H. Rept. 115-657 - SMALL BANK EXAM CYCLE IMPROVEMENT ACT OF 2018115th Congress (2017-2018)
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115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-657
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SMALL BANK EXAM CYCLE IMPROVEMENT ACT OF 2018
_______
April 26, 2018.--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. 5076]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 5076) to amend the Federal Deposit Insurance Act
to extend the examination cycle for certain insured depository
institutions, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
The amendment is as follows:
Add at the end the following:
SEC. 3. GAO STUDY AND REPORT.
Not later than 2 years after the date of enactment of this Act, the
Comptroller General of the United States shall submit a report to the
Congress on the effect of extending the examination cycle for
qualifying institutions pursuant to section 2 of this Act on the
ability of agencies to effectively supervise and protect the safety and
soundness of qualifying institutions.
Purpose and Summary
Introduced by Representative Claudia Tenney on February 20,
2018, H.R. 5076, the ``Small Bank Exam Cycle Improvement Act of
2018'' amends the Federal Deposit Insurance Act (FDIA) to
increase the qualifying asset threshold for insured depository
institutions eligible for 18-month on-site examination cycles
from $1 million to $3 billion.
Background and Need for Legislation
Section 10(d) of the FDIA generally provides that federal
banking agencies must conduct a full-scope, on-site examination
of each insured depository institution at least once during
every 12-month period. As part of the examination process,
federal financial regulators rate financial institutions on
several criteria, including safety and soundness\1\ and their
compliance with legal and regulatory requirements. Regulators
also calculate capital ratios and classify financial
institutions according to the adequacy of their capitalization.
If an examination reveals that an institution is not complying
with the law or that it is undercapitalized, the regulator will
assign the institution unsatisfactory ratings or
classifications in the institution's examination report. The
institution is then subject to penalties that are authorized or
required by law, including restrictions on asset growth,
expansion, and other activities.
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\1\These safety and soundness ratings are known as CAMELS ratings.
CAMELS stand for capital adequacy, asset quality, management quality,
earnings, liquidity, and sensitivity to market risk.
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Community financial institutions argue that their
compliance costs have gone up as they attempt to keep up with
new regulations and more intrusive examinations. New
regulations and higher compliance costs have forced small banks
and credit unions to cut back on the services they offer to
their customers. As a result, local banks are increasingly
unable to provide consumers with the products and services that
they need and want. The higher threshold cost of compliance
programs has also accelerated the pace of industry
consolidation as efficiency concerns drive financial
institutions to merge. The Federal Reserve Bank of San
Francisco, for example, describes its process for examinations,
``During an on-site bank exam, supervisors gather private
information, such as details on problem loans, with which to
evaluate a bank's financial condition and to monitor its
compliance with laws and regulatory policies. A key product of
such an exam is a supervisory rating of the bank's overall
condition, commonly referred to as a CAMELS rating.''
This rating system is used by the three federal banking
supervisors (the Federal Reserve, the FDIC, and the OCC) and
other financial supervisory agencies to provide a convenient
summary of bank conditions at the time of an exam. The acronym
``CAMEL'' refers to the five components of a bank's condition
that are assessed: Capital adequacy, Asset quality, Management,
Earnings, and Liquidity. A sixth component, a bank's
Sensitivity to market risk, was added in 1997; hence the
acronym was changed to CAMELS. Ratings are assigned for each
component in addition to the overall rating of a bank's
financial condition. The ratings are assigned on a scale from 1
to 5. Banks with ratings of 1 or 2 are considered to present
few, if any, supervisory concerns, while banks with ratings of
3, 4, or 5 present moderate to extreme degrees of supervisory
concern.
However, paragraph (4) of Section 10(d) of the FDIA
provides that certain insured depository institutions may be
examined every 18 months. To qualify for this longer
examination cycle:
The institution must be found, at its most
recent examination, to be well managed and must earn a
1 (outstanding) or 2 (good) rating under the Uniform
Financial Institutions Rating System, commonly referred
to as CAMELS;
The institution must have total assets of
less than $500 million;
The institution must not be currently
subject to a formal enforcement proceeding; and
The institution must not have undergone a
change in control during the previous 12-month period.
Congress raised the threshold for CAMELS 1-rated
institutions from $250 million to $500 million in 2006\2\, and
granted agencies discretion to increase the threshold for 2-
rated institutions in 2007.\3\ In a 2007 rulemaking raising the
2-rated threshold to $500 million, the federal banking agencies
estimated that a total of 6,670 insured depository institutions
qualified for the 18-month exam cycle.\4\
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\2\Pub. L. 109-351.
\3\Pub. L. 109-473.
\4\72 Fed. Reg. 11798 (Apr. 10, 2007).
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In the 114th Congress, H.R. 22, the FAST Act (P.L. 114-94)
included Rep. Tipton's legislation, H.R. 1553, the Small Bank
Exam Cycle Reform Act of 2015, which President Obama signed
into law on December 4, 2015. H.R. 1553 increased from $500
million to $1 billion, the total asset threshold below which an
agency may apply an 18-month (rather than a 12-month) on-site
examination cycle for an institution with ``outstanding''
composite ratings, and to raise, from not more than $100
million to not more than $200 million, the total asset
threshold below which an agency may apply an 18-month
examination cycle to an institution with an ``outstanding'' or
``good'' composite rating.
In December 2016, the federal banking agencies issued final
rules to implement H.R. 1553 and extend the on-site exam cycle
for banks with up to $1 billion in assets from 12 months to 18
months.\5\
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\5\https://www.federalreserve.gov/newsevents/pressreleases/files/
bcreg20161212a1.pdf
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H.R. 5076 would raise the asset eligibility threshold for
smaller, well-rated financial institutions--those which pose
little risk--to qualify for extended exam cycles from $1
billion to $3 billion. As amended by an amendment offered by
the Ranking Member, H.R. 5076 also requires the Government
Accountability Office to report on the effect of extending the
examination cycle.
Hearings
The Committee on Financial Services' Subcommittee on
Financial Institutions and Consumer Credit held a hearing
examining matters relating to H.R. 5076 on April 6, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
March 21, 2018, and ordered H.R. 5076 to be reported favorably
by a recorded vote of 60 yeas to 0 nays (Record vote no. FC-
168), a quorum being present. Before the motion to report was
offered, the Committee adopted an amendment 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 as amended. The motion
was agreed to by a recorded vote of 60 yeas to 0 nays (Record
vote no. FC-168), 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. 5076
will reduce regulatory burden on well managed smaller
depository institutions by permitting a greater number of such
institutions to be examined by federal financial regulators
once every 18 months instead of once every 12 months.
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, April 5, 2018.
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. 5076, the Small
Bank Exam Cycle Improvement Act of 2018.
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. 5076--Small Bank Exam Cycle Improvement Act of 2018
H.R. 5076 would amend the Federal Deposit Insurance Act to
increase the maximum size of certain financial institutions
that are eligible to have on-site bank examinations once every
18 months instead of once every 12 months.
Current information about bank assets indicates that 600 to
700 institutions could qualify for the change in frequency of
examinations under H.R. 5076. Using information from the
federal banking regulators, CBO expects that bank examiners who
now conduct examinations on-site would instead generally
examine the affected banks remotely, as would be permitted by
the bill. In addition, CBO expects that enacting H.R. 5076
would not affect future costs to resolve failed financial
institutions because federal regulators would continue to
exercise oversight of the institutions and could impose more
frequent examinations of any institution for which they deemed
more oversight to be necessary. As a result, CBO estimates that
the net budgetary effects of enacting H.R. 5076 would be
insignificant.
Enacting H.R. 5076 could affect direct spending by federal
agencies that regulate financial institutions; therefore, pay-
as-you-go procedures apply. However, CBO estimates that the net
effect on direct spending would be insignificant for each year.
Enacting the bill would not affect revenues.
CBO estimates that enacting H.R. 5076 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. 5076 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Sarah Puro. 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. 5076 as the ``Small Bank Exam Cycle
Improvement Act of 2018.''
Section 2. Examination cycle
This section amends the Federal Deposit Insurance Act to
increase the asset threshold at which certain institutions
qualify for an 18-month examination cycle.
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 italics, 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):
FEDERAL DEPOSIT INSURANCE ACT
* * * * * * *
Sec. 10. (a) The Board of Directors shall administer the
affairs of the Corporation fairly and impartially and without
discrimination. The Board of Directors of the Corporation shall
determine and prescribe the manner in which its obligations
shall be incurred and its expenses allowed and paid. The
Corporation shall be entitled to the free use of the United
States mails in the same manner as the executive departments of
the Government. The Corporation with the consent of any Federal
Reserve bank or of any board, commission, independent
establishment, or executive department of the Government,
including any field service thereof, may avail itself of the
use of information, services, and facilities thereof in
carrying out the provisions of this Act.
(b) Examinations.--
(1) Appointment of examiners and claims agents.--The
Board of Directors shall appoint examiners and claims
agents.
(2) Regular examinations.--Any examiner appointed
under paragraph (1) shall have power, on behalf of the
Corporation, to examine--
(A) any insured State nonmember bank or
insured State branch of any foreign bank;
(B) any depository institution which files an
application with the Corporation to become an
insured depository institution; and
(C) any insured depository institution in
default,
whenever the Board of Directors determines an
examination of any such depository institution is
necessary.
(3) Special examination of any insured depository
institution.--
(A) In general.--In addition to the
examinations authorized under paragraph (2),
any examiner appointed under paragraph (1)
shall have power, on behalf of the Corporation,
to make any special examination of any insured
depository institution or nonbank financial
company supervised by the Board of Governors or
a bank holding company described in section
165(a) of the Financial Stability Act of 2010,
whenever the Board of Directors determines that
a special examination of any such depository
institution is necessary to determine the
condition of such depository institution for
insurance purposes, or of such nonbank
financial company supervised by the Board of
Governors or bank holding company described in
section 165(a) of the Financial Stability Act
of 2010, for the purpose of implementing its
authority to provide for orderly liquidation of
any such company under title II of that Act,
provided that such authority may not be used
with respect to any such company that is in a
generally sound condition.
(B) Limitation.--Before conducting a special
examination of a nonbank financial company
supervised by the Board of Governors or a bank
holding company described in section 165(a) of
the Financial Stability Act of 2010, the
Corporation shall review any available and
acceptable resolution plan that the company has
submitted in accordance with section 165(d) of
that Act, consistent with the nonbinding effect
of such plan, and available reports of
examination, and shall coordinate to the
maximum extent practicable with the Board of
Governors, in order to minimize duplicative or
conflicting examinations.
(4) Examination of affiliates.--
(A) In general.--In making any examination
under paragraph (2) or (3), any examiner
appointed under paragraph (1) shall have power,
on behalf of the Corporation, to make such
examinations of the affairs of any affiliate of
any depository institution as may be necessary
to disclose fully--
(i) the relationship between such
depository institution and any such
affiliate; and
(ii) the effect of such relationship
on the depository institution.
(B) Commitment by foreign banks to allow
examinations of affiliates.--No branch or
depository institution subsidiary of a foreign
bank may become an insured depository
institution unless such foreign bank submits a
written binding commitment to the Board of
Directors to permit any examination of any
affiliate of such branch or depository
institution subsidiary pursuant to subparagraph
(A) to the extent determined by the Board of
Directors to be necessary to carry out the
purposes of this Act.
(5) Examination of insured state branches.--The Board
of Directors shall--
(A) coordinate examinations of insured State
branches of foreign banks with examinations
conducted by the Board of Governors of the
Federal Reserve System under section 7(c)(1) of
the International Banking Act of 1978; and
(B) to the extent possible, participate in
any simultaneous examination of the United
States operations of a foreign bank requested
by the Board under such section.
(6) Power and duty of examiners.--Each examiner
appointed under paragraph (1) shall--
(A) have power to make a thorough examination
of any insured depository institution or
affiliate under paragraph (2), (3), (4), or
(5); and
(B) shall make a full and detailed report of
condition of any insured depository institution
or affiliate examined to the Corporation.
(7) Power of claim agents.--Each claim agent
appointed under paragraph (1) shall have power to
investigate and examine all claims for insured
deposits.
(c) In connection with examinations of insured depository
institutions and any State nonmember bank, savings association,
or other institution making application to become insured
depository institutions, and affiliates thereof, or with other
types of investigations to determine compliance with applicable
law and regulations, the appropriate Federal banking agency, or
its designated representatives, are authorized to administer
oaths and affirmations, and to examine and and to take and
preserve testimony under oath as to any matter in respect to
the affairs or ownership of any such bank or institution or
affiliate thereof, and to exercise such other powers as are set
forth in section 8(n) of this Act.
(d) Annual On-Site Examinations of All Insured Depository
Institutions Required.--
(1) In general.--The appropriate Federal banking
agency shall, not less than once during each 12-month
period, conduct a full-scope, on-site examination of
each insured depository institution.
(2) Examinations by corporation.--Paragraph (1) shall
not apply during any 12-month period in which the
Corporation has conducted a full-scope, on-site
examination of the insured depository institution.
(3) State examinations acceptable.--The examinations
required by paragraph (1) may be conducted in alternate
12-month periods, as appropriate, if the appropriate
Federal banking agency determines that an examination
of the insured depository institution conducted by the
State during the intervening 12-month period carries
out the purpose of this subsection.
(4) 18-month rule for certain small institutions.--
Paragraphs (1), (2), and (3) shall apply with ``18-
month'' substituted for ``12-month'' if--
(A) the insured depository institution has
total assets of less than [$1,000,000,000]
$3,000,000,000;
(B) the institution is well capitalized, as
defined in section 38;
(C) when the institution was most recently
examined, it was found to be well managed, and
its composite condition--
(i) was found to be outstanding; or
(ii) was found to be outstanding or
good, in the case of an insured
depository institution that has total
assets of not more than $200,000,000;
(D) the insured institution is not currently
subject to a formal enforcement proceeding or
order by the Corporation or the appropriate
Federal banking agency; and
(E) no person acquired control of the
institution during the 12-month period in which
a full-scope, on-site examination would be
required but for this paragraph.
(5) Certain government-controlled institutions
exempted.--Paragraph (1) does not apply to--
(A) any institution for which the Corporation
is conservator; or
(B) any bridge depository institution, none
of the voting securities of which are owned by
a person or agency other than the Corporation.
(6) Coordinated examinations.--To minimize the
disruptive effects of examinations on the operations of
insured depository institutions--
(A) each appropriate Federal banking agency
shall, to the extent practicable and consistent
with principles of safety and soundness and the
public interest--
(i) coordinate examinations to be
conducted by that agency at an insured
depository institution and its
affiliates;
(ii) coordinate with the other
appropriate Federal banking agencies in
the conduct of such examinations;
(iii) work to coordinate with the
appropriate State bank supervisor--
(I) the conduct of all
examinations made pursuant to
this subsection; and
(II) the number, types, and
frequency of reports required
to be submitted to such
agencies and supervisors by
insured depository
institutions, and the type and
amount of information required
to be included in such reports;
and
(iv) use copies of reports of
examinations of insured depository
institutions made by any other Federal
banking agency or appropriate State
bank supervisor to eliminate
duplicative requests for information;
and
(B) not later than 2 years after the date of
enactment of the Riegle Community Development
and Regulatory Improvement Act of 1994, the
Federal banking agencies shall jointly
establish and implement a system for
determining which one of the Federal banking
agencies or State bank supervisors shall be the
lead agency responsible for managing a unified
examination of each insured depository
institution and its affiliates, as required by
this subsection.
(7) Separate examinations permitted.--Notwithstanding
paragraph (6), each appropriate Federal banking agency
may conduct a separate examination in an emergency or
under other exigent circumstances, or when the agency
believes that a violation of law may have occurred.
(8) Report.--At the time the system provided for in
paragraph (6) is established, the Federal banking
agencies shall submit a joint report describing the
system to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Banking,
Finance and Urban Affairs of the House of
Representatives. Thereafter, the Federal banking
agencies shall annually submit a joint report to the
Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Banking, Finance and Urban
Affairs of the House of Representatives regarding the
progress of the agencies in implementing the system and
indicating areas in which enhancements to the system,
including legislature improvements, would be
appropriate.
(9) Standards for determining adequacy of state
examinations.--The Federal Financial Institutions
Examination Council shall issue guidelines establishing
standards to be used at the discretion of the
appropriate Federal banking agency for purposes of
making a determination under paragraph (3).
(10) Agencies authorized to increase maximum asset
amount of institutions for certain purposes.--At any
time after the end of the 2-year period beginning on
the date of enactment of the Riegle Community
Development and Regulatory Improvement Act of 1994, the
appropriate Federal banking agency, in the agency's
discretion, may increase the maximum amount limitation
contained in paragraph (4)(C)(ii), by regulation, from
$200,000,000 to an amount not to exceed
[$1,000,000,000] $3,000,000,000 for purposes of such
paragraph, if the agency determines that the greater
amount would be consistent with the principles of
safety and soundness for insured depository
institutions.
(e) Examination Fees.--
(1) Regular and special examinations of depository
institutions.--The cost of conducting any regular
examination or special examination of any depository
institution under subsection (b)(2), (b)(3), or (d) or
of any entity described in section 3(q)(2) may be
assessed by the Corporation against the institution or
entity to meet the expenses of the Corporation in
carrying out such examinations.
(2) Examination of affiliates.--The cost of
conducting any examination of any affiliate of any
insured depository institution under subsection (b)(4)
may be assessed by the Corporation against each
affiliate which is examined to meet the Corporation's
expenses in carrying out such examination.
(3) Assessment against depository institution in case
of affiliate's refusal to pay.--
(A) In general.--Subject to subparagraph (B),
if any affiliate of any insured depository
institution--
(i) refuses to pay any assessment
under paragraph (2); or
(ii) fails to pay any such assessment
before the end of the 60-day period
beginning on the date the affiliate
receives notice of the assessment,
the Corporation may assess such cost against,
and collect such cost from, the depository
institution.
(B) Affiliate of more than 1 depository
institution.--If any affiliate referred to in
subparagraph (A) is an affiliate of more than 1
insured depository institution, the assessment
under subparagraph (A) may be assessed against
the depository institutions in such proportions
as the Corporation determines to be
appropriate.
(4) Civil money penalty for affiliate's refusal to
cooperate.--
(A) Penalty imposed.--If any affiliate of any
insured depository institution--
(i) refuses to permit an examiner
appointed by the Board of Directors
under subsection (b)(1) to conduct an
examination; or
(ii) refuses to provide any
information required to be disclosed in
the course of any examination,
the depository institution shall forfeit and
pay a penalty of not more than $5,000 for each
day that any such refusal continues.
(B) Assessment and collection.--Any penalty
imposed under subparagraph (A) shall be
assessed and collected by the Corporation in
the manner provided in section 8(i)(2).
(5) Deposits of examination assessment.--Amounts
received by the Corporation under this subsection
(other than paragraph (4)) may be deposited in the
manner provided in section 13.
(f) Preservation of Agency Records.--
(1) In general.--A Federal banking agency may cause
any and all records, papers, or documents kept by the
agency or in the possession or custody of the agency to
be--
(A) photographed or microphotographed or
otherwise reproduced upon film; or
(B) preserved in any electronic medium or
format which is capable of--
(i) being read or scanned by
computer; and
(ii) being reproduced from such
electronic medium or format by printing
any other form of reproduction of
electronically stored data.
(2) Treatment as original records.--Any photographs,
microphotographs, or photographic film or copies
thereof described in paragraph (1)(A) or reproduction
of electronically stored data described in paragraph
(1)(B) shall be deemed to be an original record for all
purposes, including introduction in evidence in all
State and Federal courts or administrative agencies,
and shall be admissible to prove any act, transaction,
occurrence, or event therein recorded.
(3) Authority of the federal banking agencies.--Any
photographs, microphotographs, or photographic film or
copies thereof described in paragraph (1)(A) or
reproduction of electronically stored data described in
paragraph (1)(B) shall be preserved in such manner as
the Federal banking agency shall prescribe, and the
original records, papers, or documents may be destroyed
or otherwise disposed of as the Federal banking agency
may direct.
(g) Authority To Prescribe Regulations and Definitions.--
Except to the extent that authority under this Act is conferred
on any of the Federal banking agencies other than the
Corporation, the Corporation may--
(1) prescribe regulations to carry out this Act; and
(2) by regulation define terms as necessary to carry
out this Act.
(h) Coordination of Examination Authority.--
(1) State bank supervisors of home and host states.--
(A) Home state of bank.--The appropriate
State bank supervisor of the home State of an
insured State bank has authority to examine and
supervise the bank.
(B) Host state branches.--The State bank
supervisor of the home State of an insured
State bank and any State bank supervisor of an
appropriate host State shall exercise its
respective authority to supervise and examine
the branches of the bank in a host State in
accordance with the terms of any applicable
cooperative agreement between the home State
bank supervisor and the State bank supervisor
of the relevant host State.
(C) Supervisory fees.--Except as expressly
provided in a cooperative agreement between the
State bank supervisors of the home State and
any host State of an insured State bank, only
the State bank supervisor of the home State of
an insured State bank may levy or charge State
supervisory fees on the bank.
(2) Host state examination.--
(A) In general.--With respect to a branch
operated in a host State by an out-of-State
insured State bank that resulted from an
interstate merger transaction approved under
section 44, or that was established in such
State pursuant to section 5155(g) of the
Revised Statutes of the United States, the
third undesignated paragraph of section 9 of
the Federal Reserve Act or section 18(d)(4) of
this Act, the appropriate State bank supervisor
of such host State may--
(i) with written notice to the State
bank supervisor of the bank's home
State and subject to the terms of any
applicable cooperative agreement with
the State bank supervisor of such home
State, examine such branch for the
purpose of determining compliance with
host State laws that are applicable
pursuant to section 24(j), including
those that govern community
reinvestment, fair lending, and
consumer protection; and
(ii) if expressly permitted under and
subject to the terms of a cooperative
agreement with the State bank
supervisor of the bank's home State or
if such out-of-State insured State bank
has been determined to be in a troubled
condition by either the State bank
supervisor of the bank's home State or
the bank's appropriate Federal banking
agency, participate in the examination
of the bank by the State bank
supervisor of the bank's home State to
ascertain that the activities of the
branch in such host State are not
conducted in an unsafe or unsound
manner.
(B) Notice of determination.--
(i) In general.--The State bank
supervisor of the home State of an
insured State bank shall notify the
State bank supervisor of each host
State of the bank if there has been a
final determination that the bank is in
a troubled condition.
(ii) Timing of notice.--The State
bank supervisor of the home State of an
insured State bank shall provide notice
under clause (i) as soon as is
reasonably possible, but in all cases
not later than 15 business days after
the date on which the State bank
supervisor has made such final
determination or has received written
notification of such final
determination.
(3) Host state enforcement.--If the State bank
supervisor of a host State determines that a branch of
an out-of-State insured State bank is violating any law
of the host State that is applicable to such branch
pursuant to section 24(j), including a law that governs
community reinvestment, fair lending, or consumer
protection, the State bank supervisor of the host State
or, to the extent authorized by the law of the host
State, a host State law enforcement officer may, with
written notice to the State bank supervisor of the
bank's home State and subject to the terms of any
applicable cooperative agreement with the State bank
supervisor of the bank's home State, undertake such
enforcement actions and proceedings as would be
permitted under the law of the host State as if the
branch were a bank chartered by that host State.
(4) Cooperative agreement.--
(A) In general.--The State bank supervisors
from 2 or more States may enter into
cooperative agreements to facilitate State
regulatory supervision of State banks,
including cooperative agreements relating to
the coordination of examinations and joint
participation in examinations.
(B) Definition.--For purposes of this
subsection, the term ``cooperative agreement''
means a written agreement that is signed by the
home State bank supervisor and the host State
bank supervisor to facilitate State regulatory
supervision of State banks, and includes
nationwide or multi-State cooperative
agreements and cooperative agreements solely
between the home State and host State.
(C) Rule of construction.--Except for State
bank supervisors, no provision of this
subsection relating to such cooperative
agreements shall be construed as limiting in
any way the authority of home State and host
State law enforcement officers, regulatory
supervisors, or other officials that have not
signed such cooperative agreements to enforce
host State laws that are applicable to a branch
of an out-of-State insured State bank located
in the host State pursuant to section 24(j).
(5) Federal regulatory authority.--No provision of
this subsection shall be construed as limiting in any
way the authority of any Federal banking agency.
(6) State taxation authority not affected.--No
provision of this subsection shall be construed as
affecting the authority of any State or political
subdivision of any State to adopt, apply, or administer
any tax or method of taxation to any bank, bank holding
company, or foreign bank, or any affiliate of any bank,
bank holding company, or foreign bank, to the extent
that such tax or tax method is otherwise permissible by
or under the Constitution of the United States or other
Federal law.
(7) Definitions.--For purpose of this section, the
following definitions shall apply:
(A) Host state, home state, out-of-State
bank.--The terms ``host State'', ``home
State'', and ``out-of-State bank'' have the
same meanings as in section 44(g).
(B) State supervisory fees.--The term ``State
supervisory fees'' means assessments,
examination fees, branch fees, license fees,
and all other fees that are levied or charged
by a State bank supervisor directly upon an
insured State bank or upon branches of an
insured State bank.
(C) Troubled condition.--Solely for purposes
of paragraph (2)(B), an insured State bank has
been determined to be in ``troubled condition''
if the bank--
(i) has a composite rating, as
determined in its most recent report of
examination, of 4 or 5 under the
Uniform Financial Institutions Ratings
System;
(ii) is subject to a proceeding
initiated by the Corporation for
termination or suspension of deposit
insurance; or
(iii) is subject to a proceeding
initiated by the State bank supervisor
of the bank's home State to vacate,
revoke, or terminate the charter of the
bank, or to liquidate the bank, or to
appoint a receiver for the bank.
(D) Final determination.--For purposes of
paragraph (2)(B), the term ``final
determination'' means the transmittal of a
report of examination to the bank or
transmittal of official notice of proceedings
to the bank.
(i) Flood Insurance Compliance by Insured Depository
Institutions.--
(1) Examinations.--The appropriate Federal banking
agency shall, during each scheduled on-site examination
required by this section, determine whether the insured
depository institution is complying with the
requirements of the national flood insurance program.
(2) Report.--
(A) Requirement.--Not later than 1 year after
the date of enactment of the Riegle Community
Development and Regulatory Improvement Act of
1994 and biennially thereafter for the next 4
years, each appropriate Federal banking agency
shall submit a report to the Congress on
compliance by insured depository institutions
with the requirements of the national flood
insurance program.
(B) Contents.--Each report submitted under
this paragraph shall include a description of
the methods used to determine compliance, the
number of institutions examined during the
reporting year, a listing and total number of
institutions found not to be in compliance,
actions taken to correct incidents of
noncompliance, and an analysis of compliance,
including a discussion of any trends, patterns,
and problems, and recommendations regarding
reasonable actions to improve the efficiency of
the examinations processes.
(j) Consultation Among Examiners.--
(1) In general.--Each appropriate Federal banking
agency shall take such action as may be necessary to
ensure that examiners employed by the agency--
(A) consult on examination activities with
respect to any depository institution; and
(B) achieve an agreement and resolve any
inconsistencies in the recommendations to be
given to such institution as a consequence of
any examinations.
(2) Examiner-in-charge.--Each appropriate Federal
banking agency shall consider appointing an examiner-
in-charge with respect to a depository institution to
ensure consultation on examination activities among all
of the examiners of that agency involved in
examinations of the institution.
(k) One-Year Restrictions on Federal Examiners of Financial
Institutions.--
(1) In general.--In addition to other applicable
restrictions set forth in title 18, United States Code,
the penalties set forth in paragraph (6) of this
subsection shall apply to any person who--
(A) was an officer or employee (including any
special Government employee) of a Federal
banking agency or a Federal reserve bank;
(B) served 2 or more months during the final
12 months of his or her employment with such
agency or entity as the senior examiner (or a
functionally equivalent position) of a
depository institution or depository
institution holding company with continuing,
broad responsibility for the examination (or
inspection) of that depository institution or
depository institution holding company on
behalf of the relevant agency or Federal
reserve bank; and
(C) within 1 year after the termination date
of his or her service or employment with such
agency or entity, knowingly accepts
compensation as an employee, officer, director,
or consultant from--
(i) such depository institution, any
depository institution holding company
that controls such depository
institution, or any other company that
controls such depository institution;
or
(ii) such depository institution
holding company or any depository
institution that is controlled by such
depository institution holding company.
(2) Definitions.--For purposes of this subsection--
(A) the term ``depository institution''
includes an uninsured branch or agency of a
foreign bank, if such branch or agency is
located in any State; and
(B) the term ``depository institution holding
company'' includes any foreign bank or company
described in section 8(a) of the International
Banking Act of 1978.
(3) Rules of construction.--For purposes of this
subsection, a foreign bank shall be deemed to control
any branch or agency of the foreign bank, and a person
shall be deemed to act as a consultant for a depository
institution, depository institution holding company, or
other company, only if such person directly works on
matters for, or on behalf of, such depository
institution, depository institution holding company, or
other company.
(4) Regulations.--
(A) In general.--Each Federal banking agency
shall prescribe rules or regulations to
administer and carry out this subsection,
including rules, regulations, or guidelines to
define the scope of persons referred to in
paragraph (1)(B).
(B) Consultation required.--The Federal
banking agencies shall consult with each other
for the purpose of assuring that the rules and
regulations issued by the agencies under
subparagraph (A) are, to the extent possible,
consistent, comparable, and practicable, taking
into account any differences in the supervisory
programs utilized by the agencies for the
supervision of depository institutions and
depository institution holding companies.
(5) Waiver.--
(A) Agency authority.--A Federal banking
agency may grant a waiver, on a case by case
basis, of the restriction imposed by this
subsection to any officer or employee
(including any special Government employee) of
that agency, and the Board of Governors of the
Federal Reserve System may grant a waiver of
the restriction imposed by this subsection to
any officer or employee of a Federal reserve
bank, if the head of such agency certifies in
writing that granting the waiver would not
affect the integrity of the supervisory program
of the relevant Federal banking agency.
(B) Definition.--For purposes of this
paragraph, the head of an agency is--
(i) the Comptroller of the Currency,
in the case of the Office of the
Comptroller of the Currency;
(ii) the Chairman of the Board of
Governors of the Federal Reserve
System, in the case of the Board of
Governors of the Federal Reserve
System; and
(iii) the Chairperson of the Board of
Directors, in the case of the
Corporation.
(6) Penalties.--
(A) In general.--In addition to any other
administrative, civil, or criminal remedy or
penalty that may otherwise apply, whenever a
Federal banking agency determines that a person
subject to paragraph (1) has become associated,
in the manner described in paragraph (1)(C),
with a depository institution, depository
institution holding company, or other company
for which such agency serves as the appropriate
Federal banking agency, the agency shall impose
upon such person one or more of the following
penalties:
(i) Industry-wide prohibition
order.--The Federal banking agency
shall serve a written notice or order
in accordance with and subject to the
provisions of section 8(e)(4) for
written notices or orders under
paragraph (1) or (2) of section 8(e),
upon such person of the intention of
the agency--
(I) to remove such person
from office or to prohibit such
person from further
participation in the conduct of
the affairs of the depository
institution, depository
institution holding company, or
other company for a period of
up to 5 years; and
(II) to prohibit any further
participation by such person,
in any manner, in the conduct
of the affairs of any insured
depository institution for a
period of up to 5 years.
(ii) Civil monetary penalty.--The
Federal banking agency may, in an
administrative proceeding or civil
action in an appropriate United States
district court, impose on such person a
civil monetary penalty of not more than
$250,000. Any administrative proceeding
under this clause shall be conducted in
accordance with section 8(i). In lieu
of an action by the Federal banking
agency under this clause, the Attorney
General of the United States may bring
a civil action under this clause in the
appropriate United States district
court.
(B) Scope of prohibition order.--Any person
subject to an order issued under subparagraph
(A)(i) shall be subject to paragraphs (6) and
(7) of section 8(e) in the same manner and to
the same extent as a person subject to an order
issued under such section.
(C) Definitions.--Solely for purposes of this
paragraph, the ``appropriate Federal banking
agency'' for a company that is not a depository
institution or depository institution holding
company shall be the Federal banking agency on
whose behalf the person described in paragraph
(1) performed the functions described in
paragraph (1)(B).
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