S. 3241 (111th): Safe, Accountable, Fair, and Efficient Banking Act of 2010

111th Congress, 2009–2010. Text as of Apr 21, 2010 (Introduced).

Status & Summary | PDF | Source: GPO

II

111th CONGRESS

2d Session

S. 3241

IN THE SENATE OF THE UNITED STATES

April 21, 2010

(for himself, Mr. Kaufman, Mr. Casey, Mr. Merkley, Mr. Whitehouse, and Mr. Harkin) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To provide for a safe, accountable, fair, and efficient banking system, and for other purposes.

1.

Short title

This Act may be cited as the Safe, Accountable, Fair, and Efficient Banking Act of 2010 or the SAFE Banking Act of 2010.

2.

Definitions

(a)

In general

As used in this Act—

(1)

the term appropriate Federal regulator means—

(A)

the Board of Governors of the Federal Reserve System (in this Act referred to as the Board);

(B)

the Comptroller General of the United States (in this Act referred to as the Comptroller); or

(C)

the Federal Deposit Insurance Corporation (in this Act referred to as the Corporation);

(2)

the term average total consolidated assets has the same meaning as in part 225 of title 12, Code of Federal Regulations, as in effect on the date of enactment of this Act, or any successor thereto;

(3)

the term FDIC-assessed deposits means the assessment base, as computed under part 327 of title 12, Code of Federal Regulations, as in effect on the date of enactment of this Act, or any successor thereto;

(4)

the term financial company means any nonbank financial company that is supervised by the Board;

(5)

the term liabilities equals a financial company’s total assets less tier 1 capital;

(6)

the term nondeposit liabilities means the total assets of a bank holding company, less tier 1 capital, less FDIC-assessed deposits; and

(7)

the term tier 1 capital has the same meaning as in part 225 of title 12, Code of Federal Regulations, as in effect on the date of enactment of this Act, or any successor thereto.

(b)

Nonbank financial company definitions

(1)

Foreign nonbank financial company

The term foreign nonbank financial company means a company (other than a company that is, or is treated in the United States, as a bank holding company or a subsidiary thereof) that is—

(A)

incorporated or organized in a country other than the United States; and

(B)

substantially engaged in, including through a branch in the United States, activities in the United States that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956).

(2)

U.S. nonbank financial company

The term U.S. nonbank financial company means a company (other than a bank holding company or a subsidiary thereof) that is—

(A)

incorporated or organized under the laws of the United States or any State; and

(B)

substantially engaged in activities in the United States that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956).

(3)

Nonbank financial company

The term nonbank financial company means a U.S. nonbank financial company and a foreign nonbank financial company.

3.

Deposit concentration limit

Section 3(d) of the Bank Holding Company Act of 1956 (12 U.S.C. 1842(d)) is amended—

(1)

in paragraph (2), by striking subparagraph (A) and inserting the following:

(A)

Nationwide concentration limits

No bank holding company may hold more than 10 percent of the total amount of deposits of insured depository institutions in the United States.

; and

(2)

by striking paragraph (5) and inserting the following:

(5)

Enforced compliance

The Board shall require any bank holding company having a deposit concentration in violation of this subsection to sell or otherwise transfer assets to unaffiliated firms to bring the company into compliance with this subsection.

.

4.

Leverage ratio and size requirements for bank holding companies

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended by inserting after section 5 the following:

5A.

Limits on leverage and size

(a)

Leverage ratio requirements for bank holding companies and financial companies

(1)

Leverage ratio

No bank holding company or financial company may maintain tier 1 capital in an amount equal to less than 6 percent of average total consolidated assets.

(2)

Balance sheet leverage ratio

No bank holding company or financial company may maintain less than 6 percent of tier 1 capital for all outstanding balance sheet liabilities, as determined under section 13(m) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(m)).

(3)

Exemptions

(A)

In general

The Board may adjust the leverage ratio requirements provided in paragraph (1) or (2), for any class of institutions, based upon the size or activity of such class of institutions. No adjustment made under this subparagraph may allow an institution to carry less capital than provided in paragraph (1) or (2).

(B)

Adjustments

Consistent with this subsection, the Board may adjust, by rule, the definitions of the terms leverage ratio and balance sheet leverage ratio to harmonize such ratios with official international agreements regarding capital standards, only if the Board determines that the international capital standards are commensurate with the credit, market, operational, or other risks posed by the bank holding companies or financial companies to which the international agreements regarding capital standards apply.

(C)

Authority of other regulators

(i)

In general

The appropriate Federal regulator may, in a manner consistent with this subsection, grant any bank holding company an emergency temporary exemption from the ratio requirements provided in paragraph (1) or (2), where necessary to prevent an imminent threat to the financial stability of the United States.

(ii)

Publication required

Any exemption granted under this subparagraph shall be published in the Federal Register within a reasonable period after the date on which such exemption is granted, not to exceed 90 days, and such publication shall provide—

(I)

the name of the bank holding company or financial company being granted an exemption;

(II)

the reason for the exemption; and

(III)

the plan of the appropriate Federal regulator detailing the manner by which the bank holding company shall be brought into compliance with paragraphs (1) and (2).

(4)

Leverage ratio requirements for operating subsidiaries of bank holding companies and financial companies

Notwithstanding any other provision of law applicable to insured depository institutions, the Board shall, within 1 year of the date of enactment of the SAFE Banking Act of 2010, promulgate regulations establishing a leverage ratio and a balance sheet leverage ratio, in a manner consistent with paragraphs (1) and (2), for all operating subsidiaries of bank holding companies and financial companies.

(5)

Prompt corrective action

(A)

Authorities

The Board shall require any bank holding company or financial company that is in violation of paragraph (1) or (2) to raise capital, sell or otherwise transfer assets or off-balance sheet items to unaffiliated firms, or impose conditions on the manner in which the bank holding company conducts 1 or more activities to bring the company into compliance with paragraphs (1) and (2).

(B)

Corrective action plan

The Board shall, not later than 60 days after determining that a bank holding company or financial company is in violation of paragraph (1) or (2), present to the members of the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a plan detailing the manner by which the bank holding company or financial company shall be brought into compliance with the applicable provision of law.

(C)

Reports to Congress

(i)

Written reports

The Board shall provide to the members of the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives periodic reports for each 60-day period during which a corrective action plan required by subparagraph (B) has not been fulfilled.

(ii)

Testimony

The Board shall provide testimony to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives for each 90-day period that a corrective action plan required by subparagraph (B) has not been fulfilled.

(b)

Limits on nondeposit liabilities for bank holding companies and financial companies

(1)

Bank holding companies

(A)

Limit on nondeposit liabilities for bank holding companies

No bank holding company may possess nondeposit liabilities exceeding 2 percent of the annual gross domestic product of the United States.

(B)

Determination of gross domestic product

The annual gross domestic product of the United States shall be determined for purposes of subparagraph (A) using the average of such product over the 16 calendar quarters, as calculated by the Bureau of Economic Analysis of the Department of Commerce, most recently completed as of the time of the determination.

(C)

Off-balance-sheet liabilities

The computation of the limit under this paragraph shall take into account off-balance-sheet liabilities.

(D)

Treatment of insurance companies

Notwithstanding the liability limit established in this section, the Board may set a separate liability limit with respect to certain bank holding companies primarily engaged in the business of insurance, as the Board deems necessary in order to provide for consistent and equitable treatment of such institutions. In establishing such separate liability limits for insurance companies, for any insurance company with any subsidiary regulated by a State insurance regulator, the Board shall consult the appropriate State insurance regulator.

(E)

Treatment of foreign deposits

Notwithstanding the definition of the term nondeposit liabilities established in this section, the Board may exclude from its calculation of nondeposit liabilities any foreign and other deposits not covered by the definition of the term FDIC-assessed deposits, if the Board deems such action necessary to ensure the consistent and equitable treatment of institutions with international operations.

(2)

Financial companies

(A)

Limit on nondeposit liabilities for financial companies

No financial company may possess nondeposit liabilities exceeding 3 percent of the annual gross domestic product of the United States.

(B)

Determination of gross domestic product

The annual gross domestic product of the United States shall be determined for purposes of subparagraph (A) using the average of such product over the 16 calendar quarters, as calculated by the Bureau of Economic Analysis of the Department of Commerce, most recently completed as of the time of the determination.

(C)

Off-balance-sheet liabilities

The computation of the limit under this paragraph shall take into account off-balance-sheet liabilities.

(D)

Treatment of insurance companies

Notwithstanding the liability limit established by this paragraph, the Board may set a separate liability limit with respect to insurance companies or other financial companies, as the Board determines necessary in order to provide for consistent and equitable treatment of such institutions. In establishing such separate liability limits for insurance companies, for any insurance company with any subsidiary regulated by a State insurance regulator, the Board shall consult with the appropriate State insurance regulator.

(E)

Treatment of foreign deposits

Notwithstanding the definition of the term nondeposit liabilities established in this section, the Board may exclude from its calculation of nondeposit liabilities any foreign and other deposits not covered by the definition of the term FDIC-assessed deposits, if the Board deems such action necessary to ensure the consistent and equitable treatment of institutions with international operations.

(3)

Prompt corrective action

(A)

Authorities

The Board shall require any bank holding company or financial company that is in violation of a provision of paragraph (1) or (2), as applicable, to sell or otherwise transfer assets or off-balance-sheet items to unaffiliated firms, to terminate 1 or more activities, or to impose conditions on the manner in which the bank holding company or financial company conducts 1 or more activities to bring the company into compliance with paragraphs (1) or (2), as applicable.

(B)

Corrective action plan

The Board shall, not later than 60 days after determining that a bank holding company or financial company is in violation of paragraph (1) or (2), present to the members of the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a plan detailing the manner by which the bank holding company or financial company shall be brought into compliance with the applicable provision.

(C)

Reports to Congress

(i)

Written reports

The Board shall provide to the members of the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives periodic reports for each 60-day period during which a corrective action plan required by subparagraph (B) has not been fulfilled.

(ii)

Testimony

The Board shall provide testimony to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives for each 120-day period during which a corrective action plan required by subparagraph (B) has not been fulfilled.

(c)

Definitions

As used in this section—

(1)

the term appropriate Federal regulator means—

(A)

the Board of Governors of the Federal Reserve System (in this Act referred to as the Board);

(B)

the Comptroller General of the United States (in this Act referred to as the Comptroller); or

(C)

the Federal Deposit Insurance Corporation (in this Act referred to as the Corporation);

(2)

the term average total consolidated assets has the same meaning as in part 225 of title 12, Code of Federal Regulations, as in effect on the date of enactment of this Act, or any successor thereto;

(3)

the term FDIC-assessed deposits means the assessment base, as computed under part 327 of title 12, Code of Federal Regulations, as in effect on the date of enactment of this Act, or any successor thereto;

(4)

the term financial company means any nonbank financial company that is supervised by the Board;

(5)

the term liabilities equals a financial company’s total assets less tier 1 capital;

(6)

the term nondeposit liabilities means the total assets of a bank holding company, less tier 1 capital, less FDIC-assessed deposits;

(7)

the term foreign nonbank financial company means a company (other than a company that is, or is treated in the United States, as a bank holding company or a subsidiary thereof) that is—

(A)

incorporated or organized in a country other than the United States; and

(B)

substantially engaged in, including through a branch in the United States, activities in the United States that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956);

(8)

the term U.S. nonbank financial company means a company (other than a bank holding company or a subsidiary thereof) that is—

(A)

incorporated or organized under the laws of the United States or any State; and

(B)

substantially engaged in activities in the United States that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956);

(9)

the term nonbank financial company means a U.S. nonbank financial company and a foreign nonbank financial company; and

(10)

the term tier 1 capital has the same meaning as in part 225 of title 12, Code of Federal Regulations, as in effect on the date of enactment of this section, or any successor thereto.

.

5.

Capital Assessment Program

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended by inserting after section 7 the following new section:

7A.

Capital Assessment Program

(a)

Annual assessments

Beginning 1 year after the date of enactment of the SAFE Banking Act of 2010, and annually thereafter, the Board shall conduct a capital assessment to estimate losses, revenues, and reserve needs for bank holding companies and financial companies.

(b)

Reports

The Board shall provide a report on the results of the capital assessment program under this section to the Secretary, the members of the Committee on Banking, Housing, and Urban Affairs of the Senate, and the members of the Committee on Financial Services of the House of Representatives.

.

6.

Amendment to the Securities and Exchange Act

Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end the following new subsection:

(m)

Standard balance sheet calculation for reports

(1)

Establishment of standard balance sheet reporting

Not later than 1 year after the date of enactment of the SAFE Banking Act of 2010, the Commission, or a standard setter designated by and under the oversight of the Commission, shall issue a rule requiring that each issuer of securities required to file reports under this section record all of its assets and liabilities on its balance sheets. The recorded amount of assets and liabilities shall reflect a reasonable assessment by the issuer of the most likely outcomes, given currently available information. Such issuers shall record all financings of assets for which the issuer has more than minimal economic risks or rewards.

(2)

Exclusion for indeterminate liabilities

If an issuer required to file reports under this section cannot determine the amount of a particular liability, for purposes of paragraph (1), such issuer may exclude that liability from its balance sheet only if it discloses an explanation of—

(A)

the nature of the liability and purpose for incurring it;

(B)

the most likely and maximum loss that the issuer could incur from the liability;

(C)

whether there is any recourse to the issuer by another party and, if so, under what conditions such recourse could occur; and

(D)

whether the issuer has any continuing involvement with an asset financed by the liability or any beneficial interest therein.

(3)

Rulemaking

The Commission shall promulgate rules to ensure compliance with this subsection, including enforcement by the Commission and civil liability under the Securities Act of 1933 and this title.

.

7.

Effective date

(a)

In general

This Act and the amendments made by this Act shall take effect upon the date of enactment of this Act.

(b)

Allowance for bank holding companies and financial companies not in compliance at date of enactment

Any institution that is in violation of—

(1)

the deposit concentration limit in section 3(d)(2)(A) of the Bank Holding Act of 1956, as amended by this Act, as of the date of enactment of this Act, shall bring itself into compliance with that limit not later than 1 year after the date of enactment of this Act;

(2)

the leverage ratios in section 5A of the Bank Holding Act of 1956, as amended by this Act, as of the date of enactment of this Act, shall bring itself into compliance with those ratios, not later than 1 year after the date of enactment of this Act; and

(3)

the limits on nondeposit liabilities in section 7A of the Bank Holding Company Act of 1956, as added by this Act, as of the date of enactment of this Act, shall bring itself into compliance with those limits, not later than 3 years after the date of enactment of this Act.