[Congressional Record Volume 160, Number 62 (Tuesday, April 29, 2014)]
[Senate]
[Pages S2471-S2473]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself, Mr. Brown, Mr. Johanns, Mr. Kirk, 
        and Mr. Tester):
  S. 2270. A bill to clarify the application of certain leverage and 
risk-based requirements under the Dodd-Frank Wall Street Reform and 
Consumer Protection Act; to the Committee on Banking, Housing, and 
Urban Affairs.
  Ms. COLLINS. Mr. President, I am delighted to be joined today by my 
colleagues, Mike Johanns and Sherrod Brown, in introducing the 
Insurance Capital Standards Clarification Act of 2014. We are pleased 
to be joined by Senators Kirk and Tester as cosponsors. This 
legislation clarifies the Federal Reserve's authority to recognize

[[Page S2472]]

the distinctions between banking and insurance when implementing 
section 171 of the Dodd-Frank Act, commonly referred to as the 
``Collins Amendment'' since I wrote this provision of the law.
  Before I describe our bill in detail, I would like to provide some 
background on section 171 and why it is so important that nothing be 
done to diminish or weaken it.
  We all recall the circumstances we faced 4 years ago, as our Nation 
was emerging from the most serious financial crisis since the Great 
Depression. That crisis had many causes, but among the most important 
was the fact that some of our nation's largest financial institutions 
were dangerously undercapitalized, while at the same time, they held 
interconnected assets and liabilities that could not be disentangled in 
the midst of a crisis.
  The failure of these over-leveraged financial institutions threatened 
to bring the American economy to its knees. As a consequence, the 
federal government was forced to step in to prop-up financial 
institutions that were considered ``too big to fail.'' Little has 
angered the American public more than these taxpayer-funded bailouts.
  That is the context in which I offered my capital standards 
amendment, which became section 171 of Dodd-Frank. Section 171 is aimed 
at addressing the ``too big to fail'' problem at the root of the 2008-
2009 crisis by requiring large financial holding companies to maintain 
a level of capital at least as high as that required for our nation's 
community banks, equalizing their minimum capital requirements, and 
eliminating the incentive for banks to become ``too big to fail.''
  Incredibly, prior to the passage of Section 171, the capital and risk 
standards for our Nation's largest financial institutions were more lax 
than those that applied to smaller depository banks, even though the 
failure of larger institutions was much more likely to trigger the kind 
of cascade of economic harm that we experienced during the crisis. 
Section 171 gave the regulators the tools, and the direction, to fix 
this problem.
  It is important to recognize that Section 171 allows the federal 
regulators to take into account the significant distinctions between 
banking and insurance, and the implications of those distinctions for 
capital adequacy. I have written to the financial regulators on more 
than one occasion to underscore this point. For example, in a November 
26, 2012, letter I stressed that it was not Congress's intent to 
replace State-based insurance regulation with a bank-centric capital 
regime. For that reason, I called upon the federal regulators to 
acknowledge the distinctions between banking and insurance, and to take 
those distinctions into account in the final rules implementing Section 
171.
  While the Federal Reserve has acknowledged the important distinctions 
between insurance and banking, it has repeatedly suggested that it 
lacks authority to take those distinctions into account when 
implementing the consolidated capital standards required by Section 
171. As I have already said, I do not agree that the Fed lacks this 
authority and find its disregard of my clear intent as the author of 
section 171 to be frustrating, to say the least. Experts testifying 
before the Financial Institutions and Consumer Protection subcommittee 
of the Senate Banking Committee, chaired by Senator Brown, concur that 
the Federal Reserve has ample authority to draw these distinctions.
  Nevertheless, the bill we are introducing today clarifies the Federal 
Reserve's authority to recognize the distinctions between insurance and 
banking.
  Specifically, our legislation would add language to section 171 to 
clarify that, in establishing minimum capital requirements for holding 
companies on a consolidated basis, the Federal Reserve is not required 
to include insurance activities so long as those activities are 
regulated as insurance at the State level. Our legislation also 
provides a mechanism for the Federal Reserve, acting in consultation 
with the appropriate State insurance authority, to provide similar 
treatment for foreign insurance entities within a U.S. holding company 
where that entity does not itself do business in the United States. In 
addition, our legislation directs the Fed not to require insurers which 
file holding company financial statements using Statutory Accounting 
Principles to instead prepare their financial statements using 
Generally Accepted Accounting Principles.
  I should point out that our legislation does not, in any way, modify 
or supersede any other provision of law upon which the Federal Reserve 
may rely to set appropriate holding company capital requirements.
  In closing, I want to thank my colleagues, Senators Brown and 
Johanns, for working so hard with me over many months to help craft the 
language we are introducing today. I believe our language removes any 
doubt about the Federal Reserve's authority to address the legitimate 
concerns raised by insurers that they not have a bank-centric capital 
regime for their insurance activities imposed upon them. I urge my 
colleagues to support this legislation.
  Mr. President, I ask unanimous consent that the text of the bill and 
a letter of support be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2270

       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 ``Insurance Capital Standards 
     Clarification Act of 2014''.

     SEC. 2. CLARIFICATION OF APPLICATION OF LEVERAGE AND RISK-
                   BASED CAPITAL REQUIREMENTS.

       Section 171 of the Dodd-Frank Wall Street Reform and 
     Consumer Protection Act (12 U.S.C. 5371) is amended--
       (1) in subsection (a), by adding at the end the following:
       ``(4) Business of insurance.--The term `business of 
     insurance' has the same meaning as in section 1002(3).
       ``(5) Person regulated by a state insurance regulator.--The 
     term `person regulated by a State insurance regulator' has 
     the same meaning as in section 1002(22).
       ``(6) Regulated foreign subsidiary and regulated foreign 
     affiliate.--The terms `regulated foreign subsidiary' and 
     `regulated foreign affiliate' mean a person engaged in the 
     business of insurance in a foreign country that is regulated 
     by a foreign insurance regulatory authority that is a member 
     of the International Association of Insurance Supervisors or 
     other comparable foreign insurance regulatory authority as 
     determined by the Board of Governors following consultation 
     with the State insurance regulators, including the lead State 
     insurance commissioner (or similar State official) of the 
     insurance holding company system as determined by the 
     procedures within the Financial Analysis Handbook adopted by 
     the National Association of Insurance Commissioners, where 
     the person, or its principal United States insurance 
     affiliate, has its principal place of business or is 
     domiciled, but only to the extent that--
       ``(A) such person acts in its capacity as a regulated 
     insurance entity; and
       ``(B) the Board of Governors does not determine that the 
     capital requirements in a specific foreign jurisdiction are 
     inadequate.
       ``(7) Capacity as a regulated insurance entity.--The term 
     `capacity as a regulated insurance entity'--
       ``(A) includes any action or activity undertaken by a 
     person regulated by a State insurance regulator or a 
     regulated foreign subsidiary or regulated foreign affiliate 
     of such person, as those actions relate to the provision of 
     insurance, or other activities necessary to engage in the 
     business of insurance; and
       ``(B) does not include any action or activity, including 
     any financial activity, that is not regulated by a State 
     insurance regulator or a foreign agency or authority and 
     subject to State insurance capital requirements or, in the 
     case of a regulated foreign subsidiary or regulated foreign 
     affiliate, capital requirements imposed by a foreign 
     insurance regulatory authority.''; and
       (2) by adding at the end the following new subsection:
       ``(c) Clarification.--
       ``(1) In general.--In establishing the minimum leverage 
     capital requirements and minimum risk-based capital 
     requirements on a consolidated basis for a depository 
     institution holding company or a nonbank financial company 
     supervised by the Board of Governors as required under 
     paragraphs (1) and (2) of subsection (b), the appropriate 
     Federal banking agencies shall not be required to include, 
     for any purpose of this section (including in any 
     determination of consolidation), a person regulated by a 
     State insurance regulator or a regulated foreign subsidiary 
     or a regulated foreign affiliate of such person engaged in 
     the business of insurance, to the extent that such person 
     acts in its capacity as a regulated insurance entity.

[[Page S2473]]

       ``(2) Rule of construction on board's authority.--This 
     subsection shall not be construed to prohibit, modify, limit, 
     or otherwise supersede any other provision of Federal law 
     that provides the Board of Governors authority to issue 
     regulations and orders relating to capital requirements for 
     depository institution holding companies or nonbank financial 
     companies supervised by the Board of Governors.
       ``(3) Rule of construction on accounting principles.--
     Notwithstanding any other provision of law, a depository 
     institution holding company or nonbank financial company 
     supervised by the Board of Governors of the Federal Reserve 
     that is also a person regulated by a State insurance 
     regulator or a regulated foreign subsidiary or a regulated 
     foreign affiliate of such person that files its holding 
     company financial statements utilizing only Statutory 
     Accounting Principles in accordance with State law, shall not 
     be required to prepare such financial statements in 
     accordance with Generally Accepted Accounting Principles.''.
                                  ____



                                                  U.S. Senate,

                                Washington, DC, November 26, 2012.
     Hon. Ben S. Benanke,
     Chairman, Board of Governors of the Federal Reserve System, 
         Washington, DC.
     Hon. Martin J. Gruenberg,
     Acting Chairman, Federal Deposit Insurance Corporation, 
         Washington, DC.
     Hon. Thomas J. Curry,
     Comptroller, Department of the Treasury, Office of the 
         Comptroller, Washington, DC.
     Re Regulatory Capital Rules: Regulatory Capital, 
         Implementation of Basel III, Minimum Regulatory Capital 
         Ratios, Capital Adequacy, Transition Provisions, and 
         Prompt Corrective Action (RIN 3064-AD95); Regulatory 
         Capital Rules: Standardized Approach for Risk-weighted 
         Assets; Market Discipline and Disclosure Requirements 
         (RIN 3064-AD96); Regulatory Capital Rules: Advanced-
         Approaches Risk-Based Capital Rule; Market Risk Capital 
         Rule (RN 3064-AD87).

       Dear Chairman Bernanke, Acting Chairman Gruenberg, and 
     Comptroller Curry: I am writing to comment on the proposed 
     rules implementing the Basel III regulatory capital 
     framework.
       As the author of Section 171 (the ``Collins Amendment'') of 
     the Dodd-Frank Act, I believe strongly that capital 
     requirements must ensure that firms have an adequate capital 
     cushion in difficult economic times, and provide a 
     disincentive to their becoming `too big to fail.' To achieve 
     this, Section 171 requires that large bank holding companies 
     be subject, at a minimum, to the same capital requirements 
     that small community banks have traditionally faced.
       During consideration of the Dodd-Frank Act, I supported 
     modifications to the final language to Section 171 to ensure 
     a smooth transition to increased capital standards. Among 
     these modifications were provisions to delay, for five years, 
     the application of new capital requirements for savings and 
     loan holding companies (``SLHCs''), and for certain foreign-
     owned bank holding companies. See subsections (b)(4)(D) and 
     (E) of Section 171. These modifications were intended to 
     allow these entities the time they need to adjust their 
     balance sheets and capital levels in order to come into 
     compliance with the new capital standards. The proposed rules 
     implement the five year delay provided to foreign-owned bank 
     holding companies by Section 171 (b)(4)(E), but neglect to 
     implement the nearly identical delay for SLHCs provided by 
     Section 171 (b)(4)(E). I do not understand why the proposed 
     rules fail to implement this provision, as required by 
     Congressional intent and the clear language of the statute.
       I am hopeful, too, that in crafting final rules, you will 
     give further consideration to the distinctions between 
     banking and insurance, and the implications of those 
     distinctions for capital adequacy. It is, of course, 
     essential that insurers with depository institution holding 
     companies in their corporate structure be adequately 
     capitalized on a consolidated basis. Even so, it was not 
     Congress's intent that federal regulators supplant prudential 
     state-based insurance regulation with a bank-centric capital 
     regime. Instead, consideration should be given to the 
     distinctions between banks and insurance companies, a point 
     which Chairman Bernanke rightly acknowledged in testimony 
     before the House Banking Committee this summer. For example, 
     banks and insurers typically have a different composition of 
     assets and liabilities, since it is fundamental to insurance 
     companies to match assets to liabilities, but this is not 
     characteristic of most banks. I believe it is consistent with 
     my amendment that these distinctions be recognized in the 
     final rules.
       I am hopeful you will keep these concerns in mind as you 
     continue to implement the Dodd-Frank Act and the proposed 
     rules referenced above implementing the Basel III regulatory 
     capital framework.
           Sincerely,
                                                 Susan M. Collins,
     United States Senator.

                          ____________________