
determine appropriate, based on the nature of
operations, size of assets, and other
appropriate criteria related to the nonbank
financial company supervised by the Board of
Governors or a bank holding company described
in subsection (a), as applicable; and
(C) include at least 1 risk management expert
having experience in identifying, assessing,
and managing risk exposures of large, complex
firms.
(4) Rulemaking.--The Board of Governors shall issue
final rules to carry out this subsection, not later
than 1 year after the transfer date, to take effect not
later than 15 months after the transfer date.
(i) Stress Tests.--
(1) By the board of governors.--
(A) Annual tests required.--The Board of
Governors, in coordination with the appropriate
primary financial regulatory agencies and the
Federal Insurance Office, shall conduct annual
analyses in which nonbank financial companies
supervised by the Board of Governors and bank
holding companies described in subsection (a)
are subject to evaluation of whether such
companies have the capital, on a total
consolidated basis, necessary to absorb losses
as a result of adverse economic conditions.
(B) Test parameters and consequences.--The
Board of Governors--
(i) shall provide for at least 3
different sets of conditions under
which the evaluation required by this
subsection shall be conducted,
including baseline, adverse, and
severely adverse;
(ii) may require the tests described
in subparagraph (A) at bank holding
companies and nonbank financial
companies, in addition to those for
which annual tests are required under
subparagraph (A);
(iii) may develop and apply such
other analytic techniques as are
necessary to identify, measure, and
monitor risks to the financial
stability of the United States;
(iv) shall require the companies
described in subparagraph (A) to update
their resolution plans required under
subsection (d)(1), as the Board of
Governors determines appropriate, based
on the results of the analyses; and
(v) shall publish a summary of the
results of the tests required under
subparagraph (A) or clause (ii) of this
subparagraph.
(2) By the company.--
(A) Requirement.--A nonbank financial company
supervised by the Board of Governors and a bank
holding company described in subsection (a)
shall conduct semiannual stress tests. All
other financial companies that have total
consolidated assets of more than
$10,000,000,000 and are regulated by a primary
Federal financial regulatory agency shall
conduct annual stress tests. The tests required
under this subparagraph shall be conducted in
accordance with the regulations prescribed
under subparagraph (C).
(B) Report.--A company required to conduct
stress tests under subparagraph (A) shall
submit a report to the Board of Governors and
to its primary financial regulatory agency at
such time, in such form, and containing such
information as the primary financial regulatory
agency shall require.
(C) Regulations.--Each Federal primary
financial regulatory agency, in coordination
with the Board of Governors and the Federal
Insurance Office, shall issue consistent and
comparable regulations to implement this
paragraph that shall--
(i) define the term ``stress test''
for purposes of this paragraph;
(ii) establish methodologies for the
conduct of stress tests required by
this paragraph that shall provide for
at least 3 different sets of
conditions, including baseline,
adverse, and severely adverse;
(iii) establish the form and content
of the report required by subparagraph
(B); and
(iv) require companies subject to
this paragraph to publish a summary of
the results of the required stress
tests.
(j) Leverage Limitation.--
(1) Requirement.--The Board of Governors shall
require a bank holding company with total consolidated
assets equal to or greater than $50,000,000,000 or a
nonbank financial company supervised by the Board of
Governors to maintain a debt to equity ratio of no more
than 15 to 1, upon a determination by the Council that
such company poses a grave threat to the financial
stability of the United States and that the imposition
of such requirement is necessary to mitigate the risk
that such company poses to the financial stability of
the United States. Nothing in this paragraph shall
apply to a Federal home loan bank.
(2) Considerations.--In making a determination under
this subsection, the Council shall consider the factors
described in subsections (a) and (b) of section 113 and
any other risk-related factors that the Council deems
appropriate.
(3) Regulations.--The Board of Governors shall
promulgate regulations to establish procedures and
timelines for complying with the requirements of this
subsection.
(k) Inclusion of Off-balance-sheet Activities in Computing
Capital Requirements.--
(1) In general.--In the case of any bank holding
company described in subsection (a) or nonbank
financial company supervised by the Board of Governors,
the computation of capital for purposes of meeting
capital requirements shall take into account any off-
balance-sheet activities of the company.
(2) Exemptions.--If the Board of Governors determines
that an exemption from the requirement under paragraph
(1) is appropriate, the Board of Governors may exempt a
company, or any transaction or transactions engaged in
by such company, from the requirements of paragraph
(1).
(3) Off-balance-sheet activities defined.--For
purposes of this subsection, the term ``off-balance-
sheet activities'' means an existing liability of a
company that is not currently a balance sheet
liability, but may become one upon the happening of
some future event, including the following
transactions, to the extent that they may create a
liability:
(A) Direct credit substitutes in which a bank
substitutes its own credit for a third party,
including standby letters of credit.
(B) Irrevocable letters of credit that
guarantee repayment of commercial paper or tax-
exempt securities.
(C) Risk participations in bankers'
acceptances.
(D) Sale and repurchase agreements.
(E) Asset sales with recourse against the
seller.
(F) Interest rate swaps.
(G) Credit swaps.
(H) Commodities contracts.
(I) Forward contracts.
(J) Securities contracts.
(K) Such other activities or transactions as
the Board of Governors may, by rule, define.
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