[House Report 115-592]
[From the U.S. Government Publishing Office]


115th Congress    }                                     {      Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {     115-592

======================================================================



 
     FINANCIAL STABILITY OVERSIGHT COUNCIL IMPROVEMENT ACT OF 2017

                                _______
                                

 March 9, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 4061]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4061) 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, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                          Purpose and Summary

    On October 10, 2017, Representative Dennis Ross introduced 
H.R. 4061, the ``Financial Stability Oversight Council 
Improvement Act'', which amends Title I of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank) to 
require the Financial Stability Oversight Council (FSOC), as it 
determines whether to subject a U.S. or a foreign nonbank 
financial company to supervision by the Board of Governors of 
the Federal Reserve System (Federal Reserve), to consider the 
appropriateness of imposing heightened prudential standards as 
opposed to other forms of regulation to mitigate identified 
risks to U.S. financial stability.

                  Background and Need for Legislation

    The goal of H.R. 4061 is to enhance transparency and 
procedural fairness of the nonbank systemically important 
financial institution (SIFI) designation process. Criticisms 
about FSOC's opaqueness are well known and H.R. 4061 will in 
the words of the National Association of Insurance 
Commissioners ``address many of our concerns and represent a 
positive step forward in improving FSOC's operations, 
processes, communication, and transparency.'' The proposed 
reforms in the Financial Stability Oversight Council 
Improvement Act address many of our concerns and represent a 
positive step forward in improving FSOC's operations, 
processes, communication, and transparency. The legislation 
would require the FSOC to evaluate the need to subject nonbanks 
to heightened prudential standards by the Federal Reserve and 
reevaluate annually and periodically, in coordination with the 
designated company and the appropriate prudential or market 
regulator, whether designated companies still pose a systemic 
risk to the financial system. Bank-style regulation, such as 
capital requirements, is fundamentally incompatible with the 
market-based entities, such as the asset management business 
model. Imposing bank-like standards on asset managers would 
increase costs and fees and reduce investment returns for 
savers. In a January 16, 2018 letter to the Committee, SIFMA 
noted, ``Designating an asset management company as a 
systemically important financial institution has significant 
consequences, imposing stringent, bank-like capital standards 
resulting in undue and burdensome costs that would be passed 
onto investors, ultimately harming their retirement savings and 
future financial security.'' The financial regulatory regime 
can better serve investors if companies, identified by either 
the FSOC or their functional regulator, have the opportunity 
first to address identified risks and then modify their 
business, structure, or operations prior to a SIFI designation.
    Section 113 of the Dodd-Frank Act authorizes the FSOC to 
determine that the material financial distress of a nonbank 
financial company could pose a threat to the financial 
stability of the United States. Once the FSOC makes a 
determination about a nonbank financial company, the nonbank 
financial company becomes subject to heightened prudential 
supervision and regulation by the Fed. Dodd-Frank requires the 
FSOC to consider a number of factors as it considers a SIFI 
determination. H.R. 4061 would add an additional factor to the 
FSOC's requirements before it can designate a nonbank financial 
company as systemically important. Specifically, H.R. 4061 
requires the FSOC to consider the ``appropriateness of the 
imposition of prudential standards as opposed to other forms of 
regulation to mitigate the identified risks.''
    Section 113(e) of the Dodd-Frank Act requires the FSOC to 
provide a nonbank financial company a written notice of a 
proposed designation determination, including an explanation of 
the basis of the proposed determination. Dodd-Frank entitles 
the nonbank financial company to a hearing and can submit 
written materials to the FSOC to contest a proposed 
determination. H.R. 4061 would require the FSOC, upon 
identifying a nonbank financial company as a potential threat 
to the financial stability of the United States, to provide the 
nonbank financial company with a written notice that explains 
with specificity the basis for identifying the company and 
would require a copy of the notice to be provided to the 
company's primary financial regulatory agency. For example, for 
an insurance company, the Dodd-Frank Act defines its primary 
financial regulatory agency as ``the State insurance authority 
of the State in which an insurance company is domiciled.'' 
Therefore, if the FSOC is considering the designation of an 
insurance company, H.R. 4061 would require the FSOC to notify 
the applicable state insurance regulator early in the 
designation process and would have an opportunity to address 
risks that the FSOC identifies.
    Upon its receipt of a notice of potential designation, H.R. 
4061 would afford a nonbank the opportunity to submit written 
materials to the FSOC for consideration and meet with the FSOC 
to discuss the FSOC's analysis. The legislation requires the 
FSOC to give the nonbank financial company a list of the public 
sources of information that FSOC used to evaluate a potential 
designation. The FSOC would then be permitted to approve a 
resolution that identifies with specificity any risks to the 
financial stability of the United States that the FSOC has 
identified relating to the nonbank financial company by a vote 
of at least two-thirds of the voting members of the FSOC, 
including the affirmative vote of the Treasury Secretary. The 
nonbank financial company's primary regulator would have 180 
days to consider the risks identified in the resolution and 
provide a written response to the FSOC 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. In 
addition, the nonbank financial company would be (i) permitted 
to meet with the FSOC to discuss the FSOC's analysis, (ii) 
permitted to submit written materials to the FSOC, (iii) 
entitled to receive an explanation from the FSOC of how any 
request by the FSOC for information from the nonbank financial 
company relates to the potential systemic risks posed by the 
company; and (iv) entitled to receive written notice when the 
FSOC deems its evidentiary record to be complete.
    After following the above process, the FSOC could, by a 
vote of at least two-thirds of the voting members of the FSOC, 
including the affirmative vote of the Treasury Secretary, make 
a proposed designation of a nonbank. Prior to making a proposed 
designation, the legislation requires the FSOC to determine 
that any proposed regulations or other regulatory actions taken 
by the primary regulator are insufficient to mitigate the risks 
identified in the resolution. If the FSOC makes a proposed 
designation, H.R. 4061 requires FSOC to provide 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 are 
insufficient. Following a proposed designation, the nonbank 
financial company would be permitted to request a hearing 
before the FSOC to contest its decision and present a 
remediation plan to modify the company's business, structure, 
or operations. If the FSOC approves the remediation plan, then 
the FSOC would monitor implementation of the plan. If the FSOC 
rejects the remediation plan, then the FSOC could vote to make 
a final designation.
    Section 113(d) currently requires the FSOC annually to 
reevaluate each determination and rescind any determination if 
at least two-thirds of the voting members of the FSOC, 
including the affirmative vote of the Treasury Secretary, 
determine that the material financial distress of the nonbank 
financial company could not pose a threat to the financial 
stability of the United States. H.R. 4061 would amend this 
provision and require the FSOC, in connection with its annual 
review, to allow each designated company (i) an opportunity to 
submit written materials to contest the determination, (ii) 
provide each designated company an opportunity to meet with the 
FSOC, and (iii) provide the designated company and its primary 
financial regulatory agency with the reasons for the FSOC's 
decision to maintain a designation. In addition, the bill 
requires the FSOC, at least every five years, to conduct a 
reevaluation of a determination and hold a vote on whether to 
rescind a determination. In connection with this five-year 
review, the legislation would permit the company to submit a 
remediation plan that would explain how the company could 
modify its business, structure, or operations. The FSOC would 
be required to consider whether the plan, if implemented, would 
cause the company to no longer pose a threat to the financial 
stability of the United States.
    H.R. 4061 would also require the FSOC to disclose in its 
annual report the number of nonbank financial companies from 
the previous year that were subject to preliminary analysis, 
further review, and a proposed or final determination. The FSOC 
would be required to publish information regarding its 
methodology for calculating any quantitative thresholds or 
other metrics used to identify nonbank financial companies for 
analysis by the FSOC. In addition, the FSOC would be required 
every five years to conduct a study of the FSOC's 
determinations and comprehensively assess the impact of such 
determinations, including whether such determinations are 
having the intended result of improving the financial stability 
of the United States.
    On November 17, 2017, Treasury, in response to an April 21, 
2017 Executive Order signed by President Trump, released a 
report on Financial Stability Oversight Council Designations 
that recommended many of the provisions in H.R. 4061, including 
engagement with nonbank financial companies under review, 
engagement with primary regulators, and increasing public 
transparency in regards to determinations or rescissions of 
determinations. Additionally the report recommends that FSOC 
provide a clear ``off-ramp'' for designated nonbank financial 
companies. Ultimately H.R. 4061 is smart regulation and as the 
Investment Company Institute noted that the legislation will 
make the ``nonbank SIFI designation process more accountable 
and transparent, and ensures that a SIFI designation is only 
used when systemic risk cannot be addressed more effectively by 
an entity's primary regulator or by an action of the entity 
itself.''

                                Hearings

    The Committee on Financial Services held a hearing 
examining matters relating to H.R. 4061 on April 26, 2017 and 
April 28, 2017.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
January 17, 2018, and January 18, 2018, and ordered H.R. 4061 
to be reported favorably to the House without amendment by a 
recorded vote of 45 yeas to 10 nays (Record vote no. FC-146), a 
quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 45 yeas to 10 nays 
(Record vote no. FC-146), a quorum being present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 4061 
will promote accountability in the designation of systemically 
important nonbank financial institutions for the Federal 
Reserve supervision and regulation by, among other things, 
reforming the process leading to designation and requiring 
review of whether such designations remain appropriate and are 
having their intended effect of reducing risks to the U.S. 
financial system.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, March 8, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4061, the 
Financial Stability Oversight Council Improvement Act of 2017.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 4061--Financial Stability Oversight Council Improvement Act of 
        2017

    Summary: H.R. 4061 would change the procedures that federal 
regulators follow for determining which nonbank financial 
institutions should be designated by the Financial Stability 
Oversight Council (FSOC) as systemically important financial 
institutions (SIFIs). For example, the bill would increase the 
frequency and complexity of studies, reviews, and meetings that 
must be completed before the FSOC can designate a nonbank 
company as a SIFI. The bill also would allow companies to 
contest prior designations on the basis of the new criteria and 
procedures.
    CBO estimates that enacting H.R. 4061 would increase net 
direct spending by $29 million and reduce revenues by $5 
million over the 2019-2027 period. CBO estimates that, on net, 
budget deficits would increase by $34 million over the 2018-
2027 period. Because enacting H.R. 4061 would affect direct 
spending and revenues, pay-as-you-go procedures apply. CBO also 
estimates that implementing the bill would cost $1 million over 
the 2019-2022 period, subject to the availability of 
appropriated funds.
    CBO estimates that enacting H.R. 4061 would not increase 
net direct spending or on-budget deficits by more than $2.5 
billion in any of the four consecutive 10-year periods 
beginning in 2028.
    H.R. 4061 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA).
    If the FSOC, the Federal Housing Finance Agency (FHFA), the 
National Credit Union Administration (NCUA), the Office of the 
Comptroller of the Currency (OCC), or the Securities and 
Exchange Commission (SEC) raises the fees they charge to offset 
the costs associated with implementing the bill, H.R. 4061 
would increase the cost of an existing mandate on private 
entities required to pay those fees. Using information from the 
affected agencies, CBO estimates that the incremental cost of 
the mandate would be small. CBO estimates that the incremental 
cost of the mandate would fall well below the annual threshold 
for private-sector mandates established in UMRA ($156 million 
in 2017, adjusted annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 4061 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      By fiscal year, in millions of dollars--
                                                           ---------------------------------------------------------------------------------------------
                                                             2019    2020    2021    2022    2023    2024    2025    2026    2027   2019-2022  2019-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              INCREASES IN DIRECT SPENDING
 
Additional Costs to Resolve Nonbank Financial
 Institutions:
    Estimated Budget Authority............................       0       0       0       0       1       3       4       4       4         0         16
    Estimated Outlays.....................................       0       0       0       0       1       3       4       4       4         0         16
Administrative Costs to Financial Regulators:
    Estimated Budget Authority............................       1       1       1       1       1       2       2       2       2         5         13
    Estimated Outlays.....................................       1       1       1       1       1       2       2       2       2         5         13
    Total:
        Estimated Budget Authority........................       1       1       1       1       2       5       6       6       6         5         29
        Estimated Outlays.................................       1       1       1       1       2       5       6       6       6         5         29
 
                                                                  DECREASES IN REVENUES
 
Estimated Revenues........................................       *      -1      -1      -1      -1      -1      -1      -1       *        -2         -5
 
                                        NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
 
Effect on the Deficit.....................................       1       2       2       2       3       6       6       6       6         7         34
 
                                                     INCREASES IN SPENDING SUBJECT TO APPROPRIATION
 
Estimated Net Authorization Level.........................       *       *       *       *       *       *       *       *       *         1          3
Estimated Outlays.........................................       *       *       *       *       *       *       *       *       *         1          3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components may not sum to totals because of rounding; * = between -$500,000 and $500,000.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
4061 will be enacted late in 2018. Estimated spending is based 
on historical patterns for similar regulatory activities. The 
budgetary effects of the legislation would stem from increased 
administrative costs to the federal financial regulators and 
additional costs to resolve certain financial institutions.

Background

    Under current law, the voting membership of the FSOC 
consists of one independent member with insurance expertise and 
the heads of nine federal agencies--the FHFA, NCUA, OCC, SEC, 
the Consumer Financial Protection Bureau (CFPB), the Commodity 
Futures Trading Commission (CFTC), the Federal Deposit 
Insurance Corporation (FDIC), the Federal Reserve System, and 
the Department of the Treasury.
    The operating costs for six of those banking regulators 
(the CFPB, FDIC, FHFA, FSOC, NCUA, and OCC) are classified as 
direct spending. All of those agencies except the CFPB collect 
fees to offset their operating costs. Because of lags between 
the time that costs are incurred and fees are imposed, not all 
additional costs resulting from the bill would be recovered 
within the next 10 years. Costs incurred by the Federal Reserve 
would reduce remittances to the Treasury (such remittances are 
recorded as revenues). Any costs for the CFTC, SEC, and the 
Treasury are subject to the availability of annual 
appropriations. However, the SEC is authorized under current 
law to collect fees sufficient to offset its annual 
appropriation, and CBO estimates that the net costs to the SEC 
would be negligible, assuming appropriation actions consistent 
with that authority.

Additional costs to the FDIC to resolve failed financial institutions

    Under current law, nonbank SIFIs may be subject to what is 
known as enhanced prudential regulation by the Board of 
Governors of the Federal Reserve. Using information from 
national credit-rating agencies and other experts, CBO 
concludes that standards similar to those imposed on banking 
institutions improve the safety and soundness of the affected 
institutions. CBO estimates that such regulation lowers the 
FDIC's cost of resolving insolvent institutions through the 
Orderly Liquidation Fund (OLF), primarily because those 
measures should result in shareholders' and other creditors' 
absorbing a larger share of any losses in the event of 
insolvency.
    Although only one nonbank institution is currently 
classified as a SIFI, CBO anticipates that others may be 
designated in the future as a result of FSOC's ongoing 
assessments of such companies.\1\ Based on the scope of past 
oversight of nonbank SIFIs, CBO projects that under current 
law, the enhanced prudential regulation of such companies will 
reduce the net deficit over the 2019-2027 period by about $60 
million, less than one-half of one percent of CBO's projected 
cost of the OLF over that period.
---------------------------------------------------------------------------
    \1\In 2014, four nonbank institutions were designated as SIDIs. By 
the end of fiscal year 2017, two of those companies had reduced the 
size of their operations and risks, resulting in a rescission of their 
designation. The status of a third firm is under judicial review. As a 
result, only one nonbank financial company currently is being regulated 
as a SIFI. See Standard & Poor's, ``Nonbank SIFI,'' a Currently 
Symbolic Designation, Is Down to One Designee (October 2017).
---------------------------------------------------------------------------
    Based on recent trends in the pace of FSOC's review of 
nonbank institutions, CBO anticipates that implementing the 
bill would roughly double the time needed to review and 
possibly approve any new designations. For this estimate, CBO 
assumes that such delays would result in a corresponding 
reduction in the assets of nonbank companies subject to 
enhanced prudential regulation relative to current law, 
resulting in a net increase in the deficit of $15 million over 
the 2019-2027 period. That estimate reflects an increase in 
direct spending of $16 million and an increase in revenues of 
$1 million from fees paid by large financial institutions to 
offset costs incurred by the OLF. Most of the costs incurred in 
the 10-year period would be offset by fees collected after 
2027.

Additional administrative costs

    Compared with current procedures, H.R. 4061 would increase 
the frequency and complexity of studies, reviews, and meetings 
that must be completed for the FSOC to complete the designation 
process for nonbank financial institutions. CBO estimates an 
increase in work for the FSOC and other financial regulators 
that are charged with designating SIFIs. Using information from 
the affected financial regulators, CBO expects that the FSOC 
and federal financial regulators would need to hire about 15 
additional employees (with average annual costs of around 
$225,000 each) to comply with the requirements of the bill. CBO 
expects that those employees would primarily be at agencies 
with direct spending authority, although some could work for 
agencies whose spending is subject to appropriation.
    In total, CBO estimates that enacting the administrative 
provisions of H.R. 4061 would cost $35 million over the 2019-
2027 period to conduct the expanded review and designation 
process. Of those costs:
           $26 million would be for direct spending 
        agencies and would be offset by $13 million in fees,
           $6 million would result from reduced 
        remittances by the Federal Reserve, and
           $3 million would be for agencies with 
        spending subject to annual appropriations.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table.

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 4061, THE FINANCIAL STABILITY OVERSIGHT COUNCIL IMPROVEMENT ACT OF 2017, AS ORDERED REPORTED BY THE HOUSE
                                                   COMMITTEE ON FINANCIAL SERVICES ON JANUARY 18, 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2018-2022  2018-2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact....................       0       1       2       2       2       3       6       6       6       6         7         34
Memorandum:
    Changes in Outlays............................       0       1       1       1       1       2       5       6       6       6         5         29
    Changes in Revenues...........................       0       0      -1      -1      -1      -1      -1      -1      -1       0        -2         -5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term direct spending and deficits: CBO 
estimates that enacting H.R. 4061 would not increase net direct 
spending or on-budget deficits by more than $2.5 billion in any 
of the four consecutive 10-year periods beginning in 2028.
    Mandates: If the FHFA, FSOC, NCUA, OCC, or SEC increased 
fees to offset the costs associated with implementing the bill, 
H.R. 4061 would increase the cost of an existing mandate on 
private entities required to pay those fees. Using information 
from the affected agencies, CBO estimates that the incremental 
cost of the mandate would fall well below the annual threshold 
for private-sector mandates established in UMRA ($156 million 
in 2017, adjusted annually for inflation).
    The bill contains no intergovernmental mandates as defined 
in UMRA.
    Estimate prepared by: Federal Costs: Stephen Rabent (for 
the FSOC), Kathleen Gramp (for the OLF), and Sarah Puro (for 
the FDIC, the OCC, and the NCUA); Revenues: Nathaniel Frentz; 
Mandates: Rachel Austin.
    Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed 
rulemakings: The Committee estimates that the bill requires no 
directed rulemakings within the meaning of such section.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 4061 as the ``Financial Stability 
Oversight Council Improvement Act of 2017''.

Section 2. SIFI designation process

    Amends section 113 of the Financial Stability Act of 2010 
to require the FSOC to examine the impact on the U.S. financial 
system of imposing heightened prudential standards by the 
Federal Reserve in lieu of other regulation.
    In addition, this section directs the FSOC to reevaluate, 
both annually and periodically, final determinations of 
systemic risk regarding a nonbank financial company under 
supervision by the Federal Reserve. Where a reevaluation 
determines that a nonbank financial company no longer poses a 
threat to the financial stability of the United States, 
affirmed by a vote of two-thirds of the FSOC voting membership, 
this bill directs FSOC to rescind the determination.
    Further, this section prescribes procedural requirements 
for proposed FSOC determinations and final decision-making, 
including: written notification, opportunity to submit written 
materials to FSOC as part of the initial evaluation, 
opportunity to meet with the FSOC to discuss the analysis, and 
disclosure of the public sources of information considered by 
the FSOC as part of its analysis.
    Finally, this section directs the FSOC every five years to 
study: (1) the impact of its determinations to subject nonbank 
financial companies to supervision by the Federal Reserve and 
prudential standards, and (2) whether such determinations have 
the intended result of improving domestic financial stability.

Section 3. Rule of construction

    This section stipulates that this bill does not limit the 
powers of the FSOC to implement their emergency powers under 
section 113(f) of the Financial Stability Act.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                    FINANCIAL STABILITY ACT OF 2010



           *       *       *       *       *       *       *
TITLE I--FINANCIAL STABILITY

           *       *       *       *       *       *       *


Subtitle A--Financial Stability Oversight Council

           *       *       *       *       *       *       *


SEC. 113. AUTHORITY TO REQUIRE SUPERVISION AND REGULATION OF CERTAIN 
                    NONBANK FINANCIAL COMPANIES.

  (a) U.S. Nonbank Financial Companies Supervised by the Board 
of Governors.--
          (1) Determination.--The Council, on a nondelegable 
        basis and by a vote of not fewer than \2/3\ of the 
        voting members then serving, including an affirmative 
        vote by the Chairperson, may determine that a U.S. 
        nonbank financial company shall be supervised by the 
        Board of Governors and shall be subject to prudential 
        standards, in accordance with this title, if the 
        Council determines that material financial distress at 
        the U.S. nonbank financial company, or the nature, 
        scope, size, scale, concentration, interconnectedness, 
        or mix of the activities of the U.S. nonbank financial 
        company, could pose a threat to the financial stability 
        of the United States.
          (2) Considerations.--In making a determination under 
        paragraph (1), the Council shall consider--
                  (A) the extent of the leverage of the 
                company;
                  (B) the extent and nature of the off-balance-
                sheet exposures of the company;
                  (C) the extent and nature of the transactions 
                and relationships of the company with other 
                significant nonbank financial companies and 
                significant bank holding companies;
                  (D) the importance of the company as a source 
                of credit for households, businesses, and State 
                and local governments and as a source of 
                liquidity for the United States financial 
                system;
                  (E) the importance of the company as a source 
                of credit for low-income, minority, or 
                underserved communities, and the impact that 
                the failure of such company would have on the 
                availability of credit in such communities;
                  (F) the extent to which assets are managed 
                rather than owned by the company, and the 
                extent to which ownership of assets under 
                management is diffuse;
                  (G) the nature, scope, size, scale, 
                concentration, interconnectedness, and mix of 
                the activities of the company;
                  (H) the degree to which the company is 
                already regulated by 1 or more primary 
                financial regulatory agencies;
                  (I) the amount and nature of the financial 
                assets of the company;
                  (J) the amount and types of the liabilities 
                of the company, including the degree of 
                reliance on short-term funding; [and]
                  (K) the appropriateness of the imposition of 
                prudential standards as opposed to other forms 
                of regulation to mitigate the identified risks; 
                and
                  [(K)] (L) any other risk-related factors that 
                the Council deems appropriate.
  (b) Foreign Nonbank Financial Companies Supervised by the 
Board of Governors.--
          (1) Determination.--The Council, on a nondelegable 
        basis and by a vote of not fewer than \2/3\ of the 
        voting members then serving, including an affirmative 
        vote by the Chairperson, may determine that a foreign 
        nonbank financial company shall be supervised by the 
        Board of Governors and shall be subject to prudential 
        standards, in accordance with this title, if the 
        Council determines that material financial distress at 
        the foreign nonbank financial company, or the nature, 
        scope, size, scale, concentration, interconnectedness, 
        or mix of the activities of the foreign nonbank 
        financial company, could pose a threat to the financial 
        stability of the United States.
          (2) Considerations.--In making a determination under 
        paragraph (1), the Council shall consider--
                  (A) the extent of the leverage of the 
                company;
                  (B) the extent and nature of the United 
                States related off-balance-sheet exposures of 
                the company;
                  (C) the extent and nature of the transactions 
                and relationships of the company with other 
                significant nonbank financial companies and 
                significant bank holding companies;
                  (D) the importance of the company as a source 
                of credit for United States households, 
                businesses, and State and local governments and 
                as a source of liquidity for the United States 
                financial system;
                  (E) the importance of the company as a source 
                of credit for low-income, minority, or 
                underserved communities in the United States, 
                and the impact that the failure of such company 
                would have on the availability of credit in 
                such communities;
                  (F) the extent to which assets are managed 
                rather than owned by the company and the extent 
                to which ownership of assets under management 
                is diffuse;
                  (G) the nature, scope, size, scale, 
                concentration, interconnectedness, and mix of 
                the activities of the company;
                  (H) the extent to which the company is 
                subject to prudential standards on a 
                consolidated basis in its home country that are 
                administered and enforced by a comparable 
                foreign supervisory authority;
                  (I) the amount and nature of the United 
                States financial assets of the company;
                  (J) the amount and nature of the liabilities 
                of the company used to fund activities and 
                operations in the United States, including the 
                degree of reliance on short-term funding; [and]
                  (K) the appropriateness of the imposition of 
                prudential standards as opposed to other forms 
                of regulation to mitigate the identified risks; 
                and
                  [(K)] (L) any other risk-related factors that 
                the Council deems appropriate.
  (c) Antievasion.--
          (1) Determinations.--In order to avoid evasion of 
        this title, the Council, on its own initiative or at 
        the request of the Board of Governors, may determine, 
        on a nondelegable basis and by a vote of not fewer than 
        \2/3\ of the voting members then serving, including an 
        affirmative vote by the Chairperson, that--
                  (A) material financial distress related to, 
                or the nature, scope, size, scale, 
                concentration, interconnectedness, or mix of, 
                the financial activities conducted directly or 
                indirectly by a company incorporated or 
                organized under the laws of the United States 
                or any State or the financial activities in the 
                United States of a company incorporated or 
                organized in a country other than the United 
                States would pose a threat to the financial 
                stability of the United States, based on 
                consideration of the factors in subsection 
                (a)(2) or (b)(2), as applicable;
                  (B) the company is organized or operates in 
                such a manner as to evade the application of 
                this title; and
                  (C) such financial activities of the company 
                shall be supervised by the Board of Governors 
                and subject to prudential standards in 
                accordance with this title, consistent with 
                paragraph (3).
          (2) Report.--Upon making a determination under 
        paragraph (1), the Council shall submit a report to the 
        appropriate committees of Congress detailing the 
        reasons for making such determination.
          (3) Consolidated supervision of only financial 
        activities; establishment of an intermediate holding 
        company.--
                  (A) Establishment of an intermediate holding 
                company.--Upon a determination under paragraph 
                (1), the company that is the subject of the 
                determination may establish an intermediate 
                holding company in which the financial 
                activities of such company and its subsidiaries 
                shall be conducted (other than the activities 
                described in section 167(b)(2)) in compliance 
                with any regulations or guidance provided by 
                the Board of Governors. Such intermediate 
                holding company shall be subject to the 
                supervision of the Board of Governors and to 
                prudential standards under this title as if the 
                intermediate holding company were a nonbank 
                financial company supervised by the Board of 
                Governors.
                  (B) Action of the board of governors.--To 
                facilitate the supervision of the financial 
                activities subject to the determination in 
                paragraph (1), the Board of Governors may 
                require a company to establish an intermediate 
                holding company, as provided for in section 
                167, which would be subject to the supervision 
                of the Board of Governors and to prudential 
                standards under this title, as if the 
                intermediate holding company were a nonbank 
                financial company supervised by the Board of 
                Governors.
          (4) Notice and opportunity for hearing and final 
        determination; judicial review.--Subsections (d) 
        through (h) shall apply to determinations made by the 
        Council pursuant to paragraph (1) in the same manner as 
        such subsections apply to nonbank financial companies.
          (5) Covered financial activities.--For purposes of 
        this subsection, the term ``financial activities''--
                  (A) means activities that are financial in 
                nature (as defined in section 4(k) of the Bank 
                Holding Company Act of 1956);
                  (B) includes the ownership or control of one 
                or more insured depository institutions; and
                  (C) does not include internal financial 
                activities conducted for the company or any 
                affiliate thereof, including internal treasury, 
                investment, and employee benefit functions.
          (6) Only financial activities subject to prudential 
        supervision.--Nonfinancial activities of the company 
        shall not be subject to supervision by the Board of 
        Governors and prudential standards of the Board. For 
        purposes of this Act, the financial activities that are 
        the subject of the determination in paragraph (1) shall 
        be subject to the same requirements as a nonbank 
        financial company supervised by the Board of Governors. 
        Nothing in this paragraph shall prohibit or limit the 
        authority of the Board of Governors to apply prudential 
        standards under this title to the financial activities 
        that are subject to the determination in paragraph (1).
  [(d) Reevaluation and Rescission.--The Council shall--
          [(1) not less frequently than annually, reevaluate 
        each determination made under subsections (a) and (b) 
        with respect to such nonbank financial company 
        supervised by the Board of Governors; and
          [(2) rescind any such determination, 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 that the nonbank financial 
        company no longer meets the standards under subsection 
        (a) or (b), as applicable.
  [(e) Notice and Opportunity for Hearing and Final 
Determination.--
          [(1) In general.--The Council shall 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.
          [(2) Hearing.--Not later than 30 days after the date 
        of receipt of any notice of a proposed determination 
        under paragraph (1), the nonbank financial company may 
        request, in writing, an opportunity for a written or 
        oral hearing before the Council to contest the proposed 
        determination. Upon receipt of a timely request, the 
        Council shall fix a time (not later than 30 days after 
        the date of receipt of the request) and place at which 
        such company may appear, personally or through counsel, 
        to submit written materials (or, at the sole discretion 
        of the Council, oral testimony and oral argument).
          [(3) Final determination.--Not later than 60 days 
        after the date of a hearing under paragraph (2), the 
        Council shall notify the nonbank financial company of 
        the final determination of the Council, which shall 
        contain a statement of the basis for the decision of 
        the Council.
          [(4) No hearing requested.--If a nonbank financial 
        company does not make a timely request for a hearing, 
        the Council shall notify the nonbank financial company, 
        in writing, of the final determination of the Council 
        under subsection (a) or (b), as applicable, not later 
        than 10 days after the date by which the company may 
        request a hearing under paragraph (2).]
  (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).
  (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.
  (f) Emergency Exception.--
          (1) In general.--The Council may waive or modify the 
        requirements of subsection (e) with respect to a 
        nonbank financial company, if the Council determines, 
        by a vote of not fewer than \2/3\ of the voting members 
        then serving, including an affirmative vote by the 
        Chairperson, that such waiver or modification is 
        necessary or appropriate to prevent or mitigate threats 
        posed by the nonbank financial company to the financial 
        stability of the United States.
          (2) Notice.--The Council shall provide notice of a 
        waiver or modification under this subsection to the 
        nonbank financial company concerned as soon as 
        practicable, but not later than 24 hours after the 
        waiver or modification is granted.
          (3) International coordination.--In making a 
        determination under paragraph (1), the Council shall 
        consult with the appropriate home country supervisor, 
        if any, of the foreign nonbank financial company that 
        is being considered for such a determination.
          (4) Opportunity for hearing.--The Council shall allow 
        a nonbank financial company to request, in writing, an 
        opportunity for a written or oral hearing before the 
        Council to contest a waiver or modification under this 
        subsection, not later than 10 days after the date of 
        receipt of notice of the waiver or modification by the 
        company. Upon receipt of a timely request, the Council 
        shall fix a time (not later than 15 days after the date 
        of receipt of the request) and place at which the 
        nonbank financial company may appear, personally or 
        through counsel, to submit written materials (or, at 
        the sole discretion of the Council, oral testimony and 
        oral argument).
          (5) Notice of final determination.--Not later than 30 
        days after the date of any hearing under paragraph (4), 
        the Council shall notify the subject nonbank financial 
        company of the final determination of the Council under 
        this subsection, which shall contain a statement of the 
        basis for the decision of the Council.
  (g) Consultation.--The Council shall consult with the primary 
financial regulatory agency, if any, for each nonbank financial 
company or subsidiary of a nonbank financial company that is 
being considered for supervision by the Board of Governors 
under this section [before the Council makes any final 
determination] from the outset of the Council's consideration 
of the company, including before the Council makes any proposed 
or final determination with respect to such nonbank financial 
company under subsection (a), (b), or (c).
  (h) Judicial Review.--If the Council makes a final 
determination under this section with respect to a nonbank 
financial company, such nonbank financial company may, not 
later than 30 days after the date of receipt of the notice of 
final determination under subsection (d)(2), (e)(3), or (f)(5), 
bring an action in the United States district court for the 
judicial district in which the home office of such nonbank 
financial company is located, or in the United States District 
Court for the District of Columbia, for an order requiring that 
the final determination be rescinded, and the court shall, upon 
review, dismiss such action or direct the final determination 
to be rescinded. Review of such an action shall be limited to 
whether the final determination made under this section was 
arbitrary and capricious.
  (i) International Coordination.--In exercising its duties 
under this title with respect to foreign nonbank financial 
companies, foreign-based bank holding companies, and cross-
border activities and markets, the Council shall consult with 
appropriate foreign regulatory authorities, to the extent 
appropriate.
  (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.

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                             MINORITY VIEWS

    H.R. 4061 is an attempt to prevent the Financial Stability 
Oversight Council (FSOC) from doing its statutorily-required 
job of preventing another financial crisis by bogging it and 
its designation process down in endless analysis and 
litigation. Congress created the FSOC when it passed the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank) for the purpose of identifying and responding to risks 
to financial stability, as well as eliminating expectations the 
government will shield market participants from losses. 
Congress specifically granted the FSOC authority to determine 
that a U.S. nonbank financial company should be supervised by 
the Federal Reserve and subject to enhanced prudential 
standards if financial distress at, or the activities of the 
company, would pose a threat to U.S. financial stability.
    The Dodd-Frank Act contains guidelines for identifying such 
systemically important financial institutions (SIFIs) and 
activities, including the consideration of risks like leverage, 
off-balance sheet exposures, transactions and relationships 
with other financial companies, the impact of the company as a 
creditor, assets and liabilities, current regulation and 
supervision, and the company's financial activities. The Act 
also requires the FSOC to take certain steps to ensure 
transparency and due process. For example, after making a 
proposed designation, the FSOC must submit a report to the 
House Financial Services and Senate Banking Committees 
detailing the reasons for making its designation and provide 
notice and an explanation to the nonbank financial company. The 
company is given 30 days after receipt of the notice to contest 
FSOC's determination and an additional 30 days after a final 
determination to appeal the determination in U.S. courts.
    Pursuant to the Dodd-Frank Act, the Council established a 
three-stage process for the designation of nonbank financial 
companies. In 2015, following months of evaluation and 
engagement with financial companies, trade associations, 
nonbank financial companies subject to previous FSOC 
determinations, public interest groups, and Congressional 
stakeholders, the FSOC adopted 17 changes designed to promote 
transparency related to the evaluation of nonbank financial 
companies. Generally, these changes include: informing 
companies earlier in the process that they are under review; 
providing the company with additional opportunities to engage 
with and present information to the FSOC, its staff and their 
regulator; and making more information about FSOC designations 
public.
    H.R. 4061 goes much further and more than doubles time it 
would take for the FSOC designate a company like American 
International Group (AIG). H.R. 4061 would take the FSOC's 
already lengthy and deliberative two year process to more than 
four years. Such delays would allow companies to avoid 
prudential measures intended to mitigate threats to our economy 
for the benefit of their own shareholders. H.R. 4061 seeks to 
provide institutions that the markets likely conclude are 
``too-big-to-fail'' with a statutory roadmap to challenge the 
FSOC indefinitely.
    For these reasons, we oppose this bill.

                                   Maxine Waters.
                                   Carolyn B. Maloney.
                                   Keith Ellison.
                                   Al Green.
                                   Stephen F. Lynch.

                                  [all]