[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4061 Reported in House (RH)]

<DOC>





                                                 Union Calendar No. 450
115th CONGRESS
  2d Session
                                H. R. 4061

                          [Report No. 115-592]

      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.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 12, 2017

 Mr. Ross (for himself, Mr. Delaney, Mr. Luetkemeyer, Ms. Sinema, Mr. 
   McHenry, Mr. Meeks, Mr. Huizenga, Mr. David Scott of Georgia, Mr. 
Duffy, Mr. Foster, Mr. Barr, Mr. Sherman, Mrs. Wagner, Mr. Perlmutter, 
  Mr. Royce of California, Mr. Himes, Mr. Lucas, Mr. Gottheimer, Mr. 
Stivers, Mr. Kihuen, Mr. Pittenger, Mrs. Beatty, Mr. Messer, Ms. Sewell 
   of Alabama, Mr. Tipton, Mr. Kilmer, Mr. Williams, Mr. Peters, Mr. 
Poliquin, Mr. Kind, Mrs. Love, Ms. DelBene, Mr. Hill, Mr. Cardenas, Mr. 
    Emmer, Mr. Quigley, Mr. Mooney of West Virginia, Mr. Costa, Mr. 
   MacArthur, Mr. Brendan F. Boyle of Pennsylvania, Mr. Costello of 
Pennsylvania, Mr. Thompson of California, Mr. Renacci, Miss Rice of New 
  York, Mr. Schweikert, Mr. Moulton, Mr. Sessions, Mr. Norcross, Mr. 
Tiberi, and Ms. Kuster of New Hampshire) introduced the following bill; 
       which was referred to the Committee on Financial Services

                             March 9, 2018

   Additional sponsors: Mr. Aguilar, Mr. Hultgren, Mr. Connolly, Mr. 
 Hollingsworth, Mr. Budd, Mr. Loudermilk, Ms. Blunt Rochester, and Mr. 
                           Gonzalez of Texas

                             March 9, 2018

Committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed


_______________________________________________________________________

                                 A BILL


 
      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.


 


    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 ``Financial Stability Oversight 
Council Improvement Act of 2017''.

SEC. 2. SIFI DESIGNATION PROCESS.

    Section 113 of the Financial Stability Act of 2010 (12 U.S.C. 5323) 
is amended--
            (1) in subsection (a)(2)--
                    (A) in subparagraph (J), by striking ``and'' at the 
                end;
                    (B) by redesignating subparagraph (K) as 
                subparagraph (L); and
                    (C) by inserting after subparagraph (J) the 
                following:
                    ``(K) the appropriateness of the imposition of 
                prudential standards as opposed to other forms of 
                regulation to mitigate the identified risks; and'';
            (2) in subsection (b)(2)--
                    (A) in subparagraph (J), by striking ``and'' at the 
                end;
                    (B) by redesignating subparagraph (K) as 
                subparagraph (L);
                    (C) by inserting after subparagraph (J) the 
                following:
                    ``(K) the appropriateness of the imposition of 
                prudential standards as opposed to other forms of 
                regulation to mitigate the identified risks; and''; and
            (3) by amending subsection (d) to read as follows:
    ``(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).'';
            (4) by amending subsection (e) to read as follows:
    ``(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.'';
            (5) in subsection (g), strike ``before the Council makes 
        any final determination'' and insert ``from the outset of the 
        Council's consideration of the company, including before the 
        Council makes any proposed or final determination''; and
            (6) by adding at the end the following:
    ``(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.''.

SEC. 3. RULE OF CONSTRUCTION.

    None of the amendments made by this Act may be construed as 
limiting the Financial Stability Oversight Council's emergency powers 
under section 113(f) of the Financial Stability Act of 2010 (12 U.S.C. 
5323(f)).
                                                 Union Calendar No. 450

115th CONGRESS

  2d Session

                               H. R. 4061

                          [Report No. 115-592]

_______________________________________________________________________

                                 A BILL

      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.

_______________________________________________________________________

                             March 9, 2018

Committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed