[House Report 117-355]
[From the U.S. Government Publishing Office]


117th Congress }                                          { Report
                        HOUSE OF REPRESENTATIVES
 2nd Session   }                                          { 117-355

======================================================================
 
        PROMOTING DIVERSITY AND INCLUSION IN BANKING ACT OF 2021

                                _______
                                

  June 7 2022.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Ms. Waters, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2516]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2516) to amend the Dodd-Frank Wall Street Reform 
and Consumer Protection Act to require Federal banking 
regulators to include a diversity and inclusion component in 
the Uniform Financial Institutions Rating System, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     3
Section-by-Section Analysis of the Legislation...................     3
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     5
Committee Oversight Findings.....................................     7
Statement of Performance Goals and Objectives....................     7
New Budget Authority and C.B.O. Cost Estimate....................     7
Committee Cost Estimate..........................................     9
Federal Mandates Statement.......................................     9
Advisory Committee Statement.....................................     9
Applicability to Legislative Branch..............................     9
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
  Benefits.......................................................     9
Duplicative Federal Programs.....................................     9
Changes to Existing Law..........................................    10

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Promoting Diversity and Inclusion in 
Banking Act of 2021''.

SEC. 2. DIVERSITY AND INCLUSION RATINGS.

  (a) In General.--The Dodd-Frank Wall Street Reform and Consumer 
Protection Act (12 U.S.C. 5301 et seq.) is amended by inserting after 
section 342 the following:

``SEC. 342A. DIVERSITY AND INCLUSION RATINGS.

  ``(a) In General.--The Board of Governors, the Comptroller of the 
Currency, the Corporation, and the National Credit Union Administration 
Board, in assigning a rating to a depository institution under the 
Uniform Financial Institutions Rating System (or an equivalent rating 
by any such agency under a comparable rating system) shall include a 
diversity and inclusion component that examines--
          ``(1) whether the depository institution has effective 
        policies in place to encourage diversity and inclusion in the 
        hiring practices of the institution;
          ``(2) whether the depository institution provides training to 
        the employees of the institution, that is appropriate to the 
        size and resources of the institution, on diversity and 
        inclusion; and
          ``(3)(A) with respect to a depository institution with total 
        consolidated assets of $1,000,000,000 or less, whether such 
        depository institution has designated an individual to serve as 
        a Diversity and Inclusion Officer who reports to the Chief 
        Executive Officer of the institution on all diversity and 
        inclusion matters; or
          ``(B) with respect to a depository institution with total 
        consolidated assets of more than $1,000,000,000, whether such 
        depository institution--
                  ``(i) has designated an individual to serve as a 
                Diversity and Inclusion Officer; and
                  ``(ii) has established a committee for diversity and 
                inclusion that holds meetings quarterly and that 
                includes in its membership the Diversity and Inclusion 
                Officer designated under clause (i) and the Chief 
                Executive Officer of the institution.
  ``(b) Application to Minority Depository Institutions.--In carrying 
out subsection (a) with respect to minority depository institutions, 
the Board of Governors, the Comptroller of the Currency, the 
Corporation, and the National Credit Union Administration Board shall--
          ``(1) assign such institutions the most favorable rating with 
        respect to the diversity and inclusion component described 
        under subsection (a); and
          ``(2) exempt such institutions from any examination 
        procedures related to the diversity and inclusion component 
        described under subsection (a).
  ``(c) Definitions.--In this section:
          ``(1) Depository institution.--The term `depository 
        institution' means a depository institution or a credit union.
          ``(2) Minority depository institution.--The term `minority 
        depository institution' means an entity that is--
                  ``(A) a minority depository institution, as defined 
                in section 308 of the Financial Institutions Reform, 
                Recovery, and Enforcement Act of 1989 (12 U.S.C. 1463 
                note); or
                  ``(B) considered to be a minority depository 
                institution by--
                          ``(i) the appropriate Federal banking agency; 
                        or
                          ``(ii) the National Credit Union 
                        Administration, in the case of an insured 
                        credit union.''.
  (b) Clerical Amendment.--The table of contents for the Dodd-Frank 
Wall Street Reform and Consumer Protection Act is amended by inserting 
after the item relating to section 342 the following:

``Sec. 342A. Diversity and inclusion ratings.''.

                          Purpose and Summary

    On April 21, 2021, Representative Green introduced H.R. 
2516, the ``Promoting Diversity and Inclusion in Banking Act of 
2021'', which would require Federal banking regulators to 
include a diversity and inclusion component in the CAMELS 
rating system to evaluate how federally insured depository 
institutions are promoting diversity and inclusion. 
Specifically, institutions would be rated on whether they: have 
policies to encourage diversity and inclusion in their hiring 
practices; provide training to their employees on diversity and 
inclusion; and designate an individual to serve as the 
Diversity and Inclusion Officer (DIO) who reports to the CEO. 
Depository institutions with more than $1 billion in total 
assets would be required to establish a committee for diversity 
and inclusion that holds quarterly meetings with the CEO and 
DIO.

                  Background and Need for Legislation

    Federal banking regulators examine and rate a bank or 
credit union based on the Uniform Financial Institutions 
Ratings System (UFIRS), more commonly referred to as the CAMELS 
rating system. The institution receives a rating from 1 (best) 
to 5 (worst) across six ``CAMELS'' components--capital 
adequacy, asset quality, management, earnings, liquidity, and 
sensitivity to market risk--as well as a composite rating. 
While management is rated generally under the current system, 
management's approach to diversity and inclusion, such as 
ensuring its hiring policies encourage diversity and 
inclusion--is not, even though diverse and inclusive 
organizations have been found to be more productive and 
profitable. Relatedly, a lack of diversity poses a safety and 
soundness risk, as evidenced during the financial crisis when 
non-diverse institutions made more predatory loans while gender 
diversity in leadership positions led to ``lower levels of non-
performing loans''' and greater stability during the financial 
crisis.
    Moreover, Section 342 of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act of 2010 established Offices of 
Minority and Women Inclusion (OMWI) at various financial 
regulators, including the Board of Governors of the Federal 
Reserve System (Fed), Federal Deposit Insurance Corporation 
(FDIC), Office of the Comptroller of the Currency (OCC), and 
National Credit Union Administration (NCUA). OMWI Directors are 
mandated to assess the diversity policies and practices of 
their regulated entities. In its 2020 annual report to 
Congress, the FDIC OMWI found that despite having fewer 
resources, small community banks were incorporating diversity 
into their workforce practices, and that ``more institutions 
are recognizing the importance of integrating diversity and 
inclusion into their corporate culture.'' Additionally, for 
those that responded to an NCUA survey, 42% of credit unions 
have a written diversity and inclusion policy approved by 
senior leadership; 60% have a senior official focused on 
diversity and inclusion; and 61% regularly conduct training on 
equal employment as well as diversity and inclusion. Instead of 
relying on voluntary industry surveys, this legislation would 
help ensure depository institutions have policies and practices 
in place that promote diversity and inclusion.

                      Section-by-Section Analysis


Section 1. Short title

     This Act may be cited as the ``Promoting Diversity 
and Inclusion in Banking Act of 2021''

Section 2. Diversity and inclusion ratings

     Amends Dodd-Frank Wall Street Reform and Consumer 
Protection Act by inserting after section 342, the following:
``Section 342A. Diversity and inclusion ratings
     This section requires the Board of Governors, the 
Comptroller of the Currency, the Corporation, and the National 
Credit Union Administration Board to include a diversity and 
inclusion component when assigning ratings to depository 
institutions.
           The diversity and inclusion component 
        must include whether the institution has effective 
        policies to encourage diversity and inclusion in hiring 
        practices and whether the institution provides 
        diversity and inclusion training to employees that is 
        appropriate to the size and resources of the 
        institutions.
           For institutions with total consolidated 
        assets of $1,000,000,000 or less, the diversity and 
        inclusion component must also include whether the 
        institution has a designated Diversity and Inclusion 
        Officer who reports to the CEO on all diversity and 
        inclusion matters.
           For institutions with total consolidated 
        assets of more than $1,000,000,000, the diversity and 
        inclusion component must also include whether the 
        institution has:
                  D Designated an individual to serve as a 
                Diversity and Inclusion officer; and
                  D Has established a committee for diversity 
                and inclusion that holds meeting quarterly and 
                that includes the Diversity and Inclusion 
                officer and the CEO.
           This section also requires the Board of 
        Governors, the Comptroller of the Currency, the 
        Corporation, and the National Credit Union 
        Administration Board to:
                  D Assign the most favorable rating based on 
                subsection (a) components; and
                  D Exempt institutions from any examination 
                procedures related to subsection (a) 
                components.
     This section also defines depository institution, 
minority depository institution and makes necessary clerical 
amendments.''

                                Hearings

    For the purposes of section 3(c)(6) of House Rule XIII, the 
Committee on Financial Services considered H.R. 2516 at a Full 
Committee hearing on March 10, 2021 entitled, ``Justice for 
All: Achieving Racial Equity through Fair Access to Housing and 
Financial Services''' and a Diversity & Inclusion Subcommittee 
hearing entitled ``By the Numbers: How Diversity Data Can 
Measure Commitment to Diversity, Equity and Inclusion,'' on 
March 18, 2021.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
April 21, 2021 and ordered H.R. 2516 to be reported favorably 
to the House with an amendment in the nature of a substitute by 
a vote of 30 yeas and 23 nays, a quorum being present.

                  Committee Votes and Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of H.R. 2516: Ordered reported to the House, as 
amended, with a favorable recommendation by a recorded vote of 
30 yeas and 23 nays.




  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

             Statement of Performance Goals and Objectives

    Pursuant to clause (3)(c) of rule XIII of the Rules of the 
House of Representatives, the goals of H.R. 2516 are to require 
Federal banking regulators to include a diversity and inclusion 
component in the CAMELS rating system to evaluate how federally 
insured depository institutions are promoting diversity and 
inclusion.

               New Budget Authority and CBO Cost Estimate

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974, and pursuant to clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 2516 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, January 11, 2022.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2516, the 
Promoting Diversity and Inclusion in Banking Act of 2021.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

    
    

    Under current law, the Federal Reserve, Federal Deposit 
Insurance Corporation (FDIC), National Credit Union 
Administration (NCUA), and Office of the Comptroller of the 
Currency (OCC) supervise depository institutions and evaluate 
their financial condition and operations under the Uniform 
Financial Institutions Ratings System (UFIRS). That system 
assigns composite ratings in six areas to uniformly assess the 
safety and soundness of financial institutions. H.R. 2516 would 
direct those agencies to add a new component to the ratings to 
assess practices aimed at promoting diversity and inclusion.
    The operating costs of the FDIC, NCUA, and OCC are 
classified in the federal budget as direct spending. Using 
information from some of those agencies, CBO estimates that 
under the bill administrative costs would total about $1 
million annually to update the UFIRS and broaden the scope of 
financial institution examinations. CBO expects that those 
activities would require two additional staff members per 
agency and estimates that gross direct spending would increase 
by $12 million over the 2022-2031 period. However, the NCUA and 
OCC collect fees from financial institutions to offset their 
operating costs; those fees are considered reductions in direct 
spending. Therefore, CBO estimates, the net effect on direct 
spending would be $3 million over the 2022-2031 period.
    Costs incurred by the Federal Reserve reduce remittances to 
the Treasury, which are recorded in the budget as revenues. CBO 
estimates that enacting H.R. 2516 would increase the Federal 
Reserve's administrative costs by $4 million over the 2022-2031 
period, thus decreasing revenues by that amount.
    Ratings issued under the UFIRS can affect depository 
institutions in several ways. For example, banks with a certain 
rating may qualify for 18-month rather than annual review 
cycles. In addition, the amount they pay in premiums to the 
Deposit Insurance Fund depends, in part, on their composite 
ratings under the UFIRS. However, CBO has no basis to predict 
how institutions' composite ratings might change under H.R. 
2516 or how any resulting changes would affect direct spending 
or revenues.
    If federal financial regulators increased fees to offset 
the costs associated with implementing the bill, H.R. 2516 
would increase the cost of an existing mandate on financial 
institutions that are required to pay those assessments. CBO 
estimates that the mandate's cost would be small and fall below 
the annual threshold established in the Unfunded Mandates 
Reform Act for the private sector ($170 million in 2021, 
adjusted annually for inflation).
    The bill contains no intergovernmental mandates as defined 
in that act.
    The CBO staff contacts for this estimate are Stephen Rabent 
(for federal costs), Nathaniel Frentz (for federal revenues), 
and Fiona Forrester (for mandates). The estimate was reviewed 
by H. Samuel Papenfuss, Deputy Director of Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 2516. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act (as amended by Section 101(a)(2) of the 
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee 
adopts as its own the estimate of federal mandates regarding 
H.R. 2516, as amended, prepared by the Director of the 
Congressional Budget Office.

                           Advisory Committee

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

              Application of Law to the Legislative Branch

    Pursuant to section 102(b)(3) of the Congressional 
Accountability Act, Pub. L. No. 104-1, H.R. 2516, as amended, 
does not apply to terms and conditions of employment or to 
access to public services or accommodations within the 
legislative branch.

                           Earmark Statement

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 2516 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as described in clauses 9(e), 9(f), and 9(g) of rule 
XXI.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of H.R. 2516 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                        Changes to Existing Law

    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, H.R. 2516, as reported, are shown as follows:

         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 (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

       DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT


SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Dodd-Frank 
Wall Street Reform and Consumer Protection Act''.
  (b) Table of Contents.--The table of contents for this Act is 
as follows:

Sec. 1. Short title; table of contents.
     * * * * * * *

 TITLE III--TRANSFER OF POWERS TO THE COMPTROLLER OF THE CURRENCY, THE 
                 CORPORATION, AND THE BOARD OF GOVERNORS

     * * * * * * *

                        Subtitle D--Other Matters

     * * * * * * *
Sec. 342A. Diversity and inclusion ratings.

           *       *       *       *       *       *       *


 TITLE III--TRANSFER OF POWERS TO THE COMPTROLLER OF THE CURRENCY, THE 
CORPORATION, AND THE BOARD OF GOVERNORS

           *       *       *       *       *       *       *


Subtitle D--Other Matters

           *       *       *       *       *       *       *


SEC. 342A. DIVERSITY AND INCLUSION RATINGS.

  (a) In General.--The Board of Governors, the Comptroller of 
the Currency, the Corporation, and the National Credit Union 
Administration Board, in assigning a rating to a depository 
institution under the Uniform Financial Institutions Rating 
System (or an equivalent rating by any such agency under a 
comparable rating system) shall include a diversity and 
inclusion component that examines--
          (1) whether the depository institution has effective 
        policies in place to encourage diversity and inclusion 
        in the hiring practices of the institution;
          (2) whether the depository institution provides 
        training to the employees of the institution, that is 
        appropriate to the size and resources of the 
        institution, on diversity and inclusion; and
          (3)(A) with respect to a depository institution with 
        total consolidated assets of $1,000,000,000 or less, 
        whether such depository institution has designated an 
        individual to serve as a Diversity and Inclusion 
        Officer who reports to the Chief Executive Officer of 
        the institution on all diversity and inclusion matters; 
        or
          (B) with respect to a depository institution with 
        total consolidated assets of more than $1,000,000,000, 
        whether such depository institution--
                  (i) has designated an individual to serve as 
                a Diversity and Inclusion Officer; and
                  (ii) has established a committee for 
                diversity and inclusion that holds meetings 
                quarterly and that includes in its membership 
                the Diversity and Inclusion Officer designated 
                under clause (i) and the Chief Executive 
                Officer of the institution.
  (b) Application to Minority Depository Institutions.--In 
carrying out subsection (a) with respect to minority depository 
institutions, the Board of Governors, the Comptroller of the 
Currency, the Corporation, and the National Credit Union 
Administration Board shall--
          (1) assign such institutions the most favorable 
        rating with respect to the diversity and inclusion 
        component described under subsection (a); and
          (2) exempt such institutions from any examination 
        procedures related to the diversity and inclusion 
        component described under subsection (a).
  (c) Definitions.--In this section:
          (1) Depository institution.--The term ``depository 
        institution'' means a depository institution or a 
        credit union.
          (2) Minority depository institution.--The term 
        ``minority depository institution'' means an entity 
        that is--
                  (A) a minority depository institution, as 
                defined in section 308 of the Financial 
                Institutions Reform, Recovery, and Enforcement 
                Act of 1989 (12 U.S.C. 1463 note); or
                  (B) considered to be a minority depository 
                institution by--
                          (i) the appropriate Federal banking 
                        agency; or
                          (ii) the National Credit Union 
                        Administration, in the case of an 
                        insured credit union.

           *       *       *       *       *       *       *


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