[Congressional Record Volume 159, Number 96 (Monday, July 8, 2013)]
[House]
[Pages H4181-H4182]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FINANCIAL COMPETITIVE ACT OF 2013
Mr. FINCHER. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 1341) to require the Financial Stability Oversight Council
to conduct a study of the likely effects of the differences between the
United States and other jurisdictions in implementing the derivatives
credit valuation adjustment capital requirement, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 1341
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 Competitive Act of
2013''.
SEC. 2. STUDY OF IMPLEMENTATION OF BASEL III CAPITAL
REQUIREMENTS RELATED TO DERIVATIVES EXPOSURES.
(a) Study.--The Financial Stability Oversight Council shall
conduct a study of the likely effects that differences
between the United States and other jurisdictions in
implementing the derivatives credit valuation adjustment (in
this section referred to as ``CVA'') capital requirement
would have on--
(1) United States financial institutions that conduct
derivatives transactions and participate in derivatives
markets;
(2) end users of derivatives; and
(3) international derivatives markets.
(b) Content.--The study required by subsection (a) shall
include--
(1) an assessment of--
(A) the extent to which there are differences in the
approaches that the United States and other jurisdictions are
taking regarding implementation of the CVA capital
requirement, and the nature of the differences;
(B) the impact that the differences would have on--
(i) United States financial institutions that conduct
derivatives transactions and participate in derivatives
markets, including their ability to serve end users of
derivatives;
(ii) pricing and other costs of, and services available to,
end users of derivatives in the United States and other
jurisdictions; and
(iii) the competitiveness of United States financial
institutions and United States derivatives markets, including
the extent to which differences in the CVA capital
requirement could shift derivatives business among
jurisdictions; and
(C) the interaction between differing CVA capital
requirements and margin rules; and
(2) recommendations regarding steps that the Congress and
the Federal financial regulatory agencies that comprise the
Financial Stability Oversight Council should take to--
(A) minimize any expected negative effects on United States
financial institutions, derivatives markets, and end
users[and];
(B) encourage greater international consistency in
implementation of internationally agreed capital, liquidity,
and other prudential standards[]; and
(C) ensure that the Financial Stability Oversight Council
fulfills its statutory mandate to identify risks and respond
to emerging threats to financial stability.
(c) Report.--No later than 90 days after the date of the
enactment of this Act, the Financial Stability Oversight
Council shall submit a written report containing the results
of the study to the Chairman and ranking minority member of
the Committees on Agriculture and Financial Services of the
House of Representatives, and the Chairman and ranking
minority member of the Committees on Agriculture, Nutrition,
and Forestry, and Banking, Housing, and Urban Affairs of the
Senate.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Tennessee (Mr. Fincher) and the gentlewoman from California (Ms.
Waters) each will control 20 minutes.
The Chair recognizes the gentleman from Tennessee.
General Leave
Mr. FINCHER. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days within which to revise and extend their remarks
and submit extraneous materials for the Record on H.R. 1341, as
amended, currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Tennessee?
There was no objection.
Mr. FINCHER. Mr. Speaker, I yield myself such time as I may consume.
I want to thank Chairman Jeb Hensarling, Chairman Frank Lucas, and
Chairman Scott Garrett for working with both Congressman David Scott
and me to bring H.R. 1341 to the floor for consideration today.
I am pleased that we are considering H.R. 1341, the Financial
Competitive Act of 2013. Mr. Scott and I have worked in a bipartisan
manner to move this measure forward to ensure America remains
competitive in the global marketplace. We need folks around the world
to know America is open for opportunity, advancement, and upward
mobility. In this country, we promote opportunity, not unfair
regulations that punish business and kill jobs here. I introduced the
Financial Competitive Act with my friend Mr. Scott for one reason--to
ensure the law of unintended consequences does not place America at a
disadvantage globally.
Our bill simply requires the Financial Stability Oversight Council to
conduct a study of the impacts implementing the credit valuation
adjustment capital requirement, or CVA, will have on the U.S.
consumers, end users, and U.S. financial institutions. This study is in
response to the recent Basel 3 Accord, which is a global regulatory
standard for capital requirements for banks.
Unfortunately, European Union Basel 3 regulators decided to exempt
their own European banks from complying with certain provisions of
Basel 3. Specifically, European regulators have decided to exempt
transactions with sovereign pension funds and corporate counterparties,
which are also exempt from clearing obligations from CVA-risk-weighted
assets. This means European banks will not have to put up capital like
American banks.
I have some serious questions about the impact the European exemption
will have on U.S. financial institutions, consumers, and the larger
U.S. economy. To me, this exemption will provide a significant
financial and business advantage to European banks, European customers,
and European end
[[Page H4182]]
users at the expense of American business, banks, and end users.
Mr. Scott and I are not alone. Canada recently announced it will
delay its CVA capital requirement for 1 year even though it implemented
the rest of the Basel 3 package on schedule. Canada's decision to delay
the implementation of the CVA requirement was simple. It was driven by
concerns that Canadian banks would be at a competitive disadvantage
because of the European CVA exemption. U.S. financial institutions and
consumers share those same concerns and will be competitively
disadvantaged, which will affect how these institutions serve consumers
and the derivatives business as well as the commercial loan business.
Our bill will clarify the impact the CVA exemption for European
financial institutions will have on the U.S. economy. The U.S. economy
can't afford to wait while Europe takes valuable market share away from
U.S. companies. If the U.S. doesn't act, this disadvantage could
potentially cost the U.S. economy billions of dollars and lead to jobs
moving overseas.
It's simple: this bill is about America versus Europe. I urge you to
support me in passing the Financial Competitive Act in order to ensure
the law of unintended consequences doesn't place U.S. consumers, end
users, and financial institutions at a disadvantage.
I reserve the balance of my time.
Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
Just last week, the government made an important step towards
repairing our financial system after the worst financial crisis since
the Great Depression. The Federal Reserve adopted final rules
implementing Basel 3, including new capital requirements intended to
bolster capital throughout the financial system. As losses mounted
during the financial crisis, the woefully inadequate capital cushions
at banks and others nearly brought our entire economy to a halt.
I also appreciate that the bank regulators have taken a commonsense
approach, for which I had strongly advocated, related to community
banks, including the treatment of residential mortgages. I applaud the
banking regulators for finalizing these critical rules, which, along
with the other Dodd-Frank reforms, will create the conditions for a
robust and resilient financial sector.
This legislation before us today, H.R. 1341, requires the Financial
Stability Oversight Council, or FSOC, to conduct a study of the
potential effects of any differences between the U.S. and other
jurisdictions' implementation of one aspect of the Basel 3 Accords--
the credit valuation adjustment capital requirement related to
derivatives transactions. The Basel signatory countries rightly agreed
that banks should hold capital against the possibility that their
counterparties, be they airlines or other banks, would default.
However, despite agreeing to do so under Basel 3, the European Union
has made a preliminary decision to exclude the credit valuation
adjustment from the calculation of European banks' capital
requirements. As a result of the EU dropping this requirement, some
U.S. banks think that they may be disadvantaged relative to their
international counterparts.
Under the bill, the FSOC will study these and other differences
between the regulators' implementation of this requirement. I agree
that it is important for U.S. regulators to ensure that the way by
which the CVA is calculated for domestic financial institutions
includes an appropriate methodology that will not inadvertently create
an unlevel playing field relative to foreign competitors. At the same
time, we must be mindful not to engage in a global race to the bottom
when it comes to capital requirements for our largest, most globally
interconnected financial institutions. After all, the strength of the
U.S. financial system is and will be based on its stability and
transparency.
Importantly, during consideration of the bill, Mrs. Beatty of Ohio
added language balancing the study's scope. As a result, the FSOC study
will also consider the effects that failing to implement the CVA would
have on the stability of U.S. financial markets in a period of market
stress as well as how the regulators are fulfilling their statutory
mandate to respond to emerging threats to financial stability.
With the addition of this language, the bill's study now balances not
just the implications for derivatives market participants of this
specific capital charge but also the effects on our economic stability.
Undercapitalized derivatives exposures were one of the major drivers of
the 2008 financial crisis. Market participants should hold capital
against the risk of a counterparty defaulting or entering bankruptcy.
We can certainly consider how the implementation of the CVA could
best be accomplished; but, again, we cannot engage in a global race to
the bottom when it comes to capital rules. It is my hope that the FSOC
will use the findings from this study to urge the other global
regulators to expeditiously adopt standards that are as strong as ours.
I yield back the balance of my time.
Mr. FINCHER. Mr. Speaker, I urge the passage of H.R. 1341, and I
yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Tennessee (Mr. Fincher) that the House suspend the rules
and pass the bill, H.R. 1341, as amended.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. FINCHER. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further
proceedings on this motion will be postponed.
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