I 111th CONGRESS 1st Session H. R. 2897 IN THE HOUSE OF REPRESENTATIVES June 16, 2009 Mr. Gutierrez (for himself, Mr. Kanjorski, Mr. Capuano, Ms. Moore of Wisconsin, and Ms. Lee of California) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Federal Deposit Insurance Act to return a sense of fairness and accountability to the deposit insurance premium assessment process, and for other purposes.

1.

Short title

This Act may be cited as the Bank Accountability and Risk Assessment Act of 2009.

2.

Findings and purpose

(a)

Findings

Congress makes the following findings: (1)The unprecedented Government intervention into the financial markets in 2008 was required by a threat to our Nation's economy from large, complex, and deeply inter-connected financial institutions, many of which were on the verge of failing. (2)The necessary Government intervention in the financial system placed hundreds of billions of taxpayer dollars at risk. (3)Many of the financial institutions involved in the crisis were so large and their dealings so intertwined that their failures could have led to the collapse of America's financial system. (4)The scale of the banking system crisis put severe strains on the Deposit Insurance Fund of the Federal Deposit Insurance Corporation. (5)The depository institutions that present a systemic risk to the financial system would overwhelm the resources of the Deposit Insurance Fund if one or more of them were to fail. (6)Without a substantial increase in the Deposit Insurance Fund, depository institutions that are deemed too-big-to-fail will remain potential threats to the health of the entire financial system and possibly place U.S. taxpayer dollars at risk. (7)It is inherently unfair to require the financial institutions that are too small to be systemic risks, or that do not become involved in the most risky, questionable, and harmful financial practices, to share the financial responsibility for the failures of these too-big-to-fail institutions. (8)Large depository institutions whose failure may threaten the safety and soundness of the entire financial system should be assessed premiums based on their potential risk to the system, not just on the deposits they hold. (9)The Deposit Insurance Fund should be insulated against potential financial crises, the financial institutions that cause a crisis in the future must be held accountable, and U.S. taxpayer dollars should not be placed at risk. (b)

Purpose

The purpose of this Act is to maintain the safety and soundness of the U.S. banking system by ensuring that the Federal Deposit Insurance Corporations' Deposit Insurance Fund is adequately capitalized to respond to the failures of large depository institutions that would otherwise threaten our financial system and to return a sense of fairness and accountability to the deposit insurance premium assessment process.

3.

Accounting for actual risk to the Deposit Insurance Fund

(a)Section 7(b)(1)(C) of the Federal Deposit Insurance Act is amended to read as follows: (C)

Risk-based assessment system defined

For purposes of this paragraph, the term risk-based assessment system means a system for calculating a depository institution's assessment based on— (i)the probability that the Deposit Insurance Fund will incur a loss with respect to the institution; (ii)the likely amount of any such loss; (iii)the risks to the Deposit Insurance Fund attributable to such depository institution and its affiliates, taking into account— (I)the amount, different categories, and concentrations of assets of the insured depository institution and its affiliates, including both on-balance sheet and off-balance sheet assets; (II)the amount, different categories, and concentrations of liabilities, both insured and uninsured, contingent and noncontingent, including both on-balance sheet and off-balance sheet liabilities, of the insured depository institution and its affiliates; and (III)any other factors the Corporation determines are relevant to assessing the risks; and (iv)the revenue needs of the Deposit Insurance Fund. . (b)Section 7(b)(1) of the Federal Deposit Insurance Act is further amended by redesignating subparagraphs (E) and (F) as subparagraphs (F) and (G), respectively, and by adding the following new subparagraph (E): (E)

Systemic risk premium

(i)In addition to any annual assessment imposed under paragraph (2) or special assessment imposed under paragraph (5), the Board of Directors shall impose a systemic risk assessment, at least annually, on all systemically important depository institutions. For purposes of the subparagraph, systemically important depository institution shall mean an insured depository institution that is designated as systemically important by the Corporation, in consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System, or that is an affiliate of a depository institution holding company or, in the case of an industrial loan company, controlling parent company designated as systemically important by the Corporation, in consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System. (ii)In designating an insured depository institution, depository institution holding company, or controlling parent company as systemically important, the Corporation shall take into account: (I)the amount, different categories, and concentrations of assets of the entity and its affiliates, including both on-balance sheet and off-balance sheet assets; (II)the amount, different categories, and concentrations of liabilities, both insured and uninsured, contingent and noncontingent, including both on-balance sheet and off-balance sheet liabilities, of the entity and its affiliates; (III)the activities of the entity and its affiliates; (IV)the relevant market share of the entity and its affiliates; and (V)the potential adverse effects on economic conditions and financial stability, in the event any of the grounds in (c)(5) were to exist with respect to such entity. . (c)Section 7(b)(2) of the Federal Deposit Insurance Act is amended by striking paragraph (D) and by redesignating subparagraph (C) as subparagraph (D).

4.

Creating a risk-focused assessment base

Section 7(b)(2), as amended, is further amended by adding the following new subparagraph (C): (C)

Assessment base

The assessment of any insured depository institution imposed under this subsection shall be an amount equal to the product of— (i)an assessment rate established by the Corporation; and (ii)the amount of the insured depository institution's average total assets during the assessment period minus the amount of the insured depository institution's average tangible equity during the assesssment period. .