[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 798 Introduced in Senate (IS)]

113th CONGRESS
  1st Session
                                 S. 798

To address equity capital requirements for financial institutions, bank 
    holding companies, subsidiaries, and affiliates, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 24, 2013

    Mr. Brown (for himself, Mr. Vitter, Mr. Kirk, and Mr. Sessions) 
introduced the following bill; which was read twice and referred to the 
            Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
To address equity capital requirements for financial institutions, bank 
    holding companies, subsidiaries, and affiliates, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Terminating Bailouts for Taxpayer 
Fairness Act of 2013'' or the ``TBTF Act''.

SEC. 2. DEFINITIONS.

    (a) In General.--As used in this Act--
            (1) the terms ``affiliate'', ``appropriate Federal banking 
        agency'', ``Federal banking agency'', ``foreign bank'', and 
        ``insured depository institution'' have the same meanings as in 
        section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
        1813);
            (2) the terms ``bank holding company'' and ``subsidiary'' 
        have the same meanings as in section 2 of the Bank Holding 
        Company Act of 1956 (12 U.S.C. 1841);
            (3) the term ``Board'' means the Board of Governors of the 
        Federal Reserve System;
            (4) the term ``Corporation'' means the Federal Deposit 
        Insurance Corporation;
            (5) the term ``financial institution'' means an insured 
        depository institution, bank holding company, a savings and 
        loan holding company, and a foreign bank subject to the Bank 
        Holding Company Act of 1956;
            (6) the term ``nonbank financial company'' has the same 
        meaning as in the Dodd-Frank Wall Street Reform and Consumer 
        Protection Act (12 U.S.C. 5311); and
            (7) the term ``savings and loan holding company'' has the 
        same meaning as in section 10 of the Home Owners' Loan Act (10 
        U.S.C. 1467a), except that such term does not include any 
        savings and loan holding company described in section 
        10(c)(9)(C) of the Home Owners' Loan Act (12 U.S.C. 
        1467a(c)(9)(C)).

SEC. 3. EQUITY CAPITAL REQUIREMENTS.

    (a) Equity Capital Requirements for Bank Holding Companies, 
Subsidiaries, and Affiliates.--
            (1) Equity capital requirements.--
                    (A) In general.--Not later than 1 year after the 
                date of enactment of this Act, the appropriate Federal 
                banking agency, in consultation with the other Federal 
                banking agencies, shall, by rule, establish capital 
                requirements for the ratio of equity capital to total 
                consolidated assets for all financial institutions.
                    (B) Limitations.--
                            (i) In general.--In no case may the 
                        requirements issued under this subsection 
                        require any financial institution with more 
                        than $50,000,000,000 in total consolidated 
                        assets to have a ratio of less than 8 percent 
                        of equity capital to total consolidated assets.
                            (ii) Comparability.--The equity capital 
                        requirement issued under this subsection for 
                        any financial institution with $50,000,000,000 
                        or less in total consolidated assets shall be 
                        comparable to the requirements established by 
                        the appropriate Federal banking agencies under 
                        the prompt corrective actions regulations 
                        implementing section 38 of the Federal Deposit 
                        Insurance Act (12 U.S.C. 1831o) and under the 
                        capital adequacy regulations implementing 
                        section 5 of the Bank Holding Company Act of 
                        1956 (12 U.S.C. 1844), that were in effect as 
                        of May 1, 2013.
            (2) Capital surcharge for the largest financial 
        institutions.--
                    (A) Study required.--
                            (i) In general.--The Corporation shall 
                        study historical equity capital ratios chosen 
                        by large depository institutions before the 
                        advent of the Federal Reserve System, Federal 
                        deposit insurance, and the Federal income tax 
                        encouraged depositories to favor more highly 
                        leveraged deposit and debt funding.
                            (ii) Report to congress.--Not later than 90 
                        days after the date of enactment of this Act, 
                        the Corporation shall issue a report to the 
                        Committee on Banking, Housing, and Urban 
                        Affairs of the Senate and the Committee on 
                        Financial Services of the House of 
                        Representatives regarding the study conducted 
                        under clause (i).
                            (iii) Incorporation of findings.--The 
                        Corporation, in consultation with the other 
                        Federal banking agencies, shall structure the 
                        capital surcharge for financial institutions 
                        with at least $500,000,000,000 in total 
                        consolidated assets, such that the surcharge 
                        fully accounts for and offsets any distortion 
                        of capital levels by the Government policies 
                        described in clause (i).
                    (B) Rules.--Not later than 1 year after the date of 
                completion of the study required by subparagraph (A), 
                the appropriate Federal banking agency, in consultation 
                with the other Federal banking agencies, shall, by 
                rule, establish equity capital surcharges for each 
                financial institution having at least $500,000,000,000 
                in total consolidated assets.
                    (C) Increases authorized.--Capital requirements 
                established under this paragraph may increase 
                continuously as a percentage of total consolidated 
                assets as the total consolidated assets of a financial 
                institution increase.
                    (D) Required amount.--The surcharge imposed under 
                the rules issued under this paragraph shall require any 
                financial institution having at least $500,000,000,000 
                in total consolidated assets to have a ratio of not 
                less than 15 percent of equity capital to total 
                consolidated assets.
                    (E) Anti-evasion.--
                            (i) In general.--Any attempt by a financial 
                        institution to structure any activity, 
                        transaction, or affiliation for the purpose or 
                        effect of evading or attempting to evade the 
                        asset threshold that gives rise to the 
                        surcharge provided in subparagraph (A) shall be 
                        considered a violation of the Federal Deposit 
                        Insurance Act, section 24 of the Revised 
                        Statutes of the United States, and the Bank 
                        Holding Company Act of 1956, as applicable to 
                        such financial institution.
                            (ii) Restricting activities.--
                        Notwithstanding any other provision of law, if 
                        the Board, the Corporation, or the Comptroller 
                        of the Currency has reasonable cause to believe 
                        that a financial institution or any affiliate 
                        thereof has engaged in an activity, 
                        transaction, or affiliation in a manner that 
                        functions as an evasion of the asset threshold 
                        that gives rise to the surcharge provided in 
                        subparagraph (A) or otherwise violates such 
                        provision, the appropriate Federal banking 
                        agency shall order, after due notice and 
                        opportunity for hearing, the financial 
                        institution to restrict, restructure, or divest 
                        the offending activities, transactions, or 
                        investments.
            (3) Effective date.--The equity capital and surcharge rules 
        issued under paragraphs (1) and (2) shall apply with respect to 
        each financial institution not later than 5 years after the 
        date on which final rules are published in the Federal Register 
        with respect to that financial institution.
            (4) Well-capitalized status.--
                    (A) Compliance with other provisions.--Any 
                financial institution that meets the equity capital 
                requirements established under paragraph (1) or 
                surcharge requirements established under paragraph (2) 
                shall be considered well capitalized for purposes of--
                            (i) section 38 of the Federal Deposit 
                        Insurance Act (12 U.S.C. 1831o); and
                            (ii) the early remediation requirements 
                        established pursuant to section 166 of the 
                        Dodd-Frank Wall Street Reform and Consumer 
                        Protection Act (12 U.S.C. 5366).
                    (B) Agency actions.--Consistent with this section, 
                the appropriate Federal banking agency, in consultation 
                with the other Federal banking agencies, shall, by 
                regulation, establish the appropriate capital 
                categories for financial institutions under section 38 
                of the Federal Deposit Insurance Act (12 U.S.C. 1831o) 
                and early remediation requirements established pursuant 
                to section 166 of the Dodd-Frank Wall Street Reform and 
                Consumer Protection Act (12 U.S.C. 5366).
            (5) Enhanced prudential standards.--The equity capital and 
        surcharge rules issued under paragraphs (1) and (2) shall be 
        considered sufficient to satisfy the risk-based capital 
        requirements and leverage limits for purposes of section 165 of 
        the Dodd-Frank Wall Street Reform and Consumer Protection Act 
        (12 U.S.C. 5365).
    (b) Equity Capital Requirements for Affiliates and Subsidiaries of 
Bank Holding Companies.--
            (1) In general.--Not later than 1 year after the date of 
        enactment of this Act, notwithstanding any other provision of 
        law applicable to insured depository institutions, the Board 
        (subject to section 5(c)(3) of the Bank Holding Company Act of 
        1956 (12 U.S.C. 1844(c)(3)) and section 10(g) of the Home 
        Owners' Loan Act (12 U.S.C. 1467a(g))), the Corporation, and 
        the Comptroller of the Currency shall each promulgate 
        regulations to establish capital requirements for each 
        affiliate and subsidiary of a financial institution that are no 
        less stringent than the equity capital requirements established 
        under subsection (a)(1) or surcharge requirements established 
        under subsection (a)(2).
            (2) Limitation.--Paragraph (1) and the regulations issued 
        under paragraph (1) do not apply in the case of any financial 
        institution with less than $50,000,000,000 in total 
        consolidated assets.
            (3) Amendment to bank holding company act of 1956.--Section 
        5(c)(5)(B) of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1844(c)(5)(B)) is amended--
                    (A) by striking clauses (i) and (v);
                    (B) in clause (iv), by striking ``; or'' and 
                inserting a period;
                    (C) in clause (iii), by inserting ``or'' after the 
                semicolon; and
                    (D) by redesignating clauses (ii) through (iv) as 
                clauses (i) through (iii), respectively.
            (4) Amendment to the home owner's loan act.--The Home 
        Owner's Loan Act (15 U.S.C. 1461 et seq.) is amended--
                    (A) in section 2 (12 U.S.C. 1462) by adding at the 
                end the following:
            ``(12) Functionally regulated affiliate.--The term 
        `functionally regulated affiliate' means, with respect to a 
        savings association, any affiliate of such savings association 
        that is a company described in section 5(c)(5)(B) of the Bank 
        Holding Company Act of 1956 (12 U.S.C. 1844(c)(5)(B)).''; and
                    (B) in section 10(g) (12 U.S.C. 1467a(g)) by adding 
                at the end the following:
            ``(6) Capital for functionally regulated subsidiaries and 
        functionally regulated affiliates.--Notwithstanding section 
        3(b)(1) of the Terminating Bailouts for Taxpayer Fairness Act 
        of 2013, the Board may not, by regulation, guideline, order, or 
        otherwise, prescribe or impose any capital or capital adequacy 
        rules, guidelines, standards, or requirements on any 
        functionally regulated subsidiary of a savings and loan holding 
        company or functionally regulated affiliate of a savings 
        association that--
                    ``(A) is not a depository institution; and
                    ``(B) is--
                            ``(i) in compliance with the applicable 
                        capital requirements of its Federal regulatory 
                        authority (including the Securities and 
                        Exchange Commission) or State insurance 
                        authority;
                            ``(ii) properly registered as an investment 
                        adviser under the Investment Advisers Act of 
                        1940, or with any State; or
                            ``(iii) licensed as an insurance agent with 
                        the appropriate State insurance authority.''.
    (c) Specific Elements of Capital Requirements.--For purposes of 
calculating--
            (1) equity capital requirements under this section, equity 
        capital shall consist of tangible common equity (defined as 
        common stockholders' equity less goodwill), deferred tax 
        assets, accumulated other comprehensive income, treasury stock, 
        and intangible assets plus retained earnings; and
            (2) total consolidated assets under this section, 
        derivative exposures shall include--
                    (A) the fair value of the derivative exposures 
                without recognizing the benefits of any netting 
                arrangement, unless--
                            (i) the netting arrangement is documented 
                        under a formal master netting agreement or 
                        other formal arrangement with a derivatives 
                        clearing organization; and
                            (ii) the financial institution, as a matter 
                        of ongoing business practice, exchanges 
                        collateral on a daily basis for the fulfillment 
                        of variation margin requirements on a net 
                        basis, and fulfills all contractual payment 
                        requirements, including payments for contract 
                        termination, on a net basis, with such net 
                        exchange of collateral and payments 
                        encompassing all derivative exposures covered 
                        by the formal arrangement; and
                    (B) off-balance sheet assets--
                            (i) defined as any assets in which the 
                        financial institution has guaranteed 
                        performance by another party or provided a 
                        liquidity backstop should another party be 
                        unable to perform under the contractual 
                        obligation; and
                            (ii) excluding commitments to lend, whereby 
                        certain provisions and or covenants exist that 
                        limit the risk to the bank holding company with 
                        respect to future draws of liquidity.
    (d) Risk-Based Capital Requirements Permitted.--
            (1) Rule of construction.--Except as provided in paragraph 
        (2), nothing in this section shall be interpreted to prevent 
        any appropriate Federal banking agency from establishing 
        supplemental risk-based capital requirements for any financial 
        institution with more than $20,000,000,000 in total 
        consolidated assets, or any affiliate or subsidiary of such 
        institutions for the purpose of measuring the relative risk of 
        certain assets and preventing investment in excessive amounts 
        of riskier assets.
            (2) Limitation.--
                    (A) Joint determination.--An appropriate Federal 
                banking agency may not implement risk-based capital 
                requirements with respect to a financial institution 
                with more than $20,000,000,000, unless all appropriate 
                Federal banking agencies agree that bank supervision is 
                insufficient to prevent the excessive concentration of 
                riskier assets.
                    (B) Report to congress.--Before proposing risk 
                based capital rules described in this subsection, the 
                appropriate Federal banking agencies shall submit a 
                joint report to the Committee on Banking, Housing, and 
                Urban Affairs of the Senate and the Committee on 
                Financial Services of the House of Representatives 
                detailing the deficiency in supervisory tools in 
                preventing investment in excessive amounts of riskier 
                assets and how risk based capital will be used. The 
                appropriate Federal banking agencies may establish 
                supplemental risk-based capital requirements that do 
                not replace the equity capital requirements required by 
                this Act not earlier than 90 days after the date of 
                submission of the report under this subparagraph.
    (e) Treatment of Basel III International Accord.--The Board, the 
Corporation, and the Comptroller of the Currency shall be prohibited 
from any further implementation of any rules of the Federal banking 
agencies regarding ``Basel III: A Global Regulatory Framework for More 
Resilient Banks and Banking Systems''.

SEC. 4. PROHIBITION ON SUBSIDY TRANSFERS.

    Section 23A of the Federal Reserve Act (12 U.S.C. 371c) is 
amended--
            (1) in subsection (a), by adding at the end the following:
            ``(5) Prohibition on transactions by insured depository 
        institutions with affiliates or subsidiaries.--
                    ``(A) Affiliate transactions prohibited.--Except as 
                provided in subparagraph (B), only an insured 
                depository institution that is a member bank or an 
                affiliate or subsidiary of a member bank may engage in 
                a covered transaction with another affiliate or 
                subsidiary that is not an insured depository 
                institution.
                    ``(B) Exceptions.--Notwithstanding subparagraph 
                (A), an insured depository institution that is not a 
                member bank or an affiliate or subsidiary of a member 
                bank may--
                            ``(i) engage in lawful dividend payments to 
                        its holding company; or
                            ``(ii) make sales of property or securities 
                        to, or accept infusions of capital or other 
                        distributions from, its parent holding company, 
                        consistent with section 38A of the Federal 
                        Deposit Insurance Act (12 U.S.C. 1831p).''; and
            (2) in subsection (b)--
                    (A) by redesignating paragraphs (8) through (11) as 
                paragraphs (9) through (12), respectively; and
                    (B) by inserting after paragraph (7) the following:
            ``(8) the term `member bank' means a member bank having 
        less than $50,000,000,000 of total consolidated assets;''.

SEC. 5. LIMITATION ON THE FEDERAL SAFETY NET.

    (a) Prohibition Against Government Assistance to Non-Banks.--Except 
in connection with the resolution of any insured depository institution 
or financial company for which the Corporation has been appointed as 
receiver, no affiliate or subsidiary of a financial institution, or 
affiliate of an insured depository institution or nonbank financial 
institution may receive any assistance through--
            (1) asset purchases made by the United States Government, 
        loans from the United States Government, investments in debt or 
        equity made by the United States Government, or capital 
        injections from the United States Government;
            (2) the Exchange Stabilization Fund, as established under 
        section 2 of the Gold Reserve Act of 1934;
            (3) the Deposit Insurance Fund established under section 
        11(a)(4) of the Federal Deposit Insurance Act (12 U.S.C. 
        1821(a)(4));
            (4) the Board, pursuant to its authority under section 10B, 
        13, or 13A of the Federal Reserve Act (12 U.S.C. 347b, 342, and 
        343); or
            (5) the Board, pursuant to its authority under the third 
        paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 
        343).
    (b) Exclusion for Monetary Policy.--Subsection (a) shall not apply 
to transactions or operations implementing monetary policy matters 
under the direction of the Federal Open Market Committee or the Board 
of Governors of the Federal Reserve System.
    (c) Lending to Systemically Important Financial Market Utilities.--
Section 806 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 6455) is amended--
            (1) by striking subsections (a) through (c); and
            (2) redesignating subsections (d) and (e) as subsections 
        (a) and (b), respectively.
    (d) Termination of Systemic Risk Exemption.--Section 13(c)(4)(G) of 
the Federal Deposit Insurance Act (12 U.S.C. 1823(c)(4)) is amended--
            (1) by striking subparagraph (G); and
            (2) by redesignating subparagraph (H) as subparagraph (G).

SEC. 6. RELIEF FOR COMMUNITY BANKS AND SMALL SAVINGS ASSOCIATIONS.

    (a) Rural Definition.--For purposes of the rules of the Bureau of 
Consumer Financial Protection (in this section referred to as the 
``Bureau'') regarding qualified mortgages for purposes of section 
129C(c)(2) of the Truth in Lending Act, the definition of the term 
``rural'' means any area other than--
            (1) a city or town that has a population of greater than 
        50,000 inhabitants; and
            (2) any urbanized area contiguous and adjacent to a city or 
        town described in paragraph (1).
    (b) Securities Exchange Act of 1934.--The Securities Exchange Act 
of 1934 (15 U.S.C. 78a et seq.) is amended--
            (1) in section 12(g) (15 U.S.C. 78l(g))--
                    (A) in paragraph (1)(B), by inserting after ``is a 
                bank'' the following: ``, a savings and loan holding 
                company (as defined in section 10 of the Home Owners' 
                Loan Act),''; and
                    (B) in paragraph (4), by inserting after ``case of 
                a bank'' the following: ``, a savings and loan holding 
                company (as defined in section 10 of the Home Owners' 
                Loan Act),''; and
            (2) in section 15(d), by striking ``case of bank'' and 
        inserting the following: ``case of a bank, a savings and loan 
        holding company (as defined in section 10 of the Home Owners' 
        Loan Act),''.
    (c) Federal Reserve Board.--The policy statement of the Board in 
the Small Bank Holding Company Statement found at Part 225 of the 
appendix to title 12, Code of Federal Regulations (or any successor 
thereto), shall apply to financial institutions that are otherwise 
subject to that policy statement with consolidated assets of more than 
$5,000,000,000.
    (d) Mutual Holding Company Dividend Waivers.--Notwithstanding the 
rule of the Board regarding Mutual Holding Company Dividend Waivers in 
section 239.63 of title 12, Code of Federal Regulations (or any 
successor thereto), grandfathered mutual holding companies and all 
other mutual holding companies shall be permitted to waive the receipt 
of dividends declared on the common stock of their bank or mid-size 
holding companies.
    (e) Examination Ombudsman.--
            (1) In general.--The Federal Financial Institutions 
        Examination Council Act of 1978 (12 U.S.C. 3301 et seq.) is 
        amended by adding at the end the following:

``SEC. 1012. OFFICE OF EXAMINATION OMBUDSMAN.

    ``(a) Establishment.--There is established in the Council an Office 
of Examination Ombudsman.
    ``(b) Head of Office.--There is established the position of the 
Ombudsman, who shall serve as the head of the Office of Examination 
Ombudsman, and who shall be hired separately by the Council and shall 
be independent from any member agency of the Council.
    ``(c) Staffing.--The Ombudsman is authorized to hire staff to 
support the activities of the Office of Examination Ombudsman.
    ``(d) Duties.--The Ombudsman shall--
            ``(1) receive and, at the Ombudsman's discretion, 
        investigate complaints from financial institutions, their 
        representatives, or another entity acting on behalf of such 
        institutions, concerning examinations, examination practices, 
        or examination reports;
            ``(2) hold meetings, at least once every 3 months and in 
        locations designed to encourage participation from all sections 
        of the United States, with financial institutions, their 
        representatives, or another entity acting on behalf of such 
        institutions, to discuss examination procedures, examination 
        practices, or examination policies;
            ``(3) review examination procedures of the Federal 
        financial institutions regulatory agencies to ensure that the 
        written examination policies of those agencies are being 
        followed in practice and adhere to the standards for 
        consistency established by the Council;
            ``(4) conduct a continuing and regular program of 
        examination quality assurance for all examination types 
        conducted by the Federal financial institutions regulatory 
        agencies;
            ``(5) process any supervisory appeal initiated under 
        section 1015 or section 309(e) of the Riegle Community 
        Development and Regulatory Improvement Act of 1994; and
            ``(6) report annually to the Committee on Financial 
        Services of the House of Representatives, the Committee on 
        Banking, Housing, and Urban Affairs of the Senate, and the 
        Council, on the reviews carried out pursuant to paragraphs (3) 
        and (4), including compliance with the requirements set forth 
        in section 1012 regarding timeliness of examination reports, 
        and the Council's recommendations for improvements in 
        examination procedures, practices, and policies.
    ``(e) Confidentiality.--The Ombudsman shall keep confidential all 
meetings, discussions, and information provided by financial 
institutions.''.
            (2) Definition.--Section 1003 of the Federal Financial 
        Institutions Examination Council Act of 1978 (12 U.S.C. 3302) 
        is amended--
                    (A) in paragraph (2), by striking ``and'' at the 
                end;
                    (B) in paragraph (3), by adding ``and'' at the end; 
                and
                    (C) by adding at the end the following:
            ``(4) the term `Ombudsman' means the Ombudsman established 
        under section 1012.''.
    (f) Exception to Annual Written Privacy Notice Requirement Under 
the Gramm-Leach-Bliley Act.--Section 503 of the Gramm-Leach-Bliley Act 
(15 U.S.C. 6803) is amended by adding at the end the following:
    ``(f) Exception to Annual Written Notice Requirement.--
            ``(1) In general.--A financial institution described in 
        paragraph (2) shall not be required to provide an annual 
        written disclosure under this section, until such time as the 
        financial institution fails to comply with subparagraph (A), 
        (B), or (C) of paragraph (1).
            ``(2) Covered institutions.--Paragraph (1) applies with 
        respect to a financial institution that--
                    ``(A) provides nonpublic personal information in 
                accordance with the provisions of subsection (b)(2) or 
                (e) of section 502 or regulations prescribed under 
                section 504(b);
                    ``(B) has not changed its policies and practices 
                with respect to disclosing nonpublic personal 
                information from the policies and practices that were 
                disclosed in the most recent disclosure sent to 
                consumers in accordance with this section; and
                    ``(C) otherwise provides customers access to such 
                most recent disclosure in electronic or other form 
                permitted by regulations prescribed under section 
                504.''.
    (g) Exemption From Small Business Data Collection.--Section 
704B(h)(1) of the Equal Credit Opportunity Act (15 U.S.C. 1691c-
2(h)(1)) is amended by inserting ``with more than $10,000,000,000 in 
total consolidated assets'' after ``entity''.
    (h) Dodd-Frank.--Section 171(b)(5)(C) of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (12 U.S.C. 5371(b)(5)(C)) is amended 
by inserting before the period at the end ``or savings and loan holding 
company with less than $500,000,000 in total consolidated assets''.
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