[Congressional Record Volume 165, Number 144 (Tuesday, September 10, 2019)]
[House]
[Pages H7579-H7581]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       BANK SERVICE COMPANY EXAMINATION COORDINATION ACT OF 2019

  Mr. SAN NICOLAS. Mr. Speaker, I move to suspend the rules and pass 
the bill (H.R. 241) to amend the Bank Service Company Act to provide 
improvements with respect to State banking agencies, and for other 
purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                H.R. 241

       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 ``Bank Service Company 
     Examination Coordination Act of 2019''.

     SEC. 2. BANK SERVICE COMPANY ACT IMPROVEMENTS.

       The Bank Service Company Act (12 U.S.C. 1861 et seq.) is 
     amended--
       (1) in section 1(b)--
       (A) by redesignating paragraphs (2) through (9) as 
     paragraphs (3) through (10), respectively; and
       (B) by inserting after paragraph (1) the following:
       ``(2) the term `State banking agency' shall have the same 
     meaning given the term `State Bank Supervisor' under section 
     3 of the Federal Deposit Insurance Act;'';
       (2) in section 5(a), by inserting ``, in consultation with 
     the State banking agency,'' after ``banking agency''; and
       (3) in section 7--
       (A) in subsection (a)--
       (i) in the first sentence, by inserting ``or State banking 
     agency'' after ``appropriate Federal banking agency''; and
       (ii) in the second sentence, by striking ``Federal banking 
     agency that supervises any other shareholder or member'' and 
     inserting ``Federal or State banking agency that supervises 
     any other shareholder or member'';
       (B) in subsection (c)--
       (i) by inserting ``or a State banking agency'' after 
     ``appropriate Federal banking agency'';
       (ii) by striking ``such agency'' each place such term 
     appears and inserting ``such Federal or State agency'';
       (C) by redesignating subsection (d) as subsection (f);
       (D) by inserting after subsection (c) the following:
       ``(d) Availability of Information.--Information obtained 
     pursuant to the regulation and examination of service 
     providers under this section or applicable State law may be 
     furnished by and accessible to Federal and State agencies to 
     the same extent that supervisory information concerning 
     depository institutions is authorized to be furnished to and 
     required to be accessible by Federal and State agencies under 
     section 7(a)(2) of the Federal Deposit Insurance Act (12 
     U.S.C. 1817(a)(2)) or State law, as applicable.
       ``(e) Coordination With State Banking Agencies.--Where a 
     State bank is principal shareholder or principal member of a 
     bank service company or where a State bank is any other 
     shareholder or member of the bank service company, the 
     appropriate Federal banking agency, in carrying out 
     examinations authorized by this section, shall--
       ``(1) provide reasonable and timely notice to the State 
     banking agency; and
       ``(2) to the fullest extent possible, coordinate and avoid 
     duplication of examination activities, reporting 
     requirements, and requests for information.'';
       (E) in subsection (f), as so redesignated, by inserting ``, 
     in consultation with State banking agencies,'' after 
     ``appropriate Federal banking agencies''; and
       (F) by adding at the end the following:
       ``(g) Rule of Construction.--Nothing in this section shall 
     be construed as granting authority for a State banking agency 
     to examine a bank service company where no such authority 
     exists in State law.''.

     SEC. 3. DETERMINATION OF BUDGETARY EFFECTS.

       The budgetary effects of this Act, for the purpose of 
     complying with the Statutory Pay-As-You-Go Act of 2010, shall 
     be determined by reference to the latest statement titled 
     ``Budgetary Effects of PAYGO Legislation'' for this Act, 
     submitted for printing in the Congressional Record by the 
     Chairman of the House Budget Committee, provided that such 
     statement has been submitted prior to the vote on passage.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Guam (Mr. San Nicolas) and the gentleman from Ohio (Mr. Stivers) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Guam.


                             General Leave

  Mr. SAN NICOLAS. Mr. Speaker, I ask unanimous consent that all 
Members may have 5 legislative days in which to revise and extend their 
remarks on this legislation and to insert extraneous material thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Guam?
  There was no objection.
  Mr. SAN NICOLAS. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in strong support of H.R. 241, the Bank Service 
Company Examination Coordination Act of 2019.
  I thank the gentleman from Texas, Representative Williams, for his 
work on this bill that would promote better coordination between 
Federal and State banking regulators as they oversee third-party 
vendors and companies that provide a wide range of services for banks.
  In recent years, technology has disrupted every industry, including 
banking, and has given the significant cybersecurity risks that come 
with that technology.
  In light of the recent Capital One data breach, which involved 
consumer data the bank stored on a cloud server provided by Amazon Web 
Services, a third-party service provider, or TSP, used by the bank and 
many other companies, it is important that Congress ensure there is 
strong oversight over these third-party companies that work with banks.
  Currently, the Bank Service Company Act authorizes Federal regulators 
to examine TSPs to assess the risks they may pose to the banks with 
which they work. Similarly, many State banking regulators are 
authorized to examine bank TSPs under various State laws. These State 
regulators are responsible for ensuring that these third-party 
relationships do not pose undue risks to the State-chartered banking 
system, which accounts for nearly 80 percent of all banks in the United 
States.
  However, the Bank Service Company Act is silent regarding State bank 
regulators, which could hamper information sharing among State and 
Federal regulators.
  While H.R. 241 would not give States any new authority to conduct TSP 
exams, it would recognize at the Federal level the supervisory 
authority that many State regulators already have under current State 
law and encourage Federal regulators to coordinate with them.
  Given the increase in fintech companies that partner with banks, 
especially State-chartered banks, it is important that we consider ways 
to encourage innovation, coordination, and consistency among Federal 
and State regulators in the oversight of TSPs.
  Furthermore, in its 2017 annual report, the Financial Stability 
Oversight Council recommended that Congress pass legislation to 
strengthen oversight of third-party companies that

[[Page H7580]]

work with banks to improve cybersecurity. To that end, last Congress, 
Democrats and Republicans of the Committee on Financial Services voted 
unanimously, 56-0, in support of this legislation.
  H.R. 241 will promote consistency and strengthen oversight of our 
banks and the technology companies with which they work. Therefore, I 
encourage Members to support H.R. 241, and I reserve the balance of my 
time.
  Mr. STIVERS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 241, the Bank Service Company 
Examination Coordination Act of 2019.
  This bill amends the Bank Service Company Act to enhance State and 
Federal regulators' ability to coordinate examinations and share 
information with a bank's technology vendors and partners.
  State and Federal regulatory authorities are rightfully frustrated by 
the inability to share information as a result of constraints resulting 
from the Bank Service Company Act, specifically the duplicative 
examination processes that are in no way uniform or collaborative. 
Their inability to share exam information between Federal and State 
regulators creates vulnerabilities in the financial system.
  The commonsense changes contained in H.R. 241 reduce the regulatory 
burden for institutions that are already struggling to comply with the 
current regulatory regime.
  H.R. 241 also helps enhance the safety and soundness of our financial 
system by allowing regulators to coordinate their activities.
  Sharing exam results among agencies allows risks and weaknesses of 
individual institutions, as well as the overall financial system, to be 
revealed more effectively. It also allows Federal and State financial 
agencies to more effectively expend limited resources and avoid 
duplicative examinations, strengthen communications among regulators, 
and ensure the appropriate level of oversight for risk to the financial 
system is maintained.
  To put it in perspective, the Bank Service Company Act was enacted in 
1962. That is 1 year before ZIP Codes were introduced and the first 
push-button telephone was made available to the American consumer. A 
lot has changed since 1962. The Bank Service Company Act fails to take 
into consideration the advancements in technology and the implications 
for nearly half a century of consumer data.
  The statute needs modernization. In 2017, the Financial Stability 
Oversight Council recommended congressional action to encourage better 
coordination between Federal and State regulators as it relates to 
overseeing financial institutions and periodically as it relates to 
their relationships with third-party and technology service providers. 
Two years later, legislation that would encourage coordination is still 
needed.
  I commend the gentleman from Texas (Mr. Williams) for being the 
sponsor and champion of this issue over several years, as well as the 
gentleman from New York (Mr. Meeks), who has been a strong advocate for 
modernization.
  Mr. Speaker, I urge my colleagues to join me in supporting H.R. 241, 
and I reserve the balance of my time.

                              {time}  1400

  Mr. SAN NICOLAS. Mr. Speaker, I yield 1 minute to the gentleman from 
New York (Mr. Meeks), the chair of the Consumer Protection and 
Financial Institutions Subcommittee.
  Mr. MEEKS. Mr. Speaker, I rise today to speak in support of H.R. 241, 
the Bank Service Company Examination Coordination Act.
  As chair of the House Financial Services Subcommittee on Consumer 
Protection and Financial Institutions, I am very focused on the 
appropriate oversight of our banking sector and effective coordination 
among our bank regulators in overseeing the integrity and stability of 
individual banks and the banking system as a whole.
  We learned in the most painful way possible during the financial 
crisis that failure to properly coordinate and gaps in regulatory 
oversight allow systemic risks to emerge.
  In particular, with the enactment of this bill, State and Federal 
regulators will be directed to coordinate their work in auditing and 
monitoring technology solution providers in banking and the use of such 
technology. This type of coordination is key to giving consumers and 
average Americans faith in the stability of the banking system, 
security of the technology solutions used in banking, and will 
streamline regulatory oversight without cutting corners.
  So I am pleased to join with my colleague, Mr. Williams, who has been 
a strong advocate of making sure that we have this kind of transparency 
in working together, and I urge all of my colleagues to vote ``aye'' on 
H.R. 241.
  Mr. STIVERS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Texas (Mr. Williams), who is a great entrepreneur, a 
great businessman, and a supporter of the free market system.
  Mr. WILLIAMS. Mr. Speaker, I am proud to support H.R. 241, the Bank 
Service Company Examination Coordination Act, commonsense legislation 
that enables State and Federal regulators to better coordinate their 
examination activities.
  The bill allows for the sharing of supervisory information concerning 
technology service providers, better known as TSPs, between State and 
Federal regulators.
  Banks use TSPs in their day-to-day operations for a variety of 
activities, such as processing payments, taking deposits, or assisting 
with cybersecurity efforts. As banks are adapting to a more 
interconnected world, partnerships between financial institutions and 
TSPs are not only common, but they are necessary.
  State and Federal regulators each have the ability to examine 
technology vendors for safety and for soundness, but current law 
prevents them from sharing the results of their independent 
examinations, a problem that H.R. 241 corrects.
  H.R. 241 helps to harmonize the oversight process without adding risk 
to their financial system. Sharing the results of regulatory 
examination results between agencies can reveal the weaknesses of an 
individual institution as well as the larger banking system as a whole.
  The Financial Stability Oversight Council, which is charged with 
identifying risks in the U.S. financial system, recommended in their 
2017 annual report to enhance coordination between State and Federal 
regulators. Specifically, the report called on Congress to pass 
legislation that encourages coordination among the Federal and State 
regulators in the oversight of third-party service providers. The 
result would be reducing potentially conflicting and duplicative 
regulatory oversight, while also promoting more consistent 
cybersecurity standards.
  Sharing the results of these TSP supervisory exams allows for 
agencies to more efficiently use their limited resources, while 
ensuring that private companies are not subject to an avoidable, 
duplicative review.
  I want to thank Chairwoman Waters. I want to thank Ranking Member 
McHenry, and especially my friend on the other side of the aisle, 
Congressman Meeks, and all the staff for their diligent work.
  I am proud of the bipartisan effort in both the 115th and the 116th 
Congresses that allowed for the passage of H.R. 241 today. I urge all 
my colleagues to support this legislation.
  Mr. SAN NICOLAS. Mr. Speaker, I am prepared to close. I reserve the 
balance of my time.
  Mr. STIVERS. Mr. Speaker, I yield myself such time as I may consume.
  H.R. 241 will help reduce duplicative examinations and better 
coordinate the exams that State and Federal agencies give to our 
financial system to better identify vulnerabilities of individual 
institutions in the overall system. It is a bipartisan act that will do 
great things for our financial services system. I would urge its 
adoption.
  I yield back the balance of my time.
  Mr. SAN NICOLAS. Mr. Speaker, I yield myself the balance of my time.
  Better coordination between Federal and State banking regulators will 
make oversight of third-party vendors and companies that provide a wide 
range of services for banks more effective. H.R. 241 helps accomplish 
that.
  I want to again thank the gentleman from Texas (Mr. Williams) for 
introducing this bill, as well as the gentleman from New York (Mr. 
Meeks) for his advocacy.

[[Page H7581]]

  I urge all of my colleagues to join me in supporting H.R. 241.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Levin of Michigan). The question is on 
the motion offered by the gentleman from Guam (Mr. San Nicolas) that 
the House suspend the rules and pass the bill, H.R. 241, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

                          ____________________