[House Report 114-871]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 114-871
======================================================================
FINANCIAL STABILITY OVERSIGHT COUNCIL IMPROVEMENT ACT OF 2015
_______
December 12, 2016.--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
together with
MINORITY VIEWS
[To accompany H.R. 1550]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 1550) to amend the Financial Stability Act of
2010 to improve the transparency of the Financial Stability
Oversight Council, to improve the SIFI designation process, and
for other purposes, having considered the same, report
favorably thereon without amendment and recommend that the bill
do pass.
Purpose and Summary
H.R. 1550 amends the Financial Stability Act of 2010 to
require the Financial Stability Oversight Council (FSOC), when
determining whether to subject a nonbank financial company to
supervision by the Board of Governors of the Federal Reserve
System, to consider the appropriateness of imposing such
standards as opposed to other forms of regulation to mitigate
identified risks to U.S. financial stability. The bill also
provides for annual and periodic reevaluation of FSOC
determinations, enhanced procedures for making additional
determinations, and periodic FSOC assessments of the impact of
its designations.
Background and Need for Legislation
Section 113 of the Dodd-Frank Act authorizes the FSOC to
determine that the material financial distress of a nonbank
financial company could pose a threat to the financial
stability of the United States. Once the FSOC makes a
determination regarding a nonbank financial company, the
nonbank financial company becomes subject to heightened
prudential supervision and regulation by the Fed. The FSOC is
required to consider a number of factors when making its
determination. H.R. 1550 would add an additional factor that
the FSOC would be required to consider before designating a
nonbank financial company as systemically important.
Specifically, the FSOC would be required to consider the
``appropriateness of the imposition of prudential standards as
opposed to other forms of regulation to mitigate the identified
risks.''
Section 113(e) requires the FSOC to provide a nonbank
financial company written notice of a proposed designation
determination, including an explanation of the basis of the
proposed determination. The nonbank financial company is
entitled to a hearing and can submit written materials
contesting a proposed determination. H.R. 1550 would require
the FSOC, upon identifying a nonbank financial company as a
potential threat to the financial stability of the United
States, to provide the nonbank financial company with a written
notice that explains with specificity the basis for identifying
the company and would require a copy of the notice to be
provided to the company's primary financial regulatory agency.
Upon receiving a notice of potential designation, a company
would be provided an opportunity to submit written materials
for consideration by the FSOC and meet with the FSOC to discuss
the FSOC's analysis. The FSOC would be required to give the
nonbank financial company a list of the public sources of
information being considered by the FSOC. The FSOC would then
be permitted to approve a resolution that identifies with
specificity any risks to the financial stability of the United
States that the FSOC has identified relating to the nonbank
financial company by a vote of at least 2/3rds of the voting
members of the FSOC (including the affirmative vote of the
Treasury Secretary). The nonbank financial company's primary
financial regulatory agency would have 180 days to consider the
risks identified in the resolution and provide a written
response to the FSOC that includes its assessment of the risks
identified and the degree to which they are or could be
addressed by existing regulation and, as appropriate, issue
proposed regulations or undertake other regulatory action to
mitigate the identified risks. In addition, the nonbank
financial company would be (i) permitted to meet with the FSOC
to discuss the FSOC's analysis, (ii) permitted to submit
written materials to the FSOC, (iii) entitled to receive an
explanation from the FSOC of how any request by the FSOC for
information from the nonbank financial company relates to the
potential systemic risks posed by the company; and (iv)
entitled to receive written notice when the FSOC deems its
evidentiary record to be complete.
After following the above process, the FSOC could, by a
vote of at least 2/3rds of the voting members of the FSOC
(including the affirmative vote of the Treasury Secretary) make
a proposed designation of a company. Prior to making a proposed
designation, the FSOC would be required to determine that any
proposed regulations or other regulatory actions taken by the
primary financial regulatory agency are insufficient to
mitigate the risks identified in the resolution. If the FSOC
makes a proposed designation, it would be required to provide
an explanation of the specific risks to the financial stability
of the United States presented by the nonbank financial company
and a detailed explanation of why existing regulations are
insufficient. Following a proposed designation, the nonbank
financial company would be permitted to request a hearing
before the FSOC to contest its decision and present a
remediation plan to modify the company's business, structure,
or operations. If the FSOC approves the remediation plan, then
the FSOC would monitor implementation of the plan. If the FSOC
rejects the remediation plan, then the FSOC could vote to make
a final designation.
Section 113(d) currently requires the FSOC annually to
reevaluate each determination and rescind any determination if
at least 2/3rds of the voting members of the FSOC (including
the affirmative vote of the Treasury Secretary) determine that
the material financial distress of the nonbank financial
company could not pose a threat to the financial stability of
the United States. H.R. 1550 would amend this provision and
require the FSOC, in connection with its annual review, to
allow each designated company (i) an opportunity to submit
written materials to contest the determination, (ii) provide
each designated company an opportunity to meet with the FSOC,
and (iii) provide the designated company and its primary
financial regulatory agency with the reasons for the FSOC's
decision to maintain a designation. In addition, the FSOC would
be required at least every five years to conduct a reevaluation
of a determination and hold a vote on whether to rescind a
determination. In connection with this five-year review, the
company would be permitted to submit a remediation plan that
would explain how the company could modify its business,
structure, or operations. The FSOC would be required to
consider whether the plan, if implemented, would cause the
company to no longer pose a threat to the financial stability
of the United States.
H.R. 1550 would also require the FSOC to disclose in its
annual report the number of nonbank financial companies from
the previous year that were subject to preliminary analysis,
further review, and a proposed or final determination. The FSOC
would be required to publish information regarding its
methodology for calculating any quantitative thresholds or
other metrics used to identify nonbank financial companies for
analysis by the FSOC. In addition, the FSOC would be required
every five years to conduct a study of the FSOC's
determinations and comprehensively assess the impact of such
determinations, including whether such determinations are
having the intended result of improving the financial stability
of the United States.
In a letter of support for H.R. 1550 dated November 2,
2015, the Financial Services Roundtable wrote:
[H.R. 1550] would bring greater transparency to the
Financial Services Oversight Council (FSOC). The goal
of FSOC is to identify and mitigate systemic risk.
Asset managers are different than banks, however. The
standards for assessing their risk exposures should be
measured by risk-related activities and not simply the
amount of assets under management. H.R. 1550 will
improve accountability and transparency by requiring
FSOC to identify the reasons it believes a nonbank
entity should be declared a Systemically Important
Financial Institution (SIFI), and allow the entity the
opportunity to ``de-risk'' before being designated.
Importantly, the bill will also allow the nonbanks'
primary regulator to first address any identified
risks. This common-sense approach has strong bipartisan
support.
Hearings
The Committee on Financial Services' Subcommittee on
Financial Institutions held a hearing examining matters
relating to H.R. 1550 on July 8, 2015.
Committee Consideration
The Committee on Financial Services met in open session on
November 3, 2015 and November 4, 2015, and ordered H.R. 1550 to
be reported favorably to the House without amendment by a
recorded vote of 44 yeas to 12 nays (recorded vote no. FC-66),
a quorum being present.
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 without amendment. The
motion was agreed to by a recorded vote of 44 yeas to 12 nays
(Record vote no. FC-66), a quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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. will
promote accountability in the designation of systemically
important nonbank financial institutions for Federal Reserve
supervision and regulation by, among other things, reforming
the process leading to designation and requiring review of
whether such designations remain appropriate and are having
their intended effect of reducing risks to the U.S. financial
system.
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.
Committee Cost Estimate
The Committee adopts as its own 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, September 15, 2016.
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. 1550, the
Financial Stability Oversight Council Improvement Act of 2015.
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.
Enclosure.
H.R. 1550--Financial Stability Oversight Council Improvement Act of
2015
Summary: H.R. 1550 would require the Financial Stability
Oversight Council (FSOC) to change the procedures by which it
designates certain companies as systemically important
financial institutions (SIFIs). Those procedural changes would
apply only to SIFIs that are not banking institutions and would
affect the regulatory activities of other federal financial
regulators including the Board of Governors of the Federal
Reserve.
Based on information from FSOC and other federal financial
regulators, CBO estimates that enacting the legislation would
increase net direct spending by $73 million and increase
revenues by $22 million over the next 10 years, leading to a
net increase in the deficit of $51 million over the 2017-2026
period. Some of that cost would be recovered from financial
institutions in the years after 2026. Pay-as-you-go procedures
apply because enacting the legislation would affect direct
spending and revenues.
CBO estimates that enacting the legislation would not
increase net direct spending or on-budget deficits by more than
$5 billion in any of the four consecutive 10-year periods
beginning in 2027.
H.R. 1550 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA).
CBO expects that the federal financial regulators would
increase fees and other assessments to offset the costs of
implementing the bill. Doing so would increase the cost of an
existing private-sector mandate on entities required to pay
those assessments. Based on information from the federal
financial regulators, CBO estimates that the aggregate increase
in fees and assessments would fall well below the annual
threshold established in UMRA for private-sector mandates ($154
million in 2016, adjusted for inflation).
Estimated cost to the Federal Government: The estimated
budgetary effect of H.R. 1550 is shown in the following table.
The costs of this legislation fall within budget function 370
(commerce and housing credit).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-2021 2017-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
Administrative Costs to Financial Regulators to Review and 2 3 2 2 2 2 2 2 2 2 11 21
Designate Financial Institutionsa..........................
Additional Costs to resolve Non-Bank Financial Institutionsb 0 0 1 3 5 5 4 4 4 4 9 30
Total Increase in the Deficit........................... 2 3 3 5 7 7 6 6 6 6 20 51
Memorandum: Components of the Net Increase in the Deficit
INCREASES IN DIRECT SPENDING
Total Changes in Direct Spending:
Estimated Budget Authority.............................. 2 4 5 7 9 10 9 9 9 10 26 73
Estimated Outlays....................................... 2 4 5 7 9 10 9 9 9 10 26 73
INCREASES IN REVENUES
Total Changes in Revenues................................... 0 1 2 2 2 3 3 3 3 4 6 22
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
Notes: Amounts may not sum to totals because of rounding; FDIC = Federal Deposit Insurance Corporation.
aAdministrative costs to financial regulators include costs incurred by the Federal Deposit Insurance Corporation, the Financial Stability Oversight
Council, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Federal Reserve System. Costs to the Federal
Reserve System reduce remittances to the Treasury (which are recorded in the budget as revenues). Administrative costs to the financial regulators are
typically offset, over time, by assessments levied on financial industries.
bAdditional costs to resolve financial institutions under H.R. 1550 would be eventually offset, by increased assessments on federally insured depository
institutions. Some of those increases would occur after 2026.
Basis of estimate: The budgetary effects of the legislation
would stem from increased administrative costs to the federal
financial regulators and costs to resolve certain financial
institutions. CBO estimates that provisions in the bill that
would change the standards and procedures for designating
systemically important financial institutions would slightly
increase the probability of losses to the Federal Deposit
Insurance Corporation (FDIC) from resolving possible future
defaults by certain nonbank financial institutions. The FDIC
can eventually recover its costs for resolving those defaults
from assessments on the financial industry; however, CBO
estimates that such recoveries would occur over many years,
resulting in a small additional net increase in deficits over
the 2017-2026 period.
For this estimate, CBO assumes that the bill will be
enacted near the end of 2016 and that spending will follow
historical patterns.
Administrative costs to financial regulators to review and designate
financial institutions
Enacting H.R. 1550 would change the procedures and timeline
FSOC uses to designate nonbank financial institutions (such as
insurance companies) as SIFIs. Provisions in the bill would
increase the workload of FSOC and other financial regulators
that are charged with designating such firms as SIFIs. Based on
information from FSOC, CBO estimates that FSOC and the federal
financial regulators would need to hire an additional 20 to 30
people (with average salaries of around $200,000) to comply
with the requirements of the bill. About half of those staff
would be required to assist with implementing new requirements
associated with conducting annual reviews of nonbank financial
firms and about half would be required to assist with reviewing
and identifying firms that may be designated in the future. As
a result, CBO estimates that enacting the administrative
provisions of H.R. 1550, assuming a partial recovery of
administrative costs from private entities (some of which are
recorded as revenues in the budget), would increase budget
deficits by $21 million over the 2017-2026 period.
Additional costs to the FDIC to resolve non-bank financial institutions
Under current law, non-bank firms that are designated as
SIFIs are subject to enhanced prudential regulation by the
Board of Governors of the Federal Reserve. Those regulations
are designed to be similar to those imposed on banks, which
typically require SIFIs to undergo special stress tests,
develop resolution plans, and maintain certain levels of
liquidity and loss absorbing capacity. Based on information
from national credit rating agencies and from academic,
industry, and regulatory experts, CBO concludes that the added
capital and transparency that results from those enhanced
prudential regulations improve the safety and soundness of the
affected firms.\1\ On balance, CBO estimates that such
regulation lowers the FDIC's cost of resolving insolvent firms
through the Orderly Liquidation Fund by 2 percent to 3 percent,
primarily because those measures should result in shareholders
and other creditors absorbing a larger share of any losses in
the event of insolvency.
---------------------------------------------------------------------------
\1\See, for example, Standard and Poors, ``Dodd-Frank Five Years
Later: The Good, the Questionable, and the Unintended,'' July 1, 2015.
---------------------------------------------------------------------------
CBO expects that the revised standards and procedures in
H.R. 1550 could delay when some nonbank firms are designated as
SIFIs and may reduce the number of firms so designated. Under
current law, CBO estimates that enhanced prudential regulation
of nonbank SIFIs will reduce the net losses incurred by the
FDIC by about $150 million over the next 10 years. Based on
recent trends in the designation process, CBO estimates that
the amount of nonbank assets subject to enhanced regulation
would be about 20 percent smaller over the next ten years under
this bill, resulting in additional net costs totaling $30
million over the 2017-2026 period. Most of those losses would
be offset after 2026 by income to the FDIC from fees paid by
insured depository institutions and large financial firms.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1550, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON NOVEMBER 5, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2016-2021 2016-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go Impact....................... 0 2 3 3 5 7 7 6 6 6 6 20 51
Memorandum:
Changes in Outlays............................... 0 2 4 5 7 9 10 9 9 9 10 26 73
Changes in Revenues.............................. 0 0 1 2 2 2 3 3 3 3 4 6 22
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in long-term direct spending and deficits: CBO
estimates that enacting the legislation would not increase net
direct spending or on-budget deficits by more than $5 billion
in any of the four consecutive 10-year periods beginning in
2027.
Estimated impact on state, local, and tribal governments:
H.R. 1550 contains no intergovernmental mandates as defined in
UMRA and would impose no costs on state, local, or tribal
governments.
Estimated impact on the private sector: CBO expects that
the federal financial regulators would increase fees and
assessments to offset the costs of implementing the additional
regulatory activities required by the bill. Doing so would
increase the cost of an existing mandate on private entities
required to pay those assessments. Based on information from
the agencies, CBO estimates that incremental cost of the
mandate would amount to about $37 million over the 2017-2026
period and, in aggregate, would fall well below the annual
threshold established in UMRA for private-sector mandates ($154
million in 2016, adjusted annually for inflation).
Previous estimates: On July 29, 2015, CBO transmitted a
cost estimate for S. 1484, the Financial Regulatory Improvement
Act of 2015, as ordered reported by the Senate Committee on
Banking, Housing, and Urban Affairs on June 2, 2015. Title II
of that bill includes provisions that would modify the
processing for designating nonbank SIFIs. The specific
requirements in H.R. 1550 differ from those in S. 1484, but CBO
estimates that the net budgetary effect of the provisions in
the two bills would be similar.
Estimate prepared by: Federal Costs: Sarah Puro and
Kathleen Gramp; Revenues: Nathaniel Frentz; Impact on State,
Local, and Tribal Governments: J'nell Blanco Suchy; Impact on
the Private Sector: Logan Smith.
Estimate approved by: Theresa Gullo, Assistant Director for
Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
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
H.R. 1550 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Duplication of Federal Programs
Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015),
the Committee states that no provision of H.R. 1550 establishes
or reauthorizes a program of the Federal Government known to be
duplicative of another Federal program, a program that was
included in any report from the Government Accountability
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance.
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015),
the Committee states that H.R. 1550 contains no directed
rulemaking.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This Section cites H.R. 1550 as the ``Financial Stability
Oversight Council Improvement Act of 2015''.
Section 2. SIFI designation process
Amends section 113 of the Financial Stability Act of 2010
to require the FSOC to examine the impact on the U.S. financial
system of imposing heightened prudential standards by the
Federal Reserve in lieu of other regulation.
In addition, this section directs the FSOC to reevaluate,
both annually and periodically, final determinations of
systemic risk regarding a nonbank financial company under
supervision by the Federal Reserve. Where a reevaluation
determines that a nonbank financial company no longer poses a
threat to the financial stability of the United States,
affirmed by a vote of 2/3rds of the FSOC voting membership,
this bill directs FSOC to rescind the determination.
Further, this section prescribes procedural requirements
for proposed FSOC determinations and final decision-making,
including: written notification, opportunity to submit written
materials to FSOC as part of the initial evaluation,
opportunity to meet with the FSOC to discuss the analysis, and
disclosure of the public sources of information considered by
the FSOC as part of its analysis.
Finally, this section directs the FSOC every five years to
study: (1) the impact of its determinations to subject nonbank
financial companies to supervision by the Federal Reserve and
prudential standards, and (2) whether such determinations have
the intended result of improving domestic financial stability.
Section 3. Rule of construction
This section stipulates that this bill does not limit the
powers of the FSOC to implement their emergency powers under
section 113(f) of the Financial Stability 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):
SECTION 113 OF THE FINANCIAL STABILITY ACT OF 2010
SEC. 113. AUTHORITY TO REQUIRE SUPERVISION AND REGULATION OF CERTAIN
NONBANK FINANCIAL COMPANIES.
(a) U.S. Nonbank Financial Companies Supervised by the Board
of Governors.--
(1) Determination.--The Council, on a nondelegable
basis and by a vote of not fewer than \2/3\ of the
voting members then serving, including an affirmative
vote by the Chairperson, may determine that a U.S.
nonbank financial company shall be supervised by the
Board of Governors and shall be subject to prudential
standards, in accordance with this title, if the
Council determines that material financial distress at
the U.S. nonbank financial company, or the nature,
scope, size, scale, concentration, interconnectedness,
or mix of the activities of the U.S. nonbank financial
company, could pose a threat to the financial stability
of the United States.
(2) Considerations.--In making a determination under
paragraph (1), the Council shall consider--
(A) the extent of the leverage of the
company;
(B) the extent and nature of the off-balance-
sheet exposures of the company;
(C) the extent and nature of the transactions
and relationships of the company with other
significant nonbank financial companies and
significant bank holding companies;
(D) the importance of the company as a source
of credit for households, businesses, and State
and local governments and as a source of
liquidity for the United States financial
system;
(E) the importance of the company as a source
of credit for low-income, minority, or
underserved communities, and the impact that
the failure of such company would have on the
availability of credit in such communities;
(F) the extent to which assets are managed
rather than owned by the company, and the
extent to which ownership of assets under
management is diffuse;
(G) the nature, scope, size, scale,
concentration, interconnectedness, and mix of
the activities of the company;
(H) the degree to which the company is
already regulated by 1 or more primary
financial regulatory agencies;
(I) the amount and nature of the financial
assets of the company;
(J) the amount and types of the liabilities
of the company, including the degree of
reliance on short-term funding; [and]
(K) the appropriateness of the imposition of
prudential standards as opposed to other forms
of regulation to mitigate the identified risks;
and
[(K)] (L) any other risk-related factors that
the Council deems appropriate.
(b) Foreign Nonbank Financial Companies Supervised by the
Board of Governors.--
(1) Determination.--The Council, on a nondelegable
basis and by a vote of not fewer than \2/3\ of the
voting members then serving, including an affirmative
vote by the Chairperson, may determine that a foreign
nonbank financial company shall be supervised by the
Board of Governors and shall be subject to prudential
standards, in accordance with this title, if the
Council determines that material financial distress at
the foreign nonbank financial company, or the nature,
scope, size, scale, concentration, interconnectedness,
or mix of the activities of the foreign nonbank
financial company, could pose a threat to the financial
stability of the United States.
(2) Considerations.--In making a determination under
paragraph (1), the Council shall consider--
(A) the extent of the leverage of the
company;
(B) the extent and nature of the United
States related off-balance-sheet exposures of
the company;
(C) the extent and nature of the transactions
and relationships of the company with other
significant nonbank financial companies and
significant bank holding companies;
(D) the importance of the company as a source
of credit for United States households,
businesses, and State and local governments and
as a source of liquidity for the United States
financial system;
(E) the importance of the company as a source
of credit for low-income, minority, or
underserved communities in the United States,
and the impact that the failure of such company
would have on the availability of credit in
such communities;
(F) the extent to which assets are managed
rather than owned by the company and the extent
to which ownership of assets under management
is diffuse;
(G) the nature, scope, size, scale,
concentration, interconnectedness, and mix of
the activities of the company;
(H) the extent to which the company is
subject to prudential standards on a
consolidated basis in its home country that are
administered and enforced by a comparable
foreign supervisory authority;
(I) the amount and nature of the United
States financial assets of the company;
(J) the amount and nature of the liabilities
of the company used to fund activities and
operations in the United States, including the
degree of reliance on short-term funding; [and]
(K) the appropriateness of the imposition of
prudential standards as opposed to other forms
of regulation to mitigate the identified risks;
and
[(K)] (L) any other risk-related factors that
the Council deems appropriate.
(c) Antievasion.--
(1) Determinations.--In order to avoid evasion of
this title, the Council, on its own initiative or at
the request of the Board of Governors, may determine,
on a nondelegable basis and by a vote of not fewer than
\2/3\ of the voting members then serving, including an
affirmative vote by the Chairperson, that--
(A) material financial distress related to,
or the nature, scope, size, scale,
concentration, interconnectedness, or mix of,
the financial activities conducted directly or
indirectly by a company incorporated or
organized under the laws of the United States
or any State or the financial activities in the
United States of a company incorporated or
organized in a country other than the United
States would pose a threat to the financial
stability of the United States, based on
consideration of the factors in subsection
(a)(2) or (b)(2), as applicable;
(B) the company is organized or operates in
such a manner as to evade the application of
this title; and
(C) such financial activities of the company
shall be supervised by the Board of Governors
and subject to prudential standards in
accordance with this title, consistent with
paragraph (3).
(2) Report.--Upon making a determination under
paragraph (1), the Council shall submit a report to the
appropriate committees of Congress detailing the
reasons for making such determination.
(3) Consolidated supervision of only financial
activities; establishment of an intermediate holding
company.--
(A) Establishment of an intermediate holding
company.--Upon a determination under paragraph
(1), the company that is the subject of the
determination may establish an intermediate
holding company in which the financial
activities of such company and its subsidiaries
shall be conducted (other than the activities
described in section 167(b)(2)) in compliance
with any regulations or guidance provided by
the Board of Governors. Such intermediate
holding company shall be subject to the
supervision of the Board of Governors and to
prudential standards under this title as if the
intermediate holding company were a nonbank
financial company supervised by the Board of
Governors.
(B) Action of the board of governors.--To
facilitate the supervision of the financial
activities subject to the determination in
paragraph (1), the Board of Governors may
require a company to establish an intermediate
holding company, as provided for in section
167, which would be subject to the supervision
of the Board of Governors and to prudential
standards under this title, as if the
intermediate holding company were a nonbank
financial company supervised by the Board of
Governors.
(4) Notice and opportunity for hearing and final
determination; judicial review.--Subsections (d)
through (h) shall apply to determinations made by the
Council pursuant to paragraph (1) in the same manner as
such subsections apply to nonbank financial companies.
(5) Covered financial activities.--For purposes of
this subsection, the term ``financial activities''--
(A) means activities that are financial in
nature (as defined in section 4(k) of the Bank
Holding Company Act of 1956);
(B) includes the ownership or control of one
or more insured depository institutions; and
(C) does not include internal financial
activities conducted for the company or any
affiliate thereof, including internal treasury,
investment, and employee benefit functions.
(6) Only financial activities subject to prudential
supervision.--Nonfinancial activities of the company
shall not be subject to supervision by the Board of
Governors and prudential standards of the Board. For
purposes of this Act, the financial activities that are
the subject of the determination in paragraph (1) shall
be subject to the same requirements as a nonbank
financial company supervised by the Board of Governors.
Nothing in this paragraph shall prohibit or limit the
authority of the Board of Governors to apply prudential
standards under this title to the financial activities
that are subject to the determination in paragraph (1).
[(d) Reevaluation and Rescission.--The Council shall--
[(1) not less frequently than annually, reevaluate
each determination made under subsections (a) and (b)
with respect to such nonbank financial company
supervised by the Board of Governors; and
[(2) rescind any such determination, if the Council,
by a vote of not fewer than \2/3\ of the voting members
then serving, including an affirmative vote by the
Chairperson, determines that the nonbank financial
company no longer meets the standards under subsection
(a) or (b), as applicable.
[(e) Notice and Opportunity for Hearing and Final
Determination.--
[(1) In general.--The Council shall provide to a
nonbank financial company written notice of a proposed
determination of the Council, including an explanation
of the basis of the proposed determination of the
Council, that a nonbank financial company shall be
supervised by the Board of Governors and shall be
subject to prudential standards in accordance with this
title.
[(2) Hearing.--Not later than 30 days after the date
of receipt of any notice of a proposed determination
under paragraph (1), the nonbank financial company may
request, in writing, an opportunity for a written or
oral hearing before the Council to contest the proposed
determination. Upon receipt of a timely request, the
Council shall fix a time (not later than 30 days after
the date of receipt of the request) and place at which
such company may appear, personally or through counsel,
to submit written materials (or, at the sole discretion
of the Council, oral testimony and oral argument).
[(3) Final determination.--Not later than 60 days
after the date of a hearing under paragraph (2), the
Council shall notify the nonbank financial company of
the final determination of the Council, which shall
contain a statement of the basis for the decision of
the Council.
[(4) No hearing requested.--If a nonbank financial
company does not make a timely request for a hearing,
the Council shall notify the nonbank financial company,
in writing, of the final determination of the Council
under subsection (a) or (b), as applicable, not later
than 10 days after the date by which the company may
request a hearing under paragraph (2).]
(d) Reevaluation and Rescission.--
(1) Annual reevaluation.--Not less frequently than
annually, the Council shall reevaluate each
determination made under subsections (a) and (b) with
respect to a nonbank financial company supervised by
the Board of Governors and shall--
(A) provide written notice to the nonbank
financial company being reevaluated and afford
such company an opportunity to submit written
materials, within such time as the Council
determines to be appropriate (but which shall
be not less than 30 days after the date of
receipt by the company of such notice), to
contest the determination, including materials
concerning whether, in the company's view,
material financial distress at the company, or
the nature, scope, size, scale, concentration,
interconnectedness, or mix of the activities of
the company could pose a threat to the
financial stability of the United States;
(B) provide an opportunity for the nonbank
financial company to meet with the Council to
present the information described in
subparagraph (A); and
(C) if the Council does not rescind the
determination, provide notice to the nonbank
financial company, its primary financial
regulatory agency and the primary financial
regulatory agency of any of the company's
significant subsidiaries of the reasons for the
Council's decision, which notice shall address
with specificity how the Council assessed the
material factors presented by the company under
subparagraphs (A) and (B).
(2) Periodic reevaluation.--
(A) Review.--Every 5 years after the date of
a final determination with respect to a nonbank
financial company under subsection (a) or (b),
as applicable, the nonbank financial company
may submit a written request to the Council for
a reevaluation of such determination. Upon
receipt of such a request, the Council shall
conduct a reevaluation of such determination
and hold a vote on whether to rescind such
determination.
(B) Procedures.--Upon receipt of a written
request under paragraph (A), the Council shall
fix a time (not earlier than 30 days after the
date of receipt of the request) and place at
which such company may appear, personally or
through counsel, to--
(i) submit written materials (which
may include a plan to modify the
company's business, structure, or
operations, which shall specify the
length of the implementation period);
and
(ii) provide oral testimony and oral
argument before the members of the
Council.
(C) Treatment of plan.--If the company
submits a plan in accordance with subparagraph
(B)(i), the Council shall consider whether the
plan, if implemented, would cause the company
to no longer meet the standards for a final
determination under subsection (a) or (b), as
applicable. The Council shall provide the
nonbank financial company an opportunity to
revise the plan after consultation with the
Council.
(D) Explanation for certain companies.--With
respect to a reevaluation under this paragraph
where the determination being reevaluated was
made before the date of enactment of this
paragraph, the nonbank financial company may
require the Council, as part of such
reevaluation, to explain with specificity the
basis for such determination.
(3) Rescission of determination.--
(A) In general.--If the Council, by a vote of
not fewer than \2/3\ of the voting members then
serving, including an affirmative vote by the
Chairperson, determines under this subsection
that a nonbank financial company no longer
meets the standards for a final determination
under subsection (a) or (b), as applicable, the
Council shall rescind such determination.
(B) Approval of company plan.--Approval by
the Council of a plan submitted or revised in
accordance with paragraph (2) shall require a
vote of not fewer than \2/3\ of the voting
members then serving, including an affirmative
vote by the Chairperson. If such plan is
approved by the Council, the company shall
implement the plan during the period identified
in the plan, except that the Council, in its
sole discretion and upon request from the
company, may grant one or more extensions of
the implementation period. After the end of the
implementation period, including any extensions
granted by the Council, the Council shall
proceed to a vote as described under
subparagraph (A).
(e) Requirements for Proposed Determination, Notice and
Opportunity for Hearing, and Final Determination.--
(1) Notice of identification for initial evaluation
and opportunity for voluntary submission.--Upon
identifying a nonbank financial company for
comprehensive analysis of the potential for the nonbank
company to pose a threat to the financial stability of
the United States, the Council shall provide the
nonbank financial company with--
(A) written notice that explains with
specificity the basis for so identifying the
company, a copy of which shall be provided to
the company's primary financial regulatory
agency;
(B) an opportunity to submit written
materials for consideration by the Council as
part of the Council's initial evaluation of the
risk profile and characteristics of the
company;
(C) an opportunity to meet with the Council
to discuss the Council's analysis; and
(D) a list of the public sources of
information being considered by the Council as
part of such analysis.
(2) Requirements before making a proposed
determination.--Before making a proposed determination
with respect to a nonbank financial company under
paragraph (3), the Council shall--
(A) by a vote of not fewer than \2/3\ of the
voting members then serving, including an
affirmative vote by the Chairperson, approve a
resolution that identifies with specificity any
risks to the financial stability of the United
States the Council has identified relating to
the nonbank financial company;
(B) with respect to nonbank financial company
with a primary financial regulatory agency,
provide a copy of the resolution described
under subparagraph (A) to the primary financial
regulatory agency and provide such agency with
at least 180 days from the receipt of the
resolution to--
(i) consider the risks identified in
the resolution; and
(ii) provide a written response to
the Council that includes its
assessment of the risks identified and
the degree to which they are or could
be addressed by existing regulation
and, as appropriate, issue proposed
regulations or undertake other
regulatory action to mitigate the
identified risks;
(C) provide the nonbank financial company
with written notice that the Council--
(i) is considering whether to make a
proposed determination with respect to
the nonbank financial company under
subsection (a) or (b), as applicable,
which notice explains with specificity
the basis for the Council's
consideration, including any aspects of
the company's operations or activities
that are a primary focus for the
Council; or
(ii) has determined not to subject
the company to further review, which
action shall not preclude the Council
from issuing a notice to the company
under subparagraph (1)(A) at a future
time; and
(D) in the case of a notice to the nonbank
financial company under subparagraph (C)(i),
provide the company with--
(i) an opportunity to meet with the
Council to discuss the Council's
analysis;
(ii) an opportunity to submit written
materials, within such time as the
Council deems appropriate (but not less
than 30 days after the date of receipt
by the company of the notice described
under clause (i)), to the Council to
inform the Council's consideration of
the nonbank financial company for a
proposed determination, including
materials concerning the company's
views as to whether it satisfies the
standard for determination set forth in
subsection (a) or (b), as applicable;
(iii) an explanation of how any
request by the Council for information
from the nonbank financial company
relates to potential risks to the
financial stability of the United
States and the Council's analysis of
the company;
(iv) written notice when the Council
deems its evidentiary record regarding
such nonbank financial company to be
complete; and
(v) an opportunity to meet with the
members of the Council.
(3) Proposed determination.--
(A) Voting.--The Council may, by a vote of
not fewer than \2/3\ of the voting members then
serving, including an affirmative vote by the
Chairperson, propose to make a determination in
accordance with the provisions of subsection
(a) or (b), as applicable, with respect to a
nonbank financial company.
(B) Deadline for making a proposed
determination.--With respect to a nonbank
financial company provided with a written
notice under paragraph (2)(C)(i), if the
Council does not provide the company with the
written notice of a proposed determination
described under paragraph (4) within the 180-
day period following the date on which the
Council notifies the company under paragraph
(2)(C) that the evidentiary record is complete,
the Council may not make such a proposed
determination with respect to such company
unless the Council repeats the procedures
described under paragraph (2).
(C) Review of actions of primary financial
regulatory agency.--With respect to a nonbank
financial company with a primary financial
regulatory agency, the Council may not vote
under subparagraph (A) to make a proposed
determination unless--
(i) the Council first determines that
any proposed regulations or other
regulatory actions taken by the primary
financial regulatory agency after
receipt of the resolution described
under paragraph (2)(A) are insufficient
to mitigate the risks identified in the
resolution;
(ii) the primary financial regulatory
agency has notified the Council that
the agency has no proposed regulations
or other regulatory actions to mitigate
the risks identified in the resolution;
or
(iii) the period allowed by the
Council under paragraph (2)(B) has
elapsed and the primary financial
regulatory agency has taken no action
in response to the resolution.
(4) Notice of proposed determination.--The Council
shall--
(A) provide to a nonbank financial company
written notice of a proposed determination of
the Council, including an explanation of the
basis of the proposed determination of the
Council, that a nonbank financial company shall
be supervised by the Board of Governors and
shall be subject to prudential standards in
accordance with this title, an explanation of
the specific risks to the financial stability
of the United States presented by the nonbank
financial company, and a detailed explanation
of why existing regulations or other regulatory
action by the company's primary financial
regulatory agency, if any, is insufficient to
mitigate such risk; and
(B) provide the primary financial regulatory
agency of the nonbank financial company a copy
of the nonpublic written explanation of the
Council's proposed determination.
(5) Hearing.--
(A) In general.--Not later than 30 days after
the date of receipt of any notice of a proposed
determination under paragraph (4), the nonbank
financial company may request, in writing, an
opportunity for a written or oral hearing
before the Council to contest the proposed
determination, including the opportunity to
present a plan to modify the company's
business, structure, or operations in order to
mitigate the risks identified in the notice,
and which plan shall also include any steps the
company expects to take during the
implementation period to mitigate such risks.
(B) Grant of hearing.--Upon receipt of a
timely request, the Council shall fix a time
(not earlier than 30 days after the date of
receipt of the request) and place at which such
company may appear, personally or through
counsel, to--
(i) submit written materials (which
may include a plan to modify the
company's business, structure, or
operations); or
(ii) provide oral testimony and oral
argument to the members of the Council.
(6) Council consideration of company plan.--
(A) In general.--If a nonbank financial
company submits a plan in accordance with
paragraph (5), the Council shall, prior to
making a final determination--
(i) consider whether the plan, if
implemented, would mitigate the risks
identified in the notice under
paragraph (4); and
(ii) provide the nonbank financial
company an opportunity to revise the
plan after consultation with the
Council.
(B) Voting.--Approval by the Council of a
plan submitted under paragraph (5) or revised
under subparagraph (A)(ii) shall require a vote
of not fewer than \2/3\ of the voting members
then serving, including an affirmative vote by
the Chairperson.
(C) Implementation of approved plan.--With
respect to a nonbank financial company's plan
approved by the Council under subparagraph (B),
the company shall have one year to implement
the plan, except that the Council, in its sole
discretion and upon request from the nonbank
financial company, may grant one or more
extensions of the implementation period.
(D) Oversight of implementation.--
(i) Periodic reports.--The Council,
acting through the Office of Financial
Research, may require the submission of
periodic reports from a nonbank
financial company for the purpose of
evaluating the company's progress in
implementing a plan approved by the
Council under subparagraph (B).
(ii) Inspections.--The Council may
direct the primary financial regulatory
agency of a nonbank financial company
or its subsidiaries (or, if none, the
Board of Governors) to inspect the
company or its subsidiaries for the
purpose of evaluating the
implementation of the company's plan.
(E) Authority to rescind approval.--
(i) In general.--During the
implementation period described under
subparagraph (C), including any
extensions granted by the Council, the
Council shall retain the authority to
rescind its approval of the plan if the
Council finds, by a vote of not fewer
than \2/3\ of the voting members then
serving, including an affirmative vote
by the Chairperson, that the company's
implementation of the plan is no longer
sufficient to mitigate or prevent the
risks identified in the resolution
described under paragraph (2)(A).
(ii) Final determination vote.--The
Council may proceed to a vote on final
determination under subsection (a) or
(b), as applicable, not earlier than 10
days after providing the nonbank
financial company with written notice
that the Council has rescinded the
approval of the company's plan pursuant
to clause (i).
(F) Actions after implementation.--
(i) Evaluation of implementation.--
After the end of the implementation
period described under subparagraph
(C), including any extensions granted
by the Council, the Council shall
consider whether the plan, as
implemented by the nonbank financial
company, adequately mitigates or
prevents the risks identified in the
resolution described under paragraph
(2)(A).
(ii) Voting.--If, after performing an
evaluation under clause (i), not fewer
than \2/3\ of the voting members of the
Council then serving, including an
affirmative vote by the Chairperson,
determine that the plan, as
implemented, adequately mitigates or
prevents the identified risks, the
Council shall not make a final
determination under subsection (a) or
(b), as applicable, with respect to the
nonbank financial company and shall
notify the company of the Council's
decision to take no further action.
(7) Final council decisions.--
(A) In general.--Not later than 90 days after
the date of a hearing under paragraph (5), the
Council shall notify the nonbank financial
company of--
(i) a final determination under
subsection (a) or (b), as applicable;
(ii) the Council's approval of a plan
submitted by the nonbank financial
company under paragraph (5) or revised
under paragraph (6); or
(iii) the Council's decision to take
no further action with respect to the
nonbank financial company.
(B) Explanatory statement.--A final
determination of the Council, under subsection
(a) or (b), shall contain a statement of the
basis for the decision of the Council,
including the reasons why the Council rejected
any plan by the nonbank financial company
submitted under paragraph (5) or revised under
paragraph (6).
(C) Notice to primary financial regulatory
agency.--In the case of a final determination
under subsection (a) or (b), the Council shall
provide the primary financial regulatory agency
of the nonbank financial company a copy of the
nonpublic written explanation of the Council's
final determination.
(f) Emergency Exception.--
(1) In general.--The Council may waive or modify the
requirements of subsection (e) with respect to a
nonbank financial company, if the Council determines,
by a vote of not fewer than \2/3\ of the voting members
then serving, including an affirmative vote by the
Chairperson, that such waiver or modification is
necessary or appropriate to prevent or mitigate threats
posed by the nonbank financial company to the financial
stability of the United States.
(2) Notice.--The Council shall provide notice of a
waiver or modification under this subsection to the
nonbank financial company concerned as soon as
practicable, but not later than 24 hours after the
waiver or modification is granted.
(3) International coordination.--In making a
determination under paragraph (1), the Council shall
consult with the appropriate home country supervisor,
if any, of the foreign nonbank financial company that
is being considered for such a determination.
(4) Opportunity for hearing.--The Council shall allow
a nonbank financial company to request, in writing, an
opportunity for a written or oral hearing before the
Council to contest a waiver or modification under this
subsection, not later than 10 days after the date of
receipt of notice of the waiver or modification by the
company. Upon receipt of a timely request, the Council
shall fix a time (not later than 15 days after the date
of receipt of the request) and place at which the
nonbank financial company may appear, personally or
through counsel, to submit written materials (or, at
the sole discretion of the Council, oral testimony and
oral argument).
(5) Notice of final determination.--Not later than 30
days after the date of any hearing under paragraph (4),
the Council shall notify the subject nonbank financial
company of the final determination of the Council under
this subsection, which shall contain a statement of the
basis for the decision of the Council.
(g) Consultation.--The Council shall consult with the primary
financial regulatory agency, if any, for each nonbank financial
company or subsidiary of a nonbank financial company that is
being considered for supervision by the Board of Governors
under this section [before the Council makes any final
determination] from the outset of the Council's consideration
of the company, including before the Council makes any proposed
or final determination with respect to such nonbank financial
company under subsection (a), (b), or (c).
(h) Judicial Review.--If the Council makes a final
determination under this section with respect to a nonbank
financial company, such nonbank financial company may, not
later than 30 days after the date of receipt of the notice of
final determination under subsection (d)(2), (e)(3), or (f)(5),
bring an action in the United States district court for the
judicial district in which the home office of such nonbank
financial company is located, or in the United States District
Court for the District of Columbia, for an order requiring that
the final determination be rescinded, and the court shall, upon
review, dismiss such action or direct the final determination
to be rescinded. Review of such an action shall be limited to
whether the final determination made under this section was
arbitrary and capricious.
(i) International Coordination.--In exercising its duties
under this title with respect to foreign nonbank financial
companies, foreign-based bank holding companies, and cross-
border activities and markets, the Council shall consult with
appropriate foreign regulatory authorities, to the extent
appropriate.
(j) Public Disclosure Requirement.--The Council shall--
(1) in each case where a nonbank financial company
has been notified that it is subject to the Council's
review and the company has publicly disclosed such
fact, confirm that the nonbank financial company is
subject to the Council's review, in response to a
request from a third party;
(2) upon making a final determination, publicly
provide a written explanation of the basis for its
decision with sufficient detail to provide the public
with an understanding of the specific bases of the
Council's determination, including any assumptions
related thereof, subject to the requirements of section
112(d)(5);
(3) include, in the annual report required by section
112, the number of nonbank financial companies from the
previous year subject to preliminary analysis, further
review, and subject to a proposed or final
determination; and
(4) within 90 days after the enactment of this
subsection, publish information regarding its
methodology for calculating any quantitative thresholds
or other metrics used to identify nonbank financial
companies for analysis by the Council.
(k) Periodic Assessment of the Impact of Designations.--
(1) Assessment.--Every five years after the date of
enactment of this section, the Council shall--
(A) conduct a study of the Council's
determinations that nonbank financial companies
shall be supervised by the Board of Governors
and shall be subject to prudential standards;
and
(B) comprehensively assess the impact of such
determinations on the companies for which such
determinations were made and the wider economy,
including whether such determinations are
having the intended result of improving the
financial stability of the United States.
(2) Report.--Not later than 90 days after completing
a study required under paragraph (1), the Council shall
issue a report to the Congress that--
(A) describes all findings and conclusions
made by the Council in carrying out such study;
and
(B) identifies whether any of the Council's
determinations should be rescinded or whether
related regulations or regulatory guidance
should be modified, streamlined, expanded, or
repealed.
MINORITY VIEWS
H.R. 1550 represents yet another attempt to prevent the
Financial Stability Oversight Council (the Council) from doing
its congressionally-mandated job of preventing another
financial crisis by bogging it and its designation process down
in endless analysis and litigation. The Council is a regulatory
body created in the Dodd-Frank Wall Street Reform and Consumer
Protection Act for the purpose of identifying and responding to
risks to financial stability, as well as, eliminating
expectations the government will shield market participants
from losses. Congress specifically directed the Council to
determine whether a U.S. nonbank financial company should be
supervised by the Federal Reserve and subject to enhanced
prudential standards if the Council concludes that financial
distress at or the activities of the company would pose a
threat to U.S. financial stability.
While the Dodd-Frank Act contains guidelines for
identifying systemically important institutions and activities
(including the direction that the Council consider risks like
leverage, off-balance sheet exposures, transactions and
relationships with other financial companies, the impact of the
company as a creditor, assets and liabilities, current
regulation and supervision, and the company's financial
activities), Congress provided the Council with broad
discretion in designating an institution, but required certain
steps to ensure transparency and due process. For example,
after making a proposed designation, the Council submits a
report to the House Financial Services and Senate Banking
Committees detailing the reasons for making its designation and
provide notice and an explanation to the nonbank financial
company. The company is given 30 days after receipt of the
notice to contest FSOC's determination and an additional 30
days after a final determination to appeal the determination in
U.S. courts.
Pursuant to the Dodd-Frank Act, the Council established a
three-stage process for the designation of nonbank financial
companies. Earlier this year following months of evaluation and
engagement with financial companies, trade associations,
nonbank financial companies subject to previous Council
determinations, public interest groups, and Congressional
stakeholders, the Council adopted 17 changes and Supplemental
Procedures designed to promote transparency related to the
evaluation of nonbank financial companies. Generally, these
changes include: informing companies earlier in the process
that they are under review; providing the company with
additional opportunities to engage with and present information
to the Council, its staff and their regulator; and making more
information about Council designations public.
H.R. 1550, however, goes further merely codifying the
Council's changes, and instead more than doubles time it would
take for the Council to designate a company like American
International Group or AIG. Department of the Treasury
Secretary Jack Lew, the Chair of the Council, explained to the
Committee, ``A misleading case has been made that the Council
has overstepped in its effort to protect the financial system.
But in the five years since the Council was established, it has
identified only four nonbank financial companies whose material
financial distress could pose a threat to U.S. financial
stability.'' H.R. 1550 would take an already lengthy and
deliberative two-year process to more than four years. Such
delays would allow companies to avoid prudential measures
intended to mitigate threats to our economy for the benefit of
their own shareholders. Rather than merely codify the changes
made earlier this year, H.R. 1550 seeks to by statute provide
institutions that the markets likely conclude are ``too-big-to-
fail'' with a roadmap to challenge the Council's, as one
witness described, ``indefinitely.''
For these reasons, we oppose this bill.
Maxine Waters.
Wm. Lacy Clay.
Ruben Hinojosa.
Keith Ellison.
Al Green.