[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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