Text of H.R. 5714 (112th): Safe, Accountable, Fair, and Efficient Banking Act of 2012 (Introduced version)

1.

This Act may be cited as the Safe, Accountable, Fair, and Efficient Banking Act of 2012 or the SAFE Banking Act of 2012.

2.

(a)

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 of the Currency (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 tangible common equity means qualifying common stockholders’ equity plus retained earnings;

(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)

(1)

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)

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)

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

3.

(a)

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)

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)

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

.

(b)

Section 14 of the Bank Holding Company Act of 1956 (12 U.S.C. 1852) is amended—

(1)

in subsection (a), by striking paragraph (3) and inserting the following:

(3)

the term liabilities means—

(A)

with respect to a United States financial company—

(i)

the total assets of the financial company, including all off-balance-sheet assets, including financings of assets for which the issuer has more than minimal economic or reputational risks or rewards; less

(ii)

the total regulatory capital of the financial company;

(B)

with respect to a foreign-based financial company—

(i)

the total assets of the United States operations of the financial company, including all off-balance-sheet assets, including financings of assets for which the issuer has more than minimal economic or reputational risks or rewards of the financial company; less

(ii)

the total regulatory capital of the United States operations of the financial company; and

(C)

with respect to an insurance company or other nonbank financial company supervised by the Board, such assets of the company as the Board shall specify, by rule, in order to provide for consistent and equitable treatment of such companies.

; and

(2)

by striking subsections (b) through (e) and inserting the following:

(b)

A financial company may not hold more than 10 percent of the total consolidated liabilities of all financial companies.

(c)

The Board shall require any financial company having liabilities in violation of this section to sell or otherwise transfer liabilities to unaffiliated firms to bring the company into compliance with this section.

(d)

The Board shall issue regulations implementing this section, including the definition of terms, as necessary. The Board may issue interpretations or guidance regarding the application of this section to an individual financial company or to financial companies in general.

.

4.

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

5A.

(a)

(1)

(A)

No bank holding company with total consolidated assets equal to or greater than $50,000,000,000 or nonbank financial company supervised by the Board may maintain tangible common equity in an amount less than 10 percent of average total consolidated assets.

(B)

For purposes of this paragraph, average total consolidated assets shall include all off-balance-sheet assets, including financings of assets for which the issuer has more than minimal economic or reputational risks or rewards.

(2)

(A)

The Board may adjust the leverage ratio requirements provided in paragraph (1) 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 tangible common equity than provided in paragraph (1).

(B)

(i)

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)

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).

(3)

For bank holding companies with total consolidated assets equal to or greater than $50,000,000,000 and nonbank financial companies supervised by the Board, the Board may promulgate regulations establishing a leverage ratio, in a manner consistent with paragraph (1), for all operating subsidiaries that are not insured depository institutions.

(4)

(A)

The Board shall require any bank holding company with total consolidated assets equal to or greater than $50,000,000,000 or nonbank financial company supervised by the Board that is in violation of paragraph (1) to raise capital, sell or otherwise transfer assets, liabilities, 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 paragraph (1).

(B)

The Board shall, not later than 60 days after determining that a bank holding company or financial company is in violation of paragraph (1), 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)

(i)

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)

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)

(1)

(A)

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

(B)

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)

The computation of the limit under this paragraph shall take into account off-balance-sheet liabilities, including any liabilities used to finance assets for which the issuer has more than minimal economic or reputational risks or rewards.

(D)

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)

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)

(A)

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

(B)

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)

The computation of the limit under this paragraph shall take into account off-balance-sheet liabilities, including any liabilities used to finance assets for which the issuer has more than minimal economic or reputational risks or rewards.

(D)

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)

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)

(A)

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, liabilities 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)

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)

(i)

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)

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)

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

(5)

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

(6)

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);

(7)

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);

(8)

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

(9)

the term tangible common equity means qualifying common stockholders' equity plus retained earnings; 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.

(a)

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

(b)

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 concentration limit in section 14 of the Bank Holding Company 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;

(3)

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

(4)

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.